BAE Systems Lays Off 40 Engineers in Michigan

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.