Bush provides a short respite for defense industry.

The Southland's defense industry -- which routinely landed $25 billion in annual Pentagon business during the 1980s -- is now in a collective sweat. The demise of U.S.-Soviet rivalry and a rising federal deficit have ushered in anything but a gentler, kinder world for those reared on Cold War profits.

But the $291-billion defense bill President Bush signed in November may provide some respite to local defense firms this year -- in contrast to 1991, when 26,000 local aerospace jobs were lost.

Contracts for 1992 military programs didn't come in the multibillion-dollar packages of bygone days. But they did come.

Lockheed Corp. got $1.2 billion for C-130 cargo planes, hundreds of millions of dollars more for the Trident missile, and up-front funds for the huge Advanced Tactical Fighter program.

Rockwell International Corp., TRW Inc. and Hughes Aircraft Co. were each rewarded with tens of millions in "Star Wars" contracts, and Beverly Hills-based Litton Co. got Pentagon funds to build Navy destroyers, which run $250 million a copy. Even Douglas Aircraft's troubled C-17 program landed $1.53 billion.

And while Northrop's B-2 bomber program garnered less than the company had intensely lobbied for, it came out with funds for subcontracting work on the F/A-18 Hornet jet.

"Overall, the (1992 Defense Department) budget produced nothing very surprising. The terms were pretty well set in advance by the Congress," said aerospace analyst Paul Nisbet of Prudential Bache.

Added Wolfgang Demisch, an analyst with UBS Phillips & Drew in New York, "I don't think L.A. did worse than anyone else. . . .It might have been a little painful to some, but it surely wasn't tantamount to an industry in collapse."

For 1992, Nisbet, Demisch and other analysts predict local contractors will continue to streamline operations, cut overhead and hand out thousands more pink slips. But the kind of financial traumas that gutted the savings and loan industry in the late 1980s aren't expected to surface in the Southland's defense sector in 1992.

According to estimates by Prudential Bache's Nisbet:

* Lockheed's sales will increase by $400 million over last year, to $10.4 billion.

* Northrop's revenues will remain "flat" at $5.5 billion.

* Hughes, owned by General Motors Corp., will probably see sales grow to between $7.8 billion to $8.1 billion.

* St. Louis aerospace giant McDonnell Douglas, which owns Douglas Aircraft, will experience a drop in business, with its 1991 revenues of $19.3 billion down $1.2 billion.

* Rockwell's sales of $11.5 billion last year will rise by only $300 million to $400 million.

"As companies wind down some of their operations and liquidate their inventories, they will be spending a lot less on new programs," said Nisbet. "Because of that, you'll probably be seeing interesting increases in revenues."

In employment, the short-term outlook is also a mixed bag.

The UCLA Business Forecasting Project estimates the unemployment rate in Los Angeles County's aerospace business will be 6.5 percent in 1992, an improvement over last year's 10.4 percent.

The unemployment rate in aircraft and parts -- the county's largest aerospace sector -- is projected at 5.85 percent, less than half the 1991 joblessness level of 13.1 percent. UCLA predicts this year's unemployment rate in missiles and space locally will be 6.5 percent, compared to 9.6 percent in 1991, and joblessness in aerospace instruments will be at 7.3 percent, about 1 percentage point higher than in 1991.

About 213,000 employees work in private defense industries, according to the Los Angeles County Economic Development Corp. Another estimated 83,000 toil in the commercial side of aerospace. Together, aerospace and defense are the county's biggest manufacturing sector -- 29 percent of the industrial work force -- though that No. 1 status is being threatened.

The future of the bat-winged B-2 should come into clearer focus this year.

Last year, Congress budgeted $4.4 million for the program, but placed tight restrictions on production of any new planes. The House of Representatives last year didn't kill the controversial program outright but did prevail over the Senate and White House in limiting to 15 the number to be built.

Election-year politics and zealousness for "peace dividends" may well bury the B-2 this year, many believe, though supporters will try to revive the project by casting it as a jobs program.

McDonnell Douglas' gambit to sell 40 percent of Douglas Aircraft to Taiwanese investors for $2 billion should also crystallize this year, raising anew concerns about the transfer of high technology to foreign governments.

More worrisome than 1992 to the defense industry is 1993. That's when scores of long-term military projects are expected to run out of money or federal patience. Those programs include the C-17, the MX ballistic missile, the C-130 gunship, a host of jet-mounted missiles like Phoenix and Maverick and the $865-million-a-copy B-2.

"I don't see any major corporate changes or any big mergers in 1992. Maybe they'll just sell off smaller divisions," said aerospace consultant Michael Beltramo, a former staffer at Santa Monica-based think tank Rand Corp. "This year we'll be down, but compared to the year after, we'll feel good about 1992."

By 1993, Beltramo predicted, Los Angeles County's annual share of prime Pentagon contracts may well plummet from about $11 billion to $4 billion.

Meanwhile, structural changes are under way in the defense sector.

Defense manufacturing work represented 60 percent of L.A. military work five years ago. Today it stands at 40 percent.

Defense electronics, research and development and Pentagon-oriented space work are the only areas expected to experience any true growth. Because of that, most local aerospace companies are hurriedly redoing their strategic business plans to better compete while shrinking.

"Basically, L.A. County defense has become a post-aircraft society. When we finish up with the B-2 and the C-16, that's the end," Beltramo said.

The Pentagon budget, under a 1990 deal hammered out between the White House and Congress, will be cut in real (inflation-adjusted) terms by 20 percent by 1995. In fiscal year 1990-91, the Defense Department's spending package was cut more than 11 percent, but in 1991-92 military appropriations were trimmed only about 1 percent.

Many believe partial salvation may be in the commercial side of the aerospace ledger.

Locally, Douglas Aircraft assembles the MD-80 and MD-11 jetliners; Northrop does subcontracting work on Boeing's 747; Hughes has scores of commercial satellite contracts; and Rockwell, which looks to the Defense Department for only one-quarter of its business, still has ties to NASA's Space Shuttle though the production line is no longer moving.

Even Lockheed, perhaps the Southland's hottest defense contractor, is striving to move into more non-military work.

Yet commercial work is hardly an economic plum these days because of the recession, a depressed airline market and ferocious competition from Europe and Asia.

Moreover, says UBS's Demisch, the problem with turning to non-defense work is that it's only one-third to one-quarter as large as the military business. "That makes it hard to grow fast enough," said Demisch.

But even if 1992 brings no major corporate surprises, there will likely be increased political rhetoric about the need to make Southern California more manufacturer-friendly.

Last year, critics blamed much of the aerospace industry's decline on strict environmental rules, high taxes and unwieldy workers' compensation costs. The movement to retain manufacturing picked up steam when Gov. Pete Wilson jumped on board.

But Lockheed is already moving its manufacturing operations to Georgia, Hughes is looking to expand in Arizona and McDonnell Douglas announced last year its new MD-12 jetliner will not be assembled in California.

"It's a little bit like locking the barn doors after the animals have left," said Beltramo. "In general, the industry is just too weak."