Bloomberg News

Lockheed Gets Set to Furlough 3,000 Workers as Shutdown Drags On

October 05, 2013

Lockheed to Furlough 3,000 Employees Due to U.S. Shutdown

The Lockheed Martin Corp. facility stands in Fort Worth, Texas. Photographer: Mike Fuentes/Bloomberg

Lockheed Martin Corp. (LMT:US), the biggest U.S. defense contractor, said it was ready to furlough 3,000 employees on Oct. 7 because of the partial government shutdown.

“I’m disappointed that we must take these actions and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown,” Chief Executive Officer Marillyn A. Hewson said yesterday in a statement. She said the number of workers on unpaid leave is expected to increase weekly if the shutdown continues.

Warnings of planned or potential furloughs, coupled with pleas for an end to the impasse, extended beyond Lockheed. Boeing Co. (BA:US), the No. 2 contractor, said yesterday it may begin “limited furloughs” next week. The Aerospace Industries Association, a trade group, said tens of thousands of defense workers face being forced off their jobs without pay.

“Shutting down the government has been a tragic mistake,” said Marion Blakey, president of the Arlington, Virginia-based association, which counts Lockheed and Boeing among its members.

Some Lockheed employees aren’t able to work because their jobs are in closed government facilities, their tasks require government inspections or a stop-work order has been received, the company said in a statement.

Contacting Congress

“If you want to make your voice heard on this issue, I urge you to contact your members of Congress on your personal time,” Hewson said in a memo to employees.

The shutdown is negatively affecting development and testing of Lockheed’s F-35 fighter jet, according to Air Force Lieutenant General Christopher Bogdan, the Pentagon’s manager of the $391.2 billion program. Flight tests have been hampered, and aircraft deliveries are also at risk, he said in a statement.

“Maintaining a stable program is one of the key drivers to keeping the F-35 on track and on budget,” Bogdan said. “We look forward to a quick resolution that will enable our government to properly function again.”

Lockheed fell less than 1 percent to $122.50 at the close of trading yesterday in New York. The Bethesda, Maryland-based manufacturer received $36.9 billion in federal contracts in fiscal 2012, which ended about a year ago, according to a Bloomberg Government study.

Boeing Outlook

Boeing “is seeing increasing effects on certain daily operations that involve U.S. government facilities and people,” Dan Beck, a company spokesman, said by e-mail.

“We expect more consequences could emerge in the coming days, including limited furloughs of employees in some areas,” Beck said. The Chicago-based defense and aerospace company won $30.3 billion in contracts in fiscal 2012, the BGOV study shows.

Some employees of Booz Allen Hamilton Holding Corp. (BAH:US), ranked 13th on the BGOV list with $4 billion in fiscal 2012 contracts, are being assigned to other tasks or being allowed to take paid leave, James Fisher, a spokesman for the consulting firm, said by e-mail.

“We have not begun any furloughs, but are considering various options, depending on the length of the shutdown,” Fisher said. The company is based in McLean, Virginia.

The shutdown is affecting all aspects of military contracting, according to a letter to Defense Secretary Chuck Hagel from Blakey, the aerospace association president, and retired Lieutenant General Lawrence Farrell Jr., president of the National Defense Industrial Association, also in Arlington.

Absent Inspectors

Blakey and Farrell said their “most immediate concern” was the absence of contract-management inspectors, who audit work throughout the manufacturing process.

Two other top defense contractors, BAE Systems Plc (BA/) and United Technologies Corp. (UTX:US), have said they plan cutbacks following the government shutdown that began Oct. 1.

As many as 10 percent to 15 percent of the 34,500 employees of London-based BAE’s U.S. unit may be affected, according to Neil Franz, a company spokesman.

The U.S. division, BAE Systems Inc., already has excused 1,000 employees from work, Linda Hudson, the unit’s chief executive officer, said yesterday in a statement. The division will pay affected workers through this week, Hudson said Sept. 30 in a message posted on Facebook Inc.’s website.

United Technologies Corp., a supplier of military jet engines and helicopters, said this week that an extended U.S. shutdown would put as many as 5,000 employees on unpaid leave.

The first effect will be furloughs for about 2,000 workers at the company’s Sikorsky Aircraft unit on Oct. 7, and possibly 2,000 more at Pratt & Whitney and UTC Aerospace Systems if the shutdown extends into next week, the Hartford, Connecticut-based manufacturer said Oct. 2. It said the total may surpass 5,000 employees if the partial closure continues into November.

To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net; Kathleen Miller in Washington at kmiller01@bloomberg.net.

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net.


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Companies Mentioned

  • LMT
    (Lockheed Martin Corp)
    • $191.64 USD
    • 6.49
    • 3.39%
  • BA
    (Boeing Co/The)
    • $125.67 USD
    • 0.61
    • 0.49%
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