Skip to playerSkip to main contentSkip to footer
TV Hub
  • yesterday
How post-Cold War cutbacks in military spending have affected the industries and people whose livelihood was invested in the military-industrial complex.

Category

📺
TV
Transcript
00:00Frontline is a presentation of the Documentary Consortium.
00:09Tonight on Frontline...
00:11We have not won the Cold War to lose the aftermath.
00:14The downsizing of America's defense industries has already cost hundreds of thousands of workers their jobs.
00:21It's a sense of having played by the rules, and when push came to shove, finding that you were absolutely disposable.
00:29I know today that the world's finest makers of swords can and will be the world's finest makers of plowshares.
00:37But can defense contractors learn how to compete in commercial markets?
00:41It's an unnatural act to instill commercial mentality on a military business.
00:47If contractors can't compete, millions could lose their jobs.
00:51I really don't know who to be angry at. Who do you blame for the fact that peace broke up?
00:58Tonight on Frontline...
01:00Ashes of the Cold War.
01:08With funding provided by the financial support of viewers like you.
01:14And by the Corporation for Public Broadcasting.
01:20This is Frontline.
01:21Frontline.
01:22Frontline.
01:41The B-52.
01:43It stands as a monument to the country's determination to prevail.
01:51It was built to win a nuclear war no one ever wanted to fight.
01:56Now, five generations of them sit parked in the Arizona desert.
02:06And what are the people who made these weapons? Flew them? Maintained them?
02:20What happens to them at the end of the Cold War?
02:27What are we going to do with our victory?
02:30Is it going to be a source of strength or weakness?
02:33Candidate Bill Clinton acknowledged the dilemma facing the United States in the wake of the Cold War.
02:39We have to plan for the peace dividend. If we don't do it, we'll lose jobs. If we do it, we'll generate jobs. That is a major issue.
02:50In the United States today, the last of the good blue collar jobs are defense jobs.
02:59During the 80s, their numbers increased even as steel and auto jobs fell away.
03:06At least six million Americans earn their living through the defense budget.
03:14By the decade's end, two million could be unemployed.
03:20A very high percentage of them are military, both active and retired.
03:24California's prosperity was built on Pentagon spending.
03:28In fact, they like to say there are more admirals per square mile over here than anywhere else around.
03:33California absorbed nearly three trillion dollars of the defense budget during the 44 years of the Cold War.
03:39Just before the Second World War, a small aircraft company left Buffalo, New York for San Diego.
03:59The city offered a good deal. Free land near the airport.
04:05And a harbor specially dug to accommodate the company's flying boats.
04:14In return, San Diego got new jobs.
04:18Over the next 60 years, the company would shift from airplanes to missiles.
04:23It would join General Dynamics, the largest defense contractor in the country.
04:29General Dynamics and the United States Navy became the largest employers in San Diego County.
04:35Until the twilight of the Cold War.
04:40General Dynamics is out of the missile business tonight.
04:43The report said he could lose some 4,000 jobs as political and business leaders scrambling.
04:53Last summer, General Dynamics sold its missile division to Hughes Aircraft.
04:58The threat of losing thousands of jobs stunned the city.
05:02All right. Thank you, Michael.
05:03And let me remind you again that in talking to Hughes today, they say they've not decided to take any jobs out of town.
05:09And they have not decided on a timetable to make that decision.
05:14General Dynamics had been losing contracts for four years.
05:18The company had earned billions during the Reagan buildup.
05:20But by 1990, GD's stock hit a new low.
05:25To boost its value, GD's chairman, former astronaut William Anders, decided to cut his losses and sell off parts of the company.
05:3952-year-old David Blanchard is a casualty of those decisions, laid off from a management job after 13 years.
05:46The principal owners of General Dynamics back in Chicago finally decided that they'd had enough and wanted to collect their money and go do something else.
05:56And hired a CEO to sell the company.
06:00I guess it was their right.
06:02Maybe they could have treated the workers nicer in the process, but maybe they don't have an obligation to do that.
06:13Life doesn't owe you a living.
06:15On the other hand, it's scary when you don't have a job.
06:20You wish life owed you a living.
06:21And my first impression when I saw all of you sitting here this morning was, wow, they all look like they are ready to go to work.
06:32Hundreds of engineers like Blanchard have replaced their office routine with the retraining seminar.
06:37Now you have the three cards that say highly proficient, competent, little or no skill.
06:45A deck of aptitude cards and platitudes is the best parachute now for missile engineers and scientists.
06:52They make up 42% of the industry.
06:55Hi, I'm calling in regards to job openings.
07:01Quality engineer job.
07:04San Diego defense contractors anticipate laying off 14,000 more in 1993.
07:16On average, aerospace workers earned more than $18 an hour.
07:21These engineers say new jobs now pay $10 an hour.
07:25And not many companies want middle-aged former defense workers.
07:30It's a very destructive process.
07:33It just grinds you down.
07:35And it just, you know, tears into you.
07:40And it gets harder and harder to walk out the door in the morning in the face of that kind of stuff.
