Factories Fueled Growth of Valley By JASON SCHAFF Staff Reporter Manufacturing, especially in the post-World War II years, may have single-handedly fueled the rapid growth of the San Fernando Valley and its surrounding communities. The factories, both large and small that have dotted the Valley’s landscape over the years, have provided well-paying jobs that provided the main fuel for the strong economic engine that was created here in less than a century. Even though the Valley began mainly as an agricultural and ranching area, a variety of manufacturing industries began to spring up in the late 1880s before the “manufacturing” of films became the Valley’s first big manufacturing industry sector. The area’s first filmmakers came here soon after the turn of the 20th century drawn by its “western”-looking terrain and its sunny climate. Aerospace eventually became an even bigger industry than movies attracting thousands of workers to the Valley and truly establishing the area as a distinct section of the city of Los Angeles where people came to live and to work. As the importance of aerospace waned toward the end of the century, the Valley’s manufacturing economy became more of a mixture of several different types of industries actually making for a healthier industrial base as it did not rely on one single industry. Here is a timeline with some highlights of the Valley’s manufacturing history: 1882: The railroad stimulated the manufacturing industry in the Valley more than a century ago. The Andrew Jergens Co. sets up a soap factory located at Verdugo Avenue and the Southern Pacific Railroad tracks in Burbank. The hard water of the western states had created a demand for soaps and lotions. Jergens started its business with a single product, coconut oil soap. 1887: The Burbank Furniture Manufacturing Co. is established at the Verdugo railroad crossing. Burbank would later become the Valley’s manufacturing hub for several years. 1912: Universal, the first established studio in the Valley, opens on the Oak Crest Ranch near the Cahuenga Pass. 1915: The Valley, where only 3,000 residents live, is annexed to the city of Los Angeles. 1916: Adohr Farms dairy is established. A milk bottling facility is opened in Reseda. In the 1930s, child star Shirley Temple does a series of promotional photographs for the farm. 1920: Morgan Pipe Organ Factory is churning out musical instruments at Van Nuys Boulevard and Oxnard Street in Van Nuys. Meanwhile, over in Burbank, Moreland Motor Truck Co. is humming along. 1926: First National Studios, later to become Warner Bros., moves onto farmland in Burbank. 1928: Metropolitan Airport, later known as Van Nuys Airport, opens. That same year, Lockheed-Vega Aircraft opens a factory in Burbank. The company would later evolve into Lockheed Corp. 1930: United Airport opens in Burbank. It is taken over by Lockheed Aircraft in 1940 and renamed Lockheed Air Terminal. It is now Burbank-Glendale-Pasadena Airport. 1933: Lockheed introduces the Model 10 Electra. 1938: Lockheed receives its first defense order when the British place an order for $25 million worth of Hudson reconnaissance bombers. It was the largest military contract ever awarded at the time and seen as a pivotal point for growth of the Valley’s defense industry. 1942: The Lockheed and Vega plants employ more than 90,000 workers as World War II rages. 1940s: General Motors Chevrolet assembly plant opens in Van Nuys and the Joseph Schlitz Brewery opens in Panorama City. 1950s: Nine of the 10 biggest manufacturers in the Valley are defense contractors including Lockheed, Rocketdyne, Litton Systems, Ramo-Wooldridge, RCA, Marquardt and Radioplane. Lockheed’s Skunk Works plant in Burbank builds the U2 spy plane and other Cold War aircraft. 1958: Explorer I, America’s first orbiting satellite, is launched with an engine produced at Rocketdyne in Canoga Park. 1980s and 1990s: The technological hardware industry, which is still a major force in the Valley, begins to thrive. 1990s: General Motors plant closes and Lockheed ends a major presence in the Valley.

