Defense company executives warn of layoffs if cuts go through

Wednesday - 7/18/2012, 10:06pm EDT

Pentagon Solutions

Download mp3

A slate of defense industry executives lined up to testify before the House Armed Services Committee Wednesday, telling lawmakers that the automatic budget cuts known as sequestration would be devastating to their businesses and could lead to mass layoffs.

The lack of action by Congress, so far, to avert the cuts has led to a "fog of uncertainty," five months away from when sequestration would take effect, the CEO of Lockheed Martin testified.

"With just 167 days remaining until it is triggered, we have little insight as to how sequestration will be implemented, no insight into which programs will be curtailed, which sites will be closed, which technologies will be discontinued, or which contracts will be reformed," Lockheed CEO Robert Stevens said in his prepared remarks.

Stevens estimated the company may have to cut as many as 10,000 positions from the company rolls. But specifics are hard to nail down without additional government guidance, he said.

A new analysis released by the Aerospace Industries Association on the effect of the automatic cuts warned that about half of the estimated 2.1 million layoffs would come from the defense industry.

EADS North America will likely issue WARN Act notifications to employees as a precaution, Chairman and CEO Sean O'Keefe said.

He said the move is necessary "in the absence of definitive guidance" from the Defense Department and the administration.

"It's not something we want to do," O'Keefe said. "But it appears the law requires us to do it. Clearly the intent of the act is to provide employees with time to prepare for known events that may impact their employment. Without a doubt, sequestration could be just that kind of event."

David Hess, president of jet engine-maker Pratt & Whitney and chair of the AIA, also called for "clarity" from the Office of Management and Budget in how sequestration will be implemented across federal agencies.

"Regardless of how the cuts are implemented," Hess said in his prepared remarks, "the consequences for the industry will be dire."

Della Williams, president and CEO of Williams-Pyro, a small business in Fort Worth Texas, reiterated to the panel that defense cuts would impact small businesses as well as top tier contractors.

"These cuts will flow down the supply chain and through the broader economy," she said in her prepared remarks. "They will impact companies, like mine and threaten the jobs of thousands of skilled workers."

RELATED STORIES:

House OKs bill requiring White House to hand over sequestration details

Civilian workforce faces brutal consequences under sequestration

Clock already ticking on automatic cuts