Archive for February, 2014

Why Manufacturing is Critical to California’s Economy

Tuesday, February 25th, 2014

For every one job created in manufacturing, at least two to three jobs are created to support the sector. Further, manufacturing firms create regional wealth by producing a product that is exported to other states and countries. This attracts additional funds to the region — creating business, individual and community wealth. Because of this ripple effect, manufacturing firms have a deeper impact on the state of the economy than most other industries.

California is the number one state for manufacturing jobs, firms and output – accounting for 11.7 percent of the total U. S. output, and employing 9 percent of the U. S. manufacturing workforce. California manufacturing generates $229.9 billion, more than any other state. Manufacturing is California’s most export-intensive activity contributing significantly to California’s $159 billion in exports in 2011. Overall, manufacturing exports represent 9.4% ($120 billion in goods) of California’s GDP, and computers and electronic products constitute 29.3% of the state’s total manufacturing exports. More than one-fifth (21.9%) of all manufacturing workers in California directly depend on exports for their jobs.

Since January 2001, the manufacturing sector lost 33% of its job base, down from 1.86 million jobs in 2001 to 1.237 million jobs in 2019. In 2010, the manufacturing sector began adding employment, regaining 7,900 jobs. California exports have also increased — up from $104 billion of manufactured goods in 2009 to $124 billion in 2010.

A 2011 report by the Center for Applied Competitive Technologies (CACT) at El Camino College and the Center Of Excellence (COE) of the Los Rios Community College District identified the following 17 cluster industries in California:

  •  Aerospace Manufacturing
  • Biotechnology, Medical Devices, & Pharmaceutical Manufacturing
  • Building Materials Manufacturing
  • Chemical Manufacturing
  • Computers/Electronics Manufacturing
  • Dental Equipment, Supplies & Laboratories Manufacturing
  • Fashion/Clothing Manufacturing
  • Furniture Manufacturing
  • Household Products Manufacturing
  • Machinery Manufacturing
  • Metals Manufacturing
  • Paper Products Manufacturing
  • Petroleum Manufacturing
  • Plastic Products Manufacturing
  • Printing and Publishing
  • Transportation Manufacturing

 The report states, “With the exception of food manufacturing, biotechnology, dental equipment, and petroleum, nearly every manufacturing cluster in California has shed jobs over the last five years [2006-2011.] Building materials lost the most jobs with a decline of 32%, followed by printing (22%), and computers/electronics (10%).”


The report states that the “manufacturing sector must address a variety of challenges, from navigating a complex regulatory environment to developing strategies to compete with low cost economics. There are a number of factors that have inhibited the manufacturing sector’s ability to compete locally and internationally.” Some of these challenges are:

  • California’s regulatory climate is difficult, expensive and time consuming to navigate
  • Higher health care expenditures compared to countries where health care is paid for by general tax revenues
  • Higher salaries and other benefits, such as paid leave, insurance, and retirement plans
  • Higher costs associated with litigation claims
  • Higher costs associated with environmental compliance;
  • Higher corporate tax rates than most other countries (the United States’ tax rate is 40%, the second highest tax rate among major trading partners.)


Competition from low-cost economies, such as China, India, Singapore, South Korea, Thailand, and Vietnam, is one of the major challenges faced by the manufacturing sector. However, the total cost of outsourcing to other countries is often miscalculated. According to the Reshore Initiative, the true cost of manufacturing outside of the United States does not include costs associated with:

  •  National policy issues (trade negotiations, etc.)
  • Changes in currency exchange rates
  • Intellectual Property theft
  • Supply chain disruptions
  • Lengthy delivery times
  • Traveling to the manufacturing site to assess and resolving production issues

Further, in the last few years many countries have started to raise their prices to adjust for increases in wages and higher transportation/fuel expenses. By examining the total cost of outsourcing, the Reshore Initiative argues that hiring local production firms is just as price sensitive as hiring firms from low-cost economies. Also, there are several benefits to working local, such as:

  •  Improved quality and consistency of inputs
  • Ability to create just-in-time operations that reduce inventory and shipping costs and improve business-to-business relations
  • Intellectual property security
  • Faster delivery to customers

As this viewpoint has gained popularity, it has started to shift production back to the United States, creating jobs and wealth in the process. By 2013, the Reshoring Initiative estimated that about 80,000 jobs returned to the United States through reshoring, about 15% of the nationwide increase of 526,000 manufacturing jobs since 2010.

