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Defense and Space Related Layoffs Announced by Big Defense Contractors

Several announcements have been made in the last few days of planned layoffs and work force reductions by large defense contractors in the United States. Some of these have only been for small amounts of employees but in total they reflect a large amount of job losses in a short time. They further illustrate the cyclical nature of the defense business where permutations in the budget may affect areas disproportionately when it comes to the local economy.

Both General Dynamics (GD) and Lockheed Martin (LMT) announced major cuts to parts of their companies. GD plans to reduce its C4 Systems group by about 500 positions or roughly five percent. The jobs will be eliminated over the next two weeks. The group has job locations across the U.S. and Canada and most will be affected. The total workforce will be affected with engineers, management and support staff positions eliminated. GD says that the move is not necessarily related to the loss of one individual contract but is due to a need to begin reducing their costs so as to offer the government a better price as well as delays in the receipt of funding from the Defense Department.

Lockheed Martin citing some of the same reasoning plans to eliminate eight percent of their space systems division or 1,200 positions. These too will include the removal of twenty-five percent of their middle management. Many of the slots will be eliminated in Sunnyvale, CA; Pennsylvania and Denver, CO. The company says that the potential for less business in the near future is driving some of the cut backs and is seeing less orders for their products.

Boeing (BA) is planning on reducing its workforce at the Wichita, KS Defense, Space & Security’s Maintenance, Modifications and Upgrades (MM&U) facility. This operation performs military modifications and maintenance and will do much of the work on the new U.S. Air Force KC-46A tankers. Boeing says that it plans for the facility to perform less work then in the past which is why it is cutting back. Not all employees will be laid off as the company may place them elsewhere and also rely on retirements and voluntary separation to cushion the blow.

BAE Systems (BAE:LSE) has announced that due to the end of contracts to produce body armor for the U.S. military it may end up closing a plant in Tennessee and laying off its entire work force. As the United States leaves Iraq and Afghanistan demand for such products will lessen. BAE is looking for other work for the plant but if it cannot be found they will just close it and eliminate the 132 jobs there.

The U.S. defense budget has been very cyclical in the past. This has led to situations where work forces are increased rapidly to meet specific needs for equipment or systems. Then the funding is reduced and the work goes away. There are many towns in the United States that have gone through this process. The effect on some of them has been quite drastic as the money flowing in and being spent is suddenly cut off. People are forced to move as there are often no similar jobs available in the area which can depress the real estate market.

At a time when the U.S. economy is already struggling with ten percent unemployment these kind of job cuts and losses are not helpful. Many of these are high paying, well benefited positions that will be hard to replace. The pressure on the U.S. defense budget though to shrink will only increase over the next several years as the U.S. begins to confront its large budget deficits. Stories like this will be only more common in the next months.

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