U.S. Air Force Senior Airman Skyler Fleming, 20th Component Maintenance Squadron engine test facility (ETF) journeyman, inspects an active General Electric F110-GE-129 engine at Shaw Air Force Base, S.C., May 29, 2019.

U.S. Air Force Senior Airman Skyler Fleming, 20th Component Maintenance Squadron engine test facility (ETF) journeyman, inspects an active General Electric F110-GE-129 engine at Shaw Air Force Base, S.C., May 29, 2019. USAF Senior Airman Christopher Maldonado

Pentagon Starts Bailing Out Companies That have Lost Business Due to Coronavirus

The Defense Department is sending millions of dollars to keep companies afloat, and more deals are expected.

The Pentagon has begun to bail out U.S. companies that have seen large parts of their business dry up amid the coronavirus pandemic, in a bid to make sure they can still build weapons. 

On Wednesday, officials announced that five mid-tier defense companies had received a total of $135 million to “help sustain defense-critical workforce capabilities in body armor, aircraft manufacturing, and shipbuilding,” according to a Defense Department statement.“These actions will help to retain critical workforce capabilities throughout the disruption caused by COVID-19 and to restore some jobs lost because of the pandemic,” Lt. Col. Mike Andrews, a Defense Department spokesman, said in the statement.

Meanwhile, a senior Pentagon official told lawmakers that DoD plans to ask Congress for money to reimburse many of its contractors for COVID-related expenditures; for example, wages paid to keep employees on the payroll despite idled production lines and vacated offices; purchases of personal protective gear, and alterations to factory and other work spaces for social distancing.

These moves will buttress earlier Pentagon efforts to shore up its COVID-rattled contractors, including paying firms more money up front and awarding multibillion-dollar contracts earlier than planned.

On Wednesday, Ellen Lord, defense undersecretary for acquisition and sustainment, told a House Armed Services Committee hearing that the Pentagon has asked White House’s Office of Management and the Budget for permission to request on the lower end” of “tens of billions of dollars” to cover personnel-cost reimbursements in a future coronavirus stimulus package. 

The CARES Act allows defense companies to recoup money they used to keep employees working amid the pandemic. But while Congress authorized these disbursements, it appropriated no new funds to cover them. If lawmakers don’t provide the money, Lord said, Pentagon officials would likely have to cut weapons programs.

“The defense industrial base, I believe, is the nexus of economic security and national security,” Lord told lawmakers. “It’s vitally important to make sure that they remain as healthy as possible.”

To date, Lord said, no contractors have requested reimbursements.

The costs from COVID-19 related delays — such as sick workers, employees unable to report to work because of local lockdown or suppliers not delivering parts to assembly lines forcing production to slow — could cost the six largest defense companies $8 billion, Jim McAleese, who runs McAleese & Associates, wrote in a note to clients Thursday morning. Last month, Lockheed said it would deliver 18 to 24 fewer F-35 fighter jets in 2020 because of coronavirus-related delays.

“Lockheed appears to be projecting ~$2.5B total COVID-19 impact,” McAleese wrote.

For months, defense officials have said they were concerned about the aerospace and shipbuilding sectors, two industries devastated by coronavirus. Global shipbuilding deals reportedly fell 71 percent in the first quarter while U.S. travel plummeted 96 percent in early April.

Bailout details

The $135 million for five contractors comes through the Defense Production Act, the DoD statement said.

One of the recipients is aircraft manufacturers Spirit AeroSystems — a key supplier to Boeing, Sikorsky, Bell, and Northrop Grumman. Spirit received $80 million to “expand its domestic production capability and capacity for advanced tooling, composite fabrication and metallic machining at Spirit and the supporting lower level supply chain,” the statement said. 

The Wichita, Kansas, company has seen an increase in its classified military work in recent years, but was hit hard by coronavirus-related production slowdowns and Boeing’s suspension of its 737 Max airliner manufacturing. The company Wednesday said it would temporarily lay off or furlough roughly 900 workers beginning next week.

The Air Force nominated Spirit to receive the Defense Production Act money, Will Roper, the service’s head of acquisition, said during a Wednesday briefing. 

“Aerospace was particularly hard hit by COVID-19 because so much of the aerospace industry that supports defense is reliant on commercial revenue streams,” Roper said. “We’ve had to work double hard in the Air Force because everything that we do is aerospace, and so all that’s been hard hit.”

Spirit on Thursday said it would use the money “to build tooling, fabricate composite parts and machine complex metallic parts.”

“This funding for Spirit provides the Department of Defense additional production capacity for defense needs and helps maintain critical skills in the Defense Industrial Base,” Duane Hawkins, president of defense and fabrication,” said in a statement.

Another recipient was military aircraft engine maker General Electric. The company, which is laying off 25 percent of its workforce, received $20 million from the Pentagon.

“GE Aviation will expand development in advanced manufacturing techniques, including additive manufacturing, promoting advanced material development, and improving digital engineering proficiencies,” the statement said. “This will enable GE Aviation to retain critical workforce capabilities throughout the disruption caused by COVID-19 and to sustain engineering positions put at risk by commercial aviation contraction during the pandemic.”

Shipbuilding suppliers Steel America received $19.5 million. Allied Systems, a company that builds cranes for the Navy and Coast Guard, received $500,000.

Last month, Navy acquisition chief James Geurts said that while the aviation sector has been hit hardest by coronavirus, officials are closely monitoring the shipbuilding industry.

“I'm worried about all of it,” he said during a briefing with reporters. “We're trying to track all of it. The most immediate impacts we've seen have been on aviation.”

Body armor maker Bethel Industries received a $15 million deal Wednesday to “increase critical industrial capacity for specialized laser cutting of laminated nylon fabrics for soldier protective systems during the COVID-19 pandemic.”

More “defense focused” Defense Production Act contracts — like the ones announced Wednesday — would be announced soon, including “several this week,” Roper said.

“We’re either trying to stabilize a supply, ensure that workforce are able to continue working, especially workforces that have [security] clearances,” he said. “ A lot of the companies do not have a huge cleared workforce and so if they’re looking at having to do a furlough, we want to make sure that their engineers, their mechanics, etc, that have clearances are not put under duress, so that it’s an easy call for that company to keep them working.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.