Light During Wartime

Oregon missed the 9/11-industrial train, but one local defense contractor has thrived.

WE SEE YOU: The modified Huey helicopter in this U.S. Navy photo features a FLIR Systems BriteStar thermal-imaging system—it's the pod mounted under the nose. While commercial night-vision technology works by detecting ambient light, FLIR's technology visualizes heat, providing a tactical advantage.

Since 2001, the U.S. government has spent $8 trillion on defense and homeland security, but that largesse has resulted in few local jobs.

Oregon receives roughly one-fifth the national average in per-capita military spending, according to the Portland-based Pacific Northwest Defense Coalition. And Portlanders keep electing one of the members of Congress willing to vote against the Pentagon budget, Rep. Earl Blumenauer (D-Portland). 

"Oregon prides itself on not having that type of an economy," former two-term Gov. Ted Kulongoski told WW in a Jan. 4 exit interview.

Kulongoski, himself a Marine, said that traditional reluctance to participate in the "recession-proof" military sector is beginning to change, as suburban tech companies land more contract work on aerial drones.

One large but low-profile local company has already learned to thrive in the "war on terror": FLIR Systems of Wilsonville appears to be the state's greatest financial beneficiary of post-9/11 war spending.

To arrive at that determination, WW reviewed tens of thousands of Department of Defense, Homeland Security and Veterans Affairs contracts with Oregon companies signed between summer 2001 and 2011.

FLIR, the eighth-largest publicly traded company in Oregon, has received more than $1 billion in defense and security contracts since 9/11. FLIR claims roughly $12 of every $100 of those contracts in Oregon. 

The company's name is an acronym for "forward-looking infrared," which is one type of the advanced imaging systems it designs and manufactures. Such systems are critical to modern military and police forces because they allow users to see targets in the dark, at great distances, and through concealment and camouflage. FLIR's corporate headquarters are in Oregon, but it has sales offices in more than 100 countries, and manufacturing sites in four states, France and Sweden.

Since 9/11, its revenues have increased sixfold, to $1.4 billion last year. As impressive as that may be, consider FLIR's profitability: from a $29 million loss in 2000 to a $56 million profit last year. 

Chairman and CEO Earl Ray Lewis III this year signed a contract that sets his base salary at $875,000 next year, several times what he made when he joined the company before 9/11. Forbes magazine says Lewis' compensation last year totaled $5.4 million.

Late last month, blaming uncertainty around the military budget, FLIR announced it would lay off 40 workers in Wilsonville—one-tenth of its workforce in the state. Then last week, FLIR won a three-year, $52 million U.S. Navy contract for the Star SAFIRE thermal-imaging systems it manufactures in Wilsonville.

Shane Harrison, FLIR's director of corporate strategy and investor relations, says civilian products are increasingly important to the company. "We don't consider ourselves a defense contractor," Harrison says. He then asked for his comments to be retroactively taken off the record, citing a company policy of not speaking to the press.

The U.S. military is a key FLIR customer, but nearly half of FLIR's business is abroad, according to federal filings. "Building a presence in new international markets has been successful, most recently in regions of the Middle East," says the company's last annual report.

In May, the Pentagon notified Congress of its plan to sell $330 million worth of night-vision equipment to the government of Saudi Arabia, including 200 night-vision sniper scopes made at FLIR's Boston facility. The sale came two months after Saudi forces had helped the government of Bahrain squelch street protests. There were reports of deadly night raids on protesters by riot police; some demonstrators claimed they were fired on by helicopters and snipers.

There's no evidence that FLIR equipment has or will be used in such cases to put down pro-democracy protests. But clearly not every foreign military that purchases FLIR technology has a sparkling reputation. One recent order bound for Pakistan—"a familiar customer," a FLIR executive said in a conference call this year—was held up by a U.S. review of export licenses to that country following the discovery of Osama bin Laden there.

"We sometimes will try to control [military] items as an exercise in political symbolism, but for a country like Saudi Arabia, this kind of item has no impact whatsoever on its ability to deal with popular unrest," says Anthony Cordesman, a defense expert at the Center for Security and International Studies in Washington, D.C. "If you don't give [foreign military allies] CS gas or rubber bullets, they use real bullets. The whole idea that somehow you can inhibit the ability of a sophisticated armed force to deal with crowds…while it's well-meaning, simply ignores how easy it is to substitute one form of equipment for another."

Other experts disagree. Chris Hellman, a researcher at the National Priorities Project in Massachusetts, says: "It's not even a question that [the night-vision gear] could be used for internal security."

WWeek 2015

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