07:47California's state economy ranks seventh among nations in the world.
07:51But defense cutbacks are reducing its plans to rubble.
07:59There's record empty office space.
08:02Tens of thousands of bankruptcies.
08:05And in San Diego, a real estate market in a tailspin.
08:09It's not yet massive homelessness on the streets.
08:14But for many of those involved, it's equally or even more frightening.
08:18It's children in college that can no longer be supported.
08:21It's homes that are being lost.
08:23It's families that are divorcing.
08:25It's alcoholism that's rising.
08:26Carly Shakin is a professor at the University of California.
08:30It's a sense of having played by the rules, having given your all in the expectation that you would be taken care of.
08:37And when push came to shove, finding that you were absolutely disposable.
08:41In San Diego, those who once built the nation's defense line up for a handout.
08:50The machinist union gives free food to former co-workers.
08:55Take one box, they're all the thing.
08:58Men who check the quality of warheads now load groceries into a box.
09:03Brothers who'd taken a step up the economic ladder step up for charity.
09:11Okay.
09:13Mothers wonder how they'll put their children through school.
09:17Their dreams washed away in a deluge of layoffs.
09:22Thank you very much.
09:24You go there, you pick up some food, which you feel like you're getting a hangout.
09:28Because you're used to buying your own food.
09:33Getting your own money.
09:40There's places you can go.
09:43And they tell you you can go there and apply for food stamps.
09:50Good morning.
09:52Becky and Roger Dawson met while working at General Dynamics.
09:55After ten years building Tomahawk missiles, both were laid off.
10:00I gave them my 60 day notice and they told me the reason I was chosen was that I didn't have a college degree.
10:09And that I was over 50 years old.
10:12With two teenagers to support, the Dawson's have sent out hundreds of resumes in the past two years.
10:22Responses coming back are, we've got 3,000 applicants for that job.
10:29We closed the job.
10:30We're not going to hire anybody because we can't choose one person.
10:33Overqualified?
10:35You're overqualified.
10:37You're underqualified for what we have available at this time, or you're overqualified for what we have available.
10:41We'll hold your resume.
10:42If something comes up in the future, we'll give you a call.
10:44Roger Dawson's unemployment ran out months ago.
10:51Their savings spent, the family lives on Becky's unemployment check.
10:56We have four people in the house.
10:59She's getting a maximum of 920 right now a month.
11:02That's not too much.
11:04Their rent is $964.34 for this house.
11:09I'm two months behind right now going on three months behind in payments and they're going to foreclose on me.
11:18The Dawson's faced the future of many former defense workers.
11:22Lost jobs.
11:24The prospects of losing a home and living in public housing.
11:28I have no idea where we're going to go.
11:31I'm sure we'd like a job.
11:33If I'd like a job, I might be able to keep my house, you know.
11:35One month after taking office, President Clinton came to California.
11:45A state which has lost nearly half a million defense jobs over the last two years.
11:51California helped Bill Clinton win the presidency.
11:55He told Californians how together they could win the peace.
11:58Our country began a few years ago to reduce defense with no plan to convert our massive human capital.
12:08From producing instruments of war to using the technologies of peace to clean up the environment and to improve the quality of our lives and to go forward.
12:16And so we have to do that.
12:18But because we haven't, California suffers today.
12:20Clinton told California he wants to unleash military technology towards more socially useful goals.
12:29But as the defense budget shrinks, what's been unleashed instead is an economic war between the states.
12:35Many of the jobs leaving California have gone to Arizona, one of the least populated states in the nation.
12:50Historically, Arizona's economy ran on what old timers called the five C's.
13:02Cotton, cattle, citrus, copper, and climate.
13:08In 1951, when Hughes Aircraft broke ground for a new plant outside Tucson, it became the first large manufacturer in the state.
13:20Howard Hughes had bought 30,000 acres of Arizona desert for a military electronics plant.
13:26By the late 50s, the plant made the world's first guided missile, the Falcon.
13:31Over the course of the Cold War, Arizona would become one of the most military dependent states in the nation.
13:42By 1986, the Hughes plant built missiles for each military service.
13:47Now, those programs are in danger.
13:50We used to have six programs in production here.
13:53And in 1994, only two of those programs would be in production.
13:57The vice president of Hughes Missile Systems Group is Ed Biggers.
14:02So we're trying to posture ourselves so that, okay, if one of the programs disappears, it's not one out of two, it's one out of eight.
14:09Or if three disappear, it's not both of the programs we have in production, it's three out of the eight programs.
14:15Hughes lost bids on two recent missile competitions.
14:20Over the last seven years, 5,000 jobs have been lost.
14:23That had state politicians like Governor Pfeif Symington worried.
14:28Well, there are thousands of jobs at stake.
14:30I mean, if you use Hughes alone as an example, with their workforce going from over 8,000 down to about 4,000 in a period of five years,
14:39and the trend lines were ugly, we could see that we needed to go in and really stabilize that situation.
14:50They asked us what we were doing about it.
