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April 1, 2020 | International, Aerospace

Lockheed Signals Change Is Coming With New CEO

Michael Bruno

Lockheed Martin Chairman, CEO and President Marillyn Hewson became the prime example of how to stumble into the corner office of the Pentagon's top contractor and still provide laudable business results. Now, as she hands off the reins to an enigmatic successor, Lockheed stakeholders hope the uncertainty ahead will be just as lucrative.

On March 16, the Bethesda, Maryland-based prime—the largest contractor to the U.S. Defense Department by annual sales—surprised many followers with the news that current Lockheed board member James “Jim” Taiclet, Jr. will become CEO and president on June 15, while Hewson becomes executive chairman.

Lockheed also promoted Frank St. John, current executive vice president of the company's Rotary and Mission Systems (RMS) division, to become chief operating officer (COO)—a role that Hewson technically held last, and briefly, before her January 2013 appointment as chief executive. Before that, the COO role was mostly held by Chris Kubasik prior to his downfall at Lockheed. Stephanie Hill, now senior vice president for enterprise business transformation, was appointed to succeed St. John as executive vice president for RMS. These appointments also are effective June 15.

Hewson is 66 years old and Taiclet is 59. The company, which does not have a retirement rule, had not announced a formal transition plan or successor process. Nevertheless, industry insiders were watching movements—such as St. John's rise and recent board appointments—and analysts said they assume the transition was planned before the ongoing COVID-19 crisis erupted.

While the announcement was a surprise, the timing was not—due to Hewson's age and the fact that Lockheed ended 2019 with a record $144 billion backlog of work and a stock price that has more than tripled under Hewson, including the recent COVID-19-related pullback. Still, many observers are intrigued by the selection.

“While Marillyn's retirement has been in the cards for a while, we were not expecting Lockheed to go outside the company for its new CEO,” say analysts at Vertical Research Partners. “Taiclet has an impressive pedigree based on his resume, but from an A&D perspective, he is an unknown quantity. . . . But with Marillyn sticking around as chairman, and a very experienced cohort of senior Lockheed managers, we are not expecting there to be any revolutionary change as a result of this appointment.”

Cowen analysts also noted that St. John's appointment as COO further bookends Taiclet with experienced Lockheed managers. St. John, 53, joined Lockheed more than 30 years ago and as COO is naturally positioned as a potential future CEO, analysts say.

Taiclet is currently chairman, president and CEO of American Tower, a real estate investment holding company and owner/operator of wireless and broadband communications networks, where he has held the executive reins since 2003. He joined that company in 2001 and, according to Lockheed, is credited with guiding American Tower's transformation from a U.S.-centric focus to a multinational business outlook. Analysts said he also was central in leading mergers and acquisitions as part of the company's expansion. American Tower announced an immediate replacement for Taiclet but said he will remain chairman and an advisor through June 14.

Taiclet previously served as president of Honeywell Aerospace Services and before that was vice president for engine services at the Pratt & Whitney division of United Technologies (UTC). He also worked as a consultant at McKinsey & Co., specializing in telecommunications and aerospace strategy and operations. He is a retired U.S. Air Force pilot and Persian Gulf War veteran.

Loren Thompson, a Lexington Institute consultant to Lockheed, says Hewson's selection of Taiclet seems calculated to continue her emphasis on tight financial management and good customer relations while positioning the leading prime for a changing demand environment.

“That environment will be characterized by two shifts from previous years,” Thompson writes. “First, the defense budget will enter a flat to declining period very different from the spending increases of the early Trump [administration] years. Second, the preference of military customers for nontraditional suppliers who think like entrepreneurial enterprises rather than government contractors will continue to grow.”

Hewson's selection of Taiclet also is telling because she has won the respect of many industry insiders, analysts and advisers. While unplanned, Hewson's tenure as CEO was deemed successful by most.

