LOS ANGELES

Inside
The city faces a
fork in the road
on tackling
congestion
FINANCIAL TIMES SPECIAL REPORT | Tuesday October 28 2008 Page 4
www.ft.com/los­angeles­2008

Diverse city looks beyond challenges

hub, but when that industry larger rivals. The recent housing
Matthew Garrahan shrank at the end of the cold and construction boom brought
reports on a city of war, the local economy was hit financial services back to Los
hard, primarily because it was so Angeles.
contrasts – one of the reliant on manufacturing. “In the past three or four
richest in the world, “Now, the economy is much years, there was an increase in
more diversified,” says Jerry financial jobs here,” says Mr
it is also one of the Nickelsburg, an economist with Martinez, adding that much of
worst for transport the UCLA Anderson School of that growth was housing-related.
Management, pointing to But the collapse of the subprime

T
he architect Frank Lloyd strengths in business services, lending market and the steep fall
Wright once said that if accounting and entertainment. in property prices during the
the world were tipped on The city’s business mix has past 18 months brought that
its side “everything loose evolved over the decades. “Going growth to an end. IndyMac, a
will land in Los Angeles”. back 20 or 30 years, it used to be large local lender, was recently
All life can indeed be found in a banking centre,” says Eduardo taken over by federal regulators,
the city, whether it is the 140 Martinez, an economist with the and Countrywide Financial, one
nationalities that live there, the Los Angeles County Economic of the biggest mortgage lenders,
aspiring actors that flock to its Development Corporation. Con- was acquired by Bank of Amer-
film studios in search of stardom, solidation in the 1980s saw its ica to avert collapse.
or the entrepreneurs, businesses banking sector decline, as famil- Still, other sectors continue to
and immigrant workers that iar local names, such as Security grow. Platinum Equity, a Beverly
drive its economy. Pacific, were snapped up by Hills private equity firm, recently
Los Angeles is the creative cap- closed a $2.75bn fund at the
ital of America, the centre of the height of the credit crunch. Fash-
film and television industries and Inside this issue ion and textiles are also booming.
the outsize egos that go with Art Los Angeles has carved American Apparel, the clothing
them. It gave the world the work out a position as a west coast manufacturer known for its racy
of Walt Disney and Raymond centre for culture, says Rachel adverts, plans to expand. It is
Chandler, MySpace, and Barbie Grant Page 2 based in Los Angeles, where it
dolls. Satellite technology was employs more than 4,000 people.
born in Los Angeles, and great Green agenda Mayor Antonio The city has a significant Lat-
aviators such as Howard Hughes Villaraigosa (below) is setting a ino workforce that plays a vital
built companies there. challenge to the whole country role in supporting economic
It has a vibrant and diverse with his push on clean growth, particularly in service
economy, home to Mattel, the technology, writes Matthew industries, landscaping and
world’s biggest toymaker, and Garrahan Page 2 building. Latino workers make a
the biggest companies in the vital contribution but many are
video games industry. Yet it is Real estate The home pruce in the US illegally; the Milken
also an industrial powerhouse. bust may well spread to the Institute, a research firm, esti-
most affluent areas, reports
Despite the 1990s retrenchment mates that there are about
Mark Lacter Page 4
of the aerospace industry, it con- 625,000 undocumented workers in
tinues to be the biggest manufac- Ports Four­tenths of all US Los Angeles.
turing centre in the US, with imports come through the A common complaint from visi-
more than 450,000 people docks of Los Angeles and Long tors is that the city lacks a cen-
employed making electronic Beach, says Matthew Garrahan tre, which is partly true. Efforts
goods and clothing. More people Page 5 are under way to revive the main
work in manufacturing in Los commercial district in downtown
Angeles County than in Michi- Defence Innovation is keeping Los Angeles by turning part of it
gan, for example. the space sector aloft, writes into an entertainment district.
The city has the biggest port Matthew Yet the soul of Los Angeles can
complex in the western hemi- Garrahan be found in any of the cities that
sphere on its doorstep. Los Ange- Page 6 make up Los Angeles County,
les and nearby Long Beach are one of the largest counties in the
responsible for 45 per cent of sea- US and bigger than the states of
borne goods that enter the US. It Delaware and Rhode Island com-
is also the global centre of space bined.
technology and research. And, Malibu, Pasadena, Inglewood
nearly 100 years after the fledg- and Manhattan Beach are among
ling film industry moved to Hol- the dozens of cities squeezed into
lywood, Los Angeles has become Los Angeles County, each with
a magnet for new digital media their own unique character and
companies.
Bright lights in the city of the stars: a big push is being made to revive the downtown area of Los Angeles Chad Ehlers/Alamy It has long been an aerospace Continued on Page 2
2 ★ FINANCIAL TIMES TUESDAY OCTOBER 28 2008

Los Angeles
LA looks Sun, sea and loyal talent draw online businesses
beyond DIGITAL MEDIA partner in the corporate considerable presence in the southern California. “Look A joint venture between mentality around the media son Avenue [in New York] –

the Matthew Garrahan

looks at the reasons
department of Latham &
Watkins, an international
law firm.
city when it moves to a vast
new headquarters in Playa
Vista in south-west Los
at the weather,” says Mr
Levinsohn. “But it’s also
about the jobs we’re offering.
NBC Universal and News
Corporation, Hulu is an
online video site that earned
industry is certainly deeper
and more robust in Los
Angeles.”
and where content comes
from, which is Hollywood,”
he says. “Hollywood speaks

