Lockheed Martin backed off its promise to issue layoff notices days before the presidential election on Friday following a guidance letter issued by the White House and promises made by the Pentagon not to cancel defense contracts on Jan. 2.
Lockheed CEO Bob Stevens had threatened to issue layoff warnings to the his workforce in accordance with the Worker Adjustment and Retraining Notification (WARN) Act. In light of the Pentagon's Friday promise not to cancel or modify contracts, Lockheed issued a statement saying the company "we will not issue sequestration-related WARN notices this year."
The WARN Act mandates that companies issue a notice to its employees at least 60 days ahead of large planned layoffs. The 60-day mark ahead of sequestration's drop dead date of Jan. 2 would land four days before November's presidential election. Thousands of defense workers receiving a notice of a potential layoff would obviously harm President Obama's campaign, especially in Virginia, a major battleground state.
Robert Hale, the Pentagon's comptroller, has said in recent public appearances the Defense Department will have a little bit of flexibility to move funds around to protect certain programs from the 9.4 percent across the board defense cuts dictated by sequestration legislation voted on by Democrats and Republicans.
Pentagon officials had feared the sequestration cuts mandate a 9.4 percent cut indiscriminate of programs. However, a sequestration report released by the Office of Management and Budget indicated the Defense Department will apply the cuts to overall budget accounts, not specific programs.
This means, if Congress fails to come to a compromise to delay or avoid sequestration, the Pentagon will have time to move money around and save certain programs from the 9.4 percent cut. Defense contracts have not avoided the budget axe, but even under the worst case scenario, Pentagon budgeteers will have have an unspecified amount of time before announcing budget cancellations and modifications.
Defense companies received further cover Friday with a guidance letter from OMB. It said the federal government will pay for severance costs mandated by the WARN Act should it be necessary because of the earlier Department of Labor guidance. Labor officials had told defense executives that the threat of sequestration did not require companies to issue WARN notices in November.