TRW Buyout Could Boost Job Prospects

Northrop Grumman Corp.’s purchase of TRW Inc. could improve growth prospects for Southern California’s defense industry and result in few if any layoffs, unlike past defense mergers that brought devastating job cuts for the region, officials and analysts said Monday.

“I see no layoffs or strong consolidations [of plants] occurring in Southern California,” Northrop Chairman Kent Kresa said after announcing the $7.8-billion deal.

The potential job growth reflects increased U.S. spending for defense and homeland security that could drive more contracts to Northrop, they said. But any job creation would pale next to the tens of thousands of layoffs that nearly gutted Southern California’s once-vaunted aerospace industry during the 1990s, when a plunge in post-Cold War defense spending and a spree of industry consolidation dramatically shrank the region’s work force.

In fact, aerospace employment still is slipping. In the Los Angeles-Long Beach metropolitan area, for instance, jobs related to the production of aircraft, missiles, spacecraft and parts totaled 45,700 in May, down from 47,300 in December, according to the California Employment Development Department. A dozen years ago, such aerospace jobs totaled nearly 132,000.

But for the 10,000 people who work for TRW in Southern California--especially the 8,700 at its satellite and electronics base in Redondo Beach--the outlook is more promising. Northrop is buying TRW precisely because it is not a significant player in TRW’s fields of satellites, laser weapons and missile defense systems, so there won’t be the overlap that leads to widespread job cuts.

At the same time, TRW would get Northrop’s added financial horsepower to boost its vaunted research-and-development skills, and Northrop would benefit from having an even bigger stable of defense capabilities when it bids for Pentagon contracts. All of that should stabilize employment in the region’s aerospace sector, analysts said.

The merger would be “neutral to positive from the Southern California standpoint,” said Jon B. Kutler, president of Quarterdeck Investment Partners Inc., an investment banking firm that focuses on defense. “This should not result in headcount reductions.” TRW also has workers in Carson and San Diego.

Redondo Beach hopes to “maintain as many of the [TRW] jobs in the community as possible,” Mayor Greg Hill said, because TRW is by far the largest private employer in the city of 64,000. He expressed hope that the merger would lead to more contracts going forward and even an increase in jobs in the city.

Northrop, based in Century City, has 12,500 employees in Southern California, with its largest plants in El Segundo (where it builds parts of the F/A-18 fighter jet), San Diego, Woodland Hills, Palmdale and Azusa.

After it buys TRW, Northrop not only would be the second- largest defense company behind Lockheed Martin Corp. but also would benefit from the growth in spending on conventional defense and new homeland security initiatives, analysts said.

Defense spending on the procurement of aircraft, ships, weapons, supplies and other equipment is projected by the White House to surge from $62 billion this year to about $92 billion in 2007, and “you would have to go back to the Reagan buildup in the early 1980s” to find so large a peacetime increase in that period of time, said Steve Kosiak, a director at the Center for Strategic and Budgetary Assessments, a nonpartisan researcher of defense spending.

There is no guarantee that that much money will be approved by Congress, or whether a larger-than-expected portion will be spent on maintaining the Pentagon’s existing programs instead of new weaponry or systems. Still, Northrop and TRW would benefit even from continued spending on programs they already have underway, said Richard Aboulafia, an analyst at Teal Group, an aerospace research firm in Fairfax, Va.

“Anything involving missile defense and systems integration are much faster growth areas” in the defense budget, he said, “and Northrop and TRW are well-positioned to take advantage of both.”

*

Times staff writer Peter Pae contributed to this report.