Rockwell intensifies campaign to illustrate its emphasis on non-military contracting.

Rockwell intensifies campaign to illustrate its emphasis on non-military contracting

Rockwell International Corp., the largest defense contractor in the state, is trying to convince Wall Street that it should not be grouped with other Los Angeles-area weapons manufacturers like Northrop, Lockheed, Douglas Aircraft and Hughes Aircraft.

Since 1986, when at least 50 percent of its revenues came from defense contracts, Rockwell has been steadily reducing its weapons work, until now when it accounts for between 25 percent and 28 percent of the company's $12.5 billion in annual sales.

Wall Street so far has responded positively. Unlike other Los Angeles defense companies, industry analysts are confident about Rockwell's earnings potential, mainly because of its de-emphasis of military work.

During the past two years the El Segundo-based company has launched advertising campaigns to change its corporate image from a weapons producer to a diversified, high-technology corporation.

In ads produced by Bozell Inc. in Los Angeles, Rockwell is portrayed as a down-home company that can help smaller businesses with problems like automating a shop floor.

The promotions have run with Rockwell logos like: "Where science gets down to business."

Last week Rockwell introduced a new series of ads that the company says "highlights its commitment to education." In jaither campaign is there a hint of Rockwell's defense electronics or other weapons business.

The ads are in marked contrast to television commercials that Northrop Corp. has run featuring the company's controversial B-2 stealth bomber, or more recent newspaper ads touting its work on the F/A-18 Hornet jet fighter.

"What our chairman, Donald Beall, is trying to tell Wall Street is that we are a diversified company that is structured to be a leader in several different areas," said a Rockwell spokesman.

In order of size, Rockwell's most productive divisions are electronics, aerospace (which includes defense), automotive and graphics. Rockwell is one of the largest producers of printing presses in the world. Up until 1986, when Rockwell completed sork on the B-1 bomber, its last big defense contract, military work was the top revenue-producer at the company.

Rockwell, with one-third of its 105,000 employees in the Los Angeles area, "has proven that it can cope with defense cuts better than the other contractors," said Wolfgang Draack, senior analyst for Moody's Investors Service in New York City.

"Rockwell has our third-highest rating for value compared to other defense contractors that are way down on the list. The others have gone down during the year while Rockwell has gone up on our rating," said Draack.

Unlike the other big Los Angeles-area defense contractors, Rockwell has not laid off thousands of workers during the last two years because of cuts in military spending. Its stock has not taken dramatic falls. Last week Rockwell stock, traded on the New York Stock Exchange, was selling between $24 and $25, compared to a 52-week low of a little over $19 and a high of $28.

In its 1990 fiscal year, which ended on Sept. 30, the company and analysts are projecting fairly flat revenues but an increase in per share earnings from $2.47 in 1989 to between $2.55 to $2.60.

If there is one segment of Rockwell's business that concerns analysts it is the company's contracts with the National Aeronautics and Space Administration (NASA). Rockwell is NASA's biggest contractor and is currently working on the fifth and possibly last space shuttle, a $1.8 billion project.

"At this point Rockwell may be facing a glitch in its growth pattern because of the possibility of losing the shuttle, but it came through the demise of the B-1 program rather well. But when you lose a program of that magnitude (the shuttle) it could be a problem," said John Simon, an analyst with Seidler Amdec Securities Inc., a Los Angeles-based regional brokerage company.

"There is a risk there for the company in losing the shuttle, but they can be picking up $1 billion a year in maintainence contracts for the shuttles even if this could be the last one," said George Shapiro, an aerospace analyst for Salomon Brothers in New York.

The Rockwell executive said the fifth shuttle, which will replace the Challenger that blew-up shortly after launch several years ago, will be delivered next year to NASA. He said it remains to be seen if funding will be authorized for additional shuttles.

The California Commission on State Finance, in a recent study of the defense industry, said that Rockwell is the biggest contractor in the state. The company spokesman said Rockwell has no plans to completely withdraw from military work.

"It's going to continue to be a major segment of our business but it will be more involved with the electronics and high-tech end. It's unlikely we will be involved in building weapons per se. By and large we will be doing business with defense in areas that we consider will continue to be important and will continue to hold up," said the executive.

In recent years, Rockwell has escaped much of the negative publicity about management and legal problems that have plagued many of the other major defense contractors in Los Angeles. Those problems have in part contributed to those other companies' unstable financial picture and unattractive rating by securities analysts.

"Unlike what you hear or read about other defense companies, Rockwell, I think, is a very well managed company. Three of their businesses--aerospace, automotive and defense--will probably continue to be somewhat unstable but Rockwell is a stable company that seems to be able to cope better than the others," said Shapiro.

"To me it doesn't have as much investment appeal as it might to others but it certainly is more attractive than Northrop or Lockheed, or some of the other contractors," he said.