Loral Aeronutronic Plans to Move : Industry: The company’s missile plant will definitely vacate its prime Newport Beach site and may leave Orange County altogether.
Loral Aeronutronic’s top executive acknowledged Wednesday that the defense contractor may move its missile plant out of Orange County and will definitely relocate its 2,500-employee work force from its current site on prime hilltop property before 1998.
Loral Aeronutronic officials notified workers in a memorandum Monday of the company’s intention to move from its current site in Newport Beach. The Aeronutronic plant is a division of Loral Corp., a New York-based defense electronics company.
The memo, sent by division President James Woolnough, did not say where the company would move or when the move would take place.
Because the company wants to retain its top administrative and engineering talent, those white-collar workers probably will be moved to offices elsewhere in Orange County, Woolnough said in an interview Wednesday.
But the missile plant, which accounts for a third of the division’s employees, might be moved to a separate facility--possibly outside the county--due to rising production costs in the region, Woolnough said.
The plant has been in Newport Beach since 1960.
“There is no decision yet,” Woolnough said. “I hope to decide in the fall where we’re going and when we’re going to do it. My goal is to keep a combined (production and engineering) facility. There are certain impracticalities to that, so we may have to look outside of Orange County” for a new production site.
Loral’s lease on the Newport Beach property runs through 1998, but Woolnough said the company is likely to vacate the site well before the sublease expires.
The decision “is moving at an accelerated rate,” he said. “But we have to maintain our deliveries to our customers. This decision is our top priority right now.”
In recent years, a growing number of Southern California defense contractors have been relocating manufacturing operations to areas with lower labor costs, less-stringent environmental rules and lower taxes.
Woolnough said those issues are a consideration, but the major factor for the company is fast-rising rent payments on the 99-acre property.
The Newport Beach defense plant was part of Ford Aerospace Corp. until Loral acquired the defense subsidiary from Ford Motor Co. for more than $715 million last year. The sale did not include the Newport Beach property, which Ford leases from the Irvine Co. The property has been valued at roughly $75 million.
Under an eight-year subleasing agreement with Ford, Loral’s rent for the land would soar from the current $92,000 a month to $1 million a month by 1996.
The memo came as little surprise to some workers at the Newport Beach plant.
“Some people here have been reading the writing on the wall and finding other jobs,” said one employee, who asked not to be identified. “You don’t have to fight for spaces in the parking lot anymore.”
Another employee, who also asked not to be named, said he believes that the move will probably result in defections by employees fearful of being thrown out of work. Woolnough said the company will try to retain as many employees as it can.
If Loral decides to move from Southern California, it would deal a blow to the company’s subcontractors, said Tom Johnson, an employee of Tools & Metals Inc. in San Diego, a Loral supplier.
“That would really hurt us,” he said. “Especially since so many other companies have moved out of the area.”
In interviews during the past year, Loral Chairman Bernard Schwartz said he wasn’t planning to move the unit, nor was he troubled by the higher rent payments on the Newport Beach property.
“We’ll stay on as long as we can and look for an appropriate solution at the end of the eight years,” Schwartz said in September.
He noted that Woolnough’s management team would be responsible for choosing the site, not the New York headquarters. Woolnough confirmed that on Wednesday, and he added that his decision to move more quickly on the issue is a departure from the company’s earlier intentions.
He also said Loral would not have trouble making missiles profitably in Newport Beach as long as the subsidiary kept winning defense contracts. The division makes Sidewinder air-to-air missiles, Chapparal ground-to-air missiles and infrared targeting equipment. The division had revenue of $325 million in 1989, the last year for which public figures are available.
Byron Callan, an analyst with Prudential Bache Research in New York, said the most important future program for the Aeronutronic unit is the U.S. Navy’s planned AIM-9R Sidewinder missile upgrade.
Loral’s Changing Plans July 23, 1990 Elizabeth Allen, Loral Corp. spokeswoman: “We have no plans to move any Ford operations or break up the company.” August, 1990 Bernard Schwartz, chairman of Loral Corp.: “We have no plans to move Aeronutronic.”
October, 1990 Bernard Schwartz, chairman of Loral Corp.: “I’m not suggesting there’s never a need to close a plant or move an operation. I don’t foresee any of that in Loral’s arena.... If we can go out and book new business and raise the level of business activity at Aeronutronic, the rent portion will be unimportant.” July, 1991 James Woolnough, president of Aeronutronic, in a memo: “The production facility represents special problems. We need a facility that allows us to be competitive.... We may have to look outside the borders of Orange County.”
Raising the Rent Terms of the sublease granted Loral Corp. by Ford Motor Co., whose lease expires in 2053, call for steep increases in lease payments staring in mid-1995. Monthly lease payments In thousands of dollars 1991: $92 1992: $92 1993: $92 1994: $92 1995: $550* 1996: $1,000 * Payments increase in mid-year
Major Milestones at Aeronutronic Plant
1956: Ford Motor Co. acquires defense unit called Systems Research Corp. and renames it Aeronutronic Systems Inc.
1960: Ford Aerospace & Communications moves its Aeronutronic unit to Newport Beach.
1965: Newport Beach division wins contract for Chaparral ground-to-air missile.
1967: Sidewinder air-to-air missile program transferred to Aeronutronic.
1977: Division wins contract for Air Force “smart” targeting system known as Pave Tack.
1985: The Pentagon cancels troubled Sgt. York tank-mounted gun program after investing $1.8 billion; 1,300 Newport Beach workers laid off.
1987: Company changes its name to Ford Aerospace Corp.
1988: Ford Aerospace establishes a headquarters in Newport Beach.
1988: Division awarded contract for an anti-radar missile component known as HARM.
1990: Loral Corp. purchases Ford Aerospace Corp., including Aeronutronic.
1991: Marine Corps awards contract to develop the an short-range antitank weapon; Loral Aeronutronic decides to move from Newport Beach site.
