The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight: A summary of today's news; a look at the decision on prosecuting John Walker, the American Taliban; an update of the latest on the Enron disaster; a report on the newest from the auto industry; and a foreign correspondence about covering the war in Afghanistan.

NEWS SUMMARY

JIM LEHRER: An American who fought with the Taliban in Afghanistan will be tried in U.S. Civilian court. The justice department announced today John Walker will be charged with crimes related to terrorism. He could face life in prison, but not the death penalty. He was captured in November in Northern Afghanistan. We'll have more on this story in a few minutes. In Afghanistan today, U.S. Marines destroyed a hidden tunnel complex just a few hundred yards from their airport base near Kandahar. Last night, seven armed men were spotted in the area. The men disappeared, but this morning a Marine patrol discovered the tunnels and a store of weapons. Last week, gunmen fired on Marine positions from that same area. In Louisiana today, President Bush said the United States would continue hunting down the Taliban and al-Qaida "one man at a time." .

PRESIDENT GEORGE W. BUSH: I wish this ended yesterday, but that's not how this is going to work. You see, we've got people who send youngsters to suicide missions and they themselves hide in caves. Those are the kind of people we're dealing with. But there's not going to be enough caves in the world to hide 'em.

JIM LEHRER: U.S. planes halted bombing today around a cave complex in eastern Afghanistan. Military officials have said it was an al-Qaida base, and is now largely destroyed. Refugees said the attacks destroyed homes and killed at least a dozen civilians. In the Middle East today, the Palestinian Authority detained the leader of the Popular Front for the Liberation of Palestine. Group claimed responsibility for killing an Israeli cabinet minister last October. Israel has demanded the assassins be arrested. The Israeli military has blocked Palestinian leader Arafat from traveling until he takes action. There was a major shakeup today at the accounting firm for Enron. Arthur Andersen fired the lead auditor of the energy company's finances. It said he directed the destruction of documents involving Enron. Andersen also placed three auditors on leave, and it replaced the management of its office in Houston, where Enron is based. Last night, a house committee released an internal memo to Enron's chairman, warning about accounting practices. It was sent last August. In it, a top company executive said, "I am incredibly nervous that we will implode in a wave of accounting scandals." Enron filed for bankruptcy protection December 2. On Wall Street today, the New York Stock Exchange suspended trading in Enron's stock. It said the company's securities were "no longer suitable for trading." We'll have more on the Enron story later in the program. Dozens of people arrested after September 11 spent weeks in jail before being charged. The "Washington Post" reported that today. More than 700 people were detained for immigration violations after the attacks. Justice Department documents showed most were charged within days. But some were held up to two months before charges were filed. The Social Security Administration settled a racial bias suit today. It agreed to pay nearly $8 million to 2,200 black male employees. They alleged they were denied promotions because of their race and sex. They worked at the agency's national headquarters in Maryland.

FOCUS - AMERICAN TALIBAN

JIM LEHRER: The details of the American Taliban story, and to Gwen Ifill.

GWEN IFILL: John Walker Lindh, the American who was discovered living and fighting on behalf of the Taliban in Afghanistan, was charged today with aiding and abetting terrorism. The Justice Department said the 20-year-old Californian, who goes by his mother's last name, Walker, freely admitted his ties to the Taliban and to at least one friendly meeting with Osama bin Laden. Attorney General John Ashcroft listed the charges: Conspiracy to kill U.S. Nationals, providing material support resources to terrorist organizations, and engaging in prohibited transactions with the Taliban.

JOHN ASHCROFT: The United States does not casually or capriciously charge one of its citizens with providing support to terrorists. We are compelled to do so today by the inescapable fact of September 11, a day that reminded us in no uncertain terms that we have enemies in the world and that these enemies seek to destroy us. The complaint alleges Walker knowingly and purposely allied himself with certain terrorist organizations with terror, that he chose to embrace fanatics, and his allegiance to those fanatics never faltered-- not even with knowledge they murdered thousands of his countrymen, not with knowledge that they engaged in war with the United States, and not finally the in prison uprising that took the life of CIA Agent Johnny Spann.

GWEN IFILL: While in U.S. custody, Ashcroft said, Walker was read his rights, including the right to a

lawyer, and waived them.

