Irvine Co. Ties New Layoffs to Growth Issue

The Irvine Co. said Thursday it will lay off 100 employees within the next two months, citing the growing opposition to development in Orange County and a slowing economy.

“We have concluded that the future is uncertain,” Executive Vice President William H. McFarland and Senior Vice President Gary H. Hunt said in a memo to employees.

“We cannot justify an optimistic projection of continued strong levels of economic activity on our land.”

The huge Newport Beach landowner and developer had already laid off or not replaced more than 900 people in the past two years, saying it wants to slim down by turning many day-to-day operations over to outside companies.

But this is the first time the company has blamed the rise of slow-growth sentiment and expectations of a weaker economy for laying off employees. The announcement formally acknowledges a new political environment in the county.

The layoffs will fall on employees across the board, from “clerical workers to senior managers,” the company said.

When the layoffs are completed within the next two months, the company will employ fewer than 400 people, down from a peak of 1,423 two years ago.

Some observers, however, questioned the company’s explanation of the latest layoffs.

They suggested that the company--which they said has traditionally employed more people than it needs--might be looking for a graceful way to shed employees while also striking a blow against a pending slow-growth initiative. That initiative, builders have said, would drastically curtail construction in the county by tying new development to adequate roads and other public facilities.

‘Adequately Staffed’

“It’s safe to say they’ve been ‘adequately staffed’ for years,” said Robert Dunham, president of the Newport Beach consulting firm Newport Economics Group and a former Irvine Co. employee.

Brea real estate consultant Alfred J. Gobar said: “They may actually perceive a decline in demand and be getting ready for it, but they could also be saying they may as well strike a political blow while they’re doing it.”

Not so, a company spokesman said. “This is not an attack on the initiative, even though we oppose the initiative,” said Larry Thomas, vice president for corporate communications.

“The initiative is only one product of an entire political environment that would exist whether the initiative was on the ballot or not.”

Even without the initiative, the memo to employees says, resistance to development is growing, and it is getting more difficult to obtain permission to build from local governments.

Difficult to Conduct Business

“A slowing economy coupled with the regulatory drag produced in the current slow-growth environment already are making it more difficult to conduct our business,” the memo says.

“Pending land-use initiatives and ordinances to impose more stringent and expensive new conditions for development further cloud our future.”

The memo continues: “Notwithstanding continued high market demand for housing and the full range of business space, our ability to respond sufficiently to that demand is seriously undermined in the current political environment.”

The company’s accountant said the Irvine Co. was following a prudent course that some other local developers and builders have also taken: The company has stopped hiring and begun using more outside contractors to avoid getting hurt in a building slowdown.

“Southern California builders should be tightening their belts,” said Michael L. Meyer, managing partner in the Newport Beach office of Kenneth Leventhal & Co., which consults for the building industry.

‘More Turbulent Times’

“The last couple of years have been pretty good, but builders should be getting ready for more turbulent times.”

But others in the real estate industry said they don’t see a decline in local construction or in demand for houses, offices and factories. And they weren’t sure what the immediate future might bring.

“You look for signs of demand easing off, but it’s stronger now than it has been for the last six months,” said Scott Perley, a vice president at real estate brokerage Coldwell Banker’s Santa Ana office.

“I certainly don’t see any great slowdown,” said Dunham, the consultant. “Last year was an all-time record for office leasing in the county.”

But the Irvine Co. is immense enough to often go its own way. The company was formed by the Irvine family from a Mexican land grant and still owns 68,000 acres in Orange County. It is the largest private landowner in the county.

In the past two years it has begun relying on outside companies for its home construction business, its farming operations, the management of its office and apartment buildings and other businesses.