Marillyn Hewson, Lockheed Martin’s CEO, president, and chairperson, attends the 2015 Fortune Global Forum in San Francisco, California. Photo by Justin Sullivan/Getty Images.
Lockheed Martin, the arms-manufacturer giant currently advocating for a reduced corporate tax rate, has already deployed its robust lobbying leverage to secure tax benefits at the state level, with mixed results when it comes to job creation.
The company has been at the forefront of President Trump’s push to secure a federal tax reform bill. Its CEO, Marillyn Hewson, has appeared at multiple events with Trump and seconded his claim that tax reform will stimulate domestic job growth.
TYT previously reported that while Lockheed Martin has mounted a public campaign to support the notion that a reduced corporate rate will create new American jobs, the company has no plans in the works to do so.
According to the Good Jobs Project, Lockheed Martin has received over $1 billion in state and local tax subsidies since 1996.
One of Lockheed Martin’s most recent state subsidies is by far the largest. In 2014, the California legislature passed a bill that effectively subsidized $420 million for the development of a stealth bomber jet at a facility in Palmdale—drawing criticism from watchdog organizations.
A sponsor of the bill, then-state Sen. Steve Knight , pledged that the tax benefit would “authorize up to 1,100 direct jobs, 4,700 indirect jobs over [15 years].” He added, “We’re not talking about minimum wage jobs, we’re talking about high paying jobs . . . those jobs that buy a house, that buy the car, that are able to put their kids in college.”
“This is not a subsidy,” Knight said, insisting, “a net gain will come back to the taxpayers of California.”
“Call it an investment,” Knight added. He said, “If the jobs are not created here in California, no incentive goes out.”
The bill, signed by Gov. Jerry Brown, was passed in an expedited fashion, with minimal time allotted for legislators to review an analysis from the Governor’s Office of Business and Economic Development, which was deemed “classified” and withheld from the public; state senators reportedly only had “a few minutes” to review the secret details. In response to a 2014 public records requests by CalNewsroom.com, a spokesperson for the Office claimed that releasing the relevant information would “jeopardize California’s efforts to recruit companies like Lockheed Martin.”
According to a separate legislative analysis summarizing the bill’s alleged benefits, the tax credit was meant to subsidize 17.5 percent of the wages paid to employees working on “advanced strategic aircraft” for the Air Force.
But less than two years later, Lockheed Martin announced that 900 workers at the Palmdale facility were eligible for voluntary buyouts as part of a round of layoffs within the aeronautics division. Between 2014 and 2016, Lockheed Martin’s total workforce fell from 112,000 to 97,000—a decline of 13 percent.
“This tax credit will help California gain and retain high-paying jobs for our people,” declared bill sponsor Steve Fox, then an assemblymember for the district encompassing Palmdale.
This February, the company announced it would move 650 jobs from its facility in Sunnyvale, California, to locations out of state—exactly what the 2014 tax incentive was designed to prevent. “Other states are offering incentive packages, and other states are luring what is ours. And they’re trying to take it from us,” Knight said on the floor of the state Senate in 2014, urging passage of the bill. “If California is not competitive, then shame on us,” he warned.
Later in 2014, Knight won election to Congress. Lockheed Martin was one of his top campaign contributors.
The following year, Lockheed Martin sold three properties in California for $165 million.
Lockheed has sought tax incentives elsewhere in the country, with similarly murky job results. In 2014, the same year it was warning it might move jobs from California, the company threatened to move 250 jobs from New Jersey unless it received tax incentives. Shortly after, the state Economic Development Authority obliged, awarding a $107 million credit package.
Although an audit by the New Jersey legislature later found that the subsidy program had “adequate controls” overall, the auditors recommended improving approval processes and enhancing what they saw as insufficient oversight, saying that the program “may not be in the best interest of the state.” Procedures to “verify the status of grant eligible retained jobs” had not been satisfactorily implemented, the audit concluded.
A tax subsidy package similar to what passed in California later fell through in Arkansas. In 2015, the Arkansas legislature passed a bill that would’ve granted $87 million in incentives to Lockheed Martin to produce Joint Light Tactical vehicles in the state; Governor Asa Hutchinson said this would “secure” 1,100 jobs. But Lockheed Martin ultimately failed to procure the pertinent Defense Department contract, suggesting that the operative factor in whether Lockheed creates jobs tends not to be the tax incentives it is offered, but whether it can obtain the requisite federal government contract. TYT previously reported that major defense industry officials at a recent conference for contractors were unconcerned with tax reform as it relates to creating jobs, and instead pointed to the centrality of government expenditure in dictating business decisions.
In 2016, a year after Lockheed Martin acquired Sikorsky, Connecticut’s legislature by sweeping margins granted Lockheed Martin $220 million to keep Sikorsky helicopter production operations in the state. Again, the threat of jobs moving out of state or even abroad impelled legislators to offer the generous incentive package.
“This is a defensive act,” state Sen. Toni Boucher said in support of the deal. “You’ve got the state of Texas, Georgia, South Carolina, where there are already facilities in place that can very easily absorb the jobs that could be lost here in Connecticut,” she said.
As part of the parameters of the Connecticut agreement, Lockheed pledged to “retain and grow its full-time employment to over 8,000.”
But Lockheed Martin’s acquisition of Sikorsky was followed by a precipitous decrease in its workforce, with layoffs at multiple Sikorsky facilities—including at least 109 workers terminated in Connecticut—despite assurances that the jobs would be preserved. When it acquired Sikorsky in 2015, Lockheed Martin’s overall employee headcount stood at 126,000. A year after the acquisition, its total headcount dropped to 97,000—a 23 percent reduction, despite the influx of 15,000 Sikorsky personnel.
The Connecticut bill gives Lockheed Martin an “out” should its job-creation promises not come to fruition. The bill allows Lockheed to “deviate” from job-growth benchmarks and still receive annual incentives when “federal government action necessitates changes to the production schedule.” Because federal expenditures are so integral to the company’s structure, and can be unpredictable depending on political circumstances, Lockheed Martin can attribute less-than-predicted job growth to federal-government inaction rather than its own failings—and retain tax breaks anyway.