threats for a sector’s rapid

expansion
Hollywood has driven the
city’s appetite for all things
digital, he says. Sony Pic-
Angeles next summer.
FIM’s other businesses,
which include Rotten Toma-
The harder, more compli-
cated, more exciting the
tasks, the easier it is to
a provisional valuation of
$1bn last year after a 10 per
cent stake in the business
The appeal of Los Angeles
extends beyond digital
media. Fandango, the cin-
the same language as Madi-
son Avenue, but that’s not
really true of Silicon Valley.
tures Entertainment, Walt toes, the movie review site, attract talent.” was sold to Providence ema tickets service, EHar- Mr Addante has founded
Continued from Page 1 Disney and Paramount Pic- Photobucket, a photo-shar- Los Angeles, he adds, “is Equity Partners. mony, Lowermybills.com several online companies. He
Silicon Valley may be better tures are among the studios ing service, FoxSports.com the place where technology Santa Monica-based Hulu and PriceGrabber were all moved one, StrongMail, from
appeal. More than 10.3m peo- known as the centre of the with sophisticated digital and IGN, an online video was created to give content created in the city and con- Los Angeles to Silicon Val-
ple live there, aware that technology and internet distribution businesses: Dis- game site, will all move into owners a legitimate platform tinue to operate there. ley partly to tap into talent
they could face disruption industries. But Los Angeles ney’s ABC television net- the new building, together ‘The talent and the for their programming. More recently, the Rubi- in the tech-heavy Bay Area.
and chaos at any time if the is fast becoming one of the work was the first to stream with MySpace. mentality around Other online video operators con Project, an ad-network “It turned out there was
earthquake California has pre-eminent locations for its programming online, for “All of our businesses will are in the city: Crackle, a optimisation company, more talent [in Silicon Val-
long been expecting – “the new digital media and online example. come together in a single the media industry Sony-owned site that special- opened offices on Bundy ley] but there was also more
big one” – rattles across the
San Andreas Fault.
advertising companies.
After all, with the venture
But there are other new
media businesses in the city
campus,” says Peter Levin-
sohn, president of FIM.
is certainly deeper ises in original, short-form
video content, will shortly
Boulevard in the west of the
city. Frank Addante, the
competition for it,” he says.
“There’s great talent here in
Wildfires are another regu- capitalist firms of San Fran- beyond the digital arms of “We’ve really built out the and more robust’ move its operations from the company’s founder, says a Los Angeles – and it’s more
lar threat to local communi- cisco and the Bay Area only the studios. MySpace, the engineering and technical Bay Area in northern Cali- community of digital start- loyal. There’s not as much
ties when the fierce Santa an hour away by air and largest online social net- capability of our workforce. fornia to Los Angeles. ups has emerged, held job-hopping.”
Ana winds and dusty Hollywood’s biggest studios work, was created in Los We’ve been able to hire high- and entertainment intersect. Sean Carey, senior execu- together by regular network- There are also differences
autumn temperatures create on its doorstep, the city is Angeles and has expanded quality executives and engi- Four years ago media com- tive vice-president at Sony ing events similar to those in mentality, he adds. “In
tinderbox conditions. the natural place for digital there since News Corpora- neers from northern Califor- panies were very nervous Pictures Television, says the common in Silicon Valley. Silicon Valley, entrepreneurs
The climate and relaxed entrepreneurs looking to set tion bought it for $580m nia and bring them to Los about moving content on the move to southern California Online advertising links think about building compa-
lifestyle make up for the pit- up shop. three years ago. Angeles.” internet. But there’s been was not driven by a need to many of the Los Angeles dig- nies that venture capitalists
falls that come with living in “There’s been an explosion The company is part of Year-round sun, beautiful lots of experimentation.” find technical talent. “Argu- ital businesses, he says. will want to buy into. But in
Los Angeles. But residents of digital media in the Fox Interactive Media, News beaches and a laid-back This, he says, has resulted in ably there’s more technical “There’s a connection Los Angeles entrepreneurs
have to grapple with other greater Los Angeles area,” Corp’s digital arm, which is approach to life are among the creation of businesses, talent in the Bay Area,” he between where the ad dol- are looking to build profita-
frustrations. says Richard Wirthlin, a about to increase its already the many appeals of life in such as Hulu. says. “But the talent and the lars are being spent – Madi- ble companies.”
It is one of the richest cit-
ies in the world, home to bil-
lionaires, such as Rupert
Murdoch, David Geffen and

City carves
Eli Broad. Yet the freeway
system and public infra-
structure are falling apart,
the result of years of chronic
under investment. It has
numerous bus routes and a

out position
limited light rail network
that connects the downtown
area with the San Fernando
Valley, Pasadena and Long
Beach.
But it lacks a comprehen-

as centre
sive subway or mass transit
system to connect Santa
Monica and the Westside
with the rest of the city.
With no alternative to
traveling by car, gridlock is

for culture
common.
Gang crime continues to
be a problem, despite the
best efforts of Bill Bratton,
the chief of the Los Angeles
Police Department. The city
has world-class higher edu-
cation establishments, but ART “This is a golden age for the
its state school system is arts in Los Angeles County,” says
grappling with falling gradu- Rachel Grant assesses Zev Yaroslavsky, member of the
ation rates and a cash-
crunch. With California des-
its emergence from Los Angeles County Board of
Supervisors, the powerful govern-
perately looking for ways to the shadow of New ing body of the largest county in
trim spending amid an eco-
nomic slowdown, schools are
York and London the US.
Los Angeles has also benefited
continually threatened with from the arrival of a number of
cuts in funding. prestigious museum directors.

N
There are other draw- ot even the oppressive Ann Philbin has been credited
backs. Los Angeles is a vast, late-summer heat inside with transforming the Hammer
sprawling city yet it can at the airless marquee Museum in the city’s Westwood
times be an insular goldfish could stifle the enthusi- area since arriving from the
bowl, with some residents asm of Los Angeles civic leaders, Drawing Center in Manhattan in
seemingly unwilling to con- art lovers and patrons at the Los 1999. Michael Govan, the former
sider the world beyond the Angeles County Museum of Art director of the Dia Art Founda-
Santa Monica Mountains. (Lacma) last month. tion in New York, has similarly
There are plenty of interna- They had gathered to see plans given Lacma a “shot of adrena-
tionally-minded residents, for a new exhibition pavilion, line” since being appointed chief
but a common grumble is designed by Pritzker Prize- executive two years ago, accord-
that Los Angeles lacks the winning architect Renzo Piano. ing to Lynda Resnick.
cultural and intellectual Funded by a $45m donation from Private galleries have opened Contemporary look: a Julian Schnabel exhibition at the Gagosian Gallery in Los Angeles Alex Berliner/BEI/Rex Features
clout of New York. local philanthropists Lynda and throughout Los Angeles’ urban
But there is no denying Stewart Resnick, the new building sprawl, from Chinatown to Culver Los Angeles Philharmonic. The in February this year following a city risks losing what makes it
the growing international will be Mr Piano’s latest contribu- City, and a young, sophisticated local theatre scene is booming $60m donation from the Broads. It special, says Mr Hoi. “Its sensibil-
status of America’s second tion to an ongoing expansion of generation of collectors has too, he adds. “There are more features works from, among oth- ity may become more homoge-
largest city. It has forged Lacma, which is transforming the sprung up to sustain the market. theatrical productions [in Los ers, Damien Hirst, Jeff Koons and nised, with artists pressured by
important relationships with largest art museum in Los Ange- “Los Angeles has always been Angeles] than in New York or Jasper Johns. galleries to make work that is
the Asian countries that les into a genuine player on the the place where artists emerged London.” The city’s teaching tradition more saleable.”
send consumer goods to the global stage. to be discovered by other cities Mr Broad and his wife Edythe has also helped its arts scene There are other challenges. A
US through its ports and an For decades the cultural life of such as New York and London,” established the Broad Art Founda- prosper, with artists such as John recent report from Rand, the non-
ambitious plan to “green” Los Angeles has laboured in the says Samuel Hoi, director of Otis tion in 1984 to increase public Baldessari continuing to teach in profit think tank, said better co-
the port complex is being shadow of New York. Artists were College of Art and Design, one of exposure to contemporary art by Los Angeles long after establish- ordination was needed between
copied by other international happy to live in the city but had the city’s leading art colleges. “It acting as a lending library to ing themselves with their work. arts and civic leaders to promote
port operators and heavy to go elsewhere to exhibit their has now become a marketing cen- public institutions. Unlike New York, which is “a the city’s cultural attractions.
polluters. work and make their name. tre [for artists] in its own right.” “We have more than 2,100 fiercely competitive market. . . Without a common strategy, there
It is taking the lead in But over the last decade, Los Eli Broad, a billionaire philan- works of art and we want to get there is a real sense of collabora- are concerns that the city’s recent
other areas too. The Holly- Angeles has enjoyed a creative thropist based in Los Angeles, has them to the broadest audience tion in the artistic community creative momentum may be lost.
wood studios that control boom. Together with Lacma, a been a long-time champion of its possible,” he says. While the foun- ‘It was a place where here”, says Mr Hoi. The lack of a mass transit system
the entertainment industry host of prominent cultural institu- cultural scene. He says it “is one dation has lent artworks to more artists emerged to be Over the years, Los Angeles has is another problem.
are forging new distribution tions has opened or undergone of the major cultural centres of than 450 public institutions, it lagged behind other art markets, But despite these hurdles, there
systems for their content, renovation in the last few years, the world, along with New York, favours those based in Los Ange- discovered by other such as New York. Freed from is a widespread optimism that the
which is consumed the
world over.
including the Getty Center and
Getty Villa, as well as the Frank
London and Paris”. As well as its
strengths in the visual arts, he
les.
A significant proportion of the
cities. It has now commercial pressure, many artis-
tic voices have emerged that are
Los Angeles arts scene will con-
tinue to flourish.
The city is also ready to Gehry-designed Walt Disney Con- says no other city has a sym- foundation’s artworks are on view become a marketing influenced by the city’s rich “This is the future,” says Mr
step out of New York’s artis- cert Hall and Colburn Conserva- phony hall or orchestra to rival at the Broad Contemporary Art multicultural heritage. But as the Broad. “This is really the arts city
tic shadow. The arts scene is tory of Music. the Walt Disney Concert Hall and Museum which opened at Lacma
centre in its own right’ Los Angeles market matures, the of the 21st century.”
booming in Los Angeles,
thanks to a string of recent
gallery openings, a world-
class symphony orchestra

