Northrop May Purchase Convair’s Fuselage Unit
Los Angeles-based Northrop is holding “early discussions” about acquiring the MD-11 airliner fuselage business from General Dynamics’ Convair Division in San Diego, Northrop Chairman Kent Kresa said Wednesday.
If a deal is struck, it might spark a bidding war between Los Angeles and San Diego for the thousands of well-paid jobs. San Diego already is pitted against Arizona, which is using a string of incentives to woo Hughes Aircraft Co. after its agreement earlier this month to buy Convair’s San Diego-based missile division.
The Convair operation at Lindbergh Field, where 3,500 employees build fuselages for the McDonnell Douglas jetliner, “could fit into our long-term strategy,” Kresa said during Northrop’s annual shareholders’ meeting in Los Angeles.
Northrop, one of the nation’s largest defense contractors, has not elaborated on that strategy, but the company appears to be interested in becoming the leading producer of commercial aircraft fuselages. Northrop already has made a bid to acquire a piece of LTV Corp.’s commercial aircraft business.
Kresa’s comments prompted immediate speculation in San Diego on whether Northrop might view the MD-11 operation as one way to augment shrinking military business at its massive aircraft production facilities in the greater Los Angeles area. About 25,000 employees work at Northrop’s plants in Hawthorne, El Segundo, Pico Rivera and Palmdale.
San Diego officials expressed hope Wednesday that Northrop’s interest signals a positive development for the city, which stands to lose thousands of jobs as General Dynamics sells off the bulk of its local holdings.
“All we can do is be hopeful that the (MD-11 program) buyer doesn’t have excess capacity elsewhere in a lower-cost environment,” said Dan Pegg, president of the San Diego Economic Development Corp. “If General Dynamics has to sell the MD-11 business, we want the jobs to stay here.”
Kresa said any consolidation of the aircraft operations of LTV, Convair and Northrop--even if the deals are completed--is “at least three years down the road.”
Northrop evidently has excess capacity at its Hawthorne plant, but a Northrop spokesman on Wednesday declined to say how much.
General Dynamics has not identified any potential buyers for its Lindbergh Field fuselage manufacturing operation. Company executives declined Wednesday to discuss Kresa’s comments.
The MD-11 program was put up for sale earlier this month when General Dynamics Chairman William Anders said the company would sell off its San Diego-based Convair and Electronics divisions as part of a continuing corporate restructuring.
General Dynamics already has agreed to sell its missile manufacturing business, with 4,500 local employees, to Hughes Aircraft Co. That announcement prompted immediate speculation that thousands of jobs might be lost in San Diego if Hughes consolidates its missile business at its massive plant in Tucson.
Although Northrop is known largely as a military contractor--90% of its $5.7-billion in 1991 revenue came from the Pentagon--it has a small presence in commercial aircraft manufacturing. Northrop has built fuselages for the Boeing 747 jetliner since the 1960s.
Northrop’s commercial aircraft business will grow significantly if it completes a previously announced bid to acquire a 49% interest in LTV’s aircraft business, which produces major parts for Boeing’s 747, 757 and 767 jetliners, McDonnell Douglas’ new C-17 military cargo jet and Northrop’s B-2 stealth bomber.
Kresa’s acknowledgment that Northrop is talking to General Dynamics about the MD-11 business caught local labor and business leaders by surprise.
“This is the first we’ve heard of it,” said William Hickey Sr., president of International Machinists Union Local 1125, which represents thousands of General Dynamics employees.
A deal involving Northrop and Convair’s commercial aircraft operation “would make sense if Northrop wanted to build its base in the commercial sector,” Hickey said. “I’m familiar with their interest in LTV.”
The eventual buyer of Convair’s MD-11 business would be purchasing “the existing tooling, the employees and a location” that is relatively near Long Beach, where McDonnell Douglas assembles the MD-11, said Pegg of the San Diego Economic Development Corp.
It’s relatively common for aircraft manufacturers to have manufacturing plants hundreds of miles away from their assembly plants, observers said.
LTV, McDonnell Douglas and Northrop all have commercial aircraft structures and components manufactured at plants around the country.
Northrop’s 747 work, for example, is done in Los Angeles, with finished product shipped via air to Boeing’s Seattle production plants for assembly.
Similarly, Convair has the sole contract to build MD-11 fuselages for McDonnell Douglas, which assembles the jetliner in Long Beach. Convair uses ocean-going barges to transport fuselage sections from its Lindbergh Field plant to Long Beach.
McDonnell Douglas has ordered 200 MD-11 fuselages from Convair. The company had delivered 63 fuselages as of Dec. 31, but McDonnell Douglas slowed orders for the fuselages earlier this year as airline orders stalled. That cutback sped up the pace of layoffs in progress at General Dynamics.
It had been rumored that Taiwan Aerospace Corp. was discussing an acquisition of the MD-11 fuselage unit, but this was denied in Taiwan.
“We have all kinds of people walking through, looking at the line,” Hickey said. “It’s driving people nuts. . . . We can’t get anything concrete from the company . . . and we don’t know who’s looking to buy us.”
Hickey said his union will be “happy to do business with Northrop. They’re an American company, a good, strong company. Our interest all along has been keeping the jobs here in San Diego.”
Under the agreement to buy the LTV aircraft operations, Northrop has an option to buy the entire business after three years.
SALE OF MISSILE UNIT: Cuts in the Pentagon budget and changing bidding procedures pushed General Dynamics to sell its San Diego-based Convair missile
