Mixed Business Reaction to ‘Local Content’ Law : Regulation: Foreign firms don’t like it, many American owners don’t see a benefit, but trade groups are hopeful.

The locally based foreign business community is decrying the “buy California” charter amendment approved by Los Angeles voters Tuesday, calling it a protectionist measure that would severely limit the city’s purchasing options.

However, some state business leaders say the local economy could be bolstered if the Los Angeles City Council takes the cue from voters and finds an effective way of giving preference to products made in Los Angeles or other parts of the state when awarding city contracts.

Still, such an ordinance is not expected to create a windfall for California firms, and many firms--particularly parts suppliers--don’t expect to benefit.

Said Jeff Ornstein, vice president of finance at Superior Industries, a Van Nuys automobile wheels producer: “We sell to General Motors, and they sell to the city. The city’s not going to start buying directly from us.”

But such an ordinance can help buoy some local enterprises, said Lou Custrini, vice president of communications for the Los Angeles-based Merchants and Manufacturers Assn., a 4,500-member trade group.

“Anything that would enhance employment in California would certainly be in our favor,” Custrini said. “What we’re trying to do is promote business initiatives in the state of California, and we think something like this can do that.”

City Councilman Zev Yaroslavsky, sponsor of the “local content” proposal, Thursday said he would ask city departments to help develop a proposed ordinance for Council approval. At least 20 states and a growing number of cities have various local content provisions, a movement associated with the “buy American” campaign waged by some industries and unions.

The local-content concept gained support in the Southland amid controversy over the Los Angeles County Transportation Commission’s January decision to award a $128-million contract to Japanese-owned Sumitomo Corp. of America--a deal that was later canceled.

“The results are going to be good for the business community,” Yaroslavsky said during an interview. “Why should we spend money somewhere else when it could be spent here at home--when we could use it to fuel the economic engine here at home, which is sputtering a little bit?”

But leaders in Los Angeles’ international business community say the measure will hurt foreign firms and run counter to free-trade trends in other parts of the world.

“Japanese companies are not happy with the vote because such an ordinance would have a negative impact on our members,” said Masayuki Kohama, spokesman for the Japan Business Assn. of Southern California, a coalition of 700 firms with Southland operations. “This is regrettable because we have worked hard to develop a positive relationship with the city and people of Los Angeles.”

Representatives of the German American Chamber of Commerce, the Australian business community and the British American Chamber of Commerce echoed his sentiments.

“You shouldn’t be disadvantaged if your company operates outside the area and outside the state,” said Dennis Storer, executive director of the 537-member British American chamber.

Colin Hook, senior trade commissioner at the Los Angeles offices of the Australian Trade Commission, was also critical.

Said Hook: “How can Los Angeles prepare to adopt such a protectionist measure when the local economy relies so heavily on international trade?”

But one California-based business coalition, the 44,000-member state branch of the National Federation of Independent Business, is heartened by the prospect of a local content law. Said state NFIB chief Martyn Hopper: “Any time you give a break to small businesses in this country and particularly in California . . . you’re going to boost your local economy.”

The local content proposal has stirred debate among analysts of international trade policy. Among those favoring the concept is Richard Drobnick, director of the International Business Education and Research Program at USC.

“Local content provisions are a time-honored practice worldwide,” Drobnick said. “Depending on how the ordinance is actually implemented, it could help produce local jobs.”

But Drobnick said such an ordinance would bog down the bidding process and create a huge procurement bureaucracy if every contract was submitted to local content analysis. Such an ordinance would be most effective if applied only to contracts of larger value, he said.

The city will also have to determine how much local content a product must have to get preferential treatment, Drobnick said. And the city must develop guidelines for determining how much more it is willing to pay for a product with the most local content, he said.

Until an actual ordinance is adopted, many local firms will not know if they will benefit, said Bill Murray, vice president of MagneTek Inc., an electrical equipment manufacturer that employs about 500 in Los Angeles and Orange counties. Said Murray: “Our corporate office is in Los Angeles, but we have manufacturing plants all over the country. What will that mean?”