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  Y2K Gloom May Bring On the Doom

By Rajiv Chandrasekaran, Stephanie Stoughton and Stephen Barr
Washington Post Staff Writers
Monday, March 22, 1999; Page A1

Panicked consumers who hoard cash, food, medicine and gasoline could create more severe social and economic problems than any technological failures resulting from the Year 2000 computer glitch, industry and political leaders increasingly fear.

Although many businesses and government agencies say they have made extraordinary progress over the last six months in vanquishing the so-called "millennium bug," public unease appears to be growing because of inadequate information and skepticism toward official pronouncements that major problems are unlikely.

Political and industry leaders also worry that in doing their duty by exhorting the public to make modest preparations -- such as keeping a week's supply of food and water -- they could alarm substantial numbers of Americans and cause gas lines and panic food shopping.

"There's a difficulty in walking the middle ground between 'Be prepared' and 'Don't worry,' " said Stephen D. O'Leary, a University of Southern California professor who has been studying the Year 2000 issue. "I think we run a serious risk of a full-scale social panic between now and the end of the year."

At the Walgreen Co. drugstore chain, for instance, executives are trying to figure out how to handle customers who may want to stock up on prescription drugs. "We don't think there will be a problem with pharmaceutical supplies," company spokesman Michael Polzin said. "But people might think there's a problem, which causes the problem."

With that possibility in mind, the federal government has started to develop elaborate "contingency plans" that call for the Federal Reserve to give banks an extra $50 billion in cash, for example, and for the Federal Emergency Management Agency to activate its command centers.

Large corporations, feeling increasingly confident that their computer systems will be repaired in time, are placing more emphasis on trying to anticipate how consumers will behave going into the new year, and how to keep store shelves, automated teller machines, pharmacies and gas stations stocked.

"The impact that we feel will have much more to do with how people are reacting to the problem than with the actual problem itself," said Daniel Bachman, the director of global consulting at the WEFA Group, an economic forecasting service in Eddystone, Pa.

At Community First Bankshares in Fargo, N.D., for example, Chief Executive Donald R. Mengedoth has ordered that every branch office be open on Jan. 1, even though that Saturday is a national holiday. The bank also has made special arrangements for armored trucks to ferry additional cash to the branches and to ATMs if needed.

But Mengedoth is worried that a last-minute run by nervous customers could create severe problems: If each of the bank's 30,000 active account holders withdraws $1,000, it would add up to eight times more cash than is normally kept in vaults.

"The concerns, I think, will turn very much to the emotional reaction of the customer," he said.

At Amelia Springs Water in Amelia, Va., a group of employees is trying to figure out whether the company must boost production. Now, the company can provide extra bottles to special customers like Sutton Place Gourmet, Giant and Safeway on 10 days' notice. But if everyone orders more at the same time, can it meet the demand?

At Kroger Co., the country's largest supermarket chain, officials plan to keep a 35-day "safety stock" of groceries, batteries, bandages and diapers. But Michael S. Heschel, a Kroger executive vice president, said, "Unless there is widespread hoarding or excessive stockpiling, January 1, 2000, will be a routine shopping day."

Still, government and industry officials acknowledge, no one can be certain about the effects or impact of Year 2000 problems, popularly known as Y2K. The glitch stems from a decades-long practice of using two-digit date fields in computers, which will lead systems to interpret "00" not as 2000 but as 1900. This could cause computers to shut down or, perhaps worse, produce inaccurate information. Then again, most of them might work just fine.

For many businesses and government agencies, the technical challenge of finding occurrences of the glitch, rewriting software and testing those changes has turned out to be a manageable, albeit a costly and time-consuming, task that will be largely completed before the new year. The federal government, for instance, now reports that 79 percent of its systems are "fully compliant."

At the same time, consumer overreaction remains a possibility. While a Gallup poll conducted earlier this month for the National Science Foundation and USA Today found that 77 percent of the respondents said they expected minor to no problems, 39 percent of respondents said they plan to stockpile food and water. That is up from 26 percent in December. The survey also found that almost one in four people plan to buy either a generator or a wood stove, and three in 10 plan to withdraw a large amount of cash.

"There is a self-fulfilling prophecy element to this," said Jerrold M. Post, a psychology professor at George Washington University who studies crisis decision-making. "If people behave in a stable fashion, this wouldn't be a problem, but this does indeed become a problem because of excessive reaction."

Y2K fears already have contributed to shortages of some products, including wood stoves, manual water pumps, freeze-dried food and portable generators. At the Heyser Cycle Center in Laurel, for instance, about 30 customers have put down deposits to get on a waiting list for generators.

"The manufacturers are just overwhelmed with requests," said store manager Caroline Spahr.

The scarcity of generators and non-electrical products, however, does not overly worry industry and political leaders, who believe the demand for such items likely will be confined to a narrow group of people. Of greater concern is whether a larger slice of Americans decide to purchase sizable quantities of everyday products -- such as batteries, flashlights and canned food -- in the last few days of 1999.

"It's not going to be possible to put enough gasoline in the underground tanks or to put enough milk in the coolers if people decide to hoard," said Cathy Hotka, the vice president for information technology at the National Retail Federation, a Washington-based trade group that been studying Y2K-related consumer behavior. "We're trying to tell consumers not to freak out."

