When Northrop Grumman Corp. announced last week that it would eliminate some 8,000 jobs by the year 2001 with most of those cuts coming locally the national media characterized the downsizing as yet another blow to Southern California's aerospace industry.
Well, not really.
The cuts are relatively minor, were largely expected, and represent the final stage of a repositioning by L.A.'s aerospace industry.
"We're seeing that the principal growth is in defense electronics and space here in California, and not in aircraft," said Kent Kresa, Northrop's chairman, president and chief executive. "And the primary reason is that defense programs are few and far between."
Most of the jobs Northrop will eliminate by 2001 are in a sector that, for the most part, has been tailing off in L.A. for some time: final assembly of military aircraft.
After the B-2 program comes to an end in two years, the only military plane that will undergo final assembly in L.A. is Boeing Co.'s C-17 transport plane. That plane, which remains popular with the U.S. military, is assembled at Boeing's plant in Long Beach.
But as assembly work tails off, other sectors are showing strength in Los Angeles including commercial satellites, electronics systems, missile components and commercial aircraft components.
The number of jobs Northrop is eliminating in L.A. County while not insignificant at about 7,000 represents less than 4.9 percent of the area's total aerospace workforce.
Furthermore, many of the cuts particularly the 4,300 jobs in the B-2 stealth bomber program long had been expected. The B-2 program was known to be at risk ever since the end of the Cold War and the resulting defense downsizing of the early 1990s.
"Certainly people understood for a long time that additional B-2 planes are not being funded," Kresa said.
Analysts and economists project that growth in other aerospace sectors will more than make up for the loss. Los Angeles County has about 144,000 aerospace and high-tech workers up from a low of 136,600 in October 1996 and that number is projected to increase to about 154,000 by 2005, according to the Economic Development Corp. of Los Angeles County.
In some ways, Northrop, whose proposed merger with Lockheed Martin Corp. was called off in the face of government opposition, reflects the changes.
The company expects to double its information technology and electronics business to about $2 billion in annual revenues within five years. It invested heavily in those sectors through last year's acquisition of Logicon Inc. Northrop also expects to add about 2,500 employees in that business sector by the end of 2000, which will partially offset what otherwise would have been a loss of 10,500 jobs at the company.
"I don't view (the cuts) as being a big deal," said Jon Kutler, president of aerospace investment firm Quarterdeck Investment Partners Inc. "Some of it is basically attrition, and things that were expected."
Other local operations poised for job growth include Hughes Space and Communications Co., which has received a spate of orders for commercial communications satellites over the last several years, and Boeing's Rocketdyne division, which makes parts for rockets used in launching satellites.
(Boeing was dealt a setback last week, as the first of its new Delta 3 rockets exploded shortly after liftoff off the coast of Florida, with a Hughes-built communications satellite on board.)
Kutler said what's driving aerospace is increased efficiency a trend most recently seen in Boeing's spate of layoffs and its push to make subcontractors more cost-efficient.
No one expects the local aerospace industry to regain the peak of 274,000 aerospace and high-tech workers in 1988. But the industry is expected to continue its current upticks particularly in commercial satellites, rockets and other components.
The commercial space sector will likely grow more than 10 percent annually over the next five to 10 years, according to a study of the local aerospace industry by A.T. Kearney Inc. Annual growth of more than 5 percent is also expected in the commercial aircraft sector and in new markets, such as special effects for the film and multimedia industries and global-navigation applications for satellites, the report said.
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