See original story on SDNN

Monday, May 18, 2009

You thought you had it bad. Wait till you hear these two stories about real estate investors in housing foreclosures.

John Woodbury has six houses in foreclosure. Lenska Bracknell has three houses in short sales.

Woodbury, 62, was a retired state worker turned real estate investor who had a credit score of 780. He lost everything.

Bracknell, 45, runs an aerial photography business and is a real estate broker. She bought three houses on 30-year-fixed rates, full doc loans and 20 percent down. Now, those investments are sour.

Woodbury and Bracknell both attended a workshop last month about how small business owners are facing mortgage foreclosures. They agreed to share their stories with SDNN.

John Woodbury loses six houses

Investment dream: “We hoped this would help our retirement,” said Woodbury. “We were all looking forward to it.”

Number of properties: 6

Locations: Escondido, Hemet, Los Angeles, Montana, South Carolina, Texas

Credit score: 780

The good life: In 2006, “all the properties were making money,” he said. “I could borrow money, and even if they had a negative, I knew they were going up in value, so that was great.”

Warning signs: In 2008, the L.A. house rent dropped to $1,600. The mortgage was $3,200. “We knew we had to get rid of the property, because we were going through our savings.”

Refinancing: In September 2008, Woodbury applied for a refinance on the L.A. property. The mortgage broker said Woodbury’s finances were excellent, and could qualify. But Fannie Mae changed its rules, limiting the number of houses that an investor could get loans on to four. He no longer qualified for the loan.

Negotiating with the bank: Woodbury contacted First Horizon Bank, the lender on the L.A. house. “The first thing out of their mouth was, ‘Are you behind?’” said Woodbury. “We said, ‘No.’ And they said, ‘Well, you have to be behind at least two months before we can even talk to you.’”

Woodbury missed two payments, called the bank again, and “they said there’s nothing they can do.”

Attempt to sell the house: Woodbury found a buyer, with ample down payment. The house went into escrow. Two weeks before closing, the HUD statement showed that Woodbury would have to bring $33,000 to close.
Saving the deal: Woodbury borrowed $16,000 from his sister. He wiped out his savings. The real estate agents agreed to lower their commissions from 6 percent to 4.5 percent. But Woodbury was still $7,000 short.

Negotiating with the bank: Woodbury asked the bank to lower its penalties and late fees by $7,000.

“They said, ‘No.’ I said, ‘You understand, if this doesn’t close, and this house goes into foreclosure, you are going to lose about $200,000 on the value of the property immediately. I can give you all the principal, part of the interest, just not all of it.’ The bank said, ‘No, we don’t want to have anything to do with it.’”

Failed deal: The house fell out of escrow March 6 and went into foreclosure. “Everybody lost,” said Woodbury.

Bank’s motives: “They don’t need to do this,” said Woodbury, “because they know that even if they have to go into foreclosure, and they lose money, they’re going to get money from the federal government in the bailout.

“They’re not concerned about helping citizens at all. Why spend the extra time and money for something you’re going to get paid to do anyway, if you don’t do anything?”

First Horizon Bank’s response: “First Horizon strictly adheres to all applicable privacy laws, and our confidentiality policy prohibits the disclosure of customer information,” said Anthony Hicks, public relations officer, in an email.

“We recognize these are difficult times for many people and work with our customers to exhaust all available options. We encourage customers who may be experiencing difficulties, and those who think problems are likely, to contact us immediately so we can offer the best solutions for their needs within the parameters of their loans.”

Other foreclosures: “That’s one of six loan modifications I’ve tried to do, and all of them have fallen through for lack of cooperation” from banks, said Woodbury. “Part of the reason is because my credit scores have gone down, and they’ve gone down because they didn’t loan me the money, because of (rules changes at) Fannie Mae.”

Dead dreams: “Now we have no retirement, no money,” said Woodbury.

How they are surviving: Wife’s government job salary. Woodbury is filing for bankruptcy.

Responsibility: “I’m not blaming anyone but myself, because I’m the one who made all the decisions,” Woodbury said. “Nobody guaranteed me anything when I was born. You do the best that you can. Sometimes it works, sometimes it doesn’t. You just do the best you can.”

Lenska Bracknell negotiates three shortsales

Her main business: Aerial photography

How she started investing: In 2003, Bracknell bought one house, fixed and sold it. She used the profits to buy more houses.

Number of houses: 3

Location: Boise, Idaho

Great loans: 30-year fixed, 20 percent down, full documentation.

Warning signs: In 2006, many people lost jobs in Idaho. Rents dropped from $1150 to $750. The mortgages were $950.

“Suddenly, the whole cash-flow was not working anymore,” said Bracknell.

A property manager ran off with two months’ rent and a deposit. Bracknell had no rent income.

The state raised its property taxes. The property tax went up from about $750 to $3,500 a year, said Bracknell.

Negotiating with bank: “I tried to contact my lender to try to make the payments, but obviously, they don’t want tot talk to you,” said Bracknell. “So you really have to default in order to get the bank’s attention.” That didn’t work.

