Aerospace Industry Expects Boost from Bush Administration
After weathering a decade of consolidation and layoffs, northern Los Angeles County defense firms and economic officials say they expect a moderate, if not healthy, boost to business under President Bush.
Following a review of military programs, Bush officials have discussed increasing defense outlays by as much as $65 billion over 10 years. And that could bring an additional $8.5 billion for California.
But while more contracts are likely to flow to local companies from a Republican administration, industry experts say defense firms in the San Fernando, Santa Clarita and Antelope valleys will not reap windfalls comparable to the defense boom under President Reagan.
“This time around, Valley defense companies should not be sitting there waiting for the spigot to open,” said Jon B. Kutler, president of Century City-based Quarterdeck Investment Partners Inc., an aerospace investment banking firm. “The fact is, new defense contracts will be less dramatic than what was generated in previous cycles.”
Instead of big-ticket defense projects, analysts and company officials see further growth in smaller sectors of the industry, primarily among companies that supply or upgrade aircraft.
“Aerospace contractors are looking at opportunities in the commercial sector on top of those in the military,” said David Myers, North County regional manager for Los Angeles County Economic Development Corp. “That’s not to say there won’t be big projects in the area’s future. But the strong base will be maintenance and modernization.”
The work includes cosmetic changes to an aircraft, such as tearing out seats of a commercial jet so it can be used for cargo purposes. Often, however, the jobs are more difficult and expensive, including replacing engines, upgrading electronic cockpit systems or rewiring a fuselage.
Myers estimates that new defense spending will create 5% to 10% annual growth, or as many 2,000 jobs a year, though that could change.
Last year, newcomer SR Technics opened a major commercial aircraft maintenance depot in Palmdale--a move that state and local officials hailed as a sign of an aerospace rebound. The Swiss company employs about 250 workers but has long-range plans to grow to 6,000 workers over the next five years.
Even with the addition of SR Technics, most of the work is being done primarily by four prime contractors in Palmdale, including Boeing Co., BAE Systems, Northrop Grumman Corp. and Lockheed Martin, Myers said. Together, the companies employ about 8,000 of the Antelope Valley’s 20,000 defense workers.
Boeing, for example, has about 1,000 people working on major upgrades for the Space Shuttle at Air Force Plant 42 in Palmdale. The company also has a contract to refurbish the C-130 military transport plane and has been competing with Lockheed Martin since 1996 to develop and test a winning prototype for the Joint Strike Fighter.
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Northrop Grumman still has 1,000 employees connected with ongoing work on the B-2 Stealth bomber. Those numbers could grow significantly if the Bush administration decides to restart the B-2 production line, a move being urged by congressional defense leaders, Myers said.
Two decades ago, development and production of the B-2 Stealth Bomber, B-1B bomber and F-117 Stealth Fighter helped propel aerospace-related employment in Los Angeles County to a 1987 peak of 124,900.
By 2000, however, national defense cutbacks led in a wave of mergers and job cuts at large local defense firms, including Lockheed Corp., McDonnell Douglas and Rockwell International.
Amid the retrenchment, aerospace and defense-related employment in the county dropped to 50,000. Statewide, as many as 300,000 jobs were lost while California’s share of national defense contracts dwindled from 20% to 15%.
“In the last 10 years we saw a decrease in military spending that dropped our share of military contracts to about 30% of business versus 60% in the late ‘80s,” said Alex Abramowitz, director of engineering at ChrissAir, a Palmdale-based aircraft parts producer that employs 150. “It was difficult.”
Abramowitz and others say aerospace and defense businesses should get a boost from the Bush administration. “Obviously, we feel like we’ll get a large increase under Bush, mostly for existing programs that didn’t move much in the last 10 years.”
John Bass, vice president of business development at Fiberset, a Mojave company that provides composites for aircraft companies, is more cautious in his outlook, even with a moderate increase in defense spending.
The state’s power crisis, Bass said, could add significantly to the cost of doing business and put firms at a disadvantage when bidding for contracts.
“A rising tide lifts all ships,” Bass said. “But there are a lot of ships left to lift.
Quarterdeck’s Kutler said the state’s energy woes could have a broader and longer-range effect. “Obviously, energy is a capital-intensive part of this business and the current energy problems are having a major impact. This needs to be resolved soon, and if it isn’t, you will see even more work migrate out of the area.”
