Lockheed’s next CEO says mergers could accelerate from defense cuts

Lockheed Martin’s next CEO says the uncertainty from the potential automatic cuts to the Pentagon could spark a new round of mergers from defense contractors.

Christopher Kubasik, who will take over as CEO of the defense giant at the end of the year, said in an interview with The Wall Street Journal on Tuesday that an uptick in mergers is one potential consequence of the $500 billion cut that the Pentagon faces if sequestration is not undone.

Consolidation "would absolutely be a scenario," Kubasik told the Journal. “It would not surprise me.”

Kubasik is replacing current Lockheed Martin CEO Bob Stevens, who announced he was retiring last week. Stevens has run the defense contractor since 2004, and is expected to remain as chairman until January 2014.

He gave a speech in March on Capitol Hill that warned about the potential devastating impact that sequestration could have on the defense industry.

“It will be a massive disruption,” Stevens said.

The defense industry is already bracing for a $487 billion budget cut over the next decade that was included in the 2011 Budget Control Act. If sequestration goes through that could tack on the additional $500 billion cut, which the Pentagon’s leaders have warned would decimate the military.

Both Democrats and Republicans in Congress say that sequestration should not occur, but they cannot agree on how to replace it with alternate deficit reduction.

"Sequestration will absolutely devastate the industry,” Kubasik told the Journal, echoing Stevens’s comments. 

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