ROCKWELL PUTS AEROSPACE UNITS ON MARKET.

Byline: Russ Britt Daily News Staff Writer

Rockwell International Corp. is courting buyers for its aerospace divisions, which include Canoga Park-based Rocketdyne and factories in Palmdale, sources said Wednesday.

Competing aerospace firms have received sale proposals from Rockwell, which is offering the divisions that built the space shuttle, B-1 bomber and Apollo moon rocket engines, for $3.5 billion.

"We got a copy of the (proposal)," said one official from a competing aerospace company. "The usual characters got it."

Rockwell officials would not comment. Rockwell, however, has not participated in the defense industry consolidation that has taken place in recent years, concentrating more on building its commercial businesses.

"We're constantly evaluating our business options," said Terry Francisco, company spokesman. "(Company chairman) Don Beall has always maintained the commercial businesses are a strategic part of Rockwell."

It was unclear whether a possible sale would further erode employment at Rocketdyne, which hit a peak of 9,300 jobs in 1989 but now has a work force of 5,200. The division has three facilities, two in Canoga Park and one in the Santa Susana Hills northwest of Chatsworth.

Rocketdyne builds replacement space shuttle engines, the electrical power system for Space Station Alpha and engines for the Atlas and Delta commercial rockets.

Rocketdyne employees said their managers have told them nothing about any plans to sell the sprawling facility.

"We just had a meeting with a vice president and he said he'd heard about the story but he didn't know anything about it," said one woman, who declined to give her name.

She said that if true, the report would represent a "180-degree turnaround" on the part of Beall with regard to layoffs in recent years.

"He was saying, 'We're downsizing so we can get competitive and then we can work our way back into the market,' " she said.

"Everybody's wondering what's going on," said another woman. But, she said, anxiety about the company's future was nothing new among the employees.

"There's been rumors for about a year," she said. "We're all concerned."

In Palmdale, the company has space shuttle and B-1 bomber modification plants, employing about 1,130 workers.

Rockwell's aerospace divisions have played a steadily decreasing role in the past decade, contributing 51 percent of revenue in 1986 compared with 28 percent last year.

The company started making more commercial acquisitions as aerospace began its decline in the mid-1980s, purchasing Allen Bradley Co. in 1985 and Reliance Electric Co. in 1995. Both entities specialize in industrial automation.

Analysts largely were not surprised that Rockwell is considering such a sale.

"I think it's a great idea. I'm surprised they haven't done it earlier," said Jon Kutler, president of Quarterdeck Investment Partners in Century City, an aerospace acquisition specialist. He said it may free up more funds for Rockwell to make other civilian company purchases.

Rockwell, a venerable aerospace firm long known as one of the prime National Aeronautics and Space Administration contractors, would end decades of involvement in the business if it completes a sale. Rockwell not only built the space shuttle but constructed key components for the Mercury, Gemini and Apollo programs of the 1960s.

Rockwell reached its zenith in the aerospace world during the early 1980s, when it was building both the B-1 and the space shuttle. Its aerospace business fell off sharply thereafter.

The most likely buyers for Rockwell are said to be Seattle-based Boeing Co., the industry leader in passenger aircraft production, and McDonnell Douglas Corp. in St. Louis, which is bouncing back from years of financial ills. Officials from those two companies would not comment.

Boeing and McDonnell, two of the largest aerospace concerns in the United States, considered merging last' year but the plan fell through.

"There's been a tremendous amount of consolidation in the defense industry and neither of these (companies) have participated," said Jack Modzelewski, analyst for PaineWebber Inc. in New York. Modzelewski said the purchase may be more urgent for Boeing, since it relies so heavily on commercial aircraft building, which has suffered in recent years.

But Wolfgang Demisch, analyst at BT Securities Corp. in New York, said Rockwell wants to make a stock deal. That could be out of the question for McDonnell, since it would eat up one-fourth of the company's outstanding shares and chief executive Harry Stonecipher has indicated smaller operations are more efficient.

"That, at least, suggests for McDonnell Douglas to make a large acquisition, it would be something of a reversal or at least a modification of their stance," Demisch said.

Other possible suitors may be GM Hughes Electronics in Los Angeles and Cleveland-based TRW Inc., which has a major division in Redondo Beach, sources said. Officials at those two firms also would not comment on a possible acquisition, and are considered less likely to buy.

One scenario, however, includes a joint purchase by Boeing and Hughes, with Hughes taking on Rockwell's defense electronics businesses and Boeing ending up with Rocketdyne and other structure-building components, one source said.

Other companies that have made major purchases recently - Lockheed Martin Corp. and Northrop Grumman Corp. - are considered unlikely contenders. The two companies spent several billion dollars over the past three years buying large aerospace companies and are considered to be too debt-ridden to make a purchase.

Rockwell's stock rose 1-1/2 Wednesday to close at 60.

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(1) Rockwell profile (stock prices from 1991 to 1996) (2 -- 3) Sales of Rockwell International;s divisions, in billions (2) 1991 (3) 1995 The New York Times