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EDITIONS
Wednesday, 10 October, 2001, 21:57 GMT 22:57 UK
Blame it on Bin Laden
Islamic leader Islamic Bin Laden
Declining profits are being blamed on the actions of Osama Bin Laden
David Schepp

Before 11 September, US companies were uniform in their indictment of the slowing economy as the reason for their profit woes.

A new villain, however, has emerged in the wake of the terror attacks on New York and Washington in the form of terrorist leader Osama Bin Laden.


At this moment it is anyone's guess as to how deep an effect the recent event will have on the consumer psyche

Damon Brundage,
analyst, Raymond James
Whether it is airlines or media companies or hamburger joints, every firm's bottom line, it seems, has been affected by the frail, wiry leader of a fringe religious movement.

It would appear Mr Bin Laden has been far more successful in his assault on the American psyche than even he could have conceived.

Fast-food fiasco

Take for example, the plight of Wendy's International, the third-largest US hamburger chain.

Hamburger
Fast-food restaurants have blamed the terror attacks

The firm on Monday said it expected profits for the third quarter and for the full year to be below analysts' expectations.

Wendy's blamed lower sales in the wake of the attacks on the World Trade Center and the Pentagon, which it said will take profits nearly $3.5m lower than it had anticipated for the July-to-September quarter.

Never mind that Wendy's issued profits warnings nearly two months in advance of the attacks, blaming the slowing US economy for a lower profit picture.

"At this moment it is anyone's guess as to how deep an effect the recent event will have on the consumer psyche," says Damon Brundage, restaurant analyst for Raymond James.

"Reducing [profits] estimates at best is a shot in the dark."

Piling on

Wendy's is hardly alone in jumping on the Osama-related band wagon.

Boeing manufacturing facility in Everett, Washington
Lower demand for aircraft has halted assembly lines

Firm after firm has lined up to point the finger at the leader of the al-Qaeda group for deteriorating profits and then travelled to Washington to ask for a handout.

Airlines and were among the very first to vocalise their profit-picture plights.

The industry was successful in landing a $15bn bailout package that has other industries salivating in the hopes of a multi-million or billion-dollar handout.

Media outlets have got their message out as well that they are reeling from the 11 September attacks that left nearly 5,600 people dead.

Broadcast television networks, such as ABC, CBS, Fox and NBC, went commercial-free in their coverage of the event for several days after the attacks and for a short while after the US began its retaliatory strikes on 8 October.

That stripped about $45m a day from the broadcast networks' income as they cancelled commercials and advertisers pulled adverts.

Treading a fine line

In recent days, the networks have treaded a fine line in providing coverage of the US bombing of Afghanistan and plugging in adverts while hoping neither advertiser nor viewer is offended.

But television - and other media outlets - have been warning for nearly a year of lower profits as the flagging US economy resulted in fewer ads.

The list goes on. From stagnant productions lines in the aircraft and auto industries to empty hotel rooms and cruise ships in the leisure sector to hi-tech firms - companies are collectively gloomy.

Perfect storm

Why? The attacks came at a particularly vulnerable moment for the US economy.

The perfect storm of events that slowed the American economic engine to a crawl in preceding months gained in intensity through the terrorist attacks.

"The conflict is not helping," said one senior economist at a US investment bank in Hong Kong.

"The world has bet on the fact that the US consumer would be key to any possible recovery," the economist said. "But for now the mood [is] extremely cautious."

Analysts say it was fair to blame the attacks for some of the economic discomfort being felt by consumers and business alike.

In fact, many were talking of recession long before the 11 September attacks.

Blaming Mr Bin Laden for the all the current ills being suffered by American business, however, is a bit like blaming Mrs O'Leary's cow for burning down Chicago during the Great Fire of 1871.

It makes for a convenient scapegoat, but no one really believes it.


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See also:

21 Sep 01 | Business
25 Sep 01 | Business
08 Oct 01 | Business
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13 Sep 01 | Business
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