A Recipe For Corporate Success in Tough Times?

Is it possible that one of the Pentagon's contractors has a tripartite
business model for our tough economic times: one division that
specializes in crock-pots, another in adult diapers, and a third in
medium caliber tactical ammunition? Can the maker of the SaladShooter,
a hand-held electric shredder/dicer that hacks up and fires out sliced
veggies, really be a tops arms manufacturer? Could a company that
produces the Pizzazz Pizza Oven also be a merchant of death? And could
this company be a model for success in an economy heading for the
bottom?

Once upon a time, the military-industrial complex was loaded with household-name companies like General Motors,
Ford, and Dow Chemical, that produced weapons systems and what arms
expert Eric Prokosch has called, "the technology of killing." Over the
years, for economic as well as public relations reasons, many of these
firms got out of the business of creating lethal technologies, even
while remaining Department of Defense (DoD) contractors.

The military-corporate complex of today is still filled with familiar names from our consumer culture, including defense contractors
like iPod-maker Apple, cocoa giant Nestle, ketchup producer Heinz, and
chocolate bar maker Hershey, not to speak of Tyson Foods, Procter &
Gamble, and the Walt Disney Company. But while they may provide the
everyday products that allow the military to function, make war, and
carry out foreign occupations, most such civilian firms no longer
dabble in actual arms manufacture.

Whirlpool: Then and Now

Take the Whirlpool Corporation, which bills itself as "the world's
leading manufacturer and marketer of major home appliances" and boasts
annual sales of more than $19 billion to consumers in more than 170
countries. Whirlpool was recently recognized as "one of the World's Most Ethical Companies by the Ethisphere Institute." The company also professes
a "strong" belief in "ethical values" that dates back almost 100 years
to founders who believed "there is no right way to do a wrong thing."

In the middle of the last century, however -- as Prokosch has documented -- Whirlpool was engaged in what many might deem a wrong thing. In 1957, Whirlpool took over work on flechettes
-- razor-sharp darts with fins at the blunt end -- for the U.S.
military. While International Harvester, the prior Pentagon contractor
producing them, had managed to pack only 6,265 of these deadly
darts into a 90mm canister round, Whirlpool set to work figuring out a
way to cram almost 10,000 flechettes into the same delivery vehicle.
Its goal: to "improve the lethality of the canisters." (In addition,
Whirlpool also reportedly worked on "Sting Ray" -- an Army project
involving a projectile filled with flechettes coated in a
still-undisclosed chemical agent.)

In 1967, an Associated Press report noted that U.S. troops were
using new flechette artillery rounds to "spray thousands of dart-shaped
steel shafts over broad areas of the jungle or open territory" in
Vietnam. "I've seen reports of enemy soldiers actually being nailed to
trees by these things," commented one Army officer.

On a recent trip to Vietnam, I spoke to a Vietnamese witness who had
seen such "pin bullets" employed by U.S. forces many times in those
years. In one case, Bui Van Bac recalled that a woman from his village,
spotted by U.S. aircraft while she was walking in a rice paddy, was
gravely wounded by them. Local guerillas came to the woman's aid and
brought her to a hospital where a surgeon found a number of extremely
sharp, three centimeter long "pins" inside her body. Medically, it was
all but hopeless and the woman died.

A top player in lethal technologies back then, Whirlpool is now
among the tiniest defense contractors. While, in recent years, the
company has ignored requests for information from TomDispatch.com on
their dealings with the Pentagon, records indicate that last year, for
example, it received just over $105,000 from the Department of Defense,
most of which apparently went towards the purchase of kitchen
appliances and household furnishings.

Similarly, Whirlpool's predecessor in the flechette game, International
Harvester, is now Navistar International Corporation. Navistar Defense,
a division of the company,
remains one of the Pentagon's stealth "billion dollar babies."
But while it did more than $1 billion in business with the DoD last
year, Navistar appears to have been building vehicles for the Pentagon,
not creating anti-personnel weaponry. There are, however, companies
that can't seem to say goodbye to lethal technologies.

