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California

O.C. Business Leaders' Optimism Flags

Economy: Higher energy, housing, labor costs are blamed. About 25% plan to relocate at least some operations, survey says.

April 25, 2001|LESLIE EARNEST | TIMES STAFF WRITER

Energy woes and higher housing and labor costs are eroding optimism among business leaders in Orange County, prompting a growing number of executives to consider moving all or part of their operations elsewhere, according to a survey released Tuesday.

Almost 25% of the executives polled said they plan to relocate some or all of their operations over the next five years, the highest percentage since 1998, the UC Irvine survey found.

In a further sign of pessimism, about one in five executives expect to downsize in future years, the highest level in five years.

Most executives still expect an improved financial performance by their companies this year, but the "rampant optimism" that local business leaders displayed a year ago has diminished, said Dennis Aigner, a professor of management and economics and director of the university's annual executive survey.

The survey, which involved telephone interviews with 300 executives in January and February, provides new evidence that though Orange County has thus far dodged the brunt of the national economic slowdown, its effect is beginning to be felt in the area.

In separate interviews, executives say local firms are growing increasingly cautious.

Developers are still launching housing projects, but the ventures are smaller in scope. Some businesses report dwindling backlogs of customer orders, and others note that some customers are canceling orders at the last minute.

"The real growth is not here in California any more," said James Majewski, president of Stratacom, an Irvine company that sells printed business products. "I'm sorry, but it's out of the area."

Seizing on the growing discontent, out-of-state recruiters are trying to coax local firms to relocate. The survey shows that 44% of the manufacturers--the segment hardest hit by power disruptions and surging energy bills--received such inquiries.

Indeed, local manufacturing executives seemed to have the most pessimistic outlook. One-third said they are considering moving at least part of their operations elsewhere within the next five years. And 29% said they expect to trim operations during that period.

But the growing concerns extend beyond manufacturing, the survey found. Overall, the county's allure as a place to do business has slipped to its lowest level in five years.

Some of the barriers are long-standing gripes--high housing prices and labor costs, for example. But this was the first year executives were asked about energy issues, and they rated power costs as the second-biggest concern after housing.

At Aluminum Precision Products, which has four plants in the county, the gas bill is eight times higher than it was a year ago, and unexpected blackouts have damaged machines and ruined parts, President Philip S. Keeler said.

"They don't give you a minute's notice," he complained, noting that one machine took two days to repair, costing the Santa Ana-based company about $6,000 in sales.

Keeler said he'd like to move, but it would be too costly to relocate with such heavy equipment.

"We're stuck here forever," he said.

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