A matter of priorities

Former tanker, retired general defense-industry executive considers the economic ripple effect and national security threat of major DoD budget cuts and the end of U.S. tank production.

An Operation Desert Storm tank battalion commander, Ed Dyer knows armored combat vehicles and what they mean to the effective prosecution of war. The retired U.S. Army brigadier general also knows what those vehicles mean to the workers who build them, from the major manufacturers to the small suppliers. The significance of both perspectives, he fears, has been missed in Washington.

The Department of Defense stands squarely in the budget-reduction crosshairs in the final months of 2012. A drawdown of nearly $500 billion in DoD funding is set to begin in January, a function of sequestration, the consequence of failure by the bipartisan congressional “super committee” that could not agree on a federal deficit-reduction solution last winter. Unlike ships and aircraft, which have some immunity from the cuts because they are designated as strategic necessities, combat vehicles like tanks, armored personnel carriers and Humvees are not exempt.

That means the 920-employee Lima Army Tank Plant in Lima, Ohio, is in jeopardy. Layoffs have already begun, and a temporary shutdown is a serious threat for a plant that has been in operation since the 1940s. Should it close, continuous U.S. production of  armored combat vehicles would cease for the first time since World War II.

The vice president of military programs for Indianapolis-based Allison Transmission, Inc., a global manufacturer that supplies the Lima plant, Dyer spent 29 years in the U.S. Army – most of that time as an officer of armored elements. An executive for Lockheed Martin following his military retirement in 2001, Dyer joined Allison Transmission, which does about 14 percent of its business in the defense industry, in 2010.

One of the featured speakers at The American Legion’s 1st National Security Symposium at the 2012 national convention in Indianapolis, he recently spoke with The American Legion Magazine.

How has defense contracting been a part of Allison Transmission, Inc., through the years?

It dates back to World War I when we built, or actually upgraded, what were then Liberty engines for aircraft. Through World War II, we built Allison engines, which were famous throughout the Army Air Corps. Then we began building transmissions for military vehicles shortly after World War II. We’ve been building transmissions for military vehicles ever since. We’ve been in every tank in the Army since the M46. Currently, we build the transmission for the Abrams tank. We build the transmission for the whole M113 family of armored vehicles. And we are in almost every medium and heavy truck in the Army and Marine Corps’ inventory, and almost all the MRAPs (Mine Resistant Ambush Protected vehicles).

What do the imminent federal budget cuts mean to your particular segment of the defense industry?

We are in the combat-vehicle and tactical-wheeled vehicle industry. Obviously, with the drawdown in the two conflicts we’ve been in over the past decade, there is a decline in our defense work. That’s to be expected. It has happened after every conflict. The concern today is the overall impact that budget cuts will have on the combat-vehicle industry.
Recently, in the (Department of Defense Strategic Guidance), there were a couple of industries that were spelled out as strategic industries for the country. One of those is combat aircraft. Another one is the shipbuilding industry. Those, for decades, have been strategic industries. What is not recognized is that the combat-vehicle industry is as strategic an industry as those are, and it’s not called out. Sometimes leadership loses sight of the impact of budget cuts on that segment of the industry.

Aren’t there lessons from history about this?

Certainly times change. And while there are lessons to learn from history, you can’t apply them directly. Obviously, if there is a surge required, and the industry is shut down for some period of time, you lose capability because it’s going to take a great deal of time to get it started again.

In terms of recent history, 70 or so years ago, the government came to the conclusion that nuclear weapons on the ends of aircraft or missiles could guarantee our national security. Since that time, we have fought in Korea, Vietnam, Grenada, Panama, Iraq, Afghanistan ... each of those conflicts has required a large number of soldiers and Marines on the ground. And yet, each time one of those conflicts ends, we declare peace at hand, and we decide that aircraft and ships, and now special operations forces, can fill the void, and we don’t need the soldiers and the Marines. We have apparently gotten that wrong.

If a military need arose suddenly, and tank manufacturing is out of the mix in the United States, couldn’t they just start up again?

Can you restart an industry like this again? Certainly. We’ve done it before. But you’re talking a large amount of time and a great deal of money.

Is it a foregone conclusion that the United States will soon be out of the tank-building business, and if so, who’s harmed?

There has been discussion of (the Lima Army Tank Plant) shutting down. There is discussion of whether or not foreign military sales can fill in the gap. That doesn’t address the sub-tier suppliers that are part of that industry. Some of those suppliers are going to go out of business ... Any of those communities, especially those that have a higher percentage of their business focused on the industry, obviously there will be a ripple effect.

