Lost Army Contract Blamed : For Sale: Ford Ordnance Plant in San Juan Capistrano

Ford Aerospace said Wednesday that it plans to sell its ordnance division in San Juan Capistrano because it lost a crucial Army contract.

The ordnance division, which employs 100 workers and had revenues of about $10 million last year, developed and manufactured the 25-caliber ammunition that is commonly used by quick-firing automatic weapons mounted on the Army’s armored vehicles.

The division had sold more than 5 million rounds of the ammunition since the 1960s, but it lost its share of the Army ammunition contract last year, prompting the decision to sell.

Filling Contracts

The division is still manufacturing ammunition to fulfill past Army contracts and makes ammunition for other branches of the military, but its work for the Army was the base of its operations.

“We believed that the future of the business was going to be good, but we would rather sell than continue to invest in it,” said Mark Miller, a Ford Aerospace spokesman in Washington. Ford Aerospace, a subsidiary of Ford Motor Co., has dual headquarters in Newport Beach and Washington. Ford Aerospace is a defense and space operations firm with 3,500 employees in Orange County.

Miller said that Ford Aerospace is aware of several potential buyers and that it expects to complete a sale by the end of the year. He declined to identify the potential buyers or the division’s asking price.

Potential Bidders

Honeywell and Tustin-based Aerojet, which share the Army’s latest contract for the 25-caliber ammunition, and Rockwell are among the prospective bidders for the division, industry sources said.

Ed Smith, an Aerojet vice president, said the company has not talked with Ford Aerospace about buying the ordnance division, and he declined to speculate on whether it would be interested.

Aerojet employs 265 workers at its headquarters and research and development facility in Tustin and 1,100 workers at manufacturing plants in Downey and Chino.

Suppliers Reduced

Ford lost the Army contract last year when the Army decided to reduce suppliers of the 25-caliber ammunition from three to two. Although Ford said its manufacturing price for the ammunition was competitive, it said it lost the job because of higher transportation costs.

Ford Aerospace recently spent $10 million for new equipment at its 880-acre manufacturing facility in San Juan Capistrano, and the company owns patents on munitions technology it is developing for potential use by the Air Force, said James Watson, a spokesman for the company, which had revenues of about $1.3 billion last year.

But without the contract, the value of the ordnance division is difficult to determine.

John Simon, a defense industry analyst at Seidler Amdec Securities in Los Angeles, asked: “Who would want to buy it? If they don’t have the contract now, it appears they’ve lost a lot of their value.”

Times staff writer David Olmos contributed to this story.