Two States Hit by Defense Cuts

SOMEHOW, the idea of a peace dividend just doesn't sound so great to many hard-working people in this southern corner of New England.

Driven heavily by the defense industry, this area has been hit hard by company layoffs that will put tens of thousands of employees out of work in Connecticut and Rhode Island.

The most recent jolt here came when President Bush proposed canceling the Seawolf submarine program, an action which would be a major blow to the Electric Boat shipyard here.

Last week, Electric Boat general manager Roger Tetrault announced plans to lay off as many as 4,000 employees by the end of the year.

"The decision to substantially reduce our work force was extremely difficult to make, both from a personal standpoint and a corporate standpoint," Mr. Tetrault said last week at a press conference. "But I have to tell you, there is just no other way to proceed if we are going to be a long-term, viable employer in the New England area." Leaders scrambling

Business leaders, local officials, and members of Congress here are likewise concerned about the long-term effects of the defense industry's decline and are scrambling to lessen the impact.

Last month, United Technologies Corporation, the largest employer in Connecticut, announced a cost-cutting plan that would eliminate 6,412 jobs in the state by 1995.

Such belt-tightening moves may have a devastating impact on the regional economy. Area subcontractors, suppliers, and other defense-related businesses will also feel the impact.

"There is a considerable ripple effect involved in this defense spending reduction," says Diane Disney, director of the Research Center in Business and Economics at the University of Rhode Island.

Rep. Sam Gejdenson (D) of Connecticut predicts a "one for one" job-loss ratio: For every job lost inside Electric Boat, another job will be lost outside the company, he says.

He says he is frustrated that the administration is not freeing up $50 million in job-creation funds, part of a $200 million legislative package passed by Congress to help highly impacted defense-dependent communities.

Rhode Island will be hurt as well. Electric Boat's Quonset Point plant - the state's largest manufacturing facility - employs more than 6,388 Rhode Island residents. Company layoffs will force welders, mechanics, and machinists out of jobs with no place to go, says Leonard Lardaro, an associate professor of economics at the University of Rhode Island.

"The mobility of these people must actually be less just because there aren't any alternatives in defense," Mr. Lardaro says.

Electric Boat's layoff plan was not unexpected. This Groton, Conn., subsidiary of General Dynamics said last year that it expected to lay off half its work force of 17,000 by 1996 because of cutbacks in the US Navy's submarine program.

The Navy originally conceived of a fleet of several Seawolf submarines, but the program has been incrementally scaled back. Now, the Bush administration wants to cancel the entire Seawolf program after the first one, currently near completion.

But the US representatives and senators from Connecticut and Rhode Island are fighting to retain the Seawolf program. They hope to convince Congress not to rescind funding for two previously approved Seawolfs.

Rep. Jack Reed (D) of Rhode Island says he is frustrated that the White House wants to cut the program but offers little relief. "It's a one-two punch to Rhode Island," he says. "No jobs and no help." Difficult to diversify

Defense companies, for their part, find it difficult to diversify into other markets. Some company facilities are just not suited for other types of work. In addition, it may well take years to take on new projects.

According to Mr. Tretrault, for example, it would take 200 diversification projects to replace the company's lost submarine work. He says the company is looking into the idea, but would not be specific.

"When one is getting into diversification, you're getting into somebody else's business line," he says.

State and local leaders are trying to cope as well. Connecticut has reserved $22.5 million for its defense diversification office.

Rhode Island is conducting a study to assess the state's dependence on the defense industry. But observers say both states were not prepared for the president's announcement of plans to eliminate the Seawolf program.

"There's no question from the point of view of the state, though, that the economy of this region has got to diversify," says Joseph McGee, commissioner of Connecticut's office of economic development. "There's got to be more economic base other than defense contracting. The defense business got a little fat in the '80s.... Now they're on a diet. So is the state of Connecticut."