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O.C. ENTERPRISE / DEAN TAKAHASHI

Defense Cuts a Boon for Conversion Consultant : M.L. (Bud) Warrick's business suffered after Vietnam buildup ended. Now he helps companies find new markets.

April 12, 1993|DEAN TAKAHASHI

SANTA ANA — In 1970, as the Vietnam War military buildup began to subside, M.L. (Bud) Warrick lost his electronic machinery manufacturing business during the defense downturn.

More than two decades later, he is putting his lessons from failure to good use as a consultant trying to persuade defense subcontractors to find new non-defense markets for their products.

"The situation was very similar to today, a devastation," said Warrick, 57, an animated fellow--a smoker who paces when he talks. "I argue that it's cheaper to retain a job than to create one. The cost can be $100 a job for retention, while it can cost $50,000 (per job) to start a new business and create one."

Hughes Aircraft Co. has used its expertise in radars to develop air traffic control systems, but most diversification efforts don't come easy.

Weaning themselves from defense-related products isn't a popular idea among the region's battered subcontractors, who have often failed by doing insufficient research and going totally into brand-new businesses.

But the Warrick & Associates consulting company, which charges from $600 to $30,000, has had success in helping companies adjust in the post-Vietnam era.

Warrick sizes up a company's expertise and products, then runs computer searches through as many as 600 databases to find new commercial customers. The painstaking searches through obscure trade journals--a form of information brokering--is key to locating the new opportunities and relatively few companies actually do it, he said.

Good librarians can also provide such services, often for a fee, but Warrick himself has completed more than 2,500 computer searches related to defense conversion.

"The trouble has been the defense contractor doesn't have the marketing capability to identify new opportunities," he said. "In the past, they only had one customer."

Warrick launched his first conversion program in 1975 for Los Angeles County. Of the 40 aerospace companies that participated, more than 70% found his efforts useful and were able to explore new markets for existing products.

But the Reagan Administration defense boom of the 1980s ended the need for conversion, and Warrick became a venture capitalist, while continuing to consult several companies. He reviewed more than 600 companies and found a total of $3 million to $5 million for 10 of them.

He tried to revive the defense conversion business in 1988, after the thawing of the Cold War signaled the end of another spending cycle. But the Bush Administration didn't resurrect Warrick's program after he proposed it again. On a national basis, the Administration provided little conversion funding until 1991, when $200 million was allocated by the Department of Labor.

Conversion programs are much more trendy now that the Clinton Administration has proposed spending $1.4 billion for defense conversion, mostly for retraining retiring military personnel. About $90 million of the proposed conversion budget is earmarked for subcontractor conversion.

Vying for a piece of the funding, Warrick has proposed establishing--with federal funds--a program for converting defense businesses through Los Angeles County's Community Development Commission, which wants to support the region's high-tech companies.

"He has made a very good proposal and we hope to get money for his program," said Bob Swayze, special development assistant for the commission, which has secured $9 million in overall federal funding so far. "It makes sense to go into a company and help them before they start laying off workers. There are a lot of consultants out there, but he is one of the few with a track record."

Warrick hopes to make his biggest impact by providing services directly to subcontractors. Leach Corp., a struggling aerospace manufacturer with about 450 employees in Buena Park, has hired Warrick & Associates as a consultant.

Unsolicited, Warrick sent a thick proposal, based on a database search, that suggested Leach could find commercial customers for its military aerospace relays--tiny electronic widgets that control other devices. In particular, Warrick suggested that the company could sell to the light rail and electric vehicle industries.

"We've been going through downsizing, and his proposal hit at a good time," said Ritchie Tryon, director of applications engineering at Leach. "We gave him a consulting project, and it was money well spent. He came up with a new approach to the market for us."

In the future, Warrick hopes to find clients in the former Soviet Union, as defense contractors there convert to commercial businesses.

"The Russians don't think in terms of laying people off," he said. "They have to find something for them to do."

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