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Murphy: State’s manufacturers ‘right’ to be nervous about future

By Jennifer McDermott

Publication: theday.com

Published March 28. 2013 4:00PM   Updated March 29. 2013 12:03AM
As economy shrinks, submarine parts makers forced to rely on Electric Boat

Groton — The president of Electric Boat told U.S. Sen. Chris Murphy Thursday that the recent passage of a continuing resolution that protects submarine funding resolved many of his concerns, but the smaller manufacturers the senator met with later in the day remain worried about their future.

The continuing resolution by which the government will operate for the next six months fully funds EB's two major programs — the construction of two Virginia-class submarines annually with Newport News Shipbuilding, and the design of a new class of ballistic-missile submarines. However, some of the shipyard's expected overhaul and repair work is still in jeopardy due to the automatic budget cuts known as sequestration.

"From our standpoint, it turned out as best as we could have expected," said Kevin J. Poitras, president of EB, adding that the shipyard is continuing to recruit engineers and has hired 350 people in the trades.

"They're busy and we like when Electric Boat is busy. We want to keep them busy," Murphy, D-Conn., said.

After seeing the three, full graving docks at EB, and the North Dakota, a Virginia-class submarine EB is aiming to deliver seven months early, Murphy went to the Groton Public Library to meet with 19 executives of Connecticut companies that make parts for submarines.

Christopher Jewell, principal and chief financial officer at Collins & Jewell Co. in Norwich, said "good news for EB is good news for all of our businesses." But, he said, he was concerned about relying too heavily on EB and government spending, given the fact that the defense budget is going to shrink.

Prior to 2008, Jewell said, 60 percent to 70 percent of his custom steel-fabrication business was in the private sector. Now it's about 30 percent and holding.

"We don't like having everything hinge on EB and the Navy. It's scary," said Blair Munyan, a design engineer at Hillery Co. custom metal fabricators in Groton.

Murphy said the manufacturing industry is growing, but Connecticut has not seen the same growth as other states. That could be because of higher labor costs, the aging workforce, state mandates or the tax structure, he said.

John Barto, vice president and general manager of Ansonia Specialty Metals in Waterbury, said the state needs to support manufacturers "if we want manufacturing to flourish."

Barto and several others said health care costs are a major expense and impediment to hiring new employees. Jewell said the rates he pays for his employees' health insurance have increased by 20 percent for two consecutive years. David Weller, manager of programs at Electro Mechanical Specialists in Norwich, said his rates increased 25 percent.

"When was the last time you hired someone," Munyan asked Jewell from across the table.

"It has been a while," Jewell replied.

Others said they were concerned about cuts to defense research and development, as well as the prospect of small companies, some of which are the only supplier of a specific part, going out of business.

Yoram Shahar, vice president of operations at Ward Leonard Electric Co. Inc. in Thomaston, said his company works with many sole-source suppliers. If they close, he said, it would be disastrous. It takes a year for the Navy to qualify a new supplier, he added.

After the meeting, Murphy said it's not easy to be a small manufacturer in this state.

"They're right to be nervous," he said.

The only way to avoid sequestration is for Congress to "strike a grand bargain," a major debt reduction deal of $4 trillion to $6 trillion that swaps broad defense cuts for entitlement reform and targeted tax reform, he said.

The chance of that happening, Murphy added, is "50-50."

Fresh from a Wednesday visit to Sikorsky Aircraft Corp. and Pratt & Whitney, Murphy said EB and Sikorsky are protected a bit by their multi-year contracts. Pratt & Whitney has year-to-year contracts, making it fairly easy to order fewer planes, he added.

Poitras said he's not predicting any layoffs at this time, but that could change later this year if the overhaul and repair work is cut and other projects do not materialize.

"Fingers crossed, we're going to continue working at it," he said. "What we can do here is keep delivering quality ships ahead of schedule, under budget, and do some good design work."

j.mcdermott@theday.com

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