Lockheed Fires First Shots In Budget Wars

(MoneyWatch)  Updated on 4/30/09 to make clear that more job losses are contingent on the status of the VH-71 program.

Lockheed announced today that they are laying off 225 people in their Owego, NY facility with the possibility of at least 575 more to come. This will be 20% of their work force. The Owego facility had received a great deal of support from former Senator, now Secretary of State, Hillary Clinton. Lockheed is saying these work force adjustments are due to uncertainty in the next year's defense budget.

Owego was where the VH-71 Presidential helicopters were going to be modified and integrated. There are 800 jobs related to this program that will go away if it really is canceled. If the CSAR-X new competition had been won by Lockheed and Agusta Westland the plant would have had a role in that as well. Secretary of Defense Gates has recommended canceling both programs.

Obviously one of the major counters of contractors and supportive Members of Congress is the job losses in the respective states. Lockheed has said they are looking at moving people to other programs and facilities but that doesn't help Upstate New York. This is an area that has seen most of its civil industry disappear over time. The Lockheed jobs were considered prime, high-wage, high-skill jobs that really cannot be replaced.

That is why the fight over the budget details could get really ugly in Congress once it moves past Committee and onto the floors and conferences. While Gates has increased funding for certain programs the ones he has cut are the big ticket production items like F-22, DDG-1000, C-17 and VH-71. These would provide steady state employment for several years once they had settled into production.

Some areas like Upstate New York, Wichita, KS, St. Louis, MO and Long Beach, CA could lose prime manufacturing jobs if these programs do end and no replacement work is found. The number of new contracts is limited and competition will be very strong to win them.

The contractors involved in the losing program can begin doing things like Lockheed to ramp up the pressure on both DoD and Congress. In this time of rising unemployment in the U.S. they will argue that it might not be a good idea to increase this and that the programs can be fixed without outright cancellation.