Mayor sets agenda for the nation

and Frank Gehry’s stirring
Walt Disney Concert Hall,
perhaps the most beautiful
building in the city, which
has transformed impressions
of the downtown district.
Los Angeles has plenty of PROFILE protocol within days of and geo-thermal power, at a operators were offered emissions and renewable
challenges to overcome. But ANTONIO VILLARAIGOSA taking office. “We had the cost of about $1bn a year incentives to switch to energy because of an
it is an optimistic, ambitious dirtiest air in America,” he over the next five years. cleaner trucks and almost absence of White House
place, a diverse and exciting Green is the colour told the FT. “It was He is also using the city’s 600 companies signed up. leadership. “We believe
world city that is constantly
looking forward.
of the mayor’s big incumbent on us to take a
lead in greening and
ownership of the port to cut
emission levels. The Los
By 2012, 16,000 diesel
trucks will have been taken
cities have an important
responsibility, particularly
push, writes cleaning the nation.” Angeles port and its off the road as a result of when the federal
Contributors Matthew Garrahan This year, the city will
meet its Kyoto targets and
neighbour in nearby Long
Beach are the worst
the scheme. “It’s the most
far-reaching clean-air action
government has failed in its
responsibilities [to the
Matthew Garrahan will generate 10 per cent of polluters in southern plan in the nation,” says Mr environment],” he says.
Los Angeles Correspondent Los Angeles has always its energy from renewable California, thanks to the Villaraigosa. But his plans extend
been a centre for innovation sources, having started at nearly 17,000 diesel trucks Shipping lines using the beyond meeting Kyoto
Rachel Grant – witness, among other 2 per cent when Mr that regularly ship goods in port will be offered targets. He says renewable Mr Clean: Antonio Villaraigosa Kelly Fajack/WPN
FT Contributor
things, the birth of the Villaraigosa was elected. and out of the facilities. incentives to use low- energy is a big opportunity
Sean Ross global positioning system, It is on track to generate sulphur fuels, while Los that could have lasting programme: the fund is draw on the engineering
FT Contributor the skateboard and the 20 per cent of its energy Angeles is also replacing economic benefits for Los investing $45m in talents of local
Mars rover. from renewable sources by ‘We had the dirtiest diesel locomotives at the Angeles. clean-technology companies. higher-education
Mark Lacter
FT Contributor
Antonio Villaraigosa, Los 2010 and will reach 35 per air in America. It docks with electric ones. As part of the clean However, to become the institutions, such as the
Angeles’ mayor, says he cent by 2020, outstripping Although the ports trucks programme, the city leading global player in the California Institute of
wants to add the Kyoto targets as well as was incumbent scheme is at an early stage, gave a $500,000 grant to development of clean Technology and the
Rohit Jaggi
Commissioning Editor
development of “clean”
technology to the list of the
those set for California by
Arnold Schwarzenegger, the
on us to take it has attracted global
attention: the city has been
Balqon, a small company
that had designed a
technology, it needs to
attract international
University of California at
Los Angeles.
Steven Bird city’s creative state’s governor. a lead in greening approached by international prototype electric truck. The companies. About 20 acres has also
accomplishments. The targets have been port operators wanting to Los Angeles port helped A large parcel of derelict been set aside for a
Designer
He has set his sights on met quickly because Mr and cleaning’ learn how to improve Balqon test the truck and industrial land around the manufacturing centre,
Andy Mears Los Angeles becoming the Villaraigosa controls a environmental conditions at then bought the first 25 Los Angeles River has been which the mayor hopes will
Picture Editor greenest city in America unique set of municipal The California Air their own facilities. vehicles for about $6m. set aside to create what city attract new businesses.
and wants to use its size assets, such as the Los Resources Board says the “We have been Every time Balqon sells a officials are dubbing a It is an ambitious plan
and purchasing clout to Angeles port and the trucks produce emissions hamstrung by community truck to another port Los “clean-technology corridor”. but there is much to be
For advertising details, reduce its greenhouse gas Department of Water and that are more harmful than opposition to expansion,” Angeles will receive a Discussions have started gained, says Mr
contact: emissions and attract Power, which is the largest the area’s 6m cars. says Geraldine Knatz, royalty fee, which will be with international Villaraigosa. “We’re taking
Hope Kaye on: investment from public utility in the US. In conjunction with the executive director of the reinvested in developing companies about relocating our environmental problems
+1 212 641 6548; clean-technology companies. The DWP has significant two ports, Mr Villaraigosa Los Angeles Port. “But new, clean technology. to the corridor and a range and turning them into
fax: +1 212 641 6545; The mayor has pursued electricity needs, so Mr recently launched a “clean going green allows us to The mayor has also of incentives are available economic opportunities. Los
e­mail: hope.kaye@ft.com an environmental agenda Villaraigosa directed it to trucks” scheme that banned move forward.” included the Los Angeles for businesses opting to Angeles is uniquely
or your usual since being elected three buy 20 per cent of its nearly 2,000 diesel vehicles Mr Villaraigosa stresses City Employees Retirement move to the city. positioned to emerge as a
representative years ago and committed energy from renewable built before 1989 from that Los Angeles has taken System (Lacers) pension The site will include a global capital of the green
Los Angeles to the Kyoto sources, such as wind, solar entering the ports. Haulage such wide-ranging action on fund in his green research facility that will economy.”
FINANCIAL TIMES TUESDAY OCTOBER 28 2008 ★ 3

