891016-0112.
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891016-0112. Letters to the Editor: @ Boundless Entity
10/16/89
WALL STREET JOURNAL (J) PZL TX LAW AND LEGAL AFFAIRS (LAW) JUSTICE DEPARTMENT (JUS)

The Second U.S. Circuit Court of Appeals opinion in the Arcadian Phosphate case did not repudiate the position Pennzoil Co. took in its dispute with Texaco, contrary to your Sept. 8 article "Court Backs Texaco's View in Pennzoil Case -- Too Late."

The fundamental rule of contract law applied to both cases was that courts will not enforce agreements to which the parties did not intend to be bound. In the Pennzoil/Texaco litigation, the courts found Pennzoil and Getty Oil intended to be bound; in Arcadian Phosphates they found there was no intention to be bound.

Admittedly, the principle in the cases is the same. But the outcome of a legal dispute almost always turns on the facts. And the facts, as found by the various courts in these two lawsuits, were different.

When you suggest otherwise, you leave the realm of reporting and enter the orbit of speculation.

Charles F. Vihon

Boston

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891016-0111. Imperial Corp. Ends @ Plan to Buy Branches @ From Valley Federal
10/16/89
WALL STREET JOURNAL (J) VFED ICA TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) VAN NUYS, Calif.

Valley Federal Savings & Loan Association said Imperial Corp. of America withdrew from regulators its application to buy five Valley Federal branches, leaving the transaction in limbo.

The broken purchase appears as additional evidence of trouble at Imperial Corp., whose spokesman said the company withdrew its application from the federal Office of Thrift Supervision because of an informal notice that Imperial's thrift unit failed to meet Community Reinvestment Act requirements.

The Community Reinvestment Act requires savings and loan associations to lend money in amounts related to areas where deposits are received.

The transaction, announced in August, included about $146 million in deposits at the five outlets in California's San Joaquin Valley. Terms weren't disclosed, but Valley Federal had said it expected to post a modest pretax gain and to save about $2 million in operating costs annually.

Valley Federal said Friday that it is considering whether to seek another buyer for the branches or to pursue the transaction with Imperial Corp., which said it is attempting to meet Community Reinvestment Act requirements.

Valley Federal, with assets of $3.3 billion, is based in Van Nuys. Imperial Corp., based in San Diego, is the parent of Imperial Savings & Loan. In the first six months of the year it posted a net loss of $33.1 million.

891016-0110.
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891016-0110. Law: @ Broke S&Ls Adopt @ 'Cleaned Out' Tack @ Against Lawsuits @ --- @ Dismissals of Heaps of Suits @ Sought as Appeals Court @ Gives Theory Some Help @ ---- @ By Christi Harlan @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) LAW AND LEGAL AFFAIRS (LAW) JUSTICE DEPARTMENT (JUS)

Call it the "we're too broke to fight" defense.

Lawyers for dozens of insolvent savings and loan associations are trying a new tack in their efforts to defuse suits filed by borrowers, developers and creditors.

The thrifts' lawyers claim that the suits, numbering 700 to 1,000 in Texas alone, should be dismissed as moot because neither the S&Ls nor the extinct Federal Savings and Loan Insurance Corp. has the money to pay judgments.

Though the argument may have a common-sense ring to it, even the S&L lawyers concede there's little precedent to back their position.

Still, one federal appeals court has signaled it's willing to entertain the notion, and the lawyers have renewed their arguments in Texas and eight other states where the defense is permitted under state law.

The dismissal of the pending suits could go a long way toward clearing court dockets in Texas and reducing the FSLIC's massive legal bills, which topped $73 million last year.

The S&L lawyers were encouraged last month by an appellate-court ruling in two cases brought against defunct Sunbelt Savings & Loan Association of Dallas by the developers of the Valley Ranch, best known as the training center for the Dallas Cowboys football team. Sunbelt foreclosed on the ranch.

Sunbelt and the FSLIC argued to the Fifth U.S. Circuit Court of Appeals "that there will never be any assets with which to satisfy a judgment against Sunbelt Savings nor any means to collect from any other party, including FSLIC."

"If true," the court wrote, "this contention would justify dismissal of these actions on prudential grounds." But the court said it lacked enough financial information about Sunbelt and the FSLIC and sent the cases back to federal district court in Dallas.

Charles Haworth, a lawyer for Sunbelt, says he plans to file a brief this week urging the district judge to dismiss the suits, because Sunbelt's liabilities exceeded its assets by about $2 billion when federal regulators closed it in August 1988.

"This institution is just brain dead," says Mr. Haworth, a partner in the Dallas office of Andrews & Kurth, a Houston law firm.

But a lawyer for Triland Investment Group, the developer of Valley Ranch, dismisses such arguments as a "defense du jour." Attorney Richard Jackson of Dallas says a judgment for Triland could be satisfied in ways other than a monetary award, including the reversal of Sunbelt's foreclosure on Valley Ranch.

"We're asking the court for a number of things he can grant in addition to the thrill of victory," he says. "We'd take the Valley Ranch free and clear as a booby prize."

891016-0109.
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891016-0109. Who's News: @ Western Capital Investment Corp.
10/16/89
WALL STREET JOURNAL (J) WECA WNEWS WESTERN CAPITAL INVESTMENT Corp. (Denver)

Kenneth J. Thygerson, who was named president of this thrift holding company in August, resigned, citing personal reasons. Mr. Thygerson said he had planned to travel between the job in Denver and his San Diego home, but has found the commute too difficult to continue. A new president wasn't named.

891016-0108.
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891016-0108. What's News -- @ World-Wide
10/16/89
WALL STREET JOURNAL (J)

SOUTH AFRICA FREED the ANC's Sisulu and seven other political prisoners.

Thousands of supporters, many brandishing flags of the outlawed African National Congress, gave the anti-apartheid activists a tumultuous reception upon their return to black townships across the country. Most of those freed had spent at least 25 years in prison. The 77-year-old Sisulu, sentenced to life in 1964 along with black nationalist Nelson Mandela for plotting to overthrow the government, said equality for blacks in South Africa was in reach. The releases, announced last week by President de Klerk, were viewed as Pretoria's tacit legalization of the ANC.

Mandela, considered the most prominent leader of the ANC, remains in prison. But his release within the next few months is widely expected.

---

The Soviet Union reported that thousands of tons of goods needed to ease widespread shortages across the nation were piled up at ports and rail depots, and food shipments were rotting because of a lack of people and equipment to move the cargo. Strikes and mismanagement were cited, and Premier Ryzhkov warned of "tough measures."

---

Bush indicated there might be "room for flexibility" in a bill to allow federal funding of abortions for poor women who are vicitims of rape and incest. He reiterated his opposition to such funding, but expressed hope of a compromise. The president, at a news conference Friday, also renewed a call for the ouster of Panama's Noriega.

The White House said minors haven't any right to abortion without the consent of their parents. The administration's policy was stated in a friend-of-the-court brief urging the Supreme Court to give states more leeway to restrict abortions. Ten of the nation's governors, meanwhile, called on the justices to reject efforts to limit abortions.

---

The Justice Department announced that the FBI has been given the authority to seize U.S. fugitives overseas without the permission of foreign governments. Secretary of State Baker emphasized Friday that the new policy wouldn't be invoked by the Bush administration without full consideration of foreign-policy implications.

--- NASA pronounced the space shuttle Atlantis ready for launch tomorrow following a five-day postponement of the flight because of a faulty engine computer. The device was replaced. The spacecraft's five astronauts are to dispatch the Galileo space probe on an exploration mission to Jupiter.

---

South Korea's President Roh traveled to the U.S. for a five-day visit that is expected to focus on ties between Washington and Seoul. Roh, who is facing calls for the reduction of U.S. military forces in South Korea, is to meet with Bush tomorrow and is to address a joint session of Congress on Wednesday.

---

China's Communist leadership voted to purge the party of "hostile and anti-party elements" and wealthy private businessmen, whom they called exploiters. The decision, reported by the official Xinhua News Agency, indicated that the crackdown prompted by student-led pro-democracy protests in June is intensifying.

---

Hundreds of East Germans flocked to Bonn's Embassy in Warsaw, bringing to more than 1,200 the number of emigres expected to flee to the West beginning today. More than 2,100 others escaped to West Germany through Hungary over the Weekend. In Leipzig, activists vowed to continue street protests to demand internal change.

---

Zaire's President Mobutu met in southern France with Angolan rebel leader Savimbi and a senior U.S. envoy in a bid to revive an accord to end Angola's civil war. Details of the talks, described by a Zairean official as "very delicate," weren't disclosed.

---

PLO leader Arafat insisted on guarantees that any elections in the Israeli-occupied territories would be impartial. He made his remarks to a PLO gathering in Baghdad. In the occupied lands, underground leaders of the Arab uprising rejected a U.S. plan to arrange Israeli-Palestinian talks as Shamir opposed holding such discussions in Cairo.

---

Lebanese Christian lawmakers presented to Arab mediators at talks in Saudi Arabia proposals for a new timetable for the withdrawal of Syria's forces from Lebanon. A plan currently under study gives Damascus two years to pull back to eastern Lebanon, starting from the time Beirut's legislature increases political power for Moslems.

---

Hurricane Jerry threatened to combine with the highest tides of the year to swamp the Texas-Louisiana coast. Thousands of residents of low-lying areas were ordered to evacuate as the storm headed north in the Gulf of Mexico with 80 mph winds.

891016-0107.
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891016-0107. Anti-Posner Group @ Of Arby's Franchisees @ Forms an Association
10/16/89
WALL STREET JOURNAL (J) DWG ATLANTA

A group of Arby's franchisees said they formed an association to oppose Miami Beach financier Victor Posner's control of the restaurant chain.

The decision is the latest move in an escalating battle between the franchisees and Mr. Posner that began in August. At the time, a group called R.B. Partners Ltd., consisting of eight of Arby's largest franchisees, offered more than $200 million to buy Arby's Inc., which is part of DWG Corp. DWG is a holding company controlled by Mr. Posner. One week later, Leonard H. Roberts, president and chief executive officer of Arby's, was fired in a dispute with Mr. Posner.

Friday, 42 franchisees announced the formation of an association -- called A.P. Association Inc. -- to "preserve the integrity of the Arby's system." The franchisees, owners or operators of 1,000 of the 1,900 franchised Arby's in the U.S., said: "We have concluded that continued control of Arby's by Victor Posner is totally unacceptable to us, because it is extremely likely to cause irreparable damage to the Arby's system. We support all efforts to remove Victor Posner from control of Arby's Inc. and the Arby's system."

The group said it would consider, among other things, withholding royalty payments and initiating a class-action lawsuit seeking court approval for the withholdings.

In Florida, Renee Mottram, a senior vice president at DWG, responded: "We don't think any individual or group should disrupt a winning system or illegally interfere with existing contractual relationships for their own self-serving motives."

891016-0106.
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891016-0106. Economy: @ September Data Show Inflation Persisting @ As Energy Fuels 0.9% Producer Price Rise @ --- @ Pessimism on Rates Results, @ Contributing to Plunge @ In Stock Market Friday @ ---- @ By Hilary Stout @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) ECONOMIC AND MONETARY INDICATORS (EMI) WASHINGTON

September's steep rise in producer prices shows that inflation still persists, and the pessimism over interest rates caused by the new price data contributed to the stock market's plunge Friday.

After falling for three consecutive months, the producer price index for finished goods shot up 0.9% last month, the Labor Department reported Friday, as energy prices jumped after tumbling through the summer.

Although the report, which was released before the stock market opened, didn't trigger the 190.58-point drop in the Dow Jones Industrial Average, analysts said it did play a role in the market's decline. Analysts immediately viewed the price data, the grimmest inflation news in months, as evidence that the Federal Reserve was unlikely to allow interest rates to fall as many investors had hoped.

Further fueling the belief that pressures in the economy were sufficient to keep the Fed from easing credit, the Commerce Department reported Friday that retail sales grew 0.5% in September, to $145.21 billion. That rise came on top of a 0.7% gain in August, and suggested there is still healthy consumer demand in the economy.

"I think the Friday report, combined with the actions of the Fed, weakened the belief that there was going to be an imminent easing of monetary policy," said Robert Dederick, chief economist at Northern Trust Co. in Chicago.

But economists were divided over the extent of the inflation threat signaled by the new numbers.

"The overall 0.9% increase is serious in itself, but what is even worse is that excluding food and energy, the producer price index still increased by 0.7%," said Gordon Richards, an economist at the National Association of Manufacturers.

But Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis, blamed rising energy prices and the annual autumn increase in car prices for most of the September jump. "I would say this is not bad news; this is a blip," he said. "The core rate is not really out of line."

All year, energy prices have skewed the producer price index, which measures changes in the prices producers receive for goods. Inflation unquestionably has fallen back from its torrid pace last winter, when a steep run-up in world oil prices sent the index surging at double-digit annual rates. Energy prices then plummeted through the summer, causing the index to decline for three consecutive months.

Overall, the index has climbed at a 5.1% compound annual rate since the start of the year, the Labor Department said. While far more restrained than the pace at the beginning of the year, that is still a steeper rise than the 4.0% increase for all of 1988.

Moreover, this year's good inflation news may have ended last month, when energy prices zoomed up 6.5% after plunging 7.3% in August. Some analysts expect oil prices to remain relatively stable in the months ahead, leaving the future pace of inflation uncertain.

Analysts had expected that the climb in oil prices last month would lead to a substantial rise in the producer price index, but the 0.9% climb was higher than most anticipated. "I think the resurgence {in inflation} is going to continue for a few months," said John Mueller, chief economist at Bell Mueller Cannon, a Washington economic forecasting firm. He predicted that inflation will moderate next year, saying that credit conditions are fairly tight world-wide.

But Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, said that last month's rise "isn't as bad an omen" as the 0.9% figure suggests. "If you examine the data carefully, the increase is concentrated in energy and motor vehicle prices, rather than being a broad-based advance in the prices of consumer and industrial goods," he explained.

Passenger car prices jumped 3.8% in September, after climbing 0.5% in August and declining in the late spring and summer. Many analysts said the September increase was a one-time event, coming as dealers introduced their 1990 models. Although all the price data were adjusted for normal seasonal fluctuations, car prices rose beyond the customary autumn increase.

Prices for capital equipment rose a hefty 1.1% in September, while prices for home electronic equipment fell 1.1%. Food prices declined 0.6%, after climbing 0.3% in August.

Meanwhile, the retail sales report showed that car sales rose 0.8% in September to $32.82 billion. But at least part of the increase could have come from higher prices, analysts said.

Sales at general merchandise stores rose 1.7% after declining 0.6% in August, while sales of building materials fell 1.8% after rising 1.7%.

Producer prices for intermediate goods grew 0.4% in September, after dropping for three consecutive months. Prices for crude goods, an array of raw materials, jumped 1.1% after declining 1.9% in August and edging up 0.2% in July.

---

Here are the Labor Department's producer price indexes (1982=100) for September, before seasonal adjustment, and the percentage changes from September, 1988. @ Finished goods .......................... 113.5 4.5% @ Minus food & energy ..................... 122.2 4.3% @ Intermediate goods ...................... 112.4 3.4% @ Crude goods ............................. 102.0 5.5%

891016-0105.
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891016-0105. CityFed to Report @ At Least $125 Million @ Loss for 3rd Quarter
10/16/89
WALL STREET JOURNAL (J) CTYF PALM BEACH, Fla.

CityFed Financial Corp. said it expects to report a loss of at least $125 million to $150 million for the third quarter.

In the year-earlier period, CityFed had net income of $485,000, but no per-share earnings.

CityFed's president and chief executive officer, John Atherton, said the loss stems from several factors. He said nonperforming assets rose to slightly more than $700 million from $516 million between June and September. Approximately 85% of the total consisted of nonperforming commercial real estate assets. Accordingly, CityFed estimated that it will provide between $85 million and $110 million for credit losses in the third quarter.

CityFed added that significant additional loan-loss provisions may be required by federal regulators as part of the current annual examination of City Federal Savings Bank, CityFed's primary subsidiary, based in Somerset, N.J. City Federal operates 105 banking offices in New Jersey and Florida.

Mr. Atherton said CityFed will also mark its portfolio of high-yield corporate bonds to market as a result of federal legislation requiring that savings institutions divest themselves of such bonds. That action, CityFed said, will result in a charge against third-quarter results of approximately $30 million.

CityFed also said it expects to shed its remaining mortgage loan origination operations outside its principal markets in New Jersey and Florida and, as a result, is taking a charge for discontinued operations.

All these actions, Mr. Atherton said, will result in a loss of $125 million to $150 million for the third quarter. He added, however: "Depending on the resolution of certain accounting issues relating to mortgages servicing and the outcome of the annual examination of City Federal currently in progress with respect to the appropriate level of loan loss reserves, the total loss for the quarter could significantly exceed this range."

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891016-0104. Dividend News: @ CenTrust Ordered by Regulators to Halt @ Payouts on 2 Classes of Preferred Stock @ ---- @ By Martha Brannigan @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) DLP GWF DIVIDENDS (DIV) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) BOND MARKET NEWS (BON) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) FEDERAL GOVERNMENT (FDL)

CenTrust Savings Bank said federal thrift regulators ordered it to suspend dividend payments on its two classes of preferred stock, indicating that regulators' concerns about the troubled institution have heightened.

In a statement, Miami-based CenTrust said the regulators cited the thrift's operating losses and "apparent losses" in its junk-bond portfolio in ordering the suspension of the dividends. Regulators also ordered CenTrust to stop buying back the preferred stock.

David L. Paul, chairman and chief executive officer, criticized the federal Office of Thrift Supervision, which issued the directive, saying it was "inappropriate" and based on "insufficient" reasons. He said the thrift will try to get regulators to reverse the decision.

The suspension of a preferred stock dividend is a serious step that signals that regulators have deep concerns about an institution's health.

In March, regulators labeled CenTrust a "troubled institution," largely because of its big junk-bond holdings and its operating losses. In the same month, the Office of Thrift Supervision ordered the institution to stop paying common stock dividends until its operations were on track.

For the nine months ended June 30, CenTrust had a net loss of $21.3 million, compared with year-earlier net income of $52.8 million. CenTrust, which is Florida's largest thrift, holds one of the largest junk-bond portfolios of any thrift in the nation. Since April, it has pared its high-yield bond holdings to about $890 million from $1.35 billion. Mr. Paul said only about $150 million of the current holdings are tradeable securities registered with the Securities and Exchange Commission. The remainder, he said, are commercial loan participations, or private placements, that aren't filed with the SEC and don't have a ready market.

CenTrust and regulators have been in a dispute over market valuations for the junk bonds. The Office of Thrift Supervision has been hounding CenTrust to provide current market values for its holdings, but CenTrust has said it can't easily obtain such values because of the relative illiquidity of the bonds and lack of a ready market.

Regulators have become increasingly antsy about CenTrust's and other thrifts' junk-bond holdings in light of the recent federal thrift bailout legislation and the recent deep decline in the junk-bond market. The legislation requires thrifts to divest themselves of junk bonds in the new, somber regulatory climate.

In American Stock Exchange composite trading Friday, CenTrust common shares closed at $3, down 12.5 cents.

In a statement Friday, Mr. Paul challenged the regulators' decision, saying the thrift's operating losses and "apparent" junk-bond losses "have been substantially offset by gains in other activities of the bank." He also said substantial reserves have been set aside for possible losses from the junk bonds. In the third quarter, for instance, CenTrust added $22.5 million to its general reserves.

Mr. Paul said the regulators should instead move ahead with approving CenTrust's request to sell 63 of its 71 branches to Great Western Bank, a unit of Great Western Financial Corp. based in Beverly Hills, Calif.

The branch sale is the centerpiece of CenTrust's strategy to transform itself into a traditional S&L from a high-flying institution that relied heavily on securities trading for profits, according to Mr. Paul. Most analysts and thrift executives had expected a decision on the proposed transaction, which was announced in July, long before now. Many interpret the delay as an indication that regulators are skeptical about the proposal. Branches and deposits can be sold at a premium in the event federal regulators take over an institution.

CenTrust, however, touts the branch sale, saying it would bring in $150 million and reduce the thrift's assets to $6.7 billion from $9 billion. It said the sale would give it positive tangible capital of $82 million, or about 1.2% of assets, from a negative $33 million as of Sept. 30, thus bringing CenTrust close to regulatory standards.

CenTrust said the branch sale would also reduce the company's large amount of good will by about $180 million. Critics, however, say the branch sale will make CenTrust more dependent than ever on brokered deposits and junk bonds.

Mr. Paul counters that he intends to further pare the size of CenTrust by not renewing more than $1 billion of brokered certificates of deposit when they come due. The thrift is also working to unload its junk-bond portfolio by continuing to sell off the bonds, and it plans to eventually place some of them in a separate affiliate, as required under the new thrift law.

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891016-0103. La Boob Tube: @ Europe Complains @ About U.S. Shows @ --- @ But to Entertain, in Spain, @ Quality Television Goes @ Mainly Down the Drain @ ---- @ By Philip Revzin @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) EUROP MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) PARIS

On a recent Saturday night, in the midst of West Germany's most popular prime-time show, a contestant bet the host that she could name any of 100 different cheeses after just one nibble, while blindfolded.

The woman won the bet. But perhaps even more remarkable, the three-hour-show, "Wetten Dass" (Make a Bet), regularly wins the top slot in the country's TV ratings, sometimes drawing as many as 50% of West German households.

As the 1992 economic integration approaches, Europe's cultural curators have taken to the ramparts against American "cultural imperialism," threatening to impose quotas against such pop invaders as "Dallas," "Miami Vice" and "L.A. Law." But much of what the Europeans want to protect seems every bit as cheesy as what they are trying to keep out.

The most militant opposition to American TV imports has come from French television and movie producers, who have demanded quotas ensuring that a full 60% of Europe's TV shows be produced in Europe. So far, the French have failed to win enough broad-based support to prevail.

A glance through the television listings and a few twists of the European television dial suggest one reason why. While there are some popular action and drama series, few boast the high culture and classy production values one might expect. More European air time is filled with low-budget game shows, variety hours, movies and talk shows, many of which are authorized knock-offs of their American counterparts.

One of France's most popular Saturday night programs features semi-celebrities seeking out their grammar-school classmates for on-air reunions. A Flemish game show has as its host a Belgian pretending to be Italian. One of Italy's favorite shows, "Fantastico," a tepid variety show, is so popular that viewers clamored to buy a chocolate product, "Cacao Fantastico," whose praises were sung each week by dancing showgirls -- even though the product didn't exist.

Topping the cheese stunt, on another typical evening of fun on "Wetten Dass," a contestant won a bet with the show's host, Thomas Gottschalk, that he could identify 300 German dialects over the telephone. A celebrity guest, U.S. Ambassador to West Germany Richard Burt, also won a bet that someone could pile up $150 worth of quarters on a slanted coin. Mr. Burt nonetheless paid the penalty as if he had lost, agreeing to spend a day with West German Foreign Minister Hans-Dietrich Genscher frying and selling their combined weight in potato pancakes.

If this seems like pretty weak stuff around which to raise the protectionist barriers, it may be because these shows need all the protection they can get. European programs usually target only their own local audience, and often only a small portion of that. Mega-hits in Germany or Italy rarely make it even to France or Great Britain, and almost never show up on U.S. screens.

Attempts to produce "pan-European" programs have generally resulted in disappointment. One annual co-production, the three-hour-long "Eurovision Song Contest," featuring soft-rock songs from each of 20 European countries, has been described as the world's most boring TV show. Another, "Jeux Sans Frontieres," where villagers from assorted European countries make fools of themselves performing pointless tasks, is a hit in France. A U.S.-made imitation under the title "Almost Anything Goes" flopped fast.

For the most part, what's made here stays here, and for good reason. The cream of the British crop, the literary dramas that are shown on U.S. public television as "Masterpiece Theater," make up a relatively small part of British air time. Most British programming is more of an acquired taste. There is, for instance, "One Man and His Dog," a herding contest among sheep dogs. Also riveting to the British are hours of dart-throwing championships, even more hours of lawn bowling contests and still more hours of snooker marathons.

European drama has had better, though still mixed, fortunes. The most popular such shows focus on narrow national concerns. A French knock-off of "Dallas," called "Chateauvallon" and set in a French vineyard, had a good run in France, which ended after the female lead was injured in a real-life auto accident. "Schwarzwaldklinik," (Black Forest Clinic), a kind of German "St. Elsewhere" set in a health spa, is popular in Germany, and has spread into France.

Italy's most popular series is a drama called "La Piovra," or "The Octopus," which chronicles the fight of an idealistic young investigator in Palermo against the Mafia. It was front-page news in Italy earlier this year when the fictional inspector was gunned down in the series. Spain's most popular mini-series this year was "Juncal," the story of an aging bullfighter.

"The trend is pretty well established now that local programs are the most popular, with American programs second," says Brian Wenham, a former director of programs for the British Broadcasting Corp. "Given a choice, everybody will watch a home-produced show."

But frequently there isn't much choice. Thus, Europe has begun the recent crusade to produce more worthy shows of its own, programs with broader appeal. "We've basically got to start from scratch, to train writers and producers to make shows that other people will want to see," concedes Colin Young, head of Britain's National Film Theatre School.

While some in the U.S. contend that advertising is the bane of television, here many believe that its absence is to blame for the European TV industry's sluggish development. Until recently, national governments in Europe controlled most of the air time and allowed little or no advertising. Since production costs were guaranteed, it didn't matter that a program couldn't be sold abroad or put into syndication, as most American programs are. But not much money was spent on the shows, either, a situation that encouraged cheap-to-make talk and game shows, while discouraging expensive-to-produce dramas.

Now, however, commercial channels are coming to most European countries, and at the same time, satellite and cable technology is spreading rapidly. Just last week, Greece authorized two commercial channels for the first time; Spain earlier began to allow commercial television alongside its state channels. The result is a new and huge appetite for programming.

But perhaps to the consternation of those calling for quotas, most of this void is likely to be filled with the cheapest and most plentiful programming now available -- reruns -- usually of shows made in the U.S.

Sky Channel, a British-based venture of Australian-American press tycoon Rupert Murdoch, offers what must be a baffling cultural mix to most of its audience. The financially struggling station offers programs obviously made available cheaply from its boss's other ventures. In a Madrid hotel room recently, a viewer caught the end of a badly acted series about a fishing boat on Australia's Great Barrier Reef, only to be urged by the British announcer to "stay tuned for the further adventures of Skippy the Kangaroo."

---

Lisa Grishaw-Mueller in Bonn, Laura Colby in Milan, Tim Carrington in London and Carlta Vitzhum in Madrid contributed to this article.

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891016-0102. International: @ Defense Giants @ Close to Merger @ Of Missile Units @ --- @ British Aerospace, France's @ Thomson to Bolster Ties; @ Pact Is Seen by Year-End @ ---- @ By Richard L. Hudson and E.S. Browning @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) U.BA TCSFY GE G.DAI F.MAT U.FNT U.DWT EUROP TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AEROSPACE (ARO)

British Aerospace PLC and France's Thomson-CSF S.A. said they are nearing an agreement to merge their guided-missile divisions, greatly expanding collaboration between the two defense contractors.

The 50-50 joint venture, which may be dubbed Eurodynamics, would have combined annual sales of at least #1.4 billion ($2.17 billion) and would be among the world's largest missile makers. After two years of talks, plans for the venture are sufficiently advanced for the companies to seek French and British government clearance. The companies hope for a final agreement by year-end.

The venture would strengthen the rapidly growing ties between the two companies, and help make them a leading force in European defense contracting. In recent months, a string of cross-border mergers and joint ventures have reshaped the once-balkanized world of European arms manufacture.

Already, British Aerospace and French government-controlled Thomson-CSF collaborate on a British missile contract and on an air-traffic control radar system. Just last week they announced they may make a joint bid to buy Ferranti International Signal PLC, a smaller British defense contractor rocked by alleged accounting fraud at a U.S. unit.

The sudden romance of British Aerospace and Thomson-CSF -- traditionally bitter competitors for Middle East and Third World weapons contracts -- is stirring controversy in Western Europe's defense industry. Most threatened by closer British Aerospace-Thomson ties would be their respective national rivals, including Matra S.A. in France and Britain's General Electric Co. PLC. But neither Matra nor GEC -- unrelated to Stamford, Conn.-based General Electric Co. -- are sitting quietly by as their competitors join forces.

Yesterday, a source close to GEC confirmed that his company may join the Ferranti fight, as part of a possible consortium that would bid against British Aerospace and Thomson-CSF. Companies with which GEC has had talks about a possible joint Ferranti bid include Matra, Britain's Dowty Group PLC, West Germany's Daimler-Benz AG, and France's Dassault group.

But it may be weeks before GEC and its potential partners decide whether to bid, the source indicated. GEC plans first to study Ferranti's financial accounts, which auditors recently said included #215 million in fictitious contracts at a U.S. unit, International Signal & Control Group, with which Ferranti merged last year. Also, any GEC bid might be blocked by British antitrust regulators; Ferranti is GEC's main competitor on several key defense-electronics contracts, and its purchase by GEC may heighten British Defense Ministry worries about concentration in the country's defense industry. A consortium bid, however, would diminish GEC's direct role in Ferranti and might consequently appease ministry officials.

A British Aerospace spokeswoman appeared unperturbed by the prospect of a fight with GEC for Ferranti: "Competition is the name of the game," she said.

At least one potential GEC partner, Matra, insists it isn't interested in Ferranti. "We have nothing to say about this affair, which doesn't concern us," a Matra official said Sunday.

The missile venture, the British Aerospace spokeswoman said, is a needed response to the "new environment" in defense contracting. For both Thomson and British Aerospace, earnings in their home markets have come under pressure from increasingly tight-fisted defense ministries; and Middle East sales, a traditional mainstay for both companies' exports, have been hurt by five years of weak oil prices.

The venture's importance for Thomson is great. Thomson feels the future of its defense business depends on building cooperation with other Europeans. The European defense industry is consolidating; for instance, West Germany's Siemens AG recently joined GEC in a takeover of Britain's Plessey Co., and Daimler-Benz agreed to buy Messerschmitt-Boelkow Blohm G.m.b.H.

In missiles, Thomson is already overshadowed by British Aerospace and by its home rival, France's Aerospatiale S.A.; to better compete, Thomson officials say, they need a partnership. To justify 50-50 ownership of the planned venture, Thomson would make a cash payment to British Aerospace.

Annual revenue of British Aerospace's missile business is about #950 million, a Thomson spokesman said. British Aerospace's chief missile products include its 17-year-old family of Rapier surface-to-air missiles. Thomson missile products, with about half British Aerospace's annual revenue, include the Crotale surface-to-air missile family.

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891016-0101. Canadian Oil Pipeline Concern to Delay @ Expansion Plans, Citing Drop in Output @ ---- @ By Gary Lamphier @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) CANDA IHEIF PIPELINE OPERATORS (PIP) PETROLEUM (PET) OIL, INTEGRATED MAJORS (OIL) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) EDMONTON, Alberta

Interprovincial Pipe Line Co. said it will delay a proposed two-step, 830 million Canadian-dollar (US$705.6 million) expansion of its system because Canada's output of crude oil is shrinking.

Interprovincial, Canada's biggest oil pipeline operator and a major transporter of crude to the U.S., said revised industry forecasts indicate that Canadian oil output will total about 1.64 million barrels a day by 1991, 8% lower than a previous estimate. Canadian crude production averaged about 1.69 million barrels a day during 1989's first half, about 1% below the 1988 level.

"The capability of existing fields to deliver oil is dropping," and oil exploration activity is also down dramatically, as many producers shift their emphasis to natural gas, said Ronald Watkins, vice president for government and industry relations with Interprovincial's parent, Interhome Energy Inc. Mr. Watkins said volume on Interprovincial's system is down about 2% since January and is expected to fall further, making expansion unnecessary until perhaps the mid-1990s.

"There has been a swing of the pendulum back to the gas side," he said.

Many of Canada's oil and gas producers say the outlook for natural gas is better than it is for oil, and have shifted their exploration and development budgets accordingly. The number of active drilling rigs in Canada is down 30% from a year ago, and the number of completed oil wells is "down more than that, due to the increasing focus on gas exploration," said Robert Feick, manager of crude oil with Calgary's Independent Petroleum Association of Canada, an industry group.

Mr. Watkins said the main reason for the production decline is shrinking output of light crude from mature, conventional fields in western Canada. Interprovincial transports about 75% of all crude produced in western Canada, and almost 60% of Interprovincial's total volume consists of light crude.

Nearly all of the crude oil that Canada exports to the U.S. is transported on Interprovincial's system, whose main line runs from Edmonton to major U.S. and Canadian cities in the Great Lakes region, including Chicago, Buffalo, Toronto and Montreal.

Canada's current oil exports to the U.S. total about 600,000 barrels a day, or about 9.1% of net U.S. crude imports, said John Lichtblau, president of the New York-based Petroleum Industry Research Foundation. That ranks Canada as the fourth-largest source of imported crude, behind Saudi Arabia, Nigeria and Mexico.

Mr. Lichtblau said Canada's declining crude output, combined with the fast-shrinking output of U.S. crude, will help intensify U.S. reliance on oil from overseas, particularly the Middle East. "It's very much a growing concern. But when something is inevitable, you learn to live with it," he said.

Mr. Lichtblau stressed that the delay of Interprovincial's proposed expansion won't by itself increase U.S. dependence on offshore crude, however, since Canadian imports are limited in any case by Canada's falling output.

Under terms of its proposed two-step expansion, which would have required regulatory approval, Interprovincial intended to add 200,000 barrels a day of additional capacity to its system, beginning with a modest expansion by 1991. The system currently has a capacity of 1.55 million barrels a day.

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891016-0100. Inland Steel to Post @ Lower 3rd-Period Net
10/16/89
WALL STREET JOURNAL (J) IAD STEEL MANUFACTURERS (STL) CHICAGO

Inland Steel Industries Inc. expects to report that third-quarter earnings dropped more than 50% from the previous quarter as a result of reduced sales volume and increased costs.

In the second quarter, the steelmaker had net income of $45.3 million or $1.25 a share, including a pretax charge of $17 million related to the settlement of a suit, on sales of $1.11 billion.

The company said normal seasonal softness and lost orders caused by prolonged labor talks reduced shipments by 200,000 tons in the latest quarter, compared with the second quarter.

At the same time, the integrated-steel business was hurt by continued increases in materials costs and repair and maintenance expenses, as well as higher labor costs under its new contract. The service-center business was hurt by reduced margins and start-up costs associated with its Joseph T. Ryerson & Son unit.

The company said it is beginning to see some shipping-rate improvements in both the intergrated-steel and steel-service-center segments, which should result in improved results for the fourth quarter.

Inland said its third-quarter results will be announced later this week. In the year-earlier third quarter, when the industry was in the midst of a boom, the company had net of $61 million, or $1.70 a share, on sales of $1.02 billion.

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891016-0099. Industry Analysts Struggle to Decode @ Computer Companies' Earnings Decline @ ---- @ By G. Pascal Zachary @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) HWP AMH SUNW IBM AAPL BLI ALDC ADBE WYS CPQ COMPUTERS AND INFORMATION TECHNOLOGY (CPR) SOFTWARE (SOF)

Predicting the financial results of computer firms has been a tough job lately.

Take Microsoft Corp., the largest maker of personal computer software and generally considered an industry bellwether. In July, the company stunned Wall Street with the prediction that growth in the personal computer business overall would be only 10% in 1990, a modest increase when compared with the sizzling expansion of years past.

Investors -- taking this as a sign that a broad industry slump was in the offing -- reacted by selling the company's stock, which lost $3.25 that day to close at $52 in national over-the-counter trading.

But that was all of three months ago.

Last week, Microsoft said it expects revenue for its first quarter ended Sept. 30 to increase 34%. The announcement caused the company's stock to surge $6.50 to close at $75.50 a share.

Microsoft's surprising strength is one example of the difficulty facing investors looking for reassurances about the financial health of the computer firms. "It's hard to know what to expect at this point," said Peter Rogers, an analyst at Robertson Stephens & Co. "The industry defies characterization."

To illustrate, Mr. Rogers said that of the 14 computer-related firms he follows, half will report for their most recent quarter earnings below last year's results, and half above those results.

Among those companies expected to have a down quarter are Hewlett-Packard Co., Amdahl Corp. and Sun Microsystems Inc., generally solid performers in the past. International Business Machines Corp. also is expected to report disappointing results. Apple Computer Inc., meanwhile, is expected to show improved earnings for the period ended Sept. 30.

Another contradictory message comes from Businessland Inc., a computer retailer. In July, the company reported that booming sales of new personal computers from Apple and IBM had resulted in net income more than doubling for its fourth quarter ended June 30 to $7.4 million, or 23 cents a share.

This month, however, Businessland warned investors that results for its first quarter ended Sept. 30 hadn't met expectations. The company said it expects earnings of 14 to 17 cents a share, down from 25 cents a share in the year-earlier period.

While the earnings picture confuses, observers say the major forces expected to shape the industry in the coming year are clearer.

Companies will continue to war over standards. In computer publishing, a battle over typefaces is hurting Adobe Systems Inc., which sells software that controls the image produced by printers and displays. Until recently, Adobe had a lock on the market for image software, but last month Apple, Adobe's biggest customer, and Microsoft rebelled. Now the two firms are collaborating on an alternative to Adobe's approach, and analysts say they are likely to carry IBM, the biggest seller of personal computers, along with them.

The short-term outlook for Adobe's business, however, appears strong. The company is beginning to ship a new software program that's being heralded as a boon for owners of low-end printers sold by Apple. The program is aimed at improving the quality of printed material. John Warnock, Adobe's chief executive officer, said the Mountain View, Calif., company has been receiving 1,000 calls a day about the product since it was demonstrated at a computer publishing conference several weeks ago.

Meanwhile, competition between various operating systems, which control the basic functions of a computer, spells trouble for software firms generally. "It creates uncertainty and usually slows down sales," said Russ Crabs, an analyst at Soundview Financial Group.

Mr. Crabs said this probably is behind the expected weak performance of Aldus Corp., maker of a widely used computer publishing program. He expects Aldus to report earnings of 21 cents a share on revenues of $19.5 million for its third quarter, compared with earnings of 30 cents a share on revenue of 20.4 million in the year-earlier period. Aldus officials couldn't be reached for comment.

On the other hand, the battle of the bus is expected to grow increasingly irrelevant. A bus is the data highway within a computer. IBM is backing one type of bus called microchannel, while the nine other leading computer makers, including H-P and Compaq Computer Corp., have chosen another method.

"Users don't care about the bus," said Daniel Benton, an analyst at Goldman, Sachs & Co. He said Apple's family of Macintosh computers, for instance, uses four different buses "and no one seems to mind."

The gap between winners and laggards will grow. In personal computers, Apple, Compaq and IBM are expected to tighten their hold on their business. At the same time, second-tier firms will continue to lose ground.

Some lagging competitors even may leave the personal computer business altogether. Wyse Technology, for instance, is considered a candidate to sell its troubled operation. "Wyse has done well establishing a distribution business, but they haven't delivered products that sell," said Kimball Brown, an analyst at Prudential-Bache Securities. Mr. Brown estimates Wyse, whose terminals business is strong, will report a loss of 12 cents a share for its quarter ended Sept. 30.

Personal-computer makers will continue to eat away at the business of more traditional computer firms. Ever-more powerful desk-top computers, designed with one or more microprocessors as their "brains," are expected to increasingly take on functions carried out by more expensive minicomputers and mainframes.

"The guys that make traditional hardware are really being obsoleted by microprocessor-based machines," said Mr. Benton.

As a result of this trend, longtime powerhouses H-P, IBM and Digital Equipment Corp. are scrambling to counterattack with microprocessor-based systems of their own. But they will have to act quickly. Mr. Benton expects Compaq to unveil a family of high-end personal computers later this year that are powerful enough to serve as the hub for communications within large networks of desk-top machines.

A raft of new computer companies also has targeted this "server" market.

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891016-0098. PEOPLE PATTERNS @ ---- @ By Alan L. Otten
10/16/89
WALL STREET JOURNAL (J) BANKS (BNK) ECONOMIC NEWS (ECO)

Population Drain Ends

For Midwestern States

IOWA IS MAKING a comeback. So are Indiana, Ohio and Michigan. The population of all four states is on the upswing, according to new Census Bureau estimates, following declines throughout the early 1980s.

The gains, to be sure, are rather small. Iowa, for instance, saw its population grow by 11,000 people, or 0.4%, between 1987 and 1988, the Census Bureau says. Still, even that modest increase is good news for a state that hadn't grown at all since 1981.

Between 1987 and 1988, North Dakota was the only state in the Midwest to lose population, a loss of 4,000 people. Six of the 12 midwestern states have been growing steadily since 1980 -- Illinois, Kansas, Minnesota, Missouri, South Dakota and Wisconsin.

The Northeast has been holding its own in the population race. Seven of nine states have grown each year since 1980, including New York, which lost 4% of its population during the 1970s. And although Pennsylvania and Massachusetts suffered slight declines earlier in the decade, they are growing again.

At the same time, several states in the South and West have had their own population turnaround. Seven states that grew in the early 1980s are now losing population -- West Virginia, Mississippi, Louisiana, Oklahoma, Montana, Wyoming and Alaska.

Overall, though, the South and West still outpace the Northeast and Midwest, and fast-growing states like Florida and California ensure that the pattern will continue. But the growth gap between the Sun Belt and other regions has clearly started narrowing.

More Elderly Maintain

Their Independence

THANKS TO modern medicine, more couples are growing old together. And even after losing a spouse, more of the elderly are staying independent. A new Census Bureau study of the noninstitutionalized population shows that 64% of people aged 65 to 74 were living with a spouse in 1988, up from 59% in 1970.

This doesn't mean they're less likely to live alone, however. That share has remained at about 24% since 1970. What has changed is that more of the young elderly are living with spouses rather than with other relatives, such as children. In 1988, 10% of those aged 65 to 74 lived with relatives other than spouses, down from 15% in 1970.

As people get even older, many become widowed. But even among those aged 75 and older, the share living with a spouse rose slightly, to 40% in 1988 from 38% in 1970.

Like their younger counterparts, the older elderly are less likely to live with other relatives. Only 17% of those aged 75 and older lived with relatives other than spouses in 1988, down from 26% in 1970.

The likelihood of living alone beyond the age of 75 has increased to 40% from 32%. More people are remaining independent longer presumably because they are better off physically and financially.

Careers Count Most

For the Well-to-Do

MANY AFFLUENT people place personal success and money above family.

At least that's what a survey by Ernst & Young and Yankelovich, Clancy, Shulman indicates. Two-thirds of respondents said they strongly felt the need to be successful in their jobs, while fewer than half said they strongly felt the need to spend more time with their families. Being successful in careers and spending the money they make are top priorities for this group.

Unlike most studies of the affluent market, this survey excluded the super-rich. Average household income for the sample was $194,000, and average net assets were reported as $775,000.

The goal was to learn about one of today's fastest-growing income groups, the upper-middle class. Although they represent only 2% of the population, they control nearly one-third of discretionary income.

Across the board, these consumers value quality, buy what they like rather than just what they need, and appreciate products that are distinctive.

Despite their considerable incomes and assets, 40% of the respondents in the study don't feel financially secure, and one-fourth don't feel that they have made it. Twenty percent don't even feel they are financially well off.

Many of the affluent aren't comfortable with themselves, either. About 40% don't feel they're more able than others. While twothirds feel some guilt about being affluent, only 25% give $2,500 or more to charity each year.

Thirty-five percent attend religious services regularly; at the same time, 60% feel that in life one sometimes has to compromise one's principles.

Odds and Ends

THE NUMBER of women and minorities who hold jobs in top management in the nation's largest banks has more than doubled since 1978. The American Bankers Association says that women make up 47% of officials and managers in the top 50 banks, up from 33% in 1978. The share of minorities in those positions has risen to 16% from 12%. . . . Per-capita personal income in the U.S. grew faster than inflation last year, according to the Bureau of Economic Analysis. The amount of income divvied up for each man, woman and child was $16,489 in 1988, up 6.6% from $15,472 in 1987. Per capita personal income ranged from $11,116 in Mississippi to $23,059 in Connecticut. . . . There are 13.1 million students in college this fall, up 2% from 1988, the National Center for Education Statistics estimates. About 54% are women, and 44% are part-time students.

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891016-0097. Pretty Soon They'll Be Ordering @ Band Uniforms and Instruments @ ---- @ By Marj Charlier @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) ADDISON, Texas

This small Dallas suburb's got trouble. Trouble with a capital T and that rhymes with P and that stands for pool.

More than 30 years ago, Prof. Harold Hill, the con man in Meredith Willson's "The Music Man," warned the citizens of River City, Iowa, against the game. Now kindred spirits on Addison's town council have barred the town's fanciest hotel, the Grand Kempinski, from installing three free pool tables in its new lounge.

Mayor Lynn Spruill and two members of the council said they were worried about setting a precedent that would permit pool halls along Addison's main street. And the mayor, in an admonition that bears a rhythmic resemblance to Prof. Hill's, warned that "alcohol leads to betting, which leads to fights."

The council's action is yet another blow to a sport that its fans claim has been maligned unjustly for years. "Obviously they're not in touch with what's going on," says Tom Manske, vice president of the National Pocket Billiards Association. Pool is hot in New York and Chicago, he insists, where "upscale, suit-and-tie places" are adding tables. With today's tougher drunk driving laws, he adds, "people don't want to just sit around and drink."

Besides, rowdy behavior seems unlikely at the Grand Kempinski, where rooms average $200 a night and the cheap mixed drinks go for $3.50 a pop. At the lounge, manager Elizabeth Dyer won't admit patrons in jeans, T-shirts or tennis shoes.

But a majority of the Addison council didn't buy those arguments. Introducing pool, argued Councilwoman Riley Reinker, would be "dangerous. It would open a can of worms."

Addison is no stranger to cans of worms, either. After its previous mayor committed suicide last year, an investigation disclosed that town officials regularly voted on their own projects, gave special favors to developer friends and dipped into the town's coffers for trips and retreats.

The revelations embarrassed town officials, although they argued that the problems weren't as severe as the media suggested. Now comes the pool flap.

"I think there's some people worried about something pretty ridiculous," Councilman John Nolan says. "I thought this was all taken care of in `The Music Man.'"

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891016-0096. Letters to the Editor: @ Adding Insult to Insult
10/16/89
WALL STREET JOURNAL (J) CBS MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED)

The only thing Robert Goldberg could praise about CBS's new show "Island Son" (Leisure & Arts, Sept. 25) was the local color; unfortunately neither he nor the producers of the show have done their homework. For instance: "Haole" (white) is not the ultimate insult; "Mainland haole" is. Richard Chamberlain dresses as a "Mainland haole," tucking in a Hawaiian shirt and rolling up its long sleeves. And the local expression for brother is "brah," not "bruddah." And even if a nurse would wear flowers in her hair while on duty, if she were engaged she would know to wear them behind her left, not right, ear. Sorry, the show does not even have the one redeeming quality of genuine local color.

Anita Davis

Austin, Texas

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891016-0095. LEISURE & ARTS -- Television: @ Jackie Mason in the Soup @ ---- @ By Martha Bayles
10/16/89
WALL STREET JOURNAL (J)

Of all the ethnic tensions in America, which is the most troublesome right now? A good bet would be the tension between blacks and Jews in New York City. Or so it must seem to Jackie Mason, the veteran Jewish comedian appearing in a new ABC sitcom airing on Tuesday nights (9:30-10 p.m. EDT). Not only is Mr. Mason the star of "Chicken Soup," he's also the inheritor of a comedic tradition dating back to "Duck Soup," and he's currently a man in hot water.

Here, in neutral language, is the gist of Mr. Mason's remarks, quoted first in the Village Voice while he was a paid spokesman for the Rudolph Giuliani mayoral campaign, and then in Newsweek after he and the campaign parted company. Mr. Mason said that many Jewish voters feel guilty toward blacks, so they support black candidates uncritically. He said that many black voters feel bitter about racial discrimination, so they, too, support black candidates uncritically. He said that Jews have contributed more to black causes over the years than vice versa.

Of course, Mr. Mason did not use neutral language. As a practitioner of ethnic humor from the old days on the Borscht Belt, live television and the nightclub circuit, Mr. Mason instinctively reached for the vernacular. He said Jews were "sick with complexes"; and he called David Dinkins, Mr. Giuliani's black opponent, "a fancy shvartze with a mustache."

If Mr. Mason had used less derogatory language to articulate his amateur analysis of the voting behavior of his fellow New Yorkers, would the water be quite so hot? It probably would, because few or none of the people upset by Mr. Mason's remarks have bothered to distinguish between the substance of his comments and the fact that he used insulting language. In addition, some of Mr. Mason's critics have implied that his type of ethnic humor is itself a form of racism.

For example, the New York state counsel for the NAACP said that Mr. Mason is "like a dinosaur. People are fast leaving the place where he is stuck."

These critics fail to distinguish between the type of ethnic humor that aims at disparaging another group, such as "Polish jokes"; and the type that is double-edged, aiming inward as well as outward. The latter typically is the humor of the underdog, and it was perfected by both blacks and Jews on the minstrel and vaudeville stage as a means of mocking their white and gentile audiences along with themselves.

In the hands of a zealot like Lenny Bruce, this double-edged blade could cut both the self and the audience to ribbons. But wielded by a pro like Jackie Mason, it is a constructive form of mischief. Why constructive? Because despite all the media prattle about comedy and politics not mixing, they are similar in one respect: Both can serve as mechanisms for easing tensions and facilitating the co-existence of groups in conflict. That's why it's dangerous to have well-intentioned thought police, on college campuses and elsewhere, taboo all critical mention of group differences.

As Elizabeth Kristol wrote in the New York Times just before the Mason donnybrook, "Perhaps intolerance would not boil over with such intensity if honest differences were allowed to simmer." The question is, if group conflicts still exist (as undeniably they do), and if Mr. Mason's type of ethnic humor is passe, then what other means do we have for letting off steam?

Don't say the TV sitcom, because that happens to be a genre that, in its desperate need to attract everybody and offend nobody, resembles politics more than it does comedy. It is true that the best sitcoms do allow group differences to simmer: yuppies vs. blue-collar Bostonians in "Cheers"; children vs. adults in "The Cosby Show." But these are not the differences that make headlines.

In "Chicken Soup," Mr. Mason plays Jackie, a Jewish bachelor courting Maddie (Lynn Redgrave), an Irish widow and mother of three, against the wishes of his mother (Rita Karin) and her brother Michael (Brandon Maggart). It's worth noting that both disapproving relatives are immigrants. At least, they both speak with strong accents, as do Jackie and Maddie. It couldn't be more obvious that "Chicken Soup" is being made from an old recipe. And a safe one -- imagine if the romance in question were between an Orthodox Jew and a member of the Nation of Islam.

Back in the 1920s, the play and movie versions of "Abie's Irish Rose" made the theme of courtship between the assimilated offspring of Jewish and Irish immigrants so popular that its author, Anne Nichols, lost a plagiarism suit on the grounds that the plot has entered the public domain. And it has remained there, as evidenced by its reappearance in a 1972 CBS sitcom called "Bridget Loves Bernie," whose sole distinction was that it led to the real-life marriage of Meredith Baxter and David Birney.

Clearly, the question with "Chicken Soup" is not whether the pot will boil over, but whether it will simmer at all. So far, the bubbles have been few and far between. Part of the problem is the tendency of all sitcoms, ever since the didactic days of Norman Lear, to preach about social issues. To some extent, this tendency emerges whenever the show tries to enlighten us about ethnic stereotypes by reversing them.

For instance, Michael dislikes Jackie not because he's a shrewd Jewish businessman, but because he quits his well-paying job as a salesman in order to become a social worker. Even more problematic is the incompatibility between sitcom preachiness and Mr. Mason's comic persona. The best moments in the show occur at the beginning and the end (and occasionally in the middle), when Mr. Mason slips into his standup mode and starts meting out that old-fashioned Jewish mischief to other people as well as to himself. But too often, these routines lack spark because this sitcom, like all sitcoms, is timid about confronting Mr. Mason's stock in trade-ethnic differences.

I'm not suggesting that the producers start putting together episodes about topics like the Catholic-Jewish dispute over the Carmelite convent at Auschwitz. That issue, like racial tensions in New York City, will have to cool down, not heat up, before it can simmer. But I am suggesting that they stop requiring Mr. Mason to interrupt his classic shtik with some line about "caring for other people" that would sound shmaltzy on the lips of Miss America. At your age, Jackie, you ought to know that you can't make soup without turning up the flame.

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891016-0094. The Sell-Off in Stocks: @ U.S. Response to Plunge @ In Market Bears Repeating
10/16/89
WALL STREET JOURNAL (J) SECURITIES INDUSTRY (SCR) STOCK MARKET, OFFERINGS (STK) TREASURY DEPARTMENT (TRE) EXECUTIVE (EXE) WASHINGTON

The official White House reaction to a plunge in stock prices has a 60-year history of calm, right up through Friday.

Treasury Secretary Nicholas Brady said in a statement Friday that the stock-market decline "doesn't signal any fundamental change in the condition of the economy."

"The economy," he added, "remains well-balanced and the outlook is for continued moderate growth."

Sound familiar? Here's what Ronald Reagan said after the 1987 crash: "The underlying economy remains sound. There is nothing wrong with the economy . . . all the indices are up."

Heard that before? After the 1929 crash, Herbert Hoover said: "The fundamental business of the country . . . is on a sound and prosperous basis."

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891016-0093. Who's News: @ National Micronetics Inc.
10/16/89
WALL STREET JOURNAL (J) NMIC WNEWS NATIONAL MICRONETICS Inc. (Kingston, N.Y.)

James Robinson, 57 years old, was elected president and chief executive officer of this maker of magnetic recording heads for disk drives. He has been president and chief executive officer of Amperex Electronics Corp., a division of North American Philips Corp., itself a subsidiary of N.V. Philips of the Netherlands. Charles J. Lawson Jr., 68, who had been acting chief executive since June 14, will continue as chairman. The former president and chief executive, Eric W. Markrud, resigned in June.

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891016-0092. Politics & Policy: @ Capital-Gains Tax Cut May Resurface @ In Wake of Senate Deficit-Reduction Bill @ ---- @ By Jeffrey H. Birnbaum @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) TAXES LABOR ECONOMIC NEWS (ECO) FINANCIAL, ACCOUNTING, LEASING (FIN) INSURANCE (INS) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) CONSTRUCTION, MATERIALS (CON) TELEPHONE SYSTEMS (TLS) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) MUTUAL AND MONEY-MARKET FUNDS (FND) DIVIDENDS (DIV) STOCK MARKET, OFFERINGS (STK) BOND MARKET NEWS (BON) AIRLINES (AIR) ENVIRONMENT (ENV) CHEMICALS, PLASTICS (CHM) COMMODITY NEWS, FARM PRODUCTS (CMD) PETROLEUM (PET) NUCLEAR POWER, FUEL (NUK) CONGRESS (CNG) FEDERAL GOVERNMENT (FDL) EXECUTIVE (EXE) TRANSPORTATION DEPARTMENT (TRN) POSTAL SERVICE (POS) FEDERAL COMMUNICATIONS COMMISSION (FCC) WASHINGTON

The Senate's decision to approve a bare-bones deficit-reduction bill without a capital-gains tax cut still leaves open the possibility of enacting a gains tax reduction this year.

Late Friday night, the Senate voted 87-7 to approve an estimated $13.5 billion measure that had been stripped of hundreds of provisions that would have widened, rather than narrowed, the federal budget deficit. Lawmakers drastically streamlined the bill to blunt criticism that it was bloated with special-interest tax breaks and spending increases.

"We're putting a deficit-reduction bill back in the category of being a deficit-reduction bill," said Senate Budget Committee Chairman James Sasser (D., Tenn.).

But Senate supporters of the trimmer legislation said that other bills would soon be moving through Congress that could carry some of the measures that had been cast aside, including a capital-gains tax cut. In addition, the companion deficit-reduction bill already passed by the House includes a capital-gains provision. House-Senate negotiations are likely to begin at midweek and last for a while.

"No one can predict exactly what will happen on the House side," said Senate Minority Leader Robert Dole (R., Kan.). But, he added, "I believe Republicans and Democrats will work together to get capital-gains reform this year."

White House Budget Director Richard Darman told reporters yesterday that the administration wouldn't push to keep the capital-gains cut in the final version of the bill. "We don't need this as a way to get capital gains," he said.

House Budget Committee Chairman Leon Panetta (D., Calif.) said in an interview, "If that's the signal that comes from the White House, that will help a great deal."

The Senate's decision was a setback for President Bush and will make approval of a capital-gains tax cut less certain this year. Opponents of the cut are playing hardball. Senate Majority Leader George Mitchell (D., Maine) said he was "confident" that any House-Senate agreement on the deficit-reduction legislation wouldn't include a capital-gains tax cut. And a senior aide to the House Ways and Means Committee, where tax legislation originates, said there aren't any "plans to produce another tax bill that could carry a gains tax cut this year."

One obvious place to attach a capital-gains tax cut, and perhaps other popular items stripped from the deficit-reduction bill, is the legislation to raise the federal borrowing limit. Such legislation must be enacted by the end of the month.

The Senate bill was pared back in an attempt to speed deficit-reduction through Congress. Because the legislation hasn't been completed, President Bush has until midnight tonight to enact across-the-board spending cuts mandated by the Gramm-Rudman deficit-reduction law.

Senators hope that the need to avoid those cuts will pressure the House to agree to the streamlined bill. The House appears reluctant to join the senators. A key is whether House Republicans are willing to acquiesce to their Senate colleagues' decision to drop many pet provisions.

"Although I am encouraged by the Senate action," said Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee, "it is uncertain whether a clean bill can be achieved in the upcoming conference with the Senate."

Another big question hovering over the debate is what President Bush thinks. He has been resisting a stripped-down bill without a guaranteed vote on his capital-gains tax cut. But Republican senators saw no way to overcome a procedural hurdle and garner the 60 votes needed to win the capital-gains issue on the floor, so they went ahead with the streamlined bill.

The Senate bill was stripped of many popular, though revenue-losing, provisions, a number of which are included in the House-passed bill. These include a child-care initiative and extensions of soon-to-expire tax breaks for low-income housing and research-and-development expenditures. Also missing from the Senate bill is the House's repeal of a law, called Section 89, that compels companies to give rank-and-file workers comparable health benefits to top paid executives.

One high-profile provision that was originally in the Senate bill but was cut out because it lost money was the proposal by Chairman Lloyd Bentsen (D., Texas) of the Senate Finance Committee to expand the deduction for individual retirement accounts. Mr. Bentsen said he hopes the Senate will consider that measure soon.

To the delight of some doctors, the bill dropped a plan passed by the Finance Committee that would have overhauled the entire physician-reimbursement system under Medicare. To the detriment of many low-income people, efforts to boost Medicaid funding, especially in rural areas, also were stricken.

Asked why senators were giving up so much, New Mexico Sen. Pete Domenici, the ranking Republican on the Senate Budget Committee, said, "We're looking like idiots. Things had just gone too far."

Sen. Dole said that the move required sacrifice by every senator. It worked, others said, because there were no exceptions: all revenue-losing provisions were stricken.

The Senate also dropped a plan by its Finance Committee that would have increased the income threshold beyond which senior citizens have their Social Security benefits reduced. In addition, the bill dropped a plan to make permanent a 3% excise tax on long-distance telephone calls. It no longer includes a plan that would have repealed what remains of the completed-contract method of accounting, which is used by military contractors to reduce their tax burden. It also drops a provision that would have permitted corporations to use excess pension funds to pay health benefits for current retirees.

Also stricken was a fivefold increase in the maximum Occupational Safety and Health Administration penalties, which would have raised $65 million in fiscal 1990. A provision that would have made the Social Security Administration an independent agency was excised.

The approval of the Senate bill was especially sweet for Sen. Mitchell, who had proposed the streamlining. Mr. Mitchell's relations with Budget Director Darman, who pushed for a capital-gains cut to be added to the measure, have been strained since Mr. Darman chose to bypass the Maine Democrat and deal with other lawmakers earlier this year during a dispute over drug funding in the fiscal 1989 supplemental spending bill.

The deficit reduction bill contains $5.3 billion in tax increases in fiscal 1990, and $26 billion over five years. The revenue-raising provisions, which affect mostly corporations, would:

-- Prevent companies that have made leveraged buy-outs from getting federal tax refunds resulting from losses caused by interest payments on debt issued to finance the buy-outs, effective Aug. 2, 1989.

-- Require mutual funds to include in their taxable income dividends paid to them on the date that the dividends are declared rather than received, effective the day after the tax bill is enacted.

-- Close a loophole regarding employee stock ownership plans, effective June 6, 1989, that has been exploited by investment bankers in corporate takeovers. The measure repeals a 50% exclusion given to banks on the interest from loans used to acquire securities for an ESOP, if the ESOP owns less than 30% of the employer's stock.

-- Curb junk bonds by ending tax benefits for certain securities, such as zero-coupon bonds, that postpone cash interest payments.

-- Raise $851 million by suspending for one year an automatic reduction in airport and airway taxes.

-- Speed up the collection of the payroll tax from large companies, effective August 1990.

-- Impose a tax on ozone-depleting chemicals, such as those used in air conditioners and in Styrofoam, beginning at $1.10 a pound starting next year.

-- Withhold income taxes from the paychecks of certain farm workers currently exempt from withholding.

-- Change the collection of gasoline excise taxes to weekly from semimonthly, effective next year.

-- Restrict the ability of real estate owners to escape taxes by swapping one piece of property for another instead of selling it for cash.

-- Increase to $6 a person from $3 the international air-passenger departure tax, and impose a $3-a-person tax on international departures by commercial ships.

The measure also includes spending cuts and increases in federal fees. Among its provisions:

-- Reduction of Medicare spending in fiscal 1990 by some $2.8 billion, in part by curbing increases in reimbursements to physicians. The plan would impose a brief freeze on physician fees next year.

-- Removal of the U.S. Postal Service's operating budget from the federal budget, reducing the deficit by $1.77 billion. A similar provision is in the House version.

-- Authority for the Federal Aviation Administration to raise $239 million by charging fees for commercial airline-landing rights at New York's LaGuardia and John F. Kennedy International Airports, O'Hare International Airport in Chicago and National Airport in Washington.

-- Increases in Nuclear Regulatory Commission fees totaling $54 million.

-- Direction to the U.S. Coast Guard to collect $50 million from users of Coast Guard services.

-- Raising an additional $43 million by increasing existing Federal Communications Commission fees and penalties and establishing new fees for amateur radio operators, ship stations and mobile radio facilities.

---

John E. Yang contributed to this article.

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891016-0091. Letters to the Editor: @ Reality in the Eye @ Of the Job Holder
10/16/89
WALL STREET JOURNAL (J) LABOR

In response to your overly optimistic, outdated piece on how long unemployment lasts (People Patterns, Sept. 20):

I am in the communications field, above entry level. I was laid off in August 1988, and after a thorough and exhausting job search, was hired in August 1989. My unemployment insurance ran out before I found a job; I found cutbacks and layoffs in many companies.

The statistics quoted by the "new" Census Bureau report (garnered from 1984 to 1986) are out of date, certainly as an average for the Northeast, and possibly for the rest of the country.

I think what bothered me most about the piece was that there seemed to be an underlying attitude to tell your readers all is well -- if you're getting laid off don't worry, and if you're unemployed, it's a seller's market.

To top it off, you captioned the graph showing the average number of months in a job search as "Time Off." Are you kidding? Looking for a job was one of the most anxious periods of my life -- and is for most people. Your paper needs a serious reality check.

Reva Levin

Cambridge, Mass.

891016-0090.
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891016-0090. Corrections & Amplifications: @ Bull HN Information Systems Inc.
10/16/89
WALL STREET JOURNAL (J) ZE COMPUTERS AND INFORMATION TECHNOLOGY (CPR) CORPORATE PROFILE (PRO)

BULL HN INFORMATION SYSTEMS Inc. is a U.S. majority-owned unit of Cie. des Machines Bull. In Friday's edition, the name of the unit was misstated.

(See: "Bull's Chairman to Use U.S. Acquisitions to Lift Computer Maker's World Stature" -- WSJ Oct. 13, 1989)

891016-0089.
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891016-0089. Credit Ratings
10/16/89
WALL STREET JOURNAL (J) CSV FSAK BOND MARKET NEWS (BON) COLUMBIA SAVINGS & LOAN ASSOCIATION

Moody's Investors Service said it reduced its rating on $165 million of subordinated debt of this Beverly Hills, Calif., thrift, citing turmoil in the market for low-grade, high-yield securities. The agency said it reduced its rating on the thrift's subordinated debt to B-2 from Ba-2 and will keep the debt under review for possible further downgrade. Columbia Savings is a major holder of so-called junk bonds. New federal legislation requires that all thrifts divest themselves of such speculative securities over a period of years. Columbia Savings officials weren't available for comment on the downgrade.

---

FRANKLIN SAVINGS ASSOCIATION (Ottawa, Kan.) -- Moody's Investors Service Inc. said it downgraded its rating to B-2 from Ba-3 on less than $20 million of this thrift's senior subordinated notes. The rating concern said Franklin's "troubled diversification record in the securities business" was one reason for the downgrade, citing the troubles at its L.F. Rothschild subsidiary and the possible sale of other subsidiaries. "They perhaps had concern that we were getting out of all these," said Franklin President Duane H. Hall. "I think it was a little premature on their part."

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891016-0088. The Sell-Off in Stocks: @ Now What? The Experts Tell Investors 'Don't Panic' @ --- @ Gurus' Views Vary, @ But Crash Not Seen @ ---- @ By John R. Dorfman and Tom Herman @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) STOCK INDEXES (NDX) NEW YORK

Just when it seemed safe to go back into stocks, Wall Street suffered another severe attack of nerves.

Does this signal another Black Monday is coming? Or is this an extraordinary buying opportunity, just like Oct. 19, 1987, eventually turned out to be?

Here's what several leading market experts and money managers say about Friday's action, what happens next and what investors should do.

Joseph Granville. "I'm the only one who said there would be an October massacre, all through late August and September," says Mr. Granville, once a widely followed market guru and still a well-known newsletter writer.

"Everyone will tell you that this time is different from 1987," he says. "Well, in some ways it is different, but technically it is just the same. If you're a technician, you obey the signals. Right now they're telling me to get the hell out and stay out. I see no major support until 2200. I see a possibility of going to 2200 this month."

Mr. Granville says he wouldn't even think of buying until at least 600 to 700 stocks have hit 52-week lows; about 100 stocks hit new lows Friday. "Most people," he says, "have no idea what a massacre pattern looks like."

Elaine Garzarelli. A quantitative analyst with Shearson Lehman Hutton Inc., Ms. Garzarelli had warned clients to take their money out of the market before the 1987 crash.

Friday's big drop, she says, "was not a crash. This was an October massacre" like those that occurred in 1978 and 1979. Now, as in those two years, her stock market indicators are positive. So she thinks the damage will be short-lived and contained.

"Those corrections lasted one to four weeks and took the market 10%-12% down," she says. "This is exactly the same thing, as far as I'm concerned." Thus, she says, if the Dow Jones Industrial Average dropped below 2450, "It would just be a fluke. My advice is to buy."

As she calculates it, the average stock now sells for about 12.5 times companies' earnings. She says that ratio could climb to 14.5, given current interest rates, and still be within the range of "fair value."

Ned Davis. Friday's fall marks the start of a bear market, says Mr. Davis, president of Ned Davis Research Inc. But Mr. Davis, whose views are widely respected by money managers, says he expects no 1987-style crash.

"There was a unique combination in 1987," he says. "Margin debt was at a record high. There was tremendous public enthusiasm for stock mutual funds. The main thing was portfolio insurance," a mechanical trading system intended to protect an investor against losses. "A hundred billion dollars in stock was subject" to it. In 1987, such selling contributed to a snowball effect.

Today could even be an up day, Mr. Davis says, if major brokerage firms agree to refrain from program trading. Over the next several months, though, he says things look bad.

"I think the market will be heading down into November," he says. "We will probably have a year-end rally, and then go down again. Sort of a two-step bear market." He expects the downturn to carry the Dow Jones Industrial Average down to around 2000 sometime next year. "That would be a normal bear market," he says. "I guess that's my forecast."

Leon G. Cooperman. "I don't think the market is going through another October '87. I don't think that's the case at all," says Mr. Cooperman, a partner at Goldman, Sachs & Co. and chairman of Goldman Sachs Asset Management.

Mr. Cooperman sees this as a good time to pick up bargains, but he doesn't think there's any need to rush. "I expect the market to open weaker Monday, but then it should find some stability."

He ticks off several major differences between now and two years ago. Unlike 1987, interest rates have been falling this year. Unlike 1987, the dollar has been strong. And unlike 1987, the economy doesn't appear to be in any danger of overheating.

But the economy's slower growth this year also means the outlook for corporate profits "isn't good," he says. "So it's a very mixed bag."

Thus, he concludes, "This is not a good environment to be fully invested" in stocks. "If I had come into Friday on margin or with very little cash in the portfolios, I would not do any buying. But we came into Friday with a conservative portfolio, so I would look to do some modest buying" on behalf of clients. "We're going to look for some of the better-known companies that got clocked" Friday.

John Kenneth Galbraith. "This is the latest manifestation of the capacity of the financial community for recurrent insanity," says Mr. Galbraith, an economist.

"I see this as a reaction to the whole junk bond explosion," he says. "The explosion of junk bonds and takeovers has lodged a lot of insecure securities in the hands of investors and loaded the corporations that are the objects of takeovers or feared takeovers with huge amounts of debt rather than equity. This has both made investors uneasy and the corporations more vulnerable."

Nevertheless, he says a depression doesn't appear likely. "There is more resiliency in the economy at large than we commonly suppose," he says. "It takes more error now to have a major depression than back in the Thirties -- much as the financial community and the government may try."

Mario Gabelli. New York money manager Mario Gabelli, an expert at spotting takeover candidates, says that takeovers aren't totally gone.

"Companies are still going to buy companies around the world," he says. Examples are "Ford looking at Jaguar, BellSouth looking at LIN Broadcasting." These sorts of takeovers don't require junk bonds or big bank loans to finance them, so Mr. Gabelli figures they will continue.

"The market was up 35% since {President} Bush took office," Mr. Gabelli says, so a correction was to be expected. He thinks another crash is "unlikely," and says he was "nibbling at" selected stocks during Friday's plunge.

"Stocks that were thrown out just on an emotional basis are a great opportunity {this} week for guys like me," he says.

Jim Rogers. "It seems to me that this is the pin that has finally pricked the balloon," says Mr. Rogers, a professor of finance at Columbia University and former co-manager of one of the most successful hedge funds in history, Quantum Fund.

He sees "economic problems, financial problems" ahead for the U.S., with a fairly strong possibility of a recession. "Friday you couldn't sell dollars," he says. Dealers "would give you a quote, but then refuse to make the trade." If the dollar stays weak, he says, that will add to inflationary pressures in the U.S. and make it hard for the Federal Reserve Board to ease interest rates very much.

Mr. Rogers won't decide what to do today until he sees how the London and Tokyo markets go. He recommends that investors sell takeover-related stocks, but hang on to some other stocks -- especially utilities, which often do well during periods of economic weakness.

Frank Curzio. Many people now claim to have predicted the 1987 crash. Queens newsletter writer Francis X. Curzio actually did it: He stated in writing in September 1987 that the Dow Jones Industrial Average was likely to decline about 500 points the following month.

Mr. Curzio says what happens now will depend a good deal on the Federal Reserve Board. If it promptly cuts the discount rate it charges on loans to banks, he says, "That could quiet things down." If not, "We could go to 2200 very soon."

Frank W. Terrizzi. Stock prices "would still have to go down some additional amount before we become positive on stocks," says Mr. Terrizzi, president and managing director of Renaissance Investment Management Inc. in Cincinnati.

Renaissance, which manages about $1.8 billion, drew stiff criticism from many clients earlier this year because it pulled entirely out of stocks at the beginning of the year and thus missed a strong rally.

Renaissance is keeping its money entirely in cash equivalents, primarily U.S. Treasury bills. "T-bills probably are the right place to be," he says.

(See related story: "Your Money Matters: Unloading Stocks Worst Step to Take" -- WSJ Oct. 16, 1989)

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891016-0087. Letters to the Editor: @ C-Span Sees All as Lantos Heaps Scorn
10/16/89
WALL STREET JOURNAL (J) CONGRESS (CNG) HOUSING AND URBAN DEVELOPMENT (HUD)

Regarding the Oct. 3 letter to the editor from Rep. Tom Lantos, chairman of the House Subcommittee on Employment and Housing, alleging:

1. That your Sept. 28 editorial "Kangaroo Committees" was factually inaccurate and deliberately misleading.

I thought your editorial was factually accurate and deliberately elucidative.

2. That Mr. Lantos supported the rights of the witnesses to take the Fifth Amendment.

Yes, he did. As I watched him on C-Span, I heard him speak those lovely words about the Bill of Rights, which he quotes from the transcript of the hearings. He did repeat those nice platitudes several times as an indication of his support for the Constitution. He used about 56 words defending the witnesses' constitutional rights.

Unfortunately, by my rough guess, he used better than 5,000 words heaping scorn on the witnesses for exercising the Fifth. He sandwiched his praise of constitutional meat between large loaves of bilious commentary. As your editorial rightly pointed out, Samuel Pierce, former HUD secretary, and Lance Wilson, Mr. Pierce's former aide, "are currently being held up to scorn for taking the Fifth Amendment." That certainly is not the supposed "distorted reading" indicated by Mr. Lantos.

3. That his "committee does not deal with any possible criminal activity at HUD. My colleagues and I fully realize we are not a court . . . etc."

Absolute rubbish. By any "reasonable man" criterion, Mr. Lantos and his colleagues have a whole bunch of people tried and convicted. Apparently, their verdict is in. Right now they're pursuing evidence. That's not a bad way to proceed, just somewhat different from standard American practice.

How was that practice referred to when I was in school? Ah, yes, something called a Star Chamber.

Of course, Mr. Lantos doth protest that his subcommittee simply seeks information for legislative change. No doubt that's partially true. Everything that Mr. Lantos says in his letter is partially true. He's right about his subcommittee's responsibilities when it comes to obtaining information from prior HUD officials. But if his explanation of motivation is true, why is his investigation so oriented as to identify criminal activity? Why not simply questions designed to identify sources and causes of waste and inefficiency? Such as, what happened when Congress wanted to know about $400 toilet seats or whatever they supposedly cost? No, Mr. Lantos's complaints simply won't wash.

4. That the Journal defends "the sleaze, fraud, waste, embezzlement, influence-peddling and abuse of the public that took place while Mr. Pierce was secretary of HUD," etc. and so forth.

No, to my mind, the Journal did not "defend sleaze, fraud, waste, embezzlement, influence-peddling and abuse of the public trust . . ." it defended appropriate constitutional safeguards and practical common sense.

The problem, which the Journal so rightly pointed out in a number of articles, is not the likes of Mr. Lantos, who after all is really a bit player on the stage, but the attempt by Congress to enhance itself into a quasi-parliamentary/judicial body. (Of course, we've also got a judiciary that seeks the same objective.) The system is the problem, not an individual member. Individuals can always have their hands slapped. It's when such slapping doesn't occur that we've got trouble.

I do not by any means defend HUD management. But I think the kind of congressional investigation that has been pursued is a far greater danger to American notions of liberty and freedom than any incompetency (and, yes, maybe criminality) within HUD could possibly generate. The last time I saw a similar congressional hearing was when "Tail Gunner Joe" McCarthy did his work.

Raymond Weber

Parsippany, N.J.

---

I disagree with the statement by Mr. Lantos that one should not draw an adverse inference against former HUD officials who assert their Fifth Amendment privilege against self-incrimination in congressional hearings.

The Fifth Amendment states in relevant part that no person "shall be compelled, in any criminal case, to be a witness against himself." This privilege against self-incrimination precludes the drawing of an adverse inference against a criminal defendant who chooses not to testify. Thus, in a criminal case, a prosecutor cannot comment on a defendant's failure to testify nor can the defendant be compelled to take the stand as a witness, thus forcing him to "take the Fifth." The privilege, however, has been limited in accordance with its plain language to protect the defendant in criminal matters only.

The Supreme Court and some states have specifically recognized that "the Fifth Amendment does not preclude the inference where the privilege is claimed by a party to a civil cause." Baxter v. Palmingiano, 425 U.S. 308 (1976). Thus, in a civil case, a defendant may be called as a witness, he may be forced to testify or take the Fifth, and his taking of the Fifth may permit the drawing of an adverse inference against him in the civil matter. He may take the Fifth in a civil matter only if he has a good faith and justifiable belief that his testimony may subject him to criminal prosecution. Allowing the defendant to take the Fifth in a civil matter is not based on a constitutional right to refuse to testify where one's testimony harms him in the civil matter, but because the testimony in the civil matter could be unconstitutionally used against him in a subsequent criminal prosecution. Absent the risk of such prosecution, a court may order the defendant to testify.

Thus, when Mr. Pierce asserted the Fifth in a noncriminal proceeding, particularly after presumably receiving extensive advice from legal counsel, one must conclude that he held a good-faith, justifiable belief that his testimony could be used against him in a subsequent criminal prosecution. The subcommittee, Congress and the American public have every right to draw the adverse inference and to concur with Mr. Pierce's own belief that his testimony could help convict him of a crime. Drawing the adverse inference in a noncriminal congressional hearing does not offend the Fifth Amendment shield against self-incrimination.

Clark S. Spalsbury Jr.

Estes Park, Colo.

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891016-0086. The Sell-Off in Stocks: @ Triskaidekaphobes Take @ Plunge With Pinch of Salt
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) NEW YORK

It was Friday the 13th, and the stock market plummeted nearly 200 points. Just a coincidence? Or is triskaidekaphobia -- fear of the number 13 -- justified?

In academia, a so-called Friday the 13th effect has been set up and shot down by different professors.

Robert Kolb and Ricardo Rodriguez, professors of finance at the University of Miami, found evidence that the market is spooked by Friday the 13th. But their study, which spanned the 1962-85 period, has since been shown to be jinxed by an unlucky choice of data.

In the '70s, the market took falls nine times in a row on Friday the you-know-what. But the date tends to be a plus, not a minus, for stocks, according to Yale Hirsch, a collector of stock market lore.

Another study found that the 82 Fridays the 13th in the 1940-1987 period had higher than average returns -- higher even than Fridays in general, which tend to be strong days for stock prices.

On the only other Friday the 13th this year, the Dow Jones Industrial Average rose about four points.

Professor Kolb says the original study, titled Friday the 13th, Part VII, was published tongue-in-cheek. In a similar vein, he adds that the anniversary of the 1987 crash and Saturday's full moon could have played a part, too, in Friday's market activity.

891016-0085.
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891016-0085. OTC Focus: @ Stock Prices Plummet, Trading Activity @ Escalates, Phone Calls Go Unanswered @ ---- @ By Sonja Steptoe @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) NEW YORK -- There were widespread complaints Friday

reminiscent of those during the 1987 crash -- that as stock prices plummeted and trading activity escalated, some phone calls to market makers in over-the-counter stocks went unanswered.

"We couldn't get dealers to answer their phones," said Robert King, senior vice president of OTC trading at Robinson-Humphrey Co. in Atlanta. "It was {like} the Friday before Black Monday" two years ago.

Whether unanswered phone calls had any effect or not, Nasdaq stocks sank far less than those on the New York and American exchanges. Nonetheless, the Nasdaq Composite Index suffered its biggest point decline of the year and its sixth worst ever, diving 14.90, or 3%, to 467.29. Ten points of the drop occurred during the last 45 minutes of trading. By comparison, the New York Stock Exchange Composite tumbled 5.8% Friday and the American Stock Exchange Composite fell 4%.

On Oct. 16, 1987, the Nasdaq Composite fell 16.18 points, or 3.8%, followed by its devastating 46.12-point, or 11% slide, three days later.

Nasdaq volume Friday totaled 167.7 million shares, which was only the fifth busiest day so far this year. The single-day record of 288 million shares was set on Oct. 21, 1987.

"There wasn't a lot of volume because it was just impossible to get stock moved," said E.E. "Buzzy" Geduld, president of Herzog, Heine, Geduld, a New York company that makes markets in thousands of OTC issues.

Most of the complaints about unanswered phone calls came from regional brokers rather than individual investors. Mr. King of Robinson-Humphrey and others were quick to add that they believe the problem stemmed more from traders' inability to handle the volume of calls, rather than a deliberate attempt to avoid making trades.

The subject is a sore one for Nasdaq and its market-making companies, which were widely criticized two years ago following complaints from investors who couldn't reach their brokers or trade in the chaos of the crash.

Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, declared: "It was the last hour of trading on a Friday. There were too many phones ringing and too many things happening to expect market makers to be as efficient as robots. It wasn't intentional, we were all busy."

James Tarantino, head of OTC trading at Hambrecht & Quist in San Francisco, said, "It was just like two years ago. Everybody was trying to do the same thing at the same time."

Jeremiah Mullins, the OTC trading chief at Dean Witter Reynolds in New York, said proudly that his company executed every order it received by the close of trading. But, he added, "you can only take one call at a time."

Market makers keep supplies of stock on hand to maintain orderly trading when imbalances occur. On days like Friday, that means they must buy shares from sellers when no one else is willing to. When selling is so frenzied, prices fall steeply and fast. Two years ago, faced with the possibility of heavy losses on the stocks in their inventories, market makers themselves began dumping shares, exacerbating the slide in OTC stock prices.

On Friday, some market makers were selling again, traders said. But, with profits sagging on Wall Street since the crash, companies have kept smaller share stockpiles on hand.

Mr. Tarantino of Hambrecht & Quist said some prices fell without trades taking place, as market makers kept dropping the prices at which they would buy shares. "Everyone was hitting everyone else's bid," he said.

So, while OTC companies incurred losses on Friday, trading officials said the damage wasn't as bad as it was in 1987. "Two years ago we were carrying huge inventories and that was the big culprit. I don't know of anyone carrying big inventories now," said Mr. King of Robinson-Humphrey.

Tony Cecin, head of equity trading at Piper, Jaffray & Hopwood in Minneapolis, said that Piper Jaffray actually made money on Friday. It helped that his inventory is a third smaller now than it was two years ago, he said.

Joseph Hardiman, president of the National Association of Securities Dealers, which oversees the Nasdaq computerized trading system, said that despite the rush of selling, he never considered the situation an "emergency."

"The pace of trading was orderly," he said. Nasdaq's Small Order Execution System "worked beautifully," as did the automated system for larger trades, according to Mr. Hardiman.

Nevertheless, the shock of another steep plunge in stock prices undoubtedly will shake many investors' confidence. In the past, the OTC market thrived on a firm base of small-investor participation. Because Nasdaq's trading volume hasn't returned to pre-crash levels, traders and OTC market officials hope the damage won't be permanent.

But they are worried. "We were just starting to get the public's confidence back," lamented Mr. Mullins of Dean Witter.

More troubling is the prospect that the overall collapse in stock prices could permanently erode the base of small-investor support the OTC market was struggling to rebuild in the wake of the October 1987 crash.

Mr. Cecin of Piper Jaffray says some action from government policy makers would allay investor fears. It won't take much more to "scare the hell out of retail investors," he says.

The sellers on Friday came from all corners of the OTC market -- big and small institutional investors, as well as individual investors and market makers. But grateful traders said the sell orders generally ranged from 20,000 shares to 50,000 shares, compared with blocks of 500,000 shares or more two years ago.

Shearson's Mr. DaPuzzo said retail investors nervously sold stock Friday and never returned to bargain-hunt. Institutional investors, which had been selling stock throughout last week to lock in handsome gains made through the third quarter, were calmer.

"We had a good amount of selling from institutions, but not as much panic," Mr. DaPuzzo said. "If they couldn't sell, some of them put the shares back on the shelf." In addition, he said, some bigger institutional investors placed bids to buy some OTC stocks whose prices were beaten down.

In addition, Mr. DaPuzzo said computer-guided program selling of OTC stocks in the Russell Index of 2000 small stocks and the Standard & Poor's 500-stock Index sent occasional "waves " through the market.

Nasdaq's biggest stocks were hammered. The Nasdaq 100 Index of the largest nonfinancial issues, including the big OTC technology issues, tumbled 4.2%, or 19.76, to 449.33. The Nasdaq Financial Index of giant insurance and banking stocks dropped 2%, or 9.31, to 462.98.

The OTC market has only a handful of takeover-related stocks. But they fell sharply. McCaw Cellular Communications, for instance, has offered to buy LIN Broadcasting as well as Metromedia's New York City cellular telephone interests, and in a separate transaction, sell certain McCaw properties to Contel Cellular. McCaw lost 8%, or 3 1/2, to 40. LIN Broadcasting, dropped 5 1/2, or 5%, to 107 1/2. The turnover in both issues was roughly normal.

On a day when negative takeover-related news didn't sit well with investors, Commercial Intertech, a maker of engineered metal parts, said Haas & Partners advised it that it doesn't plan to pursue its previously reported $27.50-a-share bid to buy the company. Commercial Intertech plummeted 6 to 26.

The issues of companies with ties to the junk bond market also tumbled Friday. On the OTC market, First Executive, a big buyer of the high-risk, high-yield issues, slid 2 to 12 1/4.

Among other OTC issues, Intel, dropped 2 1/8 to 33 7/8; Laidlaw Transportation lost 1 1/8 to 19 1/2; the American depositary receipts of Jaguar were off 1/4 to 10 1/4; MCI Communications slipped 2 1/4 to 43 1/2; Apple Computer fell 3 to 45 3/4 and Nike dropped 2 1/4 to 66 3/4.

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891016-0084. Money Rates
10/16/89
WALL STREET JOURNAL (J) EUROP CANDA JAPAN FNM FRE MER FINANCIAL, ACCOUNTING, LEASING (FIN) BOND MARKET NEWS (BON) BANKS (BNK) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) CONSTRUCTION, MATERIALS (CON) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) TREASURY DEPARTMENT (TRE) FEDERAL RESERVE BOARD (FED)

Friday, October 13, 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 1/2% low, 8 5/8% 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.: 8.60% 30 to 44 days; 8.55% 45 to 59 days; 8.375% 60 to 79 days; 8.50% 80 to 89 days; 8.25% 90 to 119 days; 8.125% 120 to 149 days; 8% 150 to 179 days; 7.625% 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; 8.55% 60 days; 8.55% 90 days.

CERTIFICATES OF DEPOSIT: 8.15% one month; 8.15% two months; 8.13% three months; 8.11% six months; 8.08% 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: 8.65% one month; 8.65% three months; 8.55% six months.

BANKERS ACCEPTANCES: 8.52% 30 days; 8.37% 60 days; 8.15% 90 days; 7.98% 120 days; 7.92% 150 days; 7.80% 180 days. Negotiable, bank-backed business credit instruments typically financing an import order.

LONDON LATE EURODOLLARS: 8 13/16% to 8 11/16% one month; 8 13/16% to 8 11/16% two months; 8 13/16% to 8 11/16% three months; 8 3/4% to 8 5/8% four months; 8 11/16% to 8 9/16% five months; 8 5/8% to 8 1/2% six months.

LONDON INTERBANK OFFERED RATES (LIBOR): 8 3/4% one month; 8 3/4% three months; 8 9/16% six months; 8 9/16% 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 8.50%; 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 Tuesday, October 10, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.63% 13 weeks; 7.60% 26 weeks.

FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.91%, standard conventional fixedrate 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) 9.86%, standard conventional fixed-rate mortgages; 8.85%, 6/2 rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

MERRILL LYNCH READY ASSETS TRUST: 8.33%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.

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891016-0083. The Sell-Off in Stocks: @ Institutions Found Buys on Friday @ And Plan More Purchases Today @ ---- @ By James A. White @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) LABOR STOCK MARKET, OFFERINGS (STK) FINANCIAL, ACCOUNTING, LEASING (FIN) MUTUAL AND MONEY-MARKET FUNDS (FND) SECURITIES INDUSTRY (SCR) NEW YORK

Pension funds, insurers and other behemoths of the investing world said they began scooping up stocks during Friday's market rout. And they plan to buy more today.

Rightly or wrongly, many giant institutional investors appear to be fighting the latest war by applying the lesson they learned in the October 1987 crash: Buying at the bottom pays off.

To be sure, big investors might put away their checkbooks in a hurry if stocks open sharply lower today. They could still panic and bail out of the market. But their 1987 performance indicates that they won't abandon stocks unless conditions get far worse.

"Last time, we got rewarded for going out and buying stocks when the panic was the worst," said John W. Rogers, president of Chicago-based Ariel Capital Management Inc., which manages $1.1 billion of stocks.

Mr. Rogers spent half his cash on hand Friday for "our favorite stocks that have fallen apart." He expects to invest the rest if the market weakens further.

Denver-based portfolio manager James Craig wasn't daunted when Friday's rout shaved $40 million from the value of the $752 million Janus Fund he oversees. "I waited to make sure all the program trades had kicked through," he said. Then he jumped into the market: "I spent $30 million in the last half-hour."

Other money managers also opened their wallets. "I was buying at the close (Friday) and I'll be buying again because I know we're getting good value," said Frederick A. Moran, president of Moran Asset Management Inc., Greenwich, Conn. "There is no justification on the fundamental level for this crash."

Unlike mutual funds, which can be forced to sell stockholdings when investors rush to withdraw money, big investors such as pension funds and insurance companies can decide to ride out market storms without jettisoning stock. Most often, they do just that, because stocks have proved to be the best-performing long-term investment, attracting about $1 trillion from pension funds alone.

"If you bought after the crash, you did very very well off the bottom," said Stephen B. Timbers, chief investment officer of Chicago-based Kemper Financial Services Inc. The $56 billion California Public Employees Retirement System, for one, added $1 billion to its stock portfolio two years ago.

"The last crash taught institutional investors that they have to be long-term holders, and that they can't react to short-term events, good or bad," said Stephen L. Nesbitt, senior vice president for the pension consultants Wilshire Associates in Santa Monica, Calif. "Those that pulled out (of stocks) regretted it," he said, "so I doubt you'll see any significant changes" in institutional portfolios as a result of Friday's decline.

Stocks, as measured by the Standard & Poor's 500-stock index, have been stellar performers this year, rising 27.97% before Friday's plunge, excluding dividends. Even Friday's slump leaves investors ahead more than 20%, well above the annual average for stocks over several decades.

"You could go down 400 points and still have a good year in the market," said James D. Awad, president of New York-based BMI Capital Corp.

Mr. Awad, however, worries that the market "could go down 800 or 900 points in the next few days. It can happen before you can turn around." He said he discerns many parallels with 1987, including the emphasis on takeover stocks and the re-emergence of computerized program trading. "The only thing you don't have," he said, "is the `portfolio insurance' phenomenon overlaid on the rest."

Most institutional investors have abandoned the portfolio insurance hedging technique, which is widely thought to have worsened the 1987 crash. Not really insurance, this tactic was designed to soften the blow of declining stock prices and generate an offsetting profit by selling waves of S&P futures contracts. In its severest test, the $60 billion of portfolio insurance in effect in the 1987 crash didn't work, as stock buyers disappeared and stock and futures prices became disconnected.

Even without portfolio insurance, market conditions were grim Friday, money managers said. Neil Weisman, whose New York-based Chilmark Capital Partners had converted 85% of its $220 million investment pool to cash in recent months, said he was besieged by Wall Street firms Friday asking him to take stock off their hands.

"We got calls from big block houses asking us if we want to make bids on anything," said Mr. Weisman, who, happy with his returns on investments chalked up earlier, declined the offers.

Mr. Weisman predicts stocks will appear to stabilize in the next few days before declining again, trapping more investors. "I think it will be a rigor mortis rally," he said. Meanwhile, Friday brought a reprieve for money managers whose investment styles had put them at odds with the market rally. Especially gleeful were the short sellers, who have been pounded by this year's market climb.

