A form of asbestos once used to make Kent cigarette filters has caused a high percentage of cancer deaths among a group of workers exposed to it more than 30 years ago, researchers reported. The asbestos fiber, crocidolite, is unusually resilient once it enters the lungs, with even brief exposures to it causing symptoms that show up decades later, researchers said.Lorillard Inc., the unit of New York-based Loews Corp. that makes Kent cigarettes, stopped using crocidolite in its Micronite cigarette filters in 1956. Although preliminary findings were reported more than a year ago, the latest results appear in today's New England Journal of Medicine, a forum likely to bring new attention to the problem. A Lorillard spokewoman said, "This is an old story.We're talking about years ago before anyone heard of asbestos having any questionable properties.There is no asbestos in our products now." Neither Lorillard nor the researchers who studied the workers were aware of any research on smokers of the Kent cigarettes. "We have no useful information on whether users are at risk," said James A. Talcott of Boston's Dana-Farber Cancer Institute.Dr. Talcott led a team of researchers from the National Cancer Institute and the medical schools of Harvard University and Boston University. The Lorillard spokeswoman said asbestos was used in "very modest amounts" in making paper for the filters in the early 1950s and replaced with a different type of filter in 1956.From 1953 to 1955, 9.8 billion Kent cigarettes with the filters were sold, the company said. Among 33 men who worked closely with the substance, 28 have died -- more than three times the expected number.Four of the five surviving workers have asbestos-related diseases, including three with recently diagnosed cancer.The total of 18 deaths from malignant mesothelioma, lung cancer and asbestosis was far higher than expected, the researchers said. "The morbidity rate is a striking finding among those of us who study asbestos-related diseases," said Dr. Talcott. The percentage of lung cancer deaths among the workers at the West Groton, Mass., paper factory appears to be the highest for any asbestos workers studied in Western industrialized countries, he said.The plant, which is owned by Hollingsworth & Vose Co., was under contract with Lorillard to make the cigarette filters. The finding probably will support those who argue that the U.S. should regulate the class of asbestos including crocidolite more stringently than the common kind of asbestos, chrysotile, found in most schools and other buildings, Dr. Talcott said. The U.S. is one of the few industrialized nations that doesn't have a higher standard of regulation for the smooth, needle-like fibers such as crocidolite that are classified as amphobiles, according to Brooke T. Mossman, a professor of pathlogy at the University of Vermont College of Medicine.More common chrysotile fibers are curly and are more easily rejected by the body, Dr. Mossman explained. In July, the Environmental Protection Agency imposed a gradual ban on virtually all uses of asbestos.By 1997, almost all remaining uses of cancer-causing asbestos will be outlawed. About 160 workers at a factory that made paper for the Kent filters were exposed to asbestos in the 1950s.Areas of the factory were particularly dusty where the crocidolite was used.Workers dumped large burlap sacks of the imported material into a huge bin, poured in cotton and acetate fibers and mechanically mixed the dry fibers in a process used to make filters.Workers described "clouds of blue dust" that hung over parts of the factory, even though exhaust fans ventilated the area. "There's no question that some of those workers and managers contracted asbestos-related diseases," said Darrell Phillips, vice president of human resources for Hollingsworth & Vose. "But you have to recognize that these events took place 35 years ago.It has no bearing on our work force today."
When it's time for their biannual powwow, the nation's manufacturing titans typically jet off to the sunny confines of resort towns like Boca Raton and Hot Springs. Not this year. The National Association of Manufacturers settled on the Hoosier capital of Indianapolis for its fall board meeting.And the city decided to treat its guests more like royalty or rock stars than factory owners.The idea, of course: to prove to 125 corporate decision makers that the buckle on the Rust Belt isn't so rusty after all, that it's a good place for a company to expand. On the receiving end of the message were officials from giants like Du Pont and Maytag, along with lesser knowns like Trojan Steel and the Valley Queen Cheese Factory. For starters, the executives joined Mayor William H. Hudnut III for an evening of the Indianapolis Symphony Orchestra and a guest pianist-comedian Victor Borge.Champagne and dessert followed. The next morning, with a police escort, busloads of executives and their wives raced to the Indianapolis Motor Speedway, unimpeded by traffic or red lights.The governor couldn't make it, so the lieutenant governor welcomed the special guests.A buffet breakfast was held in the museum, where food and drinks are banned to everyday visitors.Then, in the guests' honor, the speedway hauled out four drivers, crews and even the official Indianapolis 500 announcer for a 10-lap exhibition race. After the race, Fortune 500 executives drooled like schoolboys over the cars and drivers.No dummies, the drivers pointed out they still had space on their machines for another sponsor's name or two. Back downtown, the execs squeezed in a few meetings at the hotel before boarding the buses again.This time, it was for dinner and dancing -- a block away. Under the stars and moons of the renovated Indiana Roof ballroom, nine of the hottest chefs in town fed them Indiana duckling mousseline, lobster consomme, veal mignon and chocolate terrine with a raspberry sauce.Knowing a tasty -- and free -- meal when they eat one, the executives gave the chefs a standing ovation. More than a few CEOs say the red-carpet treatment tempts them to return to a heartland city for future meetings.But for now, they're looking forward to their winter meeting -- Boca in February.
Newsweek, trying to keep pace with rival Time magazine, announced new advertising rates for 1990 and said it will introduce a new incentive plan for advertisers. The new ad plan from Newsweek, a unit of the Washington Post Co., is the second incentive plan the magazine has offered advertisers in three years.Plans that give advertisers discounts for maintaining or increasing ad spending have become permanent fixtures at the news weeklies and underscore the fierce competition between Newsweek, Time Warner Inc. 's Time magazine, and Mortimer B. Zuckerman's U.S. News & World Report. Alan Spoon, recently named Newsweek president, said Newsweek's ad rates would increase 5% in January.A full, four-color page in Newsweek will cost $100,980.In mid-October, Time magazine lowered its guaranteed circulation rate base for 1990 while not increasing ad page rates; with a lower circulation base, Time's ad rate will be effectively 7.5% higher per subscriber; a full page in Time costs about $120,000.U.S. News has yet to announce its 1990 ad rates. Newsweek said it will introduce the Circulation Credit Plan, which awards space credits to advertisers on "renewal advertising." The magazine will reward with "page bonuses" advertisers who in 1990 meet or exceed their 1989 spending, as long as they spent $325,000 in 1989 and $340,000 in 1990. Mr. Spoon said the plan is not an attempt to shore up a decline in ad pages in the first nine months of 1989; Newsweek's ad pages totaled 1,620, a drop of 3.2% from last year, according to Publishers Information Bureau. "What matters is what advertisers are paying per page, and in that department we are doing fine this fall," said Mr. Spoon. Both Newsweek and U.S. News have been gaining circulation in recent years without heavy use of electronic giveaways to subscribers, such as telephones or watches.However, none of the big three weeklies recorded circulation gains recently.According to Audit Bureau of Circulations, Time, the largest newsweekly, had average circulation of 4,393,237, a decrease of 7.3%.Newsweek's circulation for the first six months of 1989 was 3,288,453, flat from the same period last year.U.S. News' circulation in the same time was 2,303,328, down 2.6%.
New England Electric System bowed out of the bidding for Public Service Co. of New Hampshire, saying that the risks were too high and the potential payoff too far in the future to justify a higher offer. The move leaves United Illuminating Co. and Northeast Utilities as the remaining outside bidders for PS of New Hampshire, which also has proposed an internal reorganization plan in Chapter 11 bankruptcy proceedings under which it would remain an independent company. New England Electric, based in Westborough, Mass., had offered $2 billion to acquire PS of New Hampshire, well below the $2.29 billion value United Illuminating places on its bid and the $2.25 billion Northeast says its bid is worth.United Illuminating is based in New Haven, Conn., and Northeast is based in Hartford, Conn.PS of New Hampshire, Manchester, N.H., values its internal reorganization plan at about $2.2 billion. John Rowe, president and chief executive officer of New England Electric, said the company's return on equity could suffer if it made a higher bid and its forecasts related to PS of New Hampshire -- such as growth in electricity demand and improved operating efficiencies -- didn't come true. "When we evaluated raising our bid, the risks seemed substantial and persistent over the next five years, and the rewards seemed a long way out.That got hard to take," he added. Mr. Rowe also noted that political concerns also worried New England Electric.No matter who owns PS of New Hampshire, after it emerges from bankruptcy proceedings its rates will be among the highest in the nation, he said. "That attracts attention . . . it was just another one of the risk factors" that led to the company's decision to withdraw from the bidding, he added. Wilbur Ross Jr. of Rothschild Inc., the financial adviser to the troubled company's equity holders, said the withdrawal of New England Electric might speed up the reorganization process.The fact that New England proposed lower rate increases -- 4.8% over seven years against around 5.5% boosts proposed by the other two outside bidders -- complicated negotiations with state officials, Mr. Ross asserted. "Now the field is less cluttered," he added. Separately, the Federal Energy Regulatory Commission turned down for now a request by Northeast seeking approval of its possible purchase of PS of New Hampshire.Northeast said it would refile its request and still hopes for an expedited review by the FERC so that it could complete the purchase by next summer if its bid is the one approved by the bankruptcy court. PS of New Hampshire shares closed yesterday at $3.75, off 25 cents, in New York Stock Exchange composite trading.
Commonwealth Edison Co. was ordered to refund about $250 million to its current and former ratepayers for illegal rates collected for cost overruns on a nuclear power plant. The refund was about $55 million more than previously ordered by the Illinois Commerce Commission and trade groups said it may be the largest ever required of a state or local utility. State court Judge Richard Curry ordered Edison to make average refunds of about $45 to $50 each to Edison customers who have received electric service since April 1986, including about two million customers who have moved during that period.Judge Curry ordered the refunds to begin Feb. 1 and said that he wouldn't entertain any appeals or other attempts to block his order by Commonwealth Edison. "The refund pool . . . may not be held hostage through another round of appeals," Judge Curry said. Commonwealth Edison said it is already appealing the underlying commission order and is considering appealing Judge Curry's order. The exact amount of the refund will be determined next year based on actual collections made until Dec. 31 of this year.Commonwealth Edison said the ruling could force it to slash its 1989 earnings by $1.55 a share.For 1988, Commonwealth Edison reported earnings of $737.5 million, or $3.01 a share. A Commonwealth Edison spokesman said that tracking down the two million customers whose addresses have changed during the past 3 1/2 years would be "an administrative nightmare." In New York Stock Exchange composite trading yesterday, Commonwealth Edison closed at $38.375, down 12.5 cents. The $2.5 billion Byron 1 plant near Rockford, Ill., was completed in 1985.In a disputed 1985 ruling, the Commerce Commission said Commonwealth Edison could raise its electricity rates by $49 million to pay for the plant.But state courts upheld a challenge by consumer groups to the commission's rate increase and found the rates illegal.The Illinois Supreme Court ordered the commission to audit Commonwealth Edison's construction expenses and refund any unreasonable expenses.The utility has been collecting for the plant's construction cost from its 3.1 million customers subject to a refund since 1986. In August, the commission ruled that between $190 million and $195 million of the plant's construction cost was unreasonable and should be refunded, plus interest.In his ruling, Judge Curry added an additional $55 million to the commission's calculations.Last month, Judge Curry set the interest rate on the refund at 9%. Commonwealth Edison now faces an additional court-ordered refund on its summer/winter rate differential collections that the Illinois Appellate Court has estimated at $140 million.And consumer groups hope that Judge Curry's Byron 1 order may set a precedent for a second nuclear rate case involving Commonwealth Edison's Braidwood 2 plant.Commonwealth Edison is seeking about $245 million in rate increases to pay for Braidwood 2.The commission is expected to rule on the Braidwood 2 case by year end. Last year Commonwealth Edison had to refund $72.7 million for poor performance of its LaSalle I nuclear plant.
The survival of spinoff Cray Computer Corp. as a fledgling in the supercomputer business appears to depend heavily on the creativity -- and longevity -- of its chairman and chief designer, Seymour Cray. Not only is development of the new company's initial machine tied directly to Mr. Cray, so is its balance sheet.Documents filed with the Securities and Exchange Commission on the pending spinoff disclosed that Cray Research Inc. will withdraw the almost $100 million in financing it is providing the new firm if Mr. Cray leaves or if the product-design project he heads is scrapped. The documents also said that although the 64-year-old Mr. Cray has been working on the project for more than six years, the Cray-3 machine is at least another year away from a fully operational prototype.Moreover, there have been no orders for the Cray-3 so far, though the company says it is talking with several prospects. While many of the risks were anticipated when Minneapolis-based Cray Research first announced the spinoff in May, the strings it attached to the financing hadn't been made public until yesterday. "We didn't have much of a choice," Cray Computer's chief financial officer, Gregory Barnum, said in an interview. "The theory is that Seymour is the chief designer of the Cray-3, and without him it could not be completed.Cray Research did not want to fund a project that did not include Seymour." The documents also said that Cray Computer anticipates needing perhaps another $120 million in financing beginning next September.But Mr. Barnum called that "a worst-case" scenario. The filing on the details of the spinoff caused Cray Research stock to jump $2.875 yesterday to close at $38 in New York Stock Exchange composite trading. Analysts noted yesterday that Cray Research's decision to link its $98.3 million promissory note to Mr. Cray's presence will complicate a valuation of the new company. "It has to be considered as an additional risk for the investor," said Gary P. Smaby of Smaby Group Inc., Minneapolis. "Cray Computer will be a concept stock," he said. "You either believe Seymour can do it again or you don't." Besides the designer's age, other risk factors for Mr. Cray's new company include the Cray-3's tricky, unproven chip technology.The SEC documents describe those chips, which are made of gallium arsenide, as being so fragile and minute they will require special robotic handling equipment.In addition, the Cray-3 will contain 16 processors -- twice as many as the largest current supercomputer. Cray Computer also will face intense competition, not only from Cray Research, which has about 60% of the world-wide supercomputer market and which is expected to roll out the C-90 machine, a direct competitor with the Cray-3, in 1991.The spinoff also will compete with International Business Machines Corp. and Japan's Big Three -- Hitachi Ltd., NEC Corp. and Fujitsu Ltd. The new company said it believes there are fewer than 100 potential customers for supercomputers priced between $15 million and $30 million -- presumably the Cray-3 price range. Under terms of the spinoff, Cray Research stockholders are to receive one Cray Computer share for every two Cray Research shares they own in a distribution expected to occur in about two weeks.No price for the new shares has been set.Instead, the companies will leave it up to the marketplace to decide.Cray Computer has applied to trade on Nasdaq. Analysts calculate Cray Computer's initial book value at about $4.75 a share.Along with the note, Cray Research is transferring about $53 million in assets, primarily those related to the Cray-3 development, which has been a drain on Cray Research's earnings. Pro-forma balance sheets clearly show why Cray Research favored the spinoff.Without the Cray-3 research and development expenses, the company would have been able to report a profit of $19.3 million for the first half of 1989 rather than the $5.9 million it posted.On the other hand, had it existed then, Cray Computer would have incurred a $20.5 million loss. Mr. Cray, who couldn't be reached for comment, will work for the new Colorado Springs, Colo., company as an independent contractor -- the arrangement he had with Cray Research.Regarded as the father of the supercomputer, Mr. Cray was paid $600,000 at Cray Research last year.At Cray Computer, he will be paid $240,000. Besides Messrs.Cray and Barnum, other senior management at the company includes Neil Davenport, 47, president and chief executive officer; Joseph M. Blanchard, 37, vice president, engineering; Malcolm A. Hammerton, 40, vice president, software; and Douglas R. Wheeland, 45, vice president, hardware.All came from Cray Research. Cray Computer, which currently employs 241 people, said it expects a work force of 450 by the end of 1990.
The U.S., claiming some success in its trade diplomacy, removed South Korea, Taiwan and Saudi Arabia from a list of countries it is closely watching for allegedly failing to honor U.S. patents, copyrights and other intellectual-property rights. However, five other countries -- China, Thailand, India, Brazil and Mexico -- will remain on that so-called priority watch list as a result of an interim review, U.S. Trade Representative Carla Hills announced.Under the new U.S. trade law, those countries could face accelerated unfair-trade investigations and stiff trade sanctions if they don't improve their protection of intellectual property by next spring. Mrs. Hills said many of the 25 countries that she placed under varying degrees of scrutiny have made "genuine progress" on this touchy issue.She said there is "growing realization" around the world that denial of intellectual-property rights harms all trading nations, and particularly the "creativity and inventiveness of an {offending} country's own citizens." U.S. trade negotiators argue that countries with inadequate protections for intellectual-property rights could be hurting themselves by discouraging their own scientists and authors and by deterring U.S. high-technology firms from investing or marketing their best products there. Mrs. Hills lauded South Korea for creating an intellectual-property task force and special enforcement teams of police officers and prosecutors trained to pursue movie and book pirates.Seoul also has instituted effective search-and-seizure procedures to aid these teams, she said. Taiwan has improved its standing with the U.S. by initialing a bilateral copyright agreement, amending its trademark law and introducing legislation to protect foreign movie producers from unauthorized showings of their films.That measure could compel Taipei's growing number of small video-viewing parlors to pay movie producers for showing their films. Saudi Arabia, for its part, has vowed to enact a copyright law compatible with international standards and to apply the law to computer software as well as to literary works, Mrs. Hills said. These three countries aren't completely off the hook, though.They will remain on a lower-priority list that includes 17 other countries.Those countries -- including Japan, Italy, Canada, Greece and Spain -- are still of some concern to the U.S. but are deemed to pose less-serious problems for American patent and copyright owners than those on the "priority" list. Gary Hoffman, a Washington lawyer specializing in intellectual-property cases, said the threat of U.S. retaliation, combined with a growing recognition that protecting intellectual property is in a country's own interest, prompted the improvements made by South Korea, Taiwan and Saudi Arabia. "What this tells us is that U.S. trade law is working," he said.He said Mexico could be one of the next countries to be removed from the priority list because of its efforts to craft a new patent law. Mrs. Hills said that the U.S. is still concerned about "disturbing developments in Turkey and continuing slow progress in Malaysia." She didn't elaborate, although earlier U.S. trade reports have complained of videocassette piracy in Malaysia and disregard for U.S. pharmaceutical patents in Turkey. The 1988 trade act requires Mrs. Hills to issue another review of the performance of these countries by April 30.So far, Mrs. Hills hasn't deemed any cases bad enough to merit an accelerated investigation under the so-called special 301 provision of the act.
The White House said President Bush has approved duty-free treatment for imports of certain types of watches that aren't produced in "significant quantities" in the U.S., the Virgin Islands and other U.S. possessions. The action came in response to a petition filed by Timex Inc. for changes in the U.S. Generalized System of Preferences for imports from developing nations.Previously, watch imports were denied such duty-free treatment. Timex had requested duty-free treatment for many types of watches, covered by 58 different U.S. tariff classifications.The White House said Mr. Bush decided to grant duty-free status for 18 categories, but turned down such treatment for other types of watches "because of the potential for material injury to watch producers located in the U.S. and the Virgin Islands." Timex is a major U.S. producer and seller of watches, including low-priced battery-operated watches assembled in the Philippines and other developing nations covered by the U.S. tariff preferences. U.S. trade officials said the Philippines and Thailand would be the main beneficiaries of the president's action. Imports of the types of watches that now will be eligible for duty-free treatment totaled about $37.3 million in 1988, a relatively small share of the $1.5 billion in U.S. watch imports that year, according to an aide to U.S. Trade Representative Carla Hills.
Magna International Inc. 's chief financial officer, James McAlpine, resigned and its chairman, Frank Stronach, is stepping in to help turn the automotive-parts manufacturer around, the company said. Mr. Stronach will direct an effort to reduce overhead and curb capital spending "until a more satisfactory level of profit is achieved and maintained," Magna said. Stephen Akerfeldt, currently vice president finance, will succeed Mr. McAlpine. An ambitious expansion has left Magna with excess capacity and a heavy debt load as the automotive industry enters a downturn.The company has reported declines in operating profit in each of the past three years, despite steady sales growth. Magna recently cut its quarterly dividend in half and the company's Class A shares are wallowing far below their 52-week high of 16.125 Canadian dollars (US$13.73).On the Toronto Stock Exchange yesterday, Magna shares closed up 37.5 Canadian cents to C$9.625. Mr. Stronach, founder and controlling shareholder of Magna, resigned as chief executive officer last year to seek, unsuccessfully, a seat in Canada's Parliament. Analysts said Mr. Stronach wants to resume a more influential role in running the company.They expect him to cut costs throughout the organization. The company said Mr. Stronach will personally direct the restructuring, assisted by Manfred Gingl, president and chief executive.Neither they nor Mr. McAlpine could be reached for comment. Magna said Mr. McAlpine resigned to pursue a consulting career, with Magna as one of his clients.
Japanese investors nearly single-handedly bought up two new mortgage securities-based mutual funds totaling $701 million, the U.S. Federal National Mortgage Association said. The purchases show the strong interest of Japanese investors in U.S. mortgage-based instruments, Fannie Mae's chairman, David O. Maxwell, said at a news conference.He said more than 90% of the funds were placed with Japanese institutional investors.The rest went to investors from France and Hong Kong. Earlier this year, Japanese investors snapped up a similar, $570 million mortgage-backed securities mutual fund.That fund was put together by Blackstone Group, a New York investment bank.The latest two funds were assembled jointly by Goldman, Sachs & Co. of the U.S. and Japan's Daiwa Securities Co. The new, seven-year funds -- one offering a fixed-rate return and the other with a floating-rate return linked to the London interbank offered rate -- offer two key advantages to Japanese investors.First, they are designed to eliminate the risk of prepayment -- mortgage-backed securities can be retired early if interest rates decline, and such prepayment forces investors to redeploy their money at lower rates.Second, they channel monthly mortgage payments into semiannual payments, reducing the administrative burden on investors. By addressing those problems, Mr. Maxwell said, the new funds have become "extremely attractive to Japanese and other investors outside the U.S." Such devices have boosted Japanese investment in mortgage-backed securities to more than 1% of the $900 billion in such instruments outstanding, and their purchases are growing at a rapid rate.They also have become large purchasers of Fannie Mae's corporate debt, buying $2.4 billion in Fannie Mae bonds during the first nine months of the year, or almost a tenth of the total amount issued.
Pick a country, any country. It's the latest investment craze sweeping Wall Street: a rash of new closed-end country funds, those publicly traded portfolios that invest in stocks of a single foreign country. No fewer than 24 country funds have been launched or registered with regulators this year, triple the level of all of 1988, according to Charles E. Simon & Co., a Washington-based research firm. The turf recently has ranged from Chile to Austria to Portugal.Next week, the Philippine Fund's launch will be capped by a visit by Philippine President Corazon Aquino -- the first time a head of state has kicked off an issue at the Big Board here. The next province? "Anything's possible -- how about the New Guinea Fund?" quips George Foot, a managing partner at Newgate Management Associates of Northampton, Mass.The recent explosion of country funds mirrors the "closed-end fund mania" of the 1920s, Mr. Foot says, when narrowly focused funds grew wildly popular.They fell into oblivion after the 1929 crash. Unlike traditional open-end mutual funds, most of these one-country portfolios are the "closed-end" type, issuing a fixed number of shares that trade publicly. The surge brings to nearly 50 the number of country funds that are or soon will be listed in New York or London.These funds now account for several billions of dollars in assets. "People are looking to stake their claims" now before the number of available nations runs out, says Michael Porter, an analyst at Smith Barney, Harris Upham & Co., New York. Behind all the hoopla is some heavy-duty competition.As individual investors have turned away from the stock market over the years, securities firms have scrambled to find new products that brokers find easy to sell.And the firms are stretching their nets far and wide to do it. Financial planners often urge investors to diversify and to hold a smattering of international securities.And many emerging markets have outpaced more mature markets, such as the U.S. and Japan.Country funds offer an easy way to get a taste of foreign stocks without the hard research of seeking out individual companies. But it doesn't take much to get burned.Political and currency gyrations can whipsaw the funds.Another concern: The funds' share prices tend to swing more than the broader market.When the stock market dropped nearly 7% Oct. 13, for instance, the Mexico Fund plunged about 18% and the Spain Fund fell 16%.And most country funds were clobbered more than most stocks after the 1987 crash. What's so wild about the funds' frenzy right now is that many are trading at historically fat premiums to the value of their underlying portfolios.After trading at an average discount of more than 20% in late 1987 and part of last year, country funds currently trade at an average premium of 6%.The reason: Share prices of many of these funds this year have climbed much more sharply than the foreign stocks they hold. It's probably worth paying a premium for funds that invest in markets that are partially closed to foreign investors, such as South Korea, some specialists say.But some European funds recently have skyrocketed; Spain Fund has surged to a startling 120% premium.It has been targeted by Japanese investors as a good long-term play tied to 1992's European economic integration.And several new funds that aren't even fully invested yet have jumped to trade at big premiums. "I'm very alarmed to see these rich valuations," says Smith Barney's Mr. Porter. The newly fattened premiums reflect the increasingly global marketing of some country funds, Mr. Porter suggests.Unlike many U.S. investors, those in Asia or Europe seeking foreign-stock exposure may be less resistant to paying higher prices for country funds. "There may be an international viewpoint cast on the funds listed here," Mr. Porter says. Nonetheless, plenty of U.S. analysts and money managers are aghast at the lofty trading levels of some country funds.They argue that U.S. investors often can buy American depositary receipts on the big stocks in many funds; these so-called ADRs represent shares of foreign companies traded in the U.S.That way investors can essentially buy the funds without paying the premium. For people who insist on jumping in now to buy the funds, Newgate's Mr. Foot says: "The only advice I have for these folks is that those who come to the party late had better be ready to leave quickly."
The U.S. and Soviet Union are holding technical talks about possible repayment by Moscow of $188 million in pre-Communist Russian debts owed to the U.S. government, the State Department said. If the debts are repaid, it could clear the way for Soviet bonds to be sold in the U.S. However, after two meetings with the Soviets, a State Department spokesman said that it's "too early to say" whether that will happen. Coincident with the talks, the State Department said it has permitted a Soviet bank to open a New York branch.The branch of the Bank for Foreign Economic Affairs was approved last spring and opened in July. But a Soviet bank here would be crippled unless Moscow found a way to settle the $188 million debt, which was lent to the country's short-lived democratic Kerensky government before the Communists seized power in 1917. Under a 1934 law, the Johnson Debt Default Act, as amended, it's illegal for Americans to extend credit to countries in default to the U.S. government, unless they are members of the World Bank and International Monetary Fund.The U.S.S.R. belongs to neither organization. Moscow has settled pre-1917 debts with other countries in recent years at less than face value. The State Department stressed the pre-1933 debts as the key to satisfying the Johnson Act.But the Soviets might still face legal obstacles to raising money in the U.S. until they settle hundreds of millions of dollars in additional debt still outstanding from the World War II lend-lease program.
In another reflection that the growth of the economy is leveling off, the government said that orders for manufactured goods and spending on construction failed to rise in September. Meanwhile, the National Association of Purchasing Management said its latest survey indicated that the manufacturing economy contracted in October for the sixth consecutive month.Its index inched up to 47.6% in October from 46% in September.Any reading below 50% suggests the manufacturing sector is generally declining. The purchasing managers, however, also said that orders turned up in October after four months of decline. Factories booked $236.74 billion in orders in September, nearly the same as the $236.79 billion in August, the Commerce Department said.If not for a 59.6% surge in orders for capital goods by defense contractors, factory orders would have fallen 2.1%. In a separate report, the department said construction spending ran at an annual rate of $415.6 billion, not significantly different from the $415.8 billion reported for August.Private construction spending was down, but government building activity was up.The figures in both reports were adjusted to remove the effects of usual seasonal patterns, but weren't adjusted for inflation. Kenneth Mayland, economist for Society Corp., a Cleveland bank, said demand for exports of factory goods is beginning to taper off.At the same time, the drop in interest rates since the spring has failed to revive the residential construction industry. "What sector is stepping forward to pick up the slack?" he asked. "I draw a blank." By most measures, the nation's industrial sector is now growing very slowly -- if at all.Factory payrolls fell in September.So did the Federal Reserve Board's industrial-production index. Yet many economists aren't predicting that the economy is about to slip into recession.They cite a lack of "imbalances" that provide early warning signals of a downturn. Inventories are closely watched for such clues, for instance.Economists say a buildup in inventories can provoke cutbacks in production that can lead to a recession.But yesterday's factory orders report had good news on that front: it said factory inventories fell 0.1% in September, the first decline since February 1987. "This conforms to the `soft landing' scenario," said Elliott Platt, an economist at Donaldson, Lufkin & Jenrette Securities Corp. "I don't see any signs that inventories are excessive." A soft landing is an economic slowdown that eases inflation without leading to a recession. The department said orders for nondurable goods -- those intended to last fewer than three years -- fell 0.3% in September to $109.73 billion after climbing 0.9% the month before.Orders for durable goods were up 0.2% to $127.03 billion after rising 3.9% the month before.The department previously estimated that durable-goods orders fell 0.1% in September. Factory shipments fell 1.6% to $234.4 billion after rising 5.4% in August.Shipments have been relatively level since January, the Commerce Department noted. Manufacturers' backlogs of unfilled orders rose 0.5% in September to $497.34 billion, helped by strength in the defense capital goods sector.Excluding these orders, backlogs declined 0.3%. In its construction spending report, the Commerce Department said residential construction, which accounts for nearly half of all construction spending, was off 0.9% in September to an annual rate of $191.9 billion.David Berson, economist for the Mortgage Bankers Association, predicted the drop in interest rates eventually will boost spending on single-family homes, but probably not until early next year. Spending on private, nonresidential construction was off 2.6% to an annual rate of $99.1 billion with no sector showing strength.Government construction spending rose 4.3% to $88 billion. After adjusting for inflation, the Commerce Department said construction spending didn't change in September. For the first nine months of the year, total construction spending ran about 2% above last year's level. The government's construction spending figures contrast with a report issued earlier in the week by McGraw-Hill Inc. 's F.W. Dodge Group.Dodge reported an 8% increase in construction contracts awarded in September.The goverment counts money as it is spent; Dodge counts contracts when they are awarded.The government includes money spent on residential renovation; Dodge doesn't. Although the purchasing managers' index continues to indicate a slowing economy, it isn't signaling an imminent recession, said Robert Bretz, chairman of the association's survey committee and director of materials management at Pitney Bowes Inc., Stamford, Conn.He said the index would have to be in the low 40% range for several months to be considered a forecast of recession. The report offered new evidence that the nation's export growth, though still continuing, may be slowing.Only 19% of the purchasing managers reported better export orders in October, down from 27% in September.And 8% said export orders were down last month, compared with 6% the month before. The purhasing managers' report also added evidence that inflation is under control.For the fifth consecutive month, purchasing managers said prices for the goods they purchased fell.The decline was even steeper than in September. They also said that vendors were delivering goods more quickly in October than they had for each of the five previous months.Economists consider that a sign that inflationary pressures are abating.When demand is stronger than suppliers can handle and delivery times lengthen, prices tend to rise. The purchasing managers' report is based on data provided by more than 250 purchasing executives.Each of the survey's indicators gauges the difference between the number of purchasers reporting improvement in a particular area and the number reporting a worsening. For the first time, the October survey polled members on imports.It found that of the 73% who import, 10% said they imported more in October and 12% said they imported less than the previous month.While acknowledging one month's figures don't prove a trend, Mr. Bretz said, "It does lead you to suspect imports are going down, or at least not increasing that much." Items listed as being in short supply numbered only about a dozen, but they included one newcomer: milk and milk powder. "It's an odd thing to put on the list," Mr. Bretz noted.He said that for the second month in a row, food processors reported a shortage of nonfat dry milk.They blamed increased demand for dairy products at a time of exceptionally high U.S. exports of dry milk, coupled with very low import quotas. Pamela Sebastian in New York contributed to this article. Here are the Commerce Department's figures for construction spending in billions of dollars at seasonally adjusted annual rates. Here are the Commerce Department's latest figures for manufacturers in billions of dollars, seasonally adjusted.
Judging from the Americana in Haruki Murakami's "A Wild Sheep Chase" (Kodansha, 320 pages, $18.95), baby boomers on both sides of the Pacific have a lot in common.Although set in Japan, the novel's texture is almost entirely Western, especially American.Characters drink Salty Dogs, whistle "Johnny B. Goode" and watch Bugs Bunny reruns.They read Mickey Spillane and talk about Groucho and Harpo.They worry about their careers, drink too much and suffer through broken marriages and desultory affairs.This is Japan? For an American reader, part of the charm of this engaging novel should come in recognizing that Japan isn't the buttoned-down society of contemporary American lore.It's also refreshing to read a Japanese author who clearly doesn't belong to the self-aggrandizing "we-Japanese" school of writers who perpetuate the notion of the unique Japanese, unfathomable by outsiders.If "A Wild Sheep Chase" carries an implicit message for international relations, it's that the Japanese are more like us than most of us think. That's not to say that the nutty plot of "A Wild Sheep Chase" is rooted in reality.It's imaginative and often funny.A disaffected, hard-drinking, nearly-30 hero sets off for snow country in search of an elusive sheep with a star on its back at the behest of a sinister, erudite mobster with a Stanford degree.He has in tow his prescient girlfriend, whose sassy retorts mark her as anything but a docile butterfly.Along the way, he meets a solicitous Christian chauffeur who offers the hero God's phone number; and the Sheep Man, a sweet, roughhewn figure who wears -- what else -- a sheepskin. The 40-year-old Mr. Murakami is a publishing sensation in Japan.A more recent novel, "Norwegian Wood" (every Japanese under 40 seems to be fluent in Beatles lyrics), has sold more than four million copies since Kodansha published it in 1987.But he is just one of several youthful writers -- Tokyo's brat pack -- who are dominating the best-seller charts in Japan.Their books are written in idiomatic, contemporary language and usually carry hefty dashes of Americana. In Robert Whiting's "You Gotta Have Wa" (Macmillan, 339 pages, $17.95), the Beatles give way to baseball, in the Nipponese version we would be hard put to call a "game." As Mr. Whiting describes it, Nipponese baseball is a "mirror of Japan's fabled virtues of hard work and harmony." "Wa" is Japanese for "team spirit" and Japanese ballplayers have miles and miles of it.A player's commitment to practice and team image is as important as his batting average.Polls once named Tokyo Giants star Tatsunori Hara, a "humble, uncomplaining, obedient soul," as the male symbol of Japan. But other than the fact that besuboru is played with a ball and a bat, it's unrecognizable: Fans politely return foul balls to stadium ushers; the strike zone expands depending on the size of the hitter; ties are permitted -- even welcomed -- since they honorably sidestep the shame of defeat; players must abide by strict rules of conduct even in their personal lives -- players for the Tokyo Giants, for example, must always wear ties when on the road. "You Gotta Have Wa" is the often amusing chronicle of how American ballplayers, rationed to two per team, fare in Japan.Despite the enormous sums of money they're paid to stand up at a Japanese plate, a good number decide it's not worth it and run for home. "Funny Business" (Soho, 228 pages, $17.95) by Gary Katzenstein is anything but.It's the petulant complaint of an impudent American whom Sony hosted for a year while he was on a Luce Fellowship in Tokyo -- to the regret of both parties. In sometimes amusing, more often supercilious, even vicious passages, Mr. Katzenstein describes how Sony invades even the most mundane aspects of its workers' lives -- at the regimented office, where employees are assigned lunch partners -- and at "home" in the austere company dormitory run by a prying caretaker. Some of his observations about Japanese management style are on the mark.It's probably true that many salarymen put in unproductive overtime just for the sake of solidarity, that the system is so hierarchical that only the assistant manager can talk to the manager and the manager to the general manager, and that Sony was chary of letting a young, short-term American employee take on any responsibility.All of this must have been enormously frustrating to Mr. Katzenstein, who went to Sony with degrees in business and computer science and was raring to invent another Walkman. But Sony ultimately took a lesson from the American management books and fired Mr. Katzenstein, after he committed the social crime of making an appointment to see the venerable Akio Morita, founder of Sony.It's a shame their meeting never took place.Mr. Katzenstein certainly would have learned something, and it's even possible Mr. Morita would have too. Ms. Kirkpatrick, the Journal's deputy editorial features editor, worked in Tokyo for three years. More and more corners of the globe are becoming free of tobacco smoke. In Singapore, a new law requires smokers to put out their cigarettes before entering restaurants, department stores and sports centers or face a $250 fine.Discos and private clubs are exempt from the ban, and smoking will be permitted in bars except during meal hours, an official said.Singapore already bans smoking in all theaters, buses, public elevators, hospitals and fast-food restaurants. In Malaysia, Siti Zaharah Sulaiman, a deputy minister in the prime minister's office, launched a "No-Smoking Week" at the Mara Institute of Technology near Kuala Lumpur and urged other schools to ban on-campus smoking. South Korea has different concerns.In Seoul, officials began visiting about 26,000 cigarette stalls to remove illegal posters and signboards advertising imported cigarettes.South Korea has opened its market to foreign cigarettes but restricts advertising to designated places. A marketing study indicates that Hong Kong consumers are the most materialistic in the 14 major markets where the survey was carried out.The study by the Backer Spielvogel Bates ad agency also found that the colony's consumers feel more pressured than those in any of the other surveyed markets, which include the U.S. and Japan.The survey found that nearly half of Hong Kong consumers espouse what it identified as materialistic values, compared with about one-third in Japan and the U.S.More than three in five said they are under a great deal of stress most of the time, compared with less than one in two U.S. consumers and one in four in Japan. The Thai cabinet endorsed Finance Minister Pramual Sabhavasu's proposal to build a $19 million conference center for a joint meeting of the World Bank and International Monetary Fund two years from now.The meeting, which is expected to draw 20,000 to Bangkok, was going to be held at the Central Plaza Hotel, but the government balked at the hotel's conditions for undertaking necessary expansion.A major concern about the current plan is whether the new center can be built in such a short time. Yasser Arafat has written to the chairman of the International Olympic Committee asking him to back a Palestinian bid to join the committee, the Palestine Liberation Organization news agency WAFA said.An official of the Palestinian Olympic Committee said the committee first applied for membership in 1979 and renewed its application in August of this year.The PLO in recent months has been trying to join international organizations but failed earlier this year to win membership in the World Health Organization and the World Tourism Organization. A Beijing food-shop assistant has become the first mainland Chinese to get AIDS through sex, the People's Daily said.It said the man, whom it did not name, had been found to have the disease after hospital tests.Once the disease was confirmed, all the man's associates and family were tested, but none have so far been found to have AIDS, the newspaper said.The man had for a long time had "a chaotic sex life," including relations with foreign men, the newspaper said. The Polish government increased home electricity charges by 150% and doubled gas prices.The official news agency PAP said the increases were intended to bring unrealistically low energy charges into line with production costs and compensate for a rise in coal prices.In happier news, South Korea, in establishing diplomatic ties with Poland yesterday, announced $450 million in loans to the financially strapped Warsaw government. In a victory for environmentalists, Hungary's parliament terminated a multibillion-dollar River Danube dam being built by Austrian firms. The Nagymaros dam was designed to be twinned with another dam, now nearly complete, 100 miles upstream in Czechoslovakia.In ending Hungary's part of the project, Parliament authorized Prime Minister Miklos Nemeth to modify a 1977 agreement with Czechoslovakia, which still wants the dam to be built. Mr. Nemeth said in parliament that Czechoslovakia and Hungary would suffer environmental damage if the twin dams were built as planned. Czechoslovakia said in May it could seek $2 billion from Hungary if the twindam contract were broken.The Czech dam can't be operated solely at peak periods without the Nagymaros project. A painting by August Strindberg set a Scandinavian price record when it sold at auction in Stockholm for $2.44 million. "Lighthouse II" was painted in oils by the playwright in 1901 . . . After years of decline, weddings in France showed a 2.2% upturn last year, with 6,000 more couples exchanging rings in 1988 than in the previous year, the national statistics office said.But the number of weddings last year -- 271,124 -- was still well below the 400,000 registered in 1972, the last year of increasing marriages.
As an actor, Charles Lane isn't the inheritor of Charlie Chaplin's spirit.Steve Martin has already laid his claim to that. But it is Mr. Lane, as movie director, producer and writer, who has been obsessed with refitting Chaplin's Little Tramp in a contemporary way.In 1976, as a film student at the Purchase campus of the State University of New York, Mr. Lane shot "A Place in Time," a 36-minute black-and-white film about a sketch artist, a man of the streets.Now, 13 years later, Mr. Lane has revived his Artist in a full-length movie called "Sidewalk Stories," a poignant piece of work about a modern-day tramp.Of course, if the film contained dialogue, Mr. Lane's Artist would be called a homeless person.So would the Little Tramp, for that matter. I say "contained dialogue" because "Sidewalk Stories" isn't really silent at all.Composer Marc Marder, a college friend of Mr. Lane's who earns his living playing the double bass in classical music ensembles, has prepared an exciting, eclectic score that tells you what the characters are thinking and feeling far more precisely than intertitles, or even words, would. Much of Mr. Lane's film takes a highly romanticized view of life on the streets (though probably no more romanticized than Mr. Chaplin's notion of the Tramp as the good-hearted free spirit).Filmed in lovely black and white by Bill Dill, the New York streets of "Sidewalk Stories" seem benign.On Wall Street men and women walk with great purpose, noticing one another only when they jostle for cabs.The Artist hangs out in Greenwich Village, on a strip of Sixth Avenue populated by jugglers, magicians and other good-natured hustlers. (This clearly is not real life: no crack dealers, no dead-eyed men selling four-year-old copies of Cosmopolitan, no one curled up in a cardboard box.) The Artist has his routine.He spends his days sketching passers-by, or trying to.At night he returns to the condemned building he calls home.His life, including his skirmishes with a competing sketch artist, seems carefree.He is his own man. Then, just as the Tramp is given a blind girl to cure in "City Lights," the Artist is put in charge of returning a two-year-old waif (Nicole Alysia), whose father has been murdered by thugs, to her mother.This cute child turns out to be a blessing and a curse.She gives the Artist a sense of purpose, but also alerts him to the serious inadequacy of his vagrant life.The beds at the Bowery Mission seem far drearier when he has to tuck a little girl into one of them at night. To further load the stakes, Mr. Lane dreamed up a highly improbable romance for the Artist, with a young woman who owns her own children's shop and who lives in an expensive high-rise apartment building.This story line might resonate more strongly if Mr. Lane had as strong a presence in front of the camera as he does behind it. Mr. Lane's final purpose isn't to glamorize the Artist's vagabond existence.He has a point he wants to make, and he makes it, with a great deal of force.The movie ends with sound, the sound of street people talking, and there isn't anything whimsical or enviable in those rough, beaten voices. The French film maker Claude Chabrol has managed another kind of weird achievement with his "Story of Women." He has made a harsh, brilliant picture -- one that's captivating -- about a character who, viewed from the most sympathetic angle, would seem disagreeable. Yet this woman, Marie-Louise Giraud, carries historical significance, both as one of the last women to be executed in France and as a symbol of the Vichy government's hypocrisy.While Vichy collaborated with the Germans during World War II in the deaths of thousands of Resistance fighters and Jews, its officials needed a diversionary symbolic traitor.Marie-Louise, a small-time abortionist, was their woman. She became an abortionist accidentally, and continued because it enabled her to buy jam, cocoa and other war-rationed goodies.She was untrained and, in one botched job killed a client.Her remorse was shallow and brief.Although she was kind and playful to her children, she was dreadful to her war-damaged husband; she openly brought her lover into their home.As presented by Mr. Chabrol, and played with thin-lipped intensity by Isabelle Huppert, Marie-Louise (called Marie Latour in the film) was not a nice person.But she didn't deserve to have her head chopped off. There is very little to recommend "Old Gringo," a confused rendering of the Carlos Fuentes novel of the Mexican Revolution.Most of the picture is taken up with endless scenes of many people either fighting or eating and drinking to celebrate victory.I mention the picture only because many bad movies have a bright spot, and this one has Gregory Peck, in a marvelously loose and energetic portrayal of an old man who wants to die the way he wants to die. Video Tip: Before seeing "Sidewalk Stories," take a look at "City Lights," Chaplin's Tramp at his finest.
This is the year the negative ad, for years a secondary presence in most political campaigns, became the main event. The irony is that the attack commercial, after getting a boost in last year's presidential campaign, has come of age in an off-off election year with only a few contests scattered across the country. But in the three leading political contests of 1989, the negative ads have reached new levels of hostility, raising fears that this kind of mudslinging, empty of significant issues, is ushering in a new era of campaigns without content. "Now," says Joseph Napolitan, a pioneer in political television, "the idea is to attack first, last and always." A trend that started with the first stirrings of politics, accelerated with the dawn of the television age and became a sometimes-tawdry art form in 1988, has reached an entirely new stage. "To get people's attention these days," says Douglas Bailey, a political consultant, "your TV ad needs to be bold and entertaining, and, more often than not, that means confrontational.And, unlike a few years ago, you don't even have to worry whether the ad is truthful." In 1989, as often as not, the principal fights in the major campaigns are prompted by the ads themselves. Take a look, then, at the main attack commercials that set the tone for Tuesday's elections in New York City, New Jersey and Virginia: New York City: The screen fills with a small, tight facial shot of David Dinkins, Democratic candidate for mayor of New York City. "David Dinkins failed to file his income taxes for four straight years," says a disembodied male voice. And then this television commercial, paid for by Republican Rudolph Giuliani's campaign and produced by Roger Ailes, the master of negative TV ads, really gets down to business.Mr. Dinkins, the ad charges, also failed to report his campaign contributions accurately, hid his links to a failing insurance company and paid a convicted kidnapper "through a phony organization with no members, no receipts and no office." "David Dinkins," says the kicker, "Why does he always wait until he's caught?" "Nasty innuendoes," says John Siegal, Mr. Dinkins's issues director, "designed to prosecute a case of political corruption that simply doesn't exist." Stung by the Giuliani ads, Mr. Dinkins's TV consultants, Robert Shrum and David Doak, finally unleashed a negative ad of their own.The screen shows two distorted, unrecognizable photos, presumably of two politicians. "Compare two candidates for mayor," says the announcer. "One says he's for banning cop-killer bullets.The other has opposed a ban on cop-killer bullets.One claims he's pro-choice.The other has opposed a woman's right to choose." "Funny thing," says the kicker, "both these candidates are named Rudolph Giuliani." Who's telling the truth?Everybody -- and nobody.It's a classic situation of ads that are true but not always fully accurate. Mr. Dinkins did fail to file his income taxes for four years, but he insists he voluntarily admitted the "oversight" when he was being considered for a city job.He was on the board of an insurance company with financial problems, but he insists he made no secret of it.The city's Campaign Finance Board has refused to pay Mr. Dinkins $95,142 in matching funds because his campaign records are incomplete.The campaign has blamed these reporting problems on computer errors.And, says Mr. Dinkins, he didn't know the man his campaign paid for a get-out-the-vote effort had been convicted of kidnapping.But, say Mr. Dinkins's managers, he did have an office and his organization did have members. Mr. Giuliani's campaign chairman, Peter Powers, says the Dinkins ad is "deceptive." The other side, he argues, "knows Giuliani has always been pro-choice, even though he has personal reservations.They know he is generally opposed to cop-killer bullets, but that he had some reservations about the language in the legislation." Virginia: Democratic Lt. Gov. Douglas Wilder opened his gubernatorial battle with Republican Marshall Coleman with an abortion commercial produced by Frank Greer that analysts of every political persuasion agree was a tour de force.Against a shot of Monticello superimposed on an American flag, an announcer talks about the "strong tradition of freedom and individual liberty" that Virginians have nurtured for generations.Then, just as an image of the statue of Thomas Jefferson dissolves from the screen, the announcer continues: "On the issue of abortion, Marshall Coleman wants to take away your right to choose and give it to the politicians." That commercial -- which said Mr. Coleman wanted to take away the right of abortion "even in cases of rape and incest," a charge Mr. Coleman denies -- changed the dynamics of the campaign, transforming it, at least in part, into a referendum on abortion.The ad prompted Mr. Coleman, the former Virginia attorney general, to launch a series of advertisements created by Bob Goodman and designed to shake Mr. Wilder's support among the very women who were attracted by the abortion ad. The Coleman counterattack featured a close-up of a young woman in shadows and the ad suggested that she was recalling an unpleasant courtroom ordeal.A voice says, "C'mon, now, don't you have boyfriends?" Then an announcer interjects: "It was Douglas Wilder who introduced a bill to force rape victims age 13 and younger to be interrogated about their private lives by lawyers for accused rapists.So the next time Mr. Wilder talks about the rights of women, ask him about this law he tried to pass." Mr. Wilder did introduce such legislation 17 years ago, but he did so at the request of a constituent, a common legislative technique used by lawmakers.The legislation itself noted that it was introduced "by request," and in 1983 Mr. Wilder introduced a bill to protect rape victims from unfounded interrogation. "People have grown tired of these ads and Coleman has gotten the stigma of being a negative campaigner," says Mark Rozell, a political scientist at Mary Washington College. "Wilder has managed to get across the idea that Coleman will say anything to get elected governor and -- more important -- has been able to put the onus for all the negative campaigning on Coleman." Mr. Coleman said this week that he would devote the remainder of the political season to positive campaigning, but the truce lasted only hours.By Tuesday night, television stations were carrying new ads featuring Mr. Coleman himself raising questions about Mr. Wilder's sensitivity to rape victims. New Jersey: The attacks began when Democratic Rep. James Florio aired an ad featuring a drawing of Pinocchio and a photograph of Mr. Florio's rival, Republican Rep. Jim Courter. "Remember Pinocchio?" says a female voice. "Consider Jim Courter." And then this commercial, produced by Bob Squier, gets down to its own mean and dirty business.Pictures of rusted oil drums swim into focus, and the female voice purrs, "That hazardous waste on his {Mr.Courter's} property -- the neighbors are suing for consumer fraud." And the nose on Mr. Courter's face grows. The only fraud involved, cry Mr. Courter's partisans, is the Florio commercial itself, and so the Courter campaign has responded with its own Pinocchio commercial, produced by Mr. Ailes.In this one, the screen fills with photographs of both candidates. "Who's really lying?" asks a female voice. "Florio's lying," the voice goes on, because "the barrel on Courter's land . . . contained heating oil, was cleaned up and caused no pollution." Mr. Courter's long nose shrinks while Mr. Florio's grows. Who's telling the truth?Stephen Salmore, a political scientist at New Jersey's Eagleton Institute, says it's another example of an ad that's true but not fully accurate.Barrels were dumped on the Courter property, a complaint was made, but there is no evidence the barrels were a serious threat to the environment. Even so, according to Mr. Salmore, the ad was "devastating" because it raised questions about Mr. Courter's credibility.But it's building on a long tradition.In 1966, on route to a re-election rout of Democrat Frank O'Connor, GOP Gov. Nelson Rockefeller of New York appeared in person saying, "If you want to keep the crime rates high, O'Connor is your man."
Japanese investment in Southeast Asia is propelling the region toward economic integration. Interviews with analysts and business people in the U.S. suggest that Japanese capital may produce the economic cooperation that Southeast Asian politicians have pursued in fits and starts for decades.But Japan's power in the region also is sparking fears of domination and posing fresh policy questions. The flow of Japanese funds has set in motion "a process whereby these economies will be knitted together by the great Japanese investment machine," says Robert Hormats, vice chairman of Goldman Sachs International Corp. In the past five years, Japanese companies have tripled their commitments in Asia to $5.57 billion.In Thailand, for example, the government's Board of Investment approved $705.6 million of Japanese investment in 1988, 10 times the U.S. investment figure for the year.Japan's commitment in Southeast Asia also includes steep increases in foreign assistance and trade. Asia's other cash-rich countries are following Japan's lead and pumping capital into the region.In Taiwan and South Korea, rising wages are forcing manufacturers to seek other overseas sites for labor-intensive production.These nations, known as Asia's "little tigers," also are contributing to Southeast Asia's integration, but their influence will remain subordinate to Japan's. For recipient countries such as Thailand and Malaysia, the investment will provide needed jobs and spur growth.But Asian nations' harsh memories of their military domination by Japan in the early part of this century make them fearful of falling under Japanese economic hegemony now. Because of budget constraints in Washington, the U.S. encourages Japan to share economic burdens in the region.But it resists yielding political ground.In the coming decade, analysts say, U.S.-Japanese relations will be tested as Tokyo comes to terms with its new status as the region's economic behemoth. Japan's swelling investment in Southeast Asia is part of its economic evolution.In the past decade, Japanese manufacturers concentrated on domestic production for export.In the 1990s, spurred by rising labor costs and the strong yen, these companies will increasingly turn themselves into multinationals with plants around the world.To capture the investment, Southeast Asian nations will move to accommodate Japanese business. These nations' internal decisions "will be made in a way not to offend their largest aid donor, largest private investor and largest lender," says Richard Drobnick, director of the international business and research program at the University of Southern California's Graduate School of Business. Japanese money will help turn Southeast Asia into a more cohesive economic region.But, analysts say, Asian cooperation isn't likely to parallel the European Common Market approach.Rather, Japanese investment will spur integration of certain sectors, says Kent Calder, a specialist in East Asian economies at the Woodrow Wilson School for Public and Internatonal Affairs at Princeton University.In electronics, for example, a Japanese company might make television picture tubes in Japan, assemble the sets in Malaysia and export them to Indonesia. "The effect will be to pull Asia together not as a common market but as an integrated production zone," says Goldman Sachs's Mr. Hormats. Countries in the region also are beginning to consider a framework for closer economic and political ties.The economic and foreign ministers of 12 Asian and Pacific nations will meet in Australia next week to discuss global trade issues as well as regional matters such as transportation and telecommunications.Participants will include the U.S., Australia, Canada, Japan, South Korea and New Zealand as well as the six members of the Association of Southeast Asian Nations -- Thailand, Malaysia, Singapore, Indonesia, the Philippines and Brunei. In addition, the U.S. this year offered its own plan for cooperation around the Pacific rim in a major speech by Secretary of State James Baker, following up a proposal made in January by Australian Prime Minister Bob Hawke. The Baker proposal reasserts Washington's intention to continue playing a leading political role in the region. "In Asia, as in Europe, a new order is taking shape," Mr. Baker said. "The U.S., with its regional friends, must play a crucial role in designing its architecture." But maintaining U.S. influence will be difficult in the face of Japanese dominance in the region.Japan not only outstrips the U.S. in investment flows but also outranks it in trade with most Southeast Asian countries (although the U.S. remains the leading trade partner for all of Asia).Moreover, the Japanese government, now the world's largest aid donor, is pumping far more assistance into the region than the U.S. is.While U.S. officials voice optimism about Japan's enlarged role in Asia, they also convey an undertone of caution. "There's an understanding on the part of the U.S. that Japan has to expand its functions" in Asia, says J. Michael Farren, undersecretary of commerce for trade. "If they approach it with a benevolent, altruistic attitude, there will be a net gain for everyone." Some Asian nations are apprehensive about Washington's demand that Tokyo step up its military spending to ease the U.S. security burden in the region.The issue is further complicated by uncertainty over the future of the U.S.'s leases on military bases in the Philippines and by a possible U.S. troop reduction in South Korea.Many Asians regard a U.S. presence as a desirable counterweight to Japanese influence. "No one wants the U.S. to pick up its marbles and go home," Mr. Hormats says. For their part, Taiwan and South Korea are expected to step up their own investments in the next decade to try to slow the Japanese juggernaut. "They don't want Japan to monopolize the region and sew it up," says Chong-sik Lee, professor of East Asian politics at the University of Pennsylvania.
Cathryn Rice could hardly believe her eyes.While giving the Comprehensive Test of Basic Skills to ninth graders at Greenville High School last March 16, she spotted a student looking at crib sheets. She had seen cheating before, but these notes were uncanny. "A stockbroker is an example of a profession in trade and finance. . . . At the end of World War II, Germany surrendered before Japan. . . . The Senate-House conference committee is used when a bill is passed by the House and Senate in different forms." Virtually word for word, the notes matched questions and answers on the social-studies section of the test the student was taking.In fact, the student had the answers to almost all of the 40 questions in that section.The student surrendered the notes, but not without a protest. "My teacher said it was OK for me to use the notes on the test," he said. The teacher in question was Nancy Yeargin -- considered by many students and parents to be one of the best at the school.Confronted, Mrs. Yeargin admitted she had given the questions and answers two days before the examination to two low-ability geography classes.She had gone so far as to display the questions on an overhead projector and underline the answers. Mrs. Yeargin was fired and prosecuted under an unusual South Carolina law that makes it a crime to breach test security.In September, she pleaded guilty and paid a $500 fine.Her alternative was 90 days in jail. Her story is partly one of personal downfall.She was an unstinting teacher who won laurels and inspired students, but she will probably never teach again.In her wake she left the bitterness and anger of a principal who was her friend and now calls her a betrayer; of colleagues who say she brought them shame; of students and parents who defended her and insist she was treated harshly; and of school-district officials stunned that despite the bald-faced nature of her actions, she became something of a local martyr. Mrs. Yeargin's case also casts some light on the dark side of school reform, where pressures on teachers are growing and where high-stakes testing has enhanced the temptation to cheat.The 1987 statute Mrs. Yeargin violated was designed to enforce provisions of South Carolina's school-improvement laws.Prosecutors alleged that she was trying to bolster students' scores to win a bonus under the state's 1984 Education Improvement Act.The bonus depended on her ability to produce higher student-test scores. "There is incredible pressure on school systems and teachers to raise test scores," says Walt Haney, an education professor and testing specialist at Boston College. "So efforts to beat the tests are also on the rise." And most disturbing, it is educators, not students, who are blamed for much of the wrongdoing. A 50-state study released in September by Friends for Education, an Albuquerque, N.M., school-research group, concluded that "outright cheating by American educators" is "common." The group says standardized achievement test scores are greatly inflated because teachers often "teach the test" as Mrs. Yeargin did, although most are never caught. Evidence of widespread cheating has surfaced in several states in the last year or so.California's education department suspects adult responsibility for erasures at 40 schools that changed wrong answers to right ones on a statewide test.After numerous occurrences of questionable teacher help to students, Texas is revising its security practices. And sales of test-coaching booklets for classroom instruction are booming.These materials, including Macmillan/McGraw-Hill School Publishing Co. 's Scoring High and Learning Materials -- are nothing short of sophisticated crib sheets, according to some recent academic research.By using them, teachers -- with administrative blessing -- telegraph to students beforehand the precise areas on which a test will concentrate, and sometimes give away a few exact questions and answers.Use of Scoring High is widespread in South Carolina and common in Greenville County, Mrs. Yeargin's school district. Experts say there isn't another state in the country where tests mean as much as they do in South Carolina. Under the state's Education Improvement Act, low test scores can block students' promotions or force entire districts into wrenching, state-supervised "interventions" that can mean firings.High test scores, on the other hand, bring recognition and extra money -- a new computer lab for a school, grants for special projects, a bonus for the superintendent. And South Carolina says it is getting results.Since the reforms went in place, for example, no state has posted a higher rate of improvement on the Scholastic Aptitude Test than South Carolina, although the state still posts the lowest average score of the about 21 states who use the SAT as the primary college entrance examination.Critics say South Carolina is paying a price by stressing improved test scores so much.Friends of Education rates South Carolina one of the worst seven states in its study on academic cheating.Says the organization's founder, John Cannell, prosecuting Mrs. Yeargin is "a way for administrators to protect themselves and look like they take cheating seriously, when in fact they don't take it seriously at all." Paul Sandifer, director of testing for the South Carolina department of education, says Mr. Cannell's allegations of cheating "are purely without foundation," and based on unfair inferences.Partly because of worries about potential abuse, however, he says the state will begin keeping closer track of achievement-test preparation booklets next spring. South Carolina's reforms were designed for schools like Greenville High School.Standing on a shaded hill in a run-down area of this old textile city, the school has educated many of South Carolina's best and brightest, including the state's last two governors, Nobel Prize winning physicist Charles Townes and actress Joanne Woodward.But by the early 1980s, its glory had faded like the yellow bricks of its broad facade. "It was full of violence and gangs and kids cutting class," says Linda Ward, the school's principal. "Crime was awful, test scores were low, and there was no enrollment in honors programs." Mrs. Ward took over in 1986, becoming the school's seventh principal in 15 years.Her immediate predecessor suffered a nervous breakdown.Prior to his term, a teacher bled to death in the halls, stabbed by a student.Academically, Mrs. Ward says, the school was having trouble serving in harmony its two disparate, and evenly split, student groups: a privileged white elite from old monied neighborhoods and blacks, many of them poor, from run-down, inner city neighborhoods. Mrs. Ward resolved to clean out "deadwood" in the school's faculty and restore safety, and she also had some new factors working in her behalf.One was statewide school reform, which raised overall educational funding and ushered in a new public spirit for school betterment.Another was Nancy Yeargin, who came to Greenville in 1985, full of the energy and ambitions that reformers wanted to reward. "Being a teacher just became my life," says the 37-year-old Mrs. Yeargin, a teacher for 12 years before her dismissal. "I loved the school, its history.I even dreamt about school and new things to do with my students." While Mrs. Ward fired and restructured staff and struggled to improve curriculum, Mrs. Yeargin worked 14-hour days and fast became a student favorite.In 1986-87 and 1987-88, she applied for and won bonus pay under the reform law.Encouraged by Mrs. Ward, Mrs. Yeargin taught honor students in the state "teacher cadet" program, a reform creation designed to encourage good students to consider teaching as a career.She won grant money for the school, advised cheerleaders, ran the pep club, proposed and taught a new "Cultural Literacy" class in Western Civilization and was chosen by the school PTA as "Teacher of the Year." "She was an inspirational lady; she had it all together," says Laura Dobson, a freshman at the University of South Carolina who had Mrs. Yeargin in the teacher-cadet class last year.She says that because of Mrs. Yeargin she gave up ambitions in architecture and is studying to become a teacher.Mary Beth Marchand, a Greenville 11th grader, also says Mrs. Yeargin inspired her to go into education. "She taught us more in Western Civilization than I've ever learned in other classes," says Kelli Green, a Greenville senior. In the classroom, students say, Mrs. Yeargin distinguished herself by varying teaching approaches -- forcing kids to pair up to complete classroom work or using college-bowl type competitions.On weekends, she came to work to prepare study plans or sometimes, even to polish the furniture in her classroom. "She just never gave it up," says Mary Marchand, Mary Beth's mother. "You'd see her correcting homework in the stands at a football game." Some fellow teachers, however, viewed Mrs. Yeargin as cocky and too yielding to students.Mrs. Ward says she often defended her to colleagues who called her a grandstander.Pressures began to build.Friends told her she was pushing too hard.Because of deteriorating hearing, she told colleagues she feared she might not be able to teach much longer. Mrs. Yeargin's extra work was also helping her earn points in the state's incentive-bonus program.But the most important source of points was student improvement on tests.Huge gains by her students in 1987 and 1988 meant a total of $5,000 in bonuses over two years -- a meaningful addition to her annual salary of $23,000. Winning a bonus for a third year wasn't that important to her, Mrs. Yeargin insists.But others at Greenville High say she was eager to win -- if not for money, then for pride and recognition.Mary Elizabeth Ariail, another social-studies teacher, says she believed Mrs. Yeargin wanted to keep her standing high so she could get a new job that wouldn't demand good hearing.Indeed, Mrs. Yeargin was interested in a possible job with the state teacher cadet program. Last March, after attending a teaching seminar in Washington, Mrs. Yeargin says she returned to Greenville two days before annual testing feeling that she hadn't prepared her low-ability geography students adequately.When test booklets were passed out 48 hours ahead of time, she says she copied questions in the social studies section and gave the answers to students. Mrs. Yeargin admits she made a big mistake but insists her motives were correct. "I was trying to help kids in an unfair testing situation," she says. "Only five of the 40 questions were geography questions.The rest were history, sociology, finance -- subjects they never had." Mrs. Yeargin says that she also wanted to help lift Greenville High School's overall test scores, usually near the bottom of 14 district high schools in rankings carried annually by local newspapers.Mostly, she says, she wanted to prevent the damage to self-esteem that her low-ability students would suffer from doing badly on the test. "These kids broke my heart," she says. "A whole day goes by and no one even knows they're alive.They desperately needed somebody who showed they cared for them, who loved them.The last thing they needed was another drag-down blow." School officials and prosecutors say Mrs. Yeargin is lying.They found students in an advanced class a year earlier who said she gave them similar help, although because the case wasn't tried in court, this evidence was never presented publicly. "That pretty much defeats any inkling that she was out to help the poor underprivileged child," says Joe Watson, the prosecutor in the case, who is also president of Greenville High School's alumni association.Mrs. Yeargin concedes that she went over the questions in the earlier class, adding: "I wanted to help all" students. Mr. Watson says Mrs. Yeargin never complained to school officials that the standardized test was unfair. "Do I have much sympathy for her?" Mr. Watson asks. "Not really.I believe in the system.I believe you have to use the system to change it.What she did was like taking the law into your own hands." Mrs. Ward says that when the cheating was discovered, she wanted to avoid the morale-damaging public disclosure that a trial would bring.She says she offered Mrs. Yeargin a quiet resignation and thought she could help save her teaching certificate.Mrs. Yeargin declined. "She said something like `You just want to make it easy for the school. ' I was dumbfounded," Mrs. Ward recalls. "It was like someone had turned a knife in me." To the astonishment and dismay of her superiors and legal authorities -- and perhaps as a measure of the unpopularity of standardized tests -- Mrs. Yeargin won widespread local support.The school-board hearing at which she was dismissed was crowded with students, teachers and parents who came to testify on her behalf.Supportive callers decried unfair testing, not Mrs. Yeargin, on a local radio talk show on which she appeared. The show didn't give the particulars of Mrs. Yeargin's offense, saying only that she helped students do better on the test. "The message to the board of education out of all this is we've got to take a serious look at how we're doing our curriculum and our testing policies in this state," said the talk-show host.Editorials in the Greenville newspaper allowed that Mrs. Yeargin was wrong, but also said the case showed how testing was being overused. The radio show "enraged us," says Mrs. Ward.Partly because of the show, Mr. Watson says, the district decided not to recommend Mrs. Yeargin for a first-time offenders program that could have expunged the charges and the conviction from her record.And legal authorities cranked up an investigation worthy of a murder case.Over 50 witnesses, mostly students, were interviewed. At Greenville High School, meanwhile, some students -- especially on the cheerleading squad -- were crushed. "It's hard to explain to a 17-year-old why someone they like had to go," says Mrs. Ward.Soon, T-shirts appeared in the corridors that carried the school's familiar red-and-white GHS logo on the front.On the back, the shirts read, "We have all the answers." Many colleagues are angry at Mrs. Yeargin. "She did a lot of harm," says Cathryn Rice, who had discovered the crib notes. "We work damn hard at what we do for damn little pay, and what she did cast unfair aspersions on all of us." But several teachers also say the incident casts doubt on the wisdom of evaluating teachers or schools by using standardized test scores.Says Gayle Key, a mathematics teacher, "The incentive pay thing has opened up a can of worms.There may be others doing what she did." Mrs. Yeargin says she pleaded guilty because she realized it would no longer be possible to win reinstatement, and because she was afraid of further charges.Mrs. Ward, for one, was relieved.Despite the strong evidence against Mrs. Yeargin, popular sentiment was so strong in her favor, Mrs. Ward says, that "I'm afraid a jury wouldn't have convicted her."
Since chalk first touched slate, schoolchildren have wanted to know: What's on the test?These days, students can often find the answer in test-coaching workbooks and worksheets their teachers give them in the weeks prior to taking standardized achievement tests. The mathematics section of the widely used California Achievement Test asks fifth graders: "What is another name for the Roman numeral IX?" It also asks them to add two-sevenths and three-sevenths. Worksheets in a test-practice kit called Learning Materials, sold to schools across the country by Macmillan/McGraw-Hill School Publishing Co., contain the same questions.In many other instances, there is almost no difference between the real test and Learning Materials.What's more, the test and Learning Materials are both produced by the same company, Macmillan/McGraw-Hill, a joint venture of McGraw-Hill Inc. and Macmillan's parent, Britain's Maxwell Communication Corp. Close parallels between tests and practice tests are common, some educators and researchers say.Test-preparation booklets, software and worksheets are a booming publishing subindustry.But some practice products are so similar to the tests themselves that critics say they represent a form of school-sponsored cheating. "If I took {these preparation booklets} into my classroom, I'd have a hard time justifying to my students and parents that it wasn't cheating," says John Kaminski, a Traverse City, Mich., teacher who has studied test coaching.He and other critics say such coaching aids can defeat the purpose of standardized tests, which is to gauge learning progress. "It's as if France decided to give only French history questions to students in a European history class, and when everybody aces the test, they say their kids are good in European history," says John Cannell, an Albuquerque, N.M., psychiatrist and founder of an educational research organization, Friends for Education, which has studied standardized testing. Standardized achievement tests are given about 10 million times a year across the country to students generally from kindergarten through eighth grade.The most widely used of these tests are Macmillan/McGraw's CAT and Comprehensive Test of Basic Skills; the Iowa Test of Basic Skills, by Houghton Mifflin Co.; and Harcourt Brace Jovanovich Inc. 's Metropolitan Achievement Test and Stanford Achievement Test. Sales figures of the test-prep materials aren't known, but their reach into schools is significant.In Arizona, California, Florida, Louisiana, Maryland, New Jersey, South Carolina and Texas, educators say they are common classroom tools. Macmillan/McGraw says "well over 10 million" of its Scoring High test-preparation books have been sold since their introduction 10 years ago, with most sales in the last five years.About 20,000 sets of Learning Materials teachers' binders have also been sold in the past four years.The materials in each set reach about 90 students.Scoring High and Learning Materials are the best-selling preparation tests. Michael Kean, director of marketing for CTB Macmillan/McGraw, the Macmillan/McGraw division that publishes Learning Materials, says it isn't aimed at improving test scores.He also asserted that exact questions weren't replicated.When referred to the questions that matched, he said it was coincidental. Mr. Kaminski, the schoolteacher, and William Mehrens, a Michigan State University education professor, concluded in a study last June that CAT test versions of Scoring High and Learning Materials shouldn't be used in the classroom because of their similarity to the actual test.They devised a 69-point scale -- awarding one point for each subskill measured on the CAT test -- to rate the closeness of test preparatives to the fifth-grade CAT. Because many of these subskills -- the symmetry of geometrical figures, metric measurement of volume, or pie and bar graphs, for example -- are only a small part of the total fifth-grade curriculum, Mr. Kaminski says, the preparation kits wouldn't replicate too many, if their real intent was general instruction or even general familiarization with test procedures.But Learning Materials matched on 66.5 of 69 subskills.Scoring High matched on 64.5. In CAT sections where students' knowledge of two-letter consonant sounds is tested, the authors noted that Scoring High concentrated on the same sounds that the test does -- to the exclusion of other sounds that fifth graders should know. Learning Materials for the fifth-grade contains at least a dozen examples of exact matches or close parallels to test items. Rick Brownell, senior editor of Scoring High, says that Messrs.Kaminski and Mehrens are ignoring "the need students have for becoming familiar with tests and testing format." He said authors of Scoring High "scrupulously avoid" replicating exact questions, but he doesn't deny that some items are similar. When Scoring High first came out in 1979, it was a publication of Random House.McGraw-Hill was outraged.In a 1985 advisory to educators, McGraw-Hill said Scoring High shouldn't be used because it represented a "parallel form" of the CAT and CTBS tests.But in 1988, McGraw-Hill purchased the Random House unit that publishes Scoring High, which later became part of Macmillan/McGraw.Messrs.Brownell and Kean say they are unaware of any efforts by McGraw-Hill to modify or discontinue Scoring High.
The Internal Revenue Service has threatened criminal sanctions against lawyers who fail to report detailed information about clients who pay them more than $10,000 in cash. The warnings, issued to at least 100 criminal defense attorneys in several major cities in the last week, have led to an outcry by members of the organized bar, who claim the information is protected by attorney-client privilege. The IRS warnings stem from a 1984 law that requires anyone who receives more than $10,000 in cash from a client or customer in one or more related transactions "in the course of trade or business" to report the payment on a document known as Form 8300.The form asks for such details as the client's name, Social Security number, passport number and details about the services provided for the payment. Failure to complete the form had been punishable as a misdemeanor until last November, when Congress determined that the crime was a felony punishable by up to 10 years in prison. Attorneys have argued since 1985, when the law took effect, that they cannot provide information about clients who don't wish their identities to be known.Many attorneys have returned incomplete forms to the IRS in recent years, citing attorney-client privilege.Until last week, the IRS rarely acted on the incomplete forms. "This form forces a lawyer to become, in effect, a witness against his client," said Neal R. Sonnett, president of the National Association of Criminal Defense Lawyers. "The IRS is asking lawyers to red-flag a criminal problem to the government," added Mr. Sonnett, a Miami lawyer who has heard from dozens of attorneys who received letters in recent days and has himself received the computer-generated IRS forms sent by certified mail. Mr. Sonnett said that clients who pay cash may include alleged drug dealers who don't have domestic bank accounts.These individuals may not necessarily be under investigation when they hire lawyers.Mr. Sonnett said there also may be other circumstances under which individuals wouldn't want the government to know they had retained criminal defense lawyers.Filling out detailed forms about these individuals would tip the IRS off and spark action against the clients, he said.The defense lawyers' group formed a task force this week, chaired by New York attorney Gerald Lefcourt, to deal with the matter. The American Bar Association's House of Delegates passed a resolution in 1985 condemning the IRS reporting requirement.Michael Ross, a New York lawyer who heads the ABA's grand jury committee, said that lawyers are prohibited by the ABA's code of ethics from disclosing information about a client except where a court orders it or to prevent the client from committing a criminal act that could result in death. Mr. Ross said he met with officials of the IRS and the Justice Department, which would bring any enforcement actions against taxpayers, to discuss the issue last May.At that meeting, he said, the Justice Department assured him that enforcement procedures wouldn't be threatened against attorneys without further review and advance notice.Mr. Ross said IRS officials opposed the Justice Department's moderate stance on the matter. But in the letters sent in recent days, Christopher J. Lezovich of the IRS computing center in Detroit, told attorneys that "failing to voluntarily submit the requested information could result in summons enforcement action being initiated." In some cases, the IRS asked for information dating back to forms it received in 1985. A spokesman for the IRS confirmed that "there has been correspondence mailed about incomplete 8300s," but he declined to say why the letters were sent to lawyers now.Individuals familiar with the Justice Department's policy said that Justice officials hadn't any knowledge of the IRS's actions in the last week. Lawyers worry that if they provide information about clients, that data could quickly end up in the hands of prosecutors.Prosecutors need court permission to obtain the tax returns of an individual or a business.But they have obtained 8300 forms without court permission and used the information to help develop criminal cases. Some criminal lawyers speculated that the IRS was sending the letters to test the issue.In a number of recent cases, federal courts have refused to recognize attorneys' assertions that information relating to fees from clients should be confidential. THE WAR OVER FEDERAL JUDICIAL SALARIES takes a victim. Often, judges ease into more lucrative private practice with little fanfare, but not federal Judge Raul A. Ramirez in Sacramento, Calif.On Tuesday, the judge called a news conference to say he was quitting effective Dec. 31 to join a San Francisco law firm.The reason: the refusal of Congress to give federal judges a raise. "A couple of my law clerks were going to pass me in three or four years, and I was afraid I was going to have to ask them for a loan," the judge quipped in an interview.Federal judges make $89,500 annually; in February, Congress rejected a bill that would have increased their pay by 50%. Judge Ramirez, 44, said it is unjust for judges to make what they do. "Judges are not getting what they deserve.You look around at professional ballplayers or accountants . . . and nobody blinks an eye.When you become a federal judge, all of a sudden you are relegated to a paltry sum." At his new job, as partner in charge of federal litigation in the Sacramento office of Orrick, Herrington & Sutcliffe, he will make out much better. The judge declined to discuss his salary in detail, but said: "I'm going to be a high-priced lawyer." DOONESBURY CREATOR'S UNION TROUBLES are no laughing matter. Cartoonist Garry Trudeau is suing the Writers Guild of America East for $11 million, alleging it mounted a "campaign to harass and punish" him for crossing a screenwriters' picket line. The dispute involves Darkhorse Productions Inc., a TV production company in which Mr. Trudeau is a co-owner.Mr. Trudeau, a Writers Guild member, also was employed as a writer for Darkhorse, which was covered by a guild collective-bargaining agreement. The guild began a strike against the TV and movie industry in March 1988.In his lawsuit, Mr. Trudeau says the strike illegally included Darkhorse, and the cartoonist refused to honor the strike against the company.A spokesman for the guild said the union's lawyers are reviewing the suit.He said disciplinary proceedings are confidential and declined to comment on whether any are being held against Mr. Trudeau. Mr. Trudeau's attorney, Norman K. Samnick, said the harassment consists mainly of the guild's year-long threats of disciplinary action.Mr. Samnick said a guild disciplinary hearing is scheduled next Monday in New York.Mr. Samnick, who will go before the disciplinary panel, said the proceedings are unfair and that any punishment from the guild would be unjustified. In addition to the damages, the suit seeks a court order preventing the guild from punishing or retaliating against Mr. Trudeau. ABORTION RULING UPHELD: A federal appeals court upheld a lower court ruling that the U.S. can bar the use of federal funds for family-planning programs that include abortion-related services.A Department of Health and Human Services rule adopted in 1988 prohibits the use of so-called Title X funds for programs that assist a woman in obtaining an abortion, such as abortion counseling and referrals.The rule also prohibits funding for activities that "encourage, promote or advocate abortion." Title X funds are the single largest source of federal funding for family-planning services, according to the opinion by the Second U.S. Circuit Court of Appeals in New York.The panel ruled that the restrictions don't violate the freedom of speech of health care providers and that the limits on counseling services don't violate the rights of pregnant women. INQUIRY CLEARS TEXAS JUDGE of bias in comments on homosexual murder victims. Dallas District Judge Jack Hampton had sparked calls for a judicial inquiry with his remarks to the press last December, two weeks after sentencing an 18-year-old defendant to 30 years in state prison for killing two homosexual men in a city park.The judge was quoted as referring to the victims as "queers" and saying they wouldn't have been killed "if they hadn't been cruising the streets picking up teenage boys." But Robert R. Murray, a special master appointed by the Texas Supreme Court, said Judge Hampton didn't breach any judicial standards of fairness, although he did violate the state's judicial code by commenting publicly on a pending case.Observing that the judge "has never exhibited any bias or prejudice," Mr. Murray concluded that he "would be impartial in any case involving a homosexual or prostitute" as a victim.Mr. Murray also said Judge Hampton's comments didn't discredit the judiciary or the administration of justice. The report is subject to review by the State Commission on Judicial Conduct, which is empowered to impose sanctions. GAF TRIAL goes to round three.Attorneys in the third stock-manipulation trial of GAF Corp. began opening arguments yesterday in the Manhattan courtroom of U.S. District Judge Mary Johnson Lowe.In an eight-count indictment, the government has charged GAF, a Wayne, N.J., specialty chemical maker, and its Vice Chairman James T. Sherwin with attempting to manipulate the common stock of Union Carbide Corp. in advance of GAF's planned sale of a large block of the stock in November 1986.The first two GAF trials ended in mistrials earlier this year.This trial is expected to last five weeks. SWITCHING TO THE DEFENSE: A former member of the prosecution team in the Iran/Contra affair joined the Chicago firm of Mayer, Brown & Platt.Michael R. Bromwich, a member since January 1987 of the three-lawyer trial team in the prosecution of Oliver North, became a partner in the Washington, D.C., office of the 520-lawyer firm.He will specialize in white-collar criminal defense work.Mr. Bromwich, 35, also has served as deputy chief and chief of the narcotics unit for the U.S. attorney's office for the Southern District of New York, based in Manhattan.
Rekindled hope that two New England states will allow broader interstate banking boosted Nasdaq's bank stocks, but the over-the-counter market was up only slightly in lackluster trading. The Nasdaq composite index added 1.01 to 456.64 on paltry volume of 118.6 million shares.In terms of volume, it was an inauspicious beginning for November.Yesterday's share turnover was well below the year's daily average of 133.8 million.In October, the busiest month of the year so far, daily volume averaged roughly 145 million shares. The Nasdaq 100 index of the biggest nonfinancial stocks gained 1.39 to 446.62.The index of the 100 largest Nasdaq financial stocks rose modestly as well, gaining 1.28 to 449.04.But the broader Nasdaq bank index, which tracks thrift issues, jumped 3.23 to 436.01. The bank stocks got a boost when Connecticut Bank & Trust and Bank of New England said they no longer oppose pending legislation that would permit banks from other regions to merge with Connecticut and Massachusetts banks.The two banks merged in 1985.Bank of New England's shares are traded on the New York Stock Exchange. The stocks of banking concerns based in Massachusetts weren't helped much by the announcement, traders said, because many of those concerns have financial problems tied to their real-estate loan portfolios, making them unattractive takeover targets. But speculators, anticipating that Connecticut will approve a law permitting such interstate banking soon, immediately bid up shares of Connecticut banks on the news. "A lot of the stocks that have been under water finally saw a reason to uptick," said George Jennison, head trader of banking issues in Shearson Lehman Hutton's OTC department. The biggest beneficiary was Northeast Bancorp, which surged 7 3/4 to 69.The Stamford, Conn., concern has agreed to a buy-out by Bank of New York in a transaction with an indicated value of about $100 a share that expires next August.Ed Macheski, a Wilton, Conn., money manager who follows bank stocks, said the announcement effectively gives the deal "the green light." Mr. Jennison said Northeast Bancorp also fared well because takeover stocks have returned to favor among investors.Another OTC bank stock involved in a buy-out deal, First Constitution Financial, was higher.It rose 7/8 to 18 1/4.First Constitution has signed a merger agreement with WFRR L.P. and GHKM Corp., under which all of its common shares will be acquired for $25 each, or $273.5 million. Among other Connecticut banks whose shares trade in the OTC market, Society for Savings Bancorp, based in Hartford, saw its stock rise 1 3/4 to 18 1/4.Centerbank added 5/8 to 8 3/4; shares of NESB, a New London-based bank holding company, rose 5/8 to 5 7/8. Among other banking issues, Pennview Savings Association leapt more than 44% with a gain of 6 5/8 to 21 5/8.The Pennsylvania bank agreed to be acquired in a merger with Univest Corp. of Pennsylvania for $25.50 a share.Valley Federal Savings & Loan, a California thrift issue, gained 1 to 4 1/4 after reporting a third-quarter loss of $70.7 million after an $89.9 million pretax charge mostly related to its mobile home financing unit. Dan E. Nelms, Valley Federal's president and chief executive officer, said the one-time charge substantially eliminates future losses associated with the unit.He said the company's core business remains strong.He also said that after the charges, and "assuming no dramatic fluctuation in interest rates, the company expects to achieve near-record earnings in 1990." Weisfield's surged 6 3/4 to 55 1/2 and Ratners Group's American depositary receipts, or ADRs, gained 5/8 to 12 1/4.The two concerns said they entered into a definitive merger agreement under which Ratners will begin a tender offer for all of Weisfield's common shares for $57.50 each. Also on the takeover front, Jaguar's ADRs rose 1/4 to 13 7/8 on turnover of 4.4 million.Since the British auto maker became a takeover target last month, its ADRs have jumped about 78%. After troubled Heritage Media proposed acquiring POP Radio in a stock swap, POP Radio's shares tumbled 4 to 14 3/4.Heritage Media, which already owns about 51% of POP Radio, proposed paying POP Radio shareholders with shares of a new class of Heritage Media preferred stock that would be convertible into four shares of Heritage Media's common. Rally's lost 1 3/4 to 21 3/4.The restaurant operator said it has redeemed its rights issued Monday under its shareholder rights plan. The fast-food company said its decision was based on discussions with a shareholder group, Giant Group Ltd., "in an effort to resolve certain disputes with the company." Giant Group is led by three Rally's directors, Burt Sugarman, James M. Trotter III and William E. Trotter II, who earlier this month indicated they had a 42.5% stake in Rally's and planned to seek a majority of seats on Rally's nine-member board. SCI Systems slipped 7/8 to 10 on volume of 858,000 shares.The Huntsville, Ala., electronic products maker said it expects to post a "significant" loss for its fiscal first quarter ended Sept. 30.In the year-earlier period, SCI had net income of $4.8 million, or 23 cents a share, on revenue of $225.6 million.
The Department of Health and Human Services plans to extend its moratorium on federal funding of research involving fetal-tissue transplants. Medical researchers believe the transplantation of small amounts of fetal tissue into humans could help treat juvenile diabetes and such degenerative diseases as Alzheimer's, Parkinson's and Huntington's.But anti-abortionists oppose such research because they worry that the development of therapies using fetal-tissue transplants could lead to an increase in abortions. James Mason, assistant secretary for health, said the ban on federal funding of fetal-tissue transplant research "should be continued indefinitely." He said the ban won't stop privately funded tissue-transplant research or federally funded fetal-tissue research that doesn't involve transplants. Department officials say that HHS Secretary Louis Sullivan will support Dr. Mason's ruling, which will be issued soon in the form of a letter to the acting director of the National Institutes of Health.Both Dr. Mason and Dr. Sullivan oppose federal funding for abortion, as does President Bush, except in cases where a woman's life is threatened. The controversy began in 1987 when the National Institutes of Health, aware of the policy implications of its research, asked for an HHS review of its plan to implant fetal tissue into the brain of a patient suffering from Parkinson's disease.The department placed a moratorium on the research, pending a review of scientific, legal and ethical issues. A majority of an NIH-appointed panel recommended late last year that the research continue under carefully controlled conditions, but the issue became embroiled in politics as anti-abortion groups continued to oppose federal funding.The dispute has hampered the administration's efforts to recruit prominent doctors to fill prestigious posts at the helm of the NIH and the Centers for Disease Control. Several candidates have withdrawn their names from consideration after administration officials asked them for their views on abortion and fetal-tissue transplants.Antonio Novello, whom Mr. Bush nominated to serve as surgeon general, reportedly has assured the administration that she opposes abortion.Dr. Novello is deputy director of the National Institute of Child Health and Human Development. Some researchers have charged that the administration is imposing new ideological tests for top scientific posts.Earlier this week, Dr. Sullivan tried to defuse these charges by stressing that candidates to head the NIH and the CDC will be judged by "standards of scientific and administrative excellence," not politics. But the administration's handling of the fetal-tissue transplant issue disturbs many scientists. "When scientific progress moves into uncharted ground, there has to be a role for society to make judgments about its applications," says Myron Genel, associate dean of the Yale Medical School. "The disturbing thing about this abortion issue is that the debate has become polarized, so that no mechanism exists" for finding a middle ground. Yale is one of the few medical institutions conducting privately funded research on fetal-tissue transplants.But Dr. Genel warns that Dr. Mason's ruling may discourage private funding. "The unavailability of federal funds, and the climate in which the decision was made, certainly don't provide any incentive for one of the more visible foundations to provide support," he said. Despite the flap over transplants, federal funding of research involving fetal tissues will continue on a number of fronts. "Such research may ultimately result in the ability to regenerate damaged tissues or to turn off genes that cause cancer" or to regulate genes that cause Down's syndrome, the leading cause of mental retardation, according to an NIH summary.The NIH currently spends about $8 million annually on fetal-tissue research out of a total research budget of $8 billion.
Fujitsu Ltd. 's top executive took the unusual step of publicly apologizing for his company's making bids of just one yen for several local government projects, while computer rival NEC Corp. made a written apology for indulging in the same practice. Meanwhile, business and government leaders rebuked the computer makers, and fretted about the broader statement the companies' actions make about Japanese cutthroat pricing. Fujitsu said it bid the equivalent of less than a U.S. penny on three separate municipal contracts during the past two years.The company also disclosed that during that period it offered 10,000 yen, or about $70, for another contract. But Fujitsu, Japan's No. 1 computer maker, isn't alone.NEC, one of its largest domestic competitors, said it bid one yen in two separate public auctions since 1987.In both cases, NEC lost the contract to Fujitsu, which made the same bid and won a tie-breaking lottery.All the contracts were for computer-system-design contracts and involved no hardware or software. The Ministry of International Trade and Industry summoned executives from the companies to "make sure they understood" the concern about such practices, according to a government spokesman. "These cases lead to the loss of the firms' social and international credibility," a ministry statement said. Japan's Fair Trade Commission has said it is considering investigating the bids for possible antitrust-law violations. "We would like to apologize for having caused huge trouble," Fujitsu President Takuma Yamamoto, read from a prepared statement as he stood before a packed news conference at his company's downtown headquarters.The bids, he added, were "contrary to common sense." NEC released a statement saying, "We feel sorry for having caused trouble to society," a form of apology common in Japan for companies caught in embarrassing situations. Japanese companies have long had a reputation for sacrificing short-term profits to make a sale that may have long-term benefits.But the growing controversy comes as many practices historically accepted as normal here -- such as politicians accepting substantial gifts from businessmen or having extramarital affairs -- are coming under close ethical scrutiny. The fire is also fueled by growing international interest in Japanese behavior.So far there have been no public overseas complaints about the issue.But in one of the auctions in question, International Business Machines Corp. made a bid substantially higher than the Fujitsu offer, according to the municipality.The low-ball bids touch on issues central to the increasingly tense trade debate. Foreigners complain that they have limited access to government procurement in Japan, in part because Japanese companies unfairly undercut them.The U.S. government in recent years has accused Japanese companies of excessively slashing prices on semiconductors and supercomputers -- products Fujitsu and NEC make. Asked whether the bidding flap would hurt U.S.-Japan relations, Mr. Yamamoto said, "this will be a minus factor." The "one-yen" controversy first came to a head last week when the city of Hiroshima announced that Fujitsu won a contract to design a computer system to map its waterworks.The city had expected to pay about 11 million yen ($77,000), but Fujitsu essentially offered to do it for free. Then Wednesday, Fujitsu said it made a similar bid to win a library contract in Nagano prefecture two weeks earlier.It also said that in July, it bid 10,000 yen to design a system for the Saitama prefectural library, and two years ago, it bid one yen to plan the telecommunications system for Wakayama prefecture. The company said it has offered to withdraw its bids in Hiroshima and Nagano.The municipalities said they haven't decided whether to try to force the company to go through with the contracts. Fujitsu and NEC said they were still investigating, and that knowledge of more such bids could emerge.Mr. Yamamoto insisted that headquarters hadn't approved the bids, and that he didn't know about most of the cases until Wednesday. Other major Japanese computer companies contacted yesterday said they have never made such bids. "One yen is not ethical," Michio Sasaki, an official at Keidanren, the Japan Federation of Economic Organizations, said. "Profit may be low, but at least costs should be covered."
LSI Logic Corp. reported a surprise $35.7 million third-quarter net loss, including a special restructuring charge that reflects a continuing industry-wide slowdown in semiconductor demand. In September, the custom-chip maker said excess capacity and lagging billings would result in an estimated $2 million to $3 million net loss for the third quarter.But company officials said yesterday that they decided to take a $43 million pretax charge for the period to cover a restructuring of world-wide manufacturing operations, citing extended weakness in the market as well as a decision to switch to more economical production techniques. "Over the summer months, there has been a slowing in the rate of new orders from the computer sector, our primary market," said Wilfred J. Corrigan, chairman and chief executive officer. "In addition, recent industry forecasts for 1990 indicate a slow environment, at least until midyear." As a result, the company said it decided to phase out its oldest capacity and "make appropriate reductions" in operating expenses. The $35.7 million net loss equals 86 cents a share.Not counting the extraordinary charge, the company said it would have had a net loss of $3.1 million, or seven cents a share.A year earlier, it had profit of $7.5 million, or 18 cents a share.Revenue rose 42% to $133.7 million from $94 million. The charge partly reflects a switch from older five-inch to more-efficient six-inch silicon wafers with which to fabricate chips.Related to that decision, the company said it was converting its Santa Clara, Calif., factory to a research and development facility.A spokesman declined to speculate about possible reductions in force. "This is a company that has invested in capacity additions more aggressively than any other company in the industry and now the industry is growing more slowly and they are suddenly poorly positioned," said Michael Stark, chip analyst at Robertson, Stephens & Co. "I think the stock is dead money for a while." Yesterday's announcement was made after markets closed. U.S. chip makers are facing continued slack demand following a traditionally slow summer.Part of the problem is that chip buyers are keeping inventories low because of jitters about the course of the U.S. economy.
The dollar posted gains against all major currencies yesterday, buoyed by persistent Japanese demand for U.S. bond issues. While market sentiment remains cautiously bearish on the dollar based on sluggish U.S. economic indicators, dealers note that Japanese demand has helped underpin the dollar against the yen and has kept the U.S. currency from plunging below key levels against the mark. At the same time, dealers said the U.S. unit has been locked into a relatively narrow range in recent weeks, in part because the hefty Japanese demand for dollars has been offset by the mark's strength, resulting in a stalemate. Jay Goldinger, with Capital Insight Inc., reasons that while the mark has posted significant gains against the yen as well -- the mark climbed to 77.70 yen from 77.56 yen late Tuesday in New York -- the strength of the U.S. bond market compared to its foreign counterparts has helped lure investors to dollar-denominated bonds, rather than mark bonds. "Dollar-yen {trade} is the driving force in the market," said Tom Trettien, a vice president with Banque Paribas in New York, "but I'm not convinced it will continue.Who knows what will happen down the road, in three to six months, if foreign investment starts to erode?" In late New York trading yesterday, the dollar was quoted at 1.8500 marks, up from 1.8415 marks late Tuesday, and at 143.80 yen, up from 142.85 yen late Tuesday.Sterling was quoted at $1.5755, down from $1.5805 late Tuesday. In Tokyo Thursday, the U.S. currency opened for trading at 143.93 yen, up from Wednesday's Tokyo close of 143.08 yen. Douglas Madison, a corporate trader with Bank of America in Los Angeles, traced the dollar's recent solid performance against the yen to purchases of securities by Japanese insurance companies and trust banks and the sense that another wave of investment is waiting in the wings. He contends that the perception in Japan of a vitriolic U.S. response to Sony Corp. 's announcement of its purchase of Columbia Pictures Entertainment Inc. has been temporarily mollified.He cites the recent deal between the Mitsubishi Estate Co. and the Rockefeller Group, as well as the possible white knight role of an undisclosed Japanese company in the Georgia-Pacific Corp. takeover bid for Great Northern Nekoosa Corp. as evidence. The forthcoming maturity in November of a 10-year Japanese government yen-denominated bond issue valued at about $16 billion has prompted speculation in the market that investors redeeming the bonds will diversify into dollar-denominated instruments, according to Mr. Madison. It remains unclear whether the bond issue will be rolled over. Meanwhile, traders in Tokyo say that the prospect of lower U.S. interest rates has spurred dollar buying by Japanese institutions. They point out that these institutions want to lock in returns on high-yield U.S. Treasury debt and suggest demand for the U.S. unit will continue unabated until rates in the U.S. recede. The market again showed little interest in further evidence of a slowing U.S. economy, and traders note that the market in recent weeks has taken its cues more from Wall Street than U.S. economic indicators. Dealers said the dollar merely drifted lower following the release Wednesday of the U.S. purchasing managers' report.The managers' index, which measures the health of the manufacturing sector, stood at 47.6% in October, above September's 46%, and also above average forecasts for the index of 45.3%. Some dealers said the dollar was pressured slightly because a number of market participants had boosted their expectations in the past day and were looking for an index above 50, which indicates an expanding manufacturing economy.But most said the index had no more than a minimal effect on trade. On the Commodity Exchange in New York, gold for current delivery settled at $374.20 an ounce, down 50 cents.Estimated volume was a moderate 3.5 million ounces. In early trading in Hong Kong Thursday, gold was quoted at $374.19 an ounce.
"The Cosby Show" may have single-handedly turned around ratings at NBC since its debut in 1984, and the Huxtable family still keeps millions of viewers laughing Thursday night on the network. But some of the TV stations that bought "Cosby" reruns for record prices two years ago aren't laughing much these days.The reruns have helped ratings at many of the 187 network affiliates and independent TV stations that air the shows.But the ratings are considerably below expectations, and some stations say they may not buy new episodes when their current contracts expire. Meanwhile, stations are fuming because, many of them say, the show's distributor, Viacom Inc., is giving an ultimatum: Either sign new long-term commitments to buy future episodes or risk losing "Cosby" to a competitor.At the same time, Viacom is trying to persuade stations to make commitments to "A Different World," a spin-off of "Cosby" whose reruns will become available in 1991. Viacom denies it's using pressure tactics. "We're willing to negotiate," says Dennis Gillespie, executive vice president of marketing. "We're offering this plan now because we feel it's the right time." But, says the general manager of a network affiliate in the Midwest, "I think if I tell them I need more time, they'll take `Cosby' across the street," Viacom's move comes as the syndication market is being flooded with situation comedies that are still running on the networks.One station manager says he believes Viacom's move is a "pre-emptive strike" because the company is worried that "Cosby" ratings will continue to drop in syndication over the next few years. "Cosby" is down a full ratings point in the week of Oct. 2-8 over the same week a year ago, according to A.C. Nielsen Co. Mr. Gillespie at Viacom says the ratings are rising. And executives at stations in such major markets as Washington; Providence, R.I.; Cleveland; Raleigh, N.C.; Minneapolis, and Louisville, Ky., say they may very well not renew "Cosby." Dick Lobo, the general manager of WTVJ, the NBC-owned station in Miami, for example, says the show has "been a major disappointment to us." "At the prices we were charged, there should have been some return for the dollar.There wasn't." Neil Kuvin, the general manager of WHAS, the CBS affiliate in Louisville, says "Cosby" gets the station's highest ratings and he's "pleased." But he adds, "I feel pressured, disappointed, uncomfortable and, frankly, quite angry with Viacom."
In this era of frantic competition for ad dollars, a lot of revenue-desperate magazines are getting pretty cozy with advertisers -- fawning over them in articles and offering pages of advertorial space.So can a magazine survive by downright thumbing its nose at major advertisers? Garbage magazine, billed as "The Practical Journal for the Environment," is about to find out. Founded by Brooklyn, N.Y., publishing entrepreneur Patricia Poore, Garbage made its debut this fall with the promise to give consumers the straight scoop on the U.S. waste crisis.The magazine combines how-to pieces on topics like backyard composting, explanatory essays on such things as what happens after you flush your toilet, and hard-hitting pieces on alleged environmental offenders. Garbage editors have dumped considerable energy into a whirling rampage through supermarket aisles in a bid to identify corporate America's good guys and bad boys.In one feature, called "In the Dumpster," editors point out a product they deem to be a particularly bad offender.From an advertising standpoint, the problem is these offenders are likely to be some of the same folks that are major magazine advertisers these days. With only two issues under its belt, Garbage has alienated some would-be advertisers and raised the ire of others.Campbell Soup, for one, is furious its Souper Combo microwave product was chastised in the premiere "In the Dumpster" column.The magazine's editors ran a giant diagram of the product with arrows pointing to the packaging's polystyrene foam, polyproplene and polyester film -- all plastic items they say are non-biodegradable. "It's precisely the kind of product that's created the municipal landfill monster," the editors wrote. "I think that this magazine is not only called Garbage, but it is practicing journalistic garbage," fumes a spokesman for Campbell Soup.He says Campbell wasn't even contacted by the magazine for the opportunity to comment.Modifications had been made to the Souper Combo product at the time the issue was printed, he says, making it less an offender than was portrayed.He admits, though, it isn't one of Campbell Soup's better products in terms of recyclability. Campbell Soup, not surprisingly, doesn't have any plans to advertise in the magazine, according to its spokesman. Some media experts question whether a young magazine can risk turning off Madison Avenue's big spenders. "You really need the Campbell Soups of the world to be interested in your magazine if you're going to make a run of it," says Mike White, senior vice president and media director at DDB Needham, Chicago. "The economics of magazine publishing pretty much require that you have a pretty solid base" of big-time ad spenders, he adds. The first two issues featured ads from only a handful of big advertisers, including General Electric and Adolph Coors, but the majority were from companies like Waste Management Inc. and Bumkins International, firms that don't spend much money advertising and can't be relied on to support a magazine over the long haul. A Waste Management spokeswoman says its ad in the premiere issue was a one-time purchase, and it doesn't have any plans to advertise in future issues. "We don't spend much on print advertising," she says. But Ms. Poore, the magazine's editor and publisher, contends Garbage can survive, at least initially, on subscription revenues.Individual copies of the magazine sell for $2.95 and yearly subscriptions cost $21. (It is, of course, printed on recycled paper.) According to Ms. Poore, Old-House Journal Corp., her publishing company, printed and sold all 126,000 copies of the premiere issue.The first and second issues sold out on newsstands, she says, and the magazine has orders for 93,000 subscriptions. Asked whether potential advertisers will be scared away by the magazine's direct policy, Ms. Poore replies: "I don't know and I don't care.I'm not saying advertising revenue isn't important," she says, "but I couldn't sleep at night" if the magazine bowed to a company because they once took out an ad. Ad Notes. . . . INTERPUBLIC ON TV: Interpublic Group said its television programming operations -- which it expanded earlier this year -- agreed to supply more than 4,000 hours of original programming across Europe in 1990.It said the programs, largely game shows, will be provided by its E.C. Television unit along with Fremantle International, a producer and distributor of game shows of which it recently bought 49%.It said that volume makes it the largest supplier of original TV programming in Europe.Interpublic is providing the programming in return for advertising time, which it said will be valued at more than $75 million in 1990 and $150 million in 1991.It plans to sell the ad time to its clients at a discount.NEW ACCOUNT: CoreStates Financial Corp., Philadelphia, named Earle Palmer Brown & Spiro, Philadelphia, as agency of record for its $5 million account.The business had been handled by VanSant Dugdale, Baltimore. AT&T FAX: American Telephone & Telegraph's General Business Systems division, New York, awarded the ad account for its Fax product line to Ogilvy & Mather, New York, a WPP Group agency.Billings weren't disclosed for the small account, which had been serviced at Young & Rubicam, New York. FIRST CAMPAIGN: Enterprise Rent-A-Car Inc. breaks its first national ad campaign this week.The St. Louis firm specializes in replacement-car rentals, those provided by insurance companies for cars damaged in accidents.Developed by Avrett, Free & Ginsberg, New York, the $6 million campaign pitches Enterprise's consumer-driven service and its free pick-up and drop-off service. LANDOR ASSOCIATES: Young & Rubicam said it completed its acquisition of Landor Associates, a San Francisco identity-management firm. ACQUISITION: Ketchum Communications, Pittsburgh, acquired Braun & Co., a Los Angeles investor-relations and marketing-communications firm.Terms weren't disclosed.
Sea Containers Ltd. said it might increase the price of its $70-a-share buy-back plan if pressed by Temple Holdings Ltd., which made an earlier tender offer for Sea Containers. Sea Containers, a Hamilton, Bermuda-based shipping concern, said Tuesday that it would sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 apiece. The move is designed to ward off a hostile takeover attempt by two European shipping concerns, Stena Holding AG and Tiphook PLC.In May, the two companies, through their jointly owned holding company, Temple, offered $50 a share, or $777 million, for Sea Containers.In August, Temple sweetened the offer to $63 a share, or $963 million. Yesterday, Sea Containers' chief executive officer, James Sherwood, said in an interview that, under the asset-sale plan, Sea Containers would end up with a cash surplus of approximately $620 million.About $490 million of that would be allocated to the buy-back, leaving about $130 million, he said. That $130 million, Mr. Sherwood said, "gives us some flexibility in case Temple raises its bid.We are able to increase our price above the $70 level if necessary." He declined to say, however, how much Sea Containers might raise its price. Mr. Sherwood speculated that the leeway that Sea Containers has means that Temple would have to "substantially increase their bid if they're going to top us." Temple, however, harshly criticized Sea Containers' plan yesterday, characterizing it as a "highly conditional device designed to entrench management, confuse shareholders and prevent them from accepting our superior cash offer." A spokesman for Temple estimated that Sea Containers' plan -- if all the asset sales materialize -- would result in shareholders receiving only $36 to $45 a share in cash.The lower figures, the spokesman said, would stem from preferred shares being converted to common stock and the possibility that Sea Containers' subsidiaries might be required to place their shares in the open market. Temple added that Sea Containers is still mired in legal problems in Bermuda, where the Supreme Court has temporarily barred Sea Containers from buying back its own stock in a case brought by Stena and Tiphook. {The court has indicated it will rule on the case by the end of the month.} Temple also said Sea Containers' plan raises "numerous legal, regulatory, financial and fairness issues," but didn't elaborate. Mr. Sherwood said reaction to Sea Containers' proposal has been "very positive." In New York Stock Exchange composite trading yesterday, Sea Containers closed at $62.625, up 62.5 cents.
The Transportation Department, responding to pressure from safety advocates, took further steps to impose on light trucks and vans the safety requirements used for automobiles. The department proposed requiring stronger roofs for light trucks and minivans, beginning with 1992 models.It also issued a final rule requiring auto makers to equip light trucks and minivans with lap-shoulder belts for rear seats beginning in the 1992 model year.Such belts already are required for the vehicles' front seats. "Today's action," Transportation Secretary Samuel Skinner said, "represents another milestone in the ongoing program to promote vehicle occupant safety in light trucks and minivans through its extension of passenger car standards." In September, the department had said it will require trucks and minivans to be equipped with the same front-seat headrests that have long been required on passenger cars. The Big Three auto makers said the rule changes weren't surprising because Bush administration officials have long said they planned to impose car safety standards on light trucks and vans. Safety advocates, including some members of Congress, have been urging the department for years to extend car-safety requirements to light trucks and vans, which now account for almost one-third of all vehicle sales in the U.S.They say that many vehicles classed as commercial light trucks actually carry more people than cargo and therefore should have the same safety features as cars. They didn't have much luck during the Reagan administration. "But now, there seems to be a fairly systematic effort to address the problem," said Chuck Hurley, vice president of communications for the Insurance Institute for Highway Safety. "We're in a very different regulatory environment." Sen. John Danforth (R., Mo.) praised the department's actions, noting that rollover crashes account for almost half of all light-truck deaths. "We could prevent many of these fatalities with minimum roof-crush standards," he said. Sen. Danforth and others also want the department to require additional safety equipment in light trucks and minivans, including air bags or automatic seat belts in front seats and improved side-crash protection. The department's roof-crush proposal would apply to vehicles weighing 10,000 pounds or less.The roofs would be required to withstand a force of 1.5 times the unloaded weight of the vehicle.During the test, the roof couldn't be depressed more than five inches. In Detroit, a Chrysler Corp. official said the company currently has no rear-seat lap and shoulder belts in its light trucks, but plans to begin phasing them in by the end of the 1990 model year.He said Chrysler fully expects to have them installed across its light-truck line by the Sept. 1, 1991, deadline.Chrysler said its trucks and vans already meet the roof-crush resistance standard for cars. John Leinonen, executive engineer of Ford Motor Co. 's auto-safety office, said Ford trucks have met car standards for roof-crush resistance since 1982.Ford began installing the rear-seat belts in trucks with its F-series Crew Cab pickups in the 1989 model year.The new Explorer sport-utility vehicle, set for introduction next spring, will also have the rear-seat belts.Mr. Leinonen said he expects Ford to meet the deadline easily.
When Warren Winiarski, proprietor of Stag's Leap Wine Cellars in Napa Valley, announced a $75 price tag for his 1985 Cask 23 Cabernet this fall, few wine shops and restaurants around the country balked. "This is the peak of my wine-making experience," Mr. Winiarski declared when he introduced the wine at a dinner in New York, "and I wanted to single it out as such." It is in my estimation the best wine Stag's Leap has produced, and with fewer than 700 cases available, it is sure to sell quickly.The price is a new high for California Cabernet Sauvignon, but it is not the highest.Diamond Creek 1985 Lake Vineyard Cabernet weighed in this fall with a sticker price of $100 a bottle. One of the fastest growing segments of the wine market is the category of superpremiums -- wines limited in production, of exceptional quality (or so perceived, at any rate), and with exceedingly high prices.For years, this group included a stable of classics -- Bordeaux first growths (Lafite-Rothschild, Latour, Haut-Brion, Petrus), Grand Cru Burgundies (Romanee-Conti and La Tache) deluxe Champagnes (Dom Perignon or Roederer Cristal), rarefied sweet wines (Chateau Yquem or Trockenbeerenauslesen Rieslings from Germany, and Biondi-Santi Brunello Riserva from Tuscany).These first magnitude wines ranged in price from $40 to $125 a bottle. In the last year or so, however, this exclusive club has taken in a host of flashy new members.The classics have zoomed in price to meet the competition, and it almost seems that there's a race on to come up with the priciest single bottle, among current releases from every major wine region on the globe. France can boast the lion's share of high-priced bottles.Bordeaux's first growths from 1985 and 1986 are $60 to $80 each (except for the smallest in terms of production, Chateau Petrus, which costs around $250!).These prices seem rather modest, however, in light of other French wines from current vintages.Chateau Yquem, the leading Sauternes, now goes for well over $100 a bottle for a lighter vintage like 1984; the spectacularly rich 1983 runs $179. In Champagne, some of the prestige cuvees are inching toward $100 a bottle.The first Champagne to crack that price barrier was the 1979 Salon de Mesnil Blanc de Blancs.The '82 Salon is $115.Roederer Cristal at $90 a bottle sells out around the country and Taittinger's Comtes de Champagne Blanc de Blancs is encroaching upon that level.The great reds of the Rhone Valley have soared in price as well.E. Guigal's 1982 Cote Rotie La Landonne, for example, is $120. None of France's wine regions can steal a march on Burgundy, however.The six wines of the Domaine de la Romanee-Conti, 72 of the most precious acres of vineyard anywhere in the world, have commanded three-digit price tags for several years now.With the 1985 vintage, they soared higher: La Tache, $195; Richebourg, $180; Romanee-Conti, $225.Another small Burgundy estate, Coche-Dury, has just offered its 1987 Corton-Charlemagne for $155. From Italy there is Angelo Gaja Barbaresco at $125 a bottle, Piero Antinori's La Solaia, a $90 Cabernet from Tuscany, and Biondi-Santi Brunello at $98.Spain's Vega Secilia Unico 1979 (released only in its 10th year) is $70, as is Australia's Grange Hermitage 1982. "There are certain cult wines that can command these higher prices," says Larry Shapiro of Marty's, one of the largest wine shops in Dallas. "What's different is that it is happening with young wines just coming out.We're seeing it partly because older vintages are growing more scarce." Wine auctions have almost exhausted the limited supply of those wines, Mr. Shapiro continued: "We've seen a dramatic decrease in demand for wines from the '40s and '50s, which go for $300 to $400 a bottle.Some of the newer wines, even at $90 to $100 a bottle or so, almost offer a bargain." Take Lake Vineyard Cabernet from Diamond Creek.It's made only in years when the grapes ripen perfectly (the last was 1979) and comes from a single acre of grapes that yielded a mere 75 cases in 1987.Owner Al Brownstein originally planned to sell it for $60 a bottle, but when a retailer in Southern California asked, "Is that wholesale or retail?" he re-thought the matter.Offering the wine at roughly $65 a bottle wholesale ($100 retail), he sent merchants around the country a form asking them to check one of three answers: 1) no, the wine is too high (2 responses); 2) yes, it's high but I'll take it (2 responses); 3) I'll take all I can get (58 responses).The wine was shipped in six-bottle cases instead of the usual 12, but even at that it was spread thin, going to 62 retailers in 28 states. "We thought it was awfully expensive," said Sterling Pratt, wine director at Schaefer's in Skokie, Ill., one of the top stores in suburban Chicago, "but there are people out there with very different opinions of value.We got our two six-packs -- and they're gone." Mr. Pratt remarked that he thinks steeper prices have come about because producers don't like to see a hit wine dramatically increase in price later on.Even if there is consumer resistance at first, a wine that wins high ratings from the critics will eventually move. "There may be sticker-shock reaction initially," said Mr. Pratt, "but as the wine is talked about and starts to sell, they eventually get excited and decide it's worth the astronomical price to add it to their collection." "It's just sort of a one-upsmanship thing with some people," added Larry Shapiro. "They like to talk about having the new Red Rock Terrace {one of Diamond Creek's Cabernets} or the Dunn 1985 Cabernet, or the Petrus.Producers have seen this market opening up and they're now creating wines that appeal to these people." That explains why the number of these wines is expanding so rapidly.But consumers who buy at this level are also more knowledgeable than they were a few years ago. "They won't buy if the quality is not there," said Cedric Martin of Martin Wine Cellar in New Orleans. "Or if they feel the wine is overpriced and they can get something equally good for less." Mr. Martin has increased prices on some wines (like Grgich Hills Chardonnay, now $32) just to slow down movement, but he is beginning to see some resistance to high-priced red Burgundies and Cabernets and Chardonnays in the $30 to $40 range. Image has, of course, a great deal to do with what sells and what doesn't, and it can't be forced.Wine merchants can't keep Roederer Cristal in stock, but they have to push Salon le Mesnil, even lowering the price from $115 to $90.It's hardly a question of quality -- the 1982 Salon is a beautiful wine, but, as Mr. Pratt noted, people have their own ideas about value. It's interesting to find that a lot of the expensive wines aren't always walking out the door.In every major market in the U.S., for instance, you can buy '86 La Tache or Richebourg, virtually all of the first growth Bordeaux (except Petrus), as well as Opus One and Dominus from California and, at the moment, the Stag's Leap 1985 Cask 23. With the biggest wine-buying period of the year looming as the holidays approach, it will be interesting to see how the superpremiums fare.By January it should be fairly clear what's hot -- and what's not. Ms. Ensrud is a free-lance wine writer in New York.
Signs of a slowing economy are increasing pressure on the Federal Reserve to cut short-term interest rates, but it isn't clear whether the central bank will do so. A survey by the Fed's 12 district banks shows economic growth has been sluggish in recent weeks, while upward pressures on prices have moderated. "The economy is clearly slowing," says Robert Black, president of the Richmond Federal Reserve Bank. "If you look at the third quarter as posting roughly 2.5% growth, I do see some slowing in the fourth quarter," agrees Kansas City Fed President Roger Guffey. Nevertheless, both Mr. Guffey and Mr. Black say the slowdown so far is no cause for concern. "We're coming closer to achieving the stated objective of slowing the economy to a point where hopefully some downward trend in prices will occur," said Mr. Guffey. Bush administration officials are looking to the Fed to bring down rates, and financial markets seem to be expecting easier credit as well. "I think the market had been expecting the Fed to ease sooner and a little more than it has to date," said Robert Johnson, vice president of global markets for Bankers Trust Co. The Fed cut the key federal funds interest rate by about 0.25 percentage point to 8.75% after the Oct. 13 stock market plunge, but has shown no sign of movement since. The report from the Fed found that manufacturing, in particular, has been weak in recent weeks.The Philadelphia Fed, for instance, reported that manufacturing activity "continues to decline" for the fourth month in a row.And in the Chicago district, the report said, "a manufacturer of capital goods noted slower orders for some types, including defense equipment, petroleum equipment, food packaging machinery and material handling equipment." Retail sales also were reported slow in most districts, particularly "for discretionary, big-ticket items such as furniture, home appliances and consumer electronics." And construction also was described as slow in most areas. Despite the economic slowdown, there are few clear signs that growth is coming to a halt.As a result, Fed officials may be divided over whether to ease credit.Several Fed governors in Washington have been pushing for easier credit; but many of the regional Fed presidents have been resisting such a move. Mr. Black said he is "pleased" with the economy's recent performance, and doesn't see "a lot of excesses out there that would tilt us into recession." "There is always a chance of recession," added Mr. Guffey, "but if you ask me to put a percentage on it, I would think it's well below a 50% chance."
The Treasury said it plans to sell $30 billion in notes and bonds next week, but said the auctions will be postponed unless Congress acts quickly to lift the federal debt ceiling. Michael Basham, deputy assistant secretary for federal finance, said the Treasury may wait until late Monday or even early Tuesday to announce whether the autions are to be rescheduled.Unless it can raise money in financial markets, Mr. Basham said, the federal government won't have the cash to pay off $13.8 billion in Treasury bills that mature on Thursday. Without congressional action, the Treasury can't sell any new securities -- even savings bonds.But despite partisan bickering over the debt ceiling, which has become entangled in the fight over cutting capital-gains taxes, Congress is almost certain to act in time to avoid default. "Each day that Congress fails to act . . . will cause additional disruption in our borrowing schedule, possibly resulting in higher interest costs to the taxpayer," Treasury Secretary Nicholas Brady said in a speech prepared for delivery last night to a group of bankers. "To avoid these costs, and a possible default, immediate action is imperative." The securities to be sold next week will raise about $10 billion in cash and redeem $20 billion in maturing notes. The new securities, part of the federal government's regular quarterly refunding, will consist of: -- $10 billion of three-year notes, to be auctioned Tuesday and to mature Nov. 15, 1992. -- $10 billion of 10-year notes, to be auctioned Wednesday and to mature Nov. 15, 1999. -- $10 billion of 30-year bonds, to be auctioned Thursday and to mature Aug. 15, 2019.The Treasury also said it plans to sell $10 billion in 36-day cash management bills on Thursday.They will mature Dec. 21. None of the securities will be eligible for when-issued trading until Congress approves an increase in the debt ceiling, clearing the way for a formal offering, Mr. Basham said. The Treasury said it needs to raise $47.5 billion in the current quarter in order to end December with a $20 billion cash balance.Auctions held in October and those scheduled for next week will raise a total of $25.6 billion. The remaining $21.9 billion could be raised through the sale of short-term Treasury bills, two-year notes in November and five-year notes in early December, the Treasury said. In the first three months of 1990, the Treasury estimates that it will have to raise between $45 billion and $50 billion, assuming that it decides to aim for a $10 billion cash balance at the end of March.
Investor Harold Simmons and NL Industries Inc. offered to acquire Georgia Gulf Corp. for $50 a share, or about $1.1 billion, stepping up the pressure on the commodity chemicals concern. The offer follows an earlier proposal by NL and Mr. Simmons to help Georgia Gulf restructure or go private in a transaction that would pay shareholders $55 a share.Georgia Gulf rebuffed that offer in September and said it would study other alternatives.However, it hasn't yet made any proposals to shareholders. Late yesterday, Georgia Gulf said it reviewed the NL proposal as well as interests from "third parties" regarding business combinations.Georgia Gulf said it hasn't eliminated any alternatives and that "discussions are being held with interested parties, and work is also continuing on other various transactions." It didn't elaborate. Analysts saw the latest offer as proof that Mr. Simmons, an aggressive and persistent investor, won't leave Georgia Gulf alone until some kind of transaction is completed. "He has clamped on their ankle like a pit bull," says Paul Leming, a vice president with Morgan Stanley & Co. "He appears to be in it for the long haul." Mr. Simmons and NL already own a 9.9% stake in Georgia Gulf. Mr. Simmons owns 88% of Valhi Inc., which in turn owns two-thirds of NL. NL is officially making the offer. Mr. Leming wasn't surprised by the lower price cited by NL, saying he believes that $55 a share is "the most you can pay for Georgia Gulf before it becomes a bad acquisition." Georgia Gulf stock rose $1.75 a share yesterday to close at $51.25 a share, while NL shares closed unchanged at $22.75 and Valhi rose 62.5 cents to $15, all in New York Stock Exchange composite trading. J. Landis Martin, NL president and chief executive officer, said NL and Mr. Simmons cut the price they were proposing for Georgia Gulf because they initially planned a transaction that included about $250 million in equity and a substantial amount of high-yield subordinated debt.However, the junk-bond market has collapsed in recent weeks, lessening the likelihood that such a transaction would succeed. Now, he said, the group plans to put in "several hundred million" dollars in equity and finance the remainder with bank debt.He also said that the group reduced its offer because it wasn't allowed to see Georgia Gulf's confidential financial information without agreeing that it wouldn't make an offer unless it had Georgia Gulf's consent. In a letter to Georgia Gulf President Jerry R. Satrum, Mr. Martin asked Georgia Gulf to answer its offer by Tuesday. It wasn't clear how NL and Mr. Simmons would respond if Georgia Gulf spurns them again.Mr. Martin said they haven't yet decided what their next move would be, but he didn't rule out the possibility of a consent solicitation aimed at replacing Georgia Gulf's board.In other transactions, Mr. Simmons has followed friendly offers with a hostile tender offer. Although Georgia Gulf hasn't been eager to negotiate with Mr. Simmons and NL, a specialty chemicals concern, the group apparently believes the company's management is interested in some kind of transaction.The management group owns about 18% of the stock, most purchased at nominal prices, and would stand to gain millions of dollars if the company were sold. In the third quarter, Georgia Gulf earned $46.1 million, or $1.85 a share, down from $53 million, or $1.85 a share on fewer shares outstanding.Sales fell to $251.2 million from $278.7 million.
Criticism in the U.S. over recent Japanese acquisitions is looming ever larger in the two countries' relations. Officials from both nations say the U.S. public's skittishness about Japanese investment could color a second round of bilateral economic talks scheduled for next week in Washington.Not that Washington and Tokyo disagree on the Japanese acquisitions; indeed, each has come out in favor of unfettered investment in the U.S. Where they disagree is on the subject of U.S. direct investment in Japan.The U.S. wants the removal of what it perceives as barriers to investment; Japan denies there are real barriers.The heated talk stirred up by recent Japanese investments in the U.S. is focusing attention on the differences in investment climate, even though it's only one of many subjects to be covered in the bilateral talks, known as the Structural Impediments Initiative. The Japanese "should see this rhetoric as a signal of the need for a change in their own economy," says Charles Dallara, U.S. assistant Treasury secretary, who has been in Tokyo this week informally discussing the impending negotiations with government and business leaders. "We have a long history of maintaining an open direct-investment policy," Mr. Dallara says. "U.S. investors should have a greater opportunity at direct investment" in Japan. The Japanese fret openly about the U.S. public's rancor.One clear sign of Japan's nervousness came this week, when a spokesman for Japan's Foreign Ministry devoted nearly all of a regular, half-hour briefing for foreign journalists to the subject of recent Japanese investments in the U.S. "We believe that it is vitally important for those Japanese business interests {in the U.S.} to be more aware of the emotions and concerns of the American people," said the spokesman, Taizo Watanabe.At the same time, though, he chastised the media for paying such close attention to Japanese investment when other foreign countries, notably Britain, are acquiring more American assets. Fears that Japanese investors are buying up America have escalated sharply in the past several weeks, with Sony Corp. 's purchase of Columbia Pictures Entertainment Inc. from Coca-Cola Co. and Mitsubishi Estate Co. 's acquisition of a 51% holding in Rockefeller Group, the owner of some of midtown Manhattan's most exclusive real estate. Even before those moves added fuel, the fires of discontent had been well stoked by the highly publicized experience in Japan of one U.S. investor, T. Boone Pickens Jr.The Texas oilman has acquired a 26.2% stake valued at more than $1.2 billion in an automotive-lighting company, Koito Manufacturing Co.But he has failed to gain any influence at the company.Koito has refused to grant Mr. Pickens seats on its board, asserting he is a greenmailer trying to pressure Koito's other shareholders into buying him out at a profit. Mr. Pickens made considerable political hay with his troubles in Japan.The Senate Finance Committee, chaired by a fellow Texan, Democratic Sen. Lloyd Bentsen, last month urged U.S. Trade Representative Carla Hills to use Mr. Pickens's experience in talks with Tokyo "to highlight this problem facing Americans who seek access to the Japanese capital markets." While Mr. Dallara and Japanese officials say the question of investors' access to the U.S. and Japanese markets may get a disproportionate share of the public's attention, a number of other important economic issues will be on the table at next week's talks.Among them are differences in savings and investment rates, corporate structures and management, and government spending.Each side has a litany of recommendations for the other. The U.S. says it is anxious for results. "We feel very strongly that we really need action across the full range of issues we've identified, and we need it by next spring," Mr. Dallara says. Both sides have agreed that the talks will be most successful if negotiators start by focusing on the areas that can be most easily changed.But they haven't clarified what those might be. After the first set of meetings two months ago, some U.S. officials complained that Japan hadn't come up with specific changes it was prepared to make.The Japanese retort that the first round was too early to make concessions. "Just to say the distribution system is wrong doesn't mean anything," says a Ministry of International Trade and Industry official. "We need to clarify what exactly is wrong with it." That process of sorting out specifics is likely to take time, the Japanese say, no matter how badly the U.S. wants quick results.For instance, at the first meeting the two sides couldn't even agree on basic data used in price discussions.Since then, a team of about 15 MITI and U.S. Commerce Department officials have crossed the globe gauging consumer prices.By Monday, they hope to have a sheaf of documents both sides can trust. "Little by little, there is progress," says the MITI official. "Both sides are taking action." Elisabeth Rubinfien contributed to this article.
While worry grows about big Japanese investments in the U.S., Japan's big trading companies are rapidly increasing their stake in America's smaller business. For Japan, the controversial trend improves access to American markets and technology.But for small American companies, it also provides a growing source of capital and even marketing help. Take the deal with Candela Laser Corp., a Wayland, Mass., manufacturer of high-tech medical devices, which three years ago set its sights on Japan as an export market.Partly to help clear the myriad obstacles facing any overseas company trying to penetrate Japan, tiny Candela turned to Mitsui & Co., one of Japan's largest trading companies, for investment. In a joint-venture deal, Mitsui guided Candela through Tokyo's bureaucratic maze.It eventually secured Ministry of Health import approval for two Candela laser products -- one that breaks up kidney stones and another that treats skin lesions.At last count, Candela had sold $4 million of its medical devices in Japan. The deal also gave Mitsui access to a high-tech medical product. "They view this as a growth area so they went about it with a systematic approach," says Richard Olsen, a Candela vice president.Indeed, for many Japanese trading companies, the favorite U.S. small business is one whose research and development can be milked for future Japanese use. The Japanese companies bankroll many small U.S. companies with promising products or ideas, frequently putting their money behind projects that commercial banks won't touch.Japanese companies have financed small and medium-sized U.S. firms for years, but in recent months, the pace has taken off. In the first half of 1989 alone, Japanese corporations invested $214 million in minority positions in U.S. companies, a 61% rise from the figure for all of 1987, reports Venture Economics Inc.The Needham, Mass., concern tracks investments in new businesses.In addition, of course, some of the Japanese investments involved outright purchase of small U.S. firms. Heightened Japanese interest in American small business parallels an acceleration of investments giving Japanese companies control of large, highly visible U.S. corporations, such as Columbia Pictures Entertainment Inc. Only this week, it was announced that Mitsubishi Estate Co. had acquired a 51% stake in Rockefeller Group, which owns New York's prestigious Rockefeller Center. While the small deals are far less conspicuous, they add to Japanese penetration of the U.S. market.As the deals also improve Japanese access to American technology and market knowledge, they feed American anxieties in this area, too. Even a low-tech product like plate glass can catch a trading company's fancy if there's a strategic fit.Free State Glass Industries of Warrenton, Va., a small fabricator of architectural glass, was foundering under its original management.Last year, Mitsubishi International Corp., the New York-based arm of Mitsubishi Corp., bought controlling interest in the glass company in a joint venture with Ronald Bodner, a glass industry executive and Mitsubishi consultant. The deal is chiefly designed to give Mitsubishi a window on the U.S. glass industry, says Ichiro Wakui, an executive in Mitsubishi's general merchandise department in New York. "It's not just a simple investment in a small company," Mr. Wakui says. "We want to see the glass market from the inside, not the outside." Mitsubishi's investment in Free State is "very small . . . less than $4 million," Mr. Wakui says.Mr. Bodner declines to comment on the arrangement. Trading companies such as Mitsubishi, Mitsui, C. Itoh & Co. and Nissho-Iwai Corp., which make many of the Japanese investments in small U.S. concerns, have no U.S. counterpart.These vertically integrated combines, some of which got their start in Japan's feudal period, deal globally in commodities, construction and manufacturing.They operate ships and banks. "All the "sogo-shosha" are looking for new business," says Arthur Klauser, adviser to the president of Mitsui, U.S.A., using the Japanese term for the largest of the global trading houses. Adds Takeshi Kondo, senior vice president of C. Itoh America Inc.: "We have a great interest in making investments, particularly in new ventures." A host of electronics firms in California's Silicon Valley were financed with trading-company venture capital.Profit, at least in the short term, is usually a secondary goal. "Strategic objectives, not financial return, drive many of the deals," says a Venture Economics spokesman. In investing on the basis of future transactions, a role often performed by merchant banks, trading companies can cut through the logjam that small-company owners often face with their local commercial banks. "It's the classic problem of the small businessman," says Malcolm Davies, managing director of Trading Alliance Corp. of New York. "People are queuing at the door to take his product but he doesn't have the working capital to make the thing and commercial banks are very unsympathetic.They want assets, they want a balance sheet, which has no relation to the business a company can generate." Adds Mitsui's Mr. Klauser: "Unlike corporations in this country, trading companies aren't so much interested in a high return on investment as they are on increasing trade flows.To the extent they can do this, they're quite content to get a return on investment of 1% to 2%." Mr. Klauser says Mitsui has 75 U.S. subsidiaries in which it holds 35% interest or more and the trading company hopes to double the number of its U.S. affiliates in 1990.Sales by these subsidiaries in the fiscal year ending last March were more than $17 billion.A 1% to 2% return on $17 billion "ain't hay," Mr. Klauser says.
For 10 years, Genie Driskill went to her neighborhood bank because it was convenient.A high-balance customer that banks pine for, she didn't give much thought to the rates she was receiving, nor to the fees she was paying. But in August, First Atlanta National Bank introduced its Crown Account, a package designed to lure customers such as Ms. Driskill.Among other things, it included checking, safe deposit box and credit card -- all for free -- plus a good deal on installment loans.All she had to do was put $15,000 in a certificate of deposit, or qualify for a $10,000 personal line of credit. "I deserve something for my loyalty," she says.She took her business to First Atlanta. So it goes in the competitive world of consumer banking these days.For nearly a decade, banks have competed for customers primarily with the interest rates they pay on their deposits and charge on their loans.The competitive rates were generally offset by hefty fees on various services. But many banks are turning away from strict price competition.Instead, they are trying to build customer loyalty by bundling their services into packages and targeting them to small segments of the population. "You're dead in the water if you aren't segmenting the market," says Anne Moore, president of Synergistics Research Corp., a bank consulting firm in Atlanta. NCNB Corp. of Charlotte, N.C., recently introduced its Financial Connections Program aimed at young adults just starting careers.The program not only offers a pre-approved car loan up to $18,000, but throws in a special cash-flow statement to help in saving money. In September, Union Planters Corp. of Memphis, Tenn., launched The Edge account, a package designed for the "thirtysomething" crowd with services that include a credit card and line of credit with no annual fees, and a full percentage point off on installment loans.The theory: Such individuals, many with young children, are in their prime borrowing years -- and, having borrowed from the bank, they may continue to use it for other services in later years. For some time, banks have been aiming packages at the elderly, the demographic segment with the highest savings.Those efforts are being stepped up.Judie MacDonald, vice president of retail sales at Barnett Banks Inc. of Jacksonville, Fla., says the company now targets sub-segments within the market by tailoring its popular Seniors Partners Program to various life styles. "Varying age, geography and life-style differences create numerous sub-markets," Ms. MacDonald says.She says individual Barnett branches can add different benefits to their Seniors Partners package -- such as athletic activities or travel clubs -- to appeal to local market interests. "An active 55-year-old in Boca Raton may care more about Senior Olympic games, while a 75-year-old in Panama City may care more about a seminar on health," she says. Banks have tried packaging before.In 1973, Wells Fargo & Co. of San Francisco launched the Gold Account, which included free checking, a credit card, safe-deposit box and travelers checks for a $3 monthly fee. The concept begot a slew of copycats, but the banks stopped promoting the packages.One big reason: thin margins.Many banks, particularly smaller ones, were slow to computerize and couldn't target market niches that would have made the programs more profitable.As banks' earnings were squeezed in the mid-1970s, the emphasis switched to finding ways to cut costs. But now computers are enabling more banks to analyze their customers by age, income and geography.They are better able to get to those segments in the wake of the deregulation that began in the late 1970s.Deregulation has effectively removed all restrictions on what banks can pay for deposits, as well as opened up the field for new products such as high-rate CDs.Where a bank once offered a standard passbook savings account, it began offering money-market accounts, certificates of deposit and interest-bearing checking, and staggering rates based on the size of deposits. The competition has grown more intense as bigger banks such as Norwest Corp. of Minneapolis and Chemical Banking Corp. of New York extend their market-share battles into small towns across the nation. "Today, a banker is worrying about local, regional and money-center {banks}, as well as thrifts and credit unions," says Ms. Moore at Synergistics Research. "So people who weren't even thinking about targeting 10 years ago are scrambling to define their customer base." The competition has cultivated a much savvier consumer. "The average household will spread 19 accounts over a dozen financial institutions," says Michael P. Sullivan, who runs his own bank consulting firm in Charlotte, N.C. "This much fragmentation makes attracting and keeping today's rate-sensitive customers costly." Packages encourage loyalty by rewarding customers for doing the bulk of their banking in one place.For their troubles, the banks get a larger captive audience that is less likely to move at the drop of a rate.The more accounts customers have, Mr. Sullivan says, the more likely they are to be attracted to a package -- and to be loyal to the bank that offers it.That can pay off down the road as customers, especially the younger ones, change from borrowers to savers/investors. Packaging has some drawbacks.The additional technology, personnel training and promotional effort can be expensive.Chemical Bank spent more than $50 million to introduce its ChemPlus line, several packages aimed at different segments, in 1986, according to Thomas Jacob, senior vice president of marketing. "It's not easy to roll out something that comprehensive, and make it pay," Mr. Jacob says. Still, bankers expect packaging to flourish, primarily because more customers are demanding that financial services be tailored to their needs. "These days, banking customers walk in the door expecting you to have a package especially for them," Ms. Moore says.Some banks are already moving in that direction, according to Alvin T. Sale, marketing director at First Union Corp. in Charlotte.First Union, he says, now has packages for seven customer groups.Soon, it will split those into 30. Says Mr. Sale: "I think more banks are starting to realize that we have to be more like the department store, not the boutique." IRAs.
Five things you can do for $15,000 or less: 1.Buy a new Chevrolet. 2.Take a Hawaiian vacation. 3.Send your child to a university. 4.Buy a diamond necklace. 5.Make a lasting difference in the regulatory life of an American savings-and-loan association through the Foster Corporate Parents Plan. Americans today spend $15,000 like pocket change -- they don't think much about it.But for an ailing savings-and-loan association -- teetering on insolvency -- it can lead to safety from imminent demise and to a future full of promise. Your $15,000 will help keep a needy savings and loan solvent -- and out of the federal budget deficit. As a Foster Corporate Parent, you'll be helping a neighborhood S&L in areas crucial to its survival.Like healthy regulatory capital.A steady deposit base.Performing loans.At the same time, you'll give your Foster Savings Institution the gift of hope and freedom from the federal regulators who want to close its doors -- for good. As a Foster Corporate Parent, you will experience the same joy felt by Robert Bass, Lewis Ranieri, William Simon and others, who find ways to help troubled savings institutions and their employees help themselves.That builds confidence, self sufficiency, not to mention critical regulatory net worth. Don't wait -- a savings institution needs your help now! Every day you delay, a savings institution's health -- and the federal budget deficit -- grows worse.Think about the good you can do for just $15,000 a month, about the cost of a mid-size Chevrolet or two semesters at a state university.Then send your support to a savings institution that has taken a bad rap in the press and on its bottom line.Every $15,000 you send will go a long way to boost sagging net worth and employee morale -- and keep your Foster Savings Institution off the federal budget deficit! Mr. Baris is a lawyer in New York.
The Chicago Mercantile Exchange said it plans to institute an additional "circuit breaker" aimed at stemming market slides. Separately, John Phelan told a closed House subcommittee meeting in Washington that he would support Securities and Exchange Commission halts of program trading during market emergencies.But the New York Stock Exchange chairman said he doesn't support reinstating a "collar" on program trading, arguing that firms could get around such a limit. The Chicago Merc said a new one-hour price limit would take effect in its Standard & Poor's 500 stock-index futures pit once S&P 500 futures fell 20 index points -- the equivalent of about a 150-point drop in the Dow Jones Industrial Average.If the 20-point limit is triggered after 1:30 p.m. Chicago time, it would remain in effect until the normal close of trading at 3:15 p.m. With the limit in effect, members would be able to execute trades at the limit price or at higher prices, but not below it. The exchange said it decided a new circuit breaker was needed following a review of the tumultuous trading in stocks and stock-index futures on Friday Oct. 13, when the Dow Jones industrials plunged 190 points and stock-index futures prices skidded as well.Late that afternoon the S&P 500 stock-index futures contract fell a total of 30 index points, hitting a Merc circuit breaker limit that remained in effect for the rest of the trading session. The Merc said that its existing 30-minute, 12-point limit on S&P 500 stock-index futures trading (equal to about 100 points on the Dow Jones industrials), which was triggered Oct. 13, will remain in effect. Leo Melamed, Merc executive committee chairman, said that the 12-point limit appeared to lessen the selling panic Oct. 13.But when the contract reopened, the subsequent flood of sell orders that quickly knocked the contract down to the 30-point limit indicated that the intermediate limit of 20 points was needed to help keep stock and stock-index futures prices synchronized. Several traders maintained that the Merc's 12-point circuit-breaker aggravated the market slide Oct. 13 by directing additional selling pressure to the floor of the New York Stock Exchange. All of the changes require regulatory approval, which is expected shortly. The exchange also said that the 30-point circuit breaker, which currently provides only a one-hour respite during market sell-offs, will become the maximum one-day limit for the S&P 500 stock-index futures contract; the one-day limit now is 50 index points. A final modification was made to the five-point opening limit for the contract.The Merc said that five-point limit will remain in effect for the first 10 minutes of trading.The limit lapses under current exchange rules if contracts trade above the limit price during the opening 10 minutes of trading. In Washington, House aides said Mr. Phelan told congressmen that the collar, which banned program trades through the Big Board's computer when the Dow Jones Industrial Average moved 50 points, didn't work well.He said that firms could get around the collar by executing trades manually. In a post-hearing news conference, Mr. Phelan, who has publicly expressed concern about market volatility, said he told the House finance and telecommunications subcommittee that he would support the program-trading halt proposal "providing the SEC would be comfortable with the language" in a bill. The program-trading issue is heating up on Capitol Hill as it is on Wall Street, and several legislators want to grant the SEC the power to shut off the programs when trading becomes too volatile.SEC Chairman Richard Breeden has said he would be willing to consider circuit breakers that have preset trigger points, but he doesn't want discretionary power to stop programs. A House aide suggested that Mr. Phelan was so "vague and mushy" that it was the kind of meeting where people of all viewpoints could "come out feeling good." At one point, Mr. Phelan angered the subcommittee's chairman, Rep. Edward Markey (D., Mass.), by not going much beyond what already had been reported in the morning newspapers. "Markey said we could have done this in public" because so little sensitive information was disclosed, the aide said.Mr. Phelan then responded that he would have been happy just writing a report to the panel, the aide added. At another point during the hearing, Rep. Markey asked Mr. Phelan what would be discussed at a New York exchange board meeting today.Mr. Phelan said the Big Board is likely to study the program-trading issue.That response annoyed Rep. Markey, House aides said, and the congressman snapped back that there had been enough studies of the issue and that it was time for action on the matter. Fifteen of the 26 subcommittee members attended the hearing, most notably Rep. John Dingell (D., Mich.), the full House Energy and Commerce Committee chairman, who has been willing to let Mr. Markey carry the legislation in recent months. Mr. Dingell expressed concern, sources said, about jurisdictional problems in regulating program trading, which uses futures to offset stock trades.The futures industry is regulated by the Commodity Futures Trading Commission, which reports to the Agriculture committees in both houses.
The art of change-ringing is peculiar to the English, and, like most English peculiarities, unintelligible to the rest of the world. -- Dorothy L. Sayers, "The Nine Tailors" ASLACTON, England -- Of all scenes that evoke rural England, this is one of the loveliest: An ancient stone church stands amid the fields, the sound of bells cascading from its tower, calling the faithful to evensong. The parishioners of St. Michael and All Angels stop to chat at the church door, as members here always have.In the tower, five men and women pull rhythmically on ropes attached to the same five bells that first sounded here in 1614. But there is also a discordant, modern note in Aslacton, though it can't be heard by the church-goers enjoying the peal of bells this cool autumn evening. Like most of the other 6,000 churches in Britain with sets of bells, St. Michael once had its own "band" of ringers, who would herald every Sunday morning and evening service.Now, only one local ringer remains: 64-year-old Derek Hammond. The others here today live elsewhere.They belong to a group of 15 ringers -- including two octogenarians and four youngsters in training -- who drive every Sunday from church to church in a sometimes-exhausting effort to keep the bells sounding in the many belfries of East Anglia. "To ring for even one service at this tower, we have to scrape," says Mr. Hammond, a retired water-authority worker. "We've tried to train the youngsters, but they have their discos and their dances, and they just drift away." Mr. Hammond worries that old age and the flightiness of youth will diminish the ranks of the East Anglian group that keeps the Aslacton bells pealing.History, after all, is not on his side.According to a nationwide survey taken a year ago, nearly a third of England's church bells are no longer rung on Sundays because there is no one to ring them. It is easy to see why the ancient art is on the ropes.The less complicated version of playing tunes on bells, as do the carillons of continental Europe, is considered by the English to be childish, fit only for foreigners.Change-ringing, a mind-boggling exercise the English invented 380 years ago, requires physical dexterity -- some bells weigh more than a ton -- combined with intense mental concentration. Proper English bells are started off in "rounds," from the highest-pitched bell to the lowest -- a simple descending scale using, in larger churches, as many as 12 bells.Then, at a signal, the ringers begin varying the order in which the bells sound without altering the steady rhythm of the striking.Each variation, or change, can occur only once, the rules state.Ringers memorize patterns of changes, known as "methods," which have odd-sounding names like Kent Treble Bob Major or Grandsire Caters.A series of 5,000 or so changes is a "peal" and takes about three hours. A look at a Thursday night practice at St. Mary Abbot church in the Kensington district of London gives an idea of the work involved.Ten shirt-sleeved ringers stand in a circle, one foot ahead of the other in a prize-fighter's stance, each pulling a rope that disappears through a small hole in the high ceiling of the ringing chamber.No one speaks, and the snaking of the ropes seems to make as much sound as the bells themselves, muffled by the ceiling.Totally absorbed, the ringers stare straight ahead, using peripheral vision (they call it "rope-sight") to watch the other ropes and thus time their pulls. Far above in the belfry, the huge bronze bells, mounted on wheels, swing madly through a full 360 degrees, starting and ending, surprisingly, in the inverted, or mouth-up position.Skilled ringers use their wrists to advance or retard the next swing, so that one bell can swap places with another in the following change. In a well-known detective-story involving church bells, English novelist Dorothy L. Sayers described ringing as a "passion {that} finds its satisfaction in mathematical completeness and mechanical perfection." Ringers, she added, are "filled with the solemn intoxication that comes of intricate ritual faultlessly performed." "Ringing does become a bit of an obsession," admits Stephanie Pattenden, master of the band at St. Mary Abbot and one of England's best female ringers. It is a passion that usually stays in the tower, however.More often than not, ringers think of the church as something stuck on the bottom of the belfry.When their changes are completed, and after they have worked up a sweat, ringers often skip off to the local pub, leaving worship for others below. This does not sit well with some clerics.With membership of the Church of England steadily dwindling, strong-willed vicars are pressing equally strong-willed and often non-religious ringers to attend services.Two years ago, the Rev. Jeremy Hummerstone, vicar of Great Torrington, Devon, got so fed up with ringers who didn't attend service he sacked the entire band; the ringers promptly set up a picket line in protest. "They were a self-perpetuating club that treated the tower as sort of a separate premises," the Vicar Hummerstone says. An entirely new band rings today at Great Torrington, several of whom are members of the congregation.But there still aren't enough ringers to ring more than six of the eight bells. At St. Mary's Church in Ilminster, Somerset, the bells have fallen silent following a dust-up over church attendance.The vicar, W.D. Jones, refuses to talk about it, saying it would "reopen the wound." But C.J.B. Marshall, vicar of a nearby church, feels the fault is in the stairs from the bell tower that are located next to the altar. "So crunch, crunch, crunch, bang, bang, bang -- here come the ringers from above, making a very obvious exit while the congregation is at prayer," he says. Vicar Marshall admits to mixed feelings about this issue, since he is both a vicar and an active bell-ringer himself. "The sound of bells is a net to draw people into the church," he says. "I live in hopes that the ringers themselves will be drawn into that fuller life." The Central Council of Church Bell Ringers, a sort of parliament of ringing groups, aims to improve relations with vicars, says John C. Baldwin, president.It hopes to speak to students at theological colleges about the joys of bell ringing and will shortly publish a booklet for every vicar in the country entitled, "The Bells in Your Care." Says Mr. Baldwin, "We recognize that we may no longer have as high a priority in church life and experience." Mr. Baldwin is also attacking the greater problem: lack of ringers.One survey says that of the 100,000 trained bellringers in England today, only 40,000 of them still ring.Also, ringers don't always live where the bells need to be rung -- like in small, rural parishes and inner-city churches. But the council's program to attract and train ringers is only partly successful, says Mr. Baldwin. "Right now, we're lucky if after five years we keep one new ringer out of 10," he adds. One bright sign is that a growing number of women have entered the once male-dominated field; more than a third of the ringers today are women.They aren't accepted everywhere, however.The oldest bell-ringing group in the country, the Ancient Society of College Youths, founded in 1637, remains male-only, a fact that's particularly galling to women because the group is the sole source of ringers for Britain's most prestigious churches, St. Paul's Cathedral and Westminster Abbey. This being Britain, no woman has filed an equal-opportunity suit, but the extent of the problem surfaced this summer in a series of letters to "The Ringing World," a weekly newspaper for ringers.One writer, signing his letter as "Red-blooded, balanced male," remarked on the "frequency of women fainting in peals," and suggested that they "settle back into their traditional role of making tea at meetings." In the torrent of replies that followed, one woman ringer from Solihull observed that "the average male ringer leaves quite a lot to be desired: badly dressed, decorated with acne and a large beer-belly, frequently unwashed and unbearably flatulent in peals." Another women wrote from Sheffield to say that in her 60 years of ringing, "I have never known a lady to faint in the belfry.I have seen one or two men die, bless them."
Investors unsettled by the stock market's gyrations can take some comfort in the predictable arrival of quarterly dividend checks.That has been particularly true this year with many companies raising their payouts more than 10%. But don't breathe too easy: Those dividend increases may signal trouble ahead for stock prices, some analysts warn. In the past, they say, the strongest dividend growth has often come at times when the stock-market party was almost over. That can be a trap for unwary investors, says Richard Bernstein, senior quantitative analyst at Merrill Lynch & Co. Strong dividend growth, he says, is "the black widow of valuation" -- a reference to the female spiders that attract males and then kill them after mating. Stephen Boesel, president of T. Rowe Price Growth and Income Fund, explains that companies raise their payouts most robustly only after the economy and corporate profits have been growing for some time. "Invariably, those strong periods in the economy give way to recessionary environments," he says. "And recessionary environments aren't hospitable to the stock market." Indeed, analysts say that payouts have sometimes risen most sharply when prices were already on their way down from cyclical peaks.In 1976, for example, dividends on the stocks in Standard & Poor's 500-stock index soared 10%, following much slower growth the year before.The S&P index started sliding in price in September 1976, and fell 12% in 1977 -- despite a 15% expansion in dividends that year. That pattern hasn't always held, but recent strong growth in dividends makes some market watchers anxious.Payouts on the S&P 500 stocks rose 10% in 1988, according to Standard & Poor's Corp., and Wall Street estimates for 1989 growth are generally between 9% and 14%.Many people believe the growth in dividends will slow next year, although a minority see double-digit gains continuing. Meanwhile, many market watchers say recent dividend trends raise another warning flag: While dividends have risen smartly, their expansion hasn't kept pace with even stronger advances in stock prices.As a result, the market's dividend yield -- dividends as a percentage of price -- has slid to a level that is fairly low and unenticing by historical standards. Put another way, the decline in the yield suggests stocks have gotten pretty rich in price relative to the dividends they pay, some market analysts say.They are keeping a close watch on the yield on the S&P 500.The figure is currently about 3.3%, up from 3.2% before the recent market slide.Some analysts say investors should run for the exits if a sustained market rebound pushes the yield below 3%. A drop below that 3% benchmark "has always been a strong warning sign that stocks are fully valued," says Mr. Boesel of T. Rowe Price. In fact, "the market has always tanked.Always.There's never been an exception," says Gerald W. Perritt, a Chicago investment adviser and money manager, based on a review of six decades of stock-market data. The last time the S&P 500 yield dropped below 3% was in the summer of 1987.Stockholders who took the hint and sold shares escaped the October debacle. There have been only seven other times -- in 1929, 1933, 1961, 1965, 1968, 1971 and 1972 -- when the yield on the S&P 500 dropped below 3% for at least two consecutive months, Mr. Perritt found.And in each case, he says, a sharp drop in stock prices began within a year. Still, some market analysts say the current 3.3% reading isn't as troublesome as it might have been in years past. "It's not a very meaningful indicator currently because corporations are not behaving in a traditional manner," says James H. Coxon, head of stock investments for Cigna Corp., the Philadelphia-based insurer. In particular, Mr. Coxon says, businesses are paying out a smaller percentage of their profits and cash flow in the form of dividends than they have historically.So, while stock prices may look fairly high relative to dividends, they are not excessive relative to the underlying corporate strength. Rather than increasing dividends, some companies have used cash to buy back some of their shares, notes Steven G. Einhorn, co-chairman of the investment policy committee at Goldman, Sachs & Co.He factors that into the market yield to get an adjusted yield of about 3.6%.That is just a tad below the average of the past 40 years or so, he says. What will happen to dividend growth next year?Common wisdom suggests a single-digit rate of growth, reflecting a weakening in the economy and corporate profits. PaineWebber Inc., for instance, is forecasting growth in S&P 500 dividends of just under 5% in 1990, down from an estimated 11% this year.In other years in which there have been moderate economic slowdowns -- the environment the firm expects in 1990 -- the change in dividends ranged from a gain of 4% to a decline of 1% , according to PaineWebber analyst Thomas Doerflinger. The minority argument, meanwhile, is that businesses have the financial wherewithal this time around to declare sharply higher dividends even if their earnings weaken. Dividend growth on the order of 12% is expected by both Mr. Coxon of Cigna and Mr. Einhorn of Goldman Sachs.Those dividend bulls argue that corporations are in the unusual position of having plenty of cash left over after paying dividends and making capital expenditures. One indicator investors might want to watch is the monthly tally from Standard & Poor's of the number of public companies adjusting their dividends.A total of 139 companies raised dividends in October, basically unchanged from 138 a year ago, S&P said Wednesday.That followed four straight months in which the number of increases trailed the year-earlier pace. While the S&P tally doesn't measure the magnitude of dividend changes, a further slippage in the number of dividend increases could be a harbinger of slower dividend growth next year. In any case, opinion is mixed on how much of a boost the overall stock market would get even if dividend growth continues at double-digit levels.Mr. Einhorn of Goldman Sachs estimates the stock market will deliver a 12% to 15% total return from appreciation and dividends over the next 12 months -- vs. a "cash rate of return" of perhaps 7% or 8% if dividend growth is weak. But Mr. Boesel of T. Rowe Price, who also expects 12% growth in dividends next year, doesn't think it will help the overall market all that much. "Having the dividend increases is a supportive element in the market outlook, but I don't think it's a main consideration," he says.With slower economic growth and flat corporate earnings likely next year, "I wouldn't look for the market to have much upside from current levels."
Troubled NBI Inc. said it fired more than half its work force and is discontinuing its hardware business to focus on its software and service operations. The ailing company, which has reported net losses for 16 consecutive quarters, said it won't manufacture network computer systems any more and will greatly reduce its costly direct sales force. Altogether, NBI said it will eliminate 266 jobs at its Boulder headquarters, 176 field sales jobs and 50 jobs at its Canadian and United Kingdom headquarters.The company's work force will fall to about 400 people. Stephen G. Jerritts, president and chief executive officer, said customers weren't willing to commit to an expensive NBI hardware systems because of the company's financial troubles.Further, he said, the company doesn't have the capital needed to build the business over the next year or two. "We flat ran out of financing resources," Mr. Jerritts said. "We had to do something structurally and radically different." As a result, he said NBI will focus on servicing its installed base of systems, trying to provide maintenance for other manufacturers and expanding its software business, using some of the applications it developed for its hardware.The company currently offers a word-processing package for personal computers called Legend. The company, which recently said it lacked the profits and capital to pay dividends on its Series A convertible preferred stock, said it has hired an investment banker to help it raise additional cash. In New York Stock Exchange composite trading yesterday, NBI common closed at 93 cents a share, up 31 cents.
It was Richard Nixon's first visit to China in 1972 that set in motion the historic rapprochement between Beijing and Washington.But the former U.S. president's sixth visit to China, during which he spoke at length with Chinese leaders, was nowhere near as successful at easing strains that have recently afflicted the Sino-U.S. relationship. Mr. Nixon, the most prominent American to come to China since Beijing's bloody suppression of pro-democracy demonstrators in June, harped on international outrage over the massacre.The Chinese, in turn, took aim at American "interference" in China's domestic affairs. One official newspaper, Legal Daily, even directly criticized Mr. Nixon, who is normally referred to here as an "old friend." The paper accused him of being a leading proponent of "peaceful evolution," a catch phrase to describe what China believes is the policy of Western countries to seduce socialist nations into the capitalist sphere. The tension was evident on Wednesday evening during Mr. Nixon's final banquet toast, normally an opportunity for reciting platitudes about eternal friendship.Instead, Mr. Nixon reminded his host, Chinese President Yang Shangkun, that Americans haven't forgiven China's leaders for the military assault of June 3-4 that killed hundreds, and perhaps thousands, of demonstrators. "Many in the United States, including many friends of China, believe the crackdown was excessive and unjustified," Mr. Nixon told Mr. Yang, who was directly involved in ordering the attack. "The events of April through June damaged the respect and confidence which most Americans previously had for the leaders of China." The Chinese responded in an equally undiplomatic fashion.In talks with Mr. Nixon, Chinese leaders expressed no regret for the killings, and even suggested that the U.S. was prominently involved in the demonstrations this spring.In a meeting Tuesday, supreme leader, Deng Xiaoping, told Mr. Nixon, "Frankly speaking, the U.S. was involved too deeply in the turmoil and counterrevolutionary rebellion which occurred in Beijing not long ago.China was the real victim and it is unjust to reprove China for it." Despite the harsh exchanges, the U.S. and China still seem to be looking for a way to mend relations, which have deteriorated into what Mr. Nixon referred to as "the greatest crisis in Chinese-American relations" since his initial visit to China 17 years ago.In his return toast to Mr. Nixon, Mr. Yang said the relationship had reached a "stalemate." Relations between China and the U.S. have been tense since June 7, when Chinese dissident Fang Lizhi and his wife, Li Shuxian, took refuge in the U.S. Embassy in Beijing.Shortly afterwards, Mr. Bush imposed a series of anti-China sanctions, including suspension of most high-level talks, which could be codified in U.S. congressional legislation in the coming weeks. Mr. Nixon is traveling in China as a private citizen, but he has made clear that he is an unofficial envoy for the Bush administration.Mr. Nixon met Mr. Bush and his national security adviser, Brent Scowcroft, before coming to China on Saturday.And he plans to brief the president at the end of the week, U.S. sources said.Mr. Nixon was to leave China today. According to an American member of the Nixon party, the former president raised a number of controversial issues in his 20 hours of talks with top-level Chinese officials.These included China's economic policies, human rights and the question of Mr. Fang.Mr. Nixon also proposed that China restore its participation in the Fulbright Program, a U.S. government-funded academic exchange.China pulled out of the program in July. In his talks, the former president urged China's leaders to acknowledge that their nation is part of the world community and welcome the infusion of outside contacts and ideas. "Ideas are going over borders, and there's no SDI ideological weapon that can shoot them down," he told a group of Americans at the U.S. Embassy on Wednesday. There are no signs, however, of China's yielding on key issues.But in one minor matter, Mr. Nixon appears to have gained a concession.In a meeting with Premier Li Peng on Monday, Mr. Nixon said that he hoped he wouldn't encounter guards with machine guns during his visit to the U.S. Embassy. Sure enough, when he arrived at the embassy two days later, the machine-gun-toting guards were gone -- for the first time in five months.A few blocks away, at the U.S. ambassador's residence, the guards encircling the compound also had discarded their Uzi-model arms for the first time since early June. But the guards there retained their pistols, and a large contingent of plainclothes police remained nearby in unmarked cars.Moreover, police and soldiers continue to harass Americans, who have filed several protests with the Foreign Ministry in the past week.Several times, Chinese guards have pointed their automatic rifles at young children of U.S. diplomats and clicked the trigger.The rifles weren't loaded.
Your Oct. 6 article "Japan's Financial Firms Lure Science Graduates" states, "Industrial companies are accusing financial institutions of jeopardizing Japan's economy by raising the salary stakes for new employees." The Japanese industrial companies should know better.They are barking up the wrong tree, because it is basically their fault they can't attract new employees. Takuma Yamamoto, president of Fujitsu Ltd., believes "the `money worship' among young people . . . caused the problem." He is just passing the buck to young people.What's wrong with asking for more money?Money is not everything, but it is necessary, and business is not volunteer work.It is not unethical to choose a higher-salaried job. Unfortunately, Japanese manufacturers have neither good working conditions nor good compensation packages.I get the impression that some Japanese managers believe working harder for less money is beautiful.I visited a lot of major Japanese manufacturers, but I never felt I would want to be employed by any of them. Many of them recently have been spending a lot of money on public relations and advertising to improve their images, but they should realize that the most important thing is real change, not changing people's perceptions. If the Japanese companies are seriously considering their survival, they could do at least three things to improve the situation: raise salaries higher than those of financial institutions; improve working conditions (better offices and more vacations, for example); accept and hire more labor from outside Japan. Hiroshi Asada Washington
In reference to your Oct. 9 page-one article "Barbara Bush Earns Even Higher Ratings Than the President," it is regrettable that you must continually define blacks by our negatives: "Among liberals, 60% have positive views of her, while 50% approve of the president's job performance.In part, this may reflect the fact that `she speaks a more progressive language' than her husband, as Columbia's Prof. {Ethel} Klein puts it.Among professionals, 76% have a favorable opinion of her, compared to 62% who approve of her husband's performance.While a quarter of black voters disapprove of Mr. Bush's handling of his job, only 15% have a negative view of his spouse." The statistics imply that three-quarters of blacks approve of Mr. Bush's job performance and 85% of blacks approve of Mrs. Bush.If the assumption is that it is surprising that so few blacks find Mr. and Mrs. Bush distasteful, the positive view is even more newsworthy.Such an editorial point of view perpetuates an insidious, stereotyped perspective.Why are we blacks continually defined by our minority and the lowest common denominator. Preston G. Foster Birmingham, Ala.
The National Association of Securities Dealers, the self-regulatory organization for the over-the-counter securities markets, disciplined a number of firms and individuals for alleged violations of industry rules. Two firms were expelled from the NASD, three were suspended or barred and nine were fined. First Securities Group of California and a principal of the firm, Louis Fernando Vargas of Marina del Rey, Calif., were jointly fined $15,000 and expelled for alleged violations of reporting requirements on securities sales.Also, Mr. Vargas was barred from association with any NASD member.Neither First Securities, of Beverly Hills, nor Mr. Vargas could be reached for comment.A telephone-information operator had no listing for either party. J.L. Henry & Co., Miami, and a principal of the firm, Henry I. Otero of Miami, were jointly fined $30,000 and expelled, for alleged improper use of a customer's funds, among other things.Also, Mr. Otero was barred from association with any NASD member.J.L. Henry hasn't any Miami telephone listing, an operator said.Mr. Otero, who apparently has an unpublished number, also couldn't be reached. Biscayne Securities Corp., of Lauderhill, Fla., and a principal of the firm, Alvin Rosenblum of Plantation, Fla., were jointly fined $20,000 and given 10-day suspensions for allegedly selling securities at unfair prices.Biscayne hasn't any telephone listing, an operator said.Mr. Rosenblum, who apparently has an unpublished phone number, also couldn't be reached. Triton Securities, of Danville, Calif., and a principal of the firm, Delwin George Chase, also of Danville, were jointly fined $10,000 and given 30-day suspensions as part of a settlement.While neither admitting nor denying wrongdoing, Triton and Mr. Chase consented to findings of violations in connection with limited-partnership sales.Officials of Triton couldn't be reached for comment.Mr. Chase didn't return a telephone call to his office.Crane & Co. Securities Inc., of Mount Clemens, Mich., and its president, Glenn R. Crane, of Sterling Heights, Mich., consented to a joint fine of $10,000.Without admitting or denying wrongdoing, they consented to findings of violations of escrow and record-keeping rules.Mr. Crane didn't return a call seeking comment. First Commonwealth Securities Corp., of New Orleans, and its president, Kenneth J. Canepa, also of New Orleans, consented to a $10,000 fine.Also, Mr. Canepa received a two-week suspension "in a principal capacity." Without admitting or denying wrongdoing, they consented to findings that they had inaccurately represented the firm's net capital, maintained inaccurate books and records, and made other violations.Mr. Canepa confirmed he had consented to the sanctions but declined to comment further. Weatherly Securities Corp., New York, and three of its principals -- Dell Eugene Keehn and William Northy Prater Jr., both of Mercer Island, Wash., and Thomas Albert McFall, of Red Bank, N.J. -- consented to a fine of $20,000.Without admitting or denying wrongdoing, they consented to findings that they failed to return funds owed to customers in connection with a limited-partnership offering. Reached at his office, Mr. McFall, currently chairman, said, "An implication that we failed to return investor funds is inappropriate and inaccurate." He described the situation as "an escrow problem, a timing issue," which he said was rapidly rectified, with no losses to customers. W.N. Whelen & Co., of Georgetown, Del., and its president, William N. Whelen Jr., also of Georgetown, were barred from transacting principal trades for 90 days and were jointly fined $15,000.The firm and Mr. Whelen allegedly sold securities to the public at unfair prices, among other alleged violations. Mr. Whelen denied the firm had sold securities at unfair prices and suggested that the examination practices of the NASD need improvement.The firm and the NASD differ over the meaning of markup and markdown, he added. Shearson Lehman Hutton Inc., New York, which is 62%-owned by American Express Co., consented to a $10,000 fine.Without admitting or denying wrongdoing, the firm consented to findings that it failed to respond "in a timely manner" to the NASD's requests for information in connection with a customer complaint.A Shearson spokesman had no comment. The following individuals were fined as indicated and barred from association with NASD members, or, where noted, suspended.Except where noted, none of these people could be reached for comment or had any comment. Andrew Derel Adams, Killeen, Texas, fined $15,000; John Francis Angier Jr., Reddington Shores, Fla., $15,000; Mark Anthony, Arlington Heights, Ill., $10,000 and 30-day suspension; William Stirlen, Arlington Heights, Ill., $7,500 and 30-day suspension; Fred W. Bonnell, Boulder, Colo., $2,500 and six-month suspension; Michael J. Boorse, Horsham, Pa.; David Chiodo, Dallas, $5,000, barred as a principal; Camille Chafic Cotran, London, $25,000; John William Curry, fined $5,000, ordered to disgorge $30,000, one-year suspension.John William Davis, Colonsville, Miss., fined $200,000; Jeffrey Gerard Dompierre, Valrico, Fla., $5,000 and 10-day suspension; Eugene Michael Felten, La Canada, Calif., fined $25,000, ordered to disgorge $16,072 and suspended one year; Marion Stewart Spitler, La Canada, fined $15,000, ordered to disgorge $18,444 and suspended six months. Mr. Felten said, "We got what amounted to a parking ticket, and by complaining about it, we ended up with a sizable fine and suspension." The matter "didn't involve anybody's securities transactions," he added. Victor Stanley Fishman, Longwood, Fla., fined $25,000; William Harold Floyd, Houston, $100,000; Michael Anthony Houston, Bronx, N.Y., $15,000; Amin Jalaalwalikraam, Glenham, N.Y., $60,000; Richard F. Knapp, London, $10,000 and 30-day suspension; Deborah Renee Martin, St. Louis, $15,000; Joseph Francis Muscolina Jr., Palisades Park, N.J., $15,000; Robert C. Najarian, Brooklyn Park, Minn., $15,000; Edward Robert Norwick, Nesconset, N.Y., $30,000. Charles D. Phipps Sr., Hermitage, Pa., fined $10,000; David Scott Rankin, Lake St. Louis, Mo., $15,000; Leigh A. Sanderoff, Gaithersburg, Md., fined $45,000, ordered to disgorge $12,252; Sandra Ann Smith, Ridgefield, N.J., $15,000; James G. Spence, Aloha, Ore., $5,000 and six-month suspension; Mona Sun, Jamaica Estates, N.Y., $60,000; William Swearingen, Minneapolis, $15,000 and six-month suspension; John Bew Wong, San Francisco, $25,000; Rabia M. Zayed, San Francisco, $50,000. The following were neither barred nor suspended: Stephanie Veselich Enright, Rolling Hills, Calif., fined $2,500 and ordered to disgorge $11,762; Stuart Lane Russel, Glendale, Calif., fined $2,500 and ordered to disgorge $14,821; Devon Nilson Dahl, Fountain Valley, Calif., fined $82,389.Mr. Dahl, a registered representative in the insurance business, said he "screwed up" because he didn't realize he was breaking securities laws. "Insurance agents have been forced by their companies into becoming registered reps," he said, "but they are not providing compliance and security-type training so that we can avoid stupid mistakes." The following were barred or, where noted, suspended and consented to findings without admitting or denying wrongdoing: Edward L. Cole, Jackson, Miss., $10,000 fine; Rita Rae Cross, Denver, $2,500 fine and 30-day suspension; Thomas Richard Meinders, Colorado Springs, Colo., $2,000 fine, five-day suspension and eight-month suspension as a principal; Ronald A. Cutrer, Baton Rouge, La., $15,000 fine and one-month suspension; Karl Grant Hale, Midvale, Utah, $15,000 fine; Clinton P. Hayne, New Orleans, $7,500 fine and one-week suspension; Richard M. Kane, Coconut Creek, Fla., $250,000 fine; John B. Merrick, Aurora, Colo., $1,000 fine and 10-day suspension; John P. Miller, Baton Rouge, $2,000 fine and two-week suspension; Randolph K. Pace, New York, $10,000 fine and 90-day suspension; Brian D. Pitcher, New Providence, N.J., $30,000 fine; Wayne A. Russo, Bridgeville, Pa., $4,000 fine and 15-day suspension; Orville Leroy Sandberg, Aurora, Colo., $3,500 fine and 10-day suspension; Richard T. Marchese, Las Vegas, Nev., $5,000 and one-year suspension; Eric G. Monchecourt, Las Vegas, $5,000 and one-year suspension; and Robert Gerhard Smith, Carson City, Nev., two-year suspension. "I wasn't ever actively engaged in any securities activities," said Mr. Cutrer. "I never had any clients at all.It was just a stupid mistake to get the license," he said, adding, "I'd just as soon not get into" details of the settlement.
Program traders are fond of predicting that if they are blocked in the U.S., they will simply emigrate to foreign stock markets.But in London and Tokyo, where computer-driven trading now plays a small but growing role, traders say a number of hurdles loom. Government officials, especially in Japan, probably would resist any onslaught of program trading by players trying to shrug off the U.S. furor over their activities and marching abroad with their business.Japan is "very concerned" about the possible effects of program trading, a senior Japanese official said after the Oct. 13 stock plunge in New York. U.S. stock-index futures aren't even traded in Japan now.And because of the time difference, the Japanese and the U.S. markets' trading hours don't overlap.It all adds up to a barrier to American-style index arbitrage, the most popular form of U.S. program trading that seeks to exploit brief differences between prices of stocks in New York and the price of a futures contract in Chicago based on those stocks. About 11.6% of all program trading by New York Stock Exchange firms in September took place in foreign markets, according to Big Board data. Yet it is difficult to imagine Japan racing to introduce Chicago-style stock-index futures.Japan's Finance Ministry already is scrutinizing institutional investors' activity to see whether policy changes are needed to cope with the current level of program trading, said Makato Utsumi, vice minister for international finance. Program trading has taken off in Japan since last year's introduction of home-market stock-index futures trading on the Tokyo and Osaka stock exchanges.But regulators are wary.They haven't forgotten the leap in share prices last Dec. 7, when the first bout of foreign-led index arbitrage drove stocks skyward in the last half-hour of trading, startling regulators who thought they had written enough rules to prevent such a swing.Japan's Finance Ministry had set up mechanisms to limit how far futures prices could fall in a single session and to give market operators the authority to suspend trading in futures at any time. "Maybe it wasn't enough," a Finance Ministry official noted after the Dec. 7 surge.Japan's regulators have since tightened controls on index-related stock purchases. Tokyo's leading program traders are the big U.S. securities houses, though the Japanese are playing catch-up.Some U.S. firms, notably Salomon Inc. and Morgan Stanley Group Inc., have reaped a hefty chunk of their Japanese earnings from index arbitrage, both for customers and for their own accounts. (Morgan Stanley last week joined a growing list of U.S. securities firms that have stopped doing index arbitrage for their own accounts.) Both Deryck C. Maughan, who heads Salomon in Tokyo, and John S. Wadsworth, who heads Morgan Stanley there, ascribe a good part of their firms' success in Tokyo to their ability to offer sophisticated, futures-related investment strategies to big institutional clients.They don't have plans to cut back. "It has not been disruptive in the markets here," Mr. Maughan said. "The real difference seems to be that the cash market here . . . is big enough and liquid enough that the futures market isn't having the same impact it does in America." The British also are scrutinizing program trades.Index-arbitrage trading is "something we want to watch closely," an official at London's Stock Exchange said. "We don't think there is cause for concern at the moment." London serves increasingly as a conduit for program trading of U.S. stocks.Market professionals said London has several attractions. First, the trading is done over the counter and isn't reported on either the U.S. or London stock trading tapes.Second, it can be used to unwind positions before U.S. trading begins, but at prices pegged to the previous session's Big Board close.In addition to the extra privacy of these trades, the transactions can often be less expensive to execute, because the parties don't have to pay a floor brokerage fee or a specialist's fee. Still, "Much less {index-arbitrage activity} is done over here than in the U.S." said Richard Barfield, chief investment manager at Standard Life Assurance Co., which manages about #15 billion ($23.72 billion) in United Kingdom institutional funds. Britain has two main index-arbitrage instruments.A Financial Times-Stock Exchange 100-share index option contract is traded on the London Stock Exchange's Traded Options Market.And an FT-SE futures contract is traded on the London International Financial Futures Exchange.Both contracts have gained a following since the 1987 global market crash. The average number of FT-SE option contracts traded on the London exchange has surged nearly tenfold since the contract's launch in 1984.This year, the average of daily contracts traded totaled 9,118, up from 4,645 a year earlier and from 917 in 1984. But a survey early this summer indicated that the volume of index-options trading was only 15% of the size of the underlying equity market, exchange officials said.This compares with estimates that the U.S. "derivatives" market is perhaps four times as large as the underlying domestic market.
The House voted to boost the federal minimum wage for the first time since early 1981, casting a solid 382-37 vote for a compromise measure backed by President Bush. The vote came after a debate replete with complaints from both proponents and critics of a substantial increase in the wage floor.Advocates said the 90-cent-an-hour rise, to $4.25 an hour by April 1991, is too small for the working poor, while opponents argued that the increase will still hurt small business and cost many thousands of jobs. But the legislation reflected a compromise agreed to on Tuesday by President Bush and Democratic leaders in Congress, after congressional Republicans urged the White House to bend a bit from its previous resistance to compromise. So both sides accepted the compromise, which would lead to the first lifting of the minimum wage since a four-year law was enacted in 1977, raising the wage to $3.35 an hour from $2.65.Under the measure passed yesterday, the minimum wage would rise to $3.80 next April. The Senate plans to take up the measure quickly and is expected to pass it. "There are no smiles about this bill," Rep. Pat Williams (D., Mont.) said during House floor debate yesterday.But "because it's all we've got, I'm going to vote for it." While the minimum wage had traditionally been pegged at half the average U.S. manufacturing wage, the level of $4.25 an hour in 1991 will still be less than 35% of average factory pay, Mr. Williams said. But Rep. Marge Roukema (R., N.J.) instead praised the House's acceptance of a new youth "training" wage, a subminimum that GOP administrations have sought for many years.Adopting a training-wage policy means "getting beyond the nickel and diming of the minimum wage," Mrs. Roukema said. Policy makers regard the youth wage as helping to limit the loss of jobs from an increase in the minimum wage, but they have lately touted it as necessary to help impart job skills to entrants into the work force. Labor unions and Democrats long fought the idea, but recently acceded to it in the face of Bush administration insistence.The compromise sets the training wage at $3.35 an hour next April, and at $3.61 an hour, or 85% of the minimum wage, in April 1991. Employers can pay the subminimum for 90 days, without restriction, to workers with less than six months of job experience, and for another 90 days if the company uses a government-certified training program for the young workers.The training wage covers only workers who are 16 to 19 years old. The White House previously insisted on an unrestricted six-month training wage that could be paid any time a worker of any age took a new job. The U.S. Chamber of Commerce, still opposed to any mininum-wage increase, said the compromise plan to lift the wage floor 27% in two stages between April 1990 and April 1991 "will be impossible for many employers to accommodate and will result in the elimination of jobs for American workers and higher prices for American consumers."
For six years, T. Marshall Hahn Jr. has made corporate acquisitions in the George Bush mode: kind and gentle.The question now: Can he act more like hard-charging Teddy Roosevelt? Mr. Hahn, the 62-year-old chairman and chief executive officer of Georgia-Pacific Corp. is leading the forest-product concern's unsolicited $3.19 billion bid for Great Northern Nekoosa Corp. Nekoosa has given the offer a public cold shoulder, a reaction Mr. Hahn hasn't faced in his 18 earlier acquisitions, all of which were negotiated behind the scenes. So far, Mr. Hahn is trying to entice Nekoosa into negotiating a friendly surrender while talking tough. "We are prepared to pursue aggressively completion of this transaction," he says. But a takeover battle opens up the possibility of a bidding war, with all that implies.If a competitor enters the game, for example, Mr. Hahn could face the dilemma of paying a premium for Nekoosa or seeing the company fall into the arms of a rival. Given that choice, associates of Mr. Hahn and industry observers say the former university president -- who has developed a reputation for not overpaying for anything -- would fold. "There's a price above which I'm positive Marshall has the courage not to pay," says A.D. Correll, Georgia-Pacific's executive vice president for pulp and paper.Says long-time associate Jerry Griffin, vice president, corporate development, at WTD Industries Inc.: "He isn't of the old school of winning at any cost." He also is a consensus manager, insiders say.The decision to make the bid for Nekoosa, for example, was made only after all six members of Georgia-Pacific's management committee signed onto the deal -- even though Mr. Hahn knew he wanted to go after the company early on, says Mr. Correll.Associates say Mr. Hahn picked up that careful approach to management as president of Virginia Polytechnic Institute.Assuming that post at the age of 35, he managed by consensus, as is the rule in universities, says Warren H. Strother, a university official who is researching a book on Mr. Hahn.But he also showed a willingness to take a strong stand.In 1970, Mr. Hahn called in state police to arrest student protesters who were occupying a university building. That impressed Robert B. Pamplin, Georgia-Pacific's chief executive at the time, whom Mr. Hahn had met while fundraising for the institute.In 1975, Mr. Pamplin enticed Mr. Hahn into joining the company as executive vice president in charge of chemicals; the move befuddled many in Georgia-Pacific who didn't believe a university administrator could make the transition to the corporate world. But Mr. Hahn rose swiftly through the ranks, demonstrating a raw intelligence that he says he knew he possessed early on.The son of a physicist, Mr. Hahn skipped first grade because his reading ability was so far above his classmates.Moving rapidly through school, he graduated Phi Beta Kappa from the University of Kentucky at age 18, after spending only 2 1/2 years in college.He earned his doctorate in nuclear physics from the Massachusetts Institute of Technology. Mr. Hahn agrees that he has a "retentive" memory, but friends say that's an understatement.They call it "photographic". Mr. Hahn also has engineered a surprising turnaround of Georgia-Pacific.Taking over as chief executive officer in 1983, he inherited a company that was mired in debt and hurt by a recession-inspired slide in its building-products business.Mr. Hahn began selling non-core businesses, such as oil and gas and chemicals.He even sold one unit that made vinyl checkbook covers. At the same time, he began building up the pulp and paper segment of the company while refocusing building products on home repair and remodeling, rather than materials for new-home construction.The idea was to buffet building products from cycles in new-home construction. The formula has paid off, so far.Georgia-Pacific's sales climbed to $9.5 billion last year, compared with $6 billion in 1983, when Mr. Hahn took the reins.Profit from continuing operations has soared to $467 million from $75 million.Mr. Hahn attributes the gains to the philosophy of concentrating on what a company knows best. "The record of companies that have diversified isn't all that impressive," he says. Nekoosa wouldn't be a diversification.It would be a good match, Mr. Hahn and many analysts say, of two healthy companies with high-quality assets and strong cash flows.The resulting company would be the largest forest-products concern in the world with combined sales of more than $13 billion. But can Mr. Hahn carry it off?In this instance, industry observers say, he is entering uncharted waters.Says Kathryn McAuley, an analyst at First Manhattan Co.: "This is the greatest acquisition challenge he has faced."
A House-Senate conference approved major portions of a package for more than $500 million in economic aid for Poland that relies heavily on $240 million in credit and loan guarantees in fiscal 1990 in hopes of stimulating future trade and investment. For the Agency for International Development, appropriators approved $200 million in secondary loan guarantees under an expanded trade credit insurance program, and total loan guarantees for the Overseas Private Investment Corp. are increased by $40 million over fiscal 1989 as part of the same Poland package. The conference approved at least $55 million in direct cash and development assistance as well, and though no decision was made, both sides are committed to adding more than $200 million in economic support funds and environmental initiatives sought by the Bush administration. The agreement on Poland contrasts with the major differences remaining over the underlying foreign aid bill, which has already provoked veto threats by the White House and is sharply confined under this year's budget.These fiscal pressures are also a factor in shaping the Poland package, and while more ambitious authorizing legislation is still pending, the appropriations bill in conference will be more decisive on U.S. aid to Eastern Europe. To accommodate the additional cash assistance, the House Appropriations Committee last week was required to reallocate an estimated $140 million from the Pentagon.And though the size of the loan guarantees approved yesterday is significant, recent experience with a similar program in Central America indicates that it could take several years before the new Polish government can fully use the aid effectively. The action on Poland came as the conference separately approved $220 million for international population planning activities, an 11% increase over fiscal 1989.The House and Senate are divided over whether the United Nations Population Fund will receive any portion of these appropriations, but the size of the increase is itself significant. In a second area of common concern, the world environment, an additional $15 million will be provided in development assistance to fund a series of initiatives, related both to global warming and the plight of the African elephant. The sweeping nature of the bill draws a variety of special interest amendments, running from an import exemption for a California airplane museum to a small but intriguing struggle among sugar producing nations over the fate of Panama's quota of exports to the profitable U.S. market. Panama was stripped of this right because of U.S. differences with the Noriega regime, but the Central American country would have received a quota of 30,537 metric tons over a 21-month period ending Sept. 30, 1990.About a quarter of this share has already been reallocated, according to the industry, but the remaining 23,403 tons are still a lucrative target for growers because the current U.S. price of 18 cents a pound runs as much as a nickel a pound above the world rate. The potential sales are nearly $9.3 million, and House Majority Whip William Gray (D., Pa.) began the bidding this year by proposing language that the quota be allocated to English-speaking countries of the Caribbean, such as Jamaica and Barbados.Rep. Jerry Lewis, a conservative Californian, added a provision of his own intended to assist Bolivia, and the Senate then broadened the list further by including all countries in the U.S. Caribbean Basin initiate as well as the Philippines-backed by the powerful Hawaii Democrat Sen. Daniel Inouye.Jamaica, wary of upsetting its Caribbean Basin allies, has apparently instructed its lobbyist to abandon the provision initially drafted by Mr. Gray, but the greater question is whether Mr. Inouye, who has strong ties to the sugar industry, is able to insert a claim by the Philippines. In separate floor action, the House waived budget restrictions and gave quick approval to $3.18 billion in supplemental appropriations for law enforcement and anti-drug programs in fiscal 1990.The funding is attached to an estimated $27.1 billion transportation bill that goes next to the Senate and carries with it a proposed permanent smoking ban on virtually all U.S. domestic airline flights. The leadership hopes to move the compromise measure promptly to the White House, but in recent days, the Senate has been as likely to bounce bills back to the House.The most recent example was a nearly $17.3 billion fiscal 1990 bill funding the State, Justice and Commerce departments.And after losing a battle Tuesday night with the Senate Foreign Relations Committee, appropriators from both houses are expected to be forced back to conference.
Beauty Takes Backseat To Safety on Bridges EVERYONE AGREES that most of the nation's old bridges need to be repaired or replaced.But there's disagreement over how to do it. Highway officials insist the ornamental railings on older bridges aren't strong enough to prevent vehicles from crashing through.But other people don't want to lose the bridges' beautiful, sometimes historic, features. "The primary purpose of a railing is to contain a vehicle and not to provide a scenic view," says Jack White, a planner with the Indiana Highway Department.He and others prefer to install railings such as the "type F safety shape," a four-foot-high concrete slab with no openings. In Richmond, Ind., the type F railing is being used to replace arched openings on the G Street Bridge.Garret Boone, who teaches art at Earlham College, calls the new structure "just an ugly bridge" and one that blocks the view of a new park below. In Hartford, Conn., the Charter Oak Bridge will soon be replaced, the cast-iron medallions from its railings relegated to a park. Compromises are possible.Citizens in Peninsula, Ohio, upset over changes to a bridge, negotiated a deal: The bottom half of the railing will be type F, while the top half will have the old bridge's floral pattern. Similarly, highway engineers agreed to keep the old railings on the Key Bridge in Washington, D.C., as long as they could install a crash barrier between the sidewalk and the road. Tray Bon?Drink Carrier Competes With Cartons PORTING POTABLES just got easier, or so claims Scypher Corp., the maker of the Cup-Tote. The Chicago company's beverage carrier, meant to replace cardboard trays at concession stands and fast-food outlets, resembles the plastic loops used on six-packs of beer, only the loops hang from a web of strings.The new carrier can tote as many as four cups at once. Inventor Claire Marvin says his design virtually eliminates spilling.Lids aren't even needed.He also claims the carrier costs less and takes up less space than most paper carriers.A few fast-food outlets are giving it a try. The company acknowledges some problems.A driver has to find something to hang the carrier on, so the company supplies a window hook.While it breaks down in prolonged sunlight, it isn't recyclable.And unlike some trays, there's no place for food. Spirit of Perestroika Touches Design World AN EXCHANGE of U.S. and Soviet designers promises change on both sides. An exhibition of American design and architecture opened in September in Moscow and will travel to eight other Soviet cities.The show runs the gamut, from a blender to chairs to a model of the Citicorp building. The event continues into next year and includes an exchange program to swap design teachers at Carnegie-Mellon and Leningrad's Mutchin Institute. Dan Droz, leader of the Carnegie-Mellon group, sees benefits all around.The Soviets, who normally have few clients other than the state, will get "exposure to a market system," he says.Americans will learn more about making products for the Soviets. Mr. Droz says the Soviets could even help U.S. designers renew their sense of purpose. "In Moscow, they kept asking us things like, `Why do you make 15 different corkscrews, when all you need is one good one? '" he says. "They got us thinking maybe we should be helping U.S. companies improve existing products rather than always developing new ones." Seed for Jail Solution Fails to Take Root IT'S A TWO BIRDS with one stone deal: Eggers Group architects propose using grain elevators to house prisoners.It would ease jail overcrowding while preserving historic structures, the company says. But New York state, which is seeking solutions to its prison cell shortage, says "no." Grain elevators built in the 1920s and '30s have six-inch concrete walls and a tubular shape that would easily contain semicircular cells with a control point in the middle, the New York firm says.Many are far enough from residential areas to pass public muster, yet close enough to permit family visits. Besides, Eggers says, grain elevators are worth preserving for aesthetic reasons -- one famed architect compared them to the pyramids of Egypt. A number of cities -- including Minneapolis, Philadelphia and Houston -- have vacant grain elevators, Eggers says.A medium-sized one in Brooklyn, it says, could be altered to house up to 1,000 inmates at a lower cost than building a new prison in upstate New York.A spokesman for the state, however, calls the idea "not effective or cost efficient."
The Labor Department cited USX Corp. for numerous health and safety violations at two Pennsylvania plants, and proposed $7.3 million in fines, the largest penalty ever proposed for alleged workplace violations by an employer. The department's Occupational Safety and Health Administration proposed fines of $6.1 million for alleged violations at the company's Fairless Hills, Pa., steel mill; that was a record for proposed penalties at any single facility.OSHA cited nearly 1,500 alleged violations of federal electrical, crane-safety, record-keeping and other requirements. A second citation covering the company's Clairton, Pa., coke works involved more than 200 alleged violations of electrical-safety and other requirements, for which OSHA proposed $1.2 million in fines. Labor Secretary Elizabeth Dole said, "The magnitude of these penalties and citations is matched only by the magnitude of the hazards to workers which resulted from corporate indifference to worker safety and health, and severe cutbacks in the maintenance and repair programs needed to remove those hazards." OSHA said there have been three worker fatalities at the two plants in the past two years and 17 deaths since 1972.Gerard Scannell, the head of OSHA, said USX managers have known about many of the safety and health deficiencies at the plants for years, "yet have failed to take necessary action to counteract the hazards." "Particularly flagrant," Mrs. Dole said, "are the company's numerous failures to properly record injuries at its Fairless works, in spite of the firm promise it had made in an earlier corporate-wide settlement agreement to correct such discrepancies." That settlement was in April 1987. A USX spokesman said the company hadn't yet received any documents from OSHA regarding the penalty or fine. "Once we do, they will receive very serious evaluation," the spokesman said. "No consideration is more important than the health and safety of our employees." USX said it has been cooperating with OSHA since the agency began investigating the Clairton and Fairless works.He said that, if and when safety problems were identified, they were corrected. The USX citations represented the first sizable enforcement action taken by OSHA under Mr. Scannell.He has promised stiffer fines, though the size of penalties sought by OSHA have been rising in recent years even before he took office this year. "The big problem is that USX management has proved unwilling to devote the necessary resources and manpower to removing hazards and to safeguarding safety and health in the plants," said Linda Anku, OSHA regional administrator in Philadelphia.USX has 15 working days to contest the citations and proposed penalties, before the independent Occupational Safety and Health Review Commission. Before the USX case, OSHA's largest proposed fine for one employer was $4.3 million for alleged safety violations at John Morrell & Co., a meatpacking subsidiary of United Brands Co., Cincinnati.The company is contesting the fine.
Your Oct. 6 editorial "The Ill Homeless" referred to research by us and six of our colleagues that was reported in the Sept. 8 issue of the Journal of the American Medical Association.Your comments implied we had discovered that the "principal cause" of homelessness is to be found in the large numbers of mentally ill and substance-abusing people in the homeless population.We have made no such statement.It is clear that most mentally ill people and most alcoholics do not become homeless.The "causes" of homelessness are poorly understood and complex in any individual case. In quoting from our research you emphasized the high prevalance of mental illness and alcoholism.You did not note that the homeless people we examined had a multitude of physical disorders in addition to their psychiatric problems and substance abuse.They suffered from malnutrition, chest diseases, cardiovascular disorders, skin problems, infectious diseases and the aftereffects of assaults and rape.Homeless people not only lack safety, privacy and shelter, they also lack the elementary necessities of nutrition, cleanliness and basic health care.In a recent report, the Institute of Medicine pointed out that certain health problems may predispose a person to homelessness, others may be a consequence of it, and a third category is composed of disorders whose treatment is difficult or impossible if a person lacks adequate shelter.The interactions between health and homelessness are complex, defying sweeping generalizations as to "cause" or "effect." If we look to the future, preventing homelessness is an important objective.This will require us to develop a much more sophisticated understanding of the dynamics of homelessness than we currently possess, an understanding that can be developed only through careful study and research. William R. Breakey M.D. Pamela J. Fischer M.D. Department of Psychiatry Johns Hopkins University School of Medicine Baltimore A study by Tulane Prof.James Wright says homelessness is due to a complex array of problems, with the common thread of poverty.The study shows that nearly 40% of the homeless population is made up of women and children and that only 25% of the homeless exhibits some combination of drug, alcohol and mental problems. According to Dr. Wright, homelessness is "simultaneously a housing problem, an employment problem, a demographic problem, a problem of social disaffiliation, a mental health problem, a family violence problem, a problem created by the cutbacks in social welfare spending, a problem resulting from the decay of the traditional nuclear family, and a problem intimately connected to the recent increase in the number of persons living below the poverty level." Leighton E. Cluff M.D. President Robert Wood Johnson Foundation Princeton, N.J. To quote the highly regarded director of a privately funded drop-in center for the homeless in New York: "If you're homeless, you don't sleep for fear of being robbed or murdered.After your first three weeks of sleep deprivation, you're scarcely in touch with reality any more; without psychiatric treatment, you may well be unable to fend for yourself ever again." Some of the homeless, obviously, had pre-existing mental illness or addiction.But many others have fallen through cracks in the economy into the grim, brutal world of our city streets.Once there, what ways of escape are open to them other than drink, drugs or insanity? Maxwell R.D. Vos Brooklyn, N.Y. You dismiss as "sentimental" the view that the reduction of federal housing-assistance programs by 77% might have played a significant role in the increased number of men and women sleeping on our city streets during the Reagan-Bush years.There is no sign that you bothered to consider the inverse of your logic: namely, that mental illness and substance abuse might be to some degree consequences rather than causes of homelessness.Your research stopped when a convenient assertion could be made. Robert S. Jenkins Cambridge, Mass. Of the approximately 200 sponsors of the recent march in Washington for the homeless, you chose to cite such groups as the National Association of Home Builders and the International Union of Bricklayers and Allied Craftsmen, insinuating that the march got its major support from self-serving groups that "know a good thing when they see it," and that the crusade was based on greed or the profit motive.But isn't the desire for profit the driving force behind those who subscribe to, and advertise in, your paper?Why didn't you mention the YMCA or the YWCA or Catholic Charities USA or a hundred other nonprofit organizations that participated in the march? As for the findings on the 203 Baltimore homeless who underwent psychiatric examinations, I suggest you conduct your own survey.Choose 203 business executives, including, perhaps, someone from your own staff, and put them out on the streets, to be deprived for one month of their homes, families and income.I would predict that within a short time most of them would find Thunderbird a satisfactory substitute for Chivas Regal and that their "normal" phobias, anxieties, depressions and substance abuse would increase dramatically. Ruth K. Nelson Cullowhee, N.C.
Follow-up report: You now may drop by the Voice of America offices in Washington and read the text of what the Voice is broadcasting to those 130 million people around the world who tune in to it each week.You can even take notes -- extensive notes, for the Voice folks won't look over your shoulder -- about what you read.You can do all this even if you're not a reporter or a researcher or a scholar or a member of Congress. And my newspaper can print the text of those broadcasts. Until the other day, you as an ordinary citizen of this democracy had no right to see what your government was telling your cousins around the world.That was the law.And I apparently had no right to print hither what the Voice was booming to yon. It was censorship.It was outrageous.And it was stupid. The theory was that the Voice is a propaganda agency and this government shouldn't propagandize its own people.That sounds neat, but this government -- any government -- propagandizes its own people every day.Government press releases, speeches, briefings, tours of military facilities, publications are all propaganda of sorts.Propaganda is just information to support a viewpoint, and the beauty of a democracy is that it enables you to hear or read every viewpoint and then make up your own mind on an issue. The restrictions on viewing and dissemination of Voice material were especially absurd: An agency in the information business was not being allowed to inform. In June 1988, I wrote in this space about this issue.Assuming it wasn't one of those columns that you clipped and put on the refrigerator door, I'll review the facts. The Voice of America is a government agency that broadcasts news and views -- some might say propaganda -- in 43 languages to 130 million listeners around the world.It does a first-rate job.Its budget$184 million -- is paid for by you.But a 1948 law barred the "dissemination" of that material in the U.S.The law let scholars, reporters and researchers read texts of VOA material, only at VOA headquarters in Washington, but it barred them from copying texts.And, of course, there's that word "dissemination." How's that again? "You may come by the agency to read but not copy either manually or by photocopying," a Voice official explained when I asked.What if I tune in my short-wave radio, transcribe an editorial or program, and print it in my newspaper? "Nor are you free to reprint such material," I was advised. That sounded a lot like censorship, so after years of letters and conversations that went nowhere, I sued. A couple of weeks ago, I lost the case in federal district court in Des Moines.At least, that's the way it was reported.And, indeed, the lawsuit was dismissed. But I -- I like to think of it in terms of we, all of us -- won the point. For a funny thing happened on the way to the ruling: The United States Information Agency, which runs the Voice, changed its position on three key points. -- The USIA said that, on reflection, of course I could print anything I could get my hands on.The word dissemination, it decided, referred only to itself. "The USIA officially and publicly declared the absolute right of everyone except the USIA to disseminate agency program materials in the United States," my lawyer, the scholarly Mark McCormick of Des Moines, said in a memo pointing out the facts and trying to make me feel good after the press reported that I had lost.The court noted the new USIA position but, just in case, officially found "that Congress did not intend to preclude plaintiffs from disseminating USIA information domestically." -- The USIA said that, on reflection, anyone could view the VOA materials, not just the reporters, scholars, researchers and congressmen who are mentioned in the statute. "The USIA publicly and officially stated in the litigation that all persons are allowed access to the materials, notwithstanding the statutory designations, because the USIA has determined that it will not check the credentials of any person appearing and requesting to see the materials," Mr. McCormick noted. -- And the USIA said that all of us could take extensive notes. "The agency publicly and officially declared in the lawsuit that persons who examine the materials may make notes and, while the agency position is that persons may not take verbatim notes, no one will check to determine what notes a person has taken," Mr. McCormick reported. I had sought, in my suit, the right to print Voice material, which had been denied me, and I had sought a right to receive the information, arguing in effect that a right to print government information isn't very helpful if I have no right to get the information. But the court disagreed. "The First Amendment proscribes the government from passing laws abridging the right to free speech," Judge Donald O'Brien ruled. "The First Amendment does not prescribe a duty upon the government to assure easy access to information for members of the press." So now the situation is this: You have a right to read Voice of America scripts if you don't mind traveling to Washington every week or so and visiting the Voice office during business hours.I have a right to print those scripts if I go there and laboriously -- but no longer surreptitiously -- copy them out in long hand.But neither of us can copy the material on a Xerox machine or have it sent to us. In an era when every government agency has a public-relations machine that sends you stuff whether you want it or not, this does seem odd. Indeed, Judge O'Brien ruled that "it would be easy to conclude that the USIA's position is `inappropriate or even stupid, '" but it's the law.So the next step, I suspect, is to try to get the law changed.We (I assume you're in this with me at this point) need to get three words -- "for examination only" -- eliminated from the law. Section 501 of the United States Information and Educational Exchange Act of 1948 says Voice material shall be available to certain of us (but now, thanks to the USIA's new position, all of us) "for examination only." If those words weren't there, the nice people at the Voice would be able to send you the information or, at the very least, let you photocopy it. This is not a trivial issue. "You have . . . raised important questions which ought to be answered: What does USIA say about America abroad; how do we say it; and how can American taxpayers get the answers to these questions?" a man wrote me a couple of years ago.The man was Charles Z. Wick.At the time, he was director of the He had no answers then. Now there are some. This democracy is suddenly a little more democratic. I feel pretty good about it. Mr. Gartner is editor and co-owner of the Daily Tribune in Ames, Iowa, and president of NBC News in New York.
The House passed legislation designed to make it easier for the Transportation Department to block airline leveraged buy-outs. The final vote came after the House rejected Republican efforts to weaken the bill and approved two amendments sought by organized labor.The Bush administration has threatened to veto such a bill because of what it views as an undesirable intrusion into the affairs of industry, but the 300-113 vote suggests that supporters have the potential to override a veto. The broader question is where the Senate stands on the issue.While the Senate Commerce Committee has approved legislation similar to the House bill on airline leveraged buy-outs, the measure hasn't yet come to the full floor. Although the legislation would apply to acquisitions involving any major airline, it is aimed at giving the Transportation Department the chance to review in advance transactions financed by large amounts of debt. "The purpose of the bill is to put the brakes on airline acquisitions that would so load a carrier up with debt that it would impede safety or a carrier's ability to compete," Rep. John Paul Hammerschmidt, (R., Ark.) said. The bill, as it was approved by the House Public Works and Transportation Committee, would give the Transportation Department up to 50 days to review any purchase of 15% or more of the stock in an airline.The department would be required to block the buy-out if the acquisition is likely to financially weaken a carrier so that safety would be impaired; its ability to compete would be sharply diminished; it would be put into foreign control; or if the transaction would result in the sale of airline-related assets -- unless selling such assets had an overriding public benefit. The House approved an amendment offered by Rep. Peter DeFazio (D., Ore.) that would, in addition to the previous criteria, also require the department to block the acquisition of an airline if the added debt incurred were likely to result in a reduction in the number of the carrier's employees, or their wages or benefits. Rep. James Traficant (D., Ohio), said the amendment, which passed 271-147, would "let the American worker know that we consider them occasionally." But Rep. Hammerschmidt said that the provision, which he dubbed a "special interest" amendment, was likely to make the bill even more controversial. On Tuesday, the House approved a labor-backed amendment that would require the Transportation Department to reject airline acquisitions if the person seeking to purchase a carrier had run two or more airlines previously that have filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code. The provision, called the "two-time-losers" amendment by its supporters, apparently was aimed at preventing Texas Air Corp. Chairman Frank Lorenzo from attempting to take over another airline.
Wednesday, November 1, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 9 1/2% high, 8 3/4% low, 8 3/4% near closing bid, 9% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.55% 30 to 44 days; 8.25% 45 to 59 days; 8.45% 60 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.65% 30 days; 8.575% 60 days; 8.50% 90 days. CERTIFICATES OF DEPOSIT: 8.07% one month; 8.06% two months; 8.04% three months; 7.95% six months; 7.88% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.60% one month; 8.55% three months; 8.35% six months. BANKERS ACCEPTANCES: 8.50% 30 days; 8.48% 60 days; 8.30% 90 days; 8.15% 120 days; 8.07% 150 days; 7.95% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 13/16% to 8 11/16% two months; 8 3/4% to 8 5/8% three months; 8 5/8% to 8 1/2% four months; 8 1/2% to 8 7/16% five months; 8 1/2% to 8 3/8% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 3/4% three months; 8 1/2% six months; 8 7/ 16% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78% 13 weeks; 7.62% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.82%, standard conventional fixed-rate mortgages; 8.25%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.64%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Robert L. Bernstein, chairman and president of Random House Inc., announced his resignation from the publishing house he has run for 23 years. A successor wasn't named, which fueled speculation that Mr. Bernstein may have clashed with S.I. Newhouse Jr., whose family company, Advance Publications Inc., owns Random House.Abrupt departures aren't unheard of within the Newhouse empire. In an interview, Mr. Bernstein said his departure "evolved out of discussions with Si Newhouse and that's the decision I reached." He declined to elaborate, other than to say, "It just seemed the right thing to do at this minute.Sometimes you just go with your gut." Mr. Bernstein said he will stay until Dec. 31 and work with his successor, who is to be named soon. Mr. Newhouse, meanwhile, insisted that he isn't unhappy with Mr. Bernstein or the performance of Random House, the largest trade publishing house in the U.S.The company said the publisher's annual sales volume increased to $800 million from $40 million during Mr. Bernstein's tenure. "Bob has handled the extraordinary growth of the company quite brilliantly," said Mr. Newhouse. "The company is doing well, it's stable, it's got good people.Bob has an agenda and this seemed like the natural time." Publishing officials believe that while Random House has enjoyed spectacular growth and has smoothly integrated many acquisitions in recent years, some of the bigger ones haven't been absorbed so easily.Crown Publishing Group, acquired last year, is said to be turning in disappointing results.As a private company, Random House doesn't report its earnings. Mr. Bernstein, who succeeded Bennett Cerf, has been only the second president of Random House since it was founded in 1925.Speculation on his successor centers on a number of division heads at the house.Possible candidates include Susan Petersen, president of Ballantine/Del Rey/ Fawcett, Random House's huge and successful paperback division.Some say Anthony Cheetham, head of a recently acquired British company, Century Hutchinson, could be chosen. There is also speculation that Mr. Newhouse could bring in a powerhouse businessman or another Newhouse family member to run the business side, in combination with a publishing executive like Robert Gottlieb, who left Random House's Alfred A. Knopf to run the New Yorker, also owned by the Newhouse family. Not included on the most-likely-successor list are Joni Evans, recruited two years ago to be publisher of adult trade books for Random House, and Sonny Mehta, president of the prestigious Alfred A. Knopf unit.When Ms. Evans took her job, several important divisions that had reported to her predecessor weren't included partly because she didn't wish to be a full-time administrator.Mr. Mehta is widely viewed as a brilliant editor but a less-than-brilliant administrator and his own departure was rumored recently. Mr. Bernstein, a tall, energetic man who is widely respected as a publishing executive, has spent much of his time in recent years on human rights issues.
Congress learned during the Reagan administration that it could intimidate the executive branch by uttering again and again the same seven words: "Provided, that no funds shall be spent. . . ." This phrase once again is found throughout the many appropriations bills now moving through Congress.It signals Congress's attempt, under the pretext of guarding the public purse, to deny the president the funding necessary to execute certain of his duties and prerogatives specified in Article II of the Constitution. This species of congressional action is predicated on an interpretation of the appropriations clause that is erroneous and unconstitutional.The appropriations clause states that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law. . . ." The prevailing interpretation of the clause on Capitol Hill is that it gives Congress an omnipresent veto over every conceivable action of the president through the ability to withhold funding.This interpretation was officially endorsed by Congress in 1987 in the Iran-Contra Report. As partisans of congressional power understand, a "power of the purse" so broadly construed would emasculate the presidency and swallow the principle of separation of powers.It is not supported by the text or history of the Constitution. The framers hardly discussed the appropriations clause at the Constitutional Convention of 1787, according to Madison's notes.To the extent they did, their concern was to ensure fiscal accountability.Moreover, the framers believed that the nation needed a unitary executive with the independence and resources to perform the executive functions that the Confederation Congress had performed poorly under the Articles of Confederation.It would contradict that objective if the appropriations clause (technically a limitation on legislative power) could be read as placing the president on Congress's short leash, making the executive consist of the president and every member of Congress. As it went to the conference panel now deliberating, the appropriations bill for the executive office of the president for fiscal 1990 contained some breathtaking attempts by Congress to rewrite the Constitution under the pretext of protecting the public's money.During the coming weeks, President Bush must decide whether to veto the bills containing them -- or, alternatively, to sign these bills into law with a statement declaring their intrusions on executive power to be in violation of Article II, and thus void and severable. The 1990 appropriations legislation attempts to strip the president of his powers to make certain appointments as provided by Article II. Article II places on the president the duty to nominate, "and by and with the Advice and Consent of the Senate" appoint, ambassadors, judges, and other officers of the U.S.It also empowers the president to make recess appointments, without Senate approval: "The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." Yet Section 605 of the appropriations bill for the executive office provides: "No part of any appropriation for the current fiscal year contained in this or any other Act shall be paid to any person for the filling of any position for which he or she has been nominated after the Senate has voted not to approve the nomination of said person." Thus, with one brief passage in an appropriations bill, Congress repeals the president's power to make recess appointments under Article II. Section 605 also imposes unconstitutional conditions on the president's ability to nominate candidates of his choosing.The language of the appropriations rider implies that any nomination to any position of a rejected nominee will result in the president being denied funding to pay that person's salary.The president could probably not avoid this restriction by choosing people willing to serve without pay, because the Anti-Deficiency Act prohibits voluntary service to the government. The 1990 appropriations bills also contain a number of "muzzling" provisions that violate the recommendation clause in Article II of the Constitution.Muzzling provisions, which might be called "blindfold laws" as well, prevent the executive branch from even looking at certain policy options, let alone from recommending them to Congress.Such laws violate the provision in Article II that requires the president to make recommendations to Congress, but which gives the president the discretion to select the subject matter of those recommendations. Typically, these laws seek to prevent executive branch officials from inquiring into whether certain federal programs make any economic sense or proposing more market-oriented alternatives to regulations.Probably the most egregious example is a proviso in the appropriations bill for the executive office that prevents the president's Office of Management and Budget from subjecting agricultural marketing orders to any cost-benefit scrutiny.There is something inherently suspect about Congress's prohibiting the executive from even studying whether public funds are being wasted in some favored program or other. Perhaps none of the unconstitutional conditions contained in the appropriations bills for fiscal 1990 better illustrates Congress's attempt to usurp executive power than Section 609 of the executive-office bill: "None of the funds made available pursuant to the provisions of this Act shall be used to implement, administer, or enforce any regulation which has been disapproved pursuant to a resolution of disapproval duly adopted in accordance with the applicable law of the United States." This provision amounts to a legislative veto over the president's execution of the law, since a one-house resolution could be said to be "duly adopted" even though it would require neither bicameral action in Congress nor presentation to the president for his signature or veto.The Supreme Court's decision in INS v.Chadha held that legislative vetoes are unconstitutional. President Bush should veto appropriations acts that contain these kinds of unconstitutional conditions on the president's ability to discharge his duties and exercise his prerogatives.If President Bush fails to do so in his first year, he will invite Congress, for the remainder of his presidency, to rewrite Article II of the Constitution to suit its purposes.What becomes custom in the Bush administration will only become more difficult for future presidents, including Democrats, to undo. President Reagan learned that lesson.By 1987, then-Speaker Jim Wright was discussing arms control in Moscow with Mikhail Gorbachev and then attempting to direct the president, through an appropriations rider, to treat the Soviets as though the Senate had ratified SALT II. If a veto is unworkable because it would leave part of the executive branch unfunded, the president could sign the appropriations bills into law and assert a power of excision, declaring the rider restricting his Article II powers to be unconstitutional and severable.The Constitution does not expressly give the president such power.However, the president does have a duty not to violate the Constitution.The question is whether his only means of defense is the veto. Excision of appropriations riders that trespass on the president's duties and prerogative under Article II would be different from the line-item veto.As discussed in the context of controlling federal spending, the line-item veto is characterized as a way for the president to excise perfectly constitutional provisions in a spending bill that are objectionable merely because they conflict with his policy objectives.The excision of unconstitutional conditions in an appropriations bill would be a power of far more limited applicability.One could argue that it is not an assertion of a item veto at all for the president, by exerting a power of excision, to resist unconstitutional conditions in legislation that violate the separation of powers. There is no downside if the president asserts a right of excision over unconstitutional conditions in the fiscal 1990 appropriations bills.If Congress does nothing, President Bush will have won.If Congress takes the dispute to the Supreme Court (assuming it can establish standing to sue), President Bush might win.In that case, he might receive an opinion from the court that is a vindication of the president's right to perform the duties and exercise the prerogatives the framers thought should be entrusted to the executive. If President Bush loses at the court, it might be disappointing, as Morrison v.Olson was for the Reagan administration.But the presidency would be no worse off than it is now.Moreover, the electorate would have received a valuable civics lesson in how the separation of powers works in practice. As it stands now, Congress presumes after the Reagan administration that the White House will take unconstitutional provisions in appropriations bills lying down.President Bush should set things straight.If he does not, he will help realize Madison's fear in The Federalist No. 48 of a legislature "everywhere extending the sphere of its activity and drawing all powers into its impetuous vortex." Mr. Sidak served as an attorney in the Reagan administration.His longer analysis of executive power and the appropriations clause is to appear in the Duke Law Journal later this year.
Despite one of the most devastating droughts on record, net cash income in the Farm Belt rose to a new high of $59.9 billion last year. The previous record was $57.7 billion in 1987, according to the Agriculture Department. Net cash income -- the amount left in farmers' pockets after deducting expenses from gross cash income -- increased in 33 states in 1988, as the drought cut into crop yields and drove up commodity prices, the department's Economic Research Service reported yesterday.Most of those states set farm income records. The worst crop damage occurred in the Midwestern Corn Belt and the northern Great Plains.What saved many farmers from a bad year was the opportunity to reclaim large quantities of grain and other crops that they had "mortgaged" to the government under price-support loan programs.With prices soaring, they were able to sell the reclaimed commodities at "considerable profit," the agency's 240-page report said. In less parched areas, meanwhile, farmers who had little or no loss of production profited greatly from the higher prices. To the surprise of some analysts, net cash income rose in some of the hardest-hit states, including Indiana, Illinois, Nebraska and the Dakotas.Analysts attributed the increases partly to the $4 billion disaster-assistance package enacted by Congress. Last year's record net cash income confirms the farm sector's rebound from the agricultural depression of the early 1980s.It also helps explain the reluctance of the major farm lobbies and many lawmakers to make any significant changes in the 1985 farm program next year. Commodity prices have been rising in recent years, with the farm price index hitting record peaks earlier this year, as the government curtailed production with land-idling programs to reduce price-depressing surpluses.At the same time, export demand for U.S. wheat, corn and other commodities strengthened, said Keith Collins, a department analyst.Farmers also benefited from strong livestock prices, as the nation's cattle inventory dropped close to a 30-year low. "All of these forces came together in 1988 to benefit agriculture," Mr. Collins said. California led the nation with $6.5 billion in net cash income last year, followed by Texas, $3.9 billion; Iowa, $3.4 billion; Florida, $3.1 billion; and Minnesota, $2.7 billion.Iowa and Minnesota were among the few major farm states to log a decline in net cash income. Despite federal disaster relief, the drought of 1988 was a severe financial setback for an estimated 10,000 to 15,000 farmers, according to the department.Many lost their farms. Department economists don't expect 1989 to be as good a year as 1988 was.Indeed, net cash income is likely to fall this year as farm expenses rise and government payments to farmers decline.At the same time, an increase of land under cultivation after the drought has boosted production of corn, soybeans and other commodities, causing a fall in prices that has been only partly cushioned by heavy grain buying by the Soviets. Last year, government payments to farmers slipped to less than $14.5 billion from a record $16.7 billion in 1987.Payments are expected to range between $9 billion and $12 billion this year.
After years of struggling, the Los Angeles Herald Examiner will publish its last edition today, shut down by its parent, Hearst Corp., following unsuccessful efforts to sell the venerable newspaper. The demise of the 238,000-circulation Herald, once the nation's largest afternoon newspaper with circulation exceeding 700,000, turns the country's second-largest city into a one-newspaper town, at least in some senses.The Los Angeles Times, with a circulation of more than 1.1 million, dominates the region.But it faces stiff competition in Orange County from the Orange County Register, which sells more than 300,000 copies a day, and in the San Fernando Valley from the Los Angeles Daily News, which sells more than 170,000.Nearby cities such as Pasadena and Long Beach also have large dailies. In July, closely held Hearst, based in New York, put the paper on the block.Speculation had it that the company was asking $100 million for an operation said to be losing about $20 million a year, but others said Hearst might have virtually given the paper away. An attempted buy-out led by John J. McCabe, chief operating officer, never materialized, and a stream of what one staff member dismissed as "tire-kickers and lookee-loos" had filed through since.The prospective buyers included investor Marvin Davis and the Toronto Sun. The death of the Herald, a newsstand paper in a freeway town, was perhaps inevitable.Los Angeles is a sprawling, balkanized newspaper market, and advertisers seemed to feel they could buy space in the mammoth Times, then target a particular area with one of the regional dailies.The Herald was left in limbo. Further, the Herald seemed torn editorially between keeping its old-time Hearst readership -- blue-collar and sports-oriented -- and trying to provide a sprightly, upscale alternative to the sometimes staid Times.Hearst had flirted with a conversion to tabloid format for years but never executed the plan. The Herald joins the Baltimore News-American, which folded, and the Boston Herald-American, which was sold, as cornerstones of the old Hearst newspaper empire abandoned by the company in the 1980s.Many felt Hearst kept the paper alive as long as it did, if marginally, because of its place in family history.Its fanciful offices were designed by architect Julia Morgan, who built the Hearst castle at San Simeon.William Randolph Hearst had kept an apartment in the Spanish Renaissance-style building. Analysts said the Herald's demise doesn't necessarily represent the overall condition of the newspaper industry. "The Herald was a survivor from a bygone age," said J. Kendrick Noble, a media analyst with PaineWebber Inc. "Actually, the long deterioration in daily newspapers shows signs of coming to an end, and the industry looks pretty healthy." Founded as the Examiner in 1903 by Mr. Hearst, the Herald was crippled by a bitter, decade-long strike that began in 1967 and cut circulation in half.Financially, it never recovered; editorially, it had its moments.In 1979, Hearst hired editor James Bellows, who brightened the editorial product considerably.He and his successor, Mary Anne Dolan, restored respect for the editorial product, and though in recent years the paper had been limping along on limited resources, its accomplishments were notable.For example, the Herald consistently beat its much-larger rival on disclosures about Los Angeles Mayor Tom Bradley's financial dealings.The Herald's sports coverage and arts criticism were also highly regarded. Robert J. Danzig, vice president and general manager of Hearst Newspapers, stood up in the paper's newsroom yesterday and announced that no buyers had stepped forward and that the paper would fold, putting more than 730 full-time employees out of work. Hearst said it would provide employees with a placement service and pay them for 60 days.Some long-tenured employees will receive additional benefits, the company said.Hours after the announcement, representatives of the Orange County Register were in a bar across the street recruiting. The reaction in the newsroom was emotional. "I've never seen so many people crying in one place at one time," said Bill Johnson, an assistant city editor. "So Long, L.A." was chosen as the paper's final headline. "I'm doing the main story, and I'm already two beers drunk," said reporter Andy Furillo, whom the Times hired away several years ago but who returned to the Herald out of preference.His wife also works for the paper, as did his father. Outside, a young pressman filling a news box with an extra edition headlined "Herald Examiner Closes" refused to take a reader's quarter. "Forget it," he said as he handed her a paper. "It doesn't make any difference now."
If you'd really rather have a Buick, don't leave home without the American Express card. Or so the slogan might go.American Express Co. and General Motors Corp. 's beleaguered Buick division are joining forces in a promotion aimed at boosting Buick's sales while encouraging broader use of the American Express card. The companies are giving four-day vacations for two to Buick buyers who charge all or part of their down payments on the American Express green card.They have begun sending letters explaining the program, which began Oct. 18 and will end Dec. 18, to about five million card holders.Neither company would disclose the program's cost. Buick approached American Express about a joint promotion because its card holders generally have a "good credit history" and are "good at making payments," says a spokeswoman for the division.American Express also represents the upscale image "we're trying to project," she adds. Buick has been seeking for the past few years to restore its reputation as "the doctor's car" -- a product for upscale professionals.Sales were roughly flat in the 1989 model year compared with a year earlier, though industry sales fell.But since the 1990 model year began Oct. 1, Buick sales have plunged 33%. For American Express, the promotion is part of an effort to broaden the use of its card for retail sales, where the company expects to get much of the future growth in its card business.Traditionally, the card has been used mainly for travel and entertainment expenses. Phillip Riese, an American Express executive vice president, says the promotion with Buick is his company's first with an auto maker, but "hopefully {will be} the first of many" in the company's effort to promote its green card as "the total car-care card." To that end, American Express has been signing up gasoline companies, car repair shops, tire companies and car dealers to accept the card. Many auto dealers now let car buyers charge part or all of their purchase on the American Express card, but few card holders realize this, Mr. Riese says. Until now, however, buyers who wanted to finance part of a car purchase through General Motors Acceptance Corp. couldn't put their down payment on a charge card because of possible conflicts with truth-in-lending and state disclosure laws over finance rates, says a spokesman for the GM finance arm.But GMAC approved the Buick program, he says, because the American Express green card requires payment in full upon billing, and so doesn't carry any finance rates. Mr. Riese says American Express considers GM and Buick "very sophisticated direct-mail marketers," so "by joining forces with them we have managed to maximize our direct-mail capability." In addition, Buick is a relatively respected nameplate among American Express card holders, says an American Express spokeswoman.When the company asked members in a mailing which cars they would like to get information about for possible future purchases, Buick came in fourth among U.S. cars and in the top 10 of all cars, the spokeswoman says. American Express has more than 24 million card holders in the U.S., and over half have the green card.GMAC screened the card-member list for holders more than 30 years old with household incomes over $45,000 who hadn't "missed any payments," the Buick spokeswoman says.Some 3.8 million of the five million who will get letters were preapproved for credit with GMAC.These 3.8 million people also are eligible to get one percentage point off GMAC's advertised finance rates, which start at 6.9% for two-year loan contracts. A spokesman for Visa International's U.S. subsidiary says his company is using promotions to increase use of its cards, but doesn't have plans for a tie-in similar to the American Express-Buick link. Three divisions at American Express are working with Buick on the promotion: the establishment services division, which is responsible for all merchants and companies that accept the card; the travel division; and the merchandise sales division. The vacation packages include hotel accommodations and, in some cases, tours or tickets to local attractions, but not meals.Destinations are Chicago; Honolulu; Las Vegas, Nev.; Los Angeles; Miami Beach, Fla.; New Orleans; New York; Orlando, Fla.; San Francisco; and Washington, D.C.A buyer who chooses to fly to his destination must pay for his own ticket but gets a companion's ticket free if they fly on United Airlines. In lieu of the vacation, buyers can choose among several prizes, including a grandfather clock or a stereo videocassette recorder.Card holders who receive the letter also are eligible for a sweepstakes with Buick cars or a Hawaii vacation as prizes.If they test-drive a Buick, they get an American Express calculator. This isn't Buick's first travel-related promotion.A few years ago, the company offered two round-trip tickets on Trans World Airlines to buyers of its Riviera luxury car.The promotion helped Riviera sales exceed the division's forecast by more than 10%, Buick said at the time.
R. Gordon McGovern was forced out as Campbell Soup Co. 's president and chief executive officer, the strongest evidence yet of the power that Dorrance family members intend to wield in reshaping the troubled food company. Herbert M. Baum, the 53-year-old president of the company's Campbell U.S.A. unit, and Edwin L. Harper, 47, the chief financial officer, will run Campbell as a team, dividing responsibilities rather evenly until a successor is named.The board already has been searching for strong outside candidates, including food-industry executives with considerable international experience. Wall Street reacted favorably to Mr. McGovern's departure and its implications.In heavy trading on the New York Stock Exchange, Campbell's shares rose $3.375 to close at $47.125. "The profit motive of the major shareholders has clearly changed for the better," said John McMillin, a food industry analyst for Prudential-Bache in New York.Mr. McGovern was widely seen as sales, and not profit, oriented. "New managers would think a little more like Wall Street," Mr. McMillin added.Some of the surge in the stock's price appeared to be linked to revived takeover speculation, which has contributed to volatility of Campbell shares in recent months. Campbell's international businesses, particularly in the U.K. and Italy, appear to be at the heart of its problems.Growth has fallen short of targets and operating earnings are far below results in U.S. units. For example, Campbell is a distant third in the U.K. frozen foods market, where it recently paid 24 times earnings for Freshbake Foods PLC and wound up with far more capacity than it could use.Similarly, Campbell's Italian biscuit operation, D. Lazzaroni & Co., has been hurt by overproduction and distribution problems. Such problems will require considerable skill to resolve.However, neither Mr. Baum nor Mr. Harper has much international experience. Mr. Baum, a seasoned marketer who is said to have a good rapport with Campbell employees, will have responsibility for all domestic operations except the Pepperidge Farm unit.Mr. Harper, a veteran of several manufacturing companies who joined Campbell in 1986, will take charge of all overseas operations as well as Pepperidge. In an joint interview yesterday, both men said they would like to be the company's next chief executive. Mr. McGovern, 63, had been under intense pressure from the board to boost Campbell's mediocre performance to the level of other food companies.The board is dominated by the heirs of the late John T. Dorrance Jr., who controlled about 58% of Campbell's stock when he died in April.In recent months, Mr. Dorrance's children and other family members have pushed for improved profitability and higher returns on their equity. In August, the company took a $343 million pretax charge against fiscal 1989 earnings when it announced a world-wide restructuring plan.The plan calls for closing at least nine plants and eliminating about 3,600 jobs.But analysts said early results from the reorganization have been disappointing, especially in Europe, and there were signs that the board became impatient. Campbell officials said Mr. McGovern wasn't available yesterday to discuss the circumstances of his departure.The company's prepared statement quoted him as saying, "The CEO succession is well along and I've decided for personal reasons to take early retirement." But people familiar with the agenda of the board's meeting last week in London said Mr. McGovern was fired. Mr. McGovern himself had said repeatedly that he intended to stay on until he reached the conventional retirement age of 65 in October 1991, "unless I get fired." Campbell said Mr. McGovern had withdrawn his name as a candidate for re-election as a director at the annual shareholder meeting, scheduled for Nov. 17. For fiscal 1989, Mr. McGovern received a salary of $877,663.He owns about 45,000 shares of Campbell stock and has options to buy more than 100,000 additional shares.He will be eligible for an annual pension of more than $244,000 with certain other fringe benefits. During Mr. McGovern's nine-year term as president, the company's sales rose to $5.7 billion from $2.8 billion and net income increased to $274 million from $130 million, the statement said. Mr. Baum said he and Mr. Harper both advocated closing some plants as long ago as early 1988. "You've got to make the restructuring work," said Mr. Baum. "You've got to make those savings now." Mr. Harper expressed confidence that he and Mr. Baum can convince the board of their worthiness to run the company. "We look upon this as a great opportunity to prove the fact that we have a tremendous management team," he said.He predicted that the board would give the current duo until early next year before naming a new chief executive. Mr. Baum said the two have orders to "focus on bottom-line profits" and to "take a hard look at our businesses -- what is good, what is not so good." Analysts generally applaud the performance of Campbell U.S.A., the company's largest division, which posted 6% unit sales growth and a 15% improvement in operating profit for fiscal 1989. "The way that we've been managing Campbell U.S.A. can hopefully spread to other areas of the company," Mr. Baum said. In the interview at headquarters yesterday afternoon, both men exuded confidence and seemed to work well together. "You've got two champions sitting right before you," said Mr. Baum. "We play to win."
The United Kingdom High Court declared illegal a variety of interest-rate swap transactions and options deals between a London borough council and commercial banks. The ruling could lead to the cancellation of huge bank debts the London Borough of Hammersmith and Fulham ran up after losing heavily on swap transactions.As many as 70 U.K. and international banks stand to lose several hundred million pounds should the decision be upheld and set a precedent for other municipalities.An appeal is expected. In response to the ruling, gilt futures swiftly plunged more than a point yesterday before recovering much of the loss by the end of the session.Gilts, or British government bonds, which also fell sharply initially, retraced some of the losses to end about 3/8 point lower. The council, which is alleged to have engaged in over 600 deals valued at over #6 billion ($9.5 billion), lost millions of pounds from soured swap deals.At one point, Hammersmith is reported to have accounted for as much as 10% of the sterling market in interest-rate swap dealings. When two parties engage in an interest-rate swap, they are betting against each other on future rates.Thus, an institution obligated to make fixed-rate interest payments on debt swaps the payments with another making floating-rate payments.In most of the British transactions, the municipalities agreed to make floating-rate payments to banks, which would make fixed-rate payments.As interest rates rose, municipalities owed the banks more than the banks were paying them. The court hearing began in early October at the request of Anthony Hazell, district auditor for Hammersmith, who argued that local councils aren't vested with constitutional authority to engage in such capital-markets activities.The council backed the audit commission's stand that the swap transactions are illegal.Although the Hammersmith and Fulham council was by far the most active local authority engaging in such capital-markets transactions, the court decision could set a precedent for similar transactions by 77 other local councils. "While this court ruling was only on Hammersmith, it will obviously be very persuasive in other cases of a similar nature," a solicitor representing one of the banks said. Already, 10 local councils have refused to honor fees and payments to banks incurred during various swaps dealings.Other financial institutions involved include Barclays Bank PLC, Midland Bank PLC, Security Pacific Corp., Chemical Banking Corp. 's Chemical Bank, Citicorp's Citibank and Mitsubishi Finance International. If the banks exhaust all avenues of appeal, it is possible that they would seek to have the illegality ruling work both ways, some market sources said.Banks could seek to recover payments to local authorities in instances where the banks made net payments to councils. Officials from the various banks involved are expected to meet during the next few days to consider other arrangements with local authorities that could be questionable.The banks have 28 days to file an appeal against the ruling and are expected to do so shortly.
Some Democrats in Congress are warning that a complicated new funding device for the two federal antitrust agencies could result in further cutbacks in a regulatory area already reduced sharply in recent years. The funding mechanism, which has received congressional approval and is expected to be signed by President Bush, would affect the antitrust operations of the Justice Department and the Federal Trade Commission. As a part of overall efforts to reduce spending, Congress cut by $30 million the Bush administration's request for antitrust enforcement for fiscal 1990, which began Oct. 1.To offset the reduction, Congress approved a $20,000 fee that investors and companies will have to pay each time they make required filings to antitrust regulators about mergers, acquisitions and certain other transactions. Some Democrats, led by Rep. Jack Brooks (D., Texas), unsuccessfully opposed the measure because they fear that the fees may not fully make up for the budget cuts. But Justice Department and FTC officials said they expect the filing fees to make up for the budget reductions and possibly exceed them. "It could operate to augment our budget," James Rill, the Justice Department's antitrust chief, said in an interview. Under measures approved by both houses of Congress, the administration's request for $47 million for the Antitrust Division would be cut $15 million.The FTC budget request of $70 million, about $34 million of which would go for antitrust enforcement, would also be cut by $15 million.The administration had requested roughly the same amount for antitrust enforcement for fiscal 1990 as was appropriated in fiscal 1989. The offsetting fees would apply to filings made under the Hart-Scott-Rodino Act.Under that law, parties proposing mergers or acquisitions valued at $15 million or more must notify FTC and Justice Department antitrust regulators before completing the transactions.Currently, the government charges nothing for such filings. Proponents of the funding arrangement predict that, based on recent filing levels of more than 2,000 a year, the fees will yield at least $40 million this fiscal year, or $10 million more than the budget cuts. "When you do that, there is not a cut, but there is in fact a program increase of $5 million" each for the FTC and the Justice Department, Rep. Neal Smith (D., Iowa) said during House debate. But Rep. Don Edwards (D., Calif.) responded that a recession could stifle merger activity, reducing the amount of fees collected.The antitrust staffs of both the FTC and Justice Department were cut more than 40% in the Reagan administration, and enforcement of major merger cases fell off drastically during that period. "Today is not the time to signal that Congress in any way sanctions the dismal state into which antitrust enforcement has fallen," Mr. Edwards argued. Any money in excess of $40 million collected from the fees in fiscal 1990 would go to the Treasury at large. Corporate lawyers said the new fees wouldn't inhibit many mergers or other transactions.Though some lawyers reported that prospective acquirers were scrambling to make filings before the fees take effect, government officials said they hadn't noticed any surge in filings.
In the aftermath of the stock market's gut-wrenching 190-point drop on Oct. 13, Kidder, Peabody & Co. 's 1,400 stockbrokers across the country began a telephone and letter-writing campaign aimed at quashing the country's second-largest program trader. The target of their wrath?Their own employer, Kidder Peabody. Since October's minicrash, Wall Street has been shaken by an explosion of resentment against program trading, the computer-driven, lightning-fast trades of huge baskets of stocks and futures that can send stock prices reeling in minutes. But the heated fight over program trading is about much more than a volatile stock market.The real battle is over who will control that market and reap its huge rewards.Program trading itself, according to many academics who have studied it, is merely caught in the middle of this battle, unfairly labeled as the evil driving force of the marketplace.The evidence indicates that program trading didn't, in fact, cause the market's sharp fall on Oct. 13, though it may have exacerbated it. On one side of this power struggle stand the forces in ascendency on Wall Street -- the New Guard -- consisting of high-tech computer wizards at the major brokerage firms, their pension fund clients with immense pools of money, and the traders at the fast-growing Chicago futures exchanges.These are the main proponents of program trading. Defending their ramparts are Wall Street's Old Guard -- the traditional, stock-picking money managers, tens of thousands of stock brokers, the New York Stock Exchange's listed companies and the clannish floor traders, known as specialists, who make markets in their stocks. So far, Wall Street's Old Guard seems to be winning the program-trading battle, successfully mobilizing public and congressional opinion to bludgeon their tormentors. The Chicago Mercantile Exchange, a major futures marketplace, yesterday announced the addition of another layer of trading halts designed to slow program traders during a rapidly falling stock market, and the Big Board is expected today to approve some additional restrictions on program trading. Stung by charges that their greed is turning the stock market into a gigantic crapshoot, almost all the big investment banking houses have abandoned index arbitrage, a common form of program trading, for their own accounts in the past few days.A few, such as giant Merrill Lynch & Co., now refuse even to do index arbitrage trades for clients. The Old Guard's assault on program trading and its practitioners has been fierce and broad-based, in part because some Old Guard members feel their very livelihood is at stake.Some, such as traditional money manager Neuberger & Berman, have taken out national newspaper advertisements demanding that market regulators "stop the numbers racket on Wall Street." Big Board stock specialists, in a bold palace revolt, began shortly after Oct. 13 to telephone the corporate executives of the companies whose stock is listed on the Big Board to have them pressure the exchange to ban program trading. Charles Wohlstetter, the chairman of Contel Corp. who is rallying other CEOs to the anti-program trading cause, says he has received "countless" letters offering support. "They said universally, without a single exception: Don't even compromise.Kill it," he says. Wall Street's New Guard isn't likely to take all this lying down for long, however.Its new products and trading techniques have been highly profitable.Program trading money managers have gained control over a big chunk of the invested funds in this country, and the pressures on such money managers to produce consistent profits has wedded them to the ability to move rapidly in and out the market that program trading gives them.What's more, the last time major Wall Street firms said they were getting out of program trading -- in the aftermath of the 1987 crash -- they waited a few months and then sneaked back into it. Even some members of the Old Guard, despite their current advantage, seem to be conceding that the future belongs with the New Guard.Last week, Robert M. Bradley, one of the Big Board's most respected floor traders and head of a major traders' organization, surrendered.He sold his exchange seat and wrote a bitter letter to Big Board Chairman John J. Phelan Jr. in which he said the Big Board is too focused on machines, rather than people.He said the exchange is "headed for a real crisis" if program trading isn't curbed. "I do not want my money invested in what I consider as nothing more than a casino," Mr. Bradley wrote. The battle has turned into a civil war at some firms and organizations, causing internal contradictions and pitting employee against employee.At Kidder, a unit of General Electric Co., and other big brokerage firms, stockbrokers battle their own firm's program traders a few floors away.Corporations like Contel denounce program trading, yet Contel has in the past hired pension fund managers like Bankers Trust Co. that are also big program traders. The Big Board -- the nation's premier stock exchange -- is sharply divided between its floor traders and its top executives.Its entrenched 49 stock specialists firms are fighting tooth and nail against programs.But the Big Board's leadership -- over the specialists' protests -- two weeks ago began trading a new stock "basket" product designed to facilitate program trading. "A lot of people would like to go back to 1970," before program trading, Mr. Phelan said this week. "I would like to go back to 1970.But we are not going back to 1970." Again and again, program-trading's critics raise the "casino" theme.They say greedy market manipulators have made a shambles of the nation's free-enterprise system, turning the stock market into a big gambling den, with the odds heavily stacked against the small investor. "The public didn't come to the market to play a game; they can go to Off-Track Betting for that," says A. Brean Murray, chairman of Brean Murray, Foster Securities, a traditional money management firm. The program traders, on the other hand, portray old-fashioned stock pickers as the Neanderthals of the industry.Critics like Mr. Murray "are looking for witches, and people who use computers to trade are a convenient boogieman," says J. Thomas Allen, president of Advanced Investment Management Inc., a Pittsburgh firm that runs a $200 million fund that uses index arbitrage. "Just a blind fear of the unknown is causing them to beg the regulators for protection." For all the furor, there is nothing particularly complex about the concept of stock-index arbitrage, the most controversial type of computer-assisted program trading.Like other forms of arbitrage, it merely seeks to take advantage of momentary discrepancies in the price of a single product -- in this case, a basket of stocks -- in different markets -- in this case the New York Stock Exchange and the Chicago futures markets. That divergence is what stock index traders seek.When it occurs, the traders place orders via computers to buy the basket of stocks (such as the 500 stocks that constitute the Standard & Poor's 500 stock index) in whichever market is cheaper and sell them in the more expensive market; they lock in the difference in price as profit. Such program trades, which can involve the purchase or sale of millions of dollars of stock, occur in a matter of seconds.A program trade of $5 million of stock typically earns a razor-thin profit of $25,000.To keep program-trading units profitable in the eyes of senior brokerage executives, traders must seize every opportunity their computers find. The speed with which such program trades take place and the volatile price movements they can cause are what program trading critics profess to despise. "If you continue to do this, the investor becomes frightened -- any investor: the odd lotter, mutual funds and pension funds," says Larry Zicklin, managing partner at Neuberger & Berman. But many experts and traders say that program trading isn't the main reason for stock-market gyrations. "I have not seen one iota of evidence" to support restrictions on program trading, says a Vanderbilt University finance professor, Hans Stoll, an authority on the subject.Says the Big Board's Mr. Phelan, "Volatility is greater than program trading." The Oct. 13 plunge was triggered not by program traders, but by news of the unraveling of the $6.79 billion buy-out of UAL Corp. Unable to unload UAL and other airline shares, takeover-stock speculators, or risk arbitragers, dumped every blue-chip stock they had.While program trades swiftly kicked in, a "circuit breaker" that halted trading in stock futures in Chicago made some program trading impossible.Susan Del Signore, head trader at Travelers Investment Management Co., says critics are ignoring "the role the {takeover stock} speculator is taking in the market as a source of volatility." Many arbs are "overleveraged," she says, and they "have to sell when things look like they fall apart." Like virtually everything on Wall Street, the program-trading battle is over money, and the traditionalists have been losing out on bundles of it to the New Guard in recent years.Take the traditional money managers, or "stock pickers," as they are derisively known among the computer jockeys.Traditional stock managers like to charge 50 cents to 75 cents for every $100 they manage for big institutional investors, and higher fees for smaller investors.Yet many such managers consistently fail to even keep up with, much less beat, the returns of standard benchmarks like the S&P Not surprisingly, old-style money managers have been losing clients to giant stock-index funds that use computers to juggle portfolios so they mirror the S&P 500.The indexers charge only a few pennies per $100 managed.Today, about $200 billion, or 20% of all pension-fund stock investments, is held by index funds. The new Wall Street of computers and automated trading threatens to make dinosaurs of the 49 Big Board stock-specialist firms.These small but influential floor brokers long have earned fat returns of 30% to 40% a year on their capital, by virtue of their monopoly in making markets in individual stocks.The specialists see any step to electronic trading as a death knell. And they believe the Big Board, under Mr. Phelan, has abandoned their interest.The son of a specialist and once one himself, Mr. Phelan has nonetheless been striving -- with products like the new stock basket that his former colleagues dislike so much -- to keep index funds and other program traders from taking their business to overseas markets. Meanwhile, specialists' trading risks have skyrocketed as a result of stock-market volatility. "When the sell programs hit, you can hear the order printers start to go" on the Big Board trading floor, says one specialist there. "The buyers walk away, and the specialist is left alone" as the buyer of last resort for his stable of stocks, he contends. No one is more unhappy with program trading than the nation's stockbrokers.They are still trying to lure back small investors spooked by the 1987 stock-market crash and the market's swings since then. "Small investors are absolutely dismayed that Wall Street is stacking the deck against them, and these wide swings are scaring them to death," says Raymond A. Mason, chairman of regional broker Legg Mason Inc. in Baltimore.Stockbrokers' business and pay has been falling.Last year, the average broker earned $71,309, 24% lower than in 1987. Corporate executives resent that their company's stock has been transformed into a nameless piece of a stock-index basket.Index traders who buy all 500 stocks in the S&P 500 often don't even know what the companies they own actually do, complains Andrew Sigler, chairman of Champion International Corp. "Do you make sweatshirts or sparkplugs?Oh, you're in the paper business," is one reaction Mr. Sigler says he's gotten from his big institutional shareholders. By this September, program traders were doing a record 13.8% of the Big Board's average daily trading volume.Among the top practitioners were Wall Street blue bloods: Morgan Stanley & Co., Kidder Peabody, Merrill Lynch, Salomon Brothers Inc. and PaineWebber Group Inc.But then came Oct. 13 and the negative publicity orchestrated by the Old Guard, particularly against index arbitrage.The indexers' strategy for the moment is to hunker down and let the furor die. "There's a lynch-mob psychology right now," says the top program-trading official at a Wall Street firm. "Wall Street's cash cow has been gored, but I don't think anyone has proven that index arbitrage is the problem." Too much money is at stake for program traders to give up.For example, stock-index futures began trading in Chicago in 1982, and within two years they were the fastest-growing futures contract ever launched.Stock futures trading has minted dozens of millionaires in their 20s and 30s.Now, on a good day, Chicago's stock-index traders trade more dollars worth of stock futures than the Big Board trades in stock. Now the stage is set for the battle to play out.The anti-programmers are getting some helpful thunder from Congress.Program traders' "power to create total panic is so great that they can't be allowed to have their way," says Rep. Edward Markey, a Massachusetts Democrat. "We have to have a system that says to those largest investors: `Sit down! You will not panic, you will not put the financial system in jeopardy. '" But the prospects for legislation that targets program trading is unlikely anytime soon.Many people, including the Big Board, think that it's too late to put the genie back in the bottle.The Big Board's directors meet today to approve some program-trading restrictions, but a total ban isn't being considered, Big Board officials say. "You're not going to stop the idea of trading a basket of stocks," says Vanderbilt's Prof.Stoll. "Program trading is here to stay, and computers are here to stay, and we just need to understand it." Short of a total ban, some anti-programmers have proposed several middle-ground reforms, which they say would take away certain advantages program traders currently enjoy in the marketplace that other investors don't. One such proposal regarding stock-index futures is an increase in the margin requirement -- or the "good-faith" payment of cash needed to trade them -- to about the same level as the margin requirement for stocks.Currently, margins on stock futures purchases are much lower -- roughly 7% compared with 50% for stocks -- making the futures market much faster and potentially more speculative.Program trading critics also want the Federal Reserve Board, rather than the futures industry, to set such margins. Futures traders respond that low margins help keep their markets active.Higher margins would chase away dozens of smaller traders who help larger traders buy and sell, they say. Another proposed reform is to have program traders answer to an "uptick rule"a reform instituted after the Great Crash of 1929 that protects against stocks being relentlessly beaten downward by those seeking to profit from lower prices, namely short sellers.The Big Board's uptick rule prevents the short sale of a stock when the stock is falling in price. But in 1986, program traders received what amounted to an exemption from the uptick rule in certain situations, to make it easier to link the stock and futures markets.A reinstatement of the uptick rule for program traders would slow their activity considerably.Program traders argue that a reinstatement of the rule would destroy the "pricing efficiency" of the futures and stock markets. James A. White contributed to this article. Fundamentalists Jihad Big Board Chairman John Phelan said yesterday that he could support letting federal regulators suspend program trading during wild stock-price swings.Thus the band-wagon psychology of recent days picks up new impetus. Index arbitrage is a common form of program trading.As usually practiced it takes advantage of a rather basic concept: Two separate markets in different locations, trading basically the same widgets, can't trade them for long at prices that are widely different.In index arbitrage, the widget is the S&P 500, and its price is constantly compared between the futures market in Chicago and the stock markets largely in New York.To profit from an index-arbitrage opportunity, someone who owns the S&P 500 widget in New York must sell it and replace it with a cheaper S&P 500 widget in Chicago. If the money manager performing this service is being paid by his clients to match or beat the return of the S&P 500 index, he is likely to remain fully invested at all times. (Few, if any, index-fund managers will risk leveraging performance by owning more than 100% exposure to stocks, and equally few will want to own less than a 100% position should stocks rise.) By constantly seeking to own the cheapest widget, index-arbitrage traders hope to add between 1% and 3% to the annual return of the S&P 500.That represents a very thin "excess" return, certainly far less than what most fundamental stock pickers claim to seek as their performance objective.The fact that a vast majority of fundamentalist money managers fail to beat the S&P 500 may contribute to the hysteria surrounding the issue. As more managers pursue the index-arbitrage strategy, these small opportunities between markets will be reduced and, eventually, eliminated.The current opportunities arise because the process for executing a buy or sell order in the actual stocks that make up the S&P 500 is more cumbersome than transacting in the futures market.The New York Stock Exchange's attempt to introduce a new portfolio basket is evidence of investors' desires to make fast and easy transactions of large numbers of shares. So if index arbitrage is simply taking advantage of thin inefficiencies between two markets for the same widget, how did "program trading" evolve into the evil creature that is evoking the curses of so many observers?All arguments against program trading, even those pressed without fact, conclude with three expected results after "reforms" are implemented: 1) reduced volatility, 2) a long-term investment focus, and 3) a level playing field for the small investor.But many of these reforms are unneeded, even harmful. Reducing volatility.An index-arbitrage trade is never executed unless there is sufficient difference between the markets in New York and Chicago to cover all transaction costs.Arbitrage doesn't cause volatility; it responds to it.Think about what causes the difference in prices between the two markets for S&P 500 stocks -- usually it is large investors initiating a buy or sell in Chicago. A large investor will likely cause the futures market to decline when he sells his futures.Arbitrage simply transfers his selling pressure from Chicago to New York, while functioning as a buyer in Chicago.The start of the whole process is the key-someone must fundamentally increase or decrease his ownership in widgets to make widget prices move. Why does this large hypothetical seller trade in Chicago instead of New York?Perhaps he is willing to sacrifice to the arbitrage trader some small profit in order to get quick and certain execution of his large trade.In a competitive market, this investor has many ways to execute his transactions, and he will have more alternatives (both foreign and domestic) if his volume is profitable for an exchange to handle.If not Chicago, then in New York; if not the U.S., then overseas. Volatility surrounding his trades occurs not because of index arbitrage, but because his is a large addition or subtraction to a widget market with finite liquidity.Eliminate arbitrage and liquidity will decline instead of rising, creating more volatility instead of less.The speed of his transaction isn't to be feared either, because faster and cleaner execution is desirable, not loathsome.If slowing things down could reduce volatility, stone tablets should become the trade ticket of the future. Encouraging long-term investing.We must be very cautious about labeling investors as "long-term" or "short-term." Policies designed to encourage one type of investor over another are akin to placing a sign over the Big Board's door saying: "Buyers welcome, sellers please go away!" The ultimate goal of any investor is a profit motive, and regulators should not concern themselves with whether investors are sufficiently focused on the long term.A free market with a profit motive will attract each investor to the liquidity and risks he can tolerate. In point of fact, volatility as measured by the annualized standard deviation of daily stock price movements has frequently been much higher than it is today.Periods before the advent of futures or program trading were often more volatile, usually when fundamental market conditions were undergoing change (1973-75, 1937-40, and 1928-33 for example).It is interesting to see the fundamental stock pickers scream "foul" on program trading when the markets decline, while hailing the great values still abounding as the markets rise.Could rising volatility possibly be related to uncertainty about the economics of stocks, instead of the evil deeds of program-trading goblins? Some of the proposed fixes for what is labeled "program-trading volatility" could be far worse than the perceived problem.In using program trading as a whipping boy, fundamentalist investors stand to gain the high ground in wooing small investors for their existing stock-selection products.They may, however, risk bringing some damaging interference from outside the markets themselves.How does a nice new tax, say 5%, on any financial transaction sound?That ought to make sure we're all thinking for the long term. Getting a level playing field.This argument is perhaps the most interesting one for abolishing program trading -- not because of its merits, but because of the firms championing the cause.The loudest of these reformers are money managers who cater to smaller investors.They continually advise their clients on which individual stocks to buy or sell, while their clients continue to hope for superior performance.Even with mutual funds, the little investor continues to tolerate high fees, high commissions and poor performance, while index-fund managers slowly amass a better record with lower fees, lower commissions and less risk.Yet our efforts are somehow less noble than those of an investment expert studiously devouring press clippings on each company he follows. Almost all new regulation is introduced in the interests of protecting the little guy, and he invariably is the one least able to cope with its consequences. If spreads available from index arbitrage are so enormous, surely any sizable mutual-fund company could profit from offering it to small investors.The sad reality is that the retail investor continues to pursue stellar performers first, while leaving institutions to grapple with basis points of performance on large sums of money quarter by quarter.Cost-effective index funds just aren't sexy enough to justify the high fees and commissions that retail customers frequently pay, and that institutional customers refuse to pay. Each new trading roadblock is likely to be beaten by institutions seeking better ways to serve their high-volume clients, here or overseas.Legislating new trading inefficiencies will only make things harder on the least sophisticated investors. So what is next for program trading?Left to its own devices, index arbitrage will become more and more efficient, making it harder and harder to do profitably.Spreads will become so tight that it won't matter which market an investor chooses -- arbitrage will prevent him from gaining any temporary profit. If government or private watchdogs insist, however, on introducing greater friction between the markets (limits on price moves, two-tiered execution, higher margin requirements, taxation, etc.), the end loser will be the markets themselves.Instead, we ought to be inviting more liquidity with cheaper ways to trade and transfer capital among all participants. Mr. Allen's Pittsburgh firm, Advanced Investment Management Inc., executes program trades for institutions.
FALL BALLOT ISSUES set a record for off-year elections. Odd-year elections attract relatively few ballot issues.But the 1989 fall total of 80, while well below 1988 activity, shows "a steady ratcheting up in citizen referenda and initiatives," says Patrick McGuigan, editor of Family, Law and Democracy Report.He says the 10 citizen-sparked issues on state ballots this fall represent the most in any odd-year this decade.Ballot questions range from a Maine initiative on banning Cruise missiles to a referendum on increasing the North Dakota income tax. Ballot watchers say attention already is focused on the 1990 elections.In California, two petition drives for next year's election are "essentially finished," says David Schmidt, author of "Citizen Lawmakers." Mr. McGuigan cites three completed efforts in Oklahoma.Hot ballot topics are expected to be abortion, the environment and insurance reform. Taking a cue from California, more politicians will launch their campaigns by backing initiatives, says David Magleby of Brigham Young University. PHOTOGRAPH COLLECTING gains new stature as prices rise. Price records are being set at auctions this week.At Christie's, a folio of 21 prints from Alfred Stieglitz's "Equivalents" series sold for $396,000, a single-lot record.Other works also have been exceeding price estimates.In part, prices reflect development of a market structure based on such variables as the number of prints.This information used to be poorly documented and largely anecdotal, says Beth Gates-Warren of Sotheby's. "There is finally some sort of sense in the market," she says. Corporations and museums are among the serious buyers, giving greater market stability, says Robert Persky of the Photograph Collector. "When I see prints going into the hands of institutions, I know they aren't going to come back on the market." Most in demand: classic photographs by masters such as Stieglitz and Man Ray.But much contemporary work is also fetching "a great deal of money," says Miles Barth of the International Center of Photography. DIALING 900 brings callers a growing number of services. Currently a $300 million-a-year business, 900 telephone service is expected to hit $500 million next year and near $2 billion by 1992 as uses for the service continue to expand, says Joel Gross of Donaldson, Lufkin & Jenrette Inc.The service -- which costs the caller from 30 cents to $25 a minute -- currently is dominated by celebrity chatter, horoscopes and romance lines.But more serious applications are in the wings, and that is where the future growth is expected. "I'm starting to see more business transactions," says Andrea West of American Telephone & Telegraph Co., noting growing interest in use of 900 service for stock sales, software tutorials and even service contracts.Colleges, she says, are eyeing registration through 900 service.Charities test the waters, but they face legal barriers to electronic fund raising. "The thing that will really break this market right open is merchandising," Ms. West says. Much of the 800 service will "migrate to 900," predicts Jack Lawless, general manager of US Sprint's 900 product. FAMILY PETS are improving recovery rates of patients at Columbia Hospital, Milwaukee.Patients who receive canine or feline visitors are found to have lower blood pressure and improved appetite and be more receptive to therapy, says Mary Ann O'Loughlin, program coordinator. TIRED OF TRIMMING?Hammacher Schlemmer & Co. offers a fiber-optic Christmas tree that eliminates the need to string lights.The $6,500 tree is designed to send continuously changing colored light to dozens of fiber-end bunches. MEDICINE TRANSPLANT: Growth of Japanese trade and travel prompts Beth Israel Medical Center, New York, to set up a bilingual medical practice.Funded by a $1 million gift from Tokio Marine & Fire Insurance, the service will follow Japanese medical protocols, including emphasis on preventative medicine. DIAPER SERVICES make a comeback amid growing environmental concerns. Concerned about shrinking landfills and the safety of chemicals used in super-absorbent disposables, parents are returning to the cloth diaper.Tiny Tots Inc., Campbell, Calif., says business is up 35% in the past year. "We're gaining 1,200 new customers each week," says Jack Mogavero of General Health Care Corp., Piscataway, N.J.In Syracuse, N.Y., DyDee Service's new marketing push stresses environmental awareness.Among its new customers: day-care centers that previously spurned the service. The National Association of Diaper Services, Philadelphia, says that since January it has gotten more than 672 inquiries from people interested in starting diaper services.Elisa Hollis launched a diaper service last year because State College, Pa., where she lives, didn't have one.Diaper shortages this summer limited growth at Stork Diaper Services, Springfield, Mass., where business is up 25% in Also spurring the move to cloth: diaper covers with Velcro fasteners that eliminate the need for safety pins. BRIEFS: Only 57.6% of New Yorkers watch the local news, the lowest viewership in the country, says a new study by Impact Resources Inc., Columbus, Ohio. . . . FreudToy, a pillow bearing the likeness of Sigmund Freud, is marketed as a $24.95 tool for do-it-yourself analysis.
Program trading is "a racket," complains Edward Egnuss, a White Plains, N.Y., investor and electronics sales executive, "and it's not to the benefit of the small investor, that's for sure." But although he thinks that it is hurting him, he doubts it could be stopped. Mr. Egnuss's dislike of program trading is echoed by many small investors interviewed by Wall Street Journal reporters across the country.But like Mr. Egnuss, few expect it to be halted entirely, and a surprising number doubt it should be. "I think program trading is basically unfair to the individual investor," says Leo Fields, a Dallas investor.He notes that program traders have a commission cost advantage because of the quantity of their trades, that they have a smaller margin requirement than individual investors do and that they often can figure out earlier where the market is heading. But he blames program trading for only some of the market's volatility.He also considers the market overvalued and cites the troubles in junk bonds.He adds: "The market may be giving us another message, that a recession is looming." Or, as Dorothy Arighi, an interior decorator in Arnold, Calif., puts it: "All kinds of funny things spook the market these days." But she believes that "program trading creates deviant swings.It's not a sound thing; there's no inherent virtue in it." She adds that legislation curbing it would be "a darned good idea." At the Charles Schwab & Co. office in Atlanta's Buckhead district, a group of investors voices skepticism that federal officials would curb program trading.Citing the October 1987 crash, Glenn Miller says, "It's like the last crash -- they threatened, but no one did anything." A. Donald Anderson, a 59-year-old Los Angeles investor who says the stock market's "fluctuations and gyrations give me the heebie-jeebies," doesn't see much point in outlawing program trading.Those who still want to do it "will just find some way to get around" any attempt to curb it. Similarly, Rick Wamre, a 31-year-old asset manager for a Dallas real-estate firm, would like to see program trading disappear because "I can't see that it does anything for the market or the country." Yet he isn't in favor of new legislation. "I think we've got enough securities laws," he says. "I'd much rather see them dealing with interest rates and the deficit." Peter Anthony, who runs an employment agency in New York, decries program trading as "limiting the game to a few," but he also isn't sure it should be more strictly regulated. "I don't want to denounce it because denouncing it would be like denouncing capitalism," he explains. And surprising numbers of small investors seem to be adapting to greater stock market volatility and say they can live with program trading. Glenn Britta, a 25-year-old New York financial analyst who plays options for his personal account, says he is "factoring" the market's volatility "into investment decisions." He adds that program trading "increases liquidity in the market.You can't hold back technology." And the practice shouldn't be stopped, he says, because "even big players aren't immune to the rigors of program trading." Also in New York, Israel Silverman, an insurance-company lawyer, comments that program trading "increases volatility, but I don't think it should be banned.There's no culprit here.The market is just becoming more efficient." Arbitraging on differences between spot and futures prices is an important part of many financial markets, he says.He adds that his shares in a company savings plan are invested in a mutual fund, and volatility, on a given day, may hurt the fund.But "I'm a long-term investor," he says. "If you were a short-term investor, you might be more leery about program trading." Jim Enzor of Atlanta defends program trading because he believes that it can bring the market back up after a plunge. "If we have a real bad day, the program would say, `Buy, '" he explains. "If you could get the rhythm of the program trading, you could take advantage of it." What else can a small investor do? Scott Taccetta, a Chicago accountant, is going into money-market funds.Mr. Taccetta says he had just recouped the $5,000 he lost in the 1987 crash when he lost more money last Oct. 13.Now, he plans to sell all his stocks by the first quarter of 1990. In October, before the market dropped, Mrs. Arighi of Arnold, Calif., moved to sell the "speculative stocks" in her family trust "so we will be able to withstand all this flim-flammery" caused by program trading.She believes that the only answer for individuals is to "buy stocks that'll weather any storm." Lucille Gorman, an 84-year-old Chicago housewife, has become amazingly immune to stock-market jolts.Mrs. Gorman took advantage of low prices after the 1987 crash to buy stocks and has hunted for other bargains since the Oct. 13 plunge. "My stocks are all blue chips," she says. "If the market goes down, I figure it's paper profits I'm losing.On the other hand, if it goes way sky high, I always sell.You don't want to get yourself too upset about these things."
Researchers at American Telephone & Telegraph Co. 's Bell Laboratories reported they raised the electrical current-carrying capacity of new superconductor crystals by a factor of 100, moving the materials closer to commercial use. The scientists said they created small changes in the crystal-lattice structures of the superconductors to raise the amount of current that single crystals could carry to 600,000 amps per square centimeter in a moderately strong magnetic field.The scientists said they made the advance with yttrium-containing superconductors cooled to liquid-nitrogen temperature, or minus 321 degrees Fahrenheit.Their report appears in today's issue of the journal Nature. The finding marks a significant step in research on "bulk" superconductors, which are aimed at use in wires for motors, magnets, generators and other applications.Scientists had obtained even higher current-carrying capacity in thin films of the new superconductors, but have had problems increasing the amount of current that bulk crystals could carry. Superconductors conduct electricity without resistance when cooled.A family of ceramic superconductors discovered during the past three years promise new technologies such as cheaper electrical generation -- but only if their current-carrying capacity can be raised. The AT&T advance shows how one aspect of the current-carrying problem can be overcome.But "it won't lead to imminent use" of new superconductors, cautioned Robert B. van Dover, one of the AT&T researchers.He added that the current-carrying capacity of multi-crystal samples of superconductors remains too low for most practical uses because of so-called weak links between crystals.Such multi-crystal materials will probably be needed for commercial applications. Mr. van Dover said the AT&T team created the desired crystal changes by bombarding superconductor samples with neutrons, a process that creates some radioactivity in the samples and may not be feasible for large-scale commercial use. Still, scientists breathed a collective sigh of relief about the finding, because it demonstrates how to overcome the "flux pinning" problem that earlier this year was widely publicized as undercutting new superconductors' potential.The problem involves the motion of small magnetic fields within superconductor crystals, limiting their current-carrying capacity.Mr. van Dover said the crystal changes his team introduced apparently pins the magnetic fields in place, preventing them from lowering current-carrying capacity. Mr. van Dover added that researchers are trying to determine precisely what crystal changes solved the problem.Determining that may enable them to develop better ways to introduce the needed crystal-lattice patterns.The AT&T team also is trying to combine their latest superconductor process with "melt-textured growth," a process discovered earlier at Bell Laboratories.The combined processes may significantly raise the current-carrying capacity of multi-crystal samples.
William C. Walbrecher Jr., an executive at San Francisco-based 1st Nationwide Bank, was named president and chief executive officer of Citadel Holding Corp. and its principal operating unit, Fidelity Federal Bank. The appointment takes effect Nov. 13.He succeeds James A. Taylor, who stepped down as chairman, president and chief executive in March for health reasons.Edward L. Kane succeeded Mr. Taylor as chairman. Separately, Citadel posted a third-quarter net loss of $2.3 million, or 68 cents a share, versus net income of $5.3 million, or $1.61 a share, a year earlier. The latest results include some unusual write-downs, which had an after-tax impact of $4.9 million.Those included costs associated with the potential Valley Federal Savings and Loan Association acquisition, which was terminated on Sept. 27, 1989.In addition, operating results were hit by an increase in loan and real estate loss reserves. In American Stock Exchange composite trading, Citadel shares closed yesterday at $45.75, down 25 cents.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: International Business Machines Corp. -- $750 million of 8 3/8% debentures due Nov. 1, 2019, priced at 99 to yield 8.467%.The 30-year non-callable issue was priced at a spread of 57 basis points above the Treasury's 8 1/8% bellwether long bond.Rated triple-A by both Moody's Investors Service Inc. and Standard & Poor's Corp., the issue will be sold through underwriters led by Salomon Brothers Inc.The size of the issue was increased from an originally planned $500 million. Detroit -- $130 million of general obligation distributable state aid bonds due 1991-2000 and 2009, tentatively priced by a Chemical Securities Inc. group to yield from 6.20% in 1991 to 7.272% in 2009.There is $81.8 million of 7.20% term bonds due 2009 priced at 99 1/4 to yield 7.272%.Serial bonds are priced to yield from 6.20% in 1991 to 7% in 2000.The bonds are insured and triple-A-rated. Santa Ana Community Redevelopment Agency, Calif. -- $107 million of tax allocation bonds, 1989 Series A-D, due 1991-1999, 2009 and 2019, tentatively priced by a Donaldson Lufkin & Jenrette Securities Corp. group to yield from 6.40% in 1991 to 7.458% in 2019.The 7 3/8% term bonds due 2009 are priced at 99 1/2 to yield 7.422%, and 7 3/8% term bonds due 2019 are priced at 99 to yield 7.458%.Serial bonds are priced at par to yield from 6.40% in 1991 to 7.15% in 1999.The bonds are rated single-A by S&P, according to the lead underwriter. Maryland Community Development Administration, Department of Housing and Community Development -- $80.8 million of single-family program bonds, 1989 fourth and fifth series, tentatively priced by a Merrill Lynch Capital Markets group to yield from 6.25% in 1992 for fourth series bonds to 7.74% in 2029 for fifth series bonds.There is $30.9 million of fourth series bonds, the interest on which is not subject to the federal alternative minimum tax.They mature 1992-1999, 2009 and 2017.Fourth series serial bonds are priced at par to yield from 6.25% in 1992 to 7% in 1999.The 7.40% term bonds due 2009 are priced to yield 7.45%, and 7.40% term bonds due 2017 are priced to yield 7.50%.There is $49.9 million of fifth series bonds, which are subject to the federal alternative minimum tax.They mature in 2005, 2009 and 2029.Bonds due in 2005 have a 7 1/2% coupon and are priced at par.The 7 5/8% bonds due 2009 are priced to yield 7.65%, and 7 5/8% bonds due 2029 are priced at 98 1/2 to yield 7.74%.The underwriters expect a double-A rating from Moody's. Heiwado Co. (Japan) -- $100 million of Eurobonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Daiwa Europe Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 30, 1989, through Nov. 2, 1993, to buy shares at an expected premium of 2 1/2% to the closing price when terms are fixed Tuesday.Fees 2 1/4. Svenska Intecknings Garanti Aktiebolaget (Sweden) -- 20 billion yen of 6% Eurobonds due Nov. 21, 1994, priced at 101 3/4 to yield 6.03% less full fees, via Mitsui Finance International.Guaranteed by Svenska Handelsbanken.Fees 1 7/8. Takashima & Co. (Japan) -- 50 million Swiss francs of privately placed convertible notes due March 31, 1994, with a fixed 0.25% coupon at par via Yamaichi Bank (Switzerland).Put option March 31, 1992, at a fixed 107 7/8 to yield 3.43%.Each 50,000 Swiss franc note is convertible from Nov. 30, 1989, to March 16, 1994 at a 5% premium over the closing share price Monday, when terms are scheduled to be fixed.Fees 1 3/4. Mitsubishi Pencil Co. (Japan) -- 60 million Swiss francs of privately placed convertible notes due Dec. 31, 1993, with a fixed 0.25% coupon at par via Union Bank of Switzerland.Put option on Dec. 31, 1991, at a fixed 106 7/8 to yield 3.42%.Each 50,000 Swiss franc note is convertible from Dec. 5, 1989, to Dec. 31, 1993, at a 5% premium over the closing share price Tuesday, when terms are scheduled to be fixed.Fees 1 5/8. Koizumi Sangyo Corp. (Japan) -- 20 million Swiss francs of 6 1/2% privately placed notes due Nov. 29, 1996, priced at 99 1/2 via Dai-Ichi Kangyo Bank (Schweiz).Guarantee by Dai-Ichi Kangyo Bank Ltd. Fees 1 3/4.
Although his team lost the World Series, San Francisco Giants owner Bob Lurie hopes to have a new home for them.He is an avid fan of a proposition on next week's ballot to help build a replacement for Candlestick Park.Small wonder, since he's asking San Francisco taxpayers to sink up to $100 million into the new stadium.As San Francisco digs out from The Pretty Big One, opponents say the last thing the city can afford is an expensive new stadium. A stadium craze is sweeping the country.It's fueled by the increasing profitability of major-league teams.Something like one-third of the nation's 60 largest cities are thinking about new stadiums, ranging from Cleveland to San Antonio and St. Petersburg. Most boosters claim the new sports complexes will be moneymakers for their city.Pepperdine University economist Dean Baim scoffs at that.He has looked at 14 baseball and football stadiums and found that only one -- private Dodger Stadium -- brought more money into a city than it took out.Stadiums tend to redistribute existing wealth within a community, not create more of it. Voters generally agree when they are given a chance to decide if they want to sink their own tax dollars into a new mega-stadium.San Francisco voters rejected a new ballpark two years ago.Last month, Phoenix voters turned thumbs down on a $100 million stadium bond and tax proposition.Its backers fielded every important interest on their team -- a popular mayor, the Chamber of Commerce, the major media -- and spent $100,000 on promotion.But voters decided that if the stadium was such a good idea someone would build it himself, and rejected it 59% to 41%. In San Francisco, its backers concede the ballpark is at best running even in the polls.George Christopher, the former San Francisco mayor who built Candlestick Park for the Giants in the 1960s, won't endorse the new ballpark.He says he had Candlestick built because the Giants claimed they needed 10,000 parking spaces.Since the new park will have only 1,500 spaces, Mr. Christopher thinks backers are playing some fiscal "games" of their own with the voters. Stadium boosters claim that without public money they would never be built.Miami Dolphins owner Joe Robbie disagrees, and he can prove it.Several years ago he gave up trying to persuade Miami to improve its city-owned Orange Bowl, and instead built his own $100 million coliseum with private funds.He didn't see why the taxpayers should help build something he would then use to turn a healthy profit. "This stadium shows that anything government can do, we can do better," Mr. Robbie says. But to Moon Landrieu, the former New Orleans mayor who helped build that city's cavernous, money-losing Superdome, questions of who benefits or the bottom line are of little relevance. "The Superdome is an exercise in optimism, a statement of faith," he has said. "It is the very building of it that is important, not how much of it is used or its economics." An Egyptian Pharaoh couldn't have justified his pyramids any better.But civilization has moved forward since then.Today taxpayers get to vote, most of the time, on whether they want to finance the building schemes of our modern political pharaohs, or let private money erect these playgrounds for public passions.
Wall Street's big securities firms face the prospect of having their credit ratings lowered. The reason: Risks from the firms' new "merchant banking" activities are rising as revenue from the industry's traditional business erodes. The downgrading of debt issued by CS First Boston Inc., parent of First Boston Corp., by Moody's Investors Service Inc., coupled with a Moody's announcement that Shearson Lehman Hutton Holdings Inc. is under review for a possible downgrade, sent shivers through the brokerage community this week.With the shudders came the realization that some of Wall Street's biggest players are struggling to maintain the stellar credit standing required to finance their activities profitably. Securities firms are among the biggest issuers of commercial paper, or short-term corporate IOUs, which they sell to finance their daily operations.The biggest firms still retain the highest ratings on their commercial paper. But Moody's warned that Shearson's commercial paper rating could be lowered soon, a move that would reduce Shearson's profit margins on its borrowings and signal trouble ahead for other firms.Shearson is 62%-owned by American Express Co. "Just as the 1980s bull market transformed the U.S. securities business, so too will the more difficult environment of the 1990s," says Christopher T. Mahoney, a Moody's vice president. "A sweeping restructuring of the industry is possible." Standard & Poor's Corp. says First Boston, Shearson and Drexel Burnham Lambert Inc., in particular, are likely to have difficulty shoring up their credit standing in months ahead. What worries credit-rating concerns the most is that Wall Street firms are taking long-term risks with their own capital via leveraged buy-out and junk bond financings.That's a departure from their traditional practice of transferring almost all financing risks to investors.Whereas conventional securities financings are structured to be sold quickly, Wall Street's new penchant for leveraged buy-outs and junk bonds is resulting in long-term lending commitments that stretch out for months or years. "The recent disarray in the junk bond market suggests that brokers may become longer-term creditors than they anticipated and may face long delays" in getting their money back, says Jeffrey Bowman, a vice president at S&P, which raised a warning flag for the industry in April when it downgraded CS First Boston. "Wall Street is facing a Catch-22 situation," says Mr. Mahoney of Moody's.Merchant banking, where firms commit their own money, "is getting riskier, and there's less of it to go around." In addition, he says, the buy-out business is under pressure "because of the junk bond collapse," meaning that returns are likely to decline as the volume of junk-bond financings shrinks. In a leveraged buy-out, a small group of investors acquires a company in a transaction financed largely by borrowing, with the expectation that the debt will be paid with funds generated by the acquired company's operations or sales of its assets. In a recent report, Moody's said it "expects intense competition to occur through the rest of the century in the securities industry, which, combined with overcapacity, will create poor prospects for profitability." It said that the "temptation for managements to ease this profit pressure by taking greater risks is an additional rating factor." Both Moody's and S&P cited First Boston's reliance in recent years on merchant banking, which has been responsible for a significant portion of the closely held firm's profit.The recent cash squeeze at Campeau Corp., First Boston's most lucrative client of the decade, is proving costly to First Boston because it arranged more than $3 billion of high-yield, high-risk junk financings for Campeau units.In addition, a big loan that First Boston made to Ohio Mattress Co. wasn't repaid on time when its $450 million junk financing for a buy-out of the bedding company was withdrawn. "These two exposures alone represent a very substantial portion of CS First Boston's equity," Moody's said. "Total merchant banking exposures are in excess of the firm's equity." CS First Boston, however, benefits from the backing of its largest shareholder, Credit Suisse, Switzerland's third largest bank. Shearson also has been an aggressive participant in the leveraged buy-out business.But its earnings became a major disappointment as its traditional retail, or individual investor, business showed no signs of rebounding from the slump that followed the October 1987 stock market crash.In addition, Shearson's listed $2 billion of capital is overstated, according to the rating concerns, because it includes $1.7 billion of goodwill.Shearson "really only has $300 million of capital," says Mr. Bowman of S&P. A Shearson spokesman said the firm isn't worried. "A year ago, Moody's also had Shearson under review for possible downgrade," he said. "After two months of talks, our rating was maintained." Drexel, meanwhile, already competes at a disadvantage to its big Wall Street rivals because it has a slightly lower commercial paper rating. The collapse of junk bond prices and the cancellation of many junk bond financings apparently have taken their toll on closely held Drexel, the leading underwriter in that market.The firm also has been hit with big financial settlements with the government stemming from its guilty plea to six felonies related to a big insider-trading scandal.Drexel this year eliminated its retail or individual customer business, cutting the firm's workforce almost in half to just over 5,000. Recently, Drexel circulated a private financial statement among several securities firms showing that its earnings performance has diminished this year from previous years.The firm's capital, moreover, hasn't grown at the same rate as in the past, officials at these firms say. Drexel remains confident of its future creditworthiness. "We're well positioned with $1.7 billion of capital," a Drexel spokesman said. "And as a leading investment and merchant banking firm, the fact that we are no longer subject to the uncertainties and vicissitudes of the retail business is a major plus in our view.Moreover, we've probably been the most aggressive firm on the Street in reducing costs, which are down around 40% over the last six months."
Lewis C. Veraldi, the father of the team that created the highly successful Ford Taurus and Mercury Sable cars, retired early after experiencing recent heart problems. Most recently, Mr. Veraldi, 59 years old, has been vice president of product and manufacturing engineering at Ford Motor Co.But he is best known in the auto industry as the creator of a team car-development approach that produced the two midsized cars that were instrumental in helping the No. 2 auto maker record profits in recent years and in enabling the company's Ford division to eclipse General Motors Corp. 's Chevrolet division as the top-selling nameplate in the U.S. Under the so-called Team Taurus approach, Mr. Veraldi and other Ford product planners sought the involvement of parts suppliers, assembly-line workers, auto designers and financial staff members from the initial stages of the development cycle. The concept's goal was to eliminate bureaucracy and make Ford's product development more responsive to consumer demands.It was later applied to other new-car programs, including those that produced the Ford Thunderbird and Mercury Cougar. Ford Chairman Donald E. Petersen said yesterday that Mr. Veraldi has "helped to change the world's perception of American-made cars." Mr. Veraldi worked at Ford for 40 years, holding a variety of car and parts-engineering positions.
The limits to legal absurdity stretched another notch this week when the Supreme Court refused to hear an appeal from a case that says corporate defendants must pay damages even after proving that they could not possibly have caused the harm.We can understand and share the compassion that makes judges sometimes wish to offer a kind of Solomonic aid to those who've been hurt.But this case is a stark lesson in how the failures of the traditional policy-making process have left the courts as the only forum this country has to debate risk, technology and innovation.Too often now, a single court decision becomes the precedent for other, less compelling cases. From the 1940s until 1971, some two million women took the synthetic hormone diethylstilbestrol (DES) to prevent miscarriages and morning sickness.The drug was approved by the Food and Drug Administration and marketed by some 300 pharmaceutical companies, often under generic labels.In the 1970s, scientists reported cancer cases among the daughters of DES users. The cases quickly went to court, but the mothers of several thousand DES plaintiffs couldn't recall whose brand they used.Beginning in 1980, courts in several states including California and New York decided to suspend the common-law rule that plaintiffs must prove that the defendants are the ones who are liable.Courts made the assumption that all DES pills were essentially the same, and created a market-share test so that damages would be assessed against drug makers in the proportion of their share of the original sales. This has some logic.Drug makers shouldn't be able to duck liability because people couldn't identify precisely which identical drug was used.But courts quickly tumbled down a slippery slope.Just as all plaintiffs are not alike, it turns out that DES defendants marketed the drugs differently and may have offered different warranties.The ultimate result came in Hymowitz v.Lilly, where the highest New York court expanded the market-share approach for the first time to say that drug makers that could prove Mindy Hymowitz's mother didn't use their pill must still pay their share of any damages. But as Duke University law professor William Van Alstyne notes, by this reasoning a defendant could be held liable in New York for a bad apple even if he sold all his apples in California.Despite the Supreme Court's refusal to hear the case, there are serious constitutional issues of due process and uncompensated takings from the defendants.The big problem, however, is that there's no guarantee that this reasoning will be limited to DES or to drugs. The problem here goes well beyond twisting legal doctrine.The California Supreme Court last year reversed direction to make it much harder to win DES cases because the justices saw how all the pharmaceutical litigation has chilled the introduction of new drugs.The court rejected strict liability for prescription drugs, citing the huge, hidden social costs. "Public policy favors the development and marketing of beneficial new drugs, even though some risks, perhaps serious ones, might accompany their introduction because drugs can save lives and reduce pain and suffering," the unanimous court said.The California justices noted that the fear of litigation already forced the only remaining anti-morning-sickness drug, Bendectin, off the U.S. market. This raises the key issue: What to do about people who suffer serious injuries from beneficial drugs?We now know that holding drug makers liable where there's no evidence that they or anyone else knew of any risks only means the drugs won't be available to anyone.As liability expert Peter Huber tells us, after the Hymowitz case, if any drug maker introduces an anti-miscarriage drug "it's time to sell that company's stock short." We also know that the tort system is a lousy way to compensate victims anyway; some win the legal lottery, others get much less and contingency-fee lawyers take a big cut either way. DES daughters and other victims of drugs would be better off if their cases were taken out of the courts.Congress could create a compensation program to help such victims while protecting the national interest in encouraging new drugs.But a 1986 law that supposedly replaced lawsuits over children's vaccines with a compensation fund has predictably led to even more litigation. Everyone by now understands that Congress is utterly incapable of writing legislation to help deserving people without its becoming some billion-dollar morass.We have no doubt this is one reason judges in New York and justices on the Supreme Court are willing to trash the law in the DES cases.They must figure that justice has to get done by somebody, but know it won't be done by Congress.
Tokyo stocks edged up Wednesday in relatively active but unfocused trading. London shares finished moderately higher. At Tokyo, the Nikkei index of 225 selected issues, which gained 132 points Tuesday, added 14.99 points to 35564.43. In early trading in Tokyo Thursday, the Nikkei index fell 63.79 points to 35500.64. Wednesday's volume on the First Section was estimated at 900 million shares, in line with Tuesday's 909 million. Declining issues slightly outnumbered advancing issues, 454 to 451. Investors switched trading focus quickly as they did Tuesday, reflecting uncertainty about long-term commitments to any issue or sector, traders said. Speculation, on the other hand, sparked buying in certain incentive-backed issues, though rumors underlying such shares eventually proved untrue.The development, traders said, showed that there is more than ample liquidity available for investment despite the market's recent directionless trend. Dealers led the market Wednesday by actively trading for their own accounts, observers said. Institutions mostly remained on the sidelines because of uncertainty regarding interest rates and the dollar. The Tokyo Stock Price Index (Topix) of all issues listed in the First Section, which gained 16.05 points Tuesday, was down 1.46 points, or 0.05%, at 2691.19. The Second Section index, which added 6.84 points Tuesday, was up 5.92 points, or 0.16%, to close at 3648.82. Volume in the second section was estimated at 18 million shares, up from 14 million Tuesday. Akio Yamamoto, managing director of Nomura Investment Trust Management, said that if the U.S. federal funds rate declines to around 8.5%, institutions would acquire a clearer idea regarding the direction of the market and thus more comfortably participate in active buying.Tokyu Group, Mitsubishi Estate and Bridgestone/Firestone, which advanced Tuesday, declined on profit-taking.Wednesday's dominant issue was Yasuda Fire & Marine Insurance, which continued to surge on rumors of speculative buying.It ended the day up 80 yen (56 cents) to 1,880 yen ($13.15). Due to continuingly high gold prices tied to uncertainty about the U.S. currency, investor interest was directed toward oil and mining shares, which traders called a "defensive" action frequently taken when the dollar is expected to fall or during times of inflation. Teikoku Oil, also stimulated by rumors of speculative buying, advanced 100 yen to 1,460.Showa Shell gained 20 to 1,570 and Mitsubishi Oil rose 50 to 1,500. Sumitomo Metal Mining fell five yen to 692 and Nippon Mining added 15 to 960. Among other winners Wednesday was Nippon Shokubai, which was up 80 at 2,410. Marubeni advanced 11 to 890. London share prices were bolstered largely by continued gains on Wall Street and technical factors affecting demand for London's blue-chip stocks. The Financial Times-Stock Exchange 100-share index closed 17.5 points higher at 2160.1.It rose largely throughout the session after posting an intraday low of 2141.7 in the first 40 minutes of trading.The index ended the day near its session high of 2163.2, which was posted within the last half-hour of trading. Dealers said most investor interest was focused on defensive blue-chip stocks, particularly those with limited U.K. exposure.Also, several key blue chips were pushed higher in thin volume because of a technical squeeze among market makers. Sterling's firm tone, combined with a steady opening on Wall Street, also tempted some investors to come back to the market, dealers said.There were concerns early in the day that Wall Street's sharp gains on Tuesday were overdone and due for a reversal. The FT 30-share index settled 16.7 points higher at 1738.1.Volume was 372.9 million shares, up from 334.5 million on Tuesday. Dealers said institutions were still largely hugging the sidelines on fears that the market's recent technical rally might prove fragile.They cited Wall Street's recent volatility and the lack of a clear indication over the market's short-term direction as factors in the institutional caution. Jaguar, a U.K. luxury auto maker being pursued by Ford Motor and General Motors, gained 10 pence (16 cents) a share to close at 879 pence ($13.90).It shed about 7 pence, however, after dealers said the market was disappointed that Ford didn't move to tender a bid for control of the company. Dealers said the U.K. government's decision Tuesday to waive its protective "golden share" in the auto maker raised prospects of a bidding war between the two U.S. auto giants. But the waiver also was seen as a signal that Ford, a major U.K. auto industry employer, was able to gain government acceptance of its bid for control of Jaguar.Dealers said that interpretation sparked expectations of an imminent bid by Ford. B.A.T Industries, which is being pursued by Sir James Goldsmith's Hoylake Investments, rose 9 to 753 on speculation that Hoylake will sweeten its bid, dealers said.Like Jaguar, B.A.T also eased off its highs in afternoon dealings. Reed International, a U.K. publishing group, gained 15 to 397 despite reporting a 3.7% drop in interim pretax profit. Analysts said the fall in pretax profit was due to the group's recent restructuring and sale of peripheral units, and that its remaining businesses are performing well.Dealers said the market agreed. Stocks boosted by market-makers shopping to cover book requirements in FT-SE 100 shares included Carlton Communications, which climbed 32 to 778. Drug companies in the key index also notched gains as market-makers searched for stock in anticipation of demand due to the sector's defensive qualities.Wellcome gained 18 to 666 on a modest 1.1 million shares.Glaxo, the U.K.'s largest pharmaceutical concern, advanced 23 to #14.13. Stock prices closed higher in Stockholm, Amsterdam and Frankfurt and lower in Zurich.Paris, Brussels, and Milan were closed for a holiday.South African gold stocks closed marginally lower. Elsewhere, share prices closed higher in Singapore, Taipei and Wellington, were mixed in Hong Kong, lower in Seoul and little changed in Sydney.Manila markets were closed for a holiday. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
Consumer confidence stayed strong in October, despite the unsettling gyrations of the stock market. "The sharp stock market decline in late October appears to have had little or no effect on consumers," said Fabian Linden, executive director of the Conference Board's consumer research center. "Survey returns received after the drop in the Dow Jones average were about the same as the views expressed prior to that event." The nonprofit, industry-supported group said its Consumer Confidence Index was 116.4 in October, barely changed from a revised 116.3 in September.The index was 116.9 in October 1988 and in the past year has ranged from a low of 112.9 to a high of 120.7.It uses a base of 100 in 1985. In October, more people said that present business conditions were "good" than in September.An equal number in each month said that employment conditions were good. And 19.6% of consumers contacted believed business conditions will improve in the coming six months, compared with 18.3% in September.Also, more people said conditions will worsen in the period. (Fewer said conditions won't change.) In October 1988, 21.1% said business conditions would improve. In October 1989, 16.9% said more jobs will be created in the coming six months, compared with 17.4% in September and 18.6% in October 1988.Only 26.8% in October, compared with 28.5% in September and 26.8% in October 1988, said income would increase. "The sustained level of confidence can be attributed to the continued favorable circumstances which affect the consumer's day-to-day economic life," said Mr. Linden. "Unemployment continues at a relatively low level, providing a sense of job security, and a low inflation rate has kept the purchasing power of the weekly paycheck reasonably strong." The consumer confidence survey, covering 5,000 U.S. households, is conducted in the first two weeks of each month for the Conference Board by National Family Opinion Inc., a Toledo, Ohio, market researcher.Buying plans were mixed in October, with fewer households indicating plans to buy cars and more saying they will buy homes and appliances in the coming six months. In October, 6.7% of respondents said they will buy a car, easing from September when 8.1% anticipated a purchase.In October 1988, 7.3% said they would buy a car. Home purchase plans increased to 3.3% from 3.1% in the two recent months.In October 1988, 3.7% said they would buy a house.In 1989, home purchase plans have ranged monthly from 2.9% to 3.7% of respondents.In October, 30.6% said they will buy appliances in the coming six months, compared with 27.4% in September and 26.5% in October 1988.
Despite a deluge of economic news, the Treasury market remained quiet but the corporate market was abuzz over International Business Machines Corp. 's huge debt offering. "There were so many economic reports but the market didn't care about any of them," said Kathleen Camilli, a money market economist at Drexel Burnham Lambert Inc. "So the focus turned to other fixed-income markets, corporate and mortgages in particular," she said. IBM, the giant computer maker, offered $750 million of non-callable 30-year debentures priced to yield 8.47%, or about 1/2 percentage point higher than the yield on 30-year Treasury bonds. The size of IBM's issue was increased from an originally planned $500 million as money managers and investors scrambled to buy the bonds. In the investment-grade corporate market, "it's rare that you get an opportunity to buy a name that has such broad appeal and has such attractive call features," said James Ednie, a Drexel industrial bond trader. Money managers ranked IBM's offering as the most significant investment-grade sale of the year because large issues of long-term debt by companies with triple-A credit are infrequent.Syndicate officials at lead underwriter Salomon Brothers Inc. said the debentures were snapped by up pension funds, banks, insurance companies and other institutional investors.In the Treasury market, investors paid scant attention to the day's economic reports, which for the most part provided a mixed view of the economy. "Whether you thought the economy was growing weak or holding steady, yesterday's economic indicators didn't change your opinion," said Charles Lieberman, a managing director at Manufacturers Hanover Securities Corp. The government reported that orders for manufactured goods were essentially unchanged in September while construction spending was slightly lower.Both indicators were viewed as signs that the nation's industrial sector is growing very slowly, if at all. A survey by the Federal Reserve's 12 district banks and the latest report by the National Association of Purchasing Management blurred that picture of the economy.In a monthly report prepared for use at the Fed's next Federal Open Market Committee meeting on Nov. 14., the nation's central bank found that price increases have moderated and economic activity has grown at a sluggish pace in recent weeks. Among other things, the survey found that manufacturing activity varied considerably across districts and among industries.The Philadelphia and Cleveland districts, for example, reported declines in manufacturing activity while the Boston, Dallas and San Francisco banks noted that business expanded. The purchasing managers index of economic activity rose in October, although it remains below 50%.A reading below 50% indicates that the manufacturing sector is slowing while a reading above 50% suggests that the industry is expanding. Mr. Lieberman said the diverse showing in yesterday's reports "only enhances the importance of the employment data." The employment report, which at times has caused wide swings in bond prices, is due out tomorrow.The average estimate of 22 economists polled by Dow Jones Capital Markets Report was that non-farm payrolls expanded by 152,000 in October.The economists forecast a 0.1% rise in the unemployment rate to 5.4%. Treasury Securities In a surprise announcement, the Treasury said it will reopen the outstanding benchmark 30-year bond rather than create a new one for next week's quarterly refunding of the federal debt. The Treasury will raise $10 billion in fresh cash by selling $30 billion of securities, including $10 billion of new three-year notes and $10 billion of new 10-year notes. But rather than sell new 30-year bonds, the Treasury will issue $10 billion of 29year, nine-month bonds -- essentially increasing the size of the current benchmark 30-year bond that was sold at the previous refunding in August. Credit market analysts said the decision to reopen the current benchmark, the 8 1/8% bond due August 2019, is unusual because the issue trades at a premium to its face amount.Some dealers said the Treasury's intent is to help government bond dealers gauge investor demand for the securities, given uncertainties about when the auction will occur. The Treasury said the refunding is contingent upon congressional and presidential passage of an increase in the federal debt ceiling.Until such action takes places, the Treasury has no ability to issue new debt of any kind. Meanwhile, Treasury bonds ended modestly higher in quiet trading.The benchmark 30-year bond about 1/4 point, or $2.50 for each $1,000 face amount.The benchmark was priced at 102 22/32 to yield 7.88% compared with 102 12/32 to yield 7.90% Tuesday.The latest 10-year notes were quoted at 100 22/32 to yield 7.88% compared with 100 16/32 to yield 7.90%. The discount rate on three-month Treasury bills was essentially unchanged at 7.79%, while the rate on six-month bills was slightly lower at 7.52% compared with 7.60% Tuesday. Corporate Issues IBM's $750 million debenture offering dominated activity in the corporate debt market. Meanwhile, most investment-grade bonds ended unchanged to as much as 1/8 point higher. In its latest compilation of performance statistics, Moody's Investors Service found that investment-grade bonds posted a total return of 2.7% in October while junk bonds showed a negative return of 1.5%.Moody's said those returns compare with a 3.8% total return for longer-term Treasury notes and bonds.Total return measures price changes and interest income. For the year to date, Moody's said total returns were topped by the 16.5% of longer-term Treasury issues, closely followed by 15% for investment-grade bonds.Junk bonds trailed the group again. "Even the 7.2% return from the risk-free three-month Treasury bill has easily outdistanced the 4.1% return from junk bonds," wrote Moody's economist John Lonski in yesterday's market report. "Little wonder that buyers for junk have been found wanting," he said. Moody's said the average net asset value of 24 junk-bond mutual funds fell by 4.2% in October. Mortgage-Backed Issues Mortgage securities ended slightly higher but trailed gains in the Treasury market. Ginnie Mae's 9% issue for November delivery finished at 98 5/8, up 2/32, and its 9 1/2% issue at 100 22/32, also up 2/32. The Ginnie Mae 9% securities were yielding 9.32% to a 12-year average life. Activity was light in derivative markets, with no new issues priced. Municipal Issues Municipal bonds were mostly unchanged to up 1/8 point in light, cautious trading prior to tomorrow's unemployment report.A $114 million issue of health facility revenue bonds from the California Health Facilities Financing Authority was temporarily withdrawn after being tentatively priced by a First Boston Corp. group. An official for the lead underwriter declined to comment on the reason for the delay, but market participants speculated that a number of factors, including a lack of investor interest, were responsible.The issue could be relaunched, possibly in a restructured form, as early as next week, according to the lead underwriter. A $107.03 million offering of Santa Ana Community Redevelopment Agency, Calif., tax allocation bonds got off to a slow start and may be repriced at lower levels today, according to an official with lead underwriter Donaldson Lufkin & Jenrette Securities Corp.The Santa Ana bonds were tentatively priced to yield from 6.40% in 1991 to 7.458% in Bucking the market trend, an issue of $130 million general obligation distributable state aid bonds from Detroit, Mich., apparently drew solid investor interest.They were tentatively priced to yield from 6.20% in 1991 to 7.272% in Foreign Bond West German dealers said there was little interest in Treasury bonds ahead of Thursday's new government bond issue. So far, they said, investors appear unenthusiastic about the new issue which might force the government to raise the coupon to more than 7%.It is generally expected to be the usual 10-year, four billion mark issue.Rumors to the contrary have been that it would be a six billion mark issue, or that the last Bund, a 7% issue due October 1999, would be increased by two billion marks. Elsewhere: -- In Japan, the benchmark No. 111 4.6% issue due 1998 ended on brokers screens unchanged at 95.09 to yield 5.435%. -- In Britain, the benchmark 11 3/4% bond due 2003/2007 fell 14/32 to 111 2/32 to yield 10.19%.The 12% notes due 1995 fell 9/32 to 103 3/8 to yield 11.10%.
Rep. John Dingell, an important sponsor of President Bush's clean-air bill, plans to unveil a surprise proposal that would break with the White House on a centerpiece issue: acid rain. The Michigan Democrat's proposal, which is expected today, is described by government sources and lobbyists as significantly weaker than the Bush administration's plan to cut utility emissions that lead to acid rain.The administration's plan could cost utilities, mainly those that use coal, up to $4 billion a year. The proposal comes as a surprise even to administration officials and temporarily throws into chaos the House's work on clean-air legislation.As chairman of the House Energy and Commerce Committee, Mr. Dingell has almost single-handed control over clean-air legislation. People close to the utility industry said Mr. Dingell's proposal appears to guarantee only an estimated seven-million-ton cut in annual sulfur-dioxide emissions that lead to acid rain, though additional cuts could be ordered later.Mr. Bush's legislative package promises to cut emissions by 10 million tons -- basically in half -- by the year 2000. Although final details weren't available, sources said the Dingell plan would abandon the president's proposal for a cap on utilities' sulfur-dioxide emissions.That proposal had been hailed by environmentalists but despised by utilities because they feared it would limit their growth.It also would junk an innovative market-based system for trading emissions credits among polluters. In addition, it is believed to offer a cost-sharing mechanism that would help subsidize the clean-up costs for the dirtiest coal-fired utilities in the country, sparing their customers from exorbitant jumps in their electric bills.The administration, sticking to its vow of avoiding tax increases, has staunchly opposed cost-sharing. Mr. Dingell's staff was expected to present its acid-rain alternative to other committee members, apparently in an attempt to appease Midwestern lawmakers from high-polluting states who insist on cost-sharing.It isn't clear, however, whether support for the proposal will be broad enough to pose a serious challenge to the White House's acid-rain plan. While the new proposal might appeal to the dirtiest utilities, it might not win the support of utilities, many in the West, that already have added expensive cleanup equipment or burn cleaner-burning fuels.Lawmakers representing some of the cleaner utilities have been quietly working with the White House to devise ways to tinker with the administration bill to address their acid-rain concerns.
A nickname for measures to stop the market from plunging too far too fast.Several moves were taken following the October 1987 crash to coordinate -- and sometimes deliberately disconnect -- the stock and futures markets in times of heightened volatility.On the Big Board, a "side car" is put into effect when the S&P futures rise or fall 12 points.The side car routes program trades into a special computer file that scans for imbalances of buy and sell orders.On the Chicago Mercantile Exchange, S&P 500 futures are not allowed to fall further than 12 points from the previous day's close for half an hour.If, when trading resumes, the S&P futures fall 30 points from the previous day's close, a one-hour trading halt takes effect.Also, the reforms allow the Big Board to halt trading for one hour if the Dow Jones Industrial Average falls 250 points, and for two more hours if the Dow slides an additional 150 points on the same day. DOT System -- The "Designated Order Turnaround" System was launched by the New York Stock Exchange in March 1976, to offer automatic, high-speed order processing.A faster version, the SuperDot, was launched in 1984.Used by program traders and others to zip orders into the exchange, SuperDot handles about 80% of all orders entered at the exchange. Futures Contracts -- Obligations to buy (for those who have purchased a contract) or deliver (for those who sold one) a quantity of the underlying commodity or financial instrument at the agreed-upon price by a certain date.Most contracts are simply nullified by an opposite trade before they come due. Indexing -- Many investors, mainly institutions, follow an investment strategy of buying and holding a mix of stocks to match the performance of a broad stock-market barometer such as the S&P 500.Many institutional index funds are active program traders, swapping their stocks for futures when profitable to do so. Program trading -- A wide range of computer-assisted portfolio trading strategies involving the simultaneous purchase or sale of 15 or more stocks. Quant -- Generally, any Wall Street analyst who employs quantitive research techniques.The newest breed, also called "rocket scientists" because of their backgrounds in physics and mathematics, devise the complex hedging and trading strategies that are popularly known as program trading. Stock-index arbitrage -- Buying or selling baskets of stocks while at the same time executing offsetting trades in stock-index futures or options.Traders profit by trying to capture fleeting price discrepancies between stocks and the index futures or options.If stocks are temporarily "cheaper" than futures, for example, an arbitrager will buy stocks and sell futures. Stock-index futures -- Contracts to buy or sell the cash value of a stock index by a certain date.The cash value is determined by multiplying the index number by a specified amount.The most common program-trading vehicles are futures contracts on Standard & poor's 500-stock index (traded on the Chicago Mercantile Exchange); the Major Market Index, a 20-stock index that mimics the Dow Jones Industrial Average (traded on the chicago Board of Trade); and the S&P 100 options (traded on the Chicago Board Options Exchange, and based on 100 stocks selected from the S&P 500). Stock-index options -- Options give holders the right, but not the obligation, to buy (a call) or sell (a put) a specified amount of an underlying investment by a certin date at a preset price, known as the strike price.For stock indexes, the underlying investment may be a stock-index futures contract or the cash value of a stock index.For example, there are options on the S&P 500 futures contract and on the S&P 100 index. Uptick -- An expression signifying that a transaction in a listed security occurred at a higher price than the previous transaction in that security. (See related story: "Balance of Power: Program-Trading War Masks Deeper Battle For Market Supremacy --- `Old Guard' Seizes Offensive, But Rivals Are Bigger, Richer and High-Tech --- Civil War at the Big Board" -- WSJ Nov. 2, 1989)
New York financier Saul Steinberg sought federal permission to buy more than 15% of United Airlines' parent, UAL Corp., saying he might seek control of the nation's second-largest airline. Although takeover experts said they doubted Mr. Steinberg will make a bid by himself, the application by his Reliance Group Holdings Inc. could signal his interest in helping revive a failed labor-management bid. Such an application for federal antitrust clearance is necessary for any investor that might seek control.But some investors have used such filings to boost the value of their stock holdings, which -- without buying more stock -- they then sold. Takeover stock traders were puzzled by the Reliance filing and cautioned that it doesn't mean Mr. Steinberg will definitely seek control. "Maybe he just wants to make something happen," said one takeover expert. One investment banker said Mr. Steinberg may be trying to position himself as a friendly investor who could help UAL Chairman Stephen Wolf revive a failed labor-management bid.Mr. Steinberg, he suggested, could replace British Airways PLC, which has withdrawn from the buy-out group. Reliance had already bought and sold UAL stock at a big profit without making an antitrust filing before the collapse Oct. 13 of the $6.79 billion, $300-a-share labor-management buy-out.Reliance acquired a 7% UAL stake early this year at an average cost of $110 a share, and reduced its stake to 4.7% after UAL accepted the bid at prices higher than $282 a share. Market sources said Reliance has already sold its entire UAL stake, and thus wouldn't have any reason to file the application simply to boost the value of its stock.But the exact amount of Reliance's current holding hasn't been formally disclosed. The filing adds a new twist to market speculation that Coniston Partners, a New York money manager, has bought more than 5% of UAL stock and may challenge the UAL board's decision last week to remain independent.Speculation about Coniston has caused the stock to rebound from a low of $145. UAL's announcement came after the market closed yesterday.In composite New York Stock Exchange trading, the shares closed at $177, up $1.50.UAL wouldn't elaborate on a statement that it had been notified of the filing by Reliance.Reliance confirmed the filing but wouldn't elaborate. Some takeover experts were skeptical, saying it was possible that Mr. Steinberg made the filing only to help boost the value of any remaining Reliance stake in UAL. Mr. Steinberg is thought to be on friendly terms with UAL's Mr. Wolf.The investor was instrumental in tapping Mr. Wolf to run the air cargo unit of Tiger International Inc. Mr. Wolf's success in that job helped him land the top job with UAL in December 1987. But any potential acquirer must attempt to reach some kind of accord with the company's employees, primarily its pilots and the powerful machinists' union, which has opposed a takeover.
Intelogic Trace Inc., San Antonio, Texas, said it bought 2.7 million shares, or about 18%, of its common stock from an unaffiliated shareholder for $3.625 a share, or $9.9 million. The move boosts Intelogic Chairman Asher Edelman's stake to 20% from 16.2% and may help prevent Martin Ackerman from making a run at the computer-services concern.Mr. Ackerman already is seeking to oust Mr. Edelman as chairman of Datapoint Corp., an Intelogic affiliate. The action followed by one day an Intelogic announcement that it will retain an investment banker to explore alternatives "to maximize shareholder value," including the possible sale of the company. In New York Stock Exchange composite trading yesterday, Intelogic shares rose 37.5 cents to close at $2.75. Mr. Edelman declined to specify what prompted the recent moves, saying they are meant only to benefit shareholders when "the company is on a roll." He added, "This has nothing to do with Marty Ackerman and it is not designed, particularly, to take the company private." But Mr. Ackerman said the buy-back, and the above-market price paid, prove that Mr. Edelman is running scared.
Rockwell International Corp. reported flat operating earnings for the fourth quarter ended Sept. 30. The aerospace, automotive supply, electronics and printing-press concern also indicated that the first half of fiscal 1990 could be rough. In an interview, Donald Beall, chairman, said first-half profit certainly would trail the past year's, primarily because of weakness in the heavy-truck and passenger-car markets.Still, he added, if the industrial sector remains relatively stable, Rockwell should be able to recover in the second half and about equal fiscal 1989's operating profit of $630.9 million. For fiscal 1989's fourth quarter, Rockwell's net income totaled $126.1 million, or 50 cents a share.That compares with operating earnings of $132.9 million, or 49 cents a share, the year earlier. The prior-year period includes a one-time favorable tax adjustment on the B-1B bomber program and another gain from sale of the industrial sewing-machine business, which made net $185.9 million, or 70 cents a share.Sales rose 4% to $3.28 billion from $3.16 billion. Mr. Beall said that he was generally pleased with the latest numbers and cited a particularly strong showing by the company's electronics segment. Overall, pretax electronics earnings soared 12% to $107.9 million from $96.4 million.All four areas had higher revenue for the three months ended Sept. 30. For the year, electronics emerged as Rockwell's largest sector in terms of sales and earnings, muscling out aerospace for the first time. The graphics business, which also was singled out by the chairman as a positive, saw its operating earnings for the quarter jump 79% to $42.1 million from $23.5 million.For the year, bolstered by the introduction of the Colorliner newspaper-printing press, graphics earnings almost doubled. Aerospace earnings sagged 37% for the quarter and 15% for the year, largely due to lower B-1B program profit; the last of the bombers rolled out in April 1988.That was partially offset by the resumption of space shuttle flights and increased demand for expendable launch-vehicle engines. The company also took hits in the fourth quarters of 1989 and 1988 on a fixed-price weapons-modernization development program -- probably the C-130 gunship, according to analysts. For fiscal 1989, the company posted net of $734.9 million, or $2.87 a share, down from $811.9 million, or $3.04 a share, in fiscal 1988.Excluding one-time additions to profit in each year, earnings per share were $2.47, up 7.4% from $2.30 in fiscal 1988.Sales for the year rose 5% to $12.52 billion from $11.95 billion in fiscal 1988.
Dow Jones & Co. said it extended its $18-a-share offer for Telerate Inc. common stock until 5 p.m. EST Nov. 9. The offer, valued at about $576 million for the 33% of Telerate that Dow Jones doesn't already own, had been set to expire Nov. 6. Dow Jones, which owns about 64 million of Telerate's 95 million common shares outstanding, said that about 24,000 shares have been tendered under its offer. Telerate's two independent directors have rejected the offer as inadequate.In composite trading on the New York Stock Exchange, Telerate shares closed at $19.50, up 12.5 cents. Telerate provides an electronic financial information network.Dow Jones publishes The Wall Street Journal, Barron's magazine, and community newspapers and operates financial news services and computer data bases.
World sugar futures prices soared on rumors that Brazil, a major grower and exporter, might not ship sugar this crop year and next. Prices also were boosted by another rumor that Mexico, usually a large producer and exporter, might have to buy a large quantity of sugar. Although traders rushed to buy futures contracts, many remained skeptical about the Brazilian development, which couldn't be confirmed, analysts said. The March and May contracts rose to fresh life-of-contract highs of 14.54 cents and 14.28 cents at their best levels of the day.The March delivery, which has no limits, settled at 14.53 cents, up 0.56 cent a pound.The May contract, which also is without restraints, ended with a gain of 0.54 cent to 14.26 cents.The July delivery rose its daily permissible limit of 0.50 cent a pound to 14.00 cents, while other contract months showed near-limit advances. According to reports carried by various news services, the Brazilian government told its sugar producers that they won't be allowed to export sugar during the current 1989-90 season, which began May 1, and the 1990-91 season so that it can be used to produce alcohol for automobile fuel. One analyst, Arthur Stevenson, of Prudential-Bache Securities, New York, estimated that 65% or more of Brazil's newly made automobiles run on alcohol and can't use gasoline. "This is a demand that must be met, regardless of the price of oil," said Mr. Stevenson. Brazil is the third-largest producer and the fifth-largest exporter of sugar in the world.A shift to producing more alcohol and less sugar had been expected, but the latest news, if true, indicates a more drastic shift than had been anticipated. During the current crop year, Brazil was expected to produce 6.9 million tons of sugar, a drop from 8.1 million tons in 1988-89.Its 1989-90 exports were expected to total 645,000 tons in contrast to shipments of 1.5 million tons in "It is these 645,000 tons that are in question for this crop year," explained Judith Ganes, analyst for Shearson Lehman Hutton, New York. "Producers were granted the right earlier this year to ship sugar and the export licenses were expected to have begun to be issued" yesterday. As a result, Ms. Ganes said, it is believed that little or no sugar from the 1989-90 crop has been shipped yet, even though the crop year is six months old.More than a half of all sugar produced in Brazil goes for alcohol production, according to Ms. Ganes.Also, there has been a switch in the past decade to planting of orange trees in areas that were previously used for cane, and this change is being felt now, she said. Most important, Ms. Ganes noted, "Brazilian officials said that no decision has as yet been made on the suspension of exports." Thomas Oxnard, sugar analyst for PaineWebber in Hackensack, N.J., said: "I am highly skeptical that Brazil will curtail sugar exports, particularly with the price of sugar at over 14 cents a pound." Above all, Mr. Oxnard noted, the situation is extremely confused. "Professional sugar people here who have strong contacts with the Brazilian sugar industry have been unable to confirm the reports or get enough information to clarify the situation," he said. "It's the type of nervous atmosphere in which a report can be put out, such as the one saying exports will be suspended, and no one can confirm it." Mr. Oxnard observed that the situation in Brazil is also very complicated.On the one hand, Brazil started an ethanol program about 15 years ago to fuel a huge portion of its national fleet of cars and is now committed to this program. "It has to weigh, on the other hand, the relatively high price of sugar it can earn on the export market in making decisions as to whether to produce sugar or alcohol," Mr. Oxnard said. Mexico, which is normally a sugar exporter, has had production problems in the past two years, analysts said.Last year, it had to buy sugar on the world market to meet export commitments, they noted.This year it is expected to be a net importer and is said to be seeking to buy about 200,000 tons of sugar to meet internal needs, analysts said. In other commodity markets yesterday: ENERGY: Petroleum futures were generally higher with heating oil leading the way.On the New York Mercantile Exchange, heating oil for December delivery increased 1.25 cents to settle at 60.36 cents a gallon.Gasoline futures were mixed to unchanged.But the strength in heating oil helped push up crude oil.West Texas Intermediate crude for December delivery rose 13 cents a barrel to settle at $20.07.The firmness in heating oil was attributed to colder weather in parts of the U.S. and to the latest weekly report by the American Petroleum Institute, which showed a decline in inventories of the fuel. GRAINS AND SOYBEANS: Prices closed mostly higher in relatively light trading as farmers continued to withhold their crops from the marketplace in the hope of higher prices to come.Trading was muted in part because of the observance of All Saints' Day across much of Europe.Continued export demand also supported prices.As an indicator of the tight grain supply situation in the U.S., market analysts said that late Tuesday the Chinese government, which often buys U.S. grains in quantity, turned instead to Britain to buy 500,000 metric tons of wheat.Traders said prices also were supported by widespread rumors that the Soviet Union is on the verge of receiving most favored nation status from the U.S.That designation would, among other things, provide more generous credit terms under which the Soviets could purchase grain.The Soviets are widely believed to need additional supplies, despite running up record one-month purchases of 310 million bushels of corn in October. COPPER: Futures prices rose, extending Tuesday's gains.The December contract advanced 2.50 cents a pound to $1.1650.Buying for the most part carried over from the previous session, and traders apparently ignored reports that a Chilean mine strike may have ended almost before it began, an analyst said.According to news service reports, most workers at the Disputado mines owned by Exxon Corp. agreed to a new two-year wage contract that includes a 5% increase and other benefits.However, some workers haven't yet accepted the new contract and are continuing negotiations, the analyst said.Separately, Reuter reported that the Papua-New Guinea government urged its Parliament to extend a state of emergency in copper-rich Bougainville Island for two months.The Bougainville copper mine has been inoperative since May 15 because of attacks by native landowners who want Bougainville to secede from Papua-New Guinea.
Reuters Holdings PLC said Michael Reupke resigned as general manager to pursue unspecified interests, a move the news organization termed an "amicable separation." Mr. Reupke, 52 years old and a 27-year Reuters veteran, had been the information-services company's general manager for only six months.His appointment to that post, which has senior administrative, staff and policy responsibilities, followed a several-year tenure as Reuters's editor in chief.No successor was named, and Mr. Reupke's duties will be split among three other senior Reuters executives, the company said. In a telephone interview, Mr. Reupke said his departure was for "personal reasons," which he declined to specify. "There is no business reason for my departure," nor any disagreement over policy, he added.He also rejected reports that his departure stemmed from disappointment the general manager's post hadn't also led to a board directorship at the London-based news organization. Mr. Reupke was one of three executives on Reuters's eight-person executive committee who didn't also serve on the company's board of directors. "If I were choosing the people of tomorrow, I would have chosen the people who are now on the board," he said. A Reuters spokesman said the departure reflects "no change in strategy or profits." Mark Shepperd, an analyst at UBS Phillips & Drew in London, said, "I suspect (the departure) will be fairly irrelevant for the company.I would be very surprised if his departure signals any change in strategy or change in profit expectations." On London's Stock Exchange, Reuters shares rose five pence to 913 pence ($14.43).In the U.S. over-the-counter market, American depositary shares for Reuters, each representing three shares in the London market, closed unchanged at $43.875. The senior of the three executives who will assume Mr. Reupke's duties is Nigel Judah, 58, finance director and a Reuters board director.Peter Holland, 45, deputy general manager, becomes director of corporate affairs.And Patrick Mannix, 46, international technical manager, becomes director of group quality programs.
A lack of enthusiasm with the latest economic data hampered the stock market's bid to extend Tuesday's sharp gains, as prices closed slightly higher in sluggish trading. While renewed optimism about the outlook for takeover activity boosted several so-called deal stocks, traders said profit-taking weighed on the market, with blue-chips bearing the brunt of the selling. The Dow Jones Industrial Average, which had jumped 41.60 points on Tuesday, drifted on either side of its previous close and finished with a gain of just 0.82 at 2645.90. Standard & Poor's 500-Stock Index added 0.84 to 341.20; the rise was equivalent to a gain of about six points in the industrial average.The Dow Jones Equity Market Index gained 0.99 to 319.75 and the New York Stock Exchange Composite Index went up 0.60 to 188.84. Advancing stocks led decliners on the New York Stock Exchange by 847 to 644.Big Board volume amounted to 154,240,000 shares, down from 176.1 million Tuesday. The October survey of corporate purchasing managers, as expected, provided evidence that economic growth remains subdued.An index of economic activity drawn from the survey stood last month at 47.6%; a reading above 50% would have indicated that the manufacturing sector was improving. But with the index proving somewhat better than expected and the widely anticipated report on October employment scheduled to arrive tomorrow, stock prices firmed only modestly in response to the report and then faltered. "This market's still going through its pains," said Philip Puccio, head of equity trading at Prudential-Bache Securities. "The psychology is still: `We want (stocks) up, but if they don't carry we're going to sell them. '" Uncertainty about the prospects for further action to curtail stock-index arbitrage, a form of program trading blamed for recent volatility in the market, also contributed to its lack of direction, Mr. Puccio said. Arbitrage-related trading during the session was confined largely to a round of buy programs near the close, which helped offset the impact of profit-taking among blue chips. Trading is expected to remain subdued as the market awaits tomorrow's release of the jobs data with the hope that it will point toward a decline in interest rates. "I sense that some people are reluctant to stick their necks out in any aggressive way until after the figures come out," said Richard Eakle, president of Eakle Associates, Fair Haven, Campbell Soup jumped 3 3/8 to 47 1/8 as the resignation of R. Gordon McGovern as president and chief executive officer sparked a revival of rumors that the company could become a takeover target.Prudential-Bache Securities boosted the stock's short-term investment rating in response to the departure; analyst John McMillin said he believes the company will turn to new management "that's more financially oriented." Other rumored takeover and restructuring candidates to attract buyers included Woolworth, which went up 1 3/4 to 59 1/2; Avon Products, up 1 3/4 to 29 1/4; Paramount Communications, up 2 to 57 7/8, and Ferro, up 2 5/8 to 28 3/4. Upjohn, a rumored target within the drug industry, advanced 7/8 to 38 7/8.The company said it plans a fourth-quarter charge, which it didn't specify, for an early-retirement program. AMR climbed 1 3/4 to 73 1/8 amid rumors that New York developer Donald Trump was seeking financing to mount a new, lower offer for the parent company of American Airlines.Mr. Trump withdrew a $120-a-share bid last month. UAL rose 1 1/2 to 177.Drexel Burnham Lambert analyst Michael Derchin said he sees a 70% chance that the parent of United Airlines, the target of a failed $300-a-share offer from a labor-management group, will be acquired or restructured within six months. Georgia Gulf added 1 3/4 to 51 1/4 after NL Industries, controlled by Dallas investor Harold Simmons, offered to acquire the stock it doesn't already own for $50 a share.NL, which closed unchanged at 22 3/4, has a stake of just under 10%. Great Northern Nekoosa, which surged 20 1/8 Tuesday after Georgia-Pacific launched a $3.18 billion offer for the company, dropped 1 3/8 to 61 1/2 in Big Board composite trading of 5.1 million shares.Georgia-Pacific, which went down 2 1/2 Tuesday, lost another 1/2 to 50 3/8. Other paper and forest-products stocks closed mixed.Mead rose 3/4 to 39 1/2, Federal Paper Board added 1/2 to 24 3/8 and Scott Paper gained 1/2 to 48 3/8, while International Paper> fell 7/8 to 48 7/8,>< Champion In< ternational lost 3/8 to 31 1/2 and Louisiana-Pacific dropped 1/8 to 40 1/4. Texaco rose 3/4 to 53 3/8 as 4.4 million shares changed hands.Most of the volume came from trades designed to capture the stock's next dividend; Texaco has a yield of 5.6% and goes ex-dividend today. Santa Fe Pacific dropped 1 1/8 to 17 3/4.The company's proposal to sell a 20% stake in its real-estate unit for around $400 million has caused analysts to consider whether to cut their estimates of Santa Fe's asset value. GenCorp tumbled 2 to 14.The company forecast that fourth-quarter income from continuing operations would be "significantly" lower than a year earlier. Allergan went up 1/2 to 19 3/8.The Food and Drug Administration allowed the company to begin marketing a new lens for use in cataract patients. The American Stock Exchange Market Value Index gained 1.56 to 372.14.Volume totaled 11,390,000 shares. Old Spaghetti Warehouse rose 1 to 16 1/8.Its net income for the September quarter rose about 41% from a year ago.
GenCorp Inc., hurt by a plant accident and other unexpected costs, said it expects to report that fiscal fourth-quarter profit from continuing operations will be significantly below last year's $25 million. The Fairlawn, Ohio-based company also said that full-year profit from continuing operations will be far below last year's $148 million. Last year's figures include a one-time loss of $12 million for restructuring and unusual items. But the automotive parts and aerospace concern expects that net for the year ending Nov. 30 will exceed last fiscal year's net of $70 million, or $2.19 a share, primarily because of $200 million in gains from sales of discontinued operations. Harry Millis, an analyst at McDonald & Co. in Cleveland, said GenCorp's unanticipated losses come largely from an accident at a government-owned assembly plant in Kansas, run by a private subcontractor, that makes cluster bombs for GenCorp's Aerojet Ordnance business. Transamerica Corp., San Francisco, said third-quarter profit was essentially flat despite a large one-time gain a year earlier. The insurance and financial services concern said profit for the quarter rose 1.1% to $93.9 million, or $1.19 a share, compared with $92.9 million, or $1.18 a share, the year earlier.The results reflected a 24% gain in income from its finance businesses, and a 15% slide in income from insurance operations. Transamerica said third-quarter investment gains were $10.2 million, compared with $6.4 million the year earlier.It said insurance profit reflected a $6 million loss from Hurricane Hugo.It also estimated that losses from the Oct. 17 earthquake in California would be no more than $6 million, and would be included in fourth-quarter results.
ORTEGA ENDED a truce with the Contras and said elections were threatened. The Nicaraguan president, citing attacks by the U.S.-backed rebels, suspended a 19-month-old cease-fire and accused Bush of "promoting death." While he reaffirmed support for the country's Feb. 25 elections, Ortega indicated that renewed U.S. military aid to the Contras could thwart the balloting.He said U.S. assistance should be used to demobilize the rebels.A White House spokesman condemned the truce suspension as "deplorable" but brushed off talk of renewing military funding for the insurgents. The Contra military command, in a statement from Honduras, said Sandinista troops had launched a major offensive against the rebel forces. East German leader Krenz called the protests in his country a "good sign," saying that many of those marching for democratic freedoms were showing support for "the renovation for socialism." The Communist Party chief, in Moscow for talks with Soviet officials, also said East Germany would follow Gorbachev's restructuring plans. Thousands of East Germans fled to Czechoslovakia after the East Berlin government lifted travel restrictions.The ban on cross-border movement was imposed last month after a massive exodus of emigres to West Germany.Also, a Communist official for the first time said the future of the Berlin Wall could be open to discussion. Health officials plan to extend a moratorium on federal funding of research involving fetal-tissue transplants.The assistant HHS secretary said the ban "should be continued indefinitely." While researchers believe such transplants could help treat diseases like Alzheimer's, anti-abortionists oppose the research. Rep. Dingell of Michigan plans to unveil today a proposal that would break with Bush's clean-air bill on the issue of emissions that lead to acid rain.The Democrat's proposal is described by government sources and lobbyists as significantly weaker than the president's plan to cut utility emissions. House-Senate conferees approved major portions of a package for more than $500 million in economic aid for Poland.The plan relies heavily on $240 million in credit and loan guarantees in fiscal 1990 in hopes of stimulating future trade and investment. South Africa accused armed Namibian nationalist guerrillas of crossing from bases in neighboring Angola, violating U.N.-supervised peace plans for the territory's independence from Pretoria.South African troops were placed on alert.Guerrilla leaders said Pretoria was attempting to sabotage next week's elections in Namibia. Gunmen in Lebanon assassinated a Saudi Arabian Embassy employee, and the pro-Iranian Islamic Jihad took responsibility for the slaying to avenge the beheading of 16 terrorists by Riyadh's government in September.Also in Beirut, a Moslem group vowed to kill Americans if the U.S. implements a policy to seize suspects abroad. Nixon concluded five days of private talks with Chinese leaders in Beijing, but apparently failed to ease strains in Sino-U.S. ties caused by China's crackdown against pro-democracy protesters in June.Beijing's rulers complained to the former president about U.S. "interference" in China's domestic affairs. Mexico's President Salinas said the country's recession had ended and the economy was growing again.In his first state of the nation address, Salinas pledged to continue his program of modernization and warned opposition politicians that impeding progress could cost them popular support. Pakistan's Bhutto defeated the first no-confidence motion in the nation's 42-year history, surviving the vote that could have brought down her 11-month-old government.The prime minister's opponents claimed the balloting, 12 votes short of a majority in Islamabad's 237-seat assembly, was rigged. The White House said the shipboard meetings next month between Bush and Soviet leader Gorbachev will take place in the waters off Malta.The location was disclosed as the U.S. began planning the issues to be discussed at the Dec. 2-3 tete-a-tete. Bush unveiled a package of trade initiatives to help establish "economic alternatives to drug trafficking" in the Andean nations of South America.The president's plan includes a commitment to help negotiate a new international coffee agreement. Pan Am has subpoenaed several government agencies, including the CIA and FBI, to determine whether they were warned that a bomb had been planted aboard a jet that exploded over Scotland last December, killing 270 people.The airline is attempting to show that Israel and West Germany warned the U.S. about the impending attack. Died: James A. Attwood, 62, retired chairman and president of Mutual Life Insurance Co. of New York, Tuesday, in New York City, of an acute anemic condition.
ECONOMIC GROWTH APPEARS to be leveling off, latest reports suggest.Factory orders and construction outlays were largely flat in September, while purchasing agents said manufacturing shrank further in October.Still, many economists aren't predicting a recession anytime soon. The Fed is coming under pressure to cut short-term interest rates due to the apparent slowing of the economy.But it isn't clear yet whether the central bank will make such a move. Campbell Soup forced out its president and chief executive, R. Gordon McGovern, the strongest indication yet that the Dorrance family plans to take charge of reshaping the troubled food company.Campbell's stock rose $3.375, to $47.125, in reaction. The Chicago Merc plans an additional "circuit breaker" to stem sharp drops in the market.Also, Big Board Chairman Phelan said he would support SEC halts of program trading during market crises but not any revival of a "collar" on trading. Georgia Gulf received a new takeover bid from investor Harold Simmons and NL Industries of $50 a share, or about $1.1 billion.The offer, which follows a $55-a-share bid that was rejected in September, steps up pressure on the chemicals concern. The minimum-wage bill worked out by Congress and Bush won easy approval in the House.The compromise plan, which boosts the minimum wage for the first time since 1981, is expected to clear the Senate soon. Steinberg sought clearance to buy more than 15% of United Air's parent, saying he may seek control.Takeover experts said they doubted the financier would make a bid by himself. An airline buy-out bill was approved by the House.The measure would make it easier for the Transportation Department to block leveraged buy-outs in the industry. USX was cited by OSHA for several health and safety violations at two Pennsylvania plants and may face a record fine of $7.3 million. Random House Chairman Robert Bernstein said he is resigning from the publishing house he has run for 23 years.A successor wasn't named. Cray Research indicated that the survival of a spinoff company, which is developing a new supercomputer, depends heavily on its chairman and chief designer, Seymour Cray. Light trucks and vans will face the same safety requirements as automobiles under new proposals by the Transportation Department. The Treasury plans to sell $30 billion in notes and bonds next week but will delay the auction unless Congress quickly raises the debt ceiling. U.S. farmers' net income rose to a record $59.9 billion last year despite one of the worst droughts ever. Two antitrust agencies may face further cutbacks because of a complicated new funding device, some Democrats in Congress are warning. Markets -- Stocks: Volume 154,240,000 shares.Dow Jones industrials 2645.90, up 0.82; transportation 1206.26, up 1.25; utilities 220.45, up 1.26. Bonds: Shearson Lehman Hutton Treasury index 3436.58, up Commodities: Dow Jones futures index 129.91, up 0.28; spot index 131.01, up 1.17. Dollar: 143.80 yen, up 0.95; 1.8500 marks, up 0.0085.
Junk-bond markdowns, an ongoing Securities and Exchange Commission investigation, a Drexel Burnham Lambert connection, a fizzled buy-out rumor. All this has cast a pall over Columbia Savings & Loan Association and its high-rolling 43-year-old chairman, Thomas Spiegel, who built the $12.7 billion Beverly Hills, Calif., thrift with high-yield junk bonds.Bears have targeted Columbia's stock because of the thrift's exposure to the shaky junk market.And some investors fault Mr. Spiegel's life style; he earns millions of dollars a year and flies around in Columbia's jet planes. Columbia stock recently hit 4 1/8, after reaching 11 3/4 earlier this year on rumors that Mr. Spiegel would take the thrift private.Moreover, junk professionals think Columbia's huge third-quarter markdown of its junk portfolio to $4.4 billion wasn't enough, meaning another markdown could be coming. But in recent days, Columbia has edged up, closing at 5 1/4, up 3/8, yesterday on revived speculation that the thrift might restructure.Mr. Spiegel's fans say Columbia's Southern California branches are highly salable, and the thrift has $458 million of shareholders equity underlying its assets.That's almost $10 of equity for each Columbia share, including convertible preferred shares, though more junk markdowns would reduce the cushion. Columbia has only about 10 million common shares in public hands.The Spiegel family has 25% of the common and 75% of the votes.Other big common holders are Carl Lindner's American Financial, investor Irwin Jacobs and Pacific Financial Research, though the latter cut its stake this summer. While many problems would attend a restructuring of Columbia, investors say Mr. Spiegel is mulling such a plan to mitigate Columbia's junk problems.Indeed, Columbia executives recently told reporters they were interested in creating a separate unit to hold Columbia's junk bonds and perhaps do merchant banking. Columbia won't comment on all the speculation.But like other thrifts, it's expected to seek regulators' consent to create a distinct junk-bond entity.Plans to do this are due to be filed in a week or so. New rules force thrifts to write down their junk to market value, then sell the bonds over five years.That's why Columbia just wrote off $130 million of its junk and reserved $227 million for future junk losses.But if Columbia could keep its junk bonds separate from the thrift till they mature -- at full value, unless the issuer goes bust or restructures -- the junk portfolio might do all right. Columbia, a longtime Drexel client, won't provide current data on its junk.But its 17 big junk holdings at year end showed only a few bonds that have been really battered.These were Allied Stores, Western Union Telegraph, Gillett Holdings, SCI Television and Texas Air, though many other bonds in Columbia's portfolio also have lost value.Possibly offsetting that, Columbia recently estimated it has unrealized gains on publicly traded equity investments of more than $70 million.It also hopes for ultimate gains of as much as $300 million on equity investments in buy-outs and restructurings. One trial balloon Mr. Spiegel is said to have floated to investors: Columbia might be broken up, as Mellon Bank was split into a good bank and a bad bank.But Columbia's good bank would be a regulated thrift, while the bad bank would be a private investment company, holding some of Columbia's junk bonds, real estate and equity investments. Some think Columbia's thrift, which now is seeking a new chief operating officer, might be capitalized at, say $300 million, and shopped to a commercial bank that wants a California presence.The thrift surely could be sold for more than the value of its equity, financial industry executives say. Meanwhile, the bad bank with the junk bonds -- and some capital -- might be spun off to Columbia shareholders, including Mr. Spiegel, who might then have a new career, investors say. It isn't clear how much a restructuring would help Columbia stockholders.But "the concept is workable.You sell the good bank as an ongoing operation and use some of the proceeds to capitalize the bad bank," says thrift specialist Lewis Ranieri of Ranieri Associates in New York. Mr. Spiegel's next career move is a subject of speculation on Wall Street.Few people think Mr. Spiegel wants to run a bread-and-butter thrift, which current rules would force Columbia to become. "They aren't really a thrift," says Jonathan Gray, a Sanford C. Bernstein analyst. Of course, regulators would have to approve Columbia's reorganization.And some investment bankers say a restructuring isn't feasible while the SEC still is scrutinizing Mr. Spiegel's past junk-bond trades. Pauline Yoshihashi in Los Angeles contributed to this article. Columbia Savings & Loan (NYSE; Symbol: CSV) Business: Savings and loan Year ended Dec. 31, 1988: Net income: $65 million; or $1.49 a share Third quarter, Sept. 30, 1989: Net loss: $11.57 a share vs. net income: 37 cents a share Average daily trading volume: 83,206 shares Common shares outstanding: 19.6 million Note: All per-share figures are fully diluted.
