09/14/98 WHY NO COMPANY IS IMMUNE

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WHY NO COMPANY IS IMMUNE

A few months ago, Gillette Executive Vice-President Jorgen Wedel said Russian sales of its razors, batteries, and toothbrushes would more than double, to $500 million in five years, from $200 million in '97. Today, with the ruble in shambles and Russia retreating from market capitalism, that forecast has been reduced to rubble.
It might be bearable if the problems were confined to Russia. But with markets from Asia to Latin America also in or near crisis, ''every multinational is going to have a much stronger headwind,'' says Jay H. Freedman, an analyst at Chicago investment firm Lincoln Capital Management Co.
The damage won't be confined to the most global companies, such as Coca-Cola Co. and Gillette Co. ''There is not a U.S. company that does not have global exposure, directly or indirectly,'' warns Maureen Allyn, chief economist at Scudder Kemper Investments Inc.
Take Chrysler Corp., which isn't in Russia at all and has just minor operations in Asia. ''It's not our direct exposure to these areas that has me concerned,'' says Chairman Robert Eaton. ''As it gets worse, that's starting to affect the multinational companies back here...[and] the people who work for them.'' Ultimately, he adds, ''that starts to affect the people who buy cars.''
While a flood of cheap imports from distressed countries is great for American consumers, it wreaks havoc on domestic manufacturers. ''The U.S. is bearing a disproportionate part of the burden as these countries try to export their way out of crisis,'' complains Andrew G. Sharkey, president of the American Iron & Steel Institute.
As recently as July 1, analysts surveyed by First Call Corp. thought companies in the Standard & Poor's 500 would post 10% profit growth in the third quarter. That number has now been slashed to just 3.7%, says First Call's research director, Charles L. Hill. He predicts that after Labor Day, ''the number will go significantly lower.''
Standard & Poor's DRI says S&P 500 profits will fall 3.2% for 1998 and then rise about 5% in 1999. ''Corporations are caught,'' says David A. Wyss, chief economist at DRI, a unit of BUSINESS WEEK publisher The McGraw-Hill Companies. ''Their employment costs are going up due to tight labor markets, but they can't pass it on due to the strong dollar and import competition.''
Still, far from retreating, many multinationals are boosting bets on emerging markets. Ford Motor Co. says it will keep bidding for insolvent Korean carmaker Kia Motors Corp. Campbell Soup Co. is also scouting for buys in Asia. ''Mexico taught us that when there's a crisis, that's when smart people can move in,'' says Campbell CFO Basil L. Anderson. Indeed, Gillette is going ahead with a $40 million plant in Russia's St. Petersburg. Ultimately, the crisis could leave prepared U.S. multinationals even stronger in emerging markets.
By William C. Symonds in Boston, with bureau reports

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