But eruption of gulf war would bring business to firm, analysts say


October 22, 1990|By Michael Enright | Michael Enright,Special to The Sun

The economic picture for Westinghouse Electric Corp.'s Linthicum facility, the county's largest private employer and a major player in the defense industry, won't be greatly affected by the Persian Gulf crisis, experts say, unless the confrontation explodes into a shooting war.

"Until this thing turns into a real fight, there isn't going to be much of a boon for anyone [in the defense industry] because nobody is consuming anything," said Ron Fraser, an analyst for the Center for Defense Information in Washington.

After reviewing the specifics of a $7.3 billion arms package approved by Congress earlier this month, Peter Schmidt, an economic policy analyst for the Defense Budget Project, observed that, "Westinghouse doesn't show up as one of the major beneficiaries."

The Defense Budget Project is a Washington think tank that seeks to promote a better understanding of the U.S. military budget and its impact on the economy.

"But when you're talking about weapon systems," Mr. Schmidt added, "it's hard to be a big player and not feel the effects somewhere."

For instance, he said, Hughes Aircraft Co., which specializes in producing military planes, will reap the benefits of the Pentagon's increased M-1 tank production because it also makes the engines for the tanks.

A spokeswoman for Westinghouse said the company expects the Persian Gulf crisis to have no effect on present or future job quotas.

"As for increased production, the situation is far too fluid and dynamic for us to even speculate," said Westinghouse's Ann Grizzel. "We just won't make predictions on it."

Westinghouse, which saw a 3 percent increase in revenues in 1989, compared with a 10 percent jump in 1988, is one of the country's more diversified defense giants.

Although other large defense contractors have been forced to pare their work force in the wake of massive defense cuts, Westinghouse has managed to stabilize its employee base by shifting its workers into the commercial area -- in both the overseas and domestic market.

Westinghouse has always had a strong presence in the foreign military sales market, ranking seventh in such sales among the ++ top 200 federal contractors, according to a recent ranking by Government Executive magazine.

Because of the turmoil in the Mideast, there has been increased interest in military equipment on the part of other countries, most notably Saudi Arabia and Japan, and Westinghouse may reap even more returns from its foreign markets, according to Mr. Fraser, the analyst.

Alexis Cain, research director for the Defense Budget Project, said the gulf crisis will have only a residual effect on companies like Westinghouse.

"I don't think most companies are counting on huge windfalls off the Persian crisis, although a few will," he said.

"The general decline in revenues will continue but at a slower

pace than we thought a few months ago," Mr. Cain said.

Other factors for the defense industry to include in their revenue projections for the Persian Gulf crisis are climate and terrain conditions in the Middle East.

Desert heat and sand can wreak havoc on any mechanical equipment, experts say, necessitating much shorter maintenance intervals. Should the U.S. presence continue into 1991, replacement-parts costs are likely to be higher than expected.

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