A Relocation That Wasn't:
Northrop Grumman's 400-Worker HQ Staying in Dallas
High-powered information technology has given corporations unprecedented flexibility in locating - and relocating -- their operations. Occasionally, though, a move that looks good in theory hits the wall at the bottom line.
That's the case for the announced relocation of the headquarters for Northrop Grumman's Integrated Systems and Aerostructures (ISA) sector. In early June, company officials announced that Northrop Grumman (www.northrop-grumman.com) would relocate the ISA unit HQ to Washington, D.C., from Dallas.
As it turns out, the 400 ISA HQ employees can start unpacking. The move is off. The reason: prohibitively high relocation costs of US$70 million, which worked out to 50 cents a share, according to company reports. So the ISA HQ is staying put in the Dallas metro.
Nonetheless, the unit is relocating. It has to. Its existing Dallas-area facility has been sold to buyout operation Carlyle Group, part of the decision by Los Angeles-based Northrop Grumman to unload its aerostructures business unit. To buy the Northrop Grumman unit, the Carlyle Group is forking over $843 million in cash and securities and assuming $400 million in unfunded employee health benefits. Some 4,100 Northrop Grumman employees will move over to the Carlyle Group payroll as part of the deal.
The ISA HQ is currently looking for other Dallas-metro space to occupy after its decision to nix the relocation.
Northrop Grumman officials say the decision to stay in the Texas metro will produce "significant savings." But the stay-put strategy's exact savings won't be divulged until later this summer, they say.
At the same time, another major deal in the Dallas area is following a more traditional expansion arc:
Alcatel (www.alcatel.com) recently announced that it will break ground in fourth-quarter 2000 for a new 100,000-sq.-ft. (9,000-sq.-m.) three-story office facility in Plano.
And that's only a small part of Alcatel's highly ambitious expansion designs in the area. The company has already announced plans for another 200,000-sq.-ft. (18,000-sq.-m.) six-story office building in Plano that Alcatel employees could move into as soon as early 2002, according to company officails.
The total cost of the two new buildings will exceed $52 million, not including land costs, and will add 1,200 offices on Alcatel's Plano campus, company officials say. When the two new buildings are completed, Alcatel's Plano campus will have more than 2 million sq. ft. (1,800 sq. m.) of space.
"These new facilities are intended to relieve space constraints and provide for future growth resulting from Alcatel's recognized leadership in supplying advanced telecommunication systems and services to its customers," said Krish Prabhu, Alcatel chief operating officer. Of Alcatel's 120,000 employees, 6,500 are currently in the Dallas metroplex. More Alcatel jobs in the Texas metro, though, are already on the drawing boards.
The two newly announced facilities are part of the company's long-term strategy to add up to 10 new buildings on property that Alcatel owns in Plano. The company anticipates adding those buildings at the rate of one per year, adjusting the schedule according to market demand.
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