Riding Out The Storm

The recession will stagger many industries, but some may do fine. Here is a forecast of winners and losers.

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Most American businesses have one thing in common right now: a sinking feeling. The recession that apparently began in late summer has drawn down the economy with wrenching swiftness. For most U.S. companies, simply riding out the slump has become the No. 1 short-term priority. But not all firms will be affected in the same way. Such heavy industries as petrochemicals and autos are likely to suffer the most, since they make products that people can often postpone buying. Heavily indebted companies will hurt too. But businesses that produce such necessities as pharmaceuticals and food will hardly feel the pinch. Here is a 1991 forecast for nine prominent industries:

Aerospace and Defense. Even a war will bring little help to military contractors, because Pentagon spending will decline at a brisk annual rate of 5%, after adjustment for inflation. Companies that are heavily concentrated in military production, notably Northrop, will be the hardest hit. Fighting in the Persian Gulf may produce fresh orders for suppliers like General Dynamics, which makes the Stinger antiaircraft missile, but any increase would only be temporary. Because the Bush Administration and Congress have delayed hard decisions on the future of many programs, planning has become difficult for the industry. "I think next year is going to continue that uncertainty in the budget process. Confusion reigns," says Frank Shrontz, chairman of Boeing. Producers of commercial jetliners will have the smoothest flying. Boeing and McDonnell Douglas have a hefty backlog of orders, many from foreign carriers, which will help the companies weather the downdraft.

Autos. The best hope for domestic carmakers is that sales, which have been sliding since 1986, will match last year's level of 14 million vehicles. By temporarily idling 38 plants during the first quarter of 1991, the Big Three aim to avoid a huge buildup of unsold cars. "We started a massive cost- reduction program in 1989, and all of us have slowed down our production schedules," says Robert Miller, vice chairman of Chrysler. "We all now have the staying power to get through a recession." With losses of $214 million in the third quarter alone, Chrysler is the most vulnerable of the Big Three. All the firms have their attention focused on Washington, where Congress may reconsider legislation that would raise fuel-economy levels 40% by 2001. Detroit is worried that such a law would require a major investment, which the automakers can ill afford at the moment.

Computers. Stagnant sales and customer demands for better service made the past year a tough one for the industry, with many companies cutting their budget and work force. The coming year will bring more of the same, with some bright spots. Overall, sales will be weak as cost-conscious executives curb spending on new equipment. One stronger area will be lower-priced products, including portable computers and software. The biggest variable will be exports, which account for as much as one-half of all sales. This overseas business could improve if the dollar remains weak. "To a large degree, that is what's going to determine the rebound that will occur," says Laura Conigliaro, an analyst for Prudential Bache Research. Such companies as Wang and Control Data, which rely on older technology, may be among the biggest losers. A likely winner is IBM, which has an impressive new line of products.

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