Ind. contractors mixed over looming defense cuts

INDIANAPOLIS (AP) — Looming congressional defense spending cuts have industry insiders in Indiana painting a mixed picture over how the state might fare.

Project director Ryan Metzing of Aerospace and Defense Initiatives, an arm of Indiana advanced manufacturing and logistics promotional group Conexus, said Indiana's defense contractors are more diverse than those elsewhere.

Also, more Indiana contractors specialize in service and maintenance work and established weapons systems rather than the advanced technology and expensive projects that could bear the brunt of the cuts.

"We can hopefully withstand some of these budget cuts," Metzing told The Indianapolis Star (http://indy.st/NrcNn2). "We have a lot of different types of defense contractors, with different functions and in different parts of the state."

If Indiana plays to its strengths of manufacturing knowhow and lower production costs compared to many other states, it might win more military contracts, he said.

Since 2001, the Pentagon has awarded $43 billion in contracts in Indiana, and the number of defense contractors in the state has jumped from 362 to more than 1,100. The industry currently employs 18,200 people, while subcontractors and suppliers support another 20,000 jobs

However, with the war in Iraq at an end and the Afghanistan conflict winding down, many fear lean times ahead.

"Everybody's scared of what the future holds. They're talking about layoffs," said Carlos Gaitani, chief operating officer of Tri Star Engineering in Bedford, which provides engineering support for weapons systems and other defense electronic needs.

With the Pentagon facing cuts in congressional funding, Gaitani worries hanging onto Tri Star's $50 million annually in military sales.

"I imagine we are going to see some revenue slip," Gaitani said.

Indiana already took a big hit to its defense contract business when the Army in late 2010 stopped orders for Humvee armored vehicles South Bend-based AM General. It makes the Humvees at its plant in Mishawaka, where employment is down drastically from several years ago.

The drying up of Humvee funding largely explains a nearly 50 percent drop in military contracts in Indiana from 2008 to 2010.

Global defense contractor Rolls has its largest engine production operations in Indianapolis.

"All we can do is watch as (the Pentagon) reacts to what Congress does," said Tom Hartmann, senior vice president of government business. "With half of our business being on the service side, we are pretty confident about the future. (But) it's pretty difficult to speculate how the Department of Defense is going to spend money."

Peter Bitar, founder and president of Xtreme Alternative Defense Systems in Anderson, said his 24-worker company is in a good position for now. It just sold a newly developed technology to the military that senses buried explosive devices and detonates them before soldiers or vehicles pass.

Bitar think he'll sell $12 million to $15 million of his sophisticated devices to the military this year and maybe next. But beyond that, the military hasn't committed to buy more of his $500,000 devices, so he's courting non-military customers, including the Department of Homeland Security and foreign governments.

"It's about saving money and still achieving mission. We're moving away from things like large armored conflicts ... to more of a soldier-of-one thing" where Bitar hopes his mine-detection technology will still prove useful.

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Information from: The Indianapolis Star, http://www.indystar.com