Lockheed Martin accelerate more payments to supply chain amidst COVID-19 disruptions

Following the news that Lockheed Martin will again accelerate payments of US$300m to small critical suppliers:

Nicolas Jouan, Aerospace and Defense Analyst at GlobalData, a leading data and analytics company, offers his view on Lockheed’s decision;

“This US$300m of accelerated payment is only the latest of a growing list. The company has kept adding such payments to small critical suppliers almost exponentially since the end of March when US$53m was advanced to small and medium suppliers hurt by COVID-19-related economic slowdown, immediately followed by another US$53m payment at the beginning of April.

“The company is now reaching a cumulated US$750m in advanced payments, a bill that it seems ready to undertake after announcing 9.1% sales growth year-on-year during its Q1 earning release less than a month ago.

“The lower tiers of the US defense supply chain has been a topic of concern since long before COVID-19. The Department of Defense (DoD) launched the Trusted Capital Marketplace in 2019 to provide investments to innovative companies in reaction to the low survivability rate of small and medium enterprises trying to do business in defense. BAE Systems and General Dynamics have also committed to hundreds of millions of dollars in advanced payments since the beginning of the crisis. The Pentagon itself announced in April US$3bn of early payments to face the short-term impact of COVID-19. But these might not resolve more fundamental sustainability issues of small suppliers, who tend to be suffer more from COVID-19-like disruptions because of lower margins and overreliance on primes such as Lockheed.”

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