Times Getting Tough for Many Area Firms : Economy: A spot survey in the Valley and nearby regions shows that many concerns are taking steps to cut costs.
Whether the nation is technically slipping into economic recession or just a “meaningful downturn” matters little to executives of Martin Lawrence Limited Editions Inc., a Sherman Oaks-based operator of 44 art galleries. All they know is that business is way down, forcing them to cut back and save money.
Since July, about 40 people, or 10% of Martin Lawrence’s work force, have left and the company has not filled the positions. It’s basically stopped using temporary help. Cleaning services that were used weekly at Martin Lawrence’s galleries now come in twice a month. The company, which had opened eight or 10 new galleries a year, plans only one new outlet in 1991.
“I felt we’ve been in a recession now for several months, and given that, we decided we would curtail expansion,” said Allen A. Baron, Martin Lawrence’s chief financial officer.
Martin Lawrence isn’t alone. A spot survey of three dozen companies in the San Fernando Valley and nearby regions shows that they are laying people off, freezing wages and overtime, leaving vacant jobs unfilled, scaling back expansion plans, idling production and taking other steps to cut costs in response to the sluggish economy.
The results mirror larger, more sophisticated surveys. A recent poll of 5,000 businesses in the San Fernando Valley and Ventura County by AppleOne Employment Services, a Glendale employment agency, found that nearly 40% of the firms do not plan to hire more people in 1991.
Some companies said they’ve been able to avoid major cutbacks because of the slowdown, and a few businesses said the softer economy has even presented opportunities.
But for most, cutbacks are needed. Santa Clarita-based Rexhall Industries Inc., a young and once rapid-growing maker of motor homes, has had to slash its work force to 100 from the 450 that it employed in June. That’s because it cut production 75%, to two vehicles per day from eight, after Iraq’s Aug. 2 invasion of Kuwait sent fuel prices soaring and demand for recreational vehicles plummeting.
“Retail sales have decreased significantly and dealers have not restocked their inventories,” the company stated last month. Rexhall Chairman William J. Rex said the general “uncertainty of the times” also has consumers postponing RV purchases.
The 4-year-old Rexhall is encountering its first taste of the wide business cycles that plague the RV industry. Because the vehicles are expensive and burn lots of gas, venerable RV makers such as Winnebago and Fleetwood have long been on a roller coaster of up-and-down cycles caused by oil shocks, economic recessions and high interest rates.
Other companies taking severe measures include General Motors Corp., which idled its Van Nuys assembly plant and the facility’s 3,500 workers for four weeks because of sluggish car sales. The plant, which builds the Chevrolet Camaro and Pontiac Firebird sports cars, reopened Monday, but will close again Dec. 21 to Jan. 2 for a traditional holiday shutdown.
Superior Industries International Inc., a maker of automotive wheels for GM, Ford and Chrysler, has decided to close its Van Nuys and Rogers, Ark., plants for two weeks during the Christmas holidays because of reduced shipments, said R. Jeffrey Ornstein, Superior’s chief financial officer. It’s the first such December closure for Superior, and will affect about 3,000 workers, Ornstein said.
Superior is cutting overtime pay and closely evaluating each job vacancy before deciding whether to fill it, he said. For the first nine months of 1990, Superior seemed immune to the economic slowdown, but in the current quarter “we’re going to start to feel the effects,” Ornstein said.
Layoffs also are occurring in the hard-hit real estate area. TOLD Corp., an Oxnard-based real estate developer, cut its Ventura County work force to 97 from 135. Jon Douglas Co., a real estate brokerage based in Beverly Hills, released about 35 San Fernando Valley agents since June and might trim 50 more in the next few months because of slow sales.
The Daily News, a Woodland Hills-based newspaper, laid off 48 of its 1,200 workers last month because the weak economy has depressed advertising revenue.
GTE Corp., the telecommunications concern, already has gone through several layoffs in recent years as part of a restructuring of its Thousand Oaks-based California division. No new layoffs are planned because of the weak economy, but “we are monitoring empty positions to see if we can get along without filling them,” said spokesman Larry Cox. GTE employs about 2,500 in Thousand Oaks and 19,000 in California overall.
Bekins Co., the Glendale-based moving company, has laid off about 25 workers at some of its locations east of the Rocky Mountains but not locally, Chairman Thomas E. Epley said. But Bekins is stretching merit raises for all of its 2,000 workers--including the 75 in Glendale--to every 18 months instead of annually to save cash, he said.
The area’s major aerospace and defense companies, such as Lockheed Corp., have laid off thousands of people over the past year, but that was in response to cutbacks in defense spending. Most of the companies have said they’re now streamlined to handle a recession, but they make no guarantees about maintaining their current employment.
3D Systems Inc., a Santa Clarita company that makes computerized machines that rapidly produce prototype models for manufacturers, hasn’t had to resort to layoffs. But it has frozen its 250 workers’ wages since July, and “we’re looking at every expenditure as tightly as we can,” 3D Chairman Raymond S. Freed said.
Citadel Holding Corp., the Glendale-based parent of Fidelity Federal Bank, has a hiring freeze in effect, and is closely monitoring overtime and temporary-help costs to keep expenses down.
Other companies have been affected in more subtle ways, such as American Restaurants Corp. in Ventura. The operator of Hudson’s Grills and Wendy’s restaurants had planned to open eight new stores next year. Now it plans only five to seven because banks, already stung by bad real estate loans, are reluctant to make more loans for commercial construction, said Charles L. Boppell, American Restaurants president.
“Developers aren’t able to get money right now because banks are worried about the value of real estate,” said Boppell, whose company has about 900 employees.
For some operations, the economic slowdown reportedly has had a minimal impact. Companies such as Blue Cross of California, the Woodland Hills health insurer; Semtech Corp., an electronic components maker in Newbury Park; Delphi Information Systems Inc., a computer company in Westlake Village; and Spear Financial Services Inc., an insurance and securities brokerage in Glendale, all said they did not have to institute any major cutbacks.
El Camino Resources Ltd., a Northridge marketer of computer equipment, said the slowdown is actually helping business. El Camino, among other things, leases used computers and those orders are up because some customers are unwilling to buy new machines until the economy strengthens, El Camino President David E. Harmon said.
“We benefit at times like this,” he said.
Pay-Fone Systems Inc., a Van Nuys payroll-processing concern, is gearing up for additional orders because of the soft economy, President Guy Lundberg said. Pay-Fone increased its sales force by 40%, to about 25 people, because other businesses are trimming their payroll departments and turning the work over to Pay-Fone, he said.
For companies such as Rexhall, though, it’s a time to hunker down until the slump ends. In fact, Rexhall’s Rex remains optimistic because he’s been in the RV industry most of his career and remembers the industry rebounding in the mid-1970s from the Arab oil embargo and from sky-high interest rates in the early 1980s.
“When our business comes back, it comes strong,” he said. “For those that can weather the storm, there’s lots of pent-up demand.”