California May Lag Nation as It Maneuvers Into Recovery By SHELLY GARCIA Senior Reporter Signs that the economy is rebounding are increasingly appearing on the horizon, but California may lag behind the national recovery. That was the message delivered by Scott Anderson, senior economist at Wells Fargo Bank at the 20th Annual AeA Capital Sources Conference, held Oct. 15 at Skirball Cultural Center. Anderson told the audience that the high labor costs in California coupled with the impending changes in health care legislation could adversely affect job growth in the state. And the likely repeal of the vehicle registration tax could balloon the state’s budget deficit to $12 billion, further impeding chances for a recovery anytime soon. “The economic war is far from won in California,” Anderson said. On the national front, many signs point to a recovery underway with job growth resuming by the third or fourth quarter of next year. Consumers, many still flush with cash from cash-out refinancing, have largely held onto that money, and $1.7 trillion in tax cuts expected over the next 10 years will only add to those coffers, boosting spending power further. “We believe this war chest of money could come back into the economy,” Anderson said, noting that household liquidity is now at record levels. At the same time, manufacturers have seen inventory levels reduced by $238 billion since the first quarter of 2001, indicating that production should begin to rev up shortly. And dramatic increases in depreciation tax credits under President Bush’s tax cut plan, are expected to boost business investment by 10 percent over the coming year and a half. “This will definitely help boost investment this year and in 2004,” Anderson said. Anderson said the U.S. economy grew by 5.8 percent in the third quarter, gathering momentum that will almost certainly continue despite such issues as the slower pace of job growth nationwide. Other reports have echoed that projection. Production increase A Chapman University index of factory activity released in recent weeks, for instance, showed improvement across all industry sectors for the third quarter of 2003 and indicated that production and new orders are on the rise in California as well. Some of the improvements logged so far, particularly in manufacturing, can be attributed to such dynamics as lower interest rates rather than a real boost in revenues, Anderson said. Going forward, Anderson and others say that the weak U.S. dollar, making U.S. exports more attractive to foreign companies, is likely to carry the ball on improved revenues along with a bright outlook for consumers’ income growth and, as a result, spending power. Anderson said 90 percent of consumer spending depends on income growth, and the tax cuts now underway will increase consumers’ income growth by 2 percent this year. Interest rates, too, are expected to remain at current levels at least until the second quarter of 2004, and the fed rate could remain at current levels even longer. “The fed won’t think about raising interest rates until unemployment falls to 5.5 percent,” Anderson said. Job problem Indeed, job growth is the fly in the ointment. Nationally, 2.6 million jobs were lost since 2000, 1 million of those since the recession ended in 2002. “This recession has, by far, been the longest prolonged period for job losses,” Anderson said. The recent economic growth in the face of such workforce reductions is due to what Anderson said is a rate of productivity growth, 5.4 percent in 2002, that hasn’t been seen since the 1950’s. The thinking is that companies begin to add jobs when gross domestic product increases above 5 percent, but in California, job growth is likely to be slower. Average hourly wages in California topped out at $15.01, more than $3 higher than the national average, more than $12 higher than Mexico and a staggering $14.37 higher than the average wage in China – $0.64 per hour. “The California worker has to be 15 times more productive than the Chinese worker for a company to want to remain in California,” Anderson said. Add to that the rising costs of health care, workers’ compensation and other taxes that rank California fifth highest for costs of doing business, and the outlook for job growth continues to be dim. “The economy in California probably will continue to fester,” said Anderson. The conference, presented by the Woodland Hills office of the AeA, a national technology trade association, was geared to help companies that want to raise capital and enter new markets through acquisitions and other financial strategies.

WiFi Developer Gets $15 Million in Funding By SHELLY GARCIA Senior Reporter Strix Systems Inc. has raised $15 million in the company’s second major funding round. Strix, a Westlake Village-based designer and developer of wireless LAN networks, will be using the funding to ramp up its sales and marketing efforts in addition to continuing its R & D; efforts. The company has just hired a sales vice president, Steve Chappell, and it expects to boost its employee roster, currently at 45, to 70 by the first quarter of next year. Three-year-old Strix this summer launched its first product, Strix Systems Access/One Network, an entry into the burgeoning wireless networking category. So-called wireless networks allow computers to plug into a network using radio waves; hence no wires. But the radio signal in most systems must connect with an access point that is usually immobile. Strix marketing vice president Robert Jordan said that what distinguishes the company is that its systems allow users to move access points at will. The current funding round was led by Windward Ventures, with offices in San Diego and Thousand Oaks, and CMEA Ventures in San Francisco. Also participating were UV Partners in Salt Lake City and the Strix’s existing investors, Palomar Ventures in Santa Monica and El Dorado Ventures in Menlo Park. Strix so far has raised $34 million.

