MERGED COMPANY TO BE MAJOR FORCE.

Byline: Jaxon Van Derbeken Daily News Staff Writer

The teaming of Boeing Co. and McDonnell Douglas Corp. will not only dominate both commercial and military aerospace worldwide but create an economic giant in the Southland, experts say.

``I will need to play with the numbers, but I think Boeing is now in the top five employers in Southern California,'' said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles. ``All of a sudden, whammo, here they are. They are a major force.''

``They are going to make a lot of money,'' said John Pyke, director of the Space Policy Project of the Federation of American Scientists. ``This is going to be an awfully big company.''

The experts also cautioned, however, that the merger could result in layoffs and possibly higher costs to taxpayers.

Kyser said that Boeing's recent acquisition of Rocketdyne in the San Fernando Valley and the proposed $13.3 billion merger with McDonnell Douglas mean that the new Boeing Co. will be the leader in the building of commercial and military jetliners. The only other major competitor is Lockheed Martin, he said.

``The new Boeing has expertise and critical mass in almost every phase of aerospace technology - it's a pretty formidable competitor now,'' Kyser said. ``This will put pressure on some of the other companies to be able to compete both with Lockheed Martin and Boeing. These are two huge gorillas, they are going to put pressure on everybody.''

The proposed merger of the two aerospace giants will surely lead to some cuts at McDonnell Douglas' Long Beach plant's work force of 9,500, Kyser said.

``The people most at risk are the management,'' he said.

Officials announcing the merger said Sunday that they hope that given the expansive market for commercial aircraft, most jobs will be spared.

Nonetheless, Kyser noted that Boeing's aircraft line and McDonnell Douglas' line overlap in some areas, although McDonnell Douglas has typically focused on the narrow-body airliners while Boeing has built the wider-body craft.

``You have tremendous overlap on the lower end,'' Kyser said.

Officials with the companies said the overlap is ``very, very minor'' and the companies are ``absolutely complementary.''

Kyser said whatever impact there is will be focused in the area near the Long Beach plant.

``It (is) going to have an impact, (in) south L.A. County and Orange County - Long Beach and Huntington Beach are the people who are nervous right now.''

The merger, Pyke said, will mean Boeing will be the only major contractor for civilian space exploration projects such as the National Aeronautics and Space Administration's space station.

``This means we'll have one contractor for virtually the whole space program,'' he said. ``It's not like NASA is going to have any choice.

``This is an issue here in you have really reduced the ability of NASA to supervise and discipline their contractors. Virtually every time they turn around, they are bumping into Boeing. I'm afraid NASA is going to find it very difficult to say no to Boeing.''

Pyke said that one basis for the combination of contractors is to expand political influence, with plants in various states generating jobs for local politicians to tout as economic benefits to the district.

``That's exactly why the companies are doing this - that's why it may turn out to be bad for the taxpayer - it would be extremely difficult now for the government to avoid giving contracts to Boeing or Lockheed.''

``There's not a lot of competition when you know you are going to win,'' Pyke said.

Kyser said that the merger will help fend off subsidized competitors, such as the European-backed Airbus, in competing for civilian aircraft.

Kyser added that Boeing, thanks to the merger, stands to make a dent in its backlog with the acquisition of McDonnell Douglas' facilities. Meanwhile, McDonnell Douglas signed a multibillion-dollar deal earlier this year to build a total of 100 C-17 cargo jets for the U.S. Air Force. That plane may have commercial applications as well.

``Boeing gets their hands on firmly a great commercial aircraft factory and a skilled work force,'' Kyser said. ``They have a huge backlog of orders.''

Boeing is bumping up against capacity restraints on both floor space and work force, Kyser said, and the acquisition of McDonnell Douglas means greater productivity and capacity to meet the backlog.

Boeing also ventures into the world of fighter aircraft with its acquisition of McDonnell Douglas. The only current area where Boeing is active in the defense realm is with its Palmdale facility, doing subcontract work on the B-2 stealth bomber.

``They have gone from around 3,000 people to Lord knows how many. We have got to count - but one thing, there are going to be layoffs; obviously, they will lay off down in Long Beach,'' Kyser said.

McDonnell Douglas makes the MD-80, MD-90 and MD-11 aircraft at the Long Beach plant, Kyser said.

He noted that the merger will mean the biggest and the third-largest makers of commercial aircraft will merge to compete with Airbus, the European consortium.

McDonnell Douglas produces one MD-11 a month and about four to five MD-80 and MD-90 aircraft, with a backlog of about 200 planes.

Boeing, meanwhile, has a backlog of 1,300 planes. The combined backlog is $100 billion, officials said Sunday.

``They both have backlogs - Boeing is running out of space, they have so many things on their plate - with this, they get facilities, they get trained work force,'' Kyser said.

Kyser noted that the merger means that only one contractor will be handling all the components of the NASA space station.

``How is NASA going to react to that? Boeing had to give up a couple programs to get the OK to acquire Rockwell. Are there going to be any give-ups?''

``You are looking at the defense aerospace industry moving quickly to three to four very large companies,'' Kyser said.

``Boeing McDonnell will be the largest aerospace company in the world, with Lockheed Martin second,'' he said. ``This is just further consolidation, tumult in the aerospace industry.''

Paul Sewell, spokesman for Boeing's newly acquired Rocketdyne division, said that McDonnell Douglas is a major customer for the rocket engines made locally by the 4,100 workers. An additional 1,000 workers in Palmdale - formerly of Rockwell's Space and North American Aircraft Division - are also under Boeing's wing.

Rocketdyne's facility in Canoga Park already works with McDonnell Douglas.

``McDonnell Douglas is a customer and a very good customer,'' Sewell said. ``We build the engines for the Delta launch vehicle.''

He also noted that Rocketdyne had teamed up with Douglas in developing a version of the ``evolved expendable launch vehicle'' and also teamed up with Boeing to provide the rocket for a rival version.

A decision on the final two designs, out of the field of four designs to compete for the contract, is expected on Friday of this week, Sewell said.

``This is what you call vertical integration, for Boeing, it is both vertical and horizontal,'' Sewell said of the merger.

``It's impressive, I'll tell you that,'' he said.

He noted that as part of the space station, Boeing oversees the contract for the living quarters and laboratories, while Douglas builds the frame structure and Rocketdyne is developing the electric power.

``I just hope McDonnell Douglas is as delighted with the new relationship as we are - we are just delighted,'' Sewell said.