The Aerospace Chronicles: Reinvention in a new era
If you worked in the local aerospace industry in the 1980s, you were a part of an age of technological triumph.
Aerospace was, to that decade, what the dot-com business is to this one, and the South Bay was its Silicon Valley — a hotbed of jobs, innovation, visionaries, and new technologies. As government money poured in, jobs in the South Bay proliferated and the middle class quickly swelled. Property values rose. Hopes soared.
Local engineers created products that explored space, armed armies, and ultimately swayed the outcome of a four-decade war.
When America won the Cold War in the early ‘90s, however, the implications for the aerospace industry were hardly victorious. Budgets were immediately and drastically cut, sending local companies into a tailspin.
It had happened before. It was hardly surprising in an industry that had always risen and fallen according to unpredictable geopolitical trends. What was different this time, though, was that the local industry would never fully recover.
“Aerospace in the South Bay will never be what it once was,” said longtime TRW recruiter Mark Forgea, who continues to zealously track the industry’s trajectory. “Political will, community support, taxes, and all the other things that were miraculously present for eight decades are no longer to be found in abundance at the former heart of what was once an empire.”
Companies have worked hard to reinvent themselves. Many have tried to enter commercial markets.
But the reality is that the industry was not built for mass production. It trafficked in the design and construction of products intended never to fail – products whose development required meticulous attention to detail, and big budgets that would allow it.
“In the commercial game… the objective is to design a product that you can sell and make a profit, so you never want to over-design it,” explained Dave DiCarlo, a Palos Verdes resident who last year retired as the vice president of Northrop Grumman. “You want to make it highly manufacture-able so you can mass-produce it. You want to do it fast. That’s a much different set of operations and processes than going very carefully through design of a satellite that you don’t want to lose because it’s got to be there for a long time and the security of the nation depends on it — that’s a slow, methodical, expensive process. Making the transition from one to another was — is — a very challenging thing.”
The late John Parsons, a former Redondo Beach councilman who lobbied tirelessly until his recent death to protect the L.A. Air Force Base in El Segundo from closure, went so far as to call the industry’s transition a failure.
“In 1992, we went through what we called the peace dividend,” Parsons said at an aerospace panel discussion in Torrance last year. “We decided to cut back on defense spending because the Cold War was won and wars were winding down and we didn’t need [the same] military spending anymore. There was a big effort to try and encourage the defense industry to take their technology and go commercial with it, and with a few exceptions it was almost a complete and utter failure. It’s like trying to find an aerospace company and teach them how to make lawn chairs. They’re not going to be good at that. They’re good at what they do.”
By the time defense spending increased – in 2010, the Department of Defense was spending more than $700 billion annually, as opposed to less than $400 billion in 2000 – the landscape had changed.
“Productivity gains achieved through technological innovation reduced the number of workers needed to meet production goals,” observes a 2012 report compiled by the Los Angeles County Economic Development Corporation (LAEDC). “Firms were able to increase output with fewer workers, a trend that has been reshaping the nation’s entire manufacturing sector over the last three decades. For example, parts that once required a skilled worker to assemble or shape can now be built [robotically]. Outsourcing… also contributed to the decline in the region’s aerospace workforce.”
And as the local aerospace industry shrank, global competition grew.
The industry remains a cornerstone of the South Bay economy. It might be leaner, but it is still profitable. Local aerospace companies procure contracts worth hundreds of millions of dollars and developing technologies critical to defense, space, and communication industries.
“We still have to put satellites in space,” said Bill Fisher, who is an engineer and the mayor of the aerospace-dependent city of El Segundo. “Defense spending is declining everywhere. A lot of other areas in the country have been hit really hard, and that’s a reality. But what’s also a reality is this is a burgeoning industry with high-tech work that’s going on.”
The Space and Missile Systems Center at the L.A. Air Force Base in El Segundo continues to employ about 4,500 people and administer $6 billion in government contracts annually. Hawthorne-based firm Space Exploration Technologies Corp. (SpaceX) last year won a $440 million contract to develop a successor to the space shuttle that may be operational as early as 2015. Recently SpaceX became the first private company to build a spacecraft that successfully docked at the International Space Station.
Companies like Northrop Grumman, Raytheon, Boeing, Alcoa Fastening Systems, and Lockheed Martin still employ thousands of people in local facilities, and continue to generate millions of dollars in tax revenue for local city coffers.
Much of the infrastructure – universities, research institutions, test fields, a network of electronics suppliers – built to accommodate aerospace remains intact.
Still, the heyday of the aerospace industry seems a fading memory.
