WSJ910516-0180 910516-0180. Who's News: Alexander & Alexander Services Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 AAL WNEWS FINANCIAL (FIN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW YORK (NY) ALEXANDER & ALEXANDER SERVICES Inc. (New York) -- Albert A. Skwiertz Jr. was named vice president and associate general counsel, a new post, at this insurance brokerage, risk management and human resource management consulting company. Mr. Skwiertz, 45 years old, was previously senior vice president and general counsel at Sedgwick James Inc., an insurance brokerage firm. WSJ910516-0179 910516-0179. India's Grim Election ---- By Anthony Spaeth 05/16/91 WALL STREET JOURNAL (J), PAGE A16 INDIA (II) NEW DELHI -- A scene from India's current election campaign: a candidate makes his appearance before the press dressed, or half-dressed, in a white loincloth. His head is shaved and he wears round steel-rimmed glasses. His name is Madan Lal, but for campaign purposes he calls himself "M.K. Mahatma Gandhi." His party is the Indian Opportunists Party. His aides, smirking big-bellied men wearing stage wigs and carrying bows and arrows, are dressed as the Hindu religious figures Rama and Laxman. The performance is a joke, but one with a message: that politicans are opportunistic play actors prepared to exploit even the holiest of India's figures to win a few votes. India is going into its parliamentary elections next week with a sneer. The collapse of two minority governments in four months has disgusted the average Indian. And the pillar of political stability in the past, the Congress (I) Party, has become a personality cult of former Prime Minister Rajiv Gandhi. He's introduced at campaign rallies as "your young prince." But as many Indians disdain their prince as support him. So India lurches toward an uncertain future with no perceptible anchor. Political analysts are holding their breath over the possibility of another series of weak governments -- or, worse, a government committed to the interest of India's Hindu majority, as promised by the Bharatiya Janata Party, or BJP, a front runner. Of the three front runners -- the BJP, the Congress and the Janata Dal Party of V.P. Singhonly the BJP is untested, which adds to its appeal. Both the Congress and the Janata Dal have held power and disappointed. Indian politics has always been a dirty and corrupt game, in which politicans resort to the basest tactics to gain lucrative seats in the government. A favorite: provoking deadly riots to disgrace competing parties or leaders. Nearly all of the communal disturbances reported from India, which seem from a distance the manifestation of crude religious passions, are deliberate provocations from politicans. But for most of the period since 1947, when it gained independence from Britain, India had a political lodestar: The Congress Party and its ideal of a secular state, run for and by all the country's various ethnic and religious groups. "We've always prided ourselves that India was not Pakistan, India was not Bangladesh," says Rashid Uddin Khan, a political scientist in New Delhi. Indian nationalism never degenerated into a tyranny of the majority, as it did in those two Muslim quasi-theocracies. And India's poor, illiterate electorate, though denied much, found power in the vote. Against all expectation in 1977, they booted out the Congress government led by Indira Gandhi and returned it to power when its successors proved inept. They kicked it out again, when it was led by Mrs. Gandhi's son Rajiv, in 1989. Today the Congress is weaker than ever. And so in the current election campaign, voters are questioning the politicians as they never have before: a questioning made more acute by the roster of candidates, which includes cricketers, a former prostitute, a 78-year-old body builder, numerous film stars -- including an actress who played Sita, the Hindu equivalent of the Virgin Mary, in a popular television serial -- and even Vinayak Godse, brother of the assassin of Mohandas K. "Mahatma" Gandhi. The choices in next week's elections are grand: the secularism of the Congress Party; the "Hindu Nation" of the BJP; a pro-poor, pro-lower caste government promised by the Janata Dal. And yet the parties are afraid to articulate their fundamental ideologies and risk losing the mainstream vote. So the BJP tries to appeal to Hindus with a platform calling for the construction of a controversial temple, protection for semi-sacred bulls and bullocks and a "White Revolution" -- economic growth through cow, goat and sheep breeding. The Janata Dal, led by Mr. Singh, prime minister for 11 months in 1989 and 1990, stands for "social equity" for poor Indians but vows only to reserve government jobs for them. Even the Congress, promising "stability," harps simplistically on the need for a majority government in New Delhi. India's true instability -- its economic and social gaps, its rebellious Sikh, Kashmiri and Assamese separatists -- are ignored. This is ideology reduced to gimmickry. The biggest danger, however, lies in the dangerous ideology of the BJP, which promises special treatment for Hindus in a country with 132 million non-Hindus. If the BJP gains power -- or gets close enough to taste it -- it could expand its promises to Hindu voters. Hindu fundamentalism could lurch forward with astonishing speed, as Islamic fundamentalism has in Pakistan or pro-Singhalese policies did in Sri Lanka in the 1950s -- policies that led directly to the ruinous civil war with the Tamils. A hint of how special treatments for any one group of people can goad other groups into violence was seen here last year when then-Prime Minister Singh, in order to shore up his weak political position, promised government jobs to low-caste Hindus. Each of the other major parties, afraid of alienating the millions of low-caste Hindus, adopted similar positions. The plan shook the country, threatening a caste war. The Indian voter has proven himself canny in the past. It's possible that next week voters will reject the BJP's vision of a Hindu state. It's even possible that they will rally round the Congress Party once more. But as this campaign has made clear, the secularism on which this country was founded has become just one item in a confused ideological bazaar. It's also clear that Indian voters have never been more cynical. Across the country, politicians are being stoned on their campaign trips. A billboard in New Delhi says it all. Referring to the political wranglings over candidacies and "seat adjustments," it reads: "Here's one seat adjustment we'd like to see." A drawing shows an Indian peasant kicking a politican in the rear end. --- Mr. Spaeth is a novelist and journalist in New Delhi. WSJ910516-0178 910516-0178. Who's News: AIG Names Tizzio President, Bolsters Position of Chairman Greenberg's Son ---- By Suein L. Hwang Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B9 AIG WNEWS FINANCIAL (FIN) PROPERTY & CASUALTY INSURANCE (INP) INSURANCE (INS) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW YORK (NY) NEW YORK -- American International Group Inc. announced a new president, among other executive changes, one of which strengthens the position of Chairman Maurice R. Greenberg's son at the company. The insurance and financial services conglomerate elected Thomas R. Tizzio president, succeeding Mr. Greenberg who spent 24 years in the position. Mr. Tizzio, 53 years old, currently serves as vice chairman for the domestic general insurance department, AIG's largest business unit. Mr. Greenberg, 66, continues as chairman and chief executive officer of the company. Mr. Tizzio will be succeeded by Jeffrey W. Greenberg, Mr. Greenberg's 39-year-old son, who currently serves as AIG vice president and president of the company's National Union Fire Insurance Co. unit. His title will be executive vice president of AIG, with responsibility for the domestic brokerage unit. A company spokesman said the changes aren't intended to create an order of succession and that Maurice Greenberg has no plans to retire. The chairman, in a statement, said the significant growth in AIG's world-wide business, including the creation of the Financial Services Group, required a restructuring of management responsibilities. "Tom Tizzio has worked with me for many years, and his election as AIG's president reflects his significant contributions to the company," he said. "Tom has played a major role in building our domestic brokerage business into the leading U.S. commercial and industrial insurance organization it is today." Mr. Tizzio joined AIG's American Home Assurance Co. in 1967 and held a succession of management assignments. He was elected president of the domestic brokerage division in 1985 and executive vice president of AIG in 1986. The company also announced that R. Kendall Nottingham, 53, was named senior vice president of AIG in addition to his existing title as chairman of American Life Insurance Co. Edmund Tse, 53-year-old president and chief executive of American International Assurance Co., was given the additional title of AIG executive vice president, life insurance. William D. Smith, 47, succeeds the younger Mr. Greenberg as president of National Union. Mr. Smith formerly served as president of National Union's Management Liability Division. And Kevin H. Kelley, 40, also gains the title of senior vice president of AIG in addition to being president of the Lexington Insurance Co. unit. WSJ910516-0177 910516-0177. Politics & Policy: Baker Fails to Win Israeli Compromises On Conditions for Mideast Peace Parley ---- By Robert S. Greenberger Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A18 INTERNATIONAL AGENCIES AND INSTITUTIONS (INT) STATE DEPARTMENT (STD) ISRAEL (ISR) SOVIET UNION (UR) JERUSALEM -- Secretary of State James Baker apparently failed to win compromises from Israel on two key conditions concerning a Mideast regional peace conference. Earlier this week, Mr. Baker was unable to budge Syria on the same two points, so it is increasingly likely that he and President Bush will have to rethink their strategy for Mideast peace-making after the secretary of state ends his current mission to the region today. Mr. Baker plans to hold another session with Israeli Prime Minister Yitzhak Shamir this morning in an effort to make some progress before departing for Washington, though. Mr. Baker, who is on his fourth round of shuttle diplomacy in less than two months, has suggested compromises on two thorny procedural issues. One involves what role the United Nations would play in any regional peace conference, and the other concerns whether the conference would reconvene after meeting initially and paving the way for direct talks between Israel and its Arab neighbors and Israel and Palestinians. Syria insists on an important role for the U.N. and the right periodically to reconvene the conference, which would be co-sponsored by the U.S. and Soviet Union. Israel adamantly opposes any role for the U.N., and wants the conference to be a one-time affair. Mr. Baker, who came here emptyhanded from Syria, is trying to persuade Israel to accept the presence of a U.N. official at the conference as an observer. He also is trying to work on a formula under which the conference could reconvene at certain intervals with the consent of the parties, though only to hear progress reports on the Arab-Israeli negotiations. Highlighting the lack of progress in closing the gap after almost four hours of meetings here yesterday, the U.S. issued a statement last night saying only that it was still "working with the government of Israel to clarify areas of common understanding and areas of still outstanding issues." Seeking to lower expectations that Mr. Baker's meetings would produce any breakthrough, the statement added that "the U.S. is not today asking for a formal commitment from the government of Israel." A senior U.S. official said earlier this week that Mr. Baker was determined that "at the end of this trip, we will know exactly what separates the parties. Exactly. And then we will determine what the next steps are." It appeared that the U.S. was laying the groundwork for placing blame for the failure to achieve progress on both Israel and Syria. Syria's unwillingness to compromise on what sort of conference it would attend has had an impact on another potential participant, Jordan. After meeting earlier this week with Mr. Baker, King Hussein, who said he supported the peace process, refused to commit himself to attending such a session if Syria wasn't there. WSJ910516-0176 910516-0176. Who's News: Tesoro Petroleum Corp. