Aerospace Cuts to Devastate Area, L.A. Report Says : Economy: Defense reductions could cost up to 420,000 jobs and $84.6 billion in personal income, task force reports. Broad impact seen for Orange County.

The aerospace bust in Los Angeles County will deliver a devastating blow reaching into every sector of society and the economy, resulting in the loss of as many as 420,000 jobs by 1995, according to a comprehensive new report to be released today.

The nation’s most defense-dependent region by a wide margin, Los Angeles County will have to come to terms with the loss of $84.6 billion in personal income over the next nine years, as Pentagon spending winds down in the aftermath of the Cold War, the report by the county’s Aerospace Task Force found.

While the report analyzed only Los Angeles County, its findings suggest a broad impact as well in Orange County, home to tens of thousands of aerospace workers. Defense employment in Orange County has dropped by nearly 15% in the last five years, and aerospace firms with operations here have already announced plans to eliminate an additional 1,300 high-technology jobs this year.

The report--which has yet to face scrutiny by independent economists and other experts--projects dramatic ripple effects for Los Angeles County’s economy, which by 2001 would result in:

* The construction of 122,000 fewer homes.

* A reduction in retail sales of $23.8 billion.

* A drop-off in local tax collections of $2.27 billion.

The most sobering projection foresees the loss of 210,000 to 420,000 jobs by 1995 in the county, a far higher estimate than prior studies have made for the entire state. A separate estimate in the report suggests fewer job losses, but still finds that the county would be down 184,000 jobs by 2001.

The estimated decline--which comes on top of the 71,000 aerospace jobs that have disappeared statewide in the last three years--counts projected job losses not only in aerospace but in other sectors of the economy that will feel the effects of the defense downturn.

In aerospace itself, the employment losses would cut across virtually all types of jobs, from stock clerks to scientists. Minorities in the county would bear an estimated 53% of the aerospace job losses.

“Los Angeles County is facing a severe decline of a key industry,” says the report. “The effects will be long-lasting. County communities will be affected by relocation, tax revenue loss and economic ripple effects. More tragically, the lives of hundreds of thousands of persons within Los Angeles County will be painfully disrupted. Employment opportunities for tens of thousands of workers will be severely limited.”

The grim assessment is based on more than a year of study by the task force. Created in June, 1990, at the urging of Supervisor Ed Edelman, the task force lays out a detailed adjustment strategy, calling for a combined local, state and federal response. It compares the undertaking to relief efforts after a natural disaster.

Since aerospace is integral to Los Angeles’ entire high-technology economic sector--itself the nation’s largest concentration of high-tech industry--the economic stresses in the region are bound to have national repercussions.

The task force calls on President Bush to designate representatives from the Departments of Defense, Commerce, Transportation, Labor and Energy to sit on a new Los Angeles County high-technology council, envisioned as a cornerstone of the adjustment process.

Whatever strategy is adopted, it will not reverse the pain that is inevitably coming, the report says.

“We view this as a historic turning point,” said task force member Gary N. Conley, president of the Los Angeles Economic Development Corp. “We are looking not at a temporary adjustment in defense spending. This is not a cyclical change. It is a permanent change in the defense budget until there is a different international scene.”

Orange County’s high-technology employment peaked in 1987, toward the end of the Reagan defense buildup, at 96,000 people. That fell to 83,000 in 1991.

Esmael Adibi, an economist at Chapman University in Orange, forecasts a net loss of another 2,000 high-tech jobs in the county in 1992.

Adibi said that if the Los Angeles study is accurate, the job losses will hurt Orange County as well because many of those jobs will be lost to people who live in Orange County.

For instance, out of its 46,000 workers statewide, McDonnell Douglas Corp. has about 19,100 employees living in Orange County. Hughes Aircraft Co. has 8,281 employees living in Orange County.

And Rockwell International Corp., which became Orange County’s largest corporation when it moved its headquarters to Seal Beach on Jan. 1, provides about 8,900 jobs in the county.

The largest concentration of Rockwell employees locally is in Anaheim, where 1,159 of the company’s employees live.

Los Angeles County received defense contract funds of $8.88 billion in 1990. But by 1995, the funding will drop to between $3.5 billion and $4.9 billion. If the Air Force Space Systems Division in El Segundo is moved, a plan under consideration, an additional $1 billion in payroll and 6,700 more jobs will be lost.

Even while public tax collections are going down, the region will face an increase of $362.8 million in unemployment insurance costs and $147.4 million in public assistance costs over the next decade, straining public finances.

More than a third of laid-off aerospace workers will have to change occupations, requiring a massive retraining effort.

But the report asserts that federal and local job retraining programs are inadequate, both in scope and direction. Existing federal retraining programs are oriented to the hard-core unemployed with few jobs skills--a far different sort of person than the highly skilled aerospace workers now losing their jobs.

