An electric-powered bus built by China’s B.Y.D.
Published: October 25, 2013
LOS ANGELES — At the height of the recession, Los Angeles officials spent a year and a half wooing a Chinese high-tech business to open its North America headquarters here, with Gov. Arnold Schwarzenegger traveling to China to persuade its executives.
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Gov. Arnold Schwarzenegger in 2010 with the B.Y.D. chairman, Wang Chuanfu, and the new plant.
When the deal — which included nearly $2 million in tax subsidies — was announced in 2010, Mayor Antonio R. Villaraigosa heralded the potential for hundreds of “high-paying green-collar jobs” from the company, B.Y.D., which was looking to sell its electric cars, solar panels and batteries in the American market.
Since then, the company, which has said it will create dozens of jobs in its suburban manufacturing plant, has secured contracts worth more than $40 million with the Los Angeles and Long Beach transit authorities to produce electric buses that will run on city streets.
But three and half years after its initial promise, the company has employed fewer than 40 workers here, and at least 5 of them are Chinese workers here temporarily, being paid in yuan an amount less than $8 an hour, California’s minimum wage. After an investigation this month, state officials slapped the company with $100,000 in fines for violating the minimum wage law and failing to provide sufficient documentation of pay.
As state officials continue to court Chinese investment — Gov. Jerry Brown traveled to China this year and spoke effusively about the country’s role in the state’s future — the city’s experience with B.Y.D. could serve as a cautionary tale. And more important, state investigators say, it could signal a shift in the way multinational companies fill jobs.
The state investigation comes as B.Y.D. continues to court transportation officials across the country to win contracts for electric buses, in some cases promising that their buses will be manufactured in the United States. “You cannot pay people in Chinese dollars with Chinese standards while they are doing work in America,” said Julie Su, the state labor commissioner who ordered the investigation into the company. “If this is the tip of the iceberg, you could see this ruining all kinds of industries.”
Officials with B.Y.D. — the letters stand for “Build Your Dreams” — say they plan to appeal the citation, arguing that Chinese workers here on legal work visas are not subject to state labor laws, including the minimum wage.
“They are here installing equipment and training people in a factory that is just beginning,” said Michael Austin, a company spokesman. “We’re bringing in a great Chinese investment — millions of dollars — that is a win for everybody. California is literally begging for these dollars.”
Mr. Austin said the Chinese workers would leave the United States within a few months, but declined to provide details. California labor officials say that regardless of their visa status, the workers are entitled to earn the state minimum wage.
Under a contract with the City of Los Angeles, B.Y.D. agreed to create 58 jobs in its downtown headquarters by August 2015. According to the contract, the company was to work with community groups to find potential employees. In an appendix, executives forecast the creation of more than 100 jobs by August 2013. It is unclear what city officials did to monitor the company’s progress.
Occupying a refurbished building in downtown, near dozens of auto dealerships and the Staples Center sports arena, the B.Y.D. headquarters contains dozens of empty desks. Portraits on the walls show company executives with city officials and Warren Buffett, who made a highly publicized investment in 2008.
Last year, the company won a bid to make 15 buses for the California city of Long Beach, which had secured a federal grant to create zero-emission buses. Under the terms of the contract, the buses must meet certain requirements to show that they were manufactured in the United States. The company is still completing required federal testing on the Chinese-made buses but expects to complete them in its local factory and get them to Long Beach by next spring.
In May, B.Y.D. took over a former R.V. plant in Lancaster, a suburb in the northeast desert of Los Angeles County. The plant is still mostly vacant save for a small number of local workers, several whom had been laid off when the R.V. plant closed. On a recent afternoon, three engineers from China were working to install factory equipment.
This year, Los Angeles transportation officials agreed to buy as many as 25 buses from B.Y.D. over the next several years. In its proposal, the company said it would hire employees locally — company officials say for every bus that is ordered, they need one or two workers here. At the same time, the company is trying to persuade transit agencies to buy the buses by offering up a prototype built at its headquarters in Shenzen, China. Last month, the Metropolitan Transportation Authority in New York began testing a B.Y.D. all-electric bus along routes on the Upper West Side and in Midtown Manhattan.
B.Y.D. officials say they expect to hire more engineers in the coming months and would continue to bring workers from China to help train new employees.
Chinese workers told investigators that they were working in Los Angeles for one to six months, living in dormitory-style housing in the San Gabriel Valley, a heavily Asian suburban area just east of Los Angeles. One worker said they were earning $1.50 an hour plus a $50-per-day allowance.
The state fined the company a total of $99,245, citing it for failing to provide minimum wage, not providing workers’ compensation insurance and not giving a second brief rest break.
“Workers in this kind of underground economy may not know what their rights are,” Ms. Su said. “It doesn’t matter where a company is based, if an employee is working here, the company has to abide by California law when they’re doing work in California. In no scenario is it permissible to cycle people through to get around our state’s laws.”
Mr. Austin described the workers as “terrified” by the investigation, and said that it was “a waste of taxpayer dollars.”
The company is also being sued by Sandra Itkoff, a former vice president who helped secure the Los Angeles deal. Ms. Itkoff has charged that she was a victim of discrimination and was wrongfully fired. In court papers, Ms. Itkoff asserts that she was the only non-Chinese-speaking employee in the office, and that executives routinely took advantage of Chinese workers. The company dismissed the claims and said that Ms. Itkoff was fired after she physically attacked another company executive.
Madeline Janis, the national policy director with the Los Angeles Alliance for a New Economy, who tipped state investigators off to the Chinese workers, accused the company of creating a “willful deception.”
“It’s a double outrage that they received money in the name of economic development and instead are importing people for the very jobs they promised,” Ms. Janis said.
Austin Beutner, the former deputy mayor who brokered the deal between the city and B.Y.D., said that it would be unfair to judge the company only by the number of residents hired so far. The region will benefit as long as the company continues to expand, he said.
“Whether they’re employing two dozen people or 50 from here, they are still adding to the local economy and investing here,” Mr. Beutner said. “It’s a long race — we need companies who are serious and are willing to make their long-term strategy here, which they clearly are.”