By: Christopher Bjorke
Grand Forks Herald
Grand Forks sends parts for Humvees, Abrams tanks and armored vehicles to Iraq, Afghanistan and points around the world. In return, the Department of Defense sends money.
In 2010, the military spent $34 million in Grand Forks County, some of it going to American Defense Industries, the maker of the vehicle parts along with much more of it going to Grand Forks Air Force Base and to the private companies providing services there.
The Department of Defense plans to cut its $531 billion budget by $6 billion next year and find $259 billion in cuts in the next five years.
But Tim Pribula, president of American Defense Industries, is not worried about losing his contracts.
“I’ve been through Reagan, I’ve been through Clinton, a lot of different presidents that have been pro-defense and not, and it really hasn’t had an effect on us,” he said.
Secretary of Defense Leon Panetta announced the reduction goals in January. Considering the massive undertaking of trimming the world’s largest military budget and its likely unpopularity during an election year, Pribula does not expect any immediate effects, if any.
“A lot of times, they don’t actually cut it,” he said.
Spending spread wide
Grand Forks’ large share of the military’s spending is due to presence of the Air Force base, but the $164 million it spent in North Dakota in 2010, according to pro-defense organization Coalition for the Common Defense, flowed to places across the state. Dunseith, home of contractor Benchmark Electronics with around 150 employees, received $1 million, and Fort Totten, home of armor producer Sioux Manufacturing, got $1.1 million.
Northwest Minnesota counties also pulled in money, including $2.6 million for Marshall County and $1.8 million for Kittson County.
“I think anyone who’s doing work for the military market is paying attention to the discussion,” said Randall Herman, chief operating officer for Mid-America Aviation, a West Fargo manufacturer of aircraft components that gets about 75 percent of its contracts from the military. “At least one concern is how they execute cuts.”
As a maker of replacement parts, Mid-America could benefit if the military tries to save money by extending the life of some aircraft through maintenance and repair. If the Department of Defense mothballs aircraft, the planes could be a source for parts, reducing orders to Mid-American and other manufacturers.
A more immediate concern than reductions might be uncertainty, Herman said. While politicians and the Pentagon are deciding what to cut and what to spare, many contractors will probably hold off on investments in facilities or workers, Randall said.
“Anybody that’s in that position today would be pretty cautious about moving ahead,” he said.
Cassindy Chao, director of Grand Forks technology company Laserlith, said that reductions in research and development spending could hurt her business.
“It seems to me that research budget would be more likely to be cut because the returns are not immediate,” she said.
Laserlith develops antenna systems used in unmanned aircraft systems.
Companies have diversified
Kristin Hedger, executive director of the Dakota Defense Alliance, said that companies that specialize in high-tech products would likely be safer from cuts because they usually serve programs meant to make the military leaner but still effective.
“Most companies we have in North Dakota are really solutions-oriented,” said Hedger, whose organization promotes defense contracting for businesses in North Dakota and South Dakota. “My perception is that our companies are pretty safe.”
Hedger’s own company, Killdeer Mountain Manufacturing, has contracts tied to military aircraft programs, but it does half of its work for commercial customers, she said.
Chip Laingen, executive director of the Defense Alliance of Minnesota, said that most of the companies in his group are diversified with commercial contracts and well-positioned to face defense cuts.
“Most of the companies we work with are very mature in the sense that they’ve been through ups and downs in defense spending,” Laingen said. “It’s less serious than it was in the ‘70s or ‘80s when they were less diversified.”
Pribula of American Defense Industries said he diversified enough to weather cuts in military contracting, though budget discussions often mean that contracts get delayed.
Whatever happens to the military’s budget, he his is on confident that its vehicles will continue to need replacement parts.
“They’re always breaking something,” he said.