Santa Barbara-Based Bank to Purchase Pacific Crest By SHELLY GARCIA Senior Reporter Pacific Capital Bancorp Inc. has reached an agreement to buy Pacific Crest Capital Inc., one of only a handful of remaining independent banks in the San Fernando Valley, for $135.8 million or $26 per diluted share in an all-cash transaction. The deal is expected to close in the first quarter of 2004. “They are a pretty full-service bank,” said Gary Wehrle, president and CEO of Agoura Hills-based Pacific Crest Capital. “We’re very limited service, so basically we’ll be adding the types of things we do not now have.” Santa Barbara-based Pacific Capital, with $4.4 billion in assets, operates First National Bank of Central California, San Benito Bank, Santa Barbara Bank & Trust and South Valley National Bank. Its services include retail banking, commercial lending and wealth management services. Pacific Crest, with assets of $592 million, operates three branches in Encino, Beverly Hills and San Diego and specializes in SBA and smaller commercial real estate loans. With the merger, Pacific Crest will add many of the services Pacific Capital offers to its menu of products and extend its commercial lending reach throughout the 41-branch network that Pacific Capital operates. “Where we’ve been a highly specialized, narrowly focused business bank, we’ll have more of those consumer products,” said Wehrle, who becomes executive vice president and a member of the board of the merged bank when the deal is completed. Wealth management In particular, the officials note that Pacific Crest’s trading areas, in some of the wealthiest communities of Southern California, offer ideal demographics for Pacific Capital’s wealth management services. “We believe that our wealth management strategy can be particularly successful in those areas,” said Tom Thomas, president and CEO of Pacific Capital. At the same time, Pacific Crest has established itself as a preferred SBA lender in seven territories, including Arizona and Oregon as well as California, whereas Pacific Capital’s lending activities are limited to the Central California market. That gives Pacific Capital a larger footprint to expand its SBA lending reach. Although Pacific Crest will continue to specialize in small loans its typical transaction is under $3 million Pacific Capital’s larger balance sheet will provide the wherewithal to add loans of $5 million to $7 million in size. Like many of the independents that survived the banking industry’s merger mania over the past decade, Pacific Crest has remained an attractive takeover target, and Wehrle has fielded feelers from other banks for some time. The bank reported net income of $2.2 million or $0.42 per share in its most recent reporting period, compared to $0.33 per share last year and, perhaps more important, it boasts an exceptional lending record with no cumulative credit losses over the last five years and no defaults on its income property lending, some $750,000 to $1 billion in new loans, over the past 10 years. “When another bank is looking at acquiring somebody, that’s probably most important,” Wehrle said. “Otherwise you’re buying a pig in a poke. In the banking business you’ve got to wait 10 years to find out how it worked out.” The deal arose from a long time professional association between the two bank executives. “Having known Gary for some time, and knowing the quality of the company and their success in SBA and income producing property markets, we thought these products and business lines would nicely complement our activities,” said Thomas. The right price For his part, Wehrle said Pacific Crest decided to accept the offer because officials believed the cultures of the two institutions meshed well and, bottom line, the price was right. “I’ve known Tom for five years,” Wehrle said. “We have been on several California bankers committees together, and I have a very high regard for the culture they have. It was very unusual that a bank of that size would have a culture as similar to ours. Second, we thought the price was very fair for our shareholders.” Wehrle said large banks often do not place the same emphasis on employees and customer attention that Pacific Crest and Pacific Capital do. “Tom Thomas is very similar to me in the way he deals with employees,” Wehrle said. “In his company, he’s on a first-name basis. I’m on a first name basis. There might be 50 banks that all might say the words, it’s very unusual to have two that say the words and walk the talk.” The one thing the merger apparently will not offer is much in the way of cost savings. “They are a lean organization that has done an excellent job of controlling expenses,” Thomas said. “As such, we do not anticipate any near term cost savings.” Pacific Crest is expected to continue to operate autonomously through 2004, and the two companies will begin to integrate their operating systems in 2005, officials said. Eventually, Thomas said, he anticipates a 15 percent cost savings from the merger, but the greatest impact will come from revenue growth, he added. The transaction should add $0.10 per share to the bank’s coffers in 2004 and between $0.13 and $0.14 per share in 2005, officials said. Wehrle, who is 61, agreed to a three-year contract. “I’ll be 62 next year, so three years seemed about right,” he said. Pacific Crest’s share price jumped on the news to the $25 range from $23.60 on the day before the agreement was announced. Shares in Pacific Capital advanced to the $33 range, from $32.74 on the day before the transaction was announced.

