Defense Firms Fear ’93 Federal Budget May Lead to Fewer Jobs : Economy: The first post-Cold War spending plan probably will include substantial cutbacks in military outlays. A survey shows most area firms slashed work forces at least 20% over the past two years.
With more military cuts on the horizon, local defense contractors are offering no guarantees that they won’t need to reduce employment further on top of the widespread reductions they have made since 1989.
A survey of the major aerospace and defense companies in the San Fernando, Conejo and Santa Clarita valleys and in Ventura County shows that most have slashed their work forces by at least 20% over the past two years.
The companies, whose local plants make or design everything from missiles (Hughes Aircraft Co.) to radar systems (ITT Corp.) to battlefield radios (Datron Systems Inc.), have cut employment by consolidating divisions, leaving vacant positions unfilled or by laying off workers outright.
The contractors hope that employment will now stabilize, particularly if they are able to land more commercial or foreign work. But the outlook could get worse this week, when President Bush unveils his proposed fiscal 1993 budget.
As the first defense spending plan to be proposed since the end of the Cold War, the budget is expected to include more substantial cutbacks in military outlays--which probably will mean more employment cutbacks by the contractors through the mid-1990s.
“We have to adjust employment on a continuing basis to the business environment, which is not positive at this time,” said Robert Knapp, spokesman for Litton Industries Inc., which has facilities in Woodland Hills, Van Nuys and Agoura Hills.
Moreover, the Pentagon has proposed an initiative to freeze virtually all future defense programs after the research and engineering stage, avoiding production of the weapons until they are needed and thereby saving money. If enacted, the plan could remove the need for local defense companies to maintain large forces of skilled production workers.
And a new book released last week, “Building a Peace Economy,” by Betty G. Lall and John Tepper Marlin, says California is among the 10 states that will be hit hardest as the defense downturn continues.
“The best we can hope for now is level employment” over the next year, said Rod Hanks, vice president of human resources at HR Textron, a Valencia-based unit of Textron Inc. that makes controls and other aircraft components. HR Textron’s employment stands at about 1,000, down 20% from two years ago.
The cutbacks aren’t unique to the local region, of course. Some big defense companies, such as Hughes Aircraft (a unit of General Motors Corp.), Litton, Northrop Corp. and Rockwell International Corp., have plants throughout Southern California and all have been forced to slim down.
But the San Fernando Valley and surrounding regions comprise one of the industry’s largest centers, and so they, in particular, are reeling from the defense slowdown. And the effect is being felt by large and small suppliers alike.
Hydraulics International Inc., a Chatsworth builder of trucks, lifts and other aircraft support equipment, is “anticipating layoffs in the next year” once its 230 employees’ current production begins to wind down, President Nicky Ghaemmaghami said. That’s because “there’s no new inquiries coming in for us to bid on,” he said.
At ITT’s Gilfillan radar equipment unit in Van Nuys, where employment has tumbled 44% over the past two years to 875, the outlook “is reasonably stable, assuming no further defense cuts that would impact our programs,” spokesman Brian Eden said.
But Eden cautioned that “the Bush administration is still in the process of firming up their future defense budgets. That’s an unknown.” ITT Gilfillan’s defense orders are down 30% to 40% from two years ago, he added.
In some cases, large defense operations have simply disappeared from the local scene.
Two years ago, Lockheed employed about 14,000 people in the area. But in a major restructuring, the company has shifted nearly all of its aerospace production lines that were in Burbank to its facilities in Marietta, Ga. The company still maintains its headquarters in Calabasas, and its famed advanced development unit--the top-secret “Skunk Works”--still employs about 5,000 in Burbank and Palmdale.
Northrop Corp. had one local operation, a missile plant in Newbury Park that employed 2,000 people. But Northrop closed the facility last year and transferred its work to plants in Hawthorne and Pico Rivera, eliminating 800 jobs in the process.
Some companies are hoping to offset part of the drop in defense spending with additional contracts from commercial customers or foreign clients, or with contracts to retrofit existing Pentagon equipment.
But it’s unclear how much those contracts--if won--will boost local employment.
Litton, for instance, last week won a $14.1-million contract to upgrade the navigation systems in Air Force F-16 fighter jets. Datron Systems, a Simi Valley-based maker of satellite products and high-frequency radios, recently sold more than $20 million of equipment to two foreign nations. ITT Gilfillan is trying to sell its radar systems to civil air traffic control centers, but hasn’t sold any yet.
Datametrics Corp., a Chatsworth maker of printers, keyboards and other equipment that had virtually no commercial accounts five years ago, now reaps 15% to 20% of its revenue with non-defense orders from clients such as Xerox Corp. and Halliburton Co., said President Sidney E. Wing.
“That’s our growth area,” he said.
But Datametrics hasn’t yet needed to hire significant numbers of people, Wing said. The company made big cuts in its work force in 1989--not because of a slide in defense orders, but simply to bolster its earnings--and its employment and defense orders have been stable since then, he said.
HR Textron’s Hanks said his company also is aggressively pursuing more commercial accounts to rely less on the defense business. But he noted that even if HR Textron wins commercial business, “it takes time for that to translate into serial production” of goods that would require additional workers.
Meanwhile, Hughes Aircraft’s Canoga Park plant, where tactical missiles are designed, is now devoting much of its effort to designing components of the Strategic Defense Initiative, or “Star Wars” space defense program.
But Ed Biggers, Hughes’ missile systems group president, recently told his employees in a newsletter that although the SDI programs “are well funded right now,” their long-term benefit to Hughes and other contractors remains “subject to future budget decisions.”
THE REGION’S DEFENSE INDUSTRY
The San Fernando, Conejo and Santa Clarita valleys and Ventura County comprise one of the largest homes of aerospace/defense contractors in the nation, and so the region has been particularly hard hit by defense cuts. This list shows the change in the companies’ local employment.
Current Area Area Employment Company 2 Years Ago % Change Abex Aerospace 707 964 -27 Datametrics 172 285 -40 Datron Systems(1) 372 452 -18 GTE 350 500 -30 Hughes Aircraft 2,060 2,300 -10 Hydraulics Int’l 230 200 +15 ITT 875 1,550 -44 Litton 3,800 4,700 -19 Lockheed(2) 5,295 14,115 -63 Northrop(3) 0 2,000 -100 Semtech 225 200 +13 Sierracin/Sylmar xxx xxx xx Teledyne xxx xxx xx Textron 1,000 1,250 -20 Whittaker 404 550 -27
(1) Measured from July, 1990, when Datron bought Transco Products in Camarillo. (2) Transferred major part of aerospace workforce to Georgia. (3) Closed sole area plant, in Newbury Park, last year. Source: Company reports
