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Locally Based Manufacturers Find the Right Niches for Success

San Diego retains vestiges of an aerospace industry that counted major plants operated by the likes of General Dynamics, Lockheed Martin and Rohr. The latter business remains here under Goodrich Aerostructures, and still makes the engine cowling systems called nacelles for the world’s biggest commercial aircraft manufacturers including Boeing, Airbus and Bombardier. So is GD, although the unit here makes ships through its National Steel and Shipbuilding unit. In the last decade, the region has carved out a niche as a maker of a new type of military hardware, unmanned aerial vehicles, better known as drones. Aerospace is always in flux, but the area still has a good chunk of it, said Kevin Carroll, regional vice president of TechAmerica San Diego, an industry trade group. Change in the Air“If you would have told me 10 years ago that there would be manufacturers in San Diego making planes, I would have said you’re nuts, but if you look around today, we’ve got General Atomics and Northrop Grumman who are making planes, but those that don’t need pilots,” Carroll said. Together the two companies employ about 10,000 workers locally, part of a robust defense sector that will likely undergo some downsizing as the national defense budget gets cut. At Goodrich, employment grew by 4 percent last year to about 2,000 workers, thanks to a backlog of orders from the biggest commercial aircraft makers, including Boeing with its 787 Dreamliner. The cutting edge plane was finally delivered to All Nippon Airways last month, late by three years. In addition to scores of engineers and skilled technicians, Goodrich also hired more production workers last year. San Diego continued to lose lower skilled manufacturing jobs last year to lower-wage economies like China and Mexico. But in a twist, some of the thousands of jobs outsourced to Asia have been returning here, according to a few observers. “I’ve been seeing some companies that were manufacturing in China bring it back here,” said Michele Nash-Hoff, a manufacturing consultant. “They’re doing it because of the rising labor costs in China, rising shipping costs, and the rising costs when there are problems.” Another positive trend is San Diego’s burgeoning clean-tech sector that received positive news last month when Soitec Solar Inc., a French manufacturer of semiconductors, announced plans to build a solar panel plant in Rancho Bernardo, with some 80 employees by this July. According to CleanTech San Diego, a nonprofit industry advocacy group, the region has more than 800 companies in the solar sector here and more than 50,000 employees. But local economists doubted that number. One said employment in the hard to pin down group was closer to 7,500. While the manufacturing sector is nothing remotely like it was in the 1980s when the Cold War was roaring, San Diego remains a hotbed for new product development. In 1999, Maxwell Technologies had 12 business units, most of them related to defense research, said company spokesman Mike Sund. By 2002, the company consolidated and focused on three segments, with the most important being power storage systems called ultracapacitors. The devices receive and dispense transferred energy in short bursts and are included in hybrid buses and cars, as well as in wind turbines. “We decided to make ultracapacitors the centerpiece of our company and it’s working,” Sund said. “In 2004, sales of ultracapacitors were about $5 million. This year sales of the devices will reach just under $100 million.” Business MovesMaxwell’s success and recent maneuvers underscores a continuing problem of keeping such high-tech manufacturing here. Last year, the company decided it had to set up an electrode production line outside the one it operates in Kearny Mesa. It had to move as a precaution in case a disaster shut down the plant, Sund said. Despite looking at several sites in California, Maxwell decided to build its new line in Peoria, Ariz., near Phoenix. The cost of land, costs to operate the plant, taxes, and incentives were all far cheaper than anything in this state, Sund said. Throughout the year, states adjacent to California and some others continued to target local manufacturers, with some offering major incentive packages to entice companies to relocate. One Vista developer of longer lasting brake pads called PureForge said it received an offer from the state of South Dakota worth about $30 million to set up a production plant in Rapid City, S.D. Nash-Hoff said she expected continued manufacturing job losses this year, but things could get worse, “if the tax increases proposed by Gov. Jerry Brown are passed.”

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