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By EDVARD PETTERSSON

Staff Reporter

Never mind Hollywood L.A.’s economy is still largely based on manufacturing.

One third of the entries on the Business Journal’s list of the 100 largest privately owned companies in Los Angeles County are manufacturers reflecting Los Angeles County’s standing as the nation’s largest manufacturing center in terms of employment.

With 679,700 factory workers in 1998, Los Angeles eclipses such traditional powerhouses as Chicago and Detroit, according to the Economic Development Corp. of Los Angeles County.

The strength of the local manufacturing sector lies not in heavy industry, such as steel and car plants, but in a broad range of light industries from high-tech to food to apparel.

Small and medium-sized, mostly private businesses led the resurgence of manufacturing in L.A. after the recession in the early ’90s, and these companies make up the bulk of the local manufacturing sector.

For example, 3,650, or 88.5 percent, of the apparel and textile manufacturers in L.A., have fewer than 50 employees, according to the EDC. Among industrial machinery manufacturers, the figure is 92.9 percent.

Over the last few years, L.A. County has been an attractive location for start-up businesses, according to Tom Lieser, executive director of the UCLA Anderson Forecast. “Property values were down earlier in the ’90s, local government was eager to recruit new businesses, and it was easier to obtain a business license,” said Lieser.

Lieser points out that whereas many large, publicly held manufacturing firms have only their corporate headquarters in L.A. County, the smaller private companies often have plants here. And the concentration of manufacturers in an area tends to create a snowball effect. “If one company needs a specific product, soon you’ll find a guy down the road making that product,” said Jack Kyser, the EDC’s chief economist.

But there’s often a price to be paid for doing business in L.A.

Jack Davis, president and chief executive of Ventura Foods LLC, a manufacturer of cooking oil and No. 12 on the list, says the close proximity of local clients makes delivery of his products relatively inexpensive. Davis adds, however, “If I’m going to build a new plant, I do it in Nevada; the lower taxes and cost of labor would offset the higher cost of delivery.” The company operates two of its 13 plants locally.

Others do not see any cost-benefit advantage to moving operations out of the Los Angeles area. Marvin Gussman, president of Marvin Engineering Co. in Inglewood, notes that his aerospace and defense business has become so international that it is crucial for him to be no more than 10 minutes away from a major international airport in order to ship his products overseas.

“The only major drawback of being located in L.A. currently is the lack of affordable housing for new, out-of-town employees,” Gussman said.

David Van Buren, president and chief executive of Tecstar Inc., cites the supply of high-tech labor as a prime reason for staying here. The City of Industry-based company is one of only two manufacturers of solar cells for satellites worldwide, the other being Hughes Electronics Corp. in El Segundo. Van Buren says the local two-year college system is an important source for technical labor.

Manufacturing companies on this year’s list reflect the diversity of the local economy. They include an almost equal number of companies manufacturing high-tech products, machinery and machinery parts, and other industrial products, as well as food, apparel, and other consumer goods.

The highest-ranking manufacturer is Sun Valley-based PMC Global Inc., 10th on the list with $849 million in 1997 revenues, followed by ViewSonic and Ventura Foods.

One question often faced by private companies large enough to be included on the list is whether to remain private or to go public. Tecstar’s Van Buren notes that being private offers his company more flexibility and protection from the stock market’s ups and downs. He adds, however, that the company’s long-term strategy does not exclude the possibility of going public.

“For our current operations, we have no need for access to inexpensive capital through an IPO,” said Van Buren. “If we were to engage in a major expansion or acquisition, then we probably would need to go public.”

The heads of other privately owned companies say they aren’t tempted by the thought of losing their independence.

“I get offers every week from investment bankers and other companies interested in acquiring us,” said Gussman of Marvin Engineering, “but so far I haven’t been interested.”