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American Racing to Cut 300 Area Jobs

The custom car wheel maker will shift most of its production to Mexico to reduce costs.

August 12, 2003|Marla Dickerson | Times Staff Writer

American Racing Equipment Inc., one of the nation's largest manufacturers of custom car wheels, will eliminate about 300 Southern California jobs and shift most of its production to Mexico to cut costs, the company said Monday.

In what has become a familiar refrain from the region's factories, Robert Hange, president of the Rancho Dominguez-based firm, said low-wage foreign competition and exploding business costs in California have sapped his company's profitability.

"It's very difficult, if not impossible, to compete in a cost-competitive global environment ... given our costs here," Hange said. "At some point, you've got to do what you can to survive."

American Racing, a subsidiary of Toronto-based Noranda Inc., employs about 550 people in the Los Angeles area. Hange said layoffs for the company's blue-collar workers -- some of whom earn as much as $31 an hour -- would begin in mid-September, when the bulk of its production is transferred to a facility in Tijuana.

The firm will retain its administrative, design and engineering staff and a modest production crew in Rancho Dominguez. And it will keep a small plating operation in Gardena.

The move comes at a time when many manufacturers and other businesses are threatening to cut back or leave the state amid growing complaints about rising workers' compensation costs and other expenses. Some blame the state and the federal government for not doing enough in the face of increasing competition from abroad.

"American Racing is just the latest victim of some of our trade policies," said Joel Ochoa of the International Assn. of Machinists and Aerospace Workers, which represents about 300 workers at American Racing.

He said nearly three-quarters of his union's members at the firm were slated to lose their jobs. Most are Latinos, he said, averaging 17 years of service and making $11 to $31 an hour.

"These are wages that are allowing Latino workers for the first time to scratch the surface of the middle class," he said. "But a lot of these guys are facing the possibility of having to work at minimum wage jobs for no benefits."

American Racing, started in Northern California in the 1950s by a couple of racing enthusiasts, is one of the nation's best known makers of custom wheels, commanding a 20% share of the automobile aftermarket for fancy chrome, Hange said.

Foreign competition, particularly from China, has turned up the heat on domestic producers. Unable to match the low prices of offshore makers, Hange said, his firm in recent years had been forced to outsource production of "commodity" wheels to suppliers in Asia while slashing employment at home. From a peak of 2,600 workers in the 1990s, American Racing has seen its U.S. workforce slip to about 800 today.

Parent firm Noranda, a publicly traded metal and mining company, doesn't break out the sales and profit of its subsidiaries. Hange said American Racing had not been profitable for "three or four years."

Although factory payrolls have fallen nationwide, California has been hit particularly hard, having lost more than 300,000 jobs, or 18% of its industrial base, since the sector began its long slide in late 2000.

Economists said California's manufacturing sector would be especially hard-pressed to rebound to pre-recession levels of employment.

Many of the state's factory jobs are in high-tech manufacturing, a segment that has shifted much production offshore.

In addition, firms in the state have been hit with a succession of rising costs, including energy, labor and workers' compensation.

"The legislators in Sacramento have this strange idea that California competes in a bubble," said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. "But for more and more companies, moving offshore is the only way they can survive."

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