If you are in the southern California region, you can find out more about how we can help the manufacturing industry thrive in California by attending the “Manufacturing in the Golden State – Making California Thrive” economic summit on Wednesday, March 19, 2014, 9:30 AM – 1:30 PM.

This leadership summit will explore how to grow manufacturing jobs and businesses in California. National experts and local business owners will present the best solutions to help craft a successful growth strategy. 

Where:  Brea Community Center, 1 Civic Center Circle, Brea, CA 92821

Keynote Speaker:   Dan DiMicco, Chairman Emeritus, Nucor Steel Corporation


* Dr. Greg Autry – Senior Economist, Coalition for a Prosperous America; Adjunct Professor of Entrepreneurship, Marshall School of Business, University of Southern California (Trade Reform)
* Pat Choate – Economist; Author, “Saving Capitalism: Keeping America Strong” (Manufacturing Strategy)
* Mike Dolan – Legislative Representative, International Brotherhood of Teamsters (Currency Manipulation) (invited)
* Michael Stumo – CEO, Coalition for a Prosperous America (Tax Reform)

Panel of local business leaders (partial listing):

* Michele Nash-Hoff – Chair, Coalition for a Prosperous America CA Chapter; President, ElectroFab Sales (Overview of California Manufacturing)

*Dana Mitchell, Advanced Mold Technology Inc.
* Nick Ventura – Co Founder, Venley by Youth Monument

Presented by:  Senator Mark Wyland, in partnership with the Coalition for a Prosperous America and other regional businesses and associations.

Cost: Early Bird Rate $25 through March 5, 2014; $35 thereafter (Includes light breakfast and full lunch)


City of Brea

ATE Corporation (ATEC)

California Manufacturing Technology Consulting

Industrial Metal Supply Company

Event partners
APICS – Orange County Chapter

Brea Chamber of Commerce

Corona Chamber of Commerce
Cypress Chamber of Commerce

Fountain Valley Chamber of Commerce

Fullerton Chamber of Commerce
Garden Grove Chamber of Commerce
Global Innovative Systems

La Habra Chamber

Orange County Hispanic Chamber of Commerce
Orange County SBDC
Riverside County Manufacturers & Exporters Association
West Orange County Regional Chamber
Yorba Linda Chamber of Commerce

Register today for this important event.

For more information, or if you are unable to pay online, contact Sara Haimowitz (202-688-5145,

Also: click here to find out about becoming an event sponsor!


Michele Nash-Hoff, Chair
California Chapter of the Coalition for a Prosperous America


The Innovation Act Would Squash American Innovation

Tuesday, February 11th, 2014

Sometimes well-meaning legislation is passed that has unintended consequences that are harmful. This is the case for the Innovation Act, H.R. 3309, passed by a 325 – 91 vote in the House of Representatives on December 5, 2013, The next step is consideration by the U.S. Senate of four similar bills that have been proposed: S. 1720 (Leahy D-VT), S. 866 (Schumer D-NY), S. 1013 (Comyn R-TX), and S. 1612 (Hatch R-UT). What is the purpose of this new Act and how would it have harmful unintended consequences?

The intended purpose of the Innovation Act is to curb frivolous lawsuits for patent infringement by so-called “patent trolls,” a derogatory term defined by Wikipedia  as “a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking. Related, less pejorative terms include patent holding company (PHC) and non-practicing entity (NPE).”

