Northrop checks out moves into transportation projects.

Defense firm seen eyeing automotive, rail prospects

Northrop Corp., moving to expand its meager commercial business in the post Cold War world, is exploring development of advanced transportation equipment that would be produced locally and sold to Southern California's automotive markets and well-funded rail system, sources said last week.

The Century City-based defense contractor is interested in joining at least one of four transportation consortia girded by Cal-Start, a non-profit corporation started last year by Rep. Howard Berman, D-Panorama City. With expectations it can secure between $500 million and $1 billion in public seed money over the next five years, Cal-Start is trying to galvanize design and production work for electric cars and mass-transit components in Los Angeles County.

"Northrop is assessing all its options and is completely serious about doing something very soon in the advanced transportation field," said John Slifko, Berman's legislative aide. "They are looking at what is out there and deciding whether to join Cal-Start or mount a full-scale effort by themselves. But they have made repeated expressions of interest."

Lockheed Corp. and Teledyne Inc., sources said, are also thinking of entering the transit market, possibly in one of Cal-Start's for-profit consortia, in the wake of plans to cut the Pentagon budget $50 billion over the next five years. Some believe the technological know-how Southland defense contractors could bring to the transit field in the specialized areas of electronics, composite materials and computer-aided design could bolster the region's sagging manufacturing base.

Those same companies also have extensive manufacturing sites throughout the county and labor unions anxious about their members' fate in the perestroika era.

Moreover, Northrop and others would be tapping into plans by the Los Angeles County Transportation Commission to spend at least $100 billion on 6,000 low-polluting buses and 500 to 600 rails cars during the next 30 years. In addition, strict California tailpipe-emission laws mandating the widespread use of electric cars by the late 1990s could create one of the world's most lucrative alternative-vehicle markets.

For Northrop -- whose production of the $865-million-a-copy B-2 has been slashed from 75 to 20 under President Bush's spending plan -- getting into the transportation business would signal a major shift for a company that got 85 percent of its $5 billion in revenues from military work last year.

But defense analysts warned the marriage of aerospace technology with commercial-transit equipment and low-polluting vehicles is a risky venture for defense companies accustomed to working in the protective world of Pentagon contracting.

During the last three decades, Northrop has tried unsuccessfully several times to broaden its commercial base, including producing piping for the nuclear power industry, buying and selling real estate and attempting to build barges and manage airports, analysts noted.

"Just because the defense industry is shrinking doesn't mean that they should lose their senses. Northrop's history in the commercial market has not been a happy one, so it should take a considerable amount of successful persuading for them to get into that (transport field)," said Wolfgang Demisch, an industry analyst with UBS Phillips & Drew in New York.

Specifically, Slifko and others said, Northrop may be looking to develop and sell high-tech magnets needed to operate magnetic-levitation trains, which travel on a cushion of air. Such a train system has been proposed to link Los Angeles International Airport and Palmdale as part of a $4 billion joint venture between the LACTC and the private sector.

Also, Northrop has contacted Monrovia-based Amerigon about working on the battery and other components for an electric car. Amerigon and Las Vegas-based Ashurst Technology, two of Cal-Start's private sector co-founders, are working to develop an electric car prototype by year's end.

Research and development facilities for that prototype will likely be headquartered on abandoned Lockheed land at the Burbank Airport.

On a separate front, LACTC economic development specialist Travis Montgomery confirmed that Northrop, Lockheed and Rockwell will be meeting with commission officials this month about the possibility of building rail-car shells and components for the standardized "L.A. Car." That vehicle, which the LACTC says will be capable of running on all the region's light rail lines, will likely be produced locally.

Meanwhile, Cal-Start has already secured $4 million in federal seed money, plus $375,000 from the South Coast Air Quality Management District, and expects other funds from the California Department of Commerce, the LACTC and others. In addition, $375 million in federal money for magnetic-levitation trains will be sought along with chunks of $100 million in state bond money being proposed for California transit research.

Initially, Cal-Start would be producing and patenting components and sub-systems in small batches for electric cars and rail vehicles. Later, the consortia would try to enter other domestic and foreign markets.

Amerigon President Lon Bell would not comment on Northrop's possible involvement, saying only, "The technology available here from aerospace suppliers and universities is unique in the world and should be targeted."

Northrop spokesman Tony Cantafio was also vague. "Transportation may be an area that may have potential application for our technology. At this point, we are simply exploring," he said.

While locally General Motors Corp.-owned Hughes Aircraft Co. is toiling on electric car technology and Rockwell International produces automotive parts, in recent times other military contractors have met commercial failure in the transportation world.

Grumman Corp., a major defense contractor on Long Island, N.Y., for example, failed in its attempt to build buses for New York City. Likewise, Seattle-based Boeing Co., which is primarily a builder of commercial aircraft, also fell short in its attempt to build a surface transportation system in Boston, the experts said.

Northrop's biggest commercial work right now is building fuselages for Boeing's 747 commercial jetliner.

During the past year, Northrop Chairman Kent Kresa has said on numerous occasions the company should expand into the commercial field because of Department of Defense budget cuts, though he declined to be specific.

James Roche, Kresa's special assistant and one of Northrop's executives with whom Cal-Start officials have been in contact, did not return Business Journal phone calls.

Because of the massive Southern California job losses in defense work, industry experts agree the timing may be right for Northrop to move in a new direction. Said one industry expert and a former Northrop executive who did not want to be named: "Northrop has the know-how, facilities and skilled workers to get involved in something like this. But it has to move cautiously because working in the commercial world is much different than making your living off the government."