14:52And, uh, why are you not moving more jobs from your other Hughes industries over here?
14:57Why don't you do more about that?
14:58Then, opportunity knocked.
15:02Hughes bought General Dynamics missile contracts.
15:05While this is big news, the city of Tucson is waiting for the next announcement.
15:09Hughes has talked about consolidating some operations, and Tucson's been pushing hard for those jobs.
15:16I have had a conversation with Hughes about their purchase of the General Dynamics missile group.
15:22Symington wanted those jobs.
15:25He asked Hughes whether a tax incentives bill would swing the deal.
15:29The answer is an emphatic yes.
15:35In Phoenix, the state capitol, it would become known as the Hughes Bill.
15:40A deal to help the company cut costs and beat the competition.
15:44It could cost the state at least 25 million dollars.
15:48Clearly, uh, it is, it is a gamble.
15:52Uh, and hopefully it'll pay off.
15:55Former State Senator Jaime Gutierrez chaired the Appropriations Committee.
15:59He says the Governor first sold the bill as an incentive for defense conversion,
16:03rather than simply a way to move jobs to Arizona.
16:07Members of the legislature, the Honorable Fyfe Symington...
16:10A major part of its sales was, we will have ultimately some shifting over, some, some products that came out of this defense research that is going to be consumer oriented.
16:25And that was a major part of the sale of the bill.
16:27I would say that we helped, uh, the state become more aware that, yes, that had good economic value,
16:34but there were other things that had good economic value for the state of Arizona as well, like consolidating defense structure.
16:40As the defense, the business is going through a restructuring, the state of Arizona could maybe improve its chances.
16:45It would help us, but it would help the state.
16:47This is, this, this is not the last time this is going to happen.
16:50There's going to be more of these things going on.
16:52So under Hughes' influence, a bill designed to help businesses convert became instead a bill tailored to lure jobs from California.
17:02The bill gives tax credits for new hires, which could eliminate Hughes' property and corporate income tax for five years.
17:09Tax breaks that could give Hughes the margin it needs to beat the competition.
17:13It passed overwhelmingly and sent an overwhelming message to Hughes' executives that Arizona is a state that loves defense.
17:22We would like to be a shining example in this country of a state that has a sign-up that says capital investment is welcome here.
17:31Come talk to us. We encourage this. And defense restructuring is something that we understand.
17:36We have support. This is an economic decision.
17:39Two months later, Hughes Missile Systems announced it would consolidate what's done.
17:45The ultimate question, or perhaps the eternal question always becomes, would they have done that without the bill?
17:52I don't know.
17:55Even before the bill, Hughes had been weighing the advantages of moving to Arizona.
18:00Cheaper wages, lower cost of living, and fewer regulations.
18:05The calculations that we did and the trade-offs that we did favor Tucson more than with or without that bill.
18:18I mean, what I'm saying is that the numbers, the difference in the cost, are bigger, significantly bigger than what comes to us through that bill.
18:26So you would have moved here?
18:27Yes. Yes.
18:32Back in San Diego, few have been invited to move.
18:36Instead, those who once built Tomahawk missiles at General Dynamics pack up, sending equipment and their jobs off to Arizona.
18:46I hate to tell you this, but what's the problem?
18:51Well, here's your layoff notice.
18:54What?
18:55Layoff notice?
18:57I said...
18:59What can you do?
19:01You can't go ahead and throw a temper tantrum.
19:04You know, you're supposed to be adults.
19:08Ah, okay.
19:11Lorenzo Early and Eddie Haynes spent seven years making Tomahawk missiles.
19:15Skills they thought would lead to job offers in Arizona.
19:19If they don't have a success rate with this cruise missile or the Tomahawk, the rest of the ACM, and the Phoenix missile or whatever else they bought in General Dynamics,
19:32they're going to have to layoff people anyway because they're going to lose the contract.
19:36So, taking people who doesn't have the experience don't make sense.
19:44It doesn't help their cause because it's winner-take-all now.
19:49It doesn't help their cause.
19:50So, if I was ahead of the contract, well, give me someone who knows.
19:55I don't want to train anybody.
19:56And I need someone who knows the job.
19:59Today.
20:00Yesterday.
20:01Who could step in and do a good job for me.
20:04And that's us.
20:054,000 workers had jobs when General Dynamics made its deal with Hughes.
20:14As the programs moved to Tucson, 3,000 of them will be left behind.
20:19In February, Governor Symington celebrated delivery of a political trophy.
20:34The first Tomahawk missile made in Arizona.
20:40For Hughes executives, it's almost a free lunch.
20:43The workforce paid one-third less than California's.
20:46And tax breaks worth nearly 50 million dollars.
20:51We, at the state level, deeply appreciate Hughes as a great corporate citizen.
20:55And we look to many future prosperous years together.
20:59But Hughes workers in Tucson have small cause for joy.
21:03The company has notified the Labor Department that as it consolidates,
21:071,000 of them may be laid off this year.
21:09And the tax incentives bill favors new hires, not keeping old employees.
