DETROIT AUTO SHOW -- 1991

Makers brace for Gulf war

Originally published: Jan. 14, 1991

Automakers braced for the aftershocks of a Persian Gulf war last week as Iraq and the United States headed for a showdown.

The failure of U.S. and Iraqi negotiators to settle their differences brought the industry a step closer to the prospect that a conflict could disrupt the world's oil supply and cast the U.S. economy into fur-ther turmoil.

That uncertainty was widely evident at the North American International Auto Show in Detroit, where many of the world's automotive elite had gathered.

Predictions about 1991 were already clouded by reces-sion and the U.S. savings and loan crisis. They were made more difficult last week as the United Nations' deadline for Iraq to remove troops from Kuwait by to-morrow approached.

"Our planning is based on the assumption that if shooting starts, customer buying and dealer orders will drop very dramatically," said Philip Benton Jr., Ford Motor Co.'s president and chief operation offi-cer. Benton added that some dealers have been holding off their orders until the Jan. 15 deadline.

But there was no universal feeling that war would mean disaster for carmakers.

Ellie Torre, Cadillac's director of marketing, noted that Cadillac fared well during the Korean and Vietnam wars.

And on Wall Street, analyst Ann Knight called consumer confidence the "great unknown."

"Our feeling is that the media coverage of the S&L crisis is more troubling to car-buyers than the possi-bility of shooting thousands of miles away," said Knight, a first vice president at Paine Webber Inc.

Projections aside, there were more immediate concerns as automakers attempted to protect employees from pos-sible violence.

Ford Chairman Harold Poling said it had banned employ-ees from flying commercial overseas flights this week. The company had also increased security at offices around the world.

Chrysler Corp. is advising employees not to travel to the Middle East but has no ban on trans-Atlantic trips.

GM said it was taking precautions over international travel but would not disclose details. It did fly a group of 60 European journalists back home from the Detroit show a day early "in the interest of safety," a spokesman said.

No matter what happens in the Persian Gulf, auto ex-ecutives said the next few days could be critical in deciding what kind of year 1991 will be.

"If we have a protracted deployment of our troops -- with all the uncertainty that brings with it and the drain on the nation's financial resources that brings with it -- then we are going to have a pretty bad year," said Chrysler Motors President Robert Lutz.

"If we get this thing behind us, either through a ne-gotiated settlement or through a short, sharp military conflict, then I think consumer confidence would re-turn to a certain degree and we might have a fair year."

On another front, Subaru of America Inc. said it will reduce lease car payments by half for the families of reserve and national guard members serving in the Mid-dle East. The offer is good until the lessee returns from active duty, or for a maximum of six months.

Overseas, Rolls-Royce Motor Cars' parent company, Vickers p.l.c., has employees in the Middle East be-cause it is a tank manufacturer.

"They'll continue to be out there, or at least up un-til the very last minute," said Vickers spokesman Ter-rence Collis

But those non-defense subsidiaries that do business in the Middle East, like Rolls-Royce Motor Cars, are abiding by British government advice to avoid regions of possible conflict, he said.

Reported by Lindsay Chappell, Laura Clark, Mary Connelly, Phil Frame and Jim Henry.

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