Defense industry executives have largely attributed the supply-chain woes of recent years to the coronavirus pandemic. But more than a year after the widespread arrival of COVID vaccines, shortages of skilled workers are still delaying weapons deliveries and eating into firms’ profits.
“We really expected, as COVID receded into the background, that we would see a quick recovery in the supply chain and in fact that was wrong,” Raytheon Technologies CEO Greg Hayes told investment analysts Tuesday during the company’s quarterly earnings call. “The labor challenges that we continue to see have not abated and…I think that is the challenge and that’s the reason we continue to struggle in supply chain.”
Hayes told Defense One last week that more than 350 of the company’s 174,000 employees are working directly on managing supply-chain slowdowns.
Raytheon is not alone. Lockheed Martin, the world’s largest defense company, reduced its 2022 sales estimate by $750 million, in part due to supply-chain problems. CEO Jim Taiclet said last week that his company expects these problems to fester through the end of the year.
“Going back [to] the beginning of the year, everyone was impacted by the latest [coronavirus] variant that we had,” Lockheed CFO Jay Malave said on the company’s quarterly earnings call last week. “Our operations were impacted; our supply-chain operations were impacted and I think our ability to recover from that has been more challenging than we had originally anticipated.”
A recent McKinsey study found that defense companies were hit harder by “The Great Resignation” that came during the pandemic than other sectors. Now with more than 11 million job openings across the United States, workers can be selective when choosing an employer.
“I think the only thing that’s going to solve labor availability, I hate to say this, is a slowdown in the economy. Because right now, there just simply aren’t enough people in the workforce for all of our suppliers,” Hayes said.
The International Monetary Fund said the economy was slowing amid recession fears, according to a new report released Tuesday.
Hayes last week called on the Biden administration to support apprentice programs that train the next generation of workers.
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