“Hewson's tenure is known for operational execution with such programs as the F-35, while having a successful oversight in maintaining key businesses—such as in the evolving area of space with wins such as Next-Gen OPIR and GPS IIIF,” say Jefferies analysts. Company sales grew at a 5% compound annual growth rate from $45.4 billion in 2013 to an expected $63.3 billion this year.

Taiclet's takeover sounds to many like more of the same—but different. “This is the first time Lockheed Martin has promoted someone who did not rise through the corporation to be president and CEO,” writes Capital Alpha Partners analyst Byron Callan. “We find it intriguing that he has a commercial background and wonder if that's not a different direction the company starts to explore in 2020-25.”

https://aviationweek.com/defense-space/supply-chain/lockheed-signals-change-coming-new-ceo

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  • Australia changes how it will buy drones for shipborne operations. How is industry reacting?

    March 1, 2019 | International, Aerospace

    Australia changes how it will buy drones for shipborne operations. How is industry reacting?

    By: Mike Yeo MELBOURNE, Australia — Australia's search for a new unmanned aircraft system to operate from its naval vessels has taken a new twist, as the service announced tweaks to its procurement program to streamline the process and put it in a position to take advantage of future technological advances. Speaking at a media event during an unmanned aircraft conference during the ongoing Avalon Airshow, officers from the Royal Australian Navy, or RAN, confirmed that it was rolling its two-stage procurement program into one. The program, Project Sea 129 Phase 5 Maritime Tactical Unmanned Aerial Systems, will look for a single prime contractor to offer a system to operate from all of the RAN's major fleet units, primarily its upcoming 12 offshore patrol vessels and nine future frigates. Sea 129 Phase 5 had previously been split into two stages, with the first seeking a system to operate from the OPVs and the second to equip the frigates. According to RAN Capt. Adrian Capner, Sea 129 Phase 5 will seek a platform systems integrator, or PSI, to be put in charge of the entire program, with the ability to meet capability requirements taking precedence over platform. “We will tell you what we want the system to do; you are going to come forward and show us how you expect to achieve that,” Capner told the audience. These requirements include being able to operate from the flight deck of a German-designed Lurssen OPV 80-class ships selected by Australia, which are the smallest ships slated to use the selected UAS. The aircraft must be able to perform surveillance and maritime domain awareness missions in Antarctic conditions, and participate in humanitarian assistance and disaster relief. Capner said the RAN is open to using multiple platforms to achieve the program's capability goals, adding that the PSI will also be responsible for constant upgrades to the UAS, as the service needs the system to stay relevant over the next few decades. The program is currently at the request for information stage, with Capner confirming that a request for tender is expected in the first half of 2020 and an initial operating capability planned for the mid-2020s. This change in procurement strategy appears to reduce the burden of risk on the RAN and lessen concerns about operating outdated technology by the time the platform enters service. Rather, these burdens shift to the winning PSI, who will be responsible to managing the program and adjusting for technological changes when the system is in service. The reaction to these changes from potential bidders has been mixed. James Lawless, business development manager at Saab Australia, called it an “intelligent way to approach [the program],” noting that it mirrors Saab's strategy in partnering with UMS Skeldar and Airflite to offer the UMS Skeldar V-200 UAV. Meanwhile, Melissa Pina of Northrop Grumman told Defense News that the company will continue looking for its offering based on the latest development. Northrop Grumman previously offered its MQ-8C Fire Scout drone for Sea 129 Phase 5 Stage 2 for the RAN's future frigates. The Fire Scout is slated to be the platform of choice to go onboard U.S. Navy ships, . The RAN is currently conducting trials on the use of UAS under a “navy minor project,” operating Schiebel's Camcopter S-100, the ScanEagle by Insitu (a subsidiary of Boeing), and other UAS from land bases and onboard its ships. https://www.defensenews.com/digital-show-dailies/avalon/2019/02/27/australia-changes-how-it-will-buy-drones-for-shipborne-operations-how-is-industry-reacting/

  • Does major joint military procurement really work in the Baltics?

