A hiring spree isn't the standard response to an industry-wide slump, especially when the company in question has just finished laying off 500 employees.
But that's what General Electric's Calma subsidiary is doing, and part of the spree will boost the research and development staff at Calma's Sorrento Valley operation by 40%, to 350 engineers.
Those new engineers will develop new product designs for Calma, which produces computer aided design and computer aided manufacturing (CAD/CAM). The Milpitas-based company, which generated $250 million in 1984 revenues, expects a "flat" year in fiscal 1985.
Calma is adding staff during a "flat" year because they are in a "very competitive market," according to Daniel W. McGlaughlin, the firm's president. "We believe this accelerated and aggressive R&D plan will firmly establish Calma in a leadership position" in its three computer-aided design markets.
Growth Has Slowed
Calma is adding 275 engineers at its San Diego, Milpitas and Austin research and development facilities. The R&D boost could be viewed as a "reaffirmation of GE's commitment to the computer-aided design market," explained Tony Spadarella, research analyst with Dataquest, a San Jose market research firm.
Although the computer-aided systems market is still growing, Dataquest and other industry analysts believe the rate of growth has slowed, due to an across-the-board computer industry slowdown and consumer reluctance to buy the often expensive and complicated systems.
"The market is off somewhat," Spadarella said. "We've reduced our 1985 estimate by 22%, to $3.45 billion. For 1988 . . . we've revised our estimate down by 13% to $17 billion."
In San Diego, Calma is designing CAD/CAM software systems that help engineers bring products from the design stage through to manufacturing. The Sorrento Valley operation also designs systems used in the architectural, engineering and construction markets.
"GE believes that CAD/CAM is the keystone of making the factory of the future work," explained Tom Wheeler, vice president of advanced systems' architecture at Calma's Sorrento Valley operation. "The successful use of CAD/CAM boosts productivity and cuts the time it takes to design and manufacture a product."
In manufacturing, CAD/CAM's strengths become obvious when it comes to developing or modifying a complex jet engine or a turbine with 250,000 parts.
"It takes five to eight years to develop a jet engine," Wheeler said. "With CAD/CAM, you can modify designs and (simulate) testing before you actually fabricate anything."
General Electric credits CAD/CAM with reducing by 50% the break-even point in its turbine business, Wheeler said. "(They did) that by designing turbines faster and moving them into production faster."
CAD/CAM systems allow engineers to bypass historical methods and perform standard design functions on computers equipped with CAD/CAM software packages.
However, CAD/CAM isn't reserved solely for high-tech products, Wheeler explained. General Electric has used CAD/CAM to wring out a "33% reduction in cycle time--the time it takes to design and build an appliance," Wheeler said.
Just as important in the cut-throat appliance manufacturing business is the fact that "field service (requirements) for those appliances have been cut in half," Wheeler said.
Although Calma is a wholly owned subsidiary of GE, Wheeler said only a small percentage of Calma's earnings come from GE's related manufacturing operations.
Calma is banking that the substantially increased R&D levels will help the company retain--and eventually improve upon--its position as the fourth largest CAD/CAM company in the United States. McGlaughlin has said that Calma, which spends about 15% of revenues on research, will boost that figure to 20%.
Calma, which was acquired by GE in 1981, has had "sales that have grown at an average compounded annual growth rate of about 30%," McGlaughlin reported. "We expect to continue to grow at about the same rate over the next several years."
Despite that growth expection and the recent hiring binge, McGlaughlin noted that he will continue to rely on "selective head-count reductions where necessary."