Lockheed Martin’s new CEO thrust into debate over sequestration

Lockheed Martin’s incoming CEO, Chris Kubasik has learned that even the small details matter when you’re an executive at the world’s largest defense contractor — the color of your tie, for instance.

Kubasik, as he sat for a wide-ranging interview with The Hill, made a point to note his orange tie — not red or blue — in a nod to Lockheed Martin’s attempts to play a nonpartisan role in an increasingly partisan Washington.

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Kubasik, 51, who will take over as CEO of Lockheed Martin in January, has spent much of his life in Maryland, just outside the nation’s capital. While Lockheed’s Bethesda headquarters is technically outside the District, he will become a political player in Washington in a big way when he assumes the No. 1 job.

With one of the biggest lobbying operations in Washington, Lockheed Martin spends millions on elections each year, supporting both parties — the company’s PAC gave more to the Democrats in power in 2008 and 2010 and more to Republicans this cycle, according to data from the Center for Responsive Politics.

For Kubasik, a 13-year Lockheed veteran, maintaining the company’s non-political mantra is key.

“It’s not our intention or our objective to be involved in the political process here,” said Kubasik, currently president and chief operating officer at the defense giant.

But this year Lockheed has been thrust into the middle of a political season featuring a high-pressure presidential election, thanks to sequestration and the partisan fight surrounding it.

Kubasik’s start date as CEO is Jan. 1, one day before sequestration is slated to take effect. The automatic cuts represent a $500 billion threat to a defense industry that’s already declining as two wars wind down. Sequestration, which would cut $55 billion from the Pentagon budget each of the next nine years, would quickly exacerbate existing problems, the industry says.

That has led current CEO Bob Stevens to take his company headfirst into the political fight this year, as Lockheed Martin has been at the forefront of the industry’s effort to stop the massive spending reductions. 

Stevens threatened in June to issue layoff notices to the entire Lockheed workforce of 123,000 employees — four days before the election — due to federal reporting requirements.

Stevens’s statement prompted the Obama administration to say that issuing the notices due to sequestration was “inappropriate,” and it pushed Republicans to cheer for defense companies to send them out to highlight the danger of the cuts. 

Like his orange tie, Kubasik tries his best not to take sides in what’s become a political battle royale over sequestration. But he remains a staunch defender of the company line and the CEO who groomed him for the top job.

“I can assure you it is absolutely not political,” Kubasik said when asked about the layoff notices. “Philosophically, we follow the law. My understanding is that sequestration is the law. And until the law is changed, I think it would be irresponsible for us to do anything other than comply with it.”

A Maryland native and graduate of the University of Maryland, Kubasik was exposed to the military at an early age, spending a chunk of his childhood at Clark Air Base in the Philippines, where his father worked for the National Security Agency.

Kubasik rose to his position via the financial world, coming up through the ranks at Ernst & Young, where he was named partner, before moving to Lockheed in 1999. After stints as chief financial officer and head of the company’s electronics wing, Kubasik was promoted to president and COO in 2010.

He points to his business background as a key asset for his new role, which he says will help the company through “uncertain financial times.”

While Lockheed has recently cut both infrastructure and manpower to respond to declining defense budgets, Kubasik says he’s optimistic about his company’s ability to adapt and find ways to achieve new growth.

He points to international sales as one key component, which have risen to 17 percent of the company’s sales, from 13 percent about five years ago. Lockheed wants to bump that number up to 20 percent in the next couple years, he said.

The F-35 Joint Strike Fighter, the Pentagon’s biggest weapons program in history, is a key component of that strategy. Lockheed Martin has faced a barrage of criticism for problems plaguing the project — in particular the short take-off, vertical landing Marine variant.

Kubasik defends the project and says that despite the increase in costs, the joint F-35 program would still be cheaper than having three separate fighter planes.

“I think it was a well-thought-out, well-designed program, and I’m satisfied with the progress we’ve made over the last several years,” Kubasik said. “Clearly on a major program, there are some high points and low points, but when you look at it in totality, the progress this program has made in just 10 or 11 years when it was developed, I don’t think that is fully appreciated.” 

One of the chief critics of the F-35 is Sen. John McCain (R-Ariz.), who has said the F-35 has a “terrible track record.” Kubasik said he’s been meeting with key defense lawmakers as he ramps up for his new job, although he had yet to sit down with McCain.

 McCain told The Hill he’d be “glad to meet him.”

Lockheed is no stranger to Congress. The company spent $7.9 million the first six months of 2012 on lobbying efforts, according to Senate disclosure documents, second in the defense world only to Boeing, which spent a hair over $8 million

“I think we’ve always had a good understanding of how Congress operates, and I think that’s one of the items that differentiates us and allows us to be successful in this field,” Kubasik said.

Whether Kubasik likes it or not, Lockheed will be thrown even further into the political fight in Congress if the company follows through and issues all of its employees notices for potential layoffs. The first hint will come early next month, due to New York’s 90-day notification deadline, before the federal 60-day requirement.

Like Kubasik’s statements that the notices are not political, the soon-to-be Lockheed chief has a diplomatic response when asked how he would solve sequestration.

Everything, he said, must be on the table, from new revenues to spending cuts.

“I think this is such a big problem that every aspect of the budget needs to be addressed in some form or fashion,” he said. “There’s no doubt in my mind, you can’t solve this without looking at everything holistically.”