Local manufacturers are making more products to meet increased demand. So manufacturing jobs should be on the horizon, right?
Not so, according to Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University.
“There is always a lag between increased output and increased employees,” Adibi said. “Employers don’t hire until they make sure the demand is there and sustainable.”
Demand was flat in the third and fourth quarter of last year, according to Chapman’s purchasing manager’s survey, which measures activity in the local manufacturing sector.
At the end of last year, the survey showed respondents were holding production flat.
But since the beginning of this year, the survey has shown that manufacturers are rapidly planning to increase production.
That could also include plans by manufacturers based here that do actual production elsewhere.
According to Chapman’s recent midyear economic report “expected improvements in the export market and a turnaround in business investment point to future increases in manufacturing output.”
Even with the expected increase in output, manufacturing jobs are seen dropping again in 2010, according to Adibi.
Chapman’s forecast predicts local manufacturing jobs—including jobs related to non-durable goods like clothing, durable goods like washing machines, and technology goods like chips—to drop to 150,540 this year, down 2.5% from 2009. It does see an uptick in hiring in 2011 to 151,752, a gain of less than 1%.
“The problem when it comes to employment is that manufacturing is an extremely productive industry,” Adibi said. Manufacturers “can squeeze more and more out of existing employees or even a lower number of employees depending on what technology they are using.”
“But you can only squeeze so much out of existing workers,” before companies have to start hiring, Adibi said.
One company that is adding workers is Seal Beach-based Amonix Inc.
The privately held company makes solar panels that don’t require any water in power production. The large panels are typically used in warm, sunny climates.
“Interest in our solar-power systems is growing so business is excellent,” said Carla Pihowich, senior director of marketing.
Amonix saw steady sales during the recession, but on a smaller scale as utilities had trouble getting financing for large projects, she said. Amonix doesn’t release financials.
The company recently raised $129 million in a second funding round, led by Men- lo Park-based Kleiner, Perkins, Caufield & Byers. It has raised nearly $200 million to date.
Amonix said it’s set to use the money to ramp up deployments of its solar power systems and expand its manufacturing. It has a 75,000-square-foot plant in Seal Beach and research and development facilities in Torrance. It’s also building a $20 million plant in Nevada.
The company expects to announce several projects this year, according to Pihowich.
It also plans to add nearly 100 jobs in the near future, she said. Amonix currently has 205 workers.
Moving Manufacturing Out
Amonix, which moved its headquarters to Seal Beach from Torrance last year, is a bit of an exception in Orange County manufacturing.
Heavy regulation and taxes has many companies looking to move out of the county rather than in, according to Adibi.
“Our problem is always regulation and zoning,” he said. “The types of manufacturing we could do in OC—manufacturing that doesn’t require high-skilled workers—can’t really survive or grow here because of regulation, taxation and high labor costs.”
OC relies on sophisticated manufacturers—such as chipmakers and medical device makers—that require a highly skilled workforce to stay in the county because of the accessibility of well-educated workers, Adibi said.
But even some of those companies have moved their manufacturing out of OC to contend with the economic downturn.
Anaheim’s Multi-Fineline Electronix Inc., a maker of flexible printed circuit boards that goes by M-Flex, shifted its manufacturing to China last year, but still does design, engineering and research and development here.
Chief Executive Reza Meshgin sees growth for the balance of the year, but does not expect it to be very large.
“Business is going good. Earlier this year it was very soft, but it’s getting better now,” Meshgin said.
Like Chapman’s Adibi predicted, employment lags demand at M-Flex. The company just went through another round of layoffs in May that Meshgin called part of its restructuring. He doesn’t anticipate any more layoffs in the near future.
M-Flex has 87 workers in OC and close to 15,000 worldwide.
Likewise, Kaiser Aluminum Corp., which shapes aluminum into custom pieces for the defense, aviation and auto industries, handles design and business operations from its Foothill Ranch headquarters, but has its manufacturing facilities in other parts of the country.
Kaiser recently made a $300 million investment in its facilities outside OC, including increasing capacity and technology at its Trentwood rolling mill in Spokane, Wash., and opening a facility in Kalamazoo, Mich.
“In the past several years, we have made significant strategic investments in key facilities to maintain a long-term competitive advantage,” said Daniel J. Rinkenberger, senior vice president and chief financial officer of Kaiser. “These investments position us well for future growth and profitability as the economy continues to recover.”
New Companies
While manufacturing companies are moving their operations out of OC, others are testing the waters here.
Takeya USA, a subsidiary of Takeya Japan, recently launched from a 2,500-square-foot office in Huntington Beach.
It plans to design, develop and market its acrylic food and beverage containers from Huntington Beach, but manufacture the products in Japan and China.
The company has a 12 member team here and doesn’t plan on hiring in the near future, according to John Lown, president of Takeya USA.
The recession actually helped the company launch this unit, according to Lown.
“As a startup we were able to recruit a top-notch team. Had it been a better-performing economy, this probably wouldn’t be the case,” he said.
But the improving manufacturing sector is heating up the competition for the startup.
“The playing field is getting more competitive and there is no room for poor quality or service. High performers are surviving and growing at the cost of poor performers, who are going out of business,” Lown said.
