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Thursday, Nov 30, 2023


WADE DANIELS Staff Reporter Economic turmoil in places like Asia and Russia is reverberating in the greater San Fernando Valley, with companies that do business overseas reporting a noticeable decline in sales. Job-growth rates are on the decline in many sectors that have a strong presence in the Valley, especially in the previously booming high-tech sector. “The Valley now has a range of industries tourism, entertainment, high-tech, and many smaller ones that will be hit to some extent by those problems,” said Jack Kyser, chief economist with the Economic Development Corp. of L.A. County. “We have more eggs in the basket than Silicon Valley, that’s for sure.” In general, Kyser said, the Valley is like much of Southern California in that its diverse business base means it may not be as deeply affected by economic problems abroad as some cities. Among the local companies suffering from the Asian flu is the Simi Valley office of Schlumberger Test & Transactions, which is laying off 78 of 419 employees due to a glut of computer memory chips in Asia that has resulted in weaker demand for its electronic testing equipment. Southern California Metals, a Sun Valley company that sells metal for smelting to China and Taiwan, has seen sales plummet by 80 percent this year compared with 1997 because of a drop-off in sales in those countries. Officials with Chatsworth-based Jitco Group Ltd., which primarily exports apparel, sporting goods and other products to Japan, say they will be lucky to finish 1998 with revenues of $6 million, as opposed to $14 million in 1997, because of stalled sales in Japan. “There’s a lot of talk, and the consensus is that there is going to be a slowdown all around,” said John Rooney, executive director of the Valley Economic Development Corp., a non-profit business center. “Companies that export to Asia are already feeling the pinch.” At Schlumberger T & T;, company spokeswoman Beverley Bird said demand for its electronic testing equipment is expected to improve in the second half of next year, when the company expects to refill the positions. “The problems in Asia have had a swift and hard effect on us,” Bird said. “We were on a growth path and then the economic problems hit. People became more careful of what they buy over there.” Bird did not provide specifics about sales declines overseas for the unit. Sclumberger T & T; is a San Jose-based unit of the New York-based oil-field services provider Schlumberger Ltd, whose stock price decline to around $54 in early October from about $90 last November. Schlumberger T & T; makes automated testing equipment for high-tech goods like computer chips, and is laying off 3 percent of its 7,700 employees around the world. Both Southern California Metals and the Jitco Group have sought to develop other markets for their products domestically and in other foreign lands outside Asia, though with limited success. Jitco, whose workforce has fallen from 21 to five, specializes in exporting a range of clothing, sporting goods and other products it buys from manufacturers. “We’re developing markets in Europe, and we’re now selling closeout and liquidated products in U.S. areas like the Southeast,” said Bala Balakrishna, vice president and chief operating officer. “There is some potential, but so far it’s not nearly making up for what we’ve lost.” Southern California Metals, meanwhile, saw business with its customers in countries like Japan, Taiwan and Korea start to decline late last year. Since then, the company has laid off 20 or so employees, said Manager Mike Chule. “We’ve been trying to concentrate on the domestic market, but it was not strong to begin with,” he said. Meanwhile, Russia’s economic woes have caused trouble for Tarzana-based Russian Petroleum Investors Inc., which publishes petroleum-industry publications with a subscription price between $1,500 and $2,500 a year. “Business this year has been flat at best,” said Tom Liesy, the company’s vice president. “Petroleum companies are cutting costs in their Russian operations in light of all the turmoil, meaning fewer subscriptions for us.” About two thirds of the company’s income derives from subscriptions which are on the decline. The rest comes from consulting services, an area that has seen an increase in business in recent months as some companies become interested in keeping closer tabs on regions where they have holdings. Rooney and others said that in addition to exporters, there is concern that economic problems abroad will hit firms that don’t do overseas trade. “Companies are wondering whether the slowdown is going to result in banks becoming more conservative with credit,” Rooney said. That would mean problems for the Valley’s burgeoning high-tech business component, Kyser said. Because many of the area’s software and hardware developers are relatively small businesses, their future growth could be hindered if financing becomes scarce. In fact, lenders are already taking a closer look at loan applications, said Hank Miller, vice president of the Bank of Granada Hills. “If the company that wants a loan is heavily dependent on customers in places whose economies are in trouble, you’re going to ask some very pivotal questions,” Miller said. “It’s a reasonable response by institutions to the situation.” Carl Schatz, chairman of the Encino State Bank, said he doesn’t expect banks to become more cautious about lending to customers that don’t do direct business with troubled overseas customers. “Most banks very much need to make loans and are not looking to cut back,” he said. “Everybody’s talking about cutbacks and what’s going to happen with credit, but there’s no reason to cut back.”

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