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It’s Official: Hughes Takes Over Missile Unit in S.D. : Defense: But the $450-million sale of General Dynamics missile operations to Hughes Aircraft is not good news for 2,800 workers in San Diego County.

SAN DIEGO COUNTY BUSINESS EDITOR

The $450-million sale of General Dynamics’ missiles operation to Hughes Aircraft has been completed, the prelude to what will likely be a wrenching reorganization affecting thousands of San Diego workers.

The missiles division that was sold includes the Tomahawk Cruise and Advance Cruise missile programs in San Diego that now employ 2,800 people. In addition, Hughes Aircraft is acquiring four other General Dynamics missile programs that employ 4,800 in Pomona and Rancho Cucamonga.

The proposed sale, announced in May but closed only after last week’s approval by the government, is part of a wide-ranging restructuring of the U.S. defense industry prompted by a shrinking U.S. defense budget and more-competitive bidding.

General Dynamics officials said that it was business as usual Monday morning as employees reported for their first day of work as Hughes Aircraft workers. The deal was consummated late Friday night when Hughes Aircraft, a unit of General Motors’ GM Hughes Electronics subsidiary, paid $450 million in General Motors common stock.

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Hughes will merge the General Dynamics missiles unit with its own missiles operation, creating a 14,600-worker operation with more than $2 billion in annual sales.

The merger could be painful for most San Diego missiles workers. Hughes Aircraft is expected to move the bulk of the missiles manufacturing under a single roof out of town, either to Tucson or Pomona, resulting in the loss of hundreds, even thousands, of jobs here.

San Diego has been all but ruled out as the site for the consolidation because of relatively high costs here, though some production could remain until the contracts expire. Hughes Aircraft will announce next month how it plans to reorganize the newly merged missiles unit.

Before announcing the sale of the missiles unit to Hughes Aircraft in May, General Dynamics conceded earlier this year that it no longer could compete in the missiles business, in part because of the high costs of doing business in San Diego.

Till now, General Dynamics Convair has shared the annual Tomahawk cruise missile procurement with McDonnell Douglas, but the Navy announced this month that it will start buying from a single source starting in fiscal 1994, setting up a competition between Hughes Aircraft and McDonnell Douglas to become sole supplier.

The 2,800 employees in San Diego going over to Hughes Aircraft are fewer than than the 4,500 local workers that General Dynamics initially said would be transferred.

That’s because 1,000 General Dynamics workers that were thought to be associated with missiles production were actually working on General Dynamics Convair’s MD-11 aircraft fuselage operation. Another 350 are service-related workers that General Dynamics will keep for its other San Diego divisions. And about 200 workers have been cut through attrition and layoffs since May.

However Hughes Aircraft decides to reorganize the merged unit, many of the 2,800 local missile workers are scheduled to lose their jobs by next August when the advanced cruise missile program expires, a victim of defense budget cutbacks.

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Hughes Aircraft and General Dynamics officials were unable Monday to say how many workers on the advanced cruise production line stand to lose their jobs over the next year.

Without making any guarantees, Hughes Aircraft officials promised Mayor Maureen O’Connor and the City Council that they would try to find jobs for displaced missile workers in other local Hughes Aircraft units. Hughes Aircraft employed 2,700 workers in San Diego County before the missiles merger.

General Dynamics also announced the impending retirement of Michael Keel, who has been acting vice president and general manager of Convair and executive vice president of General Dynamics missiles and electronics group.

General Dynamics also announced that Mike Wynne is the new president of the Space Systems division and that Art Veitch is the new general manager of the remaining elements of the Convair division. Terry Straeter is now general manager of the General Dynamics Electronics division.

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In addition to the Tomahawk and Advanced Cruise weapons, the major General Dynamics missile programs acquired by Hughes include the Standard shipboard surface-to-air missile, the Stinger portable anti-aircraft missile, the Phalanx shipboard anti-missile gun and Rolling Airframe Missile ship self-defense systems.

Hughes Aircraft manufactures the Phoenix air-to-air missile, the Maverick air-to-ground missile, the TOW anti-tank missile, and the AMRAAM advanced medium-range air-to-air missile.


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