Medford now too remote for antenna firm
In 1978 it made sense for Ellis Feinstein to buy a Bay Area communications antenna firm and relocate it to the Rogue Valley.
The primary market for the broadcast antennas made by Scala Electronics back then was the mountainous American West — relatively close to Southern Oregon.
As time passed, however, market needs and the customer base shifted, distancing Scala from its end users clustered along the Atlantic Coast and Southeast.
Ultimately, said Manfred Muenzel, who succeeded Feinstein as president and CEO 15 years ago, the Rogue Valley has proven too remote for Scala to compete on a global scale.
"Medford is a great place to live, but it's not a great place to have a world-class product produced because of the remoteness," Muenzel said Monday. "It's a long way to transport anything and we are an assembly location."
Last week, the head of Germany-based Kathrein-Werke KG, Anton Kathrein, announced the company's Scala Division would close by the end of 2015. A new manufacturing plant will be built at an undisclosed location in Mexico, while Scala sales and marketing will move to Texas.
Scala's 4.36-acre campus near the Medford airport was acquired by Kathrein in 1995.
As recently as seven years ago, the local plant employed close to 220 people, but now there are just over 80 on the payroll.
"Some people have been offered positions in the Dallas area," Muenzel said. "There are actually very few left in production; including supervisors it's in the low 30s."
The products designed by Scala or one of its sister companies require hundreds of parts — all which are shipped great distances.
"We just don't have suppliers anywhere near us," Muenzel said. "They are far away and, in many cases, we end up buying parts from Europe or offshore. To pay to have those parts brought here and then ship them out to market thousands of miles away makes no sense."
He said greater competition has put pressure on prices.
"It might have been possible to have some reasonable market share with higher prices in the past, but that's no longer the case," Muenzel said. "We're competing with U.S. companies that have manufacturing in Mexico, China and eastern Europe; we have to do the same."
He said companies such as Erickson Aviation and Tucker Sno-Cat, which have few competitors and make unique products, can survive in the Rogue Valley.
It was a different scenario when Scala produced low-power broadcasting antennas for a regional market, Muenzel said. Even expanding — doubling its production side in the late 1990s — wasn't going to compensate for the distances involved.
"U.S. cellular operators might buy 200,000 to 300,000 antennas a year and they have to be built in assembly line conditions," he said.
The lack of major air freight and rail options also played a role.
"You need a big airplane to carry a container load of 80 to 100 antennas," he said. "We've sent a few by Federal Express, which has smaller planes, but that is really, really expensive."
Reach reporter Greg Stiles at 541-776-4463 or email@example.com. Follow him on Twitter @GregMTBusiness, friend him on Facebook and read his blog at www.mailtribune.com/Economic Edge.