Defense Contractors Hungry for Top-Talent
Contractors from General Dynamics to Raytheon Technologies to Northrop Grumman are planning for continued grow of business from the U.S. and around the globe in the wake of Russia’s invasion of Ukraine as well as the conflict in the Middle East. But labor and supply chain delays are raising questions about how quickly firms will be able to meet the urgent demand.
Raytheon’s chief executive, Greg Hayes, said, “The only thing that’s going to solve labor availability — I hate to say this — is a slowdown in the economy because right now there just simply aren’t enough people in the workforce for all of our suppliers.”
Though Raytheon says it is raking in contract awards, on-time fulfillment of those contracts could be a challenge as lead times among its suppliers are doubling or tripling. That’s due to shortages of materials and skilled workers; Raytheonitself had planned to hire 2,000 engineers this year, but due to attrition, it has to hire 5,000, Hayes said.
“The aerospace supply chain has continued to face difficulties, but we’re confident in the eventual recovery as Tier 3 and Tier 4 suppliers work to combat labor shortages,” Honeywell Chief Financial Officer, Greg Lewis said, referring to suppliers to firms doing direct business with the Pentagon.
Lockheed Martin’s chief financial officer, Jay Malave, described the labor shortage as “an ongoing challenge” but said the firm shifted 50 employees from an unnamed international program to its new F-16 factory in Greenville, South Carolina. That will speed up lagging operations to deliver aircraft next year and help hit a full-capacity run rate in 2024, he said.
“It just goes to the strength and the breadth that we have here at Lockheed Martin. But nonetheless, it’s been a challenge,” Malave said on the company’s recent earnings call. “Our ramp on that program is taking longer than we had originally anticipated largely because of the slower ramp in hiring employees.”
Likewise, Textron, which employs more than 30,000 around the world, used its size to reshuffle workers into needed roles, among other mitigating steps, executives said. Still, it reported problems making on-time deliveries due to supply chain and labor challenges, and executives anticipated the problems would continue through the end of the year.
Defense contractors have set up training and apprenticeship programs with vocational schools and community colleges in pockets around the country, but they’re acting individually. NDIA has recommended government and industry work together on systemic fixes: improving domestic STEM education pipelines and clarifying security clearance requirements for defense jobs to ensure prospective hires aren’t overburdened.
Byron Callan, managing director at Capital Alpha Partners, said defense firms like Raytheon should have been better prepared, given the industry’s long-standing hiring problems. Steering through the tight labor market requires spending more on employee recruitment, retention and training, he said.
“It’s not like it’s a new problem. These guys have had trouble hiring people prior to the pandemic, so if they thought it was somehow going to magically resolve itself, it didn’t,” Callan said. “Maybe they’re just too attentive to [profit] margins, and squeezing every dollar you can out of an organization without taking some of these proactive steps.”
British defense contractor BAE Systems, which has a U.S. subsidiary, said the firm’s been able to weather U.S. labor shortfalls and has navigated supply chain constraints by resequencing its production lines. BAE’s chief executive, Charles Woodburn, touted established in-house apprenticeship programs it hopes to use to add workers in anticipation of the uptick in global demand. “In the U.S., where the labor market is particularly tight, it has been really pleasing to see over 250 former employees come back to work for the business, very much driven by our culture and the noble mission of supporting those who protect us,” Woodburn said on BAE’s recent earnings call.