M.com l A new L3: Muskegon manufacturer suffers as defense spending declines
January 19, 2012 § Leave a comment
Of all of the manufacturing companies in Muskegon County, historic L3 Combat Propulsion Systems has been left behind in the current economic surge in the industrial sector.
A combination of the winding down of two Middle Eastern wars and unprecedented deficit pressure on the federal budget have been a one-two punch to the defense contractor that carries the legacy of Continental Motors in Muskegon.
As surviving Muskegon-area manufacturers mainly tied to the recovering North American automobile industry thrive as they exit the Great Recession, L3 has gone in the other direction. Peak employment in 2006 was 630 workers in Muskegon on Getty Street — known among locals as the plant “on the hill.” Today, L3 employs only 350 in Muskegon, company officials report.
L3 Combat Propulsion President Michael Soimar is blunt: “The defense industry is down the drain.”
Today, L3 Combat Propulsion is a 100 percent defense contractor both for the U.S. military and its allies around the world, company officials said. But the product mix is expected to change as the uncertainty of U.S. defense spending hammer’s the local operations.
L3 Combat Propulsion develops and manufactures transmissions, air-cooled engines and suspensions for military vehicles along with gun turret drives and other tank components. The company had $1 billion of new defense contract business in the U.S. Defense Department pipeline before the current fiscal crisis and the Iraqi and Afghanistan conflicts headed for conclusion, Soimar said.
L3 isn’t sitting on the sidelines in this recovery licking its wounds. The Muskegon-based division of defense contractor L3 Communications is exploring new technologies and products both inside and outside of the defense industry. Commercial applications of its alternative energy technologies mainly associated with L3’s 2006 acquisition of German-based Magnet-Motor GmbH are in research and development stages.
The development of the future Army vehicle program has stalled. Not only will fewer vehicles and replacement parts be needed with ground troops leaving the Middle East, the Obama Administration’s strategic shift to the Far East means more resources will be shifted into the Air Force and the Navy, Soimar said.
“At this moment, the Army is at a standstill,” Soimar said on an industry downturn affect all defense contractors. “No one sees a major ground engagement in the near future.”
So even within the defense sector, L3 Combat Propulsion officials are looking for new business where they can find it. If the U.S. federal debt will not allow for spending on new Army transportation platforms, there are friendly countries around the world that still are investing in their armies.
At the end of last year, L3 Combat Propulsion announced a major, multi-year contract with the Israel Ministry of Defense for the production and remanufacture of diesel engines for tank and armed personnel carriers. L3 continues to serve the Israeli military as Continental Motors, Teledyne and General Dynamics had done for decades when those companies owned the Muskegon plant.
The company also reported a technical update on critical testing of a new heavy-fuel rotary engine that L3 hopes will be a new product made in Muskegon in the next two years.
L3’s production in Muskegon before the Great Recession had been 80 percent for the U.S. government and 20 percent for its allies, Soimar said. Today, the mix being produced by L3 here is 60 percent domestic product and 40 percent international, he said.
The Israeli contract and continued development of the company’s new R350 heavy-fuel rotary engine designed for unmanned aerial vehicles known as “drones” will keep defense work going in Muskegon. But Soimar worries about the industrial base of all the defense contractors in the future.
“When the dust settles, we need to keep supporting this industrial base,” Soimar said. “Right now it is not a very bright picture.”
By Dave Alexander
January 19, 2012