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Business of battle

• Conflict actively involves, or directly affects, local companies

As the curtain goes up on Operation Iraqi Freedom, some local companies are playing riveting, if minor, walk-on roles.

Others, particularly those in travel-related businesses, are struggling to cope with the fallout from grim advance reviews.

Less than 2 percent of Oregon's economy is directly tied to military contracts, estimates Tom Potiowsky, the Oregon state economist.

One of the more prominent bit players is HemCon Inc., a startup company in Tigard producing a revolutionary kind of bandage designed to keep wounded soldiers from bleeding to death.

The company will ship at least 27,000 of its bandages to the U.S. Army in the next several weeks for use in Iraq, said Jim Hensel, HemCon president and chief executive officer.

The company's 15 employees are working feverishly at its plant on Southwest Cascade Avenue near Washington Square, Hensel said. The company will ship up to 1,000 of the bandages each week until the Army's order is filled, he said.

HemCon, which started up in November, sent 400 of the hemorrhage-control bandages to Army officials Ñ and five to President Bush Ñ last week. Another 500 went out this week.

The bandages are made from chitosan, a substance found in shrimp shells that causes blood to clot quickly, allowing wounded soldiers to be stabilized and moved. They were invented at Portland's Oregon Medical Laser Center, headed by Dr. Kenton Gregory, a HemCon founder and partner.

'We think this product will substantially lower blood loss, which is the single largest cause of death on the battlefield,' Hensel said.

The Pentagon, which has awarded the laser center nearly $10 million to develop the new wound treatments, contributed about a third of HemCon's $2 million in startup costs, he said.

The bandages, which sell for $130 apiece, are a vast improvement over the compression bandages now in use, which 'was the same standard of care used by a Civil War medic,' Hensel said.

Other local companies are engaged in the war effort in varying degrees.

Evergreen International Airlines Inc. is flying between 90 and 100 tons of military cargo in its Boeing 747s to Kuwait, according to e-mails to charter customers. The McMinnville-based company has stepped up its flights in the last month, from three trips in February to daily trips in March.

Evergreen has a charter sales team in London that handles its Middle East flights. But the company's sales director, Blair Berselli, declined to elaborate

further on the company's Middle East business.

Portland-based Precision Castparts Corp. makes parts for a half-dozen fighter planes, including the F-15, one of the military's workhorses, and F/A-18E/F, both produced by Boeing Corp.; the F-16, a Lockheed Martin Corp. product; and Lockheed's controversial new stealth fighter, the F-22 Raptor.

The Pentagon is increasing its complement of F-22s in 2004, from 13 to 23, and Precision will be providing $4 million in aircraft and engine parts for each one. The parts include structural and airfoil castings, forgings and landing gears.

Precision produces parts for commercial jet engines, gas turbines and industrial metalworking tools. It has an eight-year, $130 million contract to supply BAE Systems with large titanium castings for its production of the XM777 lightweight howitzer gun system. It's the first artillery system to use titanium parts.

Two gun sets Ñ for the Army and Marines Ñ have been delivered so far. Production will ramp up to 13 gun sets a month in 2006.

'These are long-term contracts that have been ongoing,' said Dwight Weber, a spokesman for Precision. 'It's not just because of the war effort. We just happen to be involved in military production. We have nothing to do with an Iraqi conflict. I don't know any industry making a short-term profit from this.'

Oregon Steel Mills Inc. has been making armor plates for tanks being built for a U.S. ally in the Middle East Ñ company officials declined to identify the country for fear of being targeted by extremists. The company sent between 3,000 and 5,000 tons of the plates last year.

'We are one of the few defense plate producers,' said Vicki Tagliafico, Oregon Steel's vice president. 'Depending on how long it lasts, I don't think we expect to get a lot of work out of this.'

The only other manufacturer of armor plates is Pennsylvania-based Bethlehem Lukens.

Oregon Steel produced armor plate for manufacturers of armored vehicles and tanks for the Army during the Persian Gulf War as well as steel used in the production of shell casings.

In on the mission

High-flying Flir Systems Inc. has gotten several financial shots in the arm since the war on terrorism began.

'Over the last three or four quarters, we've sold equipment that will certainly be used in this mission,' said Andy Teich, Flir's vice president of marketing.

That includes its so-called Brite Star Laser Designation system, a high-end thermal imaging system that is being deployed by the Marines in Afghanistan, perhaps in the search for Osama bin Laden.

Flir also offers several ground-based, handheld imaging products used during reconnaissance missions.

The Air Force is using Flir's tactical automated security system, with which it sets up infrared sensors around remote air bases to detect any penetration of the base's perimeters. And the Navy is using Flir's expertise in a $20 million modification of its Navigational Thermal Imaging System. The work includes failure analysis, repair and engineering services.

And Atlanta-based VistaScape Technology Corp. recently agreed to integrate Flir's thermal imaging technology into its security data management system for 'object detection' to be used in homeland security and counterterrorism efforts.

Still, Teich isn't anticipating any surge in business because of the Iraqi conflict:

'Whatever they need, they already have. But they may need replacements. And if something does well, maybe we're more widely depended on in the future.'