Independent Grocery Stores in Overtime Mode During Strike By SHELLY GARCIA Senior Reporter Somi Rehil put in two 14-hour days over the last weekend. The owner of Saam’s A-1 Produce on Reseda Boulevard in Northridge usually works about 10 hours a day, but ever since the United Food and Commercial Workers union struck California’s major supermarket chains, it’s been hard to keep up with the increased business. Rehil, who has owned his store for about a year and a half, is an independent grocer with a very small staff and only he and his wife Veena to run the checkout counters. And as sales have increased by 20 to 25 percent, there is much to do from stocking the shelves to a stepped up ordering schedule required by the increased demand. For independents like Rehil, long in the shadow of the major supermarket chains, these are the salad days. Depending on their location, most independent markets are reporting sales increases from 20 percent to more than 50 percent since the strike began, as shoppers who do not want to cross picket lines seek alternatives. “We have many, many, many new customers that are coming here because of the strike,” said Pat McQuaid, who, with his brother, owns Jim’s Fallbrook Market in Woodland Hills. “We have many customers that have been here before, and are shopping more than they would before and then we have our old customers who are mumbling to themselves because there’s too many new people here.” Jim’s, located on Fallbrook Avenue just down the street from two supermarket chains, is getting good referral business from the strikers, who are handing out flyers with the store’s location to customers as they urge them to shop elsewhere. Other markets are simply attracting attention of local shoppers who never thought to visit the store before. “They used to drive by and they never came in,” said Rehil at A-1. “Now they come in and see the prices, and they know it’s 50 percent cheaper. Every day I have 10 to 15 customers telling me they made a mistake not to come in for so long.” Not all the independents are seeing such increases. Sam, the manager at Jr. Mustang Market on Sherman Way in Canoga Park, for instance, said much of the customer base is Latino, and Vallarta Supermarkets, which caters to Latinos and is not affected by the strike, is just across the street. But for others, the increase in business has been dramatic, so much so that some report shortages in deliveries. Many local independents are supplied by the same Los Angeles-based distributor, and the company, along with its suppliers up the chain, are not prepared to meet the large increase in demand. “A typical order comes in 25 percent short,” McQuaid said. As more shoppers discover these independents they are also learning that conventional wisdom doesn’t always apply. The chains have long touted the buying power conferred by their size, but for many items, especially produce, independents say they are competitive, if not considerably less expensive. “Ralphs is always more expensive,” said Abraham Nakoud, the owner of Harvest Market on Burbank Boulevard in Van Nuys, where bananas were selling four for $1.00 and a dozen eggs were going for 99 cents. “He puts more profit in his pocket. Everyone knows that.” At A-1, onions sell for 19 cents a pound. “Nobody has them for less than 33 cents a pound,” said Rehil. “The supermarkets may get aggressive on grocery items, but they can’t compete on produce.” The independent grocers may not be able to take advantage of volume discounts from suppliers but they all say they are able to sell at lower markups, either because their expenses are lower or simply because their business philosophy is markedly different. “I try to make a fair markup so I can stay in business,” said McQuaid, whose family has owned the store since 1951. “But a lot of my customers are neighbors, and I don’t feel like becoming a millionaire off them.” Most of the grocers say they don’t expect all their new customers to continue shopping at their stores once the strike ends, at least not for all items. While many of these independent stores have far more selection than many of their new customers expect to find, they can’t stock all the items a chain offers. “I’m manager, cashier and owner,” said Nakoud. “I don’t have the time to make what people ask for. People ask me for new stuff, and I ask my suppliers, but if they don’t have it, I don’t carry it.” But these grocers say they are hopeful that at least some of the new business they’ve picked up will continue. At M & M; Market on Moorpark Street in Studio City, owner Steve Shin said he feels badly for the chain stores because they’re losing money, but he’d like to see some of the business stay. “We’re trying to provide good service and good prices,” said Shin. “We smile and try to make them happy.” Now that shoppers have discovered these alternatives, at least some are likely to keep coming back, and for these smaller retailers, even a small bump can be meaningful. “If I pick up 15 percent new customers, that’s all fine and dandy,” said McQuaid.

Valley Briefs Qualstar to Miss Revenue Targets Qualstar Corp. revised its revenue guidance downward for its first fiscal quarter ended Sept. 30. The company said it expects to report net revenues of $5.9 million, compared with earlier projections of $7.6 million to $8.1 million for the period. In the comparable period a year ago, Qualstar reported revenues of $8.8 million. Simi Valley-based Qualstar said the revision was based on “continued softness in demand for our libraries with AIT (Advanced Intelligent Tape) technology.” Officials said increasing demand in some of its other product categories was not sufficient to compensate for the falloff in AIT sales. The company will report its first quarter results on Oct. 30. Pull’R Acquires Bucket Boss Pull’R Holdings LLC has acquired the Bucket Boss line of tool organization products from Fiskars Brands Inc. Terms of the deal were not disclosed. Bucket Boss products include Gatemouth tool bags, Bucket Stacker and Bucket Seat organizers as well as Bucket Caddy. Sun Valley-based Pull’R expects to expand distribution for the Bucket Boss line into its existing hardware chain and do-it-yourself channels. Ixia Performance Soars Ixia reported net earnings doubled for the company’s third quarter ended Sept 30 on a 28.3 percent increase in revenues. The Calabasas-based company earned $2.4 million or $0.04 per diluted share on revenues of $21.6 million. That compares with earnings of $1.2 million or $0.02 per diluted share on revenues of $16.9 million for the like period a year ago. Ixia said the quarter’s growth was driven by its 10 Gig product line and sales of ANVL and Chariot software. Ixia added 93 new customers during the quarter, largely as a result of the prior acquisition of the Chariot product line. The company also reported increases in sales in the Asia Pacific region. Ixia designs and develops testing equipment for the telecommunications industry. Gala for Heart The foundations for Providence Saint Joseph Medical Center in Burbank and Providence Holy Cross Medical Center in Mission Hills will hold a black-tie fundraiser on Nov. 22 at the Sheraton Unviersal Hotel. The third Annual Festival of Trees Black and White Ball will feature holiday-decorated trees and wreaths done up by some of Hollywood’s top designers, which will be auctioned off for charity to benefit cardiac centers at both hospitals. Sam Rubin KTLA entertainment editor will serve as master of ceremonies. For more information, call: (818) 847-4673. Mayor Appoints First Service Manager Mayor James Hahn has appointed the first of seven Neighborhood Service Area Managers. Steven McDonald, currently serving as chief of the Development Services Bureau for the Los Angeles Department of Building and Safety, will oversee the South Valley Neighborhood Service area. This is the first neighborhood service manager appointment made since Hahn established seven such service areas across the city, including one for the North Valley, as part of his Teamwork L.A. program, a multi-faceted plan for improving the quality of city services and bringing government closer to the community. McDonald was also the founder and director of the Los Angeles Business Team under former Mayor Richard Riordan.

