THE HUGHES CUTBACKS : Closure of O.C. Plant Will Jolt Economy : Layoffs: Impact of Hughes move might be softened by retraining, other high-tech growth.

By ROSS KERBER and JOHN O’DELL

Sept. 13, 1994 12 AM PT

TIMES STAFF WRITERS

FULLERTON — With the departure of its largest employer, the city of Fullerton and its businesses will be hit hard as the effects of Hughes Aircraft’s plant-closing decision ripple through the Orange County economy over the next few years.

Although Hughes’ action represents Orange County’s largest-ever plant closure, economists say that it is softened somewhat by plans to send some workers to other Hughes sites nearby, the growth of other high-technology companies and increased retraining programs.

“We’re disappointed, and I’m sure it’s going to have a major impact on our businesses,” said Carl Camp, president of the Fullerton Chamber of Commerce. “It’s broader than just restaurants. It’s the suppliers for everything you need to run a business, office supplies and machine tools, you name it.”

But the area’s economy will absorb the blow, Camp said. “We’ve been through this before, we survived it and we’ll survive this one too.”

Anil Puri, a Cal State Fullerton economics professor, said, “It’s part of a long process. It isn’t going to kill the county.”

While sizable, the plant closure is only the most recent to hit Orange County since the end of the Cold War. It follows a nerve-racking series of layoffs that have slashed tens of thousand of jobs from payrolls in a county that once was awash in defense dollars and now finds itself hit hard by the nation’s effort to cut military spending.

Fullerton has coped with Hughes layoffs and job transfers before--the plant employed nearly 15,000 at its peak in 1986. In neighboring Anaheim, defense companies including Rockwell International Corp. and Northrop Corp. have shuffled workers and closed facilities numerous times over the years with more than 3,000 layoffs overall. Loral Corp. in Newport Beach recently trimmed 800 people from its staff.

Altogether, California has lost more than a third of its aerospace-related jobs since 1986, including 6,000 from various Hughes plants in 1992 and 9,000 from McDonnell Douglas Corp. facilities in 1992 and 1993.

By 1997, Northrop is expected to complete the closure of its B-2 bomber plant in Pico Rivera, which employs 7,600. About 2,500 workers will be laid off, while the rest are set to be transferred.

Economists estimate that each job created through a defense contract supports another 2.5 jobs locally, according to Jack Kyser, chief economist at the Los Angeles County Economic Development office. That translates to more than 15,000 people whose livelihoods will be shaken by Hughes’ move from Fullerton.

“Locally, this is going to have significant impacts. All of the businesses in the area will feel it,” Kyser said.

From a regional standpoint, however, the job losses and shifts of workers from Fullerton to Hughes plants in El Segundo or Long Beach might not be as significant, said Bruce DeVine, head economist with the Southern California Assn. of Governments in Los Angeles.

“Regionally, the economic impact should be a wash. You will have people commuting more and they’ll be spending more money on transportation, but that will be canceled out by the loss of retail spending at restaurants and stores around Fullerton,” he said.

“There certainly will be individual stories of great economic discomfort, but the entire process won’t (result in) a major impact.”

Under a severance plan announced Monday, laid-off Hughes workers will receive 60% of their salary for up to 12 weeks after they are dismissed, depending on their length of service. They also will receive company-paid health coverage for 3 months and $1,000 to help pay for retraining.

It is uncertain how much of a difference retraining will make, at least until worldwide demand for commercial aircraft picks up and aerospace companies in Southern California begin hiring again, said Puri, director of the Institute for Economic and Environmental Studies at Cal State Fullerton.

Computer companies, the other large portion of Orange County’s high-tech economy, will have a difficult time making use of aerospace workers’ skills, he said.

Manpower Employment Services Inc.’s Sue Foigleman,, area manager for Orange County and southern Los Angeles County, said the specialization and high pay of many defense workers may hinder their job searches.

“They higher up the ladder you are in defense, the harder it is to translate your job skills into a new environment. Aerospace defense work is a dinosaur. Most companies in Southern California are small, lean, mean and flexible and they want their employees to be that way too,” she said.

“But there are a lot of busy companies in Orange County, and for those Hughes people who lose jobs, a lot will depend on their willingness to come down in their expectations” for salary and benefits in a new job, she said.

Fullerton city officials also worry about the impact of the plant closure. Hughes paid $675,000 in property taxes to Fullerton in 1993, and though the company will continue to pay roughly that amount, it will no longer generate the revenue it once did for city business.

Direct sales tax revenues from Hughes are minimal, city officials said, because most of the company’s sales are to foreign governments, out-of-state companies or the Federal governments and thus are not taxed at all.

But Fullerton Mayor A.B. (Buck) Catlin estimates that the city will lose close to $100,000 in annual sales tax revenue from money now spent locally by Hughes workers.

One possibly large benefit is that Hughes has owned its Fullerton site for 37 years and is paying pre-Proposition 13 taxes on property valued far below the real market worth. The city and the county both could realize huge hikes in property tax revenue once the site is reassessed for a new buyer, said Edward Paul, Fullerton’s revenue manager.

Kyser, the Los Angeles economist, said that development of the 350-acre Hughes property likely would create enough new spending--and new jobs--to offset the Hughes withdrawal.

The Fullerton plant was built in 1957 as Orange County began to attract large defense manufacturers looking for cheap and plentiful land near their bases in Los Angeles. For years, the county’s economy was highly dependent on defense employment.

Only in the past decade have smaller commercial aerospace, computer and medical technology companies become as important to the county’s economy as the plants of giants like Hughes, Rockwell International Corp. and McDonnell Douglas Corp. once were.

The large defense firms did well during the Vietnam War and during the defense buildup under presidents Carter and Reagan. In 1984, Orange County companies received $4.2 billion in defense contracts.

That figure had fallen to $2.4 billion in 1993, however, and the decrease is even greater when inflation is taken into account. Orange County lost 27,000 defense-related jobs between 1987 and 1991.

Puri and Robert Kleinhenz, another Cal State Fullerton economist, estimate that while 3.7% of Orange County’s jobs were directly or indirectly related to defense contracts in 1992, the number has probably fallen to about 3% this year--a decline from about 42,00 jobs in 1992 to 33,000 in 1994.

O.C. Defense Cutbacks

Federal defense contracts in Orange County have declined to a level not much over half that of a decade ago, when $4.2 billion was spent. High-technology employment, most of which is defense-related, is also declining, having dropped 30% from 1988 to 1993:

Defense Spending (in billions):

1993: $2.4 High-Technology Employment:

1993: 63,600

Sources: Institute for Economic and Environmental Studies, Cal State Fullerton; Researched by JANICE L. JONES / Los Angeles Times