Poll: More Firms Consider Leaving Area
Spurred by concerns over soaring operating costs and restrictive environmental controls, 44% of manufacturing companies in Orange and Los Angeles counties are considering moving away, or at least opening any new facilities out of the area, according to a survey released Monday.
A year ago, that figure was only 36%.
While the year-to-year increase was sizable, it shouldn’t be surprising, said James H. Renzas, president of Location Management Services, the Irvine consulting firm that has conducted the survey of manufacturers in the two counties for the past two years.
Orange County has been losing traditional manufacturing companies for years now and the outflow has increased annually as many firms find it more profitable to move to areas with lower labor and real estate costs.
“The percentage is way up in part because this is an idea whose time is coming,” Renzas said. “But it is also in larger part because a lot of existing manufacturing firms are reaching capacity in California and picking other places, mostly in other states, for expansion. But they are not closing down their Southern California facilities.”
The net result, he said, “is that we are seeing a change in the mix of manufacturing jobs, especially in Orange County. They are moving away from the labor-intensive assembly work to more capital intensive research and development and prototype manufacturing. The firms that showed no interest in moving were largely electronics and computer firms.”
Renzas said that only about 25% of the survey respondents, which included manufacturers of consumer products, electronics and computer equipment, aerospace companies, metal and food processors and furniture makers, said they are considering moving entirely out of the area.
According to the survey, 72 of 161 firms responding said they were entertaining thoughts of relocation or expansion outside the area, but only 12--or 17% of those contemplating moves--said they would relocate corporate or regional headquarters.
Most are like Weiser Lock, a major employer in Huntington Beach that last year announced it would shut down its plant and lay off about 1,100 employees by the end of next year. Weiser said it planned to relocate to a smaller, automated facility it will build near Phoenix, principally because of cheaper labor there.
But the company recently announced it would keep its corporate headquarters and nearly 200 employees in Orange County, in new offices in Seal Beach.
And some of the proposed moves involve only a small part of existing facilities. Allergan Pharmaceuticals in Irvine, for instance, plans to expand its manufacturing capacity by building a new facility in Waco, Tex., where labor and land costs are lower. But only 220 of its 2,000 Orange County jobs will be transferred to the Waco plant, which ultimately will employ 320.
The Location Management study is based on responses by 60 manufacturing firms in Orange County and 101 firms in Los Angeles County. The responses, Renzas said, were about the same in each county.
Overall, the respondents rated the business climate in the two counties as 4.5 on a scale of 10--the same as last year.
But the current survey shows that manufacturers are less sanguine this year about several key elements: the cost of state and local taxes, especially unemployment and workers’ compensation taxes; the cost, efficiency and availability of waste disposal services; the quality and availability of labor; the crowded traffic system and climbing residential and business real estate costs, and their ability to recruit and keep key management and professional employees.
Each of those items scored lower this year than in last year’s survey, said Location Management’s president.
On the positive side, local manufacturers said they were sightly more optimistic on several fronts: their ability to compete with other areas of the country in pay and direct benefits to employees, the availability of state and local governments’ business incentive programs, and the public’s support of business expansion.
Still, none of the positive items was really all that positive. The improved attitudes about public support of business, for example, still scored only 5 on the scale of 1 to 10.
And while manufacturing executives said they were more optimistic than last year about their ability to live with the environmental controls being imposed in the South Coast Air Quality Management District, they rated such controls a 3 this year, up from 2 last year but still a failing mark on anybody’s grade curve.
“From the responses that were received,” Renzas said, “there is still a lot of concern about what the air quality rules are going to do to manufacturing businesses.”
Many firms, especially furniture manufacturers--which produce a lot of sawdust and use a lot of toxic plastics, paints and lacquers--cite environmental controls as the major reason they are considering moving.
Manufacturing employers, Renzas said, also are worried about employee absenteeism and declining productivity. They link both to the area’s transportation problems.
“Employees are late or absent because of traffic jams or because they just don’t feel like fighting the freeway on a given day,” Renzas said, “and (employers believe) they cut productivity because they are in a hurry to get out the door at quitting time to beat the traffic home.”
RATING SOUTHLAND BUSINESS CLIMATE
A survey of 161 Orange County and Los Angeles manufacturing firms found that 44 percent were considering expansion or relocation of facilities outside Southern California.
REASONS FOR CONSIDERING RELOCATION
Environmental regulations
High taxes
Growing real estate costs
High labor costs
Lack of financial incentives
High utility costs
REASONS FOR STAYING IN SOUTHLAND
Good climate
Energy availability
Easy access to markets
Good labor-management relations
Skilled workforce
Source: Location Management Services