21:15By the end of this year,
21:17half of the 16,000 people who worked for Hughes and General Dynamics missile plants
21:22will be out of the job.
21:24In this case, it became a game almost of musical jobs.
21:29Here's an industry that's contracting.
21:32And all of a sudden, Arizona offers an extraordinary series of incentives
21:37to attract the few remaining jobs.
21:40That's not economic development.
21:43That's fighting over the scraps.
21:46No bogus bonus for Bill!
21:48No bogus bonus for Bill!
21:51No bogus bonus for Bill!
21:53While GD workers in San Diego face unemployment,
21:57company managers receive bonuses for increasing stock dividends.
22:01GD stock has quadrupled in the past two years.
22:04In March, the company announced it would pay out $200 million in profits.
22:10As a result, Chairman Bill Anders received $24 million.
22:15He's one of the highest paid executives in the country.
22:18The crooks on the street are no different than the big business man
22:21that's up there sitting in his easy chair taking money out of your pocket
22:24when you go out the door.
22:25That's the same as putting a gun to your head and saying give me all your money.
22:30Because that's basically what they're doing to us.
22:33California did not plan.
22:38And I think paid a very heavy price.
22:41And will continue to pay a very heavy price.
22:43Planning after the fact is nearly disastrous.
22:47This was something that was more than on the horizon.
22:49This was something that was on television sets virtually 24 hours a day.
22:55As we saw the Eastern Bloc come unstuck.
22:58As we saw the Soviet Union dissolve.
23:00As we saw a superpower literally disappear before our eyes.
23:04Six months after Hughes announced its missile group would move.
23:15The California state and congressional delegations convene in Washington.
23:19Representative George Brown is a senior member of the California delegation.
23:27We're in the pits as far as our California state economy is concerned.
23:32It's never been worse.
23:34We have in my region something like 10 or 12 percent unemployment.
23:38Far worse than any other state or region in the country.
23:42And we're not prepared to see that continue.
23:45Focus on those specific firms that you have.
23:49And talk to their CEOs.
23:51Offer them help in any way that you can.
23:54Find out what their real problems are.
23:56They lie to you a lot sometimes.
23:58The California delegation contains the most liberal and most conservative members
24:02in both political parties.
24:05This is the first time in anyone's memory they've gathered in the same room.
24:10We can reshape the destiny of this whole country.
24:13It's a crucial time for the state.
24:15Hughes is weighing whether to move another division, its engineers, to Arizona as well.
24:20We don't want to lose any more high paid jobs over there.
24:23It's bad enough to lose the missile assembly, but to lose the highly skilled engineers that are doing design work.
24:31There's a couple of thousand of these.
24:33They make a major contribution to the area.
24:35We think that we ought to find ways to utilize that capability in California for the benefit of California.
24:41Willie Brown, the speaker of the California Assembly, says the state has done a lot to support business.
24:48No question. California has, with great regularity, provided the appropriate kind of tax incentives, but you have to give something in return.
24:57And that something in return is fair wages for people who work there and opportunity, an equal opportunity for people who are different racial stocks, different age stocks, different ethnicity stocks, as well as different sexual preferences.
25:14Keep in mind that Arizona has none of that quality of life, or very little of that quality of life.
25:21That's a state that had all kinds of trouble doing something as benign as Martin Luther King Jr.'s birthday.
25:28So it doesn't surprise me that some people would find that a more attractive place to go, particularly if they were white bread white.
25:35California has had the image that, you know, this is the golden state. Nothing can ever go wrong.
25:41And the lifestyle is different, and nothing can ever go wrong.
25:46And all of a sudden, people are starting to wake up to the fact that things go wrong.
25:50I was over there during the riots. I lived there during the Watts riots and was involved in a lot of community meetings, cross-cultural meetings.
25:58And there was a lot of pain, a lot of hurt. And so it's, there are a lot of things, social things that are at issue.
26:09And it's not, I don't think it's as simple as does the defense industry support it.
26:16I said budget authority.
26:18California has more freshmen in Congress than any other state.
26:22They work on some of the latest machinery. I just wonder how that idea strikes you.
26:26But it also has clout. Ron Dellums chairs the Armed Services Committee.
26:31As I sit at chair of the committee, I'm totally in over, for 22 years I've been talking economic conversion
26:36and finally kicking and screaming everybody's coming past the street corner.
26:39We've been standing off for 22 years and I'm very pleased about that.
26:44Ron.
26:45Dellums and other California Democrats have planted money in the federal budget to cede the state's conversion efforts.
26:50In the Defense Conversion, Reinvestment and Transition Assistance Act of 1992, the money goes for three purposes.
26:59One, to help defense-dependent industries convert and diversify away from DOD.
27:06And secondly, to help defense workers and military personnel transition into non-defense jobs.
27:13Finally, to help defense-dependent communities adjust the face closure.
27:17Last fall, Congress authorized $1.5 billion for defense conversion.
27:22California wants a fifth of that money, but the funds have never been released.
27:29The California delegation will spend the next three days lobbying, visiting 16 different agencies.
