Industrial Base Is Growing in O.C. : Manufacturing: Despite the loss of 45,000 jobs since 1989, more than 1,000 makers of goods have opened their doors in county since the recession hit in 1990.
The air in the neighborhood around Blue Gum Street and Miraloma Avenue is a fragrant stew. The tang of paints and resins blends with the odors of machine oil, rubber, plastic, fresh cut wood and hot metal to create a husky perfume that lets you know a large manufacturing complex is just around the corner.
It is a perfume that some have suggested is fast dissipating in Orange County--blown away by increasing urbanization, a fragile economy and restrictive regulation.
Aaron Bann would disagree.
His family’s manufacturing business has been a fixture in this freeway-close strip of Anaheim for 34 years, and if Bann has anything to say about it, All-Bann Enterprises will be going strong 34 years from now.
The company, which for years specialized solely in military goods, has also started producing exercise equipment.
Call it the poster child for new Southern California manufacturing.
While the aerospace, computer and defense contracting industries have been pared down in the past decade, the number of manufacturers actually has been growing as the survivors reinvent themselves.
Orange County, where 45,000 manufacturing jobs have disappeared since 1989, is a microcosm for what’s happening throughout the region.
Despite the job losses, more than 1,000 manufacturing businesses have opened their doors in the county since the recession hit in 1990.
The new companies are mostly small, often started by people who used to work for one of the defense giants. They typically look for a specialty niche to fill, often concentrating in the health-care, personal appearance and apparel industries. “Everyone has focused on the aerospace downsizing and is acting like all manufacturing is going to disappear,” says Jack Kyser, chief economist for the Los Angeles Economic Development Corp. “But there’s a hell of a lot of life left.”
Many manufacturers that once looked to other states for relief are staying, bolstered by a large, well-trained labor pool and a weak commercial real estate environment that has meant lower building rents and sale prices.
“We could have moved to Corona and spent a lot less money on our facility,” said James Nagel, president of JSN Companies, a plastics manufacturer that moved from one building in Irvine to larger leased quarters in the same city about 18 months ago. “But we didn’t want to get too far from our work force. They’re a big part of the reason we are successful, and a lot of them couldn’t have moved with us.”
Recruiting and training new workers would have set the company back far more than it would have saved with cheaper rent, he said.
But lifestyle was part of the draw too, said Sandra Nagel, the family-owned company’s vice president. “We work three shifts and we have people coming here late at night, so part of our decision had to do with safety. Irvine is a good, safe place for our people.”
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Despite the emergence of new manufacturers, Orange County’s employment numbers are still grim. Economists and other experts say more job losses will follow as the regional economy continues to struggle.
But most of the job losses are concentrated in areas affected by much greater forces than the general economic malaise.
Indeed, 80% of the jobs were cut from payrolls in just four of 20 employment categories, state Employment Development Department figures show.
Government spending cuts, which have punished the aerospace, electronics and defense industries for years now, helped account for about half the losses while nearly 10,000 jobs have been pared from computer makers’ payrolls because of the economic turmoil in that highly competitive industry.
“If you take out the manufacturers who are gone because of defense and government cuts, the picture in Orange County is a very different one,” says Harry Lambert, general partner of Costa Mesa venture capital firm Innocal.
“Venture financing conferences here are always packed, I see 600 people sitting in a ballroom, and many of them are entrepreneurs who want to start manufacturing something,” Lambert said. “We have an office on the East Coast, and people there have nowhere near the business sophistication and drive that we see here in Orange County. There’s a future for manufacturing here.”
The number of Orange County manufacturers has grown by about 20%, according to business directory publisher Contacts Influential--which lists 8,522 manufacturers in its most recent Orange County edition, published last year.
“The whole picture is changing as industry becomes primarily technology driven,” said economist Anil Puri, head of Cal State Fullerton’s economics department.
“Manufacturing these days requires fewer but more sophisticated machines and fewer but more sophisticated, educated personnel to run them,” he said. “That’s worldwide and has been going on for some time.”