Since the end of the Cold War, aerospace employment has dwindled by half. The number of employees in L.A. County was last year less than 60,000 – this represents a nearly 70 percent decline from the 189,035 workers employed in 1990, according to the Kyser Center for Economic Research. Between 1992 and 1996, the South Bay lost an estimated 47,000 aerospace jobs, according to a Los Angeles Times article published in 1998.
“We have access to a tremendous number of resources,” said Kevin Klowden, a Milken Institute economist, during an industry forum in Redondo Beach last August. “But at the same time the reality is that since the aerospace industry peaked in California in the 1980s, we have continuously been fighting to maintain jobs.”
The federal government’s spending priorities have shifted since the Cold War. An aerospace industry that was, decades ago, drunk on government resources is feeling the hangover. The government shutdown last October impacted 60 percent of aerospace workers, according to a speech Congressman Henry Waxman delivered at the time. Such a shutdown would have been unthinkable in the 1980s.
Last year, the Department of Defense’s $531 billion annual budget was slashed by 10 percent over the next decade in the automatic across-the-board “sequestration” cuts that resulted from Congress’s inability to negotiate a more specific budget deal. The reductions, according to LAEDC economists, could put the aerospace industry’s sky-high standards at risk.
“Obviously, the defense industry is not about to come to a grinding halt, but contractors will be forced to focus on affordability when developing new weapons systems for the Pentagon,” the 2012 LAEDC report says. “Additionally, less spending on research and development may result in shrinking a large part of the industry’s innovation base, shifting focus from the development of new technologies, products and systems to service and support for older platforms and systems.”
Critics argue that such broad streamlining is ill-suited for an industry based on a high level of intricacy.
“In times of shrinking defense acquisition budgets, like now, government customers also strive to include more commercial-like procurement processes to reduce cost,” DiCarlo pointed out. “But finding the right balance between reduced cost and increased risk is equally tricky, especially for space systems produced in relatively small quantities.”
Federal budget cuts coincide with rising global competition and with another, more biological trend: many of the industry’s brightest minds are aging.
“The imminent retirement of thousands of baby-boomers from the industry in the coming years,” warns the LAEDC report, “is a serious concern.”
Engineers from the Baby Boomer generation began to retire sometime around 2011, and it appears they are not being replaced. Numbers of STEM (science, technology, engineering, and mathematics) graduates are declining.
“The students that were inspired by Neil Armstrong’s first walk on the moon have done their part, but we need a new generation of rocket scientists to take their place,” Congresswoman Janice Hahn has been quoted as saying. “We are simply not graduating enough engineers to do it.”
Former congresswoman Jane Harman, an ardent industry supporter who is now president of the Woodrow Wilson International Center for Scholars in Washington, D.C., articulated it simply from the floor of the House in 2011: “We can’t build rockets,” she said, “without rocket scientists.”
All but a handful
Southern California’s aerospace industry is feeling a disproportionate pinch.
Companies and skilled employees have relocated to other states like Texas, Georgia, Virginia, and Alabama – climates made attractive by more relaxed regulations, appealing tax incentives, and comparatively low labor and manufacturing costs. Many companies have moved closer to defense sites, particularly the Pentagon, to cope with the rising price of transportation.
“At the height of the Cold War, 15 of the 25 largest aerospace companies in the United States were based in Southern California,” says the LAEDC report. “Today, all but a handful of the largest of those original firms have closed their doors, have moved elsewhere, or have been absorbed through a wave of mergers and consolidations that swept through the industry in the 1990s.”
Computer Sciences Corp. moved from El Segundo to Virginia in 2008. Last year, Raytheon moved the headquarters for Space and Airborne Systems – a unit valued at $6 billion – from El Segundo to McKinney, Texas.
There were frequent consolidations: Hughes merged with Raytheon, and was later purchased by Boeing. Lockheed merged with Martin Marietta Corporation to become Lockheed Martin. Boeing acquired McDonnell Douglas Corporation. Northrop Grumman acquired TRW. Boeing bought Rockwell International’s defense and space units. Smaller firms closed or found business elsewhere.
“Already in a recession, Southern California’s economy went into a tailspin,” the LAEDC report continues. “The severe contraction of the aerospace industry added a structural component to the downturn. As the business cycle turned up again elsewhere in the country, the permanent loss of thousands of aerospace jobs in the region led to a longer and deeper recession in Southern California. During this time, many skilled former aerospace workers scattered to other industries or other parts of the country.”
Many who remember the aerospace industry at its pinnacle – nostalgic for an era of limitless resources and astonishing innovation, and conscious of the industry’s economic value – strongly believe its revival should be a local and national priority.
“We compete with other people, whether Texas or Nevada or Florida or somewhere in the upper Midwest, [who,] when they’re trying to attract workers, do a sales pitch,” Parsons said at a public meeting last year. “They’re throwing money in and all sorts of incentives. It’s like we’re going to wait until the horse is out of the barn until we do something about it.”