Travel ups and downs

War jitters Ñ as well as concerns about a virulent strain of pneumonia that apparently originated in China Ñ are spooking the travel industry, however.

'There's a slightly elevated sense of panic out there,' said Bill Harmon, vice president of retail travel for Azumano Travel, Oregon's biggest travel agency. 'It's not extreme by any means; in fact, we are still having people today calling in new bookings to Europe in the next 30 days, both leisure and corporate.

'I don't know that the effect (of war) has really sunk in yet,' he said.

In the last 30 days, he said, 'we've seen a falloff in demand for international travel. It wasn't really as significant as we had really anticipated.'

There have been some cancellations by Asian groups who intended to come here in April. 'I think there is the unfortunate perception in some countries that the U.S. is not a safe place to be,' he said.

But Harmon said he thought that last weekend's World Health Organization alert on the spread of an unidentified pneumonic disease, rather than impending war, prompted a spate of cancellations from Asia-bound travelers Ñ as well as calls from people who are in Asia and want to come home sooner than planned.

The airlines, for their part, have announced liberal new 'comfort zone' policies permitting travelers to change bookings without forcing them to pay the usual penalties. One of them is Lufthansa German Airlines, which still plans to inaugurate its ballyhooed direct service between Frankfurt and Portland on March 31.

'Literally thousands' of people took advantage of Lufthansa's discounted introductory fare and booked flights from Portland to Frankfurt in April and May, Harmon said.

At this point, there hasn't been a surge of cancellations. 'There's lots of hope that this will be short and quick,' Harmon said.

A spokesman for Lufthansa said the airline is proceeding with its plans for direct Frankfurt-Portland service. 'At the moment, we don't expect any changes,' he said.

Alaska Airlines and Horizon Air customers also can postpone travel without incurring standard charge fees in the event of 'military action or a Level Red Alert.'

'We would expect a significant drop' in air travelers, Alaska spokesman Jack Walsh said. Alaska is the largest carrier at Portland International Airport. 'We have set up many different contingencies for different scenarios,' he said.

Gregg Fawkes, president of Max-Viz Inc., a local avionics company that sells its products to commercial and small plane operators, says he's worried about the war's longer-term effects on tourism, which would squarely hit his customers.

'It could have a big impact on the airline industry because many of them are already teetering on the financial brink,' he said. If this has the same effect that the 1991 Gulf War had, 'it could be disastrous for a few of them,' he said.

Homeland casualties

Hotels, which have seen sharp ups and downs since 9-11, are facing another rocky period.

Albert Gentner, owner of Portland's venerable Mallory Hotel, said he's seen a slowing of reservations, 'but I'm not sure how much of that is attributable to the war and how much is attributable to the general economy malaise.'

The first Gulf War, he said, didn't have much of an impact, 'but there wasn't all the saber rattling that's going on now.'

The ongoing slump in airline travel hasn't hurt the Mallory as much as some Portland hotels, he said, because the hotel serves a more regional market and has a high percentage of customers who come in by automobile or train.

'We're down, but we're not down, I think, any more than anyone else,' Gentner said. 'We're probably holding on maybe a little better than some.'

Barring 'some kind of outbreak of terrorism,' Gentner said he expects business will get better when the war is over Ñ if it's over quickly.

The war buildup also may have postponed the employment hopes of a rather sizable knot of semiconductor industry workers.

Chandler, Ariz.-based Microchip Technology, which makes the microcontroller chips embedded in a wide range of everyday products from dishwashers to microwaves, said this week that, partly because of the situation in Iraq, it will delay the full opening of its Gresham plant.

Microchip acquired the former Fujitsu plant early last year and had hoped to open it as a fully staffed chip making facility in July. Instead, the date has been pushed to October.

'The uncertainty of the looming war is one of the factors in this, but we don't see it as being delayed much longer than the fall,' said Microchip spokesman Paul Loughran.

ÊSo far, the company has hired nearly 100 workers, two-thirds of them former Fujitsu employees. Another 100 workers were expected to be hired by the end of the year.

Oregon Freeze Dry Inc., the biggest company of its kind in the country and one of Oregon's leading bit players in the first Gulf War, has been frozen out this time Ñ largely because of new technology.

The 40-year-old Albany company sold 'a huge quantity' of freeze-dried food to the military 12 years ago, said Herb Aschkenasy, its president. That gave it 'an undeserved reputation for being military contractors,' he said.

These days, with so-called MREs (meals ready to eat), 'the military eats a lot of stuff that isn't freeze dry,' he said. 'I think our stuff is much better.'

The company still sells the military some special rations, including cold weather rations. But those are not likely to be headed for Iraq.

Contact Mary Bellotti at This email address is being protected from spambots. You need JavaScript enabled to view it. ; Kristina Brenneman at kbrenneman @portlandtribune.com; Andy Giegerich at This email address is being protected from spambots. You need JavaScript enabled to view it. ; and Jeanie Senior at This email address is being protected from spambots. You need JavaScript enabled to view it.