UPDATE 2-Lockheed picks Kubasik as president, COO

* Move aimed at strengthening program oversight

* Stevens to continue as chairman, CEO

* Kubasik successor to be named soon (Adds comments from Stevens interview, Kubasik statement)

By Andrea Shalal-Esa

WASHINGTON, Oct 15 (Reuters) - Lockheed Martin Corp (LMT.N) on Thursday said Christopher Kubasik would become president and chief operating officer on Jan. 1 as part of a reorganization aimed at improving program oversight in an increasingly tough environment for U.S. defense spending.

Bob Stevens, who currently serves as president of the top U.S. defense contractor, will continue as chairman and chief executive officer, increasing his focus on high-level customers and efforts to strengthen the company strategically, operationally and financially, Lockheed said in a statement.

Kubasik's successor as executive vice president of the company's Electronic Systems business area, which had 2008 sales of $11.6 billion, would be named soon and there would be no "gap in leadership," Stevens said in a statement. "We have a number of strong internal candidates," he said.

"Re-establishing the position of president and COO, and electing Chris Kubasik to that role, will strengthen oversight of program performance across the corporation and take operational excellence to an even higher level," Stevens, 58, said in a statement.

"Our customers are facing a set of circumstances today with mounting fiscal pressures, limited resources and a considerable list of growing mission responsibilities, and they're looking to their partners in the industry to do a better job in execution," Stevens told Reuters in a telephone interview.

He said Lockheed aimed to "step up" its efforts to deliver weapons for lower cost and on shorter cycle times.

"We are not satisfied ever because we think that there is room for improvement in everything we do," he said, when asked if the reorganization was an implicit acknowledgment that the current structure did not oversee programs as well as needed.

Under the new structure, Kubasik, 48, will oversee Lockheed's four business areas. The head of operations and program management, and the chief information officer and vice president of enterprise services will also report to him.

"This new structure puts our businesses, their more than 3,000 programs, and the institutional mechanisms for improvement under Chris's operational oversight," Stevens said.

Prior to his appointment as leader of Lockheed's electronic systems sector, Kubasik served as the company's executive vice president and chief financial officer, responsible for financial strategies, processes and operations.

Stevens had served as the company's president and chief operating officer until August 2004 when he became president, chief executive and chairman. At that point, Lockheed dropped the COO position and named Kubasik as chief financial officer.

Analysts say Kubasik is clearly being groomed as Stevens' successor.

Kubasik on Thursday said he looked forward to assuming his new responsibilities and helping strengthen the company's performance on existing programs.

Stevens said he would focus on maintaining Lockheed's role as the premier global security company, and work on expanding its presence in adjacent markets such as ground vehicles, information technology applications, logistics, cybersecurity and renewable energy.

Loren Thompson of the Virginia-based Lexington Institute, said the move sent a strong signal to the Obama administration that Lockheed was determined to keep its programs on cost and on schedule at a time when Defense Secretary Robert Gates has targeted underperforming programs for cancellation.

"They are recreating the chief operating officer's job, and putting a respected executive in that position, because they want to send a signal to the administration that they take program execution very seriously," said Thompson.

The analyst said he was reminded of last April, when Lockheed decided not to lobby in opposition to a decision by Gates to end production of the company's F-22 fighter jet. "They're trying to show that they hear their customer and they're responding," he said.

Lockheed shares were trading nearly unchanged at $75.20 on Thursday morning. (Reporting by Andrea Shalal-Esa, editing by Dave Zimmerman)