Companies are trying to head off billions in automatic cuts to federal defense spending. Lockheed Martin eyes layoffs this fall

Lockheed Martin is contemplating a pre-election move that could shake up the political landscape.

Right before Election Day, the company is likely to notify the “vast majority” of its 123,000 workers that they’re at risk of being laid off, said Greg Walters, the company’s vice president of legislative affairs.


Walters’s comments are some of the most specific threats yet from an industry that’s trying to head off the $500 billion in automatic cuts in defense spending set to begin taking effect Jan. 2. Called sequestration, the cuts are being phased in over 10 years, with about $55 billion slated for 2013.

Unless Congress reaches a deal to stave off the cuts, “we will find it necessary to issue these [layoff] notices probably to the vast majority of our employee base,” Walters told POLITICO.

The company has little choice, he explained, because federal law requires large employers to provide two months’ notice to workers facing layoffs. “We would see a requirement, an obligation, to issue [layoff] notices 60 days prior to sequestration taking effect,” he said.

Lockheed Martin, the world’s largest defense contractor and a bellwether of the industry, won’t be alone. Other defense contractors have also signaled they’re considering sending out notices right before Election Day.

The layoffs, of course, won’t all happen on Jan. 2, as it would likely take months for sequestration to begin affecting contractors’ bottom lines. But the timing of the cuts — along with the requirement of 60-day notice — provides an opportunity for the defense industry to ratchet up the pressure on President Barack Obama and congressional leaders to tackle the issue before November.

Only a fraction of Lockheed’s workers ultimately would be let go as a result of the cuts. But the company plans to send out mass notifications because it is unsure exactly which employees would be affected. The White House Office of Management and Budget has not yet provided guidance for how sequestration would be carried out.

“We’ve wanted a dialog about what sequestration could look like,” Walters said. “But as of right now, no, we have no answers from OMB.”

Under sequestration, nearly every account in the Pentagon budget would be trimmed, resulting in a 10 percent reduction in the Defense Department, which has seen its funding roughly double since 2001, due largely to the wars in Iraq and Afghanistan. And Rep. Buck McKeon (R-Calif.), the chairman of the House Armed Services Committee, said that because the cuts would be leveled across the board, Pentagon planners would not be able to prioritize what should be eliminated first.

“I am very concerned,” he told POLITICO. “I feel an urgency because I think it’s happening right now. People are already being laid off, and jobs are already being frozen or they’re not hiring, and I’m frustrated.”

McKeon is pushing a bill that would pay for the first year of sequestration through a 10-year, 10 percent reduction in the federal workforce, achieved through attrition.

Asked about McKeon’s plan, Walters said Lockheed does not want to be seen as endorsing any particular proposal. “We would prefer — without endorsing one alternative or another — we certainly would like the uncertainty removed going forward,” he said.

And even if sequestration were delayed by a year, Walters added, “It would still be an environment where we wouldn’t be confident making investment and hiring decisions.”

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