The A-10 Thunderbolt II, an aging fighter jet with a bubble-shaped nose, sits on the tarmac at Lockheed Martin Corp.'s site in rural Owego, N.Y. The plane has a bandage of green tape on one side and a loose panel near the front.
"Six-ninety-nine," says Robert J. Stevens, Lockheed's chief executive, pointing at a number on the nose. "I built that! Tell me that isn't a beautiful plane."
Stevens has come a long way from Fairchild Republic Co., where he helped build A-10s, nicknamed Warthogs for their ungainly appearance, more than 30 years ago. Named Lockheed's top executive in August, Stevens now presides over the biggest defense contractor in the world at a time of shifting military priorities and precarious defense budgets.
The Warthog has come a long way, too. Originally designed to destroy Soviet tanks, it is now packed with high-tech electronics provided by Bethesda-based Lockheed.
For Stevens, 52, the Warthog's evolution symbolizes Lockheed's shift from its role as just a maker of aircraft to a diversified company developing the information technology needed to wage modern warfare. The aircraft, which was to be retired a decade ago, is less important than the high-tech electronics it carries, he says. Now the Warthog is having a second life that could last an additional 20 years.
"People said at the time the A-10 was a waste of money. Now it does all kinds of things it was not intended to do," Stevens said. "There is no greater sense of security [for a soldier] than having an A-10 coming over the horizon."
Stevens faces the task of continuing Lockheed's push into high-tech defense projects, a strategy industry analysts say some competitors have been quicker to adopt, and smoothly integrating the company's disparate operations. Over the next few years he also will face the likelihood of cuts in defense spending that could slow development of large-scale programs.
Stevens's management philosophy has roots in his early experiences at Fairchild, a onetime defense giant that ran into financial trouble in the late 1980s. Stevens had worked his way up over many years from a second-shift floor supervisor to program manager. When the firm faced financial difficulties, he was forced to fire hundreds of employees. "That is an important thing for a young manager not to loose sight of," he said. "It's a defining experience."
It's an experience that helps explain Stevens's strategy at Lockheed. "The work that you do here is . . . regarded as a national resource," he recently told nearly at 1,000 employees packed onto a production floor in Syracuse, N.Y., where the company develops military radars and sensors. "In the same breath, and at the same time, Lockheed Martin is also appropriately regarded as an economic enterprise. And frankly our future is going to be determined by how well we keep these two concepts alive and balanced."
One of Stevens's chief challenges will be protecting the company's marquee programs from budget cuts. The Pentagon's budget has grown substantially since the Sept. 11, 2001, terrorist attacks, but the wars in Afghanistan and Iraq are eventually expected to start sapping money from expensive long-term projects, like Lockheed's F/A-22 Raptor and F-35 Joint Strike Fighter. "We believe the defense budget is likely to come under increasing pressure due to Iraq and the budget deficit," David Strauss, defense analyst with UBS Investment Research, said in a recent research note.
Stevens seems unfazed by the predictions. The average F-15 Eagle and F-16 Fighting Falcon are 30 years old and have been used more rigorously since the Sept. 11 attacks, including patrolling the skies domestically, he said recently. "These fleets are aging and need to be replaced," Stevens said. "We think there will be sustained demand for the technology we have in the F/A-22 and F-35."
But the questions about the F/A-22, which is scheduled to replace the F-15 made by Lockheed rival Boeing Co., are more complicated. Some critics wonder whether the F/A-22, which will cost more than $130 million each, is needed given the low-tech conflicts the military is currently fighting. "There is nothing wrong with the word 'overmatch,' " Stevens said.
Stevens has taken the helm as Lockheed continues to battle chief rival Boeing in court. Last year, Boeing admitted that a few of its employees had obtained Lockheed's proprietary information during a rocket launch competition, leading the Air Force to punish the firm. Lockheed sued.
Adding to the complicated relationship, former Air Force procurement official Darlene A. Druyun admitted last month giving Boeing preferential treatment. In one competition Boeing was favored over Lockheed in a bid to upgrade the electronics on the C-130 Hercules transport plane.
Lockheed and other competitors are protesting the C-130 contract. Stevens told employees the company filed its protest in order to get a full accounting of Druyun's actions.
In the close-knit defense industry, where companies compete one day and then cooperate on billion-dollar programs the next, these types of scuffles are unusual. Lockheed has a "professional relationship with Boeing," Stevens said.
"In our business we compete and we cooperate," he said before adding: "You don't see Ford and Chrysler competing on one day and cooperating on the other."
Stevens is also mindful to keep Lockheed out of similar trouble. In speeches to employees, he stresses: "There is nothing that would take the operating momentum away from our company today, to distract us from doing all the things that we need to do, as sure as a violation of ethics and integrity and business conduct."
Stevens follows two chief executives who are legends in the industry -- Vance D. Coffman and Norman R. Augustine. For his part, Stevens will concentrate on the nuts and bolts of management. He acknowledges that his rise to top executive "comes with a good amount of luck, good fortune on my part."
"I wouldn't overestimate the value one person brings, notably me," he said. "It's all about the team."
Stevens has developed a reputation as a straight shooter who imposed financial discipline when Lockheed most needed it. A former Marine, he has an intense but personable manner that includes a penchant for one-liners. At a recent meeting of employees at Lockheed's office in Syracuse, he was questioned about the strain on the staff since the firm won several new defense contracts. Stevens paused briefly, then quipped, "I think the bring-a-neighbor-to-work program probably wouldn't work."
That style won him praise early in his career. As an executive at Loral Systems Manufacturing Co., he gained the loyalty of subordinates. "He could wring efficiency out of them because they liked him," said Bernard L. Schwartz, chairman and chief executive of Loral Space & Communications Ltd.
Stevens gained prominence at Lockheed in 1999 when as chief financial officer he helped steer the defense giant out of trouble after nearly 20 acquisitions in less than 10 years had left it debt-ridden. He led an internal review that prompted a consolidation of operations, which resulted in 2,800 job cuts and a savings of $200 million. His detailed and frank reports on the company's financial health to Wall Street gained praise among investors, who had abandoned the stock.
"The company had lost sight of blocking and tackling. . . . We lost programs. We had rockets blow up," said former Lockheed chief and current board member Augustine. "The solution to those problems was one word, 'discipline,' and he brought the discipline the company really needed."
Stevens says he has no drastic changes planned for Lockheed. He will focus on initiatives he began as chief financial officer and as chief operating officer. "A company that has a production cycle measured in decades doesn't change direction on a dime. It's an evolutionary change," he said.
He is chairman of a diversity council established three years ago that recommended that short lists for executive positions be required to include a minority candidate. The top priority, he says, is to successfully complete programs as well as attract talented employees. Soon after assuming the chief executive position, Stevens began focusing on a new measurement tool for a program's success: return on investment capital. Soon executives' bonuses will be partly based on the measurement.
Stevens's tenure is likely to be marked by a continued focus on building international partnerships with foreign firms. But those partnerships can be tricky given a reluctance among some members of Congress to share technology with overseas companies and concerns about domestic suppliers losing jobs. Lockheed is currently at the center of a high-profile competition with Sikorsky Aircraft Corp. to build a new presidential helicopter. The battle has stirred international debate since Lockheed is depending on a platform designed by a European firm, AugustaWestland.
Lockheed will not back down from its strategy, Stevens said, adding that he wants Lockheed to be known as the American partner of choice to foreign defense firms. "We see the world as being connected -- connected by financial, trade and security interests," he said. "We think some level of international relationship stimulates those jobs" here.