The shorts sell borrowed shares, hoping to profit by replacing them later at a lower price. The nation's largest short-selling operation is Feshbach Brothers, Palo Alto, Calif., which said last May that its short positions had shown losses of 10% for the year up to that point.

All that now has changed. "We're ahead for the year because of Friday," said the firm's Kurt Feshbach. "We're not making a killing, but we had a good day."

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891016-0082. FDA Turns Over Evidence @ In Generic-Drug Inquiry
10/16/89
WALL STREET JOURNAL (J) BLR DRUG MANUFACTURERS (DRG) FOOD AND DRUG ADMINISTRATION (FDA) JUSTICE DEPARTMENT (JUS) WASHINGTON

Food and Drug Administration spokesman Jeff Nesbit said the agency has turned over evidence in a criminal investigation concerning Vitarine Pharmaceuticals Inc. to the U.S. Attorney's office in Baltimore.

Neither Vitarine nor any of the Springfield Gardens, N.Y., company's officials or employees have been charged with any crimes. Vitarine won approval to market a version of a blood pressure medicine but acknowledged that it substituted a SmithKline Beecham PLC product as its own in tests.

Mr. Nesbit also said the FDA has asked Bolar Pharmaceutical Co. to recall at the retail level its urinary tract antibiotic. But so far the company hasn't complied with that request, the spokesman said.

Bolar, the subject of a criminal investigation by the FDA and the Inspector General's office of the Health and Human Services Department, only agreed to recall two strengths of its version of Macrodantin "as far down as direct customers, mostly wholesalers," Mr. Nesbit said.

Bolar, of Copiague, N.Y., earlier began a voluntary recall of both its 100 milligram and 50 milligram versions of the drug.

The FDA has said it presented evidence it uncovered to the company indicating that Bolar substituted the brand-name product for its own to gain government approval to sell generic versions of Macrodantin. Bolar has denied that it switched the brand-name product for its own in such testing.

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891016-0080. International: @ ASKO Plans to Challenge @ Dutch Takeover Defense @ ---- @ Special to The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) G.ASK RETAILING (RET) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AMSTERDAM

The West German retailer ASKO Deutsche Kaufhaus AG plans to challenge the legality of a widely employed anti-takeover defense of companies in the Netherlands.

The eventual court decision could become a landmark in Dutch corporate law because the lawsuit ASKO plans to file would be the first to challenge the entire principle and practice of companies issuing voting preferred shares to management-controlled trusts to dilute voting power of common stockholders.

Up to now only specific aspects of these defenses have been challenged, though unsuccessfully, ASKO's Dutch lawyers noted.

Should the courts uphold the validity of this type of defense, ASKO will then ask the court to overturn such a vote-diluting maneuver recently deployed by Koninklijke Ahold NV. ASKO says the Dutch-based international food retailer hadn't reasonable grounds to issue preferred stock to a friendly trust and thus dilute the worth and voting power of ASKO and other shareholders.

Speaking through its Dutch lawyers, ASKO also disclosed it holds a 15% stake in Ahold. It was previously thought ASKO held a 13.6% stake that was accumulated since July.

A spokesman for Ahold said his company is confident of its own position and the propriety of the preferred-share issue. He termed ASKO's legal actions as "unproductive" to international cooperation among European retailers.

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891016-0079. Politics & Policy: @ Stock Market's Plunge Leads to Finger-Pointing @ In Washington, But Isn't Likely to Spark Action @ ---- @ By Alan Murray and John E. Yang @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) CONGRESS (CNG) EXECUTIVE (EXE) FEDERAL GOVERNMENT (FDL) WASHINGTON

Chase Manhattan Bank Chairman Willard Butcher is a conservative banker and a loyal Republican, but on Friday morning he had few kind words for President Bush's economic policy-making.

"There are some very significant issues out there, such as the fiscal deficit, the trade deficit, our relations with Japan, that have to be the subject of major initiatives," he said in an interview. "I'd like to see that initiative, and I haven't. There isn't a big shot, an agenda."

A few hours later, the stock market dropped 190 points.

Politicians tried to finger each other for the blame, although many analysts doubt that Washington was singly responsible for Wall Street's woes. But Mr. Butcher's comments make one thing clear: Some on Wall Street wonder if anyone is in charge of economic policy.

Consider this:

-- By 11:59 p.m. tonight, President Bush must order $16 billion of automatic, across-the-board cuts in government spending to comply with the Gramm-Rudman budget law. The cuts are necessary because Congress and the administration have failed to reach agreement on a deficit-cutting bill. "We simply don't have strong leadership to try to reduce the deficit and make tough choices," House Budget Committee Chairman Leon Panetta (D., Calif.) said yesterday on NBC News's "Meet the Press."

-- For the last two weeks, the Bush administration and the Federal Reserve have been engaged in a semi-public battle over international economic policy. The administration has been trying to push the dollar lower; the Fed has been resisting. "One of the things that continues to worry me is this monetary warfare between the Treasury Department and the Federal Reserve Board," said Lawrence Kudlow, a Bear, Stearns & Co. economist, on ABC's "This Week."

-- The administration has sent out confusing signals about its response to a recent spate of airline takeovers.

Last month, Transportation Secretary Sam Skinner forced Northwest Airlines to reduce a stake held by KLM Royal Dutch Airlines. But he has since run into opposition from the Treasury and the White House over that decision. And he has kept mum on how his decision might affect a bid for United Airlines, which includes a big stake by British Airways PLC. Some analysts say uncertainty about Washington's anti-takeover policy was one reason that financing for the United Airlines takeover fell through -- the event that triggered the market drop.

In many ways, the backdrop to Friday's stock decline is eerily similar to that of October 1987's 508-point crash. Then, as now, the budget debate was behind schedule and automatic spending cuts were within days of taking hold. The Treasury was locked in a battle over international economic policy, although at that time it was with West German officials rather than the Federal Reserve. And concern about official actions aimed at takeovers -- then by the tax-writing House Ways and Means Committee rather than the Transportation Department -- were making markets nervous.

The 1987 crash brought the Reagan administration and Democratic lawmakers to the table for the first budget summit, resulting in a two-year plan to reduce the deficit by more than $76 billion -- even though the deficit actually rose by nearly $12 billion during that period.

But, barring further drops in the market this week, a similar outcome doesn't seem likely this year. Lawmakers and administration officials agree that Friday's drop, by itself, isn't enough to force both sides back to the table to try to reach a deficit-reduction agreement that would be more serious and more far-reaching than last spring's gimmick-ridden plan, which still isn't fully implemented.

One of the biggest reasons that new talks aren't likely to come about is that, as everyone learned in 1987, the economy and the market can survive a one-day 508-point tumble. "Everybody thought we were looking at a repetition of 1929, that we were looking at a recession," Rep. Panetta said yesterday in an interview. "That did not happen. They learned they could survive it without much problem."

But administration officials privately agree with Mr. Panetta, who said a precipitous drop this week "is going to force the president and Congress to take a much harder look at fiscal policy."

In that case, there will be plenty of blame to go around. "There is an underlying concern on the part of the American people -- and there should be-that the administration has not gone far enough in cutting this deficit and that Congress has been unwilling to cut what the administration asked us to cut," said Senate Finance Committee Chairman Lloyd Bentsen (D., Texas).

Nevertheless, it clearly will take more than Friday's 190-point decline to overcome the bitter feelings that have developed between lawmakers and White House Budget Director Richard Darman over the capital-gains fight. Hill Democrats are particularly angry over Mr. Bush's claim that the capital-gains cut was part of April's budget accord and his insistence on combining it with the deficit-reduction legislation.

"There is no prospect of any so-called grand compromise or deal next year because the administration simply didn't live up to this year's deal," Senate Majority Leader George Mitchell (D., Maine) said yesterday on CBS News's "Face the Nation."

During last week's maneuverings on the deficit-cutting bill and the capital-gains issue, there were signs that Senate Republicans and the administration were at odds. At the very moment that Senate Republicans were negotiating a deal to exclude capital gains from the deficit-reduction legislation, White House spokesman Marlin Fitzwater told reporters that it was the president's policy to include it.

When an agreement was reached to strip capital gains from the legislation, Oregon Sen. Bob Packwood, the ranking GOP member of the tax-writing Senate Finance Committee, hailed it. Asked if the administration agreed, he curtly replied: "The adminstration will have to speak for itself."

Friday's market tumble could spur action on reconciling the House and Senate versions of the deficit-reduction measure, a process that isn't expected to begin until tomorrow at the soonest.

Senate Republicans expressed the hope that the House would follow the lead of the Senate, which on Friday agreed to drop a variety of spending measures and tax breaks that would have increased the fiscal 1990 deficit.

"The market needs a strong signal that we're serious about deficit reduction, and the best way to do that is for the House of Representatives to strip their bill" of similar provisions, Sen. Warren Rudman (R., N.H.). said yesterday.

The White House Office of Management and Budget, whose calculations determine whether the Gramm-Rudman targets are met, estimated that the House-passed deficit-reduction measure would cut the fiscal 1990 shortfall by $6.2 billion, almost half of the Congressional Budget Office's estimate of $11.0 billion. Rep. Panetta said that OMB's figure would still be enough to avoid permanent across-the-board cuts, but added: "We're getting very close to the margins here."

No one in Washington was willing to take the blame for provoking Friday's drop in the stock market. But some players were quick to seize the moment. Before the sun had set on Friday, Richard Rahn, the supply-side chief economist of the U.S. Chamber of Commerce, issued a statement attributing the drop in stock prices to the Senate decision to postpone action on capital gains. "Investors, who had been holding assets in anticipation of a more favorable time to sell, were spooked," he said.

"There have been many preposterous reasons advanced to support a capital-gains tax cut," Sen. Mitchell said during his television appearance, "but I suggest that is perhaps more than any of the others."

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891016-0078. Securities Offering Calendar
10/16/89
WALL STREET JOURNAL (J) BOND MARKET NEWS (BON) STOCK MARKET, OFFERINGS (STK) INITIAL STOCK OFFERINGS (INI) FINANCIAL, ACCOUNTING, LEASING (FIN) TREASURY DEPARTMENT (TRE)

The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report: @ U.S. TREASURY @ Today

$15.2 billion of three-month and six-month bills. @ Wednesday

Two-year notes, refinancing about $9.6 billion in maturing debt. @ Thursday

$9.75 billion of 52-week bills. @ CORPORATE @ Thursday

Connecticut Light & Power Co. -- Three million shares of $25 preferred, via competitive bidding. @ One Day This Week

B&H Crude Carriers Ltd. -- Four million common shares, via Salomon Brothers Inc.

Baldwin Technology Co. -- 2.6 million Class A shares, via Smith Barney Harris Upham & Co.

Blockbuster Entertainment Corp. -- $250 million (face amount) Liquid Yield Option Notes, via Merrill Lynch Capital Markets.

Chase Manhattan Corp. -- 14 million common shares, via Goldman, Sachs & Co.

Comcast Corp. -- $150 million convertible debentures, via Merrill Lynch.

CSS Industries -- 1.3 million common shares, via Merrill Lynch.

Eastern Utilities Associates -- 1.5 million common shares, via PaineWebber Inc.

Employee Benefit Plans Inc. -- Two million common shares, via Dean Witter Capital Markets.

Exabyte Corp. -- 2,850,000 common shares, via Goldman Sachs.

Knowledgeware Inc. -- 2.4 million common shares, via Montgomery Securities. @ Municipal @ Tuesday

Oregon -- $100 million of general obligation veterans' tax notes, Series 1989, via competitive bid. @ Wednesday

Washington, D.C. -- $200 million of 1990 general obligation tax revenue notes (Series 1990A), via competitive bid. @ Thursday

Virginia Public School Authority -- $55,730,000 of school financing bonds, 1989 Series B (1987 resolution), via competitive bid. @ One Day In The Week

Austin, Texas -- $68,230,000 of various bonds, including $32 million hotel occupancy tax revenue bonds, Series 1989A, and $36.23 million convention center revenue bonds, Series 1989B, via a Morgan Stanley & Co. group.

California Health Facilities Financing Authority -- $144.5 million of Kaiser Permanente revenue bonds, via a PaineWebber group.

Connecticut -- $100 million of general obligation capital appreciation bonds, College Savings Plan, 1989 Series B, via a Prudential-Bache Capital Funding group.

Pennsylvania Higher Education Facilities Authority -- $117 million of revenue bonds for Hahnemann University, Series 1989, via a Merrill Lynch group.

Tennessee Valley Authority -- Three billion of power bonds, via First Boston Corp.

University of Medicine And Dentistry of New Jersey -- $55 million of Series C bonds, via a Prudential-Bache group.

West Virginia Parkways, Economic Development And Tourism Authority -- $143 million of parkway revenue bonds, Series 1989, via a PaineWebber group. @ Pending

San Antonio, Texas -- $640 million of gas and electric revenue refunding bonds, via a First Boston group.

South Dakota Health & Education Facility Authority -- $51.1 million of Rapid City Regional Hospital bonds, via a Dougherty, Dawkins, Strand & Yost Inc. group.

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891016-0077. The Sell-Off in Stocks: @ Small Investors @ Uneasy but Most @ Plan to Hold On @ ---- @ A Wall Street Journal News Roundup
10/16/89
WALL STREET JOURNAL (J) UAL STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AIRLINES (AIR)

Small investors matched their big institutional brethren in anxiety over the weekend, but most seemed to be taking a philosophical approach and said they were resigned to riding out the latest storm in the stock market.

"I'm not losing faith in the market," said Boston lawyer Christopher Sullivan as he watched the market plunge on a big screen in front of a brokerage firm. But he's not so sure about everyone else.

"I think on Monday the small (investors) are going to panic and sell," predicted Mr. Sullivan, whose investments include AMR Corp.'s American Airlines unit and several mutual funds. "And I think institutions are going to come in and buy . . . I'm going to hold on. If I sell now, I'll take a big loss."

Some evinced an optimism that had been rewarded when they didn't flee the market in 1987. "Oh, I bet it'll be up 50 points on Monday," said Lucy Crump, a 78-year-old retired housewife in Lexington, Ky. Mrs. Crump said her Ashwood Investment Club's portfolio lost about one-third of its value following the Black Monday crash, "but no one got discouraged, and we gained that back -- and more."

At the annual congress of the National Association of Investors Corp. at the Hyatt Regency hotel in Minneapolis, the scene was calm. Some 500 investors representing investor clubs from around the U.S. were attending when the market started to slide Friday. But Robert Showalter, an official of the association, said no special bulletins or emergency meetings of the investors' clubs are planned.

In fact, some of the association's members -- long-term, buy-and-hold investors -- welcomed the drop in prices. "We hope to take advantage of it," said John Snyder, a member of a Los Angeles investors' club. He has four stocks in mind to buy if the prices drop to the level he wants. Not everyone is reacting so calmly, however, and many wonder about the long-term implications of what is widely viewed as the cause of Friday's slide, reluctance by banks to provide financing for a buy-out of UAL Corp., parent of United Airlines.

Marc Perkins, a Tampa, Fla., investment banker, said the market drop is one of "a tremendous number of signs that the leveraged take-out era is ending. There's no question that there's a general distaste for leverage among lenders." Mr. Perkins believes, however, that the market could be stabilized if California investor Marvin Davis steps back in to the United bidding with an offer of $275 a share.

Sara Albert, a 34-year-old Dallas law student, says she's generally skittish about the stock market and the takeover activity that seems to fuel it. "I have this feeling that it's built on sand," she says, that the market rises "but there's no foundation to it." She and her husband pulled most of their investments out of the market after the 1987 crash, although she still owns some Texaco stock. Partly because of concern about the economy and partly because she recently quit her job as a legal assistant to go to school, "I think at this point we want to be a lot more liquid."

Others wonder how many more of these shocks the small investor can stand. "We all assumed October '87 was a one-time shot," said San Francisco attorney David Greenberg. "We told the little guy it could only happen once in a lifetime, come on back. Now it's happening again." Mr. Greenberg got out just before the 1987 crash and, to his regret, never went back even as the market soared. This time he's ready to buy in "when the panic wears off." Still, he adds: "We can't have this kind of thing happen very often. When the little guy gets frightened, the big guys hurt badly. Merrill Lynch can't survive without the little guy."

Small investors have tiptoed back into the market following Black Monday, but mostly through mutual funds. Discount brokerage customers "have been in the market somewhat but not whole hog like they were two years ago," says Leslie Quick Jr., chairman of the Quick & Reilly discount brokerage firm. Hugo Quackenbush, senior vice president at Charles Scwhab Corp., says Schwab customers "have been neutral to cautious recently about stocks." Individual investors are still angry about program trading, Mr. Quackenbush says.

Avner Arbel, a Cornell University finance professor, says government regulators will have to more closely control program trading to "win back the confidence of the small investor."

But it's not only the stock market that has some small investors worried. Alan Helfman, general sales manager of a Chrysler dealership in Houston, said he and his mother have some joint stock investments, but the overall economy is his chief worry.

"These high rollers took a big bath today," he said in his showroom, which is within a few miles of the multi-million dollar homes of some of Houston's richest citizens. "And I can tell you that a high roller isn't going to come in tomorrow and buy a Chrysler TC by Maserati." And, finally, there were the gloaters. "I got out in 1987. Everything," said Pascal Antori, an Akron, Ohio, plumbing contractor who was visiting Chicago and stopped by Fidelity Investments' LaSalle Street office. "I just stopped by to see how much I would have lost."

Would Mr. Antori ever get back in? "Are you kidding] When it comes to money: Once bitten, 2,000 times shy."

--- @ Largest Drops of DJIA @ DATE CLOSE DECLINE % CHG. @ Oct. 19, 1987 1738.74 508.00 -22.61% @ Oct. 13, 1989 2569.26 190.58 - 6.91 @ Oct. 26, 1987 1793.98 156.83 - 8.04 @ Jan. 8, 1988 1911.31 140.58 - 6.85 @ Oct. 16, 1987 2246.74 108.35 - 4.60 @ Apr. 14, 1988 2005.64 101.46 - 4.82 @ Oct. 14, 1987 2412.70 95.45 - 3.81 @ Oct. 6, 1987 2548.63 91.55 - 3.47 @ Sept. 11, 1986 1792.89 86.61 - 4.61 @ Oct. 22, 1987 1950.43 77.42 - 3.82 @ Nov. 30, 1987 1833.55 76.93 - 4.03 @ Dec. 3, 1987 1776.53 72.44 - 3.92

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891016-0076. Technology: @ Small PCs Swarming to Market @ ---- @ By Andy Zipser @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) CPQ ZE F.GRB COMPUTERS AND INFORMATION TECHNOLOGY (CPR)

The crowded field for notebook-sized computers is about to become a lot more crowded.

Compaq Computer Corp.'s long-awaited entry today into the notebook field is expected to put immediate heat on others in the market, especially Zenith Electronics Corp., the current market leader, and on a swarm of promising start-ups.

Compaq's series of notebooks extends a trend toward downsizing in the personal computer market. One manufacturer already has produced a clipboard-sized computer called a notepad, and two others have introduced even smaller "palmtops."

But those machines are still considered novelties, with keyboards only a munchkin could love and screens to match. Compaq's notebooks, by contrast, may be the first in their weight class not to skimp on features found in much bigger machines. Analysts say they're faster and carry more memory than anything else of their size on the market -- and they're priced aggressively at $2,400 to $5,000. All of this comes in a machine that weighs only six pounds and fits comfortably into most briefcases.

In recent months, Compaq's competition, including Zenith, Toshiba Corp., Tandy Corp. and NEC Corp. all have introduced portables that weigh approximately the same and that are called notebooks -- perhaps misleadingly. One analyst, noting that most such machines are about two inches thick, takes exception to the name. "This isn't quite a notebook -- I call it a phonebook," he says.

That can't be said of the $2,400 notepad computer introduced a few weeks ago by GRiD Systems Corp., a unit of Tandy. Instead of a keyboard, it features a writing surface, an electronic pen and the ability to "read" block printing. At 4 1/2 pounds, it may be too ambitiously named, but it nevertheless opens up the kind of marketing possibilities that make analysts froth.

Palmtops aren't far behind. Atari Corp.'s Portfolio, introduced in Europe two months ago and in the U.S. in early September, weighs less than a pound, costs a mere $400 and runs on three AA batteries, yet has the power to run some spreadsheets and word processing programs. Some critics, however, say its ability to run commonplace programs is restricted by a limited memory.

Poquet Computer Corp., meanwhile, has introduced a much more sophisticated palmtop that can run Lotus 1-2-3 and other sophisticated software programs, but costs five times as much.

At stake is what Mike Swavely, Compaq's president of North America operations, calls "the Holy Grail of the computer industry" -- the search for "a real computer in a package so small you can take it everywhere." The market is so new, nobody knows yet how big it can be. "I've had a lot of people trying to sell me services to find out how big it is," says Tom Humphries, director of marketing for GRiD. "Whether it's $5 billion or $3.5 billion, it doesn't matter. It's huge."

Consider the growth of portables, which now comprise 12% of all personal computer sales. Laptops -- generally anything under 15 pounds -- have become the fastest-growing personal computer segment, with sales doubling this year.

Responding to that demand, however, has led to a variety of compromises. Making computers smaller often means sacrificing memory. It also has precluded use of the faster, more powerful microprocessors found in increasing numbers of desktop machines. Size and weight considerations also have limited screen displays.

The competitive sniping can get pretty petty at times. A Poquet spokesman, for example, criticizes the Atari Portfolio because it requires three batteries while the Poquet needs only two. Both palmtops are dismissed by notebook makers, who argue that they're too small -- a problem Poquet also encountered in focus groups, admits Gerry Purdy, director of marketing. Poquet, trying to avoid the "gadget" label, responded with the tag line, "The Poquet PC -- a Very Big Computer."

Despite the sniping, few question the inevitability of the move to small machines that don't make compromises. Toward that end, experts say the real battle will take place between center-stage players like Toshiba, Zenith and now Compaq.

Compaq's new machines are considered a direct threat to start-up firms like Dynabook Inc., which introduced in June a computer that, like Compaq's, uses an Intel 286 microprocessor and has a hard disk drive. But the Dynabook product is twice as heavy and costs more than Compaq's.

Compaq's announcement also spells trouble for Zenith, which last year had 28% of the U.S. laptop market but recently agreed to sell its computer business to Cie. des Machines Bull, the French government-owned computer maker. Zenith holders will vote in December on the proposed $635 million sale, a price that could slip because it is pegged to Zenith's share and sales.

Compaq is already taking aim at Zenith's market share. Rod Canion, Compaq's president and chief executive officer, notes pointedly that Zenith's $2,000 MinisPort uses an "unconventional" two-inch floppy disk, whereas Compaq's new machines use the more common 3 1/2-inch disk. John P. Frank, president of Zenith Data Systems, simply shrugs off such criticism, noting that 3 1/2-inch floppies were also "unconventional" when they first replaced five-inch disks. "We don't look at it as not being a standard, we look at it as a new standard," he argues.

Analysts don't see it that way. "I can't imagine that you'll talk to anyone who won't tell you this is dynamite for Compaq and a stopper for everyone else," says Gene Talsky, president of Professional Marketing Management Inc. Adds Bill Lempesis, senior industry analyst for DataQuest, a high-technology market research firm: "We basically think that these are very hot products. The problem Compaq is going to have is that they won't be able to make enough of them."

Compaq's machines include the 3 1/2-inch floppy disk drive, a backlit screen that is only 1/4-inch thick and an internal expansion slot for a modem -- in other words, almost all the capabilities of a typical office machine.

Others undoubtedly will follow, but most analysts believe Compaq has at least a six-month lead on the competition. Toshiba's line of portables, for example, features the T-1000, which is in the same weight class but is much slower and has less memory, and the T-1600, which also uses a 286 microprocessor, but which weighs almost twice as much and is three times the size. A third model, marketed in Japan, may hit the U.S. by the end of the first quarter of 1990, but by then, analysts say, Compaq will have established itself as one of three major players.

What about Big Blue? International Business Machines Corp., analysts say, has been burned twice in trying to enter the laptop market and shows no signs of trying to get into notebooks anytime soon.

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891016-0075. Honeywell, IBM Get Contracts
10/16/89
WALL STREET JOURNAL (J) HON IBM BA GD GQ TXT AEROSPACE (ARO) DEFENSE DEPARTMENT (DEF) WASHINGTON

Honeywell Inc. and International Business Machines Corp. received Air Force contracts to develop integrated circuits for use in space.

Honeywell's contract totaled $69.7 million, and IBM's $68.8 million.

Boeing Co. received a $46.7 million Air Force contract for developing cable systems for the Minuteman Missile.

General Dynamics Corp. received a $29 million Air Force contract for electronic-warfare training sets.

Grumman Corp. received an $18.1 million Navy contract to upgrade aircraft electronics.

Avco Corp. received an $11.8 million Army contract for helicopter engines.

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891016-0074. Spanish Prices Rise
10/16/89
WALL STREET JOURNAL (J) EUROP MADRID

Sharp increases in the price of fresh produce caused Spain's September consumer price index to shoot up 1.1% from the previous month, pushing the annual rate of inflation to 6.8%, the National Institute of Statistics said Friday.

The monthly increase is the highest recorded in the past four years.

The index, which registered 156.8 at the end of September, has a base of 100 set in 1983 and isn't seasonally adjusted.

Prices have risen 5.9% in the first nine months of the year, outstripping both the initial 3% inflation goal set by the government of Socialist Prime Minister Felipe Gonzalez and the second, revised goal of 5.8%.

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891016-0073. Japanese Wholesale Prices
10/16/89
WALL STREET JOURNAL (J) JAPAN TOKYO

Japan's wholesale prices in September rose 3.3% from a year earlier and were up 0.4% from the previous month, the Bank of Japan announced Friday.

The wholesale price index stood at 90.1, compared with a 1985 base of 100.

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891016-0072. The Sell-Off in Stocks: @ There Were Still Diamonds @ In the Rough of the Tumble
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) NEW YORK

Plunge? What plunge?

Twenty-four New York Stock Exchange issues hit 52-week highs during Friday's trading, despite the Dow Jones Industrial Average's 190.58-point plunge.

Stocks of utilities held up relatively better than other market sectors during the sell-off. And among the issues hitting new highs were Detroit Edison Co. and Niagara Mohawk Power Corp. Other major issues hitting highs included American Telephone & Telegraph Co., Westinghouse Electric Corp., Exxon Corp. and Cigna Corp., the big insurer.

Of course, many more issues -- 93 -- hit new lows. These included International Business Machines Corp., which during Friday's session traded below $100 a share for the first time since June 1984. IBM closed at $102, down $5.625. Other new lows included Navistar International Corp., Union Carbide Corp. and Bethlehem Steel Corp., all of which are included in the industrial average.

Meanwhile, two initial public offerings braved the cascading market in their maiden day of national over-the-counter trading Friday. Shares of Rally's Inc., an operator of fast-food restaurants, closed at $17 each, up from its $15 offering price and shares of Employee Benefit Plans Inc., a health-care consultant, closed at $14.125, up from its $12 offering price.

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891016-0071. Ford Acquires 5% Stake @ In Jaguar PLC's Shares
10/16/89
WALL STREET JOURNAL (J) F JAGRY TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AUTOMOBILES (AUT) FEDERAL TRADE COMMISSION (FTC) DEARBORN, Mich.

Ford Motor Co. said it acquired 5% of the shares in Jaguar PLC. Jaguar, the London Stock Exchange and the U.S. Securities and Exchange Commission are being notified of the transactions, the company said.

The U.S. Federal Trade Commission advised Ford last week that it wouldn't raise any objection to the acquisition of as much as 15% of Jaguar shares.

The No. 2 auto maker disclosed last month that it wants to buy as much as 15% of the British luxury-car maker, the maximum allowed under current United Kingdom government restrictions. General Motors Corp. said it had discussed the possibility of a joint venture with Jaguar before Ford began buying shares. GM said it still is talking with Jaguar about acquiring a minority interest.

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891016-0070. The Sell-Off in Stocks: @ Brokerage Firms Expect @ To Weather Margin Calls
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) NEW YORK

Investors who bought stock with borrowed money -- that is, "on margin" -- may be more worried than most following Friday's market drop.

That's because their brokers can require them to sell some shares or put up more cash to enhance the collateral backing their loans. In October 1987, these margin calls were thought to have contributed to the downward spiral of the stock market.

Typically, a margin call occurs when the price of a stock falls below 75% of its original value. If the investor doesn't put up the extra cash to satisfy the call, the brokerage firm may begin liquidating the securities.

But some big brokerage firms said they don't expect major problems as a result of margin calls. Margin calls since Friday "have been higher than usual, but reasonable," a spokesman for Shearson Lehman Hutton Inc. said.

Merrill Lynch & Co. officials "don't expect {margin calls} to be as big a factor as in 1987" because fewer individual investors are buying stock on margin, a spokesman said.

Hugo Quackenbush, senior vice president at Charles Schwab Corp., the San Francisco-based discount brokerage firm, said he didn't expect any immediate problems with margin calls for Schwab customers. He said Schwab had increased margin requirements "so customers have more of a cushion." He added: "We learned a lesson in 1987 about volatility."

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891016-0069. Avis to End Link @ To Frequent-Flier @ Plans of 3 Airlines @ ---- @ By Christopher Winans @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) NWA PN MDW AMR DAL U FINANCIAL, ACCOUNTING, LEASING (FIN) AIRLINES (AIR)

Avis Inc., following rival Hertz Corp.'s lead, said it is backing out of frequent-flier programs with three airlines.

The Garden City, N.Y., car-rental company said it won't renew contracts with NWA Inc.'s Northwest Airlines unit, Pan Am Corp.'s Pan American World Airways unit and Midway Airlines at the end of this year. But it remains involved in programs with AMR Corp.'s American Airlines unit and Delta Air Lines.

Industry estimates put Avis's annual cost of all five programs at between $8 million and $14 million. A spokesman for Avis wouldn't specify the costs but said the three airlines being dropped account for "far less than half" of the total.

Budget Rent a Car Corp., of Chicago, and National Car Rental Systems Inc., of Minneapolis, both said they had no plans to follow suit. In fact, Budget indicated it saw some benefit to staying involved in these programs, in which renters earn frequent-flier miles and fliers can get car-rental discounts.

"I cannot see how this news by Hertz and Avis cannot benefit Budget's programs," said Bob Wilson, Budget's vice president, marketing planning. Northwest and Midway are two of the five airlines with which Budget has agreements.

National also participates in the Northwest frequent-flier program along with four other airlines, including Delta and USAir Group Inc.'s USAir unit.

A month ago, Hertz, of Park Ridge, N.J., said that it would drop its marketing agreements at year end with Delta, America West and Texas Air Corp.'s Continental Airlines and Eastern Airlines, and that pacts with American Airlines, UAL Inc's United Airlines and USAir also would be ended. . . sometime after Dec. 31. At the time, Hertz said its annual fees to those airlines amounted to $20 million and that the value of redeemed awards topped $15 million. Analysts and competitors, however, doubt the numbers were that high. Budget said its frequent-flier costs are "substantially below" Avis's level.

Robert D. Cardillo, Avis vice president of marketing, said, "The proliferation and costs attached to {frequent-flier programs} have significantly diminished their value."

This year has been difficult for both Hertz and Avis, said Charles Finnie, car-rental industry analyst at Alex. Brown & Sons. "They've been looking to get their costs down, and this is a fairly sensible way to do it," he said.

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891016-0067. Marketing & Media: @ CBS Inc. Plans to Reduce @ Sajak Show to One Hour
10/16/89
WALL STREET JOURNAL (J) CBS MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) NEW YORK

CBS Inc. is cutting "The Pat Sajak Show" down to one hour from its current 90 minutes.

CBS insisted the move wasn't a setback for the program, which is the network's first entry into the late-night talk show format since 1972.

"I have every intention of making this the best possible show and having it run one hour is the best way to it," said Rod Perth, who was named vice president of late night entertainment in August. "This will raise the energy level of the show."

CBS will continue to program action-adventure shows to follow the Sajak hour. But CBS News will extend its four-hour "Nightwatch" by 30 minutes and begin at 1:30 a.m.

The show, despite a promising start, has slipped badly in the weekly ratings as compiled by A.C. Nielsen Co., finishing far below "Tonight" on NBC, a unit of General Electric Co., and "Nightline" on ABC-TV, a unit of Capital Cities/ABC Inc. Further fractioning the late-night audience is the addition of the "Arsenio Hall Show," syndicated by Paramount Communications Inc.

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891016-0066. Tandem Computers Expects to Post Boost @ In Revenue, Profit for Fiscal 4th Quarter @ ---- @ By G. Pascal Zachary @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) TDM COMPUTERS AND INFORMATION TECHNOLOGY (CPR)

Tandem Computers Inc., preparing to fight with International Business Machines Corp. for a piece of the mainframe business, said it expects to post higher revenue and earnings for its fiscal fourth quarter ended Sept. 30.

Tandem said it expects to report revenue of about $450 million and earnings of 35 cents to 40 cents a share. The results, which are in line with analysts' estimates, reflect "a continued improvement in our U.S. business," said James Treybig, Tandem's chief executive officer.

In the year-earlier period, Tandem reported net income of $30.1 million, or 31 cents a share, on revenue of $383.9 million.

Tandem expects to report the full results for the quarter next week. Analysts have predicted that the Cupertino, Calif., company will report revenue of $430 million to $460 million and earnings of 35 cents to 40 cents a share.

Commenting on the results for the quarter, Mr. Treybig said the strength of the company's domestic business came as "a surprise" to him, noting that sales "in every region of the U.S. exceeded our plan."

The company's U.S. performance was helped by "a record quarter for new customers," he said.

Tandem makes "fault-tolerant" computers -- machines with built-in backup systems -- that run stock exchanges, networks of automatic tellers and other complex computer systems. Tomorrow the company is scheduled to announce its most powerful computer ever, which for the first time will bring it into direct competition with makers of mainframe computers.

Tandem's new high-end computer is called Cyclone. Prices for the machine, which can come in various configurations, are $2 million to $10 million.

Analysts expect the new computer to wrest a hefty slice of business away from IBM, the longtime leader in mainframes.

"We believe they could siphon perhaps two to three billion dollars from IBM" over the next few years, said George Weiss, an analyst at the Gartner group. That will spur Tandem's growth. "I'd be disappointed if the company grew by less than 20% next year," said John Levinson, an analyst at Goldman, Sachs & Co.

IBM is expected to respond to Tandem's Cyclone by discounting its own mainframes, which analysts say are roughly three times the price of a comparable system from Tandem. "Obviously IBM can give bigger discounts to users immediately," said Mr. Weiss.

But Mr. Treybig questions whether that will be enough to stop Tandem's first mainframe from taking on some of the functions that large organizations previously sought from Big Blue's machines. "The answer isn't price reductions, but new systems," he said.

Nevertheless, Tandem faces a variety of challenges, the biggest being that customers generally view the company's computers as complementary to IBM's mainframes. Even Mr. Treybig is reluctant to abandon this notion, insisting that Tandem's new machines aren't replacements for IBM's mainframes.

"We're after a little bigger niche," he said.

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891016-0065. The Outlook: @ Will Market's Plunge @ Benefit the Economy? @ ---- @ By David Wessel
10/16/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) STOCK INDEXES (NDX) FINANCIAL, ACCOUNTING, LEASING (FIN) BANKS (BNK) FEDERAL RESERVE BOARD (FED) WASHINGTON

Don't jump yet. The stock market's swoon may turn out to be good news for the economy.

In one wild hour of trading, the market managed to accomplish what the Bush administration has been trying to do, unsuccessfully, for weeks. It is forcing the Federal Reserve to ease its grip on credit and it took the wind out of a previously irrepressible dollar. The resulting decline in interest rates and the value of the dollar could reinvigorate American business -- indeed, the entire economy.

This may sound strangely optimistic. After all, until a few years ago, the stock market was viewed as a barometer of the national economy. When it went down, by all tradition, the economy followed.

That has changed, partly because the two years following the worst stock-market plunge in history have been reasonably comfortable. The 1987 crash was "a false alarm however you view it," says University of Chicago economist Victor Zarnowitz.

The market seems increasingly disconnected from the rest of the nation. Its spasms can't be traced to fundamental business conditions, nor do they appear to presage major shifts in the economy. "The market today has a life of its own," John Akers, chairman of International Business Machines Corp., said Saturday. "There's nothing rational about this kind of action."

Of course, the health of the economy will be threatened if the market continues to dive this week. Sharply falling stock prices do reduce consumer wealth, damage business confidence and discourage the foreign investors upon whom the U.S. now relies for financial sustenance. The financial-services industry was battered by the 1987 crash. What's more, although the stock market is far less overvalued today than two years ago, the U.S. economy is weaker. Growth is slower. Profits are softer. Debt burdens are heavier.

But if the stock market doesn't continue to plummet, the beneficial effects of lower interest rates and a lower dollar may well dominate. The Fed, which until Friday had been resisting moves to ease credit, is now poised to pour money into the economy if needed to soothe the markets. Fed officials may protest that this doesn't necessarily mean a fundamental change in their interest-rate policies. But the experience of the 1987 crash suggests the Fed is likely to bring down short-term interest rates in its effort to calm markets.

Anticipating the Fed's move, money traders lowered a key interest rate known as the Federal Funds rate to 8.625% late Friday, down from 8.820% the day before. Tiny movements in the rate, which is what banks charge each other for overnight loans, are usually among the few visible tracks that the Fed leaves on the monetary markets.

The dollar also began to decline Friday as the stock market's plunge caused some investors to reassess their desire to invest in the U.S. Treasury officials have been arguing for months that the dollar's strength was out of whack with economic fundamentals, threatening to extinguish the export boom that has sustained manufacturers for several years. The market drop has now apparently convinced foreign investors that the Treasury was right about the overpriced dollar.

A modest drop in the dollar -- only a modest one, mind you -- would be welcomed by the U.S. That wasn't the case in 1987, when the dollar was so weak that some economists and government officials seriously worried that it might collapse, producing panic among foreign investors and diminishing the flow of foreign capital to the U.S.

Another big difference between 1987 and 1989 isn't so comforting. In the third quarter of 1987, the economy spurted at an inflation-adjusted annual rate of 5.3%. The consensus among economists is that it grew a much more sluggish 2.3% in the third quarter of 1989, which ended two weeks ago.

The plunge in stock prices "is happening at a time when the economy has already slowed down," says economist Lawrence Chimerine of WEFA Group, a Bala Cynwyd, Pa., forecasting company. "A lot of pent-up demand is gone."

Consumer spending did drop in the months following Black Monday 1987 -- "but only slightly and for a short period of time," recalls Mr. Zarnowitz, a longtime student of business cycles. "That was offset by strength elsewhere. {The effects} were much less severe and less prolonged than some had feared or expected." Today, he frets, exports and business investment spending may be insufficient to pick up the slack if stock prices sink this week and if consumers retrench in reaction.

What's more, the corporate borrowing binge hasn't abated in the past two years. "We've had two more years of significant accumulation of debt . . . just at the time when earnings are being squeezed," Mr. Chimerine notes. The more a company relies on borrowed money, the greater its sensitivity to an economic slowdown. A company with a strong balance sheet can withstand an unanticipated storm; a highly leveraged company may end up in bankruptcy court.

The Fed, of course, knows that very well -- hence its readiness to pump credit into the economy this morning. But, in the process, the Fed risks reigniting inflation. Even before Friday's events, Harvard University economist Benjamin Friedman was arguing that the Fed won't be able to live up to its tough words on eliminating inflation because of its responsibility to protect fragile financial markets, banks and highly leveraged corporations. The biggest threat on the economic horizon right now isn't recession, he reasons; it's an outbreak of uncontrolled inflation.

In the end, the 1987 collapse suggested, the economy doesn't move in lockstep with stock prices. The economy does, however, depend on the confidence of businesses, consumers and foreign investors. A panic on Wall Street doesn't exactly inspire confidence.

Surveys suggested that consumer confidence was high before Friday. A 190-point drop isn't likely to make much of a dent; multiply that a few times over, though, and it will. If the reactions of executives gathered Saturday at Hot Springs, Va., for the Business Council meetings are typical, business leaders weren't overly rattled by Friday's decline. And if foreign investors become a tad more cautious -- well, the dollar's recent strength suggests that the U.S. can stand it.

On the bottom line, the most comforting fact for the economic outlook is that we've been through this before. Two years ago, about the only point of comparison was the 1929 crash and the subsequent Depression. The doomsayers had a receptive audience. The prosperity that followed Black Monday permits a more optimistic view today.

At the very least, the establishment here is taking comfort from the nation's success in handling the last go-around. As Sen. Lloyd Bentsen (D., Texas) observed yesterday, "The Fed avoided a meltdown last time. They are more sophisticated this time."

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891016-0064. Chemical Firms @ Face Profit Dip @ For 3rd Quarter @ --- @ Falling Commodities Prices @ Are Expected to Rein In @ String of Earnings Gains @ ---- @ By Richard Koenig @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) DOW DD MTC CUE UK HMT MNT CHEMICALS, PLASTICS (CHM)

The chemical industry is expected to report that profits eroded in the third quarter because of skidding prices in the commodity end of the business.

Producers of commodity chemicals, the basic chemicals produced in huge volumes for other manufacturers, have seen sharp inventory cutting by buyers. Once the chief beneficiaries of the industry's now fading boom, these producers also will be reporting against exceptionally strong performances in the 1988 third quarter.

"For some of these companies, this will be the first quarter with year-to-year negative comparisons," says Leonard Bogner, a chemical industry analyst at Prudential Bache Research. "This could be the first of five or six down quarters."

Perhaps most prominent, Dow Chemical Co., which as of midyear had racked up eight consecutive record quarters, is expected to report that profit decreased in the latest quarter from a year earlier, if only by a shade. Though Dow has aggressively diversified into specialty chemicals and pharmaceuticals, the company still has a big stake in polyethylene, which is used in packaging and housewares.

Analysts' third-quarter estimates for the Midland, Mich., company are between $3.20 a share and $3.30 a share, compared with $3.36 a year ago, when profit was $632 million on sales of $4.15 billion. A Dow spokeswoman declined to comment on the estimates.

At the investment firm of Smith Barney, Harris Upham & Co., the commodity-chemical segment is seen pulling down overall profit for 20 companies representative of the whole industry by 8% to 10%. "You will find the commodities off more than the others and the diversified companies about even or slightly better," says James Wilbur, a Smith Barney analyst.

First Boston Corp. projects that 10 of the 15 companies it follows will report lower profit. Most of the 10 have big commodity-chemical operations.

Still, some industry giants are expected to report continuing gains, largely because so much of their business is outside commodity chemicals. Du Pont Co. is thought to have had steady profit growth in white pigments, fibers and polymers. Moreover, the Wilmington, Del., company is helped when prices weaken on the commodity chemicals it buys for its own production needs, such as ethylene.

Analysts are divided over whether Du Pont will report much of a gain in the latest quarter from its Conoco Inc. oil company. The estimates for Du Pont range from $2.25 to $2.45 a share. In the 1988 third quarter, the company earned $461 million, or $1.91 a share, on sales of $7.99 billion. Du Pont declined to comment.

Monsanto Co., too, is expected to continue reporting higher profit, even though its sales of crop chemicals were hurt in the latest quarter by drought in northern Europe and the western U.S. The St. Louis-based company is expected to report again that losses in its G.D. Searle & Co. pharmaceutical business are narrowing. Searle continued to operate in the red through the first half of the year, but Monsanto has said it expects Searle to post a profit for all of 1989.

Most estimates for Monsanto run between $1.70 and $2 a share. A year ago, the company posted third-quarter profit of $116 million, or $1.67 a share, on sales of $2.02 billion. Monsanto declined to comment.

But the commodity-chemical producers are caught on the downside of a pricing cycle. By some accounts on Wall Street and in the industry, the inventory reductions are near an end, which may presage firmer demand. But doubters say growing production capacity could keep pressure on prices into the early 1990s.

In the latest quarter, at least, profit is expected to fall sharply. For Himont Inc., "how far down it is, we don't know," says Leslie Ravitz at Salomon Brothers. The projections are in the neighborhood of 50 cents a share to 75 cents, compared with a restated $1.65 a share a year earlier, when profit was $107.8 million on sales of $435.5 million.

Himont faces lower prices for its mainstay product, polypropylene, while it goes forward with a heavy capital investment program to bolster its raw material supply and develop new uses for polypropylene, whose markets include the packaging and automobile industries. The company, based in Wilmington, Del., is 81%-owned by Montedison S.p.A., Milan, which has an offer outstanding for the Himont shares it doesn't already own.

At Quantum Chemical Corp., New York, the trouble is lower prices for polyethylene, higher debt costs and the idling of an important plant due to an explosion. Some analysts hedge their estimates for Quantum, because it isn't known when the company will book certain one-time charges. But the estimates range from break-even to 35 cents a share. In the 1988 third quarter, Quantum earned $99.8 million, or $3.92 a share, on sales of $724.4 million.

Another big polyethylene producer, Union Carbide Corp., is expected to post profit of between $1 a share and $1.25, compared with $1.56 a share a year earlier, when the company earned $213 million on sales of $2.11 billion.

Himont, Quantum and Union Carbide all declined to comment.

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891016-0063. New Securities Issues
10/16/89
WALL STREET JOURNAL (J) DOW CNT FRE BOND MARKET NEWS (BON) CONSTRUCTION, MATERIALS (CON) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) BANKS (BNK) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) FINANCIAL, ACCOUNTING, LEASING (FIN)

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: @ CORPORATES

Dow Chemical Co. -- $150 million of 8.55% senior notes due Oct. 15, 2009, priced at par. The issue, which is puttable back to the company at par on Oct. 15, 1999, was priced at a spread of 50 basis points above the Treasury's 10-year note. Rated single-A-1 by Moody's Investors Service Inc. and single-A by Standard & Poor's Corp., the non-callable issue will be sold through underwriters led by Merrill Lynch Capital Markets.

Centel Capital Corp. -- $150 million of 9% debentures due Oct. 15, 2019, priced at 99.943 to yield 9.008%. The non-callable issue, which can be put back to the company in 1999, was priced at 99 basis points above the Treasury's 10-year note. Rated Baa-1 by Moody's and triple-B-plus by S&P, the issue will be sold through underwriters led by Morgan Stanley & Co. @ MORTGAGES

Federal Home Loan Mortgage Corp. -- $500 million of Remic mortgage securities offered in 13 classes by Prudential-Bache Securities Inc. The offering, Series 102, backed by Freddie Mac 8 1/2% securities with a weighted average remaining term to maturity of 28.4 years, was priced before the market's afternoon surge. Among classes for which details were available, yields ranged from 8.78%, or 75 basis points over two-year Treasury securities, to 10.05%, or 200 basis points over 10-year Treasurys.

Federal Home Loan Mortgage Corp. -- $300 million of Remic mortgage securities offered by Citicorp Securities Markets Inc. The offering, Series 101, is backed by Freddie Mac 9 1/2% securities. Pricing details weren't immediately available.

Federal Home Loan Mortgage Corp. -- $200 million of stripped mortgage securities underwritten by BT Securities Corp. The agency's first strips issue, collateralized by Freddie Mac 8% securities pooled into a single security called a Giant, will be divided into interest-only and principal-only securities. The collateral is being sold by a thrift institution. The principal-only securities will be repackaged by BT Securities into a Freddie Mac Remic, Series 103, that will have six classes. The interest-only securities will be sold separately by BT Securities. The principal-only securities pay the principal from the underlying Freddie Mac 8% securities, while the interest-only securities pay only interest. Freddie Mac said the principal-only securities were priced at 58 1/4 to yield 8.45%, assuming an average life of eight years and a prepayment of 160% of the PSA model. The interest-only securities were priced at 35 1/2 to yield 10.72%. @ EUROBONDS

There were no major Eurobond or foreign bond offerings in Europe Friday.

891016-0061.
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891016-0061. Economy -- Tracking the Economy: @ Bigger Numbers Are Expected This Week @ For Trade Deficit, September Inflation @ ---- @ By Pamela Sebastian @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) ECONOMIC AND MONETARY INDICATORS (EMI) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) NEW YORK

The economy's temperature will be taken from several vantage points this week, with readings on trade, output, housing and inflation.

The most troublesome report may be the August merchandise trade deficit due out tomorrow. The trade gap is expected to widen to about $9 billion from July's $7.6 billion, according to a survey by MMS International, a unit of McGraw-Hill Inc., New York.

Thursday's report on the September consumer price index is expected to rise, although not as sharply as the 0.9% gain reported Friday in the producer price index. That gain was being cited as a reason the stock market was down early in Friday's session, before it got started on its reckless 190-point plunge.

Economists are divided as to how much manufacturing strength they expect to see in September reports on industrial production and capacity utilization, also due tomorrow. Meanwhile, September housing starts, due Wednesday, are thought to have inched upward.

"There's a possibility of a surprise" in the trade report, said Michael Englund, director of research at MMS. A widening of the deficit, if it were combined with a stubbornly strong dollar, would exacerbate trade problems -- but the dollar weakened Friday as stocks plummeted.

In any event, Mr. Englund and many others say that the easy gains in narrowing the trade gap have already been made. "Trade is definitely going to be more politically sensitive over the next six or seven months as improvement begins to slow," he said.

Exports are thought to have risen strongly in August, but probably not enough to offset the jump in imports, economists said.

Views on manufacturing strength are split between economists who read September's low level of factory job growth as a sign of a slowdown and those who use the somewhat more comforting total employment figures in their calculations. The wide range of estimates for the industrial output number underscores the differences: The forecasts run from a drop of 0.5% to an increase of 0.4%, according to MMS.

A rebound in energy prices, which helped push up the producer price index, is expected to do the same in the consumer price report. The consensus view expects a 0.4% increase in the September CPI after a flat reading in August.

Robert H. Chandross, an economist for Lloyd's Bank in New York, is among those expecting a more moderate gain in the CPI than in prices at the producer level. "Auto prices had a big effect in the PPI, and at the CPI level they won't," he said.

Food prices are expected to be unchanged, but energy costs jumped as much as 4%, said Gary Ciminero, economist at Fleet/Norstar Financial Group. He also says he thinks "core inflation," which excludes the volatile food and energy prices, was strong last month. He expects a gain of as much as 0.5% in core inflation after a summer of far smaller increases.

Housing starts are expected to quicken a bit from August's annual pace of 1,350,000 units. Economists say an August rebound in permits for multifamily units signaled an increase in September starts, though activity remains fairly modest by historical standards.

--- @ Closely Watched Reports @ Statistics Released in the Week Ended Oct. 13 @ CHANGE @ (from prior @ TOTAL period) @ Money supply @ M1 Week ended @ Oct. 2 (in billions) $789.3 + $6.8 @ M2 Week ended @ Oct. 2 (in billions) $3,165.7 + $6.0 @ M3 Week ended @ Oct. 2 (in billions) $4,005.2 - $0.8 @ New jobless claims @ Week ended Sept. 30 333,000 + 5,000 @ Producer price index @ September 113.5% + 0.9% @ Retail sales @ September $145.21 + 0.5% @ Auto sales @ Early Oct. total @ vs. year ago 160,510 -12.6% @ Statistics to Be Released This Week @ Business inventories (Mon.) @ August @ Trade deficit (Tues.) @ August @ Industry production (Tues.) @ September @ Capacity utilization (Tues.) @ September @ Housing starts (Wed.) @ September @ Money supply (Thurs.) @ Consumer price index (Thurs.) @ September @ New jobless claims (Thurs.)

891016-0060.
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891016-0060. Pepper...and Salt
10/16/89
WALL STREET JOURNAL (J)

Two-Way Street

If the sixty-day plant-closing law's fair,

Why should we not then amend the writ

To require that all employees give

Similar notice before they quit?

-- Rollin S. Trexler.

---

Candid Comment

When research projects are curtailed due to government funding cuts, are we "caught with our grants down"?

-- C.E. Friedman.

891016-0059.
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891016-0059. LEISURE & ARTS: @ Yups in the Age of Thatcher @ ---- @ By Richard E. Rustin
10/16/89
WALL STREET JOURNAL (J) London

Assuming the stock market doesn't crash again and completely discredit yuppies and trading rooms, American television audiences in a few months may be seeing Britain's concept of both. "Capital City" is a weekly series that premiered here three weeks ago amid unprecedented hype by its producer, Thames Television.

The early episodes make you long for a rerun of the crash of 1987. Let's make that 1929, just to be sure.

According to the program's publicity prospectus, "Capital City," set at Shane Longman, a fictional mid-sized securities firm with #500 million capital, "follows the fortunes of a close-knit team of young, high-flying dealers, hired for their particular blend of style, genius and energy. But with all the money and glamour of high finance come the relentless pressures to do well; pressure to pull off another million before lunch; pressure to anticipate the market by a fraction of a second . . ."

You needn't be a high-powered securities lawyer to realize the prospectus is guilty of less than full disclosure. The slickly produced series has been criticized by London's financial cognoscenti as inaccurate in detail, but its major weakness is its unrealistic depiction of the characters' professional and private lives.

Turned loose in Shane Longman's trading room, the yuppie dealers do little right. Judging by the money lost and mistakes made in the early episodes, Shane Longman's capital should be just about exhausted by the final 13th week.

In the opening episode we learn that Michelle, a junior bond trader, has indeed pulled off another million before lunch. Trouble is, she has lost it just as quickly. Rather than keep the loss a secret from the outside world, Michelle blabs about it to a sandwich man while ordering lunch over the phone.

Little chance that Shane Longman is going to recoup today. Traders spend the morning frantically selling bonds, in the belief that the U.S. monthly trade figures will look lousy. Ah, perfidious Columbia] The trade figures turn out well, and all those recently unloaded bonds spurt in price. So much for anticipating the market by a fraction of a second. And a large slice of the first episode is devoted to efforts to get rid of some nearly worthless Japanese bonds (since when is anything Japanese nearly worthless nowadays?). Surprisingly, Shane Longman survives the week, only to have a senior executive innocently bumble his way into becoming the target of a criminal insider trading investigation. Instead of closing ranks to protect the firm's reputation, the executive's internal rivals, led by a loutish American, demand his resignation. The plot is thwarted when the firm's major stockholder, kelp farming on the other side of the globe, hurries home to support the executive. But the investigation continues.

If you can swallow the premise that the rewards for such ineptitude are six-figure salaries, you still are left puzzled, because few of the yuppies consume very conspicuously. In fact, few consume much of anything. Two share a house almost devoid of furniture. Michelle lives in a hotel room, and although she drives a canary-colored Porsche, she hasn't time to clean or repair it; the beat-up vehicle can be started only with a huge pair of pliers because the ignition key has broken off in the lock. And it takes Declan, the obligatory ladies' man of the cast, until the third episode to get past first base with any of his prey.

Perhaps the explanation for these anomalies is that class-conscious Britain isn't ready to come to terms with the wealth created by the Thatcherian free-enterprise regime. After all, this isn't old money, but new money, and in many cases, young money.

This attitude is clearly illustrated in the treatment of Max, the trading room's most flamboyant character. Yuppily enough, he lives in a lavishly furnished converted church, wears designer clothes and drives an antique car. But apparently to make him palatable, even lovable, to the masses, the script inflates pony-tailed Max into an eccentric genius, master of 11 Chinese dialects. He takes his wash to the laundromat, where he meets a punky French girl who dupes him into providing a home for her pet piranha and then promptly steals his car and dumps it in Dieppe.

In producing and promoting "Capital City," Thames has spent about as much as Shane Longman loses on a good day. The production costs are a not inconsiderable #8 million ($12.4 million), and would have been much higher had not the cost of the trading floor set been absorbed in the budget of "Dealers," an earlier made-for-TV movie. Another half million quid went for a volley of full-page advertisements in six major British newspapers and for huge posters in the London subway.

These expenses create a special incentive for "Capital City's" producers to flog it, or a Yank-oriented version of it, in America. Thames's U.S. marketing agent, Donald Taffner, is preparing to do just that. He is discreetly hopeful, citing three U.S. comedy series -- "Three's Company," "Too Close for Comfort" and "Check It Out" -- that had British antecedents.

Perhaps without realizing it, Mr. Taffner simultaneously has put his finger on the problem and an ideal solution: "Capital City" should have been a comedy, a worthy sequel to the screwball British "Carry On" movies of the 1960s.

The seeds already are in the script. The first episode concluded with a marvelously cute scene in which the trading-room crew minded a baby, the casualty of a broken marriage at the firm. And many in the young cast bear striking resemblances to American TV and movie personalities known for light roles. Joanna Kanska looks like a young Zsa Zsa Gabor; William Armstrong, who plays Max, could pass for Hans Conreid, and Douglas Hodge (Declan) for James Farentino; Rolf Saxon is a passable Tommy Noonan and Dorian Healy could easily double for Huntz Hall, the blank-faced foil of the Bowery Boys comedies.

So, OK kids, everybody on stage for "Carry On Trading": The cast is frantically searching the office for misplaced Japanese bonds that suddenly have soared in value because Dai-Ichi Kangyo Bank has just bought the White House. The pressure is too much for Zsa Zsa, who slaps a security guard. He backflips into a desktop computer terminal, which explodes, covering Huntz Hall's face with microchips. And all the while, the bonds are in the baby's diaper.

It should run forever.

---

Mr. Rustin is senior correspondent in the Journal's London bureau.

891016-0058.
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891016-0058. Axa-Midi Unit Gives Financing Plans @ For Acquisition of Farmers Group Inc. @ ---- @ By David J. Jefferson @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) BTI F.AXA TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) INSURANCE (INS)

Axa-Midi Assurances of France gave details of its financing plans for its proposed $4.5 billion acquisition of Farmers Group Inc., in amended filings with insurance regulators in the nine U.S. states where Farmers operates.

The proposed acquisition is part of Sir James Goldsmith's unfriendly takeover attempt for B.A.T Industries PLC, the British tobacco, retailing, paper and financial services concern that is parent of Los Angeles-based Farmers. In an attempt to appease U.S. regulators' concern over a Goldsmith acquisition of Farmers, Sir James in August agreed to sell Farmers to Axa if he is successful in acquiring B.A.T.

As part of the agreement, Axa agreed to invest $1 billion in Hoylake Investments Ltd., Sir James's acquisition vehicle.

Of the total $5.5 billion to be paid to Hoylake by Axa, about $1 billion will come from available resources of Axa's parent, Axa-Midi Group, $2.25 billion will be in the form of notes issued by Axa, and the remaining $2.25 billion will be in long-term bank loans.

In an interview Thursday, Claude Bebear, chairman and chief executive officer of Axa, said his group has already obtained assurances from a group of banks led by Cie. Financiere de Paribas that they can provide the loan portion of the financing. The other banking companies in the group are Credit Lyonnais, Societe Generale, BankAmerica Corp. and Citicorp, he said.

Mr. Bebear said Axa-Midi Group has "more than $2.5 billion of non-strategic assets that we can and will sell" to help pay off debt from the acquisition. He said the assets to be sold would be "non-insurance" assets, including a beer company and a real estate firm, and wouldn't include any pieces of Farmers. "We won't put any burden on Farmers," he said.

The amended filings also point out that under a new agreement, Hoylake has an absolute obligation to sell Farmers to Axa upon an acquisition of B.A.T. "We hope that with what we did, the regulators will not need to evaluate Hoylake, and they can directly look at the agreement with us, because Hoylake won't be an owner of Farmers at anytime," Mr. Bebear said.

Any change of control in Farmers needs approval of the insurance commissioners in the nine states where Farmers and its related companies are incorporated.

The amended filings were required because of the new agreement between Axa and Hoylake, and to reflect the extension that Sir James received last month under British takeover rules to complete his proposed acquisition. Hoylake dropped its initial #13.35 billion ($20.71 billion) takeover bid after it received the extension, but said it would launch a new bid if and when the propsed sale of Farmers to Axa receives regulatory approval.

A spokesman for B.A.T said of the amended filings that, "It would appear that nothing substantive has changed. The new financing structure is still a very-highly leveraged one, and Axa still plans to take out 75% of Farmers' earnings as dividends to service their debt." That dividend is almost double the 35% currently taken out of Farmers by B.A.T, the spokesman added. "It would have severe implications for Farmers' policy holders."

To fend off Sir James's advances, B.A.T has proposed a sweeping restructuring that would pare it to a tobacco and financial services concern.

891016-0057.
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891016-0057. Vehicle Sales @ Posted Decline @ For Oct. 1-10 @ --- @ GM Results Pullled Down @ Auto and Truck Market @ As '90 Model Year Began @ ---- @ By Neal Templin @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) GM TOYOY F C HMC NSANY J.MZD J.MOT AUTOMOBILES (AUT) DETROIT

Dismal sales at General Motors Corp. dragged the U.S. car and truck market down below year-ago levels in early October, the first sales period of the 1990 model year.

The eight major domestic auto makers sold 160,510 North American-made cars in the first 10 days of October, a 12.6% drop from a year earlier. Domestically built truck sales were down 10.4% to 86,555 pickups, vans and sport utility vehicles.

The heavy use of incentives to clear out 1989 models appears to have taken the steam, at least initially, out of 1990 model sales, which began officially Oct. 1. This appears particularly true at GM, which had strong sales in August and September but saw its early October car and truck results fall 26.3% from last year's unusually high level.

Overall, sales of all domestic-made vehicles fell 11.9% from a year ago. Without GM, overall sales for the other U.S. automakers were roughly flat with 1989 results.

Some of the U.S. auto makers have already adopted incentives on many 1990 models, but they may have to broaden their programs to keep sales up. "We've created a condition where, without incentives, it's a tough market," said Tom Kelly, sales manager for Bill Wink Chevrolet in Dearborn, Mich.

Car sales fell to a seasonally adjusted annual selling rate of 5.8 million vehicles, the lowest since October 1987. The poor performance contrasts with a robust selling rate of almost eight million last month. Furthermore, dealers contacted late last week said they couldn't see any immediate impact on sales of Friday's steep market decline.

GM's domestic car sales dropped 24.3% and its domestic trucks were down an even steeper 28.7% from the same period a year ago. All of the GM divisions except Cadillac showed big declines. Cadillac posted a 3.2% increase despite new competition from Lexus, the fledging luxury-car division of Toyota Motor Corp. Lexus sales weren't available; the cars are imported and Toyota reports their sales only at month-end.

The sales drop for the No. 1 car maker may have been caused in part by the end in September of dealer incentives that GM offered in addition to consumer rebates and low-interest financing, a company spokesman said. Last year, GM had a different program in place that continued rewarding dealers until all the 1989 models had been sold.

Aside from GM, other car makers posted generally mixed results. Ford Motor Co. had a 1.8% drop in domestic car sales but a 2.4% increase in domestic truck sales.

Chrysler Corp. had a 7.5% drop in car sales, echoing its generally slow performance all year. However, sales of trucks, including the company's popular minivans, rose 4.3%.

Honda Motor Co.'s sales of domestically built vehicles plunged 21.7% from a year earlier. Honda's plant in Marysville, Ohio, was gearing up to build 1990 model Accords, a Honda spokesman said. "We're really confident everything will bounce back to normal," he added.

Separately, Chrysler said firm prices on its 1990-model domestic cars and minivans will rise an average of 5% over comparably equipped 1989 models. Firm prices were generally in line with the tentative prices announced earlier this fall. At that time, Chrysler said base prices, which aren't adjusted for equipment changes, would rise between 4% and 9% on most vehicle.

--- @ RETAIL U.S. CAR AND LIGHT TRUCK SALES-a @ 1989 1988 x-% @ Oct 1-10 Oct 1-10 Chg. @GM total vehicles ....... 100,032 135,706 - 26.3 @ Domestic car .......... 68,301 90,183 - 24.3 @ Imported car .......... 2,455 4,434 - 44.6 @ Total car ........... 70,756 94,617 - 25.2 @ Domestic truck ........ 29,235 41,010 - 28.7 @ Imported truck ........ 41 79 - 48.1 @ Total truck ......... 29,276 41,089 - 28.7 @FORD total vehicles ..... 93,564 94,093 - 0.6 @ Domestic car........... 57,355 58,407 - 1.8 @ Imported car .......... 1,817 2,112 - 14.0 @ Total car ........... 59,172 60,519 - 2.2 @ Domestic truck ........ 34,392 33,574 + 2.4 @CHRYSLER total veh....... 46,846 47,876 - 2.2 @ Domestic car .......... 22,721 24,566 - 7.5 @ Imported car .......... 2,856 2,805 + 1.8 @ Total car ........... 25,577 27,371 - 6.6 @ Domestic truck ........ 20,120 19,297 + 4.3 @ Imported truck ........ 1,149 1,208 - 4.9 @ Total truck ......... 21,269 20,505 + 3.7 @NISSAN total vehicles.... 3,052 2,404 + 27.0 @ Domestic car .......... 1,434 1,005 + 42.7 @ Domestic truck ........ 1,618 1,399 + 15.7 @HONDA domestic car....... 6,757 8,630 - 21.7 @TOYOTA domestic car...... 2,591 475 +445.5 @MAZDA domestic car....... 442 386 + 14.5 @MITSUBISHI-c ............ 909 0 d @Total cars............... 167,638 193,003 - 13.1 @ Domestic............... 160,510 183,652 - 12.6 @ Imported............... 7,128 9,351 - 23.8 @Total trucks............. 86,555 96,567 - 10.4 @ Domestic............... 85,365 95,280 - 10.4 @ Imported............... 1,190 1,287 - 7.5 @Total domestic veh....... 245,875 278,932 - 11.9 @Total vehicles .......... 254,193 289,570 - 12.2

a-Totals include only vehicle sales reported in period.

c-Domestic car

d-Percentage change is greater than 999%.

x-There were 8 selling days in the most recent period and 8 a year earlier. Percentage differences based on daily sales rate rather than sales volume.

891016-0056.
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891016-0056. Who's News: @ Sequa Corp.
10/16/89
WALL STREET JOURNAL (J) SQAA WNEWS SEQUA Corp. (New York)

Antonio L. Savoca, 66 years old, was named president and chief executive officer of the Atlantic Research Corp. subsidiary. Mr. Savoca had been a consultant to the subsidiary's rocket-propulsion operations. Mr. Savoca succeeds William H. Borten, who resigned to pursue personal interests. Sequa makes and repairs jet engines. It also has interests in military electronics and electro-optics, marine transportation and machinery used to make food and beverage cans.

891016-0055.
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891016-0055. Radio Free Europe's Hungary Bureau @ Signals Changes in East-Bloc Attitudes @ ---- @ By Mark M. Nelson @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) EUROP MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) BUDAPEST, Hungary

It wasn't so long ago that a radio network funded by the U.S. Congress -- and originally by the Central Intelligence Agency -- was accused by officials here of employing propagandists, imperialists and spies. Now, the network has opened a news bureau in the Hungarian capital.

Employees held an open house to celebrate and even hung out a sign: "Szabad Europa Radio" -- Radio Free Europe.

"I think this is a victory for the radio," says Barnabas de Bueky, a 55-year-old former Hungarian refugee who works in the Munich, West Germany, headquarters as deputy director of the Hungarian service. In fact, the network hopes to set up offices in Warsaw and anywhere else in the East Bloc that will have it.

But the rapid changes brought on by glasnost and open borders are altering the network's life in more ways than one. In fact, Radio Free Europe is in danger of suffering from its success.

While the network currently can operate freely in Budapest, so can others. In addition, competition for listeners is getting tougher in many ways than when broadcasting here was strictly controlled. Instead of being denounced as an evil agent of imperialism, Radio Free Europe is more likely to draw the criticism that its programs are too tame, even boring.

"They have a lot to do these days to compete with Hungarian radio," says Andrew Deak, a computer-science student at the Technical University in Budapest. "The Hungarian {radio} reporters seem better informed and more critical about about what's going on here."

Indeed, Hungary is in the midst of a media explosion. Boys on busy street corners peddle newspapers of every political stripe. Newsstands are packed with a colorful array of magazines. Radio and television are getting livelier and bolder.

The British Broadcasting Corp. and the U.S. State Department's Voice of America broadcast over Hungarian airwaves, though only a few hours a day each in Hungarian. Australian press magnate Rupert Murdoch has bought 50% stakes in two popular and gossipy Hungarian newspapers, while Britain's Robert Maxwell has let it be known here that he is thinking about similar moves.

But Radio Free Europe doesn't plan to fade away. With its mission for free speech and the capitalist way, the network's staff says it still has plenty to do -- in Hungary and in the "Great Eastern Beyond." Radio Free Europe and its sister station for the Soviet Union, Radio Liberty, say they won't cut back their more than 19 hours of daily broadcasts. They are still an important source of news for 60 million listeners in 23 exotic tongues: from Bulgarian and Belorussian to Kazakh and Kirghiz.

The establishment of its first bureau in Warsaw Pact territory shows the depth of some of the changes in Eastern Europe. Months before the decision by the Hungarian Communist Party to rename itself Socialist and try to look more appealing to voters, the country's rulers were trying to look more hospitable. It proved a perfect time for Radio Free Europe to ask for permission to set up office.

Not only did the Hungarian Ministry of Foreign Affairs approve Radio Free Europe's new location, but the Ministry of Telecommunications did something even more amazing: "They found us four phone lines in central Budapest," says Geza Szocs, a Radio Free Europe correspondent who helped organize the Budapest location. "That is a miracle."

It's a far cry from the previous treatment of the network, which had to overcome jamming of its frequencies and intimidation of local correspondents (who filed reports to the network by phone, secret messengers or letters). In fact, some of the network's Hungarian listeners say they owe Radio Free Europe loyalty because it was responsible in many ways for keeping hope alive through what one writer here calls the "Dark Ages of the 20th Century."

"During the past four years, many of us have sat up until late at night listening to our radios," says the writer. "There were some very brave broadcasts."

The listeners, too, had to be brave. Through much of the post-World War II period, listening to Western broadcasts was a crime in Hungary. "When we listen to the Europe station, my mother still gets nervous," says a Budapest translator. "She wants to turn down the volume and close the curtains."

Now, the toughest competition for Radio Free Europe comes during the late-night slot. Hungarian radio often saves its most politically outspoken broadcasts for around midnight. Television, which most of the time is considered rather tame, has entered the running with a new program, "The End of the Day," which comes on after 11 p.m. It is a talk show with opposition leaders and political experts who discuss Hungary's domestic problems as well as foreign affairs. Those who want to hear even more radical views have to get up at five on Sunday morning for "Sunday Journal," on Hungarian Radio.

The competitive spirit is clearly influencing Radio Free Europe, which is trying to beef up programs. The Budapest office plans to hire free-lance reporters to cover the latest happenings in Hungarian country towns from Nagykanizsa in the west to Nyiregyhaza in the east. The Hungarian service has a daily 40-minute news show called Newsreel, with international and domestic news, plus a daily news review of opinions from around the world.

There's also a host of new programs, trying to lighten up on the traditional diet of politics. A daily 35-minute program called "The March of Time" tries to find interesting tidbits of lighthearted news and gossip from around the world. There's a program for women and a science show. And to attract younger listeners, Radio Free Europe intersperses the latest in Western rock groups. The Pet Shop Boys are big this year in Budapest.

"We are starving for all the news," says Mr. Deak, the student. "Every moment we want to know everything about the world."

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891016-0054. It's Ba-ack] National Service 1989 @ --- @ Put Brakes on the Omnibus @ ---- @ By Bruce Chapman
10/16/89
WALL STREET JOURNAL (J) LABOR CONGRESS (CNG) EXECUTIVE (EXE) FEDERAL GOVERNMENT (FDL)

Proposals for government-operated "national service," like influenza, flare up from time to time, depress the resistance of the body politic, run their course, and seem to disappear, only to mutate and afflict public life anew.

The disease metaphor comes to mind, of course, not as an aspersion on the advocates of national service. Rather, it is born of frustration with having to combat constantly changing strains of a statist idea that one thought had been eliminated in the early 1970s, along with smallpox.

It is back with us again, in the form of legislation to pay volunteers under a "National and Community Service Act," a proposal with a serious shot at congressional passage this fall.

Why does the national-service virus keep coming back? Perhaps it is because utopian nostalgia evokes both military experience and the social gospel. If only we could get America's wastrel youth into at least a psychic uniform we might be able to teach self-discipline again and revive the spirit of giving.

A quarter of a century ago national service was promoted as a way of curing the manifest inequities of the draft -- by, of all things, expanding the draft. Those of us who resisted the idea then suspect today that an obligation of government service for all young people is still the true long-term aim of many national-service backers, despite their protests that present plans contain no coercion.

Choice of the volunteer military in the 1970s seemed to doom national service as much as the draft. But the virus was kept alive in sociology departments until a couple of years ago, when it again was let loose. This time it attempted to invade two connected problems, the rising cost of higher education and the rising expense to the federal government of educational grants and loans. Why not keep and even expand the loans and grants, the advocates reasoned, but require some form of service from each recipient? Military service, moreover, could be a national-service option.

Thus, undoubtedly it was hoped that the new strain of national service would prove contagious, infecting patriotic conservatives, pay-as-you-go moderates, and idealistic liberals. The Democratic Leadership Council, a centrist group sponsoring the plan, surely thought it might help the party to attract support, especially among college students and their parents. A provision allowing grants to be applied to first-home purchases was added to appeal to those who had had enough of schooling.

The DLC plan envisaged "volunteers" planting trees, emptying bedpans, tutoring children, and assisting librarians for $100 a week, tax free, plus medical care. With a tax-free $10,000 voucher payment at the end of each year, the volunteers would be making a wage comparable to $17,500 a year. Mind you, most of "the volunteers" would be unskilled 17- to 18-year-olds, some not even high school graduates, and many saving money by living at home. They would be doing better financially under national service than many taxpayers working at the same kinds of jobs and perhaps supporting families.

As it happened, political resistance developed among educational and minority interests that count on the present education grant system, so the national-service devotees decided to abandon the supposedly crucial principle of "give in order to get." Opposition to national service from the Pentagon, which wants to protect its own recruitment process, also led to the military-service option being dropped.

Clearly, a new rationale for national service had to be cooked up. What better place to turn than Sen. Edward Kennedy's Labor Committee, that great stove of government expansionism, where many a stagnant pot of porridge is kept on the back burner until it can be brought forward and presented as nouvelle cuisine?

In this case, the new recipe for national service called for throwing many assorted legislative leftovers into one kettle: a demonstration project for educational aid (particularly satisfying to the DLC and Sen. Sam Nunn), a similar demonstration program for youth conservation (a la Sen. Chris Dodd), a competitive grants program to states to spark youth and senior citizen volunteer projects (a Kennedy specialty), a community service work-study program for students (pleasing to the palate of Sen. Dale Bumpers, among others), plus engorgement of the VISTA volunteer program and the Retired Senior Volunteer, Foster Grandparent, and Senior Companion programs. Before the menu is printed, the House may add more ingredients, also changing the initial price, now posted at some $330 million.

It is widely known that "too many cooks spoil the broth," but that wisdom does not necessarily reflect the view of the cooks, especially if they are senators. The "omnibus" bill coming out of Congress may be unwholesome glop, but the assorted chefs are happy and the restaurant is pushing the dish very hard. The aroma of patronage is in the air.

Is the voluntary sector so weak that it needs such unsolicited assistance? On the contrary, it is as robust as ever. According to the Gallup Poll, American adults contribute an average of two hours a week of service, while financial contributions to charity in the 1980s have risen 30% (adjusted for inflation).

Even if government does see various "unmet needs," national service is not the way to meet them. If we want to support students, we might adopt the idea used in other countries of offering more scholarships based on something called "scholarship," rather than on the government's idea of "service." Or we might provide a tax credit for working students. What we do not need to do is start a war, and then try to justify it by creating a GI Bill.

To the extent we lack manpower to staff menial jobs in hospitals, for example, we should raise pay, pursue labor-saving technology, or allow more legal immigration, rather than overpay high school graduates as short-term workers and cause resentment among permanent workers paid lesser amounts to do the same jobs.

Will national service, in the current highly politicized and opportunistic form exert enough appeal to get adopted? Not necessarily. Polls show wide, generalized support for some vague concept of service, but the bill now under discussion lacks any passionate public backing. Nonetheless, Senate Democrats are organizing a roll of supporting "associations," "societies" and "councils," some of which may hope to receive the paid "volunteers."

So far, the president seems ill-disposed to substitute any of the omnibus for his own free-standing proposal to endow a "Points of Light" foundation with $25 million to inform citizens of all ages and exhort them to genuine volunteerism.

However, even this admirable plan could become objectionable if the White House gives in to congressional Democratic pressure to add to the scope of the president's initiative or to involve the independent foundation in "brokering" federal funds for volunteer projects.

There's no need for such concessions. The omnibus can be defeated, the virus controlled, and real service protected. National service, the utopian idea, still won't go away then, of course, but the millions of knee-socked youth performing works of "civic content" will be mobilized only in the imagination of their progenitors.

---

Mr. Chapman is a fellow at the Indianapolis-based Hudson Institute. This article is adapted from remarks at a Hoover Institution conference on national service, in which Mr. Szanton also participated.

(See related story: "Target Expenditures Narrowly" -- WSJ Oct. 16, 1989)

891016-0053.
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891016-0053. Drug Emporium Names Chief
10/16/89
WALL STREET JOURNAL (J) DEMP WNEWS COLUMBUS, Ohio

Drug Emporium Inc. said Gary Wilber, 39 years old, who had been president and chief operating officer for the past year, was named chief executive officer of this drugstore chain.

He succeeds his father, Philip T. Wilber, who founded the company and remains chairman.

Robert E. Lyons III, 39, who headed the company's Philadelphia region, was appointed president and chief operating officer, succeeding Gary Wilber.

891016-0052.
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891016-0052. American Physicians Purchase
10/16/89
WALL STREET JOURNAL (J) AMPH PMSI COLD TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AUSTIN, Texas

American Physicians Service Group Inc. said it purchased about 42% of Prime Medical Services Inc. for about $5 million from Texas American Energy Corp.

American Physicians said it also replaced four Texas American representatives on Prime's five-member board.

American provides a variety of financial services to doctors and hospitals. Prime, based in Bedminster, N.J., provides management services to cardiac rehabilitation clinics and diagnostic imaging centers. For the year ended June 30, Prime had a net loss of $3 million on sales of $13.8 million.

891016-0051.
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891016-0051. French GDP Data Is Revised
10/16/89
WALL STREET JOURNAL (J) EUROP PARIS

The inflation-adjusted growth rate for France's gross domestic product for the second quarter was revised upward to 0.8% from the previous three months from the initial estimate of 0.7%, the National Statistics Institute said.

The state agency said the latest revision left the growth rate for the first-quarter compared with the previous three months unchanged at 1.3%.

If the economy continues to expand by 0.8% a quarter for the rest of the year, it would leave GDP growth for all of 1989 at 3%, the institute said. That would be down from the 3.8% rise posted in 1988.

891016-0050.
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891016-0050. Canada Savings Bonds
10/16/89
WALL STREET JOURNAL (J) CANDA BOND MARKET NEWS (BON) OTTAWA

The Canadian government announced a new, 12-year Canada Savings Bond issue that will yield investors 10.5% in the first year.

The annual interest rate for each of the next 11 years will be set each fall, when details of a new series are released.

Canada Savings Bonds are major government instruments for meeting its financial requirements. The government has about 41.4 billion Canadian dollars (US$35.2 billion) of such bonds currently outstanding.

Only Canadian residents are permitted to buy Canada Savings Bonds, which may be redeemed any time at face value. The bonds go on sale Oct. 19.

891016-0049.
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891016-0049. It's Ba-ack] National Service 1989 @ --- @ Target Expenditures Narrowly @ ---- @ By Peter L. Szanton
10/16/89
WALL STREET JOURNAL (J) LABOR CONGRESS (CNG) FEDERAL GOVERNMENT (FDL)

The debate over National Service has begun again. After a decade in which more than 50 localities established their own service or conservation corps and dozens of school systems made community service a prerequisite to high-school graduation, the focus has shifted to Washington.

At least 10 bills proposing one or another national program were introduced in Congress this spring. One, co-sponsored by Sen. Sam Nunn (D., Ga.) and Rep. Dave McCurdy (D., Okla.), would have restricted federal college subsidies to students who had served. An omnibus bill assembled by Sen. Edward Kennedy (D., Mass.), and including some diluted Nunn-McCurdy provisions along with proposals by fellow Democratic Sens. Claiborne Pell, Barbara Mikulski and Christopher Dodd, has been reported out of the Senate Labor Committee. It might well win Senate passage. President Bush has outlined his own Youth Entering Service (YES) plan, though its details remain to be specified.

What is one to think of all this? Doctrine and special interests govern some responses. People eager to have youth "pay their dues to society" favor service proposals -- preferably mandatory ones. So do those who seek a "re-energized concept of citizenship," a concept imposing stern obligations as well as conferring rights. Then there are instinctive opponents. To libertarians, mandatory service is an abomination and voluntary systems are illegitimate uses of tax money. Devotees of the market question the value of the work national service would perform: If the market won't pay for it, they argue, it can't be worth its cost. Elements of the left are also reflexively opposed; they see service as a cover for the draft, or fear the regimentation of youth, or want to see rights enlarged, not obligations.

But what about those of us whose views are not predetermined by formula or ideology? How should we think about national service? Let's begin by recognizing a main source of confusion -- "national service" has no agreed meaning. Would service be voluntary or compulsory? Short or long? Part-time or full-time? Paid or unpaid? Would participants live at home and work nearby or live in barracks and work on public lands? What kinds of work would they do?

What does "national" mean? Would the program be run by the federal government, by local governments, or by private voluntary organizations? And who would serve? Only males, as with the draft, or both sexes? Youth only or all ages? Middle-class people, or poor people, or a genuine cross-section? Many or few?

Those are not trivial questions, and the label "national service" answers none of them. Then how should we think about national service? As a starting point, here are five propositions:

1. Consider the ingredients, not the name. Ignore "national service" in the abstract; consider specific proposals. They will differ in crucial ways.

2. "Service" should be service. As commonly understood, service implies sacrifice. It involves accepting risk, or giving up income, or deferring a career. It follows that proposals like Nunn-McCurdy, whose benefits to enrollees are worth some $17,500 a year, do not qualify. There is a rationale for such bills: Federal subsidies to college students amount to "a GI Bill without the GI"; arguably those benefits should be earned, not given. But the earnings exceed by 20% the average income of young high-school graduates with full-time jobs. Why call that service?

3. Encouragement is fine; compulsion is not. Compelled service is unconstitutional. It is also unwise and unenforceable. (Who will throw several hundred thousand refusers in jail each year?) But through tax policy and in other ways the federal government encourages many kinds of behavior. It should also encourage service -- preferably by all classes and all ages. Its encouragement should strengthen and not undercut the strong tradition of volunteering in the U.S., should build on the service programs already in existence, and should honor local convictions about which tasks most need doing.

4. Good programs are not cheap. Enthusiasts assume that national service would get important work done cheaply: forest fires fought, housing rehabilitated, students tutored, day-care centers staffed. There is important work to be done, and existing service and conservation corps have shown that even youths who start with few skills can do much of it well -- but not cheaply.

Good service programs require recruitment, screening, training and supervision -- all of high quality. They involve stipends to participants. Full-time residential programs also require housing and full-time supervision; they are particularly expensive -- more per participant than a year at Stanford or Yale. Non-residential programs are cheaper, but good ones still come to some $10,000 a year. Are they worth that? Evaluations suggest that good ones are -- especially so if the effects on participants are counted. But the calculations are challengeable.

5. Underclass youth are a special concern. Are such expenditures worthwhile, then? Yes, if targeted. People of all ages and all classes should be encouraged to serve, but there are many ways for middle-class kids, and their elders, to serve at little public cost. They can volunteer at any of thousands of non-profit institutions, or participate in service programs required by high schools or encouraged by colleges or employers.

Underclass youth don't have those opportunities. They are not enrolled in high school or college. They are unlikely to be employed. And they have grown up in unprecedentedly grim circumstances, among family structures breaking down, surrounded by self-destructive behaviors and bleak prospects. But many of them can be quite profoundly reoriented by productive and disciplined service.

Some won't accept the discipline; others drop out for other reasons. But some whom nothing else is reaching are transformed. Learning skills, producing something cooperatively, feeling useful, they are no longer dependent -- others now depend on them. Even if it is cheaper to build playgrounds or paint apartments or plant dune-grass with paid professionals, the effects on the young people providing those services alter the calculation.

Strictly speaking, these youth are not performing service. They are giving up no income, deferring no careers, incurring no risk. But they believe themselves to be serving, and they begin to respect themselves (and others), to take control of their lives, to think of the future. That is a service to the nation. It is what federal support should try hardest to achieve.

---

Mr. Szanton, a Carter administration budget official, heads his own Washington-based strategic planning firm. He is a co-author of "National Service: What Would It Mean?" (Lexington Books, 1986).

(See related story: "Put Brakes on the Omnibus" -- WSJ Oct. 16, 1989)

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891016-0048. The Sell-Off in Stocks: @ Dow Falls 190 Points; Bucks Safeguards @ --- @ Fed Ready @ To Inject @ Big Funds @ ---- @ By Alan Murray @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) BANKS (BNK) FEDERAL RESERVE BOARD (FED) TREASURY DEPARTMENT (TRE) EXECUTIVE (EXE) WASHINGTON

Government officials here and in other countries laid plans through the weekend to head off a Monday market meltdown -- but went out of their way to keep their moves quiet.

Federal Reserve Chairman Alan Greenspan was on the telephones, making it clear to officials in the U.S. and abroad that the Fed was prepared to inject massive amounts of money into the banking system, as it did in October 1987, if the action were needed to prevent a financial crisis.

And at the Treasury, Secretary Nicholas Brady talked with friends and associates on Wall Street while Assistant Secretary David Mullins carefully analyzed data on the Friday market plunge.

But the officials feared that any public announcements would only increase market jitters. In addition, officials at the Fed and in the Bush administration decided that avoiding overt actions and statements over the weekend would give them more strength and flexibility should Friday's market drop turn into this morning's rout.

"The disadvantage at this point is that anything you do that looks like you are doing too much tends to reinforce a sense of crisis," said one government official, insisting on anonymity.

The Fed's efforts at secrecy were partly foiled Sunday morning, when both the New York Times and the Washington Post carried stories quoting a senior Fed official saying the central bank was prepared to pour cash into the banking system Monday morning. Fed Chairman Greenspan was surprised by both stories, according to knowledgeable sources, and insisted he hadn't authorized any public comment. Nevertheless, Fed officials acknowledged the stories were reasonably accurate portrayals of the central bank's game plan. It is prepared to assume the same role it played in October 1987, providing money to the markets if necessary to keep the financial system afloat. The Fed provides money to the banking system by buying government securities from financial institutions.

The reticence of federal officials was evident in the appearance Sunday of Budget Director Richard Darman on ABC's "This Week." "Secretary of the Treasury Brady and Chairman Greenspan and the chairman of the SEC and others have been in close contact. I'm sure they'll do what's right, what's prudent, what's sensible," he said.

When it was suggested his comment was a "non-answer," Mr. Darman replied: "It is a non-answer. But, in this context, that's the smart thing to do."

At the Treasury, Secretary Brady issued a statement minimizing the stock market's drop. "Today's stock market decline doesn't signal any fundamental change in the condition of the economy," he said. "The economy remains well-balanced, and the outlook is for continued moderate growth."

But administration officials conceded that Friday's drop carried the chance of further declines this week. "One possibility is that this is a surgical setback, reasonably limited in its breadth, and not a major problem," said one senior administration official, who also asked that he not be named. "The other is that we see another major disaster, like two years ago. I think that's less likely."

Nevertheless, Fed Chairman Greenspan and Vice Chairman Manuel Johnson were in their offices Sunday evening, monitoring events as they unfolded in markets around the world. The action was expected to begin with the opening of the New Zealand foreign exchange markets at 5 p.m. EST -- when stocks there plunged -- and to continue as the trading day began later in the evening in Tokyo and through early this morning in Europe. Both the Treasury and the Fed planned to keep market rooms operating throughout the night to monitor the developments. In Tokyo, share prices dropped sharply by 1.7% in early Monday morning trading. After the initial slide, the market appeared to be turning around but by early afternoon was headed lower.

In the Bush administration, the lead is being taken by Treasury Secretary Brady, Undersecretary Robert Glauber and Assistant Secretary Mullins. The three men worked together on the so-called Brady Commission, headed by Mr. Brady, which was established after the 1987 crash to examine the market's collapse. As a result they have extensive knowledge in financial markets, and financial market crises.

Mr. Brady was at the White House Friday afternoon when the stock market's decline began. He was quickly on the phone with Mr. Mullins, who in turn was talking with the chairmen of the New York and Chicago exchanges. Later, Mr. Brady phoned Mr. Greenspan, SEC Chairman Richard Breeden and numerous contacts in New York and overseas. Aides say he continued to work the phones through the weekend.

Administration officials say President Bush was briefed throughout Friday afternoon and evening, even after leaving for Camp David. He had frequent telephone consultations with Mr. Brady and Michael Boskin, chairman of the counsel of economic advisers.

Government officials tried throughout the weekend to render a business-as-usual appearance in order to avoid any sense of panic. Treasury Undersecretary David Mulford, for instance, was at a meeting of the Business Council in Hot Springs, Va., when the stock market fell, and remained there through the following day. And as of last night, Fed Chairman Greenspan hadn't canceled his plans to address the American Bankers Association convention in Washington at 10 a.m. this morning.

Ironically, Mr. Greenspan was scheduled to address the same convention in Dallas on Oct. 20, 1987. He flew to Dallas on Oct. 19, when the market plummeted 508 points, but then turned around the next morning and returned to Washington without delivering his speech.

