The Multinational Monitor


N E W S   M O N I T O R

Ford's New Idea: Space

by Lennie Siegel

When the President of Ford Motor Company visited a Ford assembly plant in Palo Alto, California recently, a local manager described their new product: vehicles which can travel 350 million miles at 5,800 miles per hour on one tank of gas.

No, Ford has not built a new supercar to rival the Japanese. The Palo Alto plant is the site of the Western Development Laboratories of Ford Aerospace and Communications, the high-technology subsidiary of Ford Motor Company. The vehicles described by the manager are communications satellites, designed to orbit the earth at an altitude of 22,000 miles.

In the last few years, Ford has dramatically increased its investments in aerospace while closing a number of domestic automobile plants. The company's ventures into the aerospace field indicate a careful analysis of economic and political trends - and reflects a general tendency in the economy towards defense and computer-based industries.

While Ford's consolidated worldwide sales fell from $43.5 billion in 1979 to $38.2 billion in 1981, Ford Aerospace's defense and space contracts rose from $558 million to more than $1 billion. Ford Aerospace now employs close to 13,000 of Ford Motor Company's worldwide payroll of 400,000.

Ford Aerospace has built 42 satellites and more than 100 ground terminals, for systems such as the international civilian communications system, INTELSAT V, India's INSAT-1, and the U.S. military's Defense Satellite Communications System. In late 1982 the division won a contract to build the equipment for the 22-nation ARABSAT consortium.

Ford Aerospace is the corporate descendant of Philco, acquired by Ford in 1961. In 1966 Fortune Magazine reported that Ford purchased Philco because the company wanted to "get a mote significant share of the U.S. defense and space business." Ford executives saw Philco "as a hedge against the possible restriction of automobile production during a national emergency. "

Initially, Philco-Ford had its own financial problems. But in the early 1970s, Philip Caldwell (now Ford's Board Chairperson) turned the company around. Philco shed its consumer electronics, semiconductor and computer operations, and focused almost exclusively on space and defense.

Today Ford Aerospace has major facilities in Palo Alto, Newport Beach, California, Houston, Texas, and Willow Grove, Pennsylvania. Roughly half of its business - $538 million in fiscal year 1981 - comes from the Pentagon. NASA supplies a substantial chunk of business as well. Each division specializes in the production of parts for missiles, satellites and weapons.

The Palo Alto-based Western Development Laboratories helps operate the Air Force's Satellite Control Facility, with a master station in Sunnyvale and remote stations around the world. The labs also provided the hardware, software and display systems for the North American Air Defense Command's (NORAD) underground bunker at Cheyenne Mountain, Wyoming. The system allows the Air Force to track thousands of orbiting objects; NORAD sounded the alarm this January over the impending fall of a nuclear-powered Soviet Cosmos satellite.

The Aeronutronic Division, organized by Ford at Newport Beach, south of Los Angeles, in 1956, was combined with Philco in 1963. Aeronutronic specializes in guidance systems for precision-guided munitions - "smart bombs" and tactical missiles. Current projects include the DIVAD air defense gun system, the Pave Tack target designator, and the Shillelagh anti-tank missile. Ford is also a major contractor on the Sidewinder air-to-air missile, which was used extensively in Israel's air victory against Syria during the 1982 Lebanon war.

In Houston, Ford Aerospace employs more than 1,100 people. While the Houston operation includes the custom manufacturing of electronic components and systems, its major work is support for the U.S. space program.

Willow Grove, Pennsylvania is the headquarters for the Engineering Services Division, which has helped build telephone communications systems in Iran, Liberia, Greece, South Korea and Panama.

Ford's aerospace strategy may suit its stockholders, but its auto workers am being left behind. Last year Ford's Palo Alto facility hired more than 500 workers, bringing its payroll to 4,125; bat in November Ford announced the closing of an automobile assembly plant in Milpitas - just 12 miles away - laying off a total of 2,400. Employees laid off from this plant are not being rehired in Palo Alto. And wages for non-union production workers in the aerospace division are much lower than the UAW-level compensation in the auto industry.

In addition, the Aerospace subsidiary's growth is heavily dependent on contracts from the U.S: government. Not only would those contracts have to increase significantly to make a large dent in Ford's overall declining sales - SS billion over two years - but any cutback in the civilian or military space program would leave Ford Aerospace in orbit - along with its satellites.

Lennie Siegel is the director of Pacific Studies Center, Mountain View, California.

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