Reporting by David M. Katz, David McCann and Alissa Ponchione
Despite an eleventh-hour deal in the U.S. Senate that would temporarily reopen shuttered government offices and let the country avert a debt default, finance chiefs say their businesses have already been hurt by Washington’s wrangling over the country’s finances.
The Congressional compromise proposed Wednesday would reopen the federal government until January 15, 2014, and raise the debt ceiling until February 7, but CFOs weren’t pleased. “It’s a short-term solution,” says Paul A. Farr, CFO of PPL, the $12 billion gas and electric utility. “We’re moving from crisis to crisis, kicking the can down the road.”
Says Bob Fetterman, vice president of finance at Oneida Indian Nation Enterprises: “It would be great if Congress could understand the impact they’re having on the real economy, real jobs and real money in people’s pockets. This isn’t just a game.”
Clearly, the chance of another disruption to federal government operations exists. The current shutdown has already put businesses on edge. For example, Dayton T. Brown (DTB), a defense contractor based in Bohemia, N.Y., narrowly missed a cash-flow disruption, says CFO Stephen Marini.
DTB gets a majority of its revenue performing subcontract work — engineering and component-testing services. It experienced payment delays during the summer because of sequestration-prompted furloughs at Defense Finance and Accounting Services, which provides payment services to the U.S. Department of Defense. That cleared up in September, but then the shutdown shelved 85 percent of the workers at the Defense Contract Management Agency (DCMA), which audits contractors’ performance. Contractors — including Sikorsky Aircraft, a United Technologies company that makes the Black Hawk helicopters and is DTB’s biggest customer — in turn made plans for their own furloughs.
That would have caused more late payments and a work slowdown for DTB, but fortunately the government decided to bring back many of the furloughed DCMA workers, and the company has mostly escaped ill effects at this point.
Meanwhile, the impact on consumer businesses may be greater. Fetterman says Oneida Nation Enterprises has seen an unusual falloff in consumer spending at its various businesses, which include a casino, convenience stores, marinas and a car repair shop. Consumers are less willing to spend discretionary money, Fetterman says, because they are worried about their jobs or their Social Security checks. That affects his company’s staffing levels.
“We’d have to cut back [employee] hours if this continues,” he says. “If it happens regularly, we’ll have to get more nimble about paring back our staffing [when] demand drops.”