There aren't any signs of the recession at Kenlee Precision Corp. in the Morrell Park section of Southwest Baltimore.
The machine shop's sophisticated lathes, milling machines and design computers are humming, two, and sometimes three, shifts a day. While other companies are laying off, Kenlee is running newspaper ads seeking new workers.
Sales are growing at a pace that would raise the eyebrows of Japanese production managers. And the company, which recently opened a second plant, is planning yet another expansion.
The secret of Kenlee's success? It's simple, said Kenneth A. Lewis, the company's 52-year-old president and founder: "You don't get too dependent on defense business; that's number one."
Kenlee, a privately held, 22-year-old company tucked into a blue-collar residential neighborhood, is a model of diversification, producing a wide range of commercial products, including sewing machine tables and satellite parts. It's a company that others in the industry point to as a case study in breaking away from the ties of Pentagon contracting.
"Ken Lewis, now there's a guy who saw this coming a long time. Ken made the adjustments and now his company is booming," says Robert E. Castor, an executive at LBL Group Inc., a competing machine shop in Lansdowne.
The biggest adjustment was reducing Kenlee's dependence on military contracts from 70 percent of total sales in the mid-1980s -- when it was making barrel parts for the M-16 rifle, parts for the machine gun components and radar components for the F-16 fighter plane -- to about 5 percent today.
Defense contracting can be rewarding, he said. "There's a lot of prestige and pride in saying, . . . 'I made parts for a plane that helps defend our country.' " The government pays well and usually offers a small company's best chance of landing a "large mega-bucks contract."
But he wasn't blinded by the money rolling in during the defense buildup of the Reagan administration. He kept a wary eye on the future. "I had this feeling" that Pentagon spending would level off again and "decided in the mid-1980s to be prepared for it by cutting back on our defense business to 10 or 15 percent" of total sales.
"If I hadn't," he said matter-of-factly, "I'd be right where the rest of them are: Scratching for survival."
A recent study by the Maryland Department of Economic and Employment Development found that 57 percent of Maryland's small- to medium-sized defense contractors will have to trim workers if Pentagon spending continues to fall.
Seven percent of the companies surveyed saw the possibility of cutting half to three-quarters of their workers. Twenty-five percent said they might have to eliminate one-quarter to half.
Survival seemed to be the furthest thing from Mr. Lewis' mind as he scurried about to keep pace with his active business. While driving from one plant to the other, Mr. Lewis said sales are up 20 percent to 25 percent for the fiscal year that ends July 31. That's on top of a 16 percent boost in business in its last fiscal year and there were a couple of years recently when sales rose 30 to 40 percent. He declined to disclose revenues or earnings.
To diversify, he has sought growth markets in the commercial sector. The aim was to land what he calls "life cycle contracts," pacts that might run 10 years or longer.
"We tried to pick companies in industries that I call the life support area," Mr. Lewis said. "People have to eat, so we moved into food processing. The medical field. . . . Clothing. We went into areas where people keep buying."
In his search for new customers, one of the first things he did was spend about $50 for industrial directories published by the various state economic development offices.
Mr. Lewis used the books to find companies he wanted to work with. "Once we identified these companies, we made phone calls, wrote letters and got appointments with them. Personal contact is very important. I spend about 20 percent of my time calling on companies."
To boost the marketing effort, Mr. Lewis hired Joseph Strosnider, a former Southern High School classmate who had recently ended a 25-year career with the Air Force. "Joe was the admission officer at the Air Force Academy. He knows public relations. We took two years to work him through the manufacturing process so he knew what that was all about, before he went on the street introducing himself and the company."
In another phase of the restructuring, Kenlee reduced its customers from 106 to 20 to narrow the scope of its business. "We saw that we couldn't be all things to all people, so we decided to concentrate on a smaller group that we could serve well."