Other States Keep Luring Valley Employers : Employment: Since 1990, about 10,000 Valley jobs have been lost. Corporate recruiters cite lower costs and higher quality of life elsewhere.
Where have all the Valley jobs gone?
Utah. Nevada. Mexico. Idaho. Oklahoma. Kentucky.
They are some of the winners in the economic tug-of-war California has been losing, as companies in the San Fernando Valley and Ventura County have moved facilities out of state to manufacture more cost-efficiently, or have relocated altogether.
Since the mid-1990 employment peak, California on the whole has lost between 400,000 and 600,000 jobs, most of them in manufacturing, construction and retailing. With the decline of aerospace and General Motors shuttering its Van Nuys plant, more than 10,000 jobs have vanished from the San Fernando Valley alone over the past three years, according to the nonprofit Los Angeles County Economic Development Corp.
The outlook remains grim. The latest quarterly UCLA Business Forecast predicts that California’s worst recession since the 1930s will continue for at least 12 months. In the meantime, there will be even more layoffs.
Redken Laboratories, a beauty-products company, announced earlier this month that it would move 250 manufacturing jobs from Canoga Park to Florence, Ky. Redken was acquired in June by New York-based Cosmair Inc.
Another old name in beauty supplies, the Andrew Jergens Co., said it would close its Burbank factory next month and focus its spending on Jergens’ main plant in Cincinnati. The Burbank closing will affect 88 employees.
California’s troubles have been a boon to Idaho corporate recruiter Robert Potter, who has found it easy to lure companies away from California. Since 1987, he has persuaded 17 Southern California companies to relocate to northern Idaho’s Coeur d’Alene area--nearly half of the 37 employers he has reeled in from all over.
Potter’s smallest local catch was a Westlake Village embroidery company with three employees. His largest: Harpers Inc., a 550-employee office-furniture maker in Torrance, a unit of Jasper, Ind.-based Kimball International.
“The difference in quality of life is also a major plus for us,” Potter said. “A lot of California executives I talk to tell me, ‘I don’t want my wife to go to shopping centers alone at night anymore, I carry a gun in my car. I don’t want my kids to grow up there.’ ”
A former executive in AT&T;’s Los Angeles office, Potter kept his home in La Canada Flintridge when he retired and moved to Idaho in 1987. Since then, it has been a handy place to stay when he comes calling on Southern California employers as president of Jobs Plus, Coeur d’Alene’s nonprofit economic-development arm.
Potter looks for small- to medium-sized companies that operate in high-cost states such as California but aren’t location-dependent. Then he does a side-by-side comparison of what it would cost them to operate in the town of Coeur d’Alene (pop. 28,000).
Economists may never agree on how many lost California jobs can be blamed on an “anti-business” attitude versus the recession.
But executives who have taken at least part of their business elsewhere are clear on the issue. Many of them say they were fleeing high taxes, over-regulation and soaring workers’ compensation insurance rates.
Three years ago, Zero Corp. President Wilford (Woody) Godbold Jr., moved 400 Valley jobs to Utah.
Zero, which is still headquartered in Los Angeles, makes carrying cases ranging from executive attaches to aluminum suitcases used by photographers. Some of that manufacturing used to be done at plants in Burbank and Pacoima. But Godbold got so fed up with California’s “pathetic business climate,” in his words, that he took those operations to Salt Lake City.
Godbold complained about the Golden State’s woes to the national media so often that a Los Angeles Times editorial named him honorary “poster boy of the ‘I’m leaving California’ movement.”
“I got so damn mad when I thought the Legislature was going in the wrong direction,” Godbold said.
For Robert Dworman, chief executive and founder of Catalina Plastics & Coating in Calabasas, “Workmen’s comp was definitely a major issue” when he decided to move his manufacturing operations to Las Vegas two years ago. His old plants, in Sun Valley and Glendale, previously had about 105 employees.
