Defense Workers Go From Jets to Video Games

In the post-cold-war 1990s, the industry that for decades drove the California economy - defense and aerospace - is morphing like a rock star in an MTV video.

Many of the workers with PhDs and secret clearances, who once designed jetfighters or top-of-the-line tanks, are now going to work for startups creating arcade simulators and animated movies.

Call it "personal defense conversion." Big weapons firms themselves have mostly remained focused on the military market, although the industry has merged and downsized a lot. But thousands of engineers and researchers have found that their skills fill needs in new niches of the US economy.

Take the experience of Bob Jacobs. In the late 1980s, Dr. Jacobs was designing virtual-reality simulators for the US government: tanks, helicopters, and ships for use by Marine, Navy, and Army troops-in-training.

Today, the veteran aerospace designer, who began his career at Hughes Aircraft in 1966, is using the same skills for a different task - creating an arcade game for a casino in Las Vegas. Instead of tanks, the product is virtual Indy 500 race cars for use in a football-field-size attraction that has won accolades for accuracy from some of the top names in racing.

"In terms of the details of what I do, not much has changed," says Jacobs, who employs 14 other engineers at Illusion Inc., an engineering design firm here.

Entrepreneurial spirit

Like many engineers who now work at home or in small suburban office pods, Jacobs has exchanged life as a minor employee in a big corporation to head his own firm. "It's really the applications and the customers who have changed," he says.

Besides entertainment-based alternatives such as Indy cars and other arcade applications, the new products of personal defense conversion include special effects for movies, automobile-guidance systems, and high-tech motors for theme-park rides.

Instead of a handful of mammoth defense corporations, there are dozens of smaller ones, often peopled by those who left such companies as the Boeing Co., McDonnell-Douglas Corp., and Lockheed Corp. Many of the traditional aerospace companies have consolidated, downsized, or moved operations to other states.

"We saw the emerging marketplace for low-cost, satellite-launch services," says Mike Gallo, who left aerospace giant TRW in 1994 to form Kelly Space, a 35-engineer design firm that has patented a reusable satellite launch plane. "We are creating commercial opportunities out of what was once solely the realm of opportunities for government-contract defense companies."

The metamorphosis is changing the nature of life in many towns long reliant on a few key industries. For generations, families and neighbors at many of the plants shared the daily ritual of common commutes, time-clock check-ins, and noontime lunches.

"The nature of the organizations has changed," says Rohit Shukla, director of the Los Angeles Regional Technology Alliance. "The towns that supported them have changed. The level of employment has changed. Even the creation of values has changed."

The three 'T's'

In Long Beach, for instance, when McDonnell-Douglas was folded into Boeing, 10,000 to 12,000 local jobs were lost in four years. Then the Navy shipyard and naval station closed, cutting another 7,000 to 9,000 positions.

"One of our major city projects is to figure out how to refocus our economy," says Greg Davy, spokesman for the city manager's office. So far, he says, three "T's" lead the list: trade, technology, and tourism.

The extent to which firms and individuals in southern California have parlayed their defense expertise into new careers offers a lesson for other regions. It is a signal to areas dominated by a few industries that reinvention is not only possible, but in many cases desirable to cope with new global demands. "It is perhaps ironic that the same forces that caused defense spending to go down - namely the end of the cold war - simultaneously stimulated our commercial business," says Steve Dorfman, vice chairman of Hughes Electronics.

Mr. Dorfman and others note, for example, that satellite communications are in demand because they can be installed quickly, compared with telephone wires. Ten years ago his company, Hughes Aircraft, did 90 percent of its business with the US government. After spinning off defense divisions, Hughes Electronics now does only about 15 percent of business with the government.

"We are selling satellites to Malaysia, Thailand, China, Russia, Indonesia, Canada, and Australia - generally not to governments but to companies owned by individuals or publicly traded," says Dorfman.

Part of the company's reinvention strategy has been the launching of DirecTV, a 200-channel direct-satellite television service. "Hughes is a perfect example of a defense company that is recasting itself in a new incarnation for a new era," says Bob Pethick, a management consultant for A.T. Kearney. Although he notes the state's aerospace and defense industry has been hurt by cutbacks - 236,000 jobs were lost from 1998 to 1996 - he predicts the creation of 200,000 jobs by early next century.

For that to happen, analysts say, California leaders will have to help guide regional economic development policy through a difficult transition. Some are pushing for a strategic coalition made up of leading aerospace and defense firms and political leaders. "Aerospace and defense is undergoing the same kind of change the Big Three automakers went through in the late 70s, when foreign imports were wiping them up," says John Cutler, defense analyst at Quarterdeck Partners.

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