A Michigan-based defense contractor says the recent government shutdown and longstanding sequester were two factors in its immediate closure earlier this week.But the 40-year-old company had struggled over the past couple of years before those government cutbacks took place.
GMA Cover Corp., a veteran-owned small business in Port Huron that provided camouflage cover systems for military applications, closed suddenly after failing to find new financing or a buyer. GMA’s product line included sun shades, camouflage, soft-top vehicle covers, shelters and parachutes.
“Poor market conditions and the recent government actions, including the extended government shutdown and the sequester, have caused the company to no longer be a viable entity,” read a Tuesday letter from the company to employees.
GMA is believed to be the first Michigan company to close that has cited the government shutdown and sequester as reasons, based on a search of a statewide layoff database.
Brian Hodges, president and CEO of GMA, did not respond to requests seeking comment. Repeated calls to the company’s headquarters went unanswered Thursday.
Congress earlier this year failed to act before March 1 to avert $85 billion in automatic, across-the-board budget cuts known as sequestration, which in Michigan resulted in the furloughing of thousands of defense workers. Under the sequester plan, the Department of Defense budget was reduced $37 billion for the remainder of the year.
At one point, the sequester caused 8,700 Michigan defense workers to take furlough time, including more than 7,000 at the Army’s Detroit Arsenal and Tank Automotive Command, or TACOM, in Warren. Another 750 employees at the Selfridge Air National Guard Base in Harrison Township also were furloughed.
A 16-day government shutdown this month temporarily halted funding; furlough notices were again sent to TACOM and Selfridge. The ensuing maneuver to end the shutdown did not address sequester cuts put in place under the 2011 Budget Control Act that calls for more than $1 trillion in spending cuts between defense and non-defense programs over 10 years.
Stephen Spurr, legal expert and interim chairman of the Department of Economics at Wayne State University, said in a telephone interview it is difficult to pinpoint whether the sequester or government shutdown is truly to blame for a company’s demise.
“They could have been on the brink anyway, for reasons of inefficiencies or they couldn’t perform under the contract at the cost they thought they could,” Spurr said.
According to the Tuesday memo to employees, GMA was “within days of being liquidated” two years ago, but found an investor that pumped “millions of dollars” into the company.
News of GMA’s closure caused a quick response from the Michigan Democratic Party.
“Republican politicians should be ashamed,” Lon Johnson, party chairman, said in an email. “While Democratic leaders are focused on creating jobs and building an economy that works for middle-class families, the Republican obsession with taking health care away from millions of people is threatening the economic recovery.”
The Michigan Republican Party did not respond to a phone call seeking comment.
The GMA letter said all employees were laid off, though it did not indicate how many workers were employed. Hodges told The Detroit News last year that 150 to 175 employees worked at GMA.
Those were the workers left after GMA was forced to lay off about 155 workers and close one of its manufacturing sites in June 2012 because of a lack of secured federal contracts.
Earlier this year, GMA closed a second facility and was in danger of having a 12-year tax exemption for $145,941 pulled by the Port Huron City Council, according to a report in The (Port Huron) Times Herald.