The U.S. International Trade Commission issued preliminary rulings under the U.S. anti-dumping act that imports of sweaters from Hong Kong, Taiwan and South Korea may be injuring a domestic industry. Because of the rulings, the Commerce Department will continue to investigate complaints by U.S. sweater makers that the imports are reaching the U.S. at unfairly low prices in violation of the U.S. anti-dumping act.The law defines unfairly low prices as ones below the cost of production or below prices in an exporter's home market. ITC officials said final Commerce Department and ITC rulings won't come until next March or later.If both agencies find violations of the U.S. trade law, the U.S. would assess penalty duties on the imports, which already are subject to import quotas under bilateral textile and apparel trade agreements. Imports of manmade-fiber sweaters in 1988 totaled about $405 million from Taiwan, $400 million from South Korea and $125 million from Hong Kong, according to the ITC. In another action, the ITC dismissed anti-dumping act complaints filed by Du Pont Co. of Wilmington, Del., against imports of neoprene, a type of synthetic rubber, from France and West Germany.These imports totaled about $17 million last year.
The following issues were recently filed with the Securities and Exchange Commission: Intermec Corp., offering of 1,050,000 common shares, via Goldman, Sachs & Co. and Piper, Jaffray & Hopwood Inc. Middlesex Water Co., offering of 150,000 shares of common stock, via Legg Mason Wood Walker Inc. and Howard, Weil, Labouisse, Friedrichs Inc. Midwesco Filter Resources Inc., initial offering of 830,000 common shares, to be offered by the company, via Chicago Corp. Nylev Municipal Fund Inc., offering of five million common shares. Occidental Petroleum Corp., shelf offering of $1.5 billion in senior debt securities. Prime Motor Inns Inc., offering of up to $300 million zero coupon convertible debentures, via Drexel Burnham Lambert Inc. and Montgomery Securities. Service Fracturing Co., proposed offering of 1.2 million shares of common stock, via Lovett Mitchell Webb & Garrison, Inc., and Blunt Ellis & Loewi Inc. Western Gas Resources Inc., initial offering of 3,250,000 shares of common stock, of which 3,040,000 shares will be sold by the company and 210,000 shares by a holder, via Prudential-Bache Capital Funding, Smith Barney, Harris Upham & Co., and Hanifen, Imhoff Inc.
Upjohn Co. said it will offer an early retirement package to as many as 1,100 employees in a cost-cutting move expected to result in a fourth-quarter charge. Upjohn officials said they couldn't estimate the size of the charge until they determine which employees, and how many, will participate in the retirement plan.But the pharmaceutical company said it "anticipates the long-term savings resulting from the plan's implementation will more than offset short-term costs." The program, available to Upjohn employees 55 years old or older, could increase an individual's retirement benefits 10% to 20%.In addition, Upjohn is offering a one-time retirement bonus equal to six months of base pay. Chairman Theodore Cooper called the program part of the company's two-year strategy to implement budget constraints and "an effective headcount-control program." But some analysts questioned how much of an impact the retirement package will have, because few jobs will end up being eliminated. "It's a cosmetic move," said Jonathan S. Gelles of Wertheim Schroder & Co. According to Upjohn's estimates, only 50% to 60% of the 1,100 eligible employees will take advantage of the plan.Upjohn further estimated that about 50% of the employees who leave for early retirement may be replaced.As a result, Upjohn will likely trim only about 275 to 350 of its more than 21,000 jobs world-wide. In composite trading on the New York Stock Exchange yesterday, Upjohn shares rose 87.5 cents to $38.875 apiece. An Upjohn spokesman said he had "heard nothing" to suggest the early retirement package was spurred by shareholder pressure or a potential bidder for the company, which occasionally has been the target of takeover speculation.The company earlier this year adopted a shareholder-rights plan to ward off unwanted suitors. The spokesman said it is the first early retirement plan offered under its two-year cost-control strategy.Earlier staff-reduction moves have trimmed about 300 jobs, the spokesman said.
"Feeding Frenzy" (Henry Holt, 326 pages, $19.95), a highly detailed account of the Wedtech scandal, begins on a reassuring note. Right up front in the preface, co-author William Sternberg gives us an example of his own integrity.When offered a free trip from the Bronx, Wedtech's home, to Washington, D.C., by one of Wedtech's principals, he tells the reader, "mindful of accepting anything of value from those I was writing about, I declined." Any question as to why an author would believe this plaintive, high-minded note of assurance is necessary is answered by reading this book about sticky fingers and sweaty scammers.Bribe by bribe, Mr. Sternberg and his co-author, Matthew C. Harrison Jr., lead us along the path Wedtech traveled, from its inception as a small manufacturing company to the status of full-fledged defense contractor, entrusted with the task of producing vital equipment for the Army and Navy. The book revolves around John Mariotta, the founder of the company, and Fred Neuberger, who became his partner soon after Wedtech's creation.Although started in 1965, Wedtech didn't really get rolling until 1975, when Mr. Neuberger discovered the federal government's Section 8(A) minority business program.This is a Johnson-era, Great Society creation that mandates certain government contracts be awarded noncompetitively to minority businesses.Mr. Neuberger realized that, although of Italian ancestry, Mr. Mariotta still could qualify as a minority person since he was born in Puerto Rico.The two partners merely had to falsify the true ownership of the corporation.Instead of 50/50 it became, on paper only, two-thirds Mariotta, one-third Neuberger, and they were in the program and off to the races. Besides being a "minority-owned company" Wedtech was located in the South Bronx, a blighted area, made famous by Jimmy Carter in his 1976 presidential campaign.The company plugged itself right into Carter campaign rhetoric about rebuilding the South Bronx and kept using the minority -- South Bronx angle through the Reagan '80s. Starting with Congressman Mario Biaggi (now serving a jail sentence), the company began a career of bribing federal, state and local public officials and those close to public officials, right up to and including E. Robert Wallach, close friend and adviser to former Attorney General Ed Meese.Wedtech didn't just use old fashioned bribery.It made ample use of the modern techniques of influence peddling, retaining politically connected "respectable" law firms, investment bankers and political consultants, including Reagan confidant Lyn Nofzinger.When necessary, it sought and received assistance from organized crime. Sometimes the bribed became partners in the company.Wedtech management used the merit system.If you were especially helpful in a corrupt scheme you received not just cash in a bag, but equity.If you were not an effective crook, you found yourself out in the cold, a fate that eventually befell Mr. Mariotta, the firm's semiliterate "minority" person. But despite the sensational nature of the revelations and the breezy, easy-to-read tabloid writing style, "Feeding Frenzy" often falls short of gripping reading.None of the scams show much ingenuity: Auditors found crookery the first day on the job.Wedtech's scammers simply bribed them to shut up. The scammers themselves were garden-variety low lifes, conspicuous consumers who wanted big houses, Mercedes cars, beautiful women, expensive clothes.Among the lot of them, not one is wrestling with good and evil, or especially intelligent or even temporarily insane.The one character at least somewhat interesting was Irving Louis Lobsenz, a pediatrician who changed his name to Rusty Kent London and became a master gambler and author of a book on blackjack.He enters the story toward the end, just in time to get arrested. Absorbed in doling out "Feeding Frenzy's" tidbits, the authors gloss over the root causes of Wedtech, namely the Section 8(A) federal program under whose auspices the scandal took place.They do at least come around to saying that the courts might want to end "rigid affirmative action programs." Programs like Section 8(A) are a little like leaving gold in the street and then expressing surprise when thieves walk by to scoop it up.Numerous other scandals, among them the ones at HUD, have the same characteristics as Wedtech.They take place in government programs that seem tailor-made for corruption. Why are programs like this not eliminated? "Feeding Frenzy" does provide a few clues.In and around all levels of government in the U.S. are groups of people who can best be described as belonging to a political insider commercial party.They know that whenever government is redistributing wealth, regulating commerce or maintaining a large defense establishment, there is big money to be made in influencing, brokering or selling the processes and decisions of government.They are our version of the East bloc's Nomenklatura and they have absolutely no wish to see anything change.How many government programs and policies exist because they line the pockets of political insiders?This is the real issue raised by the Wedtech scandal. Mr. Stern was chairman and chief executive officer of the New York State Urban Development Corp., 1983-85.
Its plans to be acquired dashed, Comprehensive Care Corp. said it plans to sell most of its psychiatric and drug abuse facilities in California and some other assets to pay its debt and provide working capital. In all, the company hopes to repay $45 million in debt through the sales, which will completely discharge its secured debt, the company said. In addition, the company has replaced its president and chief executive, naming W. James Nichol, head of the company's contract health services, to succeed B. Lee Karns.Mr. Nichol said he was "extremely disappointed in the continuing deterioration of the company's operations while it attempted to conclude the reorganization during the past four months." Concurrent with Mr. Nichol's appointment, Comprehensive Care moved its corporate headquarters from Irvine, Calif., to St. Louis, where the company maintained its contract services offices. Mr. Karns continues as chairman. Comprehensive Care had agreed to be acquired by closely held First Hospital Corp. of Norfolk, Va., but the sale sputtered almost from the beginning and finally collapsed last week. In composite trading on the New York Stock Exchange yesterday, Comprehensive Care closed at $3.75 a share, up 12.5 cents.
Ralston Purina Co. reported a 47% decline in fourth-quarter earnings, reflecting restructuring costs as well as a more difficult pet food market. The St. Louis company earned $45.2 million, or 65 cents a share, compared with $84.9 million, or $1.24 a share, a year earlier.Sales in the latest period were $1.76 billion, a 13% increase from last year's $1.55 billion. For the year ended Sept. 30, Ralston earned $422.5 million, or $6.44 a share, up 8.9% from $387.8 million, or $5.63 a share.This year's results included a gain of $70.2 million on the disposal of seafood operations.Sales for the full year were $6.6 billion, up 13% from $5.8 billion. Ralston said its restructuring costs include the phase-out of a battery facility in Greenville, N.C., the recent closing of a Hostess cake bakery in Cincinnati and a reduction in staff throughout the company.The battery plant, which makes rechargeable nickel cadmium and carbon zinc products, will be closed over the next year or so, a spokesman said. Ralston attributed its fourth-quarter slump partly to higher costs of ingredients in the pet food business as well as competitive pressures, which required higher advertising spending.For the year, pet food volume was flat, the company said. Its cereal division realized higher operating profit on volume increases, but also spent more on promotion.The Continental Baking business benefited from higher margins on bread and on increased cake sales, it added. Ralston said its Eveready battery unit was hurt by continuing economic problems in South America. Ralston shares closed yesterday at $80.50, off $1, in New York Stock Exchange composite trading.
The record corn-buying binge by the Soviet Union is causing serious bottlenecks in the U.S. grain pipeline. The Soviet purchases are so massive that exporters are struggling to find enough river barges and trains to move the recently harvested Midwest crop to ports for loading onto Soviet ships. River barge rates have soared 40% this fall from a year earlier.Railroad companies and some ports are reaping a sudden windfall of business.And some grain analysts are predicting that corn prices might gyrate this month as exporters scrounge to find enough of the crop to meet their obligations to the Soviets. The Soviet Union bought roughly 310 million bushels of U.S. corn in October, which is the most ever sold to the Soviet Union in one month from the U.S.The Soviet Union wants much of it delivered by January, which would be a strain in most years. But it is particularly difficult this autumn because of low water levels on the Mississippi River, on which flows much of the U.S. corn that is shipped overseas. "We are shipping the most corn in that short of time period to one customer on record," said William Dunton, a U.S. Agriculture Department transportation expert. "It is going to be real tight." Because of persistent dry weather in the northern Plains, the water level on the upper section of the Mississippi River is so low that many river operators are already trimming the number of barges their tows push at one time. In a few weeks, many barges probably won't be able to operate fully loaded south of St. Louis because the U.S. Army Corps of Engineers is beginning to reduce the flow of the Missouri River, which feeds into the Mississippi River.The Army Corps is cutting the flow of the Missouri River about two weeks earlier than normal because of low water levels in the reservoirs that feed it. Barge rates on the Mississippi River sank yesterday on speculation that widespread rain this week in the Midwest might temporarily alleviate the situation. But the Army Corps of Engineers expects the river level to continue falling this month.At St. Louis, the water level of the Mississippi River is already 6.5 feet below normal and it could drop an additional 2.5 feet when the flow of the Missouri River is slowed, an Army Corps spokesman said.Similar levels hamstrung barge shipments last year in the wake of the worst drought in 50 years. So far, the grain industry's budding logistical problems haven't been a major factor in the trading of corn contracts at the Chicago Board of Trade.Many grain processors and exporters use the price of the corn futures contracts traded there to calculate the price they offer to buy corn from farmers. At the Board of Trade yesterday the price of the corn contract for December delivery slipped 3.5 cents a bushel to settle at $2.375 a bushel. Corn prices have been sluggish this fall despite the huge Soviet orders because the harvest has allowed farmers to rebuild the stockpiles depleted by the 1988 drought.With the harvest winding down, however, some analysts are speculating that prices might jump in some regions as U.S. exporters try to gather the corn they are obligated to deliver. Farmers are in the best position of many years to push up corn prices.Because the drought reduced U.S. stockpiles, they have more than enough storage space for their new crop, and that permits them to wait for prices to rise. In parts of Iowa, for example, some grain elevators are offering farmers $2.15 a bushel for corn.Many farmers probably wouldn't sell until prices rose at least 20 cents a bushel, said Lyle Reed, president of Chicago Central & Pacific Railroad Co. of Waterloo, Iowa. It isn't clear, however, who would win a waiting game.Although U.S. corn stockpiles shrank by roughly half in the wake of the drought, the Agriculture Department projects that nearly one-fifth of the harvest will still be in storage before the 1990 corn harvest begins. Some analysts are worried that reports of the grain industry's problems might spark investors to begin buying corn futures contracts -- only to see little appreciation. "The public is buying the market when in reality there is plenty of grain to be shipped," said Bill Biedermann, Allendale Inc. research director. Although much of this country's export corn goes to New Orleans by barge, it is possible for exporters to sidestep the Mississippi River by shipping a larger-than-normal amount of corn by train to the port. Ports in the Great Lakes and Atlantic Coast can also relieve pressure on New Orleans.One railroad, for example, is already increasing its grain hauling service from Indiana to Baltimore. And it isn't clear that the Soviet Union will stay on its record buying pace.The Soviet orders were compressed into the month of October because of delays.The Soviet Union usually begins buying U.S. crops earlier in the fall.But its purchases apparently were delayed by a reorganization of its agricultural bureaucracy as well as budget problems. In other commodity markets yesterday: ENERGY: Crude oil futures prices increased in moderate trading, but much of the action was in heating oil.Prices rose on the news that a sizable West German refinery was damaged in a fire, tightening an already tight European market.Heating oil for November delivery ended at 58.64 cents a gallon, up one cent on the New York Mercantile Exchange.West Texas Intermediate for December delivery advanced 22 cents to $19.94 a barrel.Gasoline futures continued a sell-off that began Monday. PRECIOUS METALS: Futures prices eased as increased stability and strength came into the securities markets.December delivery gold fell $3.20 an ounce to $377.60.December silver declined 6.50 cents an ounce to $5.2180.January platinum was down $5.70 an ounce at $494.50.Precious metals, gold in particular, currently are being influenced more by stock market gyrations than the dollar as traders seek greater investment stability, according to William O'Neill, vice president of research at Elders Futures in New York. "The recent rally in precious metals was a result of uncertainty and volatility in equities," he said.Yesterday, the stock market rose strongly, creating a more defensive attitude among precious metals traders, he said.Silver and platinum, which have more of an industrial nature than gold, were even weaker, he said.Silver is also under pressure of "extremely high" inventories in warehouses of the Commodity Exchange, he said.Yesterday, these stocks rose by 170,262 ounces to a record of 226,570,380 ounces, according to an exchange spokesman. COPPER: Futures prices partially recovered Monday's declines because Chilean miners voted to strike.The December contract rose 1.20 cents a pound to $1.14.In Chile, workers at two copper mines, Los Bronces and El Soldado, which belong to the Exxon-owned Minera Disputada, yesterday voted to begin a full strike tomorrow, an analyst said.Reasons for the walkout, the analyst said, included a number of procedural issues, such as a right to strike.The analyst noted that also inherent in all metal markets was a sympathetic reaction to stocks.In the case of copper, he said, the upbeat mood of stocks was reflected in demand for futures contracts because a stronger economy means greater buying interest for the metal.Also contributing to the firmness in copper, the analyst noted, was a report by Chicago purchasing agents, which precedes the full purchasing agents' report that is due out today and gives an indication of what the full report might hold.The Purchasing Management Association of Chicago's October index rose to 51.6% after three previous months of readings below 50%.The September index was 47.1%.A reading below 50% generally indicates a slowing in the industrial sector of the economy, while a reading above 50% points to expansion.The Chicago report raised the possibility that the October survey of the National Association of Purchasing Management would also show a reading above 50%.
USX Corp. posted a 23% drop in third-quarter profit, as improved oil results failed to offset weakness in steel and natural gas operations. The nation's largest steelmaker earned $175 million, or 62 cents a share, compared with the year-earlier $228 million, or 80 cents a share.The recent quarter includes pretax gains of $98 million from asset sales, while like gains in the year-earlier quarter totaled $61 million.In the 1988 period, USX also had a $71 million after-tax gain from a tax dispute settlement.Sales rose 5% to $4.4 billion from $4.2 billion. The earnings drop appears particularly steep in comparison with last year's unusually strong third quarter, when the company was riding an industrywide boom in demand and pricing.However, third-quarter operating profit fell 14%, as USX sold sizable chunks of its diversified and steel segments, eliminating income from those operations. Among segments that continue to operate, though, the company's steel division continued to suffer from soft demand for its tubular goods serving the oil industry and other markets.Peter Marcus, an analyst with PaineWebber Inc., said that a downturn in the appliance industry, coupled with sluggish automotive sales, hurt USX results.Moreover, USX exports more than other steelmakers, and the overseas market has been under more severe pricing pressure. The company attributed lower sales and earnings for the steel segment to the loss of results from the Lorain, Ohio, plant, which now is a 50-50 joint venture with Japan's Kobe Steel Ltd. In the steel division, operating profit dropped 11% to $85 million.Profit per ton of steel shipped dropped to about $33 a ton from $42 a ton last year and $53 a ton in the second quarter, analysts said.Still, USX fared better than other major steelmakers, earning more per ton of steel shipped than either Bethlehem Steel Corp., which posted a 54% drop in net income, or Inland Steel Industries Inc., whose profit plummeted 70%. In New York Stock Exchange composite trading yesterday, USX shares closed up $1.25, at $34.625, as the reported earnings exceeded projections by some analysts who hadn't expected as great a volume of asset sales.The rise in the stock's price may also reflect the fact that USX's steel segment fared better than some other steelmakers'. Charles Bradford, an analyst with Merrill Lynch Capital Markets, said USX may have received orders lost by competitors who were involved in labor contracts earlier this year.He said USX also appeared to sell a richer mix of steel products, such as the more profitable pipe and galvanized coated sheet, than lower-priced structural goods. The energy segment, with a 15% rise in operating profit, is clearly the company's strongest.Higher crude oil prices helped boost operating profit for the Marathon Oil Co. unit to $198 million from $180 million.The Texas Oil & Gas division continues to operate in the red, although losses narrowed to $9 million from $15 million.USX announced in October that it was soliciting bids to sell TXO's oil and gas reserves. Proceeds of that sale are to be used to reduce debt and buy back shares.The company noted that it has reduced debt by $1.6 billion since the end of 1988 and bought back about 15.5 million shares of common stock since the fourth quarter of 1987.USX has about $5.5 billion in long-term debt and 257 million shares outstanding. The announced sale of the reserves was followed by news that investor Carl Icahn had increased his stake in USX to 13.1% and threatened a takeover or other business combination.Mr. Icahn has said he believes USX would be worth more if broken up into steel and energy segments. Profit for the nine months jumped 21% to $721 million, or $2.62 a share, from $598 million, or $2.07 a share.Sales rose 10% to $13.8 billion from $12.5 billion.
Two leading constitutional-law experts said President Bush doesn't have the legal authority to exercise a line-item veto. Professors Philip Kurland of the University of Chicago and Laurence Tribe of Harvard Law School said any effort by President Bush to claim authority for a line-item veto would contradict the text of the Constitution and the intent of its authors, as well as the views of previous presidents. A line-item veto is a procedure that would allow a president to veto part of a big congressional spending bill without having to scuttle the entire measure.Mr. Bush has said he would like to be able to use this procedure.A White House spokesman said last week that the president is considering declaring that the Constitution implicitly gives him the authority for a line-item veto to provoke a test case. But the two legal experts, responding to an inquiry by Sen. Edward Kennedy (D., Mass.), wrote in a joint letter that the president "lacks the constitutional authority to exercise a line-item veto." The two professors represent different ends of the political spectrum -- Mr. Kurland is a conservative and Mr. Tribe is a liberal. The two professors said the Constitution authorizes the president to veto entire bills, not partial measures.Moreover, they said the first appropriations bill passed 200 years ago covered many different items, and there was no discussion of a line-item veto.They also said that more than a dozen presidents have called for line-item veto authority since the Civil War, and "all have shared the view that such lawmaking power is beyond the reach" of the president. Sen. Kennedy said in a separate statement that he supports legislation to give the president line-item veto power, but that it would be a "reckless course of action" for President Bush to claim the authority without congressional approval.
Investors are appealing to the Securities and Exchange Commission not to limit their access to information about stock purchases and sales by corporate insiders. A SEC proposal to ease reporting requirements for some company executives would undermine the usefulness of information on insider trades as a stock-picking tool, individual investors and professional money managers contend. They make the argument in letters to the agency about rule changes proposed this past summer that, among other things, would exempt many middle-management executives from reporting trades in their own companies' shares.The proposed changes also would allow executives to report exercises of options later and less often. Many of the letters maintain that investor confidence has been so shaken by the 1987 stock market crash -- and the markets already so stacked against the little guy -- that any decrease in information on insider-trading patterns might prompt individuals to get out of stocks altogether. "The SEC has historically paid obeisance to the ideal of a level playing field," wrote Clyde S. McGregor of Winnetka, Ill., in one of the 92 letters the agency has received since the changes were proposed Aug. 17. "Apparently the commission did not really believe in this ideal." Currently, the rules force executives, directors and other corporate insiders to report purchases and sales of their companies' shares within about a month after the transaction.But about 25% of the insiders, according to SEC figures, file their reports late. The changes were proposed in an effort to streamline federal bureaucracy and boost compliance by the executives "who are really calling the shots," said Brian Lane, special counsel at the SEC's office of disclosure policy, which proposed the changes. Investors, money managers and corporate officials had until today to comment on the proposals, and the issue has produced more mail than almost any other issue in memory, Mr. Lane said.The SEC will probably vote on the proposal early next year, he said. Not all those who wrote oppose the changes.The Committee on Federal Regulation of Securities for the American Bar Association argues, for example, in its lengthy letter to the SEC, that the proposed changes "would substantially improve the {law} by conforming it more closely to contemporary business realities." What the investors who oppose the proposed changes object to most is the effect they say the proposal would have on their ability to spot telltale "clusters" of trading activity -- buying or selling by more than one officer or director within a short period of time.According to some estimates, the rule changes would cut insider filings by more than a third. The SEC's Mr. Lane vehemently disputed those estimates.The rules will eliminate filings by "vice presidents of maintenance and personnel," but will still require reports from vice presidents of sensitive or policy-making divisions, such as sales, marketing, finance and research and development, Mr. Lane said. The proposed rules also would be tougher on the insiders still required to file reports, he said.Companies would be compelled to publish in annual proxy statements the names of insiders who fail to file reports on time. Considered as a whole, Mr. Lane said, the filings required under the proposed rules "will be at least as effective, if not more so, for investors following transactions." But Robert Gabele, president of Invest/Net, a North Miami, Fla., company that packages and sells the insider-trading data, said the proposal is worded so vaguely that key officials may fail to file the reports. Many investors wrote asking the SEC to require insiders to report their purchases and sales immediately, not a month later.But Mr. Lane said that while the SEC regulates who files, the law tells them when to do so.Investors who want to change the required timing should write their representatives in Congress, he added.The SEC would likely be amenable to legislation that required insiders to file transactions on a more timely basis, he said.
Solo woodwind players have to be creative if they want to work a lot, because their repertoire and audience appeal are limited.The oboist Heinz Holliger has taken a hard line about the problem: He commissions and splendidly interprets fearsome contemporary scores and does some conducting, so he doesn't have to play the same Mozart and Strauss concertos over and over again. Richard Stoltzman has taken a gentler, more audience-friendly approach.Years ago, he collaborated with the new music gurus Peter Serkin and Fred Sherry in the very countercultural chamber group Tashi, which won audiences over to dreaded contemporary scores like Messiaen's "Quartet for the End of Time." Today, the pixie-like clarinetist has mostly dropped the missionary work (though a touch of the old Tashi still survives) and now goes on the road with piano, bass, a slide show, and a repertoire that ranges from light classical to light jazz to light pop, with a few notable exceptions.Just the thing for the Vivaldi-at-brunch set, the yuppie audience that has embraced New Age as its very own easy listening.But you can't dismiss Mr. Stoltzman's music or his motives as merely commercial and lightweight.He believes in what he plays, and he plays superbly.His recent appearance at the Metropolitan Museum, dubbed "A Musical Odyssey," was a case in point.It felt more like a party, or a highly polished jam session with a few friends, than a classical concert. Clad in his trademark black velvet suit, the soft-spoken clarinetist announced that his new album, "Inner Voices," had just been released, that his family was in the front row, and that it was his mother's birthday, so he was going to play her favorite tune from the record.He launched into Saint-Saens's "The Swan" from "Carnival of the Animals," a favorite encore piece for cellists, with lovely, glossy tone and no bite.Then, as if to show that he could play fast as well, he offered the second movement from Saint-Saens's Sonata for Clarinet, a whimsical, puckish tidbit that reflected the flip side of the Stoltzman personality. And so it went through the first half: an ingeniously chosen potpourri of pieces, none longer than five minutes, none that would disturb or challenge a listener.Mr. Stoltzman introduced his colleagues: Bill Douglas, pianist/bassoonist/composer and an old buddy from Yale, and jazz bassist Eddie Gomez.An improvisational section was built around pieces by Mr. Douglas, beginning with "Golden Rain," a lilting, laid-back lead in to the uptempo "Sky," which gave Mr. Stoltzman the opportunity to wail in a high register and show off his fleet fingers.Bach's "Air" followed.Mr. Stoltzman tied the composer in by proclaiming him "the great improviser of the 18th century," and then built on the image by joining with Mr. Douglas in some Bach two-part inventions, cleverly arranged for clarinet and bassoon by Mr. Douglas.Keeping the mood light, the two then chanted and chortled their way through some murderous polyrhythms, devised by Mr. Douglas as an alternative to Hindemith's dry theory-teaching techniques, and then, with Mr. Gomez, soared and improvised on the composer's tight "Bebop Etudes." The end of the first half, however, brought what the standing-room-only crowd seemed to be waiting for: the pop singer Judy Collins, who appears on "Inner Voices." Glamorous and pure-voiced as ever, Ms. Collins sang Joni Mitchell's "For Free" -- about an encounter with a street-corner clarinetist, to which Mr. Stoltzman contributed a clarinet obligatto -- and Mr. Douglas's lush setting of a Gaelic blessing, "Deep Peace." "Deep Peace" also featured a slide show of lovely but predictable images of clouds, beaches, deserts, sunsets, etc.It was all too mellow to be believed, but they probably would have gotten away with it, had they not felt compelled to add Ms. Collins's signature tune, "Amazing Grace," and ask for audience participation.That went over the permissible line for warm and fuzzy feelings. Was this why some of the audience departed before or during the second half?Or was it because Ms. Collins had gone?Either way it was a pity, because Mr. Stolzman offered the most substantial music of the evening just after intermission: Steve Reich's "New York Counterpoint," one of a series of Reich works that juxtapose a live performer with recorded tracks of his or her own playing. (Mr.Reich's new "Different Trains" for string quartet uses the technique magisterially.) Mr. Stoltzman must have worried that his audience might not be able to take it: He warned us in advance that "New York Counterpoint" lasts 11 1/2 minutes.He also unfortunately illustrated this intricate, jazzy tapestry with Mr. Pearson's images, this time of geometric or repeating objects, in a kitschy mirroring of the musical structure that was thoroughly distracting from Mr. Reich's piece and Mr. Stoltzman's elegant execution of it.The rest of the concert was more straight jazz and mellow sounds written by Charlie Parker, Ornette Coleman, Bill Douglas and Eddie Gomez, with pictures for the Douglas pieces.It was enjoyable to hear accomplished jazz without having to sit in a smoke-filled club, but like the first half, much of it was easy to take and ultimately forgettable. Is this the future of chamber music?Managers and presenters insist that chamber music concerts are a hard sell, but can audiences really enjoy them only if the music is purged of threatening elements, served up in bite-sized morsels and accompanied by visuals?What's next?Slides to illustrate Shostakovich quartets?It was not an unpleasant evening, certainly, thanks to the high level of performance, the compositional talents of Mr. Douglas, and the obvious sincerity with which Mr. Stoltzman chooses his selections.But it was neither deep nor lasting: light entertainment that was no substitute for an evening of Brahms. Ms. Waleson is a free-lance writer based in New York.
One of Ronald Reagan's attributes as President was that he rarely gave his blessing to the claptrap that passes for "consensus" in various international institutions.In fact, he liberated the U.S. from one of the world's most corrupt organizations -- UNESCO.This is the U.N. group that managed to traduce its own charter of promoting education, science and culture.Ever since, the remaining members have been desperate for the United States to rejoin this dreadful group. Now UNESCO apologists are lobbying President Bush to renege on President Reagan's decision to depart.But we can think of many reasons to stay out for the foreseeable future and well beyond. The U.S., along with Britain and Singapore, left the agency when its anti-Western ideology, financial corruption and top leadership got out of hand.The personal antics of agency Director Amadou-Mahtar M'Bow drew much attention, such as when several of his top aides were uncovered as KGB plants and ejected from France and when a mysterious office fire was set just before Congress sent accountants to trace U.S. funds. Mr. M'Bow was an extreme case, but even his replacement, the more personally genial Spanish biochemist Federico Mayor, has had little success at achieving reforms.Several ridiculous projects continue, including the "New International Economic Order," which means redistributionism from the West to pay for everyone else's statism.The Orwellian "New World Information Order" would give government officials rights against the press; journalists would be obliged to kowtow to their government, which would have licensing and censorship powers and, indeed, duties to block printing of "wrong" ideas. UNESCO somehow converted the founding U.N. ideals of individual rights and liberty into "peoples' rights." Million-dollar conferences were held to chew on subjects such as "ethical responsibilities of scientists in support of disarmament" and "the impact of the activities of transnational corporations." The agency was so totally subverted from the high principles of its founding that even the Soviets now wonder about an agency that seemed so congenial to them.Glasnost may be partly responsible, but Soviet Foreign Minister Eduard Shevardnadze last year admitted, "The exaggerated ideological approach undermined tolerance intrinsic to UNESCO." UNESCO is now holding its biennial meetings in Paris to devise its next projects.Mr. Mayor's hope that references to "press freedom" would survive unamended seems doomed to failure; the current phrasing is "educating the public and media to avoid manipulation." He hasn't been able to replace the M'Bow cabal.Soviets remain in charge of education programs, a former head of an African military tribunal for executions is in charge of culture, and a hard-line Polish communist in exile directs the human-rights and peace division.Of the agency's 2,750 staff members, 230 are in the field working on actual projects, such as literacy and oceanographic research. The position of the United States, which once contributed 25% of the budget, is that nothing has changed.John Bolton, the assistant secretary of state for international organizations, told Congress that the continuing "statist, restrictive, nondemocratic" programs make rejoining any time soon "extremely unlikely." This hasn't much bothered the UNESCO delegates, who last week couldn't even agree to raise funds by selling off a fancy 19th-century French chateau the agency somehow owns.Other countries, including West Germany, may have a hard time justifying continued membership. We see an even stronger argument against UNESCO than its unsurprising failure to reform.This is that the Reagan Revolution spanning Eastern Europe and Tiananmen Square shows the power of ideas unencumbered by international civil servants or government functionaries.Free markets, free minds and free elections have an appeal that seems to get muddled only when delivered through U.N. organizations -- which of course are made up largely of governments that fear these principles at home. The Babelists of the United Nations are experts at obfuscation.This can have its purposes at times, but there's no reason to cloud the importance and allure of Western concepts of freedom and justice.We can see plenty of reasons to stay out, and none to rejoin UNESCO.
Researchers at Plant Genetic Systems N.V. in Belgium said they have developed a genetic engineering technique for creating hybrid plants for a number of key crops. The researchers said they have isolated a plant gene that prevents the production of pollen.The gene thus can prevent a plant from fertilizing itself.Such so-called male-sterile plants can then be fertilized by pollen from another strain of the plant, thereby producing hybrid seed.The new generation of plants will possess the flourishing, high-production trait known as "hybrid vigor," similar to that now seen in hybrid corn. "The development could have a dramatic effect on farm production, especially cotton," said Murray Robinson, president of Delta & Pine Land Co., a Southwide Inc. subsidiary that is one of the largest cotton seed producers in the U.S. On a commercial scale, the sterilization of the pollen-producing male part has only been achieved in corn and sorghum feed grains.That's because the male part, the tassel, and the female, the ear, are some distance apart on the corn plant.In a labor-intensive process, the seed companies cut off the tassels of each plant, making it male sterile.They sow a row of male-fertile plants nearby, which then pollinate the male-sterile plants.The first hybrid corn seeds produced using this mechanical approach were introduced in the 1930s and they yielded as much as 20% more corn than naturally pollinated plants.The vast majority of the U.S. corn crop now is grown from hybrid seeds produced by seed companies. A similar technique is almost impossible to apply to other crops, such as cotton, soybeans and rice.The male part, the anthers of the plant, and the female, the pistils, of the same plant are within a fraction of an inch or even attached to each other.The anthers in these plants are difficult to clip off.In China, a great number of workers are engaged in pulling out the male organs of rice plants using tweezers, and one-third of rice produced in that country is grown from hybrid seeds.At Plant Genetic Systems, researchers have isolated a pollen-inhibiting gene that can be inserted in a plant to confer male sterility.Jan Leemans, research director, said this gene was successfully introduced in oil-producing rapeseed plants, a major crop in Europe and Canada, using as a carrier a "promoter gene" developed by Robert Goldberg at the University of California in Los Angeles. The sterilizing gene is expressed just before the pollen is about to develop and it deactivates the anthers of every flower in the plant.Mr. Leemans said this genetic manipulation doesn't hurt the growth of that plant. The researchers also pulled off a second genetic engineering trick in order to get male-sterile plants in large enough numbers to produce a commercial hybrid seed crop.They attached a second gene, for herbicide resistance, to the pollen-inhibiting gene.Both genes are then inserted into a few greenhouse plants, which are then pollinated and allowed to mature and produce seed. The laws of heredity dictate that half of the plants springing from these greenhouse-produced seeds will be male sterile and herbicide resistant and half will be male fertile and herbicide susceptible.The application of herbicide would kill off the male-fertile plants, leaving a large field of male-sterile plants that can be cross-pollinated to produce hybrid seed. Mr. Leemans said the hybrid rapeseeds created with this genetic engineering yield 15% to 30% more output than the commercial strains used currently. "This technique is applicable to a wide variety of crops," he said, and added that some modifications may be necessary to accommodate the peculiarities of each type of crop.He said the company is experimenting with the technique on alfalfa, and plans to include cotton and corn, among other crops.He said that even though virtually all corn seeds currently planted are hybrids, the genetic approach will obviate the need for mechanical emasculation of anthers, which costs U.S. seed producers about $70 million annually. In recent years, demand for hybrid seeds has spurred research at a number of chemical and biotechnology companies, including Monsanto Co., Shell Oil Co. and Eli Lilly & Co.One technique developed by some of these companies involves a chemical spray supposed to kill only a plant's pollen.But there have been problems with chemical sprays damaging plants' female reproductive organs and concern for the toxicity of such chemical sprays to humans, animals and beneficial insects. However, Paul Johanson, Monsanto's director of plant sciences, said the company's chemical spray overcomes these problems and is "gentle on the female organ." Biosource Genetics Corp., Vacaville, Calif., is developing a spray containing a gene that spreads from cell to cell and interferes with the genes that are responsible for producing pollen.This gene, called "gametocide," is carried into the plant by a virus that remains active for a few days.Robert Erwin, president of Biosource, called Plant Genetic's approach "interesting" and "novel," and "complementary rather than competitive." "There is a large market out there hungry for hybrid seeds," he said. Mr. Robinson of Delta & Pine, the seed producer in Scott, Miss., said Plant Genetic's success in creating genetically engineered male steriles doesn't automatically mean it would be simple to create hybrids in all crops.That's because pollination, while easy in corn because the carrier is wind, is more complex and involves insects as carriers in crops such as cotton. "It's one thing to say you can sterilize, and another to then successfully pollinate the plant," he said.Nevertheless, he said, he is negotiating with Plant Genetic to acquire the technology to try breeding hybrid cotton.
A bitter conflict with global implications has erupted between Nomura Securities Co. and Industrial Bank of Japan, two of the world's most powerful financial companies. The clash is a sign of a new toughness and divisiveness in Japan's once-cozy financial circles.Not only are Japan's financial institutions putting their enormous clout to work; increasingly they're squaring off against one another in unprecedented public fashion.Already, the consequences are being felt by other players in the financial markets -- even governments. What triggered the latest clash was a skirmish over the timing of a New Zealand government bond issue.Nomura was attempting to organize the 50 billion-yen ($352 million) borrowing in Japan at a time when many Japanese banks, led by Industrial Bank of Japan, were pressuring the Wellington government to help them recover loans made to a defunct investment bank that had been owned by New Zealand's civil-service pension fund.Unwilling to put up new money for New Zealand until those debts are repaid, most banks refused even to play administrative roles in the new financing, forcing an embarrassed Nomura to postpone it this week. The dispute shows clearly the global power of Japan's financial titans.Aside from Nomura's injured pride, the biggest victim so far has been the New Zealand government. Barred by its budget law from making any new domestic bond issues, Wellington's Debt Management Office had been casting abroad to raise the 3 billion New Zealand dollars (US$1.76 billion) to NZ$4 billion it needs to come up with by the end of its fiscal year next June 30.With Japan's cash-flush banks aligned against it, though, raising money may be difficult.Not only can they block Wellington from raising money in Japan, bankers here say, but as the largest underwriters in the Eurobond market, they might be able to scuttle borrowings there, too. New Zealand's finance minister, David Caygill, lashed out at such suggestions.He told reporters in Wellington Tuesday that the government hadn't guaranteed the loans to DFC New Zealand Ltd., an investment bank 80%-owned by the National Provident Fund, and wouldn't bail it out. "It may very well be what the Japanese banks want," he told Radio New Zealand. "I think it would be irresponsible and I am not about to be blackmailed by Japanese banks or any other international interests." No less significant than the Japanese banks' attempt to cut off funds to pressure a foreign government are the implications of a confrontation between Japan securities and banking industries.Anxiety is rising over recent government proposals to eventually lower the strict barriers that now separate -- and protect -- the two industries from each other. Both sides are jealously guarding their turf, and relations have been at a flashpoint for months.The banks badly want to break into all aspects of the securities business.Meanwhile, the securities companies -- most of them smaller than the banks -- are seeking access only to limited kinds of banking that wouldn't open them to the full brunt of competition from the banks. Nomura, the world's biggest securities company largely by virtue of its protected home field, and Industrial Bank of Japan, Japan's most innovative and aggressive bank in capital markets abroad, captain the opposing sides.And their suspicions of each other run deep. In the past year, both have tried to stretch the limits of their businesses.Nomura started a credit-card venture with American Express Co. that allowed cardholders to use their Nomura securities accounts like a bank account, attracting the wrath of banks.And Industrial Bank of Japan started up a London securities subsidiary that sells Japanese stocks to non-Japanese institutions overseas, a move that stirred the anger of the stock brokerage firms.The New Zealand bond issue simply has brought the two institutions face-to-face.
As Yogi Berra might say, it's deja vu all over again. Crouched at shortstop, Bert Campaneris, once Oakland's master thief, effortlessly scoops up a groundball and flips it to second.In the outfield, Paul Blair, the Orioles' eight-time Gold Glove winner, elegantly shags a fly.On the mound, former Red Sox great Luis Tiant, the wily master of 1,001 moves, throws an off-speed strike. "Babies, kiddies," growls their manager -- a fellow named Earl Weaver, who, in a different time, handled four World Series teams and now handles the Gold Coast Suns. "Old-time kiddies," he says. Perhaps.But for the next few months, these boys of summers long past are going to be reveling in an Indian summer of the soul.Now that the baseball season is officially over, you see, it's time for a new season to begin. Today is the debut of the Senior Professional Baseball Association, a new eight-team pro sports circuit, modeled after the highly successful senior tennis and golf tours and complete with good salaries, a cable television contract and even expansion plans.One hundred and ninety two former greats, near greats, hardly knowns and unknowns begin a 72-game, three-month season in spring-training stadiums up and down Florida.For everyone involved, it's one more swig of that elixir of youth, baseball. "Someone always makes you quit," says legendary St. Louis Cardinals centerfielder Curt Flood, the league's commissioner. "You feel you want one more -- one more at-bat, one more hit, one more game." Until the baby-faced heroes of today reclaim these ballparks for spring training, there is one more. And not just for the players.It's one more for the baseball-loving lawyers, accountants and real estate developers who ponied up about $1 million each for the chance to be an owner, to step into the shoes of a Gene Autry or have a beer with Rollie Fingers. "Nothing can be better than this," says Don Sider, owner of the West Palm Beach Tropics.Early in the morning Mr. Sider, an estate lawyer, pores over last wills and testaments.Midmorning, he dons an orange-and-blue uniform and, for fun, may field a bunt from Dave Kingman. It's one more, too, for the fans who dream of a season that never ends. "I feel like a little kid," says a gleeful Alex de Castro, a car salesman, who has stopped by a workout of the Suns to slip six Campaneris cards to the Great Man Himself to be autographed.The league's promoters hope retirees and tourists will join die-hard fans like Mr. de Castro and pack the stands to see the seniors. The league is the brainchild of Colorado real estate developer James Morley -- once a minor-leaguer himself -- who says he had the idea last January while lying on a beach in Australia.When he sent letters offering 1,250 retired major leaguers the chance of another season, 730 responded.Eventually, about 250 made the trip to Florida to compete for the available slots. (Players have to be 35 or older, except for catchers, who are eligible at 32 because life behind the plate is so rough.) For some players, the lure is money -- up to $15,000 a month.Others, just released from the majors, hope the senior league will be their bridge back into the big-time. But as they hurl fireballs that smolder rather than burn, and relive old duels in the sun, it's clear that most are there to make their fans cheer again or recapture the camaraderie of seasons past or prove to themselves and their colleagues that they still have it -- or something close to it. "My fastball is good.Real good," says 39-year-old Pete Broberg, working in the midday heat of the Tropics camp.Mr. Broberg, who started with the now-defunct Washington Senators, says that when he left baseball in 1978, he "never looked back." For a long time, he ignored baseball altogether, even the sports pages. Now Mr. Broberg, a lawyer, claims he'd play for free. "You can't give it up that easily," he says. "I tried." The nagging memory of one afternoon fourteen years ago drove Jim Gideon, a lean 36-year-old righthander to take a four-month leave from selling insurance in Texas to try out for Mr. Weaver's team. "It doesn't replace pitching in the majors, but it proves to me that I would have been able to play if I'd stayed healthy," he says.Back in 1975, late in the season, a then-21 Mr. Gideon made his only major league appearance, five and two-thirds innings for the Texas Rangers against the Chicago White Sox.He gave up seven hits, walked five and didn't get a decision.Arm troubles forced him back to the minors the next year. "There's a satisfaction in going against the rules," offers Will McEnaney, once a stopper with Cincinnati's Big Red Machine.He means the rule that a player can't cut it after a certain age. These days he hustles to house-painting jobs in his Chevy pickup before and after training with the Tropics.While sipping a beer after practice, he vividly recounts getting the Red Sox's Carl Yastrzemski to pop out to end the 1975 World Series, and repeating the feat against the Yankees' Roy White in 1976. Some of the game's reigning philosophers dislike the idea of middle-aged men attempting a young man's sport. "I personally don't enjoy seeing players who I remember vividly from their playing days running about and being gallant about their deficiencies," says Roger Angell, New Yorker magazine's resident baseball sage. "I feel people should be allowed to remember players as they were." Worse, says baseball author Lawrence Ritter, "Someone will get a heart attack and that will be the end of the whole story." But the ballplayers disagree.Most are trim.Some have been training for months; others only recently left active status. (No one has worked out the players' average age, but most appear to be in their late 30s.) And there's pride. "I'm not going to look stupid," vows former Pittsburgh Pirate second baseman Rennie Stennett, sweat dotting his brow as he prepares for some practice swings. "It's going to be a tough league," promises the 47-year-old Mr. Campaneris. "There will be a lot of malice." Men who have played hard all their lives aren't about to change their habits, he says. Nonetheless, one can't help wonder whether the game will be just a little bit slower. At the weatherbeaten Pompano Beach municipal stadium, Mr. Blair, the 45-year-old former Oriole, knows his power isn't what it used to be.So he adjusts.He no longer crowds the plate.He's not thinking about home runs anymore, just base hits.Still, "how sweet it is," he says, savoring the fat sound of the well-hit line drive that bounces off the center field wall. And don't expect many complete games by pitchers -- perhaps three out of 288, laughs Mr. Fingers, the former Oakland reliever.Expect "tricky" stuff from pitchers, says Mr. Weaver, the manager.Expect brushbacks but no beanballs, says Mr. McEnaney.Even expect stolen bases, says the wiry and fit Mr. Campaneris: "If you know how to slide, it's no problem," he says. And expect slower fastballs. "I'm not so young anymore," concedes the cigar-chomping, 48-year-old Mr. Tiant. "I won't be throwing 90 mph, but I will throw 80-plus," he says. White-haired Pedro Ramos, at 54 the league's oldest player and a pitcher-coach with the Suns, has lost even more speed.Stuffing a wad of Red Man into his cheek, he admits the fastball he brought into the majors in 1955 has become a slowball.Its maximum velocity is 72 mph.But he isn't worried.He will compensate with the guile learned from his years in the majors.He has good control.He will keep the ball down, move it around. After all, he says, "Even to make love, you need experience."
Tuesday, October 31, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 9% high, 8 13/16% low, 8 7/8% near closing bid, 8 15/16% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.55% 30 to 44 days; 8.25% 45 to 59 days; 8.40% 60 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.62% 30 days; 8.55% 60 days; 8.45% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.53% one month; 8.50% three months; 8.30% six months. BANKERS ACCEPTANCES: 8.49% 30 days; 8.44% 60 days; 8.27% 90 days; 8.12% 120 days; 8.05% 150 days; 7.98% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 3/4% to 8 5/8% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 11/16% three months; 8 7/16% six months; 8 7/16% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78% 13 weeks; 7.62% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.78%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.63%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
In a surprise move, the British government cleared the way for a bidding war for Jaguar PLC by agreeing to remove an obstacle to a takeover of the auto maker. Trade and Industry Secretary Nicholas Ridley told the House of Commons yesterday that he will relinquish the government's so-called golden share in the company as long as Jaguar shareholders agree.The golden share restricts any individual holding to 15% and expires at the end of 1990.It was in Jaguar's best interests "for the company's future to be assured and the present climate of uncertainty resolved as quickly as possible," Mr. Ridley said. Mr. Ridley's decision fires the starting pistol for perhaps a costly contest between the world's auto giants for Britain's leading luxury-car maker.Both General Motors Corp. and Ford Motor Co. have been trying to amass 15% stakes in Jaguar.Ford, which already has an unwelcome 13.2% holding, is prepared to bid for the entire company and had lobbied the government to lift the takeover restrictions early.GM has been negotiating a friendly transaction with Jaguar that likely would involve joint ventures and an eventual stake of just under 30%. But the government's action, which caught Jaguar management flat-footed, may scuttle the GM minority deal by forcing it to fight for all of Jaguar. "I can't believe they (GM) will let Ford have a free run," said Stephen Reitman, a European auto industry analyst at UBS-Phillips & Drew. "I am sure they will be going for a full bid." Many investors certainly believe a bidding war is imminent.Jaguar shares skyrocketed yesterday after Mr. Ridley's announcement, following their temporary suspension on London's Stock Exchange.In late trading, the shares were up a whopping 122 pence ($1.93) -- a 16.3% gain -- to a record 869 pence on very heavy volume of 9.7 million shares.In the U.S. over-the-counter market, Jaguar shares trading as American Depositary Receipts closed at $13.625, up $1.75. Analysts expect Ford will make the first move, perhaps today, with an initial offer of about 900 pence ($14.25) a share.Such a proposal values Jaguar at more than #1.6 billion ($2.53 billion).Speculation about a takeover fight has sent Jaguar shares soaring in the past six weeks.The share price was languishing at about 400 pence before Ford's Sept. 19 announcement of its interest in a minority stake. Ford is "in the driving seat at the moment," observed Bob Barber, an auto analyst at brokers James Capel & Co. An aggressive Ford bid for Jaguar would put pressure on GM to make a better offer as the British company's "white knight." Such a countermove could end Jaguar's hopes for remaining independent and British-owned.But it isn't clear how long GM would be willing to fight Ford for Jaguar.Because of their longstanding rivalry, GM just "wants to make sure Ford pays a huge packet for (Jaguar)," said John Lawson, an auto analyst at London's Nomura Research Institute. People close to the GM-Jaguar talks agreed that Ford now may be able to shut out General Motors. "It's either going to be a shootout, or there only may be one player in town," one person said.Another person close to the talks said, "It is very hard to justify paying a silly price for Jaguar if an out-and-out bidding war were to start now." In a statement, Jaguar's board said they "were not consulted about the (Ridley decision) in advance and were surprised at the action taken." The statement emphasized that holders representing 75% of the shares voting at a special shareholders' meeting must agree to lift the takeover restrictions.Jaguar officials in the U.S. noted that Ford, as Jaguar's largest shareholder, now has the power to call for such a meeting. U.S. auto analysts also noted that Ford is in the best position to benefit from the large number of Jaguar shares that have moved over the past month into the hands of arbitragers waiting for the highest takeover bid.Jaguar's own defenses against a hostile bid are weakened, analysts add, because fewer than 3% of its shares are owned by employees and management. Ford officials in the U.S. declined to comment on the British government's action or on any plans to call a special Jaguar shareholders meeting.But GM officials said they, too, were surprised by the move, which left them to "consider all our options and explore matters further." Although GM has U.S. approval to buy up to 15% of Jaguar's stock, it hasn't yet disclosed how many shares it now owns. In a prepared statement, GM suggested its plans for Jaguar would be more valuable in the long run than the initial windfalls investors might reap from a hostile Ford bid. "Our intensive discussions with Jaguar, at their invitation," GM said, "have as their objectives to create a cooperative business relationship with Jaguar that would provide for the continued independence of this great British car company, to ensure a secure future for its employees and to provide an attractive long-term return for its shareholders." Jaguar was shocked by Mr. Ridley's decision, because management had believed the government wouldn't lift the golden share without consulting the company first. Indeed, the government is taking a calculated risk.Mr. Ridley's announcement set off a howl of protests from members of the opposition Labor Party, who accused the Thatcher administration of backing down on promised protection for a privatized company.The British government retained the single golden share after selling its stake in Jaguar in The Conservative government's decision may reflect its desire to shed a politically sensitive issue well before the next election, expected in late 1991. "It's now a very good time politically to get this over and done with," observed Daniel Jones, professor of motor industry management at the University of Cardiff in Wales.The government, already buffeted by high interest rates and a slowing economy, has been badly hurt by last week's shake-up in Mrs. Thatcher's cabinet. At the same time, the government didn't want to appear to favor GM by allowing a minority stake that might preclude a full bid by Ford.Mr. Ridley hinted at this motive in answering questions from members of Parliament after his announcement.He said he was giving up the golden share "to clear the way so the playing field is level between all contestants." Bradley A. Stertz in Detroit contributed to this article.
SFE Technologies said William P. Kuehn was elected chairman and chief executive officer of this troubled electronics parts maker. The 45-year-old Mr. Kuehn, who has a background in crisis management, succeeds Alan D. Rubendall, 45. Jerome J. Jahn, executive vice president and chief financial officer, said Mr. Rubendall was resigning by "mutual agreement" with the board. "He is going to pursue other interests," Mr. Jahn said. Mr. Rubendall couldn't be reached.Mr. Kuehn, the company said, will retain the rest of the current management team. For the nine months ended July 29, SFE Technologies reported a net loss of $889,000 on sales of $23.4 million.That compared with an operating loss of $1.9 million on sales of $27.4 million in the year-earlier period. In national over-the-counter trading, SFE Technologies shares closed yesterday at 31.25 cents a share, up 6.25 cents.
Tokyo stocks rebounded Tuesday from two consecutive daily losses in relatively active dealings. London shares also rose, while trading in Frankfurt, West Germany, ended higher. In Tokyo, the Nikkei index of 225 selected issues was up 132.00 points to 35549.44.The index fell 109.85 Monday. Volume on the First Section was estimated at 900 million shares, up from 582 million shares Monday.Advancing issues outnumbered decliners 542 to 362, while 208 issues were unchanged. Small-lot buying targeted at incentive-backed issues pushed up the Nikkei.But other sectors failed to attract investor interest and remained sluggish, making overall trading appear mixed. Individuals and corporations, as well as dealers trading for their own account, actively bought Tuesday. An official at Wako Securities said these investors feel the need to make quick profits, despite destabilizing external factors, such as political uncertainty tied to the ruling party's fate at next year's Lower House elections-an event which could directly affect the stock market. The Tokyo Stock Price Index of all issues listed in the First Section, which declined 5.16 on Monday, was up 16.05, or 0.60%, at 2692.65 on Tuesday. The Second Section index, which fell 21.44 points Monday, was up 6.84 points, or 0.19%, to close at 3642.90.Second Section volume was estimated at 14 million shares, unchanged from Monday. Institutional investors mostly remained on the sidelines Tuesday. A fund manager at a life-insurance company said three factors make it difficult to read market direction.First, he said, domestic interest rates are likely to stay at higher levels as increased anticipation of inflation followed rising consumer prices reported last week.Second, the dollar is showing persistent strength despite a slowdown in the U.S. economy shown by economic indicators. Third, oil prices haven't declined although supply has been increasing. The topic that attracted participants' attention was Mitsubishi Estate's purchase of 51% of Rockefeller Center Properties, announced late Monday in New York.Mitsubishi Estate ended the day at 2680, up 150.The gains also sparked buying interest in other real-estate companies, traders said.Sumitomo Realty & Development rose 40 to 2170.Heiwa Real Estate gained 40 to 2210. Investor focus shifted quickly, traders said.Many of the morning-session winners turned out to be losers by afternoon. In other stock-market news, the Tokyo Stock Exchange said that for the week ended Friday, the balance of margin buying rose 189.8 billion yen ($1.34 billion), to 7.160 trillion yen ($50.46 billion).The balance of short positions outstanding fell 159.7 billion yen, to 779.8 billion yen. In London, prices finished at intraday peaks, comforted by a reassuring early performance on Wall Street and news that the British government will waive its "golden share" in auto maker Jaguar.But trading was very sketchy, as investment decision makers remain wary from gyrations and upsets of recent weeks. "Volume has been appalling," said a dealer at a British brokerage concern. "The market was dragged up by the scruff of its neck by Wall Street and by market makers getting caught short.No one wants stock on their books." Meanwhile, the broad-based Financial Times 100-share index added 30.4 points to end at 2142.6, while reaching its minimum of 2120.5 a half hour into the session. At the close, the narrower 30-share index was up 19.7 points to 1721.4.Volume totaled a modest 334.5 million shares, up from 257.8 million shares Monday. The market also moved at early afternoon on news that Jaguar shares were being temporarily suspended at 746 pence ($11.80) each.Secretary of State for Trade and Industry Nicholas Ridley said later in the day that the government would abolish its golden share in Jaguar, the luxury auto maker being stalked by General Motors and Ford Motor. The golden share dates from Jaguar's public offering in 1984 and was designed to protect the company from takeover.The golden share was scheduled to expire at the beginning of But although the golden share has been waived, a hostile bidder for Jaguar would still have to alter the British concern's articles of association which ban shareholdings of more than 15%.Jaguar shares closed at 869 pence, up 122 pence, on hefty turnover of 9.7 million shares. As the London trading session drew to a close, the market was still listening to the parliamentary debate on the economy, with new Chancellor of the Exchequer John Major expected to clarify his approach to the British economy and currency issues. On the Frankfurt Stock Exchange, share prices closed higher in fairly thin trading, as selective buying by foreigners helped propel prices.The DAX index closed at 1472.76, up from 1466.29. Despite the modest gains, traders said the market remains dull, with investors remaining cautiously on the sidelines. Contributing to the market's reserved stance was the release later in the day of new data on the health of the U.S. economy, in the form of the U.S. index of leading indicators.Additionally, the end of the month position-squaring might have also played a minor role, traders said. Elsewhere, share prices closed higher in Amsterdam, Brussels, Milan and Paris.Prices were mixed in Zurich and lower in Stockholm. Stocks closed higher in Hong Kong, Manila, Singapore, Sydney and Wellington, but were lower in Seoul.Taipei was closed for a holiday. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
Yields on savings-type certificates of deposit dropped slightly in the week ended yesterday. The average yield on a six-month CD of $50,000 or less was 7.90%, compared with 7.94% a week earlier.The average one-year savings-type CD was down to 7.99% from 8.01%, according to Banxquote Money Markets, a New York information service that tracks CD yields. "This week was uneventful for the CD market," said Norberto Mehl, chairman of Banxquote. "The major banks haven't even reacted to sharp rises in the three-month Treasury bill rates" in the past two weeks.Banks that adjusted payouts on CDs in the most recent week made only fractional moves, he said. The CD trend runs counter to the direction of short-term interest rates at the Treasury bill auction Monday.The average six-month bill was sold with a yield of 8.04%, up from 7.90%.The average three-month issue rose to 8.05% from 7.77%. Typically, banks offer CD yields higher than those on Treasury bills, which are considered the safest short-term investments; banks need a competitive edge to sell their products.But when market interest rates move up rapidly, increases in bank CD yields sometimes lag. Most yields on short-term jumbo CDs, those with denominations over $90,000, also moved in the opposite direction of Treasury bill yields.The average six-month yield on a jumbo CD was at 7.90%, down from 7.93%, Banxquote said.For longer-term CDs, yields were up.The average two-year and five-year jumbos were up 0.02 of a percentage point to 7.91% and 7.96%, respectively. However, CDs sold through major broker-dealer networks were up slightly almost across the board.The average six-month CD in that category added 0.05 percentage point to 8.35%, for example.Mr. Mehl attributed the rise specifically to the Treasury bill increase. Among the major banks surveyed by Banxquote in six regions of the country, 8.33% is the highest yield available.It is offered by the flagship banks of New York's Manufacturers Hanover Corp. in the one-year maturity only.The yield is offered across a range of maturities at San Francisco's BankAmerica Corp. and Wells Fargo & Co.Just two weeks ago, BankAmerica's yields in many of those maturities was 8.61%. Still, on average, the major California banks have the highest yields on CDs, according to Banxquote.The average yield there on six-month issues is 8.32%.
I had to reach back to French 101 when the monsieur avec clipboard leaned over my shoulder during the coffee phase of dinner and asked whether I wanted to ride in a montgolfiere. I was a last-minute (read interloping) attendee at a French journalism convention and so far the festivities had been taken up entirely by eating, drinking, smoking, sleeping and drinking.The man with the clipboard represented a halfhearted attempt to introduce a bit of les sportif into our itinerary.But as the French embody a Zen-like state of blase when it comes to athletics (try finding a Nautilus machine in Paris), my fellow conventioners were having none of it.The diners at my table simply lit more Gauloises and scoffed at the suggestion of interrupting a perfectly good Saturday morning to go golfing or even montgolfing (ballooning to you; the brothers Montgolfier, French of course, were the world's first hot-air balloonists). Back in the U.S.A. this kind of chi-chi airborne activity wins heartwarmingly covetous responses.As in: "You went ballooning??!! In France??!!" Americans it seems have followed Malcolm Forbes's hot-air lead and taken to ballooning in a heady way.During the past 25 years, the number of balloonists (those who have passed a Federal Aviation Authority lighter-than-air test) have swelled from a couple hundred to several thousand, with some estimates running as high as 10,000.Some 30 balloon shows are held annually in the U.S., including the world's largest convocation of ersatz Phineas Foggs -- the nine-day Albuquerque International Balloon Fiesta that attracts some 800,000 enthusiasts and more than 500 balloons, some of which are fetchingly shaped to resemble Carmen Miranda, Garfield or a 12-story-high condom. (The condom balloon was denied official entry status this year.) But in Epinal, a gray 16th-century river town adjacent to France's Vosges mountain region, none of these Yankee-come-lately enthusiasms for things aloft was evident.Ballooning at the de rigueur hour of 6 a.m. held all the attraction for most people of sunrise root-canal work.Feeling the naggings of a culture imperative, I promptly signed up. The first thing anybody will tell you about ballooning is that it requires zip in the way of athletic prowess, or even a measure of derring-do. (So long as you don't look down.) They will also tell you that even if you hate heights, you can still balloon. (I still say don't look down.At least not when you are ascending.) What they won't tell you is not to go aloft in anything you don't want to get wet.I'm not referring to the traditional champagne drenching during the back-on-terra-firma toast.I'm talking about landing in a canal.In a porous wicker basket.With a pilot who speaks no English. To wit, my maiden voyage (and novitiates are referred to as virgins) began at dawn on a dew-sodden fairway and ended at noon in a soggy field. (Balloon flights almost always occur at dawn or dusk, when the winds are lightest.) In between came lots of coffee drinking while watching the balloons inflate and lots of standing around deciding who would fly in what balloon and in what order (the baskets hold no more than four passengers).When it wasn't my turn in the balloon I followed its progress from the "chase car," listening to the driver holler into a walkie-talkie.After long stretches of this attendant ground activity came 20 or so lovely minutes of drifting above the Vosges watching the silver mists rise off the river and the French cows amble about the fields.It's hard not to feel that God's in his heaven with this kind of bird's-eye view of the world, even if your pilote in silly plaid beret kept pointing out how "belle" it all was.Eventually little French farmers and their little French farmwives came out of their stone houses and put their hands above their tiny eyes and squinted at us. No wonder.We were coming down straight into their canal.See, the other rule of thumb about ballooning is that you can't steer.And neither can your pilot.You can go only up or down (by heating the balloon's air with a propane burner, which does make the top of your head feel hot) and ride the air currents.Which makes the chase car necessary.Most balloonists seldom go higher than 2,000 feet and most average a leisurely 5-10 miles an hour.When the balloon is cruising along at a steady altitude there is little sense of motion.Only when one is ascending -- or in our case descending a tad trop rapidement -- does one feel, well, airborne in a picnic basket. "What's he doing?" hissed my companion, who was the only other English-speaking member of the convention and whose knuckles were white. "Attention," yelled our pilot as our basket plunged into the canal. "You bet attention," I yelled back, leaping atop the propane tanks, "I'm wearing alligator loafers!" Our pilot simply laughed, fired up the burner and with another blast of flame lifted us, oh, a good 12-inches above the water level.We scuttled along for a few feet before he plunged us into the drink again. Eventually we came to rest in a soggy patch of field where we had the exquisite pleasure of scrambling out of the basket into the mud while the French half of our ballooning tag team scrambled in.I looked at my watch.Barely half-an-hour aloft.Back in the chase car, we drove around some more, got stuck in a ditch, enlisted the aid of a local farmer to get out the trailer hitch and pull us out of the ditch.We finally rendezvoused with our balloon, which had come to rest on a dirt road amid a clutch of Epinalers who watched us disassemble our craft -- another half-an-hour of non-flight activity -- that included the precision routine of yanking the balloon to the ground, punching all the air out of it, rolling it up and cramming it and the basket into the trailer.It was the most exercise we'd had all morning and it was followed by our driving immediately to the nearest watering hole. This meant returning to the golf course, where we watched a few French duffers maul the first tee while we sat under Cinzano umbrellas, me nursing an espresso and my ego.A whole morning of ballooning and I had been off the ground barely 30 minutes.Still, I figured the event's envy-quotient back in the U.S.A. was near peerless. As for the ride back to camp, our pilot and all the other French-speaking passengers clambered into the chase car.My American companion and I were left to ride alfresco in the wicker basket.As we streaked by a blase gendarme, I couldn't resist rearing up on my soggy loafers and saluting. Ms. de Vries is a free-lance writer.
Treasury Undersecretary David Mulford defended the Treasury's efforts this fall to drive down the value of the dollar, saying it helped minimize damage from the 190-point drop in the stock market Oct. 13. Testifying before a House subcommittee, Mr. Mulford said that if the Treasury hadn't intervened in foreign-exchange markets in September and early October to reduce the dollar's value, the plunge in the stock market might have provoked a steep fall in the currency that might have "unhinged financial markets." Mr. Mulford, responding to critics of intervention, also said intervention is "highly visible," is taken seriously by financial markets and works better than "was recognized some time ago." Differences between the Treasury and the Federal Reserve on the usefulness of intervention to help restrain the dollar resurfaced at the hearing.Fed Vice Chairman Manuel Johnson, who had dissented from the Treasury's policy, told lawmakers, "I became convinced about what looked to me like an attempt to push the dollar down against the fundamentals in the market." Intervention, he added, is useful only to smooth disorderly markets, not to fundamentally influence the dollar's value. Rep. John LaFalce (D., N.Y.) said Mr. Johnson refused to testify jointly with Mr. Mulford and instead asked to appear after the Treasury official had completed his testimony.A Fed spokesman denied Mr. LaFalce's statement. Mr. Mulford said reports of tension between the Treasury and Fed have been exaggerated, insisting that they involved "nuances." Mr. Johnson also said that "in the scheme of things, these things are minor." On other matters, Mr. Mulford said West Germany is contributing to imbalances in the world economy because of its success as an exporter. "The solution is stronger domestic growth {in Germany}," he said.But because the growth of the German economy has been stronger than expected, Mr. Mulford said, it's difficult for the U.S. to argue that Germany ought to adopt more stimulative monetary and fiscal policies. Germany's trade surplus is largely with other European countries rather than with the U.S., Mr. Mulford acknowledged.But nonetheless U.S. companies might be more successful in European markets if not for the German export push, he said.
Some U.S. allies are complaining that President Bush is pushing conventional-arms talks too quickly, creating a risk that negotiators will make errors that could affect the security of Western Europe for years. Concerns about the pace of the Vienna talks -- which are aimed at the destruction of some 100,000 weapons, as well as major reductions and realignments of troops in central Europe -- also are being registered at the Pentagon.Mr. Bush has called for an agreement by next September at the latest.But some American defense officials believe the North Atlantic Treaty Organization should take more time to examine the long-term implications of the options being considered. For one thing, Pentagon officials, who asked not to be identified, worry that the U.S. will have a much tougher time persuading Europeans to keep some short-range nuclear weapons on their soil once Soviet armored forces are thinned out.At the same time, they contend that a reduction of NATO forces under a treaty will increase the possibility of a conventional Soviet attack unless the West retains a residual force of nuclear weapons in Europe. Allies concerned about the deadline include the British, French and smaller NATO allies, some of whom don't have adequate staffs to provide quick answers to the questions being raised by what generally are considered the most complex arms-control talks ever attempted. So far, no ally has complained openly, preserving the impression that NATO is in line with the Bush position that a quick agreement bringing Soviet conventional forces down to parity with NATO is the West's top bargaining priority. But even though NATO negotiators have only 10 months left under the Bush timetable, they are still wrestling over such seemingly fundamental questions as "What is a tank?" Five of the six categories of weapons under negotiation haven't even been defined. Tanks currently are defined as armored vehicles weighing 25 tons or more that carry large guns.The Soviets complicated the issue by offering to include light tanks, which are as light as 10 tons.Oleg A. Grinevsky, the chief Soviet negotiator in the conventional-arms talks, argued that this would mean the Soviets would have to destroy some 1,800 tanks, while the U.S. would lose none because it has no light tanks in Europe. But the issue is stickier than it seems.France, Britain and Italy all have light tanks they would like to keep out of the talks.And some U.S. Army analysts worry that the proposed Soviet redefinition is aimed at blocking the U.S. from developing lighter, more transportable, high-technology tanks. Defining combat aircraft is even tougher.The Soviets insisted that aircraft be brought into the talks, then argued for exempting some 4,000 Russian planes because they are "solely defensive." NATO hasn't budged from its insistence that any gun-carrying plane has offensive capability.The dispute over that issue, according to one U.S. official, is a "potential treaty stopper," and only President Bush and Soviet leader Mikhail Gorbachev may be able to resolve it. Accounting problems raise more knotty issues.Greece and Turkey, for example, are suspected of overstating their arsenals in hopes that they can emerge from the arms-reduction treaty with large remaining forces to deter each other. Other nations aren't sure how many weapons they have in their own arsenals. "It's just going to be sloppy, both on our side and theirs {the Warsaw Pact's}," says one NATO analyst. So far, neither the Bush administration nor arms-control experts in Congress seem moved by arguments that these problems may take more time to thrash out than President Bush has allowed.They argue that the bigger danger would be that the West would delay action so long that the Soviets might back away from the current conciliatory attitude. "So what if you miss 50 tanks somewhere?" asks Rep. Norman Dicks (D., Wash.), a member of the House group that visited the talks in Vienna. "The bottom line is that if we can get that {Warsaw Pact} superiority brought down to parity, we ought to keep pressing ahead as quickly as possible.I worry more about things becoming so unraveled on the other side that they might become unable to negotiate."
Giovanni Agnelli & Co. announced a transaction that will strengthen its indirect control of Fiat S.p.A. and will admit Prince Karim Aga Khan as its first non-family shareholder. Giovanni Agnelli, a limited partnership that is the master holding company for Fiat's Agnelli family, owns approximately 75% of the shares in Istituto Finanziario Industriale, which in turn owns approximately 40% of Fiat, Italy's biggest private-sector industrial group. The company said Maria Sole Agnelli Teodorani, sister of Fiat Chairman Giovanni Agnelli, agreed to trade her shares in IFI for new ordinary shares in the limited partnership, which will give her control of 4.67% of Giovanni Agnelli & Co. The Aga Khan, meanwhile, agreed to trade some of his stake in Luxembourg-based Ifint S.A., another Agnelli family company, for 7.45% of Giovanni Agnelli & Co. 's capital.His new stake would be in the form of preferred shares, which receive higher dividends but have voting rights only in extraordinary shareholders assemblies.The Aga Khan owns 10% of Ifint's capital, while IFI owns 23%. As a result of the transaction, which is expected to be approved at a shareholders meeting Nov. 24, Giovanni Agnelli & Co. will control 79.18% of IFI's ordinary shares.Its capital will also be raised to 232.4 billion lire ($172.5 million) from the current 204.3 billion lire.IFI also has nonvoting preferred shares, which are quoted on the Milan stock exchange. The value of the two transactions wasn't disclosed, but an IFI spokesman said no cash would change hands. The move strengthens the existing links between the Agnellis and the Aga Khan, the head of the world's Ismaili Moslems who is a longtime family friend and frequently goes sailing with Mr. Agnelli. Mr. Agnelli and the Aga Khan also have some business ties, and a spokesman for the Agnelli company didn't rule out that the current agreement could lead to further collaboration.For instance, Ifint earlier this year bought an 18% stake in Alisarda, the Aga Khan's airline, which flies between Italy and Sardinia. Giovanni Agnelli & Co., which was formed in January 1987 as a way of keeping the Agnellis' controlling stake in Fiat together despite an ever-growing family tree, has been playing a more active role in the Agnelli group of late. It raised financing of 300 billion lire for the purchase this summer by another Agnelli-related group of the food concern Galbani S.p.A., by selling a chunk of its IFI shares to Mediobanca S.p.A. Mediobanca said during the weekend that it agreed to sell the shares back to Giovanni Agnelli for 333 billion lire.
Congressional Democrats and the Bush administration agreed on a compromise minimum-wage bill, opening the way for the first wage-floor boost in more than nine years. The agreement ended a long impasse between the congressional leaders and the White House over the wage issue.President Bush in June vetoed a measure passed by Congress and said he wouldn't accept any minimum-wage rise that went beyond limits he set early in this year's debate on the issue. The compromise was a somewhat softened version of what the White House had said it would accept.Under the agreement with the House and Senate leaders, the minimum wage would rise from the current $3.35 an hour to $4.25 an hour by April 1991.Employers could also pay a subminimum "training wage" for 90 days to new workers who are up to 19 years old, and then for another 90 days if the company institutes a specific training program for the newcomers. White House officials were delighted that the compromise includes the concept of a training wage, which Mr. Bush has fought for throughout the year. "For the first time in history, we have a training wage that will be part" of the nation's labor laws, said Roger Porter, assistant to the president for economic and domestic policy. White House aides said that although they made a small compromise on the length of a training wage, the final minimum-wage increase will meet the standards set by Mr. Bush. The bill vetoed by the president in June, which the House failed to override, would have lifted the minimum wage to $4.55 an hour by late 1991, with a training wage for up to two months, generally for a worker's first job. Mr. Bush had been holding out for a bill boosting the wage floor to $4.25 an hour by the end of 1991, coupled with a six-month training wage for workers newly hired by any employer.Under the compromise, the $4.25 level would be reached nine months earlier, while the training subminimum would be shorter, unless it is tied to a training plan. Democrats argued that the training wage was a way of allowing employers to pay less than the minimum wage, while new workers need far less than six months to be trained for their jobs. Democrats had been negotiating with some Republican congressional leaders on a compromise lately.With congressional elections next year, GOP leaders have worried about opposing a minimum-wage rise for low-paid workers at a time when Congress is moving toward a capital-gains tax cut that would directly benefit wealthier taxpayers.Republicans have been imploring the White House to compromise on the wage issue. In the Senate, Edward Kennedy (D., Mass.), chairman of the Labor Committee, and Pete Domenici, (R., N.M.) ranking minority member of the Budget Committee, have been working on a compromise, and their soundings showed that the Senate appeared to be heading toward enough strength to override another Bush veto, a Democratic staff official said. The House is scheduled to vote this week on the compromise, as a substitute to a new Democratic bill, itself watered down from last spring's version.The Senate will probably vote not long afterward. Some Democrats thought they might have compromised too much.Rep. Austin Murphy (D., Pa.), chairman of the House labor standards subcommittee, said they might have done better "if we'd held their feet to the fire." Mr. Kennedy suggested Democrats "yielded a great deal" on the size of the increase, but he cited concessions from the White House on the training wage, which he said make it "less harsh." With only 16-year-olds to 19-year-olds eligible, 68% of workers getting less than $4.25 an hour, who are adults, won't be subject to the training wage, he said.The AFL-CIO, which previously opposed the administration's subminimum idea, said the compromise has "adequate safeguards, so the youth are not exploited and older workers are not displaced." Gerald F. Seib contributed to this article.
Armstrong World Industries Inc. agreed in principle to sell its carpet operations to Shaw Industries Inc.The price wasn't disclosed but one analyst estimated that it was $150 million. Armstrong, which has faced a takeover threat from the Belzberg family of Canada since July, said that disposing of the carpet business would improve "total financial performance." The move also would allow the company to concentrate on core businesses, which include ceramic tile, floor coverings and furniture. Moreover, such a sale could help Armstrong reassure its investors and deter the Belzbergs, who own a 9.85% stake in the Lancaster, Pa., company.Analysts expect Armstrong to use proceeds of the sale to reduce debt, buy back stock or perhaps finance an acquisition. The carpet division had 1988 sales of $368.3 million, or almost 14% of Armstrong's $2.68 billion total revenue.The company has been manufacturing carpet since 1967.Recently it upgraded its plants so that it could make stain-resistant products with higher quality dyes. For the past year or two, the carpet division's operating profit margins have hovered around 5%, high by industry standards, but disappointing compared with the 13% to 19% margins for two of Armstrong's chief businesses, flooring and building products. Analysts hailed the planned transaction as being beneficial to Armstrong and Shaw, the market leader in the U.S. carpet industry, with an estimated 17% to 20% share.Shaw, based in Dalton, Ga., has annual sales of about $1.18 billion, and has economies of scale and lower raw-material costs that are expected to boost the profitability of Armstrong's brands, sold under the Armstrong and Evans-Black names. Yesterday, in composite trading on the New York Stock Exchange, Shaw's shares closed ex-dividend at $26.125, up $2.25.Armstrong's shares, also listed on the Big Board, closed at $39.125, up 12.5 cents. Yesterday, Armstrong reported flat earnings for the third quarter and nine months, worsened by the stock dilution of an employee stock ownership plan adopted earlier this year. For the quarter, earnings were $47 million, or 92 cents a share, including a one-time gain of $5.9 million.In the year-ago quarter, earnings were $42.9 million, or 93 cents a share. Yesterday, Armstrong announced an agreement to sell its small Applied Color Systems unit to a subsidiary of the Swiss company, Brauerei Eichof Ltd.The price wasn't disclosed. Armstrong expects to close the sale of the color unit in late November and the carpet sale in December, with the gains to be applied to fourth quarter or first-quarter results.
The government's primary economic-forecasting gauge rose a slight 0.2% in September, but economists said the report offered little new information on the degree to which the U.S. economy is slowing. The small increase in the index of leading indicators, which had climbed 0.5% in August but was unchanged in July, does lend support to the view that the economy has slowed noticeably.However, it doesn't give much of a clue as to whether a recession is on the horizon. "I don't think it provides much new information on the economy," said Richard Rippe, economist at Dean Witter Reynolds Inc.So far this year, the index of leading indicators has risen in four months, fallen in four months and remained unchanged in the other month. In another report yesterday, the Commerce Department said sales of new single-family houses plunged 14% in September to an annual rate of 618,000 from 719,000 in August.The declines were particularly pronounced in the Northeast and in the South, where Hurricane Hugo was a factor. Although September's weakness followed two strong months for home sales, the decline supports other indications that the drop in mortgage rates earlier this year has had only a limited beneficial effect on the housing market. The September drop was the largest since a 19% drop in January 1982, but monthly changes in this measure are even less reliable than those in other economic indicators.Because the figures are based on a small sample, the department said it is 90% confident only that new-home sales fell somewhere between 5% and 23% during the month.The department also said it takes four months to establish a trend. So far this year, 534,000 newly built homes have been sold, down 4.5% from the like months of 1988. The index of leading indicators got a major boost in September from a surge in consumer expectations as measured by the University of Michigan.This measure had dropped sharply in August.The Commerce Department said that as a result of a new adjustment to the formula used to calculate the index, the influence of this component has been reduced. Of the 11 components to the index, only three others rose in September: the money supply, the length of the average work week and stock prices. Several components that track the health of the manufacturing sector of the economy turned down in September.These include new orders for manufactured consumer goods, lead times on vendor deliveries, orders for new plant and equipment, and backlogs of orders for durable goods. Meanwhile, the National Association of Manufacturers said yesterday a recent poll of 53 executives on its board found that 61% don't expect a recession to occur until 1991 or later.The remainder expect a downturn to begin sometime in Although manufacturers often are quick to call for lower interest rates, 60% of the executives said they would prefer that the Fed keep inflation-fighting as its top priority even if that means higher rates.The other 40% said the Fed ought to worry less about inflation and bring interest rates down. All the figures are adjusted to remove usual seasonal patterns. Here are the net contributions of the components of the Commerce Department's index of leading indicators.After various adjustments, they produced a 0.5% rise in the index for August and a 0.2% rise for September.September, and the change from August, are: from 1.11 in the previous month.
An imaginative novelist writing a thriller about amateur spy-chasing might invent a Clifford Stoll, but it's unlikely.It's also unnecessary.Amateur spy-chaser Clifford Stoll is a real person, or as he might waggishly put it, a surreal person. He is 37, an astronomer with impressive credentials, and something of a genius at making computers do his bidding.He once described himself as a "Berkeley Hippie," and played the role well; obligatory ragged jeans, a thicket of long hair and rejection of all things conventional, including, for a time at least, formal marriage to his "sweetheart," Martha Matthews.He also is an entertaining writer, combining wisecracks and wordplay with programmatic detail and lucid explanations of how computers work.In "The Cuckoo's Egg" (Doubleday, 326 pages, $19.95), he spins a remarkable tale of his efforts over 18 months to catch a computer spy. The result last spring was the arrest by West German authorities of five young West Germans, accused of stealing information from computers in the U.S. and Europe and selling it to the Soviet KGB.One of them, 25-year-old Markus Hess of Hannover, allegedly used the international telecommunications network to break into more than 30 high-security computers in the U.S., searching for secrets.He probably didn't penetrate any top-secret files, but the KGB in East Berlin was willing to pay two of his associates, Peter Carl and Dirk Brezinski, $15,000 for some of the material Hess collected.They promised yet more for really good stuff. Mr. Stoll draws his title from the cuckoo's habit of laying eggs in the nests of other birds, making them surrogate parents.The computer spy had discovered that a popular editing/electronic mail program called Gnu-Emacs could do tricks with the widely used Unix operating system created by AT&T.Using Gnu-Emacs, the spy could substitute a bogus "atrun" program for the one that routinely cleans up the Unix system every five minutes.Once his cuckoo's egg was laid, he could enter Unix and become a "super-user," with access to everything. Mr. Stoll was scanning the heavens at the Keck observatory of the Lawrence Berkeley Laboratory in 1986 when his grant ran low and he was asked to switch to helping run the lab's computers.He discovered a 75-cent discrepancy in the charges made to various departments for computer time and traced it to a user named "Hunter," who had no valid billing address.Mr. Stoll suspected the intruder was one of those precocious students who has fun breaking into computers. But after much tracking, it became evident to Mr. Stoll, through various clues, that the hacker was not on the Berkeley campus or even in California.Finding him became an obsession for Mr. Stoll.He made a midnight requisition of all the printers he could lay hands on so that he could monitor all the telephone lines coming into the lab's computers.After discovering that the hacker had taken over the dormant account of a legitimate user named Joe Sventek, he rigged up an alarm system, including a portable beeper, to alert him when Sventek came on the line.Some nights he slept under his desk.His boss complained about neglect of other chores. The hacker was pawing over the Berkeley files but also using Berkeley and other easily accessible computers as stepping stones to the network of computers used by the military and national security agencies.The White Sands missile range and CIA contractor Mitre Inc. were among the targets.When the hacker moved, Mr. Stoll moved too, calling up other systems managers to alert them but keeping his own system open to avoid arousing suspicion.Sometimes, if the hacker seemed to be into a sensitive file, he would drag his keychain across the terminal to create static or slow the system down to frustrate his quarry. The FBI initially showed little interest, and he had the impression other federal security agencies were tangled up in legal red tape.The CIA told him it does not do domestic counterespionage.One learns a lot from this book, or seems to, about crippling federal bureaucracy. "Seems to" because it's possible that the CIA and the National Security Agency were more interested than they let on to Mr. Stoll. Finally, he got help.Tymnet is a major network linking computers.One of its international specialists, Steve White, took a quick interest in Mr. Stoll's hunt, ultimately tracing the hacker to West Germany.The West Germans then took over and finally found Markus Hess. Eventually, Mr. Stoll was invited to both the CIA and NSA to brief high-ranking officers on computer theft.He savored the humor of his uncombed appearance among these buttoned-up chaps.Back in Berkeley, he was violently scolded by a left-wing lady friend for consorting with such people.He became angry in return.He had developed a hatred for the hacker and a grudging appreciation of the federal "spooks" who make national security their business.At several different levels, it's a fascinating tale. Mr. Melloan is deputy editor of the Journal.
Mips Computer Systems Inc. today will unveil a new general-purpose computer that will compete with more expensive machines from companies such as Sun Microsystems Inc. and Digital Equipment Corp. The closely held Sunnyvale, Calif., company also will announce an agreement to supply computers to Control Data Corp., which will sell Mips machines under its own label. The new Mips machine, called the RC6280, will cost $150,000 for a basic system.The computer processes 55 million instructions per second and uses only one central processing chip, unlike many rival machines using several processors.The machine employs reduced instruction-set computing, or RISC, technology. At that price, an analyst familiar with the machine said, the computer offers up to 10 times the performance of similar machines. "In the price range it's a tremendously high-performing product," said Sandy Gant, an analyst at the market-research firm InfoCorp. The machine is part of an effort by Mips to establish itself as a supplier of computers, not just of integrated-circuit technology.Mips also wants to wedge into markets other than traditional RISC applications such as engineering; Mips said the new machine will also be used by businesses and for communications. "This clearly demonstrates that Mips is a systems company rather than just a chip company," said Mips Vice President John Hime. The Control Data deal is a boon for Mips because it gives the the five-year-old company one more ally as it battles more established electronic concerns such as Sun, Hewlett-Packard Co., Motorola Inc. and Intel Corp. for the emerging market for RISC machines.RISC technology speeds up a computer by simplifying the internal software. For Mips, which expects revenue of $100 million this year, big-name allies such as Control Data are essential to attract software developers to the company's RISC architecture. "The thing it says about Mips is that they're on a roll right now," said Ms. Gant at InfoCorp. "They're getting some major wins," she added. Last month, for example, Mips agreed to supply its computers to Nixdorf Computer AG of West Germany and France's Groupe Bull.Sony Corp., Tandem Computers Inc. and Digital Equipment have agreed to sell MIPS computers and companies such as Japan's NEC Corp. and West Germany's Siemens A.G. have agreed to make Mips chips under license. Today's agreement gives Control Data a machine to compete against Digital and other general-purpose computer makers, said John Logan, a computer-market analyst at Aberdeen Group Inc. of Boston.The machine is essentially a mainframe computer, he said. "Suddenly CDC (Control Data) has a competitive product to fight back against the VAX9000," a machine Digital announced last month, he added. Control Data, based in Minneapolis, Minn., expects its sales of Mips systems, including the new RC6280, to amount to more than $100 million by the end of 1991, Mips said.Nixdorf, Bull and others will also sell versions of the machine, said Mips President Robert Miller. Mips will start shipping its new machine in the first quarter of 1990, he said.The machine uses a single processor, which makes it easier to program than competing machines using several processors.The computer can process 13.3 million calculations called floating-point operations every second.The machine can run software written for other Mips computers, the company said.
Another fight is brewing between Congress and the Bush administration over how to pay for the savings-and-loan bailout without adding to the federal budget deficit. In a hearing before the House Ways and Means Committee, the General Accounting Office and the Congressional Budget Office, which both are arms of Congress, advised the new S&L bailout agency to abandon plans to raise temporary working capital through debt issued from an agency that wouldn't be counted on the federal budget. Officials of the Resolution Trust Corp. have said privately that such a plan was the most likely alternative to raise short-term cash for the bailout. Instead, the GAO and the Congressional Budget Office said, the RTC should consider using Treasury debt, which is less expensive and subject to oversight by Congress.The spending could be exempted from meeting deficit-reduction targets in the Gramm-Rudman budget law. The RTC has projected that it will require between $50 billion to $100 billion in temporary working capital.The borrowing to raise these funds would be paid off as assets of sick thrifts are sold.The new S&L law allows the RTC to issue notes for as much as 85% of the value of the assets it holds. But higher interest rates paid on off-budget debt could add billions to the bailout costs, and wouldn't be subject to congressional scrutiny, Ways and Means members argued. "To allow this massive level of unfettered federal borrowing without prior congressional approval would be irresponsible," said Rep. Fortney Stark (D., Calif.), who has introduced a bill to limit the RTC's authority to issue debt. The RTC will have to sell or merge hundreds of insolvent thrifts over the next three years.The new S&L bailout law allows $50 billion to be spent to sell or merge sick S&Ls and their assets, but that is a net cost.In the meantime, the agency must raise cash to maintain assets, such as real estate, until they can be sold.Then the short-term debt is paid off through the proceeds of selling the assets. David Mullins, assistant secretary of the Treasury, said that the working capital is necessary to reduce the final costs of the bailout, by allowing the agency to sell savings and loans without their bad assets, then hold the assets until they can be sold under favorable conditions. He said it hasn't yet been determined how the RTC will raise the cash, but the administration doesn't want it to be included on the federal budget, because it would "distort" the budget process by requiring either exemptions from Gramm-Rudman or big increases in the budget deficit. But the worst possibility would be raising no working capital, he said. "If working capital financing is not provided," he said, "the RTC may have to slow {S&L sales} or dump acquired assets through fire sales."
Now was that a quarter cup or a half cup? Not a gripping question, unless you're the pastry chef of this city's Chez Panisse restaurant and you've just lost your priceless personal dessert notebook. Chez Panisse was listed among the top 30 restaurants in the world this year by Connoisseur magazine.The tattered black binder, bulging with 18 years' worth of recipes held together by rubber bands, was in chef Lindsey Shere's purse when it was stolen from her house recently. The Berkeley police don't have any leads but doubt the crime was driven by a passion for sweets.Instead, they figure the culprit probably took money from Ms. Shere's wallet and discarded all the tips in the five-by-eight-inch looseleaf. Chez Panisse, whose founder, Alice Waters, is considered the inventor of the cooking style known as California cuisine and whose patrons make reservations a month in advance, hasn't exactly subjected diners to vanilla ice cream because of the theft.For one thing, Ms. Shere can draw on her cookbook, published by Random House four years ago, which is teeming with recipes for such specialties as kiwi sherbet, gooseberry fool (a creamy dish made with crushed stewed berries) and hazelnut "oeufs a la neige." For another, sympathetic fans have sent Ms. Shere copies of her recipes clipped from magazines over the years. Still, the restaurant's ever-changing menu of five-course dinners -- it supposedly hasn't repeated a meal since opening in 1971 -- requires constant improvisation.And that puts added pressure on Chez Panisse dessert-menu planners. "We make what we know how to make," says business manager Richard Mazzera. Many in the Bay Area's pastry community express disbelief that Ms. Shere kept only one copy of such valuable notes, but she has received moral support from Baker's Dozen, a group of California pastry chefs that meets regularly to discuss issues like how to keep meringues from weeping and how bovine eating habits affect butter texture. Ms. Shere has offered a $500 reward for the book's return but figures she'll have to reinvent many recipes from scratch. "It's an overwhelming job," she says. "There are so many possible proportions when you consider how many things are made out of eggs and butter and milk."
Newport Electronics Inc. named a new slate of officers, a move that follows replacement of the company's five incumbent directors last week. Milton B. Hollander, 60 years old, was named chief executive officer, succeeding Barrett B. Weekes.Mr. Hollander's Stamford, Conn.-based High Technology Holding Co. acquired most of its 49.4% stake in Newport in August.Mr. Hollander was named chairman last week, succeeding Mr. Weekes, who was among the ousted directors. The company has declined requests to discuss the changes, but Mr. Weekes has said that Mr. Hollander wanted to have his own team. Scott Wakeman was named president and chief operating officer of U.S. operations, titles that had been held by Mr. Weekes.Mr. Wakeman was vice president of the instrument and controls division of closely held Omega Engineering Inc., another company controlled by Mr. Hollander.A company spokesman didn't know Mr. Wakeman's age. James R. Lees, 51, vice president of Newport's European operations, was named executive vice president and chief operating officer of European operations, assuming some former duties of Mr. Weekes. Arthur B. Crozier, 34, an attorney, was named secretary, succeeding John Virtue, who was another of the ousted directors.
The crowning moment in the career of Joseph F. O'Kicki came as 300 local and state dignitaries packed into his elegant, marble-columned courtroom here last year for his swearing in as President Judge of Cambria County. Baskets of roses and potted palms adorned his bench.The local American Legion color guard led the way.As the judge marched down the center aisle in his flowing black robe, he was heralded by a trumpet fanfare. To many, it was a ceremony more befitting a king than a rural judge seated in the isolated foothills of the southern Allegheny Mountains.But then Judge O'Kicki often behaved like a man who would be king -- and, some say, an arrogant and abusive one.While his case may be extreme, it reflects the vulnerability of many small communities to domineering judges. Last March, nine months after the judge's swearing-in, the state attorney general's office indicted him on a sweeping array of charges alleging more than 10 years of "official oppression" in Cambria County, a depressed steel and mining community in western Pennsylvania.The allegations, ranging from theft and bribery to coercion and lewdness, paint a disquieting picture. According to testimony in a public, 80-page grand-jury report handed up to the state attorney general, Judge O'Kicki extorted cash from lawyers, muscled favorable loans from banks and bullied local businesses for more than a decade. Prosecutors, in an indictment based on the grand jury's report, maintain that at various times since 1975, he owned a secret and illegal interest in a beer distributorship; plotted hidden ownership interests in real estate that presented an alleged conflict of interest; set up a dummy corporation to buy a car and obtain insurance for his former girlfriend (now his second wife); and maintained 54 accounts in six banks in Cambria County. In testimony recorded in the grand jury report, court employees said the judge, now 59 years old, harassed his secretaries, made imperial demands on his staff and hounded anyone who crossed him.Bailiffs claimed they were required to chauffeur him to and from work, mow his lawn, chop his wood, fix his car and even drop by his house to feed his two grown mutts, Dixie and Husky.One former bailiff charged that the judge double-crossed him by reneging on a promise of a better paying job after pocketing a $500 bribe. Some of the allegations are simply bizarre.Two former secretaries told the grand jury they were summoned to the judge's chambers on separate occasions to take dictation, only to find the judge in his bikini underwear.One secretary testified that the judge once called her to his office while wearing nothing at all. The judge, suspended from his bench pending his trial, which began this week, vehemently denies all the allegations against him, calling them "ludicrous" and "imaginative, political demagoguery." He blames the indictment on local political feuding, unhappiness with his aggressive efforts to clear the courthouse's docket and a vendetta by state investigators and prosecutors angered by some of his rulings against them. "I don't know whose toes I've stepped on," says the judge. "I'll find out, eventually, who pushed the state police buttons into action." Even if only some of the allegations stand up, however, they provide ample testimony to the awesome power of judges in rural communities.That power can sometimes be abused, particularly since jurists in smaller jurisdictions operate without many of the restraints that serve as corrective measures in urban areas. Lawyers and their clients who frequently bring business to a country courthouse can expect to appear before the same judge year after year.Fear of alienating that judge is pervasive, says Maurice Geiger, founder and director of the Rural Justice Center in Montpelier, Vt., a public interest group that researches rural justice issues. As a result, says Mr. Geiger, lawyers think twice before appealing a judge's ruling, are reluctant to mount, or even support, challenges against him for re-election and are usually loath to file complaints that might impugn a judge's integrity. Judge O'Kicki, a stern and forbidding-looking man, has been a fixture in the local legal community for more than two decades.The son of an immigrant stonemason of Slovenian descent, he was raised in a small borough outside Ebensburg, the Cambria County seat, and put himself through the University of Pittsburgh Law School.He graduated near the top of his class, serving on the school law review with Richard Thornburgh, who went on to become governor of Pennsylvania and, now, U.S. Attorney General.It was also in law school that Mr. O'Kicki and his first wife had the first of seven daughters.He divorced his first wife three years ago and married the daughter of his court clerk. Last year, Pennsylvania Supreme Court Justice John P. Flaherty called Mr. O'Kicki one of the finest judges "not only in Pennsylvania but in the United States." Clearly, the judge has had his share of accomplishments.After practicing law locally, he was elected to his first 10-year term as judge in 1971; in 1981, he was effectively re-elected.Six years ago, Judge O'Kicki was voted president of the Pennsylvania Conference of State Trial Judges by the state's 400 judges.He has been considered several times for appointments to federal district and appellate court vacancies in Pennsylvania.And when he ran unsuccessfully for a state appellate court seat in 1983, the Pennsylvania Bar Association rated him "one of the best available," after interviewing local lawyers. "He probably was the smartest guy who ever sat on our bench," says a former president of Cambria County's 150-member bar association, who, like most lawyers in Cambria County, refuses to talk about the judge publicly. "He's sharp as a tack.He could grasp an issue with the blink of an eye." For more than a decade, virtually no one complained about Judge O'Kicki. "What about those institutions that are supposed to be the bedrock of society, the banks and the bar association. . . ?" wrote a columnist for the Tribune-Democrat, a newspaper in nearby Johnstown, shortly after the scandal became public. "If only a banker or a lawyer had spoken out years ago, the judicial process wouldn't be under the taint it is today." Officials with the Pennsylvania Judicial Inquiry and Review Board, the arm of the state that investigates judicial misconduct, counter that they had no inkling of anything amiss in Ebensburg. "Nobody told us; nobody called us," says an official close to the case who asked not to be named. "Nobody had the guts to complain." Certainly not the lawyers.Johnstown attorney Richard J. Green Jr. shelled out $500 in loans to the judge over five years, he said in testimony to the grand jury. "The judge never made a pretense of repaying the money," said Mr. Green.Eventually, Mr. Green testified, he began ducking out of his office rather than face the judge when he visited. When Mr. Green won a $240,000 verdict in a land condemnation case against the state in June 1983, he says Judge O'Kicki unexpectedly awarded him an additional $100,000.Mr. Green thought little of it, he told the grand jury, until the judge walked up to him after the courtroom had cleared and suggested a kickback. "Don't you think I ought to get a commission . . . or part of your fee in this case?" Mr. Green said the judge asked him. Appalled, Mr. Green never paid the money, he testified.But he didn't complain to the state's Judicial Inquiry and Review Board, either, saying later that he feared retribution.Mr. O'Kicki said he will respond to Mr. Green's allegation at his trial. Like most of Cambria County's lawyers and residents who had dealings with the judge, Mr. Green declined to be interviewed for this article.And no one with a complaint about the judge would allow his name to be printed. "I don't have anything much to say, and I think that's what you're going to find from everyone else you talk to up here," says local attorney Edward F. Peduzzi. Says another lawyer: "The practice of law is a matter of biting one's lip when you live in a small community.One had best not dance on top of a coffin until the lid is sealed tightly shut." The judge was considered imperious, abrasive and ambitious, those who practiced before him say.He sipped tea sweetened with honey from his high-backed leather chair at his bench, while scribbling notes ordering spectators to stop whispering or to take off their hats in his courtroom.Four years ago, he jailed all nine members of the Cambria County School Board for several hours after they defied his order to extend the school year by several weeks to make up for time lost during a teachers' strike. Visitors in his chambers say he could cite precisely the years, months, weeks and days remaining until mandatory retirement would force aside the presiding president judge, giving Judge O'Kicki the seniority required to take over as the county's top court administrator.The judge, they say, was fiercely proud of his abilities and accomplishments. "My name is judge," Judge O'Kicki told a car salesman in Ebensburg when he bought a new red Pontiac Sunbird in October 1984, according to the grand-jury report.The dealership dutifully recorded the sale under the name "Judge O'Kicki." Yet, despite the judge's imperial bearing, no one ever had reason to suspect possible wrongdoing, says John Bognato, president of Cambria County's 150-member bar association. "The arrogance of a judge, his demeanor, the way he handles people are not a basis for filing a complaint," says Mr. Bognato. "Until this came up and hit the press, there was never any indication that he was doing anything wrong." State investigators dispute that view now, particularly in light of the judge's various business dealings in Cambria County.The judge came under scrutiny in late 1987, after the state attorney general's office launched an unrelated investigation into corruption in Cambria County. The inquiry soon focused on the judge.Even his routine business transactions caused trouble, according to the grand jury report.When the judge bought his new Sunbird from James E. Black Pontiac-Cadillac in Ebensburg five years ago, the dealership had "certain apprehensions" about the judge's reputation, according to the grand-jury report.The dealership took the extra step of having all the paper work for the transaction pre-approved by Ebensburg's local lender, Laurel Bank. Then, as an additional precaution, the car dealership took the judge's photograph as he stood next to his new car with sales papers in hand -- proof that he had received the loan documents. But when the judge received his payment book, he disavowed the deal. "There was no loan, there is no loan, there never shall be a loan," the judge wrote the bank on his judicial stationery, according to the report. Later, the judge went a step farther.After Laurel Bank tried to repossess the car, a vice president asked him to intervene in an unrelated legal dispute involving a trust account.The judge wrote again. "I find myself in an adversary relationship with Laurel Bank, and I am not inclined to extend myself as far as any favors are concerned," the judge wrote back in a letter attached to the grand jury's report. "Perhaps if my personal matters can be resolved with Laurel bank in the near future, I may be inclined to reconsider your request. . . ." The judge now says it was "unfortunate" that he chose to write the letter but says "there was certainly no intent to extort there." The bank acquiesced.It refinanced the judge's loan, lowered its interest rate and accepted a trade-in that hadn't originally been part of the deal -- a beat up 1981 Chevy Citation the dealer had to repair before it could be resold. The incident wasn't the only time the judge got special treatment from his local bank.Two years later, he wrote to complain that the interest he was paying on an unsecured $10,000 loan was "absolutely onerous." Paul L. Kane, Laurel's president at the time, quickly responded.The bank, he wrote back, was "immediately" lowering the rate by 3.5%, "as a concession to you." The judge says he can't discuss in detail how he will defend himself at his trial, although he contends that if he were as corrupt as state prosecutors believe, he would be far wealthier than he is.His seven-bedroom cedar and brick house outside of Johnstown is up for sale to pay for his lawyers. The judge says he is confident he will return to his old bench.Already, he notes, the 76 charges originally filed against him have been trimmed to 27.Most of the allegations no longer pending were ethics charges withdrawn by state prosecutors as part of a pre-trial agreement.The heart of the case -- "official oppression" -- remains intact. "If I lose, I lose my position, my career, my pension, my home and my investments," says the judge. "My God and I know I am correct and innocent."
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Continental Cablevision Inc. -- $350 million of senior subordinated debentures, due Nov. 1, 2004, was priced at par to yield 12 7/8%.Rated single-B-1 by Moody's Investors Service Inc. and single-B by Standard & Poor's Corp., the issue, which is non-callable for five years, will be sold through underwriters led by Morgan Stanley & Co. Beatrice Co. -- $251 million of notes, due Nov. 1, 1997, was priced in a two-part offering through underwriters at Salomon Brothers Inc.The size of the issue was scaled back from an originally planned $350 million.The first part, consisting of $151 million of 13 3/4% senior subordinated reset notes, was priced at 99.75.The rate on the notes will be reset annually to give the issue a market value of 101.However, the maximum coupon at which the notes can be reset is 16 1/4%.The minimum coupon is 13 3/4%.The second part, consisting of $100 million of senior subordinated floating-rate notes, was priced at 99 3/4 to float 4.25% above the three-month London interbank offered rate.The initial coupon on the floating-rate notes will be 12.9375%.The issue is rated single-B-3 by Moody's and single-B-plus by S&P. New Jersey Wastewater Treatment Trust -- $75.1 million, two-part offering of bonds apparently was won by a Merrill Lynch Capital Markets group.The group's bid for $40.9 million of wastewater treatment insured bonds, Series 1989 A, produced a 7.0826% true interest cost.The Series 1989 A bonds are insured and rated triple-A by Moody's and S&P.The group's bid for $34.2 million of wastewater treatment bonds, Series 1989 B, produced a 7.0808% true interest cost.The Series 1989 B bonds are uninsured and rated double-A by Moody's and S&P.Both the Series 1989 A and Series 1989 B bonds were priced to yield from 6% in 1991 to 7.15% in 2008-2009, according to a Merrill Lynch official. Matagorda County Navigation District No. 1, Texas -- $70.3 million of pollution control revenue bonds (Houston Lighting & Power Co. Project), due Oct. 1, 2019, were tentatively priced by a Goldman, Sachs & Co. group at 98 1/4 to yield 7.649% with a coupon of 7 1/2%.Interest on the bonds will be treated as a preference item in calculating the federal alternative minimum tax that may be imposed on certain investors.The bonds are insured and rated triple-A by Moody's and S&P. Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities is being offered in 11 classes by a Morgan Stanley group.The offering, Series 109, is backed by Freddie Mac 10% securities.Complete details weren't immediately available. Lomas Mortgage Funding Corp. II -- $100 million issue of collateralized mortgage obligations is being offered in four classes by a Morgan Stanley group.The securities yield from 9.35% to 10.48% for a 30-year issue with an average life of 21.18 years.The 10.48% yield represents a spread to the 20-year Treasury of 2.45 percentage points.The collateral consists of collateralized whole loans with a weighted average coupon rate of 11.08% and weighted average remaining term to maturity of 28 years.The issue is rated triple-A by S&P, Moody's and Fitch Investors Service Inc.The issue is 6% to 7% overcollateralized, and 75% of the loans are covered by a General Electric pool policy covering losses of as much as 10% of the original principal balance of the loans. J.C. Penney Co. -- $350 million of JCP Master Credit Card Trust asset-backed certificates, Series B, with a final stated maturity of Oct. 15, 2001, was priced at 99.1875 to yield 9.192% with a coupon of 8.95%.The certificates, which have an average life of 10.05 years, were priced at 1.31 percentage points over the benchmark Treasury 10-year note.Rated triple-A by Moody's and S&P, the issue will be sold through First Boston Corp.The issue is backed by a 12% letter of credit from Credit Suisse. Keio Teito Electric Railway Co. (Japan) -- $300 million of bonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 3/4% coupon at par via Nomura International Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 30 through Nov. 2, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Tuesday. Diesel Kiki Co. (Japan) -- $200 million of bonds due Nov. 16, 1994, with equity-purchase warrants, indicating a 4 1/2% coupon at par via Yamaichi International Europe Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 30 through Nov. 2, 1994, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Monday. Chugoku Electric Power Co. (Japan) -- $150 million of 8 7/8% bonds due Nov. 29, 1996, priced at 101 7/8 to yield 8 7/8% less full fees via Nikko Securities Ltd. Fees 1 7/8. Monte dei Paschi di Siena, Singapore branch (Italian parent), via the Law Debenture Trust Corp. -- 10 billion yen ($70 million) of 6% bonds due Feb. 24, 1993, priced at 101 1/4, via Daiwa Europe Ltd. Okobank (Finland) -- 10 billion yen of 6% bonds due Nov. 30, 1992, priced at 101.225 to yield 6.056% via IBJ International.
Japan has found another safe outlet for its money: U.S. home mortgages. An increasing number of big Japanese investors are buying up U.S. home mortgages that have been pooled and packaged for sale as interest-bearing instruments known as mortgage-backed securities.As much as 10% of new U.S. mortgage securities issued by the Federal National Mortgage Association, or Fannie Mae, and Federal Home Loan Mortgage Corp., or Freddie Mac, now flow into Japanese hands. That may not come as a surprise to Americans who have watched the Japanese snap up properties in the U.S. from golf courses to a stake in Rockefeller Center.But it marks a big change for the Japanese, who shunned mortgage securities after getting burned by a big downturn in interest rates a few years back. "You can't say it's a "tsunami" (tidal wave), but we're making some headway," says Fannie Mae's chairman, David O. Maxwell, who visits Tokyo at least once a year to explain and drum up investor interest in mortgage securities. "Interest is a great deal higher than it was a year ago." The steady growth of the mortgage securities market in the U.S. has even triggered talk of building up a similar market here. Evidence of the growing Japanese demand for mortgage securities abounds.Earlier this year, Blackstone Group, a New York investment bank, had no trouble selling out a special $570 million mortgage-securities trust it created for Japanese investors.Industrial Bank of Japan, which claims to be the biggest Japanese buyer of U.S. mortgage securities, says it will more than double its purchases this year, to an amount one official puts at several billion dollars.And a Fannie Mae seminar this week promises to draw hundreds of prospective investors, who can be expected to channel tens of billions of dollars into the market in the next few years. "Last year, there were only several big investors who were interested," says Kinji Kato, a vice president at the international arm of Nomura Securities Co. "This year, some investors are changing their policies and investing a lot." Ultimately, he says, strong demand could help to drive down interest rates on mortgage securities. At the moment, Nomura is the only Japanese institution authorized to act as a primary seller of Fannie Mae instruments.But other Japanese institutions say privately that they are considering asking to join the 59-dealer selling group. These securities are attractive to Japanese investors for three reasons.First, they are safe.While they aren't backed by the full faith and credit of the U.S. government, as Treasury bonds are, it is widely assumed that the government would support them if necessary. (U.S.Treasury bonds are still the dollar-denominated investment of choice for long-term Japanese investors).Second, they are liquid.The secondary market in federally backed mortgage securities now exceeds $900 billion, or nearly half of the $2.2 trillion in U.S. residential mortgages issued.Third, they offer high yields.At the moment, some offer as much as 1.6 to 1.8 percentage points over Treasury securities of similar maturities. But there is a risk, which the Japanese discovered when they first dipped their toes into the market nearly five years ago.Since most mortgages can be prepaid or refinanced at any time, issuers of mortgage securities retain the right to buy back their bonds before maturity.That's a headache for long-term investors, since it forces them to reinvest their money -- usually at lower rates than the original mortgage securities carried. "Two or three years ago, the problem was that people didn't understand the prepayment risk," says Nomura's Mr. Kato. "So they were surprised and very disappointed by prepayment." Compounding the trouble to Japanese investors, mortgage securities pay interest monthly, since most mortgages require homeowners to make monthly payments.But Japanese institutional investors are used to quarterly or semiannual payments on their investments, so the monthly cash flow posed administrative problems.As a result, Japanese investors steered clear of the mortgage securities. But they didn't lose touch with the U.S. issuers.Since 1985, Japanese investors have bought nearly 80% of $10 billion in Fannie Mae corporate debt issued to foreigners, money that Fannie Mae uses to buy mortgages from U.S. banks.And Japanese investors took up nearly all of two $200 million Real Estate Mortgage Investment Conduits, a kind of collateralized mortgage obligation, that were offered to foreigners this year. In addition, further packaging of mortgage-backed securities, such as Blackstone's fund, have reduced the effects of prepayment risk and automatically reinvest monthly payments so institutions don't have to.Freddie Mac for years has offered a so-called participation certificate that guarantees it won't be prepaid for a set number of years and offers semiannual payments.
As Georgia-Pacific's bid for Great Northern Nekoosa has shown, uninvited takeovers are still alive despite premature reports of their demise.Therefore, the debate about poison pills will continue to rage in the boardrooms of corporations and the halls of academia. Although poison pills come in different colors and shapes, they usually give current shareholders the right to buy more stock of their corporation at a large discount if certain events occur -- typically, if a hostile bidder acquires more than a specified percentage of the corporation's stock.However, these discount purchase rights may generally be redeemed at a nominal cost by the corporation's directors if they approve of a bidder. Supporters of poison pills argue that their adoption forces bidders to negotiate with a corporation's directors, who are thereby put in a better position to pursue the long-term interests of the corporation.Recent studies by Georgeson & Co. conclude that corporations with poison pills have experienced greater stock-price appreciation than corporations without poison pills during the past few years. Critics of poison pills argue that they harm shareholders by letting corporate management defeat takeover bids at premium prices and by deterring premium bids from ever being made to shareholders.These critics are backed by several academic studies showing that the adoption of poison pills reduces shareholder values not merely in the short run, but also over longer periods. Institutional investors that must evaluate poison pills on a regular basis are interested less in this general debate than in the answers to specific questions about the corporation issuing the pill.Does this corporation have a high-quality management team with a good track record?Does this team have a viable strategy for improving shareholder values, and does this strategy require implementation over an extended period?Will the adoption of this particular form of a poison pill significantly improve the chances for management to carry out this strategy? If the answers to these questions are affirmative, then institutional investors are likely to be favorably disposed toward a specific poison pill.However, the problem is that once most poison pills are adopted, they survive forever.Although the current management team may be outstanding, who will be the CEO in 10 years?Although the five-year strategy may be excellent, what will be the strategy in 25 years? The solution to this problem is a time-limited poison pill.The limit could range from three years to seven years, depending on the composition of the management team and the nature of its strategic plan.At the end of this period, the poison pill would be eliminated automatically, unless a new poison pill were approved by the then-current shareholders, who would have an opportunity to evaluate the corporation's strategy and management team at that time. One rare example of a time-limited poison pill is the shareholder rights plan adopted by Pennzoil last year after it received a huge litigation settlement from Texaco.Pennzoil's poison pill covers five years in order to give current management enough time to put these proceeds to work in a prudent manner. Another interesting example is the poison pill adopted recently by Pittsburgh-based National Intergroup Inc., a diversified holding company.The State of Wisconsin Investment Board, which owned about 7% of the company's voting stock, worked with management to devise a time-limited poison pill.This pill automatically expires after three years unless continued by a vote of the shareholders. The attitude of the Wisconsin Investment Board reflects a growing receptivity to time-limited poison pills on the part of institutional investors, as shown by the discussions at recent meetings of the Council of Institutional Investors and my informal survey of several retirement plans with large stock positions. More widespread time limits on poison pills would allow shareholders to evaluate a specific poison pill within the context of a specific management team's strategy.Such concrete analysis is likely to lead to more fruitful dialogue between management and shareholders than the abstract debate about poison pills. Mr. Pozen is the general counsel and a managing director of Fidelity Investments in Boston.
The Internal Revenue Service said it is willing to let the U.S. Tax Court decide how much oil man William Herbert Hunt will owe the government after his assets are liquidated. The surprise announcement came after the IRS broke off negotiations with Mr. Hunt on a settlement of the one-time tycoon's personal bankruptcy case.Although the action removes one obstacle in the way of an overall settlement to the case, it also means that Mr. Hunt could be stripped of virtually all of his assets if the Tax Court rules against him in a 1982 case heard earlier this year in Washington, D.C.The IRS has been seeking more than $300 million in back taxes from Mr. Hunt. Separately, a federal judge hearing Mr. Hunt's bankruptcy case yesterday turned down a proposed $65.7 million settlement between Mr. Hunt and Minpeco S.A., another major creditor in the case.The Peruvian minerals concern had been seeking a claim of $251 million against Mr. Hunt.In addition to turning down the compromise, Judge Harold C. Abramson said he would allow a claim of only $19.7 million.Minpeco attorneys said they would appeal the decision to a federal district court. Regarding Mr. Hunt's taxes, he and the IRS have apparently agreed on a basic formula for liquidating his estate in which the IRS would get 70% of the proceeds from a liquidating trust and 30% would go to other creditors.But they have been at odds over how much Mr. Hunt would owe the government after his assets are sold.The IRS had demanded $90 million but Mr. Hunt would agree to no more than $60 million. Grover Hartt III, a government lawyer, warned that Mr. Hunt stood to lose certain oil and gas properties, $200,000 in English pottery, a Colorado condominium and other assets he might have kept if he had settled with the IRS. "But they wanted to roll the dice and we're going to let them," Mr. Hartt said. Stephen McCartin, Mr. Hunt's attorney, said his client welcomed the gamble. The Tax Court isn't expected to rule before early next year.
Michael Blair, former president and chief executive officer of Enfield Corp., failed to win election to the company's board at a special shareholder meeting. Mr. Blair said after the meeting that he had filed separate lawsuits in the Ontario Supreme Court for unjust dismissal against Enfield and for libel against its largest shareholder, Canadian Express Ltd., and two executives of Hees International Bancorp Inc., which controls Canadian Express. Holders at the meeting elected a full slate of Canadian Express nominees to Enfield's 11-member board. Mr. Blair and Hees have been feuding for months.Yesterday's election was a sequel to Enfield's annual meeting in June when Mr. Blair disallowed proxies in favor of two Hees nominees.The Ontario Supreme Court overturned Mr. Blair's decision.He later resigned from his executive positions with Enfield, saying that actions by its board "amounted to {my} dismissal." Mr. Blair said his libel suit seeks 10 million Canadian dollars (US$8.5 million) from Canadian Express and Hees executives Manfred Walt and Willard L'Heureux.He said his suit against Enfield seeks two years severance pay, equivalent to C$720,000.Hees and Canadian Express executives couldn't be reached for comment. Enfield is a holding company with interests in manufacturing concerns.It is 38.5% owned by Canadian Express, another holding company.Hees is a merchant bank controlled by Toronto financiers Peter and Edward Bronfman.All the concerns are based in Toronto.
Buying 51% of Rockefeller Group Inc. is right up Mitsubishi Estate Co. 's alley in one sense: The huge Japanese real estate company is entering a long-term relationship with a similarly conservative U.S. owner of tony urban property. But in another sense, the $846 million purchase is uncharacteristically nervy, industry analysts say.The usually cautious giant will become the majority owner of the company that owns New York's beloved Rockefeller Center at a time when tensions over Japanese purchases of U.S. property are at an all-time high. Officials of Rockefeller Group and Mitsubishi Estate prefer to focus on the affinities, nearly dismissing the threat of a backlash from the U.S. public. "We think there will be positive as well as negative reactions," says Raymond Pettit, senior vice president and chief financial officer of Rockefeller Group. "On balance, we think it will be positive." But some Japanese government officials and businessmen worry that the prominent purchase is just the sort of deal that should be avoided for the time being.In particular, they criticize the timing, coming as it does on the heels of Sony Corp. 's controversial purchase of Columbia Pictures Entertainment Inc. "Officially, yes, we encourage the free flow of direct investment," says a Foreign Ministry official. "But they didn't have to choose this particular moment." During the past year, government officials and leading business organizations have repeatedly urged Japanese companies to refrain from flashy real estate purchases in the Since the mid-1980s, Japan's other major real estate purchases in the U.S. include Dai-Ichi Seimei America Corp. 's $670 million purchase of an office building at 153 East 53rd St. in Manhattan in 1987 and Mitsui Fudosan Inc. 's $610 million purchase of the Exxon Building, part of Rockefeller Center, in 1986.In Los Angeles, Arco Plaza was sold to Shuwa Corp. for $620 million in 1986, and Sumitomo Life Insurance Co. paid $300 million for Atlanta's IBM Tower last year. Altogether, annual Japanese investment in U.S. commercial real estate grew from about $1.3 billion in 1985 to about $7.1 billion in 1988. Many Japanese companies have taken the warnings by the country's leaders to heart and sought development partnerships rather than landmark properties.Critics say Mitsubishi Estate's decision to buy into Rockefeller reflects the degree to which companies are irritated by the pressure to act for the good of Japan. "Those who have no money and aren't buying think it's right to refrain, but those with money who want to buy for themselves pay no attention," says an official of the Japan-U.S.Business Council. But to Mitsubishi Estate, the acquisition has just the elements that should win support from both sides.First of all, it is a friendly acquisition in which Rockefeller sought out Mitsubishi Estate and asked it to buy a majority share.Secondly, the two companies found a similarity in their business and development philosophies and intend to cooperate in a range of activities from real estate to telecommunications.Finally, Mitsubishi Estate has no plans to interfere with Rockefeller's management beyond taking a place on the board. "We'll continue to work with them, in keeping with the reputation of the company, and we'll rely very much on their leadership," says Mitsubishi Estate President Jotaro Takagi. Rockefeller may well have found its match in Mitsubishi Estate, a company of long history, strong government ties and sound resources.In asset terms, Mitsubishi Estate is the largest real estate firm in Japan.The core of its holdings is 190,000 square meters of incredibly expensive property in the Marunouchi district, the business and financial center of Tokyo, often jokingly called "Mitsubishi Village." The Mitsubishi family company acquired that property from the government some 100 years ago when it was a portion of samurai residential land running from the moat of the Imperial Palace east toward the hodgepodge of tiny shops and twisted alleys that made up the merchants' district.At the time, Japan had just opened its doors to the world after about 250 years of isolation and needed a Western-style business center.Mitsubishi built the government's dream development, the story goes, in exchange for the official decision to locate Tokyo's central railway station there. That was just an early step in a relationship with government that has earned the Mitsubishi group the dubious moniker of "seisho," literally government-business, a title that has the pejorative connotation of doing the government's bidding, but also suggests the clout inherent in maintaining such close ties. Mitsubishi Estate is one of the dozens of companies in today's Mitsubishi group.It's known for its cautiousness in part because it has had little need for bold overseas ventures: In the year ended March 31, 57.4% of its total revenue came from office building management.Its earnings can rise 10% to 12% annually simply from the natural turnover of tenants and automatic rent increases, says Graeme McDonald, an industry analyst at James Capel Pacific Ltd.For the latest fiscal year, the company's net income jumped a robust 19% to 35.5 billion yen ($250.2 million). For Mitsubishi Estate, the Rockefeller purchase will catapult it firmly into the overseas real estate business, the one area where it has lagged notably behind Japanese competitors such as Mitsui, which had purchased the Exxon Building. "Japanese companies need to invest in overseas real estate for diversification," says Yoshio Shima, an industry analyst at Goldman Sachs (Japan) Corp. Rockefeller isn't the first overseas purchase for Mitsubishi Estate -- it has already played a leading role in designing Los Angeles's Citicorp Plaza.But the Rockefeller investment is its largest.Nonetheless, it will barely make a dent in Mitsubishi Estate's finances, analysts say. Mitsubishi Estate hasn't decided how it will raise the funds for the purchase, which are due in cash next April, but the Marunouchi holdings alone are estimated to have a market value of as much as 10 trillion yen to 11 trillion yen.Moreover, as a member of the Mitsubishi group, which is headed by one of Japan's largest banks, it is sure to win a favorable loan.Analysts say the company also could easily issue new convertible bonds or warrants. Meanwhile, at home, Mitsubishi has control of some major projects.It is the largest private-sector landowner of the Minato-Mirai 21 project, a multibillion-yen development in the port city of Yokohama, about an hour outside Tokyo.The project is one of a select group of public projects opened to U.S. firms under a U.S.-Japan construction trade agreement reached last year.The centerpiece of that complex, the Landmark Tower, will be Japan's tallest building when it is completed in 1993. Mitsubishi is also pushing ahead with a controversial plan to redevelop Marunouchi into a business center of high-tech buildings, a project budgeted for 30 years and six trillion yen.
Time Warner Inc. and Sony Corp. may be today's public enemies, but the two entertainment giants could end up becoming partners in a number of ventures as part of a settlement of their acrimonious legal dispute over Hollywood producers Peter Guber and Jon Peters. The Warner Bros. studio and Sony signaled they are close to a settlement yesterday, asking a Los Angeles Superior Court to postpone a hearing scheduled for tomorrow on Warner's request for a preliminary injunction blocking Mr. Guber and Mr. Peters from taking the top posts at Columbia Pictures Entertainment Inc. In separate statements, the two sides said they want to have "further discussions." Sony is acquiring Columbia and Guber-Peters Entertainment Co. in two separate transactions valued at more than $5 billion.Warner Communications Inc., which is being acquired by Time Warner, has filed a $1 billion breach-of-contract suit against Sony and the two producers.Warner has a five-year exclusive contract with Mr. Guber and Mr. Peters that requires them to make movies exclusively at the Warner Bros. studio. The two sides in the legal battle have hurled accusations of duplicity at each other for weeks, and both Warner and Sony have accused each other of trying to sabotage each other's prospects for success in the entertainment business.But it may amount to little more than posturing; the two have continued on-again, off-again settlement talks over the last few weeks, and people familiar with the talks say the matter could be resolved within a week. Both Warner and Sony declined to comment on the terms of the settlement discussions.But the people familiar with the talks said that Warner isn't expected to get any cash in the settlement.Instead, Sony is likely to agree to let Warner participate in certain of its businesses, such as the record club of Sony's CBS Records unit.Warner has surpassed Sony as the largest record company, but it doesn't have a powerful world-wide record club like CBS. The two sides are also discussing certain business ventures involving cable rights to Columbia's movies.In addition, Sony is expected to agree to swap Columbia's 35% stake in the sprawling Burbank, Calif., studio that Warner and Columbia share, in exchange for the old MGM studio lot that Warner acquired with the purchase of Lorimar Telepictures Corp. Still, it may be tough for the two to have a smooth partnership in anything, in the wake of sworn affidavits filed over the last week.One, for example, came from CBS Records Chairman Walter Yetnikoff, who will head a committee that will oversee Sony's entertainment division, including both records and movies.In his affidavit, Mr. Yetnikoff accused Warner Chairman Steven J. Ross of having an "antiSony, anti-Japanese bias" and said that Mr. Ross had tried to talk him out of letting Sony buy CBS Records two years ago for that reason. Mr. Ross, who will be chairman and co-chief executive officer of Time Warner after the merger is complete, denied that in his own affidavit, and called Mr. Yetnikoff's remarks "vicious" and his claims "reckless, irresponsible and baseless," saying Warner under his leadership has started a number of businesses in Japan. Mr. Ross also said he enjoys "warm professional and personal relationships" with Japanese executives including Sony Chairman Akio Morita, "who has visited my home here." But despite the acrimony between Mr. Ross and Mr. Yetnikoff, officials of the Time side of Time Warner have reportedly been increasingly interested in a settlement that might yield attractive business opportunities.Time executives such as the company's president, N.J. Nicholas, who will eventually be co-chief executive of Time Warner alongside Mr. Ross, have no personal relationships or ego at stake in the fight over the Guber-Peters duo, and were never directly drawn into the fray. Talks between the two sides could unravel, of course, as they have more than once since Sony announced its plans to hire Mr. Guber and Mr. Peters.But both sides appear to be more willing now to meet each other's terms to resolve the issue.And although Warner has said it wanted the producers to fulfill the terms of their contract, the producers said in sworn court declarations that they didn't believe the relationship could be repaired after the acrimony of the legal battle. Any settlement is also expected to exclude Mr. Guber and Mr. Peters from any of the projects they were working on at Warner.The Guber-Peters duo have 50 projects in various stages of development and production at Warner, including "Bonfire of the Vanities" and "A Bright Shining Lie." But that doesn't mean Mr. Guber and Mr. Peters might not eventually get their hands on some of their projects; studios develop hundreds of movies but produce only 10 to 20 each year.Once a studio chooses not to actually make a movie that is in development, producers are typically free to take it elsewhere. Mr. Guber and Mr. Peters also almost certainly wouldn't be able to participate in future sequels to "Batman," the blockbuster hit they produced for Warner.But in acquiring Guber-Peters Entertainment, Sony will actually get a piece of the profits from "Batman," since the publicly held concern gets certain revenue from the movies Mr. Guber and Mr. Peters produce.The two producers own a combined 28% stake in Guber-Peters.
Southern Co. 's Gulf Power Co. subsidiary pleaded guilty to two felony charges of conspiracy to make illegal political contributions and tax evasion, and paid $500,000 in fines. Gulf Power's guilty plea before U.S. District Judge Robert L. Vining yesterday marks the end of only one part of a wide-ranging inquiry of Southern Co.The company is the subject of a federal grand jury investigation into whether its officials and its utility subsidiaries conspired to cover up their accounting for spare parts to evade federal income taxes. "The terms announced today are strictly between the United States and Gulf Power," said U.S. Attorney Robert L. Barr. "This is only a further step in a lengthy investigation." The plea settlement does not allow Southern Co. to charge any of the $500,000 to its customers, or take action against employees who provided information during the federal inquiry.Gulf Power had been under investigation for violating the Utility Holding Company Act, which prohibits public utilities from making political contributions. In a statement, Southern Co. President Edward L. Addison said, "We believe our decision to plead (guilty) to these charges is responsible and proper.And our action today will allow Gulf Power to avoid prolonged, distracting legal proceedings." He did not say what effect, if any, the $500,000 fine would have on the company's earnings. Mr. Barr said yesterday's plea by Gulf Power, which came after months of negotiations, was based on evidence that Gulf Power had set up an elaborate payment system through which it reimbursed outside vendors -- primarily three Florida advertising agencies -- for making illegal political contributions on its behalf. The Appleyard Agency, for example, allegedly made contributions from 1982 to 1984 to various funds for political candidates, then submitted bills to Gulf Power.The contributions were funded by monthly payments of $1,000 to $2,000 to Appleyard in the guise of a "special production fee" -- in effect, hiding the nature of the payments from the Internal Revenue Service, federal prosecutors said. The government also indicated that former Gulf Power senior vice president Jacob F. "Jake" Horton was the mastermind behind the use of the ad agencies -- Appleyard, Dick Leonard Group II Inc. and Hemmer & Yates Corp. -- to make payments to various political candidates from 1981 to 1988.Mr. Horton, who oversaw Gulf Power's governmental-affairs efforts, died mysteriously in a plane crash in April after learning he might be fired following the uncovering of irregularities in a company audit. Government officials declined to say whether the investigation includes the ad agencies or the politicians involved. In New York Stock Exchange trading, Southern Co. rose 50 cents a share to $27.125.
`Frequent Drinker' Offer Stirs Up Spirited Debate TO GRAB a bigger piece of the declining scotch market, Seagram Co. has launched a controversial "frequent drinker" promotion for its Chivas Regal brand. Under the program, dubbed Chivas Class, customers who send in two labels from Chivas bottles will receive an upgrade in seating class on some Trans World Airlines flights.Repeat customers also can purchase luxury items at reduced prices. But at a time of mounting concern over alcohol abuse, some liquor marketers consider Seagram's frequent buyer promotion risky. "I'm surprised they're doing this," says Penn Kavanagh, president of Schieffelin & Somerset Co., which markets Johnnie Walker scotches. "I would be very leery of anything that says if you drink more, you get more." Others question the impact on Chivas's upscale image of a promotion that has customers soaking off labels. "It's really bizarre," says Albert Lerman, creative director at the Wells Rich Greene ad agency. "Chivas has an image of something you would savor, rather than guzzle." Chivas Class isn't the first such promotion.Last year, J&B Scotch offered 500 TWA frequent flier miles in exchange for a label.And Dewar's gave discounts on Scottish merchandise to people who sent in bottle labels. But the scope of Seagram's Chivas promotion sets it apart.The current campaign is just the first leg of an aggressive three-to-five-year direct marketing plan. Seagram says the promotion is designed to build brand loyalty rather than promote heavy drinking.Seagram asks customers to buy only two or three bottles over a 12-month period, says Richard Shaw, vice president of U.S. direct marketing. "We're not asking them to save up 50 proof-of-purchases.We're not saying drink more, we're saying trade up." Goya Concocts a Milk For Hispanic Tastes MOST FOOD companies these days are trimming the fat and cholesterol content of their products to appeal to health-conscious consumers.But Goya Foods Inc. believes it can milk some sales by bucking the trend. The Secaucus, N.J., company has formed a joint venture with a distributor called La Lecheria to market a higher-fat milk targeted at Hispanic consumers.To give Leche Fresca the creamier taste Goya says Hispanics prefer, the new brand has a butterfat content of 3.8%.That compares with 3.5% butterfat for whole milk. A spokesman for Borden Inc., the nation's largest milk producer, concedes Goya may be on to something.Borden sells considerably more whole milk than reduced-fat milks in southern and Hispanic markets, he says.Borden even tested a milk with 4% butterfat in the South, but decided the market was too small. Goya is selling Leche Fresca in nearly 500 grocery stores and bodegas in New York and parts of New Jersey.And it's adding 15 to 20 new outlets a day, says Greg Ricca, sales director at La Lecheria.Because of Leche Fresca's success, he says, the joint venture is developing other dairy products tailored to Hispanic tastes. Jewelry Makers Copy Cosmetics Sales Ploys FOR YEARS, costume jewelry makers fought a losing battle.Jewelry displays in department stores were often cluttered and uninspired.And the merchandise was, well, fake. As a result, marketers of faux gems steadily lost space in department stores to more fashionable rivals -- cosmetics makers. But lately, retailers say, fake has become more fashionable.And jewelry makers are beginning to use many of the same marketing tricks honed in the aggressive world of cosmetics. Last year, the total women's fashion jewelry business topped $4.9 billion, says Karen Alberg, editor of Accessories magazine.And it's growing fast, with annual sales gains of more than 10%. To increase their share of that business, jewelry makers such as Crystal Brands Inc. 's Trifari and Monet units and Swank Inc., maker of Anne Klein jewelry, are launching new lines with as much fanfare as the fragrance companies.They're hiring models to stroll the aisles sporting their jewels, and they're even beginning to borrow a perennial favorite of the beauty business -- offering a gift when consumers make a purchase. "We've started trying just about anything to keep sales moving in the stores," says Kim Renk, a Swank vice president.But there are limits.Ms. Renk says retailers nixed a promotion for pins with animal motifs.Her idea: bring in live zoo animals. Trifari, whose national ads earlier this year included paper cutouts of its costume finery, takes a tamer approach.The company focuses on the how-to aspects, says Andrew E. Philip, president.Trifari now trains sales help to advise customers on the best earring styles. But cosmetics firms still have one big marketing edge: They motivate sales people with commissions.Jewelry makers rarely pay commissions and aren't expected to anytime soon. Odds and Ends DESPITE GROWING interest in the environment, U.S. consumers haven't shown much interest in refillable packages for household products.Procter & Gamble Co. recently introduced refillable versions of four products, including Tide and Mr. Clean, in Canada, but doesn't plan to bring them to the U.S. Marketers believe most Americans won't make the convenience trade-off. . . . Braumeisters Ltd. tests a beer brewed with oat bran, rather than rice or corn.Called Otto's Original Oat Bran Beer, the brew costs about $12.75 a case.No cholesterol, of course.
Northwest Airlines settled the remaining lawsuits filed on behalf of 156 people killed in a 1987 crash, but claims against the jetliner's maker are being pursued, a federal judge said. Northwest, a unit of NWA Inc., and McDonnell Douglas Corp., which made the MD-80 aircraft, also are pursuing counterclaims against each other in the crash near Detroit Metropolitan Airport. Terms of the settlements for the remaining 145 lawsuits against Northwest weren't disclosed.A total of 157 lawsuits were filed on behalf of crash victims. U.S. District Judge Julian A. Cook Jr. announced the settlements as the jury trial was to begin yesterday.He reset opening arguments for today. The jury will resolve the claims against McDonnell Douglas, Northwest's claim that a defect in the aircraft caused the crash, and McDonnell Douglas' claim that the plane was improperly flown. The National Transportation Safety Board ruled that pilots failed to set the plane's wing flaps and slats properly for takeoff and failed to make mandatory preflight checks that would have detected the error.Also, a cockpit warning system failed to alert the pilots the flaps and slats were not set for takeoff, the NTSB said. The only passenger who survived the crash was Cecelia Cichan, then 4, of Tempe, Ariz., whose parents and brother died in the crash.She now lives with relatives in Alabama.
Sun Myung Moon, the Korean evangelist-industrialist who in 1954 founded the Unification Church, remains the mystery man behind a multimillion-dollar political and publishing operation based in this country and catering to the American right.But there may be less there than meets the eye. Mr. Moon planned to convert millions of Americans to his unique brand of Christianity -- in which he plays the role of Old Testament-style temporal, political messiah -- and then to make the U.S. part of a unified international theocracy.His original strategy (in itself a brilliant innovation for spreading a religion) was to create new economic enterprises each time he wanted to extend and fund his various religious missions.Tax-exempt airport and street-corner solicitations were intended only to provide start-up funds.More stable industries were to build an economically viable infrastructure for the Moon movement in North America, as they had in Japan and South Korea.Then he would move his movement to Europe. But that was not to be. Throughout the 1970s and early 1980s spokesmen for both the Unification Church and its opponents in the anticult movement gave wildly exaggerated membership figures.Their legacy lives on.It is still common to read in the press that the church has 10,000 or more full-time American members and 25,000 "associates." Some estimates have gone as high as 80,000 members. But internal church documents clearly show that at its publicity-seeking heights, as when it organized a spectacular Yankee Stadium bicentennial rally in 1976, there actually were only about 2,000 full-time Unification Church members in the U.S. Mr. Moon's support for a Watergate-beleaguered Richard Nixon, the Koreagate scandal, and his prison sentence for income-tax evasion did not help the church's recruitment efforts.Defections, burnouts, and abduction "deprogrammings" kept member turnover high.That the membership number has even kept close to its 1976 size is the result of the "graying" of the church.Many of the enthusiastic young "Moonies" of the Nixon era who remained faithful to Father Moon are now parents, producing new members by procreation rather than conversion. The reputed wealth of the Unification Church is another matter of contention.For a while in the 1970s it seemed Mr. Moon was on a spending spree, with such purchases as the former New Yorker Hotel and its adjacent Manhattan Center; a fishing/processing conglomerate with branches in Alaska, Massachusetts, Virginia and Louisiana; a former Christian Brothers monastery and the Seagram family mansion (both picturesquely situated on the Hudson River); shares in banks from Washington to Uruguay; a motion picture production company, and newspapers, such as the Washington Times, the New York City Tribune (originally the News World), and the successful Spanish-language Noticias del Mundo. Yet these purchases can be misleading.Most were obtained with huge inputs of church money from South Korea and Japan, minimum cash downpayments and sizable mortgages.Those teams of young fund-raisers selling flowers, peanuts or begging outright at traffic intersections brought in somewhere near $20 million a year during the mid-to-late 1970s, but those revenues were a pittance compared to the costs of Mr. Moon's lavish international conferences, speaking tours, and assorted land buys.Only his factories in Japan and Korea, employing his followers at subsistence wages and producing everything from rifles to ginseng to expensive marble vases, kept the money flowing westward. Virginia Commonwealth University sociologist David Bromley, who more than any other researcher has delved into the complex world of Unificationist finances, has concluded that profitable operations in the U.S. have been the exceptions rather than the rule.Likewise, journalists John Burgess and Michael Isikoff of the Washington Post have estimated that at least $800 million was transferred from Japan to the U.S. to deal with the church's annual operating losses in this country. Mr. Moon's two English-language U.S. newspapers illustrate the scope of this financial drain.Start-up costs for the Washington Times alone were close to $50 million, and the total amount lost in this journalistic black hole was estimated at $150 million by 1984.Since then, Moon's organization has inaugurated a pair of high-quality glossy opinion magazines, The World and I and Insight, which are a further drain.Insiders say that not even their editors know for sure how much these show-piece publications, along with the newspapers, have cost Mr. Moon. Many American church-owned businesses, such as a $30 million factory to build fishing vessels, are defunct.Some components of the American church had their budgets cut in half last year and again this year.The relatively small academic conferences that have attracted conservative guests -- and press scrutiny -- in recent years are much more narrowly targeted and austere than the thousand-person get-togethers in fancy digs and exotic locales of years past.I attended several of these in the dual role as a presenter of research findings as well as an investigator of my hosts. (Mr.Moon's Paragon House eventually even published three of my co-edited books on religion and politics.) According to veteran watchers of Unificationist affairs, such as Dr. J. Gordon Melton, director of the Institute for the Study of American Religion, almost all operations are being drastically reduced as Mr. Moon now concentrates more on developing his empire in the Far East. "Everything," one non-"Moonie" senior consultant to the Unification Church recently told me in an interview, "is going back to Korea and Japan." (Europe had proved even less hospitable than North America.European politicians were less reluctant to have their governments investigate and harass new religions.) So Mr. Moon is in retreat, refocusing on the Far East.South Korea and Japan continue to be profitable.Moon's Tong'Il industry conglomerate is now investing heavily in China, where church accountants have high hopes of expanding and attracting converts even in the wake of the bloody massacre in Tiananmen Square.Panda Motors is one such investment. According to senior consultants to the church, Mr. Moon has successfully negotiated a joint venture with the Chinese government to build an automobile-parts plant in Guangdong Province, an area of China with a substantial Korean minority.Mr. Moon has agreed to put up $10 million a year for 25 years and keep the profits in China.In return, he has the government's blessing to build churches and spread Unificationism in that country. Whatever respectability and ties to intellectuals and opinion-makers the publications and conferences bring really are salvage -- not the Rev. Moon's original final goals, but the ones for which he will have to settle. Mr. Shupe is co-author (with David G. Bromley) of "`Moonies' in America: Cult, Church, and Crusade" and "Strange Gods: The Great American Cult Scare."
The Manville Personal Injury Settlement Trust said it is considering several ways to ease a liquidity crunch that could include the sale of Manville Corp. to a third party. In a filing with the Securities and Exchange Commission, the majority holder of Manville acknowledged that the cash portion of its initial funding of $765 million will be depleted next year, and that alternative sources of funds will be necessary to meet its obligations.The trust, which was created as part of Manville's bankruptcy-law reorganization to compensate victims of asbestos-related diseases, ultimately expects to receive $2.5 billion from Manville, but its cash flow from investments has so far lagged behind its payments to victims. Spokespersons for both the trust and the company refused to comment on whether any talks with a possible acquirer of Manville had actually taken place.The trust is considering a sale of its Manville holdings, but Manville has the right of first refusal on any sales of its stock held by the trust. Manville, a forest and building products concern, has offered to pay the trust $500 million for a majority of Manville's convertible preferred stock.Manville and the trust are discussing the offer, but no decision has been made. The filing also said the trust is considering a sale of Manville securities in the open market; an extraordinary dividend on the common stock; or a recapitalization of Manville. The Soviet Union's jobless rate is soaring to 27% in some areas, Pravda said.It said the situation is caused by efforts to streamline bloated factory payrolls. Unemployment has reached 27.6% in Azerbaijan, 25.7% in Tadzhikistan, 22.8% in Uzbekistan, 18.8% in Turkmenia, 18% in Armenia and 16.3% in Kirgizia, the Communist Party newspaper said.All are non-Russian republics along the southern border of the Soviet Union, and all but Kirgizia have reported rioting in the past six months. The newspaper said it is past time for the Soviet Union to create unemployment insurance and retraining programs like those of the West. Pravda gave no estimate for overall unemployment but said an "Association of the Unemployed" has cropped up that says the number of jobless is 23 million Soviets, or 17% of the work force. An 11-week dispute involving Australia's 1,640 domestic pilots has slashed airline earnings and crippled much of the continent's tourist industry. "The only people who are flying are those who have to," said Frank Moore, chairman of the Australian Tourist Industry Association.He added: "How is a travel agent going to sell a holiday when he cannot guarantee a return flight?" Transport giant TNT, which owns half of one of the country's two major domestic carriers, said the cost of the dispute had been heavy, cutting TNT's profits 70% to $12 million in the three months to Sept. 30. Brazilian financier Naji Nahas, who was arrested on Monday after 102 days in hiding, is likely to be interrogated next week by the Brazilian judiciary.Mr. Nahas, who single-handedly provoked a one-day closure of Brazil's stock markets in June when he failed to honor a debt of $31.1 million owed to his brokers, yesterday blamed his predicament on the president of the Sao Paulo stock exchange; a few days before Mr. Nahas's failure, the exchange raised the required margin on stock-margin transactions. China's parliament ousted two Hong Kong residents from a panel drafting a new constitution for the colony.The two, Szeto Wah and Martin Lee, were deemed unfit because they had condemned China's crackdown on its pro-democracy movement.The committee is formulating Hong Kong's constitution for when it reverts to Chinese control in 1997, and Chinese lawmakers said the two can only return if they "abandon their antagonistic stand against the Chinese government and their attempt to nullify the Sino-British joint declaration on Hong Kong." NUCLEAR REACTOR FOR ISRAEL? Israeli officials confirmed that Energy Minister Moshe Shahal and his Canadian counterpart, Jake Epp, discussed a possible Israeli purchase of a $1.1 billion Canadian nuclear reactor for producing electricity.However, a Canadian Embassy official in Tel Aviv said that Canada was unlikely to sell the Candu heavy-water reactor to Israel since Israel hasn't signed the Nuclear Non-Proliferation Treaty.Israel has been accused in the past of using subterfuge to seek elements needed to develop nuclear weapons. The South Korean government is signing a protocol today establishing formal diplomatic relations with Poland.The two are also signing a trade agreement.South Korean government officials said they don't expect that Seoul can loan money to Warsaw, but it can "offer experience." Poland is the second Communist nation to recognize the Seoul government; South Korea established diplomatic relations with Hungary in February 1989. Venezuela will hold a debt-equity auction Friday, with 32 potential bidders participating. Earlier this year, Venezuela announced it was opening up debt-equity swaps to foreign investors but said the program would be limited to a net disbursement of $600 million a year.Friday's auction will be limited to $150 million disbursed by the Central Bank to potential investors. The office of foreign investment has authorized some $1.78 billion worth of investment proposals, said Edwin Perozo, superintendent of foreign investment.Most of the proposals are in tourism, basic industry and fishery and agro-industry projects, he said. Under the debt-equity program, potential investors will submit sealed bids on the percentage of discount they are willing to purchase the debt at, and the bids will be allocated based on these discount offers.The Venezuelan central bank set a 30% floor on the bidding. A song by American singer Tracy Chapman praising jailed black leader Nelson Mandela was banned from South African state radio and television.The South African Broadcasting Corp. said the song "Freedom Now" was "undesirable for broadcasting." . . . Britain's House of Commons passed a law that will force English soccer fans to carry identity cards to enter stadiums.The "anti-hooligan" law, which would deprive troublemakers of cards, must be ratified by the House of Lords and is expected to become effective early next year.
A federal judge ruled that Imelda Marcos wasn't brought to the U.S. against her will and that marital privileges, which protect spouses from incriminating each other, don't apply in her case. As a result, Judge John F. Keenan of New York ordered Mrs. Marcos to turn over to the court all pleadings and documents she may have filed in foreign countries in opposition to U.S. requests for evidence.Mrs. Marcos had claimed that she didn't have to turn over the documents because she was brought here involuntarily and because providing the materials would violate her marital privilege. In 1988, a year and a half after Mrs. Marcos and her late husband, Ferdinand Marcos, the ousted president of the Philippines, fled the Philippines for Hawaii, they were charged with racketeering, conspiracy, obstruction of justice and mail fraud in a scheme in which they allegedly embezzled more than $100 million from their homeland.Much of the money was fraudulently concealed through purchases of prime Manhattan real estate, federal prosecutors have charged.Mrs. Marcos's trial is expected to begin in March. U.S. law requires criminal defendants to turn over foreign documents such as those sought in the Marcos case.The law is meant to overcome delays caused by defendants' use of foreign procedures to block U.S. requests for records, Judge Keenan said in his opinion.For instance, the documents could involve foreign business dealings or bank accounts.The U.S. has charged that the Marcoses' alleged crimes involved bank accounts in the Philippines, Hong Kong, the U.S. and other countries. On the allegation of kidnapping, Judge Keenan wrote, "The suggestion that Mrs. Marcos was brought to this country against her will is unsupported by affidavit or affirmation." The judge also said the two marital testimonial privileges cited by Mrs. Marcos don't apply.The first one permits a witness to refuse to testify against her spouse.But Judge Keenan said that privilege's purpose is "fostering harmony in marriage." Because Mr. Marcos died Sept. 28, the privilege can no longer apply, the judge said. The second marital privilege cited by Mrs. Marcos protects confidential communications between spouses.But Judge Keenan said that privilege is meant to protect private utterances -- not litigation papers filed with foreign governments, as Mrs. Marcos's attorneys maintained. Though Judge Keenan threw out most of Mrs. Marcos's objections, he agreed with one of her concerns: that turning over the foreign documents could violate the defendant's constitutional right against self-incrimination.As a result, he said he will examine the Marcos documents sought by the prosecutors to determine whether turning over the filings is self-incrimination.Judge Keenan also directed the prosecutors to show that Mrs. Marcos's Fifth Amendment right against self-incrimination won't be violated. Mrs. Marcos's attorney in New York, Sandor Frankel, declined to comment on the ruling.Mrs. Marcos hasn't admitted that she filed any documents such as those sought by the government.Charles LaBella, the assistant U.S. attorney prosecuting the Marcos case, didn't return phone calls seeking comment. U.S. AND BRITISH LAW FIRMS announce rare joint venture in Tokyo. Sidley & Austin, a leading Chicago-based law firm, and Ashurst Morris Crisp, a midsized London firm of solicitors, are scheduled today to announce plans to open a joint office in Tokyo. The firms will be registered under Japanese law as foreign legal consultants and their practice with Japanese clients will be limited to advising them on matters of foreign law.The office may also be able to advise foreign and multinational clients on international law and general matters. The office will provide "one-stop shopping" for Japanese financial institutions and other clients seeking advice on access to the world capital markets, according to A. Bruce Schimberg, Sidley's senior banking specialist, who will move to Tokyo from Chicago to open the office next year. The Sidley-Ashurst venture will also be staffed by another Sidley partner specializing in corporate law, a partner from Ashurst concentrating on acquisitions and a Japanese attorney.The office will tap the resources of Sidley's 700 lawyers in the U.S., London and Singapore as well as the 400 Ashurst staff members in London and Brussels. Ashurst is new to the Far East.Sidley will maintain its association with the Hashidate Law Office in Tokyo. THE UNITED AUTO WORKERS said it will seek a rehearing of a U.S. appellate court ruling against the union's claim that the state of Michigan engages in wage-discrimination against female employees.A three-judge panel of the court in Cincinnati made the ruling Saturday.The UAW is seeking a hearing by the full 14-judge panel.The union sued the state in November 1985, alleging that it intentionally segregated job classifications by sex and paid employees in predominantly female jobs less than males in comparable jobs.The UAW also charged that the state applied its own standards for determining pay in a discriminatory manner.In November 1987, a district court judge in Detroit ruled against the UAW.The union is the bargaining representative for more than 20,000 Michigan state employees. NEW JERSEY MERGER: One of the largest law firms in central New Jersey has been created through the merger of Norris, McLaughlin & Marcus, a 41-lawyer firm, and Manger, Kalison, McBride & Webb, a health-care specialty law firm with 14 lawyers.Norris McLaughlin is a general-practice firm that has expanded recently into such specialties as banking, labor and environmental work.The merged firm will carry Norris McLaughlin's name. DRUG WARS: A Texas legislator proposes color-coding drivers' licenses of some drug offenders.The bill would authorize courts to order the licenses as a condition of probation.State Senator J.E. "Buster" Brown, a Republican who is running for Texas attorney general, introduced the bill.He said an altered license would be an "embarrassment" to teenagers and young adults and would act as a deterrant to drug use.Richard Avena, executive director of the Texas Civil Liberties Union, called the proposal "political gimmickry," and said it fails to recognize the drug problem as a health issue.
For years, a strict regimen governed the staff meetings at Nissan Motor Co. 's technical center in Tokyo's western suburbs. Employees wore identification badges listing not only their names but also their dates of hire.No one could voice an opinion until everybody with more seniority had spoken first, so younger employees -- often the most enthusiastic and innovative -- seldom spoke up at all. But in 1986, the badges and the "don't speak out of turn" rule were abolished -- early steps in a cultural revolution still rolling on with all the subtlety of a freight train.In recent years, Nissan has instituted flex-time work schedules and allowed employees to dress casually, even in blue jeans.A rule forbidding staffers to own competitors' cars has been lifted, and now many designers drive foreign cars to get useful ideas.Nissan's decades-old corporate song filled with references to Mount Fuji has been scrapped in favor of a snappy tune sung by a popular Japanese vocalist. And in a Japanese corporate first, Nissan recently opened the first coed company dormitory for single employees at the suburban Tokyo technical center. "We had lots of internal debate about this one," concedes Tadahiko Fukuyama, a senior public-relations official. "But in the end, top management decided to follow the voice of the younger generation." This corporate glasnost is a big reason Nissan, after years of making lackluster cars and lousy profits, has loosened up its rigid ways and now is riding a string of hits, ranging from the sleek Maxima sedan and Porsche-like 300ZX to the whimsically nostalgic Pao, a minicar sold only in Japan.The company's turnaround is far from complete; many crucial tests are just beginning.But its surprising progress so far holds important lessons for companies in trouble. The big one: A company's culture can't be radically changed unless top management first admits that things have gone badly awry and then publicly leads the charge.Atsushi Muramatsu, Nissan's executive vice president for finance, helped set the tone in December 1986, when the company was heading toward the first operating loss by a Japanese auto maker since the nation's postwar recovery. "This is a time of self-criticism to discover what is wrong with us," he said.Yutaka Kume, who took the helm as Nissan's president in June 1985, added simply, "I am deeply disappointed." No wonder.Nissan, Japan's second-largest auto maker and the world's fourth-largest, was getting beat up not only by its bigger rival, Toyota Motor Corp., but also by Honda Motor Co., the most successful Japanese car company in the U.S. but a relative pipsqueak in Japan. Nissan's market share in Japan had been dropping year by year since the beginning of the decade.Its U.S. sales sagged, partly because of price increases due to the rising yen.Worst of all, Nissan was preoccupied with management infighting, cronyism and corporate rigidity. Consider the experience of Satoko Kitada, a 30-year-old designer of vehicle interiors who joined Nissan in 1982.At that time, tasks were assigned strictly on the basis of seniority. "The oldest designer got to work on the dashboard," she recalls. "The next level down did doors.If a new person got to work on part of the speedometer, that was a big deal." This system produced boring, boxy cars that consumers just weren't buying.Desperately hoping to spark sales, Nissan transferred 5,000 middle managers and plant workers to dealerships.Meanwhile, President Kume ordered everyone from top executives to rookie designers to go "town watching," to visit chic parts of Tokyo to try to gain insights into developing cars for trend-setters. Some town-watching excursions were downright comic.One group of middle-aged manufacturing men from the company's Zama plant outside Tokyo was supposed to check out a trendy restaurant in the city.But when they arrived at the door, all were afraid to go in, fearing that they would be out of place. Other trips were more productive.Mr. Kume himself visited Honda's headquarters in Tokyo's upscale Aoyama district.He liked the well-lighted lobby display of Honda's cars and trucks so much that he had Nissan's gloomy lobby exhibit refurbished.Later, Nissan borrowed other Honda practices, including an engineering "idea contest" to promote inventiveness.One engineer developed a "crab car" that moves sideways. Such sudden cultural shifts may come across as a bit forced, but they seem to be genuine -- so much so, in fact, that some older employees have resisted.Nissan handled the die-hards in a typically Japanese fashion: They weren't fired but instead "were neglected," says Kouji Hori, the personnel manager at the Nissan Technical Center. Despite the pain of adjusting, the cultural revolution has begun to yield exciting cars.A year ago, the company completely revamped its near-luxury sedan, the $17,699 Maxima, which competes against a broad range of upscale sedans; it replaced its boxy, pug-nosed body with sleek, aerodynamic lines.Since then, Nissan also has launched new versions of the $13,249 240SX sporty coupe and 300ZX sports car.The restyled 300ZX costs as much as $33,000 and is squared off against the Porche 944, which begins at $41,900.Besides new styling, the new Nissans have more powerful engines and more sophisticated suspension systems.All three new models are outselling their predecessors by wide margins. In its home market, Nissan has grabbed attention with limited-production minicars featuring styling odd enough to be cute.One is the Pao, a tiny coupe with a peelback canvas top and tilted headlights that give it a droopy-eyed look.Nissan initially planned to sell just 10,000 Paos, but sales have passed 50,000, and there's a one-year waiting list for the car.Then, there's the S-Cargo, an offbeat delivery van with a snail-like body that inspired its name.Nissan helped develop a Tokyo restaurant with both vehicles as its design theme.The chairs are S-Cargo seats, and a gift shop sells such items as alarm clocks styled like the Pao's oversized speedometer. All these vehicles have sharply improved Nissan's morale and image -- but haven't done much for its market share.Nissan had 29% of the Japanese car market in 1980 before beginning a depressing eight-year slide that continued through last year.Strong sales so far this year are certain to turn the tide, but even the 25% market share that Nissan expects in 1989 will leave it far below its position at the beginning of the decade. Nissan concedes that it won't recoup all its market-share losses in Japan until at least 1995, and even that timetable might prove optimistic. "Everyone else is going to catch up" with Nissan's innovative designs, says A. Rama Krishna, auto analyst at First Boston (Japan) Ltd. Nissan's pace of new-model hits will slow, he adds, just as arch-rival Toyota unleashes its own batch of new cars. Likewise, in the U.S., Nissan has grabbed 5.2% of the car market so far this year, up from 4.5% a year ago.But even that brings Nissan only to the share it had in 1987, and leaves the company behind its high of 5.5% in 1980 and 1982. Why?So far, Nissan's new-model successes are mostly specialized vehicles with limited sales potential.In compact and subcompact cars, the bread-and-butter sales generators for Japanese auto makers, Nissan still trails Toyota and Honda. Nissan hopes that that will start to change this fall, with its new version of the Stanza compact sedan.The Stanza has been a nonentity compared with Honda's hugely successful Accord and Toyota's Camry.But this year, Honda has revamped the Accord and made it a midsized car.Nissan instead has kept its new Stanza a bit smaller than that and cut the base price 6%; at $11,450, Stanza prices start $749 below the predecessor model yet have a more-powerful engine.Accord prices start at $12,345. Nissan's risk is that its low-base-price strategy might get lost amid the highly publicized rebates being offered by Detroit's Big Three.But "on a new car, a rebate doesn't work well" because it cheapens the vehicle's image, contends Thomas D. Mignanelli, executive vice president of Nissan's U.S. sales arm. Even if the new Stanza succeeds, Nissan will remain behind in the subcompact segment, where its Sentra doesn't measure up to the Honda Civic and Toyota Corolla.Nissan will introduce a completely revamped Sentra next fall. At the opposite end of the market, Nissan launches its luxury Infiniti division on Nov. 8 -- three years after Honda pioneered Japanese luxury cars and two months after Toyota's Lexus went on sale.Nissan started advertising Infiniti fully eight months before the cars hit American showrooms.The ads featured fences, rocks and pussy-willow buds -- almost anything but the cars themselves.The ads have generated some laughs but also plenty of attention because they are so unlike any other U.S. auto advertising. On the other hand, Nissan's sales goals for Infiniti are modest compared with Toyota's targets for Lexus.Nissan will build only about 3,500 of the $38,000 Infiniti Q45 sedans each month, sending about 2,000 of them to the U.S. and keeping the rest for sale in Japan.Toyota wants to sell about 49,000 Lexus LS400 sedans next year in the U.S. alone. "When I saw the Lexus sales projections, I got worried," confesses Takashi Oka, who led the Infiniti development team.But on reflection, Mr. Oka says, he concluded that Nissan is being prudent in following its slow-startup strategy instead of simply copying Lexus. "Infiniti is Nissan's big business move for the 21st century, and we're in no hurry to generate large profits right away," Mr. Oka says.Despite plans to add two new Infiniti models next year, bringing the total to four, Infiniti won't show profits for at least five years, he adds. These days Nissan can afford that strategy, even though profits aren't exactly robust.Nissan had record net income of 114.63 billion yen ($868 million) in the fiscal year ended last March 31, a remarkable recovery from the 20.39 billion yen of two years earlier, when the company lost money on operations.Nissan has increased earnings more than market share by cutting costs and by taking advantage of a general surge in Japanese car sales. But Nissan expects to earn only 120 billion yen in the current fiscal year, a modest increase of 4.7%.The big reason: For all its cost-cutting, Nissan remains less efficient than Toyota.In its last fiscal year, Nissan's profit represented just 2.3% of sales, compared with 4.3% at Toyota.To help close the gap, Nissan recently established a top-level cost-cutting committee. Nissan is the world's only auto maker currently building vehicles in all three of the world's key economic arenas -- the U.S., Japan and Europe.That gives it an enviable strategic advantage, at least until its rivals catch up, but also plenty of managerial headaches. For example, Nissan's U.S. operations include 10 separate subsidiaries -- for manufacturing, sales, design, research, etc. -- that report separately back to Japan.And in July, Nissan's Tennessee manufacturing plant beat back a United Auto Workers organizing effort with aggressive tactics that have left some workers bitter. "We are in a transitional phase from being a Japanese company to becoming an international company based in Japan," says Mr. Muramatsu, the executive vice president.He promises that Nissan will soon establish a holding company overseeing all U.S. operations, just as it's doing in Europe. Perhaps the biggest challenge, however, will be to prevent a return to its former corporate rigidity as its recovery continues.Already, personnel officials are talking about the need for a "Phase Two" cultural-reform effort of some sort. "We are still only half way through the turnaround of this company, and there are many more things to do," President Kume says.He adds, however, that "the momentum we have generated is unstoppable."
President Bush and Soviet leader Mikhail Gorbachev will hold an informal meeting in early December, a move that should give both leaders a political boost at home. The White House is purposely not calling the meeting a summit so that there won't be any expectation of detailed negotiations or agreements.Rather, senior administration officials said that the unexpected meeting was scheduled at Mr. Bush's request because of his preference for conducting diplomacy through highly personal and informal meetings with other leaders. The two leaders will meet on Dec. 2 and 3, alternating the two days of meetings between a U.S. and a Soviet naval vessel in the Mediterranean Sea.The unusual seaborne meeting won't disrupt plans for a formal summit meeting next spring or summer, at which an arms-control treaty is likely to be completed. In announcing the meeting yesterday, Mr. Bush told reporters at the White House that neither he nor Mr. Gorbachev expects any "substantial decisions or agreements." Instead, he said that the purpose is simply for the two to get "better acquainted" and discuss a wide range of issues without a formal agenda. Despite the informal nature of the session and the calculated effort to hold down expectations, the meeting could pay significant political dividends for both leaders.Mr. Gorbachev badly needs a diversion from the serious economic problems and ethnic unrest he faces at home.American officials have said that a meeting with the leader of the U.S. could help bolster his stature among Soviet politicians and academics, whose support he needs. For his part, Mr. Bush has been criticized regularly at home for moving too slowly and cautiously in reacting to Mr. Gorbachev's reforms and the historic moves away from communism in Eastern Europe.A face-to-face meeting with Mr. Gorbachev should damp such criticism, though it will hardly eliminate it. Senate Majority Leader George Mitchell (D., Maine), who has been the most prominent Democratic critic of Mr. Bush's handling of the Soviet relationship, praised the president for arranging the meeting.But he added: "The mere fact of a meeting doesn't deal with the substance of policy." Mr. Bush said that the December meeting, which was announced simultaneously in Moscow, will be held in the unusual setting of ships at sea to hold down the "fanfare" and force the two sides to limit participation to just small groups of advisers. "By doing it in this manner we can have, I would say, more time without the press of social activities or mandatory joint appearances, things of that nature for public consumption," Mr. Bush said. Soviet Foreign Minister Eduard Shevardnadze, at a news conference in Moscow, said, "As the two sides plan to hold a full-scale summit in late spring-early summer next year, they found it useful, I would say even necessary, to hold an interim informal meeting." Although no specific agreements are expected, Mr. Shevardnadze said "that doesn't mean they will be without an agenda." If the two leaders cover the subjects that have been featured in lower level U.S.-Soviet meetings, their talks would include human rights, Soviet reforms, regional disputes, relations with allies, economic cooperation, arms control, and joint efforts to fight narcotics, terrorism and pollution. The president specifically mentioned U.S. economic advice to Moscow as a possible topic.Mr. Gorbachev has for months been publicly urging the U.S. to drop its restrictions on Soviet trade.He recently told a small group of American businessmen in Moscow that he hoped to sign a general trade agreement with the U.S., possibly at the 1990 summit.The Soviets hope a trade agreement would give them Most-Favored Nation status, which would lower the tariffs on Soviet exports to the U.S. In an unusually candid article about the latest economic woe -- unemployment -- Pravda yesterday reported that three million Soviets have lost their jobs as a result of perestroika and the number could grow to 16 million by the year 2005.Economists in Moscow are now proposing that the state start a system of unemployment benefits. But one Bush administration official knowledgeable about the summit plan cautioned against assuming that there will be bold new initiatives on the Soviet economy or other issues. "Don't take this as some big opening for major movement on economic cooperation, or arms control, or the environment," he said. "Those things will all come up, but in a fairly informal way." Instead, this official said, "This is vintage George Bush.This was George Bush's own idea.It's George Bush wanting to meet a foreign leader and talk to him directly." Aside from the Soviet economic plight and talks on cutting strategic and chemical arms, one other issue the Soviets are likely to want to raise is naval force reductions.Western analysts say that, given the meeting's setting at sea, Gorbachev is unlikely to pass up the opportunity to press once again for negotiated cuts in the navies of both the North Atlantic Treaty Organization and the Warsaw Pact. That theme has been a recurring one for Soviet military officials for much of this year.They argue that as the Kremlin follows through on announced plans to cut land forces -- the Soviets' area of greatest strength -- the U.S. should show more willingness to cut sea forces -- Washington's area of greatest superiority. One of the reasons Bush administration aides are anxious to insist that the coming meeting will be informal is to avoid comparisons with the last such loosely structured superpower gathering, former President Reagan's 1986 meeting with Mr. Gorbachev in Reykjavik, Iceland.That meeting sent shivers through the Western alliance because Mr. Reagan was pulled into discussing the possible elimination of nuclear weapons without consulting American allies. Mr. Bush said that he initiated talks with the Soviets on the informal meeting by sending a proposal to Mr. Gorbachev last July, which the Soviet leader readily accepted.But word of the possible session was closely held by the president and a handful of top aides, and word of it didn't reach many second-level officials until the past few days.Indeed, many senior officials had been insisting for weeks that Mr. Bush wasn't interested in such an informal get-together. Though President Bush's political critics at home have been urging him to open a more direct dialogue with Mr. Gorbachev, it actually was the arguments of leaders within the Soviet bloc itself that led the president to seek the December meeting.Mr. Bush decided he wanted the meeting after talking in Europe in July with the leaders of Poland and Hungary, who urged him to support Mr. Gorbachev's efforts to transform the Soviet system and to urge him to loosen his grip on Eastern Europe, a senior aide said.While flying home from those discussions, Mr. Bush drafted a letter to Mr. Gorbachev suggesting an informal get-together to precede their formal summit next year. Peter Gumbel in Moscow contributed to this article.
Hardly a day passes without news photos of the police dragging limp protesters from some building or thoroughfare in one of our cities.Of recent note are the activities of the pro- and anti-abortionists, anti-nuclear activists, animal rights protesters, college students concerned about racism, anti-apartheid groups, various self-styled "environmentalists" and those dissatisfied with the pace of the war against AIDS. Maybe he didn't start it, but Mohandas Gandhi certainly provided a recognizable beginning to non-violent civil disobedience as we know it today.The Mahatma, or "great souled one," instigated several campaigns of passive resistance against the British government in India.Unfortunately, according to Webster's Biographical Dictionary, "His policies went beyond his control and resulted . . . in riots and disturbances" and later a renewed campaign of civil disobedience "resulted in rioting and a second imprisonment." I am not a proponent of everything Gandhi did, but some of his law breaking was justified because India was then under occupation by a foreign power, and Indians were not able to participate fully in decisions that vitally affected them. It is difficult, however, to justify civil disobedience, non-violent or not, where citizens have full recourse to the ballot box to effect change.Where truly representative governments are safeguarded by constitutional protections of human rights and an independent judiciary to construe those rights, there is no excuse for breaking the law because some individual or group disagrees with it.There may be a few cases where the law breaking is well pinpointed and so completely non-invasive of the rights of others that it is difficult to criticize it.The case of Rosa Parks, the black woman who refused to sit at the back of the bus, comes to mind as an illustration.But most cases of non-violent civil disobedience are not nearly so benign. The public has a tendency to equate lawful demonstrations with non-violent civil disobedience.It is true that both are non-violent, but there is a fundamental difference between them.Lawful demonstrations, such as peaceful picketing and other assemblages that do not disturb the peace or cause a public nuisance or interfere with the rights of others, are rights guaranteed by any truly free system of government.Civil disobedience, violent or non-violent, is intentional law breaking. The subject of this discussion is non-violent civil disobedience; but, before we get on with that, let me make just a few tangential remarks about lawful demonstrations.They are useful to call public attention to grievances, but they have little value in educating anyone about the issues in dispute.The delight of television in dramatic confrontation encourages overuse of slogans chanted through bullhorns, militant gestures, accusatory signs and other emotionally inspired tactics.Civilized discourse and an environment where compromise can begin are lost in a hostile posture abetted by superficial media interviews. At best, demonstrations are overused and boringly uninformative; at worst, they can become the stimuli that lead to law breaking.Demonstrations are particularly apt to degenerate into criminal conduct when they leave the site of the grievance and become mobile.Petty criminals and street people looking for excitement attach themselves like remora to the fringes of the crowd and use the protest as an excuse for rock throwing, auto trashing, arson, window breaking, looting, pocket picking and general hooliganism.Soon the whole purpose of the demonstration is lost in mob mania.There are better ways to promote a cause. Where non-violent civil disobedience is the centerpiece, rather than a lawful demonstration that may only attract crime, it is difficult to justify.Some find no harm in the misdemeanors of trespass, minor property destruction, blocking traffic and the like.They say these are small prices to pay for galvanizing action for the all-important cause.The crimes may appear small, but the prices can be huge.Here are two cases to illustrate. Assume a neighborhood demonstration to protest speeding on a certain road or a careless accident involving a police car.The protesters lie down in the street, blocking traffic, and will not move until the authorities carry them away.Assume that someone caught in the jam has a heart attack.There is no way to get an ambulance in quickly to move him to a hospital.He dies.The demonstration was non-violent and involved only a simple misdemeanor, but its impact on that individual was violent and terminal. Assume that a TV network is airing a celebrity interview program with a live audience.The politician appearing is highly controversial and has recently generated a good deal of rancor amid certain groups.In a planned protest against his appearance, several members of the studio audience chain themselves in front of the TV cameras in such a way that the program cannot continue.The network must refund money to the advertisers and loses considerable revenue and prestige.The demonstrators have been non-violent, but the result of their trespasses has been to seriously impair the rights of others unconnected with their dispute. It might be alleged that TV has done more than its share to popularize and promote non-violent civil disobedience, so the second situation hypothesized above would be simply a case of "chickens coming home to roost." Or maybe the TV network would lose nothing.Geraldo or Phil would probably pull up another camera and interview the chained protesters.Let us look for a moment at another type of non-violent civil disobedience that only harms other people indirectly, yet does irreparable damage to the nation as a whole.I am referring to those young men who chose to disobey their country's call to arms during the Vietnam war and fled to Canada or some other sanctuary to avoid combat.Their cowardly acts of civil disobedience, which they tried to hide under the cloak of outrage at a war they characterized as "immoral," weakened the national fabric and threw additional burdens on those who served honorably in that conflict. Even more at fault are those leaders in and out of government who urged and supported their defections, thereby giving great help and comfort to the enemy propagandists.It is amazing that the ensuing mass executions in Vietnam and Cambodia do not weight more heavily on minds so morally fine-tuned.Worse, it remained to a well-meaning but naive president of the United States to administer the final infamy upon those who fought and died in Vietnam. Under the guise of "healing the wounds of the nation," President Carter pardoned thousands of draft evaders, thus giving dignity to their allegations of the war's "immorality." The precedent having been set, who can complain if future generations called upon to defend the U.S. yield to the temptation to avoid the danger of combat by simply declaring the war immoral and hiding until it is over? Finally, I think it important to point out the extraordinarily high visibility of non-violent civil disobedience in these days of intensive media coverage.Give television a chance to cover live any breaking of the law, and no second invitation will be required.This brings into question the motives of those who lead civil disobedience demonstrations.Do they want the spotlight for themselves or for their cause?Here is a good rule of thumb: If the movement produced the leader, the chance that he is sincere is much greater than if the leader produced the movement.In either case, ask yourself whether you have become better informed on the issues under protest by watching the act of civil disobedience.If you have not, it is probable that a thorough airing of the dispute by calm and rational debate would have been the better course. Mr. Agnew was vice president of the U.S. from 1969 until he resigned in 1973.
INTENSIVE AUDITS are coming to 55,500 taxpayers as research guinea pigs. This is the year: Unsuspecting filers of 1988 personal returns are being picked randomly for thorough audits to help the IRS update its criteria for enforcement, audit selection, and use of resources.The last Taxpayer Compliance Measurement Program survey covered 1985 returns.The 1988-return project starts Jan. 1 and is to be done by May 31, 1991.Specially trained IRS agents will look for under-reported income and unsupported deductions and credits. The agents will make more than routine inquiries about such items as marital status and dependents; they want to look at living standards and business assets.But they also are to see that taxpayers get all allowable tax benefits and to ask if filers who sought IRS aid were satisfied with it.Courts have ruled that taxpayers must submit to TCMP audits, but the IRS will excuse from the fullscale rigors anyone who was audited without change for either 1986 or 1987. Rewards have been suggested -- but never adopted -- for filers who come through TCMP audits without change. PENALTY OVERHAUL is still likely, congressional sources say. Long-debated proposals to simplify the more than 150 civil penalties and make them fairer and easier to administer are in the House tax bill.But they were stripped from the Senate bill after staffers estimated penalty revenue would fall by $216 million over five years.Still, congressional aides say penalty reform is a strong candidate for enactment, even if not this time around, although some provisions may be modified. Sen. Pryor (D., Ark.), a leader on the issue who generally backs the House plan, wants some changes -- for one, separate sanctions for negligence and large misstatements of tax owed, not a single penalty.He would ease the proposed penalties for delayed payroll-tax deposits and for faulty Form 1099 and other reports that taxpayers correct voluntarily.The General Accounting Office urges Congress to ensure that all penalties retain their force as deterrents. TAXPAYERS' RIGHTS are defined by a growing number of states. The 1988 tax act created a federal bill of rights spelling out IRS duties to protect taxpayers' rights in the assessment and collection of taxes.States are following suit.California enacted a rights law in 1988.In 1989, Illinois, Kansas, Ohio, Oregon and South Carolina have adopted rights laws, the Federation of Tax Administrators, a state officials' group, reports; the features vary.And taxpayer groups are urging legislation in many other states. One group is the Committee on State Taxation, which comprises 330 multistate corporations and advises the Council of State Chambers of Commerce.The group's Mark Cahoon says its efforts begun in 1989 have led to the introduction of bills in Massachusetts, Minnesota and Colorado to establish evenhanded procedures affecting all kinds of taxpayers.The group also seeks uniformity among states in provisions for taxpayers' rights. This week, New York City announced a 10-point policy patterned on the federal bill of rights for taxpayers. THE MILEAGE RATE allowed for business use of a car in 1989 has risen to 25.5 cents a mile for the first 15,000 from 24 cents in 1988, the IRS says; the rate stays 11 cents for each added mile.Also unaltered: 12 cents for charitable activities and nine cents for medical and moving costs. IRA BALANCES could be used to qualify for bank services under a bill entered by Reps.Chandler (R., Wash.) and Andrews (D., Texas).The bill would thwart a recent Labor Department opinion that investing individual-retirement-account funds to earn free checking violates the law. HUGO FELLED vast timberlands.South Carolina's congressional delegation has entered Senate and House bills to provide special casualty-loss treatment and other tax relief for timber growers in the hurricane disaster areas. HE RODE HIS HOBBY, but he couldn't milk it, the Tax Court says. The court often weighs deductions of sideline-business costs: Do they stem from a profit-seeking activity or a nondeductible hobby?But it's rare to see both functions in one case.Charles O. Givens of Mount Vernon, Ind.-investment broker, ex-accountant, and son of a former stable owner-bred Tennessee Walking Horses for six years, raised cattle for four, and never made a profit on either.He claimed losses totaling $42,455 -- and the IRS denied them all. Special Judge Galloway noted that Givens managed horse-breeding in a businesslike way: He kept detailed accounts, practiced soil conservation, enhanced his experience by consulting experts, spent several hours a day doing chores, and dropped the sideline when his best brood mare died.Yet he took little businesslike care with his cattle: He had no prior experience and didn't seek business counsel about them. The judge said Givens may deduct his $30,180 of losses from horse breeding, but rejected the $12,275 in deductions from the cattle operation. BRIEFS: The IRS already is doing intensive TCMP audits of 19,000 returns for 1987 and fiscal 1988 filed by corporations with under $10 million in assets. . . . President Bush says he will name Donald E. Kirkendall to the new Treasury post of inspector general, which has responsibilities for the IRS. . . . The U.S. and Finland signed an income-tax treaty, subject to ratification.
An arbitrator awarded Eastern Airlines pilots between $60 million and $100 million in back pay, a decision that could complicate the carrier's bankruptcy-law reorganization. Eastern, a unit of Texas Air Corp., said it is examining the ruling to determine if it can appeal. It's unclear whether Eastern will succeed in overturning the arbitrator's decision, made in a long-simmering "pay parity" dispute that predates both the carrier's Chapter 11 petition and its 1986 acquisition by Texas Air.All Eastern's previous court efforts to head off the pilots' demands have failed. An Eastern spokesman said he doesn't expect that the arbitrator's ruling "will have any overall material effect on the company's strategic plan." Bankruptcy experts said the law isn't clear on how such an arbitration ruling can affect a company's case.Like any other creditor, the pilots will have to apply to the court for payment of their claim. That may leave a lot of leeway for U.S. Bankruptcy Judge Burton R. Lifland to decide what, if anything, the pilots actually collect.In August, he issued the ruling that let the pilots pursue their back-pay grievance before the arbitrator.The pilots' contract with Eastern calls for a mutually acceptable private arbitrator to resolve such grievances. In a statement to employees, Eastern said the company was disappointed by the ruling. "The obligation is totally unwarranted," the statement said. James Linsey, a lawyer for the Air Line Pilots Association, said the pilots were extremely pleased. "This is a blow not only to Eastern but to the creditors committee," he said. Eastern's creditors committee, along with the company, has consistently opposed the pilots' claim, which if paid would have to come out of money both hope to use to pay off other bankruptcy claims. Eastern and its creditors are in the final, delicate stages of negotiating a second reorganization plan to pay off the airline's debts.An earlier plan, which had received the creditors' approval in July, fell apart when Eastern changed its business plan.It isn't known whether the pilot claim was figured into either plan. The dispute between Eastern and its pilots is over a "pay parity" clause in the pilots' contract.The clause was part of an agreement in which pilots accepted a substantial pay cut as long as no other labor group got a raise. Shortly after Texas Air took control of Eastern, some Machinists union supervisors received a 20% pay raise.The pilots argued that this triggered a pay raise for them.Eastern has disputed the claim, but a federal district court, an appeals court and now the arbitrator have all sided with the pilots. The two sides don't even agree about how much money is at issue.The pilots put the amount as high as $100 million, the company at $65 million. Another arbitrator is hearing another pay parity case between Eastern and its pilots, resulting from a similar set of circumstances involving a separate pay raise granted another union.A decision on that case isn't expected before mid-November. Ironically, many of the pilots involved have left Eastern or are still striking the carrier, which filed for bankruptcy protection March 9.About 800 have crossed the picket lines and returned to work.
Few people in the advertising business have raised as many hackles as Alvin A. Achenbaum.The general public may not know his name, but he's famous -- make that infamous -- in advertising circles: A marketing consultant, he pioneered slashing ad agency commissions, to the delight of advertising clients and the dismay of agencies. Now, after beating them, Mr. Achenbaum is joining them.Backer Spielvogel Bates Worldwide named Mr. Achenbaum, 62, vice chairman of professional services, reporting directly to Carl Spielvogel, chairman and chief executive officer.He joins Nov. 13, dissolving his consulting firm, Canter, Achenbaum Associates. In years past, the ad industry's most distinguished executives didn't hesitate to excorciate Mr. Achenbaum.They have since mellowed, although one senior Young & Rubicam executive, echoing others, said: "I think ad agencies owe Carl {Spielvogel} a vote of thanks for getting him out of the consulting business." But industry executives also believe hiring Mr. Achenbaum is a shrewd move for Backer Spielvogel, a unit of Saatchi & Saatchi.Mr. Achenbaum has counted among his clients some of the most visible blue-chip advertisers in the country, including Nissan, Toyota, Seagram and Backer Spielvogel clients Hyundai and J.P. Morgan.At Backer Spielvogel, he will work with clients and potential clients on marketing strategies; aside from agency compensation issues, he helped Nissan, for example, come up with its positioning and pricing for its new Infiniti line. His client contacts, meanwhile, could prove a gold mine for an agency that has had few new business wins of late. "I've done over 40 ad agency searches {for clients}, so I have a pretty good notion of what clients are interested in when they look for an agency," Mr. Achenbaum said.As a consultant, he has given seminars at agencies including Ogilvy & Mather on how to win new business. Mr. Spielvogel said he hopes Mr. Achenbaum will do some strategic consulting at the agency for "non-clients, in hopes that they become clients." At Backer Spielvogel, Mr. Spielvogel's hallmark has been personal involvement with all major clients.He pampers them; he invites them to fabulous parties; he strokes them.Mr. Achenbaum, too, delves into his clients' business. "Carl has a much higher degree of intimacy with his clients than is ordinary for an agency his size.And with Al's record of being a delver and a detail guy, you can see how the two fit," said Alan Gottesman, an analyst with PaineWebber. Mr. Achenbaum's move follows the announcement last month that his consulting partner, Stanley Canter, 66, would retire.When the announcement came out, "I picked up the phone and said, `Why don't you come to us? '" Mr. Spielvogel said. Mr. Achenbaum, who had been considering paring down his firm or merging it with another small consulting outfit, soon agreed.The two men are longtime friends and tennis partners, having met about 25 years ago. Before becoming a consultant in 1974, Mr. Achenbaum was a senior executive at J. Walter Thompson Co.He spent most of his career formulating marketing strategies, but became best-known for chipping away at ad agency compensation. Ad agencies typically earned a straight 15% commission; if a client spent $100 million on TV time, the agency made $15 million.But Mr. Achenbaum pioneered negotiated fees, which often worked out to less than 15%.More recently, he negotiated "indemnification" clauses in which an ad agency in some cases must pay a client if it drops the account. He ultimately became so well-known for cutting compensation, however, that clients didn't seek him out for anything else. "I was very frustrated," he said. "The fact of the matter is, I am a marketer.That's another reason {for the Backer Spielvogel job}.It struck me as a way to get back to what I really want to do." Mr. Spielvogel added pointedly: "The pressure on commissions didn't begin with Al Achenbaum." Mr. Spielvogel said Mr. Achenbaum will work with clients to determine the mix of promotion, merchandising, publicity and other marketing outlets, and to integrate those services.He will concentrate on, among others, J.P. Morgan and Hyundai.Mr. Achenbaum helped Morgan in its recent agency search, and he has a long relationship with Hyundai, which is having severe troubles, including declining sales. "The trail of revenue is increasingly going away from pure advertising, and going towards other services," Mr. Spielvogel said.Instead of being just an ad agency, he said: "We have redefined our mission here.Our mission is to help our clients grow, and to use every tool of marketing communications to accomplish that." Industry executives are wishing Mr. Achenbaum well.Leonard Matthews, then-president of the American Association of Advertising Agencies, called Mr. Achenbaum a "quisling" in an incendiary 1987 speech.Yesterday, Mr. Matthews, now a consultant with the Stamford, Conn., firm Matthews & Johnston, quipped, "I think he'll be very good at that {new job}.And much better at that than at {the price-cutting} he's been doing recently." Cotton Inc. Campaign Cotton Inc., the fiber company that represents cotton growers, will begin a new ad campaign, developed by Ogilvy & Mather, Thanksgiving Day. J. Nicholas Hahn, Cotton Inc. 's president and chief executive, was an outspoken critic of WPP Group's acquisition of Ogilvy Group earlier this year.During the takeover, Mr. Hahn said he would put his account up for review if WPP's bid were successful, but he didn't. Cotton Inc. 's new $9 million campaign calls cotton the "Fabric of Our Lives." The campaign replaces its "Take Comfort in Cotton" ads and marks the end of its national cooperative advertising efforts.For years, the company's ads were tied in with pitches for Cannon sheets or Martex towels, for example, and an announcer at the end of the ads would tell customers where to "find the true performance label." With the new TV spots, Ogilvy & Mather has opted for a family style with lots of laughter, hugs and tears. "We're making a fairly obvious plea for some emotional reaction," says Tom Rost, creative director at Ogilvy & Mather. Cotton Inc. will spend nearly $2 million on broadcasting on Thanksgiving Day alone, advertising on such programs as "Good Morning America," "Macy's Thanksgiving Day Parade" and the NFL holiday game. Frank Mingo Dies at 49 Frank L. Mingo, one of the pioneers of advertising targeted at black audiences, died at the age of 49 after a stroke. Mr. Mingo was chief executive officer of the Mingo Group, which he founded in 1977 and which created ads for the black market.Clients include Miller Brewing Co. and General Motors.Mr. Mingo was hospitalized Sept. 23 and died Monday, according to Samuel J. Chisholm, the agency's president and chief operating officer. Ad Notes. . . . EARNINGS: Omnicom Group Inc., New York, reported third-quarter net income rose 54% to $5.6 million, or 22 cents a share, from $3.6 million, or 15 cents a share, a year earlier.Revenue increased 20% to $246.6 million from $204.8 million.
Prime Minister Lee Kuan Yew, Singapore's leader and one of Asia's leading statesmen for 30 years, recently announced his intention to retire next year -- though not necessarily to end his influence.The prime minister, whose hair is thinning and gray and whose face has a perpetual pallor, nonetheless continues to display an energy, a precision of thought and a willingness to say publicly what most other Asian leaders dare say only privately. The 66-year-old Mr. Lee recently spent an hour discussing the state of Asia and the world with two Journal reporters in his plainly furnished, wood-paneled office.The interview did not touch on Singapore's domestic affairs.Skipping personal pleasantries, Mr. Lee picked up exactly where he left off several months earlier -- before the government crackdown in China -- when he had warned that the orthodox leadership in Beijing feared a plurality of views.Excerpts follow: On China's turmoil: "It is a very unhappy scene," he said. "It took Zhao Ziyang (former premier and party chief) 10 years to build a team of economists who understood how the Western economies work and now that team is part in exile, part being rusticated and part missing." Rebuilding that team, Mr. Lee predicted, will take another 10 years. "That's very sad for China and for Asia because China could have been a good engine for growth, not just for Hong Kong and Taiwan but for Japan, Korea and the rest of Asia." On similarities between China and the Soviet Union: "In important particulars, the Soviets are different from the Chinese.They are already industrialized. . . . Their problem is one of inefficiency of an industrial economy.The Chinese problem is much greater -- it's how to industrialize to begin with." Asked if the Soviets, like Chinese officials, won't one day face a similar conflict between the desire to liberalize economically and yet retain political control, Mr. Lee said, "I would think that the Soviets face a deeper dilemma because they have been more in blinkers than the Chinese -- I mean keeping their people cut off from the outside world." Mikhail Gorbachev, he said, is ahead of China's leaders in his awareness of the world. "But I think the Soviet peoples are more introverted than the Chinese." Regardless, he said, he still believes the Soviet Union, while falling far short of the efficiency of a Western economy, may well manage to improve considerably. On Asia-Pacific prosperity: "If America can keep up the present situation -- her markets open for another 15 years, with adjustments, and Japan can grow and not cut back, and so too, Korea, Taiwan, Hong Kong, Singapore, ASEAN, Australia and New Zealand -- then in 15 years, the economies of these countries would be totally restructured to be able to almost sustain growth by themselves." In such an arrangement, "all benefit," he said. "And if the Europeans come in, they benefit too.It's not a zero-sum game." Asked about the possibility of greater economic cooperation among Asia-Pacific nations, which will be discussed Nov. 6 and 7 at a ministerial meeting in Canberra, Mr. Lee said the goal "is to have a free and open world trading system." An Asian bloc isn't intended, he said. "That's not possible." On U.S.-Japan relations: "I'm encouraged.I think the earlier strident notes struck by {U.S.Commerce Secretary Robert} Mosbacher and {U.S.Trade Representative} Carla Hills have been more rounded.I believe the U.S. is becoming more patient and circumspect," he said. "It's the total relationship that is important." The total relationship, as Mr. Lee sees it, is "the flow of dollars to the U.S. to fund the deficits, the investments the Japanese are making in the U.S. in order to satisfy American demand that American products consumed in America should be made as much as possible in America by Americans with Japanese technology and capital." Japan's recent political turbulence, Mr. Lee said, may mean Japan will slow market adjustments. "They'll be more timorous in tackling their own voters, like opening up more to agricultural imports from America, hurting their farmers." On U.S. military presence in Asia: Asked if his offer to allow the American military to use facilities in Singapore would help preserve America's presence in the region at bases in the Philippines, he said, "What we have done is make it easier for the Philippines to continue to host American bases without it being said they are lackeys of the imperialists and the only ones in Asia or in Southeast Asia.We are willing to share the political burden of being host to America, an imperial power.We think it isn't such a great burden, that it carries no stigma, and we are prepared to do it." On U.S.-Philippine relations: "It's such a mixed-up relationship going back into history. . . . I really do not understand how it is that Filipinos feel so passionately involved in this father figure that they want to dispose of and yet they need.I just don't understand it.My relationships with the British are totally different.They lorded it over me.They did me some good.They did themselves even more good.They let me down when the Japanese came down {during World War II}. . . . I don't feel down or done in because I show British serials on my television network or read their books.I mean it is a normal adult relationship. "But the Filipinos and the Americans, when I talk to them, there's so much passion about Filipino manhood being diminished as a result of being squatted upon by the Americans and so on.The occasional Englishman tries to put on airs but we let it pass. . . . It's just comic when they try to pretend they're still the master race." Mr. Lee added that the Filipinos are "making it very difficult" for the U.S. military presence to last beyond five or 10 years. On military alternatives if the U.S. pulls back: "The Soviets already are present.I suppose sooner or later, the Japanese would have to fill up a large part of the gap on the naval side.Maybe the Chinese, maybe even the Indians." On economic consequences of a diminished U.S. presence: "America is the only major power in recent history that has used its military might to sustain a system that enables all participants to equally benefit without her as the provider of the security taking royalties." Asked why so few nations seem to share his views of America, he said, "Many people see it that way.But they have just taken it for granted." On Cambodia: "Let's assume that {former Cambodian leader Prince Norodom} Sihanouk does what the press wants him to do and joins up with {Vietnamese-backed Cambodian leader} Hun Sen.Is the trouble over?Can Sihanouk and Hun Sen knock off the Khmer Rouge still supported by China?He can't. "What is the way forward?To get the Khmer Rouge as part of a process for elections.And when they lose, then we can expect China to stop aid.Let's put it bluntly.The Chinese cannot be seen to have made use of the Khmer Rouge and then discard them." Ms. House is vice president of Dow Jones International Group.Mr. Wain is editor of The Asian Wall Street Journal.
Everything looked good as neurosurgeon Walter Levy and colleagues carefully cut away a woman's spinal tumor at the Cleveland Clinic in 1978. Using small electrical shocks applied to her feet, they were able to monitor sensory nerves.The shocks generated nerve impulses that traveled via spine to brain and showed up clearly on a brain-wave monitor, indicating no damage to the delicate spinal tissue. Then, says Dr. Levy, "she woke up paralyzed." The damage was to her motor nerves, which couldn't be monitored along with the sensory nerves, he explains.The tragedy, he adds, "galvanized me" to look for a way to prevent similar cases. Dr. Levy's answer may come with a new kind of magnetic brain probe, a device that he and dozens of U.S. researchers are studying with great hope.Besides holding the promise of safer spinal surgery, the probe could improve the diagnosis of brain and nerve disorders such as strokes and multiple sclerosis.Perhaps most exciting, the device is thrusting open a window to the workings of the brain. The probe, which is painless, non-invasive and apparently harmless, employs strong magnetic fields to induce small whirlwinds of electricity within the brain.If positioned over the brain's motor-control area, the hand-held electromagnets generate nerve impulses that zip down motor nerves and activate muscles, making, say, a finger twitch.In principle, they will enable doctors to check the body's motor system the way an electrician tests a home's electrical circuits by running current through them. "Until now, we've had no objective way of measuring motor function," says Keith Chiappa, a neurologist conducting clinical tests with the devices at Boston's Massachusetts General Hospital. "All we could do was tell a patient, `squeeze my fingers as hard as you can' or `raise your arm. ' " Under the best circumstances such tests are subjective; when a patient is unconscious, they don't work at all. Magnetic brain tweaking started in the early 1900s, when researchers produced flashes of light in the visual field with magnets.In the 1960s, Mayo Clinic researchers developed magnetic devices to stimulate motor nerves in the hand and other limbs.But for brain tests, the unwieldy machines "would have required patients to stand on their heads," says Reginald Bickford, a researcher at the University of California at San Diego. The field took off in 1985 after scientists at Britain's Sheffield University developed a handy, compact magnet for brain stimulation.Since then, at least two commercial versions have been put on the U.S. market, and an estimated 500 have been sold.In August, a Chicago conference on such devices attracted more than 100 researchers, who reported studies on everything from brain mapping to physical therapy. "We don't feel we can use {the devices} routinely in surgery yet, but we're getting close," says Dr. Levy, who is now with the University of Pittsburgh.A problem, he adds, is that anesthetized brains are more resistant to magnetic stimulation than awake ones. The devices could help indicate when surgery would help, says Charles Tator, a University of Toronto neurosurgeon.For example, paralyzed car-crash victims occasionally have some intact spinal tissues that, if preserved by emergency surgery, enable partial recovery.But such operations typically aren't performed because there is no sign right after an injury that surgery would be beneficial. "The cost {of magnetic stimulators} would seem like peanuts if we could retrieve limb function" in such people, Dr. Tator says. Scientists caution there is a chance the magnet technique might spark seizures in epileptics.But no significant problems have been reported among hundreds of people tested with the devices. The main sensation, besides feeling like a puppet jerked with invisible strings, is "like a rap on the head," says Sam Bridgers, a neurologist who has studied the brain stimulators at Yale University.One apparent side effect is a minor increase in a brain hormone.And some doctors who have conducted hours of tests on themselves report temporary headaches. At least two companies, Cadwell Laboratories Inc. of Kennewick, Wash., and Novametrix Medical Systems Inc. of Wallingford, Conn., now sell versions of the magnetic devices.The machines, which at $12,500 are inexpensive by medical standards, haven't been approved in the U.S. for marketing as brain stimulators but are sold for stimulating nerves in the hand, legs and other non-brain areas.Researchers can apply for permission to use the probes for brain studies. At the University of Kentucky, a team led by Dean Currier, a physical therapy researcher, is testing the stimulators in conjunction with electric shocks to induce muscle contractions to help prevent wasting of thigh muscles after knee surgery.Similarly, a Purdue University team led by heart researcher W.A. Tacker hopes to develop ways to magnetically induce cardiac muscle contractions.The devices might someday serve as temporary pacemakers or restarters for stopped hearts, says Dr. Tacker, whose prototype was dubbed the "Tacker whacker." The devices' most remarkable possibilities, though, involve the brain.Probing with the stimulators, National Institutes of Health scientists recently showed how the brain reorganizes motor-control resources after an amputation.Similar studies are expected to reveal how stroke patients' brains regroup -- a first step toward finding ways to bolster that process and speed rehabilitation. Scientists also are exploring memory and perception with the new machines.At the State University of New York at Brooklyn, researchers flash two groups of different letters on a computer screen in front of human guinea pigs.Between flashes, certain areas in subjects' brains are jolted with a magnetic stimulator.When the jolt is timed just right, the subjects don't recall seeing the first group of letters. "Where does that first stimulus go?" exclaims SUNY neurologist Paul Maccabee. "Trying to answer that is suggesting all kinds of theories," such as precisely where and how the brain processes incoming signals from the eyes.He and others say that the machines are weak enough that they don't jeopardize the memory. Both the SUNY team and researchers at the National Magnet Laboratory in Cambridge, Mass., are working with more potent magnetic brain stimulators.Among other things, the stronger devices may be able to summon forth half-forgotten memories and induce mood changes, neurologists say.
Battle-tested Japanese industrial managers here always buck up nervous newcomers with the tale of the first of their countrymen to visit Mexico, a boatload of samurai warriors blown ashore 375 years ago. "From the beginning, it took a man with extraordinary qualities to succeed in Mexico," says Kimihide Takimura, president of Mitsui group's Kensetsu Engineering Inc. unit. Here in this new center for Japanese assembly plants just across the border from San Diego, turnover is dizzying, infrastructure shoddy, bureaucracy intense.Even after-hours drag; "karaoke" bars, where Japanese revelers sing over recorded music, are prohibited by Mexico's powerful musicians union. Still, 20 Japanese companies, including giants such as Sanyo Industries Corp., Matsushita Electronics Components Corp. and Sony Corp. have set up shop in the state of Northern Baja California.Keeping the Japanese happy will be one of the most important tasks facing conservative leader Ernesto Ruffo when he takes office Nov. 1, as the first opposition governor in Mexico's modern history. Mexico, with its desperate need for investment, and Japan, with its huge budget surplus, would seem like a perfect match.But the two countries remain separated by a cultural barrier wider than the ocean.Conservative Japanese investors are put off by what they consider Mexico's restrictive investment regulations and loose work habits.From the Mexicans' viewpoint, vaunted tactics of methodical Japanese managers don't count for much in a land where a saying says "there are no fixed rules." Japan ranks as only the fourth largest foreign investor in Mexico, with 5% of the total investments.That is just 1% of all the money Japan has invested abroad. Mexican President Carlos Salinas de Gortari would like to change that.The young president so admires Japanese discipline that he sends his children to a Japanese school in Mexico City.He already has finagled a $2 billion loan from the Japanese government. But Mexico urgently needs more help.Mr. Salinas's unpopular Institutional Revolutionary Party, or PRI, faces congressional elections in 1991.For the PRI to stand a chance, Mr. Salinas has to press on with an economic program that so far has succeeded in lowering inflation and providing moderate economic growth.But maintaining the key components of his strategy -- a stable exchange rate and high level of imports -- will consume enormous amounts of foreign exchange.Mr. Salinas needs big investment inflows -- quickly. The problem is that Japanese businesses make decisions with a view well beyond the coming months that weigh so heavily on Mr. Salinas. "The Japanese will come to Mexico, but not immediately," says Kazushige Suzuki, director-general of the Japanese External Trade Organization in Mexico.If not now, when? "When the fruit is ripe, it falls from the tree by itself," he says.Pressed on the matter, he is more specific. "There will be big Japanese investments probably five to 10 years from now." Ryukichi Imai, Japan's ambassador to Mexico, agrees that Mexico may be too eager. "There seems to be a presumption in some sectors of (Mexico's) government that there is a lot of Japanese money waiting behind the gate, and that by slightly opening the gate, that money will enter Mexico. I don't think that is the case."Mexican officials maintain the Japanese reserve is only a result of unfamiliarity. "Because of distance, it takes a while for them to appreciate the economic stability we've achieved," says one economic policymaker.Mexico is sending a number of missions to Japan looking for a major breakthrough investment in telecommunications, petrochemicals or tourism.It is hoped that other Japanese would then follow the leader. But Japanese investors say that their reluctance to invest stems not only from concerns about Mexico's economic outlook, but also reservations about Mexico's recently revamped investment law.Unable to get a new law through a congress with a strong leftist bloc, Mexico jury-rigged the existing law's regulations.It created special 20-year trusts to allow foreigners 100% ownership in some once-closed industries.It also made artful use of semantics, redefining as non-strategic industries some that had been in the national domain. "Those devices don't give sufficient certainty to our bosses in Japan," says Yasuo Nakamura, representative of the Industrial Bank of Japan.Mr. Nakamura cites the case of a customer who wants to build a giant tourism complex in Baja and has been trying for eight years to get around Mexican restrictions on foreign ownership of beachfront property.He could develop the beach through a trust, but instead is trying have his grandson become a naturalized Mexican so his family gains direct control. Some say the best hope for the Mexicans is catching the eye of Japan by promoting the one industry the Japanese clearly like -- the border assembly plants, known as "maquiladoras," which are open to 100% foreign control. "We must do more to help the Japanese here in Baja if we want them to invest elsewhere," says Mr. Ruffo, the governor-elect of the National Action Party and himself a succesful businessman.Plant operators are heartened by Mr. Ruffo's pledge to cut corruption associated with the ruling party officials.But Mr. Ruffo frets that an even bigger problem could be protectionism from the U.S., where some politicians oppose what they consider Japanese efforts to use maquiladoras to crack the U.S. market through the back door.
Shaken by tumbling stock prices and pessimistic projections of U.S. economic growth, currency analysts around the world have toned down their assessments of the dollar's near-term performance. Most of the 10 analysts polled last week by Dow Jones International News Service in Frankfurt, Tokyo, London and New York expect the U.S. dollar to ease only mildly in November.Opinion is mixed over its three-month prospects.Half of those polled see the currency trending lower over the next three months, while the others forecast a modest rebound after the New Year. In late afternoon New York trading yesterday, the dollar stood at 1.8415 West German marks, up from 1.8340 marks late Monday, and at 142.85 yen, up from 141.90 yen late Monday.A month ago, a similar survey predicted the dollar would be trading at 1.8690 marks and 139.75 yen by the end of October.Sterling was trading at $1.5805, down from $1.5820 late Monday. In Tokyo Wednesday, the U.S. currency was trading at about 142.95 yen at midmorning, up from 142.80 yen at the opening and up from Tuesday's Tokyo close of 142.15 yen. The average of estimates of the 10 economists polled puts the dollar around 1.8200 marks at the end of November and at 141.33 yen. By late January, the consensus calls for the dollar to be trading around 1.8200 marks and near 142 yen.Those with a bullish view see the dollar trading up near 1.9000 marks and 145 yen, while the dollar bears see the U.S. currency trading around 1.7600 marks and 138 yen. A number of those polled predict the dollar will slip as the Federal Reserve eases interest rates. David Owen, an economist at Kleinwort Benson & Co. in London, said he expects further cuts in short-term U.S. rates in an effort to encourage a narrowing of the trade gap and to ensure a soft landing in the U.S. economy. Robert White, a vice president and manager of corporate trade at First Interstate of California, agreed with that view and predicted the U.S. federal funds rate will drop to between 7 3/4% and 8% within 60 days from its current level at 8 13/16%.Fed funds is the rate banks charge each other on overnight loans; the Fed influences the rate by adding or draining reserves from the banking system. Mr. White also predicted a half-point cut in the U.S. discount rate in the near future.The discount rate, currently 7%, is the rate the Fed charges member banks for loans, using government securities as collateral. He expects such a cut "because of problems in several sectors of the economy, particularly real estate and automobiles." Bolstering his argument, the Commerce Department reported yesterday that new home sales for September were down 14% from August's revised 3.1% fall.The drop marked the largest monthly tumble since a 19% slide in January 1982. In last month's survey, a number of currency analysts predicted the dollar would be pressured by a narrowing of interest rate differentials between the U.S. and West Germany. Indeed, in early October the West German central bank raised its discount and Lombard rates by a full percentage point.Several other European central banks, notably in Britain, followed the West German Bundesbank's lead by raising their own key rates.And a week later, Japan raised its official discount rate by a half point to 3.75%.The Japanese discount rate is the central bank's base rate on loans to commercial banks. After a surprisingly sharp widening in the U.S. August merchandise trade deficit -- $10.77 billion from a revised $8.24 billion in July and well above expectations -- and a startling 190-point drop in stock prices on Oct. 13, the Federal Reserve relaxed short-term interest rates, knocking fed funds from around 9% to 8 3/4%. But predictions that central banks of the Group of Seven (G-7) major industrial nations would continue their massive dollar sales went astray, as the market drove the dollar downward on its own, reacting to Wall Street's plunge and subsequent price volatility, lower U.S. interest rates and signs of a slowing U.S. economy.G-7 consists of the U.S., Japan, Britain, West Germany, Canada, France and Italy. Tomoshige Kakita, senior deputy manager in the treasury department of Mitsui Bank Ltd. in Tokyo, suggested that uncertainty about U.S. stocks and bonds has made Japanese investors leery of holding those securities in the near term, thus damping dollar demand. But, Mr. Kakita added, once U.S. equities regain some stability, players will move back into dollar-denominated investments, especially Treasury bonds, whose value rises when interest rates decline. Mr. Kakita said the key dollar-yen exchange rate is at 135 yen. "If 135 is broken, some panic will be seen," he predicted, explaining that Japanese institutions are comfortable with the dollar anywhere between current levels and 135 yen. Jens-Uwe Fischer, a senior trader at Manufacturers Hanover Trust Co. in Frankfurt, said he expects the dollar to recover within the next three months to around 1.88 marks as U.S. economic data, particularly U.S. trade figures, level off.He contended that the Fed won't ease rates further, but predicted Bundesbank officials will relax key rates in West Germany. Alfred Zapfel, chief trader at Bank of Boston in Frankfurt, took an opposite stance.He said he expects U.S. interest rates to decline, dragging the dollar down to around 1.80 marks by the end of January after a short-lived dash to 1.87 marks by the end of November.West German interest rates, he said, will remain unchanged. "But I'm not one of these great dollar bears you see more of these days," Mr. Zapfel said. "I can't really see it dropping far below 1.80 marks." Scott Greene, chief foreign exchange dealer with Julius Baer & Co. in New York, fits the description of a "great dollar bear." He predicted the U.S. unit will skid below 1.80 marks to around 1.78 marks this month and 1.75 marks by the beginning of the new year. "We're finally seeing the culmination of all the recessionary buildup of the last few months," he said, noting a continuing downward trend in U.S. interest rates, a shaky stock market and "gloomier economic times ahead" all signal a significantly lower dollar. In the wake of British Chancellor of the Exchequer Nigel Lawson's surprise resignation and sterling's subsequent nose-dive, most analysts had little good to say about the pound's near-term prospects. Mr. Owen of Kleinwort Benson suggested that the new chancellor, John Major, will take a tough line in his autumn statement later this month, helping to underpin the pound.But, he warned, the currency will remain at risk. On the Commodity Exchange in New York, gold for current delivery dropped $3.10 to $374.70 an ounce in moderate trading.Estimated volume was 3.5 million ounces. In early trading in Hong Kong Wednesday, gold was quoted at $373.80 an ounce. Christopher Hill in Tokyo, Nicholas Hastings in London, Erik Kirschbaum in Frankfurt and Caitlin Randall and Douglas Appell in New York contributed to this article.
When Thomas W. Wathen went big league last year, he acquired a treasure-trove of Americana along with a well-known but ailing security business: Pinkerton's Inc. There was a wanted poster offering "Rewards for the Arrest of Express and Train Robbers Frank James and Jesse W. James" and the original Pinkerton's logo with an open eye and the inscription "We Never Sleep," which inspired the phrase "private eye." Then there were two gold watches once owned by Allan Pinkerton, who founded the company in Chicago in 1850.But there were supposed to be three, Mr. Wathen's company claims. The missing watch is emblematic of the problems Mr. Wathen encountered in building his closely held California Plant Protection Security Service into the largest detective and security agency in the U.S. through acquisitions.The ever-optimistic Mr. Wathen has learned that while acquiring a big brand-name company can be a shortcut to growth, it can also bring a host of unforeseen problems. "We cleared out a lot of rats' nests," says the 60-year-old security veteran. Mr. Wathen, who started his career as an Air Force investigator and worked as a security officer for several large companies, built his California Plant Protection from a tiny mom-and-pop security patrol firm here in the San Fernando Valley.He joined the firm in 1963 and bought it from the owners the next year.Over the next 20 years, California Plant Protection opened 125 offices around the country. Yet although California Plant Protection was netting bigger and bigger clients -- the firm provided security for the 1984 Summer Olympics in Los Angeles -- it still didn't have the name recognition of Pinkerton's.So when American Brands Inc. decided to sell the unit in 1987 as part of a divestiture of its food and security industries operations, Mr. Wathen saw a chance to accomplish several objectives. He decided he could easily merge Pinkerton's operations with his own while slashing overhead costs because the two already operated in many of the same cities.He could acquire a staff of loyal Pinkerton's employees, many of whom had spent their entire careers with the firm, he could eliminate a competitor and he could get the name recognition he'd wanted. Mr. Wathen also relished the chance to demonstrate an entrepreneur like himself, who'd spent his whole career in the security business, could run Pinkerton's better than an unfocused conglomerate or investment banker. "The security business is my favorite subject.I love this business," he says. "Most of the LBO guys don't know how to run a business anyway." But there were hitches, not the least of which was that, Mr. Wathen says, he proceeded almost blindly in doing the $95 million acquisition, which was completed in January 1988. "We weren't allowed to do any due diligence because of competitive reasons.If we had, it might have scared us off," he says. Five years of rapid expansion under American Brands, with an emphasis on marketing the agency's services instead of improving them, had hurt Pinkerton's profits, Mr. Wathen claims.He says his team couldn't tell whether accounts receivable had been paid or not.Pinkerton's had locked itself into low-price contracts to win new business, with no hope of profitability until the contracts expired, he adds.And regional offices were "egregiously overstaffed," he claims.One office had 19 people doing the work of three, "and half of the employees had company automobiles." American Brands declined to comment on Mr. Wathen's accusations. The acquisition combined the country's second-largest security company, Pinkerton's, with 1987 sales of $410 million, and the fourth largest, California Plant Protection, with $250 million in sales, creating the industry's biggest firm, which took on the Pinkerton's name.Even after divesting itself of $120 million of unprofitable business, the new Pinkerton's will have sales of about $610 million this year and operating profit roughly double the industry average of 2%-3% of sales, says Lloyd Greif of Sutro & Co. in Los Angeles, which arranged the Pinkerton's acquisition. Mr. Wathen says his turnaround strategy has been simple: just hack away at the fat.He began by closing 120 of the combined companies' 260 offices in two months, eliminating about 31% of the company's 2,500-person adminstrative staff, including more than 100 sales positions.He shut down the company's tony New York headquarters.Pinkerton's world headquarters today is a nondescript, two-story office building across the street from the small Van Nuys Airport. Next, Mr. Wathen raised Pinkerton's rates, which were 75-cents-an-hour lower than California Plant Protection's average rate of around $8.63.And he got rid of low-margin businesses that just weren't making money for the company. Mr. Wathen, who says Pinkerton's had a loss of nearly $8 million in 1987 under American Brands, boasts that he's made Pinkerton's profitable again.But Mr. Wathen's team still must pay down about $82 million of long-term bank debt from the acquisition within the next four years.Last year, earnings of the combined companies didn't cover debt service and Pinkerton's was forced to borrow $20 million of subordinated debt. "We wouldn't have had to refinance if a lot of the problems hadn't been there," Mr. Wathen says.This year, Mr. Wathen says the firm will be able to service debt and still turn a modest profit. Now Pinkerton's could become entangled in a protracted legal fracas with its former parent.The company recently filed suit in state court in Los Angeles against American Brands, seeking at least $40 million in damages from the Old Greenwich, Conn.-based company. The suit alleges that American Brands misrepresented the financial condition of Pinkerton's before the sale, failed to disclose pending lawsuits and material contracts in which Pinkerton's was in default, hadn't registered the Pinkerton's name and trademark in the United Kingdom and didn't tell California Plant Protection about some labor controversies. "We have previously had discussions with representatives of Pinkerton's Inc. concerning the {sale of the company} and we concluded that we did not have liability under the contract," says American Brands. "As this is now a litigation matter, we have no further comment." And then there's the case of the missing gold watch. The lawsuit alleges that an inventory of Pinkerton's memorabilia disclosed that one of the watches hadn't been forked over by American Brands. "American Brand's failure to surrender the gold watch has damaged new Pinkerton's in an amount as yet {to be} determined and deprived it of a valuable artifact for which it had bargained," the suit charges. The key to Pinkerton's future will be sticking to what it does best -- being a security company, says Mr. Wathen.The company is also renewing its emphasis on investigations, particularly undercover investigations for corporations.Although investigations now account for only about 5% of Pinkerton's total revenue, that side of the business has traditionally been the more "glamorous" of the two and it carries historical and sentimental value. (Author Dashiell Hammett, who wrote "The Maltese Falcon," was a former Pinkerton's detective.) American Brands "just had a different approach," Mr. Wathen says. "Their approach didn't work; mine is."
The head trader of Chemical Banking Corp. 's interest-rate options group has left the company, following valuation errors that resulted in a $33 million charge against its third-quarter results. Chemical said Steven Edelson resigned recently, but one individual close to the situation said the resignation was forced.Mr. Edelson couldn't be reached for comment. A separate inquiry by Chemical cleared Mr. Edelson of allegations that he had been lavishly entertained by a New York money broker.That inquiry hasn't resolved similar allegations involving another Chemical options trader. In other personnel changes stemming from problems in its options unit: -- Chemical named James Kennedy, a trader in swaps contracts for the bank, to assume Mr. Edelson's duties and to be trading manager for derivative products, including swaps and interest-rate options. -- Lee Wakeman, vice president in charge of options research who discovered the valuation errors and was asked by senior management to straighten out the mess, resigned to take a position in asset and liability management at Continental Bank in Chicago.Mr. Wakeman, whom Chemical tried to keep, didn't return calls for comment. Separately, Chemical confirmed that it took an undisclosed charge in the second quarter for losses on forward-rate agreements involving foreign currency written by its branch in Frankfurt, West Germany. A Chemical spokeswoman said the second-quarter charge was "not material" and that no personnel changes were made as a result.The spokeswoman said the Frankfurt situation was "totally different" from problems in the interest-rate options unit. According to individuals familiar with the situation, the Frankfurt loss stemmed from a computer program for calculating prices on forward-rate agreements that failed to envision an interest-rate environment where short-term rates were equal to or higher than long-term rates. While the incidents involving interest-rate options and forward-rate agreements are unrelated, some observers say they echo a 1987 incident in which Bankers Trust New York Corp. restated the value of its foreign exchange options contracts downward by about $80 million. These complex products require close monitoring because each must be valued separately in light of current market conditions.In an interest-rate options contract, a client pays a fee to a bank for custom-tailored protection against adverse interest-rate swings for a specified period.In a forward-rate agreement, a client agrees to an exchange rate on a future currency transaction. Some competitors maintain the interestrate option loss, in particular, may have resulted more from Chemical's taking large and often contrarian positions than a valuation problem. Started three years ago, Chemical's interest-rate options group was a leading force in the field.From 1987 to 1988, the value of Chemical's option contracts outstanding mushroomed to $37 billion from $17 billion.More importantly, the volume of options written exceeded those purchased by almost 2-to-1.With such a lopsided book of options, traders say, Chemical was more vulnerable to erroneous valuation assumptions. The Chemical spokeswoman said the bank has examined its methodologies and internal controls. "We consider our internal controls to have worked well," she said, adding that some procedures have been strengthened.Its valuation methodologies, she said, "are recognized as some of the best on the Street.Not a lot was needed to be done."
Sea Containers Ltd., in a long-awaited move to repel a hostile takeover bid, said it will sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 apiece. Together with the 3.6 million shares currently controlled by management, subsidiaries and directors, the completed tender offer would give Sea Containers a controlling stake. Describing itself as "asset rich," Sea Containers said it will move immediately to sell two ports, various ferries, ferry services, containers, and other investments.Of the proceeds, $500 million will be used to fund its tender offer.Sea Containers added that the recapitalization plan will reduce its debt by more than $500 million. The company, which has 13.8 million common shares outstanding, said in mid-June that it was considering a restructuring to ward off a hostile takeover attempt by two European shipping concerns.In late May, Stena Holding AG and Tiphook PLC, launched a $50-a-share, or $777 million, tender offer for the Hamilton, Bermuda-based Sea Containers.In mid-August, the companies, through their jointly owned holding company, Temple Holdings Ltd., sweetened the offer to $63 a share, or $963 million. Officials for Temple declined to comment. News of the restructuring plan sent Sea Containers' shares up $1 to $62 in New York Stock Exchange composite trading. Walter Kirchberger, an analyst with PaineWebber Inc., said that offering holders a higher, $70-a-share price is "a fairly effective method of blocking" the Stena-Tiphook bid.Michael Carstens, an analyst with Tucker Anthony & R.L. Day, added that the sale of assets would allow Sea Containers to focus on its core container businesses. For holders who decide not to tender their shares, Sea Containers will issue one share of preferred stock with a stated value of $25, plus a cash dividend on the common stock.The company said its directors, management and subsidiaries will remain long-term investors and won't tender any of their shares under the offer. Sea Containers said the offer will proceed after the Bermuda Supreme Court lifts or modifies an interim injunction restraining the company from buying its shares.That injunction resulted from litigation between Temple and Sea Containers last May. The company said the court has indicated it will make a decision on or about Nov. 27.Sea Containers will soon set a date for its annual shareholder meeting to seek holder approval for the offer.
You'd think all the stories about well-heeled communities and developers getting HUD grants would prompt Congress to tighten up on upscale housing subsidies.No way.Congress has just made it easier for the affluent to qualify for insured loans from the deficit-ridden Federal Housing Administration.It appears that the only thing Congress is learning from the HUD story is how to enlarge its control of the honey pot going to special interests. Right now, the largest loan the FHA can insure in high-cost housing markets is $101,250.Last week, housing lobbies persuaded Congress to raise the ceiling to $124,875, making FHA loans more accessible to the well-to-do.But it does that at the cost of deepening the taxpayer's exposure if the FHA is forced to pay for more loans going sour.This is no idle fearlast year the FHA lost $4.2 billion in loan defaults. But the higher mortgage ceiling is only the starter kit for what Senator Alan Cranston and Majority Leader George Mitchell have in mind for housing.The Senate Banking Committee will begin hearings next week on their proposal to expand existing federal housing programs.Other Senators want to lower the down payments required on FHA-insured loans. That would be a formula for ensuring even more FHA red ink.Experience has shown that the most important element in predicting a housing-loan default is the down payment.Because a purchaser can use an FHA loan to finance all points and closing costs, the FHA can wind up lending more than a house is worth.If housing prices continue to fall, many borrowers would be better off walking away from their homes and leaving taxpayers with the losses.Much the same thing happened with busted S&Ls, a problem Congress just "solved" with a $166 billion bailout. We hear that HUD Secretary Jack Kemp is toying with going along with some of the Cranston-Mitchell proposals.That sounds like a formula for ensuring that he gets dragged into the next HUD tar pit.A group of 27 Senators has written Mr. Kemp urging him to reject Cranston-Mitchell and focus on programs that empower the poor rather than create vast new government obligations.But even if he agrees, Mr. Kemp doesn't write the nation's housing law -- Congress does.And the majority of Members cynically view the current discrediting of HUD as mainly a chance to shove through their own slate of projects. Exhibit A is last week's House vote to fund 40 pet projects out of the same discretionary fund that is at the heart of the HUD scandal.None of the grants had been requested by HUD, judged competitively or were the subject of a single hearing. More and more observers now realize that the key to ending future HUD scandals lies in forcing Congress to clean up its own act.This week, a Baltimore Sun editorial said the Lantos subcommittee on HUD should forget about Sam Pierce's testimony for the moment and call some other witnesses: the various congressional sponsors of the 40 pork-barrel projects.The Sun concluded that Mr. Pierce is only part of the problem -- and a part that's gone. "If HUD is to be reformed," it concluded, Members of Congress will "have to start looking into, and doing something about, the practices of their colleagues." Of course, self-reform is about the last thing this Congress is interested in.Proponents of expanding FHA programs say they merely want to help home buyers who are frozen out of high-priced markets.But the FHA program is hemorrhaging bad loans.Jack Kemp has submitted a package of reforms, and they are surely headed for the Capitol Hill sausage-grinder.Like the S&L mess before it, this is a problem Congress should be solving, not ignoring.
After 20 years of pushing labor proposals to overhaul the nation's health-care system, Bert Seidman of the AFL-CIO is finding interest from an unlikely quarter: big business. Corporate leaders, frustrated by double-digit increases in health-care costs, are beginning to sound like liberal Democrats.Failure to check rising medical costs ultimately could "lead some of us who today are free-market advocates to re-examine our thinking and positions with respect to government-sponsored national health insurance," Arthur Puccini, a General Electric Co. vice president, warned earlier this year. The pocketbook impact of health benefits has driven business and labor to a surprising consensus.Both the AFL-CIO and the National Association of Manufacturers are calling for measures to control rising costs, improve quality and provide care to the 31 million Americans who currently lack health insurance. Agreement on these points is a long way from a specific program, and nobody expects the U.S. to rush toward radical restructuring of the health-care system.But there are signs that labor-management cooperation could change the politics of health-care legislation and the economics of medicine. "I can't remember a time when virtually everyone can agree on what the problem is," says Mr. Seidman, who heads the AFL-CIO's department dealing with health matters. Because the Bush administration isn't taking the initiative on health issues, business executives are dealing with congressional Democrats who champion health-care revision. "Business across the country is spending more time addressing this issue," says Sen. Edward Kennedy (D., Mass.). "It's a bottom-line issue." Business complained earlier this year when Sen. Kennedy introduced a bill that would require employers to provide a minimum level of health insurance to workers but doesn't contain cost-control measures.Partly in response, a bipartisan group of senators from the finance and labor committees is drafting a plan to attract broader support.It will feature a cost-containment provision designed to keep expanded benefits from fueling higher care prices. At 11.1% of gross national product, U.S. health costs already are the highest in the world.By contrast, Japan's equal 6.7% of GNP, a nation's total output of goods and services.Management and labor worry that the gap makes U.S. companies less competitive. Chrysler Corp. estimates that health costs add $700 to the price of each of its cars, about $300 to $500 more per car than foreign competitors pay for health. "The cost of health care is eroding standards of living and sapping industrial strength," complains Walter Maher, a Chrysler health-and-benefits specialist. Labor is upset because many companies are using higher employee insurance premiums, deductibles and co-payments to deflect surging medical costs to workers.Health benefits are contentious issues in the strikes against Pittston Co. and Nynex Corp.In their new contract this year, American Telephone & Telegraph Co. and the Communications Workers of America agreed to look for "prompt and lasting national solutions" to rising health-care costs. Some analysts are cynical about the new corporate interest in health-care overhaul.Carl Schramm, president of the Health Insurance Association of America, scoffs at "capitalists who want to socialize the entire financing system" for health. "They hope they can buy some government cost discipline," but this is a false hope, Mr. Schramm says.He asserts that government has done an even worse job of controlling its health bill than business. So far neither the Bush administration nor Congress is prepared to lead the way toward revamping health care.The administration lacks a comprehensive health-care policy.Congress still is struggling to dismantle the unpopular Catastrophic Care Act of 1988, which boosted benefits for the elderly and taxed them to pay for the new coverage. A bipartisan commission established by Congress and headed by Sen. John Rockefeller (D., W.Va.) is scheduled to present new plans for dealing with the uninsured and long-term care for the elderly by next March 1.A quadrennial commission appointed by Health and Human Services Secretary Louis Sullivan is taking a broad look at the economics of Medicare for the elderly, Medicaid for the poor and the health system in general.It is expected to report next summer. "No magic bullet will be discovered next year, an election year," says Rep. Fortney Stark (D., Calif.) But 1991 could be a window for action.The pressure for change will rise with costs. "I think employers are really going to be the ones to push for major change," says Sharon Canner, a health expert at NAM. Any major attempt to revamp the health-care system is likely to trigger opposition from politically powerful interest groups, particularly the American Medical Association, and perhaps from the public as well, if Congress takes steps that patients fear will limit the availability of care. The NAM embraces efforts, which both the administration and the medical profession have begun, to measure the effectiveness of medical treatments and then to draft medical-practice guidelines.Advocates hope that such standards will improve treatment while limiting unnecessary tests and medical procedures.HHS Secretary Sullivan estimates that as much as 25% of the medical procedures performed each year may be inappropriate or unnecessary. Limiting care won't be easy or popular. "To slow the rise in total spending, it will be necessary to reduce per-capita use of services," the NAM warns in a policy statement.This will "require us to define -- and redefine -- what is `necessary' or `appropriate' care.This involves trade-offs and {it} cuts against the grain of existing consumer and even provider conceptions of what is `necessary. '" The AFL-CIO also embraces treatment guidelines.In addition, it's toying with an approach that would impose health-expenditure ceilings or budgets on the government as a whole and on individual states as a way to slow health-care spending.At a meeting here on Nov. 15, the labor federation plans to launch a major effort to build grass-roots support for health-care overhaul.
Georgia-Pacific Corp. 's unsolicited $3.19 billion bid for Great Northern Nekoosa Corp. was hailed by Wall Street despite a cool reception by the target company. William R. Laidig, Nekoosa's chairman, chief executive officer and president, characterized the $58-a-share bid as "uninvited" and said Nekoosa's board would consider the offer "in due course." T. Marshall Hahn Jr., Georgia-Pacific's chairman and chief executive, said in an interview that all terms of the offer are negotiable.He added that he had spoken with Mr. Laidig, whom he referred to as a friend, by telephone Monday evening. "I'm hopeful that we'll have further discussions," Mr. Hahn said. On Wall Street, takeover stock traders bid Nekoosa's stock well above the Georgia-Pacific bid, assuming that Nekoosa's will either be sold to a rival bidder or to Georgia-Pacific at a higher price -- as much as $75 a share, according to some estimates. Yesterday, Nekoosa common closed in composite New York Stock Exchange trading at $62.875, up $20.125, on volume of almost 6.3 million shares.Georgia-Pacific closed down $2.50, at $50.875 in Big Board trading. Takeover stock traders noted that with the junk-bond market in disarray, Georgia-Pacific's bid is an indication of where the takeover game is headed: namely, industrial companies can continue bidding for one another, but financial buyers such as leveraged buy-out firms will be at a disadvantage in obtaining financing. "The way the world is shaping up, the strategic buyer is going to be the rule and the financial buyer is going to be the exception," said one trader. For the paper industry specifically, most analysts said the deal will spur a wave of paper-company takeovers, possibly involving such companies as Union Camp Corp., Federal Paperboard Co. and Mead Corp.The analysts argued that Georgia-Pacific's offer, the first hostile bid ever among major players in the paper industry, ends the unwritten taboo on hostile bids, and will push managements to look closely at the industry's several attractive takeover candidates. "Consolidation has been long overdue.It was just the culture of the industry that kept it from happening.The Georgia-Pacific offer has definitely changed the landscape," said Gary Palmero of Oppenheimer & Co. Added Mark Rogers of Prudential-Bache Securities Inc.: "It's much easier to be second." A Georgia-Pacific acquisition of Nekoosa would create the largest U.S. forest-products company.Based on 1988 sales, Georgia-Pacific ranked third at $9.51 billion, behind Weyerhaeuser Co. at $10 billion and International Paper Co. at $9.53 billion.Nekoosa ranked 11th with sales of $3.59 billion.The combined company would have had 1988 sales of $13.1 billion. But such a combination also presents great risks.At a time when most analysts and industry consultants say pulp and paper prices are heading for a dive, adding capacity and debt could squeeze Georgia-Pacific if the industry declines more than the company expects.Moreover, any unexpected strengthening of the dollar would hurt Georgia-Pacific because two of Nekoosa's major product lines -- containerboard, which is used to make shipping boxes, and market pulp -- are exported in large quantities. "Nobody knows how deep the cycle is going to be," said Rod Young, vice president of Resource Information Systems Inc., a Bedford, Mass., economic-forecasting firm. "Depending on how far down you go, it may be difficult to pay off that debt." One person familiar with Georgia-Pacific said the acquisition would more than double the company's debt of almost $3 billion.It also could be a drag on Georgia-Pacific earnings because the roughly $1.5 billion in goodwill -- the amount by which the bid exceeds Nekoosa's book value of $1.5 billion -- will have to be subtracted from earnings over a period of decades. Georgia-Pacific's Mr. Hahn said that a combined operation would allow savings in many ways.The two companies each produce market pulp, containerboard and white paper.That means goods could be manufactured closer to customers, saving shipping costs, he said. Moreover, production runs would be longer, cutting inefficiencies from adjusting machinery between production cycles.And Georgia-Pacific could save money in selling pulp, because the company uses its own sales organization while Nekoosa employs higher-cost agents. Mr. Hahn said Georgia-Pacific has accounted in its strategy for a "significant downturn" in the pulp and paper industry, an event that he said would temporarily dilute earnings.But he said that even under those conditions, the company still would realize a savings of tens of millions of dollars in the first year following a merger. "The fit is so good, we see this as a time of opportunity," he said. Georgia-Pacific, which has suspended its stock-repurchase program, would finance the acquisition with all bank debt, provided by banks led by BankAmerica Corp. Georgia-Pacific owns 349,900 Nekoosa shares and would need federal antitrust clearance to buy more than $15 million worth.U.S. clearance also is needed for the proposed acquisition. For Nekoosa, defense options may be undercut somewhat by the precarious state of the junk-bond market, which limits how much value the target could reach in a debt-financed recapitalization.The company's chairman, Mr. Laidig, and a group of advisers met at the offices of Wachtel Lipton Rosen & Katz, a law firm specializing in takeover defense.Nekoosa also is being advised by Goldman, Sachs & Co. Georgia-Pacific's advisers are Wasserstein, Perella & Co., which stands to receive a $15 million fee if the takeover succeeds, and the law firm of Shearman & Sterling. People familiar with Nekoosa said its board isn't likely to meet before the week after next to respond to the bid.The board has 10 business days to respond. In addition to the usual array of defenses, including a so-called poison pill and a staggered board, Nekoosa has another takeover defense: a Maine state law barring hostile bidders from merging acquired businesses for five years.Nekoosa is incorporated in Maine. Georgia-Pacific has filed a lawsuit in federal court in Maine challenging the poison pill and the Maine merger law. Nekoosa's poison pill allows shareholders to vote to rescind it, but Georgia-Pacific isn't likely to pursue such a course immediately because that would take 90 to 120 days, and wouldn't affect the provisions of the Maine law. Among companies mentioned by analysts as possible counterbidders for Nekoosa are International Paper, Weyerhaeuser, Canadian Pacific Ltd. and MacMillan Bloedel Ltd. "I'm sure everybody else is putting pencil to paper," said Kathryn McAuley, an analyst with First Manhattan Co. International Paper and Weyerhaeuser declined to comment.Canadian Pacific couldn't be reached for comment, and MacMillan Bloedel said it hasn't any plans to make a bid for Nekoosa. Investors were quick to spot other potential takeover candidates, all of which have strong cash flows and low-cost operations.Among paper company stocks that rallied on the Big Board because of the offer were Union Camp, up $2.75 to $37.75, Federal Paperboard, up $1.75 to $27.875, Mead, up $2.375 to $38.75, and Temple Inland Inc., up $3.75 to $62.25.In over-the-counter national trading, Bowater Inc. jumped $1.50 to $27.50. Some analysts argued that there won't be a flurry of takeovers because the industry's continuing capacity-expansion program is eating up available cash.Moreover, some analysts said they expect a foreign paper company with deeper pockets than Georgia-Pacific to end up acquiring Nekoosa, signaling to the rest of the industry that hostile bids are unproductive. "This is a one-time event," said Lawrence Ross of PaineWebber Inc., referring to the Georgia-Pacific bid. But many analysts believe that, given the attractiveness of paper companies' cash flows, as well as the frantic consolidation of the paper industry in Europe, there will be at least a few more big hostile bids for U.S. companies within the next several months.The buyers, these analysts added, could be either foreign or other U.S.concerns. "The Georgia-Pacific bid may open the door to a new era of consolidation" in the paper industry, said Mark Devario of Shearson Lehman Hutton Inc. "I don't think anyone is now immune from takeover," said Robert Schneider of Duff & Phelps Inc., Chicago.He added: "Every paper company management has to be saying to itself, `Before someone comes after me, I'm going to go after somebody. '" Prudential-Bache's Mr. Rodgers said he doesn't see the industry's capacity-expansion program hindering takeover activity.Several projects, he said, are still on the drawing board.Moreover, "it's a lot cheaper and quicker to buy a plant than to build one." Indeed, a number of analysts said that Japanese paper companies are hungry to acquire additional manufacturing capacity anywhere in the world.Some predicted that Nekoosa will end up being owned by a Japanese company. Meanwhile, Shearson Lehman's Mr. Devario said that, to stay competitive, the U.S. paper industry needs to catch up with the European industry.Since the most-recent wave of friendly takeovers was completed in the U.S. in 1986, there have been more than 100 mergers and acquisitions within the European paper industry, he said.
Private industry's labor costs rose 1.2% in the third quarter, matching the second-quarter pace, as health insurance costs continued to soar, the Labor Department said. The increase in wage and benefit costs in the third quarter was greater than the 1% rise reported for the third quarter of 1988. "Wage increases and overall compensation increases are beginning to curl upward a little bit," said Audrey Freedman, a labor economist at the Conference Board, a business research organization. "One would have thought this would have happened two or three years ago as the labor market tightened.It is a considerably delayed reaction and it's not a severe one at all," she added. The new data underscored the severity of the nation's health-care cost problem.In the 12 months ended in September, wages and salaries of private-sector workers rose 4.4%, while health insurance costs spurted by 13.7%.The consumer price index climbed 4.3% in the same period. Despite the big increases in health-care costs, wages still account for a far greater share of overall labor costs.The overall private-sector employment cost index, which includes both wages and benefits, rose 4.7% in the 12 months ended in September, compared with 4.5% for both the 12 months ended in June and the 12 months ended September 1988. Labor costs are climbing at a far more rapid pace in the health care industry than in other industries.For instance, wages of private-sector hospital workers leaped 6.6% in the 12 months ended in September, compared with 4.4% for workers in all industries. In the third quarter, wages and salaries in all private industry rose 1.2%, compared with 1% increases in both the second quarter and in the third quarter of 1988. For the past five years, unions haven't managed to win wage increases as large as those granted to nonunion workers.For private-sector union workers, the cost of wages and benefits rose 0.9% in the third quarter.For nonunion workers, the costs rose 1.4%. Labor costs continued to rise more rapidly in service industries than in goods-producing industries, the report showed.It also found them rising much more in the Northeast than elsewhere. Including employees of state and local -- but not the federal -- governments, the employment cost index rose 1.6% in the third quarter, compared with a 1.3% rise in the same quarter in 1988.The index rose 1.1% in the second quarter. For the 12 months ended in September, this index was up 5.1%.It rose 4.8% for the 12 months ended in June and 4.7% in the 12 months ended in September 1988. Unlike most economic indicators, none of these figures are adjusted for seasonal variations.
A shiny new takeover deal sparked a big rally in stock prices, which buoyed the dollar.Bond prices also edged higher. Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa helped drive the Dow Jones Industrial Average up 41.60 points, to 2645.08, in active trading.The dollar drew strength from the stock market's climb.Long-term bond prices rose despite trepidation about what a key economic report will show today. Analysts said the offer for Great Northern Nekoosa broke the pall that settled over the takeover business for the past three weeks in the wake of the collapsed UAL Corp. buy-out.Great Northern Nekoosa soared $20.125 a share, to $62.875, substantially above the $58 a share Georgia-Pacific is offering.That indicates speculators are betting a higher offer is in the wings.Prices of other paper makers rose sharply, although Georgia-Pacific fell $2.50 a share, to $50.875. Despite all the furor over program trading, program trading played a big role in yesterday's rally.Some traders point out that as the big brokerage firms back out of program trading for their own accounts or for clients, opportunities increase for others to engage in the controversial practice.That's what happened yesterday. The rally notwithstanding, there are plenty of worries about the short-term course of stock prices.A slowing economy and its effect on corporate earnings is the foremost concern of many traders and analysts.Unless the Federal Reserve eases interest rates soon to stimulate the economy, profits could remain disappointing. Yesterday's major economic news -- a 0.2% rise in the September index of leading economic indicators -- had little impact on financial markets.But the next important piece of news on the economy's health -- this morning's release of the national purchasing manager's survey for October -- could prompt investors into action. A report late yesterday that the Chicago-area purchasing managers survey showed increased economic activity in that part of the country cut into bond-price gains.If the national survey confirms a pickup in the manufacturing sector, it could further depress bond prices while bolstering stock prices and the dollar. Meanwhile, bond investors are laboring under the onus of a national debt ceiling debate.Although the Treasury is expected to announce details of its November quarterly refunding operation today, the Nov. 79 schedule could be delayed unless Congress and the president act soon to lift the nation's debt ceiling. In major market activity: Stock prices rallied in active trading.Volume on the New York Stock Exchange totaled 176.1 million shares.Advancing issues on the Big Board surged ahead of decliners 1,111 to Bond prices rose.The Treasury's benchmark 30-year bond gained less than a quarter of a point, or less than $2.50 for each $1,000 of face amount.The yield on the issue slipped to 7.91%. The dollar gained against most foreign currencies.In late afternoon New York trading, the dollar was at 1.8415 marks and 142.85 yen compared with 1.8340 marks and 141.90 yen late Monday.
Philip Morris Cos. is launching a massive corporate advertising campaign that will put the tobacco giant's name in TV commercials for the first time since the early 1950s, when it stopped advertising its namesake cigarette brand on television. The campaign, a patriotic celebration of the 200th anniversary of the Bill of Rights, doesn't mention cigarettes or smoking; cigarette ads have been prohibited on television since 1971.But even before it begins, the campaign is drawing fire from anti-smoking advocates, who criticize Philip Morris's attempt to bolster its beleaguered image by wrapping itself in the document that is a cornerstone of American democracy. Philip Morris, which became the U.S.'s largest food company last year with its $12.9 billion acquisition of Kraft Inc., seems determined to evolve beyond its roots in Marlboro country.The company's research suggests that its name recognition among most consumers remains unusually low, although its array of brands -- including Maxwell House coffee, Jell-O, Cheez Whiz, and Miller beer -- blanket supermarket shelves. The company is expected to spend about $30 million a year on its two-year corporate campaign, created by WPP Group's Ogilvy & Mather unit in New York.The initial spots will appear during morning and prime-time news shows.Philip Morris hopes that by taking its Bill of Rights theme to the airwaves, in addition to publications, it will reach the broadest possible audience.Until now, its corporate ads, mainly promoting its sponsorship of the arts, have appeared almost exclusively in newspapers and magazines. "Most people -- whether in Toledo, Tucson or Topeka -- haven't got a clue who we are," says Guy L. Smith, Philip Morris's vice president of corporate affairs. "If they think well of the company through our support of the Bill of Rights, it follows they'll think well of our products." Mr. Smith says the Bill of Rights commercial, which trumpets the themes of liberty and freedom of expression, isn't designed to have any special appeal for smokers.Although Philip Morris typically tries to defend the rights of smokers with free-choice arguments, "this has nothing to do with cigarettes, nor will it ever," the spokesman says. But some anti-smoking activists disagree, expressing anger at what they see as the company's attempt to purchase innocence by association. "I'm outraged because this company is portraying itself at the heart of American culture and political freedom and in fact it's a killer," says Michael Pertschuk, former chairman of the Federal Trade Commission and a tobacco-industry critic. "It should be treated like the Medellin {drug} mafia, not the Founding Fathers." Mr. Pertschuk adds that the new commercial dovetails perfectly with major aspects of Philip Morris's political strategy.These include trying to protect its print advertising by invoking the First Amendment, and wooing blacks by portraying itself as a protector of civil rights. (The commercial features, among others, the voice of Martin Luther King Jr., the slain civil rights leader.) Many marketers say Philip Morris's approach will be effective, but they agree that the ads' implied smoking message is unmistakable. "This is clever, subliminal advertising that really says, `Smokers have rights, too, '" says Al Ries, chairman of Trout & Ries Inc., a Greenwich, Conn., marketing strategy firm. "This is designed to get the wagons in a circle and defend the smoking franchise." Richard Winger, a partner at Boston Consulting Group, adds: "It's very popular to drape yourself in the flag these days.If you can do that and at the same time send a message that supports your business, that's brilliant." RJR Nabisco Inc. and American Brands Inc. say they have no plans to follow Philip Morris's lead. (Indeed, RJR Nabisco is currently under fire for having sent 80-second videotapes touting its Now brand to consumers who smoke American Brands' Carltons.) Despite the criticism, Philip Morris's corporate campaign runs little risk of getting yanked off the tube. "They aren't showing James Madison taking a puff or lighting up," says Laurence Tribe, a professor of constitutional law at Harvard University. "All they are trying to do is borrow some of the legitimacy of the Bill of Rights itself."
Technology stocks woke up, helping the over-the-counter market rise from its recent doldrums. The Nasdaq Composite Index surged 4.26, or about 0.94%, to 455.63.It was the market's biggest gain since rising more than 7 points on Oct. 19.Advancing OTC stocks outpaced decliners by 1,120 to 806. But the move lagged a stronger rise in New York Stock Exchange issues.The Big Board's composite index was up more than 1.4%, and the Dow Jones Industrial Average jumped 1.6%. Nasdaq's gain was led by its biggest industrial stocks.The Nasdaq 100 rose 7.08 to 445.23.The Financial Index of 100 biggest banks and insurance issues added 2.19 to 447.76.Other strong sectors were indicated in gains of the Transportation Index, up 7.55 to 475.35, and the Utility Index, up 8.68 to 730.37. National Market System volume improved to 94,425,000 shares from 71.7 million Monday. Many of Nasdaq's biggest technology stocks were in the forefront of the rally.Microsoft added 2 1/8 to 81 3/4 and Oracle Systems rose 1 1/2 to 23 1/4.Intel was up 1 3/8 to 33 3/4. But traders who watch the stocks warned the rise may be yet another "one-day phenomenon." Technology stocks bore the brunt of the OTC market's recent sell-off, and traders say it's natural that they rebound sharply now that the market has turned around.But, they caution, conservative investors would do well to sell into the strength. "They are always the first to be sold when people are taking profits, because people are most scared of the high-technology stocks," said Robin West, director of research for Ladenburg Thalmann's Lanyi division, which specializes in emerging growth stocks. The technology group includes many of the OTC market's biggest stocks, which dominate the market-weighted Nasdaq Composite Index.Analysts say rallies in the group historically have lifted the market, while weakness in the sector often sank unlisted share prices broadly. But increasing volatility in the sector has exhausted investors who try to follow its dips and swings.The stocks have been pummeled repeatedly by inventory gluts and disappointing earnings as the industry matures and slows.Some even claim the group has become a lagging, not leading, indicator. The technology sector of the Dow Jones Equity Market Index has risen only about 6.24% this year, while the Nasdaq Composite Index has gained 18.35%.While the composite index lost less than a third of its year-to-date gains in the market's recent decline, the technology group's gains were more than halved. The OTC technology sector is far from a cohesive unit.The group is divided primarily between software, semiconductors and computers.While computer stocks have taken the biggest hit from the slowdown in the industry, many software and semiconductor stocks have continued to outperform the market.Microsoft is up more than 50% this year, while Intel is up more than 40%. The technology group is also split between large companies and small, with the biggest stocks trading as blue-chip issues in the institutional marketplace, while the smaller stocks churn on their individual merits or faults, analysts say.The volatility of smaller technology companies has served the group well overall in recent stock trading, according to Hambrecht & Quist's technology stock indexes. The brokerage firm tracks technology stocks with its Technology Index, which appreciated only 10.59% in the first nine months of this year.But the firm also tracks smaller technology companies as a subset of the larger group.That index, which contains technology companies with annual revenues of $200 million or less, gained 17.97% by Sept. 30 this year -- still lagging the S&P 500, but leading larger technology firms. Yesterday, bank stocks lagged behind the overall OTC market.The Nasdaq Bank Index rose 0.17 to 432.78.George Jennison, who trades bank stocks for Shearson Lehman Hutton, said the stocks tend to fall behind because they aren't traded as much as many other issues.But, he added, interest-rate-sensitive stocks in general are stalled. "The interest-rate sensitives aren't rallying with the rest of the market because of fears about what the (Federal Reserve) will do," Mr. Jennison said.He said that investors will scour the October employment report, due out Friday, for clues about the direction of the economy and the immediate outlook for interest rates. On the other hand, Mr. Jennison noted that the recent slide in bank and thrift stocks was at least halted yesterday. Shearson Lehman Hutton gave small investors some welcome news by announcing that it would no longer handle index-arbitrage-related program trades for its accounts.Shearson, with its in-house order execution system, has handled the bulk of such program trades in the over-the-counter market.The trading has been blamed for much of the market's recent volatility.Jaguar topped the most-active list, as its American depository receipts climbed 1 3/4 to 13 5/8 with more than 6.6 million ADRs traded.Britain said it would waive its "golden share" in the luxury auto maker if shareholders vote to allow a suitor to acquire more than 15% of the company.The announcement effectively removes the British government as an impediment to a takeover of the company, which is being stalked by General Motors and Ford. Gen-Probe was another active takeover stock.It surged 2 3/4 to 6 on volume of more than 1.7 million shares after the company agreed to be acquired by Japan's Chugai Pharmaceutical for about $110 million -- almost double the market price of Gen-Probe's stock. Priam Corp. lost 5/32 to 3/32 after filing for protection from its creditors under Chapter 11 of the federal Bankruptcy Code. MCI Communications added 1 1/2 to 43 3/8.The company has toted up over $40 million in contracts in the past two days.Monday, MCI announced a $27 million multiyear contract with the investment bank Stuart-James.Yesterday, it received a $15 million, three-year contract from Drexel Burnham Lambert. Florida National Banks of Fla. slid 1 1/8 to 24 3/4.Late Monday, the Federal Reserve Board said it is delaying approval of First Union Corp. 's proposed $849 million acquisition of Florida National Banks pending the outcome of an examination into First Union's lending practices in low-income heighborhoods.Florida National said yesterday that it remains committed to the merger. Dycom Industries gained 3/4 to 16 3/4 after it said it agreed to buy Ansco & Associates and two affiliates for cash and stock.The value of the transaction wasn't disclosed.The companies being acquired provide telecommunications services to the telephone industry. Willamette Industries, whose stock has suffered steep losses in recent sessions, surged 1 1/2 to 49.The stock was one of many in the paper products industry that rose following Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa.
A permanent smoking ban on virtually all domestic airline routes won approval from the House, which separately sent to President Bush a nearly $67 billion fiscal 1990 bill including the first construction funds for the space station. The smoking prohibition remains attached to a $27.1 billion transportation bill that must still overcome budget obstacles in Congress.But yesterday's action put to rest any lingering resistance from tobacco interests.Faced with inevitable defeat, the once dominant industry declined any recorded vote on the ban, which covers all but a fraction of 1% of daily flights in the U.S. The sole exceptions are an estimated 30 flights of six hours or more beginning or ending in Hawaii and Alaska.Assuming final enactment this month, the prohibition will take effect 96 days later, or in early February. On a 394-21 roll call, the House adopted the underlying transportation measure.But the bill still faces budget questions because it also is the vehicle for an estimated $3.1 billion in supplemental appropriations for law enforcement and anti-drug programs.The additional spending pushes the measure more than $2 billion above its prescribed budget ceiling, and the House Appropriations Committee leadership must now seek a waiver in hopes of completing action today. The separate $67 billion bill sent to the White House had budget difficulties, too, but was saved ultimately by its importance to a broad spectrum of interests in Congress and the administration itself.No single bill this year includes more discretionary spending for domestic programs and, apart from the space station, the measure incorporates far-reaching provisions affecting the federal mortgage market. The current ceiling on home loans insured by the Federal Housing Administration is increased to $124,875 during fiscal 1990.And in anticipation of increased lending, the cap on FHA loan guarantees would rise to approximately $73.8 billion. Separately, the bill gives authority to the Department of Housing and Urban Development to facilitate the refinancing of high-interest loans subsidized by the government under the so-called Section 235 home-ownership program for lower-income families.This provision met early and strong resistance from investment bankers worried about disruptions in their clients' portfolios.But the promise of at least $15 million in new savings helped to forge a partnership between HUD Secretary Jack Kemp and lawmakers wanting to protect their projects elsewhere. The estimated $1.8 billion for the space station would be double last year's level, and total appropriations for the National Aeronautics and Space Administration would grow 16% to nearly $12.4 billion.A string of costly projects, including the high-speed national aerospace plane and the advanced communications technology satellite, would continue to be developed within these limits.And while imposing a statutory cap of $1.6 billion on future spending, the bill would give NASA $30 million for the start-up of the CRAF-Cassini mission, a successor to the Voyager space probe. Separately, the National Science Foundation is promised a 7.7% increase to bring its appropriations to $2.07 billion.And while pursuing these initiatives, Congress and the White House are squeezed too by steady increases -- $551 million -- in veteran's medical care. The result is that all sides resort to sleight of hand to make room for competing housing and environmental programs, and the commitments now will drive excess spending into fiscal 1991. Senior members of the House Budget Committee are reduced in frustration to raising doomed parliamentary obstacles to individual bills, yet admit that much of the disorder now stems from the fiscal legerdemain associated with their own summit agreement with the White House this past spring. "It's hard to get the administration's attention on anything," said Rep. Bill Frenzel (R., Minn.), "because the whole agreement was built on gimmickry." Among the subsidies continued in the transportation bill is $30.7 million to maintain commercial air service for an estimated 92 communities, often in rural areas.Senate Appropriations Committee Chairman Robert Byrd (D., W.Va.) strongly resisted deeper cuts sought by the House.But at a time when the White House wants to kill the entire program, Republicans have been among its leading champions. Sen. Pete Domenici (R., N.M.), the ranking Republican on the Senate Budget Committee, used his influence to preserve more than $132,000 in subsidies for air service to Sante Fe, N.M., and more than $2.1 million would go for service to eight communities in the western Nebraska district of GOP Rep. Virginia Smith on the House Appropriations Committee. GP Express, an independent airline serving much of Nebraska, estimates that nearly 40% of its revenues come from the subsidies that, in some cases, exceed the cost of a ticket.For example, a passenger can fly from Chardon, Neb., to Denver for as little as $89 to $109, according to prices quoted by the company.But given the few number of users, the cost to the federal government per passenger is estimated at $193, according to House and Senate appropriations committees. The House action yesterday came as the Senate remained mired in difficulties over a $17.25 billion measure covering the budgets for the State, Commerce, and Justice departments in fiscal 1990.The compromise bill passed the House last week but has now provoked jurisdictional fights with the Senate Foreign Relations Committee, which jealously protects its prerogatives over operations at the State Department. The same jealousy can breed confusion, however, in the absence of any authorization bill this year.House and Senate appropriators sought to establish a Nov. 30 deadline after which their bill would become the last word on how funds are distributed.But on a 53-45 roll call this provision was stripped from the bill last night after Foreign Relations Chairman Claiborne Pell (D., R.I.) complained that it was an intrusion on exclusive powers vested in his panel for more than three decades.
General Dynamics Corp. was given an $843 million Air Force contract for F-16 aircraft and related equipment. Loral Corp. 's defense systems division received a $54.9 million Air Force contract for a F-15 weapons system trainer. Southern Air Transport Inc. won $47.5 million in Air Force and Navy contracts for transportation services. International Business Machines Corp. was given a $31.2 million Air Force contract for satellite data systems equipment. Directed Technologies received a $28.3 million Defense Advanced Research Projects Agency contract for advanced propulsion systems research. Propper International Inc. got a $22.8 million Defense Logistics Agency contract for combat camouflage trousers.
Santa Fe Pacific was the kind of story Wall Street loved. Since the value of its assets wasn't known, analysts were free to pick a number.In one of many rosy scenarios, Bear Stearns's Gary Schneider wrote in March that its real estate alone had a value of $4.5 billion.Throw in its railroad, minerals, pipeline and oil assets, he and others argued, and the Chicago-based conglomerate should be worth 30 a share. And why should holders expect to realize that presumed "worth?" That was another reason the Street loved Santa Fe.With real estate experts Olympia & York and Samuel Zell's Itel owning close to 40% of Santa Fe's stock, management was under pressure -- in a favored phrase of Wall Street -- to quickly "maximize values." But value, it turns out, is only what a buyer will pay.And with the company's recent announcement that it is contemplating a partial sale of its real estate, the values suddenly look poorer. Santa Fe has disclosed that it is negotiating to sell a 20% interest in its real estate unit to the California Public Employees Retirement System for roughly $400 million.Since the real estate unit also includes debt, the imputed value of the real estate itself is close to $3 billion. "The implied current net asset value of 22.70 {per share} is well below the 30 level that the Street believed," PaineWebber says. "The upside was in the intangible real estate . . . which is no longer an intangible." So what is Santa Fe worth? If the railroad is valued on a private market basis -- at the same multiple of earnings as in the recent sale of CNW -- it would have a value of $1.65 billion.A compromise between bulls and bears puts remaining assets and cash -- including its 44% stake in its publicly traded pipeline -- at $2 billion.Santa Fe also has $3.7 billion in debt.In addition, its railroad lost a $750 million antitrust suit, which is on appeal, and which analysts say could be settled for one-third that amount. That nets out to about $17 a share for the company on a private market basis.But Santa Fe, currently trading at 18 7/8, isn't likely to realize private market values by selling assets, because the tax against it would be onerous.Its plan, instead, is to spin off the remainder of its real estate unit and to possibly do the same with its mining and energy assets. Robert D. Krebs, Santa Fe's chairman, argues that since its businesses are valued in different ways, "the sum of the parts may be greater than the whole." But it isn't clear why that should be so.The spinoff argument, after all, reverses the current notion that assets are worth more to private buyers than to public shareholders.And real estate usually hasn't traded well under public ownership. Salomon Brothers says, "We believe the real estate properties would trade at a discount . . . after the realty unit is spun off. . . . And what about the cost, and risk, of waiting to realize the hypothetical private market values?" Some analysts remain bullish.Mr. Schneider of Bear Stearns says he is recalculating the worth of the company's assets and, in the meantime, is sticking to his "buy" recommendation on the belief that he will find "values" of 30 a share.He adds: "If for any reason I don't have the values, then I won't recommend it." First Boston's Graeme Anne Lidgerwood values Santa Fe at 24, down from her earlier estimate of 29.Her recent report classifies the stock as a "hold." But it appears to be the sort of hold one makes while heading for the door. Quoting from the report: "The stock's narrow discount to asset valuation makes it a relatively unappealing investment at current prices, especially given the risk that our projections could be on the aggressive side." Chairman Krebs says the California pension fund is getting a bargain price that wouldn't have been offered to others.In other words: The real estate has a higher value than the pending deal suggests.Since most of the unit's real estate is in California, the pension fund will be a useful political ally in a state where development is often held hostage to zoning boards.And, as Mr. Zell says, with Itel and O&Y on the unit's board, the real estate will be run by "a very unusual group" to say the least. It is possible then that Santa Fe's real estate -- even in a state imperiled by earthquakes -- could, one day, fetch a king's ransom.But as Drexel analyst Linda Dunn notes, its properties will be developed over 15 to 20 years.So despite Wall Street's rosy talk of quickly "maximizing values," holders could be in for a long wait. Santa Fe Pacific (NYSE; Symbol: SFX) Business: Railroad, natural resources and real estate Year ended Dec. 31, 1988: Revenue: $3.14 billion Net loss: $46.5 million; 30 cents a share Third quarter, Sept. 30, 1989: Net income: 21 cents a share vs. net loss of $4.11 a share Average daily trading volume: 344,354 shares Common shares outstanding: 157.4 million
Intelogic Trace Inc. said it is exploring alternatives to maximize shareholder value, including the possible sale of the company. But Asher B. Edelman, who controls about 16% of the San Antonio, Texas, computer-servicing company, insisted that the announcement didn't have anything to do with the ongoing battle for control of Datapoint Corp. Any sale of Intelogic could have an impact on the battle between Mr. Edelman and New York attorney Martin Ackerman for control of Datapoint.Intelogic holds 27.5% of Datapoint's common shares outstanding. Mr. Edelman said the decision "has nothing to do with Marty Ackerman." Mr. Ackerman contended that it was a direct response to his efforts to gain control of Datapoint. Intelogic was spun off from Datapoint four years ago, shortly after Mr. Edelman took control of Datapoint.
Federal and state thrift examiners said they saw evidence of criminal wrongdoing in the collapse of Lincoln Savings & Loan Association, and a California regulator described an attempted "whitewash" by deputies of chief federal regulator Danny Wall. In a riveting day of hearings before the House Banking Committee, the examiners described finding shredded documents, a mysterious Panamanian subsidiary, millions of dollars funneled into a Swiss bank, and a complacent attitude by Mr. Wall's deputies, one of whom was portrayed as acting more like a public-relations man for the thrift than a federal regulator. A California official also said he sent the Federal Bureau of Investigation a packet of documents relating to a previously reported $400,000 contribution from Lincoln's parent solicited by Sen. Alan Cranston (D., Calif.). Federal examiner Alex Barabolak said Lincoln's operations amounted to "pyramiding debt to provide a luxurious life style for its owners." Another federal examiner, John Meek, said Lincoln's principal owner, Charles Keating Jr., and his family drew off at least $34 million from the thrift in salaries, bonuses and proceeds from securities sales in the 3 1/2 years before federal authorities seized it earlier this year.Lincoln's collapse may cost taxpayers as much as $2.5 billion, according to estimates, making it the most expensive thrift failure in history. "I think there's overwhelming evidence to indicate probable criminal activity," said Mr. Meek, who participated last year in an examination of the Irvine, Calif., thrift.He said the evidence pointed to wrongdoing by Mr. Keating "and others," although he didn't allege any specific violation. Richard Newsom, a California state official who last year examined Lincoln's parent, American Continental Corp., said he also saw evidence that crimes had been committed. "It sure smells like it," he said.He said 30% of the loans he sampled were "dead meat on the day they were made." The state examiner also said supervisors of a parallel federal examination seemed so reluctant to demand write-downs of Lincoln's bad loans that he immediately grew suspicious. "Later on, my concerns about a whitewash became even more serious," he said.He called the sour loans "appalling" and added, "You opened the file up and it just jumped at you." Leonard Bickwit, a Washington attorney for Lincoln's parent corporation, said in an interview, "We deny any criminal behavior by the association or its officers." "Those who testified {yesterday} have consistently maintained that anyone who didn't agree with them is part of a coverup, a whitewash, or the subject of excessive influence," Mr. Bickwit said. "We simply don't agree with that or the findings of their investigation." Mr. Wall's deputies complained that they hadn't been given an opportunity to respond to the criticism brought out during the Banking Committee's hearings, which Committee Chairman Henry Gonzalez (D., Texas) has used as a forum to flay Mr. Wall's handling of the affair and to demand that he step aside from his job. "A couple of things Mr. Newsom said were at least misleading," said Kevin O'Connell, one of the Washington regulators responsible for the handling of Lincoln.In an interview, he said federal regulators eventually declared one of the loans the state regulator cited to be a total loss, and forced Lincoln to make an $18 million downward adjustment on another. "Our response to the whitewash would simply be, look what happened," another Washington official, Alvin Smuzynski, said in an interview.Federal officials seized the association in April, a day after the parent corporation entered bankruptcy-law proceedings.The government later brought a $1.1 billion fraud suit against Mr. Keating and others. Rep. Gonzalez has complained that regulators waited far too long, however, ignoring a recommendation from regional officials to place Lincoln into receivership two years before it failed. "He took the reckless course of ignoring the evidence," Rep. Gonzalez said. State thrift examiner Eugene Stelzer said he found the chief federal examiner Steve Scott to be totally uninterested in one allegedly fraudulent series of transactions. "Frankly, it was like he worked for the Lincoln public-relations department," Mr. Stelzer testified.And David Riley, a federal examiner who worked under Mr. Scott, said he found his chief oddly upbeat about Lincoln.Asked to comment, a spokesman for Mr. Scott said: "Mr.Scott has spoken to his attorney, who has advised him not to talk to anybody." Mr. Meek said that a day or two before Lincoln's parent entered bankruptcy proceedings, he and other examiners saw "a truck with a sign on it that said it was from the `Document Destruction Center. ' We observed at least two large plastic bags of shredded paper loaded into this truck." Mr. Bickwit said the paper had been donated to "a charitable organization that sells it for recycling.They shredded it simply because it contained financial information about their creditors and depositors." Mr. Meek said his suspicions were aroused by several foreign investments by Lincoln, including $22 million paid to Credit Suisse of Switzerland, an $18 million interest in Saudi European Bank in Paris, a $17.5 million investment in a Bahamas trading company, and a recently discovered holding in a Panama-based company, Southbrook Holdings.Mr. Bickwit said, "I can see why an S&L examiner would regard these as unusual activities," but said the overseas investments "essentially broke even" for the S&L.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.) LUTHER BURBANK CROSS-BRED PLANTS to produce the billion-dollar Idaho potato.Bioengineers set out to duplicate that feat -- scientifically and commercially -- with new life forms. In 1953, James Watson and his colleagues unlocked the double helix of DNA (deoxyribonucleic acid), the genetic key to heredity.Twenty years later, two California academics, Stanley Cohen and Herbert Boyer, made "recombinant" DNA, transplanting a toad's gene into bacteria, which then reproduced toad genes. When Boyer met Robert Swanson, an M.I.T.-trained chemist-turned-entrepreneur in 1976, they saw dollar signs.With $500 apiece and an injection of outside capital, they formed Genentech Inc. Commercial gene-splicing was born. Genentech's first product, a brain protein called somatostatin, proved its technology.The next to be cloned, human insulin, had market potential and Genentech licensed it to Eli Lilly, which produced 80% of the insulin used by 1.5 million U.S. diabetics. Their laboratory credentials established, Boyer and Swanson headed for Wall Street in 1980.At the time, Genentech had only one profitable year behind it (a modest $116,000 on revenue of $2.6 million in 1979) and no product of its own on the market.Nonetheless, the $36 million issue they floated in 1980 opened at $35 and leaped to $89 within 20 minutes. The trip from the test tube was not without snags.Boyer and Cohen, for instance, both still university researchers, had to be talked into applying for a patent on their gene-splicing technique -- and then the Patent Office refused to grant it.That judgment, in turn, was reversed by the U.S. Supreme Court, leaving Cohen and Boyer holding the first patents for making recombinant DNA (now assigned to their schools). Gene-splicing now is an integral part of the drug business.Genentech's 1988 sales were $335 million, both from licensing and its own products.
Senate leaders traded proposals aimed at speeding action on legislation to narrow the deficit and raise the federal government's debt limit -- but the major stumbling block remains President Bush's proposal to cut the capital-gains tax rate. Democrats want the tax provision to be a separate bill, subject to the usual procedural obstacles.Republicans, meanwhile, want to try to protect the measure by combining it with two politically popular issues that Democrats could find hard to block. The talks between Senate Majority Leader George Mitchell of Maine and his GOP counterpart, Sen. Robert Dole of Kansas, are expected to resume today. Last night, after meeting with Mr. Bush and administration officials at the White House, Mr. Dole proposed streamlining the fiscal 1990 deficit-reduction bill, now stalled in a House-Senate conference committee, and passing a long-term extension of the federal debt ceiling without any accompanying amendments. Under this plan, two provisions currently in the House version of the deficit-cutting bill -- repeal of both the catastrophic-illness insurance program and a controversial 1986 tax provision intended to counter discrimination in employee-benefit plans -- would be made into a separate bill. Republicans would try to attach a capital-gains provision to that legislation, hoping the political popularity of its other two parts would dissuade Democrats from blocking it. Democrats want to avoid having to make that choice by making the capital-gains tax cut an individual bill.Sen. Mitchell is confident he has sufficient votes to block such a measure with procedural actions. Both plans would drop child-care provisions from the House version of the deficit-reduction legislation and let it progress as a separate bill.While that could make it vulnerable to a veto by Mr. Bush, Democrats argue that a presidential rejection would give their party a valuable issue in next year's congressional elections. Senate Democrats are to meet today to consider the GOP proposal. Yesterday, Mr. Dole seemed weary of the Bush administration's strategy of pushing the capital-gains measure at every chance in the face of Democratic procedural hurdles.Pushing the issue on legislation needed to avoid default by the federal government, he told reporters, "doesn't seem to be very good strategy to me." At 12:01 a.m. EST today, the federal government's temporary $2.87 trillion debt limit expired.To avoid default, lawmakers must pass legislation raising the limit to $3.12 trillion from $2.80 trillion by next Wednesday, according to the Treasury. Pressed by Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee, Treasury Undersecretary Robert Glauber told a congressional hearing that the administration would give up its demand for the capital-gains tax cut if faced with a potential default.
LTV Steel Co. is boosting the prices of flat rolled steel products by an average of 3% following a recent erosion in the prices of such crucial steel products. The big questions are whether the increase, effective Jan. 1, 1990, will stick, and whether other major steelmakers will follow suit.It is widely expected that they will.The increase is on the base price, which is already being discounted by virtually all steel producers. But LTV's move marks the first effort by a major steelmaker to counter the free fall in spot prices.Major steel producers are selling cold rolled sheet steel at about $370 a ton, compared with a peak price of $520 a ton in 1988.Second-tier companies are receiving even less per ton.LTV's planned increase, which was announced in an Oct. 26 memo to district managers, doesn't affect electrogalvanized steel or tin plate. LTV confirmed the price-increase plan, saying the move is designed to more accurately reflect the value of products and to put steel on more equal footing with other commodities.A spokesman for LTV Steel, which is a unit of Dallas-based LTV Corp., noted that steel prices, adjusted for inflation, increased only 1.7% between 1981 and the fourth quarter of 1988, while the prices of other industrial commodities increased nearly five times as much.At the same time, steelmakers are trying to invest more to modernize technology and make themselves more competitive. But analysts say the company is also trying to prevent further price drops.Moreover, they note that LTV may be trying to send a signal to major customers, such as Chrysler Corp. and Whirlpool Corp., that steelmakers need more money.Both companies are in the process of negotiating contracts with LTV and others. "They {LTV} may believe this can impact contract negotiations and is their signal to the world that now is the time to get tough on prices," said Peter Marcus, an analyst with PaineWebber Inc. Mr. Marcus believes spot steel prices will continue to fall through early 1990 and then reverse themselves.He isn't convinced, though, that the price decline reflects falling demand because the world economy remains relatively strong.And while customers such as steel service centers are continuing to reduce inventories through the fourth quarter, they eventually will begin stocking up again, he notes. It won't be clear for months whether the price increase will stick.Steelmakers announced a round of base-price increases last year, but began offering sizable discounts over the summer.In fact, LTV was the first steelmaker to publicly boost discounts for buyers of cold rolled sheet steel and hot-dipped galvanized sheet steel. In composite New York Stock Exchange trading yesterday, LTV common shares fell 12.5 cents to close at $1.50.
Stock prices surged as a multibillion-dollar takeover proposal helped restore market players' confidence about the prospects for further deal-making. Paper and forest-products stocks were especially strong, as the offer for Great Northern Nekoosa by Georgia-Pacific triggered speculation that the industry could be in for a wave of merger activity. The Dow Jones Industrial Average climbed 41.60 to 2645.08 even though some late selling caused the market to retreat from session highs.Trading was moderate, with 176,100,000 shares changing hands on the New York Stock Exchange. Aside from the takeover news, big buy orders were placed for blue-chip shares in afternoon trading.Traders said the buy programs came from very large institutional accounts that were also active in the stock-index futures markets.At one point, almost all of the shares in the 20-stock Major Market Index, which mimics the industrial average, were sharply higher. Some 1,111 Big Board issues advanced in price and only 448 declined, while broader market averages rose sharply.Standard & Poor's 500-Stock Index climbed 5.29 to 340.36, the Dow Jones Equity Market Index added 4.70 to 318.79 and the New York Stock Exchange Composite Index climbed 2.65 to Great Northern surged 20 1/8 to 62 7/8, well above Georgia-Pacific's offering price of $58 a share, amid speculation that other suitors for the company would surface or that the bid would be raised.Nearly 6.3 million shares, or about 11.5% of the company's shares outstanding, changed hands in Big Board composite trading. With stocks having been battered lately because of the collapse of takeover offers for UAL, the parent company of United Airlines, and AMR, the parent of American Airlines, analysts viewed the proposal as a psychological lift for the market. The $3.18 billion bid, which had been rumored since last week, "creates a better feeling that there's value in the market at current levels and renews prospects for a hot tape," says A.C. Moore, director of research at Argus Research Corp. Traders and analysts alike said the market's surge also reflected an easing of concerns about volatility because of moves by a number of brokerage firms to curtail or cease stock-index arbitrage.Much of the instability in stock prices lately has been blamed on arbitrage trading, designed to profit from differences in prices between stocks and index futures. "People are looking for an ability to try and read the market, rather than be manipulated," said Dudley A. Eppel, manager of equity trading at Donaldson, Lufkin & Jenrette.He noted that institutional investors showed "pretty general" interest in stocks in the latest session. But traders also said arbitrage-related trading contributed to the market's surge, as buy programs boosted prices shortly after the opening and sporadically through the remainder of the session. Georgia-Pacific fell 2 1/2 to 50 7/8, but most paper and forest-products stocks firmed as market players speculated about other potential industry takeover targets. Within the paper sector, Mead climbed 2 3/8 to 38 3/4 on 1.3 million shares, Union Camp rose 2 3/4 to 37 3/4, Federal Paper Board added 1 3/4 to 23 7/8, Bowater gained 1 1/2 to 27 1/2, Stone Container rose 1 to 26 1/8 and Temple-Inland jumped 3 3/4 to 62 1/4. Forest-products issues showing strength included Champion International, which went up 1 3/8 to 31 7/8; Weyerhaeuser, up 3/4 to 27 1/4; Louisiana-Pacific, up 1 1/8 to 40 3/8, and Boise Cascade, up 5/8 to 42. The theme of industry consolidation had surfaced earlier this year among drug stocks, which posted solid gains in the latest session.Pfizer gained 1 7/8 to 67 5/8, Schering-Plough added 2 1/4 to 75 3/4, Eli Lilly rose 1 3/8 to 62 1/8 and Upjohn firmed 3/4 to 38. Also, SmithKline Beecham rose 1 3/8 to 39 1/2.An advisory committee of the Food and Drug Administration recommended that the agency approve Eminase, the company's heart drug. Two rumored restructuring candidates in the oil industry moved higher: Chevron, which rose 1 3/4 to 68 1/4 on 3.5 million shares, and USX, which gained 1 1/4 to 34 5/8.Pennzoil is rumored to be accumulating a stake in Chevron in order to push for a revamping of the company; investor Carl Icahn has recently increased his stake in USX, which separately reported earnings that were in line with expectations. Paramount Communications, which completed the $3.35 billion sale of its Associates Corp. financial-services unit to Ford Motor, gained 1 1/8 to 55 7/8 after losing one point Monday amid rumors of a delay.The company said the sale would produce a $1.2 billion gain in the fourth quarter. BankAmerica climbed 1 3/4 to 30 after PaineWebber boosted its investment opinion on the stock to its highest rating.The upgrade reflected the 20% decline in shares of the bank since the firm lowered its rating in early October, based on the belief the stock had become expensive.Sea Containers, which unveiled a proposed restructuring, advanced 1 to 62.The company said it would repurchase half of its common shares at $70 each, sell an estimated $1.1 billion in assets and pay a special preferred-stock dividend to common-stock holders. Shaw Industries, which agreed to acquire Armstrong World Industries' carpet operations for an undisclosed price, rose 2 1/4 to 26 1/8.Armstrong added 1/8 to 39 1/8. ERC Corp. rose 7/8 to 12.The company agreed definitively to be acquired by Ogden Corp. in a stock swap valued at about $82.5 million.Ogden gained 1 1/4 to 32 7/8. Ocean Drilling & Research dropped 1 1/4 to 21 1/2 following news of a restructuring plan that calls for the company to reorganize its drilling business into a separate company and offer a 15% to 20% stake to the public. The American Stock Exchange Market Value Index rose 1.71 to 370.58.Volume totaled 11,820,000 shares. Imperial Holly fell 1 5/8 to 27 1/8 in the wake of its third-quarter earnings report.Net income was down from a year ago, when a gain from the restructuring of a retirement plan boosted earnigs.
BUSH AND GORBACHEV WILL HOLD two days of informal talks next month. The president said that he and the Kremlin leader would meet Dec. 2-3 aboard U.S. and Soviet naval vessels in the Mediterranean to discuss a wide range of issues without a formal agenda.A simultaneous announcement was made in Moscow.Bush said that neither he nor Gorbachev expected any "substantial decisions or agreements." The seaborne meetings won't disrupt plans for a formal summit next spring or summer, at which an arms-control treaty is likely to be completed. The two leaders are expected to discuss changes sweeping the East bloc as well as human-rights issues, regional disputes and economic cooperation. Israel's army lifted a blockade around a Palestinian town in the occupied West Bank, ending a 42-day campaign of seizing cars, furniture and other goods to crush a tax boycott.While residents claimed a victory, military authorities said they had confiscated the equivalent of more than $1.5 million to make up for the unpaid taxes. East German leader Krenz arrived in Moscow for talks today with Gorbachev on restructuring proposals.In East Berlin, Communist Party officials considered legalizing New Forum, the country's largest opposition alliance, as about 20,000 demonstrators staged protests in three cities to press demands for democratic freedoms. The House approved a permanent smoking ban on nearly all domestic airline routes as part of a $27.1 billion transportation bill that must still overcome budget obstacles in Congress.The chamber also sent to Bush a nearly $67 billion fiscal 1990 measure that includes the first construction funds for a space station. Nicaragua's Ortega postponed until today a decision on whether to end a 19-month-old cease-fire in the conflict with the Contra rebels.In Washington, the Senate voted to condemn Ortega's threat to cancel the truce, and Bush said he would review U.S. policy toward Managua, including the possibility of renewing military aid to the rebels. Chinese leader Deng told former President Nixon that the U.S. was deeply involved in "the turmoil and counterrevolutionary rebellion" that gripped Beijing last spring.Nixon, on the fourth day of a private visit to China, said that damage to Sino-U.S. relations was "very great," calling the situation "the most serious" since 1972. Afghanistan's troops broke through a guerrilla blockade on the strategic Salang Highway, allowing trucks carrying food and other necessities to reach Kabul after a missile attack on rebel strongholds.The convoy of about 100 vehicles was the first to make deliveries to the capital in about 10 days. Turkey's legislature elected Prime Minister Ozal as the country's first civilian president since 1960, opening the way for a change of government under a new premier he will select.The vote in Ankara was boycotted by opposition politicians, who vowed to oust Ozal.He begins his seven-year term Nov. 9, succeeding Kenan Evren. South Africa's government dismissed demands by right-wing Conservatives, the nation's main opposition party, for emergency talks on Pretoria's recent tolerance of dissent.The government also urged whites to refrain from panic over growing black protests, such as the massive anti-apartheid rally Sunday on the outskirts of Soweto. Researchers in Belgium said they have developed a genetic engineering technique for creating hybrid plants for a number of crops, such as cotton, soybeans and rice.The scientists at Plant Genetic Systems N.V. isolated a gene that could lead to a generation of plants possessing a high-production trait. A bomb exploded at a leftist union hall in San Salvador, killing at least eight people and injuring about 30 others, including two Americans, authorities said.The blast, which wrecked the opposition labor group's offices, was the latest in a series of attacks in El Salvador's 10-year-old civil war. Hungary's Parliament voted to hold a national referendum on an election to fill the new post of president.The balloting to decide when and how to fill the position, which replaces a collective presidency under a pact signed by the ruling Socialists and opposition groups, is to be held Nov. The State Department denied asylum to a Vietnamese man who escaped from his homeland by lashing himself to the rudder housing of a tanker for two days in monsoon seas.A spokesman for Democratic Sen. Pell of Rhode Island said, however, that the Immigration and Naturalization Service would review the stowaway's request.
Under attack by its own listed companies and powerful floor traders, the New York Stock Exchange is considering reinstituting a "collar" on program trading that it abandoned last year, according to people familiar with the Big Board. The exchange also may step up its disclosure of firms engaged in program trading, these people said. Big Board officials wouldn't comment publicly.But in an interview in which he called the stock market's volatility a "national problem," Big Board Chairman John J. Phelan Jr. said, "We are going to try to do some things in the short intermediate term" to help the situation. Mr. Phelan has been viewed by many exchange members as being indifferent to stock-price swings caused by program trades.He said he is "very surprised" by the furor over program trading and the exchange's role in it that has raged in recent days. Mr. Phelan said that the Big Board has been trying to deal quietly with the issue, but that banning computer-assisted trading strategies entirely, as some investors want, would be like "taking everybody out of an automobile and making them ride a horse." The exchange has a board meeting scheduled for tomorrow, and it is expected that some public announcement could be made after that. Big Board officials have been under seige from both investors and the exchange's own floor traders since the Dow Jones Industrial Average's 190-point tumble on Oct. 13.Mr. Phelan hasn't been making public remarks in recent days, and many people have urged him to take more of a leadership role on the program trading issue. What the Big Board is considering is re-establishing a "collar" on program trading when the market moves significantly.Early last year, after a 140-point, one-day drop in the Dow, the Big Board instituted the collar, which banned program trading through the Big Board's computers whenever the Dow moved 50 points up or down in a day.It didn't work. "The collar was penetrated on a number of occasions," meaning securities firms figured out ways to conduct program trades to circumvent the collar and use the Big Board's electronic trading system, Mr. Phelan said.That was when the exchange took a new tack by publishing monthly statistics listing the top 15 program trading firms. Exchange officials emphasized that the Big Board is considering a variety of actions to deal with program trading.People familiar with the exchange said another idea likely to be approved is expanding the monthly reports on program trading to cover specific days or even hours of heavy program trading and who was doing it. Meanwhile, another big Wall Street brokerage firm joined others that have been pulling back from program trading.American Express Co. 's Shearson Lehman Hutton Inc. unit said it ceased all index-arbitrage program trading for client accounts.In stock-index arbitrage, traders buy and sell large amounts of stock with offsetting trades in stock-index futures to profit from fleeting price discrepancies between the two markets. Shearson, which in September was the 11th-biggest program trader on the Big Board, had already suspended stock-index arbitrage for its own account. Also, CS First Boston Inc. 's First Boston Corp. unit, the fifth-biggest program trader in September, is "preparing a response" to the program-trading outcry, officials of the firm said.First Boston is one of the few major Wall Street firms that haven't pulled back from program trading in recent days. Mr. Phelan is an adroit diplomat who normally appears to be solidly in control of the Big Board's factions.But he has been getting heat from all sides over program trading. Mr. Phelan's recent remarks that investors simply must get used to the stock-market volatility from program trading have drawn criticism from both the exchange's stock specialists, who make markets in individual stocks, and from many companies that have shares listed on the Big Board. Mr. Phelan said that his predicting continued volatility is just "how the world is.If bringing the message is a crime, I'm guilty of it." But he said this doesn't mean he is satisfied with the market's big swings. "We're trying to take care of a heck of a lot of constituents," Mr. Phelan said. "Each one has a different agenda." For example, in a special meeting Monday with Mr. Phelan, senior officials of some of the Big Board's 49 stock specialist firms complained that the exchange is no longer representing their interests. "We are looking for representation we haven't had," a specialist said. "We've had dictation." After another session Mr. Phelan held yesterday with major brokerage firms such as Morgan Stanley & Co., Goldman, Sachs & Co., PaineWebber Group Inc. and First Boston -- all of which have engaged in program trading -- an executive of a top brokerage firm said, "Clearly, the firms want the exchange to take leadership." Many specialist firms resent the Big Board's new "basket" product that allows institutions to buy or sell all stocks in the Standard & Poor's 500-stock index in one shot.Ultimately, the specialists view this as yet another step toward electronic trading that could eventually destroy their franchise. "His {Phelan's} own interests are in building an electronic marketplace," said a market maker. The basket product, while it has got off to a slow start, is being supported by some big brokerage firms -- another member of Mr. Phelan's splintered constituency. Mr. Phelan has had difficulty convincing the public that the Big Board is serious about curbing volatility, especially as the exchange clearly relishes its role as the home for $200 billion in stock-index funds, which buy huge baskets of stocks to mimic popular stock-market indexes like the Standard & Poor's 500, and which sometimes employ program trading.The Big Board wants to keep such index funds from fleeing to overseas markets, but only as long as it "handles it intelligently," Mr. Phelan said. Despite what some investors are suggesting, the Big Board isn't even considering a total ban on program trading or stock futures, exchange officials said.Most revisions it will propose will be geared toward slowing down program trading during stressful periods, said officials working with the exchange.Computers have made trading more rapid, but that can be fixed with some fine-tuning. "I think if you {can} speed things up, you can slow them down," Mr. Phelan said. "That's different than wrecking them." While volatility won't go away, he said, "Volatility is greater than program trading.What I'm trying to say to people is, it's proper to worry about program trading, but it's only a piece of the business." For example, Mr. Phelan said that big institutions have so much control over public investments that they can cause big swings in the market, regardless of index arbitrage. "A lot of people would like to go back to 1970," before program trading, he said. "I would like to go back to 1970.But we're not going back to 1970." Indeed, Mr. Phelan said that if stock-market volatility persists, the U.S. may lose its edge as being the best place to raise capital. "Japan's markets are more stable," he said. "If that continues, a significant number of {U.S.} companies will go over there to raise money." In coming days, when the Big Board formulates its responses to the program-trading problem, Mr. Phelan may take a more public role in the issue. Lewis L. Glucksman, vice chairman of Smith Barney, Harris Upham & Co., said: "This is a problem that's taking on a life of its own.The program trading situation seems to have driven individual investors as well as others out of the market, and even Europeans are suspicious.The exchange should take a pro-active position." For now, however, Mr. Phelan said: "I refuse to get out there and tell everybody everything is hunky-dory.We have a major problem, and that problem is volatility." Craig Torres contributed to this article.
A NEW MINIMUM-WAGE PLAN has been worked out by Congress and Bush, opening the way for the first increase in over nine years.The compromise proposal, ending a long impasse between Democrats and the president, would boost the minimum wage to $4.25 an hour by April 1991 from $3.35 now.The legislation also includes a lower "training wage" for new workers who are teen-agers. The Big Board is considering reviving a curb on program trading when the market is volatile.The exchange, which abandoned such a "collar" last year because it didn't prevent sharp price swings, has been under attack recently for not taking action against program trading. Great Northern Nekoosa reacted coolly to Georgia-Pacific's takeover bid of $58 a share, or $3.19 billion, though the suitor said all terms are negotiable.Great Northern's stock soared $20.125, to $62.875, on speculation that a higher bid would emerge. Stock prices rallied as the Georgia-Pacific bid broke the market's recent gloom.The Dow Jones industrials finished up 41.60, at 2645.08.The dollar and bond prices also closed higher. Leading indicators rose a slight 0.2% in September, a further indication the economy is slowing but without any clear sign of whether a recession looms.Meanwhile, new-home sales plunged 14% in the month. Labor costs climbed 1.2% in private industry during the third quarter, matching the second-quarter rise.Health-insurance costs soared. Time Warner and Sony could end up becoming partners in several business ventures as part of a settlement of their dispute over Hollywood producers Peter Guber and Jon Peters. A bidding war for Jaguar became more likely as Britain unexpectedly decided to end restrictions blocking a takeover of the luxury car maker. Sea Containers plans to sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 each.The company is trying to fend off a hostile bid by two European shipping firms. Eastern Airlines pilots were awarded between $60 million and $100 million in back pay by an arbitrator, a decision that could complicate the carrier's bankruptcy reorganization. LTV Steel is boosting prices of flat rolled steel products an average 3%, but it's unclear whether the increases, set for Jan. 1, 1990, will stick. Southern's Gulf Power unit paid $500,000 in fines after pleading guilty to conspiracy to make illegal political contributions and tax evasion. More big Japanese investors are buying U.S. mortgage-backed securities, reversing a recent trend. USX's profit dropped 23% in the third quarter as improved oil results failed to offset weakness in the firm's steel and natural gas operations. Miniscribe reported a negative net worth and hinted it may file for Chapter 11.The disk-drive maker disclosed a major fraud two months ago. Markets --- Stocks: Volume 176,100,000 shares.Dow Jones industrials 2645.08, up 41.60; transportation 1205.01, up 13.15; utilities 219.19, up 2.45. Bonds: Shearson Lehman Hutton Treasury index 3426.33, up Commodities: Dow Jones futures index 129.63, up 0.25; spot index 129.84, off 0.25. Dollar: 142.85 yen, up 0.95; 1.8415 marks, up 0.0075.
Bond prices staggered in seesaw trading, rising on reports of economic weakness and falling on reports of economic strength. Treasury bonds got off to a strong start, advancing modestly during overnight trading on foreign markets. "We saw good buying in Japan and excellent buying in London," said Jay Goldinger, market strategist and trader at Capital Insight Inc., Beverly Hills, Calif.The market's tempo was helped by the dollar's resiliency, he said.Late in London, the dollar was quoted at 1.8410 West German marks and 142.70 Japanese yen, up from late Monday in New York.British sterling eased to $1.5775 from $1.5825. When U.S. trading began, Treasury bonds received an additional boost from news that sales of new single-family homes fell 14% in September.The contraction was twice as large as economists projected and was the sharpest decline since a 19% drop in January 1982. Economists said the report raised speculation that the economic slowdown could turn into a recession, which would pave the way for the Federal Reserve to lower interest rates.But later in the day, a report by the Purchasing Management Association of Chicago cast doubt on the recession scenario.The association said its October index of economic activity rose to 51.6% after having been below 50% for three consecutive months.A reading below 50% indicates that the manufacturing industry is slowing while a reading above 50% suggests that the industry is expanding.Bond prices fell after the Chicago report was released. By the end of the day, bond prices were mixed.The benchmark 30-year bond was nearly 1/4 point higher, or up about $2.50 for each $1,000 face amount.New two-year notes ended unchanged while three-year and four-year notes were slightly lower.Municipal bonds ended unchanged to as much as 1/2 point higher while mortgage-backed securities were up about 1/8 point.Corporate bonds were unchanged. In the corporate market, an expected debt offering today by International Business Machines Corp. generated considerable attention. The giant computer maker is slated to offer $500 million of 30-year non-callable debentures through underwriters led by Salomon Brothers Inc. Traders expect the bonds to yield about 0.60 to 0.65 percentage point above the Treasury's benchmark 30-year bond, which ended Tuesday with a yield of about 7.90%. The last time IBM tapped the corporate debt market was in April 1988, when it offered $500 million of debt securities. IBM's visits to the debt market are closely watched by treasurers at other corporations and by credit market analysts.Some analysts believe the company has the ability to pinpoint the trough in interest-rate cycles. In October 1979, just days before the Federal Reserve raised interest rates, IBM offered $1 billion in debt securities.The boost in rates sent IBM's bonds tumbling, leaving underwriters with millions of dollars of losses and triggering a sell-off in the overall market. The company "can't be bullish if they're doing a sizable 30-year bullet," said one analyst. Others said IBM might increase the size of the offering to as much as $1 billion if investor demand is strong.The company has $1 billion in debt filed with the Securities and Exchange Commission. "I think the $500 million is a little bit of a fire drill," said Jim Ednee, head of the industrial bond department at Drexel Burnham Lambert Inc. "I think as the pricing time arrives, the bonds will come a little richer and in a larger amount." Treasury Securities Treasury prices ended mixed in light trading. The benchmark 30-year bond was quoted late at 102 12/32 to yield 7.90% compared with 102 7/32 to yield 7.92% Monday.The latest 10-year notes were unchanged at 100 16/32 to yield 7.904%. Short-term rates also were mixed.The discount rate on three-month Treasury bills rose slightly from the average rate at Monday's auction to 7.79% for a bond-equivalent yield of 8.04%.The discount rate on six-month Treasury bills fell slightly to 7.60% for a bond-equivalent yield of 7.99%. Corporate Issues Two junk bond issues were priced yesterday, including a scaled-backed offering by Beatrice Co. A spokesman for underwriters Salomon Brothers Inc. said Beatrice cut its high-yield offering to $251 million from a planned $350 million after it became clear the company would have to give investors higher yields. In the two-part offering, $151 million of senior subordinated reset notes were priced at 99.75 and carried a rate of 13 3/4%, while the $100 million of senior subordinated floating rate notes were priced to float at 4.25 percentage points above the London Interbank Offered Rate, or LIBOR.The one-year LIBOR rate yesterday was 8 7/16%. Since the recent deterioration of the junk-bond market, at least two other junk issuers have said they plan to scale back planned high-yield offerings, and several issues have been postponed. William Carmichael, Beatrice chief financial officer, said favorable market conditions in September prompted the company to plan more debt than necessary. "However, given the changes in the market conditions that have occurred since then, we decided to sell only the amount needed to proceed with our contemplated recapitalization," he said. Under the firm's original bank credit agreement, it was required to raise $250 million of subordinated debt to be used to repay some of the bank borrowings drawn to redeem $526.3 million of increasing rate debentures in August. A month ago, when Beatrice first filed to sell debt, the company had planned to offer $200 million of its senior subordinated reset notes at a yield of 12 3/4%.The $150 million in senior subordinated floating-rate notes were targeted to be offered at a price to float four percentage points above the three-month LIBOR.By October, however, market conditions had deteriorated and the reset notes were targeted to be offered at a yield of between 13 1/4% and 13 1/2%. Mr. Carmichael said investors also demanded stricter convenants. Continental Cablevision Inc., via underwriters at Morgan Stanley & Co., priced $350 million of junk bonds at par to yield 12 7/8%. Mortgage-Backed Securities J.C. Penney & Co. issued $350 million of securities backed by credit-card receivables.The securities were priced at 99.1875 to yield about 9.19%.Underwriters at First Boston Corp. said the J.C. Penney credit-card securities are the first with a 10-year average life, which is much longer than previous such issues. Elsewhere, Ginnie Mae's 9% issue for November delivery was quoted at 98 18/32 bid, up 5/32 from late Monday, to yield about 9.333% to a 12-year average life assumption. Freddie Mac's 9 1/2% issue was quoted at 99 20/32, up 3/32 from Monday.Fannie Mae's 9% issue was at 98 7/32, up 1/8. On the pricing front, an 11-class issue of $500 million Federal Home Loan Mortgage Corp. Remic mortgage securities was launched by a Morgan Stanley group.The offering is backed by Freddie Mac's 10% issue with a weighted average term to maturity of 29.583 months. Municipal Issues Municipal bonds were little changed to 1/2 point higher in late dealings. "We were oversold and today we bounced back.Some accounts came in for some blocks in the secondary {market}, which we haven't seen for a while," said one trader. "There were no {sell} lists and the calendar is lightening up a bit.There's light at the end of the tunnel for municipals," he said, adding that he expects prices to "inch up" in the near term. The market's tone improved after Monday's pricing of $813 million New York City general obligation bonds.The issue's smooth absorption eased fears that supply would overwhelm demand in coming sessions, traders said.Demand for the bonds was strong enough to permit underwriters to trim some yields in the tax-exempt portion of the offering late Monday. A two-part $75.1 million offering of wastewater treatment bonds by the New Jersey Wastewater Treatment Trust was more than half sold by late in the session, according to lead underwriter Merrill Lynch Capital Markets. The debt was reoffered priced to yield from 6% in 1991 to 7.15% in 2008-2009. Foreign Bonds Most foreign government bonds markets were quiet. West German bonds firmed a bit after Monday's fall, but traders said the market remains bearish due to speculation that interest rates could rise again. In a speech given Friday but released late Monday, Bundesbank Vice President Helmut Schlesinger suggested that it was risky to claim that the booming German economy has reached the peak of its cycle.His comments were interpreted as a sign that higher interest rates are possible.On Oct. 5, the Bundesbank raised the Lombard and discount rates by one percentage point to 8% and 6%, respectively, the highest levels in seven years. Germany's 7% bond due October 1999 was unchanged at 99.35 to yield 7.09% while the 6 3/4% notes due July 1994 rose 0.025 point to 97.275 to yield 7.445%.Japanese government bonds showed little change. Japan's benchmark No. 111 issue due 1998 ended on brokers' screens at 95.90, down 0.02 point, to yield 5.435%. British government bonds were little changed as investors awaited an address on economic policy by John Major, the new Chancellor of the Exchequer.Britain's benchmark 11 3/4% bond due 2003/2007 rose 2/32 to 111 1/2 to yield 10.14% while the 11 3/4% notes due 1991 were unchanged at 98 21/32 to yield 12.95%.
Avery Inc. said it completed the sale of Uniroyal Chemical Holding Co. to a group led by management of Uniroyal Chemical Co., the unit's main business.It valued the transaction at $800 million. Avery, which continues to operate a coal company it expects to sell at a loss, said in proxy materials it intends to seek control of one or more companies.After fees and repayment of debt, Avery is left with about $24 million in cash and securities from the Uniroyal sale.Avery paid $750 million, including various legal and financing fees, to acquire Uniroyal Chemical, Middlebury, Conn., in 1986 -- a move that burdened Avery with debt. In over-the-counter trading, Avery shares were quoted yesterday at a bid price of 93.75 cents a share. According to Avery, for the year ended Sept. 30, 1988, Uniroyal Chemical had sales of $734.2 million and a net loss of $47.1 million.An Avery spokesman said that the loss was magnified by accounting adjustments and that the company's loss was smaller on a cash basis.Uniroyal has 2,600 employees and facilities in the U.S., Canada, Brazil, Italy and Taiwan. In a related development, Avery said it completed a recapitalization in which its controlling shareholders and top officers, Nelson Peltz and Peter W. May, surrendered warrants and preferred stock in exchange for a larger stake in Avery's common shares.On a fully diluted basis, the two raised their stake to 68% from 51%. In December 1988, Messrs.Peltz and May sold their stock in Triangle Industries Inc., a packaging company they controlled, to Pechiney Corp. of France.The executives had profited handsomely by building American National Can Co., Triangle's chief asset. In January 1989, the two men acquired the non-packaging assets of Triangle, including a controlling stake in Avery and, by extension, Uniroyal Chemical.In the August proxy material, Avery said that unless it sold Uniroyal, its ability to service debt would be hurt and Avery's shareholder value would "continue to erode." Until Avery makes an acquisition, Messrs.Peltz and May will waive their direct salaries and bonuses, the company said.For at least the next six months, however, Avery will continue to pay $200,000 a month for management services to a company controlled by Messrs.Peltz and May, according to the proxy material.
The city's Department of Consumer Affairs charged Newmark & Lewis Inc. with failing to deliver on its promise of lowering prices. In a civil suit commenced in state Supreme Court in New York, the agency alleged that the consumer-electronics and appliance discount-retailing chain engaged in deceptive advertising by claiming to have "lowered every price on every item" as part of an advertising campaign that began June 1. The agency said it monitored Newmark & Lewis's advertised prices before and after the ad campaign, and found that the prices of at least 50 different items either increased or stayed the same. In late May, Newmark & Lewis announced a plan to cut prices 5% to 20% and eliminate what it called a "standard discount-retailing practice" of negotiating individual deals with customers. The consumer agency also disputed Newmark & Lewis's continuing strategy of advertising "new lower prices" when allgedly there haven't been price reductions since June 1. Richard D. Lewis, president of the 47-store chain, defended the company's pricing campaign, saying it didn't use "the misleading expression `reduced from original prices. '" Mr. Lewis said the company marked price tags and advertised at its "lowest possible prices" for all its merchandise to reduce public confusion. Mr. Lewis said the company gave the Consumer Affairs department "volumes of documents" to substantiate its statements, and made "every effort to comply" with all the agency's policies. In its suit, the consumer agency seeks fines of $1,000 per violation of the city's Consumer Protection Law, costs of investigation, and an injunction to prevent Newmark & Lewis from continuing its allegedly deceptive advertising.
Wary investors have been running for the stock market's equivalent of bomb shelters, buying shares of gold-mining and utility companies. Those two groups have recently been leading the list of stocks setting new highs.On Friday, when only a dozen common stocks hit 52-week highs on the New York Stock Exchange, five were gold-mining issues, and another four were utilities.On Monday, when a mere seven common stocks managed new highs, six were utilities or golds. At first glance, gold and utilities seem strange bedfellows.After all, gold prices usually soar when inflation is high.Utility stocks, on the other hand, thrive on disinflation, because the fat dividends utilities pay look more attractive when prices are falling (or rising slowly). But the two groups have something very important in common: They are both havens for scared money, stocks for people who hate stocks.It's as if investors, the past few days, are betting that something is going to go wrong -- even if they don't know what. If the stock market and the economy catch their breath and show that they're on firmer footing, these stocks might well fall back.Indeed, that happened to some extent yesterday, as industrial stocks rebounded, partly on news of takeovers in the paper industry. Still, a lot of investors clearly have revived their interest in gold and utility shares. "The primary overriding thing is that people are frightened," says Martin Sass, a New York money manager. "The aftershocks of Oct. 13 (when the Dow Jones Industrial Average dropped 190 points) are still reverberating." Certainly, the Oct. 13 sell-off didn't settle any stomachs.Beyond that, money managers and analysts see other problems.Inventories are creeping up; car inventories are already high, and big auto makers are idling plants.Takeover fever has cooled, removing a major horse from the market's cart. Britain's unsettled political scene also worries some investors. "The gyrations in the British government" add political uncertainty on top of high inflation and a ragged stock market, says John Hoffman, assistant director of research at Smith Barney, Harris Upham & Co. "One of the three major markets in the world is getting chewed up pretty bad." "If the Fed does not come to the rescue and produce lower short-term interest rates over the next 30 days, the market's going to flounder," says Larry Wachtel, a market analyst with Prudential-Bache Securities. With this sort of sentiment common, it's natural for investors to seek out "defensive" investments.Utilities are a classic example: Even in recessions, people continue to use electric power, water and gas at a fairly steady rate. Such defensive issues as food, tobacco, and drug stocks have been in favor for some time.But many of these stocks have now become expensive.Mr. Wachtel points to Coca-Cola Co. and PepsiCo Inc. as examples: They're selling for 18 to 22 times estimated 1990 per-share earnings. Gold stocks aren't cheap on this basis, either, with many selling for 20 times earnings or more.Even utility stocks aren't all that inexpensive, at an average of 14 times earnings.But the two groups represent a further step in defensiveness.If gold stocks and utilities continue to lead, it may signal that the market is in for rough times. That's just what Joseph Granville expects. "We are going to explode lower," says the flamboyant market seer, who had a huge following a few years back. "Anyone telling you to buy stocks in this market is technically irresponsible.You don't want to own anything long except gold stocks." One reason for his gloom is a weekly tally he keeps of stocks within a point of hitting new highs or lows.Last Friday, 96 stocks on the Big Board hit new 12-month lows.But by Mr. Granville's count, 493 issues were within one point of such lows. Robert Stovall, a veteran New York money manager and president of Stovall/ Twenty-First Securities, has money in both gold and utility issues. "I think we could very well have {an economic} slowdown, beginning very soon if not already," he says. Mr. Stovall doesn't expect an actual recession.But he does expect "a muffler dragger" of an economy, with "very slow growth, maybe one quarter of no growth at all." In such a climate, utility stocks look good to him.He favors FPL Group Inc., Florida Progress Corp., TECO Energy Inc., Wisconsin Energy Corp., and Dominion Resources Inc. The appeal of gold issues, Mr. Stovall says, is that "they're a counter group.You go into them because they move counter to the general market." He adds that gold stocks had been down so long they were "ready for a bounce." His favorites are American Barrick Resources Corp., Echo Bay Mines Ltd. and Coeur d'Alene Mines Corp. Nevertheless, Mr. Stovall emphasizes that "you don't buy {gold stocks} based on powerful fundamentals." In addition to having high price-earnings ratios, most pay puny dividends, if any. "The earning power {of gold mining companies} is restricted unless the gold price hops up over $425 an ounce," he says. Abby Cohen, an investment strategist for Drexel Burnham Lambert, also thinks it makes sense to have some money in both utilities and gold. "My outlook is for a decline of about 10% in corporate profits" in 1990, she says.But "a bunch of utilities" should post profit increases.Among utilities, Drexel currently favors Entergy Corp. and General Public Utilities Corp. As for gold, she notes that it usually rises when the dollar is weak, as it has been lately.Among gold stocks, Drexel likes Battle Mountain Gold Co., Newmont Gold Co. and Freeport-McMoRan Gold Co.
It never ceases to amaze me how the business world continues to trivialize the world's environmental problems ("Is Science, or Private Gain, Driving Ozone Policy?" by George Melloan, Business World, Oct. 24).To suggest that a 10% drop in ozone by the middle of the next century would be negligible is irresponsible and shortsighted.Consider the fact that a mere 2% drop in ozone would increase birth defects and mutations by allowing solar radiation to alter the DNA structure.Even a small reduction is unacceptable and to suggest otherwise is penny-wise and pound-foolish. The reason environmentalists "don't mind seeing new crises arise" is because there are new crises.Crises larger and more dangerous to the quality of life than they were 10 years ago.If you are doubtful, consider for a moment that the Pomton Lakes Reservoirs in northern New Jersey, which supply the tristate area with drinking water, are riddled with toxic PCBs.This is a fact and not the product of some environmental doomsayer or a group's ploy to create a market. It's time business leaders and the general public learn that mankind does not rule over this natural environment but is rather the integral, symbiotic player within nature's workings. Mark T. Kuiper Jersey City, N.J. Mr. Melloan's column was right on the money, but I wish it could have gone one step further.As an employee of a major refrigerator and freezer manufacturer, I have been heavily involved in dealing with the political manifestations of the Rowland-Molina theory (named after the researchers who found in 1974 that chlorofluorocarbons contributed to the depletion of ozone in the earth's atmosphere) and the Montreal Protocol.An important part of my effort has been to understand the science so I can explain it to corporate colleagues facing major changes in product design. In my research, I have found a paper by Joseph Scotto of the National Cancer Institute and several colleagues reporting an 11-year decrease in UV-B radiation at eight U.S. measurement sites. Our concern for the ozone layer, of course, grows out of the potential for increasing UV-B radiation, which could damage flora and fauna.The last of the measurements reported was in 1985, but recent conversations with Mr. Scotto indicated that he knew of no recent changes in the trend.I understand, but haven't yet verified, that there are studies by Norwegians, Russians and the Max Planck Institute that show either unchanging or declining UV-B at the surface. To me, this calls into question the validity of the Rowland-Molina theory and hence the whole chlorofluorocarbons replacement effort.This, in turn, threatens the massive vested interests of which you have written.My questions on this subject at a recent meeting at the World Resources Institute with representatives of the National Resource Development Commission, the Environmental Protection Agency, Friends of the Earth, etc. were greeted with derision and some mumbled comments about that report being discredited.When I expressed amazement that no one was undertaking a more current and credible UV-B study, I was urged to get back to the agenda topic, which was, ironically, a schedule for getting rid of HCFCs, the so-called soft CFCs that are such an important part of the CFC substitution scenario. Subsequently, I have learned that a private group, of which Du Pont is a part, is funding a modest program to continue data gathering at the Scotto report stations as well as to develop more sophisticated UVB measuring instruments.But this is almost an underground activity.To my knowledge, no government entities, including the EPA, are pursuing UV-B measurements.The topic never comes up in ozonedepletion "establishment" meetings, of which I have attended many. It seems to me that such measurements are a vital part of any intellectually honest evaluation of the threat posed by CFCs.While recognizing that professional environmentalists may feel threatened, I intend to urge that UV-B be monitored whenever I can. Frederick H. Hallett Vice President Industry and Government Relations White Consolidated Industries Inc. Washington The relationship between surface release of CFCs and global stratospheric ozone loss was identified back in 1974.Although, like all scientific theories, it had its initial opponents, few experts question the connection now.The discovery of the ozone "hole" over Antarctica and the results of ground-based and high-altitude aircraft experiments conducted over the past several years serve as evidence that ozone depletion is related to CFC concentrations. In the September issue of Scientific American, Thomas E. Graedel, distinguished member of the technical staff at AT&T Bell Laboratories, and Paul J. Crutzen, director of the air chemistry division of the Max Planck Institute for Chemistry in Mainz, West Germany, wrote, "It is now quite evident that chlorofluorocarbons, particularly CFC-11 and CFC-12 are the major culprits responsible for ozone depletion." Mr. Melloan quotes Peter Teagan and invokes the name of Arthur D. Little Inc. to support his statement.However, unlike Messrs.Graedel and Crutzen, who are both pioneers in the study of atmospheric chemistry, Mr. Teagan has no special expertise in the area.He is a mechanical engineer, not an atmospheric chemist. It is insulting and demeaning to say that scientists "needed new crises to generate new grants and contracts" and that environmental groups need them to stay in business.Solving the global environmental problems we all face will require an unprecedented level of cooperation and communication among industry, policy makers and the scientific community world-wide. Karen Fine Coburn Publisher Global Environmental Change Report Arlington, Mass.
Nearly two months after saying it had been the victim of widespread fraud, MiniScribe Corp. disclosed it had a negative net worth of $88 million as of July 2 and hinted that it might be forced to file for protection under bankruptcy laws. Richard Rifenburgh, chairman and chief executive of the Longmont, Colo., disk-drive maker, also said the company continued losing money in the third quarter and expects to sustain further losses through the end of the year. Mr. Rifenburgh told industry analysts he is moving "aggressively" to negotiate out-of-court settlements on a number of shareholder lawsuits, but noted that the company could file for bankruptcy-law protection if settlement talks fail.Mr. Rifenburgh also noted that 150 million shares of MiniScribe common stock were traded during the past three years, "so there's a tremendous amount of exposure." MiniScribe has said that its financial results for the past three fiscal years would have to be restated because of the allegedly fraudulent accounting and marketing practices that inflated revenues and net income. MiniScribe also hasn't filed any financial statements for 1989.Mr. Rifenburgh said such statements should be ready by the end of November.He said he expects the company to have $500 million in sales for this year.He didn't say what the company expected to report for year-earlier sales, which will be restated from the previously reported $603 million. The release of MiniScribe's new balance sheet came one day after it introduced its new line of one-inch disk drives, on which it is pinning much of its hope for survival.Although it is not the first company to produce the thinner drives, which store information in personal computers, MiniScribe says it is the first with an 80-megabyte drive; the company plans to introduce a 120-megabyte drive next year. Analysts and consultants had mixed reactions to yesterday's announcements, praising Mr. Rifenburgh's efforts but questioning whether the company can survive in a highly competitive marketplace. "It's a wait-and-see attitude," said Dave Vellante, vice president of storage research for International Data Corp. Others pointed out that at least four other disk-drive makers will have competitive one-inch drives early next year and that the industry already operates on very thin margins. The company also faces delisting by the National Association of Securities Dealers.The company continues to trade in the over-the-counter market with an exception to listing requirements.MiniScribe filed a status report with the NASD on Monday, detailing its efforts to comply with listing requirements and requesting an extension of the exception, but hasn't received a response.MiniScribe common closed yesterday at $1.9375, down 6.25 cents, and has been trading for several months at less than $3 a share. Meanwhile, U.S. Attorney Jerry Rafferty in Denver is reviewing the report prepared by MiniScribe's outside directors, to determine if criminal charges should be brought before a grand jury. The MiniScribe report outlines a host of allegedly fraudulent practices, including the shipment of bricks and defective disk drives that were booked as sales, and inventory forgeries in accounting records.The internal investigation also criticized MiniScribe's auditors, Coopers & Lybrand, for allegedly ignoring numerous red flags. Mr. Rifenburgh said the board still hasn't acted on most of the internal report's recommendations, pending restatement of the balance sheet.He added that he expects to make a recommendation within a few weeks on whether MiniScribe should file its own lawsuits against former company officers and directors.
Every workday at 11 a.m., 40-year-old Mike Sinyard dons cycling clothes, hops on a bike he keeps at his Morgan Hill, Calif., office and sets out to cover a distance most people would travel only by car.As many as 50 of his employees at Specialized Bicycle Components Inc. ride with him.When they return to their desks at 1 p.m., they have pedaled 20 miles. Such fervor for cycling helped Mr. Sinyard build a creative company at the forefront of its industry.Founded by bike enthusiasts rather than businessmen, Specialized spotted the appeal of fat-tired bikes that go almost anywhere and began mass-producing them in 1981.In the past five years, the company's sales have grown to $80 million from $26 million.Today, so-called mountain bikes account for two-thirds of the $2 billion spent annually on all bicycles in the U.S.With 65% of its sales coming from mountain bikes, Specialized is widely considered to be a market leader. (Accessories, largely for mountain-bike users, account for much of the rest of sales.) But today, the company needs its entrepreneurial spirit more than ever.One large competitor after another is leaping into the booming market Specialized helped create, turning out mountain bikes with such well-known names as Schwinn, Peugeot, Raleigh and Nishiki. Thus, Mr. Sinyard's company must innovate more than ever to stay ahead of them, by developing new products specifically for mountain biking.At the same time, though, it must become more structured to better manage its growth.Accomplishing both will be a balancing act as challenging as riding a unicycle. It is a problem common to small companies that have grown fast -- especially when their success attracts big-time competitors. "The big word around Specialized is passion," says Erik Eidsmo, a former ski-industry executive whom Mr. Sinyard recruited from Citicorp to run marketing and sales. "What I hope to bring to this is another word: process.That's my challenge.It's Mike's challenge as well." Mr. Eidsmo is one of several key people from outside the cycling industry who were hired to bring the free-wheeling, fast-growing company under tighter control. "We had a lot of problems," Mr. Sinyard says.While the company's sales were soaring, "We still had a system that was probably appropriate for $10 million to $20 million in sales." Adds Mr. Eidsmo, "What felt good that day was done that day." Since his arrival in May, Mr. Eidsmo has put in place techniques learned while working for Citicorp, such as management-by-objective, detailed project plans and forecasts of company sales and product trends. "We're finally getting -- and it's been very painful -- some understanding of what the company's long-term horizon should begin to look like," Mr. Eidsmo says. "But it's risky," he says of Specialized's attempt to adopt a corporate structure. "You don't want to lose the magic" of the company's creative drive. Hoping to stay ahead of the pack, the company is emphasizing innovation.At a recent trade show, convention-goers lined up to view a new Specialized bike frame that weighs just 2.7 pounds -- a pound less than the lightest mountain-bike frame on the market.By replacing the frame's steel lugs with titanium ones, Mr. Sinyard's company plans to make its next generation of frames even lighter. At the trade show, Specialized also unveiled a revolutionary three-spoked bike wheel developed jointly by Specialized and Du Pont Co. Made of space-age materials, the wheel spokes are designed like airplane wings to shave 10 minutes off the time of a rider in a 100-mile race, the company claims.It currently costs $750, though Mr. Sinyard thinks the price can be reduced within three years to between $200 and $250.He was able to slash the price of the company's least expensive mountain bike to $279 from $750 in But demands on the company's creativity are certain to grow.Competition is intensifying as larger companies invade a mountain-bike market Mr. Sinyard's company once had virtually all to itself.U.S. Cycling Federation official Philip Milburn says mountain biking is "growing at such a monstrous rate that a lot of companies are getting into this." One especially coveted Specialized market the new players are targeting is mountain-bike accessories, which Mr. Eidsmo calls "the future of our business." Accessories not only sell faster than whole bikes, they also offer profit margins nearly double the 25% to 30% or so on sales of complete cycles.To get a piece of the business, Nike Inc., Beaverton, Ore., introduced a line of mountain-bike shoes.About a month ago, Michelin Tire Corp., Greenville, S.C., began selling mountain-bike tires, for years a Specialized stronghold. Competition in the sale of complete bikes is heating up too.Trek Bicycle Corp., which accounts for one-quarter of the $400 million in annual sales at its Milwaukee-based parent, Intrepid Corp., entered the mountain-bike business in 1983.Trek previously made only traditional road bikes, but "it didn't take a rocket scientist to change a road bike into a mountain bike," says Trek's president, Dick Burke.The segment now makes up roughly two-thirds of his company's total sales. At Giant Bicycle Inc., Rancho Dominguez, Calif., sales have tripled since the company entered the U.S. mountain-bike business in 1987.A subsidiary of a Taiwanese holding company with world-wide sales of $150 million, Giant is one example of the sudden globalization of Mr. Sinyard's once-cozy market niche.Schwinn Bicycle Co., Chicago, established joint ventures with bike companies in mainland China and Hungary to sell bikes.In the past year, Derby International Corp., Luxembourg, has acquired such major brands as Peugeot, Raleigh and Nishiki. In response to the internationalization of the business, Mr. Sinyard's company is replacing independent distributors overseas with wholly owned subsidiaries.The move will cut out the cost of a middleman and give Specialized more control over marketing and sales.But as Bill Austin, Giant's president, puts it, "With some of the bigger players consolidating their strength, the game has changed."
The head of British Satellite Broadcasting Ltd. said he hopes to raise about #450 million ($711 million) before the satellite-TV venture makes its delayed debut next spring -- with a major chunk coming from new investors. "We'll raise it through bank loans.We'll raise it through {new} equity.And we'll raise it through existing shareholders" as well as through junk bonds, said Anthony Simonds-Gooding, the private consortium's chief executive.He said he believes the bank loan, to be arranged by February, will supply about half of the financing.British Satellite, which already has raised #423.5 million from 10 backers, initially expected to seek an additional #400 million. Mr. Simonds-Gooding said the additional financing may leave British Satellite owned by about 20 investors, including Australian entrepreneur Alan Bond, whose nearly 36% stake would be reduced to as little as 20%. Bond Corp., British Satellite's biggest investor, would like to withdraw from the satellite-TV consortium, and analysts have speculated Hollywood studios might buy the Bond stake.But Mr. Simonds-Gooding said he isn't talking to any studios about investing. Besides Bond Corp., British Satellite's other backers include Pearson PLC, Reed International PLC and Granada Group PLC.The consortium faced a setback in May when technical problems forced it to postpone the September launch until next spring.Continued uncertainty about the timing of the consortium's debut could make it hard to find a #450 million cash injection. Mr. Simonds-Gooding conceded that British Satellite's potential U.K. lenders "are saying, `When you're on the air, you'll {actually} get the money. '" The bankers also insist that the loans depend on the consortium raising more money from new and existing backers. British Satellite today is unveiling a #30 million advertising and promotional drive for the consortium's planned five channels of movies, sports, entertainment and news shows.As part of the drive, the first 50,000 viewers who put up #10 each will get a package valued at #170 -- including a satellite receiving dish, equipment installation and a three-month subscription to its pay-movie service. British Satellite faces competition from Sky Television, a satellite-TV venture begun last February and owned by Rupert Murdoch's News Corp.The rivals currently are locked in a costly bidding contest for Hollywood film rights.
Shares closed sharply higher in London in the year's thinnest volume Monday, supported largely by a technical bounce after last week's sharp declines. Tokyo stocks posted a second-consecutive loss Monday, while trading in Frankfurt, West Germany, was mixed. In London, the Financial Times 100-share index finished 30.1 points higher at 2112.2.The index settled off the high of 2117.1 posted after Wall Street opened stronger.But it showed strength throughout the session, hitting a low of only 2102.2 within the first few minutes of dealings. The 30-share index settled 23.2 points higher at 1701.7.Volume was only 256.6 million shares, breaking the previous 1989 low of 276.8 million shares recorded Oct. 23.Turnover was also down substantially from 840.8 million shares on Friday. Dealers said the market was supported to some extent by a firmer pound, gains on Wall Street and shopping by market-makers to cover internal requirements for selected stocks in the 100-share index. Dealers attributed most of the day's gains to market-makers moving prices higher, rather than an outbreak of significant buying interest.Prices were up across the board, with most blue-chip stocks registering solid gains. Though the market was stronger, dealers said fresh buying interest was sidelined ahead of a potential market-affecting debate in the House of Commons set for Tuesday.It will be Chancellor of the Exchequer John Major's first appearance before the opposition Labor Party.The market is keenly interested in hearing what he has to say about the status of the current 15% base lending rate. In London trading, Courtaulds, a chemicals and textiles company, increased 15 pence to 362 after it disclosed plans to spin off its textiles operations into a separately listed company on Jan. 1.It was the most active of the 100-share index at 8.3 million shares, 6.5 million of which were traded by midday. Jaguar ended 22 higher at 747.Dealers said fresh buying was drawn into Jaguar after a senior executive of Daimler-Benz, the auto maker, told a British television interviewer during the weekend that the West German company held talks with the luxury auto maker over possible joint ventures.Although Daimler has said it isn't interested in mounting a bid for Jaguar, dealers said its name further underlined the growing interest in the British concern. Glaxo was the biggest gainer, jumping 35 to #13.78 ($21.72) on anticipation of a stock split next week.Total turnover in Glaxo was a thin 975,000 shares. In Tokyo, stocks had a second-consecutive loss Monday in quiet trading with the exception of concentrated buying in some incentive-backed issues. The Nikkei index of 225 selected issues fell 109.85 points to 35417.44. The index fell 151.20 Friday. In early trading in Tokyo Tuesday, the Nikkei index rose 35.28 points to 35452.72. On Monday, volume on the First Section was estimated at 600 million shares, down from 1.24 billion shares Friday.Declining issues outnumbered advancers 551 to 349; 224 issues were unchanged.Investors, who took profits Friday, mostly took a wait-and-see attitude Monday amid uncertainty in the foreign-currency market and New York stocks, traders said. Takamori Matsuda, an analyst at Dresdner-ABD Securities, said fading expectation for lower interest rates made investors step back from real-estate shares, which advanced last week.Some traders said institutions were waiting to see the U.S. jobless rate to be issued Friday. The Tokyo Stock Price Index of all issues listed in the First Section, which fell 15.82 points Friday, was down 5.16 points, or 0.19%, at 2676.60.The Second Section index, which fell 36.87 points Friday, was down 21.44 points, or 0.59%, to close at 3636.06.Second Section volume was estimated at 15 million shares, down from 24.5 million shares Friday. Monday's losers included railway, electric-utility and high-technology issues. The energy of participating investors streamed into Tokyu Group shares, pushing prices of its companies up across the board.Tokyu Group announced during the weekend that each Group company will buy the others' stocks to defend themselves against a rumored takeover.The announcement fueled speculation for future advances in the shares.Tokyu Department Store advanced 260 to 2410.Tokyu Corp. was up 150 at 2890.Tokyu Construction gained 170 to 1610. Other winners Monday included nonferrous metals, which attracted investors because of a surge in gold prices on the back of the unstable dollar.Petroleum companies were also popular because of expectations of a weaker dollar, which cuts dollar-denominated crude-oil prices. Share prices in Frankfurt closed narrowly mixed after listless and directionless trading.The DAX index closed at 1466.29, up only 3.36. Traders said turnover was particularly thin as investors waited for Wall Street to set the direction for the week.Most expect the decline in New York stock prices to continue this week. Another factor weighing on the Frankfurt market involves fears about the impending wage talks between the IG Metall metal-workers union and industry representatives, which could result in a wave of strikes next spring, traders said. A few blue-chip stocks posted strong gains, boosted by special factors, while the majority of shares ended little changed. Elsewhere, stock prices were lower in Brussels, Milan and Stockholm, and mixed in Amsterdam, Paris and Zurich. Stocks closed higher in Hong Kong, Manila, Seoul, Sydney, Taipei and Wellington, but were lower in Singapore. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
Director Steve Kloves took a big gamble on Michelle Pfeiffer's voice.He'd cast the actress, not exactly known for her way with a song, as the singing star of "The Fabulous Baker Boys" -- and he wanted her to carry the tunes herself.So the call went out for Sally Stevens. Ms. Stevens is what is known in the trade as a studio singer.The Los Angeles-based artist estimates that she's performed on 200-300 film scores, among them "The Abyss," "Ironweed" and "Klute." Her voice is audible on the incidental music for the TV series "The Wonder Years," "Miami Vice" and "Matlock." She has also worked frequently as a lyricist and as a vocal contractor, hiring and conducting choruses to sing movie title tracks. "Most of what I do is very anonymous.But I was not brave enough to say I was willing to starve to death to be a recording artist.And doing studio work has been a wonderful way to make a living for a long, long time," said Ms. Stevens, who for five years in a row received the Most Valuable Player award as a female studio vocalist from the National Academy of Recording Arts and Sciences, the organization that hands out the Grammys. Ms. Stevens's involvement with "Baker Boys" was the result of a long affiliation with the movie's composer, Dave Grusin. "I had written lyrics with him and had sung for him in various films and contracted voices for him," she said. "He knew my work and he called.It was really funny.When you approach a singer and tell her you don't want her to sing you always run the risk of offending.He said, `I don't know if this is going to be a compliment or an insult but . . .' Then he explained that Michelle was going to do this film and the role she was playing was that of a singer and they wanted very much for her to do her own singing if that was possible." At that point nobody, including Ms. Pfeiffer herself, was certain it would be possible. She had, after all, sung in only one movie, "Grease II," and the vocal demands of "Baker Boys" -- singing standards with only a piano backup -- were considerably more imposing -- and exposing -- than belting out a rock 'n' roll score in concert with several other singers and instruments. If Ms. Pfeiffer wasn't sure she was up to putting over numbers like "The Look of Love," "Ten Cents a Dance" and "My Funny Valentine," Ms. Stevens wasn't sure she was up to showing the way. "I had not done any coaching before," she said. "I have produced vocal performances in the studio for professional singers.But I had never taken anyone from scratch before.I had to go a lot by instinct.I think Dave thought that in my career I had done what the Susie Diamond character had done and that Michelle, consciously or unconsciously, would pick up some things." One of the first lessons took place at the Cinegrill, a lounge in the Hollywood Roosevelt Hotel where Ms. Stevens brought Ms. Pfeiffer to hear a nightclub singer and soak up some atmosphere. "Her instincts were wonderfully astute," remembered Ms. Stevens, who is in her 40s. "Michelle sensed an undercurrent of anger in the singer's performance.I think it's true with a lot of club singers who haven't had the recognition they feel they deserve or that they had hoped for." Accordingly, Ms. Pfeiffer incorporated anger into the development of her character. As for Ms. Pfeiffer's vocal development: For five or six weeks, Ms. Stevens made daily two-hour visits to the actress's Santa Monica home armed with sheet music, and on occasion albums by June Christy, Blossom Dearie and Ella Fitzgerald, artists Ms. Pfeiffer hadn't paid much mind to in the past. "I suggested Michelle listen to Ella," said Ms. Stevens. "Nobody sings better, not that I wanted her to sound like Ella but there's a quality artists of that period had that we felt the character Susie might have listened to." From the way she sang in those early sessions, it seemed clear that Michelle had been listening not to Ella but to Bob Dylan. "There was a pronunciation and approach that seemed Dylan-influenced," recalled Ms. Stevens.Vowels were swallowed, word endings were given short or no shrift. "When we worked it almost became a joke with us that I was constantly reminding her to say the consonants as well as the vowels." To explain exactly what she meant, Ms. Stevens and Mr. Grusin went into a Los Angeles studio and recorded a vocal/piano demo of the songs being considered for inclusion in the movie so that Ms. Pfeiffer could learn the numbers, correct enunciation and all.Mr. Grusin also made a demo tape with just piano to provide accompaniment when Ms. Pfeiffer practiced. What Ms. Pfeiffer had going for her besides determination -- Ms. Stevens recalled that the actress was up one night until 3 a.m. practicing "My Funny Valentine" -- was an airy alto, a nice breathy quality and intelligence. "When we first started working it was a matter of finding a language we both understood," Ms. Stevens said. "I couldn't talk with her as I would with someone who had a lot of vocal training." So what Ms. Stevens talked about was the importance of saying the words at the front of the mouth with the lips and the teeth.She urged Ms. Pfeiffer to get the feeling of a smile in her throat and to put a smile on her face to give the pitch and the sound a lift.She kept harping on the importance of overdoing the consonants and percussive endings like "T" and "K." She talked about using language as a tool, about flirting with the lyrics.And please, Michelle, when you sing the line in "Makin' Whoopee," about another sunny, funny honeymoon, don't say "funn-ih," the way Dylan would.Say "funn-eeee." Put the clean vowel ending on it.And Michelle, must you continue to smoke two packs of cigarettes a day? "It was a process of discovery," said Ms. Stevens, who admitted she sometimes felt a bit like Henry Higgins. "What I tried to do was take the sparks of the positive stuff and fan them.I tried not to do much `don't do this, don't do that. '" There was another layer to the coaching: Helping Ms. Pfeiffer sing a song the way Susie Diamond would sing it.Not brilliantly, because, after all, this was a performer who was collecting paychecks from lounges at Hiltons and Holiday Inns, but creditably and with the air of someone for whom "Ten Cents a Dance" was more than a bit autobiographical. "It was an exercise of blending Michelle's singing with Susie's singing," explained Ms. Stevens. "If `Dangerous Liaisons' had been a musical she would have had to give a different vocal performance because she was a different character in that movie." Ms. Pfeiffer's vocal performance in "Baker Boys" -- recorded for posterity on the soundtrack album (GRP) -- is such that after her first number, "More Than You Know," viewers begin murmuring to each other "Is that really her singing?That isn't really her." "I can swear that every single note in that movie was hers," averred Ms. Stevens, who had begun kidding her protege that she was going to get a `Tonight Show' booking. "Seeing Michelle up there," she added, "was like watching myself or my daughter.I was so nervous.I wanted her to be so good.I didn't want to feel as if I'd let her down." Ms. Kaufman is a free-lance writer based in New York.