Los Angeles

Directors Total production days

Thousands
25

TV

cut to 20

15

different 10

Features

locations 5
1994 95
Source: Film LA
96 97 98 99 2000 01 02 03 04 05 06 07

ENTERTAINMENT INDUSTRY “Films employ hundreds

of people and can pump seri-
Other states have ous cash into the local econ-
taken business omy,” says Todd Lindgren of
FilmLA. TV productions
from LA, says have replaced film shoots on
Matthew Garrahan the streets of Los Angeles,
although this is not particu-
larly good news for the city.

T
he film business is Most of the growth in TV
synonymous with productions has come from
Los Angeles. So reality programmes, which
much so, that the typically employ fewer peo-
name most associated with ple than a scripted drama
the industry is visible in show. Whereas a TV drama
bold white letters to anyone would cost about $3m an
within a few miles of the hour, reality programming
hills that separate the city tends to cost about $700,000,
from the San Fernando he says. Photo: Getty Images
Valley. “We have to fight to pre-
Yet Hollywood’s place in vent further erosion of other
the firmament of the greater categories, like TV,” he adds.
Los Angeles area is slipping. Authorities in Los Angeles
Although the studios are all have not responded as
based in the city, the film emphatically to the exodus of
productions that drive the film productions as many in
industry and that create last- the city would have liked.
ing economic benefits are City and state budgets are
increasingly taking place under pressure from falling
elsewhere. tax revenues, while economic
This is because of a range growth has stalled – which
of attractive tax incentives means there is little chance
and credits that are being of similarly attractive tax
offered by other states in the schemes being launched in
US. Aware that a crew work- the home of the film indus-
ing on a film shoot will stim- try.
ulate a local economy by Still,
spending money in some-
shops, hotels and thing
restaurants, needs to
states such as be done to
Louisiana keep produc-
and New tions in the
Mexico city, says Rox-
are try- anne Christ, a
ing to partner in the
lure corporate depart-
pro- ment of Latham & Wat-
ductions kins, an international law
away from California. firm with a large presence in
Studios with an eye Los Angeles.
on production costs have “We’ve taken our status as
followed closely the incen- the centre of entertainment
tives that are being offered. slightly for granted. Los
For example, the new film Angeles needs to come up
starring Brad Pitt, The Curi- with a game plan that keeps
ous Case of Benjamin Button, business already here in the
was shot in Louisiana. The city.”
sequel to Transformers – Federal authorities have
which, like the Brad Pitt taken steps to keep film pro-
film, will be distributed by duction in the US. The
Paramount Pictures – was recent $700bn bailout of the
shot in New Mexico. financial system by the US
Competition for film pro- government included a tax
ductions first began to inten- incentives scheme but the
sify in the mid-1990s, when package only applied to pro-
Canada began offering tax ductions that stayed in the
breaks to producers. Since US and was not specific to
then, US states have got in California.
on the act: Louisiana Yet, despite the gloom, all
stepped up its efforts after is not lost for Los Angeles.
Hurricane Katrina. And New Some states, such as Louisi-
York, under its mayor ana, have over-extended
Michael Bloomberg, recently
began offering juicy incen-
tives. It recently lured the ‘Films employ
Ugly Betty TV programme
from Los Angeles to the city.
hundreds of
For filmmakers looking to people and can
squeeze every last drop out
of money out of their produc-
pump serious
tion budgets, tax credits can cash into the local
make a lot of sense. “You
can spend $1.5m on a $2m economy’
production in New Orleans
and that can be very attrac- themselves in the attempt to
tive,” says Darrell Miller, co- attract film productions and
founder of Mason Miller, an have subsequently reined in
entertainment law firm. their lavish incentive pro-
“If all states really begin grammes.
to have viable programmes Michigan, a relatively
that give deductions of recent player on the tax
25 per cent or more, in the incentive landscape, is also
long run that will take a re-examining its commit-
big bite out of the local ment to luring productions.
and state economy in Cali- It is considering a cap on
fornia.” film-related spending after a
But the effect of the local outcry that its tax
increased competition can be credit for film shoots could
already seen in the number be better used on cutting
of shooting days recorded in business taxes.
Los Angeles. According to And while attractive tax
data from FilmLA, the packages are available else-
organisation that arranges where, expensive film shoots
permits for film and TV continue to take place in Los
shoots, the number of film Angeles. Marvel Studios,
productions hit a peak in which scored one of the
1996, when 13,980 days were year’s biggest box office hits
shot in the city. with Iron Man, recently said
Since then, the number it would film the sequel in
has dwindled. Last year, Manhattan Beach, south of
only 8,247 days of shooting Los Angeles. The local film
on film productions were industry, it seems, has life in
recorded in Los Angeles. it yet.

Down and out: film­making is down in Beverly Hills and LA

despite high­flyers such as the Iron Man (above) sequel
4 ★ FINANCIAL TIMES TUESDAY OCTOBER 28 2008