    October 29, 2019 | International, Aerospace

    Does major joint military procurement really work in the Baltics?

    By: Aaron Mehta WASHINGTON — On paper, the Baltic nations appear to have closely aligned defense modernization needs that make the joint procurement of advanced military equipment a no-brainer. After all, Latvia, Estonia and Lithuania have historically shared national interests, are currently facing a similar threat from Russia and each have relatively small defense budgets. Joint procurement would drive down costs for large defense articles by allowing the smaller Baltic nations to buy in greater numbers. It would also allow the countries to share maintenance responsibilities, which would save money. And it would drive greater interoperability in countering an adversary's simultaneous attack all three nations. But then there's the reality of the situation. “I think there are many misperceptions on Baltic integration,” Janis Garisons, state secretary for the Latvian Ministry of Defence, told Defense News during a September visit to Washington. “I think this is a little bit of a wrong perception that there is a lot of added value in those common procurements.” Garisons, the No. 2 civilian at the ministry, said he is not against joint procurement efforts, but believes such initiatives work best when purchase ammunition, small arms, or chemical, biological, radiological and nuclear defense equipment — purchases already in the works among the European neighbors. But for major defense articles, the legal and logsitical challenges of coordinating a trilateral contract, combined with a lack of major savings, means it might not be worth it. “We do common procurements when it's possible, but I have to say, I haven't seen much savings on those because even if you combine all three numbers, it's not like the U.S. buying together with the U.K. — thousands and thousands. It is still numbers that are very small,” Garisons said. Lithuania's vice minister for defense, Giedrimas Jeglinskas, agrees that joint procurement of major defense articles may never be feasible among the three Baltic nations. “Joint procurement, multinational procurement — I don't think it exists that much in the world,” Jeglinskas told Defense News during a visit to Washington in October. “Most of the programs out there are joint development. But when you talk about something like three-country procurement, it has been really hard for us to achieve.” Like Garisons, Jeglinskas said smaller transactions have proven successful, specifically the joint procurement of mines with Estonia and gas masks with Latvia. But even then, “the syncing of the budgets and the procurement plans for each country [is difficult]. Say we are ready to buy gas masks this year, but the Estonians may buy them two years ahead. And that's just the small things.” Kusti Salm, the director of the Estonian government's Centre for Defence Investment, told Defense News that joint procurement among the Baltic states is challenging given the need to sync up defense budget cycles, noting that “the amounts we procure are small and do not always bring us the economies of scale.” While the idea of joint procurement is popular, there is a “genuine disconnect” between the idea and the reality, according to Chris Skaluba, a former Pentagon official who is now the director of the Atlantic Council's Transatlantic Security Initiative. Skaluba points to two reasons for this: The first is that while the Baltic states are concerned about Russia, both Latvia and Estonia are more directly concerned with the threat of “little green men” — a reference to masked soldiers in green uniforms who led Russia-backed separatists in the beginning of the conflict in Ukraine. The concern steps from the high populations of ethnic Russians in Latvia and Estonia. In response, those two countries are focuses on homeland defense, whereas Lithuania is focused on resisting a direct Russian invasion — an approach that requires a different set of equipment. Secondly, America's famously convoluted security cooperation process makes trilateral procurement from the Western ally tricky. Small purchases of ammunition or night vision goggles are doable, but the more advanced the gear, the higher the costs and the stricter the regulations. Throw in three separate national budget cycles and the process “can be daunting and just not worth the squeeze when you're through with all that work,” Skaluba said. “Do I think all sides could be more determined and find creative ways to do this? I do. I think maybe something that is technically difficult but not super expensive, like unmanned aerial vehicles, would be a good test case,” Skaluba said. “But I'm also sympathetic that because of how regulations work, the congressional requirements, having to work through [the U.S. Department of] State and the Pentagon, any major purchase is difficult. Trying to do that times three is three times as hard.” National priorities The question of maintenance is another issue for joint procurement in Garisons' eyes. The idea of having shared maintenance facilities spread across the area — for example, one tank depot in Lithuania and one helicopter depot in Estonia to service all three Baltic nations — creates vulnerabilities during an invasion, he said. “I would be very cautious assuming that we will be able to freely import, to bring everything, all supplies needed. Our goal is to ensure that all the basic things, like small arms, ammunition, the maintenance of vehicles, the maintenance of major equipment — that can be done locally,” he said. “For operational reasons we can't have shared maintenance because during wartime we will not be able to bring vehicles, for example, to any other state. “It complicates common procurements because it is not so easy to agree on joint procurements, where the maintenance base will be held and other issues. For us, I think of paramount importance to have a maintenance base.” Ultimately, Latvian officials and their regional counterparts are making informed decisions about their respective country's security, Skaluba said. “These are all really serious governments. They really feel a threat. They know precisely how they think this would work in a crisis situation and what they need to have available to them,” he said. “At a strategic level, of course it [joint procurement] makes sense, but if you're a politician or defense planner or minister of defense, your first responsibility is to defend your country. And of course you want to make sure you have resources available to you.” While skeptical of joint procurement efforts, Garisons was supportive of joint education and training across the region, calling Baltic military cooperation “as strong as any you can find.” He noted that the three nations share a high-level military education center, the Baltic Defence College in Tartu, Estonia. Estonia's Salm considers interoperability among the Baltic states critical to successful joint procurement efforts. “Defense in Estonia cannot be separated from defense in Latvia and Lithuania, as we form a single region from the military point of view,” he said. One example of that raised by both Salm and Garisons is the creation of NATO's Multinational Division North, a headquarters operation organized by Latvia, Estonia and Denmark. Garisons called it “the first attempt when we will have joint command structure, which will be able also to feed into the NATO command structure.” The command-and-control aspect of joint operations is vital, he added. A pair of major exercises in Latvia toward the end of the year will serve as test beds for the NATO division, which is expected to reach initial operational capability in early 2020. https://www.defensenews.com/global/europe/2019/10/28/does-major-joint-military-procurement-really-work-in-the-baltics/

