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Corporate poachers swoop onto SoCal to steal away firms

July 20, 1992

By CHIP JACOBS AND TIM DEADY
Staff Reporters

Representatives from 28 states planned to descend into the heart of the Southland this past weekend to poachlocal manufacturers disgruntled with California’s business climate. One economist described the event as an “in-your-face” recruiting mission highlighting the region’s troubles.

Dubbed “Trends 2000” and planned for the Anaheim Marriott Hotel July 17-19, the exhibition was promoted as a novel affair, assembling under one roof corporate cherry pickers and company executives mulling whether to relocate or expand outside the hard-hit state.

“This is the first trade show that specifically targets California business looking for other locations,” said Lori Martin, marketing director for Nevada’s Commission on Economic Development. “I don’t mean to be brash, but you’re ripe for the taking. Companies are disenchanted with Southern California’s cost of doing business and they’re crying out for alternatives.”

Organized by Dennis Carruth, a 42-year-old Carlsbad businessman, the exposition comes in the wake of the April riots in Los Angeles and recent earthquakes. More important, local economic officials said, it underscores the need to pass legislative reforms urged by Gov. Pete Wilson’s Council on Competitiveness and a Los Angeles Grand Jury report on business flight.

“It’s certainly a reason for alarm, another indication that we haven’t gone far enough or moved fast enough addressing public policy issues” like workers’ compensation, the permits process and tort reform, said Julie Wright, director of California’s Department of Commerce.

Added Jack Kyser, economist for Los Angeles County’s Economic Development Corp., “The Cold War is over, and you have a new type of warfare where states raid each other’s economic base. But this thing is sort of an in-your-face event where the gauntlet is being thrown down in our own backyard.”

Recruiters from 250 communities were expected to attend the exposition, most of them bearing tax incentives, cheap land and job training offers worth tens of millions of dollars, as well as promises of streamlined government regulations.

Among those signed up for the three days of seminars, networking and sales pitches were executives from West Texas Utilities, Washington State’s Grant County Economic Development Council, Nebraska’s Public Power District and the Greater Cleveland Growth Association.

Carruth said 125 Southland businesses had signed up as of midweek, though he was hoping for 500.

“We have advertised extensively on the radio and in places like the Wall Street Journal and since the advertisements have started, we have been getting a lot of calls,” Carruth said. “There seems to be some interest.”

Last month, Los Angeles’s EDC released a study showing that, in the past three years, more than 200 businesses — representing 50,000 jobs, the majority of them in manufacturing — have left California. Mirroring that was a 1991 Southern California Edison survey that found that of 500 new business facilities constructed in Arizona, Nevada and Mexico since 1986, one-third came from the Southland.

Still, because of the lack of official statistics and the confidential nature of most relocations, no one is sure whether the ongoing exodus is part of a cyclical economic trend, the recession or deeper structural faults. But there is consensus that many are fleeing because of soaring workers’ compensation premiums, high land and living costs, tough clean-air laws and a cumbersome permitting system that forces some smaller firms to broach 69 different agencies.

One Pacific Northwest recruiter said his group was traveling to Anaheim in hopes of luring a Burbank stereo components maker, a San Diego warehousing and distribution firm, a Gardena television-parts manufacturer and an Anaheim solidwaste recycling company. Others are reportedly looking to entice smaller electronics and aerospace contractors, transit-equipment makers, printing companies and fabricated metal concerns.

“What happens is that you get a few success stories of L.A. companies relocating to Las Vegas or Utah, and then you become a hot spot for recruiting professionals,” said David McFadden, assistant director with Washington’s BusinessLink, a private group.

And with the recent events, particularly the riots and the state’s budget crunch, there is a general feeling California is vulnerable, “though few question the state holds huge market, technical and infrastructure edges over other parts of the United States,” McFadden said.

Carruth said he put up his own money — about $100,000 — to stage the event and is counting on recouping his investment through a $1,500 booth fee and an admission charge ranging from $55 to $105 for local businesses. While he said this is his first exhibition, he plans on staging others.

And some exhibitors are nervous.

“We are concerned about the attendance,” said Jack Briggs, who represents a 28-county area of Missouri that will have a booth at the expo. “There was a show like this last year in New Jersey and attendance was not very good. But everyone knows that there are many unhappy companies in Southern California, so it’s worth the risk in spending the money for the trip.”

Another recruiter, Dan Redd, manager of economic development for a region of eastern New Mexico, predicted good attendance based on a mailing to Southland companies that may be interested in relocating.

“We did a mailing to about 4,900 businesses there in preparation for this and got back nearly 100, which is about twice the average response rate,” he said.

Perhaps one reason some response rates have been high is related to Carruth’s aggressive promotional pieces, including one entitled “Will California Lose More Jobs?”

Wright, the Commerce Department director, said that when she heard about the expo, she was irked because it was being orchestrated by a Californian. She later learned of a Palo Alto company, Western Economic Development Group, that was offering Trends 2000 recruiters “California Business Intelligence” pointing out the advantages of relocating outside the state.

“I was angry when I first learned about it,” Wright said. “Then I realized the expo might be a good way for us to be proactive, to learn which companies were thinking about leaving. That’s the positive.”

Officials from northern and central California, along with Wright and Los Angeles EDC President Gary Conley, said they plan on attending. 

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