Los Angeles

Foreclosures
burn through
the buoyancy
REAL ESTATE bringing down home prices, which
will lead to more foreclosures.
The home price bust Some of the heaviest-hit com-
may well spread to the munities are littered with for-sale
signs. “This is going to be a slow
most affluent areas, burn,” says Christopher Thorn-
writes Mark Lacter berg, a principal at Beacon Eco-
nomics, a research group that
monitors the real estate market.
Real estate in southern Califor- “Eventually, prices will hit bot-
nia is all about booms and busts. tom and when they hit bottom
They happen with regularity they’ll stay there for years.”
because so many people believe For now, the foreclosure prob-
owning property in the region, lems have not spread to the more
whether near the ocean in Mal- affluent parts of Los Angeles. In
ibu or further east in the desert, Palmdale, in the Antelope Valley,
is part and parcel of the Ameri- 450 homes were foreclosed in the
can dream. second quarter, or 28.4 homes per
But, thanks to the collapse of 1,000. By contrast, the famous
the subprime lending market, Beverly Hills 90210 zip code had
that dream has soured. After only five foreclosures during the
house values soared in southern same period, or 0.6 homes per
California in the early part of the 1,000.
decade, the region now finds One explanation is that home-
itself at the centre of a financial owners in places such as Beverly
crisis that is rippling throughout Hills and Santa Monica have
the global economy. owned their houses for years and
It was a different story only did not need to indulge in dan-
two years ago. The easy availa- gerous lending. “You have highly
bility of subprime mortgages had concentrated supply and difficult
turned Los Angeles County into entitlements,” says Paul Habibi,
a property hotspot, with house a Los Angeles real estate devel-
prices more than doubling oper and instructor at UCLA’s
between 2001 and 2007. But after Anderson School of Management.
prices ran out of control, the “It was a lot easier to put up a
market buckled. housing tract and some palm
The region now has some of trees in the Inland Empire.”
the highest rates of mortgage But some economists, such as
foreclosure in the US. In the first Mr Thornberg, believe that even
eight months of 2008, more than prosperous regions will eventu-
56,000 notices of default – the ally succumb to the real estate
first step in the foreclosure proc- bust. The last few months have
ess – were filed in Los Angeles
County, a 98.6 per cent jump
from the same period a year ear- ‘It’s going to be a
lier, according to DataQuick, a long time before
research group.
Typically, job losses lead to an those places come
Heart of the revival: the Staples Center is home to the Los Angeles Lakers franchise and launched the downtown regeneration when it opened in 1999 increase in foreclosures, which is
what happened in Los Angeles in
back, if they ever do,
because they’re not

Downtown goes upmarket

the 1990s. Layoffs in the aero-
space industry left many middle-
income homeowners unable to
job centres’
keep up with their mortgage pay-
ments. But rather than job seen a sharp increase in the
losses, the latest collapse in area’s unemployment rate, with
prices was caused by reckless jobs being lost across the local
URBAN RENAISSANCE turn that vision into reality with yet it doesn’t have a content change in 2010 when the hotels Anschutz as our chairman is that borrowing and lending. economy.
the $2.5bn LA Live project. campus.” open, says Mr Leiweke. “They he made sure we secured long- The foreclosure crisis has been Companies in the financial
An ambitious project Mr Leiweke is best known as The Nokia Theatre is a stone’s make the convention centre a term financing. The old saying centred on certain portions of services sector have been hit
aims to make the the man who brought David
Beckham to the US. AEG owns
throw from the Staples Center,
which AEG also owns. Home of
true convention centre,” he says,
pointing out that an additional 50
about Phil is that he can see
around corners.”
southern California – mainly
inland regions such as Riverside,
especially hard, including Coun-
trywide Financial, which is based
commercial centre the Los Angeles Galaxy soccer the illustrious Los Angeles Lak- conventions have been booked in The money is being spent on San Bernardino and the Antelope in Calabasas, north of downtown
worthy of the city, says franchise and is betting that the
England star will lift interest in
ers basketball franchise, the Sta-
ples Center anchors the LA Live
advance of the hotels opening.
While Marriott International
adding new venues and attrac-
tions to LA Live. An ESPN studio
Valley desert cities of Lancaster
and Palmdale.
Los Angeles, and was recently
acquired by Bank of America;
Matthew Garrahan the sport in the US to new project, having launched the will operate the two hotels, AEG will soon start operating on the Located more than an hour and IndyMac Bank, which is
heights. regeneration of the downtown will own the two properties and site, which will be the sports from downtown Los Angeles, based in Pasadena and was

D
owntown Los Angeles The LA Live scheme is simi- area when it opened in 1999. is selling 224 condominiums on cable network’s only west coast these areas have attracted huge seized by US regulators in the
used to be a no-go zone larly ambitious. The 4m sq ft LA Live includes a substantial the upper floors of the main broadcasting centre. The develop- property developments over the summer.
after dark. Crime was redevelopment scheme is not yet hotel component. A Ritz-Carlton tower. ment also includes an outdoor past 10 or 15 years, offering more Richard Green, director of Uni-
rife in the area, which finished but has already trans- This represents perhaps the plaza area, several high-end res- affordable housing to residents versity of Southern California’s
by day is home to more than formed the western edge of riskiest part of the project. Mr taurants, a music venue with a priced out of more expensive Lusk Center for Real Estate, says
300,000 office workers who com- downtown with the opening last ‘From a business Leiweke says most of the resi- capacity for 2,350 people, and the areas near the coast. he is concerned about many of
mute every day to buildings such year of the 7,100 capacity Nokia standpoint, the dences have already been sold, Grammy Museum, which will But many of these buyers took the region’s inland areas. “It’s
as City Hall or the skyscrapers Theatre. The concert venue has although he acknowledges that open in time for the 50th anniver- loans that became unmanageable going to be a long time before
that house law firms and banks. established itself as the most hotels are going the recent slump in the housing sary of the music awards show. after being reset by mortgage those places come back, if they
Yet the commercial centre of
Los Angeles is undergoing a
high-profile arena on the west
coast, having hosted the Emmy’s
to be the most market and the credit freeze has
made the process more problem-
Mr Leiweke is relaxed about
the possible effects of a downturn
companies. As home prices
started to fall last year, borrow-
ever do, because they’re not job
centres,” he says.
transformation. The impetus is and events such as the finale of important part atic. on trading at LA Live, saying he ers wound up owing more than It took nearly 10 years for
coming from Anschutz Entertain- American Idol. “Had it not been for the econ- has faith in the enduring appeal their houses were worth. “Some prices to return to their previous
ment Group, best known in the AEG is applying a formula it
of the project’ omy, we would have sold out. of music and entertainment. “I of them were not willing to face peak after the aerospace-related
UK for turning the barren waste- has already tried and tested in But we have sold more than 60 don’t think anything is recession- the reality of their situation,” collapse in the early 1990s. Even
land of the Millennium Dome London with the O2 and in Ber- and a J.W Marriott are included per cent. There are no other proof . . . but this generation says Donna Oehler, an Antelope so, the $800bn southern Califor-
into the O2, which has become lin, and which it will soon try in in the project, with the aim of projects like this in downtown thrives on entertainment. We’re Valley real estate broker who nia economy remains in good
one of the world’s most popular Shanghai: turn underused urban boosting business at the nearby LA that are anything like this bullish about this generation of specialises in foreclosed proper- shape, mainly because it is no
music and entertainment venues. areas into new centres of invest- Los Angeles Convention Center. one. . . we don’t open for another consumers and their ability to ties. “Some of them got bad longer reliant on a single indus-
AEG is owned by Philip Ans- ment by building sport and enter- “From a business standpoint, the year and we think more than 90 keep spending.” loans, some of them just made try. It is more diversified than it
chutz, a Denver-based billionaire, tainment facilities. “Los Angeles hotels are going to be the most per cent will be gone when we Although record labels are suf- bad choices.” was in the 1990s, with strengths
and is headquartered in Los is the most expensive and the important part of the project,” do.” fering, “music has never been as Foreclosures made up more in international trade, aerospace,
Angeles. The company has long longest commitment we have,” says Mr Leiweke. The credit squeeze will not popular or as important”, he than 45 per cent of all home sales entertainment and technology
desired to give its home city the Mr Leiweke told the FT. “But it The city has failed in the past affect the financing for the $2.5bn adds. “Live music is more in southern California in August, that should help the region’s
entertainment centre that it also has the greatest potential, to bring big conventions in project, which was locked up sev- vibrant than ever before and that up from just 10 per cent a year housing market bounce back.
lacks, according to Tim Leiweke, simply because Los Angeles is because it lacks sufficient nearby eral months ago, he adds. “One is a good thing to build an enter- earlier. Economists worry that the Provided that the looming US
chief executive. He is trying to the content capital of the world hotel accommodation. That will of the advantages of having Mr tainment district around.” additional inventory will keep recession does not last too long.

