Lockheed furloughs 3K as shutdown impact grows

The shutdown hammer is falling hard over at Lockheed Martin, as the company today announced plans to furlough 3,000 employees.

The furloughs will happen across all parts of the company starting on Monday, according to a memo released by Lockheed CEO and President Marillyn Hewson.

The workers will be notified by their supervisors and program managers today. Furloughed employees include those who can’t work because the government facility where they work is closed, or those whose work requires a government inspection, or where Lockheed has received a stop-work order.

And things might get worse, according to Hewson.

“Unfortunately, we expect the number of employees affected by the shutdown to grow as we experience contractual actions and the impact of furloughs among [the Defense Contracts Management Agency] and other customer inspectors across our business and our suppliers’ businesses,” she wrote.

Lockheed Martin, of course, isn’t alone. The impact of furloughed DCMA and Defense Contract Audit Agency and other procurement officials is particularly frustrating for government contractors.

I spoke with the CEO of a midsized company today, and he said that about 15 percent of his 2,000 employees are furloughed. “We have one program where we have the extension and the money is there, but the person who needs to sign the contract is furloughed,” the CEO said. “I offered to drive to his house to get him to sign, but no, he can’t be un-furloughed for 20 seconds.”

If that paperwork could be signed, most of his furloughed employees would be back to work.

At Lockheed Martin, the company is directing affected employees to use vacation time and floating holidays in lieu of being furloughed. For employees who don’t have the vacation time, the company is advancing them 40 hours of vacation time.

“If the shutdown extends beyond available vacation time, employees will be transitioned to unpaid furlough leave,” Hewson wrote.

We are hearing similar approaches from other companies. Several are using paid time off, and at least one has created a PTO bank where people with more paid leave can donate extra time to people who do not.

One company of 320 employees told us that full-time employees will have salaries cut by 15 percent to cover the losses the company is suffering during the shutdown.

From many of the comments we’ve been getting from readers, two weeks seems to be the magical number. After that, most people will have used up their paid time off.

“Once they’ve used up their accrued leave, most employees will have to convert to leave-without-pay. Their basic benefits would continue, but no salary. Not a happy scenario,” an executive with a mid-size company said.

Profitability for 2013 also is suffering.

Several executives with small and midsized companies told us that their profits for the entire year could easily evaporate if the shutdown lasts more than two weeks.

“To throw a shutdown atop things like sequestration, delayed awards, etc., well, we will be happy to have 2013 behind us,” one exec said.

I think Hewson spoke for an entire industry when she wrote to her employees: “I‘m disappointed that we must take these actions, and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown.”