‘93/’94 Year-End Review and Outlook : THE TOP BUSINESS STORIES OF 1993
Splashy announcements may have garnered bigger headlines, but these 10 phenomena dominated the world of business and economics in 1993:
1. The California Recession
California’s economic slump proved stubborn and unlikable--downright mulish. It kicked the state off the Top 10 list of those with the highest average personal income. Unemployment rates rose. Major employers went belly-up or drastically cut operations. Pink slips showered workers in aerospace, retailing, financial services and dozens of other industries. The state’s reliance on the defense industry never looked so risky as when worldwide orders for commercial airliners dropped, depriving the industry of its usual cushion.
The perception that California’s troubles stemmed from its standoffish treatment of business led to a remarkable effort to change the state’s reputation. The workers’ compensation system was reformed. The unitary tax on corporate income was abandoned, beginning this year. The Legislature and Gov. Pete Wilson collaborated on developing and selling a new “pro-business” image. Los Angeles voters elected millionaire businessman Richard Riordan as their mayor.
As the year closed, real estate and construction showed signs of improvement. Predictions of an upturn in 1994 were mixed with reminders that the golden child had done some hard growing up as its economy was permanently altered.
Holiday shoppers gathered at malls across the state with the upper hand and a determination to keep it. They were ready to spend money, but insistent that retailers respect the lessons of value learned in hard times.
2. Health-Care Reform
It became a topic for kitchen-table talk all over the country, especially with the unveiling (Sept. 22) of the Clinton Administration’s incredibly complex proposal and various counterproposals. Americans sighed with relief at the notion of universal, irrevocable medical coverage. But they worried about keeping their personal doctors. Questions of financing, coverage and administration of a reform plan swirled.
Small business owners and the American Medical Assn. opposed mandatory employer coverage of workers, warning of disruption in the workplace. Meanwhile, the health care industry was undergoing its own reorganization, responding to fierce market pressures to reduce costs and streamline services.
3. Trade
It was a grand year for international trade and America seemed to be at the center of the buzz. The United States firmed up its relations with current trading partners, with congressional approval of the North American Free Trade Agreement (Nov. 18), a new General Agreement on Tariffs and Trade accord (Dec. 15) and the summit meeting of Pacific Rim nations (Nov. 17). For California, a symbolic victory came in December, when Japan formally cracked opened its rice market.
Even spurned trading partners were brought back into the fold as hostilities eased between the United States and former East Bloc nations, South Africa and Vietnam.
4. Big Layoffs and Joblessness
Nationally, the unemployment rate gradually declined to 6.4%, but the pace of big layoff announcements from large corporations didn’t seem to slacken at all. In California, the unemployment rate was consistently more than 2 percentage points higher than in the rest of the country.
Layoff notices flew at some of the best known U.S. corporations. Sears’ announcement of 50,000 layoffs began the year (Jan. 25); Xerox closed out 1993 by posting 10,000 layoff notices (Dec. 8). In between, a dozen-odd companies accounted for another 160,000 job cuts.
5. The Information Revolution
Longstanding promises of a new wave of high-technology products that would be as potent and commonplace as the telephone and television--even replace them--finally showed a glimmer of coming true.
Steps were taken toward interactive TV, 500-channel TV, high definition TV and sophisticated on-line services. Computer, telecommunications, publishing, TV, cable and entertainment companies rushed to find partners to develop consumer products and services and to build the “information superhighway” to deliver them.
At year’s end, the quest of Paramount by rival suitors QVC and Viacom dramatized the industry’s single-minded conviction that the future of merged products and delivery systems far exceeded today’s valuations.
6. Price Wars
The consumer came out the winner as price wars were fought in an array of industries. The airline industry reneged on its vow to stick with low, standardized fares. The spring’s diaper price wars delighted parents, even converting some cloth-diaper devotees to disposables.
It was a good year to buy a computer. By mid-summer, fierce price wars were taking their toll on some of the biggest makers of PCs. There also was competition among on-line services and software makers. Cigarette makers cut the price of a pack nearly 20%.
7. Low Interest Rates
Historically low rates fueled another tidal wave of mortgage refinancing. In some cases, homeowners were re -refinancing as 30-year mortgage rates fell below 7% in late August. In October, some lenders dropped the prime rate to 5.5%--a 21-year-low.
Low interest rates spurred consumer spending and borrowing. In the last quarter of the year, home sales nationally exceeded the 1980s peak, triggering increased spending on big-ticket home furnishings such as carpets and appliances. Sales of cars and light trucks picked up. Businesses boosted equipment purchases, and factory orders and productivity increased. However, the slow pace of job growth dimmed hopes of a hearty recovery.
8. Japan’s Economy
The gloom darkened through the third year of a slump. Economic growth slowed to a standstill. Banks were crippled by huge bad-loan portfolios. The biggest corporations reported drastic declines in profits and big layoffs. The ruling party fell to voters’ dissatisfaction with its domestic economic leadership. Business confidence plummeted, and so did consumers’.
While pledges of emergency action and a huge economic stimulus package helped stem the blood-bath on Japan’s stock market, leaders said no rebound was in sight.
9. The Big Deal
Merger mania hit Corporate America once again. Media and telecommunications companies were the most active: AT&T; and McCaw Cellular announced a $12.6-billion merger (Aug. 16); Bell Atlantic’s purchase of Tele-Communications Inc. tipped the scales at $44 billion (Oct. 13); the pursuit of Paramount continues.
But other industries were affected too--especially health care, as it consolidated and realigned. Meanwhile, Mattel bought Fisher Price, tightening competition among toy makers (Aug. 19).
Some deals, however, came undone, including the intended mergers of Blue Shield of California and UniHealth America (Nov. 4), of QVC and Home Shopping Network (Nov. 5) and of Volvo and Renault (Dec. 2).
10. Changing Corporate America
“Restructuring,” “reengineering”--under whatever name, businesses continued the sweeping changes begun following the boom of the 1980s.
The emboldening of outside directors and the shakeout of top executives yielded new regimes at IBM, Eastman Kodak, Apple and other industrial giants. General Motors and IBM, among others, waded through floods of red ink, shedding burdensome flab as they began the climb to higher, profitable ground. A much shrunken corporate America turns gimlet-eyed toward a still uncertain future crowded with global competitors.
Times researchers C. A. Wedlan and Brenton Wyeth contributed to this report.
