Lockheed Martin Expands Manufacturing Overseas While Pushing Tax Cuts as Job Creators

In TYT Investigates by TYT Investigates1 Comment

Above: Lockheed Martin Chairwoman, President, and CEO Marillyn Hewson speaks during the USA Science & Engineering Festival in Washington, D.C., on April 15, 2016. Photo by Alex Wong/Getty Images. 

By Michael Tracey

Lockheed Martin, the world’s largest military contractor, is actively helping President Trump sell tax cuts as job creators, even as its own financial filings show the company is investing in an increasing amount of overseas manufacturing.

A review by TYT of Lockheed Martin’s SEC filings and earnings calls with Wall Street analysts shows no mention of future domestic hiring enabled by prospective tax cuts in its spending plans.

Lockheed Martin Chairwoman, President, and CEO Marillyn Hewson has attended two events with President Trump that were intended to boost his economic agenda. At a February 23 “Made in America” manufacturing roundtable at the White House, Trump introduced the roster of corporate executives by saying, “My administration’s policies and regulatory reform, tax reform, trade policies will return significant manufacturing jobs to our country.”

He said some companies are already hiring as “a vote of confidence.” He went on to name Hewson’s company, saying, “Lockheed Martin has—they’ve just announced 1,800 new jobs, and U.S. plants are doing a great job.”

Hewson responded, “I just want to thank you for this opportunity that we’ve spent this morning in the working groups, and the opportunity to talk to you today about generating jobs. We’re very excited about the fact that this is one of the first actions that you want to take on.”

At a Lockheed Martin media briefing in March 2017, Hewson said that corporate tax reform “would help our nation’s defense industrial base,” and added that Lockheed’s “contributions to U.S. job creation are poised to grow” as a result.

Hewson was a member of the Trump Business Advisory Council until it disbanded in August 2017 after Trump’s equivocations about the “Unite The Right” rally in Charlottesville, Virginia, where a woman was killed.

The company is active in at least two other groups that have promoted tax cuts as integral to domestic job growth.

Hewson is a vice chair of the Business Roundtable. The company’s vice president for lobbying efforts sits on the board of the National Association of Manufacturers, which President Trump addressed last month to kick off his push for tax cuts.

Lockheed Martin has also deployed at least two outside lobbying firms to pursue tax cuts this year. Lobbyists working on its behalf on the issue include former Democratic Rep. Bart Stupak of Michigan and Tom Nagle, former chief of staff to Sen. Tom Udall (D-NM). The company also reportedly donated a million dollars to Trump’s inauguration.

Tax reform has long been a political goal for Lockheed Martin’s leadership. In 2012, then-Chairman and CEO Robert J. Stevens and other corporate executives wrote a letter to the House Ways and Means Committee and the Senate Finance Committee bemoaning the “competitive disadvantage” suffered by the signatories as a result of the U.S. corporate tax rate. In the letter, the signatories promised that a lower rate would bolster domestic employment. “A lower corporate tax rate will boost investment in the U.S., bringing more American jobs, innovation, and growth,” the letter said.

Despite not securing that tax cut, Lockheed Martin has continued to prosper, racking up historic profits. The company, however, does not seem to be ramping up employment as a result.

According to military trade publications, accounts in international media, and Lockheed Martin’s own financial filings with the SEC, the company appears to be expanding its manufacturing overseas, while its U.S. footprint appears to be shrinking.

In its 2015 annual report, the company said, “As of December 31, 2015, we owned or leased building space (including offices, manufacturing plants, warehouses, service centers, laboratories, and other facilities) at approximately 591 locations primarily the U.S.”

Its 2016 annual report listed that same number as “approximately 400 locations primarily in the U.S.”

The company list of “significant operations” in each year’s report has also changed. While 2016 saw new operations in Missiles and Fire Control added in Lexington, Kentucky, and Ocala, Florida, it also saw new operations in Space Systems listed in Reading, England.