As the leading candidate for president of his country in next year's election, Mario Vargas Llosa ought to be in an enviable position.But his country is Peru, where political visibility, especially for a believer in democracy and free enterprise -- a right winger in Latin American eyes -- makes a man a target for assassination.For almost any Peruvian these days, to show an interest in public office is a heroic gesture; for Mr. Vargas Llosa especially so, since he already has achieved a high position in the world's eyes as a writer.Published everywhere to universal acclaim, doted on like a movie star in the Hispanic world from Barcelona to Ushuaia, Mr. Vargas Llosa could live comfortably on his royalties and console his political conscience with the thought that Peru is a hopeless mess not of his making and that he already did his best to reform it with his magnificently cinematic novel about the years of military dictatorship of his youth, "Conversation in the Cathedral." But, after some hesitation, he is back on the stump and also still writing important novels about Peru. "The Storyteller" (Farrar, Straus & Giroux, 246 pages, $17.95), splendidly translated by Helen Lane, first appeared in Spanish in 1987 before the Peruvian economy had reached its present state of virtual collapse.And in any case the story takes place a bit earlier than that, when the guerrilla war in the highlands had not yet made internal travel a gamble with destiny.Even still, the very first sentence of this fable that weaves together Peru's most advanced and most primitive cultural strands speaks of "my unfortunate country." The narrator may be talking about the depredations of the Shining Path Maoists among the Indians of the Andes, or he may be referring to the plunging inti, Peru's rubber currency, or the corrupting effect of the cocaine trade.But he is swiftly drawn into a tangle of memories about a less newsworthy and more exotic part of Peru: its corner of the Amazon jungle. This narrator is a foil for Mr. Vargas Llosa, a cosmopolitan writer with one well-tailored leg in journalism.He is in Florence to shake himself free of Peru and get some writing done, just as Mr. Vargas Llosa has gone to Paris and now goes frequently to London for the same purpose.But this narrator happens upon some photographs in a gallery, pictures taken in Peruvian Amazonia of the untamed and nomadic Machiguenga tribe.And they remind him of his own experiences with that unhappy scattered culture and of his friend at Lima's University of San Marcos, Saul Zuratas.Saul was a high-strung student of ethnography, a Jew marked doubly as an outsider because of a huge wine-dark birthmark on his face, for which people called him Mascarita, Mask Face.Saul knew about the Machiguengas from his studies, and through him the narrator became interested in this most recalcitrant and un-Westernizable of all the indigenous peoples who had come under the Spanish yoke.Saul, meanwhile, came to believe that anthropology, even at its most benign, was as insidious a form of cultural imperialism as the superficially more blatant activities of Christian missionaries.Saul mysteriously disappears. This is what we know at the end of the opening section of "The Storyteller." The next voice we hear sounds like this: "There was no evil, there was no wind, there was no rain.The women bore pure children.If Tasurinchi wanted to eat, he dipped his hand into the river and brought out a shad flicking its tail . . ." And this: "Moving, walking.Keeping on, with or without rain, by land or by water, climbing up the mountain slopes or climbing down the ravines." The speaker is never identified.He tells his stories in his majestically simple way, in a "language" all his own.There are creation myths and cosmologies and hunting stories -- a whole culture is contained within these dreamy narratives.It is as though Mr. Vargas Llosa had recorded a storytelling session at a Machiguenga campfire.And this is just the effect he hopes to have on the reader, as he alternates chapters in his "own" voice with chapters somehow "borrowed" from the Machiguenga storyteller. For most of the book, there is no direct connection between its urban and its Amazonian modes.But the contrast between them becomes a living thing through the brilliant contrast of narrative styles that Mr. Vargas Llosa creates.He controls this counterpoint like a novelistic Bach, reaching an audacious extreme in a hilarious chapter in which the "Vargas Llosa" voice relates his adventures as an inept television newsman.But the joke turns serious when a reportage takes him to Amazonia and he encounters the missionaries who know more than anyone else about the Machiguengas.By this point, the narrator has become obsessed with finding out about the Machiguenga storytellers, who, he had heard years before, functioned like cultural glue for a tribe split into many small bands in constant motion through the jungle.The storytellers traveled among the bands, reminding them of their identity.But why would no Machiguenga the narrator meets during his reportage even admit that there were storytellers? The narrator eventually deduces the extraordinary answer, which is confirmed in a literally Kafkaesque manner by a storyteller in the next chapter.I am trying to give away as little as possible, but this is not really a mystery or some kind of jungle thriller.It will be read for the brilliant clash of styles of narration and the even more brilliant way that they have been tied together into a large metaphor for literature and its function in society. A baby boom in sub-Saharan Africa, the world's poorest region, poses a threat for the area's future. The region's population, currently estimated at some 500 million people, is growing by 3.2% a year -- "faster than any major region has ever experienced over a sustained period," the World Bank noted in a recent review of the region between the great desert and South Africa.This is more than six times the rate for industrial nations. "Rapid population growth impedes sub-Saharan Africa's progress toward virtually all its major goals," including higher living standards, the bank said.Noting that traditional African culture respects a woman with many offspring, it said substantial resources, including foreign aid, are needed to effect change. Otherwise, the bank said, "By the time a child born today is 22, if present trends continue, sub-Saharan Africa's population will have doubled.When that child is 40, it will have quadrupled." West Germany's Lufthansa has agreed to buy a 10% stake in Austrian Airlines when the Austrian government continues next spring to sell parts of the carrier to the public, an Austrian Airlines spokesman said.Swissair will at the same time raise its stake in Austrian Airlines to 10% from the current 8% holding, he added.Elsewhere, Singapore Airlines Ltd., following its recently announced tie-up with Delta Air Lines Inc., is now "contemplating an alliance" with one of several European carriers, Chairman J.Y. Pillay said. King Fahd of Saudi Arabia dismissed as untrue allegations that his country's relations with Kuwait were marred by the Saudis' execution last month of 16 Kuwaiti Shiites; the Shiites had been convicted for bombings at Mecca.The king stressed to the Kuwaiti Al-Seyassah newspaper that the terrorists were given a fair trial in accordance with Islamic law. "Those people have been convicted after committing an awful crime," the king said.The Kuwaiti government hasn't issued any comment on the executions. Israel is ending six weeks of seizing property from Palestinians who refuse to pay income and value-added taxes in the occupied West Bank town of Beit Sahour, despite having failed to break the revolt, security sources said.Troops and tax collectors have confiscated cars, furniture and goods valued at about $1.5 million from residents of the mainly Christian middle-class town, sparking international protests.The army gave no explanation for calling off the seizures, less than a month after Defense Minister Yitzhak Rabin vowed to break the tax rebels. The Asian Development Bank denied media speculation that it's about to resume lending to China.The bank cut off loans to the country in the wake of the June 4 massacre in Beijing.The ADB staff is continuing to "prepare loan proposals for China" to present to the bank's board, said R.D. Pacheco, the bank's chief information officer.Other ADB officials said the board wasn't ready to consider resuming loans to China because leading ADB members, including the U.S. and Japan, remain opposed to a return to normal business with Beijing. As Japan formally announced it's joining an international ban on trading ivory, hundreds of angry ivory traders and carvers marched in downtown Hong Kong to protest the ban.Some of the marchers presented a petition to the U.S. consulate demanding that Washington, which earlier banned the import of ivory, help the endangered industry.Hong Kong traders have until Jan. 19 to sell off their stockpile of 670 tons of ivory. Environmental groups urged Japan to stop importing timber from Malaysia's Sarawak state, where they say loggers are destroying rain forests and trampling on the rights of natives. Japan imports about 50% of the logs exported from the state, which is on the island of Borneo.The call came as the council of the International Tropical Timber Organization opened a nine-day session in the Japanese city of Yokohama.Dr. Mikhail Kavanagh, an official of the World Wide Fund for Nature, said that "anything that the Japanese can do to influence the trade is going to come straight back in to influence how the forests are managed." He urged Japan to reduce "wasteful use of tropical timbers," such as disposable chopsticks. One study group says Japan's consumption of disposable chopsticks has doubled in the past decade, reaching 20.5 billion pairs in 1988. Pravda said that Nikolai Vasilenko, a Soviet farmer, dug up a gold bar valued at $235,000, but consumer-goods shortages left him little to spend it on during a trip to Vladivostok.He wanted to buy, but couldn't find, a shaving brush, a sewing machine and a colander . . . China is facing a musical talent shortage because top artists are leaving for foreign countries, the China Youth News said.The official daily said that 470 musicians went abroad at their own expense in the past decade, and it implied that few are likely to return.
Analyses of why currencies do what they do, losing or gaining value against goods or each other, are a favorite pursuit of economists.They also are often opaque to non-economists.Eyes glaze over when monetarists talk about base money, velocity or purchasing power parity. Anyone wondering about the subject's importance, however, should ask Nigel Lawson, who resigned last week as Margaret Thatcher's Chancellor of the Exchequer amid political turmoil generated by Britain's drift toward stagflation.Britain's inflation probably is traceable in part to Mr. Lawson's failure to get the pound-deutsche mark exchange rate right. Money's importance is central to a genteel debate now under way between two U.S. monetarist camps over something called the "world dollar base" (WDB).One economic model fashioned out of this concept is predicting a U.S. recession late this year or early next year.Whether the prediction is correct -- and with only two months left in 1989 time soon will tell -- the debate at least is a useful reminder that the U.S. dollar is not just a national, but an international currency.If U.S. monetary policy goes astray it will have repercussions well beyond those that unseated the estimable Mr. Lawson. The WDB model in question is a product of an upstart economics shop called Bell Mueller Cannon Inc. (BMC).When Goldman Sachs challenged the BMC recession forecast in its economic newsletter a few weeks ago, the BMC folks were delighted.Even though critical, it was just the kind of attention they were seeking.So they fired back at the Goldman Sachs objections in their own economics letter, "The BMC Report." They also arranged a luncheon in New York to further explain their forecast and solicit new clients. The BMC folks aren't really amateurs at intellectual dueling.President Jeffrey Bell in 1978 upset longtime New Jersey Republican Senator Clifford Case in a primary and made an unsuccessful run at Bill Bradley's U.S. Senate seat.John Mueller, BMC's vice president and chief economist, spent 10 years on the staff of Rep. Jack Kemp, sharpening his political skills and providing analysis to back up the congressman's supply-side arguments.So even though BMC is only 18 months old, its principals have been part of the national economic debate for years. What is the world dollar base?An article on these pages by Mr. Mueller on June 29 touched off the debate with Goldman Sachs.It defined the WDB as not only currency and commercial bank reserves created by the Federal Reserve, but also the sum of dollar reserves held by foreign central banks. "The world dollar base, in fact, is analogous to the world stock of monetary gold under the classical gold standard," wrote Mr. Mueller.BMC says it was able to predict the rise in inflation in the U.S. early this year from observing rapid growth in the world dollar base.Its recession, or stagflation, forecast is based on the calculation that after growing at a 14% annual rate, the WDB has since come to a standstill. Goldman Sachs snapped back that the WDB is not an accurate predictive tool because dollar reserves in central banks do not dictate how much money there is in the world. "The Bundesbank might be rather surprised to be told that dollar purchases and sales were their only instrument for monetary policy!" observed Goldman Sachs. "Instead, the supply of money in foreign countries can be (and is) expanded and contracted through open-market operations just as is the case in the United States.Foreign central banks buy or sell government securities to add or drain reserves from the banking system." BMC replied, yes, but in any monetary system there is one "final asset in which all forms of credit are ultimately payable" and today that final asset is the U.S. dollar. Whatever track record BMC is able to achieve, any debate is welcome that focuses on the U.S. dollar as the world's primary instrument for trade and investment among nations and the dominant foreign currency held by central banks.Over the past 20 years or so, the dollar has followed an erratic course.Its periods of weakness relative to other currencies correlate with rises in prices in the U.S. Mercantilists argue that a weak currency is a good thing because it makes a nation's products more competitive.But that cherished notion may have influenced Mr. Lawson to peg the pound too low, causing Britain to import all of Europe's inflationary pressures.A weak currency creates bargains for foreign buyers, sometimes pushing demand beyond a nation's productive capacity and forcing prices upward.Criticisms of the U.S. Treasury for agreeing to participate in an international effort to drive down the dollar last month are based on that danger. The U.S., because of the dollar's world role, also has exported inflation at times.When other central banks become concerned about a falling dollar and try to support it by buying dollars with their own currencies, it can inflate the supply of their own currencies. U.S. monetary policies ultimately will determine whether other nations are willing to accept American economic hegemony.Their challenges to that hegemony are probably a good thing.Because of America's international responsibilities, it is less free to engage in beggar-thy-neighbor tactics, through protectionism or attempts to manipulate currency relationships to its own advantage.The U.S. Congress and administration need frequent reminders of that responsibility.They also need reminders that if they shoulder the burden well, the U.S. can exercise enormous power on behalf of a sound world economy, with benefits to all. The best test of how well that responsibility is being exercised can be found simply in how much the dollar holds its value relative to goods and services.But in a practical world, currency relationships can't be ignored either.Whatever else the BMC model accomplishes, it furthers the discussion of how to achieve world monetary order.Given the damaging effects of monetary disorders of the past, that is something much to be desired.Just ask Nigel Lawson.
Four Seasons Hotels Inc. announced a 2-for-1 stock split and said it plans to increase its annual dividend. Separately, the hotel chain posted a 13% increase in third-quarter earnings to 3.4 million Canadian dollars (US$2.89 million), or 34 Canadian cents, compared with C$3 million, or 31 Canadian cents.Revenue for the quarter fell 6% to C$50.4 million, from C$53.7 million the year earlier. The company said it approved an increase in its annual dividend rate to 22 Canadian cents, from 19 Canadian cents.The dividend will be paid semiannually, although pay and record dates haven't yet been determined. A company spokeswoman said the stock split, planned for Jan. 8, is intended to increase trading in the stock.On the Toronto Stock Exchange yesterday, Four Seasons gained C$1.50 to C$35.75 in light trading.The company currently has 7.2 million subordinate voting shares outstanding. The company also said Isadore Sharp, chairman and president, plans to terminate his option to acquire 500,000 shares so they can be distributed to senior executives under a proposed incentive plan.In return, the company would reimburse Mr. Sharp in the event of any future sale of control of the company.The Toronto Stock Exchange limits the number of options a company can issue to employees. The incentive plan is subject to approval by a majority of holders of the subordinate voting shares, other than Mr. Sharp and his associates, at a special meeting to be held Dec. 19. The Four Seasons spokeswoman said Mr. Sharp, who has an 81% voting stake in the company, has no current plans to sell his interest.She said Mr. Sharp's stake won't be diluted by the stock split. For the first nine months of the year, net rose 12% to 9.2 million Canadian dollars, or 93 Canadian cents a share, compared with C$8.2 million, or 84 Canadian cents a share.Revenue fell to C$148 million from C$162.3 million.
It was a parent's ultimate nightmare.As the crippled jet prepared for an emergency landing, Sylvia Tsao wrapped her 23-month-old son, Evan, in blankets and, following cabin-crew orders, placed him on the floor.She held him down tightly, trying to protect him. "Suddenly, the world seemed to end," she told investigators later.Crashing into a cornfield, United Airlines' Flight 232 flipped over, and she lost her grip on her son. "I saw for an instant my son's body floating and flying" toward the back of the plane, Ms. Tsao recalled.When the plane stopped moving, she frantically tried to find him.But Evan died of smoke inhalation. July's Sioux City crash has fueled an emotionally charged debate.Safety advocates and members of Congress, calling babies "the neglected population," are stepping up a campaign for the mandatory use of infant safety seats on all flights.But the Federal Aviation Administration is reluctant to require separate seats for babies because of the added cost for traveling parents. Some FAA officials note that few infants have been killed in plane crashes, raising the question of whether safety seats really are needed.A 1981 Harvard Medical School study that scrutinized accidents in the late 1970s concluded that perhaps three babies would have been saved in a five-year period if safety-seat use had been required. The National Transportation Safety Board will take a close look at the issue during four days of hearings that begin today on the broader issue of what caused the crash that killed 112 people. "Infants', toddlers' and young children's safety should no longer be ignored as if they don't count," Mrs. Tsao wrote to the board in advocating use of the safety seats. All 50 states require that small children be strapped into safety seats in cars.On planes, FAA rules dictate that children two years old and over have their own tickets and be strapped into regular seats, just as adults are.Babies under two may sit on laps and fly for free.But it is almost impossible to keep hold of a baby during an air crash, or even in severe turbulence. During the Sioux City crash, Lori Michaelson of Cincinnati lost her grip on her baby as the plane lurched and tipped over.Another passenger heard one-year-old Sabrina's cry and pulled her from an overhead luggage compartment. The FAA encourages the use of safety seats, but in the past many parents have run into problems trying to use them, even when the plane was only half-full or they had bought an extra ticket especially for the baby. When Vanessa Merton, an associate dean at Pace University School of Law, decided to take her young son to Europe last spring, she called four carriers to ask about their policies on car seats. "The people acted like I was transporting heroin," she says.One reservation agent told her -- incorrectly -- that the airline barred the use of the seats on flights. After the Sioux City crash, Lori Michaelson bought a car seat for her daughter for the flight home to Cincinnati.But on one leg of the trip, she was ordered by a flight attendant to take Sabrina out of the seat and hold her during takeoff and landing -- the most dangerous parts of any flight. Airlines say that such mistakes are decreasing in the aftermath of Sioux City, but proponents of the safety devices say they still get complaints from parents. "People are told one thing on the phone, another at check in, another at the gate, and another on the plane," says Stephanie Tombrello, executive director of the Los Angeles Area Child Passenger Safety Association, which petitioned the FAA in June for mandatory use of child-safety seats.The Association of Flight Attendants, the main flight attendants' union, is strongly backing that request. The FAA argues that requiring safety seats for all babies might actually diminish, not enhance, safety.As part of such a rule, officials say, parents would probably be required to buy an extra ticket for the baby.The increased cost of flying would inevitably encourage some families to drive rather than fly, they say.Commercial airlines have the lowest accident rate of all transportation modes -- much lower than cars, for example. Anthony Broderick, the FAA's acting executive director for regulatory standards and compliance, contends that the current rule is the best approach because it allows parents to make their own decision on whether to use a safety seat.But he admits that the agency is in "a very uncomfortable position." He says the agency soon will propose that airlines be prohibited from denying the use of safety seats. (Most airlines don't prohibit their use.) He says the agency also will seek public comment on whether the seats should be required. Walter Coleman, vice president of operations for the Air Transport Association, the trade group for the major airlines, describes the call for safety seats as "legitimate" and says the group is studying the issue. But privately some airline officials fear that if parents must buy extra tickets for babies, whole families will stop flying.Others worry that the FAA might write a rule forcing airlines to pick up part of the tab for increased infant safety. Generally, airlines say they welcome the use of a government-approved safety seat and will even allow the restraint to take up a regular seat for free if the flight isn't crowded. (Most car seats made in recent years are certified for use on aircraft and are so marked.) But space can only be guaranteed if a ticket is purchased. What the industry really wants is some kind of device that would protect babies without taking up an extra seat.But no one has come up with anything that is safer in a crash than the current practice of bundling babies up and trying to pin them to the floor.Parents are advised against holding the infants, for fear that in an accident the babies could be crushed by the adult's weight. Proponents of safety seats are turning up the heat on the FAA. Yesterday, Rep. James Lightfoot, an Iowa Republican, sent FAA Administrator James Busey a letter signed by 56 House members urging the agency to require infant safety seats.If the FAA refuses, Rep. Lightfoot says, he will push legislation to require the change.
First Federal Bancorp Inc. said James Clarkson, its chairman, president and chief executive officer, retired effective yesterday.The company also said its board recently instituted a review of internal policies and procedures, including activities conducted by Mr. Clarkson. First Federal said Mr. Clarkson, 65 years old, is "fully cooperating in the continuing review." "None of the activities being reviewed has any adverse effect on the financial condition of the bank or its depositors," First Federal Savings Bank & Trust's president, Leo D. Ottoni, said.First Federal Savings is a subsidiary of First Federal Bancorp. The company declined to disclose further details, but said that the inquiry is continuing and that it wasn't forced by banking regulators.First Federal said no further announcements are expected before the review is finished. First Federal named Mr. Ottoni president and chief executive to succeed Mr. Clarkson and elected him as a director.The post of chairman will remain vacant indefinitely, a company spokesman said.Earlier this month Mr. Ottoni, 64, was named acting president and chief executive of the holding company and the savings bank unit.Previously he had been senior vice president in charge of the savings bank's trust division.
Toyota Motor Corp. predicted its annual imports will more than double by 1992, growing by 250% over the next three years to about 300 billion yen ($2.12 billion) as the company's overseas manufacturing operations reach full speed. The projected imports comprise importation to Japan and other nations of vehicles produced at the company's major foreign manufacturing bases. Toyota said its import program will specifically entail importing right-hand drive vehicles from its Georgetown, Ky., U.S. plant. "An ultimate target of 40,000 units annually has been set for a still-to-be-named model," Toyota said. Toyota will also begin importing engines produced at the Kentucky plant's new powertrain operation.Annual volume is expected to reach 100,000 units and will result in additional production and new employment opportunities, Toyota said. It added that exports of U.S.-made Camrys to Taiwan will rise to 10,000 a year by 1992 from a 1989 level of 4,000 units. Toyota also announced a number of major overseas purchases.They include plans to buy 200 vehicles from U.S. and European auto makers for Toyota's Rent-A-Lease division in Japan and plans to purchase a Cray Y-MP8-232 supercomputer.
Mitsubishi Estate Co., a major developer and property owner in Japan, has agreed to pay $846 million to acquire a 51% stake in Rockefeller Group Inc., Rockefeller officials said. Rockefeller Group owns the 22-acre, 19-building Rockefeller Center in midtown Manhattan.Mitsubishi is a partner in Citicorp Plaza in Los Angeles and Pacwest Center in Portland, Ore., and owns most of the land beneath Tokyo's Marunouchi central business district, often referred to as the Rockefeller Center of Tokyo. In 1985, Rockefeller Group sold a mortgage on the core of Rockefeller Center to the public in the form of a real estate investment trust.The trust has an option to convert its shares to a 71.5% equity stake in the center by the year 2000.Analysts say a sale of Rockefeller Group shares should not affect the trust's value. If the trust exercises its option as expected, Mitsubishi will gain only a minority stake in the most prestigious section of the center, which was built during the Great Depression.Among the Rockefeller Group holdings not encumbered by the trust are the Time & Life building, a majority stake in the McGraw-Hill building, a prime development site on the Manhattan's West Side and certain development rights. Sources familiar with the transaction say officials at some Rockefeller units are unhappy with the deal.Managers of Rockefeller's Cushman & Wakefield Inc., a national real estate brokerage, have reportedly structured a company buy-out plan which was rejected by its parent.Cushman President Arthur J. Mirante II had no comment on reports of the buy-out effort or the Mitsubishi acquisition.But the sources say Rockefeller was seeking at least $200 million for the real estate services firm, a price that would make a buy-out impractical for the managers.Cushman's management is made up of top brokers who are considered the firm's major asset and whose cooperation is regarded as vital to its success.Sources estimate Cushman will have 1989 revenue of more than $275 million. Rockefeller Group said in September it would seek investors to purchase as much as 80% of the firm, a holding company for Rockefeller family interests.Mitsubishi has agreed to acquire 627,000 shares of Rockefeller common stock held by trusts established by John D. Rockefeller in 1934. When people "understand the resources of Mitsubishi they'll see it represents an exciting future for the company," said Richard A. Voell, president of Rockefeller Group. William G. Bowen, chairman of the committee that oversees the family trusts, said the deal meets the committee's objective of diversification of the family's assets. David Rockefeller, chairman of Rockefeller Group, said the company talked with many potential investors in Japan, the United States and Europe.But Mr. Rockefeller said he has a 20-year association with Mitsubishi from his days as chairman of Chase Manhattan Corp. Koyata Hosokawa, executive vice president of Mitsubishi, said the company has spent years studying the U.S. real estate market. Sources say Rockefeller Group had distributed a "fact book" to international real estate investors including Mitsui Real Estate Development Co. of Japan and Canada's Olympia & York Developments Ltd. Before yesterday's announcement, many observers wondered whether a Japanese buyer would be willing to acquire a piece of such high-profile American real estate.It is understood that Japanese buyers shied from bidding on the 110-story Sears Tower in Chicago because purchasing the world's tallest building might stir anti-Japanese sentiments in the U.S. Rockefeller Group's management unit will continue to manage Rockefeller Center, a stipulation insisted upon by Rockefeller Group.
The stock market stumbled after getting off to a strong start and closed mixed in lackluster trading. Bargain-hunting and futures-related program buying lifted prices at the outset, but the rise proved short-lived as concerns about this week's economic reports and the potential for further losses in stocks weighed on investors. Selected blue-chip issues attracted buying interest, however, and the Dow Jones Industrial Average stayed in positive territory throughout the entire session.The average, which peaked with a gain of more than 23 points, added 6.76 to 2603.48. Broader market averages were little changed.Standard & Poor's 500-Stock Index went up 0.01 to 335.07, the Dow Jones Equity Market Index dipped 0.01 to 314.09 and the New York Stock Exchange Composite Index eased 0.01 to 185.59. Activity was fairly brisk at the opening as hopes for a recovery from last week's string of five consecutive losses in the industrial average led some investors into the market.Program buying related to stock-index arbitrage then surfaced shortly after 10 a.m. EST and carried prices to their session highs. But the pace slowed quickly following the round of arbitrage-related buying, involving the sale of index futures contracts and the purchase of stocks, and stayed sluggish through the rest of the session as prices drifted. "People are sitting on their hands," said Bill Langevin, manager of institutional trading at Morgan Keegan & Co., Memphis, Tenn. Just 126,630,000 shares changed hands on the New York Stock Exchange, compared with 170.3 million Friday and 135.9 million last Monday.Declining stocks led advancers on the Big Board, 774 to 684. Traders attributed the lackluster activity in part to anticipation of the first pieces of economic data for October: a monthly survey of corporate purchasing managers, due tomorrow, and the employment report, set for Friday. Also, a number of analysts believe stocks could fall to the vicinity of their lows during the market's mid-October sell-off before posting any sustainable gains.The industrial average hit bottom near the 2500 level on both Oct. 13 and Oct. 16. The market has begun a process of "trying to find a floor" after its fall, said William M. LeFevre, a market strategist at Advest Inc., Hartford, Conn.He added that the floor could prove to be well above the recent price lows, depending on whether the economic data ease concerns about slower growth. Chevron gained 7/8 to 67 1/4 in Big Board composite trading of 2.1 million shares amid continued speculation that Pennzoil is building a stake in the company.USA Today reported that an unknown party -- possibly Pennzoil -- acting on its own or with a partner holds between 3.5% and 4.7% of the company's common shares. Other strong performers among blue-chip issues included Procter & Gamble, which went up 2 3/8 to 127 3/4; Aluminum Co. of America, up 1 to 69 1/4, and Primerica, up 3/4 to 28 1/4.Also, Philip Morris gained 3/4 to 42 1/8 on 1.7 million shares. UAL Corp. moved up 4 to 175 on reports that Los Angeles investor Marvin Davis has asked United Airlines unions if they're interested in cooperating with him in a new bid for UAL.But neither the pilots nor the machinists appear interested, and Mr. Davis is barred from making a new bid under terms of an agreement he made with UAL in September, unless UAL accepts an offer below $300 a share. International Business Machines fell 3/8 to 99 1/2 as 1.2 million shares changed hands.Unisys went down 1 to 15 1/4 on 1.3 million shares and Hewlett-Packard skidded 2 3/8 to 47, but Digital Equipment rose 1 3/8 to 90 1/2 and Compaq Computer added 1 to 101 5/8.Texas Instruments, which re-entered the personal computer market by introducing three portable models, added 1/2 to 31 1/8. One series of dividend-related trades accounted for most of the volume in Southern Co., the Big Board's most active issue, which closed down 1/8 to 27 1/4 on 5.2 million shares.The utility carries an 8% dividend yield and goes ex-dividend today. Crossland Savings tumbled 1 1/2 to 3 3/4 in the wake of its management's recommendation to suspend dividends, because of concerns that it may not meet capital requirements under new federal regulations.The proposed criteria would bar Crossland from including its $380 million of preferred stock as so-called "core capital." American Savings Bank, which could face a similar problem with the new capital criteria, dropped 7/8 to 9 5/8.The company had $173.5 million in preferred stock outstanding as of June 30. Meanwhile, the savings-and-loan sector fared better than any other Dow Jones industry group.H.F. Ahmanson rose 3/8 to 19 1/8, Great Western Financial gained 5/8 to 19 3/4, Golden West Financial added 1/2 to 26 3/8 and CalFed went up 1/2 to 23 1/4. Battle Mountain Gold, which reported that third-quarter earnings fell 85% from a year ago, lost 5/8 to 16 1/8.Other precious-metals stocks finished mixed after rallying late last week; Homestake Mining went down 1/8 to 16 3/4, Newmont Gold added 7/8 to 41 1/4 and ASA Ltd. slid 1/2 to 49 1/8. Paramount Communications dropped 1 to 54 3/4 amid rumors that the $3.35 billion sale of its Associates Corp. unit to Ford Motor could be delayed until mid-November.The company said the sale was "on track" to close by today. Nashua jumped 4 1/2 to 33 1/2 despite taking steps to ward off Reiss & Co., a Dutch company that is seeking U.S. antitrust clearance to acquire as much as 25% of its common stock.Nashua expanded a stock-repurchase program by one million common shares -- about 10.6% of its shares outstanding -- and toughened a takeover defense. Unum gained 2 to 43.The company reported that third-quarter earnings were 34% higher than a year earlier, a sharper rise than analysts had expected.Telecom USA skidded 4 to 28 1/2.Its earnings from operations for the third quarter were above the year-ago level, but fell short of analysts' forecasts. The American Stock Exchange Market Value Index fell 1.14 to 368.87.Volume totaled 10,100,000 shares. First Federal Bancorp lost 1/2 to 6 3/8.James Clarkson retired as chairman, president and chief executive officer of the Pontiac, Mich.-based bank holding company, which said it is reviewing certain unspecified actions Mr. Clarkson took while in office. Philadelphia Museum of Art: "Perpetual Motif: The Art of Man Ray" -- More than 250 paintings, collages, drawings, photographs, objects and films commemorate the centennial of the artist's birth in Philadelphia.Nearly one-third of the works by this pioneer of dada and surrealism are lent by French collectors and museums (the artist spent most of his life in Paris).Many other objects have been lent for the first time by his widow, Juliet Man Ray.Parkway at 26th Street, through Jan. 7. Carnegie Museum of Art, Pittsburgh: "Impressionism: Selections From Five American Museums" -- Eighty-five paintings, pastels and sculptures by artists including Cezanne, van Gogh, Monet, Renoir, Sisley and Cassatt.The works are drawn from the permanent collections of the Carnegie (4400 Forbes Ave., on view Nov. 4-Dec. 31); the Minneapolis Institute of Arts (2400 Third Avenue South, Jan. 27-March 25); the Nelson-Atkins Museum of Art (4525 Oak St., Kansas City, Mo., April 21-June 17); the Saint Louis Art Museum (Forest Park, July 14-Sept. 9); and the Toledo Museum of Art (2445 Monroe St., Toledo, Ohio, Sept. 30-Nov. 25, 1990). Indianapolis Museum of Art: "Latin and Haitian Folk Art" -- An assortment of santos (hand-carved devotional images), retablos (painted tin votive objects) and colorful voodoo banners (handmade of satin, sequins and beads), brought here from Latin America and Haiti by importer Alden Smith. 1200 West 38th St., Nov. 1-Dec. 3. A.I.R. Gallery, New York: Carved wood bathed in glowing colors and gold leaf, Nancy Azara's sculptures evoke faraway places, forgotten rituals.Her current show gathers two dozen of these shamanistic pieces, from tiny to towering. 63 Crosby St. (corner of Spring).Through Nov. 18. "Voices From a Distant Shoreline": Three West Coast-based choreographers -- Anita Addison, Esther Aviva and Joannie Anderson -- come East with an eclectic evening of dance.Pieces scheduled include Ms. Anderson's "Ragged Claws," a comic look at T.S. Eliot's "The Love Song of J. Alfred Prufrock"; three excerpts from Ms. Aviva's "Amor Insurrecto," featuring the work of contemporary Nicaraguan poet Gioconda Belli; and the premiere of a structured group improvisation by Ms. Addison and company.Mulberry Street Theatre, 70 Mulberry St., New York.Nov. 2-4. (212) 349-0126. David Gordon/Pick Up Company: For 2 1/2 years Mr. Gordon has been weaving regionally inspired words, music and movement into a tapestry of Americana, "United States." Now the completed work, five self-contained sections stretching over two evenings, can be seen -- at the State University of New York at Purchase (Theatre B, 914-251-6200), Nov. 3-4.Those who prefer their American pie in smaller portions can catch a program consisting of just the two newest segments: Philadelphia (Zellerbach Theatre, Annenberg Center, 215-898-6791), Nov. 13; Lawrence, Kan. (Crafton-Preyer Theatre, University of Kansas, 913-864-3982), Nov. 19; St. Louis (Kiel Opera House, 314-968-3770), Dec. 1, 2. Metropolitan Opera: June Anderson makes her long-awaited debut as Gilda in a new production of Verdi's "Rigoletto." Luciano Pavarotti, partially recovered from sciatica, sings the fun-loving duke, leaving the jester's cap to Leo Nucci, as the hump-backed fool.Lincoln Center, 65th and Broadway, New York.Nov. 3, 7, 11, 15, 18, 22, 25, 28.Dec. 2. (212) Dallas Opera: After more than three decades as the world's leading coloratura soprano, Dame Joan Sutherland exits smilingly from the American stage singing the mysterious countess in Lehar's "The Merry Widow." Music Hall at Fair Park.Nov. 2, 5, 8 and 11. (214) 871-0090. Waverly Consort opens its 25th anniversary season with a fully staged production of "Il ritorno d'Ulisse in patria" ("The Return of Ulysses to His Homeland"), from the Monteverdi trilogy that also includes "Orfeo" and "L'incoronazione di Poppea." The cast of 13 singers is lead by Paul Rowe (Ulisse), Laura Pudwell (Penelope) and Laurie Monahan (Melanto), with an original-instrument Venetian opera orchestra of 20 instrumentalists.Kathryn Bache Miller Theatre, Broadway at 116th Street, New York.Nov. 10, 11 and 12. (212) 666-1260.
I would like to respond to Jude Wanniski's Oct. 19 editorial-page article, "Bradley's Team Gave the Market Its Drubbing," as a nonpartisan portfolio manager who is hardly amused by this overzealous emphasis on the Senate's maneuvering on capital gains as the prime reason for the market's slide on Oct. 13.In fact, there are several reasons for an end to the bull market and for this particular 190-point slam-dunk. First, addressing the Oct. 13 market break, this was certainly more of a technical gyration and a local jungle exercise, than an investor reaction to the day's political events in Washington.Look not to the managers of taxable investment funds as the source of selling late that afternoon, but rather to several of the usual suspects ("investment" banks and institutions) geared up with imperfect trading programs that accelerate market deterioration, once begun.The catalyst for this decline was, indeed, the breakdown of the United Airlines transaction and its resultant pre-margin call liquidation of various holdings by arbitragers and other traders.I can assure Mr. Wanniski that the market is not as politically motivated as he is. With regard to the bull market's sad demise, this can be attributed to several factors: 1.Overextension of credit.The realization that interest rates will be firm due to excessive demand for credit on the part of the federal government (including off-balance sheet requirements) and leveraged buyout related transactions.The latter credit demands no longer supported to the same degree by the market (suppliers, Michael Milken and the S&Ls, being noticeably absent). 2.Perception of future deterioration of corporate profits.This was exemplified by IBM's recent announcements.One can magnify this problem 10 times for highly leveraged companies whose revenues are slowing and where interest rates are no longer accommodative, in bifurcated credit markets. 3.A dollar that will slide into year end -- due to international interest-rate differentials and the choreographed trading techniques of certain oil importers -- which does not inspire foreign-investor interest. 4.Inflation that will be stable for the time being, despite the rising cost of imported goods, because of rising domestic inventories (housing, divestiture candidates, commodities, etc.) requiring liquidation.Modest inflation/deflation adding to the attractiveness of bonds. 5.The honeymoon is over for poor George.In the past week this was highlighted by continuing fallout on Panama and abortion rights, as well as capital gains.Anticipated poor results for Republicans at the polls in November have added to investor ennui. In sum, there are technical, economic, political and psychological reasons for the market's recent drubbing.Mr. Wanniski can "cheerfully inform" Mr. Bradley and the rest of us of his notions as to the party's end, but his energy and intellect would be better used in focusing on measures that will ensure our long-term success as leaders and capitalists. E.F. Drake Franconia, N.H. Mr. Wanniski might seem simplistic to some when he blames the Oct. 13 market crashlet on Democratic obstructionism of the president's capital-gains proposal.But it's quite true Wall Street responds dramatically to changes in the capital-gains rate, especially growth stocks. The great Growth Bull Market began in June 1978 just when the late Rep. William Steiger's proposal to cut the capital-gains tax to 25% from almost 50% began to gather majority support in Congress.The bull market in growth stocks halted when the rate was hiked to 28% from 20% effective January 1987.The Dow and other averages continued to advance, but growth-stock multiples suffered sclerosis from that point until this summer, when the market began to realize the rate might indeed be lowered.All the indexes surged when a lower rate passed the House.The UAL financing reverse shocked the market, but the prospect of capital gains not fulfilling the market's hopes was also an important factor. Richard Gilder Jr. New York Mr. Wanniski's opportuning of the recent stock drubbing to castigate Sen. Bill Bradley for his opposition to a capital-gains tax cut contains some clever but faulty reasoning.If Mr. Wanniski's theory is right, that a tax cut increases the value of capital assets held by owners, wouldn't that increase also represent a rather dramatic and totally unjustified inflation of those values?According to his figures, asset values would be pumped up some $50 billion overnight with the passage of the cut.This is "real money," Mr. Wanniski says.I say, real trouble. Robert S. Giolito Atlanta
Critics of program trading are calling increasingly for regulators to raise the cost of trading stock-index futures. The idea: Boost the amount of cash required initially to buy or sell a stock-index futures contract from the relatively low current level of about 7% of the contract's value to as much as 50%, the same amount investors must put up to buy stocks. Such a move would curb speculation in stock-index futures, the critics contend, and that would stop the stock market's breathtaking surges and plunges. But futures traders here argue this cure is worse than the volatility disease.They warn that raising the costs of trading futures could backfire and end up making stocks even more volatile. The debate over program trading is tearing Wall Street asunder.Critics are much more aggressive than they were in 1987, the last time the controversy raged this heatedly.They're also more effective.Several big Wall Street securities firms have bowed to pressure and pulled back in recent days from stock-index arbitrage, the form of program trading that many accuse of amplifying, if not actually causing, stock-market volatility. In stock-index arbitrage, computer-assisted traders buy and sell large amounts of stock with offsetting trades in stock-index futures, profiting from fleeting price discrepancies between the two markets.The 190-point plunge in the Dow Jones Industrial Average Oct. 13, followed by an 80-point rebound in the next trading session, set off the current outcry against program trading. Chicago futures traders, knowing they can't escape the critics' wrath, are bracing for trouble.They got a taste of it yesterday morning in full-page ads in major newspapers, including this paper, in which Neuberger & Berman, a big money New York manager, demanded federal regulators "immediately" boost margins on stock-index futures to 50%. The term "margin" has slightly different meanings in the stock and futures markets, but they both describe the amount of cash investors must put up to get into the game.Stock margins are literally down payments made toward the purchase of a stock, and the level is set by the Federal Reserve Board.In the futures market, a margin payment is simply a good faith deposit.Each exchange sets its own minimums, with oversight by the Commodity Futures Trading Commission. Margin requirements loom large in the program trading debate.Because a trader can control $100 in market value for $7 cash in the futures market -- rather than for $50 in the stock market -- critics contend that speculation is encouraged to a degree that would be prohibitively expensive in stocks alone.And with the markets linked so closely through arbitrage, speculation in futures is translated quickly into stocks. But raising stock-index futures margins could make the stock market even more volatile, futures traders contend.Higher margins would price many professional speculators -- whose trades help futures markets function smoothly -- out of business.If these speculators can't afford to trade as actively as before, stock-index futures prices, and therefore stock prices, may have to fall further than they might otherwise to attract buyers. "If you drive away the specs, then prices will fall in both futures and stocks," declared the head of one Chicago Mercantile Exchange member firm who asked not to be named, reflecting the highly charged debate over program trading. Another consequence of driving out speculators here, traders say, could be to widen the momentary price differences between stocks and stock-index futures that entice index arbitragers in the first place.That could trigger wide price swings and more, not less, stock-index arbitrage. "If you decrease the liquidity in the futures market, you increase the discrepancies between stocks and futures," said Christopher Pedersen, director of trading at Twenty-First Securities Corp. Opponents of index arbitrage trading don't lose much sleep over the prospect of futures speculators being driven out of the market.They argue that raising the cost of trading stock-index futures would eventually choke off price-jarring arbitrage trades between stocks and futures and increase the stability of stock prices. "You would diminish the impact of stock-index arbitrage enormously if you change the margin requirements for futures," said Richard Cantor, chief investment officer for Neuberger & Berman, which manages $17.5 billion in client funds. Mr. Cantor said that it was difficult to quantify the impact of stock index arbitrage on the performance of Neuberger & Berman -- whose tax-exempt accounts are lagging broad market averages so far this year -- or of other institutional investors.But he echoed the complaints of other money managers in claiming that stock-index arbitrage has tended to "commoditize securities, shifting from a focus on earnings and assets to a trading focus." Raising stock-index futures margins sharply could curtail the volume of index arbitrage trading by the handful of Wall Street securities firms that dominate the business.But these firms, many of whom say they have already quit doing index arbitrage trades for their own accounts, are especially resourceful when it comes to taking advantage of profitable opportunities.A few firms, while claiming not to trade for their own accounts, are effectively doing just that in the guise of executing customer orders, then quietly splitting the profits with their customers, futures traders say. Tax-exempt institutional investors don't trade on margin, and therefore wouldn't be affected by an increase in stock-index futures margins. Raising stock-index futures margins sharply wouldn't have much of an effect on S&P 500 futures traders known as locals.They often trade opposite brokerage firms, but as long as they don't carry positions overnight, they effectively trade without putting any money down. Futures industry officials here -- who fear the program-trading debate might turn into an attack on the futures markets themselves -- raise the specter of foreign competition when they argue against the kinds of changes critics are proposing. "If futures margins are raised substantially, some other country will allow lower margins, and that's where the business will go," said Barry Lind, chairman of Lind-Waldock & Co., a futures broker.
After a bad start, Treasury bonds were buoyed by a late burst of buying to end modestly higher. "The market was pretty dull" for most of the day, said Robert H. Chandross, vice president at Lloyds Bank PLC.He said some investors were reluctant to plunge into the market ahead of several key economic indicators due this week, especially Friday's potentially market-moving employment report. During the first hour of trading yesterday, prices fell as much as 1/4 point, or down about $2.50 for each $1,000 face amount.But market activity was energized as investors started to view the lower price levels as attractive.And the Treasury's $17.6 billion auction of short-term bills, which generated strong buying interest, helped to lift the bond market out of the doldrums. "We saw good retail demand by small banks, individuals and institutions and that is one reason why the market advanced" late in the day, said Sung Won Sohn, senior vice president and chief economist at Norwest Corp., Minneapolis.He said the change in sentiment also reflected perceptions that the slate of economic statistic due this week will be "conducive to a bond market rally." The employment report, which will provide the first official measure of the economy's strength in October, is expected to show smaller gains in the generation of new jobs.Other key economic indicators due this week include today's release of the September leading indicators index and new-home sales.Tomorrow, the October purchasing managers report is due and on Thursday comes October chain-store sales. Despite yesterday's modest bond market gains, economists say investors are anxious about the Treasury's huge quarterly refunding of government debt, the timing of which depends on Congressional efforts to raise the debt ceiling.Although the Treasury will announce details of the November refunding tomorrow, it could be delayed if Congress and President Bush fail to increase the Treasury's borrowing capacity.The debt ceiling is scheduled to fall to $2.8 trillion from $2.87 trillion at midnight tonight. The Treasury's benchmark 30-year bond rose 1/8 point.Mortgage-backed securities were up less than 1/8 point and investment-grade corporate bonds were unchanged. Strong demand for New York City's $813 million general obligation bonds propped up the municipal market.Traders said most municipal bonds ended 1/2 point higher. The New York City issue included $757 million of tax-exempt bonds priced to yield between 6.50% to 7.88%, depending on the maturity.The $56 million of New York's taxable general obligation bonds were priced to yield between 9.125% to 9.90%. As expected, the longer-term tax-exempt New York bonds had yields nearly as high as those on taxable long-term Treasury bonds.The yield on the benchmark 30-year Treasury bond ended yesterday at about 7.92%.Bond dealers said the rates for the long-term tax-exempt New York City bonds were among the highest, as a percentage of Treasury rates, for any New York City issue in recent memory. A spokesman for New York City Comptroller Harrison Goldin said the high rates reflect investors concerns about the city's financial health and political uncertainties. New York bonds, which have been hammered in recent weeks on the pending supply and reports that the city's economy is growing weaker, rose 1/2 point yesterday. Treasury Securities Treasury bonds ended slightly higher in light trading. The benchmark 30-year bond ended at 102 7/32 to yield 7.92%, compared with Friday's price of 102 2/32 to yield 7.93%.The latest 10-year notes ended at about 100 16/ 32 to yield 7.90%, compared with 100 11/32 to yield 7.93% on Friday. Short-term interest rates rose at the government's regular weekly Treasury-bill auction.The average discount rate on three-month bills was 7.78% and the rate on six-month bills was 7.62%.Those rates are up from 7.52% and 7.50%, respectively, at last week's auction. Due to the Treasury's need to raise funds quickly before the current authority to issue debt expires at midnight tonight, yesterday's auction was structured differently from previous sales. The Treasury bills sold yesterday settle today, rather than the standard settlement day of Thursday.And because of the early settlement, the three-month bills actually have a 93-day maturity, and the six-month bills have an 184-day maturity. Because of the early settlement, the Federal Reserve was unable to purchase bills for its system account.However, analysts expect the Fed to buy Treasury bills that were auctioned yesterday in the secondary market. The Treasury also held a hastily scheduled $2 billion sale of 51-cash management bills yesterday. Here are details of yesterday's three-month and six-month bill auction: Rates are determined by the difference between the purchase price and face value.Thus, higher bidding narrows the investor's return while lower bidding widens it.The percentage rates are calculated on a 360-day year, while the coupon equivalent yield is based on a 365-day year. Both issues are dated Oct. 31.The 13-week bills mature Feb. 1, and the 26-week bills mature May 3, 1990. Here are details of yesterday's 51-day cash management bill auction: Interest rate 8.07% The bills are dated Oct. 31 and mature Dec. 21, 1989. Corporate Issues The junk bond prices of Western Union Corp. tumbled after the company said it won't proceed with an exchange offer to holders of its reset notes. The Upper Saddle River, N.J., communications firm said it is considering alternatives to the restructuring of the senior secured notes because of changes in the high-yield market. In June, Western Union was forced to reset the interest rate on the senior secured notes due in 1992 to 19 1/4% from 16 1/2%, a move which increased the firm's annual interest payments by $13.8 million.Although the notes held at a price of 92 to 93 immediately after the reset, they started falling soon afterward. Yesterday, Western Union's senior secured reset notes fell 3 3/4 points, or about $37.50 for each $1,000 face amount, to close at 50 1/4.Other Western Union securities were also lower.The company's 7.90% sinking fund debentures were quoted at a bid price of 14 1/4 and an offered price of 30, while the 10 3/4% subordinated debentures of 1997 were being bid for at 28 and offered at around 34 3/4.The 10 3/4% debentures last traded at 35. High-yield traders said spreads between the bid and offered prices of Western Union junk bonds have been widening for some time, and in certain cases, bids for Western Union securities are not available. Elsewhere, prices of investment-grade and high-risk, high-yield junk bonds ended unchanged. In the new-issue market for junk securities, underwriters at Salomon Brothers Inc. are expected to price today a $350 million junk bond offering by Beatrice Co.. The two-part issue consists of $200 million of senior subordinated reset notes maturing in 1997 and $150 million of subordinated floating rate notes also maturing in 1997. Portfolio managers said expectations are for the issue to be priced at a discount with a coupon of 13 3/4% and a yield of about 14%.The Chicago-based food and consumer goods concern was acquired in April 1986 in a $6.2 billion leveraged buy-out engineered by Kohlberg Kravis Roberts & Co. Proceeds from the note sale will be used to repay a portion of the bank borrowings used by Beatrice to redeem its $526.3 million principal amount of increasing rate debentures in August. Meanwhile, underwriters at Morgan Stanley & Co. are expected today to price a $350 million high-yield offering by Continental Cablevision Inc.The senior subordinated debentures maturing in 2004 are targeted to be offered at a yield of between 12 5/8% to 12 3/4%. Mortgage-Backed Securities Mortgage securities ended 2/32 to 4/32 higher in light trading. Ginnie Mae's 9% issue for November delivery finished at 98 1/2, up 4/32, and its 10% issue at 102 3/8, up 4/32.Freddie Mac's 9% issue ended at 97 19/32, up 2/32. In the derivative market, insurance companies have scaled back their purchases of Remic securities, or real estate mortgage investment conduits, as they assess potential claims from the recent California earthquake and hurricane in the Carolinas.This could mean diminished issuance of derivative mortgage issues during the next few weeks. Insurance companies have been major buyers of prepayment-protected planned amortization classes (PACs) during the past few months.The PACs appeal to insurance companies and other investors because they have higher yields than topgrade corporate bonds and carry the guarantee of Freddie Mac and Fannie Mae, quasi-federal agencies. In the asset-backed market, Beneficial Corp. offered $248 million of securities backed by home-equity loans, the second large deal in the past week.Last week, a unit of MNC Financial Corp. offered $268 million of home-equity securities. Both the MNC and Beneficial offering were underwritten by Merrill Lynch Capital Markets, the leading Wall Street firm in the home-equity securities market, which was created early this year. Municipal Issues The improved tone in the municipal market, largely an offshoot of the New York City sale's reception, helped municipal futures rebound from early lows, but the spread between the contract and Tbond futures continued to grow more negative. The MOB spread, or difference between the municipal and T-bond futures contracts, has been near all-time lows in recent trading, driven basically by concerns that new-issue supply would overwhelm demand. December municipal futures ended up 11/32 point to 92-14, having pulled off a morning low of 91-23 as cash municipals rebounded.But front month T-bond futures settled the afternoon session up a slightly greater 13/32 at 99-04. Foreign Bonds British government bonds ended moderately higher, encouraged by a steadier pound and a rise in British stocks.The benchmark 11 3/4% bond due 2003/2007 rose 10/32 to 111 14/32 to yield 10.14%, while the Treasury's 12% notes due 1995 rose 7/32 to 103 5/8 to yield 11.04%. West German government bonds fell as much as 0.60 point in light, nervous trading.The 7% Treasury bond due October 1999 ended off 0.60 point to 99.35 to yield 7.09%, while the 6 3/4% notes due 1994 fell 0.35 point to 97.25 to yield 7.45%. Japanese government bonds continued to erode as the dollar remained resilient against the yen.Japan's No. 111 4.6% bond due 1998 ended the day on brokers screens at 95.11 to yield 5.43%.
Gen-Probe Inc., a biotechnology concern, said it signed a definitive agreement to be acquired by Chugai Pharmaceutical Co. of Tokyo for about $110 million, or almost double the market price of Gen-Probe's stock. The move is sure to heighten concerns about increased Japanese investment in U.S. biotechnology firms.It is also likely to bolster fears that the Japanese will use their foothold in U.S. biotechnology concerns to gain certain trade and competitive advantages. Gen-Probe, an industry leader in the field of genetic probes, which is a new technology used in diagnostic tests, last year signed an agreement for Chugai to exclusively market its diagnostic products in Japan for infectious diseases and cancer.Chugai agreed then to fund certain associated research and development costs. That arrangement apparently has worked well, and Thomas A. Bologna, president and chief executive officer of Gen-Probe, founded in 1983, said the sale of the company means "we will be able to concentrate on running the business rather than always looking for sources of financing." Chugai agreed to pay $6.25 a share for Gen-Probe's 17.6 million common shares outstanding on a fully diluted basis. Yesterday, in national trading in the over-the-counter market, Gen-Probe common closed at $3.25 a share. Because the U.S. leads in most areas of biotechnology -- largely because of research investment by the U.S. government -- the sale is sure to increase concerns that Japanese companies will buy American know-how and use it to obtain the upper hand in biotechnology trade and competition. "The biotechnology firms may be setting up their own competitors," said Richard Godown, president of the Industrial Biotechnology Association.He added that until now the Japanese have only acquired equity positions in U.S. biotechnology companies. "They are piggybacking onto developed technology," he said.During the past five years, Japanese concerns have invested in several of the U.S.'s 431 independent biotechnology companies.Chugai has been one of the most active Japanese players in U.S. biotechnology companies; it has an equity investment in Genetics Institute Inc., Cambridge, Mass., and a joint-venture agreement with Upjohn Co., Kalamazoo, Mich. The Japanese government, Mr. Godown said, has stated that it wants 10% to 11% of its gross national product to come from biotechnology products. "It is becoming more of a horse race every day between the U.S. and Japan," he said, adding that some fear that as with the semiconductor, electronics, and automobile industries, Japanese companies will use U.S.-developed technology to gain trade advantages. Mr. Bologna said the sale would allow Gen-Probe to speed up the development of new technology, and to more quickly apply existing technology to an array of diagnostic products the company wants to offer. By 1988, when only 10 genetic probe-based tests of diagnostic infectious diseases of humans had been approved for marketing by the Food and Drug Administration, eight of them had been developed and sold by Gen-Probe. Osamu Nagayama, deputy president of Chugai, which spends about 15% of its sales on research and development, was unable to pinpoint how much money Chugai would pump into Gen-Probe. "We think Gen-Probe has technology important to people's health," he said, adding: "We think it is important for us to have such technology." He and Mr. Bologna emphasized that both companies would gain technological knowledge through the sale of Gen-Probe, which will expand "significantly" as a result of the acquisition. In 1988, Chugai had net income of $60 million on revenue of $991 million.GenProbe had a net loss of $9.5 million on revenue of $5.8 million.Recently, Gen-Probe received a broad U.S. patent for a technology that helps detect, identify and quantify non-viral organisms through the targeting of a form of genetic material called ribosomal RNA. Among other things, Mr. Bologna said that the sale will facilitate Gen-Probe's marketing of a diagnostic test for acquired immune deficiency syndrome, or AIDS. Chugai also will help Gen-Probe with its regulatory and marketing expertise in Asia, Mr. Bologna said.The tender offer for Gen-Probe's shares is expected to begin next Monday, the company said.
It was supposed to be a routine courtesy call. A half-dozen Soviet space officials, in Tokyo in July for an exhibit, stopped by to see their counterparts at the National Space Development Agency of Japan.But after a few pleasantries, the Soviets unexpectedly got serious.The Soviets have a world-leading space program, the guests noted.Wouldn't the Japanese like a piece of it?The visitors then listed technologies up for sale, including launch services and propulsion hardware. "We were just surprised," says Tad Inada, NASDA's director for international affairs. "Shocked." That Moscow, with its dilapidated economic machine, would try to sell high technology to Japan, one of the world's high-tech leaders, sounds like a coals-to-Newcastle notion.But "the Soviet Union has areas where it isn't behind Japan," says Mikhail Shapovalov of the Soviet Ministry of Foreign Economic Relations. "We have obtained through the development of Cosmos {the Soviet space program} technologies you don't see anywhere else." The sales pitch mightn't be as farfetched as it seems.Japan-U.S. trade relations are bumpy these days, and some Japanese favor decreasing their reliance on U.S. technology in light of the FSX fighter-plane flap, when U.S. officials reversed an earlier decision and refused to share certain crucial fighter-plane technology. And, despite its image as a technology superpower, Japan has a lot of weaknesses.It's a world leader in semiconductors, but behind the U.S. in making the computers that use those chips.It's a world leader in auto manufacturing, but its aviation industry is struggling, and its space program is years behind the U.S., the Europeans and the Soviets. One question being debated in the Soviet Union is how to use the defense sector's research-and-production expertise in the rest of the economy.Many plants that used to make military equipment are now being ordered to produce televisions, videocassette recorders, small tractors and food-processing machinery.The Soviets also hope to make better use of their considerable expertise in theoretical science, which has helped them win twice as many Nobel science prizes as the Japanese. Where they lag behind the Japanese is in turning the scientific inventiveness into improved production.By contrast, the Japanese have proved adept at making use of Soviet inventions.Kobe Steel Ltd. adopted Soviet casting technology in 1966 and used it for 14 years until it developed its own system.Kawasaki Steel Corp. bought a Soviet steel-casting patent two years ago and has jointly developed the system with the Soviets.In 1991, the Soviets will take a Japanese journalist into space, the first Japanese to go into orbit. Soviet efforts to sell their technology abroad don't appear to worry the U.S., Japan's principal ally. "We have never opposed the development of economic relations between our allies and the Soviet Union," says a State Department official. "Frankly, I wouldn't expect the Japanese to get hooked on anybody's technology, least of all the Soviets." Under Mikhail Gorbachev's perestroika, the Soviets have sought economic ties all over the world, including new export markets.They believe technology is one of their best bets, and some Soviet officials say Moscow will even consider declassifying military know-how if the price is right.The Soviets held export exhibitions that included high-tech items in New York and West Germany.Last week, a Soviet delegation came to Japan to push more space technologies. Japan is a major target for the Soviets.In August, representatives of Keidanren, Japan's largest business organization, visited Moscow to explore exports and investments that would help the Soviet economy.Out of the blue, the Soviet Chamber of Commerce handed over details on 59 technologies that the Japanese might want to buy.These mainly involved such areas as materials -- advanced soldering machines, for example -- and medical developments derived from experimentation in space, such as artificial blood vessels. A main motive is hard cash.But, while the Soviets can't expect direct technology flow from Japan, they also hope to benefit from Japanese manufacturing expertise. "The Soviet Union has a lot of know-how, but it has been difficult to put that into actual production because of various structural problems in the economy," says Mr. Shapovalov, the Foreign Ministry official.The Soviets are "contemplating a flexible system under which it would be possible to develop {technology} jointly and even to market it jointly," he says. Even if the Japanese find Soviet technology desirable, such discussions would be fraught with political complications.Still stinging from the international backlash over the sale two years ago of sensitive military technology to the Soviets by a subsidiary of Japan's Toshiba Corp., many Japanese are eager to avoid appearing to help the Soviets in any way.Another hurdle concerns Japan's attempts to persuade the Soviet Union to relinquish its post-World War II control of four islands north of Japan. So far, the Soviets have provided only the sketchiest information about their technology and business plans.And what they have shown isn't impressive. "My impression is that there isn't anything which arouses our interest at first glance," says an official from Japan's Ministry of International Trade and Industry. Peter Gumbel in Moscow contributed to this article.
President Bush said that three members of his cabinet will lead a presidential mission to Poland to gauge how the U.S. can help the new non-Communist government's economic changes. Mr. Bush announced several weeks ago that he intended to send such a mission, composed of top government aides and business and labor leaders.The mission will visit Poland from Nov. 29 to Dec. 2, the White House said. In remarks at a White House ceremony marking Polish Heritage Month, Mr. Bush announced that Agriculture Secretary Clayton Yeutter, Commerce Secretary Robert Mosbacher and Labor Secretary Elizabeth Dole will lead the U.S. group.Michael Boskin, chairman of the Council of Economic Advisers, also will be a member. In addition, the White House said that Charles Harper, chairman of ConAgra Inc., and John McGillicuddy, chairman of Manufacturers Hanover Corp., will be among a group of at least 15 business and labor representatives in the presidential mission.Mr. Bush said the group is to "focus on economic sectors where U.S. expertise and cooperation can indeed make a difference." Mr. Bush has asked Congress to provide more than $400 million in economic aid and food grants for Poland's new government, but has been chided by Democrats for failing to do more.
Part of a Series} Tom Panelli had a perfectly good reason for not using the $300 rowing machine he bought three years ago. "I ate a bad tuna sandwich, got food poisoning and had to have a shot in my shoulder," he says, making it too painful to row. The soreness, he admits, went away about a week after the shot.Yet the rowing machine hasn't been touched since, even though he has moved it across the country with him twice.A San Francisco lawyer, Mr. Panelli rowed religiously when he first got the machine, but, he complains, it left grease marks on his carpet, "and it was boring.It's a horrible machine, actually.I'm ashamed I own the stupid thing." Mr. Panelli has plenty of company.Nearly three-fourths of the people who own home exercise equipment don't use it as much as they planned, according to The Wall Street Journal's "American Way of Buying" survey.The Roper Organization, which conducted the survey, said almost half of the exercise equipment owners found it duller than they expected. It isn't just exercise gear that isn't getting a good workout.The fitness craze itself has gone soft, the survey found.Fewer people said they were working up a sweat with such activities as jogging, tennis, swimming and aerobics.Half of those surveyed said they simply walk these days for exercise. That's good news for marketers of walking shoes.The survey also detected a bit more interest in golf, a positive sign for country clubs and golf club makers. The survey's findings certainly aren't encouraging for marketers of health-club memberships, tennis rackets and home exercise equipment, but people's good intentions, if not their actions, are keeping sales of some fitness products healthy. For instance, sales of treadmills, exercise bikes, stair climbers and the like are expected to rise 8% to about $1.52 billion this year, according to the National Sporting Goods Association, which sees the home market as one of the hottest growth areas for the 1990s. But even that group knows some people don't use their machines as much as they should. "The first excuse is they don't have enough time," says research director Thomas Doyle. "The second is they don't have enough discipline." With more than 15 million exercise bikes sold in the past five years, he adds, "a lot of garages, basements and attics must be populated with them." Still, the average price of such bikes rose last year to $145.Mr. Doyle predicts a trend toward fewer pieces of home exercise equipment being sold at higher prices.Electronic gimmicks are key.Premark International Inc., for example, peddles the M8.7sp Electronic Cycling Simulator, a $2,000 stationary cycle.On a video screen, riders can see 30 different "rides," including urban, mountain and desert scenes, and check how many calories are burned a minute. Nancy Igdaloff, who works in corporate payments at Bank of America in San Francisco, may be a good prospect for such a gizmo.She's trying to sell a $150 exercise bike she bought about five years ago for her roommate.But rather than write off home fitness equipment, she traded up: Ms. Igdaloff just paid about $900 for a fancier stationary bike, with a timer, dials showing average and maximum speeds and a comfortable seat that feels almost like a chair. "I'm using it a lot," she says. "I spent so much money that if I look at it, and I'm not on it, I feel guilty." The poll points up some inconsistencies between what people say and what they do.A surprising 78% of people said they exercise regularly, up from 73% in 1981.This conjures up images of a nation full of trim, muscular folks, and suggests couch potatoes are out of season.Of course, that isn't really the case.The discrepancy may be because asking people about their fitness regime is a bit like inquiring about their love life.They're bound to exaggerate. "People say they swim, and that may mean they've been to the beach this year," says Krys Spain, research specialist for the President's Council on Physical Fitness and Sports. "It's hard to know if people are responding truthfully.People are too embarrassed to say they haven't done anything." While she applauds the fact that more Americans are getting up from the television to stroll or garden, she says the percentage of Americans who do "real exercise to build the heart" is only 10% to 20%.So many people fudge on answers about exercise, the president's council now uses specific criteria to determine what is considered vigorous: It must produce contractions of large muscle groups, must achieve 60% of maximum aerobic capacity and must be done three or more times a week for a minimum of 20 minutes. One of the council's goals, set in 1980, was to see more than 60% of adults under 65 years of age getting vigorous exercise by 1990.That target has been revised to 30% by the year 2000. But even that goal may prove optimistic.Of 14 activities, the Journal survey found that 12 -- including bicycling, skiing and swimming -- are being done by fewer Americans today than eight years ago.Time pressures and the ebb of the fitness fad are cited as reasons for the decline. Only walking and golf increased in popularity during the 1980s -- and only slightly.Jeanette Traverso, a California lawyer, gave up running three times a week to play a weekly round of golf, finding it more social and serene.It's an activity she feels she can do for life, and by pulling a golf cart, she still gets a good workout. "I'm really wiped out after walking five hours," she says. Most people said they exercise both for health and enjoyment. "If you sit down all the time, you'll go stiff," says Joyce Hagood, a Roxboro, N.C., homemaker who walks several miles a week. "And it's relaxing.Sometimes, if you have a headache, you can go out and walk it right off." Only about a quarter of the respondents said they exercise to lose weight.Slightly more, like Leslie Sherren, a law librarian in San Francisco who attends dance aerobics five times a week, exercise to relieve stress. "Working with lawyers," she says, "I need it." But fully 90% of those polled felt they didn't need to belong to a health club. "They're too crowded, and everybody's showing off," says Joel Bryant, a 22-year-old student from Pasadena, Calif. "The guys are being macho, and the girls are walking around in little things.They're not there to work out." But at least they show up.Nearly half of those who joined health clubs said they didn't use their membership as often as they planned.Feeling they should devote more time to their families or their jobs, many yuppies are skipping their once-sacred workout. Even so, the Association of Quality Clubs, a health-club trade group in Boston, says membership revenues will rise about 5% this year from last year's $5 billion.A spokeswoman adds, however, that the group is considering offering "a behavior-modification course, similar to a smoking-cessation program, to teach people ways to stay with it." There are die-hard bodies, of course.The proprietor of Sante West, an aerobics studio in San Francisco's Marina district, which was hit hard by the earthquake, says, "People were going nuts the minute we opened," three days after the quake. "The emotional aspect is so draining, they needed a good workout." Perhaps the most disturbing finding is that the bowling alley may be an endangered American institution.The survey reported the number of people who said they bowl regularly has fallen to just 8% from 17% in 1981.The American Bowling Congress claims a higher percentage of the public bowls regularly, but concedes its membership has declined this decade. To find out why, the group recently commissioned a study of the past 20 years of bowling-related research.Three reasons were pinpointed: a preference for watching bowling and other sports on television rather than actually bowling, dowdy bowling centers, and dissatisfaction with bowling itself.People who start bowling expecting it to be a pleasurable exercise "have been generally disappointed," the report said. But not Richard Cottrell, a San Francisco cab driver who bowls in two weekly leagues.He hit the lanes three years ago on the advice of his doctor. "It's good exercise," he says. "I can't do anything score-wise, but I like meeting the girls." He says bowling helps him shed pounds, though that effort is sometimes thwarted by the fact that "when I'm drinking, I bowl better." His Tuesday night team, the Leftovers, is in first place.
Warner Communications Inc. is close to an agreement to back a new recorded music and music publishing company in partnership with Irving Azoff, who resigned in September as head of MCA Inc. 's MCA Records unit. Warner and Mr. Azoff declined comment, as did MCA, where Mr. Azoff had also been discussing such a venture.But record industry executives familiar with the talks said Mr. Azoff and Warner came to an agreement yesterday to form a 50-50 joint-venture company funded by Warner and run by Mr. Azoff.Among other things, they said, Mr. Azoff would develop musical acts for a new record label. The agreement is said to be similar to Warner's 50-50 partnership with record and movie producer David Geffen, whose films and records are distributed by the Warner Bros. studio and the Warner records unit.Although Mr. Azoff won't produce films at first, it is possible that he could do so later, the sources said. Like Mr. Geffen's arrangement, the venture gives Mr. Azoff a link to the world's largest and most successful record distributor; in the U.S. alone, Warner has a 40% share of the market, about double its nearest competitor, Sony Corp. 's CBS Records.For Warner, meanwhile, it gives the company a second young partner with a finger on the pulse of the hottest trends in the music business. The 41-year-old Mr. Azoff, a former rock `n' roll manager, is credited with turning around MCA's once-moribund music division in his six years at the company.But Mr. Azoff had been negotiating for more than a year to get out of his MCA contract, which expired in 1991.Mr. Azoff reportedly was bored and frequently clashed with top MCA management over a number of issues such as compensation and business plans. Mr. Azoff also was eager to return to a more entrepreneurial role in which he had a big financial stake in his own efforts.In an interview at the time of his resignation from MCA, he said: "I'd rather build a company than run one."
If there's somethin' strange in your neighborhood . . . If there's something' weird and it don't look good. Who ya gonna call? For starters, some people call Ed and Lorraine Warren. When it comes to busting ghosts, the Monroe, Conn., couple are perfect demons.They claim to have busted spirits, poltergeists and other spooks in hundreds of houses around the country.They say they now get three or four "legitimate" calls a week from people harried by haunts. "I firmly believe in angels, devils and ghosts," says Mr. Warren, whose business card identifies him as a "demonologist." If psychics don't work, but your house still seems haunted, you can call any one of a swelling band of skeptics such as Richard Busch.A professional magician and musician, he heads the Pittsburgh branch of the Committee for the Scientific Investigation of the Paranormal.Mr. Busch says there is a scientific explanation for all haunts, and he can even tell you how to encourage the spirits. "All you have to do is eat a big pizza, and then go to bed," he says. "You'll have weird dreams, too." Either way, the ghostbusting business is going like gangbusters.Tales of haunts and horrors are proliferating beyond the nation's Elm Streets and Amityvilles. "I get calls nearly every day from people who have ghosts in their house," says Raymond Hyman, a skeptical psychology professor at the University of Oregon. In a public opinion poll published in the October issue of Parents Magazine, a third of those queried said they believe that ghosts or spirits make themselves known to people. "The movies, the books, the tabloids -- even Nancy Reagan is boosting this stuff," says Paul Kurtz, a philosophy professor at the State University of New York at Buffalo, who heads the Committee for the Scientific Investigation of the Paranormal.The committee, formed in 1967, now has 60 chapters around the world. The spirits, of course, could hardly care less whether people do or don't believe in them.They don't even give a nod to human sensibilities by celebrating Halloween.For the spooks it's just another day of ectoplasmic business as usual, ghostbusters say; the holiday seems to occasion no unusual number of ghost reports. One of the busiest ghostbusters is Robert Baker, a 68-year-old semi-retired University of Kentucky psychology professor whose bushy gray eyebrows arch at the mere mention of a ghost.Mr. Baker says he has personally bested more than 50 haunts, from aliens to poltergeists. Mr. Baker heads the Kentucky Association of Science Educators and Skeptics.Like Hollywood's Ghostbusters, Kentucky's stand ready to roll when haunts get out of hand.But they don't careen around in an old Cadillac, wear funny suits or blast away at slimy spirits.Mr. Baker drives a 1987 Chevy and usually wears a tweed jacket on his ghostbusting forays. "I've never met a ghost that couldn't be explained away by perfectly natural means," he says. When a Louisville woman complained that a ghost was haunting her attic, Mr. Baker discovered a rat dragging a trap across the rafters. A foul-smelling demon supposedly plagued a house in Mannington, Ky.Mr. Baker found an opening under the house that led to a fume-filled coal mine.When the weather cools, Mr. Baker says, hobos often hole up in abandoned houses. "People see activity in there, and the next thing you know, you've got a haunting," he says. On a recent afternoon, Mr. Baker and a reporter go ghost-busting, visiting Kathleen Stinnett, a Lexington woman who has phoned the University of Kentucky to report mysterious happenings in her house.Mrs. Stinnett says she never believed in ghosts before, but lately her vacuum cleaner turned itself on, a telephone flew off its stand, doors slammed inexplicably, and she heard footsteps in her empty kitchen. "I was doing the laundry and nearly broke my neck running upstairs to see who was there, and it was nobody," she says, eyes wide at the recollection. Mr. Baker hears her out, pokes around a bit, asks a few questions and proposes some explanations.Of the self-starting vacuum cleaner, he says: "Could be Cuddles, {Mrs.Stinnett's dog}." The flying telephone: "You tangle the base cord around a chair leg, and the receiver does seem to fly off." The ghostly footsteps: "Interstate 64 is a block away, and heavy traffic can sure set a house to vibrating." "I'm not sure he's explained everything," Mrs. Stinnett says grudgingly. "There are some things that have gone on here that nobody can explain," she says.Mr. Baker promises to return if the haunting continues. For especially stubborn haunts, Mr. Baker carries a secret weapon, a vial of cornstarch. "I tell people it's the groundup bones of saints," he says. "I sprinkle a little around and tell the demons to leave.It's reassuring, and it usually works." Oregon's Mr. Hyman has investigated claims of flying cats, apparitions and bouncing chandeliers and has come up with a plausible explanation, he says, for every one. "Invariably," he says, "eyewitnesses are untrustworthy." Two years ago, a Canadian reader bet Omni Magazine $1,000 that it couldn't debunk the uncanny goings-on in "the Oregon Vortex," a former Indian burial ground in southern Oregon.To viewers from a distance, visitors to the spot seemed to shrink disproportionately, relative to the background.The magazine called in Mr. Hyman as a consultant. He showed up with a carpenter's level, carefully measured every surface and showed how the apparent shrinkage was caused by the perspective. "A very striking illusion," Mr. Hyman says now, his voice dripping with skepticism, "but an illusion nevertheless." The Canadian wound up writing a check. The Rev. Alphonsus Trabold, a theology professor and exorcism expert at St. Bonaventure University in Olean, N.Y., frequently is asked to exorcise unruly spirits, and he often obliges. "On certain occasions a spirit could be earthbound and make itself known," he says. "It happens." Father Trabold often uses what he calls "a therapeutic exorcism": a few prayers and an admonition to the spirit to leave. "If the person believes there's an evil spirit, you ask it to be gone," he says. "The suggestion itself may do the healing." But sometimes more energetic attacks are required.To wrestle with a demon in a house owned by a Litchfield, Conn., woman, the Warrens recently called in an exorcist, the Rev. Robert McKenna, a dissident clergyman who hews to the Catholic Church's old Latin liturgy.I attend, and so does a television crew from New York City. Mr. Warren pronounces the Litchfield case "your typical demonic infestation." A Scottish dwarf built the small red house 110 years ago and now his demonic ghost haunts it, Mr. Warren says.The owner, who begs anonymity, asserts that the dwarf, appearing as a dark shadow, has manhandled her, tossing her around the living room and yanking out a hank of hair.Two previous exorcisms have failed. "This is a very tenacious ghost," Mr. Warren says darkly. Father McKenna moves through the house praying in Latin, urging the demon to split.Suddenly the woman begins swaying and then writhing. "She's being attacked by the demon," Mrs. Warren stagewhispers as the priest sprinkles holy water over the squirming woman, and the television camera grinds.A half-hour later, the woman is smiling and chatting; the demon seems to have gone.But Mr. Warren says the woman has "psychic burns" on her back from the confrontation.She declines to show them. "This was an invisible, powerful force that's almost impossible for a layman to contemplate," Mr. Warren says solemnly as the ghostbusting entourage packs up to leave. "This time though," he says, "I think we got it." Lyrics from "Ghostbusters" by Ray S. Parker Jr. 1984 by Golden Torch Music Corp. (ASCAP) and Raydiola Music (ASCAP).All administrative rights for the U.S. jointly controlled by both companies.International copyright secured.Made in USA.All rights Reserved.Reprinted by permission.
Hospital Regulation Sparks Kentucky Feud WHICH IS the best medicine for runaway health costs: competition or regulation? The question is at the root of a brawl between Humana Inc., the big for-profit hospital and insurance company, and its not-for-profit brethren in its home state of Kentucky. The battle focuses on the state's certificate-of-need law, which regulates investment in new medical technology.The law has prevented $216 million of unnecessary expenditures since 1986, according to William S. Conn, president of the Kentucky Hospital Association. But according to David Jones, Humana's chief executive, it promotes technology monopolies, stifles innovation and raises prices. If the Legislature doesn't repeal the law, due for revision in 1990, Mr. Jones says Humana may move its insurance operations, including 3,000 jobs in Louisville, to another state. The company complains that it paid $10 million to non-Humana hospitals in its latest fiscal year for services provided to its insurance plan members.But Humana says its own facilities could serve its insured for less if they were properly equipped. Mr. Conn charges that Humana's own actions undermine its argument.When a hospital in Lexington installed a lithotripter last year, demand for a similar kidney-stone smashing machine at a Humana hospital in Louisville fell 34%.The Humana hospital responded by jacking up prices to make up for lost revenue, Mr. Conn says, and now charges as much as $8,000 for the procedure, which costs only about $3,500 in Lexington. Humana contends that $8,000 represents an extreme case and that its regular charge for lithotripsy is $4,900. Meanwhile, another hospital's proposal for a new-generation lithotripter is pending before the board that administers the certificate-of-need law.Humana, which wants to acquire one of the new machines itself, is on the record as opposed to the proposal. Debt-Burdened Doctors Seek Financial Security HEALTH-CARE experts have long worried that young doctors emerging from medical school with a mountain of debt will choose careers in high-paying specialties instead of primary care, where more physicians are needed most. Now there's a new wrinkle in what young doctors want: More than half of 300 residents responding to recent survey said they'd prefer a guaranteed salary over traditional fee-for-service compensation in their first professional position.And 81% preferred a group practice or health maintenance organization, while just 11% favored solo practice. "Ten years ago, a physician would go to a town and take out a loan (to start a practice)," says James Merritt, president of Merritt, Hawkins & Associates, an Irvine, Calif., physician recruiter that conducted the survey. "They won't do that very often today at all.They're looking for something that's very safe." The numbers behind such fears: The average debt of medical school graduates who borrowed to pay for their education jumped 10% to $42,374 this year from $38,489 in 1988, says the Association of American Medical Colleges.That's 115% more than in 1981. Money isn't the only reason for the shift in practice preferences.It reflects values of a generation that wants more time for families and personal interests, says John H. Moxley III, who directs physician-executive searches for Korn/Ferry International. "This is a change in the social fabric of medicine," he says. Related Roommates Trim Hospital Bills WHEN Catherine Bobar spent several weeks at the Medical Center of Vermont recently with a bone infection in her toe, she shared a room just like most patients. But unlike most patients, her roommate was her husband. "It was certainly good to have him handy," Mrs. Bobar says. The 12-bed "cooperative care" unit is one of about 18 nationwide where a family member or friend helps care for a patient in the hospital. "The philosophy is to make the patient and the family very responsible for a portion of their own care," says Anthony J. Grieco, medical director of cooperative care at New York University Medical Center, where the concept began 10 years ago. "It helps us, and them, while they're here, and it certainly makes them a better health-care team when they get home." It also saves money.Because patients require less attention from nurses and other staff, room charges are lower -- about $100 less per day than a regular room at the Vermont hospital. Cancer patients needing prolonged radiation therapy, diabetics learning to manage their blood sugar levels, and cardiac bypass patients are among those who spend time on cooperative-care units.The approach has generated so much interest that NYU is host to the first conference on cooperative care Nov. 30. "It's really part of the hospital of the 21st century," Dr. Grieco says. Odds and Ends THE CHIEF NURSING officer can be responsible for more than 1,000 employees and at least one-third of a hospital's budget; a head nurse typically oversees up to 80 employees and $8 million.So says the Commonwealth Fund, a New York philanthropist that's sponsoring a $1 million project to develop joint masters in business and nursing programs at 10 universities. . . . Meharry Medical College in Nashville, Tenn., launches a new research publication in the spring: the Journal on Health Care for the Poor and Underserved.
A group of Michigan investors has offered to buy Knight-Ridder Inc. 's ailing Detroit Free Press for $68 million but has left unclear how the offer will be financed. The offer came just prior to arguments before the U.S. Supreme Court over whether the Free Press should be allowed to enter into a joint operating pact with Gannett Co. 's Detroit News. The group led by Birmingham, Mich., publicist William D. McMaster didn't name an investment banker backing the deal or say how much its members will contribute to the offer.Indeed, some individuals identified with the group said they haven't committed any money to the bid and weren't aware of it until they heard about it in local news accounts over the weekend. Knight-Ridder wouldn't comment on the offer.The company has said the paper isn't for sale, and has rebuffed Mr. McMaster's earlier requests for access to Free Press financial statements. In his letter to Knight-Ridder President James K. Batten, Mr. McMaster said he arrived at the $68 million figure using Knight-Ridder's corporate financial statements and comments by Knight-Ridder officials that the Free Press has a $50 million value in salvage. But in an interview, Mr. McMaster said he and his investment banker would need access to full financial records before firming up the offer.
NRM Energy Co. said it filed materials with the Securities and Exchange Commission calling for it to restructure into a corporation from a limited partnership. The partnership said it is proposing the change largely because the provisions of its senior notes restrict it from making distributions on its units outstanding. NRM suspended its common distribution in June 1988 and the distribution on its $2 cumulative convertible acquisition preferred units in September.However, unpaid distributions on the acquisition preferred are cumulative and would total $23 million a year, hurting NRM's financial flexibility and its ability to raise capital, NRM said. In following several other oil and gas partnerships that have made the conversion to a corporation in the last year, NRM also noted that tax advantages for partnerships have diminished under new tax laws and said it would save $2 million a year in administrative costs from the change. Under the plan, NRM said holders of its common units will receive one share of new common stock in Edisto Resources Corp. for every 14.97 common units owned.Holders of NRM's $2 cumulative convertible acquisition preferred units will receive one new common share in Edisto for every 1.342 units they own. After the transaction, current common unitholders will own about 21.3% of Edisto, current acquisition preferred holders will own 72.3%, and current stockholders of Edisto will own about 6.4%, about the same stake as Edisto owns now in NRM. Edisto currently is the general partner of NRM. As the largest holder of acquisition preferred units, Mesa Limited Partnership would own about 28% of Edisto after the transaction.As part of the transaction, Edisto agreed to give Mesa, an Amarillo, Texas, oil and gas partnership managed by T. Boone Pickens Jr., a seat on its board. NRM said its $2.60 senior cumulative convertible preferred units will be converted into an equal number of shares of $2.60 senior cumulative convertible preferred stock of Edisto. The transaction is subject to approval of NRM unitholders of record on Oct. 23, among other conditions.NRM said it expects unitholders to vote on the restructuring at a meeting Dec. 15.
The recently revived enthusiasm among small investors for stock mutual funds has been damped by a jittery stock market and the tumult over program trading. After hitting two-year highs this summer, net sales of stock funds slowed in September, according to the Investment Company Institute, a trade group.The sales recovery screeched to a halt this month, some analysts say. "Confidence was starting to come back because we didn't have wildly volatile days," says Tyler Jenks, research director for Kanon Bloch Carre & Co., a Boston research firm. "Now everything" -- such as program trading and wide stock market swings -- "that everyone had pushed back in their consciousness is just sitting right there." Net sales of stock funds in September totaled $839.4 million, down from $1.1 billion in August, the institute said.But if reinvested dividends are excluded, investors put in only $340 million more than they pulled out for the month.October's numbers, which won't be released for a month, are down further, mutual fund executives say. Investors in stock funds didn't panic the weekend after mid-October's 190-point market plunge.Most of the those who left stock funds simply switched into money market funds.And some fund groups said investors actually became net buyers. But the stock market swings have continued.The recent outcry over program trading will cast a pall over the stock-fund environment in the coming months, some analysts say. "The public is very close to having had it," Mr. Jenks says. Investors pulled back from bond funds in September, too.Net sales of bond funds for the month totaled $1.1 billion, down two-thirds from $3.1 billion in August.The major reason: heavy outflows from high-risk, high-yield junk bond funds.Big withdrawals from the junk funds have continued this month. Overall, net sales of all mutual funds, excluding money market funds, fell to $1.9 billion in September from $4.2 billion in August, the trade group said. "Small net inflows into stock and bond funds were offset by slight declines in the value of mutual fund stock and bond portfolios" stemming from falling prices, said Jacob Dreyer, the institute's chief economist. Many small investors went for the safety of money market funds.Assets of these and other short-term funds surged more than $5 billion in September, the institute said.Analysts say additional investors transferred their assets into money funds this month. At Fidelity Investments, the nation's largest fund group, money funds continue to draw the most business, says Michael Hines, vice president, marketing.In October, net sales of stock funds at Fidelity dropped sharply, Mr. Hines said.But he emphasized that new accounts, new sales, inquiries and subsequent sales of stock funds are all up this month from September's level. Investor interest in stock funds "hasn't stalled at all," Mr. Hines maintains.He notes that most of the net sales drop stemmed from a three-day period following the Friday the 13th plunge. "If that follows through next month, then it will be a different story," he says.But, Mr. Hines adds, sales "based on a few days' events don't tell you much about October's trends." One trend that continues is growth in the money invested in funds.Buoyed by the continued inflows into money funds, assets of all mutual funds swelled to a record $953.8 billion in September, up fractionally from $949.3 billion in August. Stock-fund managers, meantime, went into October with less cash on hand than they held earlier this year.These managers held 9.8% of assets in cash at the end of September, down from 10.2% in August and 10.6% in September 1988.Large cash positions help buffer funds from market declines but can cut down on gains in rising markets. Managers of junk funds were bolstering their cash hoards after the September cash crunch at Campeau Corp. Junk-portfolio managers raised their cash position to 9.4% of assets in September from 8.3% in August.In September 1988, that level was 9.5%. Investors in all funds will seek safety in the coming months, some analysts say.Among stock funds, the conservative growth-and-income portfolios probably will remain popular, fund specialists say. "There will be a continuation and possibly greater focus on conservative equity funds, at the expense of growth and aggressive growth funds," says Avi Nachmany, an analyst at Strategic Insight, a New York fund-research concern.
Secretary of State Baker, we read, decided to kill a speech that Robert Gates, deputy national security adviser and a career Soviet expert, was going to give to a student colloquium, the National Collegiate Security Conference.We keep wondering what Mr. Gates wanted to say. Perhaps he might have cited Mr. Gorbachev's need for "a stable currency, free and competitive markets, private property and real prices" and other pie-in-the-sky reforms.Perhaps he'd have called for "a decentralized political and economic system" without a dominant communist party.Or political arrangements "to alleviate the grievances and demands of Soviet ethnic minorities and republics." Why, a Bob Gates might even have said, "Nor are Soviet problems susceptible to rescue from abroad through abundant Western credits." If Mr. Gates had been allowed to say these things, we would now be hearing about "discord" and "disarray" on foreign policy.Dark hints would be raised that parts of the administration hope Mr. Gorbachev would fail, just as they were when Vice President Quayle voiced similar sentiments.It's somehow OK for Secretary Baker himself, however, to say all the same things.In fact, he did; the quotes above are from Mr. Baker's speech of two weeks ago. So far as we can see, there is no disagreement among Mr. Baker, Mr. Quayle, the Mr. Gates we've read, or for that matter President Bush.They all understand point one: Nothing the U.S. can do will make much difference in whether Mr. Gorbachev succeeds with perestroika.Perhaps Mr. Gates would emphasize more than Mr. Baker the many hurdles the Soviet leader must leap if he is going to succeed.But everyone agrees that Mr. Gorbachev's problems result from the failure of his own system.They can be relieved only by changing that system, not by pouring Western money into it.GATT membership will not matter to Donbas coal miners short of soap, nor will a START treaty make any difference to Ukrainian nationalists. On the other hand, so long as Mr. Gorbachev is easing his grip on his empire, everyone we've heard agrees that the U.S. can benefit by engaging him.If a deal can be made to cut the world's Ortegas loose from Moscow, why not?We don't expect much good from nuclear-arms control, but conventional-arms talks might demilitarize Eastern Europe. There's nothing in the least contradictory in all this, and it would be nice to think that Washington could tolerate a reasonably sophisticated, complex view.Yet much of the political culture seems intent on castigating the Bush administration for not "helping" Mr. Gorbachev.So every time a Bush official raises a doubt about Mr. Gorbachev, the Washington community shouts "Cold War" and "timidity," and an administration spokesman is quickly trotted out to reply, "Mr.Bush wants perestroika to succeed." Mr. Baker seems especially sensitive to the Washington ailment known as Beltway-itis.Its symptoms include a cold sweat at the sound of debate, clammy hands in the face of congressional criticism, and fainting spells when someone writes the word "controversy." As one unidentified official clearly in the late stages of the disease told the Times: "Baker just felt that there were some lines in the speech that could be misinterpreted and seized by the press." In short, the problem is not intra-administration disagreement, but preoccupation with the prospect that perestrokia might fail, and its political opponents will ask "Who lost Gorbachev?" Mr. Baker may want to avoid criticism from Senate Majority Leader George Mitchell, but as Secretary of State his audience is the entire Free World, not just Congress.In any case, he's likely to find that the more he muzzles his colleagues, the more leaks will pop up all around Washington, a lesson once learned by Henry Kissinger.Letting officials express their own nuances can be educational.We note that in Rome yesterday Defense Secretary Cheney said that European euphoria over Mr. Gorbachev is starting to be tempered by a recognition of "the magnitude of the problems he was trying to deal with." It is in the Western interest to see Mr. Gorbachev succeed.The odds are against him, as he himself would no doubt tell you.The ultimate outcome depends on what he does, not on what we do.Even if the press is ready to seize and misinterpret, these are not very complicated thoughts.Surely there is someone in the administration, maybe Bob Gates, who could explain them to college students, or even schoolchildren.
Two gunmen entered a Maryland restaurant, ordered two employees to lie on the floor and shot them in the backs of their heads.The killers fled with less than $100. Describing this and other grisly killings, Sen. Strom Thurmond (R., S.C.) recently urged fellow lawmakers to revive a broad federal death penalty. "The ultimate punishment," he declared, "will protect the law-abiding from the vicious, cruel individuals who commit these crimes." There's just one problem: The law that Sen. Thurmond is pushing would be irrelevant in the case of the Maryland restaurant murders and almost all other killings.Most murders are state crimes, so any federal capital-punishment law probably would turn out to be more symbolism than substance. Yet the bill is riding high on the furor over drug trafficking.Senate Republicans, after repeatedly failing to attach death-penalty amendments to unrelated legislation, have finally gotten a full-blown death-penalty bill through committee.The Democratic leadership agreed to allow a floor vote on the issue before the end of the year -- a debate certain to focus on the alleged racial inequality of death sentencing.Even some Democrats concede that there is probably a majority in the Senate that favors some kind of broad capital-punishment measure. The pending bill, introduced by Mr. Thurmond, would revive the long-dormant federal death-penalty laws by instituting legal procedures required by the Supreme Court.In 1972, the high court swept aside all capital-punishment laws -- federal and state alike -- as unconstitutional.But in 1976, the court permitted resurrection of such laws, if they meet certain procedural requirements.For instance, juries would have to consider specific "aggravating" and "mitigating" factors before deciding whether to condemn someone to death.Since that 1976 ruling, 37 states have reintroduced the death penalty.But congressional Democrats have blocked the same from occurring at the federal level, with the exception of a 1988 law allowing capital punishment for certain drug-related homicides. The Thurmond bill would establish a federally administered death sentence for 23 crimes, most of which were formerly punishable by death under federal statutes that the Supreme Court invalidated.Among these crimes are murder on federal land, presidential assassination and espionage.The Thurmond bill would also add five new crimes punishable by death, including murder for hire. (Separately, the Senate last week passed a bill permitting execution of terrorists who kill Americans abroad.) Amid the swirl of punitive rhetoric surrounding the issue, one critical question involves whether a federal death penalty, on top of existing state laws, would deter any would-be criminals. For one thing, it's unlikely that many people would receive federal death sentences, let alone be executed.Most of the crimes incorporated in the Thurmond bill are exceedingly rare -- killing a Supreme Court justice, for instance, or deliberately causing a train wreck that results in a death. In fact, only 28 defendants would have been eligible for federal death sentences if the Thurmond bill had been in effect in the past three years, according to a study by the Senate Judiciary Committee's Democratic staff.The last federal execution before the Supreme Court's 1972 ruling banning the death penalty took place in 1963, meaning that the federal government didn't exercise its execution authority for eight years. "In that sense, the whole debate is sort of a fraud," argues a Democratic Senate staff member. "It's distracting attention from serious issues, like how to make DEA, FBI and Customs work together" on drug enforcement. Republicans acknowledge that few people would be executed under the Thurmond bill, but they contend that isn't the point. "Many scholars are of the opinion that the mere existence of the penalty deters many people from the commission of capital crimes," says Sen. Orrin Hatch (R., Utah).Executions, regardless of how frequently they occur, are also "proper retribution" for heinous crimes, Mr. Hatch argues.Thomas Boyd, a senior Justice Department official, says the new federal drug-related crimes punishable by death since last November may result in a jump in capital sentences, though that hasn't happened so far. In addition to resuscitating the old issue of whether death sentences deter criminals, this bill has made race a major part of the death-penalty debate.Before the bill left committee, Sen. Edward Kennedy (D., Mass.) attached an amendment that would allow a defendant to escape from a death sentence in jurisdictions shown to have meted out executions in a racist manner. The amendment prompted an ironic protest from Mr. Thurmond, who complained that it would "kill" capital punishment.A large number of studies suggest that state judges and juries have imposed the penalty in a racially discriminatory fashion.And the Kennedy amendment would invade not only federal but state sentencings, in two important ways.It would allow all defendants to introduce statistical evidence showing racially disproportionate application of the death penalty in the past.And it would shift the burden to prosecutors to disprove that discrimination caused any statistical racial disparities. "That burden is very difficult, if not impossible, to meet," says Mr. Boyd. "How do you prove a negative?" Since most prosecutors wouldn't be able to demonstrate conclusively that racial considerations didn't affect sentencing, executions everywhere might come to a halt, Mr. Boyd explains. At least 15 major studies purport to show that particular states have imposed the death penalty disproportionately against killers of whites compared with blacks, and against black defendants compared with white defendants.Conservatives question the validity of the studies and note that the Supreme Court ruled in 1987 that such research, regardless of its accuracy, isn't relevant to a constitutional attack on a particular death sentence. The Kennedy amendment would, in effect, legislate around the Supreme Court ruling.Lawyers would eagerly seize on the provision in their death-penalty appeals, says Richard Burr, director of the NAACP Legal Defense and Educational Fund's capital-punishment defense team. Mr. Kennedy failed to get his amendment incorporated into last year's anti-drug legislation, and it will be severely attacked on the Senate floor this time around.But if it survives, it could prompt other statutory changes, according to the Mr. Burr.It might force Congress and the states to narrow the death penalty only to convictions shown to be relatively free of racial imbalance -- murders by repeat offenders who torture their victims, perhaps. Narrowing the penalty in this fashion would clearly reduce whatever deterrent effect it now has.And that, in turn, would only strengthen the argument of those who oppose execution under any circumstances.
A state judge postponed a decision on a move by holders of Telerate Inc. to block the tender offer of Dow Jones & Co. for the 33% of Telerate it doesn't already own. Vice Chancellor Maurice A. Hartnett III of Delaware's Court of Chancery heard arguments for more than two hours here, but he made no comment and asked no questions.He could rule as early as today on the motion seeking a temporary injunction against the Dow Jones offer. Dow Jones has offered to pay $18 a share, or about $576 million, for the remaining Telerate stake.The offer will expire at 5 p.m. EST on Nov. 6, unless extended again. Robert Kornreich, an attorney for the Telerate holders, told Judge Hartnett the Dow Jones offer is "arrogant" and "hostile." He accused Dow Jones of "using unfair means to obtain the stock at an unfair price." Michael Rauch, an attorney for Dow Jones, defended the offer as adequate, based on what the company considers realistic projections of Telerate's revenue growth, in the range of 12%.He also contended that the plaintiffs failed to cite any legal authority that would justify such an injunction. Telerate provides information about financial markets through an electronic network.Dow Jones publishes The Wall Street Journal, Barron's magazine, other periodicals and community newspapers and operates electronic business information services.
Nothing was going to hold up the long-delayed settlement of Britton vs.Thomasini.Not even an earthquake. On the afternoon of Oct. 17, after hours of haggling with five insurance-claims adjusters over settling a toxic-waste suit, four lawyers had an agreement in hand.But as Judge Thomas M. Jenkins donned his robes so he could give final approval, the major earthquake struck, its epicenter not far from his courtroom in Redwood City, Calif. The walls shook; the building rocked.For a while, it looked like the deal -- not to mention the courtroom itself -- was on the verge of collapse. "The judge came out and said, `Quick, let's put this on the record, '" says Sandy Bettencourt, the judge's court reporter. "I said, `NOW?' I was shaking the whole time." A 10-gallon water cooler had toppled onto the floor, soaking the red carpeting.Lights flickered on and off; plaster dropped from the ceiling, the walls still shook and an evacuation alarm blared outside.The four lawyers climbed out from under a table. "Let's close the door," said the judge as he climbed to his bench. At stake was an $80,000 settlement involving who should pay what share of cleanup costs at the site of a former gas station, where underground fuel tanks had leaked and contaminated the soil.And the lawyers were just as eager as the judge to wrap it up. "We were never going to get these insurance companies to agree again," says John V. Trump, a San Francisco defense lawyer in the case. Indeed, the insurance adjusters had already bolted out of the courtroom.The lawyers went to work anyway, duly noting that the proceeding was taking place during a major earthquake.Ten minutes later, it was done.For the record, Jeffrey Kaufman, an attorney for Fireman's Fund, said he was "rattled -- both literally and figuratively." "My belief is always, if you've got a settlement, you read it into the record." says Judge Jenkins, now known in his courthouse as "Shake 'Em Down Jenkins." The insurance adjusters think differently. "I didn't know if it was World War III or what," says Melanie Carvain of Morristown, N.J. "Reading the settlement into the record was the last thing on my mind."
Chrysler Corp. Chairman Lee A. Iacocca said the nation's No. 3 auto maker will need to close one or two of its assembly plants because of the slowdown hitting the industry. In an interview with the trade journal Automotive News, Mr. Iacocca declined to say which plants will close or when Chrysler will make the moves.But he said, "we have too many plants in our system.So the older or most inefficient capacity has got to go." According to industry analysts, Chrysler plants most likely to close are the St. Louis No. 1 facility, which builds Chrysler LeBaron and Dodge Daytona models; the Toledo, Ohio, Jeep plant, which dates back to the early 1900s; and two Canadian plants that build the Jeep Wrangler and Chrysler's full-sized vans. Chrysler has had to temporarily close the St. Louis and Toledo plants recently because of excess inventories of vehicles built there. At Chrysler's 1990 model preview last month, Chrysler Motors President Robert A. Lutz said the No. 3 auto maker, along with other U.S. manufacturers, might be forced to "realign . . . capacity" if market demand doesn't improve.But Mr. Iacocca's remarks are the most specific indication to date of how many plants could be in jeopardy. General Motors Corp. has signaled that as many as five of its U.S. and Canadian plants may not survive the mid-1990s as it struggles to trim its excess vehicle-production capacity. The overcapacity problem has intensified in recent years, with foreign auto makers beginning car and truck production in the U.S.With companies such as Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co. running so-called transplant auto operations, Japanese auto production in the U.S. will reach one million vehicles this year. "Unless the market goes to 19 million units -- which we all know it's not going to do -- we have the inescapable fact that the transplants are adding capacity," Mr. Lutz said last month.The Japanese-managed plants eventually will have the capacity to build some 2.5 million vehicles in the U.S. and that will translate into "market share that is going to have to come out of somebody," he added. Already Chrysler has closed the Kenosha, Wis., plant it acquired when it bought American Motors Corp. in 1987.Chrysler has also launched a $1 billion cost-cutting program that will cut about 2,300 white-collar workers from the payroll in the next few months.
Revco D.S. Inc., the drugstore chain that filed for bankruptcy-court protection last year, received a $925 million offer from a group led by Texas billionaire Robert Bass. Revco reacted cautiously, saying the plan would add $260 million of new debt to the highly leveraged company.It was Revco's huge debt from its $1.3 billion leveraged buy-out in 1986 that forced it to seek protection under Chapter 11 of the federal Bankruptcy Code. Revco insists that the proposal is simply an "expression of interest," because under Chapter 11 Revco has "exclusivity rights" until Feb. 28.Those rights prevent anyone other than Revco from proposing a reorganization plan. Also under Chapter 11, a reorganization plan is subject to approval by bondholders, banks and other creditors.A financial adviser for Revco bondholders, David Schulte, of Chilmark Partners, had mixed reactions to the offer. He said he feared a Revco reorganization might force bondholders to accept a "cheap deal," and that the Bass group's offer would give them more money.However, the group is offering to pay off bondholders in cash only -- $260.5 million -- and no equity.The Revco bonds are high-yield, high-risk "junk" bonds; holders have $750 million in claims against Revco, Mr. Schulte said. Revco received the offer Oct. 20, but issued a response yesterday only after a copy of the proposal was made public by bondholders.Acadia Partners Limited Partnership, a Fort Worth, Texas, partnership that includes the Robert M. Bass Group, made the proposal.Mr. Bass is based in Fort Worth. Analysts said the nation's second-largest drugstore chain was a valuable company, despite its financial woes.Its problem, they say, is that management paid too much in the leveraged buy-out and the current $515 million debt load is keeping Revco in the red. "If bought at the right price, it could still be profitable," said Jeffrey Stein, an analyst at McDonald & Co., Cleveland. In addition, Revco's 1,900 stores in 27 states represent a lot of real estate, he said, and demographics are helping pharmacies: The nation's aging population will boost demand for prescription drugs. Last week, Revco's parent company, Anac Holding Corp., said the company reported a loss of $16.2 million for the fiscal first quarter, compared with a loss of $27.9 million in the year-earlier quarter.Sales were $597.8 million, up 2.4% from the previous year. The company, based in Twinsburg, Ohio, said its operating profit before depreciation and amortization increased 51%, to $9.2 million from $6.1 million. Acadia Partners and the Bass Group declined to comment.The partnership also includes American Express Co., Equitable Life Assurance Society of the U.S. and Shearson Lehman Hutton Inc. The offer consists of $410.5 million in cash and the rest in notes.Acadia would sell up to 10% of the equity in the reorganized company to creditors and bondholders in exchange for the cash distribution, but creditors and bondholders would receive no discount for their shares. Revco's chairman and chief executive officer, Boake A. Sells, said both the company and the bondholders have put forth reorganization plans, but little progress has been made since negotiations began this summer. He said he has not met with representatives from Acadia.Any reorganization proposal, Mr. Sells said, is difficult to assess because it must be agreed upon by the company, bondholders, banks and other creditors.Revco has $1.5 billion in claims outstanding. "It's not like the board can decide" by itself, Mr. Sells said, adding, "we're indifferent to (the Bass) plan.We just want a plan that satisfies creditors and at the end leaves a healthy Revco." But Mr. Schulte, the bondholders' adviser, said Revco was dragging its feet in responding to the proposal. "They want to pretend it doesn't exist," he said. Mr. Schulte, who met with Acadia representatives on Oct. 10, said, "It's certainly a responsible offer.It's not an effort to steal the company" in the middle of the night.
Copper futures prices failed to extend Friday's rally.Declines came because of concern that demand for copper may slow down. The December contract was down three cents a pound, settling at $1.1280, which was just above the day's low of $1.1270. Futures prices fell during three of five sessions last week, and the losses, individually and cumulatively, were greater than the advances. Two of the major factors buoying prices, the prolonged strikes at the Highland Valley mine in Canada and the Cananea mine in Mexico, were finally resolved.Also, the premiums paid by the U.S. government on a purchase of copper for the U.S. Mint were lower than expected, and acted as a price depressant, analysts said.The mint purchases were at premiums about 4 1/2 cents a pound above the respective prices for the copper.At the time merchants were asking for premiums of about five cents a pound. All this has led to prolonged selling in futures, mostly on the part of computer-guided funds.Prices fell through levels regarded as important support areas, which added to the selling. The reluctance of traders to buy contracts indicates that they have begun focusing on demand rather than supply.At least one analyst noted that as production improves, the concern among traders is whether the prospective increased supply will find buyers because of uncertainty over national economies. "Demand from Japan is expected to continue strong, but not from other areas of the world into the first quarter of next year," he said. Japan normally depends heavily on the Highland Valley and Cananea mines as well as the Bougainville mine in Papua New Guinea.Recently, Japan has been buying copper elsewhere.But as Highland Valley and Cananea begin operating, they are expected to resume their roles as Japan's suppliers.According to Fred Demler, metals economist for Drexel Burnham Lambert, New York, "Highland Valley has already started operating and Cananea is expected to do so soon." The Bougainville mine is generally expected to remain closed until at least the end of the year.It hasn't been operating since May 15 because of attacks by native landowners.A recent attempt to resume operations was cut short quickly by these attacks. However, traders disregarded a potential production disruption in Chile and a continued drop in inventories. Workers at two Chilean mines, Los Bronces and El Soldado, which belong to the Exxon-owned Minera Disputado group, will vote Thursday on whether to strike after a two-year labor pact ends today.The mines produced a total of 110,000 tons of copper in 1988. According to Drexel's Mr. Demler, the potential strike is expected to be resolved quickly, which may be one reason why the situation didn't affect prices much.Another analyst said that, if there was any concern, it was that a strike could encourage other walkouts in Chile. London Metal Exchange copper inventories fell 550 tons last week to 83,950 tons, a smaller-than-expected decline.But that development also had little effect on traders' sentiment. Mr. Demler said that stocks of copper in U.S. producers' hands at the end of September were down 16,000 metric tons from August to 30,000 tons.Outside the U.S., he said, producer stocks at the end of August were 273,000 tons, down 3,000 tons from the end of July. Consumer stocks of copper in the U.S. fell to 44,000 tons at the end of September from 54,000 tons a month earlier, and stocks of copper held by consumers and merchants outside of the U.S. at the end of July stood at 123,000 tons, down from 125,000 tons in June.The high point of foreigners' copper stocks this year was 136,000 tons at the end of April, according to Mr. Demler. In other commodity markets yesterday: GRAINS AND SOYBEANS: The prices of most corn, soybean and wheat futures contracts dropped slightly as farmers in the Midwest continued to rebuild stockpiles that were depleted by the 1988 drought.Buying by the Soviets has helped to prop up corn prices in recent weeks, but a lack of any new purchases kept prices in the doldrums. COFFEE: Futures prices rose slightly in a market filled with rumors that a new international coffee agreement might still be achieved.The December contract ended with a gain of 1.29 cents a pound at 74.35 cents.According to one analyst, prices opened higher because of reports over the weekend that Brazil and Colombia, at the Pan-American summit meeting in Costa Rica, had agreed to a reduction in their coffee export quotas for the sake of creating a new agreement.The reports, attributed to the Colombian minister of economic development, said Brazil would give up 500,000 bags of its quota and Colombia 200,000 bags, the analyst said.These reports were later denied by a high Brazilian official, who said Brazil wasn't involved in any coffee discussions on quotas, the analyst said.The Colombian minister was said to have referred to a letter that he said President Bush sent to Colombian President Virgilio Barco, and in which President Bush said it was possible to overcome obstacles to a new agreement.The minister was also quoted as saying that a new pact could be achieved during the first half of next year, according to the analyst. PRECIOUS METALS: Futures prices showed modest changes in light trading volume.December delivery gold eased 40 cents an ounce to $380.80.December silver was off 3.7 cents an ounce at $5.2830.January platinum rose 90 cents an ounce at $500.20.The market turned quiet after rising sharply late last week, according to one analyst.Last week's uncertainty in the stock market and a weaker dollar triggered a flight to safety, he said, but yesterday the market lacked such stimuli.There was some profit-taking because prices for all the precious metals had risen to levels at which there was resistance to further advance, he said.The dollar was also slightly firmer and prompted some selling, as well, according to the analyst.
When the Supreme Soviet passed laws on workers' rights in May 1987 and on self-managing cooperatives a year later, some Western observers assumed Mikhail Gorbachev had launched the Soviet Union on a course that would lead inevitably to the creation of a market economy.Their only doubt concerned the possibility that Mr. Gorbachev might not survive the opposition that his reforms would arouse and that the whole process might be reversed. If Mr. Gorbachev's goal is the creation of a free market, he and these Western observers have good reason to fear for his future, as economic liberalization within communist societies leads inexorably to demands for fundamental political reform accompanied by civil unrest.These fears were clearly apparent when, last week, Secretary of State James Baker blocked a speech by Robert Gates, deputy national security adviser and Soviet expert, on the ground that it was too pessimistic about the chances of Mr. Gorbachev's economic reforms succeeding. Yet the Soviet leader's readiness to embark on foreign visits and steady accumulation of personal power, particularly since the last Politburo reshuffle on Sept. 30, do not suggest that Mr. Gorbachev is on the verge of being toppled; nor does he look likely to reverse the powers of perestroika.Indeed, the Soviet miners strike this summer clearly demonstrated that Mr. Gorbachev must proceed with economic reform.But is he so clever that he has achieved the political equivalent of making water run uphill?And has he truly persuaded the Communist Party to accept economic change of a kind that will, sooner or later, lead to its demise? An alternative and more convincing explanation, confirmed by recent events and a close inspection of the Gorbachev program, is that the new Soviet economic and social structures are intended to conform to a model other than that of the market.For example, while the laws on individual labor activity allow a citizen to earn a living independent of the state, strict provisions are attached on how far this may lead to the development of a free market.Before becoming self-employed, or setting up a cooperative, workers must seek permission from the local soviet (council).Permission is far from automatic: The soviets have the legal right to turn down applications and impose conditions, and they appear to be exercising these powers.Private dressmaking, for example, is allowed in 10 Soviet republics but banned by five; shoemaking is allowed in seven but illegal in nine. The controls on cooperatives appeared relatively liberal when first introduced.But that changed following a resolution from the Supreme Soviet banning cooperatives from operating in some areas of the economy, and permitting activity in others only if the cooperatives are under contract to the state. All independent media activity is now illegal, which perhaps is not surprising, but so is the manufacture of perfume, cosmetics, household chemicals and sand candles.Medical cooperatives, among the most successful in the U.S.S.R., are banned from providing general-practitioner services (their main source of income), carrying out surgery, and treating cancer patients, drug addicts and pregnant women. Earlier this month, the Supreme Soviet adopted two more resolutions restricting the freedom of cooperatives: The first enables the soviets to set prices for which goods may be sold; the second bans cooperatives from buying "industrial and food goods" from the state or other cooperatives.If Mr. Gorbachev is looking toward unleashing the productive forces of the market, these latest resolutions are nothing short of reckless. Along with some other revealing indicators, these developments suggest that while Mr. Gorbachev wishes to move away from some rigid central controls, he is bent on creating economic structures of a kind that would scarcely find favor with the Austrian or Chicago schools of economic thought.Mr. Gorbachev has ruled out the use of the market to solve the problem of insufficient consumer goods.He told the Congress of People's Deputies on May 30: "We do not share this approach, since it would immediately destroy the social situation and disrupt all the processes in the country." Having rejected central economic planning for economic reasons, and the market for fear of the social (political) consequences, Mr. Gorbachev seeks a "third way" that would combine the discipline and controls of the former with the economic benefits of the latter.Most important, this would leave the party intact and its monopoly of political power largely undisturbed.Indeed, Mr. Gorbachev's proposals display a close conceptual resemblance to the tenets of Italian fascism, whose architects spoke specifically of a "third way": of having produced a historic synthesis of socialism and capitalism.They, too, promised to combine economic efficiency with order and discipline. The emergence of Russian corporatism had been anticipated in journalist George Urban's introduction to a series of colloquies -- "Can the Soviet System Survive Reform?" -- published this spring. "Communism will reach its final stage of development in a feckless Russo -- corporation-socialist in form, nationalistic in content and Oriental in style -- that will puzzle the world with alternating feats of realism and recklessness. . . ." The fascist concept of corporatism envisaged an "organic" society in which citizens were spiritually and morally unified, and prepared to sacrifice themselves for the nation.This unification was to be brought about through policies and institutions that would unite workers and employers with government in a fully integrated and "harmonic" society.The key to the creation of the "organic" state lay in the formation of "natural" groups that would undertake the role of decision-making.By contrast, a parliamentary system based on abstract political rights and groups was held to cause, rather than resolve, conflict. The closeness of Soviet perestroika to the fascist social blueprint of Mussolini was evident when Mr. Gorbachev presented his economic vision to the Soviet Congress.In doing so, he neither rejected a socialist planned economy nor embraced the free market.Instead, he proposed a "law-governed economy," in which there would be a "clear-cut division between state direction of the economy and economic management." The latter would be undertaken by "enterprises, joint stock companies and cooperatives." These would not function independently, but would act together to form "combines, unions and associations" to tackle problems and coordinate their activities. Mr. Gorbachev is in a much stronger position to pursue the corporatist ideal than was Mussolini, who was never able to influence business giants such as Pirelli and Fiat.The Soviet Communist Party has the power to shape corporate development and mold it into a body dependent upon it. To ensure the loyalty of the business sector, Mr. Gorbachev may offer concessions and powers that will allow the business community to preserve its own interests, probably by restricting competition.However, Mr. Gorbachev must ensure that within this "alliance" the business sector remains subordinate to the party.At the same time, he must give it sufficient freedom to provide the economic benefits so desperately needed.It is the promise of economic returns that is supposed to make the corporatist model attractive to both the party and labor. The work force provides the third arm of the "alliance." Within the alliance it is supposed to act as a balancing force, guarding against excessive control by government or abuse of its economic position by business, for either could result in a deterioration of its living standards (under the new resolutions, workers councils may demand that a cooperative be closed or its prices be reduced).By providing workers with the opportunity to move into the private sector where wages tend to be higher, and by holding out the promise of more consumer goods, Mr. Gorbachev hopes to revive the popularity of the party. At the same time, the strategy requires that he deal effectively with those who seek genuine Western-style political pluralism.The most important development in Mr. Gorbachev's policy for marginalizing the opposition movement is the claim that the U.S.S.R. also suffers from terrorism.An increasing number of references by the Soviet press to opposition groups now active in the U.S.S.R., particularly the Democratic Union, allege that they show "terroristic tendencies" and claim that they would be prepared to kill in order to achieve their aims.It is possible that, in perpetuating such myths, the ground is being laid for the arrest of opposition activists on the ground of terrorism. Mr. Gorbachev would appear to see his central task, however, as that of ensuring that foundations of an alliance among labor, capital and the state are properly laid before the demands for a multiparty system reach a crescendo.If he were able to construct a popular and efficient corporatist system, he or his heir would be wellplaced to rein in political opposition, and to re-establish control in Eastern Europe. The weaknesses in his plan do not lie in the political calculations -- Mr. Gorbachev is a consummate political leader, perhaps one of the greatest -- but in its economic prescription.Contrary to widespread belief, Mussolini failed to live up to his promise to make the trains run on time; it is doubtful whether Soviet-style corporatism will make Soviet trains run on time, or fill the shops with goods that the consumers so desperately crave. Miss Brady is deputy director of the Russian Research Foundation in London.
New construction contracting climbed 8% in September to an annualized $274.2 billion, with commercial, industrial and public-works contracts providing most of the increase, according to F.W. Dodge Group. Through the first nine months of the year, the unadjusted total of all new construction was $199.6 billion, flat compared with a year earlier.The South was off 2% after the first nine months, while the North Central region was up 3%.The Northeast and West regions were unchanged. A small decline in total construction for the entire year is possible if contracting for housing doesn't increase in response to this year's lower mortgage rates, said George A. Christie, vice president and chief economist of Dodge, the forecasting division of publisher McGraw-Hill Inc. The seasonally adjusted Dodge Index reached 175 in September, its highest level this year, from 162 in August.The index uses a base of 100 in 1982. Newly contracted residential work edged up 2% in September to an annualized $121.2 billion, largely because multifamily building rebounded from a very weak August. "At the end of the third quarter, there was still no evidence of renewed home building in response to the midyear decline of mortgage rates," Mr. Christie said.Housing has been weak all year and especially so in the past five months. Contracting for non-residential buildings rose 10% in September to an annualized $100.8 billion.Commercial and industrial construction rose sharply, partly because of three large projects, each expected to cost more than $100 million.Institutional building, such as hospitals and schools, eased in September following a surge in August. Although the third quarter was the best so far this year for non-residential building, weakness early in the year held the nine-month total to $69.6 billion, up just 1% from a year earlier. Public-works and utility projects, also known as non-building contracting, grew 18% to $52.2 billion in September, but the nine-month total of $36.9 billion was down 3% from a year earlier. The Sept. 30 end of the federal fiscal year may have prodded contractors to get any behind-schedule road and bridge construction under way "before the clock ran out," Mr. Christie said, referring to threatened 5% across-the-board budget cuts. a-Monthly construction contract values are reported on an annualized, seasonally adjusted basis.
Quotron Systems Inc. plans to cut about 400, or 16%, of its 2,500 employees over the next several months. "This action will continue to keep operating expenses in line" with revenue, said J. David Hann, president and chief executive officer of Los Angeles-based Quotron.The move by the financial information and services subsidiary of Citicorp is a "response to changing conditions in the retail securities industry, which has been contracting" since October 1987's stock market crash, the executive added. Quotron, which Citicorp purchased in 1986, provides price quotations for securities, particularly stocks.Quotron also provides trading and other systems, services for brokerage firms, and communications-network services. Independent providers of financial information, including Quotron, have been under some pressure as the major securities houses try to regain their hold on the production of market data and on the related revenue.Shearson, Goldman, Sachs & Co., Morgan Stanley & Co. and Salomon Inc. are discussing formation of a group to sell securities-price data. The job cuts, to be made in a number of areas at various job levels, are "a streamlining of operations," a spokeswoman said.The company has no immediate plans to close any operations, she said, but Quotron may subcontract some work that it has been doing in-house, including refurbishment and production of Quotron 1000 equipment used in delivering financial data. The spokeswoman said the move isn't directly a response to Quotron's loss of its two biggest customers, Merrill Lynch & Co. and American Express Co. 's Shearson Lehman Hutton Inc., to Automated Data Processing Inc. earlier this year. The spokeswoman noted that last week, Kidder, Peabody & Co., the securities subsidiary of General Electric Co., chose a Quotron subsidiary to provide order-processing services.And Oct. 24, Quotron said it will market the automated trading system of broker-dealer Chapdelaine Government Securities Inc. Quotron isn't profitable on Citicorp's books because of the interest charges the New York bank holding company incurred in buying the financial-data concern for $680 million, says Ronald I. Mandle, analyst for Sanford C. Bernstein & Co.But Citicorp "does view Quotron) as being crucial to the financial-services business in the 1990s," the analyst added. This past summer, Quotron sold its customer-service unit, employing 600, to Phoenix Technologies Inc., a closely held computer-service firm in Valley Forge, Pa.Terms weren't disclosed.
The Oakland Athletics' four-game sweep over the San Francisco Giants in the World Series may widen already-sizable losses that the ABC network will incur on the current, final year of its baseball contract. The 1989 Series, disrupted by a devastating earthquake and diminished in national interest because both teams came from the San Francisco Bay area, is likely to end up as the lowest-rated Series of this decade and probably since the event has been broadcast. The first three games were seen by an average of only 17% of U.S. homes, a sharp decline from the 23.7% rating for last year's Series.A final ratings tally from A.C. Nielsen Co. is due today. The sweep by the A's, whose pitchers and home-run hitters dominated the injury-prone Giants, will only make things worse for ABC, owned by Capital Cities/ABC Inc.The network had been expected to have losses of as much as $20 million on baseball this year. It isn't clear how much those losses may widen because of the short Series.Had the contest gone a full seven games, ABC could have reaped an extra $10 million in ad sales on the seventh game alone, compared with the ad take it would have received for regular prime-time shows. ABC had based its budget for baseball on a six-game Series. A network spokesman wouldn't comment, and ABC Sports officials declined to be interviewed.But some industry executives said ABC, in anticipation of a four-game sweep, limited its losses by jacking up the number of commercials it aired in the third and fourth games.A World Series telecast typically carries 56 30-second commercials, but by the fourth game ABC was cramming in 60 to 62 ads to generate extra revenue. ABC's baseball experience may be of interest to CBS Inc., which next season takes over the broadcasting of all baseball playoffs in a four-year television contract priced at $1.06 billion.CBS Sports President Neal Pilson has conceded only that CBS will have a loss in the first year.But other industry executives contend the losses could reach $250 million over four years and could go even higher if the World Series end in four-game romps. The Series typically is among the highest-rated sports events on television.Last year's series, broadcast by General Electric Co. 's NBC, was the lowest-rated Series in four years; instead of featuring a major East Coast team against a West Coast team, it pitted the Los Angeles Dodgers against the losing Oakland A's. ABC's hurdle was even higher this year with two teams from the same area.The Series got off to a lukewarm start Oct. 14 with a 16.2% rating; the next night it drew 17.4% of homes.Then came the earthquake and a damaging delay of 11 days. Some people had hoped ABC's ratings would go up because of the intense focus on the event in the aftermath of the earthquake.An analyst's opinion to that effect even sent Capital Cities/ABC shares soaring two weeks ago.But interest instead decreased.The third game, last Friday night, drew a disappointing 17.5 rating.
From a reading of the somewhat scant English-language medical literature on RU-486, the French abortion pill emerges as one of the creepiest concoctions around.This is not only because it kills the unborn, a job at which it actually is not outstandingly efficient, zapping only 50% to 85% of them depending on which study you read (prostaglandin, taken in conjunction with the pill, boosts the rate to 95%).By contrast, surgical abortion is 99% effective. Abortion via the pill is far more of an ordeal than conventional surgical abortion.It is time-consuming (the abortion part alone lasts three days, and the clinical part comprises a week's worth of visits), bloody (one woman in a Swedish trial required a transfusion, although for most it resembles a menstrual period, with bleeding lasting an average of 10 days), and painful (many women require analgesic shots to ease them through).Nausea and vomiting are other common side effects. Timing is of the essence with RU-486.It is most effective taken about a week after a woman misses her menstrual period up through the seventh week of pregnancy, when it is markedly less effective.That is typically about a three-week window. So far, all the studies have concluded that RU-486 is "safe." But "safe," in the definition of Marie Bass of the Reproductive Health Technologies Project, means "there's been no evidence so far of mortality." No one has researched the long-term effects of RU-486 on a woman's health or fertility. The drug seems to suppress ovulation for three to seven months after it is taken.Some women clearly have no trouble eventually conceiving again: The studies have reported repeaters in their programs.But there are no scientific data on this question. Rather ominously, rabbit studies reveal that RU-486 can cause birth defects, Lancet, the British medical journal, reported in 1987.However, Dr. Etienne-Emile Baulieu, the French physician who invented RU-486, wrote in a Science magazine article last month that the rabbit-test results could not be duplicated in rats and monkeys.The drug has a three-dimensional structure similar to that of DES, the anti-miscarriage drug that has been linked to cervical and vaginal cancer in some of the daughters of the women who took it. All the published studies recommend that women on whom the drug proves ineffective not carry the pregnancy to term but undergo a surgical abortion.A risk of birth defects, a sure source of lawsuits, is one reason the U.S. pharmaceutical industry is steering clear of RU-486. One might well ask: Why bother with this drug at all?Some abortion advocates have been asking themselves this very question.RU-486 "probably represents a technical advance in an area where none is needed, or at least not very much," said Phillip Stubblefield, president of the National Abortion Federation, at a reproductive health conference in 1986.Many physicians have expressed concern over the heavy bleeding, which occurs even if the drug fails to induce an abortion. It typically takes from eight to 10 years to obtain the Food and Drug Administration's approval for a new drug, and the cost of testing and marketing a new drug can range from $30 million to $70 million. The Health and Human Services Department currently forbids the National Institutes of Health from funding abortion research as part of its $8 million contraceptive program.But the Population Council, a 37-year-old, $20 million nonprofit organization that has the backing of the Rockefeller and Mellon foundations and currently subsidizes most U.S. research on contraceptives, has recently been paying for U.S. studies of RU-486 on a license from its French developer, Roussel-Uclaf, a joint subsidiary of the German pharmaceutical company Hoechst and the French government. In the year since the pill went on the French market, the National Organization for Women and its offshoot, former NOW President Eleanor Smeal's Fund for a Feminist Majority, have been trying to browbeat the U.S. pharmaceutical industry into getting involved. (Its scare-tactic prediction: the pill "will be available in the U.S., either legally or illegally, in no more than 2-5 years.") Following the feminist and population-control lead has been a generally bovine press.A June 1988 article in Mother Jones magazine is typical of the general level of media ignorance. "For a woman whose period is late, using RU-486 means no waiting, no walking past picket lines at abortion clinics, and no feet up in stirrups for surgery," burbles health writer Laura Fraser. "It also means she will never have to know whether she had actually been pregnant." Wrong on all counts, Miss Fraser. RU-486 is being administered in France only under strict supervision in the presence of a doctor. (Roussel reportedly has every pill marked and accounted for to make sure none slips into the black market.) Thus, a woman who used RU-486 to have an abortion would have to make three trips to the clinic past those picket lines; an initial visit for medical screening (anemics and those with previous pregnancy problems are eliminated) and to take the pill, a second trip 48 hours later for the prostaglandin, administered either via injection or vaginal suppository, and a third trip a week later to make sure she has completely aborted. Furthermore, because timing is so critical with RU-486, she will learn, via a pelvic examination and ultrasound, not only that she is pregnant, but just how pregnant she is.No doctor who fears malpractice liability would likely expose a non-pregnant patient to the risk of hemorrhaging.Many women may even see the dead embryo they have expelled, a sight the surgical-abortion industry typically spares them.At seven weeks, an embryo is about three-fourths of an inch long and recognizably human. At the behest of pro-choice members of Congress, a four-year reauthorization bill for Title X federal family-planning assistance now contains a $10 million grant for "development, evaluation and bringing to the marketplace of new improved contraceptive devices, drugs and methods." If this passes -- a Senate version has already been cleared for a floor vote that is likely early next year -- it would put the federal government into the contraceptive marketing business for the first time.It also could put the government into the RU-486 business, which would please feminists dismayed at what they view as pusillanimity in the private-sector drug industry. We do not know whether RU-486 will be as disastrous as some of the earlier fertility-control methods released to unblinking, uncritical cheers from educated people who should have known better. (Remember the Dalkon Shield and the early birth-control pills?) We will not know until a first generation of female guinea pigs -- all of whom will be more than happy to volunteer for the job -- has put the abortion pill through the clinical test of time. Mrs. Allen is a senior editor of Insight magazine.This article is adapted from one in the October American Spectator.
On June 30, a major part of our trade deficit went poof! No figure juggling; no witchcraft; just vastly improved recording of some of our exports. The result?The Commerce Department found that U.S. exports in 1988, net of imports, were understated by $20.9 billion a year and understated at the annualized rate of $25.4 billion in the first quarter of 1989.More than half of the "newly found" net exports were from just a few service-sector categories.Some of the biggest service-industry exporters -- American financial-service companies, for example -- have yet to be fully included in our export statistics. Nearly 10 years ago, representatives of service-sector companies worked out a plan with the Commerce Department to improve the data on service-sector exports.Both groups believed that tens of billions of dollars of service exports -- such as inbound tourism; legal, accounting and other professional services furnished to foreigners; financial, engineering and construction services; and the like -- were not being counted as exports. The monthly "trade deficit" figure is limited to traditional merchandise trade: manufactured goods and raw materials.In the quarterly balance-of-payments report, those merchandise trade figures are merged with statistics on exports and imports of services, as well as returns on investments abroad by Americans and returns on foreign investments in the U.S. Over time, through benchmark surveys, the corrected data on service exports and imports have been gathered.The first three major areas of the service sector to be revamped were expenditures by foreign students in the U.S. (net after expenditures by Americans studying abroad), some exports by professional firms (a law firm billing a German client for services rendered in watching legislation in Washington is as much an export as shipment of an American jet engine), and improved data from travel and tourism. In just these three areas, the Commerce Department found $23 billion more exports than previously reported and $11.6 billion more imports, with the net result that the U.S. service surplus in 1988 increased by $11.3 billion, to $19 billion. Combined with recalculations and revisions in other trade areas, the value of U.S. net exports that had not previously been recorded was about $20 billion a year.That means that the U.S. trade deficit was running closer to $75 billion than to $95 billion in 1988, and $55 billion (annualized) rather than $80 billion in the first quarter of 1989. These revised figures also may explain some of the recent strength of the dollar.The materially smaller trade deficit may have been already discounted in the market. What does this mean for trade policy?Too early to tell, but a trade deficit that is significantly smaller than we imagined does suggest a review of our trade posture.It does not relieve the need for our market-opening efforts for both goods and services, but it does suggest that it is our exports of services, and not just borrowing, that is financing our imports of goods. Mr. Freeman is an executive vice president of American Express.
If Japanese companies are so efficient, why does Kawasaki-Rikuso Transportation Co. sometimes need a week just to tell its clients how soon it can ship goods from here to Osaka?Why, until last spring, did the Long-Term Credit Bank of Japan sometimes take several days to correct typographical errors in its paper work for international transactions? Because the companies have lacked office computers considered standard equipment in the U.S. and Western Europe, Japanese corporations' reputation as hi-tech powerhouses is only half right.Their factories may look like sets for a Spielberg movie, but their offices, with rows of clerks hunched over ledgers and abacuses, are more like scenes from a Dickens novel. Now, the personal-computer revolution is finally reaching Japan.Kawasaki-Rikuso, a freight company, set up its own software subsidiary this year and is spending nearly a year's profit to more than double the computer terminals at its main office.In April, the Long-Term Credit Bank linked its computers in Tokyo with its three American offices. Overall, PC sales in Japan in the first half of 1989 were 34% higher than in the year-earlier period.Combined PC and work-station use in Japan will jump as much as 25% annually over the next five years, according to some analysts, compared with about 10% in the U.S.And with a labor shortage and intense competitive pressure to improve efficiency, more and more Japanese companies are concluding that they have no choice. "We have too many people in our home offices," says Yoshio Hatakeyama, the president of the Japan Management Association. "Productivity in Japanese offices is relatively low." With Japanese companies in a wide range of industries -- from heavy industry to securities firms -- increasing their market share world-wide, the prospect of an even more efficient Japanese economic army may rattle foreigners.But it also offers opportunities; Americans are well poised to supply the weapons.Japan may be a tough market for outsiders to penetrate, and the U.S. is hopelessly behind Japan in certain technologies.But for now, at least, Americans are far better at making PCs and the software that runs them. After years of talking about selling in Japan, more and more U.S. companies are seriously pouring in.Apple Computer Inc. has doubled its staff here over the past year.Lotus Development Corp. has slashed the lag between U.S. and Japan product introductions to six months from three years.Ungermann-Bass Inc. has a bigger share of the computer-network market in Japan than at home. But the Japanese have to go a long way to catch up.Typical is one office of the Ministry of International Trade and Industry's Machinery and Information Industries Bureau -- the main bureaucracy overseeing the computer industry. "Personal Computer" yearbooks are lined up on nearly every desk, and dog-eared copies of Nikkei Computer crowd magazine racks.But amid the two dozen bureaucrats and secretaries sits only one real-life PC. While American PC sales have averaged roughly 25% annual growth since 1984 and West European sales a whopping 40%, Japanese sales were flat for most of that time.Japanese office workers use PCs at half the rate of their European counterparts and one-third that of the Americans. Moreover, Japanese offices tend to use computers less efficiently than American offices do.In the U.S., PCs commonly perform many tasks and plug into a broad network.In Japan, many desktop terminals are limited to one function and can't communicate with other machines. The market planning and sales promotion office of Nomura Securities Co., for example, has more than 30 computers for its 60 workers, a respectable ratio.But the machines aren't on employees' desks; they ring the perimeter of the large office.Some machines make charts for presentations.Others analyze the data.To transfer information from one to the other, employees make printouts and enter the data manually.To transmit charts to branch offices, they use a fax machine.Meanwhile, a woman sitting next to a new Fujitsu terminal writes stock-market information on a chart with a pencil and adds it up with a hand calculator.In an efficient setup, the same PC could perform all those tasks. In the U.S., more than half the PC software sold is either for spreadsheets or for database analysis, according to Lotus.In Japan, those functions account for only about a third of the software market.Machines dedicated solely to word processing, which have all but disappeared in the U.S., are still more common in Japan than PCs.In the U.S., one-fifth of the office PCs are hooked up to some sort of network.In Japan, about 1% are linked. "Computers here are used for data gathering," says Roger J. Boisvert, who manages the integrated-technologies group in McKinsey & Co. 's Tokyo office.Some Japanese operations, such as securities-trading rooms, may be ahead of their American counterparts, he says, but "basically, there's little analysis done on computers in Japan." Of course, simply buying computers doesn't always solve problems, and many American companies have erred by purchasing technology they didn't understand.But healthy skepticism is only a small reason for Japan's PC lag.Various cultural and economic forces have suppressed demand. Because the Japanese "alphabet" is so huge, Japan has no history of typewriter use, and so "keyboard allergy," especially among older workers, remains a common affliction. "I have no experience before with such sophisticated machinery," says Matsuo Toshimitsu, a 66-year-old executive vice president of Japan Air Lines, explaining his reluctance before accepting a terminal in his office this summer. While most American employees have their own private space, Japanese "salarymen" usually share large, common tables and rely heavily on old-fashioned personal contact.Top Japanese executives often make decisions based on consensus and personal relationships rather than complex financial projections and fancy presentations.And Japan's management system makes it hard to impose a single, integrated computer system corporatewide. Besides, a computer processing the Japanese language needs a huge memory and much processing capability, while the screen and printer need far better definition to depict accurately the intricate symbols.Until recently, much of the necessary technology has been unavailable or at least unaffordable. Some analysts estimate the average PC costs about 50% more in Japan than the U.S.But the complex language isn't the only reason.For the past decade, NEC Corp. has owned more than half the Japanese PC market and ruled it with near-monopoly power.With little competition, the computer industry here is inefficient. The U.S. market, too, is dominated by a giant, International Business Machines Corp.But early on, IBM offered its basic design to anybody wanting to copy it.Dozens of small companies did, swiftly establishing a standard operating system.That spurs competition and growth, allows users to change and mix brands easily, and increases software firms' incentive to write packages because they can be sold to users of virtually any computer. If a record industry lacked a common standard, Sony CD owners could listen to a Sony version of Madonna's "Like a Prayer" but not one made for a Panasonic player.That is the state of Japan's computer industry.NEC won't release its code, and every one of the dozen or so makers has its own proprietary operating system -- all incompatible with each other.IBM established its standard to try to stop falling behind upstart Apple Computer, but NEC was ahead from the start and didn't need to invite in competitive allies. Meanwhile, the big players haven't tried to copy the NEC standard.Corporate pride as well as the close ties common among Japanese manufacturers help explain why.Most rivals "have a working relationship with NEC, often through cross-licensing of technology," the Japan Personal Computer Software Association noted recently. "They hesitate to market NEC-compatible machines; NEC disapproves of such machines, and marketing one would jeopardize their relationship." The result, according to many analysts, is higher prices and less innovation.While tens of thousands of software packages using the IBM standard are available in the U.S., they say only about 8,000 are written for NEC.A year ago, Japan's Fair Trade Commission warned NEC about possible violations of anti-monopoly laws for discouraging retailers from discounting. In Japan, "software is four to five years behind the U.S. because hardware is four to five years behind, because NEC is enjoying a monopoly," complains Kazuhiko Nishi, the president of Ascii Corp., one of Japan's leading PC-magazine publishing and software companies. "There are no price wars, no competition." An NEC spokeswoman responds that prices are higher in Japan because customers put a greater emphasis on quality and service than they do in the U.S.She adds that some technological advances trail those in the U.S. because the Japanese still import basic operating systems from American companies. But the market is changing.The government is funding several projects to push PC use.Over the next three years, public schools will get 1.5 million PCs, a 15-fold increase from current levels. In the private sector, practically every major company is setting explicit goals to increase employees' exposure to computers.Toyota Motor Corp. 's sales offices in Japan have one-tenth the computers per employee that its own U.S. offices do; over the next five years, it is aiming for rough parity.Within a year, Kao Corp., a major cosmetics company, plans to eliminate 1,000 clerical jobs by putting on a central computer network some work, such as credit reports, currently performed in 22 separate offices. By increasing the number of PCs it uses from 66 to 1,000, Omron Tateishi Electronics Co., of Kyoto, hopes not only to make certain tasks easier but also to transform the way the company is run. "Managers have long been those who supervise their subordinates so orders would be properly acted on," a spokesman says. "But new managers will have to be creators and innovators . . . and for that purpose it is necessary to create an environment where information from both inside and outside the company can be reached easily, and also shared." Meanwhile, more computer makers now are competing for the new business.Seiko Epson Corp., a newcomer to the industry, fought off a legal challenge and started selling NEC clones last year.It has won about 15% of the retail PC market.Sony Corp., which temporarily dropped out of the PC business three years ago, started selling its work station in 1987 and quickly became the leading Japanese company in that market. In a country where elbow room is scarce, laptop machines will take a large portion of the industry's future growth.Toshiba Corp. busted open that sector this summer with a notebook-sized machine that retails for less than 200,000 yen (under $1,500) -- one of the smallest, cheapest PCs available in the country.Fujitsu Ltd. is lavishing the most expensive promotion campaign in its history -- including a 100,000-guest bash at Tokyo Dome -- for its sophisticated sound/graphics FM Towns machine, which it advertises for everything from balancing the family checkbook to practicing karaoke, bar singing. Many of the companies are even dropping their traditional independence and trying to band together to create some sort of standard.Two years ago, most of the smaller makers joined under the Microsoft Corp. umbrella to adopt a version of the American IBM AT standard.That hasn't generated much sales, but this summer Microsoft rallied all the major NEC competitors to make their new machines compatible with the IBM OS/2 standard. A healthy, coherent Japanese market could also make it far easier for Japanese companies to sell overseas, where their share is still minimal.But it could also help American companies, which also are starting to try to open the market.As with many other goods, the American share of Japan's PC market is far below that in the rest of the world.U.S. makers have under 10% share, compared with half the market in Europe and 80% at home. Though no formal trade barriers exist, the Japanese computer industry is difficult for outsiders to enter. "If it were an open market, we would have been in in 1983 or 1984," says Eckhard Pfeiffer, who heads Compaq Computer Corp. 's European and international operations.His company, without any major effort, sells more machines in China than in Japan.Although it has opened a New Zealand subsidiary, it is still only "studying" Japan, the only nation that hasn't adopted IBM-oriented specifications.And because general retail centers such as ComputerLand have little presence in Japan, sales remain in the iron grip of established computer makers. But the Americans are also to blame.They long made little effort here.IBM, though long a leader in the Japanese mainframe business, didn't introduce its first PC in Japan until five years after NEC did, and that wasn't compatible even with the U.S. IBM standard.Apple didn't introduce a kanji machine -- one that handles the Chinese characters of written Japanese -- until three years after entering the market.Critics also say American companies charge too much.Japan's FTC says it is investigating Apple for allegedly discouraging retailers from discounting. But the U.S. companies are redoubling their efforts.Apple recently hired its first Japanese president, luring away an official of Toshiba's European operations, as well as a whole Japanese top-management team.Earlier this year, it introduced a much more powerful kanji operating system and a kanji laser printer.IBM just last year started selling its first machine that could run in both Japanese and English and that substantially enhances compatibility with its American products. "It may take five years to break even in Japan," says John A. Siniscal, who runs the Asia-Pacific office for McCormack & Dodge, a U.S. software company. "But it's an enormous business opportunity."
The collapse of a $6.79 billion labor-management buy-out of United Airlines parent UAL Corp. may not stop some of Wall Street's top talent from collecting up to $53.7 million in fees. According to one person familiar with the airline, the buy-out group -- led by United's pilots union and UAL Chairman Stephen Wolf -- has begun billing UAL for fees and expenses it owes to investment bankers, law firms and banks. The tab even covers $8 million in commitment fees owed to Citicorp and Chase Manhattan Corp., even though their failure to obtain $7.2 billion in bank loans for the buy-out was the main reason for its collapse. Under a merger agreement reached Sept. 14, the UAL board agreed to reimburse certain of the buy-out group's expenses out of company funds even if the transaction wasn't completed, provided the group didn't breach the agreement.The failure to obtain financing doesn't by itself constitute a breach. The merger agreement says the buy-out group is entitled to be repaid $26.7 million in fees for its investment bankers, Lazard Freres & Co. and Salomon Brothers Inc., and its law firm, Paul Weiss Rifkind Wharton & Garrison. The buy-out group is also entitled to $16 million to repay a fund created by the pilots union for an employee stock ownership plan.In addition to the $8 million for Citicorp and Chase, Salomon Brothers is also owed $3 million for promising to make a $200 million bridge loan. A spokesman for the buy-out group wasn't immediately available for comment. Separately, UAL stock rose $4 a share to $175 in composite trading on the New York Stock Exchange on reports that Los Angeles investor Marvin Davis has asked United Airlines unions if they're interested in cooperating with Mr. Davis in a new bid for UAL. But neither the pilots nor the machinists appear interested, and Mr. Davis is barred from making a new bid under terms of an agreement he made with UAL in September unless UAL accepts an offer below $300 a share.
Wall Street continued to buckle under the public outcry against computer-driven program trading. Kidder, Peabody & Co., a unit of General Electric Co., announced it would stop doing stock-index arbitrage for its own account, and Merrill Lynch & Co. pulled out of the practice altogether. At the New York Stock Exchange, which has been buffeted by complaints from angry individual investors and the exchange's own listed companies, Chairman John J. Phelan Jr. held an emergency meeting with senior partners of some of the Big Board's 49 stock specialist firms.The specialists, a trader said, were "livid" about Mr. Phelan's recent remarks that sophisticated computer-driven trading strategies are "here to stay." Many investors blame program trading for wild swings in the stock market, including the 190-point plunge in the Dow Jones Industrial Average on Oct. 13.A specialist is an exchange member designated to maintain a fair and orderly market in a specified stock. Mr. Phelan's meeting with the floor brokers comes as he prepares to explain the exchange's position on program trading to key congressional regulators in a closed session tomorrow, according to exchange officials. A Big Board spokesman would only say, "We're working the problem and looking at the issue and meeting with a broad number of customers and constituents to get their views and ideas on the issue." The program-trading outcry was taken to a new level when giant Contel Corp. said it and 20 or more of the Big Board's listed companies are forming an unprecedented alliance to complain about the exchange's role in program trading. The decision by Merrill, the nation's largest securities firm, represents the biggest retreat yet from program trading.Merrill has been the fourth-biggest stock-index arbitrage trader on the Big Board this year, executing an average of 18.1 million shares a month in such trades, or about one million shares a day. Merrill's move is one of the most sweeping program-trading pullbacks of recent days, because the big securities firm will no longer execute stock-index arbitrage trades for customers.Most Wall Street firms, in pulling back, have merely stopped such trading for their own accounts. Merrill has been one of the main firms executing index arbitrage for customers.Merrill also said it is lobbying for significant regulatory controls on program trading, including tough margin -- or down-payment -- requirements and limits on price moves for program-driven financial futures. Merrill, in a statement by Chairman William A. Schreyer and President Daniel P. Tully, said index arbitrage "has been clearly identified in the investing public's mind as a contributing factor to excess market volatility," so Merrill won't execute such trades until "effective controls" are in place. In stock-index arbitrage, traders buy and sell large amounts of stocks with offsetting trades in stock-index futures and options.The idea is to lock in profits from short-term swings in volatile markets. Last Thursday, PaineWebber Group Inc. also said it would cease index arbitrage altogether, but the firm wasn't as big an index arbitrager as Merrill is.Other large firms, including Bear, Stearns & Co. and Morgan Stanley & Co., last week announced a pullback from index arbitrage, but only for the firms' own accounts. Kidder made an abrupt about-face on program trading yesterday, after a special meeting between the firm's president and chief executive officer, Michael Carpenter, and its senior managers.Just a week ago, Mr. Carpenter staunchly defended index arbitrage at Kidder, the most active index-arbitrage trading firm on the stock exchange this year.Index arbitrage, Mr. Carpenter said last week, doesn't have a "negative impact on the market as a whole" and Kidder's customers were "sophisticated" enough to know that. But yesterday, Mr. Carpenter said big institutional investors, which he wouldn't identify, "told us they wouldn't do business with firms" that continued to do index arbitrage for their own accounts. "We were following the trend of our competitors who were under pressure from institutions," he said. Kidder so far this year has executed a monthly average of 37.8 million shares in index-arbitrage trading, and is second only to Morgan Stanley in overall program trading, which includes index arbitrage.Most of Kidder's program trading is for its own account, according to the New York Stock Exchange. Kidder denied that GE's chairman and chief executive, John F. Welch, had anything to do with Kidder's decision.But at least one chief executive said he called Mr. Welch to complain about Kidder's aggressive use of program trading, and other market sources said they understood that Mr. Welch received many phone calls complaining about Kidder's reliance on index arbitrage as a major business.Kidder has generally been sensitive to suggestions that GE makes decisions for its Kidder unit. "Our decision had nothing to do with any pressure Mr. Welch received," Mr. Carpenter said. "This was a Kidder Peabody stand-alone decision." A spokeswoman for GE in Fairfield, Conn., said, "Absolutely no one spoke to Jack Welch on this subject" and added, "Anyone who claims they talked to Jack Welch isn't telling the truth." Supporters of index arbitrage haven't been publicly sticking up for the trading strategy, as some did during the post-crash outcry of 1987.But Merrill Lynch, in its statement about pulling out of index arbitrage, suggested that the current debate has missed the mark. Merrill said it continues to believe that "the causes of excess market volatility are far more complex than any particular computer trading strategy.Indeed, there are legitimate hedging strategies used by managers of large portfolios such as pension funds that involve program trading as a means of protecting the assets of their pension beneficiaries." Merrill's index arbitragers will continue to do other kinds of computer-assisted program trading, so there probably won't be any layoffs at the firm, people familiar with Merrill's program operation said. Meanwhile, Bear Stearns Chairman and Chief Executive Alan C. Greenberg said his firm will continue stock-index arbitrage for its clients.At the firm's annual meeting last night, he told shareholders that index arbitrage won't go away, despite the public outcry. "If they think they are going to stop index arbitrage by causing a few Wall Street firms to quit, they are crazy," Mr. Greenberg said. "It's not going to stop it at all." Mr. Greenberg, noting that stock-index arbitrage rises and ebbs with stock market's volatility, said that for the first four months of the firm's fiscal year beginning in July, stock-index arbitrage had been a "break-even" proposition for Bear Stearns. In response to a shareholder's suggestion, Mr. Greenberg agreed that European firms will simply pick up the index-arbitrage business left behind by U.S. institutions. Pressure from big institutional investors has been the major catalyst for Wall Street's program-trading pullback.And there was speculation yesterday that Fidelity Investments and other large mutual-fund companies might soon follow the lead of Kemper Corp. and other institutions in cutting off trading business to securities firms that do program trading.A Fidelity spokesman in Boston denied the speculation, saying the program-trading issue was more of a regulatory problem. But a much smaller mutual fund company, the USAA Investment Management Co. unit of USAA, San Antonio, Texas, said it informed nine national brokerage firms it will cease business with them unless they stop index-arbitrage trading.USAA, with 400,000 mutual fund accounts, manages more than $10 billion, $2 billion of which is in the stock market.Michael J.C. Roth, USAA executive vice president, called program trading "mindless." He said there is "no valid investment reason" for stock-index futures to exist. A program-bashing move is clearly on.Charles Wohlstetter, chairman of Contel, who is helping organize the alliance of Big Board-listed firms, said he had no time to work yesterday because he received so many phone calls, faxes and letters supporting his view that the Big Board has been turned into a "gambling casino" by program traders. "We are reaching the moment of truth" on Wall Street, said Rep. Edward J. Markey (D., Mass.), chairman of the House subcommittee on telecommunications and finance. "{Wall Street} is beginning to realize -- as Shakespeare said -- the trouble is not in our stars, but in ourselves." Craig Torres and Anne Newman contributed to this article. recently ceased index arbitrage for their own accounts, in millions of shares such trading for its own account
An ancient red-figured Greek kylix, or drinking cup, was recovered backstage at Sotheby's this spring and has been returned to the Manhattan couple who lost it in a burglary three years ago.Robert Guy, an associate curator at the Princeton Art Museum, was previewing a June antiquities sale at the auction house when he recognized the kylix, which he, as a specialist in Attic pottery and a careful reader of the Stolen Art Alert in "IFAR Reports," knew was stolen.The timing of his visit was fortuitous; the man who had brought it in for an estimate had returned to collect it and was waiting in the hall.To confirm Mr. Guy's identification, Sotheby's and IFAR exchanged photos by fax, and the waiting man, apparently innocent of knowledge that the kylix was stolen, agreed to release it.The cup had been insured, and in short order it was given over to a Chubb & Son representative.The original owners happily repaid the claim and took their kylix home. A former curator of the Museum of Cartoon Art in Rye Brook, N.Y., pleaded guilty in July to stealing and selling original signed and dated comic strips, among them 29 Dick Tracy strips by Chester Gould, 77 Prince Valiant Sunday cartoons by Hal Foster, and a dozen Walt Disney animation celluloids, according to Barbara Hammond, the museum's director.He sold them well below market value to raise cash "to pay off mounting credit-card debts," incurred to buy presents for his girlfriend, his attorney, Philip Russell, told IFAR.The curator, 27-year-old Sherman Krisher of Greenwich, Conn., had worked his way up from janitor in seven years at the museum.The theft was discovered early this year, soon after Ms. Hammond took her post. Sentencing was postponed on Aug. 18, when Mr. Krisher was hospitalized for depression.His efforts to get back the stolen strips had resulted in recovery of just three.But on Oct. 6, he had reason to celebrate.Two days earlier, his attorney met in a Park Avenue law office with a cartoon dealer who expected to sell 44 of the most important stolen strips to Mr. Russell for $62,800.Instead, New York City police seized the stolen goods, and Mr. Krisher avoided jail.He was sentenced to 500 hours of community service and restitution to the museum of $45,000. Authorities at London's Heathrow Airport are investigating the disappearance of a Paul Gauguin watercolor, "Young Tahitian Woman in a Red Pareo," that has two sketches on its verso (opposite) side.Valued at $1.3 million, it was part of a four-crate shipment.The air-waybill number was changed en route, and paper work showing that the crates had cleared customs was misplaced, so it was a week before three of the four crates could be located in a bonded warehouse and the Gauguin discovered missing.Although Heathrow authorities have been watching a group of allegedly crooked baggage handlers for some time, the Gauguin may be "lost." Chief Inspector Peter Seacomb of the Criminal Investigation Department at the airport said, "It is not uncommon for property to be temporarily mislaid or misrouted." Officials at the University of Virginia Art Museum certainly would agree.Their museum had purchased an Attic black-figured column krater and shipped it from London.It was reported stolen in transit en route to Washington, D.C., in February.Months later, the Greek vase arrived in good condition at the museum in Charlottesville, having inexplicably traveled by a circuitous route through Nairobi. Two Mexican college dropouts, not professional art thieves, have been arrested for a 1985 Christmas Eve burglary from the National Museum of Anthropology in Mexico City.About 140 Mayan, Aztec, Mixtec and Zapotec objects, including some of Mexico's best-known archaeological treasures, were taken.The government offered a reward for the return of the antiquities, but routine police work led to the recovery.As it turned out, Carlos Perches Trevino and Ramon Sardina Garcia had hidden the haul in a closet in the Perches family's home for a year.Then they took the art to Acapulco and began to trade some of it for cocaine.Information from an arrested drug trafficker led to the two men and the recovery of almost all the stolen art. Among other happy news bulletins from the German Democratic Republic, the Leipzig Museum of Fine Arts announced that it has recovered "Cemetery in the Snow," a painting by the German Romantic painter Caspar David Friedrich.The artist's melancholy subjects bring high prices on the world market, and the U.S. State Department notified IFAR of the theft in February 1988.According to a source at the East Europe desk, two previously convicted felons were charged, tried, convicted and sentenced to prison terms of four and 12 years. The precious canvas, cut from its frame at the time of the theft, was found in nearby Jena, hidden in the upholstery of an easy chair in the home of the girlfriend of one of the thieves.No charges were brought against her. Trompe l'oeil painting is meant to fool the eye, but Robert Lawrence Trotter, 35, of Kennett Square, Pa., took his fooling seriously.He painted one himself in the style of John Haberle and sold it as a 19th-century original to antique dealers in Woodbridge, Conn.Mr. Trotter's painting showed a wall of wood boards with painted ribbons tacked down in a rectangle; tucked behind the ribbons were envelopes, folded, faded and crumpled papers and currency.Mr. Trotter's fake Haberle was offered at a bargain price of $25,000 with a phony story that it belonged to his wife's late aunt in New Canaan, Conn. The dealers immediately showed their new acquisition to an expert and came to see it as a fake.They persuaded Mr. Trotter to take it back and, with the help of the FBI, taped their conversation with him.After his arrest, the forger admitted to faking and selling other paintings up and down the Eastern seaboard. Ms. Lowenthal is executive director of the International Foundation for Art Research (IFAR).
Ford Motor Co. said it is recalling about 3,600 of its 1990-model Escorts because the windshield adhesive was improperly applied to some cars. Separately, Ford and Mazda Motor Corp. 's U.S. sales arm said they are recalling about 88,500 1988-model Mercury Tracers and 220,000 1986, 1987 and 1988 model Mazda 323s equipped with 1.6-liter fuel-injected engines to replace the oil filler cap.Mazda makes the Tracer for Ford. As a result of the adhesive problem on the Ford Escort subcompacts, windshields may easily separate from the car during frontal impact, the U.S. auto maker said.When properly applied, the adhesive is designed to retain the windshield in place in a crash test at 30 miles per hour. A Ford spokesman said the Dearborn, Mich., auto maker isn't aware of any injuries caused by the windshield problem.Ford said owners should return the cars to dealers so the windshields can be removed and securely reinstalled. Mazda and Ford said a combination of limited crankcase ventilation and improper maintenance could cause engine oil in some of the Mercury Tracers and Mazda 323s to deteriorate more rapidly than normal, causing increased engine noise or reduced engine life.They said the problems aren't safety related. Both companies will replace the oil filler cap with a ventilated oil filler cap.Both also will inspect and replace, if necessary, oil filters and oil strainers, at no charge to owners. For owners who have followed the recommended oil maintenance schedule, Mazda will extend to five years or 60,000 miles the warranty term for engine damage due to abnormal engine oil deterioration.The normal term for the 1986 and 1987 model 323 is two years or 24,000 miles; the term for the 1988 323 is three years or 50,000 miles.Ford said the term on its warranty is already six years or 60,000 miles. Separately, Ford said it will offer $750 cash rebates to buyers of its 1990-model Ford Bronco sport utility vehicle.It said it will also offer buyers the option of financing as low as 6.9% on 24-month loans.Ford also offered the low financing rate option on 1989-model Broncos, which previously carried a $750 cash discount.Ford said the new offer will begin Saturday and run indefinitely.
The Supreme Court agreed to decide whether the federal Pension Benefit Guaranty Corp. may require LTV Corp. to reassume funding responsibility for a $2.3 billion shortfall in the company's pension plans. The high court's decision, expected next spring, may affect the stability of many large corporate pension plans that have relied on the availability of pension insurance provided by the federal pension regulatory and insurance agency. The agency, which is funded through insurance premiums from employers, insures pension benefits for some 30 million private-sector workers who take part in single-employer pension plans.It recently reported assets of $2.4 billion and liabilities of $4 billion. In its appeal to the high court, the agency said the federal appeals court ruling, which favored LTV, threatened to transform the agency from an insurer of troubled pension plans into an "open-ended source of industry bailouts." The ruling also may determine how quickly LTV is able to complete its Chapter 11 reorganization.LTV filed for protection under Chapter 11 in federal bankruptcy court in 1986.The filing was partly the result of the $2.3 billion shortfall in LTV's three pension plans operated for its LTV Steel Co. subsidiary's employees. In January 1987, as LTV Steel continued operating while under reorganization, the agency terminated the three LTV pension plans to keep its insurance liability from increasing.Termination means that the agency's insurance assumes the liabilities and pays the pension benefits already owed under the plans, but workers don't accrue new benefits. A few months later, under pressure from the United Steelworkers of America, LTV instituted a new program to provide retirement benefits similar to those in the terminated plans.Because the federal pension agency had taken over the old plans, LTV would be responsible only for benefits paid under the new pension plans. But the agency viewed the creation of the new plans as an abuse of federal pension law and an attempt to transfer the liability of the $2.3 billion shortfall from LTV to federal insurance.The agency also concluded that LTV's financial status had improved while it was under reorganization.In September 1987, it ordered LTV to reassume liability and funding for the three original plans. LTV challenged the order, and a federal district court in New York in June 1988 ruled that the agency improperly ordered LTV to reassume responsibility for the plans. In May, a federal appeals court in New York agreed that the agency acted unlawfully.The appeals court said there was no evidence that Congress intended to allow the pension agency to consider a company's creation of new benefit plans as a basis for ordering that company to reassume liability for old plans.The appeals court also said the agency had to consider a company's long-term ability to fund pension plans, not just short-term improved financial status. In Dallas, LTV said that it was disappointed that the court agreed to hear the case because it believes the move will further delay its Chapter 11 proceedings.The company hasn't been able to come up with a reorganization plan, in part, because of the sizable disagreement with the pension agency. But LTV, a steel, aerospace and energy concern, said it is confident that the Supreme Court will uphold the lower-court decisions and said it expects to continue discussions with the agency about a settlement while the case is being reviewed. (Pension Benefit Guaranty Corp. vs.LTV Corp.)
The commercial was absolutely silent.Breaking into the raucous Chicago Bears-Cleveland Browns match during last week's Monday night football game, it was nothing but simple block letters superimposed on the TV screen. "Due to the earthquake in San Francisco, Nissan is donating its commercial air time to broadcast American Red Cross Emergency Relief messages.Please contribute what you can," the ad said.The Nissan logo flashed on the screen for a moment, and then came a taped plea for donations from former President Reagan -- followed by the silent print telling viewers where to call.Within two hours, viewers pledged over $400,000, according to a Red Cross executive. Call it disaster marketing.Nissan Motor is just one of a slew of advertisers that have hitched their ads to the devastating San Francisco quake and Hurricane Hugo.Sometimes, the ads attempt to raise money; always, they try to boost good will.By advertising disaster relief, these companies are hoping to don a white hat and come out a hero.But the strategy can backfire; if the ads appear too self-serving, the companies may end up looking like rank opportunists instead of good Samaritans. That hasn't deterred plenty of companies.Along with Nissan, Grand Metropolitan PLC's Burger King and New York Life Insurance have tied ads to Red Cross donations.Other ads don't bother with the fundraising; a touching, if self-congratulatory, American Telephone & Telegraph ad that aired Sunday intermixed footage of the devastation in San Francisco and Charleston, S.C., with interviews of people recounting how AT&T helped. At Nissan, "we felt we wanted to do something to help them gather money, and we had this airtime on Monday Night Football," explains Brooke Mitzel, a Nissan advertising creative manager. "What did we get out of it?We got some exposure . . . and pretty much good will." The ads are just the latest evidence of how television advertising is getting faster on the draw.While TV commercials typically take weeks to produce, advertisers in the past couple of years have learned to turn on a dime, to crash out ads in days or even hours.The big brokerage houses learned the art of the instant commercial after the 1987 crash, when they turned out reassuring ads inviting investors right back into the stock market.They trotted out another crop of instant commercials after the sudden market dip a few weeks ago.Nissan created its quake ad in a weekend. But as advertisers latch onto disasters with increasing frequency, they risk hurting themselves as much as helping the cause.They chance alienating the customers they hope to woo by looking like opportunistic sharks. "People see extra messages in advertising, and if a manufacturer is clearly trying to get something out of it . . . if it's too transparent . . . then consumers will see through that," warns John Philip Jones, chairman of the advertising department at the Newhouse School of Public Communications at Syracuse University. "It can backfire because companies can step across the line and go too far, be too pushy," agrees Gary Stibel, a principal with New England Consulting Group, Westport, Conn. "The ultimate form of charity is when you don't tell anyone." Still, he says that only a few of the quake-related campaigns have been "tasteless" and that "the majority have been truly beneficial to the people who need the help.We don't consider that ambulance chasing." The companies running the disaster ads certainly don't see themselves as ambulance chasers, either.Burger King's chief executive officer, Barry Gibbons, stars in ads saying that the fast-food chain will donate 25 cents to the Red Cross for every purchase of a BK Doubles hamburger.The campaign, which started last week and runs through Nov. 23, with funds earmarked for both the quake and Hugo, "was Barry's idea," a spokeswoman says. "Barry felt very committed.He felt we should be giving something back." While the campaign was Mr. Gibbons's idea, however, he won't be paying for it: The donations will come out of the chain's national advertising fund, which is financed by the franchisees.And by basing donations on BK Doubles, a new double-hamburger line the fast-food chain is trying to push, Burger King works a sales pitch into its public-service message. Toyota's upscale Lexus division, a sponsor of the World Series, also put in a plug for Red Cross donations in a World Series game it sponsored. "The World Series is brought to you by Lexus, who urges you to help relieve the suffering caused by the recent earthquake . . . ," the game announcer said.And New York Life made a plea for Red Cross donations in newspaper ads in the San Francisco area, latching onto the coattails of the Red Cross's impeccable reputation: "The Red Cross has been helping people for 125 years.New York Life has been doing the same for over 140 years." Nancy Craig, advertising manager for the Red Cross, readily admits "they're piggybacking on our reputation." But she has no problem with that, she says: "In the meanwhile, they're helping us." The Red Cross doesn't track contributions raised by the disaster ads, but it has amassed $46.6 million since it first launched its hurricane relief effort Sept. 23. Ad Notes. . . . NEW ACCOUNT: Northrup King Co., Golden Valley, Minn., awarded its $4 million field-crop-seeds account to Creswell, Munsell, Fultz & Zirbel, a Cedar Rapids, Iowa, division of Young & Rubicam.The account had previously been handled by Saatchi & Saatchi Wegener, New York. TV GUIDE: Wieden & Kennedy, Portland, Ore., was named to handle the News Corp. publication's $1 million to $2 million trade-ad account.N W Ayer, the New York agency that had handled the account since 1963, resigned the account about two weeks ago. NO ALCOHOL: Miller Brewing Co. will introduce its first non-alcoholic beer Jan. 1.The brew, called Miller Sharp's, will be supported by ads developed by Frankenberry, Laughlin & Constable, Milwaukee.
The Supreme Court let stand a New York court's ruling that the manufacturers of a drug once used to prevent miscarriages must share liability for injuries or deaths when the maker of an individual dose is unknown. The high court's action, refusing to hear appeals by several drug companies, is likely to have a significant impact at several levels.The most immediate effect is in New York, where former manufacturers of the anti-miscarriage drug DES -- the synthetic female hormone diethylstilbestrol -- face the prospect of shared liability for damages in many of the 700 to 1,000 DES lawsuits pending in that state.The lawsuits stemmed from the development of cancer and other problems in the daughters of women who took the drug. On a broader scale, the ruling could encourage other states' courts to adopt the logic of the New York court, not only in DES cases but in other product-related lawsuits, as well. The New York Court of Appeals ruling parallels a 1980 decision by the California Supreme Court requiring shared liability among manufacturers for injuries when it can't be determined which company is at fault.Paul Rheingold, a New York lawyer who represents DES victims, said that before the New York ruling, only the states of Washington and Wisconsin had followed the California decision.Now that the New York decision has been left intact, other states may follow suit. "Generally, when New York and California go one way, it has a tremendous influence on other states, especially small ones," said Mr. Rheingold.The high court refused to hear appeals by Rexall Drug Co., which went out of business in 1987 and was taken over by RXDC Liquidating Trust; E.R. Squibb & Sons Inc., a unit of Squibb Corp.; and Eli Lilly & Co. The appeals involved DES, which was approved by the Food and Drug Administration for use from the 1940s until 1971 to prevent miscarriages during pregnancy.In 1971, the FDA banned the use of DES after studies linked it to cancer and other problems in daughters of women who took the drug. Lawsuits over the harm caused by DES have flooded federal and state courts in the past decade.In many cases, the lawsuit was filed long after the drug was used -- the cancer in the daughters was typically not detected for years -- and there is no way to prove which of several companies manufactured the doses consumed by certain women. Under traditional legal theories, inability to prove which company manufactured a drug that caused an injury or death would lead to the lawsuit being dismissed.But in its ruling last April, the New York court said that all producers of the anti-miscarriage drug should share liability when the manufacturer of a specific dose can't be determined.Each company's share of liability would be based on their share of the national DES market. The New York court also upheld a state law, passed in 1986, extending for one year the statute of limitations on filing DES lawsuits.The effect is that lawsuits that might have been barred because they were filed too late could proceed because of the one-year extension. (Rexall Drug Co. vs.Tigue; E.R. Squibb & Sons Inc. vs.Hymowitz, and Eli Lilly & Co. vs.Hymowitz) Government Contractors The high court, leaving intact a $4.25 million damage award against General Dynamics Corp., declined to resolve questions about a legal defense against civil lawsuits often used by government contractors. Last year, the Supreme Court defined when companies, such as military contractors, may defend themselves against lawsuits for deaths or injuries by asserting that they were simply following specifications of a federal government contract.In that decision, the high court said a company must prove that the government approved precise specifications for the contract, that those specifications were met and that the government was warned of any dangers in use of the equipment. But last February, a federal appeals court in New Orleans upheld a damage award against General Dynamics, rejecting the company's use of the government contractor defense.The appeals court said the defense is valid only if federal officials did more than rubber stamp a company's design or plans and engaged in a "substantive review and evaluation" on a par with a policy decision. General Dynamics appealed to the high court, backed by numerous business trade groups, arguing that the appeals court definition restricts the defense too severely. General Dynamics was sued by the families of five Navy divers who were killed in 1982 after they re-entered a submarine through a diving chamber.The accident was caused by faulty operation of a valve.A federal district court awarded damages to the families and the appeals court affirmed the award. (General Dynamics Corp. vs.Trevino) Court in Brief In other action yesterday, the high court: -- Let stand the mail fraud and conspiracy conviction of John Lavery, a former vice president of Beech-Nut Nutrition Corp., a unit of Nestle S.A.The conviction stemmed from federal charges of consumer fraud for sale of phony infant apple juice between 1978 and 1983. (Lavery vs.U.S.) -- Left intact an award of $1.5 million in damages against Dow Chemical Co. in the death of an Oregon man from exposure to Agent Orange.The award was made by a federal court to the widow of a U.S. Forest Service employee who contracted Hodgkin's disease after using herbicides containing Agent Orange in a weed-killing program. (Dow Chemical Co. vs.Greenhill)
It can be hoped that Spanish Prime Minister Felipe Gonzalez will draw the right conclusion from his narrow election victory Sunday.A strong challenge from the far left, the Communist coalition Izquierda Unida, failed to topple him.He should consider his victory a mandate to continue his growth-oriented economic reforms and not a demand that he move further left.If he follows the correct path, he may be able to look back on this election as the high-water mark of far-left opposition. The far left had some good issues even if it did not have good programs for dealing with them.It could point to plenty of ailments that the Spanish economic rejuvenation so far has failed to cure.Unemployment still is officially recorded at 16.5%, the highest rate in Europe, although actual joblessness may be lower.Housing is scarce and public services -- the court system, schools, mail service, telephone network and the highways -- are in disgraceful condition.Large pockets of poverty still exist. The left also is critical of the style of the Socialist government -- a remarkable parallel to the situation in Britain.Mr. Gonzalez and his colleagues, particularly the finance minister, Carlos Solchaga, are charged with having abandoned their socialist principles and with having become arrogant elitists who refuse even to go on television (controlled by the state) to face their accusers.In response to this, the Socialist prime minister has simply cited his free-market accomplishments. They are very considerable: Since 1986, when Spain joined the European Community, its gross domestic product has grown at an annual average of 4.6% -- the fastest in the EC.In that time more than 1.2 million jobs have been created and the official jobless rate has been pushed below 17% from 21%.A 14% inflation rate dropped below 5%.Net foreign investment through August this year has been running at a pace of $12.5 billion, about double the year-earlier rate.Mr. Gonzalez also has split with the left in reaffirming Spain's NATO commitment and in renewing a defense treaty with the U.S. Mr. Gonzalez is not quite a closet supply-side revolutionary, however.He did not go as far as he could have in tax reductions; indeed he combined them with increases in indirect taxes. Yet the best the far-left could do was not enough to deter the biggest voting bloc -- nearly 40% -- from endorsing the direction Spain is taking.Now he can go further.He should do more to reduce tax rates on wealth and income, in recognition of the fact that those cuts yield higher, not lower, revenues.He could do more to cut public subsidies and transfers, thus making funds available for public services starved of money for six years. The voters delivered Mr. Gonzalez a third mandate for his successes.They, as well as numerous Latin American and East European countries that hope to adopt elements of the Spanish model, are supporting the direction Spain is taking.It would be sad for Mr. Gonzalez to abandon them to appease his foes.
Monday, October 30, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 3/4% near closing bid, 8 3/4% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.:8.50% 30 to 44 days; 8.25% 45 to 62 days; 8.375% 63 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000:8.55% 30 days; 8.50% 60 days; 8.45% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.55% one month; 8.55% three months; 8.35% six months. BANKERS ACCEPTANCES: 8.47% 30 days; 8.42% 60 days; 8.25% 90 days; 8.10% 120 days; 8.02% 150 days; 7.95% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 13/16% to 8 11/16% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78%, 13 weeks; 7.62%, 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.86%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par).9.76%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.70%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Investors in the over-the-counter market dumped banking and insurance issues, sending the Nasdaq composite index lower for the third consecutive session. All Nasdaq industry indexes finished lower, with financial issues hit the hardest.Despite some early computer-guided program buying, the Nasdaq composite fell 1.39 to 451.37.The OTC market now has declined in eight of the past 11 sessions. The Nasdaq bank index fell 5.00 to 432.61, while the insurance index fell 3.56 to 528.56, and the "other finance" index dropped 3.27 to 529.32.The largest financial issues, as measured by the Nasdaq financial index, tumbled 3.23 to Meanwhile, the index of the 100 biggest non-financial stocks, the Nasdaq 100, gained 0.47 to 438.15. Profit-taking accounted for much of the slide in OTC stock prices, according to David Mills, senior vice president of Boston Company Advisers.He said many portfolio managers, whose year-end bonuses are tied to annual performance, are selling now rather than risk seeing their gains erode further. "The profit locking-in is definitely going on," said Mr. Mills, whose firm manages $600 million for Boston Co. Tax-loss sellers, those investors who sell loss-making stocks so they can deduct their losses from this year's income, are also getting out, Mr. Mills said.That's helping put pressure on both the market's winners and its losers. "The stocks that have been the best are having big pullbacks, and the ones that have been the worst are getting clobbered," Mr. Mills said.He expects the market to sink further and to reach a low sometime next month or in December. The selling by money managers and individual investors is turning traders bearish as well. "We are advising a lot of our clients to make moves that make sense to them, rather than waiting until the last minute, because things have been so volatile," said William Sulya, head of OTC trading at A.G. Edwards & Sons in St. Louis.Ralph Costanza, head of the OTC trading department at Smith Barney, Harris Upham, said many market players are awaiting some resolution of the current debate over program trading. Much of the market's recent volatility has been blamed on this large-scale computerized trading technique that can send stock prices surging or plummeting in a matter of minutes.The problem has been particularly damaging to the OTC market, traditionally a base for the small investor. Weisfield's surged 14 to 53 after agreeing in principle to be acquired by a unit of Ratners Group for $50 a share.The stock jumped 9 1/2 Friday, when the company announced it was in takeover talks.Ratners and Weisfield's said they expect to sign definitive agreements shortly and to complete the transaction by Dec. 15. Mid-State Federal Savings Bank advanced 1 1/2 to 20 1/4 after it said it is in talks with a possible acquirer.The bank said the talks resulted from solicitations by its financial adviser. Jaguar assumed its recently customary place on the OTC most active list as its American depository receipts gained 1/4 to 11 7/8 on volume of 1.2 million shares and Daimler-Benz joined the list of companies interested in the British car maker.Daimler said it has had talks with Jaguar about possible joint ventures. Meanwhile, General Motors and Ford Motor continue their pursuit of the company.Ford has acquired more than 13% of Jaguar's shares, and GM has received U.S. regulatory clearance to buy 15%. ShowBiz Pizza Time gained 1 1/2 to 13.The company reported third-quarter operating profit of 37 cents a share, compared with 12 cents a share a year earlier.A third-quarter charge of $3.5 million related to planned restaurant closings resulted in a net loss for the quarter. Employers Casualty, which reported a $53.9 million third-quarter loss late Friday, fell 2 1/4 to 13 3/4.The loss was largely due to a $55.2 million addition to reserves.Employers Casualty had a loss of $3.6 million in the year-earlier quarter. Old Stone fell 1 5/8 to 13 1/2.Late Friday, the company reported a loss of $51.3 million for the third quarter after earning $9.2 million a year before. The loss came after a $23.3 million addition to loan-loss reserves.The bank made a $4.5 million provision in the 1988 quarter.Old Stone repeated projections that it will be profitable for the fourth quarter and will about break even for the year. Abraham Lincoln Federal Savings Bank sank 4 to 13 1/2 after announcing a shakeup that will change senior management and reorganize the bank's mortgage business as a separate unit.The bank also said it will establish a loan-loss reserve of $2.5 million to $4 million against a construction loan that is in default. The bank, which previously said it was for sale, said it has received no offers and that its board will review whether to continue soliciting bids.
Western Union Corp. took steps to withdraw its proposed debt swap for $500 million in high-interest notes and said it is looking at other alternatives for refinancing the debt. Western Union had said two weeks ago that it might withdraw the pending offer, which would have replaced $500 million in so-called reset notes, now paying 19.25% annual interest and set to come due in 1992, with two new issues paying lower interest. Yesterday the company said it had filed a request with the Securities and Exchange Commission to withdraw the registration statement regarding the proposed swap.A Western Union spokesman, citing adverse developments in the market for high-yield "junk" bonds, declined to say what alternatives are under consideration. But some holders of the Western Union notes expect the company to propose a more-attractive debt swap that will give them a substantial equity stake in the company.Western Union has had major losses in recent years as its telex business has faltered in the face of competition from facsimile machines and as other business ventures have gone awry. The major question, said one holder who asked not to be named, is whether New York investor Bennett S. LeBow, whose Brooke Partners controls Western Union, is willing to offer a large enough equity stake to entice bondholders into agreeing to a new swap. The $500 million in notes, the largest chunk of Western Union's $640 million in long-term debt, stems from the company's major restructuring in December 1987.The notes became burdensome when reset provisions allowed their interest rate to be raised to 19.25% last June. Western Union had offered to swap each $1,000 face amount of the notes for six shares of common stock and two new debt issues: a $500 note paying an interest rate starting at 16.75% annually and rising in later years, due in 1992, and a $500 note, due in 1997, paying a fixed rate of 17% and including rights protecting a holder against a decline in the trading price of the bond. Western Union must make $48 million in interest payments on the reset notes on Dec. 15, and a company spokesman said it fully intends to meet the payments.But Western Union has said it must lower the interest rate on its debt to regain full financial health.
Medical scientists are starting to uncover a handful of genes which, if damaged, unleash the chaotic growth of cells that characterizes cancer. Scientists say the discovery of these genes in recent months is painting a new and startling picture of how cancer develops.An emerging understanding of the genes is expected to produce an array of new strategies for future cancer treatment and prevention. That is for the future.Already, scientists are developing tests based on the newly identified genes that, for the first time, can predict whether an otherwise healthy individual is likely to get cancer. "It's a super-exciting set of discoveries," says Bert Vogelstein, a Johns Hopkins University researcher who has just found a gene pivotal to the triggering of colon cancer. "Only a decade ago cancer was a black box about which we knew nothing at the molecular level.Today, we know that the accumulation of several of these altered genes can initiate a cancer and, then, propel it into a deadly state." Scientists call the new class of genes tumor-suppressors, or simply anti-cancer genes.When functioning normally, they make proteins that hold a cell's growth in check.But if the genes are damaged -- perhaps by radiation, a chemical or through a chance accident in cell division -- their growth-suppressing proteins no longer work, and cells normally under control turn malignant. The newly identified genes differ from a family of genes discovered in the early 1980s called oncogenes.Oncogenes must be present for a cell to become malignant, but researchers have found them in normal as well as in cancerous cells, suggesting that oncogenes don't cause cancer by themselves.In recent months, researchers have come to believe the two types of cancer genes work in concert: An oncogene may turn proliferating cells malignant only after the tumor-suppressor gene has been damaged. Like all genes, tumor-suppressor genes are inherited in two copies, one from each parent.Either copy can make the proteins needed to control cell growth, so for cancer to arise, both copies must be impaired.A person who is born with one defective copy of a suppressor gene, or in whom one copy is damaged early in life, is especially prone to cancer because he need only lose the other copy for a cancer to develop. Emerging genetic tests will be able to spot such cancer-susceptible individuals, ushering in what some scientists believe is a new age of predictive cancer diagnosis. Bill and Bonnie Quinlan are among the first beneficiaries of the new findings.The Dedham, Mass., couple knew even before Bonnie became pregnant in 1987 that any child of theirs had a 50% chance of being at risk for retinoblastoma, an eye cancer that occurs about once every 20,000 births.Mr. Quinlan, 30 years old, knew he carried a damaged gene, having lost an eye to the rare tumor when he was only two months old -- after his mother had suffered the same fate when she was a baby. Because of the isolation of the retinoblastoma tumor-suppressor gene, it became possible last January to find out what threat the Quinlan baby faced.A test using new "genetic probes" showed that little Will Quinlan had not inherited a damaged retinoblastoma supressor gene and, therefore, faced no more risk than other children of developing the rare cancer. "It made our New Year," says Mr. Quinlan. This test was the first to predict reliably whether an individual could expect to develop cancer.Equally important, the initial discovery of the gene that controls retinal cell growth, made by a Boston doctor named Thaddeus Dryja, has opened a field of cancer study, which in recent months has exploded. "It turns out that studying a tragic but uncommon tumor made possible some fundamental insights about the most basic workings of cancer," says Samuel Broder, director of the National Cancer Institute. "All this may not be obvious to the public, which is concerned about advances in treatment, but I am convinced this basic research will begin showing results there soon." To date, scientists have fingered two of these cancer-suppressors.Dr. Dryja made his retinoblastoma discovery in 1986.Then last spring, researchers reported finding a gene called p53 which, if impaired, turns healthy colon cells cancerous. Soon after that report, two other research teams uncovered evidence that the same damaged p53 gene is present in tissue from lung and breast cancers.Colon, lung and breast cancers are the most common and lethal forms of the disease, collectively killing almost 200,000 Americans a year.Right now about a dozen laboratories, in the U.S., Canada and Britain, are racing to unmask other suspected tumor-suppressing genes.They have about seven candidates.Researchers say the inactivation of tumor-suppressor genes, alone or in combination, appears crucial to the development of such scourges as cancer of the brain, the skin, kidney, prostate, and cervix.There is evidence that if people inherit defective versions of these genes, they are especially prone to cancer, perhaps explaining, finally, why some cancers seem to haunt certain families. The story of tumor-suppressor genes goes back to the 1970s, when a pediatrician named Alfred G. Knudson Jr. proposed that retinoblastoma stemmed from two separate genetic defects.He theorized that in the eye cancer, an infant inherited a damaged copy of a gene from one parent and a normal copy from the other.The tumor, he suggested, developed when the second, normal copy also was damaged.But there was no way to prove Dr. Knudson's "two-hit" theory. Back then, scientists had no way of ferreting out specific genes, but under a microscope they could see the 23 pairs of chromosomes in the cells that contain the genes.Occasionally, gross chromosome damage was visible.Dr. Knudson found that some children with the eye cancer had inherited a damaged copy of chromosome No. 13 from a parent who had had the disease.Under a microscope he could actually see that a bit of chromosome 13 was missing.He assumed the missing piece contained a gene or genes whose loss had a critical role in setting off the cancer.But he didn't know which gene or genes had disappeared. Then, a scientific team led by molecular geneticist Webster Cavenee, then at the University of Utah, found the answer.The team used a battery of the newly developed "gene probes," snippets of genetic material that can track a gene's presence in a cell.By analyzing cells extracted from eye tumors, they found defects in the second copy of chromosome 13 in the exact area as in the first copy of the chromosome. The finding riveted medicine.It was the first time anyone had showed that the loss of both copies of the same gene could lead to the eruption of a cancer. "It was extraordinarily satisfying," says Dr. Knudson, now at Fox Chase Cancer Research Center in Philadelphia. "I was convinced that what was true of retinoblastoma would be true for all cancers." It was an audacious claim.But in Baltimore, Dr. Vogelstein, a young molecular biologist at Johns Hopkins Medical School, believed Dr. Knudson was right, and set out to repeat the Cavenee experiment in cells from other cancers.His was one of two research teams in 1984 to report dual chromosome losses for a rare childhood cancer of the kidney called Wilm's tumor. Dr. Vogelstein next turned his attention to colon cancer, the second biggest cancer killer in the U.S. after lung cancer.He believed colon cancer might also arise from multiple "hits" on cancer suppressor genes, because it often seems to develop in stages.It often is preceded by the development of polyps in the bowel, which in some cases become increasingly malignant in identifiable stages -- progressing from less severe to deadly -- as though a cascade of genetic damage might be occurring. Dr. Vogelstein and a doctoral student, Eric Fearon, began months of tedious and often frustrating probing of the chromosomes searching for signs of genetic damage.They began uncovering a confusing variety of genetic deletions, some existing only in benign polyps, others in malignant cells and many in both polyps and malignant cells.Gradually, a coherent picture of cancer development emerged.If both copies of a certain gene were knocked out, benign polyps would develop.If both copies of a second gene were then deleted, the polyps would progress to malignancy.It was clear that more than one gene had to be damaged for colon cancer to develop. Their report galvanized other molecular biologists. "It was the confirming evidence we all needed that {gene} losses were critical to the development of a common tumor," says Ray White at Howard Hughes Medical Institute in Salt Lake City. But Dr. Vogelstein had yet to nail the identity of the gene that, if damaged, flipped a colon cell into full-blown malignancy.They focused on chromosome 17.For months the Johns Hopkins researchers, using gene probes, experimentally crawled down the length of chromosome 17, looking for the smallest common bit of genetic material lost in all tumor cells.Such a piece of DNA would probably constitute a gene. When they found it last winter, Dr. Vogelstein was dubious that the search was over.His doubts stemmed from the fact that several years earlier a Princeton University researcher, Arnold Levine, had found in experiments with mice that a gene called p53 could transform normal cells into cancerous ones.The deletion Dr. Vogelstein found was in exactly the same spot as p53.But Mr. Levine had said the p53 gene caused cancer by promoting growth, whereas the Johns Hopkins scientists were looking for a gene that suppressed growth. Despite that, when the Johns Hopkins scientists compared the gene they had found in the human cancer cells with the Mr. Levine's p53 gene they found the two were identical; it turned out that in Mr. Levine's cancer studies, he had unknowingly been observing a damaged form of p53 -- a cancer-suppressing gene. The discovery "suddenly puts an obscure gene right in the cockpit of cancer formation," says Robert Weinberg, a leader in cancer-gene research at Whitehead Institute in Cambridge, Mass. Evidence now is emerging that the p53 suppressor gene is involved in other cancers, too.Researchers in Edinburgh, Scotland, have found that in 23 of 38 breast tumors, one copy of chromosome 17 was mutated at the spot where gene p53 lies.The scientists say that since breast cancer often strikes multiple members of certain families, the gene, when inherited in a damaged form, may predispose women to the cancer. The p53 gene has just been implicated in lung cancer.In a report out last week, John Minna and colleagues at the National Cancer Institute say that about half the cells taken from lung cancer tissue they tested are missing this gene. There also are reports from several labs, as yet unpublished, of missing p53 genes in tissue taken from kidney, brain and skin cancers. At the same time, the Johns Hopkins team and others are rushing to pinpoint other tumor-suppressor genes.Dr. Vogelstein hopes soon to isolate one on chromosome 18, also involved in colon cancer.Ray White in Utah and Walter Bodmer, a researcher in Great Britain, are close to finding another gene involved with some types of colon cancer, thought to be on chromosome 5. Dr. Minna believes people who inherit a defective gene somewhere on one of their two copies of chromosome 3 are especially prone to lung cancer.Recently, he and others reported that the retinoblastoma suppressor gene may also be involved in some lung cancers, as well as several other more common cancers, too. Where these discoveries will lead, scientists can only speculate.Already two major pharmaceutical companies, the Squibb unit of Bristol-Myers Squibb Co. and Hoffmann-La Roche Inc., are collaborating with gene hunters to turn the anticipated cascade of discoveries into predictive tests and, maybe, new therapies. Some researchers say new cancer drugs to slow or reverse tumor growth may be based on the suppressor proteins normally produced by the genes.The idea would be to administer to patients the growth-controlling proteins made by healthy versions of the damaged genes.It may even be possible to replace defective genes with healthy versions, though no one has come close to doing that so far. In any case, says Dr. Minna of the National Cancer Institute, "We're witnessing the discovery of one of the most important steps in the genesis of cancer."
Many investors give Michael Foods about as much chance of getting it together as Humpty Dumpty.But now at least there's a glimmer of hope for the stock. Burger King, which breaks thousands of fresh eggs each morning, is quietly switching over to an alternative egg product made by Michael Foods.Known as Easy Eggs, the product has disappointed investors.When the company this month announced lower-than-forecast sales of Easy Eggs, the stock dropped nearly 19%. Michael won't confirm the identities of any Easy Egg customers, nor will it say much of anything else.Two Minneapolis shareholder suits in the past month have accused top officers of making "various untrue statements." These federal-court suits accuse the officers of failing to disclose that Easy Eggs were unlikely to sell briskly enough to justify all of Michael's production capacity. But at least Burger King has signed on, and says that by year end it won't be using any shell eggs.The Miami fast-food chain, owned by Grand Metropolitan of Britain, expects to consume roughly 34 million pounds of liquefied eggs annually. So there is reason to believe that Michael's hopes for a bacteria-free, long-shelf-life egg weren't all hype. (Easy Eggs are pasteurized in a heat-using process.) Still, caution is advisable.A company official says Michael's break-even volume on Easy Eggs is around 60 million pounds a year -- apparently well above current shipments and a far cry from what the company once suggested was a billion-pound market waiting for such a product.Perhaps to debunk the analysts' talk of over-capacity, Michael today will take some of the skeptics on a tour of its new Gaylord, Minn., plant. There has been no announcement of the Burger King arrangement by either party, possibly for fear that McDonald's and other fast-food rivals would seize on it in scornful advertising.But Burger King operators independently confirm using Michael's product.Other institutional users reportedly include Marriott, which is moving away from fresh eggs on a region-by-region basis.The extent of Marriott's use isn't known, and Marriott officials couldn't be reached for comment. Michael Foods has attracted a good many short-sellers, the people who sell borrowed shares in a bet that a stock price will drop and allow the return of cheaper shares to the lender.Many analysts question management's credibility. "The stock, in my opinion, is going to go lower, not only because of disappointing earnings but {because} the credibility gap is certainly not closing," says L. Craig Carver of Dain Bosworth. Mr. Carver says that at a recent Dain-sponsored conference in New York, he asked Michael's chief executive officer if the fourth quarter would be down.The CEO, Richard G. Olson, replied "yes," but wouldn't elaborate. (The company didn't put out a public announcement.A spokesman said later that Mr. Olson was being "conservative" in his estimate.But the spokesman added that while Michael will earn less than last year's $1.20 a share, it thinks Street estimates of $1 or so are low.) Analyst Robin Young of John Kinnard & Co., Minneapolis, calls himself "the last remaining bull on the stock." He argues that Michael Foods is misunderstood: "This is a growth company in the packaged food industry -- a rare breed, like finding a white rhino." Earnings aren't keeping pace, he says, because of heavy investments in the egg technologies and drought-related costs in its potato business. Mr. Carver, however, believes the company's egg product won't help the bottom line in the short run, even though it "makes sense -- it's more convenient" and justifies its price, which is higher than shell eggs, because of health and sanitation concerns. Prospective competition is one problem.Last week a closely held New Jersey concern, Papetti High-Grade Egg Products Co., rolled out an aseptically packaged liquefied item called Table Ready.Company President Steve Papetti says Marriott will be among his clients as well. Michael shares closed at 13 3/4 yesterday in national over-the-counter trading.Says New York-based short seller Mark Cohodes, "In my mind this is a $7 stock." Michael late yesterday announced a $3.8 million stock buy-back program. Michael, which also processes potatoes, still relies on spuds for about a fourth of its sales and nearly half its pretax profit.But dry growing conditions in the Red River Valley of Minnesota and North Dakota are pushing spot prices of potatoes beyond what Michael contracted to pay last spring.Company lawyers recently sent letters to growers saying that Michael "would take very seriously any effort . . . to divert its contracted-for potatoes to other outlets." Still, analysts believe that profit margins in the potato business will be down again this year.
Pierre Peladeau, a Canadian newspaper publisher little-known in the U.S., figures to become a big player in North American printing -- and his ambitions don't end there. Yesterday, Quebecor Inc., a Montreal printing, publishing and forest-products company 53%-owned by Mr. Peladeau, agreed to acquire Maxwell Communication Corp. 's U.S. printing subsidiary, Maxwell Graphics Inc., for $500 million in cash and securities.The purchase, expected to be completed by year end, will make Quebecor the second-largest commercial printer in North America, behind only R.R. Donnelley & Sons Co., Chicago. The printing customers that Quebecor will gain through Maxwell Graphics include the Sunday newspaper supplement Parade, Time, Sports Illustrated and TV Guide. But the transaction is just Mr. Peladeau's latest step in a larger design: to build Quebecor through acquisitions into an integrated paper, publishing and printing concern with a reach throughout North America.He already has achieved vertical integration on a limited scale: Quebecor can put a weekly newspaper on almost any Quebec doorstep without using outside help, from chopping down the tree to making the newsprint to flinging it up onto the porch. Analysts say Quebecor's purchase is part of a trend toward consolidation in the North American printing industry.Along with Donnelley, says Jacques Massicotte, an analyst with Nesbitt Thomson Deacon Inc. in Montreal, "Quebecor has positioned itself as one of the two key players." He adds: "I think this is a great strategic move for Quebecor.They are buying an operation that is running well." Mr. Peladeau says he isn't trying to catch up to Donnelley, which has annual sales of over $3 billion. "Size doesn't matter," Mr. Peladeau says. "What counts is the bottom line." Some of Mr. Peladeau's ventures, including an earlier push into the U.S. market, haven't paid off on the bottom line.Quebecor started the Philadelphia Journal, a daily tabloid, in 1977 and closed it three years later.The venture cost Quebecor $12 million, Mr. Peladeau says. More recently, some former Quebecor executives started their own printing company, specializing in printing and distributing advertising circulars.Quebecor still lags in the Quebec circulars market, while Mr. Peladeau's former employees are expanding across Canada. Mr. Peladeau took his first big gamble 25 years ago, when he took advantage of a strike at La Presse, then Montreal's dominant French-language newspaper, to launch the Journal de Montreal.The tabloid's circulation soared to 80,000, but plunged to under 10,000 when the La Presse strike ended. Still, Mr. Peladeau stuck with the venture.Now the Journal, flush with ads and hugely profitable, is even with La Presse in weekend circulation and outsells it 3 to 2 every weekday. Mr. Peladeau has never made any apologies for publishing the tabloid, a brash mix of crime and sports. "I've read Balzac," he answers critics. "It's tabloid news from A to Z." Quebecor also publishes a second tabloid in Montreal, the struggling 18-month-old Montreal Daily News; dailies in Quebec City and Winnipeg, Manitoba; and dozens of weeklies covering most of Quebec.A series of recent acquisitions made it the dominant magazine publisher in Quebec.After a recent merger, it is also the only province-wide distributor of magazines and newspapers in Quebec.Finally, with Maxwell Communication, the company controls 54% of Donohue Inc., a Quebec City pulp and paper concern. In yesterday's accord, Quebecor agreed to pay $400 million in cash for Maxwell Graphics, and to give Maxwell Communication a 20% stake, valued at $100 million, in Quebecor's new printing subsidiary.The new, as yet unnamed, subsidiary will combine Quebecor's existing printing unit and Maxwell Graphics.It will have 61 plants from coast to coast and $1.5 billion in annual sales. Quebecor will own 57.5% of the new subsidiary.Caisse de Depot et Placement, the Quebec government pension-fund agency, will pay $112.5 million for the remaining 22.5% stake in the printing operation. Pierre-Karl Peladeau, the founder's son and the executive in charge of the acquisition, says Quebecor hasn't decided how it will finance its share of the purchase, but he says it most likely will use debt. The Maxwell deal is Quebecor's second big printing acquisition in just over a year.Last October, Quebecor bought 23 Canadian printing plants from BCE Inc., a Montreal telecommunications, manufacturing, energy and real estate company.That purchase doubled Quebecor's annual printing revenue to $750 million. Maxwell's sale of its U.S. printing unit was expected, the last major business to be disposed of in a major reshuffling of assets.According to its most recent annual report, covering the 15 months ended March 31, Maxwell Communication bought $3.85 billion in assets -- including Macmillan Inc. and Official Airlines Guides -- and sold $2 billion in non-strategic businesses.Now, Maxwell founder Robert Maxwell says he has an appetite for new acquisitions in the U.S., adding that he could spend "a good deal more" than $1 billion on another U.S. purchase. In London trading yesterday, Maxwell Communication shares rose nine pence, to 216 pence ($3.41). In Montreal, Quebecor's multiple voting Class A stock closed at C$16.375 (US$13.94), down 12.5 Canadian cents.Quebecor Class B stock closed at C$15.375, up 62.5 Canadian cents. Craig Forman in London contributed to this article.
The U.S. Equal Employment Opportunity Commission sued New York state for age discrimination against appointed state judges.The suit, filed in federal court in Manhattan, charges that New York's mandatory retirement age of 76 violates federal law. Separately, the commission intervened in a Connecticut state judge's age-bias suit in federal court in New Haven.The commission's filing in that case challenges Connecticut's mandatory retirement age of 70 for appointed judges. The New York suit was filed on behalf of Justice Isaac Rubin, whose appointment to the state appellate division expires at year end, and all other judges hurt by the alleged age discrimination.The suit, assigned to federal Judge Kimba Wood, seeks a permanent injunction, back pay for judges who have been forced to retire, reinstatement of retired judges and "other affirmative relief necessary to eradicate the effects of (New York's) unlawful employment practices." Justice Rubin, a state judge since 1969, said the mandatory-retirement age hurts the court system because it deprives the state of experienced judges still capable of serving on the bench. "The issue isn't age -- age is just a number.The issue is one of a judge's experience, his competence and his physical ability to serve on the bench," Justice Rubin said. "I've had no problems performing my duties and responsibilities." Because Justice Rubin turned 76 on May 9, he isn't eligible to be reappointed to the bench at the end of the year. The suit's impact on New York may be narrow, however.Most New York judges are elected, and the federal age-discrimination law doesn't apply to elected officials, said James L. Lee, regional attorney for the EEOC in New York.Under New York law, elected judges must retire at age 70, but then can be appointed to two-year terms until they reach 76. A spokeswoman for the state's Office of Court Administration declined to comment on the suit.But she said the state currently has 35 appointed judges who are over 70. In Connecticut, however, most state judges are appointed by the governor and approved by the state legislature.The parties in the Connecticut case have agreed to stay proceedings pending the appeal of another EEOC age-bias case against Vermont.In the Vermont case, a federal judge ruled that the state's mandatory age of 70 for appointed judges was illegal; Vermont's appeal of that decision is pending before the U.S. Second Circuit Court of Appeals in Manhattan. Aaron Ment, Connecticut's chief court administrator, declined to comment on the suit and the EEOC's intervention.He said the state has 165 appointed judges and 15 "trial referees," who are former judges over age 70 and serve a restricted role on the bench. ORGANIZED CRIME Strike Forces likely to be abolished next month. U.S. Attorney General Dick Thornburgh's plan to dissolve the 14 regional organized-crime strike forces is expected to go into effect next month, despite the opposition of Democratic congressional leaders and lawyers in the special units. The units are autonomous from U.S. attorneys' offices and focus exclusively on prosecuting organized-crime cases.In February, Mr. Thornburgh announced his plan to abolish the units.He says the strike-force lawyers will work more efficiently under the supervision of U.S. attorneys. Mr. Thornburgh will be free to disband the strike forces after Congress approves a $479 million appropriation for federal law-enforcement and drug-interdiction agencies, according to David Runkel, a Justice Department spokesman.The bill is expected to pass in Congress next month. Congress temporarily halted Mr. Thornburgh's effort with an appropriation resolution that prohibited him from using budgeted funds to implement his plan. Opponents say Mr. Thornburgh's plan will needlessly break up longtime, tightly knit crime-fighting units that have successfully prosecuted major organized-crime figures.They predict that organized-crime activity will increase once the units are dissolved and their responsibilities transferred to U.S. attorneys' offices. Some former strike-force personnel say the units have already begun to break up.The Eastern District unit in Brooklyn, N.Y., lost seven of its 15 attorneys this year partly because the lawyers were troubled by the proposed reorganization, says Laura A. Brevetti, who left the strike force to join Morrison Cohen Singer & Weinstein, a New York law firm. "Those who have left have expressed an opinion that the strike force should continue," Ms. Brevetti says. But Mr. Runkel contends there has been no exodus of strike-force lawyers.He says 27 lawyers have left and 21 have been hired since Mr. Thornburgh announced his plan.At the time the plan was announced, there were 135 lawyers. Some congressional leaders intend to continue to fight for independent strike forces.A spokesman for Sen. Edward M. Kennedy (D., Mass.) says Mr. Thornburgh would be required to reinstate the units next year if an proposed omnibus crime bill is passed.Among other things, the bill calls for a reorganization of the Justice Department.The Senate is expected to consider the bill shortly, says the senator's spokesman. Mr. Runkel says he doubts Mr. Kennedy can muster enough congressional support to reorganize the Justice Department. "We will vigorously oppose the bill," he says. "I don't think (the reorganization is) going to happen." WHITMAN & RANSOM recruits lawyers from disbanding firm: The 204-lawyer New York firm will bring in at least 12 partners and a not yet determined number of associates from Golenbock & Barell, which will dissolve Dec. 31.Golenbock, with 35 lawyers, has lost several partners during the past year.Some Golenbock lawyers won't be invited to join Whitman & Ransom, according to partners at both firms.Whitman & Ransom managing partner Maged F. Riad said the Golenbock recruits will enhance the firm's corporate and litigation departments. SHORT SKIRTS not welcome in Texas court: Shelly Hancock, a male county court judge in Houston, refused to let a woman plead guilty to a drunk-driving charge because her skirt stopped three inches above her knees.The woman appeared in court Thursday to enter her plea, but when she started to approach the bench, she was stopped by Judge Hancock.He told the woman's lawyer, Victor Blaine, that the short skirt was inappropriate for a court appearance.Despite Mr. Blaine's protests, the judge rescheduled her case for Nov. 27.Kelly Siegler, an assistant district attorney who was in the courtroom, disputed suggestions the action was sexist, saying she had seen Judge Hancock turn away male defendants dressed in shorts, tank tops or muscle shirts "many times." Judge Hancock didn't return phone calls.
Warner Communications Inc. and Sony Corp. resumed settlement talks on their legal battle over Hollywood producers Peter Guber and Jon Peters, but continued to level strong accusations at each other in legal documents. Warner has filed a $1 billion breach of contract suit in Los Angeles Superior Court against Sony and the Guber-Peters duo, who in turn are countersuing Warner for trying to interfere in Sony's acquisition of Columbia Pictures Entertainment Inc. and Guber Peters Entertainment Co. in two transactions valued at over $5 billion. Although settlement talks had been dropped, attorneys for the two sides apparently began talking again yesterday in an attempt to settle the matter before Thursday, when a judge is expected to rule on Warner's request for an injunction that would block the two producers from taking over the management of Columbia.Yesterday, in documents filed in connection with that case, Warner accused Sony officials of falsely claiming that they never read the five-year contract requiring the two producers to make movies exclusively for Columbia, citing Securities and Exchange Commission filings made by Sony that described the contracts. Warner was referring to documents filed last week in which Sony Corp. of America Vice Chairman Michael Schulof and Walter Yetnikoff, president of its CBS Records unit, said they had taken Mr. Guber and Mr. Peters at their word when the producers told them that getting out of the contract would be no problem because of a previous oral agreement. Wayne Smith, an attorney at Gibson, Dunn & Crutcher in Los Angeles representing Sony, said the Sony executives hadn't seen the contract because "it wasn't relevant once Guber and Peters told them Warner would let them terminate it at any time." Mr. Smith said statements about the contract made in SEC filings were made by attorneys who did have access to the contracts but who weren't part of the negotiations between Sony and the duo. Warner executives also filed new sworn affidavits denying claims by Messrs.Guber and Peters that the two sides had an oral agreement that enabled the producers to terminate their contract with Warner should the opportunity to run a major studio come up.But Mr. Smith said Sony intends to prove that the oral agreement did in fact exist, and that even the existing written contract doesn't preclude the producers from taking executive posts at another studio. Warner described as "nonsense" yesterday Sony's assertions in prior court filings that Mr. Guber and Mr. Peters could in theory run Columbia while still fulfilling their contract to produce movies for Warner.Such a dual role would be "impractical and unethical," Warner said, adding, "that concept is as silly as suggesting that the head coach of the Los Angeles Dodgers could simultaneously be general manager of the San Francisco Giants." Warner, which is in the process of being acquired by New York-based Time Warner Inc., also said it paid the two producers a fixed annual salary of $3 million.
Boeing Co. 's third-quarter profit leaped 68%, but Wall Street's attention was focused on the picket line, not the bottom line. In fact, the earnings report unfolded as representatives of the world's No. 1 jet maker and the striking Machinists union came back to the negotiating table for their first meeting in two weeks.Doug Hammond, the federal mediator in Seattle, where Boeing is based, said the parties will continue to sit down daily until a new settlement proposal emerges or the talks break off again. Despite the progress, Boeing indicated that the work stoppage, now in its 27th day, will have "a serious adverse impact" on the current quarter. For the third quarter, net rose to $242 million, or $1.05 a share, from $144 million, or 63 cents a share.Sales climbed 71% to $6.36 billion from $3.72 billion as the company capitalized on the ravenous global demand for commercial airliners. Because it's impossible to gauge how long the walkout by 55,000 Machinists rank and file will last, the precise impact on Boeing's sales, earnings, cash flow and short-term investment position couldn't be determined. The investment community, however, strongly believes that the strike will be settled before there is any lasting effect on either Boeing or its work force.The company's total firm backlog of unfilled orders at Sept. 30 stood at a mighty $69.1 billion, compared with $53.6 billion at the end of Although the company could see fourth-quarter revenue shrink by nearly $5 billion if it isn't able to deliver any more planes this year, those dollars actually would just be deferred until 1990.And the company is certain to get out some aircraft with just supervisors and other non-striking employees on hand. Before the union rejected the company's offer and the strike was launched with the graveyard shift of Oct. 4, Boeing had been counting on turning 96 aircraft out the door in the present period.That included 21 of the company's 747-400 jumbo jets, its most successful product. "It's not a pretty picture," said David Smith, an analyst with Raymond James & Associates. "But it would just mean a great first and second quarter next year." Phillip Brannon of Merrill Lynch Capital Markets added: "You don't want to minimize this and say nobody is looking at it.But the strike hasn't gone on long enough for Boeing to lose business in any real sense." That's the primary reason the company's share price has held up so well when, in Mr. Smith's words, "most companies would have unraveled" by now.In New York Stock Exchange composite trading, Boeing closed yesterday at $54.50 a share, off a scant 12.5 cents. Still, Boeing went through its normal verbal gymnastics and played up the downside.In a statement, Chairman Frank Shrontz asserted that the company "faces significant challenges and risks," on both its commercial and government contracts. For instance, he noted that spending on Pentagon programs is shrinking, and Boeing is either the prime contractor or a major supplier on many important military projects, including the B-2 Stealth bomber, the V-22 Osprey tilt-rotor aircraft and the Air Force's next-generation tactical fighter.Because of cost overruns on fixed-price military work, Mr. Shrontz said, the company's defense business will record "a significant loss" in 1989. Moreover, Mr. Shrontz added, production-rate increases that have been implemented on the 737, 747, 757 and 767 programs have resulted in "serious work force skill-dilution problems." Suppliers and subcontractors are experiencing heightened pressure to support delivery schedules. And, of course, there's the unsteady labor situation.Besides the Machinists pact, accords representing 30,000 of the company's engineering and technical employees in the Puget Sound and Wichita, Kan., areas expire in early December.Also, a contract with the United Auto Workers at the company's helicopter plant in Philadelphia expired Oct. 15.This contract, covering about 3,000 hourly production and maintenance workers, is being extended on a day-to-day basis. The Machinists rejected a proposal featuring a 10% base wage increase over the life of the three-year contract, plus bonuses of 8% the first year and 3% the second.On top of that, Boeing would make cost-of-living adjustments projected to be 5% for each year of the contract. The union, though, has called the offer "insulting." The company reiterated yesterday that it's willing to reconfigure the package, but not add to the substance of it. For the nine months, Boeing's net increased 36% to $598 million, or $2.60 a share, from $440 million, or $1.92 a share.Sales soared 28% to $15.43 billion from $12.09 billion. In a separate matter, the Justice Department yesterday said Boeing agreed to pay the government $11 million to settle claims that the company provided inaccurate cost information to the Air Force while negotiating contracts to replace the aluminum skins on the KC-135 tanker aircraft. The settlement relates to four contracts negotiated from 1982 to 1985, prosecutors said.They added that the settlement is the culmination of a 2 1/2-year investigation into the company's aluminum pricing practices in connection with KC-135s. A Boeing spokesman responded: "All along the company has said there was no grounds for criminal prosecution.That was borne out by the Justice Department's decision" to settle the case.
Foothills Pipe Lines Ltd. filed an application with Canadian regulators to build a 4.4 billion Canadian dollar (US$3.74 billion) pipeline to transport natural gas from Canada's Arctic to U.S. markets beginning in The application by Foothills, owned by Calgary-based Nova Corp. of Alberta and Westcoast Energy Inc. of Vancouver, Canada, is expected to kick off what could be a contentious battle for the right to transport vast quantities of gas to southern markets from still-undeveloped fields in Canada's Mackenzie River delta. "This is a pre-emptive strike by Foothills," said Rick Hillary, natural gas manager of the Calgary-based Independent Petroleum Association of Canada, an industry group. "Foothills wants to make it clear to other pipeline companies that it's on first insofar as transporting gas from the Arctic to southern markets," Mr. Hillary said. At least two rival applications are expected to emerge in coming months, including one from TransCanada PipeLines Ltd., Canada's largest natural gas pipeline operator.Another is expected from a consortium of oil and gas producers who won conditional approval this month from Canada's National Energy Board to export about 9.2 trillion cubic feet of Mackenzie delta gas to the U.S. starting in 1996. The producers include Shell Canada Ltd., a unit of Royal Dutch/Shell Group; Esso Resources Canada Ltd., a unit of Imperial Oil Ltd., which is 71%-owned by Exxon Corp.; and Gulf Canada Resources Ltd., a unit of Olympia & York Developments Ltd. "The {National Energy Board} approval of the exports just waved the starting flag for the next stage, the rush to build facilities to transport the gas," said Bill Koerner, an analyst with Brady & Berliner, a Washington, D.C., law firm. Foothills' main rival to build a Mackenzie Delta pipeline is likely to be TransCanada PipeLines.The Toronto-based company, together with Tenneco Inc. of Houston, has had an incomplete proposal filed with Canadian regulators since 1984 that it is now updating. Like Foothills, TransCanada's Polar Gas consortium plans to build a pipeline directly south from the Mackenzie River delta in Canada's western Arctic with an initial capacity to transport 1.2 billion cubic feet of gas daily.Industry sources said they expect a fierce battle to emerge between TransCanada, which has a monopoly on Canadian gas transportation east of Alberta, and Nova and Westcoast, which control the pipelines within and running west of Alberta, respectively. "This is virgin territory, unclaimed, and it's going to be nasty," said one observer, who asked not to be named. "Neither is going to back down easily." TransCanada declined to comment on the Foothills application.But last week Gerald Maier, president and chief executive officer of TransCanada, said the company "intends to be a party to any transportation system that goes up there" and that it would consider joint ventures with other players to ensure it has a role. A number of issues still need to be resolved before Canadian regulators give any project the final go-ahead. First, the price of natural gas will have to almost double.Kent Jesperson, president of Foothills, said the company believes the project would be viable if gas prices reach US$3.25 a thousand cubic feet by 1995, in current dollars, up from a current spot price of about US$1.50. Mr. Jesperson's US$3.25 estimate is somewhat below the $3.39 floor price that Calgary-based consulting firm Paul Ziff & Co. recently said would be needed for Mackenzie delta gas producers to see a return on their investment. U.S. gas buyers must also decide whether they want to enter firm contracts for Mackenzie delta gas or develop Alaskan reserves in the Prudhoe Bay area first, a project that has been on hold for more than a decade. Robert Pierce, chairman and chief executive of Foothills, said it's too early to say whether Alaskan or Mackenzie delta gas would flow to market first.But Foothills said it plans to seek regulatory approval to build an alternative line, the Alaska Natural Gas Transportation System further north toward Alaska.If that option is favored by gas buyers and regulators, Foothills said it would build another smaller pipeline connecting Mackenzie Delta reserves to the Alaska mainline. It's also likely that regulators will try to forge some kind of consensus between the would-be pipeline builders before undertaking any hearings into rival projects.Douglas Stoneman, vice president of Shell Canada, noted that producers would prefer to avoid hearings into competing proposals that would lengthen the regulatory review process and bog down development. Interprovincial Pipe Line Co., an oil pipeline operator rumored to be mulling a gas pipeline proposal of its own, said that isn't in the cards.Instead, Richard Haskayne, president and chief executive of Interprovincial's Calgary-based parent, Interhome Energy Inc., said the company would prefer to work with other "interested parties" on a joint proposal. As for Foothills' pre-emptive bid, Mr. Haskayne said, "If they think it gives them some kind of priority position, well, that's their strategy."
The Federal Reserve Board said it is delaying approval of First Union Corp. 's proposed $849 million acquisition of Florida National Banks of Florida Inc., pending the outcome of an examination into First Union's lending practices in low-income neighborhoods. The decision reflects the Fed's tougher stance on enforcing the Community Reinvestment Act, a federal law passed in 1977 to help low-income residents obtain loans.In recent years, unions and community groups have won big commitments from banks to make low-interest loans in certain neighborhoods by threatening to hold up proposed acquisitions with protests to the Fed about reinvestment act compliance.Few petitions, however, have actually delayed or scuttled mergers. The current dispute involves allegations that Charlotte, N.C.-based First Union hasn't lived up to its responsibilities under the reinvestment act. During the summer, Legal Services Corp., a Florida legal aid group, filed a petition with the Fed on behalf of residents in four Florida counties.The petition challenged First Union's lending record in the state, saying that the bank-holding company had "shut itself off from contact with the low-income community and is redlining almost every black neighborhood that it serves in the state." In deferring action on the merger, the Fed said, "The Board does not believe that there is sufficient information in the record at this time to allow {it} to reach a final conclusion on First Union's record of helping to meet the credit needs of the communities it serves in Florida and North Carolina, including low to moderate-income neighborhoods in those communities." The Fed said the Comptroller of the Currency is expected to begin a Community Reinvestment Act examination of First Union's Florida and North Carolina banking units in the next two weeks. First Union, with assets of about $32 billion, said it was disappointed by the delay but said it would cooperate with regulatory authorities.The bank added that it believes the review will "demonstrate that First Union is in compliance with the requirements of the Community Reinvestment Act." The company has already missed its initial Oct. 1 target date for completing the merger.It said yesterday it still expects to close the acquisition later this year or early in 1990. Florida National, if acquired, would almost double First Union's banking franchise in Florida to $17 billion in assets.That would make it the second-largest bank, after Barnett Banks Inc., in a state widely considered to be the most lucrative banking market in the country. In New York Stock Exchange composite trading yesterday, First Union shares rose 25 cents to $23.Florida National stock closed unchanged at $25.875 in national over-the-counter trading. Earlier this year, the Fed denied an application by Continental Bank Corp. to purchase Grand Canyon State Bank in Scottsdale, Ariz., on grounds that Continental hadn't fully complied with the Community Reinvestment Act. At the time, the Fed said the denial, the first ever on such grounds, signaled the agency's new emphasis on the Community Reinvestment Act.
Eastern Airlines' creditors committee backed off a move to come up with its own alternative proposals to the carrier's bankruptcy reorganization plans, according to sources familiar with the committee. In a meeting in New York yesterday, the committee put on hold instructions it gave two weeks ago to its experts to explore other options for Eastern's future, the sources said.The consultants had been working to finish a report this week. That means Eastern, a unit of Texas Air Corp. of Houston, can go forward with its pitch for creditor approval as early as today, when it is expected to deliver a revised reorganization plan to the committee.The committee intends to meet next week to make a recommendation on the new plan. In another development yesterday, creditors were told that $40 million they had expected to become available for implementing a reorganization may not materialize, according to one source. Texas Air has run into difficulty reselling about $20 million of debt securities because of problems in the junk bond market, the person said.And plans to raise another $20 million through changes to an insurance policy have hit a snag, the source said.An Eastern spokesman said "the $40 million will have no effect whatsoever on the asset structure of Eastern's plan.Forty million in the total scheme of things is not that significant." It is unclear what caused the creditors to do an about-face on exploring alternatives to Eastern's new reorganization plan.However, since Eastern first filed for Chapter 11 protection March 9, it has consistently promised to pay creditors 100 cents on the dollar.Because the carrier is still pledging to do that, some committee members successfully argued that there's little reason yet to explore a different plan, according to one person familiar with the creditors' position.Earlier this month the accounting firm of Ernst & Young and the securities firm of Goldman, Sachs & Co., the experts hired by the creditors, contended that Eastern would have difficulty meeting earnings targets the airline was projecting.Ernst & Young said Eastern's plan would miss projections by $100 million.Goldman said Eastern would miss the same mark by at least $120 million. The consultants maintained Eastern wouldn't generate the cash it needs and would have to issue new debt to meet its targets under the plan.Eastern at the time disputed those assessments and called the experts' report "completely off base." Yesterday, Joel Zweibel, an attorney for Eastern's creditors committee, declined to comment on whether the experts had ever been instructed to look at other choices and whether they now were asked not to.He said only that the committee has not yet taken any position on Eastern's reorganization plan and that the two sides were still negotiating. "In every case, people would like to see a consentual plan," he said. Eastern and its creditors agreed in July on a reorganization plan that called for the carrier to sell off $1.8 billion in assets and to emerge from Chapter 11 status in late 1989 at two-thirds its former size.Eastern eventually decided not to sell off a major chunk, its South American routes, which were valued at $400 million.Such a change meant the reorganization plan the creditors had agreed on was no longer valid, and the two sides had to begin negotiating again. Eastern has publicly stated it is exceeding its goals for getting back into operation and has predicted it would emerge from Chapter 11 proceedings early next year, operating more flights than it originally had scheduled.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: New York City -- $813.4 million of general obligation bonds, Fiscal 1990 Series C and D, including $757.4 million of tax-exempt bonds and $56 million of taxable bonds, tentatively priced by a Goldman Sachs & Co. group.Yields for tax-exempt bonds range from 6 1/2% in 1990 to 7.88% in 2003-2005.Yields for taxable bonds range from 9 1/8% in 1994 to 9.90% in 2009 and 2010.The bonds are all rated single-A by Moody's Investors Service Inc.The underwriters expect a single-A-minus rating from Standard & Poor's Corp., which has the issue under review. Collateralized Mortgage Securities Corp. -- $150 million of Remic mortgage securities offered in 12 classes by First Boston Corp.The offering, Series 1989-3, is by a company established by First Boston for issuing Remics and other derivative mortgage securities.It is backed by Government National Mortgage Association 9 1/2% securities with a weighted average remaining term to maturity of 29 years and being offered at market prices. Beneficial Corp. -- $248.3 million of securities backed by home-equity loans through Merrill Lynch Capital Markets.The offering, with an expected average life of 3.2 years, will float monthly at 20 basis points above the rate on an index of 30-day double-A-rated commercial paper, which now yields about 8.50%.The issue has an expected final maturity date of 1998.The offering is rated triple-A by Moody's and S&P, based on the quality of the underlying home equity loans and a letter of credit covering 10% of the deal from Union Bank of Switzerland.The offering is being made through BCI Home Equity Loan Asset-Backed Certificates, Series 1989-1. Rochester Community Savings Bank -- $200 million of 8.85% certificates backed by automobile loans priced to yield 8.99% via First Boston Corp.The issue, through RCSB 1989-A Grantor Trust, was priced at a yield spread of 100 basis points above the Treasury 7 3/4% note due July 1991.The offering has an expected average life of 1.7 years and a final maturity date of May 15, 1995.The issue is rated triple-A by Moody's, based on the quality of the underlying auto loans and a letter of credit covering 13% of the deal from Credit Suisse. South Australian Government Finance Authority (agency) -- 125 million Australian dollars of zero-coupon Eurobonds due Dec. 12, 1994, priced at 50.9375 to yield 15.06% less fees via Hambros Bank Ltd. Guaranteed by the South Australian Treasury.Fees 1 3/8. Government Insurance Office of New South Wales (agency) -- A$50 million of 17 1/2% Eurobonds due Dec. 4, 1991, priced at 101.95 to yield 17.06 less fees via Westpac Banking Corp. Fees 1 1/4. Swedish Export Credit Corp. (Sweden) -- 100 million Swiss francs of 6 1/8% privately placed notes due Sept. 30, 1996, priced at 100 3/4 to yield 5.99% via Citicorp Investment Bank Switzerland.Call from Sept. 30, 1993, at 100 3/16, declining by 1/16 point a year to to par.Fees 1 3/4.
West German insurance giant Allianz AG entered the takeover battle between France's Cie.Financiere de Paribas and Cie. de Navigation Mixte. Allianz said it won French government approval to buy as much as one-third of Navigation Mixte, a diversified financial, transport and food holding company.The move comes a week after Paribas announced that it was preparing to bid for 66.7% control of Navigation Mixte. Munich-based Allianz's brief explanatory statement said it is acting to protect its own interests as a shareholder of Navigation Mixte.That would be a blow to both Paribas and Navigation Mixte.Each had claimed Allianz, Europe's largest insurance company, as a tacit ally. The Allianz statement also reinforced the belief that the takeover battle could be a long one.It led to broad market speculation that Paribas now will sweeten its bid, which is expected to be formally launched later this week, after approval from French government regulators. Allianz's entry reflects the increasing eagerness of West German companies, looking ahead to the reduction in European Community internal barriers in 1992, to get involved in what until now were considered internal French affairs.Deutsche Bank, Dresdner Bank and Commerzbank all also have expressed eagerness to expand in France before 1992. Dresdner Bank this month moved to acquire Banque Internationale des Placements, a small French merchant bank that Deutsche Bank had looked at and passed over.Commerzbank had hoped to buy a stake in Credit Lyonnais, until the Socialists returned to government last year and canceled plans to privatize the large French bank.Deutsche Bank has actively sought a French acquisition for at least two years.Lately, analysts say, Deutsche Bank has shocked some in the French financial community by indicating it wants a strong bank with a large number of branches. "We are still looking," said a Deutsche Bank spokesman. "The banks we think would fit into our concept are either government-owned or not for sale, though Deutsche Bank would be able to pay a good price." While Allianz officials weren't willing to comment in any detail on their plans, they said Allianz currently holds between 5% and 10% of Navigation Mixte, an apparent increase from the 5% stake that Navigation Mixte officials had earlier announced.Paris market sources said they believed Allianz was buying yesterday morning, and Navigation Mixte moved up 108 francs ($17.19) to close at 1,908 francs in heavy trading.It was the first day of trading following the suspension of Navigation Mixte shares last Monday, when Paribas announced its plan to pay 1,850 francs for each Navigation Mixte share. Allianz also holds a 50% stake in Navigation Mixte's insurance subsidiary, one of France's largest insurance groups, which it bought for about 6.5 billion francs just before Paribas launched its bid.Navigation Mixte holds the remaining 50%.Allianz said in its statement that it was acting to protect that interest, which ties it to Navigation Mixte as a partner. Allianz's statement stressed the company's previously announced position that Paribas's offer price is too low.Allianz also suggested, without saying so directly, that it regrets that Paribas isn't bidding for all of Navigation Mixte's shares.The problem here, analysts say, is that if Paribas wins its 66.7%, remaining Navigation Mixte shares will fall in value.That displeases many current holders, such as Allianz, which couldn't be sure of selling all their shares if they tendered to Paribas. The Allianz statement led to speculation that Allianz eventually could sell to Paribas.That would be bad news for Navigation Mixte's current management, which was counting on Allianz to help fend off Paribas.Allianz didn't say whom, if anyone, it will support.It said simply that it will boost its Navigation Mixte stake as it sees fit over the coming days to protect itself, as long as it has French regulatory officials' approval. Paribas currently intends to offer 1,850 francs a share for Navigation Mixte shares that receive full dividends this year.It is to offer 1,800 francs for shares created on July 1, which receive partial dividends.Alternatively, it would offer to swap three Paribas shares for one Navigation Mixte share.Paribas already holds about 18.7% of Navigation Mixte, and the acquisition of the additional 48% would cost it about 11 billion francs under its current bid. The bid values Navigation Mixte at around 23 billion francs, depending on how many holders of Navigation Mixte warrants exchange them for shares before the bid expires.
Bancroft Convertible Fund Inc., New York, likely will reject a renewed offer from Florida investor Robert I. Green to buy Bancroft for $18.95 a share. Sigmund Levine, Bancroft secretary and treasurer, said the closed-end fund's directors will consider Mr. Green's offer in a couple of weeks at a regular meeting. "He hasn't added anything," Mr. Levine said, predicting the board will again reject Mr. Green's proposal. In a Securities and Exchange Commission filing, Mr. Green said he had boosted his holdings in Bancroft common to 10.4% from 8.5%, and renewed an offer he made in March to acquire the fund. Mr. Levine noted that Bancroft's shares have been trading at or above Mr. Green's offering price for the last several months. He said Bancroft attorneys are scheduled to meet with Mr. Green's attorneys in Delaware Chancery Court at the end of this week to respond to the investor's request for company records for the past five years.Mr. Green couldn't be reached.
Singer Bette Midler won a $400,000 federal court jury verdict against Young & Rubicam in a case that threatens a popular advertising industry practice of using "sound-alike" performers to tout products. The decision in Los Angeles federal court stems from a 1985 Mercury Sable TV ad that Young & Rubicam worked up for Ford Motor Co.The ad agency had approached Ms. Midler about appearing, but she declined, citing a longstanding policy of refusing advertising work.The agency then turned to a former backup singer for Ms. Midler who appeared in the ad and crooned what was generally considered a more than credible imitation of Ms. Midler's 1973 hit song "Do You Wanna Dance." The appeals court held: "When a distinctive voice of a professional singer is widely known and is deliberately imitated in order to sell a product, the sellers have appropriated what is not theirs." The judge in the jury trial said there was insufficient evidence to hold Ford liable in the case.In a statement, Young & Rubicam called the award "unfortunate but bearable." Peter Laird, a Los Angeles lawyer for Ms. Midler, said, "We believe that the verdict reaffirms her position and our position that advertisers and advertising agencies cannot with impunity imitate the voices of well-known performers.That is a property right that belongs to the performer." The award, although far less than the $10 million, including punitive damages, that Ms. Midler sought, is likely to force Madison Avenue to further rethink how they use famous songs in ads.Last year's appeals court decision, for instance, spawned several suits, reportedly including a recent action by the heirs of singer Bobby Darin against McDonald's Corp. over its "Mac Tonight" TV commercials, a rough parody of Mr. Darin's "Mack the Knife" trademark. The appeals-court decision last year was particularly surprising because the same court had dismissed a similar case in 1970 involving singer Nancy Sinatra and a tire ad -- also a Young & Rubicam product.Ms. Sinatra sued over the use of her "These Boots are Made for Walkin'" song in the ad. At that time, the court held that such a claim would interfere with federal copyright law, which has always cracked down on the unauthorized copying of songs and musical compositions but never actual performances. "One thing that is a little unnerving is that you had three old men on the court of appeals in California coming up with a statement that Nancy Sinatra is not distinctive but that Bette Midler is.I am not sure that judges, many of whom I like very much, are proper repositories for making distinctions about pop singers," said Richard Kurnit, a New York advertising lawyer. Nonetheless, Mr. Kurnit said that the latest decisions are having a chilling effect. "It has made people think twice about how they use music and is forcing them to be more circumspect about doing a particular rendition of a song in its most famous form," he said. Joanne Lipman contributed to this article.
The dollar finished mostly stronger yesterday, boosted by a modest recovery in share prices. The Dow Jones Industrial Average climbed 6.76 points in a spate of bargain-hunting following last week's declines. "Attention is fixed on the stock market for lack of anything else to sink our teeth into," said Robert White, a vice president at First Interstate of California. Some analysts predict that in the absence of market-moving news to push the U.S. unit sharply higher or lower, the currency is likely to drift below 1.80 marks this week. But others reject the view, and forecast the dollar will continue to hold its current tight trading pattern.They argue that weakness in both the yen and sterling have helped offset bearish U.S. economic news and have lent support to the dollar. In late New York trading yesterday, the dollar was quoted at 1.8340 marks, up from 1.8300 marks late Friday, and at 141.90 yen, up from 141.65 yen late Friday.Sterling was quoted at $1.5820, up from $1.5795 late Friday. The dollar rose against the Swiss and French francs. In Tokyo Tuesday, the U.S. currency opened for trading at 142.32 yen, up from Monday's Tokyo close of 142.17 yen. Last week, the surprise resignation of British Chancellor of the Exchequer Nigel Lawson sent the British pound into a tailspin. While sterling bounced back from session lows in a bout of short-covering yesterday, foreign exchange dealers said that any hopes that the pound would soon post significant gains have evaporated. Traders said that statements made over the weekend to quell concern about the stability of Prime Minister Margaret Thatcher's government and the future of her economic program largely failed to reassure investors and bolster the flagging British unit. In her first televised interview following Mr. Lawson's resignation, Mrs. Thatcher reiterated her desire to keep sterling strong and warned again that full entry into the European Monetary System's exchange rate mechanism would provide no easy solution to Britain's economic troubles. She said that the timing of the United Kingdom's entry would depend on the speed with which other members liberalize their economies. Mrs. Thatcher's remarks were seen as a rebuff to several leading members of her own Conservative Party who have called for a more clear-cut British commitment to the EMS. At the same time, a recent poll shows that Mrs. Thatcher has hit the lowest popularity rating of any British leader since polling began 50 years ago. Comments by John Major, who has succeeded Mr. Lawson, also failed to damp market concern, despite his pledge to maintain relatively high British interest rates. According to one London-based analyst, even higher interest rates won't help the pound if Britain's government continues to appear unstable. One U.S. trader, however, dismissed sterling doomsayers while acknowledging there is little immediate upside potential for the U.K. unit. "There is no question that the situation is bad, but we may be painting a gloomier picture than we should," he said. He predicts the pound will continue to trade in a very volatile fashion, with "fits of being oversold and overbought" before recovering its losses. Dealers also note that the general lack of enthusiasm for the yen has helped bolster the U.S. dollar. They observe that persistent Japanese investor demand for dollars for both portfolio and direct investment has kept a base of support for the dollar at around 140 yen. The dollar began yesterday on a firm note in Tokyo, closing higher in late trade.In Europe, the dollar closed slightly up in a market dominated by cross trades. On the Commodity Exchange in New York, gold for current delivery settled at $377.80 an ounce, down 70 cents.Estimated volume was a moderate 3.5 million ounces. In early trading in Hong Kong Tuesday, gold was quoted at $376.80 an ounce.
EAST GERMANS RALLIED in three cities to demand democratic freedoms. As the country's new leader, Egon Krenz, prepared to travel to Moscow today for talks with Soviet leader Gorbachev, hundreds of thousands of East Germans massed in the streets of Leipzig, Halle and Schwerin to call for internal freedoms and the legalization of the New Forum opposition group.Krenz, however, vowed to preserve the Communist Party's hold on political power and said East Germans shouldn't destabilize the nation with unrealistic demands. Communist officials this month have faced nearly daily pro-democracy protests, accompanied by the flight to the West by thousands of East Germans. Soviet police clashed with demonstrators in Moscow following a candlelight vigil around the KGB's Lubyanka headquarters in memory of those persecuted under Stalin.More than 1,000 Muscovites attended the service.A splinter group demonstrated in Pushkin Square, where the police clubbed and detained a number of protesters. Police in Yugoslavia dispersed about 1,000 ethnic Albanians who were protesting the trial of the former Communist Party chief of the southern province of Kosovo.Azem Vlasi and 14 others are accused of inciting riots and strikes and opposing constitutional limits to Kosovo's autonomy.If convicted, they could be sentenced to death. A court in Jerusalem sentenced a Palestinian to 16 life terms for forcing a bus off a cliff July 6, killing 16 people, Israeli radio reported.He also received 20-year sentences for each of the 24 passengers injured.It was considered the stiffest sentence passed since the start of the 22-month-old Arab uprising in the Israeli-occupied territories. U.S. and Soviet negotiators opened talks in New York aimed at resolving differences in proposals to reduce chemical-weapons arsenals.While the Kremlin has urged a ban on output of the poison gases, the White House wants to continue producing the weapons even after an international treaty calling for their destruction is signed. South Africa's government said peaceful demonstrations such as the anti-apartheid rally Sunday near Soweto have helped ease tensions and assisted political changes.About 70,000 people attended the anti-government rally, at which leaders of the banned African National Congress refused to renounce violence to end apartheid. Secretary of State Baker expressed concern that Nicaraguan President Ortega may attempt to use alleged attacks by the U.S.backed Contra rebels as an excuse to scuttle elections scheduled for February.Ortega had threatened to end a 19-month-old ceasefire.Baker's remarks came as the White House urged both sides to honor the truce. The USS Lexington returned to dock in Pensacola, Fla., following an accident Sunday in which the pilot of a training jet crashed into the ship, killing five sailors.The captain of the aircraft carrier, the oldest in the Navy, said the flier was making his first attempt to land on a carrier. Four people torched three U.S. flags on the central steps of the U.S. Capitol in a bid to test a new federal law protecting the American flag from desecration.All four demonstrators were arrested.The law, which Bush allowed to take effect without his signature, went into force Friday. Chinese officials said armed police would replace soldiers in Tiananmen Square as part of a scaling down of Beijing's five-month-old state of emergency.Separately, the U.S. Embassy has filed three protests in as many days with China's government, alleging harassment of diplomats and their families, an embassy source said. Authorities in Algeria said the toll from two earthquakes Sunday had reached at least 30 dead and about 250 injured.The heaviest damage was reported in Tipasa, about 40 miles west of Algiers.As rescue teams continued searching for victims, hundreds of suvivors accused the government of a feeble response following the temblors. Britain's Thatcher summoned senior advisers for strategy talks as opinion polls showed the prime minister's popularity had hit a record low following the resignation last Thursday of Chancellor of the Exchequer Lawson.One poll, conducted for the British Broadcasting Corp., found that 52% of voters believed that she should quit. Lawmakers in Hungary approved legislation granting amnesty to many people convicted of crimes punishable by less than three years in prison.They also established an office to control government and party finances.The laws take effect next month. Died: Robert V. Van Fossan, 63, chairman of Mutual Benefit Life Insurance Co., Sunday, in Morristown, N.J., of cancer.
GREAT NORTHERN NEKOOSA is being sought by another big paper company, Georgia-Pacific, for $58 a share, or about $3.18 billion.The tender offer, which surprised analysts because it appeared to be unsolicited, could spark a period of industry consolidation.Analysts questioned whether Georgia-Pacific will ultimately prevail, saying other paper concerns may make competing bids. Two more securities firms bowed to the outcry over program trading.GE's Kidder Peabody unit said it would stop doing stock-index arbitrage for its own account, while Merrill Lynch said it was halting such trading entirely.Also, the Big Board met with angry stock specialists. A big pension-insurance case will be reviewed by the Supreme Court.The justices agreed to decide whether federal insurers can require LTV to take back responsiblilty for funding its $2.3 billion pension shortfall. Drug companies lost a major liability case.The Supreme Court let stand a New York ruling that all manufacturers of an anti-miscarriage drug are liable for injuries or deaths if the actual maker isn't known. Revco received a $925 million takeover offer from Texas financier Robert Bass and Acadia Partners.The drugstore chain reacted cautiously, saying the plan would further swell its huge debt, which forced the company into Chapter 11 protection last year. Rockefeller Group agreed to sell a 51% interest to Mitsubishi Estate, a major Japanese developer and property owner, for $846 million.Officials at some Rockefeller units are said to be unhappy with the agreement. Continental Air replaced its top executive for the sixth time in as many years.Chairman and Chief Executive Joseph Corr was succeeded by Frank Lorenzo, chief of parent Texas Air. United Air's parent may have to pay as much as $53.7 million to the labor-management buy-out group for fees and expenses incurred in their failed $6.79 billion takeover bid. Gen-Probe agreed to be bought by Chugai Pharmaceutical for about $110 million.The sale is likely to fuel concern about growing Japanese investment in U.S. biotechnology firms. Boeing posted a 68% jump in third-quarter earnings, but Wall Street's attention was focused on the continued strike at the aircraft maker. The Fed delayed approval of First Union's $849 million acquisition of Florida National Banks pending a review of First Union's lending practices in low-income neighborhoods. Allianz of West Germany entered the takeover battle between France's Paribas and Navigation Mixte. Maxwell agreed to sell its U.S. printing unit to Quebecor for $500 million, making Quebecor the No. 2 commercial printer in North America. New construction contracts rose 8% in September, led by commercial, industrial and public-works projects, according to F.W. Dodge Group. Western Union took steps to withdraw a $500 million debt swap, citing turmoil in the junk bond market. Markets -- Stocks: Volume 126,630,000 shares.Dow Jones industrials 2603.48, up 6.76; transportation 1191.86, up 1.43; utilities 216.74, up 0.88. Bonds: Shearson Lehman Hutton Treasury index 3416.81, up Commodities: Dow Jones futures index 129.38, off 0.11; spot index 130.09, off 0.71. Dollar: 141.90 yen, up 0.25; 1.8340 marks, up 0.0040.
Cray Research Inc. won government clearance for its proposed reorganization of founder Seymour Cray's supercomputer design team into a separate company. Internal Revenue Service approval of the move as a tax-free transaction was the last hurdle to splitting up the world's dominant maker of supercomputers, which Mr. Cray founded in 1974. Cray's directors set Nov. 15 as the record date for distribution of shares in the new company, to be called Cray Computer Corp.It will trade over the counter under the symbol CRAY. The plan calls for Cray Research holders to receive one share in the new company for every two shares held.An estimated 14.7 million Cray Computer shares will be distributed, Cray Research said. Under the accord, Cray Research will transfer to Mr. Cray's fledgling operation $53.3 million of assets primarily related to the Cray-3 development project his team is undertaking and will lend Cray Computer $98.6 million. Cray Research will retain a 10% interest in the new company, which will be based in Colorado Springs, Colo. When it announced the planned breakup in May, Cray Research said development costs of several competing projects were squeezing its earnings growth.After the split, the two companies presumably will be rivals for orders from government and commercial customers.
BROKERAGE HIRING languishes amid market turmoil.But survivors earn more. Shearson Lehman Hutton Inc. counts under 39,000 workers, down 100 from the start of the year and off 8,500 from after its merger and the market collapse two years ago.Another major firm has cut 6,000 workers, 13% of its staff, since Black Monday.The Bureau of Labor Statistics says securities firms in New York City alone have slashed 17,000 jobs from the December 1987 peak of 163,000.Average annual earnings of those who have hung on, though, surged to $78,625 last year from $69,553 in 1987. Any hiring is confined to retail sales.Illinois Company Investments had been trimming its ranks until last summer.But then it was acquired by Household International Inc. Now it offers richer commissions to lure a broker a week.Interstate/Johnson Lane Inc. this year adds 70 people -- 60 of them in retail -- to its 1,300-member staff.A.G. Edwards & Sons runs training classes and looks for experienced brokers. "We're always going to hire someone we consider to be a winner," an Edwards official says. SKILLED WORKERS aplenty are available to cope with earthquake damage. "I don't foresee any shortages over the next few months," says Ken Allen, an official of Operating Engineers Local 3 in San Francisco.Ironically, "up until the quake, we desperately tried to fill jobs," especially for crane and bulldozer operators.But the Oct. 17 temblor put a halt to much nonessential building, and heavy rains last week slowed the rest, freeing construction workers for earthquake repairs. The supply of experienced civil engineers, though, is tighter.In recent months, California's Transportation Department has been recruiting in Pennsylvania, Arizona and Texas for engineers experienced in road and bridge design.But, with the state offering only $39,000 a year and California's high standard of living, "there aren't too many to choose from," says Brent Scott, a recruiting officer.He says the department now has 75 openings and wants to hire 625 civil engineers over the next 15 months. THE IRS may taketh what the Labor Department giveth.But stay tuned. Employee-benefit specialists drew a collective sigh of relief in early October when the Labor Department backed away from a proposal that companies let former employees and beneficiaries -- along with active workers -- borrow against balances in 401(k) and similar savings plans.In an advisory letter, the department said that, starting Oct. 18, loans could be limited to "parties in interest," which generally means active workers but also includes retirees who continue as directors and 10% shareholders. Now comes word that IRS regulations being drafted could put companies in violation of the tax code if they make loans to retiree shareholders and directors but don't make them available to other former workers who usually earned less.The IRS says the question won't be settled until the regulations are issued "shortly." But violation could bring substantial tax penalties to both employer and employees. "It's a severe case of regulatory whiplash," complains Henry Saveth of consultant A. Foster Higgins & Co. Frederick Rumack of Buck Consultants has asked Labor to recraft its rule to remove the IRS threat. CORPORATE DOWNSIZING digs deeper.Outplacement consultant Right Associates says the average pay of its clients fell to $66,743 last year from $70,765 in 1987; severance pay dropped to 25 weeks from 29.Both reflect the dismissal of lower-level and shorter-tenure executives. FIRST TEACH THYSELF. Executives universally believe workers should know their employer-sponsored benefits.But three out of four managers can't accurately state the value of their own packages, consultant Noble Lowndes says. MEA CULPA. Fully 62% of the doctors surveyed for Metropolitan Life Insurance Co. think their fellow physicians are responsible for rising health-care costs, ahead of hospitals (55%) and patients (48%). NO, YOU WORK! Only one in four companies with flexible benefit plans lets workers buy or sell vacation days, consultant Towers Perrin says.Employees like the option but firms say it's too tough to run.STUDENTS SHUN burger flipping for jobs tied to careers.Some even study. "Fast-food jobs aren't popular no matter what they pay," says a Tufts official.Working students, she explains, want "some satisfaction." University of Michigan students look for jobs related to planned careers.Carnegie Mellon, though, says some students conclude they can help their careers most by hitting the books: "They're opting to build their resumes through good grades and leadership roles in fraternities." Slowing economies in some areas limit student choice.Student job postings at Boston University slip 10% this year following a 10% drop in 1988.Still, the school says there are an ample number and pay is up to $7.20 an hour from $6.90 last year. M.B.A. candidates at the University of Pittsburgh earn up to $15 an hour on marketing or computer projects. THE CHECKOFF: Fiery ambition: Hyatt Corp. hires a University of Wyoming graduate with degrees in geology and petroleum engineering for $7.50 an hour to tend wood fires at a Colorado ski resort. . . . Is somebody telling us something?Our copy of Racine (Wis.) Labor comes through the mail wrapped around two sections of Baseball Card News.
Democracy is making a return with a vengeance to Latin America's most populous and deeply indebted country.On Nov. 15, when Brazilians elect a president for the first time in 29 years, the country's 82 million voters will have 22 candidates to choose from. The candidates have been crisscrossing this huge country of 145 million people, holding rallies and televised debates in hope of being elected to what must be one of the world's most thankless political jobs: trying to drag Brazil out of its economic and social mess. "I feel sorry for whoever wins," says a Brazilian diplomat. Who that winner will be is highly uncertain.A half-dozen candidates, backing policies ranging from Thatcherism to watered-down Marxism, are given a chance of winning. "Whoever says he knows which of the six will win is out of his mind," says Antonio Britto, a centrist member of Parliament. The favorite remains Fernando Collor de Mello, a 40-year-old former governor of the state of Alagoas.He came out of nowhere to grab the lead in opinion polls, probably less because of his vague program to "build a new Brazil" than because of his good looks, the open backing of the powerful Rede Globo television network and his reputation as a hunter of "maharajahs," or overpaid and underworked civil servants. But after building up a commanding lead, the moderate to conservative Mr. Collor has slipped to about 30% in the polls from a high of about 43% only a few weeks ago.To avoid a runoff, one candidate would have to win 50% of the vote -- a feat that most analysts consider impossible with so many candidates running. Two left-wing politicians, Socialist Leonel Brizola, a former governor of Rio de Janeiro state, and Marxist-leaning Luis Inacio da Silva, currently are running neck and neck at about 15%, and three other candidates are given a chance of reaching the Dec. 17 runoff election between the two biggest vote-getters: Social Democrat Mario Covas and two conservatives, Paulo Salim Maluf, a former governor of the state of Sao Paulo, and Guilherme Afif Domingos. The uncertainty is sending shivers through Brazilian financial markets.The dollar, the best indicator of the country's mood, has skyrocketed on the parallel market, as has gold.Capital flight is reported to be strong. The big question is whether the new president will have the strength and the political support in Congress to take steps to cure Brazil's economic ills.President Jose Sarney, who took office in 1985 when the man picked by an electoral college became critically ill, appears to be simply trying to avoid hyperinflation.The unpopular Mr. Sarney, whose task was to bring about a smooth transition to democracy after 21 years of military rule, isn't seeking re-election. What comes out of the ballot box could be crucial in determining whether Brazil finally lives up to the potential of the world's eighth largest economy or keeps living up to its other, less enviable title: that of the developing world's largest debtor, teetering on the brink of hyperinflation, mired in deficits and stagnation, with huge economic inequalities and social discontent boiling under the surface. If Brazil devises an economic strategy allowing it to resume growth and service debt, this could lead it to open up and deregulate its sheltered economy, analysts say, just as Argentinian President Carlos Saul Menem has been doing even though he was elected on a populist platform. "Depending on the president, we could either be a trillion-dollar economy by the end of the century or stay where we are," says political scientist Amaury de Souza. "And where we are is bad." Despite valiant efforts by Finance Minister Mailson Ferreira da Nobrega, inflation came to 36% in September alone and is expected to top 1,000% for the year.That might have been considered hyperinflation not long ago, but Argentina endured price increases of almost 200% in July before bringing the rate down sharply in August and September. Still, massive internal debt has forced the government to borrow massively on the domestic market and to offer inflation-adjusted returns of 2% to 3% a month just to get investors to hold on to its paper.About $70 billion is estimated to be tied up in the short-term money market, which acts both as a hedge against inflation for consumers and an accelerator of inflation and deficits for the government. By some estimates, Brazil's internal debt, or combined public deficit, could reach 6.5% of its $351 billion gross domestic product. Much of the money goes into subsidies or keeping inefficient state-controlled companies operating.Among the results is a frequent breakdown of public services.It's not uncommon to wait three minutes for a dial tone after picking up the telephone, and then to be interrupted by a busy signal before finishing dialing the number.Officials also say a national electricity shortage might not be far off.Economists, businessmen and some politicians agree that the answer is an orthodox economic austerity program including reduced state spending; focusing spending on vital areas such as education, health and welfare; turning state companies private; reforming the tax system, raising public service rates to match costs; and possibly a temporary wage and price freeze and a devaluation of the cruzado. Analysts also say it's inevitable that Brazil will seek to renegotiate its $115 billion foreign debt, on which it suspended interest payments last month. Analysts say, however, that a tough economic program would have to be accompanied by measures to shield the poor from its recessionary effects, for instance by subsidizing staple food items.About 80% of Brazil's voters are believed to live near the poverty level. Of the three candidates with a serious chance of winning, Mr. Collor comes closest to advocating the sort of measures that economists say are necessary.But his inexperience raises doubts that he would have the political power to carry them out.The 67-year-old Mr. Brizola has been vague about his intentions and often inflammatory in his rhetoric, but analysts say he probably would be pragmatic. Mr. da Silva, a 43-year-old former factory worker and labor leader, is the most radical, vowing to withhold payments on the foreign debt and saying he "wouldn't go around putting the country up for sale to the highest bidder." But despite the differences in what they say, according to some analysts here, economic constraints mean the next president may not have many choices about what he does.
Japanese companies have long been accused of sacrificing profit to boost sales.But Fujitsu Ltd. has taken that practice to a new extreme. Japan's biggest computer maker last week undercut seven competitors to win a contract to design a mapping system for the city of Hiroshima's waterworks.Its bid: one yen, or less than a U.S. penny. The bid created such a furor that Fujitsu said it is now offering to withdraw from the project. "From a common-sense viewpoint, it was not socially acceptable," a Fujitsu spokeswoman said yesterday.Hiroshima city officials couldn't be reached to find out whether they would drop Fujitsu's bid. Fujitsu said it issued the low bid because it wanted a foot in the door of a potentially lucrative market. "We desperately wanted the contract because we want experience in the field," the Fujitsu spokeswoman said. "We expect a big market in the future, so in the long term it will be profitable.It's a kind of an investment." Hiroshima's waterworks bureau said the municipal government had budgeted about 11 million yen ($77,500) for the project. "I was flabbergasted," Tatsuhara Yamane, head of the bureau, was quoted by Kyodo news service as saying. "I understand the firm's enthusiasm in getting the deal, but such a large company would have been better off showing a little more discretion." Indeed, Fujitsu officials admitted they may have been a little overzealous.The Fujitsu spokeswoman said headquarter officials didn't approve the bid in advance and will take measures so this kind of thing doesn't happen in the future. "It's contrary to common sense," she added. Specifically, Fujitsu won the right to design the specifications for a computerized system that will show water lines throughout the city.The system could be used in a fire or earthquake to locate problems, among other things. A waterworks official said Fujitsu will have to design the system so it would be compatible with other makers' equipment.But industry officials expressed concern that the initial project might give Fujitsu an edge in winning more lucrative contracts later. Fujitsu said it hopes the Hiroshima contract will help it secure pacts with other municipalities.Japanese local governments are expected to invest heavily in computer systems over the next few years, and many companies expect that field to provide substantial revenue. "In the near future, it will be a big market, not just for waterworks, but for all mapping systems," the Fujitsu spokeswoman said. "We can expect a hundreds-of-billions-of-yen market." No foreign companies bid on the Hiroshima project, according to the bureau.But the Japanese practice of deep discounting often is cited by Americans as a classic barrier to entry in Japan's market.Earlier this year, the U.S. complained that Japan's supercomputer makers were effectively closing out foreign competitors by slashing prices as much as 90% for universities. Fujitsu wasn't the only company willing to sacrifice profit on the project.Three competitors bid between 300,000 yen and 500,000 yen, according to the Hiroshima government office.Other bids ranged from about 10 million yen to 29 million yen.
Ratners Group PLC's U.S. subsidiary has agreed to acquire jewelry retailer Weisfield's Inc. for $50 a share, or about $55 million. Weisfield's shares soared on the announcement yesterday, closing up $11 to close at $50 in national over-the-counter trading. Ratners and Weisfield's said they reached an agreement in principle for the acquisition of Weisfield's by Sterling Inc.The companies said the acquisition is subject to a definitive agreement.They said they expect the transaction to be completed by Dec. 15. Weisfield's, based in Seattle, Wash., currently operates 87 specialty jewelry stores in nine states.In the fiscal year ended Jan. 31, the company reported sales of $59.5 million and pretax profit of $2.9 million. Ratners, which controls 25% of the British jewelry market, would increase the number of its U.S. stores to about 450 stores from 360.It has said it hopes to control 5% of jewelry business in the U.S. by 1992; currently it controls about 2%.
Georgia-Pacific Corp. offered to acquire Great Northern Nekoosa Corp. for $58 a share, or about $3.18 billion. The offer capped a week of rumors that Georgia-Pacific, an Atlanta-based forest-products company, was considering making a bid for Nekoosa, a paper-products concern based in Norwalk, Conn. Executives at Nekoosa couldn't be reached, and officials at Georgia Pacific declined to comment.Analysts, however, were surprised because the tender offer appeared unsolicited. "It's quite a bombshell," said one, adding that the offer could spark a period of industry consolidation. The two companies would appear to be a logical fit because of their complementary lines, and analysts described the offer, representing a 36% premium over Nekoosa's market price, as fair.Nekoosa closed yesterday at $42.75, up $2.75, in New York Stock Exchange composite trading. But industry observers still questioned whether Georgia Pacific will ultimately prevail. "You have to watch out for counterbids," said one analyst. "International Paper or Weyerhaeuser could step in." The bid for Great Northern, a notice of which appears in an advertisement in today's Wall Street Journal, is the first big takeover offer since the collapse of a $6.79 billion buy-out of United Airlines parent UAL Corp. Oct. 13. That collapse, following on the heels of disarray in the market for high-risk, high-yield bonds, cast doubt on the entire takeover business, which has fueled both big profits among Wall Street securities firms and big gains in the stock market generally. While Georgia-Pacific's stock has outperformed the market in the past two years, Nekoosa has lagged the market in the same period. Yesterday's rise in Nekoosa's share price came on volume of 786,700 shares, four times the daily average. According to Dow Jones Professional Investor Report, options trading in Nekoosa was also heavy, ranking only behind International Business Machines Corp. and UAL in volume on the Chicago Board Options Exchange. According to the Value Line Investment Survey, demand for Nekoosa's commodity paper has weakened, prompting earnings to decline by 6.6% in the third quarter ended Sept. 30.Value Line added, "With discounts widening on business papers, and with newsprint and corrugated shipments flat, we expect negative earnings comparisons through next year." By contrast, Value Line said Georgia-Pacific "is in a comparatively good position to deal with weakening paper markets," because its production is concentrated not in the Northwest but in the South, where it should be able to avoid some of the cost pressures from rising wood-chip prices.Also, it isn't exposed to the weakening newsprint business, and is strong in the less-cyclical tissue business. The purchase of Nekoosa would easily eclipse Georgia-Pacific's $530 million acquisition of Brunswick Pulp & Paper Co. last year.That acquisition, which also included the assumption of $135 million in debt, was designed to allow Georgia-Pacific to capitalize on the strong demand for softwood pulp, as well as reduce its exposure to the housing market. Wasserstein Perella & Co. is the dealer-manager for the offer, which will expire Nov. 29, unless extended.
For the sixth time in as many years, Continental Airlines has a new senior executive.Gone is D. Joseph Corr, the airline's chairman, chief executive and president, appointed only last December. Mr. Corr resigned to pursue other business interests, the airline said.He could not be reached for comment. Succeeding him as chairman and chief executive will be Frank Lorenzo, chairman and chief executive of Continental's parent, Texas Air Corp. Mr. Lorenzo, 49 years old, is reclaiming the job that was his before Mr. Corr signed on. The airline also named Mickey Foret as president.Mr. Foret, 44, is a 15-year veteran of Texas Air and Texas International Airlines, its predecessor.Most recently he had been executive vice president for planning and finance at Texas Air. Top executives at Continental haven't lasted long, especially those recruited from outside.But Mr. Corr's tenure was shorter than most.The 48-year-old Mr. Corr was hired largely because he was credited with returning Trans World Airlines Inc. to profitability while he was its president from 1986 to 1988.Before that, he was an executive with a manufacturing concern. At Continental he cut money-losing operations, which helped produce a modest profit in this year's second quarter.But Mr. Corr, a stunt pilot in his spare time, was understood to be frustrated by what he regarded as limited freedom under Mr. Lorenzo. While not officially an executive at Continental during Mr. Corr's tenure, Mr. Lorenzo is known for keeping close tabs on Texas Air's operating units.Continental is Texas Air's flagship and was built painfully to its present size under Mr. Lorenzo after emerging from bankruptcy proceedings in 1986. It's unclear what role, if any, Mr. Lorenzo's recent exploration of a possible sale of a stake in Continental had in Mr. Corr's departure.One source familiar with the airline said, however, that Mr. Corr wasn't informed in advance during the summer when Mr. Lorenzo began discussions with potential buyers. During his tenure, Mr. Corr attempted through a series of meetings to inform managers of some of the company's future plans, traveled widely to talk to employees and backed training sessions designed to improve the carrier's image. Mr. Foret is one of a handful of executives Mr. Lorenzo has relied on over the years.Previously, he had served in financial planning positions at the company's Eastern Airlines unit.Another longtime ally, Phil Bakes, currently heads Eastern, now in Chapter 11 bankruptcy proceedings.Mr. Bakes previously had a turn at running Continental. Among the other alumni are Stephen Wolf, now chairman of UAL Inc., and Thomas Plaskett, president of Pan Am Corp.
John Lehman's editorial-page article on the Pentagon as a haunted house omits the real roots of its ghost population ("In the Pentagon, the Undead Walk," Oct. 18).The media's treatment of the Defense Department during the Vietnam War, the Carter administration's denigration of the military, and the public scapegoating of Lt. Col. Oliver North have all served to emasculate the poor souls who live there.The resulting haunted house tends to reward followership, not leadership, it creates guilt about wearing the uniform, and raises doubt about having the will to fulfill the ghosts' role, i.e., to be able to win if called on. Perhaps the Halloween season is a good time for Congress to be looking at funding for some ghostbusting equipment. Mike Greece Former Air Force Career Officer New York Where does Mr. Lehman get off castigating Gen. George Marshall for muscling in on naval prerogatives?Ever since the days of Alfred Thayer Mahan (U.S. naval officer and naval historian) and Teddy Roosevelt the Navy has been the service most favored by Washington officialdom.Mr. Lehman overlooks the fact that the Navy possesses its own air force (the carrier fleet) and its own army (the Marines), which in turn has its own air force. Of course these turf battles are unseemly, wasteful and potentially dangerous and should be resolved in the interest of national security, but Mr. Lehman seems to be part of the problem rather than part of the answer. L.H. Blum Beaumont, Texas I agree with Mr. Lehman 100%! Isn't this the same guy who resigned as Navy secretary because he couldn't get his 1,000-ship Navy? I personally do not want to hasten Mr. Lehman's demise, but I can see him figuring prominently in his own article. Carl Banerian Jr. Birmingham, Mich.
It is a peaceful time in this part of western India.The summer crop is harvested, winter sowing has yet to begin.Farmers in loose turbans and fancy earrings spend their afternoons laughing and gossiping at the markets. One could imagine such a lull in the lives of the Arabs before the quadrupling of oil prices.For just as the Arabs were in the 1960s, the farmers of Sidhpur are on the brink of global power and fame.The Arabs had merely oil.These farmers may have a grip on the world's very heart.Or, at least, its heart disease. That is because Sidhpur has a near-monopoly on the world's supply of flea seed, also known as flea wort or, in Western parlance, psyllium: a tiny, tasteless, obscure seed that, according to early research, may reduce cholesterol levels in the blood.Ever since the link to cholesterol was disclosed, Americans have begun scarfing up psyllium in their breakfast cereals.If further research proves the seed's benefits, this dusty farm district could become the epicenter of a health-food fad to rival all fads since cod-liver oil. "This seed's not grown anywhere else in India, or anywhere else in the world," says T.V. Krishnamurthy, a vice president of Procter & Gamble India Ltd., a major psyllium buyer and promoter. "The proper climatic conditions don't exist in many places in the world." Arvind Patel, a processor and exporter of the seed, raves: "If psyllium takes the place of oat bran, it will be huge." Whether psyllium makes Sidhpur's fortune depends on cholesterol-fearing Americans, the U.S. Food and Drug Administration and, of course, the outcome of further research.Only one thing is certain here: Pysllium is likely to remain solely an export item from Sidhpur for a long time.Local farmers say it is as good a cash crop as mustard or fenugreek, a legume.But they have no desire to eat a bowl of psyllium each morning, and, perhaps, little need: lean, frugal vegetarians, the farmers are innocents in the clogged, treacherous world of cholesterol. Psyllium is an annual herb, Plantago ovata, that has been used for centuries by folk doctors here, mainly as a laxative and anti-diarrheal.As such, the soluble fiber has an almost fanatic following in northern India. "I can assure you," attests a 25-year-old lawyer in New Delhi, with a meaningfully raised eyebrow, "from personal experience, it works." A prominent businessman in Bombay gives a similar testimonial: "I have been taking it daily since 1961." Folk doctors also prescribe it for kidney, bladder and urethra problems, duodenal ulcers and hemorrhoids.Some apply it to gouty joints. The plant has a hairy stem that produces flowers and diminutive seeds.It is the seed's colorlessness and size -- 1,000 of them weigh only 1.5 grams, or about as much as two paper clips -- that explain the historical allusions to fleas.The transluscent husk of the seed is removed, sifted and crushed; the seed itself is fed to animals.Some 90% of the crop, which was worth $26 million last year, is exported. For decades, psyllium husk has been the main ingredient in such laxatives as Procter & Gamble Co. 's Metamucil, the top-selling brand in the U.S., and Ciba-Geigy Corp. 's Fiberall.But some time ago, researchers discovered that soluble fibers also lower cholesterol levels in the blood.Cincinnati-based P&G took an interest; it ordered two studies on psyllium and cholesterol. One of the studies, done at the University of Minnesota, tested 75 people with raised cholesterol levels.After 16 weeks, the group that took three daily teaspoons of Metamucil saw a significant dip in their general cholesterol levels, and an even larger reduction in levels of low-density lipoproteins, the so-called bad cholesterol.In late 1987, P&G asked the FDA for approval to market Metamucil as the first non-prescription, cholesterol-lowering product in the In April, the psyllium bandwagon got more crowded.General Mills Inc., the food giant, launched a breakfast cereal called Benefit, containing psyllium, oat, wheat and beet bran; the words, "reduce cholesterol" were prominently displayed on its package.In September, Kellogg Co. launched a competing psyllium-fortified cereal called Heartwise. Suddenly, on television, in advertisements and on their cereal boxes, Americans were inundated with news about the obscure seed.The flood of claims and counter-claims worried consumers and actually hurt sales of the new cereals.This month, the Food and Drug Administration expressed concern that Americans might someday, in various forms, ingest too much psyllium. Currently, there is a lull in the psyllium war.The FDA has asked Kellogg and General Mills to show research that their cereals are safe.It also ordered P&G to produce more studies to buttress its claims that Metamucil can lower cholesterol.But the agency hasn't yanked psyllium off store shelves.If the FDA approves the new uses of psyllium, other companies are expected to rush to market with psyllium products. "It's going to be a sensational thing," says Mr. Krishnamurthy of P&G in Bombay.Says psyllium exporter Mr. Patel: "I just got back yesterday from the U.S.In the newspapers, on the radio and TV, psyllium is everywhere." But the news of the boom has yet to trickle down to the farmers.They only know of one use for the crop, as a laxative, and with psyllium prices currently languishing in the wake of a bumper crop, they think of the seed as a marginal crop, something to grow between summer wheat crops. "Psyllium's not a good crop," complains Sooraji Jath, a 26-year-old farmer from the village of Lakshmipura. "You get a rain at the wrong time and the crop is ruined." Even at the Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council, the government agency that promotes the seed, the psyllium boom is distant thunder.The staff brags about psyllium's hefty contribution to American regularity, without quite grasping the implications of the research on cholesterol.The council's annual report has psyllium on its last page, lumped with such unglamorous export items as sarsaparilla and "Nux vomica," a plant that induces vomiting. In one way, the psyllium middlemen -- the buyers and exporters -- are glad to keep news of the boom to themselves.They want psyllium prices low for their purchases next year. But there's a catch.Sidhpur and adjacent districts are the only places in the world where psyllium is grown in large quantities.This is partly due to the particular demands of the crop.Psyllium needs sandy soil, dew during the first few weeks, and then total dryness when its seeds are maturing.Small crops are grown in Pakistan, France, Spain, Italy, Belgium and Brazil, but their quality can't compare to that of Indian psyllium. Big buyers like Procter & Gamble say there are other spots on the globe, and in India, where the seed could be grown. "It's not a crop that can't be doubled or tripled," says Mr. Krishnamurthy.But no one has made a serious effort to transplant the crop. In Sidhpur, it is almost time to sow this year's crop.Many farmers, too removed to glean psyllium's new sparkle in the West, have decided to plant mustard, fennel, cumin, fenugreek or castor-oil seeds. Mr. Jath is thinking of passing up psyllium altogether this year in favor of a crop with a future such as cumin or fennel. "Maybe I'll plant castor-oil seeds." His brother, Parkhaji, whose head is swathed in a gorgeous crimson turban, nods vigorous assent. So when next year's psyllium crop is harvested in March, it may be smaller than the 16,000 metric tons of the past few years -- right at the crest of the psyllium boom. And the world could experience its first psyllium shortage.
Nashua Corp., rumored a potential takeover target for six months, said that a Dutch company has sought U.S. approval to buy up to 25% of Nashua's shares. Nashua immediately responded by strengthening a poison-pill plan and saying it will buy back up to one million of its shares, or 10.4% of the 9.6 million outstanding. Nashua, whose major business is selling copiers, facsimile machines and related supplies, said Reiss & Co. B.V. of the Netherlands filed a request with the Federal Trade Commission under the Hart-Scott-Rodino Act for permission to buy more than $15 million of Nashua's stock but less than 25%. Previously, an affiliate of Unicorp Canada disclosed a stake of less than 5% in Nashua, according to Daniel M. Junius, Nashua's treasurer. Nashua's stock has fluctuated sharply on takeover speculation, rising to a high for the year of $42.875 a share in June from $29.75 in March.But the company has had weak results so far this year, with earnings declining 43% to $13.7 million, or $1.43 a share, on a 4% decline in revenue to $713.5 million through the first nine months of the year. Its stock has slumped recently, closing unchanged Friday at $29 a share in composite trading on the New York Stock Exchange; at that price, the company has a market value of about $278.4 million.Nashua announced the Reiss request after the market closed. Mr. Junius said Nashua's "intention is to remain an independent public company." The company said it amended its shareholder rights plan by reducing to 10% from 20% the level of ownership by an outsider that would trigger the issuance to other holders of rights to buy additional shares of Nashua common at half price. In addition, the company's board authorized the purchase of up to an additional one million shares.Under a program approved by the company in 1987 that didn't specify a share amount, Nashua had purchased 481,000 shares through Sept. 29. Alex Henderson, an analyst at Prudential-Bache Securities, said that while Nashua's performance this year has been "atrocious," the company nonetheless is attractive as a "classic breakup candidate because there's no similarity between its {four} businesses." He estimated the breakup value at $55 a share.In addition to selling Japanese-made photocopiers and facsimile machines in Europe and copier supplies in the U.S., Nashua has three other major businesses: labels and tapes, data storage disks for computers and mail-order photofinishing.
In the aftermath of the Beijing massacre on June 4, economists advanced wildly divergent views on how Hong Kong would be affected. Among the most upbeat was BT Brokerage (Asia) Ltd.In a June 5 reaction, the Bankers Trust Co. unit proclaimed the economy "shockproof." Others were more cautious.In a July analysis titled "From Euphoria to Despair," W.I. Carr (Far East) Ltd., another securities firm, said that eroding confidence might undermine future economic development. Today, with business activity in Hong Kong staggering along at an uneven pace, the economy itself seems locked in a struggle between hope and fear. Manufacturers have survived the turmoil in China largely unscathed.Signs of revival seem evident in Hong Kong's hard-hit hotel sector.But in the stock and real-estate markets, activity remains spotty even though prices have regained much of their lost ground.Waning demand reported by importers, retailers and even fancy restaurants all reinforce a profile of a community that is sharply tightening its belt. As many economists and businessmen see it, those incongruities underscore a paradox that seems likely to bedevil the economy throughout the 1990s.That paradox is Hong Kong's economically rewarding yet politically perilous relationship with China. As a model of capitalist efficiency on southern China's doorstep, Hong Kong's prospects look good.China's land and labor offer inexpensive alternatives to local industry.China-bound freight streams through the territory's port.In the decade since the communist nation emerged from isolation, its burgeoning trade with the West has lifted Hong Kong's status as a regional business center.These benefits seem secure despite China's current economic and political troubles.But to Hong Kong, China isn't purely business.It is also the sovereign power that, come 1997, will take over this British colony.China's leaders have promised generous liberties for post-1997 Hong Kong.That promise sounds shaky now that those same leaders have fallen back on Marxist dogma and brute force to crush their nation's democracy movement. Outflows of people and capital from Hong Kong have been growing since the sovereignty issue first arose in the early 1980s.A widely held assumption all along has been that, given its robust economy, Hong Kong will be able to attract sufficient foreign money and talent to comfortably offset the outflows.With interest in emigration and investment abroad soaring since June 4, that assumption no longer seems so safe. Investment and emigration plans take time to come to fruition.Only four months have passed since the Beijing massacre, and few are prepared to predict its ultimate impact.The only consensus is that more money and people may leave Hong Kong than had been thought likely.This expected blow has cast a pall over the economy's prospects.The question, as many people see it, is how long such uncertainty will last. Maureen Fraser, an economist with W.I. Carr, a subsidiary of France's Banque Indosuez, believes that the territory may not be able to regain its momentum until some time after 1997.It may experience an upswing or two in between.But with local investors shaken by China's political and economic turmoil, she says, a genuine recovery may not arrive until Hong Kong can prove itself secure under Chinese sovereignty. "Investors have to accept the possibility of a significant slowdown in economic activity in the runup to 1997," she says. "Over the next few years, I would advise caution." In a soon-to-be published book on the territory, a political economist, Miron Mushkat, has derived three future scenarios from interviews with 41 Hong Kong government officials and businessmen.Nearly half of them argue that Hong Kong's uneasy relationship with China will constrain -- though not inhibit -- long-term economic growth.The rest are split roughly between optimists who expect Hong Kong to hum along as before and pessimists who foresee irreparable chaos. The interviews took place two years ago.Since the China crisis erupted, Mr. Mushkat says, the scenario as depicted by the middle-of-the-road group bears a remarkable resemblance to the difficulties Hong Kong currently faces.The consensus of this group, which he dubs "realists," is that the local economy will grow through the 1990s at annual rates averaging between 3% and 5%. Such a pace of growth, though respectable for mature industrialized economies, would be unusually slow for Hong Kong.Only twice since the 1960s has annual gross domestic product growth here fallen below 5% for two or more consecutive years.The first instance occurred in 1967-68, when China's Cultural Revolution triggered bloody street rioting in the colony.The other came in 1974-75 from the combined shock of world recession and a severe local stock market crash.During the past 10 years, Hong Kong's economic growth has averaged 8.3% annually.Given Hong Kong's record, Mr. Mushkat's "realists" might have sounded unduly conservative when the interviews took place two years ago.Under the current circumstances, he says, their scenario no longer seems unrealistic. "The city could lose some of its entrepreneurial flavor.It could lose some of its dynamism," says Mr. Mushkat, a director of Baring Securities (Hong Kong) Ltd., a unit of Britain's Barings PLC. "It doesn't have to be a disaster.It just means that Hong Kong would become a less exciting place." Going by official forecasts of GDP, which measures the colony's output of goods and services, minus foreign income, Mr. Mushkat's "realists" seem relatively close to the mark.After taking into account the fallout from the China crisis, the government has projected 1989 GDP growth of 5%.The updated forecast, published Aug. 25, compares with an earlier forecast of 6% published March 1 and a 7.4% rate achieved in Sir Piers Jacobs, Hong Kong's financial secretary, says a further downward revision may be justified unless the economy stages a more convincing rally. "We aren't looking at anything like a doomsday scenario," he says. "But clearly we're entering a difficult period." Many factors besides a dread of 1997 will have a bearing on Hong Kong's economy.One concerns Japanese investors.Barely visible on Hong Kong's property scene in 1985, by last year Japan had become the top foreign investor, spending $602 million.The market has grown relatively quiet since the China crisis.But if the Japanese return in force, their financial might could compensate to some extent for local investors' waning commitment. Another -- and critical -- factor is the U.S., Hong Kong's biggest export market.Even before the China crisis, weak U.S. demand was slowing local economic growth.Conversely, strong consumer spending in the U.S. two years ago helped propel the local economy at more than twice its current rate. Indeed, a few economists maintain that global forces will continue to govern Hong Kong's economic rhythm.Once external conditions, such as U.S. demand, swing in the territory's favor, they argue, local businessmen will probably overcome their 1997 worries and continue doing business as usual. But economic arguments, however solid, won't necessarily impress Hong Kong's 5.7 million people.Many are refugees, having fled China's unending cycles of political repression and poverty since the Communist Party took power in 1949.As a result, many of those now planning to leave Hong Kong can't easily be swayed by momentary improvements in the colony's political and economic climate. Emigration applications soared in 1985, when Britain and China ratified their accord on Hong Kong's future.In 1987, Hong Kong's most prosperous year for a decade, 30,000 left, up 58% from the previous year.Last year, 45,000 went.The government predicts that annual outflows will level off over the next few years at as much as 60,000 -- a projection that is widely regarded as unrealistically low.A large number of those leaving are managers and professionals.While no one professes to know the exact cost of such a "brain drain" to the economy, hardly anyone doubts that it poses a threat. "When the economy loses a big portion of its work force that also happens to include its most productive members, economic growth is bound to be affected," says Anthong Wong, an economist with Hang Seng Bank.
While Wall Street is retreating from computer-driven program trading, big institutional investors are likely to continue these strategies at full blast, further roiling the stock market, trading executives say. Bowing to a mounting public outcry, three more major securities firms -- Bear, Stearns & Co. Inc., Morgan Stanley & Co. and Oppenheimer & Co. -- announced Friday they would suspend stock-index arbitrage trading for their own accounts. PaineWebber Group Inc. announced a pullback on Thursday from stock-index arbitrage, a controversial program-trading strategy blamed by many investors for encouraging big stock-market swings. Though the trading halts are offered as a sign of concern about recent stock market volatility, most Wall Street firms remain open to handle program trading for customers.Trading executives privately say that huge stock-index funds, which dwarf Wall Street firms in terms of the size of their program trades, will continue to launch big programs through the stock market. Wells Fargo Investment Advisers, Bankers Trust Co. and Mellon Capital Management are among the top stock-index arbitrage clients of Wall Street, trading executives say.These huge stock-index funds build portfolios that match the S&P 500 stock index or other stock indexes, and frequently swap between stocks and futures to capture profits. "They will do it every chance they get," said one program-trading executive. Consequently, abrupt swings in the stock market are not likely to disappear anytime soon, they say.In fact, without Wall Street firms trading for their own accounts, the stock-index arbitrage trading opportunities for the big funds may be all the more abundant. "More customers may come to us now," said James Cayne, president of Bear Stearns Cos. Executives who manage these funds see the current debate over program trading as a repeat of the concern expressed after the 1987 crash.They noted that studies completed after the 1987 crash exonerated program trading as a source of volatility. "The issues that are (now) being raised, in classic anti-intellectual fashion, fly in the face of a number of post-crash studies," said Fred Grauer, chairman of Wells Fargo Investment Advisers. A Bankers Trust spokesman said that the company's investment arm uses stock-index arbitrage to enhance investors' returns.Officials at Mellon Capital were unavailable for comment. Stock-index funds have grown in popularity over the past decade as pension funds and other institutional investors have sought a low-cost way to match the performance of the stock market as a whole.Many money managers who trade stock actively have trouble consistently matching the S&P-500's returns. Some stock-index funds are huge.Wells Fargo Investment Advisers, for example, managed $25 billion in stock investments tracking the S&P 500 at the end of June, according to Standard & Poor's Corp. Mr. Grauer said $2 billion of that is used in active index arbitrage. Stock-index funds frequently use the futures markets as a hedging tool, but that is a far less aggressive strategy than stock-index arbitrage, in which traders buy and sell big blocks of stocks with offsetting trades in stock-index futures to profit from price differences. The 190-point plunge in the stock market Oct. 13 has heightened concerns about volatility.And while signs of an economic slowdown, softer corporate earnings and troubles with takeover financing all have contributed to the stock market's recent weakness, many investors rushed to blame program trading for aggravating market swings. The Wall Street firms' pullback followed their recent blacklisting by several institutional investors.Last Tuesday, Kemper Corp. 's Kemper Financial Services Inc. unit said it would no longer trade with firms committed to stock-index arbitrage, including the three that later suspended stock-index arbitrage trading on Friday.Phoenix Mutual Life Insurance Co. and Founders Asset Management Inc. also cut off brokerage firms that engage in program trading. Though it is still doing stock-index arbitrage trades for customers, Morgan Stanley's trading halt for its own account is likely to shake up firms such as Kidder, Peabody & Co. that still do such trades for their own account.Morgan Stanley has consistently been one of the top stock-index arbitrage traders in recent months. Indeed, Morgan Stanley's president, Richard B. Fisher, said the firm is putting up money to form a group of regulators, investors and investment banks to find out if stock-index arbitrage artificially induces stock-market volatility. "We have to clear up these issues and find out what is present that is creating artificial volatility," Mr. Fisher said. "There is no question that investor confidence (in the stock market) is critical." Joining the call for some kind of study or regulatory action, Merrill Lynch & Co. recommended program-trading reforms late Friday, including higher margins on stock-index futures and greater regulatory coordination.Separately, Mr. Cayne of Bear Stearns said his firm is working with regulators to balance margin requirements to "enhance stabilization." Margin rules determine the minimum amount of cash an investor must put up when buying a security.Current rules permit investors to put up less cash for futures than for stocks. Some observers say that different rules governing stock and futures markets are partly responsible for volatility.These rules, they say, permit faster and cheaper trading in futures than in stocks, which frequently knocks the two markets out of line. Stock-index arbitrage, because it sells the more "expensive" market and buys the "cheaper" one, attempts to reestablish the link between the stock and futures markets, and the adjustments are often abrupt.But unequal trading rules allow the futures market to trade differently from stocks, which invites frequent bouts of stock-index arbitrage in the first place. "There has to be better coordination on a regulatory basis," said Christopher Pedersen, director of trading at Twenty-First Securities Corp. "One agency should have the authority over all equity products."
Like so many trends in the entertainment industry, the current spate of rape dramas on television seems to represent a confluence of high-mindedness and self-interest.The former comes from the latest wave of political activism in Hollywood, especially around feminist issues such as abortion.The latter comes from the perception, on the part of many people in network TV, that their only hope of keeping viewers from defecting to cable is to fill the airwaves with an increasingly raw sensationalism.Put these together, and you get programs about rape. The best of the crop was last week's season premiere of "In the Heat of the Night," the NBC series based on a 1967 feature film about a black Philadelphia police detective in a small Southern town.In the series, Virgil Tibbs (Howard Rollins) and his wife, Althea (Anne-Marie Johnson) have settled in Sparta, Miss.Because the show has acquired a sense of place by being filmed on location in Georgia, this episode -- in which Althea gets raped by an arrogant white schoolteacher -- does a decent job of tracing the social repercussions of the crime. Obviously, it's harder to establish a sense of place in a one-shot TV movie.But tonight's offering, "Settle the Score" (9-11 p.m. EST, on NBC), doesn't even try.This tale of a Chicago policewoman returning home to find the man who raped her 20 years earlier is supposed to be set in the Ozarks.But it's more like an illustration of what Ben Stein describes in his study of social attitudes in the TV industry: "Fear of violence and animosity . . . because of race or religion, fear and lack of comprehension about the politics of small-town people . . . produce a powerful wave of dislike of small towns in the minds of TV writers and producers." The writer and executive producer of "Settle the Score," Steve Sohmer, is a graduate of Yale who participated in a PBS documentary, aired this summer, in which six members of the Yale class of 1963 ruminated about their lives since graduation.At one point in the documentary, Mr. Sohmer, who is Jewish, says he felt rejected by many of the Protestants and Southerners he met at Yale.He quotes one student saying, "You're just the kind of Jewboy we Southerners can't stand." Mr. Sohmer confesses that it was partly in response to such attitudes that he is now "a dweller on one of the two islands off the coast of America." But is exile in Hollywood enough?Not to judge by "Settle the Score," in which Mr. Sohmer seems to be settling a score of his own.Of all the unflattering portraits of small-town America I've seen on TV, this film is the most gratuitously nasty.The sole sympathetic character is the prodigal daughter Kate (Jaclyn Smith), and she is tolerable only by virtue of having nothing in common with her kinfolk, a truly benighted pack of Southern Protestants whose grim existence consists mostly of growing peaches and repressing sex. I mean, these folks are so uptight that they blame pretty Kate for the fact that when she was a teen-ager, someone tied her hands behind her back, thrust her head into a gunny sack, brutally raped and beat her, and then left her to die in a cold-storage room.Her Pa (Howard Duff) is the kind of guy who, while saying grace at the supper table, pauses at the word "sin" and glares at the daughter he hasn't seen for two decades, because he knows in his heart that she enjoyed what happened in the cold-storage room, and has been indulging the same taste ever since in the fleshpots of Chicago. People like Pa do exist, of course.But in Mr. Sohmer's Ozarks, he is but the tip of the patriarchal iceberg.Every man Kate encounters is either sniggeringly puritanical, viciously patronizing, revoltingly lecherous, or all three.Add the fact that any one of them, including Pa, could be her attacker, and you have a setting that doesn't resemble small-town America, or even Hollywood's nightmare of small-town America, so much as a paranoid feminist dystopia like Margaret Atwood's "The Handmaid's Tale," itself soon to be (you guessed it) a Hollywood movie. There are two exceptions: Josh (Jeffrey DeMunn), the local doctor who has always loved Kate; and Lincoln (Richard Masur), Kate's simple-minded but affectionate brother.Josh makes clumsy passes at Kate when she's seething with anger and fear, but we know from the outset that he's not a member of the evil patriarchy.How could he be?He's the director of the local Planned Parenthood chapter.As for Lincoln, if you can't guess why he's so sweet to his sister when everybody else hates her, then I'm not going to tell you. As for the women, they're pathetic.Kate's Ma (Louise Latham) is a moral coward.Her sister-in-law (Amy Wright) is a sniveling prude afraid that Kate will seduce all the married men in town, including a particularly loathsome fellow named Tucker, whose idea of fun is to leave his wife at home tending to her bruises and cigarette burns, while he bullies Kate into a dance that consists of drooling on her while trying to break her ribs.At the very least, it would appear that Sis is a poor judge of masculine charm. Yet even these insulting caricatures are not as bad as the moral hypocrisy at the heart of "Settle the Score." In the aforementioned episode of "In the Heat of the Night," we saw Althea being attacked, but we weren't invited to enjoy the spectacle.In Mr. Sohmer's film, by contrast, we are urged to share the perverse excitement of the rapist creeping up on his victim, as the camera ogles Kate in various stages of undress and lingers on the sight of her trussed-up body during frequent flashbacks to the rape. At this point, the truce between feminism and sensationalism gets mighty uneasy.Take the scene in which Kate stands naked by a lighted window, whispering to her hidden assailant, "Look all you want.Starting tomorrow, I'm stalking you." Or the one in which she and Josh are stranded in the city, and, after insisting on separate motel rooms, she knocks on his door to pour out her feelings about the rape -- wearing nothing but a mini-slip and a push-up bra.Surely the question is obvious.With friends like Mr. Sohmer, do the feminists of Hollywood need enemies?
Crossland Savings Bank's stock plummeted after management recommended a suspension of dividend payments on both its common and preferred stock because Crossland may not meet the new government capital criteria effective Dec. 7. In composite trading on the New York Stock Exchange Friday, Crossland closed at $5.25, down $1.875, a 26% decline. A spokesman said the savings bank may not qualify for the capital requirements because, under the proposed guidelines, its $380 million of preferred stock doesn't meet the "core capital" criteria outlined under the new Financial Institutions Reform, Recovery and Enforcement Act of 1989.He added that final guidelines to be published in early November will determine whether the bank is in compliance. Crossland said it retained three investment bankers to assist it in developing and implementing a financial restructuring plan.It wouldn't identify the bankers. Additionally, Crossland reported a third-quarter loss of $175.5 million, or $13.44 a share, compared with net income of $27.1 million, or $1.16 a share, a year ago.A major factor in the third-quarter loss was the write-down of $143.6 million of goodwill. The spokesman said that the proposed guidelines caused Crossland to revise its business objectives and, consequently, to write down the asset value of some previous acquisitions.Crossland recorded an additional $20 million in loan loss reserves in the third quarter. Net interest income for the third quarter declined to $35.6 million from $70.1 million a year ago.However, non-interest income rose to $23.5 million from $22 million.Third-quarter loan originations dropped sharply to $663 million from $1 billion a year ago. Standard & Poor's Corp. lowered the rating on Crossland's preferred stock to double-C from single-B-minus and placed it on CreditWatch for possible further downgrade.It also placed on CreditWatch for possible downgrade other securities, including the double-B-minus/B rating of Crossland's certificates of deposit and the single-B rating of its senior subordinated capital notes.About $518 million of debt is affected.
The envelope arrives in the mail.Open it and two soulful eyes on a boy's brown face peer out from the page, pleadingly.Does the tyke have a good mind about to be wasted?Is he a victim of Gramm-Rudman cuts?No, but he's endangered all the same: His new sitcom on ABC needs a following to stay on the air. ABC hasn't had much luck with shows featuring blacks in recent years, and the producers of one new arrival are a bit desperate. "Homeroom," a show about a black ad executive who gives up the boardroom for a fourth-grade classroom, is flunking the ratings test.So producers Alyce and Topper Carew spun their Rolodexes and gathered names of black opinion makers to mount a direct-mail campaign.By wooing a core black audience they figure they might keep the show alive at least until the spring semester. Using direct mail for a TV show is like fishing for whale with a breaded hook.It just isn't done.But employing this kind of gut-wrenching plea to black consciousness makes it even more unusual.Still, Mr. Carew thinks he can reach a good chunk of the three million-plus black homes he needs by mailing to the almost 10,000 blacks who form what he calls "the grapevine." "The grapevine isn't organized, but you and I know it exists," says Mr. Carew, referring to the often uncannily small world of black professionals and community leaders. "This is a very personal, ethnic style," Mr. Carew says. "I want people in the barber shops and the beauty shops and standing in line at the rib joints to be talking about the show.I want white America to talk about it, too, but I'm convinced that the grapevine is what's happening." ABC says it is aware of the producers' action, but the mailing was sent without the network's blessing.The letter, in fact, takes a jab at ABC for being a laggard in black programming. Meanwhile, as the Sunday evening show struggles to stay afloat against the tough competition of "Murder, She Wrote," the grapevine idea is threatening to turn into a weed: The tactic apparently has inspired sample viewings, but accolades are slow in coming. Doug Alligood, a black advertising executive who tracks black viewing patterns, gives the Carews an "A" for marketing moxie, but isn't alone in his lukewarm reaction.Some shows just don't impress, he says, and this is one of them.
TransCanada PipeLines Ltd. said it plans to shift its headquarters to Calgary, Alberta, from Toronto next year to cut costs and be closer to the upstream natural-gas industry. Gerald Maier, president and chief executive officer of the natural-gas pipeline and marketing concern, said the company's future growth is "increasingly linked" to decisions made by Calgary-based gas producers. "Since deregulation of the market in 1985, producers have become much more intensely involved in both transportation and marketing," Mr. Maier said. "It's a matter of being close to those suppliers; many of those companies don't know us as well as they should." TransCanada transports all gas that moves eastward from Alberta.That includes all the gas consumed in Ontario and Quebec, along with the bulk of Canadian gas exports to the Walter Litvinchuk, vice president of Pan-Alberta Gas Ltd., a Calgary-based gas marketing concern, said the industry will welcome the move. "Having more than a token presence here should enhance communications and business relationships," Mr. Litvinchuk said. "Since the cost of transporting gas is so important to producers' ability to sell it, it helps to have input and access to transportation companies." The move, which could cost TransCanada as much as 50 million Canadian dollars (US$42.5 million) in relocation and severance payments, should be complete by next summer, Mr. Maier said.All 700 Toronto-based employees will be offered positions in Calgary, the company said. The company will save between C$4 million and C$6 million annually in office expenses and other administrative costs by moving to Calgary, Mr. Maier added. Part of both the costs and the savings could be passed on to shippers on the TransCanada pipeline through tolls, which are based on the value of the pipeline system and the cost of operating it. TransCanada is 49.1% owned by Montreal-based holding company BCE Inc.
Since its founding in 1818, Brooks Brothers, the standard-bearer of the Ivy League look, has eschewed flashy sales promotions and fashion trends -- the rules that most retailers live by.But with sales growth sluggish and other men's stores putting on the heat, the venerable retailer can no longer afford such a smug attitude. So two weeks ago, thousands of Brooks Brothers charge customers -- customers conditioned to wait for twice-yearly clearance sales -- got a surprise: an invitation to come in and buy any one item for 25% off.During the four-day promotion, shoppers at the Short Hills, N.J., store lined up to pay for big-ticket items like coats and suits. That's not all.Departing from its newspaper ads featuring prim sketches of a suit or a coat, Brooks Brothers is marketing an updated image in a new campaign that carries the slogan, "The Surprise of Brooks Brothers." One color photo displays a rainbow of dress shirts tied in a knot; another picture shows neckties with bold designs.The message is loud and clear: This is not your father's Brooks Brothers. As part of its national ad pitch, Brooks Brothers will show less preppy women's clothes, moving away from its floppy-tie business stereotype.One ad shows a bright red jacket paired with a black leather skirt.And the ad copy is cheeky: "How can you be a Wall Street hot shot without at least one Brooks Brothers suit in your portfolio?" Brooks Brothers hopes that shaking its time-honored traditions will attract more young men and more women and change consumer perceptions about its range of merchandise. "We have men who only buy their shirts and underwear here or younger customers who only buy their {job} interview suit here," says William Roberti, chairman and chief executive officer of Brooks Brothers. "We want them to buy more of their wardrobe here." Industry watchers agree that Brooks Brothers is long overdue in updating its buttoned-down image, which has stunted its growth.When acquired in May 1988 by British retailer Marks & Spencer PLC, Brooks Brothers' annual operating profit was about $41.8 million on sales of $290.1 million.Mr. Roberti concedes that since the $750 million takeover, "sales growth hasn't been dramatic." For the 11 months ended March 31, operating profit at the 52-store chain totaled $40.5 million on sales of $286.8 million. As Brooks Brothers jumps into the fashion fray, it will be playing catch up.Many clothiers, especially Ralph Lauren, have cashed in on the recent popularity of updated Ivy League and English styles.In keeping with men's broader fashion scope today, businessmen are dabbling in English and Italian suits that are conservative but not stodgy.The rigid Ivy League customer, Brooks Brothers' bread and butter, meanwhile is becoming extinct.Thus, Brooks Brothers has lost customers to stores that offer more variety such as Paul Stuart, Barneys New York and Louis, Boston. "Brooks Brothers no longer has a lock on the {Ivy League} customer who is status-conscious about his clothes," says Charlie Davidson, president of the Andover Shop, a traditional men's store in Cambridge, Mass. By making a break from tradition, Brooks Brothers is seeking a delicate balance.If it promotes fashion too much, the shop risks alienating its old-line customers; by emphasizing "value," it risks watering down its high-minded mystique. Fashion industry consultants also question whether the company can make significant strides in its women's business, given that its customer base is less established and that conservative business dress for women is on the decline.Brooks Brothers' aim is for 20% of total sales to come from the women's department, up from the current 12%. "Everybody forgets that there are fashion cycles in classic merchandise," observes Carol Farmer, a retail consultant. "For women, dressing for success in a real structured way is over." Despite these challenges, Marks & Spencer sees big potential in Brooks Brothers, noting the widely recognized name and global presence.Marks & Spencer plans to open roughly 18 more U.S. stores in the next five years.Brooks Brothers says business is robust at its 30 outlets in Japan and two shops in Hong Kong.Marks & Spencer is also considering opening stores across Europe sometime in the future. Alan Smith, president of Marks & Spencer North America and Far East, says that Brooks Brothers' focus is to boost sales by broadening its merchandise assortment while keeping its "traditional emphasis." The British parent is also streamlining: Brooks Brothers, which continues to make almost all of its merchandise, recently shut one of its two shirt plants in Paterson, N.J., and has closed boys' departments in all but 20 stores. Brooks Brothers is also remodeling its stores.Wednesday, it will unveil a $7 million refurbishing at its flagship store on Madison Avenue.With newly installed escalators, the store retains its signature wood-and-brass look but is less intimidating.More shirts and sweaters will be laid out on tables, instead of sitting behind glass cases, so that customers can "walk up and touch them," Mr. Roberti says. Because the biggest growth in menswear is in casual sportswear, Brooks Brothers is chasing more of that business.The entire second floor of its Madison Avenue store is now casual sportswear featuring items such as ski sweaters, leather backpacks and a $42 wool baseball hat with the store's crest. The centerpiece of the overhaul, according to Mr. Roberti, is the men's tailored clothing department, where Brooks Brothers has added new suit styles and fabrics. "The perception out there is that we are very conservative and we only sell one type of suit," Mr. Roberti says, referring to Brooks Brothers' signature three-button "sack suit," with a center-vented jacket and boxy fit. But it now offers more two-button versions and suits with a tapered fit.It also plans to add suits cut for athletic men with broader upper bodies.Next spring, nearly 30% of its suits will have pleated pants, compared with virtually none a couple of years ago. Says Mr. Roberti: "We want to turn the customer on."
Two rival bidders for Connaught BioSciences extended their offers to acquire the Toronto-based vaccine manufacturer Friday. Institut Merieux S.A., which offered 942 million Canadian dollars (US$801.2 million), or C$37 a share for Connaught, said it would extend its bid, due to expire last Thursday, to Nov. 6. A C$30-a-share bid by Ciba-Geigy Ltd., a pharmaceutical company based in Basel, Switzerland, and California-based Chiron Corp., a bioresearch concern, was extended to Nov. 16.It had been due to expire Friday evening. Merieux previously said it would ensure its bid remained open pending a final decision by Canadian regulators on whether to approve the takeover.Merieux, a vaccine and bioresearch firm based in Lyon, France, is controlled 50.1% by state-owned Rhone Poulenc S.A. The Canadian government previously said Merieux's bid didn't offer enough "net benefit" to Canada to be approved, and gave Merieux an until mid-November to submit additional information. Merieux officials said last week that they are "highly confident" the offer will be approved once it submits details of its proposed investments to federal regulators. Both offers are conditional on regulatory approvals and enough shares being tendered to give the bidders a majority of Connaught's shares outstanding. Institut Merieux, which already holds a 12.5% stake in Connaught, said that at the close of business Thursday, 5,745,188 shares of Connaught and C$44.3 million face amount of debentures, convertible into 1,826,596 common shares, had been tendered to its offer.At the close of business Thursday, Ciba-Geigy and Chiron said 11,580 common shares had been tendered to their offer.At last report, Connaught had 21.8 million shares outstanding. Separately, the Ontario Supreme Court said it will postpone indefinitely a ruling on the lawsuit launched by the University of Toronto against Connaught in connection with the Merieux bid. In a statement prepared by lawyers for the university and Connaught, the parties said they agreed that as a result of reaching a C415 million research accord, "It is unnecessary that there be a judgment on the merits {of the case} at this time." Lawyers for the two sides weren't immediately available for comment. The university had sought an injunction blocking Connaught's board from recommending or supporting an offer for the company by Merieux.
After days of intense but fruitless negotiations, a federal judge last week threatened to convert William Herbert Hunt's Chapter 11 personal bankruptcy case into a Chapter 7 liquidation. Judge Harold C. Abramson raised the possibility after talks to end a feud between two major creditors failed and all three reorganization plans in the case ran into roadblocks. If the case is converted to Chapter 7, what remains of the oil tycoon's once-vast estate -- now believed to have a value of less than $125 million -- would be sold off quickly with most of the proceeds going to the Internal Revenue Service, whose claim for $300 million in back taxes has priority in the case.Hundreds of smaller creditors could get nothing, according to attorneys involved. While admitting such a move would be "devastating" to most creditors, Judge Abramson told a courtroom filled with nearly two dozen attorneys that he was concerned about the toll mounting legal bills will take on Mr. Hunt's shrinking estate and about the fact that, following voting by creditors, none of the reorganization plans appeared to be viable in their present form. "It would be a shame to have a Chapter 7 after all the progress in this case," said Judge Abramson.Under Chapter 11 of the Federal Bankruptcy Code, a company continues to operate under protection from creditors' lawsuits while it works out a plan to pay its debts.Under Chapter 7, the assets of a company are sold off to pay creditors. Despite his reluctance to take the latter step, the judge indicated he would move quickly after hearing testimony later this week in the bitter dispute between Manufacturers Hanover Trust Co. and Minpeco S.A., a minerals concern owned by the Peruvian governmemt. The Manufacturers Hanover Corp. unit, which is seeking repayment of a $36 million loan, has asked the court to give its claim priority over that of Minpeco, which won a $132 million judgment against Mr. Hunt, his brother Nelson Bunker Hunt and other defendants last year in a case stemming from their alleged attempts to corner the silver market in While claiming that penalties, legal fees and interest have driven the value of its claim to more than $250 million, Minpeco has agreed to settle for an allowed claim of as much as $65.7 million.But even that is disputed by Manufacturers Hanover which, in alliance with the IRS, contends that Minpeco has already collected more than its actual damages from other defendants in the silver-conspiracy case. Under prodding from Judge Abramson, a Minpeco executive flew in from Peru last week to talk directly with executives from Manufacturers Hanover on a settlement.Despite long private sessions in both New York and Dallas, the two sides ended the week "6,000 miles and many dollars apart," according to attorney Hugh Ray, who represents Manufacturers Hanover.Meanwhile, inside the courtroom, the judge said he would fine attorneys for the two creditors $50 every time they referred to each other with terms such as "liar" or "slime." All three major creditors -- the IRS, Minpeco and Manufacturers Hanover -- voted against and effectively doomed a reorganization plan proposed by Mr. Hunt.A reorganization plan proposed jointly by the IRS and Manufacturers Hanover was stalled by a negative vote from Minpeco.The mineral concern's own reorganization plan met a similar fate after opposition from the IRS and Manufacturers Hanover.Neither plan is dead, however, and the judge could force creditors to accept some version of them after ruling on the Minpeco-Manufacturers Hanover dispute. Meanwhile, settlement negotiations continue between Mr. Hunt and the IRS, which has already reached a tentative agreement with Nelson Bunker Hunt.The two sides have been far apart on how much Herbert Hunt will continue to owe the government after his assets are sold.
Arthur Price abruptly quit as president and chief executive officer of MTM Entertainment Inc., a Los Angeles production company that has fallen on hard times. Mr. Price, 61 years old, also stepped down from the board of TVS Entertainment PLC, the British TV company that last year bought MTM, producer of such TV programs as "Hill Street Blues" and "The Mary Tyler Moore Show." A TVS spokesman said he didn't know Mr. Price's plans.James Gatward, TVS's chief executive, said in a statement that he will "assume overall responsibility" for MTM's operations until a successor is named. Industry analysts speculated that Mr. Price's sudden departure may have stemmed from conflicts with Mr. Gatward. Mr. Price "wanted to run the MTM business" and may have regretted selling the company to TVS, suggested Charles Denton, managing director of Zenith Productions, a subsidiary of Carlton Communications PLC, London. Mr. Gatward declined to comment, and Mr. Price couldn't be reached on Friday.In the TVS statement, Mr. Price said "leaving MTM was a very difficult decision," but added that "it is now time for a change. . . ." The $320 million purchase of MTM represented an audacious international move for TVS, which then was about half the U.S. concern's size.At the time, Mr. Gatward said his friendship with Mr. Price had smoothed the way for its link with the small British company.But TVS stunned industry analysts last month by disclosing that it expected MTM to post an operating loss for this year. In that announcement, TVS also said it was trimming production finance and hiring a new U.S. sales manager.Mr. Gatward has spent a lot of time since late September at MTM's headquarters; he eliminated three departments and fired six executives, according to the TVS spokesman.Further staff cuts are likely, the spokesman indicated. "Obviously, we are looking at making economies across the board." TVS blames difficulties in peddling reruns of MTM shows to U.S. broadcasters for the problems at MTM.The market for reruns sold to local U.S. broadcasters has been weak for the past three or four seasons. Mr. Price co-founded MTM in 1969 with U.S. actress Mary Tyler Moore and Grant Tinker, her then-husband.Mr. Tinker later left to become chairman of National Broadcasting Co.The TVS spokesman said Mr. Price still holds about an 8% TVS stake, acquired as part of the MTM acquisition.In late trading on London's Stock Exchange Friday, TVS shares rose four pence to 195 pence a share.
Dow Jones & Co. extended its tender offer of $18 a share, or about $576 million, for the 33% of Telerate Inc. that it doesn't already own until 5 p.m. EST, Nov. 6. The offer, which Telerate's two independent directors have rejected as inadequate, previously had been scheduled to expire at midnight Friday.Dow Jones said it extended the offer to allow shareholders time to review a supplement to the Dow Jones tender offer circular that it mailed last Friday. The supplement contains various information that has been filed with the Securities and Exchange Commission since Dow Jones launched the offer on Sept. 26, but it doesn't change the terms and conditions of the offer except to extend its expiration date. In Delaware Chancery Court litigation, Telerate has criticized Dow Jones for not disclosing that Telerate's management expects the company's revenue to increase by 20% annually, while Dow Jones based its projections of Telerate's performance on a 12% revenue growth forecast.In the tender offer supplement, Dow Jones discloses the different growth forecasts but says it views the 20% growth rate "as a hoped-for goal" of Telerate's management "and not as a realistic basis on which to project the company's likely future performance." Telerate shares fell 50 cents on Friday to close at $20 each in New York Stock Exchange composite trading.Dow Jones shares also fell 50 cents to close at $36.125 in Big Board composite trading. Dow Jones has said it believes the $18-a-share price is fair to Telerate's minority shareholders.Late last week, representatives of Dow Jones and Telerate began negotiations about the terms of the offer, but those talks didn't result in any changes in the offer. Telerate provides information about financial markets through an electronic network.Dow Jones, which owns 67% of Telerate, publishes The Wall Street Journal, Barron's magazine, community newspapers and operates financial news services and computer data bases.
Upset over the use of what it says are its exclusive trademarks, Hells Angels Motorcycle Corp. is fighting back -- in court.Concord New Horizons Corp., creators of a 1988 movie called Nam Angels, used the gang's name and trademarks without authorization, the not-for-profit corporation says in a complaint filed in federal court. Nam Angels depicts a group of the cycle gang's members on a mercenary mission to Viet Nam during the war years. In addition to being broadcast on cable television, the movie also is being distributed on videocassettes, the suit alleges in seeking unspecified damages.Also named in the suit is Media Home Entertainment Inc. of Culver City, Calif., its parent, Heron Communications Inc., and Broadstar Television of Los Angeles, holders of the copyright on the movie. A Concord spokeswoman called the suit "unfounded" but declined to comment further. Besides being upset with the film's use of the Hells Angels name and logos, the Angels are angry with their depiction in the movie. "There is absolutely no way our board or membership would have approved the portrayal of the Hells Angels in this movie," said George Christie, president of the club's Ventura chapter. "Portrayal of our members as disloyal to each other is totally contrary to the most important values of our organization -- loyalty and trust." Nam Angels shows Angels fighting with each other and also depicts them as showing no remorse when a member is killed.Both of these actions aren't characteristic of real Hells Angels, Mr. Christie said. Hells Angels was formed in 1948 and incorporated in 1966.In addition to 26 chapters in the U.S., there are 40 chapters in foreign countries.
The world had a big yuk recently when the Soviets reported a rash of UFO landings, one of them bringing tall aliens who glowed in the dark to Voronezh.It is the opinion of Timothy Good, author of "Above Top Secret: The World UFO Cover-Up" (Quill/William Morrow, 592 pages, $12.95), that the world laughs too fast. Here is a bible for UFO watchers, complete with pictures of people who say they've had personal relationships with aliens.One photo shows a woman sporting a scar she says was made by a laser beam (a low-caliber weapon, from the looks of the wound). So far anyway, our alien visitors seem more intent on brightening our skies than pulverizing us.Mr. Good devotes much serious space to the events of Feb. 25, 1942, when American gunners spotted strange lights in the sky above Los Angeles.Air-raid sirens sounded the alarm at 2:25 a.m., summoning 12,000 air wardens to duty.Soon all hell broke loose. Ground batteries, targeting an odd assortment of aircraft traveling at highly unusual speeds, opened up a furious fusillade.The sky filled with 12.8-pound shells, several of which fell back to Earth, destroying homes and buildings.When the smoke cleared, six people were dead (three from heart attacks), and everyone wondered what in the world they were shooting at. Mr. Good, who documents these things as best he can, provides an official explanation in the form of a memorandum from Chief of Staff George C. Marshall to President Roosevelt: "1,430 pounds of ammunition," he wrote his commander in chief, were expended on "unidentified aircraft," flying at speeds as slow as 200 mph and elevations between 9,000 and 18,000 feet. Well, thousands of Californians on the scene insisted the ammo had been uselessly aimed at a large, hardy UFO, but you will just have to make your own decision about such sightings.One thing's for sure: There have been a ton of them, and greater beings than the editors of the National Enquirer have shown interest.Gerald Ford, a fairly down-to-earth fellow, once sent a letter to the chairman of the Armed Services Committee recommending that "there be a committee investigation of the UFO phenomenon.I think we owe it to the American people to establish credibility regarding UFOs and to produce the greatest possible enlightenment on the subject." Jimmy Carter went further in a 1976 campaign promise: "If I become president, I'll make every piece of information this country has about UFO sightings available to the public, and the scientists.I am convinced that UFOs exist because I have seen one. . . ." But you know about campaign promises.It still doesn't look like governments are coughing up everything they know.Still, despite their efforts to convince the world that we are indeed alone, the visitors do seem to keep coming and, like the recent sightings, there's often a detail or two that suggests they may actually be a little on the dumb side. For instance, witnesses in Voronezh say the pinheaded behemoths and their robot friend, after strolling around the city park, left behind some rocks.Now why, you have to ask yourself, would intelligent beings haul a bunch of rocks around the universe?Or land in Russia so often.In a 1961 incident, a Soviet mail plane disappeared off the radar screen just after radioing its position to ground control in Sverdlovsk.A search party soon found the unscathed aircraft in a forest clearing much too small to have allowed a conventional landing.What's more, the seven mail personnel aboard were missing. Again, you have to ask the obvious question: Why would intelligent beings kidnap seven Soviet mailmen? Speculation as to the nature of aliens will no doubt continue until we wake up one morning to find they've taken over "The Today Show," the way they overwhelm an entire town in Jack Finney's "Invasion of the Body Snatchers" (Fireside/Simon & Schuster, 216 pages, $8.95).Maybe some of our talk-show hosts and anchors have already been taken over?The point of this 1955 novel, which spawned two movies, is that the soulless pod people replicated by alien plants are virtually indistinguishable from human folks. Another guy who thinks they're out there and closing fast is Whitley Strieber, whose new novel, "Majestic" (Putnam, 317 pages, $18.95), takes a look at a reported 1947 UFO crash near the Roswell Army Air Field in a New Mexico desert.Mr. Strieber knows a lot about aliens.He even had sex with one -- sort of, and not intentionally -- as readers learned in his "Communion" (a book recently described in the New York Times as a "nonfiction best seller"). The way Mr. Strieber tells it in his earnest prose, the intelligence officer who found the craft's strange debris was forced by the government to call the flower-inscribed scraps parts of a weather balloon.The apparent crash became top secret, and the alien creatures went away upset with the rude ways of human beings.We lost our chance to communicate with sweet-natured visitors "about four feet tall {who} looked as though they were made of puffed-up marshmallow." Mr. Shiflett is an editorial writer for the Rocky Mountain News.
When the economy stumbled in the mid-1970s, Akzo NV fell out of bed. Towering overcapacity in the synthetic fiber business, which accounted for half of the Dutch chemical company's sales, led to huge losses and left Akzo's survival in doubt.It wasn't until the early 1980s that Akzo nursed itself back to health. Now, as a new downturn in the chemical industry looms, Akzo says it is in far better shape to cope.Investment analysts generally agree. Aside from slashing costs and investing heavily in its plants, Akzo has spent 3.9 billion guilders ($1.88 billion) on acquisitions since 1983 to give it better balance.During the same period, the company has sold about 1.6 billion guilders of assets. The fibers business, whose products go into textiles, carpeting and myriad industrial uses, now accounts for only 20% of Akzo's sales. "We have definitely become less cyclical," Syb Bergsma, executive vice president-finance, said in an interview. Still, Akzo hasn't yet found a way to achieve another goal: a large presence in the U.S. market for prescription drugs.Mr. Bergsma said prices for U.S. pharmaceutical companies remain too high, making it unlikely that Akzo will pursue any major acquisitions in that area.But he said Akzo is considering "alliances" with American drug companies, although he wouldn't elaborate. An indication of Akzo's success in reshaping itself will come Thursday when it reports third-quarter results.Analysts expect the company to show profit of about 225 million guilders, up 9% from 206.3 million guilders a year earlier. A bigger test will come next year if, as many analysts expect, bulk chemical prices slump in Europe. "Maybe Akzo can surprise the investment world a bit," said Jaap Visker, an analyst at Amsterdam-Rotterdam Bank NV.He figures Akzo is likely to be one of the few major chemical companies to show profit growth next year.The bank projects Akzo will show per-share earnings of 24 guilders in 1990, up from an estimated 22.5 guilders for this year and the 20.9 guilders reported for 1988. At James Capel & Co. in London, analyst Jackie Ashurst notes that Akzo is less exposed than many of its rivals to the most volatile chemical products.For example, Akzo has only minor petrochemical operations, is small in plastics and doesn't make fertilizers. Thus, while Akzo profited less than many rivals from the boom of recent years in petrochemicals and plastics, it has less to fear from the current slump. The company is exposed to bulk chemicals, however.Although bulk-chemical prices have begun falling in the U.S., they are generally stable in Europe, Mr. Bergsma said.A decline may come in the first half of 1990, he said, but the market doesn't appear on the verge of a severe downturn. To reduce the danger of such pricing cycles, Akzo has invested heavily in specialty chemicals, which have highly specific industrial uses and tend to produce much higher profit margins than do bulk chemicals.Akzo's biggest move in this area was the 1987 acquisition of Stauffer Chemical Co. 's specialty chemical business for $625 million. In a less glamorous field, Akzo is the world's biggest producer of industrial salt, used as a raw material for the chemical industry as well as for such tasks as melting ice.Akzo also makes products derived from salt, such as chlorine and caustic soda. In the fibers division, profit remains weak, largely because of persistent overcapacity.But Akzo is still slimming down: It recently announced plans to eliminate about 1,700 fiber-related jobs in the Netherlands and West Germany. Although the polyester and rayon markets remain mostly bleak, Akzo has high hopes for some emerging fiber businesses, such carbon fibers and aramid, extremely strong fibers used to reinforce tires and metals and to make such products as bullet-proof vests. Akzo's Twaron aramid fiber is a distant second to Du Pont Co. 's Kevlar, which dominates the market.Mr. Bergsma said world-wide industry sales of aramid fibers are expected to total about $500 million this year.Sales growth of 10% a year seems possible, he said, and Akzo expects its Twaron business to become profitable in 1990. Akzo also has spent heavily on acquisitions in paints, auto finishes and industrial coatings.In August, for example, it completed the $110 million acquisition of Reliance Universal Inc., a U.S. maker of industrial coatings for wood, metals and plastics, from Tyler Corp. Mr. Bergsma said Akzo is likely to see strong profit growth from coatings as it realizes cost savings and other benefits from its greater scale. For Akzo's drug business, where profits have shown litle change for the past five years, Mr. Bergsma predicted moderate profit growth.Akzo is the leading seller of birth-control pills in Europe but is still seeking regulatory approvals to enter that market in the U.S. and Japan.Mr. Bergsma said Akzo hopes to have approval to sell its Marvelon pill in the U.S. in 1992. Akzo also has small operations in diagnostic tests, generic drugs and veterinary products.Veterinary products are showing especially strong growth, Mr. Bergsma said.Among the leading products is a flu shot for horses.
We're sorry to see Nigel Lawson's departure from the British government.He is a politician with the courage of true conviction, as in summarily sacking exchange controls and in particular slashing the top rate of income taxation to 40%.But in the end his resignation as Chancellor of the Exchequer may be a good thing, especially if it works as he no doubt intends -- by forcing Prime Minister Thatcher and her counterparts elsewhere to confront the genuine intellectual issues involved. The early omens, we admit, scarcely suggest so wholesome an outcome.The Fleet Street reaction was captured in the Guardian headline, "Departure Reveals Thatcher Poison." British politicians divide into two groups of chickens, those with their necks cut and those screaming the sky is falling.So far as we can see only two persons are behaving with a dignity recognizing the seriousness of the issues: Mr. Lawson and Sir Alan Walters, the counterpoint of the Chancellor's difficulties, who also resigned as personal adviser to Mrs. Thatcher. The problem is that on the vital issue of monetary policy and exchange rates, conservative, free-market economists divide into at least three incompatible camps.There are the strict monetarists, who believe that floating exchange rates free an economy to stabilize its price level by stabilizing the monetary aggregates.There are the supply-side globalists, who seek to spread the advantages of a common currency through fixed exchange rates.And there are the twin-deficit Keynesians, who predict/advocate devaluations to balance trade flows.This is a problem not only for Prime Minister Thatcher but for President Bush, as shown in the ongoing bickering over the dollar between the Federal Reserve and the Mulford Treasury. In the British case, Mr. Lawson is the closest thing in London to a supply-side globalist.He not only slashed marginal tax rates, initially sparking fresh growth in Britain, but he wanted to regulate monetary policy by targeting exchange rates, indeed joining the European Monetary System.While no doubt agreeing with Mr. Lawson on everything else, Sir Alan is a dyed-in-the-wool monetarist, inclined to defend floating rates to the death. To make matters even more confusing, the earlier U.S. experience made clear that Mr. Lawson's tax cuts would have profound effects on Britain's international accounts and the value of sterling.They increased the after-tax rate of return and made Britain a far more attractive place to invest, producing sudden capital inflows.By accounting definitions, this had to produce a sudden trade deficit.As in the U.S., it also produced a sudden burst in the demand for sterling, that is a surge in the sterling monetary aggregates, M-Whatever. At this point, the options were: Crunch money to stop the boost in the aggregates, as Sir Alan surely advised, and forget the soaring pound.To push the pound even lower trying to cure the trade deficit, a policy Britain has repeatedly proved disastrous.Or to supply enough money to meet the increased demand and stabilize the exchange rate, as the Chancellor argued, and ensure the permanence of this policy by joining the EMS. Faced with a similar situation, Paul Volcker let the dollar soar, (though monetary aggregates also grew so rapidly monetarists issued egg-on-the-face warnings of inflation).But this devastated the U.S. manufacturing sector, laying the seeds of protectionism.Mr. Lawson, though not allowed to join the EMS, chose to "shadow" the deutsche mark.He reaped inflation along with rapid growth, no doubt validating Sir Alan's predictions in the Prime Minister's mind.But more recently, the pound has been falling with high inflation, which has also seemed almost impervious to the high interest rates Mr. Lawson deployed to stop it. So the British experience presents a genuine puzzle that reaches far beyond the shores of Albion.We had been soliciting opinions on it long before Mr. Lawson's resignation, and offer some of the collection for the benefit of his successor and one-time deputy, John Major.To begin with, we should note that in contrast to the U.S. deficit, Britain has been running largish budget surpluses.In pursuit of this mystery, Keynesian adepts and twin-deficit mavens need not apply. We should also add Mr. Lawson's own explanation, as we understand it.Unlike the U.S., Britain never achieved even a momentary reduction in real wages.The wage stickiness, which OECD studies confirm is particularly high in Britain, gives its economy a structural bias toward inflation.Inflation is easier to spark and harder to control. We should also concede that in the British experience the monetarist cause regains some of the credibility it lost in the U.S. experience.Nearby Paul Craig Roberts, a distinguished supply-sider with monetarist sympathies, argues the case for Sir Alan.Perhaps the fiscal shock of tax cuts is after all best absorbed by floating rates, though of course in the event Mr. Lawson resigned over whether to support a weak pound, not restrain a strong one.We recall that Mr. Roberts not only chides the Chancellor for being too easy because of a desire to constrain sterling, but also led the chorus saying that Mr. Volcker was too tight when he let the dollar rise.Somewhere in between there must be a golden mean, perhaps measured by M-Whatever, but perhaps measured by purchasing power parity. The globalists tend to think Mr. Lawson ran onto technical reefs.In fixing rates the choice of initial parities is crucial, for example, and perhaps he picked the wrong pound-DM rate.For that matter, perhaps he fixed to the wrong currency.We sympathize with Mrs. Thatcher's reluctance to tie her currency to one governed by the domestic political imperatives of West Germany.Perhaps the shock would have been less if they'd fixed to another low-tax, deregulated, supply-side economy. Alan Reynolds of Polyconomics adds his suspicion that the unrecognized inflationary culprit is the budget surplus.Those who can shake Keynesian ghosts out of their heads might recognize that the retirement of gilts for cash is equivalent to an expansionary open-market operation, indeed, it is the definition of an open market operation to expand the money supply.Mr. Reynolds also notes that since British banks have no reserve requirements, high interest rates are less likely to curb inflation than to cause recession. We would add that in political terms, Mrs. Thatcher's problem was failing to decide between the Chancellor and her adviser.In the end, neither policy was followed, and instead of learning anything we are left with a mystery.In particular, "shadowing" a currency is anything but fixing; it is an open announcement that the exchange rate target has no credibility.All the more so when strong voices are heard opposing the policy.Better to have a true monetarist policy, just for the experience. So Mr. Lawson had to resign.In the end his move was sparked by remarks in excerpts from Sir Alan's autobiography in The American Economist, a 10,000-circulation academic journal.But it was the underlying situation that became intolerable. What Mr. Major and Mrs. Thatcher will do now remains to be seen.They confront stubborn inflation and a sagging economy, that is to say, stagflation.This cannot be solved by provoking a further downturn; reducing the supply of goods does not solve inflation.Our advice is this: Immediately return the government surpluses to the economy through incentive-maximizing tax cuts, and find some monetary policy target that balances both supply and demand for money (which neither aggregates nor interest rates can do).This was the version of supply-side economics that, in the late 1970s and early '80s, worked in America and world-wide to solve a far more serious stagflation than afflicts Britain today.
Ogilvy & Mather, whose declining profitability prompted its takeover by WPP Group earlier this year, will see its profit margins bounce back to the "11.5% range" in 1990, said Graham Phillips, the agency's new chairman-elect. The ad agency's pretax profit margins were slightly under 10% at the time of the takeover, according to analysts; London-based WPP's goal is to increase margins to 12%. Mr. Phillips made his comments during an interview detailing his plans for the agency.British-born, the 24-year Ogilvy veteran was named last week to succeed Kenneth Roman, who is leaving by year's end to take a top post at American Express, an Ogilvy client.Surrounded by stacks of paper, two computers and photos of himself boating and flying, Mr. Phillips laid out several changes he hopes to make at the agency. First and foremost, Mr. Phillips said he hopes to improve client service.Ogilvy under the fastidious Mr. Roman gained a reputation as occasionally being high-handed in its treatment of clients, of preaching what strategy a client should -- indeed, must -- follow.And some of its top client-service executives, including Mr. Phillips, were promoted to the point they were saddled with administrative duties, with little time to see clients. But Mr. Phillips recently freed himself up to spend more time with clients by delegating much of his administrative work to a deputy.He also plans to get to know clients that Mr. Roman was closer to, such as Lever Brothers, American Express and Seagram.The two men are planning joint visits to a number of clients to attempt to smoothly hand over the reins. "Clients want to see more of our senior people involved in the business -- not once a month, but two or three times a week," he said. Mr. Phillips also hopes to finally implement a reorganization announced earlier this year but put on hold by the WPP takeover.The reorganization is supposed to make one-stop shopping -- buying advertising, public relations and design all in one place, or "Ogilvy Orchestration" in Ogilvyspeak -- a reality. Under the reorganization, Ogilvy plans to name one executive on each account as a "client service director" to work as the client's single contact for all those services. "There is little or no integration of our work, quality is spotty, there is no single focus," Mr. Phillips complained to staffers in March, when the reorganization was announced.Now Mr. Phillips says he hopes to have the new system in place for several clients -- including American Express, American Telephone & Telegraph and Ryder -- by year's end. Industry executives and analysts are divided on whether Mr. Phillips is up to the task.He isn't as well-known to clients as is Mr. Roman.Under his watch, office politicking was often rampant in the agency's New York operation and the office there has had a dismal new-business record for more than a year.And while last week the agency hired a top Chiat/Day/Mojo executive, Bill Hamilton, to try to bolster its work, "Graham has to get the revenue of that New York office moving," says James Dougherty, an analyst with County NatWest Securities. The one thing Mr. Phillips clearly does have going for him is continuity, although it isn't certain if that will be enough.As Mr. Dougherty says, "The last thing they need is enormous disruption at the top . . . and Graham is obviously a long-term member of the Ogilvy Mafia, as we call it." Mr. Phillips and Mr. Roman are indeed quite similar in substance, if not in style.While Mr. Roman is a workaholic detailsman, Mr. Phillips would rather delegate, leaving him time for his interests outside the office.Mr. Roman, by contrast, seems rarely to cut loose at all, although he did appear at Ogilvy's Halloween party Friday decked out in duck feet and a duck hat, costumed as a "lame duck." Mr. Phillips said the company's expected margin improvement will be all but inevitable, given that the company's profitability was dragged down this year by an expensive move to luxurious, oversized new New York headquarters.The move, budgeted at about $7 million, actually came in at about $10 million, he said. But margins will be helped, too, by some other cost-saving steps.Ogilvy eliminated the mail room staff, closed the executive dining room and, after the takeover, let go half a dozen financial executives.WPP, which assumes financial control of its businesses in a hands-on way, instituted a new financial system and plans to sublet some floors in Ogilvy's new headquarters building to outsiders.The fact that the agency will now be part of a U.K. company, under British accounting rules, will also make the profit picture look better. Y&R's Klein Steps Down Arthur Klein, president of Young & Rubicam's New York office, stepped down "temporarily" in the wake of charges by a federal grand jury in New Haven, Conn., that he, the agency and another top executive bribed Jamaican tourist officials to win its account in 1981. In an internal memo, Alex Kroll, the agency's chairman, said Mr. Klein decided to remove himself to minimize "negative reaction" from prospective clients and others and to prepare for his defense. "The fact that he is in the process of defending himself against the present charges could conceivably have an adverse impact on Y&R," Mr. Kroll wrote.He said Mr. Klein will return to his post at the end of the trial "at which he will be vindicated." Mr. Klein will work with Mr. Kroll on some of the agency's joint venture activities and acquisitions while the case is pending.Peter Georgescu, president of Y&R's ad operations, will assume Mr. Klein's day-to-day role. Wells Rich's New Partner Wells, Rich, Greene named Cheryl Heller as an executive vice president and creative partner in its image group, which concentrates on fashion and visually oriented advertising. Ms. Heller, 38, had headed up Boston agency Heller/Breene, a unit of WCRS.The agency, with about $35 million in billings, will be dissolved, with some of its staffers absorbed by WCRS's Della Femina McNamee unit in Boston, Ms. Heller said.She said it was too early to say what would happen to its clients, including Reebok and Apple. At Wells Rich, Ms. Heller will concentrate on accounts that include Philip Morris's Benson & Hedges cigarette brand, which relies on print ads, Ms. Heller's specialty.As previously reported, the account is troubled, with Philip Morris asking Backer Spielvogel Bates, Ogilvy & Mather, and possibly others to try their hand at developing new creative work.Wells Rich declined to comment on the status of the account, as did the other agencies.
R.H. Macy & Co., the closely held department store chain, said in a financial filing Friday that its sales for the fiscal fourth quarter ended July 29 were up 10% to $1.59 billion against $1.44 billion a year earlier. Comparable store sales for the quarter were up 7.3%. The net loss for the quarter was $43.1 million against a year-earlier loss of $106 million.The loss in the fourth quarter of 1988 reflected in part expenses for an unsuccessful bid for Federated Department Stores Inc., as well as the restructuring of some of its department store operations. For the year, sales were up 5.6% to $6.97 billion compared with $6.61 billion in fiscal 1988.Sales for both years reflect 12-month performances for each year of I. Magnin, Bullock's, and Bullocks Wilshire.Macy acquired those three businesses in May 1988.On a comparable store basis, including the new acquisitions for both years, sales for fiscal 1989 were up 1.9%. Macy reported a net loss for fiscal 1989 of $53.7 million compared with a net loss of $188.2 million for fiscal 1988. The company's earnings before interest, taxes and depreciation, which bondholders use a measurement of the chain's ability to pay its existing debt, increased 11% in fiscal 1989 to $926.1 million from $833.6 million.The $833.6 million figures includes the new acquisitions.Excluding those businesses, earnings before interest, taxes and depreciation for 1988 would have been $728.5 million. As of Feb. 1, 1990, the Bullocks Wilshire stores will operate as I. Magnin stores.Altogether, Macy and its subsidiaries own or lease 149 department stores and 61 specialty stores nationwide. Although management led a leveraged buy-out of R.H. Macy in July 1986, the company still makes financial filings because of its publicly traded debt.The company estimates its total debt at about $5.2 billion.This includes $4.6 billion of long-term debt, $457.5 million in short-term debt, and $95.7 million of the current portion of long-term debt. In a letter to investors, Chairman Edward S. Finkelstein wrote that he expects the company to "benefit from some of the disruption faced by our competitors.While our competitors are concerned with their financial viability and possible ownership changes, we will be concentrating on buying and selling merchandise our customers need and want." Mr. Finkelstein is apparently referring to B. Altman and Bonwit Teller, two New York retailers that have recently filed for Chapter 11 bankruptcy protection, as well as the retail chains owned by financially troubled Campeau Corp.Those chains include Bloomingdale's, which Campeau recently said it will sell.Other retail properties for sale include Saks Fifth Avenue and Marshall Field, retailers now owned by B.A.T PLC, the British tobacco conglomerate. In his letter, Mr. Finkelstein also referred to the recent San Francisco earthquake.Mr. Finkelstein flew to San Francisco the day after the earthquake, and found that 10 to 12 of his company's stores had sustained some damage, including the breakage of most windows at the I. Magnin store on Union Square. "The volume and profit impact on our fiscal first quarter will not be positive, but looking at the whole fiscal year, we don't see the effect as material," wrote Mr. Finkelstein.