JOHN ASHCROFT: The Department of Justice complaint based on Walker statements in interviews states that on or about May 2001 Walker joined a paramilitary training camp run by the terrorist group Heraqat Mujahadin. After his training was completed, he was given a choice to fight with the Heraqat Mujahadin in Kashmir or join the Taliban to fight in Afghanistan. Walker chose to join the Taliban. He went to Afghanistan and presented himself to a Taliban recruitment center telling the individuals there that-- and I'm quoting-- quote, he was a Muslim who wanted to go to the front lines to fight. The complaint further states that because Walker's language skills were deemed insufficient by Taliban recruiters, he was referred to another group, which he was told was Osama bin Laden's al-Qaida network. When al-Qaida members told Walker he needed more military training to join the terrorist group, the complaint sets forth Walker's admission that he spent seven weeks in an al-Qaida camp training in weapons, explosives, and battlefield combat. Walker reported that Osama bin Laden visited the camp on three to five occasions. On one of these occasions Walker met personally with bin Laden who, quote, according to Walker, thanked him for taking part in Jihad. According to the complaint, when his al-Qaida training was completed, Walker, again by his own admission, chose to go to the front lines of the battle in Afghanistan. Armed with an AKM rifle he was sent to Kabul and eventually made it to the front line of the battle with the Northern Alliance in Takar. Walker told U.S. Officials that he was aware of the attacks of September 11 and that Osama bin Laden had ordered the attacks, but even after September 11 with full knowledge of the thousands dead in the United States and al-Qaida's responsibility for those deaths, the complaint states that Walker continued to fight for the Taliban against American interests. After he after he was taken prisoner in Mazar e-Sharif November, Walker refused to cooperate with U.S. officials and lied about his citizenship. Our complaint, based on Walker's own words, is very clear. Terrorists did not compel John Walker Lindh to join them. John Walker Lindh chose terrorists. Walker was blessed to grow up in the country that cherishes freedom of speech, religious tolerance, political democracy and equality between men and women. And yet he chose to reject these values in favor of their antithesis, a regime that publicly and proudly advertised its mission to extinguish freedom, enslave women, and deny education.

GWEN IFILL: Ashcroft conceded today's charges do not include treason.

JOHN ASHCROFT: Not all conduct against the United States by U.S. citizens is susceptible to the charge of treason. The Constitution imposes a high evidentiary burden to prove the charge to prove the article of treason. Article 3, Section 3 of the Constitution requires that treason be proven only by a confession in open court or by the testimony of at least two witnesses to each alleged overt act. For now, we are confident in going forward with the charges we filed today.

REPORTER: Why isn't he a candidate for a military tribunal?

JOHN ASHCROFT: Well, Mr. John Walker Lindh is a U.S. Citizen. And according to the military order issued by the President, it's for dealing with non-citizens of the United States.

REPORTER: You said other charges will be considered. Does that mean he may still be charged with treason and face the death penalty?

JOHN ASHCROFT: If additional evidence is developed that would provide a basis for other charges-- and I don't want to be... To begin an inventory of those charges at this time-- but there could be a variety of other things that might be developed, then we would be free to bring other charges against him.

GWEN IFILL: Walker is the first American, and only the second individual, charged in connection with the September 11 attacks and ensuing war.

GWEN IFILL: For more on the John Walker case, we are joined by Andrew McBride, a former assistant U.S. Attorney for the Eastern District of Virginia, where Walker will be tried; and David Cole, a professor at Georgetown University Law Center, and an attorney for the Center for Constitutional Rights.

Mr. McBride, tell us about these charges. Why these charges against this man?

ANDREW McBRIDE: Well, I think the Attorney General laid out that the charge of treason carries with it some particularly high evidentiary burdens, and I also think at this time that they have been unable to link this defendant to any particular death and therefore charging conspiracy to murder American citizens abroad namely military personnel engaged in act of combat against al-Qaida is the way to go at this point. Now, the affidavit discusses the interview that CIA Agent Johnny Spann had with the defendant and then discusses the fact that the revolt at the Mazar e Sharif prison broke out shortly thereafter, and I'm sure prosecutors are looking to make some connection there, if there is one, that Mr. Walker may have been involved in setting up Mr. Spann who evidently interrogated him fairly rigorously about his United States citizenship.

GWEN IFILL: But absent that direct proof of his involvement in the death of Johnny Spann, you're saying that this... These charges reflect the notion that the American government doesn't have any proof that he actually directly had something to do with the death of an American citizen?

ANDREW McBRIDE: That's correct, that he joined a conspiracy whose object was to kill American citizens, but if they were able to add the charge that he specifically knowingly caused the death of an American citizen, that would make the offense death eligible.

GWEN IFILL: What do you make of the charges against John Walker?

DAVID COLE: Well, I think the government made a choice to go for a charge that it thought it could win based on the confession which it obtained. That's all that the confession supports at this point. They've said that they're going to bring more charges if further evidence is developed. But at this point they're essentially resting on this confession. I think everything in the case will turn on whether or not this is, in fact, a valid confession.

GWEN IFILL: Do you think that what he is alleged to have done should have constituted a charge of treason?

DAVID COLE: Well, no, what he's alleged to have done... At this point I'm not sure that it should. All that he's alleged to have done is what they have from the confession. And question is whether they'll develop further evidence. If they don't, then the only question is I think the principal question in the case will be, is this, in fact, a reliable confession? Because if it's a reliable confession, he doesn't have much of a defense. But there's I think real serious questions about whether or not it's a reliable confession.

GWEN IFILL: How do we know whether it's a reliable confession?

DAVID COLE: I mean, what John Ashcroft says is we gave him his Miranda rights. He waived the rights. He didn't want to talk to a lawyer. He talked to us voluntarily. Here's a person who refused to cooperate initially according to Ashcroft, suddenly turns around and just voluntarily waives his rights and signs away all of his rights without ever talking to a lawyer. Was it truly a voluntary, knowing and intelligent waiver of those rights particularly in these conditions? When you're picked up in the field of battle, you're held in a military compound, you know, can we really say that John Walker made a voluntary and intelligent decision to waive his rights? If not, then the confession is not admissible. If so....

