Newport-Based Ford Aerospace May Go on Sale
Ford Motor Co. is preparing to put its Newport Beach-based aerospace division up for sale in a move that will come before the board of directors as early as next week.
The possible sale of the unit comes amid increasing concerns about the financial future of the defense industry, which is confronting major budgets cuts as U.S.-Soviet tensions ease. In addition, the Ford Aerospace operation has not been meeting its profit objectives set by Ford Motor headquarters in Dearborn, Mich.
Industry sources speculated that Ford Aerospace would be purchased as a single entity but then broken up and sold as separate pieces. The operation includes a major missile manufacturing operation, a commercial satellite manufacturing operation and various defense service organizations.
The company has purportedly prepared a prospectus for the sale of the operation but industry sources said the prospectus has not yet been circulated.
Newport Beach-based Ford Aerospace Corp. has an estimated $2.5 billion in annual revenue and 17,000 employees. It is uncertain what price Ford might seek for the aerospace division.
Ford Aerospace moved its headquarters from Detroit to Newport Beach in the summer of 1988 to be closer to its customers and its own defense plants in Orange County and the Bay Area. The company’s headquarters staff employs about 55 people.
While the move of the headquarters gave Ford Aerospace a larger profile in Orange County, the company has had a major presence locally since 1960, when it located its Aeroneutronics Division here.
Ford would not comment on speculation that Ford Aerospace is for sale. Spokesman Bill Peacock said, “I think we’re all aware that there is a lot of speculation about the retrenching in the defense industry. But we’re not commenting on specific pieces (of reporting).”
Chrysler announced recently that it would sell its defense business, but General Motors has said it has no intention of disposing of Hughes Aircraft Co., its defense unit.
A possible sale of Ford Aerospace was first reported in Washington Technology magazine on Dec. 21. The San Jose Mercury News later quoted the head of Ford’s satellite operations in Sunnyvale as saying he was not aware of a possible sale.
A senior official at a competing missile manufacturer said Ford Aerospace had not met profit objectives set by the parent company and had lost a major competition last year for a missile program known as the Advanced Anti-Armor Weapon Medium. The winning team was Martin Marietta and Texas Instruments.
A move by Ford Motor to get out of the defense business would fly in the face of Ford Aerospace’s $425-million acquisition just over a year ago of BDM International, a Virginia-based defense contractor involved in research for the “Star Wars” anti-missile program, whose prospects are also uncertain.
Perhaps the most controversial of Ford Aerospace’s programs was the Sgt. York, an armored vehicle also known as DIVAD. The program was canceled by former Defense Secretary Caspar W. Weinberger in August, 1985.
The cancellation came after the Pentagon had spent nearly $1.5 billion on the Sgt. York but then determined that the vehicle, equipped with radar and two guns, was ineffective at its task of defending Army tanks and troops from low-flying enemy aircraft.
At the time, the cancellation appeared to be a major blow to the Ford subsidiary and the parent firm’s participation in the defense business. The program employed 1,900 people in 1984.
But the information provided later by sources made it seem as if the government did Ford a big favor. Just before the cancellation, Ford was internally projecting that it would lose more than $200 million on the Sgt. York program, according to sources. As a result of the cancellation, Ford substantially reduced its projected losses.
Ford’s Newport Beach plant has a work force of approximately 3,000, and the company employs about 4,500 others at its facilities in Palo Alto, Sunnyvale and Mountain View.
In a December, 1988, interview, Ford Aerospace President Donald Rassier said the company was forecasting a growth in sales of between 10% and 12%. The company had contract awards of $1.3 billion in 1988. No figure was available for 1989.
Ford Aerospace produces ground systems for NASA, commercial satellites; command, control and communications and intelligence equipment, and tactical weapons. The Aeroneutronics division produces the Sidewinder and Chaparral missiles, electro-optical systems and ammunition.
A local official said the company’s Aeroneutronics division “is struggling to maintain the market share it has. If you asked is it some kind of deep trouble, my honest answer would be no,” said the official, who asked not to be identified. “Times are not easy, but nor are we in a going-out-of business mode.”
He said the company has laid off about 200 employees in the past year.
