By Joseph Cabadas
July/August 2012
During two World Wars, Michigan flexed its industrial might as the “Arsenal of Democracy.” Its automotive factories churned out tanks, aircraft engines, ammunition and the like.
Now, the state is positioning itself as the “Arsenal of Innovation” to draw attention to its technical and engineering talent.
“We have a significant number of companies that supply both the automotive and defense industries,” said Ron Moffett, managing director of the Michigan Defense Center, a division of the Michigan Economic Development Corp. (MEDC). “We have a lot of firms that are diversified across both industries.”
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Warren is home to what is known as the Detroit Arsenal, the focal point for much of the military’s ground vehicle research and development. The Detroit Arsenal includes the National Automotive Center (NAC); the Army’s Tank-automotive and Armaments Command (TACOM); the Tank Automotive Research, Development and Engineering Center (TARDEC); and the Defense Logistics Agency.
These federal entities work on current and future military vehicles to improve performance and extend service life. At the same time, they try to cut design, manufacturing, production, operation and support costs.
Every year, about $15 billion in military contracts for vehicles and parts flow through the Detroit Arsenal alone. Although not all that money is spent in Michigan, state businesses receive between $3 to $4 billion for defense and Homeland Security projects per year, Moffett said.
“We work primarily with the large defense contractors and the military contracting agencies,” Moffett added. “We try to match Michigan companies up with major contracting opportunities.”
Macomb County receives the lion’s share - 66 percent - of all defense contracts coming into the state, said Steve Cassin, Macomb County director of economic development.
“We have over 500 businesses that perform defense contract work; we have large firms like BAE and General Dynamics but we also have a lot of other suppliers that work with them,” said Cassin. “The defense industry basically held the county together over the last several years while the automotive industry was declining.”
Retired Lt. Gen. John Caldwell, former TACOM commander and now a consultant with the Virginia-based Spectrum Group, noted that U.S. defense businesses also supply foreign militaries with “tanks, the fighting vehicles, artillery and the truck fleets-¦ because the best vehicles are designed and managed out of here (in Michigan).”
Even Macomb County Executive Mark Hackel commented on the importance of the defense industry to the state’s economy during a roundtable discussion broadcast on the radio station WJR during the 2012 Detroit Regional Chamber Mackinac Policy Conference.
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Some of Michigan’s top 20 defense contractors include the construction firms Walbridge Aldinger Co. of Detroit and Rock Industries Inc. of Pontiac; furniture makers Herman Miller of Zeeland, Haworth Inc. of Holland, and Steelcase Inc. of Grand Rapids; advertising firm Campbell-Ewald of Warren; cereal and snack food manufacturer Kellogg Co. of Battle Creek; and Chrysler Group LLC for Jeep components among others.
Other Michigan-based companies that are fairly new to the defense industry include automotive suppliers Roush of Livonia and Wabasto of Plymouth. A host of prime defense contractors (i.e. “primes”) have major engineering facilities in the state such as General Dynamics Land Systems, BAE Systems, AM General, Lockheed Martin, Navistar Defense and Oshkosh Defense. Although these “primes” aren’t headquartered in the state, they make a substantial contribution to the local economy.
Most of the defense businesses in the county are consolidated along the so-called “Defense Corridor” that runs from Warren through Sterling Heights. It is a strip that is about a mile wide between Van Dyke and Mound roads and nine miles long from I-696 to the M-59 expressway.
The Defense Corridor also includes the Detroit Arsenal and the General Motors Technical Center, both in Warren. Other defense businesses are situated in the county along the Groesbeck and Gratiot Avenue corridors in Macomb County while there are a growing number of defense contractors in Wayne and Oakland counties too.
“When we recruit some of defense businesses, one of the first things they want are facts and information about our educational levels and technical levels of our engineers, researchers and technicians,” Cassin said. “We have the highly educated technical workforce that these companies seem to be drawn to plus defense contractors want to be close to the Detroit Arsenal and General Dynamics, BAE Systems, Northstar and Navistar and others.”
Some of the firms that have moved into the Defense Corridor include NP Aerospace, a research and development firm that creates armor and protection systems for soldiers, vehicles and aircraft; Curtiss-Wright Controls Electric Systems, a supplier of vehicle electronic computing systems, which established a sales and support office; and in March 2012 BAE Systems, which opened its new engineering and prototyping campus in Sterling Heights, redeveloping a former TRW Automotive site at Van Dyke and 15 Mile roads.
The nation’s overall budget for the Department of Defense (DoD) is $553 billion for 2012, according to figures from the U.S. Office of Management and Budget. That figure does not include $117.8 billion for “overseas contingency operations” - the war in Afghanistan.
Although the President Barack Obama administration has slated deep defense cuts for 2013, state businesses can seize opportunities to grow in the military market, said Paul D. Peters, deputy assistant secretary of defense for supply chain management, and numerous business leaders and state officers when interviewed about where Michigan ranks in terms of receiving defense contracts.