City faces fork in road on tackling congestion

TRANSPORT However, Los Angeles relief effort. More than $4bn congestion charging scheme,
businesses and politicians has been earmarked for the the funds were redirected to
Infrastructure are coming to realise that Subway to the Sea proposal, Los Angeles. Lamta already
improvements and the annual distinction of
leading the US in traffic con-
while the rest of the money
will be go to other transit
has legislative approval to
use the funds and is prepar-
road pricing are the gestion comes at a cost: programmes and improving ing to launch trial schemes
two main options, 490m hours of delays, 384m
gallons of wasted fuel, and
crumbling highway infra-
structure – if voters approve
as early as 2010.
The projects will convert
reports Sean Ross productivity losses worth the ballot measure. existing carpool lanes into
$9.3bn – without factoring in The proposal has received electronic tolling lanes on a
When the Los Angeles environmental and social backing from business and portion of two Los Angeles
County Business Federation costs – according to the auto associations but it is freeways, while beefing up
surveyed its 93,000 member Texas Transportation Insti- unclear whether voters will other forms of transport,
companies recently, the tute, a leading US authority follow suit. While polls show such as providing more
results stunned David Flem- on transport. that voters narrowly back buses. “We can’t build new
ing, its chairman. “There is no one easy solu- the plans, misgivings about freeways, but we can better
Members were asked tion,” says Mr Fleming, who the economy – combined use the freeways we have,”
about the main issue facing also serves on the board of with falling petrol prices – says Marc Littman, a spokes-
business in Los Angeles. the Los Angeles Metropoli- may mean they are reluctant man for Lamta.
“The biggest problem wasn’t tan Transportation Author- to support a sales tax Given how much opposi-
taxes or regulations,” says ity (Lamta), which manages increase come election day. tion congestion charging is
Mr Fleming. “It was traffic a daunting 1,433 sq mile area The vote may depend on likely to attract, some of the
congestion.” with more than 10m resi- how bad traffic is on the way money will be spent on con-
The Los Angeles traffic dents. He says congestion is to the polls. vincing the Los Angeles pub-
and smog problems are as “crippling” the city. Congestion pricing may be lic that implementing such a
globally recognisable as the A “multi-faceted” app- Not so free way: voters will next month be asked to approve higher taxes to fund transport improvements Getty Images a better short-term fix. “Pric- system is a good idea. “The
Hollywood sign. Its freeways roach is needed, he adds. ing strategies are the only research shows [congestion]
are decrepit and increasingly Researchers from the Rand reduce congestion. A city- charges, may reduce the what is necessary to get Los sustainable option for reduc- pricing is less of a burden on
clogged, rush hours can last Corporation, a Los Angeles wide metro system would gridlock. Angeles moving again. ing congestion. . . and they the poor than a sales tax,”
all day and city residents based international policy cost billions of dollars and However, as Los Angeles US voters go to the polls will be immediately effective says Brian Taylor, director
blame traffic for lateness group, agree – although their take years to construct, lacks a viable alternative to on November 4 to elect a upon implementation,” says of the UCLA Institute of
and missed appointments. recent study of Los Angeles although there is discussion travelling by car, raising the new president. In Los Ange- Dr Wachs. Transportation Studies.
The city lacks a conven- traffic found that many of about building a “Subway to cost of driving and parking les, they will also be asked According to Lamta, plan- The people of Los Angeles
ient citywide alternative to the “easy” solutions, such as the Sea” which would con- “will be very challenging to approve a special ballot ning for a Los Angeles con- should look at the experi-
travelling by car, such as a traffic signal synching, free- nect Beverly Hills and Santa politically”, says Dr Martin measure that would increase gestion charging scheme is ence of cities such as Singa-
subway or light rail system, way ramp metering, and car- Monica with downtown Los Wachs, director of the trans- ‘We can’t build new the sales tax paid by city res- already under way. Lamta pore, Oslo, Stockholm, and
so gridlock is common. pooling, had already been Angeles. That is some years portation program at Rand. freeways but we idents by 0.5 per cent. The has the New York legisla- London which already have
Despite years of worsening adopted in the city. away, though. In the short Yet recent efforts by city increase is projected to raise ture to thank. When New congestion charging, accord-
congestion, city authorities Local policymakers know term other measures, such authorities and Lamta indi- can better use the $40bn over 30 years, with York recently balked at ing to Dr Wachs. “It actually
have had little success in
alleviating the problem.
that stronger action is
required if they are to
as a congestion pricing sys-
tem and increased parking
cate that business and politi-
cal leaders are ready to do
freeways we have’ funds going towards a
“multi-pronged” congestion
using $210m of money from
the US government for a
benefits people more than it
costs them,” he says.
FINANCIAL TIMES TUESDAY OCTOBER 28 2008 ★ 5

Los Angeles

Terminal growth: Los Angeles port has seen trade volumes rise by leaps and bounds. It expects to suffer in the current financial crisis but is confident it can ride out the storm

