Opportunities abound in California for rubber firms

CERRITOS, Calif.—When Specialty Silicone Fabricators was looking to expand and build new facilities twice in the last decade, rather than going elsewhere, it remained in California.

Specialty Silicone—like the other California-based firms that participated in Rubber & Plastics News roundtable at R.D. Abbott Co. Inc.'s headquarters in Cerritos—decided that the benefits of being a manufacturer in California still outweighed the negatives.

In 2005, the 200-person supplier of mostly medical-related goods moved a factory from Santa Ana, Calif., to nearby Tustin, largely because it wanted to retain its staff, said Chris Mazelin, the firm's marketing manager and son of one of its founders.

“Management said they wanted to stay within this radius because we want all the people to stay,” he said. “After six buildings and a solid year of searching, we ended up in Tustin. It's interesting how that drove the decision.”

Then, in 2010, Specialty Silicone was looking to replace its complex in Paso Robles, Calif., where it had three buildings encompassing 75,000 square feet of space. “That would have been the time to move,” Mazelin said.

In fact, other states did put on a recruiting push to lure the high-tech firm away from California. “You had states like Texas that at the time we built this building in Paso, they would have literally given us a building built to suit,” he said. “Instead of us spending $13 million on a building, they would have given me a $13 million building and tax incentives for 10 years for us to move the business there. The whole state of Texas, they want your business.”

Yet, Specialty Silicone stayed put, building a 100,000-sq-ft. complex on the site of its prior factories. Mazelin said the company had a good relationship with Paso Robles officials, and its facilities were on airport property owned and managed by the city. Besides help from the city in getting the necessary approvals—a difficult proposition in California—there were other reasons Specialty Silicone remained in Paso Robles.

“There's too much potential here,” Mazelin said. “When covering the West Coast as a sales person, hands down it was the highest producing sales territory from the standpoint of new business development. There are more new ideas in the medical device industry coming out of the Bay Area than the rest of the country combined.”

The headlines coming out of the state Capitol in Sacramento can be aggravating, but that's only part of the picture of California, according to R.D. Abbott President Keith Thomas. “If you want to see what one-party rule will do for a society, you don't have to look any further than Sacramento. If you want to see what direct democracy will do, look at our prop system. It's absolute lunacy.”

But as the company's leader, he sees an innovative culture that leads many business categories, such as the issuance of new patents.

“I very much like the business people I get to do business with,” Thomas said. “California is the largest manufacturing state in the country. It's one of the largest economies in the world. As a supplier, we can't ignore this market. We have to be embedded here. It's a very complicated landscape in which to do business in. I would say that it is not the environment where you want to put your big toe in and hope for the best, because there is a lot of litigation, and there is a lot of regulation.”

Once someone has done business in the state for a long time, it becomes part of who they are, the R.D. Abbott executive said. “I would say it's a difficult place to do business, but again, that's not part of my thinking everyday. In some ways, Mexico is a lot more complicated than California.”

William Krames, president and CEO of Santa Fe Rubber Products Inc., has operated in the rubber industry in California. He moved west out of college and just celebrated his 52nd anniversary in the rubber industry. And while admitting he considered moving his operation out of state from Santa Fe Springs, in the end the cost of the move overrode what he said would have been a decision based on emotion.

“The market is here, the opportunities are here,” Krames said. About 40-45 percent of the custom rubber firm's revenues are in California, with the rest shipped elsewhere, including exports to Mexico and Ireland.

“There's a tremendous engineering capability here,” he said. “There's a level of sophistication that we have in California that doesn't exist elsewhere. I had companies that I was managing in my group (in Fluorocarbon, his prior employer) all over the U.S., and the culture is different in California for sure. Even with the high cost of real estate, we were successful in attracting key people to California.”

The loyalty of his employees also has been key to Santa Fe Rubber's success, he said. “What success I've had I've gotten through their efforts. I have seen them send their kids to college. There's an intimacy you get in a small company, a familial benefit that you don't get in the big corporate environment.”

Howard Vipperman, president of Vip Rubber Co. Inc. in La Habra, said that two decades ago, many of the “big, black and dirty” rubber companies still were operating in California. But for the most part, the rubber industry that remains in the state has vastly changed.

“You need to be on the leading edge of technology,” he said. “You need to learn how to do it in better ways. We have more people in quality today than we had in the last 20 years. ... Those companies that couldn't adapt, didn't adapt or weren't agile enough—they're gone.”

And while Vipperman is contemplating retirement in the near future, the third generation of family members, are in place to guide the company into the future.

“I think we will have a lot of the same challenges and we're going to be smart enough to get through them,” said Vice President Deena Campana, Vipperman's niece and in line to become president in the firm's succession plan. “On our website it says: Versatility, innovation and performance. And I think if we stay true to that, we can face anything that comes up and be successful here in California.”

Krames said Santa Fe Springs invested $150,000 at one point to obtain a QS 9000 certification at a time when no other firms on the West Coast had been so certified. “Everybody said to me, "How can you afford to do that?' What we found along the way,” he said, “is that we couldn't afford not to do it. It really did give us an edge. Did I get a return on that? Absolutely.”

Mazelin told the tale of Gish Biomedical, long ago a California-based firm that was big in the production of disposable goods for cardiovascular surgery. But after it eliminated its engineering department, it started a downward spiral that led to it being acquired and absorbed into another firm.

Specialty Silicone Fabricators, which he said is moving into the pharma industry, has been active over the years in improving its processes. “It's driven by the innovation and our customers pushing us and us pushing ourselves to figure out new and better ways to manipulate the rubber,” he said.

Thomas gave a poker metaphor to explain the complexities of the California business environment. “The ante is higher to get into California, but the potential pot also is much larger,” he said, adding it's also a wrong assumption to think the rubber industry is gone from the state.

As top managers, Krames said it is not unusual to focus more on issues and problems without realizing how much success you've actually achieved.

“If we step back and look at the big picture, it's been really good,” he said. “I wouldn't trade my experience, and I don't mean monetarily. It seems like our industry, as static as we think it is, it's very dynamic, and we're always learning something. It's been like a family, the industry has over the years.”