“The (Defense) Department has always been interested in the Detroit area; the last couple of years has been very hard on all of us,” Peters said while visiting the Detroit area in May for the Michigan Defense Industrial Base Expo in Warren. “While there are cuts and restructuring, there will be opportunities for those who know how to be agile.”
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Michigan has many critical components of the defense industry infrastructure with TACOM and TARDEC, Peters continued, adding “Anyone who wants to do business with the department, you’ve got to focus on being efficient, innovative, and play to your market niche.”
Four Michigan firms that are “playing to their niche” include Roush, Wabasto, Walbridge Aldinger and Altair Engineering.
Privately owned by entrepreneur Jack Roush, Roush Industries entered the defense business in 2004 with a program that looked at putting a six-cylinder engine in a Humvee for improved torque and fuel economy. Although the DoD decided to keep the AM General supplied engine, Roush can provide the military with lighter-weight components made out of composite and carbon fiber materials, plus it offers precision machining and rapid prototyping capabilities that can trim development times and costs, said Tom Kerr, Roush director of business development, military and government.
Known for making sunroofs and other automotive components, Wabasto recently entered the defense business, said technology consultant Dennis Wend. One of the company’s products is “stealth heat,” which is a spin-off of commercial trucking’s no-idle vehicle heater technology.
Twenty-six states require vehicles weighing more than 10,000 pounds to have no-idle heaters - that can keep a trucker warm while the engine is turned off - to increase fuel economy while reducing greenhouse gas emissions. Wabasto supplies these heaters for 18-wheelers, said Wend, who was the former director of the NAC at the Detroit Arsenal before retiring in 2006. Wabasto’s stealth heat technology reduces fuel consumption and noise; both factors that save lives on the battlefield.
“For every (resupply) convoy in Afghanistan, on average we lose one soldier,” Wend explained. “If (we) reduce the need for one convoy through fuel savings, we save a life.”
Detroit-based Walbridge Aldinger was co-founded in 1916 by George B. Walbridge, a former colonel in the U.S. Army Corps of Engineers during the Spanish-American War. One of the construction firm’s early contracts - No. 77 - was to construct Selfridge Airfield near Detroit for $40,126 during World War I. For World War II, some 90 percent of the firm’s business was building ammunition plants, many in Minnesota.
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Walbridge Aldinger’s military business fell off - mainly due to the decline in active military bases in Michigan - until eight years ago. By then, the firm had a well-established national presence building automotive plants. Its car factory expertise was especially attractive to the military, said Ron Hausmann, Walbridge Aldinger general manager and member of the firm’s board of directors. Now DoD work represents about 15 percent of the construction firm’s $1 billion-a-year business.
“We are targeting bases, trying to do more work for them,” Hausmann said. “We are one of the largest tactical facility builders, such as garages for tanks and Bradley (fighting vehicles)-¦ We are probably one of the top 20 construction firms for the Defense Department in the continental United States.”
A fourth Michigan firm “playing to its niche” in the defense industry is the software firm Altair Engineering of Troy. It also serves the automotive, aerospace and heavy equipment industries plus other clients in consumer products, life and earth sciences, and oil and gas sectors.
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Altair works with the defense and homeland security industries in three key areas, said Tony Norton, Altair senior director of global automotive and off-highway vehicles. Altair simulates blast events with its RADIOSS software that “allows improved protection of warfighters without the expense of destroying multiple prototypes during the design and development of new and recapitalized ground vehicles,” he explained.
Next, Altair’s Optistruct software can be used to design vehicles with an optimized structure to reduce weight and increase payloads. Finally, its MotionSolve software can calculate the loads and motions of vehicle suspensions, permitting the improvement of chassis designs through advanced multi-body simulation.
“Altair’s work in defense has certainly trended upward as defense and homeland security budgets have increased (representing about 10 percent of the firm’s revenue,” Norton said. “Now that the drawdown is in effect, overall product development spending is certainly going to reduce, but that means the value of simulation in reducing program cost and timing will become more important, as has been seen in the auto industry.”
Altair, Roush, Wabasto and Walbridge Aldinger are examples of the many Michigan businesses involved in defense work.
On a “pro-rata share,” one would think that Michigan should receive 1/50th or $13.4 billion of the $670.8 billion military “pie,” however states such as California, Alabama, Texas and others get a bigger share of defense contracts. Part of that reason comes down to military base closures over the past several decades.
About two-thirds of the defense budget is for the military pay and benefits for active-duty and retired military members and their families, Moffett said. The remaining $200 billion in the defense budget goes for acquisition, sustainment and general maintenance of the military’s equipment.
