Northrop Grumman pulls out of Farnborough 2012

Northrop Grumman pulls out of Farnborough 2012

20-Oct-2011 Source: Reuters

Northrop Grumman Corp (NOC.N) on Thursday pulled out of the 2012 international air show in Farnborough, England, a dramatic move underscoring the company’s drive to cut costs as it prepares for leaner times in the global defence market.

Northrop has participated in the air shows — which alternate between Paris and Farnborough — each year, without interruption, since it merged with Grumman in 1994, said spokesman Randy Belote.

Belote said the company had already been reducing its footprint at the international air shows in recent years, but pulling out completely would save millions of dollars.

He said it did not diminish the company’s commitment to Britain or other international customers.

“Northrop Grumman continues to focus its international business development activities and resources in areas that better support its customers’ needs,” he said.

Virginia-based defence consultant Loren Thompson said it would be the first time in decades that the company — one of the five largest U.S. defence contractors — was not present at the big international showcase of commercial and military aircraft.

“This is just the latest indication of how determined Chairman Wes Bush is to cut costs,” Thompson told Reuters. “They’re going to break the mould in terms of what is expected in terms of industry leaders.”

Bush has realigned the company around four business areas focussed on cybersecurity, logistics, communications and intelligence, and unmanned systems, and recently spun off the company’s shipbuilding business.

The company, which moved its headquarters to the Virginia from Los Angeles this year to be closer to key government customers, has also cut headcount and reduced its exposure to lower-margin work. Northrop derives more than 90 percent of its revenue from the U.S. government.

Belote said Northrop was reevaluating its participation in other international air shows as well, but was only prepared to announce its decision about Farnborough at this point.

Northrop and other arms companies have been scaling back the lavish parties, free-flowing alcohol and luxurious company “chalets” at the Paris and Farnborough air shows in recent years, concerned that too ostentatious of a presence could undermine their promises to improve affordability.

Lockheed Martin Corp (LMT.N) in 2010 halved its corporate presence at that year’s Farnborough air show, and stopped sending top executives like Chief Executive Robert Stevens.

On Thursday, Lockheed said it still planned to participate in the Farnborough show, but would keep cutting costs by reducing the number of participants and equipment it sent.

“Farnborough provides a unique opportunity to showcase our Lockheed Martin UK capabilities and engage with key global customers and industrial partners,” said spokesman Chris Williams.

Boeing Co (BA.N) and Airbus, part of Europe’s EADS (EAD.PA), have grown weary of the ever-growing number of air shows in recent years, according to industry insiders, who say the companies would be happy to scale back.

(Additional reporting by Karen Jacobs; editing by Carol Bishopric)

(Reporting by Andrea Shalal-Esa, editing by Dave Zimmerman)

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