Lockheed CEO: Decision to delay layoff notices was not driven by politics

Lockheed Martin’s decision not to send out layoff notices ahead of the election was unconnected to politics, company CEO Bob Stevens said Wednesday.

Stevens said during the company’s third-quarter earnings call that it was “absolutely wrong” to conclude that Lockheed’s action to wait on sending mass layoff notices was taken “to achieve some political objectives."

Layoffs at the big defense companies might be necessary due to the impending across-the-board cuts in government spending in that area.

Stevens said that Lockheed Martin could still send the notices but added that the company wouldn’t feel the effects of the sequestration cuts for at least three to six months after it hits on Jan. 2. He cited guidance from the Obama administration, which had urged Lockheed and other companies not to issue the notices, as the reasoning behind his time frame.

“We will issue WARN notices at the appropriate time if sequestration actions meet the required conditions in full compliance with the law, as we always have,” said Stevens, who is ending his tenure as CEO at the end of the year.

Even if Stevens was not acting politically, he sparked a political brawl between the Obama administration and congressional Republicans earlier this year when he threatened to send layoff notices to all 120,000 of Lockheed’s employees under the Worker Adjustment and Retraining (WARN) Act, which requires companies to provide 60 days' notice for mass layoffs.

The threat hit a political nerve because the notices would have gone out just four days before the election if they were timed to the Jan. 2 start date for sequestration.

The Obama administration told contractors in July that it would be “inappropriate” to send the notices due to sequestration, citing exemptions in the WARN Act. Republicans responded by accusing the White House of trying to hide layoffs ahead of the election.

The administration raised the stakes in September, telling contractors it would cover their severance losses if they did have to lay off workers immediately due to sequestration — but only if the defense firms didn’t send WARN notices before sequestration hit.

In response, Lockheed and other contractors that had threatened to send the mass notices said they would not do so in 2012.

Republicans accused the administration of “bribing” the defense firms, and said they would try to block any payouts to contractors.

On Wednesday’s earnings call, Stevens cited the guidance from the Office of Management and Budget, which promised companies they could recover WARN Act costs, as well as guidance issued by the Defense Department the same day that said no contractors would be canceled on Jan. 2.

“With this new information, we adjusted the timing of our actions, as it would have been improper for us to issue WARN notices in October or November when the timing of any potential sequestration-related events would likely not occur for at least six months or more,” he said.

That doesn’t mean the company won’t ultimately issue the layoff notices, Stevens said, should sequestration actually take effect, which would cut $55 billion from the Pentagon budget in 2013. But the company has said it would have time to give employees the 60 days required under the WARN Act.

Both Democrats and Republicans alike want to avert the sequester cuts, and President Obama said at Monday’s debate they simply “will not happen.”

Even so, the two parties are deadlocked over how to find an alternative, as the defense cuts have been wrapped up into a larger debate on taxes and spending.

Stevens gave his predictions for the lame-duck session on the earnings call, saying he thought a short-term delay or sequestration occurring were both more likely than a “grand bargain” on debt reduction.

“It would seem to be hard to get a grand bargain in a lame-duck session of the Congress,” he said. “So my guess is we'll either see a delay of the onset, or sequestration will take place.”