Manatee defense contractors brace for cuts

jsalman@bradenton.comAugust 8, 2012 

MANATEE -- Small defense subcontractors across Manatee County are bracing for federal cutbacks poised to strip away already-fragile profits.

Florida could lose as many as 40,000 jobs next year from companies that do work for the U.S. military if Congress doesn't delay billions in automatic defense spending reductions slated to take effect in January -- a move that has even critics of federal spending on edge.

Most defense contractors

who operate in Manatee believe it's still too early to gauge the full scope of the cuts. But they all agree they will hurt.

"Everybody that does business with the government has to be concerned," said Kevin McLaughlin, vice president at Hann Powerboats in Bradenton. "When the procurement guys call us, they'll try to pinch us a little harder to see if we can build a boat for less, and we will have to wrestle with that monkey when it comes across our table."

The defense cuts will come as part of a deficit-reduction plan approved by Congress last year to erase $110 billion in spending across the board.

Gov. Rick Scott has since called on Congress to delay any action, warning of the jobs in the Sunshine State now on the line.

Already, a company that operates at MacDill Airforce Base in Tampa has filed a notice that it may lay off 200 workers if a defense contract is not renewed.

The parent of Pierce Manufacturing in Bradenton also has said dwindling federal spending likely will eat away at its profits from tactical military vehicles. The company will lay off 325 Bradenton workers by next year as it closes its MedTec ambulance line.

For Hann Powerboats, the cuts will force a tightening of the belt.

The company builds specialty armored boats designed to go extremely fast and also smaller target boats for military shooting drills. A quarter of the firm's business is directly tied to government spending.

Now working on a $425,000 Air Force contract to build 17 boats, Hann is preparing next year to extend its reach into international markets to supplement the expected loss of income.

Others are preparing for similar shifts.

C Products Defense, which recently completed its move to South Manatee, sells magazines for AR rifles to law enforcement, the military and some private distributors.

Anticipated reductions in defense spending have been countered with strong demand from private gun holders, fearing potential weapon bans following the mass shootings in Colorado and Wisconsin.

But the company knows that recent surge in the private sector won't last forever.

"It usually takes about six months before the defense cuts hit us," said Adel Jamil, C Products Defense president and CEO. "It's something that's always in the back of your mind. You have to stay lean and prepared."

Unlike Detroit or Silicon Valley, Manatee-Sarasota doesn't have a signature sector within manufacturing -- so when one takes a punch, it doesn't paralyze the entire industry.

But officials estimate the production of components for the defense industry -- like parts for military vehicles and weapons systems -- is one of the region's leading subsectors.

From a small manufacturer that makes black boxes for Navy Seals to a machine shop that builds trigger mechanisms for explosive devices, there's upwards of 30 companies between Sarasota and Manatee now operating with defense contracts.

Given the nature of their work, most like to keep a low profile.

"If you spread it across the area with a number of manufacturers that play the same role, it's going to hurt them," said Peter Straw, executive director of the Sarasota Manatee Manufacturers Association. "It's going to take away from production and profits."

Congress appears likely to at least discuss a plan to spare the military after the November elections.

For now, most local defense contractors are crafting strategies to offset any potential government losses with new commercial business.

Because much of federal spending is approved three to five years in advance, many companies should at least temporarily survive on old contracts, said Rick Hansen, vice president of Hobart Ground Power in Palmetto, the parent of ITW Military GSE, which receives $18 million to $25 million a year in defense contracts.

"I think we'll see some reductions," Hansen said. "You just have to get better. It's all about price, and we'll see what happens."

Others like Honeycomb Co. of America Inc. may actually benefit from the looming cuts. The Manatee firm builds replacement parts for military aircraft.

Honeycomb President and CEO Virginia Judge predicts that as the military buys fewer new planes, it likely will need more parts to extend the life of its existing fleets. That bodes well for her company.

"It's not like we're building new aircraft," she said. "We make parts for planes that are already up in the sky."

Josh Salman, Herald business writer, can be reached at 941-745-7095. Follow him on Twitter @JoshSalman

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