By: Austin Wright
The CEOs of several defense suppliers are set to meet Wednesday with House and Senate leaders to plead once again for an end to sequestration and the gridlock that caused it.
They’re expected to deliver their message as Washington staggers toward yet another crisis point — the possibility of a government shutdown at the end of the month, in addition to another round of across-the-board defense cuts set to take effect next fiscal year unless Congress intervenes.
But the suppliers will be on the Hill as the stock prices for major defense firms soar to record highs, sucking the wind from the sails of the anti-sequestration movement. Their performance on Wall Street has raised questions about whether the defense industry cried wolf when its leaders and advocacy groups predicted catastrophic consequences as a result of the automatic spending cuts.
The suppliers visiting Capitol Hill — mainly subcontractors making parts and subsystems for airplanes, ships and other platforms built by larger, brand-name contractors — are seeking to counter that narrative, portraying themselves as some of the first victims of indiscriminate spending cuts that they say have hit the little guys first and are slowly but surely rippling up the supply chain.
They’re also seeking to highlight the potential consequences of shrinking the defense supply chain: that skilled workers could leave for other industries and companies developing new technologies could go out of business for good. That, they warn, could create national security risks down the line if the Pentagon loses key, one-of-a-kind vendors.
The CEOs or senior leaders of at least eight companies are scheduled to meet on Wednesday with five members of Congress, at least some of them in leadership roles in the House and Senate. The meetings were organized by the Aerospace Industries Association, a trade group representing more than 300 aerospace and defense contractors.
The companies participating in the meetings are Sequa/Chromalloy, Ferco Aerospace Group, Tactair Fluid Controls, Natel Electronic Manufacturing Services, Sierra Nevada, Harry Krantz, BRS Aerospace and Air Industries Machining Corp.
“I think the CEOs that are going up to the Hill are going to tell our leaders that sequestration is already having dire impacts,” said Marion Blakey, the group’s CEO. “The industrial base is being undermined by sequestration.”
Following the meetings Wednesday, AIA is set to co-host a reception on Capitol Hill with the Senate Aerospace Caucus. Speakers lined up for the event include Blakey and Navy Secretary Ray Mabus, along with the caucus co-chairs: Sens. Patty Murray (D-Wash.) and Saxby Chambliss (R-Ga.).
“The message is that this fight is much bigger and more important than just self-interest from the standpoint of our companies,” Blakey said. “It really is about our nation’s security deteriorating, our workers losing jobs and America’s ability to compete globally.”
The eight suppliers are almost certain to find a receptive audience during their meetings Wednesday with members of both parties, as the vast majority of lawmakers are opposed to sequestration — Democrats and Republicans alike. But the two parties remain starkly divided on how to stave off the automatic cuts, which increasingly are sinking in as a long-term reality.
Pentagon leaders said this week that although they continue to hope for the best, they’re planning to assume the government shuts down at the end of the month and that they must swallow another year of sequestration.
Deputy Defense Secretary Ash Carter told civilian employees in a memo to expect furloughs if the government shuts down. And Army chief of staff Gen. Ray Odierno told soldiers in an online discussion that Department of the Army civilians might suffer “reductions in force” — layoffs — if its budget crunch continued and that sequestration would force it to shed tens of thousands of active-duty soldiers.
If the full sequestration takes effect, “there’s a good chance” the active-duty force will “go as low as” 420,000 soldiers, Odierno said.
“We have to do this in order to properly balance our readiness and our modernization with our force structure,” he explained.
Even before sequestration went into effect, the Army was planning to shrink its active-duty end strength from a wartime high of 575,000 soldiers to about 490,000.
Blakey’s group and its allies waged a campaign last year, urging Congress to stave off the cuts, warning that a full year of sequestration could result in more than 2 million lost jobs. On Wednesday, the first day in a series of planned visits to Capitol Hill with defense suppliers, the group also will emphasize jobs, the top point of leverage for an industry with major programs in all 50 states.
According to Blakey, Capitol Hill hasn’t gotten the message clearly enough that sequestration is damaging small suppliers.
“This is having real, tangible effects,” she said. “People on the Hill need to understand that a lot of the ability we have to fight and to maintain a technological advantage over all of those that we have to deal with in the global market, frankly, they come from these small companies.”
And the rising stock prices of major defense companies, she said, don’t capture the industry’s pain. “The primes are very resilient, and they are well positioned,” she explained. “But we are expecting there will be effects in 2014 that even they can’t withstand.”
Smaller companies, she added, “don’t have the ability to be as flexible as the primes are.”
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