Convair Sale Spurs Layoff Speculation

General Dynamics’ decision to sell its San Diego-based Convair and Electronics divisions sparked speculation Thursday about the number of jobs that could be lost when the divisions are sold--including thousands of jobs in other businesses that could be caught in a ripple effect.

Some observers suggested that Hughes Aircraft Co. will buy Convair’s missile business and consolidate all or part of it to a massive, under-utilized production and assembly plant Hughes owns in Tucson. Such a move would jeopardize the jobs of 4,500 Convair employees who build Tomahawk Cruise Missiles in San Diego.

General Motors, Hughes’ Detroit-based parent company, acknowledged Thursday that negotiations are taking place with General Dynamics, but the company declined to elaborate. General Dynamics officials, who indicated that the missile division deal could be completed within a matter of days, declined further comment.

Hughes has a significant amount of unused factory capacity in its 2.2-million-square-foot plant in Tucson, and expects short-term declines in orders for its Phoenix and Maverick missiles. That means a consolidation of its facilities with Convair’s would be a logical outcome of a merger, observers said.

The announcement on Wednesday by General Dynamics, San Diego’s largest private employer, that it plans to sell its Convair and Electronics divisions put the jobs of 10,400 San Diegans in jeopardy. The giant defense contractor would not disclose possible buyers, a timetable for the sales or how many local jobs might be lost.

But San Diego civic and business leaders feared Thursday that a purchase of the units by outside companies could lead to the loss of thousands of jobs in an economy already battered by defense cutbacks and the recession. General Dynamics alone has cut its San Diego work force to 13,500 employees from 17,500 in less than two years.

In addition to Tomahawk Cruise missiles, the Convair division’s 8,000 employees make fuselages for McDonnell Douglas’s MD-11 commercial jetliner. The Electronics division’s 2,400 local employees make sophisticated communications and weapons-control systems.

Local labor leaders say they have heard rumors that General Dynamics is negotiating the sale of the MD-11 airliner fuselage manufacturing operation to an unidentified Asian company, a move that would eliminate 3,500 local jobs. General Dynamics officials also declined Thursday to comment on the fuselage business’s fate.

No matter how many jobs eventually are lost, San Diego will feel intense economic pain because jobs now at risk are “high-paying, highly-taxed jobs, the kinds of jobs we really hate to lose,” San Diego Economic Development Corp. President Dan Pegg said.

“If jobs do disappear, people are going to have a tough choice,” Pegg said. “Either they take lesser-paying jobs and remain in San Diego or move to where jobs are available. It’s a sad commentary, but it’s a sign of the times.”

“It’s kind of like on Dec. 7, 1941, the California economy went to war and never came back,” Greater San Diego Chamber of Commerce President Lee Grissom said. “Well, it’s now coming home. . . . The question is, what do we use to replace it?”

If there is a symbol of San Diego’s post-World War II prosperity, it is Convair. The company was created during World War II from two military aircraft manufacturers. Given Convair’s military background, it’s not surprising that the operation’s employment has risen and fallen with the cyclical turns of the defense contracting industry.

But layoffs have become a way of life at the company over the past two years as its defense contracts have shrunk and orders for MD-11 jetliner fuselages from McDonnell Douglas have slowed. Earlier this year, General Dynamics indicated that defense-spending cuts might force as many as 1,000 layoffs annually over the next few years.

But emotional and economic pain generated by recent layoffs would pale in comparison to the worst-case scenario arising from an outright sale of Convair and Electronics, in which buyers would close local operations, consolidate production elsewhere in the nation and leave thousands of General Dynamics employees on the streets.

And, since General Dynamics is heavily dependent upon local suppliers, the economic pain would spread even further.

“Our research tells us that the (job-loss) multiplier in the aerospace industry is 1.66,” Grissom said. “So, if we lose 10,000 jobs at GD, we’ll lose a total of 16,600 jobs throughout the county,” with the other 6,600 coming from other businesses.

Jobs at risk countywide include the proverbial butcher, baker and candlestick maker--any provider of goods or services who counts the company or its employees as a customer.

During the 1970s, former Rohr Chairman Burt Raynes once tried to show how important big employers are by paying his employees partly in silver dollars. “People found (the dollars) turning up all over the place . . . in donations at the Little League, the groceries, the cleaners, everywhere.”

Although massive layoffs at General Dynamics are easy to chronicle, the ripple effect throughout the economy would be difficult to track.

Many of those privately owned companies will be identified later this year when the city of San Diego completes a survey that is designed to determine how many small companies act as suppliers to General Dynamics and other defense contractors.

San Diego is not alone in suffering the economic consequences of the end of the Cold War. Overall, civilian and military aerospace industry employment nationwide will probably fall to 1.1 million at the end of 1992, down from 1.3 million in 1989, according to Virginia Lopez, director of the Washington-based Aerospace Research Center.

Similarly, the center expects that the utilization rate for aerospace manufacturing plants, now at its lowest point since 1984, will continue to fall. And, as companies shrink, they will lop off jobs and excess production capacity in order to cut expenses, Lopez said.

General Dynamics’ plan to sell off marginal businesses “is one that reflects the understanding that the (defense) industry is shrinking,” Lopez said.

Local civic leaders say they won’t simply wait and see what the new owners will do with the local operations once deals are consummated. Mayor Maureen O’Connor on Wednesday pledged to assemble a coalition of civic and business entities that will fight to retain jobs.

“We’ll do anything we can to keep the employment base here,” Pegg said. “We look forward to meeting the new owners, and we’re already trying to contact prospective buyers to see what the potential is for keeping the operations in San Diego.”