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Rising Shine for Defense Jobs

April 29, 2002

Northrop Grumman Corp.'s hostile bid to acquire TRW Corp. eventually will sort itself out. If not Northrop, some other giant defense contractor will probably gobble up TRW, which holds fast to its hope of selling divisions, reducing debt and staying independent. No matter how the story plays out, Northrop's run at TRW underscores the revival of cutting-edge space and defense research and manufacturing in Southern California.

A successful acquisition of TRW would complete Los Angeles-based Northrop's unlikely transformation from bit player in the aerospace industry to one of the country's largest defense contractors. It would also bode well for the local economy.

Merged companies don't need two corporate headquarters, so some lucky northern Ohioans would throw down their snow shovels and join 300 executives and corporate staffers at Northrop's Century City headquarters. It's a good thing for the economy when moving vans stuffed with StairMasters and big-screen televisions are heading into town.

TRW's reorganization plan is designed to keep Northrop away, but it also shows where TRW believes it can grow. TRW would sell its debt-laden automotive parts business and spin off a business that manufactures aircraft parts. That leaves El Segundo-based aerospace and defense, the division that Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., describes as TRW's "crown jewel."

Northrop has 12,000 employees scattered from San Diego to Palmdale, working on such key defense projects as the B-2 bomber, the Joint Strike Fighter and the unmanned Global Hawk reconnaissance aircraft. Northrop could solidify its status as a major local employer by adopting all 10,000 TRW employees in Southern California.

Northrop's TRW bid is part of a continuing defense industry consolidation that has produced such giants as Boeing, Lockheed Martin Aeronautics Co. and Raytheon Corp. The big fish got that way by swallowing smaller competitors and eliminating duplicate divisions--often at the acquired company's expense. TRW's space and electronics operation wouldn't feel such pain because, as Kyser notes, "the talent base is here in Los Angeles."

Hollywood's bright lights tend to blind Angelenos to the economic importance of the defense industry. California lost as many as 300,000 jobs in the 1990s as the state's share of national defense contracts dwindled from 20% to 15%. At stake now are 21st century defense contracting jobs linked to some of the military's growing space-based and high-tech battlefield initiatives.

Northrop and TRW are a good fit. Given the antitrust scrutiny that other potential buyers would attract, it's unlikely TRW would come across a better suitor.

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