However, the Patent Freedom organization states, “NPEs are not all cut from the same cloth. Some inventors choose not to pursue the development, manufacturing, and sales of their inventions. They may lack the resources to do so, or the interest, passion, and commitment that such an effort requires. Instead, they may seek to license their inventions to others who can use them to deliver better products and services, often with the assistance of those with experience in this area. Or they may choose to sell the patents outright…. some entities buy patents with the express purpose of licensing them aggressively. For instance, about 25% of “parent” NPEs tracked by Patent Freedom are enforcing only patents that they had acquired. Another 60% are asserting patents originally assigned to them, and the remaining 15% are asserting a blend of originally assigned and acquired patents”

The Innovation Act would create additional requirements as part of the legal process associated with patent infringement under United States law. Some of the provisions are paraphrased below:

  • Requires specificity in patent lawsuits – requires specified details concerning each claim of each patent was allegedly infringed.
  • Makes patent ownership more transparent with a “Joinder” clause requiring patent plaintiffs to name anyone who has a financial interest in the patent being litigated.
  • Makes the loser pay – “if a losing plaintiff cannot pay, the bill would allow a judge to order others who had a financial stake in the plaintiff’s lawsuit to join the lawsuit and pay the costs of an unsuccessful patent lawsuit.”
  • Delay discovery to keep costs down – gives time to allow the courts to address legal questions about the meaning of patent claims with the goal of reducing legal costs and allow more frivolous lawsuits to be resolved before defendants have incurred large legal bills.
  • Protect end users – allows technology vendors to step into the shoes of their customers and fight lawsuits against trolls on their customers’ behalf in cases where restaurants, supermarkets, airlines, casinos, real estate agents and other brick-and-mortar businesses are being sued for using technology such as Wi-Fi instead of the manufacturers of the equipment.

Proponents say that” in the two years since the AIA was enacted, patent litigation has exploded. More and more firms are acquiring broad patents not to use the technology but rather to extract licensing fees from companies that infringe the patents accidentally…so a number of industry groups that weren’t traditionally involved in patent debates have begun agitating for patent reform.”

The proposal enjoys broad support from some in the technology sector. Internet companies such as Google have been a driving force behind the bill. Microsoft had opposed one of the provisions of the Bill, but is now expressing support for the legislation after that provision was removed.

Opposition to Innovation ACT

Opponents say that the Innovation Act as currently written weakens our patent system and will have unintended consequences on U.S. inventors. These additional changes to the patent system will result in a shift in the balance of patent ownership, favoring large and better financed companies over startups, investors and inventors who have been responsible for some of the most historic and groundbreaking discoveries in our nation’s history.

The Biotechnology Industry Group (BIO) did not support the Innovation Act because it believed that it would undermine biotech research and innovation. Daniel Seaton noted on BIO’s Patently Biotech blog, “the Act would ultimately make it more difficult for patent holders with legitimate claims to protect their intellectual property…Provisions in the legislation would erect unreasonable barriers to access justice for innovators, especially small start-ups that must be able to defend their businesses against patent infringement in a timely and cost-effective manner, and without needless and numerous procedural hurdles or other obstacles.”

Joe Panetta, President and CEO of Biocom, San Diego’s biotechnology organization, expressed similar sentiments, stating, “Not only does H.R.3309 fail to adequately address the abusive litigation practices it aims to curb, but it would place burdensome and unnecessary requirements and penalties on all patent holders. The bill is likely to inadvertently harm the world’s greatest innovation system by limiting legitimate patent holders’ ability to assert their rights.”

The Independent Inventors of America against Current Patent Legislation, representing independent inventors and small patent-based businesses across the country disputes the claim that patent infringement litigation has escalated. Their January 2014 petition states “The Government Accounting Office Report required by the America Invents Act finds that there is no ‘patent troll’ problem. Data supporting the claim of billions of dollars of reported cost cannot be verified and actually represent primarily voluntary and court directed license agreements for valid patents. In addition, analysis of patent litigation shows that the number of patent suits relative to the number of patents issued today remains consistent over the 200 plus year history of the patent system with the exception of a short period prior to the Civil War when the rate was higher than it is today. The reports supporting this latest round of legislation are simply not valid.”

They argue that “what is being characterized as a “patent troll,” and the target of the proposed legislation, is really an investor. As individual inventors and small patent-based businesses, we need investors to practice and protect our inventions. A patent is sometimes the sole asset we can leverage to attract that investment. Damaging investors therefore damages inventors.”

Their main reasons for objecting to the Act are:

Loser Pays – would significantly increase the risk and cost of defending a patent and “could be fatal to a large percentage of inventions.”

“Joinder” clause – allows investors to be personally liable for legal fees if inventor loses lawsuit, so this would severely limit investment in new technologies.

