Create a free account to continue

UPDATED: 13 Defense Executives Bemoan Uncertainty Of Cuts

The executives from such companies as Lockheed Martin Corp., Raytheon Co., Boeing Co., and Northrop Grumman Corp., said the looming cuts had not affected current contracts. But they warned of an impact on the industry and its workforce if the indiscriminate reductions go into effect.

WASHINGTON (AP) — Thirteen defense executives are complaining that the threat of automatic, across-the-board cuts to military spending is creating uncertainty that's already affected their industry.

Seven senators released copies of the executives' letters on Monday. The six Republicans and independent Joe Lieberman are trying to ratchet up the political pressure to force Congress and President Barack Obama to produce a deficit-cutting plan to avert the cuts before they kick in Jan. 2.

However, no action is expected until after the election.

The executives from such companies as Lockheed Martin Corp., Raytheon Co., Boeing Co., and Northrop Grumman Corp., said the looming cuts had not affected current contracts. But they warned of an impact on the industry and its workforce if the indiscriminate reductions go into effect.

Editor's note: Here is Senator McCain's press release regarding the letters:

Washington, D.C. – In response to letters from U.S. Senators John McCain (R-AZ), Joe Lieberman (I-CT), Jim Inhofe (R-OK), Saxby Chambliss (R-GA), Kelly Ayotte (R-NH), Lindsey Graham (R-SC) and John Cornyn (R-TX), thirteen of the nation’s largest defense contractors expressed serious concern about the potential impacts of defense sequestration on their employees and their companies, as well as America’s security.

Senator McCain issued the following statement and summary of the responses they have received:

“The leaders of America’s defense industry share our deep concern that the across-the-board defense budget cuts slated to occur in less than four months will devastate the readiness of our armed forces to meet current and future threats to our nation’s security, will eliminate high-paying jobs in the industry, and will have a negative and long-lasting impact on the defense industrial base. Some of these companies are already seeing the effects of the impending cuts in a slowdown of contract awards and difficulty in recruiting and retaining skilled workers. Dr. Steven Fuller, of George Mason University, estimates that over 1.1 million defense-related jobs will be lost if sequestration takes effect as scheduled on January 2, 2013.

“The looming threat of sequestration cuts is forcing companies to delay hiring and capital investments, which, in turn, contributes to the sluggishness of the economy and continuing high unemployment rates.

“Without a robust defense industry, our military will not have the equipment or training needed to fight and win in future conflicts. I call again on the President to come to the negotiating table and work with Congress to avert these devastating impacts on our national security and American workers.”

Selected quotes from the industry responses follow:

Wes Bush, Chairman, CEO, and President of Northrop Grumman Corporation: “We are very concerned that … [sequestration] would have serious negative consequences for the security of our country, the defense industrial base, and the customers, employees, suppliers, investors, and communities that rely on the companies in the defense industrial base.”

Jim McNerney, Chairman, President, and CEO of The Boeing Company: “[T]he mere specter of sequestration already is having an adverse effect on investment and employment within the defense industrial base due to the additional uncertainty it represents for companies … that are working to weather a fragile economy while absorbing almost $500 billion in defense spending cuts directed by last summer’s Budget Control Act of 2011.”

Sean O’Keefe, EADS Chairman and CEO: “[W]e and our suppliers are left to wonder how and if our businesses will be disrupted as a result of sequestration, not only in the defense sector, but commercial activity as well. The most vulnerable of these aerospace and defense suppliers are the vast number of small to mid-cap businesses that sustain millions of jobs, drive technology and create the innovation that is the hallmark of American aerospace. While larger companies have the capacity to more successfully weather the impending fiscal storm, small businesses do not. … American workers are unemployed today because of the uncertainty that has been allowed to surround sequestration.”

Robert J. Stevens, Lockheed Martin Chairman and CEO: “[Sequestration] will cause dramatic program and personnel dislocation within our industry, with our government customers, and will disrupt the lives of a significant portion of our 120,000 employees and their families. … [W]e do not know how many of our 40,000 supplier contracts may have to be broken … In fact, we are very concerned that the most vulnerable segment of our supplier base is the over 12,000 small and minority businesses …”

William H. Swanson, Chairman and CEO of Raytheon Company: “All of our suppliers could be affected by sequestration, but the impact on our small business suppliers could be particularly pronounced….  [T]hese small businesses are particularly susceptible during times of economic uncertainty or distress.”

John Jumper, Chairman and CEO of SAIC, Inc.: “This would erode our investment in people who have skills and experience in sensitive areas critical to national security, as well as our ability to recruit and retain US military veterans.”

Jay Johnson, Chairman and CEO of General Dynamics: “The uncertainty surrounding the ultimate nature of sequestration is already affecting our investment and hiring activities and this will accelerate as the months pass.”

More in Supply Chain