Aerospace Systems

March 1, 2004 Roger Matz

Third generation Mankato Realtor carries on family real estate legacy

Center Photo by Jeff Silker

Forget your negative notions about the Defense Industry for a moment, especially your perceptions of fat contracts and shoddy quality.

Set aside your irritation at $650 toilet seats, backroom deals on supertankers, late deliveries and cost overruns. Instead, take a look at the industry from the perspective of Aerospace Systems in Fairmont and its general manager, Mike Wasmund.

Sure, the Fairmont company is a bit farther down on the defense establishment’s food chain than Boeing, General Dynamics or the Pentagon. But it’s survived, mostly on defense contracts and subcontracts for more than 40 years, expanding during the booms and retrenching through the busts. And it’s developed a national reputation as a manufacturer of electrical cable assemblies and harnesses used in everything from Titan rockets to Tomahawk missiles and from Apache helicopters to Bradley fighting vehicles.

Wasmund has been through 22 years of ups and downs at Aerospace. He started as a manufacturing engineer in 1982, after earning a Masters in industrial management at the Univ. of Wisconsin. He moved through a series of tougher assignments at Aerospace, including west coast sales manager, director of operations, and engineering manager for new products before ascending to general manager in 1996.

As he leans back in his office and shares the history, problems and opportunities at Aerospace Systems, one hears refrains similar to those played out in most ordinary, nondefense plants. Customers are cost-conscious, so bidding is tight and margins are thin. Customers are quality-conscious, so there’s an obsessive attention to quality and reliability. Customers are security-conscious, so confidentiality surrounds the development of nearly every product.

But there are major differences between defense and nondefense manufacturing, according to Wasmund.

“We fish in a small pond,” Wasmund said, explaining that there are far fewer potential customers for small subcontractors like Aerospace than for contract manufacturers who make parts for consumer products. The short list of defense customers includes government agencies and a few well-known giants like General Dynamics, Lockheed, Boeing, Raytheon, Pratt Whitney and Northrup Grumman. “Some consumer products manufacturers can afford to throw customers away. We can’t,” Wasmund said.

And although nearly every manufacturer pays homage to quality these days, it verges on a sacred trust at Aerospace. “We electrically test every single piece of cable assembly we make,” Wasmund said. “It has to work. Our people are totally ingrained with that. They understand that if they send cable out and it doesn’t work, a soldier’s life is on the line. They won’t allow something to go out of here that will fail.”

Aerospace first qualified in 1999 for ISO 9001 and AS 9000 certification, tough industrial and aerospace quality standards. It has since been recertified for ISO-9001: 2000 and AS 9100, both upgraded standards. But the concept of quality is more personal than abstract right now, according to Wasmund. “A number of our employees have family members in Iraq now. They’re very worried about them.” Shoddy quality isn’t an option, isn’t in the lexicon at Aerospace.

Another major difference between defense and commercial manufacturing is what Wasmund calls “the need for traceability. If a part should ever fail, we need to be able to determine who worked on it, what tools and materials were used. It’s a government requirement.” Everything Aerospace produces is “serialized,” so that each part carries a distinct number. That enables the company to track a failed part back to its source. “If a contact is crimped on a wire, then comes loose later, we’ll be able to determine the exact crimping tool we used. The tool might have been OK at the start of that day’s production, but it might have failed sometime during the run. This is a way of tracking other connections that might be affected and preventing future failures,” he said.

Manufacturers who produce defense parts must also have a flawless knowledge of military specifications, specialized knowledge that isn’t required of consumer products manufacturers, according to Wasmund. “For example, when we know the environment a part has to ‘live in,’ we know exactly what jacketing material a cable needs to meet those specifications,” he said.

Despite public perception to the contrary, fat contracts are something of an oxymoron at Aerospace. “We bid. We compete. We keep knocking on doors,” Wasmund said. “We may build $100,000 worth of cable for a customer in one year. Then it goes down to $12,000. We still service them as if they’d placed a half-million dollar order. We know that sooner or later, they’ll land an order and come to us.”