(See related story: "Abreast of the Market: Special Steps Didn't Cool Fever to Sell" -- WSJ Oct. 16, 1989)

891016-0047.
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891016-0047. Publicly Traded Funds
10/16/89
WALL STREET JOURNAL (J) MUTUAL AND MONEY-MARKET FUNDS (FND)

Following is a weekly listing of unadited net asset values of publicly traded investment fund shares, reported by the companies as of Friday's close. Also shown is the closing listed market price or a dealer-to-dealer asked price of each fund's shares, with the percentage of difference. @ Stock N.A. Stock % @ Fund Name Exch. Value Price Diff. @ Diversified Common Stock Funds @Adams Express NYSE 19.14 16 3/8 - 14.45 @Baker Fentress NYSE 28.43 23 3/4 - 16.46 @Blue Chip Value NYSE 7.79 7 - 10.14 @Clemente Global Gro NYSE b11.56 9 7/8 - 14.58 @Gemini II Capital NYSE 19.55 16 3/4 - 14.32 @Gemini II Income NYSE 9.95 12 7/8 + 29.40 @General Amerinvest NYSE 22.32 19 1/8 - 14.31 @Growth Stock Outlook NYSE 10.51 9 3/4 - 7.23 @Lehman Corp. NYSE 16.16 12 3/4 - 21.10 @Liberty All-Star Eqty NYSE 9.47 7 7/8 - 16.84 @Niagara Share Corp. NYSE 17.40 14 1/2 - 16.67 @Nicholas-Applegate NYSE 11.13 9 5/8 - 13.52 @Quest for Value Cap NYSE 16.46 12 1/4 - 25.58 @Quest for Value Inco NYSE 11.80 12 1/2 + 5.93 @Royal Value Trust NYSE 11.29 9 1/8 - 19.18 @Schafer Value Trust NYSE 11.70 10 1/4 - 12.39 @Source Capital NYSE 42.65 42 - 1.52 @Tri-Continental Corp. NYSE 28.62 23 1/2 - 17.89 @Worldwide Value NYSE z z z @Zweig Fund NYSE 11.19 11 1.2 + 2.77 @ Closed End Bond Funds @CIM High Yield Secs AMEX 8.22 7 - 14.84 @Franklin Prin Mat Tr NYSE b8.93 9 7/8 + 10.58 @Franklin Universal Tr NYSE b9.03 9 1/8 + 1.05 @Municipal High Inco NYSE 9.57 9 1/2 - 0.73 @Zenith Income Fund NYSE 7.61 7 7/8 + 3.48 @ Flexible Portfolio Funds @America's All Season OTC 5.90 5 1/4 - 11.02 @America's All S Inco OTC 9.19 9 1/2 + 3.37 @Zweig Total Return Fd NYSE 9.60 9 1/2 - 1.04 @Specialized Equity and Convertible Funds @American Capital Conv NYSE 24.21 21 1/2 - 11.19 @ASA Ltd. NYSE bc54.70 44 3/4 - 18.19 @Asia Pacific NYSE 14.96 13 1/2 - 9.76 @Austria Fund NYSE 10.85 11 1/2 + 5.99 @Bancroft Convertible AMEX 21.65 19 - 12.24 @Bergstrom Capital AMEX 63.66 62 1/8 - 2.41 @BGR Precious Metals TOR be11.61 10 1/2 - 9.56 @Brazil NYSE g23.19 10 3/8 - 55.26 @CNV Holdings Capital NYSE z z z @CNV Holdings Income NYSE z z z @Castle Convertible AMEX 22.03 19 3/8 - 12.05 @Central Fund Canada AMEX b4.97 4 13/16 - 3.17 @Central Securities AMEX 12.76 10 1/4 - 19.67 @Couns Tandem Secs NYSE 12.10 10 1/8 - 16.32 @Cypress Fund AMEX 11.11 10 1/2 - 5.49 @Duff & Phelps Sel @ Utils NYSE 8.46 8 - 5.44 @Ellsw Conv Gr & Inc. AMEX 9.00 7 5/8 - 15.28 @Engex AMEX 13.56 10 7/16 - 23.03 @1st Australia AMEX 10.93 9 3/4 - 10.80 @First Financial Fund NYSE 11.65 10 3/4 - 7.73 @First Iberian AMEX 10.31 13 3/8 + 29.73 @France Fund NYSE b13.03 12 3/8 - 5.03 @Gabelli Equit Trust NYSE 14.04 13 3/8 - 4.74 @Germany Fund NYSE 10.13 10 - 1.28 @H&Q Healthcare Inv NYSE 10.44 9 - 13.79 @Hampton Utils Tr Cap AMEX b11.86 10 1/8 - 14.63 @Hampton Utils Tr Pref AMEX b48.66 47 3/4 - 1.87 @Helvetia Fund NYSE 12.63 11 3/4 - 6.97 @India Growth Fund NYSE f13.92 16 3/4 + 20.33 @Italy Fund NYSE b11.64 13 1/4 + 13.83 @Korea Fund NYSE 18.74 39 3/8 +110.11 @Malaysia Fund NYSE 12.74 12 - 5.81 @Meeschaert G&C MWSE 8.21 8 - 2.56 @Mexico Fund NYSE b13.07 12 3/8 - 5.32 @Morgan Grenf Sm Cap NYSE 10.73 9 1/8 - 14.96 @Patriot Prem Div Fd NYSE 9.45 10 + 5.82 @Petrol & Resources NYSE 29.66 26 - 12.34 @Pilgrim Regional NYSE z z z @Rl Estate Sec Inco Fd AMEX 8.19 7 7/8 - 3.85 @Regional Fin Shrs Inv NYSE 9.90 9 - 9.09 @ROC Taiwan Fund NYSE 15.90 13 3/4 - 13.52 @Scudder New Asia NYSE 16.85 13 1/8 - 22.11 @SE Savings Inst Fd OTC b11.04 11 1/2 + 4.17 @Spain Fund NYSE 14.54 27 1/2 + 89.13 @Taiwan Fund NYSE b42.78 39 1/2 - 7.67 @TCW Convertible Secs NYSE b8.94 8 - 10.51 @Templeton Em Mkts AMEX b14.12 14 1/4 + 0.92 @Templeton Value Fund NYSE b10.69 9 7/8 - 7.62 @ Thai Fund NYSE 17.22 22 3/4 + 32.11 @United Kingdom Fund NYSE 11.36 9 1/4 - 18.57 @Z-Seven OTC 13.98 14 1/4 + 1.93

b-As of Thursday's close. c-Translated at Commercial Rand exchange rate. e-In Canadian dollars. f-As of Wednesday's close. g-10.06.89 NAV:22.15. z-Not available.

891016-0046.
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891016-0046. The Sell-Off in Stocks: @ Now What? The Experts Tell Investors `Don't Panic' @ --- @ Your Money Matters: @ Unloading Stocks @ Worst Step to Take @ ---- @ By John R. Dorfman and Earl C. Gottschalk Jr. @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) STOCK INDEXES (NDX)

Put down that phone.

Walk around the room; take two deep breaths. Resist the urge to call your broker and sell all your stocks.

That's the advice of most investment professionals after Friday's 190-point drop in the Dow Jones Industrial Average.

No one can say for sure what will happen today. And investment pros are divided on whether stocks will perform well or badly in the next six months. But they're nearly unanimous on one point: Don't sell into a panic.

Investors who sold everything after the crash of 1987 lived to regret it. Even after Friday's plunge, the Dow Jones Industrial Average was 48% above where it landed on Oct. 19 two years ago.

Panic selling also was unwise during other big declines in the past. The crash of 1929 was followed by a substantial recovery before the great Depression and awful bear market of the 1930s began. The "October massacres" of 1978 and 1979 were scary, but didn't lead to severe or sustained downturns.

Indeed, some pros see Friday's plunge, plus any further damage that might occur early this week, as a chance for bargain hunting. "There has been a lot of emotional selling that presents a nice buying opportunity if you've got the cash," says Stephen B. Timbers, chief investment officer of Chicago-based Kemper Financial Services Inc.

But most advisers think the immediate course for individual investors should be to stand pat. "When you see a runaway train," says Steve Janachowski, partner in the San Francisco investment advisory firm Brouwer & Janachowski, "you wait for the train to stop."

Even for people who expect a bear market in coming months -- and a sizable number of money managers and market pundits do -- the advice is: Wait for the market to bounce back, and sell shares gradually during rallies. The best thing individual investors can do is "just sit tight," says Marshall B. Front, executive vice president and head of investment counseling at Stein Roe & Farnham Inc., a Chicago-based investment counseling firm that manages about $18 billion.

On the one hand, Mr. Front says, it would be misguided to sell into "a classic panic." On the other hand, it's not necessarily a good time to jump in and buy. "This is all emotion right now, and when emotion starts to run, it can run further than anyone anticipates," he said. "So it's more prudent to wait and see how things stabilize."

Roger Ibbotson, professor of finance at Yale University and head of the market information firm Ibbotson Associates Inc., says, "My real advice would be to just ride through it. Generally, it isn't wise to be in and out" of the stock market.

Mr. Ibbotson thinks that this week is "going to be a roller-coaster week." But he also thinks it is "a good week to consider buying."

John Snyder, former president of the Los Angeles chapter of the National Association of Investors Corp., an organization of investment clubs and individual investors, says his fellow club members didn't sell in the crash of 1987, and see no reason to sell now. "We're dedicated long-term investors, not traders," he says. "We understand panics and euphoria. And we hope to take advantage of panics and buy stocks when they plunge."

One camp of investment pros sees what happened Friday as an opportunity. Over the next days and weeks, they say, investors should look for stocks to buy.

Friday's action "was an old-fashioned panic," says Alfred Goldman, director of technical market analysis for A.G. Edwards & Sons in St. Louis. "Stocks were being thrown out of windows at any price." His advice: "You ought to be there with a basket catching them."

James Craig, portfolio manager for the Denver-based Janus Fund, which has one of the industry's better track records, started his buying during Friday's plunge. Stocks such as Hershey Foods Corp., Wal-Mart Stores Inc., American International Group Inc. and Federal National Mortgage Association became such bargains that he couldn't resist them, he says.

And Mr. Craig expects to pick up more shares today. "It will be chaotic at first, but I would not be buying if I thought we were headed for real trouble," he says. He argues that stocks are reasonably valued now, and that interest rates are lower now than in the fall of 1987.

Mr. Front of Stein Roe suggests that any buying should "concentrate in stocks that have lagged the market on the up side, or stocks that have been beaten down a lot more than the market in this correction." His firm favors selected computer, drug and pollution-control stocks.

Other investment pros are more pessimistic. They say investors should sell stocks -- but not necessarily right away. Many of them stress that the selling can be orderly, gradual, and done when stock prices are rallying.

On Thursday, William Fleckenstein, a Seattle money manager, used futures contracts in his personal account to place a bet that the broad market averages would decline. He thinks the underlying inflation rate is around 5% to 6%, far higher than most people suppose.

In the pension accounts he manages, Mr. Fleckenstein has raised cash positions and invested in gold and natural gas stocks, partly as an inflation hedge. He thinks government officials are terrified to let a recession start when government, corporate and personal debt levels are so high. So he thinks the government will err on the side of rekindled inflation.

As a result, Mr. Fleckenstein says, "I think the ball game's over," and investors are about to face a bear market.

David M. Jones, vice president at Aubrey G. Lanston & Co., recommends Treasury securities (of up to five years' maturity). He says the Oct. 6 employment report, showing slower economic growth and a severe weakening in the manufacturing sector, is a warning sign to investors.

One strategy for investors who want to stay in but hedge their bets is to buy "put" options, either on the individual stocks they own or on a broad market index. A put option gives its holder the right (but not the obligation) to sell a stock (or stock index) for a specified price (the strike price) until the option expires.

Whether this insurance is worthwhile depends on the cost of an option. The cost, or premium, tends to get fat in times of crisis. Thus, buying puts after a big market slide can be an expensive way to hedge against risk.

The prices of puts generally didn't soar Friday. For example, the premium as a percentage of the stock price for certain puts on Eli Lilly & Co. moved up from 3% at Thursday's close to only 3.3% at Friday's close, even though the shares dropped more than $5.50. But put-option prices may zoom when trading resumes today.

It's hard to generalize about a reasonable price for puts. But investors should keep in mind, before paying too much, that the average annual return for stock holdings, long-term, is 9% to 10% a year; a return of 15% is considered praiseworthy. Paying, say, 10% for insurance against losses takes a deep bite out of the return.

---

James A. White and Tom Herman contributed to this article.

(See related story: "Gurus' Views Vary, But Crash Not Seen" -- WSJ Oct. 16, 1989)

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891016-0045. Coldwell Banker Sells @ More Than 40% Stake @ To Firm's Employees
10/16/89
WALL STREET JOURNAL (J) WNEWS LABOR TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) LOS ANGELES

Coldwell Banker Commercial Group said it sold $47 million of common stock to its employees at $10 a share, giving them a total stake of more than 40% in the commercial real estate brokerage firm.

The firm, which was acquired in April from Sears, Roebuck & Co. in a management-led buy-out, had planned to sell up to $56.4 million of stock, or a 50% stake in the company, to its 5,000 employees.

Though the offering didn't sell out, James J. Didion, chairman and chief executive officer, said, "We're pretty proud of the employees' response." He noted that unlike an employee stock ownership plan, where a company usually borrows money from third party lenders to buy stock that it sets aside to award employees over time, here employees had to fork out their own cash for the stock. "They came up with their own money instead of borrowed money," Mr. Didion said. "It's totally different."

He said the offering was designed to create long-term incentives for employees. "We're in a service business, and in that context, it's vital to have your employees involved in the ownership so they have a stake in the success." The brokerage firm won't pay a dividend on the stock.

Employees have the right to trade stock among themselves, and the company will establish an internal clearing house for these transactions. They may also eventually sell the shares to third parties, but the outside investors who own the remaining 60% of Coldwell Banker have the right to first refusal.

Those outside investors in Coldwell Banker include Carlyle Group, a closely held Washington, D.C., merchant banking firm whose co-chairman is Frank Carlucci, former secretary of defense; Frederic V. Malek, senior adviser to Carlyle Group; Mellon Family Trust of Pittsburgh; Westinghouse Credit Corp., the financial services unit of Westinghouse Electric Corp.; Bankers Trust Co., a unit of Bankers Trust New York Corp.; and a group of Japanese investors represented by the investment banking unit of Tokyo-based Sumitomo Bank. Bankers Trust and Sumitomo financed the $300 million acquisition from Sears Roebuck. Coldwell Banker also named three outside director nominees for its 17 member board. The nominees are Gary Wilson, chief financial officer of Walt Disney Co.; James Montgomery, chief executive officer of Great Western Financial Corp.; and Peter Ubberroth, former commissioner of baseball and now a private investor.

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891016-0044. The Sell-Off in Stocks: @ Major Circuit Breakers @ May Face Test Today @ ---- @ By Kevin G. Salwen and Thomas E. Ricks @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) COMMODITY NEWS, FARM PRODUCTS (CMD) SECURITIES INDUSTRY (SCR) WASHINGTON

The first major event this morning in U.S. stock and futures trading may be a pause at the Chicago Mercantile Exchange.

Under a reform arising from the 1987 crash, trading in the Merc's stock-index futures will break for 10 minutes if the contract opens and stays five points from Friday's close, a move equal to 40 points on the Dow Jones Industrial Average. The aim of the interruption would be to ease the opening of the New York Stock Exchange, which would be hammered by such a volatile move on the Merc.

That early-morning breather is just one of a number of safeguards adopted after the 1987 crash. The Big Board also added computer capacity to handle huge surges in trading volume. Several of those post-crash changes kicked in during Friday's one-hour collapse and worked as expected, even though they didn't prevent a stunning plunge. But the major "circuit breakers" have yet to be evaluated. A deeper market plunge today could give them their first test.

A further slide also would resurrect debate over a host of other, more sweeping changes proposed -- but not implemented -- after the last crash. Most notably, several of the regulatory steps recommended by the Brady Task Force, which analyzed the 1987 crash, would be revived -- especially because that group's chairman is now the Treasury secretary. The most controversial of the Brady recommendations involved establishing a single overarching regulator to handle crucial cross-market questions, such as setting consistent margin requirements for the stock and futures markets.

But for the moment, attention focuses on the reforms that were put into place, and market regulators and participants said the circuit breakers worked as intended. Big Board and Merc officials expressed satisfaction with the results of two limits imposed on of the Merc's Standard & Poor's 500 contract, as well as "hot-line" communications among exchanges. Those pauses -- from 2:07 p.m. to 2:30 p.m. CDT and from 2:45 p.m. until the close of trading a half-hour later -- forced traders to buy and sell contracts at prices at or higher than their frozen levels.

During the first halt, after the S&P index had fallen 12 points, the Big Board's "Sidecar" computer program automatically was triggered. That system is designed to separate computer-generated program trades from all other trades to help exchange officials resolve order imbalances in individual stocks.

One Merc broker compared the action in the S&P pit during the two freezes to a fire at a well-drilled school. "You don't want the fire but you know what to do," said Howard Dubnow, an independent floor broker and a Merc governor. "There was no panic. The system worked the way we devised it to work."

After reopening for about 15 minutes, the S&P index tumbled to its 30-point limit and the second freeze went into effect. Traders then spent the last half-hour "watching to see if the Dow would drop 250 points," Mr. Dubnow added, referring to the level at which the stock market itself would have closed for an hour. One observer estimated that 80% to 90% of the S&P traders "were just standing around watching."

But the 250-point circuit breaker never had to kick in, and freezes on the Chicago Board of Trade's Major Market Index also weren't triggered. The MMI and the S&P 500 are the two major indexes used by program traders to run their computerized trading strategies. The programs are considered by many to be a major cause of the 1987 crash.

The process of post-crash reforms began with calls to remake the markets and wound up a year later with a series of rather technical adjustments.

In October 1987, just after the market drop, Washington was awash in talk of sweeping changes in the way the financial markets are structured and regulated. Over the next year that grand agenda was whittled down to a series of steps to soften big stock drops by interrupting trading to give market players time to pause and reconsider positions. In addition, limits were placed on computer-driven trading, and steps were taken to better link the stock and futures markets. Few changes were made in the way the markets are regulated.

At the outset the prime target was program trading, which was much discussed but little understood on Capitol Hill. There were also calls to strip the stock markets of "derivative" products, such as stock-index futures and options, which Federal Judge Stanley Sporkin, for example, likened to "barnacles attached to the basic market." And there was much criticism of the New York Stock Exchange's system of having stock trades flow through specialists, or market makers.

When the Brady Task Force's powerful analysis of the crash was released in January 1988, it immediately reshaped the reformers' agenda. Arguing that the separate financial marketplaces acted as one, and concluding that the crash had "raised the possibility of a full-scale financial system breakdown," the presidential task force called for establishing a super-regulator to oversee the markets, to make margins consistent across markets, to unify clearing systems and to install circuit breakers.

Only the last of those recommendations ever was implemented. The Reagan White House held the Brady recommendations at arm's length and named a second panel -- the Working Group on the Financial Markets -- to review its analysis and those of other crash studies. In May 1988, the Working Group, made up of representatives from the Federal Reserve, the Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, finally endorsed only circuit breakers.

After several more months of arguments among various stock exchanges and futures markets, circuit breakers were set in place, with the most notable suspending trading after 250 and 400 point drops in the Dow Jones Industrial Average. Privately, some free marketeers dismissed such mechanisms as sops to interventionists. After all, this free-market argument went, the Dow only dropped more than 250 points once this century.

--- @ Reforms Set After '87 Crash

"Circuit breakers" set to soften big drops:

-- If S&P futures fall 5 points at opening, contract trading pauses for 10 minutes.

-- If Dow Industrials fall 25 points at opening, contract trading pauses for 10 minutes.

-- If S&P futures fall 12 points (equivalent to about 100 points on DJIA), trading is frozen for half hour to that price or higher. On NYSE program trades are diverted into a separate computer file to determine buy and sell orders.

-- If S&P futures fall 30 points, trading is restricted for an hour to that price or higher.

-- If Dow Industrials fall 250 points, trading on the Big Board halts for an hour. S&P and MMI contracts also halt.

-- If DJIA drops 400 points, Big Board halts trading for two hours. Trading in MMI and S&P futures also halted. @ Reforms Never Enacted After '87 Crash:

Brady Task Force recommendations (Jan. 1988):

-- Establish an overarching regulator for financial markets

-- Unify trade-clearing systems

-- Make margins consistent across stock and futures markets

SEC proposals (May 1988):

-- Require prompt reports of large securities trades.

-- Give SEC authority to monitor risk-taking by affiliates of brokerage firms.

-- Transfer jurisdiction over stock-related futures to SEC from CFTC. (Opposed by new SEC chairman) -- Give SEC authority to halt securities trading, (also opposed by new SEC chairman).

Congressional proposal:

-- Create a task force to review current state of the securities markets and securities laws.

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891016-0043. International: @ World Wire @ ---- @ Compiled by William Mathewson
10/16/89
WALL STREET JOURNAL (J) FREST LABOR DBRSY JAPAN EUROP LATAM FORGN MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) TRANSPORTATION, TRUCK AND SHIP LINES, RAILROADS (TRA) FINANCIAL, ACCOUNTING, LEASING (FIN) BANKS (BNK) INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN)

SOVIET TV

Breaking the Soviet government's television monopoly, an independent company has gained rights to show world programming, including American films.

"There must not be a monopoly, there must be freedom of choice for both journalists and viewers," Nikolai I. Lutsenko, the president of the Nika TV company, told the weekly newspaper Nedelya. The company is already working on its own programming in several provincial cities and hopes to be on the air regularly in about a year, the newspaper said.

Mr. Lutsenko told Nedelya that he recently had been to the U.S. to pick up the rights to show 5,000 U.S. films in the Soviet Union. Nedelya's article was accompanied by a picture of Mr. Lutsenko interviewing singer John Denver in Colorado.

Even though it will be independent of official television, Nika will have an oversight board that will include members of the Communist youth league.

STRIKE AT DE BEERS

South Africa's National Union of Mineworkers said that about 10,000 diamond miners struck for higher wages at De Beers Consolidated Mines Ltd. De Beers said that workers at five of the group's mines were on strike, which it said was peaceful, with orderly picketing occurring at one of the mines. The deadlock in negotiations occurred with De Beers offering a 17% increase in the minimum-wage category while the union demanded a 37.6% increase in the minimum wage.

JAPANESE PINBALL Japan's opposition Socialist Party denied that its legislators had been bribed by pinball-parlor owners. The allegation had been raised in Parliament by the governing Liberal Democratic Party following magazine reports suggesting that money from Japanese-style pinball, called pachinko, had infiltrated politics. Tsuruo Yamaguchi, secretary general of the Socialist Party, acknowledged that nine party lawmakers had received donations from the pachinko association totaling 8 million yen (about $55,000) but said the donations were legal and none of its members acted to favor the industry.

ILLEGAL ANIMAL TRADE

The World Wide Fund for Nature said that Spain, Argentina, Thailand and Indonesia were doing too little to prevent illegal trade in endangered wildlife across their borders. A report by the conservation group presented at the U.N.-sponsored Convention on International Trade in Endangered Species in Lausanne accused the four of trading protected species ranging from parakeets to orchids. Fund official Simon Lyster said world trade in wildlife was estimated to total $5 billion of business annually.

TROUBLES AT NATO

A NATO project to build a frigate for the 1990s was torpedoed by the pull-out of three of its eight participating nations. Britain, France and Italy announced technical reasons for withdrawing, but some officials pointed to growing reluctance among the allies to commit themselves to big defense spending while East-West disarmament talks show signs of success.

BRITISH CREDIT

Small wonder that Britain's Labor Party wants credit controls. A few hours after the party launched its own affinity credit card earlier this month, the Tories raised the nation's base interest rate. Labor's Visa card is believed to be the first linked to a British political party. Labor gets 25 pence (39 cents) for every 100 (about $155) that a user charges to the card. As with other plastic in Britain's high-interest-rate environment, the Labor card, administered by Co-operative Bank, carries a stiff (in this case, 29.8%) annual rate on the unpaid balance.

THE COST OF AUSTERITY

China's year-long austerity program has achieved some successes in harnessing runaway economic growth and stabilizing prices but has failed to eliminate serious defects in state planning and an alarming drain on state budgets.

The official China Daily said retail prices of non-staple foods haven't risen since last December but acknowledged that huge government subsidies were a main factor in keeping prices down. The State Statistical Bureau found that more than 1 billion yuan ($270 million) was spent in the first half of the year for pork subsidies.

The newspaper quoted experts as saying the subsidies would cause the difference between prices and real values of commodities to "become very unreasonable" and reduce needed funds for investment in the "already difficult state budget."

The aim of the austerity measures was to slice economic growth, which soared to 20.7% last year, to 8% in 1990.Economists now predict the growth rate will be about 11.5% for the year.

POSTSCRIPTS . . .

In a sign of growing official tolerance for religion, Russian Orthodox priests were allowed to celebrate the 400th anniversary of the Moscow patriarchate in the Kremlin's 15th-century Uspensky Cathedral, where czars were crowned. . . . A 34-foot-tall, $7.7 million statue of Buddha was completed on a hill outside Hong Kong, facing China. The statue is the brainchild of Sik Chi Wan, director of the Po Lin Monastery, who said: "Hong Kong is such a prosperous place, we also need some kind of religious symbol."

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891016-0042. Enterprise: @ Tiny Firm Faces Legal Might of Wrathful Multinational @ --- @ In Turnaround, Japan's Sony Fights @ Knockoff From U.S.'s Justin Products @ ---- @ By Jeffrey A. Tannenbaum @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) SNE MARKETING, ADVERTISING (MKT) HOME ELECTRONICS, FURNISHINGS, APPLIANCES (HMF) NEW YORK

It all seemed innocent enough: Last April, one Steven B. Iken visited Justin Products Inc. here, identified himself as a potential customer and got the word on the little company's new cassette players for children.

"It is almost identical to the Sony product," Mr. Iken remarked, after seeing prototypes and pictures. Replied a Justin salesman: "Exactly." The Justin merchandise carried wholesale prices some 40% below those of Sony Corp. of Japan's "My First Sony" line. The visitor waxed enthusiastic and promised to return.

But instead of a new customer -- part of a hoped-for bonanza from underselling Sony -- Justin got a costly legal morass. Mr. Iken, it turned out, was a private detective using a hidden tape recorder to gather information for Sony. His recording later turned up as a court exhibit. Seeking to keep Justin's "My Own" product line off the U.S. market, Sony last May filed a suit in Manhattan federal court accusing the upstart of trademark infringement, unfair competition and other violations of business law.

Since then, life has changed a lot for 61-year-old Leonard Kaye, Justin's owner. "I haven't been able to get a decent night's sleep since this has been going on," he says. "It's the most distracting thing in my life -- I can't even attend to my business." His company (annual sales: about $25 million) may suffer a costly blow -- losing an estimated 10% of total sales -- if Sony (annual sales: about $16 billion) prevails. Justin's plight shows what can happen when a tiny company suddenly faces the full legal might of a wrathful multinational.

With considerable irony, the case also shows how completely Japan has turned the tables on U.S. business. Americans used to complain bitterly about being undersold by look-alike products from Japan. Now Sony, whose innovative, premium-priced products are among the most admired in consumer electronics, is bitterly complaining about a little U.S. firm with a cheap look-alike produced in China.

"The gist of this is that Justin knocked off the Sony line and Sony wants to stop it," says Lewis H. Eslinger, Sony's attorney, who previously guarded Rubik's Cube. (Sony itself declines to comment.) If Sony wins, Mr. Eslinger says, its little rival will have to try to sell the products overseas. At worst, he adds, "They'd have to grind them all up and throw them away."

Mr. Kaye denies the suit's charges and says his only mistake was taking on Sony in the marketplace. "I made a similar line and I produced it cheaper," he says.

Today, U.S. Judge John E. Sprizzo is expected to rule on Sony's renewed request for a pre-trial order blocking sale of the disputed products, on which deliveries began in July. The judge turned down an earlier Sony request for such an order -- a decision upheld on appeal -- but Sony returned with additional evidence and arguments.

Though hoping to settle the case, Justin vows to fight on, if necessary. But the battle is more than Justin bargained for. "I had no idea I was getting in so deep," says Mr. Kaye, who founded Justin in 1982. Mr. Kaye had sold Capetronic Inc., a Taiwan electronics maker, and retired, only to find he was bored. With Justin, he began selling toys and electronics made mostly in Hong Kong, beginning with Mickey Mouse radios. The company has grown -- to about 40 employees, from four initially, Mr. Kaye says. Justin has been profitable since 1986, adds the official, who shares his office with numerous teddy bears, all samples from his line of plush toys.

Like many others, Mr. Kaye took notice in 1987 when Sony, in a classic example of market segmentation, changed the plastic skin and buttons on the famous Walkman line of portable audio equipment and created the My First Sony line for children. The brightly colored new products looked more like toys than the adult models. (In court papers, Sony says it has spent more than $3 million to promote the line, with resulting sales of over a million units.)

Sony found a new market niche, but Mr. Kaye figured that its prices left plenty of room for a lower-priced competitor. His products aren't exact copies of Sony's but strongly resemble them in size, shape and, especially, color. Sony uses mostly red and blue, with traces of yellow -- and so does Justin, on the theory that kids prefer these colors. ("To be successful, a product can be any color whatsoever, as long as it is fire-engine red," says Charles E. Baxley, Justin's attorney.)

By last winter, Justin was showing prototypes at toy fairs in Hong Kong and New York -- and Sony noticed. Indeed, concerned that Sony sales personnel were threatening legal action or other retaliation -- such as withholding desirable Sony products -- against Justin's customers, Mr. Baxley fired off a letter to Sony in April. He himself threatened to take the matter to the Federal Trade Commission or U.S. Justice Department. But Justin hasn't pursued those charges (which were without merit, according to Mr. Eslinger, the Sony attorney). Recalls Mr. Baxley: "Our purpose was to influence them to leave us alone. We never intended taking on Sony -- we don't have the resources."

Sony answered the empty threat with its real suit. Off and on since then, the companies have skirmished in court. And Justin, in a news release, says, "Once competitive, Sony now resorts to strong-arm tactics in American courtrooms to carve out and protect niche markets."

Sony's lawyer insists that the company's tactics -- including the use of a private detective posing as a buyer -- are routine in such matters. He also insists that Sony, no less than others, has a legal right to protect its "trade dress," in this case, mostly the colors that it claims make My First Sony products distinctive. (Justin claims it began using the same colors on electronic goods for children long before Sony entered the children's market.)

Whatever its merits, Sony's aggressive defense is debilitating for Justin. It's also costly. Mr. Kaye says he has paid more than $70,000 in legal fees so far.

Of Sony, Mr. Kaye says: "They know there's no way for them to lose. They just keep digging me in deeper until I reach the point where I give up and go away." For now, though, he vows to hang in.

891016-0041.
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891016-0041. Business Brief -- Unitil Corp.: @ Chairman Purchases 4.9% @ Of Common in Private Buy
10/16/89
WALL STREET JOURNAL (J) UTL EUA FGE TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

@ Charles H. Tenney II, chairman of Unitil Corp., purchased 34,602 shares, or 4.9%, of Unitil's common, according to a filing with the Securities and Exchange Commission.

The stock was bought on Thursday in a privately negotiated transaction, the filing said.

As previously reported, Unitil, Exeter, N.H., and Fitchburg Gas & Electric Co., Fitchburg, Mass., are targets of unsolicited tender offers from Boston-based Eastern Utilities Associates. Eastern Utilities has offered $40 a share for Unitil and $36 a share for Fitchburg Gas and has extended both offers to Dec. 4. Both companies rejected the offers.

891016-0040.
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891016-0040. International Brief -- Dresdner Bank AG: @ German Concern Is Seeking @ Control of a French Bank
10/16/89
WALL STREET JOURNAL (J) DRSDY F.SGF B.SGL TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BANKS (BNK)

Dresdner Bank AG of West Germany has announced a friendly tender offer for control of Banque Internationale de Placements, a French bank whose main shareholder is France's Societe Generale, the Societe de Bourses Francaises said.

The tender offer by West Germany's second-biggest commercial bank is in two stages. Dresdner is offering to acquire 32.99% of BIP's capital for 1,015 francs ($156.82) a share. The terms of the offer put a value of 528 million francs ($81.6 million) on the 32.99% shareholding.

The Societe Generale banking group controls 18.2% of the shareholding, while Societe Generale de Belgique S.A. owns 9.69% and Financiere Tradition, a holding company, owns 5.1%.

891016-0039.
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891016-0039. Business Brief -- Smith Laboratories Inc.: @ Rocha Garza Sells Stock @ To Affiliated Companies
10/16/89
WALL STREET JOURNAL (J) SMLB TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Mexican investor Joel Rocha Garza said he sold a block of 600,000 shares of Smith Laboratories Inc. common stock to companies affiliated with him.

In a filing with the Securities and Exchange Commission, Mr. Rocha Garza said Biscayne Syndicate Inc., Lahus II Inc., and Lahus III Inc. bought the 600,000 shares on Oct. 11 for $1.4 million, or $2.375 a share.

Mr. Rocha Garza said that he, Clarendon Group Ltd., Biscayne, Lahus II, and Lahus III are all affiliated and hold a combined stake of 1,234,100 shares, or 9.33%. Mr. Rocha Garza has said he wants to purchase more shares.

In San Diego, Smith Laboratories President Timothy Wollaeger said the transfer of the shares isn't significant.

891016-0038.
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891016-0038. Business Brief -- Sports & Recreation Inc.: @ Investcorp, Others, Purchase @ Retail Chain for $40 Million
10/16/89
WALL STREET JOURNAL (J) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Investcorp, New York, said it and the management of Sports & Recreation Inc. bought the operator of the 10-store Sports Unlimited chain for some $40 million.

The investment bank becomes majority shareholder in Sports & Recreation, a 10-year-old sporting goods retailer, said Oliver E. Richardson, a member of Investcorp's management committee and a director of the chain.

Sports Unlimited, Tampa, Fla., posted revenue of $59 million for the year ended July 31. The company is "very profitable" on an operating basis, Mr. Richardson said, but he declined to specify numbers.

In 1982, Sports & Recreation's managers and certain passive investors purchased the company from Brunswick Corp. of Skokie, Ill. In the latest transaction, management bought out the passive investors' holding, Mr. Richardson said.

891016-0037.
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891016-0037. Business Brief -- Hammond Co.: @ Fidelity National Financial @ Extends Standstill Accord
10/16/89
WALL STREET JOURNAL (J) THCO FNF TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Hammond Co., Newport Beach, Calif., said Fidelity National Financial Inc. extended its previous agreement, under which it won't purchase any more of the mortgage banker's common stock, through Oct. 31.

The previous agreement expired Thursday.

Hammond said that its discussions with Fidelity, an Irvine, Calif., title-insurance underwriter, are continuing, but that prospects for a longer-term standstill agreement are uncertain.

Fidelity has increased its stake in Hammond to 23.57% in recent months. Statements made in Securities and Exchange Commission filings led Hammond to request a standstill agreement.

891016-0036.
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891016-0036. Business Brief -- Giant Group Ltd.: @ Talks to Buy Aspen Air @ Are Terminated by Firm
10/16/89
WALL STREET JOURNAL (J) GPO TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Giant Group Ltd. said it terminated negotiations for the purchase of Aspen Airways, a Denver-based regional carrier that operates the United Express connector service under contract to UAL Corp.'s United Airlines.

Giant, a Beverly Hills, Calif., collection of companies that is controlled by Hollywood producer Burt Sugarman, didn't give a reason for halting its plan to acquire the airline, and Aspen officials couldn't be reached for comment.

Giant agreed last month to purchase the carrier. Giant hasn't ever disclosed the proposed price, although Avmark Inc., an Arlington, Va.-based aircraft consulting concern, has valued Aspen's fleet at about $46 million.

The airline would have become the latest in a peculiar blend of Giant companies, which are involved in making cement, recycling newsprint and operating fast-food restaurants.

891016-0035.
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891016-0035. Business Brief -- Cie. de Navigation Mixte: @ State-Controlled Insurer Gets @ Approval to Boost Its Stake
10/16/89
WALL STREET JOURNAL (J) F.AGF F.CNM EUROP TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

The state-controlled insurer Assurances Generales de France said it has obtained regulatory approval to increase its stake in the financial holding company Cie. de Navigation Mixte above 10% from the current level of about 8%.

Friday's approval was needed to conform with Bourse rules regarding companies with bank interests and follows a similar approval given Wednesday to Cie. Financiere de Paribas. Both Paribas and AGF have been increasing their stakes in Navigation Mixte recently for what they have termed "investment purposes," although the issue has been surrounded by takeover speculation in recent weeks.

AGF didn't comment officially on its reasons for seeking the approval, but people close to the group said it was done to make sure the group would have the flexibility to increase its stake in the future, should interesting price opportunities arise.

An AGF official did specify, however, that there was no foundation to recent rumors the group might be acting in concert with Paribas.

891016-0033.
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891016-0033. Business Brief -- Lockheed Corp.: @ Unit and Italian Firm Study @ New Group of Jet Trainers
10/16/89
WALL STREET JOURNAL (J) LK RTN AEROSPACE (ARO) DEFENSE DEPARTMENT (DEF)

Lockheed Aeronautical Systems Co., a unit of Lockheed Corp., said it agreed to join with Aermacchi S.p.A. of Varese, Italy, to propose a new generation of jet trainers for the U.S. Air Force.

The Air Force is looking to buy 540 new primary jet trainers, with a total value of $1.5 billion to $2 billion, between 1994 and 2004. The aircraft would replace the T-37, made by the Cessna Aircraft Co. unit of General Dynamics Corp., which the Air Force uses to train jet pilots. Lockheed said the U.S. Navy may also buy an additional 340 trainer aircraft to replace its T34C trainers made by the Beech Aircraft Corp. unit of Raytheon Corp.

Under the agreement with Lockheed, Aermacchi will license Lockheed to build the Aermacchi MB-339 jet tandem-trainer and will supply certain structures. Lockheed will build additional structures and perform final assembly of the tandem-seat trainer at its Marietta, Ga., plant should the Air Force order the craft.

A Lockheed spokesman in Burbank, Calif., said he wasn't aware of which other companies would be competing for the Air Force contract.

891016-0032.
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891016-0032. International Brief -- Peugeot S.A.: @ Striking Auto Workers End @ Occupation of Metal Shop
10/16/89
WALL STREET JOURNAL (J) F.PEU EUROP LABOR AUTOMOBILES (AUT)

Striking auto workers ended their 19-day occupation of a metal shop at a Peugeot S.A. factory in eastern France Friday as pay talks got under way in the capital.

But the Peugeot breakthrough came as a nationwide dispute by Finance Ministry employees disrupted border checkpoints and threatened the government's ability to pay its bills.

The Peugeot metalworkers began filing out of the shop, which makes auto parts, at the plant in Mulhouse after voting 589 to 193 to abandon the occupation.

Their withdrawal was based on promises by Peugeot to open negotiations in Paris at the same time the last man left the premises.

The strike by customs officers, tax collectors, treasury workers and other civil servants attached to the Ministry of Finance may pose a more serious challenge to the government and the average Frenchman. Ministry employees complain that they are poorly paid because of a complex job-rating system they say fails to take into account their education and level of technical expertise.

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891016-0031. Credit Markets: @ Trading in Junk Bonds Collapses, @ While Treasurys Stage Big Rally @ ---- @ By Matthew Winkler and Constance Mitchell @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) BOND MARKET NEWS (BON) FINANCIAL, ACCOUNTING, LEASING (FIN) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) BANKS (BNK) CONSTRUCTION, MATERIALS (CON) FEDERAL RESERVE BOARD (FED) TREASURY DEPARTMENT (TRE) FEDERAL GOVERNMENT (FDL) NEW YORK

The market for $200 billion of high-risk junk bonds, battered by a succession of defaults and huge price declines this year, practically vanished Friday.

Trading ground to a halt as investors rushed to sell bonds, only to find themselves deserted by potential buyers. Stunned, they watched brokerage houses mark down price quotations on their junk holdings while being able to execute very few actual trades.

"The junk bond market is in a state of gridlock now -- there are no bids, only offers," says independent investor Martin D. Sass, who manages nearly $4 billion and who recently decided to buy distressed securities for a new fund. This calamity is "far from over," he says.

Junk's collapse helped stoke the panicky selling of stocks that produced the deepest one-day dive in the Dow Jones Industrial Average since the Oct. 19, 1987, crash. Simultaneously, it also helped trigger this year's biggest rally in the U.S. government bond market as investors rushed to move capital into the highest-quality securities they could find.

But "an eerie silence pervaded" the junk market Friday as prices tumbled on hundreds of high-yield bonds despite "no active trading," says John Lonski, an economist at Moody's Investors Service Inc. For example, the price of Southland Corp.'s $500 million of 16 3/4% bonds due 2002 -- sold less than two years ago by Goldman, Sachs & Co. -- plummeted 25% to just 30 cents on the dollar. But not even Goldman would make a market in the securities of Southland, the owner of the nationwide chain of 7-11 convenience stores that is strapped for cash. Goldman officials declined to comment.

Junk bonds, which mushroomed from less than $2 billion at the start of this decade, have been declining for months as issuer after issuer sank beneath the weight of hefty interest payments. The shaky market received its biggest jolt last month from Campeau Corp., which created its U.S. retailing empire with junk financing. Campeau developed a cash squeeze that caused it to be tardy on some interest payments and to put its prestigious Bloomingdales department-store chain up for sale.

Now, dozens of corporations, including Ethan Allen, TW Services and York International, that are counting on at least $7 billion of scheduled new junk financings to keep their highly leveraged takeovers and buy-outs afloat, may never get the money. "The music has stopped playing," says Michael Harkins, a principal in the investment firm of Levy Harkins. "You've either got a chair or you don't."

In Friday's aftermath, says R. Douglas Carleton, a director of high-yield finance at First Boston Corp., "much of the $7 billion forward calendar could be deferred, depending on the hysteria." In August, First Boston withdrew a $475 million junk offering of Ohio Mattress bonds because potential buyers were "very skittish."

The outlook "looks shaky because we're still waiting" for mutual funds, in particular, to dump some of their junk bond holdings to pay off redemptions by individual investors, says King Penniman, senior vice president at McCarthy, Crisanti & Maffei, an investment arm of Xerox Financial Services. Indeed, a Moody's index that tracks the net asset values of 24 high-yield mutual funds declined for the 17th consecutive day Friday.

In a stark contrast, the benchmark 30-year Treasury bond climbed more than 2 1/2 points, or about $25 for each $1,000 face amount, to 103 12/32, its biggest gain of the year. The bond's yield dropped to 7.82%, the lowest since March 31, 1987, according to Technical Data Global Markets Group. The yield on three-month Treasury bills, considered the safest of all investments, plummeted about 0.7 percentage point to 7.16%, the largest one-day decline since 1982.

The main catalyst for government bond market rally was the 190.58-point drop in the Dow Jones Industrial Average. "When you get panic in one market, you get flight to quality in the other," said Maria Ramirez, money market economist at Drexel Burnham Lambert Inc.

Nevertheless, the problems of the junk market could prompt the Federal Reserve to ease credit in the months ahead. "This marks a significant shift in the interest rate outlook," says William Sullivan, director of money market research at Dean Witter Reynolds Inc., New York.

Any sustained credit-easing could be a lift for junk bonds as well as other securities. Robert Dow, a partner and portfolio manager at Lord, Abbett & Co., which manages $4 billion of high-yield bonds, says he doesn't "think there is any fundamental economic rationale {for the junk bond rout}. It was herd instinct."

He adds: "The junk market has witnessed some trouble and now some people think that if the equity market gets creamed that means the economy will be terrible and that's bad for junk. I don't believe that's the case, but I believe that people are running scared. There is a flight to quality, and the quality is not in equities and not in junk -- it's in Treasurys."

Even as trading in high-yield issues dried up over the past month, corporations sold more than $2 billion of new junk bonds. For example, a recent $375 million offering of Petrolane Gas Services L.P. bonds sold by First Boston was three times oversubscribed. A $550 million offering of Turner Broadcasting System Inc. high-yield securities sold last week by Drexel was increased $50 million because of strong demand.

First Boston estimates that in November and December alone, junk bond investors will receive $4.8 billion of coupon interest payments. "That's a clear indication that there is and will be an undercurrent of basic business going on," says Mr. Carleton of First Boston.

"I don't know how people can say the junk bond market disappeared when there were $1.5 billion of orders for $550 million of junk bonds sold last week by Turner," says Raymond Minella, co-head of merchant banking at Merrill Lynch & Co. "When the rally comes, insurance companies will be leading it because they have billions to invest and invest they will. There is plenty of money available from people who want to buy well-structured deals; it's the stuff that's financed on a shoestring that people are wary of."

But such highly leveraged transactions seemed to have multiplied this year, casting a pall over much of the junk market. Michael McNamara, director of fixed-income research at Kemper Financial Services, says the quality of junk issues has been getting poorer, contributing to the slide in prices.

"Last year we probably bought one out of every three new deals," he says. "This year, at best, it's in one in every five or six. And our credit standards haven't changed one iota." However, Mr. McNamara said the slide in junk is creating "one hell of a buying opportunity" for selective buyers.

For the moment, investors seem more preoccupied with the "bad" junk than the "good" junk. "The market has been weak since" the announcement of the Campeau cash squeeze and the company's subsequent bailout by Olympia & York, says Mr. Minella of Merrill Lynch. "That really affected the market in that people started to ask 'What else is in trouble?'"

Well before Campeau, though, there were signs that the junk market was stumbling through one of its worst years ever. Despite the relatively strong economy, junk bond prices did nothing except go down, hammered by a seemingly endless trail of bad news:

-- In June, two months before it would default on interest payments covering some of its $1.2 billion of speculative debt securities, New York-based Integrated Resources Inc. said it ran out of borrowed money.

-- In July, Southmark Corp., the Dallas-based real estate and financial services company with about $1.3 billion of junk bonds, voluntarily filed for protection under U.S. bankruptcy law. -- By the end of July, the difference in yield between an index of junk bonds and seven-year Treasury notes widened to more than 5.5 percentage points.

-- In August, Resorts International Inc., which sold more than $500 million of junk bonds, suspended interest payments.

-- In September, just as the cash squeeze hit Campeau, Lomas Financial Corp. defaulted on $145 million of notes and appeared unlikely to pay interest on a total of $1.2 billion of debt securities.

Meantime, regulators are becoming increasingly worried as the rush to leverage shows no signs of abating. Moody's says the frequency of corporate credit downgrades is the highest this year since 1982. In addition, there are six times as many troubled banks as there were in the recession of 1981, according to the Federal Deposit Insurance Corp.

"The era of the 1980s is about compound interest and the reaching for it," says James Grant, editor of Grant's Interest Rate Observer, an early critic of the junk bond market. "What we've begun to see is the damage to businesses of paying exorbitant compound interest. Businesses were borrowing at interest rates higher than their own earnings. What we're seeing now is the wrenching readjustment of asset values to a future when speculative-grade debt will be hard to obtain rather than easy."

---

Friday's Market Activity

Prices of Treasury bonds surged in the biggest rally of the year as investors fled a plummeting stock market.

The benchmark 30-year Treasury bond was quoted 6 p.m. EDT at 103 12/32, compared with 100 27/32 Thursday, up 2 1/2 points. The yield on the benchmark fell to 7.82%, the lowest since March 31, 1987, according to Technical Data Global Markets Group.

The "flight to quality" began late in the day and followed a precipitous fall in the stock market. Treasurys opened lower, reacting negatively to news that the producer price index -- a measure of inflation on the wholesale level -- accelerated in September. Bond prices barely budged until midday.

Many bond market participants will be closely eying the action of the Federal Reserve, which might repeat its October 1987 injection of huge amounts of liquidity to buoy the financial markets and keep the economy from slowing into a recession.

Prices of municipals, investment-grade corporates and mortgage-backed bonds also rose, but lagged behind their Treasury counterparts.

Mortgage securities rose in hectic trading, with most of the activity concentrated in Government National Mortgage Association 9% coupon securities, the most liquid mortgage issue.

The Ginnie Mae November 9% issue ended at 98 25/32, up 7/8 point on the day, to yield about 9.28% to a 12-year average life assumption.

Investment-grade corporate bonds were up about 1/2 to 3/4 point. But the yield spread between lower-quality, investment-grade issues and higher-quality bonds widened.

And the yields on telephone and utility issues rose relative to other investment-grade bonds in anticipation of this week's $3 billion bond offering by the Tennessee Valley Authority.

Despite rumors that the TVA's long-awaited offering would be postponed because of the debacle in the equity markets, sources in the underwriting syndicate said they expect the issue will be priced as scheduled.

One of the sources said the smaller portions of $750 million each of five-year and 10-year bonds have already been "substantially oversubscribed."

Municipal bonds rose as much as 3/4 point.

---

Roger Lowenstein contributed to this article.

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891016-0030. REVIEW & OUTLOOK (Editorial): @ Friday the 13th
10/16/89
WALL STREET JOURNAL (J) UAL KLM BAB TAXES STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AIRLINES (AIR) CONGRESS (CNG) TRANSPORTATION DEPARTMENT (TRN)

Friday's 190-point plunge in stocks does not come atop the climate of anxiety that dominated financial markets just prior to their 1987 October crash, and mechanisms have been put in place to keep markets more orderly. Still, the lesson is about the same: On Friday the 13th, the market was spooked by Washington.

The consensus along the street seems to be that the plunge was triggered by the financing problems of the UAL takeover, and it's certainly true the rout began immediately after the UAL trading halt. Still, the consensus seems almost as wide that one faltering bid is no reason to write down the value of all U.S. business. This observation leads us to another piece of news moving on the Dow Jones ticker shortly before the downturn: the success of Senate Democrats in stalling the capital gains tax cut.

The real value of all shares, after all, is directly impacted by the tax on any profits (all the more so given the limits on deductions for losses that show gains are not "ordinary income"). And market expectations clearly have been raised by the capital gains victory in the House last month. An hour before Friday's plunge, that provision was stripped from the tax bill, leaving it with $5.4 billion in tax increases without a capital gains cut.

There is a great deal to be said, to be sure, for stripping the garbage out of the reconciliation bill. It would be a good thing if Congress started to decide issues one-by-one on their individual merits without trickery. For one thing, no one doubts that the capital gains cut would pass on an up-or-down vote. Since Senate leaders have so far fogged it up with procedural smokescreens, promises of a cleaner bill are suspect. Especially so since President Bush has been weakened by the Panama fiasco.

To the extent that the UAL troubles contributed to the plunge, they are another instance of Washington's sticky fingers. As the best opportunities for corporate restructurings are exhausted of course, at some point the market will start to reject them. But the airlines are scarcely a clear case, given anti-takeover mischief by Secretary of Transportation Skinner, who professes to believe safety will be compromised if KLM and British Airways own interests in companies that fly airplanes.

Worse, Congress has started to jump on the Skinner bandwagon. James Oberstar, the Minnesota Democrat who chairs the Public Works and Transportation Committee's aviation subcommittee, has put an anti-airline takeover bill on supersonic speed so that it would be passed in time to affect the American and United Air Lines bids. It would give Mr. Skinner up to 50 days to "review" any bid for 15% or more of the voting stock of any U.S. carrier with revenues of $1 billion or more. So the UAL deal has problems, and the market loses 190 points. Congratulations, Mr. Secretary and Mr. Congressman.

In the 1987 crash, remember, the market was shaken by a Danny Rostenkowski proposal to tax takeovers out of existance. Even more important, in our view, was the Treasury's threat to thrash the dollar. The Treasury is doing the same thing today; thankfully, the dollar is not under 1987-style pressure.

Also, traders are in better shape today than in 1987 to survive selling binges. They are better capitalized. They are in less danger of losing liquidity simply because of tape lags and clearing and settlement delays. The Fed promises any needed liquidity. The Big Board's liaison with the Chicago Board of Trade has improved; it will be interesting to learn if "circuit breakers" prove to be a good idea. In any event, some traders see stocks as underpriced today, unlike 1987.

There is nothing wrong with the market that can't be cured by a little coherence and common sense in Washington. But on the bearish side, that may be too much to expect.

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891016-0029. Business Brief -- First Chicago Corp.: @ Third-Quarter Loss Posted @ After Addition to Reserves
10/16/89
WALL STREET JOURNAL (J) FNB EARNINGS (ERN) BANKS (BNK)

First Chicago Corp. posted a third-quarter loss of $23.3 million after joining other big banks in further adding to its reserves for losses on foreign loans.

The parent company of First National Bank of Chicago, with $48 billion in assets, said it set aside $200 million to absorb losses on loans and investments in financially troubled countries. The addition, on top of two big 1987 additions to foreign-loan reserves, brings the reserve to a level equaling 79% of medium-term and long-term loans outstanding to troubled nations.

First Chicago since 1987 has reduced its loans to such nations to $1.7 billion from $3 billion.

Despite this loss, First Chicago said it doesn't need to sell stock to raise capital. During the quarter, the company realized a pretax gain of $60.4 million from the sale of its First Chicago Investment Advisors unit.

Combined foreign exchange and bond trading profits dipped 24% against last year's third quarter, to $38.2 million from $50.5 million. Gains from First Chicago's venture capital unit, a big leveraged buy-out investor, rose 32% to $34 million from $25.7 million a year ago.

Interest income and most fee income was strong.

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891016-0028. Europe: @ Greek Elections: Rumbles Left, Mumbles Right @ ---- @ By Richard C. Carpenter
10/16/89
WALL STREET JOURNAL (J) EUROP ATHENS

Greece's second bout of general elections this year is slated for Nov. 5. For those hoping to see a modicum of political normalcy restored -- in view of Greece's eight-year misadventure under autocratic pseudosocialism and subsequent three-month hitch with a conservative-communist coalition government -- there is but one bright sign: The scandals still encircling former Prime Minister Andreas Papandreou and his fallen socialist government are like flies buzzing around a rotting carcass.

In the mid-June round of voting, Greeks gave no clear mandate to any single political party. The ad interim coalition government that emerged from post-electoral hagglings was, in essence, little more than the ill-conceived offspring of ideological miscegenation: On one side, the center-right New Democracy Party, headed by Constantine Mitsotakis. On the other, the so-called Coalition of the Left and Progress -- a quaint and rather deceptive title for a merger of the pro-Soviet Communist Party of Greece and its Euro-Communist cousin, the Hellenic Left.

The unifying bond for this left-right mismatch was plain: PASOK (Mr. Papandreou's party) as common political enemy. The ostensible goal was a mop-up of government corruption, purportedly at all levels, but the main marks were Mr. Papandreou and his closest associates. In point of fact, this catharsis was overdue by decades. When reduced to buzzword status in ex parte pledges, however, the notion transmogrified into a promised assault, with targets primarily for political gains, not justice.

With regard to Greece's long-bubbling bank-looting scandal, Mr. Papandreou's principal accuser remains George Koskotas, former owner of the Bank of Crete and self-confessed embezzler, now residing in a jail cell in Salem, Mass., from where he is fighting extradition proceedings that would return him to Greece. Mr. Koskotas's credibility is, at best, problematic. He has ample motive to shift the blame, and his testimony has also been found less than forthright on numerous points. Nevertheless, the New Democracy and Communist parties herald his assertions as proof of PASOK complicity.

Among unanswered questions are whether Mr. Papandreou received $23 million of stolen Bank of Crete funds and an additional $734,000 in bribes, as contended; whether the prime minister ordered state agencies to deposit some $57 million in Mr. Koskotas's bank and then skim off the interest; and, what PASOK's cut was from the $210 million Mr. Koskotas pinched.

Two former ministers were so heavily implicated in the Koskotas affair that PASOK members of Parliament voted to refer them to the special court. But eluding parliamentary probe was the case of millions of drachmas Mr. Koskotas funneled into New Democracy coffers. In the end, the investigation produced only circumstantial evidence and "indications" that point to PASOK, not clinching proof.

On another issue, Greeks were told how their national intelligence agency, the EYP, regularly monitored the telephone conversations of prominent figures, including key opposition politicians, journalists and PASOK cabinet members. Despite convincing arguments, it was never established that Mr. Papandreou personally ordered or directed the wiretaps.

The central weakness of the "scandals" debates was pointed up especially well when discussions focused on arms deals and kickbacks. The coalition government tried to show that PASOK ministers had received hefty sums for OKing the purchase of F-16 Fighting Falcon and Mirage 2000 combat aircraft, produced by the U.S.based General Dynamics Corp. and France's Avions Marcel Dassault, respectively. Naturally, neither General Dynamics nor Dassault could be expected to hamper its prospective future dealings by making disclosures of sums paid (or not) to various Greek officials for services rendered.

So it seems that Mr. Mitsotakis and his communist chums may have unwittingly served Mr. Papandreou a moral victory on a platter: PASOK, whether guilty or not, can now traipse the countryside condemning the whole affair as a witch hunt at Mr. Papandreou's expense. But while verbal high jinks alone won't help PASOK regain power, Mr. Papandreou should never be underestimated. First came his predictable fusillade: He charged the Coalition of the Left and Progress had sold out its leftist tenets by collaborating in a right-wing plot aimed at ousting PASOK and thwarting the course of socialism in Greece.

Then, to buttress his credibility with the left, he enticed some smaller leftist parties to stand for election under the PASOK banner. Next, he continued to court the communists -- many of whom feel betrayed by the left-right coalition's birth -- by bringing into PASOK a well-respected Communist Party candidate. For balance, and in hopes of gaining some disaffected centrist votes, he managed to attract a former New Democracy Party representative and known political enemy of Mr. Mitsotakis. Thus PASOK heads for the polls not only with diminished scandal-stench, but also with "seals of approval" from representatives of its harshest accusers.

Crucial as these elections are for Greece, pressing issues of state are getting lost in the shuffle. The country's future NATO participation remains unsure, for instance. Greece also must revamp major pieces of legislation in preparation for the 1992 targets of heightened Common Market cooperation. Greece's bilateral relations with the U.S. need attention soon as well. For one, the current accord concerning U.S. military bases in Greece lapses in May 1990. Negotiations for a new agreement were frozen before the June elections, but the clock is running.

Another matter of concern is the extradition of Mohammed Rashid, a Palestinian terrorist who is wanted in the U.S. for the 1982 bombing of a Pan American Airways flight. The Greek courts have decided in favor of extradition in the Rashid case, but the matter awaits final approval from Greece's next justice minister. The Greeks seem barely aware of the importance of the case as a litmus test of whether Greece will be counted in or out for international efforts to combat terrorism.

That PASOK could win the elections outright is improbable; the Greek press, previously eager to palm off PASOK's line, has turned on Mr. Papandreou with a wild-eyed vengeance. Yet the possibility of another lash-up government is all too real. If Mr. Papandreou becomes the major opposition leader, he could hamstring a conservative-led coalition. Also, he could force new elections early next year by frustrating the procedures for the election of the president of the republic in March.

New Democracy has once again glaringly underestimated the opponent and linked its own prospects to negative reaction against PASOK, forgetting to tend to either program clarity or the rectification of internal squabbles.

As for Mr. Papandreou? He's not exactly sitting pretty at this stage. But since he is undoubtedly one of the most proficient bull slingers who ever raked muck, it seems far wiser to view him as sidelined, but certainly not yet eliminated.

---

Mr. Carpenter, a regional correspondent for National Review, has lived in Athens since 1981.

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891016-0027. What's News -- @ Business and Finance
10/16/89
WALL STREET JOURNAL (J)

U.S. OFFICIALS MOVED to head off any repeat of Black Monday today following Friday's plunge in stock prices. Fed Chairman Greenspan signaled that the central bank was prepared to inject massive amounts of money into the banking system to prevent a financial crisis. Other U.S. and foreign officials also mapped out plans, though they kept their moves quiet to avoid making the financial markets more jittery.

Friday's sell-off was triggered by the collapse of UAL's buy-out plan and a big rise in producer prices. The Dow Jones industrials skidded 190.58, to 2569.26. The junk bond market came to a standstill, while Treasury bonds soared and the dollar fell.

Japanese stocks dropped early Monday, but by late morning were turning around. The dollar was trading sharply lower in Tokyo.

---

Prospects for a new UAL buy-out proposal appear bleak. Many banks refused to back the $6.79 billion transaction, but bankers said it was not from any unwillingness to finance takeovers. The decision was based solely on problems with the UAL management-pilot plan, they said.

---

The surge in producer prices in September followed three months of declines, but analysts were divided on whether the 0.9% jump signaled a severe worsening of inflation. Also, retail sales grew 0.5% last month.

---

A capital-gains tax cut was removed from the Senate's deficit reduction bill, but proponents still hope to enact the cut this year. Bush won't press for a capital-gains provision in the final deficit bill when House-Senate conferees meet later this week.

---

General Motors signaled that up to five North American assembly plants may close by the mid-1990s as it tries to cut excess capacity.

U.S. car and truck sales fell 12.6% in early October, the first sales period of the 1990-model year, dragged down by a sharp decline in GM sales.

---

Warner and Sony are entangled in a legal battle over movie producers Peter Gruber and Jon Peters. The fight could set back Sony's plans to enter the U.S. movie business.

---

Hooker's U.S. unit received a $409 million bid for most of its real-estate and shopping-center assets from an investor group. The offer doesn't include Bonwit Teller or B. Altman.

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The Boeing strike is starting to affect airlines. America West said Friday it will postpone its new service out of Houston because of delays in receiving aircraft from Boeing.

---

Saatchi & Saatchi would launch a management buy-out if a hostile suitor emerged, an official said.

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British Aerospace and France's Thomson-CSF are nearing a pact to merge guided-missile divisions.

---

New U.S. steel-import quotas will give a bigger share to developing nations that have relatively unsubsidized steel industries. Japan's steel quota will be cut significantly.

---

Four ailing S&Ls were sold off by government regulators, but low bids prevented the sale of a fifth.

---

Markets --

Stocks: Volume 251,170,000 shares. Dow Jones industrials 2569.26, off 190.58; transportation 1406.29, off 78.06; utilities 211.96, off 7.29.

Bonds: Shearson Lehman Hutton Treasury index 3421.29, up 51.60.

Commodities: Dow Jones futures index 129.87, up 0.01; spot index 129.25, up 0.28.

Dollar: 142.10 yen, off 2.07; 1.8740 marks, off 0.0343.

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891016-0026. Law -- Legal Beat: @ Apple Computer's 'Press Defense' @ Saves Concern in Liability Suit @ ---- @ By Ann Hagedorn and Arthur S. Hayes
10/16/89
WALL STREET JOURNAL (J) GRA AAPL WNEWS CONSTRUCTION, MATERIALS (CON) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) LAW AND LEGAL AFFAIRS (LAW) ENVIRONMENT (ENV) FEDERAL COMMUNICATIONS COMMISSION (FCC) JUSTICE DEPARTMENT (JUS)

A federal appeals court in San Francisco ruled that shareholders can't hold corporate officials liable for false sales projections on new products if the news media concurrently revealed substantial information about the product's flaws.

The ruling stems from a 1984 suit filed by shareholders of Apple Computer Inc., claiming that company officials misled investors about the expected success of the Lisa computer, introduced in 1983.

Lawyers specializing in shareholder suits said they are concerned that use of the "press defense" by corporations may become popular as a result of the ruling.

According to the suit, Apple officials created public excitement by touting Lisa as an office computer that would revolutionize the workplace and be extremely successful in its first year. The plaintiffs also alleged that prior to the fanfare, the company circulated internal memos indicating problems with Lisa.

The suit claimed Apple's stock climbed to a high of $63.50 a share on the basis of the company's optimistic forecasts. But when the company revealed Lisa's poor sales late in 1983, the stock plummeted to a low of $17.37 a share, according to the suit. The shareholders claimed more than $150 million in losses.

In 1987, the San Francisco district court dismissed the case largely because newspaper reports had sufficiently counterbalanced the company's statements by alerting consumers to Lisa's problems.

Late last month, the appeals court agreed that most of the case should be dismissed. However, it gave the shareholders the right to pursue a small portion of their claim that pertains to Lisa's disk drive, known as Twiggy. The court ruled that the news media didn't reveal Twiggy's problems at the time.

Lawyers are worried about the ruling's implication in other shareholder suits but pointed out that the court stressed that the ruling should be regarded as very specific to the Apple case.

"The court was careful to say that the adverse information appeared in the very same articles and received the same attention as the company's statements," said Patrick Grannon, a Los Angeles lawyer at the firm of Greenfield & Chimicles, which wasn't involved in the case. "The court is saying that the adverse facts have to be transferred to the market with equal intensity and credibility as the statements of corporate insiders."

Shareholders' attorneys at the New York firm of Milberg, Weiss, Bershad, Specthrie & Lerach last week petitioned for a rehearing of the case. They wrote: "The opinion establishes a new rule of immunity -- that if a wide variety of opinions on a company's business are publicly reported, the company can say anything without fear of securities liability."

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NFL ORDERED to pay $5.5 million in legal fees to defunct USFL.

The National Football League is considering appealing the ruling stemming from the U.S. Football League's largely unsuccessful antitrust suit against the NFL.

A jury in 1986 agreed with the USFL's claims that the NFL monopolized major league football. But the jury awarded the USFL only $1 in damages, trebled because of the antitrust claims.

Last week, the U.S. Court of Appeals in New York upheld a $5.5 million award of attorneys fees to the defunct league. Harvey D. Myerson, of Myerson & Kuhn, then of Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, was the lead trial lawyer, and his new firm pursued the application appeal. Douglas R. Pappas of Myerson & Kuhn says about $5.3 million of the award goes directly to the USFL to reimburse it for fees already paid. Myerson & Kuhn will get about $260,000 for the costs of pressing the application.

The federal appeals court held that the nominal damages and the failure to prove all claims didn't exclude the USFL from being reimbursed. Antitrust laws provide that injured parties may be reimbursed for lawyers' fees.

But Shepard Goldfein, an attorney for the NFL, says his client will consider asking for another hearing or appealing to the U.S. Supreme Court. Mr. Goldfein, of Skadden, Arps, Slate, Meagher & Flom in New York, says the ruling is wrong and the fee award is excessive because the USFL lost its major claims, including its contention that the NFL restrained trade through television contracts.

"The USFL was not the prevailing party," Mr. Goldfein insists.

---

HOUSTON-CALGARY ALLIANCE: Fulbright & Jaworski of Houston and Fenerty, Robertson, Fraser & Hatch of Calgary, Alberta, are affiliating to help serve their energy-industry clients. The affiliation is believed to be the first such cross-border arrangement among major law firms. The firms aren't required to refer work exclusively to each other and remain separate organizations. But they will work together on energy-, environmental- and fair-trade-related issues and conduct seminars on topics of mutual interest, said Gibson Gayle Jr. of 585-lawyer Fulbright & Jaworski. In addition, Fulbright & Jaworski's Washington, D.C., office will play a key role as the firms work together on regulatory issues, particularly natural-gas exports, for their clients. The arrangement, reached after about eight months of negotiations, grew out of 80-lawyer Fenerty Robertson's desire to develop ties with a U.S. firm in light of relaxed trade barriers between the U.S. and Canada, said Francis M. Saville of Fenerty Robertson.

---

IN WHAT MAY SIGNAL a turnaround for asbestos manufacturers, W.R. Grace & Co. won a 3 1/2-week trial in Pittsburgh over whether it should be required to remove asbestos fireproofing from a local high school. Mount Lebanon High School, near Pittsburgh, sought $21 million in compensatory damages from Grace, arguing that the asbestos, which can cause respiratory diseases and lung cancer, posed a risk to students. Grace successfully contended that removing the fire retardant would pose a greater health risk than leaving it alone. A spokesman for the company said the verdict is thought to be the first in favor of an asbestos manufacturer where the plaintiff was a school and the asbestos in question was used for fireproofing.

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FCC COUNSEL JOINS FIRM: Diane S. Killory will join 500-lawyer Morrison & Foerster as a partner in its Washington, D.C., office in mid-November. She will help develop the mass-media practice of the San Francisco-based firm's communications group. Ms. Killory, 35 years old, resigned as Federal Communications Commission general counsel early this month after nearly three years in that post. She was the first woman to be appointed FCC general counsel.

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RICHARD P. MAGURNO, formerly Eastern Airlines' top lawyer, joined the New York law firm of Lord Day & Lord, Barrett Smith as a partner. Mr. Magurno, 45, spent 17 years at the Miami airline unit of Houston-based Texas Air Corp. and was named general counsel in 1984. He left the company in 1987. Mr. Magurno said he will split his time between the 200-lawyer firm's offices in Washington, D.C., and New York, with specialties in aviation and labor law.

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891016-0025. Technology: @ Apple Computer to Offer @ Holiday Season Rebates
10/16/89
WALL STREET JOURNAL (J) AAPL COMPUTERS AND INFORMATION TECHNOLOGY (CPR) CUPERTINO, Calif.

Apple Computer Inc. said it will offer cash rebates on several of its machines from Oct. 14 to Dec. 31., as part of a holiday-season sales promotion.

Apple will offer a $150 rebate on its Apple IIGS with any Apple Monitor and disk drive; $200 on the basic Macintosh Plus central processing unit; $250 on the Macintosh SE central processing unit; $250 on the Macintosh SE/30 cpu, and $300 on a Macintosh IIcx with any Apple video card and Apple monitor. The rebates, as a percentage of the retail cost of the cpu of each system, amount to 6% to 13%.

The company is also offering a free trial of its computers to consumers who qualify for its credit cards or leases.

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891016-0024. International Brief -- Siemens AG: @ Electronics Joint Venture @ Completed With Matsushita
10/16/89
WALL STREET JOURNAL (J) MC G.SIE ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Matsushita Electric Industrial Co. of Japan and Siemens AG of West Germany announced they have completed a 100 million-mark ($52.2 million) joint venture to produce electronics parts.

In the venture's first fiscal year, Siemens will hold 74.9% of the venture and a Matsushita subsidiary, Matsushita Electronic Components Co., 25.1%.

A basic agreement between the two companies was announced in June.

The new company is to be called Siemens Matsushita Components G.m.b.H. It will have its headquarters in Munich.

Matsushita's share in the venture will rise to 35% Oct. 1, 1990, and to 50% the following Oct. 1. Siemens will retain majority voting rights.

The parent companies forecast sales for the venture of around 750 million marks for its first fiscal year, Matsushita said. Sales are expected to rise to one billion marks after four years. The company will have production facilities in West Germany, Austria, France and Spain.

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891016-0023. Marketing & Media: @ U.S. News & World Report @ Editor Decides to Resign
10/16/89
WALL STREET JOURNAL (J) WNEWS NEW YORK

Roger Rosenblatt, editor of U.S. News & World Report, resigned Friday from the weekly news magazine.

Mr. Rosenblatt said he resigned because of difficulties with commuting between his home in New York and the magazine's editorial offices in Washington. "Frankly, I missed my family," said Mr. Rosenblatt.

In Mr. Rosenblatt's tenure, the magazine's advertising pages and circulation have grown significantly. But at 2.3 million weekly paid circulation, U.S. News still ranks third behind Time Warner Inc.'s Time magazine, with 4.4 million circulation, and Washington Post Co.'s Newsweek, with 3.3 million circulation.

Mortimer B. Zuckerman, chairman and editor in chief, said Mr. Rosenblatt would be succeeded starting today by Michael Ruby, the magazine's executive editor, and Merrill McLoughlin, a senior writer. Mr. Ruby and Ms. McLoughlin are married to each other. Mr. Zuckerman said his magazine would maintain its editorial format, which is a mix of analysis and trend stories with service-oriented, how-to articles.

Mr. Rosenblatt, a senior writer at Time magazine before joining U.S. News & World Report, said he had numerous job offers from other magazines while he was editor. The offers were to work as a writer, not an editor. He said he will now consider those offers.

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891016-0022. International Brief -- Avions Marcel Dassault-Breguet: @ Group Profit Before Taxes @ Jumped 97% in First Half
10/16/89
WALL STREET JOURNAL (J) F.AVM EARNINGS (ERN)

Avions Marcel Dassault-Breguet Aviation S.A. said group profit before taxes and contributions to employee profit-sharing soared 97% to 839 million francs ($129.6 million) in the first half of 1989 from 425 million francs a year earlier.

The French aircraft group pointed out, however, that financial results from its sector of industry are frequently erratic because of irregular cash flow from large contracts.

It noted, for example, that group revenue for the first half was 8.734 billion francs, down about 12% from 9.934 billion francs a year earlier. Still, it said it expects sales for all of 1989 to be on the order of 20 billion francs, reflecting anticipated billings for two large contracts in the second half of the year.

For all of 1988, Dassault had group profit of 428 million francs on revenue of 18.819 billion francs. The group hasn't yet released earnings figures for the first half of 1989, nor has it made a detailed forecast of its full-year earnings.

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891016-0021. Third-Period Net @ Seen at Keystone @ Consolidated @ ---- @ By Karen Blementhal @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) KES DALLAS

Keystone Consolidated Industries Inc. expects to report earnings before extraordinary tax benefits of about $1.5 million, or about 41 cents a share, for the third quarter, compared with a loss last year, said Glenn R. Simmons, chairman and chief executive officer.

After a tax benefit of about $780,000, Keystone expects to report net income of $2.3 million, or about 62 cents a share, Mr. Simmons said. For third quarter last year, Keystone reported a $1 million loss from continuing operations and a $200,000 loss from discontinued operations, for a net loss of $1.2 million.

Revenue for the latest third quarter was about $70.5 million, up 10% from $63.6 million last year, he said.

Mr. Simmons said the results signal a turnaround for the maker of wire and wire products, which has struggled to remain competitive in the face of lower-priced, imported steel. A new $46 million steel rod minimill, which got off to a rocky start in early 1988, now is running efficiently and a new management team is more heavily marketing Keystone's products, Mr. Simmons said.

As a result, the company hopes to report net income for the year of about $11.6 million, or about $3.10 to $3.15 a share, compared with a net loss of $24.4 million last year, after a loss from discontinued operations of $18.4 million. Revenue for 1989 is expected to be about $300 million, up about 21% from $247.3 million in 1988.

For the nine months ended Sept. 30, Keystone expects to report net income of $9.3 milion, or about $2.53 a share, after an extraordinary gain from $3.2 million in tax benefits. Last year, the company had a net loss of $6.5 million, including a $6.1 million loss from continuing operations and a $400,000 loss from discontinued operations. Revenue for the nine months is expected to be about $230.5 million, up about 21% from $190.4 million last year.

Mr. Simmons said Keystone's new mill is expected to produce about 585,000 tons of steel rods this year, up from 413,000 tons in 1988. Production at the mill has exceeded the ability of Keystone's casting operation to supply it, he said, which will force Keystone to purchase billet, or unfinished steel bars, from outside the company during the fourth quarter and next year.

Keystone will have to consider expanding its casting operation, at an estimated cost of $8 million to $10 million, within the next 18 to 24 months, Mr. Simmons said.

Under Robert W. Singer, who was named president and chief operating officer last year, Keystone has expanded its sales force to about 20 people from about 15 and hopes to expand its sales from the middle portion of the country toward the East and West coasts.

"Prior to a year ago, Keystone was an order-taker. Now I think we have a group of marketing people who are out selling to retailers and wholesalers," Mr. Simmons said.

Still, he said, the 100-year-old company plans to continue its premium-priced strategy for its distinctive brand of red-tipped wire fencing and other products. The company claims a 40% share of the U.S. field fence business, a 35% share of poultry netting sales and a 30% share of barbed wire sales.

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891016-0019. Freeport-McMoran Halts @ Some Uranium Operations
10/16/89
WALL STREET JOURNAL (J) FTX DIVERSIFIED MINING (MNG) NEW ORLEANS

Freeport-McMoRan Inc. said a temporary cessation of operations at its Sunshine Bridge uranium-recovery facility in Donaldsonville, La., will result in slight earnings improvement to both the company and its Freeport-McMoRan Resource Partners Limited Partnership unit. The company didn't elaborate.

The diversified energy and minerals concern said that a depressed uranium market is responsible for the temporary mothballing of the plant, but that the plant can be reactivated quickly when the market improves. More than 400,000 pounds of uranium a year have been produced at the facility during the past seven years. A second uranium-recovery plant at Uncle Sam, La., that produces more than 700,000 pounds of uranium annually, will continue to operate.

Freeport-McMoRan said the shutdown won't affect sales volumes under long-term sales contracts of its Freeport Uranium Recovery Co. unit, but will reduce the amount of product sold on the spot market. Freeport-McMoRan Resource Partners, as owner of the uranium-recovery technology, receives royalty payments.

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891016-0018. 'Talking Chip' Ad Speaks @ To Business Week Readers
10/16/89
WALL STREET JOURNAL (J) TXN MHP MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) MARKETING, ADVERTISING (MKT) DALLAS

Business Week subscribers may hear this week's issue talking back to them.

A four-page ad from Texas Instruments Inc., running in approximately 140,000 issues of the Oct. 20 "Corporate Elite" issue of the McGraw-Hill Inc. publication, contains a speech synthesizer laminated between two of the pages. Readers who pull off a piece of tape and press a switch will hear a tiny -- but distinctly human-sounding -- voice announce, "I am the talking chip," as it launches into a 15-second discourse on its own attributes.

The talking chip isn't cheap -- the per-ad cost to Texas Instruments is about $4, and that's without adding in Business Week's charge -- but Texas Instruments believes it is a first. Previous efforts have included musical ads, featuring simple tone-generating chips that play a tune, but the voice synthesizer in this effort is much more sophisticated, with none of the robotic flatness that one hears, for example, when calling telephone directory services.

And for those who miss the message the first time around, not to worry: Three tiny batteries provide enough juice for as many as 650 replays.

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891016-0017. Business Brief -- Lomas Financial Corp.: @ Lazard May Be Retained @ To Help Sell Leasing Unit
10/16/89
WALL STREET JOURNAL (J) LFC TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BANKRUPTCIES (BCY)

Lomas Financial Corp., Dallas, said it will ask a U.S. bankruptcy court to allow it to hire Lazard Freres & Co. to help it sell its leasing unit.

Lomas, assisted by Merrill Lynch Capital Markets, has been trying to sell its Equitable Lomas Leasing Co. for several months, apparently without success.

The real estate and mortgage banking concern had hoped to use proceeds from the sale to reduce its debt. Without cash from asset sales and unable to reach a new bank-credit agreement, Lomas defaulted on $145 million in notes that became due Sept. 1. It filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code Sept. 24 to give it additional time to work on a plan to restructure its $1.45 billion in senior debt.

Lomas said Merrill Lynch, which owns bonds and equity in Lomas, couldn't continue as Lomas's investment banker because it is also a creditor. It said it chose Lazard in part because of Lazard's offices in Europe and Japan, where investors might be interested in a U.S. leasing company.

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891016-0016. Canadian Bank Boosts @ Provisions for Losses @ On Its LDC Lending
10/16/89
WALL STREET JOURNAL (J) T.CM BANKS (BNK) TORONTO

Canadian Imperial Bank of Commerce said it will increase its loan-loss provisions to cover all its loans to lesser developed countries, except Mexico, resulting in an after-tax charge to 1989 earnings of 300 million Canadian dollars (US$255 million).

Don Bowder, senior vice president and chief accountant, said the bank's strong earnings enable it to be the first major Canadian bank to set aside provisions covering all its C$1.17 billion in non-Mexican LDC debt.

"It eliminates the continuing uncertainty with respect to the ultimate value of the loans," he said.

The bank said about C$525 million will be added to its existing LDC and general loss provisions in its fourth quarter, ending Oct. 31. Mr. Bowder said the C$300 million charge to earnings would amount to about C$1.34 a share. The bank's net income for the nine months ended July 31 was C$577 million, or C$3.10 a share.

Mr. Bowder said the bank will restructure its C$604 million of Mexican debt, of which C$255 million is in Mexican notes secured by U.S. government bonds. The bank has a 45% reserve against the remaining C$349 million of Mexican debt and expects to swap that for other Mexican notes supported by U.S. Treasury zero-coupon bonds.

Mr. Bowder said the bank's experience with LDC debt has been "painful" and this latest move represents the final phase of a program begun seven years ago to reduce its exposure through provisioning, debt sales and debt swaps. He said the bank will no longer participate in LDC sovereign lending, but will support trade financing and other transactions that meet the bank's standards.

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891016-0015. Heard on the Street: @ Mega-Merger Game Will Survive, @ Some Say, but Tone Will Change @ ---- @ By David B. Hilder and Linda Sandler @ Staff Reporters of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) UAL AMR U DAL ANC MCAWA LINB BLS KPE SNE X PCI Z MCA KOL RAM AMI HLT HEARD ON THE STREET (HRD) STOCK MARKET, OFFERINGS (STK) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AIRLINES (AIR) BOND MARKET NEWS (BON) NEW YORK

The carnage among takeover stocks Friday doesn't mean the end of mega-mergers but simply marks the start of a less ambitious game, Wall Street's big-time deal makers say.

Suitors from now on are more likely to be expansion-minded companies, rather than raiders or debt-happy financiers. And they will be launching lower-priced and perhaps fewer deals, now that it's tougher to finance them.

This is an ominous sign for a stock market that lately has been fueled by takeover speculation and bidding wars for companies that put themselves up for sale. Whenever the 1980s merger boom seems to be stalling, shock waves ripple through the stock market.

"The market is overvalued, not cheap," says Alan Gaines of the New York money-management firm Gaines Berland. He recently began increasing his cash position to 45% of his portfolio. "I look at where deals can get done," he says, "and they're not getting done" at current prices.

Lenders are growing increasingly nervous about debt-financed takeovers, investment bankers say. "You had a week of a deteriorating junk-bond market that ran smack into the news on Friday about what appeared to be happening to the bank debt market," says Steven Rattner, a partner and merger specialist with Lazard Freres & Co.

Trading dried up Friday in the market for high-yield junk bonds, often used to finance takeovers. It was the latest in a series of setbacks for the junk bond market, where prices began weakening last month after Campeau hit a cash crunch.

And banks appear to be taking an increasingly skeptical view of requests for high-risk takeover loans. The group trying to buy UAL announced Friday that it couldn't arrange the $7.2 billion in bank loans it needs to buy the parent of United Airlines for $300 a share.

Takeover-stock traders today will be scrambling to learn of any UAL developments, and other takeover stocks are likely to trade in sympathy. Investment bankers representing the buy-out group and UAL's board spent a frantic weekend trying to hammer out new terms that would be more acceptable to the banks.

After UAL, the stock viewed as most vulnerable is American Airlines' parent AMR, the target of a $120-a-share takeover proposal from New York real estate developer Donald Trump. Trading in AMR shares was suspended shortly after 3 p.m. EDT Friday and didn't resume. Before the halt, AMR last traded at 98 5/8. Late Friday night, the London office of Jefferies & Co., a Los Angeles securities firm, traded AMR shares at prices as low as 80. Similarly, Delta Air Lines and USAir Group dropped 10.1% and 8.5%, respectively, on Friday and could weaken further.

Over the weeked, however, two developments in other deals indicated that commerical banks and Wall Street firms still are willing to commit billions of dollars to finance takeover bids launched by major companies.

Vitro S.A., a major Mexican glass maker, said yesterday that it agreed to buy Anchor Glass Container in a tender offer for $21.25 a share, sweetened from the original $20-a-share offer Vitro launched two months ago. On Friday, Anchor shares fell 1 1/4 to close at 18 1/2.

For the broader market, the greatest significance of the Vitro-Anchor deal may be that it was put together late Friday night -- after the market rout -- and involves a $155 million temporary "bridge" loan from Donaldson, Lufkin & Jenrette Securities and a $139 million loan from Security Pacific National Bank.

Moreover, to complete the entire Anchor Glass purchase and refinance existing debt, Donaldson said it is "highly confident" that it will be able to sell $400 million of junk bonds for Vitro, despite the current disarray in the junk bond market. Donaldson's statement isn't merely an idle boast, because those bonds will have to be sold before Donaldson's bridge loan can be paid back. Security Pacific, meanwhile, said it expects to arrange $430 million in bank loans for Vitro.

In another takeover battle, a spokesman for McCaw Cellular Communications said yesterday that McCaw has been advised by three commercial banks that they remain "highly confident" they can arrange $4.5 billion of bank loans for McCaw's tender offer for about 45% of LIN Broadcasting, "notwithstanding recent events."

McCaw is offering $125 a share for 22 million LIN shares, thereby challenging LIN's proposal to spin off its television properties, pay shareholders a $20-a-share special dividend and combine its cellular-telephone operations with BellSouth's cellular business.

On Friday, LIN shares were among the few takeover issues that didn't fall much, dropping 5 1/2, or 4.9%, to close at 107 1/2. Traders and investment bankers said LIN shares weren't hurt much because BellSouth is viewed as a well-financed corporate buyer unlikely to be affected by skittishness among bankers or bond buyers.

Investment bankers interviewed over the weekend see a silver lining for the merger business in the stock-market drop. Potential bidders for companies "were saying that things were beginning to look expensive," says Mr. Rattner of Lazard.

"Nothing makes things look cheaper than a 200-point drop in the Dow," Mr. Rattner says. "Just as there are people waiting to become bargain hunters in the stock market, there are people waiting to become bargain hunters in the deal market."

Investment bankers expect most of those bargain hunters to be well-heeled corporations.

"In the past, corporate buyers were often discouraged from making bids because of competition from LBO firms, which were often prepared to outbid" the corporations, says J. Tomilson Hill, head of mergers and acquisitions at Shearson Lehman Hutton. Now, "corporate buyers should be willing to re-enter the acquisition market because the competition from junkbond-financed buyers has been reduced."

Many takeover stocks plunged Friday, as speculators retained their confidence in corporate buyers but fled from the socalled whisper stocks, the targets of rumored deals.

Columbia Pictures Entertainment, which has agreed to a friendly $27-a-share bid from Sony of Japan, fell only 1/8 to close at 26 5/8.

But several stocks long rumored to be ripe for a takeover or restructuring fell 10% or more. They include USX, down 11.7%; Upjohn, down 11.1%; Campbell Soup, down 11%; Paramount Communications, off 10.3%; Woolworth, down 10.2%; Delta Air Lines, down 10.1%, and MCA, down 9.7%.

The market -- and investment bankers -- are even less sanguine about companies that have had at least one bid, merger agreement or restructuring plan fall through already. Given the weakness in both the junk bond market and the stock market, traders fear that these transactions may be revised yet again.

Examples include Kollmorgen, whose agreement to be acquired for $25 a share by Vernitron collapsed last month. Kollmorgen shares fell nearly 20% on Friday to close at 12 7/8.

Ramada, which first delayed and then shelved a $400 million junk bond sale that was designed to help finance a restructuring, fell 15.6% to close at 9 1/2. Ramada has said it hopes to propose a new restructuring plan but hasn't indicated when it will do so.

Shares of American Medical International, which agreed last week to accept a lower price from a buy-out group that includes First Boston Corp. and the Pritzker family of Chicago, fell 15.8% on Friday to close at 20. The buy-out group is offering $26.50 a share for 63 million American Medical shares, down from its offer in July of $28 a share for 68.8 million shares.

But investment bankers say the market may have oversold some takeover-related stocks. Hilton Hotels, for example, was among the worst-hit issues, falling 20.2% to close at 85, down 21 1/2 on Friday.

Hilton currently is soliciting bids for a sale of part or all of its hotel and casino businesses. People familiar with Hilton said over the weekend that the depth of the sell-off in Hilton shares was unwarranted because none of the likely buyers would be dependent on junk-bond financing. However, they conceded that some potential bidders would rely on bank loans and would be hurt if the troubles of the UAL buy-out group signified a general unwillingness among banks to provide credit for debt-financed takeovers.

Hilton officials said they weren't worried about the drop in the company's stock. William Lebo, Hilton's general counsel, said plans to consider a sale of the company or some of its assets are "on track" for what has been described previously as "a slow and deliberate process."

"I can't believe that any potential buyer for Hilton would be affected by one day's trading," Mr. Lebo said.

But the stock market as a whole, bolstered as it is by takeover speculation, remains vulnerable to any further pullback by takeover financiers, both in the junkbond market and among commercial banks. For debt-ridden suitors, "the takeover game has been over for some time," says New York money manager Neil Weisman of Chilmark Capital, who has been keeping 85% of his portfolio in cash. "The market is just waking up to that point."

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Pauline Yoshihashi in Los Angeles contributed to this column. @ --- @ Deal-Stock Hit List @ FRIDAY $ % @ -CLOSE FALL FALL @ Deals That Fell Through @Kollmorgen 12 7/8 3 1/8 19.5 @Ramada 9 1/2 1 3/4 15.6 @Avon Products 28 1/2 4 1/4 13.0 @MGM/UA 18 3/4 1 5/8 8.0 @ Deals Not Completed @Hilton 85 21 1/2 20.2 @UAL Corp.* 279 3/4 3 1/4 1.1 @AMI 20 3 3/4 15.8 @Harcourt Brace 7 1/8 1 12.3 @B.A.T Industries 11 1/2 1 3/8 10.7 @Holiday Corp. 71 1/2 7 3/4 9.8 @TW Services 32 1/2 3 8.5 @Time Warner 131 1/2 11 1/2 7.9 @Warner Comm. 61 1/2 5 1/8 7.7 @ Targets @AMR Corp.* 98 5/8 5 1/8 4.9 @Georgia Gulf 47 1/2 5 1/4 10.0 @Arms. World Ind. 41 1/4 3 3/4 8.3 @ Rumored Deals @USX 33 4 3/8 11.7 @Upjohn 36 4 1/2 11.1 @Campbell Soup 43 1/2 5 3/8 11.0 @Paramount Comm. 56 5/8 6 1/2 10.3 @Woolworth 59 1/2 6 3/4 10.2 @Delta Air Lines 69 1/4 7 3/4 10.1 @MCA 62 6 5/8 9.7 @Chevron 59 7/8 6 9.1 @USAir Group 41 1/2 3 7/8 8.5 @Warner Lambert 103 1/4 8 1/2 7.6 @ Held Pretty Steady @LIN Broadcasting 107 1/2 5 1/2 4.9 @Columbia Pict. 26 5/8 1/8 0.5 @ *Trading halted; did not resume.

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891016-0014. Manager's Journal: @ Real (Estate) Advantages of Down Markets @ ---- @ By Christopher B. Leinberger
10/16/89
WALL STREET JOURNAL (J) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) ECONOMIC NEWS (ECO)

Of all the one-time expenses incurred by a corporation or professional firm, few are larger or longer term than the purchase of real estate or the signing of a commercial lease.

To take full advantage of the financial opportunities in this commitment, however, the corporation or professional firm must do more than negotiate the best purchase price or lease terms. It must also evaluate the real-estate market in the chosen location from a new perspective. Specifically, it must understand how real-estate markets overreact to shifts in regional economies and then take advantage of these opportunities.

When a regional economy catches cold, the local real-estate market gets pneumonia. In other words, real-estate market indicators, such as building permits and leasing activity, plummet much further than a local economy in recession. This was seen in the late 1960s in Los Angeles and the mid-1970s in New York. But the reverse is also true: When a region's economy rebounds from a slowdown, these real-estate indicators will rebound far faster than the improving economy.

Why do local real-estate markets overreact to regional economic cycles? Because real-estate purchases and leases are such major long-term commitments that most companies and individuals make these decisions only when confident of future economic stability and growth.

Metropolitan Detroit was written off economically during the early 1980s, as the domestic auto industry suffered a serious sales depression and adjustment. Area employment dropped by 13% from its 1979 peak and retail sales were down 14%. However, the real-estate market was hurt even more. For example, residential building permits in the trough year of 1982 were off 76% from the 1979 peak level.

Once metropolitan Detroit's economy rallied in the mid-1980s, real estate rebounded. Building permits, for example, soared a staggering 400% between 1982 and the peak year of 1986.

Where, savvy corporations and professional firms are now asking, are today's opportunities?

Look no further than metropolitan Houston and Denver, two of the most depressed, overbuilt and potentially undervalued real-estate markets in the nation. Of course, some observers have touted Houston and Denver for the past five years as a counter-cyclical play. But now appears to be the time to act.

Metropolitan Houston's economy did drop and then flatten in the years after its 1982 peak. In the mid-1980s, employment was down as much as 5% from the 1982 peak and retail sales were off 13%.

The real-estate market suffered even more severe setbacks. Office construction dropped 97%. The vacancy rate soared more than 20% in nearly every product category, and more than 30% of office space was vacant. To some observers, the empty office buildings of Houston's "see-through skyline" were indicative of a very troubled economy.

As usual, the real-estate market had overreacted. Actually, the region's economy retained a firm foundation. Metropolitan Houston's population has held steady over the past six years. And personal income, after slumping in the mid-1980s, has returned to its 1982 level in real dollar terms.

Today, metropolitan Houston's real-estate market is poised for a significant turnaround. More than 42,000 jobs were added in metro Houston last year, primarily in biotechnology, petrochemical processing, and the computer industry. This growth puts Houston in the top five metro areas in the nation last year. And forecasts project a 2.5% to 3% growth rate in jobs over the next few years -- nearly twice the national average.

Denver is another metropolitan area where the commercial real-estate market has overreacted to the region's economic trends, although Denver has not experienced as severe an economic downturn as Houston. By some measures, metropolitan Denver's economy has actually improved in the past four years. Its population has continued to increase since 1983, the peak year of the economic cycle. Employment is now 4% higher than in 1983. Buying income in real dollars actually increased 15% between 1983 and 1987 (the most recent year available).

The rates of increase, however, are less than the rapid growth of the boom years, and this has resulted in a loss of confidence in the economy. In a self-fulfilling prophecy, therefore, the region's real-estate market all but collapsed in recent years. Housing building permits are down more than 75% from their 1983 peaks.

Although no one can predict when metropolitan Denver's real-estate market will rebound, major public works projects costing several billion dollars are under way or planned -- such as a new convention center, a major beltway encircling the metropolitan area, and a new regional airport. When Denver's regional economy begins to grow faster -- such a recovery could occur as early as next year -- business and consumer confidence will return, and the resulting explosion of real-estate activity will dwarf the general economic rebound.

What real-estate strategy should one follow in a metropolitan area whose economic health is not as easy to determine as Houston's or Denver's? Generally, overcapacity in commercial real estate is dropping from its mid-1980s peak, even in such economically healthy metropolitan areas as Washington, New York and Los Angeles. Vacancy rates in the 15% to 19% range today may easily rise to the low to mid-20% range in a couple of years. Under these conditions, even a flattening out of economic growth -- "catching cold" -- in the healthy metropolitan areas will create significant opportunities for corporations and professional service firms looking for bargains as the realestate industry catches pneumonia.