27:36My district contains Los Angeles Air Force Base, 8,000 military employees and roughly 80,000 civilian employees.
27:43I have a Long Beach Naval Shipyard.
27:45It's very critical that we come to talk with you today.
27:48Our areas have been hit by two base closures in the last couple of years, both Norton and Georgia Air Force bases.
27:53I'm not too sure how you'd like to handle the meeting. I'd be happy to give you a thumbnail sketch.
27:57We are a small office, currently have 30 professionals, 500 communities.
28:02The Californians find agencies ill-prepared to deal with the scale of their problem.
28:07Sam Farr is an assemblyman from the Monterey Peninsula.
28:12Well, I'm always frustrated when I have to go and sort of beg for money which Congress has allocated for the purposes of communities to use and finding that there's just sort of an ownership of that money in the Beltway rather than an attitude of get that money to the community as fast as possible.
28:32If indeed this is an emergency response, the emergency services are very, very slow.
28:39Inside the White House, the President is focused on his economic stimulus package.
28:45One aid is coordinating conversion policy.
28:49Then the New York Times leaks news of 15 bases the Secretary of Defense may close.
28:55Eight of the 15 bases are in California.
28:58The economic impact is $6.4 billion.
29:05In the San Francisco Bay Area, it is a wipeout.
29:09I spoke to the governor yesterday.
29:12Dianne Feinstein, the former mayor of San Francisco, is a newly elected senator.
29:17The economic impact of these base closures wipes out totally the benefit of the economic stimulus package for California.
29:26So it's the federal government, in essence, doing one thing with one hand and another thing with the other hand.
29:33At the White House, Speaker Willie Brown proposes a quid pro quo to Clinton.
29:38The conversion money California wants in exchange for the state's votes on Clinton's economic package.
29:44What we're talking about is trying to give him a report card that is publishable with great results by September 1st, which is the deadline date for enacting the totality of the Clinton program.
29:57And after all, there are 54 members of Congress, two U.S. senators and 52 representatives from California.
30:03That can be awfully important to Mr. Clinton in the entirety of the delivery system on his package.
30:09Mr. President!
30:12Hours after the California delegation meets with the President, the White House announces Clinton will deliver a conversion package the very next day.
30:20The idea is to preempt the bad news about base closures with good news about conversion.
30:30The Westinghouse plant where he would deliver his speech has laid off 3,800 people in the past two years.
30:37For things like border patrol and drug interdiction and things of that nature.
30:42Many defense contractors, like Westinghouse, are trying to keep government contracts by inventing civilian applications for military programs.
30:51A practice known as dual use.
30:54What's your sense of the time when there will be widely commercial events?
30:58But it will be five years before Westinghouse can get its consumer products to market.
31:02The President seems most impressed with the electric car.
31:07Nobody lets me drive anymore.
31:12Clinton wants all defense companies to do as Westinghouse is doing.
31:15But he's starting from scratch.
31:17The previous administration had no conversion program for him to build on.
31:22Clearly defense conversion can be done and can be done well.
31:26Making change our friend and not our enemy.
31:29But in order to do it, we must act, act decisively, act intelligently, and not simply react years after the cuts occur.
31:38The President releases the one and a half billion dollars Congress authorized last year.
31:44Twenty percent of it will go to California.
31:47We will triple the budget of the Defense Department's Office of Economic Adjustment.
31:52Les Aspen, the Defense Secretary, looks puzzled.
31:55He's finding out details of the policy as the President delivers his speech.
32:00We're even going to set up a toll-free lumber to attract good ideas from good companies.
32:06And if you will like this, the number is 1-800-DUAL-USE.
32:11The President has broadly outlined the plan and left his cabinet to turn policy into programs.
32:24Clinton wants to double conversion money next year.
32:36But it will take at least 18 months for the money released today to reach those who need it most.
32:42They wonder whether an 800 number will save their jobs in time.
32:47He's making a lot of good promises.
32:51I want to believe in him. I really do.
32:53But, you know, I'm a Republican. I'm a devoted Republican.
32:56But on the other hand, I saw so many people just three months ago, friends of mine, with families, who went out on the street.
33:05And I was supposed to be one of them until a guy retired my shop, saved my job.
33:10Twenty-four and a half years I've been doing this.
33:14I've worked all the way up to doing calibrations in the standards lab.
33:19And now I'm back into the maintenance department moving chairs.
33:22And 24 and a half years, and yeah, we're worried.
33:26The President says bold action will convert the defense industry.
33:30But can the military-industrial complex change itself?
33:40From California to Connecticut, communities are being devastated by defense cuts.
33:48In Groton, General Dynamics builds nuclear submarines.
33:52The latest generation is called the Seawolf.
33:58Two years ago, the Navy funded 35 Seawolves.
34:02Now they've cut back to two.
34:05The valves that make the Seawolf silent are designed in Tucson, Arizona, at Sergeant Controls.
34:19It's a one-product line shop.
34:21In less than two years, all orders will be filled.