Patent Term Adjustment – eliminates a patent adjustment for a delay in patent issuance caused by the U. S. Patent Office (Note: Patents are granted for 17 years, but if it takes five years to get a patent, the patent term would be only 12 years instead of 17.)

The petition states, “This legislation will levy grave harm upon independent inventors and small patent-based businesses, as well as the investors we need to help commercialize new technologies and to protect our inventions.” They “stand firmly against the proposed legislation and any future legislation that would weaken the American Patent System.”

Members of the governing body of the San Diego Inventors Forum, of which I am a member, signed the petition. Adrian Pelkus, SDIF President, stated, “The Innovation Act (H.R. 3309) horrifies me with the path that allows corporations to beat up on small inventors…Financial ruin for inventors will be extremely easy due to the nature of startups, meaning most inventors could lose their fledgling businesses disputing challenges to issued Intellectual Property.

To dissuade investors by increasing risk that the IP in the project they are investing in will be challenged (perhaps even frivolously just to stop them from progressing to market) will grind innovation to a standstill.

At a time when we need American ingenuity and investors to rebuild our economy, taking steps to diminish our rights as inventors is un-American, economically dumb and intellectually suicidal. Stifling innovation in a technologically based society is a sure path to economic ruin which is why the USPTO system was originally designed to reward not punish the inventor. We must not allow big multinational corporations the ability to squash. Any and all actions to stop this bill must be enacted.”

Gary Klein, V. P. Public Policy, of San Diego’s CONNECT organization, stated why they oppose the Act:  “A startup company’s main asset is its intellectual property. Most investors’ first question to startups is about how their technology is protected. The Innovation Act that passed the House has several provisions – fee shifting, covered business methods, joinder rules, discovery and customer stay – that will have some very serious adverse consequences for small/startup companies, universities and research institutions, as well as companies who use licensing as a business model.”

Join us in signing the petition and contact your Senator to ask them to oppose all of the similar bills that have been introduced in the Senate.

Should California Copy Ohio’s Economic Development Policies?

Tuesday, February 4th, 2014

Ohio’s Governor and economic development agencies may not be visiting California companies to woo them back to Ohio as Texas Governor Rick Perry has been doing, but I would say the answer is “yes” to this question. California would do well to emulate the successful economic development policies of central Ohio surrounding its capital city of Columbus.

Recessions usually didn’t affect this region very much, but the Great Recession was different. In 2009, business leaders formed Columbus 2020 to address the effects of the recession on the 11-county region surrounding the state capital. It is now a private, nonprofit entity incorporated as both a 501(c) (6) and a 501(c) (3) (Columbus 2020 Foundation) and has become a collaboration between business leaders, government, and educational institutions. Its mission is to generate opportunity and build capacity for economic growth throughout Central Ohio.

To achieve this mission, the founders set the following goals to achieve by the year 2020:

  • Add 150,000 net new jobs
  • Increase personal per capita income by 30 percent
  • Add $8 billion of capital investment
  • Be recognized as a national leader in economic development

The plan to achieve these goals is:

  • Retain and expand the companies and industries that call the Columbus Region home today
  • Attract major employers to establish operations in the Columbus Region
  • Create more commercial enterprises by leveraging research assets and entrepreneurs
  • Improve civic infrastructure that enhances the economic development environment

In my interview with Kenny McDonald, CEO of Columbus 2020, he said, “The key factor of our success was starting with the vision of the business leaders that formed Columbus 2020 and having corporate leaders that are willing to engage in the process. You need both vision and engagement. There has been a real partnership between business, government, and educational institutions.”

He added, “We take a holistic view of trade and investment, as many of the companies in the region have a global footprint, and take time to understand what is driving business. The business climate has improved, especially for companies that sell in the U. S., and we’ve noticed that many companies are reshoring back to the US as part of their strategy to regionalize. The U. S. has never been more competitive, and our markets remain attractive, while there remains instability elsewhere in the world. Companies that had a plant in China or India to export to the U. S. are bringing production back to the U. S., to sell to the U. S., while some companies are bringing back work to export to other countries.”

