REGIONAL REPORT : Mexico Leads Firms’ List of New Plant Sites : Economy: NAFTA and low-cost labor are big draws for companies planning to relocate or expand outside the Southland, a survey finds.

More than a third of the Southland’s largest employers expect to relocate their facilities or expand at new sites within the next two years--and one in four of those say the new location will be outside Southern California, according to a survey.

For those looking to move out of the area, Mexico is the most popular destination, selected by 12% who say they will go outside Los Angeles County, 9% looking outside San Diego County and 8% looking outside Orange County. Making that nation so attractive are its inexpensive labor and a belief that the North American Free Trade Agreement will soon pass, pollster Dan Stephan said.

The survey, conducted in July by California Business Intelligence Service in Palo Alto, questioned executives at 1,450 companies statewide, including nearly 1,000 in the Southland.

Some business representatives in Southern California question whether businesses are truly going to leave in such high numbers.

Other recent surveys have shown that more and more businesses are staying or expanding here, said Susan Pasternak, a spokeswoman for the Los Angeles Area Chamber of Commerce. “Certainly businesses have left, but there have been new businesses starting here,” she said.

New reforms, particularly workers’ compensation changes, have driven down costs. Some of the executives may have answered the Palo Alto group’s survey before the reforms were signed by Gov. Pete Wilson in mid-July. “A survey is really a snapshot in time,” she said.

The reason for moving most often cited by respondents--in Southern California and statewide--was to cut operating costs, said Stephan, a partner in the business information company.

“This is quite a shift from the past,” he said, “when most California interviewees mentioned the need for good, skilled people as the primary reason for relocating.”

Stephan called the shift “ominous . . . for the skilled labor force.” Many respondents voiced a preference for moving to Mexico, he said, “which has labor costs at 10% or less of what you see” in Southern California.

Most respondents, Stephan said, assume that NAFTA will be approved and open up relatively unrestricted business exchanges between the United States and Mexico.

This side of the border, anybody working in a production plant--be it manufacturing, packaging or assembling--should be concerned by the results of the survey, Stephan said. “Everyone who works in the plant is at risk, including the plant manager.”

Second to Mexico as a choice for companies considering relocation was “other states,” according to the survey: 7% of respondents from Los Angeles County gave that answer, as did 5% from Orange County and 2% from San Diego County.

Those who said they will open new facilities within the next two years, regardless of location, accounted for 41% in Los Angeles County, 36% in Orange County and 31% in San Diego County. A much smaller number said they intend to expand or move within their respective counties: 14% in Orange County, 9% in Los Angeles County and 7% in San Diego County.

California Business Intelligence Service, which was formed in 1988, contracts with companies to find them relocation sites.

Civic and political leaders concerned about the possible loss of jobs, particularly manufacturing jobs, need to be aware of the interest by many businesses in moving to Mexico, Stephan said.

“Don’t pretend that this problem will go away as free-market forces work us back to prosperity,” he said.

Times staff writers Chris Woodyard and Pradnya Joshi contributed to this report.

Relocation Plans

More than a third of Southern California employers expect to expand or relocate over the next two years, according to a July survey. Businesses say they plan to relocate because of lower costs; mergers and acquisitions, and special financial incentives. Here’s where the businesses that plan to expand or relocate will go:

Mexico:

Los Angeles: 12%

Orange: 8%

San Diego: 9%

Another foreign country:

Los Angeles: 3%

Orange: 3%

San Diego: 4%

Another state:

Los Angeles: 7%

Orange: 5%

San Diego: 2%

Another California county:

Los Angeles: 9%

Orange: 6%

San Diego: 9%

Elsewhere in same county:

Los Angeles: 9%

Orange: 14%

San Diego: 7%

Source: California Business Intelligence Service