British defense contractor BAE Systems has had challenging times in 2010, as has the entire defense industry in the United States and England. Spending in the industry is shifting.
Aerospace and defense contractor
BAE Systems confirmed earlier July 19 that it has let go of 40 engineering
workers in its office in Sterling Heights, Mich., according Crain's Detroit Business.
The company, which lost $70 billion in 2009, said
government program funding delays contributed to the layoffs, but it also
acknowledged that there were employees who did not have the skill sets needed
by the company at this time.
BAE Systems is based in Farnborough, England, with 107,000 employees worldwide. The company has been
expanding its North American facilities in Michigan. The company received $26 million in tax credits to do so
in 2008 to 2009, and was hoping to increase its employee base to about 600, Crain's reported.
Employees who have been laid off are able to apply
for other positions within the company, including working in a prototype
development facility that is set to open in Michigan in August, according to the company.
A slowed economy appears to be affecting BAE Systems'
earnings-a trend seen across most of the aerospace and defense industry. A July
19 report from Deloitte that looks at the top 25 aerospace and defense
companies globally found flat economic indicators for 2010.
"According to the outlook, defense spending,
which is led by the United States ... Department of Defense, is decreasing,
with a 5 percent drop in research and development spend expected into fiscal
year 2011, and a base budget increase of only 1.8 percent that barely keeps
pace with inflation," Deloitte said in a statement accompanying the
report. "The United Kingdom ... is expected to have a steeper decline in defense
spending. However, the study also states that defense expenditure in India is expected to increase to [$32 billion] and spending in
the Gulf Coast countries is expected to rise dramatically."
Commercial aircraft sales are up in 2010 by 127
percent, with a solid backlog of 6,600 units of guaranteed work over six years.
Merger and acquisition activity in this industry is also up 10 percent in 2010-and
the value of deals has increased by 300 percent. But defense companies are
having a tough time, and are adjusting to newer areas of business including "mission
capability software integration, battle space simulation, directed energy,
precision engagement, threat identification, and energy and infrastructure
security," the report said.
"Decreasing defense [spending] by developed
countries will require smarter use of the remaining funds in order to develop
and deploy the technologies needed to counter more sophisticated adversaries,"
retired Air Force Gen. Charles Wald, a Deloitte senior adviser, said in a
statement.
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