SOUTH BAY / COVER STORY : Taking Control : With the embattled local economy still unsteady, residents look for ways to ensure their own job security and success.


Bob and Marianne Kelchner went to work at TRW in the 1980s with their minds focused on designing ballistic missiles or complicated radar systems--work requiring engineering degrees and high-level security clearances.

But for the past three years the couple have stained their hands with ink in the cramped quarters of their modest downtown Torrance print shop. They transformed their recreational Ford Bronco into a delivery van so they could ferry business cards and City Council campaign posters to customers.

They are among hundreds of South Bay aerospace workers whose jobs evaporated during the recession and who landed in positions with lower wages and fewer benefits. The Kelchners decided to invest in a small business so they would have more control over their own destiny--and might someday make as much money as they did in the aerospace industry.

"A lot of people were not willing to do this," Bob Kelchner says. "They figured they would just sit back and it would come to them. But that's not going to happen."

Business leaders, economists and politicians in other parts of Los Angeles County have proclaimed that the region's economy is on the rebound. But the South Bay was hit disproportionately hard by the loss of aerospace-related jobs--an estimated 80,000 positions in the past six years alone. So even though the Los Angeles County jobless rate dropped last month to 7.9%, from 8.9% in January, South Bay business leaders have doubts about how fast the recovery is taking hold locally.

"It may be recovering in some places, but it ain't recovering (here)," says Alan Schwartz, past president of the South Bay Assn. of Chambers of Commerce.

Says Mike Collins of Shorewood Realtors in Hermosa Beach: "It's the one-step-forward, two-steps-backward syndrome." Existing home sales jumped 17% in 1994, but the median prices of the homes fell 4%.

Office space is almost one-quarter vacant, more than Los Angeles County's overall vacancy rate of 19%. And aerospace giants are still cutting their payrolls. The most dramatic example is Northrop Grumman's decision in February to lay off 1,500 workers in Hawthorne and El Segundo after the Pentagon cut a missile program. That sent those who got pink slips searching elsewhere for the security that the giant firm once provided.

"I don't care about pay," says Bob Finch, a Northrop Grumman engineer and 40-year aerospace veteran who had just gotten the news that his job was cut. "I care about, 'Will this job be around?' "

It used to be that there were jobs aplenty in the area even when a company lost a contract. With a large pool of firms such as TRW Inc., Hughes Aircraft Co. and Rockwell International, a worker could just walk across the street to find work if a contract ended or was canceled.

"At the height (of the defense building boom), people could get laid off and go to the next company," says Mark Conley, 35, a mechanic on the Hornet fighter program at Northrop Grumman Corp. in El Segundo. "It was like a circle."

Not anymore. And the Pentagon and NASA cutbacks have created a "ripple effect" that affects subcontractors, machine shops, retail outlets, restaurants and mom-and-pop operations.

Earlier this month, Kaiser Permanente Harbor City Medical Center cut 95 positions. Among the reasons for the layoffs, officials said, is that fewer employees in the South Bay area are on medical plans.

When a major company cuts back, "we feel it right away," says Nick Bazos, owner of the Hairitage House, a hair styling and nail salon in Torrance. His shop, nestled in a storefront just off Hawthorne Boulevard, has seen business decline about 10% per year during the recession, he said.

"And, as far as this year," he said, "it looks worse."

June McKinley, a stylist who leases space at the shop, recently added a few new clients, but it hasn't helped her bottom line much. "They are spending the same amount, but they are stretching it. Like a perm. Instead of every four months, they will get one every six months."

The Comedy & Magic Club, a venerable South Bay nightspot, suffered its worst year since the late 1970s, when it was just opening. "There were times when I was really concerned," owner Mike Lacey says. "I would sit in the showroom, look around and say, 'What am I doing wrong here?' "

He says the only reason he survived is because top performers such as Jay Leno and Jerry Seinfeld appeared at much lower fees than they would command in Las Vegas. "The comics really stepped up to the plate," Lacey says.


South Bay business leaders have forged plans to replace the high-skill, high-wage jobs that the area has lost, but the results have come slowly.

In 1993, the South Bay captured a handful of federal contracts to help defense firms diversify into the commercial sector, but that government program is now in jeopardy as Congress tries to trim the budget.

Hi-Shear Technology Corp. in Torrance won an $800,000 federal government contract to make several devices that help firefighters tear through car metal and rescue accident victims. The government, however, cut the award short last month when Hi-Shear changed the design of one of the products.