Those looking for real-estate bargains in distressed metropolitan areas should lock in leases or buy now; those looking in healthy metropolitan areas should take a short-term (three-year) lease and wait for the bargains ahead.

---

Mr. Leinberger is managing partner of a real-estate advisory firm based in Beverly Hills, Calif.

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891016-0013. Kysor Expects to Post @ Sharp Decline in Net
10/16/89
WALL STREET JOURNAL (J) KZ CADILLAC, Mich.

Kysor Industrial Corp. said it expects its third-quarter net earnings to be between two cents and four cents a share, compared with 61 cents a share a year ago. Analysts had been projecting that the company's earnings would be between 25 cents and 30 cents a share. The year-earlier third-quarter earnings amounted to $4.1 million.

The company said a drop in activity in the powerboat industry reduced sales volume at its two marine-related operations. Also, the company said its commercial products operation failed to meet forecasts.

Kysor, a maker of heavy-duty truck and commercial refrigeration equipment, said it expects its fourth-quarter earnings to be more closely in line with usual levels, which are between 30 cents and 50 cents a share.

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891016-0012. Common Cause Asks U.S. to Investigate @ Arizonan Keating's Gifts to 5 Senators @ ---- @ By Brooks Jackson @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) AMC SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) BANKRUPTCIES (BCY) CONGRESS (CNG) WASHINGTON

Common Cause asked both the Senate Ethics Committee and the Justice Department to investigate $1 million in political gifts by Arizona businessman Charles Keating to five U.S. senators who interceded with thrift-industry regulators for him.

Mr. Keating is currently the subject of a $1.1 billion federal anti-racketeering lawsuit accusing him of bleeding off assets of a California thrift he controlled, Lincoln Savings & Loan Association, and driving it into insolvency.

Fred Wertheimer -- president of Common Cause, the self-styled citizens lobby -- said Mr. Keating already has conceded attempting to buy influence with the lawmakers -- Democratic Sens. Dennis DeConcini of Arizona, Alan Cranston of California, John Glenn of Ohio and Donald Riegle of Michigan; and GOP Sen. John McCain of Arizona.

Mr. Wertheimer based this on a statement by Mr. Keating that was quoted in a Wall Street Journal story in April: "One question . . . had to do with whether my financial support in any way influenced several political figures to take up my cause. I want to say in the most forceful way I can: I certainly hope so."

In a highly unusual meeting in Sen. DeConcini's office in April 1987, the five senators asked federal regulators to ease up on Lincoln. According to notes taken by one of the participants at the meeting, the regulators said Lincoln was gambling dangerously with depositors' federally insured money and was "a ticking time bomb." Mr. Keating had complained that the regulators were being too zealous.

The notes show that Sen. DeConcini called the Federal Home Loan Bank Board's regulations "grossly unfair," and that Sen. Glenn insisted that Mr. Keating's thrift was "viable and profitable."

For the next two years, the Bank Board, which at the time was the agency responsible for regulating thrifts, failed to act -- even after federal auditors warned in May 1987 that Mr. Keating had caused Lincoln to become insolvent. Lincoln's parent company, American Continental Corp., entered bankruptcy-law proceedings this April 13, and regulators seized the thrift the next day. The newly formed Resolution Trust Corp., successor to the Bank Board, filed suit against Mr. Keating and several others on Sept. 15.

Mr. Keating has filed his own suit, alleging that his property was taken illegally.

The cost to taxpayers of Lincoln's collapse has been estimated at as much as $2.5 billion.

Details of the affair have become public gradually over the past two years, mostly as a result of reporting by several newspapers. In the midst of his 1988 re-election campaign, Sen. Riegle, chairman of the Senate Banking Committee, returned $76,000 in contributions after a Detroit newspaper said that Mr. Keating had gathered the money for him about two weeks before the meeting with regulators.

Sen. DeConcini, after months of fending off intense press criticism, returned $48,000 only last month, shortly after the government formally accused Mr. Keating of defrauding Lincoln.

In addition, Sen. McCain last week disclosed that he belatedly had paid $13,433 to American Continental as reimbursement for trips he and his family took aboard the corporate jet to Mr. Keating's vacation home at Cat Cay, the Bahamas, from 1984 through 1986. Sen. McCain said he had meant to pay for the trips at the time but that the matter "fell between the cracks."

Mr. Keating, his family members and associates also donated $112,000 to Sen. McCain's congressional campaigns over the years, according to press accounts. But Sen. McCain says Mr. Keating broke off their friendship abruptly in 1987, because the senator refused to press the thrift executive's case as vigorously as Mr. Keating wanted. "He became very angry at that, left my office and told a number of people that I was a wimp," Sen. McCain recalls.

In July, California newspapers disclosed that Mr. Keating gave $850,000 in corporate funds to three tax-exempt voter registration organizations in 1987 and 1988 at the behest of Sen. Cranston, who conceded that soliciting the money was "a pretty stupid thing to do politically." In addition, Sen. Cranston received $47,000 in campaign donations through Mr. Keating, and the California Democratic party received $85,000 in corporate donations for a 1986 get-out-the-vote drive that benefited the senator's re-election campaign that year.

Also in July, Ohio newspapers disclosed $200,000 in corporate donations by Mr. Keating to the National Council on Public Policy, a political committee controlled by Sen. Glenn. That was in addition to $34,000 in direct campaign donations arranged by Mr. Keating to the Ohio senator.

Mr. Wertheimer said the Senate Ethics Committee should hire a special outside counsel to conduct an investigation, as was done in the case of former House Speaker James Wright. Wilson Abney, staff director of the ethics panel, wouldn't comment.

Sen. Riegle said he would cooperate with any inquiry, but that his conduct had been "entirely proper." Sen. McCain said he had been "deeply concerned" at the time of the meeting that it might seem to be improper, but decided it was "entirely appropriate" for him to seek fair treatment for a constituent.

Sen. Glenn said he had already made a complete disclosure of his role in the affair and "I am completely satisfied to let this matter rest in the hands of the Senate Ethics Committee." Sen. DeConcini said, "When all is said and done, I expect to be fully exonerated."

Sen. Cranston, who had already volunteered his help to the Federal Bureau of Investigation in any investigation of Mr. Keating, portrayed his role in 1987 as prodding regulators to act. "Why didn't the Bank Board act sooner?" he said. "That is what Common Cause should ask be investigated."

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891016-0011. Trinity in Rail Car Agreement
10/16/89
WALL STREET JOURNAL (J) TRN NSC DALLAS

Trinity Industries Inc. said it reached a preliminary agreement to manufacture 1,000 coal rail cars for Norfolk Southern Corp. Trinity estimated the value of the pact at more than $40 million.

Trinity said it plans to begin delivery of the rail cars in the first quarter of 1990. It said the 1,000 rail cars are in addition to the 1,450 coal rail cars presently being produced for Norfolk Southern, a Norfolk, Va.-based railroad concern.

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891016-0010. Hong Kong Toy Manufacturers Mull @ Other Plant Operations Outside of China @ ---- @ By Steven Jones @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) FREST RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) HONG KONG

When China opened its doors to foreign investors in 1979, toy makers from Hong Kong were among the first to march in.

Today, with about 75% of the companies' products being made in China, the chairman of the Hong Kong Toys Council, Dennis Ting, has suggested a new sourcing label: "Made in China by Hong Kong Companies."

The toy makers were pushed across the border by rising labor and land costs in the British colony. But in the wake of the shootings in Beijing on June 4, the Hong Kong toy industry is worrying about its strong dependence on China. Although the manufacturers stress that production hasn't been affected by China's political turmoil, they are looking for additional sites. The toy makers, and their foreign buyers, cite uncertainty about China's economic and political policies.

"Nobody wants to have all his eggs in one basket," says David Yeh, chairman and chief executive officer of International Matchbox Group Ltd.

Indeed, Matchbox and other leading Hong Kong toy makers were setting up factories in Southeast Asia, especially in Thailand, long before the massacre. Their steps were partly prompted by concern over a deterioration of business conditions in southern China.

By diversifying supply sources, the toy makers don't intend to withdraw from China, manufacturers and foreign buyers say. It wouldn't be easy to duplicate quickly the manufacturing capacity built up in southern China during the past decade. A supply of cheap labor and the access to Hong Kong's port, airport, banks and support industries, such as printing companies, have made China's Guangdong province a premier manufacturing site.

"South China is the most competitive source of toys in the world," says Henry Hu, executive director of Wah Shing Toys Consolidated Ltd.

Hong Kong trade figures illustrate the toy makers' reliance on factories across the border. In 1988, exports of domestically produced toys and games fell 19% from 1987, to HK$10.05 billion (US$1.29 billion). But re-exports, mainly from China, jumped 75%, to HK$15.92 billion. In 1989's first seven months, domestic exports fell 29%, to HK$3.87 billion, while re-exports rose 56%, to HK$11.28 billion.

Manufacturers say there is no immediate substitute for southern China, where an estimated 120,000 people are employed by the toy industry. "For the next few years, like it or not, China is going to be the main supplier," says Edmund Young, vice president of Perfecta Enterprises Ltd., one of the first big Hong Kong toy makers to move across the border.

In the meantime, as manufacturers and buyers seek new sites, they are focusing mainly on Southeast Asia. Several big companies have established manufacturing joint ventures in Thailand, including Matchbox, Wah Shing and Kader Industrial Co., the toy manufacturer headed by Mr. Ting. Malaysia, the Philippines and Indonesia also are being studied.

With the European Community set to remove its internal trade barriers in 1992, several Hong Kong companies are beginning to consider Spain, Portugal and Greece as possible manufacturing sites.

Worries about China came just as Hong Kong's toy industry was recovering from a 1987 sales slump and bankruptcy filings by two major U.S. companies, Worlds of Wonder Inc. and Coleco Industries Inc. Hong Kong manufacturers say large debt writeoffs and other financial problems resulting from the 1987 difficulties chastened the local industry, causing it to tighten credit policies and financial management. The industry regards last year and this year as a period of recovery that will lead to improved results. Still, they long for a "mega-hit" toy to excite retail sales in the U.S., Hong Kong's biggest market for toys and games.

The closest thing the colony's companies have to a U.S. mega-hit this year is the Teenage Mutant Ninja Turtles series of action figures manufactured by Playmates Holdings Ltd. Introduced in mid-1988, the 15-centimeter-tall plastic turtles are based on an American comic book and television series.

Paul Kwan, managing director of Playmates, says 10 million Ninja Turtles have been sold, placing the reptilian warriors among the 10 biggest-selling toys in the U.S. Should sales continue to be strong through the Christmas season, which accounts for about 60% of U.S. retail toy sales, Mr. Kwan said the Ninja Turtles could make 1989 a record sales year for Playmates.

Other Hong Kong manufacturers expect their results to improve only slightly this year from 1988. Besides the lack of a fast-selling product, they cite the continued dominance of the U.S. market by Nintendo Entertainment System, an expensive video game made by Nintendo Co. of Japan. Nintendo buyers have little money left to spend on other products.

Many of the toy makers' problems started well before June 4 as a result of overstrained infrastructure and Beijing's austerity programs launched late last year. Toy makers complain that electricity in Guangdong has been provided only three days a week in recent months, down from five days a week, as the province's rapid industrialization has outstripped its generating capacity. Manufacturers are upgrading standby power plants.

Bank credit for China investments all but dried up following June 4. Also, concern exists that the harder-line Beijing leadership will tighten its control of Guangdong, which has been the main laboratory for the open-door policy and economic reforms.

But, toy manufacturers and other industrialists say Beijing will be restrained from tightening controls on export-oriented southern China. They say China's trade deficit is widening and the country is too short of foreign exchange for it to hamper production in Guangdong. "The Chinese leaders have to decide whether they want control or whether the want exports," says Mr. Kwan of Playmates.

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891016-0009. Administration Urges @ Easier Rule for States @ To Restrict Abortions
10/16/89
WALL STREET JOURNAL (J) LAW AND LEGAL AFFAIRS (LAW) EXECUTIVE (EXE) WASHINGTON

The Bush administration, urging the Supreme Court to give states more leeway to restrict abortions, said minors haven't any right to abortion without the consent of their parents.

Solicitor General Kenneth Starr argued that the 1973 Supreme Court decision, Roe vs. Wade, recognizing a constitutional right to abortion, was incorrect. He also argued that the high court was wrong in 1976 to rule that minors have a right to abortion that can't be absolutely vetoed by their parents.

The administration's position was outlined in a friend-of-the-court brief filed in one of three abortion cases the Supreme Court will hear argued and will decide this term. The administration filed the brief in an appeal involving a Minnesota law that requires that both parents of a minor be notified before she may have an abortion.

The administration urged the justices to adopt a legal standard suggested by Chief Justice William Rehnquist last July when the high court upheld Missouri's abortion restrictions. Under that standard, which garnered the votes of only three of the nine justices, a state restriction of abortion is constitutional if the state has a "reasonable" justification for adopting it. That is a much easier standard for a state to satisfy than the Supreme Court's test since 1973, which requires a state to have a "compelling" reason for restricting abortion.

On the provisions of the Minnesota law, the Bush administration said that requiring that both parents be notified is a reasonable regulation, and that there is no need to have an alternative that allows minors to go to court for a judge's permission instead.

The case, Hodgson vs. Minnesota, will be argued Nov. 29.

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891016-0008. Alcoa Net Fell 3.2% @ To $219 Million Total @ In the Third Quarter
10/16/89
WALL STREET JOURNAL (J) AA ALUMINUM (ALU) EARNINGS (ERN) PITTSBURGH

Aluminum Co. of America, hit hard by the strength of the dollar overseas, said net income for the third quarter dropped 3.2% to $219 million, or $2.46 a share.

The nation's No. 1 aluminum maker earned $226.3 million, or $2.56 a share, a year earlier.

Revenue rose 11% to $2.83 billion from $2.56 billion.

Analysts, who were expecting Alcoa to post around $2.70 to $3 a share, were surprised at the lackluster third-quarter results. "It's disappointing," said William Siedenburg, an analyst with Smith Barney, Harris Upham & Co.

Much of the earnings decline was led by currency-exchange rate adjustments, which affected the bottom line by $15.3 million, or 17 cents a share, compared with $3.6 million, or four cents a share, the previous year.

Lower prices for aluminum ingots and certain alloy products and a shift in the product mix also contributed to lower earnings, the company said. "In addition, costs were higher partly due to scheduled plant outages for modernization work," the company said.

Excluding the higher tax rate, which rose two percentage points to 38%, and the negative exchange rate adjustment, the company would have met analysts' expectations, said R. Wayne Atwell, an analyst with Goldman, Sachs & Co.

Noting that the third quarter is usually the aluminum industry's slowest, Mr. Atwell added, "the third quarter is never a bang up period for them anyway."

Nevertheless, the company said shipments were up slightly to 679,000 metric tons from 671,000, buffing the impact of the unexpected earning decline.

The results were announced after the stock market closed. In New York Stock Exchange composite trading Friday, Alcoa closed at $72 a share, down $4.75, in a sharply lower market.

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891016-0007. TV Networks Seek Way Around Rules @ --- @ Japanese Threat @ Cited in Fight @ To Own Shows @ ---- @ By Dennis Kneale @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) GE CCB CBS MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) CONGRESS (CNG) FEDERAL COMMUNICATIONS COMMISSION (FCC)

For 20 years, federal rules have barred the three major television networks from sharing in one of the most lucrative and fastest-growing parts of the television business. And for six years, NBC, ABC and CBS have negotiated with Hollywood studios in a futile attempt to change that.

But with foreign companies snapping up U.S. movie studios, the networks are pressing their fight harder than ever. They hope the foreign deals will divide the Hollywood opposition and prod Congress to push for ending federal rules that prohibit the networks from grabbing a piece of rerun sales and owning part of the shows they put on the air.

Even network executives, however, admit privately that victory -- either in Congress or in talks with the studios -- is highly doubtful any time soon. And so the networks also are pushing for new ways to sidestep the "fin-syn" provisions, known formally as the Financial Interest and Syndication Rules.

That became clear last week with the disclosure that National Broadcasting Co., backed by the deep pockets of parent General Electric Co., had tried to help fund Qintex Australia Ltd.'s now-scuttled $1.5 billion bid for MGM/UA Communications Co. NBC's interest may revive the deal, which MGM/UA killed last week when the Australian concern had trouble raising cash.

Even if that deal isn't revived, NBC hopes to find another. "Our doors are open," an NBC spokesman says. NBC may yet find a way to take a passive, minority interest in a program-maker without violating the rules. And any NBC effort could prompt CBS Inc. and ABC's parent, Capital Cities/ABC Inc., to look for ways of skirting the fin-syn regulations.

But the networks' push may only aggravate an increasingly bitter rift between them and Hollywood studios. Both sides are to sit down next month for yet another meeting on how they might agree on reducing fin-syn restraints. Few people privy to the talks expect the studios to budge.

The networks still are "uninhibited in their authority" over what shows get on the air, charges Motion Picture Association President Jack Valenti, the most vociferous opponent of rescinding the rules. Studios are "powerless" to get shows in prime-time lineups and keep them there long enough to go into lucrative rerun sales, he contends. And that's why the rules, for the most part, must stay in place, he says.

Studio executives in on the talks-including officials at Paramount Communications Inc., Fries Entertainment Inc., Warner Communications Inc. and MCA Inc. -- declined to be interviewed. But Mr. Valenti, who represents the studios, asserts: "The whole production industry, to a man, is on the side of preserving" the rules.

Such proclamations leave network officials all the more doubtful that the studios will bend. "They don't seem to have an incentive to negotiate," says one network executive. "And there's no indication that Washington is prepared to address the rules. That's the problem, isn't it?"

Indeed it is. Congress has said repeatedly it wants no part of the mess, urging the studios and the networks, which license rights to air shows made by the studios, to work out their own compromise.

But recent developments have made the networks -- and NBC President Robert Wright, in particular -- ever more adamant that the networks must be unshackled to survive. The latest provocation: Sony Corp.'s plan to acquire Columbia Pictures Entertainment Inc. for $3.4 billion, and to buy independent producer Guber Peters Entertainment Co. for $200 million.

"I wonder what Walter Cronkite will think of the Sony/Columbia Broadcast System Trinitron Evening News with Dan Rather broadcast exclusively from Tokyo," wrote J.B. Holston, an NBC vice president, in a commentary in last week's issue of Broadcasting magazine. In his article, Mr. Holston, who was in Europe last week and unavailable, complained that the "archaic restraints" in fin-syn rules have "contributed directly to the acquisition of the studios by non-U.S. enterprises." (He didn't mention that NBC, in the meantime, was hoping to assist Australia's Qintex in buying MGM/UA.)

An NBC spokesman counters that Mr. Holston's lament was "entirely consistent" with NBC plans because the U.S. rules would limit NBC's involvement in the Qintex deal so severely as to be "light years away from the type of unrestrained deals available to Sony -- and everyone else except the three networks."

The Big Three's drumbeat for deregulation began intensifying in the summer when the former Time Inc. went ahead with plans to acquire Warner. Although Time already had a long-term contract to buy movies from Warner, the merger will let Time's largely unregulated pay-cable channel, Home Box Office, own the Warner movies aired on HBO -- a vertical integration that is effectively blocked by fin-syn regulations.

NBC's Mr. Wright led the way in decrying the networks' inability to match a Time-Warner combination. He spoke up again when the Sony bid for Columbia was announced. Since NBC's interest in the Qintex bid for MGM/UA was disclosed, Mr. Wright hasn't been available for comment. With a Qintex deal, NBC would move into uncharted territory -- possibly raising hackles at the studios and in Washington.

"It's never really been tested," says William Lilley III, who as a top CBS executive spent years lobbying to have the rules lifted. He now runs Policy Communications in Washington, consulting to media companies. Fin-syn rules don't explicitly block a network from buying a passive, small stake in a company that profits from the rerun syndication networks can't enjoy.

Hence, NBC might be able to take, say, a 5% stake in a company such as MGM/UA. If the transaction raised objections, the studio's syndication operations could be spun off into a separate firm in which the network doesn't have a direct stake.

But such convolutions would still block the networks from grabbing a big chunk of the riches of syndication. Under current rules, even when a network fares well with a 100%-owned series -- ABC, for example, made a killing in broadcasting its popular crime/comedy "Moonlighting" -- it isn't allowed to share in the continuing proceeds when the reruns are sold to local stations. Instead, ABC will have to sell off the rights for a one-time fee.

The networks admit that the chances of getting the relief they want are slim -- for several years at the least.

Six years ago they were tantalizingly close. The Reagan-era Federal Communications Commission had ruled in favor of killing most of the rules. Various evidence, including a Brookings Institution study of some 800 series that the networks had aired and had partly owned in the 1960s, showed the networks didn't wield undue control over the studios as had been alleged.

But just eight days before the rules were to die, former President Ronald Reagan, a one-time actor, intervened on behalf of Hollywood. The FCC effort collapsed.

The networks and studios have bickered ever since. Network officials involved in the studio talks may hope the foreign influx builds more support in Washington, but that seems unlikely. In Congress, the issue falters: It's about money, not program quality, and Hollywood has lots of clout given its fund raising for senators and representatives overseeing the issue.

A spokesman for Rep. Edward J. Markey (D-Mass.), who heads a subcommittee that oversees the FCC, says Mr. Markey feels "the world has been forever changed by the Sony-Columbia deal." But he said Mr. Markey hopes this pushes the networks and studios to work it out on their own. And at the FCC, meanwhile, new Chairman Alfred C. Sikes has said he wants the two sides to hammer out their own plan.

--- @ A Tangled Web of Regulation @ 1959: Federal Communications Commission begins inquiry into whether networks wield monopoly power over program production and distribution. @ 1970: FCC passes Financial Interest and Syndication Rules, Forces networks out of the syndication business, bars them from sharing in rerun sales and prohibits them from owning less than 100% of a TV series. @ 1972: Nixon Administration's Justice Department files antitrust suit against CBS, NBC and ABC alleging anti-competitive behavior. @ 1977: FCC begins new study of whether to toughen "fin-syn" rules. @ 1978: NBC signs consent decree with Justice. Incorporates fin-syn rules and adds new limits on how many 100%-owned shows the networks can put on the air. Limit to expire November 1990. @ 1980: CBS and ABC enter similar consent decrees. @ 1982: FCC staff, in study begun in 1977, finds networks haven't been anti-competitive, rules haven't served their purpose. FCC starts new study of staff findings. @ 1983: FCC prepares to repeal fin-syn rules. Eight days before repeal, Reagan White House intervenes at studios' request. FCC delays action. Congress asks Hollywood and networks to privately work out a comprise. @ 1985: Studios and CBS reach possible settlement; it collapses when ABC and NBC won't agree. @ 1986: Another proposed settlement is reached. But three networks' new owners balk. @ 1987-Present: Studios and networks begin new talks. Little progress is made.

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891016-0006. Settlement Set in Suit @ Against Recognition @ Equipment by U.S.
10/16/89
WALL STREET JOURNAL (J) REC JUSTICE DEPARTMENT (JUS) POSTAL SERVICE (POS) DALLAS

Recognition Equipment Inc. said it settled a civil action filed against it by the federal government on behalf of the U.S. Postal Service.

The government sued the company in April, seeking $23,000 and other unspecified damages related to an alleged contract-steering scheme. The suit named the company, former chief executive officer William G. Moore Jr., former vice president Robert W. Reedy and five defendants who weren't part of the company. The suit charged the defendants with causing Peter E. Voss, an ex-member of the Postal Service board of governors, to accept $23,000 in bribes, kickbacks and gratuities. Mr. Voss was previously sentenced to four years in prison and fined $11,000 for his role in the scheme.

In the agreement, Recognition agreed to pay the government $20,000 in return for the release of all claims against the company, Mr. Moore and Mr. Reedy. The five additional defendants weren't parties to the settlement.

A trial on criminal allegations against the company and the same two former executives began Sept. 27 in federal court for the District of Columbia. They were indicted last October on charges of fraud, theft and conspiracy related to an effort to win $400 million in Postal Service equipment contracts by the maker of data management equipment. The company and its executives deny the charges.

In a related development, Recognition Equipment said the Postal Service has barred the company from bidding on postal contracts for an additional 120 days. The Postal Service originally suspended the company Oct. 7, 1988, and has been renewing the ban ever since. The company said it will continue to pursue a lifting of the suspension.

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891016-0005. Intel Net Declined @ 50% to $72 Million @ In Third Quarter
10/16/89
WALL STREET JOURNAL (J) INTC EARNINGS (ERN) SEMICONDUCTORS, INTEGRATED CHIPS (SEM) SANTA CLARA, Calif.

Intel Corp. reported a 50% drop in third-quarter net income, partly because of a one-time charge for discontinued operations.

The big semiconductor and computer maker, said it had net of $72 million, or 38 cents, down 50% from $142.7 million, or 78 cents a share. The lower net included a charge of $35 million, equal to 12 cents a share on an after-tax basis, for the cost of abandoning a computer-systems joint venture with Siemens AG of West Germany. Earning also fell from the year-ago period because of slowing microchip demand. Sales amounted to $771.4 million, down 1.7% from $784.9 million.

Intel's stock rose in early over-the-counter trading Friday, as investors appeared relieved that the company's income from continuing operations was only slightly below the second quarter's earnings of $99.3 million, or 53 cents a share, and that sales actually exceeded the $747.3 million for the second period. But Intel later succumbed to the stock market's plunge, closing at $31.75, down $2.125.

In August, Intel warned that third-quarter earnings might be "flat to down" from the previous period's because of slowing sales growth of its 80386 microprocessor, start-up costs associated with a line of computers and costs of preparing for mass shipments of the company's new 80486 chip in the current quarter.

On Friday, Andrew S.Grove, Intel president and chief executive officer, said "Intel's business is strong. Our bookings improved as the quarter progressed and September was especially good. For the full quarter, our bookings were higher than the previous quarter, and our book-to-bill ratio exceeded 1.0."

For the nine-month period, Intel reported net of $268.3 million, or $1.43 a share, down 27% from $367.1 million, or $2.05 a share. Revenue amounted to $2.23 billion, up slightly from $2.15 billion.

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891016-0004. International: @ 'Old Lions' of South Africa @ Are Freed, as Is Their Cause @ --- @ Release of Black Nationalists @ Sparks Rallies for ANC @ In Defiance of Pretoria @ ---- @ By Roger Thurow @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) AFRIC SOWETO, South Africa

Walter Sisulu and the African National Congress came home yesterday.

After 26 years in prison, Mr. Sisulu, the 77-year-old former secretary-general of the liberation movement, was dropped off at his house by a prison services' van just as the sun was coming up. At the same time, six ANC colleagues, five of whom were arrested with him in 1963 and sentenced to life imprisonment, were reunited with their families at various places around the country.

And as the graying men returned to their homes, the ANC, outlawed in South Africa since 1960 and still considered to be the chief public enemy by the white government, defiantly returned to the streets of the country's black townships. A huge ANC flag, with black, green and gold stripes, was hoisted over the rickety gate at Mr. Sisulu's modest house, while on the street out front, boys displayed the ANC colors on their shirts, caps and scarves. At the small four-room home of Elias Motsoaledi, a leading ANC unionist and a former commander in the group's armed wing, Umkhonto we Sizwe, well-wishers stuck little ANC flags in their hair and a man tooted on an antelope horn wrapped in ANC ribbons.

"I am happy to see the spirit of the people," said Mr. Sisulu, looking dapper in a new gray suit. As the crowd outside his home shouted "ANC, ANC," the old man shot his fists into the air. "I'm inspired by the mood of the people."

Under the laws of the land, the ANC remains an illegal organization, and its headquarters are still in Lusaka, Zambia. But the unconditional release of the seven leaders, who once formed the intellectual and organizational core of the ANC, is a de facto unbanning of the movement and the rebirth of its internal wing.

"The government can never put the ANC back into the bottle again," said Cassim Saloojee, a veteran anti-apartheid activist on hand to welcome Mr. Sisulu. "Things have gone too far for the government to stop them now. There's no turning back."

There was certainly no stopping the tide of ANC emotion last night, when hundreds of people jammed into the Holy Cross Anglican Church in Soweto for what became the first ANC rally in the country in 30 years. Deafening chants of "ANC" and "Umkhonto we Sizwe" shook the church as the seven aging men vowed that the ANC would continue its fight against the government and the policies of racial segregation on all fronts, including the armed struggle. And they called on the government to release Nelson Mandela, the ANC's leading figure, who was jailed with them and remains in prison. Without him, said Mr. Sisulu, the freeing of the others "is only a half-measure."

President F.W. de Klerk released the ANC men -- along with one of the founding members of the Pan Africanist Congress, a rival liberation group -- as part of his efforts to create a climate of trust and peace in which his government can begin negotiations with black leaders over a new constitution aimed at giving blacks a voice in national government.

But Pretoria may instead be creating a climate for more turmoil and uncertainty in this racially divided country. As other repressive governments, particularly Poland and the Soviet Union, have recently discovered, initial steps to open up society can create a momentum for radical change that becomes difficult, if not impossible, to control.

As the days go by, the South African government will be ever more hard pressed to justify the continued imprisonment of Mr. Mandela as well as the continued banning of the ANC and enforcement of the state of emergency. If it doesn't yield on these matters, and eventually begin talking directly to the ANC, the expectations and promise raised by yesterday's releases will turn to disillusionment and unrest. If it does, the large number of right-wing whites, who oppose any concessions to the black majority, will step up their agitation and threats to take matters into their own hands.

The newly released ANC leaders also will be under enormous pressure. The government is watching closely to see if their presence in the townships leads to increased anti-government protests and violence; if it does, Pretoria will use this as a reason to keep Mr. Mandela behind bars. Pretoria hasn't forgotten why they were all sentenced to life imprisonment in the first place: for sabotage and conspiracy to overthrow the government.

In addition, the government is figuring that the releases could create a split between the internal and external wings of the ANC and between the newly freed leaders and those activists who have emerged as leaders inside the country during their imprisonment. In order to head off any divisions, Mr. Mandela, in a meeting with his colleagues before they were released, instructed them to report to the ANC headquarters in Lusaka as soon as possible.

The men also will be faced with bridging the generation gap between themselves and the country's many militant black youths, the so-called young lions who are anxious to see the old lions in action. Says Peter Mokaba, president of the South African Youth Congress: "We will be expecting them to act like leaders of the ANC."

They never considered themselves to be anything else. At last night's rally, they called on their followers to be firm, yet disciplined, in their opposition to apartheid. "We emphasize discipline because we know that the government is very, very sensitive," said Andrew Mlangeni, another early Umkhonto leader who is now 63. "We want to see Nelson Mandela and all our comrades out of prison, and if we aren't disciplined we may not see them here with us."

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891016-0003. International -- Washington Insight: @ Seoul's Roh Comes to U.S. From a Nation @ Thriving and at a Political Crossroads @ ---- @ By Albert R. Hunt @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) FREST MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) COMMODITY NEWS, FARM PRODUCTS (CMD) CONGRESS (CNG) COMMERCE DEPARTMENT (COM) STATE DEPARTMENT (STD) WASHINGTON

There's an intense debate in South Korean President Roh Tae Woo's inner circle over his scheduled speech Wednesday to a joint meeting of Congress: Should he give it in English or Korean?

It would be more effective with the U.S. politicians and public in English, the president's foreign policy advisers argue. But, counter some domestic political aides, it would hurt Mr. Roh at home if he seems to be pandering to the Americans.

U.S. politicians and policy-makers would do well to remember such backhome pressures on the South Korean president as they prepare for an important series of meetings with him this week. For U.S.-South Korean relations, in economic and security terms, are at their most critical stage since the Korean War.

When most Americans think about South Korea, they still conjure up images of the war years, popularized by the TV series M*A*S*H. But South Korea no longer is a backwater, Third World country. With a dynamic, growing economy, it is the U.S.'s seventh-largest trading partner. Moreover, the Korean peninsula remains one of the strategic focal points of East Asia; there are 43,000 U.S. troops stationed there. And the country is at a political crossroads now, as it struggles with its new experiment in democracy.

South Korea is "critically important to us now, both economically and in terms of security," says Sen. Richard Lugar (R., Ind.), the former chairman of the Senate Foreign Relations Committee. "Unfortunately, many Americans don't think much about Korea. But the miracle of their economic growth and the development of democracy -- imperfect though it is -- are very important to the United States." One major topic during Mr. Roh's visit will be human rights. Due process still is denied in South Korea; a few months ago, Kim Dae Jung, the major opposition leader, was detained and interrogated for 20 hours by security thugs. Just as Pope John Paul II did in Seoul last week, President Bush and members of Congress ought to tell Mr. Roh in no uncertain terms that this kind of behavior is unacceptable.

But context is important. South Korea had a free election last year; the liberals lost only because they couldn't unite behind one candidate. Moreover, there is a violent anti-U.S. minority in South Korea -- as demonstrated by the handful of radical students who broke into U.S. Ambassador Donald Gregg's residence in Seoul Friday and vandalized it (the ambassador and his wife were unharmed).

Mr. Roh, a former general and a member of the repressive previous regime, has made impressive strides in supporting democratic values and institutions. It isn't a perfect democracy, but it's a far cry from the authoritarian rule of only a few years ago.

One thing that hasn't changed in South Korea is paranoia about North Korea; several people are being prosecuted for making unapproved visits to the communist north. But a visit to Panmunjom, where the constant tension between the communists and the joint U.S.-South Korean forces is palpable, makes it easier to understand these feelings. Sometimes U.S. politicians forget that North Korea, a country with a population of only 20 million, has an armed force of over one million troops, the sixth largest in the world.

Whatever winds of change are blowing through much of the communist bloc, they haven't reached Pyongyang. As long as it continues to pose a real threat, U.S. critics ought to go slow on demands to reduce troop levels in South Korea.

The major topic when Mr. Roh calls on administration and congressional figures this week will be economics and trade. South Korea hardly is without fault for trade frictions with the U.S.; most experts in the administration think that Commerce Secretary Robert Mosbacher got it exactly wrong a few months ago when he declared that South Korea is more open economically than Japan. On agricultural products in particular -- everything from beef to apples -- the Koreans have succumbed to domestic political pressures for protectionism.

Yet, earlier this year, South Korea promised to make some real concessions on its investment laws and other trade impediments. They enabled the country to avoid being targeted as an unfair trade partner under the tough "Super 301" section of the 1988 U.S. trade act. Separately, as a result of the revaluation of the won and other measures, the almost $10 billion trade surplus the South Koreans enjoyed with the U.S last year will be cut in half this year.

Moreover, just a few days ago, the national assembly, with the governing and opposition parties in an unusual alliance, passed a resolution calling for a gradual opening up of South Korean agricultural markets.

It's appropriate for U.S. officials to keep hammering for more open trade policies, as U.S. Trade Representative Carla Hills did in Seoul last week. But there's also sometimes a tendency in American political circles to pick especially on South Korea, out of frustration over our inability to do much about Japan. That's counterproductive.

Most importantly, it's time for American policy-makers to better appreciate that our economic future rests more with Asia -- Seoul as well as Tokyo -- than anyplace else.

The U.S. always ought to stand up for its interests, but it's essential that U.S. officials have an appreciation of the politics and history of our allies. In the upper echelons of the Roh Tae Woo's government, they're still buzzing about Commerce Secretary Mosbacher's trip to South Korea earlier this year. It seems he learned, for the first time, that South Korea had been occupied for decades by Japan.

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891016-0002. Phone Firms @ Seen Posting @ Healthy Profits @ --- @ Industry's Earnings Increases @ For the Third Quarter @ Are Put as High as 19% @ ---- @ By Julie Amparano Lopez @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) T MCIC UT GTE PAC BLS RTC NYN TELEPHONE SYSTEMS (TLS) COMMUNICATIONS TECHNOLOGY (CMT)

Bolstered by a robust long-distance business, the telephone industry is expected to post a healthy profit increase for the third quarter.

Analysts estimate that third-quarter earnings for the industry will increase as much as 19% from the year-earlier period. If so, their cumulative earnings could hit $4.12 billion.

Most of the earnings growth, however, will come from the long-distance sector. American Telephone & Telegraph Co. is expected to post a profit increase of about 18% and MCI Communications Corp.'s earnings are expected to surge 58%.

United Telecommunications Inc. reported last Wednesday that third-quarter net income climbed 75% to $94.6 million, or 90 cents a share, on revenue of $1.93 billion. United Telecom's Sprint unit posted operating profit of $60 million.

Paul Aran, a telecommunications analyst with Bear, Stearns & Co., said the long-distance companies have been buoyed by strong growth in the facsimile and data-service business. He said declining long-distance prices also have helped stimulate usage.

The local telephone companies, however, aren't expected to fare as well. Growth is predicted to be in the 1% to 2% range for most companies, with Southern New England Telephone and GTE Corp. posting profit increases in the neighborhood of 10%.

"The long-distance companies have kept their momentum," says Robert Morris III, a telecommunications analyst with Goldman, Sachs & Co., "while the pace of growth for the local telephone companies is slowing." That's especially true for the regional Bell companies.

He said regulation is primarily responsible for the Bells' dull earnings growth. Most companies have reached their maximum allowed earnings ceilings, which are set by regulators. "This signals the need for regulatory change," Mr. Morris said.

Pacific Telesis Group, which is expected to post earnings of about 75 cents a share, obtained regulatory relief from California regulators last week. Under the plan, the company is allowed to earn more if it can operate more efficiently. In the year-earlier quarter, Pacific Telesis earned $318 million, or 75 cents a share, on revenue of $2.38 billion.

Analysts expect installations of new telephone lines to grow about 3%. However, GTE, BellSouth Corp. and Pacific Telesis, which operate in territories with hearty economies, are expected to report new-telephone-line growth in the range of 4% to 5%. Nynex Corp.'s profits could begin to show signs of weakening from the effects of a nearly three-month strike, while other Bell companies, such as Ameritech and Southwestern Bell Corp., could be hurt in the quarter by one-time charges associated with the settlement of new union contracts.

Mr. Aran, the Bear Stearns analyst, said that generally, after eight weeks, "A strike starts hurting earnings. I'm waiting to see what the impact is on Nynex."

Analysts predict Nynex earnings will be about $1.57 a share, compared with $1.72 a share a year earlier, when the company earned $338.9 million on sales of $3.18 billion.

The independent telephone companies also may post third-quarter results that trail the comparable year-ago period. Rochester Telephone Co., for instance, said it expects third-quarter earnings to be "somewhat lower" than the year-earlier quarter -- even though the company expects to post an extraordinary gain of 50 cents during the period. The company said higher expenses and competitive pressures hampered earnings.

For the 1988 third quarter, Rochester Telephone reported a net income of $12.9 million, or $1.10 a share, on revenue of $120.2 million.

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891016-0001. Sony Bid to Enter U.S. Film Market Faces @ Setback as Battle With Warner Heats Up @ ---- @ By Laura Landro @ Staff Reporter of The Wall Street Journal
10/16/89
WALL STREET JOURNAL (J) SNE TL WCI GPEC KPE RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

The tug of war between Warner Communications Inc. and Sony Corp. over movie producers Peter Guber and Jon Peters has exploded into a legal battle that could prove an embarrassing setback to Sony's plans to enter the U.S. movie business.

On Friday, after two weeks of fruitless settlement talks, Warner filed suit in Los Angeles Superior Court against Sony and Guber Peters Entertainment Co., charging Sony with inducing the two producers to breach a five-year contract with Warner. The suit seeks $1 billion in damages and an injunction barring Messrs. Guber and Peters from taking the top management posts at Columbia Pictures Entertainment Inc. As previously reported, Sony has agreed to pay $3.4 billion to acquire Columbia and separately has agreed to pay $200 million for Guber Peters Entertainment to obtain the services of its two co-chief executives.

Sony and Guber Peters promptly countersued, charging Warner with attempting to interfere in Sony's acquisition of the two companies and with falsely asserting that the Guber Peters agreement with Warner prevents them from accepting the senior management posts at Columbia.

At issue in the lawsuits is the contract signed last March by Messrs. Guber and Peters that requires the two to make movies exclusively for Warner for the next five years. Sony and Messrs. Guber and Peters maintain that the contract doesn't prohibit taking an executive post at another studio. Moreover, they assert, the producers have an oral agreeement with Warner Bros. studio executives that gives them the right to "terminate the producer relationship in the event they were given and chose to accept the opportunity to become senior executives of a motion picture studio," according to their countersuit.

Warner, for its part, maintains that the written agreement prevents Messrs. Guber and Peters from doing anything else in the motion picture business. Warner says in its suit that Sony "has unethically and illegally sought to steal the services of Guber and Peters and injure Warner as a major competitor of Columbia." Moreover, Warner says, Sony enticed the producers with "unprecedented financial rewards to breach their binding contractual commitments to Warner." Warner also names in its suit the two producers, Sony Corp. of America Vice Chairman Michael Schulof, and Walter Yetnikoff, head of Sony's CBS Records unit.

Sony responded in its countersuit by charging Warner, its chief executive Steven J. Ross, and Warner Bros. unit chairman Robert Daly and President Terry Semel with embarking on an unlawful scheme to interfere with and disrupt Sony's acquisitions. Warner, which is in the process of being acquired by Time Warner Inc., is attempting to "sabotage" Sony's efforts as part of a "plan and scheme to dominate and control the entertainment business," the countersuit from Sony and Guber Peters adds.

Warner also appears to be trying to embarrass Sony by accusing the Japanese company's U.S executives, Messrs. Schulof and Yetnikoff, of dishonorable dealings. In its suit, Warner says that Mr. Ross warned Sony's Mr. Schulof on Sept. 26 at a dinner in Washington, "with Guber Peters in mind" that in the U.S. "it is essential that corporations honor written contracts and do not induce breach of contracts by others." Sony went ahead the next day anyway and executed its own five-year agreement with the producers and agreed to buy their company, the suit adds. Moreover, the suit adds that Sony initially said it wouldn't buy Guber Peters unless the Warner contract was settled. On Tuesday, although a settlement wasn't reached, Sony publicly announced it would acquire Guber Peters. "Sony has thus knowingly and willfully, and over Warner's protests, induced Guber and Peters to repudiate their contract with Warner," the suit says.

Warner's decision to file suit in the wake of its failure to reach a settlement with Sony didn't surprise executives at rival studios, who say Warner is only protecting its own interests. The outcome of the legal battle, they add, could redefine contractual relationships in Hollywood, where the unwritten rule has often been that contracts were made to be broken.

In Warner's case, the studio obviously regards the relationship with Guber Peters as a crucial factor in Warner's recent success and a central part of its future plans. Warner has relied heavily on the two to find and produce movies for the studio, including this summer's hit "Batman." Warner says in its suit that "Guber and Peters claim to have generated over one-half billion dollars in profits for Warner from combined projects," a claim Warner doesn't dispute. And Warner says it is currently financing about 50 new projects being developed by the two producers.

Under an earlier agreement with Warner, the producers were allowed to make movies elsewhere. For example, they made the hit "Rainman" for MGM/UA Communications Co. But when Warner signed a new agreement with the two in March, the terms specifically prohibited them from serving as producers or executive producers of movies for any other studio.

Sony and the Guber Peters executives say in their countersuit, however, that the new contract eliminated language barring the two from serving "in any other capacity" in the motion picture business. And they appear to be relying heavily on an alleged "oral agreement" the two producers claim to have with Warner that would let them out of their written contract in the event that an actual executive post at another company became available. In their countersuit, they say that on two previous occasions -- once in 1987 when they considered a post at Columbia, and once when Messrs. Guber and Peters tried to buy a stake in MGM/UA in 1988 -- Warner was prepared to release them from their contract. The countersuit also charges Warner with making the oral agreement to "falsely induce" them into a new written contract in 1989. Moreover, they say, Warner is trying to cheat them out of "a unique business opportunity" and the fulfilment of their "long-term dream" to run their own studio.

But entertainment industry executives say that the new contract was signed after Guber Peters efforts to take over MGM failed and that Warner may argue in court that the producers' willingness to sign a new long-term contract signaled the end of their search for a movie studio.

Mr. Ross and his team at Warner appear to view the move by the two producers to Sony as a personal betrayal after years of support and friendship. "Warner has been nurturing its relationship with Guber and Peters since 1972, long before their recent success," the Warner suit says. That success, the suit adds, "is due in large measure to the trust and confidence that Warner has reposed in these producers, even in the early years of the relationship when the creative partnership was not particularly profitable for Warner."

Warner, whose executives are the highest paid in the entertainment industry, also charges that Sony induced the two producers to breach their Warner contract by offering them "the most lucrative and expensive package of financial inducements in the film industry," including $2.7 million each in annual salary, deferred compensation of $50 million, as much as 10% of Columbia's cash flow, and as much as 8% of the future appreciation of Columbia's market value. The producers also stand to get more than $50 million from their combined 28% stake in Guber Peters Entertainment from Sony's $200 million offer for the company.

In their countersuit, Messrs. Guber and Peters say they seek $100 million in damages initially from Warner but may seek a higher amount later after determining the extent of damages.

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891016-0081. Quarterly Earnings Surprises
10/13/89
WALL STREET JOURNAL (J) SHX FPC WMTT ALTR NWOR AFP GLYT IFL ANLY MII BCC PCH NBD EARNINGS (ERN)

Companies listed below reported quarterly profit substantially different from the average of analysts' estimates. The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share. Estimated and actual results involving losses are omitted.

The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days. Otherwise, actual profit is compared with the 300-day estimate. @ ESTIMATE @ (# of analysts) @ ACTUAL --------------- % @ COMPANY NAME EPS 30-DAY 300-DAY DIFF. @ POSITIVE @ Shaw Industries $.48 ... $.41 (5) 17.07 @ Florida Progress 1.47 ... 1.30 (7) 13.08 @ Willamette Indus. 2.08 ... 1.85 (7) 12.43 @ Altera Corp. .15 ... .14 (4) 7.14 @ NEGATIVE @ Neworld Bancorp $.35 ... $.53 (3) 33.96 @ Affiliated Publ .12 ... .16 (3) 25.00 @ Genlyte Group .22 ... .29 (3) 24.14 @ IMC Fertilizer .76 ... .96 (7) 20.83 @ Analysts Intl .29 ... .35 (3) 17.14 @ Morton Intl .54 ... .59 (4) 8.47 @ Boise Cascade 1.34 ... 1.44 (13) 6.94 @ Potlatch Corp. 1.22 ... 1.31 (7) 6.87 @ NBD Bancorp .87 ... .92 (9) 5.43

Source: Zacks Investment Research

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891013-0177. McDonnell Douglas Contract
10/13/89
WALL STREET JOURNAL (J) MD MDEST DEFENSE DEPARTMENT (DEF) WASHINGTON

McDonnell Douglas Corp. received a $54.3 million Navy contract for F/A18 aircraft for Kuwait.

Propper International Inc. won a $20.2 million Defense Logistics Agency contract for camouflage trousers.

Altama Delta Corp. was given an $18.5 million Defense Logistics Agency contract for combat boots.

891013-0176.
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891013-0176. Microamerica Plans Buy-Back
10/13/89
WALL STREET JOURNAL (J) MRAC TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) MARLBOROUGH, Mass.

Microamerica Inc. said its board authorized the purchase of as many as two million, or 15%, of its common shares outstanding.

The purchases would be made periodically on the open market or in privately negotiated transactions, the company said.

Microamerica, a distributor of personal-computer products, has about 13.5 million shares outstanding.

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891013-0175. Ad Agencies to Post @ Higher Earnings, @ Analysts Believe @ ---- @ By Thomas R. King @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) MARKETING, ADVERTISING (MKT)

Advertising agencies' third-quarter earnings are expected to be up modestly from a year ago, securities analysts say.

Andrew Wallach, an analyst at Drexel Burnham Lambert, is estimating Interpublic Group, for example, at 21 cents a share, up from 18 cents a share a year ago. Greg Ostroff, an analyst at Goldman Sachs, is pegging Omnicom Group at 17 cents a share, up from 15 cents a share, and Foote, Cone & Belding Communications Inc. at 55 cents a share, up from 46 cents.

Analysts note, however, that the third period is a minor quarter in terms of absolute profits. Those who watch Madison Avenue say this period, along with the first quarter, is traditionally weak. The fourth quarter is where the real impact is made. "We tend not to read much into third-quarter earnings," Mr. Ostroff says.

Also notable is the fact that Saatchi & Saatchi Co. and WPP Group PLC, two British giants that are principal players in the advertising business, don't report quarterly earnings.

In the industry overall, "profits will increase unless revenues are disastrously lower," said Alan Gottesman, an analyst at PaineWebber Inc., New York. "There are no external indications" to indicate that will be the case, he said. Mr. Gottesman noted that the employee count for the industry is down and that most agencies are watching staffing levels in a bid to closely monitor costs.

Others are cautiously watching the value of the dollar overseas. "From where I sit, the biggest issue for the U.S. agencies is the dollar," said Emma Hill, an analyst at Wertheim Schroder & Co., New York. "For the U.S. companies, the risk is one of disappointment versus better-than-expected because of the dollar." Ad agencies rely heavily on business overseas for their bottom line. The strength of the dollar will hurt the reporting of foreign earnings, many analysts said.

Some agencies, including Interpublic Group's Lintas and Saatchi & Saatchi's Backer Spielvogel Bates, have said that their clients are spending less than they had expected. Few agencies are reporting that their clients' ad budgets are expanding.

All eyes, however, are on the fourth quarter and to reporting by the giant British companies. "Saatchi & Saatchi is having a very tough year," Drexel Burnham's Mr. Wallach said. "It's real guesswork figuring out what they'll earn." That agency, rumored as a takeover candidate, earlier this year said pretax profit for 1989 would trail 1988's already disappointing level. For WPP Group, on the other hand, most analysts are looking for margin improvement and good results considering its acquisition earlier this year of Ogilvy Group.

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891013-0174. U.S. Banks' Involvement in China Loans @ Signals Willingness to Resume Business @ ---- @ By Cynthia Owens @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BT CMB FREST BANKS (BNK) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) HONG KONG

The involvement of units of two major U.S. banks in separate loans to China has signaled a growing willingness among foreign bankers to resume lending to the Beijing government.

One of the units, BT Asia Ltd., a subsidiary of Bankers Trust New York Corp., this week arranged the syndication of a $50 million, five-year loan to Shortridge Ltd., which is owned by China International Trust & Investment Corp. (Holdings), or Citic. The loan will be used for Shortridge's share of the purchase of a satellite, a BT Asia director said.

The other unit, Chase Manhattan Asia Ltd., a Hong Kong subsidiary of Chase Manhattan Corp., of New York, said it is underwriting a $50 million loan for China's biggest trading company, China Resources (Holdings) Co., for general corporate purposes. Of the total, $30 million can be swapped into marks.

Amid the international outcry following the shooting of students and bystanders in Beijing on June 4, foreign-bank lending to China came to a halt.

Bankers in Hong Kong said this week's Citic loan was an important sign that foreign banks are interested in resuming regular business with China. "It's sort of a benchmark," said a U.S. banker who didn't participate in the loan.

Russell L. Magarity, senior managing director of Chase Manhattan Asia, said "it is time" to start considering loans to China again. Mr. Magarity said Chase hopes to assemble an international group of banks in the lending syndicate, including some of U.S. and Japanese banks with which China Resources has had a strong relationship in recent years. "Right now we think we can successfully syndicate this loan because of China Resources' name," he said.

Indeed, the reputations of China Resources and Citic played a significant role in the decisions. China Resources and Citic are considered exceptionally good credit risks, bankers said. Other loans to China will have to be considered on a case-by-case basis. Beyond the political considerations, banks are concerned about the state of China's economy and about borrowers' ability to make loan payments. Now that the first major syndication of a Chinese loan has proceeded smoothly, a Japanese banker said it will be easier for foreign banks to consider making loans to China.

Citic, which acts as a sort of merchant bank for overseas acquisitions by China, is a relatively independent company. Through Shortridge, it is one of three partners in Asia Satellite Telecommunications Co., which plans to launch a private satellite on a Chinese rocket next year. The other partners are Cable & Wireless PLC of Britain and Hutchison Whampoa Ltd. of Hong Kong. Citic guaranteed the loan.

The loan was syndicated to a group of foreign banks from Europe, Hong Kong and Canada, foreign bankers said; they didn't identify the institutions. BT Asia arranged the syndication but didn't underwrite the loan.

A BT Asia official wouldn't disclose all the terms of the loan but said it was linked to a currency option that allows banks to receive repayment in yen instead of dollars. The official said Citic will pay an interest rate that will be about 0.5 percentage point higher than the amount Citic would have paid for a similar borrowing before June 4. He said it was difficult to calculate the exact interest rate because of the currency option.

Bankers said they believe China Resources' loan costs have risen by about the same amount.

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891013-0173. Some Managers See @ Demand Slipping, @ Dun Survey Shows @ ---- @ By Robert Daniels @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) NEW YORK

Demand for products in the current quarter should weaken and inflation shouldn't put any upward pressure on prices, say U.S. plant managers in a Dun & Bradstreet Corp. survey.

Fewer plant managers expect higher new orders and output this quarter than in the year-earlier period, according to the survey, which polls 1,500 managers of manufacturing facilities on conditions in their factories and industries.

Plant managers' optimism "has moderated, which is in line with current economic data that indicate slow but continuing economic growth," said Joseph W. Duncan, corporate economist and chief statistician for Dun & Bradstreet, a financial-data company.

The managers expect materials costs to drop in the quarter, leading fewer to forecast higher selling prices, Mr. Duncan said.

Dun & Bradstreet calculates several optimism indexes, subtracting the percentage of managers expecting a decline from the percentage expecting growth.

For overall demand, the fourth-quarter index fell to 28 from 31 last quarter and 32 in the 1988 fourth period. For output, the index was 29, the same as last quarter, but a three-point drop from a year ago. For new orders, the figure again was flat with the third quarter at 29. The latest figure also is down a point from the year earlier.

The U.S. dollar strengthened during the summer and may have damped the managers' hopes for higher demand from overseas. Recent "declines in the dollar should bolster manufacturers' selling opportunities abroad," Mr. Duncan said.

For the next 12 months, each of the indexes for overall demand, production and new orders fell one point from last quarter, to 57, 57 and 59, respectively. The year-earlier figures were 60, 60 and 61.

Dun & Bradstreet's data measuring fourth-quarter costs of making a single unit of a product indicated that "manufacturers foresee weaker prices" for materials "while wage pressures, though still present, are not expected to escalate," Mr. Duncan said.

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891013-0172. Bank Profits @ In Southwest @ Were Mixed @ --- @ Real Estate Loans Hurt Net @ Of Some in Third Period; @ Bailouts Assisted Others @ ---- @ By Michael Allen @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) NCB BANKS (BNK)

Bad real estate loans continued to gnaw at third-quarter profits of Southwestern banks, with the notable exception of institutions that cleansed their books with federal bailouts.

"You've got a two-tiered market," said Frank W. Anderson, an analyst with Stephens Inc., Little Rock, Ark. On top, he said, are such dynamos as NCNB Corp. and First City Bancorp of Texas, which acquired big, ailing Texas banks in government-assisted transactions that allowed them to slough off bad loans. They are expected to ring up big profits for the third quarter, Mr. Anderson said.

As for the rest, warns James McDermott, an analyst with Keefe Bruyette & Woods, New York, "asset quality concerns are going to dominate third-quarter reports."

For example, Cullen/Frost Bankers Inc., San Antonio, Texas, is expecting "an uptick in {non-performing loans} related to real estate" in the third quarter, said Thomas Frost, chairman and chief executive. As the only major bank holding company in Texas to survive without a bailout or merger, Cullen/Frost managed only "very modest" earnings in the period, he said. "If the government handed me a big bucket of money I'd look good, too," Mr. Frost added.

NCNB Corp.'s Texas operation, on the other hand, is expected to report an operating profit "in line with {or} perhaps a bit better" than its results in the first two quarters, Timothy Hartman, vice chairman of the Texas unit, said. The Texas unit had an operating profit of $58.7 million in the first quarter and $55.7 million in the second quarter.

NCNB, based in Charlotte, N.C., bought the banking assets of failed First Republic Bank Corp. of Dallas last year in a transaction expected to cost the Federal Deposit Insurance Corp. about $3 billion. (First Republic isn't related to First Republic Bancorp of San Francisco.) Robert Rieke, an analyst with Raucher Pierce Refsnes Inc., Dallas, estimates Houston-based First City's third-quarter net was higher than second quarter earnings of $28.1 million. However, he estimated that per-share earnings stayed "relatively flat" at about the second quarter's $1.19 a share because the total number of shares outstanding increased.

First City was recapitalized last year by a group led by Chicago banker A. Robert Abboud. The FDIC contributed nearly $1 billion to the new organization.

More recent Texas bailouts won't have much impact on the third quarter results of the new parent companies, analysts said. These include the sale of MCorp's failed banks to Banc One Corp., Columbus, Ohio; the sale of National Bancshares Corp. of Texas to Equimark Corp. of Pittsburgh; and the sale of Texas American Bancshares Inc.'s banking assets to Deposit Guaranty Bank of Dallas. The transactions haven't yet been completed and the Texas units are still unprofitable.

Said Ronald Steinhart, chairman of Deposit Guaranty: "You won't see the newly cleansed bank in operation until approximately Dec. 1."

Outside Texas, the biggest real estate nightmare for banks in the region is probably Arizona. "Arizona is going to be a mess," said Keefe Bruyette's Mr. McDermott.

Several banks with operations in Arizona, including First Interstate Bancorp. and Security Pacific Corp., both of Los Angeles, have already indicated they see asset-quality problems. Chase Manhattan Corp., New York, last month took a $126 million charge against earnings related to real estate loans at Chase Bank of Arizona.

Several credit rating agencies recently downgraded the senior debt of Valley National Corp., warning that the Phoenix-based bank holding company is vulnerable to the deteriorating real estate market. "Despite the special addition to reserves in the second quarter, Valley remains poorly reserved against its real estate exposure," Moody's Investors Service Inc. said in July.

One of the few bright spots in the region is Colorado, where a mild economic recovery has helped several banks staunch the flow of red ink. For instance, United Banks of Colorado Inc., the state's largest multibank holding company, resumed a cash dividend earlier this year after recording eight straight quarters of profitability.

More good news comes from New Mexico, where banks didn't have as much opportunity to get into difficulty in the first place. "The state never grew fast enough to get banking organizations in real trouble and the banking organizations were never big enough to lend into trouble," said Mr. Rieke of Raucher Pierce Refsnes.

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891013-0171. REVIEW & OUTLOOK (Editorial): @ Colombia's Brave Publisher
10/13/89
WALL STREET JOURNAL (J) LATAM MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) EXECUTIVE (EXE)

We don't know who is winning the drug war in Latin America, but we know who's losing it -- the press. Over the past six months, six journalists have been killed and 10 kidnapped by drug traffickers or leftist guerrillas -- who often are one and the same -- in Colombia. Over the past 12 years, at least 40 journalists have died there. The attacks have intensified since the Colombian government began cracking down on the traffickers in August, trying to prevent their takeover of the country.

The slaughter in Colombia was very much on the minds of 450 editors and publishers from Latin America, the United States, the Caribbean and Canada attending the 45th general assembly of the Inter-American Press Association in Monterrey, Mexico, this week. On Tuesday the conference got word of another atrocity, the assassination in Medellin of two employees of El Espectador, Colombia's second-largest newspaper. The paper's local administrator, Maria Luz Lopez, was shot dead, and her mother wounded, while her car was stopped for a red light. An hour later, the paper's circulation manager, Miguel Soler, was shot and killed near his home.

The drug lords who claimed responsibility said they would blow up the Bogota newspaper's offices if it continued to distribute in Medellin. They bombed the Bogota offices last month, destroying its computer and causing $2.5 million in damage.

El Espectador has been a special target because of the extraordinary courage of its publisher and his staff. At Monterrey, publisher Luis Gabriel Cano, although shaken by the murders, issued a statement saying: "We will not cease our fight against drug trafficking. They want to terrify the press and in particular El Espectador because it has always been a torchbearer in this war." This comes from a man whose brother, Guillermo, was murdered in 1986.

The publishers in Monterrey command no battalions, but they agreed to express their outrage with editorials in today's editions. Many will use a common editorial. A final statement yesterday said: "While some advances are being made in nations throughout the hemisphere, the state of press freedom in the Americas still must be regarded as grim as long as journalists and their families are subject to the crudest form of censorship: death by assassination."

The report charged that Panama's Manuel Noriega is not only in league with the drug traffickers but also is bullying the press as never before. "Noriega has closed every independent newspaper, radio and television station and arrested, tortured or forced into exile a long list of reporters," the statement declared.

It added: "In Cuba, public enemy No. 1 of press freedoms in the hemisphere, repression of journalists both Cuban and foreign is worse than ever." And in Nicaragua, promises of press freedom by the Sandinistas "have not materialized."

As it happens, the four countries cited, Colombia, Cuba, Panama and Nicaragua, are not only where the press is under greatest attack but also are linked by the drug trade and left-wing politics. Noriega is close to Castro and may once have been his agent. Sandinistas Thomas Borge and the Ortega brothers are Castro proteges; he backed their takeover of Nicaragua. In Colombia, the drug-financed guerrillas trying to seize the country and destroy democracy include M-19, which Castro has clearly backed.

Robert Merkel, a former U.S. attorney handling drug indictments in Florida, doesn't think for a minute that Castro's much publicized trials of high officials engaged in the drug trade mean he has broken off with the Medellin drug cartel. "If the cartel succeeds in blackmailing the Colombian authorities into negotiations, the cartel will be in control and Fidel can exploit his past relationships with them," he told the Journal's David Asman recently.

The struggle against the drug lords in Colombia will be a near thing. This week, the government arrested Jose Abello Silva, said to be the fourth-ranking cartel leader. He will probably be extradited to the U.S. for trial under an extradition treaty President Virgilia Barco has revived. Later, another high-ranking trafficker, Leonidas Vargas, was arrested and 1,000 pounds of dynamite seized. Mr. Barco has refused U.S. troops or advisers but has accepted U.S. military aid.

President Bush has agreed to meet within 90 days with Mr. Barco, President Alan Garcia of Peru and President Jaime Paz Zamora of Bolivia to discuss the drug problem. It might not be a bad idea to do that sooner, rather than later. After the Panama fiasco, they will need some reassurance. Certainly, the Colombian press is much in need of that.

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891013-0170. Financing Business: @ Great American Communications Co.
10/13/89
WALL STREET JOURNAL (J) AFINP GACC TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BOND MARKET NEWS (BON)

GREAT AMERICAN COMMUNICATIONS Co., Cincinnati, said it exchanged about $50 million in debentures and notes for 3.65 million of its common shares at $12 a share. As a result of the transaction, American Financial Corp.'s common holdings in Great American declined to 64% from 71%. The broadcasting concern said the debt retired consisted of $35 million of 14 3/8% senior subordinated debentures, $14.2 million of 13 1/4% senior notes and $200,000 of 14 1/8% senior notes of a subsidiary. American Financial is a financial holding company.

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891013-0169. Who's News: @ Chemical Banking Corp.
10/13/89
WALL STREET JOURNAL (J) CHL WNEWS CHEMICAL BANKING Corp. (New York)

Robert L. Corcoran Jr., 45 years old, was named managing director and regional manager of Japan and Asia at this firm's Chemical Bank unit. The post was occupied on an interim basis by Marc Morrison, a managing director in the international-money-markets and government-securities department in Tokyo. Mr. Corcoran most recently was head of administration and portfolio management at the Chemical Realty Group division of Chemical Bank.

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891013-0168. Matra Unit Projects @ Strong Profit Gains; @ Share Offer Readied @ ---- @ Special to The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) F.MAT TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) PARIS

Matra Communications S.A., a unit of France's defense and electronics group, Matra S.A., said it expects strong profit growth in both 1989 and 1990.

The company, which is preparing to sell 10% of its shares on the French stock market, said profit could reach between 100 million francs ($15.4 million) and 110 million francs this year, representing increases of between 30% and 44% from the 1988 level of 76.5 million francs.

For 1990, profit growth could slow to between 18% and 20%, reaching between 120 million and 130 million francs, the company said.

The company plans to raise 1.5 billion francs with its share offer, involving the sale of one million shares. Between 1% and 2% of the offering has been set aside for the company's employees. The offering will begin Oct. 24. en

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891013-0167. Walker Telecommunications
10/13/89
WALL STREET JOURNAL (J) WTEL BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) HAUPPAUGE, N.Y.

Walker Telecommunications Corp. said it plans to repurchase as many as one million shares from time to time, depending on the state of the market.

The supplier of electronic key telephone systems has 5.1 million shares outstanding and will purchase the shares in the market, and or in privately negotiated transactions. In national over-the-counter trading, Walker shares closed yesterday at 90.625 cents, up 21.875 cents.

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891013-0166. Du Pont Plans Brazilian Facility
10/13/89
WALL STREET JOURNAL (J) DD WILMINGTON, Del.

Du Pont Co. said its Du Pont do Brasil subsidiary will invest about $19 million to build a multimillion-pound-per-year fluoropolymers plant and technical center in Sao Paulo, Brazil.

The plant, scheduled to operate in early 1992, is part of Du Pont's plan to increase world-wide fluoropolymer capacity 40% by 1992.

Du Pont markets fluoropolymers under the trademark Teflon.

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891013-0165. Initial Joblessness Claims @ Climbed in Sept. 30 Week
10/13/89
WALL STREET JOURNAL (J) LABOR ECONOMIC NEWS (ECO) ECONOMIC AND MONETARY INDICATORS (EMI) WASHINGTON

Initial claims for regular state unemployment benefits rose to a seasonally adjusted 333,000 during the week ended Sept. 30 from 328,000 the previous week, the Labor Department said.

The number of people receiving regular state benefits in the week ended Sept. 23 increased to a seasonally adjusted 2,204,000, or 2.2% of those covered by unemployment insurance, from 2,156,000 the previous week, when the insured unemployment rate was 2.1%.

Counting all state and federal benefit programs, the number of people receiving unemployment benefits in the week ended Sept. 23 fell to 1,837,800 from 1,839,600 a week earlier. These figures aren't seasonally adjusted.

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891013-0164. The American Way of Buying: @ Shoppers' Blues: The Thrill Is Gone @ --- @ Dropouts Cite @ Poor Service, @ Tight Schedules @ ---- @ By Francine Schwadel @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) RETAILING (RET) MARKETING, ADVERTISING (MKT) {A Wall Street Journal Centennial Survey

Part of a Series}

Marlene Dash would appear to be a marketer's dream come true. The corporate manager likes to dress smartly, both on and off the job. She owns a condominium in Chicago and takes pride in furnishing it well.

Yet Ms. Dash, in her mid-30s, loathes shopping. Lousy service and poor selections at many stores have turned a once favorite pastime into what she calls a "frustrating" experience. These days, she would rather exercise, visit friends or read. "If you don't make it reasonably easy for me," she says of shopping, "I'm not going to waste my time."

Ms. Dash is far from alone. Shopping has become such a chore that more people hate browsing in stores than hate doing household work, according to The Wall Street Journal's "American Way of Buying" survey. Nearly a third of the 2,064 people interviewed by the pollster Peter D. Hart Research Associates said they "do not enjoy at all" window-shopping or browsing. growth of catalog companies that have stolen sales from retail stores for much of this decade. Yankelovich, Clancy, Shulman, a market research firm in Westport, Conn., warns clients that Americans' love affair with shopping is on the rocks: More than half the women it has surveyed in recent years, and an even larger percentage of men, say shopping for clothes is a hassle.

Stressed-out consumers -- juggling jobs, families and leisure activities -- feel they have less time to shop. They also complain about obnoxious and poorly trained salespeople, lower quality merchandise and exorbitant prices.

But underlying these complaints is a more far-reaching change: For many shoppers, the thrill is gone.

Back in the 1970s, when malls were sprouting across the country, consumers were content to browse away an afternoon and buy whatever struck their fancy. Then in the early 1980s, Americans viewed shopping as a quest for the trendiest merchandise or the best bargains they could brag about to their friends.

Now, on the eve of the 1990s, consumer researchers say that for most people, shopping is simply less fun. Retailers hawk look-alike merchandise in stores that are numbingly similar in appearance. Shopping has become "just one of the activities that we have to do," says Susan Hayward of Yankelovich. "It's not an end in itself anymore."

In the Journal poll, more than a third of the people interviewed said they probably wouldn't spend a free hour poking around in stores, even if a prime shopping district were nearby.

That isn't to say consumers don't like new things. But when they go to a store today, they're more likely to think of the trip as a mission rather than an adventure. "They're buyers as opposed to shoppers," says Thomas Rauh, a retail consultant at the accounting firm of Ernst & Young.

Surveys and focus-group research show that most people are indeed shopping more purposefully. Consumers visit fewer stores per trip (an average of three last year, down from 3.6 in 1982, according to consultant Stillerman Jones & Co.) and spend less time in malls (an average of 68 minutes per trip last year, down from 90 minutes in 1982). "I leave rather than hunt for something," snaps Lisa Max, a 46-year-old real estate broker in New York.

Despite such negative attitudes, retailers generally say consumers aren't cutting back on what they buy. "If it is dropping off, it would be more likely that they're shopping less often and buying more when they do shop," says Michael Wellman, vice president of marketing at K mart Corp.

"There's no question our customers' time has become more valuable than ever," says Stephen Watson, chairman and chief executive officer of Dayton Hudson Corp.'s department store unit. But he contends the company's record sales and profits indicate it is making the shopping experience easier. For example, the company is hiring more sales people than in the past and paying them more. It also is laying out remodeled and new stores with a center-aisle design and installing escalators and elevators in more convenient central locations.

Of course, there are still people for whom shopping is a joy, even a passion. But some of those people have complaints, too. Take Cyd Hinman, a mother of two from Norwood, Mass. She often enjoys shopping, but is so fed up with the clerks at a nearby Filene's department store that she refers to them as "idiots."

Twice, Mrs. Hinman picked merchandise off Filene's racks labeled with "sale" signs, only to be told when she got to the cash register that the goods weren't on special. The second time, she demanded that she receive the discount anyway, and the clerk gave in. "I'm willing to spend a lot of money," she says, "but not if I feel like I'm getting jerked around."

Complaints about service are so widespread that six of 10 people in the Journal survey said they have boycotted stores because of the way they were treated. The percentage was even higher -- roughly three-quarters -- among professionals and those earning more than $50,000 a year.

Service has declined just at a time when consumers are more impatient than ever. "The whole tone of voice is different now in terms of what people expect from a store," says William Ress, whose Columbus, Ohio, management consulting firm has surveyed consumers for more than 20 years.

Despite the rising resentment, few stores are making shopping more appealing. Sales people spraying perfume still assault shoppers at many department stores, even though some consumers complain that the spritzers could provide a far more useful service if they were trained to operate a cash register.

Consumers want selection to be easy and efficient, but that's not what most merchandisers want. Retailers generally go to lengths to keep shoppers in their stores as long as possible. Many stores, for example, require customers to walk through a maze of boutiques designed to show off their wares just to find, say, a simple white blouse. But rather than tempt people to buy more, consumer researchers say, this tactic just irritates many shoppers. Over half the respondents in the Journal survey said they rarely buy on impulse anyway.

So what should a retailer do? "Those that do the best job of making the shopping experience enjoyable and making the customer feel like a human being are very well rewarded," says Leo J. Shapiro, a market researcher in Chicago.

He cites Nordstrom Inc., the Seattle-based department store. The chain's strategy: pay sales people an incentive to provide good service and keep more merchandise in stock than competitors.

Other retailers are trying to mollify miffed shoppers by doing away with their decades-old practice of setting high "regular" prices that can later be cut to "sale" levels. Under a new approach being hyped as "everyday low pricing," retailers such as Sears, Roebuck & Co. now run fewer sales. Instead, they set prices between their old "sale" and "regular" prices.

Last month, R.H. Macy & Co. started promising in ads that shoppers in search of women's coats could "cut through all the confusing sales, special buys and clearances out there" and pay what Macy's says is the "lowest prices . . . every day."

Sears started its "everyday pricing" approach in March, but so far sales results don't reflect strong consumer response.

Still, such a pricing strategy just might appeal to people like Connie Bates, a respondent in the Journal survey. She recently walked out of a furniture store because the salesman offered to cut the price of a sectional couch three times. When a store keeps dropping prices, the Farmington, Mich., resident says, "I get suspicious that they're trying to get the most they can out of you."

(See related story: "Diehards Say The Experience Feels Too Good" -- WSJ Oct. 13, 1989)

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891013-0163. EC, Switzerland Sign @ A Treaty on Access @ To Insurance Services
10/13/89
WALL STREET JOURNAL (J) EUROP MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) INSURANCE (INS) LUXEMBOURG

The European Community and Switzerland signed a treaty granting reciprocal access to their markets for most kinds of insurance products and services.

The accord is an example "of the kind of relations the community wishes to develop with its European partners," said Edith Cresson, the French minister for European affairs who presided over a recent EC Council of Ministers meeting.

As European partners, Mrs. Cresson cited in particular the members of the European Free Trade Association, composed of Switzerland, Austria, Sweden, Norway, Finland and Iceland.

EC and association ministers are scheduled to meet Dec. 19 to discuss economic cooperation. Mrs. Cresson said she hopes the talks will show "a common resolve to go beyond bilateral, sectorial agreements," such as the one just signed with Switzerland.

Swiss President Jean-Pascal Delamuraz said the insurance pact could "pioneer" a broader agreement between the Community and the association.

The treaty allows Swiss insurance companies to open branches in the EC, and vice versa, without restriction. But it doesn't permit selling insurance across borders without establishing branches. The treaty needs to be approved by the European Parliament, which is expected to endorse the measure, EC officials said.

The agreement, which had been 16 years in the making, covers general-insurance services and excludes life insurance and reinsurance. Because Swiss and EC insurers are widely present on each other's markets, the accord isn't expected to substantially increase near-term competition.

An important element in the accord, EC officials said, is a clause that provides for bilateral consultations when one party decides to modify its internal insurance legislation. A joint panel would decide whether the changes are compatible with the treaty or whether the treaty needs to be amended to cope with the changes.

Mrs. Cresson said a similar clause could be useful in future accords between the EC and other countries.

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891013-0162. Chief Executives in New York Region @ Are Optimistic About Firms' Prospects @ ---- @ By Patrick M. Reilly @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) NEW YORK

Chief executive officers in the New York region say they share a national pessimism about the economy, yet are bullish on their own prospects, according to a study of business executives.

One particularly positive note in the study of chief executives in the tri-state area, commissioned by National Westminster Bancorp, is that as many as 88% of the executives intend to expand their businesses or at least maintain employment levels in 1990. Employment at financial-related companies in the New York area were hit hard after the 1987 stock market crash.

The survey examined the opinions of 550 randomly selected companies in the New York metropolitan area -- Connecticut, Long Island, New York City, Westchester County and New Jersey -- with annual sales between $5 million and $250 million.

Executives in the area have grown more pessimistic about the performance of the national economy. When the study was taken in 1988, 32% of the respondents thought the national economy was worse that year than the year before, while in 1989, that stance was taken by 41% of the executives. The pessimism was greater among the larger -- and more national -- companies.

Looking ahead, the majority of area officials expect interest rates to decline and inflation to rise, while 44% of the chief executives feel a recession is likely by the end of 1990.

On the regional level, executives had less good news to report about their own businesses. Only 49% of the executives reported improved company performance this year, down from the 60% in the 1988 study. Predictably, the year ahead looks brighter; 63% of the executives anticipate better company performance in 1990, while only 10% envision a decline.

A good sign for the long-term health of the region is that chief executives were generally "quite satisfied" with the region as a business place, saying its benefits consistently outweigh drawbacks. Highest marks went to the availability of professional business services, which 51% of the executives consider the top benefit. The local marketplace and availability of professional employees also were ranked high. Among major drawbacks to the region, 63% consider the level of state taxes at the top of the list, followed by 54% who had the same opinion on local taxes. Coming in third, 40% said it was the cost of non-professional employees.

On questions of employment, 40% of the executives increased their work force since last year, and 44% expect to expand next year. Only 9% reduced their payrolls in the past year.

For the second year in a row, New Jersey was rated as the region's most desirable place to do business. Among all of the executives surveyed who would consider a move, 50% would look at New Jersey, compared with an average 23% who would consider other states in the region. In one of the highest degrees of loyalty shown in the study, of those New Jersey executives considering a move, 74% would stay within the state. But one-fourth of the state's executives listed transportation problems as a drawback.

Chief executives in New York City showed a noticeably high expectation of improved company performance in the next year. In New York, 75% of the executives predict their companies' performance will improve in 1990, compared with an average of 63% from chief executives from the other locales who feel the same way.

Westchester executives reflected the most bullish prospects for employment. More companies in Westchester than any other location have increased the number of their employees in the past year. In 1990, Westchester chief executives lead the way in plans to increase their number of employees. In Westchester, 51% of the executives anticipate hiring more, while in Long Island that number was 39% and in Connecticut 42%.

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891013-0161. Who's News: @ Woolworth Corp.
10/13/89
WALL STREET JOURNAL (J) Z WNEWS WOOLWORTH Corp. (New York)

Ronald J. Berens was elected to the new post of senior vice president-U.S. apparel group, effective Nov. 1. He will be responsible for the apparel operations of the retailer's Holtzman's Little Folk Shop Inc. and Richman Brothers Co. units and the Susie's division of its Kinney Shoe Corp. unit. Mr. Berens, 50 years old, currently is president and chief executive officer of the Little Folk unit.

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891013-0160. Suzuki Motor Co.'s @ Anderson Is Named @ Top U.S. Sales Official
10/13/89
WALL STREET JOURNAL (J) J.SUZ WNEWS BREA, Calif.

Suzuki Motor Co.'s U.S. sales arm has named Gary Anderson its top U.S. official in the wake of a series of resignations last month.

Three senior executives, all Americans, quit in September. Doug Mazza, former vice president and general manager and at the time the top American, said in a prepared statement that his and the other resignations were prompted by "changes in the company's operating goals and philosophies."

Mr. Anderson, who joined American Suzuki Motor Corp. in June 1987, gets the title of marketing director for the company's automotive division. He inherits "bits of several positions," said a Suzuki spokeswoman, who added that a reorganization last month has eliminated some previous posts.

In his new job, Mr. Anderson will oversee all sales, advertising and dealer development activities in addition to formulating marketing strategies. Some of these duties had been handled by Mr. Mazza and others by John Dorsey, former director of sales, and Larry Messelt, former national sales manager. Messrs. Dorsey and Messelt were the other two executives who resigned in September.

Suzuki sales so far this year, at 24,405 cars and sport utility vehicles, are less than half the level of a year ago, despite the introduction of two additional vehicles, including Suzuki's first U.S. car. The company hasn't recovered from claims by Consumer Reports magazine that its Samurai utility vehicle was unsafe, even though the National Highway Traffic Safety Administration refused to open a safety investigation into the allegations.

"Suzuki recognizes its responsibility to boost dealer confidence and improve direct communication with its dealers and field personnel on its plans and strategies," said Mr. Anderson in a prepared statement.

Mr. Anderson was most recently Suzuki's New York regional sales manager. He also served as manager of dealer development.

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891013-0159. Cummins Announces @ Engine Piston Defects @ And Shares Tumble
10/13/89
WALL STREET JOURNAL (J) CUM TRANSPORTATION, TRUCK AND SHIP LINES, RAILROADS (TRA) COLUMBUS, Ind.

Cummins Engine Co. shares dropped yesterday after the company disclosed it will have to correct defects in pistons installed in some of its engines.

In a terse release, the maker of diesel engines, parts and power systems said it has "identified a problem" with pistons used in its model K and KV diesels since May 1. The high-horsepower motors are used in heavy applications such as construction and mining equipment.

Cummins said the problem relates to recent modifications in the design of a piston it buys from an outside supplier. None of the engines have failed to date, said a spokeswoman, adding that the defect doesn't represent a hazard.

The company wouldn't identify the supplier, nor would it say how many of the defective engines it has produced. A spokeswoman noted, however, that such engines represented only 2.5% of the company's overall production in the first six months of the year.

The company said it will replace all pistons in the affected engines, and as a result, will "supplement K and KV warranty accruals." The spokeswoman declined to say how much money the company will have to spend on the repairs; the company recently halted production of the models until replacement pistons are available Oct. 16.

In composite New York Stock Exchange trading yesterday, Cummins shares stumbled $2 to close at $52. The company's shares traded as high as $64 last month, before Cummins disclosed in late September that it expects to report a "substantial" third-quarter loss because of deteriorating demand and other difficulties.

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891013-0158. Profits of Big Steelmakers to Plummet @ Due to Soft Demand, Eroding Prices @ ---- @ By Clare Ansberry @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BS X STEEL MANUFACTURERS (STL) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON)

Major steel companies, stung by soft demand from car makers and eroding prices, are expected to report that third-quarter operating profits plummeted to possibly the lowest levels in two years.

"This will be the worst quarter since the third quarter of 1987, when steel companies were just on their way up," predicted John Tumazos, an analyst with Donaldson, Lufkin & Jenrette Securities Corp. The fourth quarter could be even more dismal.

"We are in the midst of a very severe price drop that will really hit in the fourth quarter," said Peter Marcus, an analyst with PaineWebber Inc. A rebound in those prices is expected sometime after the winter of 1990.

After enjoying a 24-month honeymoon of full production, rising prices and lower costs, steelmakers are facing declining volume from disappointing automotive, appliance and even capital goods markets.

The consensus is that major steelmakers earned between $30 and $35 for each ton of steel shipped, compared with $49 in last year's third quarter. The latest quarter is also down from the $51 a ton earned in the second quarter, when the industry benefited from modest price increases and lower raw material costs. Mr. Marcus expects fourth-quarter profits to drop to about $25 a ton.

Along with lackluster sales to car makers -- their largest customer -- steelmakers are losing shipments to their second largest customer, steel service centers, which are trying to reduce inventories. The Steel Service Center Institute reported in September that 72% of its members believe inventories were "too high," with 65% planning to reduce those levels during the next six months.

Christopher Plummer, an analyst with WEFA Group, noted that the capital goods market, which had been stronger than automotive and appliance markets, is showing signs of weakness as well. Companies, concerned about the economy and trying to slash their own costs, are backing off capital improvement programs, he said.

Overall, second-half steel shipments are expected to drop about 15% to 36 million or 37 million tons, which some analysts say could cost the industry $700 million in lost income.

Two companies, in particular, were hurt by unusual events in the third quarter. Bethlehem Steel Corp., the nation's second largest steelmaker, was hampered by wildcat coal strikes, a spot strike at its freight car operation and blast furnace problems at its crown jewel Sparrows Point plant. Charles Bradford, an analyst with Merrill Lynch Capital Markets, predicts Bethlehem earnings dropped more than two-thirds to about 50 cents a share, from $2.35 a year ago, excluding major nonrecurring items.

National Steel Corp., the nation's sixth largest steel company, predicted at the beginning of 1989 that the third quarter would be its best. However, an initial rejection by steelworkers of a new labor accord sent nervous National Steel customers scrambling for alternative suppliers. Moreover, National Steel is tied closely to the sluggish automobile industry.

One other factor for some steelmakers: higher costs associated with new labor contracts. Inland Steel Industries Inc., which recently negotiated an accord that calls for immediate and significant wage increases, is expected to see earnings drop to less than $1 a share from $1.70 a year earlier because of the pact, as well as disappointments in its steel service center operations.

About the only major steelmaker expected to post improved results is USX Corp., which once again will post gains from asset sales. Many analysts initially raised earnings forecasts for the nation's largest steelmaker as a result of the coming sale of reserves from its Texas Oil & Gas unit. The expected $1 billion-plus proceeds are expected to be used to reduce debt and buy back shares. One wild card in USX's future earnings is investor Carl Icahn, who boosted his stake in USX and is urging more restructuring.

Recent order rates indicate that the fourth quarter, a time shipments usually pick up, will be weak as well. Merrill Lynch's Mr. Bradford said, "We haven't seen the pickup in flat rolled orders that we should have." Flat rolled steel is the industry's major product.

Typically, steelmakers would look to the export market to unload excess capacity. But that market is hurting as well. PaineWebber noted that the world steel export price of cold-rolled steel has dropped to $460 to $480 a metric ton from a high of $560 this spring. Moreover, the relative strength of the dollar and lower world prices may result in increased sales in the U.S. by foreign producers offering lower prices.

There are some bright spots for the industry. The service center association reports that shipments were up in August, indicating a resurgence in demand for carbon flat rolled and stainless steel products. John Jacobson, an analyst with AUS Consultants, also said he believes steel production costs are coming down because of increased efficiencies at major mills.

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891013-0157. Letters to the Editor: @ Among the Amish, a True Physician
10/13/89
WALL STREET JOURNAL (J) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA)

I was profoundly moved by the incongruity of modern American life illustrated by your Sept. 20 page-one article "Country Doctor: How a Physician Solved Riddle of Rare Disease in Children of Amish."

Here is a young man who honestly understands what being a physician means and what it requires. It requires delivering quality medical care to those in need. It requires doing the utmost within oneself to alleviate the illness and suffering of others. The physician providing such care derives his reward from being fulfilled as a provider, and from realistic charges for his care.

Though Holmes Morton fulfills the "requirements" for being a true physician, our so-called sophisticated society and its medical system fail to appreciate the value of such a dedicated physician. Otherwise, why is there not a rush of funds from medical circles or the related medical-support industry -- i.e. pharmaceutical companies, etc. -- or, most significantly, from all of us to support this doctor and his patients, to support a clinic to further the work of resolving human suffering?

Ted Ferrier Jr.

Dallas

---

Having grown up among the Amish in Iowa, I think I can appreciate more than most the difficulty of Dr. Morton's work. The average person can hardly imagine the suspicion, bred by centuries of isolation and persecution, among the Amish toward outsiders and things modern. This, in my experience, is particularly true of their attitude toward modern medicine. Dr. Morton's success is not only a measure of the outstanding quality of his work, but also of the desperation the Amish must feel in the face of this horrendous disease.

Sadly, the article also contains a profound statement about the current state of academe, the professions in particular and American society in general. Some experts were quoted as speculating on the detrimental effects of Dr. Morton's work on his career. According to these experts, he will find it difficult to get grants and will lose access to sophisticated laboratories. They point out that he "will be, at best, on the very outer circle." As a marginal academic myself, I thought we were at least discreet enough to keep our real concerns hidden behind our academic robes and in our faculty cliques.

We can only hope that more people will choose to be "on the very outer circle."

James E. Groff

Associate Professor

University of Texas at San Antonio

San Antonio

---

How very refreshing to read about Dr. Morton after all the articles about the Boeskys, Millkens, Icahns, Trumps and such like; about S&L officials and self-seeking officials and legislators, federal and state; about corporate executives whose sole concern is the "bottom line," all of which lead to the conclusion that as a society we have a woeful sense of values and give no thought to what "life is all about." Here is an individual to be greatly admired and respected.

Sandro Mayer

Fishkill, N.Y.

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891013-0156. Owens-Corning Says @ Operating Profit Fell @ In the Third Quarter
10/13/89
WALL STREET JOURNAL (J) OCF CONSTRUCTION, MATERIALS (CON) TOLEDO, Ohio

Owens-Corning Fiberglas Corp. said it expects to report that third-quarter operating profit fell "substantially" from a year earlier, when the maker of insulation, roofing and plastic materials had profit before extraordinary items of $1.36 a share.

In a prepared statement, the company said the decline "reflects reduced activity in construction, marine and transportation markets."

An Owens-Corning spokesman said the company still expects to post net income for the just-ended third quarter but he declined to be more specific. He also declined to comment on expectations for the fourth quarter.

Owens-Corning closed at $30.75 a share, down $2.875, in New York Stock Exchange composite trading following the news.

In the 1988 third quarter, Owens-Corning had profit from continuing operations of $57 million. A charge of $6 million, or 15 cents a share, related to the purchase of company debt made net $51 million, or $1.21 a share. Sales in the 1988 third quarter totaled $760 million.

The spokesman said the problems in the construction market relate mainly to "reduced volume in insulation and roofing, especially reroofing and commercial roofing products." He said roof repairs were relatively strong in Texas and should be strong in the Southeast during the fourth quarter as home and building owners repair property damaged by Hurricane Hugo. "But nationally, based on trends so far this year, we expect {that segment} to remain weak over all," he said.

The spokesman said sales of reinforced-fiberglass material to the boat-building industry also were weak, largely because of softening in the marine market. Weakness in the auto industry also is expected to continue through the rest of the year. Car and truck production was strong earlier this year, but expectations of slower sales in the fourth quarter have cut manufacturers' output forecasts. However, Owens-Corning was able to offset that decline somewhat with new business at General Motors Corp., which recently introduced a new, plastic-body van.

Owens-Corning expects to post third-quarter results by the end of next week, the spokesman said.

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891013-0155. Letters to the Editor: @ Villanova Vilified
10/13/89
WALL STREET JOURNAL (J) DEFENSE DEPARTMENT (DEF)

In reference to your Sept. 11 article "ROTC Regains Respect on Campuses as Graduates Fare Well in Workplace," we want to clarify an erroneous impression regarding the Villanova Naval ROTC Program for 1971-1974. Joseph Hebert III was incorrectly identified. He was not an instructor at Villanova but was a recruiter who traveled to many universities. The Naval ROTC program at Villanova never held meetings at fraternity houses as we have no fraternity houses. Villanova University and the surrounding community have supported the Navy 100% every year since World War II and the university is recognized as unequaled in providing the best of support to the Navy. All that occurred during the Vietnam era was an occasional sign-carrying student near the parade ground in peaceful protest, but no effort was made to disrupt the Naval ROTC activities.

Villanova and the U.S. Navy are very proud of their superb relationship over the past 50 years.

The Rev. L.C. Gallen

Vice President for Academic Affairs

Villanova University

Villanova, Pa.

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891013-0154. Indian Government's Use of Television @ Sparks Controversy as Elections Near @ ---- @ By Ajay Singh @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) FREST MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) NEW DELHI

As India gears up for general elections to be held by January, television is emerging as a powerful political tool -- and a highly controversial one.

Television is beamed into 74% of the country's villages, up from 49% during the 1984 general-election campaign. The government hopes to get broadcasts into all of India's 57,500 villages eventually.

But the government is essentially the only broadcaster. It controls the sole national TV network, Doordarshan, and the only national radio system, All India Radio. TV news coverage has generally favored the government.

In recent months, however, critics say the coverage has been so biased toward Prime Minister Rajiv Gandhi and his ruling Congress (I) Party that what is labeled news is merely propaganda. With the elections approaching, critics say the manipulation of such an influential medium poses a threat to India's democratic traditions.

"In a country with our measure of literacy, television is becoming a serious impediment in the way of free and fair elections," says Lal Krishna Advani, an opposition-party leader and a former minister of information and broadcasting. "It tilts the balance totally in favor of the ruling party."

But Kamal Kant Tewary, minister for information and broadcasting, says: "We are the elected representatives of the people, and we will do whatever we think is fit and in the interests of the people."

There is general agreement on one point: The elections are likely to be the most uncertain since 1967. Many say Mr. Gandhi and Congress (I), with seesawing popularity and an arms scandal that has tarnished the government, stand a chance of losing power. The arms scandal involves a report by India's comptroller and auditor general, which cited lapses in the government's evaluation and purchase of artillery guns from a Swedish arms company.

Television came to India in 1965, when black-and-white broadcasts began in New Delhi. Broadcasts to other cities didn't start until 1972, and color broadcasts debuted just seven years ago.

In 1980, the country had 1.6 million TV sets; today there are 20 million. That's a small number for a nation of 800 million people, but a single set might have much of a village for its audience. A sizable portion of illiterate Indians now rely on television for news they used to hear third or fourth hand, if at all.

Doordarshan is controlled by the Ministry of Information and Broadcasting and often takes orders directly from the prime minister's office, some Doordarshan staff members contend.

