Hughes’ Cuts Now Official : Aerospace: Firm’s shutdown of Fullerton site will be largest-ever plant closure in O.C. Up to 1,000 jobs will be lost.
Hughes Aircraft Co. made it official Monday: Its huge aerospace complex employing 6,800 people here will be closed over the next two years as the company continues to slash its work force and streamline operations.
In the largest-ever plant closure in Orange County, Hughes said it expects to eliminate an estimated 800 to 1,000 jobs and transfer most of the remaining Fullerton employees to sites in El Segundo and Long Beach. Overall, Hughes said it would cut its Southern California work force by 4,400 positions--mostly through layoffs.
Although seen by some as inevitable with military spending cuts continuing to hammer the aerospace industry, Monday’s announcement was a painful one in Fullerton, not just for the workers and their families but also for a community that boomed in the late 1950s and 1960s along with Hughes, its biggest employer.
“We’ve known for a long time that this was coming, but it’s very disappointing,” said Les Ito of Anaheim Hills, a grant writer in the finance division. “A lot of people won’t know for more than a year whether or not they have a job.”
“I’d do anything just to keep my job,” said worried engineer Henri Leroy, who is married with two children. “I’d work anyplace doing anything.”
“This, of course, is a major blow” to Orange County, said Ken Moore, president of the Orange County Chamber of Commerce. Though Hughes’ employment had been shrinking in Fullerton since the mid-1980s, when it employed about 15,000 workers, the company remained one of the county’s largest private employers. The loss of those payroll dollars and taxes will undoubtedly be felt, Moore said.
But noting the county’s recent successes in retaining employers like Taco Bell and Johnson Controls, Moore said: “I don’t think it’s time to panic. If we continue to keep our head up and do what we’re doing now, we will be able to replace those jobs.”
In Fullerton, about 700 Hughes employees will remain in two leased buildings, Hughes said. But most of the 350-acre complex will be vacated by the end of 1995 and put up for sale.
“It’s a bad day for Fullerton,” said Mayor A.B. (Buck) Catlin, himself a former Hughes employee. “If Hughes’ selection criteria had been the local business climate and community amenities, we would have won hands down, but unfortunately its criteria were different,” he said.
Hughes officials did not specify the number of Fullerton workers who would be laid off or transferred, but they told workers that layoffs at the Fullerton plant would be proportional to its share of total company employment. That suggests that 800 to 1,000 positions would be eliminated in Fullerton. Without confirming the numbers, a company official said Monday that he had no problem with that estimate.
The precise number of layoffs at Fullerton and at other Hughes’ sites will depend on how many people are transferred elsewhere, retire or resign, the company said.
The layoffs will occur over the next 16 months at the Fullerton site and in El Segundo, where Hughes has 7,800 workers, as well as some of Hughes’ smaller defense systems plants, such as Long Beach and Santa Barbara.
“All defense locations will be affected,” said Hughes Chairman C. Michael Armstrong. The Fullerton plant and the others make such products as ship-based radar gear, air-defense systems and commercial air traffic control equipment.
The company’s overall layoffs alone represent 9% of its worldwide work force of 51,000, and 13% of its California employment of 34,000.
The consolidation will reduce 3 million square feet of excess space at Hughes’ facilities. But Los Angeles-based Hughes is still saddled with far more factory capacity than it needs because of the slide in defense spending, even though it has already slashed more than 10,000 jobs in recent years.
The company said flatly that it must slim down further to survive the post-Cold War era. “People keep asking when this is going to be over,” Armstrong said in a phone interview. “It’s going to be over when the defense budget stabilizes and our costs are competitive.”
In the early 1990s, Hughes consolidated its missile production--which had been spread among several sites in California and elsewhere--into one plant in Tucson, Ariz. Some workers in Fullerton are expected to be transferred there, but details were not provided Monday.
Armstrong said that the fact that Southern California accounted for such a large part of the defense industry’s buildup in the 1980s “now is the reason why Southern California is bearing such a brunt in the downsizing.”
Indeed, analysts said Hughes’ announcement won’t be the last in California. “We’re about two-thirds of the way through this downsizing,” said Nancy Bolton, an analyst with the UCLA Business Forecasting Project.
Her group estimates that another 60,000 aerospace workers statewide will be laid off by the end of 1996--when California’s total aerospace employment will drop to about 131,000, or one-third of its peak of 383,000 in 1986.
Those figures don’t include additional jobs that are lost at parts makers, restaurants and other suppliers whose business suffers because of the aerospace industry’s slump--what economists call the “multiplier effect.”
Taken together, the additional aerospace-related cuts also won’t help California’s anemic economic recovery, though some analysts said the rest of the state’s economy is trying to overcome the industry’s severe contraction.
Some economists said the latest Hughes job losses and transfers may not be all that important to the overall Southern California economy. But that’s no consolation to the communities directly hit by Hughes’ decision Monday.
“Locally, this is going to have significant impacts,” said Jack Kyser, chief economist of the Economic Development Corp. of Los Angeles County. “All of the businesses in the area will feel it.”
In Orange County, businesses were already shuddering. At Slotsy (Tours & Travel Inc. in Fullerton, owner Randy Schlotthauer) said that Hughes employees have accounted for 20% of his walk-in business and 10% of his overall customers. “It’s going to impact our business,” he said, although he added that it would not be life-threatening.
The announcement by Hughes capped months of speculation for anxious Hughes workers. Hughes, part of GM Hughes Electronics Corp., which in turn is a unit of General Motors Corp., had said in May it was studying how to consolidate its defense-electronics work.
Hughes expects to sell 286 acres of the site, while keeping 64 acres for parking and two office buildings that the company will continue leasing. (Hughes’ headquarters in Los Angeles and its satellite and communications plants in El Segundo are not involved in this consolidation.)
The big Fullerton plant, which opened two years after Hughes started out in 1957 from a couple of small buildings across from Fullerton Airport, is expected to fetch more than $75 million in one or more sales.
The consolidation stemmed from Hughes’ formation in March of a new subsidiary called Hughes Aerospace & Electronics Co., which merged the firm’s aerospace, defense, missile and systems groups. The unit, which accounted for nearly $7 billion of GM-Hughes’ $13.5 billion in sales last year, will be based in Washington.
Armstrong traveled to Fullerton to make the announcement Monday morning to more than 25,000 Hughes’ workers, via a closed-circuit television broadcast and in personal meetings with workers.
In the interview, Armstrong said California’s costly business climate played no role in Hughes’ decision, because there is nothing the state can do to prevent the defense industry’s shrinkage. But he repeated a favorite theme that California must keep improving conditions if it hopes to attract new investment in other industries.
Times staff writers Ross Kerber, John O’Dell and Debora Vrana in Costa Mesa contributed to this report.
The Hughes Cutbacks: More Coverage
* THE GLORY DAYS--Hughes Aircraft’s massive Fullerton facility stood tall in the nation’s defense and was once known as the world’s preeminent supplier of air-defense systems. D1
* SHOCK WAVE--Loss of the Fullerton plant and its jobs will hurt the city’s economy immediately, but its impact also will be felt throughout Orange County over the next few years. D1
* FEARS REALIZED--Anxiety gave way to anguish among workers and Fullerton townspeople as Hughes Chairman C. Michael Armstrong confirmed their long-held fear of a plant shutdown. D1
* SILVER LINING -- Housing developers are eager to buy a large portion of the 350-acre Hughes property in Fullerton and build homes that would bring a big tax revenue boost to the city. D6
