DoD Buzz | The birth of a defense contractor

October 14, 2011 § Leave a comment

by Philip Ewing
Published: 14 October 2011

At the end of the month, the company once known as ITT is splitting itself up three ways. The ITT that’s been part of the military-industrial complex for decades will become “ITT Exelis,” and eventually just Exelis. It’s got a new corporate brand but the same old portfolio of ITT Defense, and two top leaders told Buzz they think the new firm’s prospects are bright.

Retired Lt. Gen. Ken Hunzeker, who runs ITT Exelis’ mission services division; and David Albritton, the company’s vice president of communications, sat down this week at the Association of the United States Army trade show to make the pitch for their spin-off. They gave a rare behind-the-scenes look at what it takes nowadays to create a “new” player in the defense game – although, of course, there’s no such thing as a new defense contractor. The names just change.

In the case of Exelis, company officials started with more than 900 names, Albritton said, which they narrowed down to 150, then down to 30 that they began to seriously consider. They decided “Exelis” connoted “excellence or exceptional products and solutions,” he said, so they took it and then began to build the new brand. The company and its PR vendors decided the “x” in “Exelis” gave the opportunity to build a logo into the name – as opposed to, for example, Boeing’s whooshy-globe, which stands next to the name. For Exelis, the company decided to make its “x” an “arrow” pointing forward.

All that was left was a characteristic color. Albritton observed that there are a lot of reds and blacks and blues in the defense game. “We wanted something that popped out,” he said. “We wanted to be a futuristic, forward-looking company.” That eventually translated into orange.

Exelis is going off on its own because of a business decision by ITT’s corporate board, Hunzeker said. The company’s other divisions did well during lean times for the defense division, then did poorly when defense was flush, so the directors believed splitting up the conglomerate was the best move for the long term. Investors viewed ITT as a defense company only and, as such, believed it was heading for another fallow period with DoD’s pending crunch. When ITT announced it was spinning off its defense division, its stock rose about 16 percent that day.

As you’ve read here before, Loren Thompson has warned about this sort of thing – he likes conglomerates such as GE and United Technologies Corp., which do business on both the commercial and defense sides, and has warned about smaller players being broken up for quick profit.

Hunzeker and Albritton acknowledged that virtually all of Exelis’ business is government work, about 70 percent DoD and 30 percent from other federal agencies. But they said the company was created to stand on its own, not provide a quick kill for corporate raiders or a tasty morsel for whales such as Northrop Grumman or Lockheed Martin. Still, as we’ve seen, DoD says it recognizes that mergers and acquisitions are going to happen in the “free market” of the defense industry, so it’ll be interesting to see whether this Exelis survives in its present form.

Part of its advantage, Hunzeker and Albritton argued, is that ITT Exelis does a lot of different stuff. Hunzeker’s division helps transport and repair Army vehicles in Kuwait; it also runs logistics for big installations including Fort Bragg, N.C.; Fort Benning, Ga.; and Maxwell AFB, Ala. The company also is in the running, along with Boeing, to build a next-generation jammer; it builds night-vision goggles; it builds the SINCGARS radio; it has some things up its sleeve – not program of record, Hunzeker stressed — for the Joint Tactical Radio System. And on and on.

“We pride ourselves in saying ‘We’re platform agnostic,’ Hunzeker said. “So if you take a position on the F-16, if you want to buy more of those, modernize more or less or those, we build the bomb racks. We will build the jammers. The fact that we have pieces and parts of this based on electronics portfolio, and we’re platform agnostic, means if you decide to expand, you’re going to keep something longer, we get a piece of that. If you’re going to buy new stuff, we have a piece of that. We’re strategically positioned on the electronics and systems side.”

Continued Hunzeker: “I run mission systems. We’ve had a kegger over the last few years of 19 percent, had continual growth, a lot of programs. We like to win large programs, we like to excel at them, give good performance, keep those contracts and get more … I only see a bright future there.”

Hunzeker is the former deputy commander of U.S. forces in Iraq. When he took off his uniform and put on his business suit, he stepped from one side of the Iraq drawdown operation onto the other. Having helped build the logistics system that sends vehicles, big weapons and equipment out of the country, now he’s responsible for running part of the contractor team that helps make it go.

Hunzeker’s workers in Kuwait repair and trans-ship Army vehicles as U.S. forces complete their pullout. A Military Sealift Command or other cargo ship pulls up to a dock and ITT workers drive the Army’s trucks aboard – or sometimes tow them – so it can take them home or to Afghanistan.

That work is going to stay healthy for awhile, but not forever, so Hunzeker is setting his sights elsewhere: He wants to get more contracts to run logistics for Air Force and Navy installations, as well as to run the Army’s White Sands Missile Range, N.M. His campaign plan is built around getting as much work as possible that will come from DoD’s base budget, not the soon-to-dwindle overseas contingency account.

Another key will be keeping Exelis in areas where ITT Defense has kept “strategic footholds,” he said, such as the Navy’s Barking Sands Missile Range, Hawaii. To hear Hunzeker describe his recent schedule is to get a snapshot into the broader picture of today’s latter-day defense firms.

“I’m meeting with the [commanding general] in charge of all the missile ranges at 1 today to talk about White Sands, to see how we can do that kind of stuff. We do well at that stuff. Out in Hawaii, we’ve been running that Navy range on and off for the past 20 years. I met with [Hawaii Sen Daniel] Inouye’s staff, and went to a fundraiser for him and talked to all those guys as well.”

ITT Exelis is licensed to keep “ITT” for five years, Albritton said, and then it’ll stand on its own. Hunzeker said it was important to keep “ITT” for awhile to remind people where the new company came from, but also because it has a lot of name recognition in the Middle East.

“Most people change their name downrange because their out of business or under indictment,” he said. “Fortunately we’re neither.”

DoD Buzz | The birth of a defense contractor

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