Defense Industry Experts Learn Harsh Lessons : Business: Executives and engineers find the transition to the civilian economy is a far from easy task.

Ordinarily, San Diego engineer Robert McMurray has better things to do that sit in an all-morning seminar with a room full of executives in blue suits. He’d rather be in his factory, designing the computer display screens that his company sells to the military.

But these are extraordinary times for the 1,000 companies in San Diego--including McMurray’s--that depend mainly on defense contracts for work.

With the Cold War over, and defense budgets declining, contractors are desperately seeking ways of converting their products and services to commercial markets.

Self-preservation is the order of the day.

That’s why McMurray and 150 others attended a Thursday seminar titled, “Finding New Civilian Markets for Your Defense Technologies.” Sponsored by UC San Diego’s Connect program and the American Electronics Assn., the meeting was designed to give companies practical advice on how to make the switch.

The audience listened intently as the speakers described commercialization as difficult, costly, time-consuming and rarely successful. Many of the speakers were executives at defense firms who have already tried to develop commercial products--with decidedly mixed results.

Nevertheless, those in the audience seemed grateful for the straight talk.

“This is all new for us,” said McMurray, of GEC Marconi Electronics, during a break in the seminar. “Where do you start when you’re a 100% defense company and you need to branch out into commercial? We’re just trying to find out what steps to take.”

Unfortunately, there are few guideposts on the path to commercial success, Titan Corp. Chief Executive Gene Ray told the gathering. His best advice to companies trying to convert to commercial products was to make sure they had competent management to lead the company into uncharted commercial waters.

To illustrate, Ray told how a lack of experience and expertise in commercial markets cost his previous employer a potential bonanza in holography, the technique for producing the images now used to foil counterfeiters of credit cards and sports collector cards.

Jack Farnan, human resources director at San Diego’s Orincon, told the audience that his company has little to show after two years of looking for outside investors and a new commercial market niche for its defense electronics technology.

His advice: keep the company in front of the public as much as possible and network with potential “strategic partners.”

Despite the difficulties in conversion to commercial markets, defense companies have little choice but to start, given the economic reality of a slowing war machine and its already painful effects on San Diego’s economy, which is one-fifth reliant on defense contracts and payrolls.

The U.S. defense budget has declined 29% over the last seven years and is still headed down. Nationwide, the number of engineers working for defense contractors is expected to drop by 37% over the five-year period ending 1995.

The effect of that downshifting has been obvious on San Diego’s economy. One local defense-dominated job category declined by 13% in 1991 from the previous year and the output of San Diego’s defense industry was off by nearly 5% in 1991 from the previous year, according to a figures from the Greater San Deigo Chamber of Commerce.

The problem is that most defense contractors are unequipped for commercial markets, said speaker Tom Darcy, an accounting and consultant at Price Waterhouse of San Diego.

While the defense market is slow moving and based on long term strategic requirements of the government, the commercial market is constantly changing. Defense firms have trouble adjusting to that “new world.”

In agreement was John Collins, an accountant with Hughes Missile Systems who was in the audience and who, after spending a career with defense contractors, is now trying to decide whether he should shift to a commercial employer.

“Very few of us are prepared for the exigencies, the problems, the conditions of the commercial marketplace,” Colins said. “The government was always looking for the enemy. If we could convince it that we had the technology to help find it, the government would buy it. Government’s scenario was always long term, looking for us to solve the problems.

“With commercial markets it’s much faster moving. The technology and products are leap-frogging . . . rapidly. You’ve got to stay flexible.”

Collins said he was attending the seminar to help decide “what to do with the rest of my life . . . to find out how transportable my skills are.”