RJR Nabisco Inc. said it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle S.A.'s Nestle Foods unit for $370 million. The sale, at a higher price than some analysts had expected, helps the food and tobacco giant raise funds to pay debt and boosts Nestle's 7% share of the U.S. candy market to about 12%. The candy businesses had sales of about $154 million last year, which was roughly 12% of total revenue for RJR's Planters LifeSavers unit, according to a memorandum distributed by RJR's owner, Kohlberg Kravis Roberts & Co., to bankers last December. The Nestle acquisition includes a candy plant in Franklin Park, Ill., which employs about 800 workers. The sale, which had been expected, is part of KKR's program to pay down $5 billion of a $6 billion bridge loan by February.Roughly $2 billion of that debt has already been repaid from previous asset sales, and RJR expects to use another $2 billion from the pending, two-part sale of most of its Del Monte unit.That sale, however, could still fall through if financing problems develop.Thus, it remains crucial for RJR to obtain top dollar for its smaller assets like the candy brands. Louis Gerstner Jr., chairman and chief executive officer of New York-based RJR, called the sale a "significant step" in the company's divestiture program, as well as a "a strategic divestiture." Since KKR bought RJR in February for $25 billion of debt, it has agreed to sell nearly $5 billion of RJR assets.RJR's executives have said they will dispense with certain brands, in particular, that aren't leaders in their markets. "RJR Nabisco and Planters LifeSavers will concentrate more on our own core businesses," Mr. Gerstner said Friday. Baby Ruth and Butterfinger are both among the top-selling 15 chocolate bars in the U.S., but RJR's overall share of the roughly $5.1 billion market is less than 5%.Nestle's share of 7% before Friday's purchases is far below the shares of market leaders Hershey Foods Corp. and Mars Inc., which have about 40% and 36% of the market, respectively. "This means Nestle is now in the candybar business in a big way," said Lisbeth Echeandia, publisher of Orlando, Fla.-based Confectioner Magazine. "For them, it makes all kinds of sense.They've been given a mandate from Switzerland" to expand their U.S. chocolate operations.Nestle S.A. is based in Vevey, Switzerland. The new candy bars, "make an important contribution to our Nestle Foods commitment to this very important strategic unit," said C. Alan MacDonald, president of Nestle Foods in Purchase, N.Y.
Out of the mouths of revolutionaries are coming words of moderation. Here, at a soccer stadium near the black township of Soweto yesterday, were eight leaders of the African National Congress, seven of whom had spent most of their adult lives in prison for sabotage and conspiracy to overthrow the government.Here were more than 70,000 ANC supporters, gathering for the first ANC rally inside South Africa since the black liberation movement was banned in 1960.Here was the state security appartus poised to pounce on any words or acts of provocation, let alone revolution. But the words that boomed over the loudspeakers bore messages of peace, unity, negotiation and discipline. "We stand for peace today and we will stand for peace tomorrow," said Walter Sisulu, the ANC's former secretary general who, along with five of his colleagues, served 26 years in prison before being released two weeks ago.Some members of the huge crowd shouted "Viva peace, viva." These are curious times in South African politics.The government and the ANC, the bitterest of enemies, are engaged in an elaborate mating dance designed to entice each other to the negotiating table.Pretoria releases the ANC leaders, most of whom were serving life sentences, and allows them to speak freely, hoping that the ANC will abandon its use of violence.The ANC leaders speak in tones of moderation, emphasizing discipline, hoping the government will be encouraged to take further steps, such as freeing Nelson Mandela, the most prominent ANC figure, and unbanning the organization. The government of President F.W. de Klerk is using this situation to improve its international image and head off further economic sanctions.Meanwhile, the many organizations inside the country that back the ANC are taking the opportunity to regain their strength and mobilize their supporters even though the state of emergency, which has severely curtailed black opposition, remains in force. The result is that the unthinkable and illogical are happening.Six months ago, government approval for an ANC rally was inconceivable.Equally inconceivable is that the ANC, given the chance to hold a rally, would extend a hand, albeit warily, to the government.In a message read out at the rally, exiled ANC President Oliver Tambo, who can't legally be quoted in South Africa, said the country was at a crossroads and that Mr. de Klerk "may yet earn a place among the peacemakers of our country" if he chooses a "path of genuine political settlement." Still, this doesn't mean that either the government or the ANC is changing stripes -- or that either has moved significantly closer to the other. The government may ease repression in some areas, but it still keeps a tight grip in others.For instance, it releases Mr. Sisulu without conditions, yet his son, Zwelakhe, a newspaper editor, is restricted to his home much of the day and isn't allowed to work as a journalist. The ANC vows to keep up pressure on the government.Speakers yesterday called on foreign governments to increase sanctions against Pretoria and urged supporters inside the country to continue defying emergency restrictions and racial segregation, known as apartheid. "We cannot wait on the government to make changes at its own pace," Mr. Sisulu said. Because the ANC remains banned, both the government, which approved the rally, and the organizers, who orchestrated it, denied it was an ANC rally.They both called it a "welcome home" gathering.Nevertheless, an ANC rally by any other name is still an ANC rally. The recently released leaders sat high atop a podium in one section of the stadium stands.Behind them was a huge ANC flag and an even bigger sign that said "ANC Lives, ANC Leads." Next to them was the red flag of the outlawed South African Communist Party, which has long been an ANC ally.In the stands, people waved ANC flags, wore ANC T-shirts, sang ANC songs and chanted ANC slogans. "Today," said Mr. Sisulu, "the ANC has captured the center stage of political life in South Africa." As a police helicopter circled overhead, Mr. Sisulu repeated the ANC's demands on the government to create a climate for negotiations: Release all political prisoners unconditionally; lift all bans and restrictions on individuals and organizations; remove all troops from the black townships; end the state of emergency, and cease all political trials and political executions.If these conditions are met, he said, the ANC would be prepared to discuss suspending its guerrilla activities. "There can be no question of us unilaterally abandoning the armed struggle," he said. "To date, we see no clear indication that the government is serious about negotiations.All their utterances are vague." Echoing a phrase from Mr. de Klerk, Mr. Sisulu said, "Let all of us who love this country engage in the task of building a new South Africa."
Among the things I learned covering the World Series these past few weeks is that the Richter scale, which measures earthquakes, isn't like the one in your bathroom.A quake that measures two on the Richter isn't twice as severe as a "one" -- it's 10 times worse.A "three" is 10 times 10 again, and so on.That put the "seven" of Oct. 17 in perspective for me.Think I'll buy one of those "I Survived" T-shirts after all. By Richterian standards, the show that the Oakland Athletics put on Friday and Saturday nights, in putting a mercifully swift end to the game's Longest Short Series, rated somewhere between a 10 and an 11.The boys with the white elephants on their sleeves might not have made the earth move much, but they certainly did some impressive things with baseballs. The Pale Pachyderms propelled six of 'em out of the unfriendly confines of Candlestick Park during the two games en route to 13-7 and 9-6 wins over the San Francisco Giants.Combined with their two pre-quake victories, way back on Oct. 14 and 15 (the scores were 5-0 and 5-1, remember?), that gave them a sweep of the best-of-seven series. The joke here is that the Giants lost by de fault.That's geologically correct, but a trifle unfair otherwise.They showed up, but didn't -- or couldn't -- challenge. They led for nary an inning in the four games, and managed to stir their fans only once.That came in the seventh inning of Game Four when, trailing 8-2, they scored four times and brought their big heat -- Will Clark and Kevin Mitchell -- to the plate with one out and a runner on.But Clark flied out to short right field and Mitchell's drive to left was caught on the warning track by Rickey Henderson as 62,000 sets of lungs exhaled as one. "I went out to Todd {Burns, the A's reliever} and told him that we weren't gonna let this guy beat us," said Oakland catcher Terry Steinbach of the decisive confrontation with Mitchell, the National League's reigning home-run king. "I told him to make Mitchell reach for everything, and that's what we did.The ball he hit wasn't a strike.If it had been, he mighta hit it out." But if the A's hadn't won in four, they would have prevailed in five, or six, or seven.The best team won this Series, which is more unusual than it may sound.Baseball ain't football, where the good teams beat up on the bad ones.The best baseball teams win six of 10 games and the worst win four of 10.Without becoming overly contentious, allow me to suggest that several recent champions of the world according to us (as in U.S.) might not have ranked No. 1 in many polls.That list includes last season's champs, the Los Angeles Dodgers, who rode a miracle home run by Kirk Gibson and two faultless pitching performances by Orel Hershiser to a five-game triumph over a bewitched, bothered Oakland crew. These A's, however, got few grades as low as B on their 1989 report card.They led the Major Leagues in regular-season wins with 99 and flattened the Toronto Blue Jays four games to one for the American League pennant before stomping their cross-bay rivals.The pithiest testimony to their domination of the just-concluded tournament came from Giants' manager Roger Craig after his team had fallen in Game Three to a five-home-run barrage that tied a 61-year-old Series record.Asked what he would do differently on the morrow, Craig allowed that he might play his outfielders deeper, "maybe on the other side of the fence." The A's offensive showing in the Series got an A, as in awesome.Their 85 total bases broke a record for a four-game set, and their nine home runs tied one.Eight Oakland players hit homers, with centerfielder Dave Henderson getting two, both on Friday.Rickey Henderson, the do-everything leadoff man, had nine hits and set or tied four-game Series marks for triples (2) and stolen bases (3). The sole A not to homer was cleanup hitter Mark McGwire, their regular-season leader with 33, and he contributed five hits plus a diving fielding play on a ground ball in Game Three that stopped a Giant rally while the issue still was in doubt. "Think I'll redo my image -- get this changed to a glove," quipped the big first baseman Saturday night, fingering the gold bat he wears on a neck chain. Even with that power show, though, the Oakland Series' star, certified by the Most Valuable Player award, was a pitcher, Dave Stewart.He shut out the Giants on five hits in Game One, and allowed three runs on five hits in seven innings Friday after the 12-day break caused by the earthquake. Stewart's honor was a nice note on a couple of grounds.One was that, despite his 62 regular-season wins over the past three seasons in the Land Beyond the Late News, he has been overshadowed by his more-muscular mates and missed out on prizes that might have been his due.The other is that he's an Oakland native, and lifted residents' spirits by his visits to quake-hit areas last week. Afterward, as the A's toasted their victory with beer (they dispensed with traditional champagne showers in deference to the quake victims), Stewart said he thought his championship-team ring would outshine his individual trophy. "Give me four or five more Series with these guys, and I don't care if I ever win a Cy Young," he said, in reference to baseball's best-pitcher award. Indeed, the possibility of an A's ring cycle, a/k/a a dynasty, was a major topic of post-game discussion Saturday, so much so that Sandy Alderson, the team's general manager, felt obliged to dampen it. "People change, teams change," he cautioned. "It's easier to get worse than better in this game." He might have added an interesting historical fact: The last Series sweep, by the Cincinnati Reds, came in 1976, which also was the first year of baseball player free agency.It was widely predicted that free agency would allow the glamorous, "big market" teams to monopolize the best talent, but quite the opposite has occurred: Twelve different clubs have won titles in the 14 seasons since its advent.The number includes such unstylish burgs as, well, Oakland.
When Westinghouse Electric Corp. shuttered its massive steam turbine plant in Lester, Pa., three years ago, it seemed like the company had pulled the plug on its century-old power generation business. But now Westinghouse is enjoying a resurgence in demand for both steam and combustion turbines and may even join the growing legion of independent electric producers.And with its new venture with Japan's Mitsubishi Heavy Industries Ltd., announced last week, it is poised to penetrate growing markets overseas. For the first time since the mid-1970s, Westinghouse this year has seen a significant increase in orders for power plants.Most are from independent producers instead of regulated utilities, and Westinghouse believes it will ride a wave of demand stretching over the next six years. Analysts agree, predicting that the revived market could significantly boost Westinghouse's bottom line in coming years. "Westinghouse's earnings could be materially enhanced in the mid-1990s or sooner," says Russell L. Leavitt, of Salomon Brothers Inc.The company expects a need for 140,000 megawatts of new generation in the U.S. over the next decade.Already this year, it has received orders for four 150-megawatt advanced combustion turbines from Florida Power & Light Co. and for two 300-megawatt plants from Intercontinental Energy Corp., among others. Westinghouse's own role as a supplier also is changing.In the past, the company usually took token equity positions in power plants it supplied as a "kicker" to close deals. But last June's annnouncement that Westinghouse would put up all of the $70 million to build a new 55-megawatt plant could herald a new age.Westinghouse's plant will provide electrical power to the Southern California Edison Co. and backup power and steam to the U.S. Borax & Chemical Co. "We haven't decided on a strategy yet, but we could become an independent producer depending on whether we're the developer or just the supplier," says Theodore Stern, executive vice president of the company's energy and utility systems group. At the same time, Westinghouse hopes its venture with Mitsubishi will help fend off growing competition, particularly in the U.S., from such European competitors as Asea Brown Boveri AG, Siemens AG, and British General Electric Co.Under the agreement, Westinghouse will be able to purchase smaller combustion turbines from its Japanese partner, and package and sell them with its own generators and other equipment. Westinghouse also jointly will bid on projects with Misubishi, giving it an edge in developing Asian markets.In addition, the two companies will develop new steam turbine technology, such as the plants ordered by Florida Power, and even utilize each other's plants at times to take advantage of currency fluctuations. "Even though we'll still compete against Mitsubishi, we can also work jointly on some projects, and we'll gain a lot of sourcing flexibility," Mr. Stern contends. The Westinghouse-Mitsubishi venture was designed as a non-equity transaction, circumventing any possible antitrust concerns.Westinghouse carefully crafted the agreement because the Justice Department earlier this year successfully challenged a proposed steam turbine joint venture with Asea Brown Boveri. It is expected that the current surge in demand for new power will be filled primarily by independent producers which, unlike utilities, aren't regulated and therefore don't need government approval to construct new plants.Westinghouse expects about half of its new orders for turbines to come from independent producers for at least the next six years. Despite shutdowns of the company's Lester and East Pittsburgh plants, the company believes it has sufficient capacity to meet near-term demand with its much smaller and more efficient manufacturing facilities in North Carolina. Still, Westinghouse acknowledges that demand from independent producers could evaporate if prices for fuel such as natural gas or oil rise sharply or if utilities, which have been pressured by regulators to keep down rates, are suddenly freed to add significant generating capacity. Even if that scenario occurs, Westinghouse figures it is prepared.The company already is gearing up for a renaissance of nuclear power even though it hasn't received an order for a domestic nuclear plant in a decade.John C. Marous, chairman and chief executive officer, says he expects a commercial order by 1995 for the company's AP600 nuclear power plant, which is under development. "Once we see an order, we expect it'll be on line by 2000."
The rationale for responding to your customers' needs faster than the competition can is clear: Your company will benefit in terms of market share, customer satisfaction and profitability.In fact, managers today are probably more aware of speed as a competitive variable than ever before.However, for many, managing speed does not come naturally. "Most of us grew up believing in the axioms `Haste makes waste' and `Don't cut corners, ' ideas that seem to run counter to the concept of managing speed," says Dean Cassell, vice president for product integrity at Grumman Corp. "But in the real world, you learn that speed and quality are not a trade-off.Speed is a component of quality -- one of the things we must deliver to satisfy customers." Companies that actually market speed as part of their service train their managers to lead and participate in teams that increase speed and improve quality in everyday operations.Managers learn to spot opportunities to increase customer satisfaction through speed, and shift some responsibility for analyzing, improving and streamlining work processes from themselves to teams of employees. One team at the Federal Express Ground Operations station in Natick, Mass., focused on a particularly time-sensitive operation: the morning package sort.Every morning, tractor-trailer trucks arrive at the Natick Ground Station from Boston's Logan Airport, carrying the day's package load.In peak periods that load may include 4,000 pieces.The packages must be sorted quickly and distributed to smaller vans for delivery, so couriers can be on the road by 8:35.No customer is present at the morning package sort, but the process is nevertheless critical to customer satisfaction. "We're committed to deliver the customer's package by a stated time, usually 10:30," notes Glenn Mortimer, a Federal Express courier who led the Natick team. "The sooner our vans hit the road each morning, the easier it is for us to fulfill that obligation." Following a problem-solving formula used by teams throughout Federal Express, members of the Natick team monitored their morning routine, carefully noting where and when the work group's resources were used effectively and where they were idle, waiting for others upstream in the process to send packages their way. "We suspected there was downtime built into our process.But we didn't know just where it was until we completed our data gathering," Mr. Mortimer says. "We used the data to redesign our sorting system and put our resources where they could do the most good." The team even created a points system to identify those couriers and subgroups that were doing the most to reduce package-sort cycle time.Winners of the friendly competition earn a steak dinner out with their spouses. "Monitoring shows that the Natick team's new system really does reduce cycle time for the morning package sort," reports James Barksdale, chief operating officer at Federal Express. "The vans leave at least 15 minutes earlier, on average, than they used to.And service levels have increased to the point where they're consistently above 99%." A cross-functional team at Union Carbide's Tonawanda, N.Y., facility, which produces air-separation plants, followed a similar path to reduce manufacturing cycle time. "The team included craftsmen from the shop floor as well as engineering, scheduling and purchasing personnel," reports Alan Westendorf, director of quality. "First, they produced a flowchart detailing the process by which an air-separation plant actually gets built.Then they identified snags in the process." The Tonawanda team determined that holdups for inspections were the main problem and identified which kinds of delays involved critical inspections and which were less critical or could be handled by workers already on the line.The team then proposed modifications in their work process to management. "The streamlined manufacturing process benefits our customers in at least two ways," Mr. Westendorf concludes. "First, we have better quality assurance than ever, because the people building the product have taken on more responsibility for the quality of their own work.Second, we trimmed more than a month off the time required to deliver a finished product." At Grumman's Aircraft Systems Division, a cross-functional team reduced the cycle time required to produce a new business proposal for an important government contract.The team was composed of representatives from engineering, manufacturing, corporate estimating, flight test, material, quality control, and other departments. "We needed contributions from all these departments to generate the proposal," says Carl Anton, configuration-data manager for Grumman's A-6 combat aircraft program. "But instead of gathering their input piecemeal, we formed the team, which reached consensus on the proposal objectives and produced a statement of work to guide all the functions that were involved." Armed with this shared understanding and requisite background information, each department developed its specialized contribution to the proposal, submitting data and cost estimates on a closely managed schedule. "We cleared up questions and inconsistencies very quickly, because the people who had the skills and perspective required to resolve them were part of the task team," Mr. Anton explains. The team trimmed more than two months from the cycle time previously required to develop comparable proposals. "The team eliminated the crisis mentality that proposal deadlines can generate.The result was a more thoughtful, complete and competitive proposal," Mr. Anton concludes. The successes achieved at Federal Express, Union Carbide and Grumman suggest that managing speed may be an underutilized source of competitive advantage.Managers in all three companies recognize speed as a component of quality and a key to customer satisfaction.They effectively lead team efforts to reduce cycle time.And they prepare all their people to increase the speed and improve the quality of their own work. Mr. Labovitz is president of ODI, a consulting firm in Burlington, Mass.
Home taping of pre-recorded music cuts into record industry revenues, but banning home taping would hurt consumers even more. That's the conclusion of an independent report prepared by the Office of Technology Assessment at the request of the House and Senate judiciary committees.The report is to be released today. The report says the availability of such advanced analog recording equipment as cassette recorders doesn't seem to increase the quantity of home copying.That finding, the report says, casts doubt on the record industry's contention that the new generation of digital recording equipment will inevitably lead to wholesale abuse of copyrighted material by home tapers. The longstanding position of the Recording Industry Association of America, a trade group based in Washington, D.C., is that record companies, performers, songwriters and music publishers need to be remunerated by government-imposed fees on the sale of blank tapes and recording equipment to make up for royalties lost to home taping. "I think it is a nail in the coffin in any royalty tax proposal," says Gary Shapiro, vice president for government and legal affairs of the Electronic Industries Association in Washington. "What {the report} shows is everything we've been saying for the past eight or nine years -- that audio taping is the best thing to happen for the recording industry.The people who tape the most buy the most." Trish Heimers, a spokesperson for RIAA says her organization hasn't received a copy of the completed report yet and has no immediate comment. A recent agreement between the recording industry and electronics manufacturers requires that any digital audio tape, or DAT, recorder sold in the U.S. have a built-in device that restricts its ability to make second copies from DAT tape copies of digital compact disks.But the disappointing sales of DAT machines here and abroad so far have not seemed to warrant the three years of legal wrangling that went into the agreement. Under current copyright laws, it is considered "fair use" to reproduce copyrighted material for one's personal use or for use by one's family or friends, while copying for purposes of resale or profit is prohibited.A survey contained in the 291-page report, "Copyright and Home Copying: Technology Challenges the Law," found that most people consider home copying for such personal use a "right" -- a right, moreover, that was exercised by 40% of Americans over the age of 10 in the past year. The study says that the "ambiguous legal status" of home copying makes it "appropriate to examine the effects on consumers, as well as on industry." Reports by the Office of Technology Assessment don't prescribe any specific legislative action but suggest a range of options that Congress may pursue. The study also says that advent of new communications technologies makes "an explicit congressional definition of the legal status of home copying more desirable in order to reduce legal and market uncertainties and to prevent de facto changes to copyright law through technology," and says that finding an "appropriate balance of harms and benefits is a political decision, not a technical one."
Small businesses say a recent trend is like a dream come true: more-affordable rates for employee-health insurance, initially at least.But then they wake up to a nightmare. The reasonable first-year rates can be followed by increases of 60% or more if a covered employee files a major claim, they complain.Insurance premiums for one small Maryland concern went up 130% in less than two years, the last increase coming after one of its three workers developed a herniated disk. "There's a distinct possibility that I may lose my job over this," the employee, Karen Allen, of Floor Covering Resources, Kensington, Md., recently told a congressional hearing.She said her employer can't afford the rate increases, and she fears she won't find another job with a benefit plan covering her ailment. For employee and employer alike, the worry is widespread.Surveys repeatedly show that small-business owners rank the availability and rising cost of health insurance as one of their biggest concerns. The House Energy and Commerce Committee's health subcommittee, headed by Democratic Rep. Henry Waxman of California, is looking into complaints that small businesses not only can't keep reasonably priced employee-health insurance if claims are filed, but often can't get coverage at all if a worker is termed medically uninsurable. "I have an old-fashioned name for people in that position: sick people who need health insurance," Rep. Waxman says. "What we're seeing now makes a mockery of the idea of insurance: collect premiums from the healthy, dump the sick and let them pay their own bills." Some lawmakers may seek legislation to limit overly restrictive insurance policies. The concern grows out of increased efforts by the insurers to woo the small-business market.As larger companies increasingly self-insure, or use reserves to pay their own workers' medical bills, the insurance industry has turned to the small-employer market that was once a backwater for them. "Insurance companies will offer a good rate if no one is sick, but it's a roll of the dice," says Rosemary Heinhold of the Small Business Service Bureau, a group representing 35,000 small businesses nationwide. "One case of cancer or a high-risk pregnancy with a sick infant, and rates go up 40% to 60%.Small-business people end up paying insurance premiums worth two to three times the cost of one illness." In addition, the group says some of its member companies have been denied insurance because individual workers had medical problems that ranged from a mild cardiac condition to psychological counseling after a divorce, hemorrhoids and overweight. The Health Insurance Association of America, an insurers' trade group, acknowledges that stiff competition among its members to insure businesses likely to be good risks during the first year of coverage has aggravated the problem in the small-business market.But it says that rapid rate increases are directly tied to the soaring cost of health care. Some business analysts blame the problem on tough competition in the insurance market.They say insurance companies use policies aimed at excluding bad risks because their competitors do.But the general practice makes it more difficult to combine small groups of people into larger groups, thus spreading the risk over a larger base of premiums. "I'm not accusing insurers of dereliction of duty," Robert Patricelli of the U.S. Chamber of Commerce told Mr. Waxman's panel. "You can't ask one carrier to underwrite on social grounds when that might destroy it in the marketplace." Rep. Waxman and Democratic Sen. Edward Kennedy of Massachusetts have proposed regulation to deal with the problem.The proposal is just part of legislation that would require businesses to provide health benefits, an idea that is strongly opposed by small business who say it would just compound the insurance-cost problems. But small-business lobbyists say they support the idea, included in the Kennedy-Waxman bill, of new laws or regulations requiring greater use of community rating, which pegs rates to the use of health care by a community or other large group, and is designed to prevent insurance companies from taking only low-risk small companies as clients. But first on the list of priorities, says the National Federation of Independent Business, is to prohibit state laws requiring the inclusion of specialty items, such as psychiatric care, in basic health plans.Such requirements, they argue, make it difficult to provide a basic, low-cost health-benefits package. "Before the state of Wisconsin mandated that mental-health care be covered, there were only 70 mental-health clinics in the state; now there are 400," says Carolyn Miller, an NFIB lobbyist.She contends that similar mandates have driven up insurance costs 20% in Maryland and 30% in California. The insurance-industry association also strongly disagrees with the proposed community rating, which "doesn't save one dollar," argues James Dorsch, HIAA's Washington counsel. "It just makes healthy businesses subsidize unhealthy ones and gives each employer less incentive to keep his workers healthy." Mr. Dorsch says the HIAA is working on a proposal to establish a privately funded reinsurance mechanism to help cover small groups that can't get insurance without excluding certain employees. The complexities of the insurance problem make the outcome difficult to predict.But to Ms. Allen, the employee whose back problem triggered a huge insurance-rate increase, the issue was simple. "What good is having health insurance," she asked, "when it's so expensive that it becomes impossible to keep after only one major claim?"
In the second step of a reorganization that began earlier this year, Boeing Co. said it will create a Defense and Space Group to consolidate several divisions. Meanwhile, Boeing officials and representatives of the Machinists union met separately last night with a federal mediator in an attempt to break the month-old strike that has shut the aerospace giant's assembly lines at a time when it has an $80 billion backlog of jetliner orders.The two sides were scheduled to meet with the mediator this morning. Machinists already have rejected a package that would provide a 10% pay raise plus bonuses over the three-year life of the contract.Boeing has said repeatedly it won't expand its offer and the machinists have responded that the offer isn't good enough. However, the resolve of some of the striking 57,000 machinists might be weakening.About 1,000 strikers signed petitions last week calling for Boeing and Machinists representatives to schedule new meetings.The two sides hadn't met since Oct. 18. While Boeing's commercial business is booming, its military business is feeling the effects of a declining defense budget after a strong buildup during the Reagan presidency.In May, the company consolidated its Aerospace and Electronics groups; the new Defense and Space Group will contain the Aerospace and Electronics division and Advanced Systems, both based in the Seattle area; Boeing Helicopters in Philadelphia; Boeing Military Airplanes in Wichita, Kan., and ArgoSystems in Sunnyvale, Calif. B. Dan Pinick, president of Boeing Aerospace and Electronics, will become president of the new group, which will become operational Jan. 2. In addition, Boeing said it also will reorganize all its work in Wichita into military and commercial divisions.All of the changes will reduce its overhead and streamline operations, Boeing said. Analysts agreed. "It's a further step to better returns in the hemorrhaging defense business," said Steven Binder, an analyst with Bear, Stearns & Co. in New York. "They had to do it." Howard Rubel, an analyst with C.J. Lawrence, Morgan Grenfell Inc. in New York, said the shift reflects Boeing confidence in Mr. Pinick, described by Mr. Rubel as an expert on doing business with the military. "His side of the business has been successful in a tough environment," Mr. Rubel said.
Unisys Corp. 's announcement Friday of a $648.2 million loss for the third quarter showed that the company is moving even faster than expected to take write-offs on its various problems and prepare for a turnaround next year. At the same time, the sheer size of the loss, coupled with a slowing of orders, made some securities analysts wonder just how strong that turnaround will be at the computer maker and defense-electronics concern. "Unisys is getting clobbered.Just clobbered," said Ulric Weil, an analyst at Weil & Associates who had once been high on the company. "The quarter was terrible, and the future looks anything but encouraging." Unisys, whose revenue inched up 3.7% in the quarter to $2.35 billion from $2.27 billion in the year-earlier quarter, had an operating loss of about $30 million.On top of that, the Blue Bell, Pa., concern took a $230 million charge related to the layoffs of 8,000 employees.That is at the high end of the range of 7,000 to 8,000 employees that Unisys said a month ago would be laid off.Unisys said that should help it save $500 million a year in costs, again at the high end of the previously reported range of $400 million to $500 million. The company also took a write-off of $150 million to cover losses on some fixed-price defense contracts, as some new managers took a hard look at the prospects for that slow-growing business.In addition, Unisys set up an unspecified reserve -- apparently $60 million to $70 million -- to cover the minimum amount it will have to pay the government because of its involvement in the defense-procurement scandal.Unisys also noted that it paid $78.8 million in taxes during the quarter, even though tax payments normally would be minimal in a quarter that produced such a big loss. The tax payments will leave Unisys with $225 million in loss carry-forwards that will cut tax payments in future quarters.In addition, Unisys said it reduced computer inventories a further $100 million during the quarter, leaving it within $100 million of its goal of a reduction of $500 million by the end of the year. Still, Unisys said its European business was weak during the quarter, a worrisome sign given that the company has relied on solid results overseas to overcome weakness in the U.S. over the past several quarters. The company also reported slower growth in another important business: systems that use the Unix operating system.That would be a huge problem if it were to continue, because Unisys is betting its business on the assumption that customers want to move away from using operating systems that run on only one manufacturer's equipment and toward systems -- mainly Unix -- that work on almost anyone's machines. In addition, Unisys must deal with its increasingly oppressive debt load.Debt has risen to around $4 billion, or about 50% of total capitalization.That means Unisys must pay about $100 million in interest every quarter, on top of $27 million in dividends on preferred stock. Jim Unruh, Unisys's president, said he is approaching next year with caution.He said the strength of the world-wide economy is suspect, and doesn't see much revenue growth in the cards. He also said that the price wars flaring up in parts of the computer industry will continue through next year.He said the move toward standard operating systems means customers aren't locked into buying from their traditional computer supplier and can force prices down.That, he said, is why Unisys is overhauling its whole business: It needs to prepare for a world in which profit margins will be lower than computer companies have been used to. "We've approached this not as a response to a temporary condition in the industry but as a fundamental change the industry is going through," Mr. Unruh said. "The information-systems industry is still going to be a high-growth business, and we're confident that we have tremendous assets as a company.But we don't minimize the challenges of the near term." Securities analysts were even more cautious, having been burned repeatedly on Unisys this year.Some had predicted earnings of more than $4 a share for this year, up from last year's fully diluted $3.27 a share on earnings of $680.6 million.But the company said Friday that it had losses of $673.3 million through the first nine months, compared with earnings a year earlier of $382.2 million, or $2.22 a share fully diluted, as revenue inched up 1.4% to $7.13 billion from $7.03 billion.And Unisys is expected to do little better than break even in the fourth quarter. So Steve Milunovich at First Boston said he is cutting his earnings estimate for next year to $2 a share from $3. "I was feeling like I was too high to begin with," he said. Mr. Weil of Weil & Associates said he will remain at $1 a share for next year but said he wonders whether even that low target is at risk. "The break-even point for next year is much lower, but is it low enough?" he asked. Reflecting the concern, Unisys stock fell a further 75 cents to $16.25 in composite trading Friday on the New York Stock Exchange.
If a TV weatherman gets butterflies facing the camera again after a questionable forecast, Donald H. Straszheim surely understands.The chief economist of Merrill Lynch & Co. finds himself in such a position as he buzzes the Midwest on his first road trip since backpedaling on a major prediction. Mr. Straszheim expects he will take some heat, and he's right.Since the last time he traveled this way several months ago, he has recanted a series of bold forecasts of a recession.In February 1988, for example, Merrill Lynch's weekly commentary announced that "the economy is likely to fall into recession in early 1989." The forecasts were widely disseminated, and, in a splashy ad campaign launched in the summer of 1988, Merrill Lynch urged investors to buy bonds.It said long-term interest rates, then above 9%, could drop to 7% by the end of 1989, so bonds, which benefit from falling rates, would be a good buy.The firm also raised the percentage of bonds in its model portfolio from 40% to 45% and later to 55%. But this September -- just when many market economists, including some at Merrill Lynch, believed that Mr. Straszheim was about to be proved right -- he took a detour if not a U-turn.He softened the talk about a recession.Now, in fact, he is predicting economic growth of 2.9% this year and 2.1% next year, a more optimistic outlook than the consensus of some four dozen top forecasters surveyed by Blue Chip Economic Indicators newsletter. And, just recently, Merrill Lynch cut the recommended bondholdings back to 50%.While such changes might sound minor, they aren't: Merrill Lynch manages or oversees some $300 billion in retail accounts that include everything from mutual funds to individual annuities. Two well-known colleagues who believe Mr. Straszheim was right the first time are David Bostian Jr. and A. Gary Shilling, both of whom run their own New York research firms.Mr. Bostian said in August that his macroeconomic index signaled recession.Mr. Shilling, who was Merrill Lynch's chief economist from 1967 to 1971, has heralded a recession for months. "My own personal opinion is that Don threw in the towel just about the time he should have doubled his bet," he says. Now a rocky stock market and weak corporate profits may further threaten the economy.And Mr. Straszheim conceded after a recent drop in manufacturing jobs that "it may prove to be the case that we got whipsawed -- that we pulled the recession forecast at just the wrong time." He adds, "That's the forecasting business." However risky the business, it's brisk these days.Pestered by bosses, brokers, clients and media people and pushed by their own egos, Wall Street economists are forecasting about everything from broad economic trends to the dinkiest monthly indicator.But the surprisingly durable seven-year economic expansion has made mincemeat of more than one forecast. This isn't the quiet economic science practiced in the universities.This is the commercial version. Carrying the new message on the road, Mr. Straszheim meets confrontation that often occurs in inverse proportion to the size of the client.No sophisticated professional expects economists to be right all the time.Some smaller clients don't seem to notice his switch.But with some clients, the talk can heat up a bit. Dennis O'Brien, the treasurer of Commonwealth Edison Co. in Chicago, adopts a polite approach, waiting for an opportunity to ask about the forecast.A good half-hour into breakfast at the Palmer House, Mr. O'Brien looks up from his plate after Mr. Straszheim says something about people who believe interest rates are about to nosedive. "I'm one of them who hope they will, with $6 billion in debt on the books.Is that the forecast?" Mr. O'Brien asks, trying to pin down the economist.He doesn't fully succeed, although Mr. Straszheim lists an array of interest-rate scenarios. In a chilly conference room at Alliance Capital Management in Minneapolis, in contrast, the firm's money managers seem ready to pin Mr. Straszheim to the wall.Alfred Harrison, the manager, shoves Mr. Straszheim's handout back at him: "Do we want to go through this?Or can we ask you why you changed your forecast just when it's about to be right?" Swiveling in his chair, Mr. Straszheim replies that the new outlook, though still weak, doesn't justify calling a recession right now. "It's all in this handout you don't want to look at.We could still have a recession" at some point.One of Mr. Straszheim's recurring themes is that the state of the economy isn't a simple black or white.Sometimes, like now, it's gray. This somewhat-ambiguous assessment moves one Alliance portfolio manager to ask: "So, what is this -- a Stealth recession?" Another challenges Merrill Lynch's bond recommendation last year. "We're not running that ad campaign any more," Mr. Straszheim snaps in a rare show of irritation.He adds, "I think it was a fairly decent call." Explaining his change of mind, Mr. Straszheim says later, "It's hard to pin this on one factor." He says the economy, and especially the employment numbers, look much better than he expected; interest rates have generally declined; inflation hasn't run amok. "Our business is constantly looking at all these things," he says.His new forecast calls for "a soft landing." And it may be right, judging from last week's report that inflation-adjusted gross national product rose at a 2.5% annual rate in the third quarter. Mr. Shilling understands Mr. Straszheim's problems. "There's unbelievable pressure on economists to forecast these numbers," he says. "You make a forecast, and then you become its prisoner." It is indeed hard to back away from a widely publicized forecast, and Mr. Straszheim is fidgeting with the handcuffs on this trip.His approach to the recantation is direct but low-key. "For some time, we had forecast negative third- and fourth-quarter growth.We pulled that forecast," he begins matter-of-factly in a meeting with Piper, Jaffray & Hopwood Inc. officials in Minneapolis, the first stop.
Crane Co. said it holds an 8.9% stake in Milton Roy Corp., an analytical-instruments maker, and may seek control of the company. Crane, a maker of engineered products for aerospace, construction, defense and other uses, made the disclosure in a Securities and Exchange Commission filing. In the filing, Crane said that in the past it considered seeking control of Milton Roy, of St. Petersburg, Fla., through a merger or tender offer and that it expects to continue to evaluate an acquisition from time to time.Crane officials didn't return phone calls seeking comment. Crane holds 504,200 Milton Roy shares, including 254,200 bought from Sept. 14 to Thursday for $15.50 to $16.75 each.In New York Stock Exchange composite trading Friday, Milton Roy shares leaped $2, to $18.375 each, while Crane sank $1.125, to $21.125 a share. John M. McNamara, chief financial officer of Milton Roy, said the company has no comment on Crane's filing. Milton Roy recently fended off unsolicited overtures from Thermo Electron Corp., a Waltham, Mass., maker of biomedical products.Milton Roy disclosed in May that it was approached for a possible acquisition by Thermo Electron, which agreed to purchase Milton Roy's liquid-chromatography line for $22 million in February.Thermo Electron acquired some 6% of Milton Roy's common stock before throwing in the towel and reducing its stake in early September. Gabelli Group began raising its Milton Roy stake in July, and holds 14.6%, according to a recent SEC filing.It hasn't made merger overtures to the board. Earlier this month, Milton Roy signed a letter of intent to acquire Automated Custom Systems Inc., Orange, Calif., and its sister operation, Environmental Testing Co., in Aurora, Colo.The companies are automotive-emissions-testing concerns. Under the terms, Milton Roy will pay an initial $4 million for the operations and additional payments during the next four years based on the earnings performance of the businesses. In the nine months, Milton Roy earned $6.6 million, or $1.18 a share, on sales of $94.3 million.
Last week the British displayed unusual political immaturity.The Chancellor of the Exchequer, Nigel Lawson, resigned because Prime Minister Thatcher would not fire her trusted adviser Sir Alan Walters.The opposition Labor Party leader, Neil Kinnock, in a display of the male chauvinism typical of the British lower class, denounced Mrs. Thatcher for having an independent mind and refusing to heed the men in her Cabinet.The British press, making a mountain out of a molehill, precipitated an unnecessary economic crisis by portraying Mrs. Thatcher as an autocrat who had thrown economic policy into confusion by driving a respected figure from her government. Behind the silly posturing lies a real dispute.Mr. Lawson and his European-minded colleagues want the British pound formally tied to the West German mark.Sir Alan considers this an ill-advised and costly policy.As there is an effort to "anchor the dollar" either to gold or other currencies, the dispute is worth examining. Until his resignation, Mr. Lawson had been conducting British monetary policy as if the pound were tied to the mark.When Mrs. Thatcher cut the top tax rate to 40%, Mr. Lawson flooded the country with money to prevent the pound from rising against the mark.As a result, he reignited the inflation that Mrs. Thatcher, through a long and costly effort, had subdued. With inflation surging, the pound began falling against the mark.To keep the exchange rate pegged, Mr. Lawson tightened monetary policy and pushed interest rates up to 15%.This doubled the mortgage interest rates of the many new homeowners that Mrs. Thatcher's policies had created, producing widespread disaffection and pushing Labor ahead in the polls. Instead of realizing his mistake in letting the exchange rate dominate both British economic policy and Mrs. Thatcher's political fortune, Mr. Lawson pushed for tying the pound formally to the mark by entering the European Monetary System, which subordinates all member currencies to German monetary policy.This put Mrs. Thatcher in a bind.The concept of European integration is one of those grand schemes that appeal to intellectuals, the media and the imagination, but are full of practical pitfalls. If the pound had been tied to the mark, the British would have been unable to cut their exorbitant tax rates.The reason is simple.When a country cuts tax rates, it makes itself more attractive to investors and drives up the value of its currency. It was fear of disturbing EMS exchange-rate relationships that caused the Chirac government in France to be timid about cutting tax rates.Edouard Balladur, the finance minister at the time, was sold on the tax-cut policy but was concerned that his government would be criticized as anti-European for disturbing the linked European currency relationship. The price of attracting capital -- whether one's own or that of foreigners -- is a trade deficit.To avoid this deficit Mr. Lawson inflated the pound in order to prevent its rise.This misguided policy could not prevent a British trade deficit.Consequently, Mr. Lawson saddled Mrs. Thatcher with a record trade deficit, renewed inflation and high interest rates -- three political failures in a row.Little wonder that Mrs. Thatcher's opponents were so anxious to keep Mr. Lawson in office. It is extraordinary that the British Treasury thought it could prevent a trade deficit by inflating the pound.The British balance-of-payments statistics show that after the top tax rate was cut to 40%, the flow abroad of British capital slowed, to 50 billion pounds ($79 billion at the current rate) in 1988 from 93 billion pounds in 1986.This change in the British capital account required an offsetting change in the trade account, a change that could not be prevented by pegging the currency. Nigel Lawson was a victim of the immense confusion in thought that has been characteristic of Western financial circles during the 1980s.The most important governments have ignored the role of low tax rates in attracting real capital investment, instead emphasizing financial flows in response to high interest rates.This has led them in a fruitless and destructive policy circle.First comes monetary expansion to drive down the currency's value that was pushed up by tax-rate reduction.Then, when the currency falls, interest rates are raised to attract financial flows in order to stabilize the exchange rate.This policy is totally mindless, and Sir Alan is correct to point out its deficiencies. Britain and all of Europe need to reconsider the prospects for European integration in light of the possible reunification and neutralization of Germany.A unified Germany that remained within the Western alliance would give Germany such an overshadowing position that all other members of a unified Europe would become vassals of the German state.Unless the Soviet Union collapses, German reunification is likely to require Germany's neutralization.The implications for Britain, France and the rest of Europe of having their currencies tied to the economic policy of a neutral country need considering before we judge Mr. Lawson's resignation to be unfortunate. In the least, we must recognize the futility of trying to use exchange-rate intervention to offset the effects of tax-rate reduction on capital flows. Mr. Roberts was assistant Treasury secretary under President Reagan.
Personal spending, which fueled the economy's growth in the third quarter, was clearly slowing by the end of the period, raising questions about the economy's strength as the year ends. Personal spending grew 0.2% in September to a $3.526 trillion annual rate, the Commerce Department said.It was the smallest monthly increase in a year. At the same time, personal income was held down by the effects of Hurricane Hugo, which tore through parts of North and South Carolina in late September.The department said personal income rose 0.3% in September to a $4.469 trillion rate but would have climbed 0.6% had it not been for the storm.Among the economic effects of the hurricane was a sharp drop in rental income. The figures came a day after the government released a report showing that consumer spending propelled U.S. economic expansion in the third quarter while -- on an inflation-adjusted basis -- business investment slowed, government spending declined, and exports were flat. But the new statistics show that by September, the burst in spending seemed to be tapering off.Many economists expect the weakness to continue. "I think the consumer has pretty well played himself out," said David Littman, senior economist at Manufacturers National Bank of Detroit. "I don't think there's a lot in the wings" in other sectors of the economy to keep growth above 1%, he said.In the third quarter, the economy grew at a moderate 2.5% annual rate. In August, personal income rose 0.3% and spending grew 0.9%. Analysts have attributed much of the summer's spurt in spending to bargain car prices at the end of the model year.Car sales slackened in September after the 1990 models were introduced.According to the Commerce Department report, spending on durable goods -- items expected to last at least three years, including cars -- declined by $6.2 billion. The nation's savings rate was unchanged in September at 4.9% of after-tax income, far below the 5.6% it reached in July. All the figures are adjusted for seasonal variations. Here is the Commerce Department's latest report on personal income.The figures are at seasonally adjusted annual rates in trillions of dollars.
Control Data Corp., which just months ago was hemorrhaging financially, thinks it will be healthy enough soon to consider repurchasing public debt. Moreover, the company, whose go-it-alone approach nearly proved fatal, now sees alliances with others as the way back to prosperity in what it calls "the data solutions" business. "I'm not saying everything is hunky-dory, but we have completed the transition," Robert M. Price, chairman and chief executive, said in an interview. "Transition" is a reference to the company's five-year restructuring effort.During that time, Control Data had losses of more than $1 billion. Now, following asset sales that shrank revenue by more than one-third this year alone, Control Data is flush with cash.So its senior executives are talking openly about possibly buying back some of the company's $172.5 million in subordinated convertible debentures next year. "We'd like to continue to reduce debt," President Lawrence Perlman said.Noting that the company is offering to buy back $154.2 million in senior notes paying 12 3/4%, he said the response will help determine future debt-reduction efforts.The offer was automatically triggered by the recent sale of Control Data's Imprimis disk-drive business to Seagate Technology Inc. Mr. Perlman, who is also acting chief financial officer and the odds-on favorite to become the next chief executive, said the company is achieving "modest positive cash flow from operations, and we expect that to continue into 1990." He said the company has no intention of tapping its short-term bank lines "for a good part of 1990." Sometime next year, Control Data will "develop a new bank relationship," Mr. Perlman said.In recent months a group of lenders, led by Bank of America, has extended Control Data up to $90 million in revolving loans through January, as well as $115 million in standby letters of credit. Loan covenants require that the company achieve specified levels of operating earnings and meet a rolling four-quarter profitability test.Last week Control Data reported third-quarter earnings of $9.8 million, or 23 cents a share, on revenue of $763 million.Through the first nine months, the company had a loss of $484 million, largely reflecting the closing of its supercomputer unit. While a few assets are still being shopped -- including the sports and entertainment ticketing portion of the company's Ticketron unit -- Mr. Price said future restructuring would be a question of strategy. "We don't need the cash." Ticketron's automated wagering business, which operates lotteries in a half dozen states, is not for sale, the company said.Rather, Mr. Perlman said, Control Data intends to bid for the coming Minnesota lottery contract and is seeking new applications for the technology overseas, where "there is great interest in games of skill." He wouldn't elaborate. Control Data's semiconductor business, VTC Inc., continues to lose money, the executives acknowledged, but they said they consider some of the technology vital to national defense and so are reluctant to dispose of it. The company's strategy for keeping its computer products business profitable -- it recently achieved profitability after several quarters of losses -- calls for a narrow focus and a lid on expenses.Partly, costs will be held down through strategic technology alliances, management said.Control Data recently announced an agreement with MIPS Computer Systems Inc. to jointly develop machines with simplified operating software. James E. Ousley, computer products group president, said such arrangements could help slash Control Data's computer research and development costs in half by the end of 1990.He disclosed that before Control Data scrapped its ETA Systems Inc. supercomputer business this past spring, those costs were running at nearly 35% of group revenue.At the same time four of six design projects were spiked, he said. Asked how the company hopes to expand its computer hardware business, Mr. Ousley said it sees good opportunities in systems integration. "We think we're getting only 10% of the integration dollars our customers are spending," he said. "We're in environments that are going to spend a lot of money on that." Control Data mainframes are designed for numerically intensive computing users, such as the scientific, engineering and academic communities.Utilities management is a major commercial niche. Reviewing the company's scrape with disaster, Mr. Price conceded it had tried to do too much on its own. "Absolutely," he said. But while its stock is selling at about half Control Data's estimated breakup value, neither Messrs.Perlman nor Price said he spends much time considering the possibility of a hostile takeover. "We've been listed as a candidate for so long it's not worth worrying about," said Mr. Price.
Well, the arrogant East Coast media have spoken again ("Going for the Green," editorial, Oct. 17).Having resided in the great state of California for the past seven years, I find it hard to ignore our environmental problems when I start my commute to work with eyes tearing and head aching from the polluted air; when I try to enjoy the beaches and come home covered with tar and oil; when I hear of numerous deaths related to irresponsible processing of cheese and use of chemicals in fruit growing. Perhaps it's entertaining for those like you to discount the concerns of environmentalists, suggesting that their save-the-earth initiatives are "whacky" and referring to so many citizens as "la-la activists." Strange that we don't hear similar criticisms of the East Coast activists who seek to clean up Boston Harbor or rid their beaches of medical waste. While there are no easy low-cost solutions, simply ignoring our problems will result in their severity increasing and spreading throughout the state, the nation and the world.If nothing else, such initiatives as these will provide an awareness to citizens and lawmakers and encourage appropriate corrective action. Before your next California-bashing editorial, please spend more time out here witnessing the situation -- it just may change your view. John Barry Ventura, Calif. I realize you were just looking for something snotty to say about California and its environmental movement, but picking Frank Lloyd Wright to say it for you was a bad call.Wright's organic architecture demonstrated a keen sensitivity to the environment decades before it became fashionable among "la-la activists." Indeed, Wright said all his life that the greatest lessons he learned were derived from the study of nature.Obviously, it's lost on you that about 75% of the American people these days (and in fact the president of the United States) consider themselves environmentalists. As for California being a state run by liberal environmental loonies, let's not forget where Ronald Reagan came from.Perhaps Mr. Reagan, who claimed that air pollution is caused by trees, is the man you should be quoting to back up your position that economics is more important than the Earth.But it was Frank Lloyd Wright who said, "Is this not Anti-Christ?The Moloch that knows no God but more?" Robert Borden Santa Monica, Calif. Your editorial was commendable and neatly matched by the readers' comments in letters to the editor, "Alar: Scaring on the Side of Caution." The illogic and inaccuracy of John H. Adams's comments for the National Resources Defense Council fully justifies your characterization of California's Greens in particular as "la-la activists." We may all hope that California's voters will heed the scientific realities that their own university's renowned Prof.Tom Jukes provides them and ignore the charlatanry profferred by their "wealthy Hollywood weepers." I have a different approach to offer, not only to Californians, but to all Americans.In a free country, the law should restrict citizens as little as is consistent with good manners and public safety.Would-be naysayers should have the burden of proving reasonable necessity when they urge a prohibition for enactment into law. W. Brown Morton Jr. Warsaw, Va. The 170 airlines in the International Air Transport Association last year posted group net profit of $2.5 billion on revenue of $125.1 billion. According to the association's annual report, scheduled to be released today in Warsaw, IATA members haven't posted such a strong performance since the late 1970s.Revenue last year increased by more than 11% over 1988, and net income nearly tripled from restated year-earlier net of $900 million. The group attributed the strong results to the favorable economic climate, rising demand for air travel and improved average yield (revenue received per ton of traffic transported a kilometer).Systemwide, IATA airlines carried 632 million passengers last year, 2% more than in 1987.But passenger-kilometers, the distance flown while carrying people, increased 5.3% in 1988. The association said that lack of airport and air space capacity is the biggest problem facing the airline industry. The KGB has abolished a unit known for persecuting dissidents, the government newspaper Izvestia said.The newspaper quoted KGB chairman Vladimir A. Kryuchkov as saying the definition of anti-Soviet crimes had narrowed, the laws had changed and people no longer have to fear a simple slip of the tongue.Mr. Kryuchkov was quoted as saying that in place of the infamous 5th Directorate a new unit would work "to foil the conspiracies of foreign intelligence services to create and use organized anti-government groups in our country." Czechoslovakia has restricted consumer-goods exports to neighbor countries because of "massive buying out of food" by tourists from Poland, Hungary and the Soviet Union, the Rude Pravo daily said.Rising inflation in Poland and Hungary makes Czechoslovak food, clothing and shoes relatively cheap for visitors from these countries.The paper gave no details of what the restrictions would entail but said the measures were necessary to protect the domestic market. West Germany's biggest union, IG Metall, said it is ready to back demands for more pay and shorter hours with strikes against the nation's automotive, steel and engineering industries.Its chairman told the union to prepare for the worst in next year's confrontation with employers over a new three-year wage deal.A major goal is to cut the working week to 35 hours from the present 37. Last week came news of alarm in Venice over a plan to tap gas fields off the city's coast.Now comes word from a scientist that over the next century Venice will sink nearly three times faster than the present rate because of the "greenhouse effect." "Global warming means higher tides which will lower Venice by another 23 inches in the next 100 years," Giovanni Cecconi of the the New Venice Consortium said.The consortium of scientists and companies was set up by Italy to help preserve the fabled city of canals.Venice has sunk 10 inches in this century. West Germany's Quelle said it will establish a mail-order operation with two local partners in the Soviet Union next year.Saying this is a first for a Western company, West Germany's largest mail-order group said the newly established Moscow-based Intermoda company is scheduled to begin operations in February 1990.Intermoda will initially only send the textile and clothing section of the Quelle catalog, translated into Russian, to Soviet customers who have access to convertible currency. The European Community Commission has imposed provisional anti-dumping duties on imports of South Korean small-screen color-television sets. Saying that a surge in low-priced imports had damaged EC producers' profits and led to job losses, the commission imposed a duty of 10.2% on TVs made by Daewoo, a duty of 12.3% on Goldstar Co., 13% on Samsung and 19.6% on TVs made by other South Korean producers. The commission said that EC television producers lost "important market shares" and suffered an "unsustainable" pressure on prices because of the Korean companies' marketing and pricing policies, which it said were "in clear violation" of international trade rules. In other news concerning South Korea's television industry, Samsung signed an agreement with Soyuz, the external-trade organization of the Soviet Union, to swap Korean television sets and videocassette recorders for pig iron from the Soviet Union.South Korea and the Soviet Union have no diplomatic relations but exchanged trade offices earlier this year. Sri Lanka, where more than 15,000 people have died in six years of ethnic turmoil, said it will ban sex and violence from state-owned television next year. "Many programs we have now come from the West and are not suitable to our culture," a government minister said.A star attraction on the national network is the U.S.'s "Dynasty." . . . A poll of South Koreans showed overwhelming opposition to efforts to curb dog-meat consumption just because it offends foreigners.
Despite politicians' hand-wringing about the federal budget, the government ended fiscal 1989 with a $152.08 billion deficit, about the same as the two previous years. Even White House budget director Richard Darman had trouble finding a silver lining in the report. "I suppose you could say the good news is that the deficits are not heading up," he said, "but you can't be satisfied with deficits at this level and we're not." The federal deficit was $155.15 billion in 1988 and $149.69 billion in 1987. The 1989 deficit would have been nearly $10 billion larger had the government been able to spend as much as Congress intended on cleaning up the thrift industry before the year ended on Sept. 30.Because the Resolution Trust Corp. couldn't spend the money fast enough, the savings-and-loan outlays were pushed into fiscal 1990. Nevertheless, the 1989 deficit still exceeded the $136 billion target set by the Gramm-Rudman deficit-reduction law by $16 billion, a reminder of that law's shortcomings. The law sets a deficit target of $100 billion for fiscal 1990.A partisan fight over cutting capital-gains taxes has slowed the progress of 1990 deficit-reduction legislation almost to a halt, triggering across-the-board spending cuts under the Gramm-Rudman law. The White House and the Democratic leadership in Congress blame each other for turning capital-gains taxes into such a divisive issue this year.Neither side showed any sign of retreating. Meeting with reporters Friday, Mr. Darman again said he would rather live with across-the-board spending cuts than accept a deficit-reduction bill like the one passed by the House, which would increase spending in future years. Underscoring the size of the deficits of the past few years, the Treasury report showed that for the first time interest paid on the public debt -- $240.86 billion -- exceeded spending on Social Security, the single largest government program. In all, federal outlays amounted to $1.143 trillion in 1989, up 7.5% from the previous year, the Treasury said.Federal revenues rose 9% to $990.79 billion. The Treasury said a surge in tax receipts noted earlier in the year didn't turn out to be quite as strong as it first appeared.The Treasury marked up its forecast by $17 million in July, but that proved to be about $5 billion too optimistic. The government ran a deficit of $6.16 billion in September, compared with a surplus of $10.17 billion in September 1988. Outlays for the month totaled $105.39 billion, up from $87.57 billion a year earlier.The increase reflects spending on the S&L rescue as well as payroll and Social Security checks normally issued in October that were issued in September this year because Oct. 1 fell on a Sunday. Revenues were $99.23 billion, up from $97.74 billion a year earlier.
If this battle were a movie, the producers would be fighting over two scripts with nothing but an opening scene in common. In the opener, Sony Corp. would agree to buy Columbia Pictures Entertainment Inc. in a transaction valued at close to $5 billion.Shortly after that, Sony would offer to buy Guber-Peters Entertainment Co. for $200 million and offer its co-chairmen, Peter Guber and Jon Peters, the chance to run Columbia.Mr. Peters would fly to New York with the intention of telling Warner Communications Inc. Chairman Steven J. Ross that Guber-Peters planned to end its five-year contract to produce movies exclusively for Warner. That's where the two scripts would diverge.In affidavits filed in Los Angeles Superior Court in connection with the $1 billion breach-of-contract suit Warner brought against Sony for hiring the two producers, Mr. Guber and Mr. Peters tell one story.Warner tells another. In the affidavits, Mr. Peters says he was "shocked" when Mr. Ross refused a meeting and made it clear he would stop them.Mr. Peters claims he reminded Mr. Ross that Robert Daly and Terry Semel, the top executives of the Warner Brothers studio, had "repeatedly agreed that we had every right to accept" an offer such as Sony's.In response, Mr. Peters says, Mr. Ross referred to his colleagues at Warner with an "obscenity" and said: "Tell them that they don't have a job.You can take them with you." Warner denies Mr. Ross ever said any such thing, and, in fact, denies virtually everything Mr. Guber and Mr. Peters say in their affidavits.Tomorrow, Warner will file another batch of documents contending that "the essence of everything these guys are saying is basically lies," says Warner's chief outside counsel, Stuart Rabinowitz.Thursday, a judge is scheduled to rule on Warner's motion seeking to block the Guber-Peters duo from going to Columbia. The battery of legal documents filed in the past week in connection with the suit provide a peek into the inner workings of this Hollywood dogfight.But they also make it clear that the first thing a judge will have to decide is which, if any, version of events in this morass is fiction, and which fact. The matter may never even be tried in court.Warner says that what it really wants is for the producers to fulfill their contractual obligations, but the bitterness of this battle and the accusations flying on both sides make it unlikely that the decade-long relationship between Warner and its two most prolific producers can ever be repaired.Warner, which is in the process of merging with Time Warner Inc., says it is willing to settle the matter out of court.So far, however, Sony hasn't been willing to meet its considerable financial demands. Mr. Guber and Mr. Peters don't have much to gain from a protracted battle.Sony, for its part, could decide that the cost of a Warner settlement or court fight is too high, choosing instead to find someone else to run Columbia, although that too would be costly given the financial arrangement already guaranteed to Mr. Guber and Mr. Peters.In that case, Mr. Guber and Mr. Peters might not suffer financially, but they would be left without their dream job of running a studio and with a considerably scarred relationship with Warner. At the center of any court fight will be the differing interpretations of the written contract between Warner and the two producers, but other murkier issues will play a big role.Sony and the Guber-Peters team are hanging much of their case on Warner's willingness last year to release the producers from another contract and on an oral agreement they say allowed them to terminate the current written contract if the opportunity to run a major studio came up.Warner denies such an agreement was made, and disputes the Guber-Peters version of virtually every telephone call and meeting the two sides had on the matter. Just how rancorous the relationship has become is clear from the differing versions of the two sides' current business dealings.Mr. Guber and Mr. Peters say in their affidavits that Warner already is taking steps to freeze them out of their projects at Warner, notably the Sylvester Stallone film "Tango and Cash." Mr. Peters says in his affidavit that the movie's staff was told last week that Warner was "taking over" the picture, and another producer would be giving all of the orders.Over his objections, Mr. Peters says, the film's release date was moved up "by many months" to December, and plans for a soundtrack "worth millions of dollars" were dropped. Hubert de la Bouillaire, an editor on the film, backs Mr. Peters in a separate sworn declaration.Mr. de la Bouillaire says Warner Brothers production president Mark Canton called him Oct. 19 and said Mr. Peters is "off the picture.If he calls you up, just tell him everything is fine." The editor also says the new producer on the film, Bruce Baird, told editors to screen the picture without telling stars Sylvester Stallone and Kurt Russell or Mr. Peters. "The less they know, the easier it is for us.If someone asks, just lie and tell them it will be done," Mr. de la Bouillaire says Mr. Baird told them. That, says Warner's Mr. Rabinowitz, is "a total 100% lie." The movie, he says, is in its post-production stages of "cleaning up the film." He says Mr. Peters and Mr. Guber, as the contractual producers with consultation rights, have been invited to screenings and to give their input on the film.Dozens of Guber-Peters staffers are still working on the Warner lot and consulting on various projects on a "daily basis," the attorney says. Mr. Guber, in his affidavit, says that when he advised Warner President Terry Semel of the Sony offer at lunch on Sept. 25, Mr. Semel "hugged and congratulated me, and expressed joy that we had finally realized our long-term ambition of running and having an equity position in a major entertainment company." Mr. Guber says he brought to lunch a release document Warner had agreed to in 1988, when he and Mr. Peters made an aborted bid to buy part of MGM/UA Entertainment Co. to run the MGM studio.Mr. Guber says he had crossed out "MGM" with a red pen and written in "Columbia," giving the document to Mr. Semel. "Mr.Semel said absolutely nothing to indicate Warner would have any objection to our assuming management positions at Columbia," Mr. Guber says. Mr. Semel, in his affidavit, doesn't mention any hugging or congratulating.He says he told Mr. Guber he couldn't sign any documents and that "the deal, although apparently a good one for him and Mr. Peters, would have a very negative impact on Warner." He said he would contact Mr. Ross and Warner Brothers Chairman Robert Daly and that, in a conference call, the three agreed they couldn't let the producers out of their contract. Mr. Ross, in his own affidavit, says he and Mr. Daly instructed Mr. Semel to tell the producers Warner wouldn't terminate their agreement. Mr. Guber says that Mr. Semel did convey that information and that Mr. Semel said Mr. Ross was "crazy because of the Time deal," meaning, Mr. Guber says, that Mr. Ross "did not want to communicate to his new merger partner, Time Inc., that Warner's agreements provided for our departure under these circumstances." Mr. Guber also says in his affidavit that Mr. Daly "told us that even if Sony did not want us, Warner's relationship with us already was irreparably damaged, that there was no way `to put the egg together, ' and that it would sue Sony for tons of money." Moreover, Mr. Guber claims, Mr. Semel told him that Mr. Ross probably wouldn't object "if it were anybody other than Sony.But Sony is a problem." The Guber-Peters side has said Warner is particularly concerned about the prospect of a huge Japanese company controlling important segments of the U.S. entertainment business. Some in Hollywood suggest Mr. Guber and Mr. Peters took encouragement from Warner studio executives such as Mr. Semel and Mr. Canton too literally.According to this theory, Warner executives, hoping to strengthen their relationships with the producers, encouraged Mr. Guber and Mr. Peters in their ambitions to build a major entertainment company.But the Warner executives in their affidavits deny ever telling the producers they could get out of their written contract. Mr. Rabinowitz, the Warner attorney, says the studio still wants the producers to come back and fulfill their contract. "They are like a mini-studio; they have 50 projects in development for Warner," he says. But Mr. Guber indicates in his affidavit that not all of the projects will be used.For example, he says that since 1985, he and Mr. Peters have developed over 85 movie projects, and Warner has "passed" or chosen not to produce at least 76. As for the projects remaining at Warner, Mr. Guber says, "Mr.Semel informed me that Warner's producers have already started a `feeding frenzy' for our projects."
Polly Peck International Inc. 's agreement to acquire 51% of Sansui Electric Co. proves that foreign companies can acquire Japanese companies -- if the alternative for the Japanese company is extinction. Polly Peck, a fast-growing British conglomerate, will pay 15.6 billion yen ($110 million) for 39 million new shares of Sansui, a well-known maker of high-fidelity audio equipment that failed to adjust to changing market conditions.Japanese government officials, eager to rebut foreign criticism of Japanese investments overseas, hailed the transaction as proof foreigners can make similar investments in Japan.Polly Peck's chairman, Asil Nadir, echoed the official Japanese view of the accord, which was announced Friday. "The myths that Japan is not open to concerns from outside has, I think, been demolished at a stroke," Mr. Nadir said. But analysts say Sansui is a special case.It expects to post a loss of 6.4 billion yen for the year ending tomorrow and its liabilities currently exceed its assets by about 13.8 billion yen. "If you find sound, healthy companies in Japan, they are not for sale," said George Watanabe, a management-consultant at Tokyo-based Asia Advisory Services Inc. Statistics on acquisitions by foreigners vary in detail, because unlike Sansui, which is listed on the Tokyo and Osaka stock exchanges, most of the Japanese companies acquired by foreigners are privately held.But by all accounts foreign companies have bought only a relative handful of Japanese companies this year, while Japanese companies have acquired hundreds of foreign companies. Nor do analysts expect the Sansui deal to touch off a fresh wave of foreign purchases.If the strong yen and the high stock prices of Japanese companies weren't deterrents enough, webs of cross-shareholdings between friendly Japanese companies and fiercely independent Japanese corporate attitudes repel most would-be acquirers. Usually when a Japanese company is ready to sell, it has few alternatives remaining, and the grim demeanors of Sansui's directors at a joint news conference here left little doubt that this was not the company's finest hour.Sansui was once one of Japan's premier makers of expensive, high-quality stereo gear for audiophiles. But in recent years, the market has moved toward less expensive "mini-component" sets, miniaturized amplifiers and receivers and software players that could be stacked on top of each other. Some of Sansui's fellow audio-specialty companies, such as Aiwa Co. and Pioneer Electric Corp., responded to the challenge by quickly bringing out mini-component products of their own, by moving heavily into the booming compact disk businesses or by diversifying into other consumer-electronics fields, including laser disks or portable cassette players.Sansui was late into the mini-component business and failed to branch into other new businesses. As the yen soared in recent years, Sansui's deepening financial problems became a vicious circle.While competitors moved production offshore in response to the sagging competitiveness of Japanese factories, Sansui lacked the money to build new plants in Southeast Asia. "Our company has not been able to cope very effectively with" changes in the marketplace, said Ryosuke Ito, Sansui's president. But even a Japanese company that looks like a dog may turn out to be a good investment for a foreign concern, some management consultants maintain. Yoshihisa Murasawa, a management consultant for Booz-Allen & Hamilton (Japan) Inc., said his firm will likely be recommending acquisitions of Japanese companies more often to foreign clients in the future. "Attitudes {toward being acquired} are still negative, but they're becoming more positive," Mr. Murasawa said. "In some industries, like pharmaceuticals, acquisitions make sense." Whether Polly Peck's acquisition makes sense remains to be seen, but at the news conference, Mr. Nadir brimmed with self-confidence that he can turn Sansui around.Sansui, he said, is a perfect fit for Polly Peck's electronics operations, which make televisions, videocassette recorders, microwaves and other products on an "original equipment maker" basis for sale under other companies' brand names. He said Polly Peck will greatly expand Sansui's product line, using Sansui's engineers to design the new products, and will move Sansui's production of most products other than sophisticated audio gear offshore into Polly Peck's own factories. "Whatever capital it (Sansui) needs so it can compete and become a totally global entity capable of competing with the best in the world, that capital will be injected," Mr. Nadir said. And while Polly Peck isn't jettisoning the existent top-management structure of Sansui, it is bringing in a former Toshiba Corp. executive as executive vice president and chief operating officer. Such risk taking is an everyday matter for the brash Mr. Nadir, who is 25% owner of Polly Peck as well as its chairman.He took Polly Peck, once a small fabric wholesaler, and used it at as a base to build a conglomerate that has been doubling its profits annually since 1980.In September, it announced plans to acquire the tropical-fruit business of RJR Nabisco Inc. 's Del Monte foods unit for #557 million ($878 million). Last month, Polly Peck posted a 38% jump in pretax profit for the first half to #54.8 million from #39.8 million on a 63% rise in sales. Joann S. Lublin in London contributed to this article.
The bolstered cellular agreement between BellSouth Corp. and LIN Broadcasting Corp. carries heightened risks and could fail to fend off McCaw Cellular Communications Inc., the rival suitor for LIN. Moreover, the amended pact shows how McCaw's persistence has pushed LIN and BellSouth into a corner, forcing huge debt on the proposed new company.The debt, estimated at $4.7 billion, could mortgage the cellular company's future earning power in order to placate some LIN holders in the short term. The plan still calls for LIN to combine its cellular telephone properties with BellSouth's and to spin off its broadcasting operations.But under new terms of the agreement, announced Friday, LIN holders would receive a special cash dividend of $42 a share, representing a payout of about $2.23 billion, shortly before the proposed merger.LIN said it expects to borrow the money to pay the dividend, but commitments from banks still haven't been obtained.Under previous terms, holders would have received a dividend of only $20 a share. In addition, New York-based LIN would exercise its right to buy out for $1.9 billion the 55% equity interest of its partner, Metromedia Co., in a New York cellular franchise.That money also would have to be borrowed.In effect, McCaw has forced LIN's hand by bidding $1.9 billion for the stake earlier this month. "We're taking on more debt than we would have liked to," acknowledged Michael Plouf, LIN's vice president and treasurer.Although he expressed confidence that the proposed new company's cash flow would be sufficient to cover interest payments on the debt, he estimated that the company wouldn't be profitable until 1994 or later. Analyst estimate the value of the BellSouth proposal at about $115 to $125 a share.They value McCaw's bid at $112 to $118 a share.The previous BellSouth pact was valued at about $98 to $110 a share. McCaw, the largest provider of cellular telephone service in the U.S., already owns about 9.4% of LIN's stock.In response to BellSouth's amended pact, the Kirkland, Wash., company extended its own offer to buy 22 million LIN shares for $125 apiece, which would give McCaw a 50.3% controlling interest.Over the weekend, McCaw continued to call for an auction of LIN. Analysts said they expect McCaw to escalate the bidding again. "This game isn't over yet," said Joel D. Gross, a vice president at Donaldson, Lufkin & Jenrette Securities Corp. "At some point, it will become non-economical for one company.But I don't think we're at that point yet." Under its revised proposal, Atlanta-based BellSouth would have a 50% interest in the new cellular company and would be responsible for half of its debt.To sweeten the pact further -- and to ease concerns of institutional investors -- BellSouth added a provision designed to give extra protection to holders if the regional Bell company ever decides to buy the rest of the new cellular company.The provision, described as "back-end" protection, would require BellSouth to pay a price equivalent to what an outside party might have to pay. McCaw's bid also has a similar clause.Only McCaw's proposal requires the company to begin an auction process in June 1994 for remaining shares at third-party prices. To mollify shareholders concerned about the long-term value of the company under the BellSouth-LIN agreement, BellSouth also agreed to pay as much as $10 a share, or $540 million, if, after five years, the trading value of the new cellular company isn't as high as the value that shareholders would have realized from the McCaw offer. "We're very pleased with the new deal.We didn't expect BellSouth to be so responsive," said Frederick A. Moran, president of Moran Asset Management Inc., which holds 500,000 LIN shares.BellSouth's "back-end protection was flawed previously.We think this is a superior deal to McCaw's.We're surprised.We didn't think a sleeping {Bell} mentality would be willing to take on dilution." But Kenneth Leon, a telecommunications analyst with Bear, Stearns & Co., finds the BellSouth proposal still flawed because the company doesn't have to wait five years to begin buying more LIN shares. "How many shares will be around in 1995?" he asked. "There's nothing preventing BellSouth from buying up shares in the meanwhile." BellSouth's revised proposal surprised many industry analysts, especially because of the company's willingness to accept some dilution of future earnings.William O. McCoy, president of the company's BellSouth Enterprises Inc. unit, said the revised agreement with LIN would dilute BellSouth earnings by about 9% in both 1990 and 1991 and by significantly less thereafter.Indeed, BellSouth's cellular operations were among the first in the country to become profitable. For 1988, BellSouth earned $1.7 billion, or $3.51 a share, on revenue of $13.6 billion.Analysts were predicting 1990 BellSouth earnings in the range of $3.90 a share, or $1.9 billion, but now those estimates are being scaled back. In composite trading Friday on the New York Stock Exchange, BellSouth shares fell 87.5 cents to $52.125. In national over-the-counter trading, LIN shares soared $4.625 to closed at $112.625, while McCaw fell $2.50 a share to $37.75. The proposed BellSouth-LIN cellular company, including the newly acquired Metromedia stake, would give the new entity 55 million potential customers, including about 35 million in the nation's top 10 markets. Mr. Leon of Bear Stearns speculated that McCaw, in an attempt to buy time, might consider filing an antitrust suit against BellSouth with the Justice Department and U.S. District Judge Harold Greene, who oversees enforcement of the consent decree that broke up the Bell system in 1984. Indeed, McCaw seemed to hint at that option in a brief statement.Urging LIN directors to conduct "a fair auction on a level playing field," McCaw asked how well the public interest would be served "with the Bell operating companies controlling over 94% of all cellular {potential customers} in the nation's top 10 markets."
London share prices closed sharply lower Friday in active trading after Chancellor of the Exchequer Nigel Lawson's resignation slapped the market and Wall Street's rapid initial sell-off knocked it down. London shares were depressed initially by overnight losses in New York and by the drop in sterling after Mr. Lawson's resignation.It showed some early resilience after central bank support firmed sterling, but the weight of Wall Street late in London trading, and signs of further weakness in the British pound, proved a hefty load to bear.New York stocks recovered some of their losses after the London market closed. The Financial Times 100-share index shed 47.3 points to close at 2082.1, down 4.5% from the previous Friday and 6.8% from Oct. 13, when Wall Street's plunge helped spark the current weakness in London. The 30-share index settled 42.0 points lower at 1678.5.Volume was 840.8 million shares, up from 443.6 million Thursday and the week's most active session. Dealers said the turnover, largely confined to the 100-share index stocks, partly reflected the flurry of activity typical at the close of a two-week trading account and the start of a new account.But they said Friday's focus on the top-tier stocks telegraphed active overseas selling and showed the broad-based fears over the status of the U.K. economy and Britain's currency in the wake of the upheaval in Prime Minister Margaret Thatcher's cabinet. A senior dealer with Warburg Securities noted British Gas, the most active blue-chip stock at 20 million shares traded, was affected by the political implications of Mr. Lawson's departure and Mrs. Thatcher's cabinet shuffle. He attributed the unusually high volume to broad-based selling on fears that the Thatcher government may be in turmoil and Britain's Labor Party positioned to regain control of the government and renew efforts at nationalization. British Gas shed 8.5 pence a share to close at 185 pence ($2.90). Other dealers added that the blue-chip stocks in general were hit by profit-taking over concerns that London shares will continue posting declines and the uncertainty over sterling given that Mr. Lawson's successor, John Major, had only been in the job one day. Besides British Gas, British Steel skidded 1.74 to 123.5 on turnover of 11 million shares. British Petroleum fell 5 to 286 on 14 million shares traded.Dealers said the multinational oil company was pressured by recent brokerage recommendations urging investors to switch into Shell Trading & Transport.Shell eased 1 to 416 on turnover of 4.8 million shares. Among the other actively traded blue-chip issues, Imperial Chemical Industries dropped 11 to #10.86, Hanson skidded 9.5 to 200.5, and British Telecom fell 10 to 250. In Tokyo, stocks closed lower but above intraday lows in active trading.The Nikkei index was pressured down by profit-taking triggered by sharp advances made through this week and fell 151.20 points to 35527.29. In early trading in Tokyo Monday, the Nikkei index fell 148.85 points to 35378.44. On Friday, the Tokyo stock price index of first section issues was down 15.82 at 2681.76.First-section volume was estimated at 1.3 billion shares, up from 886 million shares Thursday. An official at Wako Securities said brokerages' excessive expectations about recent advances in Tokyu Group shares and real estate issues were dashed Friday. Dealers placed heavy buy orders in the morning to start the first trading day for November transactions.But they failed to sell these stocks to client investors, who were cautious about the sharp gains these issues made this week, the Wako official said. Fund managers said Friday's profittaking was a natural result of the week's "abnormal fever" in buying real estate, shipbuilding, steel and construction shares. Frankfurt prices closed lower again Friday, the fourth decline in the past five days and the culmination of a week that saw the DAX index lose 4%.The DAX dropped 19.69 points Friday to 1462.93. Traders said the continued turbulence in other markets, coupled with the drop in London following the Lawson resignation, were responsible. Traders said that selling pressure wasn't enormous and that the DAX dropped Friday more on a lack of any substantial buying interest.They said contributing to the downward drift was the fact that many professional traders had chosen to square positions ahead of the weekend. "It's the whole uncertainty about what's happening around us," said Valentin Von Korff, a trader at Credit Suisse First Boston in Frankfurt. "If you take away the outside influences, the market itself looks very cheap.What's happening here isn't justified by the fundamentals." Traders said the market remains extremely nervous because of the wild swings seen on the New York Stock Exchange last week.That's leaving small investors with cold feet, they said, and prompting institutions to take a reserved stance on the sidelines as well, at least until the market in New York settles down somewhat. Elsewhere, share prices closed lower in Paris, Zurich, Amsterdam, Brussels and Stockholm, and were mixed in Milan.The British shakeup was widely cited for the declines. Share prices also closed lower in Sydney, Hong Kong, Singapore, Taipei, Manila, Wellington and Seoul.Concern about declines in other markets, especially New York, caused selling pressure. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end. Last week's best and worst performing stocks among those issues that make up 80% of the world's stock market capitalization (in local currency) Source: Morgan Stanley Capital Intl.Perspective
APARTHEID FOES STAGED a massive anti-government rally in South Africa. More than 70,000 people filled a soccer stadium on the outskirts of the black township of Soweto and welcomed freed leaders of the outlawed African National Congress.It was considered South Africa's largest opposition rally.Walter Sisulu, the ANC's former secretary general who served 26 years in prison before being released two weeks ago, urged peace, negotiation and discipline.President de Klerk's government permitted the rally, and security forces didn't interfere. Pretoria's approval of the demonstration and the ANC's conciliatory tone appeared aimed at setting up negotiations to give blacks political rights. CONGRESSIONAL LEADERS BACKED Bush's criticism of Nicaragua's Ortega. While lawmakers haven't raised the possibility of renewing military aid to the Contras following Ortega's weekend threat to end a truce, Senate Majority Leader Mitchell said on NBC-TV that Ortega had made "a very unwise move." Minority Leader Dole plans to offer a resolution tomorrow denouncing the Nicaraguan president, whose remarks came during a celebration in Costa Rica marking regional moves to democracy.Ortega cited renewed attacks by the U.S.backed rebels. Lawmakers must decide next month whether the Contras will get so-called humanitarian aid under a bipartisan agreement reached in March. Spain's Socialist Party claimed victory in nationwide elections, saying it had retained its parliamentary majority by one seat.With all the votes counted, a government spokesman said Prime Minister Gonzalez's party won 176 seats in the 350-seat Cortes, or lower house of parliament.The Socialists held 184 seats going into the balloting. Thousands of East Germans attended public rallies organized by the Communist leadership and demanded free speech, controls on the security forces and an end to official privileges.The gatherings in East Berlin and elsewhere were viewed as part of a government effort to stop activists from staging protests to press their demands.Dissidents in Czechoslovakia said the nation's pro-democracy movement was growing despite the government's move to crush a protest Saturday in Prague's Wenceslas Square.More than 10,000 demonstrators had called for free elections and the resignation of Communist Party leader Milos Jakes.Police detained more than 350 people. Federal investigators have determined a metallurgical flaw that developed during the making of an engine disk led to the July crash of a United Airlines jetliner in Sioux City, Iowa, killing 112 people. Congress sent to Bush an $8.5 billion military construction bill that cuts spending for new installations by 16%.The measure also moves more than $450 million in the Pentagon budget to home-state projects from foreign bases. U.S. and Soviet officials are to open a new round of talks today aimed at reducing chemical-weapons arsenals amid superpower differences over whether to stop making the gases.The talks in New York are the first since Bush and Soviet Foreign Minister Shevardnadze unveiled proposals in September to scrap existing weapons. Afghan guerrillas bombarded Kabul in a weekend assault that Western diplomats called one of the biggest offensives since the Soviet Union completed a troop withdrawal in February.The rebels also reportedly tightened a blockade on roads leading to the capital, and government forces shelled a guerrilla-held area in western Afghanistan. Lebanon's Christian leader convened an emergency meeting of his cabinet after indications that he might dissolve Parliament in an attempt to scuttle an Arab-sponsored peace plan.Gen. Michel Aoun rejected the pact because it fails to provide a timetable for a Syrian troop pullout from Lebanon. Authorities in Hawaii said the wreckage of a missing commuter plane with 20 people aboard was spotted in a remote valley on the island of Molokai.There wasn't any evidence of survivors.The plane failed to reach Molokai's airport Saturday while on a flight from the neighboring island of Maui. The Oakland Athletics won baseball's World Series, defeating the San Francisco Giants in a four-game sweep.An earthquake Oct. 17 in Northern California had caused a 10-day delay midway through the championship contest, which ended Saturday at San Francisco's Candlestick Park. Died: Rudolf von Bennigsen-Foerder, 63, chairman of Veba AG of West Germany, in Duesseldorf, of pneumonia.
Market makers in Nasdaq over-the-counter stocks are adding their voices to the swelling chorus of complaints about program trading. Their motivation, however, has a strong practical aspect: Program trading is hazardous to their paychecks.The most controversial form of program trading, stock-index arbitrage, is "making it tough for traders to make money," declares Robert Antolini, head of OTC trading at Donaldson, Lufkin & Jenrette. Stock-index arbitrage -- the computer-guided buying and selling of stocks with offsetting trades in stock-index futures to profit from fleeting price discrepancies -- affects the OTC market directly through the 31 stocks included in Standard & Poor's 500-stock index.The S&P 500 is often used in arbitrage strategies. The portion of OTC volume attributable to program trading isn't known, as it is on the New York Stock Exchange, where it amounted to more than 13% in September.Estimates from traders put it at less than 5% of Nasdaq's average daily volume of roughly 133 million shares. Other market-maker gripes: Program trading also causes the Nasdaq Composite Index to lose ground against other segments of the stock market.Because of program trading it is more difficult to trade many OTC stocks without sharp price moves, a condition known as illiquidity.Moreover, the price volatility that is amplified by program trading is undercutting efforts to woo individual investors back to an OTC market that sorely misses them. Some of these problems are neither new nor unique to the OTC market.But the big, often tumultuous slide in stock prices this month has turned some of those who have been profiting from the practice against it. Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, acknowledges that he wasn't troubled by program trading when it began in the pre-crash bull market because it added liquidity and people were pleased to see stock prices rising. "We weren't as concerned until they became sell programs," says Mr. DaPuzzo, who now thinks it adds unnecessary volatility.Shearson Lehman, however, executes program trades for clients. Merrill Lynch, Goldman Sachs and Kidder Peabody, in addition to Shearson, do program-trade OTC stocks.Shearson, Merrill Lynch and Goldman Sachs say they do so only for customers, however.Kidder Peabody does program trading for its own as well as clients' accounts. Of course, there were sell programs in past years, too, but they seem to hurt market makers more painfully these days.That's largely because of defensive measures they adopted after the 1987 crash, when individual investors fled the market and trading activity dwindled.Market makers, to cut costs, slashed inventories of stocks they keep on hand to sell investors when other holders aren't selling. And to protect their reduced capital investment from eroding further, market makers became quicker to lower price quotes when sell programs are in progress.On days when prices are tumbling, they must be willing to buy shares from sellers when no one else will.In such an environment, market makers can suffer huge losses both on trades made that day at steadily dropping prices and in the value of their inventories of shares. "It makes no sense for us to put money at risk when you know you're going to lose," says Mr. Antolini, of Donaldson Lufkin. But this skittishness, Mr. Antolini says, is creating liquidity problems in certain OTC stocks. "It's harder to sell stocks when the sell programs come in because some market makers don't want to {take the orders}.No one has big positions and no one wants to take big risks." Joseph Hardiman, president of the National Association of Securities Dealers, which oversees trading on Nasdaq, agrees that program trading is hurting the market's efforts to bring back small investors.But, he observes, while makers suffer losses when program trading drags the market down, they also make money when program trading pushes the prices higher. "Sometimes {traders} lose sight of that," he says. The OTC stocks in the S&P 500 include Nasdaq's biggest, such as Apple Computer, MCI Communications, Tele-Communications and Liz Claiborne.These big stocks greatly influence the Nasdaq Composite Index.When the computers say "sell," the composite tumbles as well as the Dow Jones Industrial Average. The problem, market makers say, is that while the industrial average and the S&P 500 usually recover as buy programs kick in, the Nasdaq Composite frequently is left behind. Eight trading days after Oct. 12, the day before the stock market plunge, for instance, the Nasdaq Composite had fallen 4.3%, compared with 3.3% for the S&P 500, 3.5% for the New York Stock Exchange Composite Index and 3.6% for the industrial average.This gap eventually closes, but slowly.Three days later, as of Friday's close, the Nasdaq Composite was down 6%, compared with 5.9% for the industrial average, 5.7% for the S&P 500 and 5.8% for the Big Board Composite. The main reason for this lag is that individual investors own 65% of the OTC market's capitalization, according to Mr. Hardiman, much more than on the Big Board.Such investors tend to be more cautious than institutional investors are about re-entering the market after massive selloffs, market makers say. Friday's Market Activity The Nasdaq Composite Index tumbled 5.39, or 1.2% to 452.76 on Friday.For the week, the index dropped 3.8%. Weakness in big technology stocks hurt the composite as well as the Nasdaq 100 Index, which fell 1.4%, or 6.43, on Friday, to 437.68.The Nasdaq Financial Index lost about 1%, or 3.95, to 448.80. Friday's trading volume totaled 132.8 million shares.The average daily share turnover for October is almost 148 million shares. LIN Broadcasting surged 4 5/8 to 112 5/8; LIN and BellSouth sweetened their merger agreement in an attempt to keep shareholders from tendering their shares to McCaw Cellular Communications.McCaw, which dropped 2 1/2 to 37 3/4, has offered $125 a share for a majority of LIN's shares. The revised LIN-BellSouth agreement boosts the dollar amount of the special dividend LIN promises to pay shareholders.LIN now plans to dole out $42 a share in cash, up from the earlier $20 amount. Intel eased 1/8 to 31 7/8.The semiconductor concern said the interruption in shipment of its 80486 computer chip will be brief and have little impact on the company's earnings.The stock fell 7/8 Thursday amid concerns over problems discovered with the chip.Intel told analysts that the company will resume shipments of the chips within two to three weeks. Weisfield's rocketed 9 1/2 to 39 after the jewelry store operator said it is in preliminary discussions, with a party it wouldn't identify, regarding the possible acquisition of the company. Starpointe Savings Bank rose 3 to 20 after the Federal Deposit Insurance Corp. approved Dime Savings Bank of New York's $21-a-share acquisition of Starpointe. Kirschner Medical fell 4 to 15.The company said its third-quarter earnings will probably be lower than the 16 cents a share it reported last year, despite a rise in the company's revenue.Kirschner earned $376,000 on revenue of $14.5 million in the 1988 quarter.The company blamed a number of factors for the earnings decline, including softer sales of joint-implants.
When Michael S. Perry took the podium at a recent cosmetics industry event, more than 500 executives packing the room snapped to attention. Mr. Perry, who runs Unilever Group's world-wide personal-care business, paused to scan the crowd. "I see we have about half the audience working for us," he said, tongue in cheek. "The other half, we may have before long." Members of the audience gasped or laughed nervously; their industry has been unsettled recently by acquisitions.First Unilever, the Anglo-Dutch packaged-goods giant, spent $2 billion to acquire brands such as Faberge and Elizabeth Arden.It now holds the No. 3 position at U.S. department-store cosmetic counters.Then Procter & Gamble Co. agreed to buy Noxell Corp. for $1.3 billion.That acquisition, to be completed by year end, will include the Cover Girl and Clarion makeup lines, making P&G the top marketer of cosmetics in mass-market outlets. It's not so much the idea of acquisitions that has agitated the cosmetics industry as the companies doing the acquiring: P&G and Unilever bring with them great experience with mundane products like soap and toilet paper, sparking disdain in the glitzy cosmetics trade; but they also bring mammoth marketing clout, sparking fear.Though it is far from certain that companies best known for selling Promise margarine and Tide detergent will succeed in cosmetics, there's little doubt they will shake up the industry. For now, both companies are keeping quiet about their specific plans.But industry watchers expect them to blend the methodical marketing strategies they use for more mundane products with the more intuitive approach typical of cosmetics companies.Likely changes include more emphasis on research, soaring advertising budgets and aggressive pricing.But some cosmetics-industry executives wonder whether techniques honed in packaged goods will translate to the cosmetics business.Estee Lauder Inc., Revlon Inc. and other cosmetics houses traditionally have considered themselves fashion enterprises whose product development is guided by the creative intuition of their executives.Cosmetics companies roll out new makeup colors several times a year, and since most products can be easily copied by competitors, they're loath to test them with consumers. "Just because upscale cosmetics look like packaged goods and smell like packaged goods, it doesn't mean they are packaged goods," says Leonard Lauder, chief executive of Estee Lauder. "They're really fashion items wrapped up in little jars." In contrast to the more artistic nature of traditional cosmetics houses, Unilever and P&G are the habitats of organization men in gray-flannel suits.Both companies are conservative marketers that rely on extensive market research.P&G, in particular, rarely rolls out a product nationally before extensive test-marketing.Both can be extremely aggressive at pricing such products as soaps and diapers -- to the extent that some industry consultants predict cents-off coupons for mascara could result from their entry into the field. P&G already has shown it can meld some traditional packaged-goods techniques with the image-making of the cosmetics trade in the mass-market end of the business.Consider Oil of Olay, which P&G acquired as part of Richardson-Vicks International in 1985.The moisturizer, introduced in 1962, had a dowdy image. "Oil of Olay brought with it the baggage of being used basically by older women who had already aged," says David Williams, a consultant with New England Consulting Group. P&G set out to reposition the brand by broadening the product line to include facial cleansers and moisturizers for sensitive skin.It also redesigned Oil of Olay's packaging, stamping the traditional pink boxes with gold lines to create a more opulent look.Moreover, P&G shifted its ad campaign from one targeting older women to one featuring a woman in her mid-30s vowing "not to grow old gracefully." The company says sales have soared. Goliaths like Unilever and P&G have enormous financial advantages over smaller rivals.Next year, Noxell plans to roll out a perfume called Navy, says George L. Bunting Jr., chairman of Noxell.Without P&G's backing, Noxell might not have been able to spend the estimated $5 million to $7 million needed to accomplish that without scrimping on its existing brands.Packaged-goods companies "will make it tougher for smaller people to remain competitive," Mr. Bunting says. Further consolidations in the industry could follow.Rumors that Unilever is interested in acquiring Schering-Plough Corp. 's Maybelline unit are widespread.Unilever won't comment; Schering, however, denies the brand is for sale. The presence of Unilever and P&G is likely to increase the impact of advertising on cosmetics.While the two are among the world's biggest advertisers, most makers of upscale cosmetics spend relatively little on national ads.Instead, they focus on events in department stores and pour their promotional budgets into gifts that go along with purchases.Estee Lauder, for example, spends only an estimated 5% of sales on advertising in the U.S., and Mr. Lauder says he has no plans to change his strategy. The most dramatic changes, however, probably will come in new-product development.Nearly 70% of cosmetics sales come through mass-distribution outlets such as drug stores and supermarkets, according to Andrew Shore, an analyst at Shearson Lehman Hutton Inc.That figure has been inching up for several years.As the trend continues, demand for mass-market items that are high quality but only mid-priced -- particularly skin-care products -- is expected to increase.This fall, for example, L'Oreal Group, ordinarily a high-end line, rolled out a drug-store line of skin-care products called Plenitude, which retail for $5 to $15. The packaged-goods marketers may try filling that gap with a spate of new products.Unlike the old-line cosmetics houses, Unilever and P&G both have enormous research and development bases to draw on for new products.P&G, in fact, is noted for gaining market leadership by introducing products that offer a technical edge over the competition.Sales of its Tide detergent soared earlier this year, for example, after P&G introduced a version that includes a bleach safe for all colors and fabrics. That's led industry executives to speculate that future product development will be driven more by technological innovation than by fashion whims -- especially among mass-market brands. "There will be more emphasis on quality," says Guy Peyrelongue, chief executive of Cosmair Inc., the U.S. licensee of L'Oreal. "You'll see fewer gimmicks." But success for Unilever and P&G is far from guaranteed, as shown by the many consumer-product companies that have tried and failed to master the quirky beauty business.In the 1970s, several pharmaceutical and packaged-goods companies, including Colgate-Palmolive Co., Eli Lilly & Co., Pfizer Inc. and Schering-Plough acquired cosmetics companies.Industry consultants say only Schering-Plough, which makes the mass-market Maybelline, has maintained a meaningful business.Colgate, which acquired Helena Rubenstein in 1973, sold the brand seven years later after the brand languished. Unilever already has experienced some disappointment.The mass-market Aziza brand, which it acquired in 1987 along with Chesebrough-Pond's Inc., has lost share, according to industry analysts. The ritzy world of department-store cosmetics retailing, where Unilever is concentrating its efforts, may prove even more treacherous.In this niche, makeup colors change seasonally because they are linked to ready-to-wear fashions.Because brand loyalty is weak and most cosmetics purchases are unplanned, careful training of store sales staffs by cosmetics companies is important.And cultivating a luxury image strong enough to persuade consumers to pay more than $15 for lipstick or eye makeup requires a subtle touch that packaged-goods companies have yet to demonstrate on their own.
There may be a truce in the long war of nerves between the White House and Congress over how this country conducts secret intelligence operations abroad. After years of mistrust born of Watergate, past misdeeds of the Central Intelligence Agency, and the Iran-Contra scandal, President Bush and the Senate Intelligence Committee appear ready -- for now, at least -- to trust each other when it comes to setting policy on covert activities.If that attitude lasts, it could infuse covert action planning with a level of care and confidence that hasn't been seen in years. Over the past week, the president has agreed to keep the committee informed, usually in advance, of covert actions and to put key intelligence decisions in writing.That wasn't always the way the Reagan administration handled such matters. Mr. Bush has pledged as well to respect the 14-year-old executive order barring U.S. agents from assassinating foreign leaders or helping others to do so.Congress never fully trusted former CIA chief William Casey and National Security Adviser John Poindexter to honor the ban. Despite objections by the CIA, Mr. Bush also has agreed to the establishment of an inspector general at the CIA who would be independent of the CIA director. In return, the Senate panel has dropped efforts to enact legislation requiring the administration to inform it within 48 hours of the launching of any covert activity.It also has removed a ban on CIA use of a contingency fund for covert acts and has agreed to wipe away some tortured and legalistic restrictions on coup planning put in place to ensure that the CIA didn't get back in the assassination game. "We've finally been able to convince them that Casey and {Oliver} North don't work here anymore," says one administration official. The new understanding didn't just spring to life in a spontaneous eruption of sweetness and light.It emerged after a rancorous display of old-style intelligence politics that followed this month's failed coup attempt in Panama. The White House used television appearances and leaks to argue that congressionally imposed restrictions on covert actions made U.S. support for such coups difficult.Mr. Bush even disclosed privately that one Reagan-era deal with Congress required him to notify the odious Panamanian dictator, Manuel Noriega, if the U.S. learned of a coup plot that might endanger his life.The president also hinted he might veto this year's intelligence authorization bill if it is too restrictive. Intelligence Committee Chairman David Boren (D., Okla.) and Vice Chairman William Cohen (R., Maine), for their part, angrily accused the White House of selectively leaking classified documents and trying unfairly to shift the blame to Congress for the bungled attempt to topple Gen. Noriega. The White House got the better of the exchange but took care not to press its advantage to the kind of constitutional confrontation sought by conservative Republicans who don't want any congressional oversight of intelligence activities.Instead, Mr. Bush and his aides made it clear they respected Congress's role and felt they could work with the conservative Mr. Boren and the moderate Mr. Cohen to iron out their differences. The senators responded in kind.Sen. Boren happily told reporters that there had been "a meeting of the minds" with the White House, and that the committee had given Mr. Bush "a clean slate," free of the impediments imposed during the Reagan years.Sen. Cohen said the relationship has reverted to its pre-Reagan character. There still are some details to be nailed down.Mr. Bush is reserving the right in "rare" instances to keep Congress in the dark, asserting a constitutional prerogative the committee doesn't recognize.And a pending Justice Department interpretation of the assassination ban could raise questions that would have to be settled. Moreover, both sides may face political critics.Some conservatives will accuse the president of promising Congress too much.And they continue anonymously attacking CIA Director William Webster for being too accommodating to the committee.At the same time, some congressional liberals will accuse Sens.Boren and Cohen of wimping out, and they will warn that the lawmakers' concessions raise the specter of more internationally embarrassing covert operations like the mining of Nicaraguan harbors and the Iran arms sales. But if the cooperative attitude holds and there is greater consultation on covert activities, the country could be entering an era when such hare-brained schemes are scrapped before they get off the drawing boards, while risky but well-planned secret operations can be undertaken without fear that a panicky Congress will balk.
Several of the New York Stock Exchange's own listed companies, led by giant Contel Corp., are joining for the first time to complain about program trading and the exchange's role in it. Claiming program trading has turned the Big Board into a "gambling casino," Contel Chairman Charles Wohlstetter said that he and at least 20 other corporate executives are forming an unprecedented alliance.The group, Mr. Wohlstetter said in an interview, wants to end the market's wild price swings that critics blame on computer-aided program-trading strategies.The group will complain to Washington, to the heads of program-trading firms and to the heads of the Big Board itself, he said. "They should call {the exchange} Trump East," charged Mr. Wohlstetter, the 79-year-old founder of Contel who's also a former investment banker and stock trader. "What is the mission of the financial community -- to help some scavengers or schemers, or help corporate America?" Contel is a $6 billion telephone and electronics company. Pressure has been building on the Big Board in the past two weeks to do something about market volatility, which many investors say is caused by program trading.The market's Friday-the-13th plunge of 190 points in the Dow Jones Industrial Average, and the Big Board's understated response to it, galvanized some longstanding dissatisfaction among companies listed on the exchange.Last month, program trading accounted for a record 13.8% of average daily Big Board volume. Mr. Wohlstetter, for example, said he wrote to Big Board Chairman John J. Phelan Jr. about program trading after the 190-point Dow plunge, and as in previous queries, "what I get back is gobbledygook." He said he's upset that Mr. Phelan, trying to calm investors after the plunge, said that investors would simply have to get used to the market's big price swings.The Big Board "is partly to blame {for the price swings}, because they're cowards," said Mr. Wohlstetter. "Their powerful members manage them." The focus of the outcry has been stock-index arbitrage, which accounts for about half the program trading that goes on.Index arbitragers argue that their trading is healthy because it links markets, but critics say such trading accelerates market movements and increases the chance for a crash. The Big Board has refused to be drawn into a public debate about program trading.Richard Grasso, Big Board president, last week said only that the exchange is concerned about all its constituents.Privately, exchange officials worry that without a hospitable system for program trading at the Big Board, billions of dollars in trading will simply migrate to overseas exchanges such as London's.It is partly for this reason that the exchange last week began trading in its own stock "basket" product that allows big investors to buy or sell all 500 stocks in the Standard & Poor's index in a single trade.One intended customer of the new basket product is index arbitragers, according to the exchange. Investors have complained for some time about program trading, particularly index arbitrage, to little avail.But according to some Big Board traders, an organized campaign from exchange-listed companies might make the exchange finally consider big changes. "They won't fight the listed companies.Now the assault is on," said one top trader.The Big Board can't ban stock-index futures, of course, but it could ban use of its high-speed electronic trading system for program trading or at least encourage securities firms to back off.The exchange put a bit of a damper on program trading when, last year, it simply started to publish monthly statistics of each firm's program-trading volume. Contel's Mr. Wohlstetter said the group of Big Board companies isn't ready to go public yet with its effort, and that he doesn't plan to be the leader once it is public.However, he said he planned to spend the weekend making calls to gather additional support.Among those Mr. Wohlstetter said he has been talking to are Sanford Weill of Primerica Corp., which is the parent of Smith Barney, Harris Upham & Co.; GTE Corp. 's James Johnson, and ITT Corp. 's Rand Araskog. None of these chief executives were available for comment. Among the targets of the Big Board companies' campaign will be some corporate pension funds that use program-trading strategies to maximize returns on their investments.For Contel's part, the company a month ago informed each of its money managers that it would drop them if they give business to program-trading firms. It was just those kinds of ultimatums that last week succeeded in turning up the heat in the debate.Kemper Corp. 's Kemper Financial Services unit said it cut off Bear Stearns, Morgan Stanley, Oppenheimer and General Electric Co. 's Kidder, Peabody & Co. unit.All of the firms except Kidder, which is the second-biggest program trader on Wall Street, quickly announced pull-backs from index arbitrage. Kidder officials stand by their aggressive use of program trading.Chief Executive Officer Michael Carpenter said that despite the outcry even by some of Kidder's own brokers, he believes index arbitrage doesn't have a "negative impact on the market as a whole." However, pressure on Kidder's parent, GE, could change Kidder's policy.GE Chairman John Welch has been "besieged with phone calls" complaining about his unit's program trading, according to a person close to him.
Margaret Thatcher's instinctive response to the latest upheaval in her government is to promise business as usual.That may be the last thing she needs. As the air clears from last week's storm of resignations and reshufflings, the government faces a daunting job of rebuilding confidence in its policies.The prime minister and her new chancellor of the exchequer, the untested John Major, need to haul the country through something like a recession to bring down inflation and set the economy moving again.Mrs. Thatcher has to come to terms with European economic integration, beginning with the European Monetary System, which Britain is committed to joining fully someday.Finally, the government has to convince a rattled financial community -- and voters -- it is proceeding coherently toward its goals. It sounds like the work of a decade, but the deadline is late 1991, when Mrs. Thatcher is expected to call another national election.What's worrying her supporters is that the economic cycle may be out of kilter with the political timetable.She could end up seeking a fourth term in an economy sick with inflation, high interest rates and a heavy trade deficit. Though Mrs. Thatcher has pulled through other crises, supporters wonder if her steely, autocratic ways are the right formula today. "There's a rising fear that perhaps Mrs. Thatcher's style of management has become a political liability," says Bill Martin, senior economist at London brokers UBS-Phillips & Drew. The prime minister's insistence on keeping a private coterie of advisers -- including an economic guru who openly criticized former Chancellor of the Exchequer Nigel Lawson -- confused the financial community.Last week, the strategy of playing the two experts off each other blew up: Mr. Lawson quit in exasperation and Sir Alan Walters, the adviser, announced his resignation within an hour. The confusion could be costly.Currency traders, suspecting Mr. Major won't defend the pound strenuously, sent the British currency sharply lower Friday against the dollar and West German mark.Analysts expect further jitters this week. A continuing slide in the pound could force the government to push through another rise in the base rate, currently 15%.That could shove a weak economy into recession.Economists have been anticipating a slump for months, but they now say it will be deeper and longer than they had thought.Britain's economy "is developing rapidly toward no-growth," says J. Paul Horne, international economist with Smith Barney, Harris Upham Co. in Paris. A mild slowdown probably would have run its course by early 1991, economists say, while the grueling downturn now expected could stretch into 1992.Recovery could be hampered if Britain's major trading partners in Europe, which are enjoying robust economic activity, cool off as expected in late 1990 and 1991. That would leave Mrs. Thatcher little room for maneuver.For the Tories to win the next election, voters will need to sense economic improvement for about a year beforehand.Though Mrs. Thatcher doesn't need to call an election until June 1992, she would prefer doing so in late 1991. "If the economy shows no sign of turning around in about year's time, she will be very vulnerable," says John Barnes, a lecturer at the London School of Economics. There's an equally pressing deadline for the government to define its monetary and economic ties to the rest of the European Community.It has sent mixed signals about its willingness to take part in the exchange-rate mechanism of the European Monetary System, which links the major EC currencies.At a June EC summit, Mrs. Thatcher appeared to ease her opposition to full EMS membership, saying Britain would join once its inflation rate fell and the EC liberalized capital movements. Since then, the government has left observers wondering if it ever meant to join.Sir Alan assailed the monetary arrangement as "half-baked" in an article being published in an American economics journal.That produced little reaction from his boss, reinforcing speculation the government would use its two conditions as a pretext for avoiding full EMS membership. Despite the departure of Mr. Lawson and Sir Alan, the tug-of-war over the EMS could continue.Sir Geoffrey Howe, deputy prime minister and a Lawson ally on the EMS, has signaled he will continue pressing for early membership. Of immediate concern is whether the Thatcher government will continue Mr. Lawson's policy of tracking the monetary policies of the West German Bundesbank and responding in kind when the Frankfurt authorities move interest rates.Mrs. Thatcher "doesn't like taking orders from foreigners," says Tim Congdon, economist with Gerrard & National Holding PLC. As Conservatives rally around Mrs. Thatcher during the crisis, many harbor hopes last week's debacle will prompt change. "We won't have any more of this wayward behavior," says Sir Peter Hordern, a backbench Tory member of Parliament. "The party is fed up with sackings of good people." It's an unrealistic expectation.As long as a decade ago, Mrs. Thatcher declared she didn't want debate in her cabinet; she wanted strong government.Over the weekend, she said she didn't intend to change her style and denied she is authoritarian. "Nonsense," she told an interviewer yesterday on London Weekend Television. "I am staying my own sweet, reasonable self."
Wives May Not Benefit When Men Do Chores WHEN HUSBANDS take on more housework, they tend to substitute for chores done by the kids rather than by the wife. Rand Corp. researchers Linda Waite and Frances Goldscheider analyzed a large sample of married women with at least one child at home between the ages of six and 18.The women indicated which family member usually did various household chores and the approximate share each did. Not unexpectedly, wives, whether working or non-working, did by far the most -- about 80% of the shopping, laundry and cooking, and about two-thirds of housecleaning, washing dishes, child care and family paper work.Only for yardwork and home maintenance did women do less than half. But the researchers found that while children's household tasks eased the mother's burden appreciably, the husband's helping hand "appears to lighten the children's load almost on a one-for-one basis and to reduce the wife's responsibility only modestly." This pattern was particularly evident among more highly educated couples.In these families, husbands took on 80% more chores than in couples with only grammar school education.But the kids with highly educated parents did 68% less housework than those in less-educated families. "It is clear," Ms. Waite says, "that most of the effect of increasing education has been to shift who is helping the wife/mother.Her share decreases, but only slightly." Nursing Home Patients Apt to Be Private Payers FAR FEWER elderly nursing home residents bankrupt themselves than was previously believed, two recent studies declare. State governments place very low ceilings on how much property people may own or how much income they may keep if they want welfare help on medical bills.Conventional wisdom has long held that anywhere from one-fourth to one-half of all elderly long-term care patients are obliged to spend themselves into poverty before qualifying for Medicaid assistance.But separate reports from Joshua Weiner and Denise Spence of the Brookings Institution and Korbin Liu of the Urban Institute find that "a surprisingly small proportion" -- only about 10% -- of residents start out as private payers but "spend down" to Medicaid levels in a single nursing home stay before they die or are discharged. (Another one-third are already on Medicaid when they enter the nursing homes, a considerably higher proportion than the analysts anticipated.) But a remarkably high percentage -- over half -- are private payers throughout their stay, even a fairly lengthy one.About one-third pay out of their own pockets, while the rest are covered throughout by Medicare, private insurers or the Veterans Administration.Both reports are based on several thousand patients sampled in a 1985 nationwide government survey. The Brookings and Urban Institute authors caution, however, that most nursing home stays are of comparatively short duration, and reaching the Medicaid level is more likely with an unusually long stay or repeated stays.Moreover, they note, those who manage to pay their own way often do so only by selling their homes, using up life savings or drawing heavily on children and other relatives. Reagan Era Young Hold Liberal Views THE REAGAN generation young men and women reaching political maturity during Ronald Reagan's presidency -- are firmly liberal on race and gender, according to NORC, the social science research center at the University of Chicago. Many political analysts have speculated that the Reagan years would produce a staunchly conservative younger generation.NORC's most recent opinion surveys find the youngest adults indeed somewhat more pro-Reagan and pro-Republican than other adults.But, says chief investigator Tom Smith, this "does not translate into support for conservatism in general or into conservative positions on feminist and civil rights issues." Answers to a dozen questions in the 1986, 1987, 1988 and 1989 national surveys reveal that men and women in the 18 to 24 age bracket are considerably more liberal on race and gender than were the 18 to 24 year olds in NORC's polling in the early 1970s and early 1980s.They were also as liberal or more liberal than any other age group in the 1986 through 1989 surveys. For example, 66% of the 18 to 24 year olds in the four latest surveys favored an "open housing" law prohibiting homeowners from refusing on racial grounds to sell to prospective buyers.That compares with 58% of the similar age group in the 1980 through 1982 surveys and 55% in the 1972 through 1975 surveys. Asked whether they agreed or disagreed with the claim that men are emotionally better suited to politics than women, 70% of the Reagan generation disagreed, compared with under 60% of younger men and women in the earlier years.Odds and Ends SEPARATED and divorced men and women are far more likely to be smokers than married persons, the Centers for Disease Control discovers. . . . Graduate students are taking longer than ever to get their doctor of philosophy degrees, the National Research Council says.It estimates the time between college graduation and the awarding of a Ph. D. has lengthened by 30% over the past 20 years, with the average gap now ranging from about 7.4 years in the physical sciences to 16.2 years in education.
October was an edgy month for the practitioners of glasnost, the official Soviet policy of allowing more candor from the nation's media.For one of the superstars of glasnost, Vitaly Korotich, editor of the trail-blazing weekly Ogonyok, Friday, Oct. 20 was a somersaulting day that turned from tension to elation. He had been summoned to the Central Committee of the Soviet Communist Party, after he finished his lunch at the Savoy Hotel, an unlikely prelude to a bureaucratic brow-beating: Eight-foot-tall Rubenesquely naked ladies float on their canvases toward a ceiling teeming with cherubs, all surrounded by gilt laid on with a pastry chef's trowel and supported by marble corinthian columns whose capitals are fluting fountains of gold. Why had Mr. Korotich been called? "I told my driver," he said, "that he was taking my butt to the Central Committee so they can . . ." whack, whack, whack his hand made vigorous spanking gestures on his left palm. "They feel the need from time to time to `educate' me." And indeed, as he later reported, that was the import of the meeting.Anxious allies of President Mikhail Gorbachev are cautioning media leaders to take it easy, to be careful not to do anything that could be used by Mr. Gorbachev's opponents.The government is nervous.According to Mr. Korotich, who was present, Mr. Gorbachev's publicized tongue-lashing of the press on Oct. 13 was more of a plea: "Be careful boys; use good judgment.We're standing in gasoline, so don't smoke!" U.S. and northern European diplomats confirm Mr. Korotich's assessment that glasnost is in no immediate danger.In fact, a very high-ranking Soviet official told an American official at a diplomatic dinner that no change in the policy was contemplated.The day after that conversation at the residence of the U.S. ambassador, the Brezhnevite editor of Pravda, Victor Afnasjev, was replaced by a college classmate of Mr. Gorbachev's.Brezhnevite holdovers have more to fear from Mr. Gorbachev than the verbal spanking he gave to the press. At the end of the very week in which Mr. Korotich was called to the Central Committee, Ogonyok was again demonstrating its independence by printing a poll that showed that 35% of the Soviet population, a plurality, believed that Mr. Gorbachev's economic reforms, perestroika, would result in only insignificant change. A good measurement of the popularity of ice-breaker journals like Ogonyok is circulation.When Mr. Korotich took it over in 1986, it sold 250,000 copies; today it sells 3.4 million.Pravda, meanwhile, has retained only 57% of its 1986 readership. Glasnost has made celebrities of men like Mr. Korotich.Prevented by the Communist Party from getting on its slate of nominees for the new Supreme Soviet, he stood as an independent candidate for Congress from his native Ukraine and won with 84% of the vote.The same evening that he was summoned for a warning from the Party, he was cheered by thousands of his supporters at a rally of what can only be called the Korotich party. But as astounding as the changes that have already occurred are, there is a fragility to glasnost.Censorship isn't a Marxist invention.The czars were no civil libertarians.As late as the 1890s, the Russian government prevented any coverage of famines.It even directed newspapers not to publish anything that might stain the honor of the Turkish sultan's wives.So glasnost is not a value woven with steel threads into the fabric of Russian society.It is an admirable public relations program initiated by a single political leader during a four-year blink of history.It is public relations of the highest sophistication, that recognizes that credibility is enhanced by honesty -- up to a point. What is that point?Will Ogonyok begin a series of reports analyzing the failures of perestroika? "I'd be destroying myself," replies Mr. Korotich, who then asks, "What would that accomplish?" His answer reveals his vulnerability -- it also draws the line that Soviet society must cross to enter the normal dialogue of Western culture.It is the line beyond which the press can report not only on the bankruptcy of factories but on the failures of even admirable leaders. Mr. Ayers is editor and publisher of the Anniston, Ala., Star.
Federal Reserve critics used to complain of "stop and go" monetary policies.They claimed that the Fed would first give a green light to the economy by making credit readily available and then turn on the red and bring growth to a screeching halt.But under Alan Greenspan that has changed.A supremely cautious man, the Fed chairman is forever blinking yellow. Indeed, his caution has become legendary within the government.He fusses endlessly over economic statistics, dissecting them in dozens of ways, probing for hours in search of potential problems.After thoroughly digesting reams of information, he often concludes that more data are needed, and when he finally decides to act, his movements sometimes seem excrutiatingly small. Such caution was evident after the recent Friday-the-13th stock market plunge.Some Bush administration officials urged Mr. Greenspan to make an immediate public announcement of his plans to provide ample credit to the markets.But he refused, claiming that he wanted to see what happened Monday morning before making any public statement. Mr. Greenspan's decision to keep quiet also prompted a near-mutiny within the Fed's ranks.A "senior Fed official" spoke on Saturday after the market swoon to both the Washington Post and the New York Times, saying the Fed was prepared to provide as much credit as the markets needed.The statement angered Chairman Greenspan, but it was greeted with applause by the Bush administration and the financial markets.And, while the mutinous Fed member hasn't gone public, some Fed governors, most notably Vice Chairman Manuel Johnson, are known to have disagreed with the chairman's decision to remain silent.Ironically, the anonymous official's comments have earned some plaudits for Mr. Greenspan, who is mistakenly seen as the source.At a hearing last week, Democratic Sen. Chris Dodd of Connecticut told Treasury Secretary Nicholas Brady that "Chairman Greenspan's" announcement over the Oct. 13 weekend was a "very important statement." Mr. Brady hesitantly replied that he wasn't sure whether Mr. Greenspan "made a statement himself, or whether that was a newspaper report." The Fed chairman's caution was apparent again on the Monday morning after the market's plunge, when the central bank took only modest steps to aid the markets.A surprisingly small amount of reserves was added to the banking system.And, by the end of that week, the key federal funds interest rate, which is largely controlled by the Fed, had settled at 8.75%, barely changed from the level of just under 9% that prevailed the previous week. Bush administration officials appear increasingly concerned that Mr. Greenspan is cautious to a fault.Signs of growing weakness in the economy, paired with indications that inflation is staying well under control, have caused them to wonder why the Fed chairman is so grudging in reducing rates. Those concerns aren't expressed in public.In fact, the administration and the Fed have been going out of their way in the past two weeks to dispel any impression that they are at odds, fearing stories about an administration-Fed split added to the stock market's jitters.Still, the split is there. The administration's concerns are understandable.The economy is showing signs of weakness, particularly among manufacturers.Exports, which played a key role in fueling growth over the last two years, seem to have stalled.Factory payrolls and production fell in September, and the auto industry and housing are in a severe crunch. But Mr. Greenspan remains reluctant to loosen policy, partly because he faces a phalanx of presidents of regional Fed banks who oppose credit easing.In addition, the chairman has a wary eye aimed a year or two down the road.Inflation may be stable at the moment, running at about 4.5%.But if the Fed eases too soon, Mr. Greenspan fears, prices may begin to accelerate again next year.Moreover, if the Fed holds tight, it may be able gradually to reduce inflation, moving toward the zero-inflation goal that the Fed chairman embraced in testimony to Congress last week. So far, Mr. Greenspan's cautious approach to policy has served both him and the nation well.His hand on the monetary tiller seems one reason why the economy next month seems highly likely to begin an unprecedented eighth year of peacetime growth without a recession. "We've gotten through two stock market crashes, and we've gone through an election without any major problems," says David Hale, an economist of Kemper Financial Services. "I think you have to give Greenspan a good rating." But such caution is no guarantee against mistakes.The Fed's reluctance to ease credit now could be laying the groundwork for a new recession, perhaps starting early next year.If that happens, Chairman Greenspan could well become an open target.Already, Congress is toying with legislation to curb the Fed's independence.If the economy turns down, such proposals could gain strong momentum.
Switzerland's most famous raider says he isn't one.Werner K. Rey believes fortunes are made by being friendly. And in little more than a decade of being friendly -- and at the same time rocking the staid Swiss business community with some U.S.-style wheeling and dealing -- the 46-year-old Mr. Rey has grown from a modest banker to a billionaire.He achieved this in part with an uncanny talent for getting his foot peacefully in the door of established European companies. His latest coup: September's masterminding of the five billion Swiss-franc ($3.07 billion) merger between Adia S.A., the world's second-largest temporary employment agency, and Inspectorate International S.A., a Rey-controlled product-inspection company. Shareholders must approve the merger at general meetings of the two companies in late November.But approval is almost certain since Mr. Rey and a friendly Adia management are in control. After the transaction, Mr. Rey estimates the value of his 20% stake in the new company, to be held by his Omni Holding AG, will be about 1 billion Swiss francs.This will be his return on an original investment of between 50 million Swiss francs and 80 million Swiss francs.Mr. Rey bought a controlling stake in Inspectorate for 18 million Swiss francs in 1982, building up the little-known engineering company with European and U.S. acquisitions. "I like to succeed," says Mr. Rey during a recent morning of working at home, which he also likes.Home is an estate with green meadows opening onto Lake Geneva and a low-slung house whose rooms overlook the water and offer a view of the French Alps.In the corner of his reception room is a delicate antique desk piled high with dossiers.There is a small Renoir on the wall.Zurich-based magazine Bilanz lists Mr. Rey as having a fortune of about 1.5 billion Swiss francs.Writes Bilanz: "No one in Switzerland ever came so far so fast . . . He was simply the first in this country to realize that treasures were just lying around waiting to be picked up.In short: Rey found companies with weak earnings but rich assets." However, the Swiss financial press in general, as well as many analysts, have had a hard time making up their minds about Mr. Rey and his un-Swiss ways. For Switzerland's most prestigious newspaper, Neue Zuercher Zeitung, Mr. Rey seems destined to remain the "former Bally raider," an image that has proved hard to overcome. In 1976, as an upstart in the eyes of Switzerland's establishment, Mr. Rey laid the foundations of his present-day prominence with an unheard-of raid on Bally, the country's traditional shoemaker. Sitting beside a banker at a luncheon in London, where he was working as a financial consultant, he learned that a large packet of Bally's shares was up for sale.Looking into Bally, he could hardly believe what he saw: a company with enormous real-estate holdings in major European cities and a market capitalization of 28 million Swiss francs; it had 7,000 employees. Investing four million Swiss francs earned from his financial transactions and two million Swiss francs from his parents and his wife, Mr. Rey acquired 20% of Bally's shares. But such tactics were alien to Switzerland in 1976, and still aren't common because of share restrictions that companies are allowed to maintain.Eventually, Mr. Rey was forced to sell his Bally shares to the weapons maker Oerlikon-Buehrle Holding AG as establishment pressure grew on this hostile move into the Swiss old boys' network. Mr. Rey made 50 million Swiss francs on the sale. "Bally was not an unfriendly takeover," he insists.Buying from willing shareholders makes an unfriendly takeover impossible, Mr. Rey contends. "I bought from willing shareholders." Nevertheless, Mr. Rey has been very careful since then to make sure his moves are welcome.And he has worked to shed his raider image. In 1979, his career as an industrialist began with the acquisition of the Swiss metals works Selve, based in Thun.With the nonferrous metals business undermined in Switzerland by tough foreign competition and high domestic costs, this looked like a dull undertaking.But Mr. Rey brought about a merger in the next few years between the country's major producers; the increased efficiency has perked up the industry. Three years later, machinery producer Ateliers de Constructions Mecaniques de Vevey S.A. was to become part of the Rey empire.Once again the company's future looked less than rosy.But after restructuring under new management, the profits began rolling in. A major boost to Mr. Rey's respectability among the Swiss came in 1986 when he sold 60% of his Phibro Bank to the conservative Swiss cantonal banks.They renamed it Swiss Cantobank and are using it to expand abroad.In 1987, Mr. Rey bested leading publishing houses to take over Switzerland's Jean Frey AG, a major producer of magazines and newspapers. And with the recent acquisition of 30% of Winterthur-based machinery manufacturer Gebrueder Sulzer AG, Mr. Rey has enjoyed the status of white knight.Sulzer preferred him to financier Tito Tettamanti, whose secretive raid on the company's stock had led to a bitter battle. Meanwhile, as such strategic investments have mounted, the merchant-banking arm of Mr. Rey's Omni Holding has been busily buying and selling dozens of companies, often after a financial or corporate restructuring. Today, this branch of Mr. Rey's empire runs under the name Omnicorp Offering Services and handles mergers and acquisitions, placement of securities and real estate.In its portfolio are such diverse companies as United Kingdom-based Air Europe; Checkrobot Inc., a U.S. company that makes supermarket checkout machines; Norment Industries, a U.S. manufacturer of securities systems; Com Systems Inc., a U.S. regional telephone company; and major real-estate projects in the U.S. and Europe. For financial analysts, reading Omni's accounts is a tough challenge. "Companies move in and out," says Helga Kern of KK Swiss Investment. Financial analysts note that Mr. Rey is attracted to companies that are undervalued on the basis of their real-estate interests.In August, Omni unexpectedly bought Inspectorate's 80% stake in Harpener AG of West Germany, a land-rich company.The internal transaction within the Rey empire puzzled Harpener's small shareholders, but analysts say it makes sense for Inspectorate-Adia to focus on its main businesses of product inspection and temporary help. Mr. Rey says the move is yet another example of his conservatism.He explains that companies with real estate give "security." The real estate can be used, he points out, as guarantees for bank loans for corporate development. He says he wants to "influence" but not "manage" companies. "I don't want to be like {financier Alan} Bond and the other Australians.I don't want companies to be built around me as a person.I want them to stand alone."
In an age of specialization, the federal judiciary is one of the last bastions of the generalist.A judge must jump from murder to antitrust cases, from arson to securities fraud, without missing a beat. But even on the federal bench, specialization is creeping in, and it has become a subject of sharp controversy on the newest federal appeals court. The Court of Appeals for the Federal Circuit was created in 1982 to serve, among other things, as the court of last resort for most patent disputes.Previously, patent cases moved through the court system to one of the 12 circuit appeals courts.There, judges who saw few such cases and had no experience in the field grappled with some of the most technical and complex disputes imaginable. A new specialty court was sought by patent experts, who believed that the generalists had botched too many important, multimillion-dollar cases.Some patent lawyers had hoped that such a specialty court would be filled with experts in the field.But the Reagan administration thought otherwise, and so may the Bush administration. Since 1984, the president has filled four vacancies in the Federal Circuit court with non-patent lawyers.Now only three of the 12 judges -- Pauline Newman, Chief Judge Howard T. Markey, 68, and Giles Rich, 85 -- have patent-law backgrounds.The latter two and Judge Daniel M. Friedman, 73, are approaching senior status or retirement. Three seats currently are vacant and three others are likely to be filled within a few years, so patent lawyers and research-based industries are making a new push for specialists to be added to the court.Several organizations, including the Industrial Biotechnical Association and the Pharmaceutical Manufacturers Association, have asked the White House and Justice Department to name candidates with both patent and scientific backgrounds.The associations would like the court to include between three and six judges with specialized training. Some of the associations have recommended Dr. Alan D. Lourie, 54, a former patent agent with a doctorate in organic chemistry who now is associate general counsel with SmithKline Beckman Corp. in Philadelphia.Dr. Lourie says the Justice Department interviewed him last July. Their effort has received a lukewarm response from the Justice Department. "We do not feel that seats are reserved (for patent lawyers)," says Justice spokesman David Runkel, who declines to say how soon a candidate will be named. "But we will take it into consideration." The Justice Department's view is shared by other lawyers and at least one member of the court, Judge H. Robert Mayer, a former civil litigator who served at the claims court trial level before he was appointed to the Federal Circuit two years ago. "I believe that any good lawyer should be able to figure out and understand patent law," Judge Mayer says, adding that "it's the responsibility of highly paid lawyers (who argue before the court) to make us understand (complex patent litigation)." Yet some lawyers point to Eli Lilly & Co. vs.Medtronic, Inc., the patent infringement case the Supreme Court this month agreed to review, as an example of poor legal reasoning by judges who lack patent litigation experience. (Judge Mayer was not on the three-member panel.) In the Lilly case, the appeals court broadly construed a federal statute to grant Medtronic, a medical device manufacturer, an exemption to infringe a patent under certain circumstances.If the Supreme Court holds in Medtronic's favor, the decision will have billion-dollar consequences for the manufacturers of medical devices, color and food additives and all other non-drug products that required Food & Drug Administration approval. Lisa Raines, a lawyer and director of government relations for the Industrial Biotechnical Association, contends that a judge well-versed in patent law and the concerns of research-based industries would have ruled otherwise.And Judge Newman, a former patent lawyer, wrote in her dissent when the court denied a motion for a rehearing of the case by the full court, "The panel's judicial legislation has affected an important high-technological industry, without regard to the consequences for research and innovation or the public interest." Says Ms. Raines, "(The judgment) confirms our concern that the absence of patent lawyers on the court could prove troublesome."
Friday, October 27, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 5/8% near closing bid, 8 11/16% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 30 to 44 days; 8.25% 45 to 65 days; 8.375% 66 to 89 days; 8% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.575% 30 days; 8.475% 60 days; 8.40% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.40% six months. BANKERS ACCEPTANCES: 8.52% 30 days; 8.35% 60 days; 8.33% 90 days; 8.17% 120 days; 8.08% 150 days; 8% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.80%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.65%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Kidder, Peabody & Co. is trying to struggle back. Only a few months ago, the 124-year-old securities firm seemed to be on the verge of a meltdown, racked by internal squabbles and defections.Its relationship with parent General Electric Co. had been frayed since a big Kidder insider-trading scandal two years ago.Chief executives and presidents had come and gone. Now, the firm says it's at a turning point.By the end of this year, 63-year-old Chairman Silas Cathcart -- the former chairman of Illinois Tool Works who was derided as a "tool-and-die man" when GE brought him in to clean up Kidder in 1987 -- retires to his Lake Forest, Ill., home, possibly to build a shopping mall on some land he owns. "I've done what I came to do" at Kidder, he says. And that means 42-year-old Michael Carpenter, president and chief executive since January, will for the first time take complete control of Kidder and try to make good on some grandiose plans.Mr. Carpenter says he will return Kidder to prominence as a great investment bank. Wall Street is understandably skeptical.Through the first nine months of the year, Kidder ranks a distant 10th among underwriters of U.S. stocks and bonds, with a 2.8% market share, up slightly from 2.5% in the year-earlier period, according to Securities Data Co.It's quite a fall from the early 1980s, when Kidder still was counted as an investment-banking powerhouse.Gary S. Goldstein, president of the Whitney Group, an executive search firm, said: "I'd like to see (Kidder) succeed.But they have to attract good senior bankers who can bring in the business from day one." In 1988, Kidder eked out a $46 million profit, mainly because of severe cost cutting.Its 1,400-member brokerage operation reported an estimated $5 million loss last year, although Kidder expects it to turn a profit this year. In fact, Kidder is a minor player in just about every business it does except computer-driven program trading; in that controversial business, only Morgan Stanley & Co. rivals Kidder.But even that niche is under attack, as several Wall Street firms pulled back from program trading last week under pressure from big investors. Mr. Carpenter, a former consulting-firm executive who has a love for "task forces," says he has done a "complete rethink" of Kidder in recent months.There have been a dizzying parade of studies of the firm's operations.More than 20 new managing directors and senior vice presidents have been hired since January.The firm's brokerage force has been trimmed and its mergers-and-acquisitions staff increased to a record 55 people. Mr. Carpenter says that when he assumes full control, Kidder will finally tap the resources of GE.One of GE's goals when it bought 80% of Kidder in 1986 was to take advantage of "syngeries" between Kidder and General Electric Capital Corp., GE's corporate-finance unit, which has $42 billion in assets.The leveraged buy-out group of GE Capital now reports to Mr. Carpenter. So far, instead of teaming up, GE Capital staffers and Kidder investment bankers have bickered.Yet, says Mr. Carpenter, "We've really started to exploit the synergy between GE Capital and Kidder Peabody." The units have worked on 37 investment banking deals this year, he says, though not all of them have panned out. "We've had a good relationship with GE, which is the first time you could say that -- uh, let me withdraw that.It's been a steadily improving relationship," says Mr. Carpenter. Still, without many actual deals to show off, Kidder is left to stress that it finally has "a team" in place, and that everyone works harder. A month ago, the firm started serving dinner at about 7:30 each night; about 50 to 60 of the 350 people in the investment banking operation have consistently been around that late. "We are working significantly longer and harder than has been the case in the past," says Scott C. Newquist, Kidder's head of investment banking since June. Everywhere, Kidder stresses the "always working" theme.A new in-house magazine, Kidder World -- which will focus on the firm's synergy strategy, says Mr. Carpenter -- confides that on weekends Mr. Newquist "often gets value-added ideas while flying his single-engine Cessna Centurion on the way to Nantucket." The firm's new head of mergers and acquisitions under Mr. Newquist, B.J. Megargel, talks of the opportunity to "rebuild a franchise" at Kidder. "The Kidder name is one of only six or seven that every CEO recognizes as a viable alternative" when considering a merger deal, he says.Now, according to a Kidder World story about Mr. Megargel, all the firm has to do is "position ourselves more in the deal flow." With investment banking as Kidder's "lead business," where do Kidder's 42-branch brokerage network and its 1,400 brokers fit in?Mr. Carpenter this month sold off Kidder's eight brokerage offices in Florida and Puerto Rico to Merrill Lynch & Co., refueling speculation that Kidder is getting out of the brokerage business entirely.Mr. Carpenter denies the speculation.To answer the brokerage question, Kidder, in typical fashion, completed a task-force study.The result: Kidder will focus on rich individual investors and small companies, much closer to the clientele of Goldman, Sachs & Co. than a serve-the-world firm like Merrill Lynch or Shearson Lehman Hutton Inc. Mr. Carpenter notes that these types of investors also are "sophisticated" enough not to complain about Kidder's aggressive use of program trading. As part of the upscale push, Kidder is putting brokers through a 20-week training course, turning them into "investment counselors" with knowledge of corporate finance.They will get "new and improved tools to sell, particularly to the affluent investor," says brokerage chief Charles V. Sheehan. Theoretically, the brokers will then be able to funnel "leads" on corporate finance opportunities to Kidder's investment bankers, possibly easing the longstanding tension between the two camps.However, skeptics caution that this kind of cross-pollination between brokers and investment bankers looks great on paper, but doesn't always happen. Kidder competitors aren't outwardly hostile to the firm, as many are to a tough competitor like Drexel Burnham Lambert Inc. that doesn't have Kidder's long history.However, competitors say that Kidder's hiring binge involving executive-level staffers, some with multiple-year contract guarantees, could backfire unless there are results. The departing Mr. Cathcart says he has no worries about Kidder's future.Mr. Cathcart, who will return to the Quaker Oats Co. board of directors, in addition to his personal ventures, is credited with bringing some basic budgeting and planning discipline to traditionally free-wheeling Kidder.He also improved the firm's compliance procedures for trading. Mr. Cathcart says he has had "a lot of fun" at Kidder, adding the crack about his being a "tool-and-die man" never bothered him. "It was an absolutely marvelous line and one I used many times," he says. Smiling broadly when he talks about Mr. Carpenter, Mr. Cathcart says the new Kidder chief is "going to be recognized shortly as one of the real leaders in the investment-banking business." In coming years, Mr. Cathcart says, Kidder is "gonna hum." Or, as Mr. Carpenter, again drawing on his consulting-firm background, puts it: "We're ready to implement at this point."
In what could prove a major addition to the Philippines' foreign-investment portfolio, a Taiwanese company signed a $180 million construction contract to build the centerpiece of a planned petrochemical complex. Taiwan's USI Far East Corp., a petrochemical company, initialed the agreement with an unidentified Japanese contractor to build a naphtha cracker, according to Alson Lee, who heads the Philippine company set up to build and operate the complex.Mr. Lee, president of Luzon Petrochemical Corp., said the contract was signed Wednesday in Tokyo with USI Far East officials.Contract details, however, haven't been made public.The complex is to be located in Batangas, about 70 miles south of Manila. USI Far East will hold a 60% stake in Luzon Petrochemical, according to papers signed with the Philippine government's Board of Investments. The proposed petrochemical plant would use naphtha to manufacture the petrochemicals propylene and ethylene and their resin derivatives, polypropylene and polyethylene.These are the raw materials used in making plastics. The contract signing represented a major step in the long-planned petrochemical project.At an estimated $360 million, the project would represent the single largest foreign investment in the Philippines since President Corazon Aquino took office in February 1986.It also is considered critical to the country's efforts to both attract other investment from Taiwan and raise heavy industry capabilities.The project has been in and out of the pipeline for more than a decade. However, workers can't break ground until legal maneuvers to block the complex are resolved, moves which caused the signing to remain questionable up to the last moment.As previously reported, a member of the Philippines' House of Representatives has sued to stop the plant.The legislator, Enrique Garcia, had actively backed the plant, but at the original site in his constituency northwest of Manila.The country's Supreme Court dismissed the suit, but Mr. Garcia late last month filed for a reconsideration. In addition, President Aquino has yet to sign into law a bill removing a stiff 48% tax on naphtha, the principal raw material to be used in the cracker. However, at a news conference Thursday, Mrs. Aquino backed the project and said her government was attempting to soothe the feelings of residents at the original site, adjacent to the government's major petroleum refinery in Bataan province. "We have tried our best to tell the people in Bataan that maybe this time it will not go to them, but certainly we will do our best to encourage other investors to go to their province," Mrs. Aquino told Manila-based foreign correspondents. The project appeared to be on the rocks earlier this month when the other major partner in the project, China General Plastics Corp., backed out.China General Plastics, another Taiwanese petrochemical manufacturer, was to have a 40% stake in Luzon Petrochemical. However, Mr. Lee said that USI Far East is confident other investors will take up the slack.He said USI Far East has applied to both the Asian Development Bank and the World Bank's International Finance Corp. for financing that could include equity stakes.
President Bush insists it would be a great tool for curbing the budget deficit and slicing the lard out of government programs.He wants it now. Not so fast, says Rep. Mickey Edwards of Oklahoma, a fellow Republican. "I consider it one of the stupidest ideas of the 20th century," he says. It's the line-item veto, a procedure that would allow the president to kill individual items in a big spending bill passed by Congress without vetoing the entire bill.Whatever one thinks of the idea, it's far more than the budgetary gimmick it may seem at first glance.Rather, it's a device that could send shock waves through the president's entire relationship with Democrats and Republicans alike in Congress, fundamentally enhance the power of the presidency and transform the way the government does its business. President Bush badly wants a line-item veto and has long called for a law giving it to the president.Now the White House is declaring that he might not rely on Congress -- which hasn't shown any willingness to surrender such authority -- to pass the line-item veto law he seeks.White House spokesmen last week said Mr. Bush is considering simply declaring that the Constitution gives him the power, exercising a line-item veto and inviting a court challenge to decide whether he has the right. Although that may sound like an arcane maneuver of little interest outside Washington, it would set off a political earthquake. "The ramifications are enormous," says Rep. Don Edwards, a California Democrat who is a senior member of the House Judiciary Committee. "It's a real face-to-face arm wrestling challenge to Congress." White House aides know it's a step that can't be taken lightly -- and for that reason, the president may back down from launching a test case this year.Some senior advisers argue that with further fights over a capital-gains tax cut and a budget-reduction bill looming, Mr. Bush already has enough pending confrontations with Congress.They prefer to put off the line-item veto until at least next year. Still, Mr. Bush and some other aides are strongly drawn to the idea of trying out a line-item veto.The issue arose last week when Vice President Dan Quayle told an audience in Chicago that Mr. Bush was looking for a test case.White House Press Secretary Marlin Fitzwater confirmed that Mr. Bush was interested in the idea, but cautioned that there wasn't a firm decision to try it. Mr. Bush, former President Reagan and a host of conservative activists have been arguing that a line-item veto would go a long way in restoring discipline to the budget process.They maintain that a president needs the ability to surgically remove pork-barrel spending projects that are attached to big omnibus spending bills.Those bills can't easily be vetoed in their entirety because they often are needed to keep the government operating. Conservatives note that 43 governors have the line-item veto to use on state budgets.More provocatively, some conservative legal theorists have begun arguing that Mr. Bush doesn't need to wait for a law giving him the veto because the power already is implicit in the Constitution. They base their argument on a clause buried in Article I, Section 7, of the Constitution that states: "Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him or . . . disapproved by him. . . ." This clause, they argue, is designed to go beyond an earlier clause specifying that the president can veto a "bill," and is broad enough to allow him to strike out items and riders within bills.Senate Minority Leader Robert Dole (R., Kan.), for one, accepts this argument and earlier this year publicly urged Mr. Bush "to use the line-item veto and allow the courts to decide whether or not it is constitutional." There's little doubt that such a move would be immediately challenged in court -- and that it would quickly make its way to the Supreme Court to be ultimately resolved. "It's a major issue, and they wouldn't want to leave it at a lower level," says Stephen Glazier, a New York attorney whose writings have been instrumental in pushing the idea that a president already has a line-item veto. Rep. Edwards, the California Democrat, is one who pledges that he would immediately challenge Mr. Bush in the courts, arguing a line-item veto would expand a president's powers far beyond anything the framers of the Constitution had in mind. "It puts this president in the legislative business," he declares. "That's not what our fathers had in mind." In addition to giving a president powers to rewrite spending bills meant to be written in Congress, Rep. Edwards argues, a line-item veto would allow the chief executive to blackmail lawmakers. He notes that, as a lawmaker from the San Francisco area, he fights each year to preserve federal funds for the Bay Area Rapid Transit system.If a president had a line-item veto and wanted to force him to support a controversial foreign-policy initiative, Rep. Edwards says, the president could call and declare that he would single-handedly kill the BART funds unless the congressman "shapes up" on the foreign-policy issue. Proponents maintain that a president would choose to use a line-item veto more judiciously than that.But there may be another problem with the device: Despite all the political angst it would cause, it mightn't be effective in cutting the deficit.Big chunks of the government budget, like the entitlement programs of Social Security and Medicare, wouldn't be affected.Governors have found that they have to use the device sparingly to maintain political comity.And it isn't even clear that some pork-barrel projects can be hit with a line-item veto because they tend to be listed in informal conference reports accompanying spending bills rather than in the official bills themselves. Still, proponents contend that the veto would have what Mr. Glazier calls an important "chilling effect" on all manner of appropriations bills.Lawmakers, they say, would avoid putting many spending projects into legislation in the first place for fear of the embarrassment of having them singled out for a line-item veto later. Whatever the outcome of a test case, President Bush would have to move cautiously becase the very attempt would "antagonize not just Democrats but Republicans," says Louis Fisher, a scholar at the Congressional Research Service who specializes in executive-legislative relations.Republicans have as much interest as Democrats in "the way the system works," he notes. Indeed, although a majority of Republican lawmakers favor a line-item veto, some, ranging from liberal Oregon Sen. Mark Hatfield to conservative Rep. Edwards are opposed.Rep. Edwards voices the traditional conservative view that it's a mistake to put too much power in the hands of a single person.Conservatives pushing for a line-item veto now, he notes, may regret it later: "Sometime, you're going to have a Democratic president again" who'll use his expanded powers against those very same conservatives. "Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him, or being disapproved by him, shall be repassed by two-thirds of the Senate and House of Representatives, according to the rules and limitations prescribed in the case of a bill." -- The Constitution, Article I, Section 7, Clause 3
This hasn't been Kellogg Co. 's year.The oat-bran craze has cost the world's largest cereal maker market share.The company's president quit suddenly.And now Kellogg is indefinitely suspending work on what was to be a $1 billion cereal plant. The company said it was delaying construction because of current market conditions.But the Memphis, Tenn., facility wasn't to begin turning out product until 1993, so the decision may reveal a more pessimistic long-term outlook as well. Kellogg, which hasn't been as successful in capitalizing on the public's health-oriented desire for oat bran as rival General Mills Inc., has been losing share in the $6 billion ready-to-eat cereal market.Kellogg's current share is believed to be slightly under 40% while General Mills' share is about 27%. Led by its oat-based Cheerios line, General Mills has gained an estimated 2% share so far this year, mostly at the expense of Kellogg.Each share point is worth about $60 million in sales. Analysts say much of Kellogg's erosion has been in such core brands as Corn Flakes, Rice Krispies and Frosted Flakes, which represent nearly one-third of its sales volume.Kellogg is so anxious to turn around Corn Flakes sales that it soon will begin selling boxes for as little as 99 cents, trade sources say. "Cheerios and Honey Nut Cheerios have eaten away sales normally going to Kellogg's corn-based lines simply because they are made of oats," says Merrill Lynch food analyst William Maguire. "They are not a happy group of people at Battle Creek right now." Kellogg is based in Battle Creek, Mich., a city that calls itself the breakfast capital of the world. Another analyst, John C. Maxwell Jr. of Wheat, First Securities in Richmond, Va., recently went to a "sell" recommendation on Kellogg stock, which closed Friday at $71.75, down 75 cents, in New York Stock Exchange composite trading. "I don't think Kellogg can get back to 40% this year," he said. "Kellogg's main problem is life style.People are reading the boxes and deciding they want something that's `healthy' for you -- oats, bran." Mr. Maxwell said he wouldn't be surprised if, over the next two years or so, General Mills' share increased to 30% or more. In announcing the plant delay, Kellogg Chairman William E. LaMothe said, "Cereal volume growth in the U.S. has not met our expectations for 1989." He said construction wouldn't resume until market conditions warrant it. Kellogg indicated that it has room to grow without adding facilities.The company has five other U.S. plants, including a modern facility at its Battle Creek headquarters known as Building 100, which is to add bran-processing and rice-processing capacity next year. General Mills, meanwhile, finds itself constrained from boosting sales further because its plants are operating at capacity.A large plant in Covington, Ga., is to come on line next year. A Kellogg officer, who asked not to be named, said the Memphis project was "pulled in for a reconsideration of costs," an indication that the ambitious plans might be scaled back in any future construction.Initial cost estimates for the plant, which was to have been built in phases, ranged from $1 billion to $1.2 billion. A company spokesman said it was "possible, but highly unlikely," that the plant might never be built. "As we regain our leadership level where we have been, and as we continue to put new products into the marketplace and need additional capacity, we will look at resuming our involvement with our plan," he said. The new facility was to have been the world's most advanced cereal manufacturing plant, and Kellogg's largest construction project.The company had retained the Fluor Daniel unit of Fluor Corp. as general contractor. But in recent weeks, construction-industry sources reported that early preparation work was slowing at the 185-acre site.Subcontractors said they were told that equipment orders would be delayed.Fluor Daniel already has reassigned most of its work crew, the sources said. Last Friday's announcement was the first official word that the project was in trouble and that the company's plans for a surge in market share may have been overly optimistic.Until recently, Kellogg had been telling its sales force and Wall Street that by 1992 it intended to achieve a 50% share of market, measured in dollar volume. Although he called current market conditions "highly competitive," Mr. LaMothe, Kellogg's chairman and chief executive officer, forecast an earnings increase for the full year.Last year, the company earned $480.4 million, or $3.90 a share, on sales of $4.3 billion. As expected, Kellogg reported lower third-quarter earnings.Net fell 16% to $123.1 million, or $1.02 a share, from $145.7 million, or $1.18 a share.Sales rose 4.8% to $1.20 billion from $1.14 billion. The company had a one-time charge of $14.8 million in the latest quarter covering the disposition of certain assets.The company wouldn't elaborate, citing competitive reasons.
The following were among Friday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Sun Microsystems Inc. -- $125 million of 6 3/8% convertible subordinated debentures due Oct. 15, 1999, priced at 84.90 to yield 7.51%.The debentures are convertible into common stock at $25 a share, representing a 24% conversion premium over Thursday's closing price.Rated single-B-1 by Moody's Investors Service Inc. and single-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Goldman, Sachs & Co. Hertz Corp. -- $100 million of senior notes due Nov. 1, 2009, priced at par to yield 9%.The issue, which is puttable back to the company in 1999, was priced at a spread of 110 basis points above the Treasury's 10-year note.Rated single-A-3 by Moody's and triple-B by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets. Canadian Imperial Bank of Commerce (Canada) -- 10 billion yen of 5.7% bonds due Nov. 17, 1992, priced at 101 1/4 to yield 5.75% less full fees, via LTCB International Ltd. Fees 1 3/8.
General Motors Corp. 's general counsel hopes to cut the number of outside law firms the auto maker uses from about 700 to 200 within two years. Harry J. Pearce, named general counsel in May 1987, says the reduction is a cost-cutting measure and an effort to let the No. 1 auto maker's 134-lawyer in-house legal department take on matters it is better equipped and trained to handle.GM trimmed about 40 firms from its approved local counsel list, Mr. Pearce says. The move is consistent with a trend for corporate legal staffs to do more work in-house, instead of farming it out to law firms.Mr. Pearce set up GM's first in-house litigation group in May with four lawyers, all former assistant U.S. attorneys with extensive trial experience.He intends to add to the litigation staff.Among the types of cases the in-house litigators handle are disputes involving companies doing business with GM and product-related actions, including one in which a driver is suing GM for damages resulting from an accident. Mr. Pearce has also encouraged his staff to work more closely with GM's technical staffs to help prevent future litigation.GM lawyers have been working with technicians to develop more uniform welding procedures -- the way a vehicle is welded has a lot to do with its durability.The lawyers also monitor suits to identify specific automobile parts that cause the biggest legal problems. Mr. Pearce says law firms with the best chance of retaining or winning business with GM will be those providing the highest-quality service at the best cost -- echoing similar directives from GM's auto operations to suppliers. This doesn't necessarily mean larger firms have an advantage; Mr. Pearce said GM works with a number of smaller firms it regards highly.Mr. Pearce has shaken up GM's legal staff by eliminating all titles and establishing several new functions, including a special-projects group that has made films on safety and drunk driving. FEDERAL PROSECUTORS are concluding fewer criminal cases with trials. That's a finding of a new study of the Justice Department by researchers at Syracuse University.David Burnham, one of the authors, says fewer trials probably means a growing number of plea bargains.In 1980, 18% of federal prosecutions concluded at trial; in 1987, only 9% did. The study covered 11 major U.S. attorneys' offices -- including those in Manhattan and Brooklyn, N.Y., and New Jersey -- from 1980 to 1987. The Justice Department rejected the implication that its prosecutors are currently more willing to plea bargain. "Our felony caseloads have been consistent for 20 years," with about 15% of all prosecutions going to trial, a department spokeswoman said.The discrepancy is somewhat perplexing in that the Syracuse researchers said they based their conclusions on government statistics. "One possible explanation for this decline" in taking cases to trial, says Mr. Burnham, "is that the number of defendants being charged with crimes by all U.S. attorneys has substantially increased." In 1980, the study says, prosecutors surveyed filed charges against 25 defendants for each 100,000 people aged 18 years and older.In 1987, prosecutors filed against 35 defendants for every 100,000 adults. Another finding from the study: Prosecutors set significantly different priorities.The Manhattan U.S. attorney's office stressed criminal cases from 1980 to 1987, averaging 43 for every 100,000 adults.But the New Jersey U.S. attorney averaged 16.On the civil side, the Manhattan prosecutor filed an average of only 11 cases for every 100,000 adults during the same period; the San Francisco U.S. attorney averaged 79. The study is to provide reporters, academic experts and others raw data on which to base further inquiries. IMELDA MARCOS asks for dismissal, says she was kidnapped. The former first lady of the Philippines, asked a federal court in Manhattan to dismiss an indictment against her, claiming among other things, that she was abducted from her homeland.Mrs. Marcos and her late husband, former Philippines President Ferdinand Marcos, were charged with embezzling more than $100 million from that country and then fraudulently concealing much of the money through purchases of prime real estate in Manhattan. Mrs. Marcos's attorneys asked federal Judge John F. Keenan to give them access to all U.S. documents about her alleged abduction.The U.S. attorney's office, in documents it filed in response, said Mrs. Marcos was making the "fanciful -- and factually unsupported -- claim that she was kidnapped into this country" in order to obtain classified material in the case.The office also said Mrs. Marcos and her husband weren't brought to the U.S. against their will after Mr. Marcos was ousted as president.The prosecutor quoted statements from the Marcoses in which they said they were in this country at the invitation of President Reagan and that they were enjoying the hospitality of the U.S. Lawyers for Mrs. Marcos say that because she was taken to the U.S. against her wishes, the federal court lacks jurisdiction in the case. THE FEDERAL COURT of appeals in Manhattan ruled that the dismissal of a 1980 indictment against former Bank of Crete owner George Koskotas should be reconsidered.The indictment, which was sealed and apparently forgotten by investigators until 1987, charges Mr. Koskotas and three others with tax fraud and other violations.He made numerous trips to the U.S. in the early 1980s, but wasn't arrested until 1987 when he showed up as a guest of then-Vice President George Bush at a government function.A federal judge in Manhattan threw out the indictment, finding that the seven-year delay violated the defendant's constitutional right to a speedy trial.The appeals court, however, said the judge didn't adequately consider whether the delay would actually hurt the chances of a fair trial.Mr. Koskotas is fighting extradition proceedings that would return him to Greece, where he is charged with embezzling more than $250 million from the Bank of Crete.His attorney couldn't be reached for comment. PRO BONO VOLUNTARISM: In an effort to stave off a plan that would require all lawyers in New York state to provide twenty hours of free legal aid a year, the state bar recommended an alternative program to increase voluntary participation in pro bono programs.The state bar association's policy making body, the House of Delegate, voted Saturday to ask Chief Judge Sol Wachtler to give the bar's voluntary program three years to prove its effectiveness before considering mandatory pro bono. "We believe our suggested plan is more likely to improve the availability of quality legal service to the poor than is the proposed mandatory pro bono plan and will achieve that objective without the divisiveness, distraction, administrative burdens and possible failure that we fear would accompany an attempt to impose a mandatory plan," said Justin L. Vigdor of Rochester, who headed the bar's pro bono study committee. DALLAS AND HOUSTON law firms merge: Jackson & Walker, a 130-lawyer firm in Dallas and Datson & Scofield, a 70-lawyer firm in Houston said they have agreed in principle to merge.The consolidated firm, which would rank among the 10 largest in Texas, would operate under the name Jackson & Walker.The merger must be formally approved by the partners of both firms but is expected to be completed by year end.Jackson & Walker has an office in Fort Worth, Texas, and Dotson & Scofield has an office in New Orleans. PILING ON?Piggybacking on government assertions that General Electric Co. may have covered up fraudulent billings to the Pentagon, two shareholders have filed a civil racketeering suit against the company.The suit was filed by plaintiffs' securities lawyer Richard D. Greenfield in U.S. District Court in Philadelphia.He seeks damages from the company's 15 directors on grounds that they either "participated in or condoned the illegal acts . . . or utterly failed to carry out their duties as directors." GE is defending itself against government criminal charges of fraud and false claims in connection with a logistics-computer contract for the Army.The trial begins today in federal court in Philadelphia.The government's assertions of the cover-up were made in last minute pretrial motions.GE, which vehemently denies the government's allegations, denounced Mr. Greenfield's suit. "It is a cheap-shot suit -- procedurally defective and thoroughly fallacious -- which was hurriedly filed by a contingency-fee lawyer as a result of newspaper reports," said a GE spokeswoman.She added that the company was considering bringing sanctions against Mr. Greenfield for making "grossly inaccurate and unsupported allegations."
As competition heats up in Spain's crowded bank market, Banco Exterior de Espana is seeking to shed its image of a state-owned bank and move into new activities. Under the direction of its new chairman, Francisco Luzon, Spain's seventh largest bank is undergoing a tough restructuring that analysts say may be the first step toward the bank's privatization. The state-owned industrial holding company Instituto Nacional de Industria and the Bank of Spain jointly hold a 13.94% stake in Banco Exterior.The government directly owns 51.4% and Factorex, a financial services company, holds 8.42%.The rest is listed on Spanish stock exchanges. Some analysts are concerned, however, that Banco Exterior may have waited too long to diversify from its traditional export-related activities.Catching up with commercial competitors in retail banking and financial services, they argue, will be difficult, particularly if market conditions turn sour. If that proves true, analysts say Banco Exterior could be a prime partner -- or even a takeover target -- for either a Spanish or foreign bank seeking to increase its market share after 1992, when the European Community plans to dismantle financial barriers. With 700 branches in Spain and 12 banking subsidiaries, five branches and 12 representative offices abroad, the Banco Exterior group has a lot to offer a potential suitor. Mr. Luzon and his team, however, say they aren't interested in a merger.Instead, they are working to transform Banco Exterior into an efficient bank by the end of 1992. "I want this to be a model of the way a public-owned company should be run," Mr. Luzon says. Banco Exterior was created in 1929 to provide subsidized credits for Spanish exports.The market for export financing was liberalized in the mid-1980s, however, forcing the bank to face competition.At the same time, many of Spain's traditional export markets in Latin America and other developing areas faced a sharp decline in economic growth. As a result, the volume of Banco Exterior's export credit portfolio plunged from 824 billion pesatas ($7.04 billion) as of Dec. 31, 1986, to its current 522 billion pesetas. The other two main pillars of Banco Exterior's traditional business -- wholesale banking and foreign currency trading -- also began to crumble under the weight of heavy competition and changing client needs. The bank was hamstrung in its efforts to face the challenges of a changing market by its links to the government, analysts say.Until Mr. Luzon took the helm last November, Banco Exterior was run by politicians who lacked either the skills or the will to introduce innovative changes.But Mr. Luzon has moved swiftly to streamline bureaucracy, cut costs, increase capital and build up new areas of business. "We've got a lot to do," he acknowledged. "We've got to move quickly." In Mr. Luzon's first year, the bank eliminated 800 jobs.Now it says it'll trim another 1,200 jobs over the next three to four years.The bank employs 8,000 people in Spain and 2,000 abroad. To strengthen its capital base, Banco Exterior this year issued $105 million in subordinated debt, launched two rights issues and sold stock held in its treasury to small investors. The bank is now aggressively marketing retail services at its domestic branches.Last year's drop in export credit was partially offset by a 15% surge in lending to individuals and small and medium-sized companies. Though Spain has an excess of banks, analysts say the country still has one of the most profitable markets in Europe, which will aid Banco Exterior with the tough tasks it faces ahead. Expansion plans also include acquisitions in growing foreign markets.The bank says it's interested in purchasing banks in Morocco, Portugal and Puerto Rico.But the bank's retail activities in Latin America are likely to be cut back. Banco Exterior was one of the last banks to create a brokerage house before the four Spanish stock exchanges underwent sweeping changes in July.The late start may be a handicap for the bank as Spain continues to open up its market to foreign competition. But Mr. Luzon contends that the experienced team he brought with him from Banco Bilbao Vizcaya, where he was formerly director general, will whip the bank's capital market division into shape by the end of 1992.The bank also says it'll use its international network to channel investment from London, Frankfurt, Zurich and Paris into the Spanish stock exchanges.
The head of the nation's largest car-dealers group is telling dealers to "just say no" when auto makers pressure them to stockpile cars on their lots. In an open letter that will run today in the trade journal Automotive News, Ron Tonkin, president of the National Car Dealers Association, says dealers should cut their inventories to no more than half the level traditionally considered desirable. Mr. Tonkin, who has been feuding with the Big Three since he took office earlier this year, said that with half of the nation's dealers losing money or breaking even, it was time for "emergency action." U.S. car dealers had an average of 59 days' supply of cars in their lots at the end of September, according to Ward's Automotive Reports.But Mr. Tonkin said dealers should slash stocks to between 15 and 30 days to reduce the costs of financing inventory. His message is getting a chilly reception in Detroit, where the Big Three auto makers are already being forced to close plants because of soft sales and reduced dealer orders.Even before Mr. Tonkin's broadside, some large dealers said they were cutting inventories. Ford Motor Co. and Chrysler Corp. representatives criticized Mr. Tonkin's plan as unworkable.It "is going to sound neat to the dealer except when his 15-day car supply doesn't include the bright red one that the lady wants to buy and she goes up the street to buy one," a Chrysler spokesman said.
Southern Co. 's Gulf Power Co. unit may plead guilty this week to charges that it illegally steered company money to politicians through outside vendors, according to individuals close to an investigation of the utility holding company. The tentative settlement between Gulf Power, a Pensacola, Fla., electric company, and federal prosecutors would mark the end of one part of a wide-ranging inquiry of Southern Co. in the past year.A grand jury has been investigating whether officials at Southern Co. conspired to cover up their accounting for spare parts to evade federal income taxes. The grand jury has also been investigating whether Gulf Power executives violated the federal Utility Holding Company Act, which prohibits certain utilities from making political contributions. The individuals said Gulf Power and federal prosecutors are considering a settlement under which the company would plead guilty to two felony charges and pay fines totaling between $500,000 and $1.5 million.Under one count, Gulf Power would plead guilty to conspiring to violate the Utility Holding Company Act.Under the second count, the company would plead guilty to conspiring to evade taxes. The guilty pleas would be made solely by Gulf Power, the individuals said.No employee or vendor would be involved. A spokesman for Southern Co. would say only that discussions are continuing between Gulf Power and federal prosecutors. "We have no further developments to report," he said.Officials at Gulf Power couldn't be reached for comment.And prosecutors declined to comment. While Southern Co. has been reluctant to discuss the grand jury investigations, Edward L. Addison, chief executive officer, has said the company is prepared to defend its tax and acccounting practices if any charges are brought against it.Morever, Mr. Addison has said Southern Co. and its units don't condone illegal political contributions.Neither Mr. Addison nor any other Southern Co. official has been charged with any wrongdoing in connection with the current inquiries. The probe of Southern Co. has attracted considerable attention this year because of several events that have befallen the company, including the death of a Gulf Power executive in a plane crash and the disappearance of a company vendor who was to be a key grand jury witness. Witnesses have said the grand jury has asked numerous questions about Jacob F. "Jake" Horton, the senior vice president of Gulf Power who died in the plane crash in April.Mr. Horton oversaw Gulf Power's governmental-affairs efforts.On the morning of the crash, he had been put on notice that an audit committee was recommending his dismissal because of invoicing irregularities in a company audit.Investigators have been trying to determine whether the crash was an accident, sabotage or suicide. Gulf Power said in May that an internal audit had disclosed that at least one vendor had used false invoices to fund political causes.But the company said the political contributions had been made more than five years ago.
The Treasury said it plans to sell $2 billion of 51-day cash-management bills today, raising all new cash. The bills will be dated Oct. 31 and will mature Dec. 21, No non-competitive tenders will be accepted.Tenders, available in minimum denominations of $1 million, must be received by noon EST today at Federal Reserve Banks or branches. The Treasury also announced details of this week's unusual bill auction, which has been changed to accommodate the expiration of the federal debt ceiling at midnight tomorrow. The 13-week and 27-week bills will be issued tomorrow rather than Thursday, Nov. 2, as originally planned.The three-month bills will still mature Feb. 1, 1990, and the six-month bills on May 3, 1990. The Treasury also said noncompetitive tenders will be considered timely if postmarked no later than Sunday, Oct. 29, and received no later than tomorrow. The Treasury said it won't be able to honor reinvestment requests from holders of bills maturing Nov. 2 held in the Treasury's book-entry system.The department will make payment for bills maturing on Nov. 2 to all investors who have requested reinvestment of their bills on that date, as well as to all account holders who have previously requested payment.
In Bombay stock market circles, the buzzword is "mega." At least 40 companies are coming to the capital market to raise $6 billion, an amount never thought possible in India. "When they talk mega-issues, they're truly talking mega," says S.A. Dave, chairman of the Securities and Exchange Board of India. "The capital market is booming." But the mega-issues are raising megaquestions about the rapidly evolving Indian capital market.One is whether there is enough money to fund the new issues without depressing stock trading. Moreover, in the relatively unregulated Indian stock markets, investors frequently don't know what they are getting when they subscribe to an issue.A prospectus in India doesn't always tell a potential investor much.Some of the large amounts are being raised by small firms.In addition, once money is raised, investors usually have no way of knowing how it is spent. Some analysts are concerned that the mega-issues, in such an unregulated environment, could lead to a mega-crash. "The rate of failures will be much more than the rate of successes in the mega-projects," says G.S. Patel, a former chairman of the giant, government-run mutual fund, the Unit Trust of India. "They're going to have mega-problems." The Indian stock markets have been on a five-year high, with dips and corrections, since Prime Minister Rajiv Gandhi started liberalizing industry.But the last stock market boom, in 1986, seems small compared with the current rush to market. The $6 billion that some 40 companies are looking to raise in the year ending March 31 compares with only $2.7 billion raised on the capital market in the previous fiscal year.In fiscal 1984, before Mr. Gandhi came to power, only $810 million was raised. This year's biggest issue, $570 million of convertible debentures by engineering company Larsen & Toubro Ltd., is the largest in Indian history.And it isn't the only giant issue: together, the top four issues will raise $1.3 billion.Convertible debentures -- bonds that can later be converted into equity shares -- are the most popular instrument this year, though many companies are also selling nonconvertible bonds or equity shares. These mega-issues are being propelled by two factors, economic and political. In the past, the socialist policies of the government strictly limited the size of new steel mills, petrochemical plants, car factories and other industrial concerns to conserve resources and restrict the profits businessmen could make.As a result, industry operated out of small, expensive, highly inefficient industrial units. When Mr. Gandhi came to power, he ushered in new rules for business.He said industry should build plants on the same scale as those outside India and benefit from economies of scale.If the output was too great for the domestic market, he said, companies should export. India's overregulated businessmen had to be persuaded, but they have started to think big.Some of the projects being funded by the new issues are the first fruits of Mr. Gandhi's policy, and they require more capital than the smaller industrial units built in the past.The industrial revolution has produced an explosion in the capital market, which is a far cheaper source of funds than government-controlled banks, where interest rates for prime borrowers are around 16%. The second factor spurring mega-issues is political.Mr. Gandhi has called general elections for November, and many businessmen fear that he and his Congress (I) Party will lose.Some companies are raising money in anticipation of a government less predictable than Mr. Gandhi's, and possibly more restrictive. The buoyant Bombay rumor mill also says that some of the money raised in the current spate of issues will be used as campaign donations before the elections.No one admits to anything, but India's industrialists have a history of making under-the-table campaign donations. So far, the mega-issues are a hit with investors.Earlier this year, Tata Iron & Steel Co. 's offer of $355 million of convertible debentures was oversubscribed.Essar Gujarat Ltd., a marine construction company, had similar success with a slightly smaller issue.Larsen & Toubro started accepting applications for its giant issue earlier this month; bankers and analysts expect it to be oversubscribed. Still to come are big issues by Bindal Agro Chem Ltd., a petrochemical and agrochemical company, and Usha Rectifier Corp. (India), a semiconductor maker.While many investors are selling parts of their portfolios to buy the new issues, prices on India's 16 stock exchanges are holding up so far. "I don't think it will lead to any chaos in the secondary market," says Mr. Patel, "only a sagging tendency." Says M.J. Pherwani, chairman of the Unit Trust of India: The "markets are headed for growth unheard of and unseen before." But with growth come growing pains, and never has this been clearer on the Indian capital market than now. In the past, the government controlled the markets indirectly, through its tight grip on industry itself.Various ministries decided the products businessmen could produce and how much; and government-owned banks controlled the financing of projects and monitored whether companies came through on promised plans. The government has been content with this far-reaching, subtle form of control, exercised on a case-by-case basis with no clear rules or guidelines.But now, with large amounts being raised from investors, the government's dawdling on regulation and disclosure requirements has a more dangerous aspect.The Securities and Exchange Board of India was set up earlier this year, along the lines of the U.S. Securities and Exchange Commission, but New Delhi hasn't pushed the legislation to make it operational.Mr. Dave, its head, acts cheery and patient, but he makes no bones about the need to get to work. "Mega or non-mega, we feel the prospectus standards need to be considerably improved," he says. "Disclosures are very poor in India." He says the big questions -- "Do you really need this much money to put up these investments?Have you told investors what is happening in your sector?What about your track record? -- "aren't asked of companies coming to market.Instead, he says, most investors have to rely on the rumor-happy Indian press. An example is the biggest offering of them all, Larsen & Toubro's $570 million bond issue.The engineering company was acquired in a takeover earlier this year by the giant Reliance textile group.Although Larsen & Toubro hadn't raised money from the public in 38 years, its new owners frequently raise funds on the local market. (Reliance floated a $357 million petrochemical company in 1988 that was, at the time, the largest public issue in Indian history.) The media has raised questions about Larsen & Toubro's issue, pointing out that it exceeds the company's annual sales and its market capitalization. Even stranger is the case of Usha Rectifier, a semiconductor company with 1988 sales of $28 million that's raising $270 million to build an iron plant. Once the money is raised, it isn't always certain how it is used.Larsen & Toubro, for example, says it's raising $570 million to use as supplier credit on large engineering jobs.Unlike other companies, it hasn't pin-pointed specific projects for the funds.And even when specific projects are described in prospectuses, the money often is used elsewhere, according to analysts. "Someone must monitor where the funds are deployed," says Mr. Dave.Mr. Patel agrees: "There is no proper monitoring and screening of the use of these funds.They're trying to plug the various loopholes, but they're totally unprepared for this." Because of the large amounts of money being raised, the loose disclosure requirements and the casual monitoring of how the money is used, some analysts fear that there could be a few mega-crashes, which could hurt market confidence far more than the small bankruptcies that followed the boom of 1986.The government insists that such a possibility is low.It says that despite loose regulation of the market itself, its longstanding regulation of industry will prevent such crashes. T.T. Ram Mohan contributed to this article.
Lion Nathan Ltd., a New Zealand brewing and retail concern, said Friday that Bond Corp. Holdings Ltd. is "committed" to a transaction whereby Lion Nathan would acquire 50% of Bond's Australian brewing assets. Lion Nathan issued a statement saying it is applying to Australia's National Companies & Securities Commission, the nation's corporate watchdog agency, for a modification to takeover regulations "similar to that obtained by" S.A. Brewing Holdings Ltd. SA Brewing, an Australian brewer, last Thursday was given approval to acquire an option for up to 20% of Bell Resources Ltd., a unit of Bond Corp. Bell Resources is acquiring Bond's brewing businesses for 2.5 billion Australian dollars (US$1.9 billion). S.A. brewing would make a takeover offer for all of Bell Resources if it exercises the option, according to the commission. Bond Corp., a brewing, property, media and resources company, is selling many of its assets to reduce its debts. "Lion Nathan has a concluded contract with Bond and Bell Resources," said Douglas Myers, chief executive of Lion Nathan.
General Motors Corp. and Ford Motor Co. are now going head to head in the markets for shares of Jaguar PLC, as GM got early clearance from the Federal Trade Commission to boost its stake in the British luxury car maker. GM confirmed Friday that it received permission late Thursday from U.S. antitrust regulators to increase its Jaguar holdings past the $15 million level.Ford got a similar go-ahead earlier in October, and on Friday, Jaguar announced that the No. 2 U.S. auto maker had raised its stake to 13.2%, or 24.2 million shares, from 12.4% earlier in the week. A spokesman for GM, the No. 1 auto maker, declined to say how many Jaguar shares that company owns.In late trading Friday, Jaguar shares bucked the downward tide in London's stock market and rose five pence to 725 pence ($11.44).Trading volume was a moderately heavy 3.1 million shares.In the U.S., Jaguar's American depositary receipts were among the most active issues Friday in national over-the-counter trading where they closed at $11.625 each, up 62.5 cents. Analysts expect that the two U.S. auto giants will move quickly to buy up 15% stakes in Jaguar, setting up a potential bidding war for the prestigious Jaguar brand. British government restrictions prevent any single shareholder from going beyond 15% before the end of 1990 without government permission.The British government, which owned Jaguar until 1984, still holds a controlling "golden share" in the company. With the golden share as protection, Jaguar officials have rebuffed Ford's overtures, and moved instead to forge an alliance with GM. Jaguar officials have indicated they are close to wrapping up a friendly alliance with GM that would preserve Jaguar's independence, but no deal has been announced.Ford, on the other hand, has said it's willing to bid for all of Jaguar, despite the objections of Jaguar chairman Sir John Egan.Analysts continued to speculate late last week that Ford may try to force the issue by calling for a special shareholder's meeting and urging that the government and Jaguar holders remove the barriers to a full bidding contest before December 1990.But a Ford spokeswoman in Dearborn said Friday the company hasn't requested such a meeting yet. Individuals close to the situation believe Ford officials will seek a meeting this week with Sir John to outline their proposal for a full bid.Any discussions with Ford could postpone the Jaguar-GM deal, headed for completion within the next two weeks.The GM agreement is expected to retain Jaguar's independence by involving an eventual 30% stake for the U.S. auto giant as well as joint manufacturing and marketing ventures. Jaguar and GM hope to win Jaguar shareholders approval for the accord partly by structuring it in a way that wouldn't preclude a full Ford bid once the golden share expires. "There's either a minority {stake} package capable of getting Jaguar shareholder approval or there isn't," said one knowledgeable individual. "If there isn't, {the deal} won't be put forward" to shareholders. Union sentiment also could influence shareholder reaction to a Jaguar-GM accord.GM's U.K. unit holds crucial talks today with union officials about its consideration of an Ellesmere Port site for its first major engine plant in Britain.One auto-industry union leader said, "If they try to build it somewhere else {in Europe} besides the U.K., they are going to be in big trouble" with unionists over any Jaguar deal.
These are the last words Abbie Hoffman ever uttered, more or less, before he killed himself.And You Are There, sort of: ABBIE: "I'm OK, Jack.I'm OK." (listening) "Yeah.I'm out of bed.I got my feet on the floor.Yeah.Two feet.I'll see you Wednesday? . . . Thursday." He listens impassively. ABBIE (cont'd.): "I'll always be with you, Jack.Don't worry." Abbie lies back and leaves the frame empty. Of course that wasn't the actual conversation the late anti-war activist, protest leader and founder of the Yippies ever had with his brother.It's a script pieced together from interviews by CBS News for a re-enactment, a dramatic rendering by an actor of Mr. Hoffman's ultimately unsuccessful struggle with depression. The segment is soon to be broadcast on the CBS News series "Saturday Night With Connie Chung," thus further blurring the distinction between fiction and reality in TV news.It is the New Journalism come to television. Ms. Chung's program is just one of several network shows (and many more in syndication) that rely on the controversial technique of reconstructing events, using actors who are supposed to resemble real people, living and dead.Ms. Chung's, however, is said to be the only network news program in history to employ casting directors. Abbie Hoffman in this case is to be played by Hollywood actor Paul Lieber, who isn't new to the character.He was Mr. Hoffman in a 1979 Los Angeles production of a play called "The Chicago Conspiracy Trial." Television news, of course, has always been part show-biz.Broadcasters have a healthy appreciation of the role entertainment values play in captivating an audience.But, as CBS Broadcast Group president Howard Stringer puts it, the network now needs to "broaden the horizons of nonfiction television, and that includes some experimentation." Since its premiere Sept. 16, the show on which Ms. Chung appears has used an actor to portray the Rev. Vernon Johns, a civil-rights leader, and one to play a teenage drug dealer.It has depicted the bombing of Pan Am flight 103 over the Scottish town of Lockerbie.On Oct. 21, it did a rendition of the kidnapping and imprisonment of Associated Press correspondent Terry Anderson, who was abducted in March 1985 and is believed to be held in Lebanon.The production had actors playing Mr. Anderson and former hostages David Jacobsen, the Rev. Benjamin Weir and Father Lawrence Jenco. ABC News has similarly branched out into entertainment gimmickry. "Prime Time Live," a new show this season featuring Sam Donaldson and Diane Sawyer, has a studio audience that applauds and that one night (to the embarrassment of the network) waved at the camera like the crowd on "Let's Make a Deal." (ABC stops short of using an "applause" sign and a comic to warm up the audience.The stars do that themselves.) NBC News has produced three episodes of an occasional series produced by Sid Feders called "Yesterday, Today and Tomorrow," starring Maria Shriver, Chuck Scarborough and Mary Alice Williams, that also gives work to actors. Call it a fad.Or call it the wave of the future. NBC's re-creations are produced by Cosgrove-Meurer Productions, which also makes the successful prime-time NBC Entertainment series "Unsolved Mysteries." The marriage of news and theater, if not exactly inevitable, has been consummated nonetheless.News programs, particularly if they score well in the ratings, appeal to the networks' cost-conscious corporate parents because they are so much less expensive to produce than an entertainment show is -- somewhere between $400,000 and $500,000 for a one-hour program.Entertainment shows tend to cost twice that.Re-enactments have been used successfully for several seasons on such syndicated "tabloid TV" shows as "A Current Affair," which is produced by the Fox Broadcasting Co. unit of Rupert Murdoch's News Corp.That show, whose host is Ms. Chung's husband, Maury Povich, has a particular penchant for grisly murders and stories having to do with sex -- the Robert Chambers murder case, the Rob Lowe tapes, what have you. Gerald Stone, the executive producer of "A Current Affair," says, "We have opened eyes to being a little less conservative and more imaginative in how to present the news." Nowhere have eyes been opened wider than at CBS News.At 555 W. 57th St. in Manhattan, one floor below the offices of "60 Minutes," the most successful prime-time news program ever, actors wait in the reception area to audition for "Saturday Night With Connie Chung." CBS News sends scripts to agents, who pass them along to clients.The network deals a lot with unknowns, including Scott Wentworth, who portrayed Mr. Anderson, and Bill Alton as Father Jenco, but the network has some big names to contend with, too.James Earl Jones is cast to play the Rev. Mr. Johns.Ned Beatty may portray former California Gov. Pat Brown in a forthcoming epsiode on Caryl Chessman, the last man to be executed in California, in 1960. "Saturday Night" has cast actors to appear in future stories ranging from the abortion rights of teen-agers to a Nov. 4 segment on a man named Willie Bosket, who calls himself a "monster" and is reputed to be the toughest prisoner in New York. CBS News, which as recently as two years ago fired hundreds of its employees in budget cutbacks, now hires featured actors beginning at $2,700 a week.That isn't much compared with what Bill Cosby makes, or even Connie Chung for that matter (who is paid $1.6 million a year and who recently did a guest shot of her own on the sitcom "Murphy Brown").But the money isn't peanuts either, particularly for a news program. CBS News is also re-enacting the 1979 Three Mile Island nuclear accident in Middletown, Pa., with something less than a cast of thousands.It is combing the town of 10,000 for about 200 extras.On Oct. 20, the town's mayor, Robert Reid, made an announcement on behalf of CBS during half-time at the Middletown High School football game asking for volunteers. "There was a roll of laughter through the stands," says Joe Sukle, the editor of the weekly Press and Journal in Middletown. "They're filming right now at the bank down the street, and they want shots of people getting out of cars and kids on skateboards.They are approaching everyone on the street and asking if they want to be in a docudrama." Mr. Sukle says he wouldn't dream of participating himself: "No way.I think re-enactments stink." Though a re-enactment may have the flavor, Hollywood on the Hudson it isn't.Some producers seem tentative about the technique, squeamish even.So the results, while not news, aren't exactly theater either, at least not good theater.And some people do think that acting out scripts isn't worthy of CBS News, which once lent prestige to the network and set standards for the industry. In his review of "Saturday Night With Connie Chung," Tom Shales, the TV critic of the Washington Post and generally an admirer of CBS, wrote that while the show is "impressive, . . . one has to wonder if this is the proper direction for a network news division to take." Re-creating events has, in general, upset news traditionalists, including former CBS News President Richard S. Salant and former NBC News President Reuven Frank, former CBS News anchorman Walter Cronkite and the new dean of the Columbia University Graduate School of Journalism, Joan Konner.Says she: "Once you add dramatizations, it's no longer news, it's drama, and that has no place on a network news broadcast. . . . They should never be on.Never." Criticism of the Abbie Hoffman segment is particularly scathing among people who knew and loved the man.That includes his companion of 15 years, Johanna Lawrenson, as well as his former wife, Anita.Both women say they also find it distasteful that CBS News is apparently concentrating on Mr. Hoffman's problems as a manic-depressive. "This is dangerous and misrepresents Abbie's life," says Ms. Lawrenson, who has had an advance look at the 36-page script. "It's a sensational piece about someone who is not here to defend himself." Mrs. Hoffman says that dramatization "makes the truth flexible.It takes one person's account and gives it authenticity." CBS News interviewed Jack Hoffman and his sister, Phyllis, as well as Mr. Hoffman's landlord in Solebury Township, Pa.Also Jonathan Silvers, who collaborated with Mr. Hoffman on two books. Mr. Silvers says, "I wanted to be interviewed to get Abbie's story out, and maybe talking about the illness will do some good." The executive producer of "Saturday Night With Connie Chung," Andrew Lack, declines to discuss re-creactions as a practice or his show, in particular. "I don't talk about my work," he says.The president of CBS News, David W. Burke, didn't return numerous telephone calls. One person close to the process says it would not be in the best interest of CBS News to comment on a "work in progress," such as the Hoffman re-creation, but says CBS News is "aware" of the concerns of Ms. Lawrenson and Mr. Hoffman's former wife.Neither woman was invited by CBS News to participate in a round-table discussion about Mr. Hoffman that is to follow the re-enactment. Mr. Lieber, the actor who plays Mr. Hoffman, says he was concerned at first that the script would "misrepresent an astute political mind, one that I admired," but that his concerns were allayed.The producers, he says, did a good job of depicting someone "who had done so much, but who was also a manic-depressive."
Dentsu Inc., the world's largest advertising agency on the strength of its dominance in the Japanese market, is setting its sights on overseas expansion. Last year, Dentsu started HDM, a joint network with U.S. ad agency Young & Rubicam and Eurocom of France.A few months ago, Dentsu acquired 69% of Australian agency Fortune Communication Holdings Ltd. for 5.9 million Australian dollars (US$4.6 million).Dentsu has U.S. subsidiaries, but they keep low profiles. Now, the giant marketing company, which holds 25% of Japan's 4.4 trillion yen ($30.96 billion) advertising industry, is considering the acquisition of an advertising network in the U.S. or Europe.What is driving Dentsu's international expansion largely is the need to keep up with its Japanese clients as they grow in the U.S. and Europe. "If we don't do something . . . we won't be able to catch up with demand," says a Dentsu spokesman. "Our president said acquisition is an effective method." Last year, Dentsu's foreign business accounted for less than 10% of total billings, but the company is aiming at 20% in the near future.So far, it appears cautious about taking the big step.For example, the spokesman says Dentsu has been approached by banks and securities companies a number of times to invest in the troubled British marketing group Saatchi & Saatchi PLC.But he said Dentsu hasn't looked seriously at Saatchi. Though Dentsu says it has no concrete acquisition plans or deadlines, it is laying the groundwork for international growth.It is setting up a special team in charge of international markets and training workers to do business abroad. For the year ended March 31, Dentsu sales rose 19% to $8.9 billion from $7.5 billion, and net income jumped 59% to $102 million from $64 million.Dentsu's billings last year were larger than those of Young & Rubicam, the world's second-largest ad agency, according to a survey by the publication Advertising Age. But success overseas in unfamiliar markets could be trickier than for other industries such as manufacturers.On its own, Dentsu's muscle in Japan may count for little in major foreign markets when seeking non-Japanese clients.Thus, an acquisition may prove the necessary course. But Japanese agencies are cautious about expanding abroad because client relationships are different.Japanese agencies do business with rival clients in the same industry, a practice "that would be unacceptable by traditional Western conflict rules," says Roy Warman, the London chief executive of Saatchi & Saatchi's communications division. Although acquiring a foreign company would expand Japanese advertising agencies' business to foreign clients, many clients would also be Japanese companies expanding overseas, says the Dentsu spokesman.But the different business system would make it hard for Dentsu to provide these Japanese companies the same kind of services they do in Japan.
John Labatt Ltd. said it plans a private placement of 150 million Canadian dollars (US$127.5 million) in preferred shares, to be completed around Nov. 1. Proceeds will be used to reduce short-term debt at the beer and food concern, said Robert Vaux, vice president, finance. The preferred shares will carry a floating annual dividend equal to 72% of the 30-day bankers' acceptance rate until Dec. 31, 1994.Thereafter, the rate will be renegotiated.Mr. Vaux said that if no agreement is reached, other buyers will be sought by bid or auction.The shares are redeemable after the end of 1994. Mr. Vaux said the share issue is part of a strategy to strengthen Labatt's balance sheet in anticipation of acquisitions to be made during the next 12 to 18 months.Labatt's has no takeover bids outstanding currently, he said. Lead underwriter to the issue is Toronto Dominion Securities Inc.
Retailers in the West and parts of the South are entering the critical Christmas shopping season with more momentum than those in other regions. In a new report, the International Council of Shopping Centers said sales of general merchandise in the West for the first seven months of 1989 rose 6.6% above year-earlier levels. Sales increased a more modest 4.8% in the South and 4.4% in the Midwest.But sales in the oil-patch state of Texas surged 12.9% and sales in South Carolina jumped 10.6% in the period, the New York trade group said. In the Northeast, however, sales declined 0.4% in the period, with sales in New England falling 2.6%. The numbers show that "we don't have a monolithic economy," said Isaac Lagnado, council research director. "There are a lot of have and have-not markets." Sales nationally rose 3.9% through July, the latest month for which the figures are available, the council said. The Northern California earthquake and Hurricane Hugo are likely to temporarily damp sales growth in the West and South Carolina.But Mr. Lagnado predicted the regional trends would continue through Christmas. "The big mo is as much of a factor in retailing as in politics," he said. The Christmas quarter is important to retailers because it represents roughly a third of their sales and nearly half of their profits. The council's report is based on data the trade group buys from the U.S. Census Bureau.The information on 125 metropolitan markets is supplied by retailers such as Sears, Roebuck & Co. and K mart Corp. as well as closely held concerns such as R.H. Macy & Co.The council plans to release its regional reports monthly. Mr. Lagnado said strength in employment appears to have the biggest impact on sales growth.El Paso, Austin and Fort Worth, the three strongest retail markets in the nation, are all located in Texas, where employment grew a relatively strong 2%.Massachusetts, which has lost jobs in the computer and defense-related industries, was the weakest link in bleak New England. The results reflect a reversal in the fortunes of the regions during the past two years.In 1987, the West had the slowest sales growth, and the South and the Midwest were first and second respectively, according to the council. Mr. Lagnado said that although retailers probably won't ever recover sales lost because of the California quake and Hurricane Hugo, they could see some benefits later on.Stores such as Sears that sell big-ticket durable goods might actually get a boost as consumers rush to replace items lost in the disasters, he said.
This maker of electronic devices said it replaced all five incumbent directors at a special meeting called by Milton B. Hollander, whose High Technology Holding Co. of Stamford, Conn. acquired most of its 49.4% stake in Newport in August.Elected as directors were Mr. Hollander, Frederick Ezekiel, Frederick Ross, Arthur B. Crozier and Rose Pothier.Removed from office were George Pratt, Robert E. Davis, Norman Gray, John Virtue, corporate secretary, and Barrett B. Weekes, chairman, president and chief executive officer.Newport officials didn't respond Friday to requests to discuss the changes at the company but earlier, Mr. Weekes had said Mr. Hollander wanted to have his own team on the board.
Insurers may see claims resulting from the San Francisco earthquake totaling nearly $1 billion -- far less than the claims they face from Hurricane Hugo -- but the recent spate of catastrophes should jolt property insurance rates in coming months. The property claims service division of the American Insurance Services Group estimated insured losses from the earthquake at $960 million.This estimate doesn't include claims under workers' compensation, life, health disability and liability insurance and damage to infrastructure such as bridges, highways and public buildings. The estimated earthquake losses are low compared with the $4 billion in claims that insurers face from Hurricane Hugo, which ripped through the Caribbean and the Carolinas last month.That's because only about 30% of California homes and businesses had earthquake insurance to cover the losses. However, insurance brokers and executives say that the combination of the Bay area earthquake, Hugo and last week's explosion at the Phillips Petroleum Co. 's refinery in Pasadena, Texas, will cause property insurance and reinsurance rates to jump. Other insurance rates such as casualty insurance, which would cover liability claims, aren't likely to firm right away, says Alice Cornish, an industry analyst with Northington Research in Avon, Conn.She believes the impact of losses from these catastrophes isn't likely to halt the growth of the industry's surplus capital next year. Property reinsurance rates are likely to climb first, analysts and brokers believe. "The reinsurance market has been bloodied by disasters" in the U.S. as well as in Great Britain and Europe, says Thomas Rosencrants, director of research at Interstate/Johnson Lane Inc. in Atlanta. Insurers typically retain a small percentage of the risks they underwrite and pass on the rest of the losses.Insurers buy this insurance protection for themselves by giving up a portion of the premiums they collect on a policy to another firm -- a reinsurance company, which, in turn, accepts a portion of any losses resulting from this policy.Insurers, such as Cigna Corp., Transamerica Corp, and Aetna Life & Casualty Co., buy reinsurance from other U.S.-based companies and Lloyd's of London for one catastrophe at a time. After Hugo hit, many insurers exhausted their reinsurance coverage and had to tap reinsurers to replace that coverage in case there were any other major disasters before the end of the year. After the earthquake two weeks ago, brokers say companies scrambled to replace reinsurance coverages again and Lloyd's syndicates turned to the London market excess lines for protection of their own. James Snedeker, senior vice president of Gill & Roeser Inc., a New York-based reinsurance broker, says insurers who took big losses this fall and had purchased little reinsurance in recent years will be asked to pay some pretty hefty rates if they want to buy reinsurance for 1990.However, companies with few catastrophe losses this year and already big buyers of reinsurance are likely to see their rates remain flat, or perhaps even decline slightly.Many companies will be negotiating their 1990 reinsurance contracts in the next few weeks. "It's a seller's market," said Mr. Snedeker of the reinsurance market right now. But some large insurers, such as State Farm Mutual Automobile Insurance Co., don't purchase reinsurance, but fund their own program.A few years ago, State Farm, the nation's largest home insurer, stopped buying reinsurance because no one carrier could provide all the coverage that it needed and the company found it cheaper to self-reinsure.The $472 million of losses State Farm expects from Hugo and an additional $300 million from the earthquake are less than 5% of State Farm's $16.7 billion total net worth. Since few insurers have announced what amount of losses they expect to see from the earthquake, it's impossible to get a clear picture of the quake's impact on fourth-quarter earnings, said Herbert Goodfriend at Prudential-Bache Securities Corp. Transamerica expects an after-tax charge of less than $3 million against fourth-quarter net; Hartford Insurance Group, a unit of ITT Corp., expects a $15 million or 10 cents after-tax charge; and Fireman's Fund Corp. expects a charge of no more than $50 million before taxes and after using its reinsurance.
NBI Inc. said that it cannot pay the Oct. 31 dividend on its Series A convertible preferred stock, allowing the stock's holder to convert the shares into as much as 27.7% of NBI's shares outstanding. NBI said that it has the funds to pay the dividend, but that it doesn't have the surplus or profit required under Delaware law for payment of the dividend.All the preferred stock is held by the Yukon Office Supply Stock Ownership Plan. Under terms of the stock, the Yukon ESOP can demand that the stock be redeemed for $4,090,000 on Nov. 30, but NBI said it is legally prohibited from making the redemption.Failure to pay the dividend allows Yukon to convert all or some of its shares into NBI common after Nov. 30, at a conversion price based on NBI's closing stock price. NBI, a maker of word-processing systems, said it can't predict if any of the preferred stock will be converted. NBI also said it has hired Prudential-Bache Securities Inc. as its financial adviser and investment banker to help it restructure financially and improve its balance sheet.
Rally's Inc. said it filed suit in U.S. District Court in Delaware against a group led by Burt Sugarman, seeking to block the investors from buying more shares. Rally's, a Louisville, Ky., fast-food chain, alleges that the three investors, who are directors of the company, broke securities laws because they didn't disclose their intentions to acquire a big Rally's stake. The group, led by Giant Group Ltd. and its chairman, Mr. Sugarman, owns about 45.2% of Rally's.In the Securities and Exchange Commission filings, the group has said it may seek control of Rally's. Mr. Sugarman called the lawsuit "not nice" and said his group will continue to push for control of the company and the removal of certain directors. He asserts that some directors, who have joined forces with company founder James Patterson, have ties to Wendy's, a competing hamburger chain.The Patterson group, which controls about 42% of Rally's shares, also may seek control. Rally's also said it formed a committee of three directors, who aren't associated with either the Patterson or Sugarman groups, to analyze the situation.
Nicaraguan President Daniel Ortega may have accomplished over the weekend what his U.S. antagonists have failed to do: revive a constituency for the Contra rebels. Lawmakers haven't publicly raised the possibility of renewing military aid to the Contras, and President Bush parried the question at a news conference here Saturday, saying only that "if there's an all-out military offensive, that's going to change the equation 180 degrees." But Mr. Ortega's threat over the weekend to end a 19-month cease-fire with the rebels seeking to topple him, effectively elevated the Contras as a policy priority just as they were slipping from the agendas of their most ardent supporters. Senate Majority Leader George Mitchell (D., Maine) said yesterday on NBC-TV's "Meet the Press" that Mr. Ortega's threat was "a very unwise move, particularly the timing of it." The threat came during a two-day celebration in Costa Rica to highlight Central America's progress toward democracy in the region, attended by President Bush, Canadian Prime Minister Brian Mulroney and 14 other Western Hemisphere leaders.Mr. Bush returned to Washington Saturday night. Mr. Ortega announced on Friday that he would end the cease-fire this week in response to the periodic Contra assaults against his army.Saturday, he amended his remarks to say that he would continue to abide by the cease-fire if the U.S. ends its financial support for the Contras.He asked that the remaining U.S. humanitarian aid be diverted to disarming and demobilizing the rebels. Not only did Mr. Ortega's comments come in the midst of what was intended as a showcase for the region, it came as Nicaragua is under special international scrutiny in anticipation of its planned February elections.Outside observers are gathering in Nicaragua to monitor the registration and treatment of opposition candidates.And important U.S. lawmakers must decide at the end of November if the Contras are to receive the rest of the $49 million in so-called humanitarian assistance under a bipartisan agreement reached with the Bush administration in March. The humanitarian assistance, which pays for supplies such as food and clothing for the rebels amassed along the Nicaraguan border with Honduras, replaced the military aid cut off by Congress in February 1988.While few lawmakers anticipated that the humanitarian aid would be cut off next month, Mr. Ortega's threat practically guarantees that the humanitarian aid will be continued. Senate Minority Leader Robert Dole (R., Kan.) said yesterday on "Meet the Press": "I would hope after his {Mr.Ortega's} act yesterday or the day before, we'd have unanimous support for quick action on remaining humanitarian aid." Sen. Dole also said he hoped for unanimous support for a resolution he plans to offer tomorrow denouncing the Nicaraguan leader. While renewing military aid had been considered out of the question, rejected by Congress and de-emphasized by the Bush administration, Mr. Ortega's statement provides Contra supporters with the opportunity to press the administration on the issue. "The administration should now state that if the {February} election is voided by the Sandinistas . . . they should call for military aid," said former Assistant Secretary of State Elliott Abrams. "In these circumstances, I think they'd win." Sen. Mitchell said that congressional Democrats intend to honor the March agreement to give non-lethal support to the Contras through the February elections, although he added that the agreement requires that the Contras not initiate any military action. Mr. Ortega's threat to breach the cease-fire comes as U.S. officials were acknowledging that the Contras have at times violated it themselves.Secretary of State James Baker, who accompanied President Bush to Costa Rica, told reporters Friday: "I have no reason to deny reports that some Contras ambushed some Sandinista soldiers." Mr. Baker's assistant for inter-American affairs, Bernard Aronson, while maintaining that the Sandinistas had also broken the cease-fire, acknowledged: "It's never very clear who starts what." He added that the U.S. has cut off aid to some rebel units when it was determined that those units broke the cease-fire. In addition to undermining arguments in favor of ending Contra aid, Mr. Ortega's remarks also played to the suspicions of some U.S. officials and conservatives outside the government that he is searching for ways to manipulate or void the February elections. Administration officials traveling with President Bush in Costa Rica interpreted Mr. Ortega's wavering as a sign that he isn't responding to the military attacks so much as he is searching for ways to strengthen his hand prior to the elections.Mr. Abrams said that Mr. Ortega is seeking to demobilize the Contras prior to the elections to remove any pressure to hold fair elections. "My sense is what they have in mind is an excuse for clamping down on campaigning" by creating an atmosphere of a military emergency, he said.
Milton Petrie, chairman of Petrie Stores Corp., said he has agreed to sell his 15.2% stake in Deb Shops Corp. to Petrie Stores. In a Securities and Exchange Commission filing, Mr. Petrie said that on Oct. 26 Petrie Stores agreed to purchase Mr. Petrie's 2,331,100 Deb Shops shares.The transaction will take place tomorrow. The filing said Petrie Stores of Secaucus, N.J., is purchasing Mr. Petrie's Deb Shops stake as an investment.Although Petrie Stores has considered seeking to acquire the remaining equity of Deb Stores, it has no current intention to pursue such a possibility, the filing said. Philadelphia-based Deb Shops said it saw little significance in Mr. Petrie selling his stock to Petrie Stores. "We didn't look at it and say, `Oh my God, something is going to happen, '" said Stanley Uhr, vice president and corporate counsel. Mr. Uhr said that Mr. Petrie or his company have been accumulating Deb Shops stock for several years, each time issuing a similar regulatory statement.He said no discussions currently are taking place between the two companies.
October employment data -- also could turn out to be the most confusing. On the surface, the overall unemployment rate is expected to be little changed from September's 5.3%.But the actual head count of non-farm employment payroll jobs is likely to be muddied by the impact of Hurricane Hugo, strikes, and less-than-perfect seasonal adjustments, economists said. The consensus view calls for an overall job gain of 155,000 compared with September's 209,000 increase.But the important factory-jobs segment, which last month plunged by 103,000 positions and raised recession fears, is most likely to be skewed by the month's unusual events. Several other reports come before Friday's jobs data, including: the September leading indicators index, new-home sales and October agricultural prices reports due out tomorrow; the October purchasing managers' index and September construction spending and manufacturers' orders on Wednesday; and October chain-store sales on Thursday.Friday brings the final count on October auto sales. "The employment report is going to be difficult to interpret," said Michael Englund, economist with MMS International, a unit of McGraw-Hill Inc., New York. Mr. Englund added that next month's data isn't likely to be much better, because it will be distorted by San Francisco's earthquake.What's more, he believes seasonal swings in the auto industry this year aren't occurring at the same time as in the past, because of production and pricing differences that are curbing the accuracy of seasonal adjustments built into the employment data. Wednesday's report from the purchasing agents will be watched to see if the index maintains a level below 50%, as it has for the past couple of months.A reading of less than 50% indicates an economy that is generally contracting while a reading above 50% indicates an economy that's expanding. Samuel D. Kahan, chief financial economist at Kleinwort Benson Government Securities Inc., Chicago, said that the purchasers' report is valuable because it often presents the first inkling of economic data for the month.But he added: "Some people use the purchasers' index as a leading indicator, some use it as a coincident indicator.But the thing it's supposed to measure -- manufacturing strength -- it missed altogether last month." David Wyss, chief financial economist at Data Resources Inc., Boston, said that the purchasers' index "does miss occasionally," adding: "When it misses one month it tends to miss the next month, too." The consensus view on September leading indicators calls for a gain of 0.3%, the same as in August.Economists said greatly increased consumer optimism, a larger money supply and higher stock prices helped lift the index.All orders-related components, such as consumer-goods orders and building permits, are thought to have been weaker. Data Resources' Mr. Wyss added that he will be keeping a closer eye than ususal on October chain-store sales.Usually, October "isn't a very interesting month {for retail figures} because school clothes have been bought and people are waiting for December to buy Christmas presents," he said.But Mr. Wyss said he will watch the numbers to get an inkling of whether consumers' general buying habits may slack off as much as their auto-buying apparently has.He noted that higher gasoline prices will help buoy the October totals. Seasonal factors are also expected to have taken their toll on September new-home sales, which are believed to have fallen sharply from August's 755,000 units.Construction spending is believed to have slipped about 0.5% from August levels, although economists noted the rate probably will pick up in the months ahead in response to hurricane and earthquake damage.
Presidio Oil Co. said it signed a definitive agreement to acquire Gulf Canada Resources Ltd. 's U.S. unit for $163 million. Presidio, a Denver oil and gas concern, said it will acquire the properties and operations of Home Petroleum Corp., which includes two regional gas-gathering systems and proved reserves of about nine million barrels of oil and 72 billion cubic feet of natural gas. Presidio said the properties are generally situated in Wyoming, North Dakota, Texas, Oklahoma and Louisiana. Gulf Canada, Calgary, said the transaction is part of its plan to sell non-strategic assets and focus operations on Canada, Indonesia and other international areas. A spokesman for Gulf Canada, which is controlled by Toronto's Reichmann family, said the properties account for about 6% of the company's assets and produce about 5,000 barrels of oil and 35 million cubic feet of gas a day.He said Gulf Canada will likely report an extraordinary gain from the sale in the fourth quarter, but he wouldn't offer a specific estimate. The transaction is expected to close by Nov. 30.
Factory owners are buying new machinery at a good rate this fall, machine tool makers say, but sluggish sales of new cars and trucks raise questions about fourth-quarter demand from the important automotive industry. September orders for machine tools rebounded from the summer doldrums, but remained 7.7% below year-earlier levels, according to figures from NMTBA -- the Association for Manufacturing Technology.Domestic machine tool plants received $303 million of orders last month, up 33% from August's $227.1 million, but still below the $328.2 million of September 1988, NMTBA said. Machine tools are complex machines ranging from lathes to metal-forming presses that are used to shape most metal parts. "Overall demand still is very respectable," says Christopher C. Cole, group vice president at Cincinnati Milacron Inc., the nation's largest machine tool producer. "The outlook is positive for the intermediate to long term." September orders for all U.S. producers, in fact, were slightly above the monthly average for 1988, a good year for the industry. "Aerospace orders are very good," Mr. Cole says. "And export business is still good.While some automotive programs have been delayed, they haven't been canceled." "September was one of the biggest order months in our history," says James R. Roberts, vice president, world-wide sales and marketing, for Giddings & Lewis Inc., Fond du Lac, Wis.At a recent meeting of manufacturing executives, "everybody I talked with was very positive," he says.Most say they plan to spend more on factory equipment in 1990 than in 1989. But sales of North American-made 1990-model cars are running at an annual rate of only six million, down from 7.1 million a year earlier.And truck sales also are off more than 20%.Auto makers, who began deferring some equipment purchases last spring, can be expected to remain cautious about spending if their sales don't pick up, machine tool builders say. Machine tool executives are hopeful, however, that recent developments in Eastern Europe will expand markets for U.S.-made machine tools in that region.There is demand for state-of-the-art machine tools in the Soviet Union and in other Eastern European countries as those nations strive to improve the efficiency of their ailing factories as well as the quality of their goods. However, there's a continuing dispute between machine tool makers and the Defense Department over whether sophisticated U.S. machine tools would increase the Soviet Union's military might. "The Commerce Department says go, and the Defense Department says stop," complains one machine tool producer. If that controversy continues, U.S. machine tool makers say, West German and other foreign producers are likely to grab most of the sales in Eastern Europe. September orders for machining centers, lathes, milling machines, grinders, boring mills and other machines that shape metal by cutting totaled $192.9 million, down 28% from $266.5 million a year earlier, but a 23% increase from August's $156.3 million, NMTBA said. Orders last month for metal-forming presses and other machinery to form metal with pressure surged to $110.1 million, a 78% rise from $61.7 million a year earlier and a 55% gain from $70.9 million in August.Today's presses are large and costly machines, and a few orders can produce a high total for one month that doesn't necessarily indicate a trend. Machine tool shipments last month were $281.2 million, a 24% rise from a year earlier and a 25% increase from August.Shipments have run well ahead of 1988 all year, as machine tool builders produce against relatively good backlogs. U.S. producers had a $2.15 billion backlog of unfilled orders at the end of September.That was up 2.8% from a year earlier, even though orders for the first nine months of 1989 were down 19% from the comparable 1988 period. $2,057,750,000. $675,400,000. $1,048,500,000. $588,350,000.
The New York Mercantile Exchange, the world's chief oil futures marketplace, is at a critical juncture. Several longtime observers of the commodities industry think the fortunes of the Merc over the next decade will be determined to a large extent by how well its new natural gas futures contract does and how successful its new president is in raising the level of compliance by floor traders with exchange and Commodity Futures Trading Commission rules.If the exchange falters in these moves, they say, it might once again fall behind its chief New York competitor, the Commodity Exchange.On Friday, the Merc's board announced that it had approved Sabine Pipe Line Co. 's Henry Hub in Erath, La., as the delivery site for its long-awaited natural gas futures contract.It also said that it would start trading the contract as soon as the CFTC approved it.The CFTC has 90 days to respond to such applications.The Merc first started working on developing this contract in 1984. Only three weeks earlier, the Merc had turned to one of its own executives, 40-year-old R. Patrick Thompson, to replace Rosemary T. McFadden as president.Mr. Thompson is believed to have a mandate from the board of directors to help improve the Merc's tarnished reputation as an exchange whose floor traders don't follow the rules very well. Ms. McFadden had been forced out in July in a bitter power struggle with Z. Lou Guttman, chairman and a longtime floor trader on the exchange.Mr. Guttman told one person familiar with the New York exchanges during the search for a replacement that he was looking for a president who would be "responsive to the needs of the membership and the board." Mr. Thompson first came to the exchange in 1981 and has been executive vice president since March 1988.He previously held posts of senior vice president of compliance and senior vice president and general counsel. By contrast, the Comex in July imported a highly regarded outsider, Arnold F. Staloff, as its president.Mr. Staloff, 44, was a senior officer of the Philadelphia Stock Exchange and is considered a specialist in new financial products. Mr. Thompson isn't bereft of experience with new products, however.For the past two years, he said, he and the exchange's research department have been working on the new natural gas contract, seeking a good delivery site and studying the natural gas market. "Our members are eager to begin trading this contract, so we expect no difficulty in attracting locals to the natural gas pit," he said.The educational effort of teaching companies in the natural gas industry how to use the futures to hedge would have to continue for another a year or two, he added.The Merc's extremely successful contracts in crude oil, gasoline and heating oil have made it the largest futures exchange in New York, and third behind the Chicago Board of Trade and Chicago Mercantile Exchange. In a recent interview, Mr. Thompson said the biggest problem facing all commodity exchanges was one of image.Earlier this year, the U.S. attorney indicted 45 floor traders and one clerk at the two big Chicago exchanges.Federal authorities in New York started investigating exchanges in May, though no indictments have been handed down there.So far they have issued scores of subpoenas, some of which went to members of the New York Merc.Mr. Thompson will have to face some of the consequences of those subpoenas. In a recent General Accounting Office study, the Merc was found to have been the most lax in enforcing exchange rules.It levied the smallest number of suspensions of traders and fines of the four largest commodity exchanges studied over the past five years.It also had both the fewest, and least experienced, investigators per million contracts traded. The Merc received considerable criticism in 1987 when it was discovered that its compliance director, Kevin P. Conway, who then was responsible for policing the exchange's busy oil and metal pits, "was engaged in other personal business activities on Exchange time," including out-of-state trips, according to a New York Merc report prepared last year.Mr. Conway is no longer at the exchange. "We had a management breakdown in 1987 in terms of compliance," Mr. Thompson says. "We recognized the problem and took care of it." He says that even if the natural gas contract boosts volume at the exchange strongly, the 1990 business plan calls for having adequate compliance people to ensure that exchange rules are being followed. For years the five New York exchanges have been talking about cooperating in various aspects of their business in order to improve the efficiency of their operations.Periodically, there has even been talk of mergers between one or more exchanges.So far there is little to show for such efforts. Mr. Thompson believes the case for working together is stronger now than ever. "The cost of competition has become extremely high," he says. "We must find ways to save money for the futures commission merchants who do business on our exchanges." He thinks that progress in cooperation can be made in areas where no vested interests have built up.One of those areas is the development of a hand-held electronic device that would permit floor traders to enter trades as they make them.The GAO has recommended the creation of a system to record trade data so that an independent, verifiable audit trail can be established to prevent customer fraud.The Merc is now cooperating with the Comex in developing such a device to provide such an audit trail.The Chicago exchanges also are working on such a device. Another major electronics problem faces Mr. Thompson -- the creation of a 24-hour trading system that can be used outside normal trading hours.In January, the New York Merc signed a letter of intent with the Chicago Merc as a preliminary step to joining their electronic system called Globex.But in May, the Chicago Merc said it was looking into creating a common system with the Chicago Board of Trade, and it suspended negotiations with the New York Merc. Mr. Thompson says his exchange isn't waiting for the results of the Chicago exchanges' cooperation.It recently began a pilot program to test an electronic trading system called ATS/2, the automated trading system created by the International Commodities Clearing House. Looking ahead to commodity markets this week: Copper Michael Frawley, metals trader for PaineWebber Inc. in New York, said there is good technical support between $1.10 and $1.12 a pound for December copper, which ended Friday at $1.1580 a pound, up 1.6 cents.He views the $1.10 to $1.12 range as a buying opportunity and considers the market oversold. "I think the market could pop up to the $1.22 to $1.25 level without too much difficulty," he said.But he said it won't climb further and he expects it to remain in a trading range between $1.10 and $1.25.He noted that the equity markets will set the tone for the industrial metals this week and traders should keep an eye on Wall Street. William O'Neill, research director for Elders Futures Inc. in New York, said for a rally to occur, there must be demand from the Far East.He added that talk of strike settlements at producing mines has been fully discounted.However, to resume the bull trend, according to Mr. O'Neill, copper would have to close over $1.19.He said there are two reports this week that might affect prices: the purchasing managers report on Wednesday and the unemployment report on Friday. Precious Metals Friday's strong price gains confirmed a turnaround in the precious metals markets, according to PaineWebber's Mr. Frawley. "Most traders will be looking to buy {on} pullbacks," he said. He thought the moves in the metals last week were most influenced by the uncertainty in the equity and other financial markets.According to Mr. Frawley, floor traders say there is good support for December gold in the $374 to $375 per ounce area, around $5.20 an ounce for December silver and in the $485 to $490 an ounce range for January platinum. William O'Neill, research director for Elders Futures Inc. in New York, said the price action for all of last week is the best he has seen on a weekly basis in more than a year.He said last week's activity in gold could portend a move to $390 an ounce for the December contract. He also said traders should keep an eye on the stock market, because "if the stock market rallies, that could spell trouble for the precious metals." He said traders should be on the lookout for how metals producers react to this rally. "I expect to see some selling, but will they kill this one as they have every rally in the recent past" by selling and locking in prices for their production?He noted that for the first time in months there was some light investor interest in the metals. Grains And Soybeans Prices this week will likely be dominated by reports on the progress of the corn and soybean harvest as well as by speculation about more purchases of U.S. crops by the Soviet Union. In recent weeks, warm and dry weather has sped the Midwest harvest and that is permitting farmers to rebuild the stockpiles that were cut by the 1988 drought.If the weather allowed farmers to work in their fields over the weekend, many Midwest grain elevators will probably sell futures contracts today at the Chicago Board of Trade in order to hedge their weekend purchases from farmers.That selling of futures contracts by elevators is what helps keep downward pressure on crop prices during the harvest. Traders will also watch for whether the Soviet Union continues its traditional fall buying of U.S. grain.So far this month, the Soviets have bought about 7.2 million metric tons of U.S. corn. There may be some activity in soybean prices this week as investors try to get rid of the contract for November delivery.Investors usually don't want to take physical delivery of a contract, preferring instead to profit from its price swings and then end any obligation to take delivery or make delivery as it nears expiration.
Wall Street is just about ready to line the bird cage with paper stocks. For three years, a healthy economy and the export-boosting effects of a weak dollar propelled sales and earnings of the big paper companies to record levels.As the good times rolled they more than doubled their prices for pulp, a raw material used in all sorts of paper, to $830 a metric ton this past spring from $380 a ton at the start of 1986. But now the companies are getting into trouble because they undertook a record expansion program while they were raising prices sharply.Third-quarter profits fell at several companies. "Put your money in a good utility or bank stock, not a paper company," advises George Adler of Smith Barney. Other analysts are nearly as pessimistic.Gary Palmero of Oppenheimer & Co. expects a 30% decline in earnings between now and 1991 for "commodity-oriented" paper companies, which account for the majority of the industry.Robert Schneider of Duff & Phelps sees paper-company stock prices falling 10% to 15% in 1990, perhaps 25% if there's a recession. Paper companies concede that business has been off recently.But they attribute much of the weakness to customer inventory reductions.Generally they maintain that, barring a recession and a further strengthening of the dollar against foreign currencies, the industry isn't headed for a prolonged slump. "It won't be an earthshaking drop," a Weyerhaeuser spokesman says. Last week Mr. Adler lowered his rating from hold to "avoid" on Boise Cascade, Champion International, Great Northern Nekoosa, International Paper, Louisiana Pacific and Weyerhaeuser.Oppenheimer's Mr. Palmero, meanwhile, is steering clear of Gaylord Container, Stone Container and Federal Paper Board.Mr. Schneider is cool to Georgia Pacific and Abitibi-Price.Lawrence Ross of PaineWebber would avoid Union Camp. The companies in question believe the analysts are too pessimistic.Great Northern Nekoosa said, "The odds of the dire predictions about us being right are small." International Paper emphasizes that it is better positioned than most companies for the coming overcapacity because its individual mills can make more than one grade of paper. A Boise-Cascade spokesman referred to a speech by Chairman John Fery, in which he said that markets generally are stable, although some risk of further price deterioration exists. Stone Container Chairman Roger Stone said that, unlike for some other paper products, demand for Stone's principal commodity, unbleached containerboard, remains strong.He expects the price for that product to rise even more next year. Gaylord Container said analysts are skeptical of it because it's carrying a lot of debt.Champion International said, "We've gotten our costs down and we're better positioned for any cyclical downturn than we've ever been." Louisiana Pacific and Georgia Pacific said a number of other analysts are recommending them because of their strong wood-products business. Federal Paper Board said, "We're not as exposed as the popular perception of us." The company explained that its main product, bleached paperboard, which goes into some advertising materials and white boxes, historically doesn't have sharp price swings. Because the stock prices of some paper companies already reflect an expected profit slump, PaineWebber's Mr. Ross says he thinks that next year the share prices of some companies may fall at most only 5% to 10%.A company such as Federal Paper Board may be overly discounted and looks "tempting" to him, he says, though he isn't yet recommending the shares. Wall Street isn't avoiding everything connected with paper.Mr. Palmero recommends Temple-Inland, explaining that it is "virtually the sole major paper company not undergoing a major capacity expansion," and thus should be able to lower long-term debt substantially next year. A Temple-Inland spokesman said the company expects record earnings in 1989, and "we're still pretty bullish" on 1990. The analysts say their gloomy forecasts have a flip side.Some take a warm view of consumer-oriented paper companies, which buy pulp from the commodity producers and should benefit from the expected declines in pulp prices.Estimates on how much pulp prices will fall next year currently run between $150 and $250 a metric ton. Analysts agree that the price drop should especially benefit the two big tissue makers, Scott Paper and Kimberly-Clark.A spokesman for Scott says that assuming the price of pulp continues to soften, "We should do well."
Nissan Motor Co. expects net income to reach 120 billion yen (U.S. $857 million) in its current fiscal year, up from 114.6 billion yen in the previous year, Yutaka Kume, president, said. Mr. Kume made the earnings projection for fiscal 1990, ending next March 31, in an interview with U.S. automotive writers attending the Tokyo Motor Show. The executive said that the anticipated earnings increase is fairly modest because Nissan is spending heavily to bolster its dealership network in Japan and because of currency-exchange fluctuations. During the next decade, Mr. Kume said, Nissan plans to boost overseas vehicle production sufficiently to account for a majority of sales outside Japan.Last year, Mr. Kume said, Nissan exported slightly over one million vehicles, and produced 570,000 cars and trucks at its factories in North America, Europe and Australia.But by 1992, he added, Nissan will build one million vehicles a year outside Japan, or sufficient to equal exports. "By the end of the 1990s," he said, "we want to be producing roughly two vehicles overseas for every vehicle that we export from Japan." That will involve a substantial increase in overseas manufacturing capacity, he acknowledged, but didn't provide specific details.
National Intergroup Inc. said it expects to report a charge of $5.3 million related to the sale of its aluminum unit's extrusion division for the third quarter. The company said it has agreed to sell the extrusion division for $15 million to R.D. Werner Co., a closely held firm based in Greenville, Pa. The charge is offset by an after-tax gain of about $30 million in the quarter from the previously announced pact to sell National Aluminum's rolling division. National Intergroup in the year-ago third quarter earned $22.5 million, or 97 cents a share, including a gain of $18 million from the sale of a steel tube company.Revenue was $778.6 million. The company also said it continues to explore all options concerning the possible sale of National Aluminum's 54.5% stake in an aluminum smelter in Hawesville, Ky. The sale of the extrusion division is subject to audit adjustments for working capital changes through the closing. The agreement also provides for potential payments of additional proceeds to National Aluminum over the next two years, depending on the plant's shipping levels. The extrusion unit produces bare and painted custom extrusions for building products and construction industries.In fiscal 1989, it had sales of about $40 million and an operating loss of $1.5 million.
The municipal bond market is bracing for tough times through the end of the year as it struggles to absorb an oversupply of bonds and two of its best customers turn into sellers. Commercial banks and property/casualty insurers, which together own about 36% of all municipal bonds, have been dumping their securities for weeks.Last week, traders said, there were three institutional sellers for every buyer. "Every day we're getting new bid lists" from would-be sellers, one trader said. "Most dealers cannot continue to absorb this supply." As a result, yields on long-term muni bonds now stand at about 95% of long-term Treasury yields, the highest such level in more than two years. "There is incredible negative psychology building in the market," said Donna Avedisian, a vice president at Merrill Lynch & Co. "People are very concerned about who is going to step up to the plate and buy municipal bonds in the absence of institutional buyers." The yield on a group of 25 revenue bonds compiled by the Bond Buyer, a trade publication, now exceeds 7.50%. At this week's New York City bond sale, traders expect yields on the 20-year New York bonds to nearly match the 7.9% yield on 30-year Treasury bonds.For an investor in the 28% federal tax bracket, 7.9% tax-free is the same as 10.38% on a taxable investment.That's a taxable-equivalent yield nearly three percentage points more than the current yield on 30-year Treasury bonds.How quickly things change.This past summer, investors' appetite for municipal bonds seemed insatiable.Individuals eager for tax-free income drove up bond prices, making state and local government debt one of the best-performing types of fixed-income investments during the period. But while analysts say that municipal bonds still offer good value, you wouldn't know it by the way institutional investors are rushing to dump their holdings. Bond market analysts say the institutional selling was triggered by several factors.Big banks such as Chemical Bank and Chase Manhattan, which have been taking heavy charges to expand their Third World loan-loss reserves, aren't looking for tax-exempt income. "We don't need the shelter of tax-free bonds," said a spokeswoman at Chemical. In recent weeks, traders said, Chemical has sold more than $1 billion of tax-free bonds.The spokeswoman confirmed that the bank has significantly reduced its muni holdings, but couldn't immediately confirm the amount. Insurance companies are rushing to sell before the end of the year, when some of their tax benefits associated with municipal bonds will be phased out.There is speculation that property/casualty firms will sell even more munis as they scramble to raise cash to pay claims related to Hurricane Hugo and the Northern California earthquake. Fundamental factors are at work as well.Muni bond holders are worried about the impact of a slowing economy on tax revenue, at a time when many state and local governments already face budget deficits and huge spending needs.The recent natural disasters, and the need of many other cities to rebuild crumbling infrastructure, suggests that supply of new issues will continue to rise sharply -- even as demand tapers off. "There is just so much going on that it's difficult to pick just one factor that's driving the market," said Ronald Ian Heller, vice president at First Chicago Capital Markets Inc., a subsidiary of First Chicago Corp. Some of the recent selling could actually be considered a positive sign.Mutual funds, for example, are said to be selling existing municipal bonds to raise cash to buy new issues.Because municipal bonds yields have risen at a time when interest rates generally have fallen, some portfolio managers are assuming that bonds bought now will appreciate in value as the municipal bond market rebounds. Ms. Avedisian believes that the mutual funds are selling muni bonds that have a negative convexity -- those that have appreciated in price slowly relative to the decline in interest rates.Such bonds, she says, are those that are nearing their call date. But traders said the market's tone could pick up this week if New York City's $787 million bond offering goes well.The offering will include $729 million of 20-year tax-exempt bonds and $57.8 million of taxable bonds.A few weeks ago, New York sold $750 million of tax-exempts. New York City bonds have been beaten down for three straight weeks.On Friday, some issues fell nearly one point, or close to $10 for each $1,000 face amount. The sell-off in New York City bonds was triggered by concerns about the city's financial health and political uncertainty in view of the impending mayoral election.The city's economy is growing weaker and expenditures are rising as tax revenue is falling. "The city has issued so much supply recently that some people are getting a little concerned.They'd like to see some other names in their portfolios," said Michael S. Appelbaum, first vice president at Shearson Lehman Hutton. But he thinks investors may be overreacting to the market's problems.Overall, he says, municipal prices are "very cheap" and represent an "excellent buying opportunity." Friday's Market Activity Treasury bonds fell sharply on confusion about this week's Treasury debt auction and rumors that a major Japanese investor was unloading large amounts of long-term bonds. The Treasury's benchmark 30-year bond ended at a price of 102 2/32, down nearly 5/8 point from Thursday, or about $6.25 for each $1,000 face amount.The issue's yield rose to 7.93% from 7.88%. Late Thursday, the Treasury said it needed to raise $17 billion quickly and would do so by issuing new securities this week. Credit market analysts expected the Treasury to cancel today's three-month and six-month sale and to sell $17 billion of cash management bills. Instead, the Treasury announced it would sell $2 billion of 51-day cash management bills today and said that the weekly sale of $15.6 billion of three-month and six-month bills will take place today, as usual, but the sale will settle tomorrow instead of Thursday. By moving the settlement date ahead, the Treasury can raise money under the $2.87 trillion debt ceiling that is in effect through tomorrow, after which it reverts to $2.8 trillion. The market also was hurt by rumors that Nippon Kangyo Kakumaru, a Japanese brokerage firm, was unloading some of the 30-year bonds it recently purchased.One dealer said the talk was that the firm sold about $500 million of bellwether 30-year bonds. The firm is thought to have purchased up to $3 billion of 30-year bonds in a buying spree on Wednesday and the previous Thursday. Dealers say the firm apparently has wanted to publicize its recent buying and subsequent selling of 30-year bonds by using Cantor Fitzgerald Securities Corp. as a broker.Cantor provides price quotes to Telerate Systems Inc., a widely used electronic system. Nippon Kangyo's moves puzzled traders and created confusion among potential investors, many of whom decided to stay out of the market.As a result of its large-scale buying, some analysts now say that liquidity, or the ability to easily buy and sell, has been constrained in the benchmark Treasury bond issue. In other markets: -- The junk bonds of RJR Nabisco Inc. rallied Friday on news that the company is selling its candy bar brands to Nestle Foods Corp. for $370 million. The sale price, which was above Wall Street expectations, sent many RJR securities up by one point. "It shows that there are buyers of high-quality assets at high prices in today's market," said Robert Long, managing director and head of the high-yield research department at First Boston Corp. Many of the RJR securities, which had been trading near their 52-week lows earlier in the session, bounced back after the company's announcement that it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle Foods, a unit of the Swiss-based food concern.The sale, expected to close before the end of the year, also includes a manufacturing plant in Franklin Park, Ill. RJR's subordinated discount debentures of 2001, which traded as low as 45 Friday, finished the day at 46 7/8.Other RJR securities also closed higher.RJR Holdings Capital Corp. 's 14.7% convertible pay-in-kind securities maturing in 2009 closed 1/2 higher at 86 1/2 after trading as low as 85 1/4. Most other junk bond issues finished a quarter-point lower on rumors that Campeau Corp. was filing for protection from creditors under Chapter 11 of the Bankruptcy Code.A spokesman for Campeau called the rumors "ridiculous." Most investment-grade bonds fell 3/8 to 1/2 point. -- Mortgage securities fell 7/32 to 8/32 but held up better than intermediate Treasurys. Dealers said some defensive investors were buyers of mortgages, as were dealers seeking collateral for REMICs priced earlier last week.Among major issues, Government National Mortgage Association 9% securities for November delivery ended at 98 12/32, down 8/32 point for a yield of about 9.35% to a 12-year average life assumption.
PROGRAM TRADING is being curbed by more securities firms, but big institutional investors are expected to continue the practice, further roiling the stock market.Bowing to criticism, Bear Stearns, Morgan Stanley and Oppenheimer joined PaineWebber in suspending stock-index arbitrage trading for their own accounts.Still, stock-index funds are expected to continue launching big programs through the market. Several Big Board firms are organizing to complain about program trading and the exchange's role in it.The effort is being led by Contel. Personal spending rose 0.2% in September, the smallest gain in a year.The slowdown raises questions about the economy's strength because spending fueled much of the third-quarter GNP growth.Meanwhile, personal income edged up 0.3%. Factory owners are buying new machinery at a healthy rate this fall, machine-tool makers say.But weak car sales raise questions about future demand from the auto sector. Southern's Gulf Power unit may plead guilty this week to charges it illegally steered company money to politicians through third parties.The tentative pact would resolve part of a broad investigation of the Atlanta-based company in the past year. LIN Broadcasting and BellSouth sweetened their plan to merge cellular phone operations, offering LIN holders a special $42-a-share payout.But the new pact will force huge debt on the new firm and could still fail to thwart rival suitor McCaw Cellular. Unisys posted a $648.2 million loss for the third quarter as it moved quickly to take write-offs for various problems and prepare for a turnaround.But some analysts wonder how strong the recovery will be. RJR Nabisco agreed to sell three candy businesses to Nestle for $370 million.The accord helps RJR pay off debt and boosts Nestle's 7% share of the U.S. candy market to 12%. GM and Ford are expected to go head to head in the markets to buy up rival 15% stakes in Jaguar.GM confirmed it received U.S. antitrust clearance to boost its holding. Sansui Electric agreed to sell a 51% stake to Polly Peck of Britain for $110 million.Still, analysts said the accord doesn't suggest Japan is opening up to more foreign takeovers. Kellogg suspended work on a $1 billion cereal plant, indicating a pessimistic outlook by the cereal maker, which has been losing market share. Insurers could see claims totaling nearly $1 billion from the San Francisco earthquake, far less than the $4 billion from Hurricane Hugo. Nashua strengthened its poison-pill plan after announcing a Dutch firm is seeking to buy up to 25% of the New Hampshire copier company. Mobil is cutting back its U.S. oil and gas exploration and production group by up to 15% as part of a restructuring of the business. Markets --- Stocks: Volume 170,330,000 shares.Dow Jones industrials 2596.72, off 17.01; transportation 1190.43, off 14.76; utilities 215.86, up 0.19. Bonds: Shearson Lehman Hutton Treasury index 3406.31, off Commodities: Dow Jones futures index 129.49, up 0.27; spot index 130.80, off 0.24. Dollar: 141.65 yen, off 0.45; 1.8300 marks, off 0.0100.
Jim Pattison Industries Ltd., one of a group of closely held companies owned by entrepreneur James Pattison, said it "intends to seek control" of 30%-owned Innopac Inc., a Toronto packaging concern. Jim Pattison Industries, a holding company with annual sales of about C$1.9 billion, largely from car dealerships and grocery stores, didn't elaborate on the statement, and a company official declined further comment. The company said it currently holds about 4.2 million of Innopac's 13.8 million common shares outstanding, which have an aggregate market value of about 137.8 million Canadian dollars (US$117.3 million). Separately, Innopac reported a fourth-quarter loss of about C$2.6 million, or 18 Canadian cents a share, reflecting inventory write-downs.The results made net income for the year ended Aug. 31 C$2.7 million, or 20 Canadian cents a share, down from C$9.7 million, or 70 Canadian cents a share last year.Revenue was C$291.6 million, up from C$252 million in 1988. Martin Fabi, Innopac's president and chief executive, said Innopac viewed Mr. Pattison's decision to seek control as a "very positive" move. "I'm happy that he feels positively about our company," he said.Mr. Fabi wouldn't say directly whether Mr. Pattison has disclosed potential terms for his planned bid for control. Among other things, Innopac is involved in recycling polystyrene foam products that are often used by fast food chains, such as McDonald's Corp., for food packaging.A joint venture involving units of Innopac and Mobil Corp. earlier this year opened the first U.S. polystyrene recycling plant, in Leominster, Mass.
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.) Thomas Jefferson sold Congress on the idea of the decimal system for currency, thus saving Americans the headaches of pounds, shillings and pence.But he struck out with the decimal system of metric weights and measures the French had invented.Instead, Congress opted for the inches, feet and yards the colonists had brought with them. Americans didn't dislike metrics; they simply ignored them.Scientists felt differently.In 1807, the Swiss mathematician who headed the U.S. Coast and Geodetic Survey made an "iron meter" that he had brought from Europe the standard of measure.By the end of the century scientists had embraced the system. Businessmen took their cue from the engineers.When Congress finally passed the Metric Conversion Act in 1975, industry was far ahead.Because the law made compliance voluntary, it inspired little more than jokes. (The press had a field day with questions about what would happen to "six-footer," "yardstick" and "inchworm.") Today, though the public is barely aware, much of U.S. industry, particularly companies manufacturing or selling overseas, have made metrics routine.General Motors, for example, uses metric terms for its automobile bodies and power trains. (In auto advertising, however, items such as wheelbases are still described in inches.) Farm-machine makers such as Caterpillar and Deere work in the metric system.The liquor industry went metric 10 years ago. The Pentagon has led the charge, particularly as military alliances spread world-wide.New weapons systems will be around until the next century, notes John Tascher, the Defense Department's metric coordinator. Still, like the auto makers, when dealing with Mr. Everyman the Pentagon sticks to the tried and true.Soldiers and sailors are still measured in inches and pounds.
Whittle Communications L.P., which for months has fought a public relations battle with education leaders, said it has signed 500 schools in 24 states to subscribe to the controversial Channel One news program and its sister programs. Channel One, a satellite-delivered daily program supported by advertising, is scheduled to be launched next March.Whittle said its field staff signed up the 500 schools in 238 school districts after only eight weeks and company executives now expect to reach their start-up goal of 1,000 schools before the end of this year. Christopher Whittle, chairman of the Knoxville, Tenn., media company that is 50% owned by Time Warner Inc., said that by December 1990 he expects to have Channel One installed in about 8,000 schools with a potential audience of six million.Installation of the TV system, which includes providing free 19-inch TV sets in classrooms, begins in January. "What we've done in eight weeks shows we won't have enormous difficulties getting to the place we want to be," said Mr. Whittle.He said his sales force is signing up schools at the rate of 25 a day. In California and New York, state officials have opposed Channel One.Mr. Whittle said private and parochial schools in both states will be canvassed to see if they are interested in getting the programs. Subscribing schools get the 12-minute daily Channel One news program, whose four 30-second TV ads during each show have drawn protests from educators. Subscribers also get the Classroom Channel, which will feature ad-free educational programming similar to some public-TV shows, and the Educator's Channel, which will offer instructional programming for teachers and school administrators and will be supported by advertising. Whittle has met some resistance.The Educational Network, as Mr. Whittle has named the three programs, has been offered to 1,290 school districts and Whittle continues to negotiate with 919 districts.About 10% of the school districts approached have rejected the network. Mr. Whittle said that so far, three of the six schools that carried the program in a five-week test last spring have subscribed to the program.One of the test schools, Withrow High School in Cincinnati, rejected the project. John Bruner, associate director of communications for Cincinnati Public Schools, said Channel One was rejected because students watching the program didn't fare particularly better on a 28-question current events quiz than a control school without the program and school absences were almost unchanged during the period when the program was being aired. "The number of correct responses was 45% on the test and school absences didn't change much," said Mr. Bruner. "The pilot program was received well (by teachers and students), but there wasn't reason enough to sign up.We even invited the public to stop by and see the program, but there wasn't much interest." Advertisers are showing interest.Last month, Whittle announced it had sold $150 million in advertising time on the network to national advertisers.Mr. Whittle Friday said several more advertisers have been added.Whittle is spending $150 million initially to launch the network.Installation of satellite dishes, TVs and videocassette equipment will cost the company about $20,000 per school, Mr. Whittle said.
The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report: $15.6 billion of three-month and six-month bills. $2 billion of 51-day cash management bills. Associated Natural Gas Corp. -- 1.4 million common shares, via Dillon Read & Co. B & H Crude Carriers Ltd. -- Four million common shares, via Salomon Brothers Inc. Chemical Banking Corp. -- 14 million common shares, via Goldman, Sachs & Co. Chemex Pharmaceuticals Inc. -- 1.2 million units consisting of two shares of common stock and one common warrant, via PaineWebber Inc. Comcast Corp. -- $150 million convertible debentures, via Merrill Lynch Capital Markets. Energy Service Co. -- 9.5 million common shares, via Alex.Brown & Sons Inc. Harmonia Bancorp Inc. -- 4,750,000 common shares, via Shearson Lehman Hutton Inc. Healthsource Inc. -- Two million common shares, via Kidder, Peabody & Co. Immune Response Corp. -- Three million common shares, via Merrill Lynch. Marsam Pharmaceuticals Inc. -- 1.3 million common shares, via Smith Barney Harris Upham & Co. Potash Corp. of Saskatchewan Inc. -- 13 million common shares, via Merrill Lynch. Municipal New Jersey Wastewater Treatment Trust -- $75,075,000 of various bonds, including $40.86 million Wastewater Treatment insured bonds, Series 1989A, and $34,215,000 Wastewater Treatment bonds, Series 1989B, via competitive bid. Eastern Municipal Water District, Calif. -- $56,565,000 of 1989 certificates of participation (treatment plant projects), via competitive bid. California Health Facilities Financing Authority -- $114 million of health facility revenue bonds (Catholic Healthcare West), Series 1989A, via a First Boston Corp. group. Detroit -- $130 million of distributable state aid bonds, via a Chemical Securities Inc. group. Maryland Community Development Administration, Department of Housing and Community Development -- $80 million of single-family program bonds, 1989 4th and 5th Series, via a Merrill Lynch group. Matagorda County Navigation District No. 1, Texas -- $70,315,000 of pollution control revenue Alternative Minimum Tax (AMT) bonds (South Texas Project Units No. 1 and 2), via a Goldman Sachs group. New York City -- $786,860,000 of bonds, Fiscal 1990 Series C and D, including $729.04 million tax-exempt bonds and $57.82 million taxable bonds, via a Goldman Sachs group. Santa Ana Redevelopment Agency -- $107 million of tax allocation bonds, 1989 Series A-D, via a Donaldson Lufkin & Jenrette Securities Corp. group. Pending Shelby County, Tenn. -- $80 million of refunding bonds, Series 1989, via a First Tennessee Bank group.
Wham! Bam! Twice in two weeks the unraveling of the on-again, off-again UAL buy-out slammed the stock market. Now, stock prices seem to be in a general retreat.Since peaking at 2791.41 on Oct. 9, the Dow Jones Industrial Average has lost 194.69 points, or 7%, closing Friday at 2596.72, down 17.01.The number of issues falling on the New York Stock Exchange each day is eclipsing the number of gainers.And the number of stocks hitting new lows far outstrips the number setting new highs. But why should an iffy $6.79 billion leveraged buy-out deal shake the foundations of the entire stock market? Opinions vary about how important the UAL deal was to the market's health, but analysts generally agree that the market gyrations created as the UAL plan crumbled revealed a fundamental change in investor psychology. "If this had happened a few months ago when the atmosphere was still very positive it wouldn't have been greeted with anything like the impact it has had over the past two weeks," says Dennis Jarrett, a market strategist at Kidder Peabody. There are, of course, analysts who view the near-panic that briefly swept through investors on Oct. 13 and again on Oct. 24 as momentary lapses of good judgment that have only temporarily undermined a healthy stock market.Sure, price action is volatile and that's scary, but all-in-all stocks are still a good place to be, they suggest. The reaction to the UAL debacle "is mindless," says John Connolly, chief market strategist at Dean Witter. "UAL is a small deal as far as the overall market is concerned.The only way you can make it a big deal is to draw linkages that just don't make sense." He suggests, for example, that investors may have assumed that just because UAL couldn't get financing, no leveraged buy-outs can get financing.Carried even further, some investors assumed that since leveraged buy-outs are the only thing propping up stock prices, the market would collapse if no more LBOs could be done. "There will still be deals," argues Mr. Connolly. "There may not be as many and the buyers may not get away with some of the things they've done in the past, but deals won't disappear." He forecasts that the emphasis in mergers and acquisitions may soon return to what he calls "strategic deals, in which somebody is taking over a company not to milk the cash flow, but because it's a good fit." And even without deals, Mr. Connolly figures the market would remain healthy.He notes, for instance, that there hasn't been a merger or acquisition among the 30 stocks in the Dow Jones Industrial Average since 1986, yet that average only three weeks ago hit a record high. "Those stocks are up because their earnings are up and their dividends are up," he says. Even the volatility created by stock index arbitrage and other computer-driven trading strategies isn't entirely bad, in Mr. Connolly's view.For the long-term investor who picks stocks carefully, the price volatility can provide welcome buying opportunities as short-term players scramble frantically to sell stocks in a matter of minutes. "Who can make the better decision, the guy who has 10 seconds to decide what to do or the guy with all the time in the world?" he says. "What on earth does the UAL deal have to do with the price of Walmart, which I was able to buy on Oct. 16 at a very attractive price?" Kidder Peabody's Mr. Jarrett also sees some benefits to the stock market's recent drop. "We've run into a market that was beginning to run out of steam and get frothy," he says. "The balloon had been blown up so big that when somebody came along with a pin -- in this case the UAL deal -- we got a little pop." The pop sobered up investors who had been getting a little too ebullient, says Mr. Jarrett. "It provided an excuse for people to get back to reality and to look at the economic data, especially the third-quarter economic numbers, and to realize that we can't continue to gloss over what is going on in the junk bond market." But he figures that at current levels the stock market is comfortably valued, even with the economy obviously slowing. "Just because we've got some realism back in the market doesn't mean it's going lower from here," he says. "The bottom line is that it's healthy to have this kind of sideways activity, especially after a 30% gain in stock values over the past 12 months." He's now estimating that after a period of consolidation, the Dow Jones Industrial Average will once again forge new highs. Maybe, maybe not.Abby Joseph Cohen, a market strategist at Drexel Burnham Lambert, isn't nearly so sanguine about the market's chances of surging to new highs anytime soon.Her view is that stock prices have three major props: merger and buy-out proposals, earnings and the economic outlook.At current levels of economic activity and earnings, stocks are fairly valued, she says.But any chance for prices to surge above fair value lies in the speculation that accompanies a vigorous merger and buy-out business, and UAL has obviously put a damper on that. "Stocks aren't cheap anymore, there have been some judicial and legislative changes in the merger area and all of this changes the arithmetic of deals," she says. "I'm not saying they've stopped altogether, but future deals are going to be structured differently and bids probably won't be as high." But that's not the only problem for stocks.The other two props -- earnings and the economic outlook -- are troubling, too. "M&A is getting all the headlines right now, but these other things have been building up more gradually," she says.Third-quarter earnings have been generally disappointing and with economic data showing a clear slowing, the outlook for earnings in the fourth quarter and all of 1990 is getting worse. "There are a lot more downward than upward revisions and it looks like people are questioning corporate profits as a means of support for stock prices," she says. With all this, can stock prices hold their own? "The question is unanswerable at this point," she says. "It depends on what happens.If the economy slips into a recession, then this isn't a level that's going to hold." Friday's Market Activity Stock prices tumbled for a third consecutive day as earnings disappointments, a sluggish economy and a fragile junk bond market continued to weigh on investors. The Dow Jones Industrial Average fell 17.01 points to 2596.72 in active trading.Volume on the New York Stock Exchange totaled 170,330,000 shares.Declining issues on the Big Board were far ahead of gainers, 1,108 to 416.For the week the Dow Jones Industrial Average sank 92.42 points, or 3.4%. Oil stocks escaped the brunt of Friday's selling and several were able to post gains, including Chevron, which rose 5/8 to 66 3/8 in Big Board composite trading of 2.4 million shares.The stock's advance reflected ongoing speculation that Pennzoil is accumulating a stake in the company, according to Dow Jones Professional Investor Report. Both companies declined to comment on the rumors, but several industry analysts told the Professional Investor Report they believed it was plausible that Pennzoil may be buying Chevron shares as a prelude to pushing for a restructuring of the company. USX gained 1/2 to 33 3/8 on a report in Business Week magazine that investor Carl Icahn is said to have raised his stake in the oil and steel company to just about 15%.Earlier this month, Mr. Icahn boosted his USX stake to 13.4%. Elsewhere in the oil sector, Exxon rallied 7/8 to 45 3/4; Amoco rose 1/8 to 47; Texaco was unchanged at 51 3/4, and Atlantic Richfield fell 1 5/8 to 99 1/2.Mobil, which said it plans to cut its exploration and production work force by about 8% in a restructuring, dropped 5/8 to 56 1/8. The precious metals sector outgained other Dow Jones industry groups by a wide margin for the second consecutive session.Hecla Mining rose 5/8 to 14; Battle Mountain Gold climbed 3/4 to 16 3/4; Homestake Mining rose 1 1/8 to 16 7/8; Lac Minerals added 5/8 to 11; Placer Dome went up 7/8 to 16 3/4, and ASA Ltd. jumped 3 5/8 to 49 5/8. Gold mining stocks traded on the American Stock Exchange also showed strength.Echo Bay Mines rose 5/8 to 15 7/8; Pegasus Gold advanced 1 1/2 to 12, and Corona Class A gained 1/2 to 7 1/2. Unisys dropped 3/4 to 16 1/4 after posting a third-quarter loss of $4.25 a share, including restructuring charges, but other important technology issues were mixed. Compaq Computer, which had lost 8 5/8 Thursday following a disappointing quarterly report, gained 5/8 to 100 5/8.International Business Machines dropped 7/8 to 99 7/8.Digital Equipment tacked on 1 1/8 to 89 1/8, and Hewlett-Packard fell 3/8 to 49 3/8. Dividend-related trading swelled volume in Merrill Lynch, which closed unchanged at 28 3/8 as 2.7 million shares changed hands.The stock has a 3.5% dividend yield and goes ex-dividend today. Erbamont advanced 1 1/8 to 36 1/2 on 1.9 million shares.Montedison, which owns about 72% of the company's common stock, agreed to buy the rest for $37 a share.Himont, another majority-owned unit of Montedison, added 1 1/4 to 47 1/8. Milton Roy jumped 2 to 18 3/8.Crane said it holds an 8.9% stake in the company and may seek control.Crane dropped 1 1/8 to 21 1/8. Comprehensive Care, which terminated its agreement to merge with First Hospital, dropped 7/8 to 3 7/8.The company's decision was made after First Hospital failed to obtain financing for its offer.
A frozen mountaintop in Tibet may offer an important clue about whether the Earth is warming perilously. Researchers at Ohio State University and Lanzhou Institute of Glaciology and Geocryology in China have analyzed samples of glacial ice in Tibet and say temperatures there have been significantly higher on average over the past half-century than in any similar period in the past 10,000 years. The ice samples are an important piece of evidence supporting theories that the Earth has warmed considerably in recent times, largely because of pollutants in the air, and will warm far more in the century ahead.A substantial warming would melt some of the Earth's polar ice caps, raising the level of the oceans and causing widespread flooding of heavily populated coastal areas. "If you can use data to reconstruct what happened in the past, you have much more confidence in predictions for the future," said Lonnie Thompson, a research scientist at Ohio State who dug for and analyzed the ice samples. To compare temperatures over the past 10,000 years, researchers analyzed the changes in concentrations of two forms of oxygen.These measurements can indicate temperature changes, researchers said, because the rates of evaporation of these oxygen atoms differ as temperatures change. Analysis of ice from the Dunde ice cap, a glacial plateau in Tibet 17,000 feet above sea level, show that average temperatures were higher in 1937-87 than in any other 50-year period since before the last Ice Age, Mr. Thompson said.Some climate models project that interior regions of Asia would be among the first to heat up in a global warming because they are far from oceans, which moderate temperature changes. But the ice-core samples aren't definitive proof that the so-called greenhouse effect will lead to further substantial global heating, Mr. Thompson acknowledged.According to greenhouse theories, increased carbon dioxide emissions, largely caused by burning of fossil fuels, will cause the Earth to warm up because carbon dioxide prevents heat from escaping into space. Skeptics say that if that's the case, temperatures should have risen fairly uniformly over the past century, reflecting the increase in carbon dioxide.Instead, the Dunde ice-core record shows increasing temperatures from 1900 through the early 1950s, decreasing temperatures from the late 1950s through the mid-1970s, then higher temperatures again through last year.Other temperature data show similar unexplained swings. "Climate varies drastically due to natural causes," said Mr. Thompson.But he said ice samples from Peru, Greenland and Antarctica all show substantial signs of warming.
Congress sent to President Bush an $8.5 billion military construction bill that cuts spending for new installations by 16% while revamping the Pentagon budget to move more than $450 million from foreign bases to home-state projects. The fiscal 1990 measure builds on a pattern set earlier this year by House and Senate defense authorizing committees, and -- at a time of retrenchment for the military and concern about the U.S.'s standing in the world economy -- overseas spending is most vulnerable.Total Pentagon requests for installations in West Germany, Japan, South Korea, the United Kingdom and the Philippines, for example, are cut by almost two-thirds, while lawmakers added to the military budget for construction in all but a dozen states at home. The result is that instead of the Pentagon's proposed split of 60-40 between domestic and foreign bases, the reduced funding is distributed by a ratio of approximately 70-30.The extra margin for bases in the U.S. enhances the power of the appropriations committees; meanwhile, lawmakers used their positions to garner as much as six times what the Pentagon had requested for their individual states. House Appropriations Committee Chairman Jamie Whitten (D., Miss.) helped secure $49.7 million for his state, or more than double the Pentagon's budget.West Virginia, home of Senate Appropriations Committee Chairman Robert Byrd, would receive $21.5 million -- four times the military's request.Tennessee and North Carolina, home states of the two Democratic chairmen of the House and Senate military construction subcommittees, receive $243.2 million, or 25% above the Pentagon's request.Though spending for Iowa and Oregon was far less, their increases above Pentagon requests -- 640% and 430%, respectively -- were much greater because of the influence of Republicans at critical junctures. The swift passage of the bill, which cleared the Senate and House on simple voice votes last week, contrasts with the problems still facing a more cumbersome $66.8 billion measure funding housing, environmental, space and veterans programs.By an 84-6 margin, the Senate approved the bulk of the spending Friday, but the bill was then sent back to the House to resolve the question of how to address budget limits on credit allocations for the Federal Housing Administration. The House Democratic leadership could seek to waive these restrictions, but the underlying bill is already under attack for excesses elsewhere.Appropriations committees have used an assortment of devices to disguise as much as $1 billion in spending, and as critics have awakened to these devices, the bill can seem like a wounded caribou trying to make it past ice and wolves to reach safer winter grazing. Much of the excess spending will be pushed into fiscal 1991, and in some cases is temporarily parked in slow-spending accounts in anticipation of being transferred to faster-spending areas after the budget scorekeeping is completed. For example, a House-Senate conference ostensibly increased the National Aeronautics and Space Administration budget for construction of facilities to nearly $592 million, or more than $200 million above what either chamber had previously approved.Part of the increase would provide $90 million toward ensuring construction of a costly solid rocket-motor facility in Mr. Whitten's Mississippi.But as much as $177 million, or nearly 30% of the account, is marked for potential transfers to research, management and flight accounts that are spent out at a faster clip. The bill's managers face criticism, too, for the unusual number of conditions openly imposed on where funds will be spent.Conservatives, embarrassed by Republican influence-peddling scandals at the Department of Housing and Urban Development, have used the issue in an effort to shift blame onto a Democratic-controlled Congress.HUD Secretary Jack Kemp backed an unsuccessful effort to strike such language last week, but received little support from the White House budget office, which wants to protect space-station funding in the bill and has tended to turn its eyes from pork-barrel amendments. Within discretionary funds for community development grants, more than $3.7 million is allocated to six projects in Michigan, home state of a subcommittee chairman, Rep. Bob Traxler.House Speaker Thomas Foley won $510,000 for a project in his district in Washington state, and $1.3 million, earmarked by Sen. Daniel Inouye, amounts to a business subsidy under the title "Hawaiian sugar mills job retention." The powerful Democrat had first wanted to add language relaxing environmental restrictions on two mills on the Hamakua coast that are threatening to close.When this plan met resistance, it was agreed instead to take money from HUD to subsidize needed improvements in two settling ponds for the mills, which employ an estimated 1,500 workers, according to Mr. Inouye's office.
Dennis Farney's Oct. 13 page-one article "River of Despair," about the poverty along the Mississippi, fanned childhood memories of when my parents were sharecroppers in southeastern Arkansas, only a few miles from the river.Although we were white, the same economic factors affected us as affects the black people Mr. Farney writes about.Fortunately, an aunt with a college degree bought a small farm and moved us 50 miles north to good schools and an environment that opened the world of opportunity for me as an eight-year-old. Though I've been blessed with academic degrees and some success in the materialistic world, I've never forgotten or lost contact with those memories of the 1930s. Most of the land in that and other parts of the Delta are now owned by second, third or fourth generations of the same families.These are the families who used -- and sometime abused -- their sharecroppers, people who had no encouragement and little access to an education or training for a better life.Following World War II, when one family with mechanized equipment could farm crops formerly requiring 20 families, the surplus people were dumped into the mainstream of society with no Social Security, no skills in the workplace, no hope for their future except welfare.And today, many of their children, grandchildren and great-grandchildren remain on welfare. In the meantime, the landowners continue receiving generous subsidies that began during New Deal days.Or those who choose not to farm can lease their lands and crop allotments for handsome sums. Farmers in the Midwest and other areas have suffered, but those along the Mississippi continue to prosper with holdings that were built with the sweat of men and women living in economic slavery.And when they were no longer needed, they were turned loose unprepared to build lives of their own. Denton Harris Chairman Metro Bank Atlanta Because the cycle of poverty along the lower Mississippi goes back so many generations, breaking this cycle will be next to impossible.Sadly, the cycle appears not as waves but as a downward spiral.Yet the evidence that we have not hit bottom is found in the fact that we are not yet helping ourselves.The people of the Delta are waiting for that big factory to open, river traffic to increase, government spending to fund job-training programs or public schools to educate apathetic students. Because we refuse to face the tough answers, the questions continue as fodder for the commissions and committees, for the media and politicians.Coffee-shop chatter does not lend itself to solving the problems of racism, teen pregnancy or lack of parental support or guidance. Does the Delta deserve government help in attracting industry when the majority of residents, black and white, do not realize racism alienates potential employers?Should we focus on the region's infant-mortality rate when the vocal right-wingers and the school boards, mayors and legislators prohibit schools from teaching the two ways (abstinence or contraceptives) of decreasing teen pregnancy?Delta problems are difficult, not impossible, to solve -- I am just not convinced that we are ready to solve them yet. Leslie Falls Humphries Little Rock, Ark. I would like to issue a challenge to corporate America.The next time expansion plans are mentioned at the old company and somebody says, "Aw heck, guys, nobody can do it like Japan or South Korea," I wish you would butt in and say, "Hold it, fellas, why don't we compare prices and use our own little Third World country.We would even save on freight." There is no mystery why the Delta originated "Singin' the Blues." Eugene S. Clarke IV Hollandale, Miss. Your story is an insult to the citizens of the Mississippi Delta.Many of the problems you presented exist in every part of this country.Poverty is only two blocks from President Bush's residence.For years, we tried to ignore the problem of poverty, and now that it has gotten out of hand it's a new crusade for the media and our Democratic Congress. Nobody should have to live in such poor conditions as in "Sugar Ditch," but when you travel to Washington, Boston, Chicago or New York, the same problems exist.The only difference is, in those cities the poor are housed in high-rise-project apartments each consisting of one room, with rusty pipes called plumbing, rodents and cockroaches everywhere and nonworking elevators -- and with the building patrolled by gangs and drug dealers. Many middle-class people would love free food, Medicaid insurance, utilities and rent.Then maybe I could stay home and have seven children and watch Oprah Winfrey, like Beulah in the article, instead of having one child and working constantly just to stay above water, like so many families in this country. Dee Ann Wilson Greenville, Miss.
Mobil Corp. is in the midst of cutting back its exploration and production group, which finds and develops oil and gas reserves in the U.S., by as much as 15% as part of a new restructuring of that sector of its business. Management advised employees Friday that it was going to reduce employment in production operations of the group by 8%, or 400 people.The exploration side of the unit has recently undergone a similar overhaul, during which it also lost as many as 400 employees, a company spokesman said in response to questions.Mobil Exploration & Producing U.S. Inc., the group involved, currently has a work force of somewhat less than 5,000. A few years ago, Mobil restructured the entire company during an industrywide shakeout.But since then U.S. oil production has declined and Mobil wants to focus its oil-finding efforts overseas. Mobil alluded to the work-force cuts last week when it took a $40 million charge as part of its third-quarter earnings and attributed it to a restructuring.Mobil officials said that it is unlikely any additional charges related to this move will be taken in future quarters. On Wednesday, Mobil will begin offering separation packages and voluntary retirement in its U.S. production operation.Mobil officials said they have been studying ways of streamlining these operations since early this year. During the coming months, layers of management will be peeled away and regional offices will become more autonomous.For greater efficiency, employees at those locations will be reorganized into teams responsible for managing the properties under their jurisdiction, Mobil said. "The main feature of the new organization is that each local manager will have both the authority and accountability for profitable and technically sound operations," said Charles E. Spruell, president of the Mobil unit. Field offices at New Orleans; Houston; Denver; Midland, Tex.; Bakersfield, Calif.; Oklahoma City; and Liberal, Kan., will be maintained.But the staffs at some of those locations will be slashed while at others the work force will be increased. For instance, employment in Denver will be reduced to 105 from 430.But on the West Coast, where profitable oil production is more likely than in the midcontinent region, the Bakersfield, Calif., office staff of 130 will grow by 175 to 305.The reorganization will "focus on the value and potential of assets," Mr. Spruell said.
Wanted: An investment that's as simple and secure as a certificate of deposit but offers a return worth getting excited about. With $150 billion of CDs maturing this month, a lot of people have been scouring the financial landscape for just such an investment. In April, when many of them bought their CDs, six-month certificates were yielding more than 9%; investors willing to look could find double-digit yields at some banks and thrifts.Now, the nationwide average yield on a six-month CD is just under 8%, and 8.5% is about the best around. But investors looking for alternatives aren't finding it easy.Yields on most fixed-income securities are lower than several months ago.And the stock market's recent gyrations are a painful reminder of the dangers there. "If you're looking for a significantly higher yield with the same level of risk as a CD, you're not going to find it," says Washington financial planner Dennis M. Gurtz. There are, however, some alternatives that income-oriented investors should consider, investment advisers say.Short-term municipal bonds, bond funds and tax-deferred annuities are some of the choices they mention -- and not just as a way to get a higher return. In particular, advisers say, investors may want to look at securities that reduce the risk that CD holders are confronting right now, of having to reinvest the proceeds of maturing short-term certificates at lower rates. A mix of CDs and other holdings may make the most sense. "People should remember their money isn't all or nothing -- they don't need to be shopping for the one interest-rate-type investment and putting all their money in it," says Bethesda, Md., adviser Karen Schaeffer. Here's a look at some of the alternatives: SHORT-TERM MUNICIPALS: Investors with a heavy tax load should take out their calculators.Yields on municipal bonds can be higher than after-tax yields on CDs for maturities of perhaps one to five years.That's because municipal-bond interest is exempt from federal income tax -- and from state and local taxes too, for in-state investors. For an investor paying tax at a 33% rate, a seemingly puny 6% yield on a one-year muni is equivalent to a taxable 9%.Rates approach 6.5% on five-year municipals. Some of the more cautious CD holders might like "pre-refunded" municipals.These securities get top credit ratings because the issuers have put aside U.S. bonds that will be sold to pay off holders when the municipals are retired. "It's a no-brainer: You don't have to worry about diversification; you don't have to worry about quality," says Steven J. Hueglin, executive vice president of the New York bond firm of Gabriele, Hueglin & Cashman Inc. Consider a "laddered" bond portfolio, with issues maturing in, say, 1992, 1993 and 1994, advises Malcolm A. Makin, a Westerly, R.I., financial planner.The idea is to have money rolling over each year at prevailing interest rates. BOND FUNDS: Bond mutual funds offer diversification and are easy to buy and sell.That makes them a reasonable option for investors who will accept some risk of price fluctuation in order to make a bet that interest rates will decline over the next year or so. Buyers can look forward to double-digit annual returns if they are right.But they will have disappointing returns or even losses if interest rates rise instead.Bond resale prices, and thus fund share prices, move in the opposite direction from rates.The price movements get bigger as the maturity of the securities lengthens. Consider, for instance, two bond funds from Vanguard Group of Investment Cos. that were both yielding 8.6% on a recent day.The Short Term Bond Fund, with an average maturity of 2 1/2 years, would deliver a total return for one year of about 10.6% if rates drop one percentage point and a one-year return of about 6.6% if rates rise by the same amount.But, in the same circumstances, the returns would be a more extreme 14.6% and 2.6% for the Vanguard Bond Market Fund, with its 12 1/2-year average maturity. "You get equity-like returns" from bonds if you guess right on rates, says James E. Wilson, a Columbia, S.C., planner.If interest rates don't change, bond fund investors' returns will be about equal to the funds' current yields. DEFERRED ANNUITIES: These insurance company contracts feature some of the same tax benefits and restrictions as non-deductible individual retirement accounts: Investment gains are compounded without tax consequences until money is withdrawn, but a 10% penalty tax is imposed on withdrawals made before age 59 1/2.Aimed specifically at CD holders are so-called CD-type annuities, or certificates of annuity.An interest rate is guaranteed for between one and seven years, after which holders get 30 days to choose another guarantee period or to switch to another insurer's contract without the surrender charges that are common to annuities. Some current rates exceed those on CDs.For instance, a CD-type annuity from North American Co. for Life & Health Insurance, Chicago, offers 8.8% interest for one year or a 9% rate for two years. Annuities are rarely a good idea at age 35 because of the withdrawal restrictions.But at age 55, "they may be a great deal," says Mr. Wilson, the Columbia, S.C., planner. MONEY MARKET FUNDS: That's right, money market mutual funds.The conventional wisdom is to go into money funds when rates are rising and shift out at times such as the present, when rates seem headed down.With average maturities of a month or so, money funds offer fixed share prices and floating returns that track market interest rates, with a slight lag. Still, today's highest-yielding money funds may beat CDs over the next year even if rates fall, says Guy Witman, an editor of the Bond Market Advisor newsletter in Atlanta.That's because top-yielding funds currently offer yields almost 1 1/2 percentage points above the average CD yield. Mr. Witman likes the Dreyfus Worldwide Dollar Money Market Fund, with a seven-day compound yield just under 9.5%.A new fund, its operating expenses are being temporarily subsidized by the sponsor. Try combining a money fund and an intermediate-term bond fund as a low-risk bet on falling rates, suggests Back Bay Advisors Inc., a mutual fund unit of New England Insurance Co.If rates unexpectedly rise, the increasing return on the money fund will partly offset the lower-than-expected return from the bond fund.
Federal drug regulators, concerned over British reports that diabetics have died after shifting from animal to human-based insulin, say they are considering a study to see if similar deaths have occurred here. The United Kingdom reports came from Dr. Patrick Toseland, head of clinical chemistry at Guy's Hospital in London.In a telephone interview Friday, Dr. Toseland said the number of sudden, unexplained deaths of diabetics he had seen this year was 17 compared with just two in 1985.At least six of the deaths occurred among relatively young diabetics who had switched from animal to human insulin within the past year, he said. Dr. Solomon Sobel, director of metabolism and endrocrine drug products for the U.S. Food and Drug Administration, said FDA officials have discussed Dr. Toseland's findings "fairly intensively." While there have been no reports of similar sudden unexplained deaths among diabetics in the U.S., Dr. Sobel said the FDA plans to examine Dr. Toseland's evidence and is considering its own study here. Dr. Toseland, a toxicologist, said he was preparing an article for a British forensic medical journal raising the possibility that the deaths may have occurred after human insulin blunted critical warning signs indicating hypoglycemia, or low blood sugar, which can kill diabetics. The usual warning signs of hypoglycemia include sweating, anxiety and cramps.With proper warning, diabetics can easily raise their blood sugar to safe levels by eating sugar or sugary food. "The anecdotal data certainly shows that some of the people were not aware of the rapid onset of hypoglycemia," Dr. Toseland said. At the U.S. National Institutes of Health, Dr. Robert E. Silverman, chief of the diabetes program branch, said no evidence of unexpected deaths from hypoglycemia had shown up in a study of 1,500 diabetics that has been under way at NIH for five years.However, he said officials conducting the study hadn't been looking for signs of problems related to hypoglycemia unawareness. "We are now monitoring for it much more closely," he said. "We do know there are slight differences in the way human and animal insulins drive down blood sugar," Dr. Sobel said.The human-based drug starts the blood sugar dropping sooner and drives it down faster, he said. "But we don't believe there is enough of a difference to be clinically significant," Dr. Sobel said. Reports of Dr. Toseland's findings in the British press have triggered widespread concern among diabetics there.Both the British Diabetic Association and the Committee on Safety in Medicines -- Britain's equivalent of the U.S. FDA -- recently issued statements noting the lack of hard scientific evidence to support Dr. Toseland's findings.On Friday, the American Diabetes Association issued a similar statement urging the six million U.S. diabetics not to overreact to the British report. "A loss of the warning symptoms of hypoglycemia is a complex problem that is very unlikely to be due simply to the type of insulin used," the American association said. The FDA already requires drug manufacturers to include warnings with insulin products that symptoms of hypoglycemia are less pronounced with human insulin than with animal-based products. Eli Lilly & Co., the Indianapolis-based drug manufacturer, dominates the U.S. human insulin market with its product known as Humulin.Lilly is building plants to make the insulin in Indianapolis and Fagershein, France.In its latest annual report, Lilly said Humulin sales have shown "excellent growth." Lilly officials said they had seen reports of hypoglycemic unawareness among some patients making the shift from animal to human insulin, but didn't know if the problem had caused any deaths.Dr. Leigh Thompson, a Lilly group vice president, said the company's clinical trials of both its animal and human-based insulins indicated no difference in the level of hypoglycemia between users of either product. Dr. Toseland said most of the British diabetics who died had been taking a human-based insulin made by Novo/Nordisk, a Danish manufacturer.None of the diabetics were using Lilly's insulin.
Defense intellectuals have complained for years that the Pentagon cannot determine priorities because it has no strategy.Last April, the new defense secretary, Richard Cheney, acknowledged that, "given an ideal world, we'd have a nice, neat, orderly process.We'd do the strategy and then we'd come around and do the budget.This city doesn't work that way." With a five-year defense plan costing more than $1.6 trillion, it's about time we put together a defense strategy that works in Washington. This won't happen until strategists come down from their ivory tower and learn to work in the real world of limited budgets and uncertain futures.As it is, we identify national goals and the threats to these goals, we shape a strategy to counter these threats, we determine the forces needed to execute the strategy, before finally forging the budgets needed to build and maintain the forces.These procedures consume millions of man-hours of labor and produce tons of paper, and each year, their end product -- the Five Year Defense Plan -- promptly melts away. The graph on the left shows how this happens (see accompanying illustration -- WSJ Oct. 30, 1989).Compare the past eight five-year plans with actual appropriations.The Pentagon's strategists produce budgets that simply cannot be executed because they assume a defense strategy depends only on goals and threats.Strategy, however, is about possibilities, not hopes and dreams.By ignoring costs, U.S. strategists abdicate their responsibility for hard decisions.That puts the real strategic decisions in the hands of others: bean counters, budgeteers, and pork-barrelers.These people have different agendas.And as a result -- as the recent vote by the House to undo Mr. Cheney's program terminations suggests -- the preservation of jobs is becoming the real goal of defense "strategy." How can we turn this situation around? Reform starts in the Pentagon.Strategists should consider the impact of budget uncertainties at the beginning of the planning process.They ought to examine how a range of optimistic to pessimistic budget scenarios would change the defense program.They would then develop priorities by identifying the least painful program cuts as they moved from higher to lower budgets.They would also identify the best way to add programs, should the budget come in at higher levels.This kind of contingency analysis is common in war planning and business planning.There is no reason that it can not be done for defense planning. Two steps are necessary to translate this idea into action.Step 1 cleans up our books.Our five-year plan contains three accounting devices -- negative money, an above guidance management reserve and optimistic inflation estimates -- which understate the spending the Pentagon has committed itself to by almost $100 billion. Negative money was invented in 1988 to make the 1990-94 Five Year Defense Plan conform to the numbers in President Reagan's final budget submission to Congress.That plan exceeded the numbers contained in his budget message by $45 billion.To make the books balance, as is required by law, somebody invented a new budget line item that simply subtracted $45 billion.It is known in the Pentagon as the "negative wedge." The Pentagon argues that the negative wedge is the net effect of $22 billion in the as-yet unidentified procurement reductions that it intends to find in future years and $23 billion in an "above guidance" management reserve that accounts for undefined programs that will materialize in the future. The 1990 plan also assumes inflation will decline to 1.7% by 1994.Most forecasters, including those in the Congressional Budget Office, assume inflation will be in excess of 4% in each of those five years.At that rate, the defense plan is underfunded by $48 billion. By adding the negative wedge and recalculating the remaining program using a more probable inflation estimate, we arrive at a baseline program costing $1.7 trillion between 1990 and 1994. Step 2 examines how four progressively lower budget scenarios would change the baseline and how these changes would affect our national security.The graph on the right (which assumes a 4% rate of inflation), places these scenarios in the context of recent appropriations (see accompanying illustration -- WSJ Oct. 30, 1989).Note how the baseline program assumes a sharp increase in future appropriations.Step 2 will answer the question: What happens if these increases do not materialize? Scenario 1, known as the "Constant Dollar Freeze," reimburses the Pentagon for inflation only -- it slopes upward at 4% per year.This scenario has been the rough position of the U.S. Senate since 1985, and it reduces the baseline by $106 billion between 1990 and 1994. Scenario 3, the "Current Dollar Freeze," has been the approximate position of the House of Representatives for about four years.It freezes the budget at its current level, and forces the Pentagon to eat the effects of inflation until 1994.This reduces the baseline by $229 billion. Scenario 2 extends the recent compromises between the House and the Senate; it splits the difference between Scenarios 1 and 3, by increasing the budget at 2% per year.It reduces the baseline by $169 billion. Finally, Scenario 4 reduces the budget by 2% per year for the next five years -- a total reduction of $287 billion.This can be thought of as a pessimistic prediction, perhaps driven by the sequestering effects of the Gramm-Rudman deficit reduction law or possibly a relaxation of tensions with the Soviet Union. The strategic planners in the Joint Chiefs of Staff would construct the most effective defense program for each scenario, maximizing strengths and minimizing weaknesses.They would conclude their efforts by producing a comprehensive net assessment for each plan -- including the assumptions made, an analysis of its deficiencies and limitations, the impact on national security, and the best strategy for working around these limitations. This exercise would reveal the true cost of a particular program by forcing the strategists to make hard decisions.If, for example, they choose to keep the B-2 Stealth bomber, they would have to sacrifice more and more other programs -- such as carrier battlegroups or army divisions -- as they moved toward lower budget levels.These trade-offs would evolve priorities by revealing when the cost of the B-2 became prohibitive. Some may be tempted to argue that the idea of a strategic review merely resurrects the infamous Zero-Based Budgeting (ZBB) concept of the Carter administration.But ZBB did not involve the strategic planners in the Joint Chiefs of Staff, and therefore degenerated into a bean-counting drill driven by budget politics.Anyway, ZBB's procedures were so cumbersome that everyone involved was crushed under a burden of marginalia.A strategic review is fundamentally different.It would be run by the joint chiefs under simple directions: Produce the best possible force for each budget scenario and provide the Secretary of Defense with a comprehensive net assessment of how that force could be used to achieve U.S. goals. It might be feared that even thinking about lower budgets will hurt national security because the door will be opened to opportunistic budget cutting by an irresponsible Congress.This argument plays well in the atmosphere of gaming and mistrust permeating the Pentagon and Congress, and unfortunately, there is some truth to it.But in the end, it must be rejected for logical as well as moral reasons.To say that the Pentagon should act irresponsibly because acting responsibly will provoke Congress into acting irresponsibly leads to the conclusion that the Pentagon should deliberately exaggerate its needs in the national interest; in other words, that it is justified in committing a crime -- lying to Congress -- because it is morally superior. Strategy is not a game between the Pentagon and Congress; it is the art of the possible in a world where constraints force us to choose between unpleasant or imperfect alternatives.If we want meaningful priorities, we must understand the trade-offs they imply before we make commitments.Strategy is not a separate event in an idealized sequence of discrete events; it is a way of thinking that neutralizes threats to our interests in a manner consistent with our financial, cultural and physical limitations. Mr. Spinney is a permanent Pentagon official.This is a condensed version of an essay that will appear in the January issue of the Naval Institute Proceedings.The views expressed do not reflect the official policy of the Department of Defense.
Although bullish dollar sentiment has fizzled, many currency analysts say a massive sell-off probably won't occur in the near future. While Wall Street's tough times and lower U.S. interest rates continue to undermine the dollar, weakness in the pound and the yen is expected to offset those factors. "By default," the dollar probably will be able to hold up pretty well in coming days, says Francoise Soares-Kemp, a foreign-exchange adviser at Credit Suisse. "We're close to the bottom" of the near-term ranges, she contends. In late Friday afternoon New York trading, the dollar was at 1.8300 marks and 141.65 yen, off from late Thursday's 1.8400 marks and 142.10 yen.The pound strengthened to $1.5795 from $1.5765. In Tokyo Monday, the U.S. currency opened for trading at 141.70 yen, down from Friday's Tokyo close of 142.75 yen. The dollar began Friday on a firm note, gaining against all major currencies in Tokyo dealings and early European trading despite reports that the Bank of Japan was seen unloading dollars around 142.70 yen.The rise came as traders continued to dump the pound after the sudden resignation Thursday of British Chancellor of the Exchequer Nigel Lawson. But once the pound steadied with help from purchases by the Bank of England and the Federal Reserve Bank of New York, the dollar was dragged down, traders say, by the stock-market slump that left the Dow Jones Industrial Average with a loss of 17.01 points. With the stock market wobbly and dollar buyers discouraged by signs of U.S. economic weakness and the recent decline in U.S. interest rates that has diminished the attractiveness of dollar-denominated investments, traders say the dollar is still in a precarious position. "They'll be looking at levels to sell the dollar," says James Scalfaro, a foreign-exchange marketing representative at Bank of Montreal. While some analysts say the dollar eventually could test support at 1.75 marks and 135 yen, Mr. Scalfaro and others don't see the currency decisively sliding under support at 1.80 marks and 140 yen soon. Predictions for limited dollar losses are based largely on the pound's weak state after Mr. Lawson's resignation and the yen's inability to strengthen substantially when there are dollar retreats.With the pound and the yen lagging behind other major currencies, "you don't have a confirmation" that a sharp dollar downturn is in the works, says Mike Malpede, senior currency analyst at Refco Inc. in Chicago. As far as the pound goes, some traders say a slide toward support at $1.5500 may be a favorable development for the dollar this week. While the pound has attempted to stabilize, currency analysts say it is in critical condition.Sterling plunged about four cents Thursday and hit the week's low of $1.5765 when Mr. Lawson resigned from his six-year post because of a policy squabble with other cabinet members. He was succeeded by John Major, who Friday expressed a desire for a firm pound and supported the relatively high British interest rates that he said "are working exactly as intended" in reducing inflation.But the market remains uneasy about Mr. Major's policy strategy and the prospects for the pound, currency analysts contend. Although the Bank of England's tight monetary policy has fueled worries that Britain's slowing economy is headed for a recession, it is widely believed that Mr. Lawson's willingness to prop up the pound with interest-rate increases helped stem pound selling in recent weeks.If there are any signs that Mr. Major will be less inclined to use interest-rate boosts to rescue the pound from another plunge, that currency is expected to fall sharply. "It's fair to say there are more risks for the pound under Major than there were under Lawson," says Malcolm Roberts, a director of international bond market research at Salomon Brothers in London. "There's very little upside to sterling," Mr. Roberts says, but he adds that near-term losses may be small because the selling wave that followed Mr. Major's appointment apparently has run its course. But some other analysts have a stormier forecast for the pound, particularly because Britain's inflation is hovering at a relatively lofty annual rate of about 7.6% and the nation is burdened with a struggling government and large current account and trade deficits. The pound likely will fall in coming days and may trade as low as 2.60 marks within the next year, says Nigel Rendell, an international economist at James Capel & Co. in London.The pound was at 2.8896 marks late Friday, off sharply from 2.9511 in New York trading a week earlier. If the pound falls closer to 2.80 marks, the Bank of England may raise Britain's base lending rate by one percentage point to 16%, says Mr. Rendell.But such an increase, he says, could be viewed by the market as "too little too late." The Bank of England indicated its desire to leave its monetary policy unchanged Friday by declining to raise the official 15% discount-borrowing rate that it charges discount houses, analysts say. Pound concerns aside, the lack of strong buying interest in the yen is another boon for the dollar, many traders say. The dollar has a "natural base of support" around 140 yen because the Japanese currency hasn't been purchased heavily in recent weeks, says Ms. Soares-Kemp of Credit Suisse.The yen's softness, she says, apparently stems from Japanese investors' interest in buying dollars against the yen to purchase U.S. bond issues and persistent worries about this year's upheaval in the Japanese government. On New York's Commodity Exchange Friday, gold for current delivery jumped $5.80, to $378.30 an ounce, the highest settlement since July 12.Estimated volume was a heavy seven million ounces. In early trading in Hong Kong Monday, gold was quoted at $378.87 an ounce.
A group of investors led by Giant Group Ltd. and its chairman, Burt Sugarman, said it filed with federal antitrust regulators for clearance to buy more than 50% of the stock of Rally's Inc., a fast-food company based in Louisville, Ky. Rally's operates and franchises about 160 fast-food restaurants throughout the U.S.The company went public earlier this month, offering 1,745,000 shares of common stock at $15 a share.Giant has interests in cement making and newsprint. The investor group includes Restaurant Investment Partnership, a California general partnership, and three Rally's directors: Mr. Sugarman, James M. Trotter III and William E. Trotter II.The group currently holds 3,027,330 Rally's shares, or 45.2% of its commmon shares outstanding.Giant Group owned 22% of Rally's shares before the initial public offering. A second group of three company directors, aligned with Rally's founder James Patterson, also is seeking control of the fast-food chain.It is estimated that the Patterson group controls more than 40% of Rally's stock. Rally officials weren't available to comment late yesterday. For the year ended July 2, Rally had net income of $2.4 million, or 34 cents a share, on revenue of $52.9 million.
Efforts by the Hong Kong Futures Exchange to introduce a new interest-rate futures contract continue to hit snags, despite the support the proposed instrument enjoys in the colony's financial community. Hong Kong financial institutions have been waiting for interest-rate futures for a long time.The contract was first proposed more than two years ago, but shortly afterward, the colony's markets were hit hard by the October 1987 global stock crash.The subsequent drive to reform Hong Kong's markets also has embroiled the interest-rate futures contract. The Securities and Futures Commission, a government watchdog set up after the 1987 crash to try to restore confidence and order to Hong Kong's markets, had been expected to give the contract conditional approval last week.But regulators this week said futures-exchange officials still have a way to go before they answer all the remaining detailed questions about the contract. The exchange had forecast that the contract would begin trading by December.But securities regulators now say privately that it isn't likely to start until the first quarter of next year. Analysts and financial officials in the British colony consider the new contract essential to the revival of the Hong Kong Futures Exchange, which has never fully recovered from the October 1987 crash.Many believe that without a healthy futures exchange, Hong Kong's aspirations to be recognized as an international financial center will suffer.In addition, local banks say the new contract is important in helping them offset their Hong Kong-dollar exposure. The contract will be based on the three-month Hong Kong interbank offered rate, or Hibor.It is almost a carbon copy of the Chicago Mercantile Exchange's Eurodollar contract, which is based on the three-month Eurodollar rate, the rate paid on U.S.-dollar deposits in London banks. If the contract is as successful as some expect, it may do much to restore confidence in futures trading in Hong Kong. "The contract is definitely important to the exchange," says Robert Gilmore, executive director of the Securities and Futures Commission. Two years ago, the futures exchange was the envy of other would-be futures centers.After only 17 months, its main contract, based on the Hang Seng index, had grown to be the second-largest stock-index-futures contract in the world. {A futures contract is an agreement to buy or sell a commodity or financial instrument at a set price on a specified date.In the case of stock-index and interest-rate futures, the instruments are given an underlying cash value and are settled in cash.} But in the week following the 1987 stock crash, the exchange verged on collapse, and the stock and futures markets in Hong Kong were closed for four days.Only a government-sponsored bailout kept the crisis from swallowing the exchange. Trading in Hang Seng index futures remains crippled by the experience.Volume for the entire month of September totaled only 21,687 contracts, compared with a daily average of 27,000 in the month before the 1987 crash. Despite the thin trading, and after two painful years of restructuring, the futures market has shown itself to be resilient in two recent tests.While Asian markets struggled to cope with the uncertainty caused by the Oct. 13 plunge in New York stock prices, futures trading in Hong Kong was relatively heavy and went smoothly.That was also the case in the days following the June 4 massacre in Beijing, which caused a sharp drop in Hong Kong stock prices. "There was no problem at all," says Douglas Ford, chief executive officer of the futures exchange. Most important to the contract's success is the commitment of Hong Kong's big financial institutions, especially the two leaders, Hongkong & Shanghai Banking Corp. and the local subsidiary of Britain's Standard Chartered Bank PLC.The two big banks were instrumental in designing the new contract. "If those two banks are there, then the balance of the banking institutions will be there," says Mr. Gilmore, the Securities and Futures Commission official. Colony banks have a major stake in how interest rates move because of their enormous Hong Kong-dollar exposure.Even though the currency is pegged to the U.S. dollar, with a fixed exchange rate of HK$7.8 to the American currency, the U.S. and Hong Kong economies don't always move in lock step, making it difficult to predict where interest rates in the colony will go. In early 1988, when the three-month Eurodollar rate was between 7% and 8%, the three-month Hibor rate was as low as 1%.Just a few months ago, the three-month Eurodollar rate was around 9.5%, while three-month Hibor hit highs above 11%. The Hibor contract "solves quite a bit of the problem of interest-rate risk in the interbank market," says Eric Cheng, a director of James Capel (Far East) Ltd., the Hong Kong arm of the British brokerage firm. Despite the initial support expected, trading in the contract is likely to start slowly.The wounds from the 1987 crash haven't yet healed, and not all claims against the exchange clearinghouse -- by those who bet the Hang Seng index would fall -- have been settled.Companies and financial institutions familiar with Hong Kong remain wary of trading in its futures market. And Mr. Gilmore cautions that there may be limits on how much the contract can grow because the Hong Kong dollar isn't a widely traded currency.He says the contract will be considered a success if it starts trading 500 to 1,000 lots a day. Exchange officials also point out that Hibor futures were designed for institutions and corporations, not for the type of small individual investors who were very active in Hang Seng index futures and defaulted in the 1987 crash.Mr. Cheng says the low margin required for trading futures attracted a lot of small investors before the 1987 crash who didn't realize that their risk was virtually unlimited. "You're not going to get your taxi drivers and amahs and all that," says Rory Nicholas, a director for securities company Elders Bullion & Futures Ltd. That should help to inspire confidence, Mr. Gilmore says.But many bankers remain nervous, especially as the start-up of the contract continues to be delayed.
Two of Japan's largest paper manufacturers, Oji Paper Co. and Jujo Paper Co., posted unconsolidated pretax profit gains from a year earlier for the first half ended Sept. 30, on continuing robust domestic demand for paper products. Oji Paper, the nation's largest in terms of sales, said its pretax profit rose 1.5% to 23.11 billion yen (US$163.3 million) from 22.76 billion yen. Sales jumped 12.2% to 232.12 billion yen from 206.87 billion yen.Net income increased 6.7% to 12.43 billion yen from 11.66 billion yen.Per-share net rose to 20.48 yen from 19.51 yen. Oji Paper's sales strength was evident in overall paper products sales, including newsprints, printing and wrapping papers, which rose to 221.61 billion yen in the first half from 200.70 billion yen a year earlier.Pulp, processed and miscellaneous paper sales also surged. For the full fiscal year ending next March, Oji predicted that total sales of 477.00 billion yen, up from 420.68 billion yen in the previous fiscal year.Pretax profit is seen at 45.00 billion yen, down from 47.17 billion yen, while net income is estimated at 23.500 billion yen, up from 23.031 billion yen. The company didn't provide an explanation for the softer pretax profit performance and officials couldn't be reached for comment. Jujo Paper said its pretax profit rose 0.3% to 13.05 billion yen from 13.02 billion yen.Sales rose 8.5% to 195.19 billion yen from 179.916 billion yen.Net income surged 10% to 7.12 billion yen from 6.47 billion yen.Per-share net rose to 14.95 yen from 14.44 yen. General paper product sales, including newsprints and other papers, accounting for the bulk of sales, rose to 157.78 billion yen from 143.88 billion yen. Jujo Paper predicted that for the full fiscal year ending next March 31, sales will total 400.0 billion yen, up from 366.89 billion yen.Pretax profit was estimated at 23.0 billion yen, down from 25.51 billion yen, while net income was estimated at 12 billion yen, up from 11.95 billion yen.
Unocal Corp. 's decision to put its Norwegian oil and gas interests up for sale earlier this week is another step in the company's strategic review of its properties, and shows that few of them are sacred cows. The company declined to estimate the value of the Norwegian holding.But Eugene L. Nowak, an analyst at Dean Witter Reynolds Inc., forecast that the sale will bring in "$200 million or substantially more." The proposed transaction is the latest in a redeployment of assets by the Los Angeles-based oil company that has included the $200 million sale of its headquarters property and the pending sale of half of its Chicago refinery and related marketing operations to Petroleos de Venezuela S.A. Mr. Nowak said he attaches particular importance to the proposed sale because it suggests that the company is willing to sell oil and gas assets that aren't part of its major strategic strengths. Unocal said it expects to complete the sale of its Unocal Norge A/S unit by next March or April.In addition to an 18% stake in the Veslefrikk offshore field, the Norwegian unit has interests ranging from 10% to 25% in three other Norwegian oil and gas production licenses. In 1986, Unocal sold a 7.5% stake in the Veslefrikk field to Deutsche Erdolversorgungs G.m.b.H., a West German oil company, for an undisclosed amount.In 1987, it sold a 2.5% stake in the Veslefrikk field to the Swedish national oil company, resulting in a $7 million after-tax gain. However, those sales were early in the field's history, before production equipment was installed.The field is currently being developed and is slated to start production by the end of the year.It's expected to produce about 62,000 barrels per day. A company spokesman said the Veslefrikk field's gross reserves were estimated in 1987 at 229 million barrels.However, he added that that estimate, made before extensive development drilling, currently is being reappraised. The spokesman said Unocal has had "considerable interest" from prospective buyers.The company has retained J. Henry Schroder Wagg & Co. as financial adviser and agent for the sale.
When the going gets tough, it's tough to trade stocks in continental Europe. That's the troubling conclusion reached by many international investors and money managers angry at the malfunctions on Continental stock exchanges during last week's global market turbulence.They say the recent market volatility has underscored the shortcomings of the way many European exchanges trade stocks. The weaknesses of Continental exchanges are driving some fund managers to switch business to stocks traded on London's stock exchange, which quotes firm trading prices for about 350 blue-chip issues from 12 major countries. "I'm not saying London covered itself in glory, but the events of the past week have certainly exposed Europe's weaknesses," says Stewart Gilchrist, a director of Scottish Amicable Investment Managers in Glasgow, Scotland, which manages about #6 billion ($9.63 billion) in institutional money.He says the problems on European exchanges included market-system breakdowns, delayed execution of buy and sell orders and trading suspensions. "The events strengthen London's hand in becoming the center for trading European stocks," Mr. Gilchrist says. Unable to unload a large block of a French blue-chip company's shares in Paris for two days last week, a frustrated Scottish Amicable fund manager finally tossed down her phone in disgust and called James Capel & Co., a London brokerage firm.The firm did the trade in seconds on the London stock exchange's SEAQ automated-quotation system. On so-called Manic Monday, Oct. 16, stock prices plunged across Europe and trading problems erupted.London had some problems, too.The London exchange's electronic price-reporting system provided only indicative, or non-firm, prices for about 40 minutes on Manic Monday.Some dealers say other traders weren't picking up their phones. But London's problems were nothing compared with the Continent's.In Brussels, which recently spent millions of dollars on a computer-assisted trading system, disgusted traders watched helplessly as a software failure before opening on Manic Monday prevented trading for two days.For 48 hours, no one had any idea precisely how much his securities were worth. By Wednesday, frustrated Belgian brokers reopened the market by using the time-honored method of quoting stocks with chalk on a blackboard.The Belgian computer system finally was repaired and restarted on Tuesday of this week, with the aid of Toronto Stock Exchange officials who developed the system. In Frankfurt, which only has a two-hour daily stock-trading session even in the best of times, stocks didn't open for the first 45 minutes because of order imbalances that brokers blame on a wave of sell orders from small investors. As banks processed six-foot telexes of sell orders, the crush led to Manic Monday's worst decline: German stocks ended down 13%.Exchange officials extended trading hours, 75 minutes on Monday and 65 minutes on Tuesday, to clear up order backlogs. In France, more than half the top 25 blue-chip stocks -- including such giants as BSN and Elf Aquitaine -- didn't open until Wall Street rallied late in the European trading day, traders say.The rally transformed some big sell orders into big buy orders, solving an order-imbalance problem.But by that time, many big institutions had switched business to London. "Belgium was closed for two days, France closed for a couple of hours, Germany was stuck.It was a nightmare," says Susan Noble, an investment manager at Robert Fleming Holdings Ltd. 's International Investment Management unit in London. "It's very worrying that these markets can't cope." On Manic Monday, the volume of German shares traded in London more than tripled to 2.2 million, and the volume of French shares rose 48%. (By comparison, German domestic stock volume in Frankfurt only doubled that day.) The switch to the London market during such turbulent times is significant.For one thing, the size of the affected market is enormous -- the European stock markets account for some 22.5% of global stock market capitalization, with an estimated value of $2.175 trillion, according to Morgan Stanley Capital International.The Continental markets alone contribute about 14.3% of estimated world market capitalization of $9.671 trillion. Though the widely traded shares that are quoted in London account for only a small portion of those totals, they still are the most closely watched stocks and are often viewed as a barometer for the local markets generally. The switch to London underscores the fact that despite the economic restructuring associated with European Community efforts to develop a single market by 1992, European stock trading remains a highly fragmented and very localized activity.Against this backdrop, one thing that doesn't seem likely to result from 1992 is a single European stock market. Rather, there increasingly is a group of international brokerage and trading firms that operate in most European financial centers -- including European giants such as Barclays Bank PLC and Deutsche Bank, as well as Merrill Lynch & Co. and Shearson Lehman Hutton Inc. of the U.S. and Japan's Nomura Securities Co. These firms, which often have acquired a local brokerage firm, are calling the shots when it comes to deciding in which market to transact a trade.And senior officials of two U.S. securities houses say they switched trades in European stocks to the London market last week when they couldn't unwind positions on the Continent. Meantime, brokers on the Continent are worried, too, mostly by the potential loss of business. "I would be much happier if this volume {in German stocks} were in Frankfurt rather than London," says Dieter Bauernfeind, head of international equity sales at Dresdner Bank in Frankfurt.He acknowledges that spreads "were too wide and volumes too light" in the extreme conditions on Manic Monday. Already the Germans appear to be acting; at a special meeting on the day of the decline, directors of the Frankfurt Stock Exchange voted to extend their trading hours, although they haven't decided when or by how much.A Frankfurt exchange official, acknowledging the brokers' anxieties, says the market still feels it "functioned OK during this crash." The Dutch, who had some trading problems because of insufficient computer capacity, say new equipment to solve the problems ought to be installed within a month. Says a spokeswoman for the Brussels Bourse: "Nobody around here will tell you they are happy the system didn't work.But it's just one of those things that happened.Investors can be assured now that this kind of problem can never occur again." But for others, the pledges echo the promises made after the 1987 stock crash, when similar problems led many markets to develop the new systems that performed so badly last week. "They all said they invested huge amounts of money.But they either didn't buy the right machines or they wasted it," says Fleming's Ms. Noble.
European Community employers fear that the EC Commission's plans for a "charter of fundamental social rights" is a danger to industrial competitiveness. "We don't want Brussels deciding conditions for workers unless they are necessary and useful," said Zygmunt Tyszkiewicz, secretary general of the employers' confederation Unice. Unice -- an acronym for the Union of Industrial and Employers' Confederations of Europe -- fears that the charter will force EC countries to adopt a single pattern in labor relations.Workers and management, Mr. Tyszkiewicz said, would lose the "flexibility and diversity" that has so far allowed them to adapt to local conditions and traditions. The British government also strongly opposes the charter in its current form.It argues, as does Unice, that labor relations are best left to be regulated at the national level. France will propose a slightly watered-down version of the charter to be discussed by EC social-affairs ministers on Monday, officials said.But the cosmetic changes aren't expected to win over Britain. "We still have serious differences with the text," a British official said, because it provides for a "regulation of the labor market." Mr. Tyszkiewicz said the charter would put poorer EC countries such as Spain, Greece and Portugal at a disadvantage.It would force these countries to introduce minimum standards for pay and working hours, and provide for collective bargaining and worker "participation" in major corporate decisions. This, he warned, would prevent these countries from bridging the difference with their richer EC brethren.Indeed, lower wages -- in Greece, they are a third of the EC average -- aren't enough to offset higher transport costs and lower productivity in the southern countries.Increasing labor costs, Mr. Tyszkiewicz argued, would only put the countries at a further disadvantage in competing in the barrier-free EC market planned for after 1992. But the Unice official said that producing a charter acceptable to both Britain and European industry isn't an unattainable goal.The charter would just have to be restricted to a list of workers' fundamental rights, without seeking to impose any norms. A key provision in the current version of the charter would give the commission a mandate to produce an "action program" detailing on what points EC member states would be required to comply with the goals set out in the charter.This provision lies at the heart of the British and Unice fears of "social engineering" by the commission. One possible political solution, an EC official said, would be for the commission to present the action program in late November, before the adoption of the charter at a summit of EC governments on Dec. 8 and 9.This would leave Britain free to adopt the charter after having rebutted the action program. The charter was approved by the EC Commission on Sept. 21.France's Socialist government, which currently holds the council's rotating presidency, is committed to having the charter adopted by all 12 EC states before the end of 1989 -- the bicentennial of the French revolution and its "Universal Declaration of Human Rights."
Sam Ramirez and his men are late.They pile out of their truck and furiously begin twisting together steel pipes linking a giant storage tank to the Sharpshooter, a freshly drilled oil well two miles deep. If they finish today, the Sharpshooter can pump tomorrow.One roustabout, hanging by his hands from a ladder, bounces his weight on a three-foot wrench to loosen a stuck fitting. "We've been putting in long hours," Mr. Ramirez says -- six-day weeks and 13-hour days for the last two months.A year ago, when almost nothing was happening amid these desolate dunes, "you'd spend two days working and two days in the yard," he recalls. After a three-year nightmare of uncertain oil prices, draconian budget cuts and sweeping layoffs, fear is finally leaving the oil patch.Independent drillers are gingerly sinking bits into the Earth's crust again.Some in Big Oil are easing the grip on their wallets.Investment capital is creeping back, and oil properties are fetching more.Oil-tool prices are even edging up. What happened? In broadest terms, stability has quietly settled into international oil markets.Mideast politics have calmed down and the squabbling within the Organization of Petroleum Exporting Countries seems under control for now. "The fundamentals of supply and demand once again are setting oil prices," says Victor Burk, an Arthur Andersen & Co. oil expert.After years of wild swings, oil prices over the last 12 months have settled at around $15 to $20 a barrel. That isn't the $40 that delighted producers a decade ago or the $10 that pleased users a year ago.But it is high enough to prod the search for future supplies, low enough to promote consumption and, most important, steady enough for both producers and users to believe in. Not that oil suddenly is a sure thing again.The current equilibrium is fragile and depends on steady, strong demand and continued relative harmony within OPEC, producer of more than 40% of the non-Communist world's crude.A recession or new OPEC blowup could put oil markets right back in the soup.Also, the new stirrings are faint, and some question their extent.Drilling activity is still far below eight years ago, there's no hiring surge and some companies continue to shrink. With all this, even the most wary oil men agree something has changed. "It doesn't appear to be getting worse.That in itself has got to cause people to feel a little more optimistic," says Glenn Cox, the president of Phillips Petroleum Co. Though modest, the change reaches beyond the oil patch, too.The same roller-coaster prices that halted U.S. oil exploration and drove many veteran oil men and companies out of the business also played havoc with the nation's inflation rate, the trade deficit and oil users' corporate and personal budgets.Now, at least some predictability has returned, for everyone from economists to motorists. Corporate planners can plan again. "Management doesn't want surprises," notes Jack Zaves, who, as fuel-services director at American Airlines, buys some 2.4 billion gallons of jet fuel a year.Prices had been so unstable that two years ago Mr. Zaves gave up on long-term forecasts. And consumers "should be comfortable," adds W. Henson Moore, U.S. deputy secretary of energy. "I don't see anything on the horizon that could lead to a precipitous rise in the price." The catalyst for all this has been OPEC.About a year ago, it ended an on-again, off-again internal production war that had put prices on a roller coaster and pitched oil towns from Houston to Caracas into recession.Saudi Arabia, OPEC's kingpin, abandoned a policy of flooding the market to punish quota-cheaters.About the same time, the Iran-Iraq war, which was roiling oil markets, ended. In addition, global petroleum demand has been climbing.It is projected to keep growing by a million barrels a day, or up to 2% annually, for years to come. For OPEC, that's ideal.The resulting firm prices and stability "will allow both producers and consumers to plan confidently," says Saudi Arabian Oil Minister Hisham Nazer.OPEC Secretary-General Subroto explains: Consumers offer security of markets, while OPEC provides security of supply. "This is an opportune time to find mutual ways {to prevent} price shocks from happening again," he says. To promote this balance, OPEC now is finally confronting a long-simmering internal problem.At its November meeting, it will try to revise its quotas to satisfy Persian Gulf members that can produce far more oil than their allotments.Being held well below capacity greatly irritates them, and has led to widespread cheating.OPEC has repeatedly raised its self-imposed production ceiling to legitimize some of that unauthorized output. Oil ministers now hope to solve the issue for good through an Iranian proposal that gives a larger share of output to countries with surplus capacity and reduces the shares of those that can't produce more anyway.But "if they walk out without any effort to resolve their problem, production could increase to 23 million or 24 million barrels a day, making for a very troublesome first quarter," warns Nordine Ait-Laoussine, a consultant and former Algerian OPEC delegate. That would send prices plummeting from what some gun-shy U.S. oil executives still regard as too low a level.Patrick J. Early, president of Amoco Corp. 's oil-production unit, says that despite recent stability, he plans continued tightening of costs and exploration spending.The view of some others in Big Oil, he maintains, "is very much {similar to} Amoco's outlook." Just this week Mobil Corp. disclosed new cutbacks in its domestic exploration and production operations. Out here on the Querecho Plains of New Mexico, however, the mood is more upbeat; trucks rumble along the dusty roads and burly men in hard hats sweat and swear through the afternoon sun.Santa Fe Energy Co., a unit of Santa Fe Southern Pacific Co., bought from Amoco the rights that allowed it to drill the Sharpshooter.A mile and a half away looms the 150-foot-tall rig of the Sniper, due to be pumping by December. "Talk is that everybody is going to drill more wells," says foreman Tommy Folsom. Santa Fe aims to drill about 30 wells in this area in 1989 and double that next year.It is more aggressive than most, but it isn't the only company with a new attitude, as it found when it went looking for a partner for the Sharpshooter. "We went to six companies over two days pitching the prospect," says Tim Parker, a Santa Fe exploration manager. "Five were interested." Mitchell Energy & Development Corp. became the partner, ponying up more than half of the $600,000 in drilling and start-up costs.Mitchell will get a half-interest in the oil. "A kind of no-mistakes mentality" had been stifling activity, says Don Covey, Mitchell's oil exploration chief.Now "everybody is a lot more optimistic." One attraction for oil operators here and in other fields is the bargain-basement cost of drilling and equipment, reflecting service companies' hunger for work.Kadane Oil Co., a small Texas independent, is currently drilling two wells itself and putting money into three others.One of its wells, in southwestern Oklahoma, is a "rank wildcat," a risky well where oil previously hasn't been found. "At this price, $18 plus or minus, and with costs being significantly less than they were several years ago, the economics are pretty good," says George Kadane, head of the company. "If you know you've got stability in price, you can do things you wouldn't do with the volatility of the past few years." The activity is enough to move some oil-service prices back up a little.Some drill-bit prices have risen 5% in the past month.In the Gulf of Mexico, a boat to deliver supplies to offshore rigs now costs around $3,000 a day, up nearly 60% since June.Some service boats recently were auctioned for about $1.7 million each, up from less than $1 million two years ago.At the bottom of the slump, Schlumberger Inc. was discounting 75% on an electronic evaluation of a well; now it discounts about 50%, drillers say. Still, there is money to be made.Most oil companies, when they set exploration and production budgets for this year, forecast revenue of $15 for each barrel of crude produced.Prices have averaged more than $2 a barrel higher than that -- not a windfall, but at least a pleasant bonus for them.So, according to a Dun & Bradstreet Corp. survey, companies that had been refusing to spend even their very conservative budgets may loosen up before year end.It says 40% of those surveyed report that 1989 exploration spending will exceed 1988's. Funds for drilling may inch up more next year if oil prices stay stable.Texaco, thinking in terms of $18-to-$19 oil for 1990, may raise spending, especially for low-risk prospects, an official says.Outside investors, scarce since '86, are edging back.Although "it's still difficult to raise money for a pure wildcat program," says William Thomas, a Texas Commerce Bank official in Houston, "institutions are starting to see there are cycles to these things, and this one is beginning to turn." Wall Street generally likes the industry again.The appetite for oil-service stocks has been especially strong, although some got hit yesterday when Shearson Lehman Hutton cut its short-term investment ratings on them.Contractors such as Parker Drilling Co. are raising cash again through stock offerings, and for the first time in years, two oil-service companies recently went public. (They are Grace Energy Corp. of Dallas and Marine Drilling Co. of Houston.) Most oil companies are still reluctant to add to the office and professional staffs they slashed so deeply.But a few new spots are opening.Arthur Andersen, the accounting firm, has increased its energy staff 10% in a year. Out in the oil fields, if activity picks up much more, shortages could appear because so many roughnecks, roustabouts and others left after the crash.Already "it's hard to get people.They're so busy," says one Santa Fe drilling foreman here. For most field workers, it's about time.Mr. Ramirez, who arrived late at the Sharpshooter with his crew because he had started early in the morning setting up tanks at another site, just got the first raise he can remember in eight years, to $8.50 an hour from $8.Norman Young, a "mud-logger" at the Sniper well, has worked all but about nine days of this year.Last year, "I was off a straight month, then one time for two to three weeks and another two to three weeks," he says. Butch McCarty, who sells oil-field equipment for Davis Tool Co., is also busy.A native of the area, he is back now after riding the oil-field boom to the top, then surviving the bust running an Oklahoma City convenience store. "First year I came back there wasn't any work," he says. "I think it's on the way back now.But it won't be a boom again.No major booms, no major setbacks," he predicts.Business has been good enough that he just took a spur-of-the-moment weekend trip to the mountain area of Cloudcroft, something "I haven't done in years." The figures confirm that there certainly isn't any drilling boom.Only 14,505 wells, including 4,900 dry holes, were drilled for oil and natural gas in the U.S. in the first nine months of the year, down 22.4% from the like 1988 period. But that was off less than at midyear, when completions lagged by 27.1%.And the number of rigs active in the U.S. is inching up.According to Baker Hughes Inc., 992 rotary rigs were at work in the U.S. last week, up from the year-ago count of 933. (In 1981, before the bust, the rig count was above 4,000.) Global offshore-rig use shows a similar upward trend. Some equipment going to work is almost new.Grace Energy just two weeks ago hauled a rig here 500 miles from Caspar, Wyo., to drill the Bilbrey well, a 15,000-foot, $1-million-plus natural gas well.The rig was built around 1980, but has drilled only two wells, the last in 1982.Until now it had sat idle. For Zel Herring, owner and a cook at the Sandhills Luncheon Cafe, a tin building in midtown, all this has made for a very good year.After 11:30 a.m. or so "we have them standing and waiting," she says, as she whips out orders for hamburgers and the daily special (grilled roast beef, cheese and jalapeno pepper sandwich on whole wheat, potato salad, baked beans and pudding, plus coffee or iced tea.Price: $4.50). Mike Huber, a roustabout, is even making it in his new career as an entrepreneur.He started Arrow Roustabouts Inc. a year ago with a loan from a friend, since repaid, and now employs 15.He got three trucks and a backhoe cheap. "I want to add one more truck," Mr. Huber says.I sense that it's going to continue to grow.That's the word.The word is out."
Eight people, including a supervisor of Security Pacific National Bank's central vault, were arrested in an investigation of an alleged drug money-laundering operation. The U.S. Attorney's office filed a criminal complaint against six bank employees charging them with conspiracy in the scheme, which apparently was capable of handling millions of dollars a week by funneling cash through fictitious bank accounts.Two other men also were charged with participating in the operation. The arrests capped a four-month investigation by the Internal Revenue Service, the U.S. Attorney's office and a Security Pacific internal investigation team.Walter S. Fisher, executive vice president and general auditor of the bank's parent, Security Pacific Corp., said no bank funds were at risk during the investigation. Arrested were Jose O. Lopez, 27 years old, of Whittier, Calif., the vault supervisor; Carlos O. Huerta, 29, of La Puente; Luis A. Arroyo, 36, of Los Angeles; Ignacio Rojas Jr., 32, of Baldwin Park; Doris Moreno, 37, of Bell Gardens; and Ana L. Azucena, 27, of Huntington Park.Geno M. Apicella, 27, of Los Angeles, and Terrell N. Madison, 27, of Hawthorne, were also charged with participating in the conspiracy. Each defendant faces a possible sentence of 20 years in prison and $250,000 in fines.The defendants couldn't immediately be reached for comment.
S.A. Brewing Holdings Ltd. began laying the groundwork to launch a rival offer for Bond Corp. Holdings Ltd. 's Australian brewing operations. Such an offer could torpedo a plan by Lion Nathan Ltd. of New Zealand to acquire half the brewing interests.But it would probably increase the amount of cash that debt-ridden Bond Corp. would earn from the transaction. Australia's National Companies and Securities Commission said it will allow S.A. Brewing to acquire an option on as much as 20% of Bell Resources Ltd., a unit of Bond Corp. that is in the process of acquiring Bond Corp. 's brewing businesses for 2.5 billion Australian dollars (US$1.93 billion). S.A. Brewing, which is 20%-owned by Elders IXL Ltd., Australia's largest brewer, will make a takeover offer for all of Bell Resources if it exercises the option, the corporate regulators said in a statement. Bond Corp., a brewing, property, media and resources concern controlled by financier Alan Bond, is selling many of its assets to reduce an A$6.9 billion debt.
Contrary to what might be expected based on the headline on John R. Dorfman's recent Money Matters article ("Pros Hit Theorists Right Where It Hurts" Oct. 3), I was able to stand proudly before my undergraduate finance students and proclaim that the findings of your yearlong experiment on stock picking is completely consistent with what they have been taught in the classroom.In particular, I do not find the fact that your group of pros' monthly selections of four stocks outperforms the market in general to be inconsistent with market efficiency. Mr. Dorfman states that an investor who invested $100,000 a year ago in the first four stocks selected by your pros and then sold those one month later, purchasing the four new pro picks, and repeated this process for the year would have accumulated $166,537, excluding account dividends, taxes and commissions.In contrast, an investor holding the Dow Jones portfolio over the year would have accumulated only $127,446. Accepted theories of asset pricing offer a perfectly legitimate explanation.Accepted theories state that investors require higher returns on riskier investments.Thus, rather than seeing the excess returns to the pro-selected portfolio as being abnormal, I see those returns as simply compensations for taking on added risk.I believe the risk for each individual stock selected by your pros is very large.If you asked me to select a stock with the highest expected return, I would select a stock with the greatest amount of undiversifiable risk, as I am sure your pros do.Your hypothetical investor is simply being compensated for taking on this added risk. Moreover, your hypothetical investor has forsaken the gains to be had in reducing risk by diversifying his portfolio.A four-stock portfolio is still exposed to a great deal of unnecessary risk.This means the returns can vary a great deal.Mr. Dorfman provides confirming evidence of this phenomenon when he reports that your staff of dart throwers would have accumulated only $112,383 by randomly selecting four new stocks to be held in a portfolio each month. Scott E. Hein Texas Tech University Lubbock, Texas Your Investment Dartboard article misses the target.The fact that stock pickers have bested a randomly selected portfolio in eight of 12 months has no bearing on the efficient-market theory. What matters is that the stocks recommended by your pros tend to be substantially riskier than a diversified portfolio.For example, your pickers' recommendations for the coming month are, on average, 22.5% riskier than holding the market portfolio according to Value Line's Beta estimates.James Morgan's pick for October -- Dynascan -- is a substantial 35% riskier than the market portfolio; his lauded Thermo Electron pick is 40% riskier. Eric C. Meltzer New York
California Thefts Make Travel Agents Jittery BEING A TRAVEL agent used to be pretty glamorous.Now it's getting downright dangerous. In recent months, more than 25 agencies have been robbed, compared with only a handful all last year, according to police and travel-agency groups.Most of the cases have been in California, where one agent was stabbed and another was shot and killed. Los Angeles police say the thieves seem to be part of a crime network that knows how to convert blank tickets into real ones.Already, the stolen tickets have been used for flights all over the world.So far, the thieves have stolen 3,632 blank tickets, according to Airline Reporting Corp., a ticket processing center. Police say the robberies are usually pulled off by two to five men, who walk into the agencies near closing or lunch time, when few employees are there. "They looked like ordinary vacationers at first," says Willy LLerena, owner of Travel Air Service in Monte Bello, Calif., describing five men who entered his agency last June. But then, he says, they put two loaded pistols to his temple and demanded he open the safe.When he initially refused, he says, they stabbed him in the back and made off with $2,000 and 280 blank tickets. "They said they wanted to show me how serious they were," he says. As word of the crime spree has spread, many agents have started changing their open-door policies.At El Monte Travel Center in El Monte, Calif., customers now can get in only through a buzzer and lock system. "It's hard to deal with clients this way in a service business," says Ralph "Bud" Conner, owner of the agency, which was robbed of 180 blank tickets and $850 last month. "But we're just too nervous." The robberies also have set off a controversy involving the airlines.Agents say airlines, which track ticket numbers of all stolen tickets, should be doing more to catch the thieves by confiscating the tickets when they're used. "They have the most sophisticated computers in the world," says Mr. LLerena. "They ought to be able to do this." But airlines say it would be too expensive and cause too many delays if they started using computerized scanners to check tickets at the gate. Texans Get Reasonable Car Rental Insurance CONSUMER advocates have long claimed that car rental companies charge too much for car rental insurance.Now, a new law in Texas seems to be providing the proof. The law -- the first of its kind -- requires car rental companies in Texas to charge only "reasonable" rates for collision-damage waiver insurance.Specifically, the law says the rates must closely reflect what the company's actual expenses have been to replace damaged cars. Before the law went into effect last month, car rental companies were charging as much as $12 a day for the waiver in Texas.Now, they're charging as little $3 a day. "If they're telling the truth now, then they've been charging 300% more than what is reasonable," says Steve Gardner, an assistant state attorney general in Texas. A spokesman for Hertz Corp. acknowledges, "The waiver isn't a source of protection for consumers, but a source of revenue." But Hertz points out that at least it's now charging only $3.95 a day in Texas, while some competitors are charging $6.99.The state attorney general's office is investigating rental car agencies charging noticeably higher prices. Flight Attendants Lag Before Jets Even Land IF YOUR FLIGHT attendant seems a little weary, it may be because he or she has been working 20 straight hours. A recent study for the Federal Aviation Administration found that major airlines sometimes make flight attendants work 16 hours or more straight -- despite union contracts at some airlines limiting duty time to 14 hours.Some flight attendants on charter planes are putting in 20-hour work days, the study found. This happens because the FAA doesn't have any rules on duty time for flight attendants; by contrast, it strictly restricts duty time for pilots and air traffic controllers, usually to a maximum of 10 consecutive hours. "As far as the FAA is concerned," says Matt Finucane, air safety director at the Association of Flight Attendants, "flight attendants can work an unlimited number of hours." Experts say such long hours for attendants pose a safety risk.For instance, tired flight attendants might not react quickly enough during an emergency evacuation. "At the end of their day, they are zombies," says John Galipault, president of the Aviation Safety Institute, a public-interest group in Worthington, Ohio. "They have to work such long hours and then we expect them to be heroes if there's an evacuation." In response to the study, the FAA says it is considering changing its policy -- or lack of it -- on flight attendants.The agency may not have much choice: A congressional bill has been introduced that would force the agency to limit flight attendant duty time to 14 hours on U.S. flights and 16 hours on international trips. Odds and Ends GOLF HAS BECOME the latest diversion for travelers stuck at some airports.Simulated golf games, in which players hit golf balls into nets, have been installed at airports in Denver and Pittsburgh. . . . The average cost for breakfast at a "decent" hotel restaurant in New York is $17.12, according to Corporate Travel magazine.The cheapest, among 100 cities surveyed, was $5.11 in El Paso, Texas.
Why do you continually ignore the salubrious effects of indexing the basis of capital gains for inflation?Why do you maintain the House-passed capital-gains plan is a "temporary" reduction when it is not? I think the reason is that you are confusing tax "rates" with tax "payments." Your Sept. 29 page-one story on the House-passed capital-gains plan is a good example.You lead readers to believe that the House reduced the capital-gains tax for two years only.You virtually ignore the tax-reducing power of indexation, which in many cases is more substantial than a lower rate. The monetary tax benefit of indexation for all gains in excess of inflation can be measured using the following equation: tax rate, times inflation rate, times basis for the gain.Depending on the size of the gain and the rate of inflation, indexation can mean a lower tax payment than using the 19.6% rate without indexation.But in any event -- and this is the important point -- tax "payments" on capital gains will be lower with indexation than under current law, even though the tax "rate" is the same under both systems. As you can see, the capital-gains reduction plan adopted by the House would not be temporary, but permanent.I hope that you begin talking about the plan's permanent and, in my view, most beneficial feature -- indexation. Rep. Robert K. Dornan (R., Calif.) Washington That the motivation for the two-year reduction to 19.6% is budgetary does not mean it is not in the public interest.The reduction eases the burden on portfolio changes and frees capital to seek more productive or more appropriate uses.But what is really significant is the indexation of capital gains after 1991.To argue that this is "not likely" to affect the economy in positive ways is contrary both to recent experience with capital-gains tax cuts and to common sense.A large part of the long-term appreciation of assets reflects inflation, and the taxation of inflation-created capital gains is confiscation.Does the Journal really believe that people ignore the prospect of having a substantial part of their capital confiscated when they decide whether to save or how to invest? Under current law, it is not financially rational to forgo consumption.Real, aftertax returns from financial assets are on the order of 1% or 2% a year.The capital-gains tax reform is a step toward correcting one of the gravest structural weaknesses of the U.S. economy, the closely connected phenomena of low savings rates, weak capital formation and high capital costs. J. Sigurd Nielsen Richmond, Va.
A potentially safer whooping cough vaccine made by novel genetic engineering techniques was described by a team of Italian, U.S. and Japanese scientists. The team reported they managed to induce bacteria to produce a non-toxic version of the poisons produced by the bacterium that causes whooping cough.Laboratory tests showed that non-toxic versions of the poisons are capable of inducing an immunity to whooping cough, the researchers reported in this week's issue of the journal Science. The current vaccine for whooping cough, or pertussis, is part of the "DPT" (for diphtheria, pertussis, tetanus) shot given most infants and young children.The vaccine is effective in preventing a disease that still afflicts about 60 million children a year world-wide, causing an estimated one million deaths. The vaccine, however, causes allergic reactions that can be fatal.The reactions stem from the fact that the vaccine contains multiple copies of the whole Bordetella pertussis bacterium, which causes whooping cough.This bacterium produces a toxin that, if used as a vaccine, can induce immunity to whooping cough.Unfortunately, the toxin is also poisonous. The Italian-led scientific team said they had succeeded in getting bacteria to produce a non-toxic version of the pertussis toxin, which could be used as a safe vaccine.The researchers reported they have been able to pluck the five genes that produced the toxin out of the pertussis bacterium.It turned out that although it took all five genes to produce the toxin, only one was responsible for the toxin's virulence. Ordinarily in genetic engineering each of these genes, minus the one that caused the virulence, would have been transferred to another bacterium, called E. coli, which would then produce a nonvirulent version of the toxin.The researchers said they did this, but the toxin didn't induce immunity to whooping cough. The scientists then took the five toxin genes and triggered a mutation in the one gene that caused virulence.Then, using a new technique (called homologous recombination) for introducing genes into cells, they transferred all five genes to bacteria closely related to the pertussis organism.These bacterial "cousins" ordinarily don't make the toxin.But the genes were accompanied by a piece of DNA, called a promoter, that turns the genes on. The new bacteria recipients of the genes began producing pertussis toxin which, because of the mutant virulence gene, was no longer toxic.Experiments showed that the new, non-virulent toxin is capable of inducing immunity, according to the researchers from the Selavo Research Center in Siena, Italy, the Medical College of Wisconsin in Milwaukee and the Japanese National Institutes of Health.
At a time when foreign banks are pouring vast resources and personnel into West Germany's financial center, the opening of a three-man office on a Frankfurt side street shouldn't attract much attention. Unless, of course, it happens to be run by the Rothschilds. After an 88-year absence from the birthplace of the family banking empire, the return of the Rothschild group to Frankfurt was greeted by the glare of television lights, curious reporters and a mayoral reception in Town Hall. Like other foreign banks establishing a presence here, the family describes its move as a calculated decision to set up a financial services outlet in Europe's largest economy ahead of the integration of European Community markets after 1992.Yet the Rothschilds don't deny an emotional element to the decision. In 1796, Mayer Amschel Rothschild founded Bankhaus M.A. Rothschild & Sons and later sent his four sons to London, Paris, Vienna and Naples to begin the bank's expansion during the early 19th century.The original bank in Frankfurt closed in 1901 after the death of Wilhelm Carl von Rothschild, and the family's banking activities focused on London and Paris. Baron Elie de Rothschild, the family's elder spokesman, explains that by the end of the 19th century, Berlin had replaced Frankfurt as Germany's financial center.Yet the chief reason for the closure, he says, was rooted in a family tradition that wouldn't allow a bank to bear the Rothschild name without a Rothschild in its management. "At the time we had only daughters," explains the 72-year-old patriarch, "so we had to close the bank." Much of the family's mystique remained.Although its palatial residence was destroyed by bombs during World War II, the Rothschilds' place in Frankfurt's history is still recalled by the city park and a street bearing the Rothschild name. The family's long absence is understandable.The family was in Allied countries during both World War I and the long period of economic strife of the 1920s.During the Third Reich, the Rothschilds were a target of Nazi propaganda against Jewish financiers.The persecution pursued the Rothschilds across Europe as the Nazis grabbed countries, confiscating the family's property in the process. American journalist William L. Shirer, in his book "The Rise and Fall of the Third Reich," wrote of how in Vienna he had witnessed "squads of {Nazi} SS men carting off silver, tapestries, paintings and other loot from the Rothschild palace." In the immediate postwar years, the Rothschilds concentrated on rebuilding their other European operations, delaying their return to Frankfurt. "For a member of the Rothschild family, the return to Frankfurt is a very meaningful event, although it might not mean as much to German banking as it means to us," says Baron David de Rothschild, Elie's younger cousin and a partner in Rothschild & Cie.Banque in Paris. Indeed, the competition isn't greatly concerned. "It would be surprising if they didn't come to Frankfurt in time for 1992, and they bring an interesting tradition.But the market really isn't going to be stood on its head," said a banker at one of Frankfurt's Big Three banks. The return of the Rothschilds is modest.The new representative office, with one manager and two assistants -- none a member of the Rothschild family -- will carry out no banking operations of its own.Instead, it is to seek out corporate financing business and sell investment products on behalf of the family's mainstay banking units: N M Rothschild & Sons Ltd. in London, Rothschild & Cie. in Paris and Rothschild Bank AG in Zurich. The constraints don't bother the office's 54-year-old manager, Erich Stromeyer.He left his job as general manager of Shearson Lehman Hutton Holdings Inc. 's Frankfurt office because, he says, "When the Rothschilds called, I couldn't resist." Each Rothschild bank is linked by family ties and cross-ownership.In March, N M Rothschild in London and Rothschild Bank in Zurich showed assets of #4.1 billion ($6.51 billion) and 1.26 billion Swiss francs ($774 million), respectively.The Paris bank doesn't publish that figure. In Europe, the Rothschilds banks are focusing on mergers and acquisitions as European industry restructures ahead of 1992.Yet the group's limited resources makes it a niche player. "Obviously, there are quantitative limitations on the assistance we can provide," concedes Baron David de Rothschild, "but we feel we have some cards to play." Among them, he says, is the family's traditional ties to old wealth and decision-makers in banking and industry throughout Europe and beyond. The Rothschilds hope to use a long history in private banking and an aura of exclusivity to attract private and institutional investors.As at the Zurich bank, the minimum investment for individuals will be high: about a million German marks ($538,000), three times what many other West German investment banks require. "But we do make exceptions," says a smiling Baron Elie de Rothschild, "especially if they are very young and have very rich parents."
As program trading comes under renewed attack for causing stock market gyrations, a few people on Wall Street say it is time to consider extreme measures. The real answer to curbing wild swings in stock prices, they say, might be to curb or even abolish stock-index futures. A stock-index future is a contract to buy or sell the market value of a basket of stocks, such as the Standard & Poor's 500-stock index.Since stock futures were created in 1982, trading on the Chicago Mercantile Exchange and other exchanges has boomed to the point where trading in stock-index futures rivals that in the stocks themselves. The conventional view, as voiced by Goldman, Sachs & Co. partner Fischer Black, is that stocks and "derivatives" such as futures and options "form a single market, and that derivatives make it a more liquid market." But increasingly, people are questioning that view, and the critics include some of the country's most successful investors.Warren Buffett has been on record as opposing stock-index futures since their inception in 1982.And Mario Gabelli, another star in the investing world, says, "My gut says the negatives of futures and synthetics far outweigh the benefits." Like others, Mr. Gabelli says that if futures cause investors to lose confidence in stocks, they will move away from stocks -- as many have already done.And those who remain, he says "will demand a higher return and over time raise the cost of capital to companies." Essentially, the critics of stock-index futures fall into two camps.One group says the futures contribute to stock market volatility; the other contends that futures are a sideshow of speculation that detracts from the stock market's basic function of raising capital. "Before futures," says New York investor Michael Harkins, "you actually had to pay attention to whether the thing you were buying had any intrinsic value." While it was once expected that futures would mimic stock prices, traders now routinely check the futures markets in Chicago before they buy or sell stocks.When Chicago futures prices jump up or down, the New York Stock Exchange follows. On Tuesday, for instance, the Dow Jones Industrial Average plunged 80 points in little more than an hour.Then, in the space of a 20-minute coffee break, the average rallied almost all of the way back.Paul Lesutis, who manages more than $3 billion of investments at Provident Capital Management Inc., blames futures markets for leading the way. "The fundamentals don't change in an hour," he says. "I think they should close down the futures exchange and then we could get back to investing." Index arbitrage -- the rapid-fire buying and selling of stocks offset with opposite trades in futures -- is frequently blamed for adding to stock market volatility.Although index arbitrage is said to add liquidity to markets, John Bachmann, managing partner of Edward D. Jones, says too much liquidity isn't a good thing "The kind of instant liquidity that is implied by index futures is that you can buy a portfolio over two years and get out in one day.It's too disruptive," he says. "It isn't investing." But stock-index futures have plenty of support.Defenders say futures make markets more efficient and provide ways for investors to reduce risks.They note that stocks experienced volatile swings long before futures.And, defenders say, few people complain about futures when stock prices are rising. Louis Margolis, managing director in charge of equity options and futures at Salomon Inc., says that trading baskets of stocks began in the 1970s, a decade before the advent of futures.Futures, he says, merely cut down on trading costs. He says "blaming futures is like blaming the messenger." Since stock-index arbitrage merely narrows the gap between prices in the futures and stock markets, it can't add to volatility, he says. Futures "don't need defending," says Andrew Yemma, a spokesman for the Chicago Mercantile Exchange, which trades the S&P 500, by far the largest stock-index futures contract. Despite the current outcry over stock market volatility, few people expect stock futures to disappear.For one thing, the Chicago futures exchanges have political and financial clout -- including many friends in Congress.And traders say that futures have become an accepted part of the financial landscape. "All life is about change -- either you adapt or die," says one Chicago futures trader. "If futures aren't permitted here, we'll take it to Australia or Tokyo." Average daily volume in S&P 500 futures last year was 44,877 contracts.Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.By contrast, average dollar volume on the Big Board last year was $5.3 billion. Many investment managers say futures are useful as a way to hedge portfolios.If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts. Average daily volume in S&P 500 futures last year was 44,877 contracts.Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.By contrast, average dollar volume on the Big Board last year was $5.3 billion. Many investment managers say futures are useful as a way to hedge portfolios.If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts. And although criticism of futures generally comes from Wall Street, one Chicago futures trader notes that brokerage firms rely on futures as hedging tools when they buy and sell big blocks of stocks from institutions. One reason futures are said to add volatility is that -- unlike in stocks -- people can speculate in futures with little money down.Margin requirements for speculators on the Chicago Mercantile Exchange are currently about 7%. "For $10 million, you can move $100 million of stocks," a specialist on the Big Board gripes. "That gives futures traders a lot more power." By contrast, an investor in stocks must put up 50% in cash. Some critics say futures encourage people to think of stocks as a single commodity, rather than as investments in individual businesses.Thus, they say, futures inhibit the basic purpose of the stock market: to accurately price securities so that capital and investment flows where it's needed most. The S&P 500 index futures "transferred the identity of 500 stocks into one unit-making them a simple commodity to trade," says George Kegler, senior vice president at A. Webster Dougherty in Philadelphia. "It took away the need to know the bad third-quarter report of IBM, for example," Mr. Kegler says. Of course, portfolio trading -- the increasingly common practice of buying or selling baskets of actual stocks -- also treats stocks as homogenous commodities. "There is a class of investor that wants to be exposed" to the whole market, says Sandip Bhagat, assistant vice president at Travelers Investment Management Co.The S&P futures are merely a "cheaper and quicker" way to get access to all 500 stocks, he says.The Big Board yesterday began trading in its own basket trading vehicle representing the S&P 500 stocks. But owning index futures isn't the same as owning the underlying stocks.Stockholders, as a group, can win, because they own a share of corporate earnings, which can grow and boost stock prices. Futures, on the other hand, are a zero sum game -- a market for making side bets about the direction of stock prices. "You don't own anything," says Stephen Boesel, a money manager for T. Rowe Price in Baltimore. "You're making a pure bet on the market."
General Motors Corp. wants to buy as much as 15% of Jaguar PLC, marking its first salvo in a possible full-scale battle against Ford Motor Co. for control of the British car maker. GM sought U.S. antitrust clearance last week to purchase more than $15 million worth of Jaguar shares but doesn't own any yet, according to GM officials here and at the company's Detroit headquarters.The No. 1 U.S. auto maker then wrote Jaguar that it intends "to go to that 15%" level once it wins the U.S. clearance to go beyond $15 million, a Jaguar spokesman said yesterday. The GM move follows Tuesday's declaration by Ford, which holds an unwelcome 12.45% stake in Jaguar, that it is prepared to bid for the entire company.GM is close to completing a friendly deal with Jaguar that is likely to involve an eventual 30% stake and joint manufacturing ventures.Speculative investors, betting on an imminent clash between Ford and GM, pushed up Jaguar's share price five pence (eight U.S. cents) to a near-record 720 pence ($11.60) in late trading on London's stock exchange yesterday.Since Tuesday, the shares have gained nearly 4%. But an all-out bidding war between the world's top auto giants for Britain's leading luxury-car maker seems unlikely. "We will not go over a certain level," said David N. McCammon, Ford's vice president for finance, at a news conference yesterday in Dearborn, Mich. "There's some price at which we'd stop bidding." He wouldn't specify what it was. And powerful political pressures may convince the Conservative government to keep its so-called golden share, which limits any individual holding to 15%, until the restriction expires on Dec. 31, 1990. "I really don't see the government doing something that Jaguar doesn't want over the next 14 months," said Kenneth Warren, a Conservative member of Parliament and chairman of the Select Committee on Trade and Industry in Britain's House of Commons. "The golden share is a single share, but it is the magic share." The government retained the single share after selling its stake in Jaguar in 1984 -- part of a nationalistic practice of protecting former government-owned enterprises to deflect criticism of privatization.The 15% restriction covers any would-be suitor, British or foreign. Ford is willing to bid for 100% of Jaguar's shares if both the government and Jaguar shareholders agree to relax the anti-takeover barrier prematurely.As Jaguar's biggest holder and Britain's biggest car maker, Ford could turn up the heat by convening a special shareholders' meeting and urging holders to drop the limits early.Ford might succeed because many shareholders are speculators keen for a full bid or institutional investors unhappy over Jaguar management's handling of its current financial difficulties. The government probably wouldn't give in readily to a hostile foray by Ford, however.It has relinquished a golden share only once before -- during British Petroleum Co. 's #2.5 billion ($4 billion) takeover of Britoil PLC in 1988. In wooing British lawmakers, GM has pointed out that its willingness to settle for a minority stake would keep Jaguar British-owned and independent.This week, the U.S. auto giant paid for 10 House of Commons members and two House of Lords members to fly to Detroit and tour its operations there.While the visit was unrelated to Jaguar, GM Chairman Roger Smith answered the legislators' questions about it over lunch Tuesday.He said Jaguar "shouldn't be smothered by anyone else," recalled one participant. Politics also influences the government's thinking on the anti-takeover restriction.The Conservatives don't dare jeopardize marginal Tory seats in Coventry, where Jaguar has headquarters, nor can the government easily back down on promised protection for a privatized company while it proceeds with controversial plans to privatize most of Britain's water and electricity industries. Prime Minister Margaret Thatcher might, however, be receptive to any request by Jaguar Chairman Sir John Egan for the restriction's early removal to let GM amass more than 15% or mount a friendly suitor bid against Ford.In the end, Sir John -- rather than the government or Jaguar shareholders -- may hold the key that unlocks the golden share.
