Defense a Bright Spot for Otherwise Down Manufacturing Sector
MANUFACTURING
By CHRIS CZIBORR
2002 is set to be a mixed bag for Orange County manufacturers, with defense contractors keeping busy and others awaiting an economic turnaround.
OC makers of technology, durable and other products are projected to see flat employment in 2002 with a less than 1% decline to 231,600 jobs, according to Chapman University. Many of the county’s manufacturers are coming off a tough 2001, in which the economic slowdown and rising electricity costs took their toll.
“Many industries expect low production levels in the coming months, with the exception of food and medical instruments industries,” said Raymond Sfeir, professor of economics and management science at Orange-based Chapman University.
The other bright spot is defense. Local contractors are benefiting from three years of new government spending on fighter jets, missiles and other projects.
“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.
Boeing Co.,OC’s biggest manufacturing employer,is doing work on the $65 billion F-22 Raptor fighter jet and the $200 billion F-35 Joint Strike Fighter projects, both of which are headed up by Lockheed Martin Corp.
In Anaheim, Boeing is working on the ground-based midcourse defense portion of the Ballistic Missile Defense program.
Boeing workers in Long Beach are churning out C-17 Globemaster III cargo planes as part of a seven-year contract.
“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.
OC subcontractors also are benefiting from the big defense projects. Irvine-based Parker Aerospace, a unit of Cleveland-based Parker Hannifin Corp., currently does mostly commercial work but expects to become chiefly a defense company once its $5 billion in F-35 work gears up.
Production on the project won’t begin for another six years, but Parker already is forecasting a 5% rise in military business for the fiscal year ending in June.
More than 60 other OC subcontractors are doing F-22 work, including Los Alamitos-based fuel-delivery duct maker Arrowhead Products, Buena Park-based Certified Fabricators Inc., West Paterson, N.J.-based Cytec Industries Inc.’s Cytec Fiberite unit in Anaheim and Costa Mesa-based Flexible Metal Hose MFG Co.
“On the military side we have seen a bit of an uptick so far,” said Arrowhead President David Schramm.
The big defense projects being worked on in OC have been in the works long before Sept. 11. But one segment could get a lift from the war in Afghanistan,so-called “guns and underwear” companies, or makers of military consumables. They stand to see added orders for spare components and items such as parachutes.
Beyond defense, though, the outlook for other manufacturers isn’t as strong. According to purchasing managers, much of OC’s manufacturing sector hadn’t posted a recovery by 2001 year-end, Chapman’s Sfeir said.
Chapman’s latest survey of manufacturing taken in September found that the sector experienced a major contraction across most industries that won’t reverse until the overall economy picks up again.
New orders, an indicator used to gauge future manufacturing performance, decreased at a much faster rate in the third quarter compared to the first half of the year for much of the sector, according to Chapman.
Computers and office equipment showed a particularly rapid decline both locally and nationally, Chapman reported.
Grand Rapids, Mich.-based Steelcase Inc., the world’s largest designer and maker of workplace furniture, earlier in the year laid off 130 employees at its 985,000-square-foot Tustin facility,nearly a 17% staff reduction.
“With uncertainty about the economy, a lot of businesses have held back in making major capital expenditures,” said Steelcase spokeswoman Heidi Hennink.
Typically, expenditures for office upgrades are cut back early in a business downturn and recover later during an upturn.
About 650 employees remain at the Tustin facility, which makes workstation furniture including chairs and lateral files.
