Lockheed Martin



In this comprehensive exploration of Lockheed Martin's historical impact and current operations, Ben Gilbert and David Rosenthal of the "Acquired" podcast delve into the aerospace giant's transformative role during the Cold War and its evolution into a leading defense contractor. They discuss Lockheed's Skunk Works division, renowned for developing groundbreaking aircraft like the U-2 and SR-71 Blackbird, and its lesser-known sibling, the Lockheed Missiles and Space Company (LMSC), which pioneered stealth technology and space-based reconnaissance. The episode examines the "last supper" directive that led to industry consolidation, the controversial F-22 and F-35 fighter jet programs, and the implications of a defense industry intertwined with government interests. Lockheed's dual purpose—serving national defense and its stakeholders—highlights the complex relationship between military needs, technological innovation, and the market-driven Silicon Valley ethos.

Summary Notes

Introduction to "Maverick" and Impact of Delays

  • "Maverick" is praised for its quality despite the long gap since its predecessor and the changing environment.
  • The film's release was delayed due to the coronavirus pandemic.
  • The delay led to an interesting situation where the aircraft featured in the film, the FA-18 Hornet, was nearing its end of service with the Navy by the time the movie was released.

"It's so shocking how good Maverick is so many years later in such a different environment and then, like, delayed due to coronavirus."

The quote expresses surprise at the quality of "Maverick" given the time elapsed since the original and the challenges posed by the pandemic.

"The fighter that Maverick is in is an FA 18 Hornet, the Boeing plane. And by the time the movie gets released, it's basically discontinued within a couple of years."

This quote points out the irony that the aircraft featured in "Maverick" was becoming obsolete around the time the movie was released.

Lockheed Martin's Role in Defense

  • Lockheed Martin is the largest defense contractor in the United States.
  • The company receives approximately $50 billion a year from American taxpayers.
  • Lockheed Martin's products are primarily designed for defense and deterrence, including weapons of overwhelming force and air superiority.
  • The morality and ethics of Lockheed Martin's products are complex and may evoke conflicting feelings.
  • The decision to use Lockheed Martin's products is ultimately entrusted to the office of the President of the United States.
  • Lockheed Martin's history includes stories of engineering, innovation, and inspiration.

"Lockheed Martin makes, among other things, killing machines. The company is, of course, critical to defending the American way of life."

The quote highlights the duality of Lockheed Martin's products as both necessary for national defense and as creators of weapons.

The Skunk Works Division and Silicon Valley's Origins

  • Lockheed's history includes multiple mergers, with 17 predecessor companies forming Lockheed Martin.
  • The episode will focus on two stories from Lockheed's history: the Skunk Works division and a story tied to the birth of Silicon Valley.
  • The impact of Lockheed and its defense technology extends beyond the military and has influenced the tech world significantly.

"Instead, we're going to focus on two interwoven stories from Lockheed, not Martin, but Lockheed's golden eras."

The quote indicates that the episode will concentrate on specific aspects of Lockheed's rich history.

Lockheed's Early History and Innovations

  • The original Lockheed company was founded in 1912 by Allan Lockheed, who later changed his name to avoid mispronunciations.
  • The company was involved in early aviation and created the Model G plane for tourist flights over San Francisco Bay.
  • Malcolm Lockheed, Allan's brother, left the company and invented the hydraulic brake system for cars.
  • John Northrop, who worked for Lockheed, played a major role in founding three major defense contractors.
  • The second Lockheed company was successful with the Vega airplane, favored by aviators like Amelia Earhart.
  • The company was sold to the Detroit Aircraft Corporation (DAC), which went bankrupt during the Great Depression.
  • Robert Gross purchased the Lockheed division out of bankruptcy, leading to the modern Lockheed company.

"The first Lockheed company was founded in 1912 by one Alan Lockheed."

This quote provides the origin story of the Lockheed company and its founder's contribution to aviation history.

The Electra Airplane and World War II

  • Lockheed built the Electra airplane during the 1930s, which became iconic and was used by Amelia Earhart.
  • The Electra was also featured in the film "Casablanca."
  • Clarence "Kelly" Johnson, who started the Skunk Works division, was instrumental in Lockheed's success during World War II.
  • Johnson designed the P-38 Lightning fighter, which became the US's elite aircraft during the war.
  • The Skunk Works division was created to rapidly develop a US jet fighter in response to German advancements in jet technology.

"Kelly once said that unless he had the hell scared out of him at least once a year in a cockpit, he wouldn't have the proper perspective to design airplanes."

This quote illustrates Kelly Johnson's hands-on approach and dedication to understanding the aircraft he designed.

