Manufacturers’ List : California Glides Past N.Y. as Home to Multinationals

Reflecting major shifts in the world economy, California has pushed past New York to become the nation’s leading home to manufacturers with foreign operations, a new study has found.

California now serves as the base for 150 multinational manufacturers, many in high-tech fields and with strong links to the Far East, according to the report released Wednesday by the Conference Board, a business research organization.

New York, with 130 such publicly owned manufacturers, slid to second place, ahead of Illinois, Ohio and Massachusetts.

“New York lost a lot to takeovers by foreign companies, companies moving out of the state and mergers in some cases,” said James Greene, a trade specialist who helped prepare the report.

At the same time, he added, California remained fertile territory for lean, youthful firms that make computers, electronics and other products.

“California has been a place where this kind of company feels comfortable and is growing fast,” he said.

Major Distribution Point

There are well-known reasons for California’s emergence as a manufacturing center: its closeness to vibrant Asian economies, the availability both of unskilled and highly skilled labor, and an economic climate that seems to encourage entrepreneurs and new ventures.

“The major trade corridor right now is the Pacific Rim to the United States--and California is the major distribution point for that,” said Stephen Levy, an economist at the Center for the Continuing Study of the California Economy in Palo Alto.

What may be less widely known is how much some of these forces have begun to redistribute America’s industrial might.

As recently as 1987, for example, New York still held a firm lead in the number of multinational manufacturers, with 123 based there, compared to 108 in California, Greene said. Both states experienced gains in 1988, but New York’s totals were partly offset by mergers with firms from abroad, such as the recent agreement by Pechiney of France to buy Triangle Industries, a New York-based packaging concern.

In one ranking, however, the Empire State remains pre-eminent: It is still home to 44 manufacturing giants, those with annual sales of more than $1 billion and with such established names as Exxon, AT&T; and Eastman Kodak.

Giants Still Live in New York

California only had 22 such companies, including Chevron, Occidental Petroleum, Atlantic Richfield, Lockheed and Hewlett-Packard.

A glance at Fortune magazine’s listing of the largest industrial companies underscores New York’s continuing role as headquarters to the giants, with 68 New York firms in the Fortune 500, compared to 41 from California.

But if the mammoth firms tend to have New York addresses, the corporate cubs have an affinity for California, the new report suggests. California is home to 66 multinational enterprises with sales below $100 million, almost double New York’s total.

“That’s what made California so interesting,” Greene said. “They have a very high number of smaller companies that are in this game.”

And to some observers, this suggests that growing numbers of industrial behemoths will be California citizens as well: “Eventually, some of them will fail but others will become the bigger companies,” said Frederick Cannon, an economist with the Bank of America.

Already, California leads in national statistics on manufacturing employment, once dominated by the Northern and Northeastern powerhouses of New York, Detroit and other cities.

Los Angeles, with 910,200 manufacturing employees, led U.S. metropolitan areas in that category, according to the Commerce Department’s preliminary 1988 figures. In addition, San Jose was seventh, and Anaheim-Santa Ana (Orange County) was ninth. (New York placed fourth).

Axis of Tomorrow

Those interviewed cited a range of secondary factors that contributed to California’s manufacturing prowess. These included the fast-expanding population and high manufacturing productivity which is aided by newer facilities.

In addition, California’s manufacturing base is expected to increase in importance, as America’s competitiveness becomes increasingly linked to items at the upper end of technology. Many such goods include parts manufactured in such bustling Asian nations as Taiwan, Hong Kong, South Korea and Singapore.

“The old axis was New York to London. The axis of tomorrow is Los Angeles-Tokyo,” said Mansoor Zakaria, president of the MZ Group, a business information firm in San Francisco.

But Zakaria said that other forces also were propelling California forward as a manufacturing center, including the rich mix of skills among California’s work force and the widely shared feeling that it is a place where entrepreneurship will be rewarded.

“Can you remember the last Horatio Alger story you heard about New York?” he asked.

CALIFORNIA’S BIGGEST MULTINATIONALS Multinational manufacturing corporations with annual revenue of $1 billion or more

Worldwide Company Headquarters sales (billions)* Chevron San Francisco $28.106 Kaiser Aluminum & Chemical Oakland 22.215 Atlantic Richfield Los Angeles 17.608 Occidental Petroleum Los Angeles 17.096 Lockheed Calabasas 11.321 Unocal Los Angeles 9.393 Hewlett-Packard Palo Alto 8.379 Northrop Los Angeles 6.062 McKesson San Francisco 4.900 Litton Industries Beverly Hills 4.420 Wickes Los Angeles 3.477 MCA Universal City 2.590 Lear Siegler Santa Monica 2.500 Intel Santa Clara 1.907 Apple Computer Cupertino 1.902 National Semiconductor Santa Clara 1.868 Amdahl Sunnyvale 1.505 Avery International Pasadena 1.466 Mattel Hawthorne 1.308 Fleetwood Enterprises Riverside 1.259 Clorox Oakland 1.126 Tandem Computers Cupertino 1.035

* As of Dec. 31, 1987

Source: Conference Board