FORT WAYNE – Fort Wayne’s largest defense contractors are unsure how they will be affected if U.S. military spending is chopped by nearly $500 billion over a decade beginning next year.
But officials at ITT Exelis, Raytheon Systems and BAE Systems, which together employ about 3,300 at local operations, don’t want to find out.
“Fort Wayne, of course, would be affected by this as it’s a major part of the ITT Exelis company,” plant spokesman Tim White said Friday.
Exelis’ city operations, which produce military communications equipment and weather-monitoring instruments, employ about 1,200.
In a Friday filing with the Securities and Exchange Commission and a letter sent to the Senate Armed Services Committee, McLean, Va.-based Exelis forecast revenue of $5.4 billion to $5.5 billion this year, compared with $5.84 billion in 2011.
With 69 percent of its sales tied to more than 1,000 federal defense and intelligence contracts, the projected drop in revenue “is in part due to the current uncertainty around the defense market timing of contract awards that have been or will be canceled or delayed,” Exelis President and Chief Executive Officer David Melcher wrote.
Because of restructuring last year that shed 722 jobs from Exelis, Melcher does not see the likelihood of additional layoffs before “much later” in fiscal year 2013, which begins Oct. 1.
But he said Exelis’ 5,000 suppliers “are where substantial reductions are likely to hit first and hardest.”
White agreed: “The loss of key contracts for them could be devastating,” he said in a phone interview.
A study released this week by the Aerospace Industries Association predicts that the planned defense cuts, known as sequestration, could result in the elimination of 2.14 million U.S. jobs next year.
At a congressional hearing Wednesday, Lockheed Martin CEO Robert Stevens predicted the company might slash 10,000 of its 120,000 jobs under sequestration.
Local Raytheon executive Jeff Miller said in an interview this week that “any defense contractor is going to be affected” by the size of automatic spending reductions.
But he said Raytheon’s local plant, which designs military communications gear and employs about 1,000, should fare better than contractors that build large platforms, such as planes and tanks.
“We don’t do a lot of production work here. We do engineering work, so it’s been a little more stable,” he said.
The operation is further guarded against sequestration because “we do a lot more international work than a lot of defense contractors,” he said.
BAE manufactures electronic controls for aircraft at its Fort Wayne plant, which employs about 1,100. Kristen Gossel, an official at BAE in Arlington, Va., said Friday it is too soon to know what steps the company would take in the event of sequestration.
“No one knows if it’s going to happen, and if it does happen, no one knows what it’s going to look like,” Gossel said. “We are committed to telling our workers as soon as we know something and have a definite understanding of the impact.”
She also said: “We are really concerned about sequestration and what it could mean to the whole industry and to the economy and to the nation – the impact on national security and the impact on jobs.”
Members of Congress have indicated their desire to cancel the spending cuts, which would be triggered by last summer’s Budget Control Act unless lawmakers make comparable reductions in appropriations elsewhere.
But with the Republican House and the Democratic Senate in a standoff over spending, tax rates and the pending expiration of tax cuts, action on sequestration could wait until after the Nov. 6 elections.
There’s the possibility Congress will get nothing done before Dec. 31 and be forced to stall defense cutbacks by extending current spending levels into next year.
“I think a lot of it will be dealt with in the lame-duck session” after the elections, Rep. Marlin Stutzman, R-3rd, said during a visit Monday to the local Raytheon plant.
“We better not come home until it’s fixed.”
