200,000 State Jobs Seen Periled by Defense Cuts : Military: The loss of 600,000 nationwide by 1997 is predicted. Northrop will eliminate 1,500 positions.

The precipitous defense spending cuts unveiled Wednesday by the Pentagon could throw as many as 600,000 U.S. workers out of jobs nationwide--including more than 200,000 in California, according to projections by defense analysts.

The first of the local employment cutbacks were announced only hours after the spending reductions were released in Washington, when Northrop Corp. said that it would eliminate 1,500 jobs on the B-2 Stealth bomber program in Palmdale and Pico Rivera through layoffs and attrition.

The Air Force will halt B-2 production after just 20 aircraft, meaning that the last plane will leave its Mojave Desert plant by no later than 1998 and the vast majority of Northrop’s 13,400 jobs on the program would be eliminated. The program accounts for 40,000 jobs in California.

Defense Secretary Dick Cheney unveiled a Pentagon budget Wednesday that would reduce spending by 7% in fiscal 1993, compared to this year, and by 1997 would drive down the defense budget by 37%, compared to its peak in 1985. In defense procurement, the funding cutback is a stark 50%, going from a peak of about $120 billion in the mid-1980s to a projected $54.4 billion by 1993.

The cutbacks will have a profound economic impact, even beyond the direct defense industry jobs. The U.S. labor market will be flooded with 138,000 military personnel to be released during the current fiscal year and a total of 321,000 by 1995, senior defense officials said in briefings Wednesday.

The economic forecasting firm DRI/McGraw Hill projected that anticipated budget cutbacks would result in the loss of 600,000 jobs in the U.S. economy by 1997, based on both the loss of direct defense industry jobs and a broad range of jobs throughout the economy. On a similar basis, the California impact was 200,000, according to Sal Monaco, a principle in DRI’s aerospace practice.

David Hensley, an economist at UCLA’s Business Forecasting Project, said he estimates that the budget cutbacks will result in the loss of 71,000 direct aerospace jobs in California over the next five years, not including indirect effects through the economy. Hensley said 61,000 jobs have already been lost since the state’s aerospace employment peaked in 1988 at 375,000 jobs.

Both the DRI and the UCLA forecasts do not account for possible job growth in other segments of the economy that would result from alternative government spending or from reductions in the federal deficit, which could mitigate the loss of jobs resulting from defense cutbacks. Monaco said he is skeptical that a reduction in the budget deficit alone would create enough stimulus in the economy to offset the loss of defense jobs in the near term.

Cheney unveiled a long list of canceled defense programs Wednesday, many of them unfamiliar to the general public but representing the bread and butter of the defense industry--including a key Navy missile program at Texas Instruments, an early warning aircraft at Grumman, a nuclear attack missile at Boeing, an attack submarine program at General Dynamics and torpedo propulsion system at Hughes Aircraft.

As bad as California contractors were hit, Hughes Chairman Malcolm Currie remarked in an interview Wednesday: “It could have been much worse.”

Indeed, the Pentagon budget calls for $2.7 billion in funding to produce eight C-17 cargo jets at McDonnell Douglas in Long Beach, a sharp increase in production. Previously, funding had been approved for 10 C-17s.

“Clearly on the surface, McDonnell Douglas fared very well, at least the initial volley,” Herbert Lanese, chief financial officer for the St. Louis-based firm, told a wire service, but he cautioned that a lot could change between now and the time Congress acts on the Bush budget.

Although substantial cuts were made against most programs, funding for the Strategic Defense Initiative, also known as “Star Wars,” was boosted to $5.3 billion from $4.1 billion. California contractors account for the leading positions in the program.

Meanwhile, the Navy is seeking funding to produce another 48 F-18 jet fighters for $1.8 billion, about 40% of which is produced in El Segundo by Northrop. The B-2 decision, in which the Air Force will spend $2.6 billion for the last four aircraft, saved Northrop from an immediate cancellation that would have devastated the program.

In other Southland programs, the Pentagon is seeking $200 million to continue development work on the National Aero Space Plane, a program led by Rockwell International in Palmdale.

“Overall, we came out on the plus side,” said Sam Iacobellis, executive vice president at Rockwell. He said that the company will take cuts in its Midgetman missile program in Orange County, but anticipates new work to reduce the payloads on the Minuteman 3 missile, as part of strategic weapons reductions outlined by Cheney.

But the overall message brought out by Cheney on Wednesday was that the industry will face cutbacks through the mid-1990s.

“It keeps extremely negative pressure on defense employers year after year after year,” remarked First Boston aerospace analyst Peter Aseritis.

Currie, the Hughes chief, said: “The industry is going to continue to go down. As the existing production programs end over the next several years, that is going to be the real crunch period for the industry.”

The Pentagon plan includes an end to production of the Grumman F-14 and McDonnell F-15 jet fighters, both of which have significant content in California, including radars built by Hughes. The firm also builds the radar for the B-2 bomber.