Aerospace adapts to survive in Southern Calif. county
By MARGOT ROOSEVELT | The Orange County (Calif.) Register | Published: February 2, 2013
During the Cold War, 15 of the 25 biggest aircraft companies in the U.S. were based in Southern California. Today, they have mostly closed their doors, merged with rivals or moved their headquarters away.
In 1990, in Orange County alone, more than 42,000 people manufactured planes, rockets, satellites or parts of them. Now, the official number is about 15,000, although that doesn't include many related jobs.
"In Orange County, as in the rest of the aerospace and defense industry, we are in a down cycle," said Daryl Pelc, vice president of engineering and technology for Boeing's Phantom Works, which develops advanced military technology. "But we are very excited about the pending upcycle."
If the giant factories that once pumped out warplanes have mostly disappeared, however, a vibrant aerospace economy is nonetheless powering new businesses in the region. In defense, companies see opportunities in cybersecurity, drone manufacturing and exports to foreign militaries. A boom in commercial aircraft orders is creating work for hundreds of local suppliers.
Despite recent layoffs, looming defense cuts and technical problems with its new commercial Dreamliner 787, Boeing is celebrating a record year. The company delivered 601 commercial airplanes last year, the most since 1999, and surpassed Airbus as the world's No. 1 passenger jet maker. Boeing orders stood at 4,373, the most in company history.
Many local suppliers are talking upcycle, too. Coast Composites, a high-tech toolmaker in Santa Ana, has boosted its workforce from 170 to more than 300 in less than three years as it ramps up its carbon-fiber mold business.
Thales USA employs 1,000 engineers and technicians in Irvine, and is growing at 15 percent a year, due to demand for its in-flight entertainment and Internet equipment.
Even at Lam Precision, a nine-person machine shop in Garden Grove that makes small, complex parts for Lockheed Martin's F-35 Joint Strike Fighter, owner Paul Lam is upbeat.
Bracing for changes
The Pentagon has slowed spending on the multibillion-dollar jet, but if military business dries up, Lam Precision can make parts for commercial craft, oil drilling and medical devices. "We do very, very high-quality work," said Lam, a former refugee who escaped from Vietnam by boat. "Our parts can mean life or death. People give us work so they can sleep well at night."
Nationally, aerospace and defense contractors have scrambled to adjust as the U.S. has wound down wars in Iraq and Afghanistan. In 2010, the Pentagon projected $485 billion in cuts over a decade.
More cuts are expected. Congress is scheduled to vote by March 1 on automatic "sequestration" spending triggered by a 2011 agreement to shrink the federal deficit by $500 billion.
"People know it is going to hurt," said Paul Weisbrich, an Irvine-based investment banker who specializes in aerospace for D.A. Davidson & Co. "But people hope they can limp through it. Over centuries, we have never stood down on our war machine. You need to be ready for the next threat."
Chicago-based Boeing remains Orange County's biggest aerospace employer, with about 7,000 workers in Huntington Beach and Seal Beach, most of them dependent on military contracts. Another 4,000 work in Long Beach, where Boeing builds C-17 cargo planes.
No government agency compiles full data on the number of people whose jobs are tied to aerospace. California's Employment Development Department counted 11,700 workers in Orange County in "aerospace product and parts manufacturing" in December – a 10.4 percent rise from a year earlier, even as overall manufacturing remained stagnant. Several thousand more work in search, detection and navigation instrument manufacturing.
For a 2012 report, "The Aerospace Industry in Southern California," the L.A. County Economic Development Corp. conducted a Dunn & Bradstreet search of aerospace firms based on state employment data, and came up with 385 firms employing 88,400 workers in Southern California in 2011, including 15,000 in Orange County.
But that "narrow definition" fails to capture the extent of the industry, the report noted, adding that Northrop Grumman has 2,000 Southern California suppliers. Boeing has 850 suppliers in Orange County alone.
A tally of Orange County's 25 biggest aerospace companies, compiled by the Orange County Business Journal last year, counted 23,833 workers among them, a 7.6 percent rise over the year before.
A complex supply chain
Complete airplanes are no longer built from the ground up in Southern California, although final assembly of some aircraft still takes place, including Boeing's C-17 and, in Palmdale, Northrop Grumman's Global Hawk drone. a Still, a vast subcontractor ecosystem continues to thrive, making everything from fasteners to aircraft seats, fuselage panels, antennas, body armor, parachutes and communications software.
With the Obama administration's "pivot to the Pacific," companies are not just developing airborne drones,but also unmanned underwater vehicles. Both have civilian applications. Police and firefighters are lobbying to buy drones for local use. Unmanned submersibles are used in oil and gas exploration.
Thales USA, which exports some $400 million in in-flight entertainment equipment from its Irvine plants,, also operates a joint venture in Fullerton with Raytheon, making radars for the U.S. Army. ThalesRaytheonSystems employs about 700 locally.
"Orange County is an outstanding place to be," said CEO Alan Pellegrini. "We manage a complex supply chain. The access to talent is spectacular because people want to live here."
Defense cutbacks" have the potential for negative effects," he said. But firms with a mix of commercial and military business, as well as companies that export, will do well, he predicted. .
Exports also are important for Santa Ana's Coast Composites. On a plant tour, CEO Paul Walsh pointed to molds for aircraft parts. "Those are for Embraer, the Brazilian company, a new client," he said. Coast also sells to Japan, Germany, France, Israel and China.
"We are toolmakers for the world's airplane makers," Walsh said. "We don't make anything that flies. We make the stuff that makes the stuff that flies."
Coast's equipment includes machines that "cut metal like butter," huge ovens that can heat as high as 1,700 degrees F. and laser machines that "are the Ferraris of the machine shop," Walsh said. Workers sat astride molds for Dreamliner parts, attaching layers of resin and carbon fiber in precise patterns.
Coast's skilled welders make up to $25 an hour, Walsh said.Composite technicians make $10 to $14 an hour. The company also offers health benefits and 401(k)s.
According to the Los Angeles County Economic Development Corp., the average annual wage in Southern California's aerospace products and parts manufacturing was $86,200 in 2011, 45 percent higher than the average manufacturing wage.
The region's aerospace industry is surely smaller, relative to the economy as a whole, than it was during the Cold War, but it maintains a high level of innovation, due in part to close cooperation with UCI's School of Engineering and other local institutions.
In Orange County, it continues to be an important driver of the economy. "Our nearly 100-year history of innovation and adaptation has carried us through," said Boeing's Pelc. "We are here, and we are going to be here."
Distributed by MCT Information Services