Recently, a group led by Torrance developer Allan Mackenzie tried to create a science park to foster start-up companies. But other areas, including the San Gabriel Valley and the San Fernando Valley, also have similar proposals, competing for the same grant dollars and venture capital. The South Bay Science Center would target such emerging industries as multimedia and satellite communications in the hopes of retaining highly paid employees in the region.

These Information Age industries are likely to grow substantially in the next few years, economists say, but the companies will be much more vulnerable to competitive pressures than are defense firms. Merisel Inc. in El Segundo, one of the largest distributors of personal computer hardware and software, said earlier this month that it would lay off 61 employees, including 20 at a Rancho Dominguez warehouse. Sales have soared, but profit margins have shrunk because of fierce price-cutting in the personal computer industry.

"It has always come down to 'What do you want to focus on? What are the emerging industries?' " says Patricia Unangst, administrator of the Carson-Lomita-Torrance Private Industry Council, a federally funded job-training and placement service. "You almost have to have a crystal ball. It's a moving target nowadays."


Take Peter Brandt, who was cut from his job as an engineer on a classified military program at TRW Space and Electronics Group in 1991 after 37 years employed by Southern California aerospace firms. After he was laid off, he took classes in environmental engineering, expecting it to be a growing field with the cleanup of Superfund sites. He thought environmental consulting and cleanup firms would be looking for skilled workers.

"By the time we were finished, they were laying off," Brandt says. "Most of the money has been going to the lawyers, not the cleanup."

Even in the recession, however, some South Bay companies are growing. Davidson & Associates, a maker of educational software, hired 225 employees last year and plans to add about 100 this year. Late last year, Toyota Motor Sales USA bought a 40-acre site for future expansion of its Torrance headquarters. And even TRW Space and Electronics Group sees bright spots in personal communications. A joint venture it has with another company recently won a Federal Communications Commission license to start a service called Odyssey, which will offer voice, fax and paging communications services anywhere in the world.

Economists hold even more hope for job growth in international trade. The Port of Los Angeles, one of the largest in the country, is enjoying an uptick in Pacific Rim trade.

"You have customs brokers, freight forwarders, people working on the docks, unloading cargo, driving trucks," says Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. "If you are doing international trade, you would have to say that the South Bay is the most attractive area for you."

Real estate experts credit port-related business for filling industrial space, especially warehouses in Carson, Wilmington and Dominguez Hills. The vacancy rate fell from 13% at the start of the year to 10% at the end, according to the Seeley Co. in Torrance.

"The bleakness has passed," says Terry Reitz, a broker at Grubb & Ellis Co., a real estate firm in Torrance. "This is the beginning of the growth market."


Economists also see more manufacturing employment in light industries that churn out products from decorative pillows to cosmetics. Pelican Products in Torrance, a maker of underwater flashlights, has moved into Allied Signal's former warehouse and plans to add 35 to 40 employees this year.

"Manufacturing is starting to come back," says Bob Smith, employment specialist at the Carson-Lomita-Torrance Private Industry Council, which provides job training and placement services. "But it's not aerospace anymore."

And the wages fall short of what the aerospace industry offered. Adds Smith: "When there is competition from overseas, manufacturers are not able to pay high wages."

Recent positions filled at Kintetsu Intermodal in Carson, a transportation firm that makes rotors and brake parts, paid about $6.50 per hour to start, according to the Private Industry Council. By contrast, a job on Northrop Grumman's Hornet line pays about $17 per hour.

A worker in these newer jobs, meanwhile, is likely to have many more responsibilities. For example, a worker in a distribution warehouse is responsible for moving goods and for tracking inventory via computer.

"The concept of going to high school and being an indifferent student, and then getting a job on an assembly line is gone forever," says Kyser, the economist. "You can't just drift through life expecting to do well. People are realizing that."


Many displaced workers have tried to make a go of it on their own. At the Roadium Open Air Market in Gardena, fledgling entrepreneurs try to survive by selling a mixture of socks, belts and T-shirts, or by cleaning out their garages and hawking their goods like a rummage sale.

"Sometimes you make only $10 in one day," says Richard A. Gonzales, 44, of Montebello, who travels from swap meet to swap meet with a collection of old clothes and furniture. "If you make $100, you're doing great."

Gonzales went into the business two years ago after work as an independent truck driver dried up. He made about $25,000 a year but found his $25-per-hour bids being undercut by drivers willing to work for $10 per hour. That was when he looked into his garage and saw a future in rummage sales.

