A&D companies expect to lose twice as many employees as they hire, and looming budget cuts raise the specter of mass layoffs
Sometime in the next three months, Anthony Eddy may receive a layoff notice. The 29-year-old engineer has had several different assignments during his six-year career at , rising to the position of communications systems lead, a post in which he designs and tests satellites at a facility near Philadelphia. He is heavily involved in R&D and just finished his master's degree in electrical engineering.
Like nearly half his fellow aerospace and defense (A&D) professionals under 30, Eddy still owes money on student loans racked up a decade ago while he was earning his B.S. degree in electrical engineering at Purdue University. He was not skating through on borrowed money; he worked two internships at a major A&D company, served as a dorm resident adviser to offset housing costs and has been paying off his loans faster than required.
Robert Stevens, Lockheed Martin's outgoing CEO, warned lawmakers in July that the company may be forced to cut 10,000 jobs—about 8% of its workforce—if Congress fails to halt another $500 billion in automatic cuts to the defense budget due to take effect next January under a process known as sequestration. The hope is that a lame-duck Congress will reach a compromise after the November elections to forestall the cuts to Pentagon spending.
But A&D contractors cannot wait until then. By law, they must give employees advance notice of major layoffs or facility closures. Add to that the massive legal penalties that would have to be paid to unravel major military programs. And so, the industry heads into the unknown, and young workers like Eddy are left to wait and wonder.
Uncertainty about which defense programs will be cut, and how deeply, already has the industry hunkering down, as revealed by Aviation Week's 2012 Workforce Study, which garnered responses from 37 companies that employ 80% of the U.S. A&D sector. These companies plan to hire 28,000 workers this year—about as many as the entire staff at Google. But the U.S. A&D industry will lose twice that many employees—56,000—to attrition and retirements, pushing total employment below 600,000 for the first time since 2004.
There are bright spots amid the gloom. Record backlogs of commercial jets atand are reflected in green-field manufacturing sites, which are sprouting from Singapore to Mobile, Ala., where Airbus plans to open an final assembly line on Boeing's home turf. Other pockets of growth focus on alternative fuels, information technology and cyberdefense, where expertise in supporting government national security agencies can be leveraged to meet the needs of hospitals, financial institutions and local utilities.
“Every aerospace and defense company I've talked to is trying to achieve the right size, and as part of that they are both hiring and reducing,” says Richard Stephens, Boeing's senior vice president for administration and human resources. “We have been working to get the workforce right.” As defense budgets turn down in the U.S. and Europe, Stephens sees an industry that is more diversified than it was a decade ago. “Yes, there is a very large defense component, but we go beyond defense,” he says. “We are much more diversified.”
But if you are betting that soaring orders for commercial aircraft will soak up all the jobs lost to defense cuts, think again. Respondents to Aviation Week's survey plan to make just 15,609 civil aerospace hires during the next five years. Those same companies plan to hire 102,735 new employees for defense jobs—if the sequestration cuts can somehow be avoided.
That goal, elusive as it may seem, has kept Marion Blakey on her feet for months. Blakey, president and CEO of the U.S. Aerospace Industries Association (AIA), has been prodding, cajoling and issuing dire warnings as she tries to stop the march toward sequestration. Working with a George Mason University professor, Stephen S. Fuller, and Chmura Economics and Analytics, the AIA calculates that sequestration will create a bow wave of economic devastation that will ripple across the industry and spill over into other sectors such as construction, wiping out more than 2 million jobs and pushing the U.S. unemployment rate back above 9%.
Blakey has been so effective at sounding the alarm that anxiety has spread to many corners of the A&D workforce. “I just met with a group of young professionals, and the first question they had was, 'What is the impact of sequestration on us?'” says Wanda Austin, CEO at The Aerospace Corp.
Austin's response was to remind employees of their purpose. “I asked them, 'Why did you choose this field to begin with?' We need to remind ourselves we are about exploration, discovering new capabilities, the fabulous things we do through space. Space isn't just up there; it is part of our daily life, like turning on the lights. Focus on this: 'What are you doing that is of value?'”
But Austin is not blind to reality: Respondents to the workforce survey plan to make just 1,420 hires in the space sector during the next five years. The Aerospace Corp. has aggressively looked to identify and weed out redundancies or duplications, while working with employees to update their skills and experience to match where the company's customers are heading.
Among other highlights of this year's workforce survey:
•Finding skilled workers. Respondents believe the most important factor for future success is a well-trained workforce. Eighty-two percent identified this as the most important element for business success, ahead of innovation and mergers and acquisitions.
The biggest growth roadblock for Acutec Precision Machining of Saegertown, Pa., is finding skilled machinists. To deal with the shortage, the company developed an on-site training program that puts senior machinists in the roles of teachers. The company also partners with area trade schools and is attracting interest from high school students, says Patrick Faller, who leads Acutec's human resources.
But even where workers are plentiful, they often lack key skills. States investing in vocational programs and training packages for new jobs have an advantage in winning new factory locations. These are not the manufacturing plants of the past with thousands of workers streaming in as a whistle blows in the background and smoke billows from a stack. The new sites are highly automated, focused on high-performance work teams, and require a higher level of basic skills. Line workers are using hand-held devices and computers, programming in control options and assessing possible disruptions and problems.