  • Integration is the next step for Air Force information warfare leaders

    June 15, 2020 | International, Aerospace, C4ISR, Security

    Integration is the next step for Air Force information warfare leaders

    Mark Pomerleau Following a significant merger and reorganization of its intelligence, surveillance and reconnaissance and cyber enterprises, Air Force leaders are turning their attention to how these functions can work more closely together. “We're maturing this organization, moving past merging and focusing on integration,” Lt. Gen. Mary O'Brien, deputy chief of staff for intelligence, surveillance, reconnaissance and cyber effects operations, said during a Joint Service Academy Cybersecurity Conference webinar June 11. “We find that our intelligence and cyber roles are focused increasingly interdependent and interconnected.” Within the last 18 months, the Air Force reconfigured its intelligence shop, formerly known as the deputy chief of staff for intelligence, surveillance, reconnaissance, and added cyber effects operations. That change was followed by the merger of two numbered Air Forces – 24th Air Force and 25th Air Force – to create 16th Air Force last fall, the service's first information warfare entity. Officials have said in this new setup the deputy chief of staff handles the workforce, concepts, training, platforms, tools and integration. This is done so operators at 16th Air Force have the guidance they need. O'Brien added that the Air Force is now working at integrating the 2018 ISR flight plan and the 2019 cyber warfare flight plan. Each sought to chart a path for how the Air Force will fight in each respective area into the next decade as part of a great power competition. The ISR flight plan examined transforming the enterprise to meet future threats as opposed to modernization. The cyber flight guided funding, resourcing, training and capabilities for Air Force cyber offices. O'Brien also said integration related to network defense has proven critical with the increased telework during the pandemic. Intelligence and cyber experts are “identifying the threats and they're posturing to defend against them,” she said. "This was not always the case.” https://www.c4isrnet.com/information-warfare/2020/06/11/integration-is-the-next-step-for-air-force-information-warfare-leaders/

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