Aerospace Swords Into Plowshares : Defense Contractors Convert to Consumer Goods and Brush Up on Their Rusty Marketing Skills


At TRW Space and Electronics Group in Redondo Beach, engineers who once designed missile guidance systems now develop radar devices that will help get a Winnebago driver safely to Disneyland.

At Aura Systems Inc. in El Segundo, technicians who once created electromagnetic devices for the Strategic Defense Initiative now rig pillows with hi-tech speakers to provide couch potatoes a new experience in television sound.

And at a Torrance unit of Hughes Aircraft Co., designers who provided power systems for fighter-jet radar are now perfecting electric charging stations for battery-driven cars.

Increasingly, South Bay aerospace contractors are entering the brave new world of defense conversion, taking Cold War technology and putting it to commercial uses. The South Bay, in fact, has become a conversion showcase. In the past two months, defense department officials, Vice President Albert Gore and members of Congress have visited local plants to tout conversion as a cure for ailing, defense-based economies.


In June, Los Angeles County corporate chieftains, university presidents and government officials formed the High Technology Council, which is expected to pay close attention to the South Bay in its drive to promote conversion efforts.

“The South Bay is a premiere laboratory for the entire grand experiment,” said Rohit Shukla, director of aerospace and high technology business for the Los Angeles County Economic Development Corp., a nonprofit group promoting business growth. “It’s one of the areas hit the worst, but it’s also poised to make the biggest recovery.”

There is, to be sure, concern that the experiment could fail.

Some doubt that defense businesses, so accustomed to dealing with the Pentagon, can successfully adapt to the hurly-burly of the private market. These skeptics say contractors lack a crucial skill: consumer marketing. And contractors themselves downplay the job payoff from their new ventures, mindful of the failure of conversion efforts in the 1970s.


Then there’s the sluggish economy.

“The sum total of all (the conversion work) that is being done can have an impact,” said Joan Horn, chairwoman of the Defense Reinvestment Assistance Task Force for the Department of Defense. “But in the final analysis, the economy has to move.”

Still, aerospace companies with plants in the South Bay are clearly banking on a conversion payoff. Given recent economic trends, many experts say, the gamble is worth the effort. Since 1989, the South Bay has lost 63,100 jobs, many of them in areas of heavy defense spending, such as the manufacture of missiles, space vehicles, instruments and electronic components.

“There’s going to be a lot of wrenching going on and a significant loss of jobs,” said Shukla. But (with conversion) what we will get are more (responsive,) market-driven companies.”


For now, many contractors consider conversion a sidelight to their defense work. A recent study conducted by A. T. Kearney and the Los Angeles County Economic Development Corp. showed that smaller companies are the ones most aggressively pursuing conversion projects. Of the 70 Los Angeles County companies surveyed, 60% of the suppliers and 29% of the subcontractors were pursuing conversion work. Only 10% of prime contractors had projects on the table.

“It’s a little easier (for the smaller companies),” said former Gov. George Deukmejian, chairman of the Economic Development Corp. “There’s not that huge bureaucracy, and they can make decisions very quickly.”

One such company is Aura Systems in El Segundo, which was formed in 1987 to develop electromagnetics and optical technology for the Strategic Defense Initiative.

By 1990, with SDI’s prospects dimming, Aura’s executives decided to concentrate on commercial markets. The company now has a slew of projects in development, including a lightweight television speaker with less distortion, greater bass output and higher volume than most on the market. Daewoo Electronics Corp., a consumer electronics company in Korea, plans to order 2 million of the speakers by next June, bringing in $4 million for Aura.


Aura’s other projects include a more efficient valve system for car engines, an improved technique for cataract surgery and a spool-like device, to be connected to movie theater seats, that converts sound energy into vibrations. A home version of the vibration machine, to be called PillowSonics, is due on the market this fall.

Aura is also developing a high-definition television and a movie projector that would eliminate the need to distribute celluloid prints to hundreds of theaters each time a film opens. Movie signals would be beamed from a studio via satellite to the theaters, and the projectors could screen an image that matches the quality of film.

Said Larry Shultz, Aura’s senior vice president of audio and video technologies: “The day of the second-run theaters will be over.”