34:26That has the company's president, former subcommander Don Tarquin, worried.
34:32Keeping the business alive and keeping the opportunity for jobs open.
34:39Making sure that I don't make some stupid decision that will cost the jobs of our employees.
34:47I think that concerns me more than anything.
34:50And I face those kind of decisions almost on a daily basis.
34:53Tarquin's most concerned about keeping his engineers.
34:56Their skills are crucial to making silent submarines.
35:00If we go away, or if we go strictly commercial, the United States Navy will not have access to that technology in the future.
35:09There is a use for the technology that we supply the submarines that quiets the submarine.
35:15It also has a side effect in that it eliminates erosion from the components that it's involved with.
35:24And in the petrochemical and in the utilities industries, they have a need for erosion control.
35:34But Tarquin faced difficulty breaking into commercial markets.
35:37He had laid off 60 of his 220 employees.
35:42Desperate for help, he approached the Arizona Council for economic conversion.
35:48It's founder, Roz Boxer, is a former nuclear freeze activist, armed with a belief that military contractors can convert.
36:03Her group holds a monthly breakfast where defense subcontractors exchange ideas.
36:08Last July, she told Tarquin about a federal conversion grant that might help him break into the utilities industry.
36:15Up until then, even though I had been working with companies and I knew some of this information,
36:20it really became clear to me that this company never had a marketing department.
36:25They never had to sell in the commercial field.
36:29So, we're talking about a whole area that this company has to now develop.
36:34When you deal with the Department of Defense, you don't have a sales organization.
36:39We have no sales organization.
36:41The marketing manager for this company is, you're looking at them.
36:44I do all the marketing.
36:47And you can't get away with that kind of an organization when you're competitively going after commercial fields that people are already established in.
36:57Last fall, Sargent won the $325,000 grant through the Pentagon's Office of Economic Adjustment and the Department of Labor.
37:06But after eight months of waiting, Sargent has yet to see a dime.
37:12The year ago, we figured that in three years that we would run out of our backlog and complete all our contractual requirements.
37:22So, we had a three-year life, which is now down to two.
37:25I sure am.
37:29That's putting it mildly.
37:31For high-tech defense contractors, conversion could be profitable.
37:36Some say Hughes Aircraft is poised to make the switch.
37:41Hughes has really quite exceptional technical strength on a very broad front of areas which have application to the real world.
37:52In other words, not the military, but the commercial.
37:55In communications, in auto electronics, possibly in consumer markets.
38:00Wolfgang Demisch is an aerospace analyst with the Union Bank of Switzerland.
38:05The company has both the technical know-how and the corporate motivation to try to pursue those opportunities.
38:15This is World News Tonight with Peter Jenning.
38:19It is the largest non-oil business merger in history.
38:22General Motors announced today it is buying the Hughes Aircraft Company.
38:25Together, they will add up to the second largest company in the world, behind Exxon.
38:30It was big news.
38:32GM had bought the world's leading military electronics company.
38:36And Hughes got instant access to a $500 million a year market in auto electronics.
38:42In suburban Los Angeles, a Hughes engineer works on a futuristic GM project.
38:51It's an electric car.
38:53A project conversion advocates cite as an ideal use for military technology.
38:58For David Auerkirk, this project represents a personal conversion from defense to automotive engineering.
39:05It's a better feeling working on something that's not going to be used to hurt people.
39:12And missiles and things, you know, are needed.
39:14They have to be done.
39:15But electric vehicles are something that's going to be doing something good.
39:18Hopefully something that's remembered.
39:20This is Auerkirk's maiden voyage into the commercial world.
39:24He spent years designing power supplies for missiles and satellites.
39:29In the military, we designed for very high performance, very tight specifications.
39:34In the commercial arena, we're looking to lower the cost significantly so that it's affordable by the consumer.
39:40And they can't afford million-dollar inverters and, you know, $10 million cars.
39:44Is that restricted at all?
39:46Yeah.
39:49Engineers working on the power supply have to make it lightweight, safe, and easy to recharge.
39:55These are all problems Hughes solved in its military applications.
39:59A market is emerging.
40:01California, Massachusetts, and New York have mandated sales of non-polluting cars by 1998.
40:08But GM's had record losses.
40:11It says it can't afford to mass-produce the car.
40:14That's left Hughes trying to do development on its own.
40:18They really don't have a clue where to begin.
40:23Normally, the government came to them and said, here is a problem.
40:27And then they could focus on solving it.
40:29But in the commercial market, you know, nobody goes to Microsoft and says, hey, invent Windows.
40:35Here is our problem.
40:36You have to do it yourself.
40:38It's taken nearly 10 years for the marriage of GM and Hughes to get a product ready for market.
40:48Forewarn alerts school bus drivers when kids are in their way.
40:53Its development shows how differently the Defense Department and the commercial world do business.
41:03Forewarn is manufactured by H.E. Microwave at Hughes' Tucson plant.
41:07Managers from Delco, GM's auto electronics subsidiary, run the line.
41:14Project manager Jeffrey Owens.
