Defense sector braces for Pentagon cuts

Jeff Tyler Nov 15, 2011
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Defense sector braces for Pentagon cuts

Jeff Tyler Nov 15, 2011
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Steve Chiotakis: Defense Secretary Leon Panetta and other top military leaders will appear in front of a Senate panel today. He’ll be facing questions about how the military could survive big cuts from Congress that could come if the so-called super committee doesn’t reach some sort of budget deal. Some in the defense industry are already preparing for the worst.

Marketplace’s Jeff Tyler explains.


Jeff Tyler: The defense department is already committed to cut spending by $350 billion over the next 10 years. If it’s forced to slash a trillion dollars more, it will need to scrap more than equipment.

Wolfgang Demisch: Just killing a weapons system — or two or three or 10 — isn’t going to get you there.

Aerospace analyst Wolfgang Demisch says most money is spent on workers. To reduce those costs…

Demisch: That means major cuts in jobs.

Defense powerhouse Boeing has not mentioned job cuts. It says demand from international markets could help offset reduced demand at home. But industry consultant Scott Hamilton with Leeham Company has doubts.

Scott Hamilton: The international markets combined are smaller than the U.S. market.

International competition is getting more intense. Consider the air show in Dubai this week. Boeing did just nail down an $18 billion deal for passenger planes. But Hamilton says Arab nations in the market for new fighter jets are soliciting bids from Europe.

I’m Jeff Tyler for Marketplace.

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