TRW and 1,200 Jobs to Remain in Orange : Economy: City promises subsidies, other inducements to retain its second largest private employer.
TRW Inc., wooed with promises of rent subsidies and other benefits, said Tuesday that it has canceled plans to uproot about 1,200 employees and move its big credit-reporting division out of state.
The announcement came after hush-hush weekend meetings as city officials and business leaders scrambled to assemble a package of inducements--some still undisclosed--that would stop the departure of the city of Orange’s second-largest private employer.
The division’s entire work force had been summoned Tuesday afternoon to the ballroom of the Hyatt Regency Alicante in Garden Grove to hear their fate from General Manager D. Van Skilling. Employees had received no advance word of what to expect.
Standing before hundreds of employees, Skilling brought a thunderous roar of applause when he said, “We are not moving out of Orange County.” The tumult could be heard outside the ballroom, and the delight spilled into the lobby as the session concluded.
“I’m glad they decided to stay here. I like it here,” computer systems security officer Larry Palmblade said through a wide grin after the half-hour meeting. “My wife and I will celebrate tonight.”
City officials were just as pleased. “We’re delighted,” said William G. Steiner, an Orange City Council member.
The credit-reporting business, which maintains records on 170 million individuals, is the largest of its kind in the nation. The parent company, based in Cleveland, also makes products that range from highly classified weapons systems to steering gears for trucks.
TRW reported a $231-million loss for 1991, mostly because it wrote off $250 million in the fourth quarter to cover the costs of restructuring its operations. In August, the company acknowledged that its credit-reporting business was not performing up to snuff.
The information services unit said it could have saved money by relocating to any one of three cities: Dallas, Cleveland or Denver. Skilling told reporters Tuesday that he had decided to move but changed his mind after meeting with city officials over the weekend and reaching an agreement that will save the company millions of dollars.
Steiner said the complicated deal requires the city to subsidize about $2 million worth of TRW’s rent payments over the next 10 years.
Other city officials were reluctant to disclose more about the agreement, which has not been officially approved by the City Council and still faces a public hearing, yet to be scheduled.
Although Skilling made his decision over the weekend, he kept employees on tenterhooks for several more days.
For half an hour before the 4:30 p.m. gathering, grim-looking workers filed through the 13-story lobby of the Hyatt, not far from Disneyland.
Few wanted to talk to reporters, and most merely shrugged when asked questions. A few attempted wan jokes: One man in a Windbreaker called out, “This is where they’re going to announce the massive raises.” Then he turned the corner into the ballroom, where two security guards checked identifications before admitting employees to the meeting. No press members or other outsiders were allowed in.
However there were a few “buts” Tuesday. The decision to remain in Southern California does not include an Anaheim computer bank that employs about 100 people. Skilling said the company will decide the fate of that office within two months, when it considers whether to consolidate the data center with its Texas office.
Nine hundred people work for information services in Orange County. Another 100 work for another unit that tracks business records, and another 100 are in administrative positions.
Meanwhile, Tishman West Cos., TRW’s landlord, said it has negotiated a new lease worth $30 million over 10 years for TRW, its major tenant at The City, a huge office park and shopping mall in Orange.
That is considerably less than what Tishman charges TRW now for its 250,000 square feet of office space, or 15 floors in three buildings, said Donald L. Mitchell, director of leasing for The City. TRW has leased space at The City for nearly 15 years.
“It’s been a long roller-coaster ride,” Mitchell said on learning late Tuesday afternoon of TRW’s decision to stay. The City had been negotiating with TRW--whose long-term lease is up for renegotiation next year--since 1988.
At one point, in 1991, TRW signed a deal with another developer to have a building constructed for it across the street. That deal fell through because the developer, Long Beach’s IDM Corp., could not get financing; at that point TRW began looking at sites in other states.
A move certainly would have been bad for The City, opening a gash in its 1.9 million square feet of office space.
Had TRW moved out of the county entirely, though, it would have put a major dent in the office market in the central part of Orange County and a lesser dent in the county’s economy as a whole.
“For one of our biggest tenants to dump that much office space on the market would have thrown the entire marketplace here into uncertainty,” said Russell P. Johnson, a senior vice president at brokers Grubb & Ellis’ Anaheim office. “Rents have just started coming back up here, and this would have had an impact on people’s attitudes.”
More than a fifth of Orange County’s tens of millions of square feet of high-rise office space are empty. But north and central Orange County are actually somewhat better off because few office towers have been built there in the past five years. A TRW move would have been less of a blow there than to the high-vacancy office neighborhoods around John Wayne Airport.
TRW said Tuesday that a study begun last month showed that information services could save $6 million by moving to Dallas or Denver, where the unit also has operations.
But Skilling told reporters that, with its new lease and the rent subsidy from the city of Orange, TRW can save most of the $6-million difference and make up the rest through employee productivity.
The company was leaning toward moving, Skilling said, until Assemblyman Mickey Conroy, a Santa Ana Republican, began a series of talks with the company several weeks ago about what help it might expect from the city of Orange.
The TRW tremors began rumbling through this city of 113,000 about a month ago, when the company announced that it might relocate.
The city had already taken one hit and was nervous about sustaining another: Its largest private employer, a headquarters and plant for Van’s Tennis Shoes, had decided against an expansion and said it would grow in San Diego instead.
On the other hand, the largely middle-class city, which has a median household income of $50,556--has a cushion against short-term economic changes such as recessions and against long-term, structural changes too. Three of its five biggest employers are nonprofit organizations, which are less exposed to downturns in the economy.
The largest is St. Joseph Hospital, with 2,700 employees; UCI Medical Center is tied with Van’s for second at 2,500; next is the city school system, 2,400; and then TRW.
Had TRW moved, the relocation almost certainly would have rekindled the debate over whether California stifles its businesses with high costs and onerous regulations. TRW had been pointedly and publicly complaining about this recently, attempting to justify what many expected was an imminent move.
Against a backdrop of unemployment in the county--nearly 77,000 people out of work and a jobless rate of 5.6%, the highest in eight years--the loss of hundreds of relatively well-paying jobs in a clean industry would have been a considerable blow.
In the current recession, the county has been losing service jobs for the first time, said Esmail Adibi of Chapman College’s Center for Economic Research.
“The other recessions weren’t as drastic as this one, with its huge overhang of empty buildings and the cutback in defense spending,” Adibi said.
Unlike the national economy, Orange County’s economic engine won’t really rev up until next year, Adibi said.
There was speculation last year that TRW might sell the information services unit, but the company denied that it was considering that possibility. Such a sale, however, would not have a major effect on TRW’s annual revenue: The unit accounted for only about 10% of the conglomerate’s 1991 total of $8 billion.
The unit has already been shrinking: It is using about 30,000 fewer square feet of office space these days, and it laid off 70 people in March as part of a consolidation of several businesses and said it might cut a few more.
Times staff writer Cristina Lee contributed to this report.
* SIGHS OF RELIEF: Employees happy to know they’re staying. A18
At a Glance: TRW Inc.
Corporate headquarters: Cleveland
1991 loss: $140 million
1991 revenue: $7.9 billion
Nature of business: Auto parts, military equipment, space equipment, credit reporting
Employees: 900 at Information Services Division in Orange and Anaheim, 400 at other subsidiaries in Orange
Information Services Division
Parent company: TRW Inc.
Headquarters: Orange
Nature of business: Market leader in credit reporting on individuals
Source: TRW Information Services
