Sequester Imperiling Our National Security: Blakey

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Oct. 22 (Bloomberg) –- Aerospace Industries Association CEO Marion Blakey discusses the defense industry and budget cuts. She speaks with Erik Schatzker, Stephanie Ruhle and Phil Mattingly on Bloomberg Television's "Market Makers." (Source: Bloomberg)

We are certainly moving into high gear to make sure that not only the administration and members of congress that, frankly, people back in the districts, the american citizens, know what is at stake.

Unlike a lot of the other discussion, we are talking about something that is imperiling national security, defense of our freedom, the kind of investment that has to go into defense in the long room -- in the long run are ones that -- r&d, the technology that protect our troops, all of that is going to dry up if we see another round of sequestration.

Why have the stock prices of these major defense companies soared/ one would think that automatic spending cuts would hurt them.

We are very lucky that you are talking about some of the best managed companies in the world.

They have anticipated -- with the end of two wars they have understood that there will be reductions in the defense at it they have been preparing for that.

Remember, the defense industry has taken under the budget control act almost $500 billion in cuts.

Unlike most of the other sectors, this has been going on for a while, and these companies have been able to cut costs, streamline, and frankly, downsized in some cases.

They are managing very well, but there is a limit if i'm in fact, the kind of cuts that sequestration requires continued to roll on top of us.

I think the expectation was that republicans would be the ones to come to the table and help out to get rid of defense cuts, but more and more, particularly on the house side, republicans i talk to care more about bringing it down to 968 in helping with defense cuts.

Are you worried that you have lost some of your republican defenders that you thought would help in the process?

I think we all understand that we are going to have to address the debt and deficit, so we are in agreement on that.

The problem is the mechanism.

This across the board, mindless way of doing it, and the fact that it is disproportionately hitting defense -- remember, $.70 of every dollar that goes into defense goes to small businesses.

There is a huge supply chain in this country, in all most every community, that is supplying, and they are very small companies.

In some cases mom-and-pops.

They are already hurting right now and some are already shutting the doors.

That means we are in a very fragile state at this point, and members of congress, republicans as well as democrats, have got to come to terms with that.

Marion, you set a couple moments ago that these cuts imperil national security and freedom.

Those are big words and big concerts and are very dear to americans, so i know what you are saying it.

But give me a sense of how big does the defense in history and aerospace industry need to be to ensure freedom and sigourney for americans?

-- freedom and security for americans?

I'm not sure it is a question of an overall size.

It is a question of the fact that we have to continue to invest in technology.

That is what has given the united states our edge -- but, marion, excuse me for a moment.

If it is not about size, why are you complaining about the cuts?

It is all about size if the cuts are the problem.

Yes, i can tell you exactly what we think, because that does give the margin to continue to do the kind of investment for the long run that we need.

So, yes, it is something that we are well below at this point.

We fear that the pentagon budget is going to get well below $500 billion, and while that sounds like a lot of money, you have to understand that the vast majority of that is going to operations and maintenance.

It is going to the troops.

And that's fine.

But the investment side of things is going to have to be supported if we are going to continue to have the kind of advantage that so far we take for granted, i'm afraid.

Marion, you talk about how well managed and led some of these companies are.

If the sequestration stays, cuts are going to get exponentially worse.

They had been prepared and their stock prices went up.

What happens when more cuts happen?

You could be the best manager in the world, but if cuts are in the way, how do you have a standing business?

It is difficult across the board in the industry?

Most of activities are saying that and trying to explain that while they're doing everything to diverse affiant, -- to diversify and make certain they are the right size for the contract that are already in the pipeline, but we are very concerned because 30,000 smaller suppliers are out there, often with only one product, one particular technology.

Some of it is very, very unusual.

It is not like you can find the skill sets that do this.

We are watching the worker base erode, and that is a very odd thing because in the long run, if people go elsewhere -- young people say that this is too volatile and industry, we don't want to commit here -- that is going to erode the defense- industrial base that the country relies on.

Over the next few weeks capitol hill will be flooded with people making similar pitches to lawmakers.

How do you differentiate yourself and how do you taylor your message to lawmakers who have different perspectives on defense?

I think the key thing is for everyone to understand that we are differentiating.

When you look at the primary purpose of government, most fundamental is to protect our own citizens.

Go back to the constitution.

When you look at the fact that defense in the country has already been cut severely, it is important for us to differentiate and say no, this is a debate where the discretionary budget, which is what defense is a part of, has been hit hard, but even more so, the defense portion of that budget.

It is time for us to look at the question of how do we bring revenues, how do we bring spending in line, how do we make a fair choice across the entire federal budget.

That does mean looking at mandatory accounts as well.

Marion, we thank you for joining us.

The ceo of the aerospace industries association, former administrator at the faa.

And phil mattingly, our washington correspondent, with us in a new york city today.

When we come back, they are one of the biggest drivers of job creation.

We're going to cover that when we come back.

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This text has been automatically generated. It may not be 100% accurate.

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