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Bracing for an Economic Nose-Dive : Business: If Hughes Aircraft moves General Dynamics' missile production out of San Diego, the shock wave would be felt far and wide.

May 17, 1992|CHRIS KRAUL and GREG JOHNSON | TIMES STAFF WRITERS

The impending sale of General Dynamics' Convair missile business and other San Diego-based operations has Andy Loehr "extremely concerned," and it's easy to see why.

Loehr's family owns Tools & Metals, an El Cajon-based distributor of metal cutting tools and abrasives that depends on Convair for about 30% of his sales. So, Convair's deal announced this week to sell its missile business to Hughes Aircraft--and Hughes' admission that there is a "likelihood" that those operations will be relocated away from San Diego--hits Loehr very much where he lives.

"Obviously I'm not pleased, not only about General Dynamics but about the whole goddamn city," Loehr said. "Manufacturing in San Diego has been declining, especially aerospace manufacturing, for some time and so has our business base. We are having to go farther to get less. I just got back from Texas, trying to develop customers. I'm not going to lie down."

The announcement that General Dynamics Convair Division, a fixture of the city's corporate scene since 1935, is being sold and might leave the city produced shock waves throughout the community--waves that spread far beyond its thousands of employees to reach Loehr and 600 other San Diego County subcontractors and suppliers as well as local charities.

None of which speaks to the blow that a Convair departure would be to the prestige and psyche of a city that has witnessed the flight and failures of many of its top corporations in recent years.

Although only Convair's 4,500-employee missile operations are to be sold to Hughes, General Dynamics also announced plans to unload Convair's aircraft fuselage business and its electronics division as soon as "appropriate deals can be made," sales that could affect an additional 6,000 employees in San Diego.

The city's chance of retaining General Dynamics' missile operations is open to question. Arizona Gov. Fife Symington last week unveiled a far-reaching series of tax incentives designed to attract a Convair relocation to his state, which might start a bidding war for Convair jobs that San Diego is ill-equipped to fight.

General Dynamics would become only the latest in a recent flow of heavy manufacturers out of San Diego and Southern California to states where labor is cheaper, regulatory laws looser and taxes and fees lower.

The stakes are high: The city stands to absorb the biggest single hit in jobs and economic loss since the early 1960s. And, whereas Convair--and by extension the city--always has been the victim of highly cyclical defense contracts, the current situation carries the prospect that many of these jobs could be leaving for good because of the winding down of the Cold War and the restructuring of the defense industry.

General Dynamics' total payroll of 13,500 may represent only 1.6% of the county's employment base--down from an astounding 15% in 1961, when it employed 47,000, but the loss of Convair's missile operations and its 4,500 jobs would "send a certain shock wave through the system," San Diego Economic Development Corp. President Dan Pegg this week.

That's partly because General Dynamics workers are a stable and well-paid force, Pegg said. But it's also because hundreds of San Diego companies stand to lose a major customer.

Despite the enormous dimensions of the Convair operation--perhaps best represented by the towering sheds along Pacific Highway next to Lindbergh Field where the company assembles cruise missiles and aircraft fuselages--the San Diego firms most likely to be hurt by its departure are small businesses.

Its 600 local suppliers and subcontractors supplied $57 million worth of goods and services to Convair last year, and a high percentage of them are small companies with no more than 50 employees, said George Chandler, regional director of the U.S. Small Business Administration.

"I am sure there's going to be a ripple effect that will impact a lot of small business subcontractors and vendors," Chandler said.

Those smaller companies, whose selling points are prompt and personal service, are much more at risk of losing Convair business than larger, out-of-town subcontractors such as United Technologies, which provides cruise missile boosters.

AJ Manufacturing of Escondido is one of those small companies at risk. Winner of General Dynamics "Subcontractor of the Year" award earlier this month, the company provides tooling to Convair for missiles and MD-11 manufacturing. Convair accounts for 30% of the company's business.

"Obviously it's a big deal for us," AJ Chairman Bill French said. His company provided tooling for aircraft launch tubes for cruise missiles, but he said it does more business selling products for Convair's MD-11 program, which is also on the sales block and rumored near a sale to Taiwanese interests.

"My fear would be if they were allowed to sell everything out to Taiwan. That would put everyone in a fix," French said, adding that he thinks local government should offer Hughes financial incentives to keep Convair here.

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