Several Massachusetts-based defense companies have faced a less fiscally supportive U.S. government due to cutbacks in federal military spending, and with more automatic cuts scheduled to take place at the beginning of March, the bad news might not be over.
In Massachusetts, where economic growth has been slow in the defense contracting industry, these cuts could jeopardize nearly 60,000 jobs, according to a report released by U.S. Rep. Edward Markey on Friday.
The Department of Defense reduced spending in 2012, and if legislators do not negotiate a different budget deal to reduce the national deficit, about $495 billion in military spending will be cut in the next nine years, according to Markey’s report.
American Science and Engineering Incorporated, an x-ray technology business based in Billerica, is the latest to be hit by the cuts.
“Global economic uncertainties continue to impact spending in our sector — affecting us and our competitors with lower business volumes for products,” said President and Chief Executive Officer of AS&E, Anthony Fabiano in a press release last Monday. “As we prepare for fiscal 2014, we will be implementing further cost-cutting measures, including a reduction in workforce, focused on right-sizing our organization to address this continuing uncertain demand.”
AS&E reported a nearly 50-percent drop in revenue from fiscal 2011 to 2012. iRobot Corporation, which builds combat-proven robots, reported a 57-percent drop in the same period.
The Defense and Security branch of the Bedford-based robot producer that aided in the corporation’s $465 million in revenue in 2011 took a hit when the DOD dropped $100 million in bomb-defusing robotics contracts across the nation, according to a press release from Feb. 6.
“As expected, the decline in Defense & Security revenue resulted in lower total company revenue and profit for the [2012 fiscal] year,” said Chairman and CEO of iRobot Colin Angle, in the press release. “We are a different company than we were a year ago. Our business performance over the next few years will be driven by our rapidly growing home technology business.”
Raytheon Corporation, another Massachusetts-based defense firm, has not felt as much of an effect as other defense industries in the state. Raytheon is the Commonwealth’s largest defense contractor, and a report by the University of Massachusetts Donahue Institute said it generated about $3 billion more than any other contractor in Massachusetts.
“Raytheon’s solid operating performance in 2012 was a result of our continued focus on improving productivity and program execution, which delivered value to both our customers and shareholders,” said Raytheon’s Chairman and CEO, William Swanson, in a press release from Jan. 24.
Markey has proposed his own plan to make the needed cuts of $1.2 trillion through different means than cutting federal programs.
Markey’s proposed fix include closing tax loopholes, scaling back funding for nuclear weapons and ending tax loopholes for oil companies.
Katherine Einstein, assistant professor of political science at Boston University, said the issues that might come with federal spending cuts] can be fixed by national legislators.
“It is critically important that lawmakers find a solution,” Einstein said. “Massive, broad-based spending cuts like these might hamper economic growth and limit our post-recession recovery. Moreover, these massive spending cuts won’t just be an issue because of defense spending. They will also affect important spending in education, research and energy.”
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