A good offense for the economy lies in having good defense industry

Cotton, cattle, and oil have long been thought to be economic mainstays of Texas, but defense industry executives are all grins these days over President Reagan's proposed $1.6 trillion military buildup in the next five years.

Military spending is among the state's biggest industries - nearly $20 billion a year in direct business - and it is projected to grow substantially over the next two decades.

After the Vietnam war, major airframe makers, such as St. Louis-based General Dynamics Corporation's Fort Worth division, had a falloff in contracts. Others, such as LTV's Vought Corporation subsidiary, tried to diversify into commercial businesses such as people-mover systems, with mixed results. (Vought's Airtrans system at Dallas/Fort Worth Airport encountered snafus which eventually were ironed out.)

Today, however, Texas defense contractors are enjoying brisk business. Dallas-based Texas Instruments has contracts totaling some $2.4 billion for defense-related products ranging from airborne radar to infrared-night-vision systems. General Dynamics, listed as the US Department of Defense's No. 3 contractor, received almost $1.6 billion last year alone to produce the F-16, regarded widely as the world's most sophisticated jet fighter.

During 1981 LTV Corporation's Vought and Kentron International subsidiaries received more than $400 million in prime contracts; Vought's defense work includes its multiple launch rocket system (MLRS) and the formidable Lance missile. Vought, based near Dallas, which is nearing the end of a 15-year contract to manufacture the Navy's A-7 jet, expects much of its future business to come from a subcontract for a large fuselage section for the B-1 bomber.

Other leading Texas defense contractors include Bell Helicopter-Textron, which last year got $230.7 million in contracts, mainly for upgrading AH-1 Cobra helicopters for the Army at its Amarillo and Fort Worth plants; and Rockwell International ($99.2 million in '81 contracts), which produces communications equipment and is involved in modernizing the Strategic Air Command's ground communications network at its Collins Communications Systems division in the Dallas suburb of Richardson.

In military procurement contracts, Texas ranks a healthy, though distant, second behind California, with some $7.5 billion in contracts awarded in fiscal year 1981 (8.6 percent of the national total), vs. $16.7 billion (19 percent of the total) for California, according to Pentagon figures. But Texas ranks No. 1 in the actual number of military contracts - upwards of 15,000, excluding those administered directly by branches of the armed services.

Moreover, Texas is home to a payroll of more than 200,000 active-duty military personnel and civilians, and it's home to more Air Force bases than any other state (11) as well as to the largest Army installation in the United States - Fort Hood. Fort Bliss, near El Paso, is the Army's primary missile-training center, and San Antonio is the site of five major military installations: Fort Sam Houston, headquarters of the Fourth Army, plus four Air Force bases - Kelly, Randolph, Lackland, and Brooks. And stuck way off in the Panhandle city of Amarillo is the Pantex plant (employment: around 2,400), the nation's sole assembly facility for nuclear weapons, which is operated by the Mason & Hanger Co.

It's estimated that the strong military presence pumps a total of around $400 million a year into the San Antonio-area economy, and directly or indirectly, the defense business contributes nearly 50,000 jobs in the Dallas-Fort Worth area. All told, Pentagon figures indicate that Texas will receive a whopping $3. 8 billion in fiscal year 1983 for military operations across the state.

Typical of the Texas companies that stand to benefit from rising defense spending is the Dallas-headquartered E-Systems. Once a subsidiary of formerly troubled LTV Corporation, it believes it is well positioned to capitalize on what is viewed as a major defense growth area: electronic warfare and command, control, and communications (C3).

The company's net income jumped 87 percent last year, to $23.8 million from $ 12.8 million in 1980, on a 29 percent gain in sales to $572 million; its order backlog has more than doubled in the last two years, climbing just above $1 billion at the end of 1981. Significantly, electronic warfare and C3 accounted for more than 75 percent of its 1981 sales and 86 percent of its year-end backlog.

E-Systems (with nearly 12,000 employees and a dozen divisions or subsidiaries , including an aircraft maintenance and overhaul firm in Taiwan) feels that it is unique among US defense contractors, in that its a broadly diversified systems company, with several hundred contracts or product lines - as opposed to being something like an airframe producer that must depend on one product for its bread and butter.

''E-Systems is a different breed of cat,'' a Dallas financial analyst explains. ''It has total capabilities in the electronic warfare and C3 businesses - from the design of 'black boxes' to the building of completely integrated systems.''

The company has developed a concept it calls Electronic Battle Management (EBM), the logic of which goes like this: Instead of trying to match the Soviet Union bullet for bullet or plane for plane, the United States, for instance, can detect, locate, and disrupt the Soviets' critical communications, thus rendering useless the weapons supported by those communications. If the US can suppress the Soviet air defense weapons, its aircraft can then penetrate to battlefields and strike vital targets. If the US can design situation-monitoring systems with minimum manning, it can use people for other tasks. And if the US can design systems to give battle commanders data more rapidly, it can gain an edge in time.

''In short,'' notes John W. Dixon, E-Systems' hard-driving, 62-year-old chairman and chief executive, ''EW and C3 technology can multiply our force effectiveness as the concept of Electronic Battle Management is employed. Our task as a company thus is to provide equipment and systems that make information available to decisionmakers ranging from battlefield commanders to the national command authority, as well as to provide systems which can electronically counter massive enemy forces.''

Dixon cites independent projections that have put the growth of the EW/C3 market at from 15 percent to 25 percent annually through 1986.

The company's EBM-related products (which generally are highly classified) range from sensors and processing-fusion systems to sophisticated communications equipment (such as tactical radios and satellite-borne units); the advanced airborne command post program (under which it's equipping Boeing 747s to function as survivable flying bases from which to deploy and control US military forces); remotely piloted vehicles.

In addition, E-Systems maintains the Air Force's Special Air Mission aircraft (including Air Force One); operates the Sinai Field Mission, which seeks to keep the peace between Israel and Egypt; and produces such products as air-navigation equipment, solar energy systems, and mail-sorting machines. The company's goal is to attain $1 billion in yearly sales, with return on equity of 20 percent, by 1985.

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