Lockheed Martin Chairman and CEO Robert Stevens, EADS North America Chairman and CEO Sean O'Keefe and Pratt and Whitney President David Hess testify before the House Armed Services Committee on Capitol Hill July 18, 2012 in Washington, DC.
Over the last few months, the aerospace industry has become a thespian, staging a drama of fear about the impact of a sequester on defense. Lockheed CEO Robert Stevens warned his employees that as many at 10,000 Lockheed jobs could be affected and thumped the tub about the one million defense jobs that a sequester would threaten (according to an Aerospace Industries Association-commissioned study). Republican Senators Ayotte, Graham, and McCain are putting the production on the road, touring carefully selected audiences with the same message.
Stevens was very specific. He sent a letter to his employees with the warning that their jobs might be at risk. And he said the company would be forced to let employees know that they were “late in the third quarter” this year.
Sounds suspiciously political theater. And it is. The Department of Labor is bringing the curtain down. It has now issued “guidance” to state agencies about the requirements of the WARN Act and it is patently clear that no defense contractor is under any obligation to inform anyone about the potential implication of a sequester.
The heart of the Labor Department’s guidance is clear. The law and implementing regulations (developed at the end of the Reagan administration) require such notices at least 60 days before ordering a plant closing or mass layoff. And the WARN notifications need to go to “affected employees.”
That means the company needs to know a) that sequester will happen; b) that DOD will execute the sequester in a specific way; and c) that DOD decisions will affect specific contracts, work locations, and employees, who need to be notified.
None of this is known today, and very little of it is likely to take immediate effect if a sequester were to happen. As the Labor Department memo notes: “It is unlikely that employers will have enough information to predict which contracts will be affected and, therefore which plants could close and which groups of employees could experience employment losses” without knowing what the level of FY 2013 funding is or how agencies would actually implement a sequester.
So we’re talking politics here. As the Vice-President might have said, Robert Stevens got a little bit out over his skis. Time for the industry to get serious, instead of looking for a way to “save defense” by frightening workers about the unknown. The AIA study was silly because it took none of this time phasing into account and it counted a bunch of jobs that are unlikely to be affected.
The underlying budget problem is what needs to be addressed. Sens. Ayotte, McCain, and Graham need to call off their “tour of fear,” (carefully controlled to make sure only defense workers are in the audience and then callously announcing that “MacDill is toast” if a sequester happens, when they have no such specific information). The defense budget is going down; it is time to focus on managing the build-down instead of running a horror show in the middle of an election campaign.