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Hughes Aircraft Will Cut 600 More Jobs : Move Is Aimed at Slashing Costs to Improve Competitiveness

November 20, 1987|RALPH VARTABEDIAN | Times Staff Writer

Hughes Aircraft will eliminate as many as 600 jobs before the end of the year either by layoffs or attrition, according to company sources and a memorandum to employees obtained by The Times.

The company will end 1987 with 79,987 employees, down 2,500 from the start of the year. Most of the job eliminations will be through normal turnover and retirements, according to Hughes Vice President Lee Pitt.

Pitt said he was not sure how many of the 2,500 jobs were still to be cut. But the number was conservatively estimated by one Hughes source to be about 600.

Employees at Hughes Ground Systems Group in Fullerton were recently notified in a newsletter that the unit's "costs are in many cases exceeding projections. Unless something is done, we will become too expensive for our customers to continue to afford; we risk losing future business to more efficient competitors."

The newsletter went on to state that the company is implementing "an accelerated, focused reduction in indirect costs. Cost reductions will include the elimination of jobs in indirect classifications. As many as 300 jobs in these classifications could be affected over the next several months."

The 300 jobs to be lost at Fullerton are not isolated cases in the company. Job reductions at some of Hughes' five other major business groups in Los Angeles and Orange counties are likely, according to Hughes officials.

Overall Sales Flat

Moreover, the company's effort to reduce overhead costs are apparently not meeting an internal corporate plan at some Hughes units, raising the potential of continuing weak profits in some areas at the General Motors subsidiary.

A Hughes official said the firm's overall profit margins are up over last year, but overall corporate sales did not grow in the first nine months of this year.

The newsletter states: "Each division is presently analyzing its situation and deciding how it will meet cost reduction objectives."

In addition to the reductions at the Ground Systems Group, the Hughes Missile Systems Group is eliminating 500 jobs at its Tucson and Canoga Park facilities, according to one knowledgeable Hughes executive. If his figure is correct, it would push the total of job eliminations before the end of the year to at least 800.

The missile group has come under increasing pressure to reduce its costs because the Pentagon has sought out second production sources for all of the missiles that Hughes originally developed. The companies that become second production sources typically have lower overhead costs and can underbid for production contracts.

Even the Hughes corporate headquarters in Culver City is being squeezed.

Lost Contract Biddings

"If you visit corporate headquarters, you notice that there are whole areas with empty desks where nobody is working," the executive said. "You get a feeling of being in a shopping mall that isn't doing too well."

The executive, who spoke on the condition that he would not be identified, said Hughes has eliminated more than 3,000 jobs since it peaked at 83,000 in the early 1980s.

A number of the groups at the company have been hard hit by major losses in contract competitions and the relatively flat Pentagon budgets of recent years.

According to one source at the Ground Systems Group, defense contract awards have dropped sharply at the Fullerton unit in the past two years. At that group alone, employment is off 3,000 jobs from the peak several years ago, he said.

It was not clear how many of the new job eliminations would require layoffs and how many jobs would disappear due to normal attrition, such as turnover and retirement.

The newsletter, however, makes it clear that a significant number of layoffs is coming.

"Any employees affected by these circumstances are eligible to take full advantage of the group's outplacement program, which provides information on jobs available among other Hughes organizations and Southern California firms, and helps employees compose resumes and sharpen interview skills."

An undercurrent to the cutbacks is growing concern in the Hughes organization that General Motors, itself under tremendous financial pressure due to its poor showing in the automobile business, will tighten its control of Hughes.

"General Motors has been very benign but there is always that overhanging concern," one employee said. "People are wondering whether they are going to take over some day."

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