O.C. Industry Has Its Work Cut Out : Jobs: Plant moves, closures and recession ravage manufacturing, with jobs gone for good. Companies retool or die.

She is only 42, but Andria Allen worries that she may already be an industrial dinosaur.

For 18 years, Allen has worked the assembly line at Beckman Instruments Inc. She began as a $2.65-an-hour assembler. Now she works on a computer, testing and aligning a sophisticated system used by research laboratories to dispense near-microscopic droplets into racks of test tubes, expects to earn $40,000 this year, and owns a home in Santa Margarita.

Amid the longest economic downturn since the Great Depression, she feels lucky to have a steady manufacturing job. “I feel a little guilty and a little grateful,” Allen said, then corrected herself. “ Real grateful.”

Although they still account for nearly 20% of the employment in Orange County, jobs like Allen’s are becoming as rare as fossil findings in suburban back yards.

Strained by high wages and high costs, reeling from military spending cutbacks, and buffeted by steep competition from out-of-state and overseas competitors, Orange County manufacturers have taken a pounding in this recession.

More than 200 manufacturing plants have shut down or packed up and left the county in the past two years. Manufacturing employment has plunged to 1981 levels, wiping out the gains of a decade of explosive growth.

Since the slump began in 1988, Orange County through July of this year had lost 13.3% of all goods-producing jobs--and economists say many of them will never come back.

In a disturbing development, manufacturing employment has continued to erode even after the putative end of the recession--a phenomenon not experienced during previous downturns.

Between 1981 and 1982, for example, Orange County lost nearly 10,000 manufacturing jobs, or 4% of the total. But during the recovery of 1983 to 1984, the county created 20,000 new manufacturing jobs in a single year.

This slump, however, is deeper and more tenacious. Manufacturing employment peaked at 258,900 jobs in 1988. As of July, it had dropped 13.3% to 224,400 jobs, California Employment Development Department statistics show. And although the Orange County recession ended during the fourth quarter of 1991, according to Chapman University economists, the manufacturing sector actually lost another 6,400 jobs, or 5%, during the first six months of 1992.

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More bad news came last Friday when Labor Department statistics showed that California’s unemployment rate in August jumped a full point to 9.8%. In that report, the state showed the biggest decline in the manufacturing sector, which lost 14,500 jobs.

Although the employment picture is dismal, there is no data to indicate whether manufacturing output is equally depressed. But there is a broad consensus that the manufacturing industry in Orange County--and across Southern California--has changed forever.

“I think we’re witnessing a permanent change in the makeup and composition of the manufacturing industry,” said Lawrence P. Ball, of the Merchants and Manufacturers Assn., a statewide group.

Companies that require inexpensive, unskilled labor to assemble technologically simple products will never again prosper in a county where high land and housing prices and costly regulations will keep wages and business costs high for the foreseeable future, Ball and others argue.

Furniture makers, for example, need space and cheap labor, and are finding it nearly impossible to paint and finish and still comply with ever-tightening air quality standards.

“We’ve been losing companies that use entry-level workers to companies that make high-ticket items and have to hire highly trained people to make their products--and they have to pay those people a lot so those people can afford to live in this county,” Ball said.

But the recession has also hobbled the aerospace and electronics firms that have traditionally offered such high-skill, high-wage jobs. Half of all Orange County’s lost manufacturing jobs are in industries the state classifies as “high-tech.”

The only manufacturers that have flourished during this recession are textile and apparel makers, which boosted their work force by 33% since 1988, and food processing firms, where employment has risen 17%. The market for food and clothing is relatively immune to recessions, which typically hurt makers of durable goods, meaning products built to last more than three years.

But the apparel and food processing industries account for only about one in 10 of the county’s manufacturing jobs--and they offer among the lowest wages.

The average Orange County manufacturing wage was $12.24 per hour as of June, up 6.4% since 1990, according to the EDD. But apparel workers earned an average $7.21 per hour, while food processing workers averaged $10.96.

Though Orange County has been better known for its beaches, subdivisions and malls than its industrial prowess, in 1987--the last year for which data is available--it had a nearly $15-billion manufacturing base, the third largest in California. That year the county’s gross domestic product was roughly $55 billion, according to Chapman economist Esmael Adibi. How well the economy can compensate for the erosion in manufacturing employment by creating other high-wage jobs remains open to debate. But economists agree that low-skilled workers--including those whose education ended with a high school degree--will find the Southern California job market ever more inhospitable.

And the North American Free Trade Agreement announced last month is likely to accelerate the trend, endangering unskilled jobs even as it opens vast new markets to Orange County firms that have the expertise to compete internationally, experts said.

