Bringing Even More Job Losses to the State

Michigan has been losing jobs at a great clip and now boasts one of the highest unemployment rates in the country. A great deal of this has been due to the decline of the U.S. automotive industry. Over the last ten years some of this has been countered with increased defense spending especially in the area of armored vehicles. Now even this market is starting to change bringing even more job losses to the state.

The Army, Marines and even the Navy and Air Force were showered with money by Congress to buy Mine Resistant Ambush Protected (MRAP) vehicles to protect against what was turning out to be the biggest killer in Iraq and Afghanistan: The Improvised Explosive Device (IED). This meant that several companies were able to win contracts due to the high demand. A secondary market was also created in making armor for the MRAP and other military vehicles such as up-armored HUMVEES.

Now that Iraq is winding down and the current focus in on Afghanistan there has been a change in approach. The Department of Defense is buying a new lighter, more maneuverable MRAP called the MRAP-ATV. A contest was held that involved several MRAP producers but the first two contracts have gone to Oshkosh. This end of the production boom for these vehicles now is leading to job losses and cut backs in the defense money moving to Michigan.

This is a common problem with large defense production contracts. Eventually they will come to an end and the system will either move into sustainment or be replaced by a newer system. This is why contractors prefer a lower level of production over a greater number of years rather then buying a large number quickly. This steady state allows a proper ramp up of production and suppliers and also guarantees several years of income. It also provides stability to the job market in a geographic area. When a program ends that stability and job market is disrupted.

Source: Defense Restructuring Adding To Michigan Woes