Revival of U.S. Defense Sector Is Mixed Bag For Valley After all the cutbacks, layoffs and closures of the 1990s, what’s left of the San Fernando Valley’s aerospace and defense industries have had little to cheer about. When President Bush pledged in his State of the Union address last year to increase defense spending and develop new military technologies, some wondered whether the Valley might be poised to rebuild its once-bustling defense industry. But many things have changed since the Star Wars era of the 1980s. Some longtime defense contractors sold off units or got into new businesses altogether, others chose to stay the course and try to weather the ’90s. In the meantime, new companies have entered the arena with new technologies to offer and new reasons to benefit from any increase in defense spending that may be around the corner. By CARLOS MARTINEZ Staff Reporter Long-time Van Nuys Company Sells High-Tech Radar System to Air Force Despite the hope that lucrative defense contracts would follow President Bush’s pledge to strengthen the U.S. military last year, many Valley aerospace firms so far appear to have been left behind in the proverbial dust. But there are exceptions. There is the highly visible Global Hawk, developed by Northrop Grumman Corp. in Palmdale, an experimental jet plane now in use in Afghanistan. And a handful of smaller companies have managed to snag a defense contract here and there so far. The latest to see some potential in the recent era of the Star Wars defense schemes is ITT Industries’ Van Nuys-based Gilfilland Defense and Electronics unit. Radar systems manufacturer Gilfilland secured a $13.3 million contract with the U.S. Air Force on Jan. 11 to build mobile radar equipment. The deal will be worth $40 million if the military exercises options for additional equipment, said company spokeswoman Evelyn Teichner. The company will build an unspecified number of Mobile Approach Control System Precision Approach Radars to be delivered to the Defense Department in the next 18 months. The system features sophisticated equipment not typically found in mobile radars, the company said. The new equipment will be integrated with an existing radar system developed by ITT Gilfilland in late 2000. The new units will provide precision approach landing guidance at a distance of as much as 20 nautical miles and can be linked to similar systems elsewhere. “We have a long history of leadership in this area and that gives us an advantage,” Teichner said, “but we can’t really get into a lot of detail about the contract without getting into confidential matters.” ITT Gilfilland has developed air traffic control and defense radar equipment for tactical and naval systems for nearly 60 years, according to the company’s Web site. The company’s other noted technologies include the 1993 anti-radiation missile decoy, which steers enemy missiles away from radar installations. ITT Gilfilland is one of seven defense-related units operated by ITT Industries that account for about 30 percent of the parent company’s total sales. For the quarter ending Sept. 30, ITT reported $67.5 million in net income on $1.12 billion in sales, compared to $64.9 million in net income on $1.17 billion in sales a year earlier. ITT Gilfilland, however, is one of only a few Valley-based businesses benefiting so from the planned military buildup. Other Valley firms receiving military contracts include Westlake Village-based Optics 1 Inc., which received a $25 million contract in September to develop an advanced optical surveillance system for the U.S. Navy. But even that deal is the exception rather than the rule when it comes to the local defense industry, say local experts “I just haven’t heard of very many defense contracts out here,” said Garrick Matheson, director of operations for Optics 1. But Howard Rubel, an analyst with Goldman Sachs in New York, said more defense spending could be on the horizon for the Valley’s aerospace companies. “There’s a lot of interest in unmanned aircraft, like the Global Hawk being built by Northrop Grumman out there (in Palmdale),” he said. Other Valley companies that have been tapped for defense work in recent months are: Condor Systems Inc.’s Electronic Systems Division in Simi Valley, which received a $9.3 million contract from the U.S. Army to develop electronic protection systems for communications equipment. Northrop Grumman System Corp.’s Woodland Hills-based California Microwave Systems unit, a $7.4 million U.S. Navy contract for technical support services for telecommunications equipment. L-3 Communications Holdings Inc.’s Sylmar-based Ocean Systems Division, a $5.2 million Navy contract for technical support for sonar transducers and related equipment. One-Time Player Decides to Leave Defense Contracts to Others This Time Ten years ago, Camarillo-based AML Communications Inc. would have seemed poised to take advantage of the kind of buildup the defense industry is expecting since President Bush’s State of the Union speech a year ago. AML survived the collapse of the area’s defense industry in the 1990s by heading straight into the commercial wireless communications market. And now, after a decade away from the defense arena, AML Chairman, President and CEO Jacob Inbar has decided it may not be worth the trouble to reenter it. Leaving a lot of the cutting edge satellite technology for others, the company has concentrated on developing products that provide wireless and satellite communications to developing countries and large metropolitan areas. Inbar said the company has done some defense-related work for subcontractors in recent months, but the $500,000 in revenue from the projects is peanuts compared to the tens of millions reaped by other telecoms who’ve gone after military contracts. Inbar said the commercial side of the industry is preferable, given the competition of larger defense firms with longer track records. TRW Inc. in Redondo Beach, Motorola Inc. in Maryland and Boeing Co. in St. Louis have won big contracts for satellite and telecommunications services, but AML is an example of a telecom that has remained out of the picture. The company, Inbar said, would rather focus on its core tasks of building amplifiers that pump up the volume for satellite communications systems and wireless local loop systems, or phone systems that connect homes and businesses through wireless connections instead of cables. AML’s customers Transcept Inc. and AT & T; Wireless account for about 45 percent of all sales. In its most recent quarter, ending Sept. 30, AML lost $170,000 on $1.4 million in total revenue, compared to a $1.6 million loss on revenues of $1.2 million a year earlier. Jon Kutler, an analyst with Quarterdeck Investment Partners in Los Angeles who covers the defense industry, said Southern California firms for the most part have been left out of this latest defense buildup. The fact that much of that industry left the area for greener, if not cheaper, pastures in other parts of the country, Kutler said, is the biggest reason local firms are left to battle for tiny subcontracting contracts. Kutler noted that the richest defense contract ever the $200 billion joint strike fighter program pitted Boeing against Lockheed Martin, neither of which is based in California. The contract, won by Lockheed Martin, would create a next-generation fighter plane that could take off and land vertically. While President Bush’s pledge to strengthen the military last year has sparked more defense spending, it has meant little to the Valley and the rest of the city. The Los Angeles Economic Development Corp. expects 3,000 to 4,000 new defense-related jobs in the next few years.
