Defense Giant Says Budget Cuts Could Mean Pink Slips With dramatic cutbacks in defense spending looming if Congress fails to reach a budget deal, defense systems manufacturer Lockheed Martin says it will be forced to send layoff warnings to more than 100,000 employees this fall.
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Defense Giant Says Budget Cuts Could Mean Pink Slips

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Defense Giant Says Budget Cuts Could Mean Pink Slips

Defense Giant Says Budget Cuts Could Mean Pink Slips

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Come January, the U.S. could fall off what's being called a fiscal cliff. The Bush-era tax cuts are set to expire and across the board spending cuts are set to kick in. Those spending cuts, called sequestration, were a part of last summer's debt limit deal. Now the defense industry is warning those cuts could have dramatic consequences.

NPR's Tamara Keith reports.

TAMARA KEITH, BYLINE: Just imagine the political fallout. November 2nd, only days before the election and tens of thousands, maybe hundreds of thousands of layoff notices go out. That's exactly what some in the defense industry say will happen if Congress doesn't act soon to reverse sequestration.

MARION BLAKEY: I believe that everyone understood that sequestration was going to involve layoffs.

KEITH: Marion Blakey is president and CEO of the Aerospace Industries Association, a defense industry group that has been lobbying heavily to get Congress to avert the cuts.

BLAKEY: But what I don't think anyone understood was the unintended consequence of early layoff notices.

KEITH: There's a federal law called the Warn Act that requires companies expecting massive layoffs to notify affected employees at least 60 days in advance. Lockheed Martin is the most prominent company to announce it plans to issue early layoff notices this fall. Executives say they may be forced to send these warnings to all 123,000 Lockheed employees, though they obviously would not cut that many jobs.

California Republican Congressman Buck McKeon says he recently spoke with Lockheed's CEO.

REPRESENTATIVE BUCK MCKEON: He said I'm going to have to send them notices 60 days before that they might not have a job in January. So he's going

KEITH: California Republican Congressman Buck McKeon says he recently spoke with Lockheed's CEO.

MCKEON: He said, I'm going to have to send them notices 60 days before that they might not have a job in January. So he's going to do that to all of his employees and to their suppliers.

KEITH: The conventional wisdom is Congress isn't going to have the time, inclination or political will to address sequestration or any of the other fiscal cliff issues until after the election.

McKeon, who's chairman of the House Armed Services Committee, is part of a vocal group of lawmakers who insist something must be done sooner.

MCKEON: I think it should be done today. Friday would be OK, but it should be done now. Then, you don't have to even worry about the notices being sent out. We could fix it.

KEITH: He has a bill that would reduce the federal workforce by 10 percent to avoid the cuts, though it doesn't have a shot in the Senate. Arizona Republican Senator John McCain is pushing the White House to detail where the spending cuts would hit so government agencies and companies would have a better sense of what programs would be affected.

McCain almost seems to welcome the idea of these layoff notices because they might lend emphasis to an argument he's been making for months.

SENATOR JOHN MCCAIN: Oh, I think the American people need to know the impact of sequestration, both on our national security and as well as the effect on our economy.

KEITH: And while those effects would be very real, they probably wouldn't hit all at once in the first week of January, says Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments. He can't say whether talk of layoff warnings is a ploy by the defense industry to put pressure on politicians, but he's pretty sure they don't really need to send out the notices right before the election.

TODD HARRISON, CENTER FOR STRATEGIC AND BUDGETARY ASSESSMENTS: Will they have to lay some people off down the road, within a few months, the next year or two? Absolutely. But the timing of this - are they going to have to do that starting exactly on January 3rd? I think that's highly suspect.

KEITH: The National Association of Manufacturers recently put out a report saying defense cuts scheduled for 2013 would mean a loss of a million jobs in 2014. It's just the latest in a series of efforts from industry groups trying to get Congress to do something to blunt the impact. In the meantime, defense contractors big and small are watching, wondering and lobbying.

Della Williams is CEO of Williams-Pyro, a defense firm in Fort Worth, Texas with 92 employees.

DELLA WILLIAMS: They're just saying to me, is this going to happen and, if so, should we jump now or should we take our chances? What do you think? And, of course, you know, I just have to tell them, you know, hopefully, this is not going to happen.

KEITH: It's what Lockheed Martin's CEO has taken to calling the fog of uncertainty. Tamara Keith, NPR News, the capitol.

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