War Gives Business New Problems

GULF WAR: IMPACT AT HOME

EVEN before the Gulf conflict expands from an air war to a ground battle, it is already having a significant economic and social effect on United States corporations. Economists have not yet been able to fully quantify the actual economic costs of the war on companies. But it is believed to be in the hundreds of millions of dollars or more.

``There's a very definite relationship under way between the impact of the recession and the war on many companies,'' says Robert Wilkerson, president of Corporate Response Group Inc., a management consulting firm in Washington. Small and medium-sized companies are particularly affected, he notes, since they have already lost thousands of skilled professionals who have been called up with reserve units.

``It's important to recall that wars typically are expansionary,'' says Cynthia Latta, an economist with DRI/McGraw-Hill, a consulting firm. ``You got the downside from consumer concerns, terrorism, and so forth, but you got an upside in terms of new Pentagan orders, added communication connections, and so on.''

The impact of the conflict, managment experts say, includes:

Scores of firms with business activities abroad have had to change work schedules because of concerns about terrorism; employees are reluctant to accept transfers or to use international air carriers; security costs are climbing. Firms most affected are those with offices in the Gulf region. Among such companies: Citicorp, which has over 20 branches in the Gulf region; Texaco Inc.; KPMG Peat Marwick, an accounting firm with associate offices in the Gulf; ABB Lummus Crest Inc., a constuction firm; Pan Am Corporation.

With some products diverted to the Gulf, some companies are having difficulties finding these supplies on the domestic market.

Besides losing skilled professionals to the war, some business sectors, such as retailers and airlines, have been financially hurt by the juxtaposition of war and recession. Companies which have announced lost earnings include Pan Am, Trans World Airlines, and General Motors.

Finally, the Gulf conflict has cut into worker efficiency. ``Errors by employees have been on the rise; managers are finding it more difficult to start meetings,'' because of concerns about the war, says Jeanette Taylor, a officer of Corporate Transformations International, a management consulting group in New York.

The first several weeks of the war were particularly rocky, Ms. Taylor says, although workers have begun to settle down. But if a ground war were to commence, ``workers will most likely once again become preoccupied with battle reports,'' to the detriment of their work.

What most sets the Gulf crisis apart from the Vietnam war is the huge call-up, says Mr. Wilkerson. Vietnam was fought by younger draftees. The Gulf war, he says, is taking highly skilled and somewhat older professionals.

``Many corporations are doing lots of extra things to help their employees,'' says Lt. Col. Phil Aigner, with the National Committee For Employer Support of the Guard and Reserve, based in Arlington, Va. The committee is a clearing house between the military and private corporations.

According to Lt. Colonel Aigner, many companies are voluntarily paying the difference between military pay and former civilian pay for their reservists for the duration of the conflict; health benefits are being continued for family members. Among additional steps recommended by the committee, says Aigner: companies could pick up costs of phone calls between servicemen and their families in the US; companies could help organize letter-writing campaigns, such as involving schools; set up family support centers; help families with car gasoline charges. ``One company even lent a company car to a family,'' he says.

``We're doing everything we can to help our employees,'' says William Smith, a spokesman for Exxon Corporation, in Irving, Texas. ``We provide two months salary for our people called up; then we underwrite the pay differential between military and civilian pay.'' Exxon also continues to cover family members with health insurance.

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