Can Panorama Project Get Around Roadblocks? By JACQUELINE FOX Staff Reporter Take a spin north on Van Nuys Boulevard into the heart of Panorama City, squint and imagine a bustling, pedestrian-friendly shopping and retail nexus, with bubbling fountains, bright, colorful storefronts, affordable housing and a thriving cultural heartbeat strong enough to rival any Old Pasadena. This vision for Panorama City, an area now dominated by traffic, older mom and pop shops and plagued by urban blight and gang activity, is exactly what a team of volunteer architects, developers, historians, planners and Valley business leaders offered up Oct. 15 in a report called the “Panorama City Commercial Area Concept Plan.” Two years in the making, the plan was crafted by an Urban Design Assistance Team or UDAT, and sponsored by the San Fernando Valley Chapter of the American Institute of Architects (AIA) and the Economic Alliance of the San Fernando Valley. The concept plan calls for revitalizing roughly 280 acres stretching out from Panorama City’s core at Roscoe and Van Nuys boulevards. It includes gateway signage, landscaping, mixed-use housing and retail components, parks, artists’ lofts, senior housing, a hotel and convention center, community gardens and a school for industrial arts. The UDAT team, which began studying the area’s demographics and the socio-economics of Panorama City’s some 70,000 residents right after Sept. 11, 2001, say because their plan is so comprehensive, and because it practically mirrors the boundaries of the city’s approved community design overlay district plan for the area, that it shouldn’t take a mountain of red tape and years to get approved. Others, while optimistic, say it’s going to take some work. “I don’t see this happening in one or even two years, but I have had dozens of telephone calls from people who want to be involved in the next phase and certainly involved in making investments in Panorama City,” said Bob Scott, former Los Angeles city planning commissioner and director of the Civic Center Group in Calabasas. It was Scott who managed to convince the local chapter of the AIA to form a UDAT team for the Valley and identify an area for redevelopment as part of the Alliance’s Vision 20/20 plan, which was unveiled in 2001 but yet to spark much interest from the city or the development community. Until now. The team chose Panorama City because of its urban density, proximity to local freeways, and development potential. Their plan calls for dividing the area into three sections: a northern district with a focus on Panorama City’s Latino heritage; a central district that would link the Panorama Mall and Wal-Mart store with senior housing and other components of the plan, and a southern district, where an industrial arts school and museum would be built to compliment a new high school now under construction. Both city councilmen Tony Cardenas and Alex Padilla’s districts include portions of the project area. Cardenas said he plans to meet with both Padilla and Robert “Bud” Ovrom, director of the city’s Community Redevelopment Agency, over the next few weeks to discuss its viability. Roadblocks ahead? Cardenas said he supports the plan, but noted its likely hefty price tag and the fact that there was no way to accurately predict its viability or the chances that it wouldn’t end up like so many redevelopment plans for the Valley have in the past: stifled by NIMBYISM on one hand, and endless politicking on the other. “It sounds to me like it’s a real plan, not pie in the sky,” said Cardenas. “But, it’s also something that is going to be expensive, appropriately expensive nonetheless. And this is the kind of thing that doesn’t get off the ground one piece at a time. You are going to have myriad investors and developers’ interest.” The plan was well-received during its unveiling by a handful of business leaders and key city officials, including Ovrom. “This is incredibly exciting,” said Ovrom, who, since taking his post earlier this year, has helped kick-start long-stalled plans for a town-center project in North Hollywood, now set to break ground in December after two decades of delays in planning. Ovrom, known as a fierce but respected negotiator among the development community, did not mince words spelling out his plans upon taking office. He said his focus would be on housing and he has since pointed to a policy bent on shifting focus away from scorched-earth developments and on to projects that include livable communities and mixed-used concepts. New direction He indicated that it’s a new day for development in the Valley. “I think the CRA has been guilty of doing projects just for the sake of doing projects,” Ovrom told the UDAT team upon seeing the report. “I think we can very much follow your lead. And, it’s no accident that when (Mayor James Hahn) announced my appointment he did it in the Valley.” Tom Rath, a city planner overseeing the overlay plan for Panorama City, called the concept “One heck of a vision,” but he cautioned that it would need support from every level of the community in order to come to fruition. “I would say that neighborhoods have to be involved from the beginning,” said Rath. “There should be a concept and policy committee and design and advisory committee established that consist of residents, so that they can give feedback to developers along the way for a reduction in controversy.” One of the first things the city must do to move the plan forward is convince the council to approve a resolution declaring the area a redevelopment zone, which would open up access for additional funding through the CRA’s Earthquake Disaster Assistance Project. Other funding could come through city tax incentive programs for revitalization areas and federal Community Development Block Grants through the Targeted Neighborhood Initiative program.

