Business & Economy

Trump's defense budget raises hopes for SoCal aerospace firms

Launch of JCSAT-14 rocket by SpaceX on May 6, 2016. The company could benefit if Congress increases funding for missile defense or the space program.
Launch of JCSAT-14 rocket by SpaceX on May 6, 2016. The company could benefit if Congress increases funding for missile defense or the space program.
Courtesy of SpaceX

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President Donald Trump’s $1.1 trillion proposed budget blueprint released last week includes a $54 billion increase in defense spending. If some of that money ends up being spent building bombers or drones in California, it would be a big boost for the state’s once-thriving aerospace industry, which has seen employment cut in half since the end of the Cold War.

Still, local aerospace executives aren't allowing themselves to get too excited yet because of how vague the budget is and the fact it still needs congressional approval.

"I hate to speculate on what might be," said David Blanco, president of Performance Ascent and co-chair of the SoCal Aerospace Council, a trade group. "We really don't know what's going to happen with the proposed budget."

To further complicate matters, Blanco points out that since 2013, military spending has been capped because of sequestration limits agreed to by President Obama and congressional Republicans. Lifting the cap requires 60 votes in the Senate, meaning eight Democrats would have to break ranks, which is seen as unlikely. 

More than 85,000 people worked in Southern California's aerospace industry in 2014, down from more than 270,000 in 1990, according to a report released last year by the Los Angeles Economic Development Corporation. Aerospace jobs account for just 1 percent of jobs in the area but they pay well - an average of about $105,000 a year. 

One bright spot has been the F-35 stealth fighter, which is being partially built in California. The  Navy says the project will create more than 26,000 direct and indirect jobs at Lockheed Martin Corp. in the Mojave Desert and at more than 100 subcontractors in Southern California.

"We’re already expecting F-35 to quadruple production by 2020," said Blanco. He's not certain what effect Trump's budget would have, if any, have on F-35 production; the president criticized the program as "out of control" shortly before taking office.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.</p>&mdash; Donald J. Trump (@realDonaldTrump) <a href="https://twitter.com/realDonaldTrump/status/808301935728230404">December 12, 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>

If Congress increases funding for the space program or missile defense, it would be a big boost for Southern California companies like SpaceX and Aerojet Rocketdyne, according to Jim Adams, an L.A.-based aerospace consultant at PWC.

"You think about a lot of the base here and a lot of it is space – the satellite businesses, the launch businesses," said Adams. "It’s been fairly neglected over the last years."

But Adams added that Trump's budget blueprint is very thin on details: "It’s not clear any of the proposed increases would have an impact on Southern California companies," he said.