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Two decades ago, nearly one out of every three Orange County workers was employed in manufacturing--and most of the manufacturing jobs paid a high school graduate enough to afford a home here. But, as elsewhere in America, the service sector has created new jobs much faster, and as of July, less than one in five workers toiled in manufacturing jobs.

Manufacturers who pay $12 an hour and up--plus medical and retirement benefits--find they have little employee turnover, said Eleanor Jordan, Orange County labor market analyst for the EDD.

“You’re not going to go out and find a job paying $13 an hour selling clothes--let alone giving you retirement, medical and dental coverage,” Jordan said. “And these are not union jobs.”

Nationally, service-sector jobs typically pay about 15% less than manufacturing work, according to Erica Goshen, an economist with the Federal Reserve Bank of Cleveland. In 1991, for example, the average manufacturing wage was $11.18 per hour, while the average service-sector job paid $10.24 per hour.

But that “service jobs” category embraces everything from corporate lawyers to computer engineering consultants, janitors and sales clerks. And wages in “producer services”--services that support other companies--tend to be much higher than wages in sectors that serve the consumer directly, Goshen said.

Just because manufacturing employs fewer people doesn’t necessarily mean it is endangered, argues Gordon Richards, economist for the National Assn. of Manufacturers in Washington. Through automation and efficiency gains, manufacturers have boosted productivity by an average of 3% annually during the 1980s, NAM says, while productivity growth in the U.S. economy as a whole was nearly zero.

“Manufacturing firms are just getting more productive and figuring out how to get things done with fewer and fewer workers,” said Edward Lawler, professor of management and organization at USC. All but the highest-skilled, most capital-intensive jobs are being automated or moved out of state, offshore or to Mexico, he said.

“What that says about Southern California--which is kind of scary--is what you’re left with is a service economy and a relatively highly paid professional group of knowledge workers,” Lawler said. “I think that’s going to . . . expand the separation between the rich and poor, or the educated and non-educated. . . .

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Three decades after an industrial crisis gutted the nation’s Rust Belt, however, manufacturers on Southern California’s Gold Coast are well aware that they must face down competitors in states and nations with lower wages, lower costs and less regulation--or go the way of the U.S. auto industry.

And, though the outlook for unemployment is unrelentingly bleak, there is evidence that a leaner, more efficient manufacturing sector has become a tougher global competitor.

California’s exports rose 9% in 1990 to $58.4 billion, according to NAM. Surprisingly, two-thirds of the products were computers, industrial machinery, electronics, transportation equipment and instruments.

But judging from two Orange County manufacturers who are weathering the recession relatively well, the survivors are by no means complacent.

Take Marty Breen, program manager for manufacturing at Fullerton-based Beckman. He watched his hometown of Lackawanna, N.Y., collapse along with Bethlehem Steel, and then worked as a materials manager for Ford Motor Co. at a time when the company switched to buying all of its steel from foreign suppliers. “Living out here has been a godsend,” Breen said. “You go back there today and it looks like Berlin after the Blitz.”

Beckman, the largest medical instrument maker in Orange County, has seen sales increase 42% since 1986--but it has boosted productivity by 65%, and reduced its manufacturing work force by 15% in the same period, according to Jim Quirk, vice president for corporate manufacturing.

Some of the gains are due to revolutions in technology and simpler designs that have slashed production time and costs, he said.

In the 1970s, the company had 20 people at work making pH meters that took eight hours each to assemble, Quirk said. Now, the company needs only three people because the product “takes about three minutes to assemble and maybe two minutes to package,” Quirk said. Meanwhile, the $500 average price tag for the pH meters has remained virtually unchanged for 20 years.

Though Beckman’s work force shrank from 7,287 in 1988 to 6,883 in 1991, those who kept their jobs, like Allen, are better trained than ever before. Rooms full of draftsman have been replaced by small pods of engineers who design by computer. And the fraction of employees with only a high school degree has shrunk. “You’re definitely seeing a shift to a higher skill level,” Quirk said.

Though the recession has flattened sales, which rose just 2% last quarter, profits rose 15%, making Beckman one of the few winners in a hard-pressed industry.

More difficult, perhaps, is the task faced by Odetics Inc., an aerospace and robotics firm that, like aerospace giants Hughes, Rockwell and Lockheed, is trying to remake itself for a post-Cold War economy.

Odetics drew the limelight in July when President Bush visited its Anaheim plant and praised its metamorphosis from 100% dependence on government contracts to a firm whose customer base is now 50% commercial. The company was formed in 1969 to make data recorders for the U.S. space program--but half of its sales are now to foreign satellite owners. Moreover, Odetics is holding its market share against Japanese competitors--including Panasonic, Sony and Fujitsu.

