(FORTUNE Magazine) – MANAGING/COVER STORY 40 JACK WELCH'S NIGHTMARE ON WALL STREET The management fiasco at Kidder Peabody represents an ugly blot on the record of GE's CEO. It is a brutal lesson in how not to run a business. by Terence P. Pare

42 WAS CARPENTER BROKERING WITHOUT A LICENSE?

46 A LITANY OF SINS

AUTOS 52 THE AUTO INDUSTRY MEETS THE NEW ECONOMY Everything from designing cars to building factories will get cheaper as auto companies quit making their own parts and rely more on independent suppliers. by Alex Taylor III

60 AUTO SUPPLIER WITH AN ATTITUDE

MANAGING/FORTUNE BOOK EXCERPT 64 SEEING THE FUTURE FIRST Most managers spend far too little energy forming a long-term view of their industry. Yet until they reconceive their corporation and the industries in which it competes, they're doomed to be rule takers, not rule makers. by Gary Hamel and C.K. Prahalad

HEALTH 74 THE NEW FIGHT AGAINST KILLER MICROBES Bacteria have developed scary resistance to antibiotics, spawning deadly infections that doctors sometimes can't treat. The hunt is on for new wonder drugs. by Gene Bylinsky

MANAGING 86 THE TROUBLE WITH TEAMS They're a major innovation in organizing work, and everybody loves them -- in theory. In practice it's another story. Here's how smart companies use them. by Brian Dumaine

MONEY & MARKETS 94 THE REVOLUTION IN REAL ESTATE Companies are attacking property costs with a vengeance. The result: fewer offices, more big workspaces, and lots of commercial space for sale. Is it time to give up your office? by Richard D. Hylton

ASIA 100 INDIA GETS MOVING % Problems remain, but foreign investment is welcome, and Western companies are finding plenty of opportunity. by Rahul Jacob

102 INDIA OR CHINA: HOW TO CHOOSE

DEPARTMENTS 1 EDITOR'S DESK 8 INDEX 14 NEWS/TRENDS Beyond the Beltway (health care reform that makes a difference), Japan logs on to the Internet, a fissure in the glass ceiling, gross is good, and more.

23 FORTUNE FORECAST Business confidence slips a bit but remains high overall. by Vivian Brownstein

Economic Intelligence: Detroit's dilemma, another capital-spending boom, where to find fast growth.

DEPARTMENTS 29 PERSONAL INVESTING Why powerful earnings gains should propel cyclical stocks.

by Shelley Neumeier

Also: The return of the GIC, buy Australia, and Portfolio Talk with Robert E. Killen of the Berwyn Income fund in Berwyn, Pennsylvania.

38 LETTERS TO FORTUNE

107 PRODUCTS TO WATCH Improved sound quality for videoconferences from PictureTel, Wild Planet Toys' updated scouting equipment, and more. by Wilton Woods

109 TECHNOLOGY TO WATCH New high-tech packaging is thriftier and niftier: It looks snazzy, improves the products it protects, and cuts down on trash. by Alison L. Sprout

111 BOOKS & IDEAS Computers, companies, and the networks that link them evolve like nature itself -- free of any central command -- according to a new book from the editor of the techno-rag Wired. by Rick Tetzeli

113 KEEPING UP Strange days on Wall Street (ask Mr. Statistics), where you can fly for $1,000, the murder equation, and other matters. by Daniel Seligman

117 HOW'S BUSINESS? Want to know why jobs and investment are fleeing the U.S.? Just ask Ken Derr, the CEO of Chevron Oil. by Marshall Loeb

120 ENTREPRENEURS Banks didn't get it when Michael Malone outlined his plan to sell recorded tapes like a book club. They should have paid attention. by Justin Martin

Cover and photo at left: The Kidder Peabody nightmare proved a wake-up call for General Electric CEO Jack Welch, photographed by Joe McNally.