CEOs On Sequestration

Four defense industry chiefs will discuss their views on the effects of budget cuts and the threat of sequestration on national security at the National Press Club on Monday.

According to a club statement released this morning, the participants include Northrop Grumman CEO Wes Bush; Pratt & Whitney President David Hess; Dawne Hickton, CEO of RTI International Metals Inc.; and TASC CEO David Langstaff.

Northrop's Bush painted a worst-case scenario during an Oct. 24 teleconference call with investors on his company's third-quarter 2012 earnings. As Defense:Next reported that day:

During a conference call on Northrop's 2012 third-quarter earnings, investors asked how the company planned to proceed under the shadow of sequestration and what the financial fallout would be from an across-the-board cut of about $500 billion from the Pentagon's budget. Sequestration, which was carved out in the 2011 Budget Control Act, was designed to motivate Congress to work with the White House on trimming the budget. Congress has so far been unable to chisel out a financial plan for how to curb the deficit, which means the policy could be implemented in less than 70 days.

Wes Bush, chairman, president and CEO of Northrop, and Jim Palmer, the company's corporate vice president and chief financial officer, told investors that while Northrop -- and the Defense Department -- would feel the effects of sequestration rather quickly, so would a broad range of government agencies.

"This is a broader set of national issues and national concerns than just the defense community," he said.

Northrop Grumman would be hit hard by sequestration because the contracting base of the military services has a higher turnaround rate, prompting those services to spend their obligated amounts within a set time frame, Bush said.

"Long-term, I don't think I have to speculate in saying the impacts would be profound and very, very negative," he said.

The uncertainty about whether sequestration will happen has made it difficult for Northrop to prepare the way ahead, Bush said. "We all know there is a substantial deficit situation and there are some tough decisions that lie ahead regarding the outcomes for each component of that budget," he said. "So it's a little unclear today from where we are to predict how that's going to go."