At least two Orange County businesses have relocated or shifted some operations to other states, citing California’s power shortage as a factor for ditching the Golden State.
In April, Costa Mesa-based Valentec-Wells LLC, a metal stamping and plating company, closed its Costa Mesa plant and shifted manufacturing to two Midwest states. Company officials say only one person relocated while the remaining 107 at the Costa Mesa plant were idled.
Valentec-Wells now operates a plant in Ohio, where it employs around 100 people, and one at the Lake City Army Ammunition Plant in Independence, Mo., where it will have 80 workers.
“When power outages started happening, it became difficult to meet our customer requirements,” said Bob Lonergan, the Independence plant manager of Valentec-Wells. “We had to pay hefty fines (to Southern California Edison) to meet our customer orders.”
But Lonergan said energy merely was the straw that broke the camel’s back. He said that Valentec-Wells was considering leaving California before the energy shortage and power outages.
“The cost of doing business in California is high,” he said.
The company’s main concern before the energy crisis was high lease rates and other operating costs, Lonergan said.
“We have a large requirement for energy,” he said. “What accelerated the relocation was the energy shortage (and cost).”
Valentec-Wells bills itself as the nation’s largest producer of machine gun links and is owned by Safety Components Inc. of Greenville, S.C. The Army is providing more than $1.8 million to retool the Independence plant for Valentec-Wells.
IPC Communication Services Inc., a printer and compact disc replication company with a Foothill Ranch plant, said it opted to shift some operations to Michigan. The company didn’t mention power specifically but said Michigan offered “locational advantage.” IPC is part of Milwaukee-based media company Journal Communications Inc. and employs about 100 people in OC, down from 150 a few months back.
The company has added 160 jobs in Michigan after downsizing its OC facility. IPC shifted printing, manufacturing and fulfillment to its St. Joseph, Mich., plant and kept its CD and DVD replication operation in Foothill Ranch. The company said Michigan had a better location advantage over California.
Out-of-state recruiters point to the Valentec and IPC cases as successes in their renewed bids to get companies to leave California.
“The energy issue is certainly a calling card to initiate a discussion, but soon after the discussion begins, we are talking about inherent operating cost about doing business in Kansas City and living in Kansas City,” said Tim Cowden, senior vice president of business development for the Kansas City Area Development Council.
According to recruiters, companies from other parts of California also are expanding or relocating elsewhere.
In the early 1990s, aerospace layoffs and recession in California’s economy led to a steady stream of companies and people leaving to other states.
So far, the exodus isn’t anywhere near what it was a decade ago. Most executives say they’re inclined to stay in California as long as they see that officials are working to solve the power crisis.
But for companies already pushed to the brink by the state’s high cost of living and doing business, the energy crunch is proving enough to send them packing.
Denmark’s Grundfos Group, a maker of pumps used in offices, industry, agriculture and residential projects, plans to relocate its North American headquarters from Fresno to the greater Kansas City.
“Fresno did not have a good airport and was not the best place to operate from,” said Victor Lukic, chief executive of North American operations at Grundfos. “So we decided to move.”
Grundfos looked at 23 different cities and finally settled on Kansas City for its airport, central U.S. location, lower cost of living and demographics.
The company plans to occupy a 59,000-square-foot facility in Olathe, Kan.,an initial investment of $4 million. Grundfos plans to employ 10 people in Kansas City at an average annual salary of $78,000.
Recruiters also say they’ve claimed other successes, such as San Francisco-based Gap Inc.’s move of part of its headquarters operations from San Francisco to Albuquerque, N.M. Then there was Innovative Software Technologies Inc.’s move from Los Angeles to Kansas City.
“In the West Coast, we are finding the cost of labor, real estate, and other operating cost are onerous, and we provide an excellent alternative to those conditions,” said Kansas City’s Cowden. “The reliability of power is important but is one of the many important considerations for a company.” n
