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Friday, Mar 29, 2024

Area Takes Local Giants’ Woes in Stride

By NADRA KAREEM and LINDA COBURN Although Valley-area giants Amgen and Countrywide Financial Corp. have had severe problems in recent weeks which have led to the announcement of layoffs, local officials believe that at this time the impact of these woes to the area will be limited. Gary Wartik, manager of Economic Development for the City of Thousand Oaks, met with Amgen representatives on Aug. 15, the day before the world’s largest biotechnology company announced that it would cut up to 2,600 jobs, or 12 to 14 percent of its workforce, following the Centers for Medicare and Medicaid Services’ July decision that doctors would only be reimbursed for prescribing Amgen’s anemia drugs Aranesp and Epogen in certain ways. “The sky is not falling,” said Wartik, who is distressed by news reports indicating that companies in the area will lose as much as 40 percent of their business. “The business community of the Conejo Valley — Thousand Oaks, Westlake Village, Agoura Hills — knows that the loss of some jobs will not have a material effect on the local economy,” Wartik said, “A number of the jobs will be cut through attrition. The incumbents in those positions will remain in their jobs. When they leave or transfer, the positions will be terminated. Some of the reduction is in jobs that have been vacant.” When Wartik met with Amgen officials in August he made contact with two companies, the names of which he said he could not disclose, about the possibility of hiring Amgen employees who have lost their jobs. “Many of these people are very talented and will be able to find jobs in Ventura County and the West San Fernando Valley that would allow them to stay in their homes,” Wartik said. “It’s easier to find replacement jobs in this community than in others facing similar circumstances.” Mark Schniepp, director of the Santa Barbara-based California Economic Forecast, which produces economic forecasts for every county in California, also says that, contrary to popular belief, there are jobs for Amgen employees in the greater Thousand Oaks area. “They could go to Santa Barbara and work at Raytheon,” he said. “They do hire chemists and technology people. There are chemical manufacturers and biotech companies in the San Fernando Valley and Baxter Pharmaceuticals in San Gabriel Valley. There’s probably a variety of small companies here and there that would certainly love to hire people.” Furthermore, Schniepp thinks that the employees Amgen will initially lay off will likely not be specialists, but those with highly transferable skills. “It’s very unlikely that you’re going to have a deluge of chemists being laid off,” he said. “It’s more of the transitory people, more of the human resources people, multi-skilled administrative, clerical, warehouse, drivers, whatever the case may be. That’s likely who it’s going to be. When a company lays off the first tier, they don’t lay off the best people. You normally lay off the more expendable first.” Schniepp is all the more optimistic about the job prospects for uprooted Amgen employees because there’s currently little slack in the labor force, he said. The drawback is that it will be difficult for Amgen employees to find salaries competitive with their earnings at Amgen because the company offered such lucrative compensation. Employees at the company average six figures annually. If the majority of employees Amgen cuts live in the Thousand Oaks area, the economic impact would be greater, Schniepp acknowledged. “The question will be to what extent will people sell their house and leave town,” he said. “We’re thinking that not many people will do that. Even if, let’s say, 300 or 400 of the people laid off are specialists and they want to go to another chemical manufacturing company out of the area, not all of them are going to be owning. Let’s suppose that 70 percent own their homes; 280 people leaving in the next 10 months is not going to have any impact.” When considering the worst case scenario for the Conejo Valley — that Amgen and Countrywide would lay off a combined 2,000-plus employees locally — Schniepp remains unruffled. While he believes that such a development would affect retail spending and the like, he doubts that it would further weaken the housing market because the layoffs would probably happen in an orderly fashion rather than in a chaotic and episodic manner. That’s because, as Amgen spokesman David Polk said when the layoffs were first announced, the job cuts will occur gradually. “There is a voluntary transition program, and we have to roll that out first,” Polk stressed. One person on a biotech industry message board recently wrote that staffers eligible for the company’s voluntary transition program had been given until Sept. 7 to accept the offer. Amgen spokeswoman Kristen Davis would neither confirm nor deny the claim, saying that information was for employees only. Other conjecture that company representatives have refused to validate is that Amgen Rhode Island will experience the bulk of job cuts. “RI will be the primary layoff target,” wrote someone on the Biofund message board. “They are completely shutting down an entire manufacturing facility — 800 people