Nearly a quarter of the county’s manufacturing businesses have fewer than five employees, said Eleanor Jordan, Orange County labor analyst for the state Employment Development Department.
Many are companies like MCM Motorcycles in Costa Mesa. The firm is set to begin producing a motorcycle for the off-road racing market, with plans to segue quickly into the street-legal market.
But while technically a manufacturer, MCM is really a marketing and assembly operation. Its “factory” is a network of several dozen specialty manufacturers scattered throughout Orange, Riverside and Los Angeles counties.
It is less expensive at this stage for MCM to contract with others to produce the framing, engine mounts, exhaust systems and other parts for its motorcycles than it would be to finance construction of an in-house manufacturing facility, co-owner Bill Kniegge said.
Another example is former aerospace engineer Benjamin Carrion, who is assembling a squad of subcontractors to build parts for an exercise machine he developed after being laid off by McDonnell Douglas in 1992.
“I’m a fitness bug and I started searching for work in that field, and I found that these fitness companies very much underpay their engineers,” compared to defense companies, he said.
“I think that’s why their equipment isn’t always that good. So I decided to use my background in aerospace precision engineering to come up with solutions that the industry has not yet come up with.”
He said he will use subcontractors for the first few years because the cost of starting a production factory is too high.
“A lot of precision machining companies with sophisticated machinery used in cutting-edge manufacturing are still located here,” Carrion said. “They are companies that used to serve the demanding aerospace industry, and now they are looking for other work to do.”
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They are companies like Superior Jig Inc., in Anaheim.
Superior makes specialized tools that help manufacturers assemble their products, part of an industry that has actually grown in recent years.
Owner John Morrissey said he has been busier in the past 12 months than at any time since the mid-1980s.
The economy has improved, he said, and many companies are reinventing themselves, converting from government to commercial work and ordering up tools to help them make the new products that will keep them going into the next century.
“We downsized three years ago, like a lot of people in this business, but now we’ve been able to hire back three of the six people we laid off, so we’re back up to 22 employees,” Morrissey said.
“We are seeing a tremendous difference in the kind of work we’re getting too,” he said. “Five years ago it was all aerospace and we got a lot of work because of past relationships. Now it’s much more competitive and our customer base changed.
“We’ve looked at stuff ranging from production jigs for a new bicycle to machined parts for satellites.”
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All-Bann too is looking at new products to help it move into the future as its traditional defense base continues shrinking.
The plant was started in 1961 by a welder and metal fabricator named Sid Bann. It operated as a job shop, making metal parts for other contractors who in turn were supplying defense industry behemoths like Rockwell International, Northrop Corp. and McDonnell Douglas Corp.
In 1967, the company stepped up a notch and negotiated directly with the Pentagon’s procurement office for a contract of its own and became a prime contractor. By the end of the 1980s, most of All-Bann’s revenue came from defense work and the company had grown to fill five buildings and employed about 230 people.
After years of steady government defense cuts, All-Bann is down to 120 workers now. While defense contracts still pay most of the bills, it has embarked on an expedition into the civilian world.
Aaron Bann, the third generation of his family to work for the company, went in three years ago to set up a marketing department to sell commercial clients on All-Bann’s expertise in high quality, low-cost metal fabrication.
The effort is proving successful: Alongside the stacks of drab green portable decontamination units that it makes for the Army is a smaller operation turning out shiny black back therapy and exercise machines that the marketing department sells to chiropractors and physical therapists throughout the land.
In another building, next to hefty trailers on which All-Bann assembles self-contained fuel stations and vehicle body repair shops that the military uses in the field, workers have started making rectangular, stackable, refillable 350-gallon stainless steel containers for businesses that are tired of fussing with the ubiquitous but awkward-to-store and easily damaged 55-gallon drum.
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The ability to jump between military equipment and civilian products exemplifies the flexibility that is a key to survival, says UCLA social geographer Allen J. Scott, author of several texts about industry and society.
In 1988, Scott called Orange County the prime example of an economic community in which industry would survive because of its ability to change.
“And I stand by those statements today,” said Scott, associate dean of the university’s new School of Public Policy and Social Research.
For awhile it looked iffy.
