The term “defense industrial base” doesn’t mean much to many people. But America’s shipbuilding, aerospace and defense manufacturing workforce employs more than 1 million people directly. And most of them work at small companies, not titans of industry like Lockheed Martin or Boeing. Speaking at the Heritage Foundation on Tuesday, Aerospace Industries Association President Marion Blakey estimated that 70 cents on the dollar of defense investments flow down the supply chain to small and medium-sized firms.
These small companies are ones like JWF Industries in western Pennsylvania, which makes parts for Army vehicles as a subcontractor. Some 450 “families” work at JWF Industries, run by John Polacek. He said that guys like him and those he employs will get hit first and hardest by the automatic defense budget cuts set to take place early next year.
“It’s the first-tier subcontractors like us that are going to feel the impact, and these guys [JWF employees] may not be here come January because of that,” Polacek told CNN. “The impact to this town is a lot more brutal than it will be down in the Beltway of Washington, D.C., because there are fewer jobs available here for these people to go get.”
Another small business about 160 workers large, Advex Corp. in Hampton, Va., provides parts and services to Huntington Ingalls’ Newport News Shipbuilding, a company building the U.S. Navy’s newest class of aircraft carriers. Advex President George Hill recently penned an article discussing how his small business invested in new technologies and equipment to modernize both their facility and production processes — all in the expectation that carrier funding would remain uninterrupted for the next several years. Now the uncertainty of sequestration’s defense budget cuts threatens those investments and could ultimately lead to “significantly increased prices for the labor, materials and components necessary to construct these aircraft carriers.” That means taxpayers would pay more for military equipment later after the effort to “save” money for debt reduction is implemented. Go figure.
Hill’s comments track those of Huntington Ingalls CEO Mike Petters, who recently warned that sequestration could wreak havoc on the shipbuilding supply chain. Petters explained that up to 60 percent of the firms who supply his yards are “sole source” — companies that may be the only possible provider for critical components. If sequestration breaks these links, his whole supply chain could crumble.
And the effect of these cuts won’t be limited to those who work directly at these small and medium-sized companies. They will also hurt small neighborhoods and local economies that interact with the defense economy. Deanna Smith runs Deanna’s Tobacco & Cigar Shop in Taunton, Mass. She benefits from the plant nearby because those employees often stop by her store after work. They are her “steady customers.” Faced with changing budget priorities this year, however, the General Dynamics facility is facing possible layoffs. If General Dynamics begins downsizing, Smith told the Boston Globe, she and other store owners in Taunton “will surely feel the loss.” Smith said these budget cuts hurt “everyone, because now those guys won’t stop in to a local sub shop to get something small on the way home, or they won’t come by here. It adds up.”