Federal deficits — and a budget-cutting mood in Washington — have left Maryland companies less and less able to rely on government work, analysts said Thursday. Defense giants such as Northrop Grumman are particularly vulnerable, they said.
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And with additional cuts on the horizon, and no increases likely over the next decade, Harrison expects the trend to continue.
Even as Northrop Grumman was announcing its cuts Thursday, state officials moved to retain 1,250 high-paying jobs at another large employer, Bechtel Power Corp., which was considering a move to Virginia.
The state's Legislative Policy Committee, which includes Senate and House of Delegates leaders, approved a $9.5 million loan package for the Bechtel Corp. subsidiary that designs and builds energy projects. The package from the state's Sunny Day Fund includes a $2 million loan and additional loans of up to $7.5 million, all of which require the company in Frederick County to retain the 1,250 jobs through 2018.
House Speaker Michael E. Busch called the loans a great investment and an anchor for the community at a time when other states are trying to lure Maryland businesses away. Added Senate President Thomas V. Mike Miller, "We are doing our best to be sure that everyone who has jobs keeps them."
Northrop Grumman, one of the largest private employers in Maryland, announced that voluntary buyouts would be followed by an undetermined number of layoffs through January.
Most of the cuts are expected at the division's main campus just northwest of Baltimore-Washington International Thurgood Marshall Airport and facilities in Annapolis, Sykesville and Elkridge, said Jack Martin Jr., a company spokesman. The rest of the cuts will be made at facilities across the nation.
Electronic Systems, which makes airborne radar, navigation systems and other military equipment, has 17,000 employees nationwide, including 7,625 in Maryland.
"These workforce reductions are based on the current business outlook for Electronic Systems and the anticipation of further defense spending reductions," Martin said in a statement. The company is expecting "an increasingly competitive and challenging business environment."
Electronic Systems has seen its workforce decrease since January 2009, when it employed about 8,600 workers in Maryland. The cuts announced Thursday are the second round this year for the company, which announced in May it would cut 500 Baltimore-area jobs, also through buyouts and layoffs.
While the Department of Defense and Congress continue looking for defense cuts, especially in areas such as new weapons systems, "one of the ways that defense and national security is going to continue to be robust is by investment in all kinds of information technology," said Ray Bjorklund, chief knowledge officer for Deltek, a consultant to government contractors. "The kinds of adversaries that the U.S. is facing now are much more in the cyber-world."
That's a growing area, but defense contractors don't always have the flexibility to quickly adapt to the types of projects available.
"They can't move their bench from one project to another, and it's probably going to be at least five to 10 years of much-reduced spending," and workforce reductions, Bjorklund said.
Last year, federal spending in Maryland, largely in government contracting and individual assistance, dropped by nearly $1.4 billion, representing the steepest decrease since 1996, the Census Bureau reported recently.
"There's no question that Maryland finds itself in a more vulnerable position than other states because of the proximity to Washington," and its reliance on federal contracts, said Alexander M. Sanchez, the state Department of Labor, Licensing and Regulation secretary.
But Sanchez and others said it's too early to tell just how deep any upcoming budget cuts will be or how they will affect Maryland-based jobs. Displaced or laid-off workers from Northrop Grumman and other defense contractors have the advantage of possessing skills that employers still desire — even amid high unemployment, he said.
Northrop Grumman is facing problems because the government is purchasing fewer of the contractor-built radar systems for defense aircraft, said Aris Melissaratos, the state's former secretary of economic development and a former chief operating officer for the Electronic Systems group.