ANDREW McBRIDE: I disagree with that. I mean I think the affidavit in support of the criminal complaint says that he was given Miranda, hesigned a written Miranda waiver. He orally waived Miranda. He also said he acknowledged that he had had medical treatment and he had been treated fairly in military custody by the United States, that he's not been abused in any way. Secondly... So now you have two FBI agents who interviewed him said he waived his rights, a physical document that can be looked at and determined whether that's his handwriting on the waiver, his own admission that he's been treated well in the military custody. Finally statements made to CNN that have been broadcast on the air outside of the presence of law enforcement officers that corroborate the things that have been said to the law enforcement officers themselves so....

GWEN IFILL: But why not give an American citizen access to an attorney, his attorney has been here in the United States apparently trying to get access to John Walker just to be on the safe side?

ANDREW McBRIDE: Well, nobody's entitled to an attorney until they've been charged with a crime. There's no Sixth Amendment right that attaches to an individual until in some cases until an indictment has been filed against them. But certainly now the Sixth Amendment has attached with the criminal information filed. But in a military setting overseas I think the United States is within its rights to say as long as he's in military custody that a civilian attorney should not have access to him. Now he's been indicted. I think it's pretty clear that U.S. law enforcement officers will not speak to him until he reaches Virginia and is able to speak with his attorney.

GWEN IFILL: Did you want to respond to that?

DAVID COLE: Well, he is entitled to an attorney if he's being interrogated in custody. That's why they read him his Miranda warnings. At that point he was entitled to an attorney. They claimed that he voluntarily waived that right. If he did so, then the confession is admissible. What I'm suggesting is that that's going to be A... It seems to me that would be a central of the focus. If that's not a legitimate concern, the validity of the confession, then you've essentially got... The defense counsel has simply got to try to humanize him in the hopes that the sentence that he receives will not be the maximum.

GWEN IFILL: Why do these charges, in your opinion, fall short of a death penalty... something that is punishable by the death penalty if these charges are so serious, if what he did is so serious?

ANDREW McBRIDE: I think we have to be careful. This is a criminal complaint. In our criminal system, Mr. Walker has the right to be indicted by a grand jury. At the same time the United States will be using that grand jury to gather more evidence. This is in a sense a placeholder to begin the process. And I think if the United States develops evidence sufficient to charge treason or sufficient to charge that Mr. Walker caused or directly set in motion events that actually caused the death of an identifiable American citizen like CIA Agent Johnny Spann or a U.S. soldier, then they would go ahead and charge the death penalty. But at this point although there's some very shocking details in this affidavit, there's nothing that indicates that Mr. Walker, having adhered to al-Qaida directly caused the death of an American citizen.

GWEN IFILL: Well, that's an interesting point. If you're fighting against the Northern Alliance-- and he admits apparently according to this affidavit that he joined al-Qaida to fight against the Northern Alliance-- and the Northern Alliance is an ally of the United States does that automatically mean that hewas part of a conspiracy to fight against the United States?

DAVID COLE: Well, I think that will be one of the arguments in the case, that he was essentially fighting against the Northern Alliance and the United States came in and joined up with the people that he was fighting against. Does that mean that he has, in fact, engaged actively in a conspiracy to attack Americans?

GWEN IFILL: What do you think?

DAVID COLE: I think it's an open question. I don't think... I think it's an open question, but... And it will be one about which there will be some argument. I think at the end of the day my guess is that if these facts as alleged are true that he will be found guilty of conspiring to kill Americans. He knew that Americans were fighting with the Northern Alliance. He knows that you're shooting against people who include Americans. That's going to be probably sufficient.

ANDREW McBRIDE: Even prior to that, Gwen, on the conspiracy charge, in June this affidavit alleges that in June of 2001 he was in training camps in Afghanistan where he gained the knowledge through al-Qaida members that there were terrorist activities going on in the United States targeted against the United States. Right there the prosecutor could argue his adherence to the conspiracy was complete -- even before taking up arms against the Northern Alliance and the United States troops that when he was in those training camps and he knowingly participated in training knowing that these sleeper operations were going on in the United States, he adhered himself to that conspiracy.

GWEN IFILL: That's interesting. The Attorney General talked about him choosing these different crossroads, choosing to align himself against the United States. How important is it that his intent was to hurt Americans, not just to fight on behalf of the Taliban?

ANDREW McBRIDE: I think that's going to be key. What was mentioned earlier is there's going to be a battle here about whether this was a cult that overcame the will of John Walker or whether John Walker consciously chose at each stage in his development as an al-Qaida member to escalate his involvement. And the affidavit and the Attorney General's comments clearly try and make the case. It seems to be a strong one, that at every step Mr. Walker said I want in for more, I want in for more. Even after September 11 when he knew that the United States had been attacked in an unprovoked manner and U.S. civilians killed he again asked to be part of the operations.

GWEN IFILL: How important is intent, Professor Cole?

