Bay area companies nervous, optimistic

The nation's economic slowdown hasn't yet hit Florida hard, and some people think it won't. Just in case, some business leaders are preparing for the worst.

By KYLE PARKS

© St. Petersburg Times, published February 25, 2001

Houses are selling, but Gulfport real estate broker Poul Hornsleth is still trying to cut costs.

His company, R.W. Caldwell Realty, won't increase its ad budget this year, and Hornsleth is even mindful of how much he spends on business lunches.

"Sales have been good," Hornsleth said. "It's not a bad market. But we're watching our expenses. . . . I think it's something a lot of people are doing after they watch the news."

Around the Tampa Bay area, businesses are nervous, even though the nation's economic slowdown hasn't yet hit Florida hard. And many executives have been trimming their companies' budgets for months, trying to make sure they won't get hurt if things get worse.

Locally, major layoffs have been confined to companies that were struggling before the economy started to cool off, such as Fingerhut Companies Inc., which is closing its Tampa call center, and Danka Business Systems.

Instead, an informal survey by reporters at the St. Petersburg Times shows that many area companies are taking more subtle approaches.

HealthPlan Services Corp. cut its printing costs by 40 percent after shopping for a new vendor. Vitality Beverages Inc. is eliminating its worst-selling juice products to trim production and inventory costs. And Jerry Ulm Dodge has cut its advertising budget by 10 percent as sales slow.

There are signs that Florida may escape the slowdown with relatively little damage, economists say. The bay area led the nation in job growth in December. Home sales, office leasing and consumer confidence, three bellwethers of the Sunshine State's economy, remain relatively strong.

And Florida's lack of manufacturing and high-tech companies, long a sore point for the state, may be a good thing right now.

States such as Pennsylvania, Ohio and auto capital Michigan have been hurt by the manufacturing industry's recession.

Meanwhile, the meltdown of many dot-com companies has hit some cities hard: In Atlanta, failed Internet and telecom companies have unloaded 3.4-million square feet of vacant office space on the market. (For comparison, consider that the Tampa Bay area's total office space is 27-million square feet.)

Still, businesses worry that a sustained slowdown into the summer or fall could hurt Florida. If Northerners have less cash, they won't vacation here. And if they can't get a good price for their houses, they won't be as quick to retire and move their bank accounts south.

But beyond all the economic forecasts, there's another factor fueling the cost-cutting. Worries about the economy can offer a good reason for companies to make painful moves they needed to make anyway.

"A lot of people are using the economy as an excuse to clean up some issues, such as overstaffing," said Sandy MacKinnon, who runs Yale Industrial Trucks' Central and North Florida operations.

Adds Bill McGill, chief executive of boat retailer MarineMax Inc.: "When times are good, sometimes you get sloppy. Then, you have to tighten things up when things are not as good."

Newfound nimbleness

This is a new kind of slowdown, economists and business leaders say. In the past two slowdowns, in the early 1980s and early 1990s, companies took months to react to warning signs. Now, they can make dramatic shifts in strategy in weeks or even days.

The reason is technology. More manufacturers use "just-in-time" inventory, which means they bring in supplies and ship out goods as they're needed, reducing the need to rely on forecasts. Service companies also are more nimble: New software is helping Tampa Electric Co. better predict call volume at its customer service center, which will save the company about $50,000 in staffing costs this year.

And with more sophisticated computer tracking systems, companies now check their sales daily, looking for the slightest reason for concern.

"Businesses moved very quickly when there were problems with fourth-quarter earnings," said Mark Vitner, an economist with First Union Corp. in Charlotte, N.C. "That made the downturn more painful, and there may be some more pain, depending on how the first-quarter earnings go."

Many Tampa Bay area companies made aggressive cost-cutting moves as early as last spring, and the topic keeps coming up. One example: an employee meeting at Tech Data Corp. in Clearwater two weeks ago.

Perry Monych, president of U.S. operations, urged employees to consider whether all their business trips were necessary. Are there times one person could go on a trip instead of three and still accomplish the same goals? he asked.

"He also encouraged us to think about our departmental costs "as though it was your money,' " Tech Data spokeswoman Beth Hardy said.

But even though the talk around some companies could be described as doom-and-gloom, many economists think the economy's newfound nimbleness could hasten a recovery. They think this slowdown will be in the shape of a "V," with the sharp downturn followed by an equally quick rally.

More pessimistic experts predict a recovery in the shape of a "U," a more gradual comeback as the economy and the stock market cope with the failure of so many high-tech companies.

"We are looking for it to be sluggish at least through the third quarter," said Vitner, who's in the "U" camp. "But I seriously doubt Florida will slow much at all."

