Heavy metal: declining commercial orders could have crushed Brek Manufacturing, but a shift to military aircraft has strengthened the metal fabrication firm. (Small Business).

WITHIN six months of the Sept. 11, 2001 terrorist attacks, the portion of Brek Manufacturing Co.'s business coming from the commercial airline industry was slashed in half, to 25 percent.

The Gardena-based operation could easily have become another victim of consolidation.

Instead, Brek leveraged a different industry trend-a rapidly increasing defense budget -- to transform itself into one of the region's most visible parts suppliers for military aircraft.

Brek has invested $12.1 million for five state-of-the-art metal cutting machines, including two $3 million models, called gantry mills, that help it conform to the Pentagon's make-it-better-for-less-money procurement philosophy.

The result: While revenues fell by nearly $2 million last year, to $23.2 million, this year they are projected to top $27 million.

Instead of laying people off, the company is hiring. By summer, Brek plans to add 42,000 square feet of manufacturing space near its existing 76,000-square-foot operation. The employee count is projected to reach 100 by the end of this year, said Gene Price, the company's owner -- up from 80 at the end of 2001.

"If we continue to improve the process, continue to perform and keep up to date with the latest manufacturing techniques, we'll succeed," Price said.

Brek uses aluminum and titanium to make bulkheads, frames, beams and other parts for planes' fuselages and wings. One of its major contracts is for single-piece large aluminum bulkheads -- made three at a time on a single machine -- for Boeing Co.'s C-17 Globemaster m cargo plane. Before Brek landed the contract in 1999, as many as 15 suppliers made the parts, which were riveted and bolted together.

Cost tradeoff

Boeing had to slash its cost per plane to $154 million from $198 million, to entice the Air Force last year to purchase 60 more planes on top of the 120 that will be delivered through 2004. Brek's share of each plane's revenue, about $950,000 per plane, will stay the same.

Boeing wanted to sell more airplanes, but that was only possible by getting costs down, Price said. The strategy helped generate more business overall.

"Our priorities are quality, schedule and cost -- in that order," said Chuck Agne, procurement director for Boeing's Long Beach-based Integrated Defense Systems sector, where the C-17 is made.

Brek has gotten larger and larger pieces of work from Boeing, Agne said -- at a time when competitors are starved for work. Later this month, Price will fly to Seattle to accept an award as Boeing's supplier of the year for outside manufacturing of parts and assemblies.

"There are people who have been cutting machine parts the same way they were doing it 10 years ago. They're already out of business and they just don't know it yet," Price said.

The company was formed in 1968 as a small machine parts maker for Northrop Aircraft's Hawthorne-based F-5 fighter jet and T-38 training aircraft programs. Price, who was hired as a shop manager in 1981, said he was "basically running the company" when its founder, Gene Clark, decided to sell out in 1986.

Price couldn't pay the $1.5 million asking price, so Clark offered immediate ownership if he agreed to pay off the purchase price within five years. Price beat the deadline by six months, he says, even as he expanded Brek's operations.

New vistas

Brek still works for Northrop Grumman Corp., which is the primary subcontractor on Boeing's F/A-18 Super Hornet jet fighter, but the company has been looking for other military projects. It will make large bulkheads for Lockheed Martin Corp.'s F-15 Joint Strike Fighter, with full production on the 3,000-plane program scheduled to begin until 2008.

The company also wants to land work converting 100 Boeing 767 commercial jets into military tankers. The Pentagon is counting on the 767s to replace its aging fleet of KC-135 and KC-10s, made originally by Boeing and McDonnell Douglas (now a Boeing unit), respectively.

The $11.5 million annually that Brek generates on C-17 work comes at a time when revenues from its major commercial project, Boeing's 737 commercial jet, fell more than 40 percent over the past two years, to $5.8 million.

On the commercial side, Brek is pursuing Boeing's chief competitor, France-based Airbus Industrie, to gain additional work providing structural parts to its commercial aircraft. Entering the European market, however, might prove to be Brek's biggest challenge yet.

"Airbus is going to be tough to crack," said Peter Arment, vice president of JSA Research Inc., a Newport, R.I. defense analyst firm. "Machining is a very localized business that generally supports manufacturers in the region. (Brek) will have to distinguish itself by being cost competitive and offering enhanced capabilities."

RELATED ARTICLE: PROFILE

Brek Manufacturing Co.

Year Founded: 1968

Core Business: Machine parts for military and commercial aircraft

Revenues in 2001: $25.1 million

Revenues in 2002: $23.2 million

Employees in 2001: 80

Employees in 2002: 88

Goal: To enter the European market as a means of diversifying commercial aircraft customer base.

Driving Force: The skyrocketing defense budget in post-Sept. 11, 2001 times.