California Steamin': Business Makes Tracks From L.A.

Ritchie Bonkowski is feeling unloved. The owner of a small Orange County (Calif.) electronic components business fumed as workers' compensation costs skyrocketed. Even when he could find workers, they often were untrained and quick to quit. Worse yet, no one at city hall seemed to care. In fact, the first time Santa Ana officials paid him any heed--aside from fire inspections--was after he decided to move to Idaho. Bonkowski gripes: "California aggravated me to the point where I wanted to leave."

Ritchie Bonkowski is small fry. But he's joining a school of others swimming away from Southern California, including such big fish as McDonnell Douglas and Lockheed. The latest defector is Bank of America. It's moving its credit-card operation and 1,300 jobs from Pasadena to Phoenix to save money.

California used to be the paradise businesses fled to from the gritty realities of the Rust Belt. A sunny climate, legions of science and engineering grads, plus access to large markets in the West and Asia, still lure plenty of companies to the Los Angeles area. But now, smog, traffic, and steep real estate prices, added to rising labor costs and government red tape, are driving companies away. Even though BofA, Lockheed, and others are keeping headquarters in California, there's still plenty for armies of recruiters to pick over.

The prizes they're pursuing include scores of small manufacturers plagued by Southern California's severe air-quality and construction restrictions. To expand his soldering-materials plant in Santa Fe Springs, Matthew H. Roeser, manager of Fusion Inc.'s western division, looked at all the water, air-quality, and other permits he needed. Cross-eyed, he's heading for Albuquerque. "We don't hate California," Roeser says. "But we're seeing any expansion here as almost impossible."

That acute frustration makes Southern California companies easy pickings. Besides bargain real estate and labor costs, other states also boast job-hungry work forces and governments downright friendly to business. South Carolina bagged a new Hughes Aircraft Co. plant back in 1984 with the help of loans and tax breaks. So when Hughes began looking recently to relocate a 1,300-employee operation, officials in Torrance and Sacramento promised to be helpful in obtaining various permits Hughes needs to modernize or stay in business. Hughes is staying put.

Most often, though, Southern California is its own worst enemy. Air-quality rules set in 1989, including limits on solvents and varnish, drove away nearly 50 furniture makers and more than 5,000 jobs, the Western Furnishings Manufacturers Assn. says.

ALARM. The nation's most expensive workers' compensation insurance hurts, too. Security Metal Products Corp., a maker of security doors, expects to save $300,000 a year from its move to Clinton, Okla., from the Los Angeles suburb of Hawthorne, mostly because its premiums fell 60%, to 50~ an hour. All this has begun to alarm politicians. Assemblyman Richard Polanco is pushing a bill to find out why companies are fleeing. Governor Pete Wilson has named a panel to study the issue.

Begging for jobs is still unfamiliar. "So many companies came here that we never had to worry about doing anything to keep them," says Patricia Nunn, head of economic development for Santa Ana. But her city's recent survey found that a quarter of its businesses plan to move. Before long, Ritchie Bonkowski and other emigres could find lots of old friends to keep them company in their new hometowns.

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