Margins are razor thin to nonexistent when it comes to helping customers develop a product, according to Wasmund. “When our customers are working on specific projects and need prototype assemblies, we build it for next to nothing or maybe we’ll ‘take it on the chin.’ We always hope we’re betting on the right horse,” he said. “Service is everything to us. So is quality. If you don’t do those things, you won’t have customers and we work very hard to keep every customer we have.”

Most of Aerospace’s customers are large defense contractors, but occasionally the company gets an opportunity to try directly for a government contract. “The government will have contract offerings for cable assemblies and we’ll bid,” Wasmund said. But the cable Aerospace sells isn’t the generic type wound on reels and sold at retail outlets like Best Buy, where customers take it home to network their computers or to run system peripherals.

“We build 99 percent of the cable we use. You cannot order this from a catalogue,” he said. The cabling is designed to withstand severe environmental conditions, including extreme heat and cold, salt spray, abrasion, water and chemical immersion and electromagnetic interference. Over the years, Aerospace has developed processes to mold unique cable, flat or round, some of it embedded with fiber optics. It’s become a recognized leader at producing cabling for a variety of applications, including communications, ground support, testing and training,

As an example of cabling used in training, Wasmund cites a military version of laser tag, which records hits and misses of weaponry ranging from M-16 rifles to antitank rockets. “It can differentiate whether a tank is hit by an M-16 rifle bullet or a rocket, and it can measure the disabling effect of a hit,” Wasmund said. Aerospace makes the cabling system for this, which interconnects both components and sensors.

The military requires absolute realism for these training exercises, Wasmund said. The antitank rockets can be launched from a vehicle, a tripod or a helicopter using a weapon that Wasmund describes as a “bazooka on steroids.” The pilot or soldier launching this rocket must keep the target in sight, using a guidance system to steer the rocket toward it. At the moment of launching, the rocket emits a plume of smoke. “That plume attracts the attention of any infantry protecting the tank, so they fire their rifles in the direction of the incoming rocket, forcing the launcher to keep his head down and maybe causing the rocket to miss,” Wasmund said.

Producing this level of sophisticated equipment requires highly trained, experienced employees, some of whom have been with Aerospace for 35 years. “It is the people who make this company what it is. Without the specific expertise that these individuals have and have learned over the years, this company would not function efficiently, or maybe not at all,” Wasmund said.

The need to hold together a stable, competent workforce may be Wasmund’s most knotty challenge as he copes with defense industry’s cycles. Last year brought mixed results. The good news: Aerospace set a revenue record of $14.25 million in 2003. The bad: A downturn through the summer forced the company to shrink from about 170 employees to 107 by the end of October.

“But we’ve done pretty well in recent years. We hadn’t had a big workforce reduction since 1999,” he said. Aerospace has subsequently rehired the majority of regular employees cut since last summer.

The summer slump wasn’t caused by any single factor, like the loss of a contract. “We just didn’t get the orders we anticipated based on the number of projects we’d quoted,” Wasmund said. He surmises that the Iraq war “took away the funding from some of the programs we were bidding. The military needed the funding elsewhere.”

Wasmund isn’t sure what causes all the defense industry’s ups and downs, but theorizes that it “partly depends on who’s thinking what in Washington. It could be who’s in power and what programs they are supporting.” When politicians or military planners shift in a new direction, existing programs suffer. The gap between existing and new isn’t easily bridged because “new designs take a long time to produce. They’re not something you come up with instantly,” he said.

Wasmund tried to mitigate the effects of the summer slide by gradually reducing the number of employees rather than making immediate cuts. “First the summer help went away, then the temporary and part-time workers. But we finally had to cut 40 regular employees,” he said.

In the 1980s, when Teledyne Systems of Los Angles owned Aerospace, the plant gained a local reputation for up and down spurts. “We hired and cut, hired and cut. We became known for it.” In 1989 and 1990, Aerospace peaked at 250 employees. Many of them worked on one large defense contract, producing thousands of feet of cable for a coded radio system with frequency-hopping capabilities. “The federal prison system decided it wanted this contract, so we dropped from 250 employees down to about 120. Now we try very hard not to do that. We’re trying to keep a nice, steady growth rate.”

