Westinghouse Diversifies

January 18, 1991

Any misgivings about Westinghouse Corp.'s diversification moves were put to rest by Defense Secretary Dick Cheney's decision to ax the A-12, the Navy's medium-range carrier-based stealth bomber. Westinghouse, a major subcontractor on the $52 billion project, expects to idle as many as 1,200 Maryland workers once it gets final word from prime contractor General Dynamics. In the interim, the company is scrambling to reassign some of these workers to other jobs.

Disastrous as it was, the cancellation didn't catch the big contractor flat-footed. Since the mid-1980s, Westinghouse has laid the groundwork for a diversification strategy that not only mutes the pain of the A-12 termination but leaves the company well positioned in an era of shrinking defense budgets. In recent years, the company has built a strong customer base outside the Pentagon for its technical wizardry.

The radar and associated technologies it employs to detect enemy aircraft are also used to land commercial planes, intercept drug smugglers and even sort mail. It has embarked on some of these ventures on its own, others in strategic alliances with old rivals. Last year, 29 percent of Westinghouse's Electronic Systems Group's sales came from commercial projects, up from 16 percent in 1986. The company is shooting for a 50-50 split by the mid 1990s.

Certainly, losing the A-12 work is a blow to Westinghouse and its Maryland workers who could face unemployment. Still, the company's efforts to reduce its dependence on Pentagon work holds the promise of new jobs on non-defense projects. Moreover, Mr. Cheney made it clear that the Navy is still in the market for another generation of strike aircraft that will almost certainly use the same kind of radar and infrared gadgetry Westinghouse was supplying to the A-12.

All this bodes well for Westinghouse, and by association the Maryland defense economy in which it is a major player. There will be some short-term pain associated with the A-12 termination, but the big contractor's non-defense emphasis is good news for Maryland. Late last summer it became a partner and project manager in the proposed Worldbridge Centre, a $1 billion amusement park and trade center complex on 1,000 acres of vacant land in Middle River. Worldbridge is expected to attract 2.5 million visitors annually and about 4,200 jobs when completed.

Mr. Cheney's cancellation announcement sent an unmistakable message to the defense establishment, which is trying to grapple with the realities of tight budgets and improved relations with the Soviets. Fortunately, Westinghouse, an industry pioneer non-defense diversification, tuned in some time ago.

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