Boeing: More U.S. Defense-Budget Cuts Would Be 'Devastating'

Another round of dramatic U.S. defense-budget cuts would be "devastating" to the arms industry and would force thousands of people out of their jobs, Boeing Co. (IW 500/15) warned Friday.

Dennis Muilenburg, president and chief executive of Boeing Defense, Space and Security, said smaller companies from around the world that form part of the firm's supply chain also would be affected.

Boeing's defense business already has seen its work force slashed by around 8,000 people to 61,000 over the past two years, as a result of a $500 billion defense-budget cut currently being implemented.

However, there also is the potential for automatic defense-spending cuts -- called "sequestration" -- totaling another $500 billion over 10 years from 2013 if Congress does not reach a deal on slashing the country's deficit.

"That's very significant. We believe that would have a devastating impact on industry," Muilenburg told reporters in Singapore on the eve of a security conference.

"We are strongly encouraging the U.S. government to find a way to avoid that sequester scenario and avoid the impact that would have on jobs and industry."

Muilenburg said he could not confirm the number of jobs that could be shed in the event of such cuts, but it likely would run into the "thousands" in the United States alone.

"We have thousands of suppliers in our global network that support our defense and commercial business, and the ripple effect to second- and third-tier suppliers would be very significant," he added.

Boeing's defense business thus far has managed to survive the effects of current cutbacks in defense spending in the United States and Europe because of rising demand from militaries in Asia Pacific and the Middle East, he said.

Last year, 24% of Boeing Defense's revenue came outside its U.S. home market, and Boeing expects this to grow to 25% to 30% percent over the longer term, he added.

Of Boeing Defense's revenue outside the United States, about half comes from Asia Pacific.

Boeing's other major business, making commercial planes, is faring better than its defense component.

Boeing said first-quarter net income surged 58% to $923 million from a year earlier as sales of commercial planes continued to grow despite the weak global economy.