Between 1987 and 1990, “our workmen’s comp expenses went from $40,000 a year to $350,000,” Dworman said. Why? “Too many people with the same doctor,” he replied, referring to apparently widespread claim abuses.
Dworman picked Nevada also because the state offered to reimburse him for some training expenses. In addition, the move “let us bring in some high-tech people from the East we couldn’t bring to California because of the high cost of housing.”
Ironically, Southland office and industrial space has become so cheap and plentiful that some companies that are thinking of leaving now might be better off staying. “With all those empty buildings, lease rates in Southern California are probably lower than anywhere else,” Potter said.
On the other hand, the influx of Californians is driving up the prices of most things in Coeur d’Alene. While housing is still cheaper there than in California, property taxes went up 20% last year.
For Bernie Gurnstein, who four years ago moved his Agoura Hills company to Hayden Lake, Ida., near Coeur d’Alene, “finding a better quality of life was our prime concern. We got fed up with the traffic, the smog and the crime.”
Gurnstein’s U.S. Products Inc., which makes portable cleaning equipment, had six employees in Agoura Hills. Now, it employs 24 in Hayden Lake and had revenues between $3 million and $4 million last year.
“It was an economic bonanza when we came up here,” Gurnstein said. “We’ve been able to do things we couldn’t do in California, like build our dream plant for probably half what the cost would have been in L.A.” Even the company’s product-liability insurance is cheaper in Idaho, “though logically it shouldn’t make any difference,” he added.
Superior Industries International, a Van Nuys-based maker of aluminum wheels for auto makers, including GM, Ford and Chrysler, is building a $30-million plant in Chihuahua, Mexico. Expected to employ 500 people and start shipping wheels in 1994, Superior’s 250,000-square-foot factory will be able to spin out 1 million units per year, about half the capacity of its Van Nuys plant.
Superior, a fiercely anti-union company, didn’t consider expanding the Van Nuys plant, spokesman Jeff Ornstein said, even after workers there ousted the United Auto Workers last year.
“Our reason for locating the plant in Mexico was to satisfy American car manufacturers (located) there,” said Ornstein. “This is business that could be obtained only by locating in Mexico,” close to the American-owned sites south of the border.
Martin Lichtman and his son thought long and hard before they decided to move their family-owned auto-accessories company, Covercraft Industries, from Northridge to Oklahoma. In fact, they toured nine other states.
After 30 years in the San Fernando Valley, they decided to move Covercraft to Paul’s Valley, Okla., a small town (pop. 6,500) 60 miles south of Oklahoma City, taking 300 jobs with them. Some of the other states they considered were Arkansas, Kentucky, Tennessee, Mississippi, Alabama and Missouri.
Why Oklahoma? It is “a state that is really proactive, trying to bring jobs,” said Lichtman. When Covercraft’s new plant had its grand opening a few weeks ago, he said, Oklahoma’s lieutenant governor, a state senator and a state supreme court justice attended.
Unlike California, Oklahoma gives companies an investment tax credit against state income taxes, which lowered the cost of Covercraft’s new equipment. The company will spend about half as much to provide health care for the same number of employees in Paul’s Valley as it did in Northridge. Its workers’ compensation insurance will cost 30% less than it did in California.
Lichtman himself will stay behind to manage Covercraft’s West Coast business, while his son Martin has moved to Norman, Okla., 45 minutes north of Paul’s Valley, to run the company.
Martin’s desire to bring his three young children up where there are better schools prompted the decision as much as anything else. In Norman, “there are 20 students to a class,” the elder Lichtman said. “How could he not like it?”
With all of California’s problems, Zero Corp.’s Godbold said, the state Legislature is finally taking action, and today he isn’t sure he’d relocate some of his company’s jobs out of state.
Indeed, Godbold, who came to California in 1956 at the age of 18, is a member of Gov. Pete Wilson’s Council on California Competitiveness. He cites California’s recent steps to reform the workers’ comp system, streamline the permit-application process and apply cost-benefit analysis to regulations as hopeful signs.
