Massachusetts Defense Contractors Brace for Cuts

By Michael B. Farrell
November 08, 2012
 
President Obama’s second term will almost certainly mean deep cuts in military spending that could lead to job losses in the state’s multibillion dollar defense sector that includes one of Massachusetts largest employers, Raytheon Co.
 
While Mitt Romney pledged to bulk up the Navy, Obama has long advocated for leaner armed forces. “Obama’s priorities for the years ahead spell trouble for the Massachusetts defense industry,” said Loren Thompson, a defense analyst at the Lexington Institute in Washington, D.C.
 
The industry employs more than 130,000 people in Massachusetts and generated $14 billion in contracts in 2011, according to the Defense Technology Initiative, a Massachusetts trade group.
 
Those contractors are already under intense pressure as US orders for military hardware and software shrink as a result of the end of the Iraq war, the drawdown in Afghanistan, and planned spending cuts of $487 billion over the next decade. And they are also nervous about additional hits as a result of “sequestration,” a budget-balancing measure that would lop $600 billion more from the military if Congress doesn’t cut the deficit.

“The biggest question is how the president and the Congress will deal with the defense cuts coming with sequestration,” said Chris Anderson, president of the Defense Technology Initiative.
 
In October, Chelmsford defense contractor Mercury Computer Systems Inc. announced it cut 142 positions because uncertainties surrounding the future defense budget have led the industry to operate in what appears to be a soft sequestration environment.” It declined to comment.
 
Even if sequestration is avoided, military analysts anticipate painful reductions in spending, particularly in areas that are key parts of the Massachusetts sector such as weapons and research and development.
 
That could be a blow to Raytheon, the world’s biggest maker of missiles.
 
The Waltham contractor, which employs 71,000 people worldwide, may be able to soften the blow as it looks to sell more overseas; already more than half of its sales of missile systems are to international clients. Raytheon declined to comment.
 
The Massachusetts defense sector also loses an advocate with the defeat of Senator Scott Brown, a member of the Senate Armed Services Committee. “Not having a voice on the Senate committee will be a concern,” said Anderson of the Defense Technology Institute. He added that Senate victor Elizabeth Warren has pledged to “protect the industry, but there is a huge learning curve that will take a couple of years.”
 Michael B. Farrell can be reached at michael.farrell@globe.com.