Sequester 'paralysing' US defence firms

09 July 2012

The threat of a further $500bn of defence cuts is having a paralysing effect on investment and jobs among US defence firms, senior industry figures have warned.

If US lawmakers do not agree on how to make $1.2 trillion of cuts across government by January 2013, the country will face the prospect of automatic cuts, or sequester, which would slice $500bn from the defence budget automatically.

So far the US Department of Defence has not planned for the cuts, believing a solution will be found, but this approach also means that any cuts cannot be planned for and it is this which is causing difficulties.

Mick Maurer, president of Sikorsky admitted the prospect of sequestration had "paralysed us a little bit".

"We are reluctant to make certain commitments and investments not knowing what will happen," he said. "Why would I hire a bunch of employees if there is a chance six months after I bring them in I would have to let them go?"

Dennis Muilenburg, president and chief executive of Boeing defence, said sequester itself would have a "devastating impact" on industry.

"It would cause us to have to open up contracts with all of our supply chain. Just the sheer mechanism of making those contractual changes will be very difficult and very expensive," The Financial Times quoted him as saying.

"There is a clear understanding that there will be a very direct relationship between a potential sequester and jobs impact."