Wednesday, February 08, 2006

Manufacturing robust in Sacramento area - The Sacramento Bee

Manufacturing robust in area - The Sacramento Bee:

"Manufacturing robust in area
Firms are adding jobs as layoffs mount around U.S.
By Rachel Osterman -- Bee Staff Writer
Published 2:15 am PST Wednesday, February 8, 2006

When CertainTeed Corp. wanted to build new manufacturing facilities in 2004, the window maker did not look to inexpensive locations in Asia or Latin America. Ditto for low-cost states like Nevada.
Instead, CertainTeed moved into a 300,000-square-foot plant in West Sacramento. The reason: It's more efficient to make windows near where homes are built.

CertainTeed is not alone, in Sacramento at least. In an era of factory closures and jobs shifting overseas, the region's manufacturers actually have a good story to tell - they're adding employees.

Between December 2004 and December 2005, manufacturing jobs in the region climbed 3.1 percent, to 49,600, comprising a mix of technology, transportation, food processing and construction-related jobs. The 1,500 new positions represent the reverse of what has occurred nationally, with U.S. manufacturers shedding 84,000 jobs in 2005.

"We've bucked the national trend," said David Lyons, a local labor market consultant for the state Employment Development Department.

He and other economists offer several reasons: Sacramento offers undeveloped land, a skilled work force, easy access to transportation networks and reasonably priced real estate. At the same time, companies like CertainTeed prefer to be close to their markets, allowing for less costly shipping and more face time with customers.

Even so, Sacramento's factories do not dominate the regional economy.

Manufacturing jobs make up just 5.6 percent of the region's overall employment base, less than the U.S. and California averages of 10.7 and 10.2 percent, respectively, according to state and federal statistics. Much of the growth here has been fueled by small and midsized firms, which typically have anywhere from seven to several hundred employees.

And the region has suffered its share of manufacturing losses, ranging from the 2002 closure of the JVC Disc America plant in Elk Grove to the shrinking of Apple Computer's local operation.

But over the last 15 years, one trend is clear. While the state and nation have lost manufacturing jobs, the greater Sacramento region has added them, up 8,700 since 1990. Manufacturing jobs peaked in the four-county region of El Dorado, Placer, Sacramento and Yolo in 1999 and 2000, but declined along with the tech bust. They began creeping back up in 2004 as the economy recovered.

For economic planners, that's great news. Factories create a ripple of economic activity through payroll and contracts with local suppliers. Manufacturing jobs also tend to pay better than those in the service sector, offering solid wages to immigrants and workers with basic education.

"The hours work well for me and my family, and every three months we get a bonus," said Anh Lu, a machine operator at the CertainTeed plant.

Lu, 43, worked at the Apple plant in Elk Grove until her job was eliminated in 2004. At CertainTeed, the pay is less than the $13 an hour she earned at Apple, but she likes the teamwork, paid vacation and health insurance.

Another bonus: she works a 5 a.m.-to-1:30 p.m. shift, which allows her to pick up her two children after school.

Prior to its arrival in West Sacramento, CertainTeed supplied the growing Northern California and Nevada home-building markets from its factories in Washington state and Riverside County.

Both were too far away, a CertainTeed spokesman said.

"You don't want to transport windows long distances because of the glass. To get the goods there in one piece and cost-effectively, you want your manufacturing as close to your market as possible," said spokesman Michael Loughery.

The West Sacramento facility employs 125 workers and plans to add up to 375 more jobs within five years.

Other local manufacturers also tout the advantages of making products close to where they sell them. Officials at Quikrete, which makes packaged concrete, said they're building a 50-employee facility in southeast Sacramento for that same reason.

And although some firms complain they can't find workers with basic skills, others praise the region's educated work force.

"We stay in Sacramento because we need a talent pool that fulfills the complex jobs. You wouldn't find a lot of people who can run $100-million projects in Nevada," said Oliver Hauck, chief executive officer of Siemens Transportation, which recently invested $6.5 million in its Sacramento light-rail plant.

Not all of Sacramento's factories pay the kind of middle-class wages and lifetime benefits often associated with manufacturing. Sacramento-based Starr Brand Company, Inc., which makes canvas and polyester covers for boats, pays wages of $8.50 to $11 an hour, with no health care or retirement benefits, said general manager Brian Willard.

"The only benefit we can offer is a vacation. We're just making it," he said.

If anything, Sacramento's gain of 1,500 manufacturing jobs is symbolic, said Perry Wong, an economist with the Santa Monica-based Milken Institute.

"It's a small portion of the overall work force, but ... it says these are jobs that can't be moved overseas," Wong said.

The modest manufacturing increases in both Sacramento and California raise the issue of California's business climate.

By one measurement, the manufacturing sector is quite healthy, with statewide industrial output growing at a booming 8.1 percent rate in 2004.

"There's quite a bit of strength there," said Howard Roth, chief economist at the state Department of Finance, noting that manufacturers have benefited from technological efficiencies.

But California business groups contend the cost of doing business remains too high, which is why manufacturing jobs now represent 10 percent of the state's overall work force, down from 15.7 percent in 1990.

Because of labor costs, "if we grew substantially, it would no longer be cost-effective to be based in this area," said Larry Bawden, president of Jadoo Power Systems, Inc., which makes portable fuel cell power systems in Folsom.

"We've gained some of the jobs back, but I would hardly say it's a turnaround," said Gino DiCaro, spokesman for the California Manufacturers & Technology Association.

Nevertheless, Sacramento economic experts are optimistic.

"If the construction sector slows, it won't have that big of an impact," said Ryan Sharp, director of the Sacramento Regional Research Institute. "Manufacturing here is diversified."

About the writer:
The Bee's Rachel Osterman can be reached at (916) 321-1052 or

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