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Lockheed Martin Corp. is Born, And It's Big

By John Mintz
Washington Post Staff Writer
Thursday, March 16, 1995; Page B11

Martin Marietta Corp. and Lockheed Corp. closed their $10 billion "merger of equals" yesterday, creating the world's largest defense company and one of the biggest firms based in the Washington area, as shareholders of the two companies overwhelmingly approved the transaction.

But a proxy measure connected to the deal barely passed after several institutional investors, including the California Public Employee Retirement System (Calpers), raised questions about a provision under which 460 Martin Marietta executives would be paid a total of $82 million. Only 57 percent of the two firms' shares outstanding were voted in favor of the executive pay package, and 27 percent against.

The pay provision didn't specifically contain the $82 million payout to Martin Marietta officials, but Calpers officials said it voted against the measure as a criticism of compensation plans that it considers excessive.

Now comes the hard part for the new Lockheed Martin Corp., to be based at Martin Marietta's offices in Bethesda. Its top executives must blend two aerospace firms, each with its own proud heritage, and lay off employees fast enough to keep pace with cuts at the Pentagon and the National Aeronautics and Space Administration.

Company officials said they don't know how many of the merged company's 170,000 employees will lose their jobs. But other executives estimate 30,000 will be laid off over 18 months -- making it one of the nation's largest corporate cutbacks in recent years.

"We did this to create jobs, not lose jobs," said Norman R. Augustine, Lockheed Martin's president and, until yesterday, chairman of Martin Marietta. "We realize the uncertainty and difficulty for everyone. . . . One has to do things that are painful in the short term but are good for you in the long term."

"Had we done nothing, there would have been work force reductions anyway," said Daniel M. Tellep, chairman of the new company and of the old Lockheed, speaking with Augustine at a news conference in Chicago after the companies held their last shareholder meetings there.

The pair said they would announce which facilities will close and how many employees will be laid off by June 30 -- an extremely ambitious schedule for reaching decisions so fundamental to the firm's future.

But company officials said they can maintain that timetable because they've already made crucial decisions about structuring the new headquarters staff, and whom to lay off in the two companies' home offices.

Among the Lockheed Martin facilities most vulnerable to cutback or closure are those that design and build satellites, company officials said, including a Lockheed complex in California's Silicon Valley, and Martin Marietta sites near Denver, Philadelphia and Trenton, N.J., that do similar work.

Tellep, 63, is expected to step down as chairman at the end of this year, and to be succeeded by Augustine, 59.

© Copyright 1995 The Washington Post Company

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