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Aerospace Swords Into Plowshares : Defense Contractors Convert to Consumer Goods and Brush Up on Their Rusty Marketing Skills


Defense giants, used to working through all stages of product development with their Pentagon customers, often appear reluctant to risk devoting too many resources to projects that might be rejected by a fickle public.

TRW, for instance, has assigned only 30 employees to the development of its automobile radar system. Hughes, meanwhile, employs about 150 people in Torrance to make the inverter and charging systems for electric vehicles. That figure is expected to double by the mid- to late 1990s--a tiny gain, considering that 12,000 jobs have been lost at Hughes since 1989. Many companies point to ill-fated conversion attempts in the 1970s. After the Vietnam War, many Pentagon contractors poured billions into the production of buses, yachts, solar energy and even VCRs, only to fail to penetrate a market.

"They fell flat on their face because they didn't know the commercial market," said Steve Jarvis, director of the Office of Competitive Technology at the California Department of Trade and Commerce. "And now, it's going to be much harder to do. The market moves much quicker, and it's a global economy."

Many contractors prefer to move cautiously, competing for a smaller piece of the conversion pie--in some cases with civilian government agencies as the customer. Northrop, for instance, is building a prototype of its lightweight bus under a Southern California Transit District contract that involves 18 other suppliers.

In some cases, government has created a market for products offered by contractors. Hughes, for instance, stands to gain from a state anti-pollution law that requires 2% of each auto maker's California sales to be electric vehicles.

Even when contractors attract customers in droves, some--particularly smaller companies--have trouble raising the private capital they need to follow through on their conversion projects.

Two South Bay defense contractors, Data Integration Solutions Corp. in Gardena and Dyna-Cam Industries in Redondo Beach, turned to EDC, the nonprofit development group, receiving $100,000 in low-interest loans.

Data Integration Solutions Corp., founded by three former aerospace engineers, is developing software to tie together diverse computer data networks. Dyna-Cam, which has been designing a lighter and mechanically simpler aircraft engine for the military, now wants to sell the propeller engine commercially.

"We found that (venture capitalists) were incapable of grasping the capability of the engine," said Patricia Wilks, Dyna-Cam president, who has also applied for state grant money to help finance production of the aircraft engine. "They were so dependent on following the lead of someone else."

Such problems make it unlikely that the switch from defense work to commercial projects will produce dramatic job gains anytime soon. But over the long term, supporters of conversion say, the entrance of defense contractors into the civilian marketplace could help reshape California's economy.

"If this works, . . . what we will see is a regeneration," said Rep. Jane Harman (D-Marina del Rey), who is proposing a federal bill to promote conversion projects. "New industries (would be) growing in the South Bay, with the potential of becoming bigger and more successful than the ones they replace."

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