Biden’s vaccine mandate will further disrupt supply chains, Raytheon CEO says

By Matt Egan, CNN Business

The Biden administration’s Covid-19 vaccine mandate for federal contractors will further disrupt already stressed-out supply chains, Raytheon Technologies warned Tuesday.

Raytheon, a conglomerate that makes jet engines, missiles and drones, joins a growing list of business groups expressing concern about the December 8 deadline for employees of federal contractors to get vaccinated.

“We certainly expect that there will be some disruption in both the supply chain and with our customers as a result of this,” Raytheon CEO Gregory Hayes warned during a conference call with analysts Tuesday. “But we’re going to work our way through it.”

Hayes pointed to a range of problems that are scrambling supply chains right now, including shortages of components and materials as well as rising prices for aluminum and steel.

“It’s just harder to get material in the door on time. We’re also seeing, of course, labor shortages in our supply chain, which is also slowing down input,” Hayes said. “I think that’s going to be a continuing problem into next year. And the vaccine mandate is probably not going to help that.”

However, Raytheon sees that its business can benefit from from the vaccine mandate.

“Higher vaccination rates will continue to build confidence in the safety of air travel going forward,” Neil Mitchell, Raytheon’s chief financial officer, said during the call.

The CEO likewise said as much last month when talking about the rebound in air travel.

“I think the president’s mandate last week in terms of the vaccine is only going to strengthen the outlook as we go into the fourth quarter, so we’re not discouraged yet,” Hayes said at the Morgan Stanley Laguna Conference.

Meanwhile, the American Trucking Associations is schedule to meet with the Office of Management and Budget Tuesday to discuss its concerns about the Biden vaccine mandate.

The largest trucking trade group warned in a letter last week that more than one-third of truck drivers at major US companies could be lost to retirement, smaller carriers or independent contractors if the rule does not provide exemptions for the trucking industry.

The National Association of Wholesaler-Distributors, an influential trade group that represents an industry with nearly 6 million workers, wrote a letter last week pleading with the administration to delay the December 8 deadline.

“If tens or hundreds of thousands of employees are terminated just two weeks before Christmas … the result could be nothing short of catastrophic for the newly unemployed and their families and for the US economy,” Eric Hoplin, the NAW’s president and CEO, wrote in a Wednesday letter to Biden.

Other business leaders have been more upbeat.

Southwest Airlines CEO Gary Kelly expressed confidence this week that the vaccine mandate will not disrupt travel. “We want our employees to know that nobody is going to lose their job on December 9 if we’re not perfectly in compliance,” Kelly said Thursday.

The Biden executive order, signed last month, requires employees of contractors that do business with the federal government to get vaccinated against Covid-19, with no option of being regularly tested to opt out. The order, which applies to subcontractors as well, is aimed at preventing the spread of Covid-19.

Last week Biden officials pushed back on concerns about the impact from the vaccine mandate.

“Vaccination requirements work. They’ve increased vaccination rates by 20-plus percentage points to over 90% in most organizations,” Jeff Zients, the administration’s coronavirus response coordinator, told reporters last week.

Zients pointed out that the first step for employees who do not get vaccinated is a “period of education and counseling,” not termination.

“The requirements for federal workers and contractors will not cause disruptions to government services that people depend on,” Zients said. “Agencies have the flexibility necessary to enforce the mandate without impacting critical operations.”

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