Views from the Front : Seven Southern Californians Tell What They Expect in 1993

As the curtain descends on another grim 12 months for the California economy, the outlook for 1993 is not reassuring.

In the recent words of UCLA’s economic forecasting department: “The question concerning the California economy in the short-term is whether the state is poised for recovery. In our best judgment, the answer is no.”

Yet the view from the front lines--where business decisions are made and jobs are created--is not nearly so simple.

The gloomy backdrop notwithstanding, there are notable successes in niche businesses, along with an enduring confidence among most experts that this bust, prolonged as it has been, will run its course.

The general feeling is that Southern California certainly has been bloodied, but is far from bowed. What follows are the perspectives of seven Southern Californians, from all walks of economic life, about their companies, their jobs and the outlook for the year ahead.

Larry P. Arnn, think tank president

As president of the Claremont Institute, a conservative think tank, Larry P. Arnn sees several years of hard times ahead before Southern California has any chance of a sustained and robust recovery.

While 1993 might look “a little better than 1992,” he says, “I think we’re in for a longer period of slow growth where we won’t do as well as the rest of the country.”

The reasons? As Arnn ticks them off, they are the business community’s classic laundry list of what needs to be done to reform the business climate in Southern California and restore its former economic might:

* Housing prices remain twice as high as the national average, in part because construction approvals are so expensive and time-consuming to obtain.

* The state’s workers’ compensation system is outrageously expensive and badly in need of reform.

* Expensive and ill-conceived air-quality regulations are choking job growth in small business.

* The public school system is both costly and largely ineffective.

Though none of these problems are new, Arnn says, “they’re a lot worse now then they used to be.” While they have solutions, the problems require extensive political action by state and local government, he says.

Poorer areas, where decent jobs and housing are in short supply, only get more blighted, he says, while the more affluent yearn for high-quality lifestyles in regions that are more affordable and less congested.

“If you can afford to move,” Arnn says, “there’s a high chance that you can live better somewhere else.”

Donald R. Beall, corporate CEO

As an international aerospace and commercial-manufacturing company with prodigious investments in Southern California, Rockwell International has been shrinking its work force for years.

Since U.S. defense cutbacks began in 1986, Seal Beach-based Rockwell has slashed its employment rolls by a third to less than 80,000--deep cuts that were felt in plants across Southern California.

“Fortunately, we think the bulk of our reductions are behind us,” says Donald R. Beall, Rockwell’s 54-year-old chief executive.

Southern California’s economy is another matter. Though he thinks the region will fare better in 1993, Beall says fundamental problems remain.

Among them:

* Reductions in the U.S. defense budget still are not over.

* There is a severe glut of commercial and industrial real estate.

* Commercial aircraft orders are down at McDonnell Douglas in Long Beach (as well as Boeing in Seattle).

* National economic growth will remain sluggish.

Echoing Claremont’s Arnn, Beall says: “I think we will see growth in (regional) economic activity, but it’s just going to be slower and lower than the rest of the country.”

Nelson Davis, television producer

Early risers flipping through television channels on Sunday morning are likely to stumble across “Making It!,” a show whose theme is boot-strap economics.

The show, which airs at 6:30 on Channel 5, features success stories of minority entrepreneurs Asian, Latino, African-American, Native American--along with tips about how to start your own business and whom to call for advice.

What viewers don’t know is that the show’s producer, Nelson Davis, is a prime example of minority success in a world of commerce that remains Anglo-dominated. While Nelson Davis Productions remains modest in size, entrepreneur Davis is aglow about his company’s prospects.

His business, he points out, “is growing in spite of the shrinking economy.”

A former NBC television executive, Davis, 48, found his entrepreneurial niche by forging an alliance with KTLA to produce public-service programs, sponsored by civic-minded corporations anxious to promote efforts at minority self-help.

With an ear attuned to the latest in minority business, Davis knows of the recovering alcoholic who escaped Skid Row to run a coffee shop in the Crenshaw district, along with the pharmacist who quickly rebuilt his store shortly after it was torched in the riots.

They are stories that go largely unnoticed but are certainly more uplifting than the continual bombshells that have been landing on corporate America. “As we shed tears over IBM and GM,” Davis says, “these are the success stories out there.”

Indeed, in Davis’ view, one key to the future of Southern California commerce lies with small, minority-owned businesses that are now displaying a renewed spirit of confidence and self-reliance in the wake of the spring riots.

“Nobody is talking about getting another (government) program,” Davis says. “The talk I keep hearing is: ‘Keep the playing field level and give us a chance.’ ”

Glenna Hurd, small businesswoman

While the nation’s health-care system is a costly morass, it has provided a giant financial opportunity for a young medical-billing specialist named Glenna Hurd.

In the six months since Hurd bought the Inland Medical Billing Service in Canyon Lake near Lake Elsinore, the number of her physician-clients has nearly doubled (to 100)--a feat she hopes to repeat next year. She expects her current staff of 12 to grow to 20 or 25 by next June.

