United Technologies Sees 5,000 Jobs at Risk in Shutdown

Stock Chart for United Technologies Corp (UTX)

United Technologies Corp. (UTX), a supplier of helicopters and jet engines to the U.S. military, said an extended government shutdown would force furloughs of as many as 5,000 workers.

The first effect will be layoffs for about 2,000 Sikorsky Aircraft employees in Connecticut, Florida and Alabama on Oct. 7, United Technologies said yesterday. They may be followed by 2,000 furloughs at Pratt & Whitney and UTC Aerospace Systems if the shutdown lasts into next week, the company said.

The total “could exceed 5,000 employees if the government shutdown continues into next month,” United Technologies said in a statement. The Hartford, Connecticut-based company receives about 18 percent of its revenue from the government, Chief Financial Officer Gregory Hayes told analysts this week.

Potential cuts at United Technologies underline the vulnerability of federal contractors as the faceoff between President Barack Obama and congressional leaders drags on. With no funding for government operations in place for the new fiscal year that began Oct. 1, services ranging from medical research to tax audits have been put on hold.

Chief executive officers have begun chiding Obama and congressional Republicans to end their impasse, especially with the approaching deadline this month to increase U.S. borrowing authority, a step required to avoid a government default.

Blankfein, Cote

Goldman Sachs Group Inc. CEO Lloyd Blankfein told reporters yesterday after a White House meeting with the president that failure to act on the debt measure would imperil the economic recovery. Honeywell International Inc. (HON) CEO David Cote said Sept. 30 that the economy was already being put at risk from the government shutdown.

At United Technologies, work on Black Hawk helicopters at Sikorsky has already been slowed in response to the absence of government inspectors, Hayes said. The effects on the division are “only manageable for a short time,” Paul Jackson, a spokesman, said by e-mail earlier this week.

United Technologies fell 0.8 percent to $104.14 at 9:51 a.m. in New York, heading toward a fifth straight daily decline. That would mark the longest such streak since December, according to data compiled by Bloomberg.

Mandatory budget cuts known as sequestration, which call for military spending to shrink by $500 billion over a decade, are already taking a toll on Sikorsky’s business. The unit will fall short of its parent’s forecast for annual sales growth because the reductions, which began in March, have sapped demand for spare parts, Hayes said.

Sikorsky won an $8.5 billion, five-year contract to build Black Hawks for the U.S. military last year. Pratt & Whitney reached an agreement with the Defense Department to manufacture a sixth lot of 38 F-35 fighter jet engines in August. While no value was announced, a 2012 pact for the fifth batch of 30 power plants was valued at $1.1 billion.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net