hughes facilities/d.taub/mike1st/mark2nd

DANIEL TAUB Staff Reporter

When Hughes Electronics Corp. agreed last month to sell its aerospace and defense units to Raytheon Co. for $9.5 billion, a cloud of uncertainty settled over the Westchester-based company’s 11,000-plus L.A.-area workers.

Simply put, who stays and who gets laid off?

The affected personnel includes a range of employees engineers, managers, customer-service representatives, lawyers, accountants and human resource workers.

They inhabit 5.5 million square feet of South Bay facilities 2.6 million square feet of it owned by Hughes and 2.9 million square feet of it leased.

Officials from Hughes and Raytheon say it’s too early to know what will happen to either the facilities or the employees, noting that the sale itself will not likely be finalized until mid-year.

They say only that large layoffs are not expected, and that it could be years before any local facilities are vacated.

Indeed, Hughes’ engineers who make up the vast majority of the company’s local work force can feel fairly secure in their positions. But the company’s smaller cadre of middle managers and administrators would be well advised to begin updating their r & #233;sum & #233;s.

“Guys on the factory floor are the most worried, but have the least to worry about. Legal, buyers and administrative have the most risk, even in a complementary acquisition,” said Jon Kutler, president of Quarterdeck Investment Partners Inc., an L.A.-based investment bank that specializes in the aerospace and defense industries.

Kutler said engineers and other highly specialized workers feel the most at-risk because they feel so distant from corporate decisions, but “they’re usually the ones least at-risk.”

Most likely to be laid off early in the acquisition, Kutler said, are those who are performing work already being done at the acquiring company, Lexington, Mass.-based Raytheon.

“The first thing that’s consolidated is middle management or administrative people,” Kutler said. “Administration people are the people usually most at risk.”

The majority of workers at risk are those at Hughes Aircraft Co.’s administrative operations in Manhattan Beach, and those at Hughes Electronics’ corporate headquarters in Westchester. About 100 people are employed in Manhattan Beach, and another 450 work in Westchester.

“That might be something that could disappear,” said Paul Nisbet, president of Newport, R.I.-based JSA Research Inc., an investment research firm specializing in the aerospace industry.

“There’s no reason, if you’re going to consolidate the operations and get synergism, you would want separate headquarters,” Nisbet said.

But Hughes’ Westchester and Manhattan Beach administrative facilities only account for a small part of its Los Angeles County aerospace and defense operations, which are heavily concentrated in the South Bay.

The company also has 800 customer-service employees, mostly engineers, at Hughes Technical Services Co. in Long Beach, and 450 employees at a Malibu research facility. It has another 180 or so employees who make radio-communications devices for the U.S. Army at a facility in Torrance.

But the bulk of the Hughes’ aerospace and defense work force is at its El Segundo facility, where about 9,000 employees mostly engineers develop electro-optical and radar systems.

Among the devices developed at that facility are thermal weapons sights, guidance electronics for missiles, weapons-locating radar, infrared sensors and radar for front-line military aircraft, including the F-18, the B-2 and the Harrier jets.

Those workers, industry analysts said, are not facing high risk because they are highly trained meaning they cannot be replaced by cheaper labor in another state and their work is not largely duplicative of work being done by Raytheon.

“Overall, I don’t see this as an acquisition that will result in major layoffs,” Kutler said.

But electro-optical and radar work done at Hughes’ El Segundo facility is similar to some work done by the defense operations of Texas Instruments, which Raytheon also agreed to purchase early last month.

Nisbet noted that Hughes’ El Segundo facility might be the more attractive for Raytheon to maintain because it has undergone heavy layoffs and consolidation over the last few years. It also has approximately $650 million in electro-optical work a year, vs. about $350 million a year at TI’s unit in Texas.

Nevertheless, if electro-optical and radar operations were consolidated, the decision on where that consolidated operation would be located might hinge less on the past financial success of the operations and more on which operation had contracts expiring, Nisbet said.

“My guess is there would be a slow consolidation into one area, as certain programs disappear,” Nisbet said. “(And) there may be some elements where there is overlap that would be subject to immediate consolidation or fairly immediate.”

Nisbet added that Raytheon’s ultimate decision about where to locate its consolidated operations could also depend on such factors as whether legislators in California or Texas are willing to offer tax cuts or other incentives.

Kutler said that, if and when Hughes’ electro-optical and radar facilities are consolidated, Texas’ lower cost of living, lower utility rates and lower wages could prove a great draw for Raytheon to move some operations out of California.

“My guess is that over time, more and more of production will migrate, if there are overlaps, to Texas,” he said.

Other analysts agreed, saying it is likely that Raytheon will keep a large number of Hughes engineers in California, but will move manufacturing and assembly workers to states where it is less expensive to do business, such as Arizona, Tennessee and Texas.

But Kutler, Nisbet and other analysts all said it is unlikely Hughes will undergo any downsizing or consolidation for at least a year.

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