St. Louis Diversity May Blunt Impact Of Boeing Buyout

City is well prepared to weather any layoffs

For the past half century McDonnell Douglas and St. Louis have been synonymous with aviation and exploration.

The company built everything from the legendary World War II transport plane to all the space capsules for the Mercury and Gemini programs. The city symbolizes its fealty to aviation in a ribbon of blacktop, Lindbergh Boulevard, that bears the name of its favorite son.

Now the historic union between McDonnell Douglas and St. Louis is entering a new era, one in which the destiny of the corporation and the city will still be intertwined but in different ways.

With Sunday's announcement of a buyout by the Boeing Company, McDonnell Douglas may soon merely be a subsidiary of its longtime aviation rival - with the headquarters located in Seattle.

Yet in St. Louis, a city known for its allegiance to the past, dissolution of the McDonnell Douglas name is causing little consternation. The main reason: The region's economy has diversified to the point where it is now capable of absorbing any unemployment that might result from a buyout.

In that sense, St. Louis's experience mirrors what is going on in some other cities in an era of defense downsizing and corporate mergers. While many have been hard hit by consolidations in the past few years, some have found a new sense of self-reliance and economic diversity.

Indeed, the loss of corporate identity in St. Louis might actually improve prospects. Ray Caldwell fabricates sheet metal for the F-15 fighter, which along with the state-of-the-art F-18 is the mainstay of the McDonnell Douglas assembly lines.

"This is great!" he said after hearing the news. "They've got stability now. I've been laid off four times in four years. I'm ready to have steady employment now."

Mr. Caldwell was on strike for 99 days this summer in a bitter dispute between the International Association of Machinists and the company. Nearby, Scott Brooks, a production methods engineer who worked during the strike, is also upbeat.

"I'm in favor of it," he said. "I think it's a good idea to keep our company strong. I don't think it follows that with mergers there will be layoffs, at least in this case."

Boeing executives acknowledge that the merger would cause "reassignments" but say they hope to minimize layoffs. That may be more than corporate happy talk, since McDonnell Douglas may win by being swallowed by the world's largest civilian aircraft maker.

Defense-industry analysts say the consolidation follows the national trend. With the absence of a hostile Soviet Union, the government-spending pie is shrinking, says Liesel Heeter at the Center for Strategic Budgetary Assessments in Washington. With only two or three behemoth contractors on the block, contractor production "may reduce DOD flexibility in some cases, and it may cost taxpayers more money, but not as much as if we were still fighting the cold war."

Mac, as it's known locally, is still the world's biggest maker of military aircraft, and it has secured contracts for the next 10 to 15 years. But in the past year, the company has been hammered by a series of setbacks. The strike damaged the corporate culture. The company also lost out in competitions to make the X-22 successor to the space shuttle, lost the Advanced Tactical Fighter contract, and also missed the Joint Strike Fighter, a multipurpose fighter to be used by the Marines, Navy, Air Force, and British Royal Navy.

In 1990, McDonnell Douglas had 42,000 St. Louis employees. Today, because of layoffs, that number is around 23,000. From 1990 to 1996, the St. Louis region lost more than 50,000 defense-related jobs. "We've replaced the 50,000 lost, plus 50,000 new jobs," says Dennis Coleman of the St. Louis County Economic Council. "The economy in St. Louis is perking along. If we're going to absorb any job losses, this is the time to do it."

Economist Murray Weidenbaum, at St. Louis's Washington University, agrees. "This is a tight labor market. Unemployment is well below the national average."

Indeed, the major local concern seems to be the impact on the city's business culture - and on corporate philanthropy. "We will just have to wait and see how things play out," says the St. Louis Symphony's director of development, John Limbacher. "Their move just highlights our need to diversify our fund-raising to include more individual donors."

Staff writer Skip Thurman contributed to this report.

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