Nortech Systems, Aerospace’s parent company since 1995, encourages growth. We’ve been aggressively expanding our customer base. This has helped bring us growth and we need it to weather the ups and downs,’ Wasmund said.

The company continually solicits business from existing and potential customers. “We’re knocking on doors constantly. We never give up,” he said. Aerospace has a sales manager based in Fairmont, and employs two sales engineers, stationed in Pennsylvania and Arkansas. It also uses independent sales representatives who sell several product lines.

The key to Aerospace’s future, in a sense, involves team building both outside and inside the plant. “We’re teaming with our customers. We’re in it for the long haul with them. We understand they’ll have good times and bad times. Our philosophy is to support them through both,” Wasmund said.

Under Nortech, Wasmund said Aerospace has begun “teaming with suppliers and developing strategic alliances with them as part of a supply chain management initiative. This enhances our ability to respond to changing market demands.” Results have been dramatic in some instances, he said. “On some major components that we purchase, this has compressed delivery to us from 12 weeks down to two weeks. In turn, this allows us to make a more rapid response to our customers’ needs.”

Inside the plant, Wasmund sees the dilemma as a “huge circle. If sales doesn’t do their job, then employees can’t show how good they are. If we can’t manufacture for on-time delivery, then sales can’t do its job. We need to stretch ourselves.”

Building teams seems to be a process that requires continual attention, fine-tuning and perfecting. “It’s a matter of getting the right people in place and having them get to know the whole system. Then everything starts jelling,” he said.

“Sometimes, when they first start working with each other, they’ll fumble the ball left and right. But that happens less often, once they get to know each other and get used to pulling together as a team,“ he said.

Fortunately, Wasmund feels Aerospace’s management team is “in sync. We just hired a new materials manager and a controller. They’re going to fit in beautifully. It takes awhile to build a team and get everybody working together.”

When it comes to recruiting and retaining employees, Wasmund regards the community of Fairmont as a prime asset. “It’s one of the big selling points to employees. It’s a great place to raise kids. It has five lakes. It’s a safe community with honest, hard-working people.”

Wasmund is an import himself. He grew up in Red Wing, known for its scenic, hilly terrain along the Mississippi River. “Sure, Fairmont is flat. But it’s gorgeous. And there are parks everywhere.”

Copters and Rockets and Tanks, Oh My!

Aerospace Systems broke into the defense industry with a device allowing military cargo planes to more accurately drop supplies and equipment.

Rudimentary by today’s standards, it triggered a small explosive charge to open a parachute a few seconds after the plane dropped its load. “With the load free-falling for a specific number of seconds toward the target, the pilot could do a better job of aiming the cargo,” said Mike Wasmund, general manager of the Fairmont company.

The gadget could be set to activate anywhere from 10 to 40 seconds, depending on how far the pilot wanted the load to fall before the chute opened. Today’s versions include a built-in altimeter, with the chute opening at a designated altitude, which provides even greater accuracy.

Although Aerospace no longer manufactures this product, the company used it as a launching pad four decades ago. Now it manufactures military hardware that’s far more complex. Founded in the Twin Cities in the early 1960s, the company moved to Fairmont about 1964 after a tornado ravaged its Twin Cities plant.

Now it operates from three buildings encompassing 50,000 square feet, supplying parts for military equipment and systems that are almost household names—Titan rockets, Abrams tanks, Bradley Fighting Vehicles, Apache and Blackhawk helicopters, even “smart bombs” and a long list of jet fighters and bombers.

Wasmund is understandably reluctant to discuss in much detail the specific military devices, accessories or systems the company has, is or might produce. But Aerospace has furnished cabling for Titan rocket’s launch tower, engine harnesses for the Abrams tanks and harnesses for the Apache helicopter’s twin turbo engines.

The company also has been involved in the military’s “Land Warrior” program, which involves “trying to outfit soldiers with communications and positioning equipment. Wearing a computerized system, they can see around corners or over a wall. Using a regular scope or thermal imaging, they can see what’s out there, and make that information immediately available to their battlefield commanders or others,” Wasmund said. “The government is very much pushing this.”