Ports give economic edge to California

TRADE China as the world’s pre-eminent requiring no public money. Their were shipped into Los Angeles. countries that have become so Angeles traffic system is another the prospect of a new port at
manufacturing exporter. The San importance to the region cannot By 1995, the number had risen to dominant in the manufacturing obstacle to growth but the Punta Colonet in Mexico.
Four­tenths of all US Pedro ports are ideally placed be overstated: the Los Angeles 2.5m. of consumer goods”, he says. “It’s impact of gridlocked freeways But rival west coast ports can-
imports come through geographically for Asian manu-
facturers looking to export goods
port alone generates $39.1bn in
annual wages and tax revenues,
The volume of imports jumped
again after 2001 when China
China, but it’s also Malaysia,
India and Indonesia.”
has been minimised by the open-
ing of the Alameda Corridor, a
not compete with the size of the
southern California market.
the docks at LA and to the US. Rather than ship employing 919,000 people directly joined the World Trade Organisa- However, the ailing global $2.4bn rail cargo line linking the There are 18m people living close
Long Beach, says goods through the Panama Canal
to reach the eastern US, it can be
and indirectly, according to city
officials.
tion, says Jerry Nickelsburg, an economy is likely to hinder
growth. Imports and exports in
two ports to the transcontinental
rail network near downtown Los
to the San Pedro ports, says Mr
Keenan. “You save time if you
Matthew Garrahan more efficient for Asian export- The two ports combined are Los Angeles in 2007 were slightly Angeles. It had an immediate can offload goods in Los Ange-
ers to use Los Angeles and Long the biggest in the western hemi- ‘We are close to Asia down on 2006, while global trade impact when it opened in 2002, les.”
Beach. Once there, containers sphere and the fifth largest in the and have a relatively will almost certainly be hit by cutting congestion and increas- With east coast ports seeking

T
hey may not generate as carried by ship can be trans- world. the financial crisis. “Last month ing the speed of distribution. federal money for expansion, the
many headlines as the ferred to rail or road and quickly They rose to prominence in the deep port that was we were up 6 per cent although The corridor has had other pos- port authorities at Los Angeles
city’s entertainment
industry, but the San
moved to other cities.
“We are close to Asia and have
1960s with the introduction of
container shipping. But it was
actually dredged to overall we’re down on last year,”
says Geraldine Knatz, executive
itive effects. “The area east of
Los Angeles has become a major
and Long Beach are not standing
still. For example, the Los Ange-
Pedro Bay ports of Los Angeles a relatively deep port that was not until Asian economies began new levels to handle director of the Los Angeles port. logistics centre,” says Mr Nick- les port plans to construct more
and nearby Long Beach are the actually dredged to new levels to their domination of global manu- “But we will ride this out like elsburg. Distribution businesses on-dock rail yards, which allow
unsung heroes of the Californian handle the larger ships that were facturing in the 1980s that the
larger ships’ everyone else.” have sprung up to unload and goods to be put on to trains as
economy. coming on line,” says Michael volume of imports into Los Ange- Growth has also been threat- move goods that have arrived at soon as they are brought ashore.
With more than 40 per cent of Keenan, harbour planning and les and Long Beach began to take economist with the UCLA Ander- ened by potential industrial the ports, creating more jobs in “The challenge the ports face is
all US imports coming through economic analyst with the Port off. son School of Management. By action by dockworkers. The ports the Inland Empire region east of being able to provide cost-effec-
their docks, the ports are of huge of Los Angeles. “We are a signifi- The industry measures con- 2007, 8.4m TEUs were shipped in were last hit by a strike in 2002 Los Angeles. tive shipping into the US,” says
importance to the regional and cant economic engine for the tainer shipping in 20ft-equivalent and out of Los Angeles with although a walk-out by the Inter- The San Pedro ports face Mr Nickelsburg. “There’s a lot of
national economy. nation.” units (TEUs), with large ships another 8m or so arriving in national Longshore and Ware- increased competition in the work being done on infrastruc-
They have boomed over the The Los Angeles and Long capable of carrying more than Long Beach. The two ports are house Union was averted this north, with the rival Prince ture and that’s important
past 30 years, thanks to aggres- Beach ports are quasi-public enti- 8,000 TEUs – roughly 4,500 con- “the closest major port and dis- summer with a pay deal. Rupert development in British because it means the ports can
sive expansion and the rise of ties, owned by the two cities but tainers. In 1980, 600,000 TEUs tribution system to the Asian The notoriously congested Los Columbia, and in the south, with continue to stay competitive.”

Efforts grow to legalise a

vital section of workforce
IMMIGRATION The large undocumented
Californian demographic trends workforce – which tends to
The contribution Population be relatively poorly paid –
of new arrivals is Million (as at Jul 1) Annual change(’000) has benefited the city
because it keeps the cost of
700
acknowledged – 38
labour down in areas such
600
up to a point, says 36
as construction. “Los Ange-
les is a high-cost place to do
500
Matthew Garrahan business but you could make
400
34 a compelling case that the
300 undocumented economy
Los Angeles, a city that was 200 allows the city to compete,”
ruled by Spain and then 32 says Mr DeVol.
Mexico until 1848, has an 100 Yet there are clear bene-
uneasy relationship with 30 0 fits to bringing illegal work-
immigration. 2000 02 04 06 07 2000 02 04 06 07 ers into the system. “A lot of
Workers from Latin Amer- these workers aren’t paying
ica play a vital role in driv- Population movements (’000) taxes to the city, so potential
ing the city’s economy, tak- 250 revenue is being lost.”
ing hard, manual jobs that Immigration reform has
are often low-paid and lack- 250 Net foreign immigration lost its political momentum
ing in benefits. Yet thou- Net domestic migration in the current presidential
200
sands of those workers are campaign. Neither Barack
in Los Angeles illegally, liv- 150 Obama nor John McCain
ing with the constant threat have focused on the topic,
of deportation. 100 yet, whichever of them wins,
The city has come to rely 50 it is likely that the push for
on this underground work- reform will return in the
force. The Milken Institute, a 0 next administration.
research group, estimates -50 That will not happen
that there are about 625,000 unless there is a ground-
undocumented workers in -100 swell of public support. Dow-
Los Angeles who are respon- 2000 01 02 03 04 05 06 07 ell Myers, a professor of pol-
sible for about $32bn of the Source: California Department of Finance icy planning and develop-
city’s gross metropolitan ment at the University of
product – roughly equivalent remain in the shadows. This off, the head of the depart- Southern California, says
to 7.5 per cent of its eco- has become a point of frus- ment of Homeland Security, Americans need to realise
nomic output. tration for many in Los Mr Villaraigosa expressed that new workers are essen-
Undocumented workers Angeles, including Antonio concern that “non-exploita- tial to the US economy.
have been demonised in Villaraigosa, its mayor. tive employers” had been “The public doesn’t seem
other parts of the US, Mr Villaraigosa is a strong targeted, with the Immigra- to know that we need immi-
blamed for putting pressure supporter of a programme tion and Customs Enforce- grants,” he says, pointing
on public services, such as that would creat a path to ment focus likely to have out that incomers will take
health and education. But in US citizenship for undocu- “severe and lasting effects” an increasing share of work
Los Angeles their contribu- mented workers. One of on the city’s economy. as baby-boomers retire. “If
tion is widely acknowledged. America’s most prominent The mayor also played a we think we don’t need them
“You don’t have that fear Latino politicans, he has key role in the latest push to then we won’t legalise
of the unfamiliar here that become one of the champi- overhaul immigration laws. them.”
you sometimes get in other Two years ago, more than But despite various legisla-
places,” says Linton 500,000 people took to the tive setbacks, supporters of
Joaquin, general counsel for ‘Everyone knows city’s streets, joining march- immigration reform have not
the National Immigration that undocumented ers across the US in a call lost hope. American Apparel,
Law Centre, which promotes for federal reform. But a Los Angeles-based clothing
the rights of low-income workers aren’t just despite the support of the company, is one of the most
immigrants. “There are
established [immigrant]
a sideshow. They’re Bush Administration, the
effort eventually ran into the
prominent supporters of
reform and employs thou-
communities here.” the centrepiece of legislative sand. sands of Latino workers in
The city is in the forefront “Los Angeles civic leaders the city. The company
of the push for reform of
the economy’ have played a leading role in started a pressure group –
immigration laws, partly trying to reform immigra- Legalize LA – to help undoc-
because its leaders recognise ons of the immigration tion across the country,” umented workers become
the key role undocumented reform movement and says Ross DeVol, director of legal citizens.
workers play in the econ- recently called for a review regional economics at the Dov Charney, American
omy. Whole sectors such as of enforcement policies car- Milken Institute. “They rec- Apparel’s chief executive,
construction, textiles, land- ried out by the US Immigra- ognise that reform is only says Los Angeles would fall
scaping, restaurants and tion and Customs Enforce- fair to undocumented work- apart without its immigrant
other service industries ment body. ers and their families. But workforce. “Everyone knows
depend on their labour. The group conducted a they also recognise that and understands that undoc-
But with no legal guest string of raids on businesses these workers are an embed- umented workers aren’t just
worker programme for ille- in Los Angeles this year to ded part of the Los Angeles a sideshow here,” he says.
gal immigrants, many of find undocumented workers. economy and we simply “They’re the centrepiece of
these workers have to In a letter to Michael Chert- can’t survive without them.” the economy.”
6 ★ FINANCIAL TIMES TUESDAY OCTOBER 28 2008

