* Pratt & Whitney, Lockheed consider warnings on job cuts
* Shareholder, employee concerns trump Labor Department
By David Lawder
JUPITER, Florida, Aug 8 U.S. defense contractors
facing automatic budget cuts at the year-end are still
considering issuing layoff notices to employees just before the
Nov. 6 elections, even though the Obama administration says such
warnings are unnecessary.
David Hess, president of aircraft engine maker Pratt &
Whitney, told Reuters on Wednesday the company was still
examining its legal obligations regarding notification of
employees who could be put out of jobs in January.
At issue are some $55 billion in automatic spending cuts for
fiscal 2013 that are due to hit on Jan. 2 and which could cost
the defense industry thousands of jobs.
Hess and other aerospace industry executives are mounting a
campaign to persuade Congress to stop them.
In a controversial move last week, the U.S. Labor Department
said the circumstances surrounding the planned cuts were too
uncertain to require defense and other federal contractors to
comply with the provisions the so-called WARN Act, which
requires employees to be notified 60 days before major layoffs
or plant closures.
Republican lawmakers immediately accused the Obama
administration of trying to suppress potentially damaging
notices of layoffs just before the election.
"Right now the WARN Act is the law, and we always comply
with the law, so we're not quite sure we understand the
direction from the Department of Labor," Hess told Reuters at a
rally for employees at Pratt & Whitney's jet engine test
facility and rocket engine plant near West Palm Beach, Florida.
The cuts in January stem from an August 2011 congressional
budget deal to avoid a historic default on U.S. Treasury debt.
Congress pledged to find $1.2 trillion in additional spending
cuts by the end of 2012, or they would happen automatically,
with half coming from defense spending.
Although defense firms have warned that some $500 billion in
cuts over 10 years will ultimately cause the loss of more than
two million jobs countrywide, they have little clarity on how
the Defense Department will parse out the pain starting in
Pay and benefits for military personnel are exempt from the
cuts, but executives are waiting to hear which weapons programs
will be hit hardest.
DETAILS DUE WITHIN 30 DAYS
On Tuesday, President Barack Obama signed legislation
requiring his administration to detail within 30 days how it
will administer the cuts, which may help contractors decide
where to cut.
"We'll make a decision in the future as to whether or not
we'll issue WARN notices. Some of it may depend on what clarity
we get in 30 days," Hess said.
Job cuts at Pratt & Whitney's U.S. operations could reach
into the hundreds, Hess said. The Florida plant does development
work on engines for the stealthy F-35 Joint Strike Fighter and
builds rocket engines and has been under consideration for new
investment to produce engines for exported F-35s.
Should the cuts cause a reduction in the fighter jet's
production rate, the company would have to re-evaluate its
expansion plans, Hess added.
Tom Burbage, program integration manager for the F-35 at the
plane's prime contractor, Lockheed Martin, said his firm
"appreciates" and will analyze the Labor Department guidance,
but management must first answer to shareholders and employees.
"The Labor Department is not a major shareholder in
corporations like Lockheed Martin or (Pratt & Whitney
parent)United Technologies," Burbage said.
"Generally speaking, if we know there's a potential to have
a major reduction in the future, we have to take appropriate
action," he said. "All we are trying to do is be transparent
with our employees so that nobody is caught by surprise."
Lawmakers from both parties say they oppose the
across-the-board cuts that will hit in January as a result of a
budget deal made a year ago, but they have not been able to
agree on alternative ways to reduce spending.
Congress is on a five-week recess and when it returns in
September, it will have only 11 legislative days to try to
broker a deal before the November election.
With both parties dug into partisan positions on budget and
spending issues, a resolution is not likely until a
post-election "lame duck" session of Congress that will be
crowded with other fiscal deadlines.