According to critics, the shift in Doordarshan's news coverage from generally favoring the government to outright bias began in May. From around that time, the critics say, items on Mr. Gandhi and Congress (I) have increasingly dominated the nationwide evening news and have been overwhelmingly positive, while the opposition has been given short shrift or blatantly abused.

In May, a Doordarshan news bulletin quoted excerpts from a newspaper article by an opposition leader. The article criticized both the government and the opposition, but Doordarshan aired only the parts criticizing the opposition. This was merely news judgment, says Mr. Tewary, the information and broadcasting minister.

In the same month, a group of politicians circulated a photo of a top opposition leader, Ajit Singh, socializing with an alleged drug smuggler. Newspapers carried the photo on their front pages. Doordarshan showed it on the nationwide news broadcast. The next day, a different group of politicians produced a photo of Mr. Gandhi standing next to the same alleged drug smuggler. Newspapers again gave it front-page play. Doordarshan ignored it. Mr. Tewary says the prime minister is photographed with many people and that therefore the photograph wasn't news.

But a senior reporter at All India Radio, who declines to be identified, says: "We get orders from a chain of people. We are a government news agency and are expected to project the government."

For all the criticism of what is seen as government propaganda, many media experts say it could be counterproductive. Says Probhat Chandra Chatterji, one of the pioneers of Indian broadcasting and a former director-general of All India Radio and Doordarshan: "It is debatable whether this propaganda will bring votes to the government. By and large, people think that it will turn the people away."

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891013-0153. International: @ Troubled Ferranti @ Names a Briton @ To Head U.S. Unit @ ---- @ By Richard L. Hudson @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) U.FNT WNEWS TCSFY U.BA TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) LONDON

Troubled British defense contractor Ferranti International Signal PLC replaced the head of its scandal-plagued U.S. division.

Ferranti said Joseph Zilligen, 49 years old, chairman of Ferranti International USA, is "relinquishing" his post. Succeeding him as chairman of the large, Lancaster, Pa.-based unit, is a longtime Ferranti executive, Albert Dodd. Mr. Dodd, a 53-year-old Briton, is a Ferranti board member and managing director of Ferranti's instrumentation division.

The U.S. unit is at the center of what Ferranti has called a "serious fraud" that has rocked the British company for the past month. Ferranti acquired the U.S. business last year, in a merger with the then International Signal & Control Group PLC.

An International Signal unit, according to Ferranti, reported on its books #215 million ($332.5 million) of weapons contracts that didn't exist. The falsified figures inflated International Signal's reported assets, and increased the price Ferranti paid when it bought the company, according to Ferranti officials.

Mr. Zilligen's departure is the latest fallout from the scandal. Ferranti has said it expects an accounting correction that would eliminate nearly half its reported net worth, and it's seeking a buyer to repair its finances.

British Aerospace PLC and France's Thomson-CSF S.A. are leading contenders for a joint Ferranti bid. Yesterday, a London brokerage firm, Hoare Govett Ltd., confirmed that it purchased on Wednesday 5.7 million Ferranti shares at 56 pence (87 cents) apiece on behalf of British Aerospace. The purchase boosts the British Aerospace-Thomson stake to 12.98 million shares, or 1.7% of the stock outstanding.

A Ferranti spokesman declined to comment on whether the management shuffle is related to the financial scandal, but called it generally part of the "integration" of International Signal into Ferranti since the 1988 merger. He said Mr. Zilligen remains a Ferranti director, but will also be succeeded by Mr. Dodd as chief executive of Ferranti Italia.

Mr. Zilligen, through a spokesman in Lancaster, declined to comment. The executive was a colleague since 1980 of International Signal founder James Guerin, who left International Signal and Ferranti last spring.

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891013-0152. Who's News: @ Waltham Corp.
10/13/89
WALL STREET JOURNAL (J) WLBK WNEWS WALTHAM Corp. (Waltham, Mass.)

Roy S. MacDowell Jr., founder of MacDowell Co., a construction and site-development concern, was named a director of this bank holding company, expanding the board to seven members.

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891013-0151. Foreign Exchange: @ Dollar Drifts Lower Amid Speculation @ Fed Is Gently Easing Monetary Policy @ ---- @ By Caitlin Randall @ Special to The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) EUROP JAPAN FREST CANDA MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) FOREIGN-EXCHANGE MARKETS (FRX) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) COMMODITY NEWS, FARM PRODUCTS (CMD) NEW YORK

The dollar drifted lower in indecisive trading, its strength sapped by concern that the Federal Reserve is gently easing monetary policy.

Despite reserve-draining operations by the Fed yesterday and on the three preceding business days, some analysts say the central bank is subtly relaxing credit.

They say the Fed's draining operations have been necessary to address a seasonal surfeit of reserves, but note that the actions haven't been tough enough to prevent the federal funds rate from easing to about 8 3/4% from its recent level of 9%. The federal funds rate is the overnight rate banks charge each other.

"They're draining in a consistently less aggressive manner and at a lower level," said James T. McGroarty, a senior vice president at Greenwich Capital Markets.

But others analysts say opinion differs markedly on whether the Fed is softening its credit stance, noting that the market's muted reaction reflects this division.

"We just don't know enough yet to definitively say that the Fed has eased . . . the fed funds rate still is in a band around 9%," said one economist.

Speculation that the Fed would sharply ease its credit reins was damped earlier this week when Chairman Alan Greenspan said central banks shouldn't focus too much on intermediate goals for exchange rates and interest rates.

In late New York trading Thursday, the dollar was quoted at 1.9083 marks, down from 1.9166 marks late Wednesday, and at 144.17 yen, down from 144.57 yen late Wednesday. Sterling was quoted at $1.5523, up from $1.5463.

In Tokyo Friday, the U.S. currency opened for trading at 143.60 yen, down from Thursday's Tokyo close of 144.60 yen.

Many foreign exchange traders remain skeptical that a credit-softening is in the offing. They plan to look for clues in two economic indicators due out today, one on the producer-price index and the other on retail sales, both for September.

"The market believes PPI will confirm Greenspan's concern about inflation," said Francoise Soares-Kemp, a vice president with Credit Suisse in New York. She said the market has already reacted to "that particular prompting" and is unlikely to bid the dollar significantly higher.

Higher energy and auto prices are expected to have pushed producer prices up 0.3% in September after declining in August and July. Retail sales are expected to have remained flat in September, according to economists, following gains of 0.7% in August and 0.5% in July.

A long-awaited speech by British Chancellor of the Exchequer Nigel Lawson failed to bolster the flagging pound and left many market participants with a decidedly bearish view of sterling.

Vowing to continue his government's strategy of combating inflation with high interest rates, Mr. Lawson told the Conservative Party conference that the battle to rein in inflation required a strong currency. The Tories are "not the party of devaluation," he said.

But Mr. Lawson failed to outline specific policy changes or say how the British government planned to support the beleaguered pound. He also avoided any mention of when London would bring sterling into the exchange rate mechanism of the European Monetary System, and warned there are "no easy answers" to Britain's economic problems.

Some market analysts see early entry into the EMS exchange rate mechanism as one of the few alternatives left for stabilizing the pound. But entry has been opposed by Prime Minister Thatcher, who insists Britain should join from a position of strength.

Wednesday's discount rate increase in Japan continued to dominate trading in Tokyo, with dealers trying to guess what the Bank of Japan and the Fed will do following the failure of the rate boost to depress the dollar.

The Bank of Japan entered the market several times in the morning to sell dollars for yen, traders said. European dealings were dominated by cross activity, highlighted by sterling.

On the Commodity Exchange in New York, gold for current delivery settled at $363.40 an ounce, up $1.40. Estimated volume was a light 2.2 million ounces.

In early trading in Hong Kong Friday, gold was quoted at $363.35 an ounce.

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891013-0150.
10/13/89
WALL STREET JOURNAL (J) CGP BOND MARKET NEWS (BON)

COASTAL Corp. said it completed the public offering of 9.2 million common shares and $200 million of 15-year senior debentures. The diversified Houston energy concern said combined proceeds of about $580.6 million will be used to retire and refinance outstanding debt. Underwriters for the offerings included Drexel Burnham Lambert Inc. and Shearson Lehman Hutton Inc.

891013-0149.
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891013-0149. Who's News: @ Kidder, Peabody & Co.
10/13/89
WALL STREET JOURNAL (J) GE WNEWS KIDDER, PEABODY & Co. (New York)

Gordon A. Paris, 36 years old, was named managing director in charge of a new division, the corporate restructuring group, at this investment banking and brokerage firm. In April, Mr. Paris joined Kidder from General Electric Capital Corp., where he was a vice president. Kidder is about 80%-owned by General Electric Co., Fairfield, Conn., which also owns GE Capital.

891013-0148.
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891013-0148. World Markets: @ Tokyo Shares Tumble 1.3% as Rate Rise Fails @ To Halt Dollar; London Posts Technical Rebound @ ---- @ A Wall Street Journal News Roundup
10/13/89
WALL STREET JOURNAL (J) FREST JAPAN EUROP CANDA STOCK MARKET, OFFERINGS (STK) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) COMMODITY NEWS, FARM PRODUCTS (CMD)

Tokyo stocks fell sharply as the dollar remained strong despite Wednesday's half-point discount rate increase by the Bank of Japan.

London shares recovered some lost ground, largely on technical factors as Chancellor Nigel Lawson's speech to the Conservative Party conference was viewed as basically neutral for the market.

Tokyo's Nikkei Index of 225 issues, which fell 136.28 points Wednesday, closed at 34795.05, down 445.02. The decline of nearly 1.3% left the index below 35000 for the first time since Sept. 25.

In the first hour of trading in Tokyo Friday, the Nikkei Index rose 145.96 points to 34941.01.

Thursday's volume on the first section was estimated at 650 million shares, compared with 751 million Wednesday. Declining issues outpaced advancers 857-161, with 110 unchanged. The Tokyo Stock Price Index of all issues in the first section, which lost 13.07 Wednesday, was down 36.89, or 1.4%, to 2623.60.

The market opened at what proved to be its high and continued to slip toward the end of the day. Traders said the reason its drop was larger than Wednesday's moderate loss was that investors began selling their holdings when they saw that Wednesday's rise to 3.75% in the discount rate -- the central bank's base rate on loans to commercial banks -- failed to curb the dollar's rise against the yen.

A stronger dollar concerns Japanese stock investors because it contributes to Japanese inflation, particularly by raising oil and other energy and natural resource prices, which are denominated in dollars. In addition, higher prices for imports allow domestic manufacturers to increase their own prices.

Moreover, the current high level of the U.S. stock market, and the possibility of U.S. interest rates being cut or Japanese rates being raised again to keep the dollar down, might draw funds currently invested in Japanese equities into the U.S. market, some investors fear.

Masami Okuma, senior trader at UBS Phillips & Drew International, said expectations of another increase in the discount rate already are causing some investors not only to stop buying but also to dump some of their recently acquired shares.

Yoshiaki Mitsuoka, manager of the investment information department at Daiwa Investment Trust & Management Co., said the market had been sustained recently by smaller issues with relatively low price-earnings ratios. Prices of such shares, he said, now have risen an average of 57% in the past six months, making them less attractive for fresh buying.

Yukio Itagaki, director of the fund management department at Kokusai Investment Trust Management Co., said the discount rate increase didn't have much effect on the actual market environment, as short-term interest rates already had been above 5%. And as the rate on newly issued three-month certificates of deposit went up to 6.2% Wednesday, institutions and corporations had little incentive to invest new funds in stocks.

The higher discount rate discouraged institutions from holding steel and construction shares, traders said. Nippon Steel fell 10 to 698 yen ($4.83) a share, Sumitomo Metal lost 19 to 677, and Kobe Steel was down 9 at 690. Kajima was down 100 at 1,900, while Ohbayashi lost 60 to 1,500.

Shipbuilding issues also were sold off. Kawasaki Heavy Industries fell 37 to 903, and Mitsubishi Heavy Industries was down 30 at 1,010. Among housing issues, Misawa Homes lost 140 to 2,830, Sekisui House declined 70 to 2,400, and Daiwa House lost 100 to 2,470.

Retail issues, which advanced in September on speculation about mergers and acquisitions in the sector, were sold on profit-taking, traders said. Seiyu was down 240 at 2,710, Daiei fell 70 to 2,980, and Isetan lost 170 to 4,720.

Some of the blue-chip issues that had gained in the previous couple of days were lower as investors retreated quickly. Hitachi lost 10 to 1,510, Toshiba was down 40 at 1,130, and Toyota Motor lost 30 to 2,820.

Among the few winners was Sharp, which attracted investors because of growing demand for its liquid crystal projectors, traders said. Sharp gained 20 to 1,550. Other gainers included Nippon Shokubai, which rose 70 to 2,270, Nikon, up 30 to 1,620, and Aiwa, which gained 120 to 2,000.

In London, the Financial Times-Stock Exchange 100-share index finished 19 points higher at 2237.8. The Financial Times 30-share index rose 20.4 to 1817.7. Volume was 437.4 million shares, down from 503.2 million Wednesday.

Chancellor Lawson, who has been under political fire for his decision a week ago to force U.K. banks' base lending rates up to 15%, an eight-year high, addressed the governing Conservatives' annual conference on current economic issues, and dealers said the speech was exactly what the market had expected.

"It was a good party political conference speech," a dealer with a large U.K. market-making operation said. "He didn't calm any fears or anxieties, but at least he didn't create any new ones."

Dealers attributed the day's advances largely to a technical rebound from the sharp declines that followed last week's base-rate increase. They also cited markdowns by market-makers seeking to generate some business and a general absence of active selling.

There was also some speculative energy that helped to support the FT-SE 100 later in the session, when Wall Street showed signs of weakness early in its trading day. That energy came in part from renewed rumors that U.S. takeover specialists Kohlberg Kravis Roberts are preparing to make a takeover bid for industrial concern BTR rather than simply take a 15% stake in it. Dealers also pointed to active options dealing in the stock recently and said some of the options had been exercised. BTR ended 7 higher at 437 pence ($6.76) a share.

Ferranti International Signal rose 1 1/2 to 58 on 8.5 million shares. British Aerospace said earlier in the week that it was considering making a joint bid with France's Thomson-CSF for Ferranti.

ASDA Group, a U.K. food retailer, closed 4 higher at 163 after holders approved the company's acquisition of 61 stores from Isosceles. ASDA was relatively active at 6.3 million shares.

Other companies in the food sector also firmed on active volume, with Argyll Group gaining 8 to 223, Tesco up 1/2 to 194 1/2 and J. Sainsbury advancing 3 to 255.

Blue-chip issues attracted institutions looking for defensive positions amid the current doubts about the future of the U.K. economy, dealers said.

British Steel edged 2 higher to 126 1/2 on 8.3 million shares, British Telecommuncations settled 6 higher at 268, and British Petroleum gained 1 to 307 1/2.

In other European markets, share prices ended higher in Frankfurt, lower in Paris, Brussels and Amsterdam and mixed in Stockholm, Milan and Zurich. South African gold stocks were slightly firmer.

Elsewhere, stocks rose in Taipei, Singapore, Seoul and Manila and were lower in Hong Kong, Wellington and Sydney.

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. @ % This @ Oct 11 Oct 10 Year @U.S. .......................... 328.1 330.1 + 28.1 @Britain ....................... 662.8 662.5 + 21.4 @Canada ........................ 438.4 440.1 + 19.4 @Japan ......................... 1534.5 1537.7 + 8.0 @France ........................ 553.0 563.3 + 24.9 @Germany ....................... 257.6 262.2 + 23.9 @Hong Kong ..................... 2127.7 2155.9 + 4.8 @Switzerland ................... 228.5 230.8 + 32.2 @Australia ..................... 349.6 351.7 + 20.4 @World index ................... 535.8 540.6 + 8.4

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891013-0147. Big Beverage Concerns Say Profit Rose @ In Third Quarter Despite Flat Volume @ ---- @ By Michael J. McCarthy @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) KO PEP CCE BUD ACCOB BEVERAGES (BVG)

The nation's biggest beverage companies are expected to report stronger third-quarter earnings, even as the soft-drink giants take their lumps from higher domestic soda prices and brewers' struggle with flat industry volume.

Coca-Cola Co., the first of the group to report, said yesterday that earnings rose 10%, excluding a gain from the sale of a bottled water business. PepsiCo Inc. and Anheuser-Busch Cos. will report third-quarter earnings gains of at least 9% and 14%, respectively, while results for Coca-Cola Enterprises Inc. and Adolph Coors Co. will decline, analysts estimate.

Since the summer, soft-drink companies have been trying to extract themselves from a price-slashing war designed to steal market share from each other. The battle drove up volumes for several years, but the discounted prices have squeezed bottlers' profit margins. Because raw material costs have been escalating and because Coke and Pepsi have become bigger owners of bottling businesses, the companies have been raising soda pop prices in recent months.

That, along with generally cooler, rainier weather this year, has slowed the industry's volume growth. Unlike the 4% to 5% growth rate of recent years, the soft-drink industry is expected to report third-quarter volume was, at worst, flat, and at best, up only 3%. That's a fairly wide range, given the sheer size of the $42 billion soft-drink industry.

But analysts, and indeed, some of the soda companies, have had difficulty predicting consumer reaction to higher prices. In August, Coca-Cola Enterprises, Coke's largest bottling operation, said its 1989 earnings would fall as much as 37%, partly because it misjudged consumer resistance to the new prices, which were 2% to 3% higher on average in July and August. Blaming higher prices in part, Coca-Cola said its third-quarter unit case sales were flat.

The volume in the summer selling season suffered, too, from the lack of a critical, yet intangible, element in the softdrink industry: excitement. After a controversial flap involving a Madonna music video, Pepsi dropped its plans for a big summer advertising promotion featuring the pop singer. And there have been no major new product introductions, such as cherry-flavored soft drinks, which made sales sizzle two years ago.

"What's been hot in the soft-drink business lately?" asks Emanuel Goldman, an analyst with PaineWebber Inc. "Nothing."

Still, the beverage industry's slower results in the latest quarter could lead to some positive earnings surprises in next year's third quarter, when comparisons will be easier, said George Thompson, an analyst with Prudential-Bache Securities Inc. "This year's ugly ducklings will be next year's swans," he said.

Coca-Cola's earnings were stronger primarily because of sharply improved volume from the company's international operations, which account for the bulk of its business. Volume rose 14%, well ahead of analysts' 10% to 11% projections for the business.

Analysts are looking for Pepsi to earn as much as $1.04 a share, with most estimates settling around 99 cents, compared with 91 cents in the year-ago quarter. The latest quarter results, are expected to be a little soft compared with Pepsi's historical earnings growth rate, reflecting some dilution for snack-food and soft-drink bottling acquisitions. Stronger restaurant and snack-food sales helped boost Pepsi's profits, too, analysts said.

Anheuser-Busch is expected to report third-quarter earnings between 89 cents and 92 cents a share, compared with 78 cents a year earlier. On the strength of Bud Light, Busch and Michelob Dry, the company's volume in the quarter is estimated to increase about 3% to 4%, while the rest of the industry will be flat, or up slightly. Coors earnings are expected to fall, as its volume declines perhaps 3% to 4%. Coors is expected to achieve greater production efficiencies once it completes its plan, announced last month, to acquire most of the beer-related assets of Stroh Brewery Co.

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891013-0146. LEISURE & ARTS: @ The Gallery: Petipa's Slippers @ ---- @ By Dale Harris
10/13/89
WALL STREET JOURNAL (J) New York

"Time," says Tamara Geva, "is meaningless. My youth in Petrograd, my father -- whom I never saw again after 1924, when I left Russia for the West -- the whole of my early life, it's all been brought back to me by the arrival, out of a clear blue sky, of this exhibition. The years between Petrograd and New York are the dream. The objects I grew up with, the things I thought I had said goodbye to forever -- that is the reality."

The reality to which Ms. Geva refers is the hoard of dance memorabilia currently on view at Eduard Nakhamkin Fine Arts here, under the title, "100 Years of Russian Ballet: 1830-1930." Consisting of roughly 400 items from the Leningrad State Museum of Theater and Music, the show offers tantalizing glimpses of a rich artistic achievement.

For Ms. Geva, an actress and author who began her career as a dancer during the early days of the Soviet state under her original name of Gevergeyeva, it offers something more: a sense of completion, the lifting of a curtain on the past. A great deal of what is currently on display in New York belonged to her father. These lithographs, designs, programs, photographs, which she pored over day after day, fed her adolescent yearning to join the ballet. Of this ambition her father disapproved, because, he said, dancers weren't properly educated.

Levki Gevergeyev had a passion for learning and for the arts, especially the performing arts. In addition to his holdings of theatrical material, he also owned 50,000 books, among them a great cache of bibles, although, in fact, he was an atheist. That didn't keep him from making a great deal of money manufacturing gold vestments for the Russian Orthodox Church. He owned a 26-room house, in which, according to his daughter, four enormous rooms were filled with his collection.

After the Revolution, when everything he owned was sequestered by the Bolsheviks, he was put in charge of the state's first Museum of Theater and Music, situated in Ostrovsky Square. In effect, he became the official curator of his former collection, which grew prodigiously and soon included several thousand costumes.

Despite the deprivations to which her father was subject in those years, Ms. Geva imagines that he must have been happy to be allowed to remain with the objects he had assembled so devotedly. While she found out soon after the war that he had perished during the Siege of Leningrad, she didn't know until the curators arrived from the Soviet Union with the contents of this exhibition that he had died of starvation on a sofa in the museum. Though weakened by malnutrition, he was unwilling to budge in case the collection was bombed and needed to be saved.

As it happened, the collection survived intact. Today, the Leningrad State Museum of Theater and Music owns some 400,000 items. For Americans, the most interesting of the 400 items on display in New York include designs by the German-born Andrei Roller (1805-91) for the Russian productions of important early 19th-century Paris ballets. No less illuminating are the designs from Petipa's "Sleeping Beauty" (1890), "Nutcracker" (1892) and "Raymonda" (1897), which shed light on the role played by spectacle in the ballets of this great choreographer. There also is much to be learned from the early stage photographs of Petipa's work, which, though posed, extend our knowledge of its theatrical ambiance.

Petipa, the fountainhead of balletic classicism, emerges as the show's hero, whether perceived through scenes from his ballets or through glimpses of the dancers whose technique and artistry his choreography played a decisive role in shaping. Among the most important of the Petipa ballerinas is Mathilde Kchessinska, represented in a series of fascinating photographs. The mistress of Nicholas II until his engagement to Alexandra of Hesse-Darmstadt, she dominated the Imperial Ballet of St. Petersburg as much through her dancing as through her connections. Even Isadora Duncan, the self-professed enemy of ballet, found her enchanting. A 1910 photograph shows Kchessinska reclining on a chaise longue in her St. Petersburg mansion. Clearly visible in the background is the balcony from which Lenin was to proclaim the Revolution.

The Diaghilev material is less interesting. The Ballets Russes never appeared in Russia and most of the important artifacts are in the West. George Balanchine, to whom Ms. Geva was married as a teenager in 1923 and who began his career as an artistic revolutionary, also gets short shrift. Better by far is the representation accorded the avant-garde dance that flourished in the U.S.S.R. until ruthlessly repressed during the Stalin years. The presence of so much material concerning Feodor Lopukhov, the leading choreographer of the post-Revolutionary Leningrad school, and virtually unknown in this country, is particularly welcome.

Less welcome is the random nature of the exhibition, which has no point to make beyond the indisputable fact that there are treasures in the Leningrad State Museum of Theater and Music. Miscellaneous and haphazard -- did we really need to see Anna Pavlova's tea set or Marie Petipa's slipper? -- the show invites uninformed, and thus superficial, viewing.

While it's an astonishing achievement for the Nakhamkin gallery to have organized the show in only three months, the time has surely come to present this kind of material in ways that reveal a context and a point of view. Even the title is misleading: The exhibition covers ballet, not in Russia, but only in what is now Leningrad. It also begins before 1830 and ends after 1930. In compiling the catalog, the gallery has missed a great opportunity to document a lot of rare material. Though well-illustrated, the publication is uninformative and often simply untrustworthy. Clearly, no dance lover should skip the show, but it's only a stopgap for the serious, scholarly endeavor we really need.

The show closes in New York on Oct. 20 and reopens in Saratoga, N.Y., on May 19 at the National Museum of Dance, its co-sponsor.

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891013-0145. Bull's Chairman to Use U.S. Acquisitions @ To Lift Computer Maker's World Stature @ ---- @ By Philip Revzin @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) ZE COMPUTERS AND INFORMATION TECHNOLOGY (CPR) CORPORATE PROFILE (PRO) PARIS

"In our business," says Groupe Bull Chairman Francis Lorentz, "one and one sometimes add up to 1.1, or 1.2, but rarely two."

Mr. Lorentz is talking about mergers, not mathematics. Bull, the French-government-owned computer maker, earlier this month agreed to buy the computer business of Zenith Electronics Corp. for as much as $635 million, but denies this is a merger. Bull says it intends to retain existing management of the U.S. unit and keep the Zenith label, while selling Zenith personal computers -- a product line in which Bull had been lagging -- as part of Bull data-processing systems.

Merger or not, the Zenith acquisition is a key part of Mr. Lorentz's plan to grow Bull -- the world's 11th biggest computer company last year -- into a profitable member of the top five or six computer makers. It won't be easy. Bull had a first-half net loss of 537 million francs ($82.7 million) on revenue of 14 billion francs ($2.16 billion). Mr. Lorentz says his objective remains posting a small profit for this year, but he isn't certain the company will make it into the black.

He adds that any full-year loss won't be "anywhere as big" as the first-half loss, which was caused in part by production problems, "which are being solved," at the company's Angers, France, circuit-board plant and a squeeze on profit margins because of growing competition. In any event, Bull thus far hasn't had any trouble finding the cash to fund its acquisitions. Bull posted a profit in 1988 of 303 million francs on revenue of 31.55 billion francs.

The other key to Bull's future health is its other U.S. leg. Bull last year increased to 69.4% its controlling interest in Honeywell Bull Inc. Honeywell Inc. retains 15.6%, and NEC Corp. of Japan owns the remaining 15%. In addition, Bull renamed the U.S. company Bull HN Information Services Inc. Bull HN reports to Mr. Lorentz as chairman of holding company Cie. des Machines Bull. During the past decade or so, Bull and Honeywell tried various approaches to combining their businesses, none of which really jelled. "We were spending all our energies internally, while externally the world was changing at breakneck speed," Mr. Lorentz says.

But now, with Bull in firm control, these U.S. operations are key ingredients in Mr. Lorentz's plans to ensure that Bull remains one of the half-dozen or so world-wide, full-range computer companies likely to survive the 1990s. To do so, Bull is planting itself firmly in the U.S., where, says Mr. Lorentz, a lot of the best people and research are. The Zenith buy means Bull will derive 22% of its revenue from the U.S. -- up from 18% previously -- and the company spends 30% of its 3.64 billion-franc research and development budget in the U.S.

Keeping Zenith relatively independant, says Mr. Lorentz, makes sense because "they are completely different cultures, making personal computers, like Zenith, and making mainframes like Bull." He says disarmingly: "We aren't fast enough. We {mainframe makers} live in cycles of four or five years of development and product life. They {PC makers} get six months of development and maybe 12 months of shelf life. They can afford to take some risks and fail."

"It is absolutely essential to keep Zenith's originality, its extraordinary force," the 47-year-old Mr. Lorentz adds.

"Our vocation is to be able to respond to any question our clients ask," says Mr. Lorentz, who joined Bull seven years ago after stints as chief financial officer of a water company and various posts in the French Treasury. "We want to be able to offer complete systems in specialized areas, like banking, ranging from the automated-teller machines to the front-desk workstation to the back-office equipment to the mainframe computer. To do these we need to make all the basic building blocks."

Mr. Lorentz succeeded Jacques Stern as chairman of Bull in June, and like his predecessor, he is a crusader for "open software" -- that is standards that will work on the machines of various makers -- in order to give smaller companies like Bull a chance against industry giants. Mr. Lorentz, Mr. Stern's No. 2 since 1982, inherits the task of making Bull the biggest and healthiest European soup-to-nuts computer company, competing globally with the likes of International Business Machines Corp., Unisys Corp., and a handful of Japanese companies. Counting only sales of computer equipment, Bull is already the biggest in Europe, ahead of Siemens AG of West Germany and Ing. C. Olivetti & Co. of Italy, Mr. Lorentz says.

Mr. Lorentz, an intense, cerebral product of France's elite "Ecole National d'Administration" likes to go rock climbing in his spare time, and used to practice the martial art of aikido. He will discuss frankly Bull's past problems; when asked if the company has suffered from an unfocussed image, he readily agrees. He allows that the products of all computer makers are getting more and more alike -- "a certain banalization" he calls it -- and that specialized service will make the difference in the future. "How we manage the problem of service will make all the difference between now and 1995," he says. After having added Zenith PCs to the Bull stable, Mr. Lorentz says, the company will be better armed for battle especially in Europe. "Our biggest asset is that we are well implanted in Europe, and Europe will be the fastest growing market in the world over the next 10 years." But the conquest of Europe will happen, in part, from the U.S.

"The information industry is global," says Mr. Lorenz, "but the image of that industry is created in the U.S., so we must be present in the U.S. in order to be known everywhere else. The U.S. represents 45% of the world information market, so it's 45% of our world. The technology and the human resources are there, and since the scarcest resource for us is people, and the people are in the U.S., so are we. That's the whole story."

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891013-0144. Your Money Matters: @ Stock Splits Can Be Mere Paper-Shuffling @ ---- @ By Tom Herman @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) DIVIDENDS (DIV)

With stock prices hovering near record levels, a number of companies have been announcing stock splits.

But investors trying to play all the angles may find that stock splits are a lot like cotton candy: They look tempting, but there's hardly any substance. And they can even leave a sticky problem, in the form of higher brokerage commissions.

"A stock split unaccompanied by a cash dividend increase is like giving somebody five singles for a $5 bill. You've got a thicker billfold, but it has no economic significance whatsoever," says Leon Cooperman, a partner at Goldman, Sachs & Co.

In a typical split, a company increases the number of shares it has outstanding, with each stockholder participating on the basis of existing holdings. With a 2-for-1 split, for example, an investor who owned 100 shares before the split would have 200 shares afterward. The stock's price usually falls to reflect the greater number of shares, assuming no other changes at the company.

Companies usually split their shares in the hope that a lower share price will attract more individual investors, increase trading volume and improve the stock's liquidity. The theory is that a stock selling for $20 or $30 a share will be more affordable to individuals than one selling for more than $100 -- especially for investors who like to buy round lots of 100 shares.

Take L.A. Gear Inc., a fast-growing designer and marketer of athletic footwear that had a 2-for-1 split last month. The main reason for the split was "to make the stock more attractive to the retail buyer," says Elliott J. Horowitz, the company's executive vice president and chief financial officer.

But if a stock suddenly becomes more attractive to the masses, shouldn't that boost its price? After all, L.A. Gear was selling for around $60 a share when the split was announced on Aug. 24, then soared to more than $75 a share before splitting in late September. Yesterday, the stock closed at $41.75.

Mr. Horowitz scoffs at the idea that his company's price surge was caused by the split. "If it were that easy to take a stock from 60 to 75, I think a lot of other companies would be doing it," he says. While a split "does create more demand for the stock," he says, "I just don't think it's that much of a factor."

Investment managers and others agree. While a stock split accompanied by a dividend increase can pack a powerful punch, a split by itself "has no lasting impact on the stock price," says Mr. Cooperman of Goldman Sachs.

Adds James L. Cochrane, senior vice president at the New York Stock Exchange: "We've done research on this, and it shows a split really doesn't to seem to matter significantly."

Even if splits did affect stock prices, some academics argue that it would be futile for investors to try to take advantage of them. In their view, financial markets tend to anticipate news. Thus any impact from a split would already be incorporated in a stock's price by the time the split was announced, they argue.

"Normally, the investor isn't able to benefit" by buying a company's stock immediately after news of a split, says Frank K. Reilly, a Notre Dame professor of finance and co-author of a 1981 study on splits. "By the time the average investor hears the news, traders already have acted and the stock already has moved."

A few money managers even say a stock split sometimes may represent a sell signal. "Remember the old Wall Street adage: Buy on the rumor and sell on the news," says Samuel Thorne Jr., a managing director at Scudder, Stevens & Clark in Boston.

Splits can also mean a bigger expense for investors when they buy or sell shares. That's because brokerage houses often calculate their commission rates using a complex formula based partly on the number of shares being traded.

For example, a Merrill Lynch official says that firm's commission on 100 shares of a $40 stock would be about $97. But the commission would jump to about $115 to trade 200 shares of a $20 stock -- even though the dollar amount of the trade would be exactly the same. Another large firm gave similar figures: The standard commission on 100 shares of a $40 stock would be $91, but the commission would jump to $112.50 to trade 200 shares of a $20 stock.

"Stock splits are the biggest ripoff on Wall Street," contends Hans R. Reinisch, a New York investor. "The only thing that changes with a split is the brokerage commissions, and they often go up sharply. If you're an active investor, you have to take into account the transaction costs."

Some corporate executives also question the idea that more shares are better. Among these is Warren E. Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., whose stock closed yesterday on the New York Stock Exchange at $8,700 a share.

"We often are asked why Berkshire does not split its stock," he wrote in the company's 1983 annual report. "The assumption behind this question usually appears to be that a split would be a pro-shareholder action. We disagree."

In the lengthy discussion that followed, Mr. Buffett said: "We want {shareholders} who think of themselves as business owners with the intention of staying a long time. And, we want those who keep their eyes focused on business results, not market prices."

Underscoring his feelings on the subject, Mr. Buffett once sent a birthday greeting to a friend, wishing him good health and saying: "May you live until Berkshire splits."

Still, many companies like splits as an inexpensive marketing tool that generates favorable publicity and helps broaden their shareholder base.

A stock split is "a nice exercise in cosmetics, but that's about all," says James H. Coxon, senior vice president and head of the common-stock division at Cigna Investments Inc. "It's a small net positive because it can improve the marketability of a particular stock. But it's really of very little significance."

A split's impact, if any, can depend on the company involved and the price of that company's stock, says John P. Rosenthal, senior partner of Silberberg, Rosenthal & Co. But he adds that any impact from a split "really is very short-term."

Advises Michael Metz, a managing director at Oppenheimer & Co: "Just ignore splits." In his view, "They're irrelevant for the long-term investor. Look only at the fundamentals of a company, not whether it splits its stock."

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891013-0143. Financing Business: @ Federal Industries Ltd.
10/13/89
WALL STREET JOURNAL (J) FIL.A TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BOND MARKET NEWS (BON)

FEDERAL INDUSTRIES Ltd. said it agreed with underwiters led by Scotia-McLeod Inc. to issue 75 million Canadian dollars ($63.8 million) principal amount of 9% convertible subordinated debentures. Federal Industries, a diversified manufacturing, distribution and transportation concern based in Winnipeg, Manitoba, said the debentures will be convertible until their 1999 maturity into the company's Class A shares at C$18.50 a share. Federal Industries said C$54 million of the proceeds will be used to finance its previously reported plan to buy W.H. Smith Canada Ltd., a bookstore chain, and the balance to repay short-term debt.

891013-0142.
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891013-0142. Letters to the Editor: @ Hazardous Hulls
10/13/89
WALL STREET JOURNAL (J) TRANSPORTATION, TRUCK AND SHIP LINES, RAILROADS (TRA) AEROSPACE (ARO) DEFENSE DEPARTMENT (DEF)

Your Sept. 15 story on the destroyer DDG-51, the Arleigh Burke, inaccurately asserts, "several aluminum-hulled British ships were destroyed by Argentine missiles."

Only one aluminum-hulled British vessel was so destroyed, the HMS Sheffield. It was struck by an Exocet, setting off fires that ignited its aluminum superstructure. As far as I know, there is no way to extinguish such a fire at sea, which is why the U.S. Navy has sensibly built the Burke of steel.

However, the Navy also claims that its mostly aluminum Aegis-class cruisers, some of which are yet to be built, could never meet the fate of the Sheffield because no enemy missile could penetrate their defenses.

Frank H. Price Jr.

Birmingham, Ala.

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891013-0141. Letters to the Editor: @ Raw Language
10/13/89
WALL STREET JOURNAL (J)

"Snoozing" through the Beijing massacre? This is the buzzword Adi Ignatius chooses to characterize in his review of my book "Tiananmen Diary: Thirteen Days in June" (Leisire & Arts, Sept. 8). I doubt that many readers of this chronicle of the blood and bullets and terror of the Beijing massacre would put it just this way. Nor mistake, as he seems to have done, a raw, rough-cut, unretouched, genuine diary, complete with blips, print lice and all the confusions of real time with high-gloss footnoted academic scholarship. Such works will be forthcoming, but I doubt if they will convey the anguish of what Mr. Ignatius calls my "insta-book."

Harrison E. Salisbury

Taconic, Conn.

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891013-0140. Financing Business: @ Repligen Inc.
10/13/89
WALL STREET JOURNAL (J) RGEN

REPLIGEN Inc. said it will issue one million new common shares in a $9 million private placement to institutional investors in the U.K. The Cambridge, Mass., biotechnology company said proceeds will be used to broaden its research and development of products to fight infectious diseases and to increase manufacturing capabilities. Bear Stearns & Co. handled the closing of the transactions, Repligen said. After the sale, Repligen will have about 8.3 million shares outstanding.

891013-0139.
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891013-0139. Pepper...and Salt
10/13/89
WALL STREET JOURNAL (J)

In Other Words

Why, wishing someone

A recovery, must it

Be "speedy"?

Why, if a felon's eyes

Are narrow,

Must they always be

"Beady"?

Why are muscles --

this is so vexing --

When exercising, said

To be "flexing"?

I guess it's just one

Of my whims,

But I wonder what

Happened To synonyms.

-- Dow Richardson.

---

Safety in Numbers

The "raison d'etre" for committees

(At least the way I construe it):

Why should just one person mess things up

When several persons can do it?

-- George O. Ludcke.

---

Daffynition

Horseman: reinman

-- Shannon Rose.

891013-0138.
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891013-0138. First Federal Savings Bank
10/13/89
WALL STREET JOURNAL (J) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) DECATUR, Ala.

First Federal Savings Bank said holders voted to approve its proposed merger with First American Federal Savings & Loan Association, Huntsville, Ala.

The thrift said it is waiting for final regulatory approval of the transaction, after which its holders will be entitled to receive $20.83 for each share held.

891013-0137.
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891013-0137. Bank Earnings for 3rd Quarter to Sag, @ Reflecting Increased Loan Loss Reserves @ ---- @ By Robert Guenther @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) JPM CMB BKB FBS CCI MHC BANKS (BNK)

Securities analysts are using terms like "kitchen-sink syndrome" and "clearing the decks" to describe the generally disappointing results that commercial banks are expected to report in the coming weeks.

A number of major banks have chosen to make huge additions to their loan-loss reserves in the third quarter, either for troubled loans to Latin American nations, soured real-estate loans in this country or bad loans to companies involved in leveraged buy-outs.

The banks hope to get the bad news behind them now, so that their earnings -- and their stock prices -- can rebound in the coming quarters.

J.P. Morgan & Co. has effectively neutralized any problems that its developing-country loan portfolio could pose in the future by announcing a $2 billion addition to reserves for the quarter. As a result, Morgan will post a loss for the quarter and year.

Similarly, Manufacturers Hanover Corp. made a big addition to reserves for developing-country debt that will cause it to post a loss. Chase Manhattan Corp. on Wednesday, as expected, reported a net loss for the third quarter of $1.11 billion, or $12.45 a share, following a massive addition to reserves for possible losses on loans primarily to developing countries.

And several regional banks, including Bank of Boston Corp. and First Bank System Inc., are expected to report losses stemming from major additions to reserves for foundering domestic loans.

With all this disappointing news, analysts wouldn't be surprised to see other banks, particularly those with loans to developing countries, use the spate of reserve-building by others as an opportunity to clean up their own balance sheets.

The nation's biggest banking company, Citicorp, isn't expected to follow the lead of Manufacturers, Chase and Morgan with a massive boost in reserves. Nevertheless, analysts expect Citicorp's third quarter will be near its level for the same period a year ago and therefore somewhat disappointing.

Many analysts were expecting generally weak third-quarter results anyway due to continued rises in non-performing loans and pressure on interest-rate margins.

Keefe, Bruyette & Woods Inc., a securities firm specializing in bank stocks, estimates that third-quarter results will rise 8% from the year-ago figure for 144 regional banks that it follows. That's the smallest increase this year.

The principal reason for the slower growth is the narrowing difference in interest rates on loans and the cost of interest-bearing consumer deposits. Keefe estimates this difference will shrink to 4.39 percentage points in the third quarter, the lowest level in a year.

Further deterioration in domestic loan quality is adding to the pressure on earnings. Nonperforming real-estate loans in New England continue to climb, and the number of highly leveraged commercial loans that have gotten into trouble is rising. Hooker International, Seaman Furniture Co., Lomas Financial Group Inc., Integrated Resources Inc. and Resorts International Inc. are some of the more prominent troubled concerns.

891013-0136.
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891013-0136. MEI Diversified Inc. @ Will Acquire LecTec, @ Skin-Product Maker
10/13/89
WALL STREET JOURNAL (J) MEI LECT BAX TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) MINNEAPOLIS

MEI Diversified Inc. agreed to acquire LecTec Corp. for stock currently worth $17.6 million. In a related transaction, the two also agreed MEI will help LecTec finance a $42-million purchase of a Baxter International Inc. unit.

The agreement, which requires approval by both regulators and LecTec stockholders, calls for LecTec holders to receive for each of their common shares nine-tenths of an MEI common share. The pact represents a slight sweetening from the 0.88 MEI share LecTec holders would have received under an earlier tentative agreement.

In national over-the-counter trading yesterday, LecTec shares moved up 12.5 cents to close at $5.375; MEI shares were unchanged at $6.375 in composite New York Stock Exchange trading.

LecTec, which makes medical products for the skin, also agreed with Baxter to acquire its New Dimensions in Medicine unit for $42 million and assumption of some debt. New Dimensions, a unit of Baxter's operating-room division, manufactures electrodes, cables and electrosurgical products.

MEI and LecTec agreed that MEI -- a snack and health-food distributor that has said it is seeking to expand into other fields -- will provide financing for LecTec's purchase of New Dimensions. The purchase is expected to be completed within a month. MEI's owners include investor Irwin Jacobs.

Baxter, a manufacturer of health-care products based in Deerfield, Ill., will distribute New Dimensions products -- and probably some LecTec products, too -- according to contract terms.

Baxter said it is selling New Dimensions because its operating-room division is now focusing on products solely used in hospital operating rooms. Annual sales for New Dimensions range from $35 million to $40 million; the acquisition overshadows Lectec's own annual sales of about $6 million.

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891013-0135. Letters to the Editor: @ People Aren't Happy @ In Man-Made Paradise
10/13/89
WALL STREET JOURNAL (J) EUROP

In response to David Backhaus's Sept. 11 letter, "Why the West Subverts Germany's Better Half": Last summer I had the opportunity to spend three days in "Germany's better half," specifically in Weimar, Eisenach and Erfurt. I recognize that three days does not an expert make, but what I saw differed significantly from what Mr. Backhaus reported. The shops were essentially devoid of fresh fruits and vegetables, the ubiquitous (in the West) boom-boxes were priced equivalent to a month's wage, while black-and-white TV sets were twice or three times a month's pay. The streets and buildings were covered with soot, as the "better half" is both unwilling and unable to spend its scarce resources to burn a fuel cleaner than soft coal and to add anti-pollution devices to its generating plants.

The only gasoline station I saw had a sign indicating it was out of fuel. Napkins were not available in restaurants (paper is scarce) and the meat (mostly pork) contained an unacceptably high level of fat.

More important, however, is the recent exodus of Germans from the "better half" to the West. There is a long line of East Germans waiting to get out. Over the years many have even risked their lives to leave. I have never been able to find a line of people waiting to enter.

The problems of crime and drug abuse in the West are real and must be acknowledged. If the West were to employ authoritarian methods, these problems could be solved. Unfortunately, they may in part be the price we have to pay for freedom. But we are aware of these problems and are working on means to solve them, without trampling on the rights of our citizens.

Edward C. Weckel

Bel Air, Md.

---

Mr. Backhaus's words describing the paradise in East Germany ". . . There is no crime of consequence, no poverty, no drug abuse, no illiteracy, no pornography, no prostitution . . ." were almost the same as those describing the conditions in Hitler's Germany before World War II and almost the same describing the U.S.S.R. and countries behind the Iron Curtain until a couple years ago.

Why? Every child should know the cost of freedom, democracy's inherent deficiencies. Every intelligent man and woman should use most efficiently the meager means available to him or her to get rid of the faults of the system and to improve it. If we are producing more naive men such as Mr. Backhaus, we are bound to pay dearly for the shortcuts to reach "law and order" more efficiently.

Millions of innocent victims killed by the "producers of instant paradises" should make us etch in our hearts Winston Churchill's wisdom that democracy is a very bad way to govern, but still the best one we have.

Karel Kriz

Mount Prospect, Ill.

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891013-0134. Who's News: @ SmithKline Beecham's James Andress @ Resigns Unexpectedly From No. 3 Post @ ---- @ By Joann S.Lublin @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) WNEWS SBH LONDON

James Andress, a top executive at SmithKline Beecham PLC, resigned unexpectedly in a sign of growing pains at the newly merged health-care giant here.

Mr. Andress, who shared the No. 3 spot at SmithKline Beecham, is quitting his #325,000-a-year ($502,613) job to run a much smaller company outside the pharmaceutical industry. Next month, he becomes president and chief operating officer of Information Resources Inc., Chicago-based marketing consultants with $150 million in annual sales.

Mr. Andress gave up the presidency of U.S. drug maker Sterling Drug Inc. in 1988 to become heir apparent to then Beecham Group PLC Chairman Robert Bauman. A year later, Beecham merged with Philadelphia's SmithKline Beckman Corp.

John Chappell, a senior SmithKline executive, took over Mr. Andress's responsibility for the pharmaceutical business following completion of the unusual trans-Atlantic marriage.

Mr. Andress said SmithKline Beecham will eliminate his post as chairman for health-care products and services because he finished integrating those businesses. "I guess my ego could be hurt," but it isn't, he said in a phone interview. "Were I to stay, there wouldn't be very much to do."

At Information Resources Mr. Andress, 50 years old, will move into a spot left vacant by Gian Fulgoni, who moved up last January to become the company's chief executive officer.

Drug-industry analysts were surprised and dismayed by his sudden departure. Erling Refsum, a drug analyst at Nomura Research Institute in London, said, "It's part of a shakeout, obviously."

Mr. Andress was highly regarded for his leadership of Beecham's pharmaceuticals business. One ex-Beecham executive suggested Mr. Andress may be quitting because Mr. Chappell edged him out.

But Mr. Andress, who helped arrange the SmithKline deal and has been a board member of the merged company, recalled that he didn't object to Mr. Chappell's appointment. "It seemed to make sense that John be in charge of integrating the much larger SmithKline {pharmaceuticals} business with the smaller Beecham business," he said.

Mr. Andress added that personal reasons also influenced his return to Chicago, where his wife and three children live. His family never moved when he left Abbott in 1984 to join Sterling Drug.

Analysts nevertheless see the resignation as an indication of SmithKline Beecham's difficulties in quickly delivering the merger's promised "synergy." Many investors foresaw gains from joining sales forces and possibly $600 million in savings from pruning duplicative functions.

But combining the companies' far-flung operations is turning out to be a delicate and time-consuming task -- even though wholesale staff cuts and plant closings have yet to begin. Mr. Bauman, chief executive officer, has asked staff task forces and management consultants McKinsey Co. to devise restructuring plans by year end. Meanwhile, "nobody knows what they are doing or for how long and why," a recently retired employee said. And few combined marketing efforts have begun yet.

There have been other resignations among lower-level managers, but Mr. Andress becomes only the second top Beecham executive to leave since the merger. R. Paul Tatman, 55, will take early retirement this month, a spokeswoman said. He had been deputy chairman of the pharmaceuticals business and, previously, a Beecham board member.

891013-0133.
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891013-0133. Continental Health @ Mulls Restructuring, @ May Sell 2 Businesses
10/13/89
WALL STREET JOURNAL (J) CTHL HDYN TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ENGLEWOOD CLIFFS, N.J.

Continental Health Affiliates Inc. said it is considering a restructuring that may involve selling one or both of its infusion-therapy and home-nursing businesses.

The health-care-services company said separating its businesses would increase shareholder value "in light of values recently placed on the infusion-therapy business." The company was referring to recent acquisitions in the industry. An official said there has been much interest in the company recently.

He said that if both businesses were sold the company would be left with its nursing-homes/retirement-living business, roughly one-third of its overall business. The company didn't say how much it expects the businesses to fetch.

In over-the-counter trading, Continental Health closed at $4.875 a share, up $1.

Continental Health said it hired Drexel Burnham Lambert Inc. to explore the sale of the businesses. Continental Health also is considering other options, including a spinoff of a division.

The company said it sold almost all of its shares in Healthdyne Inc., a Marietta, Ga., health-care-services and electronicmedical-equipment concern. Last year, Continental Health unsuccessfully bid for Healthdyne, offering as much as $7 a share, or $105 million. Healthdyne rebuffed the advance and restructured. Continental, which at one time held 7.4% of the company, said overall, it sold its Healthdyne shares at a premium, which it will disclose when it reports third-quarter results.

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891013-0132. Coca-Cola Net Rose @ 22% in 3rd Period; @ Sales Abroad Cited @ ---- @ By Martha Brannigan @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) KO EARNINGS (ERN) BEVERAGES (BVG) ATLANTA

Coca-Cola Co. said third-quarter earnings jumped 22%, as a surge in international sales made up for disappointing domestic results.

The giant soft-drink company posted net income of $361.3 million, or $1.03 a share, up from $295.6 million, or 81 cents a share, a year earlier. The most recent quarter included a gain of $36 million, or 10 cents a share, from the sale of bottled-water operations.

Revenue rose 8.2% to $2.30 billion from $2.13 billion a year earlier, due largely to a 14% jump in international volume.

"Overseas operations are the bread and butter of Coca-Cola, and those performed well," said Emanuel Goldman, an analyst with PaineWebber in San Francisco. He noted that about 80% of the company's earnings come from international operations.

The 14% increase in international gallon sales well exceeded the 8% to 10% goal the company had set. "A 14% increase on top of a very big base is a very strong performance," said Randy Donaldson, a Coke spokesman.

The company said a variety of factors, including promotional activities and the rollout of new products -- including Sprite in Britain -- contributed to the strong growth in most overseas markets. Unit volume in Europe showed a strong 17% growth, while Japan, another major market, showed an increase of 10%.

The firming of the dollar against foreign currencies had a small effect of reducing net income by about one cent in the quarter and five cents for the nine months.

In contrast to the performance overseas, domestic unit case sales were flat in the third quarter, and sales of gallons of concentrate dropped 2%. The company attributed the results to consumers balking at higher prices and sluggish times in the restaurant business. Domestic results "are modestly disappointing," said George Thompson, an analyst with Prudential-Bache Securities. He said an unusually rainy summer in many parts of the U.S. also hurt sales.

Coca-Cola said chilled orange-juice volume rose 25% in the quarter due to growth of its Minute Maid Premium Choice orange juice and a new 96-ounce plastic bottle for its chilled orange juice that comes from concentrate. However, frozen orange-juice volume plummeted 33% as consumers continue to shift to the chilled juice.

For the nine months, Coca-Cola reported net income rose 19% to $966.6 million from $809.2 million last year, while revenue increased 6.4% for the nine months to $6.72 billion from $6.31 billion a year earlier.

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891013-0131. Aerospace Firms @ Still Are Caught @ In a Downswing @ --- @ Third-Period Results Seen @ Hurt by Expenses Tied @ To Fixed-Price Accords @ ---- @ By Rick Wartzman @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) LK GD RTN ESY LOR NOC MD BA AEROSPACE (ARO) EARNINGS (ERN) DEFENSE DEPARTMENT (DEF)

Lockheed Corp.'s $32 million third-quarter net loss, brought on by $165 million in charges from cost overruns on fixed-price development contracts, is bound to be only the first in a symphony of sour notes for aerospace companies.

Many more airplane makers, their profit levels plunging for the past few periods, again are likely to post meager results due to increased expenses on fixed-price accords with the military.

Yesterday, Lockheed reported its 50-cent-a-share loss versus net income of $300 million, or $5.06 a share, a year earlier. The year-ago figures include a one-time gain from discontinued operations of $177 million. Sales decreased to $2.1 billion from $2.3 billion.

"Once one company signals it's taking write-offs, it provides the impetus for others to do it now, rather than later," says Lawrence Harris, an analyst with Bateman Eichler, Hill Richards Inc.

He notes that some companies may be especially eager to take loss provisions for the three months ended Sept. 30 because Lockheed's stock price has remained relatively steady since the Calabasas, Calif., concern first disclosed its intention last week to take the charges. (Some of that, though, is attributable to takeover speculation spurred by Dallas investor Harold Simmons's 10.43% stake in Lockheed.)

Surely, some companies will demonstrate improvement for the quarter. Martin Marietta Corp. and General Dynamics Corp., which in the past has been hampered by strife at its electric boat division, should both report slight year-to-year gains. And defense electronics companies such as Raytheon Co., E-Systems Inc. and Loral Corp. -- inured to federal budget cuts because of the diversity of their projects and growing opportunities overseas -- "are better off than the metal-benders," says Gary Reich, of Shearson Lehman Hutton Inc.

But besides Lockheed -- which chalked up its deficit to problems in manufacturing the wings on the Air Force C-17 cargo plane and in modifying the Navy's EP-3E reconnaissance aircraft -- Northrop Corp. and McDonnell Douglas Corp. are also candidates for write-downs, analysts say.

In a fixed-price development contract, the company locks itself in at what it thinks it will take to bring a particular weapons system into production. If there are engineering changes or other hitches along the way, as there nearly always are, the company almost always swallows the extra cost.

"The idea of eliminating the customer's risk and putting it totally on the supplier is a zero-sum game," asserts Donald H. White, president of General Motors Corp.'s giant Hughes Aircraft Co. unit. "There is no way to win."

Los Angeles-based Northrop already has taken several adjustments on classified programs, and Mr. Harris says he doesn't "think we've seen the last of that." Meanwhile, St. Louis-based McDonnell Douglas, which last quarter took a $72 million charge to reflect problems on the C-17, is also having troubles with the T-45 Navy training jet; the company recently told analysts that it is potentially liable for all or part of the cost of two major fixes on the program and that it is presently booking zero profit on the contract due to overruns.

At this point, though, it's anybody's guess whether any special items will be recorded in the third quarter or later instead. "It's a crap shoot, pure and simple," Mr. Reich says, pointing out that Lynch, Jones & Ryan's brokerage-by-brokerage snapshot of analysts' earnings estimates shows wide-ranging predictions for most Pentagon contractors. But, he hastens to add: "We should never be surprised by a write-off. We should always expect some of these to be coming."

Eventually, the fixed-price squeeze will ease. Top Pentagon officials for some time "have indicated a lot of sympathy for the industry," says Barry Blechman, president of Defense Forecast Inc., a Washington research firm. Defense Secretary Dick Cheney and, in particular, Deputy Secretary Donald Atwood have promised "to bring some relief" by preventing the further proliferation of these contracts.

But enough fixed-price arrangements are already signed and sealed to keep aerospace executives in an uproar. Lockheed has sworn off bidding on all such pacts in the future. Northrop, at its annual meeting earlier this year, said it passed over 14 programs in 1988 because of the "unsatisfactory terms and conditions" offered by the government.

"It's fair to say that we're going to feel the impact of these contracts for a number of years," says LeRoy Haugh, vice president for procurement and finance at the Aerospace Industries Association, a trade group. In the meantime, the companies will be aiming to exploit any advantage they can from this unfavorable situation -- the industry's equivalent of making chicken salad out of chicken feed.

For instance, Boeing Co., depending on where it stands over the next few weeks with the striking machinists union, might be inclined to take a hit against operating income in the third quarter in a bit of fiscal legerdemain. Clearly, the company is going to show improved operating profit, having delivered an impressive 86 jets during the period. Mr. Harris even anticipates a bottom line of $1.15 a share and Mr. Reich expects one dollar versus 63 cents a year ago.

But Boeing, too, is vulnerable on fixed-price military contracts, and a write-off could make the company look less prosperous while negotiating a new labor pact. "I find it hard to believe they'd want to show an 80% earnings gain during a walkout," Mr. Harris says.

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891013-0130. Chrysler Official Estimates Auto Maker @ Broke Even on 3rd-Quarter Operations @ ---- @ By Joseph B. White @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) C AUTOMOBILES (AUT) DETROIT

A top Chrysler Corp. official said that the auto maker just about broke even on operations during the third quarter, an estimate that surprised some analysts.

Most Wall Street analysts had estimated that Chrysler's third-quarter earnings fell to about $58 million, or 25 cents a share, from $112.5 million, or 50 cents a share, a year earlier. But Chrysler Chief Financial Officer Robert S. Miller Jr. told a group of bankers in Frankfurt, West Germany, that, excluding an expected $1.33-a-share gain from the sale of 45% of the company's holdings in Mitsubishi Motors Corp., "I doubt we did much better than break even." Mr. Miller added that fourth-quarter earnings will depend "on how severe the discounts" are in the U.S. market. Chrysler is already offering rebates of as much as $2,000 on some 1990-model vehicles. A Chrysler spokesman confirmed Mr. Miller's remarks.

Yesterday, Chrysler stock closed at $24, down 62.5 cents, in heavy trading on the New York Stock Exchange.

Analysts said Chrysler's estimate was lower than expected, but not a total shock in light of the intense competition in the U.S. auto market and the relative volatility of earnings in a quarter when the Big Three auto makers traditionally have their highest expenses and weakest revenues.

Still, Chrysler's earnings estimate highlight the vulnerability of the No. 3 U.S. auto maker at a time when Japanese auto makers are gearing up for another major assault on the U.S. market.

Chrysler, like Ford Motor Co., General Motors Corp. and some Japanese auto makers, spent heavily on rebates and other incentives to boost sales during the third quarter. Chrysler also cut U.S. vehicle production during the quarter to trim bulging inventories.

Analysts estimate that the combination of big rebates and sharp production cuts pushed the North American auto operations of each of the Big Three into the red during the July-September quarter.

But while GM and Ford have extensive overseas auto operations and non-automotive businesses to offset losses in their North American vehicle operations, Chrysler depends on its North American auto business for the bulk of its earnings. "They just don't have the resources" the other auto makers have, said Smith, Barney, Harris Upham Co. analyst Wendy Beale Needham.

Chrysler also may have hurt itself by overspending in its effort to maintain market share during the quarter, some analysts said yesterday.

"They could have gotten away with {lower} rebates," said Morgan Stanley analyst Scott Merlis. "A lot of Chrysler models have 20 days of inventory or less. So a $1,500 rebate could have been a $750 rebate." A 60-day to 65-day supply of unsold cars is considered normal.

Other analysts said they were confused by the way the company chose to break the news of the earnings disappointment.

"Why would Steve Miller make a statement like this in Germany?" asked PaineWebber analyst Ann Knight. Ms. Knight said it wasn't immediately clear to her whether Mr. Miller was referring to Chrysler's overall earnings, or just its North American automotive operations. When she was unable to get clarification from Chrysler officials, she made an unusual announcement to traders over PaineWebber's in-house public address system, telling them that if Chrysler did no better than break-even overall, "it will be an unpleasantly surprising short-term {event} but my neutral rating {on the stock} is unchanged."

Through the first half of this year, Chrysler earned $692 million, or $2.96 a share, compared with $504 million, or $2.27 a share, a year earlier. Now, some analysts said they will cut their estimates for Chrysler's full-year profit. Chrysler earned $1.05 billion, or $4.66 a share, in 1988, and the consensus among analysts had been that earnings for 1989 would be roughly flat.

"This would indicate that my fourth-quarter number of $1.20 a share is too high," said Ms. Needham. "I had $4.35 for the year. I might be in the $3.75 range" after revising the forecast, she said.

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891013-0129. Marketing & Media: @ Bill Aims to Increase @ Canadian TV Programs @ On Stations in Canada
10/13/89
WALL STREET JOURNAL (J) CANDA MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) OTTAWA

The Canadian government introduced an amended bill in the House of Commons aimed at increasing the amount of Canadian programming shown on Canadian television stations.

The bill "will offer a greater choice of more and better Canadian programming, enriching Canadian life and strengthening Canadian identity," Communications Minister Marcel Masse said.

The bill instructs the Canadian Radio-television and Telecommunications Commission, a regulatory agency, to provide financial incentives to privately owned television networks to use more Canadian material than the current quota of 50% in prime time.

The bill also states that programming carried on the government-owned Canadian Broadcasting Corp. should be "predominantly and distinctively Canadian." The corporation has its own objective of boosting Canadian content on prime time to 95% from its current level of 60%.

The new bill also instructs cable companies to give preference to Canadian programming and permits them to produce programming.

The bill is very similar to one that was passed by the House of Commons last year but that didn't get Senate approval before the November 1988 federal election.

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891013-0128. We Just Wonder if Those Readers @ Are Using American-Made Copiers @ ---- @ By Jolie Solomon @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) SNE MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) FEDERAL GOVERNMENT (FDL) WASHINGTON

Sony Corp. has spent years pushing its exports to the U.S., but now it has a hot product it doesn't want anyone here to buy.

"The Japan That Can Say No," a collection of essays by Sony Chairman Akio Morita and Shintaro Ishihara, a top politician in the ruling Liberal Democratic Party, has been a best seller in Japan all year. In it, Mr. Ishihara cites as a mentor a general who planned the attack on Pearl Harbor, and Mr. Morita urges Japan to eschew its Confucian heritage and say no to the U.S. more often on economic issues.

Such a good read would seem a natural for the U.S. market. But a Sony spokesman says Mr. Morita has "no plans" for a translation. Even copies in Japanese are hard to get in the U.S.

Nonetheless, hundreds of 74-page, typewritten, bootleg editions are circulating through Washington. Readers credit a variety of translators, but so far only the CIA admits it's working on a translation -- "for restricted use."

Distributors aren't as shy. Rep. Mel Levine, a California Democrat, has given away at least 50 copies, and the American Electronics Association is running its copiers overtime. Some lawmakers may even put it in the Congressional Record.

Richard Elkus Jr., the head of Prometrix Inc., a semiconductor firm, was particularly interested in a scenario on page 3 about selling computer chips to the Soviets and not the U.S. to demonstrate Japan's economic power. "This would upset the entire military balance," Mr. Ishihara writes. America, he adds, might invade.

Mr. Elkus hoped something had been lost in translation, and he asked a Japanese friend to "put this in terms that make me feel better." His friend responded, Mr. Elkus says, that he couldn't.

Readers say points in Mr. Morita's essays are often legitimate, while Mr. Ishihara's are incendiary. Mr. Morita, meanwhile, complains that Americans are confusing his opinions with Mr. Ishihara's and says he wishes he'd never got involved.

But Mr. Morita isn't backtracking on his criticism of the U.S. In fact, he cites the bootleg translations as another example of unfair U.S. trade practices. "I believe that to be a violation of my intellectual property rights," he says through a spokesman.

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891013-0127. LEISURE & ARTS -- Bookshelf: @ When Public Policy Falls Into Private Hands @ ---- @ By Robert Bork
10/13/89
WALL STREET JOURNAL (J)

In his thoughtful new book, "Judicial Compulsions: How Public Law Distorts Public Policy" (Basic, 322 pages, $22.95), Jeremy Rabkin takes us into the entangled world of judicial activists, partisan judges, federal regulators and litigious special interest groups. His topic is administrative law, but the bad news the professor from Cornell brings to us from this front is equally applicable to such other areas as criminal law, malpractice and product liability. In all these fields, judges have taken much of the formation of public policy out of the hands of elected representatives and those accountable to them. The result not only produces government of dubious legitimacy but consequences that often have been perverse.

Administrative law is not high on the list of fascinating subjects for most people. The very words "administrative law" sound dry and dusty. Often enough when pondering whether Section 7(b)(3) can be reconciled with 4(a)(17), both of Title III of the Clean Sludge Act of 1983, I have had occasion to reflect on the adage that working in the law is like eating sawdust without butter. Mr. Rabkin has eaten the requisite amount of sawdust but he spares his readers and places administrative law in its larger policy and constitutional contexts. Judicial review of regulatory decisions often determines the success or failure of crucial national policies regarding clean air and water, nuclear safety, safe work places, equality of the races and sexes, and so on through the seemingly endless programs that Congress has outlined but left to regulators and courts to flesh out.

Mr. Rabkin demonstrates that in this area courts have, largely unthinkingly, and with considerable assistance from Congress, perverted the concept of rights. These were once thought to be something the individual possessed and could defend in court. But the individual had to show an injury to himself. These last two decades, it has come to be thought that individuals can go to court to assert their own parochial views of the public's legal rights.

This is contrary to the traditional rule that a citizen cannot sue a prosecutor to require him to enforce law in a particular way, or even to enforce a law at all. Courts recognize "prosecutorial discretion," which means that important aspects of policy are left in the hands of executive-branch officials who are accountable only to their superiors and to legislative oversight. Modern administrative law, however, has lost this constitutional perspective and allows private lawsuits to control agencies' enforcement discretion. This necessarily shifts important segments of policy-making from those politically accountable to private persons and courts.

In "Judicial Compulsions," Mr. Rabkin examines three agencies whose priorities have been distorted as a result. The Office for Civil Rights, for example, enforced laws dealing with discrimination in federally funded programs. The NAACP Legal Defense Fund sued, claiming that OCR had a neglected duty to ensure racial balance in public schools by requiring that students be assigned by race. This was a long step beyond the existing ban on intentional racial segregation, and it was something the law's sponsors had said was not required. The named plaintiffs were not shown to have been hurt by the alleged agency "default." The suit was a demand for a particular social policy, and one not necessarily wanted by the millions of people, black and white, whose rights were supposedly being vindicated.

Confused and complex litigation proceeded for almost 20 years as other groups made claims and judges responded piecemeal. The perspective fostered by litigation rarely provides an overall understanding of the best public policies, the tradeoffs between them, or the best allocation of resources. Ultimately, OCR devoted less than 10% of its resources to discrimination against blacks, while women got one third and the handicapped more than half. Why? Because the largest portion of complaints regarding discrimination was brought by middle-class parents seeking more extensive support services for their handicapped children. Litigation ended up diverting almost all of OCR's efforts away from the primary problem for which the agency had been established. Public law had perverted public policy.

Mr. Rabkin assigns the blame to "a disoriented legal culture," reflecting "not simply the obfuscations of visionary law professors or the confusions of impulsive judges, but the underlying ambivalence in modern American liberalism." We have created "increasingly large government programs capable of rearranging society to serve consciously formulated plans, while at the same time seeking to accommodate deep-rooted suspicions . . . of centralized administrative power." The result has been to allow persons not harmed by regulation to litigate abstract policy. In a subversion of legal traditions, outcomes often are determined by the policy preferences of judges and ideological litigants rather than by those of Congress and the president. As Mr. Rabkin's lucid book reminds us, the implications of this go far beyond administrative law, touching the very cornerstone of constitutional government.

---

Mr. Bork is the John M. Olin scholar in legal studies at the American Enterprise Institute.

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891013-0126. Marketing & Media: @ Miller Doesn't See @ Humor in T-Shirts @ Mocking 'Lite' Ads @ --- @ Company Sues Physicians, @ Charging Infringement @ On Trademark Rights @ ---- @ By Wayne E. Green @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) MO MARKETING, ADVERTISING (MKT) BEVERAGES (BVG)

Miller Brewing Co. has filed suit against a physicians group that sold T-shirts mocking its Miller Lite ad campaign in Texas.

The suit, filed in federal court in Houston, sets up a clash between trademark claims by the company and an assertion of free speech rights by the doctors group, a nonprofit organization called Doctors Ought to Care.

Miller's campaign featured actor Randy Quaid telling the public in a months-long series of ads that "We're having a party" in Texas, and to stay tuned for the details. Touted as "The Biggest Party in History," Miller followed up by sponsoring public bashes over the Labor Day weekend in Houston, Dallas, San Antonio, and other Texas cities. The parties, which included entertainment by well-known musical groups, raised money for the Texas Special Olympics.

The campaign drew criticism from several anti-alcohol groups, but the legal clash focuses on T-shirts sold by the doctors group at the Houston party. The front of the shirts carried the words "Killer Lite" and a logo that stated, "We're pushing a drug." The back of the shirts stated, "We're grabbing a potty," and depicted a man throwing up in a toilet.

In a lawsuit filed Sept. 28 in U.S. District Court in Houston, Miller contends the T-shirts infringe on its "Lite" trademark "in a manner calculated to slander plaintiffs' business reputation and dilute its goodwill." The lawsuit asks for an injunction barring such infringement, for profits "unlawfully gained," for unspecified damages and for destruction of the defendant's products.

But Dr. Alan Blum, a Houston physician who founded the doctors group in 1977, said the central issue is its free speech right to spoof advertising, not trademark law. He said the physicians were objecting to the link between a beer company and a health charity, such as the Texas Special Olympics. The lawsuit, he said, "is a malicious attack on us, and on the First Amendment." Miller earlier had gone to state court seeking to stop the T-shirt sales. A state district judge denied its request for a temporary restraining order, saying he saw the sales as a form of protest under the First Amendment, not a trademark matter.

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891013-0125. Credit Markets: @ Treasury Bonds Rise Modestly on Speculation @ That Fed Is Letting Interest Rates Ease Slightly @ ---- @ By Constance Mitchell and Susan Scherreik @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) RAM RJR XON CBK FNM FRE JAPAN EUROP FINANCIAL, ACCOUNTING, LEASING (FIN) BOND MARKET NEWS (BON) BANKS (BNK) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) CONSTRUCTION, MATERIALS (CON) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) ECONOMIC NEWS (ECO) FEDERAL GOVERNMENT (FDL) TREASURY DEPARTMENT (TRE) FEDERAL RESERVE BOARD (FED) NEW YORK

Treasury bonds ended modestly higher yesterday on growing speculation that the Federal Reserve is allowing interest rates to ease slightly.

But junk bond prices fell again, as an already fragile high-yield market grew increasingly skittish. High-grade corporates, mortgage securities and municipals followed the movement of Treasurys.

Several economists and money managers on Wall Street contend that the softness in the federal funds rate, which fell 1/4 percentage point to 8 3/4% yesterday, is a sign that the nation's central bank loosened credit conditions. The rate, which in recent years has been the Fed's principal policy target, is the rate banks charge each other on overnight loans.

"I think the easing has started again and we're on our way to a funds rate of 8 1/2%," said Donald Fine, chief economist at Chase Manhattan Bank. He said the Fed is taking the action because of indications that the manufacturing sector is growing weaker. "This is not a major move, it's merely a continuation of the Fed's accommodative position."

But some investors were skeptical, noting that they've been burned many times in recent months by rushing to buy bonds on the expectation that lower rates would soon arrive.

And there was no indication from government officials that Fed policy-makers agreed to ease monetary policy. Indeed, some members of the Fed's open market committee, which would have to approve any significant policy shift, yesterday reaffirmed their views that the latest data suggest the economy is slowing just about as much as the Fed desired and no more.

"It's still too early to say that there's enough accumulating evidence" that the economy is headed for a recession, said Roger Guffey, president of the Federal Reserve Bank of Kansas City, Mo.

But on Wall Street, some economists are turning a deaf ear to such statements.

Maria Fiorini Ramirez, money-market economist at Drexel Burnham Lambert Inc., contends that the Fed had several chances to aggressively counteract the falling funds rate. But when the central bank took no action to prevent the decline, "for all intents and purposes, it confirmed that the Fed eased," she said. "My experience in watching the Fed is to watch what they do instead of listening to what they say," she said.

However, others weren't so quick to jump to conclusions. Their skepticism, combined with caution ahead of new supply and today's release of the September producer price index, blunted the bond market's advance.

Irwin Kellner, chief economist at Manufacturers Hanover Bank, said the talk of Fed easing was much ado about nothing.

"This would be an odd time to make an overt move toward ease in view of the fact that there is a big PPI number expected," he said. "If the Fed was going to ease because of the state of the economy, it would have done so on Friday after the weak employment data was released." In addition to the PPI report, data on September retail sales will be released today.

Economists surveyed by Dow Jones Capital Markets Report expect, on average, a 0.8% rise in the September PPI and a drop of less than 0.1% in retail sales.

Treasury bonds, which had risen as much as 3/8 point on talk of Fed easing, sold off late in the day after Resolution Funding Corp. announced it would hold its first bond auction Oct. 25.

Resolution Funding is a division of Resolution Trust Corp., the new federal agency created to bail out the nation's troubled savings and loans. The amount and maturity of the first auction will be announced Wednesday. The market consensus is that the offering will consist of as much as $5 billion of 30-year securities.

"The announcement took away some of the bullish sentiment," said James R. Capra, a senior vice president at Shearson Lehman Government Securities Inc. "The thought of more new supply put pressure on the market," he said.

The benchmark 30-year bond ended about 1/8 point higher, or up about $1.25 for each $1,000 face amount.

Junk bonds closed about 1/4 point lower, continuing to react to Wednesday's news that Ramada Inc. pulled a $400 million junk bond offering for Aztar Corp.

Treasury, Agency Securities

Treasury securities were modestly higher yesterday. The benchmark 30-year bond was quoted late at 100 27/32 to yield 8.02%, compared with 100 24/32 to yield 8.05% Wednesday. The latest 10-year notes were quoted at 99 17/32 to yield 8.025%, compared with 99 13/32 to yield 8.067% Wednesday. Two-year notes were quoted at 100 20/32 to yield 7.989%, compared with 100 15/32 to yield 8.076%.

Short-term rates were essentially unchanged. The discount rate on three-month Treasury bills was 7.72% for a bond-equivalent yield of 7.95%, while six-month bills had a discount rate of 7.66% for a bond-equivalent yield of 8.01%.

In the agency market, $900 million of seven-year Federal National Mortgage Association debentures came to market yielding 8.474%. The new issue was priced at 99.875 with an 8.45% coupon.

Corporate, Other Issues

Investment-grade corporate bonds ended unchanged to 1/4 point higher.

In the high-yield market, RJR Holdings Capital Corp.'s 14.7% convertible pay-in-kind securities, which fell as much as two points Wednesday, closed off 3/4 point yesterday to finish at 95 5/8.

In the new-issue market, more than $600 million of corporate debt was issued yesterday, including a $200 million offering by Exxon Capital Corp. The non-callable notes were priced to yield 8.312%.

Continental Bank Corp. tapped the market with a $150 million issue of floating-rate notes, maturing Oct. 18, 1994.

As expected, the Tennessee Valley Authority, the nation's largest electric utility, said it will price $3 billion in securities next week. The three-part offering includes $1.5 billion in 30-year bonds and $750 million each in five-year and 10-year bonds.

The TVA decided to proceed with the offering following an accord last week with the Treasury's Federal Financing Bank that allows the TVA to keep borrowing short term from the bank for two years after it goes to the public market. The bank had contended that the TVA couldn't borrow from both it and the public market.

Mortgage-Backed Securities

Mortgage securities gained 2/32 to 9/32 point after moderate trading.

In the derivative market, new-issue activity slowed after a busy session Wednesday, when five real estate mortgage investment conduits totaling $2 billion were priced.

The only Remic priced yesterday was a Federal National Mortgage Association issue of $400 million underwritten by Morgan Stanley & Co.

Meanwhile, in the pass-through sector, Government National Mortgage Association 9% securities for October delivery ended at 97 30/32, up 7/32; 9 1/2% securities at 100 1/32, up 6/32; 10% securities at 101 31/32, up 3/32; 10 1/2% securities at 103 18/ 32, up 2/32. Federal Home Loan Mortgage Corp. 9% securities rose 9/32 to 97 6/32. Traders noted strong demand for Ginnie Mae 9 1/2% securities in recent sessions, particularly when the securities dipped below 100.

The Ginnie Mae 9% issue was yielding 9.41% to a 12-year average life assumption, as the spread above the 10-year Treasury note held at 1.38 percentage points.

Municipals

A strong reception for California's $450 million general obligation bond sale kept a floor under municipals, but worries over potential institutional selling pressure kept the market from posting more than modest advances.

Active municipal dollar bonds were flat to 3/8 point higher in late dealings, but serial bonds were relatively unchanged on the day, according to traders.

A Bank of America NT&SA-run account had the winning bid for the California issue, the state's largest general obligation offering ever. The group's bid produced a 6.634% true interest cost.

The bonds, rated triple-A by Moody's Investors Service Inc. and Standard & Poor's Corp., were priced to yield from 5.75% in 1990 to 6.80% in 2005. Bonds due 2006-2009 were priced to yield 6.70%.

Traders termed the yields aggressive, yet presale demand was such that the underwriters were accepting orders from the general market by late afternoon only for bonds due in 1993-1999, 2006 and 2008.

But concerns that major institutional investors may be heavy sellers of tax-exempts in the near-term continued to plague the market. The worries were deepened by the $526.4 million bid list put up for sale Wednesday through Chemical Securities Inc. by an unspecified customer.

Foreign Bonds

Interest rates and inflation weighed heavily on the Japanese government bond market, which ended lower one day after the Bank of Japan raised its discount rate.

"The dollar has a very good bid," and "the money market is pricing in another discount-rate hike," a yen-bond trader said.

And for Japan the specter of imported inflation looms because the dollar's cost could compound the firm price of oil, which is denominated in dollars.

The benchmark Persian Gulf crude oil that Japan imports is near $16 a barrel, up from $10.50 a year earlier. Meanwhile, the dollar is up about 10% from a year ago.

Neither oil prices nor the dollar is expected to soften in the next few months as demand for both is expected to remain firm, so the worst inflation news may still be ahead for Japan.

Japan's benchmark No. 111 4.6% bond due 1998 ended on brokers screens at 98.84, down 0.20. The yield was 5.475%.

West German bonds also fell. The Treasury's 6 3/4% issue due June 1999 closed down 0.04 point at 97.74 to yield 7.07%, while the 6 3/4% notes due 1994 fell 0.15 point to 97.65 to yield 7.37%.

British government bonds ended mixed, with underlying sentiment still bearish. The Treasury's 11 3/4% bond due 2003/2007 rose 5/32 to 110 21/32 for a yield of 10.24%, while the 11 3/4% notes due 1991 fell 1/32 to 98 1/4 to yield 13.23%.

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891013-0124. Gibbons, Green van Amerongen's Woes @ May Be a Portent for Buy-Out Business @ ---- @ This article was prepared by @ Randall Smith, David B. Hilder and James A. White
10/13/89
WALL STREET JOURNAL (J) UTX SECURITIES INDUSTRY (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) NEW YORK

Gibbons, Green van Amerongen Ltd., a leveraged buy-out firm, is sailing into rough waters.

Two recent buy-outs engineered by the firm, once the third largest buy-out boutique, have encountered financial snags. And those snags have emerged less than six months after the departure of one of its founding partners, Leonard Green.

The problems at Gibbons Green may be another sign that the heady days of the buy-out business are waning and that some of its second-tier players may not emerge untarnished.

Last month, Gibbons Green flopped in an attempt to refinance a $450 million bridge loan for its $980 milllion buy-out of Ohio Mattress Corp. The deal was one of the first victims of a slump in the junk-bond market, the financial underpinning of many leveraged buy-outs, in the wake of a liquidity crunch at Campeau Corp.

Yesterday, it was disclosed that Sheller-Globe Corp., which Gibbons, Green purchased last December for $240 million in a joint venture with United Technologies Corp., "has experienced difficulties in funding its working capital requirements."

In a formal offer to repurchase outstanding Sheller-Globe notes, United Technologies said the difficulty arose "primarily because of possible misrepresentations about Sheller-Globe that may have been made" at the time of the buy-out. Earlier this month, Gibbons Green sold its interest in Sheller-Globe to United Technologies.

Laurie Shahon, a managing director of Knoll International Holdings Inc., which sold Sheller-Globe, a car-parts business, denied any misrepresentation, describing the matter as a "routine accounting dispute." United Technologies declined to elaborate.

In an interview, Mr. Green said the two buy-outs, which he wasn't involved in, were "part of a pattern of philosophical differences" that prompted his departure, announced on May 4. He is in the process of raising his own fund of about $300 million. Mr. Green, now head of Leonard Green & Partners in Los Angeles, said he favored buying companies that aren't subject to cyclical fluctuations, and which have a favorable "price-valuation" relatonship.

A spokesman for Gibbons Green declined to comment and said its partners, Edward Gibbons and Lewis M. van Amerongen, weren't available to comment. However, the problems of the two buy-outs could hurt investors' returns, which Gibbons Green has claimed have totaled 86% annually. The firm has done 30 buy-outs totaling $6.5 billion in value.

Some investment bankers said that although each of the two transactions has different problems, Gibbons Green apparently paid a steep price for both companies. One said he believes that two funds managed by Gibbons Green invested about $50 million for a 46% stake in Sheller-Globe, and lost a substantial part of that investment when it sold the stake to United Technologies for less than it paid.

Gibbons, Green might recover some of the money if it succeeds in any claim against Knoll.

This week, Gibbons Green sent letters to investors in its buy-out fund detailing its latest problems with Sheller-Globe, and the firm's planned remedies. "My sense is that they certainly have their work cut out for them, and they're taking steps to rectify the situation," said Scott Sperling, a partner for Harvard University's endowment arm, a Gibbons Green investor.

According to Securities Data Corp., the firm's other big buy-outs have included: Bath Iron Works Corp. for $500 million; Horace Mann Cos. for $484 million; Foodmaker Inc. for $476.3 million; and Budget Rent-A-Car Corp. for $333 million. Like other funds, Gibbons, Green keeps 20% of profits from its deals, and charges an annual management fee of 1% to 2% of the money in the fund.

If the bridge loan for the Ohio Mattress buy-out isn't refinanced soon, the pain is likely to be greater for Gibbons Green than for First Boston Corp., the lender. Under terms of most bridge loans, the lender gradually assumes more control of the borrowing company if the loan remains unpaid for very long.

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891013-0123. Politics & Policy: @ Crisis-Management Committee Slated @ By White House After Panama Review @ ---- @ By Gerald F. Seib @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) FORGN LATAM EXECUTIVE (EXE) STATE DEPARTMENT (STD) DEFENSE DEPARTMENT (DEF) WASHINGTON

The White House has decided, as a result of an internal review of its activities during the failed coup in Panama, that it automatically will convene a designated crisis-management committee to coordinate its handling of future emergencies.

But despite the collapse of the coup, the White House has concluded that the national-security decision-making system otherwise needs only "fine-tuning," a senior administration official said.

Some other minor changes will be made to improve communications among second-level officials, which administration aides acknowledge were dangerously faulty at some points during the Panama crisis. "Underneath the principal {officials}, the lateral communication wasn't too great," said the senior administration official.

For instance, the White House has decided that in future emergencies, officials from such agencies as the State Department, the Pentagon and the Central Intelligence Agency automatically will be summoned to the White House Situation Room to coordinate the flow of information from overseas cables and telephone calls to top Bush aides. White House aides are concerned that different agencies had different versions of information at some points in the Panama crisis.

And the White House has decided that its sophisticated capabilities to conduct teleconferences bringing together numerous officials weren't used enough in the crisis.

The changes called for in the review, conducted by National Security Adviser Brent Scowcroft, amount to minor tinkering with the Bush administration's decision-making system. Senior aides consider them "procedural and organizational changes," one said. Critics of the administration are bound to argue that the changes don't go far enough to correct flaws in government coordination or to ensure better contingency planning. Still, they represent a move toward a more structured decision-making system than President Bush has preferred so far. Mr. Bush is more comfortable making decisions in informal gatherings with a handful of his top advisers, rather than in structured meetings with officials from many agencies.

The senior official said the changes indicate that the president needs a "slightly" more structured decision-making system. More importantly, he said, "what we need to do is ensure a little more formalized backup just under him."

Mr. Bush will designate the so-called Deputies Committee, an already existing panel consisting of the second-highest officials at the State Department, Pentagon, Central Intelligence Agency and the Joint Chiefs of Staff, to serve as his crisis-management team. The committee's chairman is Robert Gates, who is Mr. Scowcroft's deputy on the National Security Council staff.

The Deputies Committee already meets regularly to handle routine national-security business, and officials previously had considered it the group that would coordinate the administration's handling of emergencies. But the panel never was convened during the Panama crisis.

As a result of the review of that affair, officials said, Mr. Bush is likely to amend the secret, formal directive with which he set up his decision-making system to provide that the Deputies Committee automatically will be called to the White House whenever he declares that a crisis exists. The president also is likely to specify precisely which officials will sit on the committee to handle a crisis.

The White House has concluded that Mr. Bush and other top administration officials made decisions based on correct information during the Panama crisis, largely because of direct phone links between the Oval Office and U.S. military commanders and diplomats in Panama.

But officials say the review found that at lower levels, the bureauracy had dangerously skewed or incomplete information. At one point, for instance, officials in the State Department and the CIA thought the Panamanian officers leading the coup were offering to turn Panamanian strongman Manuel Noriega over to the U.S. But President Bush and White House aides thought -- correctly, the administration now insists -- that the rebels refused to turn the leader over.

Administration aides also implied the White House has begun considering new plans for destabilizing Mr. Noriega. "One of the things we'll be looking at are ways to increase his anxiety," a senior official said. The U.S., he added, may "do things to indicate that he is vulnerable and that he needs to keep looking over his shoulder."

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891013-0122. Talking Baysball: @ The A's and Giants @ Have Scores to Settle @ --- @ Oakland, San Francisco Trade @ Slurs That Hit Home; @ A Seventh-Inning Retch @ ---- @ By Carrie Dolan @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) SAN FRANCISCO

As this town's Giants and nearby Oakland's Athletics approached the World Series, Mayor Art Agnos was asked if he would make the traditional bet on the contest with Oakland Mayor Lionel Wilson. No, the San Francisco mayor said, because "there's nothing in Oakland I want."

Mayor Agnos now says he was only joking, but Mayor Wilson wasn't laughing at the joke. The first Bay Bridge World Series in history, and the first subway series since 1956, is rekindling the ancient animosity between the two cities that face each other across San Francisco Bay. Unflattering stereotypes, Oakland's deep-seated inferiority complex and San Francisco's haughty hubris fuel the rivalry.

Nobody ever sang of leaving his heart in Oakland. "We're the ugly sister," says Dave Newhouse, sports columnist for the Oakland Tribune. "We've been called the Buffalo of the West. It hurts. Oakland dislikes San Francisco, and San Francisco is indifferent. If the Giants win, it will be devastating for Oakland, just one more rap that we'd endure from San Francisco."

Oakland has had public-relations problems from the very beginning. Its original Spanish name translates loosely to "Oak Grove Near the Sweathouse." It still smarts from former resident Gertrude Stein's observation that in Oakland, "there is no there there."

In this century, Oakland became a sort of industrial annex of San Francisco, handling most of the shipping that comes into the bay. It became the home of one of the country's most crack-ridden ghettos. Its schools are so troubled that the state has forced a trustee on the school district, over local objections, to deal with its deficit. San Franciscans tend to view the place as a war zone.

San Francisco, on the other hand, has wallowed in mellow, self-congratulatory pride, billing itself as the most beautiful metropolis in the country, America's "city of light," a Boston with better weather. San Franciscans see themselves as a tolerant, sophisticated Chardonnay-sipping crowd.

But the stereotypes are gravely flawed, historically as well as in the here and now. During the Gold Rush, Oakland was considered a much nicer place to live. San Francisco was a windy, flea-infested sand dune. Oakland's shores were lined with its oaks and 300-foot redwoods. When the Barbary Coast of San Francisco was racked by prostitution, drugs and murder in the late 19th century, Oakland was known as the Athens of the West for its superior private schools.

Today, a revived downtown Oakland surrounds a pretty lake. Pleasant neighborhoods sit on rolling hills. Oakland's summer weather is the best in the country, according to the U.S. Weather Service.

As for San Francisco, it has its own crack-ridden ghetto in Hunter's Point. The city's schools are hardly the best around. Boxy new skyscrapers burden much of the skyline. San Francisco's gluttony -- its residents spend more per capita at restaurants than anyplace else in America -- has earned it the sobriquet, "the Stomach by the Bay."

The specter of another big earthquake haunts San Francisco. While live people can hardly afford to live here, dead people can't be buried here-for fear that a quake will exhume them, and also to save room for more real-estate development.

Nowhere, however, do the stereotypes ring so hollow as in baseball.

San Francisco's most visible and audible baseball fans, while a minority, belie the mellow San Franciscan of the pretty myth. They're the terrors of the National League.

They behave like thugs. They drink heavily, burn souvenirs of the Giants' opponents in the stands, shout obscenities, occasionally vomit in the aisles, and assault each other and bystanders. In the unearthly fog and cold that often sweeps through San Francisco's Candlestick Park, the rowdiness seems nightmarish.

Candlestick Park has a peculiar standing in baseball. "It's the ultimate challenge," says George Costa, who this year became head of security for Candlestick Park, "recognized as the worst {behaved} stadium in the major leagues."

Mr. Costa, who has worked with the Federal Bureau of Investigation and the Secret Service, has sent his security forces, who wear military-style uniforms, to train at the San Francisco police academy. He keeps a "hit list" of repeat offenders who show up at games, and with the district attorney's help has sought restraining orders to keep out unsavory San Francisco fans.

Things have improved since the crackdown. But trouble can erupt at any time, Mr. Costa says, recalling a typical game: "Sept. 15. Padres. Friday night. Full moon. Four fights." But last year, he says, the park averaged "a fight an inning."

The Athletics' Coliseum, by contrast, is a balmy, sun-kissed park, one of the showcases of the major leagues. Oakland fans are generally benevolent, family-oriented people who even applaud good plays by the opposition.

"People think Giants fans are all mellow and wonderful, coming from San Francisco with flowers in their hair. That's bull," says Tom DeVries, an Oakland resident. Once, while on crutches with a broken foot, he took his family to see the San Francisco Giants. In the first inning, three Giants fans in front of him jumped up at every pitch. When he asked one of them to sit down, he says, "without preface, he turned around and swung at me. I jerked my head back and he hit my wife. He knocked her out."

Mr. DeVries adds: "That incident was in keeping with the tone of fans in Candlestick. It would have been extraordinary in the {Oakland} Coliseum."

"Giants fans really get into booing their own team," says a longtime supporter. More than 800 were ejected this season. Some served time in jail. In 1984, an apparently intoxicated fan fell to his death from a seat in the upper deck.

The San Francisco Chronicle recently detailed the "fundamental differences" between the fans. While A's fans wait for the seven-inning stretch, the newspaper said, Giants fans wait for the seventh-inning retch. A's fans come by public transport, and wait for the Wave to start, while Giants fans come on motorcycles and wait for fights to start. The typical date for an A's fan is his wife and kids; for a Giants fan, a 16-year-old runaway from Portland, Ore.

Some blame the rowdiness on bad weather and losing streaks in the past. "Candlestick fans are hardier, tougher. They've had to endure more," says William Orrick, a San Francisco lawyer. Some fans are proud of their exuberance. "The A's fans are dead," says Marco Rodriguez. "You have to wind them up to get them out of the stadium." Giants fan Hank Klein says that A's fans "just sit and watch the game. They only cheer if there's action."

Candlestick Park has tried to civilize its fans this year with tofu hot dogs, a snack bar hawking trail mix and diaper-changing areas in the men's bathrooms. There is a no-drinking, no-smoking family section for fans who want to be isolated from "immature and rude behavior," a Giants spokeswoman says.

From Oakland's point of view, an opponent other than San Francisco would have generated more tourist revenue as well as more civility. Oakland has estimated that a series with a team from another part of the country could have pumped up to $100 million into the area economy. But the subway series, it is reckoned, may bring in 25% less.

For San Francisco, where tourists leave their hearts and about $3 billion each year even without a World Series, the additional revenue is gravy. "We don't have to hit people over the head to get their attention," says Dale Hess, of the San Francisco Convention and Visitors Bureau. "We compete against the world: London, Paris, Hawaii."

