Defense Firms Warned of Future Cuts

Orange County’s defense industry, already feeling the pinch of lower government spending, should expect another wave of cuts in 1995, when Washington will review and probably trim the nation’s conventional ground forces, a top U.S. Department of Commerce official said Wednesday.

“There’s no place for complacency for the American businessman in the 1990s,” Dennis Kloske, Commerce’s undersecretary for export administration, told Orange County executives Wednesday.

Only those companies nimble enough to shift their military technology to serve the international commercial markets are likely to survive this decade of cutbacks in military spending, he said.

“There will be two kinds of American (defense) companies that will emerge in this decade of cutbacks in military spending--the quick and the hungry,” Kloske warned.

In addition to the impact of domestic budget trimming, Kloske said a united Germany and a strong European Economic Community will become formidable trade competitors in the next few years. Combined with a “strong Pacific economy, led by Japan,” these factors will weed out weak and unresponsive companies in the U.S. defense industry.

Kloske, visiting to brief local companies on the latest developments in national export regulations, said the Commerce Department is beefing up its staff to help defense-related companies adjust to new markets.

One area that promises a lot of growth is in electronics surveillance equipment, he said.

“This equipment will be in big demand among Western allies to monitor all the arms control agreements,” Kloske said.

In addition, Eastern European countries will need diagnostic and medical equipment and computers to modernize their hospitals and businesses, he said. Likely buyers for such equipment include East Germany, Poland, Czechoslovakia and Hungary.

Although the Commerce Department is waiving export license requirements on more than 100,000 items by the end of the year, a variety of technologies will remain under tight control, Kloske said.

Companies interested in selling products, especially in the Eastern European markets, should talk to Commerce Department representatives to find out what items are still controlled, he said.