Shortsale: “I decided to cut my losses there, because obviously I’m not able to recoup the money,” said Bracknell. “I hired a short-sale company, an investor group that makes offers on these houses … and negotiates the shortsale with the bank,” said Bracknell.

Credit cuts: Bracknell had two American Express cards, with credit limits of $18,000 and $38,000. Since 1996, “I have never carried balances, paid every balance for the last 13 years.”

In March 2009, American Express “cut my credit down to $2000.”

Business impact: For the aerial photography business, “I can’t rent helicopters or airplanes using credit cards or do business like I normally do.”

Sleepless nights: “I got some chest pains a few weeks ago,” said Bracknell. “I had my sleepless nights, sleepless weeks, months. But I decided I can’t give in to it.”

Responsibility: “To be honest, I don’t think I did anything wrong,” said Bracknell. “I put 20-percent down, full doc loans. I treated my tenants well.”

“But due to the economic climate, certain people got too greedy,” she said. “Small people on the street really have to feel it and change their whole life.

How she’s surviving: Savings.

Future: “I love real estate,” said Bracknell. “I love to actually help people to make the right decision. And that’s why I’m using all that experience … to give that advice to other investors, who now have the cash to do the investments and turn those properties around,” she said.
___________________________________________________________________________________

Woodbury’s settlement breakdown

$445,000 — Mortgage owed
$ 26,000 — Real estate commissions
$ 7,000 — Title fees
$ 16,000 — FIRPTA* tax
+ $ 13,000 — Penalties and late fees
—————————————-
= $507,000 — TOTAL OWED

Amount still needed to close

$507,000 — Total owed
- $475,000 — Sale price
- $ 25,000 — Loans and savings Woodbury brought to table
—————————————-
= $ 7,000 — Difference needed to close

Appraisal value 2006: $775,000

* Foreign Investment in Real Estate Property income tax for non-owner occupied properties.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Monday, April 27, 2009

Robert Noble imagines a day when across the nation, instead of car owners paying big companies for gasoline, the reverse happens: Car owners get paid for putting energy into charging stations.

It’s possible with a network of electric cars.

“We see it everywhere,” said Noble, the founder of Envision Solar, a La Jolla-based solar installation company.

Last week, his company kicked off this dream. Envision Solar International, which Noble started in 2006, announced the nation’s most advanced solar-powered electric-car charging station. The Capitol Hill event was done in collaboration with Bright Automotive, an Indiana-based company, which unveiled a breakthrough electric-hybrid van.

But in an interview given one day after returning to San Diego, Noble said he also wants to promote the concept here. He is talking to potential partners about installing such charging stations across the county.

“In San Diego, it’s completely feasible,” said Noble. “We absolutely would love to see the first project here in San Diego.”

At the charging stations just announced, electric car drivers can pay for electricity powered by the sun to charge their cars. But during peak hours, when energy is in high demand, they can also “draw down” their batteries and sell electricity back to the stations at a premium price, said Noble.

Envision is a solar installation company moving into the electric car market. Its solar-paneled parking lots have led the industry, with high-profile structures at Kyocera’s San Diego headquarters and the UC San Diego campus. It has other projects in Napa, Calif.; Albuquerque, N.M.; Golden, Colo.; and West Africa.

Bright Automotive was the first car designer to commission a hybrid-electric car charging station, to be promoted in conjunction with its electric utility vehicle. It chose Envision based on the company’s track record, according to press statements.

As the electric car industry grows, many companies are competing to have their technologies become industry standards, with a variety of battery types and capabilities being built. But Noble said that its new charging stations, officially called CleanCharge/Solar Tree Charging Stations, can be used with any type of electric cars.

“We are technology agnostic,” he said.

How the stations work

Envision’s charging station works by absorbing solar energy from the roofs of the structure. It turns the energy into electricity, which is downloaded through a pump, much like a traditional gas pump. The driver, who uses an electric car – 100 percent electric or a hybrid – pulls up and inserts a credit card into the machine.

The car owner is charged based on the amount of electricity used, and the time of day pumped. During peak hours, such as afternoons, the price would be higher. During non-peak hours, such as at night, the price would be lower, said Noble.

Get paid more during peak hours
Here’s the amazing part: car owners could actually get paid by utility companies to give back electricity through such charging stations. Instead of pumping electricity from the stations into their cars, owners with high battery levels could actually do the reverse and get paid for it.

“They would pay you a far higher premium for the energy, because it’s peak time,” said Noble.

Noble explains why. “When a peak load happens – summer, 2 p.m. — they have to generate the electricity or there will be a blackout. They can’t just cut back evenly on all appliances. If more air-conditioners are on than they can accommodate, they have to black out.”

As a back up, utilities use other generators, which are very expensive to build and maintain, said Noble.
But with an electricity “smart grid,” said Noble, the utility company can access additional energy through cars.