Manufacturers In All Sectors Bleeding Jobs By CARLOS MARTINEZ Staff Reporter Just by looking at the largely empty parking lot at Boeing’s Rocketdyne Propulsion & Power in Canoga Park, it’s obvious things aren’t the way they used to be for the defense contractor. “Now we have about 4,000 people here and that’s just a fraction of what we had back in the early days of Apollo.” said Stephen Jacques, director of operations. Jacques doesn’t have to go back to the 1960s to make comparisons. Once the builder of all rocket engines that propelled American astronauts into space, the company hit hard times in the mid 1990s when defense spending and space-related projects slowed to a crawl. Today, it is slowly recovering with the development of engines for the Delta IV rockets used for satellite launches as well as the development of other engines and systems for the military and the National Aeronautics and Space Administration. But it remains unclear whether the company will stay in the Valley after Alabama officials earlier this year began openly courting the company to move there where it already operates a testing facility. Neither Rocketdyne nor its parent Boeing are currently commenting about possible moves. But Rocketdyne has had its share of layoffs. About 3,000 workers lost their jobs between 1994 and 1996 an example of a declining manufacturing industry in the Valley, a sector that has seen steady erosion in the past several years. Between 1991 and 2001, 32,000 manufacturing jobs were lost in the Valley, going to 90,000 jobs from 122,000 jobs in that time, according to a study by the San Fernando Valley Economic Research Center at Cal State Northridge. But the bad news doesn’t end there, Just in the last two years the number of manufacturing jobs in the Valley has dwindled to 82,900 with more expected to be lost next year, the center predicts. At the same time, the number of manufacturers in the Valley has gone from nearly 3,600 in 1991 to about 3,100 today. Many of those who lost their manufacturing jobs migrated to the lesser-paid service and retail industries, said Daniel Blake, an economics professor at CSUN and director of the center. Education is partly a factor in the industry’s troubles. While CSUN and other colleges continue to turn out engineers and technical experts, high schools and technical schools are graduating fewer people qualified to run high-end factory machinery, leaving community colleges to pick up the slack. Global competition is also a factor. “We’re seeing an industry that is still impacted by the economy and world markets and we’re not seeing any sign of a return for that sector,” Blake said. With increased competition from Asia, high fuel and energy costs combined with growing workers’ comp costs and already high tax rates, manufacturers in the Valley are not likely to see an upswing any time soon, experts say. Even with an otherwise optimistic economic forecast for the Valley, Blake says things aren’t so bright for the manufacturing sector, which he adds may have already bottomed out. And it’s not just aerospace that’s taking a beating. Many other segments of manufacturing in the Valley have all seen their employment numbers head south in a big way. A status report: Technology Technology, which saw slow growth during the early 1990s before really taking off in the late 1990s, saw its bubble burst with the loss of nearly 20,000 jobs between 1991 and 2001. The rapid rise and decline in technology shocked many in the Valley, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “There was a lot of growth in that area and it seemed that it would continue, but it didn’t and it impacted a lot of jobs in the Valley,” he said. The up-and-down nature of the technology sector was a new experience for many who saw new chips and processors quickly go by the wayside as newer, faster and more efficient chips kept coming along. “It became a roller coaster for a lot of companies,” said Lou Tomasetta, president and CEO of Camarillo-based Vitesse Semiconductor Corp. which started out as a super computer chip maker before that market crashed and the company moved on to make chips for the telecom industry before changing again into a manufacturer of data storage chips last year. Having cut nearly 600 jobs in the last two years, Vitesse is typical of many tech firms that have struggled with a bad economy. A down tech market has meant the closing of Conexant’s Thousand Oaks plant last year and at the same time the acquisition of optics component maker Luminent by its parent MRV Communications which had spun it off in 2000. The rise of technology firms in China and much of Asia where there are government subsidies and a cheap workforce have also worked against local manufacturers who have struggled to compete. But high end technology and a steady stream of new products has kept some local tech firms in the game against overseas competitors offering cheaper knockoffs, Kyser says. The technological edge must continue for these firms to survive, says Kyser who cautioned that the gap is closing. As for the future, Kyser says local technology firms must make their manufacturing processes better and continually develop new products in order to survive. Defense While many manufacturers have struggled in this new economy, some have managed to find their niche and