Amid curtbacks in the Pentagon budget, Maryland's small defense contractors are struggling to stay alive. But they're fighting back by seeking new markets, diversifying and cutting costs.


October 07, 1991|By Ted Shelsby

Little seems to have changed at the Maryland Clothing Manufacturing Inc. factory in East Baltimore.

Inside the 37-year-old brick building, familiar olive-green pattern parts still lie scattered about the cutting tables. The sounds of traffic outside on East Madison Street are still drowned out by the high-speed whining of as many as 75 sewing machines, as workers turn cloth pieces into Army dress coats.

But August Piccinni Jr., president of the company founded by his grandfather, knows the difference. "They look much the same, but the material is different," he says, comparing a coat made last week with the wool-blend, government-issue Class A uniform coats that accounted for about 90 percent of the company's business a year ago.

The material (100 percent polyester) is not the only difference. Coats coming off the sewing lines are made under subcontract to a Philadelphia company, to be sold at post exchanges on military bases.

And that means lower profits for Maryland Clothing. "But you do what you have to do to keep the factory running," Mr. Piccinni adds.

Mr. Piccinni is not the only small- to medium-size Maryland defense contractor struggling to make ends meet these days. As pressure mounts for the Pentagon to reduce military spending, companies throughout the state are feeling pinched.

Companies are trying to cope by cutting costs or by diversifying into non-defense markets. Producing coats for sale through the PX, for example, is just one step Mr. Piccinni has taken to offset the loss of Defense Department orders.

Maryland Clothing's approximately 100 production workers are making a lot more clothes for the civilian market these days. The product mix includes men's and women's topcoats, women's jackets and men's suits and sports coats.

But such changes exact a price.

"It helps keep us alive," Mr. Piccinni says, "but you don't get maximum efficiency from the factory when you're producing a number of small lots."

Maryland Clothing's workers suffer too, he says. They are paid on an incentive basis, according to how much they produce. But their productivity is greater when the plant produces a single product, like a military order, because they can concentrate on a single style.

Meanwhile, Maryland Clothing's management staff has shrunk by 25 percent. Mr. Piccinni says, "The rest of us just had to work harder for the same amount of pay. We've not had a raise for a long, long time -- over a year."

Still, companies have little choice but to change the way they do business.

The Pentagon, which sees the Soviet military threat fading, is changing the way it does business, too.

Gen. Colin L. Powell, chairman of the Joint Chiefs of Staff, perhaps best summed up the changes facing the military establishment earlier this year when he told an Army Times reporter, "I'm running out of demons, I'm running out of villains. . . ."

The general's comment does not bode well for Maryland, which regularly appears on the Pentagon's annual list of top prime contractors.

An estimated one in 20 jobs in Maryland is linked to military spending. Military sales also account for nearly 4 percent of the state gross product, according to a study last year by the state Department of Economic and Employment Development. And more than a thousand Maryland companies -- ranging in size from Westinghouse Electric Corp. and Martin Marietta Corp. to small machine shops -- are doing business with the military.

Their products show up in many weapons programs, including the F-22 and F-16 fighter planes, the vertical takeoff V-22, the Patriot and Tomahawk missiles, artillery shells, computers, nerve gas detectors and a pilotless drone that carries a television camera to spy on enemy troops.

Maryland already has felt the Pentagon budget squeeze.

Westinghouse's big Electronic Systems Group in Linthicum has 2,000 fewer workers now than in the late 1980s. Martin Marietta has trimmed its work force at Middle River and Glen Burnie by 2,100 since late 1988, and employment at AAI, in Cockeysville, is down 1,500 since 1987. In the past year, Grumman Corp. has eliminated more than 100 jobs at its plants in Glen Arm and Salisbury.

And the troubles for defense contractors are likely to continue. Pentagon spending by 2000 will be 33 percent lower than this year, after adjustments for inflation, says the Electronic Industry Association, a trade association whose members include nearly all of the nation's major defense contractors.

Meanwhile, DRI/McGraw-Hill, which estimates that Maryland has lost 14,000 defense industry jobs over the past three years, projects that the state will lose another 32,000 military jobs by 1997.

Sal Monaco, a principal at the Lexington, Mass., economic forecasting and consulting firm, says this does not mean Maryland will lose these jobs completely. Some of these workers will remain with the companies but be shifted to other lines of work.

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