From: Subject: Defense contractors add muscle to state economy | detnews.com | The Detroit News Date: Mon, 3 Jan 2011 16:23:01 -0500 MIME-Version: 1.0 Content-Type: multipart/related; type="text/html"; boundary="----=_NextPart_000_0073_01CBAB62.7D8C6A10" X-MimeOLE: Produced By Microsoft MimeOLE V6.00.2900.5931 This is a multi-part message in MIME format. ------=_NextPart_000_0073_01CBAB62.7D8C6A10 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Content-Location: http://www.detnews.com/article/20110103/BIZ/101030377/Defense-contractors-add-muscle-to-state-economy Defense contractors add muscle to state economy | = detnews.com | The Detroit News tyntVariables =3D {"ap":"From The Detroit = News:"};
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Defense contractors add muscle to state economy

Macomb County at center of efforts to lure military dollars

Melissa Burden / The Detroit News

Major defense companies in southeast Michigan are building facilities = and=20 hiring more employees in hopes of landing more lucrative military = contracts.=20

Some of the biggest and growing players =97 General Dynamics Land = Systems, BAE=20 Systems and Oshkosh Defense =97 are expanding along the Van Dyke = corridor in=20 Warren and Sterling Heights, near a major Army arsenal, as they compete = for=20 millions of dollars in contracts to build the military vehicles of the = future.=20

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"It's growing, and interest is continuing," said Stephen Cassin, = executive=20 director of the Macomb County Department of Planning and Economic = Development.=20 "It's like when you open up a mall. All businesses want to be located = next to=20 that mall."

Their efforts come even as defense spending in Michigan has waned in = recent=20 years. Military spending here fell to $3.9 billion in fiscal 2010, from = $5.8=20 billion the year before.

Still, the military remains a huge source of business for many = companies and=20 is especially important in a state where the unemployment rate remains = in double=20 digits =97 and among the highest in the nation =97 and where tens of = thousands of=20 jobs in manufacturing have been lost in the past few years.

The draw to Macomb County is the U.S. Army TACOM Life Cycle = Management=20 Command and its research arm TARDEC (Tank Automotive Research, = Development and=20 Engineering Center) in Warren. TACOM awards billions in contracts = annually to=20 support vehicle and soldier equipment; TARDEC focuses on increasing fuel = efficiency in military vehicles and on robotics.

"Individual companies are looking to get closer to TACOM to be more=20 customer-oriented and responsive and to accelerate their product = development=20 cycle so they can get to the right answer faster," said John Olson, a = New=20 York-based defense industry expert with AlixPartners LLP.

General Dynamics Land Systems, which builds the Abrams tank, recently = opened=20 an $11 million facility near its Mound Road headquarters in Sterling = Heights.=20 BAE Systems, which builds the M13 infantry carrier vehicles and Bradley = fighting=20 vehicles, is constructing a $58.4 million prototype and a research = center, test=20 track and four-story office building.

Oshkosh Defense, a maker of military vehicles and trucks, is = investing $5.6=20 million in an engineering facility in Warren, where it hopes to = eventually house=20 200 employees, and Navistar Inc., which makes military and commercial = trucks,=20 plans to invest $4 million in a similar facility in Madison Heights and = hire 87=20 people.

In the last decade, nearly two-thirds of defense spending in Michigan = went to=20 companies in Macomb County, according to a recent study by the = University of=20 Michigan's Gerald R. Ford School of Public Policy. The county is home to = more=20 than 500 companies that have over that 10-year period won more than = 9,300=20 contracts valued at $24 billion =97 or 6.6 percent of the total value of = Department of Defense contracts awarded during the period, according to = the=20 study.

Just how much defense spending will be awarded to Michigan companies = in the=20 future is unclear, as the Department of Defense plans to scale back over = the=20 next few years, analysts say. But the expansions and investments by = companies=20 like General Dynamics and BAE Systems are signs the defense industry = remains big=20 business for southeast Michigan, economic developers say.

TACOM preps for growth

Like some of its vendors, TACOM and TARDEC also are adding employees. =

TACOM and TARDEC employ about 6,000 people in Warren. TACOM will add = another=20 1,200 workers by Sept. 15, as people are transferred from an arsenal in = Rock=20 Island, Ill., as part of a realignment, said Eric Emerton, public = affairs=20 officer for TACOM.

To prepare for those new workers, a $69.2 million administration = building is=20 under construction and is expected to be completed in the summer, = Emerton said.=20 TACOM officials expect about 44 percent of the work force at Rock Island = to=20 relocate to Warren, meaning hiring may be necessary.

That growth comes even as contracts awarded by TACOM are projected to = fall to=20 about $16.5 billion in fiscal 2011, down from $30.5 billion just four = years ago.=20

Much of the growth in defense contracts in Michigan was aided by the = Iraq=20 war, with the military, for example, buying about 20,000 mine-resistant=20 ambush-protected vehicles over a two-year period, said Col. Jim Braden, = director=20 of the Defense Contact Coordination Center, a business unit of the = Michigan=20 Economic Development Corp.

More than half of Michigan's defense contracts are for ground = vehicles,=20 ranging from trucks and tanks to Bradley fighting vehicles. Both the = Army and=20 the Marine Corps are looking to reduce orders of ground vehicles, Braden = said.=20

"We're looking at probably a small reduction, but both the Army and = Marine=20 Corps are looking for new =85 vehicles," as the Army looks to replace = the Bradley=20 and modernize its fleet, Braden said.

TACOM, for example, hopes this spring to award up to three contracts, = each=20 worth up to $450 million, for technology development for a new ground = combat=20 infantry fighting vehicle that could replace the Bradley.

Defense companies with Michigan ties, including some companies = teaming up=20 such as BAE Systems and Navistar Inc., are working to win major = contracts for a=20 joint light tactical vehicle that will be used by the Army and Marine = Corps.=20

"You're going to see there's continued emphasis on solution providers = instead=20 of individual contractors," Olson said.

BAE Systems' Mark Signorelli, vice president and general = manager for=20 its ground combat vehicle program, said it is reorganizing its business = to focus=20 on serving TACOM and TARDEC.

"Our plan is to add staff in Sterling Heights as we get new business = there,"=20 he said.

Shipbuilding on the rise

While much of Michigan's defense economy relies heavily on ground = vehicles,=20 there have been other successes, Braden said.

Michigan's Procurement Technical Assistance Centers enjoyed a record = year in=20 fiscal 2010, helping small businesses secure $821 million in local, = state and=20 federal contracts, up nearly $50 million from the previous year. Those = contracts=20 created an estimated 16,000 jobs, Braden said.

"Another part that looks like it's growing significantly is the naval = shipbuilding side," Braden said.

Lockheed Martin and Marinette Marine Corp . in Marinette, = Wis., just=20 across from Menominee in Michigan's Upper Peninsula, will build 10 = Littoral=20 combat ships for the Navy =97 each with a price tag up to $480 million. = The=20 contract, approved by Congress last month, lasts for several years and = is worth=20 more than $1.4 billion to the state's economy.

About half of the shipyard's work force comes from Michigan, and the = state=20 expects about 500 direct jobs will be created for its residents and = another=20 2,500 jobs throughout the state as part of the supply chain to help = build the=20 ships, Braden said.

"I think 2011 is going to be a good year," Braden said.

mburden@detnews.com

(313) 222-2319

Detroit News Staff WriterTim Devaney contributed.

=20 Subscribe to Detroit News home delivery and receive a SPECIAL = INTRODUCTORY=20 OFFER.

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