Utah’s fourth-biggest private employer, defense contractor L-3 Communication Systems-West, on Thursday axed 220 workers as it adjusts to automatic federal budget cuts and downward trends in defense spending.
The layoffs, about 5.5 percent of its Utah workforce, add to some 200 people who accepted buyouts from the company last month. Another 190 Utah employees were laid off in April. The latest layoffs mainly affect the company’s engineering organization.
What L-3 Communication Systems-West does
The company develops and manufactures communications systems for surveillance, reconnaissance and other airborne intelligence collection. Its primary customers are the Department of Defense and other government agencies.
"These difficult but necessary actions are being taken to size the business appropriately to stay competitive as CS-W [L-3 Communication Systems-West] continues to manage the impact of sequestration and related budget shifts in the defense industry," the company said in a statement.
Sales have slowed this year and new orders for CS-W’s products are down 20 percent, the company said. The company develops and manufactures communications systems for surveillance, reconnaissance and other airborne intelligence collection. Its primary customers are the Department of Defense and other government agencies.
With the reductions, CS-W still employs about 3,600 people in Salt Lake City. The company did not rule out further cutbacks in the future.
"We will continue to evaluate CS-W operations in line with industry and customer business demands," spokeswoman Jennifer Barton said in an email.
In total, at least 610 employees have been laid off or volunteered to leave CS-W, one of numerous business units of New York-based L-3 Communications Holdings Inc. The latest reductions occurred about six weeks after L-3 Communications Holdings 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 in the quarter. A year earlier, the company earned $205 million.
At the time, CEO Michael Strianese said the company was closely monitoring the effects of sequestration and how the cuts would affect future defense spending. His comment came three days after Val Snyder, president of CS-W in Salt Lake City, presented a voluntary separation package to employees that he hoped would minimize the number of people who would be terminated against their will.
The cuts are the first major setback in what otherwise has been a striking period of broad-based recovery in Utah’s labor conditions. Employers have added close to 40,000 jobs in the Salt Lake metro area since January 2012, according to the Bureau of Labor Statistics. Over the past year, statewide job growth has returned to long-term trends, a key indicator that the economy has largely recovered from the recession. Only government employment has shown signs of weakness.
"Defense employment in Utah stayed fairly steady in its growth rate through the recession. But the growth rate has backed off in these last few months of recovery," said Carrie Mayne, chief economist at the state Department of Workforce Services.
"The thing that we know is driving it most is defense layoffs and contracts ending, due to sequestration," Mayne said.
Spencer Eccles, executive director of the Governor’s Office of Economic Development, said Utah’s economy is strong enough to absorb the layoffs.
"What we are most pleased with is that because of our diverse economy there are many employers who will be looking for the skills of the employees who are affected by the layoffs," Eccles said.
Barton, the CS-W spokeswoman, said the cuts do not signal that L-3 Communications Holdings is backing away from the airborne intelligence collection systems business.
"CS-W will continue to produce a broad array of critical products for our military and government customers. The business is a key contributor to the global national security industry, and an important part of L-3," Barton said.
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