CEOs See Negative Impact from War in Iraq
Sat Oct 5,11:18 AM ET
dailynews.yahoo.com
By Jeremy Pelofsky
WHITE SULPHUR SPRINGS, W.Va. (Reuters) - A war against Iraq could spell
trouble for a fragile U.S. economy trying to regain momentum from its first
recession in a decade, top U.S. corporate executives said this week.
The overall impact would be negative since, for
example, energy prices spiking up and consumers
would curtail travel. But that, in turn, could help
communications companies because calling traffic
spikes in times of crisis, executives said during the
annual gathering of the U.S. Business Council here.
The Bush administration has been pushing for
renewed, unconditional inspections for weapons of
mass destruction in Iraq and is contemplating military
action if Iraqi President Saddam Hussein ( news -
web sites) refuses.
"This is just another negative ... with respect to the
capital markets and the equity markets," said Bill
Harrison, CEO at J.P. Morgan Chase & Co. Inc. and
also vice chairman of the Business Council.
A short war against Iraq might mitigate the downside impact on the U.S.
economy, but should the conflict become complicated the economy would
almost certainly suffer more, Harrison said, adding that the prospect of war was
a "net negative."
CEOs from a wide swath of companies, from technology to pharmaceutical
firms, have been discussing national security and the economy at the luxurious
Greenbrier resort in the mountains of West Virginia.
As part of their talks, they received briefings from Central Intelligence Agency chief George Tenet and U.S. Attorney General John Ashcroft
.
The CEOs released a survey in which almost all of them expect economic
growth to slow in the second half of 2002 from the 3.2 percent tallied in the first
half of the year.
The U.S. economy started recovering late last year but the recovery has been
bumpy, with annualized growth of 5 percent in the first quarter that fell to 1.3
percent in the second quarter.
"I don't think a $100 billion tax on U.S. citizens is a good thing," Scott
McNealy, chief executive of Sun Microsystems Inc. , said referring to the
potential cost of a war in Iraq.
One top chief executive, Fannie Mae CEO Franklin Raines, said he believed
that a war with Iraq was inevitable.
"War would have a depressive impact on the economy ... I think it would delay
the start of business investment," he told Reuters. "It would be offset somewhat
by lower Treasury rates as there's a flight to quality by investors, but it would
probably be a net negative."
Delta Air Lines Inc. chief Leo Mullin said there undoubtedly would be a dropoff
in travel, noting that during the 1991 Gulf War , there was a
10 percent decline in traffic across the Atlantic and 5 percent drop within the
United States.
"If the war is of short duration, it may have very limited consequences. But if it's
longer, we'll just have to handle it as the time comes," Mullin told Reuters. "
And a big factor that would affect the airlines and numerous other sectors of the
U.S. economy is oil prices. "Obviously energy costs will be a factor, there will
be a spike," said Charles Holliday, CEO at DuPont Co. "We're already seeing
oil up $5 a barrel."
But not all companies expect their businesses to decline if war breaks out in
the Middle East.
Bill Esrey , CEO at Sprint Corp. , the No. 2 U.S. long-distance telephone carrier
and No. 4 U.S. mobile telephone carrier, said whenever there is a major event,
Americans pick up the phone or dash off e-mails to friends and family.
Any time you have an event, whether it's a war or a national news event, an
earthquake , hurricane or whatever, it stimulates traffic," he
told Reuters. "It's a boost in activity, it's not a huge change, but an incremental
change."
On Sept. 11, 2001 after the attacks on the World Trade Center and Pentagon , telephone networks were jammed with double the normal
amount of traffic as people tried to locate loved ones and friends.
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