Strength in Diversity : Recession: A willingness to do other things--and the little jobs as well as the big ones--has helped a lot of building-industry subcontractors and suppliers survive the construction slump.
Francis Sullivan has been a part of the building industry for nearly 30 years, and never, he says with a shake of his head, have times been this bad.
“I’ve been through four building recessions, and I think this one is going to be the worst.”
But Sullivan, founder and president of Sullivan Concrete Textures in Costa Mesa, is a survivor.
In a year in which hundreds of Southern California subcontractors and suppliers to the residential and commercial building industry have collapsed, Sullivan serves as an exemplary messenger of the gospel of diversification.
The company specializes in custom concrete installations--concrete that looks like slate and brick and tile and flagstone--and that comes in almost any color an architect can dream up.
And for years now it has been called on to do major jobs for commercial and residential developers: the intricate black-and-white mosaic plaza at the Hyatt Alicante Hotel in Garden Grove, modeled after the Copacabana beachfront walk in Rio de Janeiro, is actually textured and hand-colored concrete installed by Sullivan’s crew; so is the gray-green “slate” drive that leads visitors into the posh gated community of Dove Canyon.
But even while dispatching crews to large jobs like those--the Alicante contract was for nearly $3 million--the company still pours back-yard patios and residential driveways and plans to continue doing so, Sullivan says.
A willingness to do the little jobs as well as the big ones is what has helped a lot of building industry subcontractors and suppliers survive the nearly two-year construction slump, industry insiders say.
But the recession, especially in the past year, still has thinned the ranks substantially.
Because so many of the businesses are small and most are privately owned, getting a handle on exactly what has been happening is difficult. But if the experience of the Orange County Building Industry Assn. is any gauge, it hasn’t been pretty.
After posting substantial membership increases in the building boom of 1988 and 1989, the BIA’s subcontractor’s unit’s membership shrank from 995 members in June, 1990, to 774 last month.
The BIA says not all of the lost memberships are because the businesses folded. In some cases, companies are having financial problems and can no longer afford the annual BIA dues, said James B. Hogan, who heads the subcontractor group.
Hogan said his own landscape architecture firm, HRP LanDesign in Santa Ana, has survived by laying off about 33% of its employees, spending nearly $500,000 on a computer-assisted design system and shifting its emphasis from landscape design for residential tracts to land planning for large master-planned communities.
“Diversifying is the name of the game,” he said, “and those who can’t or won’t do it are the ones having the most problems.”
Some of those problems end up in federal bankruptcy court in Santa Ana, where workers say the number of filings by small residential and commercial developers and building subcontractors has increased from one or two a week early this year to one or two a day in recent weeks.
And it is not always small unknowns that go under.
Last month, one of the largest model home decorating specialists in the county, Bobbie Stearn Interior Design in El Toro, filed for Chapter 7 bankruptcy liquidation, quitting business after 22 years.
The company in recent years specialized in decorating model home complexes for builders, and it was unable to realign its business as new home construction dried up, industry sources said.
But another large interior design firm, Carole Eichen Interiors in Santa Ana, has had better luck finding new business. Until recently, most of the company’s customers were large home builders such as the William Lyon Co., for whom it designed model home interiors. The downturn in new home construction prompted the company to create a new unit that provides design services for private homeowners.
“We just had a meeting of the (Orange County chapter of) American Society of Interior Designers, and the talk was all about ways to diversify and spread out,” said association publicist Dee Dee Ginter.
For Sally Palm, owner of 46-year-old Del Piso Brick & Tile in Anaheim, the building industry crunch has meant a substantial decline in sales to developers. So the company, which had expanded rapidly in the 1980s and now has eight showrooms and distribution facilities in Southern California, Northern California, Nevada and Arizona, stepped up its efforts to woo remodeling contractors.
“We knew in early 1990 that the tract development market was beginning to soften,” Paul Muce, Del Piso’s executive vice president, said in an interview earlier this year. He said the company’s major customers are developers and architects; housing development design centers and remodeling contractors. “And with the first two areas dying, we decided to shift our focus to remodeling. That is what has carried us through.”
Palm said the company, which trimmed its payroll from about 190 people to 150 early this year, has held the line on layoffs, partly by asking employees to put in fewer hours when times were toughest.
Muce said business has begun improving again. But Del Piso, like other firms, has not counted on an economic revival to pull it through. Its success has been in its ability to look ahead and to build sufficient diversity into its business plan to handle the bad times.
A Shrinking Supply of Suppliers Orange County Building Industry Assn. membership has declined 16.2% from 1990 because of business failures and because many firms’ finances are so marginal they can no longer afford the annual BIA dues. June membership figures 1988: 736 1989: 897 1990: 995 1991: 834 Source: Orange County Building Industry Assn.
