Lockheed Pullout to Cost 4,500 Jobs in Southland

Lockheed will eliminate as many as 4,500 jobs from its Southern California operations over the next several years largely under a corporate reorganization in which several major military aircraft programs will be transferred to facilities in Marietta, Ga., the company announced Tuesday.

Lockheed will move the headquarters of its Aeronautical Systems Co. to Georgia from Burbank this year, and proceed with an earlier plan to move its advanced development projects--better known as the Skunk Works--to Palmdale from Burbank, all in a complex effort to reduce costs.

By the mid-1990s, the company said it will largely vacate its 325-acre site in Burbank and either eliminate the 9,500 jobs at that location or transfer them to Palmdale or Georgia. The land, adjacent to the Burbank airport, is worth roughly $1 million per acre.

Lockheed executives said they did not have an exact assessment of the job impact, but of the 12,600 Lockheed aircraft workers located in Los Angeles County as of April 1, an estimated 8,100 would remain by the mid-1990s.

Lockheed said it would transfer 500 headquarters staff jobs to Georgia by the end of this year. In addition, the firm will either transfer to Georgia or phase out programs that currently employ 2,000 people. And last month, it announced that it would lay off 2,000 workers by this summer.

The estimated 8,100 jobs that will remain in Los Angeles County assumes that the Skunk Works operation remains at its current level of 4,000 to 5,000 employees and that the 1,000 jobs at the firm’s research facilities at Rye Canyon are unchanged.

At its worst, the decision means that many thousands of potential jobs--if Lockheed wins the competition to build the Air Force’s advanced tactical fighter--would go to Georgia, rather than Palmdale, as previously planned.

Besides the ATF, Lockheed will move production of the Navy P-7A to Georgia and may move support and spare parts work for such programs as the L-1011 commercial jetliner and the S-3 Viking Navy patrol aircraft.

The Lockheed announcement marks the most dramatic instance of an aerospace firm moving operations out of Southern California, but the trend to expand and relocate outside the state has been building for nearly 10 years.

Even though the aerospace industry grew in Southern California during the military buildup of the 1980s, it also was setting up operations out of state that now threaten to worsen the downturn brought on by Pentagon budget cuts.

In addition to Lockheed, the Los Angeles operations of McDonnell Douglas, Hughes Aircraft, Northrop and General Dynamics have relocated or opened satellite factories in Utah, Arizona, Arkansas and Ohio.

Lockheed Chairman Daniel Tellep said the reorganization will save $75 million by eliminating the need to build facilities for the ATF in Palmdale, and will save another $50 million annually through efficiencies. The massive Marietta facility, which is owned by the Air Force and leased to Lockheed, has been partially vacant since Lockheed completed the C-5B program last year. It employs 9,800.

“I don’t think this is a marginal benefit,” Tellep said. “This is a major benefit.”

He said Lockheed had been studying the plan to separate the Aeronautical Systems Co. from the Skunk Works for several years and had received recommendations to do so from the consulting firm Booz Allen & Hamilton.

Nonetheless, Tellep said, “I don’t think it is a vote of confidence against Southern California. We were already phasing out all of our manufacturing operations in Burbank. This is a logical consequence of a path we already were on.”

The decision, which was approved after a daylong board of directors meeting, was forced by the bleak defense industry outlook, Tellep added.

Lockheed’s ATF program was delayed two years in a decision announced last month by Defense Secretary Dick Cheney. Also, problems at Lockheed in the development of the Navy P-7A patrol aircraft program have forced a two-year delay, according to Navy officials.

The decision to forgo $75 million in new facilities in Palmdale comes after Lockheed has invested $100 million there in recent years. Those new facilities will be taken over by the Skunk Works, but based on current workload they will not be fully occupied, according to Kenneth W. Cannestra, president of Lockheed’s Aeronautical Systems Co.

Cannestra said Lockheed has no plans to sell the Palmdale facilities.

“We think that the Skunk Works at the 4,000 to 5,000 employee level can be a financially profitable stand-alone entity,” Tellep said. “The question is whether it grows or contracts.”

Tellep said opportunities are not as great as they once were for the Skunk Works. The operation has specialized in producing secret aircraft in small numbers, typically under 100. It will shortly deliver to the Air Force the final F-117A, a specialized attack aircraft.

A Lockheed announcement said the firm will offer early retirement incentives to ease the impact. “We deeply regret the need to eliminate those jobs,” Tellep said in a statement. “We know how painful it is for employees and their families. But this action is absolutely essential if we are to remain competitive and win new business.”

Additional layoffs are possible beyond those previously announced, a spokesman said. It was left unclear which employees would be offered transfers.

“They would not be forced to go down there and eat grits,” Lockheed spokesman Jim Ragsdale said. “They would be given a choice. But it may be a choice between that and being unemployed.”

Burbank Mayor Tom Flavin called the news that the company would pull out all its operations there an “economic bombshell.”

“No doubt the city will feel a financial shock from Lockheed’s departure,” he said in a statement. “But we will emerge an ecologically cleaner and financially stronger city from this experience.”

Lockheed’s announcement dimmed what had been one of the brightest job prospects in the Palmdale area, a major center of aerospace activity. Company officials had been predicting Lockheed’s Antelope Valley work force was going to increase to as many as 7,000 by the mid-1990s.