Lockheed Martin on Sequestration Related WARN Notices

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eed Martin An Update on Sequestration-Related WARN Notices

www.lockheedmartin.com/us/news/enr/1001-sequestration.html[11/3/2012 9:09:23 PM]

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An Update on Sequestration-Related WARN Notices

Memorandum

DATE: October 1, 2012TO: All Lockheed Martin EmployeesFROM: Bob Stevens, Chairman and Chief Executive Officer

Chris Kubasik, Vice Chairman, President and Chief Operating Officer SUBJECT: An Update on Sequestrat ion-Related WARN Notic es

For the better part of this year, we and others in industry and government have

worked to raise awareness in Congress as to the devastating effects of sequestration-- the federal law passed last year through the Budget Control Act that forcesautomatic across-the-board cuts in government spending. In July , we informed youthat, without clear direction from the government about how these cuts would beimplemented, the corporation could issue conditional Worker Adjustment andRetraining Notification (WARN) notices to a substantial number of employees.

We have been working closely with the government to understand our obligationsunder the WARN Act and to ensure our employees are provided fair treatment andappropriate notice, if their jobs are impacted by sequestration. On Friday afternoonthe U.S. Office of Management and Budget (OMB) and the Department of Defense(DOD) released guidance clarifying responsibilities under the WARN Act and outliningtheir timeline for making sequestration-related program decisions.

After careful review of the additional guidance provided by the Office of Managementand Budget and the Department of Defense, we will not issue sequestration-related

WARN notices this year. The additional guidance offered important new informationabout the potential timing of DOD actions under sequestration, indicating that DODanticipates no contract actions on or about 2 January, 2013, and that any action toadjust funding levels on contracts as a result of sequestration would likely not occurfor several months after 2 Jan. The additional guidance further ensures that, ifcontract actions due to sequestration were to occur, our employees would beprovided the protection of the WARN Act and that the costs of this protection wouldbe allowable and recoverable.

We remain firm in our conviction that the automatic and across-the-board budgetreductions under sequestration are ineffective and inefficient public policy that willweaken our civil government operations, damage our national security, and adverselyimpact our industry. We will continue to work with leaders in our government to stopsequestration and find more thoughtful, balanced, and effective solutions to ournations challenges.

If sequestration were to happen, we are compelled to comply with the law and will doso as respectfully and as ably as we can. While we work to stop sequestration we willalso continue to petition the government to outline exactly how sequestration will beimplemented so that we can responsibly prepare for the impact to our employees andour business. We will keep you informed through direct communication and our LMNews series.

Your commitment to delivering to our customers has never wavered despite theuncertainty that sequestration has caused. Were proud of your resilience andappreciate your continued focus on our global security mission. Our values andintegrity distinguish us, and will continue to distinguish us into the future.

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eed Martin An Update on Sequestration-Related WARN Notices


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eed Martin Straight Talk On Sequestration


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Straight Talk OnSequestration

Memorandum

DATE: July 18, 2012TO: All U.S. EmployeesFROM: Bob Stevens, Chairman and Chief Executive Officer

Chris Kubasik, Vice Chairman, President and Chief Operating Officer

SUBJECT: Straight Talk On Sequestrat ion

Over the past several months, you may have seen news coverage about our positionon a federal law passed last year and the negative effects it will have on our nationand our industry. And in the weeks ahead, you will hear more from us on thissubject. Its called sequestration.

Under the Budget Control Act (BCA) of 2011, the Department of Defense committedto reduce spending by $487 billion over the next 10 years, with $47 billion of thatoccurring in this years budget.

Like every company in our industry, we feel the effects of those reductions, but weunderstand the fiscal pressures our nation faces and we are doing our part.

However, there is a provision in the BCA known as sequestration, which was originallydesigned as a mechanism to force bipartisan cooperation on deficit spending anddebt reduction a process that failed. As a result, sequestration now requires $1.2trillion in automatic cuts in U.S. government discretionary spending beginning January

2, 2013. Half that total is expected to come from defense spending; the rest fromother domestic spending, including education and infrastructure. This would result in$492 billion in reductions for defense over the next nine years in addition to the $487billion mentioned above.

We believe sequestration is the single greatest challenge facing our company and our industry. Defense Secretary Leon Panetta has said sequestration will havecatastrophic consequences for our nations defense because it was developed withoutconsideration for national security strategy, force structure, technology needs or operational reality. We agree, and we have candidly and publicly voiced our concerns with our government customers, members of Congress, and our industrypartners.

With little guidance from the government on the specifics of sequestration, it is difficultto determine the impact of these cuts on our employees, programs and suppliers. Wedo know, however, that we have responsibilities under the federal Worker Adjustmentand Retraining Notification (WARN) Act to provide 60 days notice to employees of afacility closure or major layoff. New York law requires 90 days notice. As wecontinue our analysis, we see that these laws could result in the need to issueconditional WARN notices to a substantial number of our employees, starting late inthe third quarter.

We know this is unsettling information and you are probably asking, Will I beaffected? Our very rough estimate of the number of employees who could beaffected, based on the limited information available to us from the government, isabout 10,000. Wed prefer to give you more clarity and details, and we will, just assoon as we get specific guidance from the government.

Until then, we ask that you remain focused on our global security mission. We knowthat you care deeply about the work you do in support of our nation and our customers, and we ask that you continue to help us meet our commitments to our customers as the sequestration debate plays out. At the same time, we will continue

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eed Martin Straight Talk On Sequestration

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doing everything we can to encourage government leaders to find a better solution tothe nations fiscal challenges than sequestration.

At Lockheed Martin, we have a seasoned leadership team and a strong strategyfocused on growing our company in core, adjacent and international markets that isreliant on our continued strong performance. And we have you, the best employeesin the business. As we embark on our second century as a successful enterprisesupporting the U.S. government and our allies, we are committed to making sure our company, our industry, and our nation remain strong and vital.

One way well do that is by continuing to voice our concerns about sequestration atevery opportunity. If you would like to find out more about the effort to stopsequestration, visit the Aerospace Industries Association's Stop Sequestration

website .

Thank you, as always, for your commitment to Lockheed Martin, our customers andour nation. Even with the challenges we face, our customers need us to focus withthe full concentration and complete dedication that have been hallmarks of your work. We have great confidence in our future success because of our confidence inyou.

Editors Note: Bob Stevens is testifying before the U.S. House of Representatives Armed Services Committee today on the impact of sequestration. You can see Bobs statement for the record here .

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Lockheed Martin on Sequestration Related WARN Notices

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