DAVID COLE: Well, intent is very important. I think it's important at this point to note that all we have are the government's allegations. He hasn't retained a lawyer or a lawyer that can actually help him. We haven't heard his side of the story. So we don't know what the ultimate facts are. But, yeah, his intent is... I mean, I think the question in people's minds is how did a young American man end up in this place and I'm sure one thing a defense attorney might think is, can we make a showing that, you know, he was sort of caught up in the cult that led him there.

GWEN IFILL: And another question is, how does one get a fair trial when one is accused of betraying one's country in such a high-profile way?

DAVID COLE: Well, that's a very tough question. It's an even tougher question for someone like Zacharias Moussaoui, who is not a U.S. citizen to begin with. At least because Mr. Walker is a U.S. citizen there will be some sympathy. I think there's far less sympathy for the non-citizens and yet we have a right to try people who are alleged to have committed these kinds of crimes against us. We have to simply try through the mechanisms we have of voir dire to ensure that we get a jury that can keep an open mind about it.

ANDREW McBRIDE: I agree with that. I think the jury selection in the Moussaoui case is going to be extremely difficult where you're talking about an individual who is according to the government's evidence the 20th hijacker. And you're talking about trying him in Virginia where one of the planes landed at the Pentagon and picking jurors who literally may have seen the smoke. So I think it's going to be very difficult. Mr. Walker is charged with crimes that by and large occurred outside the United States. And so I think he may be in a different situation. If I were defending Mr. Walker, I think the avenue would be a cult-type defense, that Mr. Walker's will was overborne by these people and that some of his involvement with al-Qaida was really not of his own mind because I think these statements by Mr. Walker will come into evidence in this case and in the Eastern District of Virginia. Let's face it, on the other side these are only allegations but this is also only a preview of what the government has. It may indeed have more evidence.

GWEN IFILL: Andrew McBride and David Cole, thank you very much for joining us.

JIM LEHRER: Still to come on the NewsHour tonight: An Enron update, some auto industry economics, and a foreign correspondence.

UPDATE - FALLOUT

JIM LEHRER: Our Enron updates come from "New York Times" business columnist Gretchen Morgenson. Gretchen Morgenson, welcome.

GRETCHEN MORGENSON: Thank you, Jim.

JIM LEHRER: Today's developments first. Late today, Arthur Andersen fired its lead auditor on the Enron account. What was the reason given?

GRETCHEN MORGENSON: He had apparently called a meeting with the other folks who were on the Enron account and asked for an expedited effort to get rid of documents. Now this was on October 23 according to Andersen, which was shortly after the SEC notified the accounting firm that they wanted information from them.

JIM LEHRER: Now, is this a rare occurrence? Is this a no-no in the auditing business, in the accounting business?

GRETCHEN MORGENSON: Well, it certainly sounds like it. Now Andersen is saying that this was against its policies. We will, of course, hear from the partner himself, I'm sure, but the fact of the matter is it certainly doesn't smell right, doesn't pass the smell test. If the nation's securities regulators want information, why do you then rush to the shredder?

JIM LEHRER: Is there any word on what kinds of documents were actually shredded?

GRETCHEN MORGENSON: There isn't. There is very little detail. But you can only assume that these are documents that are damning in some way. They certainly wouldn't be likely to shred things that look innocent or that back up the accounting that the company did.

JIM LEHRER: All right. Now the other development today was the New York Stock Exchange's decision to delist... Did I get the term right? Is that what it's called?

GRETCHEN MORGENSON: Yes. That's right.

JIM LEHRER: Delist Enron. Why was that done?

GRETCHEN MORGENSON: Well, it really is a moot point. The company is in bankruptcy. These things typically take a while to unravel as far as the New York Stock Exchange is concerned, but the Exchange has certain levels of share... Number of shareholders, revenues, income earned that a company must meet in order to be traded on the Exchange. Obviously Enron no longer meets those standards, andit was only a matter of time after the bankruptcy filing that they would be delisted.

JIM LEHRER: Now didn't another company kind of take over its trading function today? Did that have anything to do with this?

GRETCHEN MORGENSON: No. That was very interesting, though, Jim. UBS, a large financial services firm which was the old Union Bank of Switzerland, agreed to take over Enron's so- called vaunted trading operation for zero amount of cash. So here is this operation that was supposedly so powerful, so profitable and they couldn't get anybody to pay a dime for it.

JIM LEHRER: So UBS, if it, in fact, makes any money, that money goes to... into the bankruptcy court to pay off creditors, right? Is that correct?

GRETCHEN MORGENSON: I believe a portion of it would, yes.

JIM LEHRER: But as a practical matter, does Enron even exist anymore as we sit here tonight?

GRETCHEN MORGENSON: Well, it does. Certainly there are people who are still employed there. I believe that they've only let go maybe 5,000 people. They had 20,000 employees. So as far as those workers are concerned, it still exists. The pipeline, I guess, is in the process of being sold. It is now in the bankruptcy courts, which, as you know, is a long and arduous process.

JIM LEHRER: Now, the other big development was last night. A memo was released by a House Committee. It was a memo written by a vice president of Enron to the Chairman, Kenneth Lay. She said among other things-- I had this in the News Summary but just to refresh everybody's memory-- "I am incredibly nervous that we will implode in a wave of accounting scandals." Now that was an important warning, was it not?