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 TSO WNEWS ENERGY (ENE) OIL, SECONDARY (OIS) PETROLEUM (PET) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) TEXAS (TX) TESORO PETROLEUM Corp. (San Antonio, Texas) -- Stewart G. Nagler, senior executive vice president of Metropolitan Life Insurance Co., was named a director of this energy company, replacing Peter S. Hadley, who resigned from the Tesoro board and is retiring as a senior vice president of Met Life. A Met Life subsidiary owns about 25% of Tesoro. WSJ910516-0175 910516-0175. Who's News: Tenneco Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B12 TGT WNEWS INDUSTRIAL (IDU) DIVERSIFIED INDUSTRIAL (IDD) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) TEXAS (TX) TENNECO Inc. (Houston) -- Kenneth D. Allen, vice president and deputy general counsel, was named senior vice president, public and governmental affairs, of this agricultural equipment, natural gas pipeline, shipbuilding, packaging and automotive parts concern. He succeeds Gordon B. Bonfield, 65 years old, who will retire. Separately, Karl A. Stewart, corporate secretary, was named to the additional post of vice president. WSJ910516-0174 910516-0174. Counterpoint: Quota Scare Must Not Destroy Civil Rights Bill ---- By Eleanor Holmes Norton 05/16/91 WALL STREET JOURNAL (J), PAGE A17 LABOR LAW AND LEGAL AFFAIRS (LAW) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) LAW & LEGAL ISSUES, HEARINGS, RULINGS, LEGISLATION (LAW) CONGRESS (CNG) SUPREME COURT (SUP) The Civil Rights and Women's Equity Act of 1991, scheduled for a vote next week in the House of Representatives, seeks to overturn five Supreme Court decisions that make it more difficult to prove job discrimination. Similar legislation was passed last year, but the Senate failed by one vote to override the president's veto. With this bill, the country repeats a chapter in our history that I thought was closed. In the early 1960s I was a law student and a civil rights activist who thought she had a pretty good idea of where the struggle for civil rights was headed. Sit-ins and demonstrations had finally exposed racism in a uniquely compelling way. Civil rights legislation, on the other hand, seemed off on a distant horizon. Nor did passage of Title VII of the 1964 Civil Rights Act following President Kennedy's assassination convince me that statutory law would do what demonstrations were beginning to accomplish. The act seemed pitifully watered down and unworthy of the great cause that had called it forth. All that seemed predictable were more demonstrations, increasingly violent retaliation, like that in Birmingham, Ala., and the instability that had finally shaken cast-iron Southern traditions. What was most unpredictable was the role that courts, the most conservative of American institutions, would play using statutory law to disassemble patterns of job discrimination for the first time in our history. Although increasingly conservative, the Supreme Court and the lower federal courts read the new job-discrimination statute broadly, in keeping with the usual rules for construction of remedial statutes. When legislatures seek to root out an entrenched problem, the rule goes, courts countermand that intent if they interpret the statute so narrowly as to leave the problem intact. This routine rule on construction had not been applied to state civil-rights laws or to such federal attempts as there had been. As a result, patterns of discrimination remained unmoved, the willingness of Congress and the president to do something about it was cynically regarded, and the credibility of courts was on the line. Title VII introduced modern anti-discrimination law and broke with this discredited past. The courts responded, applied traditional remedial rules of statutory construction, and broke up centuries-old discriminatory practices and patterns. The fight for the 1991 Civil Rights bill in Congress today is over whether to reintroduce the only concepts that have proven effective and to correct for anomalies in existing law, an effort made necessary by several Supreme Court decisions that effectively rewrote existing job-discrimination law. The largely technical battle about burden of proof and similar concepts has not excited much interest from the public. After all, the country has not only lived with this statute for a quarter of a century, Congress several times has blessed the interpretations now at issue, and Americans have seemed proud of the progress now visible in the work place, where people of color and women are no longer invariably at the bottom. All sides concede, however, that race and sex discrimination are still abundant and that Title VII must be repaired. With the statute open for amendment for the first time in years, two important actors have seized the opportunity to rewrite it their way for reasons special to them. Some (but by no means all) businesses would like to avoid the expense associated with making job qualifications relate to the job and to avoid monetary damages to sex- and religious-discrimination victims, as the law already requires in cases of racial and ethnic discrimination. The Bush administration has raised and shamelessly exploited the racially polarizing issue of quotas. Notwithstanding explicit language barring quotas and 25 years of experience showing damage awards to be rare and small, these have become the two resonating issues in the fight for the Civil Rights bill. Quotas is a dangerously false issue. It is false because it has been used to imply that numerical remedies benefit blacks and Hispanics when the major beneficiaries of goals (quotas are barred under existing statutory interpretation) have been white women. Their superior life advantages make them the most readily available pool of workers to fill previously exclusionary jobs. Yet quotas will not be possible for women any more than for blacks. If used, claimants will have an explicit cause of action, just as other victims of discrimination do. Sixteen major Jewish organizations, experts on quotas and the primary victims, recently held a press conference to express strong support for the Civil Rights bill and to say that the bill will not lead to quotas. The Anti-Defamation League, the American Jewish Committee, the American Jewish Congress, the Rabbinical Assembly of Conservatism and others have put this issue to rest for all except those who do not want to hear it. But the quota issue is also dangerous. In the hands of the president, who has marketed the quota scare, it poisons the racial atmosphere already polluted by racial incidents and self-segregation on campuses and by the mutual suspicion between blacks and whites that is the legacy of retrenchment, resistance and resentment on racial issues that began in the 1980s. The largest irony about the Civil Rights bill is that the major issue that divides the Congress is not race but sex: whether there should be a limit on damages to victims of sex discrimination (religion, too). This issue, which has gotten little public exposure or concern, is driven by a flood of letters and calls from small and medium-sized businesses. They are not reacting to any pattern or even instances of large awards in discrimination cases, where back pay is the rule and damages are rare, but to an atmosphere in which business is trying to cap medical malpractice and similar damage awards. Proponents of the Civil Rights bill, however, find it difficult to sanction invidious discrimination within the text of an anti-discrimination statute, especially when the data show damages very difficult to prove or win. Thus, a bill that is controversial in the public because of race is hung up in the Congress largely because of sex. The president has brought confusion rather than clarification, and House leaders are trying to translate a vexing set of technical issues for that bulky body. Surely it is too late in the century for the issues that moved people like me from civil-rights activism to civil-rights law to be misunderstood, miscast, or simply missed. As I join the debate on the House floor 26 years after our activism stimulated the passage of Title VII, I hope it is not too late for the bill to be rescued from racial demagoguery. --- Rep. Norton, who represents the District of Columbia, headed the Equal Employment Opportunity Commission under President Carter. WSJ910516-0173 910516-0173. Business Inventories Declined in March, Despite Fall in Sales 05/16/91 WALL STREET JOURNAL (J), PAGE A2 ECONOMIC NEWS (ECO) U.S. ECONOMIC AND MONETARY INDICATORS (EMI) ECONOMIC NEWS, TRENDS, INDEXES, PROJECTIONS, ANALYSES (ECO) ECONOMIC RELEASES (EMI) WASHINGTON -- Business inventories showed a big decline in March despite an even larger drop in sales, Commerce Department figures show. Although the inventory decline will slightly hurt the statistics for first-quarter gross national product, such declines are considered good news during a recession. If stocks are low, production will start more quickly when demand picks up. The department said inventories of manufacturers, retailers and wholesalers fell 0.8% in March after declining 0.4% in February. Sales dropped 1% after a February rise of 0.2%. In calculating the GNP -- the broad measure of output of goods and services -- an increase in inventories counts as goods produced. Last month in a preliminary report the Commerce Department said firstquarter GNP slipped at a 2.8% annual rate. The department will update that figure at the end of this month. With both sales and inventories declining, the inventory-sales ratio was unchanged in March at 1.57 -- meaning it would take 1.57 months to sell off current stocks at the current sales rate. While the ratio has jumped from the 1.50 range in the middle of last year, it is still low compared with past recessions. Here is a summary of the Commerce Department's report on business inventories and sales in March. The figures are in billions of dollars, seasonally adjusted: (billions of dollars) March Feb. March 1991 1991 1990 Total business inventories ...... 821.83 828.20 810.83 Manufacturers ................... 386.28 388.46 384.95 Retailers ....................... 237.78 241.18 236.30 Total business sales ............ 522.63 527.92 540.94 Inventory/sales ratio ........... 1.57 1.57 1.50 WSJ910516-0172 910516-0172. Who's News: American Express Co. 05/16/91 WALL STREET JOURNAL (J), PAGE B12 AXP WNEWS FINANCIAL (FIN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) MASSACHUSETTS (MA) NEW YORK (NY) AMERICAN EXPRESS Co. (New York) -- Raymond L. Mobley was named president of integrated systems technologies, a newly formed group, based in Boston, in the information services unit of this financial, travel, and information services company. Mr. Mobley, 55 years old, was previously president and chief executive officer of Atek Information Services Inc., Dallas, a subsidiary of Ameritrust Co., Cleveland, Ohio. He will manage the combined data processing operations of the company's Shearson Lehman Brothers unit, Boston Co., and its shareholder services group. WSJ910516-0171 910516-0171. Credit Markets: Most Bonds End Little Changed, but Junk Prices Tumble on Jitters Over Potential Insurer Selling ---- By Kevin Donovan and Sharon R. King Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C17 FEXC FCH FNM TWA FRE BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) MORTGAGES, MORTGAGE BANKERS, MORTGAGE-BACKED SECURITIES (MOR) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) BOND MARKET NEWS (BON) MORTGAGES, MORTGAGE RATES (MOR) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) U.S. GOVERNMENT AGENCY FINANCINGS -- NON-TREASURY (AGN) HOUSING AND URBAN DEVELOPMENT (HUD) TREASURY DEPARTMENT (TRE) DISTRICT OF COLUMBIA (DC) FLORIDA (FL) NEW YORK (NY) NEW YORK -- Most bond prices ended little changed as the market paused to catch its breath after a hectic sell-off Tuesday. The price of the Treasury's latest 30-year bond, the credit market's benchmark issue, ended slightly higher, while prices of many short-term Treasurys closed unchanged. Yesterday's activity was a relief for investors who had watched bond prices skid nearly a full point Tuesday after a moderate upturn Monday and a steep 1 1/4-point decline Friday. One point is equivalent to $10 in the price of a bond with a $1,000 face amount. Prices of municipal, mortgage-backed and investment-grade securities ended unchanged to modestly higher. But prices of junk bonds were sharply lower, dragged down by jitters over potential insurance-company selling and sliding stock prices. In the Treasury market, analysts said that although prices didn't fall yesterday, the market continues to be weighed down by an abundance of supply. Last week, the Treasury sold $37 billion of securities in its quarterly refinancing of the federal debt. In yet another reminder that the government's financing needs continue to grow, the Treasury announced it will sell $12.5 billion of two-year notes and $9.25 billion of five-year notes next week. The size of each auction was increased by $250 million from last month. The Treasury also announced it will sell $16 billion of 335-day cash management bills next week. Though analysts had expected the Treasury to sell cash management bills soon, they generally were looking for a smaller amount and a shorter maturity. The Treasury sells cash management bills from time to time when the government's cash needs outstrip revenue from taxes and the regular auction cycle. Comments by Federal Reserve Bank of New York President E. Gerald Corrigan and Council of Economic Advisers Chairman Michael Boskin had marginal effects on note and bond prices. Mr. Corrigan told a congressional committee that the pace of economic contraction appeared to be moderating. Mr. Boskin was a bit more emphatic. "The best judgment is that the economy is bottoming out . . . stabilizing," he told reporters. "Some things are starting to shift from the negative column to the positive column." Traders and investors will be looking for evidence of that in today's data on initial claims for state unemployment insurance. Recent declines in initial claims have suggested that the business cycle may be nearing its low point. If they fall again, "the idea of a gradually stabilizing economy will take hold a little more," said Dan Seto, economist at Nikko Securities Co. International. However, he expects the data to show that initial claims rose to about 480,000 from the previous week's 455,000. Treasury Securities Prices ended little changed. The 30-year bond was quoted late in the day at a price of 97 22/32 to yield 8.32%, up from 97 19/32 to yield 8.33% Tuesday. The latest two-year notes ended unchanged at 100 10/32 to yield 6.81%. Meanwhile, when-issued trading got under way in the two Treasury issues to be auctioned next week -- $12.25 billion of two-year notes and $9.25 billion of five-year notes. The when-issued yield on the two-year notes, which will be sold Wednesday, was quoted at 6.85%. The when-issued yield on the five-year notes, to be auctioned next Thursday, ended at 7.76%. Corporate & Junk Bonds Junk bonds plunged a point or more at the opening but rebounded as buyers stepped into the market to snap up bargains. Most junk bonds, or speculative-grade securities with low credit ratings or no credit ratings at all, ended the day with losses of 1/2 to 3/4 point. Stocks also slumped, with the Dow Jones Industrial Average closing 21.47 points lower. The declines in the high-yield market came amid growing