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the industry. With respect to profitability, petitioner ranked
near the top of Adamson's client portfolio. Adamson considered
petitioner to be a high performer with gross profit margins often
exceeding 20 percent.
Rick Muth (Muth), an owner of Orco Block Co., characterized
Ginger's sales and marketing expertise as "outstanding". Muth
considered petitioner a low credit risk, and he ranked petitioner
at the top of its field in quality.
E. The Recession
In late 1989 and early 1990, economic experts had predicted
a slowdown in the construction industry with a corresponding
"soft landing" for the Southern California residential housing
market. There was no soft landing. Petitioner did well through
July of 1990, and then in August 1990 petitioner's business "fell
apart".
In August 1990, the California housing market suffered a
severe setback. When this happened, petitioner's customers, the
large housing developers, reevaluated their positions. Ginger
estimated that 50 to 60 percent of petitioner's substantial
contract backlog that existed in July of 1990 was canceled within
60 days. Developers called Ginger about building contracts
already entered into by petitioner. The developers told Ginger
that the jobs were canceled unless petitioner would lower its
bids by 8 to 10 percent. Ginger renegotiated his material
purchases and slashed his bid prices just to stay in business.
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