Lockheed warns on costs of further U.S. defense cuts

Tue Jun 19, 2012 6:25pm EDT
 
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By Andrea Shalal-Esa

WASHINGTON (Reuters) - Lockheed Martin Corp (LMT.N: Quote), the Pentagon's largest supplier, said on Tuesday it could face hundreds of millions of dollars in business claims from suppliers if $500 billion in additional defense spending cuts take effect in January, as currently mandated.

Lockheed Chief Executive Bob Stevens said further cuts required under the process called "sequestration" would cause massive disruption across the defense industry, resulting in extensive layoffs, facilities closures and an erosion of quality.

"From an industry perspective, the near-term horizon is completely obscured by a fog of uncertainty," Stevens told reporters on Tuesday, calling it a "fiction" that the U.S. defense industry was robust enough to survive additional cuts.

Lockheed officials say they expect to complete within the next few weeks their own assessment of the impact of the additional budget cuts, which come on top of $487 billion in cuts already slated to take effect over the next decade.

U.S. lawmakers are considering various ways to avert the additional slashes, but no one has any clear answers for Lockheed and other major U.S. defense contractors.

The additional defense cuts are part of $1.2 trillion in U.S. budget cuts triggered after a congressional committee failed to reach agreement on other ways to reduce the cavernous federal deficit.

Republicans want to slash federal spending on education and other programs to trim the deficit, while Democrats have said some tax reforms are needed. Lawmakers on both sides have said they hope to avoid the mandatory defense cuts.

Stevens said the sequestration cuts could trim 10 percent of programs across the board in just the first year, which would carve about $3.8 billion from its annual total of $38 billion in government contracts, potentially triggering thousands of claims from its 43,000 suppliers.   Continued...

 
Lockheed Martin CEO Robert Stevens takes part in the Reuters Aerospace and Defense Summit in Washington September 6, 2011. REUTERS/Kevin Lamarque