March/April 2015 Issue
Photos courtesy of Spectra Technologies and Highland Industrial Park
Top photo: A large sign at the entrance to the park’s more than 15,000 acres displays the names of the organizations with a presence there — Fortune 500 companies like General Dynamics, Lockheed Martin, and Raytheon, among many others.
Camden’s War EconomyCamden, Ark., is an old, historic city. The Ouachita River lies still as a serpent where it curves against the bluff upon which the town is built. The streets and buildings of downtown seem to exist under a spell from the past. Life feels slow and easy.
But in 2001, when International Paper’s Camden mill closed, there was a danger that slow and easy might become — as it has for some towns in south Arkansas — death and decay. Camden, however, had a secret weapon. As ground wars heated up in Afghanistan and Iraq, nearby Highland Industrial Park (HIP), home to numerous defense contractors making munitions, heated up with money and jobs. Now, with large-scale fighting by U.S. forces winding down and defense budget cuts kicking in, can the park continue to fuel the local economy?
Highland Industrial Park is several miles from Camden proper, near a community known as East Camden, out among the pine forests of the countryside. Approaching it along Highway 274, a large sign welcomes you to the park’s more than 15,000 acres. The sign displays the names of the organizations with a presence there — Fortune 500 companies like General Dynamics, Lockheed Martin, and Raytheon, among many others. It is an example of an economic cluster, a geographic grouping of firms focused on a specific industry. A cluster creates synergy between its firms, as with movie studios in Hollywood or tech firms in the Silicon Valley.
Highland’s cluster supports national defense. The park’s headquarters sit just north of the highway in a low, rambling, house-like structure on an expansive lawn. Inside the headquarters is the office of Gene Hill, the park’s president and CEO. He runs HIP for its owner, Houston-based Highland Resources Inc.
“This was an active Navy facility from 1944 to 1957,” Hill said.
Back then, the park was known as Shumaker Naval Ammunition Depot and run by the U.S. government primarily for making, testing, and storing bombs and rockets. After closing, it was in limbo for several years before being put out to private bid. Brown Engineering, the predecessor of Highland Resources, purchased it in 1961.
“They actually purchased it as a salvage operation,” Hill said. “And then the salvage operation was ceased somewhere around 1964, there was a high-level meeting, and they determined that they might make a go of it as an industrial park, if they had a way to train a [local] workforce which had primarily up to that point been an agrarian-type workforce.”
To help with the workforce, the new owners donated some of the depot’s buildings for a school, which today is Southern Arkansas University Tech. That step was important to the park’s eventual success.
“And it’s paid off [for the local economy] in terms of between 2,500 and 3,000 jobs pretty consistently over the last 12 years that I’ve been here,” said Hill. “And they’re good-paying jobs … some of the highest average hourly wage jobs in the state of Arkansas.”
That’s borne out by a 2012 report that showed Calhoun County, where HIP is located, has the highest weekly wages of any county in the state while also being Arkansas’ least populous county with just 5,100 residents.
Despite the good pay, Hill admitted that recruiting in such a rural area remains a challenge, partly because the education requirements keep increasing with the technology of the weaponry being made.
“The other part is just a numbers game. If you want 300 or 400 or 500 people, and you’re in a county that only has 5,000 people, it gets to be a bit of a challenge,” he said. “So we have to reach out and touch other areas. And people have to be willing to drive a little bit. But the jobs have been good enough that, to this point, that’s worked out OK.”
Hill believes the closing of the paper mill made Highland’s jobs more critical to the region’s economic health.
“In large part, for many years Camden’s economy was based around the paper mill, and these jobs out here were considered to be cyclical. They were considered to be across the river,” he said. “And it’s not that they weren’t appreciated, but [HIP] really wasn’t the basis of the economy in the area. The basis of the economy was more the timber industry and the paper mill and all the things associated with that.”
Now that situation has changed. Ouachita County Judge Robert McAdoo, who has also served as mayor of East Camden, said the impact of the park on the region has been tremendous. “Highland Industrial Park is the backbone and foundation of the economy in all of Ouachita County.”