“We’re getting about two new clients each week,” says Hurd, 32. “They’re coming to us.”

As a billing agent for doctors, Hurd specializes in Medicare and workers’ compensation, where medical collections require careful navigation through government bureaucracies and keeping pace with continual rule changes.

She tells of one doctor who came to her for help after falling a year behind in billing for Medicare patients. He wanted her to mount a concerted effort to collect on the outdated bills. Her fee: 3% to 10% of the amount that comes in.

“This is definitely a growth industry,” she says.

Hurd’s success has helped her offset tough times. Her husband died of cancer three years ago, leaving her with three children, while her house in San Bernardino has been plagued by construction problems.

Still, she is resolutely upbeat. “I couldn’t be happier,” Hurd says. “This (business) is the best move I ever made.”

Edwin Giebel, unemployed accountant

After losing his corporate accounting job two years ago, Edwin Giebel has been sliding down a slippery slope of despair that has yet to end.

Giebel, 46, personifies the plight of middle-age managers who have lost their jobs by the thousands in this recession and have yet to land on their feet. In the meantime, they lead lives of quiet desperation--eager to work but thwarted at most every turn.

“Basically, you’re anxious all the time,” Giebel says during an interview in the kitchen of his Long Beach bungalow within earshot of the traffic on the San Diego Freeway. “It’s a horrible way to live.”

With a wife who works long hours as a nursing-home administrator and a grown daughter, Giebel worries that he is becoming isolated from the rest of the world. His primary social contact during the day comes at the local convenience store, where he buys his cigarettes.

“I’ve been by myself for so long,” he says, “I’m starting to feel a little alienated from people.”

He works sporadically as a real estate agent, but has yet to consummate a sale in more than a year of trying. “I had to take money from my wife to buy her a Christmas present,” he says. “That’s kind of rough.”

Giebel says that his future is probably not in Southern California, where he came with great hopes as a college student from Ohio. He’s currently considering investing his savings and home equity to buy a nursing home near Prescott, Ariz., home to many retirees from Southern California.

“I came here because of the lure of the West,” he muses. “It was probably a mistake.”

Charlotte Chamberlain, banking analyst

Count Charlotte A. Chamberlain among the optimists for 1993--a year she expects the regional economy to bounce back from the extended hard times. “I’m bullish on California,” she declares.

A banking analyst for Wedbush Morgan Securities in Los Angeles, Chamberlain says Southern California is often mistakenly compared to the Texas of the 1980s and New England of the 1990s in regard to its economic ailments.

“The big difference,” she says, “is we did not have an overbuilding of residences like they did in Texas and Massachusetts.” As a result, when the general economy begins to improve next year, she says, Southern California won’t have a housing glut with which to contend.

“Affordable housing has never gone soft and it’s going to do very well in a recovery,” says the 46-year-old economist.

A big obstacle to the recovery, she concedes, is commercial real estate--a market so overbuilt that it is not expected to recover for several years. “The bromide there is: Stay Alive till ’95. Celebrate in ‘98,” she says.

Nevertheless, Chamberlain believes the long-term future is bright as Southern California’s large foreign-born population becomes an increasing economic asset due to the region’s growing trade ties with Mexico and Asia.

“People still want to live in Southern California,” she says. “They like the lifestyle and the business opportunities it offers.”

Ira Norris, homebuilder

Though the recession has devastated vast portions of the housing industry, it has not scathed builder Ira Norris, owner of Inco Homes in Upland, east of Los Angeles.

Norris focuses exclusively on constructing homes for a key slice of the housing market where demand only keeps growing: first-time buyers seeking affordable homes away from urban congestion and blight.

Norris, 56, formed his own company in the mid-1970s after working as a senior executive with home builder Kaufman & Broad. After modest accomplishments in its early years, Inco is now one of the region’s fastest-growing builders.

With most of its higher-priced competitors struggling to survive, Inco has sold nearly 700 houses in Los Angeles, Riverside and San Bernardino Counties this year, up more than 38% from 1991.

Norris said that he expects 1993 to be another boffo year for the handful of builders, including Inco, that specialize in affordable housing in inland Southern California. A typical Inco home sells for about $100,000.

The buyers typically are blue-collar employees--such as truck drivers and warehouse workers--who are weary of renting and want a back yard of their own. Through direct mail advertising, Inco encourages renters to buy their first homes for as low as $60,000 and $70,000 in high-desert towns such as Victorville and Adelanto in San Bernardino County.

“What is really happening is that demand (for affordable houses) is not dropping but supplies are,” Norris says.

Among other woes, many builders have been unable to obtain bank financing for construction loans due to a credit squeeze, but the vice may loosen in 1993. More bankers are exploring a return to real estate development lending on projects that are modest in scope, says Norris, whose success has enabled him steady access to financing.

“There is going to be a cautious expansion in bank lending in an area that had been contracting since 1990,” Norris says.