http://www.reuters.com/article/2012/12/13/us-lockheed-north-korea-idUSBRE8BC1H020121213

Lockheed well-placed amid global insecurities, CEO says

By Jim Wolf

WASHINGTON

Dec 13, 2012

(Reuters) - North Korea's launch this week of a long-range rocket may have sparked an outcry across much of the globe but the anxieties it has provoked could mean more business for Lockheed Martin Corp, the world's largest arms maker.

Lockheed, the Pentagon's No. 1 supplier by sales, makes a wider range of missile shields that have been successfully tested than "anybody else on this planet," Robert Stevens, the company's chief executive, told Reuters on Thursday.

"Everywhere we go around the globe, with every leader in every nation that we participate with, this proliferation of missile technology ... it's on everybody's mind," he said in a joint interview with Marillyn Hewson, his designated successor.

"And we have, I would argue, the most mature portfolio of missile defense capabilities," Stevens said, projecting that foreign arms sales would help offset flattening U.S. military spending in coming years.

Stevens cited programs including Patriot, Aegis, Terminal High Altitude Area Defense and Medium Extended Air Defense System, plus communications and command-control systems that can link them in a layered defense. He said this has "high levels of interest internationally."

North Korea on Wednesday rattled the United States, its Asian neighbors and many other countries by putting a satellite in orbit for the first time, a step widely seen as advancing its ballistic missile program in defiance of U.N. resolutions.

Stevens, who hands over the CEO job next month to Lockheed President and Chief Operating Officer Hewson, said the company was poised to benefit from a rebalancing of U.S. forces toward the Pacific announced by President Barack Obama a year ago, after a decade of land wars in Iraq and Afghanistan.

Bethesda, Maryland-based Lockheed expects this so-called "pivot" to Asia to rely largely on air, naval and space assets, more than on ground forces, dovetailing with Lockheed's top product lines, he said.

These include satellites as well as systems used for intelligence, surveillance, reconnaissance, situational awareness, naval and air power, and missile defense.

U.S. competitors in these markets typically include Boeing Co (BA.N), Northrop Grumman Corp (NOC.N), Raytheon Co (RTN.N) and the U.S. unit of BAE Systems (BAES.L).

Lockheed shares fell about 2 percent, or $1.82, to $89.99 on the New York Stock Exchange on Thursday, swept up in broader investor concerns about potential U.S. tax increases and budget cuts that could take effect next month.

The commander of U.S. forces in the Asia-Pacific, Admiral Samuel Locklear, told a forum hosted by the Asia Society in Washington last week that he aimed to boost the ability of U.S. forces to operate and communicate with regional partners.

"The cornerstone of our rebalance effort will be to modernize and strengthen our five Pacific treaty alliances, and that work has begun in earnest," he said. The pacts are with Australia, Japan, South Korea, the Philippines and Thailand.

Stevens welcomed U.S. plans to engage "more assertively in international security partnerships" such as those described by Locklear.

"This is a virtuous cycle that is good for them (U.S. partners) and good for us," he said. "And that's a policy dimension that Marillyn and I want to work on to advance in discussions as we look forward."

The Asia-Pacific region has been shaken by China's increased assertiveness of its claims to disputed island groups in the South China and East China seas. The region is the world's most militarized, with seven of the 10 largest standing militaries.

Hewson will take over on January 1 as CEO of Lockheed, which posted 2011 sales of $46.5 billion and a backlog of $80.7 billion.

She said the company was on its way to boosting its international sales to 20 percent of its total in a "few years" from about 17 percent now.

Sales of the company's F-35 Joint Strike Fighter, the Pentagon's costliest arms program, will play a big role. International sales growth for now is driven mainly by missile defense systems, C-130J transport aircraft and F-16 multi role fighters, said Jennifer Whitlow, a company spokeswoman.

Stevens said he expected conversations about the future of the F-16 production line to continue for "over a decade" because of continuing demand for the planes. Lockheed is currently building F-16s for Egypt, Oman and Iraq - enough to continue the production line until January 2016, Joseph LaMarca, another spokesperson, said by email.

Stevens said the performance of the F-35, now in early production, was improving steadily across the board.

Lockheed is co-developing the F-35 with eight international partners - Britain, Norway, Canada, Denmark, the Netherlands, Turkey, Australia and Italy.

The program generated 13 percent of Lockheed's annual revenue last year. It is due to reach 20 percent when full production starts, perhaps in about 2017, Stevens said.

(Reporting By Jim Wolf; Editing by Ros Krasny and Steve Orlofsky)