Business: Aerospace: End of the Gravy Years

• Share

IT is axiomatic that industries most dependent on Government contracts are the first to feel the pinch of a budget cutback. So it is with aerospace, which has become the nation's largest manufacturing employer, with 1,300,000 workers, mostly on the strength of Government purchases stretching back to World War II. Lately the industry has suffered a succession of blows: a slowdown in space exploration, a $6.9 billion cutback in Washington's defense budget, and a fall-off in orders for commercial aircraft. As a result, aerospace-men have come down with a severe case of what they call the "unk-unks"—the "unknown unknowns."

In some ways the industry is only suffering a temporary lull—though it is not likely to see soon again the triple boom in space, defense and commercial-jet sales that made the late '60s its gravy years. The cutback in Government contracts coincides with the beginning of the end of production runs on the first generation of jet transports. Full production of the wide-bodied airbuses, the McDonnell Douglas DC-10 and Lockheed 1011, will not begin until 1972, and Government contracts for such major projects as the B-1A supersonic bomber and a space-shuttle vehicle have yet to be awarded, or funded by Congress.

Aerospace sales in 1969 fell 4.1% from the boom year of 1968, to $28.3 billion; a further drop to $27.7 billion is expected in 1970. Profits, 3.2% in 1968, will probably slide to 2.3%. The biggest impact, however, is on employment, which dipped by 119,000 in 1969, and is still declining. In the space program alone, the number of jobs has dropped from a peak of 420,000 in 1965 to 190,000, and is expected to level off at 144,000 next year.

Strapped for Cash. The impact has fallen unevenly among large aerospace corporations. Boeing, which began 1969 with 134,322 employees nationwide, trimmed its work force by 26,000 before the year ended, and plans to cut back by another 18,000 in 1970. The company's problem is primarily cash flow. Airlines do not pay for new aircraft until they are delivered, and Boeing is more than three months behind schedule in production of its $23 million superjet 747. Forced to finance the production line from its own and borrowed money, the company is strapped for cash, and has cut its payroll.

North American Rockwell was the prime contractor for the Apollo command and service modules and thus a prime loser when the space program was curtailed. Then last December, in the competition for the contract to build the F-15 Air Force fighter, the company lost out to McDonnell Douglas. North American Rockwell started firing, and plans to reduce its work force from 61,000 in December to 55,000 by

April. The company's electronics division has not lived up to its billion-dollar promise. Two weeks ago, North American Rockwell put the division's brand-new, $23 million plant at Laguna Niguel, Calif., up for sale. Next day, J. Leland ("Lee") Atwood, North American's president for 22 years, stepped down. The vacancy will not be filled. Instead, Chairman Willard F. Rockwell Jr. will take over as chief executive officer and leave aerospace operations in the hands of Robert Anderson, who came from Chrysler as executive vice president two years ago.