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Military Shift May Shield N.E. Jobs

Jan 23, 2012Boston Globe, Council in the News

Technology Needs Expected to Rise

WASHINGTON – A new military emphasis on air and naval power that President Obama is expected to advocate in his State of the Union address tomorrow could soften the blow of defense cuts on New England companies and research labs, according to lawmakers and defense analysts.

Republicans and Democrats have raised concerns that plans for cutting the projected growth of defense spending by at least $487 billion over the next decade will hurt small and large companies and research universities that depend on military contracts to support tens of thousands of jobs across New England.

Yet the new strategy, which emphasizes checking China’s military and economic expansion and containing Iran, requires more warships, submarines, missiles, and an array of electronic components. And that is expected to play to the strengths of New England’s defense industry base, analysts said.

“Even in a downturn there will still be pockets of winners,’’ said Todd Harrison, senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments, a Washington think tank. “A lot of the winners in recent years have been ground systems and lower-end systems needed for operations in Iraq and Afghanistan.

“We are shifting away from those kinds of wars and focusing more on other regions of the world where we will rely on substantially different weapons systems.’’

The shift in strategy was first detailed earlier this month in a 16-page document designed to guide defense expenditures for years to come. Its effect can be seen in a company such as General Dynamics. One program believed to be on the chopping block is the Littoral Combat Ship, a coastal patrol vessel that has ballooned in cost and had design problems. Last year, General Dynamics Advanced Information Systems, a key subcontractor, added at least 100 high-tech jobs at its Pittsfield plant to work on the vessels, which are each estimated to cost $500 million.

Those jobs have been seen as imperiled. But some analysts now predict that as a result of the new focus on the Asia-Pacific region, the Navy will increase its production of larger warships, such as destroyers built by General Dynamics’ Bath Iron Works in Maine. Each destroyer costs several billion dollars and its construction relies on hundreds of smaller suppliers across New England.

Meanwhile, the company’s Electric Boat Division in Groton, Conn., could also receive more work to upgrade the nation’s submarine fleet, several analysts predicted.

“General Dynamics is going to look better than some of their competitors due to the role of shipbuilding in their business base,’’ said Loren Thompson, chief executive of Source Associates, a defense consulting firm in Arlington, Va.

And the new strategy also emphasizes cyber warfare, a growing area of concern as US military forces increasingly rely on computer networks and as China has shown a willingness to develop cyber weapons, software designed to steal or corrupt digital information. That could translate to a greater role for such universities as the Massachusetts Institute of Technology, said Chris Anderson, president of the of the Massachusetts High Technology Council, an industry group.

Senator Susan Collins, Republican of Maine, cited the Pentagon’s new strategy in expressing confidence earlier this month that the Maine shipyard and other companies in the region will play a bigger role.

“High-end naval combat capabilities like ballistic missile defense, open-ocean antisubmarine warfare, and strike warfare make perfect sense when framed in the context of . . . refocusing on Asia-Pacific as the region of highest strategic priority,’’ Collins, a member of the Armed Services Committee, told the annual gathering of the Surface Navy Association on Jan. 11.

To highlight the greater role of air and naval power, Secretary of Defense Leon Panetta over the weekend made a special trip to the USS Enterprise off the coast of Georgia to affirm the administration’s commitment to maintain a fleet of 11 aircraft carriers, despite the budget pressures.

“Our view is that the carriers, because of their presence, because of the power they represent, are a very important part of our ability to maintain power projection both in the Pacific and in the Middle East,’’ he said.

The full details of the defense cuts will be revealed in Obama’s budget plan early next month. Defense officials who have previewed the proposed cuts said they would slice the size of the Army’s forces and curtail or cancel several costly weapons projects that have run into technical troubles. That could include the multibillion dollar plan to design new weather satellites.

Anderson, of the High Tech Council, said in an interview that the cuts are likely to reverberate locally at such large firms as Raytheon Co. to subcontractors, start-ups, and research institutions. Some firms are positioning themselves for such cuts. IRobot in Bedford, maker of the Packbot robot that scouts out explosives, has announced several dozen layoffs in Massachusetts.

The overall harm caused New England companies will be significantly higher if the White House and Congress fail to agree on a plan this year to pay down the national debt. That would trigger an additional $1 trillion in cuts in defense over a decade. That could threaten up to 40,000 of the estimated 115,000 jobs in the Bay State alone that are tied to defense, according to an analysis sponsored by the council last fall.

Divisions of the state’s largest private employer, Raytheon, could face some of those cuts. Nonetheless, executives there find reasons for hope.

The new strategy document released this month highlights areas in which Raytheon divisions – and by extension, their suppliers – have a strong position.

That includes “sustaining our undersea capabilities, developing a new stealth bomber, improving missile defenses, and continuing efforts to enhance the resiliency and effectiveness of critical space-based capabilities,’’ as the document stipulates.

“Much of what the Pentagon is emphasizing is in our sweet spot,’’ said one senior Raytheon official who declined to be identified by name before the official release of the defense budget.

The small number of military facilities in the region, meanwhile, are not expected to be subject to major cutbacks.

“Hanscom will be fine,’’ said Representative Barney Frank, Democrat of Newton, referring to the Air Force base in Bedford that is home to the service’s Electronic Systems Center.

Increasingly, the Massachusetts High Technology Council is stepping up to create, execute, and lead critical statewide competitiveness strategies. Fostering a vision for our innovation economy under the MassVision2050 banner, the Council solidifies its position as a thought leader providing valuable insights to navigate emerging technologies, facilitates long-term planning, and reinforces the Council's commitment to excellence and action in the evolving Massachusetts tech-driven economy.

To learn more, contact Council President Chris Anderson.