The Downsizing of Defense : Northrop Grumman to Slash 8,650 Jobs

Northrop Grumman Corp., in another stark illustration of the human cost of spending cutbacks in the defense industry, said Thursday it will slash 8,650 jobs during the next 15 months, including 4,150 in Southern California.

The job losses are “a painful but necessary step to reduce our costs” and to make the contractor “a leaner, streamlined company” in the face of the defense slowdown, Northrop Grumman Chairman Kent Kresa said in a statement.

The Los Angeles-based aerospace company said it does not yet know how many of the cuts will involve actual layoffs. The number will depend on attrition and how many workers accept an early retirement program being offered to 5,000 employees.

If 60% of the eligible workers accept its early retirement offer, Northrop Grumman said it expects to incur a one-time, pretax charge against earnings of about $300 million in this year’s fourth quarter.

“We’re sorry to see this happen,” said Tom Quintana, a spokesman for the city of Hawthorne, one of the sites hard hit by Northrop Grumman’s move. “If there’s a ray of good news, at least some of the employees will have the option of getting retirement (benefits) out of it.”

Some job losses were expected following Northrop’s $2.2-billion purchase of Grumman Corp. in May and its acquisition last month of the 51% of Vought Aircraft Co. in Texas that it didn’t already own.

But Northrop Grumman said only about 1,000 of the cuts--which will also be concentrated in New York and Texas--are directly related to those deals. The bulk of the lost jobs are due to the relentless slide in Pentagon spending, which continues to leave Northrop Grumman and other defense contractors with far more capacity than they need.

While the Northrop Grumman cuts were anticipated, the company had not previously indicated how big they would be. They turned out to be substantial--about 18% of its current worldwide employment of 47,500.

The reductions include:

* 2,400 jobs at Palmdale and Pico Rivera, where the B-2 Stealth bomber is built. Northrop Grumman first disclosed these cuts last week. By 1996, the remaining 8,000 jobs at these sites will also be in jeopardy, because the B-2 program is scheduled to be completed by the decade’s end.

* 1,750 at Hawthorne and El Segundo, where Northrop Grumman makes fuselages for the McDonnell Douglas F/A-18 fighter jet as well as an attack missile known as TSSAM, aircraft sensors and other defense electronics. The two sites currently employ about 10,000 workers.

The F/A-18 work, which by itself employs about 4,000 in El Segundo, is one of Northrop Grumman’s healthier programs, with a new E/F version of the jet expected to begin production in the late 1990s. But the company said it has completed much of the E/F’s engineering and development, forcing job cuts in that program as well.

* 3,500 on New York’s Long Island. Grumman’s former headquarters, in Bethpage, is closing, and the cuts will extend to several other sites involved in defense electronics, data systems and administrative work.

* 600 at Dallas, where Vought makes a variety of aircraft subassemblies, including sections of the B-2 bomber and McDonnell Douglas’ C-17 transport.

* 400 at smaller plants nationwide.

The layoff announcements in the aerospace industry have come with depressing regularity in recent years, and were a major reason why the early 1990s marked the worst economic downturn in Southern California since the Depression.

Defense contractors have been slashing employment since the late-1980s--eliminating more than 300,000 aerospace-related jobs in California alone--and some analysts have said the process is about two-thirds complete.

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But that still means there’s more pain to come.

Northrop Grumman’s announcement came only 10 days after another aerospace giant, Hughes Aircraft Co., unveiled plans to shed 4,400 jobs in Southern California. And California workers are bracing for expected layoffs stemming from the proposed $10-billion merger of Calabasas-based Lockheed Corp. and Martin Marietta Corp.

“You’re definitely going to see continued rounds of layoffs in the industry,” said Jon Kutler, president of Quarterdeck Investment Partners, a Los Angeles defense consulting firm.

When Northrop Grumman’s job reductions are completed at the end of 1995, its California employment will total 17,850. That’s less than half what the old Northrop Corp. employed in California seven years ago.

For the fiscal year beginning Oct. 1, Pentagon procurement spending for arms and other goods will total about $43 billion, compared with $81 billion as recently as fiscal 1990, according to the Defense Budget Project, a research firm in Washington.

With that stream of Pentagon dollars narrowing, many defense firms are merging to survive the leaner times. And those deals--like most corporate marriages--are resulting in even more layoffs as the merged companies eliminate duplication.

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Richard Bitzinger, an analyst with the Defense Budget Project, said the Northrop Grumman announcement serves as a precursor for what Lockheed and Martin Marietta are likely to do. Lockheed has about 20,000 employees in California, primarily in Palmdale and Sunnyvale.

But he said that merger, too, will probably account only for a minority of the layoffs--mainly in the middle management and administrative ranks--of the new Lockheed Martin Corp.

“At the assembly line,,” he said, “the layoffs are still generated by the overall downsizing of the defense budget.”

Job Cuts at Northrop Grumman

Here are the Northrop Grumman job cutbacks and the programs affected:

CALIFORNIA:

* 2,400 jobs at Palmdale and Pico Rivera (B-2 stealth bomber)

* 1,750 jobs at Hawthorne and El Segundo (F/A-18 fighter jet, TSSAM missile, aircraft sensors and other defense electronics)

NEW YORK:

* 3,500 jobs at Bethpage (former Grumman headquarters), Melville (business development and administration), Great River (radar and other defense electronics), Holtsville (data systems; research and development)

TEXAS:

* 600 jobs at Dallas (Aircraft subassemblies made by Vought unit)

OTHER STATES:

* 400 jobs at smaller sites nationwide, including Georgia, Florida, Illinois and Massachussetts.

CALIFORNIA AEROSPACE EMPLOYMENT

The job cutbacks at Northrop Grumman are the latest in a long line of layoff announcements that have jolted California’s aerospace industry since the late 1980s. The jobs in aerospace include work in the aircraft industry, guided missiles and spacecraft, and search and navigation systems. California aerospace employment in thousands of jobs:

1993: 227

Source: Northrop Grumman Corp.; Employment Development Department