Northrop Grumman: a stealth path to growth
By Helen Kaiao Chang
Wednesday, May 27, 2009
Northrop Grumman, one of the largest defense companies in San Diego, has a problem many companies would envy in this market: revenue growth.
Yes, the company is expanding. By the end of this year, the company aims to hire 500 more employees in San Diego, in addition to the 4,345 already working in its regional facilities.
Despite defense industry budget cuts, a worker shortage and a lawsuit settlement, this company is growing in San Diego. The eighth-largest private employer in San Diego, the company is an anchor in the regional economy.
The reasons for Northrop Grumman’s success are as much about the company as about San Diego’s economic strength. It shows how focused management, advanced technology and service contracts create a formula for business success in San Diego.
Even their challenges — or their response to challenges — bear lessons for other San Diego companies who want to take advantage of a global market in a shrinking economy.
Since establishing operations in San Diego with its acquisition of Ryan Aeronautical in 1999, Northrop Grumman has become a key player in the regional market.
“We are a heritage company,” said John Pettit, the company’s corporate lead executive for San Diego.
San Diego’s defense industry
San Diego is still a military town. While the county enjoys a diversified economy, the defense industry contributed a healthy $24.6 billion to the $163.2 billion of the region’s total economic activity in 2007, according to statistics provided by the San Diego Regional Economic Development Corporation. That’s 15 percent of the region’s economy.
In the current economy, the defense sector is strongest and “will lead the area out of recession ,” said Marney Cox, chief economist at the San Diego Association of Regional Governments. Some 48,000 new jobs are expected in the defense sector alone this year, Cox said.
Among defense companies in San Diego, Northrop Grumman is the second-largest in revenue, after the homegrown Science Applications International Corporation. It is the third-largest in employee size, after SAIC and General Dynamics Nassco.
Business overview
Headquartered in Los Angeles, Northrop Grumman has five core business sectors: aerospace, electronics, information systems, shipbuilding and technical services. In San Diego, the company’s leading division is aerospace, which creates unmanned stealth planes.
This division is based in Rancho Bernardo, with elegant but unobtrusive offices, consistent with the stealth vehicles it designs. San Diego’s engineers and technicians primarily design and test the unmanned vehicles; manufacturing is done in Palmdale, Calif.
Northrop Grumman has several more facilities located in various locations, including Clairemont Mesa, Rancho Carmel, Mission Valley, North Island and Coronado. These facilities house its information systems, shipbuilding and technical service operations.
Total revenue for the parent company was nearly $34 billion in 2008, with $1.5 billion generated from San Diego. In terms of the local economy, this resulted in $350 million in salaries and $500 million in subcontractor business.
“Our portfolio covers battle space — from air to sea to land to undersea,” said Pettitt. “That’s where we put our focus. ”
Future
Looking ahead, the company is exploring products in the clean tech and cyber security industries in the next five years, said Pettitt. But most of the work would be done outside San Diego.
Within the region, Northrop Grumman’s growth area will continue to be unmanned vehicles and information systems. “Here in San Diego, we forecast stability at a minimum, and growth for the future,” said Pettitt.
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NG’s San Diego point man
John Pettitt is Northrop Grumman’s head man in San Diego.
He spent 26 years in the U.S. Navy, before moving into the private sector. He has been with Northrop Grumman for 15 years.
A graduate of the Aviation Officer Candidate School, “he flew single-seat light attack and strike fighter aircraft, accruing over 5,500 flight hours and 675 carrier landings,” according to the company.
He also attended the Naval War College, and retired as a U.S. Navy captain in 1994. Pettitt joined Northrop Grumman in 1994, starting as a naval field marketing rep for the West Coast.
Today, Pettitt overseas the company’s entire operations in San Diego, which has more than 4,000 employees, 100 suppliers and $1.5 billion in annual sales.
More stories in this series about Northrop Grumman:
Northrop Grumman’s Success Formula
Northrop Grumman’s Business Challenges
Northrop Grumman’s economic impact in San Diego
Follow Helen on Twitter @HelenChang.
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