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Contractors battle against further military cuts

By John Crawley

WASHINGTON (Reuters) - Defense contractors launched a broad lobbying campaign on Wednesday to drum up public support for holding the line on U.S. military spending cuts.

Alarmed at the prospect of Congress dictating steep new reductions on top of more than $350 billion in cuts already in the pipeline from Pentagon streamlining, contractors based their urgent appeal on economic as well as national security grounds.

Industry lobbyists are highlighting the role of small business in aerospace production and asking the general public to contact lawmakers directly to support their position.

"Our position is: no more," Marion Blakey, chief executive of the Aerospace Industries Association trade group, told a news conference on the stepped-up lobbying effort. "Defense has been cut to the bone. We are there already."

Boeing Co; engine maker Pratt & Whitney, a unit of United Technologies Corp; and other companies under the AIA umbrella are looking to create general awareness about the potential impact of extended spending reductions.

A congressional "super committee" on deficit reduction is trying to find at least $1.2 trillion in budget savings over the next decade.

The worst-case scenario coming out of the panel by year's end -- if it cannot reach agreement on additional cuts -- would be an additional defense cut of up to $600 billion over the same period.

Industry calls this possibility "draconian." Senior U.S. civilian military officials, including the nominee for the Pentagon's No. 2 post, Defense Undersecretary Ashton Carter, told the Senate this week that cuts "over and above" the level already in the works would be devastating.

Beyond traditional lobbying that includes CEO visits to "super committee" members this week, the AIA trade group -- which also represents Lockheed Martin Corp, General Dynamics, Northrop Grumman and others -- is launching a grass-roots strategy.

In addition to national security, the contractors are drawing attention to the connections between the industry to the economy and small business, highlighting the impact on communities and working families.

The defense industry has taken its issues to the public before, but those efforts centered on decisions impacting specific regions. It has done little previously to promote its message on the national economy.

Blakey said defense companies will try to reach out to every member of Congress, and is encouraging the public to do the same.

The industry, according to figures compiled for AIA, directly employs more than a million people in the United States and affects nearly 2 million additional jobs.

Defense companies benefited enormously from a run-up in military spending over the past decade and face a tougher future. Some defense experts contend the Pentagon's budget has become bloated and could absorb as much as $1 trillion in total budget cuts over the next 10 years. This includes the $350 billion already in the works.

But Blakey said aerospace companies were "fragile" and are now cutting jobs.

Jim Albaugh, chief executive of Boeing's commercial aircraft division and AIA chairman, said potential job losses associated with the cuts under consideration could add about 1 percentage point to national unemployment over 10 years. The U.S. jobless rate is currently 9.1 percent.

The group met with Defense Secretary Leon Panetta on Wednesday, which the executives characterized as a productive discussion. Panetta underscored the importance of maintaining the skills and capabilities of the defense industrial base as well as continuing to invest in research and development, the companies and a Pentagon spokesman said.

Defense company executives have met or plan to meet with as many super committee members as possible, including Senator Jon Kyl and Representatives James Clyburn and Pat Toomey.

The AIA gave an award this week to super committee member Senator Patty Murray, who represents Washington state, where Boeing's main aircraft assembly operations are based.

(Editing by Gary Hill and Tim Dobbyn)

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