Lockheed Martin’s 2015 annual report has several significant operations that no longer appear on the list in 2016, including sites in San Antonio, Texas; Baltimore and Gaithersburg, Maryland; Shelton, Connecticut; Jupiter and Lakeland, Florida; Coatesville, Pennsylvania; and Huntsville, Alabama.

The company’s global headcount also shrank dramatically, from 126,000 in 2015 to 97,000 by the end of 2016.

Neither the shifts in its physical locations nor its shrinking workforce appear to be due to Lockheed Martin’s tax burden.

Although the statutory federal tax rate is 35 percent, Lockheed Martin reported an effective tax rate—what it paid after deductions—of 23.2 percent last year, compared to the 20 percent Trump is seeking. At Trump’s proposed rate, Lockheed Martin would have kept approximately $156 million more last year.

Even without that extra revenue, last year was Lockheed Martin’s most profitable since 2000. The company saw profits of $5.3 billion in 2016—up 47 percent from the previous year. Its annual report indicated no need for a tax windfall to fund new hiring, saying, “We expect our cash from operations will continue to be sufficient to support our operations … [and] we have financing resources available to fund potential cash outflows that are less predictable or more discretionary…”

In a January 2017 earnings call, Hewson reported to investors that in 2016, Lockheed “returned 100 percent of our free cash flow to stockholders” through dividends and stock repurchases that totaled more than $2 billion.  

Hewson has not said how many jobs she expects to create in the U.S. if Lockheed gets a tax windfall. But even as she has helped amplify Trump’s messaging about jobs, she is also overseeing a major expansion in overseas manufacturing—including some production and services once carried out by U.S. employees .

TYT was able to identify plans, some underway and some still ramping up, to expand manufacturing or maintenance in several countries, including Italy, Israel, Japan, and India. “We have active programs and pursuits in the United Kingdom, Saudi Arabia, Canada, Singapore, and Australia,” the company noted in its annual 10-K report, released in February 2017.

Bruce Tanner, the company’s CFO, said in a January 2017 earnings call that Lockheed Martin is a “domiciled company with most of our income … coming from U.S. locations.” Tanner explained that because, “we don’t import a lot,” Lockheed Martin was not likely to run afoul of Trump’s opposition to offshoring manufacturing. “We don’t have the sort of offshore issues that a lot of the global companies would,” he said.

The company is, however, intent on increasing the amount of weapons manufacturing it does overseas.

Five months after Tanner’s remarks, the company announced a deal with the Indian firm Tata Advanced Systems Limited to transfer Lockheed Martin’s entire F-16 production line to a proposed plant in India, provided that the Indian Air Force retains Lockheed Martin as its sole provider of single-engine aircraft.

The U.S. Air Force has not placed an order for F-16s since 1999, but Lockheed Martin continues to make them for allies, including some with blemished human rights records. Last month, the State Department approved a sale to Bahrain, which could be finalized by the end of the year.

One anonymous person described by Reuters as “close to Lockheed” argued in February that the proposed move to India would preserve some “component production” in the U.S. Lockheed Martin reportedly said at the time that winning the Indian contract would create 200 engineering jobs and retain 800 component-part production jobs in the U.S..

In August, Don Erickson, site director for the Greenville, South Carolina, plant that makes the F-16, reportedly said, “If Lockheed Martin is selected as the winner of that program, the production line will shift to India.”

According to Erickson, South Carolina workers impacted by the eventual transfer will “likely” be “retained for other production projects”—but the Greenville facility is non-unionized, and no formal assurances have been granted to this effect.

A Lockheed Martin spokesperson, Maureen Schumann, told TYT, “India represents a significant opportunity to extend F-16 production, which preserves U.S. jobs and creates new jobs in India. Of the approximately 1,140 U.S. Lockheed Martin F-16 personnel, about 270 support F-16 production.”

