Impact of sequester on defense contractors remains uncertain

Posted Wednesday, Mar. 06, 2013  comments  Print Reprints
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The budget axe is set to drop in a matter of weeks, but the area's largest defense contractors are still in the dark about the specific impact of automatic spending cuts caused by the budget impasse in Washington.

Lockheed Martin and Bell Helicopter are awaiting guidance from the Pentagon to determine the actual impact of the so-called sequester on their Tarrant County operations. The forced spending cuts, triggered March 1 by congressional inaction, threaten thousands of jobs and programs at the two aerospace giants and other local contractors that are part of the state's $36 billion aerospace industry.

The nature and extent of the Pentagon budget shifts "are as yet undetermined," Bell Helicopter spokesman William Schroeder said Tuesday. "Until we see the final numbers and determine their impact, it's premature to comment."

Lockheed Martin officials say they face a similar holding pattern.

"Until we receive specific guidance from our government customers, we cannot speculate on how significantly sequestration will impact our programs or facilities," Lockheed spokesman Ken Ross said. "We will of course work with our customers and adapt to any significant changes."

But even as they wait for specifics, the companies are starting to slim down their workforces or curtail hiring.

In the past few months, Lockheed Martin has laid off more than 300 workers. It has also offered a voluntary separation program, which provides a lump-sum payment to those with 25 years of seniority.

On Friday, Bell, which has not had significant layoffs in recent years, laid off 15 hourly workers, though all but two of them found other jobs with Bell, Schroeder said.

It's still unclear whether the Pentagon will ask for across-the-board cuts of up to 8 percent to defense contracts, or whether agencies will have some discretion in making the reductions. The Budget Control Act of 2011 imposed $487 million in Defense Department cuts over the next decade.

To halt the sequester, Congress will have to pass, and the president sign, a bill extending routine government funding after a stopgap bill expires March 27. Otherwise, a partial government shutdown is anticipated.

The North Texas workforces at Lockheed and Bell exceed 25,000.

Any layoffs triggered by the sequester at Lockheed Martin will be announced companywide, Ross said.

"As we have previously stated, if warranted, we will provide affected employees the full notice period required by jurisdictional WARN Acts for covered layoff activity at the appropriate time," he said.

The cuts aren't expected to be immediate, and Tarrant's big defense employers could have weeks or months to adjust, analysts say.

The initial impact on Bell Helicopter, officials have said, would likely be small because the company has contracts and funding on V-22 aircraft and military helicopters through 2015.

And the cuts would not apply to funds already obligated to support Lockheed's F-35 program.

In December, Lockheed received a Pentagon contract guaranteeing a final installment of about $127.7 million for the fifth production lot of F-35 fighters. It later received Pentagon contracts worth up to $3.67 billion for 31 additional F-35 jets, according to news reports.

Yamil Berard, 817-390-7705

Twitter: @yberard

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