GRETCHEN MORGENSON: It was absolutely a huge red flag, and it apparently was either sent or written in the August period. That's important for a couple of reasons. The company's president, Jeffrey Skilling, left the firm on August 14, claiming to want to spend more time with his family. This normally sends up huge warning signals to investors if an executive at that level just sort of disappears. This memo was either being drafted or had been submitted right around that time. At the same time, Ken Lay, the chairman of the company, was reassuring Wall Street analysts that there was nothing wrong, that Mr. Skilling's departure had nothing to do with any accounting problems, any potential charges to earnings. And so to have this memo now surface that was at the same time that Mr. Lay was reassuring the world at large that everything was fine is certainly damaging.

JIM LEHRER: Damaging legally? Damaging in what way?

GRETCHEN MORGENSON: Well, damaging to his credibility because you have to say, "Why didn't you do something about it?" Now, they did hire a law firm to go and do some due diligence, but there's some question as to whether or not the law firm was told to be as aggressive as it should have been to get to the bottom of the matter. So it just calls into question Mr. Lay's claims to have been ignorant of any matters that were then contributor to the debacle and to the bankruptcy filing.

JIM LEHRER: Now in a more overview way, Gretchen, this document was made public by a House Committee, and they've got all kinds of documents. Is this what we're in for, these kinds of things are happening, the storm is going to be built even more so than it already has?

GRETCHEN MORGENSON: I think so. Unfortunately, this story has a lot of legs, Jim, and I think the reason why it's got staying power is because there's a sense among people in my profession who follow these companies that there are other situations out there where there is questionable accounting being approved by pliant accounting firms that have misled investors for a very long time. And with that suspicion sort of lurking or hanging over our heads, every sort of new wrinkle in the Enron story is going to have broader implications.

JIM LEHRER: Because the numbers are the underpinning of the confidence that must be there for people to participate in markets right?

GRETCHEN MORGENSON: Well, and as you know, we have had many, many newcomers to the stock markets in the 1990s that never were invested in stocks before. So people with their 401(k)s, their retirement savings in stocks, it is crucial that we have integrity in the accounting profession and in the stock market in general. So that is why this story has legs.

JIM LEHRER: Are we very close yet to a simple, real explanation as to how a company worth $100 billion could fall so far so quickly?

GRETCHEN MORGENSON: We are not. But we do know that the accounting for their business was almost certainly, if not outright fraudulent, misled everyone to the degree that they were a profitable company, to the degree that the revenues even were $100 billion. This is now all in question. And so when you realize that maybe they really weren't making $101 billion last year, then you can see that it could really crater quickly. And when you add on to it the amount of debt that they had amassed recently, that adds into the mix.

JIM LEHRER: And then, as you say, people now are going to say, "wait a minute, there are other companies out there that say they're worth $50 billion or $1 billion and maybe they're not."

GRETCHEN MORGENSON: Exactly.

JIM LEHRER: The dominos, the people are worried about the dominos.

GRETCHEN MORGENSON: That's right. Unfortunately, I think they have reason to be.

JIM LEHRER: On that wonderful, upbeat note, we'll leave it. Gretchen, thank you very much.

GRETCHEN MORGENSON: You're welcome.

FOCUS - THE ROAD AHEAD

JIM LEHRER: And now the newest from the auto industry. Ray Suarez was in Detroit today. Here is his report.

RAY SUAREZ: There's still a lot of razzle-dazzle at this year's North American auto show. Plenty of chrome on the fenders and big engines under the hood, like in the Ford GT-40 racecar, or Chevrolet's concept car-- the Belair convertible. And there are garagefuls of eye- catching trucks and sport- utility vehicles with eye- popping price tags to match.

MAN: Okay, this your car of the future, folks.

RAY SUAREZ: There's also optimism about new car technologies, like the hydrogen fuel cell in General Motor's autonomy. Last week, the federal government announced it was abandoning a program to build more fuel-efficient gasoline- powered cars, replacing it with a long-range plan to build more cars that run on fuel cells. Fuel cells produce electricity through a chemical reaction that combines hydrogen with oxygen. When operating, fuel cells are silent and emit only water vapor. But behind all of the normal hoopla and hype, there's also a sense of nerves in Detroit; they're worried that 2002 could be one of the toughest years in a decade for U.S. makers. Consumers continue to flock to the less flashy but more affordable foreign-made cars. Last year, Japanese vehicles accounted for nearly 27% of the U.S. auto market. And although American automakers had their second best year ever in 2001 in terms of numbers of vehicles sold-- some 17.2 million-those sales records came at a price.

SPOKESMAN: To help America move forward with interest-free financing on all new Fords.

RAYSUAREZ: In order to attract customers, the big companies offered 0% financing. Such low interest loans and car leasing programs lure buyers, but in bad economic times, customers more often default on their loans, which can cost automakers dearly. Ford was particularly hard-hit in 2001. It lost an estimated $2 billion, due mainly to the cost of replacing 13 million Firestone tires it considered unsafe for trucks. Last week, Ford Motors announced it was eliminating 35,000 jobs worldwide, closing five plants in North America, and eliminating four vehicle models to cut costs. Ford executives said the changes are painful, but necessary. Jim Padilla heads North American operations for Ford.

