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The Nation | BLACKOUT: THE RECOVERY

For Many Businesses, Millions in Revenue Lost Along With Power

August 16, 2003|James F. Peltz | Times Staff Writer

Losses for U.S. businesses soared Friday as they struggled to recover from a massive power outage in the Northeast and upper Midwest.

New York City suffered $750 million in lost revenues in the 24 hours after the blackout hit Thursday, the City Council estimated.

With mass transit idled and many automated teller machines unable to spit out cash, shopping malls and other retail outlets in the affected areas lost at least $30 million Thursday alone, estimated ShopperTrak, a retailing-analysis firm in Chicago.

That number was expected to surge Friday and into the weekend, although estimates were difficult to make as power sporadically came back.

"It could have been worse if the blackouts had come earlier in the day" on Thursday, said ShopperTrak spokesman Jason Milch.

The impact on other heavily affected industries -- including airlines, auto makers, telecommunications companies, chemical companies and ground shippers -- was expected to reach millions of dollars as well, analysts said.

Many merchants and other businesses reopened their doors Friday as power was restored. The stock market and other financial exchanges operated without major interruption.

The disruptions are not expected to seriously damage the U.S. economy, analysts said.

"It's like a heavy snowstorm hitting that region," said Keitaro Matsuda, a senior economist at Union Bank of California. Restaurants, florists and other sellers of perishable items might not recover the lost business, but otherwise "if people have something to buy, they'll simply go back to the store when they can," he said.

Indeed, tons of meat and other perishable foods that require refrigeration were thrown out in the affected states, supermarkets and restaurants reported.

Those types of problems probably will spawn a wave of insurance claims filed by businesses large and small, said David Steuber, a partner and insurance specialist at the law firm Howrey Simon Arnold & White in Los Angeles.

"At the very least you're talking tens of millions of dollars, if not hundreds of millions" in potential claims, he said. But with the blackout's cause yet to be pinpointed, it's not yet clear who might be liable, he said.

"It's a very tangled web here of potentially impacted companies," Steuber said.

Among them were banks in New York City, Detroit and other affected regions with ATMs that stopped working when the lights went out. There were no reports of problems with the overall U.S. banking system, said Treasury Department spokesman Rob Nichols.

The loss of ATM transaction fees to banks was expected to be small compared with the toll suffered by restaurants, retailers and other small businesses because people weren't able to get cash for spur-of-the-moment purchases.

Losses also extended to manufacturing. General Motors Corp., the nation's largest auto maker, shuttered until at least Sunday 17 plants in Michigan, Ohio and Canada that employ 44,000 workers, said GM spokesman Pat Morrissey.

Deliveries to car dealers shouldn't be affected, and GM hopes to make up the lost production in the coming days, he said. But that will mean running its plants overtime and paying workers extra wages.

"We can't really judge what the financial impact will be yet," Morrissey said.

Ford Motor Co. said its plants in southeastern Michigan also were shut down, but it had no immediately details.

Many of the nation's largest airlines, already in deep financial trouble, were grounded for a second day at some Northeastern airports, notably New York's LaGuardia and Kennedy airports. Detroit's power loss also hampered Northwest Airlines, which has a major hub in the city.

More than 1,000 flights in the U.S. and Canada were canceled or expected to be canceled by Friday night. Those setbacks had a ripple effect at Los Angeles International Airport. More than 20 flights departing or scheduled to arrive at the airport had been canceled or delayed since the blackout, airport officials said.

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Times wire services contributed to this report.

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