The US defence production industry survived recession. But Pentagon’s decision to cut defence budget is likely to have a negative impact on the job scenario in the country.
The bad news came when the United States economy was looking up. Media reports suggest that with the Iraq war over, the process of withdrawal from Afghanistan is set to begin soon and the US deficits soaring, the Pentagon has agreed to cut spending by $487 billion over the next decade. There would be $500 billion more in defense cuts in the next decade if Congress fails to make tough deficit reduction decisions by year’s end and allows automatic spending cuts to go into effect in January, says a Reuters report.
For example, the US Army is planning to halt work on tanks from 2014 to 2017. The last tank industry in Lima in Ohio will be the worst affected. Tanks built here have symbolized American might in wars in Iraq and Afghanistan.
Now the job cut on the eve of election would hurt Lima in particular and Ohio state in general.
The tank plant here employs 920 people. It is the last US tank production site following the 1996 closure of a similar facility outside Detroit. The Army now is planning to halt US tank production for the first time since World War-II.
Reports also said that reductions in defense spending could jeopardize the economic recovery in the United States. In Ohio alone the aerospace and defense sector generates $9.6 billion in annual revenues and employs more than 28,000 workers.
Not only tanks, even fighter jets, warships and related equipment may face slow down in the United States.
The job losses is likely to have a cumulative impact on the other sector.
Any job cut in the defence production sector now may have a negative impact on the electrol prospect of President Obama as in most of the states where he performed better in 2008 have such industries.
Incidentally, the decision to cut jobs in defence production sector came when the United States is facing slow down in its export of other goods. This is primarily because of debt crisis in Europe.
It needs to be recalled that at the peak of the wars in Afghanistan and Iraq, the plant worked three shifts to bring out on an average 2.5 tanks a day as well as Stryker combat vehicles and Mine Resistant Ambush Protected (MRAP) vehicles. Now workers build less than a tank a day. The rate is due to drop until ending completely in 2014.
According to Chicago-based consulting firm Challenger, Christmas & Gray more than 2,300 workers in the aerospace and defense sector lost their jobs in April, pushing the total for the year to 10,102. If this rate continues Obama may have to face stiff challenge ahead.
Experts are of the view that the United States already has enough tanks and heavy vehicles. Their foreign demand has receded forcing the industry to suspend production. Halting tank production for four years would cost the US.
The Army says foreign orders, primarily from Israel, Saudi Arabia, Egypt etc will keep the Lima tank plant running at a minimal level until it resumes production on the next version of the Abrams tanks in 2017.