National Presto Industries

National Presto Industries traces its history to the 1905 founding
of the Northwestern Iron and Steel Works in Eau Claire, Wisconsin,
according to the Business & Company Resource Center. By 1908, the
company was making industrial steam pressure cookers and, in 1915,
began making models for home use. On the eve of the U.S. entry into
World War II, the company entered the arms game when it scored a
multi-million dollar contract to produce artillery fuses. Even with
that deal in hand, it was reportedly on the verge of bankruptcy when
its new president, Lewis Phillips, landed a series of other lucrative
military contracts.

In the early years of the Cold War, about the time Whirlpool was
getting into the flechette business, National Presto Industries had
just introduced "a revolutionary new concept in electric cooking... a
complete line of fully immersible electric cooking appliances employing
a removable heat control" -- and was about to launch "the world's first
automatic, submersible stainless steel coffee maker." The company was
also still churning out war materiel.

In
1953, National Presto announced plans to build a multi-million dollar
plant to produce 105mm artillery shells. In 1955, it was awarded
millions to make howitzer shells for the Army, and the next year,
millions from the Air Force for fighter-bomber parts. By 1958, company
President Lewis Phillips would declare, "The future of this company in
Eau Claire and hence the security of our jobs here is now almost wholly
dependent upon defense contracts awarded by the U.S. Government." When
the Army cancelled its contracts with Presto in 1959, Phillips
lamented, "With little or no notice, this Government decision has
forced us completely out of the manufacturing business here in Eau
Claire."

The tough times didn't last. Soon enough, National Presto returned
to the fray, benefiting from the disastrous American war in Vietnam.
From 1966 to 1975, the company manufactured more than two million
eight-inch howitzer shells and more than 92 million 105mm artillery
shells. In Vietnam, 105mm shells would kill or maim untold numbers of civilians,
but it was a boom time for National Presto, which took in at least $163
million in Pentagon contracts in 1970-1971 alone for artillery shell
parts. Finally shuttered in 1980, the company defense plant was kept on
government "stand-by" into the 1990s, a sweetheart deal that earned
Presto $2.5 million annually for producing nothing at all.

As the Vietnam War wound down, National Presto turned back to the
civilian market with a series of new kitchen gadgets: in 1974, the
PrestoBurger, an electric, single-serving fast broiler for hamburgers;
in 1975, the Hot Dogger; and in 1976, the Fry Baby deep fat fryer. In
1988, the company introduced its wildly popular SaladShooter, followed
in 1991 by its Tater Twister potato peeler. When sales of its
SaladShooters, corn poppers, pressure cookers, deep fryers, and
griddles became sluggish, however, weaponry again proved a savior.

In 2001, National Presto decided to get back into the arms game. Months
before 9/11, the company's chairman Melvin Cohen expressed fears that a
future war might mean ruin for the company's kitchen appliance
business. As a result, Presto purchased munitions manufacturer Amtec.
In the years since, according to Securities and Exchange Commission filings, Presto has also "made other complementary acquisitions in the defense industry." These have included Amron, a manufacturer of medium caliber ammunition (20-40mm) cartridge cases and Spectra Technologies,
which is "engaged in the manufacture, distribution, and delivery of
munitions and ordnance-related products for the DOD and DOD prime
contractors." Such types of ammunition are extremely versatile and are
fired from ground vehicles, naval ships, and various types of aircraft
-- both helicopters and fixed-wing models.

Additionally, in the months after 9/11, National Presto entered the
diapers trade, setting up that business in its old munitions plant. In
2004, with Melvin Cohen's daughter MaryJo now at the helm, the company
further expanded into the business of adult-incontinence products. "I
spent a couple of days wearing them," the younger Cohen told the Milwaukee Journal Sentinel at the time. "They're very comfortable."

In 2005, Presto's Amtec was awarded a five-year deal by the Pentagon for its 40mm family
of ammunition rounds. By the end of last year, it had already received
$454 million and was expecting the sum to top out, at contract's end,
above $550 million.

