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ITT Exelis Lays Offs Workers As SINGCARS Production Ends

ITT Exelis (XLS) is the defense part of the former ITT Corporation (ITT) which at the beginning of this month broke into three parts. The other two parts deal with pumps and electronics. ITT Corporation itself was created by the division of the old ITT Industries into three parts twenty years ago severing the production company from Sheraton hotels and Hartford insurance.

ITT Corporation did a lot of different things for the U.S. and other nations defense establishments including making radars, airborne jammers and radios as well as providing maintenance and other services. One of their core products was the Single Channel Ground and Airborne Radio System (SINCGARS) which became the standard tactical radio for the U.S. military and many allies. ITT and other companies under license mad tens of thousands of the radios for almost three decades. Now the SINCGARS is ending its life as the new Joint Tactical Radio System (JTRS) comes into production as well as other new systems. In June ITT received a contract to provide engineering support for the system as it will remain in service for several more years.

Even with the decision last month to end the ground radio portion of the JTRS program headed up by Boeing (BA) does not mean more SINGCARS work. The Army is planning on developing a new series of radios to fulfill the JTRS requirement rather then continue buying the legacy ITT system.

What this means is that ITT Exelis will continue to restructure its work force especially that part supporting SINCGARS. Layoffs had already been announced in the past but this week a further 200 jobs at their Fort Wayne, IN facility will be eliminated. Many of these positions were short term ones created when the last contract was awarded to cover a surge in requirements. This will bring the total jobs eliminated to over 700.

That is one of the problems with defense contracts, especially production related ones, as the military usually has a fixed number of systems to buy and will always be working on an upgrade or replacement. If the current contractor does not win the new work they will reach a point where their product is no longer needed. Gone are the days like in WW II when the U.S. and other countries could afford to have multiple systems to meet a requirement. SINCGARS is ending, JTRS and other radios is starting adn ITT Exelis has less work. Unfortunately that means less jobs.

Another unfortunate thing is that often the new work takes place at a different plant in another part of the country or world. That can bring serious economic harm to a locale. Sealy, TX is going through this after BAE Systems (BAE:LSE) lost the U.S. Army truck contract to Oshkosh (OSK) who moved the production to their plant in Wisconsin. The Texas town’s major employer now had no work and it is slowly shutting down eliminating many jobs. Sealy will probably face economic hardship for several years. Its not Oshkosh’s, the Army or BAE Systems’ fault that production moved it is just how the system works.

ITT Exelis to maintain their workforce in Fort Wayne will need to find a new product to make at that plant or see its number of employees slowly wither away. With the coming cuts in U.S. defense spending there will be many communities across the U.S. that will see the same affect as programs are reduced or ended. The U.S. economy will take a significant hit as these jobs are eliminated along with the spending.

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