So while manufacturing looms as a people issue, what worries study respondents more is the need for people who can dream and create; developing new technologies, products and service; connecting the dots between what is possible and anticipating the next need. Stephens and his peers across the industry also are keenly aware of the need to nurture that new generation of technical talent. “I don't know of anyone who is backing off the push for quality and quantity in terms of STEM [science, technology, engineering and mathematics] professionals,” he says.
Survey respondents say this is their top concern: shortages in design, development and basic science. Within this category, the shortages tend to focus on software development, aerospace, mechanical, electrical and systems engineering.
The U.S. graduates 72,000 new engineers each year. Over the next two years, A&D companies plan to hire 8,100 engineers, as well as 3,000 software developers. They will be competing for them with the likes of Google, Apple, Microsoft, the oil and gas industry, and Wall Street.
The notion that there is a shortage of applicants is incorrect, according to members of the 2012 Workforce Advisory Board, who helped Aviation Week analyze the results of the survey. Rather, human resource departments are often flooded with applicants who know the keywords that will get them through online application screening but lack the high-level knowledge and experience needed for many positions in A&D.
And in some cases, companies that cannot find employees with the necessary skills are building classrooms.' U.S.–based Intelligence & Security sector set up a training facility for intel analysts. Now the company is duplicating that effort in cyber, where it trains both BAE employees and customers about cutting-edge cyberforensics that focus on what information cyberattackers are after and how they are trying to access it.
“A few universities are offering training capabilities, but they're very early in the process,” says DeEtte Gray, president of the sector. “It's challenging to recruit and clear individuals in the cyber and IT markets, so we're focused on establishing our own training capabilities in order to enhance the skill set of our workforce.”
While respondents point to engineering/R&D and manufacturing as areas of opportunity, they also point to looming shortages in program management and business development. After a more than decade-long campaign focused on developing program leadership bench strength, leaders are concerned that cuts to defense programs will send this talent to other industries when the opportunity arises.
•Where the jobs are. Those looking for work in the U.S. A&D industry can find it in manufacturing/operations or the defense/security sector. And, if you are qualified, jobs are available in engineering, software development, sustainment/ maintenance, repair and overhaul, as well as hourly production. About half of the 28,000 positions that respondents plan to fill this year are in the Northeast or Southeast U.S.
Easily three-quarters of the jobs that companies plan to add are in defense and security—again, assuming sequestration is somehow averted—and 10% will require security clearances. But with even the most optimistic CEOs predicting that defense spending will decline at the rate of inflation in 2013 and 2014, sharp drops are projected in defense and security hiring. Space is even more dismal: Respondents expect just 200 hires next year in the sector.
•Pushing out retirement. Slightly more than 12% of the industry's workforce were eligible for retirement in 2011; a mere 1.2% took it.
The highest rates of actual retirement for 2011 were in hourly production and the R&D job functions. Hourly manufacturing employees were twice as likely to take retirement as other employees. The challenge is bigger for the largest of companies, where more than 25% of employees are eligible to retire, a figure that will rise to 30% by 2013.
If the economy rebounds and lifts the value of 401(k) plans, will the industry be hit with a wave of retirements? It seems likely that not all retiree positions will be filled. More than 200,000 workers could retire by 2015, yet Aviation Week's survey finds that companies are planning to make just 120,000 hires during that time.
So far, the retirement deferrals have largely protected companies from brain drain. But the flip side is that there is no headroom to promote younger workers—the traditional way to recognize quality work. Aviation Week's study indicates that recognition and the ability to contribute to meaningful work are critical to engaging employees, of all ages, in the business. This will be among the most significant challenges faced by companies.
Despite budget cuts and the stalemate in Congress, the industry must continue to hire. Headcount will drop owing to the combination of retirements, voluntary attrition and slower hiring. But make no mistake; hiring will continue. In an industry where development cycles stretch into years but 14% of 2011 revenues came from new products, organizations must learn to balance the needs of talented people of all ages.
The winners, say members of the study advisory team, will be the organizations that can identify the people they need, by name, what they're working on and the risk of their leaving.
Such companies will define jobs more specifically, with clarity around the skills required. They will partner with universities to create internships and cooperative job experiences that pull young people into the industry, and they will offer them the kinds of pay, sign-on bonuses and other benefits needed to lure them away from other high-stake industries. Employers will brand and market themselves to the sharpest minds on college campuses and in other industries, while paying attention to the needs of current employees. Most important, the winning organizations' leaders will rally the troops behind a clear vision of what needs to be done.
So what happens to Anthony Eddy? The data indicate that young professionals continue to look for jobs, but the rate of voluntary attrition has dropped from more than 20% three years ago to 12% in 2011. Of those who looked for a new job in 2011 and found one, 20% left A&D for another industry. But Eddy does not think he will be joining them.
“I feel pretty confident about my career right now,” he says. “If [sequestraton] happens, we have pretty good exposure to the commercial side, so there's enough work for me to be gainfully employed. I'm not looking for another job.”
With Joseph C. Anselmo.
To view a slideshow of Workforce Study highlights as well as more data, go to AviationWeek.com/workforce Subscribers to the Aviation Week Intelligence Network can find this plus additional data, Workforce Survey details and more at AviationWeek.com/awworkforce
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|Source: Aviation Week 2012 Workforce Study|