COVER STORY : THE YEAR IN REVIEW: For Valley business, there was more than just the earthquake : ’94 Shook Business to the Core : Northridge Quake Jolted the San Fernando Valley Economy With Profound, Long-Lasting Effects

The Northridge temblor that hammered the region in January is still shaking the business community as the year draws to a close. Retailers, contractors, insurers and a host of large and small businesses whose livelihood depends on a local customer base have all been coping with its aftereffects.

To be sure, the earthquake wasn’t the only big business story in the San Fernando Valley this year. Aerospace and defense industry downsizing continued to plague the region. The beleaguered real estate market showed signs of recovery--albeit a weak one.

But there were some success stories, including a few booming health-care concerns. Saban Entertainment, the Burbank firm behind the hit “Power Rangers” children’s TV show, and growing pool supplies retailer Leslie’s Poolmart in Chatsworth both enjoyed a good year.

Amgen Inc. in Thousand Oaks also remained a standout. The world’s largest biotechnology concern, still riding high on sales of two blockbuster drugs, is expected to post a record profit of $430 million in 1994. In November, Amgen said it would buy Synergen Inc., a struggling Boulder, Colo., biotech company, for $240 million. Analysts said the deal will broaden Amgen’s research in developing drug No. 3 in hopes of fueling its future growth.

And there were failures--including the liquidation of DAK Industries, the once-popular Canoga Park electronics catalogue firm, and the Chapter 11 bankruptcy filings of apparel maker Cherokee Inc. and fabric retailer House of Fabrics Inc.

But it’s the earthquake that reigned as the No. 1 story this year.

One of the companies hardest hit by the quake was 20th Century Industries. For years, the Woodland Hills insurer was profitable due to its low-cost auto insurance business. But its smaller homeowners’ business nearly sank the company in 1994 as it suffered a staggering $900-million estimated loss from earthquake damage claims.

On the brink of insolvency, 20th Century closed a deal this month with American International Group Inc., the big New York insurer, under which AIG could eventually invest more than $400 million in 20th Century and own more than 40% of its stock.

The quake also threw the local retailing industry into a tailspin. In the first weeks after the temblor, stores and shopping malls struggled to get back in operation. Home repair meccas such as Home Depot were crowded with weary shoppers, and big-selling items included flashlights, batteries and bottled water.

As the months went on, many retailers who reopened quickly benefited from the absence of badly damaged rivals. Undamaged or lightly hit malls in Woodland Hills, Glendale and Thousand Oaks saw sales rise from 10% to 30%.

Others weren’t so lucky. Parts of the Sherman Oaks Fashion Center were out of commission for several months. Laurel Plaza in North Hollywood has been closed permanently. And the Northridge Fashion Center, once one of the region’s most successful malls, was the most heavily damaged in the quake and remains dark as repairs continue. Only the Broadway and Sears department stores there managed to reopen in November.

Small merchants in hard-hit areas continued to suffer, including those along one devastated block of Reseda Boulevard in Northridge, near the crumpled Northridge Meadows Apartments, where 16 people died in the quake. The shop owners there have seen the neighborhood turn into a ghost town as residents fled condemned apartment buildings and as many homeowners moved out during repairs.

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One of those shopkeepers, Laura D’Angelo, worked tirelessly to keep her Kids at Heart gift shop afloat. Half the units in the strip mall where her store is situated remained empty after the quake. The mall owner gave up and deeded the property to the lender. Sales at remaining shops fell from 10% to 80%. Yet throughout the year, D’Angelo persisted, posting signs, offering discounts and hosting parking lot promotions in an effort to keep her small business going.

For local building contractors, the anticipated rush in earthquake repair jobs didn’t materialize right away. In the initial months after the quake, most were busy making estimates, but the wait for federal assistance and insurance money meant delays in rebuilding.

It wasn’t until at least six months after the quake that carpenters, plumbers, masons, electricians and construction companies began seeing the hoped-for boom in earthquake repair jobs. The new business provided a boost for an industry weakened by years of hard times caused by the slowdown in new home construction.

Aside from the earthquake, the local aerospace industry continued to shrink in 1994. A survey conducted in mid-year found that the eight major aerospace and defense concerns in the San Fernando and Antelope valleys and Ventura County had reduced their payrolls by a collective 15,000 jobs so far this decade, or an average of 40%.

