Site of Old GM Plant Is Facing a Rocky Road : Commercial property: The 100-acre parcel is unlikely to be used by another auto maker. A lengthy cleanup could prove to be very costly.
During their recent campaigns for city offices, few candidates passed up the opportunity to make grand pronouncements about how they would restore the 2,600 jobs lost when the General Motors auto assembly plant closed in Van Nuys last August. A few even used the shuttered factory as a dramatic backdrop when announcing their candidacies.
But as GM quietly gears up efforts to sell the huge plant and the 100-acre parcel on which it sits, many business and real estate experts offer a more realistic appraisal of the plant’s future.
The prognosis: The plant, which used to turn out racy Chevrolet Camaros and Pontiac Firebirds, will probably become one of the biggest industrial real estate white elephants Los Angeles has seen.
“I can’t be optimistic,†said Michael Beltramo, a Santa Monica-based management consultant. “I see that plant sitting there for a number of years.â€
The odds are stacked against a successful transformation of the property anytime soon. For one thing, the cleanup of paints, solvents and gasoline undoubtedly left after 45 years of auto manufacturing could take years and millions of dollars to complete.
The chances of any auto maker moving to Van Nuys are virtually nil, despite state officials publicizing their effort to lure Mercedes-Benz to set its new American car plant here. That’s because the Van Nuys plant is antiquated and the few companies adding new facilities are being doggedly pursued by other states where business costs are lower.
Just as important, auto makers for a decade have concentrated most of their U.S. production in the Midwest and Southeast, because many of their suppliers are nearby. In fact, the high cost of shipping parts out West is one reason GM now builds its Camaros and Firebirds at a plant in Canada, closer to its Midwest suppliers.
The possibility of luring another type of manufacturer to the 71,000-square-foot Van Nuys plant is also unlikely because many manufacturers are downsizing or moving operations to states with lower wages and workers’ compensation costs. The office vacancy rate for Los Angeles County is about 20% and the industrial vacancy rate about 12%--and experts say those numbers mask an even higher level of vacancies.
What’s more, the experiences of three other Southern California communities in recovering after losing auto plants in the 1970s and 1980s supports the view that Van Nuys has a tough road ahead.
Widely viewed as the biggest obstacle, however, is California’s inhospitable business climate. Without an active government helping smooth the way for a new owner, “Ten years from now, you’re still going to be 10 years away from anything happening there,†said James Schriner, principal of PHH Fantus, a New York consulting firm that advises manufacturers on selecting sites.
Schriner, who recently helped BMW choose South Carolina for its first U.S. assembly plant, said other communities offer manufacturers tax breaks, financing assistance and new facilities. They invest in studies and marketing efforts. “California typically has not done that.â€
In fact, only after pleading by GM did the Los Angeles City Council recently shelve a proposal to rezone the Van Nuys property for more restrictive uses. GM argued that the rezoning would impede its efforts to sell the site.
GM listed the plant with commercial real estate broker Cushman & Wakefield last month, but there are “no strong leads†on possible buyers, said GM spokeswoman Janine Fruehan. She noted that GM has several other empty facilities around the country, all of which the company wants to unload.
Fruehan said GM has met with a task force formed by the Los Angeles City Council to help with the plant’s conversion. But there have been no specific offers of government assistance, she said.
Los Angeles Planning Director Con Howe promised a cooperative approach by his department in efforts to find another use for the plant.
“In the past, the city’s attitude has been: It’s private property, it’s a private problem,†Howe said. “The first hurdle is for the city to accept that it does have a role to play. At a minimum, we should not put up inappropriate barriers.â€
Nonetheless, given the history of auto plant closings in Southern California, Van Nuys faces a hard future without GM.
The City of Commerce still has not completely recovered from the closure of a Chrysler plant there more than 20 years ago. That 100-acre site was purchased in 1972 by Dallas developer Trammell Crow, which tore down part of the auto plant and built smaller industrial and office buildings. Now the redeveloped area employs about 2,500 workers in a record-manufacturing facility, a grocery distribution plant and small offices--about half the number of workers at the Chrysler plant at its peak.
