Chicago and the Municipal-Industrial Complex

[xchrom]

http://www.thenation.com/blog/177594/chicago-and-municipal-industrial-complex


On Tuesday I quoted Chicago anti-privatization activist Tom Tresser about why corporate America is falling in love with cities: "We have a massive global movement of capital which, because they've burned their own fucking houses down through their own greed, don't have the gilt returns that they're used to receiving.... So the new guaranteed annual returns that big business and big capital are looking for is our assets."

Consider the very model of the modern major municipal contractor: Cubic. Trading on the NASDEQ with a market capitalization of almost a billion dollars under the adorable stock symbol CUB, Cubic earns over 99 percent of its revenues from government contracts, according to a Credit Suisse equity research report. When they're not mismanaging urban fare-transit collection systems like Chicago's Ventra they do a once-pretty trade as "the leading pure-play provider of [the] defense training and mission support service areas which stand at the heart of modern military practices." But, as we'll see, defense isn't offering the gilt-edged returns it once did. So look for Chicago's very stupid smart cards to come soon to a city bus near you. Look, in other words, for Cubic to be picking your pocket, too.

Cubic was founded in 1951 in a San Diego storefront as a modest electronics company specializing in precision distance measuring equipment. In 1966 they developed the first electronic stadium scoreboard. Then they gained worldwide recognition for the first satellite-based surveying system—expertise that turned out to be useful for getting their foot into the door where the real money was: defense. Tracking systems for military aircraft. Measurement apparatuses for missile ranges. "These core technologies," Credit Suisse's analysts explain, "led to the development of combat training instrument displays." By 1973 they'd created the "world's first Top Gun ACMI system for the Marine Corps Air Station at Yuma, Arizona," whatever that is; "Later, Cubic pioneered the world's first turnkey gorund combat/instrumentaiton system at Hohenfels, Germany. The same technoglozies were incorporated into Cubic's bradocast data links and comabt personnel recovery system, which were used sucessfully during Operaiton Desert Storm and in peacekeeping operations in Bosnia." Their "best known products" now, according to a J.P. Morgan report, "are laser engagement simulation kits (e.g. MILES), used to conduct realistic war games... communications products, such as data links, power amplifiers, avionics systems, multi-band communications tracking deveice, and cross-domain hardware solutions for mutli-level security requiremnts." Their subsidiary NEK Special Programs Group, LLC "[o]ffers special training services in the areas of combat marksmanship, close quarter battle, sniper and survival training, tactical evasion driving, tactical life saving, military freefall and winter warfare, mountaineering operations, and medical training and services.... Cubic supports three of the four U.S. combat training centers as a prime contractor (e.g. Joint Readiness Training Center at Fort Polk), and serves as a subconractor on the fourth."

Which used to be a damned reliable customer base. But listen to the advice of the analysts at the House of Morgan: "The threat of sequestration continues to hang over defense segment funding, and we think Mission Support will be under pressure owing to DoD srutiny of contractor sources." They predict "flattish growth for these businesses."