Saturday, October 1, 2011

Perspective: No More says Blakey

By Marion C. Blakey
President & CEO AI, U.S

No more. That was the message AIA executives delivered to reporters at a press briefing launching the Second to None campaign during National Aerospace Week. With $460 billion in defense cuts already on the table, this industry has been cut to the bone.

Hundreds of thousands of jobs and our national security are at risk as the supercommittee meets to decide how they can achieve the $1.5 trillion in deficit reduction mandated by the Budget Control Act. As Chuck Gray, vice president and COO of Frontier Electronics Systems Corporation said, “We’ve already given at the office.” But, apparently that isn’t enough as another $600 billion in defense cuts could be mandated if sequestration takes effect. Certainly FAA and NASA will be eyed for sharp reductions as well.

According to estimates prepared by Deloitte Consulting LLC, the aerospace and defense industry employs more than one million workers. Barr Group Aerospace calculates that 2.9 million more American families benefit from those jobs in every state across the nation – jobs that are also at risk as budgets are slashed. Secretary of Defense Leon Panetta has said that the Budget Control Act could devastate the military and defense industrial base, adding one percent to the nation’s unemployment rate. These numbers are staggering, particularly at a time when the economy is struggling to gain a solid footing and creating and sustaining jobs is a focus for both the administration and Congress.

Each executive brought a story of how cancellations, cuts and uncertainty affect their company’s growth, health and ability to provide the capabilities that Americans have come to expect.

RTI International provides titanium for every American fighter plane in the sky. CEO Dawne Hickton reported that the company has taken some tough steps to address the soft economy. Hours have been reduced, pay frozen and healthcare coverage has been revamped so that employees share more of the cost. Cancellation of construction of a new plant caused a significant write-off of investment.

Chuck Gray’s small company employs 150 workers in Oklahoma. Woman-owned Frontier trains ranch hands and farmers from the field to assemble sophisticated electronics – everything from satellites to unmanned aerial systems. They’ve been challenged by cancellations and funding delays. The uncertainty is impacting their capital investment decisions and jobs.

Lord Corporation CEO Rick McNeel reported that the company invests $80 million annually in new research and development. Additionally the firm employs more than 1,300 people in Pennsylvania and Ohio alone, with a supply chain of 151 companies. What happens to those jobs under continued budget cuts?

So while the industry has solid results on Wall Street, concerns remain for the capabilities that have made this industry Second to None. As Jim Albaugh, AIA’s chairman and president and CEO of Boeing Commercial Airplanes reminded us, for the first time in over one hundred years we don’t have an active design team working on a manned military aircraft.

Dave Hess, president of Pratt & Whitney, said that where a few years ago you might have had four or more suppliers with a specific technical capability, today you might have one or two. If companies elect to pursue other markets because the defense industry is no longer viable for them, we could lose that capability altogether.

So, what’s next? We’re continuing to meet with members of Congress and the administration in Washington and encourage our companies to invite officials to their facilities and engage one on one. There’s not a lot of time left before the Nov. 23 supercomittee report is due. But it's clear we have a good and important story to tell.

Ill-considered cuts will have unintended consequences to our economy, national security, position as a leader in space and ability to be first with the Next Generation Air Transportation System. If we’re going to continue to be Second to None into the future, we need to stop cutting investment. As I said at our press briefing, “No more.”

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