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Mass. Defense Companies Brace For Federal Budget Cuts

“We’re prepared to take some cut,” said Chris Marzilli, president of Massachusetts-based General Dynamics C4 Systems, referring to automatic federal spending cuts set to take effect Friday. (Courtesy General Dynamics)

“We’re prepared to take some cut,” said Chris Marzilli, president of Massachusetts-based General Dynamics C4 Systems, referring to automatic federal spending cuts set to take effect Friday. (Courtesy)

BOSTON — As the week moves forward, the likelihood grows that Friday’s deadline for deep federal budget cuts will arrive with no fix from congressional lawmakers.

Across Massachusetts, the defense industry is bracing. Chris Anderson, president of the Massachusetts High Technology Council, says paralysis can be felt up and down the defense supply chain in Massachusetts.

“Nobody’s initiating contracts because they just don’t know if the money’s going to be there from the federal government,” Anderson said. “In the fourth quarter in Massachusetts alone hundreds of jobs have already been lost. So sequestration, the threat of it, is almost more damaging than a decision on which way to go to replace sequestration.”

Estimates vary on how many defense jobs would be lost in Massachusetts if the sequester happens. The White House said 7,000 civilian defense workers will be furloughed, while the MHTC puts the figure as high as 40,000.

“Nobody’s initiating contracts because they just don’t know if the money’s going to be there from the federal government.”
– Chris Anderson, president of the Mass. High Technology Council

Anderson said it is an especially acute challenge for small companies that produce components for larger projects.

“You can’t sustain a workforce when you don’t have the orders and the revenue coming in. Those are the ones with under 100 employees that are seeing the most important negative impacts of just the delay, let alone the full blown effect of sequestration,” Anderson said.

Billerica-based American Science and Engineering, which makes bomb-detection equipment, has cut 40 jobs — 10 percent of its workforce. Profits at iRobot in Bedford fell 57 percent last year in large part because of cuts to military contracts for robots to defuse bombs. Last fall, iRobot announced it was cutting 80 jobs — 13 percent of its workforce.

“We’re prepared to take some cut,” said Chris Marzilli, president of General Dynamics C4 Systems. General Dynamics has a large defense presence in the state, with facilities in Taunton, Needham and Pittsfield.

Anticipating the cuts, Marzilli said General Dynamics has been working to diversify: finding new customers overseas and adapting its products for uses other than defense.

“What we’ve done is largely insulated our business from those effects by dual-purposing, dual-using those solution sets for domestic priorities as well,” he said.

Marzilli runs the company’s plant in Taunton, which is rolling out a new secure Internet military communications system. It’s designed to be rugged enough to be mounted in vehicles in the battlefield. The system is designed to allow instant communication among soldiers in the field with their commanders elsewhere. But General Dynamics is also marketing parts of it for use by border security and first responders.

Marzilli will not say just what kind of a hit General Dynamics could take if a sequester compromise is not reached.

“I wouldn’t handicap that. It’s hard for us to know exactly what’s going to happen March 1,” he said. “It’s just a question of how we manage that, if you will, low tide.”

Many political leaders and several economists have said defense spending needs to be cut because the wars in Iraq and Afghanistan are coming to a close.

“If anything deserves to be cut at this point, it’s the military because we aren’t fighting the two wars that led to the increase in military, ” said UMass Amherst economist Robert Pollin. “I mean, in principle, when you end a war you should have less money going to the military, not more.”

But Pollin said while military spending needs to be cut over the long term, government spending should not be cut at all right now.

“We have to worry about falling into a double-dip recession and we have evidence from the last month that we’re hovering right there,” Pollin said.

However, with lawmakers standing firm, it looks as if the cuts are coming.

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  • http://profile.yahoo.com/MUP4QFLVOF62SBERMYJDMVRVJY Jamie Folk

    I wrote it on Twitter but I’ll write it here too. If a company gets the vast majority of its money from the federal government and pays its CEO millions, the CEOs should take a steep pay cut before laying off a single person. Tax payer funded CEOs need to end

  • jaime

    The democrats have always been begging for defense cuts. Well here you are.

    • http://profile.yahoo.com/MUP4QFLVOF62SBERMYJDMVRVJY Jamie Folk

      Yeah well if their CEOs didnt get paid millions, the job cuts wouldnt be this bad. Why are repubs ok with their tax dollars going to publicly funded CEOs? Just throw the word “defense” in front of any government program and repubs will defend it to the death. We spend as much as the rest of the world COMBINED on “defense”. The only way to balance the budget is to cut defense.

  • sjw81

    can not wait for these long overdue cuts to happen. what do you expect them all to say, go ahead and cut our bloated staffs and salaries? our needless jobs? we have been funding theis military industrial complex since eisenhower…we spend more on defense that all nations combined! yet we fight war after war after war. all this money, our taxes, can go to other things to benefit society or ourselves, not ceos of defense contractors, or all these “jobs” making instruments of war to be used again and again and again…

  • http://www.facebook.com/futo.buddy Futo Buddy

    In his farewell address, U.S. President Dwight Eisenhower, when speaking about the military-industrial complex stated:
    “Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations”

  • Vinnie G

    This is fantastic! These cuts were long overdue. One can get the daily DOD Contract list by email, simply by signing up for it. There are so many companies across the USA and in Massachusetts that most people have never even heard of receiving millions in Contracts. Though after contacting some of these smaller companies in Massachusetts who received tens of millions in Federal Contract money, they don’t hire anyone, respond to employment request and the whole system looks like it only benefits the greedy owners of these companies who somehow are getting these huge grants in the millions. People wouldn’t believe the corruption, waste and fraud committed against the taxpayers of the USA. There is so much waste and laziness in the State Agencies too like Massachusetts Rehabilitation Commission, that people would be outraged to see how much these State Workers receive in Salary and benefits and do essentially little to no work to justify this money from taxpayers.

  • Vinnie G

    Obama actually agreed to these sequester cuts in 2011 along with the Republicans and now is putting on an act like he has nothing to do with it? Are you people all asleep or watching to much tv or something? Because you have Obama blaming everyone else but himself. Do you really think he has nothing to do with things that are going on then if you do you are a fool.

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