War

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LARRY KANTER

Senior Reporter

As a U.S.-led NATO assault sent bombs and missiles raining down on targets in Serbia last week, there was something missing: Much of L.A.’s defense industry.

Where military conflicts in years past sparked assembly lines at manufacturing plants throughout the region, little of the high-tech military hardware being deployed in the current assault is manufactured in Southern California a stark reminder of just how much the defense industry has changed in the post-Cold War era.

Homegrown behemoths such as Lockheed, Douglas Aircraft and Rockwell International once dominated the entire industry. But these days, L.A. is just one of many stars in the nation’s aerospace and defense constellation, overshadowed by Seattle, Bethesda, Md. and Marietta, Ga.

“The old name plates have disappeared” from Los Angeles, said Jon Kutler, an aerospace analyst and president of Quarterdeck Investment Partners Inc.

Instead, he said, “the work is handled by small subcontractors” the hundreds of largely anonymous firms that supply components to large prime contractors, as well as companies that provide some of the technological brains behind so-called “smart” bombs and guided-missile systems.

Such companies are keeping a close eye on current developments in the Balkans.

Consider Brad Spahr, president of Composite Structures, a Monrovia-based manufacturer of aircraft parts, including rotary blades for Boeing Co.’s Apache helicopter.

Following the Gulf War, Composite Structures, which has 460 employees and had 1998 sales of about $60 million, experienced a brief surge in orders as the military sought to replace worn-out helicopter blades.

Will the current conflict spark a similar demand? “It depends what happens,” said Spahr. “If they just continue the bombing, we will not see a major spike. But if there is ground action, and they send in Apache (helicopters), then we most certainly will see a spike in sales.”

How big a jump? Demand for helicopter blades, the company’s second-largest product line, could leap some 10 percent, Spahr said, adding as much as 5 percent to the firm’s overall sales. But he’s not counting it.

Nor should he, says Kutler. “Limited campaigns like this one (in Serbia) tend not to have a direct impact on companies’ bottom lines,” he said. “The money spent just isn’t enough to flow through to companies.”

Indeed, like many local subcontractors, Composite Structures is steadily scaling back its reliance on defense subcontracts in favor of commercial business, which currently represents about half of its annual revenues, up from 40 percent in 1997.

“You always want to have a good balance between military and commercial customers,” Spahr said.

It’s only relatively recently that L.A.’s defense suppliers have had to become so careful.

For much of the region’s recent history, the military was a reliable and deep-pocketed customer. As the nation entered World War II, for example, government orders for aircraft like Lockheed P-38 fighters and Douglas C-47 transports stimulated assembly lines throughout the region, putting hundreds of thousands of people to work and remaking the local economy. Later military conflicts unleashed similar economic dividends.

But even if a prolonged Serbian conflict leads to an increase in defense spending and a demand for new equipment, the local impacts will remain minimal, especially in the short term, Kutler said. He cited the significant lag time between when a contract is awarded and the time the funds actually work their way into the procurement cycle.

The employment numbers bear out L.A.’s loss of stature in the defense industry.

In 1998, 142,400 people in L.A. County worked in aerospace, according to the state Employment Development Department, compared to 274,200 in 1988. The Economic Development Corp. of L.A. County is forecasting a further dip in local aerospace employment, to 136,700 in 1999.

The Yugoslav conflict has to be particularly bittersweet for Northrop Grumman Corp. Its B2 stealth bomber, long the subject of controversy thanks to its $2.1 billion price tag and one of the few pieces of hardware made here in L.A, last week made its military debut to generally enthusiastic reviews just as the aerospace giant begins to phase out the project, closing the Pico Rivera plant that once employed thousands.

Northrop also is a significant subcontractor on Boeing’s F/A-18 Hornet and C-17 transport jets, and builds the radar for the F-16 all of which are being deployed in the Balkans.

Will demand for those products increase? It’s difficult to gauge a direct cause and effect, said Northrop spokesman Jim Taft. However, he added, “Obviously, as they distinguish themselves in operational use, then that increases their value to the customer community.”

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