We read with interest Robert Tomsho's Sept. 28 page-one article on Robert Redford ("The Sundance Kid Gets Little Respect Around Sundance").Misunderstanding conversations with us, Mr. Tomsho argued that Mr. Redford's environmental views are at odds with Utah residents.This may have been true 10 years ago, but times have changed, even in Utah.Mr. Redford no longer stands out as an extremist.He has not changed, but those around him have.Many of his views on the protection of wilderness areas, rivers and canyons are now embraced by mainstream, conservative Utahans. Recently, some 60 environmental and outdoor groups representing such divergent points of view as the Sierra Club, the League of Women Voters and the National Rifle Association joined together to request a reassessment of the environmentally unsound Central Utah Project.While Utah is not yet a haven for environmentalism, public views toward the environment have significantly improved.In one of the most conservative, Republican states in the entire nation, the greening of Robert Redford's neighbors is the real story that Mr. Tomsho missed. Sammye Meadows Sam Rushforth Gary Bryner Heber City, Utah If Mr. Redford wanted to be accepted by the people of Utah, he should have taken an advisory role instead of one of forcing his personal preferences.Furthermore, his actions imply that it is too damaging or costly for society to provide jobs through power-plant construction, coal mining or to build roads for public safety because of the adverse impact on the environment, but it is just fine and dandy for him to transform a mountain high in the Wasatch Range into a ski resort. It astounds me he can rationalize his self-righteous and greedy actions in Utah.An excellent environmental actor he is. David Vranian M.B.A. Student University of Colorado Boulder, Colo. Mr. Redford, like it or not, is like a braking system on a runaway truck, kind of slowing it down into control.He's rich, famous and intelligent, and has the time to do something that not even the federal government will do.Mr. Redford is slowing down a mindless, speeding maniac known as the progress of mankind. Personally, I'm glad there are people like him around to slow down the profit takers, and those who are in such a blind hurry for something that may appear to benefit them in the immediate future, not caring about the long-range implications. Ron Dyer Atlanta
When President Bush travels to Costa Rica today, he'll go with little of the fanfare that accompanies many of his foreign travels.But the two-day trip still has managed to fuel controversy over his administration's policies in Central America. Some conservatives say Mr. Bush shouldn't make the trip, during which he will participate in Costa Rica's celebration of 100 years of democracy.These critics object to Mr. Bush's participation in a meeting that includes Nicaraguan President Daniel Ortega among the guests.In addition, they argue he won't help Washington's standing in the region by trumpeting the U.S. commitment to democracy less than a month after his administration played an ineffectual role in the failed coup attempt in Panama. "I believe it will do more damage than good because it will legitimize people like Daniel Ortega," says Curtin Windsor, who served as U.S. ambassador to Costa Rica during the Reagan administration.Mr. Windsor, among other analysts connected to the conservative Heritage Foundation, fears the gathering of 18 leaders, mostly from Central American nations, will force Mr. Bush "to explain and redeem himself" in the wake of charges that the U.S. failed to do enough to aid the removal of Panamanian dictator Manuel Noriega. At the same time, liberal and moderate Democrats note the irony of Mr. Bush's joining a celebration of Costa Rican democracy at a time his administration has sought sharp cuts in U.S. aid to the tiny country.The administration proposed only $57 million in so-called economic support funds for Costa Rica this year, down from the $90 million the U.S. provided last year. The administration said improvements in Costa Rica's economic condition warrant the cut in aid, which the country uses mainly to make payments on its $4.5 billion foreign debt.But Costa Rican officials argue that the recent drop in coffee prices, combined with the country's continuing struggle to reinvigorate its economy, make the support as necessary as ever. "We are crossing the river and we need a little more help to get to the other side," said Rodrigo Sotela, an economic affairs specialist at the Costa Rican Embassy in Washington. Democrats argue that Costa Rica deserves more assistance for the same reason that Mr. Bush is attending the celebration this weekend: to reward the country for its stability in a region wracked with turmoil and for its efforts to promote peace in Nicaragua. However, peace efforts by Costa Rican President Oscar Arias haven't always helped the country's cause in Washington.Mr. Arias's long-time refusal to support the U.S.'s campaign against leftist Nicaragua earned him the ire of the Reagan White House.And more recently, he insisted on signing a five-nation agreement intended to disarm Nicaragua's U.S.-backed Contra rebels faster than the Bush administration would prefer. "I think Bush's going there is a helpful sign," said Sen. Terry Sanford (D., N.C.) a member of the Foreign Relations Committee who pushed to provide Costa Rica about the same amount of aid as it received last year.Lawmakers in both houses support the higher level. Administration officials defend Mr. Bush's decision to make the trip.While they acknowledge the president will attend several meals and a working session also attended by Mr. Ortega, they insist that Mr. Bush won't be extending the Nicaraguan leader any special courtesies.The administration also made clear its continuing distate for the leftist Nicaraguan government in recent days, endorsing a package of electoral aid to the Nicaraguan opposition, renewing the U.S. trade embargo against the country and continuing to complain that the country supports rebel groups in the region. Officials also insist Mr. Bush will use the trip to highlight his own initiatives for pushing democracy in the region, fighting illegal drugs and assisting the less developed countries. "Let me say there is a symbolic component to this trip," Secretary of State James Baker told reporters Wednesday. "There won't be any formal resolutions or communiques, I don't think.But we still see this as an opportunity to discuss many, many very important issues."
In 1987, the Presidents Commission of the NCAA, which oversees most U.S. intercollegiate sports, contracted with the Washington-based American Institutes for Research to do a survey on the college experiences of what the body chooses to call student-athletes.A brief "executive summary" was issued last April, and attracted some, but not much, attention.More-detailed reports followed, and attracted even less notice.I suspect I may be one of the few people to have read them all. The sixth and last report now is out, and it puts the effort in perspective.Titled "Comments From Students," it focuses on the real shame of college sports: what happens to young athletes once they enter academe.It's little less than a cry for help from those who make the costly show possible. The previous five reports were mainly statistical, but clear enough in outline.They showed that participants in Division I football and men's basketball, the big-time "revenue sports," entered school with poorer high-school grades and test scores than "minor-sport" jocks and students who participated in other extracurricular activities, and they got lower grades once they got there, at least partly because of the athletic demands placed on them. The football and basketball players spent more time on their sports in season than they did on class attendance and homework combined (30 hours a week versus 25.3).Almost half (49.8%) reported suffering "mental abuse" from coaches, and almost one-quarter (24.8%) said they had been pressured to ignore injuries. But even those numbers don't describe the situation as well as the athletes do in their own words.The composite portrait that emerges isn't of a pampered jock marking time until he can land a seven-figure pro contract -- he's part of a tiny minority.Rather, it's of a kid (we're talking about 17 to 22 year olds here) having a tough time making the best of what will probably be his one shot at college. The pertinent question, coming at the end of a lengthy, confidential questionnaire, was this: "Are there things about your college life you would like to tell us that we didn't ask about?" Of the almost 3,000 athletes surveyed, 1,240 took the time to respond.Here are a few of their answers: -- "They say that I am a student-athlete, but really I'm an athlete-student.They lied to me on the recruiting trip.Football is the No. 1 thing here." -- Junior football player. -- "Being a student-athlete at college is a lot different from high school.First, the sport you play is no longer a game -- it becomes a job.Your coaches demand a lot more out of you even though some of them are not willing to take the time to watch you progress.You become expendable.Your interest is not taken to heart because people only care about your performance." -- Freshman basketball player. -- "The coaches should have a more personal and sympathetic attitude toward the athletes -- not treat us like pieces of meat.They always say to get a degree first, but they don't allow us time or to skip practice to study for a test.They just want to get their job done at any cost to the athlete." -- Freshman football player. -- "The pressure put on us to win at all times has resulted in physical violence, such as punching and slapping by coaches.Some days the coaches make you feel as though you are part of a large herd of animals.In other words, they treat you like a piece of meat." -- Sophomore football player. -- "Playing intercollegiate sports doesn't give you a lot of time to spend with others.We are almost left out of {campus} social activities.This mostly happens because we go from football in the fall to lifting in the winter to football again in the spring." -- Freshman football player. -- "You talk about free time -- .what free time?Time to relax and enjoy ourselves is always taken up by something to do with football (meetings, lifting weights, conditioning or films).There is no recovery period -- it's go, go, go.ABUSE to our bodies is overwhelming.With our schedule, it's hard to sleep well knowing what is going to happen the next day." -- Junior football player. -- "Physical exhaustion and depression are common in my life and in some of my teammates' lives." -- Football player, class unspecified. -- "More often than not, college athletes go through college never really experiencing collegiate life to the fullest.One has to establish one's own identity away from athletics and make athletics only a part, not a whole, of the student-athlete's life." -- Sophomore basketball player. -- "Somehow, and I don't know how, the game needs to be played for fun again, and not for the big bowl revenues or lucrative TV contracts." -- Graduate-student football player. There have been rumblings that, at long last, changes may be in the works.The Knight Foundation, of Akron, Ohio, has established a national commission to look into college-sports reform, and the NCAA Presidents Commission earlier this month recommended cutting spring football practice in half, moving the start of basketball practice back by a month and reducing maximum schedules in that sport to 25 games from 28. The key word in that paragraph, though, is "may." NCAA Executive Director Richard Schultz, in accepting a place on the Knight Commission, urged that the panel take a "balanced" view, which looks for all the world like a plea not to rock the boat too much, and the presidents' recommendations could face considerable opposition at the NCAA's full convention in January, which will vote on them.I read that one unnamed athletics director predicted that the basketball-cutback proposal could fail because of "real world" (i.e., economic) considerations. But the "real world" also includes the unpleasant truth that colleges are cheating the athletes they have wooed and won.If they won't change their ways voluntarily, maybe somebody bigger -- Congress -- should make them.
Environmental concerns are beginning to have as much influence in oil-industry spending plans as the price of crude does. In the wake of the Exxon Valdez spill in March, new governmental drilling bans are sharply curtailing exploration in promising locations offshore and in Alaska. At the same time, moves toward tighter air-quality standards are spurring interest in lighter or alternative fuels that don't pollute as much as fuel refined from "heavy" crudes, generally high in sulfur.Over the years, the world's stream of oil has been growing heavier. So the scramble is on for lighter crudes globally, and for natural gas in the U.S. Recently Saudi Arabia and Venezuela, traditional heavy-crude producers, have boasted of new finds of light, low-sulfur oil by their national oil companies.Venezuela has also earmarked $200 million in new money for light-crude exploration. And some oil companies are trying to lock in future supplies.Typical is Ente Nazionale Idrocarburi, Italy's state-owned energy company, which not long ago acquired through its AGIP oil subsidiary a 5% share in the consortium accounting for half of Nigeria's oil output.AGIP already has an oil stake in Libya.Both countries produce high-quality, low-sulfur crudes especially suited to making high-octane motor fuel at minimum refining cost. Franco Reviglio, ENI chairman, looks for sweeping structural change in the oil industry -- he calls it a "revolution" requiring huge investments -- as a result of environmental issues.He made a special trip to examine U.S. environmental trends because they are often followed in Europe.ENI needs to know what's coming as it prepares to spend some $1.3 billion on upgrading its refineries, he says. Oil companies world-wide will have "to spend a lot of money for the cleaner fuels that will be required," says John H. Lichtblau, the president of the Petroleum Industry Research Foundation.It will go for work ranging from refinery modification to changes in the distribution system, including the way service stations pump fuel into cars. In the U.S., the search for oil had been headed toward environmentally sensitive areas believed to have vast reserves.Alaska's Arctic National Wildlife Refuge alone is thought to hide more than three billion barrels of oil.Until the tanker spill, Big Oil was slowly convincing authorities it could safely produce from such places. Now the wildlife refuge has been closed to the industry, possibly for years.Similarly, a group of companies led by Chevron Corp. has been unable to pump oil found off the California coast in the early 1980s.A huge production system built in the sea off Santa Barbara and ashore is sitting idle. But the push for cleaner fuels is increasing the attractiveness of natural gas.More than half the domestic drilling now under way is for gas, partly on the assumption that demand will rise for a fuel that is cleaner to burn than either oil or coal. Activity has revived in the largest U.S. gas-producing regions, such as the Gulf of Mexico.Santa Fe International Corp., which is owned by Kuwait (and isn't related to Santa Fe Southern Pacific's unit), is stepping up development of a well off Texas' Matagorda Island where it found gas in 1987. "We could have sat on it longer, but the impetus is to get the gas to the marketplace," says Richard Poole, senior scout for Santa Fe International. "We're trying to get it on line as soon as possible now." This month, Exxon Corp. announced plans for a 400-day project drilling for gas about five miles underground in the Anadarko Basin of western Oklahoma -- the deepest drilling project in the U.S. Exxon will use a Parker Drilling Co. rig built in 1981 that can go down 9 1/2 miles.
As the Soviet Union grapples with its worsening economy, leading reformers have drawn up a blueprint for change designed to push the nation much closer to a free-market system. The proposals go far beyond the current and rather confused policies of perestroika, Mikhail Gorbachev's restructuring of the economy.They lay out a clear timetable and methodology for liberalizing the system of setting prices, breaking up huge industrial monopolies and putting unprofitable state-owned companies out of business.They also address such taboo subjects as the likelihood of unemployment and high inflation, and recommend ways to soften the social consequences. While many solutions to the nation's economic troubles are being discussed, the blueprint is attracting widespread attention here because of its comprehensiveness and presumed high-level authorship. Although it was published unsigned in the latest edition of the weekly Ekonomicheskaya Gazeta, Soviet sources say the article was written by Leonid Abalkin and a small group of colleagues.Mr. Abalkin, head of the Academy of Science's Institute of Economics, was recently appointed deputy chairman of the Soviet government and head of a state commission on economic reform. "It's clearly a manifesto for the next stage of perestroika," said one analyst. The economic ideas in the document are much bolder than current policies.For example, the proposed overhaul of prices -- an extremely sensitive political topic -- is far more precise than the vague plans announced by Mr. Gorbachev in 1987 and later dropped. But the proposals also display political savvy, couching some of the most controversial ideas in cautious language so as not to alienate powerful conservatives in the government who stand to lose out if they are implemented.Seeking a middle path between opponents of change and radicals who demand overnight solutions, the article advocates what it calls a "radical-moderate approach." The document is to be discussed at a conference of leading economists late this month, and will probably be presented to the Soviet Parliament for consideration this year.As policy-makers draw up proposals for the next five-year plan, which starts in 1991, the blueprint represents a powerful first shot in what is likely to be a fierce battle over economic reform. The authors make a gloomy assessment of the economy and concede that "quick and easy paths to success simply don't exist." Instead, they map out a strategy in several phases from now until 1995.Most of the measures would probably only start to have an effect on beleaguered Soviet consumers in two to three years at the earliest.The key steps advocated include: -- PROPERTY. Rigid ideological restrictions on property ownership should be abandoned.The document proposes breaking up the monolithic system of state-owned enterprises and farms and allowing a big private sector to flourish, helped by tough anti-monopoly legislation.The economy would be thrown open to numerous types of ownership between now and 1992, including factories leased by workers or owned by shareholders, cooperatives and joint ventures.Some forms of private property would be sanctioned.Such moves would greatly reduce the power of government ministries, who now jealously guard their turf and are seen as one of the major obstacles blocking economic reform. -- FINANCES. Emergency measures would be introduced to ease the country's financial crisis, notably its $200 billion budget deficit.By the end of next year, all loss-making state enterprises would be put out of business or handed over to workers who would buy or lease them or turn them into cooperatives.Similar steps would be taken to liquidate unprofitable state and collective farms by the end of 1991.A unified system of taxation should be introduced rapidly.To mop up some of the 300 billion rubles in circulation, the government should encourage home ownership, including issuing bonds that guarantee holders the right to purchase an apartment. -- LABOR.A genuine market for labor and wages would replace the present rigid, centralized system.Departing from decades of Soviet dogma, the new system would lead to big differences in pay between workers and almost certainly to unemployment.To cushion the blows, the government would introduce a minimum wage and unemployment benefits. -- PRICES.The entire system of centrally set prices would be overhauled, and free-market prices introduced for most wholesale trade and some retail trade.Consumers would still be able to buy some food and household goods at subsidized prices, but luxury and imported items, including food, would be sold at market prices.Wholesale prices would be divided into three categories: raw materials sold at fixed prices close to world levels; government-set procurement prices for a small number of key products; and free prices for everything else to be determined by contracts between suppliers and purchasers.Inflation-adjusted social benefits would ensure that the poor and elderly don't suffer unduly. -- FOREIGN TRADE.The current liberalization and decentralization of foreign trade would be taken much further.Soviet companies would face fewer obstacles for exports and could even invest their hard currency abroad.Foreigners would receive greater incentives to invest in the U.S.S.R. Alongside the current non-convertible ruble, a second currency would be introduced that could be freely exchanged for dollars and other Western currencies.A domestic foreign exchange market would be set up as part of an overhaul of the nation's banking system. The blueprint is at its vaguest when referring to the fate of the two powerful economic institutions that seem likely to oppose such sweeping plans: the State Planning Committee, known as Gosplan, and the State Committee for Material Supply, or Gossnab.But it hints strongly that both organizations would increasingly lose their clout as the changes, particularly the introduction of wholesale trade and the breakup of state monopolies, take effect.
Albert Engelken and Robert Thomson had never met, though for 38 years their lives had been intertwined in a way peculiar to the sports world.Mr. Engelken, now a transit-association executive in Washington, D.C., and Mr. Thomson, a paper-products salesman in Montvale, N.J., hadn't even talked to each other.But one recent day, they became much closer. Mr. Engelken, a rabid baseball fan, pores over the sports pages to chart the exploits of "my favorite and not-so-favorite teams and players." He often groans, he says, at the "clutter" of sports stories about drugs, alcohol, gambling and some player's lament "about the miserly millions he is offered to play the game." His morning paper, the Washington Post, even carries a sports column called "Jurisprudence" that recounts the latest arrests and convictions of players and team managers.Like many sports buffs, Mr. Engelken has turned cynic. But his is a story about a hero in an era of sports anti-heroes, and about what Babe Ruth, Mr. Engelken reminds us, once called "the only real game in the world." To Mr. Engelken, it is also a story "about love, because I'm blessed to have a wife who still thinks her slightly eccentric husband's 50th birthday deserves the ultimate present." To understand what Mr. Engelken means, one must go back to a sunny October afternoon in 1951 at New York's Polo Grounds stadium, where, it can be argued, the most dramatic moment in baseball history was played out. It was the ninth inning of the third game of a three-game playoff between the Brooklyn Dodgers and the New York Giants (the predecessor to the San Francisco Giants scheduled to play in tonight's world series).Baseball fans throughout New York had sweated out a long summer with their teams, and now it had come to this: a battle between the two for the National League pennant -- down to the last inning of the last game, no less. Some 34,320 fans jammed the stands, and shouted at the top of their lungs.Mr. Engelken was doing the same across the Hudson River in New Jersey, where, with his nose pressed against the front window of the Passaic-Clifton National Bank, he watched the duel on a television set the bank set up for the event. The playoff series had riveted the 12-year-old Giants fan. "The Giants struck first, winning the opener, 3-1, on a two-run homer off Dodger right-hander Ralph Branca," Mr. Engelken recalls with precision today. "The Giants got swamped in the second game, 100, and trailed 4-1 going into the bottom of the ninth of the third and deciding game.The Giants scored once and had runners on second {Whitey Lockman} and third {Clint Hartung} as Bobby Thomson advanced to the plate." The rest, as they say, is history.Mr. Thomson, a tall, Scottish-born, right-hand hitter, stepped into the batter's box. "Thomson took a called strike," Mr. Engelken recounts.The tension mounted as Ralph Branca, again on the mound, stared down the batter.He wound up and let loose a fastball.The pitch sailed toward Bobby Thomson high and inside and then, with a crack of the bat, was sent rocketing back into the lower leftfield stands. "Giants fans went into euphoria," says Mr. Engelken. And Bobby Thomson was made a legend.The same Bobby Thomson, it turns out, who sells those paper-goods today. There can't be an older baseball fan alive who doesn't clearly remember that Bobby Thomson homer, who can't tell you where he was when he heard the famous Russ Hodges radio broadcast -- the one that concluded with Mr. Hodges shouting, over and over, "The Giants win the pennant, the Giants win the pennant!" Mr. Engelken and Mr. Thomson drifted in different directions in the subsequent years, and the Polo Grounds, located under Coogan's Bluff in upper Manhattan, was replaced by a public-housing project.Mr. Thomson played outfield and third base until 1960, posting a lifetime .270 batting average and chalking up 264 home runs before retiring and going into paper-goods sales. Mr. Engelken moved south to Washington, but he took with him enduring memories of the homer of 1951.When his wife, Betsy, came down the aisle on their wedding day in 1966, Mr. Engelken -- no slouch on the romantic front -- gave her the ultimate compliment: "You look prettier than Bobby Thomson's home run." The couple's first dog, Homer, was named after the Great Event, though unwitting friends assumed he was the namesake of the poet. And when Mr. Engelken's sister, Martha, who was born two days before the home run, reached her 25th birthday, Mr. Engelken wrote his sports hero to tell him of the coincidence of events.Mr. Thomson sent off a card to Martha: "It doesn't seem like 25 years since I hit that home run to celebrate your birth," it read.Martha was pleased, but nowhere near as much as Mr. Engelken. The family license plate reads "ENG 23," the first three letters of the family name and -- no surprise here -- Bobby Thomson's uniform number.And on Mr. Engelken's 40th birthday, his wife bought a book detailing the big homer and sent it off to Mr. Thomson to be autographed. "What could have been better?" asks Mr. Engelken. Betsy Engelken asked the same question earlier this year, when her husband was about to turn 50.She had an idea. On her husband's 50th birthday (after an auspicious 23 years of marriage, it should be noted), Betsy, Al and their college-bound son set out for New York to visit Fordham University.Mrs. Engelken had scheduled a stop on the New Jersey Turnpike to, she told her husband, pick up some papers for a neighbor.The papers would be handed over at a bank of telephone booths just off Exit 10. "It sounded like something out of Ian Fleming," Mr. Engelken recalls. At the appointed exit, the family pulled over, and Mrs. Engelken went to get her papers.Mr. Engelken turned off the motor and rolled down the window. In a matter of minutes, she was back, with a tall, silver-haired man in tow.She crouched down by the car window and addressed her husband with her favorite nickname: "Bertie," she said, "Happy 50th Birthday.This is Bobby Thomson." "And there he was," recalls Mr. Engelken. "The hero of my youth, the one person in history I'd most like to meet.Keep your Thomas Jeffersons, or St. Augustines or Michelangelos; I'd take baseball's Flying Scot without hesitation." They talked of the home run. "I thought it was in the upper deck," said Bobby Thomson, now 66 years old.They talked of the aftermath. "I never thought it would become so momentous," Bobby remarked.Mr. Engelken, says his wife, "was overwhelmed by the whole thing.It was worth it, just for the look on Albert's face." The two men spent an hour at Exit 10, rehashing the event, "fulfilling the lifelong dream of a young boy now turned 50," Mr. Engelken says.His hero signed photographs of the homer and diplomatically called Ralph Branca "a very fine pitcher." And when Mr. Engelken asked him why he took time off from work for somebody he didn't even know, Bobby Thomson replied: "You know, Albert, if you have the chance in life to make somebody this happy, you have an obligation to do it." In an interview, Mr. Thomson, who is married and has three grown children, says he has few ties to baseball these days, other than playing old-timers games now and again.But his fans, to his constant amazement, never let him forget the famous four-bagger.His mail regularly recalls "my one event," and has been growing in recent years. In response to the letters, Mr. Thomson usually sends an autographed photo with a polite note, and rarely arranges a rendezvous.But when Betsy Engelken wrote him, saying she could stop near his New Jersey home, it seemed different. "What a good feeling it would be for me to do that," he says he thought. When the Engelken family got back from its trip up north, Mr. Engelken wrote it all down, just to make sure no detail was missed. "On the way home," his notes recall, "it took concentrated effort to keep that car pointed south.My mind was miles north at a place called Coogan's Bluff, where a real sports hero had captured the imagination of a kid who never fully grew up and is all the richer for it. "Take heart, sports fans," he wrote. "Real heroes exist.You might not find one in the `Jurisprudence' column.But who knows?You might meet up with him at that bank of telephone booths just off Exit 10 of the New Jersey Turnpike."
Southam Inc. said its unprofitable weekly newspaper, The Financial Times of Canada, is up for sale. Analysts said the announcement, the latest in a series of divestitures and restructuring moves, is aimed at improving Southam's earnings before the expiration in June of a standstill pact with Torstar Corp. When that agreement expires, Torstar will be free to increase its 22.4% stake in Southam, or to make an offer for the whole company.Descendants of the Southam family hold an additional 22.6% stake in the Toronto-based company, Canada's largest newspaper publisher. The newspaper could fetch between 15 million and 20 million Canadian dollars (US$12.8 million to $17.1 million), said one analyst, who asked not to be identified.A spokesman for Southam declined to comment on the price the company is seeking or on estimates of the paper's annual losses, which most analysts place at between C$4 million and C$7 million. Yesterday, Southam reported third-quarter earnings of C$10.8 million on revenue of C$395.4 million, down from C$14.6 million on revenue of C$389.6 million in the year-ago quarter. "To be profitable, the paper requires more circulation and building circulation is an expensive undertaking," said John Macfarlane, the paper's publisher.Southam said the level of future investment required by the paper would have restricted its options in other areas. The acquisition of the Financial Times of Canada is "well within reach for any number of media companies, both public and private," said James Cole, an analyst with Toronto-based BBN James Capel Inc. Possible bidders include Christopher Ondaatje, a Toronto financier and vice chairman of Hees International Bancorp Inc., a holding company controlled by Toronto's Bronfman family.Mr. Ondaatje sold his stake in Pagurian Corp. to Hees earlier this year and is said to be seeking a media acquisition.Mr. Ondaatje couldn't be reached for comment, but Roy Mac-Laren, chairman of CB Media, a closely held concern that publishes two business magazines, said his company would take a close look at the newspaper. Mr. Cole said the sale of the 77-year Financial Times, which Southam has owned since 1961, is consistent with Southam's strategy of cutting costs to obtain maximum profits from its operations while disposing of "chronically under-performing" assets. Southam agreed to sell its 47% stake in Selkirk Communications Ltd., a broadcasting concern, to Maclean Hunter Ltd. for about C$285 million last year.This year, it has moved to cut costs in its newspaper division through layoffs and asset sales, while reaching joint venture and acquisition agreements in other areas. The Financial Times of Canada has no links to the British daily newspaper, The Financial Times.
Norton Co. said net income for the third quarter fell 6% to $20.6 million, or 98 cents a share, from $22 million, or $1.03 a share. Operating profit for the abrasives, engineering materials and petroleum services concern was $19.2 million, or 91 cents a share, up 3% from $18.7 million, or 87 cents a share. The company had a tax credit of $1.4 million.In the year-earlier quarter, the tax credit was $3.3 million.Sales rose 8% to $368.5 million from $340.7 million. Operating profit in the company's abrasives segment rose 16% while operating profit in the engineering materials segment rose 2%.However, the company's petroleum services segment, while profitable, was hurt by high financing costs associated with the company's buy-out of a 50% stake in Eastman Christensen Co. from Texas Eastern Corp. last June.Norton and Texas Eastern had each held a 50% stake in Eastman in a joint venture. Norton announced earlier this month that it was exploring the possible sale of all or part of Eastman Christensen. For the nine months, Norton had net of $81.2 million, or $3.87 a share, and a tax credit of $4.4 million.In the year-earlier period, the company had net of $77.2 million, or $3.68 a share, and a tax credit of $7.7 million. Norton had operating profit of $76.8 million, or $3.66 a share, up 11% from $69.5 million, or $3.31 a share. Sales rose 8% to $1.15 billion from $1.06 billion.
Y.J. Park and her family scrimped for four years to buy a tiny apartment here, but found that the closer they got to saving the $40,000 they originally needed, the more the price rose.By this month, it had more than doubled. Now the 33-year-old housewife, whose husband earns a modest salary as an assistant professor of economics, is saving harder than ever. "I am determined to get an apartment in three years," she says. "It's all I think about or talk about." For the Parks and millions of other young Koreans, the long-cherished dream of home ownership has become a cruel illusion.For the government, it has become a highly volatile political issue. Last May, a government panel released a report on the extent and causes of the problem.During the past 15 years, the report showed, housing prices increased nearly fivefold.The report laid the blame on speculators, who it said had pushed land prices up ninefold. The panel found that since 1987, real-estate prices rose nearly 50% in a speculative fever fueled by economic prosperity, the 1988 Seoul Olympics and the government's pledge to rapidly develop Korea's southwest.The result is that those rich enough to own any real estate at all have boosted their holdings substantially.For those with no holdings, the prospects of buying a home are ever slimmer. In 1987, a quarter of the population owned 91% of the nation's 71,895 square kilometers of private land, the report said, and 10% of the population owned 65% of the land devoted to housing.Meanwhile, the government's Land Bureau reports that only about a third of Korean families own their own homes. Rents have soared along with house prices.Former National Assemblyman Hong Sa-Duk, now a radio commentator, says the problem is intolerable for many people. "I'm afraid of a popular revolt if this situation isn't corrected," he adds.In fact, during the past three months there have been several demonstrations at the office complex where the Land Bureau is housed, and at the National Assembly, demanding the government put a stop to real-estate speculation. President Roh Tae Woo's administration has been studying the real-estate crisis for the past year with an eye to partial land redistribution.Last week, the government took three bills to the National Assembly.The proposed legislation is aimed at rectifying some of the inequities in the current land-ownership system.Highlights of the bills, as currently framed, are: -- A restriction on the amount of real estate one family can own, to 660 square meters in the nation's six largest cities, but more in smaller cities and rural areas.The government will penalize offenders, but won't confiscate property. -- A tax of between 3% and 6% on property holdings that exceed the governmentset ceiling. -- Taxes of between 15% and 50% a year on "excessive" profits from the resale of property, or the sale of idle land to the government.The government defines excessive profits as those above the average realized for other similar-sized properties in an area. -- Grace periods ranging from two to five years before the full scope of the penalties takes effect. The administration says the measures would stem rampant property speculation, free more land for the government's ambitious housing-construction program, designed to build two million apartments by 1992 -- and, perhaps, boost the popular standing of President Roh. But opposition legislators and others calling for help for South Korea's renters say the proposed changes don't go far enough to make it possible for ordinary people to buy a home.Some want lower limits on house sizes; others insist on progressively higher taxation for larger homes and lots. The Citizens Coalition for Economic Justice, a public-interest group leading the charge for radical reform, wants restrictions on landholdings, high taxation of capital gains, and drastic revamping of the value-assessment system on which property taxes are based. But others, large landowners, real-estate developers and business leaders, say the government's proposals are intolerable.Led by the Federation of Korean Industries, the critics are lobbying for the government to weaken its proposed restrictions and penalties. Government officials who are urging real-estate reforms balk at the arguments of business leaders and chafe at their pressure. "There is no violation of the capitalistic principle of private property in what we are doing," says Lee Kyu Hwang, director of the government's Land Bureau, which drafted the bills.But, he adds, the constitution empowers the government to impose some controls, to mitigate the shortage of land. The land available for housing construction stands at about 46.2 square meters a person -- 18% lower than in Taiwan and only about half that of Japan. Mr. Lee estimates that about 10,000 property speculators are operating in South Korea.The chief culprits, he says, are big companies and business groups that buy huge amounts of land "not for their corporate use, but for resale at huge profit." One research institute calculated that as much as 67% of corporate-owned land is held by 403 companies -- and that as little as 1.5% of that is used for business.The government's Office of Bank Supervision and Examination told the National Assembly this month that in the first half of 1989, the nation's 30 largest business groups bought real estate valued at $1.5 billion. The Ministry of Finance, as a result, has proposed a series of measures that would restrict business investment in real estate even more tightly than restrictions aimed at individuals. Under those measures, financial institutions would be restricted from owning any more real estate than they need for their business operations.Banks, investment and credit firms would be permitted to own land equivalent in value to 50% of their capital -- currently the proportion is 75%.The maximum allowable property holdings for insurance companies would be reduced to 10% of their total asset value, down from 15% currently. But Mrs. Park acknowledges that even if the policies work to slow or stop speculation, apartment prices are unlikely to go down.At best, she realizes, they will rise more slowly -- more slowly, she hopes, than her family's income.
Energetic and concrete action has been taken in Colombia during the past 60 days against the mafiosi of the drug trade, but it has not been sufficiently effective, because, unfortunately, it came too late. Ten years ago, the newspaper El Espectador, of which my brother Guillermo was editor, began warning of the rise of the drug mafias and of their leaders' aspirations to control Colombian politics, especially the Congress.Then, when it would have been easier to resist them, nothing was done and my brother was murdered by the drug mafias three years ago. The most ruthless dictatorships have not censored their press more brutally than the drug mafias censor Colombia's.The censorship is enforced through terrorism and assassination.In the past 10 years about 50 journalists have been silenced forever, murdered. Within the past two months a bomb exploded in the offices of the El Espectador in Bogota, destroying a major part of its installations and equipment.And only last week the newspaper Vanguardia Liberal in the city of Bucaramanga was bombed, and its installations destroyed.Journalists and their families are constantly threatened as are the newspaper distribution outlets.Distribution centers are bombed, and advertisers are intimidated.Censorship is imposed by terrorism. If the Colombian media accept this new and hideous censorship there is little doubt that the drug mafia's terrorism someday will extend to all the newspapers published in the free world.The solidarity of the uncensored media world-wide against drug terrorism is the only way press freedom can survive. The American people and their government also woke up too late to the menace drugs posed to the moral structure of their country.Even now, the American attack upon this tremendous problem is timid in relation to the magnitude of the threat.I can attest that a recent Colombian visitor to the U.S. was offered drugs three times in the few blocks' walk between Grand Central Terminal and the Waldorf Astoria Hotel in midtown Manhattan.Colombia alone -- its government, its people, its newspapers -- does not have the capacity to fight this battle successfully.All drug-consuming countries must jointly decide to combat and punish the consumers and distributors of drugs.The U.S., as the major drug consumer, should lead this joint effort.Reduction, if not the total cessation, of drug consumption is the requirement for victory. Much is being done in Colombia to fight the drug cartel mafia.Luxurious homes and ranches have been raided by the military authorities, and sophisticated and powerful communications equipment have been seized.More than 300 planes and helicopters have been impounded at airports, and a large number of vehicles and launches has been confiscated.The military has also captured enormous arsenals of powerful and sophisticated weapons, explosives and other war-like materiel.Much has been accomplished and public opinion decisively supports the government and the army -- but, on the other hand, none of the key drug barons have been captured. There has been a lot of talk that a large portion of the Colombian economy is sustained by the laundering of drug money.In my opinion, this is not true.Laundered drug money has served only to increase, unrealistically, the price of real estate, creating serious problems for low-income people who aspire to own their own homes.Drug money has also gone to buy expensive cars, airplanes, launches and nightclubs where drugs are consumed.But most of the drug money is kept in investments and in financial institutions outside Colombia.In fact, the cooperation of those financial institutions is essential to the success of the drug battle. What is of much more importance to the Colombian economy than the supposed benefits of laundered drug money is higher prices for Colombia's legitimate products.The price of coffee has gone down almost 45% since the beginning of the year, to the lowest level (after inflation) since the Great Depression.Market conditions point to even lower prices next year.The 27-year-old coffee cartel had to be formally dissolved this summer.As a result, Colombia will earn $500 million less from its coffee this year than last.Our coffee growers face reductions in their income, and this tempts them to contemplate substituting coca crops for coffee. U.S. interests occasionally try to impose barriers to the import of another important Colombian export -- cut flowers -- into the American market.A just price and an open market for what Colombian produces and exports should be the policy of the U.S. I take advantage of this opportunity given to me by The Wall Street Journal to make a plea to the millions of readers of this newspaper, to become soldiers dedicated to the fight against the use of drugs.Each gram of cocaine consumed is a deadly bullet against those in our country and in the rest of the world who fight this terrible scourge.A crusade of NO to the consumption of drugs is imperative. Mr. Cano is president of El Espectador, a newspaper founded by his grandfather.
It has more drug users than Boston has people.Thirty-four thousand of its children live in foster homes, while 50,000 residents have no homes at all.Its tax base is shrinking, a $1 billion budget deficit looms, and the city faces contract negotiations with all major municipal unions next year. This is New York City.When the dust and dirt settle in an extra-nasty mayoral race, the man most likely to gain custody of all this is a career politician named David Dinkins.Running the nation's largest and most ornery city may be no treat, but at least Mr. Dinkins knows what to expect from it.As the campaign hits the home stretch, however, voters still have very little idea what they can expect from him.After 25 years in city politics, David Dinkins remains an enigma. The soft-spoken, silver-haired Manhattan borough president -- the first black man to win the Democratic nomination for mayor here -- doesn't have a single prominent political enemy.While he is widely described as a man with deep convictions, he has few major political programs that he can call his own.Asked about his greatest achievement in public life, he first speaks about the quality of his staff. Now, as election day nears, even some supporters wonder what he will do if he wins the mayoralty on Nov. 7.They wonder whether he can be firm with his longtime allies, including union leaders and political cronies who may seek a place at the trough.They wonder whether he has the economic know-how to steer the city through a possible fiscal crisis, and they wonder who will be advising him.Will he, if he wins, be in the thrall of the most liberal of his allies, who advocate such policies as rent control for commercial buildings, or will he tilt toward the real-estate interests that have funneled money into his campaign? After his decisive primary victory over Mayor Edward I. Koch in September, Mr. Dinkins coasted, until recently, on a quite-comfortable lead over his Republican opponent, Rudolph Giuliani, the former crime buster who has proved a something of a bust as a candidate. But Mr. Dinkins has stumbled in the past two weeks over his campaign's payments to a black activist who is a convicted kidnapper, and over his handling of a stock sale to his son.Polls also have recorded some slippage in Mr. Dinkins's support among Jewish voters, and citywide projections now put his lead at between four and 20 percentage points. In an interview with reporters and editors of The Wall Street Journal, Mr. Dinkins appears quite confident of victory and of his ability to handle the mayoralty. "A lot of people think I will give away the store, but I can assure you I will not," he says. "I am aware we have real budgetary problems." The city is full of aging bridges, water mains and roadways that are in need of billions of dollars worth of repair.Renewed efforts to fight drugs and crime will be costly.But city officials say tax revenues are lagging.And after a decade of explosive job growth on Wall Street, a period of contraction is under way. Mr. Koch already has announced he will drop 3,200 jobs from the city payroll, but that won't be enough.New York State Comptroller Edward Regan predicts a $1.3 billion budget gap for the city's next fiscal year, a gap that could grow if there is a recession.If elected, Mr. Dinkins will probably have no choice but to raise taxes on overburdened businesses or cut spending in already under-serviced neighborhoods. "He is going to face a mess," says City Council President Andrew Stein. "His supporters are not venal, but their solution to everything will be to spend more money, and he won't have any money." By and large, Mr. Dinkins has finessed the touchy question of whose ox he would gore.Instead of focusing on the financial future, Mr. Dinkins has sold himself as a unifier for a city recently touched by racial violence and as a soothing antidote to 12 years of commotion generated by Mayor Koch. "The thing about the Dinkins candidacy is that it offers hope to a broad range of people," says Meyer Frucher, a real-estate executive and former aide to Gov. Mario Cuomo. "It is a feel-good candidacy." No doubt, Mr. Dinkins has been a calming influence.He is an avuncular figure who remembers the birthdays of colleagues' children, opens doors for women, and almost never has a bad word to say about anybody.More important, he emerged as a peacemaker last summer after the Central Park rape of a white jogger -- in which a group of Harlem teens was charged -- and the racial murder of a black teen-ager in the white Brooklyn neighborhood of Bensonhurst.Rather than scaring off white voters, as many predicted he would, Mr. Dinkins attracted many whites precisely because of his reputation for having a cool head. (Keeping cool is a Dinkins priority: On humid days this summer, he was known to change his double-breasted suits as many as four times a day.) But even in his front-runner campaign, he has shown signs of the indecisiveness and confusion that some say has plagued his tenure as Manhattan borough president -- and might hinder him as mayor.Over the last few weeks, he has frittered away roughly half of what was once a 33-point lead in the polls over Mr. Giuliani.A story about how he mishandled the sale to his son of his stock in a media company controlled by his political patron Percy Sutton was allowed to fester a full week before Mr. Dinkins faced the media.He has canceled numerous campaign appointments and was largely inaccessible to the media until the stock story broke. His campaign was caught flat-footed amid allegations it paid almost $10,000 for what it said was a "get-out-the-vote" effort by black activist Sonny Carson, a convicted kidnapper who later said publicly that he is "anti-white." Critics have said the payment looked like an attempt by the Dinkins camp to get Mr. Carson to stop leading confrontational demonstrations protesting the Bensonhurst murder -- protests the campaign may have feared could cause some white voters to turn from a black candidate. Mr. Dinkins also has failed to allay Jewish voters' fears about his association with the Rev. Jesse Jackson, despite the fact that few local non-Jewish politicians have been as vocal for Jewish causes in the past 20 years as Mr. Dinkins has. These campaign problems have echoed difficulties Mr. Dinkins has run into before.A former U.S. Marine, Mr. Dinkins got off to a quick start in politics, joining a local Democratic political club in the 1950s, linking up with black urban leaders such as Charles Rangel, Basil Paterson and Mr. Sutton, and getting himself elected to the state assembly in 1965.But his chance to become deputy mayor under Mayor Abraham Beame, a plan boosted by Mr. Sutton, was squandered because of Mr. Dinkins's failure -- still largely unexplained -- to file income tax returns for four years running. "I always thought of this as a thing that could always be done tomorrow," he said at the time. Later, Mr. Dinkins became more deeply indebted to Mr. Sutton and other city pols, including then-City Council President Paul O'Dwyer, when they helped him get appointed city clerk, a largely ceremonial post responsible for the city's marriage bureau, among other things. (Mr.O'Dwyer is now one of the lawyers for Mr. Sutton's media company.) The debt rose further in 1977 when Mr. Sutton resigned his position as Manhattan borough president to run for mayor.Mr. Sutton recalls: "When I left, I sat down with Charlie {Rangel}, Basil {Paterson} and David, and David said, 'Who will run for borough president? ' And I said, 'You will. '" David Garth, Mayor Koch's longtime media adviser, says of Mr. Dinkins, "He really is the personification of the patronage system.But the guy is so personally decent, people tend to forget that." Mr. Dinkins lost twice by wide margins before finally getting elected borough president in 1985.But by most accounts, he made little of the post and was best known among city politicians for his problems making up his mind on matters before the city's Board of Estimate, the body that votes on crucial budget and land-use matters.Colleagues today recall with some humor how meetings would crawl into the early morning hours as Mr. Dinkins would march his staff out of board meetings and into his private office to discuss, en masse, certain controversial proposals. "He taught me how to drink herbal tea instead of coffee at 3 a.m., I'll give him that," says Deputy Mayor Robert Esnard. Often, Mr. Dinkins's procrastination prevented him from having a say in the way things turned out, critics claim.On the campaign stump, he often points out that he was the only Board of Estimate member to vote against a controversial real-estate project at Manhattan's Columbus Circle.But board members say he took so long to decide how to vote that by the time he decided, it was too late to try to draw other members to his position.Says one city official: "Everybody else had brought in the wagons and made their deal.He would have got a lot more done if he made up his mind faster." One Board member, Bronx Borough President Ferdinand Ferrer, was said to be so impatient with Mr. Dinkins's behavior at many meetings that he withheld his support for Mr. Dinkins's mayoral effort until late in the primary campaign. "I had some problem from time to time on the length of time he would take to make up his mind," Mr. Ferrer admits, but he maintains that he didn't delay his support of Mr. Dinkins and that he backs the Democratic candidate enthusiastically. Mr. Dinkins's campaign manager and former chief of staff, Bill Lynch, denies that the Manhattan borough president has taken too long to decide important issues. "We didn't rubber-stamp everything that came to us," Mr. Lynch says. On some occasions when Mr. Dinkins has discussed the issues during the campaign, he has run into a familiar kind of trouble.Some supporters were stunned this summer when Mr. Dinkins suggested weakening the law forbidding public employees to go on strike.He withdrew the remark.When he later sided with striking hospital workers, some allies cringed a little more, concerned that Mr. Dinkins was setting the wrong tone for coming contract negotiations with city employees. Then, two days before receiving an endorsement from environmental groups, Mr. Dinkins promised he would issue a three-year moratorium on construction of garbage-incinerator plants.That announcement was roundly criticized by Mayor Koch -- who has endorsed Mr. Dinkins -- because the city faces a garbage crisis and has already spent $5 million planning for an incinerator that would be scrapped under Mr. Dinkins's proposal. While his public statements have at times been confusing, Mr. Dinkins's position papers have more consistently reflected anti-development sentiment.He favors a form of commercial rent control, which the financial community believes would make it more difficult to attract investment in the city.In the midst of a labor shortage, he proposes linking city subsidies to businesses to their record of hiring New York City residents.With an untrained local labor pool, many experts believe, that policy could drive businesses from the city. And he favors a more cooperative approach toward the neighboring states of New Jersey and Connecticut in the battle over companies thinking of moving employees out of New York City.Many economic-development officials say the Koch administration's aggressive approach helped save 5,000 Chase Manhattan Bank jobs from moving across the Hudson. But Mr. Dinkins's economic planks don't seem to bother the business community, where he draws significant support.Steven Spinola, president of the Real Estate Board of New York, an industry organization, says Mr. Dinkins's "economic development program is shortsighted, but when it comes down to it, he can be reasonable." Mr. Dinkins's inner circle of advisers appears to include both ideologues and pragmatists, leaving voters with little clue as to who will be more influential.The key man seems to be the campaign manager, Mr. Lynch.A disheveled, roly-poly son of a Long Island potato farmer, Mr. Lynch is a veteran union organizer who worked on the presidential campaigns of Sen. Edward Kennedy and Mr. Jackson.But as the Dinkins campaign hit tough times this month, Andrew Cuomo, the politically seasoned son of the New York governor, is also said to have taken a more active role on strategy. Another close ally is Ruth Messinger, a Manhattan city councilwoman, some of whose programs, such as commercial rent control, have made their way into Mr. Dinkins's position papers.If she remains influential with Mr. Dinkins, as some suggest she will, his mayoralty may take on a more anti-development flavor. But Lincoln Center President Nathan Leventhal, who would head a Dinkins transition team, is more mainstream, as is real-estate executive Anthony Gliedman, another insider.Mr. Dinkins also has said he would receive economic advice from a board that would include American Express Co. chairman James D. Robinson III, investment banker Felix Rohatyn, leveraged-buy-out specialist Reginald Lewis and attorney Joseph Flom. Some business leaders and others also believe that Mr. Dinkins would place significant responsibility in the hands of a deputy mayor with a strong administrative background.Names of possible deputies that have surfaced include former mayoral candidate Richard Ravitch, former schools chancellor Frank Macchiarola and Messrs.Leventhal and Gliedman. Then there are Mr. Dinkins's old-time Harlem colleagues, such as U.S. Rep. Rangel, former Deputy Mayor Paterson and Mr. Sutton.Having attained positions of real influence or wealth, these men constitute the Old Guard of New York City black politics; they are less confrontational than the younger, more activist black political community that has been based largely in Brooklyn. (Part of Mr. Dinkins's strength is his ability to win the support of both the Brooklyn and Harlem factions.) "We know there are potholes for the city out there," says Mr. Paterson, Mr. Dinkins's former law partner. "If any of us think we're going to sidetrack David's determination to be the best possible mayor because of his obligations to us, we are making a sad mistake." Adds Ms. Messinger, who is expected to win the borough president's job Mr. Dinkins is vacating, "You have to remember David is a pragmatist." But Mr. Dinkins's sense of pragmatism often comes across more as an insider's determination not to upset the political apple cart.He is taken aback in an interview when asked whether, as mayor, he plans on reforming the political "fiefdoms" that perpetuate the monumental ineffectiveness of New York's school system. "I will sit down and talk some of the problems out, but take on the political system?Uh-uh," he says with a shake of the head. Despite many doubts about his candidacy, white New Yorkers -- who gave Mr. Dinkins 30% of their votes in the primary -- aren't expected to desert in sufficient numbers to turn the election to Mr. Giuliani.The former U.S. attorney, who prosecuted targets ranging from Mafia dons to Wall Street executives, has succeeded in raising questions about Mr. Dinkins's ethical standards, but so far has failed to generate excitement about his own candidacy.As a Republican in an overwhelmingly Democratic city, Mr. Giuliani has an inherent handicap.As a first-time candidate, he has been slow to learn the nuances of New York City politicking. Mr. Giuliani is finding that Mr. Dinkins, in his many years in public life, has built up considerable good will that so far has led many voters to overlook certain failings. "The bottom line is that he is a very genuine and decent guy," says Malcolm Hoenlein, a Jewish community leader. "In the end, I think David will be judged for being David."
Toni Johnson pulls a tape measure across the front of what was once a stately Victorian home. A deep trench now runs along its north wall, exposed when the house lurched two feet off its foundation during last week's earthquake.A side porch was ripped away.The chimney is a pile of bricks on the front lawn.The remainder of the house leans precariously against a sturdy oak tree. The petite, 29-year-old Ms. Johnson, dressed in jeans and a sweatshirt as she slogs through the steady afternoon rain, is a claims adjuster with Aetna Life & Casualty.She has been on the move almost incessantly since last Thursday, when an army of adjusters, employed by major insurers, invaded the San Francisco area to help policyholders sift through the rubble and restore some order to their lives. Equipped with cellular telephones, laptop computers, calculators and a pack of blank checks, they parcel out money so their clients can find temporary living quarters, buy food, replace lost clothing, repair broken water heaters, and replaster walls.Some of the funds will used to demolish unstable buildings and clear sites for future construction. Many adjusters are authorized to write checks for amounts up to $100,000 on the spot.They don't flinch at writing them. "That's my job -- get {policyholders} what they're entitled to," says Bill Schaeffer, a claims supervisor who flew in from Aetna's Bridgeport, Conn., office. The Victorian house that Ms. Johnson is inspecting has been deemed unsafe by town officials.But she asks a workman toting the bricks from the lawn to give her a boost through an open first-floor window.Once inside, she spends nearly four hours measuring and diagramming each room in the 80-year-old house, gathering enough information to estimate what it would cost to rebuild it.She snaps photos of the buckled floors and the plaster that has fallen away from the walls. While she works inside, a tenant returns with several friends to collect furniture and clothing.One of the friends sweeps broken dishes and shattered glass from a countertop and starts to pack what can be salvaged from the kitchen.Others grab books, records, photo albums, sofas and chairs, working frantically in the fear that an aftershock will jolt the house again. The owners, William and Margie Hammack, are luckier than many others.A few years ago, Mrs. Hammack insisted on buying earthquake insurance for this house, which had been converted into apartments.Only about 20% of California home and business owners carried earthquake coverage.The Hammacks' own home, also in Los Gatos, suffered comparatively minor damage. Ms. Johnson, who works out of Aetna's office in Walnut Creek, an East Bay suburb, is awed by the earthquake's destructive force. "It really brings you down to a human level," she says. "It's hard to accept all the suffering people are going through, but you have to.If you don't, you can't do your job." For Aetna and other insurers, the San Francisco earthquake hit when resources in the field already were stretched.Most companies still are trying to sort through the wreckage caused by Hurricane Hugo in the Carolinas last month.Aetna, which has nearly 3,000 adjusters, had deployed about 750 of them in Charlotte, Columbia, and Charleston.Adjusters who had been working on the East Coast say the insurer will still be processing claims from that storm through December.It could take six to nine months to handle the earthquake-related claims. When the earthquake rocked northern California last week, Aetna senior claims executives from the San Francisco area were at the company's Hartford, Conn., headquarters for additional training on how to handle major catastrophes, including earthquakes. Since commercial airline flights were disrupted, the company chartered three planes to fly these executives back to the West Coast and bring along portable computers, cellular phones and some claims adjusters.Because of the difficulty of assessing the damages caused by the earthquake, Aetna pulled together a team of its most experienced claims adjusters from around the country.Even so, few had ever dealt with an earthquake. Some adjusters, like Alan Singer of San Diego, had been working in Charleston for nearly four weeks.He returned home last Thursday, packed a bag with fresh clothes and reported for duty Friday in Walnut Creek.Offices were set up in San Francisco and San Jose. In a few instances, Aetna knew it would probably be shelling out big bucks, even before a client called or faxed in a claim.For example, officials at Walnut Creek office learned that the Amfac Hotel near the San Francisco airport, which is insured by Aetna, was badly damaged when they saw it on network television news. "The secret to being a good adjuster is counting," says Gerardo Rodriguez, an Aetna adjuster from Santa Ana. "You have to count everything." Adjusters must count the number of bathrooms, balconies, fireplaces, chimneys, microwaves and dishwashers.But they must also assign a price to each of these items as well as to floors, wallcoverings, roofing and siding, to come up with a total value for a house.To do that, they must think in terms of sheetrock by the square foot, carpeting by the square yard, wallpaper by the roll, molding by the linear foot.Using a calculator and a unit-price guide for such jobs as painting, plumbing and roofing in each major region of the country, adjusters can figure out the value of a home in today's market and what it would cost to rebuild it. Sometimes repairs are out of the question.When Aetna adjuster Bill Schaeffer visited a retired couple in Oakland last Thursday, he found them living in a mobile home parked in front of their yard. The house itself, located about 50 yards from the collapsed section of double-decker highway Interstate 880, was pushed about four feet off its foundation and then collapsed into its basement. The next day, Mr. Schaeffer presented the couple with a check for $151,000 to help them build a new home in the same neighborhood.He also is working with a real-estate agent to help find them an apartment to rent while their home is being built. Many of the adjusters employed by Aetna and other insurers have some experience with construction work or carpentry.But such skills were alien to Toni Johnson.Four years ago, she was managing a film-processing shop and was totally bored.A friend mentioned that she might want to look into a position at Aetna, if she was interested in a job that would constantly challenge her.She signed up, starting as an "inside" adjuster, who settles minor claims and does a lot of work by phone.A year later, she moved to the commercial property claims division. She spent a month at an Aetna school in Gettysburg, Pa., learning all about the construction trade, including masonry, plumbing and electrical wiring.That was followed by three months at the Aetna Institute in Hartford, where she was immersed in learning how to read and interpret policies. Her new line of work has some perils.Recently, a contractor saved her from falling three stories as she investigated what remained of an old Victorian house torched by an arsonist. "I owe that contractor.I really do," she says. As Ms. Johnson stands outside the Hammack house after winding up her chores there, the house begins to creak and sway.The ground shakes underneath her.It is an aftershock, one of about 2,000 since the earthquake, and it makes her uneasy. The next day, as she prepares a $10,000 check for the Hammacks, which will cover the cost of demolishing the house and clearing away the debris, she jumps at the slightest noise.On further reflection, she admits that venturing inside the Hammacks' house the previous day wasn't "such a great idea." During her second meeting with the Hammacks, Ms. Johnson reviews exactly what their policy covers.They would like to retrieve some appliances on the second floor, but wonder if it's safe to venture inside.Ms. Johnson tells them that, if the appliances can't be salvaged, their policy covers the replacement cost.Mr. Hammack is eager to know what Aetna will pay for the house, which has to come down. "When will I get that check for a million dollars?" he jokes. The adjuster hadn't completed all the calculations, but says: "We're talking policy limits." In this case, that's about $250,000.It suddenly dawns on Mr. Hammack that rebuilding the house in Los Gatos, an affluent community in Santa Clara County, may cost more than Aetna's policy will pay. "We can lose money on this," he says. "And you didn't want me to buy earthquake insurance," says Mrs. Hammack, reaching across the table and gently tapping his hand. Earthquake insurance costs about $2 to $4 annually for every $1,000 of value, and high deductibles mean it generally pays only when there is a catastrophe.So, many Californians believe they can get by without it.Even Ms. Johnson herself made that assumption. "I always knew that the 'Big One' was coming, but not during my lifetime," she says.Now she says she's thinking of contacting her own insurance agent. For Ms. Johnson, dealing with the earthquake has been more than just a work experience.She lives in Oakland, a community hit hard by the earthquake.She didn't have hot water for five days.The apartment she shares with a 12-year-old daughter and her sister was rattled, books and crystal hit the floor, but nothing was severely damaged.Her sister, Cynthia, wishes Toni had a different job. "We worry about her out there," Cynthia says. Last Sunday, Ms. Johnson finally got a chance to water her plants, but stopped abruptly. "I realized I couldn't waste this water when there are people in Watsonville who don't have fresh water to drink." She hasn't played any music since the earthquake hit, out of respect for those who died on Interstate 880 where the roadway collapsed.
The Federal Communications Commission allowed American Telephone & Telegraph Co. to continue offering discount phone services for large-business customers and said it would soon re-examine its regulation of the long-distance market. The FCC moves were good news for AT&T, which has been striving since the breakup of the phone system for greater latitude in pricing and reduced regulation.Alfred Sikes, the new FCC chairman, championed deregulation of AT&T at his last job as head of a Commerce Department telecommunications agency.But it has been an open question whether Mr. Sikes, an extraordinarily cautious man, would continue pushing deregulation at the FCC in the face of what is likely to be great political pressure. "It means that Sikes is serious about the deregulation of long distance," said Jack Grubman, a telecommunications analyst at PaineWebber Inc., who attended the FCC meeting. "All the commissioners were in amazing agreement {to re-examine regulation} for only having been together for a few months." The FCC took three specific actions regarding AT&T.By a 4-0 vote, it allowed AT&T to continue offering special discount packages to big customers, called Tariff 12, rejecting appeals by AT&T competitors that the discounts were illegal.Then by a separate 4-0 vote, it chose the narrowest possible grounds to strike down a different discount plan, called Tariff 15, that AT&T offered to Holiday Corp. AT&T gave a 5% to 10% discount to the Memphis, Tenn., company that oversees Holiday Inns, in response to a similar discount offered to Holiday Corp. by MCI Communications Corp.The agency said that because MCI's offer had expired AT&T couldn't continue to offer its discount plan.But the agency specifically didn't rule whether AT&T had the right to match offers by competitors if that means giving discounts not generally available to other phone users. Indeed, Joe Nacchio, AT&T's vice president for business-communications services, said AT&T offered a similar Tariff 15 discount to Resort Condominium International, of Indianapolis, to meet another MCI bid.The FCC "didn't say I couldn't do it again," he said. Apart from those two actions, Mr. Sikes and the three other commissioners said they expect to re-examine how AT&T is regulated since competition has increased.Richard Firestone, chief of the FCC's common-carrier bureau, said he expected the agency to propose new rules next year. AT&T applauded the FCC's actions. "The time is long overdue to take a look at the fierce competition in the long-distance business and the rules governing it," the New York telecommunications firm said in a statement.But MCI, of Washington, was displeased with the FCC decision concerning Tariff 12, arguing that "AT&T cannot be allowed to flaunt FCC rules." United Telecommunications Inc. 's US Sprint unit said it was "obviously disappointed" with the FCC decision on Tariff 12.US Sprint said was it will petition the FCC decision in federal court. "We believe that the court will find it unlawful," said a US Sprint spokesman. Separately, AT&T filed a countersuit against MCI accusing it of misleading consumers through allegedly "false and deceptive" advertising.The AT&T action was the most recent blow in a nasty fight.Earlier this month, MCI sued AT&T in federal district court, claiming that AT&T's ads are false. AT&T assembled three of its top executives in Washington, all visibly angry, to try to refute MCI's charges. "MCI has made hawks out of the upper echelon of AT&T," said PaineWebber's Mr. Grubman, who said he expected AT&T to become increasingly aggressive in dealing with its longtime nemesis. Julie Amparano Lopez in Philadelphia also contributed to this article.
Billions of investors' dollars are pouring out of the nation's junk-bond mutual funds, undermining a pillar of support in the already reeling junk market. Last week alone, an eye-popping $1.6 billion flowed out of the junk funds, or nearly 5% of their total assets, according to estimates by Dalbar Financial Services Inc., a Boston research firm. In the past two months the nation's 88 junk funds have lost a total of about $6 billion -- more than 15% of assets -- through sales or transfers of junk-fund shares, Dalbar says.It made the estimates based on data collected from more than a dozen big junk funds. Interviews with three major fund groups -- Fidelity Investments, Vanguard Group Inc. and T. Rowe Price Associates Inc. -- confirm the trend.Their junk funds combined have had net outflows totaling nearly $500 million, or about 13% of their junk fund assets, in the past two months. Some fund managers say negative publicity has exacerbated investors' concern about recent declines in junk-bond prices. "People have been seeing headline after headline after headline and saying: `I can't take it anymore -- I'm getting out, '" says Kurt Brouwer of Brouwer & Janachowski, a San Francisco investment adviser. The withdrawals could spell trouble for the $200 billion junk market.If the heavy outflows continue, fund managers will face increasing pressure to sell off some of their junk to pay departing investors in the weeks ahead.Such selling could erode prices of high-yield junk bonds, already weakened by a rash of corporate credit problems. Mutual fund groups haven't lost control of much of the outgoing money, says Louis Harvey, Dalbar's president.Mutual fund officials say that investors have transferred most of it into their money market accounts, and to a lesser extent, government-bond funds.So the impact on the $950 billion mutual fund industry as a whole probably will be slight. But tremors are likely in the junk-bond market, which has helped to finance the takeover boom of recent years.Mutual funds are the among the largest holders of junk, accounting for more than a quarter of the entire high-yield, high-risk market.The 88 mutual funds investing solely in junk bonds hold assets of about $32 billion.Other funds hold a smattering of junk bonds, too. The $1.5 billion Fidelity High Income Fund has had a net outflow of about $150 million in the past two months.About $60 million streamed out last week alone, double the level of the week following last month's Campeau Corp. credit squeeze.About 98% of the outflow was transferred to other Fidelity funds, says Neal Litvack, a Fidelity vice president, marketing, with most going into money market funds. "You get a news item, it hits, you have strong redemptions that day and for two days following -- then go back to normal," says Mr. Litvack.The fund, with a cash cushion of more than 10%, has "met all the redemptions without having to sell one thing," Mr. Litvack says.He adds: "Our fund has had {positive} net sales every month for the last three years -- until this month." Vanguard's $1 billion High Yield Bond Portfolio has seen $161 million flow out since early September; $14 million of that seeped out Friday Oct. 13 alone.Still, two-thirds of the outflow has been steered into other Vanguard portfolios, says Brian Mattes, a vice president.The fund now holds a cash position of about 15%. At the $932 million T. Rowe Price High Yield Fund, investors yanked out about $182 million in the past two months.Those withdrawals, most of which were transferred to other T. Rowe Price funds, followed little change in the fund's sales picture this year through August. "The last two months have been the whole ball game," says Steven Norwitz, a vice president. Junk-fund holders have barely broken even this year, as fat interest payments barely managed to offset declining prices.Through Oct. 19, high-yield funds had an average 0.85% total return (the price change plus dividends on fund shares), according to Lipper Analytical Services Inc. That's even less than the 4.35% total return of the Merrill Lynch High-Yield Index. Fidelity's junk fund has fallen 2.08% this year through Oct. 19, Lipper says; the Vanguard fund rose 1.84%; and the T. Rowe Price fund edged up 0.66%. People who remain in junk funds now could get hit again, some analysts and fund specialists say.Many funds in recent weeks and months have been selling their highest-quality junk issues, such as RJR Nabisco, to raise cash to meet expected redemptions. Funds might be forced to accept lower prices if they expand their selling to the securities of less-creditworthy borrowers.And then, asset values of the funds could plunge more than they have so far. Says Michael Hirsch, chief investment officer of Republic National Bank and manager of the FundTrust Group in New York: "It's a time bomb just waiting to go off."
The surprise resignation yesterday of British Chancellor of the Exchequer Nigel Lawson sent sterling into a tailspin against the dollar by creating uncertainties about the direction of the British economy. The U.S. unit also firmed against other currencies on the back of sterling's tumble, as market participants switched out of pounds. The pound also dropped precipitously against the mark, falling below the key 2.90-mark level to 2.8956 marks from 2.9622 marks late Wednesday. Mr. Lawson's resignation shocked many analysts, despite the recent recurring speculation of a rift between the chancellor and Prime Minister Margaret Thatcher. Indeed, only hours earlier, Mrs. Thatcher had called Mr. Lawson's economic policies "sound" and said she has "always supported" him. "There was a general feeling that we'd seen the worst," said Patrick Foley, deputy chief economic adviser for Lloyds Bank in London. "The resignation came as a great surprise." Graham Beale, manager of foreign-exchange operations at Hong Kong & Shanghai Banking Corp. in New York, added that Mrs. Thatcher's comments reinforced the market's growing confidence about sterling and compounded the unit's later decline. "The market was caught totally the wrong way. . . . Everyone was extremely long on sterling," Mr. Beale said. In late New York trading yesterday, the dollar was quoted at 1.8400 marks, up from 1.8353 marks late Wednesday, and at 142.10 yen, up from 141.52 yen late Wednesday.Sterling was quoted at $1.5765, sharply down from $1.6145 late Wednesday. In Tokyo Friday, the U.S. currency opened for trading at 142.02 yen, up from Thursday's Tokyo close of 141.90 yen. Few analysts had much good to say about the pound's near-term prospects, despite the fact that most don't anticipate a shift in Mrs. Thatcher's economic policies. Mr. Foley of Lloyds noted that Mr. Lawson's replacement, John Major, the British foreign minister, will take time to establish his credibility and, in the meantime, sterling could trend downward in volatile trade. But Mr. Foley predicted few economic policy changes ahead, commenting that Mr. Major shares "a very similar view of the world" with Mr. Lawson. Bob Chandross, chief economist at Lloyds Bank in New York, also noted that the pound's sharp decline is pegged more to uncertainty in the market than a vision of altered United Kingdom economic policies. Unless Mr. Lawson's resignation leads to a change in British interest-rate policy -- Mrs. Thatcher's administration firmly supports high interest rates to keep inflation in check -- or posturing toward full inclusion in the European Monetary System's exchange-rate mechanism, Mr. Lawson's withdrawal will have little long-term impact on exchange rates, Mr. Chandross concluded. Also announcing his resignation Thursday was Alan Walters, Mrs. Thatcher's economic adviser and Mr. Lawson's nemesis. The pound, which had been trading at about $1.6143 in New York prior to Mr. Lawson's announcement, sank more than two cents to $1.5930, prompting the Federal Reserve Bank to buy pounds for dollars.The Fed's move, however, only proved a stopgap to the pound's slide and the Fed intervened for a second time at around $1.5825, according to New York traders. Meanwhile, dollar trading was relatively uninspired throughout the session, according to dealers, who noted that Thursday's release of the preliminary report on the U.S. third-quarter gross national product was something of a nonevent. U.S. GNP rose at an annual rate of 2.5% in the third quarter.The implicit price deflator, a measure of inflation, was down to a 2.9% annual rate of increase in the quarter from a 4.6% rate of gain in the second quarter. In Europe, the dollar ended lower in dull trading.The market closed prior to Mr. Lawson's announcement. On the Commodity Exchange in New York, gold for current delivery rose $3.40 to $372.50 an ounce in heavy trading.The close was the highest since August 3.Estimated volume was five million ounces. In early trading in Hong Kong Friday, gold was quoted at $370.85 an ounce.
The following issues were recently filed with the Securities and Exchange Commission: Anheuser-Busch Cos., shelf offering of $575 million of debt securities. Coca-Cola Bottling Co. Consolidated, shelf offering of $200 million of debt securities, via Salomon Brothers Inc. and Goldman, Sachs & Co. First Brands Corp., proposed offering of 6,475,000 common shares, of which 1,475,000 common shares will be sold by the company and five million shares by holders, via First Boston Corp. and Credit Suisse First Boston Ltd. Home Nutritional Services Inc., a wholly owned subsidiary of Healthdyne Inc., proposed initial offering of four million common shares, of which 1.8 million will be sold by Home Nutritional Services and 2.2 million will be sold by Healthdyne, via Smith Barney, Harris Upham & Co. Parametric Technology Corp., initial public offering of 1.7 million common shares, of which 1,365,226 will be offered by the company and 334,774 will be offered by holders, via Alex.Brown & Sons Inc., Hambrecht & Quist Inc. and Wessels, Arnold & Henderson. SynOptics Communications Inc., proposed public offering of 1.5 million common shares, of which 1,003,884 shares are to be sold by the company and 496,116 shares are to be sold by holders, via Morgan Stanley & Co. and Hambrecht & Quist.
On an office wall of the Senate intelligence committee hangs a quote from Chairman David Boren, "Don't hold your ticket 'til the show's over." He once used that line in a closed-door meeting on Panama, meaning don't shrink from taking action against Manuel Noriega. So how did a good senator like this end up approving a policy that required the U.S. to warn Mr. Noriega of any coup plot against him? "I agree, it's ridiculous," says Mr. Boren, and indeed by now ridiculous may be the only way to describe how the U.S. decides to take -- or rather, not to take -- covert action. George Bush disclosed the policy last week by reading it to GOP senators, perhaps as a way of shifting blame for the Panama fiasco to Congress.But the broader truth is more complicated -- and dismaying.The policy was contained in an exchange of letters last October between the Senate intelligence committee and the CIA and National Security Council.Staff lawyers for both sides were busy agreeing with one another about what the U.S. could not do to oust the Panamanian thug.They simply got carried away with interpreting what the executive order banning assassinations really meant.Mr. Boren himself didn't discover the warn-your-enemy nuance until Mr. Bush told him privately at the White House last week. It's ironic that David Boren should be in the center of this mire.A former Oklahoma governor, he's a thoughtful defender of presidential powers in foreign policy.He's a rare Democratic hawk.He's the senator most like Arthur Vandenberg, the GOP senator from Michigan who worked to forge a bipartisan foreign policy in the 1940s. "Vandenberg and Rayburn are heroes of mine," Mr. Boren says, referring as well to Sam Rayburn, the Democratic House speaker who cooperated with President Eisenhower. "They allowed this country to be credible.I really want to see that happen again." If this were 1949, Mr. Boren might even succeed.But in 1989 most senators have other ideas.Last July, his committee rejected a Reagan administration plan to support a coup in Panama.Ohio Democrat Howard Metzenbaum refused to support any plan that might get people hurt, a charming notion for a great power.Maine Republican William Cohen said the plan might violate the assassination ban.So the administration dropped it.By October, when the committee rejected a much more modest covert proposal, even the administration was agreeing little should be done. Mr. Boren doesn't think all this influenced the failed coup this month, but he does concede that Congress has made mistakes. "In the aftermath of Vietnam, in the aftermath of Iran-Contra, I can understand some people might think that if they plan a coup, they have to bring their lawyers," he says. But even Mr. Boren defends congressional oversight.Writing in the Harvard International Review, he says that his committee approves covert operations only when there's a "consensus." So what does consensus mean? "It doesn't mean unanimous," he insists, though he implies it means a bipartisan majority. "The sustainability of U.S. foreign policy is essential," he explains. "Why was containment so successful?Because it had bipartisan support." Mr. Boren is confusing consensus on general principles with agreement on specific actions.Elliott Abrams, a veteran of intelligence committee debates, doubts that even Grenada or the Libyan raid would have taken place if "consensus" had been required.Vandenberg and Rayburn were wise enough to leave specific operations to presidents; modern senators, Mr. Boren notwithstanding, are less modest. The result is that the Senate committee has what amounts to veto power over every covert action. "I wouldn't say it's quite a veto," Mr. Boren demurs.But wouldn't a president who acted despite Senate objections be taking grave political risks? "He would," agrees the chairman. "But that is something the president ought to know before he goes ahead." Mr. Boren even spies a silver lining.He figures the episode will help "clarify any ambiguities" between the committee and administration.He points to a letter on his desk, his second in a week from President Bush, saying that they "don't disagree." More broadly, Mr. Boren hopes that Panama will shock Washington out of its fear of using military power. "Maybe this will jolt us out of the post-Vietnam syndrome that we never are prepared to use force," he says. Maybe -- if every senator shared the principles of Mr. Boren.But it's just as plausible to argue that if even David Boren can get mired in this sort of mess, the problem goes beyond legal interpretation.Maybe the problem is a political system that won't act without an "exchange of letters," that insists on running foreign policy by committee, that treats a president as just another guy at the table. The reply of the Metzenbaums and Cohens is that we can't abolish these oversight committees because we've seen too many abuses of executive power.But Panama illustrates that their substitute is a system that produces an absurd gridlock.The lawyers are now in charge of our national security.In Panama, the U.S. interests at stake were happily minor; the only people killed were foreigners hapless enough to trust American will.Americans may not be so lucky the next time.
I was impressed by the perceptiveness of your Sept. 12 story "Rural Enterprise: Tough Row To Hoe." We lived in rural areas many years, but now live in St. Louis County, Mo.This morning as I drove the 13 miles to my law office and endured the routine heavy traffic during that twice-daily journey, I thought of how fortunate it was that we made the decision to be residents of an expanding community with so many opportunities and where so much is happening. The presence of so many people, cars and competing businesses is evidence of a healthy economy in a place where people want to live. I thought back to our time in small, sparsely populated communities.I remembered how hard it was for an outsider to become accepted by long-established, stake-holding residents, and what pitfalls awaited an original thinker in societies that were long accustomed to unchanging, "safe" ways of thought and action. I remembered being fired at age 44, with five children at home, when my views and actions were deemed unsettling by a timid, small-town employer.How difficult it is for a thinking person to live among societies rooted in the past. Now, I revel in the freedom, culture, activity and diversity of this great metropolitan area with its traffic jams and perpetual road-building projects. Yet when my youngest child died two years ago, I buried him in the church cemetery of a small Missouri town. So after all, even the bitterest critic of rural exclusivity harbors a continuing yearning for those scarce, rural virtues thought to exist amid fields, forests and country lanes. Ronald Edwin Parsons Ballwin, Mo.
Finnish government officials are negotiating with creditors of Waertsilae Marine Oy, a major shipyard that filed for bankruptcy protection this week, amid confusion and mounting doubts that collapse of the nation's entire shipbuilding industry can be averted. At stake are almost 10,000 jobs in an industry that has been the mainstay of Finland's post-war economic revival.Shipbuilding became a point of pride as Finnish shipyards remained profitable long after rivals collapsed all over Europe. But if, as many now fear, Waertsilae Marine joins the ranks of failed shipyards it might turn out to be remembered most as a blemish on Finland's international reputation.The shipyard's 6.5 billion Finnish markka ($1.54 billion) backlog includes about 20 ships ordered by big international shippers, including three for Carnival Cruise Lines Inc. Miami-based Carnival said the first of the three ships is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.The second ship is scheduled to be delivered in fall 1990 and the third in fall 1991.One analyst said the first ship probably will be delivered close to schedule, but that Carnival may have to pay up to 25% more to get the second and third ships. All the ships are covered by loan guarantees from a state export financing agency, even though it's not clear whether they will actually be built.Bankers worry that if the government makes good a threat to withdraw its guarantee commitments, shippers will counter with a hail of lawsuits. State loan guarantees are rarely a source of controversy.However, some bankers cited possible parallels between the Waertsilae Marine case and the collapse of Norway's state-owned Kongsberg Vappenfabrikk AS two years ago.In that case, international banks and investors incurred big losses because they incorrectly believed the company's debt carried implicit state guarantees. Doubts about the quality of state credit guarantees could reduce the competitive strength of Finnish companies in world markets where financing often is the key to winning orders, analysts warn.Moreover, state-owned Finnish companies lacking formal state guarantees could face greater difficulty raising funds in international financial markets, bankers say. The decision by a majority of state-appointed Waertsilae Marine directors Monday to file for bankruptcy was an abrupt about-face from previous government policy.In August, the government played a major part in a sweeping restructuring of the troubled shipyard. At the time 71%-controlled by Oy Waertsilae, a conglomerate, the shipbuilding unit faced potential losses estimated at one billion markka and was on the brink of liquidation.Under the rescue plan, Waertsilae sold 51% of its stake to a group of banks and pension funds.The government, in turn, guaranteed financing to complete the order backlog and took control of the board. Government officials were expected to combine Waertsilae Marine with two other struggling firms, and thus ensure Finland's survival as a shipbuilding nation.The government spent most of last year attempting to carry out such a plan but was thwarted when the parent Waertsilae concern pulled out at the last minute. After the restructuring of Waertsilae Marine and bolstered by state loan guarantees, two big bank creditors, Union Bank of Finland and state-controlled Postipankki, resumed lending the shipyard working capital.But the bankers got cold feet recently as government officials complained they had been misled about the shipyard's actual financial condition, and hinted the credit guarantees might be withdrawn. People familiar with Monday's board meeting said it was the state's refusal to explicitly reaffirm the credit guarantees that led Union Bank and Postipankki to halt lending to Waertsilae Marine.Then, in a boardroom showdown, state-appointed directors voted to file for bankruptcy, apparently under instructions from Finland's Industry Minister Ilkka Suominen. Analysts say Mr. Suominen had grown increasingly worried about the state's potential financial exposure as Waertsilae Marine's losses ballooned to more than double the figure estimated in August.Noting that Sweden wound up wasting state subsidies of about 35 billion Swedish kronor ($5.47 billion) during the 1970s in a vain attempt to salvage its shipbuilding industry, one analyst suggested that Mr. Suominen may have decided to cut Finland's losses once and for all. Senior ministry officials huddled with creditors during the week in an attempt to agree on some form of restructuring that would keep Waertsilae Marine operating.The talks may drag on for weeks before any concrete result is announced, people familiar with them said. One solution would be to sell the shipyard to an outsider.But there appear to be few, if any, suitors.Indeed, the potential losses make any rescue scheme unlikely unless the politicians once again change tack and agree to pick up the bill, analysts said.Meantime, shippers with vessels on order from Waertsilae Marine will remain in limbo.
Turner Broadcasting System Inc. said it expects to report an extraordinary loss of about $122 million in the fourth quarter due to early retirement of debt. The cable programmer said the loss will consist primarily of prepayment penalties, and unamortized issue discount and costs related to its just-completed $1.6 billion refinancing of its long-term debt and some preferred stock in one of its subsidiaries. A Turner spokesman wouldn't speculate on the extent of the charge's effect on the quarter's earnings, but said the company continues to expect to report a net loss for 1989. The company said the repayment or redemption of the long-term debt, and the outstanding Class A cumulative exchangeable preferred stock of Cable News Network, was made possible by an offering of about $750 million of debentures and notes and $900 million in bank borrowings. The offering included $550 million of 12% senior subordinated debentures due 2001 and $200 million of zero coupon liquid yield option notes due 2004.The notes were priced to yield 8% and are convertible into the company's Class B common stock at a price which represents a 15% premium over the market price on Oct. 10, 1989. In addition, the company called its 12 7/8% senior subordinated notes due 1994, with an aggregate principal amount of $200 million, for redemption on Dec. 15. As a result of the refinancing, the company said the interest on the debt will fall to slightly more than 11% from slightly more than 14%. In American Stock Exchange composite trading, Turner's Class A stock closed at $50.50, down 37.5 cents.
General Motors Corp. said it will temporarily idle its Arlington, Texas, assembly plant for one week beginning Monday because of slow sales. The closing will affect about 3,000 workers and eliminate production of 700 cars.The assembly plant builds the Cadillac DeVille, Chevrolet Caprice and Oldsmobile Cutlass Ciera Wagon. In addition, GM's Truck & Bus Group said slow sales are forcing it to close its Detroit assembly plant the week beginning Monday.The plant builds chassis for recreational vehicles and about 450 workers will be affected by the closing. The No. 1 auto maker scheduled overtime this week at its Janesville, Wis., assembly plant, manufacturer of the Chevrolet Cavalier. The nine major U.S. auto makers plan to build 147,121 vehicles this week, down 9.6% from the 162,767 a year ago, but 2.5% higher than last week's 143,534. Ford Motor Co. slated overtime again this week at its Wixom, Mich.; Wayne, Mich.; Kansas City, Mo., and Norfolk, Va., assembly plants.They build the Lincoln Town Car, Continental and Mark VII, the Ford Escort and full-sized pickup trucks. Chrysler Corp. scheduled overtime this week at its St. Louis Assembly Plant No. 2, Newark, Del., and Sterling Heights, Mich., assembly plants.They build extended minivans and the Dodge Spirit, Acclaim, Shadow and Sundance. d-Percentage change is greater than 999%. e-Estimated. f-Includes Chevrolet Prizm and Toyota Corolla. r-Revised. x-Year-to-date 1988 figure includes Volkswagen domestic-production through July.
The surprise resignations of two top economic government officials heaped more uncertainty on London's financial markets, which already have been laboring under worries about Britain's ailing economy. "The last thing markets like is uncertainty," said Ian Harwood, chief economist at S.G. Warburg & Co., of the resignations of Chancellor of the Exchequer Nigel Lawson and chief economic adviser Sir Alan Walters. "I think you'll see share prices go down, and sterling now is under something of a cloud." The pound immediately began to take a buffetting after the resignations were announced.In late New York trading, sterling stood at $1.5765, down from $1.6145 late Wednesday. The British economy is hardly the picture of health these days.At 15%, base interest rates are the highest in eight years, and the 7.6% annual inflation rate is by far the highest in the European Community.Unions are pressing demands for wage increases of more than 10% despite general belief that economic growth next year will be less than 2%. Increasingly, the financial markets are reflecting the gloom.The Financial Times 100-share index has dropped about 12% from its 1989 high of 2423.9 on Sept. 8.Yesterday, even before the resignations were announced, the index dove 32.5 points to close at 2129.4. "We are expecting a recession," says Donald Franklin, chief economist at Schroders investment bank. "The only question is, how deep is it going to be?The outlook for corporate earnings is fairly bleak.It's quite likely we're going to get repeats" of the mid-October market shocks. Red ink already has begun to flow in the wake of the U.S.-U.K. market breaks of Oct. 13 and Oct. 16.London-based LIT Holdings, the largest financer of traders in the Chicago options and futures markets, said yesterday it will incur a second-half loss as a result of the market plunge.The company, which also will omit its second-half dividend, didn't specify the size.But company insiders estimated that the loss could approach the equivalent of $10 million. Christopher Castleman, LIT chief executive, said in an interview that the loss stemmed from the default of three options traders who had bet on a price rise in UAL Corp. shares before Oct. 13.The price plummeted after a proposed leveraged buy-out of the airline fell through. LIT Holdings shares plummeted 36 pence to close at 54 pence (85 cents), a 40% drop, on London's stock exchange. Denizens of London's financial district are cushioning themselves for heavy blows. "A lot more of our customers are staying until our 10 p.m. closing time," says Christopher Brown, managing director of Corney & Barrow Restaurants Ltd., which runs five tony wine bars in the district. "There's a strong sense among the martini set that there's more {bad news} to come," asserts Roger Yates, chief investment officer at Morgan Grenfell Asset Management. "People in the stock market were very much Thatcher's children -- very young and wealthy optimists.Now it's dawning on them that they can be non-wealthy." The malaise has created a nostalgic longing for the uncomplicated days of the mid-1980s, before a rash of securities-firm mergers on the eve of the industry's deregulation in 1986. "People come to us saying they'd like to be back where they were a few years ago, in a more collegial atmosphere, with less tension," says Stephen Waterhouse, managing director of Hanover Partners Ltd., a financial district head-hunting firm. But after trading losses in the mid-October market jolts here, many people will be lucky to have jobs at all, executives predict.The industry, which currently employs about 25,000 people in London, has shed about 2,500 jobs over the past two years. "I can see cuts of at least 20% more," says the head of the London office of a major U.S. firm. The mergers and acquisitions market has been a saving grace for the industry, but uncertainties are beginning to mount even there.Intra-European takeovers are expected to continue at their brisk pace.But investment bankers say that stock market uncertainties in the U.S. may cause many European companies to mark time before bidding for American companies, in the hope that share prices will come down. "If prices in the States go down, industrial buyers in Europe have the opportunity of getting reasonable prices in the U.S.," says Francois von Hurter, chief of Continential M&A at Credit Suisse First Boston Ltd.But he adds: "Everybody and his sister have opened up M&A shops.It's difficult to see that there's going to be enough business to go around.About eight firms will get the lion's share.At the others, there are going to be a lot of disappointments, after all those promises and all that big money that's been paid to people." It all adds up to a cold winter here.Says Allen D. Wheat, head of trading at Bankers Trust Co.: "People are just plain scared." One person who is past worrying about London's blues is Christopher Hartley.Last summer, he chucked his 10-year career as a London stockbroker and headed for the mountains.He didn't stop until he got to Jackson Hole, Wyo. "I'm glad to be out," said the 32-year-old Mr. Hartley in a phone interview. "The percentage of your day spent twiddling your thumbs got greater, and the work day kept getting longer.What am I doing in Jackson Hole?Not a great deal.My wife and I will stay through the skiing season, or until the money runs out -- whichever comes first.But unlike London, out here I've never heard anybody blow a car horn in anger."
The government is sharpening its newest weapon against white-collar defendants: the power to prevent them from paying their legal bills.And defense lawyers are warning that they won't stick around if they don't get paid. The issue has come to a boil in Newark, N.J., where federal prosecutors have warned lawyers for Eddie Antar that if the founder and former chairman of Crazy Eddie Inc. is indicted, the government may move to seize the money that Mr. Antar is using to pay legal fees. The warning by the U.S. attorney's office follows two decisions by the U.S. Supreme Court last June.In those cases, the high court ruled that federal law gives prosecutors broad authority to seize assets of people accused of racketeering and drug-related crimes, including fees paid to lawyers before an indictment. If the government succeeds in seizing Mr. Antar's assets, he could be left without top-flight legal representation, because his attorneys are likely to quit, according to individuals familiar with the case.A seizure also would make the case the largest -- and one of the first -- in which lawyers' fees have been confiscated in a prosecution unrelated to drugs. "The people who suffer in the short run are defendants, but the people who suffer in the long run are all of the people, because there won't be a vigorous private bar to defend the Bill of Rights," says Gerald Lefcourt, a criminal defense attorney who says he has turned down a number of cases to avoid possible fee seizures. Mr. Antar is being investigated by a federal grand jury in Newark, where prosecutors have told him that they may soon seek an indictment on racketeering and securities fraud charges.Under the Racketeer Influenced and Corrupt Organizations law, or RICO, the government has the authority to seek to freeze or seize a defendant's assets before trial. According to individuals familiar with Mr. Antar's case, prosecutors issued their warning this week after one of Mr. Antar's attorneys asked whether legal fees might be subject to seizure.In a letter, prosecutors told Mr. Antar's lawyers that because of the recent Supreme Court rulings, they could expect that any fees collected from Mr. Antar may be seized.Prosecutors have told Mr. Antar's attorneys that they believe Mr. Antar's allegedly ill-gotten gains are so great that any money he has used to pay attorneys derives from illegal activities.Therefore, they said, the money can be taken from the lawyers even after they are paid. Justin Feldman and Jack Arseneault, attorneys for Mr. Antar, both declined to comment on the matter. In Newark, U.S. Attorney Samuel A. Alito said, "I don't think there's any legal reason to limit forfeiture of attorney's fees to drug cases." Mr. Alito said his office "just responded to an attorney's question about whether we would go after attorney's fees, and that is different from actually doing it, although we reserve that right." Mr. Antar was charged last month in a civil suit filed in federal court in Newark by the Securities and Exchange Commission.In that suit, the SEC accused Mr. Antar of engaging in a "massive financial fraud" to overstate the earnings of Crazy Eddie, Edison, N.J., over a three-year period.Through his lawyers, Mr. Antar has denied allegations in the SEC suit and in civil suits previously filed by shareholders against Mr. Antar and others. The SEC has alleged that Mr. Antar aimed to pump up the company's stock price through false financial statements in order to sell his stake and reap huge profits.Mr. Antar, the SEC said, made more than $60 million from the sale of his shares between 1985 and 1987. The Justice Department has emphasized that the government's fee-forfeiture power is to be used sparingly.According to department policy, prosecutors must make a strong showing that lawyers' fees came from assets tainted by illegal profits before any attempts at seizure are made. Still, criminal defense lawyers worry that defendants are being deprived of their Sixth Amendment right to counsel and a fair trial if the government can seize lawyers' fees.They also worry that if the government applies asset-forfeiture laws broadly, the best defense lawyers will be unwilling to take criminal cases unless they are assured of being paid.
The stock market correction of Oct. 13, 1989, was a grim reminder of the Oct. 19, 1987 market collapse.Since, like earthquakes, stock market disturbances will always be with us, it is prudent to take all possible precautions against another such market collapse. In general, markets function well and adjust smoothly to changing economic and financial circumstances.But there are times when they seize up, and panicky sellers cannot find buyers.That's just what happened in the October 1987 crash.As the market tumbled, disorderly market conditions prevailed: The margins between buying bids and selling bids widened; trading in many stocks was suspended; orders took unduly long to be executed; and many specialists stopped trading altogether. These failures in turn contributed to the fall in the market averages: Uncertainty extracted an extra risk premium and margin-calls triggered additional selling pressures. The situation was like that of a skier who is thrown slightly off balance by an unexpected bump on the slope.His skis spread farther and farther apart -- just as buy-sell spreads widen during a financial panic -- and soon he is out of control.Unable to stop his accelerating descent, he crashes. After the 1987 crash, and as a result of the recommendations of many studies, "circuit breakers" were devised to allow market participants to regroup and restore orderly market conditions.It's doubtful, though, whether circuit breakers do any real good.In the additional time they provide even more order imbalances might pile up, as would-be sellers finally get their broker on the phone. Instead, an appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve.The availability of timely assistance -- of a backstop -- can help markets retain their resilience.The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign-exchange markets.The Fed has assumed a similar responsibility in the market for government securities.The stock market is the only major market without a market-maker of unchallenged liquidity or a buyer of last resort. This does not mean that the Federal Reserve does not already play an important indirect role in the stock market.In 1987, it pumped billions into the markets through open market operations and the discount window.It lent money to banks and encouraged them to make funds available to brokerage houses.They, in turn, lent money to their customers -- who were supposed to recognize the opportunity to make a profit in the turmoil and buy shares. The Fed also has the power to set margin requirements.But wouldn't it be more efficient and effective to supply such support to the stock market directly?Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole. The stock market is certainly not too big for the Fed to handle.The foreign-exchange and government securities markets are vastly larger.Daily trading volume in the New York foreign exchange market is $130 billion.The daily volume for Treasury Securities is about $110 billion. The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion.The $13 billion the Fed injected into the money markets after the 1987 crash is more than enough to buy all the stocks traded on a typical day.More carefully targeted intervention might actually reduce the need for government action.And taking more direct action has the advantage of avoiding sharp increases in the money supply, such as happened in October 1987. The Fed's stock market role ought not to be very ambitious.It should seek only to maintain the functioning of markets -- not to prop up the Dow Jones or New York Stock Exchange averages at a particular level.The Fed should guard against systemic risk, but not against the risks inherent in individual stocks.It would be inappropriate for the government or the central bank to buy or sell IBM or General Motors shares.Instead, the Fed could buy the broad market composites in the futures market.The increased demand would normalize trading and stabilize prices.Stabilizing the derivative markets would tend to stabilize the primary market.The Fed would eliminate the cause of the potential panic rather than attempting to treat the symptom -- the liquidity of the banks. Disorderly market conditions could be observed quite frequently in foreign exchange markets in the 1960s and 1970s.But since the member countries of the International Monetary Fund agreed to the "Guidelines to Floating" in 1974, such difficulties have been avoided.I cannot recall any disorder in currency markets since the 1974 guidelines were adopted.Thus, the mere existence of a market-stabilizing agency helps to avoid panic in emergencies. The old saying advises: "If it ain't broke, don't fix it." But this could be a case where we all might go broke if it isn't fixed. Mr. Heller, now at VISA International, was a governor of the Federal Reserve Board from 1986 until earlier this year.This is adapted from a speech to the Commonwealth Club in San Francisco.
Bank of England Governor Robin Leigh-Pemberton urged banks to be cautious in financing leveraged buy-outs. "Caution should . . . be the rule of the day," said Mr. Leigh-Pemberton in a speech to the Association of Corporate Treasurers' annual dinner. "It would be damaging to industry and to the financial sector in general, to say nothing of banks, if prudence does not guide the financing of leveraged transactions." His remarks were distributed to the press before Chancellor of the Exchequer Nigel Lawson announced his resignation last evening.Bank of England officials said the central bank had no comment on Mr. Lawson's resignation. Mr. Leigh-Pemberton reiterated that the exposure of United Kingdom banks to leveraged deals haven't yet reached "worrying levels." However, in light of the risks involved in such transactions, banks should satisfy themselves that they have the skills to participate in this market and clear policy guidelines on acceptable levels of exposure to such transactions, he said. In other comments, he said takeovers may not always be the most efficient way of securing a change of corporate direction or strategy. "A similar result could sometimes be achieved, at less cost, by changing managements," he said.
Intel Corp. 's most powerful computer chip has flaws that could delay several computer makers' marketing efforts, but the "bugs" aren't expected to hurt Intel and most computer makers. Computer experts familiar with the flaws, found in Intel's 80486 chip, say the defects don't affect the average user and are likely to be cleared up before most computers using the chip as their "brains" appear on the market sometime next year. Intel said that last week a customer discovered two flaws in its 80486 microprocessor chip's "floating-point unit", a set of circuits that do certain calculations.On Friday, Intel began notifying customers about the bugs which cause the chip to give wrong answers for some mathematical calculations. But while International Business Machines Corp. and Compaq Computer Corp. say the bugs will delay products, most big computer makers said the flaws don't affect them. "Bugs like this are just a normal part of product development," said Richard Archuleta, director of Hewlett-Packard Co. 's advanced systems development.Hewlett announced last week that it planned to ship a computer based on the 486 chip early next year. "These bugs don't affect our schedule at all," he said. Likewise, AST Research Inc. and Sun Microsystems Inc. said the bugs won't delay their development of 486-based machines. "We haven't modified our schedules in any way," said a Sun spokesman.To switch to another vendor's chips, "would definitely not be an option," he said. Nonetheless, concern about the chip may have been responsible for a decline of 87.5 cents in Intel's stock to $32 a share yesterday in over-the-counter trading, on volume of 3,609,800 shares, and partly responsible for a drop in Compaq's stock in New York Stock Exchange composite trading on Wednesday.Yesterday, Compaq plunged further, closing at $100 a share, off $8.625 a share, on volume of 2,633,700 shares. Most of Compaq's decline is being attributed to a third-quarter earnings report that came in at the low end of analysts' expectations. Intel said it had corrected the problems and would start producing bugless chips next week. "We should not be seeing any more," said Bill Rash, Intel's director for the 486 chip. What's more, the bugs only emerge on esoteric applications such as computer-aided design and scientific calculations, he said, and then very seldom. "These errata do not affect business programs," he said.The bugs will cause problems in "specific and rare circumstances that will not occur in typical applications" such as word-processing and spreadsheets, said Michael Slater, editor of the Microprocessor Report, an industry newsletter. Sun, Hewlett-Packard and others say Intel isn't wholly to blame for the snafu.The real culprits, they said, are computer makers such as IBM that have jumped the gun to unveil 486-based products. "The reason this is getting so much visibility is that some started shipping and announced early availability," said Hewlett-Packard's Mr. Archuleta. "You can do that but you're taking a risk.Those companies are paying the price for taking the risk." In late September, IBM began shipping a plug-in card that converts its PS/2 model 70-A21 from a 80386 machine to an 80486 machine.An IBM spokeswoman said the company told customers Monday about the bugs and temporarily stopped shipping the product. IBM has no plans to recall its add-on cards, the spokeswoman said, and could probably circumvent the bugs without long product delays. "We don't look at this as a major problem for us," she said. Compaq, which said it discovered the bugs, still plans to announce new 486 products on Nov. 6.Because of the glitch, however, the company said it doesn't know when its machine will be commercially available.That's a break from Compaq tradition, because the company doesn't announce products until they're actually at the dealers. The problem is being ballyhooed, experts say, because the 486 is Intel's future flagship.Intel's microprocessors are the chips of choice in many of today's personal computers and the 80486 microprocessor is the spearhead of the company's bid to guard that spot in the next generation of machines. "Although these sorts of bugs are not at all uncommon, the 486 is an extremely high-profile product," said Mr. Slater, the newsletter editor. Intel's 80486 chip is the Corvette of Intel's microprocessors, a super-fast, super-expensive chip that only the most power-hungry computer users are likely to buy for at least several years. Unveiled last April, the chip crams 1.2 million transistors on a sliver of silicon, more than four times as many as on Intel's earlier model, 80386.Intel clocks the chip's speed at 15 million instructions per second, or MIPs.That's four times as fast as the 386. Machines using the 486 are expected to challenge higher-priced work stations and minicomputers in applications such as so-called servers, which connect groups of computers together, and in computer-aided design. But while the chip's speed in processing power is dazzling, it's real strength lies in its software inheritance.The 486 is the descendant of a long series of Intel chips that began dominating the market ever since IBM picked the 16-bit 8088 chip for its first personal computer. (A 16-bit microprocessor processes 16 pieces of data at a time and is slower than newer, 32-bit chips.) Since then, Intel has cornered a large part of the market with successive generations of 16-bit and 32-bit chips, all of which can run software written for previous models. That's what will keep computer makers coming in spite of the irritation of bugs.Big personal computer makers and many makers of engineering workstations are developing 486-based machines, which are expected to reach the market early next year. Of the big computer makers, only Apple Computer Co. bases its machines on Motorola chips instead. "The 486 is going to have a big impact on the industry," said Hewlett-Packard's Mr. Archuleta. "It's going to be the leading edge technology in personal computers for the next few years.This bug is not going to have any affect on that at all." Andy Zipser in Dallas contributed to this article.
Bethlehem Steel Corp. has agreed in principle to form a joint venture with the world's second-largest steelmaker, Usinor-Sacilor of France, to modernize a portion of Bethlehem's ailing BethForge division. The venture, which involves adding sophisticated equipment to make cast-iron mill rolls, is part of a two-pronged effort to shore up a division that has posted continuing operating losses for several years.The other element includes consolidating BethForge's press-forge operations.The entire division employs about 850 workers. While the joint venture affects only a small part of Bethlehem's operations, it is significant because it marks the first time the nation's No. 2 steelmaker has joined forces with a foreign partner.Wall Street analysts have criticized Bethlehem for not following its major competitors in linking with a foreign company to share costs and provide technology to modernize old facilities or build new ones. "We think it's a step in the right direction for Bethlehem," said Felix Bello, WEFA Group's international steel analyst. "It's important to share the risk and even more so when the market has already peaked." He said the move could be the beginning of a broader relationship between the two companies, one that could open up new markets for Bethlehem.Bethlehem had little choice but to go with a European steelmaker, because its competitors already have tapped the Japanese and South Korean industry leaders, analysts noted. Under terms of the agreement, Usinor's Chavanne-Ketin unit and Bethlehem would establish a modernized facility to make cast-iron mill rolls at the company's cast-iron shop here.Terms for the venture, which would be jointly owned by both companies, weren't disclosed.The Usinor unit has agreed to provide technology and expertise to install a so-called spin caster by early next fall.The caster improves the metallurgical quality of the iron mill rolls, which are basically huge rolling pins used to flatten or shape steel products. Bethlehem is also working with the United Steelworkers union to consolidate BethForge's two machine shops and four heat-treatment facilities of the press-forge operations.Once the consolidation is complete, Bethlehem plans to concentrate its forgings business on nuclear fabrication, hardened steel and large-diameter steel rolls for rolling mills and selected custom-die applications. Bethlehem said earlier this year that it planned to restructure the BethForge division to improve its cost structure.In the second quarter, Bethlehem posted a $50 million charge related to its plans to realign the division.
Exxon Corp. said it will move its headquarters from Manhattan to Dallas. Most of the 300 employees at the oil company's midtown headquarters building -- including much of senior management -- were unaware of the plan until informed at a morning meeting by Chairman Lawrence G. Rawl.The shift won't affect operations.As part of its restructuring several years ago, Exxon moved most of those out of the city and sold its 53-floor Rockefeller Center skyscraper to a Japanese company. But the pullout is an embarrassment to New York City officials, coming at a time of high office building vacancy rates and departures by other major companies.Mobil Corp. is in the process of vacating its headquarters here, and huge operations like J.C. Penney & Co. and Trans World Airlines have recently left. New York authorities, informed yesterday about the move, reacted with concern and even some anger to the idea of the nation's third-largest corporation leaving without giving them an opportunity to accommodate it. "We are dismayed, but there's nothing we can do about it now," said Stanley Grayson, New York City deputy mayor for finance and economic development. Meanwhile, Dallas welcomed the move.City officials there had been were aware that a large company was moving in, but negotiations had all been conducted through a law firm and under the code name "Everglades." "When we were told it was Exxon, it was beyond all expectations; what a coup," said Tom Lewis, senior vice president of Dallas Partnership, the economic development affiliate of the city's Chamber of Commerce.Dallas, its economy based on oil and real estate, has been in a slump. Exxon said it will build a new headquarters on a 132-acre tract in the 10-year-old Las Colinas complex in the suburb of Irving.Until the building is completed, Exxon will rent part of an existing office tower.Las Colinas, once a huge Texas ranch, is a sprawling complex of office buildings, homes and recreational facilities that its developers have been struggling to populate in recent years. Exxon officials said it will cost less to run its headquarters at Las Colinas than in New York.The company won't say how much it will save, but during at its interim location, sources say it will likely pay rent of $10 to $15 per square foot.Owners of the building in New York say they will be asking $50 per square foot for rent to fill the space that Exxon is vacating.In Texas, taxes and development costs are also lower, they said. Plus, one Exxon official said, by eliminating the typically long New York commutes between office and home, management will expect employees to work 40 hours a week in Dallas, rather than a 35-hour work week in New York.
Treasury Secretary Nicholas Brady said that Congress should grant the Securities and Exchange Commission the power to close the stock markets in periods of crisis. In testimony to the Senate securities subcommittee, Mr. Brady disputed the view of SEC Chairman Richard Breeden, who told a House panel Wednesday that he doesn't want the ability to halt the markets.Mr. Breeden contended that discretionary power could have an impact on the markets if rumors were to circulate about when the exchanges might be closed.He added that the president already has the power to close the markets in an emergency. But Mr. Brady argued that the SEC is closer to the markets and in a better position to understand when the exchanges are under such stress that they should be closed. Separately, Mr. Brady said he asked the Working Group on Financial Markets to determine whether futures margins are too low.He noted that some minimum margin requirements have been reduced to levels below those before the 1987 crash. "This raises questions whether futures and equity margin requirements are consistent at these levels and whether futures margins are adequate," Mr. Brady said.Margins are the amount of money an investor needs to put up to buy or sell a futures contract.Margins on the futures exchanges typically are raised and lowered according to market volatility. The Chicago Mercantile Exchange margins for the Standard & Poor's 500 stock-index futures stood at $10,000 a contract for speculators and $5,000 for hedgers before Oct. 16, 1987; that day the hedging margin was raised to $7,500. Margins were raised or lowered about a dozen times since the crash Oct. 19, 1987.Currently, they stand at $12,000 for speculators, who are typically individuals and non-member traders, and $6,000 for hedgers, which are usually institutions and have offsetting positions in the underlying stocks. Mr. Brady also said he expects the leveraged buy-out phenomenon to "end under (its) own weight." Asked whether there is anything Congress should do to curb the LBO boom, Mr. Brady responded, "I think the LBO phenomenon, (while) it won't stop completely, will be a thing of the past." Before taking any action, he advised the panel to "see what the market has produced as a cure." Mr. Brady also agreed with senators' concerns about recent stock-market volatility, and said he realizes that the gyrations are scaring investors from investing in stocks.But he added that individuals still are participating in the equity market indirectly through mutual funds and pension funds. The former Wall Street executive refused to offer an opinion on the controversy surrounding program trading, which has recently become a larger part of the trading in the market and has been blamed for accelerating the drop two weeks ago. "I do not have a view of whether we should do anything about program trading at this time," he said. But Mr. Brady endorsed the market-revision bill that both houses of Congress will try to push through this session.That bill, proposed by the SEC last year, would require brokerage firms to disclose the financial positions of their holding companies, mandate large traders' reporting of program or block trades, and improve clearing and settlement of trades between the futures and stock markets. The bill also would give the SEC the power to close the markets, a discretion that former SEC Chairman David Ruder wanted but Mr. Breeden doesn't. Mr. Brady and senators agreed to have their staffs meet within the next week to start fine-tuning the bill.
IMA Holdings Corp. completed its $3 billion acquisition of American Medical International Inc., purchasing 63 million shares, or 86%, of the Los Angeles-based health-care services concern for $26.50 a share.The price also includes assumption of about $1.4 billion in debt. IMA is a group that includes First Boston Corp. and the Pritzker family of Chicago through the leveraged buy-out fund Harry Gray Melvyn Klein & Partners.Harry J. Gray and Melvyn N. Klein, along with five other IMA designees, were named to join American Medical's 10-member board. The completion of the merger agreement follows months of twists and turns.In January, American Medical brought in a new chief executive officer, Richard A. Gilleland, 45, who will remain as chairman, president and chief executive.A few days later, American Medical announced sharply lower earnings, taking charges of $24 million for insurance reserves and canceled real estate leases. In March, American Medical received a $24-a-share offer to take the company private from an investor group including large holder M. Lee Pearce.It also was considering a restructuring to help boost the stock price.A group including several members of the the Bass family of Texas urged the company to take some steps to maximize shareholder value. The following month, the company put itself up for sale.It received more offers, but the auction was surprisingly won by IMA, which bid $28 a share and asked Mr. Gilleland to stay on as an equity participant.He indicated that some assets might be sold off to service the debt. Then, after extending its offer four times waiting for a congressional tax ruling, IMA early this month lowered its offer to $26.50 a share amid turbulence in the junk bond market.American Medical accepted the offer, meanwhile indicating it had heard from two other suitors.But they never materialized and IMA completed the purchase yesterday. Other new board members include John S. Harrison and Mark A. Adley of First Boston, James F. Lyons, William S. Goldberg and Harold S. Handelsman.
The Senate Agriculture Committee is responding to trading abuses in the futures markets with a far-reaching bill that would become the Futures Trading Practices Act of 1989.The proposed legislation has a laudable goal: to assure the integrity of the U.S. futures markets.However, as is common with sweeping legislation, the proposal contains many provisions that could destroy important parts of the system it sets out to preserve. The complex bill, introduced by Sens.Patrick Leahy (D., Vt.), Richard Lugar (R., Ind.), and Bob Kerrey (D., Neb.), covers a wide range of provisions that would affect the funding and authority of the Commodity Futures Trading Commission and would profoundly change the way the industry is regulated.These include provisions relating to the technology and systems that must be employed by exchanges, oversight and disciplinary procedures for exchange trading practices, the relationship between commodity brokerage firms and floor traders, and exchange governance.The bill also elevates even minor rule infractions to felonies and provides for recovery of punitive damages in civil lawsuits and arbitration cases without any showing of willful misconduct. Many aspects of the bill are salutary, providing appropriate public safeguards that can and should be instituted throughout the industry.Indeed, some of the bill's requirements, including broad representation on the exchanges' boards of directors and strong measures to prevent conflicts of interest, already have been put in place by the Coffee, Sugar & Cocoa Exchange and other futures exchanges. Other aspects of the bill, however, are either structured in ways that create unnecessary burdens for the industry or actually are harmful to the exchanges, the industry and ultimately the general public. One of the most prominent features is the requirement that in three years all exchanges have in place a system that records all trades by a source independent of the executing broker.The New York futures exchanges have been working together to develop a trade recording system much like the one called for in the bill.We would be delighted to have such a system in place today.But is it realistic for Congress to mandate by a rigid deadline a system that has not yet been subjected to feasibility studies?What if the system doesn't work?What if the only system that does work is so expensive that, at best, only the largest exchanges can afford it? Cost is a key consideration because of the global sweep of the financial markets.The U.S. futures exchanges compete world-wide as never before.Today, trading in almost any commodity can be diverted from U.S. markets with just a few strokes of a keyboard.All foreign markets are aggressively courting U.S. business.In fact, several London markets already offer lower costs for trading in the same or very similar contracts.The U.S. exchanges need both market integrity and cost-efficiency; long-term growth depends on it. The Senate bill contains many provisions that will increase the costs of trading.The most arbitrary of these is the imposition of "service fees," which will directly widen the cost spread between U.S. and foreign markets. Other provisions have a more subtle, but nonetheless real and detrimental effect on the international position of U.S. exchanges.These include the extension of liability into areas beyond those established by judicial precedent and the expansion of liability to include punitive damages. In addition to increasing costs as a result of greater financial exposure for members, these measures could have other, far-reaching repercussions. One section of the bill would make all commodity brokerage firms and floor brokers liable for damages without willful misconduct.Nowhere in the federal securities law is simple negligence or inadvertent action a source of liability under similar circumstances. It is only logical to assume that the enactment of this provision will lead to increased litigation.In an already low-profitmargin business, commodity brokerage firms may well decide to eliminate the risk and expense of dealing with the retail public, depriving the private individual of access to the markets. Another measure makes commodity brokerage firms liable for violations committed by independent floor brokers who execute trades for them.This untried concept would expose these firms to potentially astronomical punitive damages. Faced with the virtually impossible task of supervising the execution of each trade, many commodity brokerage firms are likely to stop doing business with independents and instead hire their own salaried floor brokers.This would force out of business many of the individuals and small firms that function as floor brokers.A consequence of their departure could be a serious diminution of market liquidity. Finally, under the bill, a number of legitimate, longstanding business practices would be arbitrarily banned, unless the CFTC were to take specific and timely action to permit them to continue.In other words, regulation will occur through inaction and happenstance, rather than through a normal deliberative procedure. The affected practices include the placing of oral orders, which is the way most public customer orders are placed, and trading between affiliated brokers, even though in some cases trading with affiliates may be the only way to obtain the best execution for a client.Also precluded would be dual trading, whereby a broker trades for customers as well as his own account, a practice that provides needed liquidity to the markets. All U.S. futures exchanges agree that these and other trading practices require proper regulation and supervision.Nonetheless, each has too much potential value to the system to be banned by legislative fiat before the CFTC carefully considers all the consequences of a ban and what the regulatory alternatives are. The markets are complex, as is the environment in which they function.When problems surface, the temptation becomes strong to summarily overhaul a market system that has served for more than 100 years.That temptation must be put aside to permit careful consideration of all the implications, positive and negative, of the proposed resolutions to those problems, and to avoid creating a marketplace where no one trades. Mr. Nastro is chairman of the Coffee, Sugar & Cocoa Exchange in New York and director of commodity administration at Shearson Lehman Hutton.
On the hungry streets of Naguib Mahfouz's Cairo, life is nasty, brutish and wickedly entertaining. Zaita the "cripple-maker" rearranges the limbs of aspiring beggars -- and takes a cut of every cent they cadge.Hassan Kamel Ali is a card shark and dope dealer who has a simple creed: "I live in this world, assuming that there is no morality, God or police." For the killer and thief, Said Mahran, fame flows from the barrel of a gun. "One man said you act as a stimulant," a prostitute tells him, "a diversion to relieve people's boredom." Mr. Mahfouz's Cairo also has Sufi sheiks and saintly wives who look to God, not crime, for their salvation.But it is his portrait of Cairo low-life -- of charlatans and opium addicts, of streets filled with "dust, vegetable litter, and animal dung" -- that made his reputation, and won him the Nobel Prize in 1988. Three novels, "The Beginning and the End" (412 pages, $19.95), "The Thief and the Dogs" (158 pages, $16.95), and "Wedding Song" (174 pages, $16.95), recently published by Doubleday offer an uneven sample of the 77-year-old Mr. Mahfouz's talent.But they do show the range of a restless intellect whose 30-odd novels span five decades and include work of social realism, protest and allegory.They also chart the evolution of a city that has grown tenfold in the author's lifetime, from a colonial outpost of fez-wearing pashas to a Third World slum choking on its own refuse. "Soon it'll be so crowded," a narrator complains, "that people will start eating each other." "The Beginning and the End," easily the best of the three, belongs to Mr. Mahfouz's "realistic" period and it is the one for which he is most renowned.Published in 1949, it follows the decline of a Cairo family with the saga-like sweep and rich detail that critics often compare to Dickens, Balzac and Galsworthy. A minor bureaucrat dies suddenly, dooming his family to poverty and eventual disgrace.His daughter turns to dressmaking, then to peddling herself for a few piasters.One son sacrifices his own career so that his avaricious brother can succeed, while another helps support the family with money siphoned from crime. The real tragedy, though, lies not in the family's circumstances but in its concern for appearances.Mourning for the father is overshadowed by the shame of burying him in a pauper's grave.The family moves to another house at night to conceal shabby belongings from neighbors.And the successful son wishes his embarrassing siblings dead. As a critique of middle-class mores, the story is heavy-handed.But its unsentimental sketches of Cairo life are vintage Mahfouz.We see, smell and hear slums filled with "the echoes of hawkers advertising their wares interspersed with abusive language, rattling coughs and the sound of people gathering spittle in their throats and spewing into the street." And we meet engaging crooks, such as Hassan "the Head," famed for his head-butting fights, his whoring and his hashish. "`God has not yet ordained that I should have earnings, ' he tells his worried mother." Hassan comes to a bad end, but so does almost everyone else in the book. If the setting is exotic, the prose is closer to Balzac's "Pere Goriot" than it is to "Arabian Nights." Mr. Mahfouz began writing when there was no novelistic tradition in Arabic, and he modeled his work on Western classics.In one sense, this limits him; unlike a writer such as Gabriel Garcia Marquez, who has a distinctive Latin voice, Mr. Mahfouz's style offers little that can be labeled "Egyptian." But the familiarity of his style also makes his work accessible, as the streets of Cairo come alive for the Western reader as vividly as Dickens's London or Dostoevski's St. Petersburg. "The Thief and the Dogs," written in 1961, is a taut, psychological drama, reminiscent of "Crime and Punishment." Its antihero, Said Mahran, is an Egyptian Raskolnikov who seeks nobility in robbing and killing. "I am the hope and the dream, the redemption of cowards," he says in one of many interior monologues.Later, he recalls the words of his Marxist mentor: "The people! Theft! The holy fire!" Said's story reflects the souring of socialism under Nasser, whose dictatorial rule replaced the monarchy overthrown in 1952.By 1961, Mr. Mahfouz's idealism had vanished or become twisted, as it has in Said.His giddy dream of redeeming a life of "badly aimed bullets" by punishing the "real robbers" -- the rich "dogs" who prey on the poor -- leads only to the death of innocents, and eventually to his own. Cairo's spirited squalor also has gone gray.Here, the city is dark and laden with symbolism: Said has left his jail cell only to enter the larger prison of Cairo society.While the theme is compelling, the plot and characters are not.We never care about Said or the "hypocrites" he hunts. "The Thief and the Dogs" is a pioneering work, the first stream-of-consciousness novel in Arabic, but it is likely to disappoint Western readers. The 1981 novel "Wedding Song" also is experimental, and another badly aimed bullet.The story of a playwright's stage debut unfolds in first-person monologues, in the manner of Faulkner's "The Sound and the Fury." But the device obscures more than it illuminates.Buried in the work is a meditation on the morality of art, and on the struggle for integrity in an unfair world.But again, the themes get tangled in Mr. Mahfouz's elliptical storytelling.The indirectness of his later work reflects both an appetite for new genres and the hazards of art in the Arab world.Mr. Mahfouz has been pilloried and censored for questioning Islam and advocating peace with Israel.Veiling his message has helped him endure.Art, says the playwright in "Wedding Song," is "the surrogate for the action that an idealist like me is unable to take." "Wedding Song" gives glimpses of a Cairo that has become so much harsher since his youth, when, as he once said, "the poorest person was able to find his daily bread and without great difficulty." The clutter of the 1940s remains, but its color has drained away, and the will to overcome has been defeated.Cars can't move because of overflowing sewers.Characters complain ceaselessly about food queues, prices and corruption.And the ubiquitous opium addict is now a cynical and selfish man who gripes: "Only government ministers can afford it these days!" Having lost their faith in God, in social reform and in opium, Cairenes are left with nothing but their sense of humor. Mr. Horwitz is a Journal staff reporter covering the Middle East.
Norwood Partners Limited Partnership of Boston said it may make a tender offer for some or all of Phoenix Technologies Ltd. 's common shares. Norwood, Mass.-based Phoenix, a once-high-flying maker of software for personal computers, has had substantial losses in the past two quarters.Its stock, which was as high as $18.75 a share, has been trading under $4 a share recently.Yesterday it closed at $4.375 a share, up $1.125, in national over-the-counter trading. In a Securities and Exchange Commission filing, Norwood said it's part of a group that holds 525,546 Phoenix Technologies common shares, or a 5.3% stake. Norwood has made "no detailed plans," but it has engaged in talks with other shareholders, the filing said.Phoenix declined to comment. Norwood is controlled by Daniel L. Barnett and Paul A. Reese, both officers of Boston-based Oasis Capital Management Inc., a small Boston money management firm.Also involved in the group is Robert F. Angelo, formerly Phoenix's senior vice president, field operations, who left Phoenix at the beginning of October.Mr. Angelo was described in the filing as a consultant to Oasis.
Ground zero of the HUD scandal is the Secretary's "discretionary fund," a honey pot used to fund projects that weren't approved through normal HUD channels.Jack Kemp wants to abolish it.Instead, Congress's idea of reform is to increase this slush fund by $28.4 million.And transfer control of much of it to Capitol Hill.The HUD scandals will simply continue, but under new mismanagement. After one of the most amazing debates we've ever seen on the cable channel C-SPAN, the House voted 250 to 170 on Wednesday to order $28.4 million in spending for a New Jersey arts center, a Michigan library and 38 other pet projects out of the same discretionary fund that was supposed to have been so abused during Sam Pierce's tenure.HUD has no paper work whatsoever on 30 of the projects, none of the others has been approved and not a single congressional hearing has been held on any of them.However, four are in the Michigan district of Rep. Bob Traxler, the chairman of the House subcommittee that writes the HUD spending bill. Of course, this kind of blatant congressional pork-barreling is called "constituent service" by Members, while the same kind of noncompetitive favoritism at HUD is labeled "influence peddling." Unlike those awful Republican consultants, Members don't profit directly from HUD projects.They merely collect campaign contributions from developers that help keep them in office. The 40 pet projects were discovered buried in the appropriations bill for HUD and some other agencies after it returned from a conference committee that was called to resolve differences between the House and Senate versions.Conference committees are breeding grounds for mischief.They are often closed to the public and no minutes are taken.Members find it easy to doctor legislation by slipping in special provisions that could never survive in the cold light of day. In this case, the Members outdid themselves.They transferred some $28 million from the Community Development Block Grant program designated largely for low- and moderate-income projects and funneled it into such items as: -- $1.2 million for a performing-arts center in Newark, -- $1.3 million for "job retention" in Hawaiian sugar mills. -- $400,000 for a collapsing utility tunnel in Salisbury, -- $500,000 for "equipment and landscaping to deter crime and aid police surveillance" at a Michigan park. -- $450,000 for "integrated urban data based in seven cities." No other details. -- $390,000 for a library and recreation center at Mackinac Island, Mich.Rep. Traxler recently purchased an unimproved building lot on the island.
The U.S. economy grew at a moderate 2.5% annual rate in the third quarter, the same pace as the second quarter, despite the worst trade performance in six years, the Commerce Department reported. Personal spending, buoyed by a burst of automobile buying, was the main catalyst to the economy's expansion.But trade, one of the economy's main forces in the past few years, showed a sharp deterioration.Imports of goods and services soared, while exports were flat. Some economists found the mixture ominous. "For the past two years, the foreign trade sector has been a major contributor to economic growth.You can't rely now solely on consumer spending to sustain the economy on a solid growth path," said Norman Robertson, chief economist at Mellon Bank in Pittsburgh. Although the economy showed no change of pace from the second quarter, many analysts expect it to slow considerably in the fourth quarter as demand for autos falls, partly because of higher prices on models introduced last month.Many economists think the rise in the value of the U.S. dollar this year will further crimp progress in trade, because it makes exports more expensive and imports cheaper.And business investment -- which slowed in the third quarter, according to yesterday's report -- is expected to continue to be sluggish. A sharp reduction in inflation was by far the brightest spot in the report on the real gross national product -- the inflation-adjusted market value of all the goods and services the economy produced. An inflation gauge that measures the quarterly change in prices of an array of goods and services slowed its growth to a 2.9% annual rate in the third quarter from 5% in the second. Much of the moderation came from declining energy prices, which have since turned up a bit, analysts said.Consequently, Michael Darby, undersecretary for economic affairs at the Commerce Department, said inflation probably will edge up from the third-quarter rate in the final three months of 1989.But he said he believes the second quarter's 5% rate "will prove to have been this year's peak quarterly inflation rate." Generally, the Bush administration expressed satisfaction with the economy's progress as it heads into its eighth year of sustained growth next month. Treasury Secretary Nicholas Brady called the 2.5% pace "good, solid growth," although he said he expects the expansion to slow in the fourth quarter.He added: "Inflation is lower than I think people expected it to be, and I think that's good news." But administration officials were concerned over the bleak trade report, which showed the deficit in the country's trade of goods and services swelling to a $74 billion annual rate in the third quarter from a $51 billion rate in the second quarter.Mr. Darby called it a "disappointment" but predicted exports will pick up again. "We were unprepared for the deterioration in net exports," said Daniel Van Dyke, vice president of U.S. forecasting at Bank of America in San Francisco. "I can't believe it will continue," he added, noting that the economies of the country's major trading partners are strong and prices of U.S. products are still competitive. Some analysts also were disturbed by a pickup in the growth of business inventories.While a buildup of these stocks adds to GNP, it can hurt the economy because a pileup of unsold goods can lead to production cuts and layoffs. According to the report, inventories outside the farm sector grew at an annual rate of $24.6 billion in the third quarter, up from a $19.5 billion pace in the second quarter.Manufacturers' stocks fattened at an $18.4 billion annual rate, up from $8.3 billion. "That suggests there is a little more inventory overhang than some people expected," said Edward Boss, senior financial economist at Continental Bank in Chicago. "I don't think it's anything that's going to cause a downturn in economic activity.But it will slow production." Devastation from Hurricane Hugo, which slammed into the Southeast coast in late September, diminished personal income by about $4 billion, the department said, but it called the effect on the roughly $5 trillion economy "negligible." Except for the loss from the hurricane, all the figures were adjusted for seasonal factors and inflation. Here are some of the major components of the gross national product expressed in seasonally adjusted annual rates in billions of constant (1982) dollars: In the third quarter, the implicit price deflator fell to 2.9% of the 1982 average, from 4.6% in the previous quarter.
Hudson's Bay Co. announced terms of a previously proposed rights issue that is expected to raise about 396 million Canadian dollars (US$337 million) net of expenses. Proceeds of the offering will be used to redeem C$264 million of preferred shares and to reduce short-term debt, the company said. Canada's largest department store operator said the rights offering will entitle holders of its ordinary shares, except residents in the U.S. and Britain, to subscribe for two additional shares for every five shares held at a price of C$31.25 a share.The record date is Nov. 9. The company has about 31 million ordinary shares outstanding.On the Toronto Stock Exchange, Hudson's Bay shares closed at C$35, up 12.5 cents. Hudson's Bay said that Woodbridge Co., which currently holds about 77% of the ordinary shares, will subscribe for all the shares to which it is entitled and for any shares that aren't otherwise taken up.Woodbridge is a holding company owned by Toronto's Thomson family. Hudson's Bay said it will redeem 9.5 million Series H preferred shares on Oct. 31 at a price of C$27.75 each.The move was approved at a special shareholders' meeting yesterday. Gary Lukassen, chief financial officer, said redemption of the preferred shares, originally issued at C$25 each, will eliminate dividend payments of C$17.9 million annually.
Iverson Technology Corp. was one of the fastest-growing small companies in America -- until last year. The McLean, Va., company modifies computers to keep sensitive military data out of unfriendly hands.From 1984 to 1987, its earnings soared six-fold, to $3.8 million, on a seven-fold increase in revenue, to $44.1 million. But in 1988, it ran into a buzz saw: a Defense Department spending freeze.Iverson's earnings plunged 70% to $1.2 million.The troubles continued in this year's first half, when profit plunged 81% to $302,000. Iverson Technology is one of many small defense contractors besieged by the slowdown in defense spending.Unlike larger contractors with a broad enough base to weather the downturn easily, these companies are suffering big drops in business as once-lucrative specialty niches in the massive military market erode or even disappear. Companies that only recently were thriving find themselves scrambling to survive.As their varied strategies suggest, there is more than one way to respond to a disaster -- though it's too soon to tell whether the changes will pay off.For many companies, the instinctive first response is to cut costs.Others are trying to find specialty defense work spared by the slowdown or new niches created by budget-cutting.More venturesome businesses are applying their skills in commercial fields. ERC International Inc., which provides professional and technical services to the military, is refining its defense niche, not retreating from it.After quadrupling annual earnings over four years to $6.8 million in 1988, the Fairfax, Va., company, posted a 23% drop in earnings for this year's first half. In the belief that development of advanced military technology will remain a top Defense Department priority, ERC last year acquired W.J. Schafer Associates, a technical and scientific analysis company with contracts under the Strategic Defense Initiative.While the SDI anti-missile program recently awarded W.J. Schafer two contracts totaling $13.4 million, ERC's chairman and founder, Jack Aalseth, says he bought the company "more for its technology than its customer." UNC Inc., an Annapolis, Md., contractor that earned $23.8 million on revenue of $400.4 million in 1988, has gone even further in realigning its military business.As orders for its aircraft and submarine parts dwindled, three years of steady growth ended with a 69% drop in income in this year's first half.The company hit on a new strategy: If the Defense Department is so intent on saving money, why not make money off that trend? Among the company's current efforts: repairing old parts at 25% of the cost of replacing them.UNC also is selling new parts, if needed, directly to the military instead of through a prime contractor.At as little as one-third of the government's cost, the company is running a program to train Army helicopter pilots.It is also taking over the maintenance of certain Navy aircraft with 40% fewer people than the military used. In another approach, tiny Iverson Technology is trying to resume its growth by braving the new world of commercial products.Donald Iverson, chairman, says he hopes the company can eventually get up to half of its revenue from commercial markets.For now, he says, "we're looking at buying some small companies with niche markets in the personal-computer business." Earlier this month, Mr. Iverson agreed to buy exclusive rights to a software system developed by Visher Systems Inc., Salt Lake City.The product automates an array of functions performed at small to medium-size printing companies.Mr. Iverson says there are 5,000 potential customers for the software in the Washington, D.C., area alone. QuesTech Inc., Falls Church, Va., also has acquired some companies outside the military market.Moreover, it's trying to transfer its skill at designing military equipment to commercial ventures.A partnership with a Williamsburg, Va., unit of Shell Oil Co. recently patented a process for producing plastic food containers that won't melt in microwave ovens. "We're trying to take the imagination and talent of our engineers and come up with new processes for industry," says Vincent Salvatori, QuesTech's chief executive. "It is an effort to branch out from the government, which is very difficult for a defense contractor." Mr. Salvatori should know.Instead of helping his company in the defense spending slowdown, Dynamic Engineering Inc., a troubled subsidiary that makes wind tunnels for the space industry, contributed to much of QuesTech's $3.3 million loss on $55.6 million in revenue last year.In January, Mr. Salvatori sold the unit. "It was our first acquisition," he says, "and it was a mistake." Some companies are cutting costs and hoping for the best.Telos Corp., a Santa Monica, Calif., provider of software-development and hardware-maintenance services to the military, enjoyed steady growth until this year.Following a tripling of earnings, to $3.9 million, on a doubling of revenue, to $116 million, over four years, earnings in the company's fiscal first quarter, which ended June 30, plunged 90% to $45,000.A one-time write-off for booking nonexistent revenue was partly to blame, but so were lower profits from a stingier contract with the Army and delays in getting paid. Telos responded by combining three of its five divisions to reduce expenses and "bring more focus to potentially fewer bidding opportunities," says Lin Conger, Telos chairman and controlling shareholder. "It's evident we're entering a more competitive era," he says. TransTechnology Corp., a Sherman Oaks, Calif., defense contractor that earned $9.2 million on revenue of $235.2 million in 1988, provides a more dramatic example of cost-cutting.The company not only merged three military-electronics manufacturing operations, but also closed an unrelated plant that makes ordnance devices used in fighter planes and missiles.The closing contributed to a $3.4 million loss in the fiscal first quarter ended July 31 -- its first quarterly loss since 1974. "Our ordnance business has been hurt very badly by the slowdown," says Arch Scurlock, TransTechnology's chairman. "I wouldn't say we're out of the business.But we're not making as many {pyrotechnic devices} as we used to."
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Tenneco Credit Corp. -- $150 million of 9 1/4% senior notes due Nov. 1, 1996, priced at 99.625 to yield 9.324%.The noncallable issue was priced at a spread of 144 basis points above the Treasury's seven-year note.Rated Baa-2 by Moody's Investors Service Inc. and triple-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Merrill Lynch Capital Markets.Tenneco Credit is a unit of Tenneco Inc. Allegany Health System -- three-part issue of $156.7 million of revenue bonds, tentatively priced through a Morgan Stanley & Co. group.The offering includes a new issue of $53 million of Tampa, Fla., Series 1989 revenue bonds for St. Joseph's Hospital Inc., due 1996-2000, 2005 and 2023.The bonds are tentatively priced to yield from 6.90% in 1996 to 7.55% in 2023.The other two portions of the deal are remarketings of outstanding debt rather than new issues.The bonds are rated single-A by Moody's and single-A-plus by S&P, according to the lead underwriter. City and County of Honolulu -- $75 million of general obligation bonds, 1989 Series B, due 1993-2009, through a Bear, Stearns & Co. group.The bonds, rated double-A by Moody's and S&P, were priced to yield from 6.20% in 1993 to 7.10% in 2008 and 2009. Federal National Mortgage Association -- $500 million of Remic mortgage securities being offered in 12 classes by Shearson Lehman Hutton Inc.The offering, Series 1989-89, backed by Fannie Mae 9% securities, brings Fannie Mae's 1989 Remic issuance to $33.2 billion and its total Remic volume to $45.3 billion since the program began in April 1987.Pricing terms weren't available. Kyushu Electric Power Co. (Japan) -- $200 million of 8 7/8% bonds due Nov. 28, 1996, priced at 101 7/8 to yield 8 7/8% less full fees, via Yamaichi International Europe Ltd. Fees 1 7/8. Toshiba Corp. (Japan) -- $1.2 billion of bonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 3/4% coupon at par, via Nomura International Ltd.Each $5,000 bond carries a warrant exercisable Dec. 1, 1989, through Nov. 9, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Nov. 2. Credit Lyonnais Australia Ltd. (French parent) -- 50 million Australian dollars of 16 1/4% bonds due Nov. 30, 1992, priced at 102 to yield 16.03% less full fees, via Hambros Bank Ltd. Guarantee by Credit Lyonnais.Fees 1 1/2. World Bank (agency) -- #100 million of 10 7/8% bonds due Aug. 15, 1994, offered at 96.95 to yield 11.71%, via Baring Brothers & Co. Tap on outstanding #100 million issue.Also issued were 10 billion yen of bonds due Dec. 5, 1994, priced at 101 1/2, with coupon paid in Australian dollars, via LTCB International Ltd. Interest during first year paid semiannually at 7.51%.Thereafter, interest paid annually at 7.65%.The World Bank also offered 100 million Swiss francs of 6% bonds due Nov. 16, 1999, priced at 101 1/4 to yield 5.83% via Credit Suisse.Option by borrower to increase issue amount to 150 million francs. Mandom Corp. (Japan) -- 80 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Nomura Bank Switzerland.Put March 31, 1992, at a fixed 107 3/4 to yield 3.43%.Each 50,000 Swiss franc note convertible Dec. 4, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed. Nippon Air Brake Co. (Japan) -- 140 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Yamaichi Bank (Switzerland).Put March 31, 1992, at fixed 107 13/16 to yield 3.43%.Each 50,000 Swiss franc note convertible Nov. 27, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed. Credit Suisse Finance Gibraltar Ltd. (Swiss parent) -- 100 billion lire of 12 5/8% bonds due June 30, 1993, priced at 101.45 to yield 12.75% less full fees, via Banca Nazionale del Lavaro.Guarantee by Credit Suisse.Fees 1 5/8.Maryland National Bank -- $267 million of securities backed by home-equity lines of credit through Merrill Lynch Capital Markets.The bank is a subsidiary of Baltimore-based MNC Financial Inc.The securities were priced to float monthly at 20 basis points above the 30-day commercial paper rate.The issue, formally titled MNB Home Equity Loan Asset Backed Certificates, Series 1989, will represent interest in a trust fund of home equity revolving credit line loans originated by the retail finance division of Maryland National Bank and secured primarily by second deeds of trust or second mortgages on single to four-family residential properties.The securities are rated triple-A by Moody's and Duff & Phelps Inc.They are expected to have an average life of 3.16 years.Maryland National Bank's retail finance division will continue to service the loans.First National Bank of Chicago will act as trustee, and the transaction will be supported by an 8% letter of credit issued by Dai-Ichi Kangyo Bank Ltd., Chicago branch. Province of Nova Scotia -- $250 million of 8 1/4% debentures due Nov. 15, 2019, priced at 99.775 to yield 8.28%.The noncallable issue, which can be put back to the province in 2001, was priced at a spread of 41 basis points above the Treasury's 10-year note.Rated single-A-2 by Moody's and single-A-minus by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
The growing crowd of Japanese investors buying up foreign companies aren't all strait-laced businessmen in dark suits. Yasumichi Morishita, whose art gallery last month became a major shareholder in Christies International PLC, the London auction house, is one man who doesn't fit the mold. In Japan, he's known in racy weekly magazines as the "King of Shady Money." If nothing else, the 57-year-old's past has its share of dents. Nearly 20 years ago, Mr. Morishita, founder and chairman of Aichi Corp., a finance company, received a 10-month suspended sentence from a Tokyo court for violating a money-lending law and an income tax law.He was convicted of charging interest rates much higher than what the law permitted, and attempting to evade income taxes by using a double accounting system. He's had other brushes with the law.He was arrested, though not indicted, on at least three other occasions in the '60s and '70s: for assault and unlawful confinement, for fraud and forgery of private documents, and for extortion. Christies says it has had no contact with Mr. Morishita since the stock purchase, but that it's happy to deal with him. "We like to make our own judgments" about Mr. Morishita, says Christopher Davidge, Christies' group managing director. "People have a different reputation country by country." Mr. Morishita is a leading figure among Japan's 38,000 "machikin," which lend to small companies, and "sarakin," which lend to individuals.Many of these financiers lend freely, often without demanding collateral.But the interest rates they charge are often near Japan's 54.75% legal limit, says Kenji Utsunomiya, a lawyer specializing in loan troubles. Aichi is a machikin, Mr. Utsunomiya says, and "one of the nasty ones." In describing that business in general, he says that when the client can't repay the loan, some machikin "clutch on like hyenas" and even take over the client's company.Last month, Mr. Morishita's new gallery, Aska International Ltd., purchased 6.4% of Christies for #33 million ($53.3 million).Acquired from Carisbrook Holdings U.K. Ltd., a company owned by Australian financier Robert Holmes a Court, the stake was apparently the first of its kind for Aska, an entity separate from Aichi.And the acquisition, which made Aska one of Christies' top five shareholders, left many people wondering who this man was and what his intentions were. "We're an investor," Mr. Morishita says, sitting back in his purple gallery filled with some 20 Monets and Renoirs. "In the long run, the {stock} prices will go up." It's not clear whether Aska plans to buy more shares.But Christies, Mr. Morishita insists, is happy to see him become a long-term stockholder. Mr. Morishita considers himself a connoisseur of art.In 30 years of collecting impressionist and Japanese paintings, he has acquired 600 items, he says, enough to persuade him to start a museum next year.He says he spent $300 million on his art business this year.A week ago, his gallery racked up a $23 million tab at a Sotheby's auction in New York buying seven works, including a Picasso. "He makes snap judgments," says Kiyotaka Kori, the art gallery's manager and Mr. Morishita's secretary for more than seven years. Mr. Morishita's main business certainly appears to be thriving, although he won't disclose numbers.According to Teikoku Data Bank Ltd., which tracks company earnings, Aichi's revenue rose 15% to 49.3 billion yen ($348.4 million) in the year ended February.Revenue doubled from two years ago. That is, if the company reported results correctly.The Asahi Shimbun, a Japanese daily, last month reported that Aichi revised its tax calculations after being challenged for allegedly failing to report all of its income to tax authorities over a two-year period.The Tokyo Regional Taxation Office declines to comment, and Mr. Kori, the tycoon's secretary, says the problem simply resulted from a difference of opinion over what was considered income. The small, wiry Mr. Morishita comes across as an outspoken man of the world.Stretching his arms in his silky white shirt and squeaking his black shoes, he lectures a visitor about the way to sell American real estate and boasts about his friendship with Margaret Thatcher's son. But when asked what exactly he does in business, he immediately takes offense. "Are you stupid?" he snaps. "You should know what questions to ask to get people to answer." Not many people know the details of Mr. Morishita's business, but it's a source of rumors about shady dealings.When a small company goes belly-up, for instance, the gossipy weekly magazines are often quick to link the demise with Aichi.Mr. Morishita scoffs at those stories, as well as the ones connecting him to the Japanese mob.He says he has never even dined with gangsters. The seventh child of a store owner in Aichi prefecture, Mr. Morishita started out in the textile business.From there, he set up his finance company and rapidly expanded from lending to investment in real estate to building golf courses.He spends most weekends flying his helicopter to one of his nine courses, he says, two of which were designed by Jack Nicklaus.He also owns courses in the U.S. and France. The gruff financier recently started socializing in upper-class circles.Although he says he wasn't keen on going, last year he attended a New York gala where his daughter made her debut.He also leads an opulent life style.Even in Denenchofu, one of Tokyo's richest neighborhoods, Mr. Morishita's splashy brick manor -- one of some 10 houses he owns -- outshines the neighbors'.A lavish white portico with a stained-glass window towers over the brick wall surrounding his property. Although Mr. Morishita says little about his business, he offers one rule to success: Never gamble too far. "I quit after one try, whether I win or lose," he says. "I'm done in two minutes." Mr. Morishita says he intends to expand his business to many other areas at home and abroad.He'll be there wherever there's money to be made, laughs Mr. Kori, the secretary. "Who knows," he says, "if he heard that soybeans make money today, he might be flying out to Chicago tomorrow."
An enormous turtle has succeeded where the government has failed: He has made speaking Filipino respectable. The 6 1/2-foot-tall turtle, Pong Pagong, is a character who stars in the children's television show "Batibot." He speaks only in Filipino. "Batibot," which started in 1983 as a hybrid of the U.S. program "Sesame Street," has developed into a distinctly Philippine effort.Radio programs and books have followed the daily television show. In the process, "Batibot," an archaic Filipino word meaning "strong" or "enduring," has become a powerful advocate of the use of the Filipino language. "It impresses on ordinary, young Filipinos that there's nothing to feel inferior about in using their own language," says Randy David, a sociologist and host of a popular television talk show. "When we started the program six years ago, the use of Filipino was deemed unwise by the predominantly middle class," says Lydia Brown, the program's creator.Now, she says, "it's no longer an issue." The success of "Batibot" stands in marked contrast to many academic and government attempts to promote Filipino as a national language.Filipino -- once known as Pilipino -- is predominantly Tagalog, the Malay-based language spoken in a part of the country's principal island of Luzon. Resistance to a national language comes primarily from members of the country's elite, who generally prefer English.But while better-off Filipinos are quick to cite the logic in using a language as widespread as English, they are often slow to reveal that they are prejudiced against Filipino, say advocates of the native language. "For the middle and upper-middle class {Filipino} is declasse," says Bien Lumbera, a Philippine-studies professor at Quezon City's University of the Philippines. There's also resentment.Other opponents of Filipino come from non-Tagalog regions.They argue that their own languages should have equal weight, although recent surveys indicate that the majority of the country's population understands Filipino more than any other language. (There are seven major languages and more than 70 dialects in the country.) What tongue to speak is an emotional mine field in the Philippines.It is entrenched in the country's colonial bonds to the U.S., in Philippine class structure, in the regional loyalties of its people and in its island geography.As they did when the Philippines was a colony of the U.S., teachers for the most part teach in English, even though it is a foreign language for most Philippine children.As a result, they often speak one language at home, another at school.Mrs. Brown calls the modern-day cultural ambivalence to Filipino a "language schizophrenia." The issue has been simmering for years.It doesn't take much to provoke an intense debate.When President Corazon Aquino, whose command of Filipino is spotty, announced last year that the language would be used in official communications, there was an uproar from many legislators, who continue to conduct debates mostly in English. But many proponents of Filipino see resistance to the language finally crumbling.They believe the media, including "Batibot," have played a crucial role. According to chief scriptwriter Rene Villanueva, "Batibot" doesn't set out to advance the cause of Filipino. "It's not as if we're teaching language per se," he says, "We're just using it." These days, "Batibot" is produced in a converted lumberyard on a shoestring budget of $3,000 a one-hour segment.It is shown weekdays on two of the country's five networks. With an audience totaling more than 400,000, "Batibot" consistently ranks in the country's top-four most-watched daytime programs.But advertising revenue is inadequate.Periodically, there are threats that the program will fold. "Batibot" lacks the polish of "Sesame Street." Sound stages echo.Acting sometimes falls flat.There are only two large puppets in the program: Pong Pagong and a monkey named Kiko Matsing. But the production is the equal of any local program.And the show's creativity makes up for any technological deficiencies.The program isn't afraid to tackle controversial topics such as nuclear weapons and the environment. Not that the language war is won, even on "Batibot." During one recent episode, all the advertisements were in English.
Black & Decker Corp. said it agreed to sell its Bostik chemical adhesives unit to Orkem S.A., a French chemical company, for $345 million. Bostik is the first Emhart Corp. unit to be sold as part of the power-tool manufacturer's effort to reduce debt and consolidate operations after it acquired Emhart earlier this year. Black & Decker said it plans to put other Emhart units on the block in the future, with the goal of raising $1 billion in net proceeds. Black & Decker rescued Emhart from the takeover bid of Topper Limited Partnership last March by agreeing to acquire the maker of door locks and gardening tools for about $2.8 billion. The move significantly expanded Black & Decker's product line, but also significantly increased its debt load.The acquisition boosted Black & Decker's ratio of debt to total capital to more than 80%.Company officials have said they plan to reduce that ratio to less than 50% over the next 2 1/2 years. Earlier this year, Black & Decker put three Emhart businesses on the auction block: the information and electronics segment, the Dynapert electrical assembly business and Mallory Capacitors.The three units had combined 1988 sales of about $904 million.The three units contributed about a third of Emhart's total sales. In addition, Black & Decker had said it would sell two other undisclosed Emhart operations if it received the right price.Bostic is one of the previously unnamed units, and the first of the five to be sold. The company is still negotiating the sales of the other four units and expects to announce agreements by the end of the year.The five units generated sales of about $1.3 billion in 1988, almost half of Emhart's $2.3 billion revenue.Bostic posted 1988 sales of $255 million. "Our divestiture program is on schedule, and we remain confident that we will achieve our stated goal of over $1 billion in net proceeds," said Nolan D. Archibald, Black & Decker's president and chief executive officer, in a statement. The sales are an attempt to quell investor concern about Black & Decker's increased debt burden from the Emhart purchase.The company's stock plunged when it first announced that it planned to acquire Emhart. The company maintains that it doesn't expect Emhart to contribute to earnings for about another 12 months. In composite trading on the New York Stock Exchange, Black & Decker closed at $19.75 yesterday, down 25 cents.The company didn't announce the sale until after the close of the market.
Cie. de Navigation Mixte Chairman Marc Fournier said his board unanimously rejected as too low the $1.77 billion bid by Cie.Financiere de Paribas to bring its stake in Navigation Mixte to 66.7%. At a news conference, Mr. Fournier accused Paribas of planning to pay for the takeover by selling parts of the company, whose interests include insurance, banking, tuna canning, sugar and orange juice. The chairman said his board members, including representatives of West German insurance giant Allianz AG and French banks Credit Lyonnais and Societe Generale, hold nearly 50% of Navigation Mixte's capital. Mr. Fournier said that as Navigation Mixte chairman, he is prohibited by takeover regulations from organizing his own defense or doing anything besides managing current company business.But sources said he will be urging his allies to boost their stakes in Navigation Mixte, which is being traded in London and is to resume trading in Paris Tuesday.At the same time, he is expected to seek legal and regulatory means of blocking or delaying Paribas's bid.For the moment, the sources said, he has decided against seeking a white knight or organizing a counterbid for Paribas. Mr. Fournier said Navigation Mixte's 1989 unconsolidated, or parent-company, profit is likely to be 4.7 billion francs ($754.4 million), up from 633.8 million francs last year.That is due mostly to payments from Allianz for most of the 50% stake it has agreed to acquire in Navigation Mixte's insurance business.Mr. Fournier said the exceptional gain would mean nearly twice as high a dividend this year as last.If holders avoid tendering to Paribas, he added, they can expect strong dividends again next year. Analysts noted that over the past 20 years, Mr. Fournier has built his company through astute stock-market activity and has warded off at least three takeover attempts.This time, however, some analysts think he could face a real battle. "Without some unexpected "coup de theatre", I don't see what will block the Paribas bid," said Philippe de Cholet, analyst at the brokerage Cholet-Dupont & Cie.Mr. de Cholet said Mr. Fournier's biggest hope was to somehow persuade regulatory authorities to block the bid.Paribas still needs the go-ahead from the Commission des Operations de Bourse, a government regulatory agency, but analysts said that is considered likely. Mr. Fournier also noted that Navigation Mixte joined Paribas's core of shareholders when Paribas was denationalized in 1987, and said it now holds just under 5% of Paribas's shares.Once he realized that Paribas's intentions weren't friendly, he said, but before the bid was launched, he sought approval to boost his Paribas stake above 10%.The petition is still pending, but Mr. Fournier downplayed the likelihood of his organizing a takeover bid of his own for the much-larger Paribas. One big question now is the likely role of Mr. Fournier's allies.Mr. Fournier said the large institutions that hold nearly 50% of Navigation Mixte's capital all strongly support him, but some analysts said they aren't so sure.Allianz, for example, has said in official comments so far that it will remain neutral.Paribas is Allianz's lead French bank. Paribas said Monday that it intends to bid to boost its stake in Navigation Mixte to 66.7%, from the 18.7% it already owns.The purchase of the additional 48% stake is expected to cost more than 11 billion francs ($1.77 billion). Paribas says it will offer 1,850 francs ($296.95) each for Navigation Mixte shares that enjoy full dividend rights, and 1,800 francs each for a block of shares issued July 1, which will receive only partial dividends this year.Alternatively, it is to offer three Paribas shares for one Navigation Mixte share.The Paribas offer values Navigation Mixte at about 23 billion francs, depending on how many of Navigation Mixte's warrants are converted into shares during the takeover battle.
In search of buyers for upscale department-store chains such as Bloomingdale's and Saks Fifth Avenue, investment bankers are turning to -- who else?The Japanese.But so far Japan's cash-rich retailers are proving to be cautious shoppers. "We have the money to buy.But operating a U.S. department-store chain would be very difficult," says Motoyuki Homma, managing director of the international division at Mitsukoshi Ltd., one of Japan's leading department stores. Japanese retail executives say the main reason they are reluctant to jump into the fray in the U.S. is that -- unlike manufacturing -- retailing is extremely sensitive to local cultures and life styles.The Japanese have watched the Europeans and Canadians stumble in the U.S. market, and they fret that business practices that have won them huge profits at home won't translate into success in the U.S. Japanese department stores are also wary of attracting negative publicity.After Sony Corp. 's recent headline-grabbing acquisition of Columbia Pictures, many say it makes good political sense to lie low. "It's a question of timing," says Mayumi Takayama, managing director of international operations at Isetan Co., a Tokyo department store. Still, for those with a long-term eye on the vast U.S. retail market, this is a tempting time to look for bargains.Britain's B.A.T Industries PLC is trying to unwind its U.S. retailing operations, which include such well-known stores as Saks Fifth Avenue, Marshall Field's, Breuners and Ivey's.And debt-ridden Campeau Corp. of Toronto is giving up the 17-store Bloomingdale's group. "Every department store in Japan is taking a look," says Mike Allen, a retail analyst at Barclay's de Zoete Wedd Securities (Japan) Ltd. Mr. Allen, however, doesn't think that Japan is about to embark on a major buying binge. Nonetheless, speculation heated up yesterday when Tokyu Department Store Co. confirmed a report in Nihon Keizai Shimbun, Japan's leading business daily, that Tokyu is talking with Campeau about buying Bloomingdale's.Tokyu, however, said no agreement had been reached. Nor is Tokyu the only Japanese retailer interested in Bloomingdale's, which bankers in Tokyo estimate could cost between $1 billion and $1.5 billion.Seven Japanese department-store groups were approached by investment bankers representing Bloomingdale's chairman, Marvin Traub, and more than half are seeking additional information on the group, bankers say. What Mr. Traub is hoping to put together, investment bankers say, is a management-led group to buy the New York department-store group that he heads from Campeau's Federated Department Stores subsidiary.Federated ran into a cash crunch after it was acquired last year by Campeau, which relied heavily on debt to finance the transaction.Paying off that debt put such a squeeze on Campeau and its stores that Federated decided to sell off the jewels of its retailing empire, including Bloomingdale's. Hoping to avoid another takeover, Mr. Traub retained Blackstone Group and Drexel Burnham Lambert Inc. to help him find partners for a management-led buy-out.Ideally, investment bankers say, he wants to get backing from a Japanese department store and a European department store to forge a global retailing network. "When you look at the economics, Traub needs a Japanese and a European partner to make it work," says one investment banker who follows the retail industry. "Looking only at a narrow American strategy isn't where it's at." Persuading tradition-bound Japanese retailers to get involved in the turmoils of the U.S. retailing industry isn't likely to be so easy, analysts say.Up until now, most stores have followed the same basic overseas strategy: First they set up overseas merchandising offices to import items and track new fashion trends.Then they opened small gift shops mostly aimed at Japanese tourists. Reluctant to advance further on their own, some stores have settled for tie-ups with famous specialty shops.Last March, Isetan invested 1.5 billion yen ($10.6 million) in a venture with Barney's Inc., an up-scale New York specialty clothier.The first Barney's shop is scheduled to open in Japan next year. And Mitsukoshi recently increased its equity stake in Tiffany & Co. to 13%.Through the longstanding relationship between the two companies, Mitsukoshi has opened 22 Tiffany shops in its stores and arcades in Japan.Plans are under way to open a Tiffany's in Hawaii to cater to Japanese tourists; it will be run mostly by Mitsukoshi. Some industry observers say that Mitsukoshi's classy image makes it a possible match for Saks Fifth Avenue.Company officials say they are studying various proposals but won't discuss details. Takashimaya Co., Japan's oldest department store, is another name that keeps popping up as a potential fit with Saks.Eiji Nakazato, a Takashimaya general manager, admits that his company's image is similar to Saks's and that there is some interest in the idea.But he stops there. "We'd like to do business in America," he says. "But it looks tough." Marcus W. Brauchli contributed to this article. Compiled by William Mathewson The Vatican was in the red last year. It said the regular 1988 deficit amounted to $43.5 million, based on revenue of $74.4 million and expenses of $117.9 million.But it said extraordinary expenditures for its radio station and restoration of buildings increased the deficit to $57.2 million. A statement from the council of cardinals said Catholics had responded generously to an appeal last year to give more money after 1987's record $63 million deficit.The statement said a 5% jump in the "Peter's Pence" collection -- the annual offering from Catholics to the pope -- helped cover the deficit. Council member Cardinal Gerald Carter of Toronto told Vatican Radio: "Now that we say we covered our deficit this year, people are going to relax and say well that's fine, the Holy See is out of the hole.But we're . . . going to be in the exact same situation next year." Former President Richard Nixon is to visit China at the invitation of the government beginning Saturday, the Foreign Ministry announced.According to Mr. Nixon's office, "This is solely a fact-finding trip.There will be no sightseeing, no shopping and no social events." Mr. Nixon's office said the former president "expects to have one-on-one discussions with the major Chinese leaders" and will give his assessment of those leaders to President Bush upon his return. A poll conducted in 12 of 16 NATO countries shows that the Dutch appear to be the strongest supporters of the alliance.The poll, conducted for the Dutch daily De Telegraaf by Gallup International said 81% of Dutch people supported NATO. Canada was the second most pro-NATO country with 78% supporting the alliance, followed by the U.S. with 75%, Britain with 71%, Belgium with 69% and West Germany with 63%.All other countries registered support below 50%. The Israeli Manufacturers' Association filed a police complaint against an Arab pasta maker for using the four colors of the outlawed Palestinian flag on spaghetti packages. "We asked police to investigate why they are allowed to distribute the flag in this way.It should be considered against the law," said Danny Leish, a spokesman for the association.The spaghetti is made by the Al Ghazel Macaroni Co. in Bethlehem and is marketed in a package decorated with green, black, red and white stripes. British postal authorities say they have uncovered a large-scale scheme where unscrupulous stamp dealers chemically removed stamp cancellations, regummed the stamps and sold them to U.S. collectors or, in large lots, to British businesses.The scheme allegedly cost the post office #10 million ($16.1) in revenue in the past 12 months.Dealers bought the used stamps cheaply from charities, including the Guide Dogs for the Blind Association.The charities regularly sell used stamps, which they collect from children and other donors, to raise funds. Akio Tanii, president of Japan's Matsushita Electric Industrial Co., presented the U.S. consul general in Osaka with a $1 million check to help San Francisco's earthquake victims.The company's U.S. subsidiary, Matsushita Electric Corp. of America, had donated over $35,000 worth of Matsushita-made flashlights and batteries to residents shortly after the disaster, a company spokesman said.Several other Japanese companies and regional governments have sent aid to San Francisco.Sumitomo Bank donated $500,000, Tokyo prefecture $15,000 and the city of Osaka $10,000. Chinese officials are trying to use the Canton Trade Fair to lure back overseas traders after the bloody crackdown on dissent.But attendance is down from previous years. What's more, a Hong Kong textile trader says, some Chinese exporters from state-run enterprises are protesting the crackdown by dragging their feet on soliciting new business. "They are angry about the government . . . so they hold back the goods," he said. This autumn's edition of the biannual fair will run through Oct. 31.Inside the 156,000-square-yard glass exhibition complex, products ranging from clothing to AK-47 machine guns are on display. Fair officials say that 21,000 guests visited during the first five days, a 10% drop from the spring exhibition.But China's official Xinhua News Agency reported that the number of foreign businessmen was greater than the previous fair -- without providing statistics. In another sign of glasnost, Alexander Solzhenitsyn's long-banned chronicle of Soviet repression, "The Gulag Archipelago," is now recommended reading in one 11th-grade Moscow history class. . . . British customs officers said they'd arrested eight men sneaking 111 rare snakes into Britain -- including one man who strapped a pair of boa constrictors under his armpits.A customs official said the arrests followed a "Snake Day" at Utrecht University in the Netherlands, an event used by some collectors as an opportunity to obtain rare snakes.
The 1986 Tax Reform Act has nearly eliminated the number of large, profitable corporations that don't pay federal income tax, according to Citizens for Tax Justice, a nonprofit, labor-funded research and lobbying group. In a study of 250 of the nation's richest companies, the group found that only seven managed to avoid paying federal income taxes last year compared with 40 in 1986, the last year the old tax rules were in effect, and 16 in 1987, when some of the new tax provisions went into effect. Moreover, 41 companies that paid no federal income tax from 1981 through 1985 -- despite billions of dollars of profits -- ended up paying an average of 27.9% of their income in federal taxes in 1988. The report, released yesterday, comes as Congress is considering a number of special tax breaks only three years after the sweeping tax-revision legislation abolished or curtailed many loopholes. In the corporate realm, the 1986 law abolished the investment-tax credit, scaled back use of an accounting method that allowed large contractors to defer taxes until a project was completed and strengthened the so-called alternative minimum tax, a levy to ensure all money-making businesses pay some federal tax. The combination of lower rates and fewer loopholes has meant that the so-called average effective tax rate -- the rate actually paid -- of the 250 corporations surveyed reached 26.5% in 1988, compared with 14.3% in the years from 1981 through 1985, according to the study. In addition, corporations are now shouldering a bigger share of the tax burden, as the authors of the 1986 law hoped.Corporate taxes paid for almost 12% of federal spending in 1988 -- excluding Social Security -- compared with less than 8% in the first half of the 1980s, the study found. "Tax reform is working," the study said. "Under the new tax-reform law, the days of widespread, wholesale corporate tax avoidance have come to an end." Still, Kroger Co., Pinnacle West Capital Corp., CSX Corp., Illinois Power Co., Media General Inc., Santa Fe Southern Pacific Corp. and Gulf States Utilities Co., didn't pay any federal income tax last year although they garnered a total of $1.2 billion in profits, the group said.In fact, six of those companies received refunds, which totaled $120 million. The lobbying group used publicly available information to calculate each company's domestic profits and its federal income tax payments.This is the fifth year Citizens for Tax Justice has released a study on corporate tax bills.Earlier reports, which revealed that as many as 73 companies were avoiding income tax legally, have been credited with helping galvanize efforts to overhaul the tax code. But even though companies are paying more taxes, many are still paying less than the statutory rate, the report said.And 45 companies paid effective tax rates of below 10% of their income. "While the overall picture is very encouraging, significant corporate tax avoidance continues," the study said. Glenn Hall contributed to this article.
Some lousy earnings reports whacked the stock market, but bond prices fell only slightly and the dollar rose a little against most major currencies. The Dow Jones Industrial Average tumbled 39.55 points, to 2613.73, in active trading.Long-term Treasury bonds ended slightly higher.The dollar rose modestly against the mark and the yen, but soared against the pound following the resignation of Britain's chancellor of the Exchequer, Nigel Lawson. Analysts have complained that third-quarter corporate earnings haven't been very good, but the effect hit home particularly hard yesterday.Compaq Computer nose-dived $8.625 a share, to $100, and pulled other technology issues lower after reporting lower-than-expected earnings after the stock market closed Wednesday.Later yesterday the nation's major auto makers added to the gloom when they each reported their core auto operations were net losers in the third quarter. The less-than-robust third-quarter results came amid renewed concern about the volatility of stock prices and the role of computer-aided program trading.Taken together, the worries prompted a broad sell-off of stocks.The number of stocks on the New York Stock Exchange that fell in price yesterday exceeded 1,000, a key measure of underlying sentiment among technical analysts. Although the government said the economy grew an estimated 2.5% in the third quarter, in line with expectations, analysts are increasingly predicting much more sluggish growth -- and therefore more corporate earnings disappointments -- for the fourth quarter. "There are a lot more downward revisions of earnings forecasts than upward revisions," said Abby Joseph Cohen, a market strategist at Drexel Burnham Lambert. "People are questioning corporate profits as a pillar of support for the equity market." The bond market was unmoved by the economic statistics.While bond investors would have preferred growth to be a little slower, they were cheered by inflation measures in the data that showed prices rising at a modest annual rate of 2.9%.That is another small encouragement for the Federal Reserve to lower interest rates in coming weeks, they reasoned. In major market activity: Stock prices fell sharply in active trading.Volume on the New York Stock Exchange totaled 175.2 million shares.Declining issues on the Big Board outstripped gainers 1,141 to 406. Bond prices were barely higher.The Treasury's benchmark 30-year rose fractionally.Yield on the issue was 7.88%. The dollar rose modestly against most major currencies.In late New York trading the dollar was at 1.8400 marks and 142.10 yen compared with 1.8353 marks and 141.52 yen Wednesday.The dollar soared against the pound, which was at $1.5765 compared with $1.6145 Wednesday.
The House joined the Senate in making federal reparations for Japanese-Americans held in World War II internment camps a legal entitlement requiring the Treasury Department to meet expedited payments of an estimated $1.25 billion during the next several years. The 249-166 roll call came as the chamber approved a compromise bill allocating $17.2 billion to the departments of State, Justice, and Commerce in fiscal 1990 and imposing increased fees on business interests making filings with the government. An estimated $40 million would come annually from a new $20,000 charge on pre-merger notifications to the Justice Department, and Securities and Exchange Commission filing fees would rise by 25% to fund a $26 million increase in the agency's budget. Yesterday's vote on Japanese-American reparations ensures final enactment of the entitlement provision, which abandons earlier efforts to find offsetting cuts but is seen as a more realistic path to expediting compensation first authorized in 1988. "The only way to reduce the costs is to say we don't want to pay the bill," said Rep. Neal Smith (D., Iowa), who taunted President Bush's party to back up his campaign promise of supporting the claims of $20,000 per individual. "Read my lips," said Mr. Smith. "If you're for paying the claims . . . I don't know how anyone can oppose this." No payments would be made this year, but beginning in fiscal 1991, the bill commits the government to annual payments of as much as $500 million until the total liability of $1.25 billion is met. The issue has assumed some of the character of past civil-rights debates and reopens old regional divisions in the Democratic majority.As much as Republicans led the opposition, among the 53 Democrats voting against treating the payments as an entitlement, 42 came from the 13 states in the Old Dixiecrat South and its borders. The odd mix of departments in the underlying bill makes it one of the more eclectic of the annual appropriations measures, and it is a lightning rod for a running battle over the fate of the Legal Services Corp. The measure provides $321 million to maintain services but would sharply curb the power of the current board until successors are agreed to by the Bush administration.The conservative bent of the incumbent appointees, named by former President Reagan, has divided Republicans.And on back-to-back roll calls, 206-199 and 223-178, the Appropriations Committee leadership turned back efforts to weaken or strip the proposed restrictions first added by Sen. Warren Rudman (R., N.H.) The estimated $40 million from the new pre-merger notification fee would be divided between the Justice Department's Antitrust Division and the Federal Trade Commission, which both face serious cuts if the income isn't realized.The Federal Bureau of Investigation is slated to receive $30 million by charging for fingerprint services in civil cases, and the judiciary will rely on another $32 million from bankruptcy charges, including a 33% increase in the current filing fee. The $17.2 billion total for the bill doesn't include an estimated $1.2 billion in supplemental anti-drug funds approved by the House-Senate conference yesterday, and the rush of money is already provoking jealousy among states competing for assistance. The House agreed to defer for a year a scheduled 50% increase in the required state matching funds for law-enforcement grants but, by a 287-123 margin, the chamber stripped a Senate initiative to raise the minimum grant for smaller states, such as New Hampshire and Delaware, to $1.6 million from $500,000. Few are more powerful in the competition for funds than the appropriations committees themselves -- including the three authors of the Gramm-Rudman-Hollings deficit-reduction law. When a House-Senate conference on yesterday's bill rescinded $11.8 million in unexpended funds for a Fort Worth, Texas, economic development project backed by former Speaker James Wright, Sen. Phil Gramm (R., Texas) insisted last week that the money be preserved. The measure includes $2 million secured by Mr. Rudman for a marine-research project at the University of New Hampshire, and Sen. Ernest Hollings (D., S.C.) used his power to add $10 million for an advanced technology initiative in the Commerce Department.This was in addition to a more parochial $4.5 million authorization for a health center in South Carolina upheld by a 273-121 vote in the House last night.
The Big Three U.S. auto makers posted losses in their core North American automotive businesses for the third quarter, and expectations of continued slow vehicle sales and price wars are casting a pall over the fourth period. The strongest sign of the Big Three's woes came from Ford Motor Co., which said it had a loss in its U.S. automotive business for the first time since 1982.Ford predicted fourth-quarter net income will fall below the year-earlier level, partly because of a likely $500 million charge from the sale of its steel operations. The bleak automotive results were offset by strong earnings from some non-automotive operations.Still, the combined profit of Ford, Chrysler Corp. and General Motors Corp. fell 44% to $1.02 billion from $1.83 billion a year earlier, excluding a one-time gain of $309 million at Chrysler from the sale of Mitsubishi Motors Corp. stock.The last time all three companies reported North American automotive losses was in the recession year of 1982. Yesterday's announcements helped spark a midday wave of program selling in the stock market.GM's common closed at $44.375 a share, down 50 cents, Ford fell 37.5 cents to end at $47.50, and Chrysler eased 37.5 cents to $22.25, all in New York Stock Exchange composite trading. The market's pessimism reflects the gloomy outlook in Detroit.As Japanese auto makers gained market share, the Big Three, with GM in the lead, slashed North American production and launched a retail discounting blitz.The price war peaked in the third quarter as Big Three factory discounts climbed to more than $1,000 a vehicle, according to industry officials.GM probably had the "heaviest incentives," said Robert S. Miller, Chrysler's chief financial officer. "We all did what we had to do to stay within sight of them." But the costly efforts did little to slow Japanese market gains, and domestic car sales have plunged 19% since the Big Three ended many of their programs Sept. 30.GM, Ford and Chrysler have already cut fourth-quarter U.S. output plans an estimated 15% from 1988 levels.If sales don't pick up, the cuts will go deeper and incentives will sprout again. Ford, which has long boasted of its ability to weather a downturn, saw earnings take a beating.The No. 2 auto maker blamed incentive costs and reduced production -- both the result of a substantially weaker U.S. market -- for a 44% drop in net to $477.1 million, or $1.03 a share, on revenue of $20.24 billion. Nearly all the decline came in Ford's U.S. automotive operations.The Dearborn, Mich., auto maker ran a loss of $37 million on assembling and marketing cars in the U.S., a deterioration of $378 million in that line from the 1988 quarter. Ford managed to show a profit for the quarter primarily because of earnings from overseas auto operations and financial services.A year earlier, Ford reported record net of $856.3 million, or $1.78 a share, on revenue of $20.38 billion.In the latest nine months, Ford earned $3.52 billion, or $7.51 a share, compared with $4.14 billion, or $8.53 a share. The U.S. automotive loss was a sharp reversal for a company that had reeled off 12 consecutive quarters of improved earnings until the 1989 second quarter.But David N. McCammon, vice president, finance, insisted that cost-cutting and tight production capacity will make results "better in this downturn than in prior downturns," when Ford had net losses. Still, Mr. McCammon said Ford expects the U.S. economy to weaken through the end of 1990, causing weaker sales and production.As a result, fourth-quarter profit will come in below 1988 results, although the drop won't be as sharp as the 44% third-quarter decline, he said. Part of the drop will come from an anticipated charge of as much as $500 million from the proposed sale of its Rouge Steel unit.In the 1988 fourth quarter, Ford had net of $1.16 billion, or $2.42 a share. Chrysler's operating profit fell to a scant $22 million, or 10 cents a share, its lowest quarterly total in seven years. Its $309 million, or $1.32 a share, gain from the sale of 75 million Mitsubishi shares made net $331 million, or $1.42 a share.Sales were flat at $7.88 billion.The results include record quarterly earnings of $76 million from Chrysler Financial Corp.A year earlier, Chrysler's net was $113 million, or 50 cents a share. Mr. Miller said costs of incentives caused a "moderate" loss in the Highland Park, Mich., company's North American car and truck business.He said the loss wasn't "that much different" from Ford's $37 million loss on U.S. automotive operations, but he declined to be specific. Mr. Miller said Chrysler spent an average of $1,000 a vehicle on its incentive programs in the third quarter, compared with about $450 a vehicle a year earlier -- a "high-water mark" at the time. He said Chrysler "is no longer sure" of its forecast for industry car and truck sales of 14.2 million in the 1990 model year.Consumers, he said, are balking at higher prices on 1990 cars, especially after seeing the incentive-reduced prices on 1989 models. In the nine months, net was $1.02 billion, or $4.38 a share, including the gain from the Mitsubishi stock sale, compared with $617 million, or $2.77 a share, after a charge of $93 million, or 42 cents a share, for plant closings in the 1988 period.Sales rose 8.4% to $27.95 billion from $25.78 billion. Heavy losses in North American auto operations sent GM's net tumbling to $516.9 million from a record $859.2 million. Detroit-based GM doesn't issue separate quarterly earnings for the North American automotive business.But analysts estimated that GM had a loss of as much as $300 million on domestic vehicle operations. An 8.5% drop in North American factory sales of cars and trucks cut into revenue, and rebates to dealers and customers more than offset gains from price increases on 1990 model vehicles delivered during the period, a GM spokesman said. But GM's results also illustrate the increasing diversity of its operations.In one breakdown, GM attributed half of its net to its two big technology units, Electronic Data Systems Corp. and GM Hughes Electronics Corp. Meanwhile, GM said overseas auto operations are on track to exceed last year's record full-year net of $2.7 billion. The diversified operations helped GM build its cash reserves, exclusive of its financial subsidiary, to $5.5 billion as of Sept. 30, a 22% increase from a year earlier.This cushion could come in handy if GM has to trim fourth-quarter North American production schedules more than the already scheduled 9.5%. Under the circumstances, it won't be easy for GM to exceed its record 1988 fourth-quarter net of $1.4 billion, the spokesman acknowledged.That means it's unlikely the company will surpass last year's $4.9 billion full-year profit, even though net for the first nine months was up 1.9% to $3.52 billion on revenue of $95.57 billion.It earned $3.46 billion on revenue of $91.21 billion in the 1988 nine months. slides represents income before $309 million after-tax gain from sale of stock
There are two versions of "Measure for Measure" on stage at the Alley Theater here.One is a strong, vigorous portrayal of Shakespeare's play; the other is director Gregory Boyd's overlay of present-day punk rock decadence on old Vienna. "Measure for Measure" is one of Shakespeare's "problem" plays, so named because it does not fit neatly into a category such as tragedy, comedy or history.Its ambiguity and uneasy mixture of the serious and the comic is no doubt one reason why it is very much in vogue with directors just now. Last season, Hartford Stage director Mark Lamos mounted a production at Lincoln Center, and currently two other productions -- one just closed at the Old Globe in San Diego and another now at the Seattle Rep -- overlap with Mr. Boyd's. In the play, the Duke of Vienna despairs over the licentiousness of his subjects and turns over the rule of the city to the puritanical Angelo, hoping he can set things right.When Angelo hears that the young man Claudio has made his fiancee pregnant before he could marry her, Angelo summarily condemns Claudio to death. When, however, Claudio's sister, Isabella, a novitiate in a convent, goes to Angelo to plead her brother's case, the obdurate ruler immediately falls in love with her and, in a supreme act of hypocrisy, demands that Isabella yield up her virtue to him in exchange for her brother's life. Meanwhile, the Duke, who set the original scheme in motion, appears on the scene disguised as a friar and becomes involved in a series of intrigues that has everyone fearing the worst possible outcome until the Duke arranges a last minute reprieve for all concerned. For the Alley production, scene designer Peter David Gould has arranged a stark but extremely effective set featuring a rectangular platform of white-washed boards that extends into the audience.When the action requires, a prison cell, consisting of an enlarged wire cage, rolls forward on iron wheels on the platform. In the play's major scenes Mr. Boyd demonstrates that he has a firm grasp of the Shakespearean dynamic.When Isabella (Ellen Lauren) confronts her brother Claudio (Matt Loney) in his cell, explaining the price she has been asked to secure his freedom; when Isabella and the disguised Duke (Philip Kerr) conspire to trick Angelo; and when Mariana (Annalee Jefferies), a woman wronged by Angelo, confronts him with his past misdeeds, the performers bring the dramatic high points to life with intense energy and intelligence. At such moments Mr. Boyd makes it clear that he has the capacity to be a superior interpreter of Shakespeare. When, however, he decides to be modern, or more accurately, when he decides to be trendy, the results are far less satisfactory.Mr. Boyd is of the directorial school that believes one must find modern parallels or metaphors to make Shakespeare accessible to today's audiences.It's a valid approach, but it puts a heavy burden on the director to show an uncommon degree of imagination and taste. In his "Measure," Mr. Boyd has "modernized" the pimps and prostitutes of Vienna whom Angelo is supposed to bring under control by converting them into transvestites, punk rockers and heavy metal types, with a strong emphasis on leather, chains and porno-inspired costumes.Loud rock music accompanies all the scene changes, even those in the convent. When Claudio is arrested, he is brought on stage nude except for the manacles on his wrists and ankles.When the opportunist Lucio (Jack Stehlin) visits the convent to inform Isabella of her brother's fate, Lucio not only slaps the mother superior on her rear, but brings along a voluptuous companion (Jill Powell), not in Shakespeare's script, to undulate lasciviously. Meanwhile, the pimp Pompey (Glen Allen Pruett), dressed in black leather and a prominent codpiece, indulges in enough obscene gestures and pelvic thrusts to launch a space probe. The problem here is not in the concept but in its lack of discrimination.The inclusion at one point, for example, of a list of glitzy modern-day malefactors, ranging from Jim Bakker and Leona Helmsley to Zsa Zsa Gabor, is a bid for a cheap laugh unworthy of Mr. Boyd's ability. Despite the excesses, however, the scorecard for the production has many more pluses than minuses.What's more, it represents an important step for the Alley Theater. "Measure for Measure" is Mr. Boyd's first directorial assignment as the theater's new artistic director. He succeeded Pat Brown, who was fired by the Alley board 18 months ago.Her dismissal angered many in the regional theater establishment and led Peter Zeisler, head of Theatre Communications Group, to write an editorial in American Theatre magazine condemning the board.None of this backlash could change the fact that Ms. Brown's regime was remarkably undistinguished and unimaginative. Now the Alley has moved ahead on both artistic and financial fronts.Not only is Mr. Boyd giving the theater a new sense of adventure and excitement on stage, the balance sheet is the best the theater has had in 10 years.As opposed to the $1.4 million deficit of the 1987-88 season, the 1988-89 year concluded with a $200,000 surplus and a $500,000 cash reserve. Admittedly last season's runaway hit, "Steel Magnolias," helped a lot, but so did cost cutting and other measures insisted on by the board.Only time will tell if Mr. Boyd can restore to the Alley the acclaim it received when its founder, Nina Vance, was at the height of her powers.But it is clear he is going to give it a shot.
Democratic leaders have bottled up President Bush's capital-gains tax cut in the Senate and may be able to prevent a vote on the issue indefinitely. Senate Majority Leader George Mitchell (D., Maine) said he intends to use Senate procedures to force advocates of the tax cut to come up with at least 60 votes before they can address the issue.And neither Democrats nor Republicans are predicting that the capital-gains forces can produce enough votes. "The 60-vote requirement will be there and they don't have the 60 votes," Sen. Mitchell said. "They don't have the votes to get it passed." Sen. Bob Packwood (R., Ore.), the leading Republican proponent of the tax cut, didn't disagree. "I'm not sure what's going to happen," he said.Previously he had said he would be able to find the requisite 60 votes eventually. Sen. Packwood has offered his capital-gains-cut package as an amendment to a bill, now pending in the Senate, that would authorize aid to Poland and Hungary.Democrats are holding up a vote on the amendment by threatening a filibuster, or extended debate.For a cloture vote to stop the filibuster, Republicans must muster at least 60 votes. Yesterday, Sen. Packwood acknowledged, "We don't have the votes for cloture today." The Republicans show no sign of relenting.GOP leaders continued to press for a vote on the amendment to the Eastern Europe aid measure.And they threatened to try to amend any other revenue bill in the Senate with the capital-gains provision. "This is serious business; we're serious about a capital-gains reduction," said Kansas Sen. Robert Dole, the Senate's Republican leader. "The strategy is `Let's vote. ' " The Republicans contend that they can garner a majority in the 100-member Senate for a capital-gains tax cut.They accuse the Democrats of unfairly using Senate rules to erect a 60-vote hurdle.Democrats counter that the Republicans have often used the same rules to suit their own ends. The two sides also traded accusations about the cost of the Packwood plan.Democrats asserted that the proposal, which also would create a new type of individual retirement account, was fraught with budget gimmickry that would lose billions of dollars in the long run.Republicans countered that long-range revenue estimates were unreliable. The Packwood proposal would reduce the tax depending on how long an asset was held.It also would create a new IRA that would shield from taxation the appreciation on investments made for a wide variety of purposes, including retirement, medical expenses, first-home purchases and tuition. A White House spokesman said President Bush is "generally supportive" of the Packwood plan.
Quantum Chemical Corp. suspended its cash dividend until at least April, saying it would pay stock dividends instead. The move came as the company, hurt by falling plastics prices and two fires at an important plant, reported a third-quarter loss of $21.4 million, or 86 cents a share. In the year-earlier quarter, the New York-based maker of commodity plastics reported earnings from continuing operations of $94.7 million, or $3.72 a share.Profits from discontinued operations made year-ago net $99.8 million, or $3.92 a share. As partial compensation to its shareholders, who received a special $50-a-share cash dividend earlier this year, Quantum declared a 1% stock dividend payable Dec. 1 to stock of record Nov. 10. The company said it suspended the cash dividend because of a covenant with some of its bondholders that limits payouts to 50% of retained operating profit from Jan. 1, 1989.For the nine months, the company has already paid $2.25 a share of dividends on operating earnings of $3.87 a share. While an exception could have been made, the company said, it would only have postponed the suspension. "Why not bite the bullet?" said a spokesman for the company. As previously reported, Quantum has been hurt by a drop of 20% to 30% in prices for polyethylene, a basic ingredient used to make such products as garbage bags, milk jugs, meat packaging and toys. Sales from continuing operations fell sharply to $557.7 million from $724.4 million in the year-earlier quarter.For the nine months, sales fell slightly to $2.04 billion from $2.11 billion. Although Quantum has captured about a 20% share of the U.S. polyethylene market, it is more vulnerable to price swings than some of its bigger rivals, including Dow Chemical Co. and Union Carbide Corp., which have much broader business bases. In addition, two devastating fires at Quantum's chemical complex in Morris, Ill., caused an estimated loss of $22 million, or 89 cents a share, in the third quarter.The plant, which filled about 25% of the company's ethylene needs and represented about 25% of its polyethylene capacity, won't be back on line until early 1991.Until then, secondary plants that depend on products made at Morris will operate at reduced capacity. A further hit came from expenses connected with Quantum's joint acquisition in August of Petrolane Inc., a propane distributor.Nonrecurring charges from the bridge loan and other purchase expenses cost the company $17.9 million, or 79 cents a share, for the quarter. Moreover, Quantum is still in the midst of a three-year plant expansion program valued at about $1.3 billion that will continue to put pressure on its cash flow and earnings. Despite the hammering, Quantum said it may restore the cash dividend at its April 26 board meeting.If not, the company says it will pay 2% stock dividends on a semiannual basis until its cash situation improves. Investors seemed ambivalent about Quantum's prospects.Several brokerage firms issued buy recommendations on the stock yesterday.In active trading on the New York Stock Exchange, Quantum's shares closed at $33.25, down $1.50.
Just when it looked like the Nasdaq over-the-counter market might be firming, nervous investors dumped shares of the biggest nonfinancial issues and sent the market tumbling. Because of the heavy selling of such large stocks as Intel, Oracle Systems, Apple Computer, Microsoft and Lotus Development, the Nasdaq Composite Index slumped 4.74, or 1%, to 458.15.Those stocks and other industrial issues are part of the Nasdaq 100 Index, which plunged 8.12, or 1.8%, to By comparison, the New York Stock Exchange Composite fell 1%; the Dow Jones Industrial Average slid 1.5% and the S&P 500 Index dropped 1%. Every Nasdaq industry index was lower.The Utility Index, which includes Tele-Communications, MCI Communications and LIN Broadcasting, plummeted 9.55 to 734.41.All three of those stocks declined.Industrial stocks fell 5.80 to 444.19 and transportation issues slid 4.03 to 478.28. The Other Finance Index -- the barometer of regional banking, real-estate-investment and brokerage issues, dropped 2.58 to 536.94.The index of small commercial banks was down 2.54 to 440.99 and the index of insurance stocks eased 0.84 to 536.04.The Nasdaq Financial Index of the 100 largest stocks in the group lost 2.11 to 452.75. "The market felt sloppy.I didn't see any buying at all," said William Sulya, head OTC trader at A.G. Edwards & Sons in St. Louis. Mr. Sulya also noted that volume was tepid, totaling only 128.7 million shares. "We were down and it was quiet on top of it.Those are two nails in a trader's coffin," he commented. Some traders complained that OTC market makers are becoming more risk-averse because of the recent volatility.Tony Cecin, managing director of equity trading at Piper, Jaffray & Hopwood in Minneapolis, said the overall OTC market is drifting lower in part because "nobody has the nerve to make a bid for anything," he said.Mostly in response to news from bellwether Compaq Computer, the OTC market's technology stocks were battered all day.Compaq's quarterly earnings were at the low end of analysts' forecasts, and the company said it is experiencing problems with a new microchip from Intel.Intel confirmed the Compaq report, but said the problems aren't expected to affect most users, except in "certain scientific applications." Intel said it has more than 200 customers using the chip. Nevertheless, Intel dropped 7/8 to 32 on 3.6 million shares.Other computer stocks caught in the fallout included Apple, which fell 1 1/4 to 45 1/4.Oracle Systems dropped 1 to 24 5/8.Microsoft tumbled 2 to 77 3/4 and Lotus Development was off 1 5/8 to 30 5/8. Sun Microsystems eased 5/8 to 17 1/8, despite better-than-expected fiscal first-quarter earnings.Yesterday, Sun reported net income of seven cents a share, compared with 26 cents a share a year earlier.But the report was better than the flat earnings the company had projected this summer, after reporting a loss for its fiscal fourth quarter.Also, Sun's sales in its first quarter, ended Sept. 29, were up 39% from the year-earlier period. MCI lost 1/4 to 42 3/4.In response to a similar lawsuit by MCI filed earlier, American Telephone & Telegraph sued its competitor for misleading advertising. Jaguar fell 5/8 to 11.General Motors said it is seeking clearance to buy as much as 15% of the company.On Wednesday, Ford Motor said it had already bought 12.45% of the British company's shares and may bid for the rest.Yesterday, Ford said it won't enter an unlimited bidding war with GM for Jaguar's shares. Buffets slid 1 to 14 after reporting third-quarter earnings of 17 cents a share, one cent below the low end of analysts' estimates.The company earned 14 cents a share in the year-earlier period. Chartwell Group plunged 1 1/2 to 1 1/2 after estimating that it had a loss of about $3.2 million in the latest third quarter, before a $5,350,000 addition to loss reserves.The company also said it wouldn't make the semiannual interest payment on its $40 million of 7% convertible subordinated debentures by the Nov. 1 due date or within the grace period.It blamed softness in the interior-furnishings industry for its financial troubles. Astec Industries tumbled 2 1/8 to 9 7/8 after it reported a $2.4 million loss in the latest third quarter, compared with net income of more than $1 million a year earlier.The paving-equipment maker said the loss was caused by bad weather, which had hurt sales in its Barber-Greene Co. and Telsmith Inc. units. Foremost Corp. of America surged 2 1/8 to 36 1/2.The company's third-quarter net income rose to eight cents a share from five cents a share the year before.The mobile-home insurer said Hurricane Hugo cost it 80 cents a share in the latest quarter.
Charter One Financial Inc., a bank holding company, expects to report that third-quarter net income jumped 30% to $4.5 million, Charles John Koch, president and chief executive officer, said. On a per-share basis, earnings are estimated at 64 cents to 66 cents.In the year-ago quarter, Charter One earned $3.4 million, or 51 cents a share.Last year's figures have been restated to reflect the August 1989 mergers of Western Reserve Savings Bank in Cleveland and First Federal Savings of Akron with Charter One.In connection with the mergers, Charter One issued 1,063,946 common shares.The company currently has 6.6 million shares outstanding. In an interview, the chief executive attributed the improved results to strength in its core operations, as well as higher volume of loans and fee income, especially relating to tax-deferred annuities.He noted that Charter One also had a more profitable loan mix, with gains in both consumer and commercial loans.The thrift's largest loan category is residential mortgages. Because of the mergers, the company had $750,000 in nonrecurring expenses in the latest quarter.Those expenses, however, were offset by a gain of about $1.7 million on the sale of 35,000 shares of Federal Home Loan Mortgage Corp.The company retains 421,000 shares of Freddie Mac, but expects to continue to sell about 30,000 shares a quarter. For the year, Mr. Koch said the company expects to earn $13 million, or $1.85 to $1.88 a share, up from a restated $9.5 million a year ago.The company's book value as of Sept. 30 was $23.20 a share, up 17% from a year ago.Mr. Koch said the increase was due in large part to the addition of the two thrifts. Mr. Koch also said that Ohio's strong economy has helped Charter One, as well as other thrifts in the state.In a year when scores of such institutions failed in Texas, Oklahoma, Arizona and other states, Mr. Koch said only a few of Ohio's 221 thrifts have failed. "The institutions in Ohio that failed were primarily those that made loans outside of Ohio," he said. "Those that have succeeded have continued to lend in local areas." In addition to Cleveland and Akron, First Federal Savings also serves the Youngstown and Portsmouth areas and in Toledo operates under the name of People's Savings.
Investors ran away from the stock market yesterday, dumping many recently favored stocks as they fled. The Dow Jones Industrial Average fell 39.55 to 2613.73.New York Stock Exchange volume rose to 175,240,000 shares from 155.6 million Wednesday. Badly shaken by recent big swings in stock prices and the cloudy outlook for the economy, investors sold many of the consumer-oriented blue chips that were the market's star performers only a week ago.Many of those issues-such as Philip Morris, Procter & Gamble and Merck -- are in the Dow Jones Industrial Average. Traders said investors were either raising cash or buying very selectively.In a sign of just how nervous investors are, precious-metals stocks were among the best performers yesterday. Compaq Computer's disappointing earnings report after the market closed Wednesday set the pace for the sell-off yesterday.Compaq closed down 8 5/8 to 100 on 2.6 million shares.Compaq, a highly sought stock only a few days ago, hit a record high of 112 1/2 on Oct. 19. Third-quarter earnings were on the low end of analysts' forecasts, and the company disclosed that it had uncovered two technical flaws in Intel's new microprocessor, which could cause delays in shipments of some new Compaq products.Intel dropped 7/8 to 32 in over-the-counter trading. "When you see what happened to Compaq, it is completely (numbing) for the mentality of the market," said Jack Solomon, technical analyst for Bear Stearns. "It is hard for the mind to digest that what was the leading stock is now the one leading you down the tubes." Investors took little comfort in yesterday's report that third-quarter gross national product grew at a 2.5% annual rate.Though that growth was in line with expectations, investors focused on signs of a slowdown: a buildup in inventories and dubious strength in consumer spending. Futures-related selling pushed the industrial average about 45 points lower in the morning as rumors about RJR Nabisco's pending sale of its Del Monte foods unit spread through the trading pits in Chicago.The purchase of Del Monte is likely to be financed with junk bonds or a bridge loan.The stock market has had a heightened concern about turmoil with high-risk financing ever since Campeau Corp. nearly missed an interest payment on its junk bonds in September. While futures-related sell programs depressed prices at first, buy programs pared the industrial average's losses later in the session.However, Donald Selkin, head of futures research at Prudential-Bache Securities, said that the stock market appears to be poised for a round of futures-related selling this morning, given the discrepancies between futures and stocks at the close. The New York Stock Exchange started trading its new "basket" product yesterday, with which institutions can buy and sell all the stocks in the Standard & Poor's 500-stock index in one trade.About $45 million of stock traded through the basket. In a sign of the credit needs among market makers during the 190-point plunge on Oct. 13, the Federal Reserve Bank of New York said yesterday that loans by New York's nine largest banks for the financing of securities positions rose $786 million, to $6.6 billion during the week ending Oct. 18. Among other computer stocks, International Business Machines fell 1 1/8 to 100 3/4 on 1.7 million shares, Digital Equipment droped 2 1/4 to 88 and Unisys lost 1/2 to 17.Also, Tandem Computers lost 1 to 24 7/8 even though earnings for the September quarter were in line with expectations. Semiconductor issues slumped as well; Texas Instruments dropped 1 to 31 1/2, Motorola fell 5/8 to 55 1/4 and Cypress Semiconductor lost 1/2 to 12 1/4. Anheuser-Busch slid 1/2 to 38 and led the Big Board's list of most active issues as 4.3 million shares were traded.The stock had plunged 4 3/8 Wednesday on the news of third-quarter earnings weakness and its discounting strategy, which it expects to affect results through the end of 1990. Philip Morris fell 1 7/8 to 41 5/8 on 3.7 million shares, reflecting the possibility that Anheuser-Busch's decision could have a negative impact on results at its Miller Brewing unit. Other consumer stocks coming under selling pressure included Procter & Gamble, which went down 3 1/4 to 126 3/4; Coca-Cola Co., down 1 3/8 to 71 1/8, McDonald's, down 1/4 to 31 1/4; PepsiCo, off 1 to 60 3/8, and Merck, down 1 1/2 to 76 3/4. Auto stocks slumped as each of the nation's Big Three auto makers reported that third-quarter operating profits were down from 1988.Ford Motor, which also said it expects results for the fourth quarter to be soft because of a slowdown in auto sales, dropped 3/8 to 47 1/2.General Motors lost 1/2 to 44 3/8 and Chrysler slid 3/8 to 22 1/4. Oil field-services issues were especially weak.Shearson Lehman Hutton cut short-term investment ratings on Schlumberger, which went down 2 1/4 to 41 1/8; Halliburton, down 1 1/8 to 35 1/8; Dresser Industries, off 1 to 37 3/4, and Baker Hughes, down 3/4 to 21.Precious-metals stocks, widely viewed as a safe investment haven in periods of uncertainty, posted solid gains.Newmont Gold climbed 2 1/2 to 39, Battle Mountain Gold rose 1 to 16, Hecla Mining went up 5/8 to 13 3/8, Homestake Mining added 5/8 to 15 3/4 and ASA Ltd. rose 2 to 46. Tandy fell 5/8 to 43 3/8 on 1.8 million shares, including a 1.5 million-share block that the company repurchased as part of an ongoing buy-back program.The block equaled 1.7% of its shares outstanding. Nipsco Industries, the owner of Northern Indiana Public Service, rose 1/2 to 17 7/8.Its board authorized the repurchase of an additional 3.5 million common shares, or about 5% of its shares outstanding, under an ongoing buy-back program. N.V. Philips, whose third-quarter net profit was up 41% from a year earlier, added 1/2 to 22 1/4.Also, the company said it would file for an initial offering of a 20% stake in its Polygram unit, as expected. Imperial Chemical Industries plunged 6 1/4 to 69 7/8.The company's third-quarter pretax profit was 12% lower than the year-ago level and fell short of its expectations. Quantum Chemical, which reported a loss for the third quarter, dropped 1 1/2 to 33 1/4.The company also suspended payment of cash dividends on its common stock until at least next April; it plans to pay stock dividends instead. Telerate, which said it is holding talks with Dow Jones about the latter's $18-a-share takeover offer, advanced 7/8 to 20 1/2.Earlier this month, a special committee of Telerate's board rejected the bid as inadequate. The American Stock Exchange Market Value Index fell 2.44 to 373.48.Volume totaled 12,190,000 shares. La Jolla Bancorp climbed 3 to 13.Security Pacific signed a letter of intent to acquire the company in a stock swap valued at $15 a share.
Prince, the rock star, is indecent, according to the Federal Communications Comission.At least before 8 p.m. The FCC proposed to fine KLUC-FM, in Las Vegas, $2,000 for playing the Prince song "Erotic City" on May 16, 1988, at 7:53 p.m. because the song is allegedly indecent.By FCC standards, that means the song uses "patently offensive" terms to describe "sexual or excretory activities or organs." "Erotic City," which was released as a single in 1984 and sold 250,000 copies, is certainly hot -- too hot for this newspaper to reproduce the lyrics.Suffice it to say, the song uses a short word for sexual congress, and congress is in session a lot during the song. An agent for Prince didn't return a telephone call seeking comment.And KLUC, a part of Nationwide Communications Inc., couldn't be reached.The Las Vegas telephone directory only lists KLUC's "Concert Hot Line" -- and no one answered the Hot Line at midday yesterday. But the proposed fine is bound to be controversial.For one thing, the FCC dismissed 51 complaints about indecency because the programs aired material after 8 p.m. -- only seven minutes after KLUC played "Erotic City." The FCC now says 8 p.m. is the time that is all right to begin airing indecent material because children aren't likely listening in great numbers.Earlier, the agency set the decency line at midnight, but an appeals court rejected that time as too restrictive. "You have to draw some lines," said Robert Pettit, the FCC's general counsel. Tom Chiusano, vice president and general manager of WXRK-FM in New York, said the FCC decision singling out KLUC seemed unfair because he estimated probably 500 radio stations have played "Erotic City." But Mr. Chiusano has his own problems.The FCC also sent WXRK a letter saying it believed one of its shows, the Howard Stern Show, contained indecent material. The agency hasn't yet proposed a fine for WXRK.But two years ago, when the agency began its crackdown on indecency, Mr. Stern's show, which features a lot of gross jokes, was one of the shows cited in the agency's first warning letters to broadcasters. "Howard Stern doesn't broadcast indecent material," said Mr. Chiusano. "He does four hours of contemporaneous humor." So far the indecency crackdown has managed to offend both civil libertarians, who say the FCC has gone too far, and Congress, which says the FCC hasn't gone far enough.Meanwhile the courts have rejected most of the FCC's plans, and the agency has been subject to constant ridicule.One commissioner even proposed banning a reading of James Joyce's "Ulysses" until cooler heads prevailed. But the agency hasn't given up.In addition to citing the stations in New York and Las Vegas, the FCC proposed fining radio stations in Miami and Los Angeles for airing allegedly indecent material before 8 p.m.In addition, the agency said it would begin a proceeding to see whether it was possible to find legal grounds for a ban on indecent programming around the clock.
Lawyers for former Housing and Urban Development Secretary Samuel Pierce say he again will refuse to answer questions from a congressional subcommittee investigating federal housing scandals. In a letter to Rep. Tom Lantos (D., Calif.), chairman of the House Government Operations subcommittee on housing and employment, the lawyers said Mr. Pierce would invoke his Fifth Amendment protection against self-incrimination at hearings scheduled for today and Friday. On Sept. 26, Mr. Pierce invoked the Fifth Amendment and refused to testify.At that time, he said his lawyers hadn't been given enough time to prepare.The letter sent yesterday to Mr. Lantos says Mr. Pierce "is concerned that there continues to be an atmosphere wherein he remains a target of the subcommittee's hearings." In the letter, lawyers Paul Perito, Robert Plotkin and Inez Smith say they "hope that sometime in the near future the present level of tension may be reduced such that Mr. Pierce can reconsider his present position and testify under fair and mutually agreeable circumstances."
McDonnell Douglas Corp. reported a 54% drop in third-quarter net income, but its Douglas Aircraft Co. subsidiary appears to be fixing some of its problems. Douglas Aircraft completed a restructuring in the third quarter but clearly is still adjusting to the jolt.The subsidiary posted a $3 million loss for the quarter, but that was after a one-time pretax gain of $25 million stemming from an insurance payment. "They lost $28 million, but that is good news," said Jack Modzelewski, a PaineWebber Inc. analyst, who had expected Douglas's loss to be as much as $50 million.In the second quarter, the subsidiary had a $158 million loss. At least, Mr. Modzelewski said, "it's losing money at a decelerating rate." Indeed, while investors weren't exactly gleeful, McDonnell Douglas held steady on the New York Stock Exchange, closing yesterday at $67.125 a share, unchanged. McDonnell Douglas posted third-quarter net of $38 million, or 98 cents a share, down from $83 million, or $2.18 a share, a year earlier.The latest results include an extraordinary gain of $6 million, or 14 cents a share, from the divestiture of the bulk of the company's information systems group.In the year-earlier period, the company had a $4 million loss from discontinued operations. Sales for the St. Louis-based aircraft and defense company rose 1.1% to $3.72 billion from $3.68 billion. Besides the troubles at Douglas -- which continued to be plagued by high development costs on the new MD-11 tri-jet and parts shortages -- McDonnell Douglas's combat aircraft segment also had its difficulties.Profits for the division tumbled to $67 million from $91 million, primarily because of reduced earnings for its AH-64 Apache helicopter and write-downs on several other helicopter programs.These more than offset an improved financial performance by the F-15 fighter.Earnings were also off 33% in the missiles, space and electronic-systems segment, despite a 13% rise in revenue.Mr. Modzelewski, while noting that times are tough for arms makers, said he expected McDonnell Douglas's Pentagon-related projects to "bounce back next quarter" to some degree.A number of defense-oriented aerospace companies, including Northrop Corp. and General Dynamics Corp., have reported either flat or lower third-quarter earnings. But the biggest question mark remains Douglas.Deliveries of its MD-80 jetliner, which competes primarily with Boeing Co. 's 737 series, jumped to 30 in the third quarter, from 24 in the second period and 28 a year earlier.Losses on the program narrowed to $1 million in the latest quarter from $34 million in the second period. Company officials boast that Douglas could account for half of McDonnell Douglas revenues by 1992, compared with about a third now.Besides the MD-80 and MD-11 commercial jetliners, Douglas is building the T-45 Navy trainer and C-17 military transport. But whether things at the Long Beach, Calif., subsidiary can really be turned around has yet to be seen. "Douglas is improving," said Judith Comeau, analyst at Goldman Sachs & Co., "but they're no where near where they need to be."
Delta Air Lines, in a move that could help it thwart the kind of takeover attempts that have bedeviled other airlines this year, agreed to sell about 5% of its stock to Singapore Airlines Ltd. It was the second such transaction for the Atlanta-based airline, which this summer sold a 5% stake to Swissair and placed another 14% of its stock in employees' hands. As part of a 10-year marketing agreement with Singapore Airlines announced yesterday, Delta also agreed to spend about $183 million -- the same amount Singapore Airlines will spend for its Delta shares -- to buy a similar stake in Singapore Airlines. Delta wouldn't comment on whether the moves were anti-takeover measures.But they come after a period during which three of the carrier's largest rivals were the subject of takeover bids. With its fat profits, low debt levels and steady growth, Delta has been considered by Wall Street analysts as likely prey for corporate raiders.Its shares have risen nearly 15% over the past six months.Yesterday, it closed at $66.375 in New York Stock Exchange composite trading, down 12.5 cents. Under the terms of equity cross-purchase agreements, Singapore Airlines agreed to buy 2.5 million shares of Delta common stock for 110% of its closing price for the four days surrounding its purchase announcement.Delta agreed to buy the same dollar amount of Singapore Airlines shares. Singapore Airlines also agreed not to transfer its Delta shares and to vote those shares in the same proportion as all other shares are voted or as recommended by Delta's board.Delta made a similar pact regarding its Singapore Airlines holdings. As part of the 10-year marketing agreement, the two airlines also plan to coordinate their schedules and possibly operate joint service on certain routes. An added benefit for Delta is that its agreement with Singapore Airlines provides a toehold in the Pacific, where U.S. airlines face the best possibility of expansion.
Pilots of Federal Express Corp. voted to reject affiliation with the Air Line Pilots Association, giving a resounding victory to the company's founder and chairman, Frederick W. Smith. In the National Mediation Board election, 709 pilots voted to support the union, out of a total electorate of 2,022 Federal Express aviators.The results were unexpectedly dismal for the pro-union side, especially given that some 960 eligible voters were former Tiger International Inc. pilots who had been longtime ALPA members.Federal Express bought Tiger in February for $880 million. "We're stunned," said Barney Barnhardt, a captain and leader of the pro-ALPA campaign. "Apparently, we lost a lot of the Tiger votes.I don't know why." Mr. Smith had campaigned hard against the union, insisting in company materials that a union would infuse unnecessary confict into the company's employee relations.A pilots' union would have been Federal Express's first major collective bargaining unit in the U.S., and company executives had feared that it would soften Federal's gung-ho, customer-driven culture. "The company feels very gratified" with the vote, said T. Allan McArtor, Federal's senior vice president, air operations. "We like to think that the Federal Express management can deal directly with its pilots without a union's intervention." Mr. Smith, through a spokesman, declined to be interviewed yesterday. In Washington, ALPA issued a statement saying the union was "disappointed" with the election's outcome.It said it filed an objection with the National Mediation Board, protesting "improprieties" in the vote.Specifically, the union is contending, among other charges, that Federal Express misled pilots by calling the Flight Crewmembers Handbook a valid contract. Mr. Barnhardt said Federal was apparently successful in its effort to persuade former Tiger pilots to give the company a chance without a union.The company had told pilots that it's much easier to vote in a union than to vote one out. "It looks like the `let's-give-it-a-year campaign' worked," said Mr. Barnhardt. As for the veteran Federal pilots, Mr. Barnhardt said the pro-union side had counted on getting at least 100 of them to support ALPA.But it seems many fewer than that actually voted for the union, probably because of fears that union rules would hurt them in their battle over seniority issues against the former Tiger pilots. Depending on how a mediator reconciles the different job classifications of Federal and Tiger, Federal Express still faces possible union elections this fall among airplane mechanics, ramp workers and stock clerks. In composite trading yesterday on the New York Stock Exchange, Federal's shares closed at $52, down 12.5 cents.
Thursday, October 26, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 13/16% high, 8 11/16% low, 8 11/16% near closing bid, 8 3/4% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.20% 45 to 66 days; 8.325% 67 to 89 days; 8.05% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.40% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.45% six months. BANKERS ACCEPTANCES: 8.48% 30 days; 8.32% 60 days; 8.30% 90 days; 8.12% 120 days; 8.02% 150 days; 7.94% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 9/16% to 8 7/16% two months; 8 5/8% to 8 1/2% three months; 8 9/16% to 8 7/16% four months; 8 7/16% to 8 5/16% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 5/8% three months; 8 7/16% six months; 8 3/8% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.77%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.70%, standard conventional fixed-rate mortgages; 8.65%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.65%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
When Adolph Coors Co. announced the appointment of William Coors as president late Wednesday, Peter Coors wasn't promoted -- at least not officially. But the announcement by the big Golden, Colo., brewer was an implicit statement of Peter Coor's rising role at the company, analysts say.It also underscores the difficult task ahead as Coors attempts to purchase Stroh Brewery Co. and fight off increasingly tough competition from Anheuser-Busch Cos. The latest management shuffling at Coors seemed to focus on Jeffrey Coors, who will relinquish the president's post to his uncle William, who is 73.The elder Coors has been chairman since 1970.Jeffrey, who at 44 is one year older than his brother Peter, will head up Coors Technology Co., a small unit he has run for several years. But Coors insists the administrative changes won't really shift responsibilities at the company.Indeed, a spokesman for Coors said that since January, Peter has been reporting directly to William, rather than to his brother.The change in titles "makes the structure conform to the reality," the spokesman said. (William, the brothers, another brother Joe Jr., and their father Joseph Sr. all serve on the company's nine-member board.) According to analysts, the changes reflect the tough task the company faces in integrating the operations and marketing efforts of Stroh and Coors, steering the merger through the Justice Department and continuing to fight the battle Coors is waging with Anheuser and Miller Brewing Co., a unit of Philip Morris Cos. "It's gray-beard time," said Tom Pirko, president of Bevmark Inc., a Los Angeles consulting firm, referring to the move of William into the presidency. "This is a time of tremendous risk at the company, and Peter has a tremendous amount of responsibility." Putting William at the helm probably won't increase the elder Coors's imput into the beer business, but "it doesn't hurt to have a senior statesman at the top," he said. In a brief telephone interview yesterday, Peter Coors said his uncle "is our leader.We depend on all his years of experience and knowledge in the industry, and that doesn't change." But in January, Peter said, his uncle told him and his brothers, "You guys run those units." Coors stressed that the removal of Jeff from the presidency wasn't a demotion, but would allow him to devote his full attention to his unit.Coors has continually pointed to the importance of the technology unit to its diversification efforts. But overall, "Coors's success or lack thereof depends on the beer business," said Emanuel Goldman, analyst at PaineWebber Inc. in San Francisco. Mr. Goldman credits Peter Coors with "pulling Coors's marketing efforts into the 20th century" by pushing for intensified marketing efforts, modern advertising campaigns and significantly higher marketing expenditures.Analysts also credit Peter with selling other family members on the purchase of Stroh, a transaction that will cost about $425 million and slap a big piece of debt on Coors's books for the first time in the company's history. "Peter had a major struggle in getting this done," said Mr. Pirko.Taking on debt was controversial within the family, Mr. Pirko added, but in the end, "Peter called the shots." In yesterday's interview, however, Peter declined to take individual credit for the moves. "We manage as a team here," he said. "The team establishes the goals.It's the result that's important, not who's the architect or the driving force." And Peter will continue to be under the gun, given the dominance of Anheuser, the stubbornly flat beer market of the past decade and recent Coors financial results that have been frustratingly mediocre.So far this year, Coors' market share has been slipping and so has net income, due to increased costs and increased price competition, the company said. Price competition is about to become even more fierce.Anheuser announced on Wednesday that it would begin discounting Budweiser, its flagship brand, which analysts say will put exceptionally heavy pressure on Coors management in the midst of a major merger. Peter Coors, however, said the discounting by Anheuser could also mean that Coors' increased marketing efforts are having an impact.Furthermore, he said, "I don't know how the industry can get too much tougher.This is just a signal that the toughness is going to continue."
UAL Corp. 's third-quarter net income fell 72%, but that reflected a large year-earlier special gain and sizable expense this year for stock appreciation rights tied to recent takeover activity. UAL, parent of United Airlines, said net income fell to $110.9 million, or $5.11 a share, from $402.4 million, or $18.68 a share.The year-earlier quarter included a one-time after-tax gain of $223.4 million from the sale of interests in its computerized reservations partnership, Covia. The company said its third-quarter results reflected the recent sharp climb in UAL stock to $282 a share as of Sept. 29, sparked by bids from Los Angeles investor Marvin Davis and a labor-management buy-out group.UAL's board approved the labor-management bid Sept. 14.But the bid collapsed two weeks ago, and the stock has dropped sharply since.Thus, UAL said it expects to reverse most of the stock appreciation expenses in the fourth quarter. The stock appreciation rights are related to stock options that UAL officers hold.As the value of UAL stock rises, the company must reflect this in its accounting methods as an increased expense. In New York Stock Exchange composite trading yesterday, UAL shares rose $9.75 to $170.75 on volume of 1.1 million shares. Excluding the stock appreciation expense this year and the special gain last year, per-share earnings would have been $6.74 in the third quarter, compared with $8.31.Most industry analysts expected UAL to report third-quarter earnings of around $7 a share. Third-quarter revenue rose 7% to $2.58 billion from $2.41 billion.Third-quarter traffic was up 3% to 19.3 billion revenue passenger miles from 18.8 billion in the year earlier.A revenue passenger mile is one paying passenger flown one mile. For the nine months, net income fell 71% to $317.3 million, or $14.66 a share, from $1.1 billion, or $34.35 a share, which includes the gain from the sale of Covia interests.Revenue increased 10% to $7.43 billion from $6.76 billion.Traffic was nearly flat at 52.8 billion revenue passenger miles vs. 52.6 billion miles a year earlier. Separately, the leadership of UAL's machinists union met to discuss the possibility of proposing a recapitalization to UAL's board.The leadership came to no conclusion, and discussions will continue.The board said Monday it believes the company should remain independent for now.Takeover stock traders and other investors, however, have been pushing for some form of recapitalization to regain the losses they suffered when the labor-management bid collapsed.
Sony Corp. asked a Los Angeles court to deny Warner Communications Inc. 's request for an injunction preventing Hollywood producers Peter Guber and John Peters from taking over the management of Columbia Pictures Entertainment Inc. The Japanese concern made its request in Los Angeles Superior Court, where Warner last week filed a $1 billion breach of contract suit against Sony.Mr. Guber and Mr. Peters are currently under contract to produce movies exclusively for Warner.Sony, which has agreed to pay $3.5 billion and to assume $1.5 billion in debt to buy Columbia, is also offering $200 million for Guber Peters Entertainment Co., of which the producers are co-chairmen and own a combined 28% stake. While executives from both sides say the matter still could be settled, papers filed in the court by Sony appear to heighten the acrimony of Hollywood's most-watched legal battle.Sony claims an injunction would leave it "faced with the ominous possibility that it would complete a $5 billion entertainment company acquisition and be left with no management to run the company." Sony adds that "Warner must be grinning from ear to ear at the possibility of leaving Sony in such a position and at the opportunity to prevent the revitalization of Columbia into a strong competitor." Sony disputes Warner's contention that its offer to Mr. Guber and Mr. Peters violates their contract with Warner, which is in the process of being acquired by New York-based Time Warner Inc. Furthermore, Sony claims that the contract as written -- and oral agreements that Warner has denied exist -- allow the producers to take on such executive posts.Sony's legal argument even raises the novel idea that Mr. Guber and Mr. Peters could actually make movies for Warner while serving in executive posts at another studio. Sony acknowledges that Warner's contract prevents the Guber-Peters team from being producers or executive producers of movies for another studio.But, Sony says, that doesn't exclude them from taking an executive post at another company where they would be involved in choosing movies and in managing, but not in day-to-day production of movies.Sony says Columbia "could allow Guber and Peters to produce motion pictures for Warner as soon as the acquisition is consummated." But Sony also says in its filing that the Warner contract "doesn't require that Guber and Peters take any affirmative steps to produce motion pictures; it simply rewards them when they do and prohibits them from producing for another entertainment company." And Sony says Warner has already shown it doesn't need the producers "by taking action to prevent Guber and Peters from completing production in Warner properties." Among the arguments Sony makes is that Warner should let the producers go to Columbia because it already allowed the producers to become co-chairmen of publicly held Barris Industries Inc., which earlier this year changed its name to Guber Peters Entertainment.Sony also says in its filing that Mr. Guber and Mr. Peters were offered management posts at Columbia once before in 1987, and that "Warner approved and encouraged them to do so." But in a sworn affidavit last week, Warner Bros.Chairman Robert Daly denied that.Mr. Daly said that Mr. Guber had mentioned such an offer, and that he responded that "I thought the idea was a bad one from his point of view, and I understand he dropped the idea shortly thereafter." The two sides did some rival-bashing yesterday as well.In a sworn declaration, Walter Yetnikoff, president of Sony's CBS Records unit, said Warner Chairman Steven Ross has an "anti-Japanese, anti-Sony" bias.But Stuart Rabinowitz, Warner's outside counsel, says Sony "violates American business morality by secretly raiding major producers under exclusive contract to Warner." In another sworn declaration yesterday, Sony Corp. of America Vice Chairman Michael Schulof said that while he was negotiating with Mr. Guber and Mr. Peters, he relied on the producers' assurances that Warner had previously agreed to let them terminate the contract and wouldn't have any trouble obtaining a release. Mr. Guber, meanwhile, in his own sworn declaration yesterday, maintained that running a studio has always been "our professed goal," and that Warner executives made an oral agreement that would free the producers from their contract should the opportunity arise.Mr. Peters, in his declaration, supported Mr. Guber's claims and said he is "shocked" by the assertions of Warner executives that such an agreement was never made.
Regional thrift regulators charged that phone calls were bugged during the examination of Lincoln Savings & Loan Association and that federal officials in Washington delayed Lincoln's seizure until its $2.5 billion cost made it the most expensive thrift failure ever. "Clearly, we were shot in the back . . . as we battled to protect the taxpayers," said William Black, acting district counsel for the San Francisco region of thrift regulators. In a day of extraordinary testimony before the House Banking Committee, officials from the San Francisco Office of Thrift Supervision also testified that a Big Eight accounting firm, Arthur Andersen & Co., participated in back-dating loan documents and that the Washington officials even agreed in one document not to prosecute Lincoln over certain infractions. The hearing may also add to the unease of Sens.Alan Cranston (D., Calif.) and Dennis DeConcini (D., Ariz.), who are being scrutinized for intervening on behalf of Lincoln, a unit of American Continental Corp., Phoenix, Ariz.The officials said Sen. DeConcini and an aide to Sen. Cranston called California state thrift officials to press for a sale of Lincoln, instead of its seizure. Witnesses said the room in which California examiners were auditing Lincoln this past spring was bugged.According to a government memo, regulators who took control of the thrift in August discovered that a phone line in Lincoln's headquarters in Irvine, Calif., had been "compromised" to allow calls to be monitored on other extensions.It didn't say who was monitoring the calls, but said the matter was turned over to the Federal Bureau of Investigation. A Lincoln spokesman said its management "never authorized or participated in any bugging of anyone." The regional officials said Washington's chief thrift regulator, Danny Wall, and his principal lieutenants repeatedly ignored warnings that Lincoln was being operated in a reckless manner, certain to cause its failure.They also accused Mr. Wall of holding improper meetings with Lincoln officials, while refusing to listen to field examiners. Members of the Banking Committee generally received the regional officials as bureaucratic heroes and sharply criticized their Washington bosses, who had relieved them of their responsibility for Lincoln two years before the thrift's parent filed for bankruptcy-law protection. Committee Chairman Henry Gonzalez (D., Texas) said Mr. Wall "willingly cut the legs out from under his regulatory troops in the middle of the battle," and renewed his call for Mr. Wall to step aside.Rep. Joseph Kennedy (D., Mass.) said, "The higher up in the regulatory process, the more corrupt it would appear." Mr. Wall is scheduled to testify Nov. 7, and his agency said that all sides of the issue should be heard before drawing conclusions.Separately, other Washington thrift officials disputed the regional examiners' statement that they had called specifically for the seizure of Lincoln in 1987, saying that it was only one option they presented. The regional officials also said that Arthur Andersen backdated data to support loans that were made with no underwriting standards.Over two years, until April 1986, $1 billion in loans were approved, even though Lincoln had no written loan standards, said Mike Patriarca, acting principal supervisory agent with the Office of Thrift Supervision.Fifty-two loans were made in March 1986, he said, and none had credit reports or other background work completed. "At a later time, the files looked good because they had been stuffed," Mr. Patriarca said.Leonard Bickwit, a Washington attorney for Lincoln, conceded that some memos had been written after the fact.He said that "memorialization of underwriting activities that had been undertaken at an earlier time" did occur, but that Lincoln believed it adhered to lending standards superior to the industry average. A spokesman for Arthur Andersen denied any improprieties, adding, "At the request of our then-client, we provided staff personnel to work for a limited period of time under the direction of client personnel to assist them in organizing certain files." The matter is under active criminal investigation at the Justice Department, Mr. Black said. The hearings also disclosed that Washington officials promised in May 1988 not to launch any civil or criminal actions based on an examination in which regional officials concluded that Lincoln was being operated in an unsafe and unsound manner. "Giving up the right to make criminal referrals to me is inconceivable," Mr. Black said. The committee also heard testimony from two officials who said that Sens.Cranston and DeConcini, who received campaign contributions from Lincoln Chairman Charles Keating Jr., arranged for telephone calls on their behalf to state thrift regulators.The officials said both calls encouraged a sale of Lincoln to an outside buyer, which Mr. Keating sought, rather than putting it in receivership. A spokesman for Sen. Cranston said that telephone-company records for three months disclosed no phone calls to the state regulators from his office.An aide to Sen. DeConcini said the phone call to a top California thrift regulator was "informational."
The White House and the Senate Intelligence Committee agreed on new rules for covert operations that will give President Bush a freer hand to involve the U.S. in coup plots in Panama and elsewhere. Based on assurances from the White House, the committee agreed to rescind Reagan-era restrictions and give U.S. operatives wide latitude to participate in planning foreign coups, according to committee officials. In particular, the Bush administration will no longer be bound by a controversial legal interpretation put in place last year that could have required notifying dictators in advance of coup plots that might endanger their lives.Instead, the officials said, an executive order barring assassinations would be considered satisfied as long as U.S. agents stay away from coup plots that have assassinations as their explicit goal. "We start with a clean slate," said one official familiar with the pact. The agreement was disclosed last night after the panel approved separate intelligence legislation and held a closed hearing regarding Panama with officials from the Central Intelligence Agency, the State Department and the Pentagon. The legislation also contains significant compromises that have the effect of giving Mr. Bush more leeway in covert actions.The panel dropped a plan to require 48-hour notice of covert acts, and it voted to permit the CIA to use a contingency fund to launch covert acts. In return, Mr. Bush is sending Congress a letter pledging to notify the committee in advance of nearly all covert acts, but reserving the right to delay notification in some cases until a few days after the operations are launched, and in rare cases, to take longer. In addition, the administration promised to put into writing all presidential intelligence decisions, called "findings." And the CIA reluctantly agreed to accept a more independent internal inspector's office than now exists.
Some gifts are better left unopened. In 1984, Howard Conant, a director of Valspar Corp., donated to Goodwill Industries Inc. of Chicago an eight-acre site on the city's west side, where Valspar had operated a paint factory.Goodwill planned to sell the property and pocket the proceeds, as it had in many similar cases. Six months later, Goodwill says, it was stunned to learn from the Illinois Environmental Protection Agency that Mr. Conant's gift was contaminated and that the charity, as the current owner, could be held responsible for any cleanup costs.Only this June, after the state agency made a more complete survey of the site, did Goodwill realize the extent of the problem: The property contains more than 70 storage tanks holding hazardous oily solvents and lead, and the soil is contaminated by similar substances. "It's a toxic time bomb," says James D. Wadsworth, president of the Chicago Goodwill, which is independent of sister Goodwills around the country.Cleaning up the site is expected to cost many millions of dollars.Paying even a portion of the cleanup costs could bankrupt the charity, which has annual revenue of $6 million, says Russell B. Selman, Goodwill's lawyer.In a pending lawsuit, the charity has asked a federal district court in Chicago to rescind its donation agreement with Valspar and Mr. Conant. Goodwill's problem looms as a potential threat to any charity that accepts property gifts in the new age of tough environmental laws.Under federal and Illinois law, present and past owners of a contaminated site are among those who can be held liable for all cleanup costs, regardless of who caused the problem; regulators generally assign the costs. Donating contaminated property allows companies to share the costs of their environmental problems, says Laurence Molloy of Molloy Corp., an environmental management firm in New York.It also allows businesses to stop paying taxes and insurance on land they no longer use and to take a tax deduction on the property, tax lawyers say. Nonprofit organizations might escape liability by showing that they didn't know a site was contaminated, but to succeed they must also show that they conducted an investigation before accepting the donation and that it didn't disclose the toxic-waste problem.Such an investigation can cost as much as $50,000. Charities face a dilemma, because they can't reject gifts of property without significantly reducing their revenue.Since 1984, non-cash donations, which include real estate, have accounted for 20% of corporate giving, according to the Conference Board, a New York trade group that tracks corporate giving.In 1983, such donations represented only 11% of corporate giving. Still, because of the hazards, many nonprofit organizations are tightening their rules on such gifts.Since June, the Salvation Army's Eastern division has refused real-estate donations unless the donor first conducts an environmental assessment of the property. "We tend to be very careful," says Carl Schoch, property secretary for the Eastern division. "We're aware an owner might want to get rid of" a hazardous site. At the Nature Conservancy, site inspections, which have been mandatory since the late '70s, "are now specifically geared to looking for hazardous-waste problems," says Michael Dennis, general counsel for the Rosalind, Va., group. So far the organization hasn't incurred any major liabilities.Last year it went back to a donor eight years after accepting a gift when the conservancy learned of waste on the site.The donor agreed to share the cleanup costs.Now the group is considering hiring environmental specialists and engineers to work for it and investigate properties."All you need is one hazardous property, and you could have a multimillion-dollar liability on your hands," Mr. Dennis says. Universities also are proceeding with caution.In 1987 the University of Minnesota spent $100,000 cleaning up toxic waste at a property donated by a local power utility.The site had been contaminated by a company that leased the property and is now bankrupt.Now all property transfers involving the university are scrutinized for potential hazards -- at a base cost of about $20,000 for preliminary research and soil samples -- and scuttled if environmental problems can't be resolved. Many nonprofit groups spurn some donations out of fear of potential problems.The Council on the Environment of New York City, a governmental agency, refused a gift of a site to be used for a children's playground when the council learned an auto repair shop had been located there.Little money was available for tests on the site, but "common sense said there could be problems," says Lys McLaughlin, the agency's executive director. Since receiving the Valspar gift, the Chicago Goodwill has virtually closed the door on property donations, says its president, Mr. Wadsworth.But that's no help in its current toxic-waste mess.In its suit, Goodwill claims that Valspar, a paint and varnish maker based in Minneapolis, and Mr. Conant haven't met terms of the donation agreement or environmental regulations about property transfers. Mr. Conant, however, isn't about to take back his gift.His lawyer, Michael Quinn, says he doesn't want the land back because its value has declined since it was donated due to vandalism or poor maintenance.Valspar, which had leased the property from Mr. Conant, says it has complied with all requests from the Illinois EPA about the site. "We have empathy for the unfortunate situation Goodwill is in, but that doesn't mean a legal obligation attaches to it," says Leo G. Stern, a lawyer for Valspar.Both Valspar and Mr. Conant argue that Goodwill doesn't have standing to bring its suit. As the litigation progresses toward the pretrial fact-finding stage, Goodwill's bills continue to mount.It has already spent more than $50,000 on security guards and fences at the site.The charity also owes $400,000 in back taxes on the property; its tax-exempt status applies only if property is being used for charitable purposes. The state of Illinois has sued Goodwill for a share of the cleanup costs at a second site, a former paint factory in Chicago.That property was donated to Goodwill by Artra Group Inc., a Northbrook, Ill., company with interests in fashion jewelry and accessories.Goodwill later sold the site, before, it says, there was any indication of contamination. Some charity officials now say Congress should exempt nonprofit organizations that receive land donations from any cleanup liability.That seems unlikely, though, because "everyone wants an exemption," says David Van Slyke, a lawyer with the enforcement and compliance division of the federal EPA. "But the agency is trying to be equitable.We're not trying to jam people when they are an innocent party." For now, Goodwill's Mr. Wadsworth lectures other charities about accepting land donations. "It's supposed to be a gift," he says. "But it can turn out to be a liability."
For a company that sells billions of dollars in military hardware each year, Northrop Corp. is pressing awfully hard to get back a mere $6,250,000. The missing funds -- and the way they've been accounted for -- are at the center of a long-running dispute between the Los Angeles aerospace company and a well-connected Korean enterprise called Asia Culture Travel Development Co. Since news of Northrop's Korean dealings became public last year, the company has insisted that it sunk the money into a proposed hotel venture in Seoul, losing everything when it was bamboozled by Korean con men.The Koreans say that the hotel was a ruse from the beginning, and Northrop really intended to bribe government officials to buy its ill-fated F-20 Tigershark jet fighter. Now, a document released by the House Energy and Commerce subcommittee alleges that Northrop tried to cover up those purportedly illicit payments by forging signatures, shuffling millions of dollars in and out of banks and even paying hush money to middlemen who threatened to disclose the scam to the authorities. Some of the allegations were given to the subcommittee during testimony in August 1988.But the document -- featuring a passel of new details -- is sure to revive interest in the matter on Capitol Hill, where lawmakers this week are deciding on appropriations for Northrop's most important Pentagon program, the B-2 Stealth bomber.Asia Culture Travel submitted the document as part of its legal defense to the International Chamber of Commerce, which is arbitrating the case between Asia Culture Travel and Northrop. One subcommittee investigator, who works for Chairman John Dingell (D., Mich.), called the information "a major step forward" in its own inquiry.A federal grand jury also is actively trying to determine whether Northrop violated the Foreign Corrupt Practices Act. Northrop has strongly denied any illegalities.It said that in August it made an extensive filing to the chamber that rebuts, point by point, the allegations by Asia Culture Travel.A copy wasn't immediately available. In a May 8 filing to the chamber, though, Northrop stressed its view that "this is not a complex case . . . but is instead a straightforward breach-of-contract dispute." The company added that Asia Culture Travel's "allegations are so contradictory and inconsistent that they provide powerful evidence" that the Koreans "deceived Northrop" by pitching the hotel project. But Asia Culture Travel lays out a much different story in its 52-page brief.Northrop's first contact with the Koreans, this version of the tangled events goes, occurred in the summer of 1983 when Northrop approached Dong Yang Express Co., a bus company that was run by Lee MinHa.His brother-in-law was the late Park Chong Kyu, a powerful businessman. Mr. Park, the pistol-packing owner of a notorious Seoul night spot called the Safari Club, was a member of the Seoul Olympic Organizing Committee with easy access to the highest echelons of the Korean government. The brief alleges that Northrop, by way of a Honolulu-based consultant named James Shin, proposed the idea of selling to Korea as many as 200 F-20s through Dong Yang Express, which was to receive a 2% commission with a $55 million cap.As part of the arrangement, the document contends, Northrop was asked to invest in the Sofitel Seoul, "a high-class hotel" that was to be built on the site of a Dong Yang Express garage. Though it is typical for American companies to invest in foreign countries in which they want to trade arms, thereby offsetting the cost of currency conversion on its contracts to the overseas government, it was still initially puzzling why Northrop approached a bus company to do it. "I first thought it made no sense to offer to an express bus company the distribution of up-to-date fighters," Mr. Lee told public prosecutors in Seoul who have also investigated the situation, according to the document. "But later I learned that it was not Dong Yang Express but Mr. Park Chong Kyu that Northrop aimed to contact." In May 1984, the document asserts, Northrop officials met with Mr. Park -- known best to Americans as C.K. Park -- and allegedly asked him to "perform promotional activities" for the F-20.The brief says Mr. Park then asked for $5 million up front, adding that "he could procure such expenses from the budget for the Sofitel Hotel project if approved by Northrop." But Northrop declined, the brief says, when its representatives pointed out that a payoff would be illegal and "such a payment, if done, would constitute a scandal." Yet the document alleges that it didn't take long before Northrop and Mr. Park devised a new scheme to funnel the money.The conduit, the filing insists, was to be another hotel project -- this time a joint venture with Asia Culture Travel, another Park-affiliated concern. Promotional materials touting Asia Culture Travel were delivered to Northrop and appear to have been signed by Kang Oh-Hyun, an official of the firm; in fact, the filing alleges, they were forged by Mr. Shin, the Northrop consultant.The brief says other procedural forms relating to the joint venture appear to have been signed by four Asia Culture Travel shareholders when Mr. Park came to Los Angeles in the summer of 1984 for the Olympic Games.But three of the holders, the filing says, weren't in California at the time. On Aug. 9, 1984, Northrop told Mr. Park that $6,250,000 had been deposited to an account in Hong Kong that he controlled.Everything, the arbitration filing suggests, seemed set. That is, at least until October when, during a test flight, an F-20 crashed.The pilot was killed and the aircraft destroyed.Shortly thereafter another F-20 crashed in Canada during a demonstration, and Northrop eventually gave up on the F-20 program after out-of-pocket expenditures of more than $1 billion.Mr. Park died of cancer in 1985. Meanwhile, Northrop's own board began inquiring about what happened to the hotel -- the Seoul Palace, it was to be called -- and the $6,250,000.It was at that point, the filing alleges, that a cover-up began. First, the brief says, Northrop wanted to formally cancel with Dong Yang Express the earlier Sofitel Hotel transaction that had been proposed.The idea, the filing alleges, was to be able to transfer to Dong Yang Express $3.5 million in termination fees.Donald Foulds, a Northrop executive, even allegedly drafted the settlement claim for Dong Yang Express. Mr. Foulds's attorney, Jan Handzlik, said his client "denies that he engaged in any improper activity in respect to the Korean hotel project, including any cover-up activities." That money, investigators for the House subcommittee said, was in turn designed to be handed back to Northrop to help it account for more than half of the missing $6,250,000.Of the remainder, the filing maintains, $1,750,000 could be chalked up to expenses and $1 million was available through a Park bank account. But, the filing says, that plan had to be killed when "the blackmailers appear." The first allegedly was a Dong Yang Express middleman, who told James Dorsey, a Honolulu-based Northrop marketing executive, that he would "publish all the facts concerning Northrop's efforts to sell the F-20 to the Korean government," the document says.Both Mr. Dorsey and his lawyer, Daniel Bookin, declined to comment. Welko Gasich, then a top Northrop executive, allegedly handed over $1.5 million to Dong Yang Express, which passed on $500,000 to silence the middleman, the document claims.Mr. Gasich declined to comment; the middleman couldn't be located. In early 1987, the arbitration filing asserts, Mr. Shin, the Northrop consultant, demanded $2 million to remain silent.Mr. Shin, who is being sued by Northrop in federal court in Honolulu, couldn't be reached. It was then that Northrop filed suit against the Koreans -- in what the House investigators claim was an attempt to make it look as if Northrop had been swindled. The company is asking the International Chamber of Commerce to order Asia Culture Travel and its associates to return the $6,250,000, plus interest "at the highest lawful rate."
Arnold C. Pohs was officially named president and chief executive officer of Cellular Inc., a provider of management, financing and operating services to cellular-telephone systems. Mr. Pohs, previously executive vice president and chief operating officer, was named interim president and chief executive officer after David M. Harrold, a company founder, resigned from the posts for personal reasons in August. Cellular said Robert J. Lunday Jr., its chairman and another founder, resigned from the company's board to pursue the sale of his telephone company, Big Sandy Telecommunications Inc.A new director hasn't been named to fill that seat, which expires in 1992.Mr. Pohs said the board probaby will elect a new chairman at its meeting Nov. In addition, the company said Monroe M. Rifkin, a cable television investor and consultant, was elected a director, filling a vacant seat that will expire in 1991.The board currently has six members, but is expanding to nine, Mr. Pohs said.
France's Banque Indosuez shocked London markets by moving to become the dominant shareholder in prestigious but troubled merchant bank Morgan Grenfell Group PLC. Indosuez said it has agreed to purchase Willis Faber PLC's 20.4% stake in Morgan Grenfell, by far the largest single holding in the bank.That would bring Indosuez's total stake to 24.8%, Indosuez said. While awaiting Bank of England permission to pass the 15% mark, Indosuez said, it has agreed to purchase immediately a 10.5% share in the bank for 410 pence ($6.62) a share, bringing its stake to 14.9%.It then intends to acquire the remaining Willis stake at 462 pence a share.The transaction still must be cleared by Willis shareholders. Morgan Grenfell shares jumped 38 pence to 400 pence on London's stock exchange. Indosuez said it has agreed that, barring a major change in Morgan Grenfell's situation, it won't launch a full takeover bid for at least a year.But despite signs that Morgan Grenfell staff was unhappy at the sudden investment, Indosuez Chairman Antoine Jeancourt-Galignani said he will begin linking the two banks into "an important merchant banking group in Europe." In a telephone interview, Morgan Grenfell Chairman John Craven said the Indosuez holding "wasn't one that was taken at our initiative," adding that Morgan Grenfell "remains perfectly confident in the future of our business as an independent entity." Mr. Craven added he held "important discussions" yesterday with Indosuez officials about the possible benefits of a combination, and that Morgan Grenfell's attitude "is entirely objective." He added: "My understanding of what I have heard is that their intentions are very long term.I guess if they get to 25%" Morgan Grenfell would be a troublesome target for another counterbidder, he added. In a statement, Morgan Grenfell said it now seeks further clarification of Indosuez's intentions. Mr. Jeancourt-Galignani refused to say whether Indosuez will bid for all of Morgan Grenfell when its year is up.If it does, the operation would be one of the largest foreign purchases of a U.K merchant bank.It would catapult Indosuez from the position of a marginal London player, with strong Asian and Middle Eastern activities, to the upper levels of the U.K. merchant banking scene.It is part of Indosuez's overall plan of building its business across Europe, as the 1992 reduction of European Community market barriers looms. Mr. Jeancourt-Galignani said Indosuez had to move fast because it feared that another investor -- widely rumored to be Deutsche Bank -- was buying shares heavily.Indosuez said it believes Deutsche Bank currently has a 4.9% stake, but it refused to say who it believed was buying.It said Deutsche Bank is the largest other holding it knows of. Indosuez completed the purchase in just two weeks, and market sentiment is that Indosuez's rush led it to pay a high price, but French analysts tended to welcome the investment. "The logic is that Indosuez is a French investment bank with a lot of market activities, but not a lot of fund management," said Romain Burnand, a financial analyst at Paris brokerage Cholet-Dupont & Cie. He said Morgan Grenfell manages about #7 billion pounds ($11.3 billion) in investment funds. "It is a force in the market and has a very good international image," Mr. Burnand said. "The problem is that executives are volatile.They can leave when they are unhappy."
One year after hitting the auction block, RJR Nabisco Inc. resembles a runner in a long-distance race: The first mile has been almost flawless, but the pace may be difficult to maintain. Under buyer Kohlberg Kravis Roberts & Co., which acquired the food and tobacco giant for $25 billion in February, RJR has kept pace with an ambitious schedule to pare its massive debt load.But events beyond the company's control -- namely the skittish bond markets -- could have a big effect on the buy-out's profitability.And rumors resurfaced yesterday that RJR's planned $1.48 billion sale of its Del Monte canned foods unit might fall through. If the Del Monte deal does hit a snag, it would be the first setback in an otherwise successful year.Since February, RJR has been a study in perpetual motion.It has moved its headquarters here from Atlanta, shed about 2,000 employees, sold businesses accounting for nearly a quarter of its $17 billion revenue base, and kicked what is called the "loading" habit, the practice of shipping distributors billions of cigarettes that stuff inventories but are never consumed. So far, history's biggest leveraged buy-out looks good from a financial standpoint.In the first six months this year, RJR's operating profit soared 21% from the year-earlier period.The results have led analysts to predict that the company's 1989 cash flow will be more than 20% ahead of the debt-coverage ratio required by RJR's banks. "We're acting like we're not an LBO company," said a beaming Louis Gerstner Jr., RJR's chairman and chief executive officer. But there are clouds on the horizon.Much of KKR's financing for the RJR buy-out is with so-called payment-in-kind debt, notes that accumulate interest in more notes and don't require cash payments for several years.Although RJR is having no trouble meeting cash-interest payments, it is too early to tell just how onerous the high-interest PIK notes will be once they come due. Moreover, asset sales, which have gone smoothly so far, could hit some hurdles.Yesterday, prices of RJR's high-yield junk bonds fell on rumors of problems with the Del Monte deal.Since Oct. 4, the price of RJR's junior bonds has fallen by about 14%. "Everything had gone well until the junk market went into disarray," said David Goldman, an analyst with Nomura Securities International Inc. "But from this point forward, I think the jury is definitely out." In some respects, the deal is right on track.RJR's operating profit from tobacco, bolstered by strong overseas sales and manufacturing improvements, jumped 17% in the first six months.The tobacco business does have some long-term problems.Its brands are battered by Philip Morris Cos., and it is still unclear whether KKR will be able to afford the major overhaul to turn that business around. In the short term, however, the tobacco unit will continue to throw off more cash because of an estimated $500 million in cost cuts. Meanwhile, RJR's food business is surpassing almost everybody's expectations.RJR operating income from food soared 31% in the six months, paced by 40% growth at its Nabisco Brands unit. Nabisco has cut costs aggressively, according to John Greeniaus, the unit's chief executive.Savings have come from firing some high-paid research engineers, ending peripheral marketing activities such as race-car promotions and deferring plant-modernization plans.Mr. Greeniaus also says Nabisco, following the lead of competitors, has been "relatively aggressive" in raising prices. But the big story at Nabisco this year is new products.The unit's Teddy Grahams snack food has surged to become the industry's third-selling cookie in less than a year on the market, behind Nabisco's own Oreos and Chips Ahoy! brands.Mr. Greeniaus put Teddy Grahams' first-year sales at just under $150 million, which he called "unprecedented." Last month, Nabisco brought out a dozen more new products. Next year, Mr. Greeniaus said, Nabisco's operating income should climb 15% -- down from the expected 40% growth this year but above the 10% level considered strong in the industry. RJR's asset sales will be on schedule, too -- if the Del Monte deal is successful.In June, RJR got $2.5 billion for its European food units, which it used, along with about $200 million of other proceeds, to pay down about $2 billion of a $6 billion bridge loan.RJR owes another $3 billion on that loan by February.It expects to pay that with roughly $1 billion in sales of assorted small assets (probably including its 20% stake in ESPN, its Butterfinger and Baby Ruth candy bar brands, and its breakfast cereals unit) and $2 billion from the two-part sale of most of Del Monte.A group led by Merrill Lynch & Co. agreed to acquire Del Monte last month, but the agreement is contingent on the securities firm's ability to finance about $350 million of the purchase price, either by selling junk bonds or making a bridge loan. The Del Monte purchase is scheduled to close in late December.If it doesn't go through, that could force KKR to adjust the terms of the sale or to sell other assets, including RJR's food units in Latin America and New Zealand, the hot-cereals division, or even the Planter's LifeSavers unit, to meet the bank debt pay-down time-table. Neither Merrill, RJR nor KKR would comment yesterday on the deal. Several people familiar with the agreement said Merrill hasn't told RJR of any decision not to proceed with the purchase.By next August, RJR must pay the last $1 billion of the bridge loan, with half that amount required to come from more asset sales. Predictably, RJR is taking advantage of its improving balance sheet to refinance some of its most expensive debt.Karl von der Heyden, chief financial officer, said he is talking with bankers about refinancing between $2.5 billion and $3 billion of RJR loans at lower interest rates, possibly securing the refinanced debt with some of RJR's assets. "Conceptually, the longer we wait, the better our credit gets," said Mr. von der Heyden. "There would have to be some cataclysmic event for us not to bring our interest rate down." But once the bridge loan is paid off, the company will still owe some $19 billion in various types of debt.And although the company apparently is meeting its cash-interest payments with ease, the clock is ticking on its non-cash notes -- to the tune of about $1.4 billion of accrued interest this year, with the amounts expected to rise to about $2.3 billion in 1993. A pivotal test will come in the next 18 months, according to bankers and money managers familiar with the buy-out.Some time before April 1991, RJR must fix the interest rates on $5.8 billion worth of PIK bonds so the notes trade at par, in accordance with the bonds' terms.That means if the notes continue trading below their $100 par value -- they are now trading below $80 (excluding accrued interest) -- RJR must boost the bonds' interest rates as high as necessary to drive their market price to $100.That could require fixing the interest rate as high as 20%, bankers say, especially if the junk-bond market remains weak or deteriorates further. If RJR does have to raise rates significantly on the PIK debt, it won't cost the company cash for several years.The bonds will continue to accrue interest in paper until the mid-1990s to late 1990s.But it could erode the deal's profitability.For example, a large, accruing debt to bondholders would diminish RJR's value in an initial public offering of stock. As the transaction was originally structured, about one-third of the PIK debt is due to convert into a 25% stake of RJR equity in 1993, unless 90% of the bond holders decide against conversion.The key factor in the bond holders' decision will undoubtedly be whether the PIK notes that they are holding are more valuable than a 25% equity stake.And that, of course, will depend on just how high RJR is forced to fix the interest rate to get the bonds trading up to par. Moreover, the $4 billion of PIK debt that isn't convertible into equity could be a big drain on returns if the bonds' interest rates have to be fixed higher. "The higher the reset, the greater the share of the return on equity will accrue to bondholders as opposed to equity holders," said Robert Long, a bond analyst with First Boston Corp. RJR's executives say they aren't concerned about the troubled junk-bond market yet. "We certainly wouldn't want to reset those bonds today," said Mr. von der Heyden. "If the markets don't recover, it will be costly.But we have until April 28, 1991, to do it." "I really don't worry about what happens in the bond market from day to day, or even week to week," added Mr. Gerstner, RJR's chairman. "I think our paper has been well received.I'm not concerned." Randall Smith contributed to this article.
The New York Post plans to close down its Sunday edition after launching it just eight months ago with much fanfare. Peter Kalikow, owner and publisher of the Post, announced that he would discontinue the edition, which he initially started in the hopes of luring upscale readers and retail advertisers that shunned the more sensational tabloid in favor of the New York Times and the Daily News. Industry observers and analysts still are unsure whether folding the Sunday Post will guarantee that the paper will survive.When Rupert Murdoch sold the paper to Mr. Kalikow, it was posting losses of $10 million a year by conservative estimates.In its first 10 weeks, the Sunday edition alone was estimated to have recorded a deficit of as much as $7 million. Mr. Kalikow and Editor Jerry Nachman assembled employees in the paper's newsroom in lower Manhattan yesterday afternoon to break the news, which had been rumored in recent weeks.Post executives had denied earlier reports that the Sunday edition was closing down. Mr. Kalikow said the death of the Sunday paper is no indication that the Post itself is in danger of closing down, as some industry observers have speculated.By closing down the Sunday Post, he said in a statement, the Post "foresees a profitable year in 1990." The Post's last Sunday edition will be Nov. 26. Mr. Kalikow blamed the demise of the Sunday Post on the soft ad market in the New York area and on low circulation. "The economics just aren't there," he said. While there has been a wave of new Sunday newspapers launched in small to medium-sized cities in the last decade, the Post was by far the largest newspaper to launch a Sunday edition in years.While Post executives had expected circulation would reach 500,000, Valerie Salembier, president of the Post, said the Sunday circulation has reached only about 250,000. "In any other city, 250,000 would be considered great, but it just wasn't enough in New York," said Ms. Salembier. Ms. Salembier said about 30 people in circulation, ad sales and other business departments would lose their jobs. "What we don't know about is the number of layoffs on the editorial side," she said. "The editorial side is more complicated," she added, saying that editorial layoffs will be announced later. The paper has been particularly hurt by declines in the level of real estate and retail advertising, and by the fact that the Sunday paper could not attract any coupons from national companies.In late September, the paper announced its was canceling its weekly real estate section.The section had shrunk from more than 20 pages to six pages recently as a result of declines in advertising. Months earlier, Mr. Kalikow had already begun to scale back the Sunday Post.In May, the Post said it would scratch all supplements in the Sunday edition, including USA Weekend magazine, and cut the $1 price to 40 cents. Ms. Salembier said closing the Sunday paper was a "big disappointment" but the right move. "We were losing a lot of money.While Peter {Kalikow} has deep pockets, it makes sense to put our resources into our Monday through Saturday product," she said.
Bolar Pharmaceutical Co., under pressure from the Food and Drug Administration, agreed to recall its generic version of the antibiotic drug Macrodantin from retail shelves, according to FDA officials. It was another setback for Bolar, the flagship of the generic drug industry.Earlier this month, Bolar began recalling its nitrofurantoin macrocrystalline capsules from wholesalers and distributors because of FDA evidence suggesting that the company passed off Macrodantin as its own to obtain FDA approval to market its generic product.At that time, however, the company balked at a retail recall, arguing that the evidence wasn't sufficient to justify such a move. But on Oct. 25, the FDA offered additional evidence to buttress its case that the brand-name drug had been substituted for Bolar's product in pre-market testing, FDA officials said yesterday.The agency now has evidence that Bolar submitted Macrodantin as its generic version for testing not only at PharmaKinetics Laboratories Inc., Baltimore, but also at an independent laboratory in Canada. FDA investigators obtained a sample of the Bolar drug from the Canadian lab, according to FDA official Michael Shaffer. "It turned out to be the brand-name product," he said. In Copiague, N.Y., Robert Shulman, president of Bolar, and sales director Karen Sattig couldn't be reached for comment. The inspector general's office of the Health and Human Services Department already is conducting a criminal investigation of whether Bolar filed "false information" with the FDA in seeking clearance to market at least two generic drugs. Meanwhile, the FDA is moving to withdraw its approval of Bolar's nitrofurantoin macrocrystalline capsules, which are used primarily to treat urinary-tract infections.The brand-name drug is manufactured by Norwich Eaton, a subsidiary of Cincinnati-based Procter & Gamble Co. Although no health problems are known to have been caused by Bolar's product, the FDA officials said the agency can no longer ensure that it is the equivalent of Macrodantin. In American Stock Exchange composite trading yesterday, Bolar closed at $14.375, down 50 cents.
Bond investors sat on the sidelines yesterday, paying little attention to falling stock prices and the government's latest gross national product report. "This was a bit surprising," said John Lonski, an economist at Moody's Investors Service Inc.He said that in recent weeks, such news has often set a positive tone for the bond market. The Dow Jones Industrial Average fell 39.55 points to close at 2613.73.Meanwhile, the government reported that third-quarter real gross national product, the inflation-adjusted value of the nation's goods and services, rose at an annual rate of 2.5% in the third quarter. Although the rate of growth was unchanged from the second quarter, economists said the new GNP report had an ominous tone.Among other things, the report showed a sharp deterioration in export trade, which had been a major source of strength for the economy. Bond investors didn't show much reaction to the news.As a result, the benchmark 30-year Treasury bond, which meandered for most of the day, ended little changed.Mortgage-backed securities moved slightly higher, and investment-grade corporate bonds ended unchanged. In the junk bond market, most prices were unchanged to slightly lower.But there was one notable exception.The junk bonds of RJR Nabisco, which have been whipsawed in recent months for a variety of reasons, fell sharply yesterday on rumors of possible problems with RJR's pending $1.48 billion sale of its Del Monte canned foods unit to a group led by Merrill Lynch & Co. However, late yesterday, a spokesman for Merrill Lynch said the planned sale is on track. Proceeds from the Del Monte sale would account for a portion of the $5 billion worth of bank debt RJR had planned to repay by Feb. 9.RJR bonds closed one to two points lower, or off between $10 to $20 for each $1,000 face amount.RJR's 13 1/2% subordinated debentures maturing in 2001 were off 1/2 at 101, while its 14.7% convertible pay-in-kind securities finished the day down 1 7/8 at 86. In the municipal market, institutional selling drove prices sharply lower.The municipal market has been struggling for weeks to absorb large customer "bid-wanted" lists, or sell orders.But dealers said inventories now are full and bids for bonds are getting soft. Among others, a bid-wanted list totaling about $109 million circulated yesterday.It followed a $223 million sell list handled by Chemical Securities Inc. Wednesday and at least three other lists in that size range within the past two weeks. Traders said the bonds appear to be coming from a range of investors, with commercial banks among the leading sellers.Tax law changes that go into effect later this year make municipal holdings less attractive to certain investors. Municipal market participants also remain concerned that property and casualty insurers may be forced to lighten their tax-exempt holdings as a result of claims stemming from Hurricane Hugo and the Northern California earthquake. Treasury, Agency Securities The Treasury market could get an unexpected $17 billion of new supply next week. Late yesterday, a Treasury official said the department may take the unprecedented step of borrowing $17 billion to avoid default on certain obligations unless Congress assures by 1 p.m. EDT today that it will raise the debt limit, according to Dow Jones Capital Markets Report. If assurance isn't given, the official said the Treasury might raise the money by adding to the weekly Treasury bill issue or through a cash-management bill issue. The official said Treasury Secretary Nicholas Brady indicated the possible move in a letter dated yesterday to House Minority Leader Robert Michel (R., Ill.). Separately, the $4.52 billion of Resolution Funding Corp. bonds sold Wednesday were quoted late yesterday at 99 19/32, down 1/8 from the auction average. Much of the Refcorp issue was purchased by four large securities firms that had planned to repackage the bonds.But yesterday, some dealers said the repackaged bonds were selling slowly. The benchmark 30-year bond ended at about 102 21/32, compared with 102 22/32 Wednesday.The yield was unchanged at 7.88%.The 10-year notes ended at about 100 23/32, compared with 100 24/32.The yield was unchanged at 7.87%. Mortgage-, Asset-Backed Securities Mortgage securities were 1/32 to 4/32 point higher, with Government National Mortgage Association 10 1/2% securities the top-performing issue. Dealers said the 10 1/2% securities rose in response to a $500 million purchase by a bank for its mortgage portfolio.The dealers noted that the securities, which gained 4/32 to 104 1/32, have been relatively weak recently because high-coupon securities aren't favored in rising markets.Thus, the issue has quite a high yield. Ginnie Mae 9% securities were at 98 5/8 late yesterday, up 2/32, and Federal Home Loan Mortgage Corp. 9% securities were at 97 3/4, up 1/32.The yield spread of the Ginnie Mae 9% issue over the 10-year Treasury note narrowed 0.01 percentage point to 1.45. In derivative markets, the Federal National Mortgage Association issued a $500 million real estate mortgage investment conduit backed by its 9% securities through Shearson Lehman Hutton Inc. In other matters, Maryland National Bank, a unit of Baltimore-based MNC Financial Inc., became the first commercial bank to issue securities backed by home-equity lines of credit.The $267 million transaction was underwritten by Merrill Lynch Capital Markets. Foreign Bonds British government bonds rose for the fourth consecutive day, buoyed by a firm pound and further weakness in British stocks.But later, after trading had basically ended, the pound declined sharply on the unexpected resignation of Nigel Lawson, Chancellor of the Exchequer. The Treasury 11 3/4% bond due 2003/2007 rose 10/32 to 112 30/32 to yield 9.95%, while the 12% notes due 1995 were up 3/32 at 104 11/32 to yield 10.86%. Japanese government bonds ended lower after quiet trading, pulled down in part by the sale of 500 billion yen ($3.53 billion) of new one-year bonds.They were priced at 99.58 to yield 5.163% with a coupon rate of 5.1%. The rate compares with a 4.9% coupon at the previous auction in August.In response to the auction, Japan's No. 111 4.6% bond due 1998 ended on brokers' screens at 95.33, down 0.20, to yield 5.39%. West German bonds ended lower in quiet trading.Bonn's 7% bonds due October 1999 fell 0.10 to 99.95 to yield 7.01%. Municipals Details of New York City's forthcoming bond offering were released yesterday.As described in the preliminary official statement, the city will offer $729 million of tax-exempt bonds tentatively structured as serial bonds maturing in 1989 to 2008. The city also plans to sell $57.8 million of taxable municipal bonds at the same time, possibly maturing in 1994, 2004, 2009 and 2010.The bulk of the taxable bonds are in the two longest maturities, which are tentatively to total $26.9 million each. In the secondary market, New York City 7% bonds due 2014 were offered priced to yield 7.70%, while 7 1/2% bonds due 2007 were offered at 98 to yield 7.71%. Among active issues, New Jersey Turnpike Authority 7.20% bonds due 2018 were off 1/4 point at 98 1/4 bid to yield 7.35%. Corporate Issues Most corporate bonds were unchanged to slightly lower. New-issue volume dropped off sharply from Wednesday. Among the issuers that tapped the debt market yesterday was Tenneco Credit Corp.The subsidiary of Tenneco Inc. offered $150 million of seven-year senior notes priced to yield 9.324%.The issue was sold through underwriters led by Merrill Lynch Capital Markets.
CONFRONTATIONS LOOM between Bush and Democrats in Congress. The early bipartisanship dissipates as issues become more contentious and the Democrats find their voice.They begin to blame Bush's insistence on a capital-gains cut for the disarray in the budget process; one White House aide sees a "train wreck" coming.The Democrats also increasingly lash Bush for timidity on Eastern Europe. White House advisers formally threaten vetoes of the foreign-aid and child-care bills and informally discuss a possible veto of the defense bill.Child care could be an especially tough fight; after Bush's veto of abortion funding for rape and incest victims, anti-abortion lawmakers feel extra pressure to show attention to women's concerns. Bush still tries a personal touch; he golfs with Ways and Means Chairman Rostenkowski and meets privately with Senate Democrats. A "MUST-SIGN" BILL becomes a magnet for controversial proposals. To avoid missing Social Security payments, the government must get a raise in its borrowing limit by Nov. 8; the necessity of the measure attracts numerous attempts at adding unrelated measures to it.Republicans will try to offer the capital-gains cut in the Senate; the Democrats probably have the votes to block it, though some fear brinksmanship on the bill. Other likely candidates for riders include revision of the Gramm-Rudman law, repeal of catastrophic-illness insurance, child care and other measures that were stripped off the recent budget-reconciliation bill.Democratic leaders will try to keep them off, fearing that allowing any of them would weaken their argument against capital gains. BUSH TURNS the failed Panama coup to his advantage, at least for now. His complaints about secret restrictions on anti-Noriega plots put Congress on the defensive, even though the curbs didn't play a role in the coup's collapse.Senate intelligence chiefs Boren and Cohen agree with the White House to loosen the rules; CIA agents stand to gain broad leeway to work with rebels, even if a coup might endanger Noriega's life. The next step: a new covert plan for unseating the dictator.One possibility is more active American recruitment of rebels who would agree to hand Noriega to the U.S. and install the elected leaders he rebuffed.The last coup plotters refused to do either. But Bush's handling of the previous attempt hobbles future efforts.Noriega has purged potential enemies, and doubts grow about U.S. resolve. LAWMAKERS' PATIENCE wears thin over the CFTC's slow pace of reform after the "sting" operation that led to the spring indictments of 46 traders at two Chicago exchanges.Incredulous senators grill Chairman Wendy Gramm about the fact that 11 of the traders are still handling customer accounts.Nebraska Sen. Kerrey asks her: "Do you work full-time at this job?" THE PENTAGON BALKS at Darman's budget strategy of threatening to make the automatic Gramm-Rudman cuts permanent.Pentagon brass worry it could mean sharp cutbacks in training, acquisition of spare parts and weapons development. "The impact for us could be appreciably worse than OMB has admitted in its maneuvering with Congress," says a Pentagon budget aide. NEW ALLY: Attorney General Thornburgh, back from the U.S.S.R., reports that the Soviets are now providing assistance and intelligence to the U.S. on international drug trafficking.In exchange, the U.S. Drug Enforcement Administration is training several Soviet agents in drug enforcement. ORGAN-TRANSPLANT DOCTORS worry at HHS moves to assert control over the transplant system, currently overseen by a nonprofit group under federal contract.The department decides to impose a 10-step review on new transplant policies.Dr. Robert Corry, who heads the nonprofit group, says the move will "stifle innovative changes" and slow medical progress; he hopes to negotiate a compromise. ABORTION POLITICS shape legal as well as electoral agendas. Illinois Attorney General Neil Hartigan, whose gubernatorial campaign is under pressure from pro-choice forces, pursues a settlement of the current Supreme Court case challenging the state's tough restrictions on abortion clinics.Agreement would sharply reduce the stakes in the court this term; the two remaining cases don't as directly challenge Roe vs.Wade. Pennsylvania's new abortion law almost certainly will provide a Supreme Court test, but probably not until next year.Abortion-rights activists plan a new series of major marches next month, but their biggest boost would come with a gubernatorial victory in Virginia, where black nominee Wilder is riding the pro-choice issue hard. The National Abortion Rights Action League, already running ads for Wilder, hits the airwaves today for New Jersey Democratic candidate Florio. MINOR MEMOS: Among documents in the HUD scandal: a handwritten 1987 letter from presidential son Jeb Bush to Deborah Dean, a central figure in the scandal, wishing her "every success in trying to clean up the federal government's act." . . . GOP Rep. Bentley writes business PACs promising to "lead the battle" against President Bush's proposal to abolish them -- and asking for money for her 1990 campaign. . . . Sen. Mitchell's advice to visiting Supreme Soviet members drawing up rules for their legislature: "Don't copy ours."
A New York bankruptcy judge has temporarily stopped the Resolution Trust Corp. from placing an insolvent thrift institution under government control. Deltacorp, the holding company that owns the thrift, contends that the federal law empowering the RTC to place failing savings and loan associations under government control conflicts with the federal bankruptcy law, Chapter Deltacorp has a bankruptcy petition pending in New York.The company is scheduled to appear before federal bankruptcy Judge Tina L. Brozman Thursday to ask her to impose a 60-day preliminary injunction on the Office of Thrift Supervision, the enforcement arm of the RTC. Deltacorp hopes within 60 days it will be able to sell the thrift, says its lawyer David M. Friedman, a partner with Gordon Hurwitz Butowsky Weitzen Shalov & Wein in New York. If Deltacorp prevails, similarly situated companies will be able to use Chapter 11 to thwart President Bush's program to restructure the trouble S&L industry.Under Chapter 11, a company operates under protection from creditors' lawsuits while it works out a plan to pay its debts. Passed early this year, the Financial Institutions Reform, Recovery, and Enforcement Act authorizes the RTC to declare troubled thrift institutions insolvent and place them in receivership.The RTC can then close the thrift institution and sell it whole or in parts.Established three months ago, the RTC has taken over 256 thrifts valued at $95.6 billion. The RTC was on the verge of placing Colonial Savings Bank of Roselle, N.J., a subsidiary of Deltacorp, into receivership.This week Deltacorp persuaded Judge Brozman to issue a temporary restraining order, arguing that before its thrift was taken over the apparent conflict between the two federal laws should be resolved. According to Mr. Friedman, the RTC's pending takeover would impair the company's ability under Chapter 11 to recoup loses by putting its subsidiary up for bid.Mr. Friedman claims Deltacorp estimates that by selling the thrift it could make about $23 million.If the government sells the thrift, the company will make far less, he contends. "If the court were to issue the injunction, it would set a significant precedent," says Mr. Friedman, who says he doesn't know how many other companies are in a position to use the bankruptcy law as a shelter against RTC takeovers. Jerome Kowalski, a partner with Parker Chapin Flattau & Klimpl who has clients in situations similar to Deltacorp, says lawyers would be "foolish not to tell clients to follow" the Deltacorp strategy. The Office of Thrift Supervision failed to return numerous phone calls. REAGAN TOOK more than 10 months on average to nominate federal judges. That's the conclusion of a study by Daniel Meador, a law professor at the University of Virginia.Mr. Meador, a former assistant attorney general, criticizes what he calls "inordinate delays" in filling federal judgeships and suggests the creation of a permanent office on judicial nominations within the Justice Department. Federal judges in Washington, D.C., and other areas complained recently that long-standing vacancies have contributed to mounting backlogs of cases.Forty-five federal judgeships are vacant nationwide. Mr. Meador, whose study appears in the fall issue of the University of Virginia's Journal of Law & Politics, writes that "it is not rare for two or more years to pass before the administration sends a nomination to the Senate." His study covers the years 1979 to 1988. Under Attorney General Dick Thornburgh, a committee of ten senior Justice Department officials evaluate potential judicial nominees and send recommendations to the White House.Congressional Democrats have accused Mr. Thornburgh of delaying the nomination process. But a spokesman for the the attorney general said the Senate Judiciary Committee contributed to the problem by failing to act on nominations made during the final months of the Reagan administration. U.S. DISTRICT JUDGE upholds New York's "Son of Sam" law. The state law, designed to prevent lawbreakers from profitting from such things as books and movies about their crimes, survived its first federal challenge in a ruling by Judge John F. Keenan in federal court in New York. Simon & Schuster Inc. sued to have the law declared unconstitutional, claiming it restricts publishers' freedom of speech.The company filed the suit in 1986 after the "Son of Sam" law was applied to "Wiseguy: Life in a Mafia Family," a best-seller by Nicholas Pileggi.The book was based on the life of Henry Hill, whom the court refers to as a "career criminal" and who received payments from the publisher in return for his life story. Simon & Schuster said many books about criminal activities would never be published if criminals couldn't be paid for their stories, and that this had a chilling effect on the publishing industry. But Judge Keenan said, "Although it may be more difficult for publishers and authors to create books with the cooperation of a criminal source {under the "Son of Sam" law}, it is not impossible nor is such cooperation proscribed." The judge added, "The speech itself is not the target of {the state law}; the profit-making aspect is the target." A spokeswoman for Simon & Schuster said the New York company would appeal the ruling. BAKER & McKENZIE Moscow bound. The Chicago law firm, the world's largest, will open the first Soviet-accredited office of a foreign law firm in Moscow later this year. Coudert Brothers, a New York law firm, and Arnold & Porter and Heron, Burchette, Ruckert & Rothwell, both in Washington, D.C., have had lawyers in the Soviet Union under the auspices of companies' trade offices or in unofficial capacities.But 1,400-lawyer Baker & McKenzie will open a full-fledged branch. The firm will have 46 offices in 27 countries.It became the first foreign firm with an Eastern European branch when it opened in Budapest two years ago. Three lawyers, headed by partner Paul J. Melling, will be in Moscow full-time.Ten lawyers from the firm's other offices will work with them.Fifteen joint ventures have already signed on as clients, according to Robert W. Cox, chairman of the firm. ILLINOIS JUDGE joins firm. After nine years in the state judiciary, William R. Quinlan, 49 years old, has joined the Chicago law firm of Phelan, Pope & John as a partner.He will specialize in complex commercial and environmental litigation at the 75-lawyer firm. In a Oct. 23 resignation letter to Illinois Gov. James R. Thompson, Mr. Quinlan said he could no longer sit on the bench and fulfill financial responsibilities to his family.He said that while education costs and living expenses spiralled, judicial salaries in Illinois haven't increased for four years.Mr. Quinlan was appointed to the Illinois Appellate Court in 1985.He served as a Circuit Court judge in Cook County, Ill., and corporation counsel for the city of Chicago. "The judiciary is called upon to decide the most important issues facing our society.But we're not spending the money to staff it with the best people we can get or keeping the best people there," says Mr. Quinlan. DISNEY SUES Amvest for copyright infringement. Noting that the Happy Hampster isn't one of its creations, Walt Disney Co. filed a $17 million suit in federal court against Amvest Video Corp., of Rahway, N.J. Disney alleges Amvest violated its copyrights at least 170 times in at least 23 video cassettes, some of them full-length Disney movies such as Bambi and Fantasia.The suit also alleges Amvest created a character called the Happy Hampster which it is trying to pass off as a Disney character. In addition to the $17 million in damages -- $100,000 for each copyright infringement -- Disney is seeking unspecified punitive damages. A spokeswoman for Amvest had no comment and said the company hadn't yet seen the suit.
PaineWebber Group Inc. ordered a major pullback from program trading amid mounting pressure on Wall Street from some of its biggest investors. Other big brokerage firms also showed signs of retreating from controversial computer-assisted trading, which has become a liability for Wall Street after this month's 190-point, Friday-the-13th plunge in the Dow Jones Industrial Average. Yesterday, Goldman, Sachs & Co. said it will campaign for significant curbs on the most common form of program trading -- stock-index arbitrage.Also, other firms including American Express Co. 's Shearson Lehman Hutton Inc. unit and Oppenheimer & Co. -- are debating whether to follow PaineWebber's lead and pull back from program trading. And Sears, Roebuck & Co. 's Dean Witter Reynolds Inc. unit, which used to be the 10th-biggest program trader on the New York Stock Exchange, said it is sending a program-bashing letter to more than two million clients over the next month, among other actions that may include a nationwide advertising campaign. "Program trading is simply an idea whose time has passed," said Dean Witter Chairman Philip J. Purcell. Program trading, which last month accounted for a record 13.8% of New York Stock Exchange volume, refers to a variety of computer-assisted trading of large amounts of stocks, stock-index futures and options.Much of the trading is geared to short-term gains caused by brief price swings in volatile markets. Wall Street pulled back briefly from program trading after the October 1987 stock crash.But then it charged back in, emboldened by post-crash studies that exonerated program trading from causing the crash (though not from causing big price swings).And now it's reeling from a renewed outcry -- this time not only from small individual investors, but from major institutions that control big trading commissions. The criticism came to a head Tuesday when Kemper Corp., a big insurance and financial-services firm, cut off four Wall Street firms that engage in program trading -- Oppenheimer, General Electric Co. 's Kidder, Peabody & Co., Morgan Stanley & Co. and Bear, Stearns & Co. -- from getting any more of Kemper's stock-trading business. Other big investors are following Kemper's lead.Yesterday, another institutional investor -- Keystone Group Inc., a Boston mutual-fund company -- said it will boycott firms that engage in index arbitrage.The firm manages $2.5 billion in stock mutual funds. "These firms, by using proprietary index-arbitrage trading techniques, have been competing with their own customers," said Albert H. Elfner III, president of Keystone. "Their actions can hurt long-term, fundamentally oriented investors, and have undermined public trust in the fairness of the markets." Another institutional investor, Penn Mutual Life Insurance Co., said it might join Kemper in avoiding program-trading brokerage firms.Such companies as Keystone, Kemper and Penn Mutual are dependent on business from small investors, who have been peppering them with complaints about program trading and have retreated from the financial markets since the 1987 crash. "We haven't decided to blacklist any firms.But there's a chance we might," said David Wilson, head of Penn Mutual's $100 million stock portfolio. "We are very upset about what has happened to the stock market.Program trading is almost like sitting on a calm beach and have a tidal wave hit you." Penn Mutual owns the regional brokerage firm Janney Montgomery Scott Inc. in Philadelphia.Yesterday, several officials from Janney visited the New York Stock Exchange to lobby against program trading.The firm's executive committee is considering drafting an anti-program-trading letter to its clients and to Congress. Donald B. Marron, PaineWebber chairman and chief executive officer, said the firm decided after the close of trading yesterday that it would stop doing index arbitrage for clients.It already had ceased that form of trading for its own account. "It seems clear to us that index arbitrage is a big contributor to {the market's} volatility and it's reducing confidence in the market for institutional and retail clients," Mr. Marron said.He said index arbitrage is "clearly, purely a speculative, hedging arbitrage strategy" that is "contributing to excess volatility." PaineWebber, the fifth-biggest program trader on the Big Board so far this year, will continue to engage in other forms of program trading besides index arbitrage, and indeed is Wall Street's foremost practitioner of non-arbitrage forms of program trading in terms of volume.But Mr. Marron said these other forms of program trading, such as using computers to buy or sell a range of stocks but not stock futures, help bring "liquidity" to the market. Goldman, which doesn't do index arbitrage for itself but does for customers, is concerned about the fallout. "Our corporate, institutional and individual clients are concerned about what they perceive to be excessive volatility," said Robert E. Mnuchin, senior partner in charge of Goldman's equity trading. "We share their concern.Consequently, we will recommend {to regulators} significant curbs on electronic access for waves of stocks which add volatility to the markets." He declined to comment further. Shearson, the 11th-biggest program trader, also doesn't do index arbitrage for itself.Yet some officials at a regular management meeting Wednesday night urged the firm's leaders to pull out of the practice completely, to appease small investors. "The question was: Do we get mileage out of not doing it for clients?" said a Shearson official.But so far, "the answer is no." Oppenheimer, a relatively minor program trader, is also reviewing its index-arbitrage operation.Not only was it stung by Kemper's boycott, but it suffered an approximate $2.5 million index-trading loss during the Friday-the-13th plunge.An Oppenheimer spokesman said index chief David Liptak had left the firm and wouldn't be replaced.For the time being, James Wiess, an associate of Mr. Liptak's, "is now our index arbitrager," said the spokesman. The program-trading debate has caused splits even within some Wall Street brokerage firms. At Kidder Peabody, for example, the firm's leaders staunchly defend its aggressive use of index arbitrage for both Kidder's own account and for customers.Kidder is the most active index arbitrager on the Big Board so far this year, trading about two million shares a day in the strategy. However, Kidder's 1,400 brokers aren't so sure about index arbitrage.Said Charles V. Sheehan, Kidder's managing director in charge of retail business: "To try to talk to {stockbrokers} about the virtues of program trading is like trying to talk about the virtues of nuclear power to the Audubon Society." He conceded "there is a little bit of a conflict there" between Kidder's active program trading and its wooing of individual investors. There's a similar split at Merrill Lynch & Co., the Big Board's 3rd-biggest program-trading firm.Although a Merrill spokesman stressed the firm does program trading only for clients -- "These are our clients and we have a responsibility to them" -- the argument doesn't go over on the firm's front lines.Program trading is "scaring small investors away," said Michael Keyes, a Merrill broker in Ogden, Utah. The New York Stock Exchange insists it remains sympathetic to the individual investor.Richard Grasso, Big Board president, said "it's too early to reflect on the comments" made this week by Kemper and the other program-bashing firms.But, "we value our relationships with those who use the marketplace and are certainly sensitive to their needs and desires." When Kemper cut off four program-trading Wall Street firms from getting any of the big insurance and financial company's trading business, it complained that the Big Board has "vested interests" in its big member securities firms that engage in program trading. Christopher J. Chipello in Boston contributed to this article. Average monthly program trading volume for 1989 through September, in millions of shares Source: New York Stock Exchange
London share prices closed sharply lower Thursday after the market's confidence in U.K. corporate profits was shaken severely by bellwether Imperial Chemical Industries PLC's disappointing earnings in the third quarter. Stocks rose in Tokyo for the first time since Monday, and ended mixed in Frankfurt. In London, ICI, which is part of the Financial Times 100-share index, said its pretax profit for the quarter dropped 12%, significantly worse than market expectations.Its profit for the first nine months of the year rose only 9%, also short of market expectations. As ICI's share price fell, the 100-share index followed.The index closed at its intraday low of 2129.4, down 32.5 points. "ICI is a bellwether of U.K. corporate profitability," a senior dealer with Warburg Securities said. "Its results were disappointing.The market followed." The 30-share index fell 31.4 points to close at 1720.5.Volume was 443.6 million shares traded, better than 374.6 million Wednesday, but still a relatively thin session. ICI finished 73 pence a share lower at #10.97 ($17.70) on turnover of 3.4 million shares. Analysts had anticipated soft earnings in petrochemicals and plastics, but said they were surprised by trading losses in ICI's specialty paints and films operations. Dealers and analysts also said that ICI's troubles in specialty paints helped underscore growing worries over the U.S. economy.ICI's paint operations are heavily involved in the U.S. Those concerns were fortified by Wall Street's continued slide, with the Dow Jones Industrial Average down 35.25 points at 2618.03 when London closed. In other shares, U.K. textile group Tootal rose 7 to 120 pence on conditional clearance from regulators for Coats Viyella's bid for Tootal, so long as Coats spins off its U.K. sewing thread business.Coats slid 5 to 142. Tokyo stocks rebounded sharply from two consecutive daily losses, helped by index-related buying by investment funds in the afternoon session. The Nikkei index closed up 236.09 points at 35678.49.The Tokyo stock price index of first section issues was up 25.01 at 2697.58.First section volume was estimated at 850 million shares, down from 1.1 billion Wednesday. In early trading in Tokyo Friday, the Nikkei index rose 36.36 points to 35714.85. On Thursday, the market opened in a bullish mood with participation from institutional investors, who had refrained from active trading in the past couple of months. Market observers attributed improved sentiment to the recent stability of the dollar, which offset expectations that the U.S. currency might surge above the 145-150 yen level. The Nikkei continued to gain during the afternoon session, briefly reaching above its recent record level. Trading focused on large-capitalization issues that are related to domestic demand and made a sharp contrast to export-related shares.Export shares were spurned because of continuing uncertainty on Wall Street, said Shin Tokoi, deputy general manager of Japanese equities at County Natwest Securities, Japan. Outstanding winners Thursday were non-life insurance and securities companies. Yasuda Fire & Marine advanced 90 yen to 1,680 yen ($11.90).Taisho Marine & Fire was up 80 at 1,620, and Tokio Marine & Fire advanced 40 to 2,230. Securities companies also made across-the-board gains as recent increases in stock trading volume are expected to boost their commission income, traders said. Yamaichi Securities gained 120 to 1,940, Nomura Securities surged 260 to 3,450, and Nikko Securities gained 110 to 1,940. Steel shares also ended higher.Sumitomo Metal was up 22 to 703, and Nippon Steel advanced 24 to 735. Frankfurt prices ended mixed in thin trading after an early rally led by Deutsche Bank fizzled during the session.The DAX index, which reached a peak around 1500 early in the day, closed at 1482.62, up only 1.54 points from Wednesday. Deutsche Bank surged at the opening on news that the bank has 10% holdings in several large companies, including insurer Allianz and reinsurer Munich Re.Because the shares are kept at the historically lowest value on the books, they constitute huge hidden reserves, traders said. The disclosure late Wednesday came as Deutsche Bank announced the issue of 1.2 million new shares for placement in the Tokyo market. Deutsche Bank jumped 28.5 marks early in the session, pulling the broader market along, traders said. But profit-taking soon wiped out these gains, traders said.While Deutsche Bank was still 12 marks higher at 657 ($358) at the close, most other blue-chip shares had small losses. Traders said the late decline points to a deep sense of unease in the market. Many investment funds have already closed their books for the year, a dealer said. "People have made excellent profits in the first 10 months, and they don't want to risk that any more.The mood is very cautious, so I don't think we will go firmer any time soon." But other traders said there are good buying opportunities at the lower levels because the market should soon pull out of its slump.They pointed to last year's example, when the stock market staged a major rally just before the Christmas holidays. Among other banks, Dresdner Bank gained 1.5 to 321.5 after receiving official authorization to acquire Banque Internationale de Placement in France, but Commerzbank slipped 0.5 to 246. Elsewhere, share prices closed higher in Zurich, lower in Paris, Brussels, Milan and Amsterdam, and mixed in Stockholm. Stocks closed higher in Sydney, Taipei, Wellington and Seoul, lower in Hong Kong and Singapore and mixed in Manila. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
After more than a year of losing accounts and watching its reputation slide, Ogilvy & Mather's New York office hired away a top creative executive from flashy Chiat/Day/Mojo as its creative head. Ogilvy, a unit of London-based WPP Group, named Bill Hamilton, 47, to the top creative post in New York.Mr. Hamilton had been an executive vice president and creative head of Chiat/Day's New York office, known for its funky work for Arrow shirts, Nynex yellow pages and Anne Klein II.At Ogilvy, he succeeds Norman Berry, who left the agency in June but now plans to return to the parent company, WPP. Chiat/Day said Lee Clow, the agency's president and chief creative director, will fill in as acting New York creative director until the naming of Mr. Hamilton's successor -- or possibly successors -- within the next few weeks. Mr. Hamilton faces a daunting task in reviving Ogilvy's stagnant New York office.Just a few months ago, Maxwell House yanked its $50 million account from the office, following the loss last year of the $40 million Hallmark account.The office has won just a single piece of new business -- and a tiny one, at that -- this year, and new business wins weren't substantial last year, either. The office is suffering from "a dead battery," as Alan Gottesman, an analyst with PaineWebber, puts it.And while it can be turned around, he says, "It ain't easy, and it's been parked underneath a snowdrift for a very long time." The New York office is just one of many Ogilvy outposts, plenty of which are performing well.But it is the largest and most visible.With about $800 million in billings, it's bigger than most entire agencies.And while it has won praise for some of its creative work, especially for American Express, it hasn't been able to attract substantial new business.Ogilvy last spring hired Michael Lesser, 47, from Lowe Marschalk to head up the New York operations, but Mr. Lesser hasn't had a strong creative leader to work with him. Industry executives generally lauded the move to bring in Mr. Hamilton, saying the office needs a kick from the outside.But they questioned whether there might be a culture clash between buttoned-up Ogilvy and Mr. Hamilton, an 11-year veteran of Chiat/Day's freewheeling, no-walls-no-doors culture.Mr. Hamilton, after all, presided over -- among other things -- the weird U.B.U. Reebok campaign while at Chiat/Day.Ogilvy creates more-mainstream ads for clients including American Express, Seagram and Mattel. But in an interview, Mr. Hamilton said a culture clash "is part of the agenda.I think they want some infusion of a different attitude about how you go about communicating the advantages of a certain client." He added, "A certain amount of chaos is very good in agencies." And he said he hopes within three months to be "playing football in the halls at 5:30 in the afternoon." Mr. Hamilton talked broadly of some of the changes he'd like to make at Ogilvy.Chiat/Day is one of the few American agencies to successfully use British account planning -- a method Ogilvy attempted briefly and largely unsuccessfully, and which Mr. Hamilton hopes to ultimately bring with him.In account planning, an executive with a research background represents the consumer, working closely with creative and account executives.Mr. Hamilton also said he might also bring over some Chiat/Day veterans, though from non-New York offices. Mr. Hamilton accepted the job after repeated discussions not just with Mr. Lesser, but with WPP Group's chief executive officer, Martin Sorrell, who has taken a hands-on approach with his acquisition. "I probably wouldn't have accepted the job had it not been the combination of Mike {Lesser} and Martin," he said. "I've always been intrigued by those things people say can't be done.Most of the wags and the pundits of the world will say it's pretty tough stuff to turn around an agency that's been going in one direction for a long time," he said. "But I don't think it {the issue} is turning it around -- I think it's getting back to where it was 10 or 15 years ago.There are pockets of brilliance there now." Kraft Taps Margeotes Kraft General Foods Group has asked Margeotes Fertitta & Weiss, a small New York agency, to try its hand at some creative work on a new product. A Kraft General Foods spokesman said Margeotes has been given an assignment to do "some development work on a venture project." Executives close to the Glenview, Ill.-based food giant said the work is for a new coffee beverage product currently in development. Margeotes, whose clients include Godiva and Maccabee beer, has had a string of new business wins.It recently picked up the ad accounts for Haagen-Dazs, Newsday and for a number of jewelry lines from Crystal Brands. Separately, the Kraft General Foods spokesman said it selected D'Arcy Masius Benton & Bowles, New York, to handle its Sealtest Free non-fat ice cream account.Executives estimated that account is worth about $6 million.The account had been handled by McCann-Erickson. Ad Notes. . . . LINTAS LAYOFFS: About 20 people were laid off at Lintas's Ceco Communications subsidiary in Warren, Mich., on Tuesday.Dick O'Connor, chairman and chief executive of Lintas:Campbell-Ewald, said the office isn't growing as expected.
Heating oil futures prices fell sharply after some market players moved to reduce their exposure to the vagaries of weather. Balmy autumn days might be blissful for the average Joe, but not for the speculators on the New York Mercantile Exchange who bought heating oil aggressively in September and October, betting on an early, harsh winter. As October draws to a close, weather is still generally warm in Europe and in the U.S., especially the Northeast where much heating oil is consumed.In New York Mercantile Exchange trading yesterday, many who had been counting on dips in the mercury started liquidating heating oil. The selling pushed November heating oil futures contracts 1.2 cents a gallon lower to 57.24 cents, one of the most sizable moves in either direction during the past several trading sessions.Petroleum futures prices had been caught in a tug-of-war, pulled in one direction by continuing strong demand and in the opposite direction by continuing high output from the Organization of Petroleum Exporting Countries. But yesterday's drop in heating oil pushed crude significantly lower, as well.West Texas Intermediate, the U.S. benchmark crude, fell 24 cents a barrel to close at $19.38 a barrel for December delivery.Some traders have said December WTI could well continue downward to as low as $18.50 a barrel. Even reports of a Persian Gulf incident between former war foes Iran and Iraq failed to shake crude's doldrums.Shipping industry sources said two Iranian gunboats attacked an Iraqi tugboat near an Iraq offshore oil terminal in the northern part of the gulf.Details remained sketchy, the sources said, but Iraq reportedly didn't consider the attack to be a hostile act. Neither did the petroleum markets seem to pay much attention to reports that Alaskan officials had refused to let a Unocal oil tanker dock at a refinery because it didn't have an oil-spill contingency plan approved by the state.One broker said the markets might have been more bullish had a tanker been refused access to Valdez, the terminal port for the Alaskan pipeline and site last spring of the biggest oil spill in U.S. waters. Only gasoline managed to escape the slide that dominated other petroleum futures trading.Unleaded gasoline for November delivery ended yesterday's session .23 cent a gallon higher at 53.63 cents. In other commodity markets yesterday: GRAINS AND SOYBEANS: The prices of wheat futures contracts dipped amid reports of beneficial rain in the winter wheat growing regions of Argentina and forecasts for widespread rain this weekend in the U.S. in winter wheat states such as Kansas and Oklahoma, said Victor Lespinasse, a floor broker for Dean Witter Reynolds, Chicago.In the U.S., winter wheat is planted in the fall and harvested in the early summer.The prices of corn futures contracts rose slightly. PRECIOUS METALS: Futures prices jumped to life, bestirred by a highly volatile stock market and the resignation of a key figure in the Conservative government of British Prime Minister Margaret Thatcher.December gold climbed above the critical $375-an-ounce level to settle at $375.40, up $3.10.December silver added 7.7 cents to close at $5.237 an ounce.January platinum tacked on $3.60 an ounce to settle at $490.Market analysts said that continued declines and volatility in the stock market contributed generally to enhanced investor interest in precious metals, but that the British political news was the main factor boosting prices: Chancellor of the Exchequer Nigel Lawson resigned.Sir Alan Walters, Mrs. Thatcher's economic adviser, also announced that he will resign.With the metals markets closed in London when the news was announced, a lot of U.K. buying came to the U.S., said Peter Cardillo, commodities trading adviser for Josephthal & Co. in New York.Mr. Cardillo noted that the drop in the British pound following Mr. Lawson's resignation fueled the metals' rally as investors sought a safe haven.He said he believes the rally in the metals is going to be very short-lived.William O'Neill, research director of Elders Futures Inc., said that if December gold can close above $375 for two consecutive days, he would regard that as a bullish sign.However, he expected any strong rallies to be met by producer selling. "Both the Soviet Union and South Africa must sell these rallies," he said.The two countries are major producers of precious metals.But he also noted that if uncertainty continues in the stock market, that might create some investor interest in precious metals.That interest has been lacking for a long time, he said. COPPER: Futures prices fell.The December contract dropped 1.35 cents to settle at $1.142 a pound.Mr. O'Neill said copper's price action this week indicates general weakness. "It easily violated major support at $1.19 and then {yesterday} closed under secondary support at $1.15," he said.He believes the next area of technical support is at the $1.10 level.Mr. O'Neill said the market was hit on Wednesday with the news that the atmosphere surrounding the negotiations on the strike at Bougainville, Papua New Guinea, may have improved.But he said he doubts that a settlement is anywhere in sight.He also believes that the market may have already discounted any good news that might be associated with this strike.Mr. Cardillo said that copper is reflecting a weakening U.S. economy and that he would be neither a buyer nor a seller at these levels. COCOA: Futures prices dropped again, extending the declining trend.The December contract settled at $961 a metric ton, off $38.The contract's low point yesterday, $956, was both a life-of-contract low and a 14-year low price for cocoa.The decline was apparently sparked by rumors that the Ivory Coast, a major African producer, sold 20,000 tons in London on Wednesday.Mr. O'Neill said the market is so fragile and weak that it can't absorb any selling.Bert Ruiz, soft commodity specialist at Balfour, Maclaine Futures Inc., said that all week he has seen increasing open interest and declining prices -- an almost certain sign that additional selling of contracts is taking place.Open interest is the number of outstanding contracts that remain to be settled either by an opposite trade or delivery. "I think trade interests are hedging their physical cocoa with new sales," he said.He also pointed out that the volume on Wednesday was 8,839 contracts, which for cocoa is extremely heavy.Mr. Ruiz said that the producers of cocoa have no choice but to sell their stocks because of their need for hard currencies.He believes that the major cocoa buyers are well aware of the sad state of the market and are taking advantage of the weakening prices by doing "scale-down buying." That is, they mostly buy just enough cocoa to satisfy their current needs -- a common strategy in a falling market.
Chemical Waste Management has turned into one of the market's best-performing stocks by advancing 76% in the past year.Its reward: a swarm of short sellers. Short sellers are backwards investors: They borrow stock and sell it, hoping the price will go down.Eventually the shorts must "cover" by purchasing shares to replace the borrowed ones.But if a stock declines enough in the meantime, they profit. What with all the garbage-disposal problems clogging the headlines, it's easy to see why the shares of the nation's largest hazardous-waste concern have zoomed ahead to yesterday's close of a post-split 22 1/8.But the stock now trades at a dizzying 32 times the latest 12-month earnings for the company, more than double the multiple of the market as a whole. That handsome multiple, a badge of success, is also a red flag for the shorts, who like to bet that a stock can't stay hot forever.Between Sept. 15 and Oct. 13, the New York Stock Exchange says, the total number of Chemical Waste Management shares sold short leaped to 5.3 million from 1.9 million -- the largest increase for any stock on the Big Board. The company says it hasn't any idea who is doing the shorting or why.A spokesman said he can't comment further because a stock offering is in progress.The offering will increase the public's stake to 23% and decrease that of the parent company, Waste Management, to 77% from 81%. Money managers and analysts generally agree that the stock has had a huge run and is now expensive.Some go further and say that owning it could be . . . well, hazardous. "We love the company, we expect to be owners again, but we think for the moment it's at least adequately priced," says Gerald Levine, a partner at Weiss, Peck & Greer.The firm sold much of its Chemical Waste holding earlier this year, government filings show. Mr. Levine says he can understand short sellers' motivation. "When they see a stock extend on the end of a long up move, that is often a sign the stock is going to roll over," he says. Alliance Capital Management, a unit of Equitable Life Assurance Society, has sold at least 927,000 shares this year.It won't comment on the sales. Kenneth Hackel, a money manager who runs Cash Flow Investors in Fort Lee, N.J., says Chemical Waste is "not my cup of tea." It sells for 38 times operating cash flow, he says, while the typical industrial company sells for only 7.7 times that yardstick. Pricey though it may be, Chemical Waste still is a risky short-sale candidate.It has a superb record of earnings growth and a strong balance sheet.Citing those attributes, several well-known short sellers say they aren't the ones doing the shorting. Shorting because of a high stock price alone is "a recipe for death," said Julian Robertson of Tiger Management in New York. Chemical Waste Management is "not our kind of short," said Joe Feshbach, one of the three brothers who run Feshbach Brothers, generally considered the nation's largest short-selling firm.The company, he said, is too well-capitalized to "go away." But Mr. Feshbach thinks other hazardous-waste companies' stocks "could be a fruitful area {for shorting} because a number of companies have reported disappointing earnings" recently.He said his firm has shorted the shares of one small company, which he wouldn't name. Analysts say hazardous-waste companies that have posted disappointing earnings include Canonie Environmental Services, Environmental Systems, Groundwater Technology, Gundle Environmental Systems and Rollins Environmental Services. But Chemical Waste's earnings for the third quarter were "sparkling," says Kay Hahn, an analyst with Chicago Corp.She recommends the stock, and says short sellers are "taking their life in their hands." Also bullish is Remy Fisher, a vice president with J.W. Seligman & Co., a New York money-management firm that has been increasing its Chemical Waste shareholdings. "It doesn't seem like anything could tarnish {Chemical Waste's} growth prospects," she says.She points out that Chemical Waste has about 40% of the hazardous-waste industry's revenue, and that it's hard for new firms to enter the field because of government regulations and neighborhood opposition to hazardous-waste treatment plants. Nevertheless, some analysts expect Chemical Waste's torrid growth to slow a bit.Earnings for 1989 will be up about 30%, says Deborah Thielsch of First Boston, compared with 34% growth in 1988.For 1990, she expects a 25% gain.That's still enviable growth, but Ms. Thielsch is neutral on the stock, citing its "incredibly high" price-earnings ratio. Chemical Waste Management (NYSE; Symbol: CHW) Business: Hazardous waste management Year ended Dec. 31, 1988: Revenue: $700.2 million Net income: $116.9 million; or 58 cents a share Third quarter, Sept. 30, 1989: Per-share earnings: 20 cents vs. 17 cents Average daily trading volume: 287,209 shares Common shares outstanding: 200.6 million Note: Figures adjusted to reflect 2-for-1 stock split paid in October 1989.
GORBACHEV ANNOUNCED unilateral cuts of nuclear arms in the Baltic region. The Kremlin leader unveiled a plan to reduce nuclear weapons in the Baltic Sea, including the scrapping of Moscow's nuclear-armed submarines by 1991.Gorbachev, on an official visit to Finland, also said the Soviet Union has removed all tactical nuclear missiles that could strike northern Europe.In Moscow, leading progressives have drafted a blueprint designed to push the nation closer to a free-market system.The plan includes liberalizing the system of prices, breaking up industrial monopolies and putting unprofitable state-owned companies out of business. The U.S. signaled the Soviet Union that it is willing to discuss an offer by Foreign Minister Shevardnadze to curtail military bases in Europe. LAWSON RESIGNED as Britain's finance minister amid a policy dispute. In a letter to Prime Minister Thatcher, the chancellor of the exchequer said he was leaving his cabinet post because "the successful conduct of economic policy" wasn't possible so long as Sir Alan Walters remained as her economic adviser.Sir Alan, however, also quit.Thatcher named Foreign Secretary Major to succeed Lawson, and Home Secretary Hurd was appointed foreign minister. Sir Geoffrey Howe, deputy prime minister, said in the House of Commons that London's economic and monetary policies would remain "unchanged." An East German Politburo member met with opposition leaders in East Berlin for what were considered the first substantive talks on demands for Western freedoms.Communist authorities urged pro-democracy activists to halt protests for internal changes, but about 100,000 people in Dresden ignored the appeal and staged a rally. South Africa has test-fired an intermediate-range ballistic missile that could carry nuclear warheads and was built with help from Israel, a U.S. official said.The aide said Israel and South Africa also are cooperating on the development of a long-range missile.Premier Shamir denied that Israel provided any technology to Pretoria. The White House has reached an accord with the Senate Intelligence Committee on new rules for covert operations to give Bush a freer hand to involve the U.S. in foreign coup plots.The panel agreed to rescind Reagan-era curbs and give U.S. agents wide latitude to join coup planning, officials said. Bush extended most-favored-nation trade privileges to Hungary, saying it had honored its pledge of political and economic restructuring.The president's move, which came three days after Budapest declared itself a democracy, made Hungary the first country to be freed from a 1974 law denying U.S. trade credits to most communist nations. House-Senate negotiators cleared a $3.18 billion anti-drug and anti-crime initiative, trimming domestic and defense spending to pay for it.The package would put more emphasis on treatment, education and prevention programs favored by Democrats than Bush's smaller plan. San Francisco Bay area officials urged residents of tent cities in the agricultural community of Watsonville to move to shelters, expressing concern over health and safety dangers from unrefrigerated food and open cooking fires.Tolls on bridges went back into effect, and traffic officers resumed issuing tickets in the region. The U.N. announced that its high commissioner for refugees, Jean-Pierre Hocke, resigned amid allegations of financial impropriety, mismanagement and favoritism to Western donor nations.The 51-year-old Swiss's resignation is effective Wednesday. A China Airlines jetliner crashed into a mountainside in eastern Taiwan and all 54 people aboard, including at least one American, were believed killed.The incident occurred shortly after the Taiwanese plane took off from Hualien, enroute to Taipei. Former HUD chief Pierce informed a House subcommittee that he will again refuse to answer its questions about mismanagement and political favoritism at the department he led for eight years under Reagan.He refused to testify last month, invoking his right against self-incrimination. Bush is scheduled to travel to Costa Rica today to participate in the Central American nation's celebration of 100 years of democracy.The president has ruled out any talks with Nicaragua's Ortega during the two-day gathering, where leaders of 18 nations are expected to discuss regional issues. Christian and Moslem forces traded artillery fire across Beirut's sectarian dividing line, the first major breach of an Arab-sponsored cease-fire that began about a month ago.An Arab League envoy, meanwhile, traveled to Beirut from Damascus to help arrange a meeting of Lebanon's lawmakers to choose a new head of state. Pakistan's opposition introduced a noconfidence motion in Islamabad's Parliament.Prime Minister Bhutto predicted that the move to oust her would be defeated.The U.S., meanwhile, has told the opposition parties that any change in government must be accomplished without compromising the country's fledgling democracy. A Chinese government spokesman said martial law, entering its sixth month in Beijing, will be lifted soon.The spokesman, quoted in the People's Daily newspaper, didn't offer a timetable.Premier Li Peng declared martial law May 20 amid studentled pro-democracy protests. National Football League owners elected lawyer Paul Tagliabue as commissioner, succeeding Pete Rozelle, who announced his retirement in March after 30 years in the post.The 48-year-old Tagliabue, an NFL counsel, is to serve a five-year term.
Avon Products Inc. posted a third-quarter profit of $34.6 million, reversing a year-earlier loss. The cosmetics, jewelry and gift products concern had per-share earnings of 46 cents in the latest quarter.A year earlier, it reported a loss of $405.9 million, or $7.78 a share, due to a one-time $425 million charge for discontinued operations. Sales rose 8% to $785.1 million from $725.6 million. Avon said sales in the direct-selling division dropped 2% as sales of new products, especially gift and jewelry lines, were below expectations.The weak sales are expected to continue into the fourth quarter, Avon added. "Third-quarter net was on target with expectations," said Andrew Shore, an analyst at Shearson Lehman Hutton Inc.But the third quarter isn't the problem, Mr. Shore added. "It's the fourth quarter and what might linger beyond that." Last month, Avon executives indicated that the company would experience a $75 million to $90 million revenue shortage due to weakness in its gift and decorative lines. In New York Stock Exchange composite trading yesterday, Avon closed at $26.875, down 87.5 cents. The company's retail prestige fragrance division, which includes Giorgio Beverly Hills and Parfums Stern, posted 35% higher sales.Earlier this month, Avon said it agreed to sell its Valentino fragrance business and the inventory of its Parfums Stern unit to Italy's Valentino Group for about $12.3 million in cash and notes. In the nine months, Avon earned $80.3 million, or 97 cents a share, compared with a net loss of $461.1 million, or $7.20 a share.Revenue rose 11% to $2.27 billion from $2.05 billion.
THE U.S. ECONOMY GREW at a moderate 2.5% annual rate in the third quarter despite the worst trade performance in six years.The expansion, matching the second quarter's pace, was fueled by strong consumer spending, especially for autos.But analysts expect GNP growth to slow in the current quarter.An inflation gauge slowed to a 2.9% growth rate from 5% the previous quarter. The Big Three car makers all posted quarterly losses in core North American auto operations for the first time since 1982.Expectations of slow sales and price wars are dimming the outlook for the current quarter. GM is seeking to buy up to 15% of Jaguar, marking its first salvo in a looming battle with Ford for control of the British luxury car maker. Stock prices tumbled amid growing concern about corporate earnings.The Dow Jones industrials closed off 39.55 points, at 2613.73.Most bonds eased, but long-term Treasury issues edged up.The dollar also gained, especially against the British pound. PaineWebber Group ordered a major pullback from program trading amid mounting debate about the practice at Wall Street firms. AT&T was allowed by the FCC to continue offering discount phone services to big-business clients.The agency also plans to review its regulation of the long-distance market. A capital-gains tax cut has stalled in the Senate.Democratic leaders have bottled up the plan and may be able to prevent a vote indefinitely. Treasury Secretary Brady said the SEC should be given the authority to close the stock markets in a crisis.Earlier, SEC Chairman Breeden said he doesn't want such power because it could end up disrupting the markets. Regional thrift regulators claimed that phone calls were bugged during the examination of Lincoln S&L and that federal officials delayed Lincoln's seizure until it had become the costliest thrift failure ever. Federal Express pilots voted against joining a union, a major victory for Chairman Frederick Smith. Intel's most powerful chip has flaws that could delay several computer makers' marketing efforts.But the bugs aren't expected to hurt Intel and most computer manufacturers. Bethlehem Steel agreed to form a joint venture with the world's second-biggest steelmaker, Usinor-Sacilor of France, to modernize part of Bethlehem's ailing BethForge division. The Treasury will hold an unscheduled auction of securities next week to raise $17 billion.The unusual move is intended to buy time for Congress to debate a debt-limit increase. Private-sector union contracts signed in the third quarter granted an average annual wage increase of 3%, slightly below the second-quarter rise but still above year-ago levels. Quantum Chemical suspended its cash dividend in favor of a stock payout.It also posted a quarterly loss. Navigation Mixte rejected as too low a $1.77 billion bid by Paribas, which is seeking to boost its stake in the French conglomerate to 66.7%. France's Banque Indosuez surprised London markets by moving to become the dominant shareholder in merchant bank Morgan Grenfell. Markets -- Stocks: Volume 175,240,000 shares.Dow Jones industrials 2613.73, off 39.55; transportation 1205.19, up 5.87; utilities 215.67, off 0.82. Bonds: Shearson Lehman Hutton Treasury index 3425.60, off Commodities: Dow Jones futures index 129.22, off 0.26; spot index 131.04, up 0.31. Dollar: 142.10 yen, up 0.58; 1.8400 marks, up 0.0047.
Maclean Hunter Ltd. said its board approved a shareholder-rights plan that would prevent a suitor from gaining effective control of the company without shareholder approval. The plan is similar to modified "poison pills" recently adopted by several other Canadian companies.But it leaves open the possibility of an acquisition of Maclean Hunter without approval by its board. Under the plan, holders other than a suitor would be able to buy additional shares at 50% of the market price, if a person or group acquired 10% of Maclean Hunter's Class X voting shares.The plan wouldn't be triggered if the board approved the acquisition or if the suitor made an offer for all shares outstanding and the offer was approved by 50% of holders, other than the bidder, at a special meeting. Ronald Osborne, president and chief executive officer of the publishing, broadcasting and cable-television concern, said the plan is meant to ensure that all shareholders enjoy any takeover premium in the event of an acquisition.He said he didn't know of any planned takeover moves against the company. Mr. Osborne said Maclean Hunter Holdings Ltd., owned by certain directors and subsidiaries of Maclean Hunter, has a voting interest of about 20% in the company; no other holder has as much as 10%. The plan takes effect immediately, pending shareholder confirmation at its annual meeting in April.The company said holders also will be asked to approve the reclassification of Class X and non-voting Class Y shares into a single class of voting common shares on a one-for-one basis.It said the market value of Class Y shares had traded at a "significant discount" to Class X shares. Separately, Maclean Hunter said third-quarter net income fell 12% to 19.2 million Canadian dollars ($16.4 million), or 12 Canadian cents (10.2 U.S. cents) a share, from C$21.9 million, or 14 Canadian cents a share, a year ago.Revenue was up 6.8% to C$336.5 million from $315.2 million.
House and Senate negotiators approved a $3.18 billion anti-drug and anti-crime initiative, cutting domestic and defense spending 0.43% to pay for it. The package would put more emphasis on drug treatment, education and prevention programs favored by Democrats than President Bush's smaller proposal. It is part of a compromise $26 billion fiscal 1990 spending bill for the Transportation Department and highway and airport trust funds that the House is expected to ratify Tuesday. The negotiators made only small changes to the Senate-passed plan, which was the product of more than a week of negotiations between senators and Bush administration officials.When added to previously approved programs, anti-drug spending authority for the current fiscal year would reach $8.8 billion, $900 million more than Mr. Bush requested and $3.1 billion more than in fiscal 1989, which ended Sept. 30. The initiative, which also contains funds for Mr. Bush's anti-crime package, would provide about $1 billion for federal prison construction, another approximately $1 billion for various federal treatment, education and prevention programs, and about $500 million for federal law-enforcement and drug-interdiction agencies. The measure approved yesterday doesn't include increased anti-drug funding that was already incorporated into other spending bills.Of funding for anti-drug programs, nearly $2.1 billion in spending authority would be offset from other federal funds in order to avoid enlarging the budget deficit. More than $1.3 billion of the cuts would come from new defense budget authority, or $797 million in direct spending.Foreign aid accounts would be reduced by $82 million in spending authority, or $42 million in direct spending.Domestic spending authority would be cut by $678 million, or $401 million in outlays, although some accounts will have new anti-drug and anti-crime money added back to them. Budget authority measures the level of money appropriated by Congress to fund federal programs, and outlays represent the direct spending that results as these accounts are drawn down. The specific offsetting spending cuts are to be determined by the 13 House and 13 Senate appropriations subcommittees.In some cases, those decisions have already been made and the results reflected in spending bills approved by the House and Senate. Separately, the Drug Enforcement Administration said it launched a new attack on domestic indoor marijuana cultivation.The DEA said its agents yesterday executed 38 search warrants in coordinated raids in 42 states.The targets were stores selling equipment used for growing marijuana indoors, the agency said. The DEA said late yesterday afternoon that it expected more than 100 people would be arrested in connection with the raids.The agency estimated that marijuana production in the U.S. has more than doubled since 1986 to at least 4,350 tons in 1988.That amount represents about 25% of the marijuana available for use in the country, the DEA said.
A simmering feud between the Thatcher government's two senior economic experts erupted with the abrupt resignation of Chancellor of the Exchequer Nigel Lawson, sending shock waves through an already shaken financial community and prompting an emergency cabinet shuffle. Prime Minister Margaret Thatcher named Foreign Secretary John Major to succeed Mr. Lawson.Sir Geoffrey Howe, deputy prime minister, rushed out a statement in the House of Commons that the government's economic and monetary policies would remain "unchanged." Meanwhile, Sir Alan Walters, Mrs. Thatcher's controversial economic adviser and Mr. Lawson's nemesis, also announced his resignation. The pound, which has already slid about 10% against the West German mark in recent weeks, plunged further on the news.In late New York trading yesterday, sterling was quoted at $1.5765, down sharply from $1.6145 late Wednesday.And brokers were bracing for a grueling Friday in financial markets here. "You're going to get quite a major fall in the equity market and the gilt markets," said Gwyn Hacche, U.K. economist with James Capel & Co. "Markets hate uncertainty." Despite the Howe statement, the Thatcher government's economic policy appeared to be in chaos.One major question is just how the government will handle matters on which Mr. Lawson and Sir Alan differed explosively.The two men clashed bitterly over the importance of exchange rates in setting monetary policy and the wisdom of Britain fully joining the European Monetary System, which links together the major currencies in the European Community. Though jolted by the surrounding confusion, Mrs. Thatcher emerged in undisputed command of her government's economic program.Neil Kinnock, Labor Party leader, dubbed the 46-year-old Mr. Major a "lap dog" unlikely to veer from his boss's strongly held views, as Mr. Lawson sometimes did. From the standpoint of the financial markets, however, the prime minister's positions seem murky -- in large part because she has presided over dueling advisers for the last six months. "I don't know where Thatcher stands," said Paul Horne, an economist with Smith Barney, Harris Upham & Co. in Paris. "She's played such a cat-and-mouse game with her advisers." Although sometimes arcane economic debates undergirded the Lawson-Walters rift, the 57-year-old Mr. Lawson's surprise departure boiled down to a simple stand of he-goes-or-I-go.In his letter to Mrs. Thatcher, Mr. Lawson stated: "The successful conduct of economic policy is possible only if there is, and is seen to be, full agreement between the prime minister and chancellor of the exchequer.Recent events have confirmed that this essential requirement cannot be satisfied so long as Alan Walters remains your personal economic adviser." The upheaval leaves the Thatcher government isolated within the European Community.Six months ago, the British prime minister's two senior cabinet members -- Mr. Lawson, chancellor since 1983, and Sir Geoffrey, then the foreign secretary -- both supported Britain's early entry into the EMS.With Mr. Lawson out of the cabinet, and Sir Geoffrey in the less-influential job of deputy prime minister, there's little to counter Mrs. Thatcher's innate suspicion of the EC's exchange-rate mechanism.Sir Alan, brought back to Downing Street last spring as her adviser, adamantly opposed it. Indeed, the final fracas in the Lawson-Walters battle involved the EMS. Sir Alan, who also works in Washington, D.C., as a consultant to the World Bank and a fellow at the American Enterprise Institute, said in a article to be published in a U.S. economic journal that the EMS was "half-baked." The scoff, coming from the man many consider Mrs. Thatcher's most influential adviser, sparked considerable worry.It not only conflicted with Mr. Lawson's views but ran counter to the position Mrs. Thatcher took at the EC summit in Madrid last June.There, she said that Britain would join the EMS once the EC had completely liberalized restrictions on capital movements and exchange controls, and once Britain's inflation rate had fallen into line with the rest of the EC. Economists expect those conditions to be met in 1990 or 1991. Mr. Lawson stated in a House of Commons debate this week that Sir Alan's views "aren't the view of the government." And in a subsequent television interview, he said, "I think it is right that advisers do not talk or write in public." Worn down by the feud, he then made it clear to Mrs. Thatcher that he expected the controversial adviser to be ousted.In remarks in Commons yesterday afternoon, the prime minister disappointed him.As she has done in the past, she stated her support for Mr. Lawson but insisted on keeping on an adviser who opposed and disparaged his policies. The EMS views of Mr. Major, who served as Mr. Lawson's deputy in 1987, aren't fully known.Speaking in the House of Commons last night, he said of Mr. Lawson, "I was proud to serve in his team and proud that he has been and will remain a good friend." To a great extent, the Downing Street blow-up is the result of Mrs. Thatcher's management approach.Fond of playing her senior advisers off against each other, the prime minister has often allowed rivalries and animosities to bubble up within her cabinet. Financial markets prefer a clear message from the government on its economic priorities and strategies.Since the spring, the Thatcher government has instead broadcast a cacophony.Mr. Lawson carefully watched exchange rates and stood ready to increase U.K. interest rates when the pound slid too sharply against the dollar or the mark.By contrast, Sir Alan was viewed as a "free-floater," or one who was inclined to let the currency markets set the level for the pound. Last summer, when the skirmishing became obvious, Smith Barney's Mr. Horne said that the antipathies were "adding confusion to an already murky situation" in which sterling was becoming an increasingly volatile currency. "I question the strategy of having an alternate economic adviser," he added. Mrs. Thatcher's ties with Sir Alan were cemented during her first term, when the straight-talking economist served for three years as a key adviser.According to a former Downing Street aide, she would then say to him, "You get the economics right, and I'll get the politics right." Craig Forman and Richard E. Rustin contributed to this article.
Some important people plan to gather here soon to say nice things about Brian P. Monieson.The occasion isn't a tribute to the former Chicago Mercantile Exchange chairman, however, but a hearing at which federal commodity regulators hope to ban him from the futures industry. The Commodity Futures Trading Commission alleges that Mr. Monieson was warned that some brokers at his GNP Commodities Inc. were bilking investors and that he failed to stop them promptly.One of the brokers in question was one of Mr. Monieson's best friends. The case has become the most closely watched civil commodity enforcement action in recent memory, with the futures industry's top officials rallying to Mr. Monieson's defense.His scheduled character witnesses at the Nov. 6 hearing include: U.S. Agriculture Secretary Clayton Yeutter, who was Merc president under Mr. Monieson; Leo Melamed, chairman of the Merc's executive committee, and Robert K. Wilmouth, president of the National Futures Association, an industry-funded regulatory group. Mr. Monieson's attorney in the matter is Jerrold E. Salzman, the Merc's influential outside counsel. The GNP brokers allegedly "allocated" trades, meaning they initiated futures trades without the required customer account numbers and then kept the profitable ones for themselves and stuck customers with the losers. Mr. Monieson, a childhood math whiz and self-described computer nerd, denies these charges and expects that he and GNP will be exonerated.Noting that GNP processed some nine million trades last year, he says, "Who the (heck) would know what's going on with 50 trades out of nine million?" If he loses at the hearing, Mr. Monieson can appeal to the full panel of CFTC commissioners and then to the federal courts. Messrs.Melamed, Salzman and Wilmouth came to their friend's aid despite the fact that the Merc and the National Futures Association brought similar failure-to-supervise charges against GNP, though not against Mr. Monieson personally. To some, the case shows the fallacy of self-regulation, a concept the futures industry cherishes.In theory, traders and brokers will police themselves because widespread fraud would discredit the industry and frighten away investors.This "enlightened self-interest" is supposed to overcome the built-in conflicts of interest. "The problem with self-regulation is always that the regulators are tinged with self-interest," says David Ruder, the just-departed chairman of the Securities and Exchange Commission. In this case, Mr. Ruder says, "it would seem they're acting in two capacities -- that people of that stature would testify in a disciplinary case.One would counsel the avoidance of an appearance of a conflict." Mr. Ruder adds of Mr. Yeutter: "It seems odd that people in high government positions would intervene to testify." Mr. Salzman says the Merc gave him permission to represent Mr. Monieson, adding there's no conflict because he has recused himself from the Merc's case. "I've had a long personal relationship with Brian," Mr. Salzman says. "I couldn't say no." Mr. Melamed and Mr. Wilmouth both said they see no conflict because their organizations didn't charge Mr. Monieson personally, and they're only testifying to his character.Mr. Yeutter couldn't be reached for comment. In an interview in his corner office in the Merc tower, Mr. Monieson contends he is a victim of his own celebrity. "The CFTC was looking for something high-profile," he says. The investigation already has been costly to Mr. Monieson.In January 1987, he was two weeks away from the sale of his firm for as much as $40 million.But the deal hit a snag.The Federal Reserve Board, which had to approve GNP's sale to Banque Indosuez, a French bank, learned of the CFTC investigation. A distressed Mr. Monieson called the CFTC, and asked its two top lawyers no fewer than five times to divulge confidential details of its probe into GNP.They refused, even after Mr. Monieson warned that the deal's collapse would become an "international incident" between the U.S. and France, according to a memo one of the lawyers wrote.The Banque Indosuez deal fell through. Mr. Monieson, 53 years old, wears the expensive clothes of a successful trader but his mannerisms are more those of a preoccupied math professor.His office is filled with toy pigs to remind him of the fortune he made trading pork bellies.And behind his desk hangs a more recent sign of success, a futures trader's Picasso: a Leroy Nieman painting, depicting a horse race. Mr. Monieson's defense at the CFTC hearing will partly be that he is a busy man and wasn't personally involved in GNP's retail brokerage business.During his years as Merc chairman, 1983 through 1985, Mr. Monieson played host to prime ministers and crown princes; his attorneys have prepared charts showing the many Merc meetings he attended and the time he spent away on business.The lawyers probably won't mention his interest in horse racing, though Mr. Monieson says it remains a hobby.Mr. Monieson, born on Chicago's North Side, by age five was a faithful reader of the Racing Form, regularly joining his father at the track, he says.Later, he bet the ponies with a high school friend, Myron Rosenthal, who would become his partner in GNP and other ventures. In 1965, he and Mr. Rosenthal set up what would become Indecon Inc., a computer processing firm.An early offshoot was their computerized tip sheet for harness racing -- cranked out using "the same type of equipment used in important space research and big business," Mr. Monieson told subscribers. Programming unexpectedly led him into trading in the early 1970s when a customer, a pork processor, commissioned a computer program on the supply and demand of bacon, but never used the program.Mr. Monieson and Mr. Rosenthal got together $50,000 and started trading pork belly futures at the Merc based on the program's predictions. They formed GNP in 1973 not out of any desire to run a futures clearing firm, Mr. Monieson says, but because they were tired of paying brokerage commissions. A decade later, GNP was trading all over the Merc floor, mostly in financial futures.Yet pork bellies still held a fascination for Mr. Monieson, and his trading in that pit would earn him a dubious distinction: the only Merc chairman to be found guilty of committing trading violations while running the exchange. Mr. Monieson and Mr. Rosenthal were fined, $10,000 and $70,000 respectively, for taking speculative positions beyond the exchange's limits.Mr. Rosenthal's fine was bigger because he allegedly had exceeded position limits before. Mr. Monieson, likening the fine to "a parking ticket," says he did violate the rules but contends the position limits are set too low for today's trading environment. Three associates held pork belly positions nearly identical to those of the GNP owners and appeared to be acting at their direction, according to an internal Merc account of the case.A company controlled by Mr. Monieson and Mr. Rosenthal lent the other traders more than $6.5 million to help finance the trades. One of the associates was Norman Furlett, a GNP salesman and one of Mr. Monieson's closest friends.Mr. Furlett's job was to call up investors and get them to trade futures.GNP got a commission. Ira P. Greenspon was in the same line of work, and in October 1985 joined GNP.What GNP didn't know was that Mr. Greenspon already was under investigation by the CFTC for alleged trade allocating at his previous firm.The CFTC later concluded that Mr. Furlett had been allocating trades as well. According to separate Merc charges against the two men and GNP, which haven't been made public, during the first two months of 1986, accounts they maintained, including one named Horse Trading, had profits of $62,372.95.Four customer accounts the Merc reviewed had combined losses of $20.988.12 for those months.Robert L. Sutermeister, a retired trucking company owner in Dayton, Ohio, says he lost nearly all of the $10,000 he sent the brokers.Larry Margler, a McKinleyville, Ca., engineer, says he lost about $3,000 of the $5,000 he turned over to Mr. Furlett. Between June 1985 and May 1986, the CFTC alleges, Mr. Monieson was warned by at least five GNP employees that Mr. Furlett and Mr. Greenspon were defrauding customers.After the Banque Indosuez deal collapsed in January 1987, the two salesmen left GNP.Their attorney, James Koch, says they deny any wrongdoing and that both men have agreed to leave the futures industry.
Two New England banks reported substantial third-quarter net losses, reflecting the continuing woes of the region's developers and lenders. One Bancorp, Portland, Maine, buffeted by loan write-downs and expanded loss reserves, reported a net loss of $48.5 million, or $5.92 a share.In the year-earlier period, the bank holding company reported net income of $523,000, or six cents a share. Holyoke, Mass.-based Heritage Bancorp, also hurt by the depressed New England real estate market, reported a net loss of $8.9 million, or $1.22 a share, compared with net income of $3 million, or 40 cents a share. One Bancorp, which had warned that it planned to take a $49.8 million loan-loss provision in the third quarter, said it expects things to get worse, but more slowly, in the future. "Barring marked and unanticipated declines in real estate values, we expect our growth rates of nonperforming loans to slow," Vincent E. Furey Jr., president and chief executive officer, said. After taking write-downs of about $75 million in the last 12 months, he said the company is in position, "to address accelerated disposal of problem assets." One Bancorp's primary capital-to-asset ratio is 6.6% after third-quarter charges.Under federal regulations, a 6% ratio is the standard.However, the company said it isn't in compliance with certain standards it agreed to last fall in connection with two Massachusetts acquisitions. Mr. Furey said the company is working to restore its capital ratio to regulatory compliance and expects to reach an agreement with regulators during the fourth quarter.He said he expects a formal written agreement documenting One Bancorp's plan to reduce problem assets and return to compliance. The third-quarter loss reflected a $49.8 million provision for loan losses and write-downs of $8.5 million on foreclosed real estate.One Bancorp said its loan-loss reserve of $59.4 million at Sept. 30 was 2.9% of loans outstanding and 35% of $170 million in nonperforming loans.At June 30, reserves of $52.2 million were 2.4% of loans outstanding and 35% of $150 million in nonperforming loans. Loan and real-estate write-downs have reduced $195 million in nonperforming assets by 28% from their original loan value, One Bancorp said.Nonperforming assets consist of $170 million in nonperforming loans and $25 million in real estate acquired by agreement or foreclosure. As a result of the losses, stockholders' equity declined to $76.6 million, or $9.35 a share, at Sept. 30, from $125.1 million, or $15.27 a share, at June 30. For the first nine months of 1989, net losses at One Bancorp totaled $74.5 million, or $9.12 a share, compared to net income of $9.7 million, or $1.13 a share, in the year-earlier period. Heritage Bancorp said it added $17 million to its loan-loss reserve, making the reserve $24.7 million or 1.6% of total loans and 35% of nonperforming loans.Nonperforming loans increased from $32.2 million as of June 30, 1988, to $69.6 million as of Sept. 30, 1989. Assets at Sept. 30 totaled $1.73 billion. Chairman Richard B. Covell said he expects that Heritage will rebound in the fourth quarter and return to a positive mode of operation in 1990. "We are aggressively pursuing workout strategies with respect to nonperforming assets in an effort to resolve these problems as expeditiously as possible, while simultaneously minimizing losses to the company," he said. For the nine months, Heritage reported a net loss of $10.9 million, or $1.49 a share, compared to net income of $8.3 million, or $1.12 a share.
McDonald's Corp., under pressure by environmental groups to stop using polystyrene containers, announced a program here to foster recycling of the plastics at 450 of its New England restaurants. Environmentalists, however, attacked McDonald's program as a public relations ploy and the wrong way to address the nation's garbage crisis. Under the program, McDonald's restaurants will be equipped with recycling bins for plastic items and with posters encouraging customers to use them, the company said.The plastic will be sent to a plant in Leominster, Mass., near Boston, which is owned by a joint venture recently formed by plastics makers.It then will be processed into plastic pellets for use in making products such as trash cans, flower pots and food trays, but not food containers, McDonald's said. The program will reduce trash, help educate youngsters about recycling and "is a big step toward a better environment," asserted Shelby Yastrow, McDonald's senior vice president, environmental affairs. However, it will be a small step for McDonald's as a whole.The program will include 4% of the company's 11,000 restaurants.And because many customers won't participate, such as people who drive through, it is likely that less than 2% of the company's plastic containers will be recycled under the program.McDonald's said it plans to expand the program when and if more plastic recycling plants are built near its restaurants. The plant in Leominster is the first of five planned by the National Polystyrene Recycling Co., the plastics-industry joint venture.It was formed earlier this year by Dow Chemical Co., Mobil Corp. and six other concerns in response to concerns about growing amounts of non-biodegradable plastic trash.Paul Keough , acting regional director for the Environmental Protection Agency in Boston, said, "We hope that other large companies follow McDonald's lead to undertake similar programs." But Amy Perry, a spokeswoman for the Massachusetts Public Interest Research Group, a Boston offshoot of Ralph Nader's lobbying outfits, argued that the program "just serves to legitimize increasing the use of throwaway plastics.It would be far better for McDonald's to use durable goods {that could be reused for serving food}, instead of promoting the throwaway society." Last year, a network of environmental groups commenced a "McToxics Campaign" to pressure McDonald's to stop using polystyrene.Among other things, the groups have urged consumers to mail used McDonald's plastic containers to its Oak Brook, Ill., headquarters. Concerns about plastic trash also have sparked legislative initiatives, such as one in Berkeley, Calif., to ban polystyrene products as of January.Such laws are causing major headaches for companies like McDonald's, which increasingly must wrestle with different local rules across the nation. "Political pressure has been a factor" in the introduction of recycling programs by plastics makers and sellers, conceded Ken Harman, National Polystyrene's acting president and chairman, at the news conference, which was held in a McDonald's restaurant next to Boston's Children's Museum. Some of the pressure became evident during the news conference when a McDonald's customer startled company officials by blurting out, "Why do you produce so much trash in the first place?" The customer, Jeff Simpson, a visitor from London, later explained that he was vexed by all the plastic, paper and cardboard that came with the McDonald's breakfast he had just eaten.The recycling program "is laudable," he said, "but why not use china plates?"
The current debate over reinvigorating individual retirement accounts boils down to this: Would you prefer your tax break as an appetizer or as dessert? Democrats would give taxpayers an immediate incentive to sock away more savings: Save $2,000, and you can deduct $1,000 on your tax return. Republicans would defer the tax break: Save $2,000, and you'll escape taxes on all the interest that sum earns over the years till you retire. Addressing the nation's savings shortage is once again politically fashionable.And there is ample reason for concern.The dearth of savings limits the resources available for investment in the future and forces the U.S. to import foreign savings. But some economists suggest the politicians' new infatuation with IRAs may be misplaced at a time when Congress and the president aren't taking the more important step of shrinking the federal budget deficit. "If increasing savings is the object," says economist Jane Gravelle of the Congressional Research Service, "a reduction in the deficit would be a more certain and more powerful way of achieving such an end." (The nation's total savings is what's left after substracting government borrowing from household and corporate savings.) The differences between the two IRA alternatives involve more than partisan manuevering -- although there's plenty of that. The shortcoming of offering immediate rewards for putting money in an IRA, as the Democrats propose, is that it will widen the budget deficit by an estimated $12.5 billion over the next five years. "The big problem is the up-front cost," says Sen. William Roth (R., Del.), chief Republican cheerleader for IRAs. The shortcomings of delaying the reward, as Sen. Roth and Sen. Robert Packwood (R., Ore.) propose, is that it may not boost savings much and, if it does, it may widen deficits in the future. "It looks like you haven't given anything away, but five, 10, 20, 40 years later, little bomblets go off," says Henry Aaron, a Brookings Institution economist. Although IRA fans in Congress have been talking about restoring incentives that were curtailed in 1986, they gained momentum only after Senate Finance Committee Chairman Lloyd Bentsen (D., Texas) seized on IRAs as an alternative to cutting capital-gains taxes. Republican senators, unwilling to concede the popular IRA issue to Democrats, suddenly embraced a scheme Sen. Roth had been pressing with little success.The Bush administration, which was planning to unveil an IRA proposal of its own next year, was quick to do the same.Both proposals would allow withdrawals not only for retirement, but also for buying a house or paying tuition bills. Between 1981 and 1986, any worker could put $2,000 a year into an IRA and deduct that sum from his taxable income.As banks and mutual funds advertised heavily, hundreds of billions of dollars flowed into the accounts. Economists still disagree on how much was new savings and how much was shifts of existing savings by taxpayers in order to cut their tax bill.Economist David Wise of Harvard University figures 70% was actually new savings; many prominent economists -- including Michael Boskin, chairman of the Council of Economic Advisers -- agree that IRAs did result in significant new savings. But Mr. Aaron, among others, continues to insist that the data are inconclusive.And Robert McIntyre, director of the labor-backed Citizens for Tax Justice and an admirer of the 1986 Tax Reform Act that limited IRAs, goes further. "They don't work," he contends. "They just give people a tax break for savings they would have done anyway." In any event, IRA contributions fell sharply after the 1986 law that restricted the full tax break to couples earning less than $40,000 a year and individuals earning less than $25,000.Balances in IRA and Keogh accounts (retirement accounts for the self-employed), which had swelled by $75 billion in 1986, grew by only $48 billion in 1988, including interest on past contributions. It isn't clear how Americans would react to the new IRA proposals because they are so different from the old scheme. Some economists predict any IRA plan will boost savings because brokerage houses, mutual funds and banks will advertise them heavily. "It may well be that saving, like life insurance, is sold, not bought," says Lawrence Summers of Harvard University.He notes that as IRA ads vanished, even many middle-income Americans still eligible for the full IRA tax break stopped contributing. Comparing the two proposals on the table, many economists say a rational person ought to prefer the Republican version because it offers a much bigger tax break. Under the Democratic plan, a 40-year-old in the 33% tax bracket who saves $2,000 in an IRA would cut his tax bill by $175 immediately.When he retires 25 years later, his $2,000 -- assuming it were invested at 5% -- would be worth $6,773.But $5,773 of that would be taxed when withdrawn from the Republicans wouldn't give any up-front deduction for depositing $2,000 in the IRA.But at retirement 25 years later, the entire $4,773 in interest could be withdrawn taxfree, along with the already taxed $2,000 initial contribution. Nonetheless, some economists argue that Americans simply won't save unless the government gives them an immediate reward. "This instant gratification overcomes the usual bias against savings," says John Skinner, a University of Virginia economist.The clincher, he says, is that people who owed money to the Internal Revenue Service were far more likely to put money in an IRA than those who were due a refund. On the other hand, the case for delayed gratification is bolstered by evidence that a surprising number of upper-income Americans still are putting money in IRAs even though the only tax break is deferring tax on the interest the contributions earn. The Employee Benefit Research Institute says about 23% of all workers earning more than $50,000 a year made IRA deposits in 1987, down from 56% in 1982 but still nearly one million people. Donald Underwood, head of retirement planning for Merrill Lynch & Co., says he was surprised to discover that more money flowed into the firm's IRA accounts in 1988 than in 1987. (A big IRA fan, Mr. Underwood's license plate reads: Merrill Lynch is convinced the Republican IRA plan would appeal to its customers, and it is lobbying strongly for it. "I think people are really concerned about what the tax rate will be in the future," Mr. Underwood says.The higher tax rates go in the future, of course, the more valuable the future tax breaks. The bigger the incentive the government offers for savings, the more tax revenues a scheme would lose -- or so many economists reason. But that's not how Sen. Roth and his allies look at it.First, they would allow people with old-fashioned IRAs to shift the money to the new ones as long as they pay tax -- at today's lower tax rates -- on the previously deducted contributions.That would raise $11.5 billion for the Treasury over the next five years, congressonal tax experts estimate.But allowing the interest buildup on those contributions to escape taxation would cost the Treasury far more than that sum in the long run, the Congressional Budget Office says. "It's a huge giveaway," Mr. Summers protests. Second, Sen. Roth insists that the extra savings his plan would produce would spur so much extra economic growth that the Treasury wouldn't suffer.The claim is an echo of the supply-side promise that the 1981 tax cuts that bear Sen. Roth's name would finance themselves through added growth or added savings.
