Attempt to Develop Aircraft Plant in Long Beach Nose Dives

A salvage company moved into the sprawling Long Beach Airport hangar of Mooney Aerospace Group this week, packing up tools and equipment and a decade-old dream of creating a new aircraft manufacturer in Southern California.

At an adjacent office complex, a lone employee locked the doors and drew his finger across his throat, signaling to a visitor that Mooney’s operations in Long Beach were dead.

Formerly known as Advanced Aerodynamics & Structures Inc., the company was founded in a quest to develop from scratch a futuristic-looking six-seat turboprop called the Jetcruzer 500.

Hundreds of retired Southern California aerospace engineers rushed to invest in the company’s 1996 initial public offering, excited about backing a new venture that would need to mine Southern California’s deep vein of aeronautical expertise.

It was a chance to be a part of a long and storied history that helped shape the region’s economy since before World War II. Southern Californians have designed and built everything from the space shuttle to the stealth bomber to the DC-10 passenger jet. Factories in Long Beach, Santa Monica, Burbank and Palmdale together formed the center of the nation’s aircraft industry, turning out tens of thousands of commercial and military planes.

The region remains a hub of aerospace research and development.

Since the end of the Cold War, though, aircraft factory jobs in Los Angeles County have plunged from a recent peak of 124,900 in 1987 to only 43,700 last month, according to state data.

For a time, it looked like Mooney might help raise those numbers.

Two years ago, the company employed more than 130 aircraft designers and other workers in Long Beach. Then-Chief Executive Carl Chen boasted that the firm was close to winning certification from the Federal Aviation Administration for the Jetcruzer. The company had collected $10,000 deposits on 188 aircraft, each carrying a list price of $1.5 million. The former Hughes Aircraft engineer talked of putting a larger, 12-seat business jet in production and adding 1,000 workers to the factory floor.

Funds for his plans came via private financing from Taiwanese investors, a New York money management firm and from its IPO. Although thinly traded, the shares rose nearly 50% from $4.50 at the end of the first day of trading in April 1996 to a high of $6.56 in May 1998. (They trade now for only pennies.)

Chen spent heavily on plant and equipment, including a high-tech autoclave used to cure the Jetcruzer’s composite fuselage. But despite his rosy predictions, the program suffered numerous technical setbacks and the Jetcruzer 500 never received FAA approval.

Designed to fly 345 mph at an altitude of up to 30,000 feet, the plane had a small wing in the front and a large one in the rear and an aft-mounted engine. But flight tests discovered that the prototype was too heavy, too noisy and too ungainly to be viable. By one company estimate, it could cost $30 million or more to fix the problems.

Chen was ousted from the company in January and the Jetcruzer project was shelved. The company brought in Roy Norris, another veteran general aviation executive who developed a new business plan: The company would look to purchase the production rights for existing lines of small aircraft from other manufacturers.

His first move was to purchase Kerrville, Texas-based Mooney Aircraft Corp. out of bankruptcy for $9 million in cash and stock. Although smaller than Piper and Cessna, Mooney once was a well-regarded maker of small piston-driven planes but had stumbled after a number of management miscues.

Advanced Aerodynamics pumped an additional $12 million into resuming production of Mooney piston-driven airplanes at the company’s Texas factory.

In July, Advanced Aerodynamics changed its name to Mooney Aerospace Group. So far, it has sold 12 of the piston engine aircraft, which cost $300,000 to $400,000. Though its designs are about five decades old, about 10,000 Mooney aircraft still are flying.

Norris envisioned the Mooney purchase as just the first step, but the board balked at his vision of quickly building a large aerospace concern.

“It just wasn’t feasible for such a small company,” remarked another Mooney executive.

Norris abruptly resigned in August and the company tapped former Cessna executive L. Peter Larson to take over.

As recently as two weeks ago, Larson was providing upbeat assessments of the company’s future. He told The Times that he intended to keep the engineering and sales divisions headquartered in Long Beach but leave manufacturing in Texas, where labor and other expenses are cheaper. He said Mooney could be profitable with only 60 aircraft sales a year.

Last week, though, the board fired Larson, other executives and decided to shutter its 205,000-square-foot airplane factory and office complex. What’s left will be relocated to Texas, giving the company breathing room to reduce expenses and recast itself as a maker of more conventional piston-driven planes.

One person familiar with the company’s finances said it was burning through as much as $700,000 a month in cash on salaries and rent at its Long Beach complex.

Much of Mooney’s restructuring is expected be completed by today, according to sources familiar with the situation. About 20 workers are losing their jobs.

“We just could not afford to have executives here and the manufacturing in Texas,” said J. Nelson Happy, who was named Mooney’s chief executive last week. “What we pay for people and the plant in Texas is just a fraction of Long Beach.”

Neither Larson nor Chen was available for comment.

Happy, a former chief executive of Flight International Group, agrees with Larson’s assessment that Mooney can become marginally profitable by selling only 60 aircraft annually.

“At 100 a year this is a home run,” Happy said.

But for that to work, the company still must shed the $150,000 to $200,0000 a month it pays for its long-term lease on the factory and associated expenses to become profitable. Mooney is negotiating with its landlord and prospective sublease tenants to extricate itself from its Long Beach facility, Happy said.

Even then, Mooney’s survival remains a long shot, said Richard Aboulafia, an aviation consultant with Teal Group in Fairfax, Va.

“These guys don’t have a modern aircraft, they don’t have much of a logistics and sales network compared to a company like Cessna and they don’t have deep pockets,” he said.

Aboulafia said there is almost no money to be made selling piston-driven aircraft such as Mooney’s. But “at least they now have an aircraft that they can fly and sell,” he added. And that’s “better than what they had when the company was Advanced Aerodynamics.”