THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, October 19, 1996 TAG: 9610190243
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY RICHARD BURNETT, THE ORLANDO SENTINEL
DATELINE: WASHINGTON LENGTH: 66 lines
Regardless of politics, U.S. military spending is expected to fall $22 billion over the next 10 years as military industries lose an estimated 250,000 more jobs, experts said Thursday at a major industry conference.
Despite the expected budget fall, however, Pentagon spending in many high-tech areas is expected to remain lucrative, according to a study released by the Electronic Industries Association, a Washington-based trade group. The association represents the country's major military contractors.
Military spending will continue to be cut as the government tries to balance the budget, reduce the deficit and keep Social Security and other nonmilitary programs alive, said Steve Olson, director of the Ten-Year Forecast, an annual study sponsored by the group.
The study, now in it's 32nd year, was based on 120 interviews with senior Pentagon officials, military analysts, industry executives and members of Congress. It is widely regarded within the industry as an authoritative forecast.
Cutbacks in some areas, such as military personnel, will trigger growth in other areas, such as military electronics, he said. With fewer soldiers, the military will have to depend more on technology to do the job, he said.
``External pressures on the defense budget will continue to drive overall spending lower,'' Olson said. ``However, the military's growing emphasis on smart systems means that defense electronics spending will climb over the next ten years.''
Overall, the military budget will slide from $253.8 billion in 1997 to $232.2 billion in 2006, a 9 percent decrease, the study predicted. Spending on military electronics, however, will rise 10 percent from $50.4 billion to $55.5 billion during the same period, according to the study.
Regardless of which political party occupies the White House, the military budget probably will not be much different in the long run, Olson said.
``The bottom line is that for the Defense Department, there is no particularly good news,'' he said. ``The demands of the other parts of the budget are going to put the squeeze on defense.''
But the good news for the nation's military electronics companies is that the Pentagon and Congress strongly support financing many high-tech projects in the future.
In Hampton Roads, defense jobs total about 145,000 active duty military, plus another 35,000 civilian defense workers who get Army, Navy, Air Force and Coast Guard paychecks. Defense and defense contracting account for more than a quarter of the region's employment.
Several major areas are expected to receive significant increases in financing over the next ten years.
Simulation technology, for example, is one of the Pentagon's hottest areas, experts said. Funding is projected to increase almost 60 percent over the next ten years to $11 billion in 2006.
The total market for simulation technology, military and commercial, is estimated at $300 billion during over the next ten years.
``The convergence of all simulation technologies, including everything from virtual reality to the Internet and World Wide Web, will have a profound effect on our business,'' said Mark Gerencser, a vice president at Booz, Allen & Hamilton, a military consulting company in New York.
Despite the positive signs for military electronics companies, the industry is in store for more consolidation, the trade group said. Experts estimated another 250,000 jobs will be eliminated as a result of the next round of mergers or acquisitions. by CNB