A Look at 1986, and the Climate for ’87 : Defense

Defense spending cuts in Washington during 1986 halted the significant growth spurt that Orange County’s aerospace contractors had been enjoying for the previous several years.

And on the horizon may be the county’s first sustained downturn in aerospace employment in a decade.

In its annual business outlook, Chapman College’s Center for Economic Research estimated that aerospace employment in Orange County will fall about 6% in 1987 to less than 85,000 from this year’s level of slightly more than 90,300. The county’s aerospace employment hit its peak in 1985, when nearly 90,700 workers were employed by defense contractors and mother high technology companies.

“The defense spending cuts are finally having their effect on jobs,” said James Doti, dean of Chapman’s School of Business and Management.

Although Doti’s study is the first to project a downturn in this important sector of the Orange County economy, there have already been some hints of the slide.

In October, Northrop Corp. announced that it would lay off about 400 workers at its Electro Mechanical division in Anaheim before the end of 1986 due to the slowdown and completion of several programs.

In addition, Ford Aerospace & Communications Corp., which lost the multibillion-dollar Sgt. York contract in 1985, continued to lay off the workers assigned to wrap up that program.

Last year, the company laid off 1,300 workers from the program and reassigned 300 more employees within the vast Ford defense and automobile manufacturing operation.

Still, some Orange County firms--including Northrop, Rockwell International and McDonnell Douglas Astronautics Corp.--have continued to win research contracts for the controversial Strategic Defense Initiative, or “Star Wars,” program.

Local aerospace firms are competing to win still more contracts that could prove lucrative.

For example, Ford Aerospace in October was awarded a $30-million contract to develop a new shoot-from-the-shoulder anti-tank missile system for the Army. The contract allows Ford to compete for the production contract for the system--an award potentially worth billions of dollars. The production contract is expected to be awarded in late 1988.

In September, the National Aeronautics and Space Administration gave McDonnell Douglas Astronautics a $100-million contract to build three Delta rockets, a move that allowed the company to restart its rocket assembly operations for the first time since late 1984. In addition, the company is in a four-way competition for a potential $1-billion Air Force contract to produce up to 20 more Delta rockets for the Air Force’s navigational satellite program.

McDonnell Douglas is also competing against Rockwell for the contract to build NASA’s space station. The award is expected in the last six months of 1987.