Just as 105mm shells of the sort produced by Presto were a nightmare
for the people of Vietnam, so too has 40mm ammunition spelled doom for
civilians in Iraq and Afghanistan. Earlier this year, the BBC reported
on a typical joint U.S./U.K. attack on a home in Iraq in which
insurgents had taken shelter. After exchanging ground fire, coalition
forces called in an airstrike. According to the BBC,
"The aircraft fired 40mm cannon rounds at the two houses, finally
dropping a bomb on one of them. It collapsed. The other house was set
on fire. The two insurgents in the house were buried but so were a
number of women and children." Similarly, in August, news reports tell
us, U.S. troops called in an airstrike by an AC-130 -- which packs 40mm
cannons -- that helped kill approximately 90 civilians in the village
of Azizabad in Afghanistan, according to investigations by the Afghan government and the United Nations.

As in the past, war time has been a boom-time for Presto. In 2000,
before the start of the Global War on Terror, National Presto's annual
sales clocked in at $116.6 million. In 2007, they totaled $420.7
million, with more than 50% of that coming from arms manufacturing.
Earlier this year, Presto nabbed another 40mm ammunition contract
(a $97.5 million supplemental award) set to be delivered in 2009 and
2010. According to official DoD figures, from 2001 through 2008
National Presto received more than $531 million, while Amtec has taken
home another $171 million-plus. Their combined grand total, while
hardly putting Presto in the top tier of Pentagon weapons contractors,
is still a relatively staggering $702.8 million -- not bad for a
company known for slicing and dicing vegetables.

Death is Our Business and Business is Good

These days, most civilian defense contractors aren't like Presto. General Tire and Rubber Company,
for example, once lorded it over a business empire that produced not
only car tires, but antipersonnel mines and deadly cluster bombs.
Today, the company seems to have left its days of supplying the U.S.
military with lethal technologies behind.

Dow Chemical classically drew ire from protestors during the Vietnam
War for making the incendiary agent napalm that clung to and burned off
the flesh of Vietnamese
victims. Dow got out of the napalm business long before the war ended, but, due to widespread protests at the time, the company is still living down the legacy today.

At a 2006 Ethics and Compliance Conference, Dow's President, CEO,
and Chairman Andrew Liveris recalled, "Believe me, we have had our
share of ethical challenges, most of them very public... starting with
the manufacture of Napalm during the Vietnam War... when suddenly we went
from being a company that made Saran Wrap to keep food fresh to a kind
of war machine... at least, according the characterizations of the time."
While Dow is still a defense contractor, its DoD contracts appear not
to include the manufacture of weapons of any type. Instead, such
companies have largely ceded the field to dedicated "merchants of
death" -- weapons-industry giants like Alliant Techsystems (ATK), Lockheed Martin, and Boeing.

Right now, National Presto Industries may look like a throw-back to an
earlier era when companies regularly made both innocuous household
items and heavy weapons. In a new hard-times economy, however, in which
taxpayer dollars are likely to continue to pour into the Pentagon,
could it instead be a harbinger of the future? Having proved that
outfitting real shooters is even more lucrative than making
SaladShooters, Presto has gotten rich in the Bush war years. It has, in
fact, greatly outperformed the big guns of the weapons business. While
the stocks of top defense contractors Lockheed Martin, Boeing, and
Northrop Grumman have all lost significant value in the last year --
down 29.3%, 55.3%, and 50.1%, respectively -- National Presto's stock
price was up 28.1% as of mid-December.

It isn't hard to imagine more civilian firms, especially ones which are
already Pentagon contractors, getting into (or back into) the weapons
game. After all, when the Big Three Detroit automakers were scrounging
around for a bailout just a few weeks ago, they used America's
persistent involvement in armed conflict as one argument in their
favor. For example, Robert Nardelli, Chrysler's chief executive, told the Senate
that the failure of the auto industry "would undermine our nation's
ability to respond to military challenges and would threaten our
national security." While that argument was roundly dismissed by
retired Army Lt. Gen. John Caldwell, chairman of the National Defense
Industrial Association's combat vehicles division, it probably wouldn't
have been if the automakers made more weapons systems.

Will Presto be the back-to-the-future model for Pentagon contractors in
the lean times ahead? Only time will tell. At the very least, it seems
that, as long as Americans allow the country to wage wars abroad,
require their salads to be shot, and have bladder issues, National
Presto Industries has a future.