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Mon January 7, 2013
Why CT's Defense Industry Is Still Under Threat
The fiscal cliff could have had serious consequences for Connecticut’s defense industry. Across the board spending cuts were projected to threaten thousands of jobs in the state. And industry experts say last week’s deal didn’t change a whole lot. WNPR’s Harriet Jones reports.
Turning away from the fiscal cliff, says Pratt & Whitney’s Jay DeFrank was necessary, but the fix produced last week really fixes nothing.
“At this point basically, nothing’s changed on the threat posed by sequestration. Both Pratt & Whitney and Connecticut have a lot at stake in the way sequestration plays out.”
Sequestration is the spending side of the equation in tackling the deficit. It would impose across the board cuts in the defense department, and it wasn’t addressed in last week’s deal… it still remains to be negotiated. Connecticut has been tagged as one of the ten states most at risk if sequestration happens. And De Frank told a gathering in Hartford last week, even supposing sequestration or equivalent cuts go through – it’s barely going to make a dent in the underlying debt problem.
“What this means is that we can expect battles over defense and government spending to not only continue for year after year, but I would project that they’ll intensify.”
Not good news for a defense dependent state. De Frank says he expects relentless pressure on keeping costs low – in fact he says the jet engine maker is already seeing it in every transaction it has with the department of defense. Pratt and Whitney and other United Technologies businesses have long complained of the cost of doing business in Connecticut, and De Frank used this opportunity to reiterate that message.
“But we also need our state officials to understand and not overreact when businesses located here need to move less skilled work to more competitive locations so we can meet our customers cost demands.”
Of course Pratt and Whitney relies on literally hundreds of smaller businesses to make its products. One of those is the Whitcraft Group, based in Eastford, which employs about 500 people in Connecticut. CEO Colin Cooper says sometimes he gets criticism from customers about his location in a high cost state. He says on one of their largest revenue product lines,
“We compete directly with a very capable supplier in Taiwan, and our European customer each year decides how much market share we each get, based on our pricing for the coming year.”
Whitcraft is regularly courted for relocation by other states, but despite the cost challenges Cooper says there are big advantages to Connecticut.
“We’ve found that the combination of highly skilled and experienced workforce here in Connecticut, coupled with the dense cluster of specialized aerospace support companies here in the Connecticut river valley is hard if not impossible to replicate anywhere else in the world.”
But he says, those advantages are not a given going forward. Other regions are investing heavily in their workforce, and those unique process providers are migrating to lower cost regions along with manufacturers. This should matter to policy makers because official estimates say that 50,000 jobs in Connecticut are defense related.
“That’s about $25 billion in economic activity. That’s approaching ten percent of our state’s economy, so it’s a big piece that we need to pay attention to.”
Bob Ross runs the state’s office of military affairs. It was established in the wake of the base realignment and closure process, BRAC, in 2005, when the Groton sub base was threatened.
“But there will be another BRAC coming, it has to come. The nation has to do BRAC. What we’re focused on in Connecticut is how do we prepare for that.”
In fact Ross says he’s anticipating that the defense department will request another BRAC as soon as 2015. But he says Connecticut is well placed.
“This base is not the same base that it was. We’ve invested over $50 million in projects at that base since the 2005 BRAC. $11 has been provided by the state. No other state has stepped up in that way.”
Even if the base remains open Ross says its inevitable that defense cuts will impact the state. He says current estimates say the industry in Connecticut will shrink by around ten percent in the next five years. While that sounds bad he says in fact, the mix of products that Connecticut makes is actually favored by the Pentagon’s strategic plan – other states could be looking at cuts of 20 and 30 percent.
For WNPR, I'm Harriet Jones.