He said the firm would probably have to lay off additional employees if sequestration forced another $500 billion in defense cuts over a decade. He said the size of the reduction was difficult to project until the Pentagon announced how it would implement the cuts and which programs would be affected.

Hudson has already guided BAE Systems through a big restructuring to prepare for the defense cuts since she became CEO of BAE Systems Inc in 2009, streamlining management, consolidating facilities and reshaping its portfolio.

“Those of us who have spent the last couple of years downsizing our businesses, focusing on efficiencies ... dealing with the highly competitive environment ... are actually now in better shape than we were two to three years ago,” she said. “The companies are leaner and more competitive.”

(Additional reporting by Jim Wolf and Andrea Shalal-Esa; Editing by Edmund Klamann)