Big Projects Bolster OC Defense Contractors
By CHRIS CZIBORR
After years of retrenchment, Orange County defense contractors are seeing an upswing in business. And Afghanistan has little to do with it.
From Boeing Co. to smaller players, local defense contractors are seeing the fruits of three years of new government spending on fighter jets, missiles and other projects,all of which were in the works before Sept. 11.
The increased spending, which comes after years of cuts in the 1990s, has helped make the defense sector one of the stronger parts of OC’s economy and stands to keep local contractors working for years out.
“We’re looking at a 10-year uptick in military spending,” said Jim Peterson, chief executive of Irvine-based Microsemi Corp., a supplier of chips to the aerospace industry.
As such, any work related to the military strikes in Afghanistan stands to be a blip, according to industry officials.
“Right now, I’m not seeing any significant changes to our strategy or programs,” said James Albaugh, head of Seal Beach-based Boeing Space and Communications, in a recent speech.
While some analysts are predicting the war on terrorism will drive an increase in military spending equal to 1% of the nation’s gross domestic product, Albaugh called that “premature.”
Boeing has been doing what Albaugh called “what if” studies, looking at whether the company could accelerate certain programs and what kinds of capabilities could be provided to government in the wake of Sept. 11.
But Boeing already has a lot of defense work on its plate. The company is heading up the massive missile defense program. Also, Boeing is working on the $62 billion F-22 Raptor fighter jet and the $200 billion F-35 Joint Strike Fighter, both projects headed up by Lockheed Martin Corp.
In Anaheim as well as other U.S. facilities, Boeing is working on the so-called Ground-Based Midcourse Defense portion of the Ballistic Missile Defense program, formerly known as the National Missile Defense program.
Boeing is working on the middle portion of the missile system, which backers hope will be able to shoot down any rogue missiles that could be fired at the U.S. or its allies. At the beginning of this month, the U.S. military conducted its seventh test of Boeing’s contribution to the system at Vandenberg Air Force Base.
Over in Long Beach, workers at Boeing Military and Aircraft Missile System are in the midst of a seven-year contract to build the C-17 Globemaster III cargo plane.
“We’ve been talking to the Air Force about additional C-17s and that’s going to continue,” said George Sillia, a Boeing spokesman in Long Beach. “But all of these are long-term programs,not any fits and starts based on events in the world.”
It takes about a year to build one C-17, and Boeing assembles around 15 a year in Long Beach.
“We’re not in the business of being able to change rapidly,” Sillia said. “The C-17 is being used a lot over in Afghanistan. But the need for airlift was well established long before events over there. These sorts of contracts would’ve happened anyhow.”
Boeing has C-17 deliveries scheduled through 2004.
“There will be an additional contract,” Sillia said. “But that hasn’t been finalized and we’re still waiting for word from Congress.”
Boeing employs 7,000 people in Long Beach, where it also manages work on the B1B Lancer,a long-range bomber,as well avionics for the C-130 Hercules airlift plane.
Work on the defense sector’s big projects is trickling down to subcontractors. Irvine’s Parker Aerospace, a unit of Cleveland-based Parker Hannifin Corp., expects to see $5 billion in work on the F-35 during the life of the program. But the project won’t begin production for at least another six years and is set to last until 2021.
Overall, Parker officials said they see their military business rising 5% in the fiscal year ending in June. Most of the company’s work is commercial, but officials said they expect military work to account for more than 50% of revenue once F-35 work ramps up. Parker employs 1,700 people here.
Parker Aerospace officials also expect to get a boost from the F-22 fighter jet. In the next 12 years, Parker OC operations are expected to make $713 million worth of engine fuel nozzles, start control valves, flight control actuators and other parts for the jet.
Some 60 other OC subcontractors,including Certified Fabricators Inc. in Buena Park, West Paterson, N.J.-based Cytec Industries Inc.’s Cytec Fiberite unit in Anaheim and Flexible Metal Hose MFG Co. in Costa Mesa,also are doing F-22 work.
But the added defense work comes as most contractors are seeing the commercial side of their businesses take a hit.
“On the military side we have seen a bit of an uptick so far,” said David Schramm, president of Los Alamitos-based-Arrowhead Products, a maker of fuel-delivery ducts. But, he said, it’s “certainly nothing yet that would totally offset the falloff in commercial work.”
Arrowhead is working on the F-22 and other projects. The company counts 650 employees, all in OC. Schramm said he hasn’t seen any effect on his business from the U.S. strikes in Afghanistan but would welcome any new orders.
“You’ve got to believe that the spare parts and equipment upgrades business has got to be growing, that there’s got to be some demand coming our way,” he said. “But I haven’t seen much of that yet.”