Though prime defense contractors are generally less inclined to attempt conversion projects, several with plants in the South Bay--Hughes Aircraft Co., for instance--are taking the plunge.


Hughes, more commercially minded since being bought by General Motors in 1985, is using defense technology to develop a satellite television service called DirecTv and an auto radar system now being tested that helps police track down suspects.

Two years ago, Hughes engineers set up shop in a former military electronics plant in Torrance to launch one of the company’s most ambitious conversion efforts: to build power inverters for electric vehicles, such as the Impact, the electric car being designed by GM.

The inverter transforms the battery’s energy into electricity more efficiently than other such units on the market--as much power, company officials say, as is typically consumed by a one-block residential neighborhood. The system, slightly larger than a briefcase, is derived from electronics that Hughes developed to power radar aboard military jets.

In June, Hughes signed a deal to supply a less expensive version of the technology to Electricar, a Los Angeles company that is converting cars and trucks to electric power.


The company also has developed charging stations, to be installed at public garages, restaurant parking lots, shopping malls and service stations. The charging stations would be equipped with a plug the size of a table tennis paddle that would be inserted into the front of an electric car to recharge it.

Hughes has placed its power inverters in an electric bus, developed with Specialty Vehicle Manufacturing in Downey, and an electric pickup truck, also made by Electricar. At Hughes’ Lomita Boulevard plant, visiting reporters are allowed to take the pickup for a spin.

“Everyone thinks golf cart, " said Fred Silver, marketing manager for commercial programs at Hughes’ Power Control Systems Division in Torrance. “But when people see how it runs, it’s kind of a moment of disbelief and awe that such a small motor can do that.”

Other prime contractors getting into the conversion act include Northrop and TRW.


In El Segundo, Northrop Corp.'s Aircraft Division is leading a group of companies in the design of an advanced-technology bus built with lightweight composite material similar to that used in the Stealth bomber.

In Redondo Beach, TRW’s space and electronics group, using employees from its defense and commercial units, is developing a radar system to eliminate blind spots around vehicles and help drivers keep track of oncoming traffic.

The company has already had success in auto products: Last year, it produced about 3 million sensor and inflater units for auto air bags, a product spun off from military technology in 1989. The air bag systems are produced and sold by a newly created unit of TRW.

The radar product, which has its roots in high-frequency military electronics, could lead to the creation of hundreds of jobs. But the company is cautious about making predictions.


“We don’t want to develop a new product and new market at the same time,” said Peter Staudhammer, vice president of science and technology at TRW. “That’s a problem that many have with this.”

Indeed, convincing consumers is one of the toughest challenges facing defense contractors as they try to crack the civilian marketplace.

The electric vehicles Hughes is helping to build, for instance, are being designed to match gas-powered vehicles as much as possible in acceleration and braking. But the electric cars and trucks are strangely quiet and can travel only 70 to 100 miles on a single battery charge.

“You can’t pile in and take off to Vegas,” said Kearney Bothwell, a spokesman for GM Hughes Electronics in Los Angeles. “It’s a commuter car, a second vehicle.”


To turn the public on to electric transportation, Hughes and other manufacturers are trying to persuade city governments to operate electric buses and eventually place other electric vehicles in their fleets. The hope is that by seeing electric-powered municipal cars and riding in electric city buses, the public will drop any misgivings about electric vehicles.

Some cities have begun incorporating electricity into their transportation plans. Torrance has agreed to buy at least one of the Hughes/Specialty Vehicle Manufacturing buses and plans to begin operating it this fall. Beverly Hills, meanwhile, plans to install electric-car charging stations in a city parking structure, although no manufacturer has been chosen.

To head off safety fears about its charging stations, Hughes has created a video presentation for potential customers in which its charging paddles are dipped into goldfish tanks without causing an electric shock.

“It’s education first, demonstration second,” Silver said. “We’re very good at that. We don’t need the mentality of ‘How many cars did you sell today?’ ”


Defense giants, used to working through all stages of product development with their Pentagon customers, often appear reluctant to risk devoting too many resources to projects that might be rejected by a fickle public.

