PERSPECTIVES ON JOBS AND TECHNOLOGY : Rethink Defense-Industry Retooling : Conversion to civilian purposes will take more government aid than politicians admit, but it’s a necessary task.

This election season, countless candidates proclaimed that their election would bring relief to beleaguered aerospace and defense industry workers left jobless at the end of the Cold War. How so? By seeing to the industry’s conversion to commercial products, the candidates vowed.

Can a company and its employees who have spent decades as integral members of the military-industrial complex change from the design and manufacture of missiles to the design and manufacture of, say, medical instruments? The answer is yes, but not overnight--and, for the most part, not by conversion of existing operations. Four barriers--cultural, entry, exit and labor--stand in the way of such conversion:

* Cultural : Engineering-driven defense companies are geared to manufacture to the specifications of one or a few customers, and at tolerance levels well beyond all but the most unusual commercial requirements. They have no experience assessing and responding to market needs and desires. Additionally, cost-plus pricing predominates defense acquisition. Thus, defense companies are used to prices rising as demand falls, inverse to market-driven commercial pricing. Finally, the adverse and unhealthy relationship between government and the aerospace and defense industries has led to an understandably risk-averse behavior within the industry, with a few exceptions. Also resulting from this relationship are excessive documentation and a “cover-your-rear” attitude. Cultural barriers are not going to change overnight, and they will not be overcome simply by technical skills retraining.

* Entry: The common characteristics of aerospace and defense companies leave a finite number of realistic commercial opportunities. The current prolonged economic slowdown leaves even fewer opportunities to expand existing commercial markets or for start-up in new growth markets. Consequently, neither entering a new market nor a start-up equates to new jobs overnight for unemployed aerospace and defense engineers and assemblers--no matter how well trained--or to use of underutilized major manufacturing facilities.

* Exit : Aerospace and defense company facilities are often massive and frequently antiquated. Tooling and equipment may be government-owned, limiting alternative uses; at any rate, they are often difficult to use in commercial manufacturing applications. But most worrisome may be the environmental legacy question. Years of lackadaisical handling of hazardous materials commonly used in the manufacture of aerospace and defense products have resulted in a major economic liability. While a few aerospace companies ironically are finding the adversity of dealing with their own environmental remediation a valuable and marketable business entry opportunity, one must ask how many aerospace workers can be employed in these new businesses.

* Labor : Retraining highly skilled aerospace and defense workers is often cited as a solution to the industry’s problem. Government-sponsored retraining would be the most visible element of a swords-into-plowshares public policy. However, it cannot be the only element. Job openings still must be created somewhere for these newly trained workers to fill. Moreover, while retraining highly skilled workers is expensive, of more concern is the lowered standard of living that these workers frequently would have to accept.

Successful examples of conversion of defense design and manufacturing companies are scarce. Most often, such commercialization comes about through transition over time via new business development and investment. At Raytheon, for example, a decades-long effort has achieved some success. Hughes, Lockheed, Northrop and others are beginning down this long path by taking advantage of sustainable core strengths.

What can government do to help these industries diversify? If the will of the people is to re-employ these workers, then incentives and assists must be provided that go beyond retraining. Our leaders must realize that, to be successful, government assistance will have to lower the barriers of culture, entry, exit and labor. Government efforts to redirect the U.S. industrial and technological base must center on the creation of the need for a highly skilled, technologically oriented work force outside of the aerospace and defense industries.

Without adequate planning for this change, the United States will forsake a de facto military-industrial policy for none at all. Time is wasting.