By contrast, when Oakland officials went to Japan two years ago, folks thought they were from New Zealand's biggest city -- Auckland.

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891013-0121. The Americas: @ Most Panamanians Stop Waiting for U.S. Godot @ ---- @ By Frederick Kempe
10/13/89
WALL STREET JOURNAL (J) LATAM DEFENSE DEPARTMENT (DEF) EXECUTIVE (EXE) PANAMA CITY, Panama

Alfred and Ana Ehlers blame the U.S. for Panama's underdeveloped political personality.

They often catch themselves listening to American music, watching American television programs and searching supermarket shelves for canned goods with American labels. "If I see a can of food made in the U.S. and a can of food made in Panama," sneers Mrs. Ehlers, "I buy the U.S. can even if the quality is less and I pay a dollar more. I hate you for that."

Mr. Ehlers, a National Assembly opposition candidate in the May 1989 elections, went underground after dictator Manuel Noriega annulled the voting and started throwing politicians in jail. While in hiding, he scoffed at fellow Panamanians' excitement that President Bush had dispatched 2,000 more troops to Panamanian shores, augmenting the 10,000 U.S. Southern Command forces already in place. As with the canned food, he said, Panamanians believed too much in U.S. labeling.

"The common people of Panama are waiting for the U.S. to give an answer to our problems," he complained. "It is our politics and our culture. Send us MacGyver with his penknife. Send us Mr. Solo and his men from U.N.C.L.E. Or better yet, send us Rambo." But Mr. Ehlers knew that depending on the U.S. was more like waiting for Godot. He complained at that time that the troops were sent to help President Bush politically, by showing Congress and the American people that he was tough. "They aren't here to help us," he said.

In fact, Panamanians of all political persuasions consider U.S. intervention in Panama thus far to have been counterproductive on all counts. Trade sanctions have hastened the decline of the region's once healthiest economy, thus weakening the private sector, which is at the heart of the Panamanian opposition. Isolating Noriega and the defense forces from U.S. contacts has only brought Noriega closer to Cuba, Nicaragua and Colombian drug interests and reduced Washington's intelligence capabilities. And the harsh rhetoric and feeble means that have come to characterize U.S. foreign policy have left even America's friends here grumbling foul as they stop at Tony Roma's for barbecued ribs or cruise through McDonald's "Autorapido" for a "McDLT."

The past two years of crisis have also decimated most of the positive forces that once existed in the country's political and military elite. The tentacles of military rule have spread along with corruption as Noriega has promoted cronies and exiled or neutralized opponents. If someone were to get rid of Noriega now, U.S. intelligence officials fear that disorder would be a more likely result than democracy.

On the day after paramilitary thugs attacked opposition presidential candidate Guillermo Endara and two of his running mates, the should-be president sat in his hospital room with a head that was sore from both the iron-rod blows and what he was watching on television: the arrival of new U.S. forces. He could feel the wind leaving the opposition sails as Panamanians sat back in their easy chairs to await U.S. action.

"We were hit by blows that were heard or seen around the world," reflects Mr. Endara. "I like my head better than headlines, but I guess this was worth it. But the very next day U.S. troops were on every television channel. Their camouflaged faces replaced our bloodied heads. I felt cheated out. And I knew the U.S. wouldn't do anything with these troops."

But then came a new wave of hope. President Bush ordered the U.S. Southern Command to begin a series of exercises that seemed designed to provoke Noriega into confrontation. Troops in one maneuver cut off Noriega's offices at Fort Amador, and on another they blocked the causeway that leads to his bunker. A third exercise practiced an airlift operation from the U.S. Embassy compound. Each maneuver seemed part of pre-kidnap practice. Surely, this wasn't just saber rattling, the Panamanians thought.

Panamanians only fully realized last week that the sound and fury signified nothing. Reduced U.S. interests in Panama didn't justify risking American lives to unseat Noriega. The Pentagon had decided in the late 1970s -- when new Panama Canal treaties were signed -- that it could do without its military bases there. And economically, the canal was also losing importance. U.S. traders relied more each year on the cheaper and faster land bridge across the U.S. Noriega had become more of a domestic political problem -- a drug-dealing dictator -- than a national-security risk.

But while America's need for Panama has declined, the Panamanian desire for U.S. assistance has only grown. Panamanians of all social classes stop reporters on the street to ask why Washington hasn't saved them. None that this reporter knows of criticized the concept of U.S. intervention.

A Panamanian guard at the Miraflores Locks of the Panama Canal allowed this reporter into the control room. He proudly showed off the 75-year-old equipment, and allowed his visitor to work the controls that opened the gates and controlled water levels and allowed ships the 51-mile pathway between the seas. "General Electric built it all," he said proudly. "We rarely have repairs. It works like a dream." But then he frowned. New management under Noriega in the year 2000 will take his job and give it to military cronies. The canal operation will decay under inefficient management. "The Americans don't care about Panama anymore," he complained.

U.S. officials properly shift much of the blame for Noriega's continued rule onto the Panamanians themselves. CIA and Pentagon officials have argued that the U.S. shouldn't endanger its own soldiers to free Panama from Noriega when Panamanians aren't willing to take the same risks. Panama hasn't ever matched the Philippines' people power, and Noriega certainly hasn't faced anything remotely similar to China's Tiananmen Square.

But the charm of Panamanians is that they aren't warriors. As modern-day Phoenicians, they are more adept at making a buck than making a revolution. They have convinced themselves that Noriega is America's "Frankenstein," and thus the gringos must destroy him.

And this Panamanian dependence on Washington -- this shirking of national responsibility -- is as understandable as it is counterproductive. Little has happened in Panama's history that wasn't either determined or shaped by the U.S. People who didn't fight for their independence, their economic prosperity or even build their own canal haven't proved very adept at creating their own democracy.

Panamanians still wait by the harbor and watch the horizon, looking for the proverbial U.S. fleet to sail in. But many are starting to believe that Washington is a lost hope. One opposition leader says the Panamanians' only chance now is a random assassin's bullet. He hopes for it, he says, like a man waiting for his number to come up in the national lottery. As for the Americans, he'd prefer they remain silent until they mean business.

---

Mr. Kempe, a Journal reporter, is completing a book on Panama to be published by G.P. Putnam's Sons.

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891013-0120. International: @ U.S. Group Aided Arias's Costa Rica Foes @ --- @ Republican Grudge Match @ Led to Support for Some @ Linked to Gen. Noriega @ ---- @ By Robert S. Greenberger @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) LATAM WASHINGTON

For much of the past three years, the National Endowment for Democracy, which Congress created to nurture political freedom around the world, has helped fight a Republican grudge match against the president of a democratic nation -- tiny Costa Rica.

The funding of a group with strong ties to Costa Rica's main opposition party was continued until last July and produced strange bedfellows. Another donor to the Costa Rican opposition: Panamanian strongman Manuel Noriega. According to a deposition given to a Senate Foreign Relations subcommittee last June by Jose Blandon, a former Panamanian official, Gen. Noriega gave the opposition group's candidate $500,000 in 1985.

While one wing of the National Endowment was funding the Costa Rican opposition, another was touting Costa Rica as a model of democratic stability. Now, President Bush plans to visit Costa Rica later this month to help celebrate 100 years of Costa Rican democracy.

Costa Rican President Oscar Arias was never the Reagan administration's favorite Latin American leader. He refused to support the White House's war against leftist Nicaragua and won a Nobel Peace Prize for a plan that pulled the rug from under the U.S.-backed Contra effort.

Documents that surfaced here this week show that at the same time that Mr. Arias was falling out of favor with the White House, the NED's Republican wing -- the endowment has parts from both major U.S. political parties -- began funding a political association with close ties to Mr. Arias' political opponents. Since 1986, NED has spent $434,000 on several projects, including a magazine that criticized Mr. Arias's peace plan and said it sapped the virility of the nation.

The executive director of the association, Rafael Calderon, ran against Mr. Arias in 1986 and is the opposition candidate in next February's election. The decision to launch a program in Costa Rica was a strange one for the budget-strapped NED. Costa Rica's democratic roots run deeper than almost anywhere else in the Western Hemisphere.

Last summer, as Congress got wind of the Costa Rican funding and began making quiet inquiries, NED reconsidered the situation and discontinued the project. "It has been re-oriented," says Keith Schuette, president of NED's Republican affiliate, the National Republican Institute for International Affairs.

The NED was founded by Congress in 1984 to encourage democratic institutions around the world. In addition to its Republican and Democratic wings, its has two other elements: the AFL-CIO's Free Trade Union Institute and the Center for International Private Enterprise, an affiliate of the U.S. Chamber of Commerce.

Carl Gershman, president of the endowment, says that his board was aware of the Costa Rica project. Indeed, he says, the GOP wing submitted detailed proposals. He said the board gives each of the four branches autonomy to develop programs, "as long as they operate clearly within the framework of our law," a test he says was met by the GOP wing. He adds that the Republican wing tends to "establish relations with institutions that associate with political parties," while the Democrats "have pursued a more multipartisan approach."

Mr. Schuette insists that he was only trying to help Costa Rica, which he calls "the ham in the sandwich between the two worst neighbors in the hemisphere." Wedged on the Central American isthmus between Nicaragua and Panama, Costa Rica needs protection from those totalitarian nations, he argues.

"Attempts are made to subvert their democracy," says Mr. Schuette, adding: "It's our position that no democratic system ought to be taken for granted in Latin America despite the length of its democratic history."

Yesterday, the Costa Rican Embassy in Washington didn't have any immediate comment.

Nobody is contending that the endowment broke the law. But some critics say that it came close. "They may technically have been within the law, but I felt this clearly violated the spirit," said Rep. Stephen Solarz, a New York Democrat. "The whole purpose of NED is to facilitate the emergence of democracy where it doesn't exist and preserve it where it does exist. In Costa Rica, neither of these applies."

Nonetheless, the NED seems to have stepped into the thick of Costa Rican politics. Documents supplied by a Costa Rican source show close ties between the Association for the Defense of Costa Rican Liberty and Democracy, which NED funded, and the opposition Social Christian Party. According to these documents, the association was incorporated in 1984 by an attorney, Luis Fishman, a Social Christian congressman and top campaign adviser to Mr. Calderon. The documents also list as top officials of the association several Social Christian officials and senior advisers to Mr. Calderon.

NED funds also supported the magazine "Fragua," or Forge. An editorial in the magazine's first issue, dated September 1986, attacked Mr. Arias's "political amateurism," and asserted that his peace plan for Central America was "impugning the national virility" of Costa Rica.

Such activities don't appear to meet the standard set in the endowment's "statement of principles and objectives," which mandated that the organization "will not pick and choose among the democratic competitors in countries where such competition is possible."

Mr. Schuette says that NED's GOP wing openly supports groups that are affiliated with political parties in several countries, including Bolivia, Argentina and Colombia. He says that "we watch what's in" the publication in Costa Rica but "don't exercise editorial control." He adds that his group decided to withdraw from activities in Costa Rica last July because it didn't want to become embroiled in domestic politics, as Costa Rica's February election approaches.

Even critics of NED's Costa Rica activities characterize them as an aberration from the endowment's usual good work. They note that the small organization, whose fiscal 1989 budget is $15.8 million, is playing a valuable role in fostering democracy around the world. Poland's Solidarity union received regular funding from NED before its breathtaking electoral victory earlier this year. And the organization has played an important supporting role as Chile makes the transition to democracy from military dictatorship.

"They've stopped {the Costa Rica project,} and I would write this off as part of the growing pains of an organization that is new in the American political system," concludes Rep. Solarz.

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891013-0119. Technology & Health: @ Research Report @ Links Fumigants @ To Genetic Harm @ ---- @ By Ron Winslow @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) LABOR CHEMICALS, PLASTICS (CHM) COMMODITY NEWS, FARM PRODUCTS (CMD)

Researchers at the University of Minnesota found indications of genetic damage among workers who apply fumigants to control pests in the grain industry.

Chromosome damage among the workers was linked to exposure to phosphine gas, the scientists said, which is released from pellets of aluminum phosphide or magnesium phosphide. The pellets are used to control weevils and other insects in grain elevators, railroad cars and other facilities used to store or transport grain after harvest.

While such genetic damage has been associated generally with an increased risk of cancer, no such link was established in this study, said its principal author, Vincent F. Garry, director of the environmental pathology laboratory at the University of Minnesota. The study is published in today's issue of the journal Science.

"There tends to be increased cancer of the {blood-forming} system in the grain industry, where these fumigants are commonly used," Dr. Garry said. But scientists have yet to establish a link between chromosome damage and cancer or other health effects, he said.

The study found that a group of 24 grain workers who apply pesticides had more than 3.5 times more chromosome aberrations than a control group that included non-farm industry workers as well as grain inspectors and others who might be occasionally exposed to pesticides. The damage was highest among the nine workers exposed exclusively to phosphine, the study said.

In addition, workers who spent more than 20 minutes applying the fumigant in an enclosed area suffered more chromosome damage than those who normally spent less than 15 minutes performing the task, the study said.

The phosphide in the pellets may begin converting to phosphine in as little as five minutes after application, placing workers without respirators at risk of exposure. The findings suggest workers should be better protected when using the pesticides, Dr. Garry said.

Before 1986, fumigants combining carbon tetrachloride and carbon disulfide were commonly used in the grain industry, but they were banned by the Environmental Protection Agency after research linked their use to health hazards.

Scientists at the EPA and the University of Texas also participated in the study.

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891013-0118. Gramm-Rudman Begins to Sink Its Gums @ Into Budgets but Makes Little Impression @ ---- @ By David Wessel and Kenneth H. Bacon @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) CONGRESS (CNG) FEDERAL GOVERNMENT (FDL) WASHINGTON

The teeth in the Gramm-Rudman deficit-reduction law are already crunching, but almost nobody is feeling the bite.

With few exceptions, the law's across-the-board spending cuts, known as a "sequester" in budget jargon, have little practical effect.

"We used to be able to say, `Sequester]' and everyone would run and hide in the cupboard," says Rep. Bill Frenzel (R., Minn.), top Republican on the House Budget Committee. "It doesn't seem so scary any more."

The idea behind the law was that Congress would so fear the pain of the automatic spending cuts that it would find other, more finely tuned ways of trimming red ink. In fact, automatic spending cuts were imposed provisionally Oct. 1, when fiscal 1990 began, because Congress hadn't finished work on bills to cut the projected 1990 deficit to $110 billion as required by the law. Yet, no shrieks of pain were reported.

The law says the cuts -- 4.3% for defense, 5.3% for the rest of government -- will become permanent Monday unless Congress surprises itself and finishes work on the 1990 budget before then. But in the topsy-turvy world of federal budgeting, "permanent" is only as long as it takes Congress to get around to passing a new law undoing the damage.

One reason why bureaucrats aren't panicking is that they expect Congress to restore the cut funds by early November. Any government official worth his pencil sharpener can juggle the books for a month or two. The Pentagon, for instance, is brushing up on techniques it used when a brief sequester was imposed in 1987, preparing to shift money from one pocket to another to cushion the impact.

Similarly, the Education Department's budget office has told all staff "to severely restrict their expenses," but a department official admits that means nothing more than that staffers are to hold off on scheduling any new conferences or taking any extra trips. He notes that nearly all the department's budget goes for grants that won't be awarded until next July.

Moreover, the fine print in the little-understood Gramm-Rudman law exempts more than half of all federal spending -- including Social Security, food stamps, federal pensions and interest payments -- from the automatic cuts. Salaries of the president, members of Congress and federal employees also are untouchable, although overall employment levels can be reduced. By a quirk, the law doesn't protect congressional staffers.

That leaves $16 billion of cuts to be distributed among programs that cost about $529 billion a year. In the short run, the most pain from sequester will be borne by doctors and hospitals. Under a special provision in the law, every payment mailed under the $111.6 billion Medicare program will be shaved 2% starting next week. The Health Care Financing Administration last week was drafting a notice to blame Congress.

The impact will be heaviest on hospitals, which on average collect 40% of their revenue from Medicare. "The principal problem it causes is not knowing what's going to happen," says Dennis Barry, president of the Moses H. Cone Memorial Hospital in Greensboro, N.C. The cuts also apply to skilled nursing facilities, hospices and some individuals being compensated for care at home.

Elderly people who pay their doctors directly and then file for government reimbursements -- such payments total about $2.25 billion a year -- also will be clipped 2%. As for the doctors themselves, the American Medical Association says most "don't know zip about sequestration and probably won't notice a 2% cut."

College students already are being nicked, but probably don't realize it. The Gramm-Rudman law forced origination fees on government-guaranteed student loans for undergraduates to increase Oct. 1 -- but by a maximum of only $12.50 a year. And besides, most loans for the current school year were made before then.

Dairy farmers also are being squeezed, as government milk subsidies are reduced. The law says flatly that any automatic spending in subsidies to wool producers shall be eliminated. But wool producers, it turns out, weren't in line for any automatic increase this year.

Of course, if Congress never finishes work on the 1990 bills -- a very slim possibility -- some agencies would suffer, particularly the Pentagon. As an illustration of what might happen, the Office of Management and Budget says the military might have to eliminate 160,000 active duty troops -- the combined manpower strength of an Army division, 25 ships and two Air Force wings.

But the cuts, in many cases, are made from the levels set in appropriations bills that have cleared the House and Senate but haven't yet been signed into law. It isn't widely known, but many civilian departments are getting increases in the neighborhood of 10%, according to calculations by John Cogan, a former deputy director of OMB. As a result, even after sequester, they will get more money than they did last year.

In what may be the ultimate irony, some farmers prefer the Gramm-Rudman spending cuts to the alternative. The House Agriculture Committee estimates that a pending budget bill would cut spending on farm subsidies and loans $700 million, while sequester would trim them only $560 million.

"Overall, we'd come out better under sequester," says House Agriculture Chairman Kika de la Garza (D., Texas).

---

Bruce Ingersoll contributed to this article.

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891013-0117. Newbridge's Soviet Venture
10/13/89
WALL STREET JOURNAL (J) FREST NNCXF TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) OTTAWA

Newbridge Networks Corp. formed a joint venture with the Soviet Ministry of Radio to manufacture the Canadian company's communications-network products.

The new company, owned 80% by Newbridge and 20% by the Soviet ministry, will have a manufacturing plant in Minsk.

The joint venture "should act as a gateway to the world's second-largest telecommunications market," said Terence Matthews, Newbridge's chairman.

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891013-0116. Corn, Soybean @ Crop Forecasts @ Raised by U.S. @ ---- @ By Bruce Ingersoll and Scott McMurray @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) COMMODITY NEWS, FARM PRODUCTS (CMD)

The Agriculture Department boosted its estimates of the nation's 1989 corn and soybean crops and lowered its forecast of how much grain the Soviets will purchase between now and next June 30.

The department predicted that the U.S. corn harvest will total 7.45 billion bushels, up 2% from last month's forecast and up 51% from the drought-shriveled harvest of 1988. Department analysts also raised their estimate of the soybean crop 2% above their Sept. 1 forecast -- to 1.93 billion bushels. That would be 24% above last year's crop.

Wheat production was forecast at 2.04 billion bushels, down 1% from last month's estimate but up 13% from 1988, according to the department's monthly crop report.

In a separate report, the department's World Agricultural Outlook Board increased its estimate of the 1989 Soviet grain crop five million tons, to 205 million tons, citing better than anticipated yields in important growing areas in the western Soviet Union and Kazakhstan. As a result, the board reduced its estimate of Soviet grain imports two million tons to 34 million tons for the marketing year that ends June 30.

The department's production estimates for corn, soybeans and wheat were seen in Washington as further evidence that U.S. agriculture, despite pockets of severe crop damage last spring and summer, has fully rebounded from the 1988 drought.

Corn and soybean futures prices are likely to fall, at least initially this morning, and wheat futures prices are likely to rally, based on the crop figures, analysts said.

The corn crop report exceeded the average of analysts' estimates by about 50 million bushels, said futures analyst Conrad Leslie, head of Leslie Analytical in Chicago. Analysts' average estimate for the soybean crop was closer to the mark, exceeding the actual figure by only about seven million bushels, he said.

The wheat crop figure was the biggest surprise, analysts said, being reported as 22 million bushels below the month-earlier Agriculture Department estimate of 2.064 billion bushels. Analysts said that they were particularly concerned with the estimated wheat stocks, or carryover, available next May 31, which fell 51 million bushels from month-earlier estimates to 443 million bushels, their lowest level in nearly 15 years. That compares with a carryover of 698 million bushels available this past May 31.

The department's first forecast for the 1989-1990 orange crop was somewhat gloomy. It said the harvest would total 194 million boxes, down 6% from last season, mostly because of a killing frost in Florida in late February. An 11% decline was foreseen for Florida's orange crop.

Cotton production was forecast at 12 million bales, down 22% from last year and down 2% from the department's Sept. 1 forecast.

Department analysts predicted a 14% increase in 1989 sorghum production to 657 million bushels, down slightly from last month's estimate.

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891013-0115. Dividend News: @ Rogers Communications Inc.
10/13/89
WALL STREET JOURNAL (J) RCI.B TORONTO

Rogers Communications Inc. said it is postponing a shareholder vote on a proposed 7-for-1 split of its Class A and B shares until its annual meeting in February.

The cable television company had said it would hold a meeting in November to seek holder approval of the split and a consequent change in dividend rights. It didn't give a reason for the postponement.

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891013-0114. Tech-Sym Gets Unisys Order
10/13/89
WALL STREET JOURNAL (J) UIS TSY HOUSTON

Tech-Sym Corp. received a $13.2 million contract from Unisys Corp., Blue Bell, Pa., to manufacture multiple-state memory-expansion systems for 64 U.S. airports.

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891013-0113. Saatchi Makes @ Major Changes @ In Management @ --- @ Co-Founder Seen Shifting @ From Daily Operations; @ Spielvogel Plan Rebuffed @ ---- @ By Joanne Lipman and Barbara Toman @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) SAA WNEWS TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) MARKETING, ADVERTISING (MKT)

Saatchi & Saatchi Co. announced a major management restructuring that appears to shift Maurice Saatchi, a co-founder of the company, away from day-to-day responsibilities.

Meanwhile, Carl Spielvogel, a top Saatchi unit executive, said he has offered to lead a management buy-out of the troubled British advertising and consulting giant, but was rebuffed.

Under the restructuring, Robert Louis-Dreyfus, 43 years old, a French entrepreneur who until last year headed the research concern IMS International Inc., will join Jan. 1 as chief executive officer, succeeding Mr. Saatchi. Mr. Saatchi, 43, remains chairman and will continue to guide long-term strategies, while Mr. Dreyfus will concentrate first on repairing the company's poor financial state.

Mr. Spielvogel, chairman and chief executive of Saatchi's Backer Spielvogel Bates unit, said he is interested either in a management buy-out and restructuring of the entire firm, or a management buy-out of Backer Spielvogel alone. Mr. Spielvogel said Prudential-Bache Securities, a Backer Spielvogel advertising client, is prepared to back him financially. The executive said he didn't propose a specific price. Analysts believe Saatchi would fetch upwards of $1.3 billion.

Mr. Spielvogel confirmed he first approached Maurice Saatchi's brother, Charles, on May 24 and suggested a buy-out of either the entire firm, with managers of Saatchi's advertising units participating, or of the Backer Spielvogel unit. Charles Saatchi hasn't been actively involved in day-to-day management for several years, but he remains a director and is widely believed to be the company's major strategist.

At the time, Charles Saatchi declined. Mr. Spielvogel replied that he wasn't interested in a hostile attempt.

Mr. Spielvogel repeated his offer yesterday, he said, when Mr. Saatchi called to tell him about the management restructuring. "I said, `Charles, that's fine, and I hope everything works out well, and I would like to remind you of our earlier conversation. That offer still holds true,'" Mr. Spielvogel said. He said Mr. Saatchi again replied that he wasn't interested. Mr. Saatchi couldn't be reached.

Mr. Louis-Dreyfus will have to contend with a company in turmoil. Saatchi's advertising business is performing poorly, its troubled consulting business is on the block, and its stock has been buffetted by takeover rumors. Southeastern Asset Management, Saatchi's largest shareholder with a 10.24% stake, said earlier this week that it had been approached by some third parties interested in possible restructuring transactions. Southeastern declined comment yesterday.

Some analysts and Saatchi insiders were skeptical that Mr. Louis-Dreyfus would be able to call the shots at Saatchi, saying the brothers would likely wield control just as they always have. Saatchi has brought in a series of outsiders to top positions, including Anthony Simonds-Gooding, who was chief executive of its communications business until he left in 1987. But the outsiders haven't yet been able to crack Saatchi's clubby inner circle, or to have significant influence on company strategy. And analysts believe the company has lacked direction since 1986, when Martin Sorrell, the top financial officer, left to build up rival WPP Group PLC.

Nevertheless, in an interview, Mr. Louis-Dreyfus said, "I will be having the final say. If I didn't think that was the case, I wouldn't have come to the company." And analysts said that if any outsider were able to succeed at Saatchi, it would be Mr. Louis-Dreyfus.

Mr. Louis-Dreyfus, a member of one of the wealthiest families in France, joined IMS as chief operating officer in 1982 and later became president and chief executive. When he joined the firm, its market capitalization was about $230 million; by last year, Dun & Bradstreet Corp. bought it for $1.7 billion. He has also been involved with a family-owned company, Louis-Dreyfus et Cie., which is France's largest private firm and one of the world's largest grain-trading firms.

Executives who know him say Mr. Louis-Dreyfus works non-stop, travels constantly and is at his best in turnaround situations. Several compared him with Mr. Sorrell, who since leaving Saatchi has been successful building his own ad agency group by concentrating on strict financial management. Indeed, Saatchi -- while Mr. Sorrell was there -- tried unsuccessfully to buy IMS several years ago.

Analysts believe Mr. Louis-Dreyfus may have more say than other outsiders who have joined Saatchi, both because the company is troubled and because he is wealthy enough to leave if the brothers don't listen. Mr. Louis-Dreyfus also comes to Saatchi complete with an ally: He is bringing with him Charles Scott, 40, who had been chief financial officer at IMS and will become Saatchi's group financial director. Both will become members of Saatchi's board.

Saatchi "has brought in somebody from the outside before; that's nothing. The one difference is, {Mr. Louis-Dreyfus} is bringing in an ally," noted Emma Hill, an analyst with Wertheim & Co. "But Saatchi has always struck me as a club, and I think the question is, can he become part of the club or change the club, or does he quit because he can't change it?"

In the interview, Mr. Louis-Dreyfus said he hoped "the bulk" of Saatchi's consulting operations would be sold in the next six months, so that he can concentrate on Saatchi's core advertising businesses. He said he would at first attempt to help sell the consulting operations, and then turn to cost control at the remainder of the company. But he said he doesn't expect more layoffs.

Mr. Louis-Dreyfus also will be charged with helping improve morale and repairing Saatchi's battered reputation among investors -- a process that may be starting already: Analysts in New York and London said Maurice Saatchi phoned them personally yesterday to tell them of the management change.

Several industry executives said they expected Mr. Louis-Dreyfus's appointment to prompt the departure of the co-chief executives of Saatchi's ad business. But Terry Bannister, who shares the chief executive title with Roy Warman, said neither man will leave.

Mr. Louis-Dreyfus also shares with Saatchi grand visions of growing as big as possible as quickly as possible; he said his goal is to command "20% of the advertising business in every part the world." The executive added that he isn't concerned about the takeover speculation that has dogged the company of late. "I don't think I would have joined the company if I was afraid of a takeover," he said.

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891013-0112. Thursday's Markets: @ Stocks Drop @ As Investors @ Await Data @ --- @ Fed Reaction Is Key; @ Bonds Rise Slightly @ While Dollar Declines @ ---- @ By Craig Torres @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) FINANCIAL, ACCOUNTING, LEASING (FIN) BOND MARKET NEWS (BON) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) FOREIGN-EXCHANGE MARKETS (FRX) TREASURY DEPARTMENT (TRE) NEW YORK

Trading turned cautious in financial markets as investors awaited fresh economic data scheduled for release today.

The Dow Jones Industrial Average declined 13.52, to 2759.84, down more than 1% during the past three days. Treasury-bond prices rose less than one-eighth of a point, or $1.25 for each $1,000 face amount. The dollar drifted lower against major currencies.

Investors aren't interested in today's reports on producer prices and retail sales in September as much as the U.S. Federal Reserve's reaction -- if any -- to them. To see what the Fed does they'll watch the federal-funds rate, which some analysts say the U.S. central bank will -- under the right circumstances -- lower to about 8 3/4% from around 9% currently. The federal-funds rate is the rate banks charge each other for overnight loans of reserves, and is the rate most easily influenced by the Fed.

A move to lower interest rates "remains contingent on evidence that domestic demand is slowing," said Susan Hering, an economist at Salomon Brothers Inc. Higher energy prices may have pushed producer prices up 1% last month, but analysts will zero in on the so-called core inflation rate, or wholesale prices except for food and energy, which are volatile. Flat retail-sales growth and a core inflation rate below 5%, on an annualized basis, would be the right combination for the Fed to nudge rates lower, analysts said. Yesterday, investors were anticipating such a move. That is mainly why bonds rose a bit. The dollar's decline also was acknowledgment of "the possibility that the Federal Reserve is nudging rates lower," said one trader. "That, coupled with dramatic rate increases overseas, is beginning to pressure the dollar."

Stocks drew some support from falling interest rates. But investors remained concerned about continuing disappointments in third-quarter earnings reports. Profit-taking in takeover stocks weighed on stock prices, as did the 1.3% one-day drop in the Japanese stock market early yesterday.

"You have the specter of a sell-off in Japan combined with the change in interest rates reminding people that global markets are linked," said New York Stock Exchange floor trader Arthur Cashin Jr.

In major market activity:

Stocks lost ground in moderate volume. Approximately 160.1 million shares changed hands on the Big Board, where declining issues outnumbered gainers by 907 to 543.

Bond prices rose slightly in very light trading. The yield on the Treasury's benchmark 30-year bond fell to 8.03%.

The dollar fell. In late afternoon New York trading the dollar was quoted at 1.9083 marks and 144.17 yen, compared with 1.9166 marks and 144.57 yen late Wednesday.

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891013-0111. Mutual Funds: @ Stock Funds Are Finding It Harder to Beat the Market @ ---- @ By Michael Siconolfi @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) MUTUAL AND MONEY-MARKET FUNDS (FND) STOCK MARKET, OFFERINGS (STK) NEW YORK

If you're a stock-fund investor, don't bet on beating the market.

That's because more stock mutual funds are failing to keep with the broad market indexes these days. A startling 66% of all diversified U.S. stock funds trailed behind the Standard & Poor's 500-stock index in the third quarter, according to Morningstar Inc., a Chicago firm that tracks fund performance.

This was no fluke. It was the sixth consecutive quarter that funds on average failed to match the market. In the past five years, moreover, just 37.4% of all stock funds beat the S&P-down sharply from the 52.3% of the previous five years, Morningstar says.

So what's the problem? Too many funds and too few good stock pickers, some analysts say.

There currently are 1,024 stock funds, up nearly fourfold from 10 years ago, according to the Investment Company Institute.

"There aren't enough super stockpickers around to sit at the helm of an increasing number of mutual funds," says Tyler Jenks, research director for Kanon Bloch Carre & Co., a Boston fund-research firm. "The more the industry keeps turning these things out, the more you're going to see underperformance."

Stock mutual funds have grown explosively in the 1980s, because small investors believed they needed professional advice to beat the stock market. But if too many professionally managed funds keep underperforming, investors may decide to switch to index funds, designed to match the performance of the broader market. That would be bad news for the actively managed segment of the nation's stock mutual funds, which collect annual management fees that can amount to 1% of assets.

One reason many funds have lagged behind is their cash holdings, which often stand above 9% of assets. Funds keep cash on hand so they can pay investors who want to take their money out. High cash levels also act as a buffer against steep market drops. But many fund managers have guessed wrong about where the market was headed, penalizing fund performance.

Another drag on funds' returns is their operating expenses. But many funds are so poorly managed that they fail to match the stock averages even before expenses, primarily because of poor decisions on when to get in or out of the market.

Obviously, professional management doesn't guarantee success for investors. And the so-called market timing game of boosting or shrinking cash levels to outguess the market has backfired for many stock funds.

"As a group, funds are excessively bearish and flush with cash at market lows, when they should be loading up their portfolios with stocks," says Norman Fosback, president of Mutual Fund Forecaster, a Florida newsletter. Conversely, Mr. Fosback says, funds typically are overinvested in stocks at market tops.

Of course, many funds have consistently outpaced the indexes. Fidelity Magellan Fund, Janus Fund and Lindner Fund, among others, have far surpassed the gain of the S&P 500 over the past 10 years.

Overall, however, the recent five-year period has included quarters where only 10% or 15% of all diversified stock funds have outslugged the market. (To make the comparison fairer, Morningstar excluded international and other specialty stock funds that can skew the stock-fund average.)

The past five years have been particularly tough for funds, because many hold stocks of companies with far smaller total market values than the S&P companies, Morningstar says. The median market value for a company in a stock-fund portfolio is $3.7 billion, compared with $8.6 billion for the S&P 500. And smaller companies' stocks generally have underperformed larger ones in the past several years.

"It's pretty clear that the average equity fund isn't that much like the S&P, but has more of a small-cap focus," says Don Phillips, editor of Morningstar's Mutual Fund Values publication.

When smaller stocks begin to lead the market again, Mr. Phillips says, more funds will outperform the S&P 500. "It's very likely the next five years will be strong for funds," he says.

There's another factor to consider: The average fund return is figured by giving equal weight to all funds, regardless of size. If the average was computed instead by giving more weight to the larger funds, the overall return would stack up better against the market. Bigger funds tend to get that way because they perform well and thereby attract new money.

The current calculation "shows the average fund return, but it misrepresents the return to the average investor," according to a report by Strategic Insight, a fund research firm.

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891013-0110. Marketing & Media -- Advertising: @ Ms. to Be Published Without Ads @ In Attempt to Save the Magazine @ ---- @ By Patrick M. Reilly
10/13/89
WALL STREET JOURNAL (J) CCI UN UL IPG WNEWS TL WCI OMCM ONA ISY MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) MARKETING, ADVERTISING (MKT) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

In an extraordinary attempt to save Ms. magazine from folding, its new owner plans to begin publishing the magazine without advertising beginning with the January 1990 issue.

Dale Lang, Ms.'s new owner, says that instead of compromising the magazine's advocacy spirit to fit the tastes of advertisers, he will attempt to operate Ms. based only on circulation revenues.

Mr. Lang became the fourth owner of Ms. in August when he agreed to acquire Matilda Publications Inc., publisher of Ms. and Sassy, a monthly magazine for teenage girls. Mr. Lang is purchasing both magazines with the help of Citicorp Venture Capital Partners, one of Matilda's original financial backers. Mr. Lang's new company, Lang Communications, will own 70% of Matilda, while Citicorp will own 30%.

Mr. Lang, 57 year old, also publishes Working Woman and Working Mother magazines.

Ms., a magazine born of the woman's liberation movement of the early 1970s, has never been profitable in its 17 years. But Mr. Lang, who is expected to take control of the magazine today, says it is currently in "dire straits." The December issue, which has pulled in a scant seven advertising pages, probably will be canceled, Mr. Lang says.

The publishing executive says he can operate Ms. profitably if the magazine can do away with expensive circulation drives and be allowed to find its natural circulation level, which he estimates could be in the 200,000 to 250,000 range.

The strategy is a risky one. Very few magazines, with the exception of Consumer Reports, do without ads and still attempt to reach a large audience. And no industry observers remember a magazine going from being an advertising vehicle to a non-advertising vehicle. Yet, Mr. Lang has some believers.

"The biggest mistake Ms. made was trying to make it a vehicle for standard magazine advertisers," says Neal Vitale, vice president, McNamee Consulting Company, a New York magazine consultant. "He's being smart. The people who really want to read Ms. will pay a lot of money for that point of view. Now he can focus on making it a circulation driven magazine, with a point of view, and not be compromised by putting standard celebrities on the cover to sell it."

Ms. fell into serious trouble when the magazine tried to build circulation by expensive methods such as using subscription agencies, making cut-rate subscription offers and engaging in costly direct mail campaigns. The goal was to boost the circulation above the 500,000 level considered significant by advertisers.

Circulation did reach about 550,000, but advertisers didn't respond, partly because of the magazine's editorial content. According to Mr. Lang, several advertisers pulled their ad schedules after an August cover on the Supreme Court's abortion ruling. The cover carried the headline, "It's War," in large, red letters.

Despite the circulation gains, Mr. Lang notes that a recent study by Simmons Market Research Bureau shows that Ms.'s total reading audience has fallen slightly. Moreover, readers' average household income is one of the lowest among women's magazines.

Valerie Muller, vice president and media director of Pedone & Partners, says Ms.'s problem is that it is trying to survive at a time when advertisers' concerns dominate magazine publishing. "It's just not the right time to make a Ms. statement to advertisers. Lang is smart enough to know it's still the editorial product that's important," Ms. Muller says.

---

HBO to Polish Its Image

Home Box Office Inc. is launching a $38 million image ad campaign that it is billing as the "largest and most comprehensive television advertising effort ever mounted in the cable industry."

HBO, a unit of Time Warner Inc., will begin airing 30-second ads Oct. 16 on other cable channels and during heavily watched network programs and sports events. The spots will run throughout 1990.

John Billock, HBO's senior vice president, marketing, said the campaign "ushers in the next phase of cable's development from a business whose growth was first propelled by construction to a business that must increasingly rely on its marketing prowess to achieve expansion."

---

Ad Notes. . . .

ACQUISITION: Omnicom's DDB Needham Worldwide unit agreed to buy Elgin Syferd Inc., Seattle, a advertising and public relations firm with billings of about $38 million. Terms weren't disclosed.

BRUT MOVE: Faberge Inc., a unit of the Anglo-Dutch consumer goods giant, Unilever Group, moved its account for men's toiletries, including Brut cologne and aftershave, to Lintas:New York, a unit of Interpublic Group of Cos. The account, whose budget wasn't disclosed, was previously with Bozell, Jacobs, Kenyon & Eckhardt Inc., New York.

FRANKENBERRY LINK-UP: Sausage maker Jones Dairy Farm, Fort Atkinson, Wis., named Frankenberry, Laughlin & Constable Inc. of Milwaukee as its advertising and public relations agency of record. The account, which was previously with Carmichael Lynch Inc., Minneapolis, is estimated at $2 million.

NEW ACCOUNT: Oneita Industries Inc., Andrews, S.C., is handing over its $1.5 million to $2 million ad account to Rosenfeld, Sirowitz, Humphrey & Strauss Inc., New York. Oneita, a maker of knit apparel, is a unit of Instrument Systems Corp. of Jericho, N.Y. The account was previously with Triton Advertising Inc., New York.

WHO'S NEWS: Stanley D. Canter, 66, co-founder and president of the marketing consulting company, Canter, Achenbaum Associates Inc., said yesterday that he would retire from the firm at year end.

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891013-0109. International: @ East German Leader Is Likely to Quit @ Or Be Removed, West Germans Believe @ ---- @ By Timothy Aeppel and Thomas F. O'Boyle @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) EUROP BONN

The West German government is becoming convinced that Erich Honecker, the ailing East German leader, is likely to resign or be removed from office soon.

According to a senior aide to West German Chancellor Helmut Kohl, who asked not to be identified, the 77-year-old East German Communist party chief has cancer. Mr. Honecker was twice hospitalized this summer with a gall bladder ailment, and his physical condition has been the subject of intense speculation in the Western media.

However, the cancer, confirmed by West German intelligence through sources in East Germany, doesn't appear to be immediately life-threatening, the aide said. Hence, political factors in East Germany appear decisive in determining how much longer Mr. Honecker stays in power.

The aide and several other government sources in Bonn said that while Mr. Honecker could be forced to resign within days, he also could remain in office until December, when the 163-member Central Committee of the ruling Communist Party holds its semiannual strategy meeting. Some East German officials have hinted that this gathering could be used as an occasion for outlining future reforms.

"Honecker is on his way out," says Bernard von Plate, a specialist on East Germany at the Research Institute for International Politics and Security, a West German think tank near Munich. The question now, he says, is who would replace Mr. Honecker and what this may mean for the pace of political reform.

The confusion over Mr. Honecker's status reflects the general state of affairs in East Germany. For months the government seemed paralyzed as thousands of East German citizens fled via Hungary's newly opened border with Austria. Thousands more have gained passage by occupying West German diplomatic missions in Prague and Warsaw.

The crisis entered a new stage last week when the government shook off its paralysis and moved forcefully against protesters who demanded democratic freedoms. Since then, there have been suggestions of a possible easing of the government's stance amid mounting criticism of Mr. Honecker. It's still not clear to what extent that criticism is originating from within the ruling Politburo. During his 18 years as East German leader, Mr. Honecker has kept a hammerlock on power by loading the ruling Politburo with like-minded Stalinists. These officials, most of them elderly, are still in place. The move toward change, analysts say, so far appears to be concentrated at the lower levels of the party hierarchy and in areas outside the firm grasp of central authorities in East Berlin.

The recent protests, for example, were concentrated in the cities of Dresden and Leipzig, and it is in these places that local officials have shown greater willingness to talk to the demonstrators.

West German Defense Minister Gerhard Stoltenberg told reporters in Washington Wednesday that it is "inconceivable" for East Germany to stay as it is in view of the changes now sweeping through the Soviet Union, Poland, and Hungary.

The East German leader is also feeling growing pressure from his allies in Moscow. Soviet leader Mikhail Gorbachev visited East Berlin last weekend to help celebrate East Germany's 40th birthday. According to the senior aide to Chancellor Kohl, Mr. Gorbachev in his private meetings with Mr. Honecker pressed hard for changes and for a more tolerant view toward the demonstrators.

But the Soviets appear frustrated by the situation in East Germany. Vyacheslav Dashitchev, an adviser to Mr. Gorbachev, said during a broadcast on West German television Wednesday he didn't think changes under the current East German regime were possible. He added, however, that the successors to Mr. Honecker would be from the younger generation and it would be up to them to transform the society.

West German officials say they do not expect sudden moves toward reform in East Germany. More likely, they say, is that Mr. Honecker or his successors will start a dialogue with the fragmented opposition groups aimed at developing reform proposals for next May's Communist Party congress.

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891013-0108. OTC Focus: @ Stocks Edge Up Despite Profit-Taking @ As Investors Pick at Small Supplies @ ---- @ By Sonja Steptoe and Craig Smith @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) NEW YORK

Cautious investors and traders took profits a bit more gingerly in the over-the-counter stock market than was the case elsewhere.

While the Dow Jones Industrial Average and New York Stock Exchange Composite Index fell, the Nasdaq Composite Index was up a slim 0.03, to 482.19.

Although some profit-taking occurred on Nasdaq, traders said investors weren't going overboard. "Everybody's kind of tight on the Street; there isn't much for sale," said Ralph Costanza, managing director of the OTC trading department at Smith Barney, Harris Upham. Mr. Costanza said OTC market makers have been carrying low stock inventories for some time. Firms making markets in OTC stocks must keep shares of stocks on hand to facilitate trading when order imbalances occur.

Brokerage firms' decisions to keep inventories low means they aren't active buyers of stock that's for sale. But the low supply also means there is less stock to unload when the market turns soft.

Of the 4,346 stocks that changed hands, 916 advanced and 983 declined. Volume was a shade under 131 million shares, about average for this year.

In yesterday's action, Class B shares of Laidlaw Transportation climbed 1 1/4 to 20 5/8 on 3.9 million shares after Wednesday's announcement of higher-than-expected fourth-quarter earnings. The waste removal and transportation services concern said earnings for the quarter ended Aug. 31 jumped to 32 cents a share from 19 cents a share a year earlier.

Dow Jones Professional Investor Report said analysts at Merrill Lynch and Smith Barney raised their fiscal 1990 estimates for Laidlaw and reiterated their "buy" recommendations on the stock.

Great American Communications rose 1/4 to 12 1/4 on 274,000 shares. The company said it exchanged $50 million in debentures and notes for 3,650,000 of its common shares at $12 a share. On Wednesday, the broadcasting concern, formerly known as Taft Broadcasting, was Nasdaq's most active issue, with total volume of 4.8 million shares.

Although MGM/UA terminated its buyout pact with suitor Qintex Australia earlier this week, there appeared to be a remote possibility that the agreement could be revived.

This newspaper reported that National Broadcasting Co. had earlier agreed to be an equity partner in MGM/UA's buy-out by the Australian company, which might lure MGM/UA back to the negotiating table. But MGM/UA officials have declined to comment on whether they are willing to reopen the talks.

Qintex Entertainment, which is 43%-owned by the Australian firm, jumped 1 1/4 to 5 1/4 on 418,200 shares, three times its average daily volume. Qintex Entertainment said it isn't a party to the terminated merger agreement, however.

Jaguar's American depositary receipts added 3/8 to 10 1/2 on volume of 1.6 million.

MCI Communications gained 5/8 to 45 3/4 on 1.3 million shares.

Mobile Telecommunications Technologies finished unchanged at 10 7/8 on 1.4 million shares. The company has priced 3,450,000 of its common shares for sale at $10.75 each.

Landmark Graphics fell 1 1/4 to 15 1/2 on 1.2 million shares. The maker of computer systems for oil and gas exploration said net income for the period ended Sept. 30 rose to $1.8 million, or 22 cents a share, from $1.2 million, or 21 cents.

McCaw Cellular Communications added 1/2 to 43 1/2 on one million shares. The cellular communications concern's triple-Crated subordinated debt has been on Standard & Poor's CreditWatch surveillance list since January for a possible ratings upgrade. Yesterday, the rating concern said recent events could reduce the likelihood of a rating upgrade.

McCaw has offered to acquire Metromedia's New York City cellular telephone interests and, in a separate transaction, sell certain McCaw properties to Contel Cellular. In addition, McCaw revised its previous tender offer for shares of LIN Broadcasting to $125 a share for 22 million LIN shares it doesn't already own. Earlier, it had offered to pay $110 a share for 90% of LIN.

Among other active stocks, Lotus Development gained 1 1/2 to 31 3/4, Tele-Communications lost 1 to 20 3/8 and Intel rose 1/4 to 33 7/8.

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891013-0107. Aristech Gets @ Buy-Out Bid @ Of $25 a Share @ ---- @ By Alecia Swasy @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) ARS TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) CHEMICALS, PLASTICS (CHM) PITTSBURGH

Aristech Chemical Corp. said it received an $817.5 million, or $25-a-share, buy-out bid from an investment group led by Jon M. Huntsman.

Mr. Huntsman, chairman of closely held Huntsman Chemical of Salt Lake City, owns about 8% of Aristech's 32.7 million common shares outstanding.

In previous Securities and Exchange Commission filings, Mr. Huntsman said he would consider buying Aristech's polypropylene business. The company has said repeatedly it wasn't interested in a sale.

Thomas Marshall, chairman and chief executive officer of Aristech, said the proposal will be considered by the board, but declined further comment. The board is scheduled to meet Tuesday.

Mr. Huntsman was traveling and was unavailable for comment.

Under the proposal, Huntsman Holdings Corp.'s newly formed subsidiary, Banstar Corp., would acquire Aristech. Huntsman Chemical's polypropylene business would then be combined with Aristech. Polypropylene is used to make products such as toys and furniture. Mr. Huntsman's company is one of the largest producers of polystyrene, a plastic used in fast-food clamshells and other packaging and products.

Aristech is a chemical concern that was spun off by USX Corp. It had sales last year of $1.07 billion.

Aristech closed yesterday at $17.375 a share, down 62.5 cents, in composite trading on the New York Stock Exchange, where trading of the stock was halted pending news of the bid. The stock hit a monthly high in March of $41.50 a share.

Analysts speculated that Mr. Huntsman waited until now to make a bid because the stock price has dropped recently, allowing the investor to make a lower offer. "Companies in this industry are having some earnings difficulty," said Greg Drahuschak, vice president of Butcher Singer Research Inc. in Pittsburgh. Mr. Drahuschak said he thought Aristech would reject the offer as being too low, especially in light of previous company statements rebuffing Mr. Huntsman.

The investor was in Pittsburgh to deliver his offer to Mr. Marshall, but a company spokesman declined to comment on the meeting.

One factor hurting Aristech and other polypropylene producers is the rapid growth in plant capacity by leading manufacturers. Since 1986, U.S. capacity has risen 50% to about nine billion pounds from six billion pounds, according to industry estimates. But demand hasn't been growing as quickly.

In addition, capacity at European plants is expanding. "The forecasts through 1992 show it going further south," says one industry expert.

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891013-0106. River of Despair: @ Along the Rich Banks @ Of the Mississippi Live @ Poorest of U.S. Poor @ --- @ They Endure a Lack of Jobs @ And Plantation Mentality, @ While Landowners Thrive @ --- @ Where Dreams of Blacks Die @ ---- @ By Dennis Farney @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) CONGRESS (CNG) ELAINE, Ark.

It could be a dog house, up on bricks above the gluey yellow clay. Except that it is bigger than a dog house -- and a human being lives inside.

In the dank, dark interior of his two-room shack, 63-year-old Robert Britton sits on a bed with sheets gray-black with grime. His conversation rambles at the edge of incoherence. He hitches a pant leg up and down in an absent, almost mechanical way.

You leave him, finally, standing on his porch. "Don't you worry about me," he says with a wild laugh. A cold rain beats down on his grim little house and those surrounding it.

To the north, up the winding, gunmetal-gray Mississippi River, Renee Lamm talks with quiet wonderment of her medical practice, straight out of the Great Depression.

She is the only doctor in Lake County, Tenn. The nearest X-ray machine is 35 miles away. Dr. Lamm tries to diagnose with a second-hand microscope, then usually discovers her patients can't afford the medicine. She recently helped save an infant boy with a liver abscess as big as a softball. She blames sewage-polluted drinking water.

"These are the kind of things you see in Haiti or Mexico," Dr. Lamm says softly. "Not the United States."

But this is the lower Mississippi Delta, certified by Congress as the poorest region in America. Poorer than Franklin D. Roosevelt's Tennessee Valley, poorer than John F. Kennedy's Appalachia. Poorer and much blacker -- and thus politically neglected until a rising black vote began transforming Southern politics.

Further proof of that transformation comes Monday, when a year-old commission makes its initial report to Congress and the White House. It will test whether Washington, hamstrung by deficits and debating how many B-2 bombers to buy at $500 million apiece, has time and money for a rural region where infant mortality rates in some counties rival those of Third World countries.

Behind the statistics assembled by the Lower Mississippi Delta Development Commission lie the paradox and the burden of Delta history.

"We have the river. We have a central location. Yet we've had 100 years of poverty," says Ed Jones, a retired Tennessee congressman and a member of the commission. "It's not just economically based. The effort to keep some down kept all down."

Or, at least, most down.

For here is a region that epitomizes the extremes of American wealth and poverty. It is almost unbelievably fertile, with topsoil 25 feet thick or more. It has mansions and big cars and a wealthy gentry that for decades has gathered round the fountain in the ornate lobby of Memphis's grand old Peabody Hotel. It has fields of cotton like white flowers in bloom, rice and soybeans and venerable trees that lend a benignant grace to even the poorest dwelling. Its place names roll off the tongue like molasses -- Tallahatchie and Yalobusha; Gilt Edge, Tenn., and Braggadocio, Mo.

But, especially along the Mississippi, it has county poverty rates that range from 20% to 50%-plus. In testimony before the commission, one Tennessee civic leader told of building a fence around a school to keep children from playing in raw sewage. It has white as well as black poverty, and good ol' boys who gather over coffee to talk of dove hunting and running deer with dog packs.

Official segregation, of course, is dead. But a de facto segregation lives on. In Helena, Ark., black youths cruise lower Walnut Street at night; whites cruise Cherry Street, a block away.

What the Delta doesn't have is a stabilizing middle class. "Most of our `middle class' is two paychecks away from poverty," says Wilbur Hawkins, the commission's executive director. As West Helena, Ark., attorney L.T. Simes dryly observed in one hearing: "Some have said that we have too many rich people and too many poor people."

The poor tend to melt into the background, along back roads or in notorious neighborhoods such as Sugar Ditch, a place of shacks and open sewers finally cleared away by Tunica, Miss., after it helped land the town on CBS-TV's "60 Minutes" several years ago. But they stand out grimly in a place they call The Line. It is a grubby little neighborhood in West Helena where blacks bring their dreams to die.

"You can get a lady here for $5," says Linda Messenger, an energetic federal worker who grew up not far away. Then she talks of a woman who sold herself for 25 cents. Behind a dumpster on a street.

"In this area, a good husband is hard to find," says Ms. Messenger, who has three children and has married a second time. After a series of brutal experiences, she reached a determined conclusion: "I'm not going to let men pull me down."

Out beyond The Line, in a small house amid the soybean fields, a 31-year-old woman named Beulah (she declines to give her last name) struggles to survive with seven children and no husband in the home. She sits watching Oprah Winfrey on TV and talking -- haltingly, as in a dream -- of her life and her children: "I just started so fast."

Beyond sheer poverty and human wreckage, the Delta got a bigger dose than either the Tennessee Valley and Appalachia of what Mr. Jones, the former congressman, calls "the plantation mentality." It is an ingrained attitude -- a kind of caste system -- rooted in the region's history. The land-owning rich remain complacently superior. "Whereas they once rode horses {to oversee their holdings}, they now ride pickups," Mr. Jones says. The poor, too often, remain apathetic, without any realistic job prospects and utterly dependent on welfare.

In Phillips County, Ark., home of The Line and the hardscrabble town of Elaine, government transfer payments are a top industry, bringing roughly $20 million a year. "Everybody's on relief and food stamps," Mr. Jones says. "You can't help them, except keep them alive."

Even that can be hard to do. The commission notes that 1980-84 infant-mortality rates in four Mississippi counties exceeded 25 per 1,000 -- worse than Panama's. And its statistical portrait of the region portrays a social fabric fraying away like a cheap rug on the floor.

The commission estimates that 47 of the 214 counties in its target area have poverty rates exceeding 30%, with many of the rest topping 20%. Based on 1979-80 census figures, it says that in Lake County, Tenn., some households (a loose definition that could mean one person or a dozen) were trying to live on as little as $1,954 a year, excluding Social Security.

That Pope County, Ill., had a high-school dropout rate just shy of 53%. And that only four Arkansas counties accounted for one-third of that state's infant mortality in 1986.

At rock bottom, measured by its estimated 50% poverty rate, is Tunica County, Miss. Bobby H. Papasan, a thoughtful, candid man who is the former school superintendent there, defended his town and county on CBS. But he admits, "One of the ways we kept down the dropout rate was to pass out cheap diplomas. And, let's face it, our definition of high-school education may have been one of the lowest going."

It is almost impossible for an outsider to see the world as Tunica children see it, he says over lunch at the Blue and White Restaurant. He recalls questioning young children to determine the boundaries -- the outer limits -- of their world. For many, the world ended short of the county line. Today, he says, some of the best high-school graduates, girls as well as boys, go into the military. It's a way out, an escape.

But the Delta already has witnessed one great escape, a forced human migration that ranks with that of the Dust Bowl Okies to California. The post-World War II agricultural revolution brought great machines that prowled the fields like metal beasts. That uprooted tens of thousands of sharecroppers and propelled them into cities such as Memphis and Chicago.

Sharecropping was bad. The plantation owner tethered the sharecropper with lines of credit from the plantation store; when another plantation "bought" him, it paid off his debts. But what the great migration left behind may be worse: A land that, for many, has no jobs of any kind.

To create jobs, Democratic Rep. Mike Espy talks of building "value added" processing plants to supplement the largely agricultural economy. As a case in point, he has already persuaded the Army to eat about 65% more catfish -- after cotton, Mississippi's largest cash crop, he says. Mr. Espy, a House leader in the commission legislation, represents a Delta district where unemployment averages 12% but, among blacks, nears 50% in some counties.

Rep. Espy, in 1986 the first black elected to Congress from Mississippi since Reconstruction, epitomizes a second revolution, a still-continuing political upheaval that has reshaped the Delta and made creation of the commission politically possible. The civil-rights movement of the 1960s produced the Voting Rights Act and a swelling black vote. That black vote, as much as anything, was responsible for the 1986 elections of several white Democratic senators, among them Georgia's Wyche Fowler, Alabama's Richard Shelby and Louisiana's John Breaux. At the same time, traditionally gut-Democratic Mississippi has two Republican senators now, Thad Cochran and Trent Lott, who themselves are reaching out to black voters.

These crosscurrents create a unique window in time when a concerted Delta development program is at least politically possible. But creating it won't be easy, and funding it will be even harder.

"The country's broke, unfortunately," says Arkansas Democratic Sen. Dale Bumpers, the prime Senate sponsor of the commission. "And you cannot put in enough Federal money, even if we had it, to solve the problem." (The commission is charged with designing a 10-year recovery program.) Instead, Sen. Bumpers talks of a combination approach: Some new money, a retargeting of existing federal programs, more federal-state-local cooperation and more federal purchases of Delta products. "It's supposed to take 10 years. It may take a second 10 years," he says.

At stake is the future of a region already bypassed by much of the postwar economic boom and now in danger of being left hopelessly behind in a computer-age America. "All we want is a little piece of the pie," says John E. Vaughn, the Tiptonville, Tenn., city attorney. "It's a wealthy country. Just a little piece of the pie."

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891013-0105. Machine-Tool Manufacturers Benefited @ From Increased Shipments in 3rd Period @ ---- @ By Ralph E. Winter @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) CMZ CTCO MMO GIDL INDUSTRIAL EQUIPMENT, MACHINE TOOLS (IND) ECONOMIC NEWS (ECO) ECONOMIC AND MONETARY INDICATORS (EMI)

Machine-tool company earnings in the third quarter benefited from sharply higher shipments, but unusual costs related to restructurings at two large producers held down industry profit totals.

Because of strong 1988 orders, U.S. machine-tool builders are operating plants at sharply higher levels this year. U.S. machine-tool producers boosted shipments by 36% during the first two months of the third quarter from a year earlier, according to figures from the NMTBA -- The Association for Manufacturing Technology, an industry trade group.

While new orders dropped sharply in the 1989 second quarter and continued to lag behind year-ago levels in the third period, the industry's backlog of unfilled orders remains high enough to permit strong shipments into the first half of 1990.

However, Cincinnati Milacron Inc., the industry's largest producer, said it will report lower third-quarter profit because of production disruptions arising from a reorganization of its machine-tool operations. The company earned $9.7 million, or 40 cents a share, in the year-earlier quarter, including an extraordinary gain of $3.3 million, or 14 cents a share, from tax-loss carry-forwards.

Milacron, which also produces plastics machinery, robots and other industrial products, is in the midst of a changeover to "focus factories" that it began in early 1988. Each plant will concentrate on development, production and marketing of one product line, such as turning machines or machining centers.

Reorganizing production and moving product lines from one plant to another have resulted in shipment delays and higher costs, which depressed profit in the second period and continued to affect third-quarter net, company officials said. Second-quarter net, including tax credits, dropped to $5.2 million, or 21 cents a share, from $8.3 million, or 34 cents a share, a year earlier. Milacron originally expected to complete the reorganization by mid-1989, but now believes production problems will continue in the fourth quarter. The reorganization will require more training at the plants than originally expected, officials said. The company is introducing new manufacturing methods and several new products and is converting to metric measurement at the same time it is adopting the focus factory approach, which further complicates both engineering and production.

Meanwhile, Milacron's plastics machinery business is having a record year, the company said. New products and continued strength in the plastics industry are bolstering sales. And the company has succeeded in reducing costs in many parts of the business. Plastics machinery accounted for 28% of Milacron's sales for all of last year and 45% of operating profit before interest and corporate expense.

Robots, a smaller business that the company doesn't break out separately, are only marginally profitable this year. Sales to the auto industry have slowed as the Big Three auto makers reconsider their plant spending programs, and competition from Japan is intense, Milacron said.

Cross & Trecker Corp., Bloomfield Hills, Mich., is undertaking a restructuring of its own, which involves the planned sale of three operating units and a joint-venture business, consolidation of two machine-tool units and a write-down of other assets.

The company reported a loss of $32.5 million, or $2.62 a share, for its third quarter ended June 30, including non-recurring charges of $25 million, or $2.02 a share, mostly related to the restructuring. In the year-earlier quarter, Cross & Trecker had a loss from operations of $4.2 million, or 34 cents a share.

Because the company has filed a registration statement covering the planned sale of $50 million of convertible, exchangeable preferred stock, officials declined to make earnings forecasts.

On the other hand, machine-tool companies that didn't have such unusual charges will report higher profit for the third period. The third quarter ordinarily isn't a strong profit period for the industry. Most machine-tool plants close for a week or two during July, and many key employees take additional vacation time during the summer, reducing shipments.

"Our third-quarter profits were a little better than last year's third quarter, but it will be the weakest quarter of the year," said Robert J. Siewert, president and chief executive officer of Monarch Machine Tool Co., Sidney, Ohio. In the 1988 third period, Monarch earned $208,992, or six cents a share, on revenue of $21.1 million.

The strongest part of Monarch's business is its metal-coil processing equipment, which accounts for about 25% of sales, Mr. Siewert said. That business is operating at capacity, and is "very profitable," he said.

Orders have improved for the company's vertical machining centers, he said, but have been softer for Monarch's turning machines.

Giddings & Lewis, Fond du Lac, Wis., which just went public in July after being owned by AMCA International Corp., Hanover, N.H., will report a particularly sharp third-quarter profit rise. John E. McGinty, capital-goods analyst with First Boston, estimates third-quarter net at 40 cents to 45 cents a share, about double the 1988 quarter's net.

The company has experienced strong orders during the last seven quarters, and has built a record order backlog, said William J. Fife Jr., chairman and chief executive officer. Its plants are working overtime to meet the strong demand, and shipments for the first half were up more than 50% from a year earlier.

Giddings & Lewis specializes in equipment to produce large metal parts, many of which are used on heavy machinery and aircraft. Those industries often doesn't turn up until an economic recovery is well advanced, Mr. Fife said, explaining why Giddings & Lewis lags the business cycle.

The machine-tool industry's profit outlook for 1990 depends on how aggressively auto makers order in the next six months. The auto industry has postponed a number of major plant equipment programs while companies reappraise their future needs, which has whacked machine-tool order totals in the past six months.

Machine-tool company officials said the U.S. auto makers will have to order equipment relatively soon to produce technologically-improved engines, transmissions and other key parts or they will lose more market share to Japanese-owned plants. But those orders could be deferred for a few more quarters, or scaled back from original plans, if 1990-model auto sales prove to sluggish.

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891013-0104. Investors Continue to Shun Offerings @ Of New Public Limited Partnerships @ ---- @ By Jill Bettner @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) SECURITIES INDUSTRY (SCR) STOCK MARKET, OFFERINGS (STK) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) OIL EQUIPMENT AND SERVICES (OIE) PETROLEUM (PET)

With public limited partnerships souring at an alarming rate, investors clearly have little appetite for new offerings.

Sales of new partnerships marketed by brokerage firms in the third quarter fell nearly 44% from a year earlier, according to figures compiled by Robert A. Stanger & Co., a Shrewsbury, N.J., firm that tracks partnerships. Sales for the first nine months were down almost 29% from a year ago, continuing a downward trend in recent years that is unlikely to turn around any time soon.

Limited partnerships, which invest in everything from commercial real estate to cable TV systems, shipping containers and oil and gas wells, have lives of about 10 years before they are dissolved and investors get paid off.

But many older partnerships are seriously troubled or failing just as they are about to reach that stage. The problems, especially in real estate, have prompted a flurry of investor lawsuits and caused serious financial difficulties at two of the decade's biggest syndicators, Southmark Corp. of Dallas and Integrated Resources Inc. of New York.

As a result, partnerships "aren't a real popular vehicle at the moment," said William G. Brennan, partner in the Washington office of accountants Ernst & Young. Even repeat investors, who used to buy additional units in a partnership or a favorite sponsor's latest offering every year, are on the sidelines because "there's been so much bad news on partnerships in general," he said.

But Mr. Brennan believes there is a resurgence of so-called private placements, partnerships designed for small groups of investors who put in $25,000 or more. The sales levels of these transactions are difficult to measure accurately.

Although the 1986 tax act sharply reduced the tax benefits such investments can now offer, "I'm getting a couple of calls a week on private placements -- certainly traffic I wasn't getting a year or two ago," Mr. Brennan said.

In the public arena, the strong sales of equipment leasing partnerships continue to buck the overall downward trend because of their high annual yields. Many are currently paying between 12% and 15%, although part of that is a return of investors' own capital. The dollars raised from new offerings in the third quarter increased 47%, to $355.3 million from $241.3 million a year ago.

Sales of master limited partnerships also soared. In contrast to illiquid limited partnerships, their units trade on exchanges like stocks. Investors plunked down $159.8 million to buy them in the latest quarter, nearly eight times the $20.3 million such offerings raised in the third quarter of 1988.

Two new master limited partnerships accounted for much of that increase: a $102.3 million oil and gas pipeline syndication by Kaneb Services Co. of Richardson, Texas, and a $57.5 million real estate offering by UDC Corp. of Phoenix, Ariz.

--- @ Limited Partnership Sales @ (Dollar amounts in millions) @ 1989 1988 @ THIRD THIRD PCT. @ QTR. QTR. CHG. @Real estate $748.2 $1,436.9 -47.9% @Oil and gas 82.3 162.4 -49.3 @Equipment leasing 355.3 241.3 +47.2 @Other 530.5 1,212.4 -56.2 @Total $1,716.3 $3,053.0 -43.8% @Source: Robert A. Stanger & Co.

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891013-0103. Who's News: @ Squibb President @ Quits After Merger @ With Bristol-Myers @ ---- @ By Michael Waldholz @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BMY WNEWS NEW YORK

Bristol-Myers Squibb Co. said that Jan Leschly, president of Squibb, resigned. He is the first top Squibb executive to leave following last week's completion of the merger between the two pharmaceutical companies.

Mr. Leschly, a much-respected and fast-rising star at Squibb, had been expected to become chief executive officer in the next few years had Squibb not been acquired by Bristol-Myers. Indeed, many industry observers have expected that Mr. Leschly might leave once it appeared that he wouldn't have a clear shot at the top spot of the newly combined company.

Mr. Leschly said he was resigning because "the near-term personal goals that I had hoped to achieve at Squibb as an independent company are not realistic within the same time frame with Bristol-Myers Squibb."

"I'm not at all surprised," said Patricia Lea, an analyst with Vector Securities. "He struck me as a guy who very much wants to run his own show."

Mr. Leschly, 49 years old, was named president and chief operating officer at Squibb in early 1988. A Danish national, Mr. Leschly joined Squibb in 1979 from Novo Industri AS, a Danish drug maker. Company insiders have said that Mr. Leschly quickly impressed Richard Furlaud, who was Squibb's chairman and chief executive officer, and the two men are known to be good friends.

"I am obviously sad," said Mr. Furlaud, who runs the companies' combined pharmaceutical businesses. Mr. Furlaud, 66, has called Mr. Leschly an "inspired and energetic leader."

Mr. Furlaud and others at Squibb credit Mr. Leschly, a handsome, athletic man who is personally charming but also very demanding, with building the management of Squibb's flourishing pharmaceutical operations.

While Mr. Furlaud was widely expected to relinquish his top spot to Mr. Leschly soon, Richard Gelb, chairman and chief executive officer at Bristol-Myers Squibb, has told his board that he plans to stay in his post at least until 1993. Moreover, several top executives from Bristol-Myers may have had a better chance than Mr. Leschly to succeed Mr. Gelb, who is 65.

In an interview, Mr. Gelb said Mr. Leschly decided to resign on his own. He said he had no one in mind to succeed him. Under the combined company's new management organization, Edgar Haber and William Comer are in charge of the company's drug research and development operations, while Wayne Davidson runs the operation side of the pharmaceutical business. Mr. Davidson is now considered the most likely to advance from the drug-making business to the company's top post.

Mr. Leschly, whose shares of Squibb were worth about $26 million after the merger, said he had no plans at present, but "I hope to have an opportunity to do what I wanted to do at Squibb."

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891013-0102. Technology: @ Nobel Prize in Chemistry Cites Discovery @ That Spawned New Genetic Engineering @ ---- @ By Jerry E. Bishop @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) MEDICAL AND BIOTECHNOLOGY (MTC)

A new kind of genetic engineering is being built on the biochemical discovery that won two Americans the Nobel Prize.

The Nobel Prize in chemistry was shared by Thomas R. Cech, 41 years old, of the University of Colorado, and Sidney Altman, 50, of Yale University, for their discovery that RNA, one of the two vital genetic materials in every living cell, could actively engage in chemical reactions. The discovery, made in the late 1970s and early 1980s, astonished molecular biologists who had thought RNA was a more or less passive element in the cell's genetic machinery.

As a result of the discovery and the subsequent research of Messrs. Cech and Altman, genetic engineers are learning to manipulate RNA with the same dexterity as they manipulate DNA, the other vital genetic material in the cell. It was the ability to manipulate DNA that led to the founding of the genetic engineering industry.

The new-found ability to manipulate RNA is leading to new, potentially commercial means of fighting viruses, such as those that cause AIDS, cancer and other scourges, and of altering the genetics of plants and other organisms. Already one company, U.S. Biochemical Corp. in Cleveland, which has exclusive rights to patents being sought by the University of Colorado on Mr. Cech's discoveries, is working on a host of new products. And a government-backed agency in Australia recently announced it formed a 67.5 million Australian dollar (US$52.4 million) joint venture with a French seed company to exploit the new RNA-based technology.

The chemistry award was announced simultaneously with the Nobel Prize in physics, which was shared by two Americans and one German. Norman F. Ramsey of Harvard University was honored for his discovery of how to "excite" atoms of hydrogen to higher energy levels. The discovery led to the atomic clock, in which the flicker of atoms from one energy level to another ticks off time with millionths-of-a-second accuracy. The phenomenon ultimately led to the development of so-called masers and, later, lasers.

Honored for their discoveries on trapping electrically charged atoms, called ions, were Hans G. Dehmelt of the University of Washington in Seattle and Wolfgang Paul of the University of Bonn.

In their discovery of RNA's chemical activity, Messrs. Cech and Altman overturned a basic tenet of molecular biology that developed in the mid-1950s when the double-helix structure of DNA was discovered. The DNA structure showed the sequence of the simple bead-like molecules along a stretch of DNA constitute a "message" that dictates the production by the cell of a protein. The DNA message for a complete protein comprises a gene.

The DNA message, however, stays secluded in the chromosomes in the center of the cell. To get the message to the outer reaches of the cell, a second necklace-like strand of simple molecular beads is assembled on the DNA, copying the message. This second copy-cat strand is messenger RNA, which carries the message out to the cell's protein-making factories. There other types of RNA bring in the raw materials for the protein and assemble it.

In 1977, biologists discovered that the DNA message -- the gene -- isn't a continuous "sentence." Instead, it is interrupted every few "words" by long, meaningless stretches of DNA. This meant that when the RNA copied the message the nonsense stretches had to be cut out of the message. The biochemists had assumed that this RNA editing was done by enzymes, chemically active proteins that, as far as any one knew, carried out all chemical reactions in living matter.

In 1978, Mr. Altman discovered that the cutting-and-pasting of the RNA message was done by a piece of RNA at the tip of a protein. That RNA could have such enzyme-like activity astonished biologists.

In 1981, Mr. Cech discovered that RNA was actually editing itself. Each nonsense stretch of RNA was actually cutting itself out and splicing the two remaining ends together to form a complete, uninterrupted sentence for the making of a protein. Because these self-splicing nonsense stretches of RNA acted like enzymes they were dubbed "ribozymes" (RNA stands for ribonucleic acid).

This is now opening up a fledgling industry in which ribozymes are being developed that can cut-and-paste RNA at almost any desired point. A hint of their potential might be gained by noting that the entire genetic engineering industry, as it currently exists, is based on the use of enzymes that can cut-and-paste DNA.

In a paper published late last year, Mr. Cech speculated on how ribozymes are likely to be used. Many viruses, including the AIDS virus and cancer viruses, do their damage by inserting either their own DNA or their RNA into a cell's genetic machinery. The inserted virus "message" has to be copied at some point by RNA for the virus to do its dirty work. "Ribozymes targeted against such viral RNAs might cleave and thereby inactivate them," Mr. Cech wrote in the Journal of the American Medical Association.

In some cases, viruses like the hepatitis virus do their damage by inserting a viral ribozyme into the cell that disrupts the cell's RNA functioning. It's likely, he suggested, that drugs could be developed that inactivated such viral ribozymes.

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891013-0101. Raytheon Co. Posts @ 8.5% Gain in Earnings @ For the 3rd Quarter
10/13/89
WALL STREET JOURNAL (J) RTN INDUSTRIAL EQUIPMENT, MACHINE TOOLS (IND) EARNINGS (ERN) LEXINGTON, Mass.

Raytheon Co., citing higher sales and operating profit in all of its business segments, said earnings rose 8.5% on a 9.8% sales increase for the third quarter ended Oct. 1.

The electronics and aviation company said earnings rose to $137.4 million, or $2.08 a share, for the quarter, compared with year-earlier profit of $126.7 million, or $1.91 a share. Sales rose to $2.19 billion from $1.99 billion.

Raytheon said its backlog was $7.95 billion at the end of the third quarter, down from $8.28 billion a year earlier. U.S. government funded orders were $5.91 billion at the end of the quarter, compared with $6.14 billion a year ago.

Raytheon's 1989 results have been aided by foreign tax credits, the company said. But in the third quarter, total federal and foreign income taxes rose to $59.7 million, compared with $54.7 million a year earlier. Taxes for the nine months were $170.9 million, compared with $159.7 million last year.

The company said its defense business was boosted recently by two contracts for electronic counter-measures: a $120.3 million U.S. Air Force contract and a $66.5 million U.S. Navy contract. Raytheon also was selected to develop a ground-launched version of the Tacit Rainbow missile and to be a secondary contractor on an air-launched version of the missile, the company said.

Raytheon's Beech Aircraft unit's sales and earnings benefited in the quarter from improved domestic orders for commuter and business turboprop aircraft, the company said. The appliances unit had strong sales of refrigerators, laundry and environmental products, Raytheon added. Raytheon didn't disclose details of quarterly performance by sector.

For the nine months, earnings rose 8.1% to $391.9 million, or $5.94 a share, from $362.3 million, or $5.43 a share, a year earlier. Sales rose 9.5% to $6.55 billion from $5.98 billion.

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891013-0100. Big Toy Firms @ To Post Gains @ For 3rd Quarter @ --- @ Revenue Unlikely to Grow @ Because Nintendo Games @ Continue to Score Well @ ---- @ By Joseph Pereira @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) HAS TTOY J.NTD MAT GAL TKA UMG RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC)

Most major toy makers are expected to post improved third-quarter results, as they pack off the bulk of their products -- including new introductions -- to retailers in time for Christmas.

But because Nintendo video games, which have siphoned billions of dollars from the toy industry, are still scoring nicely, third-quarter revenue for the most part won't increase significantly.

Earnings, however, will continue to improve, thanks to some belt tightening by toy makers, amid a four-year stretch of lean sales.

"The industry's healthier than last year; by and large this should be an upbeat third quarter," adds Sean McGowan, toy analyst for Gerard, Klauer, Mattison & Co. a brokerage and money management firm in New York. But there are exceptions.

Hasbro Inc., the nation's largest toy maker, is expected to report "flatish revenues," and per-share earnings of about 45 cents, estimates Gary Jacobson, analyst for Kidder, Peabody & Co. In the year-earlier period, Hasbro earned $18.1 million, or 31 cents a share, on $368.4 million in revenue.

The Pawtucket, R.I., manufacturer is counting on Record Breakers, a new line of high-performance model race cars now being rushed to market. If the toy sells well, it could offset sluggish sales at its Milton Bradley unit, whose board games have taken a beating from video games, adds Stephen Eisenberg, analyst for Bear Stearns & Co.

Backed by an advertising blitz, Record Breakers and competing products have the potential of stealing 5% to 10% of Tyco Toys Inc.'s electric toy business, which last year brought in $52 million in company sales, according to Richard E. Grey, Tyco's president and chief executive officer. Mattel Inc., based in Hawthorne, Calif., is expected to report more bullish numbers than it did a year ago. Helped by booming sales in its Barbie doll line, Hot Wheels racing cars and Disney toys for preschoolers, Mattel's per-share earnings should jump by better than 50% to about 70 cents, estimates Mr. McGowan. For the quarter ended Oct. 1, 1988, Mattel reported a profit of $21.9 million, or 45 cents a share, on sales of $306.6 million. Third-quarter sales should climb to about $380 million, Mr. McGowan adds.

Likewise, Lewis Galoob Toys Inc., based in South San Francisco, is expected to report big improvements in sales and earnings.

Galoob, whose miniature cars Micro Machines single-handedly thrust the company into the black last year, continues to thrive on the toy. For its third quarter, the company should report per-share earnings of 70 cents to 75 cents on sales of $72 million, estimates John Taylor, toy analyst for L.H. Alton & Co., San Francisco. In last year's third quarter, Galoob had net income of $4.7 million, or 51 cents a share, on sales of $50.1 million. Much of Galoob's results will come on the strengths of Micro Machines and Bouncing Babies, a mini-doll that's being shipped to retailers as soon as it arrives at the docks, reports Mr. Taylor.

Tyco Toys, aided by sales from Viewmaster-Ideal, which it recently acquired, is also expected to report tidy gains in earnings and sales. The Mount Laurel, N.J., toy maker projects that its sales will be about $380 million this year, with $294 million coming from Tyco toys and the rest from Viewmaster products. In the third quarter, Mr. McGowan puts Tyco sales at about $150 million, with about $50 million coming from its Viewmaster unit.

While Dynoriders isn't doing as well as it did last year when it was introduced, Tyco dolls, including Oopsie Daisy, a $40 doll that gets back up on its own after falling, are selling briskly, the company reports. Also boosting the company's revenues are Hot Licks, its electronic guitar made simple, and Hovercraft, a radio-controlled motor raft that kids can operate in swimming pools and lakes.

Tonka Corp., based in Minnetonka, Minn., said recently that it expects to report a profit for the third quarter "in excess of" the $4.9 million, or 62 cents a share, it had in the year-earlier period. Mr. Jacobson estimates Tonka should post per-share earnings of $1; revenue should be up slightly in the range of $275 million, from $267.5 million, he adds. Earnings gains have come in part from the company's emphasis on products such as Ghostbusters, which carry higher profit margins, along with a de-emphasis of less profitable items like Sega video games, which it distributes in the U.S, adds Mr. Jacobson. Last year Tonka shipped $160 million of video games; this year that will be down to about $50 million.

Meanwhile, a few toy makers are undoubtedly struggling, among them Universal Matchbox Group Ltd. "The company is having some production problems and is behind plan on its shipments," adds Mr. Eisenberg. "It runs the risk of having a disappointing third and fourth quarter." Kenneth A. Bloom, vice president of finance and administration, says the company "suffered a brain drain at its engineering and production facilities in Hong Kong," in part because of China's political turmoil earlier this year. The slowdown affects about a dozen of its new more expensive introductions, including its Connectables, a string of plastic vehicles that change identities with each new addition and Ring Raiders, military paraphernalia mounted on rings. Consequently, Matchbox's third-quarter results "will be disappointing," Mr. Bloom acknowledges. For the third quarter last year, Matchbox had net income of $5.8 million, or 59 cents a share, on $72.5 million in sales.

"I wish I could say I'm really gung-ho on the toy business, but I'm not," remarks Bruce Van Kooten, analyst for Kirkpatrick, Pettis, Smith, Polian Inc. in Omaha, Neb. "The industry is struggling and retailers are being cautious. Things could change in the fourth quarter but unless they do I'm not bullish."

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891013-0099. CBOE Is Planning to Offer @ A 'Market Basket' Product
10/13/89
WALL STREET JOURNAL (J) SECURITIES INDUSTRY (SCR) COMMODITY NEWS, FARM PRODUCTS (CMD) STOCK MARKET, OFFERINGS (STK) CHICAGO

The Chicago Board Options Exchange said it plans to offer its first non-option product, the "Market Basket," the week of Oct. 23, pending approval by the Securities and Exchange Commission.

"For the first time, investors will be able to buy a basket of stocks as a single unit at a single price on an exchange floor," said an exchange official.

The CBOE's new investment vehicle is aimed at institutional traders who want to use it as a way to facilitate making multimillion dollar trades in and out of the stock market. It will shortly meet stiff competition from the New York Stock Exchange, which is expected to launch its own version of a stock-basket product in the near future.

The new vehicle is one of a number of market-basket products designed since the October 1987 stock-market crash to compete with the S&P 500 Futures Index contract traded on the Chicago Mercantile Exchange.

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891013-0098. Digital Equipment Gets Pact
10/13/89
WALL STREET JOURNAL (J) DEC COMPUTERS AND INFORMATION TECHNOLOGY (CPR) FEDERAL GOVERNMENT (FDL) MAYNARD, Mass.

Digital Equipment Corp. said it was awarded a contract valued at as much as $97 million by the National Aeronautics and Space Administration's Ames Research Center in Mountain View, Calif.

The seven-year contract is for computers to be used in networks, Digital said. Shipments will begin in 30 days.

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891013-0097. Potomac Watch -- @ Child-Care: @ George Bush's @ Domestic Panama @ ---- @ By Paul Gigot
10/13/89
WALL STREET JOURNAL (J) CONGRESS (CNG) EXECUTIVE (EXE)

Congress is on the verge of passing a child-care bill that amounts to the largest expansion of government power in at least a decade. The same people who brought us the HUD scandal and Chicago's public schools are now going to make life better for our children.

The bill's progress is a study in the politics of entitlement. An unopposable idea -- "child care" -- becomes the engine in a drive for public subsidy. Democrats pile on as a way to please their various interest groups. Republicans can't decide whether to fight or cut a deal. Another social "ill" is thrown in the lap of bureaucrats to be solved.

All of this is as old as the Great Society, except that this time opponents had a sound alternative -- an increase in the tax allowance for children, plus a cash "rebate" for those who earn too little to pay taxes. The proposal would compensate, at least in part, for inflation's erosion of the value of the tax exemption for dependent children since 1948.

George Bush campaigned on this principle, and his pollster Robert Teeter believes it's a winning issue with the public. The idea is so good that smart liberals have hijacked it. Rep. Tom Downey, the New York Democrat, made it the major portion of his own child-care proposal.

In the politics of entitlement, however, tax relief is never enough. It doesn't employ enough people, create new social experiments or intrude into community life. The bills that have passed the House and Senate will do all of this, and more.

By one count, the House bill creates seven new programs. It imposes 183 new rules on states that want federal money. As the Heritage Foundation's Robert Rector points out, it calls for creating 38,000 local day-care commissions -- all answering to state regulators, who in turn answer to the Department of Health and Human Services. Somehow, these multitudes are supposed to do better by children than parents, relatives and neighbors.

While liberal Democrats are leading this charge, Republicans are the main reason it may pass. The White House started the retreat this summer by conceding to Sen. Bob Packwood (R., Ore.) the principle that mothers who work should be subsidized more than those who stay at home. The White House also went mute -- the downside of George Bush's conciliatory approach to Congress. "They never raised the philosophical issues" -- aid to parents versus aid to bureaucracies -- "in a way that would put pressure on Congress," says Gary Bauer, president of the Family Research Council.

Lobbyists, meanwhile, could spin out the demagoguery. Mailings from the main child-care lobby, the Children's Defense Fund, put it this way: "Vote For Children."

Their effort still might have failed in the House, however, if not for a supreme lobbying effort by the Democratic leadership. Having lost four big votes in a row, it didn't want to lose a fifth. "My perception is we won the debate about policy, but lost the vote," says Rep. Tom Tauke, the Iowa Republican who's fought for tax credits for two years. Sixteen Republicans, led by Rep. Christopher Shays of Connecticut, defected.

The last new entitlement, the catastrophic-illness bill, at least contained the seeds of its own destruction: the progressive tax on the elderly. This child-care bill contains the seeds of its own expansion.

The bill's new "standards," like all such government rules, will shrink the supply of casual day-care providers. Many will quit rather than endure 15 hours of training a year or get licenses. At the same time, the bill creates and subsidizes a new professional class of provider. These professionals, however well-intentioned, will become a permanent and articulate constituency for ever-greater subsidy -- which is of course precisely what the bill's sponsors want.

The bill accomplishes another critical goal of every entitlement lobby: It intentionally, if not explicitly, includes the middle class. Shrewd liberals understand that only a middle-class constituency can guarantee that an entitlement will become permanent. So despite rhetoric aimed at "helping poor children," the House bill expands Head Start to include families earning the median-family income of about $32,000 a year.

In a bizarre reversal of class warfare, the House and Senate bills even preserve the dependent-care tax credit. This may be the most egregious subsidy in the entire tax code, since its benefits go to everyone but the poor. Two alternatives defeated in the House would have eliminated this subsidy for couples earning more than $70,000, but the entitlement crowd wants something for Vogue readers, too. When Republicans do this sort of thing it's called "welfare for the rich."

Will George Bush now veto a day-care bill? Few are betting on it. He might if the bill were somehow stripped from the giant omnibus budget bill, which is why Democrats want to retain it as part of that package. Cashiering the entire omnibus bill would probably mean killing any capital-gains cut, too. To the gentrified Republicans who populate this White House, economic issues are the big political prize; social policy is largely a nuisance.

Despite some White House saber-rattling about a veto, Rep. Downey is probably right to say that "a kinder, gentler George Bush isn't going to hand us the child-care issue by vetoing this bill." Just as another Republican, Richard Nixon, gave the nation OSHA and the lawyers' subsidy known as the Legal Services Corp., George Bush is on the verge of accepting in all but name a federal Department of Child Care.

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891013-0096. Mazda's 2 Top American Aides at Plant @ In U.S. Quit, Are Succeeded by Japanese @ ---- @ By Gregory A. Patterson @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) J.MZD LABOR WNEWS AUTOMOBILES (AUT) DETROIT

For the second time in less than two years, the two most senior American officials at Mazda Motor Corp.'s U.S. manufacturing plant have resigned. This time the American managers were succeeded by Japanese officials.

James F. Korowin, vice president of manufacturing and operations, and C. Robert Leadbetter, vice president of personnel, resigned "to pursue other issues," Mazda said. Mazda announced the resignations late Wednesday, one day after results were announced for a vote of the plant's union-represented workers that changed the company's attendance policy.

The resignations were the latest revelation of managerial troubles at Mazda's Flat Rock, Mich., operations, which use Japanese management techniques in the heart of U.S. auto-industry territory.

In earlier reshufflings, Mr. Korowin's predecessor, Dennis Pawley, resigned in March 1988. Currently an executive at Chrysler Corp., Mr. Pawley has criticized Mazda's Japanese executives for being inflexible. Mr. Leadbetter's predecessor, David Merchant, resigned from the company last September.

A Mazda spokesman said the company's top Japanese officers were "dismayed" with how Messrs. Korowin and Leadbetter handled the negotiations that led to the vote on the attendance policy. The spokesman added, however, that even though the Americans were succeeded by Japanese managers, Mazda remains committed to "providing qualified Americans in ever-increasing roles of responsibility," at the plant.

In the vote earlier this week, workers approved a new attendance policy that triples annual bonuses for perfect attendance to $1,500, while limiting to four the number of absences for which workers will receive partial pay. Previously workers could receive partial pay for any absences approved by their supervisor; workers criticized that policy for allowing supervisors too much discretion.

The policy workers ultimately approved was a compromise plan developed after company officials and union members rejected a more liberal proposal that would have allowed workers to receive partial pay for 15 absences. Messrs. Korowin and Leadbetter were the company's chief negotiators in the talks that resulted in that proposal.

Negotiations on changing the attendance policy were prompted by the union, but they came in exchange for a union concession to allow Mazda greater flexibility in assigning overtime to skilled tradesmen.

Officials of United Auto Workers union Local 3000, which represents Flat Rock's 2,800 hourly workers, were disappointed with the resignations. "We felt we had developed a cooperative working relationship with those people," said Phillip Keeling, president of the local.

The state of labor relations at the Mazda facility are crucial to the UAW's attempt to prove it can work cooperatively with Japanese management, especially since Japanese auto makers plan to continue expanding their U.S. facilities. But the UAW also must prove to its members -- and to the nonunionized workers at Japanese-owned plants it hopes to recruit -- that it can win important benefits for its workers. Impressions of ineffectual leadership among its membership has led the national union recently to take a more aggressive posture toward the domestic auto makers.

Takeshi Itoh, formerly a senior adviser for operations, was named vice president manufacturing. Mr. Itoh will handle the bulk of Mr. Korowin's former responsibilities and will report to Osamu Nobuto. Mr. Nobuto, the top Mazda manufacturing official in the U.S., is more outspoken than other Japanese officials here; he recently criticized the UAW for failing to encourage better attendance among its members. Absenteeism at the Mazda plant reportedly averages 8% to 10%, significantly higher than absences at other Japanese-managed U.S. plants.

Mr. Leadbetter's duties will be assumed by Masahiro Uchida, the plant's executive vice president to whom Mr. Leadbetter had reported.

Mr. Leadbetter, reached by telephone at his home yesterday, declined to say specifically why he left Mazda. Currently looking for work, Mr. Leadbetter said his decision was "strictly personal," and that his relationship with Mazda was "positive and fulfilling." Mr. Korowin could not be reached for comment.

The personnel changes also include the appointment of Ray Hedding, who was named general manager of operations and will become the highest ranking American official at Mazda here. Mr. Hedding formerly was manager of Mazda's stamping operations in the facility.

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891013-0095. Who's News: @ Robert Trump's Atlantic City, N.J., Post @ Reflects Reputation as a Master of Detail @ ---- @ By Vindu P. Goel @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) WNEWS CASINOS AND GAMBLING (CNO)

When three top executives of Donald Trump's casino operation were killed in a helicopter crash Tuesday, he knew he needed someone trustworthy to help fill the void: his younger brother, Robert.

Quieter and more even-tempered than his aggressive, media-conscious older brother, Robert Trump satisfies Trump Organization's immediate need to stabilize its Atlantic City, N.J., operations. Wednesday, Mr. Trump was named to head the Trump Taj Mahal, soon to be one of the casinos there.

Such stability is crucial to Donald Trump, who says he remains determined to keep his promise to open the Taj Mahal, which will be Atlantic City's largest casino, "on time, on budget" by the end of next April.

Construction crews will have to be prodded, slot machines planted into the floor, middle managers and floor workers chosen and trained before the grand opening of the $1 billion complex. Robert Trump is known as a consummate details man.

In the months of negotiations between his brother and entertainer Merv Griffin for control of Resorts International Inc., the small points -- the number of Trump parking spaces Resorts would be allowed to use, for example -- were Robert Trump's forte.

"He worked hard, and he did try to focus on all the many, many details of the deal," recalls Morris Orens, one of Mr. Griffin's lawyers during the discussions.

Beyond any other considerations, 41-year-old Robert is a Trump. The elder Mr. Trump says that the two have been "great friends" since boyhood and they don't argue with each other.

But perhaps as important to Donald Trump is his brother's willingness to avoid the media spotlight. Robert "prefers to be behind the scenes, he told me once," says Dennis Gorski, a former Trump Castle official who worked closely with both men. "He doesn't get the ink his brother gets, and he doesn't want it."

Trump Organization said Robert rarely gives interviews. He was unavailable for comment for this article. Robert Trump is viewed as diplomatic and tactful. Mr. Gorski describes him as playing an effective counterpoint to Donald's hard edge when dealing with Atlantic City leaders and state casino officials.

Heading up the Trump delegation to the New Jersey Division of Gaming Enforcement when the Trump Castle casino was being built about six years ago, Robert Trump was a "delight to work with, very responsive, and very much oriented to the regulatory process," says Thomas O'Brien, director of the division at the time. As a consequence, the casino received a license in weeks instead of the usual period of months.

