Rockwell to End Era, Move From O.C. to Midwest
Rockwell International Corp., once one of Orange County’s largest employers, said Monday that it will move its headquarters to the Midwest by the end of this summer, closing another chapter in the aerospace industry that once dominated Southern California’s economy.
Costa Mesa-based Rockwell has slimmed down in recent years, as it sold or spun off nearly all of its California operations. The 165-person executive office is heading to either Chicago or Milwaukee, where the company has large manufacturing operations.
Rockwell expects to make a decision by the end of the month.
Company observers have been expecting the news since Rockwell announced its massive restructuring plan in June. But the loss of one of the county’s seven Fortune 500 companies, whose presence helps attract other businesses to Orange County, could hurt the region’s business-recruitment efforts.
“It’s a body blow to the Southern California region, but it’s part of a trend we’ve seen of major headquarters leaving Southern California,” said Stan Oftelie, executive director of the Orange County Business Council. “It’s all part of the consolidation a lot of industries are going through.”
Indeed, Rockwell’s announcement Monday marks the second time in the past five days that a major Orange County company said it was heading out of state. Thursday, the new parent of Costa Mesa consumer lending giant Avco Financial Services said it was moving the company’s headquarters to Texas.
Rockwell “was extraordinarily important” to the business council because it supported many of the economic development group’s initiatives and helped recruit other companies to move to Orange County, Oftelie said.
Further Steps in a Firm’s Transformation
Rockwell’s departure will complete one of the most dramatic and high-profile corporate restructurings in the aerospace industry. The company moved from Pittsburgh to El Segundo in 1988, and headed south to Seal Beach in 1992.
During that time, Rockwell was an aerospace and defense giant that collected 64 cents of every dollar in revenue from the U.S. government. But under a vast overhaul launched by former Chief Executive Donald R. Beall, the aerospace conglomerate transformed itself into a commercial manufacturing outfit focused on the fast-growing electronics industry.
After the years-long restructuring, which saw Rockwell sell the bulk of its defense business to Seattle-based Boeing Co., Beall stepped down and the company moved its headquarters to Costa Mesa.
The move put executives closer to Rockwell’s semiconductor division in Newport Beach--and the linchpin of its future.
But as new Chief Executive Don Davis took the reins at Rockwell, the notoriously volatile semiconductor market began to fall--as did the company’s bottom line. Other problems also surfaced: a severe downturn in the modem chip-set business, a strike at its semiconductor plant in Newport Beach, and a slump at its factory automation unit because of the Asian financial crisis.
In a move to stem its troubles, the company decided to spin off its semiconductor division into a separate, publicly traded company. When that unit, Conexant Systems Inc., began trading on its own this month, the last of Rockwell’s local business ties was severed.
“It was the right move for both of our companies,” Davis said of the spin-off. “This decision to leave is not easy. But, for Rockwell the company, it makes the most sense.”
The company still employs about 1,800 workers scattered throughout California.
Rockwell had remained mum about its plans until Monday. Davis, who spent much of his career at Milwaukee-based Allen-Bradley Co., which Rockwell bought in 1985, said part of the reason was to gauge whether the company’s high-tech professionals would be willing to leave California for the Midwest.
Acquisitions, New Opportunities Sought
The company is the automation leader in North America, making controls, software and systems for automating factory production. Rockwell’s avionics unit in Cedar Rapids, Iowa, concentrates on building electronic systems for airplanes and in-flight entertainment systems.
Rockwell expects to expand its core businesses, particularly in Europe and South America, through acquisitions and targeting new opportunities, Davis said.
“When your employment falls from 40,000 to 2,000 people, you know it’s time to move,” Davis said. “Still, we do feel we have a legacy here. And Conexant will continue to keep it alive.”
Indeed, analysts say both Beall and Davis believed passionately in staying local while thinking global.
Beall was instrumental in starting the Orange County Business Council, and has been active in other business groups and political organizations. Davis has been active with the Boys and Girls Clubs of America, among other nonprofit community groups.
Rockwell also donates several million dollars a year to area charities.
“It’s a sad day,” said Sam Iacobellis, former president of Rockwell’s North American Aviation division, who retired in 1995. “But, as a Rockwell stockholder, I think this move was the proper decision.”
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Rockwell’s Evolution
In 1919, Willard Rockwell purchased a small axle plant called Wisconsin Parts Co. to produce a new, improved axle based on his own design. How Rockwell has changed over the decades:
1953: Wisconsin Parts merges with Standard Steel & Spring and Timken Detroit to form Rockwell Spring & Axle Co.
1967: Rockwell-Standard and North American Aviation merge, forming a new company named North American Rockwell, with $2.4 billion in sales.
1973: Rockwell acquires Collins Radio Co.; name changes from North American Rockwell to Rockwell International. The 1970s also bring in government contracts to build B-1B bombers and a fleet of space shuttles. Its semiconductor business begins making modems for facsimile machines in 1978.
1985: $1 billion is added to Rockwell’s sales in electronics with the $1.6-billion acquisition of Allen-Bradley. Government contracts make up 60% of revenue, but government business is falling off. Rockwell begins emphasizing commercial and international sales.
1995: Rockwell’s automation business grows with acquisition of Reliance Electric, a well-known maker of industrial motors, drives and power transmission products. Automation is the company’s biggest business as annual sales reach $3 billion.
1996: In a move to dominate in three main areas--automation, semiconductor systems and avionics/communications--Rockwell sells its aerospace and defense businesses to Boeing for $3.2 billion.
1997: To further concentrate on market domination, Rockwell spins off its automotive components business. International and commercial sales reach 93% of the company’s total sales--a huge shift from the Rockwell of the 1980s.
1998: Rockwell announces plans to move its semiconductor unit into a separate, publicly traded company.
Sources: Rockwell International and Times reports