worries about possible selling of junk bonds by insurance companies. This week, California regulators seized control of First Capital Life Insurance Co., the junk bond-laden insurance unit of First Capital Holdings Co. Meanwhile, First Executive Corp., whose two main insurance subsidiaries were seized by regulators last month, filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code. "I think there is some nervousness in the market about the implications of First Executive and First Capital," said David Feinman, a junk bond trader at Los Angeles-based Jefferies & Co. Though market participants don't expect wholesale liquidations of junk bonds by First Capital or First Executive, some fear that the recent spate of negative publicity could prompt regulatory action that would require insurance companies to sell bonds. Meanwhile, the junk bonds of Trans World Airlines Inc. bucked the market trend and rose. The airline said it is beginning a cash tender for seven of its debt securities as a first step in a restructuring. TWA's 15% senior secured notes due in 1994 jumped five points to 59, or $590 per $1,000 bond. The bonds were trading below their tender price of $650 for each $1,000 bonds. TWA's 16% senior notes due in 1992 and 17.25% senior notes maturing in 1993, which are unsecured debt issues, ended at 30, or $300 for each $1,000 bond. TWA is offering $350 for the notes. In the investment-grade corporate debt market, prices were little changed. Municipal Securities Municipal bond prices ended unchanged to 1/4 point higher. Among actively traded issues, the Florida Board of Education's 7.25% securities of 2023 finished 1/4 point higher at 102 1/2 to yield 7.03%. In primary activity, Washington, D.C., got a lukewarm reception from investors for its $196 million issue of general obligation bonds despite gaining insurance for the issue and offering higher yields than other insured bonds in the market. While underwriters at Lehman Brothers reported an unsold balance of about $68 million on the deal late yesterday, underwriters at several other firms said a large portion of the offering may have been placed in dealer inventories. The bonds were priced to yield from 5.20% in 1993 to 7.00% in 2011. Among municipal securities outstanding, some New York City general obligation bonds rose in price despite news that the Municipal Assistance Corp. for the city deferred a decision on whether to refinance $1 billion of debt to aid the city. The agency had been scheduled to consider the move, at the request of Mayor David Dinkins and New York Gov. Mario Cuomo, at a board meeting today. But concerns expressed by rating agencies that the city's general obligation bond ratings might be affected by the refunding caused the MAC to delay making a decision, the corporation said. In the past, rating agencies have expressed concern about the city relying on nonrecurring revenue sources to balance its budget. Traders quoted long New York City general obligation bonds as yielding 8.35%. They noted that some New York City bonds traded at yields as high as 8.50% Tuesday. Mortgage & Asset-Backed Securities Mortgage-backed securities prices ended slightly higher. Among actively traded issues, Government National Mortgage Association 8.5% securities for June delivery were up 3/32 at 97 7/32, Federal Home Loan Mortgage Corp. Gold 8.5% securities were up 3/32 at 99 19/32, and Federal National Mortgage Association 8.5% securities were also up 3/32 at 99 11/32. Trading in the $1.69 billion of credit-card securities from Citicorp's Citibank unit that were priced Tuesday indicated that demand for asset-backed securities remains strong although yield spreads over Treasurys are tight and hefty new supply is anticipated. The deal's $1.5 billion of Class A securities, priced to yield 0.95 percentage point above five-year Treasurys, was bid at a narrower spread of 0.93 percentage point, the underwriter said. As much as $5 billion to $6 billion of new asset-backed securities is expected to be priced by the end of the quarter, now that issuers can sell debt at smaller premiums over Treasurys. WSJ910516-0170 910516-0170. Regulators Clear Power Link 05/16/91 WALL STREET JOURNAL (J), PAGE A5 CMS PIN UTILITIES (UTI) ELECTRIC UTILITIES (ELC) FEDERAL GOVERNMENT (FDL) INDIANA (IND) MICHIGAN (MI) JACKSON, Mich. -- Federal regulators approved a $115 million power line linking CMS Energy Corp. and PSI Resources Inc. of Plainfield, Ind. The two utilities are roughly splitting the cost. The 120-mile, 345-kilovolt transmission line is supposed to begin service in mid-1993, said William T. McCormick Jr., chairman of CMS Energy. It will allow each utility to receive cheaper power, when available, from the other company's electric system. WSJ910516-0169 910516-0169. LEISURE & ARTS -- Auction: A Season to Forget Thanks to Economy, War, `Zaitech' ---- By Ann E. Berman 05/16/91 WALL STREET JOURNAL (J), PAGE A14 New York -- The law of supply and demand is relentless, and in today's unforgiving economic climate, the sales of contemporary, impressionist and modern works of art at Sotheby's and Christie's (April 30-May 8) took hits from both sides of the equation. Consignments of salable material were so scarce this spring that the houses considered skipping the season altogether. When the mediocre sales were finally held as scheduled, the Japanese buyers who once would have gobbled up such ordinary auction fodder had no yen for this spring's offerings. The results were inevitable: The week's sales totaled just under $100 million, compared with $360 million in November and $893 million just one year ago. Assembled in an iffy economic climate and during the Gulf War, these auctions attracted few consignors with any choice in the matter. A supply of good material was therefore a matter of chance, and no major collector was kind enough to die, divorce or declare bankruptcy, thus forcing great property onto the block. This left only a small selection of first-class objects, whose strong prices were overshadowed by a mountain of indifferent material, sold at headline-grabbing low numbers or not at all. Anticipating all of this, the auction houses had scaled back their estimates, but not always far enough. Even they could not foresee that the Japanese, who used to snap up 40% of some sales, would this season be buyers of record of exactly one painting. Economic difficulties and ongoing investigations in Japan of "zaitech" (literally financial engineering, or using art for money laundering, usury, etc.) have affected every class of Japanese buyer. Corporate players like Aska International and Gallery Urban sat out the sales, and as London dealer Thomas Gibson explains: "Even genuine Japanese collectors do not want to be seen buying art because the scandals have equated it with bad behavior." American and European collectors do not have this problem and they, sidelined for several seasons by the stampeding trans-Pacific competition, were largely responsible for the week's $100 million total. "This was classic art collecting by real people sitting in the auction rooms," says New York dealer Jeffrey Deitch. "You knew exactly who they were." They found the best selection at Sotheby's contemporary sale of April 30, which included more than 30 works of the '60s, '70s and '80s from advertising king Charles Saatchi's well-known collection, and also the season's one true masterpiece, "Rebus," a 1955 "combine painting" by Robert Rauschenberg, sold by order of the creditors of the bankrupt Swedish investor Hans Thulin. "Rebus," purchased in November 1988 for a record $6.3 million, is considered to be a seminal example of early American pop art. After spirited bidding, it brought a new record price -- $7.2 million. Although the New York dealer Larry Gagosian has identified himself as the buyer, the new owner is widely believed to be Charles Saatchi himself, even though rumors have surfaced that Mr. Saatchi was selling some of his things here to clear up an already outstanding Sotheby's balance. The Saatchi material set records for nine artists of the '70s and '80s, establishing new strength in the auction markets of artists such as Jeff Koons, Jennifer Bartlett, Elizabeth Murray and Susan Rothenberg. Christie's selection illustrated the staying power of some "classic" works, such as "Razzmatazz" by Roy Liechtenstein, which went to an American collector at $1.65 million, considerably above expectations of $800,000 to $1.2 million. The American-fueled contemporary market suffered little without the Japanese. For the first time in recent memory, Sotheby's posted higher figures here than for the impressionist sales. However, still suffering from speculator-mania, neither contemporary auction managed to reach projected estimates. Works by Willem de Kooning, Philip Guston, Ellsworth Kelly and Cy Twombly failed to sell, stripping millions off potential sale totals. "Markets for some of those artists have been so inflated that even discounted estimates were not enough," says Chicago dealer Richard Gray. "But first-rate pictures will bounce back." Private buying continued at impressionist and modern sales characterized by the London dealer Leslie Waddington as "the worst in many years." Seven paintings from the estate of Hollywood princess Irene Mayer Selznick saved Sotheby's sale of May 7 from total mediocrity. "La Robe Persane" by Henri Matisse (estimated at $5 million to $7 million) sold for $4.5 million and a highly desirable study for the famous "La Grande Jatte" by Georges Seurat sold above estimates to a private collector at $1.3 million. Christie's did best with surrealist material such as "Les Barricades Mysterieuses" by Rene Magritte, which brought $2.2 million from an American collector (estimate: $1.2 million-$1.6 million). Against a projected cumulative estimate range of $65 million to $89 million, the two impressionist sales brought only $40.6 million. Unsold works included overestimated clunkers by Picasso (late works), Dubuffet, Chagall, and in the case of Sotheby's, paintings of Latin American interest dumped in the sale when the house closed that specialty department in a cost-cutting move. Even when measured against the high-held yardstick of recent record growth, however, there has been no quantifiable across-the-board drop in art prices. As Mr. Gibson suggests: "Take the Bonnard at Christie's, which was supposed to bring $500,000 to $700,000 but brought $286,000: The Japanese would have bought that last year so maybe now its value is effectively halved. But the Magritte wouldn't have sold for any more money at any other time." Dealers cite the Seurat and "Rebus" as other examples of works nearly immune to market conditions. On the other hand, values for second-tier works by Chagall, Renoir, Dubuffet and Utrillio -- and many other longtime Japanese preferences -- have taken a direct hit. They were particularly vulnerable because of fears of near-term dumping of large numbers of similar pictures by defunct Japanese ventures now in bankruptcy courts. "That material is hanging over the market like a black cloud," says Christopher Burge, CEO of Christie's. Observers don't see Japanese buyers returning to the market as fast as their unwanted inventories. In the 1981 recession when they disappeared, they took three to four years to resurface. A veteran of three market turndowns, Mr. Burge predicts no quick recovery: "We're in a familiar cycle," he says. "November should be a bit better, but if we sell $35 million to $40 million we should be pleased. It's going to take a while to get back to $200 million levels." No one is holding his or her breath. Some are even breathing easier to see the back of a market in which $80 million super-pictures were venerated as international icons, while other works were being reduced to the level of interchangeable financial chess pieces. The blockbusters may be back one of these days, and so may Japanese buyers. But during the late great '80s, masterpieces were pushed up to those dizzying price levels partly by the artificial demand zaitech had created for the secondary material underneath. It is unlikely we will ever see that peculiar market phenomenon again. --- Ms. Berman is a free-lance writer based in New York. WSJ910516-0168 910516-0168. Who's News: First Fidelity Bancorp. