ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, January 6, 1996 TAG: 9601100025
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
DATELINE: MARTINSVILLE
SOURCE: BLOOMBERG BUSINESS NEWS
Ladd Furniture Inc.'s warehouses are bulging, as beds, chairs and tables sit ready for shipping at its American of Martinsville unit.
No, tight-fisted consumers aren't to blame this time. Ladd is one of the biggest furniture suppliers to the federal government and has more than $1.5 million in orders that were supposed to go to U.S. Marines overseas.
``They're collecting dust in our warehouse because of the government shutdown,'' said American of Martinsville Chief Executive Mike Haley.
Like it or not, America's biggest business is the federal government, which spends about $1.3 trillion a year. It's been partly closed for three weeks now, hurting companies ranging from Silicon Valley software makers to Washington restaurants that cater to federal workers.
The shutdown ``can devastate individual companies, particularly those with a heavy dependency on government contracts,'' said Northern Trust Co. economist Paul Kasriel.
FTP Software Inc. should know. The North Andover, Massachusetts, company yesterday said fourth-quarter earnings will fall because of shelved government orders, sending its stock price down 12 1/8 to 13 1/8, almost 50 percent.
With the federal spending spigot shut, cash registers are falling silent and bills are going unpaid at all kinds of companies.
Most of the 600 seats at Washington's trendy Sequoia restaurant, normally packed, were empty on a recent night. With the capital's monuments and museums shut, tourists are scarce, and waiters who sometimes pocket $250 a night in tips go home broke.
Ark Restaurants Corp., which owns Sequoia and two dozen other restaurants, is bracing for a lousy quarter in Washington.
``It's been brutal,'' said Ark President Michael Weinstein.
Even Seattle-based Starbucks Corp., which owns a chain of boutique coffee shops, said sales at stores open at least a year eked out a 1 percent gain in December. It pinned partial blame for the puny increase on the government shutdown.
Businesses with no ties to government could feel the crunch. Each week the government is closed means about $25 billion doesn't get spent. That's a lot of money not circulating through the economy - not going to retailers, auto dealerships and banks, among others - possibly causing growth to slow.
The three-week-old shutdown ``could shave off a tenth of a point in the quarter's economic growth rate,'' said economist Kasriel.
The Republican-led House, under growing public pressure, today passed legislation to recall furloughed federal workers and pay for some limited operations at some federal agencies. The Senate is expected to pass a similar measure and send it to President Clinton, who gave the proposal a lukewarm response.
None of that means the government is poised to return to full operations soon.
One big surprise: Computer and software companies -- none of them tied to the defense industry -- are among those getting hurt soonest and worst.
Vienna, Va.-based BTG Inc., a software and networking company whose biggest client is the U.S. government, said fiscal third-quarter profit will fall short of expectations.
Vtel Corp., an Austin, Texas-based maker of audio-video conferencing systems, said it will post lower fourth-quarter revenue because of delayed government orders. And in Mountain View, Calif., Silicon Graphics Inc., which makes high-end graphics computers, said fiscal second-quarter earnings will be below analysts' estimates - in part because the shutdown is costing it government sales.
Shares of the companies fell steeply.
For other companies, it may take a while before the pain begins.
Findlay, Ohio-based OHM Corp., a hazardous waste disposal company, said the shutdown's impact is minimal.
``Right now we're only being affected through our business with the Environmental Protection Agency,'' said Cheryl Rectorschek, and OHM spokeswoman. ``That's only about 5 percent of our ($225 million annual) revenues.''
If the shutdown persists, though, the company could see revenue dry up from contracts with the U.S. Army Corps of Engineers. That's a much bigger piece of business, Rectorschek said.
The shutdown could even keep some new Ford pickup trucks off the road. The Environmental Protection Agency must certify a vehicle's fuel use before it can be sold.
With the agency closed, Ford may have to mothball about 10 percent of the 8,000 1997 F-Series trucks already produced, a Ford spokesman said.
LENGTH: Medium: 86 linesby CNB