North Texas braces for defense cuts

Posted Tuesday, Feb. 26, 2013  comments  Print Reprints
A

Have more to add? News tip? Tell us

Tension is mounting among North Texas aerospace workers as huge federal spending cuts due to take effect Friday under "sequestration" appear increasingly inevitable.

With Congressional leaders at an apparent impasse, automatic spending cuts threaten thousands of jobs and programs at Lockheed Martin, Bell Helicopter and other defense contractors that are part of the state's $36 billion aerospace industry.

"The only thing people can do now is hunker down and prepare to fire people, basically," said Richard Aboulafia, an aerospace analyst for the Teal Group in Washington D.C.

North Texas stands to lose big from reductions in programs and workers at some of the world's largest defense contractors, analysts say. The workforce at Lockheed Martin and Bell Helicopter tops 20,000 in Fort Worth alone, while thousands of others are employed by assorted providers of helicopters and aircraft components in Tarrant and neighboring counties.

In Tarrant County, contracts awarded to defense contractors totaled $11.1 billion in 2011, with more than $7 billion tied to Lockheed Martin's F-35 fighter program, according to the Center for Security Policy, a pro-defense group. Some big projects at Lockheed and Bell are already funded, and would escape immediate cuts.

While specific fallout from the budget battle is unknown, Lockheed Martin is already tightening its belt under pressure to contain costs on the over-budget F-35 program.

On Monday, Lockheed notified 68 employees that they will be laid off, spokesman Ken Ross said. The layoff notices went to material handlers, aircraft mechanics and assemblers, a union official confirmed Tuesday.

The layoffs are needed to adjust staffing based on program and business needs and are not related to sequestration, Ross said in response to questions from the Star-Telegram. All told, the company has had 328 layoffs in recent months. Ross has said each round of layoffs has been unrelated to sequestration.

Employees haven't been told if more layoffs are coming, but rumors are flying that more are in store, said Paul Black, president of the International Association of Machinists and Aerospace Workers, District Lodge 776.

"We're sitting here like everybody else to see what happens, but it's not going to be good,'' said Black, whose organization represents 3,600 employees at Lockheed's Fort Worth factory and thousands of service contract workers at Air Force bases in Texas.

"Good or bad, they need to share [information] so everybody knows,'' said Black, who surmises that the recent layoffs were sparked by problems associated with the Joint Strike Fighter.

Aboulafia said that companies haven't announced any plans because the specific impact of sequestration is still unknown.

A provision under the Budget Control Act of 2011 would require 5 to 8 percent to be automatically and equally cut from domestic and defense spending. In defense, that amounts to $500 billion in cuts over the next decade, starting on March 1. Actual cuts are due on March 27, Aboulafia said.

But first, key questions need to be addressed, Aboulafia said. Will the act's requirement of across-the board cuts hold firm? Or will the cuts amount to something more like 1 or 2 percent?

"That's the biggest mystery of all," he said. "Whether or not there will be leeway in the appropriation of cuts or whether they will be applying the letter of the law."

Some local aerospace suppliers are already seeing adverse effects.

Derek Boone, general manager of Fort Worth Gasket and Supply, said the uncertain fiscal environment has delayed his shipments to the Navy. On Feb. 14, the Navy postponed maintenance on the aircraft carrier USS Abraham Lincoln (CVN-72), holding up orders of materials. Boone said his company, which has about 10 employees and was founded in 1918, was expecting to hire a few additional employees this year. But with the threat of cuts, "that's likely not going to happen," he said.

According to a White House memo released this week, hundreds of millions of dollars in domestic and defense programs are at risk from the sequester. Texas Gov. Rick Perry's office accused the Obama administration of taking "the easy way out" on fixing the nation's budget problems by allowing arbitrary cuts under the sequester.

"The state is still reviewing this, but the bottom line is no one truly knows yet what the impacts in each state [is] going to be," said Perry spokeswoman Lucy Nashed. "What we do know is Washington has a spending problem."

President Barack Obama is using the sequester as a scare tactic, Nashed said. "Instead of publishing reports on hypotheticals in order to scare the American people, the White House needs to work with Congress on ways to truly address out-of-control federal spending."

The administration stated that the number of F-35 Joint Strike Fighter jets procured would be reduced. The most expensive weapons system in U.S. history, the F-35 jet fighter program has been plagued with cost overruns, technical difficulties and production delays. On Friday, the Pentagon grounded its fleet of F-35 fighters after a cracked engine blade was discovered in one plane.A Lockheed official said Monday that the impact on the F-35 program is unknown.

"At this time, we do not know how sequestration will affect any individual program or facility," Lockheed spokeswoman Jennifer Allen said.

Funding already approved for the F-35 would likely be unaffected. In December, Lockheed received a Pentagon contract guaranteeing a final installment of about $127.7 million for the fifth production lot. And then just before year's end, Lockheed and the Pentagon agreed to contracts for a sixth lot of 31 F-35s.

About 6,000 of Lockheed's 14,200 workers at the west-side complex are directly involved in F-35 development, engineering and production, and many other jobs at the plant are tied to the program.

At Bell Helicopter, the initial impact of sequestration would likely be small, Bell President and CEO John Garrison has said, because the company has contracts and funding in place for the V-22 aircraft and military helicopters through 2015.

Bell officials declined to comment for this article.

Yamil Berard, 817-390-7705

Twitter: @yberard

Looking for comments?

We welcome your comments on this story, but please be civil. Do not use profanity, hate speech, threats, personal abuse, images, internet links or any device to draw undue attention. Our policy requires those wishing to post here to use their real identity.

Our commenting policy | Facebook commenting FAQ | Why Facebook?