Aerospace also produced an assembly to open the tail fins on a “Tactical Munitions Dispenser” (TMD), which he describes as a “big trash can filled with ordnance.” After the TMD is dropped, the sides peel away, releasing “bomblets” to carpet a targeted runway. A TMD can also dump antipersonnel mines.

But the company’s areas of expertise are more in applications like communications, ground support, training and testing than in weaponry or munitions. Aerospace produces cable systems for testing everything from jet engines to missiles.

“We make a cable that interfaces between a generator and an aircraft. The interface filters out all extraneous signals from the generator, so they can test the avionics on the plane without actually running the engine,” Wasmund said.

A similar Aerospace interface links computer equipment to missiles, enabling technicians to test a missile’s avionics without firing it. “It tests all the avionics so they know the guidance system is correct and the arming mechanics are working correctly,” he said.

Lean And Mean

Aerospace Systems of Fairmont appears to be thriving under its new owner.

After several years with sales hovering between $7 and $8 million, the Fairmont defense manufacturer began pushing that figure upward to $11.8 million in 2001 and $12.6 in 2002. Last year Aerospace hit $14.25 million, “the best year we’ve ever had,” said Mike Wasmund, general manager.

“We won a large year-end contract in 2001 and that gave us momentum. We’ve sustained good growth ever since,” Wasmund said.

Aerospace has had several owners in its 40-year history. Teledyne Systems, a California electronics conglomerate, owned it for many years. But Teledyne sold it in 1992 to Communications Cable Inc., and that company sold it in 1995 to Nortech Systems. Wasmund, who had been with the Fairmont company since 1982, became general manager in 1996.

Nortech, headquartered in Wayzata, operates Aerospace as a separate division. It has three other relatively high-tech manufacturing divisions in Minnesota at Bemidji, Baxter and Merrifield, and one in Augusta, Wisc. It also owns a manufacturing plant for low-cost production in Monterrey, Mexico.

While Aerospace specializes in defense production, Nortech’s other divisions make parts destined for the fields of medical, industrial, automotive, computer and recreational products.

Nortech Systems is a publicly held company, listed on Nasdaq as NSYS. Its annual report for 2002 listed sales of nearly $61 million, up 4 percent, and net income of $2.4 million, up 14 percent. The report describes Nortech as a “world-class electronics manufacturing services provider.”

In the report, Michael Degen, president and CEO, noted that net income growth significantly outpaced sales growth, attributing this to “cost-reduction efforts and lean manufacturing activities.” He defines lean manufacturing as a hybrid, blending elements of old-fashioned craft production and modern mass production. “Team-oriented workers using flexible machinery are trained to perform multiple tasks and empowered to suggest improvements,” he said.

Degen said the lean manufacturing approach originated with Toyota Motor Co. in the 1950s and has now been adopted by leading companies to achieve increased productivity, reduced cycle times, improved quality, reduced costs and improved competitiveness.

Lean production techniques are used at Aerospace, but perhaps as an indication of the autonomy the Fairmont company enjoys under Nortech, “we don’t call it that,” Wasmund said. “We like to think we’ve always been operating that way. We are lean. We’re using a ‘pull’ system, not building up inventory or work in process. One process takes place and moves to the next process. Cable is constantly being pulled through the system.” The old way, according to Wasmund, involved “putting a big pile of cable in front of somebody and trying to push it through the system.”

One benefit of having a succession of owners is exposure to new ideas and approaches, according to Wasmund. “We’ve been through all sorts of things with Teledyne and other companies, everything from Total Quality Management to Best Manufacturing Practices.”

Nortech has also brought new ideas. “One of the greatest benefits from our association with Nortech is the company’s commitment to the concept of supply chain management. They are committed to this concept, which extends our ‘teaming’ philosophy to suppliers. This initiative greatly improves our ability to respond to a customer’s requirements in a more timely and competitive manner. It also enhances our efforts to be a ‘lean’ manufacturer,” he said.