Defense Industry Braces for Sequester While Publicly Urging Alternatives to Cuts
The Aerospace Industries Association, which has waged a two-year campaign to fight automatic defense cuts imposed by Congress, plans to add staff to its lobbying and communications divisions and is ramping up its messaging with fewer than four weeks before the ax is set to fall.
The final weeks before the March 1 deadline are filled with pessimism, “a bit more” nervousness and more activity against the sequester, according to a spokesman for the group.
“The rhetoric off the Hill is very disappointing right now, and we are trying to galvanize support in the grass roots,” the AIA’s Dan Stohr said.
Across the defense sector, groups and lobbyists working to avert the across-the-board cuts appear increasingly resigned to the idea that Congress will let them proceed, in part because any deal to avoid the sequester would require lawmakers to find at least $1.2 trillion in other savings over a decade.
That doesn’t mean the industry is folding its tent; projections about lost jobs and stifled investment helped persuade Congress to postpone the cuts for two months during year-end negotiations on the fiscal cliff.
Stohr said the AIA stopped using an outside firm, the LMG Group. “We’re in the process of in-sourcing all of that stuff,” he said. He said he was not privy to a timeline for any new hiring for the lobbying and communications teams, noting that it’s part of a long-term strategy geared toward operating in an era of tight budgets. “The industry needs to make its voice heard,” he said.
Other defense lobbyists are similarly determined but are bracing for the worst.
“Nobody wants it to happen, but it’s going to happen because it’s like a game of chicken,” said Michael Herson of the consulting firm American Defense International, which counts numerous industry players as clients. “Last year, we all thought it wasn’t going to happen, and now it seems quite certain that it will happen. But we’re still hoping cooler heads will prevail.”
For many defense firms, the looming cuts are simply another chapter in a long slog. General Dynamics Corp. and BAE Systems Inc., both members of the AIA coalition, have been encouraging employees to contact their members of Congress about the impending sequester for almost two years.
“It’s time that our elected officials focus and disarm the so-called doomsday device they set in motion,” Linda Hudson, chief executive of BAE’s U.S. unit, wrote in an online post last week to employees of the company. “Sequestration must be stopped, and you can help.”
BAE has hosted three employee rallies at work sites and has extensively promoted the campaign on the company’s social media sites.
Many companies are already adjusting to lower defense spending.
“Over the past few years, we’ve reduced our overhead, cut capital expenses, curtailed research and development, consolidated facilities, and engaged in very painful but necessary reductions in workforce,” a spokesman for Lockheed Martin Corp. said in an email.
“Until [sequestration] is permanently eliminated, there will be an overhang on our industry that stifles investment in plants, equipment, people, and future research and development essential to the future health of our industry.”
Still, the spokesman said the company’s lobbying strategy would not change.
Some lobbyists say it’s hard to top members of Congress and the Obama administration, who have repeatedly voiced concerns about the effects of the cuts.
“The most effective communicators about the issue have been [outgoing Defense] Secretary [Leon E.] Panetta and [Defense Secretary nominee Chuck] Hagel in his testimony,” said Rob Doolittle, a spokesman for General Dynamics. “It’s been hard to add to what they’ve said about the potential impact of sequestration on the Defense Department.”
General Dynamics spent $11.4 million lobbying in 2011 — more than in any single year since 1998, according to the Center for Responsive Politics — but its expenditures dropped to slightly less than $11 million last year, as it terminated contracts with five different outside firms.
Doolittle said those moves were not related to the sequester but rather were “a result of our regular review of requirements for outside lobbying support.”
While K Street shops may not be specifically helping companies avert the sequester, the issue permeates work on every topic, said Don Fleming, a lobbyist at Flagship Government Relations, whose clients include defense firm Embraer Aircraft Holding Inc. and included General Dynamics until early this year.
“The sequester adds an aura of unpredictability to every project,” he said.
Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers, said her organization, which last year released grim reports of the sequester’s economic consequences, continues to schedule meetings on Capitol Hill.
“Our position has remained the same; we need to avoid sequestration and letting it happen is going to cost jobs,” she said.
Some reports have said the job losses could amount to 2 million and could potentially set the economy on the brink of recession.
The AIA has embarked on a new letter writing campaign, taking a cue from the playbook of its recently installed chairman, Wes Bush, the CEO of Northrop Grumman Corp., who had already been urging his network of suppliers and others to do the same.