“If you have programmed your (electric) car to allow for a draw down of your battery, then the utility (company) can actually use that energy,” he said. “It will save the utility an enormous amount of money for not having to build another power plant, because they can draw down from the extensive fleet of electric vehicles that are in the parking lot.”

A “smart grid” allows solar electricity generated in one part of the network to be used in another part, he explained. It also is a renewable resource, because utility companies currently use fossil fuels to generate electricity. By using electricity created by the sun, the supply is infinite.

Challenges

The greatest obstacle to widespread use of such technology is education. The general public does not know about or understand how electric cars or smart grids work, Noble said.

Joseph Gottlieb, president of the Electric Vehicle Association of San Diego, notes that solar electric car charging stations is not a new concept and “totally feasible.” At least two other San Diego companies were working on similar projects, he said, but Envision’s seems to be the first to market, with a “smart grid” connection.
____________________________________________________________________________________

About the company

Revenues 2007: $150,000

Revenues 2008: $3 million

Revenues 2009 projected: More than $5 million

Number of projects 2007: 2

Number of projects 2008: 9

Number of projects 2009 projected: 15

Number of employees: 8

Expertise in San Diego: engineers, designers

Manufacturing locations: California, Pennsylvania, and in future, Arizona and India.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Thursday, April 23, 2009

Homeowners aren’t the only ones affected by the mortgage mess. Business owners are too. It’s worse when they’re both.

“People would lose their homes before they lose their business,” said Vino Pajanor, president at Housing Opportunities Collaborative, a San Diego-based nonprofit group. “The business is an ego for them.”

Pajanor spoke on Thursday in Del Mar at a forum aimed at helping business owners avoid foreclosure.The event was hosted by County of San Diego vice chair Pam Slater-Price, and featured experts from the banking, mortgage, legal and government industries.

As the nation’s economy and housing values continue to erode, more small business owners are getting caught in the black hole of foreclosures across the country, Pajanor said. His group, which represents 47 San Diego nonprofits and is backed by the federal government, typically counsels some 210 San Diego homeowners a month. About 15 to 20 percent are small business owners.

“We are seeing small business owners whose home equities are cashed, Pajanor said. “They are using the HELOC (home equity line of credit) to do the cashflow for their businesses. ” But “in the past year, the equity in their homes has been stripped away, therefore the cash flow is gone.

The types of business owners the center has counseled span a wide range: dry cleaners, donut shop owners, restaurant owners, real estate agents, attorneys, doctors and engineers. They may have gone through a pay cut or their spouse lost a job, and they want to prepare for future scenarios, Pajanor said. “These are individuals who were raking in money in the past and their money has dried up.”

He gave an example of a restaurant owner whose sales dropped because people are eating out less. The restaurant owner takes out a HELOC to fund the business to pay employees and rent. But the house’s market value goes down, so the amount available is less. Meanwhile all the money has gone into the business, which continues to lose money.

“There’s no equity, the house is upside down, business is not good, they’re able to pay their mortgages, they’re not able to run the business,” said Pajoner. “It’s the perfect time to foreclose on the house and lose the business.”

In these times, business owners need to manage wisely, said Dennis Guseman, dean of business administration at Cal State University San Marcos. Business owners need to get back to basics, focus their efforts and create as much liquidity as possible, he said. “Analyze, what business are you in? Who is your customer? How do you provide value?”

Business owners should talk to their bankers as soon as they sense trouble, said Bank of Escondido president Mike Peters. He also advised business owners to revise their business plans often, to build in liquidity. “Bankers make loans based on cashflow,” he said.

Financial scams are on the rise, but free help is available from government agencies, said Myrna Pascual, a specialist at the U.S. Department of Housing and Urban Development. These are trained specialists who can negotiate with mortgage lenders on behalf of homeowners for free.

For many business owners, “losing the business is worse than losing the home,” said Pajanor of the Housing Opportunities Collaborative. At the free clinics they offer, a majority of the small business owners counseled are minorities — Latinos, black, Asians, he said. Typically, it is the wife who brings the husband.

Pajanor said many minorities have difficulty giving up their businesses, because it would mean “losing face” — or facing shame — their ethnic communities, said Pajanor.

Nationally, some 3 million loans are toxic mortgages belonging to small business owners, said Pajanor. These are mostly short term, adjustable mortgages – called Alt-A and option arms in the business – that have only begun to reset in late 2008 and early 2009. This means a new wave of foreclosures that are expected to peak in 2010, he said.
_______________________________________________________________________________

Free housing counseling agencies approved by HUD

Call toll free: 1-800-569-4287

Housing Opportunities Collaborative

Altria Community Housing

Community Housing Works

Mabuhay Alliance

Neighborhood House Association

San Diego Urban League

Springboard – San Diego

Tips for avoiding foreclosure

– Don’t ignore the problem
– Contact your lender as soon as you realize you have a problem.
– Open and respond to all mail from your lender.
– Know your mortgage rights.
– Understand mortgage prevention options.
– Contact a HUD-approved housing counselor.

www.housingcollaborative.org

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Wednesday, April 14, 2010

Your e-mails can mean money for your small business.

