Introduction

On August 30, 1994, Lockheed Corporation and Martin Marietta jointly announced that their respective boards of directors had unanimously agreed to merge the two corporations through an exchange of common stock valued in excess of $10 billion.

There were millions of dollars in merger-related expenses, and the new company Lockheed Martin expected to be reimbursed by its government customers for such costs. To justify the merger-related expenses, Lockheed Martin had to prove that the consolidation would result in tremendous savings. For example, there would no longer be the need for each company to have its own board of directors. An entire set of executive management could be eliminated.

The merger team identified other areas of savings as well, and several "centers of excellence" (COE) were established. Each COE was an area where the economies of scale could be fully utilized, and related operations would be centralized. This chapter focuses on the Machining Outsourcing COE, and how the application of financially focused project management (FFPM) at Lockheed Martin Missiles and Space (LMMS) in Sunnyvale, California substantially increased profitability.

^[1]Cappels, T.M., Financially Focused Quality, CRC Press, 1999.