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End of Line For Factory

When Kinkisharyo International walked away last week from its plan to build a $50 million rail car factory, it was a big loss not only for the Antelope Valley but for all of Los Angeles County. It also was a decision that appeared to stem from a confluence of factors that antagonized the Japanese company, from tensions with organized labor to the state’s strict environmental laws – not to mention an anti-development sentiment that appears to be growing in the High Desert. While Kinkisharyo will remain in the city for now operating a temporary final assembly plant in hangar space leased from Los Angeles World Airports, the loss of the 400,000-square-foot permanent facility was noticed countywide. “What this means is every city and every economic development entity in the county is going to have to work harder in the future to locate new development and convince companies the county wants their investment,” lamented Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce. Kinkisharyo made its decision after failing to reach an agreement with Antelope Valley Residents for Responsible Development, a labor-supported group that objected to the plant for environmental reasons. The residents group appealed an August decision by the Palmdale Planning Commission that recommended approval of the plant’s site plan without requiring a new environmental report. The commission’s decision was based on reports completed in 1993 and 1996 for a planned office park on the site. Marc Joseph, an attorney representing the residents group, noted that under the California Environmental Quality Act, or CEQA, every project must be an environmental impact report, but that didn’t happen in this case. “There was none, zero (review),” Joseph said. “There was never a document that covered this project.” To local representatives for the Japanese company, there were ulterior motives at stake with the union’s challenge to the project. The appeal came only after Kinkisharyo stuck to a position of not allowing the International Brotherhood of Electrical Workers Local No. 11 use card check at the new Palmdale plant, which would employ up to 250 workers. Card check is a process by which a workplace can unionize if 50 percent or more of workers sign cards stating they want to be represented for collective bargaining. Typically, workplaces unionize by having employees vote, a more complex process. Members of the local, which is based in Pasadena, are members of the residents group, which was only founded after Kinkisharyo sought to build its plant. The local did not return calls for comment, but Joseph denied the allegation, pointing to the 51-page appeal itself where card check is never mentioned. “Our appeal to the (Palmdale) City Council was exclusively about environmental issues,” he added. Kinkisharyo spokesman Coby King noted that the company has had success establishing final assembly plants in other U.S. cities, some of which are friendly to organized labor such as Pittsburgh, Seattle and Boston. “In none of those places has card check been demanded nor has there been an organizing effort,” said King, chief executive of High Point Strategies, a Los Angeles public affairs and media relations firm. The tension between the union and Kinkisharyo may reflect an unfamiliarity with what is needed to do business in California. Manufacturing in the state has historically had union representation for the rank and file. Still, Kevin Klowden, managing economist and director of the California Center of the Milken Institute, a non-partisan think tank in Santa Monica, characterized the union’s stance on card check as aggressive and akin to a position that national unions have taken. Kinkisharyo, on the other hand, appears to have left itself vulnerable during the approval process by relying on old environmental reports “The union was playing a strong hand because there was not much for them to lose,” he said. Metro connection Kinkisharyo, the El Segundo-based U.S. arm of Kinki Sharyo Co. Ltd. of Osaka, was awarded a contract in August 2012 from Los Angeles County Metropolitan Transportation Authority, or Metro, for rail cars that would operate on the Blue, Gold and Expo lines and a planned extension of the Expo line to Los Angeles International Airport. It has previously supplied rail cars for projects in Dallas, Phoenix and other U.S. cities. Kinkisharyo is doing final assembly of the first 78 rail cars for Metro at the leased facility in Palmdale before the opening of any permanent plant. It already has about 100 workers there. The final assembly process involves attaching the rail car body to the chassis – both of which are made in Osaka – and then installing the seats, lighting, heating, air conditioning, ventilation and propulsion systems. Finally, the cars are tested and delivered to Metro. The proposed permanent plant would be used to assemble an additional 97 light rail cars for Metro, and any orders the company