Financial crisis weighs on executives' minds

NEW YORK (Reuters) - The most serious financial crisis in decades has caused business executives around the world to rein in expectations for short- and long-term growth and warn investors that business volatility will be around for some time to come.

While different companies were affected differently, most executives were keeping a close eye on Washington to see if the House of Representatives would follow the Senate and approve a $700 billion bailout package designed to halt the crisis.

In a series of interviews with Reuters reporters, these executives -- from industries as varied as health care, construction and fertilizer -- spoke of the widening global credit crisis and their many concerns.

This is Reuters’ second wrap-up of executive comments.

The following are excerpts and highlights from interviews with executives on Thursday:


Germany’s Bayer sees the current credit crisis as an opportunity to buy assets at favorable prices that can fuel future growth in its key health-care division.

Higgins said he wouldn’t rush to strike deals before the dust had settled on “the new world order” but he was confident the group’s healthy cash and credit position meant it would emerge a winner.

“We see this as an opportunity and we would hope to be able to take advantage of that opportunity in the next three to 24 months,” he said in a telephone interview from Brussels.

“We are committed to looking at ways to expand our health-care business inorganically. We believe that we are better positioned than many of our competitors.”


The chief executive of the world’s largest oilfield services company, said it will take six months to see whether the credit crisis sparks a global recession that hurts oil and gas demand.

“I think that we will know in the next six months,” Gould told Reuters.

But so far, it is business as usual for the company. Gould said Schlumberger has yet to see any pullback in spending on exploration and production from its customers, but the company is watching intently for any signs that budgets are being cut.

“We will do our yearly plan, and we will keep everyone extremely alert to signs, and if we have to revise it when those signs appear, we will do so,” the executive said.


WestJet has seen short-term travel demand drop in the past 10 days as the financial crisis has intensified, but Canada’s No. 2 carrier is still confident in its longer-term growth plans, its CEO said.

The economic meltdown has not prompted WestJet to revise its plans for capacity increases of up to 18 percent this year and 8 percent in 2009, CEO Sean Durfy said.

“We’ve seen demand for bookings come off in the near term, which would be the October time frame. But looking out into November, December, there’s still quite a bit of strength there,” Durfy told Reuters.

“I think what’s happening is the system is shocked, and it’s really all about consumer confidence. Folks are sitting back and saying, ‘What does all this mean to me?’

“I don’t think anyone’s done a great job communicating to mom and pop on the street what it actually means.”


The top executive of Lemminkainen stuck by the Finnish construction firm’s outlook for the year as its infrastructure and commercial businesses remained strong despite a slowdown in residential construction.

The builder cut its earnings forecast for 2008 when releasing second-quarter results. The company still expects 2008 sales to be higher than last year, but forecasts profits to be flat year-on-year.

Sormaala told Reuters commercial construction was still quite brisk and that infrastructure projects -- from paving to building of rail networks -- was relatively immune to the global economic crisis because of its client base.

“It’s a fairly steady market because the clients are mostly government and municipalities,” he said.

Sormaala said the recent spread of Wall Street’s turmoil to Russia showed the country was not immune, but Lemminkainen thus far had not seen signs of weakness in its business there.

“We haven’t noticed yet any impact on our housing sales ... but in Russia everything is ‘so far.’”


Lutnick, who runs one of the world’s largest bond brokerages, said the U.S. bank bailout plan is a positive step, but only one in a longer effort to revive financial markets.

“The (bailout) plan is definitely worth passing and it will help, but it is not a panacea,” Lutnick said. “We have a flood and there are guys showing up with mops and pails. It starts to sop it up. But it’s not the final answer.”

What the financial markets need, he said, is a floor under housing prices. That in tern would bolster mortgage markets, which would then help credit-related issues.

Lawmakers “are attacking it correctly, but it’s going to take time,” said Lutnick, whose closely held firm is expanding into mortgage and credit markets as many Wall Street firms stumble. “It’s going to take buyers who have the ability to get a mortgage, and who want a mortgage, and sellers to meet their price and be comfortable there.”


U.S. student loan provider Sallie Mae will be profitable even if credit conditions worsen because it has locked in funding from the government and has lower costs than competitors, Remondi said.

“Right now the marketplace is driven by fear, fear of the unknown, so a program that comes into place that helps eliminate some of that and restores confidence is going to be useful to everybody regardless of whether they participate or are eligible to participate in these areas, so the rising tide will benefit all,” he said. “That would be the best possible outcome of this facility.


Agrium continues to see bigger margins and more profits from its fertilizer business despite a sharp plunge in its stock price on Thursday, its CFO said.

“I think it’s just a lot of panic in the market right now and the market is very, very skittish, and any hint of even a possibility of bad news seems to generate a huge overreaction,” said Waterman.

“What it really comes down to is no individual company can stand up to a tidal wave of panic selling,” he said.

Reporting by Ben Hirschler, Joseph A. Giannone, Anna Driver, Elinor Comlay, Jeffrey Jones, Agnieszka Flak and Roberta Rampton; Writing by Patrick Fitzgibbons; Editing by Gary Hill