By 1992, the county was suffering with the rest of the region from a prolonged economic slump, the decimation of the defense and aerospace industries, major contraction within the computer industry and a government system that, manufacturers claimed, was inflexible and insensitive to the needs of industry.
All of it caused dozens of manufacturers to pack up and leave, and hundreds more to look into moving, said Newport Beach corporate relocation consultant Jim Renzas.
“But there are things here that just don’t exist in other parts of the country,” he said. “I give clients a checklist of 90 things they have to consider when they think about relocating, and after going through it, and realizing the huge costs involved, most companies decide to stay.”
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Bill Harris, president of Fireplace Manufacturers Inc. in Santa Ana, says he wouldn’t want to move for several reasons.
He’s close to his suppliers and his major customers, the labor pool for the high-turnover, entry level assembly and fabrication jobs his company provides is great, and he likes living in Orange County.
“I grew up here,” the Coto de Caza resident said. “Moving would be extremely difficult.”
It also would be costly. In February, the company shifted its offices and heavy production machinery from one side of a cavernous industrial building in Santa Ana to the other. The price tag, picked up by the landlord as an inducement for FMI to stay, was almost $500,000.
“It would cost $1 million to go to Tennessee,” Harris said. “And we don’t have that kind of money laying around.”
Still, FMI “seriously considered leaving the state,” Harris said. “The workers’ compensation insurance situation was bad and the [South Coast] Air Quality Management District was unmerciful. We once were fined $10 million for not reporting our paint use properly. Not for using the paint the wrong way, just for not filing the right paperwork.”
That was several years ago. Since then, Harris and other manufacturers report, state legislation has cleaned up a lot of the workers’ compensation mess--reducing premiums for employers and cutting down on the kinds of marginal claims that were inflating costs.
And the AQMD and other agencies have made major improvements in their relations with manufacturers.
In FMI’s case, the City of Santa Ana helped by referring Harris to Southern California Edison Co.--a utility with a big stake in making sure that manufacturers stay put and prosper.
Edison “worked with us to find alternate ways to paint so we wouldn’t have problems with air quality rules,” Harris said. The company now uses a dry powder coating technique that dramatically reduces fumes.
The savings FMI realized by staying in Orange County have enabled the company to step up production of several metal fireplace models, as well as its fireplace gas logs. The drive started about 18 months ago and since then Harris has hired 25 workers, swelling employment at the manufacturing plant to 220.
“Orange County has a big base of these companies, plastics manufacturers, aluminum foundries, mold makers, electronics assembly businesses, that can ebb and flow in an incredibly flexible way,” said UCLA’s Scott.
“There now is a lot of slack, but they are ready to quickly remobilize as the economy picks up--that’s their strength. And the economy is picking up.”
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Disappearing Jobs. . .
Defense budget cuts and ongoing cost-cutting efforts have trimmed tens of thousands of jobs from Orange County manufacturers’ payrolls in recent years. But the rate of decline has slowed and employment in a few industries has even grown recently. August job totals from 1989-’95. Figures in thousands.
Total jobs
1989: 249,600
1995: 205,600
Durable goods jobs
1989: 181,900
1995: 135,500
Non-durable goods jobs
1989: 67,700
1995: 70,100
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. . .But More Businesses
The number of manufacturing businesses in Orange County has grown even as the number of manufacturing jobs has shrunk. The changes, by industry, 1989-1994:
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Category 1989 1994 % Change Paper 64 153 139.06% Textile 38 78 105.26% Printing/Publishing 1,454 2,644 81.84% Metal fabrication 725 977 34.76% Apparel 252 308 22.22% Stone/glass 174 198 13.79% Electronics 638 724 13.48% Industrial machinery 1,493 1,545 3.48% Chemical 210 217 3.33% Rubber/leather 412 393 -4.61% Food 126 109 -13.49% Instruments 315 220 -30.16% Lumber/wood 327 217 -33.64% Transportation 480 219 -54.38% Total 7,031 8,522 21.2%
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Source: State Employment Development Dept. Researched by JOHN O’DELL / Los Angeles Times