receives from other U.S. customers. The work goes beyond final assembly to include manufacturing the car shells, though the rail truck would still be delivered from Japan. The appeal by the residents group asserts that the project could cause widespread environmental damage. Central to the argument are 1993 and 1996 environmental impact reports on the property that the appeal calls “outdated.” Also, Kinkisharyo has not obtained entitlement for 6.5 million gallons of water needed annually at the plant. King, however, said the company did not need the entitlements. However, neither report anticipated the property would be used for manufacturing of light rail cars. The 1993 report was done for the city’s general plan while the 1996 report was done for a proposed business park on the property. “The project is a new project with potentially significant impacts that triggers CEQA’s legal requirement to prepare an EIR (environmental impact report),” the appeal said. The appeal cited possible harmful health effects from diesel exhaust from construction equipment and delivery trucks; the close proximity of the Lancaster Adult Day Health Care Center; the impact on water supplies; construction potentially releasing into the air a fungus that causes valley fever; and disturbance of habitat for animals and plants, including the desert tortoise. Finally, the appeal asserts a new environmental report is required because the older ones did not include impacts from a proposed nearby power plant by Summit Power Group, based in Seattle. The plant has been approved by the California Energy Commission and the U.S. Environmental Protection Agency. “The cumulative impact of these projects will produce massive amounts of air pollution that will exacerbate the already unacceptable pollution levels in the region,” the appeal said. Like the Kinkisharyo project, the power plant aroused opposition, including neighbor city Lancaster, which raised environmental concerns over emissions being too close to schools and residences. Palmdale Mayor Jim Ledford said that he has detected a different tone in the valley since the power plant project. Anti-development sentiment has grown and become emboldened, he said. “We have a fully EPA-approved power plant that has opened the door to a lot more NIMBYs,” Ledford added. “This is not good,” Tim Cremin is an attorney with the firm Meyers Nave in Oakland who advised Palmdale on the CEQA challenge. He said the law has been used by not only unions but by businesses that want to prevent a competitor from locating nearby, or residents who just don’t want to see any development. “It is the most effective leverage in impeding projects going forward,” Cremin said. For business interests, though, the appeal by the group over the Kinkisharyo plant is yet another example of how the CEQA law can be abused and its provisions used to delay or kill projects for reasons other than the environment. “This project is one of the many poster children for the need for CEQA reform,” said Toebben, who served as co-chairman in 2012-13 on a state effort to reform the CEQA law that did not gain much traction. Joseph, however, stands by the challenge raised by the residents group, saying it does what the law intended by informing policy makers so they can make wise decision. “Developers trying to hide the skeletons in their closet don’t like it when someone points out that there is no water for their project,” Joseph said. “That’s not abuse.” Ticking clock With the Kinkisharyo project all but dead, Palmdale is ready to look forward and move on to bring other projects to the city. Despite his belief that the EIR was adequate – and it coming too late to have an effect on the Kinkisharyo project – Ledford said the city will likely update the report. “It is not the timeliest next step,” he said. “It would not have landed Kinkisharyo, as some environmental documents can take up to a year to complete.” A late wrinkle to the issue came on Oct. 15 when R. Rex Parris, mayor of neighboring Lancaster, sent a letter to Kinkisharyo offering his city as a location for the manufacturing plant. “We have a reputation for standing up for our community at any cost and effectively addressing third-party challenges which hinder progress,” Parris said in his letter. Kinkisharyo, however, is ready to move on as well, with the deadline to deliver finished rail cars to Metro not allowing further delays. Company executives were expected to make visits to potential factory sites in states west of the Mississippi River the week of Oct. 20, King said. In the meantime, both Ledford and Toebben said the losers in this fight were residents who could have gotten jobs at the permanent factory. The final assembly work at the LAWA property will only last as long as Kinkisharyo is building cars for Metro. “I have to bulletproof all our projects environmentally as another cost of doing business,” Ledford said.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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