O.C. Coping With Effects of Recession : Economy: Most residents, despite their diminished circumstances, remain optimistic about the future.
Next month, Bramalea Homes will begin asking up to $2.2 million for big new houses on a wind-swept stretch of coastline between Newport Beach and Laguna Beach.
But Steve Rowland won’t be there to see it; Bramalea laid him off from his $100,000-a-year job in October.
The irony--that he should be jobless as $2-million houses go on sale--isn’t lost on the 40-year-old executive.
More than a year into the recession, all the indexes of misery are way up: more foreclosed homes, more bankruptcies and business failures, more layoffs and more people queuing up at the unemployment office--so many that the line usually stretches out into the parking lot shortly after the office opens each morning.
Surrounded by big houses, expensive cars and other tangible evidence of the American dream, it can be hard to be out of work in Orange County. Reminders of what you don’t have, or can no longer afford, are all around.
Yet most of the people whom Times reporters interviewed for this story face the recession and their own daunting problems with a stoicism that is quite remarkable.
For the poor, of course, times are always hard in Orange County, and this recession merely makes their lives a little more miserable.
For the middle class, especially the older people who have been through it before, frustrating is the strongest word most can summon up to describe the collapse of their businesses or the loss of their jobs.
Perhaps that frustration will turn to anger later. Some of these people are still a little numb; they were, after all, the people who made Orange County’s economic machine go, who purchased the parts, wrote the computer programs, drove the trucks and sold the clothes. For most, the splashy lifestyle of Newport Beach would probably always have been out of reach. But at least, they thought, they’d always be needed somewhere, and be able to earn a comfortable income, afford a car and a decent place to live.
With the customary optimism of Southern Californians, most of these people picture themselves getting their old jobs back once the recession ends, or perhaps getting new work that pays even better. If they’re aware of what some economists are saying--that the state’s economy may never regain its old robustness--they aren’t letting on.
The reports on this page illustrate how a handful of county residents fared this year:
Some of dentist Joan Dendinger’s patients don’t want fillings any longer. That’s because they’ve lost their dental insurance and, in some cases, their jobs.
“I keep hearing, ‘Can it wait?’ ” she says. “With dentistry, most problems are detected before they cause pain, so people don’t understand why they should have something done about it now.
“But it’s less traumatic to fix things when they’re small.”
Dendinger had a thriving dental practice in Newport Beach--until this year.
Then came the Persian Gulf War and the recession. Dendinger is a Navy reservist and was away from her practice for 10 weeks serving at Camp Pendleton. To keep the practice going, she made the long drive to work on Saturdays and had two other dentists cover for her three days a week.
But the practice was in a shambles when she left active duty in April and returned home; it was billing just $12,000 a month, half the amount of a year earlier. Considering that the overhead for her dental practice was $10,000 a month, it left little money to pay her other bills.
When business stayed slow through the summer, Dendinger figured it was because she had been gone in the spring. But it soon became clear that the economy was largely to blame.
“People were depressed,” she says. “They didn’t know what would happen with their jobs, and they were putting off spending.”
Dendinger, 37, says she’ll manage to keep the practice going. But her life has changed.
“I’ve been in my own practice now for six years, and before this year, I thought I was over the hump of building it up,” she says. “Until two years ago, I went to breakfast meetings and spent my evenings networking--attending women’s groups and Le Tip and Chamber of Commerce mixers.”
After all that work, and before the war, “my practice,” she says, “was as busy as I wanted it to be.”
She has had to give up, for now, fixing up the old house she owns. She has minimal landscaping and no living room furniture.
Dendinger says her close brush with financial disaster has made her a more compassionate person. She does some dental work for free for her regular patients and volunteers at a children’s dental clinic. That kind of personal progress is hard-won.
“I’ve felt really frustrated this year,” she says. “Frustrated and helpless.”
Robert Hines lost his job with 190 other people one day in August when Interconnection Products Inc. shut its doors without warning.
