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How $1T budget deal will affect LI defense contractors

The new $1.01 trillion budget deal, Anne Shybunko-Moore,

The new $1.01 trillion budget deal, Anne Shybunko-Moore, president of defense contractor GSE Dynamics in Hauppauge, says how the defense funds are distributed could stall Long Island production lines. (Oct. 6, 2011) Photo Credit: Ed Betz

The U.S. Senate on Wednesday passed a $1.01-trillion budget deal that restores some sequester cuts, but defense industry insiders say the plan's impact on Long Island will hinge on precisely how the funding pie is sliced.

Many Long Island aerospace contractors focus on producing parts for legacy aircraft, said Anne D. Shybunko-Moore, president of Hauppauge-based GSE Dynamics Inc., and decisions by Department of Defense logistics administrators to slash or delay those programs could stall production lines.

"That's of direct concern for some of the local companies," she said.

The bipartisan deal, passed in the Senate by a vote of 64-36, restores $22.4 billion of the automatic sequester cuts to the Defense Department budget for 2014. The legislation, approved by the House last week, allocates $552.2 billion for the fiscal year's regular Pentagon budget and an additional $80.7 billion for overseas conflicts.

William Wahlig, executive director of Long Island Forum for Technology, a business advocacy group, said the budget deal is unlikely to have short-term consequences given the glacial pace of the military spending process, which can stretch a year or two.

"The budget change is not going to have an immediate and visible impact to businesses on Long Island," he said. "It takes a long process to ripple through prime contracts, whether it's aircraft or other weapons systems. Then they have to subcontract to companies on Long Island."

Still, Vincent Palazzolo, chief financial officer of CPI Aerostructures Inc., an Edgewood-based maker of parts and assemblies for the A-10 Warthog jet, Black Hawk helicopter and other aircraft, said removal of the sequester barriers could "open up some opportunities we were told were in the pipeline for us."

Though Grumman produced jet fighters and the Apollo lunar module on Long Island during the 1960s and '70s, today the region is dotted with scores of subcontractors that make assemblies and subassemblies for prime contractors such as Boeing Co., Lockheed Martin Corp. and the merged Northrop Grumman Corp.

"The primes get R&D to do new work," Wahlig said. "Typically, contractors on Long Island receive production contracts. It could take a year or two before that ripples through the procurement cycle."

With wire service reports

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