In 1991, just 1% of the roughly 14,000 laid-off aerospace workers in the county who made contact with the Public Employment Service were referred to job retraining programs. But the report asserts that 38% of the workers who will be laid off from aerospace will need as much as 18 months of job retraining to qualify for jobs comparable to their old ones.

The aerospace bust will undermine the bedrock of Los Angeles’ middle class, according to the task-force findings.

The typical defense worker, the report says, is a 38-year-old male homeowner who is a long-term resident of the community. He probably has a college degree and earns 10% to 20% more than his counterparts in other industries.

Within a diverse county, the economic brunt will fall unevenly among communities, according to the detailed 323-page study prepared for the aerospace task force by the Los Angeles Economic Roundtable, a private research group.

Residents of Canoga Park and Lancaster will be the most affected, accounting for 10% of the laid-off aerospace workers. North Hollywood, the East Los Angeles-Lincoln Heights area, Glendale and Torrance also will be hard hit.

By comparison, low-income areas--such as Compton, South-Central Los Angeles and South Gate--will be least affected.

The Roundtable report asserts that military aircraft production may end in Los Angeles County with the completion of the McDonnell Douglas C-17 cargo jet in Long Beach. While the county had 13 military aircraft development and production programs in 1981, just two remain today: the C-17 and Northrop’s B-2 bomber.

One of the few bright spots for the region is that Pentagon spending over the next few years will emphasize research and development, rather than production. Since Los Angeles is so research-oriented, its aerospace industry may fare better than if the cutbacks fell proportionately on both production and research, said Michael Beltramo, one of the report’s authors.

“I’m afraid the case may be worse than I documented, but I can’t prove that since the 1991 data wasn’t available,” he said. “It is easier to make a worse case than a better case.”

Without a coordinated government response, the economic adjustment to lower defense spending will be far more difficult, said task force member Conley.

“If we don’t have a strategy, we will leave the families affected to their own devices, and we will leave undirected the capability of industry here,” he said. “Ultimately, we would end up dismantling the aerospace infrastructure and we would allow the industrial heart of Los Angeles to be hollowed out.”

To avoid that outcome, the task force--consisting of aerospace executives, consultants, academicians and economic development proponents--favors a plan to help redirect the industry to commercial work, improve the state’s business climate, retrain workers and hold together Los Angeles’ aerospace technology base.

Among the task force’s recommendations are:

* Improving the state’s business climate by reforming the workers’ compensation system, streamlining environmental regulations and improving public education.

* Developing new business opportunities in the state by creating a strategy for promoting high technology, fostering an electric-vehicle industry, financing new companies (in part through state employee pension assets) and forcing the state government’s foreign suppliers to offset their sales with purchases of California products.

* Providing new employment for displaced aerospace workers by improving job training. The task force calls for a fivefold increase in federal job training funds.

Among the programs that the task force recommends is the creation of a Los Angeles County Aerospace High Technology Council--an alliance of universities, industry and government to nurture new industrial development.

It also suggests creating a technology resource center. The center would provide small and medium-sized firms with access to technology, capital and advice on marketing to the commercial sector.

The report endorses several recent efforts to form an electric vehicle industry in Los Angeles and an effort to create an alternative energy industry. It cites Los Angeles, for example, as a leader in the development of technology for fuel cells--chemical devices for producing electricity--and credits work done at Caltech, the Jet Propulsion Laboratory and USC.

Unlike distressed areas in the East and the Midwest, Los Angeles County has a base of technology that would provide a foundation for a significant alternative-fuel transit industry, according to William B. Forti, a co-chairman of the task force.

“It is project-oriented,” said Forti, an executive with General Dynamics in Rancho Cucamonga. “It is high-technology-oriented. It is systems-oriented. And the aerospace industry really does know how to put together very complex systems like these.” The aerospace report is believed to be the most comprehensive study by any federal or local agency of economic adjustment problems in the aftermath of the Cold War. It is expected to become a national model for adjustment efforts. Officials from the U.S. Department of Commerce were expected to be on hand today for the formal presentation of the study to the county Board of Supervisors.

“I had no idea when I called for the task force in 1990 that we would be facing the severe problem that we have,” Edelman said. Edelman said the county will apply for a $9-million federal grant to implement the report--mainly for technology transfer programs.

The funding source for the job retraining program, the only recommendation that requires a large contribution of public dollars, was not identified. But federal agencies have set aside $150 million for such retraining efforts.

“We can show that a local community can respond to a crisis that is really national in its proportions,” Edelman said. “We really have to retain the technology base, the industrial base and the tax base.”

Times staff writers Dean Takahashi and Gregory Crouch in Orange County contributed to this report.

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