Still yearning to leave.

A new survey shows why some California companies are still looking at alternatives elsewhere

A survey conducted in July this year by California Business Intelligence Service, the Palo Alto-based consulting firm, revealed that many executives of large, non-retail businesses based in Southern California expect to locate major new operations outside the region within the next two years.

If so, according to CBIS, large numbers of Southland residents can anticipate reduced career opportunities and/or job losses.

CBIS, which maintains a data base on 4,000 of the state's corporations, phoned 990 of Southern California's largest manufacturer, distributors and business service firms during July. These 990 were already rated by CBIS to have above-average potential for expansion or relocation. After repeated efforts, interviews were completed with 312 executives. About 60 percent of the 312 declined to predict when and where they anticipate a major new site, but 40 percent responded as follows:

Expecting new facilities

* One in nine (11 percent) anticipate new facilities in Mexico before July 1995. Most of these assume approval of the North American Free Trade Agreement (NAFTA) by the United States, Mexico and Canada, along with labor code and environmental amendments, before next summer.

* 10 percent predict that the new site will be in the same Southern California county as their current headquarters offices, while 5 percent forecast another Southland county.

* Responses were fairly close for the other locations listed in the survey. About 6 percent chose another U.S. state, while 5 percent predicted a foreign nation other than Mexico. Only 3 percent said a California county outside the Southland was most likely.

Impact on Southland

Most of those who choose to locate a new site outside the region won't relocate their headquarters office, so the positions for their employees appear relatively secure. Some of the Southland residents, moreover, will be able to move to the new or relocated plants, warehouses and "back offices" used for telemarketing, order processing, credit functions, accounting records and other uses.

Southland employees appear otherwise to be at risk. Potential career advancement diminishes whenever corporations expand or relocate to new sites outside the region. Dislocated workers and managers will suffer even more. Finding positions which pay comparable wages or salaries is already very difficult for those who have lost their jobs. Prospects for owners and employees of Southern California's retail and other businesses will also be harmed when local incomes are lost to competing regions.

In the past, higher skill positions in the Southland appeared fairly safe. Now, however, fewer are secure. Cutbacks and cancellations of federal programs have been compounded by the improved ability of many firms to expand to distant, low-cost facilities.

Improved training

The supportive role of new technologies in this process is not fully realized. Workers with less advanced skills can be trained more quickly than in the past to operate increasingly automated equipment. The latest modes in telecommunications and air transport enable executives, managers and engineers at headquarters offices more readily to manage distant operations and deliver goods and services to worldwide customers.

Some decisions by corporate executives based in other regions, moreover, will also continue to have an adverse, indirect impact on Southland residents. Nike, headquartered in Oregon, already has shoes produced by low-wage contractors in Indonesia and elsewhere rather than by unskilled residents of Los Angeles. U.S. electronics firms use satellite telecommunications to assign software tasks to inexpensive programmers in India rather than to underemployed residents of Southern California., After NAFTA, performing such operations at a Mexican site without tariffs and with wages and salaries generally about 10 percent for comparable skills will be even easier to manage and afford.

Worker dislocation

What might happen to the highly rated firms for the 60 percent who completed the interviews but were not able or willing to make a forecast about their expansion and relocation plans? The partners and associates of CBIS have interviewed California executives and tracked their locational decisions since 1988. From this, CBIS forecasts that some of the 60 percent will sign "outsourcing" agreements with subcontractors of goods and services. The others will move to their own new sites.

In both cases, the locational pattern should be roughly similar to the areas predicted above by the 40 percent. The net effect for many Southland residents is the same -- reduced career opportunities.

Site selection criteria

What primary evaluation factors were listed by executives for expanding or relocating? Over 95 percent of the interviewees gave one or more responses, even if they had declined earlier to predict the nature and location of their firm's next major new site:

* Almost four in 10 (38 percent) listed the combined package for labor costs (basic wage or salary rate, plus the firm's contributions to workers' compensation, health care, unemployment compensation, pensions and other benefits).

* One in five (20 percent) cited other operating cost factors. In order of importance to interviewees, these included reduced expenses for leasing and/or depreciation of buildings and fixed interior improvements, transportation of goods and personnel, taxes and environmental controls.

* 15 percent anticipated that a consolidation of the firm's activities and/or a merger with another corporation would be a primary consideration. Firms downsized, or absorbed into a new organization often go to consolidated new sites. The locational decisions here are often based on a broad variety of financial, operating and political motives.

* Many government and utility organizations are often pressured into providing a variety of tax, rate, and other financial incentives. Yet, only one in nine executives (11 percent) listed one or more of these in their multiple responses.

* One in six (16 percent) gave other reasons. These included the area's supply of relatively scarce labor skills and its social and/or environmental quality. Tougher price competition for most industries worldwide continues to push non-cost issues to a lower level of importance than during the 1980s.

This article was contributed by CBIS, an information service which tracks the activities of over 10,000 firms in North America, including 4,000 in California. CBIS is at P.O. Box 1721, Palo Alto, CA 94301 [phone].