To deter panic behavior, banks, retailers, utilities and government agencies are promoting their Y2K readiness through mailings, advertisements and community meetings. The federal government is inserting a small card with tax refund checks that asks "Are You Y2K OK?" and indicates how people can request more information -- and what the government is doing to address the problem. The Potomac Electric Power Co. has included with monthly bills a leaflet about its preparedness efforts.

At Community First Bankshares, stickers have been prominently placed on tellers' computers to indicate they have passed Y2K testing; the bank also plans to show a video about its Y2K efforts to customers waiting for service.

"While banks have done a fantastic job of fixing the technological problem, now the challenge is for bank communication departments to get out that information and reassure customers," said John L. Hall, a spokesman for the American Bankers Association.

To discourage large cash withdrawals, Community First will make customers who request a hefty wad of bills sign a form acknowledging that the bank has no responsibility to replace the money if it's lost or stolen. "We think the safest place for their money is in the bank," said Mengedoth, the bank's chief executive.

Despite the progress reports and reassuring messages, many technology specialists believe that there still is not enough easily understood information about the state of repair work.

"The truth is, it's not possible to know how severe the impacts are going to be," said Bob Olson, a research director at the Institute for Alternative Futures in Alexandria. "It is too big to see. No one can have an understanding of all the ways that small failures in networks, interconnected computers and interconnected supply chains around the world might cascade to cause serious failures."

John A. Koskinen, President Clinton's Y2K czar, believes that adequate information exists on Year 2000 issues but that many corporations have not shared their findings or insights with industry partners.

"What we're dealing with is what I call crummy legal advice -- lawyers telling their companies not to volunteer anything more than they have to," he said.

That strategy, if it holds for the next few months, will prompt companies to begin making alternative arrangements for supplies, Koskinen said. "We could go to the end of the year with everyone sitting mum . . . and not showing up at a meaningful public forum, and everyone getting more tense."

Consumer confusion also is abetted by conflicting statements from Washington, say technology specialists. Rep. Stephen Horn (R-Calif.), for example, has issued "report cards" on federal agencies and frequently given them C's, D's and F's for their Y2K efforts, while the White House has produced quarterly evaluations that cast the situation in a more optimistic light, stressing the progress agencies have made.

Even Christian broadcast minister Jerry Falwell has offered an opinion on the Year 2000 glitch, producing a videotape indicating that Y2K could be a sign from God.

All this uncertainty has prompted the Utne Reader to publish a "Y2K Citizen's Action Guide," the American Red Cross to prepare a "Y2K Checklist" and Sens. Robert F. Bennett (R-Utah) and Christopher J. Dodd (D-Conn.), leaders of a special Senate committee on Year 2000, to recommend that Americans gather copies of important financial statements before 1999 ends.

"It's clearly a dilemma," Bennett said. "You don't want to add to a sense of panic. At the same time, you don't want to be irresponsible in case there is a problem."

Bennett said he plans to make sure his kitchen pantry is well stocked and that he has an extra supply of batteries and flashlights, but he does not plan to pull any extra cash out of the bank or buy a portable power generator for his Salt Lake City home.

Others, however, believe more preparation is necessary. In Shepherdstown, W.Va., Mara Ashelman, the founder of a Y2K community group, has already started stockpiling food and plans to have extra firewood on hand for her family's wood stove. She has purchased 55-gallon drums to collect rainwater off her roof.

The planning for Y2K "gives you a nice feeling," she said. Even if Y2K turns out to be a non-event, her stockpile could one day prove useful in riding out a snowstorm.

"It is not going to hurt for neighbors and friends to talk about this and think about this," said Olson of the Institute for Alternative Futures. "If it turns out that nothing needs to be done, well, you've had good conversations with your neighbors and you have a couple of weeks of food."

At the same time, "if you go too far in the panicky level," Olson said, "then you may have regrets."

Y2K and You

Because no one can be certain about the effects of the Year 2000 computer glitch, the American Red Cross has prepared a checklist to help people be ready for possible problems.

* Check with manufacturers of any essential computer-controlled equipment in your home to determine if it is Y2K-compliant. This includes fire and security alarm systems, programmable thermostats, electronic locks and any equipment in which an "embedded chip" may control its operation.

* Stock supplies to last several days to a week for yourself and your family. This includes nonperishable foods, bottled water and an ample supply of prescription and nonprescription medications.

* Have some extra cash on hand, as you would in preparation for a storm of any kind.

* Keep your automobile gas tank above half full.

* In case the power fails, have plenty of flashlights and extra batteries on hand. Do not use candles for emergency lighting. If your smoke alarms are hard-wired into your home's electrical system, check to see if they have battery backups. If you plan to use a portable generator, connect what you want to power directly to the generator and keep the generator in a well-ventilated area. For a prolonged power outage, be prepared to relocate to a shelter for warmth and protection.

* Check with emergency preparedness officials in your community to see if there is information available about how your community is preparing for any potential problems.

SOURCE: American Red Cross

© Copyright 1999 The Washington Post Company

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