TRW Deal Seen as a Job-Saving Model for State
Aggressive work by local officials and business leaders to keep TRW’s credit reporting division--and its 1,200 workers--in the city of Orange was hailed Wednesday as an example of what’s needed to keep California from losing more jobs.
On Tuesday, the company announced that it was dropping plans to move to Dallas, Cleveland or Denver in return for an unusual package of inducements--including rent subsidies--from the city and from TRW’s landlord, Tishman West Cos., at the huge business park The City.
“I think California communities need to be more proactive in keeping companies that are this important to the community,” said Orange Mayor Gene Beyer. “I think a lot of our reason for success is that we showed such intense interest.”
City officials declined Wednesday to provide specifics of the TRW package, but plans may involve the Orange Redevelopment Agency taking over TRW’s lease and then renting the office space back to TRW at a lower rate. Essentially, the city would become TRW’s new landlord.
The Redevelopment Agency will use its own money, said one source familiar with the negotiations, to assume TRW’s lease on 270,000 square feet at The City. The agency will then rent the space back to TRW at a reduced rate, resulting in savings to the company of $200,000 a year--a total of $2 million over the 10-year term of its newly negotiated $30-million lease.
Donald L. Mitchell, director of leasing for The City, would not verify that, but confirmed that such an arrangement is “one of the possibilities we have discussed.”
“The deal still has to be worked out,” he said, adding that details of the lease will not be disclosed for another few weeks. He called the pact “the first of its kind for both us and the city.”
“Basically, we’re in a partnership with the city of Orange,” he said. “This happened as a result of concerns that businesses are leaving California, which is a relatively new problem for the state to face. Now all of those states that lost businesses to California during our boom are marketing their massive chunks of real estate at lower rates.”
As part of the negotiations and agreement, Tishman announced on Tuesday that it has negotiated a new lease worth $30 million over 10 years for TRW, far less than it now charges for the 15 floors the company occupies in three buildings at The City.
TRW has 900 employees at its Information Services Division in Orange and Anaheim, and 400 at other subsidiaries in Orange. TRW General Manager D. Van Skilling said an Anaheim computer bank that employs about 100 people is not included in the agreement and might be moved.
A source aware of the negotiations between the city and TRW said that when the company complained about high housing costs for its workers--a common lament among local firms--the city played up its program to give low-interest loans to first-time home buyers. In addition, there reportedly was some discussion of a possible tax credit or other ways to assist employees with child care.
The information services unit said it could have saved $6 million by moving to Dallas, Cleveland or Denver. TRW reported a $231-million loss for 1991, mostly because it wrote off $250 million in the fourth quarter to cover the costs of restructuring its operations.
Skilling said the concessions from the city of Orange and Tishman would make up most of the $6-million potential savings from moving, with employee productivity covering the rest.
“I think it’s a real breakthrough in heading off the exodus of businesses from California. If a city of this size can retain a company of the size of TRW, then it’s an example to be taken very seriously,” said Orange Councilman William G. Steiner. “It’s a symbolic victory because there’s great pressure on businesses to leave California for economic reasons, but there’s great effort by governments to keep them here. We can create a positive business climate.”
But there were cautionary notes Wednesday as well.
City Planning Commission Chairman William Cathcart expressed concern that Orange was showing preference to a big-name company while dozens of small businesses are leaving the city. He said the Planning Commission was not consulted at all on the TRW deal.
“If the details show that we gave up the ship, then I need to reserve my complete agreement on the deal,” he said. “Orange is losing 40 businesses a month, that’s 400 or more a year. I’d like to know what the relationship is between how many of those TRW employees really live and work (in Orange) in comparison to the other 400 businesses who do work here but aren’t as visible as TRW.
“Right now I have trouble with giving (the city) a ‘Great job, guys’ until I know what the details are. If we’re going to be pro-business, we should be consistent. If business is what we want to promote, then all businesses should get the same breaks.”
The city’s action to keep TRW and its jobs in Orange may be the highest-profile recent effort to keep employers from departing, but it’s not the only one. Anaheim has made two similar pacts this year.
In January, Micro Technology Inc. received from Anaheim’s Redevelopment Agency financial backing valued at $250,000 toward the construction of a 130,000-square-foot plant. The company, which employs 300 in the manufacture and management of computer systems, had threatened to move to Nevada.
And last month BACE Plastics Group Inc. agreed to stay in Anaheim and move into a larger facility in return for property tax breaks of as much as $50,000 a year through the year 2003. The company, which employs 300 and makes various plastic products, had been fielding relocation offers from Temecula and cities in Arizona, Texas and Utah.
But not all the news has been good.
In March, Orange-based Vans Inc., a manufacturer of athletic shoes, decided to build a new manufacturing plant in Vista, a loss of 600 potential jobs in Orange County. Hughes Aircraft Co. decided to move an industrial products manufacturing plant from Rancho Santa Margarita to Carlsbad, a move which affected 475 workers and hurt Orange County’s overall economy at the benefit of San Diego County. And in the past two years, Hitachi and Emerson Electric also left Orange County for more affordable pastures, setting up plants in Mexico that were formerly based in Santa Ana.
“Cities today recognize the need to work with major employers to keep them in California,” said Richard Ortwein, president of the Southern California Division of Koll Co. The Newport Beach developer was among several landlords recently courting TRW, whose long-term lease with Tishman would have come up for renegotiation next year.
“I think you will find more cities throughout the county doing everything possible to keep Southern California attractive to employers,” he said.
Richard Sim, president of Irvine Co.’s Investment Properties Group, agreed. “This is the wave of the future,” he said. “We can’t look at this as a city-by-city issue. When a company is considering leaving a particular city, the danger is that it may leave the state altogether. I applaud the city of Orange for taking positive action to keep a company in California.”
The moves to keep TRW come in the wake of a report by a blue-ribbon panel known as the Council on California Competitiveness, headed by businessman and 1984 Olympics czar Peter V. Ueberroth, that lamented California’s loss of 340,000 jobs last year and recommended last month an overhaul of California government to attract and keep jobs.
Donna Tuttle, a commission member and president of Century-City based Korn Tuttle Capital Group, a consulting and investment firm, said TRW’s choice--after it won millions of dollars worth of help from the city and its landlord--was “terrific news.”
Tuttle said the 17-member, business-dominated council offered to include in its report recommendations on keeping TRW in Orange. But the company said “it was too late and they were going to leave.” She said that “it sounds like the city has gotten smart and said ‘We have to do something.’ ”
“This is the kind of stuff we’re going to need to do,” Tuttle said. Companies are “getting great incentive packages” from cities and states “that we’re going to have to compete against.”
The timing of the TRW decision was especially welcome, coming less than two weeks after the Los Angeles riots.
“I think we were concerned that the riots would further complicate our efforts to keep industry here,” said Lucien D. Truhill, president of the Orange County Chamber of Commerce. “Fortunately, with TRW we had time to respond and work together with the city and the landlord. I hope that becomes a blueprint for what we hope to do with other companies.”
Times staff writers Dean Takahashi and Kevin Johnson and correspondents Mary Helen Berg and Terry Spencer contributed to this report.