Other economists share Vitner's optimism about how Florida and this area will fare. "Tampa Bay has held up remarkably well," said Brad Hunter of American Metro Study Corp. in Boca Raton. "Consumer confidence in Florida has slipped, but it's still very high."

While you'd think a slip in confidence would hurt Florida home sales, lower interest rates have brought in more buyers. And though commercial real estate activity has cooled off a bit, the bay area isn't overbuilt, a stark contrast to 1992, when downtown Tampa had one of the nation's highest office vacancy rates, 31 percent.

As evidence of Florida's strength, experts point to unemployment figures. Nationally, the unemployment rate was 4.2 percent in December. But in Florida, it was 3.6 percent, and in the Tampa Bay area, it was even lower, 2.4 percent.

Where to go from here

Now, business leaders are reading everything they can get their hands on, from newspapers to trade magazines to their own sales reports, to figure out when they should get aggressive again.

At Lazy Days RV SuperCenter in Seffner, there's reason for bullishness. The company cut 86 of its 593 jobs in June, preparing for the worst. But sales didn't fall off -- Lazy Days sold more than 6,000 vehicles for the year -- and January also was a good month.

"Lots of people are saying things should improve dramatically in the second half of the year," said Stewart Schaffer, the company's chief marketing officer. "We think RVs are a good leading economic indicator, so we feel optimistic."

At Clearwater-based MarineMax, the nation's largest boat retailer, Bill McGill also is seeing signs of a quick recovery.

"I sensed a change in mood around the third week in January," he said. "There is still a wealth effect. Some of the increase is pent-up demand from people who put off buying or trading up in November or December."

The key question for many businesses is whether they should start hiring more employees to be ready if the economy starts to heat up.

Some are being conservative. People's Bank in Palm Harbor plans to hire three new employees this year, which would be the slowest growth in its four-year history. With call volume down, T. Rowe Price's Tampa office is moving its 420 employees around to fill needs instead of increasing its staff.

Both of the area's largest newspapers, coping with lower ad revenues and higher newsprint costs, are holding the line on staffing. Last week, Tampa Tribune executives told staffers there would be a hiring freeze for at least the next few weeks, though publisher Reid Ashe said he would make exceptions for crucial openings.

The St. Petersburg Times expects to fill most of its vacancies this spring and summer, but editor and president Paul C. Tash said the company expects to finish the year with a smaller work force.

The slowdown also has been evident in the papers' help-wanted ads. Both the Times and Tribune have seen lineage drop in recent months.

But the cautiousness certainly isn't overwhelming around the bay area. Other companies, either because of optimism or the fact that they just haven't seen their business slow, continue to hire.

Raymond James Financial Inc. in St. Petersburg is working to fill 150 openings. "Trading volume has slowed down a little bit," spokesman Larry Silver said. "It has let us catch our breath." Still, "it seems to me that everything is pretty robust around here," he said.

Tampa insurance company Poe Financial Group plans to add 10 people to its staff of 100 this year. Ceridian Corp., which administers worker benefits from a 1,000-employee St. Petersburg office, just hired 170 salespeople to generate new accounts.

Many of the aggressive companies are fortunate to be in niches that have been recession-proof, at least so far.

Though Fingerhut's business has been hurt by the economy's impact on its lower-income customers, many Tampa Bay area financial services call centers are doing fine.

At Chase Manhattan, the company's Tampa facilities will grow from 2,700 to 5,000 over the next 18 months, which includes 700 current openings. Citigroup is adding some staffers to its Tampa work force of 3,000 and is working to fill 60 openings.

And while many high-tech companies struggle, OpenNetwork Technologies Inc. of Clearwater continues to sell security software to health insurers that use the Internet. OpenNetwork hired 45 people in the fourth quarter, bringing its total to 125, and plans to hire another 45 this quarter.

"We're moving just as fast as we can," said Kurt Long, OpenNetwork's chief executive.

-- Times staff writers Mark Albright, Jeff Harrington, Steve Huettel, Kris Hundley and Helen Huntley and Times researcher John Martin contributed to this report.

Tampa Bay area's job growth leads the nation

U.S. metro areas ranked by change in number of jobs, December 1999 versus December 2000:

(Metro area, Percent increase, Increase in jobs)

1. Tampa Bay area, 5 percent, 59,400

2. Las Vegas, 4.7, 34,600

3. Orlando, 4.5, 41,400

4. Austin, Texas, 4.3, 28,300

5. Riverside, Calif., 4.3, 41,200

6. Dallas, 4, 77,400

7. West Palm Beach, 3.7, 18,300

8. Phoenix, 3.6, 56,900

9. Denver, 3.4, 40,000

10. Fort Worth, Texas, 3.2, 25,300

- Source: First Union Corp. research

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