The move will cost at least 4,000 jobs in a state that has already suffered nearly 100,000 defence-related lay-offs in the past few years as a result of Pentagon cutbacks. But it is also being seen as significant because it offers explicit evidence that businesses are moving out of California, once a boom state, because it is cheaper to operate elsewhere.
There have long been warnings from industry lobby groups that a significant business flight was under way, although hard proof of this has been patchy. Hughes Aircraft said that it examined 50 different commercial factors before reaching its decision, and that Arizona was more attractive in almost every aspect, including housing, labour costs, utility rates, workers' compensation laws and business taxes.
Hughes, which produces radar-evading shipboard weapons and cruise missiles, including the Tomahawk and Stinger, is planning to move five programmes from southern California to a plant in Tucson, Arizona. Most of the jobs lost will be among workers from General Dynamics' missiles division, which Hughes acquired last month for dollars 450m ( pounds 230m). In July, the company announced a further 9,000 lay-offs, apart from the latest round of cuts.
Industry leaders in the Los Angeles basin have long complained about high operating costs and the maze of environmental rules introduced to reduce the region's smog. They are unlikely to take kindly to the fact that Hughes has received tax credits from Arizona in an effort to lure it eastward.Reuse content