41:17From an engineering perspective, you're just, you're dazzled.
41:20It's things that you only read about in textbooks.
41:23I mean, they're actually doing.
41:24Pushing the laws of physics, if you will.
41:26My commercial side looks at it, though, and says, boy, you know, that's going to take a lot to get that into production and be cost-affordable.
41:32So, you know, I had mixed emotions.
41:35Forewarn's military cousin is the next generation radar for F-18 fighters.
41:41Hughes wants to produce one or the other at the push of a button.
41:45The kind of dual-use President Clinton favors.
41:48But it's not that simple.
41:51It's an unnatural act to instill commercial mentality on the military business.
41:57So it takes a champion worrying about it every day to try and make it happen.
42:02The lands. We don't have flat lands.
42:04Right.
42:05Delco managers were perplexed by Hughes' approach to manufacturing.
42:09I had to get them from John.
42:11Our problem here, in terms of culture clash, is that on the military side, you may build ten of something that costs $100,000.
42:18On the commercial side, you may build $100,000 of something that only costs $10.
42:22And that just, you have a different reward system that goes with both sides of the house.
42:26On the commercial side, you care about a penny because a penny out of $10 is a lot.
42:30But a penny out of $100,000 on the military side isn't much at all.
42:34But you better make darn sure that you deliver all ten of your products on time and to schedule.
42:39You can't take people that are accustomed to selling units that are as high as $200,000 a unit that they sell to the government and get them down to where they can sell something for $35 easily.
42:54It takes a lot of retraining.
42:59It takes a lot of mental preparation and acceptance.
43:04Jerry Gary started his own company when he got laid off from Hughes.
43:11It's hard to be creative there.
43:14And this was a very, very refreshing thing for me to be able to get involved in.
43:17My attorney thanks you for all this time we've spent drawing these jackets.
43:21He teamed up with a small Hughes subcontractor to manufacture a wheelchair lift.
43:26The University of Arizona has bought eight Spectralifts in the last two years.
43:32I live in a world that's at three foot six, you know.
43:41But the first time I used it, I can remember it was just as clear as a bell.
43:47I came into the lift and when I raised up and people were standing up, I could see the entire floor and players on it.
43:54And it was just, it was incredible.
43:56It was a feeling of freedom, you know.
43:58It was very exhilarating.
44:03The Spectralift's not high-tech enough for federal dual-use funds, nor big enough for tax breaks in Arizona.
44:10Gary says dollars alone won't make conversion happen.
44:14The process of economic conversion or having somebody move from a particular type of business to another is not a simple task.
44:23It's, it's, it approaches breaking down traditions.
44:30It breaks, it, it, it involves going away from things that you know are successful in the business you've been in for years, you know.
44:37And you have to sort of be able to open your mind up and, and, you know, be a little bit innovative and flexible and, you know.
44:49As Hughes aims towards commercialization, their best customer, the Pentagon, seems itself an obstacle to commercial success.
45:01During the Gulf War, U.S. troops navigated through Iraqi minefields carrying a global positioning system known as GPS.
45:08There are virtually no landmarks. Hundreds of thousands of soldiers were able to operate using satellites that were basically parked in orbit 12,000 miles up above them.
45:19The satellites beamed location signals to hand-held receivers carried by units in Desert Storm.
45:25Stephen Colwell is president of an association of GPS users located near San Francisco, California.
45:37The initial GPS system costs in the neighborhood of $20 billion to, to build and, and produce and have all the different satellites that are up.
45:44We have a, as a, as a consumer marketplace, we have a tremendous amount at stake.
45:50We should be able to use that to our best advantage.
45:53GPS is a technology that is really going to find its home in the consumer.
45:58Your car may be off the planned route. If so, press the OK new route button for a new route.
46:05In the streets of Washington, GM Hughes Electronics tests a van that finds its way with GPS.
46:13But the commercial version of this military product still has a few bugs.
46:19Your car may be off the planned route.
46:22US 50, what it says.
46:25And it's out of reach of most taxpayers' pockets.
46:28Yeah.
46:30If we made you a real good deal and sold it right now, it'd probably cost between three quarters of a million to maybe beyond a million.
46:37We've never really figured it out.
46:38Part of the reason the van costs so much is that the military scrambles the satellite signal.
46:44This is something which our industry should be taking advantage of.
46:47Instead, it's being locked up by the Pentagon, which doesn't want to provide high precision information because hostiles could guide missiles to target in the US using it.
46:59To figure out a way around it, GM's had 15 engineers working since the Gulf War ended.
47:05The project's director is Ralph Wilhelm.
47:08The contrast is to go to Japan where the navigation system is up and running and the satellites are fully operational.
47:14Last year, they sold in excess of a quarter of a million vehicles with navigation systems.
47:20Drive straight through the intersection onto Alton Memorial BRP.
47:25There isn't a single big development that we've ever had from the A-bomb on down, which spies didn't find out about.
47:33The only guys whom we hurt, I think, by secrecy has been ourselves.
47:38People didn't know.
