BAE Systems to Lay Off 300 as Shipyard Contracts Stall

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BAE Systems PLC (ADR) (OTCMKTS:BAESY), a global defence, aerospace, and security company, said it will be laying off 300 workers from its shipyard in Norfolk, Virginia, because no new repair contracts have come in from the U.S. Navy.

Until new contracts are awarded, BAE Systems need to cut costs, which includes layoffs. The company laid off the first 50 employees in May with 250 more expected to be terminated before the end of June.

Karl Johnson, a spokesperson for BAE Systems, says the layoffs are because the company does not know which contracts the Navy will award it as part of the defense budget. The shipyard originally notified its workers at the end of March of the possibility of layoffs.

The BAE Systems shipyard’s workforce level had been at about 1,000 and will drop to 700; a 30% reduction. “That’s a little less than half of where we were in September 2015,” said Johnson.

The layoffs will continue to take place until the shipyards are awarded contracts from the U.S. Navy. But the Navy has not yet indicated whether it will be able to move work that was scheduled for mid-August or later to be moved up into the summer months.

Work on three vessels was expected to begin in April, but was then moved to June–July and now, to mid-August and early September.

The Navy has responded by saying that it hasn’t awarded any contracts, in part, because it hasn’t received bids yet on two of the three ships.

“To date, the Navy has only received proposals on Whidbey Island,” said James Slater, a spokesman for Naval Sea Systems Command. “The Navy is ready to award these contracts as soon as possible after receiving the proposals. Additionally, the Navy is more than willing to accelerate the scheduled start dates of these availabilities once a contract is awarded.”

The Navy said it issued “request for proposals,” seeking bids for work on the three ships, in April. After the federal budget was signed on May 5, the Navy issued a request to the industry asking it to fast-track its proposals.

Bill Crow, president of the Virginia Ship Repair Association, said that the Navy “did come out and adjust change dates for the submittal of the proposals.” But the dates for when the world would actually be performed did not.

“The periods of performance have not been changed – that’s what drives the start of the availabilities. That’s the key,” added Crow.

Regardless, because the start dates for work on the three ships is up in the air, the shipyards are being forced to lay people off. Even if the BAE Systems shipyard is awarded one or all of the contracts, there is no guarantee all of the laid-off workers will be called back to work.

Sources:

Lack of contracts leads to approximately 300 layoffs at BAE Systems shipyard,” WKTR News, May 19, 2017.

BAE Systems lays off 50 workers, the first of an estimated 300. Now, the Navy is responding,” The Virginian-Pilot, May 20, 2017.

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