San Diego Union-Tribune April 15, 2003
Manufacturing is down, but engineering, research have taken its place
By Bruce V. Bigelow
Mike Giorgetta didn't want to seem overtly jubilant when the Persian Gulf War began, and scores of Tomahawk cruise missiles slammed into Baghdad.
It didn't seem right to feel excited about something so ferociously destructive. Still, those opening salvos were the first time Tomahawks had been fired in combat.
"You don't jump up and down with joy," said Giorgetta, who worked on the Tomahawk program for nine years. "But inside, you're going 'Yeah!' "
That was 1991.
Now Tomahawks are flying again, but there is little that's familiar about the landscape of San Diego's defense industry.
About half of the 284 Tomahawks used in the 1991 war against Iraq were assembled at the General Dynamics plan in Kearny Mesa. Each of those was fueled and armed with a 1,000-pound warhead in Sycamore Canyon, near Scripps Ranch.
Today GD's big factories are gone, along with thousands of employees who once constituted the area's single biggest work force.
Now Giorgetta is the co-owner of L&N Industrial Tool and Supply in Poway, and his only knowledge of the current war in Iraq is what he reads in the newspapers.
Despite General Dynamics' disappearance, though, overall defense spending in San Diego County has remained fairly constant, according to the San Diego Regional Chamber of Commerce.
The $10 billion spent here on Pentagon contracts, military pay and pensions in 2001 was, when adjusted for inflation, a 9 percent decline from the $8.5 billion spent a decade earlier.
But the mix of Pentagon spending in San Diego County has changed dramatically.
"Manufacturing has declined over the years," said Kelly Cunningham, research director for the chamber. "What's come up is the professional engineering, scientific and technical work, including computers, computer programming, research and development."
Julie Wright, chief executive of the San Diego Regional Economic Development Corp., said, "We are a more high-tech place today than we were 12 years ago, just because of the sheer amount of engineering we do now."
The change reflects the Pentagon's shifting emphasis on "force transformation" that emphasizes the use of remote surveillance, intelligence, communications and precision-guided weapons.
In San Diego, perhaps nothing has embodied this change in strategy and technology more than SAIC, or Science Applications International Corp., the research and engineering conglomerate.
With more than 38,000 employees around the world, SAIC now dominates the regional defense industry in much the same way that General Dynamics did in the 1980s.
Of the $3.8 billion in defense contracts executed in San Diego County in 2001, Cunningham said, SAIC did $1.1 billion - or nearly 29 percent. And that was just in San Diego.
For the fiscal year that ended Jan. 31, SAIC reported $5.9 billion in revenue, with more than 55 percent of that derived from Pentagon contracts.
Stealthy profile
For all its success as a defense contractor, SAIC maintains a decidedly stealthy profile. For example, spokesman Ben Haddad acknowledged that the company is deeply involved in the current war in Iraq, but he refused to discuss how. Many of SAIC's long-standing defense contracts involve supporting the command and control centers for U.S. military or intelligence agencies. In March, for example, the U.S. Army Forces Command at Fort McPherson, Ga., awarded a services-and-support contract worth as much as $650 million to a team led by SAIC.
In October, the super-secret National Security Agency awarded a $280 million contract to SAIC and four other companies to modernize the NSA's electronic eavesdropping capabilities.
"It is spook stuff," said John Pike, director of GlobalSecurity.org, a Web-based institute focused on defense, aerospace and national security issues. "The part that's visible to me is mainly the communications, intelligence and imagery intelligence stuff."
Yet SAIC is enormously diversified, Pike added. Its businesses range from commercial telecommunications products and government health services to training local paramedics and police in how to respond to weapons of mass destruction.
The chamber's Cunningham credits funding from the Navy's Space and Naval Warfare Command, or SPAWAR, for accelerating the change in San Diego's defense economy.
SPAWAR, which moved its headquarters here in 1997, provides more than $1 billion in funding each year - mostly for contracts related to what it calls "network centric" warfare.
11,800 contracts
Including SPAWAR and other Pentagon sources, Cunningham says, more than 11,800 prime contracts of at least $1,000 were executed in San Diego in 2001, which is the last year for which data are available.
"Of course, we'd expect 2002 and 2003 to be higher still," Cunningham said.
That increase in federal funding for defense, national security and homeland security has flowed to many San Diego companies.
In recent months, San Diego-based Cubic Corp. has reorganized its operations to consolidate its communications business and to seek more defense-related orders for "software-defined radios." Such technology uses software to change the function of modular transceivers.
Much of the growth in Cubic's defense business has come from the company's battlefield simulation and ground and air combat training systems.
At about the same time SAIC won its NSA contract, for example, the spy agency awarded a separate contract to San Diego-based Titan Corp. for $533 million. Under the contract, Titan will assist the NSA in developing technologies to sift through the information overload collected by its network of listening posts.
"When you're collecting information worldwide, you collect a lot of it," said Gene Ray, Titan's chairman and chief executive. "So how do you go about making decisions based on that information?"
Like SAIC, Titan has grown dramatically over the past decade - with revenue of $146.5 million in 1991 growing to $1.4 billion in 2002. Much of Titan's work has focused on defense communications, including specialized radios used by the Navy.
Robotic aircraft
One of the biggest changes in San Diego's defense technologies has been the advent of robotic surveillance aircraft called Unmanned Aerial Vehicles, or UAVs.
"For reasons I've not been quite able to understand, San Diego has become the Hollywood for UAVs," said Pike of GlobalSecurity.org.
Northrop Grumman's Global Hawk, which was developed in San Diego, uses sensors and radar imaging to provide a strategic "big picture" for military commanders.
The swath viewed by the Global Hawk can be as wide as 78 miles, but the sensors are sensitive enough to distinguish a milk carton on a picnic table from 65,000 feet.
The Predator, made by General Atomics Aeronautical Systems, also has gained fame for its ability to "loiter" above hostile territory for up to 40 hours, using its video camera, infrared imaging and radar to spy on the enemy.
Some Predators equipped with anti-tank missiles have also pounced on what the Pentagon calls "targets of opportunity."
Even so, the billions spent on the war in Iraq doesn't necessarily translate to immediate revenue for defense firms in San Diego.
"Most people don't appreciate just how long-term-oriented the defense business is," said Jon Kutler of Quarterdeck Partners, a Los Angeles investment firm. "Even if a contract officer wants to open the spigot wider on a specific weapon, it takes a long time to get those weapons from paperwork, through the factory floor and into the field."
At Cubic Applications, President Gerald Dinkel agreed, saying, "Cubic booked nearly $400 million in defense this fiscal year, but that was not due so much to the current conflict as to Sept. 11 and the buildup afterward."
Copyright © 2003, Union-Tribune Publishing Co.
