Hudson repositions BAE Systems

October 11, 2012

Linda Hudson convened the top executives of BAE Systems, the large weapons contractor, in a hotel ballroom here this week with a single message: Be prepared for change.

Hudson, the company’s chief executive, made sure the other speakers at the corporate event enforced that mantra. One consultant warned against the pitfalls of not quickly recognizing opportunities during market changes. Another speaker focused on the importance of attracting and retaining excellent employees.

As the defense industry scrambles to adapt to shrinking Pentagon spending, Hudson is charting a new mission for Rosslyn-based BAE, pushing the company to shed some of its traditional thinking.

Also hanging over the meeting were the then-ongoing merger negotiations between BAE’s London-based parent company and Paris-based European Aeronautic Defence and Space. As she counseled the 200 employees against fearing change, Hudson never hinted that the deal was headed toward collapse. Even while darting out for hushed phone calls with her London counterparts, Hudson stayed on message.

“It’s tough to let go of your past,” Hudson told them. “We need to stop defining our brand by what we once were and start defining it by what we will be.” (BAE and EADS ended negotiations one day later. The deal was called off Wednesday after European officials failed to agree on terms.)

The 62-year-old contracting veteran is the most powerful and prominent woman in the macho world of defense contracting, steering her company through a significant downturn in government spending. Her choices — from consolidating some units to selling others — are emblematic of the challenges facing the rest of the industry.

Hudson came to BAE at a peak of the market in 2007, taking over its land and armaments business just as orders for armored vehicles were soaring. BAE had been a Pentagon contractor since 1999, operating under a special security agreement that gives the company access to classified programs despite its foreign ownership.

By the time Hudson was named chief executive in 2009, the market was no longer as rosy.

Her tenure has become one of contraction, not growth. She’s spent much of it trying to integrate the cultures and the back-office systems of the more than 20 businesses cobbled together the past decade to make BAE.

“What we found a few years ago was that we had [multiple] payroll systems, we had numerous benefits systems, we had different vacation policies scattered throughout the company,” she said in an interview. “All that’s well and good when you have more business than you know what to do with — which was kind of the last 10 years — but when you’re trying to run an efficient, effective enterprise, that’s just not the appropriate way to do things.”

BAE is best known for its work on weapons systems such as the MRAP armored vehicle. But Hudson has turned the company’s attention beyond military equipment to cybersecurity, intelligence-gathering and analysis, and ship repair. It is also expanding outside government contracting into commercial aviation.

A Florida native and one of only two female engineering majors in her 1972 graduating class at the University of Florida, Hudson spent much of her career moving from engineering to management positions throughout the defense industry.

She started with the highest-paying job offer she received, with Harris in Melbourne, Fla., where she worked on classified communications systems as a research and development engineer. She eventually landed at Lockheed Martin; then her group was acquired by General Dynamics.

As one of few high-ranking women in the defense industry, Hudson said she faced repeated discrimination. One early employer, Ford Aerospace, didn’t have a maternity-leave policy in the 1980s when she was pregnant. Even today, she said, many of her male counterparts are biased.

“When a woman walks in the room, [she’s] assumed to be incompetent until they prove otherwise,” she said. Where as men are “assumed to be competent until they prove otherwise.”

There was “stuff, to this day, I can’t even really talk about. In the early days of my career, there were no laws that protected women in the workplace,” Hudson said.

Hudson hesitated when BAE offered her the chief executive position. She had hoped to retire within two years, and BAE required a five-year commitment.

“It wasn’t what I wanted to do, but . . . I looked at the opportunity and said there’s just no way I can say no. I’ve spent my whole life trying to get a job like this,” she said.

By the time she took over, it was already evident that Pentagon budgets simply couldn’t be sustained, particularly as a drawdown in Iraq began.

In 2011, Hudson started divesting some small lines of business that no longer fit her vision of the company. She ditched one unit that sold police gear and another that sold ceramic materials. Last year she hired an advertising agency to raise the company’s profile.

From 2010 to 2011, the company’s sales dropped nearly 20 percent, to $14.4 billion, while it cut its workforce by 12 percent, to about 41,000. It has 6,000 employees in the Washington region.

At the New Orleans retreat, Hudson focused on embracing new opportunities. “Our brand is not chiseled in stone. It is a continuously changing piece of clay, shaped and reshaped, decision by decision, customer by customer and employee by employee,” she said.

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