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More Defense Related Layoffs Announced

by: Matthew Potter
September 28, 2011

Category: BAE Systems, Boeing, Business Line, Companies, Congress, Contract Additions, Contract Awards, Countries, Department of Defense, England, Events, Federal Budget Process, FMS, General Dynamics, Lockheed Martin, Military Aviation, production program, Proposal, Restructuring, Services | RSS 2.0

As the big defense contractors continue to restructure themselves and their workforces for what is expected to be a period of decline in spending more layoffs were announced this week. The pressure too from the U.S. and other governments to be more price conscious is also affecting decisions related to the size of overhead and support employees.

Many of the major U.S. corporations have already announced plans to reduce their overall number of employees including General Dynamics (GD), Boeing (BA) and Lockheed Martin (LMT). Despite all three having strong sales and many major programs they feel that it is best to begin creating a leaner overall structure.

Lockheed followed up its earlier announcement of eliminating 1,500 jobs in its Aeronautics unit which builds the F-35 Joint Strike Fighter and the C-130 transport with word that it has already cut 540 of them. This includes over 200 at its Georgia plant making the C-130 and F-22 fighter. This is about 2.5 percent of the workforce at that facility.

In a bigger move British defense giant, BAE Systems (BAE:LSE), said that it would plan on reducing its workforce by about 3,000 positions. Most of these would be related to aircraft production where the Eurofighter Typhoon is near the end of its production run. Most of the original European customers have ordered all of that aircraft that they plan to buy leaving it needing Foreign Military Sales (FMS) customers to keep the line going beyond the next decade.

The Typhoon is being considered by India and potentially Japan for their new fighter but it is one of many that is being bid and price pressure is very strong for these deals making it hard to predict a winner.

BAE Systems has enjoyed a strong decade as it has grown in the U.S. market as well as supplying a British military involved in Iraq and Afghanistan. Now the U.K. is trying to reduce its overall spending which will seriously affect its defense spending while the U.K. has left Iraq and will leave Afghanistan with the U.S. in the next few years. The U.S. defense budget will also be reduced limiting further growth in that market.

BAE is one of the largest employers in the U.K. and these job losses will be a blow to that country’s economy and well being. The announced cuts represent almost 10 percent of their workers in that country. Earlier this year BAE had already began to make smaller cuts related to specific programs. This large one seems to be an adjustment to what is perceived as plans for the British Government’s future spending proposals.

As defense budgets decline it won’t only be contractor positions eliminated but also civil service and military as well. A large amount of money goes to these types of jobs and the quickest way to save is to cut back there. At a time when the U.S. and European economies are still struggling with higher then normal unemployment these types of moves will not help but must occur if budgets are to be balanced.

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