PICO RIVERA — Ten years ago, the city had a 223-acre, multimillion-dollar problem. Ford Motor Co. moved out after almost 25 years. The 100 or so local residents who worked at the plant lost their jobs, and area merchants lost the dollars of a 1,200-person labor force.
"It was not a happy time," City Councilman Jim Patronite recalled.
In 1982, to the City Council's delight, Northrop Corp. moved in. The defense contractor proved a stable, moneymaking, expanding concern during a decade when a buildup of military hardware became a top national priority.
Now, however, there is the danger of a familiar, unhappy scenario repeating itself in Pico Rivera.
With Eastern Europe poised to beat its swords into plowshares and the U.S. budget deficit worsening, Northrop's prospects have declined. National lawmakers speak of a peace dividend, an opportunity to spend less tax money on national defense. But such a peace dividend could turn out to be a direct assault on Pico Rivera.
No one is panicking yet, and Southern California's economy is too diverse to collapse because of one industry's decline. But a look at how the bounty of Northrop filters into Pico Rivera shows how much a defense giant means to a city--be it Douglas Aircraft Co. in Long Beach, Lockheed Corp. in Burbank or Hughes Aircraft Co. in El Segundo.
Northrop's general store and three cafeterias generate more sales tax than any other one business in the city, Pico Rivera officials say. They would not divulge the exact figure.
About 300 of Northrop's 10,500 employees live in Pico Rivera, and about 1,300 live in surrounding communities. Most, presumably, contribute to the local tax base, as well as the livelihood of merchants in this city of 60,000.
Northrop has invested more than $500 million in improving the facility in the last decade, including $1.3 million this year. The property's increased value generates about $1.4 million in redevelopment funds for the city.
Northrop also hires subcontractors, which spreads money from government contracts throughout Southern California.
"Every direct dollar probably supports a multiple of additional ripple-down-effect dollars into the subcontracting community," said Barry Wrenn, a vice president and general counsel for BP Chemicals (Hitco) Inc. in Santa Ana.
Wrenn's company produces, for Northrop and other companies, some of the non-metal composites that make aircraft and submarines lighter, stronger and harder to detect with radar.
In 1946, his company sold insulation to the private sector. Now, as with many subcontractors, most of the firm's business filters down from government contracts won by Northrop and other defense firms.
"Within 50 miles of this room, we have some 6,000 subcontractors and suppliers," Northrop President Kent Kresa said in an address to shareholders last May in Los Angeles. "Since they begin producing parts and sub-systems for our systems that we will deliver two or three years later, they will also be among the first to feel the effects of budget reductions."
Wrenn said these subcontractors supply everything from "avionics to tires for those aircraft, machine shops, forging houses, metal suppliers, fastener makers, machine-tool makers and temporary employee agencies, under normal circumstances."
But those circumstances are changing, prompting one Pico Rivera resident to wonder whether local history will repeat itself. "When Ford left, they left a huge dent," said the man, who now works at the Northrop plant. As did other Northrop employees, he preferred not to give his name because the company directs its workers not to speak to the press without company clearance.
He pointed to a liquor store across Washington Boulevard from the plant. "It went through three owners after Ford left," he said.
A mini-city flourishes around the Northrop plant on Washington Boulevard: 14 full-service restaurants, eight fast-food outlets, five hotels, five liquor stores, four doughnut shops, four hair salons, three gift shops. Then there are the video shops, arcade, cleaners, laundry, pet store, florist, mortuary and swap meet.
To hear Kresa speak, none of these merchants need worry yet. "The United States is not going out of the defense business," he said to shareholders. "And neither is Northrop."
Some independent analysts, however, are more pessimistic. Northrop relies heavily on big-ticket items, such as the B-2 Stealth bomber, making the company vulnerable to a single legislative decision. The Defense Department had planned to buy 132 of the Stealth bombers. In April, Defense Secretary Dick Cheney reduced his request to 75, each costing about $800 million. The assembly line would be slowed, with 12 bombers built per year, down from the 24 per year once planned.
"Cheney is hoping, begging, pleading Congress will fund even close to" 75 B-2s, said Andy Lightbody, field editor for Armed Forces Journal International.
Lightbody said defense officials have said that fewer than 30 of the bombers would hardly be worth building at all.