Pentagon Teams with Executives To Fight Cuts

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WASHINGTON — The Pentagon is working with defense industry chief executives to tell Congress it must take immediate action to avoid automatic budget cuts, U.S. Defense Secretary Leon Panetta said during a June 29 briefing.

Panetta’s words concluded a week of conversations between top Pentagon officials and defense industry chief executives about the automatic cuts, known as sequestration, that culminated in a June 28 meeting between Panetta and U.S. President Barack Obama.

“One thing that I can very much assure you is that we are very much a team,” Panetta said. “We are both expressing the same concerns to Capitol Hill. And both the companies as well as the Defense Department are making very clear to Capitol Hill that this is a matter that ought not to be postponed, that it ought to be dealt with soon so that sequester a) will not happen, and b) we will have some degree of assurance that we can proceed with the budget as we’ve outlined, as opposed to facing the possibility of another drastic defense cut.”

The chief executives — including BAE Systems’ Linda Hudson; Boeing Defense, Space & Security’s Dennis Muilenburg; EADS North America’s Sean O’Keefe; General Dynamics’ Jay Johnson; Lockheed Martin’s Bob Stevens; and Northrop Grumman’s Wes Bush — were contacted June 25 with a request from Panetta to meet for discussions about the budget.

The conversations were arranged as a series of meetings with small groups of chief executives and Panetta, Deputy Defense Secretary Ashton Carter, acquisition chief Frank Kendall and industrial policy chief Brett Lambert. Additional staff members for both the Pentagon officials and executives did not attend. It is unclear whether all of the chief executives were able to attend in person.

Sources said that while the chief executives did not coordinate messages in advance, they each delivered slightly different concerns about the effect of sequestration, concerns they have voiced publicly in the past.

The overall theme revolved around the impact that sequestration is already having on the defense industry through the specter of uncertainty, and the need for immediate guidance. The chief executives discussed issues involving the Worker Adjustment and Retraining Notification Act, which requires advance notification of layoffs; the effect of the cuts on the economy and other federal agencies; and the need for clarity to allow contractors to plan.

Panetta expressed understanding for the concerns the chief executives voiced.

“It’s fair to say that the CEOs of the companies that I talked to all share the same concern that we do, with regards to sequester,” he said.

Panetta also reiterated many of the points that the chief executives had mentioned during the press briefing, while emphasizing the need for compromise.

“Too often today the nation’s problems are held hostage to the unwillingness to find consensus and compromise,” he said. “And in the face of that gridlock, artificial devices like sequester are resorted to in order to somehow force action.”

Sources characterized the meetings as information gathering sessions in preparation for the secretary’s meeting with the president, and said Panetta primarily listened, responding to several arguments with, “Good point, I’ll have to bring it up.”

The fact that the secretary is meeting with industry heads is good news, said Arnold Punaro, chief executive of the Punaro Group and a retired Marine major general.

“I think it’s a very, very good development that the secretary of defense is meeting firsthand with small groups of industry leaders to get their firsthand perspective of what’s going on,” he said.

The industry for months has been increasing its pressure on the administration to provide specific guidance about the implementation of sequestration, including a June 13 meeting requested by the Aerospace Industries Association (AIA) with personnel from the White House Office of Management and Budget.

At that meeting, Stevens, Bush, Pratt & Whitney President David Hess and AIA President Marion Blakey described their concerns, but were told not to expect guidance until after the elections in November, a source with knowledge of the meeting said.

 

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