Taking Back the Aerospace Industry

More than 41,000 California companies make their living supplying the aerospace-defense industry.

That may come as a surprise given the widespread belief that aerospace is part of California’s history, not of its future. But that conventional notion is not only wrong but harmful.

It makes the vast number of small, struggling aerospace supplier companies feel like neglected orphans. “Aerospace is a core competency of this region, yet you never hear about programs to aid the defense industry,� says David Goodreau, president of Quantum Manufacturing, a Burbank-based maker of aircraft parts.

Neglect has consequences. Other states have picked off good-paying defense work from the Pentagon and Congress while California’s congressional delegation, forgetting that aerospace remains a vital industry here, did little.

But California is about to fight back. That was the theme of Gov. Gray Davis’ aerospace summit, which brought together 300 company and public officials in Los Angeles on Monday.

The state is going to upgrade high school programs, encourage students to learn science, support defense work with tax credits and fight for California’s share of defense contracts, Davis told the conference.

“The congressional delegation’s attitude will be that jobs in one district help all districts,� says Davis, who has enlisted the aid of Reps. Jerry Lewis (R-Redlands) and Sam Farr (D-Carmel) to organize the effort in Congress.

Encouraging, but how much can government really do? The entrepreneurial small-business people, who today lead a California industry that makes parts for military and commercial planes and satellites and rockets, “will believe it when they see it,� says one of their number.

Businesspeople who have seen company headquarters and defense contracts go to other states while Sacramento pursued regulatory and tax policies that penalized manufacturing companies can be forgiven their skepticism.

Besides, the state’s small aerospace suppliers have other matters to think about. They are pressed to improve capabilities and lower costs in the aftermath of aerospace industry consolidation.

The business gets tougher every day, says Tom Mundy, president of Superior Thread Rolling, an Arleta firm that employs 40 people and does $5 million in annual revenue by threading aerospace fasteners.

Boeing, which is paring vendors and still coordinating its acquisitions of Rockwell and McDonnell Douglas, has a constant-improvement program that demands a “3% cut in costs this year, 3% next year and 4% in 2001,� Mundy says.

A business that once operated with government guarantees has become risky. NC Dynamics, a 100-employee machine tool company in Long Beach, has had to invest $500,000 in the last 18 months to upgrade equipment, reports Pat Scott, president of the firm with $15 million a year in revenue.

“We had to do it if we wanted to remain a supplier to major companies,� Scott says. But work these days can be short term with no assurance that investments will be recovered.

Business has slowed dramatically lately, says Goodreau, whose Quantum Manufacturing had $1.6 million in sales and 17 employees in 1997, but this year will have roughly $700,000 in sales. Employees have been cut to five.

But Goodreau has secured orders for metal structures from Disney’s theme park division and from Harley-Davidson motorcycles. And he hopes that California’s congressional delegation protects the state’s interests in the Joint Strike Fighter competition, which will mean a lot of business for subcontractors of either Lockheed Martin or Boeing.

Yet challenged as California’s industry is, it represents arguably the greatest concentration of aeronautical, metalworking and design skills in the United States.

That’s why other states try to persuade California companies to move--Gov. Jeb Bush of Florida, for example, has made three poaching visits to California.

Ace Clearwater Enterprises, a Torrance metal forming and welding company, is the kind of firm other states are looking for.

Ace, founded in 1949 as a welding shop in El Segundo, now has two locations in Torrance and one in Paramount, employs more than 210 people and had $22.6 million in sales last year.

It will have $28.5 million in sales this year, says Kelly Dodson, the third generation of her family to run Ace Clearwater.

Growth is following investment. Dodson and her husband and Vice President Gary Johnson have invested $2 million in the last five years to upgrade Ace Clearwater’s equipment.

And that has helped Ace to win a contract to supply metal forms to Lockheed’s air-to-surface-standoff missiles and to win Industry Week magazine’s designation as one of the 25 top U.S. manufacturers.

What can Sacramento or Washington do to help California aerospace? “Go into the high schools, tell kids about good jobs in aerospace,� Dodson says. Her firm pays $16 to $22 an hour to welders, machinists and skilled metalworkers.

“And let’s praise manufacturing for a change and reintroduce apprenticeships. We need skilled workers,� Dodson says.

In fact, Davis is introducing programs to encourage science education and earmarking infrastructure expenditures for training programs.

Other moves in Sacramento have targeted tax credits specifically for defense work performed in California.

And Davis at the aerospace summit on Monday was attempting to broker a deal that could enable a subsidiary of Swissair to put a 4,000-employee maintenance program in Palmdale.

But the main effect of Sacramento’s support for the industry will not come in any specific program, but in the heightened awareness in Congress and in the councils of finance and industry that aerospace remains a vital force in California’s economy.

“The state is best known around the world today for Silicon Valley,� Davis says. “But aerospace preceded Silicon Valley.�

And the industry has a great future. “We have advantages in research and development, in design, and in satellites and the commercial uses of space,� Davis says.

California once took those advantages, and the industrial benefits that came with them, for granted. Now it has to fight to prevail in national and international competition in aerospace and the defense industry.

The good news is that it has begun to fight.

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James Flanigan can be reached at [email protected].