Chris Murch, an e-mail marketing expert, tells these stories:

* One e-mail netted $1 million worth of business for a radio show, after a fan forwarded a promotional e-mail to a large company. The international company later signed a contract with the radio program that generated income for both.

* A fishing gear company did $70,000 of new business from one e-mail campaign. The e-mails had a photo to “See the Biggest Bass Ever Caught in Colorado,” which linked to the company’s Web site, where visitors went crazy signing up for fishing trips.

* A guitar company shop in Denver makes several thousands of dollars extra each month from guitars featured in their e-mails. The “guitar of the month” is advertised only through its e-mail list of loyal customers.

Murch told these stories during a SCORE workshop about e-mail marketing for businesses. SCORE is a non-profit group offering workshops and business coaching for entrepreneurs. Score hosted a workshop Tuesday, and it will be held again in Carlsbad on May 7.

Murch said e-mails can be an important tool for businesses to keep in touch with customers. “Anyone who’s ever purchased anything from you should be on your e-mail list,” he said. “As long as you’ve provided good service, you’re halfway there to staying in touch with your customers.”

E-mails are profitable, averaging $57 return-on-investment for every $1 spent, he said.

They are also an easy way to stay in communication, since it takes seven “touch points” — contacts with customers — to make a sale.

“When (visitors) land on your Web site, you want a way to stay in touch with them, so when they’re ready to buy, they buy from you,” said Murch. “Familiarity breeds confidence and confidence breeds sales.”

Murch told of many ways to collect e-mail addresses from customers, including:

When customers call your store, ask them for e-mail contacts to tell them about specials.
Offer a free gift on your Web site, in exchange for e-mail information.
List your e-mail and Web site contacts on the signature lines of all outgoing company e-mails.
Keep e-mail addresses of people and groups who contact you.
Capture e-mails from business cards people give you.
Murch’s own business sends out one billion (yes, with a “b”) e-mails a month, staggered by the day. He advised entrepreneurs to use real contacts, rather than using purchased lists, CD-ROM lists or list sharing services. Make sure your lists are fresh — one year or less — and maintain then quarterly, he said.

But quality is more important than quantity of e-mails. “It’s more about good information than frequent information,” he said. “It’s content over frequency.”

In planning an e-mail campaign strategy, Murch suggested the following strategy:

Set objectives
Determine format
Create a schedule
Build a professional template
Analyze results
Test, test, test

He also offered the following nine tips:

1. Just do it. Sign up for a program with a free e-mail trial. Send out test e-mails to
family and friends. Develop it from there.
2. Content is king. Make sure your e-mails comprise 80 percent content, and 20 percent sales. Even less sales is better. Position yourself as an expert. Toot your horn when appropriate.
3. Use the same business e-mail address and name. Whether someone opens an e-mail depends 60 percent on whether people recognize who it’s from.
4. Write compelling subject lines. People will open an e-mail 30 percent of the time, depending on the subject line. Make it compelling and create a call to action.
5. Create an attractive e-mail. Use graphics, images, and white space in the e-mail itself.
6. Use links. In your e-mail messages, add three to five links to the business Web site.
7. Track links. Measure which links people click. For example, a travel company might have links for cruises to Alaska, Hawaii and Mexico. If 100 of 1,000 clicks are for Alaska, they can create a new list and send follow up e-mails about Alaska specials.
8. Put a sign-up box on your Web site. Include a compelling offer, encouraging visitors to leave their e-mail contacts.
9. Send test e-mails. Send e-mails to yourself, checking how it renders, how it looks, if the links work and if everything is accurate, before sending to your database. Test your messages by dividing the list and using different subject lines, to see which are opened more.

Murch shared more examples of successful and unsuccessful e-mail campaigns.

One fitness company had such a successful e-mail newsletter — chock-full of health information and tips — Timex decided to sponsor it. The watch company paid for billboards to promote the newsletter.

One car company sent e-mails to customers who had recently bought that brand of car. The e-mails promoted the company’s new cars. But most people don’t need a new car every two or three months, said Munch. The e-mails would have been more relevant if they were about maintaining the cars.

“It’s interesting to see big companies making those big mistakes,” said Munch. “They weren’t thinking it through.”

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Monday, June 1, 2009

George Fish had been moaning for months about his warehouse. It was stuffed, disorganized and an eyesore.

Confiding in two of his business buddies, he said, “I need a divine intervention.”

“What would that look like?” they asked.

“Someone would come to my place and help me clean it out,” he said.

“You got it,” his buddies said. “We will be your divine intervention.”

We are his buddies; I and a well-known businesswoman, who wanted to be known in this story as “Lois.”

Neither Lois nor I know much about the organ business. But we are part of a business association that meets regularly to discuss issues. We have all benefited from each other’s help and wisdom in different ways, at different times.

This time, it was George’s turn.

Fish runs an organ repair business, based in La Mesa. He has a showroom and a warehouse, totaling about 1,500 square feet.