TRW, for instance, has assigned only 30 employees to the development of its automobile radar system. Hughes, meanwhile, employs about 150 people in Torrance to make the inverter and charging systems for electric vehicles. That figure is expected to double by the mid- to late 1990s--a tiny gain, considering that 12,000 jobs have been lost at Hughes since 1989. Many companies point to ill-fated conversion attempts in the 1970s. After the Vietnam War, many Pentagon contractors poured billions into the production of buses, yachts, solar energy and even VCRs, only to fail to penetrate a market.

“They fell flat on their face because they didn’t know the commercial market,” said Steve Jarvis, director of the Office of Competitive Technology at the California Department of Trade and Commerce. “And now, it’s going to be much harder to do. The market moves much quicker, and it’s a global economy.”

Many contractors prefer to move cautiously, competing for a smaller piece of the conversion pie--in some cases with civilian government agencies as the customer. Northrop, for instance, is building a prototype of its lightweight bus under a Southern California Transit District contract that involves 18 other suppliers.


In some cases, government has created a market for products offered by contractors. Hughes, for instance, stands to gain from a state anti-pollution law that requires 2% of each auto maker’s California sales to be electric vehicles.

Even when contractors attract customers in droves, some--particularly smaller companies--have trouble raising the private capital they need to follow through on their conversion projects.

Two South Bay defense contractors, Data Integration Solutions Corp. in Gardena and Dyna-Cam Industries in Redondo Beach, turned to EDC, the nonprofit development group, receiving $100,000 in low-interest loans.

Data Integration Solutions Corp., founded by three former aerospace engineers, is developing software to tie together diverse computer data networks. Dyna-Cam, which has been designing a lighter and mechanically simpler aircraft engine for the military, now wants to sell the propeller engine commercially.


“We found that (venture capitalists) were incapable of grasping the capability of the engine,” said Patricia Wilks, Dyna-Cam president, who has also applied for state grant money to help finance production of the aircraft engine. “They were so dependent on following the lead of someone else.”

Such problems make it unlikely that the switch from defense work to commercial projects will produce dramatic job gains anytime soon. But over the long term, supporters of conversion say, the entrance of defense contractors into the civilian marketplace could help reshape California’s economy.

“If this works, . . . what we will see is a regeneration,” said Rep. Jane Harman (D-Marina del Rey), who is proposing a federal bill to promote conversion projects. “New industries (would be) growing in the South Bay, with the potential of becoming bigger and more successful than the ones they replace.”

The Next Target: Consumers Southern California’s defense contractors have launched commerical projects ranging from mass-transit trains to golf clubs. Among the efforts going on in the South Bay: Hughes Electric vehicle components: The Impact, the General Motors electric vehicle expected to hit the market in the new few years, includes Hughes’ power inverter, which transforms battery energy into electricity. Hughes also developed easy-to-use charging stations, which can resupply batteries with energy in 20 minutes. The company is adapting defense technology to other sectors, such as satellite television and postal scanning systems. TRW Auto radar: The device, adapted from high-frequency military electronics, would warn motorists of blind spots and obstacles in the roadway. More advanced versions will detect oncoming vehicles and activate air bags before a collision. Aura TheaterSonics: An electro-magnetic speaker connects to a theater seat, giving viewers a greater sensation of the action ont he screen than conventional theaters because of lower distortion and greater bass out-put. The product is one of Aura’s off shoots from technology it created for the Strategic Defense Initiative. Northrop Advanced technology bus: A lightweight, advanced technology bus would cut down on pollution because of its low exhaust emissions, includes some of the structural innovations Northrop used int he stealth bomber. The company is leading 18 other firms in the initial design of the vehicle. Job Losses The slumping economy has taken a huge toll on defense contractors based int he South Bay. In the last decade, employment has been hit hard. In thousands Aircraft manufacturing 1983: 6.9 1989: 15.5 1993: 10.1 Missiles and space vehicles 1983: 7.5 1989: 9.3 1993: 5.6 Instruments manufacturing 1983: 16.6 1989: 10.7 1993: 7.2 Sources: Stanley R. Hoffman Associates Inc.; Southern California Assn. of Goverments; California Employment Development Department