1993 A LOOK AHEAD : What business leaders forsee for Orange County, the nation : Eye on the Future : O.C. Businesses Gauge Opportunities for Growth
Orange County business executives think the county’s economic climate caused frostbite in 1992. When asked how their own businesses weathered the year, however, most sounded as if they were protected by massive smudge pots.
Seven out of 10 business leaders queried in an informal survey said the county’s economy got worse or much worse during 1992. Yet almost the same number said their own firms’ financial strength was better--or much better--last year than in 1991.
Why the discrepancy?
Many of the surveyed executives said that their improvement was based on strength in the national or international marketplace. Some said their businesses followed cycles not tied directly to the economy. Still others said that they actually benefited from the bad economy.
“We’re an international company--40% of our business comes from overseas,” said Jack Allweiss, president of Future Domain Corp. in Irvine, which manufacturers personal-computer components. Allweiss was among the 31 business executives who said their companies performed better in 1992, even though they thought Orange County’s situation worsened.
“The Orange County economy alone doesn’t impact us, only as far as it reflects the overall economic situation,” Allweiss said.
The Times Orange County Edition sent the survey in December to more than 100 leaders of businesses large and small to gauge their opinions on how their companies and the local and national economies fared during the past year. The survey also asked them to predict how each would change this year and whether they had plans to expand or contract their operations in ’93.
Of the 68 who returned the surveys, 20 were executives of businesses with annual gross revenue of less than $5 million. Twelve companies had revenue of more than $500 million; the rest were fairly evenly distributed between those two revenue levels.
Although some business owners and executives were pessimistic about the future, 78% of those responding said they think their companies will be in even better shape a year from now. The economic thaw seemed to begin during the fall, suggest two personnel company executives.
Orders for temporary workers increased 12% in 1992 compared to the year before, said Donna Averill, vice president of finance for Abigail Abbott Personnel Companies Inc. in Tustin. And orders for the first week of January were up 16% compared to last year, she said.
“We saw an improvement toward the end of the summer compared to a year before that,” Averill said. “That’s when (the economy) started to pick up. . . . We’re getting more long-term orders, so people are getting more optimistic about hiring.”
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Economic recoveries usually begin with companies hiring long-term temporary workers as their need for employees increases, but their fear about hiring permanent workers remains, Averill said. As further proof a local recovery is underway, she said, the company’s division that recruits permanent employees also reported a substantial increase in orders.
Merry Neitlich, whose JM Associates in Irvine recruits attorneys for law firms, seconded Averill’s predicted timing of a local economic turnaround. She said she received as many requests to recruit attorneys during the final three months of 1992 than she received during the first part of the year.
“I definitely see things picking up,” she said. But with unemployment as high as it has been--as high as 7% in November--economic growth likely will be steady rather than stellar, she said.
Yet the county’s battered commercial and residential real estate developers are looking elsewhere for prosperity. Some commercial firms, such as the Koll Co., are expanding their property management services. Other companies are seeking to build projects in healthier markets, such as Las Vegas.
“Right now, about 85% of our business is in Orange County,” said developer Kathryn Thompson. “That will be changing significantly. We’re diversifying. We’re very hopeful we’re going to have some private prison projects out-of-state and we plan to bid on construction management contracts for infrastructure projects.”
Orange County’s economy should improve because that’s the only direction it has left to go, said Carlos Mendizabal, president of Cordax Inc. in Irvine.
“I’m hoping that we already hit the bottom of the pendulum locally,” said Mendizabal, whose company produces computerized engineering maps and databases for businesses and government agencies.
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Nationally, though, Mendizabal sees the economy getting worse. Everything President-elect Bill Clinton says offers hints that any deficit-reduction plans will be pushed aside in favor of quicker fixes, he said.
“Our deficit is probably going to grow over the next couple of years because of our new leader,” Mendizabal said. “I look at the United States as being a business conglomerate of sorts. . . . Like in any business, the deeper in debt you get the worse you are. Sooner or later it’s going to bite you.”
And some had a similar pessimism about Orange County’s economic outlook.
“Orange County’s future is bleak as far as I can tell,” said Ron Luther, president and chairman of Luther Medical Products Inc. in Tustin. “Nobody in his right mind is going to move into Orange County with any manufacturing company.”
California remains an expensive place to run a business because of the state’s high cost of workers’ compensation insurance and complying with strict air-quality standards and its food and drug administration, he said.
“You combine all of them and you have a morass you don’t find across the border, say in Arizona, or Nevada, or Montana. It’s just not there. . . .”
Still, Luther joined the majority of survey respondents in saying that his company should prosper in 1993. Orders are up nationally and internationally for his medical equipment, he said.
George Peterson, president of AutoPacific Group, said he expects continued local stagnation but improvement in the national economy. Still, his Santa Ana consulting business, which offers advice to automobile-product manufacturers, did well in 1992 and expects to do so this year too, Peterson said.
The recession may have been responsible for boosting his company’s revenue, he said, because of increased competition for limited consumer dollars.
“When people are having a tough time selling their products, they come to us asking if there is a better way for them to do it,” Peterson said.
Patricia Fyler said her nursing consultant business also benefited from the recession. Her small company, Fyler Associates in Brea, offers advice to lawyers and insurance companies regarding medical malpractice or personal-injury claims.
“I don’t think that our business is going to be affected by an adverse economy,” Fyler said. In tough times, she said, “people are more inclined to pursue these” claims.
Times correspondent Ted Johnson contributed to this report.
Optimistism and Doubt
Nearly six dozen local businesses and corporations responded to a survey conducted by The Times Orange County Edition’s Business section. Results show that more than three-fourths of the co1836081518 How would you rate your company’s financial strength now, compared to a year ago? Better: 43.5% Much better: 23.2% Same: 18.8% Worse: 14.5% How do you foresee your company’s financial strength a year from now? Much better: 27.5% Better: 50.7% Same: 10.2% Worse: 11.6% How do you think the Orange County economy has changed in the past year? Much better: 1.5% Better: 8.7% Same: 18.8% Worse: 56.5% Much worse: 14.5% What do you expect the Orange County economy to be like a year from now? Much better: 2.9% Better: 40.6% Same: 34.8% Worse: 20.3% Much worse: 1.4% What do you expect the U.S. economy to be like a year from now? Much better: 8.7% Better: 71.0% Same: 11.6% Worse: 8.7% Which of these strategies is your company likely to use in the coming year? Employment changes: Keep staff levels about the same: 60.9% Hire full-time workers: 31.9% Hire part-time workers: 20.3% Hire temporary workers: 8.7% Lay off workers: 2.9% Business improvements: Add services or product lines: 73.9% Add to plant and/or equipment: 46.4% Make capital improvements: 37.7% Drop services or product lines: 10.1% Responses total more than 100% because of multiple responses. Source: Survey, Times Orange County Edition’s Business section