Telerate Inc., which has rejected an $18-a-share tender offer by Dow Jones & Co. for the 33% of Telerate that Dow Jones doesn't already own, said the two companies began talks yesterday to try to negotiate a friendly transaction. However, the talks didn't produce any changes in the $576 million Dow Jones offer, which a committee of Telerate's two independent directors has rejected as inadequate. Peter Skinner, vice president and corporate general counsel for Dow Jones, said yesterday's talks took place both on the telephone and in person. "We discussed the bid, but Dow Jones and its board of directors believe the bid is full and fair," Mr. Skinner said.He said no future talks are currently scheduled, but added that Dow Jones representatives will meet again with Telerate officials if Telerate seeks a meeting. Telerate disclosed the opening of negotiations in a filing with the Securities and Exchange Commission, which said that "there can be no assurance that such negotiations will continue or will result in revised terms that will be satisfactory to the special committee." The talks followed an effort by Telerate to place a strongly worded advertisement attacking the Dow Jones offer in yesterday's editions of The Wall Street Journal, according to two people familiar with Telerate. After Telerate submitted its ad to the Journal Wednesday, the people said, a lawyer for Dow Jones telephoned a Telerate lawyer.Soon thereafter, Warren H. Phillips, chairman of Dow Jones, telephoned Neil S. Hirsch, chairman of Telerate.As a result of the conversations, the people said, Telerate decided not to run the ad yesterday, and Dow Jones agreed to meet with Telerate. Mr. Skinner said that Dow Jones executives had been told that the ad would be submitted by Telerate and were advised of its content.The Dow Jones executives indicated to Telerate executives that such an ad would not be "helpful," Mr. Skinner said, and Telerate decided not to run the ad. A spokesman for Telerate declined to elaborate on Telerate's filing with the SEC. Telerate stock rose 87.5 cents to close at $20.50 in New York Stock Exchange composite trading yesterday.Dow Jones fell 62.5 cents to close at $36.625. Many of Wall Street's takeover-stock speculators bought relatively large positions in Telerate stock after Dow Jones announced its tender offer on Sept. 21.The traders are betting Dow Jones will increase its $18-a-share offer in order to acquire full ownership of Telerate, an electronic distributor of financial-market information. Several takeover stock traders said yesterday they expect Dow Jones to offer at least $21.Some analysts, investment bankers and institutional investors who have studied Telerate have said they believe the company could fetch between $25 and $30 a share if it were put up for auction. But the takeover stock traders, who declined to be identified, said they believe it is unrealistic to expect Dow Jones will pay that much, considering it already owns about 67% of Telerate. Bruce Thorp, an analyst at Philadelphia-based Provident National Bank, said Dow Jones's tender offer reflects a typical premium for the purchase of a remaining minority stake.He thinks Dow Jones will end up paying $20 or $21 a share for Telerate. "The offer will be sweetened, not because it has to be, but because it will make for a smoother transaction," Mr. Thorp said. "Dow Jones could bludgeon its way through the process and get it for less, but they won't do that.Dow Jones is not going to squeeze as hard as it could." Dow Jones declined to comment on Mr. Thorp's speculation. Telerate's proposed ad, headlined "What Now, Dow Jones?" was in the form of a letter to Dow Jones directors. "How can a company of Dow Jones's reputation persist in a coercive attempt to squeeze out the minority shareholders of Telerate at a low-ball price of $18 a share?" the ad asked.A copy of the ad was obtained from a person familiar with Telerate. "We are forced to consider Dow Jones's actions as hostile -- to Telerate's shareholders, management, and employees," the ad said.It was signed by Mr. Hirsch, three other Telerate directors who are employees of Telerate, and two outside directors. People familiar with Telerate said the ad was intended to encourage Dow Jones to begin negotiations and was submitted to the Journal for that reason. "We could have run it in the New York Times," one person familiar with Telerate said. As evidence of their contention that the current Dow Jones offer is too low, takeover-stock speculators pointed to an SEC filing by Dow Jones disclosing that Dow Jones managers had proposed offering $19 a share for Telerate.However, that proposal was overruled by Dow Jones's board, which decided to offer $18 a share. After the Telerate special committee rejected the Dow Jones offer as inadequate, Mr. Phillips of Dow Jones said, "We are proceeding with our $18-a-share offer and continue to believe that the offer is fair to all Telerate stockholders." The offer is scheduled to expire Nov. 3. Separately, a hearing is scheduled for Monday in Delaware Chancery Court on a motion by certain Telerate shareholders seeking a court order to block the Dow Jones tender offer. Dow Jones paid between $10 and $15 a share for most of the 63.6 million Telerate shares it owns.The shares were purchased in various transactions, starting in August 1985.However, Dow Jones paid $28.75 a share for one block of about 10.5 million Telerate shares in September 1987.That price represented a premium of 16.8% above the then-market price of Telerate shares. In addition to The Wall Street Journal, Dow Jones publishes Barron's, various community newspapers, and operates financial news services and computer databases.
In a highly unusual move that buys time for Congress to debate a debt-limit increase, the Treasury Department announced it will hold an unscheduled auction of securities next week to raise $17 billion. The auction is expected to be held on Monday and will settle on Tuesday, just hours before the current debt-limit legislation expires.If Congress hasn't enacted a new debt limit by midnight Tuesday, the Treasury will have to suspend all sales of securities, including savings bonds. The extraordinary auction, however, should give the Treasury enough cash to cover Social Security checks due out Nov. 3.In a letter to congressional leaders, Treasury Secretary Nicholas Brady said the government will now be able to operate through Nov. 8 without a debt-limit increase. The Treasury's action comes in response to a continuing stalemate on Capitol Hill over the debt-limit legislation.Democrats want to use the debt-limit bill as a vehicle for enacting unrelated legislation that the administration opposes, and the administration is considering using the bill as a vehicle for a cut in the capital-gains tax. In recent days, the battle has become a game of chicken, and it had raised the prospect that the government might run out of cash next Friday and be unable to mail Social Security checks. Treasury officials said they decided to take their extraordinary action to make certain that Social Security recipients get their checks.They also said the administration may still seek to attach a capital-gains tax cut to the debt legislation despite the intensifying controversy. "The secretary believes capital gains is a top priority and that any available vehicle ought to be used," said Assistant Treasury Secretary Roger Bolton. Existing debt-limit legislation allows the Treasury to borrow as much as $2.87 trillion.But so far, the government's debt totals only $2.853 trillion.That means the government can legally sell another $17 billion in debt, provided it acts by Tuesday. On Tuesday, the debt limit expires, and the limit drops back to $2.8 trillion.If that occurs, no new securities can be issued without violating the debt-limit law.The Treasury's regular auction of Treasury bills, scheduled to settle on Thursday, is expected to be canceled.In addition, all sales of savings bonds and special securities issued to state and local governments will cease. The details of next week's unusual auction will be announced today. In his letter to congressional leaders, Treasury Secretary Brady called the move an "extraordinary administrative action." He said that it "is important Congress act on debt-limit legislation no later than Nov. 7, in order to ensure adequate time to arrange market borrowings to avoid default." Mr. Brady also said that he is "aware of no other realistic measures, other than debt-limit legislation, that could further extend the anticipated date of default." The debt-limit debate has become an annual ritual between the administration and Congress.Increasing the limit is necessary to keep the U.S. from defaulting on its obligations, but the increase always creates intense controversy in Congress.Legislators like to amend the debt-limit bill with extraneous legislation because they believe it's a difficult bill for the president to veto. This year, the debt-limit debate promises to be particularly intense because of the battle over capital gains.The administration and its Republican allies see the measure as a possible opportunity to pass a capital-gains tax cut.Their hope is that Democratic leaders in the Senate wouldn't block it for fear of being blamed for the government's default.
The University of Toronto said it will drop its objections to the offer by Institut Merieux S.A. to acquire Connaught BioSciences Inc. for 942 million Canadian dollars (US$803.7 million) after reaching a research agreement with the French vaccine manufacturer. Under the terms of the accord, similar to an agreement reached last week between the university and Merieux's rival bidders for Connaught, Ciba-Geigy Ltd. and Chiron Corp., Merieux agreed to spend 15 million Canadian dollars (US$12.8 million) to fund vaccine-related research in Canada, C$9 million of which would go to the university's research programs. The university had sued Connaught, arguing its directors had broken a 1972 agreement not to sell the company to a foreign concern by recommending Merieux's offer to shareholders.A decision in the case, heard last week by the Ontario Supreme Court, is expected this week.A decision in the university's favor could block Connaught's directors from recommending Merieux's offer to shareholders, but couldn't block the company's sale. James Keffer, vice president, research, at the university, said the university isn't favoring one bid over another. "Both of these agreements are good, both add substantial benefits to Canada," he said. "Ciba-Geigy {and Chiron} are offering slightly more investment dollars to Canadian universities and some new products, but Merieux is proposing to build a new biotechnology center." Ciba-Geigy, a Swiss pharmaceutical company, and California-based Chiron, a pharmaceutical research concern, are offering C$866 million, or C$30 a share, for Connaught. The Canadian government said earlier this month that the proposed Merieux acquisition didn't appear to offer enough "net benefit" to Canada to approve. "Reaching an agreement is an advantage to both the university and Merieux, both in terms of business and politically, since the university has been quite vocal about the issue of foreign ownership," said Philippe Stoeckel, president of Merieux Institute Inc., Merieux's U.S. subsidiary.
Investors gave an unexpectedly warm welcome to Resolution Funding Corp. 's first auction of 30-year bonds, which helped lift the spirits of the entire bond market. Resolution Funding, the government agency created to raise cash to bail out the troubled thrift industry, received bids totaling $13 billion for the so-called bailout bonds.It accepted $4.52 billion of the tenders at an average yield of 8.15%, slightly lower than analysts had expected. The bid-to-cover ratio on the bonds was 2.87 to 1, better than on the Treasury's own 30-year bonds in recent auctions.The ratio, which reflects the number of bids received for each bid accepted, is used to gauge investor demand. "This was an excellent response to a new security," said Michael E. Basham, deputy assistant secretary of the Treasury. "We were very pleased." Treasury officials were also surprised.Until yesterday, institutional investors had showed little interest in buying the securities.After dealers complained that potential buyers were concerned about debt repayment, the Treasury released a statement yesterday reiterating that timely payments were guaranteed by the government.Traders said the auction was saved by a small number of dealers who bought huge amounts of the bonds. "There's no doubt that the auction went better than expected," said William Sullivan Jr., a senior vice president at Dean Witter Reynolds Inc.The fact that bond prices were firm prior to and after the auction was a sign that "the market is in very good shape." Bond prices often fall right before new supply is released. Traders said a strong market tone was set early in the day when a bid to buy $1 billion of long-term bonds hit the market.Bond dealers identified the buyer as Nippon Kangyo Kakumaru International Inc., a Japanese brokerage firm that purchased the bonds on behalf of a client. Eishi Wakabayashi, a Nippon Kangyo executive vice president, confirmed that the firm "bought quite a bit" yesterday and last week, but he declined to elaborate.Last Thursday, the firm was said to have purchased close to $2 billion of long-term bonds. Joel Kazis, head of government trading at Smith Barney, Harris Upham & Co., said the billion dollar bid "helped to support the market going into the Refcorp auction" and "showed that there are real buyers for long bonds." The Treasury's benchmark 30-year bond, which jumped 1/2 point on the Nippon Kangyo bid, ended 1/8 point higher, or up $1.25 for each $1,000 face amount.Mortgage-backed securities rose less than 1/8 point, but municipal bonds ended unchanged to slightly lower.Investment-grade corporate issues and junk bonds were unchanged. At the Resolution Funding auction, traders said much of the appetite for the new 30-year bonds came from dealers who are "stripping" the bonds and repackaging them as zero-coupon securities. Strips are created by separating the interest payment portion of the bond from the principal portion, called the corpus.The two pieces are then sold separately at a deep discount to their face amount.Zero-coupon securities pay no interest until maturity, with the return to investors consisting primarily of the bond discount. Among the big buyers at yesterday's auction was Drexel Burnham Lambert Inc. Jack Norris, a Drexel executive vice president, said the firm bought a sizable share of the bonds, but he wouldn't be specific.He said Drexel intends to strip at least $500 million of the bonds the firm purchased. "We've had very strong strip demand" from institutional investors, he said. Meanwhile, the market paid close attention to comments by Federal Reserve Chairman Alan Greenspan, who testified before a congressional hearing.However, credit market analysts were unable to discern many clues about the future course of monetary policy from the Fed chairman's remarks.Among other things, Mr. Greenspan said he endorses a bill by Rep. Stephen Neal (D., N.C.) that would require the Fed to pursue policies aimed at eliminating inflation within five years. Treasury, Agency Securities Treasury bonds ended with small gains yesterday, which was better than some economists had expected considering the large amount of new supply that has hit the market this week.Including yesterday's $4.52 billion of Resolution Funding bonds, the government has sold $30 billion in new securities this week. Today, investors will be scrutinizing the government's report on gross national product for the third quarter.Economists surveyed by Dow Jones Capital Markets Report expect real GNP to have grown at a 2.5% annual rate in the third quarter, about the same as in the second quarter. The benchmark 30-year Treasury bond was quoted late at 102 22/32 to yield 7.88%, compared with 102 18/32 to yield 7.89% Tuesday.The latest 10-year notes were quoted at 100 24/32 to yield 7.87%, compared with 100 22/32 to yield 7.88%. Here are details of yesterday's Resolution Funding auction: Rates are determined by the difference between the purchase price and face value.Thus, higher bidding narrows the investor's return while lower bidding widens it. The bonds are dated Oct. 30 and mature Oct. 15, 2019. Corporate Issues Several new issues hit the corporate market yesterday. Among the new issues was Arco Chemical Co. 's $100 million in 30-year debentures, which were priced to yield 9.50%. In the junk bond market, Blockbuster Entertainment Corp. issued $300 million of zero-coupon convertible notes, also known as liquid yield option notes.The notes, underwritten by Merrill Lynch Capital Markets, were priced at $308.32 per $1,000 note to yield 8%.The size of the offering was increased from the originally planned $250 million redemption amount. In secondary trading, prices of investment grade and high-yield, high-risk junk bonds ended unchanged yesterday. However, there were some notable exceptions.Certain SCI Television Inc. junk bonds fell after the company announced a debt exchange offer.Meanwhile, junk bonds of Public Service Co. of New Hampshire surged on news of a bidding war. As expected, Donaldson Lufkin & Jenrette Securities Corp. postponed a $1.15 billion junk bond offering for TW Services Inc. Donaldson Lufkin said takeover-related financing is being restructured to include more equity and less debt.The investment banker said the new deal under consideration calls for $600 million to $700 million in high-yield debt to be offered. Mortgage-Backed Securities Mortgage securities ended 2/32 to 3/32 point higher after giving up early gains of as much as 8/32. Government National Mortgage Association 8% securities for November delivery finished at 94 1/4, up 3/32; 9% securities at 98 18/32, up 3/32; 9 1/2% securities at 100 18/32, up 3/32; and 10% securities at 102 14/32, up 3/32.Federal Home Loan Mortgage Corp. 9% securities were at 97 23/32, up 2/32. The Ginnie Mae 9% issue was yielding 9.32% to a 12-year average life assumption, as the spread above the Treasury 10-year note held at 1.46 percentage points. In derivative markets, the Federal National Mortgage Association issued a $300 million real estate mortgage investment conduit backed by its 9% securities through Goldman, Sachs & Co. Municipals Bidding for a $223 million sell list and a handful of medium-sized new issues dominated an otherwise uneventful session. Active dollar bond issues were mostly unchanged to off 1/8 in light late dealings. The 176-item bid list was made up largely of bonds due in eight years or less, with most maturing within five years.Many are state general obligations. In the new issue arena, underwriters led by Shearson Lehman Hutton Inc. set the preliminary pricing for $80 million of Michigan general obligation bonds, the first offering of such debt by the state since 1986.The sale was designed by state officials to stimulate savings by residents. The issue launches an $800 million bond program, given the go-ahead by voters in November 1988, to fund environmental protection and recreation projects. Another Shearson group had the winning bid for $134.8 million of wastewater system improvement revenue bonds issued by the Trinity River Authority of Texas.The bonds yield from 6.30% in 1992 to 7.25% in 2016.An unsold balance of $22.2 million remained in late order-taking. Foreign Bonds Most foreign government bond prices rose in light trading. Mark bonds rose about 1/8 point.The 7% bond due October 1999 rose 0.12 to 100.05 to yield 6.99%, while the 6 3/4% notes due July 1994 rose 0.05 to 97.75 to yield 7.32%. Britain's 11 3/4% bond due 2003/2007 rose 15/32 to 112 21/32 to yield 9.94%, while the 11 3/4% notes due 1991 rose 1/8 to 98 25/32 to yield 12.78%. Japan's No. 111 4.6% bond due 1998 ended on brokers' screens at 95.53, up 0.31, to yield 5.355%.
Marsh & McLennan Cos. said it agreed to acquire the rest of Gradmann & Holler, a leading West German insurance brokerage firm in which it has held a 15% stake for 15 years. The transaction, for cash and stock, would represent the biggest European takeover since 1980 for New York-based Marsh & McLennan, the world's largest insurance broker.It's also the first major sign of the long-awaited consolidation in the European insurance industry as the European Community Commission moves toward a single market by 1992. Protective barriers will start coming down within the insurance industry next summer, when big industrial companies will be able to buy insurance from carriers in any other EC country for the first time.That's why "we have been working hard to develop a single, more unified presence in Europe," said A.J.C. Smith, Marsh & McLennan's president, at a London news conference yesterday. Analysts speculated that Marsh & McLennan would spend between 250 million marks ($136.4 million) and 350 million marks for the rest of Gradmann & Holler, or roughly 25 to 30 times the private firm's estimated earnings. "This is paying a big price to maintain their virility as the world's leading insurance broker," said Philip Olsen, an analyst at Kitcat & Aitken, a U.K. brokerage firm. Earlier this year, New York Life Insurance Co. agreed to acquire Windsor Group Ltd., a first step toward establishing a presence in the European market ahead of 1992.But most U.S. insurers haven't rushed to change the way they do business in Europe because they believe the European market will still be dominated by a handful of domestic companies. Under the proposed combination, Marsh & McLennan would gain a majority stake in Gradmann & Holler that would increase over time to the rest of the remaining 85%.The three managing general partners would receive a "significant" number of Marsh & McLennan shares, said Walther L. Kiep, a partner who would also join Marsh & McLennan's board. Mr. Kiep said he sought the combination because "all our large clients in Germany are becoming European companies or multinational companies and they expect an insurance broker" to serve them as well in Paris as in Germany. Beatrice E. Garcia in Philadelphia contributed to this article.
Compaq Computer Corp. said that its net income rose 51% in the third quarter, bolstered by unusual gains from its investment in a disk-drive maker and reflecting continued growth in its European operations. The computer maker said net jumped to $87 million, or $2.02 a share, from $58 million, or $1.40 a share, a year earlier.Sales increased 36% to $683 million from $502 million.The latest quarter's results, however, included a pretax gain of $13.7 million, or 20 cents a share, in the carrying value of the company's investment in Conner Peripherals Inc. and a $7.6 million gain, or 11 cents a share, from the sale of one million Conner shares. Net for the nine months was $254 million, or $5.94 a share, up 56% from $163 million, or $4.06 a share, a year earlier.Sales rose 50% to $2.1 billion from $1.4 billion.Net for the year-earlier nine months also included a gain of $9.7 million, or 15 cents a share, in the carrying value of the Conner investment. Michael Swavely, president of Compaq's North America division, attributed the company's third-quarter performance to continued increases in international sales, which accounted for 43% of the company's sales, a 74% increase from a year earlier. "Over the next couple of years we would not be surprised to see Europe and international {sales} represent 50% of the company's revenues," he said. During the third quarter, Compaq purchased a former Wang Laboratories manufacturing facility in Stirling, Scotland, which will be used for international service and repair operations.Mr. Swavely said the new space will allow Compaq to increase the manufacturing capacity of its plant in Erskine, Scotland. In New York Stock Exchange composite trading yesterday, Compaq shares fell $1.625 to $108.625.
Call Jim Wright's office in downtown Fort Worth, Texas, these days and the receptionist still answers the phone, "Speaker Wright's office." The former congressman, who resigned as speaker of the House after an investigation of his financial dealings, is ensconced in his district office, maintained by taxpayers on a $200,000 allowance.He is negotiating a rich book contract to boot. One of the hottest tickets on Washington's social calendar this fall was a charity benefit honoring former Congressman Tony Coelho, who landed a million-dollar job on Wall Street after resigning over a controversial junk-bond investment last summer. Michael Deaver, the former White House aide, has become the most recent addition to the teeming ranks of fallen politicians and officials earning their way as lobbyists and consultants here.Mr. Deaver has reopened a public-relations business. Surviving scandal has become a rite of political passage at a time when a glut of scandal has blunted this town's sensibility.Let the president demand strict new ethics rules: With four sitting House members accused of sexual misdeeds, amid the unfolding HUD scandal and after the Wright debacle, "people are slightly dulled by scandal," says political humorist Art Buchwald. "It now takes something really weird to inspire public outrage." Not all the scandal-tripped have enjoyed soft landings.But many have. "These people bounce back more resiliently than regular people," says Washington writer Suzanne Garment, who is working on a history of post-Watergate scandal. Given their own penchant for book writing, it is surprising that none of the masters of scandal survival have yet published a guide to the art.For there is an emerging protocol -- indeed, an etiquette -- to it.Among the rules: Pretend Nothing Happened As if he were still in his old job, Mr. Wright, by resigning with his title instead of being forced from his job, by law enjoys a $120,000 annual office expense allowance, three paid staffers, up to $67,000 for stationery and telephones and continued use of the franking privilege.Not to mention a generous federal pension.There is also a busy schedule of speaking engagements at $10,000 a pop, at tony places including the Yale Political Union. "He's as busy as he was as speaker," reports Mr. Wright's administrative aide, Larry Shannon. Atone On the edge of fashionable Georgetown, in a chic office with a river view and a number of corporate clients whom he won't name, Mr. Deaver is trying to reclaim his reputation as one of the savviest image makers in town. There are few mementos of his days as White House deputy chief of staff and confidant of Ronald and Nancy Reagan.The former $3 million-a-year lobbyist now frequents shelters for the homeless and devotes a third of his time counseling other recovering alcoholics. "I feel better than I ever have in my life," he says. Mr. Deaver confessed to his alcoholism during his trial on perjury charges.He is also a recovering workaholic, relaxing with his family and creating topiary, or garden-shrub sculpture, a fashionable pursuit for which he developed a passion during his three-year legal ordeal.One sign of Mr. Deaver's renaissance: an appearance on ABC's "Nightline" for a show on pack journalism.Host Ted Koppel introduced him as "the media master of the Reagan Administration," with nary a mention of Mr. Deaver's conviction in 1987 on perjury charges. Finding God "When someone says, 'I've turned to God, ' everybody lays off," observes Frank Mankiewicz, an old Washington hand and former aide to Robert Kennedy.Thus have Charles Colson and Jeb Magruder launched successful post-Watergate careers at the pulpit. But it doesn't always work so smoothly.After allegations surfaced in a 1985 divorce contest that he had beaten his wife, SEC enforcement chief John Fedders retreated to a Trappist monastery in rural Virginia.He is now in solo law practice in Washington, but his fees have been meager and he failed in efforts to win a chunk of his ex-wife's royalties on her tell-all book.From time to time he returns to the monastery for prayer, meditation and pro bono legal work. Mr. Fedders is philosophical about his travails. "This whole experience has been an opportunity for internal growth," he says.He sees a psychoanalyst five mornings a week. "I've surrendered to the circumstances," Mr. Fedders says. "The word surrender has a precise psychoanalytic meaning.My universe has changed.I'm enjoying my life and who I am today.The aspect of being a mega-lawyer isn't as important." Don't Linger "The best thing you can do is get off the screen," says Mr. Buchwald.Nobody proved that more masterfully than Mr. Coelho, the former Democratic majority whip.Declaring that there was life after Congress, he resigned almost immediately after media reports questioned the propriety of a 1986 junk-bond investment, before any official investigations took hold. Among the glitterati who turned out in bipartisan black-tie force to benefit the Coelho Epilepsy Fund last month were Sen. Robert Dole, Rep. Newt Gingrich, and other kingpins of Congress.Dan Rather served as emcee.From his new, million-dollar-a-year perch on Wall Street as a managing director of Wertheim Schroder & Co., Mr. Coelho reports that many of his former colleagues have contacted him to find out how they, too, can pursue investment banking careers. It Helps to Be Male Male scandal victims invariably fare better.Anne Burford, the former EPA chief who resigned under fire in 1983 during a flap with Congress, was kayoed in the confrontation, even though she was never charged with official wrondgoing.She worked part-time as a consultant and wrote a book, but never restarted her high-powered legal career.It didn't help when, in 1986, she was charged (and then cleared) on allegations of public drunkenness. "I cut my losses and ran," she says, from her new home in Colorado, where she is busy remodeling.Mrs. Burford remains bitter over the overwhelming legal expenses involved in clearing her name. "My husband was instantly impoverished by the very act of marrying me," she says. Another former EPA official, Rita Lavelle, is still struggling after her conviction in 1983 on perjury charges. "There's nothing she could do to bring herself back to where she was," says her lawyer, James Bierbower. "You could say she survived, but it wasn't easy on her." No book contracts have been dangled before Deborah Gore Dean, the reigning queen of the HUD scandal.Donna Rice of Gary Hart fame failed to obtain a book contract and lost her modeling contract for "No Excuses" jeans.Fawn Hall, Oliver North's former secretary, has yet to launch a hoped-for television news career, according to her lawyer. Rita Jenrette, the former wife of Abscam-indicted Rep. John Jenrette, has yet to hit it big in Hollywood, although with roles in such movies as "Zombie Island Massacre" and "Aunt Ida's Bikini Shop," she is doing a lot better than her former husband.He was back in jail over the summer on shoplifting charges. Be the Star Central figures -- such as Richard Nixon -- usually fare better than those with supporting roles.Richard Secord, the retired Air Force general felled in the Iran-Contra scandal, is all but ruined -- forced to sell his Virginia home and pull his kids out of college, according to a recent fund-raising appeal sent out on his behalf.Yet his co-defendant in the case -- also a former military officer by the name of Oliver North -- has been busily and profitably burnishing his involvement in the affair. What accounts for the difference?During the televised Iran-Contra hearings, Mr. North came off as a patriot from central casting.Mr. Secord's performance was decidedly less inspiring. Mr. North remains in heavy demand as a speaker, for fees reported in the $20,000 range.Even in the wake of Hurricane Hugo 750 people turned out in a remote Virginia town in September for a "family tribute" to Mr. North given by two dozen conservative members of Congress. If Sex Is Involved, All Bets Are Off Sex scandals make people look careless and silly, and one of the worst sins in Washington is to be laughed at. "You can be wicked, but not foolish," says Mr. Mankiewicz. Nevertheless, Rep. Gerry Studds of Massachusetts was handily re-elected because of the candor with which he handled revelations that he had sex with a male congressional page in 1983. Former Rep. Robert Bauman, a Maryland Republican who lost his seat in 1980 after he was caught soliciting sex from a 16-year-old boy, has never regained his professional footing as a lawyer.Mr. Bauman, a conservative, says he was deserted by the right wing. "Conservatives shoot their own," he says. If the political establishment is reluctant to forgive sexual misadventures, the private sector sometimes will.John Tower was accused of womanizing and boozing during his unsuccessful bid to win confirmation as secretary of defense earlier this year.Now he is writing a book, serving on an elite foreign policy advisory board and consulting for an array of corporate clients, including British publishing mogul Robert Maxwell. Become a Lobbyist When all else fails, Gucci Gulch -- the fabled halls of the Capitol inhabited by lobbyists and their imported shoes -- offers a welcome environment for fallen officials.Former Rep. Fernand St Germain, brought down by the savings-and-loan crisis, now represents -- you guessed it -- savings-and-loans associations. Some become pseudo-lobbyists.John Mack promptly quit his job last spring as an aide to Speaker Wright amid public outrage over Mr. Mack's violent attack on a young woman when he was 19 years old.After a few weeks in seclusion, Mr. Mack opened a consulting firm, but not to enable him to directly lobby; that would require him to disclose his clients by registering as a lobbyist.Still, Mr. Mack says he talks to "30 members of Congress a week." Misery Loves Company Other scandal survivors are sometimes the best source of solace.Raymond Donovan, the New Jersey construction executive who was forced to resign as labor secretary and indicted in 1985, only to be acquitted of fraud charges, often calls other scandal-tossed public figures to offer a sympathetic ear.Each time a new scandal hits, he says, "it pulls the scabs off your knees." One of the first people to come to the Deaver home after his troubles erupted was former Nixon aide John Ehrlichman, whom Mr. Deaver scarcely knew. "He reassured me that the hurricane would end," Mr. Deaver recalls. Mr. Bauman received an encouraging letter from the recognized master of scandal survival, Richard Nixon.Says Mr. Bauman: "If things get really tough, I can always auction it off at Sotheby's."
The Canadian government, with a view to becoming more politically active in Latin America, is expected to announce tomorrow its application to join the Organization of American States, a Washington-based regional agency. The expected Canadian move has been welcomed by the Bush administration even though Canada has opposed such U.S. actions as the trade embargo against Cuba, the invasion of Grenada and the military support for Nicaragua's Contra guerrillas. Latin American countries have long urged Canada to join the OAS in the hopes that it would be a counterweight to the U.S., which for many years tended to dominate the 32-nation organization. Even though the U.S. also has supported Canadian membership, it hasn't been a Washington priority. "The fact that we might not side with the Americans may be a reason why Canada's membership in the OAS hasn't been, over the years, an item high on the U.S. agenda," said Allan Gotlieb, former Canadian ambassador to the U.S. The Canadian application is expected to be announced in San Jose, Costa Rica, by Canadian Prime Minister Brian Mulroney, who is attending a centenary celebration of Costa Rican democracy. "Canada has a larger and more beneficial role to play in the hemisphere," Mr. Mulroney said recently. Some Canadian political commentators have opposed Canada's joining what they see as a U.S.-dominated organization. "Canada could do plenty of things to get serious about Latin America without running the risk of getting caught in the cross fire" between the U.S. and Latin American members of the OAS, said Jeffrey Simpson, a columnist in Toronto's Globe & Mail newspaper. Canada, at times, could be an awkward OAS partner for the U.S. if its United Nations voting record is an indication.In U.N. General Assembly votes last year, Canada voted the same as the U.S. only 63% of the time.France voted the same as the U.S. 76% of the time, West Germany 79% and Britain 83%. Larry Birns, director of the Washington-based Council on Hemispheric Affairs, a liberal research group, said that Latin American countries would be "profoundly disappointed" if Canada were to follow the U.S. lead in the OAS. "Latin Americans see Canada as a non-interventionist power that respects their sovereignty," he said. The OAS, which tries to promote peace and economic development within the Americas, is attempting to find a settlement of the current Panama political crisis.Cuba has been suspended from OAS membership, but the organization's members are discussing Cuba's reinstatement.
Robert H. Knight's Oct. 5 editorial-page article bemoaning violence in comedy movies ("Hollywood, You Slay Me") is interesting, but somewhat off-base. As a fan of older movies from the 1920s on, I do not find modern comedies contain violence, sex and foul language to any greater degree than other recent movies.Older movies have plenty of violence, though it is portrayed in keeping with the more restrictive social conventions of the time.For example, one of my favorite movies is the 1949 British comedy "Kind Hearts and Coronets," in which the entire comedy is based on actor Dennis Price's murdering eight titled relatives (all played by Alec Guinness) because they snubbed his mother and stand in the way of his acquiring the family title.Similarly, one of the most popular comedy genres of the 1930s and '40s was the "murder mystery/ comedy." The "Thin Man" series of movies, as well as many others, based their entire comedic appeal on the star detectives' witty quips and puns as other characters in the movies were murdered. Further, I think Mr. Knight made a poor choice in picking "A Fish Called Wanda" as an example of the deplorable state of modern comedy movies.The specific scene he mentions in which pet dogs are crushed is somewhat reminiscent of the continual plights that befall the coyote in the old Warner Bros. "Road Runner" cartoons.There is no slow-motion close-up, blood-and-guts portrayal of the animal's demise.Keep in mind that this is the same movie in which a character is flattened by a steamroller only to pop right back up and peer in the window of a Boeing 747 -- from the outside -- as it takes off. I will be the first to agree that there is much to be found wrong with modern movie making.Many modern scriptwriters seem to be incapable of writing drama, or anything else, without foul-mouthed cursing.Sex and violence are routinely included even when they are irrelevant to the script, and high-tech special effects are continually substituted for good plot and character development.In short, we have a movie and television industry that is either incapable or petrified of making a movie unless it carries a PG-13 or R rating.Hence copious amounts of gratuitous sex, violence and gutter language are included as a crutch.However, these faults are not the exclusive property of modern comedies, and I believe Mr. Knight errs when he attempts to link this modern phenomenon too closely to a single category of movie making. Michael Smith St. Louis
Western European leaders who favor speedy economic and monetary union are adding a new argument to their arsenal: the dizzying political changes under way in Eastern Europe. French President Francois Mitterrand, European Community Commission President Jacques Delors, Spanish Prime Minister Felipe Gonzalez and others have begun linking the rapid changes in the East to the need to speed up changes in the West.They are stressing that the best way for the West to help the East is to move faster towards Western European economic and monetary unity.This would make the market-oriented system more attractive to Eastern countries, they argue, and allow greater economic aid and technological know-how to flow from West to East. "The only response to the challenge being presented to us by the East," Mr. Mitterrand told the European Parliament in Strasbourg yesterday, "is to reinforce and accelerate the union and cohesion of the European Community." Mr. Mitterrand proposed that a conference be convened next fall to write a new treaty for the EC allowing a European central bank, and that the treaty be ratified by 1992.Mr. Mitterrand also proposed a separate "Bank for Europe" that would channel development money to the East. One basis for linking change in the East and change in the West is the notion that integrating 110 million Eastern Europeans with 320 million Western Europeans is primarily the task of Europeans, despite the U.S.'s obvious strategic and economic interest.Says a European strategist: "The U.S. tends to look at Eastern Europe {not including the Soviet Union} as Europe looks at Latin America: important but far away.But for us in Western Europe, these are Europeans next door." A reintegrated Europe implies big changes in 40-year-old military and economic policies.There is likely to be a natural division of labor, says Francois Heisbourg, director of the International Institute for Strategic Studies in London, with the U.S. more engaged in strategic issues with the Soviet Union, and Western Europe more involved with specific aid measures for the East. The designation at July's economic summit of major industrialized nations of the EC Commission as coordinator of Western aid to Poland and Hungary was a first step.In part, this division is dictated by economics: West Germany is a net exporter of capital while the U.S. isn't.While American aid efforts have been limited by budget problems, yesterday France announced a three-year, four billion French franc ($650 million) aid plan for Poland. Despite sudden changes in the strategic equation, some Western European leaders, especially British Prime Minister Margaret Thatcher, remain skeptical about European political and economic unity, and are unlikely to let East-West concerns change their minds.But British analysts are beginning to link the issues. "We need a Western Ostpolitik," says John Roper, of the Royal Institute of International Affairs in London, referring to West Germany's longstanding policy of a diplomatic opening to the East. "For Poland and Hungary we need to think about a stick-and-carrot economic approach that would force them to price things realistically in return for removing all our tariff barriers." He notes that the Marshall Plan of U.S. aid to Europe "didn't just throw money at post-war Europe, it also liberalized and opened up those markets." The French analysis goes further. "Most of the West's leaders have finally concluded that we all want perestroika {Soviet leader Mikhail Gorbachev's policy of economic restructuring} to succeed," says Hubert Vedrine, security adviser to Mr. Mitterrand. "But they haven't yet drawn the operational policy conclusions." He adds that with communism collapsing and Mr. Gorbachev scrambling to rejuvenate the Soviet economy, "Our interest lies in a controlled transformation, a contained nuclear reaction, so we need to help him, and not just with words." Managing change, he adds, will require a lot more aid and a prominent role for the EC, especially in dealing with the question of German reunification. Thierry de Montbrial, director of the French Institutue for International Relations in Paris, says it isn't clear what, exactly, West Germany wants.Any push for a Gorbachev vision of a "common European home," implying the eventual dissolution of the EC, a Soviet-German partnership and the withdrawal of U.S. forces, "would be a very, very serious problem," he says.He doubts a Bismarckian super state will emerge that would dominate Europe, but warns of "a risk of profound change in the heart of the European Community from a Germany that is too strong, even if democratic." He adds: "We, and the rest of the EC have to talk to the Germans, now, frankly and raise these future risks with them." While many commentators, particularly French ones, worry that hasty and emotional reaction to the changes in the East might lead to dangerous pressures for a denuclearized Europe or the speeded-up withdrawal of American troops, Mr. Roper in London sees a more positive scenario. "There seems to be a message from Moscow there's a deal on offer," he says. "They want reassurance we won't try to undermine or destroy the Warsaw Pact. . . . In return, the U.K. and France could keep their nuclear weapons.He adds: "Once both sides feel comfortable, it should be that much easier to make more progress toward the economic and social reforms that are now starting in the East."
Du Pont Co. reported that third-quarter profit grew a robust 19% from a year ago on the strength of the company's operations in various chemicals and fibers, and in petroleum. Du Pont also raised its quarterly dividend to $1.20 a share from $1.05, a change that will increase the annualized payout to shareholders by some $140 million. Du Pont, unlike companies hurt badly by sharp price declines for basic chemicals and plastics, is benefiting from its broad range of businesses.The profit gain was made despite a weakening in the housing market, for which the company is a supplier, and a strengthening in the dollar, which lowers the value of overseas earnings when they are translated into dollars. The Wilmington, Del., company reported net of $547 million, or $2.36 a share, which was in line with Wall Street estimates.In the year-earlier period, the company earned $461 million, or $1.91 a share.Sales in the latest quarter were $8.59 billion, up 9.4% from $7.85 billion. The dividend increase was Du Pont's second this year, an affirmation of statements by top executives that they intend to increase rewards to shareholders. "We haven't benefited the shareholder as much as we need to," said Edgar Woolard Jr., Du Pont's chairman and chief executive officer, in an interview several months before he entered his current position in April. The largest beneficiary will be Seagram Co., which owns about 23% of Du Pont.A spokesman for Seagram, the Montreal wine and spirits concern controlled by the Bronfman family, said the company will post additional pretax profit of about $33 million a year because of the additional Du Pont dividends. Du Pont also announced plans for a 3-for-1 stock split, although the initial higher dividend will be paid on pre-split shares.Du Pont's stock rose $2.50 a share to close at $117.375 in New York Stock Exchange composite trading yesterday.Seagram closed at $84.75, up 12.5 cents a share in Big Board trading. Leading the gains for Du Pont in the latest quarter was its industrial products segment, where profit soared to $155 million from $99 million a year earlier.The company benefited from continued strong demand and higher selling prices for titanium dioxide, a white pigment used in paints, paper and plastics. James Fallon, a New Providence, N.J., marketing consultant to the chemicals industry, says Du Pont still holds an edge in making the pigment because the company was "first in with the technology" to lower costs.He said Du Pont holds about 23% of the world-wide market, the largest single share, at a time when growing uses for the pigment have kept it in tight supply, although others are now adding low-cost production capacity. Profit climbed to $98 million from $71 million in the petroleum segment, as Du Pont's Conoco Inc. oil company was helped by crude oil prices higher than a year ago and by higher natural gas prices and volume. In the diversifed businesses segment, which includes herbicides, profit grew to $64 million from $27 million.A spokesman said herbicide use in some areas of the U.S. was delayed earlier in the year by heavy rains, thus increasing sales in the third quarter. In the fibers segment, profit rose to $180 million from $155 million, a gain Du Pont attributed to higher demand in the U.S. for most textile products. Two segments posted lower earnings for the quarter.Profit from coal fell to $41 million from $58 million, partly because of a miners' strike.And profit from polymers dropped to $107 million from $122 million amid what Du Pont called lower demand and selling prices in certain packaging and industrial markets. For the nine months, Du Pont earned $2 billion, or $8.46 a share, up 18% from $1.69 billion, or $7.03 a share, a year earlier.Sales increased 10% to $26.54 billion from $24.05 billion. The increased dividend will be paid Dec. 14 to holders of record Nov. 15.The stock split, which is subject to holder approval, would be paid on a still unspecified date in January to holders of record Dec. 21.
Ohbayashi Corp. agreed to buy E.W. Howell Co., the U.S. subsidiary of Selmer-Sande AS, of Norway, for about $7 million. Howell, a Port Washington, N.Y., construction concern, was established in 1891.It has three U.S. branches. Ohbayashi officials said the purchase was undertaken to participate in ventures in and around New York City.They said Howell is particularly successful there because of its membership cooperation with local unions. Ohbayashi is Japan's second largest construction company.Until now, its inability to form membership ties with organized labor has kept it from penetrating the lucrative New York metropolitan area construction market. The company also hopes the latest acquisition will help secure large construction orders from Japanese concerns with U.S. operations. Ohbayashi cited industry publications crediting Howell, currently capitalized at $2.2 million, with receiving orders valued at $225 million in 1988. The Japanese company received orders totaling 12.44 billion yen ($87.9 million) from its U.S. business activities during the fiscal year ended in March.
H. Marshall Schwarz was named chairman and chief executive officer of U.S. Trust Corp., a private-banking firm with assets under management of about $17 billion. Mr. Schwarz, 52 years old, will succeed Daniel P. Davison Feb. 1, soon after Mr. Davison reaches the company's mandatory retirement age of 65.Mr. Schwarz, who is president of U.S. Trust, will be succeeded in that post by Jeffrey S. Maurer, 42, who is executive vice president in charge of the company's asset-management group. U.S. Trust, a 136-year-old institution that is one of the earliest high-net worth banks in the U.S., has faced intensifying competition from other firms that have established, and heavily promoted, private-banking businesses of their own.As a result, U.S. Trust's earnings have been hurt. But Mr. Schwarz welcomes the competition in U.S. Trust's flagship businesses, calling it "flattery." Mr. Schwarz says the competition "broadens the base of opportunity for us." Other firms "are dealing with the masses.I don't believe they have the culture" to adequately service high-net-worth individuals, he adds.U.S. Trust recently introduced certain mutual-fund products, which allow it to serve customers with minimum deposits of $250,000.Previously, the company advertised at the $2 million level. "We have always taken smaller accounts, but now we are looking for smaller accounts that will grow," Mr. Schwarz says. "Our bread and butter is still the $2 million to $20 million account," he says.The new services allow U.S. Trust to cater to the "new wealth," Mr. Schwarz says. Quarterly net income this year has risen just over comparable periods in 1988, when year-end net was below the 1987 level.In this year's third quarter, for example, net was $10.5 million, or $1.05 a share, compared with $10.3 million, or $1.02 a share, a year earlier.Assets as of Sept. 30 fell to $2.46 billion from about $2.77 billion. "We will have a reasonably flat year this year," Mr. Schwarz says.Mr. Schwarz also said costs associated with U.S. Trust's planned move to midtown Manhattan from Wall Street will continue to be a drag on earnings through 1990. Mr. Schwarz's great-grandfather founded the New York toy store F.A.O. Schwarz, but his family no longer has ties to the company.Mr. Schwarz's father was a U.S. Trust trustee until 1974. U.S. Trust also created a four-member office of the chairman, effective Feb. 1.It will include Messrs.Schwarz and Maurer.Donald M. Roberts, 54, treasurer, and Frederick S. Wonham, 58, who takes responsibility for the funds-service group, were named vice chairmen and will serve in the office of the chairman.Mr. Roberts continues as treasurer, and Mr. Wonham remains responsible for the offices of comptroller, planning, marketing and general services. Frederick B. Taylor, 48, also was named a vice chairman and chief investment officer, a new post.He previously held similar responsibilities.Mr. Taylor also was named a director, increasing the board to 22, but is not part of the new office of the chairman. James E. Bacon, 58, executive vice president, who has directed the funds-service group, will retire.
Sun Microsystems Inc., snapping back to profitability after its first quarterly loss as a public firm, said it earned $5.2 million, or seven cents a share, in the fiscal first quarter. Sun, a maker of computer workstations, reported sales of $538.5 million for the quarter ended Sept. 29, up 39% from $388.5 million a year earlier.In the 1988 period, the company earned $20.6 million, or 26 cents a share. Sun's results were slightly better than expectations.Earlier this month, the company said it expected to break even for the quarter on sales of $530 million. In a statement, Scott McNealy, Sun's chief executive officer, said the company's performance was hampered by problems tied to the introduction of a major new family of computers in April.One of those new computers, called Sparcstation 1, accounted for nearly half of the 28,000 systems Sun shipped in the quarter, he said.More than two-thirds of the systems shipped, meanwhile, were products introduced in April. But problems in manufacturing, forecasting demand and getting the bugs out of a new management information system made it extremely difficult for Sun to meet demand for its newest computers well into the summer.These problems also resulted in Sun reporting a $20.3 million loss for its fourth quarter ended June 30. Mr. McNealy said the issues that hurt Sun's performance earlier this year are now "largely" behind the firm, and he indicated that Sun's profitability should increase throughout the fiscal year. Sun also reported a record backlog of orders.While this indicates continued strong demand for the company's desk-top computers, Sun faces increasing competition from Digital Equipment Corp. and Hewlett-Packard Co. Recently, analysts have said Sun also is vulnerable to competition from International Business Machines Corp., which plans to introduce a group of workstations early next year, and Next Inc.
Two old friends, George Bush and Deng Xiaoping, are trying to limit further damage to U.S.-China ties.But as Congress prepares a fresh package of sanctions against Beijing, the already-tense relationship could get worse. The problem for Congress will be to weigh what China is saying to its people against the more conciliatory message it is delivering to the Bush administration. In a move apparently aimed at heading off new punitive legislation, Mr. Deng sent an indirect signal to Washington via T.D. Lee, a Columbia University physicist who met Mr. Deng and other Chinese leaders in Beijing last month.When he met with Mr. Bush on his return, Mr. Lee says, he told the president that the Chinese "made statements to me that I regard as a first step toward reconciliation." The communication Mr. Lee brought represents the softer line the U.S. has been hoping to hear from Chinese officials since the June 4 massacre of pro-democracy demonstrators in Beijing. The Chinese leader, Mr. Lee informed Mr. Bush, expressed some regret for what had happened in Beijing and conceded that China's officials bore some responsibility.Mr. Lee says Mr. Deng told him: "We should not mind those who participated in demonstrations, signed anti-government materials and went on hunger strikes." Mr. Deng added, says Mr. Lee, that "we really made mistakes.We must not shirk our responsibility and we cannot just blame the demonstrators." Mr. Lee also reported to the president that, in a separate meeting, Communist Party chief Jiang Zemin said the Chinese leadership "looked kindly on the students who took part in the demonstrations." Mr. Jiang also pledged that the Chinese Red Cross would publish "very soon" a list of those killed.And he told the physicist that China's leaders were "very much concerned" about the deaths and had arranged aid for the victims' families. "I transmitted my conversations to the White House," Prof.Lee says.But, he adds, "I was not acting as a messenger." He says that the Chinese never asked him to convey their statements to President Bush, but that the White House spontaneously invited him to do so.Mr. Lee concedes the statements made to him are far different from others being issued in China, but attributes that to the fact that the situation in China is "very complex." According to U.S. sources in Beijing, the administration hopes Mr. Deng's fairly conciliatory comments will prod Congress to be cautious about further sanctions against Beijing. "The president doesn't want to have legislative sanctions," says a U.S. official. "But he may not have a choice." Given China's far-from-conciliatory statements to its own people, Mr. Bush may be unable to prevent new sanctions.Beijing officials have said they will step up the campaign of arrests and intimidation against those who participated in the demonstrations.Sentences have been stiff.A university student got eight years for participating in the rallies, sources in Beijing said, while an 18-year-old worker got 10 years. Nor has Beijing hinted to its citizens that it will publish the identities of those killed.So far, the victims are officially considered evil-doers, and their families receive no compensation.A man gunned down by a stray bullet while cycling to work carries, after his death, the official stigma of "counterrevolutionary," his wife says. What's more, much of China's official rhetoric is hostile to the U.S. China frequently lambastes the U.S. Embassy for harboring astrophysicist Fang Lizhi, a political dissident who took refuge there after the massacre. "In the U.S., there are still people who want to crush China and interfere in our internal affairs," Zhu Qizhen, China's new ambassador to the U.S., said as he left for Washington last week. The House and Senate are to begin soon hashing out an agreement for sanctions legislation.It will probably be attached to a State Department authorization bill, which Mr. Bush isn't expected to veto.A congressional staffer involved in drafting the sanctions says they are likely to mirror those Mr. Bush enacted shortly after the massacre.But as legislative action, they would carry greater weight and would be more difficult to rescind. Measures already in effect that are expected to be made law include a ban on military sales and exchanges, a suspension of most high-level government contacts and a halt to U.S. trade enhancement programs, such as the Overseas Private Investment Corp. and the Trade Development Program. Codifying those sanctions could prompt Chinese retaliation. "If the two sides aren't careful, U.S.-China ties could spin downward, out of control," says a U.S. official in Beijing. "Bush and Deng are hoping {that} cooler heads prevail."
International Business Machines Corp. made news this summer when it landed an unusual contract to manage all of Eastman Kodak Co. 's data-processing needs.But the computer giant appears to have lost a second key contract with Kodak to archrival Digital Equipment Corp. Kodak yesterday confirmed that it has entered negotiations with Maynard, Mass.-based Digital to manage all of its voice and data communications needs.Kodak, based in Rochester, N.Y., said IBM also had bid for the business.IBM is based in Armonk, N.Y. The loss is a setback to IBM, which pointed to the Kodak contract as an example of its success in systems integration.That's an emerging business in which computer makers or consultants provide turnkey communications and computing services to major corporations. A Kodak spokesman declined to disclose the potential value of the contract, which is still in negotiation.He said that American Telephone & Telegraph, MCI Communications Corp., Rochester Telephone Corp. and IBM itself would likely be Digital's subcontractors on the project. "When we decided to look outside the company for critical data-processing and communications services, we wanted to get the best vendor for that service," said Paul Allen, the spokesman. "That's why we went with IBM for data center management . . . and now Digital for voice and data telecommunications."
The Soviet State Bank announced a 90% devaluation of the ruble against the dollar for private transactions, in an apparent attempt to curb the nation's rapidly growing black market for hard currency. The measure, which will take effect next Wednesday, will create a two-tier exchange rate.Commercial transactions will continue to be based on the official rate of about 0.63 rubles to the dollar.But for Soviet citizens who travel abroad for business or tourism, the rate will jump to 6.26 rubles to the dollar. Tass news agency said the devaluation also will apply to foreigners' transactions.But it didn't elaborate, and it remains unclear how far Western tourists and foreigners living in Moscow will be allowed to benefit from the sweeping rate cut. The current ruble rate has long been out of line with the black market.As Soviet leader Mikhail Gorbachev has opened up the country to foreign trade, the discrepancy has become ever greater.Western tourists in the Soviet Union who could exchange a dollar -- albeit illegally -- for about four rubles a year ago are now being offered 15 rubles or more. Even at such rates, black marketeers have been able to make big profits because of the dire shortage of consumer goods here.They use dollars to buy Western items such as video recorders and personal computers and then sell them at a huge mark-up.The going rate for a small personal computer that costs about $2,000 in the West is anywhere from 50,000 to 100,000 rubles.Even a pack of 20 Western cigarettes can fetch 20 rubles or more.With more than 300 billion rubles in savings accounts and little to spend them on, Soviet consumers grumble at the exorbitant black-market prices for such goods -- but they buy them anyway. Moscow has already tacitly admitted that the ruble isn't worth much, announcing in August that it will pay Soviet farmers in hard currency for grain and other produce that they grow in excess of state-plan quotas. "The absurdity of the official rate should seem obvious to everyone," the afternoon newspaper Izvestia wrote in a brief commentary on the devaluation. The State Bank's move is part of a drive to iron out exchange-rate discrepancies as Moscow moves toward making the ruble convertible -- a goal that Soviet bankers and economists say is still far away.Rumors of an impending devaluation have been circulating in Moscow for weeks, but the size of the cut took many Western bankers by surprise. "It's much bigger than we expected," said one German banker, who asked not to be named. The next step, which could have a larger effect on businesses, will come early next month, when the Bank for Foreign Economic Affairs is to hold its first auction of foreign currency.Soviet companies needing Western currencies to buy equipment and supplies abroad will be able to submit bids. Plans for the auction, which was supposed to take place last spring and become a regular event, have been thwarted by a lack of hard currency.Soviet firms that hold some are unwilling to part with it, and joint ventures aren't yet allowed to participate.The Kremlin also has been unwilling to provide hard currency for the auction, using a lot of it instead to finance emergency imports of consumer goods. If foreign tourists and businesses could sell their currencies freely at the new, better exchange rate, that would enable the State Bank to increase its dollar reserves and would mop up some of the excess rubles in the economy at the same time.But the amounts they exchange may be limited; most Soviet hotels, for example, demand payment in hard currency from Western visitors. Unless other rules are changed, the devaluation could cause difficulties for the people it is primarily meant to help: Soviets who travel abroad.Over the past three years, thousands of people here have made use of looser travel restrictions to get their first taste of life abroad. But under current rules, they are allowed to change just 200 rubles into dollars and other currencies for each trip.At the new rate, that would give them about $30 to travel on.It isn't yet clear whether the 200-ruble limit will be lifted.If it isn't, the black market for dollars probably will continue to thrive.
This year is the 75th anniversary of the Federal Reserve System, and some members of Congress think it's time to take a fresh look at the nation's central bank.After 75 years there may be a few things that are worth reexamining. The regional Federal Reserve Bank setup, for instance, may be out of date.In earlier years it may have seemed reasonable to give Richmond, Va., a bank and allow Los Angeles only a branch of the San Francisco bank, but times have changed.Maybe the whole regional system is an anachronism; the Fed, after all, is a national central bank. Some of the would-be reformers, however, want to restore an arrangement we once had -- or, at least, part of it.In the beginning, the treasury secretary and the comptroller of the currency were both ex officio members of the Federal Reserve Board.But in 1935, when Congress was trying to find someone or something to blame for the Great Depression, it decided to drop both the secretary and the comptroller from the board. Carter Glass, a former treasury secretary who was then back in Congress, probably influenced the decision.He said that when he was on the board he felt that he had a great deal of power and, somehow, he didn't think that was a good thing. Times have changed.Rep. Byron Dorgan (D., N.D.) has introduced a bill in Congress, co-sponsored by Rep. Lee Hamilton (D., Ind.), that would put the treasury secretary back on the board.There is doubt that the change would accomplish much but at least Congress, as in 1935, would be doing something.So far no one has suggested putting the comptroller back on the board. Nicholas Brady, the incumbent treasury secretary, is of course aware of the proposal, and he doesn't like it much.Mr. Dorgen has changed tactics, dropping the seat-for-the-secretary idea.That may have pleased the secretary, but H. Erich Heinemann, chief economist of the investment firm of Ladenburg, Thalmann & Co., suggests that Mr. Brady may figure he already has all the power he needs. Like most treasury secretaries, Mr. Brady takes a keen interest in monetary matters, of course.He was, in fact, taking an especially keen interest in board matters even before he went to the treasury.After the October 1987 market crash, Mr. Brady as a private citizen headed a presidential commission that tried to decide what went wrong and what should be done about it.One of the commission's recommendations was that a single agency, probably the Federal Reserve, should coordinate regulation of all financial markets. This recommendation might have encouraged a turf-hungry bureaucrat to try to expand his power, but so far Federal Reserve Chairman Alan Greenspan hasn't made a pitch for the job.The Fed has plenty of responsibilities in times of market turmoil and in 1987 and again in 1989 it appears to have handled them well.Mr. Brady has said he thought government agencies in the latest market drop were better prepared to coordinate their actions, but he has left no doubt that he still likes the ideas the commission advanced nearly two years ago. In recent weeks, moreover, Mr. Brady has joined other administration officials in trying to urge the Fed toward lower interest rates.The urging admittedly has been gentle.In an interview with the Washington Post in early October, the secretary said the Fed may be slightly more interested in curbing inflation than the administration is, while the administration may put slightly more emphasis on spurring economic growth. At least some economists, of course, would argue that inflation deserves a lot of emphasis.Earlier this month the St. Louis Fed held a conference to assess the system's first 75 years.Allan Meltzer, a Carnegie-Mellon University economist, noted that the Fed's record included the longest, most sustained, peacetime inflation in our history, dating from either 1966 or 1967 to 1989.The inflation-growth argument is an old one, but Mr. Brady, on the board or off, is surely trying to influence Fed policy. Equally importantly, the treasury secretary has spearheaded the administration effort to bring the U.S. dollar down by shopping avidly for West German marks and Japanese yen.The treasury can do something on its own, but to have any hope of success it needs help from the Fed.The central bank has been helping, but apparently not especially eagerly. The Fed has been intervening in foreign currency markets, all right, but through August, at least, it appeared to be "sterilizing" the intervention.In other words, it was offsetting purchases of marks and yen by buying dollars in the domestic money market. Now, sterilized intervention may have some effect.When traders see the Fed is in the exchange market it may make them tread a little carefully, for fear of what the central bank may do.But it's generally accepted that sterilized intervention has little or no lasting impact on currency values.After August the Fed may have stopped sterilizing, but it's hard to see much impact on the dollar.The dollar is still highly volatile.The Fed has let interest rates slip slightly, but whether the main reason was dollar intervention, the gloomy reports on manufacturing employment, or the Friday 13 market drop, only Mr. Greenspan and his associates know. Earlier this year, Martin Feldstein, president of the National Bureau of Economic Research, argued forcefully that a government that wants steady, stable exchange rates might try some steady stable economic policies.Trying to manage exchange rates to some desired level, he said, "would mean diverting monetary and fiscal policies from their customary roles and thereby risking excessive inflation and unemployment and inadequate capital formation." The more we think about it, the more we suspect Mr. Brady does indeed have enough power where he already is.
Cineplex Odeon Corp. directors said the company's chairman and chief executive, Garth Drabinsky, is considering bidding 780.6 million Canadian dollars (US$666 million) to acquire the company. The board said Mr. Drabinsky and Vice Chairman Myron Gottlieb are negotiating financing before offering C$16.40 a share to acquire all of Cineplex's shares outstanding.The directors added that the two executives haven't reached a final decision to proceed with a bid and that until an offer is made the board will continue seeking higher offers from other bidders. The directors said if Messrs.Drabinsky and Gottlieb mail an offer to shareholders by Nov. 22, it will reimburse them a maximum of C$8.5 million for expenses related to a bid. "We consider that his bid is an acceptable bid," said Sandra Kolber, spokeswoman for the independent directors' committee appointed last May to solicit and review bids for the company in the wake of a dispute between Mr. Drabinsky and Cineplex's major shareholder, MCA Inc. MCA and Cineplex's other major shareholder, Montreal-based financier Charles Bronfman and his associates, have agreed to tender their holdings to an offer by Mr. Drabinsky unless a higher offer is made by another bidder.MCA holds half of Cineplex's equity and 33% of its voting rights through restricted voting shares, while Bronfman interests hold about 24% of the company's equity. Ms. Kolber said the committee had received other bids.She declined to identify other bidders but said Mr. Drabinsky's offer "is all cash, and it's for all of the company." Several Cineplex analysts have speculated that outside bids received by the committee were either disappointingly low or for only part of the company. "All this has really established is that MCA and the Bronfmans have agreed on a price at which they can be bought out," said Jeffery Logsdon, an analyst with Crowell, Weedon in Los Angeles. "If a bid materializes at that price, shareholders will have every reason to be glad, but the question of financing still remains." Last April, Mr. Drabinsky and a group of financial backers planned to acquire up to 30.2% of Cineplex for C$17.50 a share from Bronfman associates.Mr. Drabinsky, who would have had the right to vote those shares for two years, said the purchase, subsequently rejected by regulators, was aimed at consolidating his control of the company.MCA strongly opposed the Drabinsky group's move. The directors didn't indicate the source of financing for Mr. Drabinsky's new proposal, but said MCA and the Bronfman associates agreed in principle to buy for $57 million and then lease back to Cineplex its 18-screen theater complex in Universal City, Calif., if Mr. Drabinsky succeeds in an offer. "This is being done at the suggestion of {Mr.Drabinsky} and to accommodate him, to facilitate his financing arrangements," Ms. Kolber said. In addition, the directors said if a bid by Mr. Drabinsky is successful, Cineplex expects Rank Organisation PLC to acquire the 51% of Cineplex's Film House unit it doesn't own, and provide Mr. Drabinsky with additional loan financing. Michael Gifford, Rank's chief executive, said the British theater chain's total involvement "wouldn't exceed $100 million" but declined to give a breakdown between the loan financing and the proposed Film House purchase. Cineplex shareholders responded coolly to yesterday's announcement.In trading on the New York Stock Exchange, Cineplex closed at $11, down 25 cents, with more than a million shares changing hands.On the Toronto Stock Exchange, Cineplex closed at C$12.875, off 37.5 Canadian cents, well below the C$16.40 level. "Where's the bid?" asked Pierre Panet-Raymond, an analyst and broker with Toronto securities dealer McDermid St. Lawrence Ltd. Mr. Panet-Raymond said he doesn't think Messrs.Drabinsky and Gottlieb are "anywhere close" to arranging financing and that investors will need a solid offer before the stock begins to rise again. Mr. Drabinsky couldn't be reached for comment.
This has been a week of stunning events behind what was once called the Iron Curtain and interesting shifts in official American policy toward Moscow.It has also been a week when inside-the-beltway Washington has had a high old time gnawing over ex-President Reagan's multimillion-dollar junket in Japan.The latter may seem oddly irrelevant, if not downright trivial, given the big picture and the way we have handled it in the nation's capital has done nothing to dispel that impression.In fact, however, Mr. Reagan's casual debasement of the office he so recently held raises issues about which Americans can actually do something.Our ability to influence the outcome of events in Eastern Europe and the Soviet Union is far more marginal. Those events continue to move at a rate, and in a direction, which leave informed commentary -- let alone policy -- far in their wake.Earlier this week, Soviet Foreign Minister Eduard A. Shevardnadze confessed that the U.S.S.R. ignored universal human values by invading Afghanistan and, to put it bluntly, "engaged in a violation of the ABM Treaty" by building its radar station at Krasnoyarsk.Hungary is no longer a "Socialist Peoples" republic, the Communist Party no longer has automatic delegates in the U.S.S.R.'s Congress of Peoples Deputies and Egon Krenz was not backed unanimously by his fellow party functionaries when he took over as East Germany's new maximum leader.All of that is just for starters, or so the hundreds of thousands of Eastern Europeans in the streets seem to hope and are certainly demanding. Of like, though lesser, note, Secretary of State James Baker put the administration four-square behind perestroika and glasnost, and therefore behind Mikhail Gorbachev, in a pair of carefully reasoned speeches over the past week or so.And, last but not least, President George Bush now views the changes in Eastern Europe as "absolutely extraordinary" and believes that Mr. Krenz "can't turn the clock back" in East Germany because the change is too inexorable," as he told the New York Times's R.W. Apple Jr. (In other words, after some highly visible dithering and public airing of differences, the administration has come down on the side of those who believe that what we are witnessing from Berlin to Siberia is a good thing to be welcomed, rather than a new thing to be feared or viewed with suspicion.) All of this is what history will note, assuming that events don't make it seem a bad joke, when the record of this time is put down.For journalists, however, who write what they fondly view as history's first draft, this has also been a week to give a lot of space and time to Ron and Nancy's sales appearance in Japan on behalf of a communications giant and its controversial founder.It has been a well-paid transaction, this bartering away of the prestige of the republic's highest office.The Japanese industrialist has coughed up at least $2 million, the Japanese government has put up just about as much, or so it is reported and at least one estimate puts the total tab at $7 million. All of which has enabled those of us in Washington who enjoy wallowing in such things to go into high public dudgeon, as Mr. Apple and I did the other night on ABC's "Nightline." Punching away, we raised what I still think were all the right issues and landed more than one hard blow, but at the end of the affair, there was just the tiniest nagging worry that we had been aiming at the wrong target.As one of his defenders so aptly put it, President Reagan was simply doing what he had always done before his election (and some would say thereafter as well).He was performing for pay, and why should anyone expect anything more? Primarily because there's more to the matter than Ronald Reagan's personal values, or lack of them.Selling the presidency for a mess of pottage is not so much a devaluation from the norm of public life today as it is a reflection of the disintegration of public standards.The theme song for the 1980s has been, "Anything Goes," and it has been whistled with gusto from Wall Street to some of the highest peaks of televangelism. There are those who say that this is nothing new, that America has always suffered from a bad case of schizophrenia when it comes to the dichotomy between what is professed and what is practiced.There is evidence to support that view.Eighty-three years ago, William James wrote to H.G. Wells: "The moral flabbiness born of the exclusive worship of the bitch goddess success . . . that, with the squalid cash interpretation put on the word success, is our national disease." But if it was the national disease in 1906, it is today the national commonplace.If there is no law against it, do it.If the law leaves loopholes, use them.If there is no moral prohibition that expressly forbids it, full speed ahead.And if you are caught or if people complain, simply argue that "everyone does it" or "no one said I shouldn't " and brazen it out.As a last recourse, when all else has failed and you are pinned, apologize for having disappointed those who trusted you but deny having actually done anything wrong. (See, for instance, Jim Bakker's remarks upon being sentenced to prison this Tuesday for defrauding the faithful.) Consider the troubling dissonance between Mr. Shevardnadze's speech of confession this week and the hang-tough defense of everyone concerned with the Iran-Contra affair.The Soviet foreign minister publicly concedes that his government "violated norms of behavior" in Afghanistan and just plain lied about the radar station.We have people in high place still lying through their teeth about Iran-Contra, and that apparently isn't going to change.For that matter, those long ago identified as liars are still given respectful hearings in the press. That is the key to the current "national disease." No one seems willing to hold anyone in public life to a standard higher than the narrowest construction of the law.The occasional media witch hunt about some politician's private peccadilloes notwithstanding, the general inclination is to offer a version of the old refrain, "Who am I to judge?" Thus, no standards, no judgment and no values. "You are mad because he's making so much money," say President Reagan's defenders.No, we ought to be mad because he has demeaned the office we gave him, enlisting it in the service of private gain, just as we ought to be mad that public officials lie through their teeth, play disingenuous games about their activities or, to steal a phrase, make public service a private trough. "I'm not going to be stampeded into overreacting to any of this, President Bush told Mr. Apple in this week's interview.He was referring to the "absolutely extraordinary" events in Eastern Europe, and it is a defensible position.But there is no defense at all for the ethos of the 1980s.We didn't stampede into it, we slithered and slipped down the long slope, and now we have as its quintessential symbol a former president huckstering for a foreign poohbah.Or perhaps that is a fitting symbol for the United States of 1989: Everything for sale; nothing of real value. Mr. Carter is a political commentator who heads a television production firm.
A merchant bank and investment fund have agreed to co-sponsor a reorganization plan to bring Sharon Steel Corp. out of Chapter 11 proceedings and to acquire the company's steel-related assets in a transaction valued at more than $300 million. Castle Harlan Inc., a New York merchant bank, and Quantum Fund said they would acquire the assets for a combination of cash and the assumption of certain of Sharon's liabilities.The balance of the company's assets and liabilities would be transferred to a new company that would be owned by Sharon's creditors.Quantum said it has agreed to purchase as much as $50 million in equity in the new company, if necessary, for the confirmation of the plan. Castle Harlan and Quantum said the plan is expected to be filed within 60 days with the U.S. Bankruptcy Court in Pittsburgh.The agreement is subject to certain conditions, including obtaining financing.Castle Harlan said that such financing is already being sought and that a formal proposal would be made to Sharon's Chapter 11 trustee and other Sharon creditors over the next few days. Sharon, based in Farrell, Pa., filed for protection from creditors under the federal Bankruptcy Code in April 1987.The company had been one of the maninstays of Miami Beach financier Victor Posner's empire.Mr. Posner resigned as president and chief executive officer of Sharon in April 1988.He remains chairman, but wields little power at the company. Quantum Fund, based in New York, is a $2.1 billion investment fund managed by Soros Fund Management.Quantum is Sharon's largest unsecured creditor.The Castle Harlan group includes Walter Sieckman, former chief operating officer of Sharon, and Wolfgang Jansen, former executive vice president. Executives at Sharon declined to comment on the proposal.The company's trustee, F.E. Agnew, was unavailable for comment.
Some of America's biggest trading partners gave a quick thumbs-down to a U.S. proposal to liberalize world trade and reduce farm-product subsidies. In Geneva, where world trade talks are being held under the General Agreement on Tariffs and Trade, or GATT, the European Community called the U.S. proposal "a step backward." And Japan's minister of agriculture, forestry and fisheries told a committee of Japan's parliament that Washington's proposal was impractical and that Tokyo would continue to heavily subsidize its rice farmers. The U.S., in a far-reaching plan submitted to the Geneva meeting Tuesday, proposed curbing price support subsidies within 10 years and eliminating export subsidies within five years.U.S. officials said the plan was flexible, and was intended as a pragmatic approach for gradually removing trade-distorting subsidies. But the EC reacted defiantly, arguing that the proposal's main aim is to destroy the Common Agricultural Policy, the EC's $28 billion-a-year price support program. "The American proposal is not an adequate basis for negotiation," the EC said in a statement. EC officials say they are irked that the U.S. has set a specific timetable and is insisting on the "elimination" of export subsides, not just reduction.EC Agriculture Commissioner Ray MacSharry said the U.S. plan "calls into question" the agreement reached by world negotiators last April in Geneva seeking "substantial progressive reductions in agricultural support and protection." U.S. Deputy Trade Representative Jules Katz replied that the proposal was entirely consistent with the April accord.He said he was surprised by the EC's reaction, calling it "vehement, even frenetic." The U.S. proposal also was criticized by food-importing developing countries, who said that the U.S. made no special allowances for poor nations.While many experts argue that food-importing nations would eventually become self-sufficient in a free-market system, the poorest nations are likely to need help in the meantime. Ambassador Katz said the U.S. was open to discussing particular problems of developing countries. The U.S. administration said its plan would allow considerable flexibility in determining how and when the free-trade goals would be achieved.The U.S. argues that its plan would ease the transition to freer agriculture trade by converting certain non-tariff barriers into tariffs that, together with existing tariffs, then would be phased out over 10 years.But the EC is strongly opposed to converting agricultural supports into tariffs. The new U.S. package also says countries could temporarily raise tariffs on certain products if they experience an unusually heavy volume of imports.It would establish procedures to prevent countries from using health and sanitation rules to impede trade arbitrarily. Seeking to allay European concerns, U.S. Agriculture Secretary Clayton Yeutter said in Washington that the new U.S. plan wouldn't "put farmers out of business" but would encourage them to "grow what the markets desire instead of what the government wants." The EC, with a population of 320 million, has 8.5 million farmers, while the U.S., with a population of about 245 million, has only two million farmers. Japan's objections to the U.S. plan center around its desire to stay self-sufficient in rice, a staple food, even though foreign producers are far more efficient.
Two recent decisions by federal courts cast judges in the odd role of telling authors how they should write history and biography.These decisions deserve more attention than they have received from scholars, and from journalists as well. Russell Miller's "Bare-Faced Messiah: The True Story of L. Ron Hubbard" is a biography of the founder of the Church of Scientology.Mr. Hubbard, who died in 1986, bequeathed the copyrights on his writings to his church, which licensed them to New Era Publications, a Danish corporation.In 1988 New Era sought a permanent injunction to restrain Henry Holt & Co. from publishing "Bare-Faced Messiah" on the ground that Mr. Miller's quotations from Mr. Hubbard infringed the copyrights.The publisher argued in response that the "fair use" statute permits quotation "for purposes such as criticism, comment, news reporting, teaching, . . . scholarship, or research." District Court Judge Pierre Leval denied the injunction on the ground that New Era had failed to make its claim within a reasonable time -- the doctrine lawyers call "laches." As for the merits, Judge Leval said that Mr. Miller had written "a serious book of responsible historical criticism." Verbatim quotation, the judge believed, was justified in order to prove points the author had asserted about Mr. Hubbard -- mendacity, bigotry, paranoia and other unlovely traits that could not be persuasively demonstrated without use of Mr. Hubbard's own words. "The biographer/critic," Judge Leval wrote, "should not be required simply to express . . . conclusions without defending them by example." In such circumstances, free-speech interests outweighed the interests of the copyright owner. But Judge Leval felt constrained by an earlier decision of the Second Circuit Court forbidding a biographer of J.D. Salinger to quote from Mr. Salinger's personal letters.He distinguished the two cases: In Salinger, Judge Leval noted, the quotations were for the purpose of enlivening the biography rather than of proving points about the subject.Still the Salinger decision created a strong presumption against fair use of unpublished materials.Judge Leval reluctantly concluded that a few of Mr. Miller's quotations from Mr. Hubbard's unpublished writings, because they were not necessary to prove historical points, failed the fair-use test and therefore infringed copyright.But the proper remedy, Judge Leval said, lay in a suit for damages, not in an injunction. The case went on appeal to the Second Circuit.In a decision in April of this year, Judge Roger Miner, joined by Judge Frank Altimari, agreed on denying the injunction and did not doubt that "Bare-Faced Messiah" was a serious work but rejected Judge Leval's argument that the public interest in scholarship could outweigh the sanctity of copyright. "We conclude," the two judges wrote, "that laches is the sole bar to the issuance of an injunction." Had the suit been filed in time, they said, "Bare-Faced Messiah" would have been suppressed. This was too much for James Oakes, the court's chief judge.In a powerful separate opinion, Judge Oakes further distinguished the Salinger case by pointing out that a living person, like Mr. Salinger, had privacy rights that did not apply to a dead man, like Mr. Hubbard. "I thought that Salinger might by being taken in another factual context come back to haunt us.This case realizes that concern." Decisions by the Second Circuit itself, Judge Oakes continued, had recognized that public interest in the subject matter and the indispensability in particular cases of verbatim quotations are vital components of fair use.And the injunction Judges Miner and Altimari would so readily have granted had New Era sued in time?Suppression of the book, Judge Oakes observed, would operate as a prior restraint and thus involve the First Amendment. Moreover, and here Judge Oakes went to the heart of the question, "Responsible biographers and historians constantly use primary sources, letters, diaries, and memoranda.Indeed, it would be irresponsible to ignore such sources of information." Now, scholars in fulfilling their responsibility do not claim the right to invade every collection of papers that bears upon their topics of investigation.And of course they agree that people can impose restrictions on the use of their papers, whether in their own possession or as donated or sold to libraries.But in the "Bare-Faced Messiah" case the author found most of his material in court records or via the Freedom of Information Act.And when responsible scholars gain legitimate access to unpublished materials, copyright should not be permitted to deny them use of quotations that help to establish historical points. Judges Oakes and Leval understand the requirements of historical scholarship.Judges Miner and Altimari do not appear to have a clue.Yet at the moment they are the judges who are making the law.As matters stand, the Salinger ruling, torn from context and broadly construed, is controlling.If an author quotes "more than minimal amounts" of unpublished copyrighted materials, as the Salinger decision had it, "he deserves to be enjoined." The courts have not defined "minimal amounts," but publishers, I understand, take it to mean about 50 words.The "Bare-Faced Messiah" decision strikes a blow against the whole historical enterprise.A second decision, handed down in August by the Court of Appeals for the Ninth Circuit, is another blow against scholarship.Janet Malcolm, a professional writer on psychiatric matters, wrote a series of articles for the New Yorker, later published in book form by Knopf under the title "In the Freud Archives." The articles were largely based on interviews Ms. Malcolm had taped with Jeffrey Masson, a psychoanalyst who had served as projects director of the Freud Archives. Mr. Masson then brought a libel suit against Ms. Malcolm, the New Yorker and Knopf.As a public figure, Mr. Masson had to prove malice and, as proof of malice, Mr. Masson contended that defamatory quotations ascribed to him by Ms. Malcolm were in fact fabricated.The quotes could not be found on the tapes, and the two judges who decided the case for Ms. Malcolm and her publishers conceded that, for the purpose of their decision, "we assume the quotations were deliberately altered." For all historians and most journalists, this admission would have been sufficient to condemn the Malcolm articles.But Judge Arthur Alarcon, joined by Judge Cynthia Holcomb Hall, took the astonishing position that it is perfectly OK to fabricate quotations so long as a judge finds that the fabrications do not alter substantive content or are rational interpretations of ambiguous remarks. In his eloquent dissent, Judge Alex Kozinski observed that when a writer uses quotation marks in reporting what someone has said, the reader assumes that these are the speaker's precise words or at least his words purged of "uh" and "you know" and grammatical error.While judges have an obligation under the First Amendment to safeguard freedom of the press, "the right to deliberately alter quotations is not, in my view, a concomitant of a free press." Ms. Malcolm, for example, wrote that Mr. Masson described himself as "the greatest analyst who ever lived." No such statement appears on the tapes.The majority cited Mr. Masson's remark "It's me alone . . . against the rest of the analytic world" as warrant for the Malcolm fabrication.But, as Judge Kozinski noted, the context shows that Mr. Masson's "me alone" remark referred not to his alleged pre-eminence in his profession but to the fact that his position on a particular issue was not shared by anyone else. Ms. Malcolm had Mr. Masson describing himself as "an intellectual gigolo." Again, no such statement appears on the tapes.The majority decision contended that the phrase was a rational interpretation of Mr. Masson's description of himself as a "private asset but a public liability" to Anna Freud and that in any case it was not defamatory.Judge Kozinski found the derivation entirely strained and writes that "for an academic to refer to himself as an intellectual gigolo is . . . a devastating admission of professional dishonesty." These were only two of a series of fabrications that had, in Judge Kozinski's words, the cumulative effect of making Mr. Masson "appear more arrogant, less sensitive, shallower, more self-aggrandizing, and less in touch with reality than he appears from his own statements." As Robert Coles wrote in a review of Ms. Malcolm's book, Mr. Masson emerges "as a grandiose egotist . . . and, in the end, a self-destructive fool.But it is not Janet Malcolm who calls him such: his own words reveal this psychological profile." We now know that the words were not always his own. "There is one sacred rule of journalism," John Hersey has said. "The writer must not invent." Should the green light Judges Alarcon and Hall have given to the fabrication of quotations become standard practice, it will notably reduce the value of journalism for historians -- and for citizens.As Judge Kozinski put it: "To invoke the right to deliberately distort what someone else has said is to assert the right to lie in print. . . . Masson has lost his case, but the defendants, and the profession to which they belong, have lost far more." The historical profession will survive these decisions.Perhaps in time the Supreme Court will correct them.But writing history is tough enough without judges gratuitously throwing obstacles in the scholar's path. Mr. Schlesinger is Albert Schweitzer professor of the humanities at the City University of New York and a winner of Pulitzer Prizes in history and biography.
Legal controversies in America have a way of assuming a symbolic significance far exceeding what is involved in the particular case.They speak volumes about the state of our society at a given moment. It has always been so.In the 1920s, a young schoolteacher, John T. Scopes, volunteered to be a guinea pig in a test case sponsored by the American Civil Liberties Union to challenge a ban on the teaching of evolution imposed by the Tennessee Legislature.The result was a world-famous trial exposing profound cultural conflicts in American life between the "smart set," whose spokesman was H.L. Mencken, and the religious fundamentalists, whom Mencken derided as benighted primitives.Few now recall the actual outcome: Scopes was convicted and fined $100, and his conviction was reversed on appeal because the fine was excessive under Tennessee law. So it was with the Hiss case a generation later, when Alger Hiss became a lightning rod for the anxieties of the Cold War and conflicting attitudes toward the New Deal he had served.His trials aroused public passions out of all proportion to the rather banal secrets he allegedly had passed to Soviet intelligence. And so it seems to be with the case of Elizabeth Morgan, the Washington, D.C., plastic surgeon jailed in a child custody case for refusing to reveal the whereabouts of her daughter.Dr. Morgan has just emerged from the D.C. jail after more than two years' confinement for contempt of court, a heroine to her many supporters. To the rest of us, the case is a puzzle.It is what lawyers call "fact intensive." It presents no great issue of legal principle, no overriding question of family law or the law of contempt.Instead, it turns on the disputed and elusive facts of "who did what to whom." It is difficult, if not impossible, for anyone who has not pored over the thousands of pages of court pleadings and transcripts to have a worthwhile opinion on the underlying merits of the controversy.Certainly I do not. So we must look elsewhere for an explanation of the unusual power this case has exerted over the minds of many, not just in Washington but elsewhere in the country and even the world.I suggest that three themes have come together in the strange case of Dr. Morgan. The first is that it represents an intense battle in what James Thurber used to caricature as "the war between the sexes." But although Thurber did so gently and lightheartedly, many of Dr. Morgan's supporters have taken Thurber's memorable title "The Male Animal" quite literally.The vehemence of the emotions aroused by the case testifies to its symbolic importance in the war that Thurber accepted as an eternal part of the human condition. A second theme is the undercurrent of social class and race in the public reaction to the Morgan case.Dr. Morgan is a highly educated white professional who attended some of the "best" schools.As members of the Black Caucus in Congress asked during the debate on the legislation that freed Dr. Morgan, does anyone seriously believe that if she were an uneducated, black, working-class woman, Congress would have rushed to pass a private relief bill freeing her?Or that the president would have hurried to sign the bill "out of compassion for her plight"?To ask those questions is to answer them. Finally, the case of Dr. Morgan gave Congress an opportunity to act with unaccustomed decisiveness and to engage in one of its favorite pastimes -- bashing the District of Columbia government.The local government is discredited in the eyes of many residents for a variety of reasons, and congressmen read the same newspapers and watch the same TV newscasts as other people in the area do.Bashing the D.C. government is risk-free for members of Congress, who do not have to answer to their own constituents for it. Congress is paralyzed from acting on such great issues of the day as the federal budget deficit.Yet a bill tailored to the interests of a single individual passed Congress with almost unimaginable speed, before the judicial process had run its course, and, indeed, while the Morgan case was awaiting a ruling by the appellate court. The Morgan case thus tells us much more about the current state of sex, class, race and politics in our society than it does about the facts of Dr. Morgan's particular situation.It may stand as a metaphor for how wide and deep the divisions in that society continue to be however we try to deny their existence. Mr. Rezneck is a lawyer in Washington, D.C.
General Motors Corp. 's big defense and automotive electronics unit, GM Hughes Electronics, said net income fell 22% in the third quarter, reflecting declining military spending and slumping GM vehicle production. Meanwhile, net at GM's finance arm, General Motors Acceptance Corp., fell 3.1%.By contrast, Electronic Data Systems Corp., GM's data processing subsidiary, boosted net 16%. GM closed down $1.875 at $44.875 in New York Stock Exchange trading yesterday.Earnings for GM common stock, reflecting the performance of GM's core automotive operations, will be disclosed this morning.GM Class H, which represents a dividend interest in Hughes earnings, closed at $29, up 25 cents in Big Board composite trading.GM Class E, which represents a dividend interest in EDS profit, fell 75 cents to $52.25 on the Big Board. The earnings drop at GM Hughes Electronics is a sign of tough times at both the defense operations of Hughes Aircraft Co. and GM's North American automotive operations, which are a primary customer for the Delco Electronics Corp. side of the GM Hughes unit. Profit at the unit fell to $110.6 million, or 37 cents a share, from $142.4 million, or 45 cents a share, largely because of a $24 million one-time charge associated with Hughes's previously announced plan to reduce employment by at least 6,000 people by year end.Even excluding the charge, however, net fell 5%. In addition, GM's North American vehicle production fell 8.4% from a year ago, which hurt Delco Electronic's earnings, a company spokesman said.That decline was reflected in revenue for the GM Hughes unit, which edged down to $2.58 billion from $2.63 billion. In the nine months, GM Hughes net fell 6.6% to $486.6 million, or $1.48 a share, from $521 million, or $1.58 a share.Revenue rose 3.5% to $8.47 billion from $8.18 billion. At GMAC, net dropped 3.1% to $234.5 million from $241.9 million.The finance unit attributed the decline to higher borrowing costs compared with a year earlier.GMAC said its automotive financing and leasing business rose 35% in the U.S., largely because of dealer and customer incentives used to boost sales.GMAC profits are combined with earnings from the rest of GM's operations and attributed to the company's traditional common stock. In the first nine months, GMAC's earnings fell 8% to $859.5 million from $930.2 million. At EDS, third-quarter profit jumped 16% to a record $110.9 million, or 93 cents a share, from $95.9 million, or 79 cents a share.Revenue rose 12% to $1.37 billion from $1.22 billion. In the nine months, EDS earned $315.8 million, or $2.62 a share, up 13% from $280.7 million, or $2.30 a share.Revenue rose 14% to $4.03 billion from $3.54 billion.Revenue from non-GM accounts was 45% of EDS's total business in the latest nine months, compared with 40% a year earlier.The company has said it wants to boost non-GM revenue to at least 50% of its total business by the end of 1990.
In the bidding war for Public Service Co. of New Hampshire, United Illuminating Co. raised its proposed offer to one it valued at $2.29 billion from $2.19 billion, apparently topping all other bidders. The bids remain subject to evaluation by the federal bankruptcy court supervising PS of New Hampshire's reorganization.They are also indirectly subject to approval by the state of New Hampshire, where residents fear soaring rates to pay for the cost of reorganization. Each of the four parties bidding for PS of New Hampshire proposes a complex financial package to satisfy creditors and shareholders and also proposes a formula to limit rate increases to satisfy the state. The new round of bidding would seem to complicate the decision making for Judge James Yacos, the bankruptcy judge overseeing the case, because the company's stockholders, unsecured creditors and regulators each are currently backing different plans.In addition, some of the proposals are so close, that non-financial issues such as timing may play a more important role. The unsecured creditors agreed in principle to support New Haven, Conn.-based United Illuminating's new bid.They previously had backed an internal reorganization plan proposed by PS of New Hampshire. All of the bidders contemplate full payment including interest to secured creditors.United Illuminating's plan, however, offers more for unsecured creditors. Geoffrey Kalmus, counsel to the official creditors committee, said that under the United Illuminating plan, unsecured creditors would be paid in full credits and interest of about $855 million, accrued before PS of New Hampshire's Jan. 1988 filing for bankruptcy court protection.In addition, they would receive some $200 million in payments for interest since then.Mr. Kalmus said that by next July they would have accrued unpaid interest equal to $350 million.Other plans generally wouldn't pay unsecured creditors' interest accrued since the filing. Under United Illuminating's plan, a new holding company would be formed to own the two companies.It would be 72%-owned by United Illuminating holders and 28%-owned by current holders of PS of New Hampshire preferred and common stock.PS of New Hampshire preferred holders also would get certain debentures and preferred stock.United Illuminating said the preferred holders total package would equal about 60% of their claims.Common shareholders would end up owning about 6.4% of the combined company. As previously reported, Northeast Utilities, Hartford, Conn., Monday filed a bid it valued at $2.25 billion.That offer was endorsed by the shareholders committee. The other bidders, New England Electric System, Westboro, Mass., and PS of New Hampshire, didn't change the value of their bids, although PS of New Hampshire changed its rate proposal.New England Electric values its offer at $2 billion and PS of New Hampshire values its reorganization plan at $2.2 billion. The bankruptcy judge has ruled that federal bankruptcy laws could be used to circumvent state regulation.However, creditors and bidders alike concede that the state plays a major role because it could significantly delay final settlement of a plan it didn't like. The state has endorsed the New England Electric plan, which promises to limit rate increases to 4.8% annually for seven years.Northeast Utilities' plan proposes 5.5% annual increases. PS of New Hampshire amended its plan to call for two years of 5.5% rate increases followed by five years of 4.5% increases.Fuel cost adjustments could change the effective rate increases, however.Previously it had proposed seven years of 5.5% increases. United Illuminating also amended its rate plan.The new offer assumes just five years of 5.5% rate increases, to be followed by state-approved increases under the usual hearing procedure.Previously United Illuminating had also called for seven years of 5.5% increases. The bids and rate proposals generally assume the Seabrook nuclear power plant, which is completed, will go into operation.Most of the plans have reduced bids in case the plant fails to get a license from the Nuclear Regulatory Commission. In New York Stock Exchange trading, PS of New Hampshire's 17 1/2 debenture due 2004 closed yesterday at $82.50, up $2.The utility's stock closed at $4 a share, up 37.5 cents, in composite trading on the Big Board. In a separate development, PS of New Hampshire gave 60 managers severance agreements that would pay one to three years' salary if their jobs were changed or they were dismissed in the wake of a takeover.It said the maximum cost of the plan would be $9.7 million.
Richard Breeden hadn't noticed that his new desk had just four telephone lines and one phone.It was, after all, only his second full day as chairman of the Securities and Exchange Commission. But the lack of lines became painfully apparent.As the stock market lurched into a 190-point free fall on Oct. 13, Mr. Breeden found himself scurrying around the sixth floor of the SEC -- from his desk, where the New York Stock Exchange was on an open line, to his assistant's office, where the Commodity Futures Trading Commission was connected, to a third room, where a computer monitored market moves.With other anxious calls pouring in, he recalls, "I'd either have to disconnect the New York Stock Exchange or go out to the secretary's desk." It won't happen again.Now there are more lines connected to the chairman's office, and the market-monitoring computer has been moved next to his desk.It's all part of a new "command center." The changes in the office layout illustrate Mr. Breeden's stance as the nation's top securities regulator.Like his predecessor, David Ruder, he was faced with a crisis in the stock markets soon after coming into office. But unlike Mr. Ruder, who during the 1987 crash damaged himself by saying rather offhandedly that the markets might be closed, Mr. Breeden is turning the market drop to his own advantage, using it to further his agenda for the SEC. In an interview and in congressional testimony, he repeatedly points to the recent 190-point plunge in the Dow Jones Industrial Average -- the second-largest ever -- as evidence of the need for Congress to give the SEC the ability to better monitor leveraged buy-out loan activity by brokerage firms and to track big trades in the market.A veteran of another financial crisis, the savings-and-loan bailout, Mr. Breeden wants to have the SEC regulate securities issued by banks and S&Ls. More broadly, he wants to "modernize" regulation by eliminating barriers between commercial and investment banking and by helping U.S. financial firms compete in the global market.He believes the tax code encourages the use of debt instead of stock and may fuel leveraged buy-outs, an area the SEC doesn't regulate directly but one where it wields influence both on Wall Street and in Congress. Also unlike Mr. Ruder, Mr. Breeden appears to be in a position to get somewhere with his agenda.As a former White House aide who worked closely with Congress, he is savvy in the ways of Washington.What's more, the coming months likely will offer him the opportunity to obtain his own majority on the five-member commission, enabling him to avoid the dissension that frustrated his predecessor. But Mr. Breeden, a 39-year-old securities lawyer, has skirted some of the heftier issues facing the financial markets.For instance, he hasn't stated a clear position on high-risk, high-yield junk bonds, an area of growing concern as turmoil in the junk market spills over into stocks.He may be waiting to see the results of several pending SEC studies of junk market liquidity and disclosure rules. He also has kept a close wrap on the names of people under consideration for the crucial post of enforcement director at the commission, a job vacant since the summer.Mr. Breeden's selection will be scrutinized as an important signal about the strength of his commitment to continuing the SEC's high-profile pursuit of insider trading and market manipulation on Wall Street. Congress seems likely to let the new chairman have his way for a while.Members of the Senate Banking Committee know Mr. Breeden from working on the thrift-bailout bill, and the relationship generally remains warm.Indeed, during Mr. Breeden's confirmation hearing last month, senators asked him to introduce his children three separate times -- more often than they asked about his qualifications for the job. These days, Mr. Breeden is winning praise in Washington and on Wall Street for his behind-the-scenes role in monitoring the Friday-the-13th market plunge and the following Monday's harrowing morning session.As a regulator charged with restoring investor confidence, Mr. Breeden avoided making market-jarring comments and worked to gather information critical to Wall Street and to other government agencies. Not everyone has jumped on the Breeden bandwagon, however.Some in Washington contend that it's too soon to tell whether Mr. Breeden will help or hinder the SEC. "I don't think this was a real test," says one congressional aide. "It was a fairly stressful weekend, but my sense is if you hadn't had Richard Breeden there, it wouldn't have made much of a difference." For some at the SEC, an agency that covets its independence, Mr. Breeden may be too much of a Washington insider.They note that he has adorned his office with five photos of George Bush, one of them featuring the First Dog, Millie.They worry that Mr. Breeden also will roll over when told to do so by the White House.But Mr. Breeden already has shown an eagerness to run the SEC his way.During the Monday market rebound, a New York exchange spokesman told Cable News Network viewers that the industrial average had turned down 70 points.Stunned, Mr. Breeden turned to his market-monitoring computer, which by then was next to his desk.It showed the DJIA up 30 points. SEC staffers soon determined that a widely watched stock-market service, Quotron, had miscalculated the industrial average.Mr. Breeden instructed SEC staffers to inform the network that it was airing the wrong number. "It was the plunge that didn't happen," he says. Mr. Breeden also is trying to use a far more catastrophic event -- the California earthquake -- to move another rule change past Congress.That disaster closed the Pacific Stock Exchange's stock options-trading operation, forcing those options to be switched to other exchanges temporarily. Though obscure to most investors, the question of whether to list options on more than one exchange has aroused much interest in Congress, mainly because regional exchanges fear the change could bankrupt them. Congressmen raised the issue yesterday at a hearing.Mr. Breeden, not missing a chance to press his agenda, cited the earthquake.That event, he contended, simply shows the "vulnerability" of having listings on only one exchange.
In a corner of the cavernous, new Nippon Convention Center sits Mazda Motor Corp. 's advanced-technology display.The highlight: a "fragrance control system." With the touch of a button, drivers can choose from lavender, jasmine, mint or perfume scents, all blown in through the car's air-conditioning system.The soft, wafting aromas will "improve ride comfort," the display attests, and a proud employee says Mazda hopes to move the system out of the lab and into its cars in a year or two. Welcome to the 28th Tokyo Motor Show.Here you can find Mitsubishi Motors Corp. displaying a "live fish transporter," a truck akin to an aquarium on wheels, and Nissan Motor Co. with its "keyless" Boga, whose doors unlock upon recognizing the owner's fingerprints.Suzuki Motor Co. 's Escudome sport vehicle features a pop-out rear tent and invites drivers to go "back to the nature." But this biennial event, the world's largest display of cars and trucks, has its serious side, including the first major exhibitions of future engines and vehicle-suspension systems.It's also the prime showcase for a country whose world dominance in the industry is increasingly acknowledged, and therein lies the draw. Even the biggest auto shows in the U.S. are largely regional affairs, but the Tokyo show is international.Virtually every automotive analyst in New York showed up.Detroit-to-Tokyo flights were booked solid this week as Motor City executives, including Ford Motor Co. Chairman Donald E. Petersen and Chrysler Corp. Vice Chairman Gerald Greenwald, flocked to see the future.Even the Soviet Union came, for the first time in 24 years, to show off its Lada Niva sedan and its futuristic dark-blue "Kompakt" model. Here's a firsthand look at what the Japanese hosts sported, and what the foreign visitors saw. New Technology The hottest displays were items that insulate passengers from bumps, potholes and other rigors of the road.These "active suspension systems" electronically sense road conditions and adjust a car's ride.Existing suspension systems try to absorb bounces, but active suspension provides power to counter the jolts. Nissan, in a 34-page tract, modestly compares its "hydraulic active suspension" to a cheetah, and equates the various parts to the animal's heart, brain, nerves and blood vessels.Toyota Motor Corp. grandly touted its system in a car that splits in half to reveal the suspension's inner workings. Nissan says it will introduce its first system next month on the Infiniti Q45 luxury sedan, and Toyota's Celica coupe will go on sale with the suspension device next spring.But drivers in the U.S. must wait: The Japanese, for now, are keeping active suspension for domestic use only.And Detroit's Big Three auto makers say their systems are still under development. In the engine department, several companies displayed experimental models that within a decade could provide power equal to today's engines and yet take up only half the space, allowing for shorter hoods.In the so-called two-stroke engines, which are expected to get sharply higher gas mileage, each piston goes up and down only once to provide power.By contrast, the pistons in conventional four-stroke engines must move up and down twice in each power cycle. The two-stroke engine displays by Toyota and Fuji Heavy Industries, the maker of Subaru cars, drew plenty of interest from U.S. auto executives, who are rushing to develop two-stroke engines. Honda Motor Co. shows a more conventional five-cylinder engine in the new Accord Inspire model, which made its debut just this month -- in Japan only.Honda says the five-cylinder engine provides a compromise between the fuel-economy of a four-cylinder, and the power of a V-6.It is rumored to be bound for a new model in the luxury Acura line in the U.S., but Honda officials wouldn't comment. Odd Cars, Funny Names There's plenty of whimsy here, but it isn't always clear whether it's intentional.The show's symbol is a woman riding on a snail, not your usual metaphor for speed and agility.But the sponsors have an explanation: "Through the character associated with a snail," they say, "important values such as harmony with nature and aspirations for the future are sought." Japanese auto makers are known for coming up with funny names, but this year the practice seems to have reached a new high -- or low.Honda has a tiny motorcycle called the Monkey, and a slightly larger cousin, the Gorilla.Mitsubishi has a futuristic delivery truck called the Guppy.Mazda has the Bongo truck and, under its Autozam nameplate, a "microvan" called the Scrum.Its buglike Carol minicar is "designed with softness, gentleness and warmheartedness." But the court jester appears to be Japan's smallest car maker, Daihatsu Motor Co.One of its futuristic concepts is the bubblelike Sneaker, which seats just one person in front and could hold a small child and bag of groceries in the rear.Daihatsu also has the Fellow 90, the Leeza Spider and the Hijet Dumbo. The jokes aren't just on the Japanese, though.Regie Nationale des Usines Renault, the French auto maker, has a concept car called the Megane.The name is supposed to connote feminine grandeur, but in Japanese it means "eyeglasses." Foreign Presence Foreign auto makers are taking the Tokyo Motor Show more seriously than ever.AB Volvo invites passers-by to play "the role of the test dummy" by hopping in a car that simulates a crash to show just how its seat-belt tightener works.Hyundai Motor Co. of South Korea has its first-ever exhibit in Tokyo. General Motors Corp. is sponsoring its first independent display in 10 years, and it includes a boxy Buick station wagon with wood-grain side panels.Ford and Chrysler also have exhibits, although theirs are tucked in a separate room with the less-popular automotive parts section. "We've got to get out of the Detroit mentality and be part of the world mentality," declares Charles M. Jordan, GM's vice president for design, in explaining his pilgrimage to the Tokyo Show. Even so, traditional American cockiness isn't terribly endangered.Ford officials, for example, crowed about their first-ever Tokyo Grand Prix racing victory.True, Ford was declared the winner Sunday, but only after the Honda driver who crossed the finish line first was disqualified because it hit another car and skid momentarily out of bounds. Mr. Jordan of GM, meanwhile, still criticizes Japanese styling. "It's hard for the Japanese," he says, "to get a feeling in a car, to get a passion in a car, to get emotion in a car."
PWA Corp. said it plans to sell by spring 1992 all 15 passenger planes it acquired earlier this year in its 248 million Canadian dollar (US$211.6 million) purchase of Wardair Inc. PWA, which recently merged Wardair's operations with those of PWA-owned Canadian Airlines International Ltd., Canada's second-biggest airline, said the proposed sale is part of a revised five-year plan aimed at streamlining its fleet and shedding debt. PWA wouldn't estimate the value of Wardair's aircraft, which include 12 Airbus A310-300s and three Boeing 747-100s.But James Ireland, a Miami-based technical analyst with Avmark Inc., an aircraft evaluation firm, estimated the total "half-life" value of the 15 planes at about $650 million or more. Mr. Ireland said 11 DC10-30 aircraft that PWA also said it plans to sell, beginning in 1992, have a current half-life value of about $34 million each, or a total $374 million, raising aggregate potential proceeds from the aircraft sale to about $1.02 billion. Mr. Ireland said current demand for used aircraft is strong, partly because surging orders for new aircraft have lengthened waiting lists.He predicted that PWA would have little difficulty attracting prospective buyers. Under its revised fleet plan, PWA said it will also increase its existing fleet of eight Boeing 767-300ER aircraft to 18 by 1994, and add four more Boeing 747-400s by 1994 to the two units that it previously planned to add by next year.PWA said two of the Boeing 767-300ER aircraft scheduled for delivery in 1990 would be leased out for two to five years. PWA didn't disclose the expected net cost of the fleet overhaul, but a Toronto-based analyst estimated it at about $450 million (US), excluding replacement costs for the 11 DC10-30 aircraft that PWA plans to sell, and purchase costs for as many as 17 Airbus 320-200 aircraft that PWA previously ordered. "I don't see this as a debt reduction exercise.It's focused on streamlining" PWA's fleet in a bid to cut training and aircraft servicing costs, the analyst said.PWA's long-term debt and capital lease obligations rose to C$1.24 billion at the end of the second quarter, nearly double the year-earlier figure, reflecting debt absorbed under the Wardair purchase. PWA said it also expects to announce by Tuesday whether it will take delivery of all 17 Airbus 320-200 aircraft it previously ordered.The first five leased units were to be delivered in 1991.
Federal Reserve Chairman Alan Greenspan told Congress that the Fed can wipe out inflation without causing a recession, but he said doing so will inflict some short-term pain and will require reducing the federal deficit sharply. Mr. Greenspan said he and other Fed governors endorse a bill by Rep. Stephen Neal (D., N.C.) that would require the Fed to pursue policies aimed at eliminating inflation within five years. "Such a deadline is attainable, but it would have costs," Mr. Greenspan told Rep. Neal's monetary policy subcommittee. The Fed chief opposed a bill-introduced by Reps.Lee Hamilton (D., Ind.) and Byron Dorgan (D., N.D.) -- that, among other things, would require the Fed to disclose all monetary policy moves immediately and increase outside scrutiny of the Fed. In responding to questions, Mr. Greenspan played down reports of tension between the Fed and the Treasury over exchange-rate policy. "What seem to be interpreted as great conflicts are relatively minor issues of tactics," he said.He didn't elaborate.But the Fed isn't enthusiastic about Treasury efforts to bring down the value of the dollar through intervention in foreign-exchange markets, and the Treasury is frustrated at the Fed's reluctance to cut interest rates to pull down the dollar's value. Mr. Greenspan said the inflation rate, currently about 4 1/2%, "could be brought down to levels which are close to zero without putting the economy into a recession, but I do suspect that there might be some modest loss of economic output." In other words, economic growth would be lower and unemployment would be higher for a few years.But Mr. Greenspan, who has repeatedly said the Fed's goal is to reduce inflation, added that "whatever losses are incurred in the pursuing of price stability would surely be more than made up in increased output thereafter." He warned that Fed efforts to conquer inflation would fail -- and could produce "a major financial crunch" -- unless they are accompanied by a significant reduction in the federal deficit, which causes the government to borrow heavily. Rep. Neal's bill originally called on the Fed to reduce the inflation rate by one percentage point a year for five years and to maintain a zero inflation rate thereafter.He altered the wording to win Mr. Greenspan's endorsement.Even so, his bill is given little chance of passage. Reps.Hamilton and Dorgan also have altered their bill, dropping a proposal to add the Treasury secretary to the 12-member Fed committee that makes monetary policy.Instead, the bill simply calls for twice-a-year meetings between the committee and top administration officials. Even that met with Mr. Greenspan's disapproval because it might subject the Fed "to a more intensely political perspective" and "could risk bending monetary policy away from long-term strategic goals." While each of the Hamilton-Dorgan proposals represents only a small step, together they would erode the Fed's independence, Mr. Greenspan said. Mr. Greenspan also said that although he favors cutting capital-gains taxes as sound economic policy, he would oppose such a move if it would undo the political compromise embodied in the Tax Reform Act of 1986 and result in higher marginal income tax rates.
Sears, Roebuck & Co. signed a contract with Bob Vila, the former host of the popular public television program "This Old House," to star in a half-hour home improvement show sponsored by the giant retailer. The do-it-yourself show, slated to start airing by June 1990, marks Sears's entry into the burgeoning market of home repair television programs and could bolster sales of its home improvement products.In recent months, sales of home improvement items have sagged, along with sales of other big ticket durable goods. The show also signals Mr. Vila's return as a television celebrity.Earlier this year, public television station WGBH in Boston fired Mr. Vila after a sponsor protested some of his numerous commercial endorsements. With Mr. Vila as host, "This Old House" became one of the Public Broadcasting Service's top 10 programs, airing weekly on about 300 of the network's stations and seen by an average of 12 million viewers. But Home Depot Inc., an Atlanta-based home center chain, objected when Mr. Vila started doing commercial endorsements for Rickel Home Centers, a New Jersey building supply company that competes with Home Depot in some markets. "I'm ecstatic about the change," said Mr. Vila, whose new syndicated program is called "Home Again with Bob Vila." In an interview, Mr. Vila criticized his old show, which is continuing with a new host. "Public TV is in fantasy land," he said. "Last season, we did a story that involved spending $700,000 in converting a two-family house into a bed and breakfast." In the new show, he said, "we're going to spend $60,000 building a start-up house" for a young couple. While Sears wouldn't comment on the brouhaha over Mr. Vila's commercial endorsements, it appears to be building a fence around Mr. Vila's affections.His contract makes him "exclusive" spokesman for Sears's home improvement marketing campaigns.Ogilvy & Mather in Chicago, a unit of WPP Group PLC, will handle the advertising account and syndication. The only other endorsement permitted by the contract involves a series of Time-Life home improvement and repair books.His other agreements to promote products have expired.Little matter for Mr. Vila, who complains that "public TV never paid me more than $40,000 a year." He said his compensation under the Sears contract is "a multimillion dollar deal."
The White House has decided to push for changes in pesticide law that are designed to speed the removal of harmful chemicals from the nation's food supply. The proposed changes, which are scheduled to be announced today, would apply to pesticides and other substances found on fresh and processed foods, according to federal officials.Environmental groups have been calling for faster action on dangerous pesticides and may welcome part of the proposal. But they are already objecting to, among other things, a plan to give more weight to cost-benefit considerations in evaluating pesticides."It's a tremendous disappointment," said Janet Hathaway, an attorney with the Natural Resources Defense Council. "Allowing the EPA to condone continued use of a chemical whenever the benefits outweigh the risks is absolutely anathema to the environmental community." The Bush administration plans to announce a series of principles and to work with congressional leaders in writing specific legislative proposals that embody them.The principles would give the Environmental Protection Agency increased authority and flexibility in regulating pesticides, with the aim of enabling the agency to move more quickly.There already are proposals pending in Congress to overhaul pesticide law. Moves to accelerate the removal of dangerous pesticides gained new impetus during this year's Alar scare, when the EPA was harshly criticized for failing to yank the possible carcinogen, a growth regulator used to make apples redder and crunchier.The agency has since acted to remove Alar from the nation's grocery shelves by May 31, 1991, and the apple industry has said that growers already have stopped using the chemical. In addition, the principles attempt to eliminate the so-called Delaney Paradox.Under the Delaney clause, which applies to processed food, a chemical is banned if it causes cancer in laboratory animals.Under other laws applying to pesticide use, however, that same chemical could be allowed to be used on fresh food if it fell within the EPA's tolerance level. Among other changes, the White House wants to: -- Give the EPA more flexibility to declare a pesticide an imminent hazard and pull it from the marketplace. -- Speed up the process for removing a pesticide that isn't an imminent hazard. -- Bar states from setting more stringent tolerance levels for a pesticide once the federal government has set a standard. -- Give the EPA added discretion to set "negligible risk" levels for pesticide residues in processed food.Chemicals that exceed these risk levels would be barred, but those that fall below these levels would be allowed. -- Allow the EPA to permit the continued use of pesticides that exceed its negligible risk standard if the benefits of doing so outweigh the cost.
Financial markets took a midweek break from their recent wild gyrations with stock prices falling modestly, bond prices posting tiny gains and the dollar almost unchanged. The Dow Jones Industrial Average lost 5.94 points to 2653.28 in moderate trading.Long-term Treasury bonds rose slightly despite the arrival on the market of $4.52 billion in 30-year bonds offered by the Resolution Funding Corp. as part of the government's bailout of the savings and loan industry.The dollar was barely changed against the West German mark and up marginally against the Japanese yen. Yesterday's sluggish action was in marked contrast to the rearing and plunging of stock prices Tuesday after the proposed buy-out of UAL Corp. once again collapsed.Traders said the stock market's lurching moves have prompted many investors to head for the sidelines until it regains some semblance of stability. Although bond prices weren't as volatile on Tuesday trading as stock prices, traders nevertheless said action also was much slower yesterday in the Treasury market.Bond investors paid close attention to comments by Federal Reserve Chairman Alan Greenspan, who was testifying before a congressional hearing, but weren't able to extract many clues about the future course of the Fed's monetary policy.Many analysts are expecting the Fed to lower interest rates at least once more before the end of the year. Investors now are awaiting today's release of the preliminary estimate of third-quarter gross national product.Economists predict the report will show economic growth of about 2.5% in the third quarter, which would have little effect on financial markets.But an unexpected deviation either way could roil bond and currency markets. In major market activity: Stock prices slipped lower in moderate trading.Volume on the New York Stock Exchange totaled 155.7 million shares.But advancing issues on the Big Board were ahead of decliners 784 to 700. Bond prices inched higher.The Treasury's benchmark 30-year issue rose less than an eighth of a point, or less than $1.25 for each $1,000 of face amount.The yield on the issue stood at 7.88%. The dollar was virtually unchanged.In late New York trading the U.S. currency was quoted at 1.8353 marks and 141.52 yen, compared with 1.8355 marks and 141.45 yen Tuesday.
A few years ago, I was on a panel of journalists that discussed the "image" of intercollegiate athletics for an audience of campus information directors and others.We scribblers quickly concurred that not only was the bad rep of big-time college sports richly earned, but also that it could be corrected.Competition could be maintained -- and stadiums probably would remain full -- if schedules were reduced and the games returned to the students, we said.Comments from the audience reflected widespread, if wistful, agreement with those conclusions. As the session broke up, I was approached by a man who identified himself as the alumni director of a Big Ten university. "I'd love to see sports cut back, and so would a lot of my counterparts at other schools, but everybody's afraid to make the first move," he confided. "It's like the U.S. and the Russians: Nobody wants to disarm first." And so our institutions of higher learning lurch from scandal to scandal on gridiron and basketball court, while the casualties mount.Three new books make the point that one large price of the glittery college-sports show can be the integrity of the schools that stage it.They are: "A Payroll to Meet: A Story of Greed, Corruption and Football at SMU" (Macmillan, 221 pages, $18.95) by David Whitford; "Big Red Confidential: Inside Nebraska Football" (Contemporary, 231 pages, $17.95) by Armen Keteyian; and "Never Too Young to Die: The Death of Len Bias" (Pantheon, 252 pages, $18.95) by Lewis Cole. The pick of the group is "Payroll"; it should be required reading for every college president.It chronicles how, over a period of a dozen years, Southern Methodist University bought its way to football respectability in the Southwest Conference, only to find itself trapped and strangled by the athlete-payoff system it created.The school was the first, in 1987, to receive the NCAA's "death penalty" -- two years without football -- for repeated rules violations.Given current headlines about the University of Florida, it may not be the last. The man who brought the bribe to the Dallas school was Ron Meyer, a flashy sort who came in 1975 to rescue a woebegone program, Mr. Whitford writes.Mr. Meyer's personal style was illustrated by his pinning a $100 bill to a high-school bulletin board on which other coaches tacked their cards.One recruiter working with Mr. Meyer was so generous with $10 and $20 bills that prospects sang "Here Comes Santa Claus" when he approached. Paying players at SMU was no casual operation.It involved the athletics director, two different football coaching staffs, and school trustees and governors -- just about everybody, it seemed, but Donald Shields, the university's president.There's a memorable passage in which Mr. Shields, having finally learned of the practice, expresses his outrage to Bill Clements, then a university governor (and now the governor of Texas!) and oil man Edwin Cox, chairman of the board of trustees. "You stay out of it," author Whitford quotes Mr. Clements as saying. "Go run the university." Which was about what Mr. Shields did, and quietly, until he resigned a few years later, pleading ill health, when the stuff hit the fan. Mr. Whitford drew on voluminous news media coverage of the SMU scandal, and on a university internal investigation.Mr. Keteyian had to do most of his own digging on University of Nebraska football, which is, to date, high and dry as far as the NCAA is concerned.Unfortunately, he gets low grades as an investigative reporter, relying heavily on what Chicago's late mayor, Richard J. Daley, called "insinuendo." Discrepancies go unexplained in "Confidential" (one ex-player claims he received $4,000 to $5,000 for his season football tickets while others said theirs brought only a few hundred dollars), and when Mr. Keteyian can't nail down something, like who really owned a car driven by Husker tailback Doug Dubose, he simply reprints his notes. There are gratuitous references to supposed romantic liaisons between Husker players and a low-level female university employee.A serious charge -- that star flanker Irving Fryar "threw" the 1984 Orange Bowl game by intentionally dropping a pass in the end zone -- is included, even though the Nebraska assistant coach quoted denied making it. Still, the book produces more smoke than a smoldering sofa, along with a few flames, especially concerning the use of steroids.Dean Steinkuhler, a spectacularly bulked-up former lineman, confesses that he used 'em, and says other Huskers did too.It's a mystery how this could have escaped the notice of Nebraska coaches.Probably, it didn't. "Never Too Young" is a different sort of work, focusing on the 1986 death from cocaine ingestion of Bias, a University of Maryland basketball star ticketed for sure pro stardom.While the university was no more to blame for that than for the similar fate of any other student, it must bear responsibility for its conduct in the aftermath. Bias's coach, Lefty Driesell, ordered the room in which Bias died to be cleaned before the police could arrive (the order wasn't carried out), and the school's athletics director issued false information about the academic standing of Bias and other players.Those, of course, were the responses of people with something to hide.One wonders how other college athletic officials would behave under the same circumstances. Tomorrow's "On Sports" column will look at another aspect of the college sports mess.
National Convenience Stores Inc., trying to shake the doldrums in the convenience-store business, said it will rearrange the merchandise in all of its stores in the next 18 months to cater better to the neighborhoods around its stores. As part of the plan, the Houston-based company's 1,100 Stop 'N Go stores will be refocused to target black, Hispanic, upscale or core middle-class customers.Stores in upper-income neighborhoods, for instance, will carry high-priced wines, publications such as Vanity Fair, gourmet pasta sauces, oat bran cereals and Weight Watchers and Pritikin products.Stores in Hispanic areas will stock an assortment of Spanish-language magazines, Mexican cooking items and candies.Stores in the company's core middle-class market will get more frozen and quick-to-prepare foods and a greater selection of bottled water. V.H. Van Horn, National Convenience president and chief executive officer, said the move reflects the company's realization that the industry's poor performance stems from its failure to give customers what they want -- rather than from increasing competition from gasoline stations and 24-hour grocery stores. "Convenience store merchandise has not kept pace with current trends in consumer preferences," he said in a speech at the company's annual shareholders meeting. Analysts and competitors said the move reflects a growing need by the stores to expand their customer base beyond the traditional blue-collar worker who pops into a convenience store for a sandwich, cigarettes, soda or beer. "There are an increasing number of people out there who are time-poor," said Chris Vroom, retail analyst with Alex.Brown & Sons of Baltimore. "Those are primarily white-collar workers, a customer segment that has historically proved elusive for convenience stores." National Convenience's move is likely to be echoed by other chains, though analysts note that Southland Corp., owner of 7-Eleven stores, and Circle K Corp. are too debt-heavy to roll out such an extensive effort.Still, Southland said that its franchisees have been targeting their merchandise to their customers for years, and that the company has begun to follow suit. For instance, Southland has expanded its bottled water selection in some stores and added fresh sandwiches in some outlets.Several months ago, it also added black health and beauty aids displays to many stores, a spokeswoman said. "We certainly see an increasing trend toward that," she added. National Convenience said it has tested its new merchandise mix in 100 stores, with favorable results.Analysts said the company's effort will be helped by its decision last year to put point-of-sale scanners in 200 stores, allowing National Convenience to quickly track items that are selling and those that aren't. To promote its new strategy, National Convenience said it plans to spend about $12 million on advertising for the year ending June 30, up from about $10 million in fiscal 1989.
One day after Delmed Inc. made top management changes and disclosed the end of an important business tie, its stock didn't trade and the company forecast a "significant" drop next year in sales of its core product. That disclosure came, a Delmed spokeswoman said, after the American Stock Exchange alerted the company that trading wouldn't resume in its stock until additional information about developments was provided. In addition to the forecast, the company also said it is examining potential cost cuts and reductions in overhead.The spokeswoman said the exchange would resume trading of Delmed stock today. Delmed, which makes and sells peritoneal dialysis products used in treating kidney disease, on Tuesday announced the resignations of Robert S. Ehrlich, chairman, president and chief executive officer, and of Leslie I. Shapiro, chief operating officer and chief financial officer.They were succeeded by executives of Fresenius USA Inc. and its parent, Fresenius AG, which owns about 45% of Delmed. At the same time, the New Brunswick, N.J., company said negotiations about pricing and volumes of product had collapsed between it and its exclusive distributor in the U.S., National Medical Care Inc. Following that announcement Tuesday, however, company officials were unavailable to elaborate. Yesterday, the spokeswoman said sales of Delmed products through the exclusive arrangement with National Medical accounted for 87% of Delmed's 1988 sales of $21.1 million.The current distribution arrangement ends in March 1990, although Delmed said it will continue to provide some supplies of the peritoneal dialysis products to National Medical, the spokeswoman said. Nonetheless, "Delmed currently expects that 1990 sales . . . will be significantly below their 1989 level," the company said in a statement. Delmed said yesterday that Fresenius USA would begin distributing the product and that the company is investigating other possible distribution channels.In any case, supplies to patients won't be interrupted, the company added. Fresenius, a West German pharmaceutical concern, has been discussing a transaction in which it would buy Delmed stock for cash to bring its beneficial ownership to between 70% and 80%.The transaction also would combine Fresenius USA and Delmed. But the plan now is being "reformulated," Delmed said, declining to provide most of the new terms of the combination.Said the spokeswoman: "The whole structure has changed.The value of the company has changed." Delmed did say that the proposal still would infuse cash into Delmed but less than the $10 million originally expected.Delmed also would receive the North American rights to certain Fresenius AG products. Another option for Delmed, the company said, is that it could sell its plant in Ogden, Utah.It added that no discussions about such a sale are under way.
Brooks Armored Car Service Inc. never wanted to get into money laundering. But July 5, a thunderstorm in Wilmington, Del., caused Shellpot Creek to rise 15 feet, pouring 1.3 million gallons of water into basement vaults.The water destroyed about $75 million in currency and caked $4 million of coins with mud, rendering them dangerous to counting machines. The $75 million in paper money, although moldy, mildewy and smelly, was exchanged through the Federal Reserve Bank of Philadelphia without incident.But Brooks was unable to reach a coin-cleaning agreement with the government. "We kind of got caught between bureaucracies," says President William F. Brooks Jr.The U.S. Mint wouldn't take the coin because it wasn't mutilated, and the Federal Reserve Bank accepts only clean coins, he says. The Philadelphia Fed says it is merely an "agent" for coins, responsible only for storage and distribution. "We issue paper money; we destroy paper money," says Jane Hinkle, a Philadelphia Fed spokeswoman. "The coin is their problem." A Mint official says the agency offered to clean the coins for its "bare-bones" cost of $17,000 plus certain other expenses.But Brooks declined, figuring that transporting the mucked up money to Washington would cost the company thousands more. So Brooks gave the dirty work to Coin Wrap Inc., which came up with an unusual solution. For eight hours a day for the past two weeks, in aggregates of as much as 27,000 pounds (equaling $20,000 in pennies), Coin Wrap has been pouring money into a cement-mixing truck.A giant heater, working like a blowtorch, causes the mud to crust and burns off any wrappers.After clanging around for an hour or so, the shiny, hot money pours out of the cement chute, where a giant vacuum sucks away the dried mud and burnt wrappers.After cooling, the coins are then rewrapped. Brooks expects to pay Coin Wrap a total of about $20,000 -- a cost that insurance won't cover.And while the job is half done, Brooks is still bitter.In fact, there's only one person involved who's happy, and that's Floyd String, president of Coin Wrap and conceiver of the cement-truck solution.Not only did his company find $20,000 worth of work, but when the approach was suggested, Mr. String says, Brooks officials "didn't laugh at me or anything."
"Parenthood," this summer's successful and amusing movie about parents and children, apparently was only the beginning.It seems that every day a new movie opens featuring a child coping with a mother's death, or adoption, or aging parents, or pregnancy.And why not?Some of our best and most idiosyncratic film makers -- from Truffaut to Fellini to Woody Allen -- have taken a cue from Chekhov: When it comes to compelling drama, there's no place like home. Yet too many people working in Hollywood today seem to suffer from the delusion that the drama played out in every home will be interesting to people who live somewhere else.This is not the case.Some diaries simply aren't worth snooping in. Yet there will be people who will sob at "Immediate Family," a limply constructed and offensive movie about adoption.These are the sensitive souls who can empathize with and even enjoy hearing about other people's troubles, no matter how haltingly or predictably the sad tale is told. Written by Barbara Benedek, co-author of "The Big Chill," "Immediate Family" takes the position that only rich people living in nice houses should have children.The film makers have couched this offensive idea in pretty packaging.Everyone is very nice and good-looking -- the adoptive parents (Glenn Close and James Woods) and the teen-age couple who decide to give up their baby for adoption (Mary Stuart Masterson and Kevin Dillon). Linda and Michael (Ms.Close and Mr. Woods), who seem to be pushing 40, live in a large and tastefully decorated home in suburban Seattle.All of their friends have children and they can't, so now they want a child more than anything -- perhaps even more than Michael wanted his fancy convertible or his deluxe stereo equipment.The idea of a child-as-required-yuppie-possession must be motivating them, since the wealthy offspring of their friends are shown to be rude brats, in therapy by age five. Having exhausted all modern aids to fertility, Linda and Michael decide to adopt.The actors wear pained expressions to indicate their genuine longing for a little one -- or maybe they're not-so-subtly commenting on the inadequacy of the script, and Jonathan Kaplan's ("The Accused") dull direction.Or maybe they are disgusted by the literal-minded musical score; when a character arrives at a major decision her thoughts are revealed by the sound of "I Can See Clearly Now." The adoption agency insists on introducing the adopting parents to the birth mother, so Linda and Michael pay for pregnant Lucy's (Ms.Masterson) bus ticket from Ohio. (Why in these movies is the unwed pregnant woman always from Ohio?I ask this not necessarily as a native Ohioan.) Lucy, of course, is pretty and smart, though uneducated.Everyone falls in love with everyone else.There is some pain, when Lucy has the baby and "didn't know she would feel like this" and wants to keep the baby.But in the end, everything turns out for the best, in the film makers' warped view.Like lawyers in the hostile takeover field, the baby goes where the money is. At the other end of the life cycle is "Dad," Gary David Goldberg's adaptation of the William Wharton novel.This picture is about a middle-aged son who makes sure that his delayed bond with his father will last by waiting to cement it until just before the old man dies. The glib emotional style Mr. Goldberg has perfected on television's "Family Ties" doesn't benefit from magnification.His characters practically scamper through a vast range of human emotions, like travelers doing 10 cities in eight days.They pause only to register little whimpers of distress and sighs of satisfaction, like tourists cataloging the sights they've seen from the window of a bus.Not even Jack Lemmon's expert doddering makes this trip worth taking. So it's entirely possible that "Look Who's Talking" isn't as entertaining as it seems in comparison to the turgid other films opening now.But by comparison, this fluffy comedy seems like a gem.It starts with conception, taking the sperm's point of view, then progresses to the baby's point of view.Bruce Willis's best attribute as an actor is his coy, lazy voice, and that's all you get of him here, speaking for the baby. Finally, there is one family movie that quite eloquently explores the depth of human emotion -- only its stars are bears.For the second time, in a movie called "The Bear," French director Jean-Jacques Annaud demonstrates just how powerful pictures can be. ("Quest for Fire" was the first time.) To be sure, one wonders what kind of man is this, who feels compelled to try to understand the most primitive longing and instinct in a way that requires the most sophisticated appreciation of visual storytelling.Supposedly, he proposed the movie to his producer, Claude Berri, in four lines: "An orphan bear cub.A big solitary bear.Two hunters in the forest.The animals' point of view." But then, even a great many words couldn't summarize the extraordinary pull of this movie about an orphaned bear who adopts a parent. Video Tip: One of the best movies about the child-parent thing in recent years was "Raising Arizona," the 1987 Coen brothers' comedy that definitely was not about the folks next door.
Westinghouse Electric Corp., capitalizing on a major restructuring program, expects operating margins of more than 10% and double-digit per-share earnings growth next year, top officers told securities analysts here. John C. Marous, chairman and chief executive officer, also said the company expects sales from continuing businesses to rise 8.5% annually through the next three years. In 1988, the company earned $822.8 million, or $5.66 a share, on sales of $12.49 billion. Since 1983, Westinghouse has shed 70 businesses that it didn't expect to produce 10% operating margins while acquiring 55 businesses. In the past 20 months alone, Paul E. Lego, president and chief operating officer, said the divestiture of $300 million of slow-growth, low-profit businesses has been more than offset by $600 million in profitable acquisitions. Westinghouse expects to meet its corporate goals despite a softening in the economy.Even if the gross national product is either flat or in the growth range of 2% to 2.5%, "we can handle that," Mr. Marous said.GNP is the total value of the nation's output of goods and services. A bright spot is the company's power-generation business, which is experiencing a surge of growth for the first time in years.Mr. Marous said the business will achieve higher sales this year than the company's target goal of 8.5%. While Westinghouse hasn't had a nuclear power plant order from a U.S. utility in about a decade, excess capacity is beginning to shrink.Mr. Lego said the company foresees the need for a major boost in new-generation capability throughout the 1990s. Westinghouse also is well positioned to sell steam turbine and gas turbine plants to independent power producers.The company's ability to respond to energy needs world-wide will be enhanced through a recently announced venture with Mitsubishi Heavy Industries, Mr. Lego said. He said the independent power segment could grow to provide as much as 50% of near-term generation capacity, adding: "We expect to supply a significant share of this market." Westinghouse also expects its international sales to soon grow to 25% of total corporate sales from 20% last year.The company is negotiating with the Soviets to build a Thermo King truck-refrigeration plant that would produce about 10,000 units annually. Mr. Marous said Westinghouse would own 70% of the facility.The deal, which will involve an initial $20 million investment, was struck with a handshake, he added. Company officials also said that any gain from the sale of Westinghouse's 55% stake in its transmission and distribution venture with the Swiss firm of Asea Brown Boveri will be offset by a restructuring charge in the fourth quarter.The executives didn't disclose the size of the expected gain. Capital expenditure in 1990 will rise slightly, Mr. Marous said, from an estimated $470 million this year.
A proposed conflict-of-interest policy for federally funded biomedical researchers may thwart many high-technology new ventures, say financiers, researchers and university administrators. The National Institutes of Health policy would require researchers to cut financial ties with health-care businesses -- or lose their government money.Among other concerns, the agency says researchers with business ties are more likely to falsify findings in order to tout new drugs.As ties between academia and venture capital have blossomed in recent years, governmental fear of abuse has risen. But the guidelines could "make it impossible to commercialize research," says Kenneth Smith, associate provost and vice president for research at Massachusetts Institute of Technology. The NIH is asking grant recipients and others for comments on the proposed guidelines until Dec. 15.After that, it will make a final decision on the policy. The guidelines could foil future arrangements similar to the deal behind Lithox Inc., a Salem, Mass., start-up, says Robert Daly, a managing partner of TA Associates, a venture-capital firm.With $2.3 million, he and other investors launched Lithox last year to market a gallstone cure being developed by researchers of the University of California at San Diego. The researchers, who are being financed by the Lithox funds, will receive a royalty, or percentage of sales, if their research yields a commercial product.But because the University of California, like many other universities, shares its royalties with researchers, it may disqualify itself from federal funds under the proposed guidelines, Mr. Daly says. The high-tech industry is full of the kind of arrangement that the new guidelines would affect.For instance, Commonwealth BioVentures Inc., a venture-capital concern, last month invested $600,000 to launch Amira Inc., a Worcester, Mass., concern that will produce pharmaceuticals.Scientists Rima Kaddurah-Daouk and Paul Schimmel conducted the initial research at the Massachusetts Institute of Technology.While Ms. Kaddurah-Daouk left MIT to head Amira, Prof.Schimmel will continue to work at MIT, serve on Amira's board and own a small equity stake in the company. The Amira transaction is typical of the way venture-capital firms are approaching the task of commercializing biotechnology research.While universities develop the basic research, "venture capitalists are the ones best positioned to finance its commercialization," says Gloria W. Doubleday of Commonwealth. "This is the best way to transfer technology straight off the campuses of universities." But the new guidelines could prevent scientists like Prof.Schimmel from being involved with start-ups such as Amira, venture capitalists point out.And if that happens, the entire process of transferring technology to the marketplace could be harmed, they say. The stakes in the controversy are large.Last year, venture capitalists spent an estimated $600 million to finance start-up companies in medical and biotechnology businesses, according to the National Venture Capital Association, a trade group.Many of the deals involved transactions in which scientific institutions or researchers agreed to commercialize their work in return for an equity stake or royalties. In many of these deals, "venture capitalists had the inside track," says Lawrence Bock of Avalon Ventures, La Jolla, Calif.Investors were willing to gamble on new technologies because "we had exclusive rights to those technologies," he adds. But under the proposed guidelines, all federally funded research will have to be reported publicly so that anyone can capitalize on the work. "Without the exclusivity, most venture capitalists won't have the incentive to invest in such deals," Mr. Bock says. Last year, for example, Avalon and others invested $14 million in Athena Neurosciences Inc., South San Francisco, Calif., to license and develop technology for delivery of drugs to the brain.But before Athena was able to get an exclusive license to the technology, the Federal Register published most of the details, "giving all of the company's potential competitors a chance to exploit it," Mr. Bock says.Athena eventually acquired exclusive rights to the technology and currently is developing it.But, says Mr. Bock, "It was a close call." The proposed guidelines could also delay commercialization -- and force small companies to waste scarce capital, entrepreneurs say.If start-ups can't have early access to research being conducted at institutions, "we have to replicate it ourselves or do without the research," says Ruth Emyanitoff, manager of business development at Applied bioTechnology Inc., a Cambridge, Mass., concern.Duplicating research is both costly and time-consuming for a start-up, Ms. Emyanitoff says. For its part, NIH insists that its guidelines "should not stifle research creativity or technology transfer from the research laboratory to commercial use." Universities such as Harvard and MIT should be able to develop a way to act as brokers for the individual scientists, says Katherine Bick, who oversees the huge NIH grants program as its deputy director for extramural research. NIH staff members believe the guidelines are essential to prevent the escalation of problems that have already begun to surface in scientific ventures.Not long ago, scientists holding stock in Spectra Pharmaceutical Services Inc. were accused of falsifying research to boost the stock.Many officials are also concerned about companies getting a "free ride" on government-sponsored research.A congressional subcommitee has been investigating the potential abuse from researchers holding stock in companies exploiting their research. Among other provisions, the NIH guidelines would prohibit researchers and members of their immediate families from holding stock in any company that is affected by the outcome of their research. Ms. Bick, the NIH administrator, says the business and scientific community is overreacting to what the agency merely meant to be "ideas for discussion." The predictions of doom are "premature," she says. But when agencies like the NIH circulate guidelines, they've often already formulated policy, veteran scientists say.Indeed, institutions already are taking note.On Sept. 14, Harvard began circulating a conflict-of-interest policy statement that, in effect, would follow the NIH guidelines faithfully. The University of California at San Francisco is also circulating a memo among its scientific faculty that will restrict contact with the world of business.In many other institutions, scientists are shunning contacts with venture investors until the NIH policy is settled. Says Mr. Daly, the venture capitalist: "It doesn't matter whether they call it guidelines or policy.The damage is already done."
Friday, Oct. 27, 9 p.m.-midnight EDT, on PBS (PBS air dates and times vary, so check local listings): "Show Boat." New Jersey's Paper Mill Playhouse produced this faithful revival of America's most influential musical, written by Jerome Kern and Oscar Hammerstein and first produced on Broadway in 1927.Worth watching, although the music has lasted better than the plot or the humor. Saturday, Oct. 28, 8-10 p.m. EDT, on HBO (repeated Oct. 31, Nov. 5, 8, 14, 16 and 20): "Perfect Witness." Aidan Quinn, Brian Dennehy and Stockard Channing are excellent in this gripping tale of a reluctant witness in an organized crime prosecution.It's set in New York, but it resonates with the terrible dynamics of the Latin American drug wars. Sunday, Oct. 29, 8-11 p.m. EST, on ABC: "The Final Days." No doubt there is something to irk everyone in this AT&T-sponsored dramatization of Bob Woodward and Carl Bernstein's book about Watergate.Personally, I'm irked by its combination of ponderousness and timidity, which adds up to an utter lack of drama. Sunday, Oct. 29, 10-11 p.m. EST, on Showtime (repeated Nov. 2, 6, 11 and 15): "The Strange Case of Dr. Jekyll and Mr. Hyde." Fans of Anthony Andrews ("Brideshead Revisited") will relish watching him play the title role(s) in the 19th-century Robert Louis Stevenson pre-Freudian drama of schizoid horror. Monday, Oct. 30, 10-11 p.m. EST, on PBS: "Journey Into Sleep." I promise you will stay awake through this intriguing documentary about the science of sleep. Wednesday, Nov. 1, 9-10:30 p.m. EST, on PBS: "Thomas Hart Benton." Critical opinion is divided about the success of Benton's populist defiance of modernist art.But no one could disagree that Ken Burns has made a fascinating film about this famous American painter. Thursday, Nov. 2, 9-10 p.m. EST, on A&E (repeated at 1 a.m. and on Nov. 5): "Third and Oak: The Pool Hall." A one-acter by the Pulitzer Prize-winning playwright Marsha Norman is the first presentation in a new series called "American Playwrights Theater," sponsored by General Motors.James Earl Jones and Mario Van Peebles carry out a bitter intergenerational dialogue between two black men. Thursdays, Nov. 2-23, 10-11 p.m. EST, on PBS: "Taiwan: The Other China." Judy Woodruff hosts this handsome four-part series about the history, economy, culture and politics of the island home of Chinese democracy and capitalism. Friday, Nov. 3, 9-11 p.m. EST, on PBS: "Our Town." Along with "Show Boat," "Great Performances" kicks off its new season with this Lincoln Center production of Thornton Wilder's best known play, in which the role of the small-town Stage Manager is given a hip twist by performance artist Spalding Gray. Saturday, Nov. 4, 1:30-6 p.m. EST, on NBC: Breeder's Cup Day.Polished hooves, fancy turf, fat purses -- the horse race of the year. Sunday, Nov. 5, 10:30 a.m.-1:30 p.m. EST, on ABC: New York City Marathon.Shiny Nikes, cracked cement, media glory -- the foot race of the year. Sunday, Nov. 5, 8-9 p.m. EST, on TNT: "Gary Cooper: American Life, American Legend." I've seen a great many moviestar film portraits, and this one is outstanding. Sundays, Nov. 5-12, 9-10:30 p.m. EST, on PBS: "Glory Enough for All." Can "Masterpiece Theatre" make a compelling human story out of the discovery of insulin?This earthy, amusing film answers with a resounding "yes." Sunday and Monday, Nov. 5 and 6, 9-11 p.m. EST, on NBC: "Cross of Fire." The Ku Klux Klan was revived in the 1920s as a national organization aimed at Catholics and Jews as well as blacks.One reason for its downfall was the murder trial of D.C. Stephenson, an Indiana leader whose reckless career is depicted in this film starring Mel Harris ("thirtysomething") and John Heard. Tuesday, Nov. 7, 8-9 p.m. EST, on PBS: "Hurricane!" Has the San Francisco earthquake caused you to forget Hugo?You'll remember when you see the stunning footage taken from inside a hurricane's eye, in this edition of "NOVA."
Merksamer Jewelers Inc., a fast-growing jewelry store chain, filed for Chapter 11 bankruptcy-law protection from creditors, apparently to speed a management buy-out of the chain. The filing, made yesterday in U.S. Bankruptcy Court here, follows an agreement by L.J. Hooker Corp., Merksamer's owner, to sell the chain to management for an undisclosed price.GE Capital Corp., a financial services subsidiary of General Electric Co., is providing Merksamer management with $15 million in financing. L.J. Hooker, based in Atlanta, filed for Chapter 11 protection in August and has also announced its intention to sell its B. Altman & Co. department store chain.L.J. Hooker is owned by Hooker Corp., Sydney, Australia, which itself is currently being managed by a court-appointed provisional liquidator. L.J. Hooker's planned sale of Merksamer is subject to approval by Judge Tina Brozman of U.S. Bankruptcy Court. Rumors to the effect that the Merksamer chain would file for Chapter 11 arose last week in the jewelry industry.At that time, Sam Merksamer, president of the chain, angrily denied that his company was about to file.Mr. Merksamer is leading the buy-out. According to executives close to the situation, Merksamer filed for Chapter 11 to speed the sale of the chain.One executive said an accord signed by the unsecured creditors of L.J. Hooker Corp. had frozen in place all of L.J. Hooker's assets. The Merksamer bankruptcy-law filing appears to supersede that agreement. "By filing for Chapter 11, the Merksamer chain will only need approval from a bankruptcy judge for the sale, not the hundreds of unsecured creditors," said this executive. "The cash from the sale will go to L.J. Hooker, but the company itself will belong to Sam Merksamer." Mr. Merksamer and Sanford Sigoloff, chief executive of L.J. Hooker, were unavailable for comment.In a statement, Mr. Merksamer described the filing as a "legal technicality," but also said that "our inability to obtain trade credit, combined with a need to ensure that our stores were properly stocked for the Christmas season, necessitated our filing Chapter 11." The jewelry chain, which is based in Sacramento, Calif., had revenue of $62 million and operating profit of $2.5 million for the year ended June 30.
For all of this year's explosive run-up in stock prices, Renaissance Investment Management Inc. 's computer sat on the sidelines.Now it's on the fence. Renaissance, a Cincinnati-based money manager, began buying stocks again this week with half of the $1.8 billion that it oversees for clients, according to people familiar with the firm's revised strategy.It was the first time since January that Renaissance has thought stocks are worth owning. Renaissance declined to confirm the move, but its stock purchases were thought to have begun Tuesday, timed to coincide with the maturity this week of Treasury bills owned by the firm.The other half of its portfolio is expected to remain invested in Treasury bills for the time being. Wall Street executives said they believed that Renaissance's $900 million buy program was carried out by PaineWebber Inc.As reported, PaineWebber bought shares Tuesday as part of a customer strategy shift, although the broker's client was said then to have been Japanese.Yesterday, PaineWebber declined comment. When it owns stocks, Renaissance's portfolio typically is composed of about 60 large-capitalization issues; to make buy or sell moves, the firm solicits Wall Street brokerage houses a day or so in advance, looking for the best package price to carry out the trades.The broker winning the business doesn't charge commissions, but instead profits by buying or selling for less than the overall package price. That puts the broker at risk if it's trying to buy stock in a rising market.In Tuesday's gyrating session, the Dow Jones Industrial Average fell by 80 points early in the day, but finished with less than a four-point loss. Renaissance's last portfolio shift, carried out by Goldman, Sachs & Co., was a highly publicized decision last January to sell its entire stock portfolio and buy Treasury bills.The sell signal, which sent a bearish chill through the stock market, came when Renaissance's computer found that stocks were overpriced compared with bonds and Treasury bills. At the time, the Dow Jones Industrial Average stood at about 2200.The Dow average now stands more than 20% higher, while Renaissance's portfolio of Treasurys produced a return of about 6% through the first three quarters of the year.The computer's miscalculation has been painful for Renaissance.Almost any money manager holding stocks has turned in better results, while Renaissance has played it safe with Treasury bills. So why does Renaissance's computer like stocks with the Dow at 2653.28, where it closed yesterday, when it didn't with the Dow at 2200? "With the decline in stock prices and continued low or stable interest rates, stocks are representing a better value all the time," Renaissance President Frank W. Terrizzi said yesterday. Three-month T-bill yields have fallen to 7.8% from about 9% at the start of the year.Stock prices, meanwhile, are about 140 points lower than the peak of 2791.41 reached on the Dow industrial average Oct. 9.Are those declines enough to signal a partial return to stocks? Mr. Terrizzi won't say specifically, explaining that if there was such a move, it would take about three days to complete the loose ends of the transaction.During that time, a buyer with the clout of a Renaissance could end up driving up the price of stocks it was trying to buy if it tipped its hand. But everything is relative to Mr. Terrizzi, so stocks in his view can become more attractive in comparison with bonds or T-bills, even if shares are more expensive than when they were sold in January. "Our {computer} model has a certain trigger point," he said.When the computer says switch, Renaissance switches. The firm has made 17 previous shifts from one type of asset to another in its 10-year history.Almost all have involved at least half and often the firm's entire portfolio, as the computer searches for the most undervalued investment category, following a money-management style called tactical asset allocation. Competing asset-allocation firms march to their own computer models, so some have been partly or fully invested in stocks this year while Renaissance has sat on the sidelines.As a result, competitors say Renaissance has been looking for any opportunity to return to the stock market, rather than risk losing business by continuing to remain fully invested in Treasury bills. Mr. Terrizzi confirms some clients have left Renaissance, but no major ones, and the firm has added new accounts.
David Evans, who last week resigned as president and chief executive of Qintex Entertainment Inc. "for personal reasons" just as the company filed for bankruptcy-law protection, has been temporarily reappointed to both positions, the company said. Qintex Entertainment also said Chief Financial Officer and Treasurer Jonathan Lloyd, 37 years old, would join the nine-member board.He succeeds Roger Kimmel, who resigned last week saying his participation in evaluating the company's role in buying MGM/UA Communications Co. was no longer necessary. Mr. Evans will stay until a successor is found, but not later than the end of the year, the company said. It was the 49-year-old Mr. Evans who had moved into the offices of MGM/UA and run the company during Qintex Australia Ltd. 's aborted bid for the movie company.After MGM/UA terminated the $1.5 billion merger because of a dispute over a $50 million letter of credit, Qintex Entertainment -- which is 43%-owned by Qintex Australia -- found itself facing problems of its own.And the relationship between Qintex Entertainment and the Australian company appears to be quickly deteriorating. On Oct. 19, Qintex Entertainment was about to default on a $5.9 million payment owed to MCA Inc. in connection with the distribution of a television program.Qintex Entertainment was depending on Qintex Australia to arrange financing.But early on Oct. 19, the second of two hectic days of board meetings, Mr. Evans said he believed Qintex Australia wouldn't be forthcoming.He recommended that the company file for protection under Chapter 11 of the U.S. Bankruptcy Code before the MCA deadline, according to a source familiar with the sessions. But a majority of the board, which includes three members from the Australian company, overrode him.Mr. Evans resigned.Later in the day, according to the source, the board reversed itself, decided to file for bankruptcy protection, and asked Mr. Evans to stay on.Mr. Evans told the board he needed the weekend to think about it.Mr. Evans couldn't be reached yesterday for comment. Last Monday, Qintex Australia announced a restructuring plan and said it would sell off assets.Last week the company indicated it would cut back on the working capital it would supply to Qintex Entertainment. Separately, a Qintex Entertainment shareholder filed suit in federal court in Los Angeles charging Qintex Australia with misleading shareholders about Qintex Entertainment's financial position.Qintex Australia said it hadn't seen the suit and couldn't comment.
Investors poured $2.8 billion more into money-market mutual funds in the latest week despite further declines in yields. Assets of the 400 taxable funds tracked by IBC/Donoghue's Money Fund Report jumped to $351.2 billion in the week ended Tuesday, the Holliston, Mass.-based newsletter said.Assets soared $4.5 billion in the previous week. Meanwhile, the average yield on taxable funds dropped nearly a tenth of a percentage point, the largest drop since midsummer.The average seven-day compound yield, which assumes that dividends are reinvested and that current rates continue for a year, fell to 8.47%, its lowest since late last year, from 8.55% the week before, according to Donoghue's. "Lower yields are just reflecting lower short-term interest rates," said Brenda Malizia Negus, editor of Money Fund Report.Money funds invest in such things as short-term Treasury securities, commercial paper and certificates of deposit, all of which have been posting lower interest rates since last spring. Individual investors can still get better yields on money funds than on many other short-term instruments.The yield on six-month Treasury bills sold at Monday's auction, for example, was just 7.77%.The average yield on six-month CDs of $50,000 or less at major banks was 7.96% in the week ended Tuesday, according to Banxquote Money Markets, a New York information service. One way that money fund managers boost yields in a declining rate environment is by extending the maturities of their investments, so they can earn the current higher rates for a longer period.The average maturity of the taxable funds that Donoghue's follows increased by two days in the latest week to 40 days, its longest since August. "They're anticipating further declines in rates and they're going to get them, slowly," said Walter Frank, chief economist for the Donoghue Organization, publisher of Money Fund Report. Average maturity was as short as 29 days at the start of this year, when short-term interest rates were moving steadily upward.The average seven-day compound yield of the funds reached 9.62% in late April. The highest-yielding funds are still above 9%.The top-performing fund in the latest week was Dreyfus Worldwide Dollar, with a seven-day compound yield of 9.45%.The fund invests heavily in dollar-denominated money-market securities overseas.It is currently waiving management fees, which contributes to the higher yield. The average seven-day simple yield of the 400 funds fell to 8.14% from 8.21%, Donoghue's reported.The average 30-day simple yield slid to 8.22% from 8.26%, and the average 30-day compound yield fell to 8.56% from 8.60%.
Many small investors are facing a double whammy this year: They got hurt by investing in the highly risky junk bond market, and the pain is worse because they did it with borrowed money. These people invested in "leveraged" junk bond mutual funds, the publicly traded funds that make a habit of taking out loans to buy extra junk. It's a good strategy in a rising market, where a 25% leveraged portfolio in effect allows investors to have 125% of their money working for them.The strategy boosts current yield by putting more bonds into the portfolio. Trouble is, junk bond prices have been weak for months.Thus, the leverage has amplified the funds' portfolio losses.And shares of leveraged junk funds this year have been clobbered even harder than the junk bonds they hold. "That's really where the leverage hurt," says Thomas Herzfeld, a Miami-based investment manager who specializes in closed-end funds. "Share prices performed even worse than the funds' asset values because fear has taken hold" in the junk market, he says. Leverage is never a problem for the traditional "open end" mutual funds, which aren't publicly traded and aren't allowed to use leverage at all.Leverage is used only by some of the closed-end funds. The usual maneuver is to borrow against the portfolio value or issue preferred stock, using the proceeds to buy additional bonds.The fallout for investors lately has been painful. Consider the New America High Income Fund.With a leveraged position of about 45%, the fund's share price has plunged 28.5% so far this year.That's worse than the price drop sustained by the bonds in its portfolio, whose total return (bond-price changes plus interest) has amounted to a negative 6.08%. Such problems may not be over.Leveraged funds in particular "are still extremely vulnerable, because we're still at the beginning of problems in the junk market," says George Foot, a managing partner at Newgate Management Associates in Northampton, Mass. Many investors are unaware their funds have borrowed to speculate in such a risky market. "If someone actually sat down and thought about what they were being sold," says Gerald Perritt, editor of the Mutual Fund Letter in Chicago, they might shy away. In a typical leverage strategy, a fund tries to capture the spread between what it costs to borrow and the higher return on the bonds it buys with the borrowed money.If the market surges, holders can make that much more profit; the leverage effectively acts as an interest-free margin account for investors. But when the market moves against the fund, investors lose more than other junk holders because the market decline is magnified by the amount the fund is leveraged. Fund managers, for their part, defend their use of leverage.Carl Ericson, who runs the Colonial Intermediate High Income Fund, says the fund's 25% leverage has jacked up its interest income. "As long as I am borrowing at 9.9% and each {bond} yields over that, it enhances the yield," he maintains.Mr. Ericson says he tries to offset the leverage by diversifying the fund's portfolio. Yet some funds have pulled in their horns.New America High Income Fund recently said that it plans to reduce its leverage position by buying back $5 million in preferred stock and notes from investors.The fund made a similar move earlier this year. "We are trying to increase our flexibility," says Ellen E. Terry, a vice president at Ostrander Capital Management, the fund's investment adviser.She declined to elaborate and wouldn't disclose the fund's recent purchases, sales or cash position. Ms. Terry did say the fund's recent performance "illustrates what happens in a leveraged product" when the market doesn't cooperate. "When the market turns around," she says, "it will give a nice picture" of how leverage can help performance. Several leveraged funds don't want to cut the amount they borrow because it would slash the income they pay shareholders, fund officials said.But a few funds have taken other defensive steps.Some have raised their cash positions to record levels.High cash positions help buffer a fund when the market falls. Prospect Street High Income Portfolio, for instance, now holds about 15% in cash and equivalents, nearly quintuple the amount it held earlier this year, says John Frabotta, portfolio co-manager.He says the fund, which is 40% leveraged, has maintained a "substantial cushion" between its borrowing costs and the yields of the portfolio's bonds. "I don't want to be in a position to have to sell," Mr. Frabotta says. Other funds have recently sold weak junk bonds to raise cash.At the 50%-leveraged Zenith Income Fund, portfolio manager John Bianchi recently dumped Mesa Petroleum, Wickes and Horsehead Industries, among others, to raise his cash position to a record 15%. "That's a problem because cash isn't earning us very much money," Mr. Bianchi says.He concedes: "This is the most difficult market that I've been involved in." Because of the recent junk-market turmoil, the fund is considering investing in other issues instead, including mortgage-backed bonds. "We're looking at the leverage factor every day," says Robert Moore, president of Bernstein-Macaulay Inc., a Shearson Lehman Hutton Inc. unit and the fund's adviser. "At some point, if we are unable to cover our leveraged cost -- and at the moment we're right on it -- we're going to have to make a move."
Securities and Exchange Commission Chairman Richard Breeden told a congressional subcommittee that he would consider imposing "circuit breakers" to halt program trading at volatile times. Mr. Breeden, in his first testimony to Congress since taking the SEC post, said the agency is studying the Friday the 13th market plunge, including how current circuit breakers affected the market that day and the following Monday.After the study, the SEC would be willing to consider adding new circuit breakers or fine-tuning the current ones, he added. Circuit breakers, designed to give the markets a breather in cases of sharp price movements, curb trading of futures or stocks at various trigger points.At certain points during the Friday the 13th drop, circuit breakers kicked in on the futures market, slowing trading at times.A circuit breaker that would have closed down the New York Stock Exchange wasn't tripped. Rep. Edward Markey (D., Mass.), chairman of the House Telecommunications and Finance Subcommittee, is pushing the idea of a circuit breaker for computer-driven program trading in hopes that would curb "turmoil" in the marketplace.He argued that program-trading by roughly 15 big institutions is pushing around the markets and scaring individual investors. Mr. Breeden didn't reject the proposal.After the SEC study of the drop is completed, he said, "I'm perfectly happy to work with this committee . . . in identifying whether we need other devices," such as a program-trading curb. Mr. Breeden backed most of the provisions in a market-reform bill that the SEC brought to the subcommittee last year under then-chairman David Ruder.The measure is expected to move through this Congress.But the new chairman vehemently opposed a provision in the bill that would give the agency the right to close the markets at times of stress. Mr. Breeden contended that uncertainty over when the SEC might act could worsen volatility in the markets.He argued that the current circuit-breaker system allows investors to know "precisely when and where any trading interruptions will occur and how long they will last." Mr. Breeden offered strong support for two other provisions in the bill.One would force brokerage houses to provide the SEC detailed information about loans made by their holding companies.Such loans often are used to finance leveraged buy-outs, and the agency is worried that a sharp market drop could create capital problems for the firms. He also backed a rule to require large traders to report transactions on a systematic basis.That information, he argued, is critical to reconstructing sharp market moves, such as the one nearly two weeks ago.
Motorola is fighting back against junk mail.So much of the stuff poured into its Austin, Texas, offices that its mail rooms there simply stopped delivering it.Now, thousands of mailers, catalogs and sales pitches go straight into the trash. "We just don't have the staff to {deliver} it, nor do we have the space or the time," says a spokesman for the Schaumburg, Ill., electronics company, which has 5,000 employees in the Austin area. "It's the overload problem and the weight problem we have." Motorola is in good company.Businesses across the country are getting fed up with junk mail, and some are saying they just aren't going to take it anymore -- literally.While no one has tracked how many company mail rooms throw out junk mail, direct-mail advertising firms say the number is growing. General Motors earlier this year said it wouldn't deliver bulk mail or free magazines in its Flint, Mich., office, while Air Products & Chemicals, Allentown, Pa., says it screens junk mail and often throws out most of a given mass mailing. Why the revolt?Anybody with a mailbox can answer that: sheer, overwhelming, mind-numbing volume.According to the Direct Marketing Association, total direct mail -- to both businesses and consumers -- jumped 50% to 65.4 billion pieces in 1988 from five years earlier.Though direct mail to businesses isn't broken out separately, the association says it's growing even faster. The deluge has spurred cost-conscious companies to action, with mail rooms throwing the stuff out rather than taking the time or money to deliver it. The direct-mail industry, not surprisingly, is fuming at the injustice of it all.After all, this is the industry that has a hard enough time getting any respect, that is the butt of so many jokes that television's "L.A.Law" portrays direct-mail-mogul David as short, bald, intensely nerdy, and unremittingly boring. The practice of businesses throwing out junk mail "is a commonly known problem, and it's increasing as companies attempt to put through budget cuts across the board," right down to the mail-room level, says Stephen Belth, a list consultant and chairman of the Direct Marketing Association's business-to-business council. "But it's like biting the hand that feeds them, because every one of these companies uses direct marketing." It's almost impossible to track the number of companies trashing junk mail, since the decision is usually made in the mail room -- not the board room.And the practice often varies from location to location even within a company.But industry executives say businesses seem especially inclined to dump mailers sent to titles rather than to individual names. Motorola's Austin operation was one of the first to lose patience, deciding a few years ago to junk any bulk mail that wasn't addressed to an individual.Magazines aren't delivered at all, even if an individual's name is listed; employees who want their magazines have to pick them up from the mail room or the company library -- and are told to change the subscriptions to their home addresses. At Air Products, meanwhile, the mailroom staff opens junk mail and often throws it away -- even if addressed to an individual. "If they get 50 packets of something, they open one, see what it says, throw 48 away and send two to people or departments they think are appropriate," a spokesman says. Direct marketers were especially alarmed when General Motors -- one of the country's largest companies and a big direct-mail user itself -- entered the junk-mail battle.As of March 1, its Flint office, with about 2,500 employees, stopped delivering bulk mail and non-subscription magazines.Employees were told that if they really wanted the publications, they would have to have them sent home instead.The reason: overload, especially of non-subscription magazines. Direct-mail executives see GM's stand as an ominous sign -- even if the junk-mail kings did bring it on themselves. "Why anyone would want to close themselves off {from direct mail}, a priori, doesn't make any sense," says Michael Bronner of Bronner Slosberg Associates, a Boston directmail firm. "It smacks of big brotherism.They're going to decide what their employees can or cannot read." The practice is, however, legal in most cases.Jack Ellis, a U.S. postal inspector in New York, says the Postal Service's only job is to deliver the mail to the mail room; once it gets there, a company can do with it what it wishes. The junk-mail titans, ever optimistic, are looking for ways around the problem.So far, they say, it hasn't had any noticeable effect on response rates.And before it does, they're trying to cut back on the clutter that created the situation in the first place.Among other things, the industry is trying to come up with standardized business lists that cut down on duplications. "We're going to have to mail a lot less and a lot smarter," says Jack Miller, president of Quill Corp., a Lincolnshire, Ill., business-to-business mail-order company.But then again, mailing less and smarter won't be much help if the mail ends up in the garbage anyway. New Hyundai Campaign Hyundai Motor America, fighting quality complaints, declining sales and management turmoil, yesterday unveiled its 1990 ad strategy, tagged "We're Making More Sense Than Ever." The ad campaign, created by Saatchi & Saatchi's Backer Spielvogel Bates agency, is an extension of the auto company's "Cars That Make Sense" campaign, which emphasized affordability.TV ads plugging the company's new V-6 Sonata and its souped-up Excel subcompact will begin appearing Monday. One spot shows a Sonata next to a rival midsized car, and an announcer says, "Listen to what they're saying about the Hyundai Sonata." As the announcer reads favorable quotes about the model from Motor Trend and Road & Track magazines, the other car, which is white, slowly turns green. "No wonder the competition's green with envy," the announcer says. Ad Notes. . . . ACQUISITION: EWDB, formed by the merger of Eurocom and Della Femina McNamee WCRS, said it agreed to buy Vizeversa, an agency in Barcelona.Terms weren't disclosed. HOLIDAY ADS: Seagram will run two interactive ads in December magazines promoting its Chivas Regal and Crown Royal brands.The Chivas ad illustrates -- via a series of pullouts -- the wild reactions from the pool man, gardener and others if not given Chivas for Christmas.The three-page Crown Royal ad features a black-and-white shot of a boring holiday party -- and a set of colorful stickers with which readers can dress it up.Both ads were designed by Omnicom's DDB Needham agency.
MGM Grand Inc. has agreed to pay $93 million and nearly 1.8 million common shares to buy 117 acres of land along the Las Vegas, Nev., Strip as a site for its planned movie-studio and theme-park resort. Of the total purchase price, $50 million cash and $30 million in stock (nearly 1.8 million shares) would be paid to buy the existing 700-room Marina Hotel & Casino from Southwest Securities, a Nevada limited partnership.The remaining properties to be acquired are the Tropicana Country Club & Golf Course, a facility jointly owned by Ramada Inc., of Phoenix, Ariz., and the Jaffe family, and a small parcel owned by MGM Grand director James D. Aljian. The purchase price was disclosed in a preliminary prospectus issued in connection with MGM Grand's planned offering of six million common shares.The luxury airline and casino company, 98.6%-owned by investor Kirk Kerkorian and his Tracinda Corp., earlier this month announced its agreements to acquire the properties, but didn't disclose the purchase price. The proposed stock offering and issuance of nearly 1.8 million common shares in connection with the land purchase will bring MGM Grand's total shares outstanding to 28.7 million, of which 72% will be owned by Mr. Kerkorian and Tracinda, according to the prospectus. In over-the-counter trading, MGM Grand was bid at $17.50 a share. Proceeds from the offering are expected to be used for remodeling the company's Desert Inn resort in Las Vegas, refurbishing certain aircraft of the MGM Grand Air unit, and to acquire the property for the new resort.The company said it estimates the Desert Inn remodeling will cost about $32 million, and the refurbishment of the three DC-8-62 aircraft, made by McDonnell Douglas Corp., will cost around $24.5 million. MGM Grand said the latest stock offering won't cover the $600 million or more cost of building the proposed resort and theme park, and added it will need to seek additional financing, either through bank borrowings or debt and equity offerings, at a later date.Construction is set to begin in early 1991. The resort will include the MGM Grand Hotel, a multi-spired, castle-like facility that will include 5,000 rooms and 85,000 square feet of casino space.The facility will be marketed toward families, and room rates will be between $35 and $55 a night, MGM Grand said. The prospectus didn't include many details about the studio and theme park, although conceptual drawings, released this month, show that it may feature several "themed" areas similar to those found at parks built by Walt Disney Co.
Senate Democrats who favor cutting the capital-gains tax aren't ready to line up behind the leading Senate proposal. Their reluctance to support the proposal is another blow to the capital-gains cut, which has had a roller-coaster existence since the beginning of the year, when it was considered dead and then suddenly revived and was passed by the House. Nevertheless, Oregon Sen. Bob Packwood, the ranking GOP member on the tax-writing Senate Finance Committee, last night introduced his plan as an amendment to a pending measure authorizing U.S. aid for Poland and Hungary. Senate Majority Leader George Mitchell (D., Maine) was confident he had enough votes to block the maneuver on procedural grounds, perhaps as soon as today.Mr. Packwood all but conceded defeat, telling Mr. Mitchell: "I sense at this stage you may have the votes." The two lawmakers sparred in a highly personal fashion, violating usual Senate decorum.Their tone was good-natured, with Mr. Packwood saying he intended to offer the proposal again and again on future legislation and Sen. Mitchell saying he intended to use procedural means to block it again and again. Although the proposal, authored by Mr. Packwood and Sen. William Roth (R., Del.), appears to have general backing by Republicans, their votes aren't sufficient to pass it.And Democrats, who are under increasing pressure from their leaders to reject the gains-tax cut, are finding reasons to say no, at least for now.A major reason is that they believe the Packwood-Roth plan would lose buckets of revenue over the long run. The Packwood-Roth proposal would reduce the tax depending on how long an asset was held.It also would create a new individual retirement account that would shield from taxation the appreciation on investments made for a wide variety of purposes, including retirement, medical expenses, first-home purchases and tuition. "A number of us are not going to touch capital gains, IRAs or anything else unless it contributes to deficit-reduction," said Sen. Charles Robb (D., Va.), who is one of the 10 to 20 Democrats who the Bush administration believes might favor giving preferential treatment to capital gains. President Bush has been hearing this kind of opposition first hand during meetings over the past two days with Democratic senators at the White House.And at a luncheon meeting Tuesday of Democratic senators, there was outspoken opposition to cutting the capital-gains tax this year, according to participants. The trend is making advocates of the tax cut less optimistic about success. "There is a one-out-of-three shot of getting it this year," said Sen. David Boren of Oklahoma, a leading Democratic proponent of cutting the capital-gains tax.He called the battle "uphill." Other Democrats who favor a capital-gains cut are even more pessimistic. "There will be no capital-gains bill this year," said Sen. Dale Bumpers (D., Ark.). "I'm probably not going to vote for any capital-gains proposal.The IRA portion (of the Packwood-Roth plan) is irresponsible." Another significant factor in the capitalgains debate is the extent to which it has become a purely political battle between President Bush and Senate Majority Leader Mitchell.Mr. Mitchell has made clear to his wavering colleagues that the issue is important to him personally. Today, Sen. Mitchell and other leading Democrats plan to turn up the heat again by holding a news conference to bash the proposal.Estimates requested by Sen. Mitchell from the Congressional Joint Taxation Committee show that the richest 100 taxpayers got an average benefit from the capital-gains differential of $13 million each in 1985, the last year for which figures are available. White House officials acknowledged yesterday that Democrats still are reluctant to publicly express support for the Packwood-Roth capital gains proposal because they are loath to buck Sen. Mitchell.As a result, the officials said they are open to making a variety of deals with Senate Democrats to win their support for a capital-gains tax cut. Democrats asked in this week for discussions with President Bush have suggested ways of "tinkering" with the Packwood-Roth proposal, suggesting an interest in looking for a modified version they can back, one official said. In addition, White House aides think that there are numerous other important measures Democrats badly wanted passed -- such as the scaling back of a controversial catastrophic health-care plan for the elderly -- that might provide the president leverage in cutting deals with Democrats.A capital-gains tax cut might be paired with such measures to help ensure passage.Other possibilities include a child-care initiative and an increase in the minimum wage. If they can't secure immediate passage of a capital-gains plan, administration officials also aren't ruling out making a deal with Congress to put off a vote until a firm date in the future, even next year.But the officials insist that such a deal on a future vote would have to apply to both the House and the Senate. Gerald F. Seib contributed to this article. Japanese immigration authorities said they found 658 more Chinese among Vietnamese boat people, bringing the number of Chinese trying to enter Japan by posing as Vietnamese refugees this year to 1,642. Japan plans to send the Chinese back home and is negotiating with the Chinese government, a Justice Ministry official said.The Chinese were among 3,372 boat people supposedly from Vietnam who arrived in Japan this year, compared with 219 for all of 1988, the official said. The 658 Chinese, who have been in a refugee-assistance center, were sent to immigration facilities yesterday pending deportation to China, the official said. On Sept. 13, Japan began a policy of screening boat people, accepting only those deemed to be political refugees. Francoise Verne, 52-year-old former deputy director of France's mint, faces prison for her theft of some 67 rare coins from the mint's collections.Second in command from 1979 to 1984, Mrs. Verne told a Paris court that the "great disorder" that reigned at the agency led her into temptation.Before an inventory in 1984 that showed the "disappearance" of 944 coins valued at about 2.9 million French francs (about $465,000), there hadn't been any stock-taking since 1868.Tony Lambert, Mrs. Verne's successor, says the mint's losses from the theft run into the hundreds of thousands of francs. El Salvador is destroying more than 1.6 million pounds of food that had rotted in government warehouses, government officials said.The state Supply Regulator Institute is to burn rice, corn and beans that spoiled because of neglect and corruption in the previous Christian Democrat government, a statement from the information service SISAL said.During the past administration the foodstuffs were first bought by the institute, then sold at low prices to "unscrupulous businessmen" who resold them to the institute at inflated prices, the statement said. A black-draped cruise liner sailed into Naples yesterday bringing 800 Libyans threatening vengeance if Italy refuses to pay compensation for more than 30 years of colonial rule.Another 250 Libyans were already in Italy to stage a day of mourning for victims of Italy's colonial rule between 1911 and 1943, when Tripoli says Rome kidnapped 5,000 Libyans and deported them as forced labor.Libya's revolutionary Committees have threatened attacks on Italians if Rome doesn't pay compensation.But officials in Rome say the issue was legally resolved by a settlement between Italy and King Idris, deposed by Col. Muammar Gadhafi in 1969. Canadian Indians are taking five countries to court in a bid to stop low military flights over their homes, the Dutch Defense Ministry said.Representatives of the Inuit and Cree peoples living in Quebec and Labrador in northeastern Canada told the ministry of the planned action at a meeting, a ministry spokesman said.They also wanted to prevent a NATO training base being built in the region, he said.The action, in the Canadian Federal Court, will be against Canada, the Netherlands, West Germany, Britain and the U.S., the ministry spokesman said. Japan suspended imports of French mushrooms after finding some contaminated by radiation, an official of the Ministry of Health and Welfare said.Japan has been testing imported food from Europe since the April 1986 Chernobyl accident in the Soviet Union, the spokesman said.Since then, the ministry has announced 50 bans on food imports from European countries, including Italy, Spain, Turkey, Greece and the Soviet Union. The Venice city council is battling plans to tap huge gas fields off the coast that it says will speed up the city's slow sinking into its lagoon. AGIP, the state-owned energy giant, made the announcement about the gas field last month.Located six miles northeast of Venice, the field contains 875 billion cubic feet of methane gas-one-tenth of Italy's reserves. Alarmed councilors say the project could jeopardize costly efforts to stop, or slow down, the subsidence that makes Venice subject to regular and destructive flooding.The council unanimously opposed the idea of AGIP pumping out the methane gas and swiftly appealed to the company and to Prime Minister Giulio Andreotti, who has yet to reply. AGIP refused to reconsider and says drilling is due to start early next year. "It's unlikely extracting the gas will cause subsidence," says a spokeswoman. Thieves stole a 12th century fresco from an abandoned church in Camerino, Italy, by removing the entire wall on which the work had been painted, police said. . . . West Germany's BMW commissioned the Nuremberg post office to test a prototype battery-powered car.The vehicle has a top speed of 65 miles an hour and requires recharging from a standard wall socket every 100 miles.
One of the more bizarre garden stories since Eden has been unfolding for four years now, in the private paper-and-crayon fantasies of artist Jennifer Bartlett.And if she and the Battery Park City Authority have their way, her horticulturally inept plan will soon go public as a real garden "artwork" in the downtown complex. South Gardens, as the Bartlett scheme is called, will occupy the last 3.5 acres of open space at the southwest tip of Manhattan.It could cost taxpayers $15 million to install and BPC residents $1 million a year to maintain.Created by an artist who flaunts her ignorance of plants and gardens, South Gardens, as now planned, will die from congestive garden design. Ms. Bartlett's previous work, which earned her an international reputation in the non-horticultural art world, often took gardens as its nominal subject.Mayhap this metaphorical connection made the BPC Fine Arts Committee think she had a literal green thumb. (Ms.Bartlett would not discuss her garden for this article.) Last year she boasted to HG magazine: "I'd never looked at a garden in my life." And she proved no shirking violet in her initial statement to the BPCA, a New York State public benefit corporation: "The only thing I was interested in doing was a very complicated garden, which would cost an enormous amount of money and be very expensive to maintain." Undeterred, the BPCA hired Ms. Bartlett and another confessed garden ignoramus, the architect Alexander Cooper, who claimed he had never visited, much less built, a garden, and said of the project, "I don't view this as a landscape.I view this as a building." The third principal in the South Gardens adventure did have garden experience.The firm of Bruce Kelly/David Varnell Landscape Architects had created Central Park's Strawberry Fields and Shakespeare Garden.The BPCA called its team a "stunning" collaboration. After four years, though, the South Gardens design is 100% uncollaborated Jennifer Bartlett.She has done little more than recycle her standard motifs -- trees, water, landscape fragments, rudimentary square houses, circles, triangles, rectangles -- and fit them into a grid, as if she were making one of her gridded two-dimensional works for a gallery wall.But for South Gardens, the grid was to be a 3-D network of masonry or hedge walls with real plants inside them.In a letter to the BPCA, kelly/varnell called this "arbitrary and amateurish." The landscape architects were expelled from the garden in July. All the while, Ms. Bartlett had been busy at her assignment, serene in her sense of self-tilth.As she put it in a 1987 lecture at the Harvard Graduate School of Design: "I have designed a garden, not knowing the difference between a rhododendron and a tulip." Moreover, she proclaimed that "landscape architects have been going wrong for the last 20 years" in the design of open space.And she further stunned her listeners by revealing her secret garden design method: Commissioning a friend to spend "five or six thousand dollars . . . on books that I ultimately cut up." After that, the layout had been easy. "I've always relied heavily on the grid and found it never to fail." Ms. Bartlett told her audience that she absolutely did not believe in compromise or in giving in to the client "because I don't think you can do watered-down versions of things." (This was never a problem with South Gardens, because the client had long since given in to Ms. Bartlett's every whim.) Last year the public was afforded a preview of Ms. Bartlett's creation in a tablemodel version, at a BPC exhibition.The labels were breathy: "Within its sheltering walls is a microcosm of a thousand years in garden design . . . a rose garden, herb garden, serpentine garden, flower fields, an apple orchard . . . organized in a patchwork of 50-by-50-foot squares to form `rooms' . . . here and there are simple architectural forms, a whimsical jet of water, a conceit of topiary or tartan plaid, and chairs of every sort to drag around. . . . At the core of it all is a love for plants." Plant lovers who studied the maquette were alarmed.They looked at the miniature and saw a giant folly.Ms. Bartlett's little rooms left little room for plants or people.Kelly/Varnell had put South Gardens' carrying capacity at four people per room, or about 100 humans overall.This mincemeat of tiny gridlocked squares was inspired by the artist's own digs: "My loft was 50 by 100 feet, so 50 feet by 50 feet seemed like a good garden room." Inside the grid were 24 of these plant cells jammed full of clutter.One she made into a topiary rec room, replete with plants shaped into a Barcalounger, TV, piano and chairs.In another, she requisitioned topiary MX missile cones -- costing $10,000 each -- in heights up to 20 feet.Another she stuffed with eight "rectilinear hedges" for a topiary geometry lesson in the right-angling of plants.In the herbal lounge she specified a "plaid knot garden" decor.She ordered the foyer done in a different plaid planting, and made the landscape architects study a book on tartans. In one garden roomette she implanted a 43-foot square glass cube meant to show off a plaid tile floor conceit, a "zinc sink," a "huge fishbowl with carp" and a "birdcage with cockatoos." Next door she put a smaller plaid-floored glass house, where, she suggested, a flat of strawberries might be displayed in the dead of winter. In another compartment called the Linden Bosque, 62 linden trees were to be crowded together at killing intervals of 10 or 16 feet. (Lindens need about 36 feet.) One thing about the Bartlett plan was never in doubt: It would demand the full-time skills of a battalion of topiary barbers, rosarians, orchardists and arborists.Ms. Bartlett blithely suggested calling upon "semi-skilled garden club workers for maintenance." Furthermore, she had insisted on paths so narrow (five to eight feet) and hedge corners so square that standard maintenance equipment -- trucks or cherry pickers -- couldn't maneuver. Then, to make these gardenettes quite literally rooms, Ms. Bartlett had thrown up windowless walls (brick, lattice, hedge) eight to 10 feet tall, casting her interiors into day-long Stygian shade.It was hard to see how photosynthesis would ever happen in South Gardens without decking the walls in a Christmas-like array of Gro-Lites. Finally, flouting the BPCA's wishes to continue the popular two-mile riverside Esplanade, prized for its expansive views of New York Harbor, the Statue of Liberty and Ellis Island, Ms. Bartlett threw up yet another wall, this time concrete, this time 10 1/2 feet tall.She ran it the length of the South Gardens riverfront, blotting out the city's great natural water features, the harbor and the river. (Within her garden, she has decreed a waterfall, a rill, ponds and other costly, trivial waterworks beside the Hudson.) While the model was still on view, Manhattan Community Board 1 passed a resolution against South Gardens.The Parks Council wrote the BPCA that this "too `private' . . . exclusive," complex and expensive "enclosed garden . . . belongs in almost any location but the waterfront." Lynden B. Miller, the noted public garden designer who restored Central Park's Conservatory Garden, recalls her reaction to the South Gardens model in light of the public garden she was designing for 42nd Street's Bryant Park: "Bryant Park, as designed in 1933, failed as a public space, because it made people feel trapped.By removing the hedges and some walls, the Bryant Park Restoration is opening it up.It seems to me the BPCA plan has the potential of making South Gardens a horticultural jail for people and plants." The three urban horticulture experts with Cornell Cooperative Extension weighed in with a letter to the BPCA that began: "We feel that the garden is horticulturally doomed." They then addressed the decidedly "questionable safety of . . . a complex garden of endless hiding places.The 8 ft. hedges which obstruct views in and out of small `rooms' insure . . . that this garden will be a potential breeding ground for crime." (At Harvard, Ms. Bartlett had declared: "There are going to be problems with safety . . . I'm not going to address questions of safety!") Despite the dire assessments of knowledgeable garden professionals, Ms. Bartlett's South Gardens design somehow continues on, seemingly impervious to reason, stalled only by bureaucratic lethargy and logistical complications.BPCA President and CEO David Emil hopes to negotiate a seawall that could "be significantly more visually permeable." And by substituting yet another landscape architect, Nicholas Quennell, he insists he can achieve that and other accommodations to gardening reality while still preserving the "artistic vision" of a "truly great artist." After four years of no progress in this direction, it is doubtful any viable collaboration with Ms. Bartlett will suddenly now be possible. (Mr.Quennell has said he plans to go with the grid, regardless.) There is still time, however, for Gov. Mario Cuomo or Fabian Palomino, chairman of the BPCA board, to prevent this topiary "Tilted Arc." These statesmen might take counsel from William Robinson, author of "The English Flower Garden" -- the gardener's bible since 1883 -- who seems to have had a Jennifer Bartlett in mind when he wrote: "Unhappily, our gardeners for ages have suffered at the hands of the decorative artist when applying his `designs' to the garden. . . . It is this adapting of absurd `knots' and patterns from old books to any surface where a flower garden has to be made that leads to bad and frivolous design -- wrong in plan and hopeless for the life of plants."
Wednesday, October 25, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 3/4% near closing bid, 8 13/16% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.20% 45 to 67 days; 8.325% 68 to 89 days; 8% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.40% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.53% one month; 8.45% three months; 8.27% six months. BANKERS ACCEPTANCES: 8.47% 30 days; 8.30% 60 days; 8.27% 90 days; 8.08% 120 days; 7.98% 150 days; 7.90% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 9/16% to 8 7/16% two months; 8 5/8% to 8 1/2% three months; 8 1/2% to 8 3/8% four months; 8 7/16% to 8 5/ 16% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 5/8% three months; 8 7/16% six months; 8 3/8% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.75%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.68%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.62%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
A volcano will erupt next month on the fabled Strip: a 60-foot mountain spewing smoke and flame every five minutes. The man-made inferno will tower over a man-made lagoon with more than four acres of pools, grottoes and waterfalls.Visitors, whisked from the Strip on a moving walkway, will glide over a habitat for rare white tigers, which will star in performances by the famed illusionist team of Siegfried & Roy.Nearby, six dolphins will frolic in a 1.5 million-gallon saltwater aquarium. At the core of all this stands a hotel.In the lobby behind its nine-story, orchid-strewn atrium, a 20,000-gallon aquarium will come alive with sharks, stingrays, angelfish, puffers and other creatures of the deep. And oh, yes.There's a casino, the financial heart of it all. This is the Mirage, a $630 million island-fantasy hotel-casino now being completed for opening in November by Golden Nugget Inc.It's the most stunning example of Las Vegas's concerted effort to transform itself into a world-famous vacation resort for families as well as gamblers.Las Vegas has seen nothing quite like it before. Not for 15 years has a big new hotel-casino opened here.Now the Mirage and Circus Circus Enterprises Inc. 's $290 million Excalibur are going up.The Excalibur, with a castlelike hotel, jousting tournaments and other Arthurian attractions, will be able to handle up to 30,000 visitors a day when it opens in 1990. If MGM Grand Inc. proceeds with its plan for an amusement park -- a $700 million movieland resort with a working studio, casino and 5,000-room hotel that would become Las Vegas's biggest -- the investment in the three properties will total some $1.6 billion.MGM Grand has agreed to buy a 117-acre site for the resort for $93 million in cash plus stock currently valued at nearly $30 million. Smaller projects swell the figure to at least $2.5 billion.Still other projects that have been announced but not yet started could put expenditures above $3 billion over the next few years. Stephen A. Wynn, who owns 29.4% of Golden Nugget's shares, says the Mirage and other projects will help Las Vegas attract a whole new generation of visitors. "If you create a wonderment, if you create something so exciting that the public dreams of being part of it, then they'll come," he says.The projects already under construction will increase Las Vegas's supply of hotel rooms by 11,795, or nearly 20%, to 75,500.By a rule of thumb of 1.5 new jobs for each new hotel room, Clark County will have nearly 18,000 new jobs.The county at the end of 1988 had 307,000 jobs, 95,400 of them in the tourist industry.Projects in the talking or blueprint stage would add a further 48,000 rooms. Hotel-casino operators play down the possibility of a labor shortage.After all, 40,000 newcomers a year are settling in the Las Vegas Valley.But Nevada state labor economists think a shortage is probable. Nobody yet seems to have calculated the total number of slot machines, crap tables or roulette wheels Las Vegas will add to the enormous store that Lady Luck already guards here, much less the ultimate impact of the growth on schools and municipal services. "Traffic is certainly a concern, as is pollution, water and an adequate labor market," says Frank Sain, executive director of the Las Vegas Convention and Visitors Bureau.City fathers have managed to push through projects that are crucial for tourist growth, such as the expansion of McCarran International Airport to accommodate the 44% of Las Vegas tourists who fly here.This year, by one means of transport or another, more than 18 million people will visit the city. The expansion will set off a marketing war among the big hotel-casinos.Las Vegas promises, or threatens, to become a giant carnival, with rooms to be had for $45 a day or less, for visitors uninspired solely by gambling.Amid a riot of jousting knights, circus clowns, gold-leaf centurions and creatures of the wild, lesser competitors will fall. Caesars World Inc. plans to defend its august reputation by sinking $190 million into its opulent Caesars Palace, next door to the new Mirage, and adding a $100 million shopping area reminiscent of Rodeo Drive.The Palace, with its marble fountains and toga parties for high rollers, is already well-known for its Caesarean theme.The Flamingo Hilton, Imperial Palace, Frontier and others are pouring millions of dollars into facelifts, new room towers and casino floor space just to keep up. Where's this huge amount of investment capital coming from?Golden Nugget, Drexel Burnham Lambert Inc. 's first casino client, has borrowed on more than $600 million worth of mortgage notes, mostly sold to private investors by Drexel, to build the Mirage.Other casino owners, Circus Circus among them, are financing their expansion with their own cash and revolving credit lines from local lenders such as First Interstate Bank of Nevada. Will the investments pay off?The growth of Las Vegas tourism in recent years persuades lenders that they will.Casino revenues and hotel occupancy rates are high.Last year, the tourists left $3 billion with the area's casinos, nearly 10% more than in 1987.The people with a stake in Nevada's gambling industry believe that they have barely tapped the potentially huge family trade. "If you build a better mousetrap, it will catch more mice," says Fred Benninger, chairman of MGM Grand.Ellen Cokely, a tourist from Alton, Ill., seems inclined to agree. "I'd love it if my daughter had something else to do here," says Ms. Cokely, watching seven-year-old Kristin on the water slide at the Strip's Wet `n' Wild water park. "Two generations ago, Dad came to Las Vegas by himself for a little diversion," says Van Heffner, executive vice president of the Nevada Hotel and Motel Association. "One generation ago, Mom joined Dad.Now, in the `90s, we're headed toward a total resort environment." Only a decade or so ago, casino managers balked at in-room TV sets and other fripperies that distracted from gambling.Casinos today offer bowling alleys, water parks, golf courses, tennis courts, lush swimming pools and other diversions, and more such facilities are being designed. Despite the new emphasis on the family trade, however, tourists in search of naughtier fun than gambling seem certain to find it, with Las Vegas call girls remaining on the scene. A serious economic downturn, pessimists observe, could hurt the expansionists.For now, however, the naysayers' voices are drowned by the roar of cement mixers and the clanging of construction cranes along the Strip.This is no place for pedestrians, but at 7:30 on a recent morning, when construction choked traffic at the famous Four Corners intersection to one lane, a taxi passenger found it faster to abandon the cab and walk to her destination. The ferocious competition probably will drive some poorly managed properties into bankruptcy or new ownership.It has happened before.The Dunes, the Aladdin and the Riviera were all acquired by the present owners from bankruptcy proceedings spawned by the last recession, in the early 1980s. Yet that hasn't discouraged investors.Some have bought big chunks of Strip property for what may turn into another wave of building.Atlantic City casino owner Donald Trump is scouting the Las Vegas market with an eye toward building an appropriately spectacular place. Even before the huge new projects began, the Strip's recent expansion squeezed smaller competitors.Many blue-collar customers of downtown's no-frills gambling spots have been lured to the Strip or to Laughlin, Nev., a Colorado River town catering to snowbirds and the recreational-vehicle crowd.Hotel expansion and an influx of more-discriminating tourists have hurt motels.Since 1979, the number of motel rooms has fallen by 17,000. Many people here expect a room-rate war as the new projects open. "There's probably going to be some pressure on occupancy and room rates over the next year, but after that you should see the market return to 80%-plus occupancy and regular rates," says Paul Rubeli, casino executive at Ramada Inc., which runs the Tropicana. Skeptics wonder whether mega-resorts such as the Mirage will be able to squeeze a profit from their cash flow.The Mirage will cost at least $1 million a day to operate.Mr. Wynn seems confident that it will produce a healthy profit, but some securities analysts doubt it.Competitors and analysts say that among large existing properties Bally Manufacturing Corp. 's Bally Grand hotel-casino probably will be hardest hit among major properties.Bally officials decline to discuss the situation. Bally bought the former MGM Grand hotel-casino from Kirk Kerkorian four years ago.Only now is it undergoing a badly needed facelift.Its parking lot is inconvenient, the MGM lion's-head logo still appears in places, and customers still call it the Grand, rather than the Bally Grand.It has a "great location, but they're going to have some real problems when everyone around them opens," says Daniel Lee, a Drexel analyst.Older properties that still have a 1950s image are also vulnerable. Any hotel-casino without a strong identity will get whacked by the new competition, says Glenn Schaeffer, senior vice president of Circus Circus. "If you don't know what you are, bigger won't make you better," he says. "But it'll sure make you poorer." Circus Circus's flagship casino has become the envy of competitors for its ability to vacuum cash from the pockets of vacationing families.The Circus Circus lures them with low room rates, inexpensive buffets and entertainment for children at no extra charge.The company's Excalibur will also appeal to families, of course.Its castle, Mr. Schaeffer says, will be "the most compelling piece of folk architecture ever built." Some casino owners have resisted the temptation to add rooms.Instead, they are spending to reinforce the identity that they believe attracts their customers. "More rooms aren't the answer for us," says Caesars World chairman Henry Gluck.While his company's hotel is building a retail complex in Beverly Hills style and redoing existing rooms, it has decreased the number of its rooms.Some have been combined into suites for the high rollers. Caesars has made a specialty of catering to high rollers from abroad, who are also being aggressively courted by the Mirage, the Las Vegas Hilton and others.Other, smaller concerns are also pursuing market niches -- Hawaiian tourists, for example, or the local trade. "There's still room for boutique properties," says James Barrett, president of MarCor Resorts Inc. Off the Strip, MarCor is building the Rio, a hotel-casino with a Brazilian theme and only 430 rooms -- all of them suites. Despite the proliferation of tourist distractions, Las Vegans haven't forgot that gambling is still what the town is all about. "The days when when the thrust of casinos was all high rollers, with no windows and clocks and lots of red and black decor, are gone," Mr. Sain of the visitors' bureau says. "But 93% of tourists still come for gambling.We can't lose sight of that."
ARTICLE I, SECTION 7, CLAUSE 2: Every Bill which shall have passed the House of Representatives and the Senate, shall, before it becomes a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it.If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. . . . ARTICLE I, SECTION 7, CLAUSE 3: Every Order, Resolution, or Vote to which the Concurrence of the Senate and House of Representatives may be necessary (except on a question of Adjournment) shall be presented to the President of the United States; and before the Same shall take Effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the Rules and Limitations prescribed in the Case of a Bill. President Bush told reporters a few months ago that he was looking for the right test case to see whether he already has the line-item veto.Vice President Quayle and Budget Director Darman said recently they've joined the search.On Tuesday, the subject came up again when Marlin Fitzwater explained the constitutional argument based on the provisions above to the White House press corps. President Bush doesn't have any provision in mind, but line-item-veto bait will be like earthworms at midnight in the coming Continuing Resolution.The harder question is whether anyone yet understands that Mr. Bush's fight for his constitutional prerogatives is about politics as much as it is about law. We have been persuaded by the constitutional argument for the inherent line-item veto since 1987, when lawyer Stephen Glazier first made the case on this page.The 1974 budget "reform," passed over President Nixon's veto, took away the presidential impoundment power, thereby introducing monstrous CRs and eviscerating the presidential veto. Mr. Glazier discovered that the Founders had worried that Congress might take the President out of the loop.Article I, Section 7, Clause 3 says that whether it's called an "order, resolution or vote" or anything else, Presidents must have the chance to veto.Labeling an omnibus budget a "bill" can't deprive the President of his power to veto items. Finding a test case shouldn't be hard, but there is something to be said for picking the best one possible.The White House had the perfect case, but Congress blinked before it could go to court.After the HUD and S&L stories broke, some Congressmen began to worry that their influence peddling at executive-branch and independent agencies might some day get them in trouble.They worried about an Interior Department directive to log all communications with Members or their staffs.Congress inserted the following into the Interior appropriation: "None of the funds available under this title may be used to prepare reports on contacts between employees of the Dept. of the Interior and Members and committees of Congress and their staff." The White House warned that this would be an unconstitutional usurpation of its power.When it threatened to use this provision as the test for a line-item veto, Congress caved.The fear Congress has of any line-item-veto test led Members to add the single most contorted and ridiculous provision this year, "This section shall be effective only on Oct. 1, 1989." This means Interior contacts cannot be logged only on one day -- a Sunday that had already passed. If the White House is looking for another unconstitutional bill, Rep. John Dingell is trying again to raise the Fairness Doctrine from the dead.President Reagan vetoed this as a First Amendment violation.The "Fairness" Doctrine's enthusiasts are incumbents in the House who know the rules squelch lively discussions on broadcasts, deterring feisty challengers.There are also other provisions requiring Congressmen to join treaty-negotiating teams and new restrictions on OMB. Unconstitutional bills make good legal targets, but the line-item veto is better understood as a political opportunity than as mere fodder for lawyers.Commenting on the budget mess this week, President Bush said: "The perception out there is that it's the fault of Congress.And you can look to the leadership and ask them why that is the perception of the American people." Exactly right.Now's the time to make the political case that Presidents need the line-item weapon to restore discipline to the budget. Congress is in no position to naysay Mr. Bush now that we're into Gramm-Rudman's sequestration.Just this week, the House-Senate conference met -- 231 conferees, divided into 26 different subconferences.Senator Daniel Inouye agreed to close some bases in Hawaii in exchange for such goodies as $11 million for a parking lot at Walter Reed Hospital.Conference negotiator Rep. Bill Hefner pulled down $40 million in military bases for North Carolina and graciously allowed Senator James Sasser $70 million for bases in Tennessee.President Bush should take the Constitution in one hand and a budget ax in the other and get to work.He should chop out both unconstitutional provisions and budget pork.Congress may have lost any sense of discipline, but that doesn't mean the country must learn to live forever with this mess.President Bush has the power to change how Washington works, if only he will use it.
In a rare package sale of its real estate, K mart Corp., Troy, Mich., has sold 17 of its strip shopping centers to a limited partnership led by New York developer Philip Pilevsky, according to sources familiar with the transaction.They estimate the value of the transaction at close to $100 million. K mart officials and Mr. Pilevsky wouldn't comment on the sale. K mart previously had announced it would report its third consecutive decline in quarterly earnings for the period ended yesterday, the same day the real estate deal was completed. Analysts are estimating third-quarter earnings will drop between 13% and 20% to about 50 to 55 cents per share, compared with 63 cents per share in the year-ago quarter.It is unclear what effect the sale of the shopping centers will have on earnings. K mart developed the centers, which range in size from about 150,000 square feet to just over 250,000 square feet.Most are anchored by a K mart store.The retailer reportedly will lease its stores back from the developer, who plans to expand the small centers. The centers comprise a total of about 1.6 million square feet of retail space.They are spread around the country and include locations in California, Florida, Washington and Arizona. Mr. Pilevsky, who heads Philips International Holding Corp., a New York-based real estate company, owns more than a dozen other shopping centers in which K mart is a tenant.The company is active in office and residential development in New York.However, nationally, Mr. Pilevsky controls through limited partnerships about 85 shopping centers with about 17 million square feet. K mart runs 2,200 K mart stores, primarily in leased facilities.The company typically sells the centers it develops, but has usually sold only one or several at a time.
HEALTH CLUBS gear up for a graying clientele. Although their ads picture curvy young people in skimpy outfits, club owners know the future lies with the lumpier over-40 set. "It's a misconception that physical fitness is something for the young and middle-aged," says Michael Pacholik, sales manager of the LA Fitness club, Diamond Bar, Calif.About 10% to 15% of members at Atlanta's Holiday Espre Center are elderly, says Gerald Williams, fitness consultant. "Most want cardiovascular conditioning . . . the No. 1 way of reducing risk of heart disease." The Association of Quality Clubs, which puts 1988 industry revenue at $5 billion, surveyed the health-conscious over-40 market and found that 43% exercise regularly.Michael Hays, head of ProBody Fitness, notes an industry "wash" is in progress. "Clubs need to be run like restaurants where every square foot makes a dollar," he says.Older people help profits by filling in "downtime." He adds: "The medical market and the fitness market parallel each other and are going to cross real soon." People on fixed incomes get a break at Espre; over 55 wins a 45% discount at Anaheim Imperial Health Spa. "HOT" TOPAZ sparks regulator, jeweler concern over import of irradiated stones. A committee of gem dealers investigates the source of some "hot" blue topaz stones recently reported by a Hong Kong jewelry manufacturer.In the U.S., radiation limits are set and monitored by the Nuclear Regulatory Commission, which licenses reactors that process the topaz.The agency is working on licensing importers but doesn't currently monitor imports.Topaz, a translucent mineral that is often whitish when taken from the ground, can be turned blue by irradiation, which transforms it into a gemstone that looks like an aquamarine. "The {stones} that were irradiated in the U.S. are safe," says John Hickey, chief of the NRC operations branch, Washington. "We believe that the vast majority of imported material is safe.But there is a small risk that some were imported with high radiation levels." Mr. Hickey added that the stones found in Hong Kong are thought to carry double the U.S. radiation limit, although he noted that double or even triple the U.S. limit is "still in the range of safe levels." Some jewelers have Geiger counters to measure topaz radiation. CAPITAL TRAVELS to Europe as 1992 unification nears. Boston's Advent International raises $230 million from U.S. pension funds and other institutions to invest in Europe.Other venture capitalists are already there: MMG Patricof Group and its Alan Patricof Associates, New York; Burr, Egan, Deleage & Co., Boston; and San Francisco's Hambrecht & Quist have about $800 million to invest in European companies. European venture capital funds total about $14 billion and are expected to continue growing 35% annually.Continentals believe that the strongest growth area will be southern Europe.Spain and Italy are most often mentioned as the future economic hot spots.Favored ventures include media, telecommunications and retailing.Most popular acquisition method: the leveraged buy-out. Family-owned firms that need cash to grow are attractive, says John Turner of Matuschka Gruppe, Munich. AN AIDS DIRECTORY from the American Foundation for AIDS Research rates and reviews educational materials. "Learning AIDS" lists films, pamphlets, brochures, videos and other educational data.The distributor is R.R. Bowker, New York. SUSPECT "SALES" ads are challenged by the Better Business Bureau of Metropolitan New York.The bureau found that only two of six New York furniture stores could prove their presale prices were higher. DRACULA'S BUSY this time of year, but a visit to his Transylvania castle is part of a Chicago-based Unitours trip in the spring, presumably the count's off-season. RADIO MALAISE draws the ear of the Federal Communications Commission. AM radio, which has been losing listeners to FM channels since the 1970s, approaches the 1990s with a diminished voice.But it may have a good listener in Washington.The FCC plans to hear a day of testimony Nov. 16 on the plight of AM radio.The commission believes that improving AM service would broaden listening selections and increase options for advertisers.The issues are also thought to be important to the FCC's new chairman, Alfred Sikes, a former AM broadcaster in his native Missouri. The FM radio band, considered technically superior because it can carry stereo broadcasts, has cornered the airwaves for delivering music.AM stereo remains largely undeveloped because it lacks a uniform delivery system.The National Association of Broadcasters in June adopted an agenda for revitalizing AM radio that includes, among other things, pursuing further FCC action on selecting an AM stereo standard and seeking a law requiring all stereo receivers to include AM stereo. Listeners turned to radios run on batteries for news when the San Francisco earthquake and Hurricane Hugo cut power lines. BRIEFS: A Modern Healthcare magazine article says 40% of surveyed executives admitted falling asleep during formal presentations. . . . Lee Co., the jeans maker, celebrates its 100th anniversary with a hardcover yearbook featuring photos of its 10,000 employees.
Office Market Weakens In Overbuilt Northeast THE NORTHEAST office market is feeling serious aftereffects of the giddy overbuilding of the 1980s. Foreclosures and other signs of financial distress, most often associated with the real estate market in the Southwest, are surfacing in the suburban office market of the once thriving Northeast. Some projects are now in the hands of lenders, including a 425,000-square-foot office facility in Little Falls, N.J.The owners of a 32-acre hotel and office complex in King of Prussia, Pa., have advertised for new financing.Rising office vacancy rates in Fairfield County, Conn., have builders and bankers scrambling to restructure loans.And in suburban Boston, developers are bracing for cutbacks in the computer industry, a major user of office space. Many troubled properties haven't been foreclosed on and are hard to identify, says Albert I. Berger, who heads the Secaucus, N.J., office of Helmsley-Spear Inc., a real estate brokerage.Owners are voluntarily -- and quietly -- turning over properties to lenders through "deeds in lieu of foreclosure." Often, developers stay on as property manager. Real estate analyst Lloyd Lynford says the Northeast's distress is masked by relatively low vacancy rates.But in today's overbuilt market, tenants have many choices and are negotiating low rents that squeeze building owners.On average, Mr. Lynford says, it now takes three to 3 1/2 years to fill new office space, compared with 2 1/2 years in 1988. Beverly Hills Comes To Suburban Tokyo WHY SHOULD the Japanese cross the Pacific to buy American real estate when they can simply recreate it at home? Tokyu Development Corp. is spending $500 million to build American-style luxury homes in suburban Tokyo with rarely seen back yards, front yards, swimming pools and tennis courts. The Japanese company hired Richardson Nagy Martin, a Newport Beach, Calif., architectural firm, to design what the Japanese press has dubbed "the Beverly Hills of Tokyo." Instead of Japan's typical small homes clustered on narrow streets with no sidewalks, the new "One Hundred Hills" development will offer 65 houses on half-acre lots.That's more than 10 times the usual housing site size. Buyers with $6 million to spend can select from 11 designs, including a Mediterranean-inspired California style, a traditional Yankee look and designs inspired by Midwestern architect Frank Lloyd Wright.There are spacious living rooms and baths, plus a master grandparents suite and a foyer for removing shoes to suit Japanese life styles. Exteriors are faced with brick, wood or stone, but the homes are made of steel-reinforced concrete. "We were disappointed we couldn't use wood," says architect Walter J. Richardson, "but the Japanese only want stronger materials." At $1,000 per square foot, the Japanese want the feeling of indestructibility, he explains, not to mention protection from possible earthquake damage. Housing Developers Try Brand-Name Buildings RESIDENTIAL builders, faced with a more competitive market, are turning to a traditional consumer marketing technique to establish brand-name identity. "One of the difficulties people in real estate have is that each product is like starting a new company, or starting a new line in the fashion business," says L. Robert Lieb president of Mountain Development Corp. in West Paterson, N.J.So he's using "river" in many project names. "It'll never be like what Bristol-Myers does," he adds, "but it helps establish recognition with the public -- and with banks." Weingarten-Siegel Group Inc. of Manalapan, N.J., has built Cross Creek Pointe, Allegro Pointe and other Pointes in New Jersey.Caspi Development Corp of Armonk, N.Y., has developed two apartment buildings called Classic and plans a third.Developer Steve Caspi says the same brand name indicates consistent quality, "regardless of location, design or amenities." The leader in real estate brand names is developer Ara Hovnanian.His entry-price condos are labeled Society Hill.Beacon Hill is for "move-up" town houses, and Nob Hill, for single-family houses.Because of standardized designs, Mr. Hovnanian says, "a buyer can visualize Society Hill regardless of where it is." Quake Not Likely to Jolt The Commercial Market THE EARTHQUAKE in San Francisco has sent few tremors through the hearts of real estate investors. "I think there's a disease called buyer's regret, and I'm sure it's running rampant at this moment, but it gets cured in a short period of time," says Kenneth Leventhal, co-managing partner of Kenneth Leventhal & Co,. a Los Angeles accounting firm specializing in real estate. "If I were buying a building in San Francisco now the first thing I'd do is insist on a structural inspection, then I'd delay a little, stall a little." But like other real estate professionals accustomed to California's quake risks, Mr. Leventhal anticipates little long-term change in the city's commercial real estate market. Still, local builders are eager to tell the world that most of San Francisco doesn't look like the TV images of destruction.Planners of the Urban Land Institute real estate conference this week hastily added a panel on the quake's effects. "The message is we build'em right," says Peter Bedford, a California developer and officer at Urban Land Institute. "There's seven million square feet of space that's doing great."
Troubled SCI Television Inc. proposed to restructure much of its $1.3 billion in debt to buy time to sell assets and pay its obligations. The leveraged buy-out firm of Kohlberg Kravis Roberts & Co., which owns 46% of the common equity of SCI TV, indicated in the debt plan that it would reduce its equity stake to 15%, giving the rest of its stake to bondholders in the restructuring. KKR also signaled to the company's creditors that Henry Kravis and other KKR directors of SCI TV would resign from the board once the restructuring is completed and forgo their voting rights. Holders of SCI TV's $507 million of high-yield junk bonds are being asked to forgive a lot of debt in exchange for taking a 39% equity stake in SCI TV.They immediately termed the proposal inadequate and said the restructuring would not solve the company's problems. "I think the current plan is sufficiently flawed in a sufficient number of bondholders' eyes that substantial revisions will be required to get it done," says analyst Craig Davis of R.D. Smith & Co. here. Investors interpreted the KKR move as a desire by the firm to wash its hands of SCI TV.But a spokesman for KKR says that with only a 15% equity stake, it wouldn't be appropriate for KKR to keep board representation. KKR already has made about $1 billion of gains from earlier transactions with SCI TV, thus it isn't significantly affected by the company's troubles. SCI TV, which is controlled by Nashville, Tenn., entrepreneur George Gillett, owns six TV stations, including several CBS Inc. affiliates.It is having trouble meeting its debt payments because of heavy borrowing in 1987 for a leveraged buy-out. Through investment banker Drexel Burnham Lambert Inc., SCI TV is offering to exchange three classes of junk bonds for packages of new bonds and equity that investors value at ranges from 20 cents to 70 cents on the dollar.KKR would give up a 31% equity stake to bondholders, while Mr. Gillett would surrender an 8% stake.While one big SCI TV investor thinks that's pretty generous, many junkholders had been hoping that KKR and Mr. Gillett would invest new money in SCI TV.Those investors think SCI TV needs new equity to survive. SCI TV's debt restructuring plan would defer payment of $153 million of bank debt.It also would defer interest and principal on junk bonds that have fallen due; the grace period for paying the bill expires Nov. 16. At the same time, investors estimate the restructuring would cut the company's annual cash interest bill from about $90 million to $85 million.Yet to pay that interest bill, analysts say SCI TV will only produce about $80 million to $90 million of cash flow a year.
Kemper Financial Services Inc., charging that program trading is ruining the stock market, cut off four big Wall Street firms from doing any of its stock-trading business. The move is the biggest salvo yet in the renewed outcry against program trading, with Kemper putting its money -- the millions of dollars in commissions it generates each year -- where its mouth is. The Kemper Corp. unit and other critics complain that program trading causes wild swings in stock prices, such as on Tuesday and on Oct. 13 and 16, and has increased chances for market crashes.Over the past nine months, several firms, including discount broker Charles Schwab & Co. and Sears, Roebuck & Co. 's Dean Witter Reynolds Inc. unit, have attacked program trading as a major market evil. Several big securities firms backed off from program trading a few months after the 1987 crash.But most of them, led by Morgan Stanley & Co., moved back in earlier this year.The most volatile form of program trading is index arbitrage -- the rapid-fire, computer-guided buying and selling of stocks offset with opposite trades in stock-index futures and options.The object is to capture profits from fleeting price discrepancies between the futures and options and the stocks themselves. Index arbitrage recently has accounted for about half of all program trading on the New York Stock Exchange.Last month, program trading accounted for 20.9 million shares a day, or a record 13.8% of the Big Board's average daily volume. On Tuesday afternoon, Kemper told Bear, Stearns & Co., General Electric Co. 's Kidder, Peabody & Co. unit, Morgan Stanley and Oppenheimer & Co. that it will no longer do business with them because of their commitment to index arbitrage, officials inside and outside these firms confirmed.Kemper officials declined to identify the firms but acknowledged a long-simmering dispute with four securities firms and said the list of brokers it won't do business with may be lengthened in the months ahead. "We've been opposed to" index arbitrage "for a long time," said Stephen B. Timbers, chief investment officer at Kemper, which manages $56 billion, including $8 billion of stocks. "Index arbitrage doesn't work, and it scares natural buyers" of stock. While Mr. Timbers explained he's "not totally convinced index arbitrage changes the overall level of the stock market," he said that "on an intraday basis, it has major effects.We've talked to proponents of index arbitrage and told them to cool it because they're ruining the market.They said, `Too bad, ' so we finally said we're not going to do business with them." Kemper also blasted the Big Board for ignoring the interests of individual and institutional holders. "The New York Stock Exchange has vested interests" in its big member securities firms "that cloud its objectivity," Mr. Timbers said. "It has never been interested in what we think.The Big Board also has a terrible communication problem with individual investors," he added. Small investors perceive that "big operators" dominate the market, said Thomas O'Hara, chairman of the National Association of Investors and head of the exchange's Individual Investors Advisory Committee set up after the 1987 crash. "The impression I've got is they'd love to do away with it {program trading}, but they {the exchange} can't do it," he said. Big Board Chairman John J. Phelan said in a recent interview that he has no inclination to eliminate program trading.He said the market's volatility disturbs him, but that all the exchange can do is "slow down the process" by using its circuit breakers and shock absorbers. Mr. Timbers countered that "the mere fact they put in circuit breakers is an admission of their problems." Morgan Stanley and Kidder Peabody, the two biggest program trading firms, staunchly defend their strategies. "We continue to believe the position we've taken is reasonable," a Morgan Stanley official said. "We would stop index arbitrage when the market is under stress, and we have recently," he said, citing Oct. 13 and earlier this week.Michael Carpenter, president and chief executive officer at Kidder Peabody, said in a recent interview, "We don't think that index arbitrage has a negative impact on the market as a whole." According to Lawrence Eckenfelder, a securities industry analyst at Prudential-Bache Securities Inc., "Kemper is the first firm to make a major statement with program trading." He added that "having just one firm do this isn't going to mean a hill of beans.But if this prompts others to consider the same thing, then it may become much more important."
Bethlehem Steel Corp., hammered by higher costs and lower shipments to key automotive and service-center customers, posted a 54% drop in third-quarter profit. Separately, two more of the nation's top steelmakers -- Armco Inc. and National Intergroup Inc. -- reported lower operating earnings in their steel businesses, marking what is generally believed to be the end of a two-year boom in the industry. Wall Street analysts expect the disappointing trend to continue into the fourth quarter and through at least the first two quarters of 1990, when the industry will increasingly see the effect of price erosion in major product lines, such as rolled sheet used for cars, appliances and construction. "It doesn't bode well for coming quarters," said John Jacobson, who follows the steel industry for AUS Consultants.In fact, he thinks several steelmakers will report actual losses through the third quarter of 1990. Bethlehem, the nation's second largest steelmaker, earned $46.9 million, or 54 cents a share.The figures include $15 million in costs related to a blast furnace outage and $8 million in losses from unauthorized work outages at the company's coal operations.In the year-ago period, Bethlehem earned $101.4 million, or $1.27 a share, including a $3.8 million gain from early retirement of debt. Third-quarter sales dropped 11% to $1.27 billion from $1.43 billion a year ago. In composite trading on the New York Stock Exchange, Bethlehem shares rose 50 cents to $17.375. Of all the major steelmakers, Bethlehem would seem to be the most vulnerable to a slowdown.It hasn't diversified beyond steel, nor has it linked up with a joint venture partner to share costs and risks. However, in spite of the difficult industrywide environment of high cost and low volume, Bethlehem "had pretty good earnings numbers," said Michelle Galanter Applebaum, an analyst with Salomon Brothers Inc. Ms. Applebaum had estimated third-quarter earnings of 55 cents a share, but said the losses for the unusual items were larger than expected. Still, Bethlehem's core basic steel operations experienced a steep drop in operating profit to $58.6 million from $186.4 million a year ago, when the industry enjoyed strong demand and pricing.The company said its shipments declined as a result of a reduction in inventories by service centers, a lackluster automotive market and increasing competitive pressures in the construction market. At the same time, production costs, compared with a year ago, were boosted by higher raw material and employment costs, which resulted from the company's new labor pact effective June 1. "We anticipate that steel market conditions will exhibit a further moderate decline in the fourth quarter as the automotive sector remains weak and customers continue to adjust inventories," said Bethlehem Chairman Walter F. Williams.He noted, however, that the company's order entry has increased from the low levels of the early summer, following the end of labor negotiations. Armco, hampered by lower volume in its specialty steel business, said third-quarter net income dropped 8% to $33 million, or 35 cents a share, from $36 million, or 39 cents a share in the year-ago quarter.Sales dropped to $441.1 million from $820.4 million, because the company no longer consolidates its Eastern Steel division, which is now a joint venture with Kawasaki Steel Corp. Along with reduced volume, analysts said the nation's fifth largest steelmaker was hurt by holding higher-cost inventory when raw material costs of such key products as nickel dropped.Operating profit dropped 46% in its specialty flat-rolled steel segment.Moreover, the company said higher sales and shipments to service centers from its Armco Steel Co. joint venture failed to offset weakness in the automotive market, higher production costs and a poorer product mix. Armco shares closed unchanged at $10.625 in composite trading on the New York Stock Exchange. National Intergroup, which owns 50% of the nation's sixth largest steelmaker -- National Steel Corp. -- posted net income for the fiscal second-quarter of $8.6 million, or 33 cents a share, compared with a net loss of $50.3 million.Sales increased in the quarter ended Sept. 30 to $747.8 million from $623.5 million a year ago.The latest period includes gains of $9.1 million from early retirement of debt and tax loss carry-forward.Last year's results were hurt by $41.3 million in restructuring charges. National Intergroup stock closed at $15, unchanged in composite trading on the New York Stock Exchange. The company noted that its Fox-Meyer Drug Co., Ben Franklin Stores Inc. and Permian Corp. operations showed improvements as a result of restructuring moves.However, its equity in the net income of National Steel declined to $6.3 million from $10.9 million as a result of softer demand and lost orders following prolonged labor talks and a threatened strike.National Intergroup is negotiating for the sale of its 50% interest in National Steel to concentrate more fully on drug distribution operations.
In a stunning shift in direction, Provigo Inc. said it will sell all its non-food operations to concentrate solely on its retail and wholesale grocery business.The non-food operations accounted for about 27% of Provigo's 7.38 billion Canadian dollars (US$6.3 billion) in sales in the latest fiscal year. In a related move, Pierre Lortie, chairman and chief executive, resigned.Mr. Lortie joined Provigo in 1985 and spearheaded the company's drive to grow outside its traditional food business.He couldn't be reached for comment. Bertin Nadeau, newly appointed chairman and interim chief executive of Provigo, wouldn't say if Mr. Lortie was asked to leave. "Mr.Lortie felt less pertinent," Mr. Nadeau said, given the decision to dump Provigo's non-food operations. "At this stage it was felt I was perhaps more pertinent as chief executive." Mr. Nadeau also is chairman and chief executive of Unigesco Inc., Provigo's controlling shareholder. At a news conference, Mr. Nadeau said the sale of the three non-food businesses, which account for nearly half the company's C$900 million in assets, should be completed in a "matter of months." The three units are a nationwide pharmaceutical and health-products distributor, a small sporting-goods chain, and a combination catalog showroom and toy-store chain. Investors and analysts applauded the news.Provigo was the most active industrial stock on the Montreal Exchange, where it closed at C$9.75 (US$8.32), up 75 Canadian cents. "I think it's a pretty positive development," said Ross Cowan, a financial analyst with Levesque Beaubien Geoffrion Inc., of the decision to concentrate on groceries.Mr. Lortie's departure, while sudden, was seen as inevitable in light of the shift in strategy. "The non-food operations were largely Mr. Lortie's creation {and} his strategy didn't work," said Steven Holt, a financial analyst with Midland Doherty Ltd. Provigo's profit record over the past two years tarnished the company's and Mr. Lortie's reputations.For the six months ended Aug. 12, Provigo posted net income of C$6.5 million, or eight Canadian cents a share, compared with C$18.1 million, or 21 Canadian cents a share, a year earlier.Sales were C$4.2 billion compared with C$3.7 billion.Last month, Canadian Bond Rating Service downgraded Provigo's commercial paper and debentures because of its lackluster performance. Analysts are skeptical Provigo will be able to sell the non-food businesses as a group for at least book value, and are expecting write-downs.Mr. Nadeau said he couldn't yet say if the sale prices would match book values.He said all three non-food operations are profitable. Mr. Nadeau said discussions are under way with potential purchasers of each of the units.He declined to confirm or deny reports that Provigo executive Henri Roy is trying to put together a management buy-out of the catalogue showroom unit.Mr. Roy couldn't be reached. Yvon Bussieres was named senior executive vice president and chief operating officer of Provigo, a new position.Mr. Bussieres was president and chief operating officer of Provigo's Quebec retail and wholesale grocery unit.Mr. Nadeau said he intends to remain Provigo's chief executive only until the non-food businesses are sold, after a which a new chief executive will be named.
International Business Machines Corp. said it agreed to let Motorola Inc. participate in a semiconductor research project as part of its effort to bolster the U.S. semiconductor industry. IBM, which made the announcement at the dedication of a research center here, said it invited many other companies to participate as well, including some from Europe.Jack Kuehler, IBM's president, said IBM is also considering letting other companies participate in additional semiconductor work but declined to be more specific. IBM, which said a year ago it was inviting companies to participate in some semiconductor work, has become far more open about its technology as it has tried to rally U.S. industry to head off the Japanese, who now dominate the market for dynamic random access memory chips. While IBM, Armonk, N.Y., makes the bulk of the DRAMs it uses, it doesn't make the equipment needed to produce those chips.And IBM worries that the Japanese will take over that equipment market, too, unless U.S. semiconductor companies produce enough memory chips here to keep U.S. equipment makers healthy.Failure of U.S. equipment makers, IBM fears, would leave it dependent on many of the Japanese companies that compete with it in other parts of the market. IBM also said it expects to benefit from the expertise that Motorola and other companies can bring to bear on the difficult problems involved in semiconductor manufacturing.IBM already participates in one industrywide effort to improve semiconductor-manufacturing techniques. IBM said it expects industrywide efforts to become prevalent because semiconductor manufacturing has become so expensive.A state-of-the-art plant cost $40 million in the mid-1970s but costs $500 million today because the technology is so complex.And IBM said it expects the costs to continue climbing. IBM, which said Motorola is paying just a nominal fee to cover the 21-month agreement, acknowledged some companies had turned down its invitation to join in.But it said that was mainly because the project may not bear fruit until the mid-1990s.IBM said it thought more companies would become interested as the project progresses. The project involving Motorola concerns a technique, called X-ray lithography, that figures to be crucial to future generations of memory chips. Currently, chips are produced by shining light through a mask to produce an image on the chip, much as a camera produces an image on film.But details on chips must now be extraordinarily fine, and the wavelengths of even ultraviolet light are long enough so that the images they draw may be too blurry -- much as someone using a wide paintbrush could produce a broad line but would have trouble painting a thin one.X-rays, by contrast, travel straighter and can be focused more tightly than light. X-rays have problems, too.They can make the masks brittle and can pass through material they're not supposed to.But, assuming those problems can be overcome, they should allow for memory chips that could approach one billion bits of information -- 250 times as much as is contained in the four-megabit chips that are just reaching the market and a million times what was possible in the mid-1970s.
Comments by Federal Reserve Board Chairman Alan Greenspan lent some support to the dollar, but the U.S. unit ended yesterday lower against most major currencies. Foreign-exchange dealers noted that the impact of the chairman's remarks was slight and warned that the currency remains sensitive to developments on Wall Street. Traders said that Mr. Greenspan, whose statements are ordinarily cautious, was especially careful to avoid any jarring proclamations, with fears about equities still unnerving financial markets. Testifying before a panel of the House Banking Committee, Mr. Greenspan said the short-term value of the dollar on foreign-exchange markets isn't the primary policy focus of the central bank. "Our essential focus is on domestic policy," Mr. Greenspan said, referring to the goals of price stability and a stable economy. In perhaps his most telling remark, Mr. Greenspan termed the current U.S. inflation rate of around 4.5% as "much too high to be ignored." He added, however, that inflation could be brought down "close to zero" without throwing the economy into a recession. Analysts viewed the chairman's comments as an indication that the central bank is disinclined to ease monetary policy further in the near future. The dollar climbed immediately higher on news of Mr. Greenspan's testimony, settling lower in later trade as dealers squared positions ahead of today's preliminary report on third-quarter U.S. gross national product. In late New York trading yesterday, the dollar was quoted at 1.8353 marks, down from 1.8355 marks Tuesday, and at 141.52 yen, up from 141.45 yen late Tuesday.Sterling was quoted at $1.6145, up from $1.6055 late Tuesday. In Tokyo Thursday, the U.S. currency opened for trading at 141.60 yen, up from Wednesday's Tokyo close of 141.55 yen. Many traders forecast a continuation of the market's recent bearish trend and predict the U.S. currency will remain stuck in its relatively narrow ranges in the near term and then shift lower. But according to Doug Madison, a corporate trader with Bank of America in Los Angeles, a large number of short positions must first be corrected, spurring a temporary upswing, before the unit can turn lower. He predicts a downward move in dollar-mark trade and a less dramatic slip in dollar-yen, noting that there continues to be a large pool of Japanese investor interest in U.S. securities, which could provide a solid base for the dollar at around 140 yen. Market participants hope today's GNP report will offer more substantial evidence on U.S. economic growth, although analysts are quick to point out that the figures may overstate the economy's vigor. "The `r' word is looming again," says one dealer, referring to persistent concern among some market analysts that the U.S. economy is heading toward a major slowdown if not a recession. Some dealers note that while the third-quarter figures may appear relatively bullish -- the market consensus calls for a 2.5% annual growth rate, unchanged from the second-quarter rate -- it would take a significantly stronger figure to alter market perceptions that the economy is softening. Some analysts reckon that the next quarter's figures will present a more accurate picture of the U.S. economy, showing a marked slowdown in a number of sectors, including housing starts and equities. On the Commodity Exchange in New York, gold for current delivery settled at $369.10 an ounce, down $1.10.Estimated volume was a light 1.7 million ounces. In early trading in Hong Kong Thursday, gold was quoted at $368.24 an ounce.
At a time when Jon Levy should be planning the biggest spring season in his dress company's 17 years, his work day is studded with intense moments of concern about one of his biggest customers, Campeau Corp. "The dress business has always been a gamble, but it's never been like this," says Mr. Levy, president of St. Gillian Group Ltd., which has become a hot name thanks to a campaign of sexy TV commercials. Every day, Mr. Levy checks orders from Campeau department store chains, trying to guess if he will be paid. "I'm now monitoring every major account." Campeau, owner of such retailers as Bloomingdale's, Bon Marche, and Jordan Marsh, sidestepped financial collapse last month after an emergency $250 million loan from Olympia & York Developments Ltd., a Canadian developer and a major shareholder in Campeau.The need for the loan surprised many analysts and bond holders who had been told at the company's annual meeting in July that there weren't any major problems ahead. The risk of doing business with Campeau's Federated and Allied department store chains is about to increase greatly, not only for Mr. Levy but for hundreds of other small apparel makers, button suppliers, trucking firms and fabric houses. Next week, the country's top designers and manufacturers will begin showing fashions for spring 1990, the second most important selling season of the year.And as the applause dies down in showrooms along Seventh Avenue and Broadway, stylishly clad Campeau buyers will begin writing orders. Orders from Campeau retailers used to be cause for celebration.This is no longer true because of Campeau's massive debt load. "It's all anybody wants to talk about," says Richard Posner, executive vice president for Credit Exchange Inc., a leading credit service. "People wonder what's going to happen next." Many manufacturers are worried about being paid for merchandise already shipped to Campeau stores.But those dollars at risk pale in comparison to the investment required to make and ship spring goods to Campeau stores. "The few million dollars I could lose today is nothing against what I could lose on the spring line," says Mr. Levy, who estimates that Campeau stores will sell $25 million worth of his clothes this year. "I'm buying fabric right now for clothes which I may not be paid for until April or May.What happens to me if Campeau collapses between now and then?" Some credit concerns, such as Bernard Sands Credit Consultants Inc., have told clients not to ship anything to Federated or Allied stores on credit. "This is especially true for spring merchandise," says Jim Rindos, credit manager at Bernard Sands. "Campeau has too much debt." Other credit houses, such as Credit Exchange and Solo Credit Service Corp., are suggesting that their clients study each order before shipping. "Payments are good right now, but we aren't recommending any long-term lines of credit," says Richard Hastings, a retail credit analyst, referring to credit lines which make inventory purchases automatic. "The Campeau situation is a little uncertain and very difficult to analyze." Because of those concerns, some manufacturers say they will ask for letters of credit before shipping spring merchandise. "We're being paid today, but we're worried about tomorrow and will want" letters of credit, says the sales director at one major dress maker who asked not to be identified. Howard Bloom, president of the dress firm Chetta B Inc., says: "It's big time chaos today.I'm going to ship and hope I get paid.If I need to ask for money up front later, I will." Carol Sanger, vice president, corporate communications at Campeau, says that all of the Federated and Allied chains are paying their bills in a timely manner. "They continue to pay their bills and will do so," says Ms. Sanger. "We're confident we'll be paying our bills for spring merchandise as well." Typically, manufacturers are paid 10 days after the month in which they ship.If goods are shipped to Bloomingdale's between Oct. 1 and Oct. 20, manufacturers expect to be paid by Nov. 10. But manufacturers now buying fabric for spring season goods won't be paid until March, April or even May.Some in the market question whether Campeau will be in a position to pay bills at that time. "Everybody is worried about the possibility of cancellations," says Kurt Barnard, publisher of Barnard's Retail Marketing Report. "The buyers who work for the various Campeau chains may lose their jobs.The stores they work for may be sold.What that will mean for manufacturers is anybody's guess." Campeau's financial situation is complicated by an estimated $1.23 billion in debt due next spring.This includes a working capital facility for Allied Stores of $350 million that matures March 15, 1990, and an $800 million bridge loan due April 30, 1990.The company has stated in recently filed financial documents that it anticipates refinancing its March 1990 payments.In recent months, numerous retailers have filed for Chapter 11 bankruptcy protection, including Bonwit Teller, B. Altman & Co., and Miller & Rhoads Inc.Those filings, plus the expected sale of a number of financially healthy chains, such as Saks Fifth Avenue, Marshall Field's and Bloomingdale's, have added to the anxiety. "Right now, Federated owes us a considerable amount of money," says Morris Marmalstein, president of David Warren Enterprises, a major dress manufacturer. "We expect they will be current with their debts by the end of the week, but we are considering asking them for letters of credit before we take more orders." Mr. Marmalstein adds that his company is now holding some goods in anticipation of being paid in full. "It's become a day-by-day business," he says. "Business has never been this tough before.Not only does your product have to be excellent, but you also have to be able to collect." Other manufacturers are equally cautious.Bud Konheim, president of Nicole Miller Inc., says his company is now shipping only to the flagship stores of the Federated and Allied chains.This limits his financial exposure, he says. "The branches are just warmed over, empty halls," says Mr. Konheim. "Why should I be part of that problem?I've got limited production, and I can't give it to underperformers." Campeau's Ms. Sanger disputes Mr. Konheim's comments. "Many of the branches are very lucrative," she says. "That's just nonsense." As for Mr. Levy at St. Gillian, he says he will maintain his credit lines with the various Campeau stores unless they miss a payment. "If they slip for 10 cents for 10 minutes, I'll stop," he says.
Wall Street would like UAL Corp. 's board to change its mind about keeping the company independent.But what happens next in the continuing takeover drama may depend more on the company's two most powerful and fractious unions: the pilots and machinists. Some people familiar with the situation believe that the collapse of the previous $6.79 billion buy-out, if anything, may have strengthened the hands of these two labor groups.As a result, both may now have virtual veto power over any UAL transaction. One reason: banks -- likely to react to any new UAL deal with even more caution than the first time around -- probably will insist on labor harmony before they agree to put up cash for any new bid or even a less-ambitious recapitalization plan. "United pilots have shown on a number of occasions they are willing and able to strike," said an executive at Fuji Bank, one of UAL's large lenders. "If you have both {labor} groups on strike, you've got no revenue and that's a very scary thing for a bank to be looking at." Just this past week, a leading Japanese bank asked for a meeting with the machinists' union leaders to determine where the union would stand if another bid or recapitalization became possible. Another reason: Emboldened by their success in helping to scuttle the previous transaction, the machinists are likely to be more aggressive if a second buy-out attempt occurs. The two unions already had significant leverage simply because their employer has yet to settle with either on new contracts.That gives them both the threat of a strike and the ability to resist any wage concessions that may be necessary to make a transaction work. Thus, even investors who are pushing for the board to do a recapitalization that would pay shareholders a special dividend and possibly grant employees an ownership stake acknowledge that the unions are key. "There's less likelihood of creating and completing a transaction without the unions' cooperation and wage concessions," said Richard Nye, of Baker, Nye Investments, a New York takeover stock-trader.Mr. Nye thinks the UAL board should be ousted if it doesn't move soon to increase shareholder value. Both the pilots and machinists have made it clear that they intend to block any transaction they don't like. "The pilots will be involved in any transaction that takes place around here," pilot union chairman Frederick C. Dubinsky declared yesterday.But whether the pilots can team up with their longtime adversaries, the machinists, is another question. The pilots' Mr. Dubinsky says his union would like majority ownership for employees.At the very least, the pilots want some form of control over the airline, perhaps through super-majority voting rights. On the other hand, the machinists have always opposed majority ownership in principle, saying they don't think employees should be owners. Still, in recent days, machinists' union leaders have shown some new flexibility. "We may be able to reach a tradeoff where we can accommodate {the pilot union's} concerns and ours," said Brian M. Freeman, the machinists' financial adviser. Mr. Freeman said machinists' union advisers plan to meet this week to try to draw up a blueprint for some form of recapitalization that could include a special dividend for shareholders, an employee stake and, perhaps, an equity investment by a friendly investor. If a compromise can't be reached, the pilots maintain they can do a transaction without the support of the machinists.But at this point, that may just be wishful thinking. The machinists lobbied heavily against the original bid from UAL pilots and management for the company.Their opposition helped scare off some Japanese banks. The pilots' insistence on majority ownership also may make the idea of a recapitalization difficult to achieve. "Who wants to be a public shareholder investing in a company controlled by the pilots' union?" asks Candace Browning, an analyst at Wertheim Schroeder & Co. "Who would the board be working for -- the public shareholders or the pilots?" she adds. Ms. Browning says she believes a recapitalization involving employee ownership would succeed only if the pilots relent on their demand for control.She also notes that even if the pilots accept a minority stake now, they still could come back at a later time and try to take control. Another possibility is for the pilots' to team up with an outside investor who might try to force the ouster of the board through the solicitation of consents.In that way, the pilots may be able to force the board to approve a recapitalization that gives employees a majority stake, or to consider the labor-management group's latest proposal. The group didn't make a formal offer, but instead told UAL's advisers before the most-recent board meeting that it was working on a bid valued at between $225 and $240 a share.But again, they may need the help of the machinists. "I think the dynamics of this situation are that something's got to happen," said one official familiar with the situation.The board and UAL's management, he says, "can't go back" to business as usual. "The pilots won't let them."
Delta Air Lines earnings soared 33% to a record in the fiscal first quarter, bucking the industry trend toward declining profits. The Atlanta-based airline, the third largest in the U.S., attributed the increase to higher passenger traffic, new international routes and reduced service by rival Eastern Airlines, which is in bankruptcy proceedings in the wake of a strike that began last spring. For the quarter ended Sept. 30, Delta posted net income of $133.1 million, or $2.53 a share, up from $100 million, or $2.03 a share, a year earlier. Revenue rose 15% to $2.17 billion from $1.89 billion.During the quarter, Delta issued 2.5 million shares of common stock to Swissair, and repurchased 1.1 million shares for use in a company employee stock ownership plan. "The key to Delta's record earnings continued to be excellent passenger revenue growth," said Thomas Roeck, chief financial officer.Passenger traffic jumped 14% in the quarter, while profit per passenger grew 2%. Delta has benefited more than other carriers from the weakness of Eastern Airlines, which shares the Atlanta hub.Although Eastern is back to about 80% of its pre-strike schedule now, the Texas Air Corp. subsidiary was only beginning to get back on its feet during the quarter. Separately, America West Airlines, Phoenix, Ariz., reported third-quarter profit jumped 45% to $5.8 million, or 28 cents a share, from $4 million, or 24 cents a share, a year earlier.The latest results include a $2.6 million one-time payment from a "foreign entity." America West wouldn't identify the entity, but said the payment was for the foreign company's use of certain tax benefits in connection with America West plane purchases.Year-earlier results included an extraordinary gain of $1.6 million from a buy-back of convertible subordinated debentures. Revenue rose 21% to $243.4 million from $201.2 million.For the nine months, America West posted earnings of $18.9 million, or 97 cents a share, compared with a loss of $9.7 million, or 74 cents a share, a year earlier.Revenue rose 27% to $715.1 million from $563.8 million.
Columbia Savings & Loan Association, reeling from thrift-accounting changes mandated by Congress and the recent collapse of the junk-bond market, announced a loss for the third quarter of $226.3 million, or $11.57 a share. For the quarter a year ago, Columbia reported earnings of $16.3 million, or 37 cents a share.Total assets increased to $12.7 billion in the latest quarter from $12.4 billion a year earlier. The loss stems from $357.5 million of write-downs on Columbia's $4.4 billion high-yield investment securities portfolio, which includes about $3.7 billion of junk bonds, $400 million of preferred stock, and Treasury securities. Columbia owes its spectacular growth in recent years to its junk-bond portfolio, the largest of any U.S. thrift.Much of Columbia's junk-bond trading has been done through the high-yield department of its Beverly Hills neighbor, Drexel Burnham Lambert Inc. For the nine months, losses totaled $212 million, or $10.83 a share, compared with net income of $48.7 million, or $1.11 a share, a year earlier. The results include a $130.2 million write-down of the securities in the high-yield portfolio to the lower of their cost or market value. Columbia also added $227.3 million to reserves for losses on the portfolio, increasing general reserves to $300 million, or about 6.7% of the total portfolio, as of Sept. 30.On June 30, loss reserves stood at $108.3 million.Thrift officials said the $300 million reserve will be adjusted quarterly and will reflect the rate of dispositions and market conditions. The adjustments result from the recently passed thrift-industry bailout legislation, which requires thrifts to divest all high-yield bond investments by 1994.Previously, Columbia didn't have to adjust the book value of its junk-bond holdings to reflect declines in market prices, because it held the bonds as long-term investments.Because Columbia now must sell the bonds within five years, accounting rules require the thrift to value the bonds at the lower of cost or market prices. For its future strategy, Columbia officials said the thrift may branch out into commercial lending or managing outside investments, as well as beefing up more traditional thrift activities. The quarterly results also reflected $21.4 million in non-recurring losses from commercial real-estate activities in California. Thomas Spiegel, Columbia's chairman, said in a statement that the thrift was "disappointed" by the effects of the accounting changes.But he said Columbia remains "one of the most strongly capitalized thrifts in the industry," based on the economic value of its assets and tangible capital. Columbia announced the results after the close of the stock market.Its shares closed at $5.125 each in composite New York Stock Exchange trading, down 37.5 cents.The price of Columbia shares has been cut nearly in half since August, when they traded at about $10, as investors apparently realized that the thrift would be forced to take a big write-down.The stock's decline accelerated in the past two weeks, from a price of $8 a share on Oct. 9. Columbia officials said they don't know how quickly they will dispose of the thrift's junk bonds, because federal regulations, such as those that would allow thrifts to continue holding the bonds in separately capitalized subsidiaries, haven't yet been completed. Columbia officials also said the thrift shouldn't face problems meeting regulatory capital requirements, despite the large reserves and write-downs and stiffer regulatory requirements that should be in place by year's end.Its ratio of tangible equity to total assets as of Sept. 30 was 3.6%, and total equity was $457.9 million. The thrift emphasized that it has a large portfolio of equity securities issued in connection with corporate restructurings and leveraged buy-outs, which has a book value of $90 million. Although many of the transactions related to those securities haven't been completed, Columbia said the ultimate gain on the sale of those assets will range from $200 million to $300 million.Columbia also has unrealized gains in its public equity securities portfolio of more than $70 million. David B. Hilder in New York contributed to this article.
Anheuser-Busch Cos. said it plans to aggressively discount its major beer brands, setting the stage for a potentially bruising price war as the maturing industry's growth continues to slow. Anheuser, the world's largest brewer and U.S. market leader, has historically been reluctant to engage in price-cutting as a means of boosting sales volume.With the passing of the heady days of swelling industry sales, however, the once-sporadic and brief forays into discounting are becoming standard competitive weapons in the beer industry. Over the summer, Anheuser competitors offered more and deeper discounts than industry observers have seen for a long time.Some experts now predict Anheuser's entry into the fray means near-term earnings trouble for all the industry players. The St. Louis company said major rivals, Philip Morris Co. 's Miller Brewing unit and Adolph Coors Co. "have been following a policy of continuous and deep discounting for at least the past 18 months" on their premium brands, pricing their product as much as 25 cents a 12-pack below Anheuser's Budweiser label in many markets.Anheuser said it's discounting policy basically would involve matching such moves by rivals on a market-by-market basis. Anheuser-Busch announced its plan at the same time it reported third-quarter net income rose a lower-than-anticipated 5.2% to $238.3 million, or 83 cents a share, from $226.5 million, or 78 cents.Third-period sales were $2.49 billion, up from last year's $2.34 billion. Anheuser said its new strategy -- started in some markets last month and expected to be applied soon in selected markets nationwide -- will mean lower-than-anticipated earnings for the last half of 1989 and for 1990.The projection sent Anheuser shares plunging $4.375 in New York Stock Exchange composite trading yesterday.The stock closed at $38.50 on heavy volume of about 3.5 million shares.Shares of Coors, the company's sole publicly traded major competitor, fell $1.50 apiece to $19.125 in national over-the-counter trading, apparently on investor concerns over potential fallout from the coming pricing struggle. Anheuser noted that "beer industry sales volume is 1989 is following the trend that has characterized the last half of the '80s, with sales volume being essentially flat" while consolidation creates fewer, bigger players. "We cannot permit a further slowing in our volume trend," Anheuser said, adding it will take "appropriate competitive pricing actions to support our long-term market share growth strategy" for the premium brands.Anheuser said it continues to hold to its earlier-announced goal of a 50% U.S. market share by the mid-1990s. Beneath the tepid news-release jargon lies a powerful threat from the brewing giant, which last year accounted for about 41% of all U.S. beer sales and is expected to see that grow to 42.5% in the current year. "Anheuser is the biggest guy in the bar, and he just decided to join in the barroom brawl," said Joseph J. Doyle, an analyst with Smith Barney, Harris Upham & Co. "It's going to get bloody." Jerry Steinman, publisher of Beer Marketers Insights, a trade newsletter, said Anheuser's announcement means "everybody else in the industry is going to have a difficult time reaching their profit objectives." Prudential-Bache Securities Inc. analyst George E. Thompson downplayed the importance of the announcement, and called any comparison between the coming beer-industry tiff and the seemingly unending "cola wars," unwarranted.Mr. Thompson calls discounting "a loser's game for anyone without a dominant market share," and projected that Anheuser's statement of intent could simply be a means of warning competitors to ease up on price-cutting or face a costly and fruitless battle. Mr. Thompson noted that the disappointing earnings, which fell five cents a share short of his own projections, contributed to the sell-off by an edgy and currently unforgiving investing public. But Smith Barney's Mr. Doyle, who yesterday trimmed his 1990 Anheuser earnings projection to $2.95 a share from $3.10, called the market's reaction "justified." While the third-quarter earnings were a "moderate disappointment," he said, "the real bad news is the intensity of price competition" in the premium-beer sector. According to Mr. Steinman, the newsletter publisher, Anheuser's market share is nearly twice that of its nearest competitor, Miller Brewing, which had a 21.2% stake last year.It's followed by Stroh Brewery Co., which has agreed to sell its assets to Coors.Both Coors and Stroh have recently been ceding market share to Miller and Anheuser.
Tokyo stocks closed easier for the second consecutive day, finishing at the intraday low on index-linked investment trust fund selling toward the end of the afternoon session.Stocks rose in London, but fell again in Frankfurt. Tokyo's Nikkei index fell 84.15 points to 35442.40.Trading was active.Volume on the first section was estimated at 1 billion shares, up from 914 million Tuesday.The Tokyo stock price index of first section issues was down 8.65 at In early trading in Tokyo Thursday, the Nikkei index rose 145.45 points to 35587.85. On Wednesday, the market opened bullishly with high turnover, ignoring the volatility in New York stocks.But losers were spread in a broad range by the end of the session.A trader said that the more an issue gained recently, the sharper the loss sustained Wednesday. A trader at Yamaichi Securities said the market's mood was undercut by the continuing fall of Nippon Telegraph & Telephone shares, which declined to their lowest level since the begining of this year.NTT lost 30,000 yen to 1,380,000 yen ($9,756). Some traders noted individual investors dumped NTT shares amid growing expectation for a division of the company as suggested by a recent government-sponsored panel. Dealers said they also took profits to reduce holdings in their own account at the end of the October transaction period. Among pharmaceutical shares, Chugai lost 60 yen to 2,290 yen ($16.20), and Mochida fell 150 to 4,290. Other losing issues included Showa Shell, which fell 40 to 1,520.Toyota Motor fell 40 to 2,680. Sekisui House, which gained 150 Tuesday, lost 70 to 2640.Daiwa House also ended easier, but Misawa Home was firmer. Pioneer Electronic and Sony, both of which dominated buying earlier this month, continued to fall Wednesday.Pioneer was down 90 at 5,810, and Sony lost 40 to 8,550, down 10% from its record set Oct. 11. London share prices closed modestly higher largely on technical factors, although the market was underpinned near the end of the session by Wall Street's firmer trend. The Financial Times 100-share index finished at 2161.9, up 12.6 points.The 30-share index ended 12.6 points higher at 1751.9.Volume was thin at 374.6 million shares traded, down from 405.4 million Tuesday. Dealers said the market gained some late steam on a flurry of buying by market-makers looking at blue-chip issues and stocks viewed as oversold during the market's recent downtrend. Outside what essentially amounted to a bookkeeping exercise, dealers said London dealings were largely dulled by the absence of active interest beyond the market-makers. The late buying was drawn into the London market, dealers added, after Wall Street showed signs of stability following its rocky opening. Stocks that suffered on the day were those with active U.S. operations, dealers noted.Among them were B.A.T Industries, which settled 6 pence a share lower at 753 ($12.10).Hanson, with 15 million shares traded, closed 2.5 lower at 212.5. Dealers said the shares were hit by fears of a slowdown in the U.S. economy. Cable & Wireless benefited from a market squeeze, bouncing 13 to 498 in moderately active volume. Jaguar was boosted 21 to 715 on follow-through buying after Ford Motor's announcement Tuesday that it might be prepared to mount a full bid for the U.K. luxury auto maker.It was further helped by Ford, which announced after London's close that it had raised its stake to 12% from just under 11% on Tuesday. Frankfurt prices closed sharply lower in thin dealings, hurt by the roller-coaster session on Wall Street Tuesday and worries about wage demands by the largest West German trade union.The German stock index tumbled 26.29 to end at "It was dead, listless, depressing and negative," said one trader at a U.S. bank in Frankfurt. "There was little turnover and nothing to stimulate the market." Equities tumbled at the opening as Tuesday's gyrations on Wall Street, where the Dow Jones Industrial Average recovered most of an 80-point loss, fueled fears of another stock market crash, brokers said. Tough talk from trade union officials at the conference of the powerful IG Metall metals worker union in West Berlin raised the specter of nationwide strikes next spring, they said.For the 1990 wage negotiations, the IG Metall is demanding a further cut in the German workweek and steep wage increases, which could sharply increase the costs for German industry. "All the positive figures on the economy are out already, and people are focusing more on the dangers for next year, mostly the wage talks and the {parliamentary} elections," the U.S. trader said.The market also shrugged off positive factors, such as higher bond prices and a slowdown in monetary growth in September, traders said. They said they expect the bearish mood to persist a while longer, as trading volume is falling toward the end of the year and the market is becoming more volatile. In the auto sector, Bayerische Motoren Werke plunged 14.5 marks to 529 marks ($288), Daimler-Benz dropped 10.5 to 700, and Volkswagen slumped 9 to 435.5. Continental gave up some of its recent gains, dropping 8 to 338, as rumors of an impending takeover attempt for the tiremaker faded, brokers said. Deutsche Bank plummeted 12 to 645, hurt by the general mood.Other banks were slightly more resilient, with Dresdner Bank shedding 4.8 to 320, and Commerzbank slipping 2.5 to Meanwhile, Wall Street's volatility unnerved investors in other markets.Share prices closed lower in Paris, Zurich, Brussels, Milan and Stockholm, and mixed in Amsterdam. Among Pacific markets, prices closed lower in Sydney, Seoul, Hong Kong, Manila, Singapore and Wellington.Trading in Taipei was suspended for a national holiday. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
The Democratic-controlled House, by a margin of 51 votes, failed to override President Bush's veto of legislation renewing federal support of Medicaid abortions for poor women who are victims of rape and incest. The 231-191 roll call illustrates the limits of power a resurgent abortion-rights movement still faces.It continues to gain strength in the chamber but remains far short of the two-thirds majority required to prevail over Mr. Bush. Democrats voted to override by a 3-1 margin, but Republicans were equally firm in support of the president, who has threatened to make abortion a decisive issue on at least three separate fiscal 1990 spending bills. Yesterday's vote dealt with the largest of these bills, an estimated $156.7 billion measure funding the departments of Labor, Education, and Health and Human Services.To gain more leverage, abortion-rights advocates may seek to fold the bill into an omnibus continuing resolution next month.But the stark numbers yesterday -- when 282 votes were needed -- indicate the president is in a commanding position for at least this year. "Unless he changes, they lose," said a Democratic leadership aide. The action came as Congress sent to the president last night a stopgap spending bill to keep the government operating through Nov. 15 and provide $2.85 billion in emergency funds to assist in the recovery from Hurricane Hugo and the California earthquake.By a lopsided 97-1 margin, the Senate approved the measure after attaching further provisions sought by the influential California delegation and, despite reservations, the House adopted the bill on a 303-107 roll call. The package is more than $1 billion above the recommendations of Budget Director Richard Darman this week.But given the political importance of California, the administration was content to use its influence to prevent any Senate amendments adding further new appropriations.The $2.85 billion measure comes on top of $1.1 billion appropriated after Hugo struck the Carolinas and Caribbean last month, and these totals don't reflect the additional benefit of low-interest disaster loans. The bill last night includes $500 million to help finance this credit and further raises the obligation ceiling for the Small Business Administration sixfold to $1.8 billion to accommodate the expected loan activity.In direct cash assistance, $1 billion is provided in federal highway construction funds, and $1.35 billion is divided between general emergency aid and a reserve to be available to the president to meet unanticipated costs from the two disasters. In the Senate, Majority Whip Alan Cranston used his position to win not only the expanded credit but also more generous treatment than the House had permitted in the distribution of highway funds in the next six months.The emergency assistance wouldn't be counted against a state's normal allocation of annual highway funds, and the bill circumvents existing restrictions that otherwise would prevent the use of federal aid to repair a toll road, such as the San Francisco-Oakland Bay Bridge damaged in last week's earthquake. The underlying stopgap bill is the second required by Congress this fall and, since the current fiscal year began Oct. 1, only the Energy and Interior departments are operating on permanent appropriations enacted into law.The standoff over abortion is certain to contribute to further delays and, apart from the health and education measure vetoed by Mr. Bush, bills funding the District of Columbia and the entire U.S. foreign-aid budget are in jeopardy because of related abortion or family-planning issues. The vote yesterday was the most partisan in many years, and though the Democratic leadership is ambivalent about how to address the abortion issue, the debate is increasingly measured in party terms.The 189 Democrats who supported the override yesterday compare with 175 who initially backed the rape-and-incest exemption two weeks ago and 136 last year on a similar vote. By comparison, Republicans have held closer to the anti-abortion movement.Only 42 GOP members opposed the president's veto, a marginal increase over the vote two weeks ago and just 12 more than the 30 who supported the rape-and-incest exemption last year. At a recent White House meeting, Rep. Silvio Conte (R., Mass.), the ranking minority member of the House Appropriations Committee, argued with his friend Mr. Bush against a veto, and though Mr. Conte and Minority Leader Robert Michel of Illinois stood with the president yesterday, they are plainly uncomfortable with his position. "This isn't a political issue, this is a moral issue," said Rep. Henry Hyde (R., Ill.), the most eloquent spokesman for the anti-abortion movement.But after years of using the issue for its benefit, the GOP finds its candidates on the defensive.New Jersey gubernatorial candidate Rep. James Florio pointedly returned from campaigning to vote against the president yesterday in contrast with his opponent, GOP Rep. James Courter, who has ardently supported abortion restrictions in the past but was absent. In an extraordinary mix of cultures and church-state powers, Rep. Robert Dornan (R., Calif.) lectured his fellow Roman Catholics -- including Mr. Florio -- for having the "chutzpah" to disagree with the hierarchy of their church on abortion.Rep. Les AuCoin was as blunt on behalf of the abortion-rights movement. "This may not make George Bush a one-term president," said the Oregon liberal, addressing the Republican side of the House. "But if you support him over rape victims, this may be your last term." Separately, the House last night approved a nearly $67 billion compromise spending bill providing the first construction funds for the administration's ambitious space station in fiscal 1990 and incorporating far-reaching provisions affecting the federal mortgage market.The current ceiling on home loans insured by the Federal Housing Administration would be increased to $124,875, and the bill gives the Department of Housing and Urban Development new authority to facilitate the refinancing of subsidized loans for low-income homeowners. By a 325-92 margin, the Appropriations Committee leadership beat back an early challenge by House Banking Chairman Henry Gonzalez (D., Texas) to the FHA provision.And on a closer 250-170 roll call, lawmakers upheld controversial agreements made by a House-Senate conference earmarking community development funds for more than 40 projects backed by often influential members.
The New York Stock Exchange is expected to launch its own program trading vehicle today, just as controversy over this trading strategy heats up. The Big Board this morning plans to begin trading its Exchange Stock Portfolio "basket" product, the first program-trading vehicle carrying the exchange's seal of approval.ESPs will allow institutional investors to buy or sell all 500 stocks in Standard & Poor's index in a single trade of a minimum of $5 million. "Customized" baskets of fewer stocks will also be available. The Securities and Exchange Commission gave provisional six-month approval to the Big Board basket at a meeting late yesterday.The SEC at the same time approved a similar but smaller basket product on the Chicago Board Options Exchange, where the minimum will be $1.7 million.Also approved was a plan to trade stock portfolios by computer after regular hours on the Midwest Stock Exchange. The basket products are "an evolutionary step" in solving problems in trading big blocks of stock that came to light in the 1987 market crash, said SEC Commissioner Joseph Grundfest. New SEC Chairman Richard Breeden, overseeing his first public meeting, said there have been concerns that the Big Board's basket could attract investors with a "short-term perspective" who would rapidly turn over the product, thus increasing volatility. But Richard Ketchum, the SEC's market regulation chief, said he didn't believe "this will spawn dramatic new program-trading strategies that will be destabilizing." The baskets on the Big Board and CBOE -- which involve the actual S&P stocks, unlike the stock-index contracts currently traded on the Chicago futures markets, and index options on the CBOE -- will begin trading as critics step up their attacks on program trading and its contributions to the stock market's wild price swings. The Big Board argues that its new product will help rather than hurt the situation by possibly drawing business from more-volatile forms of program trading. ESPs are also an attempt by the Big Board to head off the exodus of program trading business to overseas markets such as London.Big Board officials also hope Japanese investors will become interested in the exchange's product. Already, many of the Big Board's own floor traders are warning that the ESP baskets are risky and not in the best interests of the investing public.The 400-member Alliance of Floor Brokers said the new product, with the $5 million minimum, will benefit only big institutional investors and could lead to "wild spasms of volatility." Stockbrokers who cater to individual investors said the Big Board's new product confirms the exchange doesn't want to curtail program trading, which last month accounted for a record 13.8% of the exchange's average daily volume. "The New York Stock Exchange is losing its cool here," said James Andrews, head of institutional trading at Janney Montgomery Scott Inc. in Philadelphia.The new stock baskets "are going to make it easier for program trading to be done.And it's going to be done more frequently as the result of having more access to it at different places." Both the Big Board's Exchange Stock Portfolio and the Chicago exchange's Market Basket are designed for institutional investors.The Big Board lists its targets as pension plans, mutual fund managers and index-arbitrage traders.In index arbitrage, program traders buy and sell stocks and stock-index futures to profit from small price discrepancies between the markets. At the same time, only four securities firms have signed up with the Big Board to buy and sell ESPs as market makers, an unenthusiastic response.The market makers so far are CS First Boston Group's First Boston Corp. unit, Morgan Stanley & Co., PaineWebber Group Inc. and Salomon Inc. 's Salomon Brothers Inc. unit. Kidder, Peabody & Co., a General Electric Co. unit that has become the biggest program trader along with Morgan Stanley, isn't a market maker, although the Big Board hopes that will change.Similarly, the Big Board hopes to entice Merrill Lynch & Co. Neither has plans to be a market maker for now. Traders said major securities firms are reluctant to become market makers because they fear the baskets may attract only limited trading.Big Board officials say only 25 contracts a day may trade at first, equivalent to a day's action at a small, regional exchange. Even though the Big Board says its product represents a post-crash "reform," some traders suggest that if the new basket had been trading during this month's Friday the 13th market plunge, the Dow Jones Industrial Average might have dropped more than the 190 points it did. With the futures locked into a trading halt Oct. 13 and trading in some individual stock difficult, program traders would have undoubtedly fled to the basket system, the traders say. "If we had the baskets, we would be leaving in caskets," one trader said. The SEC's Mr. Breeden said the after-hours trading on the Midwest exchange would help the U.S. win back business that has moved overseas to conduct after-hours trades.
A group including New York investors Douglas A. Kass and Anthony Pedone holds the equivalent of a 12.6% stake in H.H. Robertson Co. 's common shares outstanding, according to a filing with the Securities and Exchange Commission. Officials of Pittsburgh-based H.H. Robertson, which makes steel roofs, store fronts and building parts, declined comment.As reported last month, Mr. Kass said he was interested in making an offer to buy H.H. Robertson for $13 a share. In the SEC filing, the Kass-Pedone group said it intends to acquire additional H.H. Robertson shares "with a view towards a possible change in control of the company." It has not, however, made a formal proposal. The group also is engaged in talks with third parties regarding obtaining financing to buy more shares, but no agreements have yet been reached, the filing said. The group controls 795,900 H.H. Robertson common shares, assuming exercise of an option it acquired from Executive Life Insurance Co. to buy 497,400 shares.Its stake includes 106,100 shares bought in the open market from Aug. 30 to Oct. 18 for $10.375 to $12.125 a share. In New York Stock Exchange composite trading yesterday, H.H. Robertson closed at $11.625, up 62.5 cents.
After coming close to a partial settlement a year ago, shareholders who filed civil suits against Ivan F. Boesky and the partnerships he once controlled again are approaching an accord, people familiar with the case said. Meanwhile, within the next few weeks, the limited partners in Ivan F. Boesky & Co. L.P. are expected to reach a partial settlement with Drexel Burnham Lambert Inc. regarding the distribution of the $330 million in partnership assets, said one of the individuals.Under the terms of the settlement, the limited partners would drop their civil suits against Drexel, now pending in federal court in New York, another individual said. Attorneys involved in the talks said that the parties were closer to accord than they were a year ago, when reports of an imminent agreement circulated.One individual said the shareholders' accord was "well worked out." However, less optimistic attorneys warned that because of the tangle of numerous defendants and plaintiffs with overlapping claims, there is always the possibility that the talks will again fall apart. A shareholders' accord would provide the first restitution to thousands of individuals and institutions claiming losses as a result of insider trading by Boesky & Co., once the largest arbitrage fund in the U.S.The plaintiffs are investors who bought and sold securities in which Mr. Boesky and his partnerships were dealing.Some claim they suffered losses because they sold while he was buying and others because they bought while he was selling. Stocks involved in the shareholder suits include Union Carbide, RJR Nabisco, American Natural Resources, Boise Cascade Corp., General Foods Corp., Houston Natural Gas and FMC Corp. There are at least 27 class-action shareholder suits that have been consolidated in federal court in New York under U.S. District Judge Milton Pollack.Among the defendants are Mr. Boesky; the now-defunct Ivan F. Boesky & Co.; Mr. Boesky's main underwriter, Drexel Burnham; and Cambrian & General Securities PLC, a British investment fund once controlled by Mr. Boesky. Individuals familiar with the negotiations said the partial settlement being negotiated would remove the Boesky partnership, the British fund and Mr. Boesky as defendants, while Drexel and other defendants would remain. Charles Davidow, of the Washington, D.C.-based law firm Wilmer, Cutler & Pickering, which represents Mr. Boesky in this matter, said only that "discussions are under way.There are no agreements yet." It has been three years since Mr. Boesky, now in prison, agreed to pay a $100 million fine to settle the government's charges that he had traded illegally using insider information.Out of this, the government set up a $50 million fund for plaintiffs who can prove their financial losses.According to William Orbe, an attorney at Grais & Richards, the escrow agents for the fund, as of Sept. 30 the fund amounted to $60.5 million. Separately, attorneys for the 42 or so limited partners have had serious discussions that could lead to the distribution of the partnership's assets.The limited partners include insurance companies, financial institutions and individual investors. An agreement with Drexel regarding the limited partners' investments is an essential step toward getting their money back.This is because a Delaware court earlier this year said that Drexel is entitled to get its money back before or at the same time as the limited partners.Drexel is owed $20 million by the partnership. An individual familiar with the negotiations said that whatever investments the limited partners do not recoup from the $330 million in partnership assets, they will receive from the $350 million restitution fund available as a result of Drexel's settlement with the government in December 1988. Drexel agreed to plead guilty to six felony counts and pay $650 million, of which $350 million was set aside for shareholders and other plaintiffs, including the limited partners, who claim they were injured by Drexel. JAILED AFRICAN-AMERICAN activist wins a battle against the U.S. District Judge Robert P. Patterson Jr. ordered the FBI to immediately begin processing Herman Benjamin Ferguson's request for documents stemming from the agency's investigation of him during the 1960s.The FBI had said it would not be able to begin processing the request until June Mr. Ferguson, who is 68 years old, fled the U.S. in 1970 after exhausting his appeals of a 1968 conviction on conspiracy to murder.He turned himself in to authorities in New York earlier this year.He maintains that the information from the FBI will help him get his 1968 conviction vacated and his bail-jumping indictment dismissed.His attorneys claim he was framed by the FBI and New York police as part of a campaign to destroy the black liberation movement of the 1960s. Because the federal Freedom of Information Act wasn't law at that time, the FBI wasn't required to turn over information on its investigations when Mr. Ferguson appealed his conviction in the 1960s.But in federal court in Manhattan, Judge Patterson said the FBI records could show that Mr. Ferguson's arrest was the result of questionable legal practices. The judge said that if the FBI's proposed schedule was followed in releasing the documents, "a delay of over one year will have occurred and plaintiff will have served approximately two-thirds of his 3 1/2-year minimum sentence by the time he receives the files." Gabriel W. Gorenstein, the assistant U.S. attorney handling the case for the FBI, said no decision has been made about appealing the judge's ruling. FEDERAL COURTS URGED to cut costs and reduce delays of civil suits. The study, conducted by a task force of the Brookings Institution, suggests that Congress should require the courts to develop the plans.The study was initiated by Senate Judiciary Committee chairman Joseph Biden (D., Del.). The Washington, D.C., think tank recommends that the courts adopt different "tracks" for different types of civil cases in order to separate the handling of highly complex suits from simpler ones.Complex cases, such as antitrust suits and many business disputes, would receive intense supervision by federal judges to keep pretrial proceedings moving.Standard cases would require less judicial attention, and fast-track cases could be resolved quickly. The study also said each federal court should set strict time limits for the pretrial exchange of documents and evidence, ranging from as much as 100 days for cases in the fast track to as much as 18 months for complex disputes.And the study said federal courts should set firm trial dates early in the process. To take advantage of local expertise and custom, the study said, Congress should require each of the 94 federal district courts to adopt its own plan to speed the handling of civil suits and to reduce the high costs in civil cases. Although some of the study's recommendations resemble those of similar projects, the makeup of the task force was unusually diverse, adding significance to the effort.It included lawyers from civil rights and consumer groups, plaintiffs' lawyers and defense attorneys, corporate counsel and law professors.
West Texas Intermediate, the U.S. benchmark crude, seemed tethered again yesterday in trading on the New York Mercantile Exchange.Widely expected to open 10 to 15 cents a barrel higher on the strength of statistics from the American Petroleum Institute, the December contract managed to start the session only eight cents higher. In the last hour of the trading day, December contract took a tumble to end the session 10 cents lower at $19.62 a barrel.And now that the price has fallen below $19.65, which many had said showed considerable resistance, some traders and analysts figure there's little to stop the price from going lower on technical decisions. With no petroleum-related news or changes in the fundamentals to dictate price moves, "technicians are wanting to sell this stuff," said Eric Bolling of Edge Trading Corp. "And short-term, the technicians may have their way." The market quickly discounted the weekly inventory report showing a 6.3 million barrel decrease in U.S. crude oil stocks as the legacy of Hurricane Jerry.That storm hit the Gulf Coast Oct. 13, closing the Louisiana Offshore Oil Port for a time and preventing tankers from unloading.Next week's report could very well show an increase in crude inventories. Dismissing the trade group's numbers left traders plenty of time to worry anew about the latest reports on OPEC production.An AP-Dow Jones survey of integrated oil companies, independent refiners, and oil industry consultants indicates that the Organization of Petroleum Exporting Countries increased its production to 22.2 million barrels a day in September.Estimates suggest October's figure may be even higher. That level of production isn't of much concern as long as demand continues strong, analysts said.But the first quarter of the year is generally the weakest and OPEC production doesn't seem to be slackening in anticipation of that.Also, maintaining current demand assumes no significant slowdown in world economies. To top off the bearish factors affecting yesterday's trading, late October weather, especially in the Northeast U.S., continues to be very moderate, leaving heating oil futures trading lackluster. "We aren't seeing any cold weather here," Mr. Bolling said from New York. In other commodity markets yesterday: GRAINS AND SOYBEANS: Soybean and corn futures prices moved higher on the strength of buying from commodity pool managers trying to profit from technical price trends, as well as continued export strength.A leveling off of farmer selling tied to the harvest also removed some of the downward pressure on futures contract prices.Wheat futures prices fell, however, at least partly in reaction to the rumored selling of futures contracts equal to several million bushels of wheat by commodity speculator Richard Dennis.Neither Mr. Dennis nor officials of his Chicago trading company, C&D Commodities, could be reached for comment.As for corn and soybean futures, "a lot of commission house buying this morning and computer-driven buying" supported prices in early trading, said Steven Freed, a futures analyst with Dean Witter Reynolds Inc. in Chicago.Soybean futures for November delivery gained 5.25 cents a bushel to close at $5.66 a bushel on the Chicago Board of Trade.December corn futures added 2.25 cents a bushel to close at $2.4225 a bushel on the Board of Trade.Announced and anticipated purchases from foreign countries are also supporting futures prices. "Russian ships are arriving in the gulf and there isn't enough grain in the pipeline," said Katharina Zimmer, a futures analyst with Merrill Lynch & Co. in New York.The Soviet Union has purchased roughly eight million tons of grain this month, and is expected to take delivery by year end, analysts said. COTTON: Futures prices rose modestly, but trading volume wasn't very heavy.The December contract settled at 73.97 cents a pound, up 0.59 cent, but it rose as high as 74.20 cents.Several cotton analysts said that the move appeared to be mostly technical.Traders who had sold contracts earlier, in hopes of buying them back at lower prices, yesterday were buying contracts back at higher prices to limit their losses.Floor traders also said that the market could have been helped by rumors, which have been circulating for the past two days, about China purchasing cotton.The rumor, which has been neither confirmed nor denied, has China buying 125,000 to 200,000 bales for near-term delivery.One floor trader said that if there were Chinese purchases, they should have had a bigger effect on the market.Another said that if China was a buyer, it would be the earliest that country had made purchases since the 1979-80 crop year, and thus would be a bullish sign.This trader characterized the recent price action as a contest between the fundamentalists, who see higher prices ahead, and the technicians, who are basically buying cotton toward the bottom of the current trading range, around 71 cents, and selling it when the price climbs more than 74 cents.This trader said that he thought the market would turn aggressively bullish from a technical standpoint if the December contract was able to exceed 75.75 cents.He also noted that stocks on Aug. 1, 1990, are currently projected at 3.3 million bales, the smallest end-of-season supply since 1985. COCOA: The modest sell-off, which started on Tuesday, continued.The December contract ended at $999 a metric ton, down $15.The market is drifting, at least partly, because of a lack of crop information out of Ghana and the Ivory Coast, the two largest African producers.Harry Schwartz, a soft commodity specialist for Cargill Investors Services in New York, said the only report Ghana has issued about the arrival of cocoa from the interior was for 7,839 metric tons as of Oct. 12.By this time last year, he noted, arrivals totaling 33,270 tons had been announced.A similar situation apparently exists in the Ivory Coast with no figures released yet this year, compared with 55,000 tons as of this time a year ago.He said that if little cocoa actually has arrived at the ports, shipping delays could result.This is the worry that probably brought steadiness to the market earlier in the week, he said.There was also some fear that without Ivory Coast cocoa a large French cocoa merchant, Cie.Financiere Sucre et Denrees, might not be able to deliver cocoa against the contracts it had sold earlier for December delivery in London.However, the French merchant has about 200,000 tons of old crop Ivory Coast cocoa stored in the Netherlands from an agreement it had negotiated with the Ivory Coast last spring.Cargill thinks that even though the merchant has a contract stating that it won't bring this cocoa to market until after March 1991, there is some evidence the contract has been modified.This modification, apparently, would permit the French merchant to deliver this cocoa, if necessary, against existing short positions.
American Medical International Inc. said it hasn't received any other offers to acquire the owner and operator of hospitals, and took another step toward completion of its $3 billion acquisition by IMA Holdings Corp. Earlier this month IMA, an investment group that includes Chicago's Pritzker family and First Boston Corp., submitted a reduced bid for American Medical after it couldn't finance its initial offer.Under the new offer, IMA will pay $26.50 a share for 63 million shares, or about 86% of the shares outstanding.IMA also will assume $1.4 billion in debt. Yesterday, in composite trading on the New York Stock Exchange, AMI common closed at $23.625, up 12.5 cents, on volume of almost 1.8 million. Earlier, American Medical said it had been approached again by two other possible suitors, whom it wouldn't identify but who had previously submitted bids for the company.Yesterday, American Medical said that the two other parties told the company that they don't have any current intention of making a takeover bid. American Medical said its directors have approved what is, in effect, a draft of a solvency opinion on the acquisition, submitted by the Los Angeles-based investment banking and evaluation consulting firm of Houlian Lokey Howard & Zukin Inc.A final opinion must be approved prior to the acceptance of tendered shares for payment under the offer, which was due to expire at 12:01 a.m. EDT today. Separately, Moody's Investors Service Inc. downgraded the ratings of American Medical's senior and subordinated debt issues and those of its international affiliate.The downgrade anticipates completion of the IMA Holdings acquisition today, Moody's said. The ratings concern said the acquisition should result in pretax losses from operations because of increases in interest expense and charges for depreciation and amortization, but that it expects the losses to be reduced through productivity gains and above average growth of the company's hospitals.Moody's said the ratings anticipate a successful debt-reduction program and modest improvement in discretionary cash flow because of planned asset sales. Moody's changes affected the following issues: American Medical International: Senior notes, sinking-fund debentures, Euromarket notes, Eurobonds, Swiss franc bonds, unsecured loan stock to Ba3 from Baa2; convertible subordinated debentures, notes, and sinking-fund debentures to B2 from Baa3. American Medical International N.V.: Guaranteed Euroissues to Ba3 from Baa2. An American Medical spokeswoman said the Moody's downgrading was expected because of the nature of the takeover.
House and Senate conferees agreed to continue production of Grumman Corp. 's F-14 and to provide more than $3.8 billion for the Strategic Defense Initiative during the current fiscal year. Industry officials and congressional aides said that the main points of a compromise defense authorization bill, hammered out during a flurry of private meetings over the past few days, provide a face-saving compromise for both the White House and House Democrats.Although conferees are still putting the finishing touches on the package, the final agreement could be announced as early as tomorrow.An announcement is more likely next week, though. President Bush and other supporters of SDI will be able to take credit for blocking House efforts to significantly cut the program to develop a space-based antimissile system, which already has cost some $17 billion.Senate Armed Services Committee Chairman Sam Nunn (D., Ga.) and other Senate conferees have opposed the House cuts, stalling for almost two months action on a number of big-ticket items in the Pentagon's budget. The Senate voted to authorize $4.5 billion for SDI spending in the current fiscal year, but the House, reflecting a dramatic erosion of support for the program, earmarked only $3.1 billion.Despite the widening gap between the two sides, conferees eventually followed the pattern set in previous years by opting to roughly split the difference.That would hold spending on the program at about the previous year's level. The decision to keep the embattled F-14's production line running for at least another year is an important victory for the House, and especially for Rep. Les Aspin (D., Wis.).As the head of the House conferees, Rep. Aspin has been under intense pressure from his colleagues to reject Senate provisions that would have abruptly cut further F-14 production. The package "provides a temporary, golden parachute for Grumman," according to one congressional aide familiar with the closed-door bargaining.But as part of the overall agreement, Grumman and its outspoken supporters on Capitol Hill effectively will be precluded from reopening the emotional issue in the debate over next year's budget. Defense Secretary Dick Cheney and most senators contend that the Navy's F-14 is too expensive in an era of shrinking Pentagon budgets.But the plane boasts a strong core of support in the House, where members are intent on saving Grumman jobs and are worried about potential shortages of carrier-based aircraft by the late 1990s. Conferees also agreed to Pentagon requests to earmark a total of nearly $1 billion for work on both mobile MX and Midgetman nuclear missiles, according to congressional aides. And lawmakers are putting the finishing touches on a compromise that would give the Air Force nearly all of the $2.4 billion it wants for production of Northrop Corp. 's radar-eluding B-2 bombers, which cost $530 million apiece.The final B-2 agreement is certain to require detailed testing and verification of the bomber's capabilities, but congressional aides said the accord won't include a House-passed provision that would have withheld production funds until Congress approves a cheaper, scaled-down version of the $70 billion fleet of 132 B-2s envisioned by the Pentagon.
A round of futures-related program selling near the close sent the stock market lower in otherwise directionless trading. Nervousness that the market hasn't seen the last of its recent volatility kept trading at a moderate pace, as did anticipation of a report on the economy's third-quarter performance. The Dow Jones Industrial Average, which plunged more than 80 points in early trading Tuesday and then recovered nearly all of its losses by the close, fell 5.94 to 2653.28 in the latest session. The average drifted in a trading range of about 30 points throughout the day.The lower boundary was established just after the opening in a brief round of selling; the upper boundary was set at midday as scattered bargain-hunting pushed prices higher. Buying interest in Du Pont, which declared a stock split and a dividend boost, and certain other blue-chip issues gave the industrial average a better performance than broader indexes. Standard & Poor's 500-Stock Index dropped 1.20 to 342.50; the decline was the equivalent of a nine-point setback in the 30-stock average.The Dow Jones Equity Market Index fell 1.16 to 320.94 and the New York Stock Exchange Composite Index slid 0.53 to 189.52. But advancing issues topped decliners by 784 to 700 on the Big Board despite the late sell programs, resulting from stock-index arbitrage.The programs occurred against the backdrop of a late pullback in UAL, which had held at slightly lower levels through most of the session amid optimism that another bidder might surface. Traders said program activity wasn't in evidence through most of the session, however, and Big Board volume dropped to 155,650,000 shares from about 238 million Tuesday as concerns about the potential for additional sharp swings in the market kept other trading in check. "People are sort of nervous to do anything in the market now.Our phones are quiet around here," said Don R. Hays, director of investment strategy at Wheat First Butcher & Singer Inc., Richmond, Va. The gross national product report, due to be released before today's opening, is expected to show that the economy continued to expand in the third quarter at a moderate pace.The consensus of economists polled by Dow Jones Capital Markets Report calls for a 2.5% annual growth rate for GNP during the quarter. Du Pont, which announced plans for a 3-for-1 stock split and raised its quarterly dividend by 14%, jumped 2 1/2 to 117 3/8.The company also posted third-quarter earnings that were in line with analysts' forecasts. Blue-chip consumer stocks also provided a lift to the industrial average. American Telephone & Telegraph rose 3/8 to 43 1/2 in Big Board composite trading of 1.5 million shares, Chevron advanced 1 3/4 to 66 5/8 on 2.3 million shares, Woolworth rose 1 to 58 5/8, Coca-Cola Co. gained 5/8 to 72 1/2 and Eastman Kodak added 3/8 to 44 1/2. But General Motors dropped 1 7/8 to 44 7/8.Its GM Hughes Electronics and financial-services units both reported that third-quarter earnings were down from a year earlier. Anheuser-Busch plunged 4 3/8 to 38 1/2 on 3.5 million shares.Its third-quarter earnings were lower than analysts had forecast, and the company said it had lowered its projections for earnings growth through the end of 1990 because of planned price cuts. Xerox fell 3 1/8 to 59 5/8.Disappointment with the company's earnings for the quarter led Prudential-Bache Securities to reduce its 1989 and 1990 earnings estimates, according to Dow Jones Professional Investor Report. Computer Associates International, the most active Big Board issue, was another victim of an earnings-related sell-off.The stock fell 3/4 to 12 7/8 as 3.6 million shares were traded in the wake of its report that fiscal second-quarter net income fell 66% from a year ago. Insurance stocks moved higher in the wake of a strong third-quarter earnings report from Chubb, coming on the heels of speculation that last week's devastating earthquake in the San Francisco area would lead to higher premium rates. Chubb, whose net income for the quarter exceeded most analysts' expectations, rallied 3 3/4 to 86 1/2.Aetna Life & Casualty gained 1 3/8 to 61 1/8, Cigna advanced 7/8 to 64 3/4, Travelers added 1/2 to 40 3/8 and American International Group rose 3 1/8 to 107 3/4. Comprehensive Care plunged 4 3/4 to 3 5/8 on 1.2 million shares.The company reported a third-quarter loss and said it is holding talks with its bank lenders for an extension on some overdue debt payments. TW Services dropped 1 1/4 to 31 1/4 following the postponement of a $1.4 billion junk-bond offering that would have permitted Coniston Partners to complete its takeover of the company.Coniston said it would pursue "various financing alternatives." UAL stock declined by 9 to 161 after nobody surfaced to claim credit for aggressive buying Tuesday by Bear Stearns that sent UAL stock up 35 points in a matter of hours.Tuesday's rumored buyer, Coniston Partners, wouldn't comment on speculation that Coniston, which battled the UAL board in 1987, might challenge the board's decision Monday to remain independent. Other airline stocks were mixed.AMR, which owns American Airlines, rose 3 3/8 to 72 1/4; USAir Group fell 1 1/2 to 38 5/8, and Delta Air Lines rose 1/2 to 66 1/2 after posting higher earnings for the September quarter. Stocks that reportedly benefited Tuesday from a Japanese buy program handled by PaineWebber gave back some of their gains.Procter & Gamble went down 3 1/2 to 130, Dow Jones fell 3 1/2 to 37 1/2 and Rockwell International dropped 2 1/8 to 25.However, Atlantic Richfield preserved its twopoint advance in the previous session and added 1/8 to 103 7/8. General Mills gained 2 1/4 to 72 7/8.Goldman Sachs placed the stock back on its list of recommended issues, raised its 1990 earnings estimate and recommended that its clients shift funds from Kellogg to General Mills.Kellogg dropped 1 3/4 to 73 1/4. Manville advanced 3/4 to 10.The company offered to purchase $500 million of convertible preferred stock from the trust that handles its payments to asbestos victims. Di Giorgio gained 1 to 30 3/4 after the company said it is starting negotiations with unidentified parties interested in acquiring its units.Investor Arthur Goldberg is pursuing a $32-a-share takeover offer. Esselte Business Systems rose 1 to 43 1/2.Esselte AB of Sweden offered $43.50 a share for the 22% of the company it doesn't already own. Public Service of New Hampshire went up 3/8 to 4.Northeast Utilities boosted its offer to acquire the company by $400 million, to $2.25 billion. Newell, which declared a 2-for-1 stock split and boosted its quarterly dividend by 14%, added 7/8 to 49 3/8.Also, the company posted improved third-quarter earnings. The American Stock Exchange Market Value Index fell 0.44 to 375.92.Volume totaled 8,930,000 shares. Mission Resource Partners lost 5 1/4 to 14 1/8.The partnership, which had solicited takeover offers, said it failed to receive any adequate bids for all of its operations but is reviewing offers for individual properties.
Japan is going on a capital-spending binge that could make its trade surpluses even harder to shrink. Its capital spending is growing at double-digit rates for the second year in a row, and its superefficient producers of everything from cars to computer chips are rushing to expand capacity, modernize factories and develop new products. "The boom's so huge," says Mitsuru Saito, an economist at Sanwa Research Institute, "it makes you think of the Golden '60s," when Japan developed rapidly. The more factories and robots Japanese manufacturers add, the more they will be able to export, and the less their domestic customers will need to import. At Canon Inc., for example, sales are up nearly 20% this year; so, the maker of cameras and computer printers is doing what any Japanese company would do under the circumstances: It is increasing capital spending -- by 60%.It is building, among other things, a new laser-beam-printer factory in western Japan that can produce up to 150,000 printers next year.Some 70% of them are to be exported to the U.S. Even companies in smokestack industries wrestling with world-wide overcapacity are joining the boom.Japan's steelmakers are raising capital spending 22% this year to $4.8 billion.Hitachi Zosen Corp., a shipbuilder buried in debt just a few years ago, will build a machinery plant, its first expansion in 14 years. So big is the capital-spending boom that Japanese companies' outlays in Japan topped American companies' domestic outlays by $521.4 billion to $494.8 billion in the 12 months ended March 31 even though Japan's total output of goods and services is less than two-thirds America's. From a financial standpoint, the boom couldn't come at a better time.Many Japanese companies expect record profits this fiscal year, and Japanese interest rates, though up a bit recently, are still low.And in a business system where shareholders have few rights and expect only modest dividends, companies can plow their profits back into plant and equipment. But some economists and government officials here aren't applauding.They fear that the boom may be too big for Japan's or anyone else's good. "It's an explosive cocktail" thrown at the world, says Kenneth Courtis, senior economist at the Tokyo unit of Deutsche Bank Group.The Ministry of International Trade and Industry is so concerned that it recently took the unusual step of urging Japanese auto companies to exercise caution in capital spending.MITI officials hope to avoid yet-another source of trade friction with the U.S. even though export restraints currently limit Japanese car exports to the U.S. Not everyone is worried, however.Some economists -- and many Japanese companies -- are puzzled by the warnings.The investment boom is mainly sparked, they say, by strong domestic demand and isn't likely to increase exports sharply. Moreover, much investment isn't aimed at increasing capacity.According to a survey of some 2,400 large companies by the Japan Development Bank, expanded capacity is the goal of just 51.8% of the outlays; for manufacturers alone, the figure is 32%.The manufacturers said 14.2% of their spending is designed to improve products or add new ones, 17.5% is to cut costs, 12.5% is for research and development, and the rest is for maintenance and other purposes. But the worriers remain unconvinced.With Japan running enormous trade surpluses against much of the world, they think that Japan should meet the increased domestic demand by importing more.And eventually, they contend, domestic demand will weaken, forcing companies to emphasize exports again. "If there's a further drive to export," says Nobuyuki Arai, an economist at the Japan Development Bank, "that'll be a problem." Even in the short run, the investment boom could exacerbate a disturbing trend: Japanese exports are showing surprisingly little tendency to ease.Japanese auto makers, for example, are increasing their production capacity in the U.S.; the additional production should, in part, replace imported vehicles with locally manufactured ones.But although Japanese companies increased their U.S. auto output by 42% from January to September compared with the year-earlier period, their exports to the U.S. will drop only 9% this year, Nikko Research Center estimates. In contrast to previous economic booms, Japanese auto companies aren't just trying to boost production.Many are pouring money into developing high-quality products to target affluent consumers and, to some extent, to avoid direct combat with cheaper cars from South Korea and Taiwan.Others are replacing older facilities with flexible assembly lines on which different models can be turned out at once.So many companies are investing in high-tech machinery that Fanuc Ltd., a robot maker, also had to build a new plant.The buildup is "making Japan clearly more efficient, more technologically advanced and more competitive," declares a Western diplomat in Tokyo. But whatever its effects on exports and imports, Japan's investment boom during the past two years has been stimulated at least partly by soaring domestic demand.Japan's marathon economy, growing at 4.3% this year, is now in its 35th month of expansion, and some economists are betting that the boom will outlast the record 57-month expansion in the late 1960s. Japanese consumers are increasingly eager to spend their money, especially on high-priced goods such as 29-inch television sets and luxury cars.Nissan Motor Co. 's domestic auto sales are up 20% this year largely because its expensive Cima, Sylvia and Cefiro models are in heavy demand. "One dealer told me that if he had more cars, he'd sell them right away," says Takuro Endo, Nissan executive vice president.He adds that the company is trying to keep up with demand "by overworking" its employees.Similarly, Honda Motor Co. 's sales are so brisk that workers grumble they haven't had a Saturday off in years, despite the government's encouragement of more leisure activity. With demand growing and workers in short supply, many Japanese manufacturers are spending heavily on automation.Among them are the shipbuilders, which had halved their shipyard work forces to cut costs during a prolonged slump in demand but now are capturing an increased share of the strengthening global market.Sasebo Heavy Industries Co., a medium-sized shipbuilder, expects its sales to increase 30% this year, largely because of rising demand for oil tankers. Once one Japanese company steps up its investments, the whole industry follows.Because most businesses put market share above profitability, to let a competitor's addition to capacity go unmatched is to concede defeat. The emphasis on market share is evident at Daikin Industries Ltd., Japan's biggest maker of industrial air conditioners.Seeing new office buildings sprout up and its sales soar, Daikin is building another plant, which will lift its production capacity 50%.The expansion is aimed not just at meeting demand but also at expanding the company's market share to 30% from 27% currently.Besides, Daikin's major competitors, Hitachi Ltd. and Mitsubishi Heavy Industries Ltd., "are all adding production lines," a Daikin spokesman says. "Until now, we were trying to increase productivity with the facilities we already had.But we can't produce enough anymore." The competition is even more heated in the auto industry, where companies are racing one another in a world-wide market.Nissan aims to expand its 25% share of the market to 30% by spending $141 million on a plant in southern Japan that could make as many as 240,000 cars a year.Meanwhile, Toyota Motor Corp. 's $247 million buildup is increasing its annual capacity by 180,000 cars, and Honda is spending $317 million on expansion.Mazda Motor Corp. is still considering its options, but it boldly aims to double its annual domestic sales to 800,000 cars in the next four years. Those who aren't worried about how Japanese manufacturers' investments will affect trade note that many new products aren't replacements for imports.Although imports account for less than 1% of beer sales in Japan, Asahi Breweries Ltd., which has been gaining share with its popular dry beer, plans to fend off Japanese competitors by pouring $1.06 billion into facilities to brew 50% more beer.But new-product development will make Japanese companies stronger, and big investments in "domestic" industries such as beer will make it even tougher for foreign competitors to crack the Japanese market. Moreover, much of the investment boom is in high-tech fields in which Japanese companies have only limited foreign competition; so, more investment practically assures more exports.Toshiba Corp., for example, is spending $986 million on two new plants to build four-megabit dynamic random access memories, the next generation of computer chips.The product isn't widely used yet, but Toshiba, which has already beaten everyone else in producing the current-generation one-megabit DRAMs, believes that its early investment will heighten its chances of beating its competitors again. "It's important to gain leadership," a Toshiba spokesman says. Meanwhile, Toshiba's Japanese rivals, Hitachi, Fujitsu Ltd. and NEC Corp., aren't sitting still.After doubling production in one plant, NEC is spending $275 million to build another plant that, in two years, will be able to make a million four-megabit DRAMs a year.The new chip plants "won't be excessive investment," says Hajime Sasaki, an NEC vice president. "We have enough products to make and the markets to sell these products." Some of Japan's goods being produced as a result of the investment boom are already successful overseas.Toyota's $35,000 Lexus automobile, a luxury model that it started shipping to the U.S. only last month, is racking up orders at a time when U.S.-made luxury-car sales are slow.Toyota plans to raise Lexus exports when a new plant starts up next year. What if its sales weaken someday?Japanese companies have a caveat competitor attitude.If excess capacity develops, they say, not everyone will suffer.The losers will be those with the least attractive products, and many of them, analysts think, will be foreign companies.
Federal health officials are expected today to approve a program granting long-deferred access to the drug AZT for children with acquired immune deficiency syndrome. Announcement of the approval is expected to be made by Louis Sullivan, secretary of Health and Human Services.The clearance by the Food and Drug Administration comes after two years of restricted access for the youngest victims of AIDS to the only antiviral drug yet cleared to treat the fatal disease. The drug will be given treatment investigational new drug status, a label accorded to drugs believed effective but lacking formal approval.The move will make the drug available free of charge for a time to children with the disease and symptoms of advanced infection. Adults with AIDS have had access to AZT since FDA approved the drug's usage for adults in March 1987.But despite more than two years of research showing AZT can relieve dementia and other symptoms in children, the drug still lacks federal approval for use in the youngest patients.As a result, many youngsters have been unable to obtain the drug and, for the few exceptions, insurance carriers won't cover its cost of $6,400 a year. So far, AIDS has stricken 1,859 children under age 13, with many times that number believed to carry the infection without symptoms.To date, 1,013 of those children have died, according to the federal Centers for Disease Control. Mothers of young AIDS patients expressed somber satisfaction. "Thank goodness it's happening.It should have happened sooner," said Elizabeth Glaser, a Los Angeles mother and activist who contracted the AIDS virus through a blood transfusion, and transmitted it to two of her children.One of them, a daughter Ariel, died a year ago at age seven after her parents unsuccessfully pleaded for the drug. "I could get AZT," says Mrs. Glaser, who bears her infection without any symptoms. "But my daughter couldn't, until she was too ill to take it.To watch your child die is an inhuman experience." Her son, healthy and symptom-free, currently takes no medication. The delay in getting AZT to children has been blamed on a combination of factors.Traditionally, the medical establishment has waited two years to approve adult treatments for pediatric uses, because of a combination of conservative safety standards and red tape.Secondly, critics have charged AZT's maker Burroughs Wellcome Co. with corporate inertia because children account for just 1% of the patient population and hence a small part of the large and lucrative market. Wellcome has replied that it is moving ahead to compile the relevant data, and recently promised to develop a pediatric syrup form easier for youngsters to take. Still, all this comes nearly a year and a half after Philip Pizzo of the National Cancer Institute offered evidence that AZT could reverse the ravages of AIDS dementia, sometimes prompting dramatic recovery of IQ levels and reappearance of lost motor skills.Since then, roughly 50 pediatric patients have received the drug in his program. To some mothers, the expected FDA action is a poignant reminder of what might have been. "My first reaction is I don't understand why it's taken so long.Why has it taken people so long for people to understand pediatric AIDS is a major problem?" asked Helen Kushnick, whose son Samuel died six years ago at age three, victim of a tainted transfusion. Similar sentiments were voiced on Capitol Hill. "While I'm pleased the FDA is finally releasing AZT for children, it's taken much too long to get to this point," said Rep. Ted Weiss. "Why did it take Burroughs Wellcome so long to apply" for treatment investigational new drug status? the New York Democrat asked. "Let's not forget this is the same company that has been profiteering with this drug for 2 1/2 years," Mr. Weiss added. Mrs. Glaser, who is a co-founder of the Pediatric AIDS Foundation, based in Santa Monica, Calif., condemned neither bureaucratic nor corporate foot-dragging. "There's no finger to be pointed," she said. "The crucial thing is that we learn our lesson well, and to make sure other experimental drugs, like Bristol-Myers Co. 's DDI, don't follow the same frustrating course as AZT." AIDS dementia -- which gradually steals children's ability to speak, walk and think -- is often the most striking aspect of the pediatric syndrome.For some patients, AZT has restored the ability to ride a bicycle or solve puzzles, giving back a piece of their childhood if only temporarily. "It's impossible to overstate how much this means to the families of these patients," said Samuel Broder, director of the National Cancer Institute and a main developer of AZT.
THE BIG BOARD PLANS to launch its own vehicle for program trading today amid growing controversy over the practice.The new "baskets" of stocks will allow big investors to buy or sell all 500 S&P index stocks in a single trade.The exchange argues that the product, which the SEC temporarily approved yesterday, will help ease rather than worsen any volatility in the stock market. SEC Chairman Breeden said he would consider imposing "circuit breakers" to halt program trading during sharp swings in the market. Kemper Financial Services has stopped executing its stock trades through four big securities firms because of their involvement in program trading, which Kemper and others say is ruining the market. The main capital-gains tax plan in the Senate isn't winning support from Democrats who favor a reduction.The trend is making proponents less optimistic a tax cut will pass. Bethlehem Steel's profit plunged 54% in the third quarter, hurt by higher costs and lower shipments to key clients.Also, Armco and National Intergroup had lower operating profit in steel, marking what may be the end of a two-year industry boom. Columbia S&L posted a quarterly loss of $226.3 million as the Beverly Hills thrift reeled from new industry rules and turmoil in junk bonds. Anheuser-Busch plans to aggressively discount its major beer brands, setting the stage for a price war as the beer industry's growth slows. PS New Hampshire received a sweetened bid from another suitor, United Illuminating, which valued its new proposal at $2.29 billion, apparently topping all others so far. Financial markets quieted, with stock prices edging lower, bonds inching up and the dollar almost unchanged.The Dow Jones industrials closed off 5.94 points, at 2653.28. Fed Chairman Greenspan said the central bank can wipe out inflation without causing a recession, but doing so will inflict short-term pain. GM's Hughes Electronics unit said profit slid 22% in the third quarter.The finance unit, GMAC, said net fell 3.1%, but EDS's profit rose 16%. Campeau reportedly may receive a $1.3 billion offer for Bloomingdale's from Tokyu Department Store of Japan.Campeau declined to comment. UAL's pilots and machinists unions appear to hold the key to any future takeover bid for the airline. Provigo plans to sell all non-food operations to refocus on its retail and wholesale grocery business.Also, Chairman Pierre Lortie resigned. Westinghouse expects operating margins of over 10% and sharply higher earnings per share next year due to a major restructuring. Some major U.S. trade partners quickly rejected a compromise proposal by Bush to liberalize trade and reduce farm-product subsidies. Markets -- Stocks: Volume 155,650,000 shares.Dow Jones industrials 2653.28, off 5.94; transportation 1199.32, off 11.38; utilities 216.49, up 1.45. Bonds: Shearson Lehman Hutton Treasury index 3427.39, up Commodities: Dow Jones futures index 129.48, up 0.24; spot index 130.73, off 0.03. Dollar: 141.52 yen, up 0.07; 1.8353 marks, off 0.0002.
GORBACHEV SAID Moscow won't intervene in East bloc moves to democracy. The Kremlin leader, on the first day of a three-day official visit to Helsinki, assured Finland's president that the Soviet Union has "no moral or political right" to interfere with moves toward democracy in Poland, Hungary or elsewhere in Eastern Europe.In Moscow, the Soviet State Bank announced a 90% devaluation of the ruble against the dollar for private transactions, in an apparent attempt to curb a black market for hard currency.The action will establish a two-tier exchange rate. Workers at six mines in Arctic Circle coal fields called strikes over a series of economic and political demands.The move defied a law, approved in Moscow this month, banning such walkouts. THE HOUSE FAILED to override Bush's veto of a bill easing abortion funding. The chamber voted 231-191, 51 votes short of the two-thirds majority needed to overturn the president's veto of legislation renewing support of Medicaid abortions for poor women who are victims of rape and incest.The roll call was considered an illustration of the limits of power that the resurgent abortion-rights movement faces.The legislation was part of a $156.7 billion measure funding the departments of Labor, Education, and Health. Michigan's Senate passed a bill requiring girls to get parental consent for an abortion and Pennsylvania's House cleared a measure banning abortions after the 24th week of pregnancy. The FDA is expected to approve today a program granting access free of charge to the drug AZT for children with AIDS. Adults have had access to the only approved antiviral drug since 1987.Research shows AZT can relieve dementia and other symptoms in children, 1,859 of whom are known to have been infected. Congress sent to Bush a $2.85 billion emergency package to assist in the recovery from last week's California earthquake and from Hurricane Hugo.The action came after the Senate approved the House-passed measure.In the San Francisco Bay area, more than 13,000 people were homeless and landslides threatened more houses. House-Senate conferees agreed to continue production of Grumman Corp. 's F-14 jet and to provide more than $3.8 billion during the current fiscal year to develop a space-based anti-missile system.The final package is expected to be announced within the next week. The White House has decided to seek changes in pesticide law that are aimed at speeding the removal of harmful chemicals from the food supply.The changes, which could be announced as early as today, would apply to pesticides and other substances found on fresh and processed foods, officials said. East German leader Krenz said he was willing to hold talks with opposition groups pressing for internal changes.The Communist Party chief, facing what is viewed as the nation's worst unrest in nearly 40 years, also said he would allow East Germans to travel abroad more freely, but made clear that the Berlin Wall would remain. A Lebanese Christian alliance accepted an Arab-sponsored proposal aimed at ending Lebanon's 14-year-old civil war.The move by the coalition of political parties and Lebanon's largest Christian militia isolated military chief Aoun, who has rejected the plan, which includes political changes and a Syrian troop withdrawal from Beirut. Baker offered to review Israel's "suggested changes" to his proposal for direct Israeli-Palestinian talks.But the secretary of state advised Israel that attempting to overhaul the five-point plan risked delaying the negotiations aimed at Mideast peace. NATO defense ministers said the 16-nation alliance continues to need a strong nuclear strategy despite political changes in Eastern Europe.The ministers, concluding a two-day meeting in southern Portugal, welcomed Moscow's pledges to cut its military forces, but urged the Soviets to do more to slash short-range nuclear weapons. The Justice Department indicated a possible challenge to a court order allowing former National Security Adviser Poindexter to subpoena ex-President Reagan's personal papers for use in the defense case against Iran-Contra charges.A department spokesman said the ruling "raised a serious question" about the office of the president. Bush said Washington would continue a trade embargo against Nicaragua, declaring that the Central American country poses "an unusual and extraordinary threat" to the security of the U.S. Meanwhile, Secretary of State Baker said the U.S. protested to Moscow over shipments of East bloc arms to Salvadoran rebels from Managua. A landslide engulfed a hillside slum in Sao Paulo, Brazil, and at least 20 people, most of them children, were missing and feared dead.The city's mayor vowed to take legal action against developers who had been excavating at the crest of the hill. Czechoslovakia's premier said he supports broad political and economic restructuring, but ruled out any dialogue between Prague's Communist government and independent human-rights or dissident groups.Ladislav Adamec, ending a two-day visit to Austria, pledged changes in Czechoslovakia, including freer travel to the West. Died: Mary McCarthy, 77, novelist and literary critic, in New York City, of cancer. . . . Marion Harper, 73, founder and ex-chief executive of Interpublic Group of Cos., in Oklahoma City, of a heart attack.
Adolph Coors Co. said William K. Coors, chairman, assumed the additional responsibilities of president, succeeding Jeffrey H. Coors. Jeffrey Coors, 44 years old, had been president since 1985, when he succeeded his father Joseph in the job.But the brewer said Jeffrey Coors voluntarily gave up the position to focus more of his energy on Coors Technology Co., a small unit of Coors he has run for several years. A Coors spokesman said the company doesn't believe the move will further increase William Coors's influence or reduce the influence of Jeffrey Coors, Peter Coors or Joseph Coors Jr., who run the company's three operating units. "It certainly wasn't intended to be a demotion," the spokesman said. "Pete and Jeff and Joe Jr. have taken over the reins and are doing most of the work.We don't think this will affect that." Jeffrey, Peter and Joseph Jr. are brothers.William Coors is their uncle.Jeffrey, Peter, Joseph Jr., William and Joseph Sr. constitute the company's board. Peter Coors runs the Coors Brewing Co. unit, the nation's fourth-largest brewery that accounted for $1.24 billion of Adolph Coors's $1.52 billion in 1988 sales.Joseph Jr. runs Coors Ceramics Co., the other operating unit, which had about $150 million in 1988 sales.
A major Tokyo newspaper reported that a Japanese department store concern is planning to offer about $1.3 billion to buy Bloomingdale's.Campeau Corp., the chain's owner, declined to comment on the report. A spokeswoman said Toronto-based Campeau has received "expressions of interest" in Bloomingdale's, but she declined to comment on whether any actual bids had been made.Nihon Keizai Shimbun, Japan's leading economic newspaper, reported Wednesday that Tokyu Department Store Co. is planning to team up with U.S. and Western European financing to buy the New York-based retail chain, which Campeau has put up for sale.The service didn't identify its Tokyu sources. "This is the first of many rumors we expect to hear during the sale's process," said a Bloomingdale's spokesman. "We won't comment on them." Tokyu executives weren't available for comment early Thursday morning in Tokyo. Campeau's chairman, Robert Campeau, said at its annual meeting in July that he valued Bloomingdale's at $2 billion.Among previously disclosed possible bidders is Bloomingdale's Chairman Marvin Traub, who has aligned himself with Drexel Burnham Lambert Inc. and Blackstone Group. Investment bankers in Tokyo confirmed that Tokyu Department Store is one of several Japanese companies that has been approached by representatives of a management committee headed by Bloomingdale's Mr. Traub.But they said detailed financial figures haven't been passed yet to any prospective buyers. "Nobody is going to make a real bid before the middle of November," said one investment banker familiar with the discussions in Japan. "Tokyu is one of the potential buyers who might raise its hand.But it's in very early stages still." Bloomingdale's is a 17-store chain acquired last year by Campeau in its $6.6 billion acquisition of Federated.Bloomingdale's does an estimated $1.2 billion in annual sales. The sale of Bloomingdale's is a condition of efforts by Toronto-based Olympia & York Developments Ltd. to arrange $800 million in bridge financing for Campeau, which disclosed last month that its retailing units, Federated Department Stores Inc. and Allied Stores Corp., were strapped for cash.O&Y, owned by Toronto's Reichmann family, is also supervising major restructuring and refinancing of Campeau, a Toronto-based real estate and retailing company. One executive familiar with the Bloomingdale's situation said, "No book has been issued regarding Bloomingdale's, there are no projections, so I doubt very much whether any bid has been made." Separately, a Campeau shareholder filed suit, charging Campeau, Chairman Robert Campeau and other officers with violating securities law. The suit, filed in U.S. District Court in Manhattan, seeks class-action status.The suit accuses the retailer and several of its officers of making false and misleading statements about the company's business affairs.The suit says the company failed to disclose material adverse information about its financial condition. A spokesman for the company said Campeau hasn't seen the suit and declined to comment.
The bad news in the junk bond market yesterday was that TW Services, a group of restaurant chains, became the latest prospective issuer to get a cold shoulder from bond buyers. The good news -- to fans of stable credit, at least -- is what the rejection says about the state of mind of junk buyers.Apparently they are learning to say no to excess risk. Coniston Partners, which with related entities controls 80% of TW, had been planning to sell $1.15 billion of junk bonds, among other things to finance their acquisition of the remaining public shares. But Coniston, a New York partnership managed by the firm of Gollust, Tierney & Oliver, yesterday announced that "in view of unsettled conditions in securities markets" the offering would be postponed and restructured.What wasn't mentioned is that Coniston and its investment banker, Donaldson, Lufkin & Jenrette, just completed a two-week "road show" for the purpose of marketing the bonds.And investors, at least for now, took a pass. TW's junk bonds weren't, as junk bonds go, unusually weak.Its fast-food restaurants -- including Denny's, Hardee's, Quincy's and El Pollo Loco ("the only significant fast-food chain to specialize in char-broiled chicken") -- are stable, recession-resistant and growing.But unless they continued to grow, TW, based in Paramus, N.J., would have run into trouble. Until recently, such buy-now, pray-for-growth-later deals were routine. "But people don't buy anything on expectation anymore," says Jack Utter, who manages the high-yield fund of IDS Financial Services. "Investors," he adds, "are getting religion." The TW buy-out may yet be financed. "There is nothing wrong with the company," says Coniston principal Paul Tierney.The rub, he says, is that "the junk market isn't as deep" as before.TW's stockholder meeting was postponed from tomorrow to Nov. 21.By then, DLJ hopes to be able to sell less-junky junk bonds. Gollust, Tierney & Oliver is likely to contribute more than the $120 million in equity it had planned on.Banks may contribute more senior debt.And the total amount of junk financing will be reduced. A DLJ banker, putting a best possible face on it, asserts that "very few people said they didn't like the credit quality.People said they didn't think a billion-dollar deal would trade." But trading risk stems from credit risk.And by adding equity, DLJ would seem to be acknowledging that credit risk was a concern.Indeed, the DLJ banker says, in the reborn capital structure cash coverage of interest "will meaningfully improve." As he sums it up: "We are listening to the market." What is it, to borrow a term from Coniston, that so unsettled the market?Some of the same risks that were cited -- and seemingly ignored -- in dozens of previous junk offerings. The TW prospectus says that if the acquisition had been completed earlier, pretax earnings "would have been insufficient to cover its fixed charges, including interest on debt securities," by approximately $62.7 million in the first six months of 1989.TW notes, as many junk issuers do, that "adjusted to eliminate non-cash charges" TW would have run a cash surplus -- in this case, of $56 million over six months. But such calculations ignore the noncash charge of depreciation, taken to allow for the gradual wearing out of french friers, deterioration of stores and the like.In fact, DLJ says, the company envisions capital expenses of about $180 million a year. TW's pitch was that sales and earnings at its restaurants have risen steadily and that people won't stop eating during a downturn.But they won't necessarily eat at Denny's.The fast-food business is "intensely competitive," notes Wertheim Schroder analyst John Rohs.Prospective bond buyers noted that TW historically has prospered because it has been willing to spend aggressively on remodeling restaurants and redoing menus. "We were concerned that they weren't going to generate enough cash for capital spending and also to pay down debt," says a big investor in high-yield debt.DLJ argues that TW could, if necessary, cut capital spending, since half of what it plans to spend is for "growth," rather than maintenance.But investors noted that under the shelved offering, TW would have needed to grow to meet its debt payments.Its calculations for meeting cash charges ignore $52 million a year in interest on cash-deferred, or zero-coupon debentures -- which ultimately would have had to be paid. The prospectus notes "there can be no assurance" that future growth will continue at past levels.In the recent past, bond buyers didn't seek such assurance.Now, apparently, they do. TW Services (NYSE; Symbol: TW) Business: Restaurants Year ended Dec. 31, 1988* Revenue: $3.57 billion Net Income: $66.9 million; $1.36 a share** Third quarter, Sept. 30, 1989: (Net Loss: 7 cents share) vs. net income: 51 cents a share Average daily trading volume: 179,032 shares Common shares outstanding: 49 million *Includes results of Denny's Inc., acquired in September **Includes $9 million write-down of assets and takeover defense costs.
Maggie Thatcher must be doing something right; her political enemies are screaming louder than ever. Mrs. Thatcher, who was practicing the read-my-lips school of politics years before Mr. Bush encountered it, has made clear her opposition to refashioning Britain's free-market policies to suit the bureaucrats in Brussels.In return, Mrs. Thatcher is excoriated from Fleet Street to Paris as an obstructionist. Well, it now turns out that Mrs. Thatcher had to travel across the globe to the 49-member Commonwealth summit in Kuala Lumpur to discomfit the Holy Order of Consensus Builders. "A disastrous farce in Malaysia," screamed the Manchester Guardian. "She can no longer be trusted to behave in a civilised -- that is unflaky -- fashion when abroad." Egad.Canada's Brian Mulroney and Australia's Bob Hawke, the paper said, were "enraged." The London Times said she had "contravened protocol." As usual, her sin was saying what she thought.She issued a separate statement, separating herself from a Commonwealth document reasserting the political value of imposing sanctions against South Africa.While supporting the Commonwealth "in utterly condemning apartheid," her statement urged it to "encourage change" rather than inflict further punishment on the country's black population. Actually there is a consensus somewhere on sanctions: In May a Gallup Poll found that most South African blacks, 85%, oppose economic sanctions.Still, Mrs. Thatcher had once again gone against the grain.Malaysia's Prime Minister Mahathir Mohamad sniffed, "If everybody else puts out their left foot and you put out your right foot, you are out of step." Mrs. Thatcher: "If it's one against 48, I'm very sorry for the 48." If indeed Mrs. Thatcher has one opponent that could throw her off political course it is Britain's mysteriously intractable inflation problem.We cannot, however, join the political chorus that as one proclaims how offputting it is that Mrs. Thatcher refuses to get along by going along.It is refreshing to see at least one world figure who knows what she believes in and is not inclined to reflexively compromise those beliefs. Perhaps Mrs. Thatcher understands better than those distressed at her style that ultimately history and Britain's voters will decide who is right about Europe, sanctioning South Africa or running Britain's economy.
After being trampled in Tuesday's selling stampede, the Nasdaq over-the-counter market dusted itself off and moved on in moderate trading. But while the Composite gained 1.19, to 462.89, many issues didn't participate in the advance. "It was a mixed bag," said Richard Bruno, who heads over-the-counter trading at PaineWebber. "We played catch-up in some areas, and sold off in some others." Volume totaled 132.1 million shares, which is about average for the year.Of the 4,348 issues that changed hands, 1,074 advanced and 866 declined. Big financial stocks carried the day.The Nasdaq Financial Index rose 2.09, to 454.86.Meanwhile, the Nasdaq 100 Index of the big non-financial stocks basically stood still, easing 0.12, to 452.23. Despite the Composite's advance, some trading officials are guardedly optimistic that the market is on the road to recovery.Lance Zipper, head of over-the-counter trading at Kidder Peabody, said it is difficult to make predictions based on yesterday's trading volume.The advance felt more like a technical bounce, he said. "The market acted better, but it wasn't a tremendous comeback," Mr. Zipper observed. "If we get a decent rally {today}, maybe the buyers will come back." If E.E. "Buzzy" Geduld is right, a seatbelt may come in handy during the next few sessions.The president of Herzog, Heine, Mr. Geduld expects the market to be "very choppy" for a while. "There's a lot of uncertainty out there, and it will cause a lot of swings," he said. Among active stocks, MCI Communications rose 7/8 to 43 on 2.2 million shares, Mentor Graphics added 1/8 to 16 3/8 on turnover of 1.5 million shares.Apple Computer dropped 1 1/8 to 46 1/2 on one million shares.Almost one million shares of Sun Microsystems changed hands, but the issue was unchanged at 17 3/4. Biotechnology issues were strong.Amgen advanced 1 1/2 to 56; Chiron jumped 2 to 29 3/4; Cetus gained 1 to 16 7/8 and Biogen rose 5/8 to 14 5/8. The American depositary receipts of Jaguar jumped 3/8 to 11 5/8 on turnover of 1.9 million.Ford Motor said it raised its stake in the British car maker to 12.45% of the ordinary shares outstanding. In a Securities and Exchange Commission filing, Ford said it holds 22.8 million ordinary shares.The company has said it is prepared to make a bid for all of the shares outstanding of Jaguar if British government restrictions to such a transaction are removed. Another takeover target, LIN Broadcasting, rose 1/2 to 109 1/4 on 495,000 shares.Its suitor, McCaw Cellular, also added 1/2 to 40 1/2 on 395,700 shares. Other stocks were affected by corporate earnings.Informix, which recently said third-quarter net income rose to 16 cents a share from a penny a share a year ago, gained 1 5/8 to 13 5/8 on 810,700 shares.The 1988 results included a one-time gain. Cimflex Teknowledge rose 13/16, or 39%, to 2 7/8 on volume of 494,100 shares.The maker of software products and services, which had a net loss in the 1988 third quarter, earned 200,000, or a penny a share, in this year's quarter.It was Nasdaq's biggest percentage gainer. Star States plunged 3 1/4 to 8 3/4 on 207,000 shares.The company suffered a $9 million loss in the third quarter, compared with net of $2.5 million a year earlier. Collagen dropped 2 5/8 to 15 5/8 on 428,000 shares.In its fiscal-first quarter ended Sept. 30, the biomedical-products maker earned 10 cents a share, up from eight cents a share in the 1988 quarter, which included an extraordinary credit. Occupational-Urgent Care Health fell 1 3/4 to 15 1/2 on 354,000 shares.The company's third-quarter earnings also rose to 10 cents a share from eight cents a share a year ago.
One day last March, CBS Sports President Neal Pilson and Olympics superagent Barry Frank met for lunch at the Lotos Club here.Mr. Frank told Mr. Pilson that Olympics officials wanted $290 million or more for TV rights to the 1994 Winter Games in Norway.The CBS official said that price sounded fine. At that price, CBS was the only player at the table when negotiations with the International Olympic Committee started in Toronto Aug. 23.Dick Pound, a committee member, began by disclosing that ABC and NBC had refused to even bid.Then, he asked Mr. Pilson to raise his offer anyway: "If we can have a number that starts with a three, you can have a dea." Mr. Pilson and his team huddled in a hallway and took just 10 minutes to return with a $300 million offer.Mr. Pound responded, "It's a deal." A beaming Mr. Pilson announced his lastest coup at a news conference that afternoon. Mr. Pilson's rivals at ABC and NBC grimaced at the price.How could CBS get pushed into outbidding itself?Well, CBS, mired in the ratings cellar and looking to sports as a way out, wanted to close the deal immediately and block its rivals from getting another chance to bid.But Mr. Pilson has been put in the uncomfortable role of setting off a bidding frenzy for sports rights, a frenzy that the networks had hoped to avoid. "The price of poker has gone up," crows Charles M. Neinas, the College Football Association's executive director. With CBS Inc. on a spending spree that may top $2.5 billion for four years of major sports events, the new bout of hyperinflation could jolt the entire broadcast business.CBS itself could run up losses of a few hundred million dollars on four years of various sports if its big gamble goes wrong.ABC, a unit of Capital Cities/ABC Inc., and General Electric Co. 's National Broadcasting Co. also risk losses if they outbid CBS for other contracts. While rights fees head skyward, ad rates won't.Advertisers already are balking at higher prices. "The networks are paying too much for rights," warns adman Paul Isacsson of Young & Rubicam. "If they ask advertisers to absorb the costs, they're likely to lose all but a few who need sports, above all." Viewers may not be cheering, either.Soaring rights fees will lead to an even greater clutter of commercials.At the same time, some sports events will move off "free" television and onto cable or pay-cable, where half the nation's TV homes can't see them. CBS has changed the rules by throwing out the old basis for sports bids -- that is, can the network alone make a profit on it?Mr. Pilson emphasizes the ancillary benefits of positive press, contented affiliate stations, enthusiastic advertisers and huge audiences that might stick around to watch other CBS programs when the game is over.The billion-dollar question is, How much are those benefits worth? Some TV people doubt they will materialize and argue that even if they do, they won't offset the multimillion-dollar deficits that CBS could run up. "As we've seen in the '80s," says Roger Werner, the president of the ESPN sports channel, "those deals can turn sour if the numbers don't work.And three years later, in a sea of red ink, the heroes can find themselves with a lot of explaining to do." CBS pursues top sports "to belie the fact that they aren't supporting affiliates, viewers and advertisers," charges Thomas H. Wyman, who was ousted as chairman of CBS Inc. after Laurence A. Tisch bought a 24.9% stake in the company and took over three years ago. "They lost the entertainment crown, and they needed one.And they've bought one." On just three big deals -- for four years of baseball and for the Olympic Winter Games in both 1992 and 1994 -- Pilson bid a total of $1.64 billion.That's well over half a billion dollars more than ABC and NBC were willing to pay. (After 1992, the winter and summer Olympics will be held two years apart, with the revised schedule beginning with the winter games in 1994 and the summer games in 1996.) Now, Mr. Pilson -- a former college basketball player who says a good negotiator needs "a level offocus and intellectual attention" similar to a good athlete-s is facing the consequences of his own aggressiveness.Next month, talks will begin on two coveted CBS contracts, for the pro and college basketball finals.CBS is likely to spend whatever it takes to keep them.The potential bill: more than $600 million for several seasons, an 80% jump.A few months later, CBS's college and pro football contracts come up for renewal; they could go for close to $100 million more than CBS now pays, a 40% to 50% rise. "What happens to those two basketball contracts will shape the next five years of network sports," says Peter Lund, a former CBS Sports president now at Multimedia Inc. J. William Grimes, former president of ESPN, says NBC may "come in with a huge bid for college basketball to take it away from CBS and say, 'We can overbid, too. ' And the winners will be the colleges, not either network.Nor, by the way, advertisers." Mr. Pilson is an unlikely big spender.In the mid-1980s, after ABC had just bid a record $309 million for the 1988 Winter Games, he sniped at rivals for paying reckless prices. "I love Pilson, but he was the guy who complained most bitterly and loudly," says Robert Wussler, a former CBS Sports president. "And yet his company is one reason why rights are so high today." Rivals carp at "the principle of Pilson," as NBC's Arthur Watson once put it -- "he's always expounding that rights are too high, then he's going crazy." But the 49-year-old Mr. Pilson is hardly a man to ignore the numbers.A Yale law school graduate, he began his career in corporate law and then put in years at Metromedia Inc. and the William Morris talent agency.In 1976, he joined CBS Sports to head business affairs and, five years later, became its president. Mr. Pilson says that when he spoke out a few years ago, "I didn't say forever, and I didn't say every property." The market changed, he adds.And he isn't the only big spender: NBC will pay a record $401 million for the 1992 Summer Games, and ESPN, 80%-owned by Capital Cities/ABC, will shell out $400 million for four years of baseball, airing 175 regular-season games a year. "Our competitors say we overbid them.Who cares?Maybe we recognize values the other guys don't," Mr. Pilson says. Mr. Pilson's "Major Events" strategy jelled after Mr. Tisch took over.Mr. Pilson recalls that in April 1986, after CBS's annual meeting in Philadelphia, he and Mr. Tisch took the 90-minute train ride back to New York, and Mr. Pilson used this extended private audience to outline his ambitions.Mr. Tisch, a billionaire in hotels and finance, was just learning the TV business.Five months later, Mr. Tisch took over as CBS's chief executive, and soon he was wielding sole approval each time Mr. Pilson scribbled a frighteningly large figure on a slip of paper, sealed it in an envelope and gave it to sports negotiators. Then, in May 1988, Mr. Tisch urgently needed to make a bold statement to quell rumors that he might sell the network.Mr. Pilson gave him one: He bid $243 million for rights to the 1992 Winter Games in Albertville, France; ABC and NBC wouldn't bid even $200 million.That started the still-raging bidding wars. The "Major Events" strategy, Mr. Pilson says, is designed to notch a place for CBS on the crowded TV dial of the 1990s.It's also a fast fix for an ailing image.He sees flashy sports as the only way the last-place network can cut through the clutter of cable and VCRs, grab millions of new viewers and tell them about other shows premiering a few weeks later.Next October, CBS, for the first time, won't have to start the season against the much-watched American and National baseball league championships and the World Series. "I've been struggling against that for years," says Jonathan Rodgers, who runs WBBM-TV, the CBS-owned station in Chicago.Even if baseball triggers losses at CBS -- and he doesn't think it will -- "I'd rather see the games on our air than on NBC and ABC," he says. That isn't surprising.Regular TV series ratings have slumped in the past five years, and premiering new shows is "a crap shoot," Mr. Pilson says.But top sports events are still a strong bet to lure audiences 30% or 40% larger than those CBS usually gets. Mr. Pilson says baseball and the Olympics may help CBS move up to No. 2 in the household ratings race, putting pizazz back into the network's image.And the Winter Olympics will air during the February "sweeps," when ratings are used to set ad rates for local stations. That will please once-grumpy affiliates -- another aim of the Pilson plan.They gleefully await the "dream season" in 1990.CBS will air the Super Bowl, baseball playoffs, college and pro basketball finals and other premier sports events. "It's made me more committed to CBS," says Philip A. Jones, the president of Meredith Corp. 's broadcast group, which has two CBS affiliates. The CBS plan to use big-time sports as a platform for other series carries no guarantee of success, however.No amount of hype will bring viewers back if the shows are weak. "In this market of 40 channels, sophisticated viewers and the remote control, trial isn't a guarantee of anything," ESPN's Mr. Werner says. "If the show ain't a killer, they're gone." During the 1984 Summer Games, for example, ABC touted "Call to Glory," but the military drama was missing in action within weeks.Last October, during the 1988 Summer Games, NBC relentlessly pitched a new series, "Tattingers." It belly-flopped anyway. Moreover, sports is hardly the best way to lure adult women.Though CBS might move up to No. 2 in household ratings, most advertisers buy based on ratings for women aged 18 to 49.CBS may remain a distant No. 3 in that regard. Nor is CBS a shoo-in to get blockbuster ratings.In recent years, the World Series and the Olympics were aired against CBS's last-place lineup.But CBS will put the athletes up against Bill Cosby, "Cheers" and other shows in NBC's No. 1 schedule. Even the boon to affiliate relations may be limited.The sports lineup may add only 1% to 5% to a station's annual profits.It alone isn't likely to stop a station from dumping CBS shows. "The World Series, seven nights, wasn't enough of an incentive," says Arnold Klinsky of WHEC-TV in Rochester, which dropped CBS for NBC six weeks ago. "You've got to judge where the network will be in three years." The intangible benefits may prove extremely costly if CBS can't avoid big losses on the sports coverage itself.And avoiding such losses will take a monumental effort.On the $1.06 billion baseball agreement alone, CBS is likely to lose $250 million in four years, contends Mr. Wussler, the former CBS man, now at Comsat Inc. Nevertheless, he deems the deal "plain smart" for its huge promotional value. Mr. Pilson calls that loss estimate "wildly inaccurate," conceding only that CBS will lose money on baseball in the first year. "It's too early to tell" what happens after that, he says.But Mr. Tisch expects losses in all four years of the contract, he told U.S. senators last June. CBS will pay an average of $82 million more each year than ABC and NBC had paid together -- and those two networks expect losses on baseball this season.Yet CBS will air only 12 regular-season games, 26 fewer than ABC and NBC.That has outraged some fans.It also indicates a $50 million drop in ad sales for regular-season games -- a risk CBS took to get an unprecedented lock on all playoff games.If the playoffs end in four-game sweeps, losses could soar. Advertisers are resisting higher prices, which would help close the gap.CBS signed General Motors and Toyota to be the only auto-maker sponsors in baseball for four years.Price: $265 million.But ad executives who negotiated the deal say that works out to only $275,000 for a 30-second ad in the World Series through 1993 -- 17% less than what ABC is charging for the Series this month.Moreover, "there's no question ad rates will come down considerably" from the GM-Toyota price, says Arnold Chase of Bozell Inc. Other admen, however, say rates could rise later if ad spending surges. The Winter Games outlook also is mixed.CBS expects to make modest profits, but rivals contend that it will take a beating.ABC lost $75 million on the 1988 Winter Games, partly because of its $309 million rights fee.It aired 94.5 hours of mostly live events in Calgary -- helping raise ratings slightly from 1984 -- but still failed to deliver the audience promised to advertisers. CBS will add 25 1/2 hours to that load in 1992, and ratings could be hurt by a lack of live events.All prime-time fare will be on tape-delay because of time differences with Norway, so the results can be announced on the 6 o'clock news. (Turner Broadcasting will pay CBS $25 million to air 50 hours of CBS coverage plus 50 hours of additional events.) Barry Frank, the agent who took Mr. Pilson to lunch last March, says that even if CBS loses, say, $10 million, it matters little. "Ten million ain't jack, man, when you got $3 billion sitting in the bank," says Mr. Frank, senior vice president at International Management Group, citing CBS's enormous cash reserves from selling off various businesses. "It doesn't mean anything -- it's public-relations money." Moreover, sports has "claimed its place" as a guaranteed ratings-getter, says David J. Stern, the commissioner of the National Basketball Association. "This isn't outlandish bidding; this is a situation of very careful businessmen making judgments about the worth of product and acting on it. . . . I would tend to trust their judgment." That's easy for him to say: CBS's four-year NBA pact, now at $176 million for four years, could double in price by the time his talks with Mr. Pilson are completed later this month.That would cut into CBS's slim margin for profit -- and error.CBS Sports earned $50 million or so last year.And CBS takes in the least money in prime time; ABC and NBC charge 30% to 35% more for ads, according to a Variety survey. But CBS's costs are huge, and the risks go up with each new sports package that CBS locks up.Although sports officials predict jumps of 50% to 100% in the major contracts coming up for renewal, ad rates may rise only 20%.CBS hopes to save money by ordering fewer episodes of regular series because sports will fill up a few weeks of prime time.But the savings will be minuscule.Each hour of Olympics and baseball in prime time will cost CBS $2.6 million to $2.8 million; an hour-long drama costs only $900,000, and it is aired twice. CBS may cushion losses with about $200 million a year in interest earned on the proceeds from selling CBS Records and other businesses.But media-stock analyst Richard J. MacDonald of MacDonald Grippo Riely says Wall Street won't take kindly to that. "On a stand-alone basis, the network ought to make money," he says. When Mr. Pilson is asked directly -- can you make money on all this? -- he doesn't exactly say yes. "What you're really asking is, Are the profit and loss margins anticipated on the events acceptable to management?" he says.Then, he answers his own question. "Yes, they are.That's the only question we need to address."
Place a phone order through most any catalog and chances are the clerk who answers won't be the only one on the line.Bosses have big ears these days. Or open up an electronics magazine and peruse the ads for sneaky tape recorders and other snooping gadgets.Some would make even James Bond green with envy. Eavesdropping -- both corporate and private -- is on the rise, thanks to the proliferation of surveillance technologies.And while sellers of the equipment and companies "monitoring" employees have few qualms, right-to-privacy advocates and some lawmakers are alarmed. "New technologies are changing the way we deal with each other and the way we work," says Janlori Goldman, a staff attorney at the American Civil Liberties Union. "Our expectation of confidentiality is being eroded." On the corporate side, companies claim that monitoring employee phone conversations is both legal and necessary to gauge productivity and ensure good service.The practice is common at catalog, insurance and phone companies, banks and telemarketers, according to trade groups and worker organizations.It's also widespread for reservations clerks in the airline, car-rental, hotel and railroad industries. The Communications Workers of America, which opposes such monitoring, says supervisors listen in on an estimated 400 million calls each year.Among companies saying they monitor employees are United Airlines, American Airlines, United Parcel Service, Nynex Corp., Spiegel Inc., and the circulation department of this newspaper.Some Wall Street firms monitor for recordkeeping purposes. Dictaphone Corp. says there's a big business demand for its voice-activated taping systems, whether the sophisticated Veritrac 9000 system, which costs from $10,000 to $120,000 and can record 240 conversations simultaneously, or simple handheld units selling for $395. Businesses "want to verify information and ensure accuracy," says John Hiltunen, Dictaphone's manager of media relations.The state of Alaska recently bought the Veritrac system, he says, "to monitor the Exxon cleanup effort." Merrill Lynch & Co. and Shearson Lehman Hutton Inc. say they use voice-activated systems to record and verify orders between salesmen and traders.Shearson says it has taped some of its institutional trading desks, such as commodities and futures, for about four years.Both companies stress that employees know they are being recorded and that customer conversations aren't taped. Kidder Peabody & Co. says it monitors bond-trading conversations between brokers and customers to safeguard order accuracy. Eavesdropping by individuals is harder to measure.But devices are there for the asking, whether in stores or through the mail.The Counter Spy Shop in Washington, D.C., for instance, offers the "Secret Connection" attache case, which can surreptitiously record conversations for nine hours at a stretch.That and other fancy gizmos may cost thousands, but simple voice-activated tape recorders sell for as little as $70 at electronics stores like Radio Shack. The most common use of spying devices is in divorce cases, say private investigators.While tape recordings to uncover, say, infidelity aren't admissible in court, they can mean leverage in a settlement. Concerned with the increased availability of surveillance technology and heavier use of it, lawmakers have proposed laws addressing the issue.Nine states have introduced bills requiring that workers and customers be made aware of monitoring.And four states -- California, Florida, Michigan and Pennsylvania -- have adopted rules that all parties involved must consent when phone calls are recorded. Two bills in Congress hope to make such restrictions national.In May, Rep. Don Edwards (D.Calif.) introduced congressional legislation that would require an audible beeping during any employee monitoring, warning people that they are being heard. (The legislation is similar to a 1987 "beeper bill" that was defeated after heavy lobbying by the telemarketing industry.) Also last spring, Rep. Ron Dellums (D., Calif.), introduced a bill requiring universal two-party consent to any tapings in cases that don't involve law enforcement.In addition, products such as voice-activated tape recorders would have to include beep tones and labels explaining federal laws on eavesdropping. The outlook on both federal bills is uncertain, especially remembering the 1987 defeat.The ACLU and worker organizations back tighter laws, but employers and device manufacturers object. "I'm sympathetic with workers who feel under the gun," says Richard Barton of the Direct Marketing Association of America, which is lobbying strenuously against the Edwards beeper bill. "But the only way you can find out how your people are doing is by listening." The powerful group, which represents many of the nation's telemarketers, was instrumental in derailing the 1987 bill. Spiegel also opposes the beeper bill, saying the noise it requires would interfere with customer orders, causing irritation and even errors.Laura Dale, center manager at the catalog company's customer order center in Reno, Nev., defends monitoring. "We like to follow up and make sure operators are achieving our standards of company service," says Ms. Dale, who supervises 350 operators. John Bonomo, a Nynex spokesman, says the telephone company needs to monitor operators to evaluate performance during the first six months on the job. "Sometimes," he says, "we'll pull someone off the phones for more training." Federal wiretap statutes recognize the right of employers to monitor employees' for evaluation purposes.And in the past, Congress has viewed monitoring as an issue best handled in union negotiations.But opponents, led by the CWA, say new laws are needed because monitoring is heavily concentrated in service industries and 81% of monitored workers aren't represented by unions.The CWA claims that monitoring not only infringes on employee privacy, but increases stress. "Nine to Five," a Cleveland-based office workers organization that supports the beeper bill, six months ago started a privacy hot line to receive reports of alleged monitoring abuses. Meanwhile, supporters of the Dellums two-party consent bill say it is needed because of a giant loophole in the one-party consent law.Currently, if the person taping is a party to the conversation, it's all right to record without the knowledge of the other person on the line. (Intercepting other people's private conversations is illegal and punishable by five years in prison and fines of $10,000.) The electronics industry is closely following the Dellums bill.Some marketers of surveillance gear -- including Communication Control System Ltd., which owns the Counter Spy Shop and others like it -- already put warning labels in their catalogs informing customers of the one-party law.But vendors contend that they can't control how their products are used. Radio Shack says it has a policy against selling products if a salesperson suspects they will be used illegally. "Everything sold at Radio Shack has a legal purpose," says Bernard Appel, president of the Tandy Corp. subsidiary.He says he hasn't yet studied the Dellums bill, but that requiring a beeping tone on recorders "would be ludicrous." Still, Radio Shack is aware that some of its products are controversial.A few years ago, the company voluntarily stopped selling "The Big Ear," a powerful microphone.With its ability to pick up rustlings and flapping wings, "it was meant to be a toy for children for bird watching," says Mr. Appel. "But we were getting too many complaints that people were using them to eavesdrop on their neighbors."
