Like most Americans, the leaders of major U.S. corporations are divided over whether a U.S. war with Iraq is a smart move. But on one issue, the boardroom set is nearly unanimous: When it comes to jump-starting a weak U.S. economy, war is hell.
Not war itself, mind you. Few executives queried by BusinessWeek reporters seemed worried that a prolonged conflict might send the tinder-box Middle East up in flames. Rather, CEOs say, continued doubts about the starting date, shape, and duration of the showdown with Iraq are acting as a lead weight, delaying investment and hiring decisions while sending oil prices up and the stock market down (see BW Online, 1/23/03, "CEOs, Learn to Live with Risk").
That's why growing international clamor for more time for U.N. weapons inspectors to scour Iraq isn't necessarily music to CEOs' ears. Many fear that a prolonged inspection timetable -- anywhere from two months to a year -- would merely deepen the cloud of uncertainty that now hangs over the U.S.
DELAYING PURCHASES. "The economy is just staggering along right now," says Wilbur L. Ross Jr., CEO of the investment firm W.L. Ross. "People are worried about jobs. People are worried about war. People are worried about terrorism. People are just worried in general."
According to W. David Sanders, senior vice-president for integration services at Bearing Point, a consulting outfit that's the successor to KPMG Consulting, many tech companies are delaying new purchases due to the uncertain war climate. Sanders wouldn't offer an opinion on the U.N. arms inspection, but he says the clear delays are a problem. "We've got to know if we're going or not going," he asserts.
That view is echoed in Little Rock, Ark., home of data-services company Acxiom (ACXM). CEO Charles D. Morgan says he has seen a surge in new business over the last month or so, but he fears that this nascent rebound could be snuffed out by Iraq-o-phobia. "Probably getting [the war] over sooner is better," he muses. "All of us in business want to get this mess behind us."
"OTHER WILD CARD." John Connors, chief financial officer of Microsoft (MSFT), expresses a sense of helplessness about the attenuated war scenario that's fairly typical in techdom these days. "The biggest impact is on [potential customers'] willingness to increase capital spending budgets," he says. "Uncertainty is not a good thing for business commitments." Ultimately, Microsoft might be forced to take a short-term earnings hit if business slows down because of a real or threatened war. "There's not a thing we can do about the overall geopolitical economy," he says. "We'll just keep plugging away."
How about manufacturing? Leaders of old-line companies feel the same sense of dread. James G. O'Connor, head of North American sales and marketing for Ford (F), terms the Iraq conflict "the other wild card in the first quarter" -- the first being Detroit's wave of profit-crunching buyer incentives. Even so, many Motown auto execs are convinced that the depressant effect of a Gulf war will be transient as fascination with the military drama fades. "It comes back quick," predicts O'Connor. [At the war's onset] "everyone stays home to watch television, then there's a pop from deferred sales."
Not all business leaders have a case of anticipatory shell-shock about the looming showdown with Saddam Hussein. One of the optimists is billionaire Samuel Zell, chairman of two of the nation's biggest real-estate investment trusts -- Chicago-based Equity Office Properties Trust (EOP) and Equity Residential Properties Trust (EXTA). While Zell concedes that war talk is depressing the economy, he still sees growth averaging a robust 3% to 3.5% this year, and he discounts fears of an Iraqi quagmire. "It's very hard for me to imagine that the war will drag on," he says. "The military will use quickly escalating force to attain its objective."
FINAL STRAW? The business community's sentiments deepen the dilemma President Bush faces. The more he listens to appeals for delay from the international community, the longer he puts off the military day of reckoning with Saddam. That fosters uncertainty at home, which translates into continued U.S. economic malaise.
"This [war] overhang makes it harder to get the economy moving again," concludes Brookings Institution economist Peter Orsag. An even more alarming view comes from Morgan Stanley chief economist Stephen Roach, a hyperbear who warns that "the Iraq factor" may well be the final straw -- the shock that takes a stalling U.S. economy back into recession.
Gloomy? You bet. But then, it's hard to find many giddy optimists in America's boardrooms these days. By Lee Walczak, with Paul Magnusson, in Washington. With Michael Arndt in Chicago, Wendy Zellner in Dallas, Katie Kerwin in Detroit, Rob Hof in San Mateo, and bureau reports