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Thursday, January 31, 2013

BAE Systems CEO Warns of Potential Impact from Sequestration

Woodrow W. Bellamy III

BAE Systems CEO Linda Hudson on Thursday sent a letter to her employees warning of the potential impact the upcoming sequester — $1.2 trillion in automatic government spending cuts — could have on the aerospace and defense industry.

                      (BAE Systems CEO Linda Hudson)

Aerospace and defense contractors spoke out about sequestration's impact on the industry throughout 2012, especially because of the severe reduction in defense spending; which would have a domino effect from top tier manufacturers like BAE Systems to the second and third tier companies that supply critical structures for their products. The fiscal cliff deal postponed the cuts from January until March, and although several lawmakers have noted the need to avoid the defense cuts, a bi-partisan deal to avoid them still has not been produced.

“Defense won’t be the only victim. Cuts will hit every government agency from the FAA to the FDA to the FBI. Services will be cut. Civilian military employees will likely be furloughed,” Hudson said in the letter.

National defense spending has already been cut by $487 billion as the result of 2011 debt-ceiling legislation, and the upcoming sequester would enact another $500 billion in new defense cuts over the next decade, unless Congress produces a restructured deficit reduction plan. 

The U.S. aerospace and defense industry generates about $324 billion in economic revenue, and employs more than 1 million workers across all 50 states, according to Aerospace Industries Association (AIA). A large portion of that revenue comes from federal contracts, which would be largely reduced under sequestration forcing layoffs.

In her letter Thursday, Hudson said the cuts could put at risk up to two million aerospace and defense industry jobs, and asked her employees to write their elected representatives in Congress urging them to prevent sequestration.

“We stand by our initial estimates that indicate sequestration could result in the elimination of 10 percent of our workforce in the United States – or approximately 4,000 jobs. If and when we receive guidance on specific programs, we will fulfill all of our legal obligations to notify potentially impacted employees in advance of any action,” Brian Roehrkasse, a spokesman for BAE Systems said in an emailed statement.

Other major aerospace and defense manufacturers such as Boeing, Northrop Grumman, Rockwell Collins and Lockheed Martin have also warned of the potential impact the sequester would have on their companies.

Earlier this week, Rep. Paul Ryan (R-Wis.) said he believes the sequester will occur on March 1, thus it will be interesting to see if the message from CEOs such as Hudson will encourage lawmakers to avoid the cuts. More

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