Congress has until January 2 to amend or alter provisions of the Budget Control Act of 2011 that will mandate $1.2 trillion in federal budget cuts over the next ten years including $500 billion from the national security budget. The defense cuts would follow reductions of $487 billion already programmed by the Obama administration.
“A very rough seat of the pants estimate is that we might be required to lay off about 10,000 Lockheed Martin employees,” Stevens told the House Armed Services Committee according to his prepared remarks released to the public.
“We firmly believe sequestration is wrong,” he told the powerful defense committee. “It’s wrong for the country, wrong for the industry, wrong for the people of Lockheed Martin. It’s the wrong process to secure greater reductions in spending.”
Stevens stressed that an automatic budget trigger – a default position – should not become the dominant force for allocating resources and shaping the nation’s security posture.
“(Sequestration) will be a blunt-force trauma to industry and to America,” he noted. “We’re concerned that it will tear the fabric of the supply chain, the industrial base and our national security in significant and irreparable ways.”
The pending reductions will trigger implementation of the WARM Act, requiring at least 60 days advanced notification before workers can be laid off, the CEO said. A substantially greater number than 10,000 Lockheed Martin workers likely will be notified beginning in the third quarter of this year , he added, since there is no clear signal from the Defense Department or Congress regarding which business lines, contracts, programs or technologies will be impacted.
Stevens said the cuts also will cause substantial disruption among Lockheed’s 40,000 suppliers and many will file claims for adverse cost impacts.
“Then we will be compelled to assemble this portfolio of requests for equitable adjustments or claims and pass that along to our government customers,” he said.
A report released earlier in the week by the Aerospace Industries Association attributed even more compelling impacts to sequestration. In 2013 alone, the report said, the nation’s economy would lose 2.14 million jobs, $215 billion in gross domestic product and $109.4 billion in personal earnings by American workers.
Defense industry would lose at least one million jobs, the AIA report concluded, along with $86.5 billion in GDP and $59.4 billion in personal earnings.
Stephen Fuller, director for regional analysis at George Mason University, said the impacts of sequestration are bleak but clear cut.
“The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two thirds,” Fuller is quoted in an AIA press release. “An already weak economy will be undercut as the paychecks of thousands of workers will be affected from teachers, nurses, construction workers to key federal employees.”
AIA President and CEO Marion C. Blakey said sequestration is not just a defense problem but an American problem.
“Unless our leaders in Washington take action, massive cuts have the potential to devastate our economy,” Blakey is quoted in the same AIA statement. “In addition, more than one million defense-dependent jobs on the line will risk our national security, economy and the technological innovation that keeps America second to none.”