The partial shutdown of the federal government is leading to layoffs and production disruptions at defense contractors
and some manufacturing companies.
United Technologies Corp. ( UTX ) said on Wednesday that it is preparing to furlough nearly 2,000 workers at its
Sikorsky unit, which makes Black Hawk helicopters for the Defense Department, and may have to idle several thousand more
workers at its Pratt & Whitney and UTC Aerospace units if the shutdown drags on for weeks.
Government workers deemed nonessential were furloughed starting on Tuesday after Congress failed to meet a Monday
deadline for extending government spending authority, and the cuts have spilled over to government suppliers and the
companies that cater to them.
The impasse compounds the situation for U.S. manufacturers already nervous about the new health-care law and a wobbly
U.S. economy. After hitting a low of about 11.5 million in early 2010, U.S. manufacturing employment recovered to nearly
12 million in mid-2012 but since then has stagnated.
"Everybody is in this giant gray area," said Lisa Goldenberg, president of Delaware Steel Co. of Pennsylvania, a
metals distributor based in Fort Washington, Pa. "What the shutdown is doing is slowing down an already slow machine."
Her company last week agreed to sell about $150,000 of hot-rolled steel coil to a maker of containers and boxes
working on a government contract, Ms. Goldenberg said. But the expected order fell through this week because the buyer
couldn't get government paperwork done, she said.
BAE Systems PLC (BA.LN, BAESY) estimates the shutdown could affect between 10% and 15% of its 34,500 U.S. employees.
It is paying them through the end of their workweek, even if their contract work hasn't been renewed. It is also
committed to paying benefits to nonunion staff hit by the shutdown for up to 90 days.
The company said its seen a "very small impact" on work overseen by federal inspectors.
Truck and engine maker Navistar International Corp. ( NAV ) said the shutdown had halted all work on new contracts with
the Department of Defense and delayed payments for work already performed. Like other military contractors, Navistar's
defense business has throttled back this year in response to falling orders from the U.S. military. The company's
Mississippi assembly plant for military trucks is already idle.
Huntington Ingalls Industries Inc. ( HII ), the Navy's largest shipbuilder, is monitoring the potential effect on its
plans to christen the Gerald R. Ford carrier on Nov. 9 as well as upcoming sea trials of another Navy vessel that are
monitored by civilian inspectors. "Our people are out there [working normally]," said Mike Petters, chief executive of
Huntington Ingalls, which has yet to see any inspector absences. But he warned that delays could start "snowballing" if
the budget impasse continues much longer.
At Hamill Manufacturing Co., a Trafford, Pa.-based family-owned maker of metal parts for a variety of defense and
industrial equipment, the shutdown is causing delays in shipments of some finished products, said Jeff Kelly, chief
executive. Mr. Kelly said the Defense Department representative who normally signs off on products destined for military
use is off duty because of the shutdown.
"We have a couple of items sitting on the dock right now" that can't be shipped until the inspector returns, Mr. Kelly
said. The lack of an inspector could also delay completion of some parts. For now, he said, Hamill has work on
nonmilitary products to keep its workers busy.
Despite the disruptions, Mr. Kelly said he supported the efforts of House Republicans to use the budget impasse as a
way to try to force changes in the Affordable Care Act. He described that act is "a disaster" and which already had
pushed up health-insurance costs at Hamill.
St. Louis-based Arch Coal Inc. ( ACI ) moved its annual safety drill, which was held Tuesday and Wednesday, from the
federal Mine Safety and Health Administration academy in Beckley, W.Va., which was closed, to one of its own mines.
"We were fortunate to have a mine right in Beckley," said Kim Link, a spokeswoman for Arch Coal. She said coal
companies generally have several mining permits outstanding at state and federal levels. While state permitting isn't
expected to be affected by the shutdown, those at the federal level could be slowed, she said.
At Superior Products LLC in Cleveland, Executive Vice President Greg Gens said he was concerned about the shutdown's
impact on ports. The privately owned Cleveland-based company exports between 30% and 40% of its products, including
fittings and systems that carry liquid natural gas to the fuel tanks of trucks and other vehicles.
"If our ability to export is hurt by backlogs of paperwork and inspections, we would be hurt quite a bit," he said. "
It won't take long for our customers overseas to start looking for other people to fill their orders."
Many companies said it was too early to assess potential harm. "I don't see anything yet," said Patrick Gallagher,
chief executive of PGT Trucking Inc., a Monaca, Pa.-based steel transportation company. "Everything seems to be moving.
But by the end of this week, you may see something,"
Jay Gould, chief executive of American Standard Brands, a maker of toilets and other plumbing products, said he was "
still optimistic that Washington will sort itself out and the economy will continue recovering." Mr. Gould said American
Standard wasn't making any adjustments in response to the shutdown for now. But, he said, if the shutdown persisted long
enough to damage consumer confidence, American Standard might have to slow down its manufacturing.
Service-based companies are expected to bear the brunt of the shutdown since many are on shorter-term contracts. "We
did lose some quality personnel who chose to accept other employment in the commercial sector instead of riding out the
fight over federal spending," said Joel Merriman, senior vice president at CSSS.NET, a Washington-based cybersecurity
Mr. Merriman said some other staff hadn't been reporting to work because their contracts had ended and not been
renewed or funded.
"However, I have been pleased to find that much of our work continues to be funded as our employees' services are
required during this period across multiple agencies," he said.
-Kate Linebaugh, Robert Tita and Clare Ansberry contributed to this article.
Write to James R. Hagerty at firstname.lastname@example.org, Doug Cameron at email@example.com and John W. Miller at
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