United Technologies says extended shutdown could put 5,000 jobs at risk
04 October 2013
United Technologies Corp, which supplies helicopters and jet engines to the military, said in the event of a prolonged government shutdown it may be forced to furlough as many as 5,000 workers.
Initially, the effects would result in layoffs for about 2,000 Sikorsky Aircraft employees on 7 October, and possibly 2,000 more at Pratt & Whitney and UTC Aerospace Systems if the shutdown ran into next week, according to the company's statement. A shutdown into November could see the total rise to over 5,000, it added.
The projected cuts at Hartford, Connecticut-based United Technologies highlight the vulnerability of federal contractors as the standoff between President Barack Obama and congressional leaders drags on. With lack of funding for government operations for the new fiscal year that started on 1 October, services ranging from medical research to tax audits were on hold.
Bloomberg quoted Jefferey Ladewig, associate professor of political science at the University of Connecticut, as saying that the effects of the shutdown were relatively slow at first. The first wave were federal employees, the second wave would be contractors and then deeper into the economy would be the suppliers and distribution centres that support all those companies, he added.
According to chief financial officer Gregory Hayes, who spoke to analysts this week, the company received about 18 per cent of its revenue from the government. Its products included Black Hawk helicopters and engines for the F-35 Joint Strike Fighter.
According to United, its operations were held up due to the absence of furloughed inspectors from the Defence Contract Management Agency "who audit and approve operations throughout the manufacturing process for military products."
The company's federal contracts for the 2013 fiscal year total over $4.6 billion, the sixth-highest among private contractors, according to the Office of Management and Budget. The government would be spending a total of $357 billion on contractors for the year.
Contractors have suffered in the past shutdowns. While federal employees had been compensated for lost wages after previous shutdowns, contractors as a group had not been reimbursed.
CNN Money quoted Cord Sterling of the Aerospace Industries Association as saying that a shutdown would harm the economy unnecessarily when it was only slowly recovering, creating widespread ripple effects as also a loss of public confidence. Amongst the association's members are major companies like Lockheed Martin, Raytheon, Northrop Grumman, and Honeywell.
A survey by the National Association of Government Contractors released on Wednesday showed that of its 925 members, 29 per cent, planned to delay hires as a result of the shutdown.