WASHINGTON - Defense contractors are speaking up increasingly loudly against the possibility of mandatory federal budget reductions starting in January, warning that the cuts would take a toll on their businesses.
Robert Stevens, chairman and chief executive at Lockheed Martin, the world's largest defense contractor, said last week that the Bethesda, Md., company might be forced to notify all its employees of the possibility of job losses as early as September or October in advance of the reductions.
The cuts, part of a process known as sequestration, were put in place last year during debate over the debt ceiling. The process mandates a roughly $1 trillion reduction in federal spending from fiscal 2013 to 2021. Sequestration requires the cuts to be split between defense spending and all non-defense accounts.
Although the reductions could be stopped by Congress, contractors and industry advocates have said they do not expect any adjustments before the presidential election. But that doesn't mean they won't be forced to take action as the campaign winds down.
Stevens said last week that under existing law, Lockheed must give employees 60 to 90 days' notice - depending on the state - of an event that might cause significant job losses or facility closures.
"It is quite possible that we will need to notify employees in the September and October time frame that they may or may not have a job in January, depending upon whether sequestration does or does not take effect," he said.
If sequestration happens, Stevens said he expects across-the-board reductions that would "start this huge, cascading effect and bow wave of contract actions."
Wes Bush, chairman, chief executive and president of Northrop Grumman in Falls Church, Va., said his company, too, is trying to prepare for the possibility of sequestration.
"We know how to do this; we know how to do it in a rational way," Bush said of implementing cuts. "If faced with a cliff where the next day you've got to take X percent out ... it will not be pretty."