RAY SUAREZ: Explain what forces were building up inside ford that led you to take the measures you took last week.

JIM PADILLA, Ford Motor Company: I think the market conditions were changing very rapidly, and the situation around September 11 accelerated that extensively. So the market was already compressing to some degree and after September 11 frankly with the incentives that were put into the marketplace, margins were brought down to almost zero across all manufacturers. The consequence of this has been that while we're selling a lot of product today, we're not selling it at any profit. And some might call it profitless prosperity.

RAY SUAREZ: So Ford cut back on capacity some. Is that going to have to happen do you feel in other places in the industry? Are there just too many companies able to make too many cars right now?

JIM PADILLA: Well, when you look at the marketplace and the compression there, the reduction of almost 15 to 20 percent in terms of sales volume, combined with the fact that in the industry in North America there's about 22 million units of capacity, and we're only going to be selling somewhere in the range of 15.5 to 16.5 million units over the next several years per year. So there's five or six million of excess capacity out there. At Ford we know that we own some of that, and we are taking steps to reduce that. And others, I think, will have to do the same.

RAY SUAREZ: Will the North American car and truck industry just simply need fewer people to build vehicles down the road as plants are modernized and as old plants are taken off stream?

JIM PADILLA: I expect that there will be some efficiency over time but make no mistake, the heart and soul of any automobile company, and particularly Ford Motor Company, is the strength of our people. So we will always rely on their intelligence, on their support, on their drive to deliver great product with great quality. So we will have to make sure that we have people with the right skill sets, not only in our engineering areas but in our factories because this is more and more becoming a knowledge-based type of arena where our people have to own the tools to get the job done and respond to our customers.

RAY SUAREZ: How do you manage a force reduction like that working with organized labor?

JIM PADILLA: It is a challenge. We have good union contracts with the United Auto Workers, with the Canadian Auto Workers; and we will live to the letter of our contract. We have spent considerable time talking with the union leaders and going to the plants where the people are affected to make sure they understand what are the business issues that we're facing and to let them know how we will work with them towards the future as we work to provide them with alternative opportunities. We have guaranteed employment arrangements where we will provide for their economic security over a period of time, a considerable period of time, as we work our way through these issues.

RAY SUAREZ: The Chrysler Group also estimates it lost nearly $2.5 billion last year in day-to-day operations and spent another $2.8 billion on retirement incentives and plant closings. Even though G.M., the world's largest auto maker, is expected to show a slight profit from last year, it had to reduce its white collar work force by 10% and scale back production for 2002. David Cole is president of the Center for Automotive Research in Ann Arbor.

RAY SUAREZ: Well, Professor, we're here in Detroit. Do we find ourselves at the annual conclave of what's really an industry in crisis?

DAVID COLE, Center for Automotive Research: There's no question about it. I think this industry at this point, as I would look at it, is an industry that has a broken business model. And by that I mean it's an industry that has been producing last year at near record volume, second highest sales volume on record, and it's just not profitable. Now it doesn't mean that every company is broken, but when you look throughout the industry structure, manufacturers and suppliers down through the supply tier, what you have in an industry is that it is broken and it has to be fixed. And as we look forward, in order to attract the kind of an investment that is necessary to sustain this industry, we have to see profitability, not just in manufacturers but at suppliers as well. I think we're looking at a future that's bright but probably not everybody is going to be there. It still has to go through a consolidation or rationalization we're probably right at the cusp of that right now. I think we're going to see significant things happen over the next six months or a year in this regard.

RAY SUAREZ: Help me understand the roots of this crisis a little bit because the industry has essentially done what we ask industries to do. They're reduced the number of worker hours that go into it, kept a lid on prices, upped quality and, what? Got in trouble for that?

DAVID COLE: Well, to begin with, if you look back ten years ago it cost, that is, for the average person to buy a car, it cost about 30 weeks of pay. That's dropped today to the low 20s. What has happened is the industry has done a fantastic job of delivering more value in their products. They're more affordable. There's more features. They're safer. They're more durable but because of the competition, what has happened is those savings have essentially have all been passed to the consumer and the industry hasn't been able to retain much for themselves. It's a fiendishly competitive industry. One of things that characterizes us is this idea of the broken business model. Now if you look at what's happening here in Detroit, there are really three stories in my view. One is the story related to the new cars and the concepts and the things that you see on the floor. There's another story that underlies that, and we, of course, saw that highlighted last week with the announcement that Ford is going through a massive restructuring to try to become profitable again. They were there just a couple of years ago in this incredible change occurred in a very short period of time and the money disappeared. They've really got to get that back. That's what their new leadership is focused on so that broken business model of this industry is the second story. The third one is really one that's a little further out. I think we saw that emerge when G.M. rolled out that fuel cell platform, the autonomy, which in a sensory defines potentially the architecture of future vehicles. So we have concurrently, you know, hot new products, a broken industry but a future that may be very different in many ways from what we thought it would be in terms of how we might think about cars and trucks of the future.

