A recent article in the Washington Post details the looming layoff of 700 employees by defense giant SAIC.
What I find funny is that the WP article makes it sound like SAIC is doing all of this great stuff for the employees facing cuts like career counseling and retraining as well as two months notice. The thing is, by Federal law, they have to do those things. The Worker Adjustment and Retraining Notification Act (WARN) requires employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs.
It’s unfortunate to see more workers being laid off and I’m starting to see shades of 2008 all over again, except this time it’s defense rather than other sectors of the economy. The slowdown was coming but impending Sequestration threatens to force even deeper cuts to defense spending. This is bound to send ripples through the economy.
SAIC is making moves to split its business in order to evolve with the economy. Currently, plans call for a $7 billion-a-year Solutions company to focus on IT for Defense, Engineering and Medical. The other new business will be ~$4 billion-a-year services business like we commonly see today providing systems engineering and technical assistance, financial analysis and program office support.
Tags: SAIC
They aren’t the first, and they won’t be the last. The DC Metro area has been largely insulated from the economy over the past 4 years because the government money kept coming. The housing market here never really suffered either. It’s going to get ugly when the money dries up. The state of Virginia is estimating between 250,000 and 400,000 lay-offs as a result of Sequestration.
Hoping Congress figures something out, but for companies who have a bottom line to protect, time is out.
The problem with the defense industry as a whole is that it largely serves one customer. When that customer tightens its belt, industry has to tighten theirs as well.
What has never failed to amaze me is that many defense companies have pools of very talented engineering staff, as well as exotic manufacturing capability and yet they never seem to want to diversify their offerings to support other industries or market segments when times are tough in defense. BAE in particular seem to have a spectacular knack for dumping staff at the end of a project, just in time to start hiring again for the start of the next one.
To quote Dick Jones of OCP from Robocop, “Good business is where you find it”.