Pentagon Contractors Play a Disturbing Game

Last Updated on June 25, 2012.

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If politics is a game of chess, Pentagon contractors have decided their workers are the pawns.

After a decade and a half of unprecedented growth, the Pentagon’s budget is now set to grow only as fast as inflation and may even shrink ever so slightly. But to hear it from the contractors who profit from the Pentagon, doomsday itself is upon us. However, without a national security reason to increase the budget — the war in Iraq is over and America is transitioning out of Afghanistan — these contractors need a new way to justify keeping the Pentagon’s budget overflowing, and they’ve found one: jobs. Not a day goes by in Washington without hearing yet another threat that cuts to the Pentagon will result in massive job losses for America’s working men and women. The latest example is Lockheed Martin’s outrageous announcement that it may send notices to all of its 123,000 employees before the November election asserting that they are at risk of being laid off if automatic cuts in Pentagon spending called for under current law were to take effect.

Don’t believe the hype.

The simple truth is that there is absolutely no reason that any major Pentagon contractor needs to send out massive numbers of pink slips. In fact, despite recent budget shifts, times have been very, very good for Pentagon contractors. A recent Pricewaterhouse Coopers analysis reveals that the defense and aerospace industry saw yet another year of record revenue and profits in 2011. With continued strong growth in sectors like commercial aerospace, an increase in exports, and hundreds of billions of dollars in backlogged orders, there is plenty of work to keep the employees in the aerospace and defense sectors busy. And with piles of cash from years of record profits, Pentagon contractors are better suited than most companies to help their employees survive today’s tight economic times.

Simply put, defense contractors are using their own workers as pawns — threatening them with massive layoffs — to scare up political opposition to any attempt to rein in runaway spending at the Pentagon.

In this callous game of political chess, perhaps one player stands above the rest: the world’s largest weapons maker, Lockheed Martin. Recently Lockheed’s CEO told reporters that any Pentagon cuts would be “blunt force trauma” to the industry, and that he could be forced to layoff 10 percent of his 123,000 employees. Lockheed appears so worried that it upped its lobbying expenditures in 2011 by 19 percent to $15 million.

But before Lockheed Martin sends out 12,000 pink slips let’s look a little closer at its balance sheet. Last year, Lockheed had another banner year bringing in $3.98 billion in profit and ending with $3.59 billion in cash. Lest you think that Lockheed had a lucky year, it has turned a substantial profit every year since 2001, bringing in a total of $34.9 billion in profit over the past 11 years.

And budget cuts or no, the good times show no signs of slowing down. Lockheed currently has $81 billion in backlogged orders and continues to win new multi-billion contracts from the Pentagon.

If Lockheed truly believes it’s time to start saving on personnel costs though, there is one obvious place to start. Last year, Lockheed Martin’s CEO Robert J. Stevens took home $25.3 million in compensation, more than all but two Wall Street CEOs. How many employees could Lockheed keep on its payrolls if Mr. Stevens took a pay cut? Mr. Stevens’ handsome compensation came for running a company that receives nearly all its revenue directly from the U.S. government. As essentially the only customers of Lockheed Martin, don’t American taxpayers have a right to demand Mr. Stevens scale back his lucrative compensation before laying off any more employees?

The reality is that Pentagon contractors like Lockheed Martin seem determined to sacrifice their own workers to protect record profits and CEO pay. That has nothing to do with keeping America safe and everything to do with corporate welfare. When it comes to America’s national security, it’s time to start standing up and demanding a little truth. We simply can’t afford to let Pentagon contractors keep playing these games anymore.

(This item is crossposted at The Huffington Post)



June 25, 2012