California manufacturing may be in trouble

on Friday, January 11, 2013

California manufacturing may be in troubleAfter a 102-year-old plant closed its doors in California to take advantage of lower manufacturing labor costs in Ohio, concern has started to arise over the state's future in the industry. Pneumatic Scale Angelus, a company which produced lid-sealing machinery for bottling companies, recently announced its owner, Barry-Wehmiller, would stop all California production in an effort to cut costs by moving its operations across the country.

According to the Los Angeles Times, even though the city still boasts a large manufacturing community, the area has lost half of its factory jobs since 1991. However, it doesn't often receive the special treatment or financial incentives the entertainment and tourism industries frequently enjoy.

Some are perplexed as to why manufacturing facilities are fleeing the state, as the area offers many things that could be appealing to plants. The state has a huge workforce, which could make it easy for opening factories to find the amount of skilled workers they require. Its location is also ideal for many in the industry. Situated on the coast with easy access to ports, international airports and major trucking routes, the state has the potential to provide manufacturers with access to important logistical routes necessary to get goods to market.

Costs could be a factor
However, some companies may be moving to other regions of the country in order to limit costs. While the costs of manufacturing in California may not be much different from other states, increased taxes and regulations can put a financial burden on companies.

The state recently made a move to increase income and sales taxes, which could put a dent in company profits and the potential for factories to invest in new workers, technology and products, which could drive even more away.

In addition to higher taxes, the state has also upped its regulatory requirements, making it more expensive for some facilities to conduct business. California's new cap-and-trade law requires businesses to buy credits for the carbon dioxide they emit. Those companies that exceed their purchased credits need to pay more, while those that don't reach their limit can sell off their extras. This makes it most cost effective for facilities to lower the amount of carbon they emit with more sustainable energy; however, not all are willing to make the investment to implement wind, solar or geothermal power. In some instances, this may make it more attractive for a manufacturing company to leave the state rather than comply with these additional rules.

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