The place was so cluttered, he couldn’t find tools, job orders or complete his work. In recent months, business had a slowed, not due to recession, he said. “It has declined because of me.”

I had seen a “shopping intervention” TV show. One woman was about to buy a very expensive dress, when her girlfriends showed up and directed her to a less expensive store.

Another friend also told me about a family intervention on her son. The 16-year-old confessed to doing drugs, so his parents put him in a rehab program.

Now, I had the opportunity to do some good, too.

Lois had similar reasons for saying yes to George. “I have valued his help in the past for my business, so I wanted to give back,” she said.

George isn’t a drug addict. Or a shopaholic. But “I have compulsive collecting disorder,” he said. “Sometimes I get this thing in my head that I need one of every kind of something.”

But George had the humility to admit his weakness and ask for help.

What did he really want? “Divine peace,” he said. “I want to have peace and serenity knowing that I’m doing what I can in my businesses, so my surroundings are peaceful. Instead of being a place to escape from, it’ll be a joy to work in.”

Saturday, Lois and I showed up at George’s show room in La Mesa at 10:30am. We agreed to work until 12:30 p.m.

He showed us the show room, which was filled with stuff. Widgets were on top of papers, on top of organ parts, lodged in all angles. We could barely step through. No wonder he wasn’t having business come in.

The warehouse across the hall wasn’t any better. It was as if someone had died and put all their life’s belongings into that one space, which was the size of a garage.

We knew we didn’t have enough time to clear his warehouse, which had taken years to accumulate. But we figured it would be enough to get him started.

Since George regarded this as a “divine intervention,” we began with a short prayer. Even though the three of us follow different faiths, we agreed it was good to call upon a greater force. “It’s not divine without God,” George explained.

We also set a target. He wanted to clear one table top, to have just one space open everyday. We also decided to organize his showroom, so that his own organs were separate from his customers’. But we didn’t think we could get to his warehouse that day.

We started out with simple tasks. Put all the papers in one pile. Put all the manuals in one box. Pull all the customer’s organs outside to put back later. Cluster all of George’s organs together. Place all the amps in one section.

It was like an archaeological dig. We found two vacuum cleaners, a menu from George’s favorite restaurant (Aliberto’s), a phone, and a Glockenspiel (a xylophone made with metal bars, used for marching bands). “I repaired this one in my youth,” said George who is 55. “I’ve had it since I was 18.”

One thing about cleaning up other people’s stuff is that you don’t have an emotional attachment to it. As we re-organized George’s amps, Lois dubbed it the “Tower of Babel.”

George said he wanted to keep the amps because he had repaired them.

“When did you repair them?” asked Lois.

“In my youth,” said George.

“How many amps can you use at once?” Lois asked.

“Your logic is impeccable,” he replied.

Together, we figured out a way to arrange George’s shelves, so he could access things easily. We organized his organs, so that his were clustered together, and his customers’ were in one place for repair. And we got all the papers and miscellaneous things off the organ tops and into boxes.

Soon, it was 12:30 p.m. and our time was up. We didn’t manage to clear one table top, as George had wanted, but he said he would able to do that later in the afternoon.

More importantly, George felt that we had gotten the momentum going. “I can work more efficiently, get things done faster, and make more money. That’s business isn’t it?”

We ended the time with a simple prayer.

“I feel wonderful, like I’ve got a fresh start,” said George. “I’m exhausted, but energized.”

For others who want a divine intervention, how do they get it? “You gotta ask for one,” he said.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Tuesday, September 15, 2009

The recession may be technically over, but San Diego’s businesses are still feeling it.

Business leaders and economists were responding to the Federal Reserve Chairman Ben Bernanke’’s comments Tuesday that “the recession is very likely over at this point.” Bernanke also said that unemployment would likely continue to rise.

“No one’s popping any champagne corks yet,” said Ruben Barrales, president of the San Diego Regional Chamber of Commerce. “At a macro-economic level, the recession may be ebbing, but the reality is we are in a soft economy right now and business people in San Diego are still faced with tough economic challenges.”

Businesses will need more time to see a turnaround, said Alan Gin, an economics associate professor at the University of San Diego.

“Spending is going to pick up, housing sales will continue to be good, but businesses will hold back before they start hiring people again,” Gin said. “They want to make sure the economy is fully rebound before they take on more jobs. ”

The residential construction industry will continue to drag down the overall economy, said Alan Nevin, an economist at Marketpointe Realty Advisors in San Diego. While the federal government has set aside stimulus funds for this sector, it was “a drop in the bucket” for what was needed, he said.

A strong residential construction industry is critical to the economy’s growth.

“Until that industry comes back, we will not have a healthy economy,” Nevin added. “It takes time and financing, and until the lenders are willing to open up their pocket books to developers, the developers will not be able to move forward.”

USD economist Gin believes job losses will continue rising through early 2010, as San Diego businesses remain cautious.

Barrales agreed that “It will be after a number of quarters of positive economic growth that we see unemployment actually stabilizing.”

