The U.S. government shutdown has forced United Technologies Corp. (UTX)’s Sikorsky Aircraft business to slow production of Black Hawk helicopters and threatens the financial performance of the unit unless it ends soon.
“The immediate impact of the U.S. government shutdown on Sikorsky is only manageable for a short time,” Paul Jackson, a spokesman for the Stratford, Connecticut-based division, said today in an e-mail. “Any extended government shutdown will considerably impact our business.”
Sikorsky won an $8.5 billion, five-year contract to build Black Hawks for the U.S. military last year. It slowed work on the aircraft after Department of Defense inspectors were furloughed due to the shutdown, Chief Financial Officer Gregory Hayes said today at a meeting with analysts and investors in Monterrey, Mexico.
The unit, which receives 75 percent of its revenue from the U.S. government, won’t meet United Technologies’ forecast for annual sales growth in the “low single digits” because spending reductions that began in March have sapped demand for spare parts, Hayes also said today. The cuts, known as sequestration, call for military spending to shrink by $500 billion over a decade.
Sikorsky earned $712 million in operating profit on $6.79 billion in sales last year.
The government shutdown and sequestration are making the unit’s financial performance over the remainder of this year and beyond difficult to predict, Hayes said.
“We’re not going to know much until we get this Washington mess sorted out about what the fourth quarter at Sikorsky is going to look like,” Hayes said. “Sikorsky will be challenged to grow earnings next year with sequestration.”
United Technologies fell 0.4 percent to $107.38 at the close in New York, making it the second-worst performer after Wal-Mart Stores Inc. among members of the Dow Jones Industrial Average today.
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