In the 1950s, Michigan ranked in the top five states when it came to defense spending, Moffet noted. That’s because the state had four large active duty Air Force bases, including K.I. Sawyer, near Marquette, Kincheloe at Kinross, Wurtsmith at Oscoda and Selfridge. Those bases contributed significantly to the local economies. Now Selfridge has been reduced to being an Air National Guard Base.
Some of the opportunities for businesses are in the areas of cyber security, unmanned air and ground vehicles, naval vessels, plus sustainment programs, Moffett continued.
While Michigan lacks naval shipyards, state-based firms are supplying half of the components for the U.S. Navy’s $35 billion Littoral combat ship program.
There are two versions of the Littoral, one designed by Lockheed and the other by General Dynamics with each vessel costing $538-million, according to the Congressional Research Service. Michigan companies are supplying the Lockheed-designed Littorals that are built by the Marinette Marine Corp. in Wisconsin, just across the state line from the Upper Peninsula city of Menominee.
“On the sustainment side, even though production of a platform like Humvee is being discontinued, there will be Humvees in military fleet for the next 15 years or so,” Moffett said. “All of those vehicles need to be sustained.”
Automation Alley created its Defense Office three years ago to assist the Army’s TARDEC division to find parts suppliers for older vehicles that must be sustained with anything from tires to steering units, said Daniel Raubinger, director of defense and manufacturing for the Michigan-based technology and business association.
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The Automation Alley Defense Office developed one of the largest databases of parts companies in the country, Raubinger said. For example, another key platform that will need to be maintained is the Mine Resistant Ambush Protected Vehicles (MRAP). MRAPs were developed to survive the improvised explosive devices used by the enemy during the Iraq and Afghanistan wars. Some 60 MRAP variants exist.
In addition to larger corporations, Michigan has a number of smaller firms and companies that have turned to supplying the defense industry after the automotive market plunged, observed Tony Vargo, lead business opportunity specialist with the U.S. Small Business Administration. When Vargo started at the SBA about 14 years ago, Michigan ranked about 48th or 49th in receiving military contracts. Now it ranks about 43rd.
“We’re always pushing our small businesses into diversifying and providing services to the federal government, which is the largest purchaser of goods and services on the planet,” Vargo said. “When the economy slowed down, businesses (ranging from construction, information technology, engineering services, and some light manufacturing) looked outside of the box to generate a new customer base.”
The MEDC’s Michigan Defense Center provides the big picture strategy for firms that are already established in the defense industry supply chain, but small and medium size firms often need help breaking into the business. That’s where the state’s Procurement Technical Assistance Centers and the procurement technical assistance counselors (PTACs) come into play.
The PTACs were authorized by Congress in 1985 with a dual mission - first to ensure that the military has a good supplier base, and next to assist companies that want to enter the defense industry.
With 11 offices, Michigan has the largest PTAC network in the country and they work hand in hand with the Michigan Defense Center. One of the most important of these offices is based at Macomb Community College in Warren, about a mile-and-a-half from the Detroit Arsenal.
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“After September 11th, we realized we were in a constant state of conflict and engaged in a different type of war,” noted Beth Cryderman-Moss, director, Macomb Regional PTAC. “That really impacted our need for land weapon systems and ground vehicles-¦ With DoD budget rollbacks there will be a major change in how we do business and where we do business.”
With defense cuts looming, the PTACs that helped companies diversify from automotive to the defense industry are also assisting businesses to diversify to other defense areas including Homeland Security, naval and the aerospace fields as opposed to ground warfare.
The engineers at the Detroit Arsenal (TACOM, TARDEC and the NAC) are looking for items such as replacement shocks, better suspension systems, plus better and lighter armor among other things added James Millhench, procurement technical assistance counselor for the Downriver Community Conference in Southgate.
“There were problems of retrofitting the Humvees that went over to Iraq and Afghanistan so they could survive IEDs (improvised explosive devices),” he continued. “When they added armor, they doubled the weight so the engines and transmission were going faster. Weight saving ideas are examples of how vendors bring solutions to TACOM.”
Michigan is vitally important to the defense industry and the defense industry is vital to the state’s economic health, said Ron Lamparter, president of the Defense Corridor Center for Collaboration and Synergy in Sterling Heights.
Michigan is rapidly developing its reputation as the “Arsenal of Innovation,” attracting defense contractors who want to tap into its highly educated technical and engineering workforce, while Macomb County is now known as the “Defense Capital of the Midwest,” Lamparter continued. The defense industry is less about bombs and bullets and more about research and development technologies.
“Many of the dollars spent by the Department of Defense are spent not on ‘war materiel’ but on things that provide jobs and ultimately benefit all of us,” Lamparter said. “These things include everything from new technologies-¦ to jobs producing vehicles here in Sterling Heights and Macomb County, breakfast cereals and other packaged foods in Battle Creek, shoes and boots in Rockford, office furniture at several companies in western Michigan.”