Los Angeles

Innovation keeps
space sector aloft
DEFENCE UCLA Anderson School of tering history in California. The
Management. first space missions were planned
Sector consolidation “Manufacturers realised that in the state, inspiring a genera-
prompted metal-bending and riveting could
be done elsewhere,” he adds.
tion of engineers and techni-
cians. “They were testing rocket
manufacturing to leave “The design, development and engines [for the first space mis-
the region – but design innovation stayed here but a lot
of the assembly work went to
sions] near my home when I was
a child,” says Jon Jones, presi-
and development have other places.” dent of Raytheon’s space and air-
grown stronger, says Space technology is driving borne systems business.
much of the innovation in the California has “always been a
Matthew Garrahan industry, whether it is the Nasa place that spawned and sup-
scientists at the Jet Propulsion ported innovation”, he adds.
Laboratory in Pasadena or the “There have been a lot of innova-

S
outhern California used to defence engineers at Raytheon’s tors. People like Howard Hughes,
be the undisputed king of space and airborne business, [Donald] Douglas and Jack North-
the defence and aerospace which designs electronic warfare rop all started companies here.”
centres – the biggest com- and next-generation radar sys- Military contracts continue to
panies were based in the area – tems. be the primary source of revenue
but then the Cold War ended and All of the biggest defence for the city’s defence companies.
they left. Or so many people out- companies continue to have sub- “Thirty or 40 years ago this
side California seem to believe. stantial operations in or around industry was primarily about
But it is a popular misconcep- Los Angeles: Boeing, Raytheon building aircraft,” says Frank
tion that Los Angeles’s once and Northrop Grumman are all Flores, vice-president of engineer-
thriving defence sector has based there, as is the Aerospace ing at Northrop Grumman.
ceased to exist. The industry has “The products that we are
certainly contracted, following developing today are very differ-
the waves of consolidation in the ‘The challenge we ent. They’re not just air-vehi-
1990s as the US came to grips face is similar to the cles . . . they’re much more inte-
with being the world’s only grated and have more functions.”
superpower, but the region telecoms industry in The entrepreneurial spirit
around Los Angeles and south-
ern California continues to be the
terms of complexity’ embodied by aerospace industry
pioneers such as Hughes and
acknowledged world leader in Douglas continues in Los Ange-
defence, thanks to an expertise in Corporation, a federally funded les where new companies, such
space technology design and research and development centre as Space X, are challenging
development. that supports US national secu- established business models.
“California lost aircraft manu- rity, civil and commercial space Based in Hawthorne, near
facturing but the space industry programs. LAX, the company was created
has become very strong,” says Aerospace Corp has been based by Elon Musk, the founder of
Michael Gruntman, a professor of in El Segundo close to Los Ange- PayPal. It is developing cheaper
astronautics at the University of les International Airport (LAX) launch vehicles with the aim of
Southern California. for 50 years and provides tech- reducing the cost of firing com-
He adds that about half of all nical support to the US Air Force mercial satellites into orbit.
US satellites are designed, devel- Space and Missile Systems Cen- Recent international develop-
oped and manufactured in the tre, which is close by. ments, such as the Russia-
region. The group pioneered the first Georgia conflict and the recent
The consolidation of the indus- global positioning system (GPS) downing by China of a weather
try when the Cold War ended for satellite navigation, which satellite, are new challenges for
meant thousands of aerospace came to public prominence in the companies that rely on US
manufacturing jobs were lost. first Gulf War and has become defence contracts.
The industry now employs about widely used in mobile phones “Space [technology] will play a
38,000 people locally, according to and car navigation systems. big role in responding to these
Los Angeles County Economic “It was developed for the changes in the geo-political envi-
Development Corporation, com- military,” says David Gorey, ronment,” says Prof Gruntman of
pared with about 130,000 in 1990. senior vice-president of Aero- USC. More real than Star Wars: space technology is a key ingredient for Raytheon and many other companies operating in the area
In spite of the industry’s space Corp’s space systems But the industry faces a
smaller size, Los Angeles and group. “And 10 or 15 years later, looming challenge. During the tries, such as telecoms or IT. Northrop Grumman, one of the eration of aerospace profession- difference is our products have to
southern California continue “to there probably isn’t an individual consolidation era of the 1990s, Although that trend has since largest aerospace employers in als,” says Mr Flores. work first time.
be the main aerospace centre in who is unfamiliar with that sys- many graduates chose to avoid been reversed, the industry con- Los Angeles, is currently looking “The challenge we face is simi- “There’s no beta test for
the US”, according to Jerry Nick- tem.” the sector in favour of other tech- tinues to suffer from a skills to fill more than 1,000 positions. lar to the telecoms industry in us . . . with our products, lives are
elsburg, an economist at the Aerospace has a long and glit- nologically sophisticated indus- shortage. “We have to develop a new gen- terms of complexity. But the big at stake.”