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 FFB WNEWS FINANCIAL (FIN) EASTERN U.S. BANKS (BAE) ALL REGIONAL BANKS (BAR) ALL BANKS, BANKING NEWS AND ISSUES (BNK) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW JERSEY (NJ) FIRST FIDELITY BANCORP. (Lawrenceville, N.J.) -- Leslie E. Goodman was named chairman of two affiliates, Fidelity Bank North Jersey and Morris Savings Bank of Morristown, N.J. Mr. Goodman is a senior executive vice president of the parent and president and chief executive officer of its Newark, N.J., affiliate, First Fidelity Bank. Also, Anthony M. Aquino was named president and chief executive of Fidelity Bank North Jersey, succeeding Donald E. Pierce, who also served as chairman and is retiring. Mr. Aquino, previously chairman and chief executive at Morris Savings Bank, is succeeded as chief executive by Ralph J. Riccioni, who continues as president. WSJ910516-0167 910516-0167. Who's News: FSI International Inc.'s President and Chief Resigns From Firm 05/16/91 WALL STREET JOURNAL (J), PAGE B12 FSII WNEWS TECHNOLOGY (TEC) SEMICONDUCTORS, INTEGRATED CHIPS (SEM) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) MINNESOTA (MN) MINNEAPOLIS -- FSI International Inc. said Richard Jackson, its 49-year-old president and chief executive officer, resigned effective immediately. The maker of automated surface conditioning equipment said Mr. Jackson wasn't asked to resign, but the company needed "new blood and the organization required a change," following five consecutive quarterly losses. FSI also has had to trim its work force by 25% over the past year to about 340 employees. "This resulted in an atmosphere that wasn't positive," said Joel Elftmann, chairman and founder. Mr. Elftmann, 51 years old, will succeed Mr. Jackson, who couldn't be reached for comment. WSJ910516-0166 910516-0166. Technology & Medicine: Acne Drug's Success Against Leukemia May Lead to New Way to Treat Cancer ---- By Jerry E. Bishop Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A16 JNJ Z.HR Z.ROC CONSUMER NON-CYCLICAL (NCY) TECHNOLOGY (TEC) DRUG MANUFACTURERS (DRG) MEDICAL AND BIOTECHNOLOGY, GENETIC RESEARCH, PROSTHETICS (MTC) NEW JERSEY (NJ) SWITZERLAND (SZ) NEW YORK -- Preliminary success with a variation of an acne drug to treat an adult leukemia may have opened a new avenue to attack cancer, scientists said. Although it is still too early to gauge the effectiveness of the treatment, 16 of 20 patients treated up to nine months ago have been in remission of their blood cancer, researchers from Memorial Sloan-Kettering Cancer Center here reported. Because of the way the acne drug is thought to work, the results support a new concept of cancer chemotherapy. In the type of leukemia suffered by the patients, white blood cells have turned malignant at an immature stage of cell development. Their arrested development is what renders them practically immortal and dangerous. The acne drug is believed to trigger these immature but malignant cells to divide and mature and then die essentially a natural death. This new concept of triggering cancer cells to mature and die contrasts with the conventional concept of chemotherapy, in which drugs simply poison malignant cells. The drug used in the experimental treatment is known as tretinoin, which belongs to a class of chemicals called retinoic acids that are related to vitamin A. Tretinoin is sold in ointment form as Retin-A, the acne medication produced by Johnson & Johnson's Ortho Pharmaceutical division. The tretinoin used in the leukemia patients, however, is a pill that was prepared for the experiment by chemists at Hoffmann-La Roche Inc., the U.S. arm of Roche Holding Ltd. of Switzerland. Roche, which has a long history of making retinoic acids, sells one of its acids as Accutane, a pill for treating severe acne. The particular form of leukemia that appears to respond readily to the acne-drug type of treatment is called acute promyelocytic leukemia. It is an uncommon cancer, afflicting about 1,000 Americans a year, in which certain cells in the bone marrow become malignant before they have matured into fully functioning white blood cells. The malignant, immature white cells (known as myelocytes) flood the blood stream, producing fatigue, fever, weight loss and bleeding. Until now, chemotherapy with standard anti-cancer drugs has been the only effective treatment for acute promyelocyltic leukemia, but it produces cures in only about a third of patients. The tip-off that an tretinoin-like drug might be effective in treating the leukemia came from a genetic finding, Dr. Raymond P. Warrell Jr. of Memorial Sloan-Kettering and his colleagues in New York and at M.D. Anderson Cancer Center in Houston reported in this week's New England Journal of Medicine. Most patients with promyleocytic leukemia apparently have the same defect in two of their 23 chromosomes, the structures in the cell that contain all the genes. A piece of chromosome number 17 appears to have broken loose and become a part of chromosome number 15. Last year, molecular geneticists identified one of the genes in chromosome 17 that was damaged when the chunk of the chromosome broke loose. The damaged gene, it turned out, ordinarily made a protein -- a receptor -- that grabbed hold of retinoic acid. This and other laboratory findings suggested that the immaturity of the leukemic white blood cells might somehow be related to a foul-up in the way the cells handled or failed to handle retinoic acid. The nature of the genetic damage also hinted that doses of retinoic acids might prod the immature malignant cells to proceed to maturity and then die as normal white blood cells do. "We're now the third group to show remissions {with tretinoin} in this leukemia," following Chinese and French researchers, Dr. Warrell said. But, he added, the U.S. group is the first to show that the drug works by triggering the immature cancer cells to mature, or to "differentiate," in the biologists jargon. "We've documented conclusively that differentiation as a method of cancer therapy in humans is a reality," he said. WSJ910516-0165 910516-0165. Water Enough for Farmer and Fish ---- By Terry L. Anderson 05/16/91 WALL STREET JOURNAL (J), PAGE A14 ENVIRONMENT (ENV) ENVIRONMENTAL NEWS (ENV) If you thought the northern spotted owl caused conflict in the Pacific Northwest, watch the fate of the Snake River sockeye. This salmon, one of five salmon species in the Columbia River system, wasn't seen last fall in the upper reaches of the Snake River, where it normally goes to spawn. The National Marine Fisheries Service has recommended that it be listed as an endangered species; if the interior secretary does so, a battle over allocation of water in the Columbia basin will begin. Sockeye salmon are in trouble because of the eight major dams on the Columbia River system. Fish ladders help adult salmon returning from the sea get around the dams, but young salmon trying to migrate to the sea in the spring are sucked into the turbines. Many salmon are killed by predators, disease and warm water when they are trapped in slack water behind the dams. All told, nearly 90% of the young salmon are lost, mainly because water flows are insufficient to push the juveniles to the Pacific. If the sockeye is listed as an endangered species, dam operators will be required to let more water flow downstream. That means the water would not be stored in the spring to meet peak summer demand. As a result, electricity prices could rise as much as 33%, and ranchers and farmers could lose several million acre-feet of water that now irrigate orchards, vineyards, forage and crops. There is not enough water for both salmon and man because, throughout the Columbia system, vast federal subsidies have led to overbuilding of dams and overuse of water. Irrigators pay only a tiny fraction of the construction costs of these dams; and on even that payment they have a grace period of 10 years during which they are exempt from repaying federal loans. And when they finally do repay, it is without interest. Such concessions add up to a more than 90% subsidy of agricultural water users. Electricity consumers are not so lavishly supported by the taxpayer, but Columbia system rates are still as much as 40% less than elsewhere in the country. With payments so low, the incentive has been irresistible to expand irrigation and energy production far beyond the level people would demand if they were paying the true cost. In the past, environmentalists and sports and commercial fishermen -- people who had an interest in preserving salmon -- were largely outside the political process that made decisions about water supply and allocation. Now that they have won political power through the Endangered Species Act and popular opinion, they are preparing to use that power in the same way that farm interests once did -- to seize control of the Columbia's water for their own interest. But rather than more political allocation of water, the sockeye salmon needs a healthy dose of free market environmentalism. By establishing clear, transferable rights to water, which do not exist now, a market can evolve. Rather than lose their water, some irrigators might give it up willingly for an attractive price, tailoring their uses more carefully and perhaps wasting less. Some electric utilities might buy peak power elsewhere. The adjustments would be made voluntarily and judiciously, without the rancor caused by forced transfers. Consider the Gunnison River in Colorado. Because rights to its water were clearly owned, the Nature Conservancy has succeeded in protecting an endangered fish, the humpback chub. Pittsburgh and Midway Coal Co. had held rights to Gunnison water, which it had planned to divert for oil-shale development. The Nature Conservancy persuaded the coal company to transfer to it 20,000 acre-feet of water, which it then left in the stream. Similarly, the Nature Conservancy has purchased water from irrigators to increase the amount of water that flows through the parched marshland of the Stillwater National Refuge in Nevada. Unfortunately, rights to Columbia River water cannot be traded among interested parties. If it were legal for organizations interested in the preservation of salmon to purchase water rights, they could bid for low-valued water and leave it in the stream. But today in the Pacific Northwest, environmentalists have only one option -- to use their political power to wrest water from other uses. That power, however, might not prevail for long. In 1992 the Endangered Species Act will be up for renewal by Congress. Given the tremendous conflict the act has generated, it will be under severe challenge. Rep. William Dannemeyer (R., Calif.) is considering introducing legislation that would enable water marketing on federal projects. Such progressive legislation offers a much better way of preserving stream and wetland habitat. Environmentalists have embraced water marketing elsewhere because it reduces waste. It is time for them to put their money where the endangered species are. --- Mr. Anderson, an associate of the Political Economy Research Center in Bozeman, Montana, is the co-author of "Free Market Environmentalism" (Pacific Research Institute, 1991.) WSJ910516-0164 910516-0164. LEISURE & ARTS -- Bookshelf: The Grand Vizier of Poetry ---- By Donald Lyons 05/16/91 WALL STREET JOURNAL (J), PAGE A14 Poor Goethe, a marble statue in German town squares forever bestowing smiling wisdom, brings to Anglophone minds the inexhaustible author of "Faust," endless and incoherent, the creator of the first teenage-suicide fad thanks to "The Sorrows of Young Werther," and a polymath dubiously pontificating on rocks and optics and chromaticism and love and nature. It is off-putting. And it is unfair. Rescue of a sort is at hand in a huge new life-and-time-and-works biography by Nicholas Boyle, whose first installment, which has just appeared, gets us through half the life: "Goethe, the Poet and the Age: Volume 1, the Poetry of Desire, 1749-1790" (Oxford University Press, 807 pages, $30). Mr. Boyle, a fellow and tutor at Magdalen College, Cambridge, spreads before us the fragmented but awakening Germany where Johann Wolfgang von Goethe was born in 1749 to a rich but professionally disappointed bureaucrat and a lively, loving mother in Frankfurt. A pampered, happy eldest child, little Goethe was tutored at home until he went off to college in "Parisian" Leipzig. College brought on, as college will, acute attacks of yearning, eroticism, religiosity and verse (mostly later burnt). Then came law school in Strasbourg, where he discovered nature (long walks in the Vosges), German philosophy (he found Herder the most congenial), atheism (he was to stay a lifelong anti-Christian "pagan") and sex (he guiltily jilted a local girl). Back home in the early 1770s, equipped with a law degree, he found his voice, or rather his voices -- his extraordinary and, until Rilke, unchallenged inner oneness with the German language. He began writing remarkable poetry: dithyrambs such as "Prometheus" that anticipate both the excited, sweeping energy of Shelley and the ecstatic precision of Hopkins; and alongside them simple, stark ballads that remind us of Wordsworth or Coleridge. He started "Faust" around then and, although he was to go on reworking and expanding it until his death in 1832, this "Urfaust" involving the original story of the forsaken love, infanticide and execution of poor Gretchen turned out to be the best part of the whole gigantic edifice, bringing Goethe's cheery pantheistic optimism face to face with evil and tragedy. But it was rather the hysterical cult that developed around the maudlin novella "Werther" that made Goethe the first true literary celebrity. He spent the rest of his life pestered by "Werther" fans. In 1775 Goethe made his career move; he accepted the invitation of Duke Carl August, ruler of tiny Weimar, to come be councilor/minister/poet laureate/tutor/grand vizier. Here he stayed essentially the rest of his life, a cherished and petted courtier. He had a long, tormentedly platonic affair with a married court lady, Charlotte von Stein. He enjoyed court life, planned some plays, but also squirmed restlessly. The solution was one of history's most famous vacations: Goethe's two-year trip to Italy in 1786-88, "the land where the lemon trees bloom." Italy was revelation and catharsis: Palladio, Raphael and Michelangelo (though Goethe loathed their Christian subjects), Vesuvius, swarming Naples, and, above all, Rome, where for two years he watched papal ceremonies, studied art and had lots of undemanding sex. His writing block dissolved: He tackled "Faust" again, this time tacking on the odd concept of Faust as a kind of summa of the human race. Back in Weimar in 1788, Goethe, now 39, met the woman of his life: Christiane Vulpius, 23, from a marginal, literate -- but -- scrimping Micawberesque family. Goethe installed the spunky, no-nonsense woman in his home (no actual wedding; mild local buzz) and soon had a son. His work thrived: He finished his best play, "Tasso," all about the stresses of being a great, mad poet in a backbiting, uncomprehending court. Above all, he wrote "Roman Elegies," 20 poems loosely modeled on Latin erotic poets like Propertius and Ovid but wholly original in essence, fusing Goethe's new marital happiness with his memories of Rome. They tell, in 20 vignettes, the short history of an intense affair between a traveling German poet and a buoyant Roman lass who likes to flirt in public by drawing the poet's initials in wine on the table; he enjoys tapping out the meters of the poems he's writing on her naked back in bed. These amazing, humorous, ironic poems are full of the sounds and smells of Rome, and the quality of light at different times of day. Along with Byron's "Don Juan" and Pushkin's "Eugene Onegin," both considerably later, the "Roman Elegies" comprise a trilogy of brilliantly erotic Romantic narrative verse -- a genre that might itself seem a paradox to those who think of Romanticism as involving merely windy rhapsodies and self-absorbed verbosities. In 1789 Goethe returned to Italy, found he hated it, could think only of Christiane and little August, and wrote the nasty, often funny "Venetian Epigrams" mocking the tackiness of it all. Mr. Boyle leaves Goethe back home, a purring paterfamilias of 41. Mr. Boyle's labors are never less than intelligent and eloquent; he discriminates and points to the living and enjoyable Goethe. For those embarking on a long sea voyage and wanting to know all about Goethe, he is a reliable companion. But the less-leisured may wish to turn to the Penguin "Goethe: Selected Verse." A variegated selection from plays, epics and lyrics, big and small, light and heavy, and preceded by David Luke's ample introduction, it offers the remedy for Goethe the bore -- not Goethe the man, however richly presented, but Goethe the thrilling, witty and sexy poet. WSJ910516-0163 910516-0163. Who's News: Two Regulatory Chiefs Stir Up Business --- FDA's Kessler Moves Swiftly On Food Labels ---- By Bruce Ingersoll Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 BIOGRAPHY (BIO) BIOGRAPHY (BIO) CONGRESS (CNG) FOOD AND DRUG ADMINISTRATION (FDA) WASHINGTON -- David A. Kessler, M.D., is moving quickly to revive a dispirited patient in deep trouble -- the Food and Drug Administration. To restore public confidence in the agency, the new FDA commissioner has prescribed a regimen of regulatory activity that is already getting the food industry's attention. Last month, the FDA exercised muscle it hadn't used since 1978, taking a major food company -- Procter & Gamble Co. -- to court for making misleading freshness claims for its processed orange juice. Just this week, the agency took action against the no-cholesterol claims of vegetable oil manufacturers for products that, though lacking cholesterol, are loaded with fat. In the offing are more Kessler-inspired no-cholesterol cases: margarine, salad dressing, snack food, mayonnaise and peanut butter. Says a spokesman for the Grocery Manufacturers of America: "He has our attention." The Harvard-trained pediatrician and University of Chicago law graduate will soon jolt the prescription drug industry with a series of enforcement actions. A clue to what's coming is an American Medical Association article he co-authored last year that is critical of drug advertising and promotional practices. One likelihood: A major pharmaceutical company will be challenged for promoting unapproved uses of a cancer-fighting drug. Dr. Kessler says his objective is to restore the FDA to the pre-eminence it held before Reagan-era budget cuts and deregulation eroded its effectiveness and a generic-drug scandal stained its reputation. "The bottom line is the agency's credibility," he says. But to fully regain credibility, the agency needs more money, more staff and more enforcement powers, a blue-ribbon advisory committee on the FDA reported yesterday. In Senate testimony, former FDA Commissioner Charles Edwards, the panel chairman, diagnosed the overextended agency as "vulnerable to fraud and blunder" and "living on borrowed time." And he warned of a growing risk of a "public health catastrophe" unless the FDA is given more funding and is made independent of the Public Health Service bureaucracy in the Department of Health and Human Services. The 39-year-old Dr. Kessler, who was medical director of a New York hospital before taking over as FDA chief late last year, has anticipated some of the panel's recommendations by planning a sweeping reorganization of the agency's hierarchy. At the same time, he is recruiting managerial talent. One new hire: a Harvard Business School graduate from Booz Allen as senior adviser on management systems. The emphasis on better management dovetails with the renewed commitment to enforcement, he says. The agency is hiring 100 criminal investigators while expanding the size of its field staff. He believes the FDA, though still hard-pressed to meet its growing regulatory duties, is verging on a "turnaround." But others aren't quite so confident when asked whether the agency is capable of carrying out its public health mission. "I think the answer is yes," says Dr. Edwards, "but it's a close call." Even the agency's critics take heart from the flurries of FDA enforcement action and Dr. Kessler's little-noticed administrative moves, including doubling the prescription drug advertising office to 20 staff members. "He's off to a promising start," says Michael Jacobson, executive director of the Center for Science in the Public Interest. "But we have a wait-and-see attitude. We hope he turns these two food actions {against freshness and no-cholesterol claims} into a continuing binge." Grumblings, in the meantime, are coming from the Grocery Manufacturers of America, which maintains "it would have made better sense" for the agency to have issued health-claim rules under the new food-labeling law before cracking down on the trade group's members. Before long, other industries, including medical device makers, are likely to be grumbling about the new aggressiveness of the Kessler FDA. "It will be only a matter of time before the various industries are whimpering to the people in the White House," says Sidney Wolfe, executive director of Public Citizen Health Research Group. "My guess is that he isn't going to back down." (See related story: "Under Steiger, FTC Has Ended `No-Go' Stance" -- WSJ May 16, 1991) WSJ910516-0162 910516-0162. Desert Drift: Their Nation Saved, Kuwaitis Now Wait For Someone to Fix It --- Many of Them, Meanwhile, Plan a Summer in London, As Decisions Go Unmade --- Reform? Maybe Next Year ---- By Tony Horwitz Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A1 INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) DEFENSE DEPARTMENT (DEF) IRAQ (IZ) KUWAIT CITY -- These days, Kuwait's Ministry of Commerce and Industry sees very little of either. Instead, footsteps echo through the empty corridors as Faiza al-Matkour looks for something to do. Ms. Matkour, an industrial engineer, arrived for work Monday in response to a televised appeal for ministry employees to return. She was one of three, in a section of about 100, who did. At noon, after several hours of shuffling papers, she went home. "I will be back tomorrow," she vowed. "With a book." Almost three months after its liberation, Kuwait remains a virtual ghost country -- its leaders remote, its citizens scarce, and its economy listless. Rather than bursting into self-sufficiency, as some here had hoped, the biggest boom seems to be in the number of gripes about the slow pace of economic recovery, as well as about social and political reform. Postwar Kuwait, some residents fear, may be even more stagnant, vulnerable and dependent than before. "This country is totally aimless," says Abdul Aziz Sultan, chairman of the Gulf Bank, Kuwait's second largest. "It's just swaying in the wind." Kuwait's malaise contrasts bluntly with the success of the U.S.-driven renewal of the country's infrastructure. Roads, power and water are in good repair, and much of Iraq's sabotage has proven superficial. Diplomats now estimate the cost of rebuilding at $5 billion to $10 billion -- one tenth the sums being bandied about just two months ago. Yet now that the emergency has passed, Kuwaitis still are in no hurry to pitch in. "It's as if we've jump-started a car and now can't find the driver," says an officer with the U.S. Army Corps of Engineers, which has led the recovery. Kuwait's drift begins at the top. Since his return in mid-March, Kuwait's emir, Sheik Jaber al-Sabah, has delivered only one speech, which equivocated on major issues. Always an aloof figure, he has retreated from public view, and acquaintances say he appears sickly, underweight and erratic. The emir's withdrawal has magnified the role of his cousin and alter ego, Sheik Saad al-Sabah, who as crown prince and prime minister is responsible for day-to-day running of the government. Where the emir prefers simple, private pleasures, such as gardening, the crown prince loves shopping in Paris and London, and redecorating his homes with sumptuous silks and antique chandeliers. Outgoing and warm-hearted, he is more popular than the emir. But while the emir was regarded as an intelligent and able technocrat, the crown prince is known for his indecision, obsession with detail and, some say, incompetence. His appointment last month of a new government, dominated by close relatives, confirmed Kuwaitis' worst fears about his judgment. "It's a joke," says Sabah al-Rayes, a prominent architect and consulting engineer. "Our lousy government was the cause of the Iraqi invasion, and now some of those same people are promoted." Mr. al-Rayes regards himself as a friend of the crown prince, for whom he has designed palatial homes in Kuwait, Beirut and London's Belgravia Square. "But the chaos here is pushing even a loyalist like me into opposition," he says. The royal family also has failed to talk tough with its subjects, despite hopes from many of those who suffered through the war that the leadership would now force the pampered citizenry to become more self-reliant. Before Aug. 2, Kuwaitis lived in a gilded welfare society. They made up only 27% of the population, relying on outsiders to do virtually all of the gritty work. They were entitled to retirement benefits at age 40, as well as free land and interest-free housing loans. As a result, the Interior Minister, Sheik Ahmed al-Sabah says, Kuwaitis lacked "the will to work." One study showed government workers laboring "less than two hours a day," he says. He and other officials insist all this has changed, and that a vigorous program of "Kuwait-ization" is under way. But at the Commerce and Industry Ministry, where 80% of 1,300 employees are Kuwaiti, only 100 were at their desks this week (though all continue to receive their pay). And ministries such as health and electricity have called back Palestinian and other foreign workers to cope with the workload. By contrast, the Gulf Bank trained Kuwaitis overseas during the occupation and now 50% of its employees are Kuwaiti, compared with 19% in August. "People are ready to work, but they need a push, some inspiration from the top," says Sulaiman Mutawa, a former planning minister. He feels that liberation offered the al-Sabahs a chance to capitalize on Kuwaitis' euphoria and exhort them to greater effort. Instead, the emir asked Kuwaitis to remain outside the country for 90 days, and quickly resorted to a traditional policy of placating the populace with handouts. (In his speech, the emir forgave all consumer loans -- to the astonishment of bankers, who weren't consulted, or told how or whether they would be reimbursed.) "We've dribbled away a heaven-sent opportunity to kill off the Kuwait of Aug. 1" and build a leaner, more independent society, Mr. Mutawa says. "Now it looks as though the crisis was just a Dracula film that scared us for a while. We didn't learn a thing." The crowds that start wrapping around the Kuwait Airways office each day at 7 a.m., attest to the prevailing malaise. With the state of emergency now coming to a close, the government is flying Kuwaitis home free of charge. But just as many want to fly out. In fact roughly half of the 200,000 or so who endured occupation have since left, and many of the new arrivals don't linger. Typical is Walid al-Adasani, a car-rental agent buying a ticket back to Cairo after a week's visit home. "The government must hurry and bring Thai and Egyptian people to fix things up," he says. Meanwhile, he plans to summer with his family in London. "Cairo is too hot," he explains. This lack of urgency is frustrating foreign businessmen, who now are flooding in. Even emergency work, such as munitions disposal, is barely under way. "We just can't find out who the decision-makers are, or what they want," says the president of one munitions disposal firm, which has been here four weeks. Other firms have had proposals mislaid, and only one munitions contract has yet been signed, for a small part of the huge cleanup. Roadsides remain so dense with explosives that all work is treacherous; bombs have killed one Army Corps contractor and blown off the arm of another. "The Kuwaitis seem to think that if they stall long enough, we'll do the cleanup for them," says an officer with the U.S. Army's civil affairs unit. Delays also are hampering work in the oil fields, where firefighters have controlled 100 of 500 wells but say they still desperately need cranes and backhoes that the Kuwaitis have been slow to purchase. Kuwait officials respond that prudence, not sloth, explains the stately pace of recovery. "We must do things our own way, at the right time, at the right price," says Minister of Electricity and Water, Ahmed al-Adsani. Many Kuwaitis say they were sold shoddy, overpriced goods during the oil boom of the '70s, and are in no hurry to be exploited again. But the government's approach is hitting its own people hardest. Kuwait's once-thriving private sector is languishing because the government has remained silent on whether and how Kuwaitis will be compensated for their losses. Population policy, setting the percentages of foreign workers who will be allowed to come back, also is unclear, making it impossible for businessmen to judge the size of their eventual market. Foreign businessmen also are affected. California architect Juan Benitez had spent eight years in Kuwait and returned here last week anticipating plenty of work refurbishing hotels and office blocks. Instead, he says, "Every time I try to hustle business, Kuwaitis say to me, `Let's forget about here and talk about prospects in California.'" Many Kuwaitis want second homes in the U.S. "so they have a place to run next time," he says. Others seek a safe haven for their capital. "There's this tremendous