Contractors relieved that they survived defense budget war

December 15, 1991|By Ted Shelsby

The fighting is over in the Defense Department's annual budget war. And giant Westinghouse Electronic Systems Group, which was scarred earlier this year by the cancellation of the Navy A-12 aircraft program, has to count itself among the victors.

"We feel good about it," Richard A. Linder, president of Westinghouse's Linthicum-based defense complex, said of the $270 billion Pentagon spending bill recently signed by President Bush. "All of the major programs we are involved with came through about as we expected."

This doesn't mean that there weren't some anxious days for Maryland's largest industrial employer, which has about 12,800 workers in the state.

At one point in the budget process, its biggest program, the F-16 fighter plane, was in trouble. The Senate shot down the administration's request for 48 additional Fighting Falcons.

But by the time the last shot had been fired, Congress signed off on a $1.07 billion check to General Dynamics Corp. for the full order of 48 F-16s. Westinghouse, which produces radar housed in the fighter's nose, estimates that this will send between $45 million and $50 million in new orders its way.

That's good news for Westinghouse -- and for Maryland, where one in 20 jobs is linked to military spending.

The defense budget is watched closely by many major Maryland companies, and by hundreds of smaller suppliers and subcontractors. These days, the budget is drawing even more attention: Pentagon spending will shrink by about 30 percent, when adjusted for inflation, by the end of the decade, the Electronic Industry Association says.

Some defense industry stock analysts warn that the cuts could be even greater -- and contractors might be getting the bad news soon. "We believe a major overhaul [of the defense budget] will be forthcoming following the 1992 presidential election," Paul H. Nisbet, an analyst with Prudential Securities, said in a recent industry report.

This doesn't bode well for the estimated 1,400 Maryland companies involved in the development or production of a wide assortment of war equipment, including handguns, nerve gas detectors, torpedoes, cruise missiles, uniform jackets and submarine tracking devices. On any given day, these companies are working on contracts totaling more than $17.5 billion.

Maryland ranks ninth among the states in receiving money from Pentagon prime contracts. The number of contracts being worked on in Maryland, and the dollar value of these contracts, have risen steadily in recent years, according to Defense Department figures.

Still, within the past year, Westinghouse, Martin Marietta Corp., AAI Corp. and Grumman Corp. have laid off more than 6,000 workers. Westinghouse alone has laid off 2,500 workers this year.

Mr. Linder said that "there are absolutely no plans for any more layoffs."

"I'm optimistic" about the work force remaining stable, he added, "but in this business, you never say never. These are dynamic times, and something unexpected can pop up at any time."

One big winner in the new defense spending bill was the `D government's "star wars" missile defense system, and this is good needs for the state.

Congress awarded another $4.15 billion to the Strategic Defense Initiative office and approved deployment as early as 1996.

SDI's list of contributors includes more than 50 state contractors and reads like a Who's Who of Maryland business. Some examples: Westinghouse, Bendix Field Engineering Corp., Martin Marietta, Computer Sciences Corp., Booz Allen & Hamilton and Fairchild Space Co. The Johns Hopkins University and the University of Maryland also are involved.

One casualty of reduced defense spending is the F-14 Tomcat, the twin-engine jet fighter that was the real star of the movie "Top Gun." This doesn't bode well for Grumman's struggling plants in Glen Arm and Salisbury.

Grumman had hoped to win approval for upgrading about 20 late-1960s vintage F-14As by replacing the engines, electronics and some structural components. This would have provided additional work at Salisbury, where workers produce wiring harnesses used in the plane, and at the machine shop in Glen Arm. Due to declining orders, these plants have eliminated 216 jobs this year, about 30 percent of their combined work force.

But Congress terminated the Tomcat program, and the last plane is due off the line in May.

Susan Vassallo, a spokeswoman for Grumman at its headquarters in Bethpage, N.Y., said there is no plan to close the Maryland plants. The company, she said, "is doing its best to find new work to keep both facilities viable."

All things considered, Maryland seems to have faired pretty well in the budget process.

Westinghouse received $139 million to continue its work on the SQY-1 anti-submarine warfare system. The electronic system, being developed at Westinghouse's Sykesville plant, is designed detect, track and destroy the new generation of silent submarines.

SQY-1 could become a $5 billion program and could create 500 new jobs at the Carroll County complex.

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