W.Pa. businesses brace for sequester
By Kim Leonard
Published: Tuesday, February 26, 2013, 8:58 p.m.
Updated: Wednesday, February 27, 2013
Government contractors across Western Pennsylvania are worried about how the partisan battle over $85 billion in federal spending cuts might affect their businesses — with some anticipating layoffs if there isn't a deal between President Obama and GOP lawmakers.
Bechtel Marine Propulsion Corp., which operates the Bettis Atomic Power Laboratory with 2,300 employees in West Mifflin, said it may lay off subcontractors at Bettis or at a Schenectady, N.Y., plant if the automatic spending mechanism known as the “sequester” kicks in on Friday.
RTI International Metals Inc., which supplies titanium for the Joint Strike Fighter aircraft, said cuts could reduce the company's revenue by $15 million a year. Spokesman Richard E. Leone wouldn't say whether any of RTI's 2,500 employees would be laid off.
The titanium products maker, based in Moon and with a plant in Hermitage, had sales totaling $738.6 million in 2012.
Federal contracts and other programs in five Pittsburgh-area congressional districts total $5.64 billion, according to the government website USASpending.gov, and it remains unclear how quickly and to what extent businesses in the region might feel the effects of sequestration.
“It's a mystery. Nobody really knows,” said Scott Deutsch, manager of communications for the National Center for Defense Manufacturing and Machining in Blairsville. “Over time, the longer this takes to resolve, the crazier, the weirder the whole thing gets.” The nonprofit works with government agencies, businesses and educators to optimize manufacturing.
No progress was made by Tuesday afternoon in efforts to stave off the wide-reaching cuts.
Obama rejected a proposal floated by Senate Republicans to give him more flexibility to pick and choose which programs should be cut to reach the $85 billion over seven months mandated by the so-called sequester, saying, “There's no smart way to do that.”
Sen. Bob Casey said this week there's still “plenty of time to work out an agreement.” Casey, D-Scranton, quoted a George Mason University forecast that Pennsylvania could lose 78,454 jobs if sequestration lasts a year, including nearly 40,000 Defense Department jobs.
“We have a lot of jobs at stake that relate to our Defense budget,” he said.
Jennison Corp. of Carnegie, which makes parts for the M40 gas mask used by armed forces, might lay off three or four employees if sequestration takes effect and spending isn't restored.
“We are kind of anxiously waiting to see what happens at the end of the week,” said Vice President Paul Sirney, adding that the company has been advised to hold off on production.
Jennison, with 45 employees, counts Defense work as close to 15 percent of its business. A sister machining company called Jennison Precision, with 40 employees, handles a smaller amount of Defense work.
Bechtel Plant Machinery, with 800 employees at a Monroeville plant, wouldn't expect immediate effects from cuts because it has 20 or so active government contracts at any given time — and those deals typically run five to 10 years, spokesman Dom Bonanno said.
“We're trying to read the papers and figure out what is, or isn't, going to be affected by sequestration,” he said.
The Bechtel Corp. subsidiary in November was awarded a $355.9 million contract to supply nuclear propulsion components to the Naval Sea Systems Command.
Forecasts that Pennsylvania might lose $73 million in National Institutes of Health funding worry John Manzetti, CEO of the Pittsburgh Life Sciences Greenhouse.
The University of Pittsburgh and Carnegie Mellon University receive $600 million each year from the institutes to nurture new medical technologies, he said, and reductions could alter the organization's programs to commercialize those innovations.
The NIH has provided local businesses with direct funding, he said.
“Most of the growth in the U.S. economy is the result of new innovations” that depend largely on federal funding for basic research, CMU spokesman Ken Walters said. “This formula has been highly successful in Pittsburgh, where CMU's Greenlighting Startups initiative has created more than 300 companies and 9,000 jobs in the past 15 years.”
Many of the 1,500 small businesses that SMC Business Councils represents worry, either because they do federal work or count sequestration as one more economic unknown to pile atop questions over the Affordable Care Act.
“This doesn't help. It doesn't build confidence in the federal government,” said Eileen Anderson, government relations manager.
Staff writer Brian Bowling contributed. Kim Leonard is a staff writer for Trib Total Media. She can be reached at 412-380-5606 or email@example.com.
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