uncertainty, as if no one's really sure Kuwait can put itself back together again," he says. For many critics, a solid economic future is inseparable from competent government, which to them means democracy. Unless the royal family shares power, they say, it will never attract able deputies (many of those asked to serve in the new government declined). And unless Kuwaitis feel they have a stake in a democratic, well-run system, they will be slow to mobilize for the formidable tasks ahead. But the royal family isn't rushing to deliver on promises of reform. The emir has said only that there will be parliamentary elections next year, "God willing" -- an indefinite timetable that alarmed democracy advocates. A newspaper critical of the government that began printing soon after liberation was quickly closed. The two government-supported papers now available are so sycophantic that Kuwaitis have dubbed them "Jamahriya" and "al-Qadissiyah", after two Iraqi papers that circulated here during the occupation. This week, authorities detained five members of a mainstream Islamic group that welcomed returning Kuwaitis at the airport with blandly worded posters saying, "Let's Build the New Kuwait Together." "It is a crime" to put up posters without a permit, explains the interior minister, adding that "everyone will be doing it" if such laws aren't enforced. "When we are secure, when we've put the country together, then we can have free expression." That time could be far away. The minister still fears Saddam Hussein, saying that as soon as the Iraqi leader recovers his strength, "he will do something to us again." On Wednesday, a rumor that 150,000 Iraqi troops were massed on the Kuwaiti border was taken so seriously that U.S. Army officers had to dispel it. As for U.S. troops, the interior minister hopes they will stay "as long as they can." Kuwait's opposition suspects the royal family is using the security issue as an excuse for delaying reform. "The royal family is playing dirty games and will keep playing them," says Imad al-Saif, a lawyer and member of a group called Democratic Forum. "They just aren't serious about democracy." But it also isn't clear that the opposition is serious about applying real pressure for change. A very loose coalition of Islamic and secular democratic groups, the opposition is broadly united in seeking elections, a free press and other safeguards laid out in the country's 1962 constitution. But there are potentially crippling differences, too. Some groups want Islam to be the sole source of Kuwaiti law, and won't meet in the same room with women, who are active in other groups. And despite endless consultations at evening sessions known as diwaniyas, the opposition has produced little apart from a few pamphlets. Nor is it eager to exploit the current discontent with more concerted action. "Opposition has limits in a country like this, where everyone lives so well," says Mohamed Hussein, a sociology professor at Kuwait University. Like almost everyone else at one opposition meeting this week, he plans to go abroad for several months. "But we will start things up again in September," he says. Such sentiments lead many to conclude that Kuwait's royal family will manage as always to muddle through, taking glacial steps toward reform and buying time and tolerance with yet more handouts. Yet Iraqi occupation has left scars that may still prove explosive. Kuwait's citizens are heavily armed. If the authorities become heavy-handed, as they did in tear-gassing protesters in early 1990, embittered young Kuwaitis could meet force with force. There also has been no let-up in the arbitrary arrest and beating of Palestinians; and other disenfranchised groups, such as stateless Kuwaitis known as "bidoun," are losing their jobs. Any violent incident, particularly involving Palestinians, could easily provoke reprisals that spiral out of control. The start Saturday of trials of suspected Iraqi collaborators is also likely to aggravate tension in this divided community. "If things keep drifting, Kuwait will just break down into factions, and then we'll end up like Beirut," warns Mr. al-Rayes, the architect. Already, Kuwaitis complain of a crime wave, with mysterious men in uniform stopping cars and breaking into homes. And then there is simply the raw power of recent history. This week, a "Torture Tools Exhibit" opened here, with grisly displays of saws, cleavers, bloodstained pillows, photos of torture victims, and mannequins with severed breasts. University student, Ali Hussein, spent some minutes staring into a formaldehyde jar containing bits of tendon, flesh and fingernails. For him, the lesson was clear. "This is what happens in dictatorships," he says. "Without democracy, you cannot think for yourself, and fight." He winces as a member of the Committee for Torture Awareness demonstrates electric shock. "We must never," he says, "never, never go back to sleep again." WSJ910516-0161 910516-0161. In U.S.S.R., Possession Is Better Than the Law ---- By David Brooks 05/16/91 WALL STREET JOURNAL (J), PAGE A16 INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) SOVIET UNION (UR) MOSCOW -- The first thing one notices at the Alisa Commodities Exchange is the legs. The exchange is staffed by attractive women, some almost six feet tall, of which four feet is legs and six inches is miniskirt. The women are dashing across the trading floor, shouting into two or three phones at a time, or signaling to the traders. This is how it would look if the old Ivan Boesky were cloned into the Radio City Rockettes. "This is not capitalism. It can't be, because this is the Soviet Union. This is a parody of capitalism," says the exchange's 24-year-old owner, German Sterligov. With his skinny chest, squirrelly mustache and wicked grin, Mr. Sterligov is the subversive imp of Soviet business. He acts like a man who, having found himself stuck in a madhouse carnival, decides to play along. He started the exchange in September, and now he is president of Young Soviet Millionaires. The organization doesn't do much, but its name is a thumb in the eye of the authorities. "I could buy a house or a Rolls-Royce or a ship or a plane," he says. "But what would be the use? Gorbachev would issue a ukase and it would all be taken. Nobody knows what will be allowed tomorrow." His company is in an equally surreal position: "There have been statements from the government that will lead to us being monopolized. We insist on remaining private. But they can easily say that we keep drugs or weapons, or that we are homosexuals. They can easily shut us down." Beneath the Soviet Union's economic crisis there is a law enforcement crisis. The basic laws of civil society have been rendered meaningless because the state apparatus violates or alters them at will. Mr. Sterligov's business is a show put on for his own amusement. He now has plenty of Monopoly money rubles that could be confiscated at the whim of a party secretary. This is why he says that Soviet business is a parody of capitalism. In a country that lacks the rule of law, the economic rescue plans hatched by Soviet and Western experts are irrelevant. Alice couldn't have reformed Wonderland, even with a 500-day privatization scheme. Thanks to official lawlessness, basic concepts such as "ownership" have lost their real meaning. When Soviets say "own," they mean "control, at least for the moment." They possess money, a business, or a house the way people in the West possess a curbside parking space. Maxim Hlobov is one of the Soviet Union's leading astrophysicists, a former colleague of Andrei Sakharov. He lived with his wife and three sons in a single room, 12 feet by 12 feet, and shared a bathroom and a kitchen with two other families. Last fall, his local district government in Moscow informed him that his name had finally come to the top of the housing waiting list; he could move into a larger apartment at 25 Alexandr Nevsky Prospect. He immediately went to the building management to get a key, but was shooed away. Hints were dropped that the apartment was being used by the KGB. Mr. Hlobov knew that if he didn't take possession of the apartment within 30 days, he would forfeit his chance for better housing. Mr. Hlobov summoned seven democratic politicians, including Russian parliamentarians, and on Nov. 5 they broke down the door to his apartment and found it completely furnished. As the parliamentarians were making a list of the contents, in walked the tenant, Yanis Mavromatis. Mr. Mavromatis is a member of the Central Committee of the Greek Communist Party and runs a joint venture in Moscow. He told Mr. Hlobov that he was subleasing the apartment from the Central Committee of the Communist Party of the Soviet Union for $800 a month. (The CPSU was paying the state 50 cents a month for the apartment.) Mr. Mavromatis called the CPSU officials to expel Mr. Hlobov and his parliamentarians. The party officials arrived carrying a deed to the apartment. Mr. Hlobov also had a deed. The party's deed bore the official stamp of the Central Committee of the CPSU and Mr. Hlobov's bore the stamp of the local government, the Frunzensky district. A heavy-set woman from the party asked to see Mr. Hlobov's deed. She then shoved it in her dress and declared: "There] You have no deed. You have no deed." Eventually, she was persuaded to give it back. Reinforcements were called. The party officials brought in the militia, and then some plain-clothes "special forces" agents, intimidating veterans of the war in Afghanistan. Tempers rose. Mr. Hlobov was dropping names like crazy, trying to demonstrate his influence in world scientific circles. He kept mentioning his acquaintance with President Bush's science adviser, Allan Bromley. Finally, the soldiers tried literally to throw Mr. Hlobov out of the apartment. The parliamentarians surrounded him, protecting him with the shield of their parliamentary immunity. Thus, a deadlock was reached. The two sides waited. "In the Soviet Union you possess something by possessing it," Victor Kuzin, member of the Russian Parliament and the Moscow City Council, now says. Mr. Kuzin and his fellow parliamentarians took shifts and stayed with Mr. Hlobov for three days around the clock. Mr. Hlobov's wife was eventually overcome by the anxiety and had to be hospitalized. Mr. Hlobov and company had the iron bottoms, and eventually outlasted the Communists. The party brought suit, and subsequent legal proceedings confirmed that Mr. Hlobov had followed the law at every turn, while the CPSU had been in violation. In another section of Mr. Hlobov's building, 14 families are now engaged in a similar face-off in apartments the party had awarded to KGB officials. They have built bars across their common entrance, and they take turns guarding against the militia. Mr. Hlobov's was a rare victory for law and order, made possible because seven democratic politicians were willing to spend days and nights with him. The case is typical in that Soviet law, as written, is legitimate. The Communist Party has simply grown into the habit of ignoring the law -- in this case by printing its own illegal deed -- and relying upon intimidation to get its way. There is also a legitimate law that allows farmers to carve out private farms from the current collectives. But when a farmer goes to his local party chieftain to acquire the land, the official tells him that privatization will be impossible because a railroad is being planned -- through the property. After months of shuffling, the farmer may be told that a free plot is available hundreds of miles away, but there he will have to face another chieftain, who will likely explain that electricity and water will be unavailable on the property. Less than 4,000 farmers in the entire Soviet Union have been able to take advantage of the private farming law. Space has also opened up for quasi-private commercial banks. But they too are at the whim of party secretaries. In Siberia, for example, banks have been ordered to buy vaults built in 1927 and office furniture built in 1957, and to pay the state current prices for them. They can be evicted from their offices at any time. Foreign exchange operations are largely forbidden. The Siberian banks are now forming an organization to offset administrative harassment, but they have little leverage. The state creates lawlessness not only by ignoring the laws, but by passing too many. "The more corrupt the state, the more numerous the laws," Tacitus wrote. Soviet authorities on all levels pass laws with amazing efficiency -- they are the world leaders -- and in that great tangle of legislation local officials usually can find one law or another that is convenient. Amid this absurdist drama, there is one hopeful sign -- appropriately absurd. Members of the nomenklatura are abusing their powers on a massive scale. In Novosibirsk, in Siberia, there was a much sought-after hotel. The local Communist chieftain created a commodities exchange, under the ownership of some of his deputies, and then assigned the hotel and accompanying equipment to the exchange. The hotel is effectively theirs. Many midlevel party members open contracting firms in the Soviet Union, taking advantage of their privileged access to building materials. It is widely suspected that state funds are being plundered by the party, and that party funds are being plundered and stashed away by nervous apparatchiks. These incidents are the stuff of outraged articles in the popular press, but they actually are steps in the right direction. Stealing is the harsh word for this sort of behavior. Privatizing to oneself is a more positive construction. If the members of the nomenklatura possess property, even if stolen, maybe they will have an interest in establishing property rights and the rule of law. "Besides," says Christian Democratic Party leader Victor Aksioutchits: "We think they'll be bad capitalists. They will lose their property." Desperate people find solace in faint hopes. The truth is that as long as the Communist Party is in place, there