Rockwell Plans Job Relocations to O.C. to Save It $100 Million : Consolidation: 1,300 employees will be shifted from El Segundo division to underused Seal Beach headquarters.
In a move to save $100 million that will bring 750 more jobs to Orange County, Rockwell International Corp. is shifting around employees to make better use of its plants in Southern California.
Rockwell said that by the end of next year, it would move 1,300 employees from its North American Aircraft division in El Segundo to underused buildings at the diversified technology company’s Seal Beach headquarters.
Rockwell also plans to shift 550 workers at its Space Systems division, who are now in Seal Beach, back to the division headquarters in Downey, where Rockwell built the space shuttle fleet.
The moves will increase Rockwell’s Seal Beach work force to 2,650 from about 1,900 now. Since few El Segundo workers are likely to move to residences in Orange County, the economic benefit to this area is likely to be muted.
After the relocation is complete, Rockwell will have 7,650 employees in Orange County.
“We’re really trying to deal with business conditions in the defense market,” said John A. McLuckey, senior vice president of Rockwell and president of its Defense Systems business. “The name of the game is affordability. We’re trying to free ourselves of excess space, consolidate, reduce our operating costs and make ourselves more competitive.”
The consolidations are expected to reduce Rockwell’s operating costs by about $100 million over five years, primarily by disposing of its excess properties. Since the National Aeronautics and Space Administration funds the Downey division’s programs, the consolidation there is expected to save NASA as much as $30 million in the next five years.
McLuckey emphasized that the employee moves were based solely on industrial and office space needs, not on whether Rockwell plans to retreat from or expand into new markets.
William Mellon, a spokesman for Rockwell, said employees will not receive relocation assistance because the company’s policy is to pay for moves only if the work site is moved more than 35 miles away. El Segundo is 28 miles from Seal Beach.
He added that many employees will actually have shorter commutes by switching from El Segundo to Seal Beach because they already live in the South Bay region of Los Angeles County.
“It’s a very sensible move to free up some valuable real estate and take advantage of the cost savings they can get from it,” said James Schmitt, analyst at Westcountry Financial, a stock research firm in Ventura County.
Unlike other companies, Rockwell only considered using its existing property for the relocation plan. But switching to different locations these days can result in better accommodations at lower rents. And cities have been forced during the recession to compete for corporate citizens.
For example, El Segundo-based Digitalk Inc. said last month that it would move 80 jobs and its headquarters to a vacant office tower in Santa Ana. And Loral Corp., which threatened to move jobs out of state, decided this week to relocate 1,300 employees from Newport Beach to Rancho Santa Margarita.
While more people will be working in Orange County, Rockwell’s Mellon said the company’s surveys show it is unlikely that any workers will be forced to move because their work site has been relocated. No layoffs are expected to result from the series of moves, Mellon said.
Overall, the relocations make sense because Rockwell’s Southern California work force has shrunk because of lower defense and space budgets since the end of the Cold War. The trend has left it with too many buildings.
Rockwell has 77,500 employees, down from 121,000 in 1986 during the defense boom. The North American Aircraft division has shrunk drastically since it completed a fleet of 100 B-1B bombers for the Air Force in 1988. Rockwell now has 21,500 employees in Southern California.
A series of developments made this latest shuffle necessary. The company renovated its Downey facility, making room for employees who were housed in empty buildings in Seal Beach.
The Seal Beach unit also lost a 1989 bid to continue building a series of navigation satellites for the Air Force. The $1.2-billion contract instead went to General Electric Co. and Martin Marietta Corp.
Rockwell delivered its last satellite under its previous contract last April, leaving hundreds of workers without jobs and a number of empty buildings at the site.
Thus, there was room to move the North American Aircraft division from half-empty buildings in El Segundo to the Seal Beach site, and, as the Downey renovation is completed, enough room to return 550 employees to the Space Systems Division headquarters. About 50 division employees will stay in Seal Beach.
Rockwell has juggled its office and factory space for the past six years, cutting its total property by 24% since 1987 to 11.4 million square feet today. After the latest consolidation, the amount of building space held will have been reduced to 67% of the 1987 level. The company will try to sell any vacant space.
Sam Iacobellis, Rockwell executive vice president, said the company has hired a consulting firm to determine what to do with the 90-acre complex in El Segundo, where Rockwell was based until December, 1991, when it moved 300 employees and its corporate headquarters to Seal Beach. Rockwell owns five buildings in the El Segundo complex.
McLuckey said there is no master plan for reducing Rockwell’s employment in Southern California, though he said market conditions would force the company to stay competitive.
He said it is hard to predict employment trends for various divisions, largely because it depends on how successful they are in pursuing government contracts.
In Anaheim, the company has reduced its work force from about 5,400 to 3,700 people in the past several years, leaving the site with several buildings for sale. Rockwell also has 1,300 employees in Newport Beach.
The return of the 550 employees to Downey will boost the plant’s work force to 4,600.
