If you're going to do business with the city of Los Angeles, you have to pay your employees what's called a living wage: $12.42 per hour.
But Build Your Dreams (BYD), the huge Chinese company positioning itself in the United States as a green automotive manufacturer, got to ignore the city's living-wage law as it built out its new DTLA headquarters using $1.6 million in taxpayer funds — a stimulus grant from Washington, D.C.
That controversy, which was reported recently by the Los Angeles Times, has in turn thrown light on the fact that BYD has fallen well short of delivering 150 jobs to L.A. that city leaders and then-Gov. Arnold Schwarzenegger promised in 2010.
BYD vice president Micheal Austin says the city's living wage is lower than the wages the feds required BYD to pay to its headquarters-renovation crew, and that nobody gave BYD a pass. But at the same time, Austin acknowledged that BYD, which has attracted national media attention, has just 212 U.S. employees, and only 67 work in Los Angeles.
He spoke after the Times reported that the industrial giant got a living-wage exemption from an obscure L.A. city bureaucrat who wrongly categorized BYD's modest, renovated vehicle showroom as a “construction” project.
Eric Preven, a municipal watchdog who ran for L.A. City Council, says, “My experience with L.A. is … promises roll in, and it's hard to hold them accountable, because the contracts are not clear.”
Author and professor Joel Kotkin, who has analyzed the problems municipal officials run into when they try to select and reward private-business “winners” with public monies and other favors, asks, “What else is new?
Kotkin, of Chapman University, says, “The way that L.A. runs, it's all about appearance: 'Oh, we can get someone from China, with capital, to build something. So we're an international city with investors!'?”
The BYD undertaking is an example of what can happen when the 15 L.A. City Council members and the mayor — none of whom have large-scale, real-world business backgrounds — embrace the use of significant taxpayer funds to create jobs.
BYD, which makes batteries, lighting, mobile phone components and electric vehicles, swept into town in a splashy 2010 press conference featuring Schwarzenegger and then-Mayor Antonio Villaraigosa promoting the community-lifting power of green jobs.
“L.A. is sexy to the Chinese.” —BYD vice president Micheal Austin
City leaders predicted 150 new BYD jobs in the city by the end of 2011.
Austin forwarded to L.A. Weekly an email he got two years later, in 2013, from Mayor Eric Garcetti's office, in which Garcetti's neighborhood development analyst, Steve Walworth, set out the company's final requirements and wished BYD well in L.A.
The company had by this time created few jobs in L.A.
Labor leaders and BYD's Austin agree that the company had no U.S. employees at its two-story Figueroa headquarters — a first-floor showroom and second-floor office — until two years into its project. “Of course we weren't hiring new employees— we had no place to put them,” Austin says by phone from Chicago. BYD is still adding staff to its DTLA office and manufacturing plant in the distant high-desert town of Lancaster.
There's no way to measure what might have been, had the $1.6 million stimulus funds — part of a much sought-after pool of money — been given to an up-and-running job creator. Kotkin believes that, whether or not BYD had quickly created 150 jobs, L.A.'s elected leaders are not capable of meaningfully boosting employment in the well-paying manufacturing sector.
“We have these fundamental problems that aren't going to be resolved by throwing money at a foreign company,” Kotkin says. “It doesn't even matter if it's not foreign, if it's just one company.” To achieve a serious jobs impact, he says, “It has to be part of an industrial complex.”
According to Austin, BYD didn't even lobby for the construction cash — the company was offered the $1.6 million from a federal stimulus fund for urban development and job creation, as an incentive to renovate an old building and set up shop in L.A.
Its new office, on Figueroa Street's auto row, has a showroom with no visible signs of staff and displays window banners (“Build your green dream”), lighting and battery product samples. BYD's red logo hangs on the building, a visible presence near established brands such as Mercedes-Benz.
Recalling the pageantry in 2010 when BYD and its plans were introduced by city fathers, Kotkin said: “From day one this was a politically correct, high-profile thing, which will have, at best, a marginal impact.”
As to the wage-payment controversy, Austin provided documents to the Weekly showing that BYD's renovator, Cyrcon Builders, paid its 26 vendors calculated at the prevailing wage, with a city stamp dated May 2012. More than half earned at least $30 per hour.
In addition, this past August, the city's Economic and Workforce Development Department (formerly the Community Development Department) sent a letter certifying that BYD had completed its grant. The department's assistant general manager, Jenny Scanlin, noted that a federal audit could follow, but that the city felt BYD had done its job.
But several weeks ago, L.A.'s Bureau of Contract Administration warned BYD's attorney that the firm had failed to comply with the city's living-wage law.
Kotkin says the living-wage scuffle takes attention away from the larger, deeper problem of companies with high-paying manufacturing jobs continuing to flee — or never considering L.A. — as the region's deindustrialization continues. “There are just gigantic structural problems that are not going to be discontinued by making believe with one or two symbolic things,” Kotkin says. “It's a different Hail Mary pass every day: It's [bringing in] the 'football team.' It's the 'Olympics.'?”
BYD, meanwhile, is entangled in a long-running dispute over the contract that governs its manufacturing of Metro electric buses in far-off Lancaster.
In Lancaster, BYD is tweaking six of Metro's fleet buses to achieve lower emissions, and building another 25 electric buses that boast an 80-mile range after one charge, powered by BYD's touted battery technology. Five such buses have been delivered.
But then came an anonymous tip that set off a surprise inspection of BYD's main Lancaster plant in 2013. As has been widely reported, BYD was hit with citations and $100,000 in fines from California's Labor Commissioner for paying workers below minimum wage, providing improper wage statements and insufficient rest periods, and paying some employees in Chinese currency.
BYD has vigorously defended itself against flagging public opinion and regulatory inquiry in Lancaster. When BYD produced documents in its defense, the state backed down. The sole allegation that stuck was the state's claim that BYD had paid workers in Chinese currency, which resulted in $1,900 in fines.
Austin says it's a distraction for the media to focus on BYD, rather than labor leaders' self-interested desire to expand their dues-paying membership in his factories. He says he doesn't oppose unions but doesn't want his employees bullied to join.
In particular, he says, BYD employees should be allowed to use a private ballot to vote on whether to join a union, rather than being required to cast their votes publicly, where they can be subjected to pressure by opponents.
Asked why a company with global choices selected a region as expensive and unionized as Los Angeles in which to launch U.S. operations, Austin explained that a flashy automotive division in hip SoCal could translate to more sales at home.
“L.A.,” he says, “is sexy to the Chinese.”
Correction: An earlier version of this story said the California Labor Commissioner conducted its surprise inspection of BYD's Lancaster plant in 2012. The correct year is 2013.