is no law. --- Mr. Brooks is deputy editorial page editor of The Wall Street Journal Europe. WSJ910516-0160 910516-0160. Who's News: Pitney Bowes Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 PBI WNEWS TECHNOLOGY (TEC) OFFICE EQUIPMENT (OFF) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) CONNECTICUT (CT) PITNEY BOWES Inc. (Stamford, Conn.) -- William E. Butler and Leroy D. Nunery were named directors at this maker of business equipment and supplies and provider of financial services. Mr. Butler, 59 years old, is president and chief operating officer of Eaton Corp. Mr. Nunery, 35, is vice president of the merchant banking group unit of Swiss Bank Corp. Messrs. Butler and Nunery succeed Eleanor Holmes Norton and Denis F. Mullan, who resigned from the 11-member board. WSJ910516-0159 910516-0159. Who's News: Bradley Real Estate Trust 05/16/91 WALL STREET JOURNAL (J), PAGE B12 BTR WNEWS FINANCIAL (FIN) REAL ESTATE INVESTMENTS (REA) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) MASSACHUSETTS (MA) BRADLEY REAL ESTATE TRUST (Boston) -- Paul G. Kirk, a partner with Sullivan & Worcester, a Boston law firm and former national chairman of the Democratic Party, was named a trustee of this real estate investment firm. He succeeds Stephen E. Smith, who died last year. WSJ910516-0158 910516-0158. International: Top Soviets Are Criticized For Sununu-Like Travel 05/16/91 WALL STREET JOURNAL (J), PAGE A13 SOVIET UNION (UR) MOSCOW -- John Sununu, the White House chief of staff, isn't alone in flying into trouble for using official planes for unofficial business. Members of the Soviet parliament were told yesterday that numerous Soviet military and civilian officials have been taking private trips, including vacations, on Defense Ministry aircraft at an annual cost to taxpayers of at least 50 million rubles ($30 million at the commercial exchange rate). Vassily Yerokhin, a member of the parliament's privileges commission, named two advisers to Mikhail Gorbachev, Marshal Sergei Akhromeyev and writer Chingiz Aitmatov, as well as army Gen. Valentin Varennikov among the those who have used official aircraft for junkets, the independent Interfax news agency reported. Igor Ancheyev, an official of the People's Control Committee, told deputies that a large number of private flights and unreasonable trips abroad literally "ruin our military aviation," Interfax said. WSJ910516-0157 910516-0157. Who's News: Luftansa Says Weber To Become Chairman Starting in September ---- Special to The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B9 G.LHA WNEWS CONSUMER CYCLICAL (CYC) AIRLINES (AIR) DIVIDENDS (DIV) EARNINGS (ERN) DIVIDENDS (DIV) EARNINGS (ERN) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) GERMANY (GE) FRANKFURT, Germany -- Deutsche Lufthansa AG, the 51.6% German government-owned airline, named Juergen Weber to succeed Chairman Heinz Ruhnau. Mr. Ruhnau's contract expires in March 1992, but Mr. Weber is to assume his new duties this September. Mr. Ruhnau is 62 years old. The decision was expected and was unanimous on the airline's supervisory board, a Lufthansa spokesman said. Mr. Weber, 49, had been the management board member responsible for technology and Mr. Ruhnau's representative since November. He joined Lufthansa in 1967. Mr. Weber's duties are to be assumed by Klaus Nittinger, 47. Lufthansa said its profit for 1990 fell 86% to 15.2 million marks (nearly $9 million) from 109.7 million marks a year earlier, reflecting higher fuel and insurance costs because of the Persian Gulf conflict. The carrier said it will omit its dividend payout on common stock, while it will pay the minimum required dividend of 2.50 marks a share on preferred stock. Last year, Lufthansa paid a four mark-a-share dividend on both types of stock. WSJ910516-0156 910516-0156. Financing Business: Graham-Field Health Products Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE C17 GFI CONSUMER NON-CYCLICAL (NCY) MEDICAL SUPPLIES, EYEGLASS MANUFACTURERS (MDS) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) STOCK MARKET, OFFERINGS (STK) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) STOCK & OTHER MARKET NEWS (STK) NEW YORK (NY) GRAHAM-FIELD HEALTH PRODUCTS Inc., a Hauppage, N.Y., medical supplies distributor, said it filed a registration statement with the Securities and Exchange Commission for a public offering of 3.5 million shares. Price of the shares wasn't determined yet, but based on the closing market value of $6.25 a share in yesterday's trading on the American Stock Exchange, the offering could raise about $21.9 million for the company. Furman Selz Inc. is acting as managing underwriter. Graham-Field said proceeds from the offering will be used to pay down debt, including debt incurred from its acquisition of Horizon International Healthcare Inc. for about $2.2 million last week. The proceeds would be also used for possible acquisitions of other businesses and for general corporate purposes. WSJ910516-0155 910516-0155. Dividend News: U.S. Surgical Boosts Dividend 20%, Plans To Split Stock 2 for 1 05/16/91 WALL STREET JOURNAL (J), PAGE C8 USS CONSUMER NON-CYCLICAL (NCY) DIVIDENDS (DIV) MEDICAL SUPPLIES, EYEGLASS MANUFACTURERS (MDS) DIVIDENDS (DIV) CONNECTICUT (CT) NEW YORK -- U.S. Surgical Corp., buoyed by its recent better-than-expected first-quarter earnings, increased its quarterly dividend 20% and declared a 2-for-1 stock split. The maker of surgical staplers said its dividend was increased to 15 cents a share, or 7.5 cents after the stock split, from 12.5 cents, payable June 28, to holders of record on June 21. The Norwalk, Conn., company said additional shares resulting from the stock split will be distributed June 7 to holders of record May 28. The announcement came following the company's annual meeting at which Chairman Leon C. Hirsh said sales of its core surgical products were "continuing to explode." Last month the company reported that first-quarter earnings rose 95% to $16.2 million, or 58 cents a share, from $8.3 million, or 33 cents a share, a year ago. Meanwhile, a shareholder resolution calling for a committee to review the company's policy of using dogs in training surgeons in the use of surgical staplers was defeated by more than 90% of those casting votes. The sedate meeting and subsequent vote on the resolution contrasted with a protest held outside the building where about 100 animal-rights activists demanded that the company stop using dogs for sales demonstrations. The company has denied using canines for sales purposes. In New York Stock Exchange composite trading, U.S. Surgical eased $1.125 to $112.75. WSJ910516-0154 910516-0154. REVIEW & OUTLOOK (Editorial): A Passage for India 05/16/91 WALL STREET JOURNAL (J), PAGE A16 INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) INDIA (II) It's a great achievement that India for all its internal ferment keeps democracy rolling along. Unlike the people of similarly poor countries such as communist China or Burma, Indians can vote unpopular leaders out of office -- as they did Prime Minister Gandhi in 1989. That's only half the democratic exercise though. The difficulty Indians face as they head for national elections this coming week is finding politicians wise and modern enough to be worth voting into office. It's a healthy sign that Indians no longer want to put up with the kind of socialist policies that have anchored much of the Indian economy to the Stone Age, with a per-capita income just over $300 a year. The world-wide lesson that state-run economies flop and market economies prosper hasn't been lost on India's growing middle class. The poorer, rural voting districts have also been showing obvious disgust with old-time politics -- voting in 1989 mainly for almost anything new. In chucking aside three prime ministers these past 18 months, the Indian electorate has been signaling its impatience with the old bureaucratic poverty-makers. A quick review of the record suggests that the more a prime minister leans toward the left, the shorter his time in office. Former Prime Minister Rajiv Gandhi took office in 1984. Rajiv did more than any other prime minister to move India toward a freer market, and he lasted five years. His downfall was that after a good start, in which lower taxes and falling trade barriers brought healthy growth, Rajiv by 1987 was swerving away from the free-market course. By 1989, he was thoroughly mired in the old statist swamps. The voters' response was to ditch the Gandhi dynasty and its ruling Congress (I) Party in favor of V.P. Singh. Mr. Singh was the man who before breaking with the Congress Party had served as finance minister in Rajiv Gandhi's first cabinet. It was Mr. Singh who directly administered the major free-market reforms that gave India a big boost in the mid-1980s. Unfortunately, after achieving the top office in 1989 Mr. Singh also stepped away from his old free-market course. Instead of pushing for necessary reforms, such as an end to currency controls, Mr. Singh whiled away his time as prime minister pursuing populist programs, including state subsidies for farm loans and government job quotas for so-called "backward castes." Mr. Singh's governing coalition fell after only 11 months. Following Mr. Singh, in November 1990, came Prime Minister Chandra Shekhar. A socialist in theory and a political horse-trader in practice, Mr. Shekhar took office leading a party that commanded only about 10% of the Parliament. To the ledgers of India's more inane policies his administration contributed such jewels as a ban on some imported books -- reportedly to conserve India's chronically low supply of foreign exchange. Mr. Shekhar clung to office for all of four months, before his governing coalition collapsed this past March. Among the top contenders in the current campaign, no one so far has shown any noteworthy commitment to the free-market policies needed to bring economic progress and consolidate political support. Rajiv Gandhi is back in the ring, with his Congress Party frantically working the local campaign circuits. It may be too much to hope that Rajiv and his Congress colleagues would figure out in time that their best bet for a comeback is to return to the mid-1980s capitalist line that brought Mr. Gandhi his initial burst of political success and world respect, earning him in 1985 the nickname, Rajiv Reagan. V.P. Singh heads what looks so far like a soft-left coalition, still prone to the statist muddles that brought him down in 1989. He, too, could more profitably hark back to his early market ventures in the first Rajiv Gandhi cabinet. Finally, there's the stridently Hindu Bharatiya Janata Party, or BJP, led by L.K. Advani. It has made a growing name for itself largely by stirring up Hindu sentiment in a country where Hindu-Muslim friction has already caused colossal grief. What's encouraging in all this is that the Indian political system is at least no longer bound to the Congress Party and its old socialist drill. It is an open question who might win this election, which for most of this huge country will be spaced out across three days -- May 20, 23 and 26. It seems clear, however, that the voters won't let any leader sit easy until he or she delivers the reforms that will at last let India's 835 million people shrug off the paper work and make the most of their energies and talents. WSJ910516-0153 910516-0153. Letters to the Editor: Volcker's Actions Dictated by Crisis 05/16/91 WALL STREET JOURNAL (J), PAGE A17 FEDERAL RESERVE BOARD (FED) I wish to take issue with three items in Jerry L. Jordan's April 26 editorial-page article, "Strong Chairmen Weaken the Fed": -- Carter Glass, the "father of the Federal Reserve," was from Virginia, not Tennessee. -- The Aldrich Bill was virtually identical to the Federal Reserve Act of 1913 (see Friedman and Schwartz, "A Monetary History of the U.S., 1867-1960," page 171). -- The article's headline is certainly not applicable to the Volcker era. Paul Volcker was faced with an unparalleled inflationary crisis; he could not afford the luxury of a collegial leadership style similar to William McChesney Martin's. Under Mr. Volcker's leadership, the Open Market Committee displayed tremendous political independence and policy pragmatism in setting the foundation for an eight-year expansion. As a result of this episode (and totally unbalanced budget policy), macroeconomic policy and Federal Reserve policy are now synonymous. Perhaps Mr. Jordan should reflect on this question: If Paul Volcker had not replaced G. William Miller as Fed chairman in 1979, what would have happened to the power, prestige and credibility of the Federal Reserve? Robert F. Stauffer Associate Professor of Economics Roanoke College Salem, Va. WSJ910516-0152 910516-0152. REVIEW & OUTLOOK (Editorial): Bad Intelligence 05/16/91 WALL STREET JOURNAL (J), PAGE A16 CONGRESS (CNG) EXECUTIVE (EXE) Washington is once again suffering from an intelligence failure. President Bush has nominated Robert Gates to head the CIA, and the first and only question on that town's mind is how much he knew about the Iran-Contra fiasco. Don't these people have anything better to ask about? Arizona Democrat Dennis DeConcini wants another congressional investigation. He wants to know when Mr. Gates, formerly deputy CIA director, knew "about the funding of the Contras and what did he do when he knew it." Having dispatched Mr. DeConcini's Keating S&L case with a mere wrist-slap, the Senate Ethics Committee no doubt has time for the job. Ohio Democrat Howard Metzenbaum says he's "surprised and disappointed" by Mr. Bush's "controversial choice," which he vows to make even more controversial. We admit to not knowing how much Mr. Gates knew, and especially to not caring. Iran-Contra has become a great playpen for Congressional Democrats who know they'll never win the presidency and want to anklebite Republicans who do win. The Gates investigation can join the other great Democratic campaign themes of the day -- the alleged Reagan deal to free the hostages in the 1980 campaign, and whether Dan Quayle