 It’s not easy to finish first among a group of formidable competitors—let alone four times running. Yet that is what Lockheed Martin managed to accomplish in the largest-companies grouping in Aviation Week’s 16th annual Top-Performing Companies (TPC) study, outpacing second-ranked General Dynamics and third-place Boeing. Oshkosh Corp. captured the top honor for companies with revenues of $5-20 billion, while Cubic took the crown for companies with revenues of $1-5 billion. Lockheed’s unprecedented first-place win for four consecutive years would have seemed improbable a decade ago, when the company was regarded as a financial basket case. Hobbled by a patchwork of cultures, accounting structures and quality control systems—coupled with a disastrous foray into commercial telecom—the enterprise placed next-to-last in the 2001 TPC study. This year’s victory might seem counterintuitive in light of the torrent of criticism for the company’s management of the Joint Strike Fighter (JSF) program. However, study advisers point out that relative to its peers, Lockheed demonstrated significant improvement in nearly every financial and operational metric for the past five years, particularly Return On Invested Capital. But can Lockheed stay on top? There is stinging criticism at the Pentagon and on Capitol Hill that the defense contractor is not delivering the same quality of returns to taxpayers it is to shareholders. That has led to demands that management devote more of its profits to paying for a larger share of cost overruns on programs where it is the prime, most notably the $380 billion JSF. Sen. John McCain (R-Ariz.) is demanding that Lockheed absorb more of the added expenses he says stem from “abysmal” program management. And it’s not just the JSF that is drawing the government’s ire: A senior defense industry insider, speaking on background, says the company recorded significant cost growth last year on multiple programs. Of course, Lockheed Martin isn’t the only large defense contractor under fire for cost and schedule performance. As departing U.S. Defense Secretary Robert Gates stated just last month, “Contractors [are] consuming too many resources relative to real military missions and measurable results.” On the JSF program, the danger for Lockheed Martin is what would happen if there were any wavering by the Air Force, the primary customer, or contraction in the number of aircraft the Navy and Marine Corps plan to buy. That would trigger an immediate spike in recurring unit costs, effectively pushing the program into a death spiral of diminishing quantities and still higher unit costs—much like what occurred on Lockheed’s F-22 program. Chairman/CEO Robert J. Stevens maintains that a close examination of Lockheed’s broader product portfolio would reveal that the company is executing generally at very high levels. “We have many, many programs that are meeting an extraordinary number of commitments,” he says. But he acknowledges that the JSF is a pain point. “We must improve our execution and be able to adapt more quickly.” The low-key Stevens is credited for accelerating Lockheed’s performance after becoming CEO in 2004. This year, in the first TPC ranking of company operations at the segment level, Lockheed’s units turned in strong results against their peers (rankings of 117 segments are detailed online for subscribers of the Aviation Week Intelligence Network). | 
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