RAY SUAREZ: Are there some players who are currently here on the floor showing their wares that simply won't be here in 2010 or 2015, won't be in the game?

DAVID COLE: Well, it's hard to say. I would say by 2010 or 2015 the game is going to be pretty much over. You know, clearly there are some companies that are very strong. It doesn't necessarily mean that they have to be large companies. Toyota is large and strong. Honda and the BMW are smaller companies that are strong. G.M. is coming on very strong and is much better shape than it was just two or three years ago. Then we have a lot of companies that I'm confident are going to be here but they have some immediate struggles, immediate challenges. People like Ford. But when you look at the rest of the companies in the world, what you have to say there's really too many in the game and no volunteers to step aside. So I think what we're looking at is a pretty bloody battle. Now there is consolidation. You have groups that are forming. Ford, for example, bought Jaguar and bought Volvo and Range Rover. G.M. has alliances with people like Suzuki and Fuji that makes the Subaru and Fiat and Isuzu. So the groups are beginning to form. What they're going to look like we're not quite sure yet, but it looks like we may distill down to four or five or six major groups of manufacturers in the world, sort of major teams but what underlies this is something that we often don't think about as a supply base, that is the suppliers that make the parts and the systems for these vehicles, there are more than three times the number of people that work in suppliers than work in those auto manufacturing plants. And the suppliers to this industry are going through the same kind of revolution, kind of hidden from view, but you see companies that were icons of federal mogul, for example, many companies that were part of this industry that are gone have been consolidated, this is an industry that is really going through a dramatic restructuring of its entire business model, and it's very painful.

RAY SUAREZ: Cole says the vicious competition in a crowded field of manufacturers will force tough changes in the car business but it's a great time to be buying a car.

FOCUS - FOREIGN CORRESPONDENCE

JIM LEHRER: Finally tonight, a foreign correspondence, our conversations with reporters working overseas for American news organizations. Terence Smith has tonight's.

TERENCE SMITH: Our foreign correspondent is David Filipov, Moscow bureau chief of the "Boston Globe." From October to Christmas Day, he covered the war in Afghanistan.

David, welcome. Welcome home.

DAVID FILIPOV: Thanks for having me.

TERENCE SMITH: Do you come out of this experience optimistic or pessimistic about the prospects for any kind of stability in Afghanistan?

DAVID FILIPOV: Well, obviously it's a positive thing that the Taliban is gone -- a regime with an atrocious record on most issues. The situation in Afghanistan is very unstable because it's that kind of country. I mean, the Taliban is gone, but there are warlords who have influence because they have a lot of men in their arms, the government doesn't have a lot of support outside of Kabul and outside of the international peacekeepers. So a lot remains to be decided.

TERENCE SMITH: Compare this story, if you will, to others that you've covered. I know that you've covered both wars in Chechnya, for example.

DAVID FILIPOV: Well, Afghanistan is a lot bigger, and it's a country that's been at war for so long. You go through the countryside and there are tanks and bombed- out villages and you say, "Is that recent?" "No, no, that was 20 years ago." It's really hard to comprehend just how much damage has been done and how much constant warfare is in the psyche of everybody there.

TERENCE SMITH: The pictures we get back here look like an almost pre-industrial society. I mean, is it that bad?

DAVID FILIPOV: 13th century with modern weapons and soviet-made jeeps. That's what it looks like in many parts of Northern Afghanistan. It seems like technology passes by except for the Kalashnikov rifle and the rocket launchers.

TERENCE SMITH: What were the greatest problems for you as a journalist? Was it moving around? You wrote at one point about hiring security guards.

DAVID FILIPOV: We went with security guards for a while to try to get some sort of sense of safety, have somebody with a machine gun in the car traveling. But at one point one of those security guards we hired from General Dostum's feared militia, we hired him and 20 miles out of town he turned to me and said, "Well, what do I do if the bandits steal my rifle from me?" I said, "What do you mean?" He said, "Well, what guarantees can you give me?" "Well, the only guarantee I can give you is we'll probably be dead by then." At this point he curled up in the fetal position and fell asleep at my shoulder and stayed like that for the rest of the drive. We ended up calling him the "insecurity guard." So after that, we didn't really hire too many security guards.

TERENCE SMITH: Yeah. How could you... Was it difficult getting information, deciding whom to trust? How to sort out what were no doubt conflicting accounts?

DAVID FILIPOV: You know as far as our own personal security as well as figuring out where to go, where to spend the night, I decided that Northern Alliance commanders, since U.S. planes were bombing the Northern Alliance enemy, would be the safest place to go and also the best source of information and the most secure place. So after a while I don't know if it was necessarily the smartest thing to do, but I would sort of drive up to a new town, find the biggest house, assume that's where the commander lived or somebody who knew the commander, and say, "Hi, I am an American journalist. Can you put me up for the night?" Generally people were glad to see me, although I imagine that kind of thing will wane, but at the moment, people were very happy to see that the journalists of the country whose planes were helping... Providing them air support show up at their door.

TERENCE SMITH: At one point, I gather you had to make your way in by horseback, which I gather was not something you were very used to.

