WASHINGTON — Driven by ongoing regional conflicts, international sales continue to play a vital part of Lockheed Martin's growth outlook, chairman and CEO Marillyn Hewson said Tuesday.
"Looking to this year and beyond, our business will continue to be shaped by the environmental factors that our customers face. The security and economic environment is as complex and dynamic as our customers have ever known," Hewson said during a presentation for media.
The Global Threat Assessment produced by James Clapper, the director of national intelligence, last month concluded that "unpredictable instability" has become the new normal, she said.
"And everything we see supports his assessment," she said.
In 2015, international sales accounted for 21 percent of Lockheed's sales, and that should reach 25 percent within the next few years, she said.
"One area where we expect the majority of our growth potential to come from in the years ahead is our international customers. While we see global demand for security products continue to increase, this demand is being met with economic headwinds that have the potential to slow global defense spending in some areas," she said.
Those headwinds include downward pressure on the budgets of oil producing countries and a strong US dollar, she said.
"However, global growth is expected to continue, albeit more slowly than in the past. And as the US has shifted foreign policy priorities, many partners are assuming an increasing share of regional security responsibilities," she said. "Today, security considerations are particularly acute among our key customers in Europe, the Middle East, and Asia, where growing conflict is driving many of our current and prospective customers to increase their defense budgets and accelerate buying."
In some instances, Lockheed Martin helps support local infrastructure by building platforms in the buyer country. For example, 39 of the 42 F-35As bought by Japan will be built at the Nagoya Final Assembly and Check-Out facility that Lockheed Martin established with Mitsubishi Heavy Industries, she said. In Saudi Arabia, Lockheed Martin is exploring an agreement to assemble Sikorsky S-70 Black Hawk helicopters locally in partnership with Taqnia Aeronautics.
Sam Mehta, president of defense programs and services for Sikorsky Aircraft, acquired last year by Lockheed Martin, also touted the international market for Sikorsky products. Of the 4,000 Black Hawks the company has produced, only 5 percent are configured with weapons, he said.
As part of Lockheed Martin, Sikorsky is now well-positioned to offer a retrofit kit that would attach weapons to Sikorsky's signature utility helicopter, he said.
"We have some expertise in some technologies that we can bring to bear that can help develop a kit that can be retrofitted onto a utility aircraft for customers who want a multi-mission capability. Armament and offensive capability is not something that was in the UTC portfolio," he said, referring to Sikorsky's previous parent company, United Technologies Corp.
The US Army is not necessarily the target for retrofit kits, he said, since it has its own robust plan about how it does attack and utility.
"It really presents an opportunity for a lot of our international military customers who don't necessarily want, need, or desire to be able to put aside the resources so that you have a dedicated utility [helicopter] separate from a dedicated attack [helicopter]," he said.
With an eye to the future, Lockheed continues to increase its independent research and development funding, which increased to $839 million in 2015, Hewson said.
"At Lockheed Martin, we know we must take the long view, despite any short-term budget pressures, and continue to invest in research and development that yields the types of innovative technologies needed to confront the global challenges I've discussed today," she said.
Lockheed will also continue to invest in research into cutting-edge technologies, such as hypersonic flight and weapons, lasers, autonomy, and unmanned systems.
Speaking of a hypersonic test vehicle, Hewson said Lockheed Martin estimates it "will cost less than $1 billion to develop, build and fly a demonstrator aircraft the size of an F-22."