"My mother said, 'You can't sell that junk,' " Gonzales says. "But I did real good. . . . You have to hustle and find connections. You still have to have odd jobs to make it."

Mark Maniago, 28, of Redondo Beach, quit his job at a shop in Downtown Los Angeles' Jewelry District, where sluggish sales dimmed his hopes of opening his own shop. Instead, he has a canopied booth at the Gardena swap meet, where he sells an assortment of watches--including ones featuring Mickey Mouse and Jesus Christ. Among his most expensive are Guess watches, which sell for $18.

"The past two to three months have been pretty slow," Maniago says. "The economy is not the best. Over here, people don't have the money like they do in the mall. There are days when I can't make anything."


The slow sales, however, won't make him return to his old job.

"You go downtown, and half of those people are gone," he says. ". . .I'm doing better than I would working for somebody else."

At Northrop Grumman's Hornet line, assembly line workers have taken steps to survive without the security of a major corporation. Although the Pentagon has contracted for existing fighters as well as the next generation of the plane, company officials say it's always a fight in Washington come budget time.

"The market says, 'This job might not be here,' " says Lloyd Harrison Jr., 36, a supervisor on the line who secured a manufacturing job at the company when he was 21. "I don't think (the cuts) are over yet."

So three years ago, Harrison started taking classes at UCLA and at Grace Bible College. His goal is to get two degrees, to become a minister and a labor negotiator.

"I don't want to talk with a victim's mentality," says Harrison, who has surrounded his factory workstation with postcards that read "Pride" and "Determination." "I wanted to create my own destiny."

That is also what drove the Kelchners to leave TRW in 1991, several months before the company announced a big series of layoffs. The couple sank $150,000 into the American Speedy Printing franchise and opened in early 1992.

"What we did was scary to a lot of people," says Bob Kelchner, 56, who served in the Air Force for 25 years before his TRW days.

The first two years were rough--so much so that Kelchner thought the business wouldn't survive. Several small print shops nearby went out of business. But about a year ago, customers started swarming into the Torrance operation. On one day, Dow Chemical needed 18,000 pieces of letterhead. Sales have jumped from $180,000 in 1991, the year the Kelchners bought the business, to $425,000 this year. And last weekend, they moved into a new location on Western Avenue, four times the size of their original store. "Financially, we're still struggling," said Bob Kelchner as he marveled at the shelves he and his wife installed at the new location. "It's going to take several more years to recoup our investment. But our potential is excellent."

And though they're no longer working in a world of classified national security projects, the Kelchners take pride in their new franchise. American Speedy's national office recently declared their shop among the most improved franchises in the country.

Jokes Bob Kelchner: "We're probably the only printers in the South Bay with security clearances this high."


A Snapshot of the South Bay The local economy has shown little improvement, even though Southern California as a whole is on the rebound. Although existing home sales jumped 17% in 1994, the median price fell 4%. Office space is still almost one-quarter vacant. On the bright side, fewer industrial buildings are vacant, and taxable retail sales have gone up slightly.

Residential Real Estate


1994: 7,201

1993: 6,143

Percent change: +17%


1994: $234,900

1993: $244,100

Percent change: -4%

*Commercial Real Estate *

INDUSTRIAL VACANCY 1994 11.6% 1993 13.2% OFFICE VACANCY RENT PRICES PER MONTH 1994 24.2% 1993 25.6%

INDUSTRIAL VACANCY RENT PRICES PER MONTH 1994 $0.15 per square foot to $0.85/sq. ft. 1993 $0.20/sq. ft. to $0.85/sq. ft. OFFICE VACANCY 1994 $0.75/sq. ft. to $2.20/sq. ft. 1993 $0.85/sq. ft. to $2.90/sq. ft.

*Taxable Retail Sales

First quarter 1994: $1.196 billion

First quarter 1993: $1.146 billion

Percent change : +4.4%

* Includes city of Long Beach.

Sources: Grubb & Ellis Co., State Board of Equalization, Dataquick Information Systems

For the Record Los Angeles Times Thursday March 30, 1995 Home Edition South Bay Part J Page 6 Zones Desk 2 inches; 36 words Type of Material: Correction South Bay economy--A quote in the March 23 cover story on the South Bay economy was incorrectly attributed to Northrop Grumman employee Bob Finch. Lisa Tyler, a Northrop contract worker, said: "I don't care about pay. I care about, 'Will this job be around?' "
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