Automatic Pentagon Cuts Must Be Stopped, Lockheed Chief Says

Automatic Pentagon budget cuts that would take effect next year must be reversed by November, Lockheed (LMT) Martin Corp. chief Robert Stevens said.

The prospect of cuts is having a “chilling effect” on the defense industry, and Lockheed and other companies may stop hiring and training, Stevens, chairman and chief executive of the world’s largest defense contractor, said today at a conference in Washington.

The possibility of about another $55 billion in cuts starting in January “is a huge disruption to our business,” Stevens said at an event on Capitol Hill organized by the Aerospace Industries Association.

“We are not going to hire,” Stevens said. “We are not going to make speculative investments. We are not going to lean forward. We are not going to invest in incremental training.”

The Bethesda, Maryland-based company already has been paring back for an era of reduced defense spending. In July, it offered a voluntary separation plan to all 6,500 employees on its salaried U.S. corporate staff, predicting about 2 percent would take the offer. Lockheed previously had announced 3,850 job cuts starting in 2010.

Lockheed had about 123,000 employees at the end of last year, according to a company filing with the Securities and Exchange Commission.

The Obama administration’s budget plans call for $487 billion in cuts over 10 years from previous projections. Lawmakers have deadlocked so far on efforts to avert an additional $500 billion in automatic defense cuts over a decade.

Those cuts would begin in January because a congressional supercommittee failed to meet deficit-reduction goals.

Lockheed Martin and other defense contractors have signed “thousands of contracts that have terms and conditions,” Stevens said.

Those contracts will be abrogated when funding stops, “and there will be thousands of claims'' from small businesses, Stevens said.

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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