On the
first business day of 2010, Los Angeles received its strongest wake-up call yet
that its days as a center of the corporate universe may be coming to a close. That’s
when new CEO Wesley G. Bush announced that Northrop Grumman would move its headquarters
to the Washington, D.C., area to be closer to the Pentagon.
Northrop was
one of the few top companies still headquartered in the city of Los Angeles. In
1985, Los Angeles was the headquarters for 16 Fortune 1000 companies. Today,
just nine call Los Angeles home. The nagging question is why?
In many
ways, the move seems logical:
? Northrop competitors
Lockheed Martin and General Dynamics are already headquartered near the capital,
home to the defense industry’s biggest customers and the decision-makers who
award the contracts.
? With
the acquisition of Westinghouse Electronics in 1996 and shipbuilder Litton in
2001, Northrop was transformed from an L.A.-based aerospace company to a
national defense firm. In addition to aerospace engineers in Los Angeles, the
company employs electronics engineers in Maryland and shipbuilders in Maryland
and Virginia.
? With
Northrop’s research and manufacturing facilities scattered throughout the
country, it has no driving impetus to be in Los Angeles other than its storied
history in Southern California aerospace.
In fact,
it’s a wonder it took Northrop this long. When Boeing decided to move its
headquarters from the Seattle area to Chicago in 2000, it proved that a major
aerospace company could easily exist with its corporate headquarters far from its
historical center and its primary manufacturing and research facilities.
Once upon
a time, Boeing was one of the only major aerospace companies based outside of
California. When Jack Northrop left Douglas Aircraft to found his own company
in 1939, Southern California was coming into its own as a center of aircraft
research and manufacturing. San Diego was home to Consolidated Vultee (Convair)
and Ryan, and Los Angeles played host to Douglas, Lockheed, North American,
Hughes and others. But over the years, every firm on this list except Northrop
was acquired by a company outside the state. Though these companies’ aircraft
manufacturing and engineering operations stayed here, the corporate
headquarters moved away.
This
dearth of corporate headquarters has a profound effect despite the fact that
most account for a small number of jobs-about 300 in Northrop’s case. As the
city’s major corporations have relocated over the past 30 years – whether they
are retailers like Bullocks or Broadway, oil companies like ARCO or Unocal,
banks like Security Pacific or First Interstate, or even manufacturers like
Lockheed or Rockwell – they have taken their engagement in the city’s
commercial, cultural and educational communities with them. They head for the
exits, leaving fewer corporations to invest in Los Angelenos through, say, a
grant to a local anti-gang program, a donation to after-school art classes, or
a check to the local symphony.
They also
leave behind fewer corporations to protest the impact of regulations and taxes on
their businesses and employees – one of the primary drivers behind companies
leaving Los Angeles and the state. California is the
sixth-costliest place in the nation to do business, with both individual and
corporate tax burdens well above the national average. When combined with the
high price of real estate and electricity, the result is fewer and fewer
companies that can afford to do business here. Now is the time for leading local politicians and
bureaucratic leaders in Los Angeles to directly engage businesses like Northrop
and ask "What will it take for you to stay?" And even more importantly, ask, "What will it take for you
to actually add jobs here?"
Los
Angeles can replace Northrop’s 300 jobs, and even the next 300 jobs. But
replacing the impact on the community will be much harder.