She said, “F-16 production in India would reinstate these 270 positions to produce initial aircraft in the U.S. and add 200 new U.S. jobs for the life of the India program, predominantly in engineering, procurement, sustainment, and customer support.”

The company already has a joint manufacturing venture with Tata producing other plane components, including C-130s, in India. Lockheed Martin Executive Director for International Business Development Abhay Paranjape told Reuters, “The capability for building components exists here, it’s been proven with the C-130s.”

Moving F-16 production to India has bipartisan support. Sens. Mark Warner (D-VA) and John Cornyn (R-TX) wrote a letter in March to Secretary of State Rex Tillerson, urging him to support the transfer of F-16 production to India. The senators said that the new arrangement would “help preserve thousands of American jobs.” The letter did not address the possibility of job losses or consider retaining F-16 production in the U.S.

According to Lockheed Martin, the Trump Administration was briefed early on about the move, which had been supported by the Obama Administration. Trump has not publicly commented on it, but a Defense Department report issued to Congress in July said that the India proposal “will help create and maintain jobs in both countries.” The report gave no specific details.

Nor is India the only country where Lockheed is ramping up manufacturing. On the company’s July earnings call, Hewson referred to “two milestones that highlight the growing international nature of the Joint Strike Fighter. The first Japanese assembled F-35A conventional takeoff and landing variant was unveiled at the Final Assembly and Checkout or FACO facility in Nagoya, Japan. This aircraft marks the first of nearly 40 jets that will be produced for the Japanese Ministry of Defense at this location.”

She added, “Similarly, the first F-35B variant to be assembled outside the United States was rolled out in Italy from the Cameri FACO facility. Cameri has already delivered multiple F-35A versions and is slated to produce over 100 aircraft in total. Together, these two events underscore the benefits of the multinational partnerships that have been forged as we work to provide fifth-generation capabilities to both U.S. and coalition forces.

Italy’s production of F-35s appears poised to increase. Guido Crosetto, a former Italian defense ministry undersecretary who was instrumental in securing a deal with Lockheed to bring production of the jets there, has said that Lockheed promised to increase job growth, but failed to deliver.

The deal, brokered with the Berlusconi government in 2002, was reportedly expected to bring 10,000 skilled jobs to Italy. But this year, Crosetto expressed remorse, and suggested Lockheed Martin will have to increase the amount of work done in Italy to avoid political blowback.

“Back then, I staked my reputation in Parliament by talking about the jobs and technology Italy would gain through choosing the F-35 program,” he said. “How easy will it be to defend these choices in Parliament now?”

Although the Italian facility is not operating at capacity now, it is expecting new business from other European customers. One aviation publication reported last November that the 22-building complex expects to build planes for the Royal Netherlands Air Force starting in 2019 and already makes wing sets for Lockheed’s Fort Worth facility.

Fort Worth’s recent hiring has been attributed by Trump to his deal-making prowess. But even those jobs do not appear to reflect a vote of confidence in his economic plans.

Because the demand for F-35s had been anticipated for years—well pre-dating the current administration—so had the jobs. A newsletter circulated last summer by the Fort Worth Chamber of Commerce noted that Lockheed Martin planned on “adding approximately 1,000 employees to accommodate an aggressive production schedule for the F-35 Joint Strike Fighter.”

Asked how many more domestic employees Lockheed projects it could hire overall as a result of a lowered corporate tax rate, Schumann, the company spokesperson, did not reply.

You can find all of our reporting on this here: TYT Investigates Series: Tax Cuts & Job Creation – Lockheed Martin.

The next article in this series is slated for publication on Friday, October 20. Follow TYT Investigates on TwitterFacebook, and YouTube to stay on top of exclusive news stories from The Young Turks.

Click here for TYT Investigates’ series on Fed Ex & UPS’ push for tax cuts as job-creation tools.


  1. Very well composed And researched article. I only wish this was available to the general public so that they could see this vital information. Thank you Mr. Tracy for your quality work.

Leave a Comment