The painful slump endured by California's aerospace industry finally appears to be over after six long years. Companies are landing new contracts again, massive layoffs are fewer and farther between, and production is picking up.
But the aerospace industry--the backbone of a prosperous state economy a decade ago--now operates in a sober new world where fundamental changes have occurred. And despite the nascent rebound, aerospace is playing a much diminished role in California's effort to return to full economic health.
Unlike in the old days, the pickup in the aerospace business is not translating into tens of thousands of new jobs across Southern California and the San Francisco Bay Area. California aerospace's industry today has three main goals: lower costs, greater efficiency and better use of information technology--all of which dampen the need for more labor.
"It's not a temporary cycle we're in," said Robert Paulson, aerospace director of the consulting firm McKinsey & Co. in Los Angeles. "It's a structural change" in how the industry does business.
Most contractors, already hardened by years of layoffs and slashing costs to survive Pentagon spending cuts and a nose dive in the commercial aircraft business, are handling the resurgence of orders largely with existing employees.
That's certainly the case at American Automated Engineering Inc., a Huntington Beach defense contractor that has slashed its payroll by two-thirds over the past five years.
"We're down to about 50 people, and we're just not seeing any reason to start increasing," said company President Kenneth Christensen. The high-tech aerospace and missile parts maker gets a lot of its work as a subcontractor for companies such as McDonnell Douglas Corp. and Rockwell International Corp.
Future growth, for his company and for the giants, Christensen said, is most likely to be in nondefense projects, such as NASA's X-33 relaunchable rocket program, which both Seal Beach-based Rockwell and Huntington Beach-based McDonnell Douglas Space Systems are bidding on.
The cautious approach means it's highly unlikely that aerospace and defense will ever again dominate the California economy as they did in the 1970s and '80s--even if Pentagon spending eventually goes back up.
It also means only a modest number of the 350,000-plus aerospace-related jobs--which vanished from California after the '90s arrived, the Cold War departed and the Reagan defense buildup ebbed--are going to be replaced in years ahead.
Hughes Electronics Corp., for example, is looking for about 50 new workers in Fullerton, where last year it eliminated more than 3,500 jobs and shut down most of its 350-acre Ground Systems Division complex. But the job specs are tightly drawn: the company's command systems unit needs 30 engineers with oceanic air traffic control systems experience to work on two new Federal Aviation Administration contracts, while Hughes' Naval and Maritime Unit is hiring 20 engineers with torpedo and ship-guidance backgrounds.
Rockwell also is supplying the Pentagon with new technologies. The company's Anaheim operation expects to hire 400 people this year to put upgraded guidance-and-control systems on existing ballistic missiles and to make small location-plotting radios for use by downed pilots. But even with the new hires, employment at the plant will be only about 10% of the 35,000 jobs it provided in its heyday.
In fact, a study released earlier this month by Rutgers University and the Economic Roundtable research firm in Los Angeles notes that "tens of thousands of [existing] jobs are still at risk" in California because of earlier Defense Department budget cuts still working their way through the economy.
There are exceptions, of course. The booming commercial-satellite business is creating work. Defense companies that have successfully moved into other commercial markets, such as auto parts, are also hiring. So are those that make gadgets for upgrading aircraft and improving communications among troops--gadgets the Pentagon is still eager to buy.
But even in those fields, hiring is apt to be very limited and very specialized, said Brad Anderson, head of business development for Interstate Electronics Corp. The 750-employee Anaheim defense contractor is moving a lot of its work into the commercial field. "We are in a hiring mode, but . . . instead of people with defense work backgrounds who can build products to military specifications, we need people with a more streamlined, speedier approach to manufacturing for commercial avionics markets," he said.
The general rule, though, is that widespread hiring is not even on the horizon because contractors want to keep squeezing more productivity from existing employees in order to stay competitive and protect profits.