1994: Grumman's sale forces Island to reinvent itself

Long Island Business News, Jul 25, 2003 by Natalie Canavor

What's a region to do when its major industry and employer fade from the scene?

That was the question Long Island faced in 1994 when Grumman, the company that had served as the economy's bedrock, was sold to Northrop, a California firm, and radically downsized.

By the early 1990s, the Cold War was over, the USSR had collapsed and the American government was allocating a lot less money to defense.

Even before that, the aerospace industry had been eroding gradually. It had been decades since Grumman, builder of fighter planes and the lunar module, had employed 27,000 people.

That number was closer to 8,000 by the end of the 1980s. New layoffs announced before the Northrop merger would have brought the total to about 5,500, according to Dick Dunne, then Grumman's director of public affairs and now a consultant and lobbyist. After the buyout, about 2,000 people remained.

With so much writing on the wall, why were Long Islanders so shocked? "People thought Long Island Grumman would be here forever, and everything in the technology community was built around it and fed off what Grumman developed," says Peter Goldsmith, president of the LI Technology Network. "There were probably a lot of advance reports, but when Northrop came and let all those people go and put the buildings up for sale - no longer could Long Island close its eyes."

A highly paternalistic organization, Grumman had employed generations of families and supported a host of happily dependent businesses. "We had probably hundreds of supply chain companies that never had to sell their work," says Patricia Howley, president of the LI Forum for Technology. "They only had to supply the Grumman machine and could just hope it would continue to use their services."

But by 1994, it was clear that Long Island needed to reinvent itself.

Seeing an opportunity to take a leadership role, the Long Island Association organized a series of town meetings. "It was a time of deep insecurity, anxiety and uncertainty about the future of Long Island," says Matt Crosson, who had just joined the LIA as president. After the public meetings ended in September, the LIA assembled an economic summit. "Unless we took control and made something happen, we were in for a rude awakening," says Goldsmith, who organized that meeting.

A dozen committees focused on different parts of the economy ranging from agriculture to taxation and education. "We then dragged out all the studies that had previously been done, recompiled their recommendations and told the relevant committees to come up with an action plan in each area," Crosson recalls. That one-day meeting produced the Long Island Action Plan with 250 action items.

Five years later, he says, 82 percent of them were "wholly or substantially accomplished."

Then in 1995, LIA's Project Long Island program was created to analyze the region's tech sector, identify which industries were promising and help them grow faster. The industries targeted were biotechnology/bioengineering, emerging electronics, graphic communications, medical imaging and health information systems and computer software.

About 30 initiatives materialized, says Crosson, including LISTnet and GraphConnect, which fosters collaboration in the printing and communication sectors. "The initiatives were catalysts both psychologically and economically, causing people to realize that Long Island did have a future," Crosson says.

Similarly, bad economic times gave the local universities both the opportunity and stimulus to work more closely with the business community. Yacov Shamash, dean of SUNY Stony Brook's College of Engineering and now the university's vice president for economic development as well, had recently arrived. He noted the Grumman sale helped people to see the need for more interaction between academia and the business world.

In 1994 Shamash's department created the SPIR program (Strategic Partnership for Industrial Resurgence), which helps business with technical issues in product development, R&D, improving manufacturing processes and testing. SPIR also facilitates joint proposals for federal funding. In the mid-1990s, Stony Brook's LI High Technology Incubator was also expanded.

Only three or four years after the Grumman sale, Long Island had indeed transformed itself into a diverse, more resilient tech-based economy of small- to medium-size companies. But the "how" has yet to be fully analyzed.

LIA economist Pearl Kamer points out that Long Island was buffered during the transition by factors such as the growth of the universities, the hospital and health care sectors, the tourist industry and foreign exports. Howley noted the role of the small business development centers, universities, tech organizations and government, but also credited "the New York entrepreneurial spirit, just brassy enough to make it happen."

Lee Koppelman, executive director of the Long Island Regional Planning Board, agrees that entrepreneurial factors contributed to economic diversification and to the growth of companies like Computer Associates and Symbol Technologies. But he noted that the area already had significant public sector jobs. Also, service sector jobs were booming and New York City firms were establishing back office operations on the Island.