The Skunk Works Rules and Philosophy

  • Skunk Works operated with a focus on rapid delivery of superior products, bypassing bureaucracy and red tape.
  • The division was characterized by a small team of highly skilled individuals working closely together.
  • Kelly Johnson created 14 rules for Skunk Works, emphasizing the importance of a small, empowered team and direct control over projects.
  • The division's success was partly due to the motivation driven by the urgency of wartime and Cold War pressures.

"The number of people having any connection with the project must be restricted in an almost vicious manner."

This rule from Kelly Johnson's Skunk Works emphasizes the need for a lean and focused team to achieve rapid and superior results.

The U-2 Spy Plane and Area 51

  • The U-2 spy plane was developed to gather intelligence during the Cold War, with the ability to fly at altitudes unreachable by Soviet aircraft.
  • The plane was tested at a remote site in Nevada, which became known as Area 51.
  • Despite being tracked by Soviet radar, the U-2 successfully completed missions due to its high-altitude capabilities.
  • The camera for the U-2 was developed by Dr. Edwin Land of Polaroid, contributing to the plane's success as a reconnaissance aircraft.
  • The U-2 program remained top secret, as admitting its existence would compromise the Soviet Union's perceived strength.

"That primitive skunkworks operation set the standards for what followed."

This quote reflects on the original Skunk Works operation and how it laid the groundwork for future innovative projects, including the U-2 spy plane.

U-2 Spy Plane and Soviet Union Engagement

  • The U-2 spy plane program was a significant operation for the United States during the Cold War.
  • The U-2 planes flew missions over the Soviet Union, gathering intelligence without being detected for a period.
  • On May 1, 1960, the Soviets shot down a U-2 plane, marking the first time a ground-to-air missile successfully downed an aircraft.
  • This incident exposed the U-2 program and halted U.S. spy flights over the Soviet Union.
  • The pilot, Francis Gary Powers, survived and was captured, leading to a diplomatic incident between the U.S. and the Soviet Union.
  • A planned summit in Paris between Eisenhower and Khrushchev was overshadowed by the incident.
  • The U-2 incident forced the U.S. to cease overflights of the USSR, but the aircraft continued to be useful in other global regions.

"The Russians are constantly trying to shoot them down. They fail, nobody says anything. And then on May 1, 1960, ironically, on Mayday, we launched the YouTube program on July 4, and it ends, at least over the Soviet Union. On Mayday, 1960, the Soviets finally have developed a missile that can reach 70,000ft with accuracy. And they shoot down a U two."

The quote describes the success of the U-2 program until the Soviets developed the capability to shoot it down. It marks a turning point in the aerial espionage capabilities of the U.S. over the Soviet Union.

Lockheed's Secret Projects and Silicon Valley's Role

  • Lockheed Martin's secret divisions played a crucial role in developing surveillance technologies.
  • The company created innovative ways to gather intelligence post-U-2 incident.
  • Lockheed's secret division in Northern California significantly contributed to the origins of Silicon Valley.
  • The secret division was involved in projects that were not public knowledge until declassification in the 1990s.
  • Lockheed's work included the development of new surveillance systems and participation in the growth of Silicon Valley's tech industry.

"But that was only true for about three months, thanks to another super secretive Lockheed division that figured out another way for us to take pictures of the Soviet Union."

This quote highlights the quick adaptation and innovation by Lockheed's secret division to continue surveillance on the Soviet Union after the U-2 program was compromised. It underscores the resilience and resourcefulness of American intelligence capabilities during the Cold War.

The Inception of Silicon Valley

  • Frederick Terman from Stanford was instrumental in fostering an ecosystem for tech innovation in Silicon Valley.
  • Terman encouraged the collaboration between academia and the defense industry, which led to the establishment of Silicon Valley.
  • Lockheed's secret division, Lockheed Missiles and Space Company (LMSC), was one of the first tenants of the Stanford Industrial Park.
  • LMSC's presence in Silicon Valley played a significant role in the region's development, becoming its largest employer.
  • The company's activities in missile systems and space exploration had a profound impact on the local economy and technological advancement.

"Lockheed becomes one of the very first and biggest tenants of the Stanford now research park and is still there to this day."

This quote emphasizes Lockheed's early and significant presence in Silicon Valley, suggesting the company's long-term impact on the region's technological landscape and its evolution into a global tech hub.

Development of Surveillance Satellites

  • Lockheed's secret division developed the Corona satellite program, which provided significant intelligence capabilities from space.
  • The Corona program was able to capture detailed images of the Soviet Union and other areas of interest.
  • The satellites operated in various orbits and could take high-resolution images, surpassing the capabilities of the U-2 planes.
  • The film from these satellites was returned to Earth using a complex re-entry and mid-air retrieval process.
  • The program was a precursor to modern satellite imagery and had a lasting impact on surveillance and intelligence-gathering methods.

"The very first corona mission, that very first satellite that went up in August 1960, produced greater photo coverage of the Soviet Union than all of the previous U two flights combined."