This is because small businesses still face tight credit markets, said Barrales.

San Diego’s high tech and life science companies are also still “feeling the pinch,” said Moya Gollaher, executive vice president of Connect, a non-profit organization representing San Diego’s high tech and life science industries.

“We feel like (the recession is) continuing, because ready access to capital does not exist right now in ways that we see would contribute to the robust growth of start up businesses in San Diego.”

Still, San Diego’s economy has several bright spots, experts said.

California has started to pull out of recession and San Diego has not suffered as much as other areas, due to a diversified economy, said Marketpointe’s Nevin.

“We are in particularly good shape because of the military spending that’s going on here,” he said.

San Diego’s residential real estate market is also on a rebound, with housing sales moving up in the last several months, said Nevin. The number of foreclosures on the market has dropped from half to a third of inventory in the last year, while sales and prices are creeping up, he said.

The experts also agreed that general consumer confidence still has a ways to go in San Diego.

“There are some very positive signed, but it’s still a fragile economy,” said Barrales.

Nationally, recovery is only taking place in certain states, said Nevin. States where the economy is tied to automobile and other manufacturing industries — such as Michigan, Ohio and Indiana – are still hurting badly, he said.

In San Diego, businesses remain cautious.

“We need to move cautiously, but anticipate that the economy will eventually turn around,” said Barrales.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Tuesday, June 2, 2009

Think of it as a job fair with booze.

The Pink Slip Party, founded in L.A., is having its first San Diego event Wednesday. It takes place in Balboa Park.

“The purpose is for people who are unemployed or looking for a career change to network with recruiters and companies that are hiring, in a casual relaxed environment,” said Beryl Smith, president, BCS Staffing, a Los Angeles-based recruiting firm

“It’s about getting in front of people and making that connection.”

For the San Diego event, 100 people have RSVPed and 10 to 15 recruiters have committed to attending as of Tuesday noon, said Smith. The recruiters represent companies with jobs in administration, accounting, sales, engineering and technical services.

The companies include Accountemps, Robert Half Technology, Colonial Life, Aerotek and Northwestern Mutual Financial.

Since March, Smith has organized four “Pink Slip Parties in L.A,” with 50 to 350 attendants each. She was inspired by “Pink Slip” parties, which have been around since 1910, when laid off factory workers gathered at taverns in New York.

In today’s work environment, face-to-face networking beats sending out resumes, said Smith. “It’s a great way to network with other unemployed people. You don’t know who knows who. It’s who do you know.”

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Wednesday, May 27, 2009

Defense contractor Northrop Grumman’s success strategy may seem specific to the defense industry, but in fact can be emulated by other businesses in San Diego.

The strategy? Business focus, advanced technology and service contracts. These are tactics well-suited to the strengths and resources of San Diego county.

Northrop Grumman has succeeded by focusing on its core industry – defense , said Ken Herbert, aerospace and defense director, Frost and Sullivan, a market research firm.

Business focus

In the early 90s, many aerospace companies moved into the intelligent transportation business, “which never became anything,” said Herbert. In 2005, defense companies also started launching satellite networks for telecommunications, resulting in a market glut and revenue losses.

In contrast, Northrop Grumman concentrated on products for the defense industry. “They’ve traditionally been very focused and very selective in their markets,” said Herbert.

The key example of this is the unmanned vehicles market. Fifteen years ago, Northrop Grumman’s leaders foresaw that it would be a strong sector in the defense industry and they went after it, according to John Pettit, Northrop Grumman’s lead executive in San Diego.

In 1999, the company bought San Diego-based Ryan Aeronautical, inventor of the Global Hawk stealth plane. Northrop Grumman absorbed Ryan’s 3,000 staff and took the product to the next level.

The unmanned vehicle systems are the stuff of military dreams – planes, helicopters and tanks that are controlled entirely by remote control, requiring no human pilots – sort of like those remote toy airplanes you find people playing with at Mission Bay. Except that these vehicles are life-size, capable of shooting real missiles and controlled across different continents. Pettitt calls them “stealthy, flying Dorito chips.”

“Northrop Grumman recognized the importance of UAVs early on and they executed it really well,” said Phil Finnegan, director of corporate analysis, Teal Group, a market research firm. “They continued to put high priority on it, even when other manufacturers did not. ”

Today, the company is the industry leader. Northrop Grumman has nearly 45 percent of the $3 billion UAV market, said Herbert. “They’ve got a very strong lead in this market,” said Herbert.

Its closest U.S. competitor is General Atomics, which has 20 percent of the market, said Herbert. General Atomics is also based in San Diego, with its main facility in Rancho Bernardo and production facilities in Sabre Springs. Their unmanned vehicles are on the lower end of the market, said Herbert. But growing orders from the U.S. military has buoyed the company’s expansion.

Northrop Grumman’s Pettitt said: “We saw 15 years ago that unmanned systems definitely had a future. We invested a lot of money into that area and we’ll build on that.”

