Uptick In Defense Spending Could Mean Big Business For Vermont's $2B Aerospace Industry

Apr 20, 2018
Originally published on April 20, 2018 6:46 pm

Every two years, the aerospace industry networks for a week in Montreal at the Montreal Aerospace Innovation Forum.  This year, seven Vermont aerospace companies were in attendance, looking for business.

Montreal is home to one of the world’s leading aerospace manufacturing hubs.

One of the principal talking points at this year’s gathering in Montreal was the Trump administration's move to raise defense spending.

For the Vermont delegation, that rise implies the possibility of revenue and jobs coming to the state’s aerospace sector. In terms of economic output, aerospace generates approximately the same as Vermont’s dairy industry.

Aerospace's big players — names such as Boeing, GE and NASA — get many of their parts from smaller companies, such as Stephens Precision in Bradford, Vermont. Among other custom-made products, Stephens manufactures parts for electrical systems in jets.

About 3,600 people work in aerospace in Vermont — making parts for guidance systems, NASA and both military and civilian aircraft. There's a mosaic of smaller aerospace manufacturers, like Stephens Precision, across the state.

"It's quite robust,” said General Manager Julian Stephens. "There are a number of good players in the state of Vermont that do a lot of good work from Bennington to Derby Line."

Those Vermont companies include Kaman Composites in Bennington, GE Aviation in Rutland, UTC Aerospace Systems in Vergennes and Manufacturing Solutions Incorporated in Morrisville, and they account for about $2 billion a year in economic output.

"And we rely heavily on each other sometimes,” Stephens explained. "If one of us is overloaded, we'll outsource to another one."

Seattle-based Boeing alone has 23 suppliers or vendors in Vermont. But Vermont's best aerospace asset is still being close to Montreal.

The city is among the world's top three largest aircraft manufacturing hubs; the other two being Seattle (home to Boeing) and Toulouse, France (home to Airbus).

Former Vermont Lt. Gov. Brian Dubie — also a former Republican candidate for governor — is a commercial pilot and part of the business development team at LMI, Liquid Measurement Systems, in Georgia, Vermont.

"We're not competing against New York,” Dubie said. “We're competing against China. We're competing in an international marketplace."

LMI makes fuel sensors that collapse in the event of a crash. The sensor won't puncture the fuel tank, which greatly reduces chances of a post-crash fire. The company's equipment is on military assets like Chinook helicopters and F-16 jets.

Dubie said the Trump administration’s rise in spending for the Department of Defense bodes well for Vermont: "DOD is spending additional resources, which is going to create demand for Vermont employers."

University of Vermont economist Art Woolf agrees.

"Vermont is a very progressive state and we tend not to like higher defense budgets," Woolf said, "but it’s worth remembering that some of the money that is spent when the defense budget goes up, does go to Vermont firms.”

Woolf recounted the effect of the last large military spending rise in the 1980s under President Ronald Reagan: "That defense buildup actually had a lot of positive impacts on the Vermont economy."

Woolf said it’s not just the number of jobs that buildup brought to Vermont — but the type.

Aerospace then and now translates into numerous well-paying jobs.

Underscoring the state's current aerospace ambitions, Gov. Phil Scott joined the Vermont group in Montreal this week.

"Relationships do matter and you have to make that effort,” Scott said. He has made multiple trips to Canada to highlight the state’s attributes for doing business to investors.

Scott said there's one, at least temporary, shadow over the state's efforts to enter Canada's large aerospace industry. It is the status of NAFTA, the North American Free Trade Agreement.

Scott says almost every conversation he has with prospective investors begins with NAFTA.

"The uncertainty around NAFTA is having a detrimental effect even on what we're doing today,” said Scott. “Excuse the pun, but they're in a holding pattern because they don't want to invest ... at this point, not knowing what to expect."

Whatever NAFTA's fate, Chris Carrigan with the Vermont Chamber of Commerce, says Vermont's aerospace sector has an ideal geographic location.

In addition to what is known as the Montreal cluster, there’s a similar one Connecticut.

"And Vermont, due to its proximity to both [the Montreal and Connecticut] clusters, is really in a position to become a nexus — a supply chain hub," Carrigan said.

Julian Stephens of Stephens Precision in Bradford says the Aerospace Innovation Forum — the event held this week in Montreal that Vermont companies attended — is an efficient way to make contacts.

"These kind of events go both ways,” he explained. “There's people selling to me, [and] people I'm selling to. But I've definitely got some good indications from businesses that would like to do business with us. So I think that's a good sign."

Another good sign for the Vermont aerospace industry as a whole is the state's 6 percent sales tax exemption for parts used to maintain, repair or overhaul planes.

Last summer, what had been a temporary exemption was made permanent by the Scott administration.

That put the state on equal footing with New York and Massachusetts, which have the same aviation exemption and New Hampshire, which doesn't have a sales tax at all.

Lorne Matalon is the 2016-2017 Journalism Fellow at the University of Texas at Austin and a Vermont resident.

He is currently a contributor to CBC Radio and files regularly for Marketplace. Matalon has reported from Colombia, El Salvador, Guatemala, Haiti, Panama and multiple locations in Mexico. Matalon's series on killings and land displacement driven by energy development in borderland Mexico was awarded a 2016 National Edward R Murrow Award for Investigative Reporting.

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