Although he is considered an effective administrator, the tall, sandy-haired Robert Trump is designated only an interim leader of the Taj Mahal operations. "It was a crisis and we had to do something," says a person close to Trump Organization.

To make the Taj Mahal a success, Donald Trump needs someone with the grandstanding style and hard-charging traits of Mark Etess, the flamboyant 37-year-old president of the Taj Mahal, who died in the helicopter crash. Mr. Etess had a love for the grand gesture, such as the Tyson-Spinks boxing match, which drew thousands to the Trump casinos last year, although it lasted only 90 seconds.

So far Trump Organization has kept quiet about who that successor might be, and where he might come from. Wall Street and industry competitors speculate that Mr. Trump will raid a rival casino operator, perhaps in Las Vegas.

"We're looking both from within and without,"says Donald Trump. "Everyone wants to head up the Taj, because it's the ultimate property."

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891013-0094. Who's News: @ Kemper Financial Services Inc.
10/13/89
WALL STREET JOURNAL (J) WNEWS KEMPER FINANCIAL SERVICES Inc. (Chicago)

Sandy Lincoln was named president of Kemper Asset Management Co., a unit of this financial services company. Mr. Lincoln, formerly managing director of asset planning for William M. Mercer-Meidinger-Hansen Inc., succeeds Leonard Spalding, who resigned earlier this year.

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891013-0093. Amex Names Ex-Congressman Chairman @ --- @ James Jones Offers @ Capitol Connection @ ---- @ By William Power @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) WNEWS STOCK MARKET, OFFERINGS (STK) SECURITIES INDUSTRY (SCR) NEW YORK

The once-mighty American Stock Exchange, which in recent years has fallen far behind the two other major stock exchanges, named as chairman a lobbyist and former U.S. House Budget Committee head.

James R. Jones, 50 years old, an influential figure in Washington for more than two decades, becomes the 15th chairman of the Amex. He succeeds Arthur Levitt Jr., 58, an Amex fixture for 11 years who says he will devote his time to publishing.

In bypassing Amex President Kenneth R. Leibler for Mr. Jones, the Amex seems determined to carry on Mr. Levitt's game plan to establish the exchange as a Washington power. While its importance as a securities exchange has declined markedly since the 1970s, the Amex under Mr. Levitt had kept a high profile in Washington, lobbying for legislation that appeals to the "mid-range, growing" companies that Amex wants to attract and keep. Mr. Jones, who has no experience on Wall Street, says he "fully subscribes" to such an emphasis for the exchange.

The Amex's focus on Washington has been seen by some on Wall Street as an admission that the exchange will never again be the rival of the New York Stock Exchange that it was from Revolutionary War days until the 1970s.

In fact, the relatively tiny exchange is sliding into obscurity.

In terms of trading, the Big Board and the Nasdaq over-the-counter market on a typical day do more stock trading within the first hour than the Amex does all day. Even the Midwest Stock Exchange surpassed the Amex in total volume last year -- 2.7 billion shares to 2.5 billion. The Big Board's volume was 40 billion shares and Nasdaq's was 21.5 billion.

The Amex currently has half the number of companies listed for trading as the New York Stock Exchange and a fifth of the Nasdaq market.

The Amex has had some victories recently. The Amex index, which measures the performance of its stocks, had a big (but little publicized) 17.5% gain in 1988 -- the greatest among any major U.S. market. And the Amex stole more Nasdaq over-the-counter trading companies last year than before.

Mr. Leibler, 40, said he will stay on as Amex president and work with Mr. Jones. Mr. Leibler, who has run the Amex's day-to-day operations as president since January 1986, said there's "no overlap" between his and Mr. Jones's skills.

Mr. Jones, an Amex board member since January 1987, has wielded influence in Washington for more than two decades, starting as a top White House aide to Lyndon Johnson while still in his 20s. With his long service in Congress, including a stint as chairman of the budget committee, the former Oklahoma lawmaker is respected by many politicians. He will take office as Amex chairman Nov. 10, six months after Mr. Levitt announced he would leave the exchange.

At an Amex news conference, Mr. Jones said his lack of securities-industry experience isn't as important as his managerial skills. A decade ago, he said, many people wondered whether "there was a future for the Amex." But he said he hopes to be "at least partially as successful" as Mr. Levitt has been in keeping the exchange going.

Amex officials say talk of the exchange's lowly status is unfair, because it neglects the Amex's importance as the nation's second biggest options exchange, behind the Chicago Board Options Exchange.

Mr. Jones visited Amex traders on the cramped trading floor in lower Manhattan after the news conference. Traders said later that they don't expect Mr. Jones to be simply a Washington lobbyist.

Stephen Schoenfeld, who is Shearson Lehman Hutton Inc.'s head of Amex floor operations, said, "I'm hoping {Mr. Jones} is there for the leadership we need in the '90s. The chairman has to lend direction and also help to attract more listed companies." The Amex had 1,161 companies listed for trading in 1976; by last year, the number had dwindled to 896. In contrast, the Big Board's number of companies remained at a steady 1,681, and the Nasdaq's roster ballooned to 4,451.

The Amex's daily trading volume is relatively anemic, at an average 9.9 million shares a day in 1988; the Big Board traded an average of 161.5 million shares a day in the same year. "I think everyone would like to see an average of at least 30 million a day," and if so, "everyone would be very happy," said Mr. Schoenfeld.

Mr. Jones ran for the Senate as a Democrat in 1986, but lost to incumbent Sen. Don Nickles. Since leaving Congress, Mr. Jones has prospered as a Washington lobbyist representing such high-profile clients as Toshiba Corp. and J.P. Morgan Securities. He successfully lobbied to limit U.S. sanctions against Toshiba after one of its subsidiaries came under fire for selling the Soviet Union highly sophisticated milling machines that enabled that nation to make advanced submarine propellers. The sale coincided with a sharp drop in the ability of U.S. forces to find or track Soviet submarines.

House Budget Committee Chairman Leon Panetta (D., Calif.), who served on the budget panel when Mr. Jones was chairman, called him "exceedingly bright and knowledgeable about both budget and economic issues." Mr. Panetta predicted Mr. Jones would bring to the Amex "the expertise of knowing how the Congress operates, at a time when the Congress is going to be paying a lot of attention to the stock markets."

---

David Rogers in Washington contributed to this article.

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891013-0092. ...And More Dependent Disabled @ ---- @ By Walter Y. Oi
10/13/89
WALL STREET JOURNAL (J) LAW AND LEGAL AFFAIRS (LAW) CONGRESS (CNG)

The lower wages and labor force participation rates of the disabled are often attributed to their diminished ability to work. I believe that this explanation ignores an important and neglected dimension -- namely, that disability steals time. Disabled people need, on average, more hours per day for sleep and personal care, are more likely to be incapacitated by illness (meaning more sick days a year) and have shorter life expectancies (meaning fewer potential working years in a lifetime).

The U.S.'s disability policies are mainly directed at providing services to restore the individual's health or to supply training that would maximize the capacity to use the remaining, smaller, stock of health capital. In the past decade, these initiatives have been understood as helping the disabled toward independence: control of their own lives, and participation in the activities and markets open to the non-disabled.

The Americans With Disabilities bill under consideration by Congress tries to help the disabled by granting them rights to jobs, workplace accommodation and access to public places and services. But the disabled cannot have it both ways. They cannot both demand independence and insist upon rights to equal job opportunities, equal access to services and more equal incomes when the social costs of those rights are imposed upon the general public. In order to enforce the rights granted under the bill, disabled people will have to turn to lawyers and regulators, because the enforcement process promises to be a litigious one.

Broadly defined rights, enforced by a combination of civil lawsuits and regulations, can easily be confused with entitlements. Entitlements can transform a poorly defined target population -- we cannot precisely identify the fuzzy boundaries that define the disabled -- into a cohesive, articulate and vocal minority, dependent on the federal government for its continued well-being. In order to enforce their rights, disabled people will have to turn to lawyers and regulators. More and more people will identify themselves as disabled, and more resources will be allocated to litigation and regulation. Charles Murray may get another opportunity to test his "Losing Ground" model.

---

Mr. Oi teaches economics at the University of Rochester. He is blind.

(See related editorial: "Toward More Crippling Lawsuits..." -- WSJ Oct. 13, 1989)

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891013-0091. International: @ Lawson Fails to Announce @ New Steps to Boost Pound @ ---- @ Special to The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) EUROP INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) FOREIGN-EXCHANGE MARKETS (FRX) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) LONDON

British Chancellor of the Exchequer Nigel Lawson pledged to continue the government's strategy of fighting inflation with a strong pound and high interest rates for as long as necessary.

But in a speech at the Conservative Party's annual conference, he declined to announce any policy change to provide explicit support for the beleaguered pound. Mr. Lawson also warned there are "no easy answers" to the problems facing the British economy.

He also avoided any mention of the government's timing to take the pound into the exchange rate mechanism of the European Monetary System.

Ian Harwood, senior economist at Warburg Securities, said the currency markets were disappointed by Mr. Lawson's failure to explain how he intends to continue supporting the pound.

After the party speech, Mr. Lawson refused to comment on suggestions that he might outline the government's EMS moves in his annual speech to the London financial community.

That address traditionally includes comments on monetary policy and a review of the government's economic achievements of the past year. Warburg's Mr. Harwood noted that the speech has also been used as "a platform for the announcement of policy changes."

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891013-0090. Toward More Crippling Lawsuits... @ ---- @ By Christopher Cox
10/13/89
WALL STREET JOURNAL (J) LAW AND LEGAL AFFAIRS (LAW) CONGRESS (CNG) JUSTICE DEPARTMENT (JUS)

The Americans With Disabilities bill now pending in Congress would have enormous consequences not only for its intended beneficiaries but also for our entire legal system. As it happens, I've had experience in both areas.

As law clerk to a federal judge, a lawyer in private practice, and finally a counsel to President Reagan, I've seen how the creation of new "rights" by both legislatures and judges has resulted in ever more expensive and expansive litigation. I've seen how even defendants who ultimately prevail in a lawsuit can lose hundreds of thousands of dollars in legal fees as a case takes years to come to trial.

Small wonder that our nation is awash in lawyers, and that all of us are burdened in hundreds of hidden ways by the costs and side effects of proliferating lawsuits. So it should be with some trepidation that we consider a new federal law that would, by its own terms, create 43 million potential plaintiffs.

According to the preamble of the disabilities bill, that's how many people would be entitled to sue not only their employers but also restaurants, private offices, hardware stores, bakeries, gas stations, or indeed almost any private establishment. (Of course, federal, state and local government agencies will also be subject to suits.)

I can understand the motivation. Shortly before I began practicing law, a Jeep that I was driving through a muddy rain forest in Hawaii flipped, landing on top of me and pinning me underneath. My spine was shattered. For weeks afterward, I lay in a hospital, paralyzed from the waist down.

Life seems very different from the perspective of one who cannot walk, or even use a restroom normally.

I was lucky enough to recover fully. That brief taste of a lifetime handicap, however, made me appreciate those who have to overcome such obstacles in our society. As a result, I'm especially keen on providing wheelchair ramps, lifts, signers for deaf people, and readers for the blind. If that was what the disabilities bill were all about, I'd be leading the charge for its passage. In fact, however, the legislation is one of the most poorly drafted pieces of legal work I have seen during more than a decade as a lawyer. It's a model of vagueness. Who is disabled? Anyone with an impairment that "substantially limits one or more of the major life activities," whatever that means. Congressional sponsors of the bill concede that, at a minimum, mental disorders, alcoholism and past drug abuse are all included.

What is required of you to avoid being sued? Well, you can't "fail to make reasonable modifications" in your "policies, practices, and procedures." And, of course, you can't "discriminate." The bill puts the burden of proof on you to justify any disparate treatment.

Just what constitutes "discrimination" under the bill? No one knows for sure, because the bill gives almost no guidance. Believe it or not, the bill does say this: You can be sued if you provide -- to anyone who is later determined to be "disabled" -- a benefit that, while different, is greater than what you offer to non-disabled persons. One can only imagine what the courts will decide when the creativity of thousands of plaintiffs' lawyers is applied to this section.

The consequence of all of this legislative ambiguity is that virtually every plaintiff -- the unscrupulous as well as the deserving -- will be able to establish a cause of action that makes it past the procedural screens of demurrer and summary judgment. Once secure in the long and slowly moving queue of cases headed for trial, a plaintiff will almost certainly be able to settle for a substantial sum. Businesses and employers, lacking contingency-fee lawyers, will face the choice of paying, say, $40,000 to an individual at a relatively early stage in the proceedings, or instead paying the even higher lawyers' fees necessary to prepare their case for trial up to six years later.

Even without this new windfall for plaintiffs' lawyers, the federal courts are already so clogged that few cases reach trial. According to the Administrative Office of U.S. Courts, only 4.9% of the 238,140 cases that were ended during the 12-month period ended June 30, 1988, had reached trial. In other words, the real world is far different than imagined by proponents of the disabilities bill. In more than 95% of the cases, a judge would never determine that an individual defendant was reasonable or unjustified; instead, those businesses -- travel agents, libraries, schools, bowling alleys -- would simply have to ante up.

Attorney General Dick Thornburgh has stressed that he is steadfastly opposed to creating any additional incentives for litigation. Indeed, the administration succeeded in getting Senate drafters to limit suits for damages to the Justice Department, and not to private lawyers. That's the right idea, but the bill still permits private civil suits for back pay, and plaintiffs' attorneys fees are recoverable. Moreover, private litigants are authorized to sue for injunctive relief that potentially could cost a business or individual defendant far more than the damage to any single plaintiff, thus generating enormous settlement value. That's why I'll seek to amend the bill to eliminate private suits, leaving the government to adopt clarifying regulations and enforce them in the courts.

It would be unfortunate if, through poor legal craftsmanship, pursuit of such a noble cause should lead to turning civil society over to the near-total governance of lawyers and courtrooms.

---

Rep. Cox (R., Calif.) is on both the Public Works and Transportation and the Government Operations Committee.

(See related editorial: "...And More Dependent Disabled" -- WSJ Oct. 13, 1989)

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891013-0088. White House Gets Behind Effort to Shift @ Oversight of Bell System Breakup to FCC @ ---- @ By Mary Lu Carnevale and Peter Truell @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) AIT BLS BEL NYN PAC SBC USW T TELEPHONE SYSTEMS (TLS) FEDERAL COMMUNICATIONS COMMISSION (FCC) EXECUTIVE (EXE) JUSTICE DEPARTMENT (JUS) CONGRESS (CNG) COMMERCE DEPARTMENT (COM) WASHINGTON

Top policy makers in the Bush administration have agreed to push legislation to shift jurisdiction over the Bell System breakup decree from a federal court to the Federal Communications Commission.

A move to the FCC could eventually allow the regional Bell companies to enter such lucrative information services businesses as electronic yellow pages, stock quotes and sports information. It also could also free the seven Bell companies to engage in manufacturing telephone equipment. But the Bells, which provide monopoly local phone service, aren't likely to get permission anytime soon to enter the long-distance market.

Since the court-supervised breakup of the Bell System Jan. 1, 1984, the seven companies have been lobbying hard for legislation to lift the restrictions on their businesses. The decree bars them from entering the long-distance and manufacturing businesses and from providing the content of information services. The Bells have argued that Judge Harold Greene, who oversees the decree, has been too restrictive and that the process of obtaining waivers moves much more slowly than the rapidly changing telecommunications marketplace.

Administration officials have been meeting with lawmakers to build support for the effort, but getting Congress to focus on esoteric telecommunications issues will be difficult. "The House is okay on the shift to the FCC," a senior administration official said. "But it simply may not excite the Senate." The administration hopes to complete a legislative proposal by year end, the official said.

The senior administration official said that at two recent meetings, the Economic Policy Council, which is headed by Treasury Secretary Nicholas Brady and includes Commerce Secretary Robert Mosbacher and Budget Director Richard Darman, discussed strategies for pitching such legislation to Capitol Hill.

The official said the administration hasn't decided whether to draft its own bill, which would shift jurisdiction from the decree court to the FCC, or to support a measure already introduced by Rep. Al Swift (D., Wash.) and Rep. Thomas J. Tauke (R., Iowa) eliminating specific restrictions on electronic publishing. If jurisdiction is transferred, efforts to lift the restrictions could still take months. Nevertheless, the FCC, with its emphasis on deregulation rather than curbing antitrust abuses, is considered a friendly forum for the regional Bells.

What form the legislation may take and whether Congress will be ready to act on it next year, as hoped, is uncertain. Even so, the administration's decision to set in motion the process of freeing the regional Bells from most consent-decree restrictions adds significant weight to their arguments that the consent decree hobbles them -- and their customers -- in the global race into the Information Age.

Even without support from the Bush administration, the effort to free the Bells from Judge Greene's jurisdiction has met with strong resistance from politically powerful opponents: American Telephone & Telegraph Co. and others in the long-distance industry, small-equipment manufacturers and the American Newspaper Publishers Association.

In a position paper presented to the Economic Policy Council, the Commerce Department noted some big advantages in deferring a decision. Policy makers would have more time to study thorny legal questions and see what the appeals court here has to say about some important rulings from Judge Greene. The paper also said a delay "keeps the administration out of a highly contentious domestic policy issue. Avoids pursuing proposals that have little support in the Senate or that might ultimately have provisions the administration should not support."

The Commerce Department, rather than the Justice Department, is taking the lead on the new administration push, the senior official said. Justice's new antitrust chief, James Rill, apparently has ordered a review of the consent decree issues and the various positions within the telecommunications industry.

The antitrust problems could be significant. The core business of the seven regional Bell companies is providing monopoly local phone service, and the top policy makers have explored ways to safeguard against harmful monopolistic behavior.

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891013-0087. Senate Begins @ Debate on Bill @ To Cut Deficit @ --- @ Democrats Expect Measure @ To Win Quick Approval, @ Don't See Gains-Tax Cut @ ---- @ By Jeffrey H. Birnbaum @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) LABOR TAXES ECONOMIC NEWS (ECO) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) FINANCIAL, ACCOUNTING, LEASING (FIN) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA) INSURANCE (INS) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BOND MARKET NEWS (BON) ENVIRONMENT (ENV) CONSTRUCTION, MATERIALS (CON) AIRLINES (AIR) OIL, INTEGRATED MAJORS (OIL) TRANSPORTATION DEPARTMENT (TRN) FEDERAL GOVERNMENT (FDL) CONGRESS (CNG) HEALTH AND HUMAN SERVICES (HHS) WASHINGTON

The Senate began debating its $14.1 billion deficit-reduction bill for fiscal 1990, with Democratic leaders asserting that the measure will be approved quickly and without a cut in the capital-gains tax.

Senate Majority Leader George Mitchell told reporters that "without doubt," he had enough votes to block the capital-gains tax cut from being considered as part of this bill. Although senators barely touched the legislation yesterday, Sen. Mitchell said he planned to work late tonight to complete the legislation and send it to a House-Senate conference.

But the Maine Democrat acknowledged that Congress probably won't complete work on the bill in time to avoid across-the-board spending cuts mandated by the Gramm-Rudman deficit-reduction law. The spending cuts are to take effect Monday.

Keeping a capital-gains tax reduction off the bill would be a major victory for Senate Democratic leaders, particularly Mr. Mitchell and Chairman Lloyd Bentsen (D., Texas) of the Senate Finance Committee. It would represent a setback, though not yet a defeat, for the Republicans and President Bush, who have made the tax cut a priority.

Last night, Senate GOP Leader Robert Dole of Kansas said that Republicans would probably offer a capital-gains proposal today. "We're going to offer it every chance we have," he told reporters.

Democratic leaders have argued that the gains tax reduction would be a boon to the rich and would widen the federal budget deficit. Republicans insist that the cut would stimulate much-needed investment.

GOP advocates of the tax change say their fight to get the cut won't end with the Senate's deficit-reduction bill, however. Other legislative vehicles could carry their amendment, they say, and Senate leaders acknowledge that a majority of the senators would vote for a gains tax cut of some kind. But more immediately, a capital-gains tax cut already is part of the companion deficit-cutting bill that passed the House, presaging a rough-and-tumble House-Senate conference.

The heart of the massive deficit-cutting bill is a tax and spending measure that was approved last week by the Senate Finance Committee. An important feature is an expansion of the deduction for contributions to individual retirement accounts for those who don't currently qualify for them. The proposal has a strong chance of enactment, given the Bush administration's recent endorsement of the concept.

The Finance Committee portion of the bill includes both tax increases and tax reductions, resulting in a net increase of $5.3 billion in taxes in the fiscal year that began Oct. 1. Taxes would be raised through a laundry list of mostly obscure revenue-law changes, many of which are contained in a bill approved by the House.

The measure also provides tax reductions, including the repeal of a law called Section 89, which compels companies to provide comparable health benefits to both highly paid executives and rank-and-file workers. The House already has voted for repeal.

On IRAs, the finance panel's bill would provide a 50% deduction for IRA contributions by individuals who aren't already eligible, and permit penalty-free withdrawals for purchases of a first home and spending for higher education. It also would extend several expiring tax breaks.

In addition, the bill would reduce Medicare spending in fiscal 1990 by about $3 billion, in part by curbing reimbursements to physicians. The plan also would impose a nationwide limit on Medicare payments to doctors, but in a way that is far more acceptable to the doctors' lobby than a tough plan approved by the House.

Yesterday, Health and Human Services Secretary Louis Sullivan mounted a campaign to halt Senate efforts to take the Social Security Administration out if the HHS. In a letter to all senators, he said that "I would recommend a veto" of the entire bill if it removed Social Security from the department. The bill also would raise spending in several areas, particularly for senior citizens. The measure would raise the income threshold beyond which senior citizens have their Social Security benefits reduced.

The tax increases include provisions that would prevent companies that have made leveraged buy-outs from getting federal tax refunds resulting from losses caused by interest payments on debt issued to finance the buy-outs. The bill also would close a loophole regarding employee stock ownership plans, effective June 6, 1989, that has been exploited by investment bankers in corporate takeovers, and would curb junk bonds by ending tax benefits for certain securities, such as zero-coupon bonds, that postpone cash interest payments.

It also would raise $851 million by repealing an automatic reduction in airport and airway taxes, speed up the collection of the payroll tax from large companies, effective August 1990, and impose a tax on ozone-depleting chemicals, such as those used in air conditioners and in Styrofoam.

Other provisions would increase tax credits for child care and for low-income families. The bill also would extend several popular tax credits that are scheduled to expire at year's end. It would extend for two years, through Dec. 31, 1991, the credit that helps employers hire low-income workers, and the credits that encourage solar, geothermal and ocean-thermal energy projects by businesses.

Permanent extensions would be granted credits that assist the construction of low-income housing and provide incentives for corporate research-and-development spending. The House also voted to extend these two tax benefits permanently.

In addition to the Finance Committee's measure, the bill includes spending cuts and increased federal fees. Among its provisions are:

-- Authority for the Federal Aviation Administration to raise $239 million by charging fees for commercial airline landing rights at New York's LaGuardia and John F. Kennedy International airports, O'Hare International Airport in Chicago and National Airport in Washington.

-- Imposition of a $3-per-passenger fee on international commercial airline flights leaving the U.S. The fee is expected to generate $111 million.

-- A fivefold increase in the maximum Occupational Safety and Health Administration penalties, raising $65 million in fiscal 1990.

-- Reinstatement of a three cent-per-barrel fee on oil produced by offshore wells to fund a proposed oil spill-cleanup fund. It is estimated to raise $9 million in fiscal 1990.

---

John E. Yang contributed to this article.

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891013-0086. Enterprise: @ Computer Vaccines or Snake Oil? @ ---- @ By Michael Selz @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) SOFTWARE (SOF)

For Winn Schwartau, these are frenetic days. He has granted interviews almost daily for the past month. This past Wednesday, he appeared on the "CBS Evening News." "I haven't seen a media event of this magnitude in my lifetime," Mr. Schwartau says.

Data-destroying computer viruses, like the so-called Friday the 13th or Columbus Day virus that may start infesting computers today, are spreading. Mr. Schwartau and a handful of other entrepreneurs claim to have the cure: software that prevents viruses from infecting a computer system and detects, identifies and removes viruses already there.

Every vaccine -- and its vendor -- deserves extreme scrutiny, says Harold Highland, a professor emeritus at the State University of New York and editor in chief of the scholarly journal Computers & Security. "The virus threat is a low probability, high consequence threat," he says. "The chances of getting hit may be smaller than being hit by lightning, but when it strikes, it's a calamity."

Every anti-virus product also warrants serious consideration, he says. But, he warns, "in most cases, anti-viral products have been produced too quickly and have not been fully tested." Of the 20 companies selling vaccines that were reviewed in a book Mr. Highland recently completed, "At least a third of them have already gone belly-up," he says.

Some of the vaccine makers' hype is stirring a controversy within the computer-security industry. But the companies seem to be raking in money. In the past three weeks, Mr. Schwartau says his company, American Computer Security Industries, Nashville, Tenn., has sold 50,000 copies of its anti-virus software.

As the computer virus threat has grown, 50 companies, including his, have emerged to pitch anti-virus products to anxious computer users, says Robert Campbell, president of Advanced Information Management Inc., a Woodbridge, Va., computer-security consulting firm. Following the publicity about the so-called Friday the 13th virus, Mr. Campbell adds, "we can expect a dozen or two more."

But many computer industry consultants and vaccine vendors themselves say some zealous vaccine vendors are employing exploitative practices not unlike an unscrupulous insurance salesman after a hurricane or a personal-injury lawyer at a plane crash.

There has been price-gouging: "I have heard of people charging absolutely exorbitant prices," Mr. Schwartau says.

Michael Corby, a Massachusetts information management consultant, says the computer-security industry is so concerned about "unqualified people masquerading as experts" to cash in on the virus scare that it is planning a special program to certify the skills of professionals in the field. The project's sponsors are the Data Processing Managers Association, Information Systems Security Association, Security Computer Institute and several federal agencies in the U.S. and Canada.

"There's a lot of profiteering going on," Mr. Corby says. "A lot of individuals have seen an opportunity to create businesses that don't solve any questions about the security, reliability or integrity of computer data."

Except for International Business Machines Corp., which is offering for $35 a copy software that fights just the viruses that may attack today, the emerging vaccine-vendor field is made up of small, little-known entrepreneurial outfits. Some were created solely to sell anti-virus products. Others were already operating as computer-security consultants or software-development firms and entered the field as a sideline. Many of them are booming.

Eric Hansen, vice president of software developer Digital Dispatch Inc., St. Paul, Minn., has sold 6,000 copies of Data Physician, its anti-virus software, during 1988 and 1989. At $99 a copy for the version used by corporations, the product now accounts for one-third of the firm's total revenue. At Pittsburgh's ASP Inc., which introduced its first anti-virus software in 1985, "We shipped out 80 copies (at $35 each) last week," says founder Fred Cohen, who presented the first computer virus to the research community in 1983.

After adding Certus, a $189 anti-virus computer program, to its line of systems management software in early 1988, Foundation Ware Inc., Cleveland, has quadrupled sales every quarter, says founder Peter Tippett. At McAfee Associates, a Santa Clara, Calif., software-development firm that offers more than a half-dozen anti-virus computer programs, president John McAfee says Viruscan, his most popular product, "was an instant success within a week of coming out with it." The bulk of Mr. McAfee's revenue now comes from large corporations that pay "several dollars per computer" to use his software at certain sites. And, he adds, "We haven't spent a penny on advertising."

Researchers began developing computer vaccines shortly after the first computer virus was discovered in 1983. But experts say even the products sold by the most reputable vendors in this fledgling industry aren't certain to protect computers, because new kinds of viruses are appearing at such a rapid rate. You wouldn't know it, however, listening to claims of some of the vendors themselves. Mr. Cohen says, "I have the best" software because it "detects any virus, whether we know about it or not." With a little updating, so can Mr. Schwartau's, says Mr. Schwartau. "No other company can do that," he adds. Unless you believe Mr. McAfee, who insists his software does as well, making it "without a doubt the world's largest selling anti-viral product."

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891013-0085. Notable & Quotable
10/13/89
WALL STREET JOURNAL (J)

From "Adam Smith's Welfare State," by Adam Meyerson, in the fall issue of Heritage Foundation's Policy Review magazine, which he edits:

The compassionate populism that drew Smith to capitalism also led him to support government programs that genuinely help people. Smith did not write in The Wealth of Nations that an "invisible hand" always connects the pursuit of self-interest in the marketplace to the interest of societyonly that it "frequently" does so. And, despite his suspicion of those clamoring for an expansion of government -- especially for merchants and manufacturers seeking monopoly power through regulation -- he believed government has important responsibilities that the marketplace alone cannot provide for. . . .

Smith was willing to entertain departures from the marketplace wherever complete economic freedom would lead to human suffering. Should the abolition of tariffs throw thousands out of work, for example, he wrote that "Humanity may . . . require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection." In most cases, he argued, restrictions on economic freedom cause more suffering than they alleviate; thus price controls on corn convert the inconveniences of a shortage into the miseries of a famine. But where freedom can genuinely be shown to lead to suffering, he would not dogmatically oppose government intervention.

891013-0084.
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891013-0084. REVIEW & OUTLOOK (EDITORIAL): @ The Capital-Gains Hostage
10/13/89
WALL STREET JOURNAL (J) TAXES ECONOMIC NEWS (ECO) EXECUTIVE (EXE) CONGRESS (CNG)

Presidents make poor hostage negotiators. This thought comes to mind as we watch President Bush and his team frantically trying to liberate something called a "capital-gains cut" from the political dungeons on Capitol Hill. We're in favor of producing a cut in the capital-gains rate, but we'd hate to see the Bush team end up in the cold light of day looking like Desert One.

We stood back a step from this melee a few days ago to suggest that Presidents would fare better in such negotiations if they were armed with line-item-veto authority. But, we hear, the administration's negotiators are too busy negotiating to consider firing an item veto at the reconciliation package. That's pretty ironic, because it looks to us as if Majority Leader George Mitchell already is exercising item-veto authority over the capital-gains proposal.

What Senator Mitchell is doing certainly quacks like an item veto: He's using Senate procedures, from the 60 votes needed to override the Byrd "germaneness" rule to a potential filibuster, to kill one item in a larger bill. To counter this arsenal of congressional-item vetoes, President Bush has essentially nothing other than the current round of frantic negotiation and vote-begging. The President ends up looking little different than any lobbyist wandering the halls of the Senate office building, looking for a "vehicle" to carry his capital-gains cut. We're perplexed that Presidents don't balance the odds by laying stake to an item-veto power of their own.

Meanwhile, one part of the White House negotiating team roams the Capitol Hill frontier, trying to find a capital-gains proposal it can call its own. We recall that Mr. Bush campaigned on an easily understood plan: a permanent cut in the capital-gains rate to 15%. The cognoscenti explain, however, that an up-or-down vote on something so clean and efficient isn't possible. The Democrats' class-warrior leadership vetoes the possibility of such a vote, and the party's capital-gains enthusiasts can't let a Republican President take sole credit for another tax cut.

In hindsight, of course, it would have been nice if the White House or its allies in Congress had worked out a strategy and gone on the offensive early with a clean proposal. Mom and Pop support was obviously waiting to be tapped. In the event, Democratic Rep. Ed Jenkins took the initiative by proposing a rate cut to 19.6%. Though on balance a positive step, the Jenkins proposal was hostage to the deficit: The lower rate would last only two years to produce a quick revenue spike, then ascend back to 28% with indexation. The White House signed on, Democrats heard from back home, and the proposal prevailed.

Mr. Bush's representatives are now over in the Senate considering an entirely different proposal under discussion by Democrat David Boren and Republican Bob Packwood. The exact terms and numbers are fluid, but there'd essentially be separate sliding-rate schedules for new and current assets. For new assets, it likely would establish a capital-gains rate of around 26.6% on short-term gains, with the rate descending in one-year increments of 5% until it reaches an effective rate of 14% on assets held for 10 years. All this would be theoretically permanent.

The sliding scale of course presumes to sanctify one kind of economic activity, "long-term investing," over another. By giving the shorter holding period a minimal cut, it reintroduces pre-1986 notions of progressivity to punish disfavored economic participants. Whatever the economic basis for the sliding scale, its rationale reflects a brand of tired economic conservatism not seen the past eight years. It would be seen as a victory for white-shoe investors over the entrepreneurial buccaneers, the people who finance the riskiest start-up firms, take their relatively short-term gains if they occur and reinvest them in another high-risk venture.

We recognize the arguments in favor of the sliding scale. It's a tax cut, it's permanent and passage would show that coalitions in both chambers support economic growth. The role played by Senator Boren and Mr. Jenkins shows the Democrats may yet have a national future. We'd hate, though, to see the Bush White House give up more than it actually gets. The capital-gains cut Mr. Bush campaigned on is a winning political issue and the House debate proved it has populist appeal. If the price demanded by Mr. Mitchell gets too high, then a President rocking along with a 60%-plus approval rating should consider running the capital-gains cut back up the flagpole in 1990 and leaving it there until he gets the kind of cut he campaigned for.

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891013-0083. NWA Confirms It Placed @ Major Order With Boeing
10/13/89
WALL STREET JOURNAL (J) NWA BA AIRLINES (AIR) AEROSPACE (ARO)

NWA Inc. confirmed that it placed an order with Boeing Co. for as many as 90 jetliners for a total $5.2 billion.

The order by the Minneapolis-based parent of Northwest Airlines was for $2.7 billion of 40 mid-range 757s and six long-range 747-400 jumbo jets. The remaining amount represents the value of 40 options for the 757 narrow-bodied jetliners and four options for the 747-400s.

Until the carrier's new owner, Alfred Checchi took control of NWA in August following a $3.65 billion buy-out, many industry observers figured that Europe's Airbus Industrie had the inside track on winning plane orders from NWA.

In recent years, Airbus had won Northwest orders and options for 136 planes in large part because it had forged a strong relationship with Steven G. Rothmeier, who resigned two weeks ago amid reports that he was chafing under the company's new ownership.

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891013-0082. Fund to Spin Off Assets @ For Manager to Handle
10/13/89
WALL STREET JOURNAL (J) INSURANCE (INS) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) DIVIDENDS (DIV) MUTUAL AND MONEY-MARKET FUNDS (FND) BOSTON

New England Mutual Life Insurance Co. said it plans to spin off, in a new subsidiary, the $2.2 billion in assets handled by star money manager G. Kenneth Heebner.

Mr. Heebner and Robert Kemp, president and chief executive officer of New England Mutual's Loomis, Sayles & Co. money-management unit, will take a 25% equity stake in the new subsidiary. The two also would have an option to buy "at least another 25%," said Mr. Kemp, who will remain at Loomis Sayles until a successor is named.

Mr. Heebner, who currently directs Loomis Sayles' Capital Growth Management division, would continue to manage most of the half-dozen mutual funds he now runs, as well as his current institutional accounts. Management of the $63 million New England Equity-Income Fund was handed over to Don Shepherd, a money manager in Loomis Sayles' Pasadena, Calif., office. Mr. Shepherd also would take over management of the $152 million New England Retirement Equity Fund, Mr. Heebner said.

Among the several funds Mr. Heebner will keep is New England Zenith Capital Growth, whose 598.7% total return over the past five years is tops among all mutual funds tracked by Lipper Analytical Services Inc.

Trustees and shareholders of the several funds that would follow Mr. Heebner must approve the transfer of assets to the new subsidiary.

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891013-0081. Washington Wire: @ A Special Weekly Report From @ The Wall Street Journal's @ Capital Bureau @ ---- @ Compiled by Ronald G. Shafer
10/13/89
WALL STREET JOURNAL (J) LATAM EUROP FREST CCB FINANCIAL, ACCOUNTING, LEASING (FIN) ECONOMIC NEWS (ECO) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) DRUG MANUFACTURERS (DRG) AIRLINES (AIR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) EXECUTIVE (EXE) FEDERAL RESERVE BOARD (FED) CONGRESS (CNG) FOOD AND DRUG ADMINISTRATION (FDA) COMMERCE DEPARTMENT (COM)

BUSH FACES growing criticism that his actions don't live up to his words.

Even supporters grouse about confusion over Panama and slow responses to events in Eastern Europe. "I'm frustrated there is something of a lack of resolve in foreign policy," says Indiana Republican Rep. Burton. Conservatives grumble that Bush is too quick to avoid clashes at home and abroad. "Anytime he can negotiate a solution, he'll do it," says activist Howard Phillips.

Lawmakers chafe that Bush doesn't back up proposals, such as on education. "The appeal of the president's positions will gradually erode as the gap between rhetoric and reality" grows, predicts Senate leader Mitchell. Bush backed saving catastrophic-health care, but "the administration didn't lay its reputation on the line for this vote," gripes Ohio GOP Rep. Gradison.

One bright spot for Bush: His reluctance to intervene in Panama should be supported by Latin American leaders at this month's summit in Costa Rica.

EAST GERMAN TURMOIL poses a tricky foreign-policy test for the U.S.

Senior national-security aides concede they were surprised at the mass exodus by East Germans. West German officials, including visiting Defense Minister Stoltenberg, advise the U.S. of dangers no matter what happens. East Berlin may violently suppress demonstrations while NATO stands by helplessly. Or it may let people leave, swamping Bonn's ability to absorb them.

Officials estimate that as many as 10% of East Germany's 18 million people could flee. To discourage vast new emigration, Bonn is prepared to aid East Berlin if economic and political reforms are made. But aiding East Germany makes U.S. officials uneasy. "We don't think of them the way we do Hungary or Poland," one U.S. official says.

FED FEARS about its independence slow moves to cut interest rates.

Fed officials resent administration pressure to ease rates in response to a slowing economy. They worry, too, about congressional hearings later this month on legislation that would limit the central bank's independence. "They don't like anything that puts pressure on them from the outside," says a recent Fed visitor.

Treasury orders for the Fed to intervene heavily in foreign-exchange markets further aggravate the situation. The Fed tries to play down Chairman Greenspan's comments in Moscow this week denouncing efforts to control exchange rates. But one administration official acknowledges that the Fed chief may have been sending a message: "Greenspan's a savvy guy."

Greenspan also grows impatient with administration efforts to develop a serious attack on the budget deficit.

COUP REBUFF? Administration officials say they asked congressional intelligence committees earlier this year to go along with specific new authorization for U.S. participation in Panama coup planning, protecting officials against accusations they violated a ban on assassinations if Noriega were killed. But lawmakers were cool to the idea, and the plan was dropped.

FINAL IRONY: In legal battling against ABC-TV's Oct. 29 showing of "The Final Days," from the Bob Woodward and Carl Bernstein book on President Nixon's last days in office, Nixon adopts what his lawyer calls "the Bernstein strategy." Bernstein pressed producers of the movie "Heartburn," based on a book by his former wife, to drop material damaging to him.

ROSTY'S REFLECTIONS: Although Rep. Rostenkowski probably will join efforts to meet deficit-reduction targets, he ponders the benefits of letting automatic cuts occur instead. An aide says the House Ways and Means chairman believes that such cuts may be "the only way that real deficit reduction will ever occur."

SOVIET GLASNOST provides an opening for American Jewish groups. B'nai B'rith, the U.S.-based world Jewish service group, opens chapters in Moscow, Leningrad, Riga and Vilnius -- with no interference from the Soviets. The group even held an unprecedented dinner in a Leningrad hotel.

GENERIC-DRUG FRAUDS widen, spurring moves for tighter regulation.

Two more FDA officials are expected to be indicted this month for taking illegal gratuities from generic-drug makers. Bolar Phamaceutical is being investigated for allegedly false drug applications. The next target: companies that passed off brand-name drugs as their own generic version to win FDA approval. Two companies have been referred for criminal investigation, and at least three more may be.

Congress, responding to the scandal, plans legislation to strengthen the FDA's authority to remove unsafe or ineffective drugs from the market. Another goal: double-checking the test results submitted by generic-drug makers. House Commerce Committee Chairman Dingell even considers a complete rewrite of the 1938 Food, Drug and Cosmetics Act.

The FDA now relies largely on companies to test products. "The honor system has got to go," asserts Rep. Ronald Wyden.

MINOR MEMOS: Celebrity in the mist: Minnesota Rep. Sikorski leaves his seat at a hearing to get his clean-air bill autographed by an observer, actress Sigourney Weaver. . . . At a Leningrad speech by Commerce Department General Counsel Wendell Willkie II, Soviet lawyers stampede the lectern to get copies of the U.S. Constitution. . . Oregon Rep. DeFazio assails buy-outs of healthy airlines as "capital vampirism."

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891013-0080. Politics & Policy: @ House Committee @ Votes to Subpoena @ Thrift Executive @ ---- @ By Paulette Thomas @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) AMC SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) BANKRUPTCIES (BCY) CONGRESS (CNG) WASHINGTON

The House Banking Committee voted to subpoena Charles H. Keating Jr., the embattled chairman of American Continental Corp., to testify about how his savings-and-loan subsidiary incurred losses that may cost taxpayers $2 billion.

The committee also voted to subpoena several past and current federal regulators, some of whom requested the subpoenas so that their disclosure of certain information would be protected from possible lawsuits in the future.

Federal regulators seized the thrift, Lincoln Savings & Loan Association, Irvine, Calif., in April, one day after Phoenix-based American Continental filed for protection from its creditors under bankruptcy law.

The Resolution Trust Corp., the new federal agency overseeing the sales and mergers of sick thrifts, filed a civil suit last month against Mr. Keating and his family. Mr. Keating has also filed suit against the regulators, alleging unlawful seizure of property. Improprieties have also been alleged over Mr. Keating's political contributions to U.S. senators of both parties, and their efforts to intercede on his behalf with the thrift regulators.

"It is a case history that cries out for answers and full examination of the charges and countercharges," said Rep. Henry Gonzalez (D., Texas), chairman of the House Banking Committee.

Four days of hearings are to begin Tuesday, when William Seidman, chairman of the Federal Deposit Insurance Corp., appears. Mr. Keating is scheduled to appear before the committee Nov. 7.

The committee also voted to issue subpoenas to Danny Wall, chairman of the Office of Thrift Supervision; Edwin Gray, the former top thrift regulator; David Ruder, former chairman of the Securities and Exchange Commission; and James Cirona, president of the Federal Home Loan Bank of San Francisco.

A Washington-based attorney for Mr. Keating said in a statement that the executive had notified Rep. Gonzalez that Mr. Keating "hasn't yet resolved whether to appear voluntarily." The statement said Mr. Keating "wants to cooperate with the committee to the maximum extent possible, but in light of the number and complexity of the legal proceedings in which he is involved, he wants to reflect on this decision." The Keating statement said he doesn't have any reason to believe a subpoena would be issued before he makes his decision about voluntary appearance.

Until recently, Mr. Keating has spoken out personally in defense of his activities and has been harshly critical of regulators. More recently, however, his reactions have been couched in legal terms and presented through attorneys.

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891013-0079. Marketing & Media: @ Yetnikoff to Head @ Record and Movie @ Committee at Sony @ --- @ By Laura Landro @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) SNE GPEC WCI KPE WNEWS TL TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) NEW YORK

Sony Corp. plans to name CBS Records President Walter Yetnikoff chairman of a new entertainment committee that will oversee both the record unit and Columbia Pictures Entertainment Inc.

Sony recently agreed to pay $3.4 billion for Columbia, and another $200 million to buy Guber Peters Entertainment Co., a television and movie company. Sony named that company's co-chief executive, Peter Guber, to be chief executive and co-chairman of Columbia; his partner, Jon Peters, will serve as the other co-chairman of Columbia.

In a telephone interview yesterday, Mr. Yetnikoff said the committee would have "overall supervisory responsibility" for the movie studio. But he stressed that Mr. Guber and Mr. Peters, who also will be on the entertainment committee, will be in command at Columbia. "Music and movies will report to me, but that doesn't mean I'm running movies," Mr. Yetnikoff said. "Obviously, they know the movie business and I don't."

Mr. Yetnikoff, who was head of CBS Records when Sony purchased it three years ago for $2 billion from CBS Inc., is a colorful, outspoken executive whom Sony generally has left alone to run CBS Records. It was Mr. Yetnikoff who approached Mr. Guber and Mr. Peters on Sony's behalf, and introduced them to Sony Corp. of America Vice Chairman Michael Schulof. Mr. Schulof will also serve on the entertainment committee, which is expected to have seven or eight members from the movie studio and record company.

Mr. Guber and Mr. Peters haven't been available to comment on what other management moves will be made at Columbia, but studio president Dawn Steel is expected to remain in her post under the two executives. It isn't clear whether Ms. Steel would be asked to serve on the entertainment committee.

Meanwhile, Sony and Guber Peters executives are continuing negotiations with Warner Communications Inc. in an attempt to extricate the two producers from a five-year contract that requires them to make movies exclusively for Warner. Sony earlier this week said it will go ahead with its acquisition of Guber Peters even if the Warner contract isn't settled. Initially, Sony had said it wouldn't complete the purchase of Guber Peters unless the matter was resolved. Warner is in the process of being acquired by Time Warner Inc.

Warner has declined to comment on the talks, but the company is taking a tough stance on the Guber Peters contract and has threatened to file suit against both Sony and Guber Peters. Among other things, Mr. Guber and Mr. Peters produced "Batman" for Warner.

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891013-0078. Computer Virus @ Doesn't Cause @ Much Lost Sleep @ ---- @ A Wall Street Journal News Roundup
10/13/89
WALL STREET JOURNAL (J) SUNW CNVX MCK TDM JCP COMPUTERS AND INFORMATION TECHNOLOGY (CPR) SOFTWARE (SOF)

Today's the day it's supposed to hit.

Reports of a new strain of computer virus have bubbled through the computer community and trade press in recent weeks and have now burst forth as a full-fledged scare: The Friday the 13th virus may be about to devour a personal computer near you.

There really is a virus. It really is nasty. But even those fanning the fears acknowledge that there have been only a dozen or so confirmed sightings of the virus, and it isn't a type that's likely to have spread very far.

"My suspicion is that it's very much overhyped," says Jonathan Rotenberg, president of the 31,000-member Boston Computer Society. A computer bulletin board at Mitre Corp. urges company employees to "Please calm down. The sky is not falling."

Still, Albert R. Belisle, deputy director of computer security at Bank of Boston Corp., says: "You have to treat them like bomb threats."

The Friday the 13th virus -- a.k.a. the Datacrime virus or the Columbus Day virus -- is believed to have originated in the Netherlands on March 1 and to have slipped across the Atlantic. The virus, a software program written by a "hacker," is an insidious type that supposedly can wipe out all the data on a personal computer's hard disk. In reality, it wipes out a directory on the hard disk that indicates where all the files are stored, meaning that most of the information is still there but the computer has no idea how to find it.

The virus itself is relatively easy to find. One variant attaches to a certain type of system file-those with a COM suffixand adds either 1,168 or 1,280 bytes to the file. Another adds 1,514 bytes and also goes after system files with an EXE suffix. All an anti-virus "vaccine" program has to do is check the actual size of those files against the size they're supposed to be. If the difference is one of those magic numbers, the vaccine has located the virus. The virus is also less contagious than some. The famous virus that hit Arpanet, the nationwide research network, did vast damage last year because so many machines are hooked together on the network and because the Unix operating system used on the network is vulnerable to such attacks. By contrast, the Friday the 13th virus is aimed at International Business Machines Corp.-compatible machines, most of which aren't on a network.

Even those on a network typically use operating-system software that is less robust than Unix and therefore less able to transmit a virus. Infection generally occurs only when someone borrows a tainted floppy disk or dials into an electronic bulletin board harboring the virus. Repairing the damage apparently is possible by using so-called utility software to figure out what's where on the hard disk.

Viruses have caught on as a concern partly because a few well-publicized ones, such as the Arpanet virus, have done extensive damage. But it's partly because computer technology still intimidates people enough that they're willing to believe the machines are malicious, and partly because virus is a catchy name. It lends itself to an extended metaphor, where endangered machines are "infected," anti-virus programs are "vaccines," and so on.

In any case, there seem to be two or three virus scares a year, often around computer hackers' favorite date: a Friday the 13th.

Andrew Davis, a partner in London with Touche Ross, the accounting firm, says, "I suspect -- I hope -- it's a journalist who has just picked up on the fact that there is such a thing as a Friday the 13th virus and is developing a story. Once you get under the hype, there's nothing magical about viruses and nothing new about Friday the 13th viruses."

Still, the virus clearly does exist. Ronald Shoupe, a computer manager at the National Aeronautics and Space Administration center in Greenbelt, Md., stumbled onto something that resembled the virus during a standard maintenance check last month. He advanced the date on the personal computer one day at a time until, when it reached Oct. 12, he triggered the virus. "It was impossible to receive data from any of the files," Mr. Shoupe says.

Many companies are taking steps to head off any problems, lest the scare turns out to be justified. A spokesman at J.C. Penney says the retailer is taking the threat seriously primarily because something called the Jerusalem virus penetrated about a dozen of its personal computers in Milwaukee in June. The infection was detected in a normal scanning procedure and eradicated, but "it certainly heightened our awareness of the problem," the spokesman says.

Tandem Computers Inc. sent a memo to employees urging them to practice "safe computing." The memo advised making copies of hard disks and setting computer clocks to Oct. 15, to skip the trigger date.

McKesson Corp. published an employee newsletter that, while calling the virus rare, suggested employees avoid public computer bulletin boards and floppy disks containing files of unknown origin. Sun Microsystems Inc. has had software engineers run the clocks forward on several computers to see what would happen -- nothing so far. Convex Computer Corp. has had three people tracking viruses closely and is constantly developing vaccines, a product manager says.

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891013-0077. ANR Pipeline to Buy @ Controlling Position @ In Vermont Company
10/13/89
WALL STREET JOURNAL (J) CGP ANP+ TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) PIPELINE OPERATORS (PIP) DETROIT

ANR Pipeline Co. said it plans to acquire a controlling position in Champlain Pipeline Co. in a bid to rescue the company's plan to construct a $342-million natural-gas pipeline from Canada to the energy-hungry U.S. Northeast.

Detroit-based ANR, a unit of Coastal Corp., said it has agreed to acquire an additional 35% of Champlain from other partners for an undisclosed sum, bringing its total stake in the Burlington, Vt.-based pipeline company to 63%.

"Obviously, we'd very much like a much larger share of the growing market in the Northeast," said Marian Droll, a spokeswoman for ANR.

Champlain's plan to construct a natural-gas pipeline to ship as much as 400 million cubic feet of gas daily to New England, beginning in 1991, ran into difficulties when Canadian natural-gas producers vetoed contracts to supply the New England customers.

"ANR is a large presence in the industry, and will help us put together gas supply from a variety of sources, and allow us get on with the project, to meet the region's demand for gas," said Dwight Curley, president of Champlain.

One of ANR's first tasks will be to reduce the size of the project, Ms. Droll said, cutting the pipeline's capacity to about 240 million cubic feet of gas daily.

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891013-0076. Hardship Abortions @ Should Be Funded, @ Congress Tells Bush @ --- @ Medicaid for Poor Women @ Who Suffer Rape, Incest @ Has Bipartisan Backing @ ---- @ By David Rogers @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) INSURANCE (INS) CONGRESS (CNG) EXECUTIVE (EXE) FEDERAL GOVERNMENT (FDL) WASHINGTON

President Bush faces pressure from the Democratic leadership in Congress and leading Republicans to relax his opposition to legislation renewing federal support for Medicaid abortions for poor women who are victims of rape and incest.

House Speaker Thomas Foley and Senate Majority Leader George Mitchell jointly appealed to the president to drop his veto threat, and opponents to abortion signaled that concessions may be possible on the narrow issue. "I think the White House is in a helluva dilemma," said a House Republican, who has previously sided with the administration on the abortion question. "I sense they're in a wicked bind."

Since 1981, Medicaid-covered abortions are allowed only when the mother's life is in danger. But in a major reversal Wednesday, the House adopted a Senate provision that permits federal support in rape or incest cases which are "reported promptly to a law enforcement agency or public health service." Any compromise would require more carefully defining these reporting requirements to satisfy conservatives. But among the most ardent anti-abortionists yesterday, there appeared to be a willingness to strike some accord and so blunt the issue.

Many Democrats appear delighted with the discomfort caused to the president, but the party leadership held out little hope that it could override a veto, even as it chose to criticize Mr. Bush's position. "This is a plea to the president to reconsider," said Sen. Mitchell (D., Maine). But his joint appearance with the speaker appeared to be part of an effort to harness what momentum the party can capture from the resurgent power of the pro-choice movement. "If Bush wants to alienate all the women, it's up to him," said House Energy and Commerce Committee Chairman John Dingell (D., Mich.), and much the same message was underscored by Mr. Mitchell and Mr. Foley. "The president's position is wrong," said the leaders. "It is harsh -- terribly harsh -- on the poorest, most vulnerable American women. The president would deny these women their right to free choice."

As adopted this week, the Medicaid provision is incorporated in a massive $156.7 billion bill funding the departments of Labor, Education, and Health and Human Services. The bill represents the heart of the federal commitment to social welfare programs. As much as the rape and incest issue divided lawmakers, the underlying measure commands broad support. Though a long shot, it's still possible the Appropriations Committee leadership will be able to win sufficient support on these grounds to override a veto, some observers believe.

Mr. Foley flatly rejected any hope of picking up the necessary 70-75 votes for an override. But the politics of the abortion issue already have changed this year beyond the expectations of most observers. Within the New England delegation, for example, those supporting the anti-abortion position this week found themselves outnumbered 2-1. And such traditional loyalists as Rep. Brian Donnelly (D., Mass.), who opposed the rape and incest exemption, said he would be likely to vote to override any veto because of the larger import of the education and health bill.

Rep. Henry Hyde (R., Ill.), the most forceful advocate of the anti-abortion movement in the House, held open the possibility of a negotiated, "more acceptable" amendment to halt the fight. And his friend, Minority Leader Robert Michel (R., Ill.) appeared uncomfortable with the prospect of a high-profile confrontation. Asked if Mr. Bush would veto the bill, Mr. Michel shrugged and said, "That's the president's call."

Although the administration has taken a hard line in letters to Congress, Mr. Bush's personal position on the issue has changed over the years. He now opposes federal funding for abortions in cases of rape and incest, but he still recognizes these are special cases and, in fact, once backed federal aid for the poor women who are victims of these crimes.

One of the ironies of the president's predicament is that he moved toward a stronger anti-abortion stand to win conservative backing for the GOP nomination. But he now risks being isolated as too extreme in the changed atmosphere after the Supreme Court's landmark decision in July upholding Missouri's restrictions on abortion. Looking at his three "home" states -- Maine, Connecticut and Texas -- a majority of the lawmakers there supported the exemption for rape and incest, and Rep. Nancy Johnson (R., Conn.) has taken the lead in circulating a letter among Republicans urging against a veto.

Mr. Mitchell, over the past decade, has moved in the opposite direction of the president. In recent years, he has adopted a more moderate position on abortion. But as a first-term senator in 1981, the main Democrat joined conservative Sen. Jesse Helms (R., N.C.) in helping to strike the exemption for rape and incest cases.

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891013-0075. Who's News: @ Heritage Bancorp
10/13/89
WALL STREET JOURNAL (J) HNIS WNEWS HERITAGE BANCORP (Holyoke, Mass.)

Milton L. Glass, vice president/finance of Gillette Co., was named a director of this bank holding company, expanding the board to 13.

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891013-0074. New Securities Issues
10/13/89
WALL STREET JOURNAL (J) XON CNG CBK NMK FNM EUROP BOND MARKET NEWS (BON) FINANCIAL, ACCOUNTING, LEASING (FIN) BANKS (BNK) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) CONSTRUCTION, MATERIALS (CON) REAL ESTATE, REITS, LAND DEVELOPMENT (REL)

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: @ CORPORATES

Exxon Capital Corp. -- $200 million of 8 1/4% notes, due Oct. 15, 1994, priced at 99 3/4 to yield 8.312%. 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 issue, which is non-callable, was priced at a spread of 37 basis points above the Treasury's five-year note.

Consolidated Natural Gas Co. -- $150 million of 8 3/4% debentures, due Oct. 1, 2019, via a group led by Drexel Burnham Lambert Inc., priced at 98.84 to yield 8.86.%. The issue, which is non-callable for 10 years, was priced at a spread of 85 basis points above the Treasury's 30-year note. The issue is rated double-A-2 by Moody's and double-A by S&P.

Continental Bank Corp. -- $150 million of floating-rate notes, due Oct. 18, 1994, priced with an interest rate that will float 15 basis points above the three-month London Interbank Offered Rate. The notes are being offered at various prices based on prevailing market conditions at the time of the sale. The initial rate will be set on Oct. 16. The rate on the non-callable notes will be set quarterly. Rated Baa-2 by Moody's and triple-B-plus by S&P, the issue will be sold through Morgan Stanley & Co.

Niagara Mohawk Power Corp. -- $100 million of 9 1/4% first mortgage bonds, due Oct. 1, 2001, priced at 99.869 to yield 9.267%. Rated Baa-2 by Moody's and triple-B by S&P, the non-callable issue will be sold through underwriters led by Merrill Lynch Capital Markets. The issue was priced at a spread of 123 basis points above the Treasury's 10-year note. @ MUNICIPALS

California -- $450 million various purpose general obligation bonds, due 1990-2009, apparently via a Bank of America NT&SA group. The bonds, rated triple-A both by Moody's and S&P, were priced to yield from 5.75% in 1990 to 6.80% in 2005. Bonds due 2006-2009 are priced to yield 6.70%.

Fairfax County, Va. -- $88.4 million of public improvement refunding unlimited tax bonds, Series 1989 B, due 1990-2005, via a First Boston Corp. group, priced to yield from 5.80% in 1990 to 6.80% in 2004 and 2005. The bonds are rated triple-A by both Moody's and S&P.

New York State Medical Care Facilities Finance Agency -- $68.1 million mental health services facilities improvement revenue bonds, 1989 Series C, due 1990-2004, 2010 and 2019, apparently via a Chase Securities Inc. group, priced to yield from 6% in 1990 to 7.30% in 2010. The approximately $32 million of term bonds maturing in 2019 aren't being formally reoffered. Serial bonds are priced to yield from 6% in 1990 to 7.20% in 2003 and 2004. There are about $15 million 7.30% term bonds due in 2010, priced at par. @ MORTGAGES

Federal National Mortgage Association -- $900 million of 8.45% debentures due Oct. 21, 1996 to be offered Friday, will be priced at 99.875 to yield 8.474%. The Fannie Mae debentures were priced at a yield spread of 42 basis points above the Treasury seven-year note.

Federal National Mortgage Association -- $400 million of Remic mortgage securities, offered in 14 classes by Morgan Stanley & Co. The offering, Series 1989-81, is backed by Fannie Mae 9% securities. Pricing details on the offering were't available from Morgan Stanley. @ EUROBONDS

Republic of Austria (sovereign) -- 100 million European currency units of 9 1/8% bonds due Nov. 9, 1994, priced at 102 to yield 9.09% less full fees via Merrill Lynch International. Fees 1 7/8.

Cassa di Risparmio delle Provincie Lombarde CARIPLO (Italy), via Law Debenture Trust Corp. PLC -- 100 million European currency units of 9 1/4% bonds due Nov. 14, 1994, priced at 101 3/4 to yield 9.28% less fees via IBJ International. Fees 1 7/8.

Fuji Kagakushi Kogyo Co., Ltd. (Japan) -- 75 million Deutsche marks of bonds with equity-purchase warrants, indicating a 1 1/2% coupon due Oct. 31, 1994, priced at par, via Deutsche Bank. Guaranteed by Dai-Ichi Kangyo Bank Ltd. Each 5,000 mark bond carries one warrant and one certificate containing another four warrants, exercisable from Nov. 15, 1989 to Oct. 21, 1994, to buy company shares at an expected premium of 2 1/2% above the closing share price when prices are fixed Oct. 18.

Sankai Heavy Industries Ltd. (Japan) -- 70 million Swiss francs of privately placed notes due Nov. 8, 1993, with equity-purchase warrants. Fixing 1 5/8% coupon at par via Bank Julius Baer. Guaranteed by Sanwa Bank. Exercise period of warrants from Dec. 1, 1989 to Oct. 25, 1993. Definitive terms and conditions of warrants fixed Oct. 19.

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891013-0073. Law -- Legal Beat: @ Grand Jury Cleared to Subpoena @ Milken's American Express Bills @ ---- @ By Laurie P. Cohen and Christie Harlan
10/13/89
WALL STREET JOURNAL (J) STPL TIC WNEWS LAW AND LEGAL AFFAIRS (LAW) SECURITIES INDUSTRY (SCR) INSURANCE (INS) JUSTICE DEPARTMENT (JUS)

A federal judge in Manhattan rejected a challenge by attorneys for Michael Milken to grand jury subpoenas seeking Mr. Milken's bills from American Express Co. from 1983 to 1987.

Attorneys for Mr. Milken claimed that prosecutors were misusing the federal grand jury by having it retrace ground already covered in the investigation that led to the March indictment of Mr. Milken, the former chief of junk bond operations for Drexel Burnham Lambert Inc.

But U.S. District Judge Kimba Wood said in a conference with prosecutors and lawyers for Mr. Milken this week that the government had "made a sufficient showing" in a letter to the court that "the grand jury is investigating transactions separate from those that are the subject of the pending indictment" of Mr. Milken. Judge Wood said that the government has shown that the American Express subpoenas were issued in connection with such separate transactions.

Mr. Milken was charged in March in a 98-count indictment alleging racketeering and fraud in connection with securities trades. Lawyers for Mr. Milken have repeatedly asserted his innocence and said he intends to fight his case in court.

In the same conference with the judge, Assistant U.S. Attorney John K. Carroll, who is leading the prosecution of Mr. Milken, said that an expanded indictment of Mr. Milken will come in November. Mr. Carroll previously had said the government would be unable to meet its Oct. 1 deadline for an expanded indictment. But he didn't specify when a new indictment might be returned.

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TWO INSURANCE COMPANIES settle an antitrust lawsuit filed by Texas' attorney general.

Travelers Insurance Co., Hartford, Conn., and St. Paul Fire & Marine Insurance Co., St. Paul, Minn., agreed to pay $500,000 each to the state of Texas as part of the settlement of the suit filed last year. The companies also agreed to refrain from participating on certain committees of the Insurance Services Office Inc., an industry rating organization, for three years.

Texas Attorney General Jim Mattox and other attorneys general have charged that the ISO was a vehicle for the insurance companies to conspire to raise rates, decrease coverage and create a crisis in commercial liability insurance. Lawyers for Travelers and St. Paul deny that such a conspiracy existed and say the settlement was more cost-effective than fighting the lawsuit and winning.

The settlement, approved yesterday by a state district judge in Austin, Texas, leaves six insurance companies as defendants in the Texas lawsuit, which was filed in March 1988. Most of the remaining defendants were also sued in a federal antitrust action filed by attorneys general from several other states, including New York. That suit was dismissed by a federal judge in San Francisco.

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THE ACTING U.S. ATTORNEY in Manhattan will join Willkie Farr & Gallagher.

Benito Romano, who has been acting U.S. attorney for the Southern District of New York since January, will join the New York law firm in early November.

Mr. Romano, 40, was appointed to his prosecutorial post following the resignation of Rudolph W. Giuliani. He had previously been a partner at the New York law firm of Dewey, Ballantine, Bushby, Palmer & Wood. Otto Obermaier, a partner in the New York law firm of Obermaier, Morvillo & Abramowitz, will be sworn in as the new U.S. attorney on Monday.

Although his tenure as U.S. attorney was short, Mr. Romano presided over a host of celebrated cases. Among them was the Princeton/Newport trial, the first-ever prosecution and conviction of securities firm officials on racketeering charges. Mr. Romano also helped negotiate criminal plea agreements with Robert Freeman, the former head of arbitrage for Goldman Sachs & Co., and former Wall Street securities trader Salim B. Lewis.

At Willkie Farr, Mr. Romano will specialize in civil and criminal litigation. Mr. Romano began his legal career at Willkie Farr in 1976.

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MYERSON & KUHN partner Philip S. Kaufman is leaving to join the New York law firm of Kramer Levin Nessen Kamin & Frankel as a partner, effective Monday.

Mr. Kaufman has represented AmBase Corp.'s Home Insurance Co. unit. James Killelea, general counsel for Home, said Mr. Kaufman will continue to represent Home at Kramer Levin.

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NORTH PROSECUTOR goes private: In another hat switch by a government lawyer, Michael Bromwich, a member of the trial team that prosecuted Oliver North, is going into private practice as a white-collar criminal defense lawyer.

Later this month, Mr. Bromwich, 35, will join the Washington, D.C., office of Chicago's Mayer, Brown & Platt as a partner. Before joining the independent counsel's investigation of the Iran-Contra scandal in 1987, Mr. Bromwich served four years as an assistant U.S. attorney for the Southern District of New York.

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891013-0072. Shoppers' Blues: The Thrill Is Gone @ --- @ Diehards Say @ The Experience @ Feels Too Good @ ---- @ By Kathleen A. Hughes @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BEVERLY HILLS, Calif.

"I love to shop. I'm born to shop]" exclaims Nancy Townsend, an animated blonde who is dashing down Rodeo Drive with her sister on a Tuesday afternoon shopping spree. "We're going to shop until we drop]"

Nevermind that Ms. Townsend has already spent $800 in the past few days on new clothes, including the peculiar T-shirt outfit she is wearing. Small colorful dolls are dangling from the neckline -- swinging wildly as she heads for new shops. "It's different," she says giggling. "How many people walk around with dolls on their clothes?"

Not too many. But then again, not too many people are such enthusiastic shoppers these days. The born-to-shop types flourished during much of the '80s, a decade of rampant consumerism. Now the tide is turning. The Wall Street Journal's "American Way of Buying" survey found that only 20% of people enjoy shopping for clothes "a lot" and that even fewer love window-shopping or browsing.

So who are these diehards? For the Journal consumer survey, Peter D. Hart Research Associates interviewed more than 2,000 adults concerning their feelings about shopping. The poll found that happy shoppers are three times as likely to be women and are much more likely to live in California than the heartland. They are more likely to be under 30 and to hold white-collar jobs. Oddly, perhaps, the wealthy aren't any more likely to love shopping than other people.

Critics of the born-to-shop types offer a simple explanation for the behavior: "I think people who love to shop don't have anything better to do," says Jay Schaeffer, an attorney rushing through Beverly Hills on his way to a business meeting. "My ex-wife was an ardent shopper. She was spoiled." And a Beverly Hills woman offers another analysis as she runs across a street: "Shoppers are insecure. It's a substitute for love."

Of course, shoppers here and in local malls have their own explanations. Joan Samara, a sales training executive, has just dropped $1,500 on a hat, a jacket, a skirt and a pair of shoes in one afternoon and is heading down Rodeo in search of another pair of shoes. "Shopping is my passion. I have been shopping since I could talk or walk. You could call me compulsive," says the middle-aged divorcee who has long red hair and is clad in a black jump suit and leopard-trimmed glasses.

Ms. Samara says she dresses for men although there isn't a man in her life now. "You get a high from shopping," she says. "I get a real thrill out of buying something new. I buy things on impulse, not because I really need them." She hesitates, then adds, "It becomes a sickness."

Psychologists draw a distinction between compulsive shoppers who spend uncontrollably and those who simply love shopping. "You see compulsive shopping as a frequent symptom in certain forms of mental illness," says Jerrold Pollak, a psychologist in Providence, R.I. "Compulsive shoppers are buying things they don't need. Purchasing items gives people a psychological sense of security. It makes them feel powerful and in control."

Some big-time shoppers just like to show off. Miriam Tatzel, a professor of human development at Empire State College, State University of New York, says some people who love shopping tend to have active social lives and "need to display themselves. They are gregarious people who have a strong sense of their egos and they are proud of themselves." Adds Ms. Tatzel, "Clothing reflects a sense of identity. Knowing your place in the world makes it easier to buy clothing."

By that measure, Susan Stone, a marketing executive for the National Equestrian Center in New Canaan, Conn., has one of the strongest egos around. "I love to shop. I shop daily," says the trim brunette who is browsing along Rodeo Drive in a tailored gray dress on a visit to the West Coast. "Shopping is an exploration of your position in life." To that end, she spent more than $1,000 in a recent week buying rugs, art and wallpaper.

She also keeps her large wardrobe updated. "I work in an office of 65 women. I'm one of the best dressed. That's who I am and that's how I want to present myself," Ms. Stone asserts. "I think I have high self-esteem. God gave me a fair amount to work with and I enjoy working with what I have."

There are men who love shopping, just not as many. The Journal survey found that only 10% of the men polled enjoy shopping "a lot," compared with 30% of the women. Most men said they aren't wild about browsing either. "It has been part of the female culture to view shopping as the place to go and as something to do," says Ms. Tatzel, the psychologist. "But that's changing. More men are shopping."

Some are shopping in a big way. Max Paini, a commodities trader, just bought a $10,000 gold watch in Paris and is gazing at some more gold watches on Rodeo Drive. "I love watches," he says. "I love beautiful things. I am always shopping." He also just paid $250 for a pair of burnt-orange crocodile shoes and then decided he didn't like the color. Now the store won't take them back.

Shopping can become a substitute for watching weekend football games with the guys. Blaine Hall, a nattily dressed antique store owner, says, "I don't play golf. Spending a few thousand dollars on a Saturday is recreation." That's why he has purchased some perfume and a few Guess watches on his way to have yet another watch adjusted.

Surprisingly, many hardcore shoppers freely admit there isn't anything else they would rather be doing. When asked what they would do if they weren't shopping, many look confused. When asked what they would do if all the malls suddenly closed, many look alarmed. This isn't a group that is yearning to read Tolstoy.

"If I weren't here, I would have stayed home and watched TV," says Candy Dasher, a blonde office worker who is darting around Los Angeles's Sherman Oaks Galleria mall in a white miniskirt and a hot-pink top. Ms. Dasher just paid $650 for several outfits, boots and three pairs of pumps. "I like to wear something new every day," she says. "I always end up at the mall."

Even being on crutches can't inspire a true shopper to stay home. Erin Harkess, 18, says she finds it "boring at home" and that's why she has hobbled into the Galleria on crutches after spraining an ankle. "I like to shop and look around. It's a place to hang out when there's nothing else to do." So what if all the malls suddenly closed? She is silent for a moment and then frowns. "Would that include Melrose?" she asks, referring to a popular shopping street in Los Angeles.

Many avid shoppers say they learned the art of shopping from their mothers, so the breed isn't likely to disappear. Jeri Fisher, a 13-year-old blonde in Van Nuys, Calif., shops every weekend and whenever she can during the week, usually with her mother. "Spending money is easy," says Miss Fisher. "My mother likes to shop and she shows me how to spend."

(See related story: "Dropouts Cite Poor Service, Tight Schedules" -- WSJ Oct.13, 1989)

891013-0071.
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891013-0071. Third-Quarter Results of 4 Big Banks, @ In New York, South, Trail Expectations @ ---- @ By Rick Christie and Robert Guenther @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) CHL BK FW CTZ MEL BBI BANKS (BNK) EARNINGS (ERN)

Two major New York banks and two Southeastern super-regionals reported worse-than-expected results for the third quarter.

Chemical Banking Corp. and Bank of New York Corp. reported losses, resulting primarily from additions to their loan-loss reserves for Latin American loans.

Barnett Banks Inc., based in Jacksonville, Fla., said per-share net income rose 7% from a year earlier, while First Wachovia Corp. of Winston-Salem, N.C., reported flat per-share earnings. Both bank holding companies attributed the lackluster performance to high interest rates they must pay on deposits because of increased competition.

However, Citizens & Southern Corp., based in Atlanta, bucked the trend in the Southeast by posting an 11% increase in per-share earnings because of cost-cutting, consumer loan growth and a slight decline in non-performing loans.

And Mellon Bank Corp. posted a profit, compared with a year-earlier loss. The Pittsburgh bank holding company's fourth consecutive quarter of strengthened results reflected a 5% rise in net interest revenue, a 6% increase in service fees and a 25% drop in operating expense.

Chemical Banking

Following the lead of other banks, Chemical boosted its reserves for possible losses in its developing-nation loan portfolio by $600 million and at its Texas Commerce Bancshares Inc. unit by $300 million.

The actions increase Chemical's reserve coverage for developing-nation loans to $1.83 billion, or about 41% of its $4.5 billion in such medium-term and long-term loans. The reserve had been about 27% of its exposure. Chemical said the $300 million for its problematic Texas bank reflects further pressures on that state's depressed real-estate market. The bank said the real-estate concerns stem from the Federal Deposit Insurance Corp.'s recapitalization of several failed competitors in the Texas market.

Those actions caused Chemical's book value to plummet 23% to $34.85 a share from $45.48 a share. Stockholder equity stood at $3.18 billion, down from $3.32 billion a year ago.

As a result, Chemical indicated it will file with the Securities and Exchange Commission to raise $500 million through an issue of new common shares. Analysts expect the action to dilute 1990 earnings about 10% a share.

In composite trading on the New York Stock Exchange yesterday, Chemical shares dropped $1 to close at $39.25.

Bank of New York

In the case of Bank of New York, a $400 million addition to loan-loss reserves for developing-nation loans brings its reserve coverage for these loans to $938.6 million, or 65% of medium-term loans. The bank also added $200 million to reserves for troubled domestic loans. Non-performing assets rose 12% to $1.21 billion from $1.08 billion on June 30.

Bank of New York shares dropped 87.5 cents yesterday, closing at $49.50.

Of the increase in bad loans, about $75 million stems from the bankruptcy-law filing of Dallas-based Lomas Financial Group Inc. Much of the rest was due to previously identified troubled lending for a South Florida real-estate project and debt owed by the Dominican Republic.

Felice Gelman, an analyst for Dillon, Read & Co., discounted fears that more troubles loom in the domestic loan portfolio. "The level of non-performing assets doesn't warrant the concerns. They've been out of the market for Florida real-estate loans for two years," she says.

Like many banks, Bank of New York is experiencing some pressure on its interest-rate margins. Its net yield, or the difference between what it pays and earns on its money (including non-interest-bearing deposits), fell to 3.06% from 3.08%, or two basis points, in the second quarter.

Barnett Banks

Interest-rate margins also were a major problem for the banks reporting in the Southeast. Barnett Banks said earnings from 14% loan growth and gains from costcutting efforts were offset by a decline of 20 basis points in its net interest margin from the year-ago quarter. The banking company also cited a $36.6 million addition to loan-loss provisions, compared with an addition of about $29 million a year earlier. Non-performing assets increased to $338.2 million from $324.4 million in the second period.

Barnett, however, managed to buck the quarter-to-quarter trend of thinning margins with a nine basis-point improvement from the second quarter. Gerald O'Meara, an analyst with Robinson-Humphrey Co., said the average yield in the bank's $5 billion installment-loan portfolio improved 28 basis points. He added, however, that a 33-basis point drop in the yield on its commercial loan portfolio kept the bank from posting the results analysts expected.

Barnett Banks shares dropped 25 cents yesterday, to $37.125.

First Wachovia

First Wachovia, which showed 15% loan growth and only a slight rise in non-performing loans on a year-to-year basis, said its interest-rate margin fell 32 basis points from the previous quarter to 4.17%. The banking company was hurt by the drop in the prime lending rate, because some 43% of its loan portfolio is in spread-sensitive commercial loans. "The average yield on the commercial loan portfolio fell 53 basis points, essentially mirroring the drop in the prime," Mr. O'Meara said.

Continued competition for short-term certificates of deposit forced First Wachovia to pay higher rates for funds in the quarter. The average rate on these core deposits rose seven basis points from the second quarter -- in a period of declining interest rates, primarily on the loan side of the balance sheet. Says Virginia Adair, an analyst with Drexel Burnham Lambert Inc., "We don't expect that scenario to change anytime soon."

First Wachovia shares fell 62.5 cents yesterday, to $44.

Citizens & Southern

Analysts said they also don't expect the competition for big-deposit accounts from money-market funds -- a major factor causing the margin squeeze -- to ease anytime soon. In response, banks like Citizens & Southern have been propping up deposit rates in aggressively competing for short-term certificates of deposit. Indeed, Citizens & Southern said consumer preference is shifting toward higher-rate certificates of deposit and premium money-market accounts from banks. Citizens' margin thinned to 4.39% from 4.65% in the second period.

Citizens & Southern shares fell 12.5 cents yesterday, to $33.75.

Mellon Bank

Analysts said Mellon Bank's results were on target with expectations, but that Mellon's performance was somewhat mixed. "I was very encouraged by Mellon's drop in operating expenses, but I'd been hoping for double-digit increases in service fees," said Kenneth Puglisi, Merrill Lynch Research, New York.

At the end of September, the reserve for loan losses totaled $720 million, or 4.09% of total loans, down from $918 million, or 4.93%, a year earlier. Non-performing and past-due loans were $733 million, or 4.17% of total loans, down from $810 million, or 4.35% a year earlier, primarily reflecting the sale of assets to a kind of liquidating trust known as Grant Street National Bank.

Domestic non-performing loans for the period increased to $338 million from $296 million because of non-performing real-estate loans. That reflected the restructuring at a reduced interest rate of a large loan originated by one of Mellon's mortgage banking units to a home builder and the addition of a large midwest commercial mortgage to a non-accrual basis. But non-performing LDC loans decreased to $382 million from $510 million.

Assets grew to $31.15 billion from $30.84 billion a year earlier.

Mellon shares closed at $34.75, down 25 cents.

--- @ 1989 1988 @ in per in per % @ millions share millions share chg. @ THIRD-QUARTER NET INCOME @ Bk New York ($271.2) ($4.10) $54.2 $1.51 ... @ Barnett Banks 64.9 1.02 59.2 0.95 10 @ Chemical Bank (824.6) (12.89) 211.9 3.43 ... @ Citizens South 61.4 0.93 53.3 0.84 15 @ First Wachovia 64.7 0.93 63.9 0.93 1.3 @ Mellon Bank 63.0 1.16 166.0 6.27 ... @ NINE MONTHS NET INCOME @ Bk New York ($55.9) ($1.18) $158.3 $4.52 ... @ Barnett Banks 191.7 3.04 170.0 2.73 13 @ Chemical Bank (578.1) (9.75) 465.1 7.36 ... @ Citizens South 177.8 2.74 151.8 2.40 17 @ First Wachovia 199.9 2.88 182.1 2.72 9.8 @ Mellon Bank 204.0 3.47 (113.0) (4.87) ...

891013-0070.
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891013-0070. Business Brief -- Nynex Corp.: @ Firm, Two Striking Unions @ Agree to Go to Mediation
10/13/89
WALL STREET JOURNAL (J) NYN LABOR TELEPHONE SYSTEMS (TLS)

Nynex Corp., New York, and two striking unions have agreed to take their labor contract dispute to mediation.

The Communications Workers of America, which represents about 40,000 employees of the regional telephone company, and the International Brotherhood of Electrical Workers, which represents an additional 20,000, had been seeking agreement on a neutral third party to look at the issues and help resolve the feud. The unions went on strike Aug. 6.

The two unions have been negotiating separately, but mediation will be a joint process. The main dispute in talks with both the IBEW and CWA has been Nynex efforts to shift some health-care costs to employees.

A CWA spokeswoman said that details haven't yet been worked out. "Who, when and where -- nothing has been decided yet," the spokeswoman said, adding that ground rules haven't been determined either.

891013-0069.
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891013-0069. Canadian Dispute @ Threatens to Upset @ Westmin Asset Sale @ ---- @ By Gary Lamphier @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) CANDA TAXES T.WMI NCN PETROLEUM (PET) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) DOW JONES INTERVIEW (CEO) OIL, SECONDARY (OIS) CALGARY, Alberta

A tax dispute with the Canadian government could scrap a proposed 528 million Canadian dollar (US$449.3 million) oil and gas asset sale by Westmin Resources Ltd. to Norcen Energy Resources Ltd., the companies said.

"Obviously, if we don't get a favorable ruling we'll have to go back to the drawing board," said Donald Webster, Westmin's executive vice president, finance and administration. "It (a negative ruling) could undo the deal. We're very frustrated."

The proposed sale, announced last February, would increase the oil and gas reserves of Calgary-based Norcen, which is already a major oil and gas producer, by about 50% and 35%, respectively, analysts estimated. It also would add significantly to Norcen's exploration acreage and production.

But the proposed purchase, which had been expected to close in July, was delayed by protracted negotiations with Revenue Canada, the country's federal tax department. Executives of Norcen and Westmin, which has interests in oil, gas and mining, said the dispute stems from a proposal by Westmin to transfer about C$400 million of related tax pools to Norcen, as part of the transaction.

Norcen planned to apply the tax pools against future taxable income, and the asset purchase price partly reflects the value of those tax pools, Norcen executives said. "If we can't roll down what we thought we could" in Westmin tax pools, the value of the Westmin assets "is not as great as we thought," said Edward Battle, Norcen's president and chief executive, in an interview. "That's the issue."

An official at Revenue Canada's tax rulings department in Ottawa said he didn't have access to details of the dispute, and couldn't comment.

Revenue Canada "has had a problem with the concept" and proposed structure under which Westmin planned to pass the tax advantages along to Norcen, Mr. Webster said. Neither he nor Norcen officials offered specifics.

A final ruling on the proposed transaction is expected at any time, Mr. Webster said, and Norcen said the purchase could close as early as Nov. 1, provided the tax ruling is favorable.

Under Canadian tax regulations, according to Paul Palmer, Norcen's senior vice president and chief financial officer, Westmin's tax pools could be applied against all of Norcen's 1989 earnings as long as the transaction closes by Dec. 31. He said the delay in closing would have "some impact" on Norcen's cash flow this year, but the effect on earnings would be negligible.

Brascade Resources Inc., a holding company controlled by Toronto's Bronfman family, owns about 73% of Westmin and about 42% of Noranda Inc., a Toronto-based resource concern that in turn owns about 34.2% of Norcen.

891013-0068.
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891013-0068. International: @ Japan's Trade Surplus @ Shrinks but Imbalance @ With U.S. Widens @ ---- @ By Yumiko Ono @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) JAPAN INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) TOKYO

A stronger dollar helped Japan's global trade surplus narrow for the fifth month in a row. But the surplus with the U.S. widened, and analysts cautioned that the weaker yen is starting to encourage Japanese exports.

Japan's global trade surplus, measured on a customs-cleared basis, fell 6.7% in September from a year earlier, to $7.24 billion from $7.76 billion, the Finance Ministry said. Imports increased 10.6% to $17.05 billion, while exports rose 4.8% to $24.29 billion.

The surplus with the U.S., however, widened for the first time in three months, growing 2.8% from a year earlier to $4.78 billion. Imports from the U.S. rose 12.3%, to $3.88 billion, while exports to the U.S. rose 6.8%, to $8.67 billion.

Analysts said the narrowing of Japan's global trade surplus in September was due largely to the dollar's 8.1% rise against the yen from a year earlier. Indeed, when calculated in yen, the September trade surplus actually widened 1.1%, to 1.05 trillion yen from 1.04 trillion yen a year earlier.

A rising dollar makes imports less attractive in Japan and the nation's exports more competitive, thereby increasing the potential for Japan's surplus to rise in the long run. But in the short term, a stronger dollar means the surplus appears smaller when stated in dollars.

Strong domestic demand kept the growth of imports at a high level in September, surpassing that of exports even in yen terms. But some special factors lay behind the sharp increase in imports. Crude oil imports totaled $1.71 billion, up 46.3% from a year earlier, because a new oil tax imposed in August 1988 temporarily discouraged demand the following month.

The dollar value of exports, meanwhile, was suppressed by the strong dollar, although volume showed some sizable increases. Exports of video cameras dropped 0.6% in dollar terms, but rose 12.5% in volume. Auto-parts exports rose 12.7% in value, but jumped 22.8% in volume.

Such a steep rise in export volume surprised some analysts, especially as Japan has started to make more goods abroad. And should the dollar remain at this high level, economists warned, exports will be stimulated even further.

"The yen's weakening could lead to export price cuts," said David Pike, an economist for UBS Phillips & Drew International Ltd. Neither policy coordination by the Group of Seven industrialized countries nor the increase in Japan's discount rate Wednesday has stopped the dollar's rise.

After seasonal adjustment, the September trade surplus stood at $5.55 billion, up 27% from August's $4.37 billion. Adjusted imports fell 7% to $17.73 billion, while adjusted exports fell 0.6% to $23.28 billion.

891013-0067.
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891013-0067. Italian Bank Sues @ Two U.S. Ex-Officers @ Over Loans to Iraq
10/13/89
WALL STREET JOURNAL (J) I.BNL MDEST BANKS (BNK) LAW AND LEGAL AFFAIRS (LAW) ATLANTA

Banca Nazionale del Lavoro filed suit in U.S. District Court in Atlanta against its former Atlanta branch manager and a former branch vice president, alleging they approved more than $2 billion of unauthorized and illegal loans and commitments to Iraq.

The suit alleges that Christopher P. Drogoul, a former first vice president and manager of BNL's Atlanta agency, and Paul Von Wedel, a vice president, concealed the transactions from BNL's senior management and from state and federal bank regulators.

The former bank officers are accused of fraud, breaching their fiduciary duties as officers and employees, and violations of federal and state Racketeer Influenced and Corrupt Organizations acts. The suit seeks unspecified damages.

The suit alleges that Messrs. Drogoul and Von Wedel acted in concert with others, but they are the only individuals named in the action.

The suit alleges that the men "engaged in illegal conduct to enrich" themselves, but doesn't elaborate. The suit is the first indication that BNL officials believe the ex-officers in Atlanta personally profited from the Iraqi credit scheme.

BNL, the largest state-owned bank in Italy, previously has said that some $3 billion in unauthorized export credits to Iraq were issued through the bank's Atlanta branch. Thus far, however, no motive for the issuance of the unauthorized credits has come to light. U.S. and Italian authorities are investigating.

Theodore H. Lackland, an attorney for Mr. Drogoul, declined to comment on the suit; Mr. Von Wedel couldn't be reached for comment.

The suit alleges that Messrs. Drogoul and Von Wedel, acting beyond their authority, executed a series of unauthorized credit facilities and loans with commercial banks in Iraq, the Iraqi Ministries of Trade and Industry, the Central Bank of Iraq and others.

BNL alleges in the suit that the credits and loans were made at interest rates and fees below prevailing market rates, "a fact that was known or should have been known both to the defendants and those acting in concert with them."

The suit also accuses the defendants of maintaining separate and secret books and records to conceal the transactions and distributing false and misleading financial information to BNL officials and regulators.

891013-0066.
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891013-0066. Varity's Massey-Ferguson Unit
10/13/89
WALL STREET JOURNAL (J) VAT TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) TORONTO

Varity Corp. said its Massey-Ferguson farm machinery unit agreed to sell a majority interest in the Italian-based Landini tractor business to EuroBelge S.A. of Luxembourg.

Terms weren't disclosed. Varity, a farm equipment and auto parts maker, said it expects to post a gain on the transaction in its results for the year ending Jan. 31.

Varity said it will retain a "substantial" minority interest in Landini and that the company will be operated as a joint venture.

891013-0065.
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891013-0065. International: @ South Korea's Roh to Downplay Trade, @ Focus on Shared Interests in U.S. Visit @ ---- @ By Karen Elliott House and Damon Darlin @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) FREST MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) SEOUL

South Korean President Roh Tae Woo, who arrives in Washington next week, will seek to shift the focus of Korean-American relations from trade tensions to shared interests in Asian security and Korean democracy.

Mr. Roh, Korea's first democratically elected president in nearly 40 years, will address a joint session of Congress and meet with President Bush. In an interview, President Roh made clear that he will seek to persuade Americans that the relationship between Korea and the U.S. is far stronger than divisions over Korea's $8.6 billion trade surplus with the U.S.

"What is important is shared ideals," he said. "Now we are in full process of democratization and I'd like to give this message to the American public." The president said he also will try to underscore the "tremendous results" the U.S. has enjoyed from its protection of Pacific Basin nations.

Asked what those benefits are, Mr. Roh said, "Suppose Korea were communist and Japan threatened. What would be the position of the U.S. as a leader of the free world? Because of U.S. steadfastness, Americans can see favorable economic changes in even communist nations like China and the Soviet Union."

However, as U.S. trade deficits with Japan and the newly industrialized nations of Asia have grown, so have doubts in the U.S. government, especially Congress, about the wisdom of continuing to bear the expense of a large military presence in Asia.

High on the list of topics for discussion between the two presidents will be the U.S. troop presence in South Korea, where some 40,000 U.S. soldiers have been based since the end of the Korean War. Mr. Roh said he sees no reason to reduce that troop strength.

Indeed, Mr. Roh said tensions in Asia are rising, not falling. "The clock has been turned back in China," he said. He added that the Soviet military presence in Asia isn't diminishing and neither is tension on the heavily armed Korean peninsula.

U.S. and Korean officials emphasize that Mr. Roh's visit won't be a problem-solving session. No announcements about trade disputes, Korea's co-production of a U.S. jet fighter, or U.S. bases in Seoul are expected. The U.S. has agreed to remove the headquarters of the Eighth Army from downtown Seoul, but it has asked the Korean government to pay for the move.

Mr. Roh will plead for patience on U.S.-Korean trade disputes. Korea's trade surplus with the U.S. is expected to decline to around $5.4 billion, a 36% drop from 1988. But U.S. trade officials still are frustrated by Korea's sluggishness in opening its market to U.S. goods and services, such as beef and agricultural products. Korea has also been lax in enforcing trade agreements to open up some markets and in protecting intellectual property. Bureaucratic inertia, as well as resistant farmers and businessmen are preventing much change.

Mr. Roh and many other Koreans believe the U.S. takes out its anger at Japan's huge trade surplus on other Asian nations who aren't as economically powerful as Japan. "You gave Japan 30 years to adapt its basic economic structure," he said. "In our case, we've had a trade surplus for only three years and you want adjustment too quickly." Said a U.S. official, Mr. Roh "must convince the Congress their impulses are misguided."

A Korean foreign ministry official said Presidents Roh and Bush won't be discussing allegations by several human-rights organizations that Korea is arresting dissidents for their political beliefs. Korea has made significant progress toward democracy-free elections, an outspoken press and more rights for trade unions, for example. But in recent months, the government has sharply cracked down on violent student dissidents, people making unofficial contact with North Korea and teachers trying to form a union. It has also indicted Kim Dae Jung, leader of one of Korea's mainstream opposition parties, for an infraction of the National Security Law.

Mr. Roh disputes the contention that Korea is going back to the "old ways" of the dictatorial regime under former President Chun Doo Hwan. He flatly denied that anyone has been detained for their political beliefs. He said those are "false stories spread by North Korean sympathizers."

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891013-0064. Dividend News: @ Colgate-Palmolive Co.
10/13/89
WALL STREET JOURNAL (J) CL DIVIDENDS (DIV)

COLGATE-PALMOLIVE Co. directors raised the quarterly dividend 22%, a level "consistent with Colgate's target earnings range," said Reuben Mark, chairman, president and chief executive officer. The New York consumer products company declared a dividend of 45 cents a share, payable Nov. 15 to shares of record Oct. 25. The company previously paid 37 cents quarterly. Mr. Mark cited the company's "strong earnings momentum and improving cash flow."

891013-0063.
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891013-0063. Abreast of the Market: @ Stock Prices Retreat Amid Worries @ Over Earnings, Producer Price Data @ ---- @ By David Wilson @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) STOCK MARKET, OFFERINGS (STK) STOCK INDEXES (NDX) NEW YORK

Stock prices drifted lower as concerns about the imminent report on September producer prices fueled continued profit-taking.

The market also was hurt by disappointing third-quarter earnings reports and estimates, including one from Chrysler, and nervousness about the junk-bond market, which acted as a catalyst for selling in takeover stocks.

The Dow Jones Industrial Average recorded its third consecutive decline by falling 13.52 to 2759.84. Since setting the last in a series of record highs Monday, the average has fallen 31.57 points, or 1.1%.