The employees got caught in the cross-fire between Wearne Bros., the Singapore technology company that bought Interconnection, and its banker, Chase Manhattan Bank.
Wearne balked at its debt payments after buying Interconnection, which made electronic connectors; Wearne closed the place down and transferred its assets to a new subsidiary.
Hines, 55, is bitter about all this. He tried to organize employees to sue the company for failure to provide notice of the layoffs or pay severance.
The computer systems analyst says he talked to more than a dozen different lawyers about suing the company for allegedly violating federal plant-closing law. The lawyers, he says, told him that a suit would be expensive and that it would be difficult to recover damages from Wearne Bros. Officials at Wearne declined to comment.
Hines hasn’t yet had to apply for unemployment benefits because he’s working part time as a computer systems consultant. But that earns him only about two-thirds of what he used to make. So he has cut back on expenses; much of his earnings now go to pay the $1,350-a-month mortgage on his four-bedroom home in Cypress.
Meanwhile, he has sent out more than 100 resumes. But he’s often told that his 30 years of experience make him overqualified for the jobs available. He says he has about six weeks of savings left. Still, he manages to hold on to a sense of humor, albeit a sardonic one.
“You know the old joke: A recession is when your neighbor loses his job, and a depression is when you lose your job,” he says.
“For me, it’s gone into a depression. But with the contacts I’m making as a consultant, I’ll see daylight again.”
STEVE AND JOANNE ROWLAND
Steve Rowland was promoted to the good life just four years ago at Bramalea Homes of California. When he was laid off a few months ago, at the age of 40, he was making $100,000 a year.
As one of two vice presidents of operations, Rowland’s job was to help the Canadian home builder break into the booming Southern California market. One of his biggest projects was helping build those $2-million houses on the Newport Coast, a swanky resort community being developed by the giant landowner Irvine Co. It’s that project where Bramalea will begin selling 58 homes next month.
“When I was promoted in 1987,” Rowland says, “there were two VPs of operation, me and a guy in the Inland Empire. At the time the industry was moving at light speed and we had a large volume of homes in both areas.
“But by earlier this year, things had slowed down tremendously,” he says, “and the bottom line was that the other guy had seniority. And Bramalea was established in Orange County and was heavy with upper-end executives. If you look at it realistically, it made sense to lay one of us off, and he’d been there six years longer than me.”
If Rowland doesn’t sound bitter about being let go, it may be because for him the blow was softened quite a bit.
As a top executive, Rowland got a fairly hefty severance package--his salary and benefits were continued for six months, or until mid-March.
And his wife, Joanne, pulls down a nice salary as director of marketing at Costain Homes, another home builder in Newport Beach.
So the Rowlands don’t have to sell their home at the base of the Anaheim hills. They can afford tuition to keep their son, Eric, 13, and daughter Kristine, 10, in parochial schools. Their oldest child, Jennifer, 18, attends Fullerton College.
And Rowland, a former race-car builder and driver, can pursue a scaled-down version of his hobby with his son: Rowland builds racing go-carts and Eric drives them.
But the layoff still hurts. There was no annual bonus this year. And when he begins job hunting in earnest after the holidays, he’ll be one of dozens of former real estate executives chasing a shrinking handful of upper-echelon jobs.
“We’re especially fortunate that my wife is in a high-paid executive position,” Rowland said, “but we’ve learned that you can’t look at these jobs as guaranteed employment.”
As the Rowlands watched the building industry shrink over the past two years, they decided to use some income to pay off debts. “That’s helped because we don’t have a lot of extra bills to pay right now,” Rowland says.
“Still, I won’t be going to Indianapolis for the Indy 500 in 1992. And we’ve put off some home-improvement projects we’d been talking about.”
And Rowland and his wife have spent a lot of time “thinking about contingency plans. We play a lot of ‘what-if’ games. Like if it all fell apart, I still have my automotive skills, and Joanne has a marketing background. And before that she was an executive secretary--and executive secretaries are more in demand these days than vice presidents.”
