The chief executive officer of Rockwell Collins Inc. (COL:US) said his company will shift some of its business into the commercial sector as Pentagon budget cuts lead to the dismissal of hundreds of workers.
Clayton Jones, speaking with Bloomberg Television’s Hans Nichols in an interview for “Capitol Gains” airing March 31, said he expects Rockwell Collins to trim about 300 employees this year because of automatic federal budget cuts known as sequestration, with more firings possible next year.
“I think that could be the tip of the iceberg because I think most of the effect is going to be felt in” fiscal year 2014, Jones said. “Sequestration is the single worst piece of public policy I’ve seen in my 33 years in this business, and it will absolutely affect us.”
Last year, federal agencies accounted for about 38 percent of sales for the Cedar Rapids, Iowa-based company, according to its 10-K filing (COL:US) with the Securities and Exchange Commission.
Jones said the company expects to see its commercial work expand by 7 percent this year.
Rockwell Collins, which produces avionics and information technology systems for aircraft, won about $1 billion in direct U.S. government contracts in the year that ended Sept. 30. That’s a 29 percent drop from about $1.4 billion in 2009 when President Barack Obama took office, according to data compiled by Bloomberg.
Uncertainty over government funding means “it’s impossible to plan,” Jones said. Budget cuts and furloughs, leading to fewer federal employees at the Defense Department, may slow cash flow for contractors, he said.
Pentagon furloughs tied to sequestration have been slated for June.
Department of Defense officials plan to cut the furloughs of civilian workers to 14 days from 22, Defense Secretary Chuck Hagel said yesterday.
The Defense Department’s initial plan to cope with sequestration called for putting civilian workers on furlough for one day a week over 22 weeks. Additional money provided by Congress in a defense spending bill for the fiscal year that ends Sept. 30 has allowed the Pentagon to scale back the amount of unpaid leave.
Retired Air Force General Charles Wald, now a director at Deloitte Services LP, said he expected the Pentagon would cut furloughs “to zero.”
Wald, speaking in a separate interview on “Capitol Gains,” said the Pentagon had been “very frugal” in its spending since the start of the fiscal year.
“My guess is that they will find a way not to have furloughs,” Wald said.
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