Company executives and legislators are, in fact, trying to find ways to nurse the industry back to optimal health. Campaigns are being waged at the legislative level to make California an appealing place for aerospace companies to do business.
Harman has been fighting for years to retain aerospace jobs.
She made it a point to return a call from Easy Reader late at night from her hotel room in Tel Aviv, where she was attending a high-level security conference, which speaks to her passion for the subject of aerospace.
“During my 17 years in Congress, the aerospace industry was central to every single thing I did…,” she said. “I can’t think of a day I didn’t think about what else I could do, how I could help the industry get the attention it needs in Washington, get the support from the Pentagon it needs… I feel that my service in Congress was valuable for lots of reasons, but certainly one of them was that I connected to the economic engine of the South Bay.”
Assemblymember Al Muratsuchi, who represents the Beach Cities and chairs the Assembly’s aerospace committee, says he is equally committed.
“Time is of the essence,” Muratsuchi has said. “We have an opportunity here to bring thousands of jobs back home. This must be a priority.”
Twice last year, Muratsuchi convened public meetings to discuss the future of a business that makes what he called a “disproportionately high contribution” to the local economies in which it operates.
“We can use sessions like this,” Kish Rajan, director of the Governor’s Office of Business and Economic Development, said during one of these meetings, “to figure out where we can bring balance between a commitment to protections in our state but acknowledging and recognizing the realities of the burdens that places on business.”
Jack Stewart, president of the California Manufacturers & Technology Association, introduced himself at that same meeting as a pessimist whose views have been shaped by years spent in a declining industry.
In his mind, the future is bleak. In particular, he fears the consequences of impending state-mandated environmental regulations.
“There’s a tidal wave, a tsunami, coming across the ocean,” Stewart said of impending climate change regulations, “and it’s ready to hit us.”
He also foresees “very dramatic” increases in the cost of electricity, transportation, and fuel, compounding a price which already exceeds that in the country’s other 49 states.
“Because of the environmental mandates, the cost of energy has become extremely high in California, especially compared to other states,” Kevin Mitchell, vice president of manufacturing for Northrop Grumman, agreed at that forum.
In addition to organizing public discussions around the industry’s future, Muratsuchi has authored two bills that aim to make it brighter.
Called the Governor’s Economic Development Initiative, AB93 exempts manufacturing and bio-tech equipment from being subject to sales tax. It further institutes two credit programs, called New Employment Credit and California Competes Credit, aimed ultimately at retaining existing business and attracting new business into California.
AB777, which passed Tuesday afternoon, exempts propulsion systems used in spaceflight from being subject to property tax.
“It’s very important to send a message to industry and places around the country, and frankly, the world, that California realizes we need to get on the ground with a stronger set of tools,” Rajan said. “[These bills] send a very loud message that California is open for business at a level we haven’t been in some time.”
Lawmakers and executives are also seeking to strengthen ties with educational institutions in an effort to bolster STEM programs. The Aerospace Corporation, a federally funded non-profit organization in El Segundo, offers STEM programs and has cultivated partnerships with local middle and high school teachers and students to encourage young interest in the industry. El Camino College’s Center for Applied Competitive Technologies offers training programs to connect students with the manufacturing departments of aerospace companies.
“Part of why aerospace grew up here and part of its strength [was] the close collaboration it had with not only government but also universities and educational institutions, so going back to the question of having enough STEM workers to supply the industry… You have to get government and industry and educational institutions and smaller firms to work together,” LAEDC economist Kimberly Ritter-Martinez said at an aerospace forum last May.
California has implemented the Innovation Hub (iHub) Initiative – a state-administered system that connects universities with businesses and start-up companies. One such hub is located in Torrance.
City governments are also doing their part to entice aerospace companies to stay local.
One of the first things Fisher did as mayor was resurrect the Economic Development Advisory Council, in large part so it could devise ways to fill the void left by the exodus of aerospace companies.
“We’re feeling it and we’re acutely aware of it,” Fisher said. “That’s why we’re [making] this push to diversify business in El Segundo and the South Bay – so that as defense declines a little bit, the engineers and folks working in that environment have options and can put their talents to work elsewhere. It’s an ebb and flow – 10-year cycles – and as defense increases they can pull from engineers and folks in the private sector and vice versa.”
While it is always possible the aerospace industry will again swell to its previous size, it remains a shadow of its former self. The people affected by its contraction, though, continue to employ a key skill they cultivated in the aerospace industry: a spirit of innovation.
The local legacy of aerospace is a dense concentration of highly-skilled, innovative people whose talents and inventions altered world history.
