Lockheed Martin Threatens Layoffs, Politics at Play?

Lockheed Martin Threatens Layoffs, Politics at Play?
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Lockheed Martin Threatens Layoffs, Politics at Play?

Lockheed Martin Corporation (NYSE:LMT), the world’s largest defense contractor, threatened to issue layoff notices to its 123,000 employees before the presidential election this November, if the Congress does not ward off from the impending defense budget cuts, also known as “sequestration.”

The proposed Sequestration Transparency Act of 2012 requires a $1.2 trillion automatic budget cuts on defense and government programs. The bill is set take effect on January 2, 2013.

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The government plans to cut 10 percent in defense and 8 percent in other government programs. The Aerospace Industries Association released a report citing that sequestration will affect 2.14 million jobs, reduce GDP by $215 billion, and workforce earnings by $109.4 billion. The study also showed that $56.7 billion in spending cuts on the government’s defense budget will cost 325,693 direct jobs, plus 48,147 civilian DoD employees.

If sequestration is implemented, the report warned, the GDP growth rate in 2013 will be reduced two-thirds, and the unemployment rate will increase by 1.5 percent. The states of California, Virginia, and Texas will be strongly affected by the bill, with five-digit losses, according to the study compiled by Stephen Fuller, economist at George Mason University.

Robert Stevens, chief executive officer of Lockheed Martin, will testify today at the House Armed Services Committee hearing.

According to Stevens, Lockheed Martin is obliged to issue layoff notices 60 days before the sequestration kicks off. He explained that it is not clear who will be affected by the layoffs. The company is still unsure if it is necessary to shut down any plant. He said, “Our best judgment is that we may have to notify a substantially higher number of our employees beginning late in the third quarter of this year, that they may not have a job if sequestration takes place. We do not look forward to making those notifications.”

If the sequestration will affect 10 percent of Lockheed Martin’s business, Stevens said the realistic number of employees who will become unemployed will be 12,000.

Yesterday, former Vice President Dick Cheney went to the Capitol Hill at the Senate GOP Conference, and spoke about the long-term damage of sequestration to military.

Senator Tom Coburn (R- Okla) told reporters that Cheney “just talked about the stupidity of the sequester, where you cut everything the same,” while Senator Bob Corker (R-Tenn) described Cheney’s presentation on sequester as a blunt objection and very sensible.  He said, “He did talk about his time as Defense secretary in the ’90s, and how he benefited from investments made the decade before.”

On the other hand, Senate Majority Leader, Harry Reid, has doubts on the former Vice President’s motives in speaking against the sequestration. Reid noted Cheney’s ties Halliburton Company (NYSE:HAL), a defense contractor and oil giant. According to Reid, Cheney worked with Halliburton before he became vice president. The company did “extremely well” when Cheney became vice president. Reid said, “I assume there’s going to be some concern about Halliburton again in this conversation they’re going to have today.”

Sean O’Keefe, chairman and CEO of EADS North America, David Hess, president of United Technologies Corporation (NYSE:UTX)’s Pratt & Whitney unit; and Della Williams, president of Williams-Pyro Inc., will also testify against the sequestration during the House Armed Services Committee hearing today.

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