Southland Economy Taking It on the Chin
The shutdown of the General Motors’ Van Nuys plant will result directly in the loss of 2,600 jobs, hurt thousands of suppliers and other businesses and deliver another blow to Southern California’s manufacturing sector.
“Those workers at GM--they were highly paid and got good benefits, and there aren’t going to be a lot of jobs for those people,” said Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County. “It’s going to send major ripples throughout that community” and Southern California as a whole.
“It’s going to be another little punch in the chops for L.A. County’s economy,” Kyser said, adding that he expects Los Angeles to lag in its recovery from the recession behind California, which is expected to turn around late this year.
Although GM’s layoffs will be sizable (including 900 already on furlough), they pale beside the estimated 25,000 jobs lost in Southern California’s aerospace industry in the past year, said David Hensley, director of the UCLA Business Forecasting Project. “It’s a piling-on effect, with no growth in manufacturing at all.”
The recession has slammed the durable-goods manufacturing sector in Los Angeles County, causing those jobs to drop to 504,900 in May from 551,300 a year earlier, Kyser said. For example, Lockheed last year announced plans to eliminate up to 4,500 local jobs by the mid-1990s, and Northrop said it would cut 3,000 jobs.
At the Mid San Fernando Valley Chamber of Commerce, where General Motors is a board member, Executive Vice President Albert A. Correia is still hoping the auto maker will change its mind and not close one of the Valley’s largest plants next year.
“It’s certainly going to be a rather large blow,” he said. “GM purchases millions and millions of dollars of supplies from local people, and people that they employ purchase goods and services. With secondary and tertiary impacts (on suppliers and other area businesses), it’s well over a $200-million impact.”
A 1986 study by the United Chambers of Commerce of the San Fernando Valley estimated that shuttering the Van Nuys plant then, when the factory employed more than 5,000 people with a payroll of nearly $160 million, would result in the indirect loss of nearly 35,000 non-manufacturing jobs and the closure of more than 500 retail establishments. About 180,400 residents would relocate, the study predicted.
Although a follow-up study was never done to account for dwindling employment at the plant, the effects will still be severe, said David Honda, president of the United Chambers, an organization made up of the Valley’s 24 chambers of commerce, representing about 10,000 small- and medium-size businesses.
“I know of some machine shops that have computer-operated lathes, and they’re looking for a new industry. It’s tough,” Honda said. “It will affect restaurants, stores. . . . The trickle-down effect will be tough for everyone.”
Business leaders interviewed Friday blamed high taxes and excessive regulation for the ongoing job drain, as companies leave the area for friendlier locales.
“We see this as just another example of a very serious problem affecting the Southland,” said Jim Gourley, chairman of the Valley Industry & Commerce Assn. and a division manager for Southern California Gas Co. “It’s not just some local Van Nuys thing.”
