Defense Driving Local Contractors
By CHRIS CZIBORR and SAMANTHA LEE
Orange County’s largest defense and aerospace contractors employ more than 20,000 people here working on everything from fighter jets to stronger cockpit doors on commercial planes.
That’s according to this week’s Business Journal list of the 15 largest contractors by OC workers, the paper’s first such listing.
The list reflects diverging trends: commercial aviation work is spiraling while an early upswing in defense work is taking hold. So far, though, the defense surge isn’t enough to offset commercial losses.
In the past year, the 15 contractors saw local employment drop by 8%, or 1,760 jobs, to 20,155 people. No. 1 Boeing Space and Communications, the Seal Beach unit of Chicago’s Boeing Co., accounted for nearly all of the loss, 1,150 jobs. With 10,850 OC workers, Boeing makes up half of the list’s total.
Accounting for the rest of the job losses was another big commercial aviation contractor, No. 5 Huntington Beach-based C & D; Aerospace Group. It shed 1,150 jobs, or half of its workforce. C & D; counts 1,117 local workers.
Without Boeing and C & D; in the mix, the remaining 13 contractors,chiefly defense subcontractors,grew employment nearly 8% in the past year, adding 573 workers for a total of 8,188.
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 and the war in Afghanistan.
While the war on terrorism stands to further swell military spending, OC defense contractors say they are yet to feel the full impact. Most expect to add workers for defense projects in the next few years.
Boeing is among those starting to see more defense work. In Anaheim, Boeing is working on the ground-based midcourse defense portion of the Ballistic Missile Defense program, formerly known as National Missile Defense.
Earlier this month, Boeing, which is heading up the missile defense program, won a $425 million contract to develop and test a second booster for the proposed missile shield.
Also earlier this month, the Pentagon tapped Boeing Space and Communications and San Diego’s Science Applications International Corp. for computers and software to tie together the Army’s ground, air and space systems. The project is expected to be worth up to $5 billion in the next five years.
The county’s second-largest contractor, Irvine-based fuel and flight control systems maker Parker Aerospace, saw no change in local employment last year, holding steady at 1,700 employees. But the unit of Cleveland-based Parker Hannifin Corp. expects to add jobs on the heels of recently won defense work.
“What we’re seeing is a firming up of orders we had in place prior to Sept. 11,” said Joel Benkie, Parker Aerospace’s general manager. “We do anticipate growth in our staff, but not at a high level.”
In November, Parker won a contract from Lockheed Martin Corp. to work on the F-35 Joint Strike Fighter,work that will bring in $5 billion for Parker in the next 20 years. Other contracts include work on Sikorsky Aircraft Corp.’s Black Hawk helicopter and Boeing’s C-17 Globemaster III transport plane, which Boeing assembles in Long Beach with spare parts support from Huntington Beach.
Most contractors on this list weren’t able to break down their employees between commercial and defense, since most do some work on both sides. Parker, for one, said most OC workers do at least some defense work.
Parker’s commercial work includes flight controls and hydraulic and fuel systems for Brazil’s Embraer-Empresa Brasileira de Aeron & #225;utica SA and Montreal-based Bom-bardier Inc.
“Our commercial business cycles tend to follow what happens at Boeing,” Benkie said.
Parker officials said they see their military business rising 5% for the 12 months through June. The majority of the company’s work is commercial, but officials said they expect military work to account for more than half of revenue once F-35 work ramps up.
Parker Aerospace officials also expect to get a boost from the F-22 Raptor fighter jet. In the next 12 years, Parker’s OC operations will make $713 million worth of engine fuel nozzles, start control valves, flight control actuators and other parts for the jet.
At No. 3 are the OC operations of Dulles, Va.-based Fairchild Corp.: Fairchild Fasteners in Fullerton and Aerostructures in Huntington Beach. The company grew its OC workforce 4% to 1,330 in the past year after expanding its local facilities.
The Fullerton plant, which makes screws, rivets, nuts, bolts, latches and clamps used in planes and heavy machinery, accounted for the growth, adding 50 jobs for a total of 1,200.
Fairchild’s Aerostructures arm employs 130 people making components for commercial and military aircraft, rockets and satellites.
Lexington, Mass.-based Raytheon Co. ranks fourth on the list with 1,160 workers in Fullerton, unchanged from a year ago. The Fullerton operation, part of Raytheon’s 1997 buy of Hughes Electronics Corp.’s defense arm, makes position location and tactical Web-based systems for the Army.
C & D; Aerospace rounds out the top five. The company has felt the fallout of the commercial aviation downturn. But it also is getting some business in the wake of Sept. 11.
Last year, C & D; picked up a Boeing contract to build antiterrorist cockpit doors and to help retrofit U.S. commercial jets.
“We hope to hire some of the laid-off people back,” said Tom McFarland, C & D;’s marketing vice president.
The Anaheim operations of New York-based L-3 Communications ranked sixth on the list with 875 local workers, unchanged from a year ago.
L-3’s Power Paragon unit in Anaheim makes switches that warn military customers of power outages and can switch to a backup source. Military contracts account for 80% of Power Paragon’s business.
“Sept. 11 caused a reduction of dot-com business for us and caused military programs to stretch out,” spokeswoman Sandra Schaffer said.
Interstate Electronics Corp., L-3’s other Anaheim unit, brings in $90 million in annual sales, according to company spokesman Greg Martz. Interstate also is the bigger of the two operations with 475 workers. The unit produces global positioning receivers for Boeing, Raytheon, Lockheed Martin Corp. and others that use the devices in guided weapons.
Defense is “where we’re focused at this time,” Martz said.
No. 12 Costa Mesa ceramic armor maker Ceradyne Inc. grew employment 36% in the past year to 326 people after more orders from the Army for lightweight infantry armor. Nearly two-thirds of the company’s employees do at least some defense work, the company said.
Irvine-based No. 13 Eaton Aerospace, a unit of Cleveland, Ohio-based Eaton Corp., was another gainer, growing OC employment 38% in the past year to 275. All the company’s employees do at least some defense work, according to the company.
Key customers include Lockheed Martin, which plans to use the group’s fluid power systems on the F-35’s landing gear and wing flaps, part of a $1 billion contract Eaton won in October.
About 55% of Eaton’s $700 million in annual sales consists of commercial work, according to spokesman Peter Parsons. The company’s Costa Mesa’s cockpit controls operation makes switches and panels for Boeing, Bombardier and Textron Inc.’s Cessna Aircraft Co.
Eaton’s other 45% of business comes from defense. Company officials say they hope military contracts will offset the anticipated 10% to 15% decline in the commercial aviation industry.