He said, “Honda of America, which has a significant presence in the Columbus Region, recently announced that they were planning to export more to countries outside of the U. S. Honda’s supply chain and other companies that are part of the global automotive supply chain are evidence of the trend to regionalize. It’s been recommended that foreign companies, especially mid-size companies, regionalize by having a plant in the U. S. to reduce risks that disrupt the supply chain.”

The region has a population of only 2 million, but has 15 Fortune 1000 companies, such as Cardinal Health, The Scotts Miracle-Gro Company, Big Lots, L Brands (including Victoria’s Secret and Bath & Body Works, Express, and Nationwide.)

There is a special industrial park, the Personal Care and Beauty Campus, built up near Victoria’s Secret and Bath & Body Works, where all of types of companies in their supply chain are located, representing about 2,000 jobs.

Middle market companies are also an important part of the Columbus Region economy. There are 1,313 businesses that have between $10 million and $1 billion in annual revenue. Even though they represent only 2.3 percent of business establishments in the Region, they employ 15.4 percent of the private sector workforce and have an outsized presence in manufacturing, headquarters and back office functions, and other key industries.

The Columbus Region is home to 63 colleges and university campuses with a total enrollment of nearly 150,000 students and more than 22,000 annual graduates. It is also home to the largest concentration of PhDs in the Midwest, and has more PhDs than the national average. The Ohio State University – the state’s flagship university and one of the country’s leading research institutions – has more than 56,000 students at its main campus in Columbus.

Businesses in the Columbus Region benefit from:

  • No personal property tax
  • No inventory tax
  • No state corporate income tax

Ohio offers the following tax incentives:

  • Job Creation Tax Credit
  • Ohio Enterprise Zone Program
  • Community Reinvestment Areas
  • Research and Development Investment Tax Credit

Ohio also offers several unique loan and grant programs as additional incentives for companies to relocate in the region.

The chart below shows the largest manufacturers in the Columbus region:

Honda of America Mfg. Inc. Automotive 9,433
Whirlpool Corporation Appliances 2,344
TS TECH Co, Ltd. Automotive 2,078
Abbott Nutrition Food & Beverage 2,055
Emerson Electric Co. Utilities 1,720
Worthington Industries Inc. Steel 1,390
Ariel Corporation Energy 1,265
Boehringer Medical 1,250
The Anchor Hocking Co. Glass 1,202
The Scotts Miracle-Gro Co. Lawn Care Products 1,165
Rolls-Royce Energy Systems Machinery 1,146
Commercial Vehicle Group Automotive 1,125
Owens Corning Corporation Automotive 1,011
Lancaster Colony Corporation Food & Beverage 856
Mettler-Toledo International Precision Instruments 800
Jefferson Industries Automotive 750
Cardington Yutaka Technologies, Inc. Automotive 725
Columbus Castings Steel 700

As a result of these policies, Columbus is now ranked as the 8th most affordable location in the U. S. for corporate headquarters. The cost of doing business is half the cost of New York City, Los Angeles, and Silicon Valley. For all of these reasons, Columbus has become the state’s largest and fastest growing city.

Columbus 2020 is well on the way to not only achieving, but exceeding these goals by 2020 as shown below:

As of August 2013, more than 53,000 jobs have been created in the Columbus Region since Columbus 2020’s founding in 2010. As of December2013, $3.71 billion of capital investment has been added to the Columbus Region since 2010. As of 2012, personal per capita income in the Columbus Region has increased 10.8 percent since 2010, from $38,547 to $42,728.

California’s Governor Brown and the State legislature should review what the Columbus 2020 organization has accomplished in revitalizing the economy of central Ohio. California’s manufacturers would love to benefit from having no corporate income tax and no inventory tax, as well as having a Job Creation Tax Credit and a Research and Development Investment Tax Credit

The new hiring tax credit and partial exemption of certain property from California’s sales and use tax are meager benefits being offered to manufacturers as part of Assembly Bill 93 and Senate Bill 90 that went into effect January 1st. Our California legislature needs to “stop fiddling while Rome is burning,” so that we will be able to stem the tide of companies moving out of California and add more than the pitiful 7,900 manufacturing jobs we have added since 2010 after losing  over 625,000 manufacturing jobs since 2001.