Voice of the Modern Manufacturing Economy Since 2013

Los Angeles digs deep to retool manufacturing, push back on critics

Article by Bart Taylor March 7, 2019, 08:31 am MST

The irony of President Trump's enmity for California is that if he cared to look, he could point to the state as a case study in success of policies he's championed. The world's fifth-largest economy is back in the black, an engine of innovation and entrepreneurship, and flashing a sign that should shine bright all the way to the White House: Its manufacturing sector is leading a national rediscovery.

The poster child for California's manufacturing story may be Los Angeles County, arguably the most important single economic district in the nation. "In L.A. County, there are about 360,000 jobs in the manufacturing sector, so it's the largest manufacturing sector in the country on a county basis," says the L.A. County Economic Development Corporation's Lawren Markle.

Let's stop here for emphasis. Those 360,000 jobs are more than twice the number of total jobs in western states like Colorado and Utah; more than most states in the Rust Belt. In L.A. County alone.

It's also diverse. "We have manufacturing strengths in aerospace, heavy machinery, food, finished metals, computer technology products, furniture, and apparel -- although the apparel sector is shrinking due to labor costs and the trend of offshoring 'low-value' manufacturing," Markle explains. "We also love the advanced transportation sector, including our electric bus sector. Aerospace is a strength here, and a lot of the technology going into autonomous and electric vehicles has roots in the aerospace industry."

He says L.A.'s manufacturing economy has stabilized after years of decline, explaining, "We've kind of hit a space where it's leveled out. We're not shedding those jobs like we did, and we have sectors like aerospace that are looking hard to hire more people and have open job requisitions again."

It's more than just jobs, though.

The fit with the transportation sector is only one example of how manufacturing outcomes are aligning with L.A.'s economic development challenges, its needs, and opportunities. "We have three companies in town working on different incarnations of the Hyperloop concept that Elon Musk has most famously championed," Markle says. "You have aerial taxis being tested here in L.A. in the near future. It's a market in need of these types of services. We're a fertile testing ground for a new transit paradigm."

L.A.'s rich cultural mix is fueling growth in other homegrown manufacturing industries like food and beverage. "L.A. is a place where hundreds of languages are spoken, meaning there are big communities from many countries here. You may find a niche because thousands of Koreans live here, and a company may have a new take on Korean food," Markle says. "A lot of the ag products grown in the central valley of California are trucked down here to processing centers to transformed into everything from ice cream to salsas -- or Sriracha! Of course, Huy Fong Foods is here, and they've blown up nationally."

California's agricultural assets are only one example of a deep and wide supply chain that undergirds manufacturing in L.A. A world-class research and development ecosystem may be the county's most compelling calling card, turning out talent and IP, rocket fuel for advanced manufacturing in aerospace. "Three of the greatest research universities in the world here: the California Institute of Technology, which also operates JPL [NASA's Jet Propulsion Laboratory], USC, and UCLA, and you could even throw UC Irvine into the mix," notes Markle. "Technology that spins out of those universities is ripe for commercialization."

Not surprisingly, L.A.'s community colleges have also found new footing in a market that's demanding a modern skill set. "A lot of manufacturing that's here today is advanced manufacturing, a lot of CNC machining, for one, and these tend to be high-wage jobs," he says. "This means higher skill requirements for incoming employees. It's very difficult today to just walk into a manufacturing company in L.A. and try work your way up from sweeping the floors. You need a level of technical skills, and we have companies like Haas Automation partnering with a number of community colleges in L.A. to offer programs and certificates around CNC skills so that manufacturers know there's a ready pool of talent in L.A. to run and maintain those machines."

Of course, all this is happening against the backdrop of national narrative that hasn't been kind to California's business prospects, including President Trump's intermittent shots at the state. Markle seems clear-eyed about L.A.'s challenges and insists the community is responding.

"We do have some minimum-wage increases that are rolling in over the next couple years that will put some pressure on some sectors like food processing," he says. "But many high-value manufacturing businesses are less affected by minimum wage. Besides, there are a lot of incentives to help offset that. There's the California Competes tax credit, to help businesses stay here in L.A. There's the sales and use tax credit, another tool that manufacturers can use to buy new equipment and offset various other costs. Our utilities often work with manufacturers to help them look at power consumption to get a better programs, or find efficiencies to reduce costs. Another is the ETP, the Employment Training Panel -- funding and systems to support retraining of current employees, so you can upscale your current workforce for the changing tech requirements in today's modern facilities."  

And the stories of businesses exiting L.A. County for points east? "What isn't always covered is in-migration, and new business formation. And if you look at the numbers in total, there's not as much outflow as the narrative might suggest," Markle says.

There's also the simple fact that the supply chain matters. "We talk to aerospace manufacturers every day who tell us they get calls from Texas, from New Mexico, from Nevada, who tell them land is cheap, labor is cheap, and so on," says Markle. "Yet as one owner told me, 'It's a fool's promise. I can put my product on truck, and a mile down the road there's a certified testing facility; in another two miles there's a certified welding and painting facility. The supply chain is here, the talent is here, and more. If I try to find that in the middle of Texas, it's not as easy as you think.'"

If the requisite piece of any plan to grow manufacturing is a working understanding of the tools required, Los Angeles is in good hands. Markle's deep understanding of manufacturing -- and advocacy -- is refreshing. Could it be that Los Angeles, and California in general, will end up a poster child for a pro-manufacturing president's re-election campaign?

The possibilities boggle the mind.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

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