Defense contractor L-3 Communication Systems West, the fourth-largest private employer in Utah, is preparing a second round of employment reductions as it tries to adjust to federal budget cuts at the same time the U.S. involvement in Iraq and Afghanistan is winding down.
Earlier this week, Val Snyder, president of L-3 in Salt Lake City, sent an email to the division's approximately 4,000 Utah employees offering buyouts that he hopes can "reduce the number of employees that would otherwise be affected by an involuntary reduction."
In April, L-3 laid off about 190 Utah workers, or about 4 percent of its workforce in the state. At the time, the company cited downward trends in defense spending and the prospect of short-term automatic budget cuts known as sequestration.
Snyder didn't say how many employees are expected to leave the company, either by accepting a buyout or because of layoffs. But in a statement emailed to The Salt Lake Tribune on Friday, the company said "this difficult decision comes as [L-3] continues to manage the impact of sequestration and related budget shifts in the defense industry, which have slowed sales and reduced orders nearly 20 percent in 2013."
Employees who want a buyout must inform the company by Aug. 5, Snyder said.
The offer is open to anyone except employees in L-3's software development and integration centers, as well as corporate employees who work in the company's Salt Lake headquarters at 640 N. 2200 West. Field service engineers and technicians are also excluded.
"This is an unsettling, challenging time for our division and our employees,'' Snyder wrote in the email to employees. "I assure you these difficult steps are necessary to ensure that we can sustain our business and remain competitive in the effects of sequestration."
The email went out to employees three days before its parent company, L-3 Communications Holdings Inc., reported its second-quarter earnings fell 9.8 percent as higher costs offset a company-wide increase in net sales.
L-3 earned $185 million, or $2.03 a share, down from $205 million, or $2.08 a share, in the second quarter of 2012. Sales were up 1.6 percent, to $3.2 billion.
L-3 Communication Systems West is inside L-3's Command, Control, Communications, Intelligence, Surveillance and Reconnaissance business unit. The unit's sales increased 2.3 percent in the second quarter, but operating income was down almost 20 percent.
"We continue to closely monitor the effects of sequestration and subsequent budget uncertainties," CEO Michael Strianese said in a statement accompanying the earnings report.
"Although we have experienced some impacts from sequestration, including funding delays and cuts, award deferrals and staffing reductions at select customers, the result is manageable and we are taking the appropriate action at the affected business units," Strianese said.
Sequestration is having an effect elsewhere in Utah, according to the state Department of Workforce Services.
Federal employment in the state fell 2.2 percent between June 2012 and last month. Defense Department jobs declined 1.8 percent.
L-3's severance package
Employees who accept the company's buyout offer will receive a lump sum payment based on the number of years they have worked for L-3 plus an additional $3,000.
Less than a year: Two weeks of annual salary
1 through 9 years: 10% of annual salary
10 through 19 years: 20% of annual salary
20 years or more: 30% of annual salary