should be vice president. Who says Democrats don't have an agenda? Most Americans may prefer to know what Mr. Gates thinks about the biggest intelligence challenges of the day, such as the disintegrating Soviet Union. His track record is better than most. In an April 1989 speech, Mr. Gates, by then the deputy national security adviser, argued that "Gorbachev intends improved Soviet economic performance, greater political vitality at home, and more dynamic diplomacy to make the U.S.S.R. a more competitive and stronger adversary in the years ahead." Mr. Gates, a Soviet specialist, also said that "our view of the Soviet Union cannot be based on the personality of one or another leader, but must be based on the nature of the Soviet system itself." He predicted enormous difficulties for perestroika, especially since "Gorbachev's Leninism still means the continued political monopoly of the Communist Party." None of this was popular to say amid the Gorbo-mania of the time, but two years later he's been proved correct. Mr. Gates's skepticism will also be useful now, when Mr. Gorbachev is grasping for food aid, arms deals, summits and other life preservers from the West. Last week Mr. Gates gave another speech insisting that the U.S. wants Saddam Hussein out of power. "All possible sanctions will be maintained until he is gone," said Mr. Gates. "Any easing of sanctions will be considered only when there is a new government." Senators might ask why this view doesn't seem to be shared by State Department and Pentagon officials who want to cut a deal with Saddam in order to get U.S. troops out of Iraq. Senators could also ask Mr. Gates how he thinks U.S. intelligence should serve the "new world order." We hope it has uses other than monitoring arms-control agreements. For example, should the CIA pay attention to a money-laundering foreign bank that disguises its ownership of a U.S. bank? Is it worth knowing about the relationship of that bank with the government of Argentina or the former government of Peru? If the world is truly less bipolar now, then these are important questions. Mr. Gates has long experience in intelligence, and people we respect say he's worked to improve it. He deserves better than to be dragged through the Iran-Contra mud again just because a few Senators want to spatter George Bush. WSJ910516-0151 910516-0151. International: Cresson Named France's First Woman Premier --- Choice of Ex-Trade Minister Known as Japan-Basher Signals Tougher Stand ---- By E.S. Browning and Philip Revzin Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A13 INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL TRADE NEWS (TRD) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) TRADE ISSUES (TRD) INTERNATIONAL AGENCIES AND INSTITUTIONS (INT) EUROPEAN COMMUNITY (EC) FRANCE (FR) PARIS -- The appointment of France's first woman premier, Edith Cresson, signals a return to combative nationalism at the top of the French government that could mean a tougher stand on trade and, possibly, on building a unified Europe. The change in government, announced yesterday by President Francois Mitterrand, means the departure of Michel Rocard, a conciliator who likes to call himself the French equivalent of an American Democrat. Mr. Rocard still is considered a strong candidate to succeed Mr. Mitterrand as president in the 1995 elections. The president, who has the right to name and fire prime ministers, had told aides he thought the government needed an "electroshock." By choosing a woman, and a strong-willed one, he is likely to give it that. Mrs. Cresson is expected to announce her new government today, and is likely to shuffle several ministerial posts. But she isn't expected to replace Finance Minister Pierre Beregovoy. Paris's CAC 40 stock-market index, after falling 1.57% Tuesday on rumors of Mr. Rocard's departure, fell only 0.16% more yesterday. Mrs. Cresson, 57 years old, won international attention as an abrasive Japan-basher during terms as France's foreign trade minister and as European affairs minister. She quit the latter post in Mr. Rocard's government last October, complaining that instead of "economic warfare" his government preferred to "roll out the carpet for the Japanese." In explaining Mrs. Cresson's appointment, Mr. Mitterrand seemed to echo that concern. He stressed the need to boost France's competitiveness before the planned lowering of European Community trade barriers at the end of 1992. He said greater competitiveness is the only way to create jobs, reduce social inequality and ensure the future of France's children. "The competition will be hard," after 1992, the president warned. "There isn't any time to lose in giving our economy more muscle and raising our industry higher, while at the same time preserving our financial balances." Political scientist Philippe Moreau Defarges called Mrs. Cresson's selection "a bizarre, nationalist reaction" by Mr. Mitterrand given that the president "had jettisoned a lot of Gaullist baggage after the Persian Gulf war and gotten much closer" to the U.S. He added: "Now he names a prime minister who is the incarnation of Socialist Gaullism." The appointment underscores Mr. Mitterrand's worries about a weakening French economy and the need to galvanize France's left wing before the 1993 legislative elections -- which current polls suggest the Socialists could lose. "He picked her because she will be aggressive in the defense of French interests against the outside world during this tough period," says Mr. Moreau Defarges. "This will translate immediately into much harder French positions in the GATT round {of international trade talks} and in EC negotiations over auto import quotas, for instance." Some officials at EC headquarters in Brussels said Mrs. Cresson might prove less difficult than Mr. Moreau Defarges suggests -- taking tough positions for public consumption, then negotiating realistically in private. They recalled a famous meeting on auto quotas in March of last year. Mrs. Cresson, then France's European affairs minister, said little at the meeting and agreed with the plan to start talking to Japan about gradually ending Europe's restrictions on Japanese imports. Then she held a news conference that made her Brussels reputation. She lashed out at the plan she had just allowed to go forward, saying the Japanese auto makers' "final aim" was "to conquer market share in Europe and to kill" local industry. She threatened to block the whole 1992 program if France's concerns weren't respected. "This woman is crazy," said a British official at the time. But other officials said she was engaging in classic EC politics -- blaming Brussels bureaucrats for decisions likely to be unpopular in France. Francois Lagrange, vice chairman of state-controlled bank Credit National, said Mrs. Cresson's nomination won't change France's commitment to the EC, but could well toughen its stance in specific negotiations. "Even if there's been a lot of change in domestic policy {since Mr. Mitterrand came to power}, there's one deep trend that hasn't altered and that's the 100% commitment to Europe," Mr. Lagrange said. But, "we could see a tougher approach on individual subjects, such as Japanese cars or high-definition television." Mrs. Cresson has been proud of her tough stances in negotiating trade disputes, notably with the Japanese. She likes to recount the story of a meeting in Tokyo when she was trade minister that involved a Japanese ban on imports of French skis. "They said they had special snow, and that French skis were dangerous because people might fall off and hurt themselves," Mrs. Cresson recalled in an interview shortly after she left the job. "I told them France had special roads, and that Japanese motorbikes were dangerous because people could fall off them. . . . They asked me how many skis I wanted to sell." WSJ910516-0150 910516-0150. MCI Signs a Pact For Rolm to Sell Business Services ---- By John J. Keller Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A9 AXP G.SIE IBM MCIC T FINANCIAL (FIN) INDUSTRIAL (IDU) TECHNOLOGY (TEC) UTILITIES (UTI) COMMUNICATIONS TECHNOLOGY (CMT) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) DIVERSIFIED INDUSTRIAL (IDD) TELEPHONE SYSTEMS, INCLUDING CELLULAR (TLS) DISTRICT OF COLUMBIA (DC) GERMANY (GE) NEW YORK (NY) MCI Communications Corp., expanding its effort to lure business customers to its long-distance telephone service, signed up office equipment supplier Rolm Co. to be one of its agents. Under the agreement, Rolm -- owned by International Business Machines Corp. and Germany's Siemens AG -- and MCI will jointly market MCI's business services including toll-free 800 lines and sophisticated voice and data services to small-sized to medium-sized business customers that buy or currently use Rolm's office phone switches -- or PBXs. Analysts, however, doubt that the alliance will help either MCI or Rolm to add much to their respective shares of the long-distance services and PBX markets or even lead to similar arrangements between other carriers and manufacturers. Rolm's smaller business customers typically spend $80,000 to $130,000 a month for long-distance phone service and tend to use one vendor, said James R. Long, Rolm senior vice president, marketing. "We're trying to position Rolm as a total solutions provider -- not just a PBX vendor," he said. In a pilot program, Rolm sales offices in Chicago and New York brought MCI more than $1 million in annual billings in two months. In return Rolm customers will get discounts of as much as 26% off MCI rates, depending on the services they use. "This gets us access to the Rolm customer base, 80% of which is not with MCI today," said Steven Zecola, vice president, business marketing, for MCI's Eastern Division. He said the MCI-Rolm team had signed up "more than a baker's dozen" customers in the past two weeks. He wouldn't disclose Rolm's cut. MCI and Rolm have been finding it increasingly difficult to compete against American Telephone & Telegraph Co., which has stanched its market share losses to MCI. MCI has responded by authorizing other companies such as American Express Co. and Amway Corp. to sell its services. In PBXs AT&T is still the dominant force, though analysts estimate it is losing more than $100 million a year on the business because of an industry price war. "AT&T had put its equipment and services sales forces together and recently broke them apart because selling the two products didn't work," noted Jack B. Grubman, an analyst at PaineWebber Inc. "Would you buy a Chrysler just because Chrysler is giving you a discount on Getty gas?" asked Joel D. Gross, of Donaldson, Lufkin & Jenrette Securities Corp. "Some people might, but how many?" Rolm's shipments in 1990 were flat in a $2.6 billion market that shrank almost 10% from the 1989 level, said Karen Scherberger, an analyst at New York-based Northern Business Information/Datapro. While "MCI and Rolm may be trying to offer smaller businesses something like AT&T's Tariff 12 service," which bundles equipment and service for big corporations, "I don't see it giving Rolm much leverage in a bid situation." --- Corrections & Amplifications AMERICAN TELEPHONE & TELEGRAPH Co. is required by law to sell equipment and long-distance service under separate contracts to the same customer. Thursday's edition incorrectly said AT&T bundles some equipment and services for big corporations. (WSJ May 22, 1991) WSJ910516-0149 910516-0149. Technology & Medicine: AZT Affects Races the Same, Study Asserts ---- By Marilyn Chase Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B5 U.WCM CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) GREAT BRITAIN (UK) A long-term study of AIDS patients in Maryland has found that the drug AZT prolongs survival for minorities as well as whites, rebutting an earlier study that found differences in the two groups' responses to the drug. However, the latest study found that minorities, women, intravenous drug users and older people were much less likely to get AZT than young, white gay men. Researchers blamed the effects of poverty and unequal access to health care for the disparity. The study by Johns Hopkins University and the Maryland Department of Health rebuts a controversial report in February by the Veterans Administration hospital system claiming that early AZT treatment for acquired immune deficiency syndrome was of dubious value to black and Hispanic patients. The Maryland study linked survival of 1,028 AIDS patients from 1983 to 1989 using confidential state, hospital and pharmaceutical records. Overall, patients treated with AZT had a median survival of 770 days, compared with 190 days for patients who never received the drug. The study found using AZT more than doubled the two-year survival rate to 56% from 26% for whites, and to 47% from 19% for minorities. "We showed AZT does benefit minorities. The VA study was a fluke," said Richard Chaisson, director of the AIDS service at Johns Hopkins Hospital, and an author of the report published in the current issue of the New England Journal of Medicine. "But we've also shown a major problem with access to health care for women and minorities," Dr. Chaisson added. "They're cut out of the system." Among the striking disparities uncovered by the study: AZT was received by 53% of men in the study group, but only 33% of women; by 63% of whites but only 43% of minorities; by 59% of homosexual men but only 49% of patients who got AIDS by heterosexual contact or blood transfusion. He blamed substandard care available to poor patients, compounded by the stigma of AIDS. He also said that women, minorities and people over 45 may be less knowledgeable and aggressive health-care consumers than are gay white men. Of all categories of AIDS patients, AZT was least likely to be received by intravenous drug users in the study group, Dr. Chaisson said, in part because impulse to seek health care may be eclipsed by their daily need to satisfy a drug habit. Only 38% of these patients in the study received the drug. The Maryland study was funