Special Edition: Growing Metro Detroit's aerospace and defense sector
GraviKor is one of those startups that can fit in a number of different classifications. Its welding and space-frame technologies are light enough that they could be considered a green business. It's technology is meant for vehicles so it could be pigeonholed as automotive.
But GraviKor is considered a defense firm because its technology is being used to refurbish military vehicles to make them stronger, more versatile and energy-efficient.
The 4-year-old company is commercializing space-age welding technology, which is comparably strong and much lighter than traditional welding, and combining it with its space-frame technology. The technologies, spun out of a partnership between Delphi and Michigan Research Institute, combined could make a standard military Humvee as much as 50 percent lighter. The improved vehicle becomes tougher, more fuel-efficient, incurs less wear and tear and allows the vehicle to carry more armor.
GraviKor, which has offices in both Ann Arbor and Madison Heights, is currently testing its technology with two Marine Corps Humvees that were used in Afghanistan. The pilot project is deconstructing the vehicles and integrating its technology into them.
"We have stripped them down and we are building them back up," says Jim Richter, president of Gravikor.
The company's team will send them through a series of stress tests, such as simulated improvised explosive device detonations (road-side bombs commonly used in Iraq). The idea is for Gravikor to demonstrate that it's more cost effective to rebuild used Humvees with its technology while making the vehicles more effective.
"We think we can drive down the cost of manufacturing these vehicles along with their weight using this technology," Richter says.
Growing Defense Industry
Gravikor is one of many growing firms that is expanding its business through the defense and aerospace industries. Not that is a new thing for Metro Detroit.
General Motors made tanks, among many other armaments during World War II. Ford was renowned for its prolific production of the B-24 Liberator bomber. Many other automotive companies diversified to make the region the Arsenal of Democracy. Metro Detroit's economy drifted away from defense and toward more automotive work in the latter half of the 20th Century. When the automotive industry began to contract over the last decade more and more local firms set out to diversify their customer bases to bolster their bottom lines. Taking on more defense work during the War on Terror was an easy move.
Plex Systems is one of those companies. The Auburn Hills-based tech firm makes ERP software for manufacturers. It has followed many of its customers (traditionally automotive firms) into the defense and aerospace industries in recent years. This relatively new vertical now accounts for about 20 percent of the company's revenue. That has played a key role in the firm's growth, helping it hire 59 people over the last year. It now employs 290 with a sizable portion of its staff dedicated to defense and aerospace.
"This is an industry we are committed to," says Jim Shepherd, vice president of strategy for Plex Systems. "It's approximately the same size market (as automotive). We would like aerospace and defense to grow to 30 percent of our revenue over the new 3-4 years."
He adds that defense and aerospace are cyclical, like most manufacturing industries, but helps to even out the ups and downs of the automotive sector. "Over the long haul it is a very significant part of the national gross domestic product and overall economy," Shepherd says.
Defense is going through one of those down cycles at the moment. Federal budget cuts have meant billions of dollars are cut from defense. The Pentagon is cutting in excess of $40 billion from its budget from sequestration alone, according to the U.S. Dept of Defense. That short-term pain doesn't mean investment in the defense sector is a poor business strategy.
"The military has to respond to new threats everyday," says Richter, who is also president of the Michigan Research Council. "There will always be a strong pull of the Dept of Defense to new technology to respond to threats in the future."
Stephen Potter isn't just the president of Patriot Services, a homeland-security firm, but he is also a colonel in the U.S. Army. Potter and his partner, Scott Hiipakka, are both veterans of the wars in Iraq and Afghanistan.
Potter started the Commerce Township-based business with Tom Quisenberry nine years ago. Today, its team of nine people provide safety consulting and emergency preparedness services for organizations across the country, such as school districts. The company recently hired an unemployed Iraq War veteran and helped mentor him to starting his own self-defense business, Sol-Tac. Potter sees many of veterans returning from war as potential entrepreneurs.
"They are coming from an environment that is like what startups face," Potter says. "Everyone has to have each other's backs for survival."
While many of these entrepreneurial veterans will start businesses in the sectors in which they specialized in the military (cooks will start catering services, etc.) a significant percentage of them will be drawn to the defense and homeland security industries like Potter and Hiipakka. Organizations like Onward March are helping battle the veteran unemployment problem by guiding more veterans toward a career in entrepreneurship so they can help create the region's next herd of gazelle startups.
"We want to give them that infrastructure so they can get something off the ground," Potter says. "Everybody knows how hard it is to raise capital and get paying customers and launch a product."
All Photos by David Lewinski Photography