Industry Sounds Off

In the wake of yesterday's issuance of the Obama administration's proposed strategic defense guidance, three major industry groups today began a full-court press to ensure defense spending doesn't get cut more than it has to. This afternoon, the Aerospace Industries Association, the National Defense Industrial Association and the Professional Services Council issued a statement:

Impending cuts to the defense budget will stifle the ability of the defense industry to deliver innovation and urgent wartime capabilities according to a report released by the Defense Industrial Base Task Force today. The Task Force, composed of companies from AIA, NDIA and PSC, was formed last October as a result of Defense Secretary Panetta's meeting with representatives of AIA's Executive Committee in September.

This report paints an alarming picture for the future of the aerospace and defense industry," said AIA President and CEO Marion C. Blakey. "Yesterday Secretary Panetta outlined very severe reductions in the defense budget. Any further cuts will cripple crucial industrial base capabilities in the national security sector."

The report, based on an industry analysis initiated by the Task Force, concluded that smaller budgets would make the industry less innovative, force the layoff of skilled technical personnel, freeze investments and escalate the pace of mergers and acquisitions. Respondents expect that cuts to procurement and R&D will be frontloaded in the first several years.

"The findings and conclusions of this report emphasize the critical need for government-industry dialog and partnership," said NDIA President and CEO Lt. Gen. (Ret.) Lawrence Farrell. "Especially in this time of shrinking defense budgets, government needs to communicate openly and often with industry to ensure impacts to the industrial base are deliberately managed, rather than left solely to market forces."

The Task Force sent the report to Secretary Panetta on Nov. 11. On Dec. 22, Deputy Secretary Ashton Carter, Acting Under Secretary of Defense for Acquisition, Technology and Logistics Frank Kendall and Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy Brett Lambert met with Task Force representatives to discuss the paper.

"We were very pleased to have the opportunity to discuss the paper with Secretary Carter and his team," said PSC President & CEO Stan Soloway. "We strongly believe that the impacts could be partially mitigated over time, particularly if DOD focuses heavily on 'how' it is buying and, in so doing, genuinely incentivizes the kinds of innovation that is necessary."

Industry acknowledges that in the current economic environment, budget reductions are necessary. However, the U.S. defense industrial base is a national strategic asset. The draconian approach if sequestration is triggered will cause the loss of critical skills and capabilities as companies make business decisions based on these radical cuts.