The hottest rivalry in the computer industry intensified sharply yesterday as Digital Equipment Corp. announced its first line of mainframe computers, targeting International Business Machines Corp. 's largest market. IBM fired back with new mainframes of its own, extending the long-dominant 3090 line with a 7% to 14% power boost. Up to now, the intense competition between IBM and Digital has been confined largely to the broad midrange of the computer market, where Digital sought to exploit IBM's weaknesses in networking.But Digital's move into mainframes will target IBM's home turf, where it has a commanding 70% share of the market. Digital, Maynard, Mass., insisted yesterday that its marketing focus would differ sharply from IBM's. "This is not your father's mainframe," said Allan McGuire, a Digital spokesman. "It's a whole new generation," he said. IBM, which gets about half its revenue and more than half its profit from mainframes, also announced upgraded operating system software that, together with the new hardware, lets customers do so-called batch processing as much as 60% faster.Batch processing is the high-volume, single-job data processing that most mainframes typically chug through at night, such as updating accounts at banks. IBM said the 16 new J and JH models will generally be available immediately, though three won't ship until the third quarter of next year.Prices on the larger models, which range as high as $13 million, generally won't change.Small models, whose performance increased as much as 46%, will carry higher prices.Upgrades to bigger models also will be costlier. Digital's VAX 9000 mainframes, which it claimed were among the fastest available, were priced from $1.2 million to $3.9 million, sharply lower than IBM models of comparable power.The first models will ship in the spring, with the largest following in the fall.Analysts were disappointed that Digital's new line apparently won't contribute much to earnings before the next fiscal year, which begins in July.Jay Stevens of Dean Witter Reynolds Inc. said he may cut his earnings estimate for the current fiscal year because he had expected at least some mainframe profit this year.But he added that he expected to raise his estimate for fiscal 1991 at the same time. After the announcement yesterday, Digital shares gained $1.25 to close at $89.875 in New York Stock Exchange composite trading.IBM shares closed at $103, down 50 cents, in Big Board trading. Analysts have predicted strong pent-up demand for the new line among Digital's customers.Large Digital buyers say the new VAX will let them stay with Digital when they need the power of a mainframe, instead of turning to IBM. "I'm convinced there's a huge market for this machine," said Stephen Smith of PaineWebber Inc. Digital also plans to compete fiercely with IBM when the giant's customers are computerizing new aspects of their businesses.Digital, however, doesn't expect to displace IBM mainframes that are already installed at big companies. In addition to commercial markets, Digital's new line targets the low end of the engineering and scientific supercomputer market, when it's packaged with an optional supercharger, known as a vector processor. Digital's push into mainframes comes at a time when its mainstay minicomputer line is under growing pressure from smaller personal computers and workstations that operate on standard operating systems rather than on the proprietary systems that older minicomputers use.Although Digital has staked out a major presence in the booming workstation market, profit margins in that market are much slimmer than for mainframes. The slow-growing mainframe market also has shown new signs of life lately.IBM's mainframe sales have held up better than expected this year, with analysts estimating they have risen 10% to 12%. "Demand for these systems has been very, very strong," said Bill Grabe, a senior IBM marketing executive. "We have a good strong backlog for the fourth quarter even without" the systems that were announced yesterday. But the 3090 line is nearly five years old -- which is getting up there in mainframe years -- and its growth is expected to slow in 1990. IBM, Armonk, N.Y., said it wanted to bring out the mainframes as soon as it could to spark as many sales as possible by the end of the year.The fourth quarter is always IBM's biggest by far, with most sales coming in December as customers seek to use budgets before year end. Still, Steve Cohen, an analyst at SoundView Financial Group Inc., said, "I don't see that this will be sufficient to give IBM a significant kick in the fourth quarter." IBM has already indicated it will have problems in the quarter, partly because of a delay in shipping a high-end disk drive and partly because the strong dollar will cut significantly the value of IBM's overseas earnings when translated into dollars.Some analysts have estimated IBM's fourth-quarter per-share earnings will fall 10% to $3.57 a share from $3.97 a share a year earlier. In addition to the new mainframe hardware and software, IBM announced a magnetic-tape system for data storage that it said occupies half as much floor space as older systems but can store five times as much data on a single cartridge.That should help IBM address the damage that a resurgent Storage Technology Corp. has inflicted in that market.
American Telephone & Telegraph Co. unveiled new optical transmission systems for data, video and voice communications. Two products in what the telecommunications giant called a new generation of such equipment are available now, AT&T said, and three others will be introduced in 1990 and 1991.The products are aimed at a market expected to total more than $1 billion a year in sales by 1995, said Morgan Buchner Jr., vice president of transmission systems for AT&T. The products already available are cross-connect systems, used instead of mazes of wiring to interconnect other telecommunications equipment.This cuts down greatly on labor, Mr. Buchner said.To be introduced later are a multiplexer, which will allow several signals to travel along a single optical line; a light-wave system, which carries voice channels; and a network controller, which directs data flow through cross-connect systems. AT&T said the products, unlike previous generations, will meet so-called Sonet compatability standards, which AT&T expects to be broadly adopted.Sonet, or synchronous optical network, products have more capacity than earlier models. "These products are the heart of our transmission-product line," Mr. Buchner said.He declined to disclose specific prices, but said each product costs in the tens of thousands, or even hundreds of thousands, of dollars. AT&T said it expects to beat to the marketplace two rivals, Northern Telecom Ltd. of Canada and France's Alcatel N.V., which also have announced Sonet-based products. AT&T predicted strong growth in demand for such products.It noted that last July, Nippon Telegraph & Telephone Corp. of Japan selected AT&T to supply $154 million of such equipment over a four-year period starting next year.
Law firms that have feasted and grown on the revenue from mergers and acquisitions work are feeling the squeeze as that work declines. The disarray in the junk-bond market that began last month with a credit crunch at Campeau Corp. and the failure of banks to deliver financing for a leveraged buy-out of United Airlines parent UAL Corp. has reverberated through some of the nation's largest law firms. While it is still too early to tell whether the dearth of takeover activity is only temporary, many lawyers say their firms are bracing for lower revenue from merger work, which has been so lucrative in the past.Much of this work was done for higher fees than other legal work and was not generally billed by the hour.If deals take longer to complete and there are fewer of them to do, "you can't bill the same kind of premium as when deals took a few weeks from start to finish," says one lawyer at a large New York firm. "We're planning on a rip-roaring year in 1989, but next year we'll be another story," said Robert Freedman, a partner at Simpson Thacher & Bartlett. "We're settling down to a less active period." Lawyers at such firms as Sullivan & Cromwell; Willkie Farr & Gallagher; Wachtell, Lipton, Rosen & Katz; and Fried, Frank, Harris, Shriver & Jacobson all say they, too, have experienced a significant slowdown, particularly during the past few weeks. "Everyone is waiting to see if deals can be done at sensible prices and if money is available," said Jack Nusbaum, co-chairman of Willkie Farr. "It's hard to know right now if the change is fundamental or cyclical." Some lawyers say the slump, while more obvious in recent weeks, began earlier this year.Dennis Block, a partner at the New York firm of Weil, Gotshal & Manges, said that in the first eight months of this year, 89 hostile offers were launched, compared with 157 for the first eight months of What's more, he said, "transactions are taking a much longer time to conclude and many fall apart for lack of financing" and more stringent scrutiny by state courts.Lawyers also say an erratic stock market and uncertain financing conditions have sharply reduced the number of lucrative big deals likely to be proposed. Still, some lawyers say the mergers slowdown hasn't affected foreign buyers as much as domestic ones. "We just took another floor for our London offices," said Joseph Flom of the New York firm of Skadden, Arps, Slate, Meagher & Flom. Davis Polk & Wardwell also said its international clients are keeping mergers and acquisitions partners busy. "European companies are looking to buy American ones," said Henry King, the managing partner at that firm. "But the question is whether things people are looking at will actually surface in live transactions in light of the current market conditions." MURDER THREAT charged in Haas Securities Corp. stock-manipulation trial. In the trial of former Haas Securities Chairman Eugene Laff, the defense accused one of the government's chief witnesses of threatening to kill Mr. Laff. Mr. Laff's attorney, John Lang, filed a memorandum asking that the trial record include a secretly taped conversation in which the witness, Henry Lorin, told a Haas stockbroker that Mr. Laff should be killed.The conversation was taped by federal investigators in what Mr. Lang said was an effort to get Mr. Lorin to implicate Mr. Laff.In his opening arguments last week in federal court in New York, Mr. Lang told the jury that Mr. Lorin was the "real master criminal" behind the stock manipulation, and that Mr. Laff knew nothing about it. In March, Mr. Laff was indicted on 15 counts of conspiracy, mail and securities fraud, and obstructing an investigation by the Securities and Exchange Commission.The government has charged that Mr. Lorin and Mr. Laff were part of a conspiracy to maintain the prices of certain stocks at artificially high prices.Mr. Lorin, a stock promoter, pleaded guilty to the stock-manipulation charges in April and agreed to cooperate with the government's investigation of Mr. Laff. During his cross examination of Mr. Lorin, Mr. Lang read from the transcripts of a conversation that was taped Oct. 20, 1988.Stanley Aslanian, the Haas broker who agreed to carry a hidden microphone during the conversation, also has pleaded guilty to conspiracy to commit securities violations in the stock manipulation and agreed to cooperate. According to the transcript, Mr. Lorin said Mr. Laff should be killed after Mr. Aslanian told him that information given to Mr. Laff by another conspirator could jeopardize the stock scheme.Mr. Lorin then repeated the threat, and Mr. Aslanian urged him not to say such things. From the parts of the transcript read by Mr. Lang, it was unclear what exactly Mr. Lorin feared might happen.When asked for a copy of the transcript, Mr. Lang said Judge Thomas P. Griesa had instructed him not to release it or the memorandum. During the trial, Mr. Lang asked Mr. Lorin whether he had been so upset "that you considered killing Mr. Laff? . . . Isn't it true that you were so worked up that framing Mr. Laff for this crime was the least that you planned for him?" Mr. Lorin responded, "No." When Mr. Lang asked Mr. Lorin whether he had taken steps to have Mr. Laff killed, the witness again said no. Peter Lieb, the assistant U.S. attorney prosecuting the case, declined to comment on the trial. TRUSTEE WHO MONITORED settlement payments to Dalkon Shield claimants quits. Stephen A. Saltzburg, one of five trustees appointed to monitor payments to women injured by the Dalkon Shield intrauterine contraceptive, resigned, citing personal reasons. Mr. Saltzburg, who teaches evidence at the University of Virginia School of Law and was a deputy assistant attorney general in the U.S. Justice Department until August, submitted his resignation earlier this month to federal Judge Robert R. Merhige Jr., in Richmond, Va.Judge Merhige is overseeing the bankruptcy-law reorganization of A.H. Robins Co., the company that manufactured the shield.In a letter Monday to Mr. Saltzburg, the judge said he would "reluctantly" accept the resignation. The $2.38 billion Dalkon Shield Claimants Trust was established as part of A.H. Robins' bankruptcy-reorganization plan to resolve injury claims arising from use of the shield.American Home Products Corp. proposes to acquire the company. The remaining four trustees on the Claimants Trust have 60 days to nominate a successor to Mr. Saltzburg.Judge Merhige will make the appointment. CHICAGO LAW FIRM recruits American Express Co. vice president: Coffield Ungaretti Harris & Slavin brought in Howard A. Menell as a partner in its Washington, D.C., office, which opened Oct. 1.For the past six years, Mr. Menell, 43 years old, served as vice president for government affairs at American Express.He previously was staff director and counsel for the Senate committee on banking, housing and urban affairs.The other lawyer in the office is partner Robert A. Macari, the firm's legislative director. THE PHILADELPHIA law firm of Ballard, Spahr, Andrews & Ingersoll said three partners have joined its business and finance department.John Ake, 48, a former vice-president in charge of legal compliance at American Capital Management & Research Inc., in Houston, will join Ballard Spahr's corporate-securities practice.Kent Walker, 45, a former partner at the Philadelphia law firm of Mesirov, Gelman, Jaffe, Cramer & Jamieson, will specialize in antitrust, real estate and mergers and acquisitions.Richard L. Sherman, 42, will advise midsized businesses.Mr. Sherman is former deputy general counsel for SmithKline Beckman Corp., in Philadelphia, now SmithKline Beecham PLC, in London.
Delmed Inc. 's top two officers resigned and were succeeded by executives of Fresenius USA Inc. and its parent, Fresenius AG, a major Delmed holder that has been negotiating to acquire a controlling stake. In addition, Delmed, which makes and sells a dialysis solution used in treating kidney diseases, said negotiations about pricing had collapsed between it and a major distributor, National Medical Care Inc. Delmed said Robert S. Ehrlich resigned as chairman, president and chief executive.Mr. Ehrlich will continue as a director and a consultant.Leslie I. Shapiro, chief operating officer and chief financial officer, also resigned, the company said. Mr. Ehrlich was succeeded as chairman by Gerd Krick, a director of Fresenius, a West German pharmaceutical concern.Ben Lipps, president of Fresenius USA, was named president, chief executive and chief operating officer. None of the officials was available for comment. In trading on the American Stock Exchange, Delmed closed at 50 cents, down 6.25 cents. Fresenius owns about 42% of Delmed's fully diluted common stock.The two companies have been discussing a transaction under which Fresenius would buy Delmed stock for cash to bring its beneficial ownership to between 70% and 80% of Delmed's fully diluted common stock.The transaction also would combine Fresenius USA and Delmed. Under the proposal, Delmed would issue about 123.5 million additional Delmed common shares to Fresenius at an average price of about 65 cents a share, though under no circumstances more than 75 cents a share. Yesterday, Delmed said it "continues to explore the possibility of a combination with Fresenius USA." It added that it is apparent that any terms of a combination "would be substantially less favorable than those previously announced." While the discussions between Delmed and National Medical Care have been discontinued, Delmed will continue to supply dialysis products through National Medical after their exclusive agreement ends in March 1990, Delmed said.In addition, Delmed is exploring distribution arrangements with Fresenius USA, Delmed said.
Genentech Inc. said third-quarter profit more than doubled to $11.4 million, or 13 cents a share, from a depressed 1988 third-quarter performance of $5.3 million, or six cents a share. Revenue rose 23% to $100 million from $81.6 million.Net product sales accounted for $76 million, up from $57.5 million a year earlier. Sales of the heart drug TPA were $43.6 million, better than last year's depressed third period when the company sold just $29.1 million of the drug.But TPA sales fell below levels for this year's first and second quarter sales of $48 million, cooling investors.Genentech stock fell 12.5 cents in trading yesterday on the New York Stock Exchange to $20.125. In the nine months, net income slid 21% to $28.4 million, or 33 cents a share, from $36 million, or 42 cents a share.Revenues climbed 18% to $289 million from $245.3 million. "We continue to be on target for . . . increasing TPA sales 20% to 25% this year," said founder and Chief Executive Officer Robert Swanson.But some analysts remain sour on the company. "TPA sales are down quarter to quarter.Expenses are flat and that's a good sign.There's contract revenue from {limited research and development} partnerships.But I still think the fundamentals are poor," said Denise Gilbert, an analyst with Montgomery Securities in San Francisco. Genentech faces competition in the cardiac-drug market from SmithKline Beecham PLC's heart drug Eminase, expected to receive market approval shortly.And Genentech isn't likely to have any new products ready for market until at least 1992, Ms. Gilbert added. "The company's stock is trading at 40 times next year's numbers, and that's too much," she said. On the plus side, Genentech is benefiting from a lower tax rate due to its research outlays, giving a boost to earnings, she said.
ITT Corp., its insurance business hurt by Hurricane Hugo, reported a 4% decline in third-quarter net income, despite a 4.2% rise in revenue. ITT also forecast a fourth-quarter blow to earnings from the California earthquake.Except for insurance, however, ITT said it expects improved operating earnings "in all of our businesses for the full year." Third-quarter net income dropped to $221 million, or $1.55 a share, from $230 million, or $1.60 a share, in the year-earlier period.ITT bought back 8.8 million shares this year, including 2.8 million during the third quarter. Third-quarter revenue rose to $4.9 billion from $4.7 billion. In New York Stock Exchange composite trading yesterday, ITT common stock fell 62.5 cents to close at $58.75 a share. In addition to insurance and finance, ITT has interests in electronic parts, defense technology, automotive parts, fluid technology, pulp and timber, and communications and information services. "Hurricane Hugo losses and the continuing industrywide downturn in the property and casualty insurance business were the major factors affecting quarterly comparisons," said Rand V. Araskog, chairman and chief executive officer. ITT's Hartford Insurance Group had a $53 million quarterly pretax loss from Hurricane Hugo, ITT said.Hartford expects to report a further pretax loss of about $30 million for the current quarter, as a result of the California earthquake this month, ITT added. The company also disclosed its financial operations had increased reserves for bankrupt accounts, resulting in a $40 million pretax charge for the third quarter.This charge was partly offset, however, by $19 million in pretax capital gains. ITT also said its consumer finance unit agreed in September to settle a civil suit with the California attorney general over alleged improper lending and sales practices.Anticipating this settlement, the company recorded a pretax charge of $24 million during the fourth quarter of 1988.An ITT spokesman said the charge wasn't publicly reported at the time. "The company's product businesses, with the exception of electronic components, had higher operating earnings for the first nine months of 1989," the company said.Elaborating on the exception, it said volume and margins were lower in semiconductor and power systems operations.
U.S. Memories Inc., the venture that seeks to crack Japan's domination of the memory-chip market, said it has chosen four potential sites for its operations after a fierce bidding war by 15 states. U.S. Memories said it will begin visits during the next several weeks to sites in Austin, Texas; Colorado Springs, Colo.; Middletown, N.Y.; and Phoenix, Ariz.Sanford Kane, president, said the finalists were chosen from among 57 locations based on financial, business, and quality of life considerations. Conspicuous by its absence is California.San Jose and several other California cities mounted major campaigns during the summer to woo the group, which was founded last June by seven electronics concerns. The venture plans to announce a final site by late November.It expects to begin construction by year end and start shipping four-megabit dynamic random-access memory chips by mid-1991. U.S. Memories investors include Advanced Micro Devices Inc., Digital Equipment Corp., Hewlett-Packard Co., International Business Machines Corp., Intel Corp., LSI Logic Corp., and National Semiconductor Corp. Mr. Kane said he expects several other companies to join some time after the venture completes a business plan, probably later this week.
This is in response to Atsushi Kageyama's Manager's Journal, "Looking for the Real Thing in Sony" (editorial page, Oct. 2).Though I agree with many of Mr. Kageyama's comments, I believe he points the gun in the wrong direction: It isn't the Americans who must be criticized for not understanding the Japanese culture, but the Japanese who insist on forcing their culture on Americans.The Japanese want us to accept their culture, but they refuse to accept the American culture.Japanese managers can't expect Americans to behave as if they were Japanese; instead, they must manage Americans as Americans. Americans are expected to conform to the Japanese culture when in Japan.What is wrong with expecting the Japanese to conform to American norms when they locate here?Americans place native or native speakers in charge of subsidiaries overseas.European multinationals do likewise; even in America, their affiliates are usually run by American managers.But the Japanese insist upon Japanese managers everywhere they set up shop.Do the Japanese feel so superior that they cannot find capable American managers? Paul A. Herbig Indiana University Bloomington, Ind. Mr. Kageyama suggests that Kotobuki Electronics Industries workers were having difficulty understanding their foreign bosses' perspective.While Mr. Kageyama does an excellent job of explaining the differences, both cultural and philosophic, I question his perspective. Would he suggest that employees of an American company doing business in Japan conform to their new bosses' culture and philosophy?Obviously not.Thus the conclusion is that the burden rests with management to understand/adopt the culture and philosophy of the country in which they are operating.The workers can be motivated, and the company reach its full potential, only when management embraces the employees' perspective. A. Lawton Langford President Municipal Code Corp. Tallahassee, Fla. I believe Mr. Kageyama left out one major aspect of Japanese culture that permeated his piece: the belief in the superiority of Japanese culture and behavior vs. others. A manager should not have to rebut the opinions of his employees about the style of his management.Instead, he should listen to see how that criticism can be used constructively to advance his objective of carrying out a set of tasks through the efforts of his subordinates.Japanese culture vs.American culture is irrelevant.The key is how a manager from one culture can motivate employees from another. For Mr. Kageyama to argue that American employees must passively accept a direct imposition of the Japanese way of doing things is outright cultural chauvinism of the first order.The Japanese are neglecting the opportunity to synthesize a new corporate culture based on a fusion of the best aspects of both national cultures. Mr. Kageyama is accurate to deny a specific anti-American bias.It is more difficult to deny a general bigotry in seeing things only the Japanese way.When the response to criticism is only a better explanation of policies without altering the reasons for the criticism, I am convinced that Mr. Kageyama has still failed to attack the root cause of the problem and is simply treating symptoms. Norman L. Owens Tempe, Ariz.
Goodyear Tire & Rubber Co., buoyed by improved operating profit in its tire segment, reported that third-quarter net income rose 11% to $70.5 million, or $1.22 a share. In the year-ago period, Goodyear had net of $63.5 million, or $1.11 a share. Sales rose slightly to $2.68 billion, from $2.66 billion. Analysts had mixed responses to the results.Donald DeScenza, an independent analyst in New Canaan, Conn., said he was "impressed with the company's performance." He said results were better than he'd expected and indicate that Goodyear is in the midst of a turnaround from a string of lackluster quarters that have plagued the company for a year. However, Harry Millis, an analyst at McDonald & Co., Cleveland, said Goodyear's results "fell at the bottom" of his range of estimates.Excluding an increase in the tax rate and the effects of foreign currency translations, Mr. Millis said the company's results "were still a little disappointing." Goodyear's stock, which has been weak in recent weeks, fell $2.875 yesterday to close at $43.875 a share in composite trading on the New York Stock Exchange. The Akron, Ohio-based company said pretax operating income in its tire segment jumped about 31% to $196.2 million from $150.2 million a year earlier, reflecting improvements in raw material costs, sales of replacement tires and pricing. McDonald's Mr. Millis said Goodyear appeared to have held or gained some market share in the U.S. for the first time since the second quarter of 1988. But Goodyear said total U.S. tire unit sales were off about 2%.Total tire segment sales were up only about 1% to $2.2 billion, and the company said it reduced manufacturing levels at some of its U.S. tire plants because of inventory adjustments and slackened production by auto makers. In the latest quarter, Goodyear's tax rate was 51% compared with 41% a year earlier.As a result, total tax outlays were $73.5 million, compared with $44.1 million the year earlier. For the nine months, profit skidded about 35%, reflecting charges taken in this year's second quarter and the effect of translations of weaker foreign currencies into the stronger U.S. dollar. Net was $192.1 million, or $3.33 a share, compared with net of $293.7 million, or $5.13 a share, the year earlier. The latest nine months included charges of $95 million related to the company's South African subsidiary and unused pipe sold by its crude oil pipeline unit. Sales rose nearly 2% to $8.13 billion from $7.98 billion.
Former USX Corp. Chairman David M. Roderick may have been lucky he retired last May. As he handed over the reins to successor Charles A. Corry, steel profits were close to a cyclical peak.Though imports were troublesome, they weren't running away with the market, and American companies had high hopes that steel import quotas would be extended for another five years.Perhaps most important, Carl Icahn, who had once threatened a hostile takeover bid, was subdued.He and Mr. Roderick were even dining out together. Today, Mr. Corry presides over a company whose fortunes have changed abruptly.Mr. Icahn, the company's deep-pocketed, tenacious adversary, recently disclosed that he had raised his USX stake to 13.1%, and he again threatened a takeover.A battle with Mr. Icahn would rattle even the most seasoned chief executive, to say nothing of one who took the helm less than five months ago. In addition, USX's giant steel segment, representing 34% of its 1988 sales, is facing softening demand and slipping prices as well as increasing competition from foreign steelmakers and low-cost minimills.The import quotas got only a 2 1/2-year extension, and USX is laboring under a staggering $5.8 billion debt at a time when it must spend money to upgrade steel mills and drill for oil. "It's a baptism of fire for Corry," says one USX executive. The burning question is whether the new chief can parry Mr. Icahn without being pushed into unwelcome moves.Mr. Corry might have to dismember the company more than he wants to.Or he might have to incur a huge expense of either buying Mr. Icahn's stock, possibly at a premium, or paying stockholders a special dividend partly because of Mr. Icahn's pressure. With his recent purchases of USX common stock, Mr. Icahn shattered a three-year-old, unwritten standstill agreement with Mr. Roderick.In 1986, Mr. Roderick adroitly dodged Mr. Icahn's first bullet after the takeover specialist had built up an 11.4% stake.Mr. Roderick did so by having USX redeem a series of guaranteed notes, a move that, in effect, raised the cost of a $7.19 billion Icahn bid by about $3 billion.And he managed to fend off further advances and even strike up an unlikely friendship with the interloper.Over dinners at New York's Sky Club and Links Club restaurants, the steel executive and the big investor talked steel, international trade and thoroughbred horses. Mr. Corry, who has boned up on corporate raiders by reading T. Boone Pickens's autobiography, had hoped the detente would continue.He was shocked, associates say, to learn of Mr. Icahn's new takeover threat. (Both men declined to be interviewed for this article.) But the fiercely competitive Mr. Corry quickly showed he's no pushover.He huddled with directors at a special meeting two weeks ago and tried to block his opponent. Although the board believed that Mr. Icahn is more interested in talking the stock price higher than acquiring USX, it adopted a poison-pill defense, to be swallowed if anyone amasses a 15% stake. Now, it's Mr. Icahn's move.Will he try to gain a seat on or control of the board and force a radical split of USX into separate oil and steel companies?Given the weakness of the junk-bond market, can he finance a buy-out?Mr. Icahn may not want to sell out unless he can get a special dividend similar to one he received before selling his stake in Texaco Inc. in June -- a coup that gave him enough cash to make his USX move. And although the recent turmoil in the stock and junk-bond markets, by making it harder to arrange takeover financing, has eased some of the pressure on Mr. Corry, it doesn't end the takeover threat. "I know it's not over," a sober-faced Mr. Corry acknowledged while greeting steel suppliers in New York on Oct. 12 and inviting them to a buffet of salmon and sushi in honor of Kobe Steel Ltd., USX's partner in a steel mill in Lorain, Ohio. In fact, it's barely begun for Mr. Corry, who faces tough decisions before he has had a chance to get settled into his new job. "He's in a vulnerable position because he hasn't established much credibility on his own," says Bryan Jacoboski, a securities analyst at PaineWebber Inc. The 57-year-old tax attorney never even aspired to the job of chief executive.An undistinguished college student who dabbled in zoology until he concluded that he couldn't stand cutting up frogs, Mr. Corry wanted to work for a big company "that could do big things." But after joining the tax department of a USX subsidiary 30 years ago, he set the modest goal of becoming tax manager by the age of 46.For years, he quietly stuck to the back accounting rooms, wearing a hat to work because everyone else did. "I was never a rebel," he said in an earlier interview. "I don't think most of the people that have been around me would ever say they've seen me pound the table or get angry." Yet, the unassuming Mr. Corry helped chart USX's transition from Big Steel to Big Oil.He served as Mr. Roderick's front man in tense negotiations for the 1982 purchase of Marathon Oil for $5.9 billion. Nevertheless, Mr. Corry, once named chief executive, didn't waste any time distancing himself from his former boss, who still has an office on the 62nd floor of the USX tower in Pittsburgh.Soon after taking over last June, Mr. Corry rescinded a pay cut imposed on clerical workers, a move that Mr. Roderick hadn't made in spite of improved earnings.Mr. Corry also ruled that all board meetings would be held in Pittsburgh instead of New York or Findlay, Ohio, Marathon's home. And, earlier this month, he announced the sale of the reserves of Texas Oil & Gas, which was acquired three years ago and hasn't posted any significant operating profits since.One former executive says, "Nobody wanted that deal inside USX except Dave Roderick," who was a hunting and fishing buddy of William L. Hutchison, chairman of Texas Oil & Gas.The executive recalls Mr. Corry whispering to him and others, "Remember, this was Dave's deal." What miffed many USX executives and shareholders was that the acquisition, for $3 billion of stock, doubled the USX shares outstanding and considerably diluted them.What's more, the takeover occurred as natural-gas prices were falling and just as Texas Oil & Gas reported its first annual loss in 28 years. Mr. Corry expected the Texas Oil & Gas sale to delight Mr. Icahn by addressing his concern about boosting shareholder value.But when the two men met in New York a day after Mr. Icahn disclosed the rise in his USX stake, Mr. Corry learned that Mr. Icahn wanted him to sell all of Texas Oil -- not just its reserves of about 1.2 trillion cubic feet of natural gas and 28 million barrels of oil but also its pipeline, gas-gathering and contract-drilling operations.That would leave USX with Marathon, its steel mills and its diversified business segment, which includes, among other things, mineral and transportation products. Some speculate that Mr. Corry would agree if he could find a buyer at the right price.The problem is that Mr. Icahn is pushing him to move faster and further in restructuring USX than Mr. Corry had planned.Mr. Icahn has long believed, associates say, that the company, whose 1988 sales totaled $16.88 billion, is worth $70 a share if broken up.The stock closed yesterday at $33.625, giving Mr. Icahn's 33.6 million shares a value of $1.13 billion. Mr. Icahn advocates the sale of the company's steel operations, and Mr. Corry doesn't necessarily disagree.Unlike his predecessor, who saw steel as America's backbone, Mr. Corry tends to view it as a capital-draining and labor-intensive business with limited potential, associates say.In the past five years, USX has turned steel into a profit maker by closing several plants and reducing labor costs.But the short-term outlook is so-so. It isn't surprising that Messrs.Roderick and Corry view steel so differently.While Mr. Roderick was reared in the shadows of Pittsburgh's smoking mills, Mr. Corry grew up in Cincinnati, a city nicknamed "Porkapolis" and more accustomed to pork chops than pig iron.He has never met Lynn Williams, the president of the United Steelworkers union, and isn't active in the industry's main trade group, the American Iron and Steel Institute, which Mr. Roderick served as chairman. "Dave thought the country needed a strong U.S. Steel and, while Chuck agreed, he was more apt to say, `Not at any cost to shareholders, '" a former executive says.Indeed, Mr. Corry, at an August press conference, talked about investing in steel as long as it provides a good return and "not a day longer." However, shedding steel would run directly counter to Mr. Roderick's original rationale for diversifying into oil and gas: Having two major products would lessen the company's vulnerability to one market's down cycle and help smooth out the flow of cash and earnings.As Mr. Roderick once said: "We're a two-product company and, boy, if you can't figure out the value of those two parts, you are so damn dumb that you don't belong on Wall Street." Moreover, the opportunity to sell steel at a price acceptable to USX may be gone, for now. "The time has passed for us to spin off steel," either in a public offering or to a buyer, one executive contends.About the only way that USX now can get out of steel is to dish it out, piece by piece, in separate joint ventures, he adds. With Mr. Icahn breathing down his neck, however, Mr. Corry may have little choice but to sell at a weak price, even if it means losing some steel-related tax-loss carryforwards.That would leave USX essentially an oil company with Marathon as its core.Marathon has benefited from higher crude-oil prices and strong demand for refined products. Oil has long been Mr. Corry's pet.Indeed, when the Bush administration finally decided this summer to renew import restrictions -- arguably the most important decision to affect the steel industry in five years -- Mr. Corry and his directors were aboard helicopters, high above Marathon's rich oil reserves in the North Sea. Should USX be left with only Marathon, Mr. Corry might well feel pushed to scout out other energy companies.However, even USX executives who work closely with him aren't sure about his long-term goals. "I don't think he has a clear sense of where he wants the company to go," one says.Right now, the executive adds, "he wants to continue to focus on paying down" USX's debt by selling assets. One thing is certain, however: Mr. Corry, while studying other options, probably won't make a major move until he's clear about Mr. Icahn's intentions.And then, "he won't panic," says J. Bruce Johnston, a former USX executive and now a labor and benefit consultant with Adler Cohen & Grigsby in Pittsburgh. Mr. Corry learned presence under fire when, as vice president of corporate planning, he handled what Mr. Johnston calls "don't-con-me" negotiations that led to USX's shedding of a wide array of assets ranging from chemicals to construction. When negotiating, Mr. Corry played his cards close to the vest.Johnnie Johnson, who worked for Mr. Corry in strategic planning, recalls how his boss would routinely ask a subordinate to research an entire industry to target acquisition candidates. "What he really wanted to know was about a particular company, but you didn't know that.He wanted your own unbiased, virgin opinion," says Mr. Johnson, now managing director at Georgeson & Co., a proxy-solicitation and investor-relations firm. Ever the pragmatist, Mr. Corry said in August that he realized that USX is on "acquisition screens all over the country." "It's part of the capitalistic market system that equity can be bought and equity is bought," he said.USX, he noted, was formed 88 years ago, "by in effect buying out a bunch of other companies. . . . People got rich through takeovers in those days, as they do today." Thomas F. O'Boyle contributed to this article.
As a presidential candidate in 1980, George Bush forthrightly expressed his position on abortion in an interview with Rolling Stone magazine published that March.What did he think of the Supreme Court's decision legalizing abortion? "I happen to think it was right," Mr. Bush said flatly. A few months later, Mr. Bush became Ronald Reagan's running mate.Suddenly, George Bush the pro-choice advocate became George Bush the anti-abortionist.And the vacillation didn't end there. Just a month ago, Mr. Bush sternly threatened to veto a pending welfare bill if it provided any abortion funds, except to save a woman's life.Then, two weeks ago -- declaring that "I'm not looking for any conflict over this" -- the president said he would consider a compromise to fund abortions for poor women in cases of rape and incest. But only four days after that, Mr. Bush resurrected the veto threat. "I do not support federal funding for abortions except where the mother's life is threatened," he proclaimed, and finally vetoed the measure last weekend. So what does George Bush really believe?The answer is so murky that it is beginning to get this popular president in trouble with each of the increasingly vocal, increasingly powerful sides of the abortion issue.The result is mistrust and criticism from all around. Anti-abortion forces regard him as at best an uncertain ally. "In all honesty if you ask me, `Is this man a true believer? ' I don't know," says John Fowler, head of the Washington-based Ad Hoc Committee in Defense of Life Inc. Yet abortion-rights forces remain bitterly critical.Douglas Gould, vice president of communications for the Planned Parenthood Federation of America, calls Mr. Bush's position on the abortion-funding issue "extremely cruel," adding: "The guy hasn't done one thing about prevention.He's totally geared to a punitive position." Mr. Bush is plainly uncomfortable with the entire abortion question.For most of the past nine years, he has striven to convince anti-abortion activists of his stalwart support for their position.But ever since the Supreme Court's Webster vs.Reproductive Health Services decision this year changed the political landscape of the abortion issue, the president seemingly has tried just as hard to avoid saying anything more unless pressed to the wall. Many Americans still agonize over their own personal feelings about abortion.Mr. Bush's problem isn't so much that he seems to be agonizing over the issue as it is that he seems to vacillate on it.The political risk would be far less if the president drew a firm line and hewed to it, experts insist. "If you have a position, you're better off to stick with it than to move around very much," says Republican strategist John Sears.The need for consistency is especially acute for Mr. Bush, who, Mr. Sears maintains, lacks a strong ideological base. By his moderate Republican heritage as well as the warnings of political advisers who say the issue is vital to younger voters, the president might seem to have at least some sympathy with abortion-rights arguments.Yet he is also firmly bound by his hard-line rhetoric and promises he made to anti-abortion activists during his long pursuit of the White House.On many issues -- flag-burning, for instance -- his keen political sensitivities overcome such conflicts. But Mr. Bush and his advisers miscalculated the politics of the abortion issue, failing to grasp how dramatically the abortion-rights movement would be aroused following last summer's Supreme Court decision to restrict those rights in the Webster case. "It was one of the quickest changes in public attitudes I've ever seen," says former Reagan pollster Richard Wirthlin. These days, when others raise the subject of abortion, the usually loquacious president can be close-mouthed almost to the point of curtness.Ten days ago he was asked to amplify the reasons behind his anti-abortion stance. "My position is well-known and well-stated," he replied. A close look at his record over the last 15 years suggests that Mr. Bush has well-stated his views -- on all sides of the issue. In 1974, as the U.S. representative to the United Nations, he wrote an introduction to a book on world population in which he boasted of his leadership during his term in Congress in expanding family-planning services for the poor.Running for president in early 1980, he was also quoted as supporting federal funding for abortions in cases of rape, incest and to save the life of the mother. In his Rolling Stone interview in 1980, Mr. Bush volunteered his abortion-rights remarks to contrast himself with his rival, Ronald Reagan.In addition to supporting the landmark Roe vs.Wade Supreme Court decision legalizing abortion, Mr. Bush said he opposed the constitutional ban on abortion that Mr. Reagan was promising to promote. As Mr. Reagan's running mate, though, Mr. Bush plunged headlong into the anti-abortion position, endorsing a constitutional amendment outlawing abortion.He acknowledged only one difference with Mr. Reagan -- that the amendment ought to have exceptions for rape and incest as well as to save a woman's life. Throughout the early 1980s, Mr. Bush was quoted sometimes supporting federal funding for abortion in cases of rape and incest and sometimes opposing it.In April 1986, then-Vice President Bush had his staff write a letter spelling out that he would support a constitutional amendment banning abortions except in cases of rape, incest and life endangerment, but that he opposed federal funding in all but the latter case.At the GOP convention last year, he again came out for an amendment with exceptions for rape, incest and life endangerment. His rhetoric gathered momentum as he rolled into office, affirming his "firm support of our cause" during an anti-abortion rally three days after his inauguration last January.He again urged passage of a constitutional amendment outlawing abortion. But when the high court ruled in the Webster case in July, the president began to lower the volume.When the ruling was handed down, the vacationing president dispatched Chief of Staff John Sununu to issue a statement and refused to answer questions himself.He did later threaten vetoes over legislation restoring the District of Columbia's right to use its own tax money to fund abortions for poor women and over restoring funding to the United Nations Population Fund.But in the months since then, while trying to drum up support for other issues -- such as an anti-flag-burning constitutional amendment -- he has shied away from talking about abortion.What few comments he has initiated have been oblique, such as urging "greater efforts toward the protection of human life" at a meeting of Catholic lawyers in Boston last month. The White House has likewise avoided any involvement in Florida's recent special legislative session on abortion, which anti-abortion forces had regarded as a key test of their ability to get state lawmakers to toughen abortion restrictions.The session failed to enact any new curbs. Now, some see Mr. Bush trapped in a position he is neither comfortable with nor able to escape.Ken Ruberg, head of the Republican Mainstream Committee, a group of party moderates, observes: "The administration finds itself in an ideological cul de sac that it will find it difficult -- if not impossible -- to get itself out of."
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Blockbuster Entertainment Corp. -- $300 million (redemption amount) of zero-coupon convertible notes, also known as liquid yield option notes, due Nov. 1, 2004, priced at 308.32 to yield at maturity 8%.The notes are zero-coupon securities and will not pay interest periodically.The size of the offering was increased from the originally planned $250 million (redemption amount).The notes are convertible into common stock of Blockbuster Entertainment at $22.26 a share, representing a 12% conversion premium over yesterday's closing price.Rated Ba-3 by Moody's Investors Service Inc. and single-B-plus by Standard & Poor's Corp., the issue will be sold through Merrill Lynch Capital Markets. Merrill Lynch & Co. -- $200 million of 8.4% notes due Nov. 1, 2019, priced at 99.771 to yield 8.457%.The issue, which is puttable back to the company Nov. 1, 1994, was priced at a spread of 70 basis points above the Treasury's five-year note.Rated single-A-1 by Moody's and single-A-plus by S&P, the noncallable issue will be sold through underwriters led by Merrill Lynch Capital Markets. Boise Cascade Corp. -- $150 million of 9.45% debentures due 2009, priced at 99.7. ITT Financial Corp. -- $150 million of 8.35% subordinated notes due Nov. 1, 2004, priced at 99.85 to yield 8.387%.The noncallable issue, which is puttable back to the company Nov. 1, 1994, was priced at a spread of 62.5 basis points above the Treasury's five-year note.Rated single-A-2 by Moody's and single-A by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.ITT Financial is a subsidiary of ITT Corp. Arco Chemical Co. -- $100 million of 9.35% debentures due Nov. 1, 2019, priced at 98.518 to yield 9.50%.Rated single-A-2 by Moody's and single-A by S&P, the issue will be sold through underwriters led by Salomon Brothers Inc. Trinity River Authority, Texas -- $134.8 million of regional wastewater system improvement revenue bonds, Series 1989, due 1992-2000, 2009 and 2016, through a Shearson Lehman Hutton Inc. group.The bonds, insured and rated triple-a by Moody's and S&P, were priced to yield from 6.30% in 1992 to 7.25% in 2016.There are $46,245,000 of 7% term bonds due 2009, priced at 97 7/8 to yield 7.20%, and $64.9 million of 7.1% term bonds due 2016, priced at 98 1/4 to yield 7.25%.Serial bonds, which all carry 7% coupons, are priced to yield from 6.30% in 1992 to 7% in 2000. Beverly Hills, Calif. -- $116,385,000 of refunding certificates of participation (civic center improvements project), due 1990-2004, 2007, 2016 and 2019, tentatively priced by a Goldman, Sachs & Co. group to yield from 6% in 1990 to 7.19% in 2016.Serial certificates yield to 7.10% in 2004.They are all priced at par.There are $12,915,000 of 7% term certificates due 2007, priced to yield 7.15%.The $58.9 million of 7% certificates due 2016 carry the issue's high yield, priced at 97 3/4 to yield 7.19%.There are also $29 million of 6 3/4% certificates due 2019, priced to yield 7.10%.The bonds are rated single-A-1 by Moody's and double-A-minus by S&P, according to the lead underwriter. Michigan -- $80 million of first general obligation bonds (Series 1989 environmental protection program and recreation program), tentatively priced by a Shearson Lehman Hutton group to yield from 6% for current interest bonds due 1990 to 7.25% for convertible capital appreciation bonds.Environmental protection program current interest bonds are due 1995-1999, 2005 and 2009.They are tentatively priced to yield from 6.45% in 1995 to 7.10% in 2009.The standard capital appreciation bonds in the issue, due 1998-2011, yield to maturity from 6.70% in 1998 to 7.10% in 2009-2011.The convertible capital appreciation bonds all yield 7.25% to their respective conversion dates, when they become 7 1/4% current interest-bearing bonds until maturity.Convertible capital appreciation bonds with a final stated maturity of Nov. 15, 2014, convert Nov. 15, 1999.Convertible capital appreciation bonds with a final stated maturity of Nov. 15, 2019, convert Nov. 15, 2004.Recreation program current interest bonds are due 1990-1995, and are priced to yield from 6% in 1990 to 6.45% in 1995.All of the bonds are rated single-A-1 by Moody's and double-A by S&P. Federal National Mortgage Association -- $300 million of Remic securities in 10 classes through Goldman Sachs.The issue is backed by Fannie Mae 9% securitiess.The offering is Fannie Mae's Series 1989-88. Fuji Heavy Industries Ltd. (Japan) -- $300 million of 8 3/4% bonds due Nov. 17, 1999, priced at 101 3/8 to yield 8.85% less full fees annually, via Daiwa Europe Ltd. Guarantee by Industrial Bank of Japan.Fees 2. European Investment Bank (agency) -- $150 million of 8 1/2% bonds due Nov. 22, 1999, priced at 99.75 to yield 8.54% at reoffered price, via lead manager JP Morgan Securities Ltd. Nippon Meat Packers Inc. (Japan) -- $200 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Yamaichi International Europe.Each $5,000 bond carries a warrant exercisable Nov. 24, 1989, through Oct. 29, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 31. GMAC Canada Ltd. (U.S. parent) -- 150 million Canadian dollars of floating-rate notes due November 1996, via Banque Paribas Capital Markets Ltd. Coupon, paid monthly, is one-month Canadian bankers acceptance rate.Guarantee by General Motors Acceptance Corp. Call at par after two years and thereafter at par every six months. Swedish Export Credit Corp. -- #100 million of 12% bonds due June 15, 1994, priced at 101 5/8 to yield 12.39% annually less full fees, via Samuel Montagu & Co. Fees 1 7/8. Skopbank (Finland) -- 10 billion yen of 5 3/4% bonds due Nov. 20, 1992, priced at 101 3/8 to yield 5 3/4% less full fees, via IBJ International.Fees 1 3/8. Hokkaido Takushoku Bank (Japan) -- 300 million Swiss francs of notes and bonds due March 31, 1994, with fixed 0.375% coupon at par via Swiss Bank Corp. Put option March 31, 1992, at 107 3/4 to yield a fixed 3.52%.The issue is in two parts: 200 million Swiss francs of privately placed notes, 100 million Swiss francs of publicly listed bonds.Indentical conditions for the two parts.Other terms to be fixed Nov. 1. Kingdom of Morocco -- $208 million (redemption amount) of zero-coupon government trust certificates, with maturities stretching from May 15, 1990, to Nov. 15, 1999, priced at yields ranging from 8.23% to 8.43%.All the issues were priced at a spread of 37 basis points above the Treasury strips with similar maturities.Proceeds from the offering are about $160.4 million.Rated triple-A by Moody's and S&P, the issue will be sold through underwriters led by BT Securities, a subsidiary of Bankers Trust New York Corp.
Israel has launched a new effort to prove the Palestine Liberation Organization continues to practice terrorism, and thus to persuade the U.S. to break off talks with the group.U.S. officials, however, said they aren't buying the Israeli argument. Israeli counterterrorism officials provided the State Department with a 20-page list of recent terrorist incidents they attribute directly to forces controlled by PLO Chairman Yasser Arafat.Mr. Arafat publicly renounced terrorism Dec. 15, satisfying the U.S. precondition for a direct "dialogue" with the PLO. A U.S. counterterrorism official said experts are studying the Israeli list. "We have no independent evidence linking Fatah to any acts of terrorism since Dec. 15, 1988," he said, referring to the specific PLO group that Mr. Arafat heads. "So far, this list doesn't change our view.Israel wants to end the dialogue, but our analysts take a different view than theirs." Israeli Prime Minister Yitzhak Shamir's top adviser on counterterrorism, Yigal Carmon, was here Monday to present the report to members of Congress, reporters and others.Mr. Carmon said he also presented the list last week to William Brown, U.S. Ambassador to Israel. Separately, the New York Times reported that the Israeli government had provided its correspondent in Jerusalem with different documents that Israel said prove the PLO has been conducting terrorism from the occupied Arab territories.The State Department said it hasn't yet seen copies of those papers. "If the dialogue was based on the assumption that Arafat or the PLO would stop terrorism, and we have evidence of continued terrorism, what would be the logical conclusion?" Mr. Carmon asked. Israel has long claimed Mr. Arafat never meant to renounce terrorism, particularly because he and his lieutenants reserved the right to press "armed struggle" against the Jewish state.Now, Jerusalem says it is backing up its contention with detailed accounts of alleged terrorist acts and plans linked to Mr. Arafat.It blames most of these on Fatah. The new accusations come at a delicate time in U.S. efforts to bring about talks between Israel and Palestinian representatives.The State Department said it had received a new letter on the subject from Israeli Foreign Minister Moshe Arens, restating Israel's previous objection to negotiating with any Palestinian tied to the PLO. Deciding what constitutes "terrorism" can be a legalistic exercise.The U.S. defines it as "premediated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine state agents." To meet the U.S. criteria, Israel contended it only listed incidents that involved civilians and occurred inside its pre-1967 borders. At the heart of Israel's report is a list of a dozen incidents Jerusalem attributes to Fatah, including the use of bombs and Molotov cocktails.But U.S. officials say they aren't satisfied these incidents constitute terrorism because they may be offshoots of the intifadah, the Palestinian rebellion in the occupied territories, which the U.S. doesn't classify as terrorism.In addition, the officials say Israel hasn't presented convincing evidence these acts were ordered by Fatah or by any group Mr. Arafat controls. U.S. terrorism experts also say they are highly uncertain about the veracity of the separate documents leaked to the New York Times.The papers, which Israel says were discovered in Israeli-occupied Gaza, refer to terrorist acts to be carried out in the name of a group called "the Revolutionary Eagles." Some supporters of Israel say U.S. policy on Palestinian terrorism is colored by an intense desire to maintain the dialogue with the PLO.But State Department officials accuse Israel of leaking questionable claims to embarrass the U.S.
The dollar finished lower yesterday, after tracking another rollercoaster session on Wall Street. Concern about the volatile U.S. stock market had faded in recent sessions, and traders appeared content to let the dollar languish in a narrow range until tomorrow, when the preliminary report on third-quarter U.S. gross national product is released. But seesaw gyrations in the Dow Jones Industrial Average yesterday put Wall Street back in the spotlight and inspired market participants to bid the U.S. unit lower. UAL's decision to remain an independent company sent share prices tumbling.By midmorning, the DJIA had plunged 80 points and foreign-exchange dealers quickly drove the dollar down. When the DJIA modestly rebounded, the dollar bounced back in choppy dealings but ended the day below the levels of late Monday.Stock prices, meanwhile, posted significant gains in later trading and closed down by only 3.69 points on the day. Some dealers said that the market's strong reaction to Wall Street reflects a general uneasiness about the dollar.They added that the DJIA's swift drop proved an easy excuse for the market to drive the U.S. currency in the direction it was already headed. In late New York trading yesterday, the dollar was quoted at 1.8355 marks, down from 1.8470 marks Monday, and at 141.45 yen, down from 141.90 yen late Monday.Sterling was quoted at $1.6055, up from $1.6030 late Monday. In Tokyo Wednesday, the U.S. currency opened for trading at 141.57 yen, down from Tuesday's Tokyo close of 142.10 yen. Tom Trettien, a vice president with Banque Paribas in New York, sees a break in the dollar's long-term upward trend, a trend that began in January 1988. He argues that the dollar is now "moving sideways," adding that "the next leg could be the beginning of a longer term bearish phase." Analysts peg the dollar's recent weakness to an underlying slowdown in the U.S. economy, highlighted by recent economic data, particularly a surprisingly sharp widening in the August U.S. trade gap. They also point out that narrowing interest-rate differentials between the U.S. and its major trading partners tend to make the U.S. currency less attractive to foreign investors. Despite several spurts of dollar trading, it was noted that mark-yen cross trade grabbed much of the market's attention. Following the dive in U.S. stocks, the mark has strengthened more than its major counterparts.Traders attribute the mark's surge to a robust West German economy and higher rate differentials.But, they add that the mark's strength is in part a reflection of a shift away from U.S. assets by Japanese investors into West German investments. "The question remains: how much can the West German market absorb?" says one senior dealer. Some dealers say that Bank of Japan Governor Satoshi Sumita's reassurance that Japanese monetary policy won't be changed for the time being has given investors an added excuse to push the yen down even further against the mark. Despite the yen's weakness with respect to the mark, Tokyo traders say they don't expect the Bank of Japan to take any action to support the Japanese currency on that front. Meanwhile, sterling slumped on news that the United Kingdom posted a wider-than-expected trade deficit in September.The news also knocked the British unit to below 2.95 marks in London, but a bout of short-covering helped sterling recoup some of its earlier losses. On the Commodity Exchange in New York, gold for current delivery jumped $3.20 to $370.20 an ounce.The close was the highest since Aug. 15.Estimated volume was a light two million ounces. In early trading in Hong Kong Wednesday, gold was quoted at $368.25 an ounce.
Boston Co., the upper-crust financial services concern that was rocked by a management scandal late last year, has had a sharp drop in profitability -- mainly because a high-risk bet on interest rates backfired. Boston Co. 's fall from grace is bad news for its parent, Shearson Lehman Hutton Holdings Inc., which has relied heavily on the banking and money management unit's contributions in recent years.In 1988, for example, Boston Co. had an estimated pretax profit of at least $110 million, while Shearson managed net income of just $96 million. Shearson doesn't break out the earnings of its subsidiaries.But people familiar with Boston Co. 's performance say the unit had profit of around $17 million for the third quarter, after barely breaking even for the first six months.Shearson, meanwhile, posted net income of $106 million for the first nine months of the year, down slightly from $110 million for the year-ago period. Moody's Investors Service Inc. last week downgraded the long-term deposit rating of Boston Co. 's Boston Safe Deposit & Trust Co. subsidiary, to single-A-1 from double-A-3, citing problems in the company's "aggressively managed securities portfolio." John Kriz, a Moody's vice president, said Boston Safe Deposit's performance has been hurt this year by a mismatch in the maturities of its assets and liabilities.The mismatch exposed the company to a high degree of interest-rate risk, and when rates moved unfavorably -- beginning late last year and continuing into this year -- "it cost them," Mr. Kriz said. Mr. Kriz noted that Boston Safe Deposit "has taken some actions to better control asset-liability management and improve controls in general, and we think these will serve to improve credit quality." As some securities mature and the proceeds are reinvested, the problems ought to ease, he said.But he also cited concerns over the company's mortgage exposure in the troubled New England real estate market.Boston Co. officials declined to comment on Moody's action or on the unit's financial performance this year -- except to deny a published report that outside accountants had discovered evidence of significant accounting errors in the first three quarters' results. An accounting controversy at the end of last year forced Boston Co. to admit it had overstated pretax profits by some $44 million.The resulting scandal led to the firing of James N. von Germeten as Boston Co. 's president and to the resignations of the company's chief financial officer and treasurer.The executives were accused of improperly deferring expenses and booking revenue early, in an effort to dress up results -- and perhaps bolster performance-related bonuses.Mr. von Germeten, in turn, attributed the controversy to judgmental errors by accountants and accused Shearson of conducting a "witch hunt." Mr. Kriz of Moody's said the problems in the securities portfolio stem largely from positions taken last year.The company's current management found itself "locked into this," he said.
CHICAGO - Sears, Roebuck & Co. is struggling as it enters the critical Christmas season. Yesterday, the retailing and financial services giant reported a 16% drop in third-quarter earnings to $257.5 million, or 75 cents a share, from a restated $305 million, or 80 cents a share, a year earlier. But the news was even worse for Sears's core U.S. retailing operation, the largest in the nation.Sears said its U.S. stores had a loss of $6.9 million, their first deficit for the period in more than five years.Analysts estimated that sales at U.S. stores declined in the quarter, too. The results underscore Sears's difficulties in implementing the "everyday low pricing" strategy that it adopted in March as part of a broad attempt to revive its retailing business.Under the new approach, Sears set prices that were somewhere between its old "regular" and "sale" prices.The company said it would resort far less often to slashing prices to woo shoppers. Sears officials insist they don't intend to abandon the everyday pricing approach in the face of the poor results.Instead, a spokesman blames the dismal third-quarter showing on "an environment that is being distorted by a very harsh climate for sales of durable goods," which account for roughly two-thirds of Sears's annual merchandise volume. The new pricing strategy "is working," the spokesman asserted.He added that, after an initial surge triggered by an advertising blitz in March, Sears expected that the pricing program wouldn't have any effect on revenue.Sears has been counting on growth coming from the large displays of brand-name merchandise it is adding to its stores over the next two years in what it calls "power formats." But analysts say Sears faces an especially daunting challenge on the eve of the Christmas shopping season. "I believe everyday pricing in the current environment doesn't work," says Walter Loeb of Morgan Stanley & Co., pointing to soft durable-goods sales. "Sears is likely to be unsuccessful if it continues with its pricing policy when everyone else is offering unusual values." In what amounts to an admission that the transition hasn't gone as smoothly as Sears had hoped, the giant retailer is now trying new ways to drum up business without appearing to abandon its seven-month-old strategy.The company is highlighting more special deals in its advertising and stores, and it's offering to defer finance charges on certain big-ticket items. Sears is also stepping up its television ads and changing its message.In a new TV ad, for instance, a woman going through the Sunday newspaper brands as hype claims by other stores that they are offering goods for "50%, 60% and 70% off." By lowering prices throughout its stores, she says, "Sears has the right idea." But the ad also mentions Sears's sales -- a topic that the retailer has avoided since switching to everyday pricing. "When Sears has a sale at a special price," the woman in the ad declares, "it's something you don't want to miss." Recent surveys by Leo J. Shapiro & Associates, a market research firm in Chicago, suggest that Sears is having a tough time attracting shoppers because it hasn't yet done enough to improve service or its selection of merchandise.The number of people who said they were more likely to shop at Sears fell in September to 37% from 66% in March, when Sears blanketed the airwaves with ads about its new pricing strategy. Moreover, the number of people who spontaneously cited lower prices as the reason for their interest in Sears declined to 16% in September from 33% in March.Just 5% of the respondents mentioned brands in September, up slightly from 2% in March.Only 2% of the people in September cited Sears's "friendly personnel." "The power of price as an appeal, which was very considerable in driving traffic in March and April, has diminished," says George Rosenbaum, president of Shapiro & Associates. "You see some improvement in these other areas, but it's a very small and slow process." For the third quarter, Sears said its total revenue rose 4.8% to $13.18 billion from $12.57 billion a year earlier. Net income at Sears's merchandise group, which includes international and credit card operations, as well as U.S. stores, fell 25%. Profit at Sears's Allstate insurance unit fell 38% to $126.1 million because of Hurricane Hugo, which inflicted the greatest single storm damage loss in the company's history.Sears said claims from the storm, as expected, reduced its third-quarter net by $80 million, or 23 cents a share. Allstate is expected to absorb another big hit in the fourth quarter as claims pour in from the San Francisco earthquake.But a spokesman said the quake won't have as big a financial impact on Allstate as Hurricane Hugo did. Net income at Sears's Dean Witter Financials Services group, meanwhile, rose nearly 32% to $35.7 million, reflecting improvements in its basic stock brokerage and Discover credit card businesses.Profit at Sears's Coldwell Banker Real Estate Group nearly quadrupled to $81.2 million because of gains on sales of property. In New York Stock Exchange composite trading yesterday, Sears shares closed at $40.50, up 87.5 cents.
This is in response to George Melloan's Business World column "The Housing Market Is a Bigger Mess Than You Think" (op-ed page, Sept. 26). In Houston, we have seen how bad the housing problem can become.Unused houses deteriorate rapidly, affecting the value of nearby homes; in a domino effect, the entire neighborhood can fall victim.At this stage some people just "walk away" from homes where the mortgage exceeds current market value.But most of them could have afforded to keep up their payments -- they chose not to do so. The problem is so vast that we need to try innovative solutions -- in small-scale experiments.Here are some ideas: 1) Foreclosed homes could be sold by the FHA for no down payment (the biggest obstacle to young buyers), but with personal liability for the mortgage (no walking away by choice). 2) Encourage long-term occupancy by forgiving one month's payment (off the tail end of the mortgage) for every six months paid; or perhaps have the down payment deferred to the end of the mortgage (balloon), but "forgiven" on a monthly pro-rata basis as long as the owner remains the occupant. 3) Develop rental agreements with exclusive purchase options for the renter.An occupant will, in most every case, be better for the home and neighborhood than a vacant house.In this way, the house is not dumped on to a glutted market. John F. Merrill Houston The Federal Housing Administration, Veterans Administration and the Department of Housing and Urban Development further aggravate the problem of affordable housing stock by "buying in" to their foreclosed properties (of which there are, alas, many) at an inflated "balance due" -- say $80,000 on a house worth $55,000 -- instead of allowing a free market to price the house for what it's really worth. Worse, the properties then sit around deteriorating for maybe a year or so, but are resold eventually (because of the attractiveness of the low down payment, etc.) to a marginal buyer who can't afford both the mortgage and needed repairs; and having little vested interest that buyer will walk away and the vicious cycle repeats itself all over again. Paul Padget Cincinnati
Xerox Corp. 's third-quarter net income grew 6.2% on 7.3% higher revenue, earning mixed reviews from Wall Street analysts. Quarter net for the business-machines and financial-services company rose to $155 million, or $1.41 a share, from $146 million, or $1.37 a share, in the year-earlier period.Revenue rose to $4.45 billion from $4.15 billion. In New York Stock Exchange composite trading, Xerox closed at $62.75 a share, up $1. Sales growth and profit in business products and systems -- Xerox's main business -- were "disappointing," said B. Alex Henderson, who follows the company for Prudential-Bache Securities Inc. Sales of Xerox copiers and other office products grew 1.6%; "we expected growth of 6% to 7%," Mr. Henderson said.Operating-profit margins slipped almost 18%, to 4.3% of sales, the analyst noted. Still, with competitors such as Eastman Kodak Co. faltering in copier sales, Xerox's sales increases "were encouraging," says Eugene Glazer of Dean Witter Reynolds Inc. "They are holding their own in a weak market, and the restructuring is working," he says. David T. Kearns, Xerox chairman and chief executive officer, cited the restructuring and "strong" cost controls for the 13% growth in profit from business products and systems operations. Mr. Glazer expects Xerox to experience tough sledding, though, in financial services because of rate pressures and uncertainty surrounding tax treatment of capital gains. In the quarter, the Crum & Forster insurance unit reported $200 million before tax of capital gains from property and casualty operations.The subsidiary also increased reserves by $140 million, however, and set aside an additional $25 million for claims connected with Hurricane Hugo. For the nine months, Xerox earned $492 million, or $4.55 a share, up 5.8% from $465 million, or $4.32 a share.Revenue rose 7.6% to $12.97 billion from $12.05 billion.
New orders for durable goods fell back slightly in September after shooting up the month before, reflecting weakening auto demand after a spurt of orders for new 1990 models, the Commerce Department reported. Orders for military equipment, household appliances, machinery and other goods expected to last at least three years dipped 0.1% last month, to $126.68 billion, after leaping 3.9% in August, the department said. Most analysts had expected a sharper decline after the steep rise in August.Moreover, a recent government report showing widespread layoffs in manufacturing had contributed to perceptions that the manufacturing sector of the economy had slowed to a crawl. But many economists pointed to a 1.8% September rise in orders outside the volatile transportation category.That "suggests the manufacturing sector is not falling apart," said Sally Kleinman, an economist at Manufacturers Hanover Securities Corp. in New York.She added, however: "It is not robust by any means." While a decline in orders for cars and civilian airplanes pulled down the orders total, an enormous jump in orders for heavy military equipment propped it up.Orders for capital defense goods skyrocketed 56%, and a government analyst said nearly all areas saw increases, including airplanes, missiles, ships, tanks and communications equipment. Orders for military goods usually catapult in September, government officials say, as the Pentagon scrambles to spend its money before the new fiscal year begins Oct. 1.While all the numbers in the durable goods report were adjusted for seasonal fluctuations, a Commerce Department analyst said that the adjustment probably didn't factor out all of the wide-ranging surge in defense orders. Without the increase in defense bookings, September orders would have plummeted 3.9%. Analysts were most unsettled by evidence the backlog of orders at factories is slipping.Unfilled orders for durable goods rose 0.4% in September, to $476.14 billion, after declining for the first time in 2 1/2 years in August.In July unfilled orders grew 1%.But analysts noted that excluding transportation-where what they believe was a temporary surge in auto demand pushed up the figures-order backlogs have declined for three months in a row. "It means we're eating into the bread that keeps us going.That is a little disturbing," Ms. Kleinman said. "It also means if you have a real drop-off in orders, production will likely fall off very quickly because there is less to keep things going." Capital goods orders outside of the defense sector tumbled for the second month in a row, posting a 5.6% drop after a 10.3% decline.Such steep drops in a category seen as a barometer of business investment would customarily be grave news for the economy.But a Commerce Department analyst said that in both months orders would have risen had it not been for a drop in civilian aircraft bookings, a category that is showing declines only after a huge surge earlier this year. Still, Milton Hudson, senior economic adviser at Morgan Guaranty Trust Co. in New York, said: "If you look back a half-year or so the evidence was pretty good of affirmative strength in the capital-goods sector.Now at least there are question marks about that, and without any question the pace of growth has slowed."
Norfolk Southern Corp. directors authorized the railroad company to buy back as many as 45 million of its shares, which would have a current value of more than $1.7 billion. The buy-back, coupled with a nearly completed earlier purchase of 20 million shares, would reduce shares outstanding by more than 26%.The Norfolk, Va., company has 172.2 million shares outstanding. In a statement, Arnold B. McKinnon, chairman and chief executive officer, noted that the new repurchase program "should serve to enhance shareholder value." A spokeswoman said the company will finance the buy-back with cash on hand, borrowing and "cash Norfolk expects to generate." Analysts said they expected the action, and investors applauded the move.In composite trading on the New York Stock Exchange, Norfolk Southern shares closed at $37.875, up $1.125. Still, analysts don't expect the buy-back to significantly affect per-share earnings in the short term. "The impact won't be that great," said Graeme Lidgerwood of First Boston Corp.That is in part because of the effect of having to average the number of shares outstanding, she said.In addition, Mrs. Lidgerwood said, Norfolk is likely to draw down its cash initially to finance the purchases and thus forfeit some interest income. Longer term, however, the buy-back is expected to increase earnings, especially after 1990, Mrs. Lidgerwood said. Moreover, the extensive program in effect establishes a floor for the stock price, said Joel Price, analyst for Donaldson, Lufkin & Jenrette.The buy-back "is really a comfort to those who want to buy the stock that there is a {price} floor," he said. "At a certain price, if the management thinks {the stock} is cheap, they can go in and buy it." Under the program, Norfolk plans to acquire shares in the open market. Under the earlier plan, Norfolk was authorized in 1987 to buy up to 20 million shares.It has purchased about 19 million of them.
Tuesday, October 24, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 3/4% high, 8 5/8% low, 8 11/16% near closing bid, 8 11/16% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.25% 45 to 68 days; 8.30% 69 to 89 days; 8.125% 90 to 119 days; 8% 120 to 149 days; 7.875% 150 to 179 days; 7.50% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.475% 60 days; 8.45% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.35% six months. BANKERS ACCEPTANCES: 8.48% 30 days; 8.30% 60 days; 8.28% 90 days; 8.10% 120 days; 8% 150 days; 7.90% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 5/8% to 8 1/2% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 1/2% six months; 8 1/2% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.78%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.59%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Japan has climbed up from the ashes of World War II and a gross national product of about $800 per capita to reach the heavyweight class among industrialized nations.Now this remarkable economic growth seems to be coming to an end because the government has not converted itself into a modern, democratic, "developed nation" mode of operation. Until 1980, when Japan joined the $10,000 per capita GNP club of the advanced countries, it was a model developing nation.The government built ports, bridges, highways, schools, hospitals and railways.When industries were weak, it protected them.It gave the Japanese people a value system, based on the rationalization that given the country's lack of natural resources, they must work hard to create value through exports and buy food with the surplus.Individual prosperity inevitably would result. That system has worked.The standard of living has increased steadily over the past 40 years; more than 90% of the people consider themselves middle class. The people have given their leading and only credible political party, the Liberal Democratic Party, clear and uninterrupted power for those 40 years.The LDP won by a landslide in the last election, in July 1986.But less than two years later, the LDP started to crumble, and dissent rose to unprecedented heights. The symptoms all point to one thing: Japan does not have a modern government.Its government still wants to sit in the driver's seat, set the speed, step on the gas, apply the brakes and steer, with 120 million people in the back seat.In a modern system, the government's role is to give the people as much choice as possible and to keep them well informed so they are capable of making a choice.It also allows people to buy the best and the cheapest goods from anywhere in the world. The Japanese government doesn't allow this.The Ministry of Agriculture and Fishery actually is a ministry for farmers and fishermen instead of a ministry of provisions.The Ministry of Health and Welfare is a ministry of doctors and pharmaceutical companies rather than an organization dedicated to protecting the health of the people.The Ministry of Education is nothing but a cartel for licensed teachers, and certainly does not act on behalf of students.The Ministry of Construction spreads concrete throughout the country and boasts in international conferences that Japan's paved roadway per capita is the longest in the world, but they seldom think of the poor commuters who spend so much time sitting in traffic.The Ministry of Transportation serves the industry, certainly not the passengers who must pay extraordinarily high prices. And the Ministry of Foreign Affairs works for itself, supporting Japanese diplomats who sprinkle abundant aid money around the world to ensure that their seat at the dinner table is next to the host's.This ministry has done nothing to correct the misunderstandings and misperceptions that are at the root of Japan's deteriorating image.Instead, it seems to be using foreign pressure and even the trade conflict to expand its sphere of influence vis a vis other ministries. All this illustrates that Japanese ministries still have a "provider" mentality; they do not serve the people, and particularly not consumers.They serve the industries and the special-interest groups.The rest of the world accepted such methods when Japan was developing.Japanese put up with it because the government provided job stability and growing paychecks. Japan is not a political country.It is a bureaucratic country.The Diet plays a minor role compared with the powerful bureaucratic system.Most bills are drafted by bureaucrats, not politicians.The Diet doesn't normally even debate bills because the opposition parties are so often opposed to whatever LDP does that it would be a waste of time.So most bills are passed without full discussion; particularly difficult bills are passed in the absence of the opposition parties. A recent example is the 3% consumption tax on all commercial activities.This makes enormous sense in Japan, where direct tax accounts for more than 70% of revenues and the capture rate of direct tax is so unfair.If you are a salaried man, Amen! 100% captured.If you are a retailer, 50%, and a farmer, 30%.To correct this inequality, most people would have favored an indirect tax, like the consumption tax.But the bill was passed without debate in the Diet, in the absence of the opposition.As a result, the Japanese people didn't know what to expect when the new law was introduced on April 1.They were frustrated by the longer queues at the cashier and the small coins given as change.All of a sudden, prices were no longer in denominations of 100 or 200.They were 103 or 206.Pockets exploded with one-yen coins. While people were jingling their change, the LDP politicians were caught in scandals.Money, such as in Recruit's political donations, and women, as in the cases of Prime Minister Sosuke Uno and Secretary General Tokuo Yamashita, seldom have caused political scandals in Japan.Whereas most men were a bit ambivalent about the sex scandals (though they were furious about Recruit), women were upset about both and surged to the polls.In the recent Upper House and Tokyo metropolitan congressional elections, in which the Socialist Party won a runaway victory, 60% of all women voted, as opposed to the usual 40%.It is difficult to analyze how much of their anger was due to Recruit, the sex scandals, or the one-yen coins in their purses, but they obviously were voting to punish the LDP. Taken by surprise, the Socialist Party is busy changing its doctrines.It's now OK to deal with the U.S., but not the Soviet Union.Nuclear power plants are acceptable.The U.S.-Japan Security Treaty can continue, sort of.And so on. Against the rapid cosmetic overhaul of the Socialist Party the LDP has been paralyzed.Now is the time to reform the government from a provider, developing-country vanguard role to that of a modern, industrialized nation in which consumers have the ultimate choice.If the LDP, as currently composed, can't make the transformation, then it should split into two parties.One party could stand for consumer interests, small government, free trade and globalism to put Japan clearly among the most developed and open countries.The other party could continue on the traditional track of the LDP, representing the manufacturers' preference for larger government, control, regulation and protectionism. The LDP must make a decision immediately; Lower House elections must take place before June.In the current mood of the Japanese people, journalists and even some industrialists, giving power to the Socialists might be good for the LDP, cleansing it of past sins.We must not forget, however, that such a humble political experiment could cause a global tidal wave of shocks in real-estate and financial markets.At the most there is only nine months before the LDP fuse burns out. Mr. Ohmae is managing director of McKinsey & Co. in Japan.
DISASTER STATES aren't jumping to raise taxes for relief and recovery. Not yet, anyway.Just after Hurricane Hugo battered South Carolina, some officials talked of perhaps adding a penny to the state gasoline tax or raising property taxes.Gov. Campbell responded, "They're mentioning rope when there's been a hanging in the family." A spokesman says the governor believes he can avoid increases by relying on federal aid and shifting funds in state programs.Still, Hugo's impact may revive unsuccessful proposals to give local governments authority to levy sales taxes. A spokesman for North Carolina Gov. Martin says Hugo hasn't prompted proposals for state or local increases.California, where earthquake damage may top $5 billion, plans a special legislative session.Property-tax relief is likely.Legislators are talking about temporary rises in sales or gasoline taxes, although Gov. Deukmejian says they should be a last resort.Needs aren't clear, and the state constitution makes increasing taxes and spending very difficult. But some legislators think the time may be ripe to revise the constitution. THE IRS WILL PAY if its error burdens you with bank charges. Policy statement P-5-39 sets out terms.As a result of an erroneous IRS levy on a bank account, a taxpayer may incur administrative and overdraft charges.If the IRS admits its error and the charges have been paid, it will reimburse a taxpayer who hasn't refused to give timely answers to IRS inquiries or hasn't contributed to continuing or compounding the error.The IRS recently amended the policy to cover stop-payment charges for checks lost by the IRS. If the IRS asks for and gets a replacement for a check that it concedes it lost in processing, it will reimburse the taxpayer for the stop-payment charge on the original.Reimbursement claims must be filed with the IRS district or service-center director within a year after the expense accrues.If the IRS seeks late-payment interest because of the lost check, you should request interest abatement, publisher Prentice Hall notes. JUST FIVE ACRES MORE are all we need to feel really at home, they say. A couple we'll call the Blandings spent nearly $800,000 on a 15-acre plot and main home and have an old $175,000 mortgage exempt from the new limit on mortgage-interest deductions.They plan to expand the home site by buying five adjoining acres for $200,000, borrowed against a first mortgage on the five acres and also collateralized by the 15 acres.Their debt will be well under the $1 million limit -- on borrowing to acquire, build, or improve a home -- that qualifies for mortgage-interest deductions. As you can guess, the Blandings want to deduct home-mortgage interest on the $200,000 loan.But, IRS private ruling 8940061 notes, no rule or court case bears directly on the issue of adding land to a principal residence.So the IRS has drawn a rationale from the sale of a home site split in two and sold in different years to the same buyer; a court let the seller in that old case treat this as the sale of one residence. Thus, the IRS says, the Blandings' $200,000 loan is home-acquisition debt, and interest on it is fully deductible. EARTHQUAKE VICTIMS facing imminent filing and payment deadlines will get extensions and penalty waivers like those provided for Hugo's victims; IRS Notice 89108 has details.Notice 89-107 offers added relief for hurricane-hit concerns that must file pension and benefit-plan returns. REPORTS OF PAYMENTS to independent contractors for services must be filed by businesses, but don't bet that contractors' unreported income will be detected that way.The General Accounting Office estimates that 50% of IRS audits don't spot companies that fail to file the reports. UH HUH: A claim by Peter Testa of New York that a stranger paid him $500 to go into a bank and change $44,400 in small bills into large bills "is unconvincing," the Tax Court found.It held that Testa is taxable on $44,400 of unreported income. WHY BE A MIDDLEMAN for charitable gifts? a retiree asks. A retired electrical engineer we'll call Ben works part-time as a consultant, but he doesn't want to earn so much that Social Security reduces his benefits.So he has arranged for a university foundation to set up a scholarship fund for undergraduate engineering students.He plans to tell clients to pay certain fees directly to the foundation instead of to him; he would omit those fees from income reported on his return.So he asked the IRS if the plan would work. Well, notes IRS private ruling 8934014, "a fundamental principle" is that income must be taxed to whoever earns it.The rule goes back at least as far as a 1930 Supreme Court decision, Robert Willens of Shearson Lehman Hutton says.If you assign your income to another, you still have controlled its disposition and enjoyed the fruits of your labor, even if indirectly. Ben earns any fees sent directly to charity and is taxable on them, the IRS says; of course, he also may take a charitable deduction for them. BRIEFS: Ways and Means veteran Gephardt (D., Mo.) moves to the House Budget Committee; Rep. Cardin (D., Md.) replaces him. . . . Seattle's license fees for adult peep shows vary from those for other coin-operated amusements without serving a substantial government interest and are unconstitutional, the ninth-circuit appeals court holds for Acorn Investments Inc.
Blue-chip advertisers have plenty of complaints about the magazines they advertise in, ranging from inadequate consumer research to ad "clutter" and a seemingly unchecked proliferation of special interest magazines. Criticism from such big advertisers as Estee Lauder Inc., Colgate-Palmolive Co. and Seagram Co. put a damper on the euphoria at the American Magazine Conference here.The conference opened Monday with glowing reports about consumer magazines' growth in circulation and advertising revenue in the past year. "Magazines are not providing us in-depth information on circulation," said Edgar Bronfman Jr., president and chief operating officer of Seagram, in a panel discussion. "How do readers feel about the magazine?How deeply do they read it?Research doesn't tell us whether people actually do read the magazines they subscribe to." Reuben Mark, chief executive of Colgate-Palmolive, said advertisers lack detailed demographic and geographic breakdowns of magazines' audiences. "We need research that convinces us that magazines are a real value in reader's lives, that readers are really involved." The critics also lambasted the magazine industry for something executives often are very proud of: the growth in magazine titles during the 1980s.Leonard Lauder, president and chief executive officer of Estee Lauder, said consumer magazines are suffering from what he called "niche-itis,"the increasing number of magazines that target the idosyncratic interests of readers. "Niche-itis fragments our advertising dollars," said Mr. Lauder. "We are being over-magazined.We are constantly faced with deciding which partnerships {with magazines} we can keep." He added: "There's probably even a magazine for left-handed golfers . . . but the general interest magazine is something we all miss, and it should come back." Mr. Lauder also attacked what he sees as the wide imitation of Elle, a fashion magazine published by Diamandis Communications Inc., and criticized the practice of stacking ads at the front of magazines. "Readers don't want to face all those ad pages at the front of a magazine," he said. Magazine editors did not take the criticisms lying down. "We spend a fortune on research information," said Steve Burzon, publisher of Meredith Corp. 's Metropolitan Home. And Tina Brown, editor of Conde Nast Publications Inc. 's Vanity Fair, said advertisers are frequently asked to take advertising positions in the back of her magazine to relieve ad clutter. "But advertisers wouldn't think of it," she said. Bernard Leser, president of Conde Nast, added: "Our research shows we sell more of our heavier issues . . . because readers believe they are getting more for what they pay for."
Early this century, diamond mining in the magnificent dunes where the Namib Desert meets the Atlantic Ocean was a day at the beach.Men would crawl in the sand looking for shiny stones.It was as easy as collecting sea shells at Malibu. Men are still combing the beach with shovels and hand brushes, searching for that unusual glint.But only after a fleet of 336 gargantuan earthmoving vehicles belonging to De Beers Consolidated Mines Ltd., the world's diamond kingpins, do their work.Last year, 43 million tons of desert were moved from one dune to another to recover 934,242 carats, which comes to 46 tons of sand per carat, or one-fifth gram.Oh yes, the Atlantic was also pushed back 300 yards. "If there's diamonds out there, we'll get to them," says Les Johns, De Beers's engineering manager. Here, wedged between shifting dunes and pounding waves at the world's most inhospitable diamond dig, lies the earth's most precious jewel box.Thanks to centuries of polishing by Mother Nature -- first in the gentle current of the Orange River that carried the stones from South Africa's interior, then in the cold surf of the ocean, and finally in the coarse sands of the desert -- 98% of the diamonds uncovered are of gem quality.While other mines might yield more carats, a higher percentage of them go to industrial use. Since this treasure chest is too big to fit in a bank vault, it has been turned into one.Months after railway worker Zacharias Lewala first picked up a diamond from the sand in 1908, the German colonialists who controlled Namibia proclaimed a wide swath of the desert -- about 200 miles north from the Orange River and 60 miles inland from the Atlantic -- a restricted area, a designation normally reserved for military operations.When the Germans lost World War I, they lost Namibia to South Africa and the diamonds to Ernest Oppenheimer, patriarch of Anglo American Corp. and De Beers.Today, no one gets in or out of the restricted area without De Beers's stingy approval. The mining zone has thus remained one of the most desolate places in Africa.Ghost towns dot the Namib dunes, proving diamonds aren't forever.Oranjemund, the mine headquarters, is a lonely corporate oasis of 9,000 residents.Jackals roam the streets at night, and gemsbok, hardy antelope with long straight horns, wander in from the desert to drink from water sprinklers.On most days, the desert's heat and the cool of the ocean combine to create a mist like a damp rag.The wind, stinging with sand, never seems to stop. Still, miners from all parts of Namibia as well as professional staff from De Beers's head offices in South Africa and London keep coming.And Oranjemund boasts attractions besides diamonds.There are six video rental shops, three restaurants, one cinema and 34 sports and recreation clubs for everything from cricket to lawn bowling.The pride of Oranjemund is the 18-hole golf course -- with the largest sand trap in the world.Last year, when the rising Orange River threatened to swamp the course, the same engineers who are pushing back the Atlantic rushed to build a wall to hold back the flood. "Nothing is too good for our golf course," says Tony George, a mining engineer. Despite fears the mine may be partially nationalized by the new Namibian government following next month's elections freeing the country from South African control, De Beers engineers are working to extend the mine's productive life for another 25 years, from the current estimate of 10. Huge machines that look as though they came from the Star Wars desert-battle scene lumber among the dunes.Mechanized vacuum cleaners probe the sand like giant anteaters; a whirring ferris wheellike excavator, with buckets instead of seats, chews through layers of compacted sand; tracks and conveyor belts, shuttling sand to the screening plants, criss-cross the beach. Then there is the artifical sea wall, 600 yards long and 60 yards thick, jutting into the ocean.Made of sand, it receives around-the-clock maintainence against the battering waves.When the mining in front of the wall is complete, it is moved northward.A companion jetty that helps hold back the sea looks like a rusting junkyard.Engineers first used concrete blocks to bolster the barrier, but the ocean tossed them aside like driftwood.Then someone decided to try broken-down earthmoving equipment that, inexplicably, held against the waves. "The Caterpillar people aren't too happy when they see their equipment used like that," shrugs Mr. George. "They figure it's not a very good advert." Despite all these innovations, most of the diamonds are still found in the sand swept away by the men wielding shovels and brushes -- the ignominiously named "bedrock sweepers" who toil in the wake of the excavators.Laboring in blue and gray overalls, they are supposed to concentrate on cleaning out crevices, and not strain their eyes looking for diamonds.But should they spy one, the company will pay a bonus equal to one-third its value.For these workers at the bottom of the mine's pay scale, this is usually enough to overcome the temptation to steal -- a crime that could earn them up to 15 years in jail. Still, employees do occasionally try to smuggle out a gem or two.One man wrapped several diamonds in the knot of his tie.Another poked a hole in the heel of his shoe.A food caterer stashed stones in the false bottom of a milk pail.None made it past the body searches and X-rays of mine security.
For the real estate industry, a watchword for the 1990s will be buy, more than build. That's the word expected to be on the lips of the more than 3,000 developers, pension-fund advisers and real estate financiers slated to attend a four-day conference, beginning here today, sponsored by the Urban Land Institute.The ULI is a non-profit research and education group based in Washington, D.C., with 14,000 members nationwide. With the market overbuilt, builders are finding limited opportunities and increased risks.Developers and money managers are looking for bargains among the thousands of financially troubled properties around the country.Real estate professionals now often bill themselves as "turnaround experts" and "workout specialists." Conference attendees are expected to be buzzing about the workings of the recently formed Resolution Trust Corp., a federal agency charged with disposing of an estimated $200 billion of real estate dumped in government hands by insolvent savings and loans. Developers are also eyeing the real estate portfolios of major corporations.Some plan to pursue foreign development ventures, mostly in Europe.And other developers may shift from commercial to residential development in the U.S. "There aren't as many economically viable alternatives for real estate developers in this country as 10 years ago," says Charles Shaw, a Chicago-based real estate developer. "So developers are saying they will look into distressed properties.They'll go into someone else's pasture as long as it's greener than the one they're in now." Developers are also forming more joint ventures with pension funds and insurance companies that can finance big projects.The builders are more willing to give up some equity and rely on management and consulting fees to stay afloat in the soft market. "Developers are teaming up with institutions often acting as project managers," says Smedes York, ULI president and president of York Properties Inc., of Raleigh, N.C. "They are growing more pragmatic about their role." Real estate firms are also using their alliances with financial institutions to amass acquisition funds. "Why should you beat your brains out fighting the environmentalists, the neighborhood groups, dealing with traffic mitigation, sewers and fighting city hall, then try to convince a lender to lend you money in an overbuilt market when you can get pension fund money, buy a portfolio, sell off pieces off it and play your own game?" says Jack Rodman, managing partner of the Los Angeles office of Kenneth Leventhal Inc. a national accounting firm. But experts say that when it comes to distressed properties, finding diamonds in the rough isn't easy.The level of interest in the RTC's properties has been greater than expected, and has come from larger companies than initially anticipated, says Stan Ross, Leventhal's co-managing partner.And to succeed in the turnaround business, he says, developers may have to put in a lot of money and time. Finding pension funds and other sources willing to invest is a high priority.Quips David Shulman, director of real estate research for Salomon Brothers Inc.: "A theme of the Urban Land conference will be `take a pension fund manager to lunch. '"
Wall Street securities giant Salomon Inc. posted a big, unexpected earnings gain in the third quarter, buoyed by its securities trading and investment banking activities. Salomon said net income soared to $177 million, or $1.28 a share, from $65 million, or 38 cents a share, a year earlier.Revenue more than doubled to $2.62 billion from $1.29 billion.A Salomon spokesman said its stock, bond and foreign exchange trading, as well as its investment banking operations, were mostly responsible for the earnings jump. "The earnings were fine and above expectations," said Michael W. Blumstein, an analyst at First Boston Corp. Nevertheless, Salomon's stock fell $1.125 yesterday to close at $23.25 a share in New York Stock Exchange composite trading. "I suspect October wasn't as good as the third quarter, and they'll have difficulty matching the third quarter in the fourth quarter," Mr. Blumstein said. But some analysts say Salomon has turned the corner. "I upgraded the firm to my buy list because I certainly see signs of improvement," says Lawrence Eckenfelder, an analyst at Prudential-Bache Securities. "The market has been overly harsh to them." Analysts say investors remain skittish toward Salomon because of its volatile earnings.In the first quarter, Salomon had a record loss of $28 million on revenue of $1.54 billion.But in the second quarter, Salomon posted a record $253 million net on revenue of $2.33 billion.
Sheraton Corp. and Pan American World Airways announced that they and two Soviet partners will construct two "world-class" hotels within a mile of Red Square in Moscow. U.S. and Soviet officials hailed the joint project as a new indication of the further thaw in U.S.-Soviet relations. "This is an outstanding example of how the East and the West can work together for their mutual benefit and progress," said Soviet Ambassador Yuri Dubinin, who hosted a signing ceremony for the venture's partners at the Soviet embassy here. Commerce Secretary Robert Mosbacher, who attended the ceremony, called the undertaking a "historic step" in the evolution of U.S.-Soviet ties.He added that it likely will have a "mulitiplier effect" in stimulating further trade between the two countries. The project will be the largest U.S.-backed joint venture to be undertaken in the Soviet Union in recent years.One of the hotels, to be called the Sheraton Moscow, will have 450 rooms and will cost an estimated $75 million to build.The six-story hotel will be on Gorky Street and initially will cater mostly to business travelers.It will have a Russian tavern, an English pub, a discotheque and Japanese and Italian restaurants, according to a Sheraton announcement.The hotel is scheduled to open in 1992. The second hotel, to be called the Budapest Hotel, is to be constructed at a site even closer to Red Square.Details about its size and cost haven't yet been determined. Sheraton, a subsidiary of ITT Corp., will have a 40% share in the two hotels; Pan American, a subsidiary of Pan Am Corp., will have a 10% share.The Soviet owners will be Mossoviet, Moscow's city governing body, and Aeroflot, the Soviet national airline. Although a Finnish group has a minority interest in an already operating Moscow hotel, the Sheraton-Pan Am venture will be the first joint-venture hotels in the Soviet Union to have as much as 50% foreign ownership. U.S. companies account for less than 8% of the 1,000 or more Soviet joint ventures that have been announced since the Soviets began encouraging such undertakings in 1987.But some U.S. companies are negotiating projects that could be among the biggest ones to be launched.Chevron Corp., Amoco Corp., Archer-Daniels-Midland Co., and Eastman Kodak Co. are among the U.S. companies known to be considering such ventures. Sheraton and Pan Am said they are assured under the Soviet joint-venture law that they can repatriate profits from their hotel venture.The Sheraton Moscow will charge about $140 to $150 a day for each of its rooms, and it will accept payment only in currencies that can be traded in foreign exchange markets, according to a Sheraton executive. Thomas Plaskett, Pan Am's chairman, said the U.S. airline's participation is a natural outgrowth of its current arrangements with Aeroflot to jointly operate nonstop New York-Moscow flights.He said the rising volume of passenger traffic on this route justifies a major investment in new high-standard Moscow hotels.
Soichiro Honda's picture now hangs with Henry Ford's in the U.S. Automotive Hall of Fame, and the game-show "Jeopardy" is soon to be Sony-owned.But no matter how much Japan gets under our skin, we'll still have mom and apple pie. On second thought, make that just mom. A Japanese apple called the Fuji is cropping up in orchards the way Hondas did on U.S. roads.By 1995 it will be planted more often than any other apple tree, according to a recent survey of six apple-industry sages by Washington State University horticulturist Robert Norton.Some fruit visionaries say the Fuji could someday tumble the Red Delicious from the top of America's apple heap. It certainly won't get there on looks.Compared to the Red Delicious, the exemplar of apple pulchritude, the Fuji is decidedly more dowdy -- generally smaller, less-perfectly shaped, greenish, with tinges of red.To hear most U.S. growers tell it, we'd still be in Paradise if the serpent had proffered one to Eve. But how sweet it is.It has more sugar "than any apple we've ever tested," says Duane Greene, a University of Massachusetts pomologist, or apple scholar.It has a long shelf life and "doesn't fool the public," says Grady Auvil, an Orondo, Wash., grower who is planting Fujis and spreading the good word about them. "It doesn't look nice on the outside while getting mealy inside." Mr. Auvil, razor sharp at 83, has picked and packed a zillion pecks of apples over the past 65 years.He is known as the father of the U.S.-grown Granny Smith, a radically different apple that the conventional wisdom once said would never catch on.It did, shaking the apple establishment to its roots.Now, even more radical changes seem afoot as the grand old maverick of American apples plays the role of Hiroshi Appleseed. "The Fuji is going to be No. 1 to replace the Red Delicious," he says. The Delicious hegemony won't end anytime soon.New apple trees grow slowly, and the Red Delicious is almost as entrenched as mom.Its roots are patriotic -- with the first trees appearing in 1872 in an orchard near Peru, Iowa, to be exact.For more than 50 years, it has been the apple of our eye.A good Delicious can indeed be delicious.More than twice as many Red Delicious apples are grown as the Golden variety, America's No. 2 apple. But the apple industry is ripe for change. "Red Delicious has been overplanted, and its prices have dropped below the cost of production," says Washington State's Mr. Norton.The scare over Alar, a growth regulator that makes apples redder and crunchier but may be carcinogenic, made consumers shy away from the Delicious, though they were less affected than the McIntosh.The glut and consequent lower prices, combined with cancer fears, was a very serious blow to growers. "A lot of growers won't be around in a few years," says Mr. Norton, although they have stopped using Alar. One may be William Broderick, a Sterling, Mass., grower. "This is beautiful stuff," he says, looking ruefully at big boxes of just-picked Red Delicious next to his barn. "But I'm going to lose $50,000 to $60,000 on it.I'm going to have to get another job this year just to eat." Besides rotten prices, he has been hit recently by hail, a bark-nibbling horde of mice, fungi and bugs.Some 500 insects and 150 diseases wiggle, chew and romp through growers' nightmares, including maggots, mites, mildew, thrips, black rot and the flat-headed borer.Even if a grower beats them back, his $2,000 rented bees might buzz off to the neighbors' orchards instead of pollinating his, Mr. Broderick says. Though growers can't always keep the worm from the apple, they can protect themselves against the price vagaries of any one variety by diversifying -- into the recently imported Gala, a sweet New Zealand native; the Esopus Spitzenburg, reportedly Thomas Jefferson's favorite apple; disease-resistant kinds like the Liberty. "I've ripped out a lot of Delicious" and grafted the trees with many different shoots, says Steve Wood, a West Lebanon, N.H., grower, tramping through his 100-acre Poverty Lane Orchard on a crisp autumn day recently. "I've got 70 kinds of apples.Here's a Waltana," he exclaims, picking one off a tree.He bites it, scowls and throws it down. "It's a real dog." Supermarkets are getting into the variety act, too.They still buy apples mainly for big, red good looks -- that's why so many taste like woodchucks' punching bags.But freshness counts more than it once did, and stores are expanding shelf space for unconventional, but tastier, and often pricier, apples. "Rather than sell 39-cents-a-pound Delicious, maybe we can sell 79-cents-a-pound Fujis," says Chuck Tryon, perishables director for Super Valu Inc., a Minneapolis supermarket chain and food distributor. The Fuji is a product of meticulous Japanese pomological engineering, which fostered it 50 years ago at a government research orchard.Japanese researchers have bred dozens of strains of Fujis to hone its color, taste and shelf life.Now the best of them age as gracefully as Grannies, the industry's gold standard for storability.In the cornucopia of go-go apples, the Fuji's track record stands out: During the past 15 years, it has gone from almost zilch to some 50% of Japan's market. "The Japanese apple market is very keyed to high quality," says David Lane, a scientist at a Canadian horticulture research center in Summerland, British Columbia, and so apples are more of a delicacy there than a big food commodity.The U.S. Department of Agriculture estimates that this year Americans will eat about 40% more fresh apples per capita than the Japanese. The Fuji is still small potatoes in the U.S., sold mainly in fruit boutiques.But in California, says Craig Ito, a Fuji-apple grower, "There's a Fuji apple cult.Once somebody eats one, they get hooked." Mr. Auvil, the Washington grower, says that he could sell Fujis to Taiwan buyers at $40 a box if he had them. (Taiwan already is a big importer of Fujis from other places, he adds.) But his first crop won't be picked till next year. "I expect to see the demand exceed supply for Fujis for the next 10 to 15 years," he adds.Washington Red Delicious, by the way, are wholesaling for less than $10 a box these days. Mr. Auvil sees Fujis, in part, as striking a blow against the perversion of U.S. apples by supermarkets. "When the chain stores took over, there was no longer a connection between grower and consumer.A guy is sitting up in an office deciding what you're going to eat." After all, until the 1950s even the Red Delicious was a firm, delectable morsel.Then, as growers bred them more for looks, and to satisfy supermarket chains' demands of long-term storage, the Red went into decline.Now, those red applelike things stores sell in summer are fruitbowl lovely, but usually not good eating.They do deserve respect, however -- they are almost a year old, probably equal to about 106 in human years. The Fuji, to be sure, has blemishes too.It ripens later than most apples, and growing it in U.S. areas with chilly autumns may be tricky.Moreover, the frumpy Fuji must compete with an increasingly dolledup Delicious.Mr. Broderick, the Massachusetts grower, says the "big boss" at a supermarket chain even rejected his Red Delicious recently because they weren't waxed and brushed for extra shine.And he hadn't used hormones, which many growers employ to elongate their Delicious apples for greater eye appeal.Still, Mr. Auvil points out, Grannies became popular without big, red looks, so why not Fujis?He sees a shift in American values -- at least regarding apples -- toward more emphasis on substance and less on glitz. "Taste has finally come to the fore," he says.Or, for that matter, the core.
Procter & Gamble Co., helped by a gain from a lawsuit settlement and continued growth overseas, posted a 38% rise in fiscal first-quarter net income. Net for the quarter ended Sept. 30 climbed to $551 million, or $1.66 a share, from $400 million, or $1.18 a share, a year earlier.Per-share figures have been adjusted for a 2-for-1 stock split effective Oct. 20.Sales increased 6% to $5.58 billion from $5.27 billion. Earnings at the consumer-products giant were boosted by a gain of $125 million, or about 25 cents a share, stemming from last month's settlement of litigation with three of P&G's competitors over patents on P&G's Duncan Hines cookies. Excluding the gain, P&G's earnings were close to analysts' predictions of about $1.40 a share for the quarter.Wall Street had expected a modest rise in the company's domestic sales and earnings, and more substantial increases in overseas results.One factor helping sales and earnings was a 3% price rise for most P&G products, except coffee, analysts said. Unit volume, or amount of products shipped, rose about 11% in the international segment, with P&G continuing to win market share in Japan's diaper and detergent markets.Jay Freedman, analyst with Kidder, Peabody & Co., said P&G's Always sanitary napkin, sold under the Whisper name in Japan, has firmly established itself as a leading brand.He figures P&G will expand its personal-care product line in Japan to "continue that momentum." P&G's U.S. shipments were up just 1%, partly because the company decided to shift more promotions and sales for health and beauty products to the fiscal second quarter.Hugh Zurkuhlen, analyst with Salomon Bros., predicts the shift will mean P&G's sales growth in the second quarter will be "in the double digits." Also slowing growth in the U.S. were lackluster results for P&G's cooking oils, which had a strong year-earlier first quarter.Last year's drought in the Midwest prompted retailers to stock up on oils ahead of anticipated price increases, boosting sales for Crisco and Puritan oils, analysts said. For fiscal 1990, analysts expect P&G's sales to continue to grow, with earnings climbing between 15% and 20%.Lynne Hyman, vice president of equity research for First Boston Corp., expects P&G to post net of about $4.20 a share, on a post-split basis. "But I'm recognizing there's a good chance they'll do a bit better than that," she says.In fiscal 1989, P&G earned $3.56 a share, adjusted for the stock split. One big factor affecting the fiscal second half will be the new stewardship of Edwin L. Artzt, who becomes chairman and chief executive officer in January.Because of his remarkable success turning around P&G's international operations, analysts have high hopes for his tenure. "If he does to the domestic operations what he did internationally," says Mr. Zurkuhlen, "this company will earn $6 or $7 a share in a few years."
The Bush administration said it is submitting a "comprehensive" proposal for overhauling agricultural trade that could help break an impasse in the current round of multilateral trade negotiations. The proposal reiterates the U.S. desire to scrap or reduce a host of trade-distorting subsidies on farm products.But it would allow considerable flexibility in determining how and when these goals would be achieved.The U.S. plan also would ease the transition to freer agriculture trade by allowing some countries to convert non-tariff barriers into tariffs that, together with existing tariffs, then would be phased out over 10 years. Trade Representative Carla Hills, who along with Agriculture Secretary Clayton Yeutter unveiled the proposal, said she is confident it will gain considerable support from the U.S.'s trading partners.Mr. Yeutter, seeking to allay European objections to an earlier U.S. plan that called for eliminating all farm-trade barriers by the year 2000, said the new U.S. proposal wouldn't "put farmers out of business" but would only encourage them to "grow what the markets desire instead of what the government wants." The U.S. is submitting the proposal today in Geneva, hoping that the initiative will spur members of the General Agreement on Tariffs and Trade to reach agreement on new trade rules before their current negotiating round concludes in December 1990.Another U.S. proposal filed Monday urges more "fair play" in services trade, including predictable and clear rules and equality in the treatment of foreign and domestic service companies. Unlike the earlier U.S. farm-trade proposal which struck European countries as too extreme, the latest plan would provide some room for maneuver.For instance, the new U.S. package makes clear there would be a transition period during which GATT members could use a combination of tariffs and quotas to cushion their farmers from foreign competition.It also says countries could temporarily raise tariffs on certain products if they experience an unusually heavy volume of imports. Instead of proposing a complete elimination of farm subsidies, as the earlier U.S. proposal did, the new package calls for the elimination of only the most tradedistorting ones.Less objectionable ones would be subject only to some restraints, and others with a "relatively minor trade impact" would be allowed to continue under certain conditions. The new U.S. plan also would establish procedures to prevent countries from using health and sanitation rules to impede trade arbitrarily.The goal would be to resolve disputes such as one prompted by the European Community's current attempt to bar imports of beef from hormone-treated U.S. cattle.The U.S. contends that the rules aren't justified on health grounds. To encourage more competition among exporting countries, the U.S. is proposing that export subsidies, including tax incentives for exporters, be phased out in five years.
The Voting Rights Act of 1965 was enacted to keep the promise of the Fifteenth Amendment and enable Southern blacks to go to the polls, unhindered by literacy tests and other exclusionary devices.Twenty-five years later, the Voting Rights Act has been transformed by the courts and the Justice Department into a program of racial gerrymandering designed to increase the number of blacks and other minorities -- Hispanics, Asians and native Americans -- holding elective office. In the 1980s, the Justice Department and lower federal courts that enforce the Voting Rights Act have required state legislatures and municipal governments to create the maximum number of "safe" minority election districts -- districts where minorities form between 65% and 80% of the voting population.The program has even been called upon to create "safe" white electoral districts in municipalities where whites are the minority. Although Section 2 of the act expressly disclaims requiring that minorities win a proportional share of elective offices, few municipal and state government plans achieve preclearance by the Justice Department or survive the scrutiny of the lower federal courts unless they carve out as many solidly minority districts as possible. The new goal of the Voting Rights Act -- more minorities in political office -- is laudable.For the political process to work, all citizens, regardless of race, must feel represented.One essential indicator that they are is that members of minority groups get elected to public office with reasonable frequency.As is, blacks constitute 12% of the population, but fewer than 2% of elected leaders.But racial gerrymandering is not the best way to accomplish that essential goal.It is a quick fix for a complex problem. Far from promoting a commonality of interests among black, white, Hispanic and other minority voters, drawing the district lines according to race suggests that race is the voter's and the candidate's most important trait.Such a policy implies that only a black politician can speak for a black person, and that only a white politician can govern on behalf of a white one.Examples of the divisive effects of racial gerrymandering can be seen in two cities -- New York and Birmingham, Ala.When they reapportion their districts after the 1990 census, every other municipality and state in the country will face this issue.New York City: Racial gerrymandering has been a familiar policy in New York City since 1970, when Congress first amended the Voting Rights Act to expand its reach beyond the Southern states.In 1972, the Justice Department required that the electoral map in the borough of Brooklyn be redrawn to concentrate black and Hispanic votes, despite protests that the new electoral boundaries would split a neighborhood of Hasidic Jews into two different districts. This year, a commission appointed by the mayor to revise New York's system of government completed a new charter, expanding the City Council to 51 from 35 members.Sometime in 1991, as soon as the 1990 census becomes available, a redistricting panel will redraw the City Council district lines.The Charter Revision Commission has made it clear that in response to the expectations of the Justice Department and the commission's own commitment to enhancing minority political leadership, the new district lines will be drawn to maximize the number of solidly minority districts.Blacks and Hispanics currently make up 38% of the city's population and hold only 25% of the seats on the council. Several of the city's black leaders, including Democratic mayoral nominee David Dinkins, have spoken out for racial gerrymandering to accord blacks and Hispanics "the fullest opportunity for representation." In this connection, it is important to note that several members of New York's sitting City Council represent heterogeneous districts that bring together sizable black, Hispanic, and non-Hispanic white populations -- Carolyn Maloney's 8th district in northern Manhattan and the south Bronx and Susan Alter's 25th district in Brooklyn, for example.To win their seats on the council, these political leaders have had to listen to all the voices in their district and devise public policies that would benefit all.Often they have found that the relevant issue is not race, but rather housing, crime prevention or education. Birmingham, Ala.: The unusual situation in Birmingham vividly illustrates the divisive consequences of carving out safe districts for racial minorities.In Birmingham, which is 57% black, whites are the minority.Insisting that they are protected by the Voting Rights Act, a group of whites brought a federal suit in 1987 to demand that the city abandon at-large voting for the nine member City Council and create nine electoral districts, including four safe white districts.The white group argued that whites were not fully and fairly represented, because in city-wide elections only black candidates or white candidates who catered to "black interests" could win. No federal court has ruled that the Voting Rights Act protects a white minority, but in June the Justice Department approved a districting plan for Birmingham that carves out three white-majority districts and six black-majority districts.Richard Arrington, Birmingham's black mayor, lamented the consequences. "In the past, people who had to run for office had to moderate their views because they couldn't afford to offend blacks or whites," he said. "Now you go to districts, you're likely to get candidates whose views are more extreme, white and black, on racial issues." Two hundred years ago, critics of the new United States Constitution warned that the electoral districts for Congress were too large and encompassed too many different economic interests.A small farmer and a seaport merchant could not be represented by the same spokesman, they said.But James Madison refuted that argument in one of the most celebrated political treatises ever written, No. 10 of the Federalist Papers.Madison explained that a representative's duty was to speak not for the narrow interests of one group but instead for the common good.Large, heterogeneous election districts would encourage good government, said Madison, because a representative would be compelled to serve the interests of all his constituents and be servile to none. Madison's noble and unifying vision of the representative still can guide us.As long as we believe that all Americans, of every race and ethnic background, have common interests and can live together cooperatively, our political map should reflect our belief.Racial gerrymandering -- creating separate black and white districts -- says that we have discarded that belief in our ability to live together and govern ourselves as one people. Ms. McCaughey is a constitutional scholar at the Center for the Study of the Presidency in New York.
Sales of North American-built cars and trucks plunged 20.5% in mid-October from a year earlier, as domestic manufacturers paid the price for heavy incentives earlier this year. "People are waiting for {new} factory giveaways," said Ben Kaye, sales manager of Bob Brest Auto World in Lynn, Mass., whose sales are slow. This trend appears to be especially true at General Motors Corp., which used both dealer and consumer incentives to ignite sales in August and September.Since then, deliveries have slumped.GM's car sales dropped 24.8% in mid-October to 69,980, while truck sales fell 26% to 37,860.GM also had dismal results in the first 10 days of the month, while other auto makers reported mixed results. All of the Big Three suffered in the just-ended period, however, with sales of all domestically made cars, including those built at Japanese-managed plants, falling 19% to 158,863 from a year earlier.The seasonal adjusted annual selling rate was six million vehicles, a small improvement from the 5.8 million rate of early October, but a big drop from the 7.1 million rate a year ago. Sales of domestically made trucks also continued to be sluggish in mid-October, dropping 22.8% to 94,543 from a year ago. The Big Three auto makers already have slashed fourth-quarter production plans 10.4% below year-ago levels, but that may not be enough to prevent inventories from ballooning if sales don't improve.Industry analyst John H. Qualls, a vice president with Hill & Knowlton in St. Louis, forecasts that domestic auto makers will have a 93-day supply of cars at the end of the year, even if car sales improve to a 6.5 million vehicle rate for the quarter.Ford Motor Co. reported a 21.2% drop in sales of domestic-made cars to 46,995 and a 24.2% drop in domestic trucks to 31,143.The sales are being dragged down by a glut of 1989 vehicles, said Joel Pitcoff, a Ford analyst.The earlier use of incentives depleted the market of "scavengers" for bargain-basement 1989 cars, he said. Town & Country Ford in Charlotte, N.C., still needs to move about 850 1989 cars and trucks.Business had been fairly strong until Hurricane Hugo hit the area, but has been down since. Chrysler Corp. also hit the rocks in mid-October.The No. 3 U.S. auto maker had a 23.7% plunge in car sales to 22,336 and a 17.5% drop in truck sales to 22,925, which include its minivans and Jeeps. Honda Motor Co., which continues to have short supplies of domestically made Accords, saw its sales of North American-built cars fall 14.1% to 8,355.But sales of domestic cars and trucks at Nissan Motor Corp. rose 26.1% to 5,651.A Nissan spokesman attributed the increase to the use of incentives this year and not a year ago and to higher fleet sales.Toyota Motor Corp., which opened a plant in Georgetown, Ky., last year, saw sales triple to 6,256 vehicles. > a-Totals include only vehicle sales reported in the period. c-Domestic car d-Percent change greater than 999%. x-There were 9 selling days in the most recent period and 9 a year earlier.Percentage differences based on daily sales rate rather than sales volume.
Short interest in Nasdaq over-the-counter stocks rose 6% as of mid-October, its biggest jump since 6.3% last April. The most recent OTC short interest statistics were compiled Oct. 13, the day the Nasdaq composite index slid 3% and the New York Stock Exchange tumbled 7%.The coincidence might lead to the conclusion that short-sellers bet heavily on that day that OTC stocks would decline further. As it happens, the Nasdaq composite did continue to fall for two days after the initial plunge.However, the short interest figures reported by brokerage and securities clearing firms to the National Association of Securities Dealers include only those trades completed, or settled, by Oct. 13, rather than trades that occurred on that day, according to Gene Finn, chief economist for the NASD. Generally, it takes five business days to transfer stock and to take the other steps necessary to settle a trade. The total short interest in Nasdaq stocks as of mid-October was 237.1 million shares, up from 223.7 million in September but well below the record level of 279 million shares established in July 1987.The sharp rise in OTC short interest compares with the 4.2% decline in short interest on the New York Stock Exchange and the 3% rise on the American Stock Exchange during the September-October period. Generally, a short seller expects a fall in a stock's price and aims to profit by selling borrowed shares that are to be replaced later; the short seller hopes the replacement shares bought later will cost less than those that were sold.Short interest, which represents the number of shares borrowed and sold, but not yet replaced, can be a bad-expectations barometer for many stocks. Among 2,412 of the largest OTC issues, short interest rose to 196.8 million shares, from 185.7 million in 2,379 stocks in September.Big stocks with large short interest gains as of Oct. 13 included First Executive, Intel, Campeau and LIN Broadcasting. Short interest in First Executive, an insurance issue, rose 55% to 3.8 million.Intel's short interest jumped 42%, while Campeau's increased 62%.Intel makes semiconductors and Campeau operates department-store chains and is strained for cash. Meritor Savings again had the dubious honor of being the OTC stock with the biggest short interest position on Nasdaq.Meritor has headed the list since May.First Executive and troubled Valley National Corp. of Arizona were next in line. Short selling isn't necessarily bad for the overall market.Shorted shares must eventually be replaced through buying.In addition, changes in short interest in some stocks may be caused by arbitrage.For example, an investor may seek to profit during some takeover situations by buying stock in one company involved and shorting the stock of the other. Two big stocks involved in takeover activity saw their short interest surge.Short interest in the American depositary receipts of Jaguar, the target of both Ford Motor and General Motors, more than doubled. Nasdaq stocks that showed a drop in short interest included Adobe Systems, Class A shares of Tele-Communications and takeover targets Lyphomed and Jerrico. The NASD, which operates the Nasdaq computer system on which 5,200 OTC issues trade, compiles short interest data in two categories: the approximately two-thirds, and generally biggest, Nasdaq stocks that trade on the National Market System; and the one-third, and generally smaller, Nasdaq stocks that aren't a part of the system. Short interest in 1,327 non-NMS securities totaled 40.3 million shares, compared with almost 38 million shares in 1,310 issues in September. The October short interest represents 1.04 days of average daily trading volume in the smaller stocks in the system for the reporting period, compared with 0.94 day a month ago. Among bigger OTC stocks, the figures represent 2.05 days of average daily volume, compared with 2.14 days in September. The adjacent tables show the issues in which a short interest position of at least 50,000 shares existed as of Oct. 13 or in which there was a short position change of at least 25,000 shares since Sept. 15 (see accompanying tables -- WSJ Oct. 25, 1989).
The Nasdaq over-the-counter market didn't fully recover from a selling stampede, and closed down 1.2%. The effects on the market of the mostly computer-driven sell-off among exchange-listed stocks irked many market makers, who watched the Nasdaq Composite Index tumble in sympathy with the Dow Jones Industrial Average, and then saw it get left behind in the subsequent rally. After plummeting 1.8% at one point during the day, the composite rebounded a little, but finished down 5.52, at 461.70.In contrast, the industrial average recovered almost completely from its skid and closed down 0.1%.The New York Stock Exchange Composite was 0.4% lower for the day. As usual, the over-the-counter market's biggest technology stocks were hardest hit. Microsoft, battered by profit taking in recent sessions, sank as much as 4; but it finished at 80 7/8, down 2 1/4 on volume of one million shares. MCI Communications, the most active issue, finished down 5/8 to 42 1/8.MCI traded as low as 41 3/8 during the session.Other active stocks included Jaguar, whose American depositary receipts added 1/8 to 11 1/4.Apple Computer improved 7/8 to 47 5/8; Intel slipped 1/4 to 33 1/4, and Valley National Corp. was up 1/8 to 15 1/8. "The market started with several strikes against it," said Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, referring to news that the labor-management buy-out of UAL Corp. continued to unravel, and reports that the junk-bond market is disintegrating. But the computer-guided selling in response to those developments dealt a serious blow to the over-the-counter market, Mr. DaPuzzo said. Even though the over-the-counter market usually doesn't fall by as much as listed stocks during program-selling blitzes, he said, "when the market does recover, the damage is done and it leaves Nasdaq down more than the Big Board." Mr. DaPuzzo also complained that the sharp swings in stock prices lately is scaring away retail and foreign investors.While Shearson doesn't do computer-guided program trading for its own account, the firm does execute orders for clients involved in the buying and selling of shares tied to movements in certain stock indexes, Mr. DaPuzzo acknowledged. The volatility inherent in program trading troubled other traders, too.They don't like the risks they are forced to assume when prices swing so drastically.Market makers are supposed to keep supplies of stocks on hand to maintain orderly trading when imbalances occur.That means that on days when prices are tumbling and sellers abound they must be willing to buy shares from sellers when no one else will.In such an environment, a market maker can absorb huge losses. But the recent volatility in stock prices caused by the program trading has made some market makers less willing to soak up the stocks that are for sale.The market makers say they aren't comfortable carrying big positions in stocks because they realize prices can tumble quickly. The situation makes it harder to buy and sell shares quickly, exacerbating the rise and fall in stock prices during program-dominated trading.Groused Robert Antolini, head of over-the-counter trading at Donaldson, Lufkin & Jenrette: "It's making it tough for traders to make money." He said that when sell programs kick in, many traders believe that "there's no sense in sticking your nose out because you're an instant loser." Kinder-Care Learning Centers added 1/4 to 4 7/8 on 461,200 shares.Lodestar Group said it will make a $6-a-share offer for the remaining Kinder-Care Learning Center common stock if it acquires a majority of the company's shares in a pending rights offering by Kinder-Care Learning Center's parent, Kinder-Care Inc. Shares of KinderCare Inc. closed at 3 1/2, also up 1/4, on volume of 700,000. Ohio Casualty dropped 2 1/8 to 49 1/2.The company posted third-quarter earnings of 95 cents a share, down from $1.26 a year earlier.The company estimated that losses from Hurricane Hugo reduced net income by 32 cents a share in the most recent quarter. The company said losses from the Oct. 17 earthquake in California haven't yet been determined, but that it provides earthquake coverage to about 1,400 properties in the stricken area.Any quake-related losses will be reported in the fourth quarter, the company said. North Atlantic Industries jumped 1 to 5 3/4.The electronics-instruments maker is to be acquired by Asset Management Associates for $7.25 a share. LIN Broadcasting slid 1 3/8 to 108 3/4, despite reporting third-quarter net of 46 cents a share, up from 39 cents the previous year.The company said the latest quarter included about $3.4 million in special legal and financial advisory costs related to McCaw Cellular Communications' bid for the company and LIN's merger pact with BellSouth.McCaw was unchanged at 40. XL/Datacomp slid 2 1/4 to 16 1/2 amid continuing concerns about the company's contract negotiations with International Business Machines.IBM is reviewing its entire business-partners program, and XL/Datacomp confirmed earlier this month that it was in talks with the company about possible modifications to its current IBM-remarketer contract.Remarketers make modifications to IBM's computer hardware and resell the products. Omni Capital Group surged 1 3/4 to 16 1/4.The company said net rose to 38 cents a share in its fiscal-first quarter ended Sept. 30, from 35 cents a shares a year ago.
Few people are aware that the federal government lends almost as much money as it borrows.From 1980 to 1988, while federal budget deficits totaled $1.41 trillion, the government issued $394 billion of new direct loans and an additional $756 billion of new primary loan guarantees.These figures omit secondary guarantees, deposit insurance, and the activities of Government-Sponsored Enterprises (a huge concern in its own right, as detailed on this page May 3). Federal credit programs date back to the New Deal, and were meant to break even financially.Since the 1950s, federal lending has experienced extraordinary growth in credit volume, subsidy rates, and policy applications, spurred on by the growth of government in general and budget gimmicks and deceptive management in particular.As we will see, many of these obligations don't show up as part of the federal deficit. But recent events indicate that federal credit is out of control.Student loan defaults remain high at about 12%, and the program has been rocked by allegations of fraud and mismanagement.Farmers Home Administration (FmHA) loans have turned into de facto giveaway programs; losses over the next three years are expected to exceed $20 billion.Defaults on Veterans Affairs loan guarantees have quadrupled in the past eight years. Last month, the General Accounting Office reported that defaults in Federal Housing Administration guarantees were five times as high as previously estimated, and that FHA's equity fell to minus $2.9 billion.GAO's findings are particularly troubling because the FHA has about $300 billion in obligations outstanding and had previously been considered one of the most financially secure credit programs. Scores of other credit programs, subsidizing agriculture, small business, exporters, defense, energy, transportation and others, are less visible but in no better shape.If the programs continue their present path, the potential government losses are staggering: The federal government holds $222 billion in direct loans outstanding and backs an additional $550 billion in primary guarantees. (Secondary guarantees of pools of FHA- and VA-backed loans by the agency known as Ginnie Mae currently exceed $330 billion.) Although external events have contributed to the morass, the principal causes of the current crisis are internal and generic to all programs.To reduce the risks while still retaining the legitimate benefits these programs can provide, credit policy must: 1.Use credit to improve the operation of capital markets, not to provide subsidies. There is a fundamental conflict between providing a subsidy and maintaining the integrity of a credit program.If the program is meant to provide a subsidy, collecting the debt defeats the original goal.Thus, subsidized loans tend to turn into giveaway programs, with increasing subsidy and default rates over time.To avoid this problem, government should issue credit only if it intends to use every legal method to collect. In contrast, credit programs can be appropriate tools to improve the operation of capital markets.For example, legal restrictions on interstate banking once inhibited the supply of credit to the agricultural sector.Farm lending was enacted to correct this problem by providing a reliable flow of lendable funds.However, this in no way justifies the huge government subsidies and losses on such loans. Credit policy should separate these two competing objectives and eliminate aspects that provide the subsidy.For example, student loans currently attempt to subsidize college attendance and mitigate problems created by the fact that students' future earnings are not accepted as collateral.The program provides highly subsidized loans to any student whose family earns less than a particular amount.High default rates, a low interest rate, and government coverage of all interest costs while the student is in school make program costs extremely high.Families that do not need the loan can make money simply by putting the loan in the bank and paying it back when the student graduates. In contrast, a student loan program that was meant solely to correct capital-market imperfections would allow loans for any student, regardless of family income, at market or near-market rates.While the student was in school, interest costs would either be paid by the student or added to the loan balance.This program, combined with cash grants to needy students, would reduce program costs and much more effectively target the intended beneficiaries. 2.Provide better incentives. Given the structure of most credit programs, it is surprising that default rates are not even higher.Guarantee rates are typically 100%, giving lenders little reason to screen customers carefully.Reducing those rates moderately (say, to 75%) would still provide substantial assistance to borrowers.But it would also encourage lenders to choose more creditworthy customers, and go a long way toward reducing defaults.For example, the Small Business Administration has had reasonable success in reducing both guarantee rates and default rates in its Preferred Lenders' Program. Borrowers' incentives are equally skewed.Since the government has a dismal record of collecting bad debts, the costs to the borrower of defaulting are usually low.In addition, it is often possible to obtain a new government loan even if existing debts are not paid off.Simple policy prescriptions in this case would be to improve debt collection (taking the gloves off contracted collection agencies) and to deny new credit to defaulters.These provisions would be difficult to enforce for a program intended to provide a subsidy, but would be reasonable and effective devices for programs that attempt to offset market imperfections. 3.Record the true costs of credit programs in the federal budget. Since the budget measures cash flow, a new $1 direct loan is treated as a $1 expenditure, even though at least part of the loan will be paid back.Loan guarantees don't appear at all until the borrower defaults, so new guarantees do not raise the deficit, even though they create future liabilities for the government.By converting an expenditure or loan to a guarantee, the government can ensure the same flow of resources and reduce the current deficit.Predictably, guarantees outstanding have risen by $130 billion since 1985, while direct loans outstanding have fallen by $30 billion. The true budgetary cost of a credit subsidy is the discounted value of the net costs to government.This figure could be estimated using techniques employed by private lenders to forecast losses, or determined by selling loans to private owners (without federal guarantees).Neither technique is perfect, but both are better than the current system, which misstates the costs of new credit programs by amounts that vary substantially and average about $20 billion annually, according to the Congressional Budget Office.A budget that reflected the real costs of lending would eliminate incentives to convert spending or lending programs to guarantees and would let taxpayers know what Congress is committing them to. 4.Impose standard accounting and administrative practices. Creative accounting is a hallmark of federal credit.Many agencies roll over their debt, paying off delinquent loans by issuing new loans, or converting defaulted loan guarantees into direct loans.In any case, they avoid having to write off the loans.Some agencies simply keep bad loans on the books; as late as 1987, the Export-Import Bank held in its portfolio at face value loans made to Cuba in the 1950s.More seriously, FmHA has carried several billion dollars of defaulted loans at face value.Until GAO's recent audit, FHA books had not been subject to a complete external audit in 15 years. The administration of federal credit should closely parallel private lending practices, including the development of a loan loss reserve and regular outside audits.Establishing these practices would permit earlier identification of emerging financial crises, provide better information for loan sales and budgeting decisions, and reduce fraud. Government lending was not intended to be a way to obfuscate spending figures, hide fraudulent activity, or provide large subsidies.The reforms described above would provide a more limited, but clearer, safer and ultimately more useful role for government as a lender.Without such reforms, credit programs will continue to be a large-scale, high-risk proposition for taxpayers. Mr. Gale is an assistant professor of economics at UCLA.
Probably the most clear-cut Soviet violation, for example, is the Krasnoyarsk radar. -- "Arms Control Reality," Nov. 20, 1984, the first of some 20 Journal editorials saying that Krasnoyarsk violated the ABM treaty. -- "Whether the installation is for early warning or space track, it clearly is not deployed," the lawmakers said. "Thus we judge it to be not a violation of the ABM treaty at this time." The delegation included a reporter from the New York Times, aides to Sen. Edward M. Kennedy and Rep. Les AuCoin, and Natural Resources Defense Council staff members. -- The Washington Post, Sept. 9, 1987. -- The U.S.S.R. has taken unprecedented unilateral measures of openness, by giving American representatives a possibility to inspect the building site of the Krasnoyarsk radar as well as radar vans in the areas of Gomel and Moscow, so as to see for themselves that there are no violations of the ABM treaty of 1972 on the part of the Soviet Union. -- Letter from Eduard Shevardnadze to U.N. Secretary-General Perez de Cuellar, reported in Tass, June 10, 1988. -- The construction of this station equal in size to the Egyptian pyramids constituted, I say it directly, a clear violation of ABM. -- Eduard Shevardnadze, Oct. 23, 1989. We're happy, we guess, to receive confirmation of the Krasnoyarsk violation from the Soviets, five years after we started writing about it.Perhaps even the American apologists will now accede.Without question, something intriguing is going on in the policy chambers of the Politburo.As it bids for new agreements, new loans and indeed admission to the civilized world, the Soviet government has recognized it has a credibility problem.So after 70 years, it is confessing the obvious, hoping to be believed about other things. It's not enough.If the Soviets want to be believed, they need to start telling the truth about more than the totally obvious.Our own test of "glasnost's" authenticity would be a Soviet decision to open itself to a complete international examination of one of the most troubling mysteries in U.S.-Soviet relations -- the reported 1979 anthrax outbreak at a Soviet military facility in Sverdlovsk. The U.S. government has never waivered in its assessment of this incident as an accident at a biological weapons facility there, and hence a violation of the 1972 Biological Weapons Convention.The Pentagon's recently issued "Soviet Military Power," though in general adopting a softer line, repeated the Sverdlovsk assessment.It also was detailed in Congressional testimony this past February: An explosion at the Microbiology and Virology Institute in Sverdlovsk released anthrax germs that caused a significant number of deaths. Since Mr. Shevardnadze did not address this topic before the Supreme Soviet, the Soviet Union's official position remains that the anthrax deaths were caused by tainted meat.We doubt this claim just as we doubted Mr. Shevardnadze's assurance last year that Krasnoyarsk didn't violate the ABM treaty.And just as we did not believe the tendentious claims of the Congressmen and arms-control advocates who visited Krasnoyarsk, we are in no way persuaded by the assent to the tainted-meat theory by a U.S. team of scientists who met with Soviet counterparts in Washington last year. The Soviets' explanation is that the anthrax came from one lot of animal feed made from the bones of cattle that grazed on soil that was naturally infected with anthrax spores.Harvard's Matthew Meselson -- who we read has sold something called the "scientific community" on the notion that "yellow rain" attacks on the Laotian Hmong were in fact the result of fecal showers by giant bees -- found the Soviet anthrax scenario "completely plausible." We don't believe it.And we certainly do not believe that Mr. Gorbachev or any of his emissaries yet deserve to have the West take their word for it.Sverdlovsk is a large gray cloud over glasnost and indeed over the legitimacy of the arms-control process itself. The U.S. government's Sverdlovsk complaint, as with Krasnoyarsk, is no mere political posturing.Biological weapons violations have figured little in political debate, and indeed have not been pressed vigorously enough by the U.S. government.But the stated U.S. position is detailed and specific, and the prospect of biological warfare is profoundly chilling. The Soviets should be willing to set in motion a process that would allow them to acknowledge that Sverdlovsk violated the 1972 agreement or, alternatively, that would give U.S. specialists reasonable confidence that this was a wholly civilian accident.Until that happens, glasnost cannot begin to deserve the kind of credibility Mr. Shevardnadze was bidding for with his confessions on Monday.
Manville Corp. said it offered to buy $500 million of its convertible preferred stock from the Manville Personal Injury Settlement Trust in a move that would improve the trust's liquidity and reduce the potential number of Manville shares outstanding. Manville said it made the offer within the past several weeks as part of an effort to improve shareholder value.It said it would purchase the stock at market price. Manville and a spokeswoman for the trust said that the two are discussing the proposal but a decision hasn't been made. "We are considering that offer along with all other alternatives," the trust spokeswoman said. "We need to look at how to maximize our cash flow to pay our beneficiaries." The trust, created as part of Manville's bankruptcy-law reorganization to compensate victims of asbestos-related diseases, owns 7.2 million of the Series A convertible preferred shares, which are each convertible into 10 Manville common shares.The trust also owns half of Manville's 48 million common shares outstanding. Based on Manville's closing price yesterday of $9.25 a share, Manville's offer would purchase about 5.4 million of its preferred shares, or about 75% of the trust's preferred stock holding. In addition to the stock and 20% of Manville's profits beginning in 1992, the trust is supposed to receive $2.5 billion over its 27-year life.But it initially was funded with about $765 million and may soon face a cash crunch.As of June 30, it had settled about 15,000 of 81,000 claims filed and its unpaid claims totaled $136 million, a large portion of its $268 million in cash and marketable securities.Since most of its assets are tied to Manville, a forest and building products concern, the trust might also want to diversify its holdings. As part of its offer, Manville said it requested changes in some covenants between it and the trust to allow Manville to "reflect a more typical corporate ownership and financial structure." A Manville spokesman wouldn't elaborate on the proposed changes.But he said they are "to a large degree, housekeeping," although some may generate some disagreement. Manville said the shares issued to the trust were intended to be sold, as needed, and that Manville has the right of first refusal to buy those shares.
Northeast Utilities raised its bid for Public Service Co. of New Hampshire, which is operating under Bankruptcy Code protection, to $2.25 billion from $1.85 billion. Northeast's raised bid, which was supported by PS of New Hampshire's official shareholder committee, is a prelude to what is expected to be a round of higher bids by the other groups trying to acquire the company, the largest utility in New Hampshire. The $2.25 billion value claimed by Northeast, based in Hartford, Conn., is the highest yet given to a bid.Some of the three other bidding groups are expected to increase their offers tomorrow, a date set for revised offers by a bankruptcy court judge.A hearing is set for Nov. 15, but participants don't expect a resolution until July 1990. Under the new Northeast Utilities plan, it would pay $1.65 billion in cash to creditors and assume $100 million in pollution control bonds.Secured creditors would recover both principal and interest, while unsecured creditors would receive only principal and interest accrued before PS of New Hampshire filed for Bankruptcy Code protection in January The biggest change in Northeast's offer was in improvements made for equity holders who had been given short shrift previously.Assuming full operation of the Seabrook nuclear power plant, which is completed but isn't yet operating, equity holders would receive up to $500 million in cash, preferred stock and new 10-year Seabrook bonds.Northeast's previous offer had proposed that equity holders receive just $165 million. In addition, Northeast promised the State of New Hampshire that rate increases would be limited to 5.5% annually for seven years.Its previous proposal had conditioned rate limits on Seabrook operations and other contingencies. Wilbur Ross, financial adviser to the equity holders said, "Given the state's strong bargaining position . . . we believe the NU plan provides the best recovery available" to PS of New Hampshire's equity holders. Officials of PS of New Hampshire couldn't be reached for comment.The company has filed an internal reorganization plan it valued at $2.2 billion that would require 5.5% rate increases.That plan would leave existing preferred shareholders with at least a 41% stake and give common shareholders as little as 13%. New England Electric System, Westborough, Mass., has proposed buying the company for $2 billion as part of a plan that would require rate increases of only 4.8% annually for seven years.The state of New Hampshire has favored that plan. The other bidder is United Illuminating Co., New Haven, Conn., with a bid valued at $2.2 billion and and a proposal for seven years of 5.5% rate increases.
The Polish rat will eat well this winter. Tons of delectably rotting potatoes, barley and wheat will fill damp barns across the land as thousands of farmers turn the state's buyers away.Many a piglet won't be born as a result, and many a ham will never hang in a butcher shop.But with inflation raging, grain in the barn will still be a safer bet for the private farmer than money in the bank. Once again, the indomitable peasant holds Poland's future in his hands.Until his labor can produce a profit in this dying and distorted system, even Solidarity's sympathetic new government won't win him over.In coming months, emergency food aid moving in from the West will be the one buffer between a meat-hungry public and a new political calamity. Factory workers on strike knocked Poland's Communist bosses off balance last year; this year, it was the farmers who brought them down.In June, farmers held onto meat, milk and grain, waiting for July's usual state-directed price rises.The Communists froze prices instead.The farmers ran a boycott, and meat disappeared from the shops.On Aug. 1, the state tore up its controls, and food prices leaped.Without buffer stocks, inflation exploded. That was when the tame old Peasants' Party, desperate to live through the crisis, broke ranks with the Communists and joined with Solidarity in the East Bloc's first liberated government. But by the time Solidarity took office in September, the damage was done. "Shortageflation," as economists have come to call it, had gone hyper.The cost of raising a pig kept bounding ahead of the return for selling one.The farmers stayed angry.They still are. At dawn on a cool day, hundreds travel to the private market in Radzymin, a town not far from Warsaw, hauling pigs, cattle and sacks of feed that the state's official buyers can't induce them to sell.Here, they are searching for a higher price. In a crush of trucks and horse carts on the trodden field, Andrzej Latowski wrestles a screeching, overweight hog into the trunk of a private butcher's Polish Fiat. "Of course it's better to sell private," he says, as the butcher trundles away. "Why should anybody want to sell to them?" The young farmer makes money on the few hogs he sells here.He won't for long, because his old state sources of rye and potatoes are drying up. "There's no feed," he says. "You can't buy anything nowadays.I don't know why." Edward Chojnowski does.His truck is parked across the field, in a row of grain sellers.Like the others, it is loaded with rye, wheat and oats in sacks labeled "Asbestos.Made in U.S.S.R." The farmer at the next truck shouts, "Wheat! It's nice! It won't be cheaper! We sell direct!" A heavy, kerchiefed woman runs a handful through her fingers, and counts him out a pile of zlotys. "Country people breed pigs," says Mr. Chojnowski, leaning against the back of his truck. "They can't buy feed from the state.There isn't enough.Some state middlemen come to buy from me.I sell -- a little.I am waiting.I have plenty more at home." On this morning, he doesn't sell much in Radzymin, either.At closing time, farmers cart out most of what they carted in.A private market like this just isn't big enough to absorb all that business. The hulk of Stalinism, it seems, will not quickly crumble away.State monopolies will keep on stifling trade, "free" prices or not, until something else replaces them.Polish agriculture will need a whole private network of procurement, processing and distribution -- plus a new manufacturing industry to supply it with tractors, pesticides, fertilizers and feed. The Communists spent 40 years working to ensure that no such capitalistic structures ever arose here.Building them now will require undergirding from the West, and removal of political deadwood, a job that Solidarity has barely started.But Polish agriculture does possess one great asset already: the private farmer. "We are dealing with real entrepreneurs," says Antoni Leopold, an economist who advises Rural Solidarity, the union's countryside offshoot. "There are a lot of them, and they have property." Polish peasants, spurning the collectivizers, were once a source of shame to orthodox Communists.Now, among Communist reformers, they are objects of envy.Food is the reformer's top priority, the key to popular support.As the Chinese have shown and the Soviets are learning, family farms thrive where collectives fail.Ownership, it seems, is the best fertilizer.The Poles have had it all along. Poland's 2.7 million small private farms cover 76% of its arable land.On it, a quarter of the country's 39 million people produce three-quarters of its grain, beef, eggs and milk, and nine-tenths of its fruit, vegetables and potatoes.Like the Roman Catholic Church, the Polish peasant is a pillar of the nation.Try as they might, the Communists could neither replace nor break him.And they did try. A few miles past Radzymin, a dirt road narrows to a track of sand and leads into Zalubice, a village of tumbledown farms.Czeslaw Pyszkiewicz owns 30 acres in 14 scattered scraps.He grows rye and potatoes for a few hens, five cows and 25 piglets.In patched pants and torn shoes, he stands in his barnyard eyeing the ground with a look both helpless and sardonic. "It's bad soil," he says. Until 1963, it was good soil.Then the state put in a reservoir to supply the area with drinking water.Farmers lay down before the bulldozers.Their protest was ignored.The dam caused the water level to drop in Zalubice.Mr Pyszkiewicz smiles and his brow furrows.He expected as much. In his lifetime, 47 years, the Communists brought electricity to his village and piped in drinking water from the reservoir.No phones.No gas. "We wanted them to build a road here," he says. "They started, and then abandoned it." A tractor, his only mechanized equipment, stands in front of the pigsty. "It's Russian.Good for nothing.Parts are a tragedy.Even if I had a lot of money, I couldn't buy what I need." The farmer can say the same for coal, cement, saw blades.In Poland, only 4% of all investment goes toward making things farmers want; in the West, it is closer to 20%.The few big state farms take first crack at what does get made.They use 60% more fertilizer per acre, twice the high-grade feed.Yet their best boast is that they produce 32% of Polish pork. "I've heard from friends that state farms are subsidized," Mr. Pyszkiewicz says as his wife, Wieslawa, sets some chairs out in the sun. "We have one near here.There is a lot of waste.A private farmer never wastes anything." The state quit shoving peasants onto its subsidized farms over 30 years ago.But it never did let up on the pressure.Until recently, a farmer with no heir had to will the state his land to collect his pension.The pension's size still depends on how much produce he sells the state.His allotment of materials also did, until the state couldn't hold up its end of that bargain.Yet the state alone sells seeds and machines.When supplies are short, it often hands them over only in exchange for milk or grain. A private farmer in Poland is free to buy and sell land, hire help, decide what to grow and how to grow it.He is free to invest in chickens, and to fail for lack of chicken wire.He has plenty of freedom -- but no choices. "I'm on my own land," Mr. Pyszkiewicz says. "I don't have to listen to what anybody tells me to do." "Sometimes," says his wife, "we're happy about that." By starving the peasant, the Communists have starved Poland.Villages like Zalubice exist in a desert of poor schools and few doctors.Farm income is 15% below the average.The young leave, especially girls who won't milk cows by hand.Some men stay, their best friend a bottle of vodka, but two million acres have gone fallow.Without machines, good farms can't get bigger.So the potato crop, once 47 million tons, is down to 35 million.Meat consumption is at 1979's level, pork production at 1973's, milk output at 1960's. If a food crisis undid the Communists, a food revolution will make Solidarity.The potential is displayed along every road into Warsaw: row upon row of greenhouses, stretching out behind modern mansions that trumpet their owners' wealth.Vegetables are abundant and full of flavor in Poland, the pickles and sauerkraut sublime, the state monopolies long broken.Grain, milk and meat come next. A private challenge to the monolithic tractor industry will take more time and money than Poland can spare, although a smokehouse or a local dairy can spring up fast.Poland makes no machinery for a plant on that scale.Solidarity wants it from the West.Maria Stolzman, one of its farm experts, lays it on the line: "The World Bank will be brought in to help us destroy the old system." Felix Siemienas is destroying it now.He packs pork.A law went on the books in January that let him smoke bacon without breeding pigs.He cashed in.Poland is short on enterprises, not enterprise. "I pay a lot to the farmer and five times the state salary to my employees," he says.He is in Warsaw to open a shop. "I hire transportation, and my customers have fresh cold cuts every day.I don't subsidize anyone.Everyone around me lives well.Yes, my prices are high.If nobody buys, I bring my prices down.That's the rule.That's the market." Mr. Siemienas is making a fortune -- $10,000 a month, he says.He has bought some trendy Western clothes, and a green Mercedes with an American flag in the window.But the meat-processing machines he picked up are 50 years old. "I don't want expensive machines.If the situation changes, I'll get stuck with them." That's politics.By taking power in a deal with the Peasant Party's onetime Communist stooges, Solidarity has spooked the rural entrepreneur.Rural Solidarity objected, to no avail, when Solidarity leader Lech Walesa accepted the Peasants' support.It objected again in September when Prime Minister Tadeusz Mazowiecki reluctantly named a Peasant Party man as his agriculture minister. Both the Peasants and Rural Solidarity are forming new political parties for farmers.The Peasants can make a credible case, against Solidarity, that hell-bent reform will drive millions from the land.Next Spring, the two will battle in local elections.But until then, and probably long afterward, the Communists' apparat of obstruction -- from the head of the dairy co-op to the village bank manager -- will stay planted in the Polish countryside. "We know how to get from capitalism to socialism," Sergiusz Niciporuk is saying one afternoon. "We don't know how to get from socialism to capitalism." He farms 12 acres in Grabowiec, two miles from the Soviet border in one of Poland's poorest places.Now he is mounting the steps of a stucco building in a nearby village, on a visit to the Communist administrator, the "naczelnik." "Many people in Poland hope this government will break down," says Mr. Niciporuk, who belongs to the local council and to Rural Solidarity. "That's what the naczelnik counts on.He is our most dangerous enemy.Every time he sees me, he gets very nervous." The farmer barges into the naczelnik's office.A thin man in a gray suit looks up from a newspaper.Mr. Niciporuk sits.Anatol Pawlowski's leg begins jiggling beneath his desk. "Solidarity doesn't care for the good of this region," he says after a few pleasantries. "They want to turn everything upside down in a week.Mr. Niciporuk here wants 60 acres used at the moment by a state farm.He can't guarantee that he can use it any better." "I am ready at any moment to compete with a state farm." The naczelnik averts his eyes. "What have you got?Not even a tractor.And you want to make wicker baskets, too." "I can do five things at once -- to be a businessman." "Big business," Mr. Pawlowski snorts in English.The farmer stands to go.The naczelnik stands, too. "I care very much for this post," he says. "Eight years I've had it.A cultural center has been built, shops.Suddenly, I am not a comfortable man for Solidarity.I have accomplished too much.They want to do more.I wish them all the best!" The farmer leaves.And the naczelnik shuts his door.
The House approved a short-term spending bill to keep the government operating through Nov. 15 and provide $2.85 billion in emergency funds to assist in the recovery from Hurricane Hugo and the California earthquake. The 321-99 roll call vote reflected broad support for the disaster assistance, but the cost to the Treasury is sure to aggravate budget pressures this year and next under the Gramm-Rudman deficit reduction law. By a lopsided 401-18 margin, the chamber rejected an effort to waive Gramm-Rudman for purposes of addressing the two disasters, and budget analysts estimate the increased appropriations will widen the fiscal 1990 deficit by at least $1.44 billion unless offsetting spending cuts or new revenues are found by Congress. The budget impact will be greater still in fiscal 1991, and the issue forced a confrontation between the Appropriations Committee leadership and Budget Committee Chairman Leon Panetta, whose California district was at the center of the earthquake last week.Going to the well of the chamber, Mr. Panetta demanded the costs be fully counted.His prominent role put him in the awkward position of challenging the very committee members on whom his state will be most dependent in the months ahead. "We do not come to this House asking for any handout," said the California Democrat. "We do not intend to hide these costs from the American people." The $2.85 billion package incorporates $500 million for low-interest disaster loans, $1 billion in highway construction funds, and $1.35 billion divided between general emergency assistance and a reserve to be available to President Bush to meet unanticipated costs from the two disasters.The funds are in addition to $1.1 billion appropriated last month to assist in the recovery from Hugo, bringing the total for the two disasters to nearly $4 billion in unanticipated spending. Because of the vagaries of Gramm-Rudman, the immediate impact is relatively small.But the appropriations set in motion spending that adds to an already grim budget picture for fiscal 1991.Within the appropriations process, the situation is even more difficult since the costs will be counted against the share of funds to be allocated to those subcommittees that recently have had the greatest difficulty in staying within the budget. The underlying bill approved yesterday is required to keep the government operating past midnight tonight, and this urgency has contributed to the speed -- and, critics say, mistakes -- that have accompanied the package of disaster assistance.The hastily drafted measure could hurt California by requiring it to put up more matching funds for emergency highway assistance than otherwise would be required.And the state's delegation is fearful that the new funding will be counted against a separate $185 million in federal highway funds it would expect to receive under its normal allocation this year. Also, the high price of San Francisco real estate puts the state at odds with federal regulations more attuned to the national average.For example, disaster loans, which will go to small businesses and homeowners, offer credit as low as 4% in some cases.But the San Francisco delegation finds itself asking that the cap per household be lifted to $500,000 from $100,000 to assist the hard hit but often wealthy Marina district. The Senate is expected to make some modifications today, but both the White House and Congress appear most anxious to speed final approval before tonight's deadline.Administration pressure discourages any effort to add to total funding, and the Senate changes are expected to be largely technical -- dealing with highway aid and lifting the ceiling on total Small Business Administration loans to $1.8 billion to accommodate the increased activity expected. Yesterday's floor action came as a House-Senate conference approved a nearly $8.5 billion fiscal 1990 military construction bill, representing a 5% reduction from last year and making severe cuts from Pentagon requests for installations abroad.An estimated $25.8 million is allocated to continue work in Oman.But all funding is cut for the Philippines, and projects in South Korea are cut to $13.6 million, or less than a sixth of the administration's request. Closer to home, the negotiators were more generous.An estimated $38.9 million was set aside for military installations in the home state of North Carolina Rep. W.G. Hefner, the House chairman.And $70.2 million would go to projects in Tennessee represented by his Senate counterpart and fellow Democrat, Sen. James Sasser.Texas and California are traditionally powerful within the conference, but equally striking is the dominance of Alaska, Pennsylvania and West Virginia because of their power elsewhere in the appropriations process.Senate Appropriations Committee Chairman Robert Byrd (D., W.Va.) even added report language listing $49.4 million in projects he wants in the budget next year. No individual illustrated this mix of power more yesterday than Sen. Daniel Inouye (D., Hawaii), who chairs the Senate defense subcommittee.In the final trading, the House was insistent on setting aside $500 million to carry out base closings ordered to begin in fiscal 1990.But it gave ground to Mr. Inouye on a number of projects, ranging from a $11 million parking garage here, to a land transfer in Hawaii, to a provision to assist the Makwah Indian Tribe in Washington state.The tribe is one of the poorest in the Pacific Northwest. Mr. Inouye, who chairs the select committee on Indian Affairs, used his power to move $400,000 from the Air Force to the Bureau of Indian Affairs to assist in renovating a decommissoned base to accommodate a drug and alcohol rehabilitation center. Meanwhile, House-Senate negotiators have tentatively agreed on a $3.18 billion anti-drug and anti-crime intitiative, cutting other federal spending 0.43% to pay for it.A formal House-Senate conference is expected to ratify the accord later this week.
"The Famous Teddy Z," which CBS Inc. had hoped would emerge as one of the few bright spots in its otherwise lackluster prime-time schedule, isn't turning out to be the hit the network envisaged. Although the half-hour situation comedy seen Mondays at 9:30 p.m. Eastern and Pacific time isn't a candidate for cancellation, it is slated for fine-tuning and by next week the network may announce "Teddy Z" is moving to 8:30 p.m. from its 9:30 time slot, replacing "The People Next Door," which became the first network show to be canceled this season. "Teddy Z," which centers on a mailroom clerk-turned agent at a Hollywood talent agency, was scheduled in the coveted 9:30 p.m. slot to follow "Murphy Brown," a situation comedy about a television news magazine, starring Candice Bergen. "Teddy Z" was boosted by favorable reviews and a network-wide promotional tie-in contest with K mart Corp.It was promoted on cable services, including MTV, Nick at Night and VH-1, and premiered as the No. 22-rated show for the week. But five weeks after the premiere, the series has floundered.In figures released yesterday by A.C. Nielsen Co. "Teddy Z," produced by the television unit of Columbia Pictures Entertainment Inc., was in 37th place.Worse, every week it suffers audience drop-off from "Murphy Brown" and viewership on CBS picks up again once "Teddy Z" is over and is followed by "Designing Women." "There is strong indication that `Teddy Z' is not compatible with the shows it is surrounding," said John Sisk, senior vice president at J. Walter Thompson Co., a unit of WPP Group PLC. Last week, "Murphy Brown" was viewed by 14.1% of the available television households, while the number dropped to 12.6% for "Teddy Z" and rose to 14.2% for "Designing Women." CBS executives said the program is also slated to undergo some plot changes.Creator Hugh Wilson, for example, included the lead character's Greek family in the cast, "but that is not the right focus anymore," said one CBS executive.Instead, CBS hopes the show will increasingly highlight the talent agency and the business of being an agent. "We're making adjustments on the show, yes, but nothing radical," said Craig Nelson, the story consultant on "Teddy Z." "But we hope to keep a balance between the office and the family." The opening credits are being redone, Mr. Nelson said, "to make Teddy's situation clear to viewers who have not been with us since the beginning.Those viewers find the show confusing."
The Justice Department is in the process of trying to gain control over a law that federal Judge David Sentelle recently called a "monster." Needless to say, he was talking about RICO.With its recently revised guidelines for RICO, Justice makes it clear that the law currently holds too many incentives for abuse by prosecutors. The text of the "new policy" guidelines from the Criminal Division are reprinted nearby.They strongly suggest that Justice's prosecutions of Drexel Burnham Lambert, Michael Milken and Princeton/Newport violated notions of fundamental fairness.Justice is attempting to avoid a replay of these tactics.This amounts to an extraordinary repudiation of the tenure of New York mayoral candidate and former U.S. Attorney Rudolph Giuliani, who was more inclined to gathering scalps than understanding markets. The new guidelines limit the pretrial forfeitures of assets of RICOed defendants and their investors, clients, bankers and others.This follows earlier new guidelines from the Tax Division prohibiting Princeton/Newport-like tax cases from masquerading as RICO cases.The forfeiture memo cited "considerable criticism in the press, because of a perception that pre-trial freezing of assets is tantamount to a seizure of property without due process." It told prosecutors not to seek forfeitures if there are "less intrusive" alternatives, such as bonds, and in any case not to seek forfeitures "disproportionate to the defendant's crime." These changes come a tad late for Princeton/Newport, the first RICOed securities firm.It was forced into liquidation before trial when investors yanked their funds after the government demanded a huge pre-trial asset forfeiture.Princeton/Newport investors, including McKinsey & Co. and the Harvard endowment, made the rational decision to withdraw their money; for the firm, the liquidation was sentence first, verdict later.Prosecutors wanted $23.8 million in forfeiture for alleged tax fraud of some $400,000. The experience of Princeton/Newport and initiation of other RICO-forfeiture cases against legitimate businesses taught Drexel that a RICOed investment bank would be an ex-investment bank.Drexel therefore agreed instead to an arrangement allowing it to plea to charges "which the company is not in a position to dispute" because of RICO. Part of Drexel's plea was to cut Mr. Milken loose.So after all the prosecutorial hoopla no one has established what, if anything, Drexel did wrong. So two cheers for the new rules.Justice has finally recognized its employees' abuses, thanks largely to the demands for reform by former U.S. attorney in Washington Joseph diGenova, who wants to salvage RICO for real criminals. But prosecutorial guidelines are effective only if someone at Justice is willing and able to supervise hyperactive prosecutors.Judge Sentelle, of the appeals court in Washington, made this point at a Cato Institute conference last week in a remarkable speech titled, "RICO: The Monster That Ate Jurisprudence." He said ours is supposed to be "a government of laws not of men," and yet RICO defenders "tell us that we should rely on prosecutorial discretion to protect against overbreadth of RICO." No prosecutorial guidelines, observed or unobserved, limit civil RICO cases by plaintiffs for damages. What now for Princeton/Newport officials, Drexel and Mr. Milken?Justice should review these cases to see what other prosecutorial abuses may have occurred.We suspect that Justice will some day agree that only the complete repeal of RICO can guarantee an end to injustices in its name.
Mobil Corp. is preparing to slash the size of its work force in the U.S., possibly as soon as next month, say individuals familiar with the company's strategy. The size of the cuts isn't known, but they'll be centered in the exploration and production division, which is responsible for locating oil reserves, drilling wells and pumping crude oil and natural gas. Employees haven't yet been notified.Sources said that meetings to discuss the staff reductions have been scheduled for Friday at Mobil offices in New Orleans and Denver. This would be a second round of cuts by Mobil, which along with other oil producers and refiners reduced its work force by 15% to 20% during the mid-1980s as part of an industrywide shakeout.Mobil's latest move could signal the beginning of further reductions by other oil companies in their domestic oil-producing operations. In yesterday's third-quarter earnings report, the company alluded to a $40 million provision for restructuring costs involving U.S. exploration and production operations.The report says that "the restructuring will take place over a two-year period and will principally involve the transfer and termination of employees in our U.S. operations." A company spokesman, reached at his home last night, would only say that there will be a public announcement of the reduction program by the end of the week. Most oil companies, including Mobil, have been reporting lower third-quarter earnings, largely as a result of lower earnings from chemicals as well as refining and marketing businesses. Individuals familiar with Mobil's strategy say that Mobil is reducing its U.S. work force because of declining U.S. output.Yesterday, Mobil said domestic exploration and production operations had a $16 million loss in the third quarter, while comparable foreign operations earned $234 million. Industrywide, oil production in this country fell by 500,000 barrels a day to 7.7 million barrels in the first eight months of this year.Daily output is expected to decline by at least another 500,000 barrels next year. Some Mobil executives were dismayed that a reference to the cutbacks was included in the earnings report before workers were notified.One Mobil executive said that the $40 million charge related to the action indicates "a substantial" number of people will be involved.Some will likely be offered severance packages while others will be transferred to overseas operations.
When the good fairy assigned to Slovakia hovered over the cradle of Edita Gruberova many years ago in Bratislava, she sprinkled her with high E flats, sparkling Ds, clean trills, and coloratura ornaments silvery as magic dust.Maybe she could drop by at the Metropolitan Opera and bring along what she forgot, a little charm, a few smidgins of thespian skills and a nice wig. Cast as Violetta Valery in a new production of Verdi's "La Traviata," Ms. Gruberova last week did many things nicely and others not so well.It isn't every day that we hear a Violetta who can sing the first act's high-flying music with all the little notes perfectly pitched and neatly stitched together.Never once did she gasp for air or mop her brow.She was as cool as a cucumber.But as you may know, things are not going well for Violetta.There are times when she must show a little emotion.She has TB, after all, and a weak-kneed lover; and though a successful courtesan, she is just about overdrawn at the bank. Worse, her walls move all the time -- at least in this production.Just when Ms. Gruberova sat down away from her guests to cough in private, her salon began sliding around the stage; her country hideaway also has a very active set of drapes.Hold on to those funny braids! you wanted to caution her as the sets started to roll around once more.This is the most moving "Traviata" I've ever seen. Normally, Violetta can go about her business without wondering whether she is moving as gracefully as the scenery.But this is a production designed and directed by Franco Zeffirelli and paid for by Sybil Harrington, who has no need to count her pennies, unlike Violetta, down to 20 louis at the opera's end.Seeing all those millions in action, I was just so relieved that Ms. Gruberova, gawky thing that she is, didn't accidentally smother herself in a drape. Large and lavish, "Traviata" is another addition to the Met's growing stock of cast-proof productions mostly by Mr. Zeffirelli.They have a life of their own and can be counted on to look good and perform whenever a cast isn't up to either.If a strike ever hits the Met, the company can still sell tickets to his "Boheme" and "Turandot" and boom out recordings (of another era).Last week's discerning audience gave a bigger hand to a greenhouse than to the tenor Neil Shicoff, who sang an aria inside it.Inexplicably costumed as a rabbinical student, tottering around on lifts, Mr. Shicoff hardly seemed the fellow to catch a fancy cocotte's eye.I wish he could wear lifts in his voice.Not nearly in his best form, the tenor made dullish sounds along with his usual clumsy hand gestures.Maybe Mr. Z. was too busy taming his set to work with his naturally ungainly Alfredo.Or is it that Mr. Z. is getting a little tired of "Traviata"?This is the same production already seen in Paris and Florence, and its scenic ideas echo the movie he made with Placido Domingo and Teresa Stratas.Decades earlier, Maria Callas sang the Dallas staging that introduced the flashback idea.In an invention that drives Verdi purists bananas, Violetta lies dying in bed during the prelude, rising deliriously when then she remembers the great parties she used to throw.The entire opera is her dream. Given the prelude's thematic connections with the music preceding the last act, the idea is more worn than bad, though as luck would have it, for a change there actually was a conductor in the pit whom we wanted to hear, Carlos Kleiber, trying to make memorable music while we all waited for the bed lump to stir into song.Once she did so, the big-souled German maestro with the shaky nerves who so often cancels offered a limpid, flowing performance that in its unswagged and unswaggering approach was totally at odds with the staging. Of heart-pounding moments there were nearly none, and whether this has to do with Mr. Kleiber or the wooden cast is hard to say.In any event, Ms. Gruberova barely ventilated Violetta's anguish in her long meeting with Wolfgang Brendel, who as Germont seemed fairly desperate trying to inject an Italianate lilt into his heavy, teutonic baritone. "Di Provenza" wasn't much of an advertisement for sunny, southern France.Perhaps Mr. Kleiber could let him substitute one of the songs about dead children and dark nights from Mahler's "Kindertotenlieder." Speaking of dark nights, the Met's next-door neighbor, the New York City Opera, has canceled its season after failing to reach a settlement with its musicians, who wanted pay parity with the the Chicago Lyric and San Francisco Opera orchestras.Well, they can now go and audition there.Good luck.Common sense suggests that people who play for a company that charges about half what those houses do for a ticket are not in the same market. The cancellation bodes poorly for a company already beset with an identity crisis exacerbated by the retirement of general director Beverly Sills and the amazing appointment of Christopher Keene as her successor after his years of feckless toiling in the pit.As the Met discovered years ago following a belated December opening, it is nearly impossible to recapture subscribers once they have had time to ponder their entertainment choices. I, for instance, was perfectly happy at Avery Fisher Hall the other day listening to Helmuth Rilling conduct the Messa per Rossini, a strange piece written by 13 different Italian composers to honor Rossini after his death in 1868.Each of them contributed a section at the behest of Verdi, who was nearly driven to his own early grave by the troublesome arrangements.For all that, the piece landed unperformed in a dusty archive after Bologna refused to supply a chorus and orchestra. We know Verdi's own contribution was mighty impressive since the operatic "Libera me" was reworked for the Manzoni Requiem, of which he wrote every note himself having learned his lesson.The surprising discovery of the evening at Fisher was the high standard achieved by some of his now-obscure colleagues, notably Raimondo Boucheron.His melodious "Confutatis" was smoothly sung by bass Brian Matthews.Also, Teodulo Mabellini's "Lux aeterna" was intriguingly scored and splendidly put across by Mr. Rilling.He brought along his Stuttgart-based Gaechinger Kantorei chorus, and even better, the Czech soprano Gabriela Benackova.She was in her most radiant, expressive voice.Maybe she could step across the plaza to the Met -- where she has still to make her debut -- and help out her Czech compatriot by singing the slow parts of "Traviata." The Tokyo International Film Festival was no match for the Cannes Film Festival in terms of prestige, but it made its mark: It awarded the largest cash prize of any film festival to young and first-time film makers. At this year's event, the third since the festival got under way in 1985, Idrissa Ouedraogo of Burkina Faso won the Sakura Gold prize of $143,000 for "Yaaba" ("Old Woman").By comparison, Cannes now gives $39,000 to the winner of its young director's award. Says director George Miller ("Mad Max"): "I think the Tokyo festival may become known as a major attraction for young directors because of the money as well as the recognition." There are drawbacks.Vincent Tolentino, a correspondent for the French magazine Telerama, says of the recently ended Tokyo festival: "No one makes deals . . . and most of the films have been seen before at other festivals." Belgium decided that investors who demand the delivery of their securities when they buy shares or domestic bonds will have to pay an additional 100 Belgian francs (about $2.60) for each transaction, bringing the total fee to 200 francs.While no figures exist, it is thought that many small investors in Belgium store securities privately, in some cases to avoid paying high inheritance taxes.The law could redound to the advantage of brokers and banks, who incur high administrative costs to deliver securities to investors. Japan is considering giving aid to Hungary and Poland to support their recent political reforms, a spokesman for the Foreign Ministry said. "This is the first time, if we decide to do so, for Japan to extend aid of this kind to Eastern European countries," the spokesman said.He said Prime Minister Toshiki Kaifu also is studying the possibility of a visit to the two Eastern bloc nations and to Western Europe next January. Drugs were a major issue in two days of talks between French President Francois Mitterrand and Spanish Prime Minister Felipe Gonzalez. "I demand the utmost severity in the fight against drug traffickers," President Mitterrand said after the meeting in Valladolid, Spain.He added: "Banks must open their books." The leaders' talks coincided with a meeting in Madrid of anti-drug experts from the U.S., France, Italy, Spain, Peru, Bolivia and Colombia.That conference, which began yesterday, was expected to cover such matters as police training and extradition agreements, Spanish officials said. Three Soviet government officials -- the ministers of railroads, of foreign economic relations and of heavy-machine building -- will visit Tehran next month for talks, Iran's official news agency reported.Under an agreement signed last June, the Soviets will help Iran in oil exploration and other areas in return for exports of Iranian natural gas.And in Paris, Mahmoud Vaezi, Iran's vice minister of foreign affairs, began a five-day visit to discuss such matters as compensation to French enterprises for contracts broken by the Khomeini regime. Toto Co., a Japanese ceramics maker, has developed a toilet that can check the user's health.A Toto spokesman said the toilet not only tests blood pressure, pulse and urine, it also stores the data for up to 130 days.Nippon Telegraph & Telephone Corp. and Omron Tateisi Electronics are involved with Toto's new product, which will go on the market in about two years time. "It will be very expensive," the spokesman warned. "The price cannot be less than $7,000." Since Mexican President Carlos Salinas de Gortari took office last December, special agents have arrested more than 6,000 federal employees on charges ranging from extortion to tax evasion. Hector Castaneda Jimenez, chief prosecutor at the Attorney General's Office, said that an estimated $82.8 million in government property and unpaid taxes have been recovered in the campaign to root out official corruption. Mr. Castaneda's office will reportedly issue warrants during the next six months for the arrest of another 10,000 federal employees.Those employees are suspected of illegally gaining an estimated $376.8 million, the prosecutor was quoted as saying by the Excelsior news service.He added that federal agents hope to recover at least half that amount. "The rest will probably not be recoverable either because the statute of limitations expired or because many prefer to spend additional time in jail rather than return the money," the prosecutor said. The United Nations, which is distributing farm tools to returning refugees in Namibia, is rethinking a plan to hand out machetes because of the tense political climate during preparations for independence from South Africa. "The decision to distribute machetes at this time, which could be used as weapons, is under review," said a U.N. spokesman. . . . Sources close to the family of Pakistani Prime Minister Benazir Bhutto said she is expecting a second child, probably early next year.
Cray Research Inc. forecast that 1990 will be a no-growth year for its supercomputer line. In what has become a series of bad-news announcements, the world's largest maker of supercomputers said that after reviewing its order prospects, "we have concluded it is prudent to plan for next year on the assumption that revenue again will be flat." Cray jolted the market in July when it slashed revenue and earnings projections for this year, citing a slowing economy that has delayed orders from government as well as commercial customers. The company made its 1990 projection -- an unusual event for Cray -- in announcing improved net income for the third quarter.Cray said it earned $30.6 million, or $1.04 a share, up 35% from $22.6 million, or 73 cents a share, a year ago.Revenue gained 45% to $210.2 million from $145.2 million. For the nine months, earnings totaled $36.6 million, or $1.24 a share, down 46% from $68.1 million, or $2.19 a share, a year earlier.Revenue was $454.6 million, a 6.9% gain from $425.4 million. Cray made its announcement after the stock market closed.In New York Stock Exchange composite trading yesterday, Cray closed down $1.125 at $34.25. Cray said its order backlog at Sept. 30 was $315 million, down $25 million from June 30.Marcello Gumucio, president, said the company "did well in the quarter as far as revenues and earnings are concerned, and not quite as well in terms of signing orders." As for the current period, Mr. Gumucio said, "We anticipate that fourth-quarter revenue and earnings will be substantially greater than any of the preceding three quarters, but not up to the record levels of last year's fourth quarter" when Cray earned $88.5 million, or $2.80 a share. He added that the company expects "strong" operating profit for the year, "but at a level significantly lower than last year." He said 1989's net income could be 11% to 13% of revenue, which, assuming current expectations, would be 40% to 45% below 1988's level.Last year, Cray earned $156.6 million, or $4.99 a share, on revenue of $756.3 million. Next year "looks dismal," said analyst Paul Luber of Robert Baird & Co., Milwaukee.Noting that Cray doesn't have a low-end supercomputer to compete with the likes of Convex Computer Corp. and International Business Machines Corp., Mr. Luber said such a machine would be necessary "to get things back on line here." Cray has indicated it will decide on whether to build such a machine before year end.
Johnson & Johnson reported a 10% rise in third-quarter net income on a 12% sales increase-results that were driven particularly by new products including pharmaceuticals and the company's professional operations. Net for the New Brunswick, N.J., maker of health-care products climbed to $265 million, or 80 cents a share, from $240 million, or 71 cents a share, in the year-earlier period.Sales rose to $2.45 billion from $2.2 billion.The year-ago per-share earnings are adjusted to reflect a 2-for-1 stock split last May. In a statement, Ralph S. Larsen, chairman and chief executive officer, said the company was pleased with its third-quarter sales performance, "especially in light of the extremely competitive environment in domestic consumer markets and the negative impact of unfavorable exchange rates this quarter." David J. Lothson, an industry analyst for PaineWebber Group Inc., said Johnson & Johnson's results slightly exceeded his expectations for the third quarter. In New York Stock Exchange composite trading yesterday, Johnson & Johnson shares fell 37.5 cents to $54.625. Mr. Larsen noted "substantial sales growth" for the recently introduced Acuvue disposable contact lens and Hismanal, a once-a-day antihistamine.Eprex, used by dialysis patients who are anemic, and Prepulsid, a gastro-intestinal drug, did well overseas, he said. Despite health-care cost controls and programs to hold down inventory, the professional division, which makes products including sutures and surgical stapling equipment, "achieved solid growth," Johnson & Johnson said. But domestic consumer sales slipped 1.2% for the quarter, to $490 million from $496 million.The company cited softness in the retail health and beauty aids category, "as well as the intense competition in the company's sanitary protection product line." Overseas sales were stronger, principally because of a rebound in Brazil, where economic turmoil had hurt year-earlier results, Johnson & Johnson said. Mr. Lothson of PaineWebber said the company's sales pace has been picking up largely because the effect of unfavorable exchange rates has been easing -- a pattern continuing this quarter.He cautioned, however, that a "tough tax-rate comparison" may slow the company's earnings growth for the current quarter.For last year's fourth quarter, the company's tax rate was less than 20%, he said. While the third period contained no major surprises, Mr. Lothson said, the results show how sensitive the multinationals can be to developments in a single country such as Brazil.He also questioned whether recent gains in that country can be sustained. The following issues were recently filed with the Securities and Exchange Commission: Bergen Brunswig Corp., proposed offering of liquid yield option notes, via Merrill Lynch Capital Markets. Columbia Gas System Inc., shelf offering of up to $200 million of debentures. Laserscope, initial offering of 1,656,870 common shares, of which 1,455,000 shares are to be sold by the company and 201,870 by holders, via Alex.Brown & Sons Inc. and Volpe, Covington & Welty. TeleVideo Systems Inc., proposed offering of 1,853,735 common shares, to be sold by holders. Western Gas System Inc., initial offering of 3,250,000 common shares, of which 3,040,000 shares will be sold by the company and 210,000 by a holder, via Prudential-Bache Capital Funding, Smith Barney, Harris Upham & Co. and Hanifen, Imhoff Inc.
Insiders have been selling shares in Dun & Bradstreet Corp., the huge credit-information concern. Six top executives at the New York-based company sold shares in August and September.Four of those insiders sold more than half their holdings. The stock, in New York Stock Exchange composite trading yesterday, closed at $51.75, up 62.5 cents, well below the $56.13 to $60 a share the insiders received for their shares.Much of the recent slide in Dun & Bradstreet's stock came late last week, after negative comments by analysts at Merrill Lynch & Co. and Goldman, Sachs & Co. A company spokesman declined to comment and said that the officials who sold shares wouldn't comment. One of Dun & Bradstreet's chief businesses is compiling reports that rate the credit-worthiness of millions of American companies.It also owns Moody's Investors Service, which assigns credit-ratings to bonds and preferred stock; A.C. Nielsen, known for its data on television-viewing patterns, and Yellow-pages publisher Donnelley. Last March, this newspaper reported on widespread allegations that the company misled many customers into purchasing more credit-data services than needed.In June, the company agreed to settle for $18 million several lawsuits related to its sales practices, without admitting or denying the charges.An investigation by U.S. Postal inspectors is continuing. Among the insider sales, Charles Raikes, the firm's general counsel, sold 12,281 shares in August, representing 46% of his holdings in the company.He received $724,579 for the shares, according to insider filings with the Securities and Exchange Commission. John C. Holt, an executive vice president and Dun & Bradstreet director, sold 10,000 shares on Aug. 31 for $588,800, filings show.He retains 9,232 shares. William H.J. Buchanan, the firm's secretary and associate general counsel, sold 7,000 shares in two separate sales in September for $406,000.The shares represented 66% of his Dun & Bradstreet holdings, according to the company. The other insiders, all senior or executive vice presidents, sold between 2,520 and 6,881 shares, representing between 8% and 70% of their holdings, according to SEC filings. Dun & Bradstreet's stock price began its recent spiral downward last Wednesday, when the company reported third-quarter results.Net income rose to 83 cents a share from 72 cents a share the year-earlier period.But analysts focused more on the drop in revenue, to $1.04 billion from $1.07 billion, reflecting in part a continuing drop in sales of the controversial credit-reporting services. Last Thursday, Merrill Lynch securities analyst Peter Falco downgraded his investment rating on the firm, according to Dow Jones Professional Investors Report, citing a slowdown in the credit-reporting business.He cut his rating to a short-term hold from above-average performer and reduced his 1990 earnings estimate.Mr. Falco continues to rank the stock a longterm buy.The stock slid $1.875 on more than four times average daily volume. The stock received another blow on Friday, when Goldman Sachs analyst Eric Philo advised that investors with short-term horizons should avoid Dun & Bradstreet stock because it is unlikely to outperform the market.The stock fell 75 cents. Insider selling is not unusual at Dun & Bradstreet; in fact, the recent pace of selling is just about average for the company, according to figures compiled by Invest/Net, a North Miami, Fla., firm that specializes in tracking and analyzing SEC insider filings. But previous sales have often been sales of shares purchased through the exercise of stock options and sold six months later, as soon as allowed, said Robert Gabele, president of Invest/Net.The most recent sales don't appear to be option-related, he said. TASTY PROFITS: Michael A. Miles, chief executive officer of Philip Morris Cos. ' Kraft General Foods unit, bought 6,000 shares of the company on Sept. 22 for $157 each.The $942,000 purchase raised his holdings to 74,000 shares. The stock split four-for-one on Oct. 10.Mr. Miles's newly purchased shares are now worth $1,068,000, based on Philip Morris's closing price of $44.50, up 62.5 cents, in composite trading on the New York Stock Exchange yesterday. A spokesman for Mr. Miles said he bought the shares because he felt they were "a good investment." The executive made his purchases shortly before being named to his current chief executive officer's position; formerly he was Kraft General Foods' chief operating officer. SHEDDING GLITTER: Two directors of Pegasus Gold Inc., a Spokane, Wash., precious-metals mining firm, sold most of their holdings in the company Aug. 31.John J. Crabb sold 4,500 shares for $11.13 each, leaving himself with a stake of 500 shares.He received $50,085.Peter Kutney sold 5,000 shares, all of his holdings, for $11.38 a share, or $56,900. Gary Straub, corporate counsel for the company, said the directors sold for "personal financial reasons." Both insiders declined to comment. On Wall Street, Merrill Lynch & Co. analyst Daniel A. Roling rates the stock "neutral" and Drexel Burnham Lambert Inc. lists it as a "buy." Pegasus Gold "has been on a lot of recommended lists as a junior growth company stepping into the big leagues," says Marty McNeill, metals analyst at Dominick & Dominick, a New York investment firm. "It's a good company, and growing; there's nothing that would warrant that it be sold." Yesterday, in composite trading on the American Stock Exchange, Pegasus closed at $10.125, up 12.5 cents.
The stock market's woes spooked currency traders but prompted a quiet little party among bond investors. Prices of long-term Treasury bonds moved inversely to the stock market as investors sought safety amid growing evidence the economy is weakening.But the shaky economic outlook and the volatile stock market forced the dollar lower against major currencies. The bond market got an early boost from the opening-hour sell-off in stocks.That rout was triggered by UAL Corp. 's announcement late Monday that the proposed management-labor buy-out had collapsed.The 80-point decline in the Dow Jones Industrial Average during the morning trading session touched off a flight to safety that saw investors shifting assets from stocks to Treasury bonds.At its strongest, the Treasury's benchmark 30-year bond rose more than a point, or more than $10 for each $1,000 face amount. As the stock market recovered some of its losses later in the day, bond prices retreated.But analysts said the combination of a second consecutive decline in monthly durable-goods orders and lackluster mid-October auto sales helped prop up the Treasury market.A slowing economy and the implication of lower inflation and interest rates tend to bolster bond prices. On the surface, the decline in September durable goods -- only 0.1% -- didn't appear very weak.But orders for non-defense capital goods, a precursor of future plant and equipment spending, were off 5.6% after falling 10.3% in August. Auto makers reported that mid-October sales were running at an annual rate of about 5.8 million units, far less than the 6.6 million units analysts had expected.Taken together, the auto-sales and durable-goods reports confirmed perceptions that the economy is bogging down. Although analysts don't expect the Federal Reserve to ease credit policy soon, reports like those yesterday help build the case for lower rates.Now bond investors are looking toward next week's report from national purchasing managers and the government's October employment report as potentially prompting the Fed to lower rates. The stock market's precipitous drop frightened foreign investors, who quickly bid the dollar lower.But as stock prices recovered some of the early losses, so did the U.S. currency.Although dealers said investors are becoming more bearish toward the dollar in the wake of the stock market's recent troubles and as the U.S. economy weakens, the dollar ended down only modestly. In major market activity: Bond prices rose.The Treasury's benchmark 30-year bond gained nearly half a point, or about $5 for each $1,000 face amount.The yield on the issue slipped to 7.89%. The dollar retreated.In late New York trading the currency was quoted at 1.8355 marks and 141.45 yen, compared with 1.8470 marks and 141.90 yen Monday.
Medieval philosophers used to hold the sensible belief that it was more perfect to exist than not to exist, and that to exist as a matter of necessity was most perfect of all.Now, only God exists as a matter of absolute necessity; it is built into His nature.But since the time of Darwin, we humans could at least claim a sort of natural necessity for the existence of our species.Aren't we, after all, the inevitable culmination of that stately pageant called evolution?If mutation and natural selection slowly but surely give rise to more and more advanced forms of life, then it was only a matter of eons before splendid beings endowed with reason, self-awareness and taste shimmered onto the scene. Now along comes Stephen Jay Gould to dash this flattering illusion.His credentials are excellent for the task.Star lecturer at Harvard, author of numerous popular books on science, and scourge of the creationist lobby, Mr. Gould is perhaps the world's most eminent evolutionary theorist.Yet he puts quite a twist on the old story handed down from Darwin.For him, natural history is anything but a gradual, predictable march from primordial slime to human consciousness; it is a careening, chaotic affair in which the emergence of a featherless biped was a one-in-a-million shot. In "Wonderful Life: The Burgess Shale and the Nature of History" (Norton, 326 pages, $19.95), Mr. Gould makes his case for "the awesome improbability of human evolution." The argument turns on the discovery in 1909 of an amazing fossil quarry high in the Canadian Rockies called the Burgess Shale.Here, in an area smaller than a city block, lay buried traces of countless weird creatures that had frolicked more than 500 million years ago -- creatures whose anatomical variety far exceeded what can be found in all the world's oceans today. Such an embarrassment of riches was inconceivable to the man who discovered the Burgess Shale, one Charles Doolittle Walcott.The received Darwinian wisdom of the day said that animals living so long ago must be simple in design, limited in scope and ancestral to contemporary species.Accordingly, the hidebound traditionalist reconstructed hypothetical organisms from the Burgess fossils in such a way that they could be shoehorned into familiar categories. It was not until the early 1970s that Cambridge Prof.Harry Whittington and two sharp graduate students began to publish a reinterpretation of the Burgess Shale.By making clever inferences about how the squashed and distorted fossil remains corresponded to three-dimensional structures, this trio was able to piece together a series of wondrous beasties quite unlike anything currently on the planet.One was so fantastic in appearance, it was dubbed Hallucigenia. Would that Mr. Gould's minute descriptions of these creatures was always so colorful.A good deal of the book is boring, particularly the endless allusions to high and pop culture and the frequent jokes festooning the text.These turns do not provide sufficient relief from sentences like, "Most modern chelicerates have six uniramous appendages on the prosoma." Interest picks up, though, when Mr. Gould gets around to discussing the meaning of the Burgess oddities for the theory of evolution.Not long after the appearance of life, evidently, there was an explosive proliferation in the number of animal designs seen on the earth.The vast majority of them, however, were wiped out by a succession of environmental upheavals that were too sudden and catastrophic for the normal rules of natural selection to operate.Consequently, the winnowing process was like a lottery "in which each group {held} a ticket unrelated to its anatomical virtues." So much for survival of the fittest. So much, too, for the notion that we humans triumphed in the Darwinian struggle by evolving big brains.Our mammalian forerunners lucked out through the extraterrestrial impact that did in the dinosaurs because they were small, not smart.If anyone has difficulty imagining a world in which history went merrily on without us, Mr. Gould sketches several.In one, birds are the dominant carnivores; in another the seas abound with "little penises." Back when the Burgess fauna were flourishing, it seems, human evolutionary hopes hung on the survival of a little worm with a backbone called Pikaia.Mr. Gould finds this oddly exhilarating; like an existentialist of old, he views our contingency as "a source of both freedom and consequent moral responsibility." I, by contrast, cannot help feeling that if some other curiosity from the Burgess Shale had survived instead, beings at once wiser and less boorish than Homo sapiens might have eventually gained earthly dominion.But even if no conscious life had evolved here at all, the universe is a big place, and given the right conditions, sympathetic to creating some form of life.Surely at some other cosmic address a Gouldoid creature would have risen out of the ooze to explain why, paleontologically speaking, "it is, indeed, a wonderful life." Mr. Holt is a columnist for the Literary Review in London.
The Justice Department scrambled to play down the significance of its new guidelines concerning prosecutions under the federal racketeering law. The guidelines were distributed to U.S. attorneys last summer but were disclosed for the first time by press reports this week.They discourage prosecutors, under certain circumstances, from seeking court orders seizing the assets of racketeering defendants prior to trial.But David Runkel, chief Justice Department spokesman, said the guidelines "are a codification and a clarification far more than a new direction." Use of the Racketeer Influenced and Corrupt Organizations law against white-collar defendants, as opposed to alleged organized-crime figures, has come under attack from some defense lawyers and legal scholars.Critics have complained that the law unfairly strips defendants of assets before a jury determines they have committed a crime and that aggressive use of the forfeiture provisions can ruin corporate defendants or force them into unfavorable plea bargains. In the new guidelines, the Justice Department says that in attempting to freeze disputed assets before trial, "the government will not seek to disrupt the normal, legitimate business activities of the defendant" and "will not seek. . .to take from third parties assets legitimately transferred to them." The guidelines also state, "The government's policy is not to seek the fullest forfeiture permissible under the law where that forfeiture would be disproportionate to the defendant's crime." Another provision clarifies certain limits on when prosecutors may use tax-fraud charges as a basis for bringing a racketeering case. Mr. Runkel declined to speculate on whether the guidelines would curb racketeering prosecutions against corporate defendants. "The impact, if there is any, will be impossible to judge ahead of time because the decision whether to use {racketeering charges} is made in individual cases" by Justice Department officials in Washington, he said. In a memorandum describing the guidelines, Assistant Attorney General Edward Dennis Jr. said that government efforts to freeze defendants' assets pending racketeering prosecutions "have been the subject of considerable criticism in the press." But Mr. Runkel said the government isn't "backing off on these kinds of matters at all."
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Exxon Capital Corp. -- $200 million of 8 1/4% notes due Nov. 1, 1999, priced at 99.60 to yield 8.31%.The notes, which are noncallable, were priced at a spread of 45 basis points above the Treasury's 10-year note.Rated triple-A by both Moody's Investors Service Inc. and Standard & Poor's Corp., the issue will be sold through Salomon Brothers Inc. Citicorp -- $200 million of 8 3/4% notes due Nov. 1, 1996, priced at 99.64 to yield 8.82%.The noncallable issue was priced at a spread of 98 basis points above the Treasury's seven-year note.Rated single-A-1 by Moody's and double-A by S&P, the issue will be sold through Salomon Brothers. Boatmen's Bancshares Inc. -- $150 million of 9 1/4% subordinated notes due Nov. 1, 2001, priced at 99.821 to yield 9.275%.The noncallable issue was priced at a spread of 140 basis points above the Treasury's 10-year note.Rated single-A-3 by Moody's and single-A-minus by S&P, the issue will be sold through underwriters led by Morgan Stanley & Co. Xerox Corp. -- $150 million of 8 3/4% notes due Nov. 1, 1995, priced at 99.555 to yield 8.85%.The noncallable issue was priced to yield 105 basis points above the Treasury's fiveyear note.Rated single-A-2 by Moody's and single-A-plus by S&P, the issue will be sold through underwriters led by Salomon Brothers. American General Finance Corp. -- $150 million of 8.45% notes due Oct. 15, 2009, through Bear, Stearns & Co., being offered at a price of 99.661 to yield 8.50%.The noncallable issue, which has a one-time put Oct. 15, 1999, was priced at a spread of 66 basis points above the Treasury's 10-year note.The issue is rated single-A-1 by Moody's and single-A-plus by S&P. Baltimore Gas & Electric Co. -- $100 million of first and refunding mortgage bonds, due Oct. 15, 1999, through Shearson Lehman Hutton Inc., offered at par to yield 8.40%.The noncallable issue is rated double-A-3 by Moody's and double-A-minus by S&P.It was priced at a spread of 55 basis points above the Treasury's 10-year note. Massachusetts -- $230 million of general obligation bonds, consolidated loan of 1989, Series D, due 1990-2009, through a Goldman, Sachs & Co. group.The insured bonds, rated triple-A by Moody's and S&P, were priced to yield from 6.00% in 1990 to 7.20% in 2009. Broward County School District, Fla. -- $185 million of school district general obligation bonds, Series 1989, due 1991-1999 and 2008, tentatively priced by a First Boston Corp. group to yield from 6.20% in 1991 to 7.30% in 2008.There are $120.7 million of 7 1/8% term bonds due 2008, priced to yield 7.30%.Serial bonds are priced to yield to 7% in 1999.The bonds are rated single-A-1 by Moody's and double-A-minus by S&P. Culver City Redevelopment Financing Authority, Calif. -- $145 million of revenue bonds, Series 1989, tentatively priced by a Stone & Youngberg group.The issue includes $100 million of insured senior lien bonds.These consist of current interest bonds due 1990-2002, 2010 and 2015, and capital appreciation bonds due 2003 and 2004, tentatively priced to yield from 5.75% in 1990 to 7.14% in 2010.Bonds due 2003, 2004 and 2015 aren't being formally reoffered.There are also $40 million of uninsured subordinate lien bonds, due Dec. 1, 2008, and Dec. 1, 2015.There are $15,015,000 of 7 1/2% bonds priced at par and due 2008 and $24,985,000 of 7.6% bonds priced at par and due 2015.The insured bonds are rated triple-A by Moody's and S&P.The uninsured subordinate lien bonds aren't rated, according to the lead underwriter. West Virginia Parkways, Economic Development and <Tourism Authority -- $143 million of parkway revenue bonds, Series 1989, with current interest bonds due 1990-2002 and 2019 and capital appreciation bonds due 2003-2008, tentatively priced by a PaineWebber Inc. group to yield from 6% in 1990 to 7.31% in 2019.There are $86,525,000 of 7 1/8% bonds priced at 97 3/4 to yield 7.31% in 2019.Current interest serial bonds are tentatively priced to yield to 7.05% in 2002.Capital appreciation bonds are priced to yield to maturity from 7.10% in 2003 to 7.25% in 2007 and 2008.The bonds are insured and rated triple-A by Moody's and S&P. Connecticut Housing Finance Authority -- $132.8 million of housing mortgage revenue bonds priced by a PaineWebber Inc. group.The $82.8 million of Series B bonds, which aren't subject to the alternative minimum tax, were priced at par to yield from 6.85% in 2000 to 7.20% in 2009.Meanwhile, the $50 million of Series C bonds, which are suject to the alternative minimum tax, were priced at par to yield from 6.25% in 1990 to 7.10% to 2000.The issue is expected to receive a double-A rating from Moody's, the underwriter said.An S&P rating of double-A-plus has already been confirmed. Montgomery County, Md. -- $75 million of general obligation, Series B, consolidated public improvement bonds of 1989, through a Manufacturers Hanover Trust Co. group.The bonds, rated triple-A by Moody's and S&P, were priced to yield from 5.75% in 1990 to 6.90% in 2006 to 2009. Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities being offered by Prudential-Bache Capital Funding Inc.There were no details available on the pricing of the issue, Freddie Mac's Series 108.The issue is backed by Freddie Mac 8 1/2% securities. Hanwa Co. (Japan) -- Two-part, $800 million issue of bonds due Nov. 9, 1994, with equity-purchase warrants, indicating a 4 3/8% coupon at par.European portion of $700 million via Yamaichi International Europe Ltd. Asian portion of $100 million via Yamatane Securities Europe Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 28, 1989, through Oct. 26, 1994, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 26. Japan Storage Battery Co. -- $100 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par via Nikko Securities Co. (Europe) Ltd. Guaranteed by Mitsubishi Bank Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 27, 1989, through Oct. 26, 1993, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Nov. 1. Sanraku Inc. (Japan) -- $100 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 3 7/8% coupon at par, via Nomura International.Guaranteed by Dai-Ichi Kangyo Bank Ltd.Each $5,000 bond carries one warrant, exercisable from Nov. 21, 1989, through Oct. 19, 1993, to buy shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 31. Nippon Signal Co. (Japan) -- 80 million marks of bonds with equity-purchase warrants, indicating a 1 1/2% coupon, due Nov. 9, 1994, and priced at par, via Commerzbank.Guaranteed by Fuji Bank.Each 5,000 mark bond carries one warrant and one certificate for four warrants, exercisable from Dec. 18, 1989, to Oct. 26, 1994, to buy shares at an expected premium of 2 1/2% above the closing share price when prices are fixed Oct. 30. Miyoshi Oil & Fat Co. (Japan) -- 120 million Swiss francs of privately placed convertible notes due Dec. 31, 1993, with a fixed 0.25% coupon at par, via Union Bank of Switzerland.Put option on Dec. 31, 1991, at a fixed 107 to yield 3.43%.Each 50,000 Swiss franc bond convertible from Nov. 28, 1989, to Dec. 20, 1993, at a 5% premium over closing share price Oct. 30, when terms are scheduled to be fixed. Fokker N.V. (Netherlands) -- 150 million Swiss francs of convertible bonds due Nov. 15, 1997, with a fixed 4% coupon at par via Union Bank of Switzerland.Each 5,000 Swiss franc bond convertible from Jan. 3, 1989, to Oct. 31, 1997.Fees 2 1/8. Sapporo Lion Ltd. (Japan) -- 50 million Swiss francs of privately placed convertible notes due Dec. 31, 1994, with a 0.25% coupon at par, via Yamaichi Bank (Switzerland).Put option on Dec. 31, 1991, at an indicated 107 7/8 to yield 3.84%.Each 50,000 Swiss franc note convertible from Dec. 1, 1989, to Dec. 16, 1994, at 5% premium over the closing share price Oct. 26, when terms are scheduled to be fixed. Credit Local de France -- 100 million Swiss francs of 6%, privately placed notes due Dec. 1, 1996, priced at 100 1/2 to yield 5.91%, via Swiss Bank Corp.
When the Trinity Repertory Theater named Anne Bogart its artistic director last spring, the nation's theatrical cognoscenti arched a collective eyebrow.Ms. Bogart, an acclaimed creator of deconstructed dramatic collages that tear into such sacred texts as Rodgers and Hammerstein's "South Pacific," is decidedly downtown.Trinity Rep meanwhile is one of the nation's oldest and most respected regional theaters, still hosting an annual "A Christmas Carol." How would this bastion of traditional values fare in Ms. Bogart's iconoclastic hands?She held her fire with her first production at the Trinity earlier this season.It was a predictable revival of her prize-winning off-Broadway anthology of Bertolt Brecht's theoretical writings, called "No Plays, No Poetry." Now, with the opening of Maxim Gorky's bourgeois-bashing "Summerfolk," Ms. Bogart has laid her cards on the table.Hers is a hand that will test the mettle of her audiences.For Ms. Bogart, who initially studied and directed in Germany (and cites such European directors as Peter Stein, Giorgio Strehler and Ariane Mnouchkine as influences) tends to stage her productions with a Brechtian rigor -- whether the text demands it or not.And Gorky, considered the father of Soviet socialist realism, did not write plays that easily lend themselves to deliberately antirealistic distancing techniques. Gorky was a loyal if occasionally ambivalent proletarian writer committed to enlightening the masses with plain speaking rooted in a slightly sour version of Chekhovian humanism.And "Summerfolk," penned in 1904 as a kind of sequel to Chekhov's "Cherry Orchard," is a lawn party of Russian yuppies engaged in an exhausting ideological fight to the finish between the allrightniks and the reformers.Along the way there also are lots of romantic dalliances. Wisely Ms. Bogart has kept Gorky's time and place intact.Despite the absence of samovars (and a tendency to turn the furniture upside down), the production is rich in Russian ennui voiced by languorous folk sporting beige linen and rumpled cotton, with boaters and fishing poles aplenty. But beyond this decorative nod to tradition, Ms. Bogart and company head off in a stylistic direction that all but transforms Gorky's naturalistic drama into something akin to, well, farce.The director's attempt to force some Brechtian distance between her actors and their characters frequently backfires with performances that are unduly mannered.Not only do the actors stand outside their characters and make it clear they are at odds with them, but they often literally stand on their heads. Like Peter Sellars, Ms. Bogart manipulates her actors as if they were rag dolls, sprawling them on staircases, dangling them off tables, even hanging them from precipices while having them perform some gymnastic feats of derring-do.There are moments in this "Summerfolk" when the characters populating the vast multilevel country house (which looks like a parody of Frank Lloyd Wright and is designed by Victoria Petrovich) spout philosophic bon mots with the self-conscious rat-a-tat-tat pacing of "Laugh In." "Talk hurts from where it spurts," one of them says.The clash of ideologies survives this treatment, but the nuance and richness of Gorky's individual characters have vanished in the scuffle.As for the humor that Gorky's text provides, when repainted in such broad strokes (particularly by the lesser members of the ensemble) it looks and sounds forced. Ms. Bogart does better with music than with words when she wants, as she so often does want, to express herself through Gorky's helpless play.Here she has the aid of her longtime associate Jeff Helpern, whom she appointed Trinity's first-ever musical director and whom she equipped with a spanking new $60,000 sound system and recording studio.For Gorky, Mr. Helpern provided an aural collage of Debussy and Rachmaninoff, which is less a score than a separate character with a distinct point of view. Like Brecht, and indeed Ezra Pound, Ms. Bogart has said that her intent in such manipulative staging of the classics is simply an attempt to "make it new." Indeed, during a recent post-production audience discussion, the director explained that her fondest artistic wish was to find a way to play "Somewhere Over the Rainbow" so that the song's "original beauty comes through," surmounting the cliche.The danger that Ms. Bogart seems to be courting here is one of obfuscation rather than rejuvenation, a vision so at odds with the playwright's that the two points of view nullify, rather than illuminate, each other. Ms. Bogart's cast is part and parcel of the problem.Ed Shea and Barbara Orson never find a real reason for their love affair as the foolish, idealistic young Vass and the tirelessly humanitarian doctor Maria Lvovna.Cynthia Strickland as the long-suffering Varvara is a tiresome whiner, not the inspirational counterrevolutionary Gorky intended.Better to look in the corners for performances that inspire or amuse.Janice Duclos, in addition to possessing one of the evening's more impressive vocal instruments, brings an unsuspected comedic touch to her role of Olga, everybody's favorite mom.Marni Rice plays the maid with so much edge as to steal her two scenes.But it is the Trinity Rep newcomer, Jonathan Fried (Zamislov, the paralegal) who is the actor to watch, whether he is hamming it up while conducting the chamber musicians or seducing his neighbor's wife (Becca Lish) by licking her bosom. Ms. de Vries writes frequently about theater.
People start their own businesses for many reasons.But a chance to fill out sales-tax records is rarely one of them. Red tape is the bugaboo of small business.Ironically, the person who wants to run his or her own business is probably the active, results-oriented sort most likely to hate meeting the rules and record-keeping demands of federal, state and local regulators.Yet every business owner has to face the mound of forms and regulations -- and often is the only one available to tackle it. There is hope of change.Last week, Sen. Malcolm Wallop (R., Wyo.) held hearings on a bill to strengthen an existing law designed to reduce regulatory hassles for small businesses. "A great many federal regulations are meant for larger entities and don't really apply to small businesses," says Marian Jacob, a legislative aide to Sen. Wallop.Other lawmakers are busy trying to revive the recently lapsed Paperwork Reduction Act, which many feel benefited small enterprises. Thus, optimistic entrepreneurs await a promised land of less red tape -- just as soon as Uncle Sam gets around to arranging it.Meanwhile, they tackle the mounds of paper -- and fantasize about a dream world where bulk-mail postal regulations and government inspectors are banished. To find out what red tape riles entrepreneurs most, the Journal asked a completely unscientific, random sample of business owners to fantasize about the forms and regulations they would most like to get lost in the mail. Some entrepreneurs say the red tape they most love to hate is red tape they would also hate to lose.They concede that much of the government meddling that torments them is essential to the public good, and even to their own businesses. Rules that set standards for products or govern business behavior, generally the best regarded form of red tape, "create a level playing field and keep unscrupulous competitors away," says Sidney West, president of TechDesign International Inc., a Springfield, Va., business that designs telecommunication and other products.Mr. West cites the Federal Communications Commission and its standards for telecommunications equipment: "They monitor product quality and prevent junk from flooding the market." Some gripes about red tape are predictable: Architects complain about a host of building regulations, auto leasing companies about car insurance rules.Determining when handicapped access is required can be a nightmare for architects, says Mark Dooling, president of Dooling & Co., a Newton, Mass., architectural firm.There is such a maze of federal, state and local codes that "building inspectors are backing away from interpreting them," Mr. Dooling says. Taxi, leasing and other companies that maintain fleets of vehicles devote substantial resources to complying with state insurance laws and a host of agencies. "It's very costly and time-consuming," says Phil Rosen, a partner in Fleet & Leasing Management Inc., a Boston car-leasing company.One senior executive at his firm spends nearly 20% of his time on insurance, he says. Other forms of red tape are more pervasive.The most onerous, many entrepreneurs say, is the record-keeping and filing required by tax authorities.Complying with environmental and workplace regulations runs a close second.But gripes run the gamut.Here is the red tape that irks surveyed business owners the most: ENVIRONMENTAL REGULATIONS: Next to medical insurance, "costs of compliance" are the fastest-growing expense at Impco Inc., a Providence, R.I., chemical company.Peter Gebhard, the company's owner, says spending on regulatory paper work and the people to do it -- mostly to comply with federal, state and local environmental laws -- will rise almost 30% this year to $100,000.Mr. Gebhard adds that spending on environmental red tape amounts to between 6.5% and 7.5% of Impco's total operating expenses. Eastern Reproduction Corp., a Waltham, Mass., maker of thin metal precision parts, must report to five federal and state agencies as well as to local fire, police, hospital and plumbing authorities, says Robert Maguire, president.One state environmental regulator returned a report because "it wasn't heavy enough, it couldn't have been correct," Mr. Maguire says. WITHHOLDING RULES: Employers must deposit withholding taxes exceeding $3,000 within three days after payroll -- or pay stiff penalties -- and that's a big problem for small businesses.It's especially nettlesome "if you're on the road and you're the one responsible," says Eddie Brown, president of Brown Capital Management Inc., a Baltimore money-management firm. EMPLOYEE MANUALS: Revising employee manuals on pensions, health care and other subjects costs over $25,000 a year for Bert Giguiere, president of Professional Agricultural Management Inc., a Fresno, Calif., provider of business services to farmers.An employer leaves itself open to a great deal of liability if its employee manuals don't reflect the most recent laws, he says.But the ever-changing laws are usually so complicated and confusing that "you need professionals to help you; you can't do it yourself," he adds. PENSION AND PROFIT-SHARING RULES: Complying with these is enough to make business owners look forward to their own pension days.Yearly changes in federal benefit laws force small businesses to repeatedly re-evaluate and redesign existing plans.Alice Fixx, who runs her own public-relations concern in New York, says she has had to overhaul her pension and profit-sharing plans three times in the past three years. "It doesn't increase benefits, but it's costly and time-consuming," Ms. Fixx says.Compliance added 15% to 20% to her accounting bill last year, she says. SALES TAX RECORDS: Advertising agencies and other service companies are exempt from city and state sales tax in most locales -- but the exemption comes at a price of exhaustive records and rigorous reviews.To justify their exempt status and avoid penalties, these businesses must show once a year that each and every transaction on which they didn't pay sales tax was a legitimate business expense. "You need one person to just take care of sales tax," says Jennie Tong, executive vice president of Lee Liu & Tong Advertising Inc., New York.
Yields on certificates of deposit at major banks were little changed in the latest week. The average yield on six-month CDs of $50,000 and less slipped to 7.96% from 8.00%, according to Banxquote Money Markets, an information service based here.On one-year CDs of $50,000 and less, the average slid to 8.02% from 8.06%.Both issues are among the most popular with individual investors. "Because of shrinkage in the economy, rates can be expected to decline over a one-year horizon," said Norberto Mehl, chairman of Banxquote. "It's unclear how much rates can fall and how soon." Changes in CD yields in the week ended Tuesday were in line with blips up and down within a fairly narrow range for the last two months.Interest rates generally began declining last spring after moving steadily upward for more than a year. The average yield on small-denomination three-month CDs moved up two-hundredths of a percentage point in the latest week to 7.85%.Long-term CDs declined just a fraction.The average yield on both two-year CDs and five-year CDs was 7.98%. Only CDs sold by major brokerage firms posted significant increases in average yields in the latest week, reflecting increased yields on Treasury bills sold at Monday's auction.The average yield on six-month broker-sold CDs rose to 8.29% from 8.05% and on one-year CDs the average yield rose to 8.30% from 8.09%.The brokerage firms, which negotiate rates with the banks and thrifts whose CDs they sell, generally feel they have to offer clients more than they can get on T-bills or from banks and thrifts directly. T-bills sold at Monday's auction yielded 7.90% for six months and 7.77% for three months, up from 7.82% and 7.61%, respectively, the week before. So-called jumbo CDs, typically in denominations of $90,000 and up, also usually follow T-bills and interest rate trends in general more than those aimed at small investors.Some jumbos posted fractional changes in average yields this week, both up and down.The average yield on threemonth jumbos rose to 8.00% from 7.96%, while the two-year average fell by the same amount to 7.89%.Six-month and oneyear yields were unchanged, on average. "The (CD) market is unsettled right now," said Banxquote's Mr. Mehl. "It's very easily influenced by changes in the stock market and the junk bond market." The small changes in averages reflect generally unchanged yields at many major banks.Some, however, lowered yields significantly.At Chase Manhattan Bank in New York, for example, the yield on a small denomination six-month CD fell about a quarter of a percentage point to 8.06%.In California, Bank of America dropped the yield on both six-month and one-year "savings" CDs to 8.33% from 8.61%. Yields on money-market deposits were unchanged at an average 6.96% for $50,000 and less and down just a hundredth of a percentage point to 7.41% for jumbo deposits.
Wang Laboratories Inc. has sold $25 million of assets and reached agreements in principle to sell an additional $187 million shortly, Richard Miller, president, said at the annual meeting. He said Wang had reached an agreement with a "major financial firm" to sell for $150 million its domestic equipment lease portfolio and that of its Wang Credit Corp. subsidiary.He said it also agreed to sell a portion of its European real estate unit for $37 million. Mr. Miller said that Wang has already sold some $12 million of miscellaneous assets and disclosed that it had received $13 million from Compaq Computer Corp., Houston, in the previously announced sale of its Stirling, Scotland, plant. Mr. Miller repeated that in the next six months he plans to sell another $200 million to $300 million of assets to repay debt and reduce interest costs at Wang, a minincomputer maker in Lowell, Mass. In response to questions after the annual meeting, Mr. Miller said the company is no longer looking for an equity investor.During the summer, Wang executives had said they might seek outside investment.
California legislators, searching for ways to pay for the $4 billion to $6 billion in damages from last week's earthquake, are laying the groundwork for a temporary increase in the state's sales tax. The talk of a sales tax rise follows a rebuff from Congress on the question of how much the federal government is willing to spend to aid in California's earthquake relief efforts.The state had sought as much as $4.1 billion in relief, but yesterday the House approved a more general scaled-back measure calling for $2.85 billion in aid, the bulk of which would go to California, with an unspecified amount going to regions affected by Hurricane Hugo. That leaves the state roughly $2 billion to $4 billion short.A sales tax increase appears to be the fastest and easiest to raise funds in a hurry.According to the state department of finance, a one-penny increase in the state's six-cent per dollar sales tax could raise $3 billion. Willie Brown, speaker of California's Assembly, said that Gov. George Deukmejian has agreed to schedule a special session of the legislature within two weeks. California's so-called Gann limit effectively prevents the state from spending new tax money and so drastically limits its options in an emergency. Both Mr. Brown, the state's most influential legislator, and Gov. Deukmejian favor a temporary sales tax increase -- should more money be needed than the state can raise from existing sources and the federal government. According to a spokesman, the governor is also studying the possibility of raising state gasoline taxes.Mr. Brown, meanwhile, believes "only one tax will be feasible, and it will be a one-penny sales tax increase," said Chuck Dalldorf, an aide. One immediate source of money is an emergency fund set up by Gov. Deukmejian.The fund has about $1 billion and is set up to handle "precisely the kind of emergency" the state faces, said Tom Beermann, the Governor's deputy press secretary.But the fund's size is disputed by Mr. Brown's office, which estimates the fund holds from $630 million to $800 million.Moreover, an aide to Mr. Brown said Gov. Deukmejian "has expressed a desire not to spend all the reserve on this." To push through a sales tax increase, however, the state will have to suspend the Gann limit, citing an emergency.And then it will be required to lower taxes by a corresponding amount during a three-year period after the temporary tax increase ends, said Cindy Katz, assistant director of the state department of finance. A sales tax increase would require two-thirds approval in both houses of the state's legislature.But observers expect broad support. "If there's an emergency and there aren't sufficient funds from elsewhere, I think the attitude will be supportive," said Kirk West, president of the California Chamber of Commerce. But others think property owners ought to pay a higher portion of the state's earthquake relief tab.Since the late 1970s, California property owners have benefited from a tax rollback as a result of a state ballot initiative known as Proposition 13. The state could also increase gasoline taxes; every one penny increase in the tax would yield $11 million a month.But Gov. Deukmejian and others are reluctant to do anything to harm the state's chances of sharply raising gasoline taxes on a permanent basis. To raise more highway funds, a measure to double the state's nine-cent a gallon tax over five years is set to appear on the state's June election ballot.But some fear imposing a temporary gasoline tax increase in the meantime could undercut support among voters for the measure. Not everyone is convinced the state must raise new revenue to meet its earthquake needs. "It's possible, though not probable," that the state could get by with its existing resources and federal help, said Quentin Kopp, chairman of the state senate's transportation committee. Separately, two men injured in last week's earthquake-triggered freeway collapse in Oakland began a legal battle against the state over whether officials adequately heeded warnings about the structure's safety. The claims, which were filed with the State Board of Control but will probably end up in court, are the first arising out of the collapse of the so-called Cypress structure viaduct. The men can defeat immunities that states often assert in court by showing that officials knew or should have known that design of the structure was defective and that they failed to make reasonable changes. A Board of Control spokesman said the board had not seen the claim and declined to comment.
Benjamin Jacobson & Sons has been the New York Stock Exchange specialist firm in charge of trading stock in UAL Corp. and its predecessors since the early 1930s. But the firm has never had a day like yesterday. At first UAL didn't open because of an order imbalance.When it did a half-hour into the session, it was priced at $150 a share, down more than $28 from Monday's close.It sank further to as low as $145, but a big rally developed in the last half hour, pushing the stock back up to close at $170, down just $8.375 from Monday.In the process, 4.9 million shares traded, making UAL the second most active issue on the Big Board. Munching pizza when they could and yelling until their voices gave out, the two Benjamin Jacobson specialists at the Big Board's UAL trading post yesterday presided over what can only be described as a financial free-for-all. "It was chaotic.But we like to call it 'controlled chaos, '" said 47-year-old Robert J. Jacobson Jr., grandson of the firm's founder.He manned the UAL post yesterday with Christopher Bates, 33, an energetic Long Islander who's a dead ringer for actor Nicolas Cage. Who was doing all the selling? "Options traders, arbitrage traders -- everyone," said Mr. Bates, cooling down with a carton of apple juice after the close yesterday.Added Mr. Jacobson, "There were some pretty bad losses in the stock." Big Board traders said a 200,000-share buy order at $150 a share entered by Bear, Stearns & Co., which was active in UAL stock all day, is what set off the UAL crowd in the late afternoon.A subsequent rally in UAL helped the staggering stock market stage an astonishing recovery from an 80-point deficit to finish only slightly below Monday's close. Both Jacobson traders, who had been hoping UAL trading would get back to normal, read the news about the unraveling of UAL takeover plans on the train into work yesterday morning.The news told them it would be a while longer before UAL resumed trading like a regular airline stock after months of gyrations.When Mr. Jacobson walked into the office at 7:30 a.m. EDT, he announced: "OK, buckle up." Messrs.Jacobson and Bates walked on the Big Board floor at about 8:45 a.m. yesterday and immediately spotted trouble.Already entered in the Big Board's computers and transmitted to their post were sell orders for 65,000 UAL shares. The UAL news had already caused a selling furor in the so-called third market, in which firms buy and sell stock away from the exchange floor.UAL, which closed on the Big Board Monday at $178.375 a share, traded in the third market afterward as low as $158 a share.There were rumors of $148-a-share trades. In the 45 minutes before the 9:30 opening bell, the Jacobson specialists kept getting sell orders, heavier than they imagined.And at 9:15, they posted a $135 to $155 "first indication," or the price range in which the stock would probably open.That range was quickly narrowed to $145 to $155, although traders surrounding the post were told that $148 to $150 would be the likely target. When UAL finally opened a half hour late, some 400,000 shares traded at $150.There was "selling pressure from everyone," said one trader. This month's Friday-the-13th market plunge spurred by UAL news wasn't as bad for the Jacobson specialists as yesterday's action.On that earlier day, the stock's trading was halted at a critical time so the specialists could catch their breath.Not yesterday. Mr. Jacobson, his gray hair flying, didn't wear out his red-white-and-blue sneakers, but he sweat so much he considered sending out for a new shirt. Mr. Bates usually handles day-to-day UAL trading on his own.But yesterday, the heavy trading action eventually consumed not only Messrs.Jacobson and Bates but four other Jacobson partners, all doing their specialist-firm job of tugging buyers and sellers together and adjusting prices to accommodate the market.About 30 floor traders crammed near the UAL post most of the day, and probably hundreds more came and went -- a "seething mass," as one trader described it.The 4.9 million-share volume flowing through the Jacobson specialist operation was about five times normal for the stock. The heavy buying in the last half hour led the specialists to take special steps. The Bear Stearns order that marked the late-day turnaround caused a "massive buying effort" as UAL jumped $20 a share to $170 in the last half hour, said Mr. Bates.With 15 seconds of trading to go, Mr. Jacobson, with what voice he had left, announced to the trading mob: "We're going to trade one price on the bell." That meant no trading would occur in the final seconds, as a way of making sure that last-second orders aren't subjected to a sudden price swing that would upset customers. About 11,000 shares sold at $170 on the bell, representing about eight to 10 late orders, the specialists estimate. Big Board traders praised the Jacobson specialists for getting through yesterday without a trading halt.In Chicago, a UAL spokesman, "by way of policy," declined to comment on the company's stock or the specialists' performance. Leaving the exchange at about 5 p.m., the Jacobson specialists made no predictions about how trading might go today.Said Earl Ellis, a Jacobson partner who got involved in the UAL action, "It all starts all over again" today.
Britain's current account deficit dropped to #1.6 billion ($2.56 billion) in September from an adjusted #2 billion ($3.21 billion) the previous month, but the improvement comes amid increasing concern that a recession could strike the U.K. economy next year. The Confederation of British Industry's latest survey shows that business executives expect a pronounced slowdown, largely because of a 16-month series of interest-rate increases that has raised banks' base lending rates to 15%. "The outlook has deteriorated since the summer, with orders and employment falling and output at a standstill," said David Wigglesworth, chairman of the industry group's economic committee.He also said investment by businesses is falling off.Of 1,224 companies surveyed, 31% expect to cut spending on plant equipment and machinery, while only 28% plan to spend more. But despite mounting recession fears, government data don't yet show the economy grinding to a halt.Unemployment, for example, has continued to decline, and the September trade figures showed increases in both imports and exports. As a result, Prime Minister Margaret Thatcher's government isn't currently expected to ease interest rates before next spring, if then.Chancellor of the Exchequer Nigel Lawson views the high rates as his chief weapon against inflation, which was ignited by tax cuts and loose credit policies in 1986 and 1987.Officials fear that any loosening this year could rekindle inflation or further weaken the pound against other major currencies. Fending off attacks on his economic policies in a House of Commons debate yesterday, Mr. Lawson said inflation "remains the greatest threat to our economic well-being" and promised to take "whatever steps are needed" to choke it off.The latest government figures said retail prices in September were up 7.6% from a year earlier. Many economists have started predicting a mild recession next year.David Owen, U.K. economist with Kleinwort Benson Group, reduced his growth forecast for 1990 to 0.7% from 1.2% and termed the risk of recession next year "quite high." But he said the downturn probably won't become a "major contraction" similar to those of 1974 and 1982. Still, Britain's current slump is a cause for concern here as the nation joins in the European Community's plan to create a unified market by 1992.Compared with the major economies on the Continent, the U.K. faces both higher inflation and lower growth in the next several months.As a result, Mr. Owen warned, investment will be more likely to flow toward the other European economies and "the U.K. will be less prepared for the single market." Britain's latest trade figures contained some positive news for the economy, such as a surge in the volume of exports, which were 8.5% higher than a year earlier.But while September exports rose to #8.43 billion, imports shot up to #10.37 billion.The resulting #1.9 billion merchandise trade deficit was partly offset by an assumed surplus of #300 million in so-called invisible items, which include income from investments, services and official transfers. Despite the narrowing of the monthly trade gap, economists expect the current account deficit for all of 1989 to swell to about #20 billion from #14.6 billion in 1988.Increasingly, economists say the big deficit reflects the slipping competitive position of British industry. "When the country gets wealthier, we tend to buy high-quality imports," Mr. Owen said.
If bluebloods won't pay high prices for racehorses anymore, who will? Breeders are betting on the common folk. The Thoroughbred Owners and Breeders Association, a Lexington, Ky.-based trade group, has launched "seminars" for "potential investors" at race tracks around the country.The group, which has held half a dozen seminars so far, also is considering promotional videos and perhaps a pitch to Wall Street investment bankers. "People in this business have been insulated," says Josh Pons, a horse breeder from Bel Air, Md. "But the real future of this game is in a number of people owning a few horses." At the Laurel race track, the breeders are romancing people like Tim Hulings, a beer packaging plant worker.Right now, Mr. Hulings is waving his racing program, cheering for Karnak on the Nile, a sleek thoroughbred galloping down the home stretch. Mr. Hulings gloats that he sold all his stocks a week before the market plummeted 190 points on Oct. 13, and he is using the money to help buy a 45-acre horse farm. "Just imagine how exciting that would be if that's your horse," he says. But experts caution that this isn't a game for anyone with a weak stomach or wallet. "It's a big-risk business," warns Charles C. Mihalek, a Lexington attorney and former Kentucky state securities commissioner. "You have to go into it firmly believing that it's the kind of investment where you can lose everything." And many have done just that.Consider Spendthrift Farm, a prominent Lexington horse farm that went public in 1983 but hit hard times and filed for bankruptcy-court protection last year.A group of investors recently bought the remaining assets of Spendthrift, hoping to rebuild it. Other investors have lost millions in partnerships that bought thoroughbred racehorses or stallion breeding rights.One big problem has been the thoroughbred racehorse market.From 1974 to 1984, prices for the best yearlings at the summer sales rose 918% to an average of $544,681.Since then, prices have slumped, to an average of $395,374 this summer.But that's for the best horses, with most selling for much less -- as little as $100 for some pedestrian thoroughbreds.Even while they move outside their traditional tony circle, racehorse owners still try to capitalize on the elan of the sport.Glossy brochures circulated at racetracks gush about the limelight of the winner's circle and high-society schmoozing.One handout promises: "Pedigrees, parties, post times, parimutuels and pageantry." "It's just a matter of marketing and promoting ourselves," says Headley Bell, a fifth-generation horse breeder from Lexington. Maybe it's not that simple.For starters, racehorse buyers have to remember the basic problem of such ventures: These beasts don't come with warranties.And for every champion, there are plenty of nags.Katherine Voss, a veteran trainer at the Laurel, Md., track, offers neophytes a sobering tour of a horse barn, noting that only three of about a dozen horses have won sizable purses. One brown two-year-old filly was wheezing from a cold, while another had splints on its legs, keeping both animals from the racetrack. "You can see the highs and lows of the business all under one roof," she tells the group. "There aren't too many winners." Perhaps the biggest hurdle owners face is convincing newcomers that this is a reputable business.Some badly managed partnerships have burned investors, sometimes after they received advice from industry "consultants." So owners have developed a "code of ethics," outlining rules for consultants and agents, and disclosure of fees and any conflicts of interest. But some are skeptical of the code's effectiveness. "The industry is based on individual honesty," says Cap Hershey, a Lexington horse farmer and one of the investors who bought Spendthrift. Despite the drop in prices for thoroughbreds, owning one still isn't cheap.At the low end, investors can spend $15,000 or more to own a racehorse in partnership with others.At a yearling sale, a buyer can go solo and get a horse for a few thousand dollars.But that means paying the horse's maintenance; on average, it costs $25,000 a year to raise a horse. For those looking for something between a minority stake and total ownership, the owners' group is considering a special sale where established horse breeders would sell a 50% stake in horses to newcomers.
Claude Bebear, chairman and chief executive officer, of Axa-Midi Assurances, pledged to retain employees and management of Farmers Group Inc., including Leo E. Denlea Jr., chairman and chief executive officer, if Axa succeeds in acquiring Farmers. Mr. Bebear added that the French insurer would keep Farmers' headquarters in Los Angeles and "will not send French people to run the company." Axa would also maintain Farmers' relationships with the insurance exchanges that it manages. Mr. Bebear made his remarks at a breakfast meeting with reporters here yesterday as part of a tour in which he is trying to rally support in the U.S. for the proposed acquisition.The bid is part of Sir James Goldsmith's unfriendly takeover attempt for B.A.T Industries PLC, the British tobacco, retailing, paper and financial-services giant that acquired Farmers last year for $5.2 billion.Axa has agreed to acquire Farmers from Sir James's investment vehicle, Hoylake Investments Ltd., for $4.5 billion plus a $1 billion investment in Hoylake. Any acquisition of Farmers needs the approval of insurance commissioners in the nine states where Farmers operates, and Mr. Bebear's trip will take him to Idaho, Arizona and New York after his stay here; he will meet with insurance regulators, legislators, industry excutives and the press. Hearings on Axa's acquisition application have been set for Nov. 13 in Idaho; Nov. 20 in Illinois; Nov. 24 and Dec. 4 in Arizona; Dec. 11 in Washington state; and Jan. 8 in Oregon.Hearings haven't yet been set in Texas, Ohio and Kansas.California's insurance commissioner doesn't hold hearings on acquisition applications. Although Axa has been rebuffed by Farmers and hasn't had any meetings with management, Mr. Bebear nonetheless appears to be trying to woo the company's executives with promises of autonomy and new-found authority under Axa.He said Mr. Denlea would be a member of the top management team of the Axa-Midi group of companies, and would "help define policies and strategies of the group." Farmers was quick yesterday to point out the many negative aspects it sees in having Axa as its parent.For one, Axa plans to do away with certain tax credits that have resulted in more than $600 million paid to the Farmers exchanges during the past few years to offset underwriting losses. Those credits result because of taxes that Farmers, as the management company, has paid, and have "proved to be very important for the exchanges," a Farmers spokesman said.Mr. Bebear contended that the tax cost to the exchanges under the revised structure would be about $8 million a year, which he described as "peanuts."
General Electric Co. executives and lawyers provided "misleading and false" information to the Pentagon in 1985 in an effort to cover up "longstanding fraudulent" billing practices, federal prosecutors alleged in legal briefs. The government's startling allegations, filed only days before the scheduled start of a criminal overcharge trial against GE in Philadelphia federal district court, challenge the motives and veracity of the nation's third-largest defense contractor. In a strongly worded response summarizing a filing made in the same court yesterday, GE asserted that "prosecutors have misstated the testimony of witnesses, distorted documents and ignored important facts." The company attacked the government's allegations as "reckless and baseless mudslinging," and said its management "promptly and accurately reported" to the Pentagon all relevant information about billing practices. The case strikes at the corporate image of GE, which provides the military with everything from jet engines and electronic warfare equipment to highly classified design work on the Strategic Defense Initiative, and could cause a loss of future defense contracts if Pentagon and Justice Department officials take a tough stance. The company has been considered an industry leader in advocating cooperation and voluntary disclosures of improper or inflated billing practices.But the government now claims that a group of company managers and lawyers engaged in an elaborate strategy over five years to obscure from federal authorities the extent and details of "widespread" fraudulent billing practices. The problems were uncovered during a series of internal investigations of the company's Space Systems division, which has been the focus of two separate overcharge prosecutions by the government since 1985.The dispute stems from pretrial maneuvering in the pending court case, in which prosecutors have been demanding access to a host of internal company memos, reports and documents.Last November, a federal grand jury indicted GE on charges of fraud and false claims in connection with an alleged scheme to defraud the Army of $21 million on a logistics computer contract. The company, for its part, maintains that many of the disputed documents are privileged attorney-client communications that shouldn't be turned over to prosecutors.A hearing is scheduled on the issue today. The government's 136-page filing covers events leading up to the current case and an earlier indictment in March 1985, when GE was accused of defrauding the Pentagon by illegally claiming cost overruns on Minuteman missile contracts.GE pleaded guilty and paid a fine of more than $1 million in the Minuteman case, which involved some of the same individuals and operations that are at the center of the dispute in the Philadelphia court. In order to show that all of its units had corrected billing problems and therefore should become eligible again for new contracts, prosecutors contend that "high-level GE executives" and company lawyers provided "misleading statements" to then-Air Force Secretary Verne Orr and other Pentagon officials during a series of meetings in 1985. Overall, the government contends that GE's disclosure efforts largely were intended to "curry favor" with Pentagon officials without detailing the extent of the management lapses and allegedly pervasive billing irregularities uncovered by company investigations. Prosecutors depict a company that allegedly sat on damaging evidence of overcharges from 1983 to 1985, despite warnings from an internal auditor.When GE finally disclosed the problems, prosecutors contend that Mr. Orr "was erroneously informed that the {suspected} practices had only just been discovered" by GE management. In its brief, the government asserted that it needs the internal GE documents to rebut anticipated efforts by GE during the trial to demonstrate "its good corporate character." GE, which was surprised by the last-minute subpoena for more than 100 boxes and file cabinets of documents, countered that senior GE managers didn't find out about questionable billing practices until 1985, and that the information was passed on quickly to Mr. Orr at his first meeting with company representatives.Subsequent meetings, initiated after the company and two of its units were briefly suspended from federal contracts, were held to familiarize Mr. Orr with the company's self-policing procedures and to disclose additional information, according to GE. GE's filing contends that the billing practices at the heart of the current controversy involved technical disputes rather than criminal activity. The company's conduct "does not even raise a question of wrongful corporate intent, ratification or cover-up," GE's brief asserts. "On the contrary, it shows a corporation reacting swiftly and aggressively to very difficult issues in largely uncharted waters." Mr. Orr couldn't be reached for comment yesterday.
London share prices closed sharply lower Tuesday on the back of Wall Street's steep drop and renewed fears over U.K. economic fundamentals.Tokyo's winning streak came to an end, and stocks fell in Frankfurt and across Europe as well. London's Financial Times 100-share index shed 40.4 points to finish at 2149.3.At London's close, the Dow Jones Industrial Average was 51.23 points lower at 2611.68. Dealers said the initial pressure came from mildly disappointing U.K. trade figures for September and a worrisome report by the Confederation of British Industry that a decline in orders for manufactured goods is depressing both business optimism and investment plans for the coming year. The trade and CBI reports refocused attention on high interest rates and corporate profitability and helped rekindle underlying concerns over prospects for a recession in the U.K., dealers said. The 30-share index fell 33.3 points to 1739.3.Volume was a modest 405.4 million shares traded, but better than the year's lowest turnover of 276.8 million Monday. Market watchers also noted an absence of institutional interest later in the session helped pave the way for broader declines when Wall Street opened weaker. They added that market-makers were knocking share prices down in midafternoon in a bid to attract some interest, but the action largely helped open the way for London's late declines. Insurance stocks provided some early support to the market, partly on favorable brokerage recommendatons and talk of continental European interest in British life and composite insurers. British life insurer London & General, which firmed 2 pence to 356 pence ($5.70), and composite insurer Royal Insurance, which finished 13 lower at 475, were featured in the talk.On the life insurance side, Pearl Group finished 5 lower at 640, and Sun Life dropped 15 to #11.53. Jaguar finished 4 lower at 694.Dealers said the market didn't react substantially to Ford Motor Co. 's disclosure to the U.S. Securities and Exchange Commission that it will seek 100% of Jaguar's shares outstanding when U.K. government share regulations are lifted at the end of next year. Tokyo stocks closed easier, posting their first loss in six trading days, partly because of programmed index-linked selling by trust investment funds in the afternoon session. The Nikkei index fell 58.97 points to 35526.55.The index gained 99.14 points Monday. In early trading in Tokyo Wednesday, the Nikkei index rose 17.92 points to 35544.47. On Tuesday, the Tokyo stock price index of all first section issues was down 6.31 at 2681.22.First section volume was estimated at 900 million shares, up from 605 million Monday. Observers said the market again failed to find a trading focus, discouraging much participation by investors. The market, however, is expected to remain stable and expectations for future gains are high, traders said.Such sentiment is being supported by word that a large amount of cash from investment trust funds is scheduled to enter the market later this week and in early November. The expected amount is said to be 700 billion yen ($4.93 billion) to 1.05 trillion yen -- the second largest amount this year in a given period, following the record high set at the end of July, according to market observers. In addition to a large amount of investment trust fund cash, analysts generally see the market environment improving compared with the past couple of weeks. Toshiyuki Nishimura, an analyst at Yamaichi Securities, said, "The market sentiment is bullish, simply because there are few bad factors." Buying activity Tuesday centered on a wide range of midcapitalization, domestic demand-related shares whose prices range from 1,000 to 2,000 yen.Investors expect these shares will be targets of investment trust funds, which often buy small amounts spread across a wide range of issues. On the other hand, high-priced shares such as Pioneer Electronic and Sony failed to spark investor interest because these issues are unlikely to be bought by investment trust funds, observers said. Tuesday's notable losers were highpriced shares such as Pioneer, which shed 210 yen to 5,900 yen.Sony was down 130 to 8,590.TDK fell 120 to 5,960, Fuji Photo Film declined 160 to 4,830, and Fanuc dropped 160 to 7,440. Share prices on the Frankfurt stock exchange closed sharply lower in thin dealings as worried investors remained idle as the result of two potentially destabilizing domestic developments.The DAX index fell 15.85 to end at 1507.37. Cutting against the downward trend was Continental, which jumped 4 marks to 346 marks ($187) in heavy trading on rumors that the tire maker is about to be taken over.It jumped 7.5 Monday. Traders said the market was exceptionally thin, as small investors remain on the sidelines.Market participants say investors are not only licking their wounds following the turbulence last week, but they have also been made nervous by two events in West Germany. On Sunday, the governing Christian Democratic Union suffered a series of setbacks, the extent of which became fully known only late Monday, in municipal elections in Baden-Wuerttemberg.Traders say investors are worried that the CDU won't be able to hold office in federal elections at the end of 1990. And statements by the chairman of the IG Metall labor union, Franz Steinkuehler, also cast a cloud over trading, dealers said.Mr. Steinkuehler said at a convention in West Berlin that the union has to prepare for "a big fight" to achieve its main goal of a 35-hour workweek, down from current 37-hour workweek. The decline in prices cut broadly through the blue-chip issues, as Siemens tumbled 7.5 to 544, Deutsche Bank plunged 7 to 657, and the auto makers fell sharply as well.Daimler-Benz dropped 12.5 to 710.5, Bayerische Motoren Werke dropped 10.5 to 543.5, and Volkswagen lost 7.1. Elsewhere, share prices closed lower in Zurich, Amsterdam, Milan and Stockholm.Uneasiness about Wall Street was cited in several markets. Prices closed lower in Sydney, Singapore and Wellington, were mixed in Hong Kong and higher in Taipei, Manila, Paris, Brussels and Seoul. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
Savings and loans reject blacks for mortgage loans twice as often as they reject whites, the Office of Thrift Supervision said. But that doesn't necessarily mean thrifts are discriminating against blacks, the agency said.The office, an arm of the Treasury, said it doesn't have data on the financial position of applicants and thus can't determine why blacks are rejected more often. Nevertheless, on Capitol Hill, where the information was released yesterday at a Senate banking subcommittee hearing, lawmakers said they are worried that financial institutions are routinely discriminating against minorities.They asked regulators to suggest new ways to force banks and thrifts to comply with anti-discrimination laws. Sen. Alan Dixon (D, Ill.), chairman of the subcommittee on consumer and regulatory affairs, said, "I'm not a statistician.But when blacks are getting their loan applications rejected twice as often as whites -- and in some cities, it is three and four times as often -- I conclude that discrimination is part of the problem." James Grohl, a spokesman for the U.S. League of Savings Institutions, said, "The data is a red flag, but lacking the financial data you can't make a case that discrimination is widespread." The trade group official added: "Certainly the federal government should take a hard look at it." Sen. Dixon held the hearing to follow up on a provision in the savings and loan bailout bill that required regulators to report on evidence of discimination in mortgage lending.The legislation also requires broad new disclosures of the race, sex and income level of borrowers, but that information won't be gathered in new studies for several months at least. The Federal Reserve said its studies in recent years, which adjust for income differences and other variables, showed that blacks received fewer home mortgages from banks and thrifts than whites.But John LaWare, a Fed governor, told the subcommittee the evidence is mixed and that the Fed's believes the vast majority of banks aren't discriminating.For instance, he noted, the Fed studies have shown that blacks receive more home improvement loans than whites. Several lawmakers were angered that the bank and thrift regulators generally said they have been too busy handling the record number of bank and thrift failures in the past few years to put much energy into investigating possible discrimination. "We would be the first to admit that we have not devoted the necessary amount of emphasis over the past several years" to developing examinations for discrimination, said Jonathan Fiechter, a top official of the Office of Thrift Supervision. "If we've got folks out there who are being turned away in the mortgage market improperly and unfairly," said Sen. Donald Riegle (D., Mich.), chairman of the banking committee, "then that is a matter that needs remedy now, not six months from now, or six years from now, or 26 years from now." Officials of the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency said they have punished only a few banks for violations of anti-discrimination laws.The FDIC said it has issued five citations to banks over the past three years for discriminatory practices. The comptroller's office said it found no indications of illegal discrimination in 3,437 examinations of banks since April 1987.The comptroller's office also said that of 37,000 complaints it received since January 1987, only 16 alleged racial discrimination in real estate lending.The agency investigated the complaints but no violations were cited. Thrift regulators didn't give any figures on their enforcement actions. Mr. Fiechter said that among the possibilities being considered by regulators to fight discrimination is the use of "testers" -- government investigators who would pose as home buyers.The Department of Housing and Urban Development has used testers to investigate discrimination in rental housing.Using testers could be controversial with financial institutions, but Mr. Grohl said the U.S. League of Savings Institutions hadn't yet taken any position on the matter.
Time Warner Inc. is considering a legal challenge to Tele-Communications Inc. 's plan to buy half of Showtime Networks Inc., a move that could lead to all-out war between the cable industry's two most powerful players. Time is also fighting the transaction on other fronts, by attempting to discourage other cable operators from joining Tele-Communications as investors in Showtime, cable-TV industry executives say.Time officials declined to comment. Last week, Tele-Communications agreed to pay Viacom Inc. $225 million for a 50% stake in its Showtime subsidiary, which is a distant second to Time's Home Box Office in the delivery of pay-TV networks to cable subscribers.Tele-Communications, the U.S.'s largest cable company, said it may seek other cable partners to join in its investment. Tele-Communications is HBO's largest customer, and the two have a number of other business relationships.Earlier this year, Time even discussed bringing Tele-Communications in as an investor in HBO, executives at both companies said.The purchase of the Showtime stake is "a direct slap in our face," said one senior Time executive. Time is expected to mount a legal challenge in U.S. District Court in New York, where Viacom in May filed a $2.5 billion antitrust suit charging Time and HBO with monopolizing the pay-TV business and trying to crush competition from Showtime.Executives involved in plotting Time's defense say it is now preparing a countersuit naming both Viacom and Tele-Communications as defendants.The executives say Time may seek to break up the transaction after it is consummated, or may seek constraints that would prevent Tele-Communications from dropping HBO in any of its cable systems in favor of Showtime. Viacom officials declined to comment.Jerome Kern, Tele-Communications' chief outside counsel, said he wasn't aware of Time's legal plans.But he said that any effort by Time to characterize the Tele-Communications investment in Showtime as anti-competitive would be "the pot calling the kettle black." "It's hard to see how an investment by the largest {cable operator} in the weaker of the two networks is anti-competitive, when the stronger of the two networks is owned by the second largest" cable operator, Mr. Kern said. In addition to owning HBO, with 22 million subscribers, Time Warner separately operates cable-TV system serving about 5.6 million cable-TV subscribers.Tele-Communications controls close to 12 million cable subscribers, and Viacom has about one million.In its suit against Time, Viacom says the ownership of both cable systems and cable-programming networks gives the company too much market power.Time argues that in joining up with Tele-Communications, Viacom has potentially more power, particularly since Viacom also owns cable networks MTV, VH-1 and Nick at Nite.Ironically, Tele-Communications and Time have often worked closely in the cable business.Together, they control nearly 40% of Turner Broadcasting Systems Inc.; Tele-Communications has a 21.8% stake, while Time Warner has a 17.8% stake.But since Time's merger with Warner Communications Inc., relations between the two have become strained.Each company worries that the other is becoming too powerful and too vertically integrated. Meanwhile, some legal observers say the Tele-Communications investment and other developments are weakening Viacom's antitrust suit against Time.Viacom accuses Time in its suit of refusing to carry Showtime or a sister service, The Movie Channel, on Time's Manhattan Cable TV system, one of the nation's largest urban systems.But yesterday, Manhattan Cable announced it will launch Showtime on Nov. 1 to over 230,000 subscribers. Showtime has also accused HBO of locking up the lion's share of Hollywood's movies by signing exclusive contracts with all the major studios.But Showtime has continued to sign new contracts with Hollywood studios, and yesterday announced it will buy movies from Columbia Pictures Entertainment Inc., which currently has a non-exclusive arrangement with HBO.
The airline industry's fortunes, in dazzling shape for most of the year, have taken a sudden turn for the worse in the past few weeks. Citing rising fuel costs, promotional fare cuts and a general slowdown in travel, several major carriers have posted or are expected to post relatively poor third-quarter results.Yesterday, USAir Group Inc., recently one of the industry's stellar performers, posted a worse-than-expected $77.7 million net loss for the period. So far, the industry's fourth quarter isn't looking too strong either, prompting many analysts to slash earning projections for the rest of the year by as much as one-fourth.And they say the outlook for 1990 is nearly as bad.Airlines in 1989 "came in like a bang and are going out like a whimper," said Kevin Murphy, an airline analyst at Morgan Stanley & Co. This turn of events has put a big damper on an industry that seemed almost invincible last spring, when fares were rising at double-digit rates and many carriers seemed to be growing fat on near-monopolies in certain markets.Now, many airline companies might become a lot less attractive as takeover targets on Wall Street.The downturn also raises questions about the carriers' ambitious orders for new airplanes, which currently total $32.5 billion over the next three years. For travelers, though, the industry's problems have had some positive effects.In recent weeks, airlines have cut numerous fares in leisure markets to try to win back customers.Others have tried to spruce up frequent-flier programs.Previously, airlines were limiting the programs because they were becoming too expensive. Just last week, for example, Trans World Airlines and Pan Am Corp. 's Pan American World Airways went so far as to offer cash rebates or gift checks of $200 to $1,000 to certain frequent-flier members making trans-Atlantic flights in business class or first class.The industry's slowdown became apparent this month when AMR Corp., parent of American Airlines, reported an 8.8% drop in third-quarter net income and said its fourth quarter would be "disappointing." Shortly before that, USAir had said its third-quarter results would be "significantly lower" than a year earlier.Yesterday, it provided the details: Its loss of $77.7 million, or $1.86 a share, contrasted with net of $68.5 million, or $1.58 a share, in the 1988 third quarter.Revenue rose only 3.3% in the latest period, to $1.53 billion from $1.48 billion. For the nine months, the Arlington, Va., company's net plunged 73% to $38.5 million, or 76 cents a share, from $142.2 million, or $3.28 a share.Revenue rose 12% to $4.75 billion from $4.22 billion. The results surprised many analysts, because USAir has almost no competition in its Pittsburgh hub and has expanded operations by completing its acquisition of Piedmont Airlines.Shortly after announcing its quarterly loss, USAir's stock tumbled $3 a share.It ended at $40.125, down $2.375, in New York Stock Exchange composite trading. "Nobody was expecting this size of a loss," said Paul Karos, an analyst with First Boston Corp.One airline executive, who declined to be identified, called the loss "amazing." In announcing the results, USAir cited many of the same problems that several other industry officials have named recently.It said the industry's domestic traffic was flat in the third quarter; analysts say this was because hefty fare increases earlier in the year scared off many leisure travelers this summer.To try to combat the traffic slowdown, airlines started reducing fares; average fares rose only 1.7% in August, in contrast to increases of 16% each in February and March.But so far, the effort has failed, and traffic is still slow. Some other fare promotions have backfired.This summer, the industry introduced a "kids fly free" program, in which children were allowed to fly free if they were traveling with an adult.Airlines tried to restrict the program substantially by limiting the offer to certain days of the week, but it still was apparently used far more heavily than the airlines expected. Airlines also say their frequent-flier programs are squeezing profits because awards are being redeemed at a heavier-than-normal rate.One airline official said about three times as many free-travel coupons are being turned in as in previous years -- not surprisingly, as the airlines last year allowed many travelers to build up mileage at triple the normal rate. Rising operating expenses are another problem.Fuel costs were up 10% in the third quarter.Labor costs, which leveled off in the past few years because of lower pay scales for newer employees, are on the upswing again at many carriers.And some carriers are facing other unexpected headaches: USAir, for example, blamed some of its loss on merger expenses and on disruptions caused by Hurricane Hugo last month. "We cannot quantify the total adverse effects of Hugo," said Edwin Colodny, chairman and president of USAir Group. Whatever the cause for the downturn, few people are predicting any sudden improvement.Airline Economics Inc., an aviation consulting firm, is projecting an industrywide operating profit of $2.5 billion for 1989, compared with earlier forecasts of $3 billion to $3.5 billion.As for 1990, the firm predicts that profit will slip to between $1 billion and $1.5 billion.
Good grief! Charlie Brown is selling out. Those Metropolitan Life ads were bad enough.But now, Charlie Brown is about to start pitching everything from Chex Party Mix to light bulbs.Why is he cashing in now?Turns out that next year, Charlie Brown, Snoopy and the gang turn 40 -- and Scripps Howard's United Media unit, the syndicator and licensing agent for Charles Schulz's comic strip, sees a bonanza in licensing the cartoon characters to a bevy of advertisers for ads, tie-ins and promotions. "Peanuts has become a major part of American culture," says Peter Shore, United Media's vice president of marketing and licensing.The comic strip "has a magical, everlasting quality about it.Our plan is to honor Charles Schulz and the strip all year long." The effort will make the Peanuts gang very familiar pitchmen in 1990.General Electric plans to use the characters to plug its Miser light bulb.Teleflora will run TV ads at Valentine's Day promoting its "Snoopy's Love Bouquet." Ralston Purina will promote its Chex Party Mix's three new flavor packets named for Charlie Brown, Lucy and Linus.The characters will also be featured in a new public service effort for the United Way. Beyond the advertisements, the syndicator is planning a traveling arena show, new TV specials for CBS and even an exhibit at the Smithsonian Institute.The yearlong schedule of festivities will be kicked off officially with a combination live and animation half-time special at the Super Bowl in January. All the tie-ins, though, have some marketing experts questioning whether the party may go too far. "There are too many people participating," says Al Ries, of Trout & Ries, a Greenwich, Conn., marketing consulting firm. "If you want to cut through the clutter, you have to make your message as distinct, sharp and individual as possible.Sharing a character with other advertisers isn't a way to do that." But United Media says it's very scrupulous with the contracts it hands out. "We're not interested in promoting every single product that comes along," Mr. Shore says. Metropolitan Life ad executives couldn't be reached about the use of the Peanuts characters by others.But Mr. Shore says that company's exclusive advertising rights extend only to the insurance and financial services category. Berry Rejoins WPP Group Norman Berry, the creative executive who was apparently squeezed out of Ogilvy & Mather in June, is returning to Ogilvy's parent company, WPP Group PLC. Mr. Berry, 58, had resigned after being asked by Ogilvy 's chairman and chief executive officer, Kenneth Roman, to give up his title as creative head of the New York office and to take a fuzzier international role.Yesterday, just a day after Mr. Roman announced he would leave to take a top post at American Express, WPP said Mr. Berry would return to take an international role at the parent company. Mr. Berry said the timing was a coincidence and that his decision was unrelated to Mr. Roman's departure. RJR Taps FCB/Leber RJR Nabisco Inc. awarded its national broadcast media-buying assignment to FCB/Leber Katz Partners, the New York outpost of Chicago-based Foote, Cone & Belding. The naming of FCB/Leber Katz Partners as agency of record for Nabisco Brands Inc. and Planters LifeSavers Co. follows RJR Nabisco's announcement last week that it will disband its RJR Nabisco Broadcast division and dismiss its 14 employees Dec. 1. to cut costs.New York-based RJR Nabisco wouldn't say what it spends annually, but industry executives say it will spend more than $140 million this year, down from about $200 million last year. Ad Notes. . . . EARNINGS: Interpublic Group of Cos. said third-quarter net rose 15% to $6.9 million, or 21 cents a share, from $6 million, or 18 cents a share, in the year-earlier period.Revenue increased more than 5% to $283.2 million from $268.6 million. HOLIDAY PROMOTION: PepsiCo Inc. will give away 4,000 sets of "Game Boy," Nintendo's new hand-held video game in a two-month promotion scheduled to begin Nov. 1.Pepsi said it will spend $10 million advertising the promotion.
Bond Corp. Holdings Ltd. 's consolidated debt totals 6.9 billion Australian dollars (US$5.32 billion), including A$1.6 billion of bonds convertible into shares. Alan Bond, chairman and controlling shareholder of the cash-strapped Australian media, brewing, resources and property concern, disclosed the debt figures yesterday. The disclosure follows last Friday's news that Bond Corp. incurred an overall loss of A$980.2 million for the fiscal year ended June 30, the largest loss in Australian corporate history. The debt load would have been higher but for a reduction of A$5 billion over the past year from asset sales, Mr. Bond said at a business gathering. Mr. Bond indicated the consolidated debt figures, which include debt of units such as Bell Group Ltd., will be published soon in Bond Corp. 's 1989 annual accounts. He predicted the debt will be reduced by another A$3.8 billion this fiscal year ending June 30, 1990, but didn't explain how this will be achieved. Mr. Bond blamed rising Australian interest rates and the acquisition of Bell Group "with its very high levels of shortterm debt" for producing a condition "that was no longer sustainable. "In order to restore confidence and ensure the support of our principal lenders," Mr. Bond said, "we embarked on fundamantal changes in the structure and direction of the group." That reassessment resulted in continuing asset sales, as well as write-offs exceeding A$1.1 billion last fiscal year. "In essence we have made a decision to clear the decks," Mr. Bond told the meeting. While some assets have been written down, others are undervalued in the accounts, Mr. Bond maintained.Among these are the company's Australian brewing assets, in the books at A$950 million but actually worth A$2.5 billion, he said.An investment in Chile's telephone company is carried at US$300 million but really worth US$500 million, and the company's property portfolio is undervalued by at least A$250 million, Mr. Bond said. Mr. Bond forecast that by next June, "what will emerge will be a company with a honed sense of purpose . . . a stable balance sheet, with good-quality assets in brewing, telecommunications, media and property." He didn't name energy resources in that list, signaling that all the company's coal and oil interests might be for sale in total or in part.Some of the oil interests already have been sold.
Mercedes-Benz of North America Inc., Grosse Pointe Shores, Mich., estimated it will sell about as many cars in 1990 as the 75,000 it expects to deliver this year. Mercedes officials said they expect flat sales next year even though they see the U.S. luxury-car market expanding slightly.Erich Krampe, president of the U.S. sales arm of West German auto maker Daimler Benz AG, predicted luxury-car sales will rise to 840,000 in 1990 from 830,000 this year primarily because of the new Japanese makes. Most of the growth, he said, will come in the $35,000-to-$50,000 price range, where Mercedes has a 35% U.S. market share.Mercedes sold 82,348 cars in 1988. Mr. Krampe also said that Mercedes plans to bring out new models every year through the mid-1990s and it will shorten its product development cycle to eight years from 10 or 12 years to compete more effectively with Toyota Motor Corp. 's Lexus, Nissan Motor Co. 's Infiniti and Honda Motor Co. 's Acura luxury-car divisions.
Copper futures sold off sharply yesterday, influenced by declines in the stock market and dollar, and a rally in bonds. December copper opened near Monday's close, tried to rally but failed, and then triggered stop-loss orders on its way down to settle at $1.1510 a pound, off 4.50 cents for the day.Stop-loss orders are placed previously with instructions to execute them if the market hits a predetermined price. William Kaiser, president of the Kaiser Financial Group in Chicago, said the decline was almost certainly influenced by the early sell-off in the stock market, which partly reflected a weakening economy.He said the recent decline in copper stocks was misleading in the face of a slowdown in manufacturing.Mr. Kaiser said traders could have picked up signals of an imminent price decline had they been watching the scrap metal markets, which became noticeably weaker two to three weeks ago. But though a weakening economy implies reduced demand, Mr. Kaiser said that Third World copper-producing countries haven't any choice but to sell copper.They might even step up sales in a falling market, he said, in an effort to maintain the flow of foreign exchange into their treasuries. Technically, Mr. Kaiser noted that a lot of traders had bought into the market when the price was in the $1.24 to $1.26 range, thinking there was support at the $1.20 level.When the market fell below that level on Monday and then yesterday couldn't climb above that level, traders started selling out their positions. Betty Raptopoulos, senior metals analyst at Prudential-Bache Securities in New York, agreed that most of the selling was of a technical nature.She said the market hit the $1.18 level at around 10 a.m. EDT where it encountered a large number of stop-loss orders.More stop-loss orders were touched off all the way down to below $1.14, where modest buying was attracted.Ms. Raptopoulos said the settling of strikes in Canada and Mexico will have little effect on supplies of copper until early next year.She thinks the next area of support for copper is in the $1.09 to $1.10 range. "I believe that as soon as the selling abates somewhat we could see a rally back to the $1.20 region," she added. She thinks a recovery in the stock market would help copper rebound as well.She noted that the preliminary estimate of the third-quarter gross national product is due out tomorrow and is expected to be up about 2.5% to 3%. "If the number is a little better, then copper will respond positively, if it is worse then more selling could ensue," she predicted. Ms. Raptopoulos noted that relating economic numbers to specific market activity is tricky.Yesterday, for example, "the durable goods numbers came out for September and the number was down only 0.1%," she said. "However, if you exclude defense-related orders then durable goods were down 3.9%.I believe that number reflects a slowing economy." She said copper traders will also be looking toward the release of the index of leading economic indicators next Tuesday. However, David Threlkeld, president of Threlkeld & Co., an international metals company, noted that so far this year copper consumption is way ahead of the same period of 1988, and that projected production is below last year. Mr. Threlkeld said the copper market seems to be anticipating a recession in three months, with declining use being the result. "But," he added, "we have had that exact same perception six times in the last six years." He noted that currently the ratio of available copper to consumption is about 3.5 weeks.He said the normal ratio is five to six weeks. According to Mr. Threlkeld, the bottleneck in copper production isn't at the mines but at the copper refineries. "It takes three months to turn copper concentrate into cathodes," he said.If there isn't a recession, he said, "we will be out of copper by the end of March.If there is a recession that will change the statistical situation." He thinks that without a recession copper prices could exceed a high of $1.65 a pound, which was reached last year. In the past Mr. Threlkeld has been known to have substantial long positionsthat is, he had bought copper futures in anticipation of rising prices -- in the copper futures market. In other commodity markets yesterday: ENERGY: The attitude was "wait-and-see" in crude oil futures yesterday in trading on the New York Mercantile Exchange.Prices for the U.S. benchmark West Texas Intermediate crude remained locked in a fairly narrow range before ending the session four cents lower at $19.72 a barrel for December delivery.Several analysts and brokers said the petroleum market was ready to rally after two days of price declines from profit-taking.But an early 80-point drop in the Dow Jones Industrial Average stopped the crude rally cold.The industrial average recovered to close only 3.69 points lower, but petroleum futures never shook off the chill.Most market participants said they were looking to this week's inventory statistics from the American Petroleum Institute to give the market some direction.The report isn't generally available until late on Tuesdays. PRECIOUS METALS: Futures prices inched upward in mostly lackluster trading.December gold was up $3.20 an ounce at $373.40; December silver gained 5.7 cents to $5.1950 an ounce.January platinum rose $2.30 an ounce to $488.60.Mr. Kaiser said there were no fundamental factors moving these markets.He noted that two weeks ago there were rumors of Soviet sales of precious metals to finance grain purchases, but the sales don't seem to have materialized.Ms. Raptopoulos thought yesterday's price action reflected weakness in the stock market and the dollar. "Gold still acts as a haven when uncertainty prevails in the financial markets as it did" yesterday, she said.Mr. Kaiser noted that gold was more than 71 times the price of silver at the close yesterday, which is historically high. "The high ratio reflects the fact that silver is still regarded as about a half-industrial metal and its price lagging relative to gold says that traders are expecting a weakening economy," he said. GRAINS AND SOYBEANS: Prices closed lower after trading in relatively narrow ranges because of strong selling in the cash market and continued favorable harvest weather.The sale to the Chinese government of 330,000 metric tons of wheat under the government's export enhancement program was announced after the close of trading Monday, but the sale was expected and failed to buoy prices yesterday, said Dale Gustafson, a futures analyst with Drexel Burnham Lambert Inc. in Chicago.As for other export customers, the Soviet Union isn't expected to be back buying U.S. corn in significant amounts until early next year, he said.A number of commercial grain users buttressed that opinion yesterday by buying certain corn options for delivery in March, indicating to analysts that the commercial companies would use the options to hedge against expected corn sales in next year's first quarter. COCOA: Futures at first continued the rally begun on Monday, but then faltered and closed lower.The December contract opened just under Monday's close, triggered some previously placed buy orders just above $1,030 a metric ton, pushing the price to $1,040, and then encountered heavy selling by traders who buy and sell for their own accounts and by commercial interests.The contract settled at $1,014 a ton, off $13.Robert Hafer, senior commodities analyst at Kaiser Financial Group, said Monday's rally continued yesterday for only about 20 minutes after the opening.He said even though there was arbitrage buying in New York because of the weak dollar, cocoa fell to relentless pressure from bearish traders.But he noted that speculators apparently don't believe there is much more of a decline in store for cocoa.The December contract reached its life-of-contract low of $975 a ton on Oct. 11; its lifetime high was $1,735, set in 1988, and its recent high was $1,368, set in early August.The last time cocoa traded at prices as low as currently was in 1974.But while further modest declines might be ahead, Mr. Hafer said it would be difficult to get through resistance levels just above yesterday's high.
Next to Kohlberg Kravis Roberts's megabillion RJR Nabisco deal, SCI Television is small fry. But the troubles of SCI TV are a classic tale of the leveraged buy-out excesses of the 1980s, especially the asset-stripping game. SCI TV, which expects to release a plan to restructure $1.3 billion of debt in the next day or so, isn't just another LBO that went bad after piling on debt -- though it did do that.The cable and TV station company was an LBO of an LBO, a set of assets that were leveraged twice, enabling the blue-chip buy-out king Henry Kravis in 1987 to take more than $1 billion of cash out of the com- pany. SCI TV's buy-out was an ace in the hole for Mr. Kravis and for investors in KKR partnerships.But it has left holders of SCI TV's junk bonds holding the bag, including some heavyweights that KKR might need to finance future deals, such as Kemper Financial Services, First Executive, Columbia Savings & Loan and Prudential Insurance Co. of America. Some junk-holders are said to be considering legal action against KKR or moves to force SCI TV into bankruptcy court.And KKR's majority partner in SCI TV's buy-out, Nashville, Tenn., entrepreneur George Gillett, also is said to be very unhappy. SCI TV's six stations once were part of Storer Communications.KKR loaded up the cable and television company with debt in an 1985 buy-out, then later sold Storer's cable operations at a fat profit. In 1987, KKR for the second time piled debt onto Storer's TV stations, selling them for $1.3 billion to a new entity that was 45%-owned by KKR and 55%-owned by Gillett Corp., which now operates the SCI TV stations.In this second LBO, KKR with one hand took more than $1 billion of cash out of the TV company's assets and moved it into the Storer cable operations, making them more valuable in a 1988 sale. (Storer also took $125 million of junior SCI TV bonds as partial payment for the TV assets.) With the other hand, KKR put back into SCI TV less than 10% of the cash it had taken out, buying SCI TV common and preferred shares. So, while KKR today has an estimated $250 million sunk in now-shaky SCI TV, including equity and debt, the LBO firm still is $1 billion ahead on the SCI TV buy-out after taking cash up front.On Storer as a whole, KKR racked up compound annual returns of 60% in the three years it owned Storer. Meanwhile, Mr. Gillett risks losing his entire equity investment of about $100 million in SCI TV if the company can't be restructured.Overall, Mr. Gillett's holding company, Gillett Holdings, is heavily indebted and, except for its Vail Mountain resorts, isn't doing very well. With the TV business falling on hard times in recent years, analysts say that if SCI TV had to be liquidated today, it might fetch 30% less than in the 1987 buy-out, wiping out most of the company's junk-holders and its stockholders.Meanwhile, SCI TV can barely pay its cash interest bill, and to stay out of bankruptcy court it must soon reschedule a lot of bank loans and junk bonds that have fallen due. SCI TV's grace period for paying its bills is due to expire Nov. 16.It now is quietly circulating among creditors a preliminary plan to restructure debt.Negotiations "have started con- structively, but that's not to say we like this particular offer," says Wilbur Ross of Rothschild Inc., adviser to SCI TV junk-holders. No major player in the SCI TV deal will talk publicly.But it's understood that Mr. Kravis is disappointed that Mr. Gillett didn't manage to boost SCI TV's operating profit after the buy-out.Mr. Kravis apparently thinks SCI TV can survive if lenders extend its debt payments until TV stations rise in value again, allowing SCI TV to sell assets to pay debt.Mr. Gillett is said to be proud of his operating record; he has lifted some stations' ratings and turned around a Detroit station. As for junk-holders, they're discovering it can be a mistake to take the other side of a trade by KKR.The bonds of SCI TV now are being quoted at prices ranging from only five cents to about 60 cents on the dollar, according to R.D. Smith & Co. in New York, which trades distressed securities. People who have seen SCI TV's restructuring plan say it offers concessions by KKR and Gillett Corp.They would both give part of their combined $50 million in common equity in SCI TV to holders of SCI TV's $488 million of junk bonds, as a carrot to persuade them to accept new bonds that might reduce the value of their claims on the company. But some militant SCI TV junk-holders say that's not enough.They contend that SCI TV's equity now is worthless.They add that it isn't costing KKR anything to give up equity because of its big up-front cash profit on the buy-out, which they think contributed to SCI TV's current problems.Kemper, the biggest holder of senior SCI TV bonds, has refused to join the bond-holders committee and is said to be reviewing its legal options. To protect their claims, some junk-holders want KKR and perhaps Mr. Gillett to invest new money in SCI TV, perhaps $50 million or more.One investment banker who isn't involved in the deal says SCI TV needs at least $50 million of new equity to survive. Junk-holders say they have a stick to beat KKR with: "The threat of bankruptcy is a legitimate tool" to extract money from KKR, says one big SCI TV holder.This could be the first major bankruptcy-law proceeding for KKR, he adds.A big bankruptcy-court case might tarnish KKR's name, and provide new fuel for critics of LBOs in Washington and elsewhere.But others say junk-holders have nothing to gain by putting SCI TV into bankruptcy-law proceedings. While KKR doesn't control SCI TVwhich is unusual for a KKR investment -- it clearly has much deeper pockets than Mr. Gillett.Bankruptcy specialists say Mr. Kravis set a precedent for putting new money in sour LBOs recently when KKR restructured foundering Seaman Furniture, doubling KKR's equity stake. But with Seaman, KKR was only trying to salvage its original investment, says bankruptcy investor James Rubin of Sass Lamle Rubin in New York.By contrast, KKR probably has already made all the money it can on SCI TV.And people who know Mr. Kravis say he isn't in a hurry to pour more money into SCI TV.
Rubbermaid Inc., reflecting strong earnings growth, boosted its quarterly dividend 18%, to 13 cents a share from 11 cents. The maker of household products said the new dividend is payable Dec. 1 to shares of record Nov. 10. Separately, the company's board adopted a proposal to amend its 1986 shareholder rights plan, further insulating the company from takeover. Rubbermaid officials said they aren't aware of any effort to take over the company, but believed the shareholder plan needed to be strengthened. "The board has stated repeatedly that Rubbermaid should be independent," said Walter W. Williams, Rubbermaid president. Some changes to the plan were minor adjustments, but the most significant was an amendment that provides that if any investor holds 25% or more of Rubbermaid's voting securities, each right held by others would entitle the holder to buy Rubbermaid shares with a market value of twice the right's exercise price. Mr. Williams said the exercise price is $125, meaning holders would have the right to buy $250 of Rubbermaid stock for half price, diluting the investor's 25% stake. For the third quarter, Rubbermaid earned $32.6 million, or 44 cents a share, up 16% from $28.1 million, or 38 cents a share, a year earlier.Sales rose 9.7% to $351.5 million from $320.4 million. Rubbermaid shares closed yesterday at $33.875, off 12.5 cents, in New York Stock Exchange composite trading.
Stock of United Airlines parent UAL Corp. gyrated wildly yesterday amid speculation that one or more investors may challenge the UAL board's decision to remain independent instead of pursuing a buy-out or other transaction. The board's decision, announced after the market closed Monday, initially prompted a severe sell-off in UAL shares, which at midday traded as low as $145 a share, down $33 a share, in composite trading on the New York Stock Exchange. The deepening bloodbath for takeover-stock traders, who by then had seen UAL stock tumble 49% since Oct. 12, also triggered a marketwide sell-off that sent the Dow Jones Industrial Average down more than 80 points at 10:40 a.m. But then steady, concentrated buying by Bear, Stearns & Co., which frequently buys stock for corporate raiders, took hold and steadied the fall in UAL, which eventually buoyed the entire market.The industrial average closed down only 3.69 points at 2659.22. Late in the afternoon, several big purchases by Bear, Stearns, particularly a block of 200,000 shares at 2:43 p.m. at $150 a share, triggered a buying spree that took UAL up more than 18 points in the final hour of trading. UAL stock closed at $170 a share, down $8.375.Volume was a tumultuous 4.9 million shares, or 22% of the 21.8 million UAL shares outstanding.Traders estimated that Bear, Stearns bought more than 1 million shares. The two most frequently rumored buyers, neither of whom would comment, were Coniston Partners, which battled the UAL board in 1987, and New York real estate developer Donald Trump, who recently made and withdrew an offer for American Airlines parent AMR Corp. However, one person familiar with UAL said the signs pointed to Coniston because Mr. Trump hasn't asked for permission to buy more than $15 million of stock under federal antitrust rules. Takeover-stock traders, stung by their huge losses in UAL stock, remained eager for some action by an outside catalyst following the collapse Oct. 13 of a $300-a-share, $6.79 billion labor-management buy-out.Their hope was that the catalyst would seek to oust the board in a solicitation of shareholder consents. Baker, Nye Investments, a New York takeover-stock trader that owns UAL stock, wouldn't comment on reports the firm is considering seeking such a shareholder vote.But partner Richard Nye said, "This is the most extraordinary failed transaction I've seen in 25 years in this business.It would make sense for somebody to do it.I have never seen a case of incompetence shared by so many participants." In 1986, Baker, Nye waged a proxy fight for control of Leaseway Transportation Inc. that ultimately led to Leaseway's being sold. Some traders pointed hopefully to earlier estimates by UAL's investment adviser, First Boston Corp., that recapitalizations could yield $245 to $280 a share.But those would require pilots' cooperation. Any investor who acquires UAL stock in an attempt to force a buy-out or recapitalization must deal with United's contentious unions.The pilots are working under an expired contract, and the machinists contract expires next month.That gives them enormous leverage, including the threat of a strike to block any buy-out or recapitalization attempt they oppose. However, a catalyst like Coniston could seek shareholder support for a sale to a labor-management group at the last price discussed by that group before the board meeting Monday.The pilots had been working on a buy-out bid between $225 and $240 a share, or $5.09 billion to $5.42 billion. One person familiar with UAL said the unsettled labor situation and the uncertain world-wide financial markets contributed to the board's decision to avoid "rushing around selling the company at a bargain price," particularly since it accepted a $300-a-share offer just last month. Even some takeover-stock traders said they couldn't quarrel with the board's logic.But the board's decision prompted many to bail out of the stock yesterday. "We had a lot of people who threw in the towel today," said Earl Ellis, a partner in Benjamin Jacobson & Sons, a specialist in trading UAL stock on the Big Board. Another trader noted that many arbitrage firms are afraid to sell their UAL stock at the bottom, but already own so much they can't buy any more. "This deal is like a Roach Motel," he said. "They check in, but they can't check out." But both the traders and the pilots remain interested in some transaction.So too, according to many reports, is British Airways PLC, despite its public withdrawal from the buy-out. The pilots might end up teaming up with their longtime adversaries, the machinists union, in a recapitalization.The machinists are reviewing proposals they made in the past for recapitalizations that would pay a special shareholder dividend and give employees a minority stake.The company rejected those past proposals. It is unclear, however, if the machinists would support a majority stake, as the pilots want.A machinist official said that would depend on how much in concessions machinists would have to give in return for the majority stake. Some investors whose names were bandied about by traders as potential UAL stock buyers said they weren't buying. "I'm not interested," said Dallas investor Harold Simmons.A source close to Carl Icahn, a corporate raider who owns Trans World Airlines Inc., said he hasn't owned any UAL stock and isn't buying. One person familiar with Texas billionaire Robert Bass said he isn't likely to make any hostile moves.And a spokesman for Reliance Group Holdings Inc., which had held 7% of UAL before the first buy-out bid but later reduced its holdings below 5%, wouldn't comment. Marvin Davis, whose $5.4 billion takeover bid originally put the nation's second-largest airline in play, is limited by a standstill agreement with UAL he signed in September.The Los Angeles investor can't buy UAL stock, solicit shareholder consents or make a new offer unless he makes a formal offer of $300 a share or UAL accepts an offer below $300. However, Mr. Davis could pressure the board by asking that the agreement be waived, or letting it be known that he has financing for an offer at a lower price.
Fireman's Fund Corp. said third-quarter net income plunged 85% to $7.2 million from last year's $49.1 million, or 99 cents a share, because of ravages of Hurricane Hugo and increased reserves for legal expenses. Payout of preferred dividends resulted in a net loss of five cents a share in the most recent quarter.Revenue edged up 3.4% to $904 million from $874 million in last year's third quarter. In New York Stock Exchange composite trading, Fireman's closed at $35.50 a share, down 50 cents. Impact of the Oct. 17 San Francisco earthquake, which will be recorded in the fourth quarter, isn't expected to exceed $50 million after taxes, the company added. For the nine months, the insurance company said net fell 46% to $88.8 million, or $1.54 a share, from $164 million, or $3.16 a share, the previous year.Revenue slid 7% to $2.6 billion from $2.8 billion a year earlier. Fireman's Fund property-liability subsidiaries reported a 120.7% combined underwriting ratio for the nine months, up from 108.4% for the year-ago period. Hurricane Hugo accounted for about $36 million in pretax third-quarter losses, net of reinsurance recoveries. The company said there was an additional increase in loss and loss-expense reserves of $71 million reflecting "higher than expected" development in claims legal expenses from to prior periods. For the third quarter, net premiums were $742 million, up 9.6% from $677 million in last year's quarter, because of the expiration of the National Indemnity quota share reinsurance agreement. Net premiums written through Sept. 30 fell 5% to $2.1 billion from $2.2 billion a year ago, because of the writing of fewer policies at flat prices, the company said. Third-quarter and nine-month results don't include any provision for premium returns that could be ordered by the California Department of Insurance under Proposition 103.Fireman's Fund said it has applied for an exemption from these rate rollbacks, and plans to defend its filing in hearings before the department.
The stock market went on a dizzying ride as UAL, parent of United Airlines, once again led shares into a breathtaking decline and then an afternoon comeback. At the end of it all, the Dow Jones Industrial Average closed down 3.69 to 2659.22.At one point yesterday morning, the Dow was down 80.53 points.New York Stock Exchange volume was 237,960,000 shares.Declining issues swamped advancers, 1,222 to 382. Yesterday's sell-off and rebound was a powerful reminder that 11 days after the 190-point plunge on Friday the 13th, the stock market still has a bad case of nerves.Takeover stock speculation and futures-related program trading drove the industrial average through wide ranges.And there is more volatility to come. "October 13th left us with a cut and exposed nerve," said Jack Solomon, technical analyst for Bear Stearns. "People are fearful and sensitive.Everybody's finger is one inch closer to the button.I have never had as many calls as I had this morning.Volatility is here to stay." The Dow Jones Industrial Average plunged about 80 points in slightly more than one hour after the opening bell. For many, it began to look like a replay of Oct. 13.As stocks and stock-index futures fell, a trading limit was hit in the S&P 500 stock futures pit.Under a post-1987 crash reform, the Chicago Mercantile Exchange wouldn't permit the December S&P futures to fall further than 12 points for a half hour.That caused a brief period of panic selling of stocks on the Big Board.But at a critical moment, stock-index arbitrage traders showed their power and control.They scooped up hundreds of S&P futures when the market needed it most. At about 10:40 a.m. EDT, several big buy orders hit the S&P pit simultaneously, lifting the futures up out of the trading limit and eventually into ranges that caused computer-driven program buying of stocks. "It is very clear that those buy orders came from people who wanted their franchise protected," said one Chicago-based futures trader. "These guys wanted to do something to show how powerful they are." Traders said Goldman Sachs, Shearson Lehman Hutton and Salomon Brothers were the main force behind the futures buying at the pivotal moment.Shearson Lehman Hutton declined to comment.Officials at Goldman Sachs and Salomon Brothers were unavailable for comment. As in the Oct. 13 massacre, yesterday morning's drop was triggered by bad news for speculators in UAL.A UAL statement after the market closed Monday indicated that the airline's board wanted to keep the company independent, effectively crushing hopes of an immediate buy-out.Five minutes before the Big Board opened, a preliminary price was flashed for UAL -- somewhere between 135 and 155, a loss of as much as $43 a share from Monday's close. UAL finally opened for trading at 10:08 a.m. at 150, down $28.Floor traders said there was a huge crowd around the Big Board specialist's post where UAL trades. "There was a seething mass of people," said one floor trader. "Then there was a big liquidation of stock" across the board, he added. Takeover speculators -- who have already taken a record loss estimated at more than $700 million on UAL -- started selling other stocks as well as S&P futures in an attempt to hedge against a further UAL blood bath.Shortly after the UAL opening, program traders started selling stocks in the Major Market Index and S&P 500 index.The 20-stock MMI mimics the Dow Jones Industrial Average. By 10:30 a.m. the Dow was down 62.70.All 20-stocks in the MMI except Exxon, General Motors and Sears were down $1 to $2. At 10:33, when the S&P 500 December futures contract crunched to a 12-point loss under the force of sell programs, S&P futures trading was halted and program trades on the Big Board were routed into a special computer that scans for order imbalances.Under the rules adopted by the Chicago Mercantile Exchange, the futures contract cannot drop below the limit, but buyers can purchase futures.At this point, the Dow industrials were down 75.41 points and falling. The trading halt in the S&P 500 futures exacerbated selling and confusion, many traders maintain.But as the fright began to spread through the S&P pit, the big brokerage firms came in and bought futures aggressively. "It was whooosh!" said one futures trader.In five minutes, the Dow industrials climbed almost 30 points.The big futures buying triggered stock-index buy programs that eventually trimmed the Dow's loss to 31 points by 11 a.m. Traders said the futures buying was finely calculated by program traders.These firms sold stock into the big morning decline, but seeing the velocity of the market's drop, held back on their offsetting purchases of futures until the S&P futures hit the trading limit.Then they completed the other side of the trade by buying futures, which abruptly halted the stock market's decline as traders began to buy stocks. From then on, the Dow industrials held at a loss of 40 to 50 points.Then, in late-afternoon trading, hundred-thousand-share buy orders for UAL hit the market, including a 200,000-share order through Bear Stearns that seemed to spark UAL's late price surge.Almost simultaneously, PaineWebber began a very visible buy program for dozens of stocks.The combined buying rallied the Dow into a small gain, before closing at a slight loss. Some institutional traders loved the wild ride. "This is fun," asserted Susan Del Signore, head equity trader at Travelers Investment Management Co.She said she used the market's wild swings to buy shares cheaply on the sell-off.On the comeback, Ms. Del Signore unloaded shares she has been aiming to get rid of. But traders who risk money handling big blocks of stock were shaken. "This market is eating away my youth," said Chung Lew, head equity trader at Kleinwort Benson North America Inc. "Credibility sounds intangible.But I think we are losing credibility because when the market does this, it doesn't present itself as a rational investment.But if you overlook all this, it is a beautiful market for investment still." Traders attributed rallies in a number of stocks to a Japanese buy program that PaineWebber carried out as part of a shift in portfolio strategy, according to Dow Jones Professional Investor Report. Dow Jones climbed 5 3/4 to 41 on very heavy volume of 786,100 shares.Analysts said a big Japanese buy order was behind the rise.A Dow Jones spokesman said there were no corporate developments that would account for the activity.Other issues said to be included in the buy program were Procter & Gamble, which rose 2 7/8 to 133 1/2; Atlantic Richfield, which gained 2 to 103 3/4, and Rockwell International, which jumped 2 3/4 to 27 1/8.PaineWebber declined to comment. UAL finished at 170, off 8 3/8.Other airline stocks fell in response to the UAL board's decision to remain independent for now, including USAir Group, which separately reported a third-quarter loss of $1.86 a share compared with a year-ago profit.USAir fell 2 1/2 to 40. AMR, the parent of American Airlines, fell 1 3/4 to 68 7/8 on 2.3 million shares; Delta Air Lines lost 1 1/2 to 66, Southwest Airlines slid 3/4 to 24 1/4 and Midway Airlines dropped 1/4 to 14 7/8.Texas Air, which owns Continental and Eastern airlines, lost 3/8 to 13 1/8 on the American Stock Exchange. Metals stocks also were especially weak, as concerns about the earnings outlook for cyclical companies weighed on the group.Aluminum Co. of America dropped 1 1/2 to 70 1/4, Phelps Dodge fell 4 to 59 7/8, Asarco lost 1 3/8 to 31 3/4, Reynolds Metals slid 1 3/8 to 50 3/8, Amax dropped 1 1/8 to 21 5/8 and Cyprus Minerals skidded 2 to 26 3/4.Alcan Aluminium was an exception, as it gained 1 3/8 to 23 on two million shares. Goodyear Tire & Rubber tumbled 2 7/8 to 43 7/8.Its third-quarter earnings were higher than a year ago, but fell short of expectations.Other stocks in the Dow industrials that failed to benefit from the market's rebound included United Technologies, which dropped 1 to 53 5/8, and Bethle hem Steel, which fell 1 to 16 7/8. BankAmerica dropped 1 1/4 to 29 1/2 on 2.3 million shares amid rumors that the earthquake last week in the San Francisco area had caused structural damage to its headquarters building.The company denied the rumors and noted that it doesn't own the building. Stocks of California-based thrifts also were hard hit.Great Western Financial lost 1 1/8 to 20 1/2 on 1.6 million shares, Golden West Financial dropped 1 1/4 to 28 1/2 and H.F. Ahmanson dipped 5/8 to 21 1/4.HomeFed plunged 3 5/8 to 38 1/2; its third-quarter earnings were down from a year ago. Golden Valley Microwave Foods skidded 3 5/8 to 31 3/4 after warning that its fourth-quarter results could be hurt by "some fairly large international marketing expenses." Dividend-related trading swelled volume in two issues: Security Pacific, which fell 7/8 to 44 1/2 and led the Big Board's most actives list on composite volume of 14.8 million shares, and Nipsco Industries, which lost 3/8 to 17 3/8 on 4.4 million shares.Both stocks have dividend yields of about 5% and will go ex-dividend Wednesday. Kellogg surged 4 1/4 to 75.Donaldson, Lufkin & Jenrette placed the stock on its list of recommended issues.The company noted that its third-quarter results should be released later this week or early next week. Vista Chemical rose 1 3/8 to 38 5/8 after Bear Stearns added the stock to the firm's buy list, citing recent price weakness. Georgia Gulf, another producer of commodity chemicals, advanced 2 to 49 1/2; Dallas investor Harold Simmons, who holds about 10% of its shares, said he hasn't raised his stake. Norfolk Southern went up 1 1/8 to 37 7/8.The company's board approved the repurchase of up to 45 million common shares, or about 26% of its shares outstanding, through the end of 1992. Airborne Freight climbed 1 1/8 to 38 1/2.Its third-quarter earnings more than doubled from a year earlier and exceeded analysts' expectations. John Harland, which will replace American Medical International on the S&P 500 following Wednesday's close, gained 5/8 to 24 1/8. The Amex Market Value Index fell 3.10 to 376.36.Volume totaled 14,560,000 shares.
After being whipsawed by a volatile stock market, Treasury bonds closed higher.But junk bonds took more hits. Early in the day, bond dealers said trading volume was heavy as large institutional investors scrambled to buy long-term Treasury bonds on speculation that the stock market's volatility would lead to a "flight-to-quality" rally.That happens when nervous stock investors dump equities and buy Treasurys, which are higher in quality and thus considered safe. "Some retail accounts, such as commercial banks and pension funds, wanted to get on the bandwagon before it was too late," said Sung Won Sohn, chief economist at Norwest Corp., Minneapolis. At one point, the Dow Jones Industrial average fell about 80 points on news that UAL Corp. decided to remain independent.In response, Treasury prices soared 1 1/8 points, or about $11.25 for each $1,000 face amount.But the gains in Treasury bonds were pared as stocks staged a partial recovery.The industrial average ended at 2659.22, down 3.69 points. Economists said the bond market's strength also is a sign that investors expect the Federal Reserve to cut interest rates amid growing evidence that the economy is slowing.While they don't expect the Fed to move right away, they say the case for lower rates is building.Yesterday, for example, the Commerce Department reported that new orders for durable goods fell 0.1%, while the nation's auto makers reported lackluster mid-October sales. The Treasury's 30-year bond ended over 1/4 point higher.Municipal, mortgage-backed and investment-grade corporate bonds rose 1/8 to 1/2 point. But high-yield, high-risk bonds fell 1/4 to 1/2 point with the stock market early in the session and never recovered.According to a trader at Drexel Burnham Lambert Inc., the hardest hit junk bonds were those issued by RJR Holdings Capital Corp., which are the easiest to sell.RJR's 14.70% bonds due 2007 fell 2 1/2 points. Trading activity in the junk market was extremely light as dealers couldn't find enough buyers to match sellers. "While the stock market was falling, most {junk bond holders} were just watching it not knowing what to do," said Paul Suckow, director of fixed-income securities at Oppenheimer Management Corp. "It was like driving down the highway watching a wreck.Everybody was rubber-necking." Adding to the junk market's jitters were reports that Donaldson, Lufkin & Jenrette Securities Corp. is having trouble structuring a $1.6 billion offering for TW Food Services Inc. and will postpone or even cancel the issue.TW is the largest franchisee of Hardee's, a fast-food restaurant, and operates several other food chains.Donaldson Lufkin wouldn't comment. Credit analysts said investors are nervous about the issue because they say the company's ability to meet debt payments is dependent on too many variables, including the sale of assets and the need to mortgage property to retire some existing debt.Also, the TW offering includes interest-deferred and pay-in-kind securities, which are currently unpopular. Meanwhile, investors turned a cold shoulder to the Treasury's sale of $10 billion of new two-year notes yesterday. "It's not too surprising that the auction was sloppy, given the volatility in the bond market because of stocks," said Robert T. McGee, a senior vice president at Tokai Bank Ltd. "People are looking past supply to lower interest rates, but they're also worried about being whipsawed by the volatility in the stock market." The new two-year notes were priced with an average yield of 7.74%.That was higher than the 7.71% to 7.73% average yield that traders had expected.In when-issued trading, the notes were quoted at a price to yield 7.78%. Sluggish demand was also evidenced by the weak 2.41-to-1 bid-to-cover ratio, which was lower than the average 2.79-to-1 ratio at the last 12 similar auctions.The ratio, which reflects the number of bids the Treasury receives for each bid accepted, is used to gauge investor demand. Dealers said players shied away from the note sale because they were concerned that prices at the time of the auction might erode if the stock market staged a recovery, which, in fact, did happen. Individual and Japanese participation in the auction was disappointing, according to dealers. "Interest by Japanese investors was limited," said Michael Moran, chief economist at Daiwa Securities America Inc. "They are typically not active in two-year note auctions, but today's participation could be viewed as lighter-than-normal." However, Mr. Moran added that the Japanese generally have a positive view of the U.S. bond market because of expectations that the dollar will remain strong and interest rates will decline.He said, "Possibly, they're waiting to buy at the (quarterly) refunding" of government debt to be held next month by the Treasury. A trader at a Japanese firm estimated that the Japanese purchased no more than 10% of the two-year notes. Treasury, Agency Securities Today investors will focus on the long-awaited auction of $4.5 billion of 30-year bonds by Resolution Funding Corp. The initial bond offering by the new government agency, which was created to help rescue the nation's troubled thrifts, isn't expected to see robust demand. A small yield premium over comparable Treasurys and a lack of liquidity is hampering dealers' efforts to drum up interest in the so-called bailout bonds.In when-issued trading, the Refcorp bonds were quoted at a price to yield 8.17%. Yesterday, the benchmark 30-year bond was quoted late at 102 18/32 to yield 7.89%, compared with 102 9/32 to yield 7.93% on Monday.The latest 10-year Treasury was quoted at 100 22/32 to yield 7.88%, compared with 100 17/32 to yield 7.9%. Short-term rates were unchanged to slightly lower.The discount rate on three-month Treasury bills was quoted at 7.52% for a bond-equivalent yield of 7.75%, while the rate on six-month Treasury bills was quoted at 7.47% for a yield of 7.85%. Rates are determined by the difference between the purchase price and face value.Thus, higher bidding narrows the investor's return while lower bidding widens it. Corporate Issues Several blue-chip companies tapped the new-issue market yesterday to take advantage of falling interest rates. Three of the largest offerings, by Exxon Capital Corp., Xerox Corp. and Citicorp, were underwritten by groups led by Salomon Brothers Inc. Exxon Capital, long-rumored to be a potential debt issuer, offered $200 million of 10-year notes priced to yield 8.31%.Citicorp issued $200 million of seven-year notes priced to yield 8.82%, and Xerox priced $150 million of six-year notes to yield 8.85%. Meanwhile, International Business Machines Corp. paved the way for a visit to the credit markets by filing a shelf registration with the Securities and Exchange Commission for $800 million in new debt.This is in addition to IBM's existing shelf registration under which $200 million in debt securities are available for issuance. In secondary trading, investment-grade corporate bonds ended 1/8 to 1/4 higher. Municipals Actively traded municipal bonds ended 1/4 to 1/2 point higher in brisk trading, despite a flood of new supply. New Jersey Turnpike Authority's 7.20% issue of 2018 finished 1/4 point stronger at 98 1/2 bid, to yield 7.32%. Traders said municipals were underpinned by influences including the climb in Treasury issue prices.Also, municipal bonds lured buying because the stock market remains wobbly, traders contended.Mainly, though, it was a favorable outlook for yesterday's new supply that propped up municipals, some traders said. Among the new issues was Massachusetts's $230 million of general obligation bonds.The bonds were won by a Goldman, Sachs & Co. group with a true interest cost of 7.17%.They were priced to yield from 6.00% in 1990 to 7.20% in 2009. The Massachusetts deal had an unsold balance of $84.3 million in late trading, the underwriter said. Mortgage-, Asset-Backed Securities Mortgage securities gained 3/32 to 9/32 point after a hectic session, with Government National Mortgage Association 8% securities as the standout issue. The Ginnie Mae issue rose amid talk of large purchases of the securities by institutional investors. The derivative markets remained active as one new issue was priced and talk circulated about more offerings in the next day or two.The Federal Home Loan Mortgage Corp. issued a $500 million real estate mortgage investment conduit backed by its 8 1/2% securities. In the asset-backed market, a big offering of Ford Motor Credit Corp. auto-loan securities was increased in size after strong institutional demand.The deal by the Ford Motor Co. unit, priced Monday, was increased to $3.05 billion from $2.58 billion. Among major pass-through issues, Ginnie Mae 9% securities for November delivery ended at 98 15/32, up 5/32, after touching an early high of 98 27/32; 8% securities were at 94 5/32, up 9/32; 9 1/2% securities at 100 15/32, up 4/32; and 10% securities at 102 11/32, up 3/32.Freddie Mac 9% securities were at 97 21/32, up 5/32. The Ginnie Mae 9% issue was yielding 9.34% to a 12-year average life assumption, as the spread above the Treasury 10-year note held at 1.46 percentage points. Foreign Bonds The Eurodollar bond market sprang to life late in the European trading session after the Dow Jones Industrial Average tumbled. Eurodollar bonds are often issued by foreign corporations, but interest and principal are paid in dollars.The bonds ended about 1/2 point higher yesterday. Prices of European government bonds also rose as U.S. stocks declined. West Germany's 7% issue due October 1999 rose 0.13 point to 99.93 to yield 7.01%, while the 6 3/4% issue due July 1994 rose 0.05 to 97.70 to yield 7.33%. Britain's 11 3/4% Treasury bond due 2003/2007 rose 17/32 to 112 6/32 to yield 10.05%, while the 12% notes due 1995 rose 11/32 to 104 2/32 to yield 10.93%. In Japan, government bond prices fell.The No. 111 4.6% bond due 1998 ended on brokers' screens at 95.22, down 0.17 point, to yield 5.41%.
Staar Surgical Co. 's board said that it has removed Thomas R. Waggoner as president and chief executive officer and that John R. Wolf, formerly executive vice president, sales and marketing, has been named president and chief executive officer. Mr. Waggoner has been involved in a dispute with the board since August, when he ousted all the directors.Later they said they fired him, and two directors attempted to place the company under bankruptcy-law protection.A federal judge turned down the Chapter 11 petition. The company's latest announcement said Mr. Waggoner will remain a director of Staar, a maker of products for small-incision surgery.Mr. Wolf and other members of the board declined to comment on the announcement.Mr. Waggoner couldn't be reached. The Staar board also said that John R. Ford resigned as a director, and that Mr. Wolf was named a member of the board.
EAST GERMANY'S KRENZ WARNED against further pro-democracy protests. After the legislature confirmed him as the Communist Party leader, Krenz said demonstrations to demand democratic freedoms could cause a "worsening of the situation, or confrontation." He also reaffirmed East Germany's allegiance to Communist orthodoxy.But as many as 12,000 people marched in East Berlin after the speech to protest his election.During the balloting, 26 members of the 500-seat Parliament voted against Krenz, a move considered unprecedented in the country's 40-year history. Officials in East Berlin, responding to complaints from opposition groups, admitted police used excessive force in dispersing protesters this month. The Iran-Contra judge agreed to allow Poindexter to subpoena the personal papers of ex-President Reagan, ruling that there was sufficient evidence that the data would be important to the defense.But the judge denied a request by the former national security adviser, who faces five criminal charges, to seek documents from Bush. San Francisco Bay area officials said nine people remain missing in the aftermath of last week's earthquake.The death toll rose to 63.The House, meanwhile, approved $2.85 billion to aid in the recovery from the temblor and from Hurricane Hugo as state legislators moved toward a temporary sales-tax increase. U.S. officials expressed skepticism over an Israeli effort to show the PLO continues to practice terrorism.Israel provided the State Department with a list of recent alleged terrorist incidents attributed to forces controlled by Arafat, but the U.S. said it wasn't satisfied that the incidents constituted terrorism. TV evangelist Jim Bakker was sentenced to 45 years in prison and fined $500,000 for defrauding followers of his PTL ministry.Bakker, who was immediately taken into custody, was convicted Oct. 5 by a federal court jury in Charlotte, N.C., of fraud and conspiracy for diverting more than $3.7 million of ministry funds for personal use. Lawmakers in Moscow voted to deny the Communist Party its 100 guaranteed seats in the Soviet Congress, meaning Gorbachev and other aides might have to face voters.In Warsaw, Shevardnadze held his first talks with the Solidarity-led government and vowed to maintain fuel supplies.Poland's premier is to visit Moscow next month. The Arab League pledged an accord for a complete Syrian troop pullout from Lebanon, where about 70,000 people marched to the headquarters of Christian leader Aoun to support his rejection of a peace plan approved Sunday by Lebanon's legislature.The plan lacked a withdrawal timetable. Pro-Iranian kidnappers renewed an offer to trade their captives in Lebanon for at least 15 Shiite Moslem comrades jailed in Kuwait.The statement by Islamic Jihad, which holds at least two U.S. hostages, was accompanied by a photograph of Associated Press correspondent Terry Anderson, longest held of 18 Western hostages. The Treasury Department said S&Ls reject blacks for mortgage loans twice as often as they reject whites.The department's Office of Thrift Supervision said that doesn't necessarily mean thrifts are biased, but conceded that it doesn't have data about applicants to determine why blacks are rejected more often. Emergency crews searched through the charred rubble of a Phillips Petroleum Co. plastics plant near Pasadena, Texas, where a series of explosions Monday killed at least two people and injured 124.Company officials said 22 workers were missing and presumed dead.Safety authorities didn't immediately know the cause of the blasts. NATO defense ministers opened a two-day meeting in Portugal to assess the alliance's nuclear-weapons needs amid reduced East-West tensions.The ministers ordered a study on the strategic role of nuclear arms in Western Europe once Soviet conventional weapons are reduced in the East bloc. The Justice Department scrambled to play down the significance of revised guidelines concerning prosecutions under the federal racketeering law.The guidelines, which discourage prosecutors from seeking court orders seizing the assets of certain racketeering defendants prior to trial, were first disclosed this week. Died: S. Clark Beise, 91, ex-president and chief executive officer of Bank of America NT&SA, Saturday, in Hillsboro, Calif.
STOCK PRICES SWUNG wildly as the market reacted to an initial plunge by UAL shares, followed by a sharp rebound in the afternoon.The Dow Jones industrials, down over 80 points in the morning, closed off 3.69, at 2659.22.Bond prices surged in reaction to the sell-off in stocks, then eased slightly during the afternoon recovery.The dollar finished lower. UAL's stock regained most of an early loss amid speculation one or more investors may challenge the airline's decision to stay independent.The stock closed down $8.375, at $170, after plunging $33, to $145. Ford may seek all of Jaguar, setting the stage for a possible bidding war with GM. Jaguar has been discussing an alliance with GM, but Ford's move may derail the talks. Car and truck sales slid 20.5% in mid-October as U.S. manufacturers paid the price for heavy incentives earlier in the year.General Motors continued to be hardest hit. Durable goods orders slipped 0.1% in September, reflecting weakening auto demand after a spurt of orders for new 1990 models.Excluding transportation items, orders rose 1.8%. Norfolk Southern's board approved a buy-back of up to 45 million shares, valued at over $1.7 billion.The repurchase, coupled with an earlier buyback, will reduce the firm's shares outstanding by over 26%. PS New Hampshire received a sweetened $2.25 billion offer from Northeast Utilities, likely spurring a new round of bidding for the utility. GE executives were accused by U.S. prosecutors of providing "misleading and false" data to the Pentagon in 1985 to cover up "longstanding fraudulent" billing practices. Texaco said profit rose 11% in the quarter, partly due to a massive restructuring.Sun posted a gain.Mobil, Shell and Chevron had declines. Mobil is preparing to slash its work force in the U.S., possibly as soon as next month, sources said. Sears posted a 16% drop in third-quarter profit as U.S. retail operations recorded the first loss in over five years.The results show Sears is struggling to attract shoppers. Digital Equipment announced its first mainframe computers, targeting IBM's largest market and heating up the industry's biggest rivalry. Cray Research expects supercomputer sales to be flat next year, the latest in a series of negative announcements by the company. Short interest increased 6% in the Nasdaq over-the-counter market for the month ended Oct. 13. Salomon posted an unexpectedly big gain in quarterly earnings, aided by its securities trading and investment banking activities. Procter & Gamble's profit surged 38% in its latest fiscal quarter, aided by a gain from a legal settlement and continued growth overseas. Goodyear's profit rose 11% in the quarter, buoyed by improved operating results in its tire business. Markets -- Stocks: Volume 237,960,000 shares.Dow Jones industrials 2659.22, off 3.69; transportation 1210.70, off 25.96; utilities 215.04, off 0.31. Bonds: Shearson Lehman Hutton Treasury index 3425.22, up Commodities: Dow Jones futures index 129.24, off 0.25; spot index 130.76, off 0.88. Dollar: 141.45 yen, off 0.45; 1.8355 marks, off 0.0115.
Genetic Defect Spotted In 3-Day-Old Embryo RESEARCHERS diagnosed a genetic defect in a three-day-old mouse embryo in an experiment directly applicable to humans. Prenatal diagnosis of genetic defects as early as the sixth week of pregnancy is increasingly common today.But the mouse experiment at a Medical Research Council laboratory in London shows genetic defects can be detected three days after conception using a new American-developed gene-copying technique. The experiment, applicable to many genetic disorders, involved beta-thalassemia, a severe blood anemia resulting from a missing hemoglobin gene.It's an inherited human disorder that's been duplicated in mice.In the experiment, mice with the defective gene were mated.Three days later, before the new embryo had become implanted in the uterus, it was washed out of the mother mouse.The embryo had progressed only to a clump of eight identical cells.One cell was teased out, and its DNA extracted. Using the new technique developed by Cetus Corp., called the polymerase chain reaction, the scientists rapidly made millions of copies of the section of DNA that ordinarily contains the hemoglobin gene, providing enough copies to test.A genetic probe showed the hemoglobin gene was missing, the researchers report in the medical journal Lancet. In the report, two molecular biologists suggest such embryo diagnosis can be used by couples at high risk of passing a genetic defect to a child. For example, infertile couples who have the woman's eggs fertilized in the test tube usually have several eggs fertilized at a time.When the fertilized cells divide to eight cells, a single cell from each embryo can be tested for genetic defects.A healthy embryo can be picked for implantation and defective ones discarded. Or in other couples, the embryo could be temporarily taken out and tested three days after conception and returned if healthy, or discarded if not. Yeast Adapted to Make Gene-Spliced Drugs AN OIL COMPANY finds a sideline in the microscopic world of yeast. In the early 1970s, when the "world food crisis" was a major worry, Phillips Petroleum Co., like several other big companies, began developing "single-cell protein," edible protein made by microbes feeding on non-edible materials.Phillips found and improved a yeast, "Pichia pastoris," which made protein from natural gas-derived alcohol.It also could convert glucose from farm wastes into edible protein.Single-cell protein never panned out, and most companies abandoned such research. But Phillips persisted, calling in scientists from the Salk Institute.They've now adapted the yeast to making genetically engineered drugs.Like the bacteria used by genetic engineers, the yeast can take in human genes and churn out human proteins for medical use.But the yeast genetic apparatus is more like that of animals than the bacterial genetic apparatus.Thus, the proteins from the yeast are molecularly more like human proteins than those from bacteria. The oil company claims its yeast system also is better than bacteria at high-volume production of genetically engineered drugs.Chiron Corp., an Emeryville, Calif., biotechnology firm, is seeing if the Phillips yeast can be used to make its genetically engineered human proteins. Peeking Inside Arteries From Outside the Body VISUALIZING BLOOD vessels without poking catheters into the body may come out of research at AT&T Bell Laboratories. Strokes, heart attacks, leg pains (intermittent claudication) and other problems stem from clogging of the arteries by cholesterol-rich deposits.At present, doctors can see how badly an artery is clogged only by inserting a thin catheter into the artery and injecting a fluid that makes the arteries visible on X-rays. A non-invasive method is being researched by biophysicist Lynn Jelinski at the AT&T unit.It relies on the fact that certain atoms give off detectable signals when subjected to an intense magnetic field.It's the same phenomenon used in the new MRI (magnetic resonance imaging) scanners being used in hospitals in place of X-ray scans. In the Bell Labs experiments, an MRI-type of machine, synchronized with the heartbeat via an electrocardiogram, rapidly flashes a magnetic field on and off as blood passes a certain point in a vessel.The rapidly flashing return signals from excited hydrogen atoms in the blood give a "stop-motion" movie of the blood-filled vessel, (like the "stop-motion" seen in disco dancers when a strobe light is flashing). The scientists have experimented on the tiny neck arteries of rats.They've been able to measure the minuscule movements of the artery wall as the beating heart raises and lowers the pressure of the flowing blood, a first for such tiny blood vessels, they report in Nature, a scientific journal.They now are experimenting with measuring blood flow.The ultimate hope is that the technique could identify diseased vessels. Odds and Ends TESTS ON 2,800-year-old mummies from Chile indicate ancient wood fires didn't produce dioxins or dibenzofurans, contradicting a theory the two pollutants today are coming from wood burning, General Electric Co. reports in Environmental Science & Technology magazine. . . . Almost 40% of schizophrenic men have an impaired sense of smell vs. fewer than 10% of schizophrenic women, reports the American Journal of Psychiatry.
Residents of this city soon will be seeing ads urging them to visit "Cleveland's outdoor museum" -- Lake View Cemetery. Despite such famous tenants as oil magnate John D. Rockefeller, Lake View Cemetery has fallen on hard times.So the inner-city burial ground is trying to resurrect itself with a television advertising campaign. The ads celebrate the achievements of some of Lake View's residents.A spot honoring Bill White, the inventor of chewing gum, shows a woman trying to extricate her high-heeled shoe from a wad of gum. Another focuses on Charles Brush, the first person to light a city electrically.It shows a boy hurling rocks at a street lamp.Street lights, the ad points out, "helped sharpen the arm of many a budding baseball player." Cemetery officials hope the ads, which will begin airing next month, will not only draw visitors but bolster burials and endowment fund contributions.Lake View had an operating deficit last year and has a poor reputation as an out-of-repair and crime-infested cemetery. The private, non-profit cemetery has had trouble competing against its for-profit counterparts, which use direct mail and other advertising to sell lots. "We don't want to be known as ambulance chasers," says William Garrison, Lake View's president. "We want people to think of Lake View as an historical park and educational experience. . . . A pleasant place to come and spend a few hours." Not all of the cemetery's better-known tenants lend themselves to the promotional job at hand, however.For example, President James A. Garfield is entombed here, the victim of an assassination in 1881. (Mr.Garrison notes, however, that the Garfield tomb is one of the nation's premier examples of Romanesque architecture.) Mr. Rockefeller, buried beneath a 180-foot-tall granite obelisk, didn't seem right for an ad either.The oil magnate, who spent his later years passing out dimes to counter his penny-pinching image, "isn't terribly amusing," says Barry Olson, creative director at Innis-Maggiore-Olson, Canton, Ohio, which is producing the ads.But there are plenty of other promising prospects at Lake View, promoters believe: Ernest Ball, for instance, who wrote "When Irish Eyes are Smiling," and Garrett Morgan, the inventor of the gas mask and the tri-colored traffic light.
Euro Disneyland shares made a debut like Snow White yesterday while most of the London stock market looked like it had eaten the Evil Queen's poisoned apple. In its first day of when-issued trading here, Euro Disney soared like Dumbo to close at 814 pence ($13.05), up 15% from its 707-pence offering price.The overall London market, following Wall Street's early nosedive, took a late beating.The Financial Times-Stock Exchange 100-Share Index plummeted 40.4 points to close at 2149.3. Traders credited Euro Disney's share performance to the tremendous hyping of the project that the shares are destined to help finance: Walt Disney Co. 's 4,800-acre theme park 20 miles east of Paris.The park is slated to open in 1992. "The issue was very well-received -- Disney is such a well-known, you can say world-wide, name," said Vernon Dempsey, head trader of European equities at Kleinwort Benson Ltd., which is making a market in the issue. Mr. Dempsey estimated that the issue's London debut was accompanied by "very, very heavy turnover -- between five million and six million shares." Most of the buying was institutional, he added. Official trading in the shares will start in London, Paris and Brussels on Nov. 6, when the French-franc denominated offering, valued at the equivalent of nearly $1 billion, comes to market in the European Community.U.S. investors will be permitted to buy the shares from EC investors 90 days later. Because of the interest connected with the issue, the London exchange took the unusual step of letting traders establish an officially sanctioned when-issued market. A volatile, unofficial "gray" market in the shares has been operating in Paris for about two weeks.In contrast to the London performance, Euro Disney there closed down three francs yesterday, at 79 1/2 francs ($12.66) bid, but still about 10% over the 72-franc offering price. "A lot of people are getting hurt on this wicked whipsawing," cautioned Alistair Cuddeford, a London-based Salomon Brothers International Ltd. trader who makes a market in franc-denominated Euro Disney shares. "There should be no great rush for investors to buy this.A lot of big European banks, mostly French, and Swiss arb accounts have been buying the stock just to flip it" for a quick profit, he said.
Ford Motor Co. intensified its battle with General Motors Corp. over Jaguar PLC by saying it is prepared to make a bid for all of the British auto maker when restrictions on its shareholding are lifted. The statement was part of a Ford filing with the U.S. Securities and Exchange Commission.Ford didn't say how much it might offer for Jaguar, or when.The British government currently forbids any outside investor from holding more than 15% of the company's shares without permission until Dec. 31, But with its stake in Jaguar, which it raised yesterday to 11.95%, Ford could convene a special Jaguar shareholders' meeting and urge holders to vote to drop the restriction sooner.A successful vote would put pressure on the British government to lift the restriction. "We have not made that decision" to seek a Jaguar special shareholders' meeting, said Martyn Watkins, a Ford spokesman in London.He emphasized that the car maker only would bid for all of Jaguar under the right circumstances, and said "those circumstances aren't right or possible at the moment." Last month, Ford announced plans to acquire as much as 15% of Jaguar.Since then, Jaguar officials have confirmed that they are discussing an alliance with GM and said last week that they hoped to reach an agreement within a month. Analysts have been expecting a GM-Jaguar pact that would give the U.S. car maker an eventual 30% stake in the British company and create joint ventures that would produce an executive-model range of cars.But the specter of Ford eventually launching a full-fledged bid could unravel the GM-Jaguar talks. Jaguar seems to be losing interest in giving GM a minority stake, said one individual close to the talks, adding, "It wouldn't surprise me if {Jaguar executives} want to wait and see what the color of that {Ford bid} is" first.He predicted Ford officials will meet with Jaguar executives in the next week to outline their proposed offer.Sir John Egan, Jaguar's chairman, so far has refused to meet with Ford officials, but he is believed to be willing to consider a specific bid proposal. As for GM, its "fallback position has to be a full bid itself," said Stephen Reitman, European auto-industry analyst at London brokers UBS-Phillips & Drew.A Ford takeover of Jaguar would "have such implications for the balance of power in the 1990s that General Motors can't afford to step aside.They will have to throw their hat in the ring." A GM spokesman yesterday reiterated the company's interest in acquiring a minority stake to help Jaguar remain independent. A pitched battle could mean Jaguar would fetch #10 ($16.02) a share, or about #1.8 billion ($2.88 billion), several analysts believe.The prospect of such a takeover fight has sent Jaguar shares soaring in recent weeks.U.S. takeover-stock speculators now own an estimated 25% of Jaguar shares.In a declining London stock market yesterday, Jaguar shares were down four pence from Monday in late trading, at 694 pence ($11.11) a share.In the U.S., Jaguar's American depositary receipts rose 12.5 cents in over-the-counter trading, to $11.25. Both Ford and GM badly need a luxury brand to combat new competition from the Japanese in the European and U.S. markets.And financially strapped Jaguar has spent over a year looking for a rich uncle to provide cash and technological know-how.The company has expressed a preference for GM over Ford because GM has promised it would keep Jaguar independent. Ford's need to acquire some or all of Jaguar became more acute last week when it abandoned a four-year effort to market its German-built Merkur Scorpio sedan as a European luxury import in the U.S. Then, last Friday, Ford's talks about a possible alliance with Saab-Scania AB of Sweden collapsed. GM's interest in Jaguar reflects a desire to help diversify the U.S. company's products in the growing luxury-car segment of the market.Its Opel line has a solid image and a recent string of highly successful new models, but it lacks Jaguar's cachet.GM officials also see a lot of potential in marrying Jaguar's cars to the technological know-how of Group Lotus PLC, a British engineering and specialty car maker GM bought in 1986.
Texaco Inc. reported an 11% increase in third-quarter earnings, which it attributed partly to the company's massive restructuring after it emerged from bankruptcy-law proceedings 18 months ago. Sun Co. also reported higher earnings.Meanwhile, like many other oil companies hurt by less-profitable downstream businesses, Mobil Corp., Shell Oil Co. and Chevron Corp. reported lower quarterly earnings. Texaco Texaco's exploration and production earnings improved as a result of its streamlining of those operations as it sold many of its marginal producing properties over the past 18 months.An increase in production at some major oil fields in the North Sea, which had been knocked out by an explosion in July 1988, also aided results.The sale of a portion of refining and marketing operations to Saudi Arabia helped alleviate the decline in earnings from that business. "The company has been completely revamped," said Frank Knuettel, analyst for Prudential-Bache Securities Inc. Third-quarter net income at Texaco rose to $305 million from $274 million last year.Revenue declined 3.4%, to $8.4 billion from $8.7 billion.Per-share earnings declined to $1.10 a share from $1.12 a share, largely because of 21 million additional shares issued to retire $1 billion of debt.Per-share earnings also shrank because of dividends on a new series of preferred stock. Sun Sun Co. 's net income climbed 18% to $85 million, or 80 cents a share, from $72 million, or 67 cents a share.Revenue increased 11%, to $2.73 billion from $2.46 billion. Sun said some of the growth reflects higher earnings in the oil sands operation of Suncor, a majority-owned Canadian subsidiary.Chairman Robert McClements Jr. said the synthetic crude oil production from the facility rose even as the price for that oil increased.Overseas exploration and production results also improved because of additional output from the North Sea Magnus Field, a portion of which was acquired by Sun earlier this year.Results declined, however, in Sun's refining and marketing and coal businesses. Shell Oil Profits of Shell, a subsidiary of the Royal Dutch/Shell Group, tumbled $24 million, or 6.6%, to $340 million, despite a gain of $30 million from an insurance settlement.President Frank Richardson attributed the decline to lower natural gas prices, which countered higher earnings from the crude oil sector of Shell's exploration and production operation.Shaving away some of the gain in that unit was a decline in U.S. oil production to 502,000 barrels of oil a day during the quarter from 527,000 barrels a day last year. Shell's chemical earnings fell by $67 million, to $137 million, reflecting lower margins and less demand for commodity chemicals. Mobil Net income at Mobil Corp. slipped 4.5% to $532 million, or $1.30 a share, from $557 million, or $1.36 a share.Revenue declined $518 million, to $13.63 billion. Earnings included a one-time gain of $192 million on a property transaction in Hong Kong.Exploration and production profits slumped $40 million due to a provision for restructuring costs.The restructuring will take place over a two-year period and will involve the transfer and layoff of employees in U.S. operations to reduce costs and focus efforts in other areas. Last year, third-quarter earnings included a $157 million gain from foreign tax rate changes and a loss from a $65 million write-off of reserves. Chevron Chevron's net income fell 0.7%, to $417 million, or $1.22 a share, from $420 million, or $1.23 a share.Results included a $37 million gain from the sale of rights from Chevron's investment in Amax Inc., and a loss of $30 million from the sale of California oil and gas properties.Revenue rose 11%, to $8 billion from $7.2 billion. Chevron said higher crude oil prices boosted profits from production operations, but margins in refining and marketing declined.Profits from U.S. exploration and production operations totaled $58 million, after the property sale loss, compared with a year-earlier $44 million loss that included a $16 million reorganization charge. Refining and marketing operations earned $130 million in the quarter this year, compared with earnings of $186 million a year earlier that included $18 million in charges for environmental programs.Foreign earnings fell to $180 million from $182 million that included a $48 million gain from lower Canadian and Australian taxes.Chemical profits fell to $78 million from $98 million. Jeff Rowe contributed to this article.
Ronald B. Koenig, 55 years old, was named a senior managing director of the Gruntal & Co. brokerage subsidiary of this insurance and financial-services firm.Mr. Koenig will build the corporate-finance and investment-banking business of Gruntal, which has primarily been a retail-based firm.He was chairman and co-chief executive officer of Ladenburg, Thalmann & Co. until July, when he was named co-chairman of the investment-banking firm along with Howard L. Blum Jr., who then became the sole chief executive.Yesterday, Mr. Blum, 41, said he wasn't aware of plans at Ladenburg to name a co-chairman to succeed Mr. Koenig and said the board would need to approve any appointments or title changes.Mr. Blum added he wasn't surprised Mr. Koenig resigned, but his departure was "nothing that we desired or worked for." Mr. Koenig said: "I just got a tremendous offer from Gruntal."
WINSTON-SALEM, N.C. -- First Wachovia Corp. said John F. McNair III will retire as president and chief executive officer of this regional banking company's Wachovia Corp. and Wachovia Bank & Trust Co. subsidiaries on Dec. 31. Mr. McNair, 62 years old, will be succeeded by L.M. "Bud" Baker Jr., 47, the parent's chief credit officer and head of its administration division.Mr. Baker will relinquish his previous positions, but a successor for him hasn't been named yet. In addition, on Jan. 1, Thomas A. Bennett, 52, will become vice chairman and chief operating officer of Wachovia and Wachovia Bank & Trust, filling a vacancy left by the retired Hans W. Wanders in April.Mr. Bennett will continue as executive in charge of the North Carolina banking operation. Messrs.Baker and Bennett have been elected directors of Wachovia and Wachovia Bank & Trust filling vacant seats on both boards.
Two Japanese scientists said they discovered an antibody that, in laboratory test-tube experiments, kills AIDS-infected cells while preserving healthy cells. If further experiments are successful, the work would represent a major advance in research on acquired immune deficiency syndrome.The drug AZT, the only treatment currently on the market, claims only to help stop the spread of AIDS, not to cure it. But several analysts and Japanese scientists familiar with the study, which was announced at a conference in Nagoya yesterday, expressed skepticism over the significance of the results.And the researchers themselves acknowledged they still must do much more work before they can say whether the treatment would actually cure humans. Shin Yonehara, a research scientist at the Tokyo Metropolitan Institute of Medical Science, said the antibody he discovered works by recognizing an antigen called a Fas-antigen, which is characteristic of an infected cell.The antibody then kills the cell. Dr. Yonehara and his partner, Nobuyuki Kobayashi of Yamaguchi University, said their experiments showed that the antibody wiped out an average of 60% of AIDS-infected cells within three days.In some of the experiments, it killed almost all the infected cells, the researchers said.Meanwhile, fewer than 10% of the healthy cells were killed. The two said they must still do more laboratory tests, then experiment on animals.They said they hoped to conduct tests on human patients in the U.S. by late next year.Japan doesn't have enough AIDS patients to do significant experimentation in that country, they said. The announcement got wide exposure in the Japanese media, and even moved some pharmaceutical stocks yesterday.But Takashi Kitamura, director of the biology department at Japan's National Institute of Health and secretary of the government's AIDS-research center, said, "I'm not so optimistic of its future use in therapeutic methods." He said some infected cells may not have the relevant antigen and so wouldn't be killed even after exposure to the antibody. "The results seem to be very premature," said Mitsuru Miyata, editor of Nikkei Biotechnology, a leading Japanese industry newsletter. Dr. Kobayashi responded that he thought the antibody could potentially kill all infected cells.But he and Dr. Yonehara said there were still several uncertainties, particularly regarding possible side effects. "Our antibody specifically killed infected cells at a very low dose, but it can also kill other cells," said Dr. Yonehara. "We don't know the effect of our antibody on the human body." AIDS isn't considered a widespread problem in Japan -- the government reports about 1,000 known carriers of the virus -- but many companies have poured substantial resources into research in recent years, hoping to cash in on a possible cure. Dr. Kitamura said about 35 projects are currently under way in Japan, and that Japanese researchers in the past year have made available three possible cures to American researchers for clinical tests.He said that when scientists from the two countries meet again in January in New Orleans, the Japanese will present at least three more drugs for human testing. AZT is the world's only prescription medicine approved for treating the disease.Wellcome PLC, a major British pharmaceutical maker, sells the drug under the name Retrovir. A Wellcome spokesman declined to comment on the discovery of the antibody in Japan.But Andrew Porter, a drug-industry analyst at Nikko Securities Co. in London, said if the product were to be successfully developed it would represent "a potential threat to the long-term viability of Retrovir."
A #320 million ($508 million) British Airways PLC rights issue flopped badly -- the victim of recent market turbulence and the collapse of the buy-out bid for United Airlines' parent, UAL Corp. The United Kingdom carrier had planned the issue to help finance its $750 million purchase of a 15% stake in UAL.But British Airways withdrew from the UAL labor-management buy-out plan last Friday, after the group failed to get bank financing for its $6.79 billion buy-out. British Airways said its shareholders accepted only 6.3% of the convertible capital bonds, but that the rest of the issue will be taken up by underwriters.Analysts said that 6.3% level marked the poorest showing for any major British rights issue since the 1987 global stock market crash. "It is close to being a record undersubscription," said Bob Bucknell, an analyst with London broker Smith New Court Securities. "Fund managers don't like to have rights issues that don't have an obvious reason.The obvious reason was (for British Air) to buy a stake in United Airlines." In a statement, British Air Chairman Lord King said the company was "obviously disappointed that the issue was not taken up, but it would have been unreasonable to expect a better result given the volatility of the stock market since the launch of the issue." But except for the embarrassment, British Air will emerge relatively unscathed from the flopped issue.Underwriters led by Lazard Brothers & Co. will pick up the rest of the airline's offer of four convertible capital bonds for every nine common shares.Lazard and other primary underwriters have reduced or eliminated their exposure by sub-underwriting the issue among U.K. institutional investors. "The (paper) loss here is very small" for these sub-underwriters, observed John Nelson, a Lazard managing director.In any case, he added, "most institutions probably won't sell" the bonds.And instead of buying the UAL stake, the U.K. carrier will be able to reduce its high debt level and build an acquisition war chest. "From a cash flow point of view, British Airways is better off not being in United Airlines in the short term," said Andy Chambers, an analyst at Nomura Research Institute in London.Added another U.K. analyst: "It gives them some cash in the back pocket for when they want to do something." For instance, British Air is continuing to negotiate with KLM Royal Dutch Airlines about each acquiring a 20% stake in Sabena World Airlines, the air transport subsidiary of the Belgian national airline.A definitive agreement had been expected by the end of July. The failed rights issue also should have a modest impact on British Air shares.The airline's share price already is far below the 210 pence ($3.33) level seen after the company announced the rights issue in late September.In late trading on London's Stock Exchange yesterday, the shares were off three pence at 194 pence.And because British Air is issuing convertible bonds rather than ordinary shares, the share price won't be directly hurt by any surplus left with underwriters after they try to sell the issue in the open market. But British Air's withdrawal from the UAL buy-out could have further repercussions.Some analysts speculated yesterday that the move has set off a board room split, which may lead to the resignation of Sir Colin Marshall, the carrier's chief executive officer. "The stories are rubbish," a British Air spokesman said. "There is no difference of opinion between (Chairman) Lord King and Sir Colin on any aspect of company policy."
The following issues were recently filed with the Securities and Exchange Commission: American Exploration Co., offering of five million common shares, via Smith Barney, Harris Upham & Co. and Shearson Lehman Hutton Inc. Chemical Waste Management Inc., proposed global offering of 8,500,000 shares of common stock, of which seven million of the shares will be offered in the U.S. and 1,500,000 shares will be offered overseas, via Merrill Lynch Capital Markets (domestic) and Kidder, Peabody & Co. (international). Interlake Corp., proposed offering of $200 million of senior subordinated debentures, via Goldman, Sachs & Co. InterMedia Capital Corp., Robin Cable Systems L.P. and Brenmor Cable Partners, offering of senior subordinated discount reset debentures, via Drexel Burnham Lambert Inc. John Nuveen & Co., initial offerings of the Nuveen California Performance Plus Municipal Fund Inc. and the Nuveen New York Performance Plus Municipal Fund Inc., via Alex.Brown & Sons Inc. KnowledgeWare Inc., initial offering of three million shares of its common stock, of which 1,657,736 shares will be sold by the company and 1,342,264 will be sold by holders, via Montgomery Securities and Donaldson, Lufkin & Jenrette Securities Corp. MGM Grand Inc., proposed offering of six million shares of common stock, via Merrill Lynch. Microlog Corp., formerly called Old Dominion Systems Inc., offering of 1.2 million common shares, of which one million will be sold by the company, and the balance by holders, via Hambrecht & Quist and Johnston, Lemon & Co. Scott Paper Co., shelf offering of up to $360 million of debt securities, via Goldman Sachs, Salomon Brothers Inc. and Smith Barney, Harris Upham. Sullivan Graphics Inc., offering of $110 million of senior subordinated notes, via Merrill Lynch. Sun Sportswear Inc., initial offering of 1.7 million common shares, of which one million shares will be sold by the company, and the balance by a holder, via Salomon Brothers Inc. and Piper, Jaffray & Hopwood Inc. Yes Clothing Co., proposed initial offering of 776,470 common shares, of which 600,000 shares will be offered by the company and 176,470 by holders, via Seidler Amdec Securities Inc.
MINORITY RECRUITING has yet to meet hopes raised by Bush administration. Six months ago, as some personnel specialists saw it, a perception that President Bush really cared about fair employment -- after what they said was eight years of Reagan-era neglect -- was prodding top management to raise hiring goals for females, blacks and other minorities.The perception lingers, says an official at a major industrial company.But so far, he declares, there's little evidence the "new urgency" is trickling down to the managers who actually do hiring. "Is there really a commitment or an illusion of activity?" he asks. The recruiting "hasn't materialized," asserts Jeffrey Christian, who runs a search agency.Samuel Hall, Howard University's placement director, also doesn't see it.And he questions the White House dedication. "I don't think the Bush administration has done anything," he says.Recruiter Donald Clark does note an increase in searches for minority candidates. But some of the activity, he says, may reflect a rush to get "numbers in order" for end-of-year reports. PAY FOR PERFORMANCE hangs mostly on boss's subjective view. Du Pont Co. in a couple of units has installed objective tests based on earnings or return on equity.Many companies have set up machinery to assure workers a fair shake.At most firms, though, it's the immediate supervisor who decides the merit increases subordinates will be paid.Managers have "some very broad discretion," says an official at Walt Disney Co. Unocal Corp. 's top management sets guidelines, but line supervisors slice up the merit pie. Lotus Development Corp. feeds its evaluations into a computer, but only for storage; the decisions are made by supervisors.Hershey Foods Corp. strives for fairness by basing increases on quarterly reviews, annual appraisals and meetings with workers.At Chemfix Technology Inc., each supervisor's recommendation must be approved by the next boss up the line, and then sanctioned by a salary review committee. JAPANESE COMPANIES fare best in U.S. when they give Americans more say. University of Michigan researchers find the companies earn more and win a bigger market share when their American employees get a voice in planning, product development and design, including decision-making back in Japan. "You can't hire competent Americans and say, `Let them run only their own show, '" says Vladimir Pucik, who headed the study run with Egon Zehnder International, a search firm. The researchers say many Japanese companies err in the U.S. by adopting the American practice of hiring managers on the "open market." In Japan, by contrast, companies tend to develop their own talent and promote from within.The Japanese also are accused of keeping their cards too close to their vests. "Some Japanese executives are not yet . . . comfortable about sharing strategic information with their American colleagues," the researchers say. Americans stay longer with Japanese firms than American companies.But they think promotions are limited. THE HOUSE votes down a proposal to put pension plans under the control of joint labor-management boards.Some consultants had insisted it wouldn't work. LONG-TERM care insurance gains favor.More than half the people surveyed for the Employee Benefit Research Institute say they would be willing and able to pick up most of the cost of the coverage. FRINGE-BENEFIT spending by small and medium-sized employers has dropped to 25% of payroll from 29% three years ago, says the National Institute of Business Management, an advisory service. OUSTED EXECUTIVES over 50 years old take slightly less time than their younger colleagues to find a job -- 3.23 months vs. 3.26 for the juniors -- outplacement firm Challenger, Gray & Christmas finds.It's the first time in the survey's 15 years that the over-50 group came out ahead. FEAR OF AIDS hinders hiring at few hospitals.Dedication runs high. Wafaa El-Sadr, who heads the AIDS program at New York City's Harlem Hospital Center, can't find help. "I've been recruiting every single day since it's been identified that many AIDS patients come from the inner city," she says.She was the only staff physician available to treat AIDS patients last summer and now she has the help of only two doctors part time.Part of the problem, though, may reflect a general unwillingness to work with the urban poor. Parkland Memorial Hospital in Dallas says it hasn't had any problem recruiting, even after a nurse contracted the virus while injecting an AIDS patient. "I can tell you that nobody quit over it.No one panicked," a spokeswoman says.St. Paul Medical Center, also in Dallas, sees only a "minimal erosion" of support staff due to AIDS. Yale-New Haven Hospital sees no problem, says John Fenn, the chief of staff. "There are enough enlightened and spirited individuals who know their responsibilities," he says. THE CHECKOFF: At least somebody gains on layoffs.The Association of Outplacement Consulting Firms says the industry's volume has soared tenfold since 1980, to $350 million a year. . . . And somebody loses on the expected repeal of Section 89, the benefits test fought by most employers.Triad Solutions says software producers had each invested hundreds of thousands of dollars in programs that now have no use.
Big gains for the ultra-right Republicans party in Baden-Wuerttemburg state municipal elections Sunday showed eroding support for Chancellor Helmut Kohl in a traditional bastion for his Christian Democratic Union. With ballots from most of the state's major cities in by yesterday morning, the Republicans came away with 10% of the vote in several of the key districts. With many rural districts yet to report ballots, election officials estimate support for Christian Democrats fell an average five percentage points statewide.The left-of-center Social Democrats and the environmental Greens party posted mixed results. Headed by a former Waffen SS sergeant and working from a nationalistic platform of anti-foreigner rhetoric, the fledgling Republicans party has scored surprising gains in earlier elections in the states of West Berlin, Hesse and North-Rhine Westphalia. With West German unemployment remaining high at two million jobless and the lack of affordable housing becoming a primary issue for next year's campaign, the Republicans are seen drawing support for their "Germans First" stand on social-welfare issues. Election analysts acknowledge that a "Red-Green" coalition of Social Democrats and Greens could edge out Chancellor Kohl's coalition in the December 1990 national election if support for the Republicans continues to spread. International investigators urged Britain to allow prosecution of suspected Nazi war criminals who took refuge there after 1945.Under current law, such suspects are immune from prosecution for acts committed while not British citizens. "If we're not careful we could become known as a haven for war criminals," said Jeff Rooker, a member of Parliament and one of several British politicians attending a London conference with government investigators from the U.S., Canada and Australia. A parliamentary inquiry found in July that more than 70 people living in Britain could have been part of death squads that roamed Nazi-occupied Eastern Europe.Parliament is expected to discuss next month whether to change the law. British investigations were prompted by a list of 17 alleged war criminals living in Britain sent to Prime Minister Margaret Thatcher in October 1986 by the Simon Wiesenthal Center in Los Angeles. In a sign of easing tension between Beijing and Hong Kong, China said it will again take back illegal immigrants caught crossing into the British colony.China had refused to repatriate citizens who sneaked into Hong Kong illegally since early this month, when the colony allowed a dissident Chinese swimmer to flee to the U.S.About 1,100 Chinese were awaiting repatriation yesterday. Italy's Foreign Ministry said it is investigating exports to the Soviet Union by an Ing.C. Olivetti & Co. subsidiary called OCN-PPL that makes numerically controlled machine tools.Although Italy's investigation of whether Olivetti had violated Western export-control rules had previously been made known, this marked the first time the unit and product were named.The U.S. is worried about the convertibility of Olivetti's machine tools to military use.However, an Olivetti spokeswoman said OCN-PPL, of which Olivetti sold the majority interest last year, "doesn't make equipment that has the type of precision necessary for sophisticated productions." Conservationists say that drift-net fishing threatens to wipe out much of the world's tuna stocks in a few years.But the Japanese Fisheries Association criticized moves to ban the practice in international waters. "It is really unfortunate for human beings to be swayed by emotional discussions," the association said.In driftnet, or "wall of death," fishing, fleets lay nets up to three miles long that trap almost everything in their path.Earlier this year, Japan said it would cut the number of its drift-net vessels in the South Pacific by two-thirds, or down to 20. Workers at Peugeot S.A.'s car plant at Sochaux, in eastern France, voted to end a six-week-old strike that has cost the Peugeot group production of 60,000 automobiles, a company spokesman said.The strikers voted to accept a series of management proposals that will give them a higher basic wage, better profit-sharing benefits and bigger annual bonuses.The spokesman said the vote at Sochaux is expected to be followed by a similar move at the company's assembly plant at Mulhouse, where the number of strikers has been whittled down to 80. About 8,000 National Union of Mineworkers members resumed their strike against De Beers Consolidated Mines Ltd. after further negotiations to settle a wage dispute broke down.Striking workers, who began striking five diamond mines on Oct. 13, had returned to work last week when the union and De Beers arranged to reopen negotiations.A De Beers spokesman said yesterday the company had offered to increase the minimum wage by 18%, while the union was demanding 26.6%.Before the two parties resumed talks last week, De Beers offered 17% and the union wanted 37.6%. China's People's Daily took note of the growing problem of computer fraud. Since the first fraud was discovered in July 1986 at an office of the People's Bank of China in Shenzhen, 15 major cases have been found, the paper said; the biggest was the theft of $235,000 from a bank in Chengdu in March 1988. The number of computers has mushroomed in recent years, with 10,000 in use, as well as 30,000 miniature models.But security systems, effective management controls and regulations to govern their use have not kept pace, the People's Daily said. Besides money, criminals have also used computers to steal secrets and intelligence, the newspaper said, but it gave no more details. Japanese tourists will be told to take care when photographing earthquake damage in San Francisco, the Japan Association of Travel Agents said.The association issued an advisory to its 1,685 member agencies following a report from the Foreign Ministry that picture-taking by Japanese tourists in earthquake-stricken areas was causing ill feeling among local residents. . . . Tass said Lenin's tomb in Red Square will be closed from Nov. 10 to Jan. 15 for essential maintenance.The red granite mausoleum draws thousands of visitors daily.
In an Oct. 10 editorial-page article, "It's the World Bank's Turn to Adjust," Paul Craig Roberts lays most of the blame for what ails developing countries at the doorstep of the World Bank.The article is, unfortunately, replete with outrageous distortions. One of Mr. Roberts's observations is that the Bank's own loan portfolio is in deep trouble because of its lending to developing countries.This is just not so.The reality is that Bank finances are rock solid.As of June 30, 1989 -- the day our past fiscal year came to a close -- only 4.1% of the Bank's portfolio was affected by arrears of over six months.This is an enviably low level.Moreover, the Bank follows a prudent provisioning policy and has set aside $800 million against possible loan losses.For the same fiscal year, by the way, the Bank's net income was a robust $1.1 billion after provisions. Because of the business-like manner in which the Bank goes about development, financial markets have confidence in it.This helps explain the triple-A rating enjoyed by our bonds and our ability to borrow $9.3 billion in fiscal 1989 on the most advantageous terms. Another of Mr. Roberts's criticisms is that Bank lending has done more harm than good "by implanting the wrong incentives and deflecting energy away from economic development." Here, too, Mr. Roberts is way off the mark.The reality is that Bank loans have been linked to policy improvements for 40 years.Our traditional project loans have, for instance, supported sensible energy pricing in the power sector, sound interest-rate policies in the credit area and the operation of public utilities as efficient, autonomous agencies.By and large, these efforts have borne fruit.In my home region, Latin America, much of the existing infrastructure base -- an important building block for development -- has been financed by the World Bank. Mr. Roberts also takes a swipe at the Bank's adjustment lending.What are the facts on this type of lending?The Bank has been making adjustment loans for 10 years.As their name implies, these operations are linked to far-reaching policy reforms that aim at helping borrowing countries get back on the growth path and at enhancing their credit-worthiness.Typically, these measures include reforms to downsize the role of government and parastatals in the economy, to open up inward-looking economies to international competition and to promote the development of a vigorous private sector. Support for the private sector has been a longstanding concern of the Bank's.Over the years, it has helped encourage investments by entrepreneurs in the Third World through its extensive credit operations and through loans and investments by the International Finance Corp.Most recently, the Bank Group has been expanded to include the Multilateral Investment Guarantee Agency to stimulate direct foreign investment in developing countries by offering guarantees against noncommercial risk and advice to member countries on how to improve their business climate. These are not the actions of a development agency wed to central planning and to the concentration of investment decisions in the hands of government, as Mr. Roberts alleges.Rather, they reflect the Bank's time-tested, pragmatic approach, which aims at ensuring that developing countries put their scarce resources to the best possible use. Francisco Aguirre-Sacasa Director, External Affairs The World Bank Washington
Ramada Inc. revised the terms of its restructuring and extended to Feb. 28, 1990, the deadline to complete the sale of its hotel business to New World Development Co. of Hong Kong and Prime Motor Inns Inc. of Fairfield, N.J. Ramada's previous plan was derailed by upheaval in the junk-bond market that hindered the offering of $400 million in high-yield securities of Aztar Corp., the new company that will operate Ramada's casinos in Nevada and Atlantic City, Under the new terms, New World will still pay $540 million for Ramada's hotel business, subject to adjustment at closing, but Ramada will now reimburse New World for $10 million in expenses.Prime will still manage Ramada's domestic franchise system when the sale closes. Revised terms call for each Ramada common share to be exchanged for $1 in cash, subject to possible reduction, and one share of Aztar common stock.Shareholders will also receive one cent per share for the redemption of preferred stock purchase rights. The cash payout will be reduced by 40% of any amount by which the weighted mean price of Ramada's common stock exceeds $14 on the day the transaction closes.The provision will help provide for tax liabilities that may stem from the restructuring. Ramada's stock rose 87.5 cents on the news to close at $11.25 in composite New York Stock Exchange trading.The announcement dispelled some Wall Street observers' fears that New World might demand a huge premium for the delay, or scrap the deal entirely.The previous deadline to complete the sale was Nov. 30. One major advantage of the revised plan is that Aztar will have far less debt than under the old terms. "They'll go from being one of the most leveraged to one of the least leveraged casino companies," said Daniel Lee, an analyst with Drexel Burnham Lambert Inc. Mr. Lee values the package at between $15 and $20 a share, based on current trading prices of other casino-company stocks. The much-revised restructuring, which was first announced in October 1988, must again be approved by shareholders and state casino regulators in Nevada and New Jersey.Financing plans include raising $170 million in debt secured by the company's holdings in New Jersey. In May, Ramada sold its Marie Callender Pie Shops Inc. unit to a group of private investors as part of its plan to focus on its casinos in Atlantic City and in Las Vegas and Laughlin, Nev.