That, in part, is because though the park is in neighboring Calhoun County, about three-quarters of its employees live in Ouachita County.
“And if [HIP] hadn’t progressed the way it has since the closing of the paper mill, it would be very desolate around here,” McAdoo said.
Though the park’s defense jobs are still somewhat cyclical compared to the steady employment of the old mill jobs, Hill said the contractor base has remained diverse enough to adjust to downturns. But that is getting harder to do.
“The last four years or so have been particularly challenging because of reductions in defense budgets,” Hill said. “They [defense companies] just can’t see very far into the future and that makes planning for both people and infrastructure particularly difficult. And I think you would hear that across the board.”
The board includes a whole spectrum of firms, from big “prime” contractors like Lockheed Martin that interface directly with the government to smaller subcontractors, or local firms to whom the primes farm out aspects of their contracts.
Spectra Technologies LLC is both a prime and a subcontractor, depending on the project. Its headquarters is just down the road from HIP headquarters. Inside, it looks like any business office, except for the mounted bombs, replica missiles, and hand grenades on display. Owned by National Defense Corporation, which is owned by National Presto Industries, Spectra manufactures ordnance used by all four branches of the military.
David Siggers, Spectra’s president, started his career working with explosives in the oil drilling industry before coming to Camden to work for a startup that was eventually absorbed by General Dynamics. In July 2002, he and a partner founded Spectra in the building where it still resides, with nothing but “two desks, two chairs, and a lot of momentum.” Before long, they sold the firm to National Presto with the agreement that they would stay on to run things. Today, Spectra employs 160 people and projects revenue for 2015 to be $35 million.
Like Hill, Siggers said defense budget cuts are making it tougher to plan for the future, but Spectra has adapted.
“Regardless of what happens to you in the marketplace, you get paid to manage the problem of a constrained D.O.D. [Department of Defense] budget,” he said. “You’ve got to figure out how to go out there and fill the void with new programs. And we’ve been able to do that. And that’s worked out really well for us. With the new projects that we’ve got, I think we can see out for three years. And I think that’s about as far out as anybody can see that does what we do.”
A passion for the job helps in such a difficult environment. While firms at the Park are competitors in many ways, Siggers also referred to them as a “community” that is united in support of the American soldier.
“One shot, one kill is today a reality. Modern electronics, guided munitions, being able to put a round on target, being able to do that without a lot of collateral damage to the civilian population, all those things are real,” he said. “It used to be you had to drop 50 bombs to hit a bridge. Now you can do that with one bomb.
“And interestingly enough,” he added, “we’re in the middle of south-central Arkansas, in the pine woods, and some of the most sophisticated weaponry out there is being built here.”
Infrastructure and synergy enables that.
“If you look at the type of support infrastructure here, the type of buildings, the type of specialized storage, the type of security that’s necessary, and a community that is familiar with ordnance production and supports it. All of those things come together to make this a great place to put an ordnance company,” Siggers said. “There just is not a better place anywhere in the country to do what we do.”
Siggers admitted the rural location presents some outward challenges to recruiting, but he believes it has a bright side as well.
“A lot of the young, technical talent that we would like to bring here is concerned about how far they would be from an urban-type environment. But there are a lot of things to do on the weekends … you just have to know how to find them,” he said. “It seems like it’s a long way away because there are maybe some pine trees between you and where you want to go. But if you live in Los Angeles, and you want to go anywhere, I don’t care where you want to go, it’s going to take 35 minutes to get there. So if you have to drive 35 minutes to the movies here, is it really that far? I moved here from Dallas-Fort Worth when I came in the early 1980s, and I’ve never looked back. I love it here. … The outdoor environment is spectacular. And it’s not that far to Little Rock or Texarkana.”
At the same time, it will take more than the region’s beauty to keep the park thriving.
“There are things that need to be done,” Siggers said. “Generally, I think for Arkansas to make this a very attractive place for people to come, there needs to be a better technology backbone in the rural parts of the state. … If we’re going to attract young tech talent, there needs to be robust Internet and wireless services.”