DAVID FILIPOV: No. Part of my training for the "Boston Globe" did not involve riding lessons. So there was one river that you had to fjord on horseback, and of course, I had never ridden in my life and the horses didn't have saddles or stirrups. So they put you on a horse and say these words in Uzbek and off you go. And I kept thinking that I'm going to fall in the river and drown and this is going to end really stupidly. But ultimately I got across and everything was fine.

TERENCE SMITH: You know, there is discussion these days about the question of civilian casualties as a result of the U.S. Bombing. In fact, a professor at the University of New Hampshire has made a study and a survey of it. He's come up with a number that 3,700... A minimum of 3,700 people were killed accidentally as a result of U.S. bombing. Having been there, does that sound credible to you?

DAVID FILIPOV: Well, it's really hard to come up with an exact number from the ground, because to do that you would have had to do the empirical work. You know, go to each town, ask people. However, that number does not seem to be totally outlandish. It doesn't seem to be very exaggerated to me because with the kind of heavy bombardment you had-- although it was targeted, although there was an effort to minimize civilian casualties-- a lot of bombings took place in areas where there were civilians. It's not out of the question that that could have taken place. One of the towns that I visited had a large number of cluster bombs that had not exploded when the Taliban were there. They were still lying there when the people came back. As a result, there were casualties, innocent civilians that happened to see them on the ground and pick them up. The after-effects of that kind of bombardment are usually felt for a long time and as a result people die inadvertently.

TERENCE SMITH: You had an article about a village north of Kabul where dozens of civilians were killed by U.S. bombing a month after the Taliban -

DAVID FILIPOV: Right.

TERENCE SMITH: -- had left the town.

DAVID FILIPOV: Well, the U.S. has denied that this raid ever took place, but everybody in this town says they saw planes roar in and start bombing. There was a kind of inter- factional violence that everyone is afraid will take place in Afghanistan. Two factions were fighting it out, and the planes came in and bombed and then the fighting stopped. But as a result, about 50 people died, half of them combatants and the rest of them civilians.

TERENCE SMITH: And you went there yourself?

DAVID FILIPOV: I went there after the bombing took place and interviewed the people.

TERENCE SMITH: And you believe bombing did take place?

DAVID FILIPOV: Well, I mean, when an aerial bomb falls, it looks a certain way. When enough people say it was a bombing, then I don't know anyone else has... who has planes. Of course I could only say "reportedly," "allegedly," but it looks about as credible as it gets.

TERENCE SMITH: Reporting this story places a special burden on you because your father, Alexander Filipov, died aboard American Airlines Flight 11, flew into the World Trade Center. What was that like for you and how difficult was it to separate out the personal feelings from the professional?

DAVID FILIPOV: Well, it wasn't always easy. Afghanistan is a separate and different story from the World Trade Center, although the events that resulted in U.S. being there started, of course, in New York and Virginia. But there were so many things going on, and it's a country where so many people have been touched by the wars that have been going on there since the late '70s that it was hard to... It was... I don't know, maybe it made me a little bit... It made it a little easier for me to empathize with so many people who had been going through this constant deprivation, loss for all these years.

TERENCE SMITH: Did you find yourself cheering inwardly when the Taliban and al-Qaida fighters were routed? I mean was that any sort of satisfaction to you?

DAVID FILIPOV: You know, I mean, I'm a professional reporter. I mean, I write it. I write stories about this kind of thing. I really find it hard to cheer any time during a war. Is it good that the Taliban is gone? Yeah, it didn't look like they were doing much good for anybody. Did I cheer when the... In Tora Bora when the al-Qaida fighters were being dragged? Not really. I mean, it doesn't really provide me a whole lot of satisfaction. It's a separate issue, although it follows from September 11. Now I was at the war and I was reporting on it and I had to keep my mind on my business. When I'd be alone by myself, yeah, I'd often think about it, but I don't think it really affected me while I was working hopefully.

TERENCE SMITH: You're going back -- back to Moscow I know soon -

DAVID FILIPOV: Right.

TERENCE SMITH: -- and back to Afghanistan?

DAVID FILIPOV: Well, it looks like it. I mean, it's part of my beat. I've been there now, so it's what I do. When there's something going on in that part of the world, I cover it along with all the other "Globe" reporters. I'm not special in that regard.

TERENCE SMITH: How do you feel about that -- about going back there? Something you dread -- something you relish?

DAVID FILIPOV: It's a great story. They're wonderful people, it's a very beautiful country and it's often very frightening. So those all go together. I don't particularly hope... Well, I don't plan to buy real estate there, but I'll continue covering it as long as it's a story. That's what I do. It's my job.

TERENCE SMITH: David Filipov, thank you very much.

DAVID FILIPOV: Thank you.

RECAP

JIM LEHRER: Again, the major developments of the day. An American who fought with the Taliban will be tried in U.S. civilian court. The Justice Department announced John Walker will be charged with crimes related to terrorism. In Afghanistan, U.S. Marines destroyed a hidden tunnel complex near their airport base at Kandahar. And the accounting firm for Enron fired the lead auditor of the energy company's finances. A clarification before we go: During a discussion here last night, I did not make it clear when Democratic Senator Joe Lieberman received a $2,000 political contribution from Enron. It was in 1994. We'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.