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Defense cuts would be ‘blunt-force trauma’

Published 9:54pm Wednesday, July 18, 2012

The president and CEO of the largest defense contractor present in North Suffolk outlined how automatic defense budget cuts would affect America during a House Armed Services Committee hearing Wednesday.

Lockheed Martin President and CEO Robert Stevens, one of several speakers, said his company has already slowed hiring and could lay off 10,000 employees if so-called sequestration occurs.

Sequestration would take effect if federal lawmakers don’t reach a deal to reduce the deficit by January, taking $500 billion more from defense budgets for 2013-2021 than the minimum $487 billion — a nine percent cut — already assured.

Lockheed Martin employs 120,000 “patriotic women and men” in 50 states and 75 countries, Stevens said.

The company is the largest employer of graduate engineers and also employs 26,000 military veterans, he said.

Stevens said he agreed with Defense Secretary Leon Panetta’s description of sequestration as a meat axe.

“It is,” Stevens said, also saying that his company’s ability to plan for the possibility is hampered by a “fog of uncertainty” from the Office of Management and Budget over where the axe would fall.

“We have little insight as to how sequestration will be implemented and no insight” into which programs will be cut, facilities closed, suppliers sidelined, and so on.

Despite later citing 10,000, he said, “we are unable to reliably estimate how many employees are going to lose their jobs, and how many families are going to be disrupted.”

Beyond the defense industry, he said, the broader consequences of sequestration are “not well understood.”

“In short, sequestration constitutes blunt-force trauma,” he said. “It’s likely to tear the fabric of our industry, adversely affect our national security, and impair our domestic agencies.”

The hearing, titled “Sequestration Implementation Options and the Effects on National Defense: Industry Perspectives,” was more important than seven previous committee hearings and one briefing on sequestration, Chairman Buck McKeon said, because it heard directly from the defense industry.

A report by George Mason University professor Stephen Fuller and Chmura Economics and Analytics, released Tuesday, identified that Virginia will be the second-hardest hit state by sequestration behind California, and the hardest-hit in terms of defense cuts.

The report predicts 136,191 defense-cut job losses in Virginia, ahead of California’s 135,209.

Defense spending cuts would reduce the sum of all goods and services produced in Virginia by $11.80 billion, against $11.72 billion in California.

Fuller estimated that Hampton Roads would bear roughly 15 percent of defense cuts in Virginia.

Most of the cuts would come from contracting, he said, because “there isn’t a whole lot” of civilian defense personnel, and military personnel would be exempt.

“I would guess that around 92 percent of the job losses would be in the private sector, and a huge part of those will come from contractors,” he said.

Likely scenarios would include deferred maintenance and canceled contracts affecting Newport News shipyard, and closures of and layoffs by restaurants and grocery stores.

The Navy will be less affected than the other branches, he said, in one hopeful piece of news.

He said the best outcome would be for lawmakers to find common ground on deficit reduction, saying, “the best thing is for this not to happen.”

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