Why manufacturing is moving east

Dan Shulte, CEO and president of Modern Stainless & Design Inc., left California behind in the dust of his mountain bike and swore never to return.

His grievances with California are many: skyrocketing workers' compensation, high corporate taxes and complicated labor laws.

"They treat us (corporations) like the bad guys," Shulte said. "The attitude of the government is to hate us. But basically what they're doing is taking jobs and revenue. It's a vicious circle that doesn't make sense."

It was enough to make the sixth-generation Californian skip over to the Silver State. But he must still grin and grip a relationship with the Golden State. After all, about 95 percent of the company's products are shipped to Central and Northern California wineries.

"If we would've stayed there we wouldn't have been able to afford it," he said about workers' compensation. "We would've been out of business."

Shulte is an energetic leader who likes to whip around the 100,000-square-foot building on a Motiv mountain bike. It is a faster way to keep up with his partners and employees. He said it saves on boardroom time. The company has been manufacturing in Dayton for about five months.

Walking onto the factory's floor, a visitor can smell the smoldering metal. Workers rolled sheets of stainless steel into an embossing machine with smooth, practiced heaves. Farther along the assembly line each welder constructed a tall, shiny wine tank. Modern Stainless makes custom tanks for small and major wine labels like Mondavi and Corbell.

Modern Stainless started eight years ago with four guys in a garage welding microbrewery systems for the beer industry. They started with $5,000 each and no safety net. The bottom broke on microbrewing in the late 1990s, so they switched to wine tanks and other stainless-steel products. Today, the company has about five times the enclosed space it did in Cloverdale, Calif., and employs 43. As Controller Rick Gibson-Schwob put it, "we're bigger than we've ever been."

Modern Stainless welder Richard Sharke moved with the company because he wanted to get out of California.

"It's like starting over for me," he said. "It's fresh faces, great ideas, the commitment to the product and being able to upgrade my standard of living."

Many companies and their employees are jumping the border for similar reasons.

Quoin International Vice President Cathy Jacobson said it benefited the tech development and management company to shed California's high state tax and workers' compensation costs. But that isn't all.

"The reason we moved to Carson City is because where we were located before in California, in the Mojave desert, we were having a very difficult time recruiting and retaining qualified engineering staff," she said.

Northern Nevada Development Authority Executive Director Ron Weisinger estimated 20 businesses have relocated to Northern Nevada from California this year.

Wayne Schell, CEO of the California Association for Local Economic Development, said some manufacturers are moving to the Silver State, but their products are still going to California. Nevada can offer a cost California can't, so it doesn't surprise him that they're going. It is part of a regional economy.

"I think it's better for us for them (companies) to go to Nevada rather than going to North Carolina," he said. "I'd sure rather have them in Las Vegas, Henderson and the Reno areas."

Nevada would rather have them, too. A $600,000 marketing campaign aimed at wooing California companies to Nevada will kick off next month. The Nevada Commission on Economic Development, Sierra Pacific Power Co. and several state economic authorities have funded the yearlong ad blitz. The 2005 campaign follows a similar one last year on which they spent $500,000.

Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.