grow. Van Nuys-based ITT Systems Gilfillan Radar Group is one such company. A maker of radar systems for air-traffic control and air-defense systems, the company is seeing an upsurge in business since 1998 as demand for improved defense systems has picked up here and around the world due to concerns over terrorism and potential conflicts. “When companies like Northrop Grumman were laying off people, we were picking up their people so the recession never touched us,” said Ron Crossman, director of business development. But employment has declined. The company had employed 2,200 people at its height in 1987. Today it has about 400 workers due to its automated manufacturing processes. But most other Valley defense contractors like Sensor Systems of Chatsworth, which makes aircraft guidance equipment, and AML Communications, a communications systems integrator, have continued to suffer from a down economy. The promise of business from homeland defense initiatives has not developed for local businesses, said AML CEO Jacob Inbar. But Kyser sees the defense sector improving as the government doles out more contracts to upgrade or maintain current defense systems. The Iraq war, he said showed gaps in the nation’s defense capabilities. Packaging Marfred Industries is a small fry when it comes to the cardboard packaging business which is led by conglomerates Smurfit-Stone Container Corp. and Weyerhaeuser Co. but its business has been hit by a down economy and foreign competition as much as its larger competitors. Having endured a tough period in the 1990s, Marfred went on the offensive and streamlined its operation with an automated manufacturing system and four-color printed boxes with high quality paper as demand for that segment increased. It was the biggest changeover in the company’s nearly 60-year history as it spent millions on new equipment to cut costs and stay competitive, said Randy Phares, general manager for manufacturing for Sun Valley-based Marfred. And it worked. The company was able to grow and expand as it opened a Las Vegas facility to better serve customers outside California even as cheaper products from China hit the market and economic woes took a further toll. Today, Marfred is fighting back with increased services and a more efficient operation. For Mark Frydman, president of Woodland Hills-based Box Brothers, such troubles with foreign companies and a sluggish market have been common in his industry. “I hope that 2004 is better, but I’m always an optimist,” he said. For Kyser, the outlook is cloudy for general manufacturing like packaging and the manufacturing of other durable goods as the overall economy continues to founder. “You’re going to see a continued decline, but it’s going to slow down because the value of the dollar is going down and it makes us compete better,” he said. Entertainment The entertainment industry has its manufacturing or set construction side which flourished in the 1970s and 1980s when the major studios closed or cut back their set manufacturing facilities in favor of outsourcing those services. But as the 1990s arrived, production began moving out of California and into Canada where wages and other costs were cheaper, forcing companies like Scenery West to look to business elsewhere. It now makes sets and display pieces for museums, theme parks and shopping malls around the country, said Tim Knipe, director of business development at Scenery West, a North Hollywood-based company. Many companies weren’t as lucky but others like Scenery West and WonderWorks in Canoga Park, adapted themselves to a changing market. Manufacturing sector still large The simple fact, experts like Kyser say, is that despite troubles within the industry, many Valley manufacturers remain in business and continue to maintain their share of the market, showing manufacturing still remains a big although dwindling part of the Valley’s economy. According to CSUN’s Blake, manufacturing is the second largest sector of the Valley’s economy with 13 percent of the labor force. In first place is the entertainment industry with 14.9 percent of the workforce. Third is retail with 11.9 percent. While many large employers like General Motors, Lockheed Martin and Northrop Grumman have left the Valley, many smaller ones have stayed, said David Braunstein, president of California Manufacturing Technology Consultants, a non-profit group aimed at assisting manufacturers. “We know the large manufacturers have gone, but the ones who stayed are a big part of the Valley economy and in some ways, the backbone of the economy,” he said. While overseas competition offers cheaper and readily available products, local manufacturers have been able to compete by offering quality products and support for the product in a timely manner, Braunstein said. Thanks to improved manufacturing methods that reduce the number of employees, Valley companies have remained competitive, Kyser said, though many still continue to suffer. Hampered by high workers compensation insurance costs, high fuel costs, tough environmental laws and high taxes, manufacturers in the Valley and elsewhere in the state will continue to face a harsh economic environment for the foreseeable future, Kyser said. “There isn’t anything out there that shows there will be a recovery for the manufacturing sector in the state,” he said. Assemblyman Keith Richman, R-Northridge, blames part of the industry’s troubles on a legislature that has steadily passed anti-business initiatives. “Legislation has been driven by special interest groups and liberal Democrats who have not taken into account the impact on business,” he said. “The legislature has not only neglected that sector but it’s been killing jobs there.” But Richman said he was optimistic about possible measures to improve the manufacturing sector under Gov.