The Power of Innovation

Remarks by CEO and President
Marillyn A. Hewson


Lockheed Martin Media Day


Arlington, Va., May 14, 2013

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Good morning everyone. Welcome. Great to see so many of you here today. This is our fourth annual Media Day here at our Global Vision Center. I know I had a chance to talk to some of you at the reception. Great to see many of you who have been here several times, and some of you who are here for the first time.

Let me start by thanking you for your diligent work in covering global security and our industry.  And certainly the key issues we have in our industry and our business.

Today, I’d like to talk with you about the three things before I take your questions. First, I’ll share our perspective on the environment our customers face. Second, I’ll tell you what we’re doing to help our customers address their challenges. And third, I’ll talk about how we’re positioning our business for long term growth.

At this facility here, and at Lockheed Martin facilities around the world, we are collaborating with our customers. We’re analyzing their greatest challenges, and rising to meet them. And we’re proud to be a trusted partner—at the moments it matters most—helping the United States and our allies around the world to balance budget constraints with global security demands … and to make affordability and excellence …one and the same.

Reaching those goals has never been more critical—or more difficult—to achieve. We live at a time when our customers must adapt to new areas of focus. 

The global security map is being re-drawn, and forces re-balanced.  For the U.S. military, it’s a pivotal moment—literally—as the Department of Defense re-balances its assets and attention toward the Asia Pacific.

Abroad, new threats are rising, even as old threats become more menacing.  The Middle East exists in a continued state of unrest—in some places, outright civil war. 

Iran, we know, edges closer to nuclear statehood. And North Korea has already achieved it. The list of threats in this environment goes on and on.

And we’re proud that when our country needs to send a strong signal our products help answer the call. From our F-22s, positioned in South Korea … to our Littoral Combat Ship, recently deployed with the Seventh Fleet … to Aegis, patrolling the Sea of Japan … to our THAAD missile defense system, deployed to Guam … we’re supporting our military as they face down these new threats. 

Meanwhile, we know that long-term challenges are looming on the horizon. Challenges like keeping our networks secure, like generating clean and renewable energy, and furthering scientific advancement for all of humanity.

As Secretary Hagel has put it… “America’s responsibilities are as enormous as they are humbling.” And even as we accept those responsibilities, we do so with an unparalleled financial backdrop.

The budget challenges are immense. The debt burden our country is bearing is unsustainable. We have to find a ways to rein in spending, reduce the deficit and strengthen the economy.

Right now, the path our country has chosen to achieve this is sequestration.

We’ve never believed that was the right path to take. The alternative, though, cannot be to stand still. We’ve all got to find ways to keep moving forward.  We’ve all got to find ways to be good stewards of limited resources, even as we ensure that U.S. and allied troops have the tools they need to prevail.

At Lockheed Martin, we’re determined to move forward with our customers … to help them make the most of every dollar … to support our leaders as they make tough choices about budget priorities and our future … and to stay ahead of the change and challenges confronting our world today.

To us, that’s what being in the global security business is all about. The steps we’re taking to meet these goals fall into three categories.

The first step we’re taking is to innovate for efficiency and effectiveness. By that, I mean making current systems more capable, and ensuring that future systems are more affordable over the long haul. 

The Orion program is a good example of that. Orion represents this nation’s future in space exploration.  It will carry future astronauts to the moon … to asteroids … and, eventually, to Mars. 

The technology in this vehicle is awe-inspiring—and affordable. That’s because our Space Systems team has worked shoulder-to-shoulder with NASA to find ways to reduce costs. 

So far, we’ve saved more than a billion dollars on this program through innovative processes … like using more simulation to optimize production … simplifying reporting and oversight requirements … and reducing the number of test flights required for the development and demonstration of the spacecraft.

Or take Aegis—which, 44 years since its launch—is still the world’s most advanced sea-based radar and missile defense system. That’s because we’ve continued to drive innovation into the system. We’ve been relentless about adding new capability to meet changing needs. 

Just last month, we successfully tested its latest evolution, Baseline 9, which enables Aegis to defend against enemy aircraft and incoming missiles … all with the same level of precision performance Aegis is known for.

Already, more than 100 ships and six international navies rely on Aegis.  And we’re very proud that the Navy recently awarded our Mission Systems and Training team a contract to continue our partnership in innovation through 2018.

Another great example comes out of our Missiles and Fire Control division. Their customers asked for new solutions to address new threats—with affordability as a cornerstone.  So Missiles and Fire Control stood up a special innovation lab … staffed with some of our best and brightest engineers … and asked them to rise to that challenge. 

Now, this team knows missile defense like no one else.  They were pioneers in “hit-to-kill” technology where the defensive missile actually strikes the enemy missile nose-to-nose, and destroys it. Ground troops are increasingly facing threats from mortars, rocket fire, and artillery…particularly in urban and asymmetric combat. So we gave the innovation team a challenge: build a portable missile defense system that can take out rockets and mortars for a fraction of the cost of today’s systems. 

And, just because we like to keep things interesting, we told them:  “When we say a fraction of the cost, we don’t mean one-half or one-third…we mean one-one-hundreth.”

No one on the team batted an eyelash … they just went to work. And they developed a technology that became the foundation for EAPS, an Army program that stands for Extended Area Protection and Survivability. 

The interceptor is just five pounds and costs $16,000 per unit. It’s fired from a portable launcher that’s easy to transport and deploy, and it’s ideal for taking out the small projectiles that threaten our troops in combat. Less than two months ago we conducted a highly successful test of the system’s guidance system. This technology is well on its way to maturity—and saving lives. 

