New CEO Could Change the Way Lockheed Martin Does Business
The selection of outsider James Taiclet hints at a new approach to its Pentagon work.
James Taiclet, an Air Force veteran with extensive background in telecommunications, real estate, and commercial aerospace services business, will become president and CEO of Lockheed Martin on June 15, the company announced Monday.
Taiclet, 59, will replace Marillyn Hewson, 66, who has led the world’s largest defense contractor since 2013. Hewson will remain executive chairman.
The Lockheed board choice of an outsider to the company — has worked at Honeywell and Pratt & Whitney — signals a shift in how corporate leaders would like to see the company run, according to analysts and outside observers. He has spent nearly 20 years at American Tower, a communications real estate and investment trust, leading it since 2004 and has been a member of Lockheed’s board of directors since 2018.
“We think his experience in commercial industry and in the aerospace services business highlights a defense evolution as the customer wants more commercial-type approaches to investments & innovation,” Citi analyst Jon Ravid wrote in a Monday note to investors. “And where defense industry can more effectively penetrate aftermarket for the benefit of industry and customer alike.”
Capital Alpha Partners’ Byron Callan also pointed to Taiclet’s commercial background: “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.”
In recent years, defense companies have increasingly adopted commercial practices to be able to quickly adapt to shifting military needs.
Pentagon and Lockheed officials have been negotiating a long-term sustainment deal for the company's F-35 Joint Strike Fighter. Maintenance, repairs and upgrades to thousands of F-35s is expected to be worth billions of dollars in the coming decades.
The Lockheed leadership announcement was not related to the coronavirus outbreak. The goal was to have Taiclet in the seat in advance of July’s Farnborough Air Show, in England, according to a person familiar with the decision. The biennial event is a major get-together for aerospace and defense, however amid the coronavirus outbreak it’s unclear if the airshow will proceed as scheduled.
Hewson took over Lockheed in 2013 when its CEO-elect Chris Kubasik was fired in November 2012 for having an improper relationship with a subordinate.
At the time, Lockheed’s stock was trading at $93.79 while today, it’s trading at about $300 per share, a 220 percent increase. (It has been as high as $439 before the stocks were driven into a bear market amid coronavirus fears). Over that same period, the Dow Jones Industrial Average has risen about 58 percent.
The company booked nearly $60 billion in sales last year and expects to clear at least $62.7 billion in 2020.
Hewson arguably became the most influential person in the defense industry. She most recently ranked 10th on Forbes’ 2019 list of “The World’s 100 Most Powerful Women.”
She’s left the F-35 Joint Strike Fighter, which accounts for about one quarter of the company’s revenue, on a more solid footing, particularly as its price tag has dropped to under $80 million per copy. The company has also made major investments in munitions, including hypersonic weapons, and space.
“She gradually weeded out executives who could not get along with their customers, or were too ego-driven to treat their subordinates as team-mates,” Loren Thompson, a defense industry consultant with the Lexington Institute, wrote Monday. “She insisted that managers become better listeners, and more responsive to customer concerns.”
After Donald Trump was elected president, Hewson became a frequent face at White House events and regularly participated in business-themed events. The president even once called her “Marillyn Lockheed.”
On Monday, the company also made two other senior leadership moves, naming Frank St. John, 53, chief operating officer, a position vacant since Hewson held the job. St. John is head of the company’s Rotary and Mission Systems business, which includes helicopter maker Sikorsky. Stephanie Hill, 55, senior vice president of Enterprise Business Transformation, will replace St. John. Both appointments are also effective June 14.
St. John, Hill and Michele Evans, who leads Lockheed’s aeronautics business, are all considered CEO candidates.