Defense Firms Are Learning `Real World'
But southern California companies find little cushion in competitive private sector
ALLAN JOHNSON has never forgotten the hassles his company had to endure to build a simple $20,000 racquetball court for a government-run missile storage base in Los Alamitos in the late 1980s.Skip to next paragraph
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``We had to hire a consultant to decipher all the regulations, and another full-time worker just for paperwork,'' says Mr. Johnson, president of Fibermux, a small engineering subcontracting firm for aerospace companies. ``Then we had to send eight copies of forms, together with eight samples of each material we used - sand, cement, blocks, wood, etc. It was totally absurd.''
Now that the cold war is over, dozens of defense and aerospace firms are having to diversify into the private sector, convert to new applications, or shut down. Johnson says the biggest firms have become so reliant on government they ``don't know how the real world works anymore.''
``They don't know what is required to put out ideas and produce products in a competitive environment,'' says Johnson, who has done subcontracting work for Northrop Corporation of Los Angeles, Lockheed Corporation, and McDonnell Douglas Corporation. ``They know how to push government paper, but they don't know how to get things done.''
Such comments were among scores of similar observations released last week in a survey of 60 top southern California aerospace firms and smaller subcontractors. The survey, conducted by the Economic Roundtable of Los Angeles, a nonprofit public-policy research foundation, examines how such firms are adapting to defense cutbacks and conversion. One conclusion: The five-county area with America's largest concentration of aerospace firms has grown more reliant on military spending since the cold war ended more than two years ago.
Because of recession, a drop in passenger aircraft orders, and military contractors' reluctance to convert to commercial work, the region's dependence on defense spending increased from 59 percent in 1991 to 65 percent in 1993, the survey found.
``We are watching the dismantling of the heart and soul of this country's aircraft design and production,'' says Michael Beltramo, a Santa Monica-based defense analyst. The 60 firms lost a total of 150,000 jobs between 1988 and 1993, as national defense spending dropped from $140 billion in 1987 to about $105 billion in 1993, according to the roundtable. That includes a drop from $12 billion to $6 billion in Los Angeles county alone.
``Yet despite so-called attempts at conversion, there is continued dependence on Uncle Sam,'' Mr. Beltramo says.
The worst is yet to come, Beltramo and others point out. A second study released last week by Beltramo & Associates, a Los Angeles-based management consulting firm, shows that more than one-half of the region's defense revenues rely on government contracts for the B-2 stealth bomber, which is scheduled to stop production in 1997.
Big firms adjust poorly
Examining the region's major defense firms in five counties - Los Angeles, Orange, Riverside, Ventura, and San Bernardino - the roundtable found that the largest firms had the most trouble adjusting to downsized post-cold-war spending. Some small- to mid-size companies added to their work forces. Those with 500 or more employees lost an average of 25 percent of their work force, while those with 100 to 499 employees increased 5 percent.