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With the six top defense companies now reporting quarterly earnings, there is unanimous agreement that labor shortages and supply chain disruptions will continue for at least the rest of the year.
As we mentioned earlier, shipyard welders and pipefitters are among the most sought-after positions in the defense sector. Skilled labor shortages have been a particular problem for shipbuilders such as Huntington Ingalls Industries and General Dynamics. The two companies jointly built the US Navy’s Virginia- and Columbia-class submarines, which were ramping up production in early 2020 amid the outbreak. every year.
“When you think about shipbuilding and the nature of the business, a shock like that can hit the system very quickly, but it takes time to recover,” said General Dynamics CFO Jason W. Aiken. That’s what we’re seeing in Virginia’s program as the supply chain struggles to recapture and track.
Late last year, the Biden administration used the Defense Production Act to help boost Virginia’s production rate. But more can and should be done. Raytheon Technologies CEO Greg Hayes last week called on the administration to do more to support training schools that train skilled workers.
At a press conference Wednesday, I asked Army Acquisition Executive Douglas Bush if the service is doing anything to help companies facing the challenges of today’s tough labor market.
“I think we are looking at them and indirectly supporting them, but we rely on the private industries to manage their workforce and solve the problem when they see it,” he said. (You can read his full answer here as the Army has posted a transcript of the roundtable – and yes, my name is wrong).
Here’s an interesting takeaway from each incoming call:
- Northrop Grumman has an $11.3 billion registered aerospace business, CEO Kathy Warden said on the company’s Tuesday call. “We continue to view the national security space as one of the strongest growth drivers for our company,” she said.
- Lockheed Martin has pulled 50 “global operations” workers to speed up its F-16 production line in Greenville, South Carolina. On the company’s July 19 call, CFO Jay Malav said, “Our progress on that program is taking longer than we expected, largely due to the slowdown in hiring.” Lockheed has a dedicated workforce in Greenville, where it now builds F-16s for U.S. allies.
- Boeing’s defense and aerospace business took a $400 million charge. The company had to eat money on the MQ-25 fuelless drone it is developing for the Navy, NASA’s Commercial Group program, the T-7A pilot training jet, the KC-46 tanker and the VC-25B for Air Force One.
- Congress passed the CHIPS Act this week, but that won’t immediately solve the semiconductor shortage, General Dynamics CFO said. The company’s IT hardware business is “facing an ongoing struggle with chip shortages, which is straining their ability to supply certain products,” he said.
- According to Raytheon Technologies CEO Greg Hayes, labor shortages (see above), especially at suppliers, are becoming more of a concern than sick worker issues at the beginning of the pandemic. The labor challenges that we’re still seeing haven’t subsided and… I think that’s the challenge and that’s why we’re struggling in the supply chain.
- Chris Kubasik, CEO of L3 Harris, said the company’s newly announced Agile Development Group is pursuing “a number of classified opportunities.” L3Harris, Lockheed and Northrop awarded Air Force contracts in June for the Stand-In Attack Weapon, a new air-to-ground weapon. L3Harris’ Agile Development Group is leading the pursuit of that contract.
Some 2,500 Boeing workers in St. Louis plan to strike on Monday. Workers who build the F-15 and F/A-18 fighter jets, the MQ-25 refueling drone and the T-7 pilot training jet rejected a contract offer on Sunday.
Senate appropriators on Thursday The announcement of the 2023 defense budget of $850.4 billion is 8.7 percent higher than the current year’s budget and 4.5 percent higher than the budget proposed by House Democrats, according to Roll Call.
And finally, the German defense company Rheinmetall It announced it will open a 46,669-square-foot facility in Sterling Heights, Michigan to conduct engineering and prototyping operations. The company, which is competing to build an alternative human combat vehicle for the military, has received a $1.5 million grant to help create 125 to 150 jobs over the next three years. “The new location is a demonstration of the business’ continued investment in the U.S., bringing new technologies and highly skilled jobs to the region as part of several U.S. military modernization programs,” the company said in a statement. “The new facility will include a spacious, state-of-the-art digital engineering, prototyping and system integration lab to enable deep customer involvement at every stage of vehicle development.”
One of the defenses
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