This quote signifies the groundbreaking success of the Corona satellite program in providing comprehensive surveillance coverage, revolutionizing the way intelligence was gathered during the Cold War.

Evolution of Space Surveillance

  • Following the Corona program, Lockheed developed subsequent satellite programs like Gambit, Hexagon, and Kennen.
  • Each program improved upon its predecessor, with enhanced resolution, coverage, and capabilities.
  • The progression of these programs demonstrated the U.S.'s increasing proficiency in space-based surveillance technology.
  • The Kennen program introduced real-time digital photography from space, a significant technological leap.
  • These advancements had profound implications for national security and the development of space technology.

"The first real time space based surveillance system, I guess maybe the first real time surveillance system, period. By 1977, there were enough communication satellites up in the sky, and digital photography had come along far enough."

This quote underscores the pioneering nature of the Kennen program, marking a milestone in the evolution of real-time surveillance from space and setting the stage for future advancements in satellite technology.

Impact of Lockheed Missiles and Space Company (LMSC) vs. Skunkworks

  • LMSC's contribution to America and the world potentially more impactful than Skunkworks
  • LMSC became Lockheed's crown jewel from a business perspective
  • At times, LMSC was the largest business by revenue within Lockheed
  • LMSC was consistently the most profitable division, crucial during Lockheed's financial struggles
  • LMSC tackled technology and computing problems, leading to higher profit margins than aircraft manufacturing
  • From 1960 to 1972, LMSC accounted for over a third of Lockheed's revenue and 128% of the profit
  • In the early post-Cold War period (1983-1992), LMSC accounted for 46% of revenue and 72% of profits

"LMSC generated more than 100% of the profits of Lockheed. So all of the rest of Lockheed, Skunkworks included, was in the red, unprofitable bleeding money, and LMSC was keeping the company afloat."

This quote highlights LMSC's critical role in sustaining Lockheed financially, especially during periods when other divisions were unprofitable.

"During the twelve year period from 1960 when Corona first launched to 1972, Lockheed as a whole did 26 billion in revenue over that twelve year period, and just 255,000,000 in total profit. Not a high margin company. During that period, LMSC accounted for over a third of that revenue and 128% of the profit."

The quote provides specific financial figures demonstrating LMSC's significant contribution to Lockheed's overall revenue and its disproportionate share of the company's profits.

LMSC's Operating Principles and Philosophy

  • LMSC's operating principles built off Skunkworks' foundation
  • LMSC had seven tenets, similar to Skunkworks' rules
  • Tenet one: focus on a threat-based need, emphasizing market context
  • LMSC's approach differed from Skunkworks by incorporating market needs into product development
  • The importance of addressing a threat-based need versus solely rapid delivery of superior products

"And don't lose sight of the market context for what you're building."

This quote underscores the importance of understanding and responding to market needs, which was a key aspect of LMSC's operating philosophy.

"Was there a threat based need for the SR 71?"

The quote poses a critical question about the necessity of the SR-71 Blackbird, suggesting that a market need does not always equate to a threat-based need, which is central to LMSC's first tenet.

The SR-71 Blackbird and Skunkworks

  • The SR-71 Blackbird, developed by Skunkworks, was an advanced reconnaissance aircraft
  • Gary Powers' U-2 incident accelerated the development of a successor
  • SR-71's design focused on speed (Mach 3+) and altitude (over 80,000 feet) to evade enemy defenses
  • The SR-71 used innovative materials like titanium and a unique fuel to withstand extreme conditions
  • Despite its technological marvels, the SR-71 faced operational challenges and high maintenance costs
  • The SR-71's decommissioning highlighted the end of an era for Skunkworks' traditional aircraft development

"The blackbird had panel gaps. And to add insult to injury, there are a variety of reasons they decided not to have custom fuel tanks. They literally just made the skin of the aircraft, the fuel tank itself."

This quote illustrates the unconventional and challenging aspects of the SR-71's design, such as its fuel system and the need for panel gaps to accommodate thermal expansion.

"And these aren't rocket engines. These are jet engines that they figured out how to make go Mach three."

The quote emphasizes the extraordinary engineering feat of designing jet engines capable of propelling the SR-71 to speeds exceeding Mach 3 without rocket propulsion.

The F-117 Nighthawk and Stealth Technology

  • The F-117 Nighthawk, also developed by Skunkworks, was the first operational stealth aircraft
  • Its design was based on a mathematical approach to minimizing radar signature
  • The Nighthawk's success in Operation Desert Storm demonstrated the effectiveness of stealth technology
  • Despite its combat achievements, the Nighthawk's development marked a shift in military strategy and the end of the Cold War era for defense contractors
  • The Nighthawk's secrecy was maintained by thousands of individuals for over two decades

"The radar signature of this plane is less than an eighth of an inch sphere."

