Jobs Cuts Jolt, but Aerospace Still Aloft
Raytheon Co.’s announcement Friday that it will eliminate 5,200 jobs in California brought back memories of the early 1990s, when the aerospace industry began hemorrhaging personnel.
Although nobody was cheering the drastic cuts, observers found reasons to be optimistic about the Southland’s future in the aerospace business.
“It’s not all gloom and doom,” said Robert Paulson, chief executive of Aerostar Capital in Wilson, Wyo., and former head of McKinsey & Co.’s aerospace practice in Los Angeles. “Several areas will be quite healthy.”
Demand for satellites, electronics and commercial aircraft will continue to fuel the region’s restructured aerospace industry, which will be far less dependent on a shrinking pool of Defense Department contracts, analysts said.
Los Angeles County has already recovered 6,400 aerospace jobs since the industry hit bottom in October 1995, and Orange County has regained 5,100 since its November 1995 low, according to Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County.
Today there are 143,000 aerospace workers in L.A. County and 60,300 in Orange County, he said. The industry that was founded in the 1930s by aviation pioneers such as Howard Hughes and John Knudsen Northrop now accounts for a respectable 4% of the Southland’s jobs.
But in the short run, Raytheon’s cutbacks are likely to ripple through the region’s economy. In addition to the 5,200 jobs being cut outright--many in redundant administrative functions and light manufacturing--the region can expect to lose another 5,200 to 7,800 jobs among the ranks of second- and third-tier aerospace suppliers, analysts said.
Local governments are bracing for the impact.
“For every job you create in L.A. County, it creates $5,000 in tax flows for various levels of government,” Kyser said. “If you eliminate a job, you basically get the reverse of that.”
That analysis puts a $26-million dent in government coffers from the lost Raytheon jobs alone. Altogether, the total could hit $65 million. “It puts sort of a chill on things,” Kyser said.
And there are still a few shoes left to drop. Lockheed Martin Corp. is expected to complete its $11.6-billion purchase of Los Angeles-based Northrop Grumman Corp. this year, and that will almost certainly result in the shuttering of Northrop’s corporate offices. But since most of Northrop’s programs in Southern California don’t compete with programs at Lockheed, employees outside the Century City headquarters will probably keep their jobs, Paulson said.
Boeing Co.’s Douglas Products Division in Long Beach is also vulnerable to cutbacks at the turn of the century, once production of the MD-80 and MD-90 jetliners is completed. If demand for commercial airplanes remains strong, the plant will probably stay busy producing the 100-seat 717 (formerly the MD-95) and perhaps build major components for Boeing’s plants near its headquarters in Seattle. But a cyclical slowdown could bring layoffs, analysts warn.
Analysts said they don’t particularly fault Raytheon for preserving so many jobs near its home base of Lexington, Mass., and in such states as Texas and Georgia, while cutting 30% of its California work force.
“We are still a high-labor-cost area, and that’s not just the overall hourly wage, that’s the whole cost of doing business here,” said Jon Kutler, president of Quarterdeck Investment Partners, a Los Angeles investment bank that focuses on the aerospace industry. “It’s taxes, environmental compliance and general red tape.”
Other factors contributing to Raytheon’s decision include the comparatively poor condition of the former Hughes defense facilities and the inability of the state’s congressional delegation to lure big projects here, Kutler said.
But the outlook for commercial aircraft, telecommunications satellites, launch vehicles and space development is definitely bullish, he and others agree.
“We’re seeing really desirable growth that’s not predicated so much on [the Defense Department] or NASA,” Kyser said. “It’s commercial applications of all the technology developed here.”
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Raytheon in the Southland
The nationwide consolidation announced by Raytheon on Friday will shutter several Southern California facilities and significantly reshuffle operations. The two-year reorganization will result in 5,200 jobs lost in California, leaving Raytheon with 11,600 employees in the state.
Following is the impact on each of Raytheon’s facilities in Southern California:
- Sensors & Communications Segment, El Segundo. Operations from several buildings will be consolidated into a single complex, some jobs eliminated, others transferred in from other sites. Net job reduction 1,100, from 6,900 to 5,800.
- Raytheon Data Systems, Irvine. No apparent impact to 190 employees.
- Raytheon Microelectronics Division, Newport Beach. To be consolidated with 10 other facilities into two Centers of Excellence in Dallas, Texas, and Quincy, Mass. Employs 630 workers; some administrative/support jobs to be phased out.
- Chula Vista Depot, Chula Vista. New facility created for depot services and customer care, 180 jobs filled mainly by transfers from Irvine, San Diego and Long Beach. Another 200 naval engineering workers expected to be transferred from San Diego.
- Irvine Depot, Irvine. Will be closed and work moved to Chula Vista, Indianapolis and Virginia Beach. Undetermined number of current 220 workers will be offered transfers.
- San Diego Depot, San Diego. Will be closed and work will move to Chula Vista, Indianapolis and Virginia Beach. Undetermined number of current 330 workers will be offered transfers.
- Long Beach Depot, Long Beach. Will be partially closed, with some work transferred to Chula Vista, Indianapolis and Virginia Beach, and some of current 850 jobs eliminated.
- Fullerton Naval and Maritime Systems, Fullerton. Partial closure. About 500 of current 2,100 jobs will be eliminated, with small numbers offered transfers to Mukilteo, Wash., and Portsmouth, R.I.
- Raytheon Information Technology Systems, Fullerton. No apparent impact on 700-plus workers.
- Santa Barbara Research Center, Goleta. Becomes Center of Excellence for electro-optical components and coolers. Currently has 900 workers, 200 to be transferred from Raytheon Amber, Goleta, then 300 will be eliminated, leaving 800.
- Raytheon E-Systems Los Carneros, Goleta. Electronic warfare center will be closed and consolidated with the Santa Barbara Research Center. Some of the 750 current workers will be offered transfers out of state, estimated 300 jobs lost.
- Raytheon Amber, Goleta. Will be closed, consolidated with the Santa Barbara Research Center. Some of 200 current employees will lose jobs.
- Raytheon Engineers & Constructors, Santa Ana and Sacramento. To be closed, fate of 100 workers unclear.
- China Lake Customer Center, China Lake. No apparent impact on less than 10 employees.
Former Hughes Electronics Corp. headquarters, Westchester. Remaining 200 people to be moved to El Segundo; some attrition likely.
Gallium Arsenide operations, Torrance. The 150 workers will be transferred to Raytheon’s commercial electronics operations. Unclear if facility will remain or be moved. Job impact unclear.
Raytheon Communications Products, Torrance. Closed, 200 employees moved to El Segundo.
Tomahawk and Stinger missile assembly, Sycamore Canyon. To be closed, programs moved to New Jersey and Arizona. Some of 160 employees expected to lose jobs, number unclear.
Engineering center, Point Mugu. No impact to 250 workers.
Aeronautical operations, Van Nuys. No impact on 150 workers.
- Raytheon Environmental Systems, El Segundo. No apparent impact on 20 workers.
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Aerospace Employment
Aerospace employment in Southern California increased slightly last year, although the cuts announced by Raytheon will put it back near 1996 levels. Southern California aerospace jobs, in thousands:
218.3
Note: Includes Los Angeles, Orange, Riverside, San Bernardino and Ventura counties
Source: Raytheon Co. Employment Developement Department, Los Angeles County Economic Corp.
Researched by KAREN KAPLAN and JENNIFER OLDHAM/ Los Angeles Times
