Space Exploration Lifts Aerospace Parts Maker

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Keystone Engineering Co., a designer and maker of precision components for aerospace manufacturers, will be nearly doubling the size of its Long Beach facility. The expansion comes as a result of an uptick in business from private space exploration ventures that have offered a glimmer of hope to the region’s ailing industry.

Keystone, which also designs and makes lightweight propellants and pressure storage tanks to protect propellants from the extremes of space, has landed a contract from Sierra Nevada Corp. of Irvine, which has a contract with NASA to provide low Earth orbital transportation serving the International Space Station and other activities. Keystone is eyeing further expansion into commercial space exploration, where another major player is Hawthorne’s Space Exploration Technologies Corp., commonly known as SpaceX.

While private space exploration contracts have been a boon to Keystone, which employs 35 and has $15 million annual revenue, the region’s aerospace industry remains a shadow of the economic powerhouse it once was in Los Angeles. And the ability of private space exploration to revive that industry is, at best, a way off.

The massive exodus of aerospace companies in the past two decades has reduced aerospace manufacturing jobs in Los Angeles County to less than 20,000 last year, from around 130,000 in 1990, according to data from the Los Angeles Economic Development Corp.

The advent of SpaceX, the brainchild of billionaire Elon Musk, and others seeking to pick up where NASA is leaving off has only staunched the bleeding of aerospace jobs from the region.

“We are pretty much holding steady,” said Kimberly Ritter-Martinez, an LAEDC economist, “which is an improvement over the job losses we have seen earlier.”

Still, the prospect of an upswing was enough to attract an investment in Keystone last year from Beverly Hills private equity firm Cornerstone Capital Holdings, which helped the company’s management team buy the business from United Technologies Corp. Terms of the transaction were not disclosed, but it was financed in part by $4.5 million in mezzanine funding from Penn Mezzanine of Wayne, Pa.

“This had been sort of a noncore asset, not a company that gets a lot of attention from United Technologies,” said Andrew M. Bushell, a principal at Cornerstone. “We like the team and the opportunities in this segment of the space industry. We felt with some investment and attention, there is a lot of potential, given the team that is in place.”

Auto roots

Established in 1907, Keystone started as an automotive machine shop in downtown Los Angeles, expanding to make digging machines and construction equipment. It began manufacturing aircraft parts and became a military supplier during World War II. In the 1990s, it started making housings for satellites and rockets, now its primary market. United Technologies acquired Keystone in 1999 and moved it to Long Beach in 2003.

The upgraded capacity offered by the new facility will allow Keystone to chase more business in the commercial spacecraft industry.

Ian Ballinger, Keystone’s director of engineering and a part of the management group that bought the business from United Technologies, said while business with commercial spacecraft companies is not significant for the company now, it has huge long-term potential. He expects that as NASA hands over more functions to the private sector, competition will drive the cost of private space exploration down.

“There will be less (direct) NASA contracts,” he said. “But if costs go down, more things will open up.”

A recent partnership was with Sierra Nevada, the company making Dream Chaser, a relatively small replacement vehicle for the space shuttle intended to carry up to seven crew members and cargo to and from low Earth orbit.

“It has been a great partnership for us so far,” said Mark Sirangelo, corporate vice president at Sierra Nevada’s space systems division. “These guys put together a terrific proposal. They have done everything they said they are going to do.”

While the Dream Chaser remains in development, Keystone continues to chase business from its core aircraft and satellite clients.

It also remains a Defense Department contractor, with a long-term deal to service and refurbish components on the fleet of 90 AWACS aircraft.

Larry Isom, Keystone’s senior vice president and another member of the buyout team, said in spite of the activity around the commercialization of space exploration, the entire industry still relies heavily on government funding and he is cautious when looking at the growth potential of that market.

“Everybody is a little worried about the direction the government is going to go in terms of the funding for the spacecraft business,” he said. “It’s all funded in some way by government requirements.”

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