This quote highlights the incredibly low radar signature of the F-117 Nighthawk, which was a key factor in its stealth capabilities.

"The Nighthawk flew 1% of the air missions in Desert Storm but accounted for 40% of all damaged targets."

The quote reflects the disproportionate impact of the Nighthawk in combat operations, despite its small number in the overall mission count.

Consolidation of the Defense Industry Post-Cold War

  • The end of the Cold War led to a decrease in defense spending and a need for industry consolidation
  • The "Last Supper" meeting directed by Deputy Defense Secretary William Perry urged defense CEOs to merge companies
  • Lockheed Martin formed from the merger of Lockheed and Martin Marietta
  • Other major mergers followed, including Boeing with McDonald Douglas
  • The consolidation was driven by shrinking defense budgets and the need to maintain a capable military industrial base

"You all need to consolidate and start merging with one another. We, the Defense Department, are no longer going to be able to feed all of the metaphorical mouths at this table."

This quote from Deputy Defense Secretary William Perry clearly instructs defense industry leaders to merge their companies due to anticipated reductions in defense spending.

"We learned that night, the first night of the Gulf War, and for many nights after that that stealth, combined with precision weapons constituted a quantum advance in air warfare."

The quote from the Secretary of the Air Force acknowledges the game-changing nature of stealth technology combined with precision weapons, as demonstrated by the Nighthawk's performance in the Gulf War.

Consolidation and Market Strategy

  • Lockheed and Martin Marietta's consolidation was a response to declining defense budgets and the need to maintain market presence.
  • The consolidation created a "Franken company" composed of multiple previously independent and not very profitable entities.
  • The merger aimed to increase market share and profitability in a shrinking defense industry.

"Lockheed soon purchased General Dynamics aircraft business, and Martin Marietta purchased General Electric's aerospace business. All told, our company comprises 17 previously independent entities." "Lockheed, at the time of the merger, did 13 billion in revenue and only 422,000,000 in net income. Martin Marietta was slightly more profitable, did 9.4 billion in revenue and 450,000,000 in net income."

The quotes highlight the scale of the mergers and the financial state of the companies involved, emphasizing the challenges and strategies in a consolidating defense market.

Military Industrial Complex Dynamics

  • The defense industry operates on a rotational basis where contracts are shared among major players.
  • Ben Rich predicted the future of aerospace manufacturing to be a collaborative effort with many subcontractors.
  • The division of labor across companies and subcontractors is seen as a blueprint for future aerospace projects.

"All five players are basically in on all the big contracts, and the government's very aware of that, and the companies are all very aware of that, and it sort of reached this stasis." "Under the current manufacturing arrangements for the B-2, Boeing makes the wings, Northrop makes the cockpit, LTV makes the Bombays and the back end of the B-2 airplane, in addition to 4000 subcontractors working on bits and pieces of everything else."

These quotes describe the shared nature of contracts within the defense industry and the complex manufacturing arrangements for military aircraft, highlighting the interdependence of major defense contractors.

Evolution of Aerospace Manufacturing

  • The transition from the Skunk Works approach to a more distributed manufacturing process is evident in recent US government aircraft programs.
  • The F-22 and F-35 programs demonstrate the lengthy and costly development cycles in modern aerospace.
  • The F-35 program, in particular, represents a shift towards a multi-role aircraft with a focus on information-based warfare.

"This is at the end of the Skunk Works book about the end of the B-2 bomber program." "The F-22 program is over... The final down from 750 to 339 is 187 planes delivered."

These quotes reflect on the end of an era in aerospace manufacturing and provide details on the scale and outcomes of the F-22 program, indicating the challenges of modern aircraft development.

Economic and Political Influence of Defense Contractors

  • Defense contractors like Lockheed Martin play a significant role in the US economy and politics.
  • The distribution of manufacturing across states is a strategic move to secure congressional support for defense programs.
  • The defense budget allocation reveals the priorities and spending patterns of the US government.

"Lockheed has become world class at understanding where their bread is buttered." "The f-22 is built in 46 states. It requires 95,000 jobs."

These quotes discuss Lockheed Martin's political and economic strategies, including job creation and distribution of work to influence government decisions, illustrating the company's significant impact on national defense budgeting.

Modern Defense Spending and Contractor Revenue

  • The US defense budget is substantial, with a significant portion allocated to defense contractors.
  • Lockheed Martin, as the largest government contractor, receives a large share of federal spending.
  • The financial structure of defense contracts ensures a predictable margin for contractors like Lockheed Martin.

"The total US government budget is $6 trillion. So defense in there at $800 billion clocks in... It's actually lower than Social Security, health care, and income security." "Lockheed Martin makes a bunch of money and at the end they only have 8%."

These quotes provide context on the scale of US defense spending in relation to the overall government budget and Lockheed Martin's revenue from government contracts, highlighting the company's financial position within the defense industry.

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