“The brain trust here is massively high-tech,” Fisher said. “The folks that worked here are responsible for [inventing] your microwave and the GPS system in your car. El Segundo is responsible for launching more satellites into space than any other city in the country. You walk into [The Aerospace Corporation] and go, ‘Whoa, what is going on in this little town?!’ It’s incredible.”
These people are, Fisher believes, some of the South Bay’s most valuable assets.
Fisher believes that if not for the classified nature of the work local aerospace engineers did — and continue to do — the area would be internationally recognized for its enormous impact on modern technology. He believes the South Bay of Los Angeles would have evolved into the digital Mecca that the South Bay of San Francisco instead became.
“If people would’ve known the stuff that was going on here and if it wasn’t all secret,” he said, “this easily could’ve been Silicon Valley.”
The old-fashioned American ingenuity that has always defined the aerospace industry is still very present in the South Bay, both within aerospace and among the people who have since left the industry behind.
So where are the ones who left?
Many of them have retired. Others were absorbed by other prominent South Bay industries, like automotives and information.
Many broke off and started their own consulting companies, and continued to do work within the aerospace field.
A large number made the natural transition into other technology-based industries and internet companies. Drawing on the skills they cultivated working in aerospace, they continued to create some of the world’s most complex technologies. Many went into computer graphics and gaming, fields in which they could apply the sophisticated knowledge of visualization they obtained in aerospace.
Lorne Lanning is one of them.
With his wife Sherry McKenna, he founded video game company Oddworld Inhabitants and created the Oddworld game series that sold more than 7 million copies.
A trained photorealist painter from New England, Lanning moved to L.A. in the ‘80s with big ambitions and a progressive vision of what the convergence of computers and art could look like. He was seeking a job in Hollywood, but was instead recruited by aerospace giant TRW in Redondo Beach to create video visualizations of its big engineering projects.
It was in TRW’s “Black Hole” — a lab outfitted with $100,000 computers — that Lanning was able to hone the skills that would later form the foundation of his successful gaming career.
“I learned this super, highly-cool medium of computer graphics and animation, and I was able to get my start in aerospace,” he said. “You had access to $100,000 computers if you could do the job. It was great.”
With his team at TRW, Lanning created video visualizations that would enable aerospace engineers and military units to communicate.
“The generals understood bombs and bullets, but they didn’t understand these new weapons systems,” he said. “They had these highfalutin concepts of high technology that they couldn’t explain, and if they couldn’t explain them, they weren’t going to get the Pentagon contracts… We made destroyers and particle weapons and Brilliant Pebbles and satellites look cool. It was visual storytelling, and it wasn’t organized like a production company. If you could make something look good, you could run with it, and the imagery started getting snazzier.”
The exposure to cutting-edge technologies would inform his eventual career path. Aerospace was ahead of the curve, and Lanning was eager to learn from it.
“I had a big fascination with the history of technology, which is inevitably directly tied to war efforts. Always, the leading technologies are in the military space, no matter what Silicon Valley wants to talk about.”
He started thinking about these military technologies being used in two arenas: theme park rides and video games. Fast forward to now, a couple of decades later — he has been hailed as a “legend” within industry circles and his company is creating games for Playstation and Xbox that have garnered more than industry 100 awards.
There were others from the local aerospace industry that went on to become nationally recognized figures.
Daniel Goldin, who worked for 25 years at TRW in Redondo Beach, became the ninth administrator of NASA. Simon (Sy) Ramo, one of TRW’s founders, became an adviser to presidents. Others, like former Lakers owner, the late Jerry Buss, went on to become multimillionaires via unrelated industries.
Locally, members of the great aerospace exodus have exerted enormous influence in every corner of the South Bay’s culture. Aerospace veterans have served as mayors, gone to Congress, become teachers, and launched businesses ranging from tech start-ups to breweries.
So while the Golden Age of aerospace may have receded in the South Bay, the industry’s legacy endures in the very fabric of the community. And as the latest technological boom, known as Silicon Beach, begins to work its way south from Santa Monica and Culver City, aerospace engineers are primed to meet it.
The industry itself continues to bear fruit. Some observers are hopeful that it could make a surprising comeback.
“With the core of industry still there and the smart people attracted to living in a place like the South Bay, there could be a renaissance sooner than we know,” Forgea said. “When it comes right down to it, the government has essentially unlocked a locked-up business and told entrepreneurs that the sky is the limit.”
That manifests in news of Virgin Galactic’s plan to take tourists to space, and SpaceX’s successful journey to the International Space Station.
“You know the old axiom, ‘Everything is new again’?” Forgea asked. “The fact is you’re living in a place that has the critical mass, has the history and the legend to bring people back in droves. And as Don Chambers, the CEO of Cisco, said years ago, the technology industry and investors in technology are always chasing the next new thing.”