Lockheed Continues Layoffs As Restructuring Continues

(MoneyWatch)  The layoff of fifty people for a company that employs over one hundred thousand people doesn't sound like much but it continues to indicate that the defense business may be entering a slump. Lockheed Martin had already warned that due to the restructuring of the budget and the changes in priorities with the new Obama administration that 2010 could be a down year.

The layoffs were announced for a plant in Archbald, PA that makes guidance kits for laser guided weapons. While the defense budget has grown over the last eight years there has been a movement towards weapons that use GPS satellites for guidance rather then lasers. Customer changes are one of the reasons cited by Lockheed for the jobs cuts.

Overall there have already been significant cuts to the defense related work force in the United States as overall unemployment has doubled in the last two years to almost ten percent. Many of these have been related to the major programs ended this year such as the VH-71 helicopter and in missile defense. In 2010 there will be quite a few more as the F-22 program begins to wind down.

Congress often manages the defense budget as a jobs budget in two ways. First they keep programs going that may not have funding requested by the Services. The C-17 is a perfect example of this. Boeing received more orders for the transport in the last supplemental and will in the 2010 defense budget unless Obama vetoes it. The other way is through earmarks. This channels money and work to a company for work that the Defense Department did not ask for. This funding does ultimately employ someone, somewhere.

The problem facing the U.S. Government and the defense industry is that it is the large acquisition programs that employ a lot of people at one location. That is what Congress wants. They don't want a program that is scattered across the country with a few people here-and-there. They want jobs in their districts. That is the kind of program they will pay for and support. This makes it hard to end these kind of programs without some kind of new one starting. That is why Congressman Hinchey (D-NY) is trying to keep some version of the VH-71 going.

With the U.S. economy seemingly not recovering in the area of employment it is tempting to keep these kind of program funded. That does mean thought that the money will not necessarily be spent on military requested or desired equipment which can lead to friction between Congress and the Executive branch. It doesn't help that all of the big companies have lobbyists who stress the economic contribution of the programs. It will take reform at all parts of the system to get meaningful effects.