Jobs: Creating Them / Keeping Them : How to End Pentagon Dependency--and Thrive

Five years ago, Mike Gibson knew he had to change his company or see it die. For three decades, Kavlico Corp. had depended on military customers to buy its high-precision sensors and related system. But with defense spending winding down, the time had come for a dramatic change.

This meant a major shift of priorities, with sizable investments in new research and development to adapt the company’s aerospace-related product line to new fields, such as automotive products, automation and other industrial machinery. As a result, the Moorpark company’s reliance on the Pentagon fell dramatically, from roughly 66% of total sales to 20%.

More remarkably, Kavlico’s shift into commercial products has not brought with it any downsizing of its work force or reduction in sales. The company’s revenues have expanded rapidly since 1986, from $20 million annually to more than $60 million. Meantime, the number of employees has risen from 250 to more than 725.

Gibson believes his successful transition from defense contractor to producer of consumer goods shows how Southern California could benefit from the enormous residue of talent and technology developed here during the Cold War. The region’s complex of small, specialized firms and universities, he suggests, provides the base of a “self-generating” innovative economy that cannot be matched in states such as Utah or Alabama, which have vigorously sought to lure his firm and others from California.

“The aerospace military business has left us with a lot of extremely talented people--skilled technicians, scientists who shouldn’t just be thrown aside,” Gibson said. “The talents are there; we just need a course correction to move them from the military to more commercial technology. The networks are already here. We have the resources to meet any potential challenge.”

The benefits of encouraging firms like Gibson’s can be seen in his growing labor force. The majority of his production workers and nearly one-third of his technical people are from minorities. Most earn wages well above the average in Los Angeles industries, and far better than those in most service or low-tech manufacturing fields.

Yet despite all this, Gibson, like many entrepreneurs, thinks most governmental agencies view him and similar employers with suspicion, even hostility. He is especially upset with what he regards as local government’s desire to shackle industrial companies with layers of regulatory restrictions. He complains, for example, that it took nine months to receive permits for a new product-development laboratory at his plant, due largely to the proliferation of different environmental agencies.

“The first thing that has to happen is that the leadership of California realizes that business is their friend, not their enemy,” says Gibson. “If you educate kids and give them an opportunity to make a good living, you’ll save yourself most of the problems that could come down the road.”