Advanced technology

Like many companies based in San Diego, Northrop Grumman has also done well by focusing on advanced technology. In the UAV market, its Global Hawk commands the high-end. “The global hawk is already established as a strong niche in the market, as really the premier high-altitude, long-endurance UAV,” said Teal Group’s Finnegan.

The general price range for Global Hawks is $30 million to $60 million each, depending on the model and sensor level, according to Jim Dunnigan, publisher of StrategyPage, an online military news site.

On average, the U.S. Air Force and Navy paid $58 million for each Global Hawk. Since 2003, the military has bought nearly 20 craft, with each new version flying longer and farther, according to StrategyPage.

The total U.S. Air Force contract commitment is about $107 million, with about $26 million fulfilled already, according to a Department of Defense statement.

Other U.S. and foreign manufacturers dominate the lower-end market, making smaller, more tactical UAVs. But Northrop Grumman has not competed in that area. “They’re really at the higher end, the higher-scale, generally more-capable UAV that a lot of countries will be looking for,” said Finnegan.

This has made Northrop Grumman competitive in the global marketplace. The company has sold Global Hawks to Germany, with potential orders from Japan, South Korea, and Australia, among others.

Selling UAVs overseas does not compromise U.S. security, said Finnegan. This is because buyer countries are friendly and the government must approve technology missile sales. “It’s in the U.S. interest to have Allies using U.S. equipment,” said Finnegan. “It promotes defense ties, operability between forces.”

This proprietary technology has enabled Northrop Grumman to broaden its product range. It is now developing stealth helicopters, called Fire Scouts, which would be sold to the U.S. Navy and Army, as well as other countries.

“This really has the potential for being a large area for growth for Northrop Grumman,” said Finnegan.

Service contracts

Northrop Grumman has also boosted revenues by moving into service contracts. In addition to selling its products, Northrop Grumman has generated more sales by repairing and maintaining them.

“That’s one of the broad shifts we’ve seen in the market, in revenue from hardware and software to the service side of the business,” said Frost and Sullivan’s Herbert. “But Northrop is a firm that has done a very good job in this.”

With federal budget cuts, defense companies are pursuing the service business, said analyst Finnegan.

“Especially now, more of these companies are going after the service business, because the defense budget may be declining,” he said. “Service revenues are going to be much more stable than the actual procurement of items. That makes it particularly desirable.”

The company’s sales revenue for manufacturing and services also shows this shift. In 2000, product sales income was $6.13 billion, or 81 percent of total revenue, while services generated $1.49 billion, or 19 percent, according to company spokesperson Thomas Henson.

By 2008, this had moved to product sales of nearly $20 billion, or 58 percent, and $14.3 billion in services, or 42 percent of total revenue, according to Henson.

Breaking that down further, a typical Global Hawk plane costs $30 million to $60 million, and the longevity is still too early to tell, said StrategyPage’s Dunnigan in an email. The “cost per flight hour, including maintenance, is cheaper than for manned air craft, but is still several thousand dollars an hour,” he said.

The same might be said of Northrop Grumman’s information technology and shipbuilding sectors. Northrop Grumman is the U.S. government’s second-largest information systems contractor. In San Diego, the company is a lynchpin for the City, with a $100 million contract to maintain 130,000 computers, servers and data centers, such as those in San Diego’s public libraries. This five-year contract lasts through 2012, providing stable revenue for the company in the interim.

Northrop Grumman’s IT division is “likely to be less cyclical than their hardware manufacturing businesses,” said analyst Finnegan. “It adds stability to the company.”

The same is true in the ship repair business. Northrop Grumman is the U.S. Navy’s largest ship contractor. In San Diego, Northrop Grumman is the leading ship repair contractor for the U.S. Navy, in charge of servicing the USS Ronald Reagan (CVN 76) aircraft carrier.

Going forward, the company expects the service side of the business to continue to grow. “We’re pursuing some major programs out of San Diego,” said Pettitt.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Wednesday, May 27, 2009

Northrop Grumman’s response to challenges are strategies that San Diego companies can adopt and adapt to their industries.

Northrop’s difficulties have forced it to pay closer attention to the market, think globally and plan for the future.

These challenges include the shrinking economy, a worker shortage, quality control and maintaining a competitive edge.

Defense budget cuts

The first challenge is a shrinking defense industry. President Obama’s defense policies have resulted in spending shifts. On national level, Defense Secretary Robert Gates recently cancelled big-ticket military items, such as F-22 fighter jets and the presidential helicopter.

These cuts do not affect Northrop Grumman directly, but are sending ripples across the industry. Lockheed Martin, which makes F-22s, could slash as many as 100,000 jobs. Boeing, hit by slowing commercial plane orders, slashed 10,000 jobs in early 2009.

Ken Herbert, an aerospace and defense director at Frost and Sullivan, believes the Department of Defense will put “significant pressure” on homeland security spending as well. Northrop Grumman will be “negatively impacted,” he said.

