Business Update with Mark Lacter

How SpaceX's recent success could help LA's economy

KPCC's business analyst Mark Lacter tells guest host Susanne Whatley that it's a critical time for private companies trying to make it in the space business.

Susanne Whatley: Mark, the Space X mission to the International Space Station continues to be a success. How big deal will it be for the local economy?

Mark Lacter: Well, it’s already a big deal, Susanne. The company has a workforce of 1,800 people, most of them based in Hawthorne (in what used to be a factory for Boeing fuselages). And 1,800 is a significant number of jobs in an industry that’s been shrinking pretty substantially in Southern California. This is all thanks to Elon Musk, the founder and CEO of Space X. Here’s another case of a California entrepreneur with big dreams – at one point they seemed like impossible dreams – and now he’s the man of the moment.

Whatley: I guess the big question is “now what?”

Lacter: That’s right – not just for Space X, but more broadly, for the regional aerospace business. And what it really boils down to is taking this singular event and turning it into a regular, routine event. That’s going to require more of an assembly line operation where they can eventually launch a rocket into space at least, oh, once a month. Now, Space X already has a preliminary contract with NASA, but whatever happens after that will obviously depend on the success of these early missions. In other words, they really have to make this a business. And to his credit, Elon Musk has come up with a very efficient operation in Hawthorne that in many ways resembles the kind of techniques used in Silicon Valley.

Whatley: How so?

Lacter: Well, instead of doing it the old-fashioned NASA way, which involved hiring a bunch of subcontractors to work on individual components - like the engine or the computer systems - Space X does much of its design and manufacturing work in house. That, of course, raises questions about how much spillover there will be for suppliers in Southern California. It’s just hard to know at this point. What does seem pretty clear is that the private space business will be structured a lot differently than when the government was in charge.

Whatley: Not as much bureaucracy, I suppose…

Lacter: Not nearly as much – and already, there’s been friction between the NASA engineers and the Space X engineers over how to do things. One other big venture worth noting involves Paul Allen, the co-founder of Microsoft; Burt Rutan, the aircraft designer; and yes, Elon Musk. The idea is to launch a multistage rocket from a six-engine specially equipped 747 – at high altitude. Some real Buck Rogers ideas.

Whatley: But what about the rest of the area’s aerospace industry?

Lacter: Well, after those huge losses in the ‘90s, employment has been relatively stable over the last few years, thanks to the defense electronics business, which is very big, and the missile and space business. The actual assembly of aircraft is not a large part of the local economy anymore. The Pentagon has given up on the C-17 cargo plane (though Boeing still has orders for customers overseas), and then you have the F-35 Joint Strike Fighter that’s been facing all kinds of cost overruns and productions snags. And aside from the delays, or maybe because of them, the Pentagon is under pressure to drastically cut costs.

Whatley: Not like the old days…

Lacter: Susanne, do you know that back in the ‘80s, one out of every 10 aerospace jobs in the country was located in L.A. County (if you can believe that) – and one out of four was in California. That’s truly remarkable. And that’s why the whole Space X phenomenon is such a big deal. If they are able to shoot up those rockets and space capsules on a routine basis, it could represent a fundamental shift in the Southern California aerospace industry.

Whatley: And more jobs for the local aerospace industry…

Lacter: Potentially. Again, it’s very early, and already Space X has competition for a piece of that NASA business. But the news is definitely promising.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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