O.C. Executives Not Sold on Prospects : Business: UCI survey finds optimism about local economy, but few companies are planning to hire and more are considering relocating.

Orange County executives are increasingly confident that the local economy is rebounding, but that optimism won’t lead to significant numbers of new jobs this year, according to an annual survey of business attitudes by UC Irvine.

And, despite the recovery, executives increasingly are looking for greener corporate pastures: Nearly two of every five local executives responding to UCI’s annual Executive Survey said that a corporate relocation is “somewhat” or “very likely” during the next five years, up from 30% in 1993 and 20% in 1992.

“There’s been a lot of talk about firms exiting Orange County for several years,” said Dennis Aigner, dean of the UCI Graduate School of Management. “However, last year we found a small upturn in the number of firms expecting to relocate outside the county, and the trend continued this year.”

UCI’s survey does not suggest a massive exodus, however, because just one in five executives who is considering an out-of-town move intends to relocate the entire company. And, those executives who may relocate say they would leave California, suggesting that it’s the Golden State--not Orange County in particular--that’s to blame for such corporate unrest.

“We have a distinct lack of leadership in our public sector,” said Rich Ottaviano, a senior vice president at AST Research Inc. in Irvine. “It’s a real mess as far as getting a united front” on issues such as business retention.

Ottaviano, whose employer recently moved 650 technical support and manufacturing jobs to Texas and Ireland during a corporate consolidation, said there’s no clear-cut leadership at the state or local level when it comes to a business retention strategy.

Executives at companies with international operations are more likely than their counterparts concentrating exclusively on domestic sales to be looking for greener corporate pastures, according to UCI.

The potential flight of international companies “is troubling for Orange County,” said Kenneth Kraemer, director of UCI’s Center for Research on Information Technology and Organizations, which helped to conduct the survey. “Special attention should be paid to (international companies’) concerns about the business environment,” Kraemer said.

Although survey respondents continue to grumble about the slow-moving economy and unfriendly government policies, 78% of the executives told UCI researchers that their businesses are better off than at the start of 1993. Most executives also believe that the painful process of downsizing--cutting payrolls to respond to the recession--has bottomed out.

However, this guarded optimism will not likely translate into a hiring binge, Aigner said. Only a third of executives plan to build their work forces in the coming months. Fully half expect no change in the size of their payrolls and nearly 20% expect to be cutting back during 1994.

Local executives said they’ll be hiring secretaries and salespeople--a trend that doesn’t bode well for managers, professional and technical workers and blue-collar employees who lost jobs during the recent economic slowdown.

“This suggests that companies have permanently eliminated layers of middle management and, in many cases, can increase output without adding production workers or managers,” Aigner said.

Nearly half of respondents said they expected to generate additional business in Mexico as a result of the passage of the North American Free Trade Agreement. But only 2% said they plan to increase operations in Mexico within the next year or within five years.

“This seems to belie the fears of NAFTA opponents that the treaty would result in a rush of jobs out of the United States,” Kraemer said. “At least for Orange County, that does not appear to be the case.”

Executives remain convinced that Southern California’s economy continues to recover. Sixty-two percent of executives said their companies are better off than a year ago, up from 49% a year earlier.

But a substantial number of executives again listed slow economic growth as the region’s most important issue. Thirty-six percent of respondents listed slow growth as their biggest concern, down from 46% in the 1993 survey.

Crime--nearly absent from past surveys--is now a major concern for 22% of executives surveyed. In past surveys, fewer than 5% of executives listed crime as a factor. Traffic and population growth--the leading sources of discontent in past surveys--fell to the bottom of most executives’ lists.

Executives again complained that California governmental agencies are “anti-business.” But 65% of executives surveyed said they were satisfied with local government, and 51% suggested that county government is doing its job.

But executives again lambasted state government: Just one in five respondents said they were satisfied with lawmakers and regulators in Sacramento.

“The leading reasons for dissatisfaction with state government are its anti-business attitude, workers’ compensation issues and an over-regulated business environment,” Aigner said.

While 41% of executives believe that the local business environment won’t deteriorate noticeably this year, an equal number feel the county will become a less attractive place to do business.

“The main reasons for the county becoming less attractive are the recession, government regulations and the high cost of doing business,” according to Aigner.

A sizable number of executives, 15%, said it is difficult to find properly trained workers in California. While the state is home to a large pool of unemployed workers, Aigner said executives are concerned that “the specific technical skills needed in their industry often are lacking, especially among professional and technical workers.”

Relocation Likelihood On the downside, more executives this year say it is at least somewhat likely their business will move out of Orange County:

Not Somewhat Very likely likely likely 1989 76% 12% 12% 1990 72 15 13 1991 75 16 9 1992 80 13 7 1993 70 17 13 1994 62 27 11

Business Outlook Brightens

Orange County executives are somewhat more optimistic about the local economy than they were last year. Hiring plans are more positive this year as are attitudes toward the county as a place to do business:

Hiring Forecasts

Modestly Substantially Less Same more more 1989 14% 38% 41% 7% 1990 12 38 41 10 1991 21 50 27 2 1992 21 46 32 2 1993 24 51 22 3 1994 17 51 30 3

Attractiveness of County for Business

Less Same More 1989 36% 31% 33% 1990 39 38 23 1991 35 44 21 1992 57 37 6 1993 43 48 10 1994 41 43 16

Attractiveness for Business by Industry County executives also see the county as being more attractive this year for two local industries that are large employers: Retail Trade

Same Less More 1989 15% 40% 45% 1990 38 33 29 1991 13 39 48 1992 37 47 16 1993 22 70 9 1994 35 50 15

Finance/Insurance/Real Estate

Same Less More 1989 30% 30% 40% 1990 24 52 24 1991 33 33 33 1992 55 36 9 1993 36 50 14 1994 48 30 22

Source: UCI Graduate School of Management; Researched by JANICE L. JONES / Los Angeles Times