More than 500,000 aerospace production jobs are at risk in the COVID-19 slowdown, wrote the International Association of Machinists and Aerospace Workers, the principal aerospace workers’ union, in a March 23 letter to members of Congress.
The IAM asked for government help for their workers, some 13,000 of whom have received layoff notices.
“It is vitally important to our national security, our domestic supply chain, and our role in the global economy that this industry and the workers which are its backbone receive immediate financial support,” said the letter from IAM International President Robert Martinez.
“This strategic industry cannot be saved without first ensuring the economic security of the workers who make it thrive,” he said. The IAM wants a relief package that preserves worker salaries, healthcare insurance, fringe benefits, and “all provisions in the applicable collective bargaining agreements.”
The IAM workforce is employed in both the defense industrial base as well as the commercial aircraft industry, which is the lion’s share of aerospace work. Airlines have slashed operations in recent weeks, commercial aircraft orders are in abeyance, and parts manufacturers have announced slowdowns and closures.
The IAM further wants Congress to mandate that any financial assistance to airlines and aircraft manufacturers bar the use of funds for stock buybacks, dividends, executive bonuses, or “moving jobs overseas.”
GE Aviation announced March 22 it would layoff about 10 percent of its workforce and furlough about 50 percent of employees involved in maintenance, repair, and overhaul (MRO) for at least three months. GE is also suspending raises and has instituted a hiring freeze. Company CEO Lawrence Culp, Jr, is foregoing salary for the rest of 2020 and vice chairman David Joyce will forego half his salary over the same period. In a press statement, Culp said the sudden dropoff in demand for parts, engines, and MRO work forced the action.
Boeing, the sole U.S. manufacturer of large airliners, announced it will suspend dividends totaling more than $1 billion, has indefinitely “paused” its stock buyback program, and CEO David Calhoun and Board chair Lawrence Kellner also will forego their pay for the rest of 2020.
Undersecretary of Defense Ellen Lord said in separate memos issued over the weekend that work must continue on defense production programs and any other enterprises that support the national security enterprise during the COVID-19 pandemic—superseding state and local orders for workers to stay home—and the Pentagon will continue to provide progress payments to contractors to ensure uninterrupted production.
Defense industry leaders have asked Lord for guidance about work, and expressed concerns that production disruptions or the reduced labor force would result in withheld progress payments on contracts, and reduced cashflow. In a memo Lord said she understands the “challenge” to industry during “this national emergency” and said her office is dedicated to working closely with industry “to ensure the safety of the workforce and accomplishment of the national security mission.
Following extensive meetings with members of industry and Congress, Lord issued a memo to DOD and industry quoting the Department of Homeland Security, “If you work in a critical infrastructure industry” as defined by DHS, “you have a special responsibility to maintain your normal work schedule.” Most of those whose activities support the defense enterprise are included, DHS said.
- Mechanical and software engineers
- Manufacturing/production workers
- IT support
- Security personnel
- Intelligence support
- Aircraft and weapon systems mechanics and maintainers
- Suppliers of medical supplies and pharmaceuticals
- Critical transportation.
Lockheed Martin had previously confirmed to Air Force Magazine that no work disruptions were planned on the F-35 fighter, and Air Force Materiel Command said work will continue without interruption at its depots.
At Lord’s direction, Kim Herring, director of defense pricing and contracting, issued a “Deviation on Progress Payments” memo that states that allowable progress payments “will increase from 80 percent of cost to 90 percent for large businesses and from 90 percent to 95 percent for small businesses.” He said the Defense Contract Management Agency will “work on mass modifications” to contracts versus one-by-one, using DCMA authorities. A Pentagon spokesman said the DOD is also “accelerating payments through several means to prime contracts and directing prime contracts to expedite payments to subcontractors,” all to keep cashflow uninterrupted.
“Invoices are being paid in a timely manner,” he said.
In addition, the Pentagon is working with the Small Business Administration to secure loans for small businesses that work on defense projects.
“It is especially important to understand that during this crisis, the [defense industrial base] is vulnerable to adversarial capital,” the spokesman said, referring to peer competitor nations who may offer financial assistance to stressed U.S. contractors in order to gain access to their technology.
“We need to ensure companies stay in business without losing their technology,” he asserted, adding that the Defense Department will have more to say on this matter in the coming days.
Lord’s memos also emphasized that industry must do all it can to ensure the health and safety of its workers even as they continue their activities.
A spokesman for Lord said she is in “daily contact” with industry leaders and those on Capitol Hill, to include Sen. James Inhofe (R-Okla.), to discuss the Pentagon’s efforts to mitigate COVID-19 effects on industry. She told Inhofe she will work with industry groups such as the Aerospace Industries Association, the National Defense Industrial Association, and National Association of Manufacturers to address their concerns. She will also be contacting various governors this week to address defense activities in their states.