“We’ve got a couple of programs that are possibly on the administration’s hit list,” said John Pettitt, Northrop Grumman’s lead executive in San Diego. This includes the Joint Tactical Radio Program, or Jitters, which is a project with Lockheed Martin. However, it is not done in San Diego and will not affect operations here.

The shipbuilding business has also fluctuated, said Pettitt. “There just isn’t enough money to buy everything war fighters need,” he said. But “we’re not going to give up on programs that we think are absolutely essential to the defense of the United States. We’re going to do what’s available to us legally to keep those programs alive. ”

Still, the company is watching the administration closely. “We like to think we are well-aligned with Obama’s programs,” said Pettitt.

Worker shortage

In San Diego, Northrop Grumman’s biggest business challenges echoes that of other businesses: a shortage of knowledge workers. Its greatest need is for engineers, technicians and project managers.

“Our biggest challenge is recruiting,” said Pettitt. “Not many people want to move to Southern California, and pay the housing costs and the general cost of living.”

Like many other high-tech companies, Northrop Grumman recruits heavily from regional universities. It also invests in programs encouraging university and high school students to pursue engineering and sciences.

But recruiting remains “a challenge,” said Pettitt. “We’re competing with the biotech industry, the U.S. government… and you got to be a U.S. citizen.”

Quality control

Quality control has also emerged as an area of attention. A recently-settled lawsuit with the federal government involving defective parts cost the company $325 million. The settlement involved a company Northrop Grumman acquired, TRW, which knowingly sold defective satellite parts to the federal government.

The settlement was offset by another $325 million settlement, paid by the federal government to Northrop Grumman, for a terminated missile contract. For the company’s bottomline,”the impact is negligible,” said analyst Finnegan.

Still, over the last 10 years since the suit was initiated, the company has beefed up employee and technology investments for quality control, particularly in its unmanned vehicles sector in Rancho Bernardo.

Today, quality control is a high priority for the company. “We’ve taken great lengths (on Global Hawk products)… to implement some of the quality initiatives that we’ve been doing,” said Chris Cool, a vice president in the San Diego aerospace sector.

Maintaining industry lead

A more important challenge for Northrop Grumman is maintaining its industry lead. “It will be competitive — with defense budgets shrinking — to maintain a differentiated position, and alternatively find new opportunities to find top line growth,” said analyst Herbert.

Northrop Grumman’s San Diego lead executive John Pettitt said the overall company is exploring new areas to apply its technology, including clean technology and cyber security.

But in San Diego, the focus will remain on its unmanned vehicles and other existing businesses for the next several years, said Pettitt.

Follow Helen on Twitter @HelenChang.

See original story on SDNN

Tuesday, April 21, 2009

San Diego businesses have a new way to save money, through zero-interest loans for clean and green upgrades. The San Diego Clean Enterprise Program is offering interest-free loans up to $100,000 for small businesses to make energy- efficient improvements.

San Diego Mayor Jerry Sanders announced the program today in Old Town, as joint effort by the City of San Diego, San Diego Gas & Electric (SDG&E) and CleanTech San Diego.

“It’s a great savings for small businesses, but it’s also a great savings for the environment,” said Mayor Sanders. “By spending less money on energy to run your lights or your air-conditioning, businesses can invest more in building their businesses, employing needed workers.”

SDG&E is funding the program, which has $3 million available for the remainder of 2009, said Mitch Mitchell, a regional vice president, SDG&E. Its yearly budget for the initiative is $10 million. While the program was already in existence, supported by the Public Utilities Commission, the new partnership allows SDG&E to reach a wider group.

For businesses applying for the program, SDG&E experts go out to the business location to inspect energy use and make recommendations for upgrades, which are funded through the loans.

“It’s a great opportunity to look at your equipment and make key decisions,” said Mitchell.

The initiative will also boost job opportunities for workers in clean tech industries, said Jim Waring, chairman, CleanTech San Diego, a non-profit group. He noted that businesses that deliver energy-efficient motors, heaters and other equipment would benefit.

“Our real goal is to grow a cluster of businesses in San Diego around clean technology,” he said.

At the morning event, Norm Niles, a manager at Old town Trolley, shared how his company used the program to save on energy costs.

After changing their lights and doing other upgrades, the company cut costs by a third.

The program’s managers will partner with several business groups to spread the word, including: restaurant associations, various chambers of commerce, the South County Economic Development Council, Biocom, CommNexus and Connect. The city government will also promote the program through its various departments, such as those issuing permits.

Some 140 measures qualify for funding, including lighting services, food services and air quality. These can help companies become “green and mean,” said Sanders.

The program can also help business in tough times, said Waring.
“Businesses struggle day to day just to stay alive,” he said. “Here’s something that’s very easy. They don’t have to write a check.”
________________________________________________________________________________

About the loans

Interest rate: 0 percent

Maximum amount: $100,000

Length of loan: Up to 10 years

Who qualifies: Small businesses under 50 employees

Contact:
SDG&E
CleanTech San Diego

Follow Helen on Twitter @HelenChang.