Bond prices took the high road and stock prices took the low road as worries mounted about the economy and the junk bond market. The Dow Jones Industrial Average fell 26.23 points to 2662.91 in sluggish trading.But long-term Treasury bonds staged a modest rally, with prices on most issues rising about half a point, or $5 for each $1,000 face amount.The dollar sagged against other major currencies in lethargic trading. Traders and analysts said the divergence between the stock and bond markets is a sign of growing unease about the economic outlook.A sinking economy depresses corporate earnings and thus stock prices, but it buoys bond prices as interest rates fall. That unease is expected to grow today when the government reports on September durable goods orders and again Thursday when the first assessment of third-quarter economic growth is released.Analysts say they think durable goods orders fell about 1%, compared with a 3.9% gain in August, and that growth in the third quarter slowed to about 2.3% from the second quarter's 2.5%. The stock market's decline, coming after a record weekly gain of 119.88 points, surprised some investors.But A.C. Moore, director of research at Argus Research, said last week's rally was a reflex reaction to the Oct. 13 stock market rout.Overall, he said, the trend in stock prices will be down as the economy weakens. "We think we're on target in looking for renewed economic deterioration," he said. "Corporate profits are going to decrease faster than interest rates will fall, and the probability is that we'll see negative economic growth in the fourth quarter." Hugh Johnson, chief investment officer at First Albany Corp., agreed that a deteriorating economy is worrisome, but he said the real concern among stock investors is that some new problem will crop up in the junk bond market. In major market activity: Stock prices slumped in sluggish trading.Volume on the New York Stock Exchange totaled 135.9 million shares.Declining issues on the Big Board were ahead of gainers, 1,012 to 501. Bond prices rallied.The yield on the Treasury's benchmark 30-year bond slipped to 7.93%. The dollar weakened against most other major currencies.In late New York trading, the dollar was quoted at 1.8470 marks and 141.90 yen, compared with 1.8578 marks and 142.43 yen late Friday.
Meredith Corp. is launching a new service to offer advertisers package deals combining its book, magazine and videocassette products. The Des Moines-based publisher said it created a new Custom Marketing Group that will offer advertisers special rates for combination packages in its magazines, such as Ladies Home Journal and Better Homes and Gardens.In addition, the group will create custom-designed media such as cookbooks, newspaper inserts and videos for ad campaigns. Earlier this year, Meredith sold its first such package for $3 million to Kraft Inc., now a unit of New York-based Philip Morris Cos.The Kraft package included a specially published cookbook, a national free-standing insert in Sunday newspapers, and a Kraft "advertorial" section that ran in five Meredith magazines.Kraft recently agreed to spend an additional $3 million on similar programs through 1990. Bill Murphy, director of the new marketing unit, said Meredith is negotiating other large-scale packages with leading companies in several product categories, but he wouldn't disclose their names.Sources close to the company and ad agencies that work with Meredith said leading advertisers in consumer electronics, packaged goods and automotive products were among those negotiating ad packages with the Meredith group. Other magazine publishing companies have been moving in the same direction.The New York Times Co. 's Magazine Group earlier this year began offering advertisers extensive merchandising services built around buying ad pages in its Golf Digest magazine.Time Warner Inc. recently formed a "synergy department" to seek out ways to offer advertisers packages that could combine Time's magazines with Warner products such as videocassettes. Paul DuCharme, director of media services at Grey Advertising, said Meredith is the leader in providing multimedia packages. "They may get passed up later when other publishers get their acts together, but for now they are the quickest offering the most extensive plan," he said. Mr. Murphy of Meredith said one advertiser, which he wouldn't identify, wants Meredith to provide ad pages in seven Meredith magazines, publish an interior-decorating book that will be distributed at point of purchase, give away a videotape on installation pointers, and possibly use Meredith's Better Homes and Gardens' residential real-estate agents to distribute discount-coupon books to new homeowners. "Five years ago, magazine publishers would simply bid on an advertiser's big ad schedule for their magazine," said Mr. Murphy. "But the marketplace changed.Advertisers now say `Help us improve our image and extend our selling season. ' They are coming to publishers looking for ideas."
The management turnover at Reebok International Ltd. continued with the resignation of company president C. Joseph LaBonte, who joined Reebok just two years ago. Mr. LaBonte's departure follows by two months the resignation of Mark Goldston as senior vice president and chief marketing officer after only 11 months at Reebok. The resignations by the two executives, considered hard-charging and abrasive by Reebok insiders, reflect a difference in style with Paul Fireman, chairman and chief executive, according to several former executives.The two executives are among a number of outsiders recruited by Reebok in the past few years to help it make the transition from a small start-up company to a marketing giant with sales last year of $1.79 billion. The changes come as Reebok, which grew rapidly in the mid-1980s but has seen its sales flatten of late, is seeking to regain momentum in the athletic-shoe business against rivals Nike Inc. and L.A. Gear Inc. The departures, said Alice Ruth, an analyst at Montgomery Securities in San Francisco, should enable the company to focus on business issues instead of management differences. "I think it's more an issue of style.I would view it as a net positive.The company can go about its business.They're in the midst of a turnaround," she noted. Earnings have rebounded in 1989 after a 20% decline last year. A former executive agreed that the departures don't reflect major problems, adding: "If you see any company that grows as fast as Reebok did, it is going to have people coming and going." Reebok said Mr. LaBonte will resume the presidency of Vantage Group Inc., a California-based venture capital firm that he founded in 1983.Before that he was president and chief operating officer of Twentieth Century-Fox Film Corp. Reebok added that Mr. Fireman will assume the title of president. A spokesman said that neither Mr. Fireman nor Mr. LaBonte would be available for comment. "We will not be commenting beyond the news release," the spokesman said. Mr. Goldston, who had been president of Faberge Inc. 's Faberge U.S.A. division before joining Reebok in September 1988, left in August to pursue other interests.
Magazine publishers are facing spiraling costs and a glut of new titles.But even a raft of recent failures isn't stopping them from launching new publications. At the American Magazine Conference here, publishers are plenty worried about the industry's woes.But they are also talking about new magazines.For example, Toronto-based Telemedia Inc. will publish Eating Well, a new food and health magazine due out next summer.New York-based Hearst Corp. this fall plans to publish its first issue of 9 Months, a magazine for expectant mothers, and has already launched American Home.And Time Warner Inc. is developing a spinoff of Time magazine aimed at kids, on the heels of its successful Sports Illustrated for Kids. Over the past four years, the number of consumer magazines has increased by an average of 80 magazines annually, according to Donald Kummerfeld, president of the Magazine Publishers of America. "This is an impressive show of faith in the future of the magazine industry," said Mr. Kummerfeld. "Entrepreneurs don't rush to get into a stagnant or declining industry." And despite the recent tough advertising climate, industry figures released at the meeting here indicate things may be turning around.For the first nine months, advertising pages in consumer magazines tracked by the Publishers Information Bureau increased 4% from the same period last year, to 125,849 pages.Total magazine ad revenue for the same period increased 12% to $4.6 billion.Though for some magazines categories a tough advertising climate persists, the industry in general is doing well compared with the newspaper industry. Though some magazines are thriving, the magazine publishing industry remains a risky business.Within the same nine months, News Corp. closed down In Fashion, a once-promising young woman's fashion magazine, Drake Publications Inc. has folded the long-troubled Venture magazine, and Lang Communications has announced Ms. magazine, after 17 years, will no longer carry advertising as of January.Lang is cutting costs and will attempt to operate the magazine with only subscription revenue. Meanwhile, American Health Partners, publisher of American Health magazine, is deep in debt, and Owen Lipstein, founder and managing partner, is being forced to sell the magazine to Reader's Digest Association Inc. Mr. Lipstein's absence from the meeting here raised speculation that the sale is in trouble.Mr. Lipstein said in a telephone interview from New York that the sale was proceeding as planned. "The magazine is strong.It's simply the right time to do what we are doing," Mr. Lipstein said. "Magazines can no longer be considered institutions," said James Autry, president of Meredith Corp. 's magazine group. "Publishers will find that some magazines have served their purpose and should die," he added. "Magazines could, like other brands, find that they have only a limited life." There are also indications that the number of magazine entrepreneurs, traditionally depended upon to break new ground with potentially risky start-ups, are dwindling.More than ever, independent magazines and small publishing groups are being gobbled up by larger publishing groups, such as American Express Publishing Corp., a unit of American Express Co., and Conde Nast Publications Inc., a unit of Advance Publications Inc., which are consolidating in order to gain leverage with advertisers. Some entrepreneurs are still active, though.Gerry Ritterman, president of New York-based Network Publishing Corp., earlier this year sold his Soap Opera Digest magazine to Rupert Murdoch's News Corp. Mr. Ritterman said that in the next six months he will take $50 million from the Soap Opera Digest sale to acquire new magazines.He would not reveal which magazines he is considering. "The magazines I am looking for are underdeveloped," said Mr. Ritterman. "They could be old or new, but they are magazines whose editorial quality needs to be improved.They will be the next hot magazines."
(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.) FRANKLIN NATIONAL BANK DIED at 3 p.m. EDT, Oct. 8, 1974, and was promptly resurrected under new owners to shore up confidence in other banks during a recession. Arthur Burns, Federal Reserve Board chairman, said the government's "luck" in keeping the bank open -- despite being the then-biggest U.S. bank failure -- prevented "shock waves around the country and around the world." Federal officials who had been probing the bank for months arranged a merger with European-American Bank & Trust, owned by six foreign banks, to avert the closedown.And federal insurance protected the bank's 631,163 depositors. The crisis had peaked on May 10, 1974, when the bank disclosed "severe" foreign-exchange losses due to "unauthorized" trading.Massive withdrawals followed and there was a brief rescue attempt, with political undertones, including $1.77 billion in Federal Reserve loans. Within six years many figures were convicted for their illegal abuse of Franklin funds.In June 1980, Michele Sindona -- an Italian financier who in July 1972 had bought a 22% block of Franklin's stock from Loews Corp., headed by Laurence A. Tisch -- was sentenced to 25 years in prison after being convicted of fraud and perjury.Included was the charge that Sindona siphoned $45 million of Franklin funds for his other ventures. (Sindona in 1979 faked his "kidnapping" for 2 1/2 months to delay his trial.) During 1976 to 1979, other former Franklin officials either pleaded guilty to or were found guilty of violations including phony transactions to hide the bank's losses. Sindona, the onetime Vatican financial adviser with reported links to the Mafia, died on March 22, 1986, at age 65, reportedly after drinking cyanide-laced coffee in an Italian prison.It happened four days after he was sentenced to life in prison for ordering a 1979 murder.Italian magistrates labeled his death a suicide.
In a nondescript office building south of Los Angeles, human behavior is being monitored, dissected and, ultimately, manipulated. A squiggly line snakes across a video screen, gyrating erratically as subjects with hand-held computers register their second-by-second reactions to a speaker's remarks.Agreement, disapproval, boredom and distraction all can be inferred from the subjects' twist of a dial.In another experiment, an elaborate chart with color codes reveals how people's opinions were shaped -- and how they can be reshaped. Donald Vinson, who oversees the experiments, isn't some white-coated researcher.He heads Litigation Sciences Inc., the nation's largest legal consulting firm, which is helping corporate America prepare for high-stakes litigation by predicting and shaping jurors' reactions.In the process, Litigation Sciences is quietly but inexorably reshaping the world of law. Little known outside the legal world but a powerhouse within, Litigation Sciences, a unit of Saatchi & Saatchi PLC, employs more than 100 psychologists, sociologists, marketers, graphic artists and technicians.Twenty-one of its workers are Ph.D.s.Among other services, the firm provides pre-trial opinion polls, creates profiles of "ideal" jurors, sets up mock trials and "shadow" juries, coaches lawyers and witnesses, and designs courtroom graphics. Much like their cohorts in political consulting and product marketing, the litigation advisers encourage their clients to play down complex or ambiguous matters, simplify their messages and provide their target audiences with a psychological craving to make the desired choice.With jury verdicts getting bigger all the time, companies are increasingly willing to pay huge sums for such advice. Recently, Litigation Sciences helped Pennzoil Co. win a $10.5 billion jury verdict against Texaco Inc.It advised the National Football League in its largely successful defense of antitrust charges by the United States Football League.And it helped win defense verdicts in product-liability suits involving scores of products, ranging from Firestone 500 tires to the anti-nausea drug Bendectin.Largely as a result, Litigation Sciences has more than doubled in size in the past two years.Its 1988 revenue was $25 million. Meanwhile, competitors are being spawned almost daily; some 300 new businesses -- many just one-person shops -- have sprung up.Mr. Vinson estimates the industry's total revenues approach $200 million.In any high-stakes case, you can be sure that one side or the other -- or even both -- is using litigation consultants. Despite their ubiquity, the consultants aren't entirely welcome.Some lawyers and scholars see the social scientists' vision of the American jury system as a far cry from the ideal presented in civics texts and memorialized on the movie screen.In the film classic "Twelve Angry Men," the crucible of deliberations unmasks each juror's bias and purges it from playing a role in the verdict.After hours of conflict and debate, that jury focuses on the facts with near-perfect objectivity.In real life, jurors may not always work that way, but some court observers question why they shouldn't be encouraged to do so rather than be programmed not to. Litigation consulting is, as New York trial attorney Donald Zoeller puts it, "highly manipulative." He adds, "The notion they try to sell is that juries don't make decisions rationally.But the effort is also being made to try and cause jurors not to decide things rationally.I find it troubling." But Mr. Zoeller also acknowledges that consultants can be very effective. "It's gotten to the point where if the case is large enough, it's almost malpractice not to use them," he says. Others complain that the consultants' growing influence exacerbates the advantage of litigants wealthy enough to afford such pricey services. "The affluent people and the corporations can buy it, the poor radicals {in political cases} get it free, and everybody in between is at a disadvantage, and that's not the kind of system we want," says Amitai Etzioni, a prominent sociologist who teaches at George Washington University. Sophisticated trial consulting grew, ironically, from the radical political movements of the 1960s and 1970s before finding its more lucrative calling in big commercial cases.The Harrisburg 7 trial in 1972, in which Daniel Berrigan and others were charged with plotting anti-war-related violence, was a landmark. In that case, a group of left-leaning sociologists interviewed 252 registered voters around Harrisburg.The researchers discovered that Episcopalians, Presbyterians, Methodists and fundamantalist Protestants were nearly always against the defendants; the lawyers resolved to try to keep them off the jury. The defense also learned that college-educated people were uncharacteristically conservative about the Vietnam War.A more blue-collar panel became a second aim.Ultimately, that carefully picked jury deadlocked with a 10-2 vote to acquit, and the prosecution decided not to retry the case.Litigation consulting had arrived. The fledgling science went corporate in 1977 when International Business Machines Corp. hired a marketing professor to help defend a complex antitrust case.The problem for IBM trial lawyers Thomas Barr and David Boies was how to make such a highly technical case understandable.As the trial progressed, they were eager to know if the jury was keeping up with them. The solution devised by the professor was to hire six people who would mirror the actual jury demographically, sit in on the trial and report their reactions to him.He then briefed Messrs.Boies and Barr, who had the chance to tilt their next day's presentation accordingly.Thus, the "shadow" jury was born.Mr. Vinson, the professor, got the law bug and formed Litigation Sciences. (IBM won the case.) "The hardest thing in any complex case is to retain objectivity and, in some sense, your ignorance," says Mr. Boies of Cravath, Swaine & Moore. "What you look for in a shadow jury is very much what you do when you give an opening argument to your wife or a friend and get some response to it.A shadow jury is a way to do that in a more systematic and organized way." The approach worked well in the recent antitrust case in which Energy Transportation Systems Inc. sued Santa Fe Pacific Corp. over the transport of semi-liquefied coal -- the kind of case likely to make almost anyone's eyes glaze over. Energy Transportation retained Litigation Sciences, at a cost of several hundred thousand dollars, to poll, pre-try, profile and shadow.Just before the actual closing arguments, the firm put the case to a vote of the five shadow jurors, each of whom was being paid $150 a day.The jurors, who didn't know which side had retained them, decided for Energy Transportation, and awarded $500 million in damages.The real jury returned days later with a $345 million victory for Energy Transportation. "It's just like weather forecasting," says Energy Transportation trial attorney Harry Reasoner of Vinson & Elkins. "It's often wrong, but it's better than consulting an Indian rain dancer." Forecasting is only one part of Litigation Sciences' work.Changing the outcome of the trial is what really matters.And to the uninitiated, some of the firm's approaches may seem chillingly manipulative. Theoretically, jurors are supposed to weigh the evidence in a case logically and objectively.Instead, Mr. Vinson says, interviews with thousands of jurors reveal that they start with firmly entrenched attitudes and try to shoe-horn the facts of the case to fit their views. Pre-trial polling helps the consultants develop a profile of the right type of juror.If it is a case in which the client seeks punitive damages, for example, depressed, underemployed people are far more likely to grant them.Someone with a master's degree in classical arts who works in a deli would be ideal, Litigation Sciences advises.So would someone recently divorced or widowed. (Since Litigation Sciences generally represents the defense, its job is usually to help the lawyers identify and remove such people from the jury.) For personal-injury cases, Litigation Sciences seeks defense jurors who believe that most people, including victims, get what they deserve.Such people also typically hold negative attitudes toward the physically handicapped, the poor, blacks and women.The consultants help the defense lawyers find such jurors by asking questions about potential jurors' attitudes toward volunteer work, or toward particular movies or books. Litigation Sciences doesn't make moral distinctions.If a client needs prejudiced jurors, the firm will help find them.As Mr. Vinson explains it, "We don't control the facts.They are what they are.But any lawyer will select the facts and the strategy to employ.In our system of advocacy, the trial lawyer is duty bound to present the best case he possibly can." Once a jury is selected, the consultants often continue to determine what the jurors' attitudes are likely to be and help shape the lawyers' presentation accordingly.Logic plays a minimal role here.More important are what LSI calls "psychological anchors" -- a few focal points calculated to appeal to the jury on a gut level. In one personal-injury case, a woman claimed she had been injured when she slipped in a pool, but the fall didn't explain why one of her arms was discolored bluish.By repeatedly drawing the jury's attention to the arm, the defense lawyers planted doubt about the origin of the woman's injuries.The ploy worked.The defense won. In a classic defense of a personal-injury case, the consultants concentrate on encouraging the jury to shift the blame. "The ideal defense in a case involving an accident is to persuade the jurors to hold the accident victim responsible for his or her plight," Mr. Vinson has written. Slick graphics, pre-tested for effectiveness, also play a major role in Litigation Sciences' operation.Studies show, the consultants say, that people absorb information better and remember it longer if they receive it visually.Computer-generated videos help. "The average American watches seven hours of TV a day.They are very visually sophisticated," explains LSI graphics specialist Robert Seltzer. Lawyers remain divided about whether anything is wrong with all this.Supporters acknowledge that the process aims to manipulate, but they insist that the best trial lawyers have always employed similar tactics. "They may not have been able to articulate it all, but they did it," says Stephen Gillers, a legal ethics expert at New York University law school. "What you have here is intuition made manifest." Many lawyers maintain that all's fair in the adversary system as long as no one tampers with the evidence.Others point out that lawyers in small communities have always had a feel for public sentiment -- and used that to advantage. Litigation consulting isn't a guarantee of a favorable outcome.Litigation Sciences concedes that in one in 20 cases it was flatout wrong in its predictions.A few attorneys offer horror stories of jobs botched by consultants or of overpriced services -- as when one lawyer paid a consultant (not at Litigation Sciences) $70,000 to interview a jury after a big trial and later read more informative interviews with the same jurors in The American Lawyer magazine. Some litigators scoff at the notion that a sociologist knows more than they do about what makes a jury tick. "The essence of being a trial lawyer is understanding how people of diverse backgrounds react to you and your presentation," says Barry Ostrager of Simpson Thacher & Bartlett, who recently won a huge case on behalf of insurers against Shell Oil Co.He says he used consultants in the case but "found them to be virtually useless." But most lawyers accept that the marketplace has spoken.And the question remains whether the jury system can maintain its integrity while undergoing such a skillful massage.For more than a decade, Mr. Etzioni, the sociologist, has been a leading critic of the masseurs. "There's no reason to believe that juries rule inappropriately," he says. "But the last thing you want to do is manipulate the subconscious to make them think better.What you then do is you make them think inappropriately." To hamper the work of litigation scientists, he suggests that courts sharply limit the number of jurors that lawyers can remove from the jury panel through so-called peremptory challenges -- exclusions that don't require explanations.In most civil cases, judges allow each side three such challenges.For complex cases, judges sometimes allow many more. Mr. Etzioni also suggests forbidding anyone from gathering background information about the jurors. (Some courts release names and addresses, and researchers can drive by houses, look up credit ratings, and even question neighbors.) Furthermore, he says, psychologists should not be allowed to analyze jurors' personalities. Even some lawyers who have used consultants to their advantage see a need to limit their impact.Mr. Boies, the first lawyer to use Mr. Vinson's services, cautions against courts' allowing extensive jury questioning (known as voir dire) or giving out personal information about the jurors. "The more extensive the voir dire, the easier you make it for that kind of research to be effective, and I don't think courts should lend themselves to that," Mr. Boies says.
Silicon Graphics Inc., a fast-growing maker of computer workstations, said it landed two federal government contracts worth more than $100 million over the next five years. One award is part of a Department of Defense contract to Loral Rolm Mil-Spec Computers and could be valued at more than $100 million over five years.The other involves the sale of about 35 of the company's high-end workstations to the National Institutes of Health.The models, which cost about $75,000 each, will be used in research. The awards are evidence that Silicon Graphics' approach to computer graphics is catching on with users of powerful desktop computers, analysts said. "The company's on a roll," said Robert Herwick, an analyst at Hambrecht & Quist. "No other {computer} vendor offers graphics performance that good for their price." In the battle to supply desktop computers for researchers and design engineers, most of the attention is given to the biggest competitors: Sun Microsystems Inc., Hewlett-Packard Co. and Digital Equipment Corp., which make computers mainly aimed at a wide range of engineering and scientific needs. Silicon Graphics, on the other hand, has targeted a specific niche since its inception in 1982, which has been dubbed by some as "motion-picture computing." This is a style of "visual" computing that provides three-dimensional, color models of everything from the inside of a house to the latest in women's fashion. Though Silicon Graphics is much smaller than Digital, Hewlett and Sun, it has emerged in recent years as a feared adversary in this graphics portion of the workstation market. In addition, the company has made it tough on competitors by offering a stream of desktop computers at sharply lower prices.A year ago, Silicon Graphics introduced a model priced at $15,000 -- almost as cheap as mainstream workstations that don't offer special graphics features. Silicon Graphics also plans to unveil even less expensive machines in the near future. "It's pretty safe to assume we can bring the cost down of these systems by 30% to 40% a year," said Edward McCracken, the company's chief executive officer. Silicon Graphics' strategy seems to be paying off.Revenue for its first quarter ended Sept. 30 was $86.4 million, a 95% increase over the year-ago period.Profit was $5.2 million, compared with $1 million for the year-ago quarter.
Remember those bulky, thick-walled refrigerators of 30 years ago?They, or at least something less efficient than today's thin-walled units, may soon be making a comeback.That something, whatever it is, could add as much as $100 to the $600 or so consumers now pay for lower-priced refrigerators. These and other expensive changes in products ranging from auto air conditioners to foam cushioning to commercial solvents are in prospect because of something called the Montreal Protocol, signed by 24 nations in 1987.In one of the most sweeping environmental regulatory efforts to date -- involving products with an annual value of $135 billion in the U.S. alone -- the signatories agreed to curtail sharply the use of chlorofluorocarbons (CFCs).World-wide production would be cut in half by 1998.The U.S. Senate liked the treaty so well it ratified it by a vote of 89 to 0.Not to be outdone, George Bush wants CFCs banished altogether by the year 2000, a goal endorsed at an 80-nation U.N. environmental meeting in Helsinki in the spring. That's a lot of banishment, as it turns out.CFCs are the primary ingredient in a gas, often referred to by the Du Pont trade name Freon, which is compressed to liquid form to serve as the cooling agent in refrigeration and air-conditioning equipment.Gases containing CFCs are pumped into polyurethane to make the foam used in pillows, upholstery and insulation.Polyurethane foam is a highly efficient insulator, which accounts for why the walls of refrigerators and freezers can be thinner now than they were back in the days when they were insulated with glass fiber. But even though by some estimates it might cost the world as much as $100 billion between now and the year 2000 to convert to other coolants, foaming agents and solvents and to redesign equipment for these less efficient substitutes, the Montreal Protocol's legions of supporters say it is worth it.They insist that CFCs are damaging the earth's stratospheric ozone layer, which screens out some of the sun's ultraviolet rays.Hence, as they see it, if something isn't done earthlings will become ever more subject to sunburn and skin cancer. Peter Teagan, a specialist in heat transfer, is running a project at Arthur D. Little Inc., of Cambridge, Mass., to find alternative technologies that will allow industry to eliminate CFCs.In addition to his interest in ozone depletion he has extensively studied the related topic of global warming, a theory that mankind's generation of carbon dioxide through increased combustion of fossil fuels is creating a "greenhouse effect" that will work important climatic changes in the earth's atmosphere over time. "I would be the first to admit that there is not a complete consensus in the scientific community on either one of these problems," says Mr. Teagan. "In the kind of literature I read I come across countervailing opinions quite frequently.But the nature of the problem is such that many others feel it has to be addressed soon, before all the evidence is in.We can't afford to wait." But does it have to be so soon?Some atmospheric scientists think that even if CFCs were released into the atmosphere at an accelerating rate, the amount of ozone depletion would be only 10% by the middle of the next century.It's easy to get something comparable by simply moving to a higher altitude in the U.S. Moreover, there are questions, particularly among atmospheric scientists who know this subject best, about the ability of anyone to know what in fact is happening to the ozone layer.It is generally agreed that when CFCs rise from earth to stratosphere, the chlorine in them is capable of interfering with the process through which ultraviolet rays split oxygen molecules and form ozone.But ozone creation is a very large-scale natural process and the importance of human-generated CFCs in reducing it is largely a matter of conjecture.The ozone layer is constantly in motion and thus very hard to measure.What scientists have known since the late 1970s is that there is a hole in the layer over Antarctica that expands or contracts from year to year.But it is at least worthy of some note that there are very few refrigerators in Antarctica.Moreover, surely someone has noticed that household refrigerators are closed systems, running for many years without either the CFC gas or the insulation ever escaping. Another argument of the environmentalists is that if substitutes are available, why not use them?Mr. Teagan cites a list of substitutes but none, so far, match the nonflammable, nontoxic CFCs.Butane and propane can be used as coolants, for example, but are flammable.Moreover, new lubricants will be needed to protect compressors from the new formulations, which, as with CFCs, are solvents.Mr. Teagan points out as well that if the equipment designed to get along without CFCs is less efficient than current devices, energy consumption will rise and that will worsen the greenhouse effect.Folks in the Midwest who just suffered a mid-October snowstorm may wonder where the greenhouse was when they needed it, but let's not be flippant about grave risks. As it happens, Arthur D. Little is not at all interested in throwing cold water on ozone depletion and global warming theories.It is interested in making some money advising industry on how to convert to a world without CFCs.There is, after all, big money in environmentalism. Maybe we should ask why it was that Du Pont so quickly capitulated and issued a statement, giving it wide publicity, that it was withdrawing CFCs.Freon, introduced in 1930, revolutionized America by making refrigeration and air conditioning practical after all.One answer is that big companies are growing weary of fighting environmental movements and are trying instead to cash in on them, although they never care to put it quite that way.Du Pont, as it happens, has a potential substitute for CFCs.Imperial Chemical Industries of the U.K. also has one, and is building a plant in Louisiana to produce it.Japanese chemical companies are at work developing their own substitutes and hoping to conquer new markets, of course. There are still others who don't mind seeing new crises arise.Environmental groups would soon go out of business were they not able to send out mailings describing the latest threat and asking for money to fight it.University professors and consultants with scientific credentials saw a huge market for their services evaporate when price decontrol destroyed the energy crisis and thus the demand for "alternative energy." They needed new crises to generate new grants and contracts. In other words, environmentalism has created a whole set of vested interests that fare better when there are many problems than when there are few.That tends to tilt the public debate toward "solutions" even when some of the most knowledgeable scientists are skeptical about the seriousness of the threats and the insistence of urgency.There is an element of make-work involved. Consumers pay the bill for all this in the price of a refrigerator or an air-conditioned car.If they were really getting insurance against environmental disaster, the price would be cheap.But if there is no impending threat, it can get to be very expensive.
but worries about 1990. With most legislatures adjourned for the year, small business is tallying its scorecard.Much of its attention was spent fighting organized labor's initiatives on issues the small-business community traditionally opposes -- from raising state minimum wage levels to mandating benefits in health plans.While results were mixed in many states, "small business got by fairly well," concludes Don L. Robinson, associate director of the National Federation of Independent Business, the largest small-business organization. Five states -- Oregon, Rhode Island, New Hampshire, Iowa and Wisconsin -- passed bills to boost the minimum wage, but measures in 19 other states were defeated.Oregon's rate will rise to $4.75 an hour, the nation's highest, in Jan. 1, 1991.Iowa's will be the second highest -- at $4.65 an hour in January 1992 -- but small-business lobbyists won an exclusion for tiny concerns and a lower training rate. In 17 central states, one small-business count shows lawmakers adopted only three of 46 bills mandating health coverage or parental leave.The Illinois Legislature narrowly passed a parental-leave bill, which Gov. James Thompson vetoed, and Iowa and Tennessee amended laws to require that employers pay for breast-cancer exams. Small business is bracing for an avalanche of similar proposals next year. "Those kinds of issues always keep coming back," says Robert Beckwith, who manages the Illinois Chamber of Commerce's small-business office. DESPITE VICTORIES this year, small business fears losing parental-leave war. Only two states -- Vermont and Washington -- this year joined five others requiring private employers to grant leaves of absence to employees with newborn or adopted infants.Similar proposals were defeated in at least 15 other states.But small business, which generally detests government-mandated benefits, has taken note of the growing number of close votes. "It's just a matter of time before the tide turns," says one Midwestern lobbyist. Consequently, small business is taking more "pro-active" steps to counter mandated leaves.In Pennsylvania, small businesses are pushing for a voluntary alternative; they favor a commission that would develop sample leave policies that employers could adopt.They also support a tax credit for employers to offset the cost of hiring and training workers who temporarily replace employees on parental leave. In 1990, the issue is expected to be especially close in Alaska, California, Michigan, New York, Pennsylvania and Illinois. "We'll be playing a lot of defense, especially in the Midwest and Northeast," says Jim Buente of the NFIB. IN LOS ANGELES, more small businesses ponder adopting a child-care policy. Triggering the re-examination is a recent city council decision to give preference in letting city contracts to suppliers with a stated policy on child care for their employees.The preferential treatment even applies to awarding small contracts under $25,000 and consulting and temporary services -- which often go to the smaller concerns.Firms are permitted wide flexibility in the child-care arrangements they provide.Council member Joy Picus, the measure's chief advocate, considers it part of a "pro-family policy" that makes Los Angeles a leader in "humanizing the workplace." NOVEMBER BALLOTS will contain few referendum or initiative issues that especially affect small business.In San Francisco, small businesses are urging passage of a local initiative to build a new $95 million downtown baseball stadium; they believe it will spur retail sales and hotel-restaurant business.But in Washington state, small business generally opposes an initiative to boost spending on children's programs by $360 million, fearing the state's 7.8% sales tax will be raised to finance the outlays. DIALING DOLLARS: Small businesses in suburban Chicago are discovering that an area-code switch Nov. 11 -- to 708 from the familiar 312 -- won't be without some costs as they alter stationery, among other things, and notify customers.Wessels & Pautsch, a small St. Charles law firm, plans to mail 500 customers a list of its lawyers' new phone and fax numbers as well as updated Rolodex cards.But many owners plan to practice frugality -- crossing out the old code and writing in the new one until their stock runs out.Even print-shop operator Clay Smith of Naperville won't discard his old supply. (He reports his business is up slightly from customers replacing old stock.) CALIFORNIA, A TREND-SETTER in franchising rules, stirs a controversy. With some new rules, state officials say they made it easier -- and faster -- to sell new franchises whose terms stray from those in state-registered contracts.Previously, regulators insisted that franchisers pre-register such changes with the state -- a costly process taking at least six weeks.Now some negotiated sales that meet a series of tests don't have to be pre-registered.For instance, franchisers no longer must pre-register sales to aspiring franchisees who qualify as "sophisticated purchasers." Such buyers must have a minimum net worth of $1 million, $200,000 annual income, or recent experience in the business area of the franchise being sold. But critics consider the changes regressive.Lewis G. Rudnick, a Chicago lawyer who represents franchisers, contends California is narrowly limiting -- rather than expanding -- opportunities for negotiating sales.He argues California regulators historically have misinterpreted their law -- and he says negotiated sales that aren't pre-registered have been legal all along. San Francisco lawyer Timothy H. Fine, who represents franchisees, insists California's cautiousness helps protect franchisees from crafty sales negotiators who push unlawful clauses. SMALL TALK: A new Maryland law frees store owners of liability if a customer trips or otherwise gets hurt on the way to the restroom. . . . Only 4% of Missouri small businesses surveyed say they've tested an employee or applicant for drug or alcohol use. . . . By 52%-36%, Tennessee NFIB members favor laws to limit foreign ownership of land and facilities in the state.
About 400,000 commuters trying to find their way through the Bay area's quake-torn transportation system wedged cheek-to-jowl into subways, sat in traffic jams on major freeways or waited forlornly for buses yesterday. In other words, it was a better-than-average Manhattan commute. City officials feared widespread gridlock on the first day that normal business operations were resumed following last Tuesday's earthquake.The massive temblor, which killed at least 61 people, severed the Bay Bridge, a major artery to the east, and closed most ramps leading to and from Highway 101, the biggest artery to the south.It will take several weeks to repair the bridge, and several months to repair some of the 101 connections. But in spite of a wind-driven rainstorm, gridlock never materialized, mainly because the Bay Area Rapid Transit subway system carried 50% more passengers than normal.For the first time in memory, it was standing-room only in BART's sleek, modern railcars. Moreover, the two main bridges still connecting San Francisco with the East Bay didn't charge tolls, allowing traffic to zip through without stopping.Officials also suspect that traffic benefited from steps by major employers to get workers to come in at odd hours, or that many workers are still staying at home. Many commuters who normally drove across the Bay Bridge, which is shut down for several weeks because of damage to one span, actually may have reached work a bit faster on BART yesterday, provided they could find a parking space at the system's jammed stations.In the best of times, the Bay Bridge is the worst commute in the region, often experiencing back-ups of 20 to 30 minutes or more. Not that getting into town was easy.Storm flooding caused back-ups on the freeway, and many commuters had to find rides to BART's stations, because parking lots were full before dawn.Bus schedules were sometimes in disarray, stranding commuters such as Marilyn Sullivan.Her commute from Petaluma, Calif., normally takes an hour and 15 minutes, via the Golden Gate Bridge, which connects San Francisco with the North Bay area.Yesterday, she was still waiting at a bus stop after three hours, trying to transfer to a bus going to the financial district. "It's worse than I thought," she said. "I don't know where all the buses are." But while traffic was heavy early in the commute over the Golden Gate, by 8 a.m. it already had thinned out. "It's one of the smoothest commutes I've ever had," said Charles Catania, an insurance broker on the bus from Mill Valley in Marin County. "It looks like a holiday.I think a lot of people got scared and stayed home." However, a spokeswoman for BankAmerica Corp. said yesterday's absenteeism at the bank holding company was no greater than on an average day. At the San Mateo Bridge, which connects the San Francisco peninsula with the East Bay, police were surprised at the speed with which traffic moved. "Everybody pretty much pitched in and cooperated," said Stan Perez, a sergeant with the California Highway Patrol. There were many indications that the new work hours implemented by major corporations played a big role.The Golden Gate handled as many cars as normally yesterday, but over four hours rather than the usual two-hour crush. Bechtel Group Inc., the giant closely held engineering concern, says it has instituted a 6 a.m. to 8 p.m. flextime arrangement, whereby employees may select any eight-hour period during those hours to go to work.Of Bechtel's 17,500 employees, about 4,000 work in San Francisco -- one-third of them commuting from stricken East Bay. Pacific Gas & Electric Co. is offering its 6,000 San Francisco employees a two-tier flextime schedule -- either 6 a.m. to 2 p.m. or 10 a.m. to 6 p.m.The flextime may cut by almost a third the number of PG&E employees working conventional 9-5 hours, a spokesman says.Some of the utility's employees may opt for a four-day workweek, 10 hours a day, to cut the commute by 20%. At Pacific Telesis Group, flextime is left up to individual working groups, because some of the telephone company's employees must be on-site during normal business hours, a spokeswoman says. Some individuals went to some lengths on their own to avoid the anticipated gridlock.One senior vice president at Bechtel said he got up at 3 a.m. to drive into San Francisco from the East Bay. But transportation officials worry that such extraordinary measures and cooperation may not last.Although one transportation official said drivers who didn't use car pools were committing "an anti-social act," about two-thirds of the motorists crossing the Golden Gate were alone, compared with the normal 70% rate.And some commuters, relieved by the absence of gridlock, were planning to return to their old ways.
Garry Kasparov went to combat Sunday with the world's most advanced chess computer and kicked it around -- symbolically, anyway -- like an old tin can. Playing black in the first game, the human champion maneuvered Deep Thought, known for its attacking prowess, into a totally passive position.Then he unleashed his own, unstoppable, attack.And in the second game, with Mr. Kasparov advancing ferociously as white, D.T. offered feeble resistance and lost even faster. Well, mankind can rest easier for now.Though almost everybody at the playing site had been looking for the 26-year-old Soviet to beat the Pennsylvania-based computer, he gave the machine a far worse drubbing than many expected.And when Mr. Kasparov strode into the playing hall, he called the outcome.As if he were Iron Mike, about to enter the ring with a 98-pound weakling, he declared: "I'll be able to beat any computer for the next five years." His strategy against D.T. was based on a thorough study of dozens of its games, he said, including its notorious whippings of the grandmasters Bent Larsen of Denmark and Robert Byrne of the U.S. Mr. Kasparov was underwhelmed. "The computer's mind is too straight, too primitive," lacking the intuition and creativity needed to reach the top, he said. The champion apparently was not worried at all about D.T.'s strong points.Its chief builder, Taiwan-born Feng-hsiung Hsu, nicknamed his brainchild "the Weasel" for its tactical flair at wriggling out of horrible positions.D.T. also has a prodigious and flawless memory, is utterly fearless, and couldn't be distracted by the sexy nude sculptures spread around the playing hall, in the New York Academy of Art.In fact, D.T. never left home, Carnegie Mellon University in Pittsburgh, but communicated with its human handlers by telephone link.They conceded that the odds favored Mr. Kasparov, but they put their hope in D.T.'s recently enhanced capacity for examining positions -- up to a million per second, from 720,000. But the handlers mistakenly stuck with silicon chips; they needed kryptonite.This became apparent as game one, a Sicilian Defense by Mr. Kasparov, proceeded.No human can examine millions of moves, but Mr. Kasparov, using his ineffably powerful brain, consistently found very good ones. After eight moves by each side, the board was the same as in a game in which Nigel Short of Great Britain fought the champion to a draw in 1980.But the computer didn't play Mr. Short's ninth move, a key pawn thrust, and its position deteriorated rapidly.Instead of castling, a standard measure to safeguard the king, D.T. made a second-rate rook maneuver at move 13; then it put a knight offside on move 16. "Only two classes of minds would think of this -- very weak human players, and computers," said Edmar Mednis, the expert commentator for the match, which was attended by hundreds of chess fans. By move 21, D.T. had fallen into a deep positional trap.It allowed Mr. Kasparov to exchange his dark-squared bishop for one of D.T.'s knights.Bishops usually are worth slightly more than knights, but in this case Mr. Kasparov was left with a very dangerous knight and D.T.'s surviving bishop was reduced to passivity.Indeed, it looked more like a pawn, a "tall pawn," as spectators snidely put it. Consistently, D.T. was over-optimistic about its chances, which it continually sized up, in numerical form.When most spectators thought its position hopeless, the computer thought it was only, in effect, one-half of a pawn down.Such evaluations met with derision, and kept the machine from resigning as soon as humans would have -- prompting more derision. While D.T. shuffled its king back and forth in a defensive crouch, Mr. Kasparov maneuvered the knight to a dominant outpost.He also launched a kingside storm, sacrificing a pawn to denude D.T.'s king.No amount of weasling could have saved this game for D.T.A piece down, the computer resigned. Now, with the crowd in the analysis room smelling figurative blood, the only question seemed to be how fast Mr. Kasparov could win game two.With the advantage of playing white (which moves first), Mr. Kasparov followed up cleverly against the computer's defense, a Queen's Gambit Accepted. As early as move six, Mr. Kasparov deviated from a well-known sequence of moves, developing a knight instead of making a standard bishop attack against the computer's advanced knight.This left the computer with a broader range of plausible replies -- and it immediately blundered by moving a queenside pawn, to the neglect of kingside development. "In a new position just after the opening, a computer will have serious problems," Mr. Kasparov said later.In such positions, he explained, "you have to create something new, and the computer isn't able to do that right now." After only 11 moves for each side, the computer's position was shaky.Greedily, it grabbed a pawn, at the cost of facing a brutal attack.And when a defensive move was called for, D.T. passed up an obvious pawn move and instead exposed its queen to immediate tactical threats.Mr. Kasparov remarked later that "even a weak club player" would have avoided the queen move. Now, after only a dozen moves, spectators were looking for a mating combination.On a demonstration board, emcee Shelby Lyman showed a quick kill initiated by a knight sacrifice; no spectator refuted this line of play.Mr. Kasparov's continuation was slower but, in the end, just as deadly.He won D.T.'s queen for two minor pieces and two pawns -- not enough compensation, in this position, to give the computer much hope. In a hopeless position, the computer resigned rather than make its 37th move.And Mr. Kasparov, to cheers and applause, marched back into the analysis room. "In both games I got exactly what I wanted," he said.What he had demonstrated, he added, is that there's more to chess than sheer calculation. Undeterred, D.T.'s handlers vowed to press on.Indeed, three of them will be building a successor machine for International Business Machines Corp. Promises Feng-hsiung Hsu: "In three years we'll mount a better challenge." Mr. Tannenbaum is a reporter in the Journal's New York bureau.
Reaching for that extra bit of yield can be a big mistake -- especially if you don't understand what you're investing in. Just ask Richard Blumenfeld, a New Jersey dentist who considers himself "a reasonably sophisticated investor." In May 1986, Dr. Blumenfeld gave Merrill Lynch & Co. about $40,000 for a federally insured certificate of deposit offering an effective yield of more than 9%. "It was a time when interest rates came down very rapidly," Dr. Blumenfeld recalls.Yields on five-year CDs at major banks were averaging about 7.45%, and 10-year Treasury notes were paying less than 8%.The CD seemed like a great deal. But nearly 3 1/2 years later, Merrill says the investment is worth about $43,000 -- an amount that represents an annual return of just over 2% on Dr. Blumenfeld's $40,000. The problem is that the CD he bought for a retirement plan wasn't a plain vanilla CD. Instead, his Merrill broker put him in a zero-coupon CD, which is sold at a deep discount to its face value.The difference between the price and the face value payable at maturity is the investor's return. More important, the CD was purchased on the secondary, or resale, market.Because the CD had an effective yield of 13.4% when it was issued in 1984, and interest rates in general had declined sharply since then, part of the price Dr. Blumenfeld paid was a premium -- an additional amount on top of the CD's base value plus accrued interest that represented the CD's increased market value. Now the thrift that issued the CD is insolvent, and Dr. Blumenfeld has learned to his surprise that the premium isn't insured under federal deposit insurance.The tip-off came when he opened a recent Merrill Lynch statement and found that the CD's "estimated current market value" had plummeted by $9,000 in a month. Several phone calls and a visit to his broker's office later, the dentist found out that the $9,000 drop represented the current value of the premium he paid when he bought the CD, and that the amount wasn't insured. "This is one thing I was never aware of," he says.He assumed that principal and interest were "fully insured up to $100,000," he adds. Dr. Blumenfeld isn't unique.Especially at times like these, when declining rates make it hard for investors to get yields they have come to expect, too many people chase the promise of above-market returns without fully appreciating the risk. "Yield greed often gets in the way of understanding things," says John Markese, research director of the American Association of Individual Investors, a Chicago-based educational group. "The biggest problem we have is that investors realize, after the fact, that they didn't understand what they were investing in." Dr. Blumenfeld concedes he didn't fully understand what he was buying.He says that he knew he was getting a zero-coupon CD and that he had previously invested in TIGRs (Treasury Income Growth Receipts), a type of zero-coupon Treasury security sold by Merrill Lynch.But he says he didn't understand he was buying the CD on the secondary market, and he contends his broker never fully explained the risks. The broker, Thomas Beairsto of Merrill Lynch's Morristown, N.J., office, refuses to discuss the matter with a reporter, referring inquiries to Merrill Lynch officials in New York.Those officials say there was full disclosure of the risks in a "fact sheet" sent to all CD investors with their confirmation of sale. The fact sheet, dated April 1986, says on page three: "If the price paid for a CD purchased in the secondary market . . . is higher than the accreted value in the case of zero-coupon CDs, the difference . . . is not insured . . . . Computations involving zero-coupon CDs are more complicated and you should discuss any questions you may have with your financial consultant." Dr. Blumenfeld says he doesn't remember the paragraph about premiums in the fact sheet he received and didn't realize part of what he paid was a premium. "I assumed I was buying a CD as a CD," he says. Nevertheless, Merrill Lynch has agreed that if the thrift that issued Dr. Blumenfeld's CD, Peoples Heritage Federal Savings & Loan Association in Salina, Kan., is liquidated and the CD terminated, the brokerage firm would cover the premium Dr. Blumenfeld paid. (Federal deposit insurance would pay principal and interest accrued to the date of liquidation, to a maximum of $100,000.) "It's not a blanket commitment, it's a case-by-case situation," says Albert Disposti, a managing director of Merrill Lynch Money Markets Inc. "There's a question whether brokers at the time were fully aware" of the risks. "We weren't sure that full disclosure, as we wanted it, was being made." Merrill Lynch says it's impossible to estimate how many investors are in Dr. Blumenfeld's situation, although it says the firm has received only one other complaint about premiums on the secondary market in three years.Merrill Lynch now provides credit rating information about the institutions whose CDs it sells, which it didn't provide in 1986. Zero-coupon CDs are only a small portion of the $1 trillion-plus in CDs outstanding, and those purchased on the secondary market are an even smaller part of the total.Merrill Lynch estimates that fewer than 10 financial institutions currently issue zero-coupon CDs.Still, there are several billion dollars of zero-coupon CDs with various maturities outstanding. Because of the tax consequences of zero-coupon investments -- income tax is payable in the year interest is accrued, although interest isn't actually paid until maturity -- zero-coupon CDs are usually sold for tax-advantaged accounts to finance things like retirement and children's education.Most zero-coupon CDs are in maturities of six to nine years, and they usually double in value by maturity. But investors who bought zero-coupon CDs in the secondary market aren't the only ones who may be surprised to learn the full amount of their investments isn't insured.People who paid a premium for standard CDs purchased on the secondary market could also find that those premiums aren't insured if the institutions that issued the CDs failed.However, those premiums are usually far smaller than on zero-coupon CDs, and the simpler pricing structure of a standard CD makes it more apparent when a premium is paid. Whatever the case, a Merrill Lynch spokesman emphasizes, investors shouldn't have to worry about the uninsured premium issue, unless the bank or thrift that issued the CD is closed and its deposits paid off before maturity or transferred to another institution at a lower rate. Dr. Blumenfeld says he's satisfied that his problem has been resolved.And he says he's learned a lesson: "You always have to watch out for yourself.No one else will watch out for you."
Americans are drinking less, but young professionals from Australia to West Germany are rushing to buy premium-brand American vodka, brandy and other spirits.In particular, many are snubbing the scotch preferred by their parents and opting for bourbon, the sweet firewater from the Kentucky countryside. With U.S. liquor consumption declining steadily, many American producers are stepping up their marketing efforts abroad.And those efforts are paying off: Spirits exports jumped more than 2 1/2 times to $157.2 million in 1988 from $59.8 million in 1983, according to the Distilled Spirits Council of the U.S., a trade group. "Spirits companies now view themselves as global marketers," says Michael Bellas, president of Beverage Marketing Corp., a research and consulting firm. "If you want to be a player, you have to be in America, Europe and the Far East.You must have world-class brands, a long-term perspective and deep pockets." The internationalization of the industry has been hastened by foreign companies' acquisitions of many U.S. producers.In recent years, for example, Grand Metropolitan PLC of Britain acquired Heublein Inc., while another British company, Guinness PLC, took over United Distillers Group and Schenley Industries Inc. But the shift has also been fueled by necessity.While premium-brand spirits like Smirnoff vodka and Jack Daniel's whiskey are riding high in the U.S., domestic spirits consumption fell 15% to 141.1 million cases in 1988 from 166 million cases in 1979. In recent years, growth has come in the foreign markets.U.S. brandy exports more than doubled last year to 360,000 proof gallons, a standard industry measure, according to Jobson Beverage Alcohol Group, an industry association.Exports of rum surged 54% to 814,000 proof gallons.Mexico is the biggest importer of both rum and brandy from the U.S. Japan, the world's third-largest liquor market after the U.S. and Britain, helped American companies in April when it lowered its tax on imported spirits and levied a tax on many domestic products.California wineries, benefiting from lowered trade barriers and federal marketing subsidies, are expanding aggressively into Japan, as well as Canada and Great Britain.In Japan, the wineries are promoting their products' Pacific roots and courting restaurant and hotel chefs, whose recommendations carry weight. In Australia, Britain, Canada and Greece, Brown-Forman Corp. has increased its marketing of Southern Comfort Liqueur.Using cinema, television and print ads, the company pitches Southern Comfort as a grand old drink of the antebellum American South. The biggest foreign inroads, though, have been made by bourbon.While U.S. makers of vodka, rum and other spirits compete against powerhouses abroad, trade agreements prohibit any other country from making bourbon. (All bourbon comes from Kentucky, though Jack Daniel's Tennessee whiskey often is counted as bourbon because of similarity of taste.) Moreover, just as vodka has acquired an upscale image in the U.S., bourbon has become fashionable in many foreign countries, a uniquely American product tied to frontier folklore.How was the West won?With a six-shooter in one hand and bourbon in the other. "We imagine with bourbon the Wild West, Western motion pictures and gunmen appearing," says Kenji Kishimoto, vice president of Suntory International Corp., a division of Suntory Ltd., Japan's largest liquor company.Suntory distributes Brown-Forman bourbons in Japan. Bourbon makes up just 1% of world-wide spirits consumption, but it represented 57% of U.S. liquor exports last year, according to Jobson; no other category had more than 19%.Big U.S. distillers are fiercely vying for this market, which grew to $77 million last year from $33 million in 1987, according to government figures. Jim Beam Brands Co., a division of American Brands Inc., is the leading exporter of bourbon and produces 10 other types of liquor.The company says it will increase its international advertising 35% in 1990, with bourbon representing most of that amount. Guinness's Schenley Industries unit has increased its TV advertising in Japan and has built partnerships with duty-free shops throughout Asia, enabling it to install prominent counter displays.The company's I.W. Harper brand is the leading bourbon in Japan, with 40% of the market. Bourbon exporters have succeeded in Japan where other industries have failed, avoiding cultural hitches in marketing and distribution by allying themselves with local agents.Jim Beam Brands has a distribution partnership with Nikka Whiskey Co., a distiller.Seagram Co., which exports Four Roses bourbon, has such a link with Kirin Brewery Co. Some bourbon makers advertise abroad as they do at home.To promote Jack Daniel's overseas, Brown-Forman uses the same photos of front porches from Lynchburg, Va., and avuncular old men in overalls and hightops. Jim Beam print ads, however, strike different chords in different countries.In Australia, land of the outback, a snapshot of Jim Beam lies on a strip of hand-tooled leather.West Germans get glitz, with bourbon in the foreground and a posh Beverly Hills hotel in the background.Ads for England are artsy and irreverent.One ad features a huge robot carrying a voluptuous woman in a faint.The tagline: "I only asked if she wanted a Jim Beam."
Capital Cities/ABC Inc. 's net income rose 29% on a modest 9% increase in revenue in the third quarter, mainly on strong advertising demand at its ABC television network operation. Demand for ads also rose at the eight TV stations Capital Cities owns and at its 80%-owned ESPN sports cable channel. The broadcast and publishing company reported net climbed to $80.8 million, or $4.56 a share, from $62.6 million, or $3.55 a share, in the year-earlier period.Revenue reached $1.1 billion from $1.01 billion. In New York Stock Exchange composite trading yesterday, Capital Cities closed at $558.50, down $5. The broadcasting unit reported operating profit of $134.9 million, up 18% from the year-earlier $114.3 million.Publishing reported operating profit was $33.3 million, nearly flat with the year-before $33 million. Revenue at the broadcasting unit, consisting of the network and stations, advanced 11%, to $838 million from $752.9 million.The publishing unit reported revenue edged up 2.6% to $263.2 million from $256.6 million.Chairman Thomas S. Murphy cited Capital Cities' nine daily newspapers in explaining most of the gain.The parent also publishes weeklies, shopping guides and specialty magazines. For 1989's first nine months, Capital Cities net income grew 23% to $303.7 million, or $16.97 a share, from $246.9 million, or $14.43 a share.Revenue eased 0.3% to $3.45 billion from $3.46 billion. Last week, ABC unseated General Electric Co. 's National Broadcasting Co. unit as the No. 1 network, as rated by A.C. Nielsen Co. ABC has four shows in the top 10, including the top show, "Roseanne."
McDonald's Corp. said third-quarter earnings rose 14% on a hefty sales gain, but domestic franchisees apparently didn't partake of the improvement. The world's largest fast-food chain said net income rose to $217.9 million, or 59 cents a share, from $191.3 million, or 51 cents a share, a year ago.In the latest period, the company had an average of 370.8 million shares, 5.6 million shares below last year's level. Revenue rose 12% to $1.63 billion from $1.46 billion.Systemwide sales, which include sales at franchisee as well as company-owned stores, totaled $4.59 billion compared with $4.2 billion. But sales for U.S. franchisees were flat at best on a per-store basis despite weak 1988 figures.Compared with the first nine months of last year, average franchisee store sales this year were down nearly $3,200, reflecting a fierce discounting war among fast-food chains.Since McDonald's menu prices rose this year, the actual decline may have been more. McDonald's closed at $31.375, up $1, in New York Stock Exchange composite trading yesterday. While franchisees were having a tough time holding sales, McDonald's company-operated stores posted hefty gains for the nine months, with sales per company-operated unit rising $20,000.One analyst noted that the company often has better store locations than do its franchisees, thus aiding promotional efforts. On average in the latest nine months, company-operated units in the U.S. had $90,552 more in sales than did franchised outlets.There are more than three times as many franchised domestic outlets as there are company stores. Profit margins at U.S. company-owned stores in the quarter were up nearly 1%, which the company attributed in part to lower food costs.Prudential-Bache Securities analyst Leslie Steppel said reduced labor costs helped boost margins, although she doubted "that kind of performance is sustainable." Calling sales "still relatively soft," Ms. Steppel believes that in real terms, U.S. sales slipped 3 1/2% to 4% at company-operated stores in the quarter. Apparently acknowledging weaker U.S. sales systemwide, McDonald's vowed "to use our size and muscle to do all that is necessary to build the brand." Overseas, both franchisees and the company performed substantially better than a year ago.Third-quarter sales in Europe were exceptionally strong, boosted by promotional programs and new products -- although weaker foreign currencies reduced the company's earnings.McDonald's said that systemwide sales would have been $115 million greater had 1988 exchange rates remained in effect. "Going into the fourth quarter the sales comparison will be more difficult," predicted restaurant analyst Howard Hansen of Kidder, Peabody & Co. Reflecting better growth prospects abroad, McDonald's noted that as of Sept. 30 more stores were under construction overseas than a year ago, while the opposite was true for domestic expansion.At the end of the third quarter McDonald's had 10,873 units operating world-wide. In the nine months, earnings rose 12% to $555.6 million, or $1.49 a share, from $494.4 million, or $1.31 a share, a year earlier.Revenue rose 11% to $4.56 billion from $4.12 billion.
Designer Sandra Garratt filed for Chapter 7 Bankruptcy Code protection, saying that her cash flow had been cut off. The designer, whose line of modular, one-size-fits-all clothing has spawned a host of clones, has been in a dispute with her latest licensee, Jerell Inc. for several months. Ms. Garratt was the subject of a Wall Street Journal article in March. The designer's attorney, Molly Bartholow, said that Ms. Garratt was forced to start bankruptcy-law proceedings because Jerell began withholding her royalty payments last month. Jerell paid Ms. Garratt royalties for the line known as Multiples by Sandra Garratt, which are sold primarily through department stores.Ms. Garratt sued the Dallas apparel maker earlier this year, charging that Jerell developed and marketed clothing lines fashioned after her designs, in violation of their contract.That lawsuit is still pending. Jerell couldn't immediately be reached for comment. Ms. Garratt's assets and liabilities weren't disclosed.
Carnival Cruise Lines Inc. 's common stock was dragged down yesterday amid concerns that a bankruptcy filing by a Finnish shipbuilder would delay delivery of three big cruise ships. The Miami-based company's stock fell $1.75 yesterday to $20.75 a share in heavy American Stock Exchange composite trading.Early yesterday, Carnival said in a company statement that it had been "notified unofficially" that Waertsilae Marine Industries, the Finnish shipyard that is building its three new cruise ships, planned to file for bankruptcy.Officials at Carnival declined to comment. "There is just a tremendous amount of uncertainty about what the effect, if any, of all this is," said John P. Uphoff, an analyst at Raymond James Associates Inc. "I didn't even know that a company in a socialistic country could file for bankruptcy." Carnival said the "Fantasy," the first of the three $200 million ships that Carnival has on order, is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.That ship, which would carry about 2,050 passengers, would expand the capacity of Carnival's existing 14-ship fleet by 24%.The second ship, which is half-completed, is scheduled to be delivered in fall 1990, and the third in fall 1991. "There's a 99% chance that the Fantasy will be delivered close to schedule," said Caroline Levy, an analyst at Shearson Lehman Hutton Inc. "The others will probably be delivered as well, but Carnival will likely have to pay a higher price for them." She said the company could pay as much as 25% more for the ships. If the ships aren't delivered, however, it will likely have an effect on the company's earnings as soon as the 1990 fiscal year, which begins Dec. 1.Analysts said those estimates -- which range from about $1.80 a share to $1.95 a share -- are based on Fantasy being in operation in 1990.If the ship fails to arrive, those per-share earnings estimates could be trimmed 15 cents or more. Analysts weren't willing to speculate on how much money Carnival might lose through deposits.Normally, a company pays a portion of the total cost of a ship as it reaches various stages of construction.Carnival, for example, has already paid about $160 million of the total cost for Fantasy.Some analysts say this may give it the right to seize the ship if the situation warrants it. According to reports from Finland, Waertsilae Marine, 19%-owned by conglomerate Oy Waertsilae, filed for bankruptcy yesterday after the shipyard's contractors had started to demand bank guarantees.The shipyard disclosed in mid-August that it expected losses stemming from a series of unprofitable orders.
Eaton Corp. had a 26% drop in third-quarter profit mainly because of lower sales of truck parts, its largest and most profitable single business. Sales of medium and heavy-duty trucks continue to lag previous-year rates, leading Eaton to expect fourth-quarter net income to fall below year-earlier levels, said Stephen R. Hardis, vice chairman and chief financial and administrative officer.He declined to make a specific earnings estimate. Third-quarter net was $40 million, or $1.04 a share, from $54.4 million, or $1.47 a share, a year ago.Sales rose 2.8% to $864.1 million, from $840.4 million. The quarter net was below analyst expectations mainly because truck-parts sales didn't rebound in September from the summer doldrums as they usually do, said Patrick E. Sheridan, analyst with McDonald & Co. Mr. Sheridan, who had been expecting quarter profit of about $1.25 a share, says he is reducing his estimate for the year to the area of $5.70 a share, from his previous estimate of $6.10. Eli Lustgarten of PaineWebber Inc., who a couple of weeks ago reduced his 1989 estimate to $5.70 a share because of the weakening truck market, says he will make another cut to about $5.50 a share in light of the third-quarter report.He said Eaton's quarter profit margin on controls was lower than he anticipated. Eaton said sales of truck axles, transmissions and other parts fell 7.2% to $295 million.Sales of parts for cars and construction vehicles rose.Eaton doesn't provide profit figures separately for each category, but operating profit for vehicle parts as a group fell 26% to $51 million on an about 1% drop in sales to $488 million. Mr. Hardis said truck-fleet operators appear to be cautious about buying new trucks until they see how the economy behaves.The truck sales slowdown reflects the general slowing in sales of consumer goods, he said, and the latest reports show a slight improvement rather than any indication of a downward spiral. Operating profit from electrical and electronics controls, Eaton's other major business group, fell 11% to $32 million, despite a 7.7% increase in sales to $376 million.The company attributed the decline to weakness in the commercial-switch market in North America and in the European appliance-controls market. For the nine months, net -- including profit from discontinued operations both years and in 1988 an extraordinary charge of $17.7 million related to settlement of a lawsuit -- was $170.6 million, or $4.54 a share, up 5.8% from $161.3 million, or $4.32 a share, a year ago.Eaton earned from continuing operations $165.1 million, or $4.40 a share, down 7% from $177.5 million, or $4.76 a share, a year earlier. Nine-month sales were $2.79 billion, up 8.2% from $2.58 billion a year earlier. In New York Stock Exchange composite trading, Eaton closed at $57.50 a share, down $2.50.
Disappointing earnings news from some technology companies unnerved investors in the over-the-counter market, who sold shares of Apple Computer, Intel and many other computer-related concerns. The drop in those and other technology stocks contributed to an 0.7% slide by the Nasdaq composite index.It finished at 467.22, down 3.45.The nervousness about the technology stock outlook also hurt the Dow Jones Industrial Average, which slipped about 1%. Mostly because of the sell-off in technology stocks, the Nasdaq 100 Index of the OTC's largest non-financial issues dropped 4.58 to 457.52.The Nasdaq Financial Index of giant insurance and banking issues lost 2.38 to 458.32. Some traders said the sell-off of technology stocks on low volume reflected a lack of conviction by investors.But Charlie Howley, vice president in charge of OTC trading at SoundView Financial in Stamford, Conn., said the selling was orderly. "It's a quiet retreat," said Mr. Howley. "It's nothing dramatic, just a routine sell-off." Some of it was due to lower-than-expected earnings from leading companies, he said.But some of it also represented profit-taking by investors who have made big gains in some issues. Yesterday's volume of 117.2 million shares was far below last week's sizzling average of nearly 177 million.For October so far, daily volume is averaging 150.3 million, putting it on track to be the year's busiest month. Apple Computer, which reported lackluster earnings Friday, lost 1 1/4 to 46 3/4 on 1.1 million shares.Stratus Computer, which reported earnings late Friday that were in line with a disappointing forecast, eased 3/4 to 24 on 816,000 shares. Investors apparently didn't like the news from Rainbow Technologies either.It said net income was 17 cents a share in the third quarter, compared with 16 cents a share a year earlier.Rainbow's stock dropped 2 to 14 1/4. Other technology stocks that were weaker included Intel, which fell 1 1/4 to 33 1/2 on 1.9 million shares, Mentor Graphics, down 3/4 to 16 1/4 on 1.6 million shares, Sun Microsystems, which slipped 3/8 to 18 1/4, and MCI Communications, down 1 to 42 3/4.Microsoft, which last week rose to a record, fell victim to profit-taking, traders said, as it declined 2 1/8 to 83 1/8.Conner Peripherals was unchanged at 15. Among takeover stocks, Jefferson Smurfit jumped 1 1/4 to 42 1/2 after SIBV-MS Holdings said the price to be paid to Jefferson Smurfit's minority holders has been raised to $43 a share.The increase of $1.25 a share is being made to settle shareholder litigation relating to SIBV-MS's tender offer. SIBV-MS Holdings is a new company jointly owned by an affiliate of Jefferson Smurfit and a Morgan Stanley limited partnership.The Jefferson Smurfit affiliate, Smurfit International B.V., holds about 78% of the shares outstanding.These shares will be bought by SIBV-MS Holdings at $41.75 each after the acquisition of the minority shares. Another takeover target, LIN Broadcasting, eased 1/2 to 110 1/8 on 313,800 shares.LIN's suitor, McCaw Cellular Communications, dropped 1 to 40 on almost 350,000 shares. Some analysts say investors will begin paying more attention to earnings, partly in response to the latest round of disappointments.They say investors will favor companies that historically have posted annual earnings growth of 15% to 20%.That would be good news for the OTC market, some analysts say, because many small growth stocks are traded there. Michael R. Weisberg, partner in charge of research at Robertson Stephens & Co. in San Francisco, said some investors have already made the switch.The Robertson Stephens Index of 340 emerging growth stocks is up 23.1% for the year through Friday.The rise matches that of the Dow Jones industrials this year. "It's been a spectacular year for the emerging growth stock investor," Mr. Weisberg said.He predicted that the most popular growth companies will be those with "some kind of unique product or franchise" that makes them appear able to sustain their momentum.He puts the OTC market's Nellcor, Office Club and BizMart on the list. Nellcor, a maker of electronic patient monitoring systems, was up 3/4 to 16 7/8 on 258,000 shares yesterday, while retailing issue Office Club was unchanged at 10 3/4 on 65,200 shares.BizMart, another retailing stock, was off 3/8 to 8 1/4 on nearly 80,000 shares. Other favorites of growth-stock analysts and money managers also had a mixed session.Payco American, a credit collection concern, jumped 1 3/8 to 20 5/8 on volume of 93,000, and Mail Boxes Etc., a private postal services company, advanced 1/2 to 23 1/2 on volume of 64,000.But Legent, a systems software stock, was down 1/2 to 29 3/4 on 39,300 shares.Novell, a computer networking concern, fell 1 1/2 to 30 on 152,000 shares. Elsewhere, Valley National continued its slide, dropping 2 1/8 to 15 on 1.7 million shares.The Arizona banking concern is facing difficulties related to weakness in the real estate market in the state. Higher earnings helped some issues.Amgen rose 2 1/4 to 54 3/4 on almost 800,000 shares, and CVB Financial jumped 4 to 41 on only 1,000 shares.
Why can't we teach our children to read, write and reckon?It's not that we don't know how to, because we do.It's that we don't want to.And the reason we don't want to is that effective education would require us to relinquish some cherished metaphysical beliefs about human nature in general and the human nature of young people in particular, as well as to violate some cherished vested interests.These beliefs so dominate our educational establishment, our media, our politicians, and even our parents that it seems almost blasphemous to challenge them. Here is an example.If I were to ask a sample of American parents, "Do you wish the elementary schools to encourage creativity in your children?" the near-unanimous answer would be, "Yes, of course." But what do we mean, specifically, by "creativity"?No one can say.In practice, it ends up being equated with a "self-expression" that encourages the youngsters' "self-esteem." The result is a generation of young people whose ignorance and intellectual incompetence is matched only by their good opinion of themselves. The whole notion of "creativity" in education was (and is) part and parcel of a romantic rebellion against disciplined instruction, which was (and is) regarded as "authoritarian," a repression and frustration of the latent talents and the wonderful, if as yet undefined, potentialities inherent in the souls of all our children.It is not surprising that parents find this romantic extravagance so attractive. Fortunately, these same parents do want their children to get a decent education as traditionally understood, and they have enough common sense to know what that demands.Their commitment to "creativity" cannot survive adolescent illiteracy.American education's future will be determined by the degree to which we -- all of us -- allow this common sense to prevail over the illusions that we also share. The education establishment will fight against common sense every inch of the way.The reasons are complex, but one simple reason ought not to be underestimated. "Progressive education" (as it was once called) is far more interesting and agreeable to teachers than is disciplined instruction. It is nice for teachers to think they are engaged in "personality development" and even nicer to minimize those irksome tests with often disappointing results.It also provides teachers with a superior self-definition as a "profession," since they will have passed courses in educational psychology and educational philosophy.I myself took such courses in college, thinking I might end up a schoolteacher.They could all fairly be described as "pap" courses. But it is unfair to dump on teachers, as distinct from the educational establishment.I know many schoolteachers and, on the whole, they are seriously committed to conscientious teaching.They may not be among the "best and brightest" of their generation -- there are very few such people, by definition.But they need not be to do their jobs well.Yes, we all can remember one or two truly inspiring teachers from our school days.But our education proceeded at the hands of those others, who were merely competent and conscientious.In this sense, a teacher can be compared to one's family doctor.If he were brilliant, he probably would not be a family doctor in the first place.If he is competent and conscientious, he serves us well. Our teachers are not an important factor in our educational crisis.Whether they are or are not underpaid is a problem of equity; it is not an educational problem.It is silly libel on our teachers to think they would educate our children better if only they got a few thousand dollars a year more.It is the kind of libel the teachers' unions don't mind spreading, for their own narrow purposes.It is also the kind of libel politicians find useful, since it helps them strike a friendly posture on behalf of an important constituency.But there is not one shred of evidence that, other things being equal, salary differentials result in educational differentials.If there were such evidence, you can be sure you would have heard of it. If we wish to be serious about American education, we know exactly what to do -- and, just as important, what not to do.There are many successful schools scattered throughout this nation, some of them in the poorest of ghettos, and they are all sending us the same message.Conversely, there are the majority of unsuccessful schools, and we know which efforts at educational reform are doomed beforehand.We really do know all we need to know, if only we could assimilate this knowledge into our thinking. In this respect, it would be helpful if our political leaders were mute, rather than eloquently "concerned." They are inevitably inclined to echo the conventional pap, since this is the least controversial option that is open to them.Thus at the recent governors' conference on education, Gov. Bill Clinton of Arkansas announced that "this country needs a comprehensive child-development policy for children under five." A comprehensive development policy for governors over 30 would seem to be a more pressing need.What Gov. Clinton is advocating, in effect, is extending the educational system down to the pre-kindergarten years.Whether desirable or not, this is a child-care program, not an educational program.We know that very early exposure to schooling improves performance in the first grade, but afterward the difference is quickly washed away. Let us sum up what we do know about education and about those education reforms that do work and don't work: -- "Parental involvement" is a bad idea.Parents are too likely to blame schools for the educational limitations of their children.Parents should be involved with their children's education at home, not in school.They should see to it that their kids don't play truant; they should make certain that the children spend enough time doing homework; they should scrutinize the report card.If parents are dissatisfied with a school, they should have the option of switching to another. -- "Community involvement" is an even worse idea.Here, the experience of New York City is decisive.Locally elected school boards, especially in our larger cities, become the prey of ambitious, generally corrupt, and invariably demagogic local politicians or would-be politicians.New York is in the process of trying to disengage itself from a 20-year-old commitment to this system of school governance, even as Chicago and other cities are moving to institute it. -- In most states, increasing expenditures on education, in our current circumstances, will probably make things worse, not better.The reason is simple: Education takes place in the classroom, where the influence of money is minimal. Decades of educational research tell us unequivocally that even smaller classes have zero effect on the academic performance of the pupils -- though they may sometimes be desirable for other reasons.The new money flows into the already top-heavy administrative structure, which busies itself piling more and more paper work on the teachers.There is neither mystery nor paradox in the fact that as educational expenditures (in real terms) have increased sharply in the past quarter-of-a-century -- we now spend more per pupil than any other country in the world -- educational performance has declined.That is the way the system works. -- Students should move up the educational ladder as their academic potential allows.No student should be permitted to be graduated from elementary school without having mastered the 3 R's at the level that prevailed 20 years ago.This means "tracking," whose main purpose is less to permit the gifted youngsters to flourish (though that is clearly desirable) than to ensure that the less gifted get the necessary grounding for further study or for entering the modern world of work.The notion that tracking is somehow "undemocratic" is absurd.The purpose of education is to encourage young men and women to realize their full academic potential.No one in his right mind actually believes that we all have an equal academic potential. -- It is generally desirable to use older textbooks -- many of them, alas, out of print -- rather than newer ones.The latter are modish, trendy, often downright silly, and at best insubstantial.They are based on dubious psychological and sociological theories rather than on educational experience.One of the reasons American students do so poorly in math tests, as compared with British, French, German or Japanese students, is the influence of the "New Math" on American textbooks and teaching methods. Anyone who wants to appreciate just how bizarre this situation is -- with students who can't add or subtract "learning" the conceptual basis of mathematical theory -- should read the article by Caleb Nelson (himself a recent math major at Harvard) in the November American Spectator. -- Most important of all, schools should have principals with a large measure of authority over the faculty, the curriculum, and all matters of student discipline.Study after study -- the most recent from the Brookings Institution -- tells us that the best schools are those that are free of outside interference and are governed by a powerful head.With that authority, of course, goes an unambiguous accountability.Schools that are structured in this way produce students with higher morale and superior academic performance.This is a fact -- though, in view of all the feathers that are ruffled by this fact, it is not surprising that one hears so little about it. Mr. Kristol, an American Enterprise Institute fellow, co-edits The Public Interest and publishes The National Interest.
In Poland's rapid shift from socialism to an undefined alternative, environmental issues have become a cutting edge of broader movements to restructure the economy, cut cumbersome bureaucracies, and democratize local politics. Initial steps were taken at Poland's first international environmental conference, which I attended last month.The conference, held in Lower Silesia, was co-sponsored by the Environment Ministry, the Rockefeller Brothers Fund, and the Polish Ecological Club, and was attended by 50 Poles from government and industry, as well as Hungarians, Czechs, Russians, Japanese and Americans. The conference was entitled "Economic Mechanisms for Environmental Protection," a significant departure from East Bloc usage, which recognizes only one economic mechanism -- central planning -- to direct industrial behavior.Even more remarkably, it focused on emissions trading and similar market approaches to address pollution, notwithstanding Poland's lack of functioning markets. Why did East Bloc participants unanimously endorse market-based pollution approaches?The answer lies both in the degraded environment of these countries and the perceived causes of that degradation. Like other East Bloc countries, Poland possesses environmental laws more honored in their breach than in their observance. According to a detailed report by Zbigniew Bochniarz of the University of Minnesota's Hubert Humphrey Institute, 27 areas containing a third of Poland's population are regarded as "ecological hazards" due to multiple violations of standards.Norms are consistently exceeded at 60% of nitrogen oxide monitoring sites and 80% of those for dust and soot emissions.Four-fifths of Poland's soils have become highly acidified; 70% of its southern forests are projected to die by century's end.Between 1965 and 1985, Polish waters fit for human consumption dropped from 33% to 6% of all surface waters, while those unfit even for industry use nearly doubled. Poland produces about 20 times more soot and five times more sulfur dioxide and solid waste per unit of gross national product than does Western Europe.Its mortality rate for males over 35 is about 50% higher than West Germany's, and 50% higher in hazard areas than the national average.Since 1978, average annual growth rates for most pollutants have outstripped the growth of GNP. Conference participants saw these effects as flowing directly from (a) Marxist devaluation of environmental resources, which are not produced by labor; (b) planned economies' inability to control pollution where enterprises are state-owned and penalties are paid by the government; and (c) the continuing Stalinist emphasis on heavy industry for economic development, producing a far heavier and more wasteful use of energy and natural resources than in the West.They repeatedly noted that environmental progress could not be secured without true ownership, genuine competition based on market factors, and the risk of bankruptcy if a business makes the wrong decisions. The solutions they formally proposed included lead/sulfur taxes, conservation and recycling incentives, reforestation offsets, transferable pollution permits, an ecological bank to finance pollution-reduction credits, and debt-for-environment swaps.But their most fundamental recommendation was to separate industry from the state, making it fully accountable for pollution control. A revolution takes more than conference manifestos.Indeed, skepticism was amply captured by a joke told by Poles at the conference: "The world must be coming to an end.The Russians are talking peace.The Palestinians are talking elections.And the Poles are engaged in commerce." But the implications of such a shift to market approaches go well beyond the fact that Poland is already working on nationwide emissions trades to reduce smelter pollution, or that the Soviets plan to introduce marketable pollution permits in some republics next year.Those implications include: -- Privatization.Faced with a $40 billion foreign debt and skyrocketing inflation, Poland must privatize industry and eliminate subsidies to stabilize its currency and qualify for international assistance.Market-based pollution control may consume some capital that would otherwise purchase state industries.But it could also accelerate "marketization" by reinforcing industrial accountability, breaking up state monopolies, giving managers a stake in solutions, and ensuring that modernization is not reversible for failure to address environmental effects. -- Least-cost solutions.As conferees noted, scarce capital means the costs of control must be minimized through a broad menu of compliance choices for individual firms.That means simple, clear rules that secure the first large blocks of reduction, deferring more complex issues such as risk.It also means use of quantity-based pollution limits such as transferable permits, rather than price-based limits such as effluent fees.That's because quota-trained managers will likely respond better to quantity than to price signals. -- Creative financing.Even least-cost environmental solutions will require billions of dollars.New types of financing must make funds available without draining Poland's hard-currency reserves. -- Democratization.East Bloc pollution data typically have been state secrets.While Polish data have been freely available since 1980, it was no accident that participants urged the free flow of information.For once information flows, public participation follows and repression becomes difficult to reimpose. -- Global reciprocity.One participant prematurely declared that America has had a free market in goods but a planned economy for environmental protection, while Poland represents the opposite.His point: It will be increasingly difficult for the U.S. to cling to command-and-control measures if even the East Bloc steps to a different drummer. At the moment, Poland resembles 19th-century Pittsburgh more than a modern industrial society -- with antiquated production, inadequate environmental management, and little ecological awareness.But the continuing pressures for free-market economics suggest the conference's vision was not all fantasy. Mr. Levin, former head of EPA's regulatory reform staff, adapted this from his November column for the Journal of the Air and Waste Management Association.
International Business Machines Corp. unveiled a broad strategy to tackle the biggest problem that manufacturers face when computerizing their operations: Most machines can't talk to each other. The company unveiled more than 50 products, mostly software, that are designed to integrate the three areas of a manufacturing operation -- the plant floor, design operations and production planning.The aim, ultimately, is to increase the flow of information into a manufacturer's main computer network for use in business planning, marketing and other operations. Manufacturers have already spent so heavily on automation that they are one of the computer industry's leading revenue sources.But many manufacturers find that communication between different computers has been rendered nearly impossible by the babel of computer languages used by different machines, including robots and machine tools. IBM's announcement, which was expected and will formally be made to customers today, also marks an attempt to gain credibility on the plant floor, where Digital Equipment Corp. has long dominated and where Hewlett-Packard Co. has recently gained market share. Consultants have said that it will take a while for all the pieces of the IBM strategy to fall into place, even though the specific products IBM unveiled will generally be available by the end of the first quarter. Sam Albert, a consultant in Scarsdale, N.Y., said that in the past IBM has developed broad software strategies only for problems that crossed industry lines.He said he believes IBM's decision to invest this sort of effort into a single industry showed that it was getting serious about understanding customers' problems and wasn't just selling technology.He said he expects IBM to unveil similar strategies for other industries in coming months. IBM's push is also unusual in its approach to marketing.Rather than just send out marketing people to knock on customers' doors, IBM is making several hundred of its own manufacturing people available to discuss specific needs.IBM's manufacturing staff also will be able to provide software that IBM has developed internally and will be able to form teams with a customer to jointly solve manufacturing problems. IBM can obviously bring its expertise to bear on problems related to computer manufacturing, but it could also help customers on software to deal with such things as changes in engineering documents. "We may not have every manufacturing problem, but we have most," said George Conrades, IBM's top marketing official.
Japan's Big Four securities firms posted first-half unconsolidated results that mirrored softer performance as a result of slower turnover on the Tokyo Stock Exchange during July and August. Figures for the period ended Sept. 30 for the four largest brokerage firms -- Nomura Securities Co., Daiwa Securities Co., Yamaichi Securities Co. and Nikko Securities -- also reflected a changeover to a fiscal year ending March 31, replacing the 12-month term formerly finishing Sept. 30. As a result, brokerage house officials said, appropriate comparisons from the same period a year earlier were unavailable.Operating profit, pretax profit and net income results, however, were provided for the immediately preceding six-month period. The statistics follow a year-on-year rebound in consolidated and unconsolidated results in the full fiscal year ended in March 1989, recovering from dismal results in the prior fiscal year as a result of the October 1987 stock market crash. Nomura said its pretax profits inched up 0.9% to 248.91 billion yen (US$1.75 billion) from 246.60 billion yen in the six months ended March 31. Total operating profit fell 3.1% to 486.1 billion yen from 501.61 billion yen.Net income, however, rose 3.7% to 107.87 billion yen from 103.98 billion yen.Per-share net rose to 55.10 yen from 54.51 yen. Daiwa said its pretax profits surged 9.6% to 171.04 billion yen from 156.12 billion yen in the preceding six-month term. Operating profit rose 5.5% to 332.38 billion yen from 315.12 billion yen.Net income jumped 21% to 79.03 billion yen from 65.53 billion yen.Per-share net rose to 62.04 yen from 51.50 yen. Yamaichi said its pretax profit increased 8.9% to 117.94 billion yen from 108.28 billion yen.Operating profit rose 5.3% to 279.75 billion yen from 265.79 billion yen.Net income surged 21% to 55.59 billion yen from 46.02 billion yen.Per-share net rose to 47.46 yen from 39.31 yen. Nikko's pretax profit rose 1.6% to 130.25 billion yen from 128.19 billion yen. Operating profit rose 4% to 293.29 billion yen from 282.08 billion yen.Net income rose 23% to 63.52 billion yen from 51.65 billion yen.Per-share net rose to 44.08 yen from 36.13 yen.
Eagle Clothes Inc., which is operating under Chapter 11 of the federal Bankruptcy Code, said it reached an agreement with its creditors. Under the accord, Albert Roth, chairman and chief executive officer, and Arthur Chase, Sam Beigel, and Louis Polsky will resign as officers and directors of the menswear retailer.Mr. Roth, who has been on leave from his posts, will be succeeded by Geoffrie D. Lurie of GDL Management Inc., which is Eagle's crisis manager.Mr. Lurie is currently co-chief executive.Arnold Levine, acting co-chief executive, will continue as senior vice president and a board member. Eagle also said it received a commitment for as much as $8 million in financing from Norfolk Capital Group Inc.In addition, a Norfolk affiliate, York Capital Inc., will purchase all of the interests of Eagle's secured lenders, which total $11.5 million, and guarantee as much as $8.2 million in payments to Eagle's unsecured creditors.A committee representing the unsecured creditors agreed to accept 24 cents on the dollar, Eagle said. The plan would extend the period under which Eagle has the exclusive right to file a reorganization plan.It would extinguish all of Eagle's existing capital stock and issue new stock to York as sole holder. A bankruptcy court hearing is set for Nov. 3 on these accords. In its bankruptcy-law petition, filed in U.S. Bankruptcy Court in Manhattan, Eagle said its problems began in 1987 and early 1988 when its then-senior lender, Bankers Trust Co., reduced its credit line.In September 1988, Eagle acquired Biny Clothing Inc., a closely held New York chain operated under the Bonds name.Eagle's management retired and Biny's management took control of the company. At the time, Eagle reached a new credit agreement with Bankers Trust and with Bank Leumi Trust Co. of New York for $8 million, and a new subordinated debt accord with First Century Partners and Biny management for $2 million.But Eagle said the financing was insufficient and sales during the past fiscal year sagged. Under Chapter 11, a company operates under protection from creditors' lawsuits while it works out a plan to pay debts.
The tougher new regulations under the savings-and-loan bailout law are accelerating the thrift industry's shrinking act. Largely to meet tougher new capital requirements, thrifts reduced their assets $13.4 billion in August, by selling such assets as mortgage-backed securities and loans. Industry assets as of Aug. 31 were $1.31 trillion, the lowest since August 1988. As thrifts sell assets to improve their capital-to-asset ratio, as required under the new law passed in August, they must also reduce liabilities, such as deposits.As interest rates paid depositors were lowered, thrift withdrawals exceeded deposits by $5.1 billion, not including interest credited to accounts. It was the third consecutive month in which thrifts shed assets to increase the size of their capital in relation to their assets, the Office of Thrift Supervision said.The asset shrinkage was particularly concentrated in several large California institutions. "The downsizing of the thrift industry is well under way," said Bert Ely, an industry consultant in Alexandria, Va. "This suggests the bailout law is having a more dramatic effect than anyone would have imagined so soon." James Barth, an economist with the Office of Thrift Supervision, also attributed some of the outflow to seasonal factors. "August is a month when people are paying school tuition," he said. "That and adjustment to the new law were the biggest factors in the industry." Not including thrifts under government conservatorship, S&Ls reduced their assets by $10.1 billion from the previous month, and deposit outflows totaled $3.9 billion. For the 264 insolvent thrifts under government management at the end of August, assets declined by $3.3 billion and withdrawals exceeded deposits by $1.2 billion. Thrifts raised capital mostly by selling mortgages and mortgage-backed securities, which were reduced by $7.8 billion in August from the prior month.As of Aug. 31, thrifts held $185 billion in mortgage-backed securities. The deposit numbers for August marked a swing back to huge outflows after a July net deposit inflow of $54 million -- the only net inflow in more than a year.Deposits aren't expected to exceed withdrawals in the foreseeable future, as the industry continues to shrink. "I think we are going to see deposit shrinkage continue, unless we see big changes in rates," Mr. Ely said. For the first eight months of 1989, thrifts' withdrawals exceeded deposits by $44.5 billion.For the prior year, deposits exceeded withdrawals by $8.8 billion.
The estimates of real gross national product prepared by the Bureau of Economic Analysis in the Department of Commerce significantly understate the rate of economic growth.Since the bureau's estimates for the business sector provide the numerator for the productivity ratios calculated by the Department of Labor, underestimated growth rates artificially depress official productivity statistics. If this thesis is correct, it has important implications for macroeconomic policies: It may lower the sense of urgency behind efforts to enact tax incentives and other measures to increase the rate of growth in productivity and real GNP.It would also affect the perceptions of the board of governors of the Federal Reserve System, and the informed public generally, as to what constitutes a reasonable degree of price stability. In the early 1980s, I predicted a significant acceleration in productivity growth over the rest of the decade.This forecast was based on the apparent reversal of most of the negative forces -- such as demographic changes, the oil shock and accelerating inflation -- that had reduced productivity gains in the 1970s.There has indeed been more than a one percentage point improvement in productivity growth since 1981.But I had expected more, which is one reason I began looking at evidence suggesting defects in the official output estimates.The evidence does not clearly support the view that the downward bias in output growth has become greater during the 1948-89 period, but all I am claiming is that the growth trend is understated. (It is, however, possible, that further study will reveal increasing bias.) This bias is in no way deliberate.The understatement of growth is due largely to the conservative expedients adopted to deal with deficiencies in basic economic data. The first of three major sources of error is the use of labor input estimates (mainly employment or hours) instead of output estimates for those sectors, such as governments, paid household services and private non-profit institutions, where there are difficulties in assembling output data.This means that no allowance is made for possible increases in output per unit of labor.In an unrelated program in which the Labor Department does estimate output per employee for more than two-thirds of federal civilian employees, it found an average annual rate of productivity improvement of 1.7% during the 1980s.Even if it is assumed that productivity rose no more than half as quickly in the rest of the nonbusiness sector, this Labor Department estimate indicates a downward bias in the real GNP estimates of 0.2 percentage point a year, on average. The federal productivity estimators use labor input, rather than output, data for their calculations of half of private financial and service industries as well.Independent estimates of output in those industries, including one by the Department of Labor for banking, suggests that productivity in finance and services appears to have risen by an average of at least 1.5% a year between 1948 and 1988.Because finance and services contribute 10% to final business product, missing these productivity improvements depresses the overall growth rate by 0.15% a year. The second source of error in growth statistics is the use of inappropriate deflators to adjust for price changes.I estimate that these mismeasurements as detailed by Martin N. Baily and Robert J. Gordon add a further 0.12 percentage point to the downward bias in the growth rate of real business product. Finally, the official estimates understate growth because they make inadequate allowance for improvements in quality of goods and services.In 1985, a new price index for computers adjusted for changes in performance characteristics was introduced, and that resulted in a significantly larger increase in real outlays for durable goods than the earlier estimates had showed.Since then, further research argues that failure to take account of quality improvements has contributed a total of at least 0.26 percentage point to the downward bias in the growth rate. In sum, the biases ennumerated above indicate a 0.7 percentage point understatement in growth of total real GNP.For the private domestic business economy, the bias was a bit over 0.5 percentage point.In other words, the growth rates of both total GNP and real private business product per labor hour have been underestimated by about 20%. Mr. Kendrick is professor emeritus of economics at George Washington University.He is co-author of "Personal Productivity: How to Increase Your Satisfaction in Living" (M.E.Sharp, 1988).
Union Carbide Corp. said third-quarter net income plunged 35% from a year earlier on weakness in the company's mainstay chemicals and plastics business. Net was $139 million, or 98 cents a share, for the quarter, compared with $213 million, or $1.56 a share, a year ago. Sales were $2.14 billion, up 1.6% from $2.11 billion the previous year. Carbide, like other companies with a heavy reliance on the so-called commodity end of the chemicals industry, was expected to post earnings sharply lower than in an exceptionally strong 1988 third quarter.But the company's latest quarter was a few pennies a share lower than the more pessimistic projections on Wall Street. "It certainly wasn't a disaster, but it does show weakness" in some of the company's chief markets, said George Krug, a chemicals-industry analyst at Oppenheimer & Co. In New York Stock Exchange composite trading, Carbide closed at $24.50 a share, down 50 cents. Prices for polyethylene, a common plastic and an important Carbide product, started to fall early this year; the slide accelerated in the third quarter as buyers continued to trim inventories.Prices also fell for ethylene oxide and glycols, products used in making antifreeze. Some producers of polyethylene, figuring the inventory reductions are near an end, have announced price boosts.The first real test of whether prices have hit bottom may come in the next several weeks, when the new prices become effective.A Carbide spokesman said "the conditions are right for the increase to hold." For the third quarter, operating profit from Carbide's chemicals and plastics business fell to $238 million from $352 million a year ago, before accounting for taxes and interest expense.Operating profit from carbon products, such as graphite electrodes, also declined, to $6 million from $20 million.In the industrial-gases segment, operating profit climbed to $87 million from $58 million. The latest quarter included a gain of about $62 million on the sale of the company's urethane polyols and propylene glycols businesses.Propylene glycols are used in making personal-care products such as shampoo, and urethane polyols are used in making the polyurethane foam found in furniture cushioning and other products. That gain was mostly offset by a loss of about $55 million from a write-down in its polysilicon business.Polysilicon is used in making integrated circuits. For the nine months, net totaled $526 million, or $3.74 a share, up 5% from $501 million, or $3.71 a share, a year ago. Sales rose 7.7% to $6.66 billion from $6.19 billion.
At least 10 states are resisting Drexel Burnham Lambert Inc. 's nationwide effort to settle its legal troubles, and some might instead try to revoke the firm's license to sell securities within their borders. The reluctance of some states to let Drexel off the hook could hamper the firm's attempts to polish its image after its guilty plea to six felonies last month, say several people familiar with the discussions. Up to now, Drexel has made a rapid-fire series of settlements with 25 states and the commonwealth of Puerto Rico.Just yesterday, New Hampshire announced it made a $75,000 settlement with Drexel, a record-tying fine for a securities-law matter in that state.These states have been entering into settlements with Drexel as part of the firm's efforts to operate freely anywhere in the U.S. despite its record as an admitted felon. But individuals familiar with the generally successful Drexel talks say the firm is meeting resistance from some big states, including New Jersey, New York, California, Pennsylvania, Connecticut and Missouri.Officials in some of these states say they don't want to simply accept the settlements offered by Drexel.They question if Drexel is getting easier treatment than the many small penny-stock firms whose brokerage licenses are routinely revoked. Drexel has to settle with state securities regulators in the wake of its criminal guilty plea and a related civil settlement with the Securities and Exchange Commission that includes payment of $650 million in penalties.These stem from a two-year federal investigation of insider trading and securities fraud on Wall Street. Ohio, the District of Columbia, Tennessee and Illinois have been less resistant to Drexel than the other six states, but nonetheless have refused to settle so far, say those familiar with the discussions. Drexel says it doesn't expect any of its state brokerage licenses will be revoked, and even if some are, its securities business wouldn't be directly hurt.It already has sold its retail, or individual-investor, brokerage network; securities firms don't need brokerage licenses for non-retail activities such as investment banking. Still, if nothing else, a revoked brokerage license could be a burden because it must be disclosed in many of the transactions in which Drexel could be involved. Securities regulators praise Drexel for its energetic effort, led by government-approved general counsel Saul S. Cohen, to settle its legal problems with the states.But they disagree about the message these settlements give to the public. "There was a lot of internal debate about that specific issue," said Susan Bryant, Oklahoma's chief securities regulator and president of the North American Securities Administrators Association, which drafted a voluntary settlement plan for the states with Drexel.The question, she said, is whether Drexel should be allowed to pay and move on, or "whether you should (simply) revoke the license when someone is convicted of a felony." While Ms. Bryant's state went ahead and accepted Drexel's settlement offer of $25,000, she said: "I don't have any argument with those who came to different conclusions.I can see both sides." Similarly, Alfred Rubega, New Hampshire's director of securities regulation, said his state hadn't received any complaints about Drexel, so it really couldn't press the issue.Still, "I understand the reasons" that other states are holding out, he said. Mr. Cohen, the Drexel general counsel, said, "I don't think, as we say in investment banking, that `by the end of the day' we'll be losing any licenses." Asked about states that are taking a hard line, he said, "There are states that have asked for additional information, which we are providing to them." Mr. Cohen said more than $2.8 million has been paid to 26 states and that Drexel still expects to pay out a total of $11.5 million.By the end of this week, Drexel should have another three to four settlements, Mr. Cohen said. "The rate we're going, I think that by the end of the month, we're looking to have a total of 30 to 35," he said. That total would be important for Drexel.The investment bank has previously announced that as part of its punishment it would create an independent foundation to promote ethical behavior in the securities industry.A proviso to that promise is that a minimum of 35 states reach settlement agreements before next Tuesday. There are, according to several securities commissioners, at least 16 states that are either close to settlements with Drexel or who don't appear opposed to settling. Drexel's proposed state fines have been based on a state's population and on the size of Drexel's business in the state. New Jersey, for example, was asked to accept $300,000, but refused.The state isn't ruling out revoking Drexel's brokerage license.The state can also bar Drexel as an investment adviser.State officials won't describe their position in detail, but James McLelland Smith, state securities chief, said: "We really are still looking at it and have informed (Drexel) that the proposal is really not sufficient for settlement." Connecticut already has issued a "notice of intent" to revoke Drexel's brokerage license.It is one of the states that have met with Mr. Cohen and asked for additional information about investors' accounts and other matters. "This particular issue goes to the very integrity of the capital-formation market," state Banking Commissioner Howard Brown said.A banking department spokesman added: "Commissioner Brown doesn't feel that money alone is the issue here." Particularly touchy are the cases of New York, which is Drexel's base, and California, the base of Drexel's highly profitable junk-bond operation that led to the firm's legal difficulties.Neither state has settled, and officials in the two states won't discuss their reasons for not doing so.But Drexel has made it clear it could mount a significant legal battle in each state if its license is revoked, according to state officials. Ms. Bryant, the head of the state securities group, said Drexel has done a better job of settling with the states than E.F. Hutton did after its guilty plea to a massive check-kiting scheme several years ago.Still, she said, Drexel's trouble with some states isn't a bad thing. "This process should point out that it's not going to be easy for a firm that's convicted of a felony to immediately jump back into the retail business," Ms. Bryant said. "We need to have somebody worried so they don't do this again." These are the 26 states, including the commonwealth of Puerto Rico, that have settled with Drexel: Alaska, Arkansas, Delaware, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Utah, Vermont, Washington, Wyoming and Puerto Rico.
Time Warner Inc. reported a third-quarter net loss of $176 million, or $2.88 cents a share, reflecting acquisition costs for a 59.3% stake in Warner Communications Inc. and the purchase method of accounting for the transaction. Separately, Warner reported a net loss of $106 million, or 56 cents a share, including merger expenses of $100 million and $120 million in charges associated with stock-appreciation-based compensation plans. Time Warner is in the process of completing its acquisition of the remaining Warner shares.Time Warner emphasized in a news release that it should be evaluated based on its cash flow, which the company defined as earnings before interest, taxes, depreciation and amortization.On a pro-forma basis, assuming the merger was effective Jan 1, 1988, including the results from both Time Inc. and all of Warner, that cash flow figure would be $526 million for the latest quarter, more than double the comparable figure a year ago, or $242 million, according to Time Warner. Some analysts at least are buying that argument, and weren't alarmed by the losses. "What really matters is the operating income of the divisions: I look at these numbers and I say, these businesses are doing well," said Mark Manson, a vice president of Donaldson, Lufkin & Jenrette Securities Corp. "For example, Warner made more than $100 million from filmed entertainment in three months.That's a big number.Warner also had a gain of more than 13% from records and music publishing, even though the domestic record business was sluggish this summer." In the year-ago third quarter, Time on its own reported net income of $81 million, or $1.42 a share.Combined revenue for the latest quarter of Time Warner was $2.2 billion, compared with the year-ago Time revenue of $1.1 billion. On a pro forma basis, including all of Warner's earnings, Time Warner had a third-quarter loss of $217 million, compared with a $342 million loss a year earlier.On the same basis, revenue rose to $2.7 billion from $2.2 billion. For the third quarter, Warner's $106 million loss compared with a year-ago loss of $113 million, or 90 cents a share.Revenue rose to $1.5 billion from $1.1 billion.The 1988 figures were restated to include the results of Lorimar Telepictures Corp., which Warner acquired in January. Time Warner's operating earnings got a boost from Warner's record box-office results. "Batman" alone has racked up more than $247 million in box-office receipts to date, making it Warner Bros. ' largest grossing film ever. "Lethal Weapon II" was also a big hit.Warner also contributed record results from its music business, where unit sales of compact discs rose more than 50% from a year ago, the company said, helped by Prince's "Batman" soundtrack. Time Warner said its cable division turned in a 77% increase in operating cash flow, to $166 million from $94 million, reflecting higher per-subscriber revenue.In addition, the 1988 results included a $20 million charge reflecting a reserve for relocation related expenses at American Television & Communications Corp. On the other hand, Time Warner said its operating cash flow declined in the quarter for its magazine division, its books division and the Home Box Office programming division.In magazines, higher advertising revenues at Sports Illustrated and Fortune were offset by lower ad revenue for other major magazines.The programming division saw a decline in operating cash flow because the year-ago quarter included a $12 million dividend from Turner Broadcasting System and because the quarter includes expenses associated with the Nov. 15 launch of HBO's Comedy Channel. In New York Stock Exchange composite trading, Time Warner closed at $138.625 a share, up $1.875, while Warner closed at $63.875 a share, up 12.5 cents.
Some House Democrats are trying to head off an appointment by President Bush to the board that oversees the savings-and-loan bailout, contending that the prospective nominee is the head of troubled banks himself. Four Democrats on the House Banking Committee sent President Bush a letter stating their concerns about the expected appointment of James Simmons, an Arizona banker and former fund-raiser for Mr. Bush, to the Oversight Board of the Resolution Trust Corp. The Oversight Board, created in the savings-and-loan law signed in August, sets policy for the RTC, which will sell hundreds of the nation's sick thrifts and billions of dollars of their assets.Treasury Secretary Nicholas Brady, Federal Reserve Board Chairman Alan Greenspan and Housing and Urban Development Secretary Jack Kemp are members of the board.President Bush must appoint two other members, one a Democrat and one a Republican. An administration official confirmed last week that Mr. Simmons, the chairman of Valley National Bank in Phoenix, is the Republican appointee, and that a security clearance was under way.The Democratic appointee hasn't been determined, the official said. Mr. Simmons declined to comment, and the White House said the congressmen's letter is under review. The letter, dated last Thursday, cited the losses at Valley National, and at United Bank, also of Phoenix, where Mr. Simmons was chairman for 29 years.Both banks have been battered, as have other Arizona banks, by falling real estate prices.Valley National, for example, had $470 million in problem assets as of June. "We believe that there are numerous other candidates more qualified for this important position and we encourage you to give them your thorough consideration before making this key RTC appointment," the letter said. "The RTC needs the most able, competent management available." But Mr. Simmons has long ties to both Republicans and banking.He was co-chairman of Mr. Bush's Arizona campaign committee in last year's election, and also worked for Mr. Bush in the 1980 election.The two met more than 30 years ago, when Mr. Simmons worked for Commercial Bank & Trust Co. of Midland, Texas, where Mr. Bush was an organizing director. In 1986, Mr. Simmons also served on a committee of businessmen headed by William Seidman, chairman of the Federal Deposit Insurance Corp. and the Resolution Trust Corp.That committee determined to open Arizona to banking across state lines.Arizona Trend magazine referred to Mr. Simmons this year as one of the 25 most influential people in the state. The letter to Mr. Bush was signed by Reps.Bruce Vento (D., Minn.), the chairman of the Banking Committee's RTC Task Force, Thomas McMillen (D., Md.), Kweisi Mfume (D., Md.) and Paul Kanjorski (D., Pa.).
At Lloyd's of London, underwriters still scratch out policies using fountain pens and blotting paper.Visitors are ushered into the premises by red-frocked doormen known as waiters, a reminder of the insurance market's origins in a coffeehouse in 17th century London. Such trappings suggest a glorious past but give no hint of a troubled present. Lloyd's, once a pillar of the world insurance market, is being shaken to its very foundation.The 301-year-old exchange is battered by enormous claims from a decade-long run of unprecedented disasters, the most recent of which is last week's earthquake in California's Bay Area.At the same time, Lloyd's is besieged by disgruntled investors and hamstrung by inefficient but time-honored ways of conducting business.The exchange is gradually being squeezed into narrow, less-profitable segments of the market by less hidebound competitors. "Lloyd's is on the ropes," says Peter Nutting, a Lloyd's investor for 17 years who now leads a dissident group threatening to sue exchange underwriters for alleged mismanagement and negligence. "It needs more discipline.It needs to sort itself out." Most troublesome is the shrinking pool of "names," the well-heeled investors (some of them royal) who, as members of about 360 syndicates, underwrite policies.Some 1,750 members quit the exchange last year, more than triple the number of resignations in 1987.Names are resigning at an even faster pace this year. Lackluster returns are one reason.The average after-tax return on investment in 1986, the most recent year for which results are available, was 6.5%, according to Chatset Ltd., an insurance consulting firm in London.In 1985, it was 2.1%. Between 1981 and 1986, the most recent five-year period for which figures are available, Lloyd's reported over #3.6 billion in claims and reserves against future losses ($5.7 billion at today's exchange rates), more than double the #1.35 billion posted in the previous five-year period. Many of the 31,329 investors who remain are beginning to question one of the exchange's most basic tenets, the concept of unlimited personal liability.Investors may reap huge profits when premiums exceed claims, but they are liable to their last pound or dollar in the event of a catastrophe.And catastrophes are getting ever more costly.Lloyd's claims for the 1988 Piper Alpha oil-rig disaster in the North Sea, for instance, may reach $1 billion. During the five-year period ended 1986, roughly 80% of the names had money tied up in money-losing syndicates, according to Chatset consultants.The peril of unlimited liability looms large for a number of them now. "I have wished I could die and be out of it -- that's how bad it is," Betty Atkins, a secretary from suburban London, says. Ms. Atkins, whose Lloyd's membership was a bonus from a former employer in 1981, belongs to Mr. Nutting's dissident group on the Outhwaite syndicate, which has been hard hit by asbestos reinsurance claims.Ms. Atkins, who underwrote #20,000, or about $32,000, of insurance coverage on that syndicate, now faces potential losses of roughly #70,000, or $111,000. "If Lloyd's wants #70,000 out of me they will have to take everything I've got -- and even then I don't know if it will be enough," she says. Unease is widespread among exchange members. "I can't think of any reason to join Lloyd's now," says Keith Whitten, a British businessman and a Lloyd's member since 1979. "The downside is very considerable, and at the moment the upside is very marginal." If profits don't improve, Mr. Whitten says he may quit the exchange. Meanwhile, competition from rivals unencumbered by history is intensifying.Lloyd's is being squeezed out of low-margin but more consistently profitable product lines such as primary property and marine insurance.Over the past decade, competitors have chipped away at the exchange's share of the #2.5 billion marine market in London, where half the world's ships are insured. Lloyd's 66% stake in that market has shrunk to 50% in that period, according to an official at the Institute of London Underwriters, a Lloyd's competitor. (The official asked not to be named.) Much of the business has gone to the institute, an association of more than 100 insurers, including Cigna Corp., Allianz Versicherungs AG of West Germany and Britain's Commercial Union Assurance PLC. Lloyd's has endured decades of genteel decline.At the peak of its power and influence a century ago, Lloyd's dominated the insurance world with a 50% stake.It virtually dictated how ships were to be built and it monitored commerce through a unrivaled intelligence network in ports around the globe. Today, Lloyd's share of the world market, excluding life insurance, is about 2%. (Its stake is even smaller if life insurance is included.) Bigger rivals, such as Aetna and Allianz, backed by armies of statisticians using computers in hundreds of branches, operate more efficiently and often can offer lower rates, brokers say.Though Lloyd's pioneered such now-standard policies as worker's compensation insurance, burglary insurance for homeowners and businesses, and bankers' liability insurance, competitors now underwrite most of that business. Beyond that, many big oil, chemical and airline companies are siphoning off big chunks of the market by insuring themselves through "captive" offshore companies for industry-specific coverage.Even Lloyd's specialty -- unusually risky ventures -- is being challenged.Only 10 years ago, for instance, Lloyd's was the pre-eminent insurer of thoroughbred horses.But since 1981, Kirk Horse Insurance Inc. of Lexington, Ky. has grabbed a 20% stake of the market. Ronald Kirk, president, says Lloyd's has suffered because its structure doesn't allow underwriters to deal directly with clients; brokers are required intermediaries.Thus, he asserts, Lloyd's can't react quickly to competition. "Lloyd's has lost control of the situation," he says. "They aren't controlling their destiny like they used to." Murray Lawrence, Lloyd's chairman, agrees the exchange faces big challenges. "This is a watershed time, and we are trying to plot our way ahead," he says. "We have been a great market for inventing risks which other people then take, copy and cut rates." Lloyd's, he says, is cut off from "the vast body of premium down at the bottom end which acts as a steadying influence" against catastrophic losses.By that, he means low-margin but low-risk products such as certain types of primary property insurance.The exchange, he says, must find new products and new markets. That won't be an easy task.Tradition is dictator at Lloyd's.Three years ago, the exchange took up residence in a space-age tower of steel and glass -- evocative of the kind of modern architecture that Britain's Prince Charles has denounced. (Some exchange wags call the building "the oil rig.") But along with such treasured artifacts as Lord Nelson's spyglass, Lloyd's also brought its outmoded ways of doing business. The Lloyd's market actively underwrites insurance just 4 1/2 hours a day, brokers say.Underwriting doesn't get under way until after morning tea at 10 a.m.A two-hour lunch break follows.Things wind down at about 4:30 p.m., just in time for afternoon tea. Lloyd's vast trading hall houses a warren of well-polished desks.The hall's few computers are used mostly to send messages.Sandwiched between desks, underwriters sit on benches surrounded by stacks of policies.Brokers clutching thick folders stand in lines, waiting their turn to speak to the underwriters.A broker may have to approach as many as 20 underwriters who insure the endeavors on behalf of the syndicates.It could take six months for a claim to be paid. "The system," says Nicholas Samengo-Turner, a Lloyd's broker who left the exchange in 1985, "is so ludicrously unprofessional it drives you mad." Some maintain underwriters also have been inept.John Wetherell, a Lloyd's underwriter, says he and his fellow underwriters underestimated by as much as 50% the premiums they should have charged for property risks from 1980 to 1985. "How unprofessional we must have appeared to the outside world -- how incompetent at risk assessment and evaluation," he says.Lloyd's officials decline to comment on the matter. More recently, property rates have increased.Many at Lloyd's expect the San Francisco earthquake will cause the industry to boost rates even further.But it will be years before it is clear whether higher rates will offset the payouts for such disasters. The magnitude of the exchange's problems may not become known for some time because of Lloyd's practice of leaving the books open for three years to allow for the settlement of claims.Lloyd's only recently reported its financial results for 1986.That year, it posted record pretax profit of #650 million, a gain it attributes to higher rates and fewer claims. But Mr. Lawrence says reported profit will be down in 1987, 1988 and 1989, though he declines to specify how steep the decline will be.Insurance analysts say the exchange's downturn in profitability is likely to be aggravated by more than $600 million in aviation losses (including the 1988 Pan Am airline disaster over Lockerbie, Scotland) and a still-uncalculated chunk of claims from September's Hurricane Hugo. Lloyd's says the departures of names isn't likely to hurt its underwriting capacity, currently about #11 billion.Mr. Lawrence says the drain of funds has been offset by an increase in investments by the remaining names.Meanwhile, the exchange has been trying to lower costs. (It recently cut its work force by 9%, or 213.) But Lloyd's is hampered in its efforts to overhaul operations by its reluctance to embrace modern technology.Mr. Wetherell, the underwriter, reckons half of his business could be transacted by computer, cutting costs at least 10%.Though Lloyd's has talked for years about computerizing underwriting transactions, the effort hasn't gotten very far.Competition among underwriters and brokers makes them loath to centralize price and policy information.Both groups cling to traditional face-to-face dealings, even for routine policies. Lloyd's overblown bureaucracy also hampers efforts to update marketing strategies.Some underwriters have been pressing for years to tap the low-margin business by selling some policies directly to consumers.Lloyd's presently sells only auto insurance directly to the public, and such policies are sold only in limited markets such as the U.K. and Canada. But such changes must be cleared by four internal committees and dozens of underwriters, brokers and administrators before being implemented.The proposal to sell directly to the public remains mired in bureaucratic quicksand. Lloyd's is moving forward on some fronts, though.Mr. Lawrence says the exchange is updating some procedures to make speedier payments on claims.By next year, all underwriters will be linked to a communications network that could reduce paper work on claims.
UAL Corp. 's board quashed any prospects for an immediate revival of a labor-management buy-out, saying United Airlines' parent should remain independent for now. As a result, UAL's chairman, Stephen M. Wolf, pulled out of the buy-out effort to focus on running the company. The two developments put the acquisition attempt back to square one and leaves the airline with an array of unresolved matters, including an unsettled labor situation and a management scrambling to restore its damaged credibility. The effort to create the nation's largest employee-owned company began unraveling Oct. 13 when the labor-management group was unable to obtain financing for its $300-a-share, $6.79 billion offer.Just last week it suffered another major setback when British Airways PLC, the largest equity investor in the labor-management bid, withdrew its support. Takeover stock traders, focusing on the company's intention to stay independent, took the announcement as bad news. UAL, which had risen $9.875 to $178.375 in composite trading on the New York Stock Exchange on reports of a new bid being prepared by the group, reversed course and plummeted in off-exchange trading after the 5:09 p.m. EDT announcement. Among the first trades reported by the securities firm of Jefferies & Co., which makes a market in UAL after the exchange is closed, were 10,000 shares at $170, 6,000 shares at $162, 2,500 at $162, and 10,000 at $158. The rebound in UAL stock during regular trading hours Monday was its first daily gain after six consecutive losses left the price 41% below its level before Oct. 13, the day the group announced the bank financing couldn't be obtained for the original deal. Twelve of UAL's outside directors met at a five-hour meeting yesterday in Chicago to consider an informal proposal from the buy-out group for a revised bid.But the board said it wasn't interested for now.That proposal, valued at between $225 and $240 a share, would have transferred majority ownership to employees while leaving some stock in public hands. The buy-out group had no firm financing for the plan.And, with no other offers on the table, the board apparently felt no pressure to act on it. The directors signaled, however, that they would be willing to consider future offers or take some other action to maximize shareholder value, saying they would continue to explore "all strategic and financial alternatives." But it was clear that for the time being, the board wants the company to return to normalcy.The board said it concluded that "the welfare of the company, its shareholders, its employees and the broader public . . . can best be enhanced by continued development of UAL as a strong, viable, independent company." Mr. Wolf urged all employees to "now turn their full attention" to operating the airline.He also vowed to "make every effort to nurture . . . a constructive new relationship that has been forged with participating employee groups." But Mr. Wolf faces a monumental task in pulling the company back together again.Labor problems top the list.For a brief time, the buy-out effort seemed to solve his problems with United's pilot union.In return for an ownership stake in the company, the pilots were willing to agree to a seven-year contract that included a no-strike clause and significant wage concessions and productivity gains the union previously resisted. That contract was tied to the success of the buy-out.As a "good-will measure," the pilots had been working four extra hours a month and had agreed to fly UAL's two new Boeing 747-400 aircraft.It's uncertain if the pilots will continue to do so without a contract settlement. The union said late last night that it is still committed to majority employee ownership and that the labor disputes that faced the company prior to the buy-out effort "still need to be addressed." The buy-out effort also worsened already-strained relations between United's pilot and machinist unions.The machinists' criticisms of the labor-management bid and their threats of a strike unless they received substantial wage increases this year helped cool banks' interest in financing the transaction. The machinists previously had shown themselves to be an ally to Mr. Wolf, but he lost much of his credibility with that group when he teamed up with the pilot union.The machinists criticized the terms Mr. Wolf and management received in the buy-out.They paid $15 million for a 1% stake and received an additional 9% of the company at no additional cost. His credibility is also on the line in the investment community.Until the collapse of this bid, Mr. Wolf was regarded as one of the nation's savviest airline executives after engineering turnarounds of Tiger International Inc. and Republic Airlines. But he and his chief financial officer, John Pope, sowed some of the seeds for the deal's failure by insisting banks accept low financing fees and interest rates, while they invested in the transaction only a small fraction of the $114.3 million they stood to gain from sale of their UAL stock and options. The board's actions leave takeover stock traders nursing some $700 million in losses and eager to respond to anyone who might make a new offer.It also inevitably leaves a residue of shareholder lawsuits. Arbitragers said they were disappointed the company didn't announce some recapitalization or other plan to maximize value.One takeover expert noted that arbitragers could force a recapitalization through the written consent process under which holders may oust the board by a majority vote.The machinists union has suggested it may propose a recapitalization that includes a special dividend for holders and a minority ownership stake for employees. Los Angeles investor Marvin Davis, whose $240-a-share offer for UAL in August triggered a bidding war, says he remains interested in the airline.However, he is restricted from making certain hostile moves by an agreement he signed to obtain confidential UAL data.Essentially, he can't make any hostile moves unless he makes a tender offer at least $300 a share.
Inco Ltd. posted a 35% decline in third-quarter net income, a performance that was in line with analysts' expectations. The nickel producer also raised its quarterly dividend to 25 cents a share from 20 cents and said it may buy back as much as 4.8% of its common outstanding. Inco shares fell after the announcements.Analysts said some investors were disappointed that the cash-rich company had failed to announce a special dividend.Inco closed at $31.125 a share, down 62.5 cents, in New York Stock Exchange composite trading. Some analysts said Inco, which had cash reserves of $272 million as of Sept. 30, could still announce a special dividend in the next few months, though it would be smaller than the $10-a-share special dividend it paid last year. The quarterly dividend is payable Dec. 1 to shares of record Nov. 3. Inco's net fell to $129.3 million, or $1.23 a share, in the third quarter from $200.3 million, or $1.88 a share, a year earlier.Sales rose 8.2% to $848.7 million from $784.5 million. Excluding special gains from tax-loss carry-forwards, earnings in the latest quarter were $117.7 million, or $1.12 a share, compared with $187.4 million, or $1.76 a share. Inco said the drop in earnings resulted mainly from lower nickel prices for the period and a temporary cut in nickel output at the company's Manitoba operations due to high levels of arsenic in the ore. Inco said it plans to buy back as many as five million common shares over the next 12 months if nickel market conditions are favorable.Under a previous buyback program, Inco has purchased 1.7 million of its shares since April.
Tandy Corp. said it won't join U.S. Memories, the group that seeks to battle the Japanese in the market for computer memory chips. Tandy's decision is a second setback for U.S. Memories.Last month, Apple Computer Inc. said that it wouldn't invest in the group.Apple said that its money would be better spent in areas such as research and development. U.S. Memories is seeking major investors to back its attempt to crack the $10 billion market for dynamic random access memory chips, a market dominated by the Japanese.Those chips were in dire shortage last year, hurting many U.S. computer companies that couldn't get sufficient Japanese-supplied chips. Tandy said its experience during the shortage didn't merit the $5 million to $50 million investment U.S. Memories is seeking from each investor. "At this time, we elected not to get involved because we have been able to satisfy our need {for DRAMs} from the market as a rule," said Ed Juge, Tandy's director of market planning. Sanford Kane, U.S. Memories president, said the decision was "disappointing," but doesn't presage U.S. Memories' failure. "I would like to have had them," he said.But "they weren't on my list of companies who were critical to be a part of it." Mr. Kane became president and chief executive officer of U.S. Memories last June, when the group was formed by seven electronics companies: Advanced Micro Devices Inc., Digital Equipment Corp.; Hewlett-Packard Co.; Intel Corp.; International Business Machines Corp.; LSI Logic Corp. and National Semiconductor Corp. Mr. Kane said he expects two or three major corporations to announce their participation in U.S. Memories soon after the group finishes a business plan, probably late this week.U.S. Memories needs a catalyst, he said, to inspire others to join. But so far, most potential participants haven't decided.Sun Microsystems Inc. said it's still actively evaluating U.S. Memories and plans to meet with U.S. Memories representatives later this week. American Telephone & Telegraph Co. said it was waiting to see U.S. Memories' business plan.Personal-computer maker AST Research Inc. said it is still studying the situation. A Compaq Computer Corp. spokeswoman said that the company hasn't made a decision yet, although "it isn't under active consideration."
In a startling turnabout, Members of the Senate Intelligence Committee are complaining that someone in the executive branch is leaking on them.David Boren, the Intelligence Committee chairman, is upset that someone leaked a letter to the committee from the Reagan administration suggesting that the U.S. would undertake to warn Panamanian thug Manuel Noriega if it got wind of an impending coup that might result in his assassination. With due respect to "highly classified correspondence" and other buzzwords, the leakers are performing a public service.If the CIA has become a protection service for Mr. Noriega, the American people ought to know.What went wrong in Panama is a fitting subject for public and congressional inquiry.Naturally, Senator Boren and his committee would like free rein to blame the executive branch while stamping "top secret" on their own complicity.But there's no danger of exposing sources and methods in disclosing the debate running up and down Pennsylvania Avenue.And if Congress is going to assume authority to micromanage foreign policy, it's going to have to take some of the responsibility too. The President of the United States urged the Panamanian armed forces to move against Mr. Noriega.When they did, his commanders didn't have the initiative to do more than block a couple of roads.The executive branch bears the first responsibility for timidity.But what kind of initiative can you expect given the climate set by Congress? For example, what exactly did the CIA tell Major Giroldi and his fellow coup plotters about U.S. laws and executive orders on assassinations?What part did U.S. warnings play in the major's unwillingness to pull the trigger when he had General Noriega in custody, but was under attack by pro-Noriega troops?Mr. Noriega didn't suffer from any hesitation once he had the pistol.Maybe we need a CIA version of the Miranda warning: You have the right to conceal your coup intentions, because we may rat on you.Or maybe a Surgeon General's warning: Confiding in the United States may be fatal. CIA chief William Webster, hardly a Washington malcontent, got the debate started last week by noting that the executive order banning assassinations had contributed to U.S. paralysis during the coup.The CIA's Deputy Director of Operations, Richard Stoltz, tried to smooth things over a few days later, but instead simply underlined Mr. Webster's point. "The interpretation" of the executive order, Mr. Stoltz said, "and the way in which the various committees have over time interpreted it, has led in my view to a proper caution on the part of operators, including me." In other words, Congress won't let the CIA do much of anything anymore, and that's fine with the CIA.The pay's the same, and the duty's lighter. And of course, doing anything that might be second-guessed by Congress carries heavy penalties.Witness the Walsh prosecution of Ollie North.The Intelligence Committee's ranking Republican, Senator William Cohen, joined with Senator George Mitchell to write a best seller about Iran-Contra, deploring "Men of Zeal." No doubt many people in the CIA, the Pentagon and the National Security Council have read it.What kind of initiative should anyone expect from people out on the line who've read all this and know what can happen if they fail?Who wants to end up as the protagonist in a Bill Cohen morality play? The order against assassinations is another artifact of the same congressional mind-set, a product of the 1970s Vietnam syndrome against any executive action.President Bush would do himself and the country a favor by rescinding the order as an ambiguous intrusion on his ability to defend America's national security.There are of course good reasons the U.S. shouldn't get into the assassination business, but rescinding the executive order is not the same thing as saying the U.S. should start passing out exploding cigars.The world being the nasty place it is, we want Presidents to have the freedom to order operations in which someone might get killed.In such situations, you cannot write rules in advance, you can only make sure the President takes the responsibility. The executive order and the reported agreements with the Intelligence Committee are neither sensible nor moral.As it now stands, the U.S. can bomb Tripoli, but can't "assassinate" Colonel Gadhafi.It can send a fighter squadron to strafe terrorist hideouts in the Bekaa Valley, but can't shoot Abu Nidal.Both the assassination order and the quality of debate in Washington are telling the world that the only way the U.S. will kill a madman is by making sure we take some innocent civilians with him.
Japan's Daiwa Securities Co. named Masahiro Dozen president. Mr. Dozen succeeds Sadakane Doi, who will become vice chairman.Yoshitoki Chino retains his title of chairman of Daiwa, Japan's second-largest securities firm.In Japanese firms, the president usually is in charge of day-to-day operations, while the chairman's role is more a ceremonial one.The title of chief executive officer isn't used. While people within Daiwa, particularly internationalists, expected that Mr. Dozen, 52, would eventually become Daiwa's president, the speed of his promotion surprised many.It was only earlier this year that the jovial, easygoing executive -- he likes to joke with Americans about how his name is synonymous with twelve -- was appointed deputy president. Mr. Dozen is taking over the reins of a securities company that does very well in its domestic market but that is still seeking to realize its potential in global investment banking and securities dealing. Daiwa is one of the world's largest securities firms.As of March 31, the Daiwa group had shareholder equity of 801.21 billion yen ($5.64 billion).For the six months ended Sept. 30, Daiwa reported unconsolidated (parent company) net income of 79.03 billion yen ($556.5 million) on revenue of 332.38 billion yen ($2.34 billion).Both figures were record highs. Several observers interpreted Mr. Dozen's appointment as an attempt by Daiwa to make its international operations more profitable while preparing the firm for the effects of the continuing deregulation of Japan's domestic markets, which should mean increased competition. All of Japan's so-called Big Four securities firms -- Nomura Securities Co. Ltd., the world's largest, Nikko Securities Co. Ltd., Yamaichi Securities Co. Ltd. and Daiwa -- have suffered setbacks in their attempts to break into foreign markets.While they have moved to the fore in underwriting fixed-income securities in the Eurobond market -- mostly for Japanese firms -- they have been only marginally profitable, if at all, in the U.S. American institutional investors have never had a large appetite for Japanese equities.And while the Japanese have stepped up their purchases of U.S. shares in the past several months, they have shown themselves in the past to be fickle investors. At the same time, Daiwa and its brethren have faced stiff competition from well-entrenched American competitors that have prevented them from building strong links to U.S. corporations and institutional investors. Mr. Dozen knows these problems firsthand.When he arrived in the U.S. in 1969 -- the start of an eight-year tour -- he tried selling Japanese yen-denominated bonds to U.S. investors. "He made desperate efforts, using the yellow pages from beginning to end," said Koji Yoneyama, president of Daiwa's U.S. unit. "But not a single piece of paper was sold." By his own account, Mr. Dozen didn't do much better with U.S. bonds.In an interview a few months ago, he recalled how after some training at Salomon Brothers Inc., he successfully bid for the opportunity to sell portions of 20 U.S. corporate bond issues.But he couldn't sell any. "Japanese stock salesmen selling American bonds?Maybe it's crazy," he said. Mr. Dozen even related the indignity suffered when he and two colleagues went on an overnight fishing expedition off the New Jersey shore and caught nothing.Upon returning to New York, "Exhausted, I got into a taxicab, and the woman driver said: `Americans make better fishermen, '" he recalled. Undaunted, Mr. Dozen said that Daiwa's goal is to build "a high-technology oriented international organization with maybe some Japanese flavor to it." He said that he was particularly interested in his firm gaining expertise in futures, options, mortgaged-backed securities, computerized trading and investment systems as well as mergers and acquisitions.Mr. Dozen said Daiwa's strengths were its large capital base, its influential position in the Tokyo market and its links to Japanese corporations and institutional investors. Mr. Dozen joined Daiwa upon his graduation from Kyoto University in 1959.Like many young recruits in Japanese securities firms, he began his career peddling stock to individual investors. In his climb to the top, Mr. Dozen also headed the company's stock-exchange division, its fixed-income units and its international operations. "He was constantly picking up new things to fill out his experience; he is very well-balanced," said Takuro Isoda, chairman of Daiwa's U.S. unit in New York. But it Mr. Dozen's experience as a salesman that enabled him to gain the political support -- particularly from the retail sales force -- to accede to the presidency.Commission income from domestic stock and bond sales accounts form a large portion of Japanese securities companies' earnings.And anybody who lacked the backing of the retail sales force "would be fragile," said a Daiwa executive. If Mr. Dozen has a weakness, it may be his golf game. "He digs in the sand instead of hitting the ball, like a farmer," said Mr. Yoneyama.
A series of explosions tore through the huge Phillips Petroleum Co. plastics plant near here, injuring more than a hundred and closing parts of the Houston Ship Channel. There were no immediate reports of deaths, but officials said a number of workers were still unaccounted for last night. The Bartlesville, Okla., oil company late yesterday still hadn't said officially what caused the explosions and fires, which sent columns of heavy black smoke billowing high into the air.One local Phillips manager said a seal blew in one of the plant's reactors.Glenn Cox, Phillips' president and chief operating officer, and other Phillips officials flew from Bartlesville to assess the damage and determine the cause of the afternoon explosions. In composite trading on the New York Stock Exchange, Phillips Petroleum shares fell $1.125 to $23.125. The plastics plant is located on an 800-acre tract in the heart of the petrochemical corridor that reaches along the U.S. Gulf Coast.The U.S. Coast Guard closed six miles of the Houston Ship Channel, where about 150 companies have operations, because the thick, black smoke obscured the area.The Port of Houston closed its terminal for handling bulk cargo. Broken water lines and gas leaks hindered firefighters' efforts, but by late yesterday authorities said they had the fire under control.The blasts blew out windows, spewed debris for miles and crumpled the ceiling in an area elementary school.The initial fireball was caught by cameras in downtown Houston, about 10 miles away. Nearby Pasadena, Texas, police reported that 104 people had been taken to area hospitals, but a spokeswoman said that toll could rise.The injured, including three in critical condition, were treated for burns, breathing problems and cuts from flying glass, hospital officials said.The plant employs between 800 and 900 on three shifts.The number working at the time of the blast wasn't known. Yesterday's explosions were the second round in two months at the plastics plant.In late August, four contract workers were injured and one Phillips employee died after an explosion at a fuel supply line near the facility's boiler house. The Phillips facility manufactures polyethylene, polypropylene and K-resin, plastics used in a wide array of applications, including milk jugs and toys.Plastics are the cornerstone of Phillips' chemicals operations, which is the biggest single contributor to the company's profits.
Exxon Corp. said its third-quarter earnings slipped 9% as profits from two of its three major businesses sagged.All cleanup costs from last spring's Alaskan oil spill were reflected in earlier results, it said. Phillips Petroleum Co. and Atlantic Richfield Co. also reported declines in quarterly profit, while Ashland Oil Inc. posted a loss for the latest quarter.Amerada Hess Corp. and Occidental Petroleum Corp. reported higher earnings. Exxon Although Exxon spent heavily during the latest quarter to clean up the Alaskan shoreline blackened by its huge oil spill, those expenses as well as the cost of a continuing spill-related program are covered by $880 million in charges taken during the first half. An Exxon official said that at this time the oil company doesn't anticipate any additional charges to future earnings relating to the cleanup of oil spilled when one of its tankers rammed into an underwater reef.She added, however, that charges already taken don't take into account the potential effect of litigation involving the oil spill.She said that impact can't be reasonably assessed yet. Exxon's net income during the third quarter dropped to $1.11 billion, or 87 cents a share, from $1.22 billion, or 93 cents a share, a year earlier.Revenue rose 8.1%, to $23.65 billion from $21.88 billion.During the third quarter, Exxon purchased 8.34 million shares of its stock at a cost of $373 million.Exxon's profitability, like that of many other oil companies, was hurt during the third quarter by declining returns from the chemicals and refining and marketing businesses.Exxon's earnings from chemicals operations fell $90 million, to $254 million, while refining and marketing profits declined $180 million, to $357 million. Although crude oil prices were significantly higher this year, they weren't strong enough to offset the declining profits in those business sectors at most oil companies, said William Randol, oil analyst for First Boston Corp.He estimates that the price of West Texas Intermediate, the U.S. benchmark crude, was $4.04 a barrel higher during the third quarter of this year than in the same period last year. Ashland Oil A rash of one-time charges left Ashland Oil with a loss of $39 million for its fiscal fourth quarter.A year earlier, the refiner earned $66 million, or $1.19 a share.Quarterly revenue rose 4.5%, to $2.3 billion from $2.2 billion.For the year, net income tumbled 61% to $86 million, or $1.55 a share. The Ashland, Ky., oil company reported a $38 million charge resulting from settlement of a 10-year dispute with the National Iranian Oil Co. over claims that Ashland didn't pay for Iranian crude it had received.In September, Ashland settled the long-simmering dispute by agreeing to pay Iran $325 million. Ashland also took a $25 million after-tax charge to cover anticipated costs to correct problems with boilers built by one of its subsidiaries.The oil refiner also booked a $15 million charge for selling Ashland Technology Corp., one of its subsidiaries, at a loss. Amerada Hess Third-quarter earnings at Amerada Hess more than tripled to $51.81 million, or 64 cents a share, from $15.7 million, or 20 cents a share, a year earlier.Revenue climbed 28%, to $1.18 billion from $925 million. Profits improved across Hess's businesses.Refining and marketing earnings climbed to $33.3 million from $12.9 million, and exploration and production earnings rose to $37.1 million from $17.9 million.Hess's earnings were up despite a $30 million charge to cover the cost of maintaining operations after Hurricane Hugo heavily damaged the company's refinery at St. Croix.It is widely known within industry circles that Hess had to buy oil products in the high-priced spot markets to continue supplying its customers.Hess declined to comment. Phillips Petroleum Phillips Petroleum's third-quarter earnings slid 60%, to $87 million, or 36 cents a share, from $215 million, or 89 cents a share.Revenue rose 6.9%, to $3.1 billion from $2.9 billion.Shrinking profit margins in chemical and refining and marketing sectors accounted for most of the decline, said Chairman C.J. Silas in a statement.Despite higher oil prices, exploration and production profits were off because of foreign-currency losses and some construction costs incurred in one of Phillips' North Sea oil fields.A year ago, results were buoyed by a $20 million after-tax gain from an asset sale. Occidental Petroleum Occidental Petroleum's third-quarter net income rose 2.9% to $108 million, or 39 cents a share, from $105 million, or 38 cents a share, a year earlier.The latest quarter included an after-tax gain of $71 million from non-recurring items.Sales dropped 2%, to $4.8 billion from $4.9 billion.The latest period included a $54 million gain from the sale of various oil and gas properties, a $22 million charge from the restructuring of Occidental's domestic oil and gas operations, and tax credits of $42 million.Both periods included non-recurring charges of $3 million for early retirement of debt. Occidental said oil and gas earnings fell to $17 million from $20 million.The latest period includes net gains of $32 million in non-recurring credits from the sale of properties, indicating operating losses for the quarter in the oil and gas division.Chemical earnings fell 10%, reflecting softening of demand. Atlantic Richfield Citing its reduced ownership in the Lyondell Petrochemical Co., Atlantic Richfield reported that net income slid 3.1% in the third quarter to $379 million, or $2.19 a share, from $391 million, or $2.17 a share, for the comparable period last year.Sales fell 20%, to $3.7 billion from $4.6 billion. Arco's earnings from its 49.9% stake in Lyondell fell to $37 million from $156 million for the same period last year, when Lyondell was wholly owned.Offsetting the lower stake in Lyondell were higher crude oil prices, increased natural gas volumes and higher coke prices, the company said.Coal earnings rose to $26 million from $21 million. For the nine months, Arco reported net income of $1.6 billion, or $8.87 a share, up 33% from $1.2 billion, or $6.56 a share a year earlier.Sales were $12 billion, off 13% from $13.8 billion. Jeff Rowe contributed to this article.
The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: Imo Industries Inc. -- $150 million of senior subordinated debentures due 2001, priced at par to yield 12%.The issue will be sold through Morgan Stanley & Co. Other details weren't available. San Antonio, Texas -- $575 million of electric and gas system revenue refunding bonds, Series 1989, 1989A and 1989B, tentatively priced by a First Boston Corp. group to yield from 6.15% in 1991 to 7.30% in 2009.The issue includes current interest bonds due 1991-2000, 2009, 2012, 2014 and 2016, and capital appreciation bonds due 2001-2005.The current interest serial bonds are priced to yield from 6.15% in 1991 to 7.10% in 2000.There are about $100 million of 7% term bonds due 2009, priced to yield 7.30%, which is the issue's high yield.There are also about $124 million of 6 1/2% bonds priced to yield 7.25% in 2012; about $97 million of 6% bonds priced to yield 7.20% in 2014; and about $26.5 million of 5% bonds priced to yield 7.15% in 2016.All of the term bonds are original issue discount bonds, according to the lead underwriter.The capital appreciation bonds are tentatively priced to yield to maturity from 7% in 2001 to 7.10% in 2003-2005.The bonds are rated double-A by Moody's Investors Service Inc. and Standard & Poor's Corp. Maryland Stadium Authority -- $137.6 million of sports facilities lease revenue bonds, Series 1989 D, due 1992-1999, 2004, 2009 and 2019, tentatively priced at par by a Morgan Stanley group to yield from 6.35% in 1992 to 7.60% in 2019.Serial bonds are priced to yield to 7.10% in 1999.There are $15,845,000 of 7 3/8% bonds priced at par and due 2004; $22,985,000 of 7 1/2% bonds priced at par and due 2009; and $82.6 million of 7.60% bonds priced at par and due 2019.The bonds are rated double-A by Moody's and double-A-minus by S&P.Interest on the bonds will be treated as a preference item in calculating the federal alternative minimum tax that may be imposed on certain investors. Federal Home Loan Mortgage Corp. -- $250 million of Remic mortgage securities being offered in 11 classes by Morgan Stanley.The offering, Series 107, is backed by Freddie Mac 15-year, 9% securities, and brings Freddie Mac's 1989 Remic issuance to $32.8 billion and its total volume to $46.8 billion since the program began in February 1988.The offering used at-market pricing. Federal National Mortgage Association -- $500 million of Remic mortgage securities being offered in 10 classes by Merrill Lynch Capital Markets.The offering, Series 1989-85, is backed by Fannie Mae 9% securities.Separately, a $400 million issue of Fannie Mae Remic mortgage securities is being offered in 15 classes by Bear, Stearns & Co.The offering, Series 1989-86, is backed by Fannie Mae 9% securities.Finally, a $300 million issue of Fannie Mae Remic mortgage securities is being offered in 12 classes by Smith Barney, Harris Upham & Co.The offering, Series 1989-87, is backed by Fannie Mae 9 1/2% securities.The three offerings together bring Fannie Mae's 1989 Remic issuance to $32.4 billion and its total Remic volume to $44.5 billion since the program began in April 1987. Credit Agricole (CNCA) (French) -- $250 million of 8 3/4% bonds due Nov. 21, 1994, priced at 101.80 to yield 8.77% annually less full fees, via IBJ International Ltd. Fees 1 7/8. Hokuriku Electric Power Co. (Japan) -- $200 million of 8 7/8% bonds due Nov. 20, 1996, priced at 101 3/4 to yield 8.90% less full fees, via Yamaichi International (Europe) Ltd. Fees 1 7/8. International Finance Corp. (agency) -- 10 billion pesetas of 11.6% bonds due Nov. 30, 1994, priced at 101 5/8 to yield 11.60% less full fees, via Citibank (Madrid) and Banco Espanol de Credito, Spain.Fees 1 5/8. Royal Bank of Canada, Grand Cayman branch (Canada) -- 100 million Canadian dollars of 10 3/4% deposit notes due Nov. 30, 1994, priced at 101 3/4 to yield 10.78% less full fees, via RBC Dominion Securities International Ltd. Fees 1 7/8. Union Bank of Finland -- 100 million Australian dollars of 9% bonds due Nov. 9, 1990, priced at 94 to yield 17.20% less full fees, via Banque Paribas Capital Markets Ltd. Fees 1.Ford Motor Credit -- $2.57 billion of certificates backed by automobile loans with a coupon rate of 8.70%, priced at 99 19/32 to yield 8.903% through an underwriting group headed by First Boston Corp.The issue is the first by Ford Motor Credit, a unit of Ford Motor Co., and the second largest in the four-year history of the $45 billion asset-backed market.The largest issue was a $4 billion offering of auto-loan securities by General Motors Acceptance Corp. in 1986.The Ford issue, through Ford Credit 1989-A Grantor Trust, was priced at a yield spread of 95 basis points above the Treasury 7 3/4% issue due July 1991.The offering is rated doubleA-2 by Moody's and double-A by S&P, based on the quality of the underlying auto loans and a guarantee covering 9% of the deal from Ford Motor Credit.The certificates have an estimated average life of 1.8 years, assuming monthly prepayments at 1.3% of the original balance.The final maturity is in five years.
The Mouth is back. Morton Downey Jr., who self-destructed as a talk-show host and frequently verbally abused his guests, has been signed to co-host a half-hour nightly program on the Consumer News and Business Channel, the cable channel partly owned by the General Electric Co. 's National Broadcasting Co. The premiere of "Showdown," with Mr. Downey and Richard G. Carter, a columnist with the New York Daily News, is scheduled for Dec. 4 at 8 p.m. CNBC is available to 13 million cable households. Mr. Downey said he is not going to change his style, which some critics said was flamboyant and others deemed offensive. "But I'm going to proceed in a more logical way.I'm not going to do anything that is not acceptable in anyone's home.But that doesn't mean I'm not going to get angry." Michael Eskridge, president of CNBC, said that although there will be a studio audience, viewers will no longer have to endure the shouting of "Mort! Mort! Mort!" But just how does Mr. Downey's unorthodox style mesh with the sedate tone of CNBC's business programming? "Ninety percent of Mort's old show fits into our style," said Mr. Eskridge. "That is consumer issues." Mr. Downey's previous show, a one-hour shout fest, syndciated by MCA Inc. and produced by Quantum Media Inc., was canceled in July after advertisers and stations abandoned it.
"Hacksaw" and "Bonecrusher" are the sort of nicknames normally associated with linebackers and heavyweight contenders.Who'd have thought that the next group of tough guys carrying around reputations like that would be school superintendents? Chicago's new school chief is the hard-nosed Ted Kimbrough.At his old job in Compton, Calif., he took a bitter teachers' strike and nearly came to blows with a school-board member.At his first Chicago press conference, he berated the reporters.In New York City, the new Chancellor, Joseph Fernandez, has landed like a 16-inch shell in the middle of a system that has been impervious to serious reform. Both men fit the mood of the times -- the mood being one of a public fed up with officials' rationalizations for why their schools don't work. Former Patterson, N.J., principal Joe Clark was no doubt the general public's first experience with this new breed of no-nonsense administrator.The subject of the movie "Lean on Me," Mr. Clark controlled his school with a bullhorn and a baseball bat.He may have gone overboard in his pursuit of good discipline, but isn't it interesting that some of the country's biggest, most troubled school districts are choosing new chiefs from the same gravel-chewing mold?Elena Scambio, the woman assigned to run the Jersey City school system that was taken over by the state, says her top priority will be to "cut through the dead hand of bureaucracy." Mr. Fernandez doesn't take control in New York until January, but already he's roiling the waters.He's attacked the concept of "building tenure," one of the most disgraceful institutions in American public schools.It means it is virtually impossible to fire or even transfer incompetent principals.Once they are in the building, they stay.One South Bronx principal kept his job for 16 years, despite a serious drinking problem and rarely showing up for work.He was finally given leave when he was arrested for allegedly buying crack. Naturally, the principals' union loves building tenure, and tenure has withstood previous challenge.We suggest that Mr. Fernandez find an incompetent principal, toss him out of the building and let the forces of the status quo explain to the parents whatever it is they're defending.In his old job, as Dade County chief, Mr. Fernandez forced out 92 teachers and reshuffled 48 principals.He cut the dropout rate by 5.5%.But the no-more-nonsense superintendents are going to have to be judicious as well; incompetent principals and administrators should go, but the good ones ought to be left alone. The situation will be especially delicate for Mr. Kimbrough.He takes over a school system in the midst of radical reform.Chicagoans have just elected 540 neophyte school boards, one for each school.This of course led to disaster in New York City.Getting a community of parents to care again about its schools is essential, but in Chicago the new boards will make mistakes and Mr. Kimbrough will have to identify them. The rise of superintendents such as Joseph Fernandez and Ted Kimbrough suggests plainly the process of disintegration in many school systems.The schools' central mission, educating children, became subsumed by the competing interests of bureaucrats, politicians and unions.The classroom itself operated on the periphery of this awful system, discipline collapsed, and kids stopped learning. Mr. Chips was a nice fellow, and maybe some day he'll return.Until then, it's clear that some of the people who've been keeping big-city schools down are going to be dealing with the Terminator.
Investors dumped stocks of big companies whose earnings fluctuate with the economy. Many of those "cyclical" issues are in the Dow Jones Industrial Average, which fell 26.23 to 2662.91.Declining issues on the New York Stock Exchange outpaced advancers, 1,012 to 501. Recession fears are springing up again among investors.Analysts say that the selling of cyclical stocks yesterday will be followed by a sell-off in shares of companies with big debt loads on their balance sheets.In an economic slowdown, heavy debt loads reduce the flexibility of companies because cash that would normally be used to keep the company buoyant must be diverted to interest payments. On the other hand, investors beat a clear path yesterday to blue-chip issues with proven earnings growth records.Among the 30 Dow industrials, they bought McDonald's, Coca-Cola Co. and Procter & Gamble and sold Aluminum Co. of America.In another sign of slowdown fears, investors dumped technology shares. Many money managers are bracing for a decline in stocks of companies with big debt loads on their balance sheets. "The junk bond market is being taken apart" because of recession fears, said J. David Mills, senior vice president at Boston Company Advisers. "Under this scrutiny, the first thing you do is sell your cyclical stocks and the second thing you do is sell your over-leveraged companies." In fact, much of the buying in blue chips yesterday was a pursuit of companies with lower debt levels.In a recent investment letter entitled "Winners of the `Leverage Wars, ' " Edward Kerschner, chairman of PaineWebber's investment policy committee, suggested that investors buy stocks of companies that have avoided loading up on debt. "We're saying companies have to pay increasing attention to balance sheets," said Mr. Kerschner.He suggested that investors buy the shares of Great Atlantic & Pacific Tea, J. Baker, McDonald's, Philip Morris and Sara Lee.He said that all of these companies will be able to compete fiercely in an economic downturn.McDonald's has long-term debt equaling 91% of shareholder equity currently, but Mr. Kerschner said the company is carrying real estate assets at about $2.6 billion below their real value. Coca-Cola climbed 1 3/8 to 72 1/8; McDonald's added 1 to 31 3/8, and Procter & Gamble gained 3/4 to 130 5/8.A&P fell 1 1/4 to 57 5/8, and J. Baker gained 3/8 to 21 1/4.Philip Morris slipped 1/2 to 43 7/8, while Sara Lee closed unchanged at 60 1/8. According to Salomon Brothers' "stub" stock index of 20 companies whose debt is giant compared with shareholder equity, investors are already beginning to retreat from shares of debt-laden companies.From January to early September, the index of stub stocks -- the tiny portion of equity that's publicly traded following a recapitalization -- outperformed Standard & Poor's 500-stock index by about 20%.But starting in early September, the index started to slide and now stands about even with the S&P 500. "Stocks that have a high default risk have started to underperform those stocks that have a lower default risk," said Eric Sorenson, director of quantitative analysis at Salomon Brothers. "Companies that have the most exposure to the business cycle have underperformed since late last summer." Union Carbide, whose third-quarter earnings dropped about 35% from a year earlier and fell short of analysts' expectations, declined 1/2 to 24 1/2.Also, Exxon went down 3/8 to 45 3/4 and Allied-Signal lost 7/8 to 35 1/8 even though the companies' results for the quarter were in line with forecasts. Other weak blue-chip issues included Chevron, which went down 2 to 64 7/8 in Big Board composite trading of 1.3 million shares; Goodyear Tire & Rubber, off 1 1/2 to 46 3/4, and American Express, down 3/4 to 37 1/4.Texas Instruments, which had reported Friday that third-quarter earnings fell more than 30% from the year-ago level, went down 2 1/8 to 33 on 1.1 million shares. Motorola, another major semiconductor producer, dropped 1 1/8 to 57 1/2. Pinnacle West Capital, whose earnings have been hurt by continued problems at its MeraBank unit, fell 1 5/8 to 9 1/8 on 2.1 million shares to lead the Big Board's list of most active issues.Growing pressures on the Arizona real-estate market are affecting the thrift; Pinnacle West told Dow Jones Professional Investor Report it may consider filing for Chapter 11 bankruptcy protection if it can't reach an agreement with federal regulators to provide additional capital to MeraBank. Hercules dropped 2 5/8 to 41 3/4 on one million shares -- about six times its average daily trading volume -- after a disappointing third-quarter earnings report.Merrill Lynch and Prudential-Bache Securities both lowered the stock's investment rating immediately after the results were issued Friday, according to PIR. Elsewhere in the chemicals sector, Dow Chemical fell 1 1/4 to 97 1/2, Monsanto lost 1 7/8 to 118, B.F. Goodrich slipped 2 1/4 to 44 3/4 and Olin slid 1 to 57 3/4.Other stocks hurt by earnings-related selling included Tandy, which dropped 1 3/8 to 44, and Eaton, which retreated 2 1/2 to 57 1/2.Third-quarter earnings at both companies were below analysts' forecasts. After declining about 41% last week, UAL advanced 9 7/8 to 178 3/8 on 1.1 million shares on anticipation of a revised takeover offer from a labor-management group for the parent company of United Airlines.However, Delta Air Lines fell 1 1/2 to 67 1/2 and USAir Group dropped 3/4 to 42 1/2. Ramada gained 7/8 to 11 1/4 after revamping the terms of its restructuring plan, which calls for the company to sell its hotel operations for $540 million and spin off its casino business to shareholders.The revision follows last month's withdrawal of a $400 million junk-bond offering for the new casino company, Aztar Corp. Mead gained 1 to 37 7/8.USA Today reported that the Rales brothers, Washington, D.C.-based investors who made an unsuccessful offer to acquire Interco last year, have bought nearly 3% of Mead's common shares. Entertainment and media stocks generally escaped the market's slide as well.Paramount Communications rose 5/8 to 58 3/4, Time Warner climbed 1 7/8 to 138 5/8, Walt Disney advanced 3 1/8 to 127 1/2, MCA rose 1 1/8 to 65 5/8 and McGraw-Hill added 1/2 to 67 1/8. The American Stock Exchange Market Value Index lost 3.11 to 379.46.Volume totaled 10,450,000 shares. Carnival Cruise Lines Class A fell 1 3/4 to 20 3/4.The company said it had been notified unofficially that Waertsilae Marine Industries, a Finnish shipyard building three cruise ships for the company, is having financial trouble and may already have filed for bankruptcy.
Just five months after Ogilvy Group was swallowed up in an unsolicited takeover, Kenneth Roman, Ogilvy's chairman and chief executive officer, said he is leaving to take a top post at American Express Co. Mr. Roman, 59 years old, abruptly announced he will leave the venerable ad agency, whose largest client is American Express, to become American Express's executive vice president for corporate affairs and communications.He will succeed Harry L. Freeman, 57, who has said he will retire in December.Mr. Freeman said in August that he would retire by the end of this year to take "executive responsibility" for an embarrassing effort to discredit banker Edmond Safra.American Express representatives apparently influenced the publication of unfavorable articles about Mr. Safra.The company later apologized and agreed to make $8 million in contributions to charities chosen by him. Although Mr. Freeman is retiring, he will continue to work as a consultant for American Express on a project basis. Ad industry executives weren't surprised by Mr. Roman's decision to leave Ogilvy.The agency, under his direction, bitterly fought a takeover attempt by WPP Group PLC of London before succumbing in May.And although Mr. Roman and WPP's chief executive, Martin Sorrell, have gone out of their way to be publicly supportive of each other, people close to Mr. Roman say he was unhappy giving up control of the company.Some executives also cite tension because of efforts by Mr. Sorrell, a financial man, to cut costs at the agency. Mr. Roman will be succeeded as the head of Ogilvy's flagship ad agency, Ogilvy & Mather Worldwide, by Graham Phillips, 50, who had been president of North American operations and who, like Mr. Sorrell, is British.Alexander Brody, 56, will take on the newly created position of president of the world-wide agency and chief executive of its international operations.He had been president of the international operations.Mr. Roman also had overseen Ogilvy Group's two other units, the Scali McCabe Sloves advertising agency and its research division, but those units will now report directly to WPP. Mr. Roman appears custom-made for the American Express job.Known as a traditional executive, he is very much in the conservative American Express mold.Moreover, after 26 years at Ogilvy he had honed a reputation for being squeaky-clean and a straight arrow -- which can only help American Express in the wake of the Safra incident.He also is close to American Express's chairman and chief executive officer, James D. Robinson III. Aside from working with Mr. Robinson on the American Express advertising account for about 11 years, Mr. Roman serves on several of the same charities and boards as Mr. Robinson. The abrupt management change sparked widespread speculation that Mr. Roman had been pushed out of Ogilvy's top spot by Mr. Sorrell.But Mr. Roman flatly denied the speculation, saying Mr. Sorrell had tried several times to persuade him to stay, offering various incentives and in one instance sending a note with a case of wine (The wine, naturally, was Seagram's brand, an Ogilvy client). "He asked me not to resign.The implication that I was pushed aside wouldn't be accurate," Mr. Roman said.Mr. Sorrell, traveling in the Far East, couldn't be reached. Mr. Roman said American Express's Mr. Robinson first approached him about the job in late September.According to industry executives, Peter Sutherland, a former European Community commissioner from Ireland, was also a serious contender for the American Express job.Although it ultimately wasn't offered to him, he will be on retainer to American Express as an adviser on international matters.After talking on and off for the past four weeks, Mr. Roman said, he agreed to take the job because "it's the right time, it's a terrific opportunity, and I think I leave the company in very strong hands.It was my decision, not anyone else's." Mr. Roman also brushed aside reports about infighting between him and Mr. Phillips, his successor at Ogilvy.The two executives could hardly be more different.Mr. Roman comes across as a low-key executive; Mr. Phillips has a flashier personality.During time off, Mr. Roman tends to his garden; Mr. Phillips confesses to a fondness for, among other things, fast cars and planes.Industry executives say that although the two executives used to clash more frequently, the WPP takeover brought them closer together. "I'm the guy who made him head of New York, head of the U.S., president of North America, and recommended him {to Mr. Sorrell} as my successor.Would I have done all those things successively if I didn't think he was the right guy?" Mr. Roman asked.He labeled reports of friction "ridiculous," and said that he spent part of the weekend on Mr. Phillips's boat in Connecticut. Mr. Roman will oversee American Express's public relations and government affairs, among other things, but he won't be involved in its advertising, which is handled by the operating units. "I consider this a second career," he said.He also will sit on the company's corporate planning and policy committee, made up of the top corporate and operating executives. Mr. Roman's departure isn't expected to have any enormous repercussions at Ogilvy.American Express, Kraft General Foods, and Mattel executives said the move won't affect their relationships with the ad agency. "General Foods's relationships with its agencies are based on the agencies' work, and will continue to be," said David Hurwitt, a vice president of Kraft General Foods. But some clients and analysts expressed concern that Mr. Phillips isn't as well-known to many clients. "Ken was my key contact," said J. Nicholas Hahn, president and chief executive officer of Cotton Inc., which represents cotton producers. "I don't know {Mr.Phillips} all that well.I haven't seen or talked to him in several years." And some analysts questioned whether Mr. Phillips would have the skills Ogilvy needs to turn the agency around.While the agency has done well in many parts of the world, its flagship New York office has had a dismal track record recently; it has won few new accounts while losing big ones, including Maxwell House. "I think {Mr.Phillips} is going to need some help.I think they need creative leadership, and I don't think they have it," said Emma Hill, an analyst with Wertheim & Co. Ogilvy & Mather's top creative executive, Norman Berry, left the agency earlier this year. "Norm Berry was a creative inspiration at the company, and nobody has filled that void," said Ms. Hill. But other analysts said that having Mr. Phillips succeed Mr. Roman would make for a smooth transition. "Graham Phillips has been there a long time, knows the culture well, is aggressive, and apparently gets along well with" Mr. Sorrell, said Andrew Wallach, an analyst with Drexel Burnham Lambert. "It's probably a reasonable transition.Hopefully, he'll be the answer to the problems they've had in New York." Sale of Saatchi Unit Close Computer Sciences Corp., El Segundo, Calif., said it is close to making final an agreement to buy Cleveland Consulting Associates from Saatchi & Saatchi Computer Sciences wouldn't disclose the proposed purchase price for Cleveland Consulting, which counsels companies on logistics and supply.But David Lord, managing editor of Consultants News, an industry publication based in Fitzwilliam, N.H., said an industry standard would suggest a purchase price of between one and two times Cleveland Consulting's approximately $15 million annual revenue. Both Saatchi & Saatchi, which announced its intention to sell off most of its consulting business in June, and Cleveland Consulting declined to comment on the proposed sale. Ad Notes. . . . NEW ACCOUNT: AmBase Corp., New York, awarded the ad account for its Home Insurance Co. unit to Biederman, Kelly & Shaffer, New York.Billings weren't disclosed. . . . Puerto Rico Telephone Co. awarded its $3 million account to West Indies & Grey, Grey Advertising's office in Puerto Rico. DIET COKE: Coca-Cola Co. yesterday said singer Elton John signed to appear in an ad for Diet Coke.Details of the commercial, which will be part of the brand's 1990 advertising campaign, weren't disclosed.Mr. John becomes the latest of many music stars, including George Michael and Whitney Houston, to appear in ads for the diet drink.
Ingersoll Publications Co. agreed to buy the New Haven Register in a transaction valued at $275 million from Goodson Newspaper Group Inc. As part of the agreement, Goodson also terminated the contract under which Ingersoll manages Goodson's 66 newspapers, ending a long association between the two companies that has turned increasingly bitter recently.Goodson has accused Ingersoll of paying less attention to its properties and more to such ventures as the recent launch of the St. Louis Sun. Under the terms of the accord, Ingersoll will pay about $255 million for the Register, a daily that Goodson bought for about $170 million in 1986.Goodson will pay the additional $20 million in settlement of the management contract.Goodson also announced that it hired the former president and senior vice president of Ingersoll to run the Goodson papers.Both executives left the company after clashes with Chairman Ralph Ingersoll Jr. Goodson, which is based here, will use part of the proceeds to pay down debt associated with its purchase of the Morristown Daily Record for $155 million in 1987.The New Jersey paper, like the New Haven, Conn., paper, was purchased by Ingersoll on Goodson's behalf as part of the management contract.Industry analysts have said that the purchase price for the paper was too high, causing a strain on Goodson's finances.Investment bankers familiar with the company said Goodson is seeking a new bank credit line of $190 million and may have to sell additional newspapers. David N. Hurwitz, president and chief operating officer of Goodson, said in a telephone interview that the company doesn't currently have any plans to sell additional newspapers. Goodson said David Carr, former president of Ingersoll Publications, and Ray Cockburn, former senior vice president, would head the new in-house management team at Goodson, which had revenue of $225 million in 1988. The association between the two companies stretches back thirty years to a friendship between television producer Mark Goodson and Ingersoll founder Ralph Ingersoll.The latter's son, Ralph Ingersoll Jr., took over the company and has been managing the Goodson properties and acting as an agent in the purchase of newspapers for Goodson.But in recent years, Mr. Ingersoll began focusing more on expanding his own newspaper empire in partnership with investment banking firm Warburg, Pincus & Co. Ingersoll has 28 dailies and 200 other non-daily papers in the U.S. and Europe.The company said its revenue will exceed $750 million this year. Ingersoll President Robert M. Jelenic said in a statement that the company is "delighted by the conclusion of the Goodson relationship" and will be able to "concentrate all our energies" on Ingersoll's own papers.Mr. Goodson, in his own statement, was less upbeat, saying "unfortunately over the past few years, it has become increasingly clear that Ralph and I have different agendas," and that he feels "more comfortable with a management team whose sole interest and responsibility is in the Goodson papers."
Crude oil futures prices fell further as analysts and traders said OPEC oil producers aren't putting the brakes on output ahead of the traditionally weak first quarter. In trading on the New York Mercantile Exchange, the U.S. benchmark West Texas Intermediate crude fell 39 cents a barrel to $19.76 for December delivery.Petroleum products prices also declined. Analysts pointed to reports that the Organization of Petroleum Exporting Countries is producing substantially more than its official limit of 20.5 million barrels a day, with some accounts putting the 13-nation group's output as high as 23 million barrels a day. That level of production didn't take its toll on futures prices for the fourth quarter, when demand is traditionally strong.But because first-quarter demand is normally the weakest of the year, several market participants say, OPEC production will have to decline to keep prices from eroding further.The group plans to meet in a month to discuss production strategy for early 1990. With prices already headed lower, news of a series of explosions at a major Phillips Petroleum Co. chemical facility on the Houston Ship Channel also was bearish for prices.Even though such facilities use a relatively small amount of crude, analysts say, now the facility won't need any, at a time of already high availability. The Phillips plant makes polyethylene, polypropylene and other plastic products.A company official said the explosions began when a seal blew out.Dozens of workers were injured, authorities said.There was no immediate estimate of damage from the company. Some petroleum futures traders say technical considerations now will help to put downward pressure on futures prices.For instance, one trader said that prices inevitably will go lower now that they've fallen below $20 a barrel. "Our technician is a little bearish now that we've taken out $20," he said. In other commodity markets yesterday: COPPER: The selling that started on Friday continued yesterday.The December contract fell 3.85 cents a pound to $1.1960.London Metal Exchange warehouse stocks were down only 4,800 metric tons for the week to 84,500 tons; expectations late last week were a drop of 10,000 to 15,000 tons.The New York market made its high for the day on the opening and when it dropped below the $1.23-a-pound level, selling picked up as previous buyers bailed out of their positions and aggressive short sellers -- anticipating further declines -- moved in.Fund selling also picked up at that point.According to Bernard Savaiko, senior commodity analyst at PaineWebber, the only stability to the market came when short sellers periodically moved in to cover their positions by buying contracts.This activity produced small rallies, which in turn attracted new short selling.Mr. Savaiko noted that copper had a steep fall in spite of a weak dollar, which would normally support the U.S. copper market.Such support usually comes from arbitragers who use a strong British pound to buy copper in New York. "The sell-off would probably have been worse if the dollar had been strong," he said.Copper has been stuck in a trading range of $1.19 to $1.34.Mr. Savaiko believes that if copper falls below the bottom of this range the next significant support level will be about $1.04. PRECIOUS METALS: Platinum and palladium struggled to maintain their prices all day despite news stories over the weekend that recent cold fusion experiments, which use both metals, showed signs of producing extra heat.January platinum closed down $2.80 an ounce at $486.30, nearly $4 above its low for the day.December palladium was off $1.55 an ounce at $137.20.Platinum is believed to have good support around $480 and palladium at around $130.Some traders were thought to be waiting for the auto sales report, which will be released today.Such sales are watched closely by platinum and palladium traders because both metals are used in automobile catalytic converters.Mr. Savaiko theorized that the news on cold fusion didn't affect the market yesterday because many traders have already been badly burnt by such stories.He said the traders are demanding a higher level of proof before they will buy palladium again.Also weighing on both metals' prices is the role of the chief supplier, the Soviet Union.Many analysts believe that the Soviets' thirst for dollars this year to buy grain and other Western commodities and goods will bring them to the market whenever prices rally very much. GRAINS AND SOYBEANS: Prices closed mixed as contracts reacted to largely offsetting bullish and bearish news.On the Chicago Board of Trade, soybeans for November delivery closed at $5.63 a bushel, down half a cent, while the December wheat contract rose three-quarters of a cent to $4.0775 a bushel.Supporting prices was the announcement late Friday of additional grain sales to the Soviet Union.But acting as a drag on prices was the improved harvest weather over the weekend and the prospect for continued fair weather this week over much of the Farm Belt.Strong farmer selling over the weekend also weighed on prices. SUGAR: World prices tumbled, mostly from their own weight, according to analysts.The March contract ended at 13.79 cents a pound, down 0.37 cent.For the past week or so, traders have been expecting India to buy between 150,000 and 200,000 tons of refined sugar, and there have been expectations of a major purchase by Japan.But with no reports of either country actually entering the market, analysts said, futures prices became vulnerable.Developing countries such as India, some analysts said, seem to have made it a point to stay away whenever sugar reached the top of its trading range, around 14.75 cents, and wait for prices to return to the bottom of the range, around 13.50 cents.But Erik Dunlaevy, a sugar analyst with Balfour Maclaine International Ltd., said the explanation for the latest drop in sugar prices is much simpler: Speculators, he said, "got too long too soon and ran into resistance around the old contract highs." A PaineWebber analyst said that in light of a new estimate of a production increase of four million metric tons and only a modest increase in consumption, sugar isn't likely to rise above the top of its trading range without a crop problem in a major producing country. COCOA: Futures rallied modestly.The December contract rose $33 a metric ton to $1,027, near its high for the day.Gill & Duffus Ltd., a British cocoa-trading house, estimated that the 1989-90 world cocoa surplus would be 231,000 tons, down from 314,000 tons for the previous year.Market technicians were encouraged by the price patterns, which in the past have preceded sharp rallies.Recent prices for cocoa have been near levels last seen in the mid-1970s.At such prices, according to Mr. Savaiko, bargain hunting and short-covering -- buying back of contracts previously sold -- by speculators isn't uncommon.But Mr. Savaiko expects stepped-up producer selling at around the $1,040 to $1,050 level.He also noted that a strong sterling market yesterday might have helped cocoa in New York as arbitragers took advantage of the currency move.Sandra Kaul, research analyst at Shearson Lehman Hutton, said the market pushed higher mainly in anticipation of a late harvest in the Ivory Coast, a major cocoa producer.
Turner Broadcasting System Inc. said it formed a unit to make and distribute movies to theaters overseas and, eventually, to U.S. theaters, too. The operator of cable-television networks said the new Turner Pictures unit will produce movies that will premiere on Turner Broadcasting's Turner Network Television channel, or TNT, and then will be released internationally in movie theaters. The unit's first two offerings are slated to be "The Secret Life of Ian Fleming," a dramatization about the former British spy who wrote the James Bond novels, and "Treasure Island," produced by Charlton Heston, who also stars in the movie. Ted Turner, Turner Broadcasting's chairman, was named chairman of Turner Pictures, and Gerry Hogan, president of Turner Entertainment Networks, was named president of the unit. In an interview, Mr. Hogan said the subsidiary's primary mission will be to make movies for TNT and to distribute them internationally.But he said Turner Broadcasting already has found some ideas that might work well as films for theatrical release in the U.S. "When that occurs, and when the time is right, we'll release the films in the U.S.," he said, adding that Turner Pictures may develop such movies next year for domestic release in 1991. Turner has made several movies, docudramas and documentaries for its networks in recent years, but the company has never acted as a full-fledged movie studio and released its own pictures to theaters. Mr. Hogan said "The Secret Life of Ian Fleming" and "Treasure Island" cost more than $6 million each to make, which is only about one-third the cost of most movies made for theatrical release. The Turner move is in line with a cable-TV trend toward more original programming -- and toward finding more ways to amortize the high cost of producing films.In July, Viacom Inc. formed Viacom Pictures to produce 12 low-budget movies a year that will premiere on Showtime network and be distributed later in various markets, including foreign theaters.
The bond market, which sometimes thrives on bad news, cheered yesterday's stock market sell-off and perceptions that the economy is growing weaker. Early in the day, bonds rose modestly on economists' forecasts that this week's slate of economic data will portray an economy headed for trouble.Such news is good for bonds because economic weakness sometimes causes the Federal Reserve to lower interest rates in an effort to stimulate the economy and stave off a recession. For example, today the Department of Commerce is scheduled to release the September durable goods report.The consensus forecast of 14 economists surveyed by Dow Jones Capital Markets Report is for a 1.2% drop in September orders.That would follow a 3.9% advance in August. Bonds received a bigger boost later in the day when stock prices moved broadly lower.The Dow Jones Industrial Average fell 26.23 points to 2662.91. "Bond investors have been watching stocks closely," said Joel Marver, chief fixed-income analyst at Technical Data Global Markets Group. "When you get a big sell-off in equities, money starts to shift into bonds," which are considered safer, he said. The Treasury's benchmark 30-year bond ended about 1/2 point higher, or up about $5 for each $1,000 face amount, while the yield slid to 7.93% from 7.98% Friday.Municipals ended mixed, while mortgage-backed and investment-grade corporate bonds rose.Prices of high-yield, high-risk corporate securities ended unchanged. In more evidence of the growing division between "good" and "bad" junk bonds, a $150 million issue by Imo Industries Inc. was snapped up by investors while underwriters for Beatrice Co. 's $350 million issue are considering restructuring the deal to attract buyers. In the Treasury market, analysts expect bond prices to trade in narrow ranges this week as the market takes in positive and negative news. "On the negative side, the market will be affected by constant supply in all sectors of the market," said William M. Brachfeld, economist at Daiwa Securities America Inc. "On the other hand, we have economic news that is {expected to be} relatively positive for the bond market.We will go back and forth with a tilt toward slightly lower yields," he said. Today, the Treasury will sell $10 billion of new two-year notes.Tomorrow, Resolution Funding Corp., a division of a new government agency created to bail out the nation's troubled thrifts, will hold its first bond auction at which it will sell $4.5 billion of 30-year bonds. So far, money managers and other bond buyers haven't shown much interest in the Refcorp bonds.Analysts have mixed views about the two-year note auction.While some say the auction should proceed smoothly, others contend that yesterday's sale of $2.58 billion of asset-backed securities by Ford Motor Credit Corp. may have siphoned some potential institutional buyers from the government's note sale. The division of auto maker Ford Motor Co. made its debut in the asset-backed securities market with the second-largest issue in the market's four-year history.The company offered securities backed by automobile loans through an underwriting group headed by First Boston Corp. The issue yields 8.90% and carries a guarantee covering 9% of the deal from the company.First Boston sweetened the terms from the original yield estimate in an apparent effort to place the huge offering.The issue was offered at a yield nearly one percentage point above the yield on two-year Treasurys. The only asset-backed deal larger than Ford's was a $4 billion offering by General Motors Acceptance Corp. in 1986. Treasury Securities Treasury bonds were 1/8 to 1/2 point higher yesterday in light trading. The benchmark 30-year bond ended at a price of 102 3/32, compared with 101 17/32 Friday.The latest 10-year notes were quoted late at 100 17/32 to yield 7.90%, compared with 100 3/32 to yield 7.97%.The latest two-year notes were quoted late at 100 28/32 to yield 7.84%. Short-term rates rose yesterday at the government's weekly Treasury bill auction, compared with the previous bill sale. The Treasury sold $7.81 billion of three-month bills with an average discount rate of 7.52%, the highest since the average of 7.63% at the auction on Oct. 10.The $7.81 billion of six-month Treasury bills were sold with an average discount rate of 7.50%, the highest since the average of 7.60% at the Oct. 10 auction. The rates were up from last week's auction, when they were 7.37% and 7.42%, respectively. Here are auction details: Rates are determined by the difference between the purchase price and face value.Thus, higher bidding narrows the investor's return while lower bidding widens it.The percentage rates are calculated on a 360-day year, while the coupon-equivalent yield is based on a 365-day year. Both issues are dated Oct. 26.The 13-week bills mature Jan. 25, 1990, and the 26-week bills mature April 26, 1990. Corporate Issues Investment-grade corporates closed about 1/4 point higher in quiet trading. In the junk bond market, Imo Industries' issue of 12-year debentures, considered to be one of the market's high-quality credits, was priced at par to yield 12%. Peter Karches, managing director at underwriter Morgan Stanley & Co., said the issue was oversubscribed. "It's a segmented market, and if you have a good, strong credit, people have an appetite for it," he said.Morgan Stanley is expected to price another junk bond deal, $350 million of senior subordinated debentures by Continental Cablevision Inc., next Tuesday. In light of the recent skittishness in the high-yield market, junk bond analysts and traders expect other high-yield deals to be sweetened or restructured before they are offered to investors. In the case of Beatrice, Salomon Brothers Inc. is considering restructuring the reset mechanism on the $200 million portion of the offering.Under the originally contemplated terms of the offering, the notes would have been reset annually at a fixed spread above Treasurys.Under the new plan being considered, the notes would reset annually at a rate to maintain a market value of 101.Price talk calls for the reset notes to be priced at a yield of between 13 1/4% and 13 1/2%. Mortgage-Backed Securities Activity in derivative markets was strong with four new real estate mortgage investment conduits announced and talk of several more deals in today's session. The Federal National Mortgage Association offered $1.2 billion of Remic securities in three issues, and the Federal Home Loan Mortgage Corp. offered a $250 million Remic backed by 9% 15-year securities. Part of the reason for the heavy activity in derivative markets is that underwriters are repackaging mortgage securities being sold by thrifts.Traders said thrifts have stepped up their mortgage securities sales as the bond market has risen in the past two weeks. In the mortgage pass-through sector, active issues rose but trailed gains in the Treasury market. Government National Mortgage Association 9% securities for November delivery were quoted late yesterday at 98 10/32, up 10/32; and Freddie Mac 9% securities were at 97 1/2, up 1/4.The Ginnie Mae 9% issue was yielding 8.36% to a 12-year average life assumption, as the spread above the Treasury 10-year note widened slightly to 1.46 percentage points. Municipals A $575 million San Antonio, Texas, electric and gas system revenue bond issue dominated the new issue sector. The refunding issue, which had been in the wings for two months, was one of the chief offerings overhanging the market and limiting price appreciation.But alleviating that overhang failed to stimulate much activity in the secondary market, where prices were off 1/8 to up 3/8 point. An official with lead underwriter First Boston said orders for the San Antonio bonds were "on the slow side." He attributed that to the issue's aggressive pricing and large size, as well as the general lethargy in the municipal marketplace. In addition, he noted, the issue would normally be the type purchased by property and casualty insurers, but recent disasters, such as Hurricane Hugo and the Northern California earthquake, have stretched insurers' resources and damped their demand for bonds. A $137.6 million Maryland Stadium Authority sports facilities lease revenue bond issue appeared to be off to a good start.The issue was oversubscribed and "doing very well," according to an official with lead underwriter Morgan Stanley. Activity quieted in the New York City bond market, where heavy investor selling last week drove yields on the issuer's full faith and credit backed bonds up as much as 0.50 percentage point. Foreign Bonds Japanese government bonds ended lower after the dollar rose modestly against the yen. The turnaround in the dollar fueled bearish sentiment about Japan's bond market.The benchmark No. 111 4.6% bond due 1998 ended on brokers' screens at a price of 95.39, off 0.28.The yield rose to 5.38%.West German bond prices ended lower after a day of aimless trading.The benchmark 7% bond due October 1999 fell 0.20 point to 99.80 to yield 7.03%, while the 6 3/4% notes due July 1994 fell 0.10 to 97.65 to yield 7.34%. British government bonds ended slightly higher in quiet trading as investors looked ahead to today's British trade report.The benchmark 11 3/4% Treasury bond due 2003/2007 rose 1/8 to 111 21/32 to yield 10.11%, while the 12% issue of 1995 rose 3/32 to 103 23/32 to yield 11.01%.
"The croaker's done gone from the hook -- damn! My language sure goes to pot down here on the coast." The husky blond guide with the Aggie cap twists his face in mock fury. "I got to get back to school and straighten out my English." He has two more years at Texas A&M.Right now he takes people out to fish in the bays behind the barrier islands that curve for hundreds of miles along the eastern coast of Texas, enclosing milky green lagoons behind ridges of sand and grassy scrub that rim the deep blue of the Gulf beyond. There have been three days of hot, wind-swept rain, and now with the first sun we are after speckled seatrout, which with redfish provides most of the game fishing hereabouts.The little radio fizzes as other boats want to see if we have found any fish -- spotting location is everything in this sport.Negative answers crackle back. The fish often are plentiful around the pilings of the old gas wells that dot the flat surface like the remains of sunken ships.We go from one to the other.The sun is hot now though it's only 8 in the morning.The great silver clouds on the horizon build themselves on the pale water. We cruise toward another set of pilings.The guide scoops into a pail and puts a frantically wiggling croaker on the hook.Then he casts out. "Just wait for that tap-tap, that thump-thump.It comes real gentle before it pulls.Don't forget, trout have very soft mouths." The radio queries again. "Pickin' one or two," says the guide, chuckling. "You can tell they've got nothin'." A pair of black skimmers zig-zag past close to the surface.Soon we have our limit of the shimmering fish stippled in rose-gold and black.And we are the first back at the dock, where the great blue herons stand waiting by the cleaning benches.The guide is young and he knows this business but he wants a different life after college, such as working for IBM and wearing a necktie. This must be the last big stretch of the American seacoast that is "undeveloped." There are a few ramshackle fishing towns with quiet atolls of resort houses nearby.People are not apt to be self-conscious about the place or themselves.Texas is big and beautiful and they live here, that's all. Jutting out just to the north of us is the Blackjack Peninsula (after the oak, not the game) which forms the core of the Aransas Wildlife Refuge.It is famous as the winter home of the whooping crane, that symbol of the destruction of wild America.Last year a gunner shot a whooper by mistake thinking that it was a snow goose.He paid an immense fine and was lucky, according to a local wag, to escape the gas chamber. The peninsula comes off the vast southeastern alluvial plain with fields of rice and cotton and sorghum as far as the eye can see.Near the coast there are dense coverts of live oak interspersed with marshes and prairies.Deer, wild hog, armadillos and alligators are the glamour quadrupeds and the birds are innumerable, especially the herons and the spoonbills.Above the blossoms of lantana and scarlet pea the inky-brown and golden palamedes butterfly floats on its lazy wingbeat. Inland a few miles from the refuge there is a place called Tivoli, with a white church, a gas station and a grocery, the houses relatively close together for such a settlement in these parts. "Tivoli Motel," I read a sign in the usual pronunciation of the name as we whoosh through. "Here in south Texas we say Tie-vole-ee," my host gently corrects. Mr. King is the director of the Foreign Press Center in New York.
At age eight, Josephine Baker was sent by her mother to a white woman's house to do chores in exchange for meals and a place to sleep -- a place in the basement with the coal. At age 19, she was a Paris sensation, transformed from unwanted child to international sex symbol in just over a decade.It is the stuff of dreams, but also of traumas.Only the bravest spirits survive such roller coasters.And, for Ms. Baker, the ride was far from over. Her bare breasts, her dancing, her voice, her beauty and, perhaps most famously, her derriere, were prominent attractions, but courage of a rare sort made her remarkable life possible.Bricktop, another American black woman who found a measure of fame in Paris, said: "I don't think I've ever known anyone with a less complicated view of life, or whose life was more complicated than Josephine's." Men were a constant complication.Baker had lots of them.But she didn't trust them and didn't reward trust.As she saw one key love affair, the problem wasn't her infidelity, it was his jealousy. Her appetite for children also was large.She adopted 12 of assorted races, naming them the Rainbow Tribe, and driving her husband first to despair and then to Argentina. She made money, but spent more.Friends pitched in.Finally, Prince Rainier and Princess Grace saved her with the offer of a house in Monaco. Another lifelong complication, as Phyllis Rose makes clear in "Jazz Cleopatra: Josephine Baker in Her Time" (Doubleday, 321 pages, $22.50), was racism.Baker had the good luck to arrive in 1925 Paris, where blacks had become exotic.African art was in vogue and some intellectuals were writing breathlessly of a dawning age to be inspired by blacks.To be exotic was to be patronized as well as prized, but for the most part Paris was a friendly island in a racist world.Baker had bitter experience of bigotry from her St. Louis childhood and her days in New York theater, where she was judged too dark for an all-black chorus line (performing of course for all-white audiences). Paris loved her at first sight. "She just wiggled her fanny and all the French fell in love with her," sniffed the literary world's Maria Jolas, not entirely inaccurately. "One can hardly overemphasize the importance of her rear end," Ms. Rose writes.Ms. Rose, who teaches literature at Wesleyan University, quickly proceeds to overemphasize, claiming that Baker's dancing "had uncovered a new region for desire" and thereby ignoring centuries of tributes to the callipygous. "Jazz Cleopatra" contains other, more important, false notes that undermine what is, for the most part, a lively account of a life already familiar from earlier works.It is easy to see why Baker, a free spirit who broke many of the restraints convention places on women, attracts Ms. Rose, the author of "Parallel Lives," a wonderful study of Victorian marriage. Still, even the title raises questions about the author's vision of her subject.Baker's art was jazz only by the widest stretch of the term.To find parallels, other than sexual appeal, with Cleopatra, requires an equal stretch. Baker was 68 years old when she died in Paris, two days after the sold-out opening of her newest show: a movie-like ending to what was a cinematic life.In fact, Ms. Baker played scenes in Casablanca that could have made it into "Casablanca." During World War II, her uncomplicated view of life led her to the conclusion that the Nazis were evil and must be resisted, a decision made by only about 2% of French citizens.She was devoted to Charles de Gaulle's cause, accepting great financial sacrifice and considerable risk to become first a spy and then a one-woman USO tour for the forces of Free France. In Humphrey Bogart's nightclub, Victor Laszlo leads Free French sympathizers in "La Marseillaise" to drown out the Nazis.The night the Germans occupied all of France, Baker performed in Casablanca.The Free French wore black arm bands, and when she sang "J'ai deux amours" they wept. Ms. Rose is best on the early years and World War II.In her introduction, Ms. Rose writes that she feels she has much in common with Baker, but as "Jazz Cleopatra" goes on, it seems more rushed, as though the author were growing less interested.It doesn't help that sometimes Ms. Rose's language fails to deliver the effect she appears to want.One chapter opens: "World War II was not one of France's glorious moments." Elsewhere, in an attempt to explain without stating it plainly that Baker had a large gay following later in her career when she was an overdressed singer rather than underdressed dancer, Ms. Rose writes: "She was a female impersonator who happened to be a woman." One devoted fan who fell under Baker's spell in 1963 and began collecting Baker memorabilia was Bryan Hammond.In "Josephine Baker" (Jonathan Cape, 304 pages, $35), which was published in Britain last year and distributed in the U.S. this month, Mr. Hammond has used his collection to produce an album of photographs and drawings of the star.The text by Patrick O'Connor is a tough read, but the pictures make her magnetism clear and help explain why Ernest Hemingway called Baker "The most sensational woman anybody ever saw.Or ever will." Mr. Lescaze is foreign editor of the Journal.
Manville, having rid itself of asbestos, now sells fiberglass, forest products, minerals and industrial goods.Heady stuff it's not. But Manville's ownership is unusual, and it has caught the eye of some canny -- and patient -- investors.The Denver-based concern, which emerged from bankruptcy-law proceedings late last year, is controlled by the Manville Personal Injury Settlement Trust.The trust, which owns 80% of Manville's stock on a fully diluted basis, is a separate legal entity that is settling claims with asbestos victims. When and if the trust runs out of cash -- which seems increasingly likely -- it will need to convert its Manville stock to cash.But as an 80% owner, if it tried to sell much of its stock in the market, it would likely depress the price of its shares. Some investors say there is a good chance that the trust will, instead, seek to convert the company's shares to cash, in some sort of friendly restructuring that wouldn't involve just dumping stock on the market. "Their principal asset is Manville common stock," says Jeffrey Halis, who runs Sabre Associates, an investment fund that owns Manville shares. "If they tried to sell, they'd be chasing their own tail.What makes the most sense is to find someone who wants to buy the whole company or cause a recapitalization of all shares." The trust isn't commenting on when it might need to liquefy its Manville stock.However, the trust's cash flow from investments is far short of its payments to asbestos victims.Its cash and liquid securities fell by $338 million in the first six months of 1989. The trust also will receive $75 million a year starting in 1991 on a bond it holds from Manville.And, beginning in 1992, it will have a claim on as much as 20% of Manville's annual net income.Even so, the trust would seem to be facing a cash crunch.As of June 30, it had settled only about 15,000 of the 81,000 received claims from asbestos victims, for an average of $40,424 each. (The average should drop over time, since the most expensive claims are being settled first).And as of midyear, settled but unpaid claims amounted to $136 million -- more than half the trust's total of $268 million in cash and marketable securities. "At some point, we're going to need an infusion of funds," a person close to the trust says. Even before then, the trust may be eager to unload Manville stock.It doesn't pay a dividend, and this trust needs income.Moreover, with 88% of its assets tied up in Manville, the trust is badly in need of diversification. "Obviously, a diversified portfolio would have less risk," the person close to the trust says. Manville itself doesn't rule out a restructuring.Though the ink is barely dry on its new, post-bankruptcy law structure, Bill Bullock, Manville's head of investor relations, says the company is continually pondering "whether there is a better way to be structured.We understand that the trust is ultimately going to need to sell some of our shares," he says. Of course, one option would be for Manville to buy out the trust's shares -- which would do little to benefit public stockholders.But the trust, in most cases, is forbidden from seeking a buyer for only its shares before November 1993.And both the trust and Manville are seeking to avoid the bad publicity that, in the asbestos era, tarred the Manville name.Thus, analysts say, the trust is unlikely to do anything that would hurt Manville's other shareholders. "This is a rare case of a company with a big majority holder which will probably act in the interests of the minority holders," one investor says. Even if there is no restructuring, Manville seems to be attractive long-term.Its stock, at 9 5/8, trades at about 8 1/2 times estimated 1989 earnings -- an appropriately low multiple for a company with recession-sensitive customers.Mr. Bullock says 45% of revenues are tied to construction.Analysts predict little or no near-term growth. They are, nonetheless, high on Manville's management. "It's one of the best in the business," says Salomon Brothers analyst Stephen Dobi.And he says Manville has the financial flexibility to buy other companies at the best possible momentwhen other construction-related firms are hurting and selling cheap.With a conservative debt-to-equity ratio of 1-to-1 -- and $329 million in cash -- Manville is indeed actively on the prowl. So far, as a price-conscious shopper, Manville hasn't bought much.Paul Kleinaitis, an analyst at Duff & Phelps, says, "Even though they have borrowing power, they have been disciplined about acquisitions." And Mr. Kleinaitis says that with 80% of its stock in friendly hands, Manville is the rare publicly traded company that can ignore short-term stock fluctuations and plan for the long haul. Manville (NYSE; Symbol: MVL) Business: Forest products and roofing Year ended Dec. 31, 1988: Sales: $2.06 billions Net loss: $1.30 billion* Third quarter, Sept. 30, 1989: Per-share earnings: 30 cents vs. 44 cents** Average daily trading volume: 74,351 shares Common shares outstanding: 120 million *Includes $1.29 billion extraordinary charge. **Year ago figure is restated.
Emerson Electric Co. and Robert Bosch G.m.b.H. said the Federal Trade Commission has requested additional information from the two companies about their announced intention to acquire Vermont American Corp. for $40 a share, or about $440 million. Yesterday, in composite trading on the American Stock Exchange, Vermont American common closed at $39.75, off 25 cents. The FTC's request was "not unusual" and Emerson will make a "full and prompt" response, according to a spokesman.Spokesmen for Emerson and Vermont American, which has agreed to be acquired, said they don't anticipate "any problems" with the completion of the transaction. An FTC spokesman said the matter is "in a non-public posture at this time" and declined to comment further. Emerson and Bosch, through their joint acquisition arm, Maple Acquisition, have begun a cash tender offer for all of Vermont's common shares outstanding.The offer, set to expire Nov. 1, may be extended pending the timing and resolution of the FTC request, the companies said. St. Louis-based Emerson and Stuttgart-based Bosch make electrical and electronic products, including power tools.The Vermont American acquisition is designed to enhance their position in the accessories portion of the power-tool industry.
Santa Fe Pacific Corp. is preparing a plan to sell a 20% stake in its large real estate unit to a California public employee pension fund for $400 million, after which it would spin off the realty operation to shareholders. The plan places an indicated value on the real estate operation, Santa Fe Pacific Realty Corp., of $2 billion.Santa Fe Pacific directors are expected to review the plan at a meeting today, according to people familiar with the transaction. If approved, the sale is expected to close by year's end, with the spinoff occurring by the end of 1992.In composite trading on the New York Stock Exchange yesterday, Santa Fe Pacific closed at $20.625, down 25 cents. Santa Fe Pacific Realty is a major California land and building owner whose prime properties include 1,850 undeveloped acres in the San Francisco Bay area, and several office sites.A spokesman said the properties survived without significant damage in last week's Northern California earthquake. As a result of the partial sale and spinoff, the $56 billion California Public Employees Retirement System would obtain two seats on the board of the real estate operation, according to officials of the fund, who described the plan. A spokesman for Chicago-based Santa Fe Pacific confirmed that negotiations were being held with the fund. Also holding two seats each on the board, they said, would be Olympia & York Developments Ltd., controlled by the Reichmann family of Canada, and Itel Corp., controlled by Chicago businessman Sam Zell.The Reichmanns and Mr. Zell, the largest holders of Santa Fe Pacific stock, have been looking for ways to raise the value of their investments, including possible spinoffs. Itel bought a 17% stake in Sante Fe Pacific last year and Olympia & York later purchased about a 20% stake; they would have interests in the new realty company in line with their holdings in Sante Fe Pacific. The sale and spinoff of the real estate unit is the first phase of what could lead to the breakup of Santa Fe Pacific into free-standing companies for its railroad and energy operations, as well as real estate.The debt-laden parent has been under pressure from large shareholders to boost the company's share price.At the same time it has been caught in an earnings squeeze. The California pension fund's planned investment in the real estate unit is unusual.Pension funds rarely own as much as a 20% stake in what is expected to be a publicly traded company.In addition, pension funds are rarely given seats on company boards and most often try to avoid them because of legal concerns. But fund officials said the Santa Fe Pacific Realty investment provides an opportunity to buy a stake in a large real estate portfolio heavily weighted with California properties.It also marks a "major commitment to {real estate} development, which we haven't been involved with before," said Dale Hanson, the fund's executive director. Under the proposed plan, the fund would also lend Santa Fe Pacific Realty $75 million in the form of a note that would be convertible into additional shares of the realty company after the second year at the then-prevailing market price.The note would accrue interest at the rate of 13.5% a year, which would be payable to the fund after five years, according to Stephen E. Roulac, a real estate consultant working for the fund. The purpose of the note is to provide added capital for the spun-off company in a form that will save it spending cash on immediate interest payments, Mr. Roulac said.The spun-off concern "clearly will be one of the dominant real estate development companies with a prime portfolio," he said. For the last year, Santa Fe Pacific has redirected its real estate operations toward longer-term development of its properties, hurting profits that the parent had generated in the past from periodic sales from its portfolio.Real estate operating income for the first nine months fell to $71.9 million from $143 million a year earlier, the company said. In a statement late yesterday, Santa Fe Pacific's chairman, Robert D. Krebs, said that Santa Fe Pacific Realty would repay more than $500 million in debt owed to the parent before the planned spinoff.That would help reduce Santa Fe Pacific's remaining debt to about $600 million from a high of $3.7 billion in early 1988. It wasn't clear where Santa Fe Pacific expected to obtain the payment of more than $500 million, which would be well above the $400 million that California pension fund officials say they plan to provide.The realty unit might take on new debt or obtain additional investors, among other possibilities.The Santa Fe Pacific spokesman declined to comment on that aspect, saying the deal was still under negotiation. Santa Fe Pacific Realty owns 2.8 million acres of property, including 219 buildings with more than 11 million square feet of space.It also holds nearly 40,000 acres of raw land with development potential, but under a previously announced strategy, the company has targeted building on 5,400 acres in California, Arizona and the Chicago area.Among those are the 1,850 acres in the San Francisco Bay area, including 208 acres in the Mission Bay area. The California pension fund, which has $16 billion already invested in real estate and mortgages, could be a valuable funding source for that development, although it isn't obliged to make further investments.The fund is the nation's largest public employee fund, and it has a growing cash flow now topping $3 billion a year. Fund officials negotiated the final structure of the proposed deal with Santa Fe Pacific, but they were approached with the idea by real estate brokers JMB Realty Corp. of Chicago.JMB officials are expected to be hired to represent the pension fund on the Santa Fe Pacific Realty board, Mr. Roulac said, to insulate the fund from potential liability problems.
In a sign the stock slump hasn't quieted Europe's takeover fever, Cie.Financiere de Paribas said it intends to bid for one of France's other large financial and industrial holding companies, Cie. de Navigation Mixte. Paribas said that once it receives the go-ahead from French stock market authorities, it will offer to boost its Navigation Mixte stake to 66.7% from the current 18.7%.Its cash-or-shares bid values Navigation Mixte at about 22.82 billion francs ($3.62 billion), making this one of France's largest-ever attempted takeovers.The cost of buying the additional 48% stake would be 10.95 billion francs ($1.74 billion). The move would greatly boost Paribas's stake in the insurance, transport and food businesses, where Navigation Mixte is strong.It also would make Paribas a major French ally of West Germany's Allianz AG insurance group. Allianz holds a 50% stake in Navigation Mixte's insurance interests, acquired three weeks ago.Those include Rhin et Moselle Vie and Via Assurances.Long considered a potential takeover target, Navigation Mixte had hoped Allianz would help protect it from raiders.That idea may have backfired.Paribas is Allianz's main French bank, and the Munich-based group said it intends to stay neutral.Navigation Mixte said it wouldn't have any comment until its board meets Wednesday. But Navigation Mixte is loosely held and hard to defend. "The defensive options are limited," says Philippe Braye, a partner in portfolio management concern France Finance Quatre. "Who would bid against Paribas?" If the Paribas bid succeeds, it will be the second time in two months a big French investment banking group has snapped up an insurance group.Last month, Paribas's archrival, Cie.Financiere de Suez, won a battle for Groupe Victoire, France's second-largest private-sector insurer, which itself had just acquired West Germany's Colonia Versicherung AG.That complex bid was billed as France's largest takeover ever (this one is slightly smaller).Moreover, Suez had just finished winning an even larger battle last year for control of Societe Generale de Belgique. Paribas officials, once considered France's toughest bankers, felt abashed at Suez's success and its rapid growth.Although Paribas denies it, analysts say the new bid in part simply reflects the continuing rivalry between France's two largest investment banking groups. It also reflects the broader pressure on companies in Europe to keep up as the European Community prepares to reduce internal trade barriers by 1992.Although Paribas Chairman Michel Francois-Poncet wouldn't rule out eventually selling all of Navigation Mixte's insurance operations to Allianz, he stressed the potential for the two groups instead to cooperate. He also told reporters the acquisition would give Paribas fresh diversity, bringing it properties in food and transport where it has been weak.Navigation Mixte has investments in a sugar company, a food and canning concern, a bakery and bus and trucking firms, among others. And Navigation Mixte has a huge hidden attraction.Payment by Allianz for the insurance interests it has just bought will help swell the French concern's treasury to an estimated 11 billion francs. Paribas said it will bid 1,850 francs a share for Navigation Mixte shares that qualify for a full yearly dividend, and 1,800 francs for those created July 1, which are eligible for partial dividends.Alternatively, it said it would offer three Paribas shares, themselves eligible for dividends as of next Jan. 1, for one Navigation Mixte share.Paribas shares closed down 30 francs at 610 francs, and Navigation Mixte shares were suspended at 1,800 francs pending the outcome of the bid. Paribas said it would publish details of its bid once authorities clear it.This is one of the first bids under new takeover rules aimed at encouraging open bids instead of gradual accumulation of large stakes. Some financial sources said privately that Paribas blundered in failing to move sooner for the insurance and industrial group, bidding only after speculation had pushed up the price.Mr. Francois-Poncet responded that his group initially intended to take only a minority stake, striking an alliance with current management.When notoriously independent-minded Navigation Mixte Chairman Marc Fournier rejected Paribas's offer and began buying Paribas shares in retaliation, Mr. Francois-Poncet said, he felt obliged to bid for control.He told reporters he had information that Mr. Fournier was preparing to buy as much as 20% of Paribas, up from less than 5% currently. A bid against Paribas couldn't be ruled out.France's second-largest government-owned insurance company, Assurances Generales de France, has been building its own Navigation Mixte stake, currently thought to be between 8% and 10%.Analysts said they don't think it is contemplating a takeover, however, and its officials couldn't be reached.
GAF, Part III is scheduled to begin today. After two mistrials, the stakes in the stock manipulation trial of GAF Corp. and its vice chairman, James T. Sherwin, have changed considerably.The first two GAF trials were watched closely on Wall Street because they were considered to be important tests of the government's ability to convince a jury of allegations stemming from its insider-trading investigations. In an eight-count indictment, the government charged GAF, a Wayne, N.J., chemical maker, and Mr. Sherwin with illegally attempting to manipulate the common stock of Union Carbide Corp. in advance of GAF's planned sale of a large block of the stock in 1986. The government's credibility in the GAF case depended heavily on its star witness, Boyd L. Jefferies, the former Los Angeles brokerage chief who was implicated by former arbitrager Ivan Boesky, and then pointed the finger at Mr. Sherwin, takeover speculator Salim B. Lewis and corporate raider Paul Bilzerian.The GAF trials were viewed as previews of the government's strength in its cases against Mr. Lewis and Mr. Bilzerian.Mr. Jefferies's performance as a witness was expected to affect his sentencing. But GAF's bellwether role was short-lived.The first GAF trial ended in a mistrial after four weeks when U.S. District Judge Mary Johnson Lowe found that a prosecutor improperly, but unintentionally, withheld a document.After 93 hours of deliberation, the jurors in the second trial said they were hopelessly deadlocked, and another mistrial was declared on March 22. Meanwhile, a federal jury found Mr. Bilzerian guilty on securities fraud and other charges in June.A month later, Mr. Jefferies was spared a jail term by a federal judge who praised him for helping the government.In August, Mr. Lewis pleaded guilty to three felony counts. Nevertheless, the stakes are still high for the players directly involved in the GAF case.The mistrials have left the reputations of GAF, Mr. Sherwin and GAF Chairman Samuel Heyman in limbo.For Mr. Sherwin, a conviction could carry penalties of five years in prison and a $250,000 fine on each count.GAF faces potential fines of $500,000 for each count. Individuals familiar with the case said that throughout September, defense attorneys were talking with the government in an effort to prevent a trial, but by the end of the month the talks had ended. There is much speculation among attorneys not involved that the strategy of GAF's attorney, Arthur Liman, and Mr. Sherwin's counsel, Stephen Kaufman, will include testimony by Mr. Sherwin or Mr. Heyman.Neither testified at the previous trials. For now, defense attorneys are tight-lipped about their plans.Max Gitter, another GAF defense attorney, said yesterday, "As we go in for the third time, Yogi Berra's famous line is apt: `It's deja vu all over again. '" DALKON SHIELD CLAIMANTS hope to stop reorganization-plan appeal. Attorneys for more than 18,000 women who claim injuries from the Dalkon Shield contraceptive device have asked the U.S. Supreme Court to refuse to hear an appeal of the bankruptcy-law reorganization plan for A.H. Robins Co., which manufactured the device. The dispute pits two groups of claimants against each other.Baltimore attorney Michael A. Pretl and 17 other attorneys representing 18,136 claimants in the U.S. and abroad argue that the appeal would delay -- and perhaps even destroy -- a $2.38 billion settlement fund that is the centerpiece of the reorganization plan. The bankruptcy-court reorganization is being challenged before the Supreme Court by a dissident group of claimants because it places a cap on the total amount of money available to settle claims.It also bars future suits against Robins company officials, members of the Robins family and Robins's former insurer, Aetna Life & Casualty Co.The latter provision is "legally unprecedented," said Alan B. Morrison, a public interest lawyer in Washington, D.C., who is challenging the plan on behalf of 900 claimants. More than 100,000 claims against Robins are pending.The company made and marketed the Dalkon Shield in the early 1970s amid mounting evidence that it could cause serious injuries.Robins has been in proceedings under Chapter 11 of the U.S. Bankruptcy Code since August 1985; such proceedings give it protection from creditor lawsuits while it works out a plan for paying its debts.American Home Products Corp. wants to acquire Robins, but only if all legal challenges to the plan are exhausted. In a brief filed with the Supreme Court last week, Mr. Pretl criticizes the appeal for raising "abstract" and "theoretical" legal issues, while jeopardizing the proposed reorganization and the settlement payments to claimants. The Supreme Court is scheduled to consider the case Nov. 3 and may issue a decision as early as Nov. 6. JURY`S CRIMINAL CONVICTION under Superfund law is a first. Charles A. Donohoo, sole proprieter of a Louisville, Ky., demolition company, was found guilty of violating the Superfund law as well as the Clean Air Act. Criminal convictions under the federal Superfund law are rare, and the decision is the first jury verdict in such a case. Under Superfund, those who owned, generated or transported hazardous waste are liable for its cleanup, regardless of whether their actions were legal at the time. Environmental lawyers say virtually all of the Superfund cases to date have involved civil penalties designed to insure cleanup of past polluting activities.But Superfund also contains a criminal provision concerning the release of toxic substances into the environment.In 1986 Congress strengthened the penalty by making it a felony. Mr. Donohoo was convicted in Louisville late last month of violating Superfund by failing to report the release of asbestos into the environment from a building he was demolishing.He was also convicted of failing to properly remove asbestos from the building, a violation of the Clean Air Act. The government sought a criminal penalty because "no cleanup is possible here.Once {asbestos} is released into the environment, it can lodge anywhere," says Richard A. Dennis, the assistant U.S. attorney who prosecuted the case.Mr. Donohoo is scheduled to be sentenced Dec. 11.His lawyer could not be reached for comment. Mr. Donohoo faces as much as three years in prison and a $250,000 fine for the Superfund conviction and as much as one year in prison and a $100,000 fine for the violation of the Clean Air Act. TED BUNDY'S LAWYERS switch to victims' side in death-sentence case. Wilmer, Cutler & Pickering, the Washington, D.C., law firm that spent over $1 million fighting the execution of mass-murderer Ted Bundy -- who eventually was executed -- has taken on another death penalty case before the Supreme Court, this time on the side of the family of four murder victims in Arkansas. The law firm has filed a friend-of-the-court brief jointly with the Washington Legal Foundation, a conservative legal group.The key issue in the case, which the law firm is handling without a fee, or pro bono, is whether a person sentenced to death can voluntarily waive his rights of appellate review. The murderer, Ronald Gene Simmons, was convicted of killing 14 people.Another murderer on death row has appealed Mr. Simmons's death sentence in a "next friend" capacity.Wilmer Cutler's brief argues that there is no mandatory appellate review of capital sentences and that the inmate who filed the appeal lacks proper standing. P.J. Mode, Wilmer Cutler's managing partner, says the trial team that represented Mr. Bundy was asked by the firm's pro bono committee whether the new case posed a conflict and that no objections were raised. The coupling of the law firm and the Washington Legal Foundation is odd also, because Wilmer Cutler was one of the firms singled out for criticism two years ago by the conservative legal group for displaying a liberal bias in its pro bono work. "We give them a lot of credit for taking this case," says WLF's Alan Slobodin. THE CASE OF THE FAKE DALIS: In federal court in Manhattan, three defendants pleaded guilty to charges of fraud in connection with the sale of fake Salvador Dali lithographs.James Burke and Larry Evans, formerly owners of the now-defunct Barclay Gallery, and Prudence Clark, a Barclay sales representative, were charged with conducting high-pressure telephone sales in which they misrepresented cheap copies of Dali artwork as signed, limited-edition lithographs.The posters were sold for $1,300 to $6,000, although the government says they had a value of only $53 to $200 apiece.Henry Pitman, the assistant U.S. attorney handling the case, said about 1,000 customers were defrauded and that Barclay's total proceeds from the sales were $3.4 million.Attorneys for Messrs.Burke and Evans and Ms. Clarke said that although their clients admitted to making some misrepresentations in the sales, they had believed that the works were authorized by Mr. Dali, who died in January.The posters were printed on paper pre-signed by Mr. Dali, the attorneys said.
In a last-ditch effort to keep its sales force and customer base, Integrated Resources Inc. said it agreed in principle to transfer ownership of its broker-dealer subsidiary to two of its top executives. The financial-services firm, struggling since summer to avoid a bankruptcy-law filing after missing interest payments on about $1 billion of debt, will retain the right to regain the subsidiary.It said it will exercise that right only if it sells substantially all of its other core businesses.It also can sell the right to regain the subsidiary to another party. Also, the broker-dealer subsidiary, Integrated Resources Equity Corp., was renamed Royal Alliance Associates Inc.Because of Integrated's widely reported troubles, the unit's representatives had been requesting a name change.Royal Alliance, to which the 3,900 representatives' licenses will be transferred, is a shell company Integrated owns. In the transaction, Integrated will transfer 100% ownership of the subsidiary to Gerard M. Lavin, executive vice president of Integrated and head of back-office operations at the subsidiary, and Gary W. Krat, executive vice president of the parent and president of the subsidiary. Integrated will pump $3.5 million to $4 million into Royal Alliance as initial funding. In an interview, Mr. Krat said that based on criteria yet to be determined, he expects to distribute 49% of Royal Alliance to the representatives, who sell Integrated's insurance and mutual-fund products.If Integrated regains Royal Alliance, the representatives will retain their 49% ownership. Mr. Krat indicated that completion of the transaction could take several weeks, and it wasn't immediately clear what would happen to the broker-dealer subsidiary if Integrated files for bankruptcy-law protection in the meantime. The subsidiary isn't expected to be profitable for at least one year.If Integrated regains the unit, it would receive any profit the unit reports, even while the unit is independent.If the deal closes, the two officers will draw salaries from the independent operation, not from Integrated. Many aspects of the agreement were worked out Wednesday in Chicago, when Integrated senior managers met with about 150 representatives. "I think it was something that we and they thought was constructive," said Stephen D. Weinroth, chairman and co-chief executive officer of Integrated. Integrated made its announcement after the market closed.In New York Stock Exchange Composite trading, Integrated shares closed at $1.125, up 12.5 cents.
Westamerica Bancorp. said Richard W. Decker resigned as president and chief executive officer after only a year on the job because of "differences" with the board. The banking company couldn't be reached to comment beyond a written announcement.It didn't specify the nature of the differences, saying only that they related to "management style" and "strategic objectives." Westamerica said Mr. Decker's posts were assumed by David Payne, Westamerica's chairman, who at 34 years of age becomes one of the youngest chief executives of a sizable bank in the country.Mr. Decker is about 45 years old. Neither Mr. Payne nor Mr. Decker could be reached to comment. Westamerica has about $1.3 billion of assets and is the largest independent bank in northern California.It controls about 35% of the affluent Marin County market across the Golden Gate bridge from San Francisco. Mr. Decker's resignation surprised many industry officials.He was brought to the company in September 1988 after 15 years at Los Angeles-based First Interstate Bancorp.The bank had been suffering in late 1987 from a slew of bad real estate loans made in Arizona.When he was hired, Mr. Payne lauded Mr. Decker's "extraordinary . . . skills" and his "outstanding reputation as one of the West's brightest bankers." Though the bank isn't performing as well as some of its competitors in the lucrative California market, its condition has improved since Mr. Decker took over.For the six months ended June 30, it earned $3.1 million, or 61 cents a share, compared with net income of $2.4 million, or 41 cents a share, a year earlier. Its stock also has risen lately, at least partly because it is considered a possible takeover candidate.Interstate banking is scheduled to begin in California in 1991, and larger California banks, such as Wells Fargo & Co., have been paying fat premiums to buy smaller banks to control markets before any out-of-state banks enter the fray. In American Stock Exchange composite trading yesterday, Westamerica closed at $22.25 a share, down 75 cents.
The dollar weakened in indecisive trading as foreign-exchange dealers awaited fresh economic news that they hope will jolt the U.S. unit out of its narrow ranges. The Canadian dollar climbed to its highest level against the U.S. dollar since late August, prompting the Bank of Canada to sell the Canadian currency on the market. Traders say that after a week of nervously tracking every development on Wall Street, the foreign-exchange market has settled back to catch its breath ahead of new U.S. economic data.They noted, however, that a 26-point drop in the Dow Jones Industrial Average gave the dollar a sharp nudge downward late in the day. In late New York trading yesterday, the dollar was quoted at 1.8470 marks, down from 1.8578 marks late Friday, and at 141.90 yen, down from 142.43 yen late Friday.Sterling was quoted at $1.6030, up from $1.5885 late Friday. In Tokyo Tuesday, the U.S. currency opened for trading at 141.80 yen, down from Monday's Tokyo close of 142.40 yen. The market's attention is especially focused on a preliminary report on the U.S. third-quarter gross national product, due out Thursday, which could show the economy is continuing to expand at a relatively brisk pace. The consensus view on real GNP, the total value of the U.S. output of goods and services adjusted for inflation, calls for a 2.3% gain on an annual basis, slowing somewhat from the second quarter's 2.5%, but still fairly strong. Few market participants expect the U.S. unit to rally sharply on the news, if it turns out as expected.Many contend that the report may overstate the economy's health and predict the third-quarter figures may be the last vigorous statistics for some time to come. "Everyone is waiting for GNP," says Walter Simon, an assistant treasurer with Bank Julius Baer & Co. "Yet even a relatively strong number -- 2.8% to 2.9% -- won't alter the market's view that the economy is softening." Hubert Pedroli, managing director of foreign exchange at Credit Suisse in New York, adds, "The market sees this as the last piece of good news." Mr. Pedroli notes that the GNP deflator, a measure of inflation, is expected to slow, which would give the Federal Reserve more room to ease key U.S. rates. Analysts predict a 3.5% rise in the deflator, after climbing 4.6% in the second quarter. They note that when an unexpectedly sharp widening in the U.S. trade gap in August was reported earlier this month, hopes for a sustained narrowing of the trade deficit were dashed and sentiment gripped the market that the U.S. economy was losing its momentum.A 190-point plunge in U.S. stock shares compounded the view, they say. "Everyone is extremely convinced the economy is slowing," says one senior New York dealer. "If we're not headed for a recession, we're certainly headed for a major slowdown." While the market expects little reaction from news of U.S. durable goods orders, scheduled for release today, participants note that the figures will probably serve to reinforce this bearish sentiment. U.S. durable goods orders are expected to show a decline of 1.2% in September, according to economists.The anticipated drop follows a 3.9% rise in August. Traders, however, are quick to point out that while there is little enthusiasm for buying dollars, the U.S. unit has found a "natural bottom" at about 1.85 marks and 140 yen. Its resilience around these levels is pegged to persistent investor demand for the greenback, especially in Japan. On the Commodity Exchange in New York, gold for current delivery settled at $367 an ounce, down 30 cents.Estimated volume was a very light one million ounces. In early trading in Hong Kong Tuesday, gold was quoted at $366.79 an ounce.
Tokyo stocks closed firmer Monday, with the Nikkei index making its fifth consecutive daily gain.Stocks also rose in London, while the Frankfurt market was mixed. In Tokyo, the Nikkei index added 99.14 to 35585.52.The index moved above 35670 at midmorning, nearly reaching the record of 35689.98 set Sept. 28.But the market lost part of the early gains on index-linked investment trust fund selling. In early trading in Tokyo Tuesday, the Nikkei index rose 1.08 points to 35586.60. On Monday, traders noted that some investors took profits against the backdrop of the Nikkei's fast-paced recovery following its plunge last Monday in reaction to the Oct. 13 drop in New York stock prices. But overall buying interest remained strong through Monday, with many observers saying they expect the Nikkei to continue with moderate gains this week. Turnover remained relatively small.Volume on the first section was estimated at 600 million shares, down from 1.03 billion shares Friday.The Tokyo stock price index of first section issues was up 7.81 at 2687.53. Relatively stable foreign currency dealings Monday were viewed favorably by market players, traders said.But institutional investors may wait a little longer to appraise the direction of the U.S. monetary policy and the dollar, traders said. Hiroyuki Wada, general manager of the stock department at Okasan Securities, said Monday's trading was "unfocused." He said investors were picking individual stocks based on specific incentives and the likelihood of a wider price increase over the short term.The selective approach blurred themes such as domestic-demand issues, large-capitalization issues or high-technology shares, which had been providing at least some trading direction over the past few weeks, Mr. Wada said.Investors took profits on major construction shares, which advanced last week, shifting their attention to some midsize companies such as Aoki Corp., Tobishima and Maeda.Aoki gained 60 yen to 1,480 yen ($10.40). Some pharmaceutical shares were popular on rumors related to new products to be introduced at a cancer conference that opened in Nagoya. Teijin was up 15 at 936, and Kyowa Hakko gained 30 to 1,770.Mochida advanced 40 to 4,440.Fujisawa continued to attract investors because of strong earning prospects stemming from a new immune control agent.Fujisawa gained 50 to 2,060. Kikkoman was up 30 to 1,600, receiving investor interest for its land property holdings near Tokyo, a trader said. London prices closed modestly higher in the year's thinnest turnover, a condition that underscored a lack of conviction ahead of a U.K. balance of payments report Tuesday. Limited volume ahead of the September trade data showed the market is nervous, but dealers added that the day's modest gains also signaled some support for London equities. They pegged the support largely to anticipation that Britain's current account imbalance can't be much worse than the near record deficits seen in July and August. "It's a case of the market being too high to buy and too afraid to sell," a senior dealer with Kleinwort Benson Securities said. "It's better to wait." The Financial Times 100-share index finished 10.6 points higher at 2189.7.The 30-share index closed 11.6 points higher at 1772.6. Volume was 276.8 million shares, beneath the year's previous low of 280.5 million shares Sept. 25, the session before the August trade figures were released. Analysts' expectations suggest a September current account deficit of #1.6 billion ($2.54 billion), compared with August's #2.0 billion deficit.Dealers, however, said forecasts are broadly divergent with estimates ranging between #1 billion and #2 billion. "The range of expectations is so broad," a dealer at another major U.K. brokerage firm said, "the deficit may have to be nearer or above #2 billion for it to have any impact on the market." Lucas Industries, a British automotive and aerospace concern, rose 13 pence to 614 pence after it said its pretax profit for the year rose 28%. Share prices on the Frankfurt stock exchange closed narrowly mixed in quiet dealings after recovering most of their early losses.The DAX index eased 0.99 point to end at 1523.22 after falling 5.5 points early in the session. Brokers said the declines early in the day were partly caused by losses of the ruling Christian-Democratic Union in communal elections in the state of Baden-Wuerttemberg.The start of a weeklong conference by the IG Metall metal worker union in Berlin is drawing attention to the impending wage negotiations, which could boost companies' personnel costs next year, they said. But there was little selling pressure, and even small orders at the lower levels sufficed to bring the market back to Friday's opening levels. Traders said the thin trading volume points to continued uncertainty by most investors following last Monday's record 13% loss.The market is still 4% short of its level before the plunge, and analysts aren't sure how long it will take until the DAX has closed that gap. But Norbert Braeuer, chief trader at Hessische Landesbank Girozentrale (Helaba), said he expects share prices to move upward in the coming weeks. Banking stocks were the major gainers Monday amid hope that interest rates have peaked, as Deutsche Bank and Dresdner Bank added 4 marks each to 664 marks ($357) and 326 marks, respectively.Commerzbank gained 1 to 252.5. Auto shares were mixed, as Daimler-Benz firmed 2 to 723, Bayerische Motoren Werke lost the same amount to 554, and Volkswagen inched down 1.4 to 451.6. Elsewhere, prices closed higher in Amsterdam, lower in Zurich, Stockholm and Milan, mixed in Brussels and unchanged in Paris. Shares closed higher in Hong Kong, Singapore and Manila, and were lower in Sydney, Seoul and Taipei.Wellington was closed. Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva.To make them directly comparable, each index is based on the close of 1969 equaling 100.The percentage change is since year-end.
Monday, October 23, 1989 The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions. PRIME RATE: 10 1/2%.The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 11/16% near closing bid, 8 3/4% offered.Reserves traded among commercial banks for overnight use in amounts of $1 million or more.Source: Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 7%.The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 9 3/4% to 10%.The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 2 to 44 days; 8.25% 45 to 69 days; 8.40% 70 to 89 days; 8.20% 90 to 119 days; 8.05% 120 to 149 days; 7.90% 150 to 179 days; 7.50% 180 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.575% 30 days; 8.50% 60 days; 8.45% 90 days. CERTIFICATES OF DEPOSIT: 8.09% one month; 8.09% two months; 8.06% three months; 8% six months; 7.94% one year.Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.The minimum unit is $100,000.Typical rates in the secondary market:8.60% one month; 8.60% three months; 8.40% six months. BANKERS ACCEPTANCES: 8.50% 30 days; 8.32% 60 days; 8.32% 90 days; 8.16% 120 days; 8.05% 150 days; 7.96% 180 days.Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 11/16% to 8 9/16% two months; 8 3/4% to 8 5/8% three months; 8 5/8% to 8 1/2% four months; 8 9/16% to 8 7/16% five months; 8 9/16% to 8 7/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 3/4% three months; 8 9/16% six months; 8 1/2% one year.The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%.These rate indications aren't directly comparable; lending practices vary widely by location. Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52%, 13 weeks; 7.50%, 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.86%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par). 9.80%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages.Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 8.56%.Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.
Exxon Corp. filed suit against the state of Alaska, charging state officials interfered with the oil company's initial efforts to treat last spring's giant oil spill. The action is a counterclaim to a suit filed by Alaska in August against Exxon and six other oil companies.The state's suit alleges that Exxon's response to the spill failed to prevent contamination of hundreds of miles of shoreline along Prince William Sound.That suit and Exxon's countersuit were filed in a state court in Anchorage. Neither suit lists specific dollar claims, largely because damage assessment hasn't yet been completed.Legal strategists say that damage claims against the oil giant and others could well exceed $1 billion.Litigation, if not settled out of court, could drag on for years. Exxon said in its suit that it will seek reimbursement from the state for that part of the cleanup costs and damage claims it says resulted from the state's conduct.The oil company claims that Alaskan officials prevented Exxon from spraying dispersant onto the almost 11 million gallons of oil dumped when one of its tankers ran into an underwater reef. Craig Tillery, an Alaska assistant attorney general, said in an interview last night that Exxon's accusations "are not new.Exxon has made them before, at which point the state demonstrated they were untrue.The state will vigorously defend against any counterclaim." Since the spill last March, Exxon and the state have been wrangling over whether spraying dispersant on the oil in the first hours after the spill, when the weather was clear and calm, would have helped limit the environmental damage. Exxon claims that use of dispersants, which break an oil slick into microscopic droplets, was a crucial part of its immediate-response plan and that state officials banned their use during the two days of fair weather following the spill. The oil company claims that it had permission from the U.S. Environmental Protection Agency prior to the spill to use dispersant during such an incident at the discretion of the U.S. Coast Guard.The state's opposition to the use of dispersants, Exxon says, caused the Coast Guard "to delay granting permission." Alaskan and Coast Guard officials say Exxon's charges aren't relevant because tests conducted during the first two days following the spill showed that the dispersant wasn't working anyway.Use of dispersants was approved when a test on the third day showed some positive results, officials said.
The House Appropriations Committee approved an estimated $2.85 billion in emergency funding to assist California's recovery from last week's earthquake and to extend further aid to East Coast victims of Hurricane Hugo. The package was termed excessive by the Bush administration, but it also provoked a struggle with influential California lawmakers who sought unsuccessfully to add nearly $1 billion more and waive current restrictions to expedite the distribution of funds. By a 26-7 margin, the committee scuttled the more expensive alternative, and the debate forced a strained confrontation between Appropriations Committee Chairman Jamie Whitten (D., Miss.) and his party's largest state delegation in the House. "I have no regrets about going forward," said Rep. Vic Fazio (D.,Calif.), who sought later to play down the sometimes hostile tone of the long evening meeting. "We are the Golden State," Mr. Fazio said, "and there is a certain amount of jealousy." The $2.85 billion package incorporates $500 million for small-business loans, $1 billion in highway construction funds, and $1.35 billion divided between general emergency assistance and a reserve to be available to President Bush to meet unanticipated costs from the two disasters. The funding is attached to a stopgap bill to keep most of the government operating through Nov. 15.The measure is expected to come before the House today, and Congress is under pressure to complete action before midnight EDT tomorrow, when the current continuing resolution expires. Given California's size and political importance, the White House is eager to appear generous.But in private meetings yesterday, Budget Director Richard Darman argued that only $1.5 billion in new federal appropriations are needed to supplement existing resources.A White House budget office analysis estimates that $500 million -- or half the level in the committee bill -- is needed for highway assistance to meet California's needs, and the administration rejects the notion that new appropriations are needed to finance disaster loans by the Small Business Administration. "Everybody appreciates that it is a national disaster and that we've got to address it," said Mr. Darman, who came to the Capitol to meet with Mr. Whitten and California lawmakers before the committee session. "I would hope very much that we wouldn't end up in a kind of situation where you have a bidding war and then a veto threat." Although this White House pressure was clearly a factor among committee Republicans, no single influence was greater than Mr. Whitten.A master of pork-barrel politics, he had crafted the $2.85 billion package in vintage style and used the full force of his chairmanship to keep the proposal intact and dismiss any alternative. When Mr. Fazio offered the California-backed $3.84 billion plan, Mr. Whitten insisted that the full 14 pages be read aloud by the panel's clerk to underscore the range of legislative changes also sought by the delegation.On the chairman's motion, the California package was subsequently reduced to less-binding report language, and even when this was accepted as such on a voice vote, Mr. Whitten pointedly opposed it. More important than money in many cases are waivers California is seeking on current restrictions covering federal highway funds, such as a $100 million cap on how much any single state can receive in emergency funds in a year.Mr. Whitten's package appears to accomplish this purpose, but the state faces more resistance in its bid for an extended waiver on having to put up any matching funds on repairs completed in the next six months. A member in the House leadership and skilled legislator, Mr. Fazio nonetheless found himself burdened not only by California's needs but by Hurricane Hugo amendments he accepted in a vain effort to build support in the panel.The California Democrat appeared embarrassed by provisions inserted on behalf of owners of private beaches in the Virgin Islands, and lumber interests sought to add another $100 million in federal aid to plant timber on private land in North and South Carolina. California's high-priced real estate puts it in an awkward position, too.One provision last night would have raised the cap on disaster loans to $500,000 from $100,000 per household to accommodate San Francisco losses.
SHEVARDNADZE ADMITTED that Moscow violated the 1972 ABM treaty. In a foreign-policy address before the Soviet legislature, the foreign minister conceded that the radar station in Krasnoyarsk breached the superpower Anti-Ballistic Missile treaty and said it would be dismantled.Shevardnadze said it took Gorbachev's government four years to determine that the station's location in Siberia violated the accord, as Western arms-control officials have long contended.He also denounced Moscow's nine-year involvement in the war in Afghanistan, saying it involved "gross violations of . . . civil norms and ethics." Secretary of State Baker, in his first major arms-control speech, called for a new military relationship with Moscow to reduce "first strike" nuclear arms. BAY AREA COMMUTERS BATTLED earthquake-related transportation snarls. Travelers crowded into subways, sat in traffic jams on major freeways or waited for buses in the rain, but the massive gridlock anticipated by officials in the San Francisco Bay area never materialized.As the death toll from last week's temblor climbed to 61, the condition of freeway survivor Buck Helm, who spent four days trapped under rubble, improved, hospital officials said.Rescue crews, however, gave up hope that others would be found alive under the collapsed roadway. The House Appropriations Committee approved a $2.85 billion aid package for the quake region, less than the $3.8 billion sought by California officials. Hungary declared itself a democracy and for the first time openly commemorated the anniversary of the 1956 anti-Stalinist uprising that was crushed by the Soviet Union.A crowd estimated at 100,000 held a torch-lit march through Budapest as Acting President Szuros delivered a nationally televised address rejecting communist dominance. About 200,000 East Germans marched in Leipzig and thousands more staged protests in three other cities in a fresh challenge to the Communist leadership to introduce democratic freedoms.In an East Berlin suburb, meanwhile, employees at an electronics plant formed an independent trade union called Reform, a worker spokesman said. The space shuttle Atlantis landed at a desert air strip at Edwards Air Force Base, Calif., ending a five-day mission that dispatched the Jupiter-bound Galileo space probe.The five astronauts returned to Earth about three hours early because high winds had been predicted at the landing site.Fog shrouded the base before touchdown. Explosions shook a Phillips Petroleum Co. plastics plant near Pasadena, Texas, hurling debris and causing a fire visible from 10 miles away.More than 100 people were injured, and a number of workers were missing.Parts of the Houston Ship Channel were closed. The White House said Bush is conferring with leaders of the Senate Intelligence Committee to ease differences over guidelines for CIA agents.The statement came after officials said Bush complained at a private meeting last week that a strict interpretation of a policy requires the U.S. to notify foreign dictators of certain coup plots. Lebanon's Gen. Aoun placed Christian military forces on alert in case of renewed fighting with Syrian-backed Moslems after Lebanon's two main Shiite militias rejected an Arab-sponsored peace accord.The plan, approved by lawmakers and rejected Sunday by Aoun, includes political changes aimed at ending the 14-year-old civil war. NATO defense ministers are expected to call for a reduction in nuclear forces in Europe when the alliance's nuclear planning group convenes a two-day session today in Portugal.The ministers are to reshape NATO's defenses in Western Europe amid fast-paced changes in the Soviet bloc. Iran's President Rafsanjani offered to help gain freedom for Western hostages in Lebanon, but said the assistance was contingent on U.S. aid in resolving the cases of three Iranians kidnapped in Lebanon in 1982 or the release of frozen Iranian assets.Washington rejected the bid, saying the hostages weren't linked to other issues. PLO leader Arafat asked Egypt to seek clarifications from the U.S. on Secretary of State Baker's plan for Mideast peace talks, an aide to Egyptian President Mubarak said.The official stressed that the PLO hasn't rejected the five-point formula. Commonwealth leaders turned to issues ranging from drugs to the world economy after Zimbabwe's President Mugabe called Thatcher's views on South Africa "despicable." At a meeting in Malaysia, Australia and Canada also assailed the British prime minister for criticizing the 49-nation group's call for Pretoria to ease apartheid.
The National Highway Traffic Safety Administration said it will start enforcing stiffer regulations Jan. 31 for so-called gray-market imports of vehicles. The regulations, required under legislation enacted by Congress last year, will apply to imports of vehicles that weren't built to meet U.S. government auto safety standards and were intended for use in Europe or elsewhere abroad. U.S. officials estimated that gray-market imports total about 2,100 units a year, a small part of the more than three million vehicles exported to the U.S. each year. According to the NHTSA, the new regulations will prohibit anyone other than an importer that has registered with the U.S. government, or a person who has a contract with a registered importer, from permanently importing a vehicle that doesn't meet the U.S. auto safety standards. The registered importer would be required to bring such vehicles into compliance with the U.S. safety standards, compared with the current situation in which anyone can bring in such vehicles and modify them to meet the U.S. standards. Congress tightened auto safety standards for gray-market imports after U.S. auto dealers, including franchised foreign-car dealers, complained that they often were blamed when the second and third buyers of such vehicles found that the cars couldn't meet U.S. auto safety standards.
UNITED AIR'S PARENT quashed any prospects for an immediate revival of the labor-management buy-out, saying UAL should remain independent for now.Also, UAL Chairman Stephen Wolf pulled out of the buy-out effort to focus on running the company.The two developments leave the airline with several problems, including an unsettled labor situation. Stock prices fell and bonds rose as worries mounted about the economy and the junk bond market.The Dow Jones industrials sank 26.23 points, to 2662.91.The dollar also declined. The turmoil in junk bonds may last for years, investors and traders say.Even Drexel is pulling back. Santa Fe Pacific plans to sell 20% of its large real estate unit to a California pension fund for $400 million and spin the rest off to shareholders.The proposal values the company's real estate operation at $2 billion. Time Warner reported a $176 million loss for the third quarter, reflecting the cost of the recent merger and a method of accounting for the deal. Thrifts continued to shed assets in August, mainly to comply with stiffer capital rules under the S&L bailout law.Also, withdrawals exceeded deposits by $5.1 billion in the month. Exxon's profit fell 9% in the third quarter, hurt by sagging results at two of its three main businesses.Phillips and Arco posted declines.Ashland had a loss.Amerada Hess and Occidental Petroleum had gains. Ogilvy's chairman, Kenneth Roman, is leaving to take a top post at American Express.His resignation follows a hostile takeover of the ad agency in May by WPP of Britain. The Justice Department took steps that could restrict the use by prosecutors of criminal racketeering charges against white-collar defendants. Shearson was sued by money manager George Soros, who claimed one of his funds was defrauded out of $60 million during stock-index futures trading just after the 1987 crash. Drexel's efforts to settle its legal troubles are being resisted by at least 10 states.Some may try to revoke the firm's license to sell securities. Prime Computer plans to dismiss 20% of its work force to cut costs following its recent leveraged buy-out.The action renews concern about buyouts in high-tech industries. Paribas plans a bid for another big French financial and industrial firm, Navigation Mixte, a sign Europe's takeover fever hasn't cooled. Qintex Australia unveiled plans to restructure and sell assets to try to ease its financial problems. Union Carbide's earnings plunged 35% in the third quarter, reflecting weakness in the company's core chemicals and plastics businesses. Japan's Daiwa Securities named Masahiro Dozen president.The rapid advance of the 52-year-old executive surprised many at the company. Markets -- Stocks: Volume 135,860,000 shares.Dow Jones industrials 2662.91, off 26.23; transportation 1236.66, up 5.86; utilities 215.35, off 0.13. Bonds: Shearson Lehman Hutton Treasury index 3411.08, up Commodities: Dow Jones futures index 129.49, off 0.13; spot index 131.64, up 0.30. Dollar: 141.90 yen, off 0.53; 1.8470 marks, off 0.0108.
The Justice Department has revised certain internal guidelines and clarified others in a move that could restrict the use of criminal racketeering charges against white-collar defendants. The most significant changes in department policy are new requirements that federal prosecutors avoid disrupting "the normal business functions" of companies charged under the racketeering law, a senior department official said. Another important revision of department policy is a new guideline warning prosecutors "not to take steps that would harm innocent third parties" in a case brought under the racketeering law, the official, David Runkel, said. The department distributed the revisions and clarifications to U.S. attorneys around the country this summer as part of a routine process of updating prosecutorial guidelines, Mr. Runkel said.The changes apply to prosecutions brought under the Racketeer Influenced and Corrupt Organizations law. Under that law, defendants who allegedly commit a pattern of crimes by means of a "criminal enterprise" may be charged with racketeering and forced to forfeit the proceeds of the enterprise. The RICO law has come under criticism from some defendants and defense lawyers.They argue that the rights of RICO defendants and third parties not named in RICO indictments have been unfairly damaged. The department's most significant clarification of existing RICO policy is a directive to prosecutors that they should seek to seize assets from defendants "in proportion" to the nature of the alleged offense, Mr. Runkel said. "That means that if the offense deals with one part of the business, you don't attempt to seize the whole business; you attempt to seize assets related to the crime," he explained. In general, the thrust of the department's directive is to encourage prosecutors to limit pretrial asset seizures if there are less intrusive means of protecting assets the government may subsequently be able to seize after a conviction, Mr. Runkel said.
It was the kind of snubbing rarely seen within the Congress, let alone within the same party. Sen. Alan Cranston trekked over to the House side of Capitol Hill a few days ago and volunteered his testimony to fellow Democrat Rep. Henry Gonzalez.It was offered as an expression of cooperation to Mr. Gonzalez, who is investigating the $2.5 billion failure of Lincoln Savings & Loan Association. But instead of thanks, Sen. Cranston was treated with cool formality. "Every witness receives a formal subpoena," Rep. Gonzalez told him. Seldom have House hearings caused so much apprehension in the Senate, where California Sen. Cranston and four other senators were already writhing in the glare of unfavorable publicity over the alleged looting of Lincoln by their friend and political benefactor, Charles Keating Jr., principal stockholder of Lincoln's parent company, American Continental Corp. of Phoenix, Ariz. At the first day of the House Banking Committee's hearings last week, William Seidman, chairman of the Resolution Trust Corp., the federal agency created to sell sick thrifts, said the agency is investigating whether Lincoln made illegal political contributions.Mr. Keating arranged nearly $1 million in donations to Sen. Cranston and his various political causes, and hundreds of thousands more to other lawmakers.Future witnesses include a former federal S&L regulator who has accused the five senators of attempting to "subvert" the regulatory process by intervening on behalf of Mr. Keating. Unlike many lawmakers, Chairman Gonzalez says he considers intervening with regulators to be improper. "When you reach a point where a policy-making body is trying to shape administrative decisions, then that's a no-no in my book," the Texas lawmaker says.And he has attached himself to the Lincoln story tenaciously. "Unless the questions are answered, I will keep on going." Lawmakers often are reluctant to embarrass colleagues, even those of opposing political parties.In the recent Housing and Urban Development Department scandal, for example, Rep. Thomas Lantos, the California Democrat who led the hearings, tiptoed through embarrassing disclosures about HUD grants secured by Sen. Alfonse D'Amato, a New York Republican. But Chairman Gonzalez is a genuine maverick.He comes from the same political line as Wright Patman, a bank-baiting Texas populist who chaired the Banking Committee until 1974.Mr. Gonzalez is also a stickler for ethical standards who refuses to accept honorariums and who believes in conducting official business in the open.Early in his political career, as a city councilman in San Antonio, he walked out of a meeting when political supporters asked that the police chief be replaced, denouncing the closed-door affair publicly as a "bat-roost meeting." The immediate target of Rep. Gonzalez's inquiry is Danny Wall, chairman of the Office of Thrift Supervision.As the principal regulator of the thrift industry, Mr. Wall delayed seizing Lincoln S&L for more than two years after his staff told him that the California thrift was insolvent and that potential losses to taxpayers were growing rapidly. Rep. Gonzalez seems primed to lash out at Mr. Wall when hearings resume Thursday with testimony by two federal regulators from San Francisco, William Black and Mike Patriarca.Mr. Wall relieved them of responsibility for supervising Lincoln in 1988.Mr. Gonzalez expressed concern over a report that the two had been summoned to Washington by Mr. Wall last week to discuss their testimony in advance. "I think he is trying to improperly influence a witness, and by God I'm not going to tolerate it," he says. Mr. Wall, however, is a self-proclaimed "child of the Senate" and former staff director of its Banking Committee.An inquiry into his handling of Lincoln S&L inevitably will drag in Sen. Cranston and the four others, Sens.Dennis DeConcini (D., Ariz.), John McCain (R., Ariz.), John Glenn (D., Ohio) and Donald Riegle (D., Mich.).They all attended a meeting in April 1987 questioning why a federal audit of Lincoln S&L had dragged on for two years. "I'm certain that in the course of the hearings the names {of the senators} will be brought out," Mr. Gonzalez says. This is raising eyebrows. "When I first got a glimpse at the witness list, I couldn't believe that they were going to go ahead and do this," says Michael Waldman, director of Congress Watch, a consumer group. "There are some witnesses who will be forced to testify about their meetings with senators." And a Democratic aide to a Banking Committee member remarks, "I too am astounded by it, because Gonzalez has certainly placed a lot of Democratic senators in a very bad position." All the senators say they merely were trying to ensure fairness for a constituent.Mr. Keating lives in Phoenix, and the California thrift's parent is an Ohio-chartered corporation with holdings in Michigan. Chairman Gonzalez expresses sympathy for Sen. Riegle, his counterpart as chairman of the Senate Banking Committee. "He's wise, he's good and I know he's an honest man," the Texan says.But at the same time, Mr. Gonzalez hasn't forgotten a confrontation over Mr. Wall during House-Senate negotiations over S&L bailout legislation during the summer.The Senate negotiators included Sens.Cranston and Riegle and Mr. Wall's principal sponsor, Republican Sen. Jake Garn of Utah. They were willing to trade important provisions in the bailout legislation to preserve Mr. Wall's job and to avoid a reconfirmation hearing in which he would be called upon to testify about Lincoln S&L.Most importantly, the Senate traded away the Bush administration's controversial plan to finance the bailout, which was partly reinstated later. At the time, Mr. Gonzalez said several senators told him that they "could get some roadblocks out of the way if there could be some understanding on Garn's insistence on Wall." Now Mr. Gonzalez is holding the equivalent of reconfirmation hearings anyway, under the guise of the Lincoln investigation. "In a way, that's what this is," Mr. Gonzalez concedes. Even some House Banking Committee members could suffer from the fallout.Mr. Keating raised $20,000 for Rep. Doug Barnard's 1986 re-election campaign while the Georgia Democrat was taking his side against regulators who wanted to curb risky investments and wholesale deposit brokering.He recently voted "present" when the committee authorized a subpoena to compel Mr. Keating to testify, then changed his vote to yes. But the chairman's supporters have the upper hand as federal regulators press a $1.1 billion fraud suit against Mr. Keating and others.Rep. Jim Leach (R., Iowa) says the Lincoln S&L affair is "the biggest bank heist in history," and adds: "The great question that remains to be resolved is whether we have a congressional Watergate in the making." A witness set to testify on Thursday was quoted in a news report over the weekend as saying Lincoln "laundered" campaign contributions illegally.But the witness, William Crawford, California's chief state thrift regulator, denies saying that. "I don't know whether it was done properly or not, because I'm not a lawyer," he said in a telephone interview yesterday.But he said he is prepared to testify that executives of Lincoln and its parent corporation got unusually high salaries and frequent calls directing them to make specific contributions. The committee also has summoned Mr. Wall's predecessor, Edwin Gray.He has characterized the five senators' roles as "tantamount to an attempt to subvert the . . . regulatory process," and he isn't expected to back down even though the five senators have disputed his account of a 1987 meeting. So the senators must brace themselves.Sen. Cranston, as he returned to the capital last week from a one-day trip to inspect earthquake damage in San Francisco, sighed to an aide: "Well, back to Keatingland."
When Anne Volokh and her family immigrated to the U.S. 14 years ago, they started life in Los Angeles with only $400.They'd actually left the Soviet Union with $480, but during a stop in Italy Ms. Volokh dropped $80 on a black velvet suit.Not surprisingly, she quickly adapted to the American way.Three months after she arrived in L.A. she spent $120 she didn't have for a hat. ("A turban," she specifies, "though it wasn't the time for that 14 years ago.But I loved turbans.") Since then she has become wealthy.Her husband and older son -- a computer prodigy profiled in The Wall Street Journal in 1981, when he was 13 -- run a software company with expected sales this year of $10 million.Most recently, she has become the publisher of Movieline, a four-year-old Los Angeles magazine that began national distribution last month, with an initial press run of 100,000 copies.Distributed by the Hearst Corp. 's Eastern News, the glossy publication melds Vanity Fair's gossipy archness and Premiere's earnest delving into behind-the-scenes minutiae, with a special emphasis on Tinseltown as fashion trendsetter.It's being sold through bookstores, newsstands and some video stores. Though Ms. Volokh is a small woman, she has an outsized personality and dramatic flair that seem perfectly suited to capitalism as it is practiced in Hollywood.Certainly life for her has changed considerably since the days in Kiev, when she lived with her parents, her husband and her two sons in a 2 1/2-room apartment in what she calls "silent internal immigration," dreaming of escape. Now, for example, she owns 48 hats.However, she remembers the lean years and recalls with relish wearing her first major American purchase -- that turban10 years later and having a Los Angeles boutique owner ask her if it was a Chanel.With obvious satisfaction, she says she told him: "No darling, I just give it a Chanel look." She keeps track of the rest of her hats by stapling Polaroid snapshots to the outside of each hatbox. Are the hats merely part of her new L.A. persona, along with the many ultra-thin Capri cigarettes she smokes, the parties she throws for 500 people, the Chekovian feasts she offers guests at her weekend place in Santa Barbara? "No, darling," she said recently in her fluent, slightly affected English, during a trip East to promote Movieline's national expansion. "You have to be born with it.I used to wear hats in Russia, but I had to make them and my dresses.On the hat side I wasn't getting what I wanted." Now 48 years old, Ms. Volokh has definite ideas about what she wants.At Movieline, she wants "specific paragraphing, specific tone, a specific attitude -- bright and bold and tongue-in-cheek." In restaurants (in this case, the Russian Samovar, a New York restaurant operated by and for Soviet emigres), she didn't want the chirpy, folkish music bouncing through the room. "You people here think this is Russian music," she said with disdain, and called over to the waitress: "Could you turn it off?" That done, Ms. Volokh spoke with rampant eloquence about the many attributes she feels she was born with: an understanding of food, business, Russian culture, human nature, and parties. "Parties are rather a state of mind," she said, pausing only to taste and pass judgment on the Georgian shashlik ("a little well done, but very good"). "If you are born to give parties, you give parties.Even in Russia we managed to give parties.In Los Angeles, in our lean years, we gave parties." As publisher of a magazine devoted to movies as guideposts for fashion and other fantasies, Ms. Volokh sees her party-giving as an important part of business.She has thrown extravagant soirees for crowds of people, but prefers more intimate gatherings. "At American cocktail parties everyone's always looking over your shoulder to see who they can talk to next.I like rather tea, because it is at the end of the day." She serves high Russian tea, at 5 p.m. "It's supposed to be later but I just moved it.In Los Angeles, it's important to catch people just after work." She also frequently invites directors, producers, actors, writers and other show business people for "coffee and clips in the pleasure dome." Guests bring movies on tape, and show their favorite three-to-five minute segments on the screen that unrolls from the ceiling of the Volokhs' art-nouveau library ("the pleasure dome").They eat "sinful and sensual things" -- and explain their clips. "It's very revealing and soul baring," said Ms. Volokh. The idea for Movieline actually was dreamed up by an old friend of the Volokhs, Boris Krutchensky (who has the title of co-publisher), and Laurie Halpern Smith, now the magazine's co-editor.Mr. Krutchensky approached Ms. Volokh five years ago about backing the publication, which started out as a listing guide.She was interested only if she could guide it editorially as well. "Anne doesn't believe in blandness," said Ms. Smith. "She wants things to be exciting.And she has this inexhaustible energy.She'll think of an idea the editorial people think is impossible, then she'll have us make it work." In fact, Ms. Volokh wasn't just a rich lady who needed a hobby.Back in the Soviet Union she was a respected journalist, writing a weekly column about the national cuisine for Sunday Izvestia.Those columns -- vivid discussions of the cultural and literary reverberations of food as well as practical advice on how to glamorize dreary Sovietized meals -- became the basis for her erudite and entertaining cookbook, "The Art of Russian Cuisine," brought out in 1983 by Macmillan Publishing Co. "I don't trust people who don't eat," said Ms. Volokh, though she herself stopped eating lunch a few years ago to drop 25 pounds. "Look at Dostoevski and Kafka.No one ever eats in their books and look at them. . . . Tolstoy's characters eat, Pushkin's, Gogol's." In her cookbook, which Macmillan is bringing out in soft cover this month (with the blini recipe revised so it works), she introduces each chapter with appropriate quotations from Russian literature: Pushkin on blini, Goncharov on piroghi.In life, she offers practical dieting advice: "Divide your meals into important and unimportant.In a great restaurant, don't deprive yourself.The other meals don't matter." Amusing as she is, and frivolous as she can seem, this is a serious person with some difficult memories.She was the child of relative privilege.Her mother was a translator; her father was "the eternal vice director." "I emigrated to wear better hats, do better parties," she said with a giggle. "But we shouldn't leave out political reasons, number one.You try to maintain your dignity under difficult circumstances.One cannot imagine how you live when you live those double and triple lives." By 1973, after their second child was born, it had become clear to Ms. Volokh and her husband Vladimir, a computer scientist, that they wanted to leave the U.S.S.R. Ms. Volokh quit her job, to remove herself from the public eye.The wait was miserable.Before granting Ms. Volokh's parents a visa, the government required her mother to obtain permission from her first husband, whom she had divorced 38 years earlier. Mr. Volokh was fired from his job, and had to endure hours of organized verbal abuse from his co-workers, accusations of sabotage and counterrevolutionary activities.The Volokhs were afraid that they'd end up like a friend of theirs who'd applied for a visa and waited for 10 years, having been demoted from his profession of theoretical mathematician to shipping clerk. They didn't.Their visa came in relatively short order, and they moved to Los Angeles.Mr. Volokh soon found work in his field, but Ms. Volokh refused the obvious and available occupation-as translatorfor a Russian who spoke fluent English. "That's always looking back," she said. "I wanted to be in business." On the way to that goal, she received her first U.S. paycheck for proofreading a book of Polish poetry, attended secretarial school, then went to work for a fund-raising organization.Soon she was running the office. When her husband and son founded their computer company, Vesoft, she worked as business manager, bookkeeper and publicist.Now Movieline is located in the same building as Vesoft. "Things work out unexpectedly in life," said Ms. Volokh. "You never know if you'll be chosen to be the scapegoat or the lucky one.We were lucky."
William D. Forrester, president of the U.S.-U.S.S.R.Trade and Economic Council, has a warning for U.S. companies trying to do business in the Soviet Union. "It's an extremely complex market, and you have to be prepared to make a big commitment," Mr. Forrester says. "We are not trying to encourage everyone." Undeterred by such words of caution, corporate America is flocking to Moscow, lured by a huge untapped market and Mikhail Gorbachev's attempt to overhaul the Soviet economy.Doing business with the Russians, once the pursuit of a handful of hardened veterans, has become the goal of such major companies as General Motors Corp., Federal Express Corp. and Procter & Gamble Co., as well as a cluster of smaller firms.Reflecting the new-found interest, more than 140 U.S. companies are taking part in a Moscow exhibition organized by Mr. Forrester's trade group. But while U.S. interest may be big and growing, the difficulties that have stymied deals in the past show no sign of abating.Alongside the old problems of a non-convertible currency and an inpenetrable bureaucracy, Western business executives must now grapple with new complexities linked to perestroika, the restructuring of the Soviet economy. Executives say Mr. Gorbachev's moves to break up the government's foreign trade monopoly have created uncertainties as well as opportunities.Changing legislation has opened the field to thousands of inexperienced Soviet players, many who promise more than they can deliver.And some foreign firms are finding that even when they manage to overcome such hurdles, their ventures now have to be endorsed by such unpredictable bodies as the Soviet parliament and the governments of the nation's republics. "You have to go out to all your constituents," says James H. Giffen, who is spearheading the most ambitious attempt by U.S. firms to break into the Soviet market, involving investment of more than $5 billion in some two dozen joint ventures.As part of that attempt, by the American Trade Consortium, Mr. Giffen says he spends a lot of time lobbying. Growing public fears about the Soviet environment is one new factor affecting some joint-venture plans.Over the past two years, Soviet ministries have been talking to international firms, including Occidental Petroleum Co. and Combustion Engineering Inc. of the U.S., Montedison S.p.A. of Italy and several Japanese groups, about jointly building and operating several big petrochemical plants.The plans have come under fire from Soviet environmentalists, and officials say many are likely to be scaled back or dropped. Whatever the difficulties, Mr. Gorbachev remains committed to increasing foreign trade.For political as well as economic reasons, U.S. companies are at the top of his priorities -- a point he underscored by spending two hours walking around the U.S. trade show last week. Talking to a small group of U.S. executives afterwards, Mr. Gorbachev appeared impatient for a big expansion in U.S.-Soviet trade, which now amounts to a meager $3 billion annually.The U.S. ranks fourth of countries that have concluded joint ventures, behind West Germany, Finland and Italy.According to several people present at the meeting, Mr. Gorbachev also supported the idea of concluding several commercial accords with the U.S., possibly at his next summit meeting with President Bush. Judging by the crush at the exhibition, deprived Soviet consumers are more than ready for U.S. products.Hundreds of people lined up every day at the Colgate-Palmolive Co. stand to receive a free tube of toothpaste, a commodity in chronically short supply here.And unruly crowds at RJR Nabisco Inc. 's booth almost knocked over a glass showcase in the rush to get a free Camel cigarette sticker. Some U.S. products are filtering into the Soviet market under an emergency import program.Both Colgate and Procter & Gamble have received big orders for toothpaste, soap and detergents.The American Trade Consortium says it is planning to ship some $500 million of consumer goods, financed by bank credits, in the first few months of next year. But the current Soviet purchasing spree may be a one-time affair.The goal of most U.S. firms -- joint ventures -- remains elusive.Because the Soviet ruble isn't convertible into dollars, marks and other Western currencies, companies that hope to set up production facilities here must either export some of the goods to earn hard currency or find Soviet goods they can take in a counter-trade transaction. International competition for the few Soviet goods that can be sold on world markets is heating up, however.Shelley M. Zeiger, an entrepreneur from New Jersey who buys Soviet porcelain and "matryoshka" nesting dolls for export to the U.S., says West German companies already have snapped up much of the production of these items. Seeking to overcome the currency problems, Mr. Giffen's American Trade Consortium, which comprises Chevron Corp., RJR, Johnson & Johnson, Eastman Kodak Co., and Archer-Daniels-Midland Co., has concocted an elaborate scheme to share out dollar earnings, largely from the revenues of a planned Chevron oil project.Several medical concerns, including Pfizer Inc., Hewlett-Packard Co., Colgate and Abbott Laboratories intend to pursue a similar consortium approach. "It's hard to invest capital here on the same basis as investing in other countries," says Dennis A. Sokol, president of Medical Service Partners Inc., who is putting the medical consortium together. Some U.S. entrepreneurs operate on a smaller scale.One group seeks to publish a U.S.-Soviet medical journal in conjunction with the U.S.S.R. Ministry of Health.According to Richard P. Mills, a Boston-based official of the U.S. partner, 10,000 copies of the quarterly will be printed in Russian from next year.It will be financed by advertisements from U.S. companies and by simultaneous publication of an English-language journal containing details of Soviet medical advancements. "We found a market niche," Mr. Mills boasts. "It's truly entrepreneurial."
Tandy Corp., citing sluggish sales of consumer-electronics goods, said net income dropped 3.3% for the first quarter ended Sept. 30. The results, which represented the fifth consecutive quarter of flat-to-lower earnings for the big electronics retailer, disappointed analysts and traders.Tandy's stock fell $1.375 a share to close at $44 in New York Stock Exchange composite trading. Net for the quarter was $62.8 million, or 73 cents a share, down from $64.9 million, or 72 cents a share, a year earlier.The company said earnings would have increased if it hadn't been actively repurchasing its shares, thus increasing its interest expense and reducing its interest income.Tandy had 86.3 million shares outstanding at Sept. 30, down from 90 million a year earlier. Revenue rose 5% to $986 million from $937 million. Tandy said consumer electronics sales at its Radio Shack stores have been slow, partly because of a lack of hot, new products. "Radio Shack continues to be lackluster," said Dennis Telzrow, analyst with Eppler, Guerin & Turner in Dallas.He said Tandy "has done a decent job" increasing sales by manufacturing computers for others and expanding sales of its Grid Systems Corp. subsidiary, which sells computers to bigger businesses, but "it's not enough to offset the problems at Radio Shack." Sales at Radio Shack stores open more than a year grew only 2% in the quarter from a year earlier, he said. As a result, Mr. Telzrow said he cut his fiscal 1990 per-share earnings estimate for Tandy to $4.05 from $4.20.Tandy earned $88.8 million, or $3.64 a share, in the year ended June 30. Barry Bryant, an analyst with Drexel Burnham Lambert Inc., said Tandy also has suffered from lethargic sales of its computers aimed at the home and small-office market, which are less-advanced and cheaper than computers aimed at the corporate market. Tandy has added several new products to that line, including a laptop computer priced around $1,000, and is focusing its advertising on the easy-to-use software that is packaged with its machines.Mr. Bryant and other analysts hope all those moves will combine to help Tandy's results improve in the important Christmas quarter. "They've been promising 13% to 15% growth based on the strategic moves they've made," he said. "If the earnings acceleration is to take place, that should be the quarter."
Shareholders of Nuovo Banco Ambrosiano S.p.A. voted to accept a bid of 5,500 lire ($4.03) a share by France's Credit Agricole for 13.32% of the bank, rejecting an earlier, equal offer by Italy's Assicurazioni Generali S.p.A. The move will give Nuovo Banco a badly needed foreign presence, and make Credit Agricole the bank's largest shareholder.It also opens a rift in the bank's shareholders' syndicate that could lead to a battle for control of the concern.Nuovo Banco will become Italy's biggest private-sector bank when it completes its scheduled merger with Banca Cattolica del Venetoen by year end. Credit Agricole asked a Milan court to sequester the Nuovo Banco shares, the Italian news agency ANSA reported.The tribunal is scheduled to rule on the request Friday.No reason for the request was given.Credit Agricole officials couldn't be immediately reached for comment. The decision to accept Credit Agricole's bid, valued at 283.3 billion lire ($207.4 million), came after a stormy weekend meeting.Nuovo Banco's second largest shareholder, the Fiat S.p.A.-controlled investment concern, Gemina S.p.A., fought to have Generali's offer approved.Gemina, which owns 13.26% of Nuovo Banco, abstained in the final vote on Credit Agricole, which was nonetheless approved by a majority of shareholders. The linkup with Credit Agricole will give Nuovo Banco its first foreign presence since it was formed from the wreck of the old Banco Ambrosiano, which collapsed amid scandal after the death of Chairman Roberto Calvi in 1982.Since then, the bank has strengthened its Italian network, and has posted strong results. "The shareholders felt we needed a foreign presence more than we needed links with an insurance company," an Ambrosiano spokeswoman said. Gemina said in a statement that "it reserves the right to take any action to protect its rights as a member of the syndicate." A company spokeswoman said the company hadn't decided what measures to take, but didn't rule out legal action. Generali, Italy's biggest insurer, last month offered 5,500 lire a share for the Nuovo Banco stake held by Banco Popolare di Milano, the bank's largest shareholder, which announced plans to sell the holdings earlier this year. A Generali spokesman declined to comment on Nuovo Banco's rejection of the insurer's offer. On the Milan stock exchange, Nuovo Banco's shares jumped to 4,830 lire each from 4,695 lire Friday.
Qintex Australia Ltd., a media and resorts concern controlled by Australian entrepreneur Christopher Skase, announced a plan to restructure and sell assets to try to ease its financial problems. Mr. Skase, a 41-year-old former newspaper reporter who chairs the company, said in a statement that Qintex will sell its 51% stake in its upscale Mirage resorts in Australia and Hawaii as well as three Australian television stations. The sales are expected to raise more than 600 million Australian dollars (US$462.2 million), Mr. Skase said.Qintex Australia hasn't disclosed its borrowings, but analysts estimate the company's debt at A$1.2 billion. Mr. Skase also said the restructuring plan calls for the merger of Qintex Australia with Qintex Ltd., which owns 55% of Qintex Australia.He said the move will "significantly reduce administrative and operating costs," but he didn't provide details of the merger. Company officials said over the weekend that Qintex Australia's bank creditors have become concerned about a barrage of bad news at the company, including a failed US$1.5 billion plan to buy MGM/UA Communications Co., a Beverly Hills, Calif., movie and television production concern. Friday, Qintex Entertainment Inc., a 43%-owned U.S. affiliate, filed for protection from creditor lawsuits under Chapter 11 of the U.S. Bankruptcy Code.Analysts predicted that the move would further shake creditor confidence in Qintex Australia and force it to sell assets. The company's latest moves were disclosed after the Australian Stock Exchange suspended trading in shares of Qintex Australia and Qintex Ltd. because the companies hadn't answered an exchange inquiry about the extent of their loans, investments and deposits at Qintex Entertainment. Mr. Skase's statement was addressed to the stock exchange and appeared to be a response to the inquiry.It said Qintex Entertainment owes Qintex Australia US$38.1 million in loans not secured by specific assets.Qintex Australia also said it has an investment of A$83.3 million in Qintex Entertainment shares. In the statement, Mr. Skase said that on the basis of current interest rates in Australia, the company's asset sales would reduce interest expense by about A$120 million a year in addition to eliminating certain liabilities. In March, Qintex sold 49% of the three Mirage resorts to Japan's Nippon Shinpan Co. and Mitsui & Co. for A$433 million.Yesterday's statement didn't say whether the Japanese companies will acquire Qintex's remaining stake in the resorts. Before its shares were suspended from trading, Qintex Australia plunged to 16 Australian cents (12 U.S. cents) a share yesterday from 33 Australian cents Friday.The shares traded at about A$1.50 in March, when the plan to acquire MGM/UA was announced.Qintex Ltd. shares sank to A$1.50 yesterday from A$3.05 Friday. Mr. Skase's statement cited four recent problems that he said had cut group cash flow by more than A$200 million. They were what he called an "unlawful termination" by MGM/UA of the acquisition agreement with Qintex, high Australian interest rates, a pilots' strike at Australian domestic airlines that cut revenue at the company's Australian resorts and delays in completing a sale of two regional TV stations in Queensland state.MGM/UA has sued Qintex Australia for breach of contract and fraud over the collapsed acquisition agreement, and Qintex Australia has threatened a countersuit. Qintex Australia hasn't yet reported results for the fiscal year ended July 31.In his statement, Mr. Skase said preliminary accounts showed that group profit before interest, tax and depreciation "will exceed A$170 million." He gave no further details. Shareholders' funds as of July 31 were estimated at more than A$1 billion, Mr. Skase said, compared with A$725 million a year earlier. The company will make "adequate provisions" to cover costs of the dispute with MGM/UA and any loss from the investment in Qintex Entertainment, he said. Mr. Skase also disclosed a disagreement among directors of Qintex Australia over certain fees claimed by Qintex Group Management Services Pty., a management-services concern in which Qintex Australia executives have an interest. Qintex Australia paid the management company A$32.6 million in the latest fiscal year.Mr. Skase said most of the money went to other parties for expenses such as rent and travel, but a smaller portion is owed to senior executives and others for management services. Non-executive directors of Qintex Australia, who must approve payments to the senior executives, balked at the amount.Two of the directors resigned, Mr. Skase said, so the payments haven't yet been approved.
Chip's Memory Is Here Today, Here Tomorrow TWO COMPANIES plan to market a new chip with ceramic circuits that store data even when the power is off. Today's most widely used data-storing chips have "volatile" memories -- their data disappear if they aren't fed a steady diet of electricity, so they need external power supplies. National Semiconductor Corp. and a start-up named Ramtron Corp. plan to start shipping so-called ferroelectric memories, which can remember data for at least 10 years without any current flowing to them.The chips use materials, such as lead zirconate titanate, to form microscopic switches that retain their data without electricity. Developers caution that broad applications are several years away because the technology isn't fully refined.But Ramtron of Colorado Springs, Colo., plans to start shipping commercial quantities of simple ferroelectric chips in December.The company expects the chips eventually to be used in devices that mimic a whole range of computer memory equipment, including floppy-disk and hard-disk drives. National Semiconductor is getting ferroelectric technology from Krysalis Corp. in Albuquerque, N.M. National says it agreed to acquire Krysalis's assets and will start shipping commercial quantities of its first chips, including a 4-kilobit memory, next year. Once production hurdles are overcome, the chips could take over a significant part of the market.In addition to not needing an outside power source, they are potentially cheaper to make because they require fewer manufacturing steps than conventional chips. Military buyers have shown interest, National says, because ferroelectric chips resist atomic radiation.And while today's non-volatile chips -- such as electronically erasable programmable read-only memory chips -- can't be used in a computer's central memory because they "learn" data slowly, ferroelectric chips accept data at very high speeds. Showing Up in Court Without Being There AN AUSTIN, Texas, company plans to make it easy for you show up in court a thousand miles away without leaving town. Witnesses often must travel long distances to give face-to-face depositions before lawyers and court reporters.That means huge travel bills.And telephone or videotape depositions just don't match physical encounters. That could change, thanks to lower long-distance rates and cheaper electronics.Video Telecom Corp., which markets videoconferencing systems, is working with court reporters to wire a nationwide network to allow depositions by live television. The company installed a prototype system that connects Dallas with Miami over digital phone lines.And it is preparing to set up shop in Chicago, New York and 10 other cities where court-reporting agencies can tie conference rooms into the network. While lawyers arranged individual tie-ups before, the formal network of court reporters should make things easier and cheaper. An attorney will be able to use the network for an hourly fee of between $200 and $400, depending on the quality of the picture, to take depositions from witnesses in any of the connected cities. Japanese Reverse Tack On Patent Protection JAPAN'S MISUSE of U.S. patents has been a sore point for American chip makers.Now at least one Japanese company is turning the courtroom tables. Until now, most Japanese charges have been responses to suits against them.But last year Hitachi Ltd. surprised Japan's electronics industry when it accused Korea's Samsung Electronics Co. of using Hitachi technology to make dynamic random-access memory chips. (A settlement was reached but wasn't made public.) And Hitachi went on the offensive against the U.S.'s Motorola Inc. earlier this month with a suit charging that Motorola's new MC88200 chip infringes on a Hitachi patent. Another recent Hitachi suit accuses Motorola of reverse engineering a Hitachi technology -- a turnabout from a nation of champion reverse engineers. The moves illustrate the more aggressive attitude toward patent protection that patent experts say Japan is starting to take. Hitachi made the reverse-engineering charges in an amendment to a counterclaim filed in a federal district court in Texas after Motorola sued Hitachi for patent violation.Hitachi charges Motorola "has engaged in fraudulent and inequitable conduct in the procurement of certain Motorola patents" used in Motorola's MC68030 microprocessor chip. Translation: Motorola appears to have taken a Hitachi technology that is patented in the U.S., Hitachi says, and "tried to make it look like a new technology." Motorola either denied or wouldn't comment on the various charges. Odds and Ends COMPUTER chips that simulate human vision have been developed by Japan's Sharp Corp.They mimic the brain by "looking" at an image, extracting the fundamentals -- boundaries, corners and lines -- and translating them into computer data.Sharp says the set of chips could improve fax machines, graphics computers or identification systems that recognize facial features. . . . An N.V. Philips unit has created a computer system that processes video images 3,000 times faster than conventional systems.Using reduced instruction-set computing, or RISC, chips made by Intergraph of Huntsville, Ala., the system splits the image it "sees" into 20 digital representations, each processed by one chip.
At a private dinner Thursday, Drexel Burnham Lambert Inc. chief executive Frederick Joseph delivered a sobering message about the junk bond market to officials of Prudential Insurance Co. of America. Mr. Joseph conceded the junk market was in disarray, according to people familiar with the discussion.He said Drexel -- the leading underwriter of high-risk junk bonds -- could no longer afford to sell any junk offerings if they might later become troubled because Drexel risked losing its highly lucrative junk franchise. The dinner was a stark confirmation that 1989 is the worst year ever for the $200 billion junk market.And investors and traders alike say the current turmoil could take years to resolve. Amid the market disorder, even Drexel, which has the widest and most loyal following of junk bond investors, is pulling in its horns.Although the big investment bank still dominates the junk market, Drexel has been unable to stem the fallout from growing junk bond defaults, withdrawn new offerings, redemptions by shareholders in junk bond mutual funds and an exodus of once-devoted investors. For many money managers, the past four months have been humiliating. "This is the worst shakeout ever in the junk market, and it could take years before it's over," says Mark Bachmann, a senior vice president at Standard & Poor's Corp., a credit rating company. In the third quarter, for example, junk bonds -- those with less than an investment-grade rating -- showed negative returns, the only major sector of the bond market to do so.Since the end of last year, junk bonds have been outperformed by all categories of investment-grade bonds, including ultra-safe Treasury securities. The junk market, which mushroomed to $200 billion from less than $2 billion at the start of the decade, has been declining for months as issuers have stumbled under the weight of hefty interest payments.The fragile market received its biggest jolt last month from Campeau Corp., which created its U.S. retailing empire with more than $3 billion in junk financing.Campeau developed a cash squeeze that caused it to be tardy on some interest payments and to put its prestigious Bloomingdale's department store chain up for sale.At that point, the junk market went into a tailspin as buyers disappeared and investors tried to sell. In an interview, Mr. Joseph says his dinner discussion with the Prudential executives acknowledged problems for junk. "What I thought I was saying is that the market is troubled but still viable and, appropriately enough, quite quality-conscious, which is not at all bad," he says. "Nobody's been perfect in their credit judgments the past couple years, and we're going to make sure our default rates are going to be in the acceptable parameters of the market." What has jolted many junk buyers is the sudden realization that junk bonds cannot necessarily be bought and sold with the ease of common stocks and many investment-grade bonds.Unlike the New York Stock Exchange, where buyers and sellers are quickly matched, the junk market, where risky corporate loans are traded, is sometimes closed for repairs. At closely held Deltec Securities Corp., junk bond money managers Amy K. Minella and Hannah H. Strasser say the problems of the junk market go deeper than a temporary malaise.In recent months, they say, there has been heavy selling of junk bonds by some of the market's traditional investors, while new buyers haven't materialized to replace them. Wall Street securities firms, "the primary source of liquidity for the high yield market," have been net sellers of junk bonds because of trading losses, Deltec said in a recent, grim report to customers.Mutual funds have also been net sellers of junk bonds as junk's relatively poor performance and negative press coverage have produced "above-normal" redemptions by shareholders, Deltec said. Investors, trying to raise cash, have sold "large liquid issues" such as RJR Holdings Corp. and Kroger Co.; declines in these benchmark issues have contributed to the market's distress. And, Deltec said, buying has been severely reduced because savings and loans have been restricted in their junk purchases by recently passed congressional legislation. "In fact, savings and loans were sellers of high yield holdings throughout the quarter," Deltec said. Ms. Minella and Ms. Strasser say they are managing their junk portfolios defensively, building cash and selectively upgrading the overall quality. Meanwhile, Prudential, the nation's largest insurer and the biggest investor in junk bonds, has seen the value of its junk bond portfolio drop to $6.5 billion from $7 billion since August because of falling junk prices. "We certainly do have a lack of liquidity here, and it's something to be concerned about," says James A. Gregoire, a managing director. "I have no reason to think things will get worse, but this market has a knack for surprising us.This market teaches us to be humble." The junk market's "yield hogs are learning a real painful lesson," he says. Although the majority of junk bonds outstanding show no signs of default, the market has downgraded many junk issues as if they were in trouble, says Stuart Reese, manager of Aetna Life & Casualty Insurance Co. 's $17 billion investment-grade public bond portfolio. "But we think the risks are there for things getting a lot worse.And the risks aren't appropriate for us," he says.The big insurer, unlike Prudential, owns only about $150 million of publicly sold junk bonds. The string of big junk bond defaults, which have been a major cause of the market's problems this year, probably will persist, some analysts say. "If anything, we're going to see defaults increase because credit ratings have declined," says Paul Asquith, associate professor at the Massachusetts Institute of Technology's Sloan School of Management. Mr. Asquith, whose study on junk bond defaults caused a furor on Wall Street when it was disclosed last April, says this year's junk bond defaults already show a high correlation with his own findings.His study showed that junk bonds over time had a cumulative default rate of 34%. One indication of a growing number of junk defaults, Mr. Asquith says, is that about half of the $3 billion of corporate bonds outstanding that have been lowered to a default rating by S&P this year are junk bonds sold during the market's big issue years of 1984 through 1986. These bonds, now rated single-D, include junk offerings by AP Industries, Columbia Savings (Colorado), First Texas Savings Association, Gilbraltar Financial Corp., Integrated Resources Inc., Metropolitan Broadcasting Corp., Resorts International Inc., Southmark Corp. and Vyquest Inc. "Obviously, we got a lot more smoke than fire from the people who told us the market wasn't so risky," says Bradford Cornell, professor of finance at University of California's Anderson Graduate School of Management in Los Angeles.Mr. Cornell has just completed a study that finds that the risks and returns of junk bonds are less than on common stocks but more than on investment-grade bonds.Mr. Cornell says: "The junk market is no bonanza as Drexel claimed, but it also isn't a disaster as the doomsayers say." Despite the junk market's problems, Drexel continues to enjoy a loyalty among junk bond investors that its Wall Street rivals haven't found.During the past three weeks, for example, Drexel has sold $1.3 billion of new junk bonds for Turner Broadcasting Co., Uniroyal Chemical, Continental Air and Duff & Phelps. Still, the list of troubled Drexel bond offerings dwarfs that of any firm on Wall Street, as does its successful offerings.Troubled Drexel-underwritten issues include Resorts International, Braniff, Integrated Resources, SCI TV, Gillette Holdings, Western Electric and Southmark. "Quality junk bonds will continue to trade well," says Michael Holland, chairman of Salomon Brothers Asset Management Inc. "But the deals that never should have been brought have now become nuclear waste."
As Helen Boehm, who owns an art porcelain company, sipped her luncheon cocktail, she reeled off the names of a few pals -- Prince Charles, Princess Diana, Sarah Ferguson, John Kluge, Milton Petrie. Then, flashing a diamond ring as big as the Ritz ("my day diamond, darling"), she told her two companions that she is on the "board" of the Vatican Museum in Rome. As it turns out, the board has a lot of important members, including Winton Blount (former postmaster general of the U.S.), Mrs. Henry Gaisman (widow of the inventor of auto-strop razor) and Vincent Murphy (an investment banker at Merrill Lynch & Co.) But Mrs. Boehm didn't mention any of them. "Helen Boehm has a way with names," says James Revson, a gossip columnist for Newsday (and son of Joseph Revson, a founder of Revlon).Like which are droppable and which are not. With the fall social season well under way, name-droppers are out in force, trying to impress their betters and sometimes put down their lessers.But the truth is that almost everyone, from real-estate agents to city fathers, name-drops; and a surprising number of people have an ancient uncle who claims he lived next door to the cartoonist who did the Katzenjammer Kids. (In case you have forgotten, his name was Rudolph Dirks.) "Name-dropping is pervasive and getting more so as society becomes more complex and alienating," says Herbert Freudenberger, a New York psychoanalyst, with a high-powered clientele. "It can be an avenue of entrance to a certain sector of society. . . . It provides some people a needed sense of affiliation and can help open up a conversation with someone you don't know." Like the Long Island matron in the theater district the other day who swore to a stranger that she once met Liza Minnelli. "I was having a drink in Sardi's, when all of a sudden I saw a woman's backside coming up the steps on the second floor and she was wearing sequined slacks.I knew it was someone important, so I followed her into the ladies room and sure enough, it was Liza.So I said, `Hello. ' And she said, `Hello. ' Can you imagine?Liza said hello to me." Some people must drop names -- call it an irresistible impulse. "They can't help talking about the big important people they know, even if they don't really know them," says Dr. Freudenberger. Beauregard Houston-Montgomery, a New York writer who changed his name from William Stretch in 1980, is an inveterate name-dropper. "I do it innately and pathologically, and while it may occasionally get me into trouble, it's also gotten me access to parties and society," he says. Name-dropping recently helped Mr. Houston-Montgomery crash a party Fame magazine threw for 100 of the 2,809 people mentioned in the diaries of the late Andy Warhol. "I guess I might have asked Beauregard to leave, but he drops so many good names, we decided to let him stay," says Steven Greenberg, publisher of Fame. "After all, Warhol was the ultimate namedropper, dropping five a day in his diaries.And Beauregard was mentioned twice -- although very briefly and in passing." Mr. Houston-Montgomery says that at the party he waved to Malcolm Forbes, publisher of Forbes magazine ("We've been in the columns together"), Mary Boone, a New York art dealer ("I think she knows me, but I'm not sure ") and Bridget Fonda, the actress ("She knows me, but we're not really the best of friends"). Mr. Revson, the gossip columnist, says there are people who actually plan whose names they are going to drop before attending a party.These droppers don't flaunt only their friendships with the Trumps, Brooke Astor or Georgette Mosbacher. "They even drop semi-obscure names like Wolfgang Flottl, whom everybody these days apparently has heard of but no one really knows," says Mr. Revson. "It's the one-upsmanship of name-dropping that counts." But name-dropping has other benefits, often civic.In the name of civic pride and from the desire to nullify a negative image, some city promoters seek to link their municipality with the most recognizable names the city has to offer. Take Cleveland.It has gotten a bad rep because its once heavily polluted Cuyahoga River caught fire, because former Mayor Ralph Perk set his hair on fire with an acetylene torch and because its proposed Rock 'n' Roll Hall of Fame was recently refused an urban-development grant.Some people call it "The Mistake on the Lake" -- Lake Erie, that is. "It helps to point out how many important people came through Cleveland on their way to the top," says George Miller, executive director of the New Cleveland Campaign, a nonprofit organization devoted to citing the city's strengths. Mr. Miller notes that actor Paul Newman's family owned a sporting-goods store in Cleveland, that the late actress Margaret Hamilton, who played the bad witch in "The Wizard Of Oz," once ran a nursery school in Cleveland and that comedian Bob Hope's father, a stonemason, once worked on a church next to Severence Hall, Cleveland's main concert hall. "Power names like that don't hurt the city's reputation," Mr. Miller says. In Hollywood, an average family can gain cachet from moving into a home vacated by the famous or near famous. "Why we even just sold a three-bedroom house in Van Nuys and were able to keep the price firm in a weak real-estate market by noting that the original Lone Ranger lived there," says David Rambo, a sales associate with Jon Douglas Co., a Los Angeles real-estate agency. "Most people can't even remember his name." (It is John Hart.) Mr. Rambo says that a 3.2-acre property overlooking the San Fernando Valley is priced at $4 million because the late actor Erroll Flynn once lived there. "If Flynn hadn't lived there, the property might have been priced $1 million lower," says Mr. Rambo, noting that Flynn's house has been bulldozed, and only the swimming pool remains. Press agents and public-relations practitioners are notorious name-droppers.And some even do it with malice aforethought.Len Kessler, a financial publicist in New York, sometimes uses it to get the attention of journalists who try to avoid him.He says that when Dan Dorfman, a financial columnist with USA Today, hasn't returned his phone calls, he leaves messages with Mr. Dorfman's office saying that he has an important story on Donald Trump, Meshulam Riklis or Marvin Davis. He admits he has no story on any of them on these occasions. "But it does get him to return my calls, and it makes me feel better for the times he's given me the brushoff," Mr. Kessler says. There are, of course, obvious dangers to blatant, unsubstantiated name-dropping.Jeffry Thal, a publicity agent for the Lantz Office in Los Angeles, warns that dropping the wrong name labels the dropper as a fake and a fraud. "Get caught and you're dead in the water," says Mr. Thal. Mr. Thal says that Elizabeth Taylor, a client, "hates being called `Liz. '. . . If directors or producers phone me and say they know `Liz, ' I know they've never met her.She prefers `Elizabeth. '" In New York society, Pat Buckley, the very social wife of author William Buckley, has the nicknames "Mrs.Buckles" and "Patsy." And her husband sometimes calls her "Ducky." "But call her `Patty, ' and it's a sure giveaway you're not in her circle, because she doesn't use that name," says Joan Kron, editor-in-chief of Avenue magazine, a monthly publication sent to all the right names. John Spencer Churchill, a nephew of the late Sir Winston Churchill, former prime minister of Great Britain, isn't that impressed with most name-droppers he meets.That's because they only drop "mere names," says Mr. Churchill. Currently writing his memoirs, Mr. Churchill, an artist, tells how tycoons such as the late Jean Paul Getty, the oil billionnaire, were, in fact, known only by one initial, their last. "When you're at the club, you ask whether they've spoken to `G.' Now they know who you mean and you know who you mean.But no one else does.Now that's name-dropping, if you know what I mean."
Part of a Series} SMYRNA, Ga. -- The auto-dealer strip in this booming suburb runs nearly five miles along Cobb Parkway, stretching from the Perimeter highway that circles Atlanta to the "Big Chicken," a pullet-roofed fast-food restaurant and local landmark. Twenty years ago, in the infancy of suburban sprawl, just a handful of dealerships were here.Now there are 23.Alongside such long-familiar names as Chevrolet, Ford and Dodge are nameplates that didn't exist until three years ago: Acura, Sterling, Hyundai.Under construction is the strip's 24th showroom, the future home of Lexus, a luxury marque launched by Toyota Motor Corp. just two months ago. The 1980s have spawned an explosion of consumer choice in America, in everything from phone companies to colas.And especially, as the Cobb Parkway strip attests, in cars.Americans now can choose among 572 different models of cars, vans and trucks, up from just 408 when the decade began, according to Automotive News, a trade publication. For car marketers, it has become a much tougher battle to keep loyal customers from defecting to one of the new makes on the block.For American car buyers, the proliferation of choice is both liberating and confusing. Malcolm MacDougall, vice chairman of the Jordan, McGrath, Case & Taylor advertising agency in New York, calls the proliferation "nameplate mania." He says the number of automobile choices is causing stress among consumers today, and that people will simply ignore new models that lack a well-defined image. "The winners," he predicts, "will be brands from car makers that have traditionally been associated with quality and value." He says it's important for a new make to be as distinctive as possible while still retaining links to the parent company's quality image.He applauds Toyota and Nissan Motor Co. for creating separate divisions for their new luxury models, rather than simply adding more nameplates to their standard car lines. Some auto executives believe the benefits of more choice outweigh the drawbacks. "There's more noise out there, and the consumer may have to work harder to cut through it," says Vincent P. Barabba, executive director of market research and planning at General Motors Corp. "But the reward is that there's less need to make tradeoffs" in choosing one's wheels. Jeanene Page, of North Salt Lake City, Utah, likes the broader selection.She wants something big, and already has looked at the Chrysler New Yorker and Lincoln Town Car.Now, the 55-year-old car shopper is zeroing in on a full-sized van, figuring that it's just the thing to haul nine grandchildren and pull a boat at the same time. "That seems to be what all my friends are using to take the grandkids to the lake," she says. Market segmentation in cars isn't new, but it's far more extensive than when Alfred P. Sloan Jr. conceived the idea 50 years ago.The legendary GM chairman declared that his company would make "a car for every purse and purpose." Now there are many cars for every purse and purpose.Just four years ago, GM planners divided the combined car and truck market into seven segments.Today, they identify 19 distinct segments for cars, and another 11 for trucks and vans. The number of makes has mushroomed because the U.S. is the world's biggest and richest market for automobiles; virtually every auto maker wants to sell here.For every brand like Renault or Fiat that has been squeezed out, others such as Isuzu, Daihatsu and Mitsubishi have come in. Detroit tries to counter the foreign invasion with new brands of its own.GM launched the Geo marque this year to sell cars made in partnership with foreign auto makers, and next year GM's long-awaited Saturn cars will make their debut.Ford Motor Co. created the Merkur nameplate in 1985 to sell its German-made touring sedans in the U.S.But slow sales forced Ford to kill the brand just last week. When consumers have so many choices, brand loyalty is much harder to maintain.The Wall Street Journal's "American Way of Buying" survey found that 53% of today's car buyers tend to switch brands.For the survey, Peter D. Hart Research Associates and the Roper Organization each asked about 2,000 U.S. consumers about their buying habits. Which cars do Americans favor most these days?It's hard to generalize, but age seems to be the best predictor.Adults under age 30 like sports cars, luxury cars, convertibles and imports far more than their elders do.Three of every 10 buyers under 30 would prefer to buy a sports car, compared with just 16% of adults 30 and over, according to the Journal survey. Young consumers prefer luxury cars by a 37% to 28% margin -- even though older buyers, because of their incomes, are more likely to actually purchase a luxury car. Perhaps most striking, 35% of households headed by people aged 18 to 44 have at least one foreign car.That's true of only 14% of households headed by someone 60 or older.Generally, imports appeal most to Americans who live in the West and are well-educated, affluent and, especially, young. "For many baby boomers, buying a domestic car is a totally foreign experience," says Christopher Cedergren, auto-market analyst with J.D. Power & Co. of Agoura Hills, Calif. Such preferences persist even though many Americans believe differences between imported and domestic cars are diminishing.Only 58% of Americans now believe that foreign cars get better gas mileage than domestic models, the Journal survey found, down from 68% in 1987.Some 46% give foreign cars higher quality ratings, down from 50% two years ago. On the other hand, only 42% say foreign cars are less comfortable than U.S. models, down from 55% in 1987. People in the automotive business disagree over how susceptible younger Americans are to brand switching. "Once buying habits are formed, they're very hard to break," declares Thomas Mignanelli, executive vice president for Nissan's U.S. sales operations. But out on Cobb Parkway, Ted Negas sees it differently. "The competition is so intense that an owner's loyalty to a dealership or a car is virtually nonexistent," says Mr. Negas, vice president of Ed Voyles Oldsmobile, one of the first dealerships to locate on the strip.Thus the very fickleness of baby boomers may make it possible to win them back, just as it was possible to lose them. The battle for customer loyalty is evident along the Cobb Parkway strip.Ed Voyles Olds recently established a special section in the service department for owners whose cars are less than a year old, so they get quicker service.Just down the street, Chris Volvo invites serious shoppers to test-drive a new Volvo to any other dealership along the strip, and compare the cars side-by-side. Manufacturers, too, are stretching further to lure buyers.GM's Cadillac division, ignoring Detroit's long-held maxim that safety doesn't sell, is airing television commercials touting its cars' safety features. Cadillac may be on to something.Some 60% of the survey respondents said they would buy anti-lock brakes even if they carry a medium or high price tag.More than 50% felt the same way about air bags.Both features appealed most to buyers under 45.In contrast, dashboard computers, power seats and turbo-charged engines had little appeal. But even a little appeal has a lot of attraction these days.GM's Pontiac division is offering a turbo-charged V-6 engine on its Grand Prix model, even though it expects to sell only about 4,000 cars equipped with that option.The reason: Items with narrow appeal can be important in a market as fragmented as today's. Americans spent more than $190 billion on new cars and trucks last year, and just 1% of that market exceeded Polaroid Co. 's sales of $1.86 billion. "Even if it's only 1%," says GM's Mr. Barabba, "would you throw away sales the size of Polaroid?" (All buyers 47%)
It's a California crime saga worthy of an Erle Stanley Gardner title: The Case of the Purloined Palm Trees. Edward Carlson awoke one morning last month to find eight holes in his front yard where his prized miniature palms, called cycads, once stood.Days later, the thieves returned and dug out more, this time adding insult to injury. "The second time," he says, "they left the shovel." No garden-variety crime, palm-tree rustling is sprouting up all over Southern California, bringing big bucks to crooks who know their botany.Cycads, the most popular of which is the Sago Palm, are doll-sized versions of California's famous long-necked palms, with stubby trunks and fern-like fronds.Because the Sago is relatively rare and grows only a couple of inches a year, it's a pricey lawn decoration: A two-foot tall Sago can retail for $1,000, and taller ones often fetch $3,000 or more. "Evidently, somebody has realized it's easy money to steal these things," says Loran Whitelock, a research associate specializing in cycads at the Los Angeles State and County Arboretum.Just last week, would-be thieves damaged three Sagos at Mr. Whitelock's home in the Eagle Rock section before something frightened them off, foiled. "It's hard to think someone is raping your garden," he says. Police suspect that the criminals, who dig up the plants in the dead of night, are selling them to nurseries or landscapers.The Sago has become a popular accent in tony new housing tracts, apparently giving the rustlers a ready market for their filched fronds. Thieves are going to find "anybody who has enough bucks to plant these things in their front yard," says William Morrissey, an investigator with the police department in Garden Grove, Calif., where five such thefts have been reported in the past several weeks.The department is advising residents to plant Sagos, if they must, in the back yard and telling nurseries to be on the lookout for anyone trying to palm one off. But for those Californians who want exotic gardens out front where neighbors can appreciate them, there's always Harold Smith's approach.After three Sagos were stolen from his home in Garden Grove, "I put a big iron stake in the ground and tied the tree to the stake with a chain," he says proudly. "And you can't cut this chain with bolt cutters."
Program trading on the New York Stock Exchange in September rose to its highest recorded level as a percentage of total monthly trading volume. September program trading amounted to 13.8% of average daily New York Stock Exchange volume of 151.8 million shares, the largest percentage since the exchange began making such figures public in July 1988. A daily average of 20.9 million shares traded in program strategies in September, the second-highest level ever.The highest level was in June 1989, when a daily average of 22.1 million shares traded in program strategies.Average daily trading volume in June of 180.3 million shares was considerably higher than in September.Program trading amounted to 12.3% of average daily volume in June. The Big Board says program trading describes a variety of strategies involving the purchase or sale of a basket of 15 or more stocks.The most controversial of these is stock-index arbitrage, in which traders buy or sell baskets of stocks and offset the position with an opposite trade in stock-index futures to lock in profits.It's the most controversial form of program trading because it can create abrupt price swings in the stock market. Salomon Brothers Inc. was the top program trader in September, but most of the firm's activity involved portfolio trading strategies other than stock-index arbitrage.Overall, Salomon reported program trading volume of 75.2 million shares. The top stock-index arbitrage firm last month was Morgan Stanley & Co.Of Morgan Stanley's 66.8 million shares in program trades for the month, 53.1 million were in stock-index arbitrage trades. Behind second-place Morgan Stanley were Kidder, Peabody & Co., Goldman, Sachs & Co. and CS First Boston Inc. 's First Boston Corp. unit.
Eastman Kodak Co., seeking to position itself in the potentially huge high-definition television market, unveiled a converter that can transform conventional motion-picture film into high-definition video. The move also helps the Rochester, N.Y., photographic giant ensure that its motion-picture film business -- for which it holds a virtual monopoly, supplying every Hollywood movie company -- isn't made obsolete by the upstart HDTV business. While the prototype converter is costly, it's being lauded by the infant HDTV industry as a way of increasing the number of high-quality shows that can be seen on the new medium. "The industry has been waiting with bated breath for the machines to come along," says David Niles, president of Eleven Twenty Five Productions Inc., a New York pioneer in high-definition programming.He notes that industry executives have until now worried that they would face a severe shortage of programs once consumers begin replacing their TV sets with HDTVs. Japanese electronic giants, such as Sony Corp. and Hitachi Ltd., have focused almost entirely on HDTV hardware, and virtually ignored software or programs shot in high-definition.And only a handful of small U.S. companies are engaged in high-definition software development.It's estimated that just about 250 hours of HD programming is currently available for airing. Kodak says its new CCD HDTV converter will help alleviate the problem by allowing programmers and broadcasters to convert movies and television programs shot in 35mm motion-picture film into high-definition video.Consumers will be able to switch on their HDTV sets and get all the viewing benefits the high-tech medium offers.Otherwise, they'd be watching programs that are no different in quality from what they currently view on color TVs. It would be like "watching a black and white movie on a color TV set," says Malcolm G. Saull, chairman of the film and video department at the Rochester Institute of Technology. The new converters are "a critical link between film and the television domain," says Joerg D. Agin, vice president and general manager of Kodak's Motion Picture and Audiovisual Products division. Kodak won't disclose the cost or when its converter will be on the market, but it's estimated the machine may be available within two years.A similar machine already on the market, made by Rank Sintel Ltd., a unit of Rank Organisation, costs about $500,000. And the potential market is tremendous, industry experts say.If HDTV takes off in the U.S., there will be demand for some 4,000 to 5,000 HDTV converters, known in the industry as telecines.Demand will come first from programming production companies and then from television stations. "The converter is head and shoulders above anything else I've seen," says Richard J. Stumpf, vice president-engineering and development at MCA Inc. 's Universal City Studios.And Mr. Niles, the program producer, contends that Kodak's move is "a sound marketing decision.They can't afford to stay out of HDTV." Indeed, the stakes are high.The U.S. electronics industry estimates that the HDTV market will total about $150 billion over the next two decades, with an additional $400 billion expected to go for related products. HDTVs break down images into more than 1,100 lines, compared with 525 for today's televisions, providing considerably sharper detail.And the sets are wider, resembling the dimensions of a movie screen. But the financial rewards aren't expected soon, nor are they guaranteed.Experts estimate the first sets of HDTVs won't be available for another five to 10 years, and will probably retail for more than $3,000 each in today's dollars.Some critics say they won't be quickly embraced by consumers because of the high price. Nevertheless, Kodak couldn't risk letting HDTV turn its motion-picture film business into a dinosaur. "Kodak understands HDTV is where everybody is going," says RIT's Mr. Spaull.
Yet another political scandal is racking Japan.But this time it's hurting opposition as well as ruling-party members.And as it unfolds, it's revealing some of the more tangled and seamier aspects of Japanese society. Already, ruling Liberal Democratic Party demands that opposition members testify under oath in parliament have stalled one budget committee session and forced the committee to plan a special two-day investigation at the end of the month.But the scandal itself is so convoluted that ruling-party members are divided between those who want to pursue the matter in hope of undermining the opposition and those who favor leaving well enough alone. "The opposition can be the most hurt because everyone already figures the LDP is that kind of beast," says Shigezo Hayasaka, former aide to LDP kingmaker Kakuei Tanaka and now an independent analyst.But, he adds, "We can't tell where it will go at all because we're still in the middle of it." This time, the scandal centers on donations made by the not-quite-mainstream pachinko parlor industry.Pachinko, a kind of pinball, is Japan's favorite form of legal gambling.The donations so far appear to be small, especially compared with the huge sums that changed hands in the Recruit Co. influence-peddling scandal that plagued the ruling party last year.But the implications could be great. Pachinko is slightly on the shady side, often linked to the lower ranks of Japan's underworld and regularly at the top of annual lists of tax evaders.Recently the industry has faced the threat of new restrictions, and political donations may have been made with the intent to bribe.Also, about 60% of pachinko parlor owners are Korean, many of whom maintain close ties with North or South Korean residents' organizations, and donations by such foreign groups are illegal in Japan. To many Japanese, pachinko is benign or enticingly unsavory.Garish neon pachinko marquees blaze from the main streets and narrow alleys of cities and towns across the country.Devotees pass hours, watching the lights blink and listening to the metal balls ping, as much to gamble as to get a little time to be anonymous, alone with their thoughts.At 500 yen ($3.60) for a handful of balls, pachinko is a common pastime, and has been since it took root as cheap entertainment in the years after World War II. But the total of all those pinging balls has created an industry with a reported annual income of 13 trillion yen (almost $92 billion), or nearly the size of Japan's vaunted automobile industry.And because the pachinko industry is regularly at the top of annual lists for tax evasion, some observers estimate the real income could be as much as 20 trillion yen. If that money were being taxed, it could bring the government a badly needed several trillion yen.In 1984, an attempt was made to crack down on the industry with tougher restrictions.Then, in 1988, a proposal to keep better track of income by selling prepaid cards for pachinko was fielded in parliament.The proposal split the industry in two, along the lines of national origin: North Koreans oppose the plan while South Koreans, Japanese and Taiwanese accept it or are neutral. In August, a conservative weekly magazine reported that a pachinko industry organization donated money to Japan Socialist Party members.The magazine alleged that in making the donations, the pachinko industry may have been offering bribes to win support in the battle against prepaid cards, or it may have been laundering money back and forth between the JSP and the North Korean residents' organization, the Chosen Soren. The Chosen Soren and the JSP immediately denied the report.And at first, neither the opposition nor the LDP wanted to pursue the issue.But the press kept it alive; as with the Recruit scandal, lists began circulating with names of people who had received money. Within a matter of weeks, less-conservative magazines reported that members of the ruling LDP had received much larger donations from pachinko organizations.So far, though, there have been no allegations that the contributions the LDP members received amounted to bribes.Then the two camps upped the ante: Reports that Chosen Soren had donated directly to JSP members were rapidly countered by statements that the South Korean residents' organization had long been donating directly to LDP members. The JSP admitted Oct. 13 that its members received about eight million yen from the pachinko organization, and charged LDP members with receiving 125 million yen ($880,000) and other opposition parties with taking about 2.5 million yen.On Friday, the chief cabinet secretary announced that eight cabinet ministers had received five million yen from the industry, including 450,000 yen ($3,175) by Prime Minister Toshiki Kaifu.No one has alleged that the donations were by themselves illegal. Direct donations from either of the residents' organizations would be illegal because the groups are defined as foreign, but both groups deny making direct donations.They say its possible some of their members may be donating privately. The issue is further complicated because although the organizations represent Korean residents, those residents were largely born and raised in Japan and many speak only Japanese.That they retain Korean citizenship and ties is a reflection of history -- their parents were shipped in as laborers during the decades when Japan occupied Korea before World War II -- and the discrimination that still faces Koreans in Japanese society. Many Japanese think it only natural that the organizations or their members would donate to politicians, the way many Japanese do, to win favor or support. Both residents' organizations admit to receiving some funding from abroad.But LDP members and supporters of the prepaid card idea tend to speak in innuendo about the JSP's alleged donations, implying that North Korean money would be more suspect than South Korean because North Korea is communist and South Korea is an ally.
Are consumers too deep in hock? A lot of observers think so, and, if they're right, the whole economy as well as the spendthrifts among us could be hurt.A sudden, forced cutback by consumers, who normally account for about two-thirds of economic activity, would damp the economy at a time when plant-and-equipment spending is slowing and deficit-racked governments can't readily take up the slack.And another wave of bad loans would further batter many already-shaky lending institutions. The worriers cite some worrisome trends.During the almost seven-year-old economic expansion, inflation-adjusted gross national product, disposable personal income and personal consumption expenditures have risen 30%, but inflation-adjusted consumer installment credit has surged 66%.And the ratio of installment debt to disposable personal income -- personal income after taxes -- has hit a high of about 18 1/2%. However, these figures don't seem to worry Thomas A. Durkin, an economist at the Federal Reserve Board.In a paper presented at the recent annual meeting of the National Association of Business Economists in San Francisco, Mr. Durkin comments that "installment credit always grows rapidly in cyclical advances, and growth in this cycle is very typical of earlier experiences." He adds: "We are now witnessing a slowdown which, if history is a guide, could persist for a while." But what about the debt burden?Mr. Durkin doubts that "there is some magic level" at which the ratio of installment debt to disposable income "indicates economic problems." And, "more importantly," he says, "the debt burden measured other ways is not really in uncharted waters." The chart below shows why (see accompanying illustration -- WSJ Oct. 23, 1989).The ratio of consumer installment credit to disposable income, though up a bit, hasn't climbed steeply, and such debt as a percent of household assets is little changed.Moreover, the burden of consumer credit payments relative to disposable income may be "lower in this cycle than earlier," Mr. Durkin says.He notes that some "revolving credit-card credit is actually convenience credit" being used simply as a handy way of paying bills rather than a handy way of borrowing.In addition, he says, "longer maturities on automobile and other forms of installment credit boost the stock of debt faster than the flow of repayments and the accompanying payment burden." And if you "consider the changing distribution of credit," Mr. Durkin says, "much of the increase in debt in recent years is due to increasing credit use by higher-income families," that is, "those probably best able to handle it." Citing figures on home-equity loans, he notes that "11% of homeowners had home-equity credit accounts, but the proportion rises to 16% of homeowners in the $45,000-$60,000 income range and 23% of homeowners with income above $60,000." And much home-equity credit is used conservatively. "The most frequent use is home improvement, which presumably improves the value of the property," Mr. Durkin says. So, it isn't surprising that consumer-credit delinquencies at banks remain, as the chart shows, reassuringly below some earlier highs (see accompanying illustration -- WSJ Oct. 23, 1989). A severe recession could, of course, raise delinquency rates, but so far the current levels of consumer debt don't seem to loom as a major threat.In fact, the current weakness in auto buying and department-store sales and the gradual upturn in the household saving rate suggest that consumers, conservative as ever, are already clutching their purses a bit more tightly.In July, consumer installment credit outstanding fell for the first time since January 1987. "Consumers appear unwilling to add to their leverage to support their spending," Bruce Steinberg, a Merrill Lynch economist, says. "As a result, household debt appears to be stabilizing at around 63% of GNP." Consumers, credit cards in hand, aren't running amok through the shopping malls -- or putting the economy at any great risk.
When Robert McDuffie was 14, he got a chance to play in the starting lineup for his high school basketball team in Macon, Ga.Unfortunately, his mother had tickets for a recital by Itzhak Perlman the same night, and she was adamant about his attending. "I threw such a fit," says Mr. McDuffie, who had begun violin studies at the age of six. "But once Perlman started playing, I didn't give a damn about basketball. . . . Afterwards, I went home and practiced for three hours." Today, it's obvious that the brawny, six-foot, one-inch musician made the right choice.At 31, Mr. McDuffie has a rich, full-bodied tone, an admirable rhythmic precision and an increasingly busy schedule.He's currently in the midst of a 17-city U.S. tour with Yehudi Menuhin and the Warsaw Sinfonia, with stops including Charleston, S.C. (Oct. 25), Sarasota, Fla. (Oct. 28), Tampa, Fla. (Oct. 29) and Miami (Oct. 31).Later this season he gives a recital at Washington's Kennedy Center, and appears as soloist with several major orchestras. Yet Mr. McDuffie's career has developed at a slower pace than those of some of his better known contemporaries.During the late 1970s, he was part of a musical "brat pack" -- a group of budding virtuosos who studied at the Juilliard School with the noted pedagogue Dorothy DeLay.His violin classmates included Shlomo Mintz, a protege of Isaac Stern who performed with major orchestras while still a student; Cho-Liang Lin, who joined the roster of ICM Artists Inc. at the age of 18; and Nadja Salerno-Sonnenberg, who launched her career by winning the 1981 Naumberg Competition. "I thought I was over the hill at 22," recalls Mr. McDuffie, an outgoing man with pale blue eyes and a light Southern drawl. "But I wasn't ready for a career at that time." Young McDuffie's first violin teacher was Henrik Schwarzenberger, a Hungarian refugee who taught in the Macon public school system. "He taught me how to play like a gypsy," jokes the musician. "I didn't learn to count until I got to Juilliard." After studies at that conservatory's Pre-College Division with an assistant to the legendary instructor Ivan Galamian, he switched at the college level to Miss DeLay, Mr. Galamian's longtime assistant and, ultimately, his rival. "I think I had to prove myself to her," says Mr. McDuffie. "But she was always encouraging.She only put her foot down twice," he continues. "In my freshman year, my roommate was known as a party animal.She thought I wasn't getting my practicing done." As the violinist tells it, his grandmotherly looking teacher "put her hands on her hips, stomped her foot and said, `You've just got to get the {expletive deleted} out of there. '" The second incident took place after Mr. McDuffie gave an ambitious student recital and was feeling rather pleased with himself.Miss DeLay requested that he come to her studio with a tape of the recital. "We listened to the Chausson `Poeme, '" he recalls, "and she said, `You hear the first note, that B-flat?That's the only note that's truly in tune . . .'." "That's the most important experience I've had with any teacher," he says, "because she taught me how to listen.Now, when I play with orchestras, the musicians often compliment me on my intonation." It was also at Juilliard that Mr. McDuffie discovered his predilection for conservative, 20th-century American composers such as David Diamond and Samuel Barber.After winning a school competition with a performance of the latter's "Violin Concerto," Mr. McDuffie was invited to play the work for the composer, who was dying of cancer. "Barber was seated by the fireplace looking very pale," recalls the violinist, who performed the work with a piano accompanist at the composer's apartment. "He didn't say much, but what he said was important because it's not in the score.There's a beautiful, Coplandesque motif -- he'd kill me if he heard me say that -- throughout the first movement . . . The only time the violin has it is right at the end.It's written `marcato' in the score, and I played it that way, kind of gigue-like.And he yelled out `dolce! dolce!' {`sweet! sweet!'}." "So we did it over," he adds. "I played very transparently, with the tip of the bow.If a conductor is sensitive enough to bring down the orchestra {volume} at that point, it makes the piece magical.I don't know why Barber never told anybody else.On Isaac Stern's recording it's very biting." Since leaving Juilliard, Mr. McDuffie has made some smart moves and some controversial ones.His guest appearance on the NBC soap opera "Another World," scandalized musical elitists.By contrast, he's won kudos for his espousal of William Schuman's "Violin Concerto," which he recently recorded for Angel/EMI along with Leonard Bernstein's engaging "Serenade for Violin Solo, Strings and Percussion." Mr. McDuffie's sweet tone, heartfelt lyricism and rhythmic punch make him an ideal interpreter of both works.Aided by the fluid playing of the St. Louis Symphony under Leonard Slatkin's direction, this "Serenade" really swings.Mr. Schuman's "Violin Concerto," which sounds more like a mildly atonal rhapsody for solo violin with orchestral accompaniment, meanders until the propulsive "Agitato, fervente." But there are ample rewards in its plaintive slow sections and virtuoso fireworks for soloist, brass and timpani.At Avery Fisher Hall here, Mr. McDuffie was heard recently with Mr. Menuhin and the Warsaw Sinfonia in more conventional fare -- Bruch's overwrought "Violin Concerto in G Minor." His performance was so effusive and driven that the phrases rarely breathed.The 35-member Sinfonia played adroitly with a big, lush sound that belied its size. Whatever he plays, Mr. McDuffie finds satisfaction in the music itself -- "something greater out there than me," as he puts it during an interview at the Manhattan apartment he shares with wife, Camille, a literary publicist. "A normal person did not write the Beethoven `Violin Concerto, '" he declares. "Even when I hear it played badly, I'm still humbled by the piece.If I could ever feel I've contributed to it in some way, then all the hard work has been worth it." Ms. Jepson is a free-lance music writer in New York.
Maidenform Inc. loves to be intimate with its customers, but not with the rest of the public. The 67-year-old maker of brassieres, panties, and lingerie enjoys one of the best-known brand images, but its financial profile is closely guarded by members of the founding family. "There are very few companies that can boast of such a close-knit group," says Robert A. Brawer, 52 years old, recently named president, succeeding Beatrice Coleman, his mother-in-law, who remains chairman. "We are a vanishing breed," he muses. Mrs. Coleman, 73, who declined to be interviewed, is the Maidenform strategist.Sales have tripled during her 21-year tenure to about $200 million in 1988.Maidenform says it is very profitable but declines to provide specifics. The company sells image.Its current ad campaign, on which Maidenform has spent more than $15 million since fall 1987, doesn't even show its underwear products, but rather men like Christopher Reeve, star of the "Superman" movies, talking about their lingerie turn-ons. The Maidenform name "is part of American pop culture," says Joan Sinopoli, account supervisor of the campaign by Levine, Huntley, Schmidt & Beaver, a New York ad firm.Maidenform generated such memorable campaigns as "I dreamed I . . . in my Maidenform bra," and "The Maidenform woman.You never know where she'll turn up." "Capitalizing on the brand is key," says Mr. Brawer, whose immediate plans include further international expansion and getting better control of distribution outside the U.S. "The intimate apparel industry is perceived to be a growth industry and clearly {Maidenform} is a force to be reckoned with," says David S. Leibowitz, a special situations analyst at American Securities Corp. in New York.Although working women are "forced to wear the uniform of the day, to retain their femininity they are buying better quality, more upscale intimate apparel," he said. Although Mr. Brawer's appointment as president was long expected, the move on Sept. 25 precipitated the resignation of Alan Lesk as senior vice president of sales and merchandising.Three days later, Mr. Lesk was named president and chief executive officer of Olga Co., a competing intimate apparel division of Warnaco Inc. Warnaco also owns Warners, another major intimate apparel maker. Mr. Lesk couldn't be reached to comment.But Maidenform officials say that after spending 24 years at Maidenform, Mr. Lesk, 48, made it clear he wanted the top job. "If you want the presidency of the company, this isn't the firm to work for," says James Mogan, 45, who was named senior vice president of sales, assuming some of the responsibilities of Mr. Lesk. The company downplayed the loss of Mr. Lesk and split his merchandising responsibilities among a committee of four people. "My style is less informal," Mr. Brawer says. Top officers insist Maidenform's greatest strength is its family ownership. "You can't go anywhere in this company and find an organizational chart," one delights. "It is fun competing as a private company," Mr. Brawer says. "You can think long range." Other major players in intimate apparel apparently feel the same way.Warnaco was taken private by Spectrum Group in 1986 for about $487 million.And last year, Playtex Holdings Inc. went private for about $680 million.It was then split into Playtex Apparel Inc., the intimate apparel division, and Playtex Family Products Corp., which makes tampons, hair-care items and other products.Publicly traded VF Corp., which owns Vanity Fair, and Sara Lee Corp., which owns Bali Co., are also strong forces in intimate apparel. Buy-out offers for Maidenform aren't infrequent, says Executive Vice President David C. Masket, but they aren't taken very seriously.When he gets calls, "I don't even have to consult" with Mrs. Coleman, Mr. Masket says. The company could command a good price in the market. "Over the past three and a half years, apparel companies, many of whom have strong brand names, have been bought at about 60% of sales," says Deborah Bronston, Prudential-Bache Securities Inc. apparel analyst. Mr. Brawer, along with Mrs. Coleman and her daughter, Elizabeth, an attorney who is vice chairman, are the family members involved in the operations of Maidenform, which employs about 5,000.Mr. Brawer's wife, Catherine, and Robert Stroup, Elizabeth's husband, round out the five-member board.Each has an equal vote at the monthly meetings. "We are all very amiable," Mr. Brawer says. Executives say Mrs. Coleman is very involved in the day-to-day operations, especially product development.In the late 1960s she designed a lightweight stretch bra that boosted sales. Her father, William Rosenthal, designed the then-dress making company's first bra in the 1920s, which he said gave women a "maiden form" compared with the "boyish form" they got from the "flat bandages" used for support at the time.While Mr. Rosenthal introduced new undergarment designs, his wife, Ida, concentrated on sales and other financial matters.The name Maidenform was coined by a third business partner, Enid Bissett. The company has 14 plants and distribution facilities in the U.S., Puerto Rico, other parts of the Caribbean and Ireland. Maidenform products are mainly sold at department stores, but the company has quietly opened a retail store of its own in Omaha, Neb., and has 24 factory outlets, with plans to add more. Before joining Maidenform in 1972, Mr. Brawer, who holds a doctoral degree in English from the University of Chicago, taught at the University of Wisconsin.As a senior vice president, he has headed the company's designer lingerie division, Oscar de la Renta, since its inception in 1988.To maintain exclusivity of that designer line, it isn't labeled with the Maidenform name. While the company has always been family-run, Mr. Brawer isn't the first person to marry into the family and subsequently head Maidenform.Mrs. Coleman's husband, Joseph, a physician, succeeded Mrs. Rosenthal as president and served in that post until his death in 1968.
China could exhaust its foreign-exchange reserves as early as next year, a Western government report says, unless imports are cut drastically to help narrow the balance-of-payments deficit. According to the report, completed last month, if China's trade gap continues to widen at the pace seen in the first seven months of this year, the reserves would be wiped out either in 1990 or 1991.A country is considered financially healthy if its reserves cover three months of its imports.The $14 billion of reserves China had in June would cover just that much. The report by the Western government, which declines to be identified, concludes that "a near-term foreign-exchange payment problem can be avoided only if import growth drops to below 5% per annum." According to Chinese customs figures, import growth has slowed in recent months, dropping to 16% in July and 7.1% in August from the year-earlier periods, compared with an average growth rate of 26% in the first half. But before import growth slowed, China's buying spree in the first half already had taken its toll on foreign-exchange reserves.The $14 billion level in June marked a drop from $19 billion at the end of April.China's last big import binge sent reserves tumbling to $10.6 billion in June 1985 from $16.6 billion the previous September. China might stave off a crisis if it acts as forcefully as it did to arrest the 1985 decline, when Beijing slammed the brakes on foreign-exchange spending and devalued the currency.But this time, China faces a more difficult battle because of economic forces that have come into play since the Tiananmen Square killings June 4. For example, China's hard-currency income is expected to suffer from the big drop in tourist arrivals since June 4.Revenue from tourism this year is projected to total $1.3 billion, down from $2.2 billion last year.Because of this and the huge trade gap, the deficit in China's current account, which measures trade in goods and services plus certain unilateral transfers of funds, is expected to widen sharply from the $3.8 billion deficit last year. The Western government report suggests a number of scenarios for China's current-account balance, two of which are considered most likely. In one, imports and exports continue to grow at the respective average rates of 25% and 5% recorded during the first seven months, and the current-account deficit widens to $13.1 billion.In 1985, China had a record deficit of $11.4 billion. The other scenario assumes that Beijing takes effective actions to curb imports in the coming months.In this case, China would still finish the year with a current-account deficit of $8.7 billion, based on projections that imports for all of this year grow 20% and exports 10%. If China were still on good terms with foreign lenders, it might be able to stem the drain on its foreign-exchange reserves by using some loan funds to offset the current-account deficit.But since June, foreign bankers led by international financial institutions have virtually suspended their new loans to China.Even if borrowing resumes, commercial bankers aren't expected to lend as much as before. In addition, economists are forecasting a slowdown in foreign direct investments as businessmen become increasingly wary of China's deteriorating political and economic environment.On top of all this, foreign-debt repayments are expected to peak in 1991 to 1992. With less capital coming in, China's balance of payments would suffer.The Western government report's first scenario assumes a 30% reduction in foreign borrowing and a 5% contraction in foreign direct investment.In the second, foreign borrowing is projected to grow 10% and investment to drop 10%. But in either case, the report says, China's balance of payments would rapidly dry up foreign reserves, which are used to finance the imbalance.In the first scenario, the reserves would be exhausted next year, and in the second they would be wiped out in 1991.
Ralph Brown was 31,000 feet over Minnesota when both jets on his Falcon 20 flamed out.At 18,000 feet, he says, he and his co-pilot "were looking for an interstate or a cornfield" to land. At 13,000 feet, the engines restarted.But knowing that mechanics would probably ground him for repairs, Mr. Brown skipped his stop in nearby Chicago and set course to get his load -- a few hundred parcels -- to the Memphis package-sorting hub on time.Had he been a little less gung-ho, "I'd have gotten the thing on the ground and headed for the nearest bar," Mr. Brown says. But he flies for Federal Express Corp., perhaps the closest thing in corporate America to the Green Berets.Federal's employees work long hours and seem to thrive on the stress of racing the clock.Like Mr. Brown, they sometimes go to surprising lengths to meet that overarching corporate goal: delivering the goods on time.They are a tribute to Federal's management which, since the company's founding 16 years ago, has had its way with its work force -- an unusual feat in the contentious transportation industry. That may soon change.This month, Federal's 2,048 pilots, including some 961 acquired along with Tiger International Inc. in February, will decide whether to elect the powerful Air Line Pilots Association as their bargaining agent.The election, which would bring the first major union to Federal's U.S. operations, has pitted new hires against devoted veterans such as Mr. Brown.It has also rattled Federal's strongly anti-union management, which is already contending with melding far-flung operations and with falling profits. "A union, sooner or later, has to have an adversary, and it has to have a victory," Frederick W. Smith, Federal's chairman and chief executive, says with disdain. "In our formula, we don't have any losers except the competition." What managers really fear is that the pro-union movement could spread beyond the pilots.Under federal transportation law, a government mediator is attempting to reconcile the melding of Tiger's job classifications into Federal's.Depending on the outcome, the merged company may face union elections this fall among airplane mechanics, ramp workers, stock clerks and flight dispatchers.These groups constitute up to 10% of its work force. "Unions would have a profound effect on the whole culture of the company," says Bernard La Londe, a professor at Ohio State University at Columbus and a Federal consultant. That culture, carefully crafted by Mr. Smith, leaves little, if any, room for unions.Since founding the company, the charismatic Vietnam vet, who is still only 46 years old, has fostered an ethos of combat.Flights are "missions." Mr. Smith's managers have, at times, been called "Ho Chi Minh's Guerrillas." The Bravo Zulu award, the Navy accolade for a "job well done," is bestowed on Federal's workers who surpass the call of duty.Competitors are known as the "enemy." To reinforce employees' dedication, Mr. Smith pays well.He also lets workers vent steam through an elaborate grievance procedure and, as a perk, fly free in empty cockpit seats.He gives pep talks in periodic "family briefings" beamed internationally on "FXTV," the company's own television network. And, with many of his 70,000 workers, Mr. Smith's damn-the-torpedoes attitude has caught on.James Cleveland, a courier who earned a Bravo Zulu for figuring out how to get a major customer's 1,100-parcel-a-week load to its doorstep by 8 a.m., considers himself far more than a courier. "We don't just hand the customer the package.That's just the beginning," he says. "In essence, we run the show." David Sanders, a longtime pilot, bristles at the mere suggestion that a union might tamper with his flight schedule. "This is America," he says. "Nobody has the right to tell me how much I can work." Such attitudes have given Federal flexibility, not only to rapidly implement new technology but to keep its work force extraordinarily lean.The company deliberately understaffs, stretching employees' schedules to the limit.But though couriers work as many as 60 hours a week during the autumn rush, they leave early during slack times while still being assured of a minimum paycheck.Pilots, as well, routinely fly overtime to ensure that none are furloughed during seasonal lows. The operational freedom has also given Federal a leg up on archrival United Parcel Service Inc., the nation's largest employer of United Brotherhood of Teamsters members.UPS won't discuss its labor practices, but, according to Mr. Cleveland, a former UPS employee, and others, union work rules prohibit UPS drivers from doing more than carrying packages between customers and their vans.Because UPS drivers aren't permitted to load their own vehicles at the depot, say these couriers, packages often get buried in the load and are delivered late. Labor problems are the last thing Mr. Smith needs right now.Although the Tiger acquisition has brought Federal a long way toward becoming the global player it wants to be, it also has brought problems.It more than doubled Federal's long-term debt to $1.9 billion, thrust the company into unknown territory -- heavy cargo -- and suddenly expanded its landing rights to 21 countries from four. Federal, on its own, hadn't been doing very well overseas.It had hemorrhaged in its attempt to get into Asia, where treaty restrictions forced it to fly some planes half-empty on certain routes.On routes to South America, the company had no backup jets to ensure delivery when planes were grounded.In Europe, business suffered as Federal bought several local companies, only to have the managers quit. These and other problems squeezed Federal's profit margins last year to 8%, down from more than 13% annually in the first half of the decade.Earnings have plummeted, too, in each of the past three quarters.In the fiscal first period ended Aug. 31, profit fell 54% to $30.4 million, or 58 cents a share, mostly because of the Tiger merger, Federal says. Federal's stock price, however, has held up well, driven in part by the general run-up of airline stocks, analysts say.Since trading as low as $42.25 a share in May, Federal's shares have rallied as high as $57.87 in New York Stock Exchange composite trading.They closed Friday at $53.25, down 50 cents on the day. There's a certain irony in the fact that Federal Express faces its first union problems as a result of its Tiger purchase.Tiger itself was founded by a band of gungho airmen who had airlifted supplies "over the Hump" from India to China during World War II.In the early 1970s, Mr. Smith modeled his fledgling company on Tiger's innovation of hub-and-spoke and containerized-cargo operations.But from early on, Tiger's workers unionized, while Federal's never have. Federal Express officials acknowledge mistakes in their drive overseas but say it will pay off eventually.Analysts expect Federal's earnings to improve again in its fiscal third quarter ending Feb. 28, when the company should begin benefiting from Tiger's extra flights, back-up planes and landing rights.Until then, they expect the cost of integrating the two carriers to continue crimping profits. For now, the union issue is the most nettlesome of Federal's Tiger problems, management believes.Although encouraging dialogue between managers and workers, Mr. Smith doesn't countenance what he considers insubordination.When a large group of pilots once signed petitions opposing work-rule and compensation changes, he called a meeting in a company hangar and dressed them down for challenging his authority.He then made most of the changes, pilots say. That sort of approach, however, hasn't worked since the addition of Tiger.Its 6,500 workers, who had battled Tiger's management for years over givebacks, were union members until the day of the merger, when most of their unions were automatically decertified.Soon after the merger, moreover, Federal's management asked Tiger's pilots to sign an agreement stating that they could be fired any time, without cause or notice.When the pilots refused, the company retracted it. Mr. Smith angered Federal's pilots, too.In his haste to seal the deal with Tiger Chairman Saul Steinberg last August, Mr. Smith ignored a promise that he had made to his own pilots three years ago: that any fliers acquired in future mergers would be "end-tailed" -- put at the bottom of the pilot seniority list that determines work schedules, pay and career options.The Tiger merger agreement stipulated that the lists be combined on the basis of tenure. Mr. Smith is trying hard to allay the anger.And even some pro-union pilots say his charisma and popularity among the many former military fliers could be tough to beat. "A lot of people are identifying a vote for representation as a vote against Fred Smith," says J.X. Gollich, a Tiger-turned-Federal pilot and union activist. Mr. Smith and other top Federal executives have met with Tiger workers in Los Angeles, Ohio, New York, Alaska, Asia and Europe.Recently, they have appeared every few weeks in talk-show type videos, countering pro-union arguments.In one video, Mr. Smith defended his agreement to merge the pilot-seniority lists.He said Mr. Steinberg had insisted that the merger talks move quickly.Regulators, as well, might have quashed the deal if Tiger's pilots hadn't been protected, he said.Furthermore, Mr. Smith added, "our contract with our pilots says that we will manage our fleet operations with their advice.It doesn't give any particular group the ability to veto change." Already, the fight has been costly.The seniority-list controversy, along with the job-classification dispute, has been turned over to the mediator.Meanwhile, the company is operating with two separate pilot groups and seniority lists, and that is costing Federal "a big number," says James Barksdale, executive vice president and chief operating officer. The issue has also cost Federal management a lot of good will among its old pilots. "They were willing to mistreat us because we hadn't shown any moxie, any resistance," says William Queenan, a DC-10 pilot and 14-year Federal veteran.Adds John Poag, a 727 captain and past chairman of the company-sponsored Flight Advisory Board: "They've made all these magnanimous gestures to the Flying Tiger pilots, and for us, nothing." Such animosity could prove pivotal in the union vote.A large majority of the 961 former Tiger fliers support the union, according to a union study.But though most of the 1,087 Federal pilots are believed opposed, it is unclear just how much their loyalty to Mr. Smith has been eroded. The fight has turned ugly and, among pilots at least, has shattered the esprit de corps that Mr. Smith worked so hard to build.Anti-union pilots have held ballot-burning parties.Some younger pilots say they have had to endure anti-union harangues by senior pilots while flying across the country. And for now, at least, the competition isn't the only enemy.Barney Barnhardt, a 727 captain and leader of the pro-union forces, said he has received two anonymous death threats and been challenged to a fight with tire irons by a colleague. "The pilots are either for us or extremely against us," he says with a sigh.
The Senate convicted U.S. District Judge Alcee Hastings of Florida of eight impeachment articles, removing the 53-year-old judge from his $89,500-a-year, lifetime job. Mr. Hastings's case was particularly nettlesome because it marked the first time a federal official was impeached and removed from office on charges of which a jury had acquitted him.In 1983, Mr. Hastings was found not guilty of accepting a $150,000 bribe in a case before him, the central charge on which the Senate convicted him.He was only the sixth federal judge ever ousted from office after an impeachment trial. With no floor debate, the Senate on Friday voted 69-26 to convict Mr. Hastings of perjury and conspiring to accept a bribe, five votes more than needed.Conviction on any single impeachment article was enough to remove Judge Hastings from office.He was found not guilty of three charges, involving accusations that he had improperly disclosed information about a sensitive, government investigation.The Senate didn't vote on six lesser charges. Although Mr. Hastings had been acquitted by a jury, lawmakers handling the prosecution in Congress had argued that the purpose of impeachment isn't to punish an individual.Instead, they argued that impeachment aims to protect public institutions from people who have abused their positions of trust, irrespective of the outcome of prior criminal or civil cases. Mr. Hastings faced the senators and sat impassively during the first two roll-call votes, then quickly left the chamber.In an impromptu news conference on the Capitol steps, he denounced the senators' action. "Their opinion is devoid of the wisdom of the forefathers' teaching regarding impeachment," Mr. Hastings said.For the future, he said he would run for governor of Florida. Mr. Hastings was appointed to the federal bench by President Carter in 1979 and was one of the few black federal judges in the country.While he packed the Senate gallery with his supporters during some of the impeachment trial, most civil rights groups kept their distance from his case. Following the impeachment conviction, Dr. Benjamin Hooks, executive director of the National Association for the Advancement of Colored People, issued a restrained statement, warning that the Hastings case could set a "dangerous precedent," but adding, "We must respect the considered judgment of the Senate."
When last we left him, FBI Agent Nick Mancuso had solved a murder mystery, unraveled a Washington political scandal, and racked up some pretty good ratings numbers in the miniseries "Favorite Son." What next for the crusty FBI agent with the heart of gold?A spinoff series, of course. There are plenty of worse inspirations for shows -- and most of them had already made the fall lineup: a nun raising some lovable orphans.A den mother raising some lovable teen models.A bunch of tans and bathing suits posing as lovable lifeguards. In that context, Robert Loggia's riveting performance as the unlovable -- even crotchety -- veteran agent seems a better franchise for a series than most.Week by week on "Mancuso FBI" (NBC, Fridays, 10 p.m. ET), he pokes around the crime styles of the rich, famous and powerful of the Washington scene -- a loose cannon on deck at the FBI. Over the first few weeks, "Mancuso FBI" has sprung straight from the headlines, which is either a commendable stab at topicality, or a lack of imagination, or both.The opening show featured a secretary of defense designate accused of womanizing (a la John Tower).When his secretary is found floating dead in the pol's pool, Mancuso is called in to investigate. Last week, a young black girl claimed she had been raped by a white police officer (a la Tawana Brawley).In this week's show, there's an unsafe nuclear weaponsmaking facility (a la Rocky Flats). Along the way, we're introduced to the supporting cast: a blond bombshell secretary (Randi Brazen -- her real name, honest), a scheming young boss (Fredric Lehne), another blonde bombshell who's also an idealistic lawyer (Lindsay Frost), and a forensics expert (Charles Siebert). If all of this seems a little stale, it's redeemed in part by some tricky plot twists: The usual suspects are found to be guilty, then not guilty, then guilty -- but of a different crime. (In last week's rape case, for example, the girl turns out to have been a victim of incest, and the biggest villains are the politicians who exploit the case.) Most of all though, the show is redeemed by the character of Mancuso. What makes the veteran FBI man so endearing is his hard-bitten cynicism -- earned, we discover, when he was assigned to the civil rights movement back in the 1960s.He wasn't protecting the Freedom Marchers; he was tailing them as subversives.This is not the "Mississippi Burning" scenario that thrills his young colleagues: "Kid, you've been reading Classic Comics too long," Mancuso says. "Back in 1964, the FBI had five black agents.Three were chauffeurs for J. Edgar Hoover, and two cleaned his house." At the core of Mr. Loggia's Mancuso is his world-weary truculence.He describes a reporter as "Miss First Amendment." He describes a drowned corpse as "Esther Williams." And when he's told "Try a little tenderness," he shoots back "I'm going home to try a little linguine." Yet for all his cynicism, he's at heart a closet idealist, a softy with a secret crush on truth, justice and the American Way.He's the kind of guy who rescues trampled flags. If "Mancuso FBI" has an intriguing central character, it also has a major flaw: It's wildly overwritten.Executive Producers Steve Sohmer and Jeff Bleckner (and writer/producers Ken Solarz and Steve Bello) have revved this show up to the breaking point. To start, there's always a crisis -- and someone always worries, "What if the press gets a hold of this?" At least once an episode we see protestors marching around screaming slogans.At least once Mancuso's boss yells "In here -- now," and proceeds to dress his investigator down: "You are a dinosaur . . . a hangover in a $10 suit . . . One more word and you are out on a park bench, mister." Finally, of course, the boss gives in, but he's still yelling: "I find myself explaining anything to Teddy Kennedy, you'll be chasing stolen cars in Anchorage." In fact, throughout "Mancuso FBI," we don't get words or lines -- we get speeches.Witnesses shout, scream, pontificate: ". . . a dream that the planet could be saved from itself and from the sadistic dumb creatures who try to tear down every decent man who raises his voice." And Mancuso himself is investigating at the top of his lungs: "How the hell can you live with yourself?" he erupts at a politician. "You twist people's trust.You built your career on prejudice and hate.The scars will be here years after the polls close." In each show, Mancuso gets to unleash similar harangues: "Where the hell are they gonna live when people like you turn the world into a big toxic waste dump?You're the real criminal here . . . and what you did wasn't just a murder -- it was a crime against humanity." And, at least once a show, someone delivers the line "Get off that soapbox." Now that's advice the writers should take to heart.They have a series with a good character, some interesting, even occasionally surprising plot lines, and they're ruining it. Why, when a key witness disappears, does Mancuso trash her apartment, tearing down drapes, smashing walls?It's a bizarre and totally inappropriate reaction, all to add more pizzazz to a script that's already overdosing on pizzazz.That's not plot.That's not character.That's hyperventilating. There is a scene at the end of the first week's show where Mancuso attends the unveiling of the memorial to his dead partner David.Asked to say a few words, he pulls out his crumpled piece of paper and tries to talk, but he's too choked up to get the words out.He bangs on the piece of paper in frustration, then turns and walks away.It was a profoundly moving moment for series television, and Robert Loggia's acting resonated in the silence. There's a pretty good program inside all the noise of "Mancuso FBI." If the show's creators could just let themselves be quiet for a little, they might just hear it.
Texaco Inc. has purchased an oil-producing company in Texas for $476.5 million, its first major acquisition since its legal brawl with Pennzoil Co. began more than four years ago. The White Plains, N.Y., oil company said Friday that it had acquired Tana Production Corp., a subsidiary of TRT Energy Holdings Inc., for $95.1 million in cash, with the rest to be paid in shares of a new, non-voting issue of preferred stock. Tana, which holds properties in 17 oil and gas fields in south Texas, will provide Texaco with mostly gas reserves.The fields contain recoverable reserves of 435 billion cubic feet of natural gas and four million barrels of oil. "This acquisition is another indication of Texaco's commitment to increase the company's reserve base," said Chief Executive Officer James W. Kinnear. Texaco has also been attempting to sell oil properties.At least two years ago, the company put 60 million barrels of oil reserves on the block.They were either too small or uneconomic to maintain, the company said.Not all of those parcels have yet been sold. Texaco acquired Tana before it completed those sales because Tana's properties are high quality and near other fields Texaco already owns, a company spokeswoman said. Texaco, like many other oil companies, has been struggling to replace its falling oil and gas reserves.Texaco's situation had become particularly complex because much of its effort had for years been focused on its brawl with Pennzoil and then on New York investor Carl C. Icahn's attempt to take over the company. Pennzoil had sued Texaco for improperly interfering with its acquisition of a portion of Getty Oil Co. Eventually, Texaco, which was forced into bankruptcy proceedings by that litigation, settled its fight with Pennzoil for $3 billion in 1986.Mr. Icahn, who played a key role in the settlement and attempted subsequently to take control of the company, sold his stake in Texaco just last summer. Completion of Texaco's acquisition of Tana is subject to government approval under the Hart-Scott-Rodino Antitrust Improvements Act.
