Military maneuvers
Minnesota has slipped a bit in the ranks of defense contractors, but companies find ways to compete.
BY JOHN WELBES
Pioneer Press

Just blocks from the Mall of America, General Dynamics engineers test the ruggedness of specially designed computers by putting them in paint-shaker-like machines. They put them underwater and expose them to subzero temperatures. They want to make sure they work the entire time.

The tests aren't designed to make sure that the computers can survive rough treatment by consumers. They're designed to simulate battlefield conditions for computers that will end up in any number of military vehicles, including tanks and F-18 fighter jets.
The work going on at General Dynamics Advanced Information Systems in Bloomington, where the company manufactures mission computers, is one piece of Minnesota's relatively small defense industry.

While some of the state's larger defense contractors like to point out that there's no direct link between their growth and the U.S. war in Iraq and Afghanistan, increased government spending on defense and security-related budget items since the Sept. 11, 2001, terrorist attacks did find its way to many Minnesota companies.

Even so, the 2004 defense contract totals showed a downturn in the military-related business coming to Minnesota, making it uncertain whether the growth will continue at the same pace.
Defense spending in the state totaled $1.34 billion in 2004, down from $1.57 billion in 2003, according to the U.S. Department of Defense. The decline also dropped Minnesota's ranking from 29th to 34th among the 50 states in defense dollars awarded. The biggest share of that decline came in U.S. Army contracts, which dropped 35 percent in 2004 to $465.8 million.
One change that might explain the decline is that even though the Crusader artillery program was canceled, contractor United Defense Armament Systems in Fridley won work building a new cannon for the Army but the dollar amount is not counted in the state's total because it's a subcontract from Boeing, said Jeff Van Keuren, a company spokesman.

"That's at least one part" of the decline from 2003 to 2004, Van Keuren said.
United Defense, the state's largest defense contractor, makes cannons, mortars and other weapons for the Army and Navy. When the Defense Department restructured its Crusader system in 2002, United Defense said the change could end up eliminating about 800 jobs at its Fridley plant. The company ultimately reduced its headcount by about 200 employees after the loss of the Crusader program.

Besides developing the new cannon for the Army, United Defense also is working on a new gun for use on Navy ships. Last week, United Defense demonstrated a new device that turns standard cannon artillery into more precise rounds by using a "Course Correction Fuze." The device is screwed onto the tip of existing projectiles and uses programmable fins to alter the artillery's aerodynamics and make it more accurate. The device is still in development and the U.S. Army has yet to decide whether it will order large-scale production.

FINDING A DEFENSE NICHE
Still, several of Minnesota's defense contractors have established niches that have grown in recent years. General Dynamics' Bloomington operation, for instance, has added about 200 jobs in the past two years. The increased workload is fueled in large part by changes in computer technology. As personal computers and networks became more commonplace, the military realized that its various systems didn't always communicate well with one another, said Brian Schubloom, the senior manager of General Dynamics' manufacturing facility.
"Our real growth market is putting networks together," he said.

At Lockheed-Martin Tactical Systems facility in Eagan, 200 jobs were added last year to bring the total close to 1,600. The facility's projects include making mission computing systems for U.S. Navy ships and developing a computer processor for the new F-35 Joint Strike Fighter jet as part of a contract with the U.S. Air Force.

Quantifying the job gains is difficult because many Minnesota firms that land defense contracts count that work as only a small part of their business. General Mills and Northwest Airlines, for instance, are among the state's top 10 defense contractors, but making cereal for military personnel and ferrying troops are a small percentage of their annual revenue.

There has been a push to increase the federal defense spending coming Minnesota's way, even though contractors here know that not all Minnesotans are receptive to military-related work.
"You raise your head, you'll have protesters outside your gate," said Chip Laingen, who leads the efforts of the Defense Alliance of Minnesota. While many defense firms here prefer to keep a low profile, they still aggressively pursue military-related contracts.

The Defense Alliance, formed a year ago, aims to help companies through the complexities of landing those contracts. The $1.34 billion in defense contracts that came to Minnesota in 2004 include all awards that go directly from the U.S. military to companies of any size in the state, said Brian Malloy, director of the Defense Contract Management Agency's Twin Cities office.
OPPORTUNITY TO GROW

Laingen, a retired U.S. Navy helicopter pilot, thinks that with the large base of manufacturers and high-tech firms here, the state's ranking should be higher. He was surprised to hear that the total defense contract figure for the state declined in 2004, but thinks there's an opportunity to grow the industry, particularly for small and medium-size companies in the state.
The alliance is supported by Minnesota Wire & Cable Co., a St. Paul firm that counts military contracts as part of its business. And hundreds of other Minnesota businesses have small pieces of the national defense budget.

M.A. Mortenson Co., a Minneapolis-based construction firm, for example, has worked on dozens of military projects, including a $13 million submarine escape training school for the Navy in Groton, Conn., and a $9.8 million contract for anti-terrorism related construction work at the Naval Shipyard in Portsmouth, Maine. Western Petroleum Co. of Eden Prairie, Minn., has a $31.7 million contract to supply jet fuel for the military.
The contractors also know that the federal defense budget is cyclical. Laingen says the state's defense firms, particularly smaller ones, are hoping to grow their business while federal spending is still relatively high.

Several of the larger defense contractors in the state have a long history here, though under names that may be more familiar to longtime Minnesotans. Sperry and then its successor, Unisys, formerly owned the Lockheed Martin operation in Eagan. General Dynamics bought the mission computer business that was owned by Ceridian and before that by Control Data.
Along with the changes in ownership, General Dynamics is now dealing with the Twin Cities' changing landscape.

The company's lease on its Bloomington manufacturing facility — which was first put into use by Control Data in 1963 — is running out. The owner, seeing the opportunities that come with having the Hiawatha Light Rail Transit line running nearby, has told General Dynamics it will have to move out, Schubloom said. That operation and its 600 employees will move in 2007, though they're still looking for a new location.

The move could be a bit of a jolt to the work force, as the average tenure of employees at the plant is 18 years. "The plan is to stay here in the Twin Cities," Schubloom said. "The heart of this operation is our people."