What kind of effect would the suspension of tank production, even if temporary, have on businesses that supply Allison Transmission?

The two major products that we produce in Plant 14 are the Abrams transmission, what we call the X-1100 and the X-200, which is the transmission that’s in the M113 family of armored vehicles. For that business, we have a little over 100 suppliers that are mostly dedicated to that business. Some of those are suppliers provide parts for both of those transmissions, and commercial transmissions. Some of those suppliers supply exclusively for those two (combat-vehicle) products. If the combat-vehicle industry was to shut down for some period of time, a certain percentage of those suppliers would be in financial risk. Thirty to 40 percent would exit the business and fill that void with other commercial business ... and then probably not be willing to come back to the defense business once it gets started again. That’s the issue.

What about research and development in the event of a major withdrawal of resources from the industry?

It’s not so much cutting R&D as it is when you start cutting out sectors of an industry, and its expertise goes and does other things, or they exit the business. The combat vehicle sector is no different. If they were to shut down the combat-vehicle industrial base for some period of time, that engineering expertise, design expertise, is going to either go away or begin focusing on other commercial business.

So, institutional knowledge is lost.

We have not built a new combat vehicle for a couple of generations now. The Bradley fighting vehicle, the Abrams tank, are 1970s and 1980s-era technology. The folks who have the expertise in building those are my age. They are not going to be in the workforce much longer. You can’t go to school at Purdue or Rose Hulman and learn how to be the designer for an Abrams tank, or a Bradly fighting vehicle, or the transmission for an Abrams tank. That’s something that has to be passed down from generation to generation. Can you learn it? Absolutely. We learned it back in the’ 60s and’ 70s. But it took a lot of time and cost a lot of money.

Can the budget deficit crisis be addressed without sacrificing national security?

I think it has to be done. We just have to figure out the best and smartest way. The budget crisis this nation faces is one of the, if not the, major national security issues we have today. So, the Defense Department has to be part of the solution. But it has to be well thought out. We have to determine exactly what our priorities are, and how we fund those priorities. (Regarding defense cuts in) the current Budget Control Act, obviously the secretary of Defense has said that the Defense Department would be gutted given the current plans for sequestration. And he is adamant that some alternate solution needs to be found.

What about the effect on unemployment, particularly for veterans, of a massive budget drawdown?

Are there lost opportunities when the defense industry draws down? No question.

The economy is down. The unemployment rate is up. So obviously that causes a problem for veterans. Veterans bring a lot more to the table than security clearances. The discipline they gain while on active duty is something that can apply to any business. I think the defense industry is more in tune to hiring veterans than maybe other industries are. From that standpoint, certainly when the defense industry draws down, there are less of those opportunities.

And again, it’s something we have seen generation after generation in this country. We saw it at the end of World War II. We saw it at the end of Korea. We saw it at the end of Vietnam. Frankly, I think we are doing a lot more to fix that situation today than we ever have before. But it’s a tough nut to crack.

What happens if nothing is resolved before January?

My focus is on combat vehicles. The issue facing that is the current plan by the Army to shut down the tank industrial base for some period – two to four years. The Lima tank plant is part of that, and all the suppliers that support the tank industrial base; that’s going to have a major impact. That’s an issue that I think has to be seriously examined.

What might this mean for the United States, in terms of its position as the world’s lone military superpower?

Our defense industrial base is one of the strategic assets that this country has. It is what’s allowed us to do what we did in 1990 in Iraq. It’s what allowed us to do what we did in 2002 and 2003 in Afghanistan. You have to have that surge capability. You have to have that production capability. And when you begin to start cutting the rug out from those industries, you start losing a lot of capability.

We can continue to produce, at a level that would cost less money over the long run, than it would to shut down the plant and then have to restart it again. The tank industrial base has never been shut down before, since we began building tanks. Plant 14 has never been shut down before. There are a lot of unknowables – what it would take to get that plant started again. We do know it’s going to cost a lot of money, and it’s going to take significant amount of time.

Dwight Eisenhower warned that a military industrial complex out of balance would be bad for the economy and for national security alike. Is America out of balance? 

I couldn’t quote you the percentage of GDP we spend on defense today, but certainly it’s as low as it’s been in generations. Again, given the fact we are facing a budget crisis like this nation has never faced before, (defense spending) has to be a part of the equation. It’s a tough balancing act. It is the issue Eisenhower was concerned about at the end of his administration. He understood that the defense industrial base was a key strategic asset to this country, and so it has to be maintained. You’ve got to balance that priority against a lot of other priorities.

 

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