But does increased investment make sense in light of so much uncertainty around defense spending? Siggers believes that a change in the government procurement process is needed. He understands, as a taxpayer, that spending will decline when a war ends, but the way it is happening now is detrimental to our investment in a strong defense.
“What we’ve seen is five years of faucet-wide-open, then the next five years there is no procurement,” he said. “You really have one customer when you’re a defense contractor. … So you make capital investments, and you’re trying to have some good decision-making about how you deploy capital to the future of your company for research and development, for managing some strategy about how you move forward, and it is a very difficult environment when someone is suddenly buying 15 percent or less of what they were before.”
Siggers added that a company then has to erase its budgeting for the next five years or so. That puts technology at risk, personnel at risk, and the future capital investment at risk — all of which impact the future direction the company wants to take “because [a company] is not going to sit idly by for five or six years” waiting for the government to start ordering again.
The alternative Siggers touted is having the government pay some amount to layaway facilities during downturns in the defense spending cycle. That would make it worthwhile for private firms to keep a “warm base” ready to ramp up production when munitions are needed again.
“And you won’t have to discard your capital investments, and you won’t have to repurpose those facilities,” he said. “We’ll support our industrial base that way.”
Historically, Siggers said, the government has tried to keep the base warm by pulling all the money into its own facilities, which he claimed has been ineffective.
“And that’s been going on as long as I’ve been in the business,” he said. “But we’re actually getting some audience now, finally, at the acquisition level in order to redirect this way of thinking.”
Back in downtown Camden, B&M Painting Company is representative of the symbiosis between Highland Industrial Park and the local economy. It is a relationship nurtured by local organizations such as the Camden Defense Business Initiative, where Director Dale Turner helps local firms learn to navigate the complex process of becoming a defense subcontractor.
B&M Painting, founded by Tom McCasland in 1984 and still family-owned, is an example of the success that can follow. The firm has more than 50 employees and an annual payroll of more than $1.4 million. They process and apply aerospace and military coatings, work that requires formal accreditations. Though not located in Highland Industrial Park, much of B&M’s work comes from its close proximity.
“We provide quick services for the companies out there,” said Matt “Hops” Hopkins, a quality manager at B&M. “We consider ourselves kind of an extension of their company. They can come to us and say, ‘We need this part today.’ There’s no shipping cost. We can move parts between facilities, put them on our truck and send them over there. So we feel with our location that it’s very advantageous for the companies [at HIP] to use us.”
Despite only indirect exposure to government procurement contracts, Hopkins said it does not take long for spending cuts to make their way to subcontractors like B&M.
“When spending gets cut, we see a direct impact fairly quickly,” he said. “If a program gets cut, or if the program’s ended early, we see a direct impact. And we’ve been facing that over the last couple years.”
B&M has dealt with the challenge through diversification. “We split our company into two categories — aerospace and defense,” Hopkins said. “So we do a lot of commercial aerospace as well as defense. That helps keep us diversified.”
This also allows B&M to maintain resources needed to be ready when new contracts come in.
“We’ve got to have the workforce here,” he said. “Even if orders are down one month, next month they may give us 200 part numbers, and we’ve got to have the workforce trained and ready. Diversifying between aerospace and defense has allowed us to do that.”
Could such diversification be a strategy for the park, which faces the same challenge but on a bigger scale? Maybe, but diversification may not come easily for an economic cluster built so much around one customer — the U.S. military.
Hill, the park’s CEO, sees hope along another path, that of being a consolidation magnet.
“I think the next few years are going to be challenging,” he said. “Almost every defense contractor in the United States would tell you that they’re uncertain about what it’s going to look like. And their response to that is to play things pretty close to the vest, to maybe shrink their footprint where they have an opportunity.
“And what we would hope would come out of that, since this has been an efficient manufacturing location for these businesses, if they do have to shrink their footprint, instead of moving things out of here they would be looking for opportunities to shutter something else and move those resources here,” said Hill. “So hopefully we can find opportunities where we can be the beneficiary of some of that downsizing.”