47:39People had to reinvent the wheel.
47:41People couldn't think of, okay, here are some things that exist.
47:44What else can I do with them?
47:46Our greatest strength is freedom of information.
47:53The Defense Department says the administration can change the policy.
47:58The political appointee who could do so has not yet been confirmed.
48:02Another Pentagon spokesperson told Frontline,
48:05DOD is not going to become an R&D lab for defense firms that want to get into commercial markets.
48:11There needs to be real change in the Defense Department.
48:16They've got to develop a culture of commercialization.
48:21They've got to learn to work with private entrepreneurs to help them to understand what the technology is capable of,
48:28and they've got to understand what the private companies can contribute in terms of manufacturing capability,
48:34global sales, commercialization, and that sort of stuff.
48:38And we've got to develop some constructive partnerships there.
48:41We haven't learned how to do that yet.
48:50Regardless of whether the administration succeeds in changing Pentagon policy,
48:54Hughes is committing the bulk of its research dollars towards military endeavors.
48:59Company executives say their survival depends on defense, not conversion.
49:07It is very difficult.
49:08Maybe that's the reason that Hughes doesn't feel real comfortable with the word defense conversion,
49:12because it's not easy to create total new businesses with big markets that other people haven't already created,
49:20or go penetrate somebody else's market, because why could we be better at that?
49:25What sustainable advantage would we have over other people in that area?
49:30Smart people?
49:31Yeah, we have smart people, but there are a lot of them around.
49:33Do we understand the market better?
49:35So we're trying to be pretty careful to penetrate areas that we think have a high probability of payoff.
49:41Hughes is betting the future on consolidation in Arizona.
49:48Last month, the company announced it would move 2,000 engineering jobs from Los Angeles to Tucson.
49:55After 40 years in Arizona, Hughes Aircraft reincorporated itself as a brand new company.
50:02Under recent amendments to the tax incentives bill, Hughes could pay no corporate tax for up to 10 years.
50:10By then, will Hughes be Arizona's strength or its weakness?
50:15You can't be reliant on one large company coming in and supplying all the work for everybody.
50:22Well, look what we've done with the military.
50:24I mean, we have become a nation that is reliant on military spending, military production in order to create jobs and to maintain jobs.
50:34So what we've done nationally, we were doing here locally.
50:37The sad truth is that so far, conversion is no solution for unemployment in the defense industry.
50:50The entire U.S. global positioning industry employs only 3,000 people.
50:55Hughes has 500 technicians and engineers working on the electric car.
51:00H.E. microwave foresees peak employment of 200.
51:10Without changes in the way the Pentagon and its contractors do business, it's unlikely that defense conversion can generate new jobs for the 2 million defense workers who will become unemployed by the year 2000.
51:21For 50 years, we've been spending 5% or more of GNP for military equipment and per people and procurement and stuff like that.
51:34Well, that's two generations.
51:37Whole communities have grown up with this.
51:40And if the government then says, okay, this particular party is over, we don't need this anymore, that's fine.
51:47But I think it's unconscionable to just say, well, we've changed our mind, goodbye.
51:55And, you know, it's sort of like strip mining a whole generation.
52:04In the desert outside Tucson sit $13 billion worth of planes.
52:09They represent half the budget for conversion over the next four years.
52:16I don't pretend that this will be easy and all of it will take some time.
52:20But the choice we face is between bold action...
52:23In California last month, unemployment neared 10%.
52:29That's that big black pit again.
52:33What is going to happen next, I don't know.
52:36I just...
52:37I'm not a person who normally expresses himself outwardly.
52:42I tend to keep it in.
52:45Yeah, I've felt a lot of anger and resentment, but I really don't know who to be angry at.
52:52You know, who's...
52:53Who do you blame for the fact that peace broke out?
52:57I know today that the world's finest makers of swords can and will be the world's finest makers of plowshares.
53:05And they will lead America into a new...
53:07Who's converting who?
53:10Is converting...
53:12Putting myself in the street with my kids?
53:15With no roof over the head?
53:18That's what conversion's done.
53:20That's what it's doing.
53:21Nobody's converted us to anything.
53:24Nobody's given us any opportunities to go anywhere else.
53:29To convert something, you have to have some place to put it.
53:33You can't convert coal into ashes without having a place to put the ashes.
53:40And that's what they're doing.
53:42They're taking the ashes and scattering them into the wind.
53:44Where are they going to land?
53:45We don't know where we're going to land.
53:46Nobody does.
53:47We're the ashes.
53:49We're the ashes.
53:50Mark Zahndi險
54:03We're what�니다.
54:04We're what animals have to live in the wilderness.
54:05And some of the dead birds never there really is.
54:08We're really morePeter out.
54:10Here's the only night that we've sang this kongling.
55:12And by the Corporation for Public Broadcasting.
55:16Frontline is produced for the Documentary Consortium by WGBH Boston, which is solely responsible for its content.
55:23For video cassette information about this program, please call this toll-free number, 1-800-328-PBS1.
55:37This is PBS.