Struggling defense firms brace for further cuts

January 02, 1994|By Ted Shelsby | Ted Shelsby,Staff Writer

There was a big celebration last month at Martin Marietta Corp.'s complex in Middle River. Workers cheered and politicians beamed as the company announced that it had won a contract to produce jet engine parts that will keep the factory open and provide up to 20 years of work.

But there aren't expected to be many repeats of the Middle River festivities any time soon, as Maryland's defense industry moves into what is expected to be another rough year.

Defense workers in Maryland will be living under the gun again in 1994 as the industry struggles to cope with yet another year of declining Department of Defense purchases.

Plant closings or cutbacks are more likely to be the norm this year. Martin Marietta is scheduled to phase out its anti-submarine warfare plant in Glen Burnie, and Grumman Corp. is set to close its aircraft cable plant in Salisbury -- and perhaps its machining factory in Glen Arm.

"Our estimate is that between now and 1998 Maryland will lose 17 percent to 32 percent of its defense-related work force," said Richard A. Bitzinger, a defense industry analyst with the Defense Budget Project, a Washington-based nonprofit research and analysis organization.

"That's between 25,000 and 48,000 jobs, and they are good-paying jobs with good benefits," he added.

Mr. Bitzinger is not alone in his gloomy outlook for the defense industry in Maryland, the fifth-most Pentagon-dependent state in the nation.

"I don't know of any reason why we should think things are going to get any better in 1994," said Robert F. Graboyes, an economist with the Federal Reserve Bank of Richmond. "I don't see any turnaround any time soon."

Mr. Graboyes anticipates continual cutbacks on the part of defense contractors. "Maryland will be harder hit than other states because the defense industry is such a big part of its economy," he said.

Even those who are more optimistic -- like Richard A. Linder, head of the local Westinghouse division, and Marsha Schachtel, the state official charged with monitoring federal activity -- hedge their bets when predicting more stable employment.

Mr. Linder stands by his prediction that the toughest years are behind the Westinghouse defense center.

He says no more significant layoffs are ahead for the company, which has already eliminated 7,000 jobs in the state through attrition and layoffs.

That is, he stresses, unless something unexpected happens like the loss of a major military contract.

Mrs. Schachtel, director of federal facilities and technology at the Department of Economic and Employment Development, said she is "cautiously optimistic" that defense workers will have a better chance of keeping their jobs this year. Her outlook, however, is based on "the absence of any new cataclysm."

The kind of things that make people like Mrs. Schachtel and Mr. Linder nervous is the federal government's recent discovery of a $30 billion Pentagon budget gap over the next five years.

Such a funding shortfall, defense economists warn, could result in the cancellation of a contract, having an adverse impact on large contractors like Westinghouse, Martin Marietta, International Business Machines Corp.'s Federal Systems divisions and AAI Corp., and their subcontractors.

Stephen S. Fuller, a professor at George Washington University who follows the defense industry, says that Baltimore-area companies will continue to suffer more from Pentagon budget cuts than than those in Maryland's suburbs of Washington because the latter provide professional services, such as administrative, legal, accounting, engineering and personnel to the military.

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