Defense spending cuts could hurt businesses, military in East Te

Defense spending cuts could hurt businesses, military in East Tennessee

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At the headquarters of Aqua-Chem in East Knoxville, workers manufacture water purification systems. At the headquarters of Aqua-Chem in East Knoxville, workers manufacture water purification systems.

By MIKE KRAFCIK
6 News Reporter

KNOXVILLE (WATE) - The countdown continues to automatic federal spending cuts set to take effect on Friday.  

Some $500 billion would be coming out of the defense budget, and that's another way this budget battle would hit East Tennessee, because local companies and communities rely on that spending.

Companies that rely on government contracts could certainly be impacted, as well as other functions of defense in East Tennessee.

At the headquarters of Aqua-Chem in East Knoxville, workers manufacture water purification systems.

The company builds water purification units for a variety of applications ranging from bottled water found in stores to large desalination and purification systems for off-shore oil platforms, luxury liners, tankers and for all branches of the military.

Defense contracts comprise about 35 percent of Aqua-Chem's revenue. Aqua-Chem President and CEO David Gensterblum says automatic spending cuts for defense will hurt what has been a growing business.

"We see this as a potential magnitude of $12 million over the course over the 12-18 months," said Gensterblum.  

Dave Patterson, executive director of the UT National Defense Business Institute, says companies like Aqua-Chem are the ones that could be hurt the most.   

"The small companies that live hand to mouth, month to month, will be the hardest hit," Patterson said.  

Patterson said a 13 percent cut in defense programs for the remainder of this fiscal year would hurt the Tennessee Air National Guard base and the Marine Corps Reserve Center, both located in Knoxville.

"In terms of Tennessee, that's where you'll see the biggest impact as in base operating support for the various reserve and guard bases," Patterson said.  

Patterson says the average person in Tennessee won't necessarily the feel the spending cuts, at least right away.

Aqua-Chem, which has 182 employees in Knoxville, doesn't anticipate having to reduce its workforce because of defense spending cuts.  

"We think we should be able to retain the workforce we currently have. Unfortunately it's hurting some of our momentum we've started 2013 with," said Gensterblum.  

President Barack Obama is set to hold a meeting with bipartisan leaders Friday. The cuts would take effect that night at midnight.  

An ABC News/Washington Post poll out Wednesday finds most Americans disapprove of the way both Republicans and the president are handling federal spending.

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