Since the plant closed, Commerce has also been hit by the closures of U.S. Steel, Firestone Tire & Rubber and Uniroyal plants. Trammell Crow developed the latter into the successful Citadel retail outlet.
But Ira Gwin, Commerce’s director of community development, lamented: “We’ve lost a lot of our good-paying, blue-collar workers and they’ve been replaced by quite a bit of office, retail and low-paying, non-union warehouse workers.â€
Even so, Commerce probably had an easier time with its redevelopment than Van Nuys will because the permitting process today is so cumbersome, and real estate financing is hard to find.
“Certainly the process today of buying a manufacturing facility would be much more complex and much more difficult,†said Hayden Eaves III, president of Trammell Crow Southern California.
Van Nuys also can’t count on a repeat of Pico Rivera’s experience after a Ford Motor Co. plant closed there in 1980 and laid off 1,670 workers, and Northrop Corp. moved in with its B-2 Stealth bomber production.
Since then, aerospace concerns have been hard hit by a shrinking defense budget, and B-2 orders have dropped sharply. Northrop now plans to halve its B-2 division work force by 1996, with most of the cuts coming from the 7,780 workers in Pico Rivera.
The redevelopment of the former site of a GM plant in South Gate has also had problems. GM closed the plant in 1982, laid off 2,550 workers, and sold the 90-acre site in 1985 to South Gate for $12 million. The city then sold the property to a development group that subdivided the land into 14 smaller parcels.
So far, only two parcels have new buildings that are used for small, light manufacturing operations, and a third building is under construction.
The cleanup of gasoline in the water wells on three other parcels isn’t finished. Ruben Lopez, South Gate’s deputy director of redevelopment, said the city has vigorously pursued tax credits and federal and state funds to help attract new business; still, progress has been slow and now state budget cuts mean fewer dollars for municipal redevelopment agencies.
The redevelopment “optimistically is going to take another five years,†he said.
The only remaining auto plant in California is a Fremont facility near Oakland that was closed by GM in 1982, but was reopened in 1984 by a joint venture between Toyota and GM and now makes Geo Prizms and Toyota Corollas.
A similar rebirth isn’t likely for Van Nuys. American manufacturers have been moving more domestic operations to places like Mexico and Taiwan. BMW has already chosen Spartanburg, S.C., for its U.S. plant because, company executives say, it’s closer to Germany than the West Coast.
Mercedes-Benz is in the early stages of choosing a site for its American plant. The company has been contacted by more than 30 states that want the plant. But most observers say that California--with its high costs and unwieldy permit process--won’t be in the running.
Many politicians have floated ideas for other uses of the Van Nuys plant. Most focus on the notion of creating a public-private partnership to foster new transportation technologies--similar to the Calstart consortium for the development of an electric car industry that moved into an abandoned Lockheed Corp. building in Burbank.
City Fire Captain Lyle Hall, for instance, pledged to work to reopen the GM plant as an electric car factory. Hall is headed for a June runoff with former mayoral aide Richard Alarcon for the City Council seat representing the area that includes the Van Nuys plant.
Assemblyman Richard Katz, a former mayoral candidate, has a plan to help turn the plant into a center for the development of advanced transportation projects.
Some professionals see other potential uses for the site. Mike Howard, senior vice president at commercial and industrial real estate broker Grubb & Ellis in Sherman Oaks, thinks government agencies such as the South Coast Air Quality Management District, which is currently looking for space, could move in and form the genesis of a service-oriented complex that would eventually include engineering, architectural and transportation firms.
Others see possibilities for retail development. Pat Hall, president of TOLD Partners Inc., a real estate brokerage in Woodland Hills, said that a large retail complex or retail distribution center are among the few uses he finds plausible at Van Nuys in the near future, although the run-down condition of the neighborhood could prove a deterrent.
Ultimately, experts say, the plant’s uncertain future lies with the state and city. If government officials take the lead in finding a new use for the property, there is hope.
Otherwise, said Hall, “the odds are that facility will remain mothballed until California rebounds.â€
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