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Still, the recession has been tough on Odetics. Its sales fell from $72.4 million in fiscal 1991 to $70.3 million this year, it laid off about 25 of its 600 employees last October, and generated almost no profits at all in 1992.

Instead, the company has plowed its money into a brand-new business: It is setting up an assembly line in Orange County to mass manufacture a sophisticated automated data storage system for use with most large business computers.

The gizmo looks like a large telephone booth stuffed with racks of data cartridges. A robotic arm swoops down, finds the right cartridge by reading its bar code with a laser scanner, picks up the cartridge, carries it to a disk drive and reads a data file--all in about the time it takes a personal computer to retrieve a file from a floppy disk.

Odetics developed a giant version of the device, called the Automated Tape Library, with a $5-million research and development contract from a government agency. Odetics won’t say which agency, because the work is classified, but it will say that it built “the largest single data storage system in the world.”

The first of the scaled-down commercial units rolled out of the Odetics plant in March. At the moment, Odetics is producing one or two of the units, which can cost up to $150,000, each day. But with help from a Silicon Valley manufacturing consultant, the firm hopes soon to be churning out eight to 10 units a day--and even to add manufacturing workers.

The success of Odetics’ commercial manufacturing venture may prove a bellwether for other Southern California aerospace and defense contractors. And patriotism is clearly a factor in company managers’ determination to prove that they can think globally and manufacture locally.

“Odetics is bucking the trend in America in terms of taking on the challenge of manufacturing onshore, building high-quality products here without going overseas,” said Todd Kreter, director of operations for the automated tape line. “But I believe we have the talent. Our people are second to none.”

Recession a Blow to Manufacturing Workers

Workers losing manufacturing jobs may not find employment in other industries. Or, if they do find other jobs, they may be at lower salaries. Job losses may threaten Orange County’s status as a state manufacturing center.

Jobs Declining

Orange County manufacturers have been pummeled by the economic slump after 1988, driving down employment to near 1981 levels. Figures are for June of each year:

Manufacturing employment, in thousands : 1992: 226.1

Unemployment Rising

Other industries have not been able to make up for lost manufacturing jobs. Still, unemployment remains lower than during the last recession in the early 1980s. Figures are for June of each year: 1992: 6.7

What Orange County Workers Earn

Median hourly wages in 1990 for a worker with three years’ experience:

Carpenter, union $20.25 Plumber, union 20.00 Auto mechanic 18.25 Drafter 14.21 Bookkeeper 12.27 Computer operator, union 12.46 Dental assistant 12.00 Machine tool operator 12.73 Average manufacturing worker 11.50 Licensed vocational nurse 10.50 Shipping clerk 9.23 Bus driver 8.62 Restaurant cook 8.50 Hotel desk clerk 7.50 Cashier 7.00 Electronic assembler 7.00

Third in the State

As measured by the value of finished products, Orange County is the state’s third largest manufacturing center. Value added to raw and semi-finished goods, in billions: Los Angeles County: $50.9 Santa Clara County: $20.8 Orange County: $14.8 Alameda County: $6.9 Other counties: $39.2 California Total: $132.6

SOURCE: California Employment Development Department; U.S. Department of Commerce, 1987 Census of Manufacturing

A Declining Manufacturing Base

The percentage of those working in Orange County manufacturing jobs has been dropping steadily through boom and bust periods.

Less a Job Source. . .

The percentage of county workers employed in manufacturing has shrunk about one-third since 1972: 1992: 19.9*

* 1992 figure is as of July 31. . . . But Still a Big Role

Despite manufacturing’s decline, it is the second largest industry segment in Orange County: In millions of jobs: Services: 3.19

Manufacturing: 2.24

Retail trade: 1.93

Government: 1.31

Recession Losers

Traditional goods-producing industries are not the only ones hurt by the recession. Half of all the jobs lost since 1988 were considered high-tech:

Job losses Jobs as of since 1988 Manufacturing sector July, 1992 (%) Lumber, wood, furniture 8,900 -35.5% Instruments 34,000 -22.4% Metal 20,200 -20.2 Electronic equipment 32,200 -16.6 Stone, clay, glass 11,600 -13.2% Industrial machinery 29,600 -11.6% Transportation equipment 24,400 -11.6% Rubber, plastic, leather 15,500 -10.9%

Source: California Employment Development Department

A Declining Manufacturing Base: Less a Job Source. . . . But Still a Big Role, THOMAS PENIX / Los Angeles Times