Jesus Hernandez gave no presents this Christmas. There wasn’t money for a turkey. Indeed, he could not even send a little money home to his wife and his two youngest children, ages 4 and 8, in Mexico.
In a good six-day week, Hernandez makes $80. Other weeks he waits endlessly at the Costa Mesa Job Center for someone to hire him to mow lawns, clip hedges or haul building materials. These days, offers are scarce.
“I was surprised to come here and see so many of my fellow countrymen not finding work,” says Hernandez in Spanish, indicating the dozens of men standing around the hiring hall one recent day.
“There is some work, but it’s very slow,” he says. “I take whatever lands. Here, there is no preference.”
Hernandez, 55 and a father of six, drove a truck in his native Puebla de Los Angeles. In September, he followed his two oldest daughters north, bringing a daughter, 14, and son, 17, in search of a better life.
He thought his two children were getting a better education and having more opportunities here. Now, he’s not so sure.
“If it doesn’t improve in the next month, I’m going home,” he says glumly. “This year there will not be any gifts for anyone. It’s sad, very sad.”
In the depths of a recession, the American dream seems not quite so sweet to those clinging to the bottom rungs of the economy. There is an edge of irony tinged by disappointment in Hernandez’s voice when he says: “I am very surprised there are so many problems here with unemployment, the homeless.
“Someone should talk to (President) Bush and tell him what is going on out here. Instead of so much war, he should be creating more jobs.”
He may be the president, but Gregg Jackson is out there on the floor hawking shoes like any other salesperson.
In August, Jackson had a dream of opening a chain of stores selling athletic shoes and clothing. A few months later he’s simply trying to keep just one Irvine store going.
It was supposed to be recession-proof, this business of selling expensive sneakers to yuppies. After all, aging baby boomers are getting more health-conscious; and they’ve got the wherewithal to be status-conscious about it too. Selling these kind of folks expensive athletic gear was easy when Jackson was a marketing executive at Nike.
“It didn’t matter whether it was good economic times or not,” says Jackson. “This was a feel-good product.”
Now Jackson is more likely to run across customers like the woman who was recently in the store looking at a pair of $150 athletic shoes. She finally put the shoes down and left. She could buy a bike, she told Jackson on the way out, for the same amount.
Sales have been so bad that the store is on the brink of closing, only four months after it opened. Called Zoom Performance Athletics, it sells the trendiest brand names; each sport has its own little department, the shoes and clothes laid out in entire ensembles designed to entice shoppers to buy a whole bunch of stuff at once.
Jackson, the 27-year-old president of Zoom, dreamed of running a chain of stores in malls across the country. But Jackson is too busy working the floor to plan much of anything these days.
From the first, the recession put a crunch on the little store. Clothing manufacturers, understandably nervous about retailers in a down economy--especially a new one--limited his line of credit to $50,000 instead of the $100,000 Jackson says he needed. And they wanted to get paid in 30 days instead of the customary 90.
With money tight, the store has been short of merchandise in some sizes, which means some customers who are anxious to buy sometimes can’t find their size.
The store tried advertising by direct mail, but the county’s mailboxes were stuffed full of brochures from other sales-starved merchants so the mailings had a limited effect. Jackson has had to heavily discount his merchandise from 30% to 35% and that, of course, takes its toll on the store’s bottom line.
“Our margins are just in the toilet,” Jackson says. By the time the week before Christmas rolled around, Zoom was barely hanging on.
“If we don’t see the numbers in the next week and a half,” he says, “our investors have asked us to close the doors.”
Advertising executive Greg Smith is sitting in an office in Costa Mesa surrounded by desks and file cabinets that he is trying to sell now that his company is out of business.
Last year, there were 420 ad agencies and public relations firms in Orange County. Today, there are 150 fewer. One of those 150 is Greg Smith & Partners, which went out of business this month.
What happened? The recession forced advertisers to drastically cut back on spending. So the big ad agencies, which traditionally disdained small accounts like the ones Smith thrived on, tried to fill the void by snatching up those smaller accounts.
