Hughes Closure Latest in Area’s Economic Setbacks : Business: Ripple effect of Canoga Park shutdown will be felt in many sectors. At least 15,000 regional manufacturing jobs have been cut in recent months.
The shutdown of Hughes Aircraft Co.'s missile-design plant in Canoga Park, which employs 1,900 people, is only the latest in a series of economic body blows the San Fernando Valley region has suffered in the 1990s.
The area’s industrial base and its retail interests have long been tied to the payrolls of large aerospace, defense and automotive corporations that dominated the region. But with many of those companies cutting back to face more difficult futures, the Valley’s economy is undergoing a wrenching shift.
“There’s a tremendous impact every time a business like this leaves the Valley,” said John Marquis, senior vice president of Sherman Oaks-based TransWorld Bank. “Whenever a large employer like Hughes closes a facility and moves the jobs elsewhere, it has a ripple effect on the economy.”
That ripple travels from the Valley’s far-flung housing market to the corner sandwich shop. “It’s going to be hard for us,” said Mo Kazevouni, owner of Big Mo Sub Shop, located just down the street from the Hughes plant. “Monday through Friday they make up 60% of our customers.”
Hughes, a unit of General Motors Corp., said Monday it will be shifting its missile-design operations from Canoga Park to Tucson, Ariz., where it has already consolidated other divisions. It is unclear how many workers might lose their jobs in the transfer, which is being phased in over the next 18 months.
“We anticipated it, but we didn’t know when” it would happen, said one Hughes worker who asked not to be identified. “Everybody has kind of been in shock.”
Hughes is the most recent company to have abandoned the area or at least cut back its local employment, either because of reduced Pentagon spending (in the case of defense companies) or excessive operating costs (in the case of commercial firms facing intense competition). At least 15,000 manufacturing jobs have been cut in recent years in the San Fernando, Santa Clarita and Antelope valleys and in Ventura County.
Closures and cutbacks include:
Lockheed Corp., which while maintaining its Calabasas headquarters, has moved thousands of aerospace production jobs from Burbank to Marietta, Ga. It also moved its famed advanced aircraft design unit, the “Skunk Works,” to Palmdale.
Northrop Corp. closed its sole area plant, a missile facility in Newbury Park that employed 2,000, in 1991. Many jobs were moved to other plants, but 800 people were laid off.
Several other aerospace or defense firms, including Abex Aerospace in Oxnard, Datron Systems Inc. in Simi Valley and ITT Corp.'s Gilfillan radar-equipment unit in Van Nuys have together eliminated hundreds of jobs since 1990, either through attrition or layoffs.
GM last summer closed its automotive plant in Van Nuys, the last major car assembly plant in Southern California. The move left 2,600 workers without jobs.
And Hughes’ announcement might not be the last. Its Canoga Park neighbor, the Rocketdyne rocket-engine division of Rockwell International Corp., which employs 6,000 in the Valley, faces a clouded future. There’s considerable doubt about Congress’ willingness to keep funding two of Rocketdyne’s big projects, the proposed Space Station and the National Aerospace Plane.
However, Rocketdyne spokesman Jeffrey Charney downplayed the uncertainty. “Barring any major shifts in these key programs, we expect our employment and business picture to remain stable,” he said.
To be sure, the Valley and surrounding regions still host dozens of healthy firms in fields such as computers, apparel and telecommunications, which help offset the big plant closures. Indeed, some local shopping malls said their sales are holding steady despite the layoffs.
“There’s a lot of entrepreneurship going on, creative people coming up with new ideas and companies,” said TransWorld’s Marquis.
But many of those firms employ 100 people or less, so it would take at least 19 of them to replace a single Hughes plant. And many of those firms are not paying the $50,000 or more annually to their employees that many Hughes engineers and designers earn.
It’s also unlikely that one industry will ever again dominate the region, as aerospace/defense has, or even whether a variety of other large businesses can restore the lost jobs or reinhabit the abandoned plants. GM, for instance, has yet to choose a buyer for its Van Nuys plant.
“We need to start planning now what can replace Hughes at that facility” in Canoga Park, said Joy Picus, the Los Angeles city councilwoman whose district includes the Hughes plant.
The ripple effect of the Hughes workers’ departure includes an automatic reduction in the local population’s ability to buy houses, cars, furniture and other relatively big-ticket items. Indeed, the area’s housing market has the clear imprint of the Valley’s changing industrial base.
Resales of existing houses in the Valley in 1992 fell for the fourth straight year, to 9,805, even though buyers could have taken advantage of the lowest mortgage costs in 20 years. Potential buyers are holding off because they are worried about their own job prospects, leaving sellers unable to peddle their properties, real estate brokers say.
The area’s banks likewise are struggling, because the massive layoffs and plant closures are leaving more people and more small businesses unable to pay off their mortgages and other loans.
Hughes’ closure also will affect less visible sectors of the economy. At Van Nuys Airport, for example, Hughes is one of the biggest tenants, making 1,500 arrivals and departures a year as it flies workers between Southern California and Arizona.
“We’ll have to see how it shakes out, because I’m not sure even they know how it’s going to impact them,” Ronald Kochevar, the airport’s manager, said of Hughes’ future at the airport. “I’m just sad for the economy of Southern California, losing another 2,000 jobs.”
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