Factory Flight : Manufacturing, Once State’s Economic Pulse, Is Fading Fast and Unlikely to Revive Soon
California’s manufacturing sector--once the metallic heartbeat of the state’s economy--has faded dramatically and is not likely to rebound strongly once the current economic downturn is over.
Some of the manufacturing job losses resulted from a cyclical downturn in such industries as chemicals, construction-related materials, commercial aircraft, plastics and metal products, economists say. But the majority of the losses have occurred in industries and companies undergoing fundamental changes or moving out of state. These are jobs not likely to come back.
“Employment in manufacturing, which has been shrinking by 4% annually, will show declines in four consecutive years by the end of 1993,” according to the UCLA Business Forecasting Project. The losses are expected to continue for several years to come.
Since 1990, California has lost more than 260,000 manufacturing jobs, nearly half of the 534,000 jobs it has lost altogether during the recession, according to the state Employment Development Department.
The vast majority of those jobs--242,200--were lost in the manufacture of durable goods--long-lasting products such as autos, industrial equipment and refrigerators.
The areas hit hardest: 79,200 jobs lost in transportation equipment (a broad category that includes defense); 48,900 in aircraft and parts (both commercial and military); 36,900 in electronics equipment (including computers), and 33,100 in instruments.
While the travails of the aerospace and defense industry have been well documented and publicized, job losses have bedeviled less prominent industries as well.
Clayton Industries, which makes industrial boilers and automobile emissions-testing equipment, has been in the Los Angeles area since 1930. Though the company employs 800, only 225 jobs remain in California; others are at plants in Mexico City and Tijuana.
“It is still extremely difficult to do business from a California base because of all the costs,” said President William Clayton Jr., who also heads the Merchants and Manufacturers Assn. in Los Angeles.
Still, he has no plans to move completely out of California, in part due to the state’s key position as an Asian trade center.
Moreover, “we’re somewhat mollified . . . by some of the recent changes in attitude coming out of Sacramento,” he said, referring to the flurry of business-friendly laws passed by the Legislature this session. “But we’re not sanguine about the long-range (prospects). . . . I just don’t know if California can come to grips with itself.”
For metropolitan Los Angeles, the dire state of manufacturing marks the end of the nearly 50-year postwar industrial boom.
After World War II, the state--and Southern California in particular--was a factory-driven powerhouse where defense workers and ex-GIs found high-paying jobs forging steel and assembling cars, airplanes and, later, spacecraft and missiles.
The jobs anchored minority communities and turned Southern California into a mecca for immigrants--foreign and domestic.
While California remains a leading industrial state today, much of the newest manufacturing is made up of meager-paying industries such as apparel, textiles, paper and food processing. Many other jobs have fled the state.
In the past 10 years, more than 1,250 companies have left California, roughly 60% of which were in such industries as computers, semiconductors, electronics, aerospace, aircraft and instruments, according to a survey done in June for the state’s electric and gas utilities. The exodus has cost the state between 176,000 and 237,000 jobs, the survey found.
Leisure Group moved a bullet-making plant and its 100 jobs out of Santa Fe Springs in 1990 to Sedalia, Mo., to take advantage of generous local incentives, low costs and an accommodating community.
Sedalia “is a small town, and they need the industry,” said company President Stephen F. Hinchliffe Jr. “We were a small fish in L.A., but we’re a big fish there . . . and there are hundreds of Sedalias in the country.”
Said Clayton: “General industry is moving out of California. The exception to that is the very high-tech industries and those industries where the proximity to the market is essential--for instance, if you’re making corrugated paper boxes . . . or food products that have to be canned and processed.”
Even in high tech, good financial performance may not mean new jobs.
“The industry is doing fairly well,” said Stephen Levy, senior economist and director of the Center for Continuing Study of the California Economy in Palo Alto. “But that does not translate into job growth, because the industry is very productive. That could be the wave of the future.”
Still, there are areas of hope.
With its infrastructure and skilled work force, California is well-positioned to lead the nascent multimedia and communications industry augured by the recently announced merger of Bell Atlantic Corp. and Tele-Communications Inc.
“That’s a job-growth industry overall, and California should attract a share of that, given some of the technical and manufacturing skills that are required,” said David Lewin, director of the UCLA Institute of Industrial Relations.
But it is the state’s commercial ties to Asia and Latin America that hold out the brightest hope for a revival of manufacturing once the international recession ends, economists say.
Demand is expected to grow in Mexico for capital and consumer products under the newly approved North American Free Trade Agreement, which goes into effect in January. California manufacturers also stand to benefit from any new free-trade agreements evolving from the Asia-Pacific Economic Cooperation forum, which just ended in Seattle.
It is the foreign connection that keeps the state’s sole remaining auto plant alive and thriving.
A 1984 joint venture between Japan’s Toyota and No. 1 U.S. auto maker General Motors Corp. succeeded in rescuing a doomed 30-year-old GM plant in Fremont, Calif.
The plant--called New United Motor Manufacturing Inc. and known by its initials, NUMMI--now makes Geo Prizms, Toyota Corollas and Toyota compact pickups. And, countering the general trend, the plant is adding employees.
With the addition of the new truck line in 1991, the plant expanded its work force by about 50% to 4,200--jobs that pay about $18 an hour with full benefits.
The plant’s location is part of its success, specifically its proximity to the Port of Oakland, which facilitates the delivery of parts from Japan. Other pluses are the Bay Area’s highly developed highway system and its skilled labor force.
Now there are plans for further expansion, including the construction of a $50-million plastics manufacturing facility that will employ a couple of hundred more people by early 1995.
“It’s expensive to do business in California,” NUMMI spokesman Michael Damer said, “but . . . there are benefits.”
Job Losses
Manufacturing employment in California has been dropping in recent years, with the biggest job losses in durable goods (items meant to last longer than three years).
Average annual employment (in thousands)
1993:*
Total manufacturing: 1,810
Durable goods: 1,115
Non-durable goods: 695
*6-month average
Source: Employment Development Department
