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To: Frank Drumond who wrote (5804)	5/9/2001 1:18:01 AM
From: Asymmetric	Read Replies (1) \| Respond to of 6317

OT: Economic Slowdown changes the game It won't happen; Area CEOs' spin on 2001 rebound: By Robert Manor/Chicago Tribune staff reporter May 6, 2001 Once buoyantly optimistic, Chicago's business leaders have recently developed a far bleaker view of the Midwest economy and the outlook for the companies they run. A Chicago Tribune survey of top area executives shows 84 percent believe the economy's performance will be worse this year than last and 47 percent predict recession. A year ago, just 7 percent were predicting that economic conditions would worsen. And tellingly, none of the 57 executives surveyed believe the economy will be better than last year. "I think we are in a recession," said Fred Krehbiel co-CEO of Molex Inc. The Lisle-based firm makes electronic and fiber-optic interconnection products, a field that has suffered recently from a downturn in spending by other companies. "Our customers are canceling orders and reducing their forecasts and all expect growth to be much slower than in the past," Krehbiel said. "I anticipate that it's going to be tough for the rest of the year." Like many companies getting ready for hard times, Molex is cutting back on most capital investments, plans to add no employees and has cut the workweek to four days at many of its factories. That said, Krehbiel isn't cutting back on spending for development of new products. He said that is the last thing any wise business would do. The bigger the boss, the worse the prognosis. Among CEOs of the area's Top 50 public companies, 93% believe the economy is softening, while 75% of CEOs at smaller public companies feel that way. The negative view of the economy is mirrored in the negative view of CEOs toward the prospects for their own companies. In recent years the Tribune survey found that less than 5 percent of CEOs expected their companies to do worse in the coming year than they had in the past. But now 26 percent say 2001 will be a weaker year for their companies. Pessimism among investors is breeding a conservative attitude toward money—and for some companies, that is an opportunity. Tim Schwertfeger, chairman of The John Nuveen Co., said investors have become more conservative in their strategies after a frightening ride in the stock market, and that helped his firm post a strong first quarter. Chicago-based Nuveen is an investment company with a bias toward bonds and fixed-income investments and a distaste for speculative adventures. Schwertfeger said investors appreciate "a more balanced approach to investing," and that fits the Nuveen strategy. Schwertfeger doesn't think a recession is in the works, although the giddy economic growth of the 1990s may be over. "What we have seen is a slowdown from an unsustainably high growth rate to a more sustainable growth rate," he said. "That felt like a recession." One key measure of confidence is the amount of capital spending executives plan for. In times of economic contraction, spending for new equipment or buildings suffers. The CEOs surveyed divided equally on capital spending: Roughly a third say they will make greater investments this year, a third say their capital spending will remain unchanged, and a third more say it will drop. Among those spending somewhat less this year is John Rowe, co-CEO of Exelon, the corporate parent of Commonwealth Edison. ComEd spent heavily in recent years to upgrade its transmission system to improve reliability. Rowe said capital spending will be "a little smaller. In the generation area, we are continuing to expand our portfolio." Although not immune to recession, electrical utilities tend to fare better than many other businesses—almost no one sits in the dark because the economy is sickly. Exelon was formed through a merger with Peco Energy Corp. last year, and Rowe said he expects the combined companies to do well over the next year. But don't bother firing off a résumé to Exelon. Rowe said the company's employment won't rise this year. "We will be cutting some jobs in our classical utility operations because, as we bring the companies together, we can do with fewer positions," he said. While the news is filled with stories of telecommunications companies canceling equipment orders and dot-coms filing for bankruptcy, at least some CEOs haven't given up on the future of computers and software. Roughly 47 percent will spend more on information technology this year than last, while 46 percent will spend less, with the remainder unsure. The boom of the 1990s led to a shortage of qualified workers. But in an ominous sign, many CEOs say they are much more disposed to lay off people than they were a year ago. The survey found the percentage of companies planning job cuts jumped to 44 percent from 13 percent in earlier years. Not surprisingly the percentage of CEOs reporting very serious trouble finding qualified workers fell to 12 percent this year from 34 percent a year ago. To counter a business downturn, the Federal Reserve has repeatedly cut interest rates. Meanwhile, Congress is considering a cut in estate taxes. Both those factors will affect Old Republic International, a Chicago insurance company. "We are involved in the coverage of mortgage guaranty and title insurance," said Old Republic CEO A.C. Zucaro. "Obviously those businesses should do well as consumers take advantage of lower mortgage rates." Zucaro said the "estate tax could adversely affect life insurance companies. For many years the industry has sold products for estate planning." For years businesses have complained it was hard to find qualified help. Now unemployment rates are rising and reports of mass layoffs are up. But Old Republic is proof that people with skills can find jobs. "We rely on white-collar help, primarily people with college degrees in actuarial science and accounting. Those people are still pretty hard to come by," Zucaro said. chicago.tribune.com