Rockwell Launches Diversification Plan in Era of Military Downsizing : Expansion: The Seal Beach-based company says it will apply more defense technology to commercial products. Its profit fell 20% as Pentagon contracts dwindled in 1992.
Rockwell International Corp. is expanding outside the defense and aerospace industries amid lingering uncertainty about government spending, the chairman of the high-tech conglomerate said Wednesday.
Rockwell, based in Seal Beach, expects its defense and aerospace business to remain stable, but the company anticipates global growth from its automotive, factory automation, telecommunications and graphics ventures as the economy improves, said Donald R. Beall, chairman and chief executive officer.
“We’re working very, very hard to take the military capabilities the company has and apply them to commercial applications wherever we can,” Beall told about 400 shareholders at the company’s annual meeting.
Rockwell is putting its expertise in avionics, defense electronics and satellites to use in the ground transportation business, creating communications systems for railroads and truckers, and traffic management systems for buses, Beall said.
The company’s profit fell 20% in 1992 to $483 million because of reduced space and defense spending in the United States and the recession in other countries. But Beall said Rockwell thinks growth in its commercial businesses will fuel double-digit earnings growth this year.
Last week, Rockwell announced that it would suspend its repurchase of common shares so it could make acquisitions to strengthen its commercial business. Beall said he could not comment on any potential transactions.
The company has gone through a metamorphosis in the past decade. Defense contracts have fallen to 27% of corporate sales, down from 50% in the mid-1980s.
Employment has fallen from about 123,000 in 1985 to about 78,700.
“We anticipated there would be a decline in the U.S. defense budget and have replaced nearly all of the reduction in defense sales by growing our commercial, international and NASA business,” Beall said.
Still, defense is an important part of the company’s livelihood. Last fall, Rockwell and TRW Inc. of Cleveland each won $495-million, six-year contracts to develop a space-based surveillance system to track ballistic missiles and locate space debris.
Rockwell is also bidding on a contract for a ground-based missile interceptor. The government has said it will award contracts later this year.
Both projects are part of the Strategic Defense Initiative, known as Star Wars.
The company’s work for NASA--building space shuttles and working on the manned space station--has held steady for several years. The NASA contracts make up about 17% of corporate sales.
Beall and 11 other board members were reelected at the meeting.
Shareholders overwhelmingly rejected a proposal that would have required the company to form a subcommittee to develop ethical criteria for accepting military contracts. Rockwell’s board had recommended voting against the proposal, citing its own review and oversight responsibility.
Rockwell moved its corporate headquarters to Seal Beach from Pittsburgh in 1988. The company was formed in 1967 when North American Aviation of El Segundo and Rockwell Standard of Pittsburgh merged.
