Two decades after federal cutbacks led to the shutdown of the Navy base, a longtime business on the former military installation finds itself in a similar predicament.
The fallout is pretty much the same, at least for now.
The owner of Charleston Marine Containers Inc. announced about 10 days ago that it will be closing the North Charleston site over the next two months, blaming a slowdown in government orders. It hopes to reopen the plant and rehire the 86 employees, from welders to engineers, once business rebounds.
It’s an unfortunate turn for a company that has earned an obscure footnote in local military archives. In 1996, CMCI became the first private-sector employer to ink a long-term lease — and put workers back to work — on the grounds of the newly shuttered Charleston Naval Base & Shipyard.
The manufacturer was formed as a subsidiary of a Bermuda-based shipping business that also invested in the Charleston Place hotel around the same time.
The startup didn’t start out chasing federal government work. It was supposed to make standard metal cargo containers for the maritime industry. But low-cost competition from China quickly torpedoed that plan.
So CMCI focused its technical know-how on military work and hit a niche.
Its products have included two-door heavy-duty steel boxes that can be interlocked to form a conventional cargo container and transported by truck, plane, ship or rail car. When broken down, the smaller individual units can be deployed to war zones and dispersed to remote areas by smaller ground vehicles or helicopters.
Demand for the containers took off as U.S. troops went into Iraq and Afghanistan after 2001.
Since then, CMCI’s business shifted to blast-resistant portable shelters that protect personnel and equipment stationed at embassies and consulates in the world’s hot spots.
But as Tom Mills tells it, the once-steady flow of orders from the U.S. State Department came to a halt last year without much explanation, even though he said he’s been told by government officials that there’s demand.
“They just stopped buying,” said Mills, president of the division that oversees CMCI for parent company Kratos Defense & Security Solutions.
He said he’s met with lawmakers and Pentagon officials to try to loosen the logjam.
“There’s a need out there, and maybe not so much money,” Mills said Monday.
He also noted that CMCI and its San Diego-based owner probably aren’t high on the Capitol Hill pecking order.
“We’re a small company,” Mills said. “We’re not building F-35s, and we’re not building big ships that keep thousands of people employed.”
Kratos acquired the local business in 2010, making it part of its modular systems division. It kept the North Charleston operation going as long as it could, as decisions on contracts CMCI had bid on were pushed back month after month, Mills said.
“So we had to do what we needed to do so that we stay viable,” he said of the decision to halt production.
Kratos, which is publicly traded, alluded to the decline in business in November, when it reported results for its fiscal third quarter. Revenue for that period was off by $29.1 million from a year earlier. One of the major culprits was an $11.3 million hit triggered by “the delay of anticipated awards for hardened critical infrastructure shelters” produced by CMCI’s division, according to a filing with the U.S. Securities and Exchange Commission.
Kratos CEO Eric DeMarco announced the plant closing a week ago Friday, calling the decision “extremely difficult.”
DeMarco also said the company will hang onto its 250,000-square-foot building on Noisette Boulevard for “when certain programs Kratos has previously been working under are turned back on, and certain new opportunities come to fruition.”
Mill said he’s optimistic that will happen.
“We generally expect to be able to open the plant again, hopefully within the next 12 months,” he said.
Mills, who is based in Pennsylvania, noted that he recently bought a home in Charleston and is keeping his local office. Also, certain key personnel at CMCI are being retained.
“We’re not selling any equipment. We need the equipment. We’re not getting rid of the plant. We need the plant,” Mills said.
Contact John McDermott at 843-937-5572.