Pentagon cuts expected to hurt electronics firms

October 16, 1990|By Ted Shelsby

The boom years are over, and the next decade is expected to bring lean times for the nation's producers of defense electronic equipment, according to a forecast released yesterday by the Electronic Industry Association.

In its annual 10-year forecast, the association predicted that defense spending by 2000 will be 33 percent lower than in fiscal 1991, after adjustments for inflation.

The trade group predicted that defense spending as a percentage of the nation's gross national product will drop to 3 percent, the pre-World War II level, down from the current 5.5 percent of the total value of the nation's goods and services.

The association's membership is made up of nearly all of the nation's major defense contractors, including Westinghouse Electric Corp., Martin Marietta Corp. and Grumman Corp.

The study made no direct reference to employment levels in the years ahead, but Mark V. Rosenker, an association spokesman, said that companies probably will continue to reduce their work forces as a result of the Pentagon belt-tightening and that there will be fewer contracts going to smaller subcontractors.

Though the defense electronic budget will be shrinking, it will remain substantial. The association study predicts that over the next 10 years, almost $900 billion will be spent by the Pentagon on research, development, testing and evaluation, and procurement, about $365 billion of the total being spent on electronics.

In releasing the results of this year's study at a membership meeting in San Diego, Geoffrey K. Bentley, business research manager for Textron Defense Systems in Wilmington, Mass., said, "We are forecasting a fiscal year 1991 [defense] budget of $277 billion, which includes almost $50 billion for defense electronics."

That compared with the $54 billion spent this year for radar, communications equipment and other electronic-warfare equipment.

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