-elect Arnold Schwarzenegger who has pledged to reform the workers’ comp system. Today, however, there are no plans for tax cuts for manufacturers, or incentives to build modern factories or even a measure to effectively reform workers’ comp. Fred Gaines, chairman of the Valley Industry & Commerce Association, says Valley manufacturers, most of whom are small businesses, have had little success in getting their message to legislators. “It’s easier for large companies to get involved in government affairs, but with smaller companies it’s more difficult so they’re not getting noticed,” Gaines said. His own organization has lobbied on behalf of Valley business interests, but he admitted it has not focused on manufacturing. Bruce Ackerman, president of the Economic Alliance of the San Fernando Valley Economic Alliance, says he’s seen little organized effort from Valley manufacturers to be heard in Sacramento. “We really don’t hear much from the manufacturers here so it’s difficult to say if they’re being heard by legislators,” he said. “They’re not involved very much with us or VICA.” Indications are that the worst is over, said Kyser, but he cautioned that the sector would likely see further decline before it sees improvement. In California alone, 57,000 manufacturing jobs were lost last year or about 167,000 jobs in the last three years, according to California Manufacturing Technology Consultants. Nationwide, the U.S. government says there have been 38 consecutive months of declining employment in the manufacturing sector with no end in sight. But Joseph Carson, director of global economic research at Alliance Capital Management in New York, says manufacturing jobs are being lost on a worldwide basis. He says due to pressures of competition and the advent of new automated plants in Asia and Europe which require fewer workers, jobs will continue to be lost here and elsewhere for years to come. As for manufacturers in the Valley and the rest of the state, part of the answer to the industry’s troubles seems to lie in one direction Sacramento. “It’s going to take legislation to change things,” said Braunstein. “And a lot of work.”

Valley Considered Nice Corporate Headquarters Address By CARLOS MARTINEZ Staff Reporter They may be Valley manufacturers, but you won’t see any plants or assembly lines anywhere on their properties. There are several companies that make their headquarters here but have little or none of their actual manufacturing operations in the area. It’s one aspect of Valley business that seems as curious as it is sound business sense. “You can’t make shoes in California anymore. It’s crazy,” said Steven Nichols, president and CEO of Westlake Village-based athletic shoe maker K-Swiss Inc. which now makes its shoes in Asia and Central America after spending nearly 20 years making its shoes in Pacoima. Like many Valley manufacturers, K-Swiss has retained its headquarters with its design, marketing and sales staff locally while farming out its manufacturing to plants in foreign countries 15 years ago. “In our industry, you can’t compete if you stay here in the Valley,” Nichols said. It’s no surprise that large manufacturers have left the Valley for places like Alabama, where factory workers earn an average $11 per hour, or China where a veteran factory worker can earn as much as $3.50 per hour. “Companies are competing globally and California is much too expensive for many of them,” said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. But even as K-Swiss and others have moved their manufacturing out, the Valley and surrounding communities maintain an attraction to manufacturing executives. “Los Angeles and the Valley is still a very desirable place for manufacturers to base themselves because of the weather, the quality of life and the talent pool,” Kyser said. “Even with our high taxes and workers’ comp issues, we’re still very desirable,” he said. Semtech Corp., based in Camarillo, is among the technology manufacturing firms whose production is handled by its subcontractors around the country and overseas. “Like a lot of other companies today, we’re a fab-less company with manufacturing handled outside,” said Terry Sears, a company spokeswoman. Semtech is part of a growing trend of companies that cuts its overhead by switching high manufacturing costs to its subcontractors, said David Goodreau, chairman of the Small Manufacturers Association of America. “You have a business model that reduces your risks and overhead but gets rid of a lot of jobs,” he said. Westlake Village-based chipmaker Diodes Inc. is another firm with no local manufacturing presence. It closed its manufacturing plants here long ago in favor of facilities in China and Kansas City. It was a business decision aimed at staying competitive in a tough market, said company CEO C.H. Chen.