Big and small, companies cling to a thread

COSTS UP, ORDERS DOWN Teddy Wojtaszek punched his card at hard-hit Universal Plastics Corp. in Holyoke. (Ed Collier for The Boston Globe)

Three weeks ago, the carnage on Wall Street hit home for Larry Noller of Affordable Furniture to Go in Avon: He lost the ability to extend financing to his customers.

Now, with sales in a tailspin and an uncertain future, Noller is slashing advertising, cutting back overtime, and considering trimming his staff of 15. He's anxious and furious at Congress's rejection of the $700 billion bailout plan while businesses like his continue to struggle.

"Somebody better do something, and something substantial soon," Noller said from his shop yesterday. "It can't be a $600 check to people like it was in the spring. We need real help."

Businesses - big and small, local and national - for the past couple of weeks have been sorting through the wreckage of the financial collapse on Wall Street. Now, companies such as Affordable Furniture to Go fear things might get worse after legislators' refusal Monday to approve the government rescue package. With no promise of a life preserver from Congress, tightened lending markets, and shaken consumer confidence, companies are starting to make difficult decisions about how to survive the long days ahead.

At Wrobel Engineering, a sheet metal manufacturer in Avon with about 130 employees, executives are battling declining sales from large high-tech clients that are foundering amid the economic downturn.

Elizabeth Wrobel, the president of the company, said sales are down about 15 percent over the past several months and the company this week decided to delay the purchase of $400,000 in equipment needed to improve operations.

"We're worried that some of the larger companies that owe us money are not going to come through with payments," said Wrobel, who has been in business for 32 years. "It's very somber around here right now. We don't know what the next day will bring."

Meanwhile, Framingham office supply chain Staples Inc. added J.P. Morgan Securities Inc. on Sept. 19 as another seller of short-term debt to give it ready access to cash when needed. The addition of J.P. Morgan allowed Staples to continue to borrow money as usual after one of its other bankers, Lehman Brothers Holdings Inc., filed for bankruptcy protection days earlier. The move is intended to ensure that Staples' operations won't be affected by the credit crisis.

"It's important to look at how we manage our cash and liquidity given the market conditions," said Paul Capelli, a spokesman for Staples, which reported a 16 percent drop in profit in September.

Even before the Wall Street meltdown, many companies faced a tough business environment. Nearly half of US retailers had lenders tighten credit and more than one-third cut back inventory, according to a survey of chief financial officers released yesterday by BDO Seidman LLP, one of the nation's leading accounting and consulting organizations. About one-quarter of merchants in the survey also reported they will have significant layoffs this year and the majority don't expect a turnaround in the economy before mid-2009.

"We have read the headlines about the bankruptcies and government takeovers of financial institutions, but this shows the knock-on effect; retailers are now suffering from a drain on liquidity," said Doug Hart, a partner in the retail and consumer product practice at BDO Seidman.

And the cost of borrowing in dollars overnight rose the most on record after Congress rejected the bailout plan, putting a chokehold on the global financial system. The ability to borrow is critical for businesses to maintain daily operations, such as payroll, or finance inventory purchases.

At Lannan Chevrolet in Woburn, owner Peter Lannan froze jobs earlier this summer and began selling used cars online at eBay Motors to make up for slumping sales. He fears that if the credit crisis deepens, he will not be able to borrow money and will have to reduce inventory at his two stores.

Manufacturers are also feeling the pinch and bracing for the worst.

Joseph Peters, the president of Universal Plastics Corp. in Holyoke, said sales to large corporate clients are down 15 to 20 percent and new orders are becoming harder to close.

"Usually we're very busy in September, but this year we're just treading water," said Peters, who sells to companies such as IBM and General Electric. "The phones have slowed down."

At the same time, Universal Plastics is getting hit hard by a 20 percent increase in costs for raw materials needed to manufacture his products. The pressures on both sides of the balance sheet have caused him to lay off a few of his 75 employees. He is worried that things are getting worse, especially without intervention to stabilize the markets.

"It's hard when you've spent years trying to get where you want to be, then this happens and you have to figure out how to pare down your operations," Peters said.

At Teradyne Inc. of North Reading, one of the world's leading makers of electronic testing equipment, executives say the new climate of fear has driven down orders over the past few weeks. Tom Newman, the company's vice president of corporate relations, said customers are cutting back whenever possible.

Newman isn't certain how much relief Teradyne would receive from a bailout bill. But he added: "Anything they can pass will probably be good for the country, as opposed to doing nothing."

Despite fears of a prolonged recession, some businesses oppose a rescue package.

Adam Odeh, who owns a two-employee jewelry shop in downtown Boston, said the home equity credit line he depends on to help keep his business running was recently reduced from $25,000 to $15,000. It has become harder to pay the bills and more people are trying to sell their jewelry than buy from him these days. Odeh plans to cut prices to try to convert them into shoppers and make it through the holiday season.

But if business doesn't improve, the jeweler may have to return to Lebanon, his home country. Still, he says a government bailout is not the answer.

"It's unfair if there is bad management in any company that the government should fix it," Odeh said. "If there are bad companies, let them go down."

Globe staff members Hiawatha Bray, Steven Syre, and Casey Ross and Globe correspondents Jonnelle Marte and Angel Jennings contributed to this report. Jenn Abelson can be reached at abelson@globe.com.