There is optimism among Southern California defense contractors that the incoming presidential administration’s plans and policies will inject adrenaline into the local economy and generate hundreds of new jobs, especially with talk of strengthening the U.S. military.
President-elect Donald Trump has publicly vowed to strengthen the country’s military by making it more efficient and through that find better ways to develop more defense products utilizing technology innovation. He has also said he will build up a larger naval fleet to compete with China.
Just after winning the presidential election, Trump named Elon Musk and Vivek Ramaswamy, founder of a pharmaceutical company, as co-leaders of a government efficiency initiative focused on cutting bureaucracy and waste in government. Many smaller tech firms, some of which have relationships with Musk’s Space X and Tesla, are hopeful the initiative could give them an edge over bigger defense companies with huge budgets.
“The new administration is very passionate about countering China and they recognize the ability for the U.S. to outcompete China that manufacturing is probably the most important thing to counter that threat,” said Chris Power, CEO and founder of Hadrian Automation, a company based in Torrance that runs automated factories building defense products. “We haven’t been talking about reindustrializing the country in the last 10 years. Now, the vice president, a lot of the policymakers are hellbent on figuring out how to reindustrialize the U.S., both by investing in the country and also by creating an even playing field with China.”
Power, an Australian who lives in Hermosa Beach and started his company just three years ago, was among hundreds who attended the 11th annual Regean National Defense Forum held over the weekend at the Ronald Reagan Presidential Library in Simi Valley. The event is an opportunity for representatives of defense and technology companies to rub shoulders and exchange ideas with lawmakers, senior Department of Defense leadership, and foreign defense leaders in an environment away from the hubbub of the nation’s capital.
Southern California is packed with hundreds of defense-oriented companies and continues to be a leader in military defense innovation. Commercial technology is also significant in the country’s national security approach. Because of that, the forum is also an opportunity for non-traditional companies to get a share of the spotlight and for startups like Hadrian Automation to get a chance to talk with people otherwise not in their sphere.
This year’s forum, themed “Peace Through Strength in a Time of Transition,” included a day of back-to-back panel discussions. Key themes included what the new presidential administration would mean for defense, overcoming production and manufacturing constraints to build the future force, space capabilities and the space economy, modernizing defense capabilities, the next national defense strategy, and public opinion on national security after the election.
During a discussion on force structure, resources and the next national defense strategy, panelists emphasized funding military needs going forward.
Rep. Ken Calvert, R-Corona, who serves on the House Appropriations Defense Subcommittee, pressed the importance of passing the appropriation bills that fund military spending.
“We need to get these bills done and give certainty to the military that they have the resources available in the Trump administration,” he said. “I know it’s difficult in an era where we have significant national debt, but nonetheless, our national security is at risk, and we need to move forward.”
The uncertainty of the government’s appropriations process makes it difficult for the defense industry, “from a development perspective and a production perspective,” said Lawrence Culp Jr., chairman and CEO of GE Aerospace. “Without that clarity, it’s very hard to keep someone at task with all these stops and starts and the policy uncertainty of late – it’s very hard.”
The smaller companies further down the supply chain bear a lot of the weight of uncertainty, he added. “When you talk about the small and medium-sized businesses that are part of that supply chain, the small companies we rely on for input, one, two, three tiers away, they’re at the end of the whip and they can’t really handle that, either operationally or financially.”
Former Secretary of Defense Leon Panetta said at the forum that is where Trump needs to use his ability to generate enthusiasm among the public and make Americans aware of the nation’s dangers if it doesn’t have a strong military.
“The American people really don’t understand how much of a threat we’re facing,” he said. “We have got to educate the American people on that. We haven’t had a president in the last years who has gone to the American people and gotten their support. It’s the only way you get leadership in Congress to pay attention and get the action you need.”
The forum produces a survey each year on public perception of military defense, the last conducted just after the November election by a bipartisan research group. Of the 2,500 surveyed, 79% of respondents said they want the U.S. to spend more on national defense. At the same time, 61% said the military should be large enough to win two wars simultaneously; 49% said China poses the most significant threat, while 25% said Russia poses more of a threat.
And, that’s where lawmakers such as Calvert think Southern California companies can have opportunities to become more successful.
“Southern California is the intellectual capital of the world when it comes to national security innovation and manufacturing,” he said. “President Trump is committed to a strong military that is focused on the threats we face today and tomorrow. There’s no doubt in my mind that Southern California will continue to make a significant contribution to those important goals in the years ahead. There’s widespread agreement that we need to invest in our national security to remain the preeminent superpower in the world.”
With a new administration coming in talking about cutting waste in government agencies while strengthening the country with a more targeted and effective military, local companies working with defense contractors and manufacturers are looking to the future with a hopeful eye.
Brandon Tseng, a former Navy SEAL who co-founded Shield AI and attended the defense forum this year for the second time, said more government interest in smaller companies that produce military technology will help Shield AI create more jobs.
The San Diego-based company, which employs 900 people, aims to protect service members and civilians with AI systems. It develops artificial intelligence-powered pilot systems, drones and technology for military operations.
“I’m bullish on the defense tech ecosystem,” he said, adding that he’s excited about Trump’s inclusion in his administration of Musk, Ramaswamy and Stephen Feinberg, a private equity investor with interests in the defense industry, who Tseng calls problem-solvers.
“What I’m optimistic about is that you have these operators who have run companies, been in the trenches, solved problems, and know what it means to walk the walk, not just talk the talk,” Tseng said. “The administration is bullish on doing things more efficiently, more effectively; that’s what technology is about. I think you’re going to see it will be very helpful for a lot of defense tech companies.”
And, it’s exactly the idea of manufacturing parts quickly and efficiently that Power, of Hadrian Automation in Torrance, believes will help reinspire U.S. manufacturing, which he believes is the basis of a strong national defense.
With his company, he hopes to inspire many young, smart people to want to get back into manufacturing – but in a more modern way that uses software to improve the manufacturing process and make it more efficient and effective.
“U.S. power is based on the dollar,” he said. “The dollar is based on military might, which is really based on industrial power. We shot ourselves in the foot as a country by outsourcing our industrial power to China. That took away all the manufacturing skillsets, manufacturing technology, and a lot of jobs. For the last 25 years, we’ve treated China like a partner, but they have been subsidizing aggressively their manufacturing base specifically to gut our industrial power as a country.”
At the same time the general public’s interest in manufacturing has dipped, he argued, with more people in the 1980s and ’90s choosing a four-year degree as the way to a successful future and a middle class that commands relatively high wages.
“If you want manufacturing in America, the only way to do it is to build software factories that give the American workforce a productivity advantage so we can scale and use a new workforce instead of a legacy,” he said. “And if we want to be cost-competitive globally and efficient, we either have to pay everyone a very small amount or give the American workforce the 10x advantage with American software engineering and robotics.”
Power sees Trump’s focus on empowering industrialization as having a huge impact on jobs. He plans to open two new facilities in the next year.
“The faster we scale, the more jobs we provide,” he said. “And they’re better and more exciting jobs.”
