Japanese Firms Employ Nearly 160,000 in Southern California

    LOS ANGELES--May 4, 2001--Japanese subsidiaries in Southern California create employment for 159,725 Californians, according to the results of a recent survey.
    The survey reports that nearly 50 percent of Japanese subsidiaries have new investment or business expansion plans. The overall business performance of the subsidiaries is stable, and 80 percent of the subsidiaries are expecting either an increase or no change in revenue and profit in 2000.
    The key factor in relocating, establishing or building new facilities is by an overwhelming margin the "cost of corporate taxes." The recent energy crisis may affect their decision with regard to the selection of a new site. Nearly 33 percent of the subsidiaries said they might relocate or build new operations in other states.
    This survey was conducted jointly by the Japan External Trade Organization (JETRO), Los Angeles, and the Japan Business Association of Southern California. They sent out a questionnaire to a sample of 1,000 companies in fall 2000. In early 2001, 510 responses were received and tabulated from the 1,000 sample companies in Southern California.

    The Trend Is Toward Diversification and Localization

    Japanese subsidiaries have diverse business lines. The most concentrated field of business is "Distribution and Retail," and 38.7 percent of respondents were classified in this category. The second- largest category is "Service" (17.9 percent), followed by "Manufacturing" (17.3 percent).
    About 70 percent of Japanese subsidiaries are concentrated in Los Angeles County. The location of the companies is becoming more decentralized, gradually spreading into Orange County and San Diego County.
    New investment from Japan has slowed, but Japanese subsidiaries, especially small businesses, are continuing to arrive in Southern California, which is considered the gateway to U.S. markets by Japanese businesses.

    Japanese Subsidiaries Create Employment for 159,725

    The total number employed by Japanese firms has slightly decreased compared with the results of the previous survey, which was conducted in 1997. However, the contribution of Japanese subsidiaries to employment remains stable, and the total number of those employed is 159,725.
    In comparison with the previous survey in 1997, the large-size subsidiaries with more than 100 employees have decreased in number, while the number of small-size subsidiaries with less than 100 employees has increased. This result indicates that the larger subsidiaries may have downsized their work force or relocated to other states or to other countries.

    Business Performance Is Stable in 80 Percent of the Subsidiaries

    Only 15 percent of the subsidiaries are reporting that their profit for fiscal 2000 will decline. Eighty percent of the subsidiaries are expecting an increase or no change in revenue and profit in fiscal 2000, as compared with the previous year. In addition, more than 80 percent of the subsidiaries report that their profitability will improve or stay about the same in the upcoming one to two years.
    Prospects are positive as reported by the real estate industry, distribution and retail and manufacturing and finance/insurance. However, some responses from the manufacturing companies indicate that they will face difficulties in achieving a profit.

    Half of the Japanese Subsidiaries Are Ready to Expand

    Nearly 50 percent of the subsidiaries have plans to expand or start new investments. Most of the subsidiaries select California as the state in which to expand or to invest. However, 33 percent of the subsidiaries are considering relocating to or investing in other states.
    The key factors in the selection of a site begin from the item of "costs, including corporate taxes," which is followed by "proximity to business partners/clients," which is followed by "secure environment" and then by "conditions of infrastructure, such as freeways and railroad transportation."

    Corporate Citizenship

    In the previous year, 70 percent of the subsidiaries paid less than $100,000 in California corporate taxes. In the previous year, 32 subsidiaries paid California corporate tax of more than $1 million.
    Also, 247 subsidiaries, which represent 57.8 percent of the total, made monetary or in-kind donations to local nonprofit organizations. The total amount of the reported donations of the 247 subsidiaries amounted to $32 million. Most of the donations were presented to Japanese nonprofit organizations/foundations, community organizations, local schools and public services.
    The full report of this survey is downloadable in English and Japanese (64 pages) at the Web sites of JETRO (http://www.jetro.org/losangeles) and JBA (http://www.jba.org).