Honeywell says most defense cuts will happen

  • Article by: DOUG CAMERON , Wall Street Journal
  • Updated: November 19, 2012 - 9:03 PM

Honeywell International Inc. said Monday that it expects the bulk of looming U.S. defense cuts to be implemented and, in a sharp break with rivals, said it welcomes the reductions.

The diversified U.S. industrial-and-aerospace group said its plans assume that 80 percent of the cuts that would be triggered by budget sequestration on Jan. 2 will happen, though they won't really start to bite until 2014 and could shrink the armed forces to the profile seen before the terrorist attacks of September 2001.

Big U.S. defense contractors have spent months lobbying fiercely against the sequestration cuts that will slash almost $500 billion from military spending over the next decade, doubling the existing cuts contained in the Budget Control Act.

"We recognize these cuts are going to happen," said Mike Madsen, president of Honeywell's defense and space unit. "We're not really fighting these -- they need to occur," he said at an investor meeting.

Honeywell CEO Dave Cote has been among the business executives consulted by President Obama over future spending and tax priorities. He attended a White House summit last week, and Madsen said the company's view of defense priorities reflects the need to address budget deficits.

Most large U.S. defense contractors have indicated that they expect a compromise to be reached on defense sequestration.

Madsen also said the mix of armed forces that emerges as ground troops are withdrawn from Iraq and Afghanistan will be more akin to that seen before the Al-Qaida attacks 11 years ago.

Defense contractors with greater exposure to what he called "enduring" platforms -- aircraft carriers, long-range bombers and fighter jets, as well as security systems -- are seen by analysts to be less vulnerable to whatever level of cuts finally emerges.

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