Among broader market averages, Standard & Poor's 500-Stock Index fell 1.60 to 355.39, the Dow Jones Equity Market Index went down 1.44 to 333.57 and the New York Stock Exchange Composite Index dropped 0.83 to 196.98. Some 907 issues declined in price on the New York Stock Exchange; only 543 advanced.

The pace of trading slackened as players sat out the session to await the release of the producer price report, along with data on September retail sales, before today's opening. Big Board volume totaled 160,120,000 shares, down from 164,070,000 Wednesday.

Higher energy and auto prices are expected to bring a sharp increase in the September PPI, which went down 0.4% in both July and August. The consensus forecast of economists polled by Dow Jones Capital Markets Report calls for a 0.8% rise in the latest month.

Traders expressed concern that the data, coming on the heels of Federal Reserve Chairman Alan Greenspan's indications that the Fed won't lower interest rates to rein in the dollar, may worsen the rate outlook even further. "There are some expectations for disappointment," said Jerome M. Hinkle, a block trader at Sanford C. Bernstein & Co.

As a result, market players took little comfort in indications that the Fed might be moving to ease monetary policy by permitting a decline in the federal funds rate, which banks charge one another on overnight loans. But Charles Clough, chief investment strategist at Merrill Lynch & Co., said the market's decline in the face of that evidence was a sign that concerns about earnings, rather than rates, are starting to take center stage.

"You're clearly going to have to deal with more weak earnings in a number of sectors," he said. "The question is whether the market is finally coming to grips with some of those earnings problems."

Chrysler dropped 5/8 to 24. The company told Dow Jones Professional Investor Report it expects to post break-even results for the third quarter, excluding a $310 million gain resulting from the sale of 45% of its stake in Japan's Mitsubishi Motors.

Analysts had been expecting the company to report a third-quarter profit of 20 cents to 25 cents a share without the gains, and they cited overspending on incentive programs as the major factor behind the shortfall.

Other disappointing third-quarter earnings estimates produced sell-offs in Owens-Corning Fiberglas, which dropped 2 7/8 to 30 3/4, and IMO Industries, which skidded 2 7/8 to 17 3/4. Both companies said their results would trail year-earlier levels.

Morton International fell 2 to 36 on 1.1 million shares -- about nine times the stock's average daily volume -- after reporting that net income for the September quarter was down from a year ago, when it was part of Morton Thiokol.

Meanwhile, three stocks mentioned in recent takeover and restructuring speculation captured top spots on the list of the most active Big Board issues: Upjohn, which fell 1 1/8 to 40 1/2 on Big Board composite volume of 2.2 million shares; Paramount Communications, down 2 1/8 to 63 1/8 on 2.1 million shares, and Chevron, off 1 1/8 to 65 7/8 on 1.7 million shares.

Other rumored acquisition candidates also ran into selling. Woolworth fell 3/4 to 66 1/4, Burlington Resources dropped 2 1/8 to 49 5/8 and USAir Group lost 1 1/8 to 45 3/8.

In addition, worries about junk bonds took a toll on Harcourt Brace Jovanovich, which fell 7/8 to 8 1/8 on 1.4 million shares, and TW Services, which declined 1 1/2 to 35 1/4 on 1.3 million shares. Harcourt Brace has about $1.6 billion in high-yield debt outstanding; TW is scheduled to issue $1.15 billion in notes within the next few weeks in connection with Coniston Partners' acquisition of the company.

But AMR added 1 5/8 to 98 3/4 as 1.6 million shares changed hands. Representatives of Texas investor Robert Bass have signaled a willingness to assist AMR, which owns American Airlines, in handling a $120-a-share takeover offer from New York developer Donald Trump.

MGM-UA Communications rose 3/8 to 20 3/8 on news of the possible revival of its agreement to be acquired for $25 a share by Qintex Australia. General Electric's National Broadcasting unit has agreed to become an equity partner in the takeover, which MGM had terminated Wednesday.

Tandem Computers rose 3/4 to 24 3/4, a new 52-week high, on 1.7 million shares ahead of a major product announcement set for Monday. The company wouldn't identify the new product, but analysts said Tandem has been expected to introduce a new fault-tolerant computer system.

Boeing added 1 7/8 to 61 3/8. As expected, the company received a jet aircraft order from Northwest Airlines, an NWA unit, worth as much as $5.2 billion. But United Technologies fell 1/4 to 55 5/8 even though its Pratt & Whitney unit was selected to provide engines for the planes; that contract is valued at more than $1.5 billion.

Elsewhere on the earnings front, Rowan Cos., which reported a third-quarter loss of eight cents a share, went down 5/8 to 8 1/4. Analysts had anticipated a smaller loss or a slight profit for the period.

Bairnco fell 1 1/4 to 19. The company posted a loss from continuing operations in the third quarter, compared with a yearago profit.

Strong earnings reports for the September quarter proved favorable for a number of other stocks, including Green Tree Acceptance, which went up 1 5/8 to 17 5/8; Anthem Electronics, up 1/2 to 15 1/8, and Shaw Industries, up 7/8 to 26 3/4.

Lomas & Nettleton Mortgage Investment rose 1/2 to 10 3/8 after trading as low as 7 1/2 on rumors of financial difficulties. In response, the company said it has sufficient cash to meet all current funding requirements and expects to continue paying quarterly dividends.

The American Stock Exchange Market Value Index fell 0.67 to 395.01. Volume totaled 12,190,000 shares.

Bolar Pharmaceutical lost 1 3/4 to 17 1/8 on 1.2 million shares. The U.S. Department of Health and Human Services acknowledged that its inspector general's office is conducting a criminal investigation of the company. The company has been the target of a probe by the Food and Drug Administration.

KMW Systems added 3/8 to 5. Andrew Corp., which has agreed to acquire the company, began a $5.25-a-share tender offer.

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891013-0062. Phoenix Canada Oil Makes Offer
10/13/89
WALL STREET JOURNAL (J) T.PCO OKCPZ TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) TORONTO

Phoenix Canada Oil Co. said it submitted a tentative offer to buy all the units outstanding of OKC Limited Partnership for $4.50 each, or about $90 million.

Phoenix Canada said the price could be paid in cash or a combination of cash and securities, depending on the outcome of negotiations with OKC.

Phoenix Canada is an oil and gas producer. OKC is a Dallas-based oil and gas partnership.

In Dallas, the general partners of OKC said they are prepared to negotiate a transaction, but they believe a $4.50 a unit offer is inadequate. A spokeswoman declined to elaborate.

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891013-0061. Soft-Drink Makers @ Are in Heated Battle @ In the Philippines @ --- @ PepsiCo Affiliate, Local Firm @ Seek to End Dominance @ Coca-Cola Recently Won @ ---- @ By Matt Miller @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) FREST PEP KO BEVERAGES (BVG) MANILA

For the past year, Philippine beer drinkers have inspired a running battle between two brewers. Now a similar contest is heating up in soft drinks.

An affiliate of PepsiCo Inc. of the U.S., as well as a local company, Cosmos Bottling Inc., are seeking to tear down some of the Coca-Cola signs that have dominated the Philippine landscape in recent years. It's a high-stakes match: Despite its low per-capita income, the Philippines population guzzles $500 million of soft drinks a year, second in Asia only to Japan. Some 360,000 outlets nationwide stock soft drinks, more than 70% of which are derived from cola products.

"It's the most widely distributed, frequently consumed product in the country," says Paul Roberts, president of Pepsi Cola Products Philippines Inc., a new company, which bought the Philippines' Pepsi franchise in July, and is 18%-owned by PepsiCo. The three soft-drink makers believe the market is worth fighting for, and they plan to pump hundreds of millions of dollars into marketing and expansion. But the sudden spurt of activity in the industry reflects more than the country's taste for a fizzy drink, analysts say.

The Philippines' three-year economic recovery has been fueled largely by consumer spending. Many factories producing consumer goods are running at or near capacity. Economists, bankers and businessmen expect an increasing number of these manufacturers, and supporting businesses, to expand.

That seems especially true when it comes to what people eat and drink. Pure Foods Corp. says it will pump one billion pesos (US$45.6 million) into its flour-milling, poultry and processed-meat facilities. Its competitors, including RFM Corp., which led a group that bought Cosmos in June, report similar kinds of projects. Coke's local franchise, Coca-Cola Bottlers Philippines Inc., is in the midst of a 2.5 billion-peso expansion. Coca-Cola Philippines is owned 30% by Coca-Cola Co. of the U.S. and 70% by San Miguel.

PepsiCo -- whose Philippine operation was pummeled for much of the 1980s by accounting scandals and financial miscues -- and Cosmos are both starting to attack that dominance. They come armed with revamped management, ambitious marketing strategies and plans to invest what the two say could eventually total as much as $200 million.

With so many industries targeting the freer-spending consumer, soft-drink makers are hoping that their huge number of outlets and long-established demand will give them an advantage. Bottlers believe the market, which they measure in terms of bottles sold, rather than revenue, can grow as much as 15% a year.

But they also have a few hurdles that others don't face.

Industrywide sales this year have been stagnant. Soft-drink prices increased with rising sugar costs, which jumped last year after a shortage in 1987 and subsequent hoarding. The government recently imposed a 10% value-added tax on the commodity. A series of devastating typhoons last year and a particularly wet 1989 disrupted production and rural distribution.

Moreover, the industry itself presents a broad target for criticism from a growing nationalist lobby. Soft drinks already have virtually destroyed the country's indigenous fruit-juice market. In addition, the industry's marketing and advertising continue to reinforce the prevalent belief among Filipinos that Western products are superior to local ones.

Even without these problems, PepsiCo's affiliate would face a a long road back to anything near the soft drink's former glory days. In the late 1970s, when it was a wholly owned subsidiary of PepsiCo, the local Pepsi operation mounted a fierce marketing-and-distribution drive.

Pepsi sales eclipsed Coke's. For a time, the Philippines was one of the few countries where Coke wasn't dominant, according to industry officials.

But the glory was short-lived. Pepsi's aggressive campaign came unraveled in 1982, when the head office announced that the subsidiary had overstated profits from 1978 to 1981. What had been billed as a profitable operation was suddenly saddled with huge losses.

Then came the economic slump that followed the assassination in August 1983 of opposition leader Benigno Aquino, husband of Corazon Aquino, who became president 3 1/2 years ago. In 1985, PepsiCo sold its operations, but the new owners couldn't reverse its sagging fortunes.

While Coke took advantage of the upturn in the economy that came with the Aquino presidency in 1986, Pepsi was mired in lawsuits, government scrutiny and corporate strife. The market share of Pepsi-Cola Bottling Co. of the Philippines Inc., which bottled Pepsi and 7-Up until the July change of ownership, toppled to 18% earlier this year from 63% in 1981, according to Mr. Roberts.

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891013-0060. How Polls Were Conducted
10/13/89
WALL STREET JOURNAL (J)

The Wall Street Journal "American Way of Buying" Survey consists of two separate, door-to-door nationwide polls conducted for the Journal by Peter D. Hart Research Associates and the Roper Organization. The two surveys, which asked different questions, were conducted using national random probability samples.

The poll conducted by Peter D. Hart Research Associates interviewed 2,064 adults age 18 and older from June 15 to June 30, 1989. The poll conducted by the Roper Organization interviewed 2,002 adults age 18 and older from July 7 to July 15, 1989. Responses were weighted on the basis of age and gender to conform with U.S. Census data.

For each poll, the odds are 19 out of 20 that if pollsters had sought to survey every household in the U.S. using the same questionnaire, the findings would differ from these poll results by no more than 2 1/2 percentage points in either direction. The margin of error for subgroups -- for example, married women with children at home -- would be larger. In addition, in any survey, there is always the chance that other factors such as question wording could introduce errors into the findings.

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891013-0059. Boise Cascade Net @ Falls; Willamette, @ Potlatch Post Gains @ ---- @ By G. Christian Hill @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BCC WMTT PCH EARNINGS (ERN) PULP, PAPER, PACKAGING (ALL TYPES) (PUL)

Willamette Industries Inc. and Potlatch Corp. reported strong earnings gains for the third quarter, but another Northwest forest-products company, Boise Cascade Corp., posted a decline.

Willamette and Potlatch cited favorable lumber prices or strong demand for pulp and paperboard products for their gains. Boise Cascade blamed soft demand for paper and paper products for its decrease.

Boise Cascade said earnings fell 13% in the third quarter to $62.8 million, or $1.34 a share, from $71.9 million, or $1.58 a share, a year earlier. Revenue rose slightly to $1.08 billion from $1.04 billion. For the nine months, the company said it earned $216.3 million, or $4.76 a share, up slightly from $212.7 million, or $4.64 a share. Revenue amounted to $3.28 billion, up 7% from $3.06 billion.

While other product lines improved, Boise Cascade's paper and paper-products segment posted a 31% drop in operating income to $93.5 million. The company said demand for uncoated white paper, coated grades and newsprint slowed while new capacity came on line and wood-chip costs rose "dramatically higher" in the Northwest.

Willamette said it earned $52.9 million, or $2.08 a share, up 35% from $39 million, or $1.54 a share in the year-earlier period. Sales increased 10% to $486.6 million from $441 million. The rate of earnings growth was seven times the 5% growth rate of the prior six months. For the nine months, Willamette reported net income of $139.8 million, or $5.50 a share, up 15% from $121.7 million, or $4.79 a share, in the 1988 period. Sales rose 11% to $1.42 billion from $1.27 billion.

Potlatch reported net income of $35.1 million, or $1.22 a share, for the third quarter, up 24% from $28.3 million, or $1.02 a share, in the year-earlier period. Sales increased 16% to $318.4 million from $273.7 million. Earnings had risen 21% in the first half. For the nine months, Potlatch said it earned $96.8 million, or $3.41 a share, up 22% from $79.3 million, or $2.85 a share. Sales totaled $911.9 million, up 14% from $798.7 million.

Potlatch said the earnings gains were achieved despite continuing problems at its Lewiston, Idaho, sawmill and with new equipment at its Cloquet, Minn., paper mill. Willamette said its third-quarter earnings were reduced by a $1.2 million pretax write-off for timber losses from Hurricane Hugo in the Carolinas.

In New York Stock Exchange composite trading, Boise Cascade fell 37.5 cents a share, to $42.875, and Potlatch closed at $35.75, up 12.5 cents. In over-the-counter trading, Willamette closed at $51.75, up $1.25.

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891013-0058. Who's News: @ Walgreen Co.
10/13/89
WALL STREET JOURNAL (J) WAG WNEWS WALGREEN Co. (Deerfield, Ill.)

L. Daniel Jorndt, currently senior vice president and treasurer, was named president and chief operating officer, effective Feb. 1. Mr. Jorndt, 48 years old, succeeds in both posts Fred F. Canning, 65, who is retiring from the drugstore chain but will retain his seat on the board.

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891013-0057. Heard on the Street: @ Bethlehem Steel's Shares Are Slipping @ As Some Money Managers Trim Stakes @ ---- @ By John R. Dorfman and Clare Ansberry @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) BS HEARD ON THE STREET (HRD) STOCK MARKET, OFFERINGS (STK) STEEL MANUFACTURERS (STL) NEW YORK

While the stock of archrival USX marches ahead under prodding from raider Carl Icahn, Bethlehem Steel watches its own shares droop.

Bethlehem closed at 20 1/2 yesterday, down 28% from its February high of 28 1/2 and barely above its 12-month low of 19 3/4. Investors have a dozen reasons not to buy shares in the nation's second-largest steelmaker. But they also have one big reason to buy: The stock, at 5 times the past 12 months' earnings, appears stupendously cheap.

Of course, it's cheap for a reason. The steel industry, after two years in the sun, is starting to slump. Shipments of steel for autos, appliances, machinery and construction are all soft; analysts figure they will be down 15% to 20% in the second half of 1989 compared with the first half.

More than any other stock, Bethlehem rises or falls with the steel industry. Other steelmakers have diversified into energy, drug distribution and service centers, but 90% of Bethlehem's revenue is tied to steel. Furthermore, it sells much of its output on the spot market rather than through long-term contracts, so earnings are tossed around with prices.

Sensing trouble, a lot of big-name money managers have been reducing their Bethlehem holdings. Still, at least one smart long-term investor is betting big on Bethlehem.

Donald Smith & Co., a patient accumulator of out-of-favor stocks, owns close to three million shares. The firm ranks second out of 309 managers in performance over the three years ended Sept. 30, according to CDA Investment Technologies in Rockville, Md. (The rankings are estimates based on government filings and reflect only stockholdings, not bonds or cash.)

"We don't get caught up in weekly or monthly moves," said Richard Greenberg, vice president at Donald Smith & Co. "It looks like Bessie's earnings will be weak for the next couple of quarters," he said, and the stock may weaken further in December because of tax selling or window dressing, in which portfolio managers arrange their portfolios to look good at year end. But he says his firm will be "hesitantly adding to our positions" on such price weakness. He would buy sooner if the price falls to 18 or below.

Bethlehem has "probably made more improvements over the past three to four years than any other steel company," said Christopher Plummer, an analyst with WEFA Group. He notes that Bethlehem was near bankruptcy in 1986 and made a significant recovery.

But other analysts view Bethlehem's moves as too little, too late. "USX closed a lot of capacity, took a long strike and cut back on the work force," said John Jacobson, an analyst with AUS Consultants. "Bethlehem has done the same things, but not with the vengeance that other firms have."

A big seller recently has been Peter Lynch, the famous helmsman of Fidelity Magellan fund, the nation's largest stock mutual fund and one of the most successful. Since March, Magellan has unloaded 1.3 million shares. It still owns 1.6 million.

Mr. Lynch sees "tremendous earning power" at Bethlehem, and says it's "a much better company than it was three or five years ago. The only catch is a lot of their businesses are starting to slow down." He has taken profits in the stock (which he bought for about 14) this year at prices well above 20.

"The company clearly can earn $7 to $8 a share" in a good year, Mr. Lynch said. "It's a very powerful company when their business is strong. When that's going to happen, I don't know."

Large money managers sold, on balance, nearly two million shares of Bethlehem in the second quarter, according to CDA. Bethlehem has 74.6 million shares outstanding.

Lately Bethlehem has been hurt by a coal strike and by a damaged blast furnace at one of its mills. Longer term, many analysts believe Bethlehem has higher labor costs than USX under its new contract. It also has roughly $1.2 billion in pension benefits promised to workers but not yet funded -- a point that David Katz, chief investment officer for Value Matrix Management, cites as a key reason he hasn't bought the stock.

For two years, Bethlehem benefited from a downward trend in the dollar, which made its exports cheaper abroad and made foreign steel more expensive here. That trend seems over for now. "A rising dollar is deadly" for Bethlehem and its peers, says Charles A. Bradford, analyst with Merrill Lynch, who rates the stock a sell.

The Wall Street consensus, according to Zacks Investment Research, is that Bethlehem will earn about $4.64 a share this year and $4.47 in 1990. But Mr. Bradford thinks Bethlehem will be lucky if it makes $3 a share next year.

---

Bethlehem Steel

(NYSE; Symbol: BS)

Business: Steel

Year ended Dec. 31, 1988:

Sales: $5.49 billion

Net Income: $403 million*; $5.32 a share

Second quarter, June 30, 1989:

Per-share earnings: 98 cents vs. $1.85 (fully diluted)

Average daily trading volume: 311,734 shares

Common shares outstanding: 74.6 million

*Includes $113 million charge related to discontinuance of certain business.

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891013-0056. S.O.S.: @ Western Union, Saved @ By a Junk-Bond Deal, @ Needs Rescuing Again @ --- @ Interest of 19 1/4% and a Plunge @ In Telex Business Batter @ Investor Bennett LeBow @ --- @ Those Pesky Fax Machines @ ---- @ By Janet Guyon @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) WU TELEPHONE SYSTEMS (TLS) CORPORATE PROFILE (PRO) UPPER SADDLE RIVER, N.J.

It was Christmas Eve, 1987, but at Western Union Corp. there was little cheer.

The petition was drafted, employee mailgrams readied, and a press release written. Western Union was about to file under Chapter 11 of the federal bankruptcy laws.

At the eleventh hour, the venerable communications firm got a reprieve. Balking bondholders finally accepted a complex refinancing plan that put New York investor Bennett S. LeBow, a client of Drexel Burnham Lambert, in control. "Life was breathed back into the patient," recalls one Western Union executive.

For a while, anyway. Less than two years later, the company whose name once meant American innovation is again gasping for air. Mr. LeBow's plan of salvation, sponsored by Drexel, has come up short. And for the fourth time in as many years, Western Union is begging creditors: Keep us alive a little bit longer.

Western Union now has a negative net worth of $766 million. Including pension liabilities, it has $1 billion of long-term debt -- but cash flow of only $70 million. Its telex business is in a breathtaking decline, devastated by facsimile. A company that some Wall Streeters thought a takeover candidate at $30 a share 5 1/2 years ago closed on the Big Board yesterday at $1.

The bane of Western Union just now is a $500 million junk-bond offering that Drexel underwrote as part of the plan that gave control to Brooke Partners, which is 65% owned by Mr. LeBow and partner William Weksel. Its interest is adjustable, and in June it leapt to 19 1/4%.

"Look, the company has got to be restructured," says Mr. LeBow, sitting in the massive boardroom at his Manhattan-based management company, LeBow, Weksel & Co. This summer the 51-year-old financier proposed swapping the bonds for notes, and rearranging things so the money-transfer business could be used as collateral for bank loans. Then came the turmoil in the junk-bond market. That "is going to make us rethink that transaction," says Mr. LeBow. "But we can't keep paying 19 1/4 interest."

Western Union's chief financial officer, Stewart Paperin, is more emphatic. If the company can't refinance the bonds and lower its interest payments, he says, "we'll be in nuclear meltdown."

The Western Union story is about a company that played ostrich while technological and regulatory changes fundamentally altered its business. Its current predicament suggests how even the sharpest financial minds -- those of Mr. LeBow and his Drexel partners -- can stumble in the face of a revolution in technology. The question now is, can these turnaround/takeover specialists -- having seen Western Union from the inside -- revise their strategies, persuade their creditors, and ultimately get the company back on its feet?

Western Union's troubles grew out of a parochial mind-set that dates back 113 years. Then a high-tech giant sending messages by Morse code, the company turned down rights to the telephone, telling Alexander Graham Bell that sending voice over wire would never replace telegraph, particularly for business communication. Mr. Bell instead sold his rights to the predecessor company of American Telephone & Telegraph Co.

AT&T went on to become the biggest corporation in the world, before the 1984 Bell System break-up. Western Union, through the mid-1970s, managed under protective regulation to carve out a profitable niche sending written messages by wire through its telex network and through another, similar business called TWX, acquired from AT&T in the mid-1970s.

Then, management seemingly panicked. Responding to competition stirred by new technology and deregulation of the telecommunications industry, Western Union embarked on a series of diversions. But unable to decide where to place its bets, it tried everything: cellular-phone manufacturing, satellite launching, airplane phone service, electronic mail, long-distance telephone. To pay for its gambles, the company took on debt, layering on 10 issues of bonds and nine of preferred stock by 1986.

"We made some fundamental mistakes," says Theodore Kheel, the New York labor lawyer, who was a director until Mr. LeBow took over. "We went into a number of tangential acquisitions instead of thinking how to be a competitor in the communications business. Then we fell too far behind the communications leaders and didn't have access to the funds to catch up."

Since 1984, the company has never been far from crisis. That year, banks pulled their credit lines, and the company had three different chairmen in six months. Soon, it was trying to sell itself, hiring Drexel to help. When that didn't work, it proposed a recapitalization, but preferred shareholders wouldn't have it. While the banks held off for fear of forcing the company into bankruptcy proceedings, Drexel banker Paul Levy kept trying to find someone to put in some money.

Gary Winnick, a former Drexel senior vice president, agreed to do so. A plan was devised that would give him control. But Mr. Winnick had trouble finding operating management. Enter Mr. LeBow, then a little-known turnaround artist, who had earlier spurned Drexel's entreaties. This time, where every other big deal maker saw a tar baby, Mr. LeBow thought he saw opportunity.

He had been buying companies, such as cigarette maker Liggett Group Inc., that were in declining markets but could be combined with competitors to generate high cash flow. Was telex such a business? Both Mr. LeBow and an associate, former Bunker Ramo Corp. president Robert Amman, thought telex was ripe for consolidation. Mr. LeBow already had an option to buy ITT Corp.'s telex business for about $144.5 million.

"We felt we could buy two telex companies, put them together and make it a very profitable business," says Mr. Amman, now Western Union's president. "We would use the cash to build other businesses" that had greater growth prospects, such as money-transfer and electronic mail.

Mr. LeBow, through borrowings of Brooke Partners, put up a minimum amount of cash -- $25 million -- for a 63% controlling equity stake that, once Western Union returns to profitability, gives him rights to 79.4 million newly issued common shares. To satisfy Mr. Winnick and his partners, Mr. LeBow granted the Winnick group options on nine million of his Western Union shares for 25 cents a share -- which is about the same price Mr. LeBow paid for his stake in the company's common equity. Western Union also paid the Winnick group $8.1 million in fees and expenses.

Then came six arduous months of negotiating with bondholders, banks and preferred stockholders for repayment of debt at a discount and a swapping of securities. One dissident stockholder launched a proxy fight, which was settled only when Mr. LeBow's group agreed to put him on the board. To get 70% of the bondholders to exchange, Western Union agreed to pay them a one-time cash sweetener of $20 million.

By the time the company had sweetened the pot for various constituencies, its annual carrying costs in interest and dividends had risen to $148 million, up $44 million from the original LeBow plan of May 1987.

And more danger lay ahead. The plan included a $500 million junk-bond offering to pay off the banks and buy ITT's business. But to sell the bonds to its clients, Drexel insisted the terms provide that interest could be reset twice by investment bankers. For its work in 1987, Drexel collected $25 million in fees and underwriting commissions.

Mr. LeBow planned to oust current management once he got control, but, to gain the cooperation of Western Union's three top officers, he agreed to employment contracts totaling $850,000 in annual salaries. All three have since left, but are still drawing their pay. Robert Leventhal, the former chairman, is currently dean of the business school at the University of Washington in Seattle. He is in the second year of a five-year, $400,000-a-year consulting contract.

Mr. Amman and Mr. LeBow figured that costs saved by combining the telex businesses of Western Union and ITT would generate an extra $100 million in cash a year. Unwanted assets, such as satellite and long-distance businesses, would be sold, cutting operating losses as well as overhead.

But, just as the telephone had blindsided Western Union 100 years ago, facsimile machines blind-sided Mr. LeBow. Customers who routinely used telex began converting to fax in droves as fax machine prices plunged and the number of them in use reached "critical mass." Telex revenue, which had been declining 6% a year, started dropping at a 35%-to-40% rate. Western Union's total revenue of $875.9 million last year fell 14% from 1987 and was some $100 million less than originally anticipated.

In addition, the telex debacle forced Western Union to write off $80 million in good will associated with the ITT telex purchase. A new Western Union telex network built only nine years ago was junked, pushing total write-offs last year to over $1 billion.

"In my career, I have never seen a market of this size decline at such rates," says Peter S. Anderson, who was hired as senior vice president of Western Union's business-services division seven months ago. "Everybody was surprised that the rate of decline kept increasing." (In April, Western Union told investors it expected telex revenue to plunge to $172 million in 1989 from $250 million last year, but now it calls the April projection "optimistic.")

Thus Mr. LeBow hasn't been able to achieve the hoped-for cash-flow boost, despite replacing 75% of management, firing and retiring 2,800 employees, selling most of Western Union's telecommunications assets and cutting $134 million in annual operating costs. Last November, the company put up its first distress signal: Directors omitted preferred dividend payments -- on securities issued just a year earlier.

By June, the sorry state of the business caused interest on the junk bonds to be reset to 19 1/4% from 16 1/2%, increasing the company's annual interest payments by $13.8 million. Terms required interest be reset to give them a market value of 101% of their principal amount. After the reset, the bonds held at a price of 92 to 93, but they started plunging soon afterwards, weakening with the rest of the junk market this fall. Yesterday they closed at 62 1/2.

Mr. LeBow has continued tinkering with the package of notes he hopes to swap for the junk bonds. But if it isn't attractive enough and bondholders won't exchange, Western Union will be forced to start repurchasing the bonds in $100 million chunks sometime next year. So, "if this current exchange doesn't go through, clearly there will have to be a son-of-exchange offer," says Mr. Paperin.

And now, the company says it is looking at alternatives to an exchange offer because of the turmoil in the junk-bond market and the long time the Securities and Exchange Commission has taken to review its proposed swap.

Mr. LeBow and his group say Western Union isn't close to a bankruptcy filing. At the moment, Brooke Partners' investment in Western Union's preferred shares and some junk bonds is worth less than it cost ($46 million), and Mr. LeBow concedes that "those were dumb investments." But he says he never expected a quick payout.

"I don't think Western Union is distressed, though people disagree with that," Mr. LeBow declares. "Obviously we are disappointed about the decline in telex, but everything else, including the management team, is working well."

The company expects to end the year with $70 million in cash, although net fixed charges of $95 million this year will exceed operating cash flow by $15 million to $20 million. Mr. Anderson says he expects the decline in telex revenue to be made up by revenue from the electronic mail service, called EasyLink, and other business services by the third quarter of next year, with operating earnings in his division hitting bottom in this year's third quarter.

Meantime, Mr. Amman has a new destiny for Western Union: financial services for the 25% of U.S. households that don't have checking accounts. The company currently moves about $3 billion a year through its money-transfer network, mostly from poor and lower-middle-class neighborhoods. Despite the financial distresses of the past five years, people still entrust the company with their cash, says Mr. Amman, although those money transfers aren't insured. Western Union recently bought National Payments Network, which collects bills for utilities from people who pay in person.

Western Union isn't the only one to think of these opportunities, of course. It is up against AT&T, MCI Communications Corp. and US Sprint Communications Co. in electronic mail, and must compete with American Express in money transfer. And Western Union in the past, under different management, has sketched itself a new destiny only to be outdone by sudden changes in technology and competition.

Still, Mr. LeBow professes great faith in Western Union. Turning it around, he says, will just take a bit longer, perhaps until 1993. "If telex had held to our original assumptions," says Mr. Amman, "the turnaround of this company would have been a slam dunk. But the game only runs out when you run out of money."

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891013-0055. Politics & Policy: @ Senate Panel Democrats Opposed Gains-Tax Cut @ But Voted for Giant Loopholes in Estate Levies @ ---- @ By Alan Murray @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) TAXES STOCK MARKET, OFFERINGS (STK) CONGRESS (CNG) WASHINGTON

The Democrats on the Senate Finance Committee voted last week to block a cut in the capital-gains tax, arguing it's a "tax break for the wealthy."

But watch what they do, not what they say.

Under the direction of Sen. Lloyd Bentsen (D., Texas), the panel also voted to open two giant loopholes in the estate tax, benefiting only the very wealthiest people. If the provisions become law, tax experts say, they'll go a long way toward eliminating what little is left of the nation's only tax on inherited wealth.

"I suspect the people lurking behind this thing in the Senate were wealthy Democrats," says Rep. Pete Stark (D., Calif.), an opponent of weakening the estate tax. "We shouldn't be in the business of writing special relief bills for people with hundreds of millions of dollars worth of assets."

"It stinks," agrees Robert McIntyre, director of the labor-backed Citizens for Tax Justice.

The two provisions would eventually provide close to a billion dollars of tax relief each year to families with huge estates.

One would reopen a once-popular loophole, known as "estate freezes," that allowed wealthy individuals to bypass estate taxes by creating corporations, giving all the common stock to their children, and holding only preferred stock for themselves. Over time, the value of the common stock would grow, enabling the company to gradually pass to the children without tax.

The other provision, an extension of the so-called "Gallo amendment," sidesteps the "generation-skipping" tax by allowing wealthy individuals to give as much as $2 million to each grandchild without paying the tax.

The Bush administration opposes both proposals. Treasury officials estimate that the annual cost of these changes would surpass $500 million in 1994 and grow larger in subsequent years. Eventually that would sharply reduce the revenue from the estate tax, which even now brings in only $9 billion a year.

"The sense that I have is that Congress has been slowly letting the air out of the estate and gift tax," says Henry Aaron, a tax expert at the Brookings Institution. "It's such a soft and blobby tax already. After this, there won't be much left in it."

For his part, Sen. Bentsen defends both changes. He claims that the 1987 law that closed the estate-freeze loophole was a mistake. "Many senators have expressed their concerns about the effect those rules have on family businesses, and I share their concerns."

Likewise, he criticizes the generation-skipping tax, which he says, in combination with the gift tax, is "in effect a double tax on grandchildren." He adds, "I think that's wrong."

Although he joined other Democrats in opposing the capital-gains tax cut, Sen. Bentsen rejects any suggestion that he's being inconsistent. A man of considerable personal wealth, he studiously avoids the class-conscious rhetoric his colleagues use in calling capital gains a "tax break for the rich."

"It's not my nature" to use such rhetoric, Sen. Bentsen says. "I think you ought to correct inequities wherever they occur, at whatever level."

The estate tax's decline in recent years is clearly illustrated by a few simple numbers. In 1976, only $60,000 of an estate was exempt from taxation; today, the exemption is 10 times that -- $600,000 -- and it's $1.2 million if half the estate goes to a surviving spouse. As a result of higher exemptions and other loopholes, the number of estates covered by the tax has declined precipitously. Only 40,000 estate-tax returns were filed in 1987, compared with 200,000 in 1977.

The 1981 tax bill, in particular, took such a large bite out of the law, according to Arne Anderson of the Economic Policy Institute, that it "virtually eliminated estate taxes for all but a handful of the super wealthy." Loopholes were so widespread that tax experts began calling the estate tax a "stupidity tax," as the only people paying it seemed to be those who failed to plan in advance for their decease.

One of the most popular loopholes was the estate freeze, which Congress effectively closed in 1987 by passing "Section 2036(c)." This section, which Sen. Bentsen would repeal, gave the Internal Revenue Service the power to treat common stock passed on to children as if it were part of the estate. But this new provision also caused howls from many in family businesses who were trying to pass those businesses on to their children.

Tax experts acknowledge that the 1987 law was clumsily fashioned. And the Treasury has said it is willing to consider modifications. But instead of trying to modify the measure, Sen. Bentsen and his colleagues on the Finance Committee have decided to repeal it outright. "I asked staff, do we have something now that we can do that we're convinced will satisfy the problem and get rid of the abuses?" Sen. Bentsen explains. "And they said, `We don't have anything that definitive yet.'"

That means the estate-freeze loophole could quickly be back in vogue among the well-to-do. "I think section 2036(c) is excessively broad and much too vague," says Leo Schmolka, a professor at New York University Law School. "But the problem with straight repeal is it puts you right back on square one. There is a legitimate area of concern."

The generation-skipping tax was first adopted a decade ago, to try to stop wealthy families from circumventing the estate tax with giant trusts that passed the ownership of wealth from grandparents to grandchildren. The new tax helped assure that taxes on giant estates were paid by every generation, not just every other generation.

During the 1986 tax debate, however, Rep. Ed Jenkins (D., Ga.) sponsored a measure that allowed transfer of as much as $2 million to a grandchild without paying the special tax. The provision, called the "Gallo amendment" after the wealthy California wine-making family that had advocated it, was set to expire this year. But Sen. Bentsen's bill would make it permanent. "I can't see how you can justify penalizing someone because he leaves his estate to his grandchildren instead of his children," says Rep. Jenkins.

If the two changes are adopted by the full Senate, they may be challenged in a conference with the House. Some top House tax writers are likely to oppose the measures -- especially repeal of Section 2036(c).

"We are not a country of nobility," says Rep. Stark, who built a fortune in the banking business before coming to Congress. "Personally, I'd love to pay for long-term health care for the elderly by really jacking up the inheritance tax."

--- @ Estate-Tax Decline

Revenues from estate taxes as a percentage of all federal tax revenues: @ 1976 1.75% 1984 0.9% @ 1980 1.20% 1988 0.8%

Source: Economic Policy Institute

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891013-0054. HEALTH COSTS @ ---- @ By James R. Schiffman
10/13/89
WALL STREET JOURNAL (J) LABOR INSURANCE (INS) DRUG MANUFACTURERS (DRG) STOCK MARKET, OFFERINGS (STK) MEDICAL SUPPLIES (MDS) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA)

ESOPs Offer an Option

For Retiree Health Plans

COMPANIES worried about skyrocketing health costs for retirees might consider phasing out their retiree insurance program and phasing in an employee stock ownership plan.

That's what Boise Cascade Corp., Ralston Purina Co. and Whitman Corp. are doing. Here's how it works: Instead of the company paying retirees' health bills, employees receive preferred stock during their working years. When they retire, they can use the proceeds to buy company-arranged group health insurance.

The big catch: There's no guarantee that the stock will generate enough money to pay retirees' insurance premiums. But that's part of the idea. The employees take the risk -- not the company.

Of course, ESOPs aren't designed simply to reduce health costs. Among other things, they can make hostile takeovers harder by putting blocks of stock in relatively friendly hands. Still, Boise, Ralston and Whitman all say that proposed changes in accounting rules for retiree health costs were a catalyst to action.

Currently, companies account for such outlays as they are paid. But under the changes, proposed by the Financial Accounting Standards Board to go into effect in 1992, companies will have to deduct in current years what they expect to pay for health benefits when employees retire. That is expected to cause substantial damage to bottom lines unless companies take action. An ESOP, on the other hand, provides tax benefits to the company.

ESOPs are "a technique to deal with tomorrow's problem today," says James Geld, a principal at William M. Mercer Meidinger Hansen Inc., a benefits-consulting firm. Companies might want to hurry, though. Congress is taking a serious look at removing tax benefits for ESOPs, which could cool corporate enthusiasm for using the technique.

New Tests May Show

If Cancer Drugs Work

SOME PHYSICIANS report encouraging results with controversial new tests that determine the effectiveness of chemotherapy drugs.

The $800 tests, developed by Irvine, Calif.'s Oncotech Inc., are designed mainly to identify chemotherapy drugs that won't work, says Paul Kanan, chief executive officer. But they also give some indication of which drugs will shrink tumors, he says.

Richard Nalick, director of gynecologic oncology at Good Samaritan Hospital in Los Angeles, says he uses the assays to rule out the use of certain drugs for patients with ovarian cancers. That can save thousands of dollars in hospital and doctor bills and avoid horrible side effects for patients who would have been treated with highly toxic drugs.

Some experts, however, are skeptical. Tests for cancer drugs have been around for years and none has been found highly effective, says Daniel Von Hoff, director of research at the University of Texas Cancer Therapy and Research Center in San Antonio. The Oncotech assays still haven't been proven effective in rigorous clinical trials, he says.

Still, some physicians using the Oncotech tests expect them to become more widely accepted soon. Says Naren Kapadia, a medical oncologist in Waukegan, Ill.: "I think it's going to be the way of life in the next five years."

Family Members Paid

To Provide Home Care

TO CONTAIN the cost of caring for AIDS patients, John Alden Life Insurance Co. is taking a novel approach.

The insurer is paying family members and friends as much as $15 an hour to care for people with acquired immune deficiency syndrome at home, according to the plan's administrator. The program soon will cover patients with any chronic or life-threatening disease, such as cancer.

The Miami-based carrier is waiving a standard provision in insurance contracts that bars payments to family members and friends providing home care.

This is believed to be the "first exception that's ever been made to pay a family member to do anything," says Gordon Nary, executive director of Chicago-based AIDS Medical Resource Center, which administers the program for John Alden. "Paying a family member is a very inexpensive way of keeping people out of a hospital." John Alden also pays homemakers to cook for these homebound patients and helps pay for experimental drugs.

Insurers have shied from such programs, fearing family members would submit inflated bills. John Alden, however, has work schedules approved in advance by case managers.

Hospitals Slow to Put

Computers in Wards

HOSPITALS have been slow to adopt one seemingly sure-fire cost-control method: computerizing medical records and other clinical data.

While most have installed computers to handle financial affairs, few have extended systems into patient wards, says Margret Amatayakul, associate executive director of the American Medical Records Association. One big problem: With price tags of $6 million to $8 million on computer systems, many hospitals simply can't afford to computerize.

Moreover, some are leery because computers apparently haven't saved other institutions much money. But in many of those instances, industry observers say, hospitals haven't had the stomach to cut staff after installing a system.

But, at LDS Hospital in Salt Lake City, which has one of the most advanced computer systems in the country, Bette Maack, director of the medical records department, says, "We all agree that {the computer system} is saving money in many ways." en

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891013-0053. GE's Net Surged @ In Third Quarter; @ Output Gains Cited @ ---- @ By Robin Goldwyn Blumenthal @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) GE EARNINGS (ERN) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) FAIRFIELD, Conn.

General Electric Co. said third-quarter net income rose 16%, reflecting widespread productivity improvements and sales growth in a number of businesses.

The consumer and industrial products and broadcasting concern said net rose to $945 million, or $1.04 a share, from $815 million, or 90 cents a share, a year earlier. GE said operating margin as a percentage of sales was 11.1%, up from 9.6% a year ago. Consolidated revenue rose 6.5%, to $12.98 billion from $12.19 billion.

John F. Welch Jr., chairman, cited strong earnings gains in the company's financial services, plastics, transportation systems and power generation systems. He reiterated GE's expectation that full-year earnings would increase in the strong double digits.

"As expected they were right on target" in terms of profit, said Linda Shuman, an analyst with Prudential Bache Research. Ms. Shuman said that although the revenue gain was a little lighter than she had thought, profit margins were a little better. Ms. Shuman said that financial services had a "great quarter."

GE Financial Services posted a 21% earnings gain, to $245 million, led by GE Capital Corp. Major appliances operating profit was "substantially above" depressed levels of a year ago on slightly higher revenue. Broadcasting operating profit was flat compared with a year ago, despite the year-ago revenue from the 1988 Olympic Games. But aerospace operating profit fell on "modestly lower sales."

GE said firm aircraft-engine orders total almost $6 billion so far this year, while the aerospace business received more than $4 billion in firm orders for the nine months. Power-generation orders spurted almost 60% from a year ago, to $3 billion, while equipment orders for medical systems also were very strong.

For the nine months, GE net rose 16%, to $2.77 billion, or $3.06 a share, from $2.38 billion, or $2.63 a share, a year ago. Consolidated revenue rose 11%, to $38.4 billion from $34.6 billion.

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891013-0052. Ford Plans to Sell @ Rouge Steel Unit @ To Investor Group @ ---- @ By Gregory A. Patterson and Neal Templin @ Staff Reporters of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) F TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) STEEL MANUFACTURERS (STL) DEARBORN, Mich.

Ford Motor Co. said it signed a memorandum of understanding with a group of investors led by Pittsburgh businessman Carl L. Valdiserri to sell its Rouge Steel operations.

The auto maker declined to disclose the amount it would receive in the transaction and underscored that a final agreement hasn't been reached yet. Peter J. Pestillo, Ford's vice president of employee and external affairs, said at a news conference that Ford normally wouldn't have made an announcement at this stage of negotiations, but that news of the possible sale had leaked to the public.

Yesterday's announcement ended months of speculation that Ford would unload the steel producing operation which has been the cornerstone of its expansive River Rouge manufacturing complex here. Ford wants to sell the facility because it doesn't want to pay modernization costs, which it estimates will total $100 million annually for "several years." Rouge Steel began operations in 1923.

Rouge Steel turned a modest annual profit last year for the first time in this decade, Ford said.

The memorandum calls for Ford to sell the unit to Marico Acquisition Co., an entity created solely to own Rouge Steel. Marico would consist of a group of equity partners, including Mr. Valdiserri, the retired chief operating officer of Wierton Steel, Ford and two unnamed businesses.

One of the unnamed partners is a steel fabrication entity and the other isn't in the steel business, Ford said. The auto maker wouldn't say how the equity interests would be divided among the partners, but expressed hope that the transaction would be completed by year end.

Ford has long wanted to sell the facility but has been pressured to keep it by the United Auto Workers union, which represents about 3,300 workers at the plant. In May, union officials said Ford was discussing selling the facility to an Ohio manufacturing firm. But Ford declined to confirm or deny any negotiations and a sale never materialized.

In 1982, the auto maker entered talks to sell Rouge Steel to a Japanese steel producer, but those talks also ended unsuccessfully.

Mr. Pestillo said he's uncertain whether Ford is contractually obligated to gain UAW approval to complete the sale. But, he added, "in any event, we want to do it in a way that is satisfactory to employees." The contract between Ford and the UAW expires next September.

UAW officials, surprised by the announcement, declined comment.

Ford said it intends to purchase 40% of its U.S. and Canadian steel requirements, or about 800,000 tons annually, from Rouge Steel for the next 10 years. That's about the amount Ford currently purchases from Rouge Steel. The steel fabricating partner will purchase about 700,000 tons of steel annually from the entity. Rouge Steel produces about 2.3 million tons of steel a year.

Meanwhile, in a matter unrelated to the transaction, Ford said due to "market conditions," including slower auto production schedules, it will cut back production at Rouge Steel in the near future. The cutback will result in about 50 layoffs.

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891013-0051. Who's News: @ Dallas Semiconductor Corp.
10/13/89
WALL STREET JOURNAL (J) DSMI WNEWS DALLAS SEMICONDUCTOR Corp. (Dallas)

C. Vincent Prothro, chairman and chief executive officer of this maker of semiconductors, was named to the additional post of president, succeeding John W. Smith, who resigned to pursue other interests. Mr. Smith will remain a consultant to the company.

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891013-0050. International Brief -- Qantas Airways Ltd.: @ Fiscal '89 Operating Profit @ Totaled $137.4 Million
10/13/89
WALL STREET JOURNAL (J) FREST U.QAI EARNINGS (ERN)

Qantas Airways Ltd., Australia's government-owned international airline, said operating profit totaled 176.8 million Australian dollars (US$137.4 million) in the year ended June 30.

That compares with A$172.8 million in the 15 months ended June 30, 1988, when the company changed its fiscal year.

Total revenue was A$3.27 billion, compared with A$3.51 billion in the earlier period.

James Leslie, chairman of Qantas, said the result "fell short" of planned earnings. Tourism into Australia, after two years of sharp growth, was less than had been expected, particularly from Japan and New Zealand.

That was partly offset by an increase in the number of Australians traveling abroad. But the strength of the Australian dollar adversely affected profits.

Mr. Leslie said late delivery of aircraft from Boeing Co. and uncertain market conditions caused by a protracted strike by Australia's domestic airline pilots will adversely affect earnings this fiscal year.

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891013-0049. International: @ World Wire @ ---- @ Compiled by William Mathewson
10/13/89
WALL STREET JOURNAL (J) FREST LATAM O.SWB LABOR EUROP I.OLV F.PEU FORGN BEVERAGES (BVG) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) AEROSPACE (ARO) STEEL MANUFACTURERS (STL) AUTOMOBILES (AUT)

AUSTRALIAN POLITICS

Australia's opposition Liberal and National political parties, which governed the country in a coalition for most of the 40 years until 1983, pledged to cut the top personal-income-tax rate and sell 1.6 billion Australian dollars (US$1.24 billion) of government assets if they are re-elected to government.

In an "Economic Action Plan," the two conservative parties said they aim to have the top personal-income-tax rate equal the corporate-tax rate of 39%; the top personal rate is currently 49%.

The two parties said that in their first year of government they would raise A$1.6 billion by selling government businesses including Qantas Airways Ltd. and Medibank Private, which is part of the government's health-insurance system.

The incumbent Labor Party government is expected to call a national election in the first half of 1990. Recent opinion polls suggest the opposition parties would attract about the same number of votes as the current government.

A PROFITABLE INVESTMENT

Panama's Gen. Manuel Noriega made millions of dollars by investing in a Mexican lab that allegedly produced counterfeit steroids, Mexican federal authorities said. The Panamanian leader invested $800,000 two years ago in Milano Laboratories of Mexico and subsequently reinvested some of his returns, said Enrique Guillermo Salazar, commander of the federal judicial police in Tijuana. The lab was closed in April by federal police. At the time, U.S. authorities said it was the largest supplier of counterfeit steroids to a multimillion-dollar U.S. black market.

SOUTH AFRICAN STRIKE

South African Breweries Ltd., or SAB, the country's largest producer of beer, was hit by a strike at seven of its 11 breweries around the country. The strike, involving about 5,500 employees, stems from a wage dispute between SAB and the Food and Allied Workers Union. SAB has offered a 16% across-the-board wage increase which would bring the minimum wage up to 1,063 rand (about $388) per month, the spokesman said. The union is demanding a 38% increase in the minimum wage, the SAB spokesman said.

OLIVETTI INVESTIGATION

Italy is investigating U.S. allegations that Italy's Ing. C. Olivetti & Co. violated Western export-control rules and sold the Soviet Union computer equipment used to manufacture a highly sophisticated jet fighter. The U.S. case regarding Olivetti, which officials say is based on intelligence information, was brought up at a meeting earlier this week between President Bush and Italian President Francesco Cossiga. "The President did mention the concern about the Olivetti case. And President Cossiga stressed that this was being pursued in . . . a highly cooperative manner," said Assistant Secretary of State Raymond Seitz.

HIGH-TECH IN SOUTH KOREA

South Korea's Trade and Industry Ministry announced a $38.8 billion five-year plan to make South Korea one of the world's top 10 high-technology nations by the year 2000. Korea's current ranking wasn't given. The plan involves government aid to industry through outright grants, low-interest loans and tax incentives such as deductions. Officials said the plan was prompted partly by the reluctance of some countries, such as Japan, to transfer high technology to Korea for fear of hurting their own business.

PROGRESS AT PEUGEOT

Striking workers at Peugeot S.A.'s car plant at Mulhouse, in eastern France, voted to evacuate a press shop that they've been occupying, clearing the way for a negotiated settlement to a six-week-long labor dispute. Peugeot management refused to open negotiations on strikers' grievances while the press shop was occupied. The strikers' decision means that the two sides can now sit down and negotiate compromise proposals put forward by a government-appointed mediator.

EUROPEAN STEEL EXPORTS

The European Community agreed in principle to limit its steel exports to the U.S. for a further 2 1/2 years.

In return, the EC Commission said it obtained concessions from Washington that "constitute a credible step toward liberalization of steel trade" with the U.S. According to the commission, these concessions include an agreement by the U.S. to increase the EC's quota slightly, to 7% from 6.7% of the U.S. steel market.

The U.S. maintains that subsidies handed out in the past to EC steelmakers continue to give them an unfair advantage when exporting to the U.S. But the Europeans say that argument is a pretext for protectionism while U.S. steelmakers are posting profits in a buoyant market.

The EC has made it clear that it won't agree to extend the quotas again after March 1992.

POSTSCRIPTS . . .

The United Nations reported that members owed it more than $1.1 billion at the end of September in budget dues and assessments for peace-keeping operations. The U.S. was the biggest debtor, owing more than $495 million towards the U.N.'s regular budgets and over $180 million for peace-keeping. . . . China said its labor and "re-education" camps were a "miracle on earth," where more than two million people were cured of their criminal ways in the past decade.

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891013-0048. Business Brief -- Mesa Airlines Inc.: @ Carrier Rejects Merger Bid @ From Rival StatesWest Air
10/13/89
WALL STREET JOURNAL (J) MESA SWAL TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) AIRLINES (AIR)

Mesa Airlines Inc., Farmington, N.M., said it has "no interest" in a merger proposal from its tiny rival, StatesWest Airlines.

In a strongly worded statement, Mesa's board said it doesn't want to merge with Phoenix-based StatesWest because of the latter's operating history. "We see no benefit to Mesa," the statement said. "Any discussions would compromise Mesa's competitive strategy."

StatesWest hasn't yet turned a profit after three years of operation. It flies four twin-engine turboprop planes to and from 10 cities in the Southwest. Ten-year-old Mesa, which operates 22 planes to 42 cities, last posted net income of $372,949 on revenue of $15.7 million for the nine months ended June 30.

StatesWest wouldn't disclose -- to Mesa or to the public -- the terms of its proposed merger, asking instead for a meeting to discuss its plan. StatesWest, which acquired 7.25% of Mesa's common outstanding in May, said it is prepared to make a tender offer for the rest.

Mesa's board declined to meet with StatesWest officials but said it is obliged to consider any cash offer for all its stock.

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891013-0047. GE Settles Allegations @ That Unit Overcharged @ In an Army Contract
10/13/89
WALL STREET JOURNAL (J) GE ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) AEROSPACE (ARO) DEFENSE DEPARTMENT (DEF) JUSTICE DEPARTMENT (JUS) FEDERAL GOVERNMENT (FDL) FAIRFIELD, Conn.

General Electric Co. agreed to pay $900,000 to the U.S. government to resolve allegations that a subsidiary overcharged for electronic adapters used in the M-1 tank and Bradley fighting vehicle.

In the agreement, GE denied government allegations that RCA Corp. intentionally concealed cost and pricing data and overcharged the government.

Investigators at the Defense and Justice departments determined that RCA, acquired by GE in 1987, submitted false and misleading pricing data to Army negotiators in a contract entered into in 1984. Investigators also determined that RCA negotiators concealed the existence of an internal document containing accurate cost data. As a result of the concealment, the Army was overcharged $450,000, it was alleged.

The $900,000 settlement represented a doubling of the Army's actual damages under terms of the federal False Claims Act. As part of the settlement, GE, with interests in electrical products, financial services and broadcasting, also agreed to implement certain policies and procedures at the facility where the adapters were manufactured, so that the situation leading to the investigation would not recur.

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891013-0046. International Brief -- L'Oreal S.A.: @ Pretax Group Profit Rose @ By 18% in the First Half
10/13/89
WALL STREET JOURNAL (J) F.ORE EARNINGS (ERN)

L'Oreal S.A. said group profit before taxes, profit-sharing and nonrecurring items climbed 18% to 1.51 billion francs ($233 million) in the first half of 1989 from 1.28 billion francs a year earlier.

The Paris-based cosmetics group said the advance was fueled by a 17% revenue gain, to 14.55 billion francs from 12.39 billion. It didn't specify whether it recorded any nonrecurring items in the half.

L'Oreal said its main cosmetics operations posted a 20% revenue gain for the period, but didn't elaborate further on the interim results.

For all of 1988, L'Oreal had group profit of 1.35 billion francs on revenue of 24.45 billion francs.

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891013-0045. Business Brief -- Spalding & Evenflo Cos.: @ Unit Reaches a Settlement @ In 2 Suits Against Wilson
10/13/89
WALL STREET JOURNAL (J) C.AMG

Spalding Sports Worldwide said it reached a "multimillion-dollar" settlement in two suits against Wilson Sporting Goods Co. for alleged patent infringements of its golf-ball cover and optical brightener that enhances the whiteness of golf balls.

The out-of-court settlement follows a July 5 ruling by a federal judge that Acushnet Co., another golf-ball maker, infringed on Spalding's patented blended Surlyn cover that adds distance to player's shots, resists cracking and makes balls more durable. Acushnet has appealed.

Financial details of the settlement were not disclosed, but Spalding has agreed to grant a continuing license to Wilson to produce Wilson Staff and Ultra golf balls without modifications.

Spalding, a Chicopee, Mass., unit of closely held Spalding & Evenflo Cos. of Tampa, Fla., has become the leader in the highly competitive golf-ball business with the help of its Surlyn cover.

A spokesman for Wilson, a unit of Amer Group Ltd. of Finland, said the company is "pleased to have finally resolved this matter which has dragged on for several years."

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891013-0044. Business Brief -- Pacific Telesis Group: @ Pacific Bell Unit Is Allowed @ 14.75% Return as of Jan. 1
10/13/89
WALL STREET JOURNAL (J) PAC TELEPHONE SYSTEMS (TLS)

Pacific Telesis Group's Pacific Bell subsidiary will be allowed to earn a return of as much as 14.75%, compared with a current actual return of about 13%, under a plan adopted by California regulators.

The plan takes effect Jan. 1 and is to be reviewed in 1992. In San Francisco, Gary McBee, executive vice president of Pacific Bell, said the plan protects consumers by limiting price increases for basic telephone service to the amount by which the inflation rate exceeds 4.5%.

"Overall, it's a good decision that provides the appropriate incentives," Mr. McBee said.

Analyst Robert Morris III of Goldman, Sachs & Co. said the plan should allow Pacific Telesis to increase earnings by about 20 cents a share over the next several years, taking into account a rate reduction that is due to be approved this year. Mr. Morris said the rate reduction could be as large as $250 million, in which case he would reduce his 1990 earnings estimate on the telephone operating company to about $3.15 a share from $3.25 a share.

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891013-0043. Corrections & Amplifications: @ Calfed Inc.
10/13/89
WALL STREET JOURNAL (J) CAL TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) INSURANCE (INS)

CALFED Inc., of Los Angeles, hasn't injected any additional capital into its Anglo American Insurance Co. unit since its initial 1987 capitalization. The company's spokesman misstated the unit's capitalization in yesterday's edition.

(See: "Business Brief -- CalFed Inc.: Unit in London to Be Sold For Price of $100 Million" -- WSJ Oct. 12, 1989)

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891013-0042. Business Brief -- Southwest Gas Corp.: @ Arizona Panel's Staff Says @ Utility Should Cut Rates
10/13/89
WALL STREET JOURNAL (J) SWX UTILITIES (UTI)

The Arizona Corporation Commission staff recommended that rates of Southwest Gas Corp. be reduced $7.1 million, a jolt to the Las Vegas-based utility that earlier this year asked for a $47.4 million increase.

Citing a decline in interest rates, an overly costly pipe replacement program and the borrowing of $58.1 million by the utility to purchase PriMerit Bank, the commission staff called the rate request "unjustified on the basis of the facts that have emerged from our extensive study."

In filing for the increase, Southwest cited "substantial investments in the operations, upgrading and maintenance" of gas systems in central and southern Arizona.

A spokesman for Southwest said the utility hadn't yet seen the recommendations and thus couldn't comment. However, the spokesman said Southwest thinks it has a solid case for the rate increase.

The commission staff report is expected to be filed today, and hearings are scheduled to begin Nov. 27.

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891013-0041. Business Brief -- Silicon Graphics Inc.: @ Firm Will Buy Back Most @ Of Control Data's Holding
10/13/89
WALL STREET JOURNAL (J) SGIC CDA BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Silicon Graphics Inc. said it agreed to buy back most of Control Data Corp.'s stake in the workstation manufacturer, providing financially troubled Control Data with $53.3 million of badly needed cash.

Silicon Graphics, based in Mountain View, Calif., said it will repurchase 2,360,000 shares of its common stock from Control Data at $22.60 a share, leaving Control Data with 702,750 Silicon Graphics shares. Control Data said it will use the proceeds to pay down debt and cover restructuring costs.

In over-the-counter trading yesterday, Silicon Graphics closed at $23.25 a share, down 25 cents.

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891013-0040. Business Brief -- Uranium Resources Inc.: @ Firm Agrees to Be Bought @ By Unidentified Company
10/13/89
WALL STREET JOURNAL (J) URIX TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Uranium Resources Inc. said it signed a letter of intent to be acquired by an unidentified public company for $2.55 a share, or between $65 million and $75 million.

The uranium producer said in Dallas that the purchase price will depend on how the transaction is structured. The company has 22.7 million primary shares and 31.1 million fully diluted shares outstanding. A group of a dozen officers, directors and employees together own 18 million primary shares.

As part of the agreement, Uranium Resources said it agreed to pay its suitor $2 million plus the suitor's expenses if Uranium Resources agrees to be acquired by another company at a higher price.

Uranium's shares were quoted yesterday at $2.375 bid, off 12.5 cents, in over-the-counter trading.

891013-0039.
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891013-0039. Corrections & Amplifications: @ Xyvision Inc.
10/13/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO)

XYVISION Inc., of Wakefield, Mass., has been publicly held since 1986. Tuesday's edition incorrectly described the company as closely held.

(See: "Economy: Weak Profits Cast a Pall Over Economy --- Corporate Cuts Feared After Third-Quarter Results" -- WSJ Oct. 10, 1989)

891013-0038.
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891013-0038. Business Brief -- Tyson Foods Inc.: @ Firm and Leasing Company @ Plan to Sell Meat Concern
10/13/89
WALL STREET JOURNAL (J) TYSNA TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Tyson Foods Inc. said it and a leasing company agreed to sell National By-Products Inc. to a group led by the company's management.

Terms weren't disclosed. Tyson, of Springdale, Ark., acquired National By-Products, a meat by-products concern with about $200 million in annual sales, when it purchased Holly Farms Corp. earlier this year.

Last month, Tyson said it sold 82% of National By-Products and other subsidiaries earmarked for sale to THF Inc., a closely held leasing company, as a way of quickly pulling cash from the units' planned sale.

A Tyson spokesman said the transaction is subject to regulatory approval and is expected to close in about a month. The purchaser, West-End Acquisition Corp., includes 22 officers and employees of National By-Products.

891013-0037.
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891013-0037. More Economist Agree @ With Bush on Rosy Outlook
10/13/89
WALL STREET JOURNAL (J) ECONOMIC NEWS (ECO) EXECUTIVE (EXE) WASHINGTON

The Bush administration's "rosy" economic scenario isn't clashing with as many other economists' views these days.

Blue Chip Economic Indicators of Sedona, Arizona, reported this week that its 53 private economists now predict, on average, that the economy will grow 2.9% this year. That's exactly what the Bush administration predicted last July -- in a forecast widely criticized as being overly optimistic. The majority of Blue Chip economists were predicting growth of well below 2.9% at the time.

The new Blue Chip forecast also shows the administration's optimistic July forecasts for inflation and interest rates this year are now more widely held.

Administration officials were delighted to find that the recent strength in the economy has convinced other economists to share their optimism. "I'm not saying we're better or worse than the others," said Michael Boskin, chairman of the President's Council of Economic Advisers. "But we are trying to do a reasonable job here, and these accusations that we're being rosy or overly optimistic are unfounded." The U.S. economy grew at nearly a 3% annual rate in the first half of this year.

The administration and the private forecasters still don't see eye-to-eye on 1990, however. The Bush economists predict 2.3% growth and a 6.7% interest rate on three-month Treasury bills; the private economists foresee only 1.8% growth and a 7.3% rate on three-month Treasury bills.

891013-0036.
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891013-0036. Business Brief -- General Motors Corp.: @ Chevrolet Unit Is Offering @ Rebates on 1990 Geo Prizm
10/13/89
WALL STREET JOURNAL (J) GM AUTOMOBILES (AUT)

General Motors Corp.'s Chevrolet division said in Detroit that it is offering owners of imported vehicles a $1,400 rebate toward the purchase or lease of any 1990 Geo Prizm model. Owners of domestically made vehicles will receive an $800 rebate. Geo Prizm prices start at $10,125.

Customers can choose finance rates ranging from 6.9% to 10.9% instead of the rebate. The rebates and low-rate financing are available "until further notice," Chevrolet said.

Chevrolet had a 125-day supply of Prizm cars at the end of September, according to Ward's Automotive Reports, an industry statistical publication. A 60-day to 65-day supply is considered normal.

891013-0035.
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891013-0035. Business Brief -- Cincinnati Bell Inc.: @ Unit, British Concern Form @ Software Products Venture
10/13/89
WALL STREET JOURNAL (J) CSN

Cincinnati Bell Inc. said its subsidiary, Cincinnati Bell Information Systems formed a joint venture with a British firm, Kingston Communications PLC, to market software products and services in Europe. The two companies will invest equally in the venture based in London. Terms weren't disclosed.

Cincinnati Bell president and chief operating officer John T. LaMacchia said the venture would allow the company to better serve its European customers and allow further expansion into Europe's rapidly expanding market for digital network technology.

Kingston Communications, one of the United Kingdom's three public network exchange carriers, markets communications and information technology services.

Cincinnati Bell Information Systems develops management systems for telecommunications, financial, commercial and government customers.

891013-0034.
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891013-0034. Who's News: @ General Electric Co.
10/13/89
WALL STREET JOURNAL (J) GE WNEWS GENERAL ELECTRIC Co. (Fairfield, Conn.)

James A. Parke, 43 years old, was named senior vice president of finance at GE Financial Services, GE's financial services, brokerage and reinsurance unit. GE also has interests in consumer and industrial products and broadcasting. When he joins the unit Nov. 6, Mr. Parke will assume responsibility for all of the unit's financing activities. He succeeds Leo A. Halloran, 58, who will retire by year end. Mr. Parke has been manager of finance at GE Aircraft Engines. GE Financial Services, which has assets of more than $79 billion, consists of GE Capital, Employers Reinsurance and Kidder, Peabody & Co.

891013-0032.
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891013-0032. Business Brief -- B.F. Goodrich Co.: @ Elastomers Business Is Sold @ To Unit of Japanese Firm
10/13/89
WALL STREET JOURNAL (J) GR J.NNZ TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

B.F. Goodrich Co., Akron, Ohio, said it completed the previously announced sale of its elastomers business to Zeon Chemicals Inc., a subsidiary of Nippon Zeon, a Japanese chemical company. Terms weren't disclosed.

Goodrich said the sale won't have a material effect on current-year results. The company's sales of elastomers, which are synthetic rubber products, amounted to about $85 million last year.

The company said the sale includes manufacturing facilities in Louisville, Ky., and Hattiesburg, Miss. About 300 people are employed in the business.

Goodrich produces vinyl resins, compounds, polymer products and chemical additives.

891013-0031.
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891013-0031. FDA Asks for Safety Data @ On Microwave Packaging
10/13/89
WALL STREET JOURNAL (J) FOOD PRODUCTS (FOD) PULP, PAPER, PACKAGING (ALL TYPES) (PUL) FOOD AND DRUG ADMINISTRATION (FDA) WASHINGTON

The Food and Drug Administration asked the microwave food-packaging industry to demonstrate the safety of metalized containers used to brown foods at extremely high temperatures.

The request for scientific data is the agency's first step toward setting standards for high-temperature microwave packaging. It also reflects increasing FDA concern that materials in packages with metalized surfaces, called heat susceptors, could be transferred to foods at the high temperatures needed to brown foods or make them crispy.

Heat susceptors are used in microwave packaging for such foods as popcorn, pizza, fish sticks and french fries, according to the FDA.

An FDA spokesman said materials used for microwave packages may comply with existing regulations written for temperatures below 300 degrees Fahrenheit. But when those regulations were written, he said, the agency didn't envision food being browned at temperatures up to 500 degrees.

The FDA is particularly concerned that adhesives, polymers and metallic components in the heat susceptors could spread to foods at high temperatures.

The agency's call for research information by Dec. 7 stems from a September 1988 meeting with the National Food Processors Association, a trade group that represents microwave food processors and microwave packaging manufacturers.

891013-0029.
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891013-0029. Money Rates
10/13/89
WALL STREET JOURNAL (J) EUROP CANDA JAPAN FRE FNM MER FINANCIAL, ACCOUNTING, LEASING (FIN) BOND MARKET NEWS (BON) BANKS (BNK) REAL ESTATE, REITS, LAND DEVELOPMENT (REL) CONSTRUCTION, MATERIALS (CON) SAVINGS AND LOANS, THRIFTS, CREDIT UNIONS (SAL) MONETARY NEWS, FOREIGN EXCHANGE, TRADE (MON) TREASURY DEPARTMENT (TRE) FEDERAL RESERVE BOARD (FED)

Thursday, October 12, 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 15/16% high, 8 3/4% low, 8 13/16% near closing bid, 8 7/8% 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.: 8.60% 30 to 44 days; 8.50% 45 to 59 days; 8.375% 60 to 80 days; 8.50% 81 to 89 days; 8.25% 90 to 119 days; 8.125% 120 to 149 days; 8% 150 to 179 days; 7.625% 180 to 270 days.

COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.675% 30 days; 8.60% 60 days; 8.55% 90 days.

CERTIFICATES OF DEPOSIT: 8.15% one month; 8.15% two months; 8.13% three months; 8.11% six months; 8.08% 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: 8.70% one month; 8.68% three months; 8.55% six months.

BANKERS ACCEPTANCES: 8.55% 30 days; 8.45% 60 days; 8.43% 90 days; 8.28% 120 days; 8.18% 150 days; 8.05% 180 days. Negotiable, bank-backed business credit instruments typically financing an import order.

LONDON LATE EURODOLLARS: 8 13/16% to 8 11/16% one month; 8 13/16% to 8 11/16% two months; 8 13/16% to 8 11/16% three months; 8 3/4% to 8 5/8% four months; 8 11/16% to 8 9/16% five months; 8 5/8% to 8 1/2% six months.

LONDON INTERBANK OFFERED RATES (LIBOR): 8 13/16% one month; 8 13/16% three months; 8 11/16% six months; 8 5/8% 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 8.50%; 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 Tuesday, October 10, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.63% 13 weeks; 7.60% 26 weeks.

FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.91%, standard conventional fixedrate 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) 9.86%, standard conventional fixed rate-mortgages; 8.85%, 6/2 rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

MERRILL LYNCH READY ASSETS TRUST: 8.33%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.

891013-0028.
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891013-0028. Technology Brief -- T Cell Sciences Inc.: @ Marketing of Leukemia Test @ Gains Approval From FDA
10/13/89
WALL STREET JOURNAL (J) TCEL MEDICAL AND BIOTECHNOLOGY (MTC) FOOD AND DRUG ADMINISTRATION (FDA)

T Cell Sciences Inc. said the Food and Drug Administration approved for marketing its Cell-free hairy cell leukemia test.

The Cambridge, Mass., biotechnology concern said the test is used to evaluate and monitor patients' responses to treatments of the blood-cell cancer. T Cell said it plans later to seek FDA approval to market the test for detecting organ transplant rejection and for monitoring rheumatoid arthritis.

The company said the FDA approval was the first for a test based on measurement of blood levels of immune system proteins called T cell receptors.

891013-0027.
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891013-0027. Business Brief -- Hollywood Park Realty: @ Two Firms Set to Nominate @ Dissident Investor Gamel
10/13/89
WALL STREET JOURNAL (J) HTRFZ

Hollywood Park Realty Enterprises Inc. and Hollywood Park Operating Co., Inglewood, Calif., said they reached an agreement to nominate dissident investor Thomas W. Gamel as director of both companies, whose stock is paired for trading.

Mr. Gamel, a Denver investor who holds more than a 5% stake in the companies, had threatened a proxy fight. He now has agreed to withdraw the slate he previously nominated and to vote his shares in favor of the boards' nominees.

The agreement prevents Mr. Gamel from acquiring additional stock of the companies without obtaining prior approval from the companies, soliciting any proxies or consents, "or engaging in any conduct calculated to result in an acquisition of the companies or their assets" or assisting anyone else in doing so. Hollywood Park Realty is a real estate investment trust that leases race track operations to Hollywood Park Operating.

891013-0026.
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891013-0026. Technology Brief -- Warner-Lambert Co.: @ Antibacterial Drug Licensed @ From Dainippon of Japan
10/13/89
WALL STREET JOURNAL (J) WLA J.DAP DRUG MANUFACTURERS (DRG)

Warner-Lambert Co., Morris Plains, N.J., said it licensed an advanced quinolone antibacterial drug from Dainippon Pharmaceutical Co., Osaka, Japan.

The agreement gives Warner-Lambert, a health-care and consumer products company, rights to the product in the U.S. and Canada. It already licenses a related antibacterial, enoxacin, sold under the name Comprecin, from Dainippon; that drug is marketed in 10 countries and is expected to be approved for U.S. marketing later this year.

Warner-Lambart said the latest licensed product is expected to be marketed in the mid-1990s.

A spokesman said Comprecin is used for certain types of infections such as urinary tract, while the new drug appears to be effective against skin and respiratory tract infections as well as pelvic inflammatory disease, a leading cause of infertility.

891013-0025.
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891013-0025. Marketing & Media: @ Washington Post's Graham @ Agrees to Pen Her Memoirs
10/13/89
WALL STREET JOURNAL (J) WPOB MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) NEW YORK

Katherine Graham, chairman and chief executive officer of Washington Post Co., has agreed to write her memoirs for Alfred A. Knopf Inc. The publisher declined to disclose the price it will pay and said a publication date hasn't been set.

Knopf said that Robert Bernstein, chairman of Random House Inc., whose imprints include Knopf, has been trying for several years to persuade Ms. Graham to write her memoirs.

Ms. Graham, who is 72 years old, is one of the most powerful women in the media and one of a handful of female chief executives at Fortune 500 corporations. Her father, originally a banker, bought the Washington Post in 1933 and Ms. Graham worked for the family publishing business for years before being named president in 1963.

Ms. Graham is writing the book herself, a Knopf spokesman said, and has already turned in a portion of the manuscript to editor Elisabeth Sifton.

Autobiographies of media barons aren't automatic bestsellers, and Ms. Graham may find that Allen Neuharth, recently retired chairman of Gannett Co., is a hard act to follow. The official publication date of Mr. Neuharth's autobiography, "Confessions of an S.O.B.," is today, but the book has already sold enough copies to land on the New York Times' hard-cover, non-fiction bestseller list.

891013-0024.
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891013-0024. Business Brief -- Connaught BioSciences Inc.: @ University Considers Settling @ Suit Over Planned Takeover
10/13/89
WALL STREET JOURNAL (J) CSESF F.INM RHPOY Z.CIG CHIR DRUG MANUFACTURERS (DRG) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

The University of Toronto is considering an out-of-court settlement of its suit to block the proposed acquisition of Connaught BioSciences Inc. by a French company for 942 million Canadian dollars (US$801.6 million).

An Ontario Supreme Court judge yesterday adjourned hearing of the suit until Oct. 18, to give university officials time to study the proposal, which was made by Connaught. The company declined to describe the proposed settlement and university officials weren't available.

In the suit, the university claims that the transfer of control of Connaught to a non-Canadian concern would violate the terms of a 1972 agreement between the university and the Canadian government. Connaught contends the agreement doesn't prevent a sale.

Connaught is the target of a C$37-a-share offer by Institut Merieux S.A. of France, a 50.2%-owned unit of Rhone-Poulenc S.A., which expires Oct. 26. A rival, C$30-a-share bid by Ciba-Geigy Ltd. of Switzerland and Chiron Corp., based in Emeryville, Calif., expires Tuesday.

In national over-the-counter trading yesterday, Connaught closed at $30.25, up 25 cents.

891013-0023.
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891013-0023. What's News -- @ Business and Finance
10/13/89
WALL STREET JOURNAL (J)

SAATCHI & SAATCHI announced a major management reorganization that appears to remove co-founder Maurice Saatchi from day-to-day operations. Meanwhile, a top Saatchi unit executive, Carl Spielvogel, said he has offered to lead a management buy-out of the troubled British advertising and communication giant, but the company rebuffed him.

---

The Senate began debating its $14.1 billion deficit-reduction bill, with Democrats asserting the measure will pass quickly and without a cut in the capital-gains tax. The House-passed version contains a capital gains cut.

The Senate's bill opens two loopholes in the estate tax that benefit only the very wealthiest people.

---

A top Chrysler official said the auto maker barely broke even on operations in the third quarter. The assessment was worse than analysts expected, though not a total surprise in the competitive auto market.

---

A move to put Bell companies under the control of the FCC rather than a federal court is gaining support among Bush policy makers because of the FCC's emphasis on deregulation.

---

Aristech Chemical received a $25-a-share, or $817.5 million, buy-out bid from a group led by Jon Huntsman, chairman of closely held Huntsman Chemical. Huntsman said Aristech has previously rebuffed proposals to sell its polypropylene business.

---

The Amex named as its chairman James Jones, a lobbyist and ex-House Budget panel chief. The decision appears to continue the exchange's plan to be a powerful voice in Washington.

---

Two recent buy-outs engineered by Gibbons, Green van Amerongen have hit financial snags, another sign of a weakening in the buy-out business.

---

Mazda lost its two top U.S. executives for the second time in less than two years. The resignations were the latest sign of managerial problems.

---

Bolar Pharmaceutical is under criminal investigation for possible "false information" in applications to make at least two generic drugs.

---

A group of air-express firms sued the U.S. Postal Service, alleging the agency's low rates for overseas delivery were "unfair and illegal."

---

Japan's trade surplus shrank in September for the fifth month in a row, helped by a stronger dollar. But the surplus with the U.S. widened.

---

Chemical Bank and Bank of New York posted losses for the third quarter. Two Southeast superregional banks had lackluster results.

---

General Electric's profit rose 16% in the third quarter, reflecting widespread productivity improvements and sales growth in several areas.

---

Coca-Cola's profit jumped 22% in the third quarter as strong international sales more than offset disappointing domestic results.

---

Markets --

Stocks: Volume 160,120,000 shares. Dow Jones industrials 2759.84, off 13.52; transportation 1484.35, off 0.18; utilities 219.25, up 0.25.

Bonds: Shearson Lehman Hutton Treasury index 3369.69, up 5.49.

Commodities: Dow Jones futures index 129.86, up 0.61; spot index 128.97, up 0.84.

Dollar: 144.17 yen, off 0.40; 1.9083 marks, off 0.0083.

891013-0022.
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891013-0022. Business Brief -- Bear, Stearns & Co.: @ Group Is Formed to Buy @ 82% of Jerusalem Economic
10/13/89
WALL STREET JOURNAL (J) BSC MDEST TENDER OFFERS, MERGERS, ACQUISITIONS (TNM)

Bear, Stearns & Co., New York, formed a group to buy the Israeli government's 82% stake in Jerusalem Economic Corp. for $1.70 a share, or $53 million.

The group plans an offer to buy the rest of Jerusalem Economic's shares, which trade on the Tel Aviv Stock Exchange, at about the same price.

Jerusalem Economic, formed by the government and other entities in 1948 to develop industrial buildings in Jerusalem, owns 2.3 million square feet of office and warehouse space around the city. Jerusalem Economic also has about 360,000 square feet under construction.

The group includes the securities firm; Uzi Zucker and Carl Glickman, directors of parent Bear, Stearns Cos.; and Eliezer Fishman, a Tel Aviv accountant, real-estate investor and publisher.

Alan C. Greenberg, chairman and chief executive officer of Bear, Stearns Cos. and its subsidiary, said Israel has "a unique position as a free-trade bridge between Europe and the U.S., which is very attractive to" the firm as an investor.

891013-0021.
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891013-0021. Business Brief -- United Technologies Corp.: @ Pratt & Whitney Unit Gets @ Order for Airplane Engines
10/13/89
WALL STREET JOURNAL (J) UTX

Pratt & Whitney, Hartford, Conn., said Japan Air System Co. ordered 16 of its JT8D-200 jet engines and acquired options on four others, in a transaction that has a potential value of $80 million.

Japan Air, Tokyo, will use the engines to power McDonnell Douglas Corp. MD-81 twin-jets it has ordered. Engine deliveries are scheduled for 1994 through 1996, Pratt & Whitney said.

The engine maker is a unit of United Technologies Corp., which has interests in making helicopters, elevators, and defense and industrial products.

Japan Air, a regional carrier, recently changed its name from Toa Domestic Airlines.

891013-0020.
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891013-0020. Air-Express Firms @ Sue Postal Service @ On Overseas Rates @ ---- @ By Glenn Ruffenach @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) FDX A.TNT AIRLINES (AIR) POSTAL SERVICE (POS) JUSTICE DEPARTMENT (JUS)

A group of air-express companies has sued the U.S. Postal Service, alleging that the agency's low rates for overseas delivery represents "unfair and illegal competition."

The suit, filed in federal court in Wilmington, Del., involves a rate change that the Postal Service made in April for express delivery overseas of packages weighing one-half pound or less. The agency lowered the cost of the service to $8.75 from $18. In June, the cost was fixed at $10.75. By comparison, private carriers charge about $20.

The plaintiffs contend that the Postal Service failed to have the reduced cost approved by the Postal Rate Commission, an independent federal agency that reviews proposed rate changes. Moreover, the plaintiffs argue that the low rate takes advantage of the monopoly that the Postal Service has in other classes of mail -- a monopoly, the plaintiffs say, that allows it to subsidize international express delivery.

The plaintiffs are asking the court to enjoin the Postal Servive from offering the $10.75 rate or any rate that isn't "fair and equitable."

"That rate is below cost," says Robert Kendall, an attorney in the Philadelphia firm of Schnader, Harrison, Segal & Lewis, which is representing the air-express companies.

A Postal Service spokesman said the agency hadn't received a copy of the lawsuit. But he did acknowledge that the Postal Service didn't obtain approval to lower the rate from the Postal Rate Commission. The commission, the spokesman said, is required to review changes only in domestic rates.

David Stover, general counsel at the Postal Rate Commission in Washington, agreed that the commission has "never asserted jurisdiction over international rates." He added, however: "There's never been a court case, so we might be told we're wrong." The Postal Service said the lower rate has been responsible for a significant increase in its volume of international overnight packages. In September, the agency shipped about 242,300 packages, a 66% increase from the year-earlier month.

The companies involved in the suit are: DHL Worldwide Express's DHL Airways Inc. subsidiary in Redwood City, Calif.; Dworkin-Cosell Interair Courier Services, New York; Federal Express Corp., Memphis, Tenn.; Intertrade Courier International Inc., Miami; TNT Skypak Inc., a U.S. subsidiary of TNT Ltd. of Australia; and UPS Air Forwarding Inc., a subsidiary of United Parcel Service Inc., Greenwich, Conn. Two industry associations are also parties to the suit: the Air Courier Conference of America/International Committee and the International Express Carriers Conference, both based in Washington.

891013-0019.
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891013-0019. Technology: @ Tandem Plans to Unveil @ New Mainframe Computers
10/13/89
WALL STREET JOURNAL (J) TDM COMPUTERS AND INFORMATION TECHNOLOGY (CPR) CUPERTINO, Calif.

Tandem Computers Inc. will announce a powerful new parallel processing mainframe on Monday which it said will, under certain circumstances, provide about the same performance as International Business Machines Corp.'s 3090 mainframe for as little as one-third the cost.

The new machine, called the Cyclone, will be priced starting at $2 million. It will offer four to 16 processors working in parallel, which allows it to process certain kinds of data much faster than computers with fewer processors. Tandem also has introduced new software that enhances the ability of data processors to retrieve and sort information at high speeds. The company declined to provide more details about the machine, or its delivery date.

Tandem's stock price has jumped 68% from its low of last April, when it announced an unexpected sales shortage, and is up about 20% from its highs early in the year. It closed yesterday at $24.75, up 75 cents, in composite trading on the New York Stock Exchange.

In 1988, Tandem earned $94.5 million, or 96 cents a share, on sales of $1.31 billion. A consensus of analysts' estimates puts the company's 1989 earnings at $1.14 to $1.20 a share, and sales of $1.61 billion to $1.64 billion.

891013-0018.
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891013-0018. U.S. Joins Pair's @ Civil Action Filed @ Against Northrop @ ---- @ By Rick Wartzman @ Staff Reporter of The Wall Street Journal
10/13/89
WALL STREET JOURNAL (J) NOC AEROSPACE (ARO) JUSTICE DEPARTMENT (JUS) LOS ANGELES

The Justice Department, as anticipated, said it will help prosecute a civil action against Northrop Corp. for alleged mischarges on equipment used to test MX missile parts.

A copy of the suit couldn't be obtained yesterday, but a Justice Department spokeswoman confirmed that the U.S. has decided to intervene in portions of a complaint brought in 1987 by two former Northrop managers, David Peterson and Jeff Kroll. The case was filed under the False Claims Act and unsealed in federal court here.

Under the so-called whistle-blower statute, the government decides if it believes the evidence in a case is compelling and, if so, it may then join in as a co-plaintiff. Messrs. Peterson and Kroll stand to share as much as 25% of any monetary recovery made by the U.S.

Last night, a Northrop spokesman said the company hadn't yet been served with a complaint in the case and therefore couldn't comment. It is expected, though, that it will be served today.

Northrop's outside counsel, Los Angeles attorney Gordon Greenberg, couldn't be reached for comment.

The Justice Department's decision to take up portions of the Peterson-Kroll case -- the intent of which was first reported in The Wall Street Journal last month -- is significant in part because making the guidance systems for the nuclear-tipped MX, also called the Peacekeeper, is big business for Northrop. Manufacture of the systems, known as inertial measurement units, is the major project in its Electronics Systems Division and accounted for 6.2% of the corporation's total $5.8 billion in sales in 1988.

Even more important, it damages further Northrop's already much-maligned reputation. The company's Precision Products Division currently is under criminal indictment for allegedly falsifying tests on the Air Force air-launched cruise missile and the Navy's Harrier fighter jet.

And criminal charges related to Messrs. Peterson's and Kroll's assertions are being actively considered by federal prosecutors, and could materialize very soon, according to people close to that investigation.

The aspects of the Peterson-Kroll case being taken up by the Justice Department relate to three areas: that Northrop allegedly mischarged the government on its labor costs by improperly shuffling expenses between different contracts; that it used unapproved vendors to obtain supplies for parts; and that it wrongfully charged the government for equipment known as the dry integrated test system. Many of these allegations were told to Congress in testimony by Mr. Peterson two years ago.

In their original suit, Messrs. Peterson and Kroll made other sweeping allegations, relating to auditing procedures and quality assurance standards, but the government declined to pursue those. Still, the pair's lawyer, Phil Benson, said the government had chosen to intervene in "the primary portions" of the case and that was "certainly good news for us."

In its complaint, the government left open the amount of damages it hopes to recover, as is customary in these matters. Mr. Benson, who is with the law offices of Herbert Hafif, said his clients believe the mischarging may total as much as $200 million, though "that issue is unresolved."

891013-0017.
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891013-0017. GM Planning to Close @ 2 Plants for a Week @ Because of Slow Sales
10/13/89
WALL STREET JOURNAL (J) GM F TOYOY C HMC NSANY J.MZD AUTOMOBILES (AUT) DETROIT

General Motors Corp. said it will temporarily close two of its assembly plants for one week each because of slow sales.

The No. 1 auto maker said it is idling its Wilmington, Del., assembly plant, which builds the Chevrolet Corsica and Beretta. About 3,000 workers will be affected by the downtime at the Wilmington plant.

GM said it also will shut its Oklahoma City assembly plant, which employs about 5,500 workers. The plant builds the Buick Century, Pontiac 6000 and Cutlass Ciera.

The auto maker scheduled overtime this week at its Flint, Mich.; Lordstown, Ohio, and Janesville, Wis., assembly plants. The plants build the Buick LeSabre, Oldsmobile 88 Royale and Chevrolet Cavalier models.

Meanwhile, the nine major U.S. auto makers plan to build 139,359 cars this week, down 11% from 156,596 a year ago and 5.4% higher than last week's 132,185.

Ford Motor Co. slated overtime 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 Ford pickup trucks.

Chrysler Corp. scheduled overtime this week at its Newark, Del., assembly plant, which builds Acclaim and Spirit cars, and at its St. Louis Assembly Plant No. 2, manufacturer of extended-body minivans.

--- @ This Last Yr. Ago -Yr. to Date- % @ Week-e Week-r Week 1989 1988 Chg. @GM 60,935 58,783 82,266 2,499,437 2,662,359 - 6 @Ford 34,717 32,933 34,904 1,367,752 1,428,545 - 4 @Chrysler 19,250 16,834 23,071 741,256 822,460 -10 @Honda 6,930 6,122 7,118 292,656 292,835 - 0 @Nissan 2,100 2,427 2,877 93,910 90,147 + 4 @Nummi-f 3,700 3,808 702 156,978 116,584 +35 @Mazda 4,485 4,448 5,658 176,486 112,540 +57 @Diam.Star 3,242 2,784 0 60,313 0 d @Toyota 4,000 4,046 0 104,707 0 d @TOTAL-x 139,359 132,185 156,596 5,493,495 5,561,309 - 1

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 35,839 Volkswagen domestic-production through July.

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891013-0016. What's News -- @ World-Wide
10/13/89
WALL STREET JOURNAL (J)

BUSH IS DESIGNATING a crisis committee following Panama's uprising.

As a result of a review of its activities during last week's attempted coup against Noriega, the White House has decided that it automatically will convene a designated committee to coordinate the handling of emergencies. The panel will include officials from the State Department, the Pentagon and the CIA. Despite the collapse of the coup, the administration has concluded that the current system needs only "fine-tuning," an official said.

Members of Congress barred at least one covert operation in Panama that was proposed by the Bush administration, intelligence sources said.

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Lebanese lawmakers announced a compromise that gives greater political authority to Lebanon's Moslems in exchange for the start of a Syrian troop withdrawal from the country. In Beirut, Christian military leader Michel Aoun rejected the plan, reached at talks in Saudi Arabia, and vowed to continue the 14-year-old civil war.

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A Swedish appeals court freed a man convicted in July of killing Prime Minister Palme, ruling that there wasn't enough evidence to blame Christer Pettersson for the February 1986 assassination. The 42-year-old Pettersson, who has a lengthy criminal record, was released from a Stockholm prison, where he had been serving a life term.

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The Nobel Prize in chemistry was shared by U.S. scientists Thomas Cech and Sidney Altman for their discovery that the genetic material RNA could actively engage in chemical reactions. The prize in physics was awarded by the Nobel committee in Stockholm to two Americans and a West German.

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Physicists have discovered strong evidence that there are only three families of fundamental particles that make up matter. The finding, which came as scientists attempted to mimic the birth of the universe in an atom smasher, "puts the lid on the complexity of nature," said Burton Richter, 1976 winner of the Nobel Prize in physics.

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Costa Rica's opposition received funding from the National Endowment for Democracy, a bipartisan group established by Congress in 1984 to encourage democracy. The funding by the organization's GOP wing continued until July of this year and was used against President Arias, documents show.

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The House approved a statutory ban on burning the U.S. flag, providing for as long as a year in prison and a $1,000 fine for anyone who desecrates it. The bill was drafted in response to a Supreme Court decision in June that found a Texas law prohibiting such protest violated free-speech protections. The measure was sent to Bush.

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Federal safety investigators found an apparently pre-existing crack in the engine disk of a United Airlines jetliner that crashed in July in Sioux City, Iowa, killing 112 people. The disk had been found Wednesday by a farmer in an Iowa cornfield.

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Six anti-American students occupied part of the U.S. ambassador's home in Seoul before riot police arrested them. Officials said the students, armed with firebombs and tear gas, were protesting U.S. trade pressure on South Korea. They also called on Roh to cancel his planned visit next week to Washington.

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A top East German official rejected the democratic changes embraced by some of the nation's Communist allies. Central Committee member Otto Reinhold said socialism would continue to dominate society. The statements came amid persistent reports that the departure of leader Honecker was imminent.

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Poland unveiled an economic program aimed at introducing free-market mechanisms and capitalist institutions "in the swiftest possible way" after 45 years of communism. The Solidarity-led government's program includes restoring private property and other forms of non-state ownership.

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Latin American leaders pledged to fight drug trafficking and condemned Noriega's regime in Panama. In a declaration issued at the end of the two-day summit in Peru, the Central and South American presidents also urged that Cuba be readmitted to the Organization of American States.

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Soviet troops killed an Azerbaijani man in the disputed territory of Nagorno-Karabakh, the second such shooting in as many days. The soldiers had been sent to restore order in the enclave. Activists in Azerbaijan, meanwhile, extended a railway blockade of Armenia to the neighboring republic of Georgia, local newspapers reported.

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Israel's Shamir dismissed as "inflated" and unnecessary a suggestion by the U.S. for a meeting with the foreign ministers of Israel and Egypt in an attempt to revive peace efforts. Separately, the premier said Israel's air defenses failed to detect a Syrian jet whose pilot landed Wednesday in Israel and reportedly sought asylum.

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A bar fight in Portugal escalated into a brawling rampage involving as many as 500 U.S. and British seamen that left cars overturned, windows smashed and more than 100 people injured. Police said 121 of the sailors were arrested following Wednesday night's incident along Lisbon's dockside.

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Security forces in East Timor battled with pro-independence demonstrators during a Mass at which Pope John Paul II told Indonesia to uphold human rights after what he called years of "destruction and death." About 100,000 people attended the service in Dili led by the Roman Catholic pontiff.

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Nelson Mandela held an unprecedented meeting with leaders of the Mass Democratic Movement, considered South Africa's "new generation" of anti-apartheid activists. The 72-year-old black nationalist, who is serving a life prison term for treason, said he had urged Pretoria to negotiate with the outlawed African National Congress.