How has Space X shaken up the local aerospace business?

spacex6.jpgElon Musk's company is hiring lots of people (close to 2,000 workers at last check) and snapping up most all available property near the giant Hawthorne headquarters. It also leads the way in the privately funded space business, having made two successful trips to the International Space Station. Still, the company remains a work in progress - as does the refashioned space business. Establishment war horses like Boeing, Raytheon, and Northrop are trying to figure out how to co-exist with the upstart Space X, whose business model is radically different from the way aerospace has worked for decades. I write about the changes in the November issue of Los Angeles magazine:

Not only is this a different business philosophy compared with 20 or 30 years ago, but it has created a different culture. Boeing and Northrop have workforces whose average age is close to 50, a reflection of the stepped-up hiring that took place during the Reagan years. These people have never left, which is why the annual attrition rate is in the 1 percent to 2 percent range (companies generally want more turnover--about 5 percent). "They're in a sort of hunkering-down mode," says Jan Vogel, executive director of the South Bay Workforce Investment Board, a career placement service. As an example, Northrop was forced to switch to a larger venue for its annual banquet that recognizes workers who have been with the company at least 25 years. By contrast, the average SpaceX employee is in his (or her) midthirties, and some of the hires are right out of graduate school. At the Quiznos a few steps from the SpaceX facility, several employees told me about the fast pace, endless days, and requisite perks (Ping-Pong tables, free frozen desserts) that you'd find at a Bay Area start-up. "We've been drinking the Kool-Aid," says a 26-year-old engineer who has been at the company several months. "We're working much longer hours than the other plants, but the Space Station was a nice reminder of what we're planning to do."

Craig Cooning, vice president and general manager of Boeing's Space and Intelligence Systems Unit, scoffs at the claim of longer hours. "I get to work every day at 6:45," he says. Still, Cooning and his managers have had to adjust to a new way of doing business--specifically the emergence of nongovernment customers who are more demanding about prices and deadlines. In the old days "if you won a major government program, it was like hitting a home run," he says. "It would go on for a long period of time, and there were usually extensions, and it generated a lot of revenue. On the commercial side it's more like bunts and hits to first base. They're on a tight time line, and you're scrambling a lot faster." Contractors are faced with conflicting agendas: Commercial customers want to keep down costs, and government customers want to be in control. In just the past year Boeing picked up a $460 million NASA contract to develop engines and spacecraft and also received commercial orders for four telecommunications satellites that will be launched into orbit by SpaceX's 18-story Falcon 9 rockets.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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