Industry’s Long Slide

Nov. 1, 1988

The United States never made a conscious decision to abandon its defense industrial base. It cer­tainly did not intend to allow its leadership in high-technology man­ufacturing to slip away.

The nation was simply preoc­cupied with other concerns and failed to recognize that its industrial base was gradually sinking. Even now, few Americans are fully aware of what has happened, although cer­tain side effects—such as a loss of business and jobs to foreign com­petitors—have begun to seize their attention.

Speakers at an Aerospace Educa­tion Foundation roundtable held on September 21 analyzed the decline of the industrial base, amplifying a report published the previous day by the Air Force Association and the USNI Military Database. (See “Lifeline in Danger,” p. 74.)

The long, steady slide was caused by the convergence of several trends that, given the hindsight of history, are easily seen as related. The relationship was not so appar­ent in the years when the trends were first gathering steam.

In the 1950s, the panel said, de­fense concepts were dominated by the existence of nuclear weapons. Most strategists believed that any future conflict would be apocalyptic and short. A strong industrial base to sustain conventional forces in wartime no longer seemed impor­tant. When national policy turned, finally, from nuclear brinksmanship and massive retaliation toward flexi­ble response and a range of options, the neglect of the industrial base continued.

The defense share of the federal budget decreased. Production rates for military goods fell. The nation, which had taken major mobilization actions for both World Wars and the Korean conflict, chose to fight the Vietnam War from a peacetime in­dustrial footing. As the unpopular war dragged on, the public came to regard the defense establishment and the defense industry with dis­favor.

Challenge From Abroad

Year by year, the ranks of US de­fense contractors thinned. Industry, reluctant to invest because of unpre­dictable defense budgets and pro­curements, did little to improve its plants and manufacturing pro­cesses. Concurrently, the foreign competition got tougher. The new­comers from abroad knew how to make products efficiently and mar­ket them aggressively.

Gen. John R. Guthrie, USA (Ret.), a roundtable panelist and for­mer Commander of the Army’s Ma­teriel Command, recalled that it was difficult for Americans to believe that the foreigners were really catching up. At one point in the 1970s, he was sent to discover why the Army had heard nothing from the Japanese about eleven data-ex­change agreements. The reason, he found, was that “Japan was ahead of US technology in all eleven cases.”

Foreign penetration of US mar­kets began small, said panelist Mar­tin H. Harris, an executive with Martin Marietta International and, at the time of the roundtable, chair­man of AFA’s Board of Directors. Major US contractors, he said, went originally to foreign suppliers as second sources, backups for US suppliers. They found that the quali­ty of components from abroad was generally better and that the prices were lower. Soon, other nations were demanding reciprocal pur­chases or concessions from the US as a condition of US military sales to them. Sometimes the “offset” de­manded was an infusion of US tech­nology, which added to the strength of firms in the gaining country.

A disturbing aspect of the indus­trial base problem is the prospect of “the technology overseas, the pro­duction overseas, and eventually, the brains overseas,” said Founda­tion President James M. Keck, moderator of the roundtable.

Foreign dependency is most per­vasive at the level of weapon system components rather than at the level of finished systems, but there are some striking voids in the ability of the US industrial base to produce larger items. “We no longer have the capability of casting tank hulls or turrets in this country,” General Guthrie said.

The defense industry has no real capacity for surge production, Gen. Robert T. Marsh, retired Com­mander of Air Force Systems Com­mand and chairman of AFA’s Sci­ence and Technology Committee, said at the roundtable. About all that’s possible, he added, is “to up your rates a little bit for things that were already in the pipeline” and then wait for eighteen months to two years for industry to build up. The nation needs an industrial base that can respond much faster than that to a call for mobilization or surge production.

White House Commission

The panelists agreed with the conclusion of the AFA-USNI Mili­tary Database study that a Presi­dential Commission should be ap­pointed to plan a long-term national recovery. The problem spreads over so many governmental agencies and aspects of the economy that only a task force with a national charter can tackle it properly.

Before the Commission begins work, General Marsh said, the De­fense Department should start gath­ering data to “calibrate the prob­lem,” identifying all the various mobilization and surge dependen­cies, an unknown number of which overlap. The Pentagon today has no idea what these dependencies are and has no reliable means of finding out.

The panel also liked a proposal made in the study for a command post exercise to be conducted by the federal government to diagnose and demonstrate the condition of the in­dustrial base. As a model, the study cited “Nifty Nugget,” a 1978 exer­cise that tested the ability of the armed forces to mobilize and deploy for a major conflict.

General Guthrie said that such exercises often reveal important in­formation. For example, the Army learned from Nifty Nugget that it did not have enough rifles—and could not acquire enough—to sup­port a mobilization. Another signifi­cant discovery was that in 1978, the US had no way to provide fresh water for forces in the Persian Gulf area.

Broadening the Base

Mr. Harris predicted that indus­try would be willing to invest in quality and productivity improve­ments if defense budgets were less subject to sudden swings and turns. Watching the instability that has prevailed up to now, contractors are cautious and reluctant to make long-­term commitments.

The panelists believed that the defense industrial base must be broader—more firms producing goods that the armed forces can use—as well as stronger. If the gov­ernment structures its incentives properly, it can make defense busi­ness more attractive to potential vendors. The fundamental reality, however, is that military require­ments constitute only a small part of the technology product market, and this is not likely to change. In the years ahead, the armed forces will have to design their systems around commercial components whenever they can. Military designers are al­ready moving in that direction, but Mr. Harris said that the complexity of military component specifica­tions still severely limits the ability of prime contractors to buy parts from commercial suppliers.

The panel explored other adjust­ments that might ease the supply-source problem and cut the time re­quired for mobilization or surge production. Mr. Harris pointed out, .for example, that redundant testing of components takes place at each sequential step of system assembly. This, he contended, is a major lim­itation on industry’s ability to surge its production. “We’ve found that if we could eliminate some of this [redundant testing], we could just about halve the time [it takes] to double the production.”

Streamlining for a Surge

Dr. Scott C. Truver, one of the study’s authors and a panelist at the roundtable, said that the complexity of modern military systems con­strains surge production in other ways, too. Some design features, such as those that provide for an extended shelf life of the product, might be waived during a surge, when the expectation would be that the product would be used soon alter its manufacture.

General Marsh agreed that under surge conditions it might make sense to streamline or eliminate some specifications, such as redun­dant testing and shelf-life features, but warned against the notion—popular in defense “reform” cir­cles—that the United States should shift its design philosophy to “simpler” systems because they are easier and cheaper to produce.

Modern weapons are complex be­cause the tasks they must perform and the adversaries they must de­feat are complex, too. General Marsh said that there are valid rea­sons for the capabilities designed into US weapon systems and added, “I don’t want to blacken the skies with a lot of [Korean War vintage] F-86-type aircraft only to make a bunch of Soviet aces.”

The roundtable panelists further concurred with the study’s conclu­sion that there is no quick and easy solution to the defense industrial base problem. They specifically cautioned against attempts to cor­rect the damage with hasty legisla­tion.

It took the nation thirty years to build the problem, General Marsh said. Recovery will require a sus­tained effort, perhaps a decade of it, before the job is done.