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Defense Industry - and its Jobs - Vulnerable

philly.com - November 4, 2011, By Harold Brubaker, Inquirer Staff Writer

The defense industry is in the budget-cutting crosshairs.

Congress has already approved defense cuts of $450 billion up to $465 billion over the next decade. An additional $500 billion could follow if the congressional supercommittee created in August were to fail to reach a deal by Nov. 23 on $1.2 trillion in overall spending cuts, over a stretch of 10 years.

Steve Callaghan director, F-35 Washington Operations for Lockheed Martin Corp. speaks…

Whatever the cuts, the ripple effect through the nation's economy, including Pennsylvania and New Jersey, will be painful.

In the two states, the combined cuts could lead to the elimination of 21,000 direct defense-industry jobs and thousands more in the broader economy, according to a professor at George Mason University in Virginia.

Job-loss estimates were not available for just the Philadelphia region, where 1,583 headquarters companies or local operations of firms based elsewhere were paid $6.4 billion by the Department of Defense in fiscal 2011, according to an Inquirer analysis of federal spending data by the zip code where the work is performed.

While the biggest local recipients were well-known defense contractors - such as Lockheed Martin Corp., Boeing Co., and L-3 Communications Holdings Inc. - the total also includes $1 billion in military sales by the pharmaceutical distributor AmerisourceBergen Corp. in Chesterbrook and $46 million by Campbell Soup Co. in Camden.

Moreover, many smaller companies also do significant business with the armed forces, supplying robots, valves, dishwashing machines, and myriad software and engineering services. Thirty-eight firms received from $10 million to $100 million during the year ended Sept. 30.

What is clear is that defense cuts anywhere will face a fight.

Top leaders from the Army, Navy, Marine Corps, and Air Force warned a House panel Wednesday that deeper cuts would severely weaken the U.S. military, making it difficult to maintain a global presence, especially in the Middle East and the Asia-Pacific.

Operations in the Philadelphia region have roles in some defense programs that analysts consider to be at risk.

"Any military investment that is expensive is potentially in danger of being cut," with expensive being a few billion dollars a year, said Travis Sharp, a fellow at the Center for New American Security in Washington.

Nationally, Lockheed Martin's F-35 Joint Strike Fighter jet, the country's most expensive defense program, has long been on the chopping block for many lawmakers.

In Mount Laurel on Thursday, Lockheed, which is based in Gaithersburg, Md., and which had $45.8 billion in sales last year, displayed an F-35 cockpit demonstrator as part of a campaign to drum up political support for the jet. Company officials made a similar stop in May at a supplier in Bucks County.

Lockheed, which employs more than 9,000 in the region, down from more than 12,000 three years ago, partially from the sale of a business unit in King of Prussia, is also involved in ballistic-missile defense, which overall costs $10 billion annually, according to Sharp.

Fortunately for Lockheed employees in Moorestown who work on that program, "the Obama administration," Sharp said, "has supported missile defense to an extent that is unprecedented for a Democratic administration."

Boeing's V-22 Osprey, a tilt-rotor aircraft manufactured in part in Ridley Township, could face cutbacks, according to a September report by the Benchmark Co. L.L.C., a New York investment bank.

Rep. Pat Meehan (R., Pa.), whose district includes the Boeing plant, fought off Osprey cuts last winter. Boeing's Chinook helicopter, also built in Ridley Township, has positive momentum, with a $1.64 billion order from the United Kingdom and three more years in a U.S. deal.

Robert Rosanio, chief executive and part owner of Ehmke Manufacturing Co. Inc., an industrial textile manufacturer in Lower Northeast Philadelphia that makes thermal acoustic blankets for the Chinook, said, "You have to be concerned anytime there's a consolidation in the budget, because you're not sure what's going to be cut."

But Ehmke, which employs about 150, is better positioned than many at a time of budget turmoil.

"We're not just stuck with one program and one branch of the service," Rosanio said. "We're attached to some legacy programs that have longer-range funding."

Contact staff writer Harold Brubaker at 215-854-4651or This email address is being protected from spambots. You need JavaScript enabled to view it. .


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The information above is for general awareness only and does not necessarily reflect the views of the Office of Economic Adjustment or the Department of Defense as a whole.