November 19, 2004    Volume 11, No. 21

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Eroding Industrial Base Raises Concern Deep Within The Military


The decline of basic U.S. industries is beginning to stir angst among procurement officials and buyers within the defense community. The rapid decline in the number of metal foundries, the loss of expertise and capabilities, and the growing dependence on imported castings and parts is raising alarm bells among military specialists involved in weapons systems, supportability, sustainability and upgrades.

A program run by the Defense Department called the Diminishing Manufacturing Sources and Materials Shortage (DMSMS -- pronounced Dee-mas) is putting together a database used by military buyers throughout the services to help them identify shortages of parts, processes and materials. Escalating shortages of basic parts and processes "makes it hard to sleep at night," says one DMSMS official.

"We're out here stomping on the grass to put out a grass fire but we haven't looked behind us to see that the barn has gone up," says Brian Suma, who runs the DMSMS Information Systems project at the Army's Tank-Automotive and Armaments Command (TACOM). "I'm supposed to be the guy who is saying that not only do we have a grass fire going up, but I need to be telling you that we have a barn fire, too. How do we get that information out to people so there is visibility so that somebody does something about it?"

The Defense Department has been aware for years about production issues regarding obsolete electronic components and subsystems. But only now is the realization growing that heavy manufacturing and castings capabilities "are killing us," says George Crandell, vice president of operations at the Castings Emissions Reduction Program (CERP) in McLellan, Calif. "Castings is one of our biggest problems right now because companies we talk to about design are all leaving."

The Defense Department has been slow to recognize the problem because the military is a relatively small buyer in the overall market, accounting for an estimated 10 percent of all castings and materials. "Because we're not buying every day, when we go back and look for these parts we're finding that the manufacturers are gone and the tooling is gone," says Crandell. "For a pretty simple industry, it's down below the radar screen and nobody pays much attention until they can't get a long lead-time item like a transmission case."

Earlier this year, CERP organized a meeting to discuss the deteriorating health of the U.S. metal castings industry and its impact on the defense industrial complex. Attendees at the "Metal Casting Technology Forum: Ensuring a Strong Domestic Capability" held at the Rock Island Arsenal, discussed the industry's plight and made recommendations on addressing it.

"Weapon system metal castings can become unprocurable as a result of the plant closings," says the final report issued from the event. "As the U.S. foundry base erodes, the domestic capability to ensure an uninterrupted supply of parts to the Department of Defense becomes more and more uncertain. A sustainable foundry strategy needs to be developed to thwart this erosion and minimize the long-term consequences of relying on foreign sources for parts."

Participants said that DOD buyers tend to be unaware of problems until they issue requests for bids and get no response from industry. "The majority of metal castings in the U.S. now come from China and other third-world countries," says the report. "China has very aggressive plans to dominate the metal casting industry and the other industries that depend on it. The success of their plans could have significant impact on our future national security."

Participants said they are growing increasingly concerned about the declining U.S. investment in research and development in the metal casting industry. "There is no place to get information on the overall U.S. investment in metal casting research and who is doing it," says the report. "At the same time, we need to stop the portability of our technology to offshore competitors."

The group recommended that Congress becomes "more informed on the global perspective and the state of the domestic foundry industry." They recommend that Congress start holding hearings on the erosion of the metal casting industry and discuss "the impacts this will have on our security and way of life."

Participants also recommended that Congress consider requiring that defense components be 100 percent made in the United States. Congress needs to help develop and deploy a comprehensive strategy to save the industry. This initiative should include the creation of new data gathering mechanisms, funding research and development of lightweight metal castings including magnesium, titanium and thin walled castings, and ways to accelerate deployment of technology into industry.

The group recommended that the Defense Department Manufacturing Technology (Mantech) programs be reoriented away from "single point solutions" to much broader based "robustly" funded initiatives. DOD must "look at the entire suppliers' base, not just the big defense prime contractors," says the report.

