Lockheed says furloughs could delay F-35 fighter, other programs

The Pentagon's plans to put most of its 800,000 civilian employees on unpaid leave for 11 days could lead to delays on Lockheed Martin Corp's F-35 Joint Strike Fighter and other weapons programs, a top company official said on Tuesday.

Chief Financial Officer Bruce Tanner said Lockheed had not been officially informed about the impact of the furloughs, but civilian government workers have played a big role in supporting flight testing and other work on the $396 billion F-35 jet, the Pentagon's costliest weapons program.

"We'll lose the capability to remain on schedule for some of our programs if in fact the government support that goes hand in hand with our flight tests, for example, is reduced," Tanner told Reuters in an interview at the company's media day.

Lockheed and other big weapons makers railed against budget cuts required under a process known as "sequestration" for over a year, warning that their across-the-board nature could result in significant layoffs throughout the industry.

Defense Secretary Chuck Hagel on Tuesday said he decided to move ahead with civilian furloughs only after exhausting every other option to meet the congressionally mandated cuts. The furloughs will begin on July 8, resulting in roughly one day of unpaid leave per week for more than 600,000 workers through September, the end of the fiscal year.

Lockheed's chief lobbyist, Greg Dahlberg, told reporters he expected the Pentagon to release details about how the mandatory budget cuts would affect procurement programs in early June.

He said the department had developed a list of 2,500 affected programs, but no details had yet emerged.

He said it was unlikely that Congress would be able to undo the sequestration cuts for fiscal year 2013, but industry executives were still hoping that lawmakers would reach agreement on other deficit-reduction measures, which could help avert the same across-the-board type cuts in future years.

Lockheed Chief Executive Marillyn Hewson told reporters she continued to voice the company's opposition to the cuts in frequent meetings with U.S. lawmakers and still hoped that Congress would reverse or restructure the cuts, which are slated to take effect over the next decade.

Most of the company's weapons programs take years to build, which meant that the cuts would not have a huge impact on contracts in the short-term, although shorter-term orders and services were already seeing some slowdown, she said.

Tanner said government workers were involved in flight testing of the F-35 jet in a variety of different jobs, including working in the air traffic control tower, providing mid-air refueling and piloting planes.

If those workers were missing 20 percent of the time, or the bases where the planes are being tested shut down, the program's schedule could be delayed, Tanner said.

He said the company was also bracing for a possible slowdown in contract payments as a result of the reduced work time for civilians, since a large part of the company's bills were handled at a Defense Department facility in Columbus, Ohio, which is staffed by many non-military employees.

"If all of a sudden people are only there for four days out of five, do I get paid 80 percent of the bills that I send in, or does it take that much longer," he said.

(Reporting by Andrea Shalal-Esa; Editing by Gerald E. McCormick and Diane Craft)