April 16, 2015 / 5:39 PM / 2 years ago

Lockheed eyes cost cuts, reputation in satellite business

4 Min Read

Workers can be seen on the moving line and forward fuselage assembly areas for the F-35 Joint Strike Fighter at Lockheed Martin Corp's factory located in Fort Worth, Texas in this October 13, 2011 handout photo provided by Lockheed Martin.Lockheed Martin/Randy A. Crites/Handout

COLORADO SPRINGS, Colo. (Reuters) - Lockheed Martin Corp (LMT.N) has long dominated the U.S. military space market, but it is fighting harder than ever to cut costs, become more innovative, and shed a reputation for arrogance, Mark Valerio, the head of its military satellite unit, said in an interview.

Lockheed, the Pentagon's No. 1 supplier, interviewed 60 officials at the Pentagon, Air Force Space Command and the Air Force's Space and Missiles Systems Center late last year as part of a broader drive to improve its relationships with the U.S. government, Valerio said.

The contractor is due to launch 15 satellites over the next five years for missions ranging from communications to missile warning and global positioning, but it could lose some of those franchises in coming years, depending on some broad studies underway by the Pentagon and Air Force.

"We don’t take it for granted that we have this business," Valerio said this week during the annual Space Syposium conference that brings together hundreds of government officials and industry executives. "We’re being interviewed for our job every day."

Valerio said the company is pushing to cut costs on existing programs by consolidating facilities, finding and testing new uses for additive manufacturing, or 3D printing, and standardizing parts across multiple satellites.

He said it was also critical for Lockheed to improve its ties with the government officials who oversee those programs, and who will help shape those future business opportunities.

"We've had a reputation … of being arrogant, and we’re trying to wipe that out completely," Valerio said. He said he repeatedly told his entire staff that every interaction and every meeting influenced how the company was viewed.

"It's all about relationships and trust and performance," he said.

One key test will be how Lockheed fares in an Air Force competition for the next batch of global positioning satellites (GPS) satellites later this year after the current GPS III program was marred by delays.

Lockheed aims to deliver the first GPS III satellite for launch in May 2017, more than two years after the initial target date due to delays in delivery of the key navigational payload built by Exelis Inc XLS.N.

The company is also awaiting a Pentagon study of satellites that provide early warning of enemy missile launches, such as Lockheed's Space Based Infrared System (SBIRS). Another key study is examining satellites that protect the president's ability to launch nuclear weapons in the event of a major war.

Lockheed also builds the current Advanced Extremely High Frequency (AEHF) protected satellites, which aims to do just that. Both the early SBIRS and AEHF satellites saw huge cost overruns and delays but are now back on track. The Defense Department is evaluating its follow-on plans for both systems and possible alternative approaches.

Doug Loverro, the Pentagon's top space policy official, told Reuters this week that both studies would be completed this summer, paving the way for future acquisition programs.

Valerio said Lockheed also saw opportunities to sell missile warning and protected communications satellites to U.S. allies in coming years, but actual orders could take several years.

Reporting by Andrea Shalal; Editing by Christian Plumb

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