Defense firms lobby to ensure COVID-19 costs do not dent Pentagon budget

Washington

Chief executives of eight defense companies including Lockheed Martin Corp (LMT.N) and Raytheon Technologies Corp RTX.N have asked the U.S. government to ensure that billions of dollars are not taken from the Pentagon’s budget to shore up firms hit by COVID-19 without being replaced with new funds.

Pentagon funds were given to defense companies to pay the salaries of highly skilled workers, preventing them from being laid off or poached by better-funded competitors.

At least several billion dollars will be needed to replace the funds to be spent on supporting the workforce and other coronavirus-related adjustments, the companies said in separate letters to the Pentagon and White House. One analyst estimates up to $15 billion could be needed. Both letters were seen by Reuters and confirmed by two of the companies that signed them.

The Pentagon has sought to make sure defense contractors do not lose highly skilled welders, laser engineers and other hard-to-find talent during the pandemic. It is also allowed to pay defense contractors for sick time or if healthy workers cannot get to job sites due to the coronavirus outbreak. These programs are aimed at maintaining a “ready workforce” among defense firms.

The Pentagon has sent a request for “lower double-digit billions” to the White House Office of Management and Budget to support defense industry claims to maintain a “ready workforce.” The letters signed by the eight CEOs said COVID-19-related workforce expenses are “well beyond” the Pentagon’s ability to fund without significantly jeopardizing ongoing military modernization efforts.

The letters, dated July 7, were signed by the CEOs of Boeing Co’s (BA.N) defense business unit, Textron Inc (TXT.N), L3Harris Technologies Inc (LHX.N), General Dynamics (GD.N), Raytheon, Lockheed Martin, BAE Systems Inc (BAES.L) and Huntington Ingalls Industries (HII.N).

Defense industry analyst Jim McAleese has estimated $12 billion to $15 billion will be needed in the next stimulus to cover the industries extensive coronavirus-related bills.