Rockwell Hit Hard by End of 2 Missiles
President Bush dealt a severe blow to Rockwell International Corp.’s defense business when he announced in his State of the Union address his plan to cancel two major nuclear weapons programs that employ hundreds of workers here, analysts said Wednesday.
Heralding the Cold War’s demise, Bush announced defense cuts that include ending development of the Midgetman single-warhead nuclear missile and eliminating all 50 of the existing 10-warhead MX nuclear missiles. Rockwell officials said they aren’t sure exactly what that means for workers.
“It’s likely we will have some sort of layoff if they go ahead and terminate the (Midgetman) missile,” said Thomas Gunckel, vice president and general manager of Rockwell’s Autonetics Strategic Systems Division in Anaheim. “We assume the government will inform us within the next 30 days.”
In Anaheim, Rockwell makes guidance systems for both missiles, and maintains the country’s Minuteman missile fleet. The division as a whole generates an estimated $400 million a year in revenue for Rockwell International.
The division is part of Rockwell’s Defense Electronics group, which employs about 5,400 people in Anaheim. The parent company, Rockwell International, became Orange County’s biggest company when it moved to Seal Beach in December.
Gunckel said that 250 to 260 Midgetman-related employees could be vulnerable to layoffs, though he added the company would try to absorb them in other programs. He said he would have more answers when the Pentagon formally notifies the company with a schedule for ending the program.
Another 470 employees work on the MX program, but Gunckel said that the MX termination was expected and that scrapping existing missiles would likely affect those employees only over a period of years. And he said the 170 employees across the country who maintain the fleet of Minuteman II and Minuteman III missiles could also be affected, but probably only after several years during which time the company would bid for additional work related to modifying or dismantling the missiles.
“We’ll have to see what Congress does, but it’s easy to see strategic weapons are declining in importance,” said Lawrence Harris, an analyst with Kemper Securities in Chicago. “Even though the President’s budget wouldn’t take effect until October, we may see anticipatory layoffs well before that.”
The cancellation of the Midgetman program is ironic because the division won a $436-million contract from the Air Force in October to develop the missile, which was scheduled for initial deployment in 1997.
“Certainly the end to the small ICBM program, if followed through by Congress, would have a substantial effect on Rockwell’s defense revenues,” said Paul H. Nisbet, an aerospace analyst for Prudential Securities Research in New York.
Rockwell is already reeling from layoffs. On Jan. 15, the company said it would lay off as many as 1,000 employees in Seal Beach and Downey because of an unexpected decline in its space shuttle business. Last October, the company dismissed 400 employees in San Bernardino and Anaheim following Bush’s decision to cancel programs to field nuclear missiles on railroad cars.
At the time, company officials said they were pleased that the Midgetman was spared from the cuts, but Bush dashed those hopes Tuesday evening.
Economists have predicted that California will lose 25,000 aerospace jobs this year as a result of spending cuts, and Orange County will have its share, losing perhaps 2,000 jobs in the high-tech sector according to Chapman University. Last Friday, Loral Aeronutronic announced it would cut 592 jobs, or 24% of its work force, in Newport Beach.
Sam F. Iacobellis, Rockwell’s executive vice president and chief operating officer, said the overall effect of the President’s decisions would have both “pluses and minuses” for Rockwell.
“On balance, I think it’s a plus,” he said. “We recognize the reality of the situation. For 40 years, we deployed against the USSR and now it doesn’t exist.”
In one bright spot, Iacobellis pointed out that Bush’s renewed support for the Star Wars missile-defense program, formally known as the Strategic Defense Initiative, could give Rockwell a boost.
The company has a Strategic Defense Center in Seal Beach that coordinates Rockwell’s research on SDI programs. McDonnell Douglas Space Systems Co. in Huntington Beach also does work on SDI and could benefit from the proposed budget, said spokesman Tom Williams.
But analysts said SDI work would be spread among numerous contractors and so it probably wouldn’t make up for the lost revenues for the missile contracts.
Iacobellis also said he was pleased with Bush’s support for continuing defense research and development, and he said the company’s B-1 bomber revenues could get a boost from Bush’s plan to convert nuclear bombers to conventional bombers.
Job Threat
Rockwell International Corp., Orange County’s largest company, said the jobs of hundreds of its workers could be at risk as a result of President Bush’s plan to stop building the Midgetman missile and scrap existing MX nuclear missiles. Seal Beach-based Rockwell makes guidance systems for both missiles, and maintains the country’s Minuteman arsenal.
DEFENSE ELECTRONICS GROUP--Anaheim
1991 revenue: $1.47 billion
Top executive: John A. McLuckey, president
Total employees: 14,000
Total Anaheim employees: 5,400
Autonetics Strategic Systems Division
Unit of Defense Electronics Group
Estimated revenue: $400 million a year
Top executive: Thomas Gunckel, vice president and general manager
Employees
Midgetman program: 250 to 260
MX missile support and production: 470
Minuteman II and III support: 170
Source: Rockwell International, Wall Street analysts
