Global Market Lures Businesses Into Offshore Manufacturing

For more than two years, Peruvian native Olinda Romani and her Los Angeles-born husband, Lance Reynolds, have been trying to grow their custom furniture business.

Setting up shop in a cavernous two-story building in Canoga Park, they’ve launched a Web site, attended trade shows and tried hard to figure out what’s the next big thing in armoires, dressers and chairs.

The real growth, they hope, will come through increased foreign trade. And they’re banking that a factory they own in Peru will help make the leap into foreign markets that much easier.

R Furniture is among the San Fernando Valley-based businesses hoping to use offshore plants to bolster their foreign trade goals.

For some, the lure is--and has been for decades--cheap labor.

Others say that as the Internet has opened up new markets abroad, they see cost savings from decreasing the distance between product and new customers. Still others say it’s simply easier to serve a foreign market from a foreign market.

Whatever the motivation, some experts say they see it as a trend among manufacturers large enough to bankroll foreign-based factories. If so, it puts a new twist on the old question of how best to tap into the vast potential of overseas sales. And it raises concerns among some about the stability of manufacturing jobs at home.

“The Internet has caused some acceleration of the movement of companies to other market areas,” said Bernie Weiss, statewide director of international trade development for a group that works with the state’s community colleges. “But the flip side of that is that, with that movement there will be much more business that can be done by U.S. firms. They have greater business opportunities to increase sales in markets that they otherwise would not have been able to tap.”

Helping local firms tap into foreign trade opportunities is the aim of a conference sponsored by the Economic Alliance of the San Fernando Valley, set Oct. 5 at the Hilton Universal City & Towers.

Sponsored by the Port of Los Angeles, Los Angeles World Airports and the Valley International Trade Assn., “Going Global III” will feature speakers detailing opportunities in trade and global e-commerce.

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Sessions will focus on obtaining financing and credit, doing business with China and Mexico, and using the Internet. In addition, Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., will present his international trade forecast for the Valley and Southern California.

Among those in attendance will be Reynolds, 38, who admits that he’s still learning about foreign trade and the furniture business.

Currently, the company, which specializes in hand-painted furniture, does nearly $500,000 in sales annually, according to Reynolds. But he sees bigger things ahead, if foreign sales take off.

“My next plan is to expand . . . internationally, to Germany,” said Reynolds, who handles the business end of the operation while his wife provides the talent.

“In Germany, there is a big demand for doing specialty pieces, especially among hotels,” he said. “These are the kinds of clients I’m trying to expose our products to.”

The growth potential?

“I could see us doubling in a year,” said Reynolds, who added that the family is expanding the factory in Lima, Peru, in anticipation of growth.

In one sense, the couple’s foreign operation predates the local business.

Romani, 37, a third-generation artisan, said she grew up wandering among the rows of carved woods and lacquered designs created at the Lima factory owned by her father, Antonio Romani. The plant once employed up to 200 workers, but closed when Romani was young.

Today, Romani, her family and her husband jointly own a new plant that employs up to 60 people, doing carpentry or painting designs created by Romani. Many of the workers are family members, including Romani’s parents.

Reynolds admits that having a plant in Peru helps in his global strategy because his labor costs are lower than they would be with a U.S.-based factory.

That’s an argument that has long galled organized labor, which fears the loss of U.S. jobs to foreign shores where labor laws and environmental requirements are not as stringent.

But some experts say that in the Internet age, manufacturers are under increased pricing pressures because buyers are no longer forced to shop locally.

“The buyer now is no longer trapped into a specific geographic area,” said Weiss. “So if you’re not competitive, someone’s going to come from across the globe and eat your lunch.”

Logistics concerns figured heavily into the decision of Van Nuys-based Superior Industries, which makes aluminum wheels and other auto components, to build a manufacturing plant in Hungary as part of a joint venture with Otto Fuchs MetallWerke, a German manufacturer. That facility opened in 1997.

“Our product is heavy and it’s expensive to ship,” said Dan Levine, Superior’s corporate secretary. “So it makes sense to have a plant where the product can be closer to the customer. That’s why we built the Hungary plant, to serve the European market.

“The most effective way to grow in Europe is to have a facility there.”

The company also is nearing completion of a $50-million plant in Chihuahua, Mexico, to join another plant already operating there.

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Levine said the company did not take any heat for creating jobs outside the region, noting that in addition to expanding elsewhere, the company embarked on a substantial upgrade of its Van Nuys plant, the oldest of its production facilities.

“We’re not a company that closed a facility here to open elsewhere,” Levine said. “If anything, we’ve done a large expansion here.”

But the fear of lost jobs locally remains a concern for some.

“We would rather help make [manufacturers] more efficient and effective here, so they don’t have to manufacture offshore,” said John Anderson, managing director of the Burbank office of the California Manufacturing Technology Center, a nonprofit organization that helps small and medium-sized manufacturers become more competitive.

Offshore production, Anderson said, “makes employment here more fragile. The first time there’s an economic downturn, [local] jobs are at risk.”

Brad Ward, president and chief executive officer of the Small Manufacturers Assn. of California, said he’s seeing more and more companies look at establishing a beachhead offshore or expanding existing foreign plants.

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He said that for higher-end products, where keen technical skills are required, most of the production will remain in the U.S. But he said at other companies, officials already are weighing the options.

“As the Internet is enabling customers to have more power, you’re going to see more and more of this movement to locate facilities closer to where the customer is,” he said.

“It’s a trend I think has just started, but it’s going to continue.”

Going Global III, a Southern California international trade conference, will be held Oct. 5 from 7:30 a.m. to 2:30 p.m. at the Hilton Universal City & Towers. For information or reservations, call (818) 782-7738.

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Valley@Work runs each Tuesday. Karen Robinson-Jacobs can be reached at Karen.Robinson@latimes.com.