To make matters worse, many account executives who were laid off from other firms are out pounding the pavement, competing as free-lancers with the agencies. “And they don’t have the overhead a firm has,” Smith says, “so they can charge less money” and still survive.
Then in January, the firm’s biggest client, motorcycle maker Yamaha Motor Corp., hired a new promotions director who yanked the account from Smith. There went 30% of the business. From billings of $17 million in 1990 and 40 employees, Smith went to $8 million and a couple of dozen employees.
Finally, just a few weeks ago, Smith threw in the towel. “Small agencies are being squeezed from both ends,” he laments.
He’ll go to Salvati Montgomery Sakoda, a bigger ad firm in Costa Mesa, as an account supervisor. Though he’s taking a cut in pay from his salary during the good ol’ days, Smith should come out ahead compared to his income in 1991--when he trimmed his own salary to support his staff. “A small business owner tends to treat his employees better than he treats himself when finances get tough,” he says.
Now 42, Smith says assuming the role of employee at somebody else’s shop for the first time in years won’t be easy. “It’s a little traumatic,” he admits.
One thing he won’t miss, however, is the stress of the past year. “It’ll be nice to concentrate on advertising and not on all the other aspects of operating a business,” Smith says, adding:
“In good times, it’s wonderful to be head of a company. In bad times, it’s not so wonderful.”
John Rondeau had a great October. His employer, Toshiba America Information Systems in Irvine, had just awarded him the biggest bonus of his career for saving the company $1 million. A little story about him was published in a purchasing industry trade magazine, with a photograph and everything.
Sure, he knew lots of people were getting laid off, even in relatively prosperous Orange County; it’s no secret that unemployment here is about 5% and about 68,000 people are out of work. By comparison, Los Angeles county has an estimated 7.8% jobless rate, and November’s national unemployment rate was 6.8%.
Even Toshiba was laying off people, an unusual step for Japanese companies, which pride themselves on almost never having layoffs. And earlier in the year, another Toshiba subsidiary that makes medical equipment backed out of a huge lease for six floors at a local office building.
Still, Rondeau had never felt more secure about his job. Six weeks later, he too was laid off.
“I was in total shock,” he said. “I didn’t believe it for the first two or three days. Even though it says on the applications that a job with Toshiba isn’t guaranteed, I still felt some sense of security, based on my previous experiences with Japanese companies.”
At 53 years old, Rondeau was without a job for the first time in his life. It was not until after he had cleaned out his desk and driven his pickup truck out of Toshiba’s huge parking lot that it dawned on him: This was for real.
Soon, other realities set in: When the new year starts, he and his family will not have health and dental insurance. His company retirement plan has disappeared.
He had trouble sleeping for a while. For more than 13 years, he had worked as a purchasing manager for three Japanese companies--for a Sony operation near San Diego, then for a Mitsubishi division in Santa Ana. He left the earlier jobs for better opportunities.
He and his wife, Maria, an inactive real estate agent, talked about relocating. But the housing market was bad, so they figured that they would not get as much as they wanted for their house.
At Rondeau’s age, he found it tough to find a new high-paying job.
Two weeks ago, he picked up the pieces of his life and went into business for himself. He sells water purification systems, a pursuit he had been toying with for a couple of years.
Since the layoff, his Laguna Hills company, Celestial Water Systems, has sold about $5,000 worth of water systems. He is hoping to sell the systems along the Pacific Rim, where the water filter market is still in its infancy.
His family’s lifestyle has changed. Rondeau, expecting tough financial times, has cut by two-thirds his family’s entertainment and shopping budgets.
“Before, I had a budgeted income, and now I have none,” Rondeau said. “Now I have to decide on how I can increase my business to sustain my family or to look for another comparable position in the purchasing management field.”
Rondeau smiled, crossed his fingers and said: “I’m taking each day as it comes and hoping for the best.”
Times staff writers Susan Christian, Cristina Lee, John O’Dell, Dean Takahashi and Chris Woodyard and free-lance writers Anne Michaud and Rose Apodaca contributed to this report.