Defense companies see cuts coming even with a budget deal

Fiscal cliff worries defense contractors
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Defense company executives conceded on Monday that their industry would likely see billions more in cuts even if Congress reaches a deal to avoid the fiscal cliff.

"We need to stop believing or pretending that there is a scenario out there that offers no defense cuts," said David Langstaff, president and chief executive of TASC, Inc. "The question is whether we make them responsibly or irresponsibly."

The automatic cuts, referred to as sequestration, are set to go into effect on January 2 if the White House and Congress cannot agree on where $1 trillion in federal savings over the next decade should come from.

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The Pentagon's budget would be axed by $500 billion over that time. That would be on top of a similar cut the Pentagon is already committed to achieving.

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Langstaff discussed the threat of the looming budget cuts at the National Press Club along with three other defense industry executives: Wes Bush, CEO of Northrop Grumman; David Hess, president of Pratt & Whitney; and Dawne Hickton, CEO of RTI Metals.

The executives would not put a number on the kind of cut the industry could sustain, but said the political uncertainty around congressional negotiations to avoid the most difficult scenario is worse for business.

"The real alternative to automatic defense spending cuts under sequestration is not an indefinite extension of defense spending at current levels," Langstaff said. "The real alternative is a process of strategically targeted, phased and predictable defense spending cuts."

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The group sent a letter signed by more than 130 defense industry executives to President Barack Obama and congressional leaders urging them to find a way to avoid sequestration with less than a month to act.

"We urge you and Congress to join together on immediate, bipartisan action to avert the upcoming "fiscal cliff," the letter stated. "No more pressing issue remains on the national agenda this year."

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