The American edition of Defense News published the material Joe Gould, Stephen Losey "Amid hiring boom, defense firms say labor shortage is dragging them down" ("Against the background of the hiring boom, defense companies say that the shortage of labor is dragging them down") about the problems with hiring the workforce of companies of the US military-industrial complex - which is relevant for the defense industry around the world.
Workers are installing hydraulic systems on the manufactured carrier-based fighter F/A-18E/F Super Hornet on the production line of the Boeing Corporation in St. Louis, 04/25/2018 (c) Ted Shaffrey / AP The shortage of labor caused by the long-term consequences of the COVID-19 pandemic remains a stone on the neck of the US defense industry, forcing companies to "juggle" staff, hold job fairs and find workarounds to ensure maximum smooth operation.
In the profit and loss statements for the second quarter, company executives repeatedly stressed the problems with personnel, which in some cases made it difficult to complete important projects and required a reduction in revenue forecasts. Some of the largest US defense firms predict that the labor market will remain tight until the end of the year.
Contractors from Raytheon Technologies to BAE Systems and Northrop Grumman predict an influx of orders in the US and around the world after Russia's invasion of Ukraine. But labor and supply chain delays raise questions about how quickly firms will be able to meet urgent demand.
This week, Raytheon CEO Greg Hayes told investors that the company was in a difficult position, as employees who were temporarily laid off at the beginning of the year did not return to work at the expected speed. "75% of the workers had to return; this time only 25% returned," he said.
"The only thing that will solve the problem of labor availability - I don't want to say this - is a slowdown in the economy, because there is simply not enough labor for all our suppliers right now," said Hayes, who called the shortage of personnel "a mountain that has yet to be overcome" for the company.
Although Raytheon claims to be receiving contracts, timely execution of these contracts can become a problem as lead times among suppliers double or triple. "This is due to a shortage of materials and skilled workers; Raytheon itself planned to hire 2,000 engineers this year, but due to staff attrition, 5,000 people had to be hired," Hayes said.
Despite fears of a possible recession and rampant inflation, American employers created 528,000 vacancies last month, restoring all the jobs lost as a result of the recession due to the coronavirus. Unemployment has fallen to 3.5%, the lowest since the pandemic began in early 2020.
Labor shortages and absenteeism related to COVID-19 have slowed production at the Northrop Grumman plant in Palmdale, California, where the company manufactures fuselages for F-35 fighter jets. According to executive director Kathy Worden, this prompted Northrop Grumman to expand its talent pool at the expense of less qualified workers, whom the company trained itself.
"We have the necessary workforce, but if the productivity of employees decreases due to absence from the workplace, then there are interruptions in work," Warden said. "The situation has started to normalize. Even the last set of problems due to COVID did not affect the work so much, because we took some mitigating measures."
Worden believes that the labor market has weakened this month, and predicts that at the end of this year it will be more similar to what we saw it before the pandemic. Meanwhile, she said, the contractor's approach to hiring and retaining "all hands free" is starting to work.
Northrop Grumman wasn't the only firm planning changes.
"The aerospace supply chain continues to face challenges, but we are confident of recovery as tier three and tier four suppliers work to overcome labor shortages," Honeywell chief financial officer Greg Lewis said, referring to suppliers of firms doing direct business with the Pentagon.
Shipbuilding giant HII plans to hire 5,000 new workers, but according to the company's executive director Chris Kastner, after hiring 2,000 people, the company began to fall behind schedule. The firm fills the shortage of employees with contracted or "leased" labor and current employees who show more willingness to work overtime than in the last two years - but Kastner clarified that these actions increase costs and are "the biggest risk for the company."
"Even in the current busy work environment, we have continued to successfully bring shipbuilders on board and use our training programs and craft schools, which has enabled us to meet commitments," Kastner said Thursday in HII's earnings report.
Lockheed Martin CFO Jay Malav called the labor shortage an "ongoing problem," and said the company had transferred 50 employees from an unnamed international program to its new F-16 fighter production plant in Greenville, South Carolina. According to him, this will accelerate the implementation of lagging aircraft delivery operations next year and help to reach full capacity in 2024.
"These problems are simply solved by the strength and breadth of capabilities that we have here at Lockheed Martin. Nevertheless, it was a challenge for us," Malav said during the company's recent profit and loss statement. "The development of this program is taking longer than we initially anticipated, mainly due to slow recruitment."
Similarly, Textron, which employs more than 30,000 people worldwide, among other mitigation steps, used its size to reallocate employees to needed positions, company executives said. However, they reported problems with on-time deliveries due to supply chain and workforce issues. Managers expect the problems to persist until the end of the year.
"Next year we plan to hire about 100 people a month. Therefore, we hold job fairs. We're seeing people getting back to work," Textron chief executive Scott Donnelly said. "We are working very hard. While this is the initial level, attracting new people. And, obviously, they have to learn and develop, so we can't do it faster."
McKinsey, a management consulting firm, has found that about 50,000 vacancies remain unfilled in the US aerospace and defense sector. A company study from 2021, The Great Retirement, showed that as many as 46% of employees in this sector are somewhat likely to quit within three to six months.
A separate McKinsey study found that aerospace and defense companies are relatively unattractive places to work. According to the study, in terms of the viability of organizations, measured by innovation, accountability, etc., they lag behind 64% of global companies.
According to the National Defense Industry Association of the USA (NDIA), the "devastation of the defense industry personnel" occurred even before the pandemic, because there was already a demand for workers with professional and scientific, engineering or mathematical education, as well as the need for a greater diversity of the workforce.
"Our member companies of the association report a constant gap between supply and demand for welders, technicians, electricians, repairmen and other skilled workers to meet the production needs of the Defense Industrial Base (DIB)," NDIA said in a statement to Defense News.
The Pentagon statement notes that the White House's budget application for next year includes more than $200 million for workforce development. At the end of 2020, the Pentagon announced the National Imperative for Industrial Skills training program.
Defense contractors have developed training and craft training programs at vocational schools and community colleges across the country, but they operate individually. The NDIA recommended that the government and the industry work together on system fixes: improve internal STEM training channels and clarify security requirements for defense positions to ensure that potential employees are not overwhelmed.
Byron Callan, managing director of Capital Alpha Partners, said defense firms like Raytheon should have been better prepared given the industry's longstanding hiring problems. According to him, in order to cope with difficulties in the labor market, it is necessary to spend more on hiring, retaining and training employees.
"This is not a new problem. These guys had trouble hiring people before the pandemic, so if they thought things would somehow magically resolve themselves, then that's not the case," Callan said. "Maybe they're just being too careful about the [profit] margin and squeezing every dollar they can out of the organization without taking proactive steps."
British defense contractor BAE Systems, which has a subsidiary in the United States, said the firm was able to cope with the shortage of labor in the United States and overcome supply chain constraints by changing the sequence of its production lines. BAE Systems chief executive Charles Woodburn touted established in-house craft programs that the company hopes to use to increase the number of workers in anticipation of rising global demand.
"In the United States, where the labor market is particularly tight, it was very gratifying to see more than 250 former employees return to work in the business, largely guided by our culture and noble mission of supporting those who protect us," Woodburn said in a recent BAE Systems profit and loss report.
Ellen Drake of Aerojet Rocketdyne said the company has stepped up recruitment efforts as it plans to hire 400 employees to support the defense product sales growth it expects this year.
"We put a lot of effort into working with recruiting firms, as well as doing internal recruiting and collaborating with various organizations in Camden, Arkansas, and Huntsville, Alabama. First of all, where we are engaged in hiring," Drake said.