The downsizing hasn’t ended. Just this month, up to 220 Teledyne Inc. workers in Northridge and Newbury Park received termination notices as the company prepared to complete the pending sale of its electronic systems division to Litton Industries Inc.

In August, Hughes Aircraft Co. moved about 1,000 workers from its West Hills missile systems facility to Tucson and closed the local complex, part of an ongoing consolidation of its manufacturing operations. Last week, Mayor Richard Riordan announced the sale of half the Hughes property to Coast Federal Bank in an unusual transaction that was brokered by a nonprofit corporation created by Riordan to assist local business.

Lockheed Corp. has agreed to merge with Martin Marietta, creating the world’s largest defense concern, with $23 billion in annual sales. As a result, Lockheed will soon leave its Calabasas headquarters, where about 250 white-collar workers are employed, and move to Maryland.

One bright spot in the local economy this year was the resurging auto sales market. Car dealers in the area reported sales increases after stagnant or declining business since the start of the decade. At Galpin Ford in North Hills, for instance, one of the nation’s two largest Ford dealers, sales through the end of November were running 38% ahead of a year earlier.

Local banks and savings and loans, although still hampered by a weak economy and the earthquake, also began to see a modest recovery late in the year as they continued to pare away at poor loans. Glendale Federal Bank, which was on the verge of being seized by federal regulators a year ago, by the third quarter of 1994 had posted a $9.4-million profit. Giant Great Western Financial Corp. in Chatsworth, Oxnard-based Ventura County National Bancorp and TransWorld Bancorp in Sherman Oaks all turned profitable again in the September quarter after year-before losses.

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The battered San Fernando Valley housing market also showed signs of a modest recovery in 1994, with sales of existing houses growing throughout the year. But the increased sales came while prices continued to fall. By November, the average resale price of a house in the Valley slid to $220,500, down 8% from a year earlier. Helping drive down housing prices were record numbers of foreclosures throughout the Valley, in part because of the earthquake.

It was another good year for three Woodland Hills health maintenance organizations, or HMOs, which have seen their enrollments surge in recent years. Health Net, CareAmerica and CaliforniaCare, the HMO arm of Blue Cross--which cut costs by negotiating discounts with doctors and hospitals--swelled in size as more employers signed up in hopes of stemming their soaring medical costs.

But squeezed by meager reimbursements from Medicare and severe pressures from HMOs, some local hospitals are fighting to survive. A survey of 29 acute-care hospitals in the San Fernando, Santa Clarita and Antelope valleys this year found that more than half were unprofitable and that their hospital bed occupancy averaged just 40%. Despite efforts to cut costs, many predict widespread hospital closures in the years ahead.

Some local companies jumped into the information superhighway race during the year. GTE of California in Thousand Oaks detailed plans to build a high-tech video network in Ventura County and three other markets. Pacific Bell targeted the Valley as one of the staging grounds for its $16-billion statewide plan to bring consumers interactive video and data services.

But it was a disappointing year for Iwerks Entertainment Inc. in Burbank.

A year ago, the supplier of special-format movie theaters was riding high because of its new virtual-reality attractions, and its 1993 stock offering was among the year’s hottest. But this year, reality of another kind set in, and disappointing sales led to an $8-million loss in Iwerks’ fiscal year that ended June 30.

Also in 1994, the airline wars took center stage at Burbank Airport, where market-dominating Southwest Airlines was challenged by a new low-cost service offered by United Airlines. The Shuttle by United began flying from Burbank and other Southland airports in October, competing against Southwest’s low-fare flights to the Bay Area and its other short hauls.

Southwest recently warned that its fourth-quarter earnings would be down sharply, due in part to the competition from United.

Meanwhile, the exodus of businesses from the region continued.

One of the biggest companies to announce such plans was Packard Bell Electronics, the personal computer maker, which is moving from Westlake Village to Sacramento.

And 1994 ended on a bad note for once-renowned Sherman Oaks businessman Quentin Thomas (Q.T.) Wiles.

In July, Wiles was found guilty in federal court in Denver on three felony counts of fraud and insider stock trading from his management of now-defunct MiniScribe Corp., a computer disk drive maker.

Wiles, 75, was known as Dr. Fix-It for his rescues of troubled high-tech firms, but after he left his post as MiniScribe chairman in 1989, new management uncovered what it called a “massive fraud” at the company to boost profits and inventory numbers.

In December, Wiles was sentenced to three years in prison.