Space Systems hopes high amid defense cutbacks.

Even prospects for its Freedom space station are unclear

Bolted to a platform inside an ordinary building in an industrial section of Huntington Beach is an extraordinary sight: a full-scale, earthbound mockup of the space station Freedom. Bearing an uncanny resemblance to a "Star Trek" prop, the ship waits patiently for Congress to dole out the funds necessary to put the real thing in orbit.

The ersatz space station belongs to McDonnell Douglas Space Systems. The company, a Huntington Beach-based unit of St. Louis' McDonnell Douglas Corp., created the mockup to demonstrate its role in a 10-year project that the Government Accounting Office says will cost taxpayers $30 billion, twice what McDonnell Douglas estimates.

So far, Congress has somewhat reluctantly cut the checks that have kept Freedom alive. But, as Space Systems executives say, Congress could blast it into oblivion at any time.

That kind of tension -- will it be funded next year? Will I still have my job then? -- hangs in the air at Space Systems these days.

Apart from Freedom's uncertain future, Space Systems' 6,175 Orange County employees have had other worries.

They have seen increasing competition for Space Systems' highly successful Delta missile launch business. And they are fearful the next news from Washington will be of reduced government funding for Strategic Defense Initiative, or Star Wars, programs and other defense-related contracts that have helped keep the wheels turning at Space Systems.

On Aug. 10, they got a fresh dose of uncertainty when John McDonnell, chairman of McDonnell Douglas Corp. announced yet another corporate restructuring.

For Space Systems, the shakeup likely means two things: an end to the unit's relative autonomy, and layoffs as redundant jobs are eliminated.

Organizationally, Space Systems is being combined with McDonnell Douglas Electronics Systems Co. in Santa Ana and the troubled Long Beach-based C-17 air transport program into a single division based in Huntington Beach.

"Consolidation" is the operative term, and it's sending a chill through local employees.

The company has indicated that several hundred production jobs may be transferred to Huntington Beach. But current Space Systems employees, particularly those in staff positions, are braced for bad news. They've already seen some 820 layoffs in the last three years, and they know the outlook isn't bullish for the government contracting business.

"I'm telling my people, 'We've done a good job and that should count for something,'" said one department head who asked not to be named. "But we won't know for some time whose jobs are safe and whose aren't."

Nonetheless, morale appears to be fairly good at Space Systems. The unit has a healthy track record, executives point out, and there is no imminent danger of losing a crucial program to cutbacks or competition.

Key managers at each of the business units within Space Systems say they are confident they will be able to maintain sales and profits, at least in the near term. And group President Kenneth A. Francis sees a solid future for this technology-driven team.

"Huntington Beach's backlog and basic operations appear to be firm and steady," he said. "I don't anticipate a dramatic effect on operations here as a result of the restructuring. The people here have been successful at bringing on a new culture and I would call on them to help transfer that culture to the C-17 and transport operations."

The workhorse of Space Systems is the Delta launch program. Space Systems builds the Delta launch vehicle that boosts satellites into orbit, a service Space Systems has been providing since 1960. Its launch experience predates the Delta, though; in the 1950s its Thor rockets were piercing the upper atmosphere.

Long the domestic leader in the business of putting government satellites into orbit, the Delta management team has been focusing on commercial launches in recent years.

About half the dozen or so annual Delta launches are now for commercial customers. Space Systems has orders for 16 commercial launches stretching into 1995 and worth about $800 million. Space Systems' commercial clients have included British Satellite Broadcasting, GE Americom & Alascom Inc., Contel ASC, the International Maritime Association and the government of India.

"Commercial launch activity is driven by telecommunications demand," said Robert Cowls, general manager, McDonnell Douglas Commercial Delta Inc. "We're the beneficiary of the enormous growth of and demand for improved telecommunications systems."

Cook is Managing Editor of the Orange County Business Journal