More Ups Than Downs in 1985
If the crystal ball gazers can be believed, Orange County remains among the truly blessed.
Repeating this year’s performance, the county’s economy in 1986 should outpace the state’s, which is already expected to be among the bright spots of a fairly healthy nation. With only a few exceptions--notably the oil services companies which are still suffering the effects of a global oil glut--all of the county’s major industries are expected to turn in a respectable showing in 1986.
Against such a backdrop of prosperity, one might wonder how anything could go awry . . . how any business could fail to make megabucks . . . how any business, indeed, could fail.
But as the, well, erratic corporate performances in 1985 showed, nothing is assured, even in the land of the blessed.
“You can’t just assume the sun is going to shine on you,” says Bank of American regional economist Duane Paul. “The business strategy has to be right, and poor concepts won’t be dragged along by the good times.”
Consider, for example, the plight of Lasermed Corp. of Costa Mesa. Despite being in the red-hot, high-tech medical device field, the company filed for bankruptcy protection in September. Its problem? Analysts said that by the time the tiny company brought its optical laser to market late last year, the industry was flooded with similar devices. An example of too little, too late, one analyst said.
Smith International Inc. the Newport Beach oil well drill-bit manufacturer, already battered by the petroleum glut, suffered even more in 1985 from its unsuccessful attempt to acquire Gearhart Industries. When the dust from the ill-fated bid settled early this year, Smith revealed it lost $83 million on Gearhart stock alone. And there was even more bad news. The company got word that Hughes Tool Co. wants a $1.2 billion settlement on a patent infringement suit.
Carl Karcher Enterprises, operator of the Carl’s Jr. fast food restaurants, struggled through the year, testing any number of plans to reverse its declining fortunes. Menus were altered; prices were slashed; outlets were opened; outlets were closed; ad agencies were dumped. By the end of the year, the company proclaimed it was “back to basics.” However, at least one analyst said the company still “had a way to go” to get the house in order.
Even Western Digital Corp.’s spiraling profits were interrupted--significantly--this summer when the electronic component maker was hit all at once by a surge in orders. To fill the demand, the company hired hundreds of temporary employees and worked its plants around the clock. When it all settled down again, the company discovered that the cost of meeting its commitments caused a $4.6 million annual loss.
Nevertheless, countywide, even the combined forces of a sluggish demand for personal computers, the oil glut and health care cost cutting couldn’t outweigh the growth in defense spending, hotel, office and apartment construction, tourism and retail sales. Overall, Chapman College’s Center for Economic Research estimates that the county added 50,000 new jobs in 1985, for a 5.1% expansion rate.
For 1986, the same research forecasts the creation of 58,000 new jobs, the equivalent of a 5.7% growth rate. Chapman forecasters agree with their counterparts at the Bank of America and First Interstate Bank that the county’s retail, tourism and defense-related aerospace sectors should be the brightest stars in the economy.
“Basically 1986 is going to be a strong year for Orange County’s strongest sectors.,” says the B of A’s Paul. “The county is definitely among the lucky ones. It has a sexiness, popularity and appeal. It’s definitely a good environment for a company with the right product and the right strategy.”