That’s what happens when we give our employees a challenge: a new product that meets our customers’ need at a price they can afford.

The second area of continued focus is to perform with excellence and deliver on our commitments. That means making sure we get the job done and done right … on budget, on time, every time.

In March, I visited our Fort Worth plant, home of the F-35 production line. If you’ve never been there, it’s worth the trip. I toured the factory floor, as I’ve done many times, meeting with employees along the way. At one stop, I asked one of the manufacturing team leads how he was feeling about the program. 

And he looked me in the eye and said, “Ma’am, every single one of us on this program is all in.  We know what’s at stake.  We’re gonna get this aircraft delivered.”

And you know what?  I believe him.  I just look at the accomplishments since the beginning of the year:

  • The first  F-35As reported to Nellis Air Force Base for operational testing
  • The UK’s third F-35 marked its first flight
  • We rolled out the second F-35 for the Netherlands
  • The F-35A completed a grueling three-year wing flutter test
  • We started assembly of the 100th F-35
  • And just last Friday we performed the first vertical take-off

Walking the line at Fort Worth … watching the employees hard at work … and seeing the jet come together … you can feel the momentum accelerating. 

We are delivering.

I also had the privilege of boarding our multi-mission Littoral Combat Ship, USS Freedom, before her maiden deployment with the Navy’s Seventh Fleet. 

Our ambassador to Singapore has called this fast and flexible ship “Exhibit A” in demonstrating our continued commitment to security in Southeast Asia.

Last year, as you know, we delivered the USS Fort Worth two months ahead of schedule.  Now, four more ships are under construction, long-lead materials are being procured for another, and this past March, the Navy awarded us a contract modification to build the next two ships. 

We are delivering.

We’ve also gone—literally—to the ends of the earth for our customers. 

Last month we closed on our first year as the prime contractor for the National Science Foundation’s U.S. Antarctic Program, making sure that 700 scientists have everything they need to complete their valuable research on the coldest, driest, windiest, emptiest and highest continent on earth. 

Over the past year, our team was responsible for shipping 10.7 million pounds of cargo—everything from furnace filters to frozen hamburger—to keep our researchers stocked and secure.

We are delivering.

Our commitment to perform with excellence extends across our portfolio.

From the C-130J and PAC-3 to the Space-Based Infrared System and MH-60 mission systems, we’re hitting our milestones and earning the trust customers are placing in us.

Finally, the third area we’re focused on is investing in the future—looking over the horizon… not just answering our customers’ needs now, but anticipating what they need next. 

That includes game-changing unmanned systems, like the Unmanned Carrier Launched Airborne Surveillance and Strike system—or UCLASS, as it’s known. 

UCLASS will integrate proven technologies from other successful systems to provide persistent intelligence, surveillance and reconnaissance … combined with a light strike capability.

This system will give the Navy a powerful, flexible intelligence asset that can operate in contested airspace.

Another example of how we’re staying ahead of the curve is in cyber defense.

Our cyber intelligence tools keep network defenders one step ahead of would-be attackers by tracking their tactics, analyzing their actions and anticipating what they’ll do next. 

It’s intelligence-driven defense that makes cyber security effective….seeing the warning signs… recognizing the threats … and knowing how to fend them off. We’re putting the power of predictive intelligence in the hands of defenders. 

Our work in clean, renewable energy technologies is another case in point. We know the world needs new energy solutions and that’s what we’re offering…  solutions like Ocean Thermal Energy Conversion … which creates power by using the temperature difference between warm surface water and cool deep ocean water to produce steam… driving a turbine generator.

And it includes our commitment to invest in talent and develop our leadership team…so we have the vision to stay ahead of change… and the skills to execute that vision.

So we feel confident and optimistic about the future.  Our strategy is sound. And it all starts with our customers. Delivering for them remains our primary mission. 

Yet, it doesn’t end there. 

Companies that last make contributions that last.  They create long-term value for all of their stakeholders: customers, stockholders, employees, communities and suppliers. 

For our stakeholders, value today is important, and value tomorrow is priceless. 

Tomorrow matters. 

And we are determined to deliver that value for the next hundred years, just as we have for the past hundred.

Looking forward, anticipating change, and acting decisively to adapt generates the kind of operational performance that our customers demand and translates into returns for our stockholders.

Those returns come in the form of financial execution … strong cash generation and financial management … share repurchases and dividend payouts… and a portfolio that’s well-aligned to our customers’ priorities, now and for decades to come. 

And being engaged in this work for the long-haul underpins our deep commitment to sustainability—from protecting our environment …to encouraging more women and minorities to pursue STEM careers … to volunteering more than a million hours in the communities we are so proud to call our home. 

Sustainability isn’t just a buzzword for us, it’s the key to our future success.

Most of all, we know that lasting value demands an exceptional workforce. Our employees help set us apart in an increasingly competitive environment. People come to work at Lockheed Martin because they want to make a difference. They thrive on challenge. They’re inspired by service. And they take their work very seriously.

They want our government customers to know that they can always count on us, the way our citizens are counting on them. 

We’ll continue to invest in developing our people so they’re ready for what’s next. 

And we’ll continue to help our customers to rise to each new challenge and opportunity.

Thank you for your time this morning.

 	  Marillyn A. Hewson, Chief Executive Officer and President

Chief Executive Officer and President Marillyn A. Hewson in Arlington, Va. at Lockheed Martin’s fourth annual Media Day.


Chief Executive Officer and President Marillyn A. Hewson in Arlington, Va. at Lockheed Martin’s fourth annual Media Day.