without anything to do.” Davis said that it was too early to determine how many Rhode Island employees would be affected. She stated, “Following a global review of our business plans, Amgen has decided not to retrofit its AR1 plant at its Rhode Island manufacturing campus and will instead decommission the building later this year.” She acknowledged that the decision would impact staffing levels and a reduction in force would be necessary. “We will access the impact of the voluntary transition program before making decision on further actions,” she stated. The company expects to complete its restructuring in 2008 and kick off its job reduction process by fall of this year. Over in Calabasas, headquarters city for Countrywide Financial, local business leaders are calm about the potential economic impact of Countrywide’s crisis on the region. Carol Washburn, president of the Calabasas Chamber of Commerce said, “I have not had any meetings or been to any programs where I’ve heard people talking about it.” Countrywide employees like Jeff Hoffman, sales manager of Countrywide Home Loan’s Woodland Hills/Warner Center office, are equally unconcerned. Hoffman said that some real estate brokers and lenders are running scared because they, “have only seen an ever-expanding market — they have only seen real estate markets going up and interests rates staying low. It’s been the halcyon days of the mortgage business.” He continued, “But the pros who have been around are excited that there’s a weaning out of the competition. It’s a smart person’s game now.” Hoffman referred to an FDIC study published in 2003 that evaluated boom and bust cycles. The most important thing to remember, he says, is that booms are only rarely followed by true busts. Technically speaking, the FDIC considers a boom to be any real estate market where values increase more than 30 percent or more over a five-year period. Conversely, a bust is any market that depreciates 15 percent or more in a five-year period. The report said that from 1975 until 2003, there were 63 booms across the country and only nine busts. That means that 86 percent of the time after a run-up, the market normalized. “But we’re kind of in uncharted water because we didn’t have a 30 percent run-up we had a 150 percent increase,” said Hoffman. The FDIC report did find one common denominator that was attributed to every bust cycle: mass layoffs in a particular industry or in an area’s primary economic generator, whether it was the oil industry in Texas or the defense industry in Los Angeles. Although it has been widely reported that Countrywide cut 500 positions in its Full Spectrum Lending and Wholesale Lending divisions, with 60,000 employees across the country, that makes barely a ripple on the pond. Bringing that closer to home, an e-mail from a Countrywide spokesman responding to reporters’ queries said, “Last week’s reductions in force had no impact on positions in the San Fernando Valley.” There are several Full Spectrum Lending offices in the region but in the Northridge branch just days after the layoff the phones were busy and it seemed to be business as usual. Hoffman spoke about a meeting he attended two weeks ago with Countrywide leaders. “Countrywide is staying very aggressive in the area of capturing market share,” he said. “They’re looking at absorbing some of the companies and some of the talent that’s out there.” Ewing & Associates Sotheby’s International Reality is headquartered in Calabasas and has 150 real estate agents working out of offices in Thousand Oaks, Calabasas and Sherman Oaks. President Roger Ewing has been in the business 30 years and he is equally unphased by Countrywide and Amgen’s woes. He reminds: “What we are hearing about in the news, particularly about Countrywide and their situation, is a lot of national and global statistics.” A close look at Countrywide’s “real estate owned” website, which lists all of the properties that Countrywide has foreclosed on and is still holding, shows more than $2 billion nationwide but less than 16 percent of that property, 121 homes in all, is located in the area bounded by Ventura/Oxnard, Burbank, Castaic and Mulholland Drive. Real estate is a local market, Ewing said, and the media is ignoring or choosing not to focus on the local statistics. The most important indicator of local economic health is employment and the most important indicator of real estate health is interest rates. “I’ve discovered real estate is more closely tied to those numbers than anything else,” said Ewing. “As long as unemployment is low and people feel confident their jobs are good and they will be making more money than less, typically the real estate market tends to flourish.” Echoing the FDIC report, Ewing said, “I can’t remember in my career a real estate recession where we didn’t have a real unemployment issue.” About the other indicator, interest rates, Ewing said that they are still at historically very reasonable numbers. “The thing that’s different about the market we’re in now is this liquidity issue, which is something that’s a little newer to the mix.” But like others interviewed for this story, Ewing’s feeling is, “As the bad press blows over, the market is going to become more active.”

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