Sikorsky, Malloy cut tentative deal to produce new helicopter in Connecticut
CT Mirror, Sept. 22, 2016
By Mark Pazniokas
Gov. Dannel P. Malloy and Lockheed Martin announced a tentative deal Tuesday to produce a new generation of Sikorsky heavy-lift helicopters in Connecticut at the cost of $220 million in financial incentives from the state and an agreement with the company’s union workforce.
The surprise announcement says the deal is contingent on union approval and an endorsement in an unusual special session session of the General Assembly in the midst of a hotly contested campaign for control of the legislature.
Legislative leaders reacted positively after a briefing Tuesday and have tentatively scheduled a special session for Sept. 28. The administration did not say what was being asked of the union, and Rocco J. Calo, secretary-treasurer of Teamsters Local Union 1150, said he would not comment until he addresses his members in two meetings Wednesday afternoon.
Malloy and company officials are to outline the deal at a press conference at 3 p.m. Wednesday at Sikorsky Aircraft in Stratford. The administration said Tuesday that the deal would “retain and grow approximately 8,000 jobs at Sikorsky Aircraft until 2032, keep the Sikorsky headquarters here in Connecticut, and increase investments in in-state suppliers.” The U.S. Navy has ordered nearly 200 CH-53K King Stallion helicopters, a heavy-lift aircraft now being subjected to flight-testing.
Lockheed Martin, which purchased Sikorsky in 2015, had considered numerous states for production of the CH-53K, the Malloy administration said. Sikorsky hopes the King Stallion, once in use by the U.S. military, will quickly prove itself to a broader international market, as happened with its medium-lift helicopter, the Black Hawk.
The administration says Lockheed Martin would: Keep the Sikorsky headquarters in the state and maintain Connecticut as a primary production facility for its government-based helicopter business. Retain and grow its full-time employment in Connecticut to more than 8,000 by the end of year 14.
A legislative source said present employment is in the mid-7,000s and was projected to fall without the new deal. Nearly double its spending of $350 million per year with suppliers throughout the state. Increase its capital spending for machinery and equipment by 22 percent. In exchange, the state would provide financial incentives totaling up to $220 million over the term of the agreement:
The company would earn grants of up to $8.57 million annually over the term of the agreement by meeting benchmarks such in jobs, payroll spending, use of in-state suppliers and spending on machinery, equipment, and other long term investments. Sales and use taxes would be exempted up to $5.7 million per year over the term of the agreement.
If Lockheed Martin exceeds the target-level employment by 100 to 550 jobs in any given year of the agreement, it will be eligible for a performance incentive grant of up to $1.9 million, for a total of up to $20 million. Economic aid to major corporations by the Malloy administration has been controversial, but Republicans have joined Democrats in backing some investments, while criticizing others.
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Initial reaction Tuesday was positive from leaders of all four caucuses: House Speaker J. Brendan Sharkey, D-Hamden; House Minority Leader Themis Klarides, R-Derby; Senate President Pro Tem Martin M. Looney, D-New Haven; and Senate Minority Leader Len Fasano, R-North Haven.
In 2014, the General Assembly approved a landmark deal negotiated by Malloy that authorized $400 million in tax breaks to United Technologies Corp., the former owner of Sikorsky, to trigger a major expansion designed to preserve Connecticut’s aerospace and engineering base.
The deal required UTC to invest a total of $500 million through 2018 in four projects: A new, 425,000-square-foot world headquarters and engineering facility on the Pratt campus in East Hartford; 100,000 square feet of new and refurbished lab and office space at the United Technologies Research Center in East Hartford; A new, 500,000-square-foot customer training center and engineering lab at the UTC Aerospace Systems facility in Windsor Locks; And upgrades to the advanced engineering lab and other facilities at Sikorsky Aircraft.
The Malloy administration says the new tentative deal is an opportunity to “strengthen one of three critical components of Connecticut’s defense industry sector and to shore up the state’s standing as a leader in fields of aerospace technology and manufacturing.”
Increased spending by Lockheed Martin in Connecticut’s supply chain alone would exceed the state’s incentives, the administration said. “This is a significant deal with wide-reaching ramifications. It ensures that great manufacturing jobs – thousands of them – will remain in Connecticut, and that Sikorsky’s extraordinary record will continue to flourish for years and years to come right here at home. If we don’t do this deal, we risk losing thousands of good-paying jobs,” Malloy said.
That will be the pre-election decision for lawmakers: Do they sign off on the deal, or risk the loss of jobs? Though leaders of all four caucuses say their initial analysis of the deal was positive, most added they want to see more details. “I think this investment could be very good for the state,” Fasano said. “I still want to review the numbers.” “Any day that can bring new jobs to the state is a good day for the state of Connecticut,” Klarides said. But she quickly added, “As we have seen in many surveys, we are seen across the country as one of the most business-unfriendly states. I hope as we go forward the governor and Democrats are consistent in what they believe the vision for Connecticut should be.” “In a global economy, this company could have chosen to move anywhere in the world, but it chose to remain in Connecticut,” Looney said in a prepared statement likely to be repeated during the fall campaign. “The educational investments we are making in advanced manufacturing career training are creating a pipeline of workers – that will fill these jobs for a generation – who are better skilled and better educated than our competitors.” “What does this investment really mean?” said Senate Majority Leader Bob Duff, D-Norwalk. “It means that Connecticut kids can go to school knowing that they’ll have jobs available to them right here in Connecticut when they graduate.” Sharkey said the deal would closely link the next generation of Sikorsky’s production to the state, with guarantees that other suppliers in the state also would benefit. “There are good protections for the state,” Sharkey said.
The proposed deal comes as Pratt & Whitney has announced a major hiring push in Connecticut in response to baby-boomer retirements and a massive backlog of jet-engine orders from the commercial airline industry. Electric Boat also is hiring in response to new orders for submarines. Electric Boat, Pratt and Sikorsky all have major supply chains through the state and region.
“This isn’t just about Sikorsky and our new relationship with Lockheed Martin – it’s also about the supply chain companies and their employees that will benefit from the CH-53K being built by Sikorsky,” Malloy said. “These companies are in every corner of our state. Today, we are supporting the small- and medium-sized businesses that are the backbone of our state and local economy. This is something that we all should celebrate.” Sikorsky called the deal the product of a three-way partnership.
“This deal represents a significant first step in the three-way partnership among Sikorsky, the state and Teamsters Local 1150,” said Dan Schultz, the former Marine helicopter pilot named the company’s president in November. “It is important for the company’s ability to meet our customer requirements, for our employment stability amid continuing and difficult financial pressures on our industry, and for our future,” Schultz said. “I thank our partners for their support and look forward to completing this deal. Assuming the state’s proposal is approved by the legislature and the union agreement is ratified, Sikorsky will be able to transition the CH-53K production work to Connecticut.” Sikorsky faces a deadline of Oct. 7 to confirm to the Navy where the King Stallion will be produced.