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Northrop rolls back outlook
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August 24, 1998: 7:40 p.m. ET
Defense firm to streamline further, increases layoffs after failed merger
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NEW YORK (CNNfn) - Just a month after its planned $10-billion merger with industry leader Lockheed Martin slammed into a brick wall, Northrop Grumman Corp. rolled back its previous aggressive growth forecasts and raised its layoff projections.
Monday's developments came despite remarks from Northrop Chairman Kent Kresa, who immediately following last month's collapse of the deal stated that revenue growth from $9 billion to $12 billion by 2002 was "not dependent" on the merger.
But the Los Angeles-based defense contractor said Monday that production cuts and contract delays will postpone the previous forecast.
"We now project reaching revenues in excess of $12 billion in 2003," Kresa said.
The company said it expects to take a charge of about $60 million this year to cover costs associated with the streamlining.
To help save $300 million in annual operating costs by 2001, Northrop Grumman will cut about 2,100 positions by the end of 2000. That's in addition to the 8,400 job reductions already planned through the end of 2000.
As a result of its companywide actions, employment is expected to total approximately 46,000 by that time, 8,000 fewer than the current 54,000.
"These actions are necessary to insure that we meet the affordability requirements of our customers," Kresa said. (67K WAV) or (67K AIFF)
Shares of Northrop Grumman (NOC) closed little changed on Monday following the news, down 1/8 at 68-11/16. The stock has lost about half of its value since last spring when government regulators first questioned the Lockheed merger.
(Click to see historic stock activity)
During an interview with CNNfn, Kresa explained troubles in Asia have hit the stock as well as its problems with antitrust regulators. (128K WAV) or (128K AIFF)
In addition, Northrop said on Monday it will adopt a new business structure under which the company will reduce the number of operating units to two from three.
Based in Dallas, the Integrated Systems & Aerostructure unit will comprise commercial and military aircraft as well as electronics platforms for aircraft that Northrop makes, including the Joint STARS surveillance system.
The Electronic Sensors & Systems sector, headquartered in Baltimore, will include the remainder of its electronics interests, including surveillance radars, air defense systems and precision weapons.
Northrop previously had operated two aircraft divisions (military and commercial) and an electronics division. (127K WAV) (127K AIFF)
Separately, the company said its Space Gateway Support joint venture received a $2.2 billion contract to provide base operations support for NASA's Kennedy Space Center and the U.S. Air Force's 45th Space Wing, which includes Cape Canaveral Air Station and Patrick Air Force Base.
The Joint Base Operations Support Contract spans five years, beginning Oct. 1, and has an option for a five-year extension. Northrop Grumman Technical Services Inc., which is part of the Logicon Inc. subsidiary, leads the joint venture, which includes ICF Kaiser Defense Programs Inc. of Fairfax, Va., and Wackenhut Services Inc. of Palm Beach Gardens, Fla.
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Northrop Grumman
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