In the past year, Northrop Grumman Chairman Kent Kresa has been preoccupied by his company's planned merger with Lockheed Martin. The deal would have cost Northrop its independence but resurrected it as a prime defense contractor. Now that the Justice Dept. has torpedoed the deal, Kresa, 60, must focus anew on his company.
On Aug. 24, Kresa announced a restructuring that will keep Northrop independent--albeit as more of a subcontractor of electronics and information systems to the likes of Boeing, Lockheed, and Raytheon. Los Angeles-based Northrop will slash its workforce by nearly 15%, to 46,000, by 2001 and take a $60 million charge this year. Northrop expects the moves to boost operating margins to 12.5% by the end of 2000, from 10% in the first half of '98. "It's finally an acceptance internally that they can compete very successfully not as a prime, but as a principal subcontractor," says Renee J. Gentry, senior analyst with the Teal Group in Fairfax, Va. To "survive and thrive," Kresa says he has no other option.