Business World Left Reeling
Shock waves from Tuesday’s attacks in New York and Washington reverberated to California’s factory floors, loading docks and office towers, disrupting daily business and work routines around the state.
The day’s events shut down the region’s huge air-freight industry, slowed local port traffic and left workers frozen in front of TV sets, trying to comprehend the latest news.
Tuesday’s upheaval could cost employers in the five-county Los Angeles area $200 million to $300 million, based on average daily economic output figures, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. Statewide, he put the estimate at $450 million to $650 million.
Yet even from a narrow economic standpoint, something far more worrisome emerged: the possibility that Tuesday’s attacks will trigger a loss in business and consumer confidence that could deepen the state’s current woes.
Several analysts said this could be enough to slide the nation and California--at least the Bay Area--into a mild recession.
The immediate costs of upheaval were apparent everywhere. The ports of Los Angeles and Long Beach, which together handle 35% of all the cargo entering the U.S., were placed on high alert within a couple of hours of the East Coast attacks. More than a dozen inbound ships were held at anchor, where they were searched by the Coast Guard before being allowed to unload their cargo, port officials said.
Outbound ships were allowed to leave port, though many of their destinations around the U.S. also are operating under stepped-up security, which will slow shipping traffic worldwide.
California port and shipping officials said it was too early to tally the economic costs of this unprecedented terrorist attack. Yet they said any backup of more than a few hours easily could cost hundreds of thousands of dollars as the disruption ripples through the regional economy.
Shippers estimate that a one-day delay in port costs them $50,000 a boat, said Julia Nagano, a Port of Los Angeles spokeswoman. She said 10 ships were due to arrive Tuesday.
Fausto Capobianco, spokesman for the Port of Long Beach, said extra police and longshoremen were called in Tuesday to provide added protection. Unscheduled deliveries were being turned away and anyone walking around the port facility with packages was stopped and checked.
“What we want to do is keep things as normal as possible, not only for the business aspect but because what the terrorists really want to do is create chaos and disruption and we don’t want to be part of that goal,” Capobianco said.
Movement of air freight nationwide came to an abrupt halt as the FAA grounded all passenger and cargo planes. Southern California is a major hub for air cargo--more than 2 million tons of freight moved through LAX last year.
If the closure of U.S. airports is lifted today, transportation specialists say, the impact should be minimal. But even a short-term shutdown would wreak havoc on local industries for which air shipments are a lifeline, Kyser said.
Manufacturers that use just-in-time delivery systems also may be hit. A spokesman for Ford Motor Co.’s Los Angeles parts distribution center said delays in receiving small parts shipped by air probably will hurt Southern California Ford dealers and garages over the next several days.
Irvine-based BAX Global Inc., one of the nation’s largest shipping companies, also is looking to shift some its domestic air cargo to the roads, said Southern California area director Mitch Wilson.
But he said most international shipments probably will be grounded for at least the next few days, and the company temporarily has lost its ability to provide domestic overnight shipping.
“Many of our customers are really in shock,” said Wilson, whose company specializes in moving heavyweight cargo for industries such as aerospace, automotive and high-tech.
Workplaces everywhere were caught in the grip of the day’s news. “All businesses are at a standstill because everyone is at the stunned stage, really numbed out,” said Ian Mitroff, University of Southern California business professor and author of “Managing Crises Before They Happen.”
No more than 20% of companies have planned for more typical threats, he said. “What you find, if organizations are prepared, is it’s maybe for a natural disaster, maybe a plane flying into a building. But if you get them off the beaten track, like a psychopath or a terrorist, they don’t want to think about that.”
Some economic analysts, while acknowledging the trauma created by the day’s events, downplayed the business impact. They pointed to the relatively moderate long-term economic consequences of the 1994 Northridge earthquake.
“We all tend to overestimate the economic impact of these kinds of events,” said Edward E. Leamer, director of the UCLA Anderson Forecast. Over the course of three months or more, he said, “these things hardly show up in the economic data, yet we all write about them as if they’re economic catastrophes. The system has incredible resiliency.”
Still, even before Tuesday’s attacks, Leamer’s forecast group predicted that the California and U.S. economies would slip into mild recessions this year. The UCLA analysts are scheduled to release their new quarterly forecast today.
Times staff writers John O’Dell, Melinda Fulmer, Lisa Girion and Ronald D. White contributed to this report.
