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VALLEY BUSINESS | RETOOLING THE VALLEY'S AEROSPACE
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Aircraft Builders Still a Strong Presence in Area

Defense: But with as many as 150 firms competing for fewer contracts, some manufacturers see diversification as only way to survive in new marketplace.

March 21, 2000|CONSTANCE SOMMER | SPECIAL TO THE TIMES

A decade after the end of the Cold War sent weapons-systems makers into a tailspin, the Valley remains flush with aerospace businesses--nearly 150 by one recent count.

The big hitters, such as Lockheed and Hughes, have closed shop here. Others were sold to distant owners--notably Rocketdyne, sold by Rockwell to Seattle-based Boeing.

While some of the companies that remain are battling for survival, others say they are finally rebuilding after the deep aerospace recession of the early and mid-1990s.

In Sylmar, Pentagon contractor Ocean Systems discovered an abundance of new clients simply by turning its focus overseas. In Sunland, Wallace Lee and his six employees work from sunrise to sunset making anything and everything for industries ranging "from pencils to airplanes." And in Burbank, a struggling machine shop called Quantum Manufacturing looks to Hollywood and amusement parks for its future.

For the Record
Los Angeles Times Wednesday March 22, 2000 Valley Edition Metro Part B Page 3 Zones Desk 1 inches; 20 words Type of Material: Correction
Hughes Facility--The year Hughes Missile Systems closed its West Hills location was incorrect in a story Tuesday. The facility closed in 1994.

Waves of funds from the U.S. government and commercial aircraft builders kept the San Fernando Valley's aerospace firms flush and static for decades. Today, though, local aerospace companies find they must scramble for new markets, along with everybody else, because to wait for the old business to return may mean to shrivel up and die.

"I think this is a historical time in this industry," said David Goodreau, owner of Quantum and president of the Small Manufacturers Assn. of California. "It's going to be critical for companies to diversify aerospace, if anything, in the region, [or else] it's going to continue to shrink."

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The money pot dried up about 10 years ago. With the disintegration of the Soviet Union--and the disappearance of the security threat it represented--Congress reapportioned funds once funneled into space and defense programs. Much of the work had been done in the Valley, where federal funds ultimately financed innumerable mortgages and sent generations of children off to college.

Then the commercial side of aerospace also began to slim down. Commercial airline companies realized they could make more money simply by purchasing fewer new planes and keeping the old ones in better shape, said Jon Kutler, president of Quarterdeck Investment Partners, a Los Angeles-based investment bank. They also pushed manufacturers such as Boeing to deliver less-expensive planes. The manufacturers, in turn, put new pressures on their subcontractors. Eventually, this filtered down to Valley companies, small and large, which either trimmed their costs or collapsed.

"The old Southern California days of contracts that are there for the picking are gone," Kutler said. "The Valley's once-dominant [aerospace] position has largely dissipated."

Across the nation and California, though, aerospace no longer looks like its old powerhouse self. Industry sales topped $160 billion in the second quarter of 1999, about $20 billion more than a previous, 1991 peak, according to the Aerospace Industries Assn. of America. Yet employment is down, pointing to the industrywide winnowing that left heftier contracts in ever-fewer hands.

Aerospace employment hit a recent high in 1989, with 1.2 million people on the payrolls, according to the association. That dropped to about 800,000 employees by the third quarter of 1999, the most recent period available, the association reported.

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Of the work that is available, less of it is ending up in California. The Golden State received about 20% of all the nation's major defense contracts in 1994, according to the Defense Department. Five years later, only 15% of all prime contracts went to California companies, the department reported.

The Valley is rife with examples of these statistics. Lockheed once brought millions of dollars worth of Pentagon contracts to Burbank, that is, until it merged with Marietta in 1989 and began the slow process of shifting its operations to Georgia and elsewhere. Hughes Missile Systems, once one of the largest employers in the Los Angeles area, closed up shop at its 86-acre West Hills site in 1984.

Major companies that remain look and feel different today even if their name has stayed the same. TA Manufacturing, for instance, a longtime division of Esterline Technologies of Bellevue, Wash., employs 230 people at its plant in Valencia. The company moved there from Glendale two years ago.

TA has seen "tremendous growth" in the past five years, powered by acquiring other companies, said Fred Gardner, vice president and general manager.

"That's been the marching orders," he said. "The [aerospace] market's been shrinking, seriously shrinking."

Rocketdyne, once a division of Seal Beach-based Rockwell International, now belongs to Boeing. The company employs 4,000 people at its headquarters in Canoga Park and other Valley-area facilities, plus another 1,000 around the country, said spokesman Daniel Beck.

That's down from a peak of 26,000 workers in the 1960s, but up from the low of 2,000 in the early 1990s, he said.

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