Calling for a timeout

By Pam Boschee
Managing Editor

When you start reading this, visualize the hand symbol for a timeout. I’m officially going to wander along several tangents, some directly related to our industry, most not.

We’re heading into a new year, which from where I’m sitting doesn’t warrant much optimism in terms of recovery. I’ll address two areas of economic recovery together for this discussion—business and personal.

There’s general agreement that we continue to recover from the economic blast that accompanied the World Trade Center (WTC) attack in September 2001. I suspect there are few of you reading who have not felt some repercussions from that day in your businesses. And as a result of your businesses’ economic hits, you’ve also experienced financial hits of your own, such as salaries showing serious flatline tendencies—a very undesirable trend, strangling restrictions on any spending for new hires, office supplies, postage, travel, etc. Many of you watched people you’ve known for years clear their desks and walk out the door for the last time.

On the other hand, you wish your 401K would have been so fortunate as to show flatline tendencies instead of the plummeting line indicating CNR—”cannot resuscitate.”

The checkered flag that officially started this domino effect was the declaration of “war on terrorism.” We rallied round the cause immediately post-WTC. American flags, heroes, “kill Osama”—we were almost giddy with the patriotic rush of it all. In spite of the tragedy, a sense of optimism prevailed because we were going to take care of this once and for all.

Here we are 15 months later. We’re not so giddy anymore. A better word to now describe our populace might be weary. While we’re involved in the war on terrorism (what exactly does this really encompass, anyway?), we’re also on the brink of war with Iraq.

The war on terrorism seems to have become a concept that can contract or expand its breadth of influence depending on the situation. If the war on terrorism is cited as a reason for a decision, it’s assumed the decision won’t be (or certainly shouldn’t be) questioned. Most obviously, this occurs in the political arena, but a diluted version of it is also being used to justify businesses’ actions.

An example of a direct tie-in with the war on terrorism is United Airlines’ (UAL) negotiations with their mechanics at press time. The airline is teetering on the brink of bankruptcy and wants the mechanics’ union to agree to financial concessions to cut costs. The flight attendants have already agreed to wage cuts over the next few years. (Wage cuts—much worse than salary flatline.)

Now, in the case of UAL, its financial mess is most likely related to the WTC terror. After all, their airplanes were among those destroyed.

However, other businesses that were not directly affected also point to the economic effects post-WTC as causing problems in their companies. Although I agree the economy overall took a hit, how great was the effect in individual companies?

What concerns me even more than the degree of impact is the sense that there doesn’t seem to be a good stopping point for this. What will be required for business leaders to finally say, “Okay, we’ve recovered.” What is that marker?

Consider that we’re depending on CEOs to determine when the turnaround is “good enough.” However, these are the same leaders that are being scrutinized for corporate mismanagement.

I wonder how much of what has happened to businesses across the United States is not so much a direct result of the war on terrorism as it is a reflection of a company being run without—to borrow one of our industry’s terms—adequate reserve capacity. Sure, it was an unprecedented event in our country’s history. But still”

One of our industry’s companies that took a direct hit, literally, at the WTC was this year’s Utility of the Year, Consolidated Edison Company of New York Inc. Downtown Manhattan’s energy infrastructure suffered extensive damage: destruction of two electric substations; 11,000 feet of gas mains destroyed, 7,700 feet of gas mains retired or abandoned; 16 miles of steam mains affected; 36 miles of temporary electric cable installed; and five electric transmission feeders, 29 electric distribution feeders and related equipment severely damaged. The attack resulted in a loss of equipment capable of handling a peak load of 450 MW.

Con Edison faced this massive restoration project while also moving forward with about $500 million worth of work on their T&D system citywide to maintain reliability in the summer.

Con Edison wasn’t devastated by the actual physical act of terrorism. And the subsequent war on terrorism doesn’t seem to have adversely affected this company. Certainly, this is one company I might have unquestioningly thought would suffer significant setback. But, it didn’t. It seemed to have adequate reserve capacity throughout its business, which made it possible for Con Edison to deal with one of the most destructive attacks on U.S. soil.

Do you see adequate reserve capacity within your company? What’s your perspective on 2003? I invite your comments on these questions as well as other tangents. Please contact me at pamb@pennwell.com or 918-831-9114.

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