Thursday, October 06, 2005

Coming to a town near you

A report in one of the local papers yesterday stated that an as-yet-unnamed auto manufacturer is searching for a home for it's newest manufacturing facility somewhere in California. I'm surprised on several different fronts.

From the report: An automobile manufacturer is hunting for a California location for an assembly plant that would employ some 1,400 people, and Santa Maria is on a tentative short list of cities that can meet the company's needs.

The Santa Maria Valley Chamber of Commerce's economic development committee has answered a preliminary request for information from California Business Investment Services about local interest in placing the assembly plant in the city, according to chamber officials.

"(CalBIS) identified some communities that might be interested and able to fill their needs," said Bob Hatch, the chamber's president and chief executive officer.

The details, including the name of the manufacturer, are confidential, according to Hatch and a CalBIS official.

"We answered the request for information," Hatch said. "It is a little bit premature. There's no way to know at this time (where the city stands). The next round will happen around Oct. 15."

CalBIS, a state agency, sent the request for information early in September and it was completed and returned before the late-September deadline, said John Everett, chairman of the chamber's board of directors.

"They need 150 acres of level terrain with rail access and interstate highway access," Everett said. "Area 9 (the recent Betteravia area annexation to the city) is perfect."

Two questions immediately come up: 1. SM's workforce is sophisticated enough to supply this company with workers skilled and knowledgeable enough for high-tech manufacturing? and 2. Anyone is looking to build manufacturing facilities in California?

On the first point, historically SM has been a small-town built around agriculture like many of it's neighbors in the region. My wife's extended family lived there for a time in the 60's and 70's; in their words: cow-town.

Perhaps things have changed. I do know that Lockheed-Martin operates at least one facility in the area and as new programs have been developed at nearby Vandenberg AFB, alot of new talent has moved into town.

In reviewing data from the 2000 census however, I don't get the impression that SM necessarily offers a high-tech workforce. Apparently though some people in better position to know than I do in fact believe so.

California has had a reputation as an unfriendly place to do business since the early 1990's. As I've watched the state government (primarily the legislature as it filled up with more and more anti-big-business types on the left) over the years, that reputation cemented in my mind. Is it still accurate?

This report dated 6/1/2003 says yes: One of the largest business sectors sapped by the sagging economy is manufacturing. According to the Employment Development Department's May report, California's manufacturing payrolls fell for the 27th time in 28 months, shedding another 5200 positions. Since January 2001, the state has lost 283,200 manufacturing jobs.

"A 16-percent loss in our industrial workforce over the last two years is unacceptable," states Jack Stewart, president of the California Manufacturing and Technology Association (CMTA). "We know what the problems are - high workers' compensation costs, high energy costs and an excessive tax burden."

Stewart's CMTA in this press release dated March 1st of this year makes an even stronger statement indicating the nature of the problem: California manufacturers could save up to one million jobs if both they and the state government take concerted action, according to a report released today by the Bay Area Economic Forum, a public-private partnership of business, government, university, labor and community leaders.

“One million jobs are up for grabs unless we act now,” said Sean Randolph, president and CEO of the Bay Area Economic Forum. “How California addresses the challenges to its manufacturing base is critical to the state’s economic future.”

So far, an estimated 200,000 manufacturing jobs have been lost in California due to economic conditions and improved productivity, while 90,000 have been lost due to falling exports and 20,000 due to jobs moving to other states. And California is at risk of losing many more as manufacturers seeking lower taxes, cheaper energy and less restrictive labor laws consider moving jobs overseas and to other states. But many companies tend to overrate the benefits of offshoring and would be much more likely to remain in California if regulatory burdens were reduced, according to the report, conducted by McKinsey & Company and co-sponsored by the California Manufacturers and Technology Association, Silicon Valley Manufacturing Group and Semiconductor Industry Association.

They go on to highlight specific actions for both the state and firms working in the state to address the issue. The full report is available here.

Despite my cynicism about Santa Maria's capabilities and California's baffling tendency to be difficult on business, I'm encouraged by this announcement. It appears, regardless of which city this project ends up in, that it will land here in California. That is good for the state. Locally, the area would benefit should it end up in SM.

This is an issue which the Governator campaigned on in 2003's recall election. Without more analysis of specifically how this project came about and more generally what is happening in Sacramento, it's hard to know with certainty if this represents a step in a new direction for the state and it's economic revitalization. I do hope that it is.

According to Everett, the assembly plant would employ 1,400 people, consist of 650,000 to 750,000 square feet of structure, and involve a capital investment of $75 million to $90 million.

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