The federal government also needs to become more active on the trade front and consider applying tariffs "on industries that don't meet human standards for acceptable working conditions," says the report. Trade laws should be changed "to help level the playing field for U.S. industries and to neutralize the effect of foreign subsides for their industries."

The DMSMS community "has acknowledged that there is a problem," says Sheila Ronis, president of University Group Inc. of Birmingham, Mich. This is a community of "solid citizens who are trying to get parts for their [military] services -- they are not policy people at all but the people who want to support the warfighter in the field. But it is Congress who at the end must say that the United States has to maintain a healthy industrial base. At some point, somebody has to say that a manufacturing sector that falls below 15 percent or 10 percent of GDP is too small, and nobody has said anything of the kind."

Ronis, who has become a vociferous proponent of developing a strategy to deal with the declining industrial base, says the Pentagon does not know what military supply chains look like "all the way down to the bottom and the closer to the bottom you get the more Chinese you get," she says. "We are getting to the point where we can't design anything, we can't make anything and we can't engineer anything and the entire security of the United States is at risk."

DMSMS provides military buyers throughout the services with information about shortages. The DMSMS database started first with parts, but program managers found that buyers were having problems finding sub parts and components. It was soon discovered that manufacturing processes needed to make replacement parts were also diminishing, as was the production of chemicals.

"If you don't have a certain chemical, you can't do these processes," says Suma. "How do we identify those and make those problems visible to the people who need to know who are making decisions on where to go next? How do you tell an engineer that the chemical family he's been using for all of his processes is no longer going to be available next year or has moved offshore? It becomes a critical issue because we no longer have a source for it in the United States and we can rely only on the outside source."

DMSMS is starting to work with different organizations, trade associations and societies asking them what capabilities are being lost. "Industrial base studies have been done on these issues, but they are not done in the context of what you actually have to do; they are done as a general capability issue," says Suma. "A lot of times when you get down to the actual person responsible, he's only interested in having the parts right now to make his system work -- he doesn't really have an issue with the entire casting industry having a problem. He anticipates and expects someone else will take care of that for him, but many of those functions have been pulled out because people really didn't see the need for them....There is a feeling that the overall capability does exist so long as you just put time and money into it, but the people in the DMSMS community are saying that even if you put a lot of time and money into it you're still not going to have the capability."

There are many examples of products and technologies that are thought to be robust but are either on the brink of disappearing or have already moved offshore. For instance, DMSMS was alerted to the fact that there was only one company left in the country that makes a roller cutter for armored plate or heavy steel. The company was on the verge of bankruptcy, and its demise alarmed a group of defense buyers. "But when you talked to the industrial base people, they said that we had the capability from other people who make rotary cutters," says Suma. "When you go out and do a search of Web pages, there are all kinds of rotary cutters, but 99 percent of them are for textiles. There is a big difference between cutting textiles and cutting armored plate."

Another issue came up when a foreign company purchased the only company in the United States producing a chemical used as a common binder. The binder secures windows to aircraft and holds aluminum panels in place. But the foreign chemical company closed the U.S. plant after it could not meet requirements from OSHA and EPA. The company told its customers that they had to buy from overseas subsidiaries.

"We found out about this and we found that it was used for a lot of other purposes and we said, 'Wait a minute. We have to get the word out on that,' " says Suma. "That was the catalyst to start pushing us into materials as well as the parts area."

From Suma's perspective, the job of cataloging the problems associated with so many different industries, materials and processes is overwhelming. "You want to talk about the headaches I get? How do I tie all of these things together and make this information available? You always get naysayers who say your data doesn't have enough information in it and I'm the first one to say that I'm still crawling putting this stuff together."

Adds Crandell of the Castings Emissions Reduction Program: "It's going to take somebody at [Defense Sec. Donald] Rumsfeld's level to say we have to rethink what we are buying, who we are buying from, who we are supporting and can we afford to give a British company a contract for all the titanium in the Howitzer. Does that make sense?"

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