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Lockheed to shutter Eagan plant, affecting 1,000 jobs

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Lockheed Martin
Lockheed Martin will close its plant in Eagan, Minn., the company announced Thursday, Nov. 18, 2010. The move will affect at least 1,000 jobs in the suburb.
MPR Photo/Jeffrey Thompson

Lockheed Martin announced Thursday it will close a plant in Eagan and move or eliminate 1,000 jobs.

The big defense contractor's Eagan plant makes communication and networking components for ships, submarines and planes, including the P-3 surveillance plane.

Unaffected, for now, are about 200 jobs at another Lockheed Martin division operating at the Eagan plant. That's the Information Systems and Global Solutions division. The company says no job cuts are planned among those employees. But when the Eagan building is sold, the division's operations there may have to move elsewhere.

Company spokeswoman Anne Marie Squeo said closing the Eagan facility is part of an ongoing effort by the defense contractor to cut costs. She said the company has no choice, as its big customer --the Department of Defense-- squeezes its budget.

"All federal budgets really are under pressure and the pentagon budget is really no different," Squeo said.

All of the 1,000 jobs are defense-related.

The company expects the move will help it save about $150 million over ten years. The job cuts and plant closing will begin in January and continue through 2013. Squeo said about 650 of the jobs will shift to Lockheed Martin plants in New York, Virginia and California. But there will be a net loss of 350 jobs for the folks working in Eagan -- more if they don't transfer to company jobs in other states.

Squeo said the company is encouraging employees to move with their jobs.

"We told employees today that if they're interested in relocating and their job is relocating, they should let a manager know," she said.

LAST-MINUTE PUSH TO RECONSIDER

Eagan Mayor Mike Maguire said he was shocked by the news of the plant closing, but hopes to find some way to keep as many of the jobs in Eagan as possible.

"Lockheed Martin and its employees in particular have made a great contribution to our community," Maguire said. "And we are very hopeful and very optimistic that one way or another we will be able to keep those employees in Eagan in well-paying jobs."

Gov. Tim Pawlenty, who is currently in San Diego, sent a letter to Lockheed Martin's CEO asking to discuss the decision. In the letter, he wrote that the plant's proximity to Minneapolis-St. Paul Airport and the state's workforce as factors to keep the Eagan plant open.  

  "As part of my pledge to the company, I will encourage the next governor to consider recommending significant and innovative incentives to the Legislature for keeping the Lockheed Martin facility in Eagan," Pawlenty wrote.

  It isn't certain what influence Pawlenty's letter will carry with Lockheed Martin officials.  

TECHNOLOGY BEING PHASED OUT

Some components made at the Eagan plant went into the Navy's P-3 surveillance plane, which is being phased out. The company wouldn't say how much of the Eagan's plant's production was related to the plane.

But Squeo said no one program resulted in the decision to close the plant. 

Richard Aboulafia, an analyst with the Teal Group, an aerospace consulting group, said funding for the P-3 will steadily diminish, as production ramps up on a replacement plane, built by rival Boeing.

Aboulafia said there'll still be a fleet of P-3s for eight to ten years, but it is shrinking.

"And the total spend associated with upgrading this plane is going to diminish," Aboulafia said.

BELTS TIGHTEN AROUND INDUSTRY

Aboulafia said all defense contractors expect the Pentagon's budget is going to shrink.

"Right now there's real fear that the defense budget is going to come down from its rather lofty peak," he said. "You've a got a fairly bi-partisan agreement that there's going to be some kind of cuts ahead. And all defense contractors are trying make themselves as lean as possible and cut costs."

Analysts say consolidating operations is an inevitable part of that process, especially for companies intent on preserving profits as sales flatline.

"If you have the top line that is staying flat, the only way to for you to improve your earnings is squeeze more efficiencies out of what you currently have," said Anil Daka, an equity analyst with Morningstar. "And that's what Lockheed is doing."

But that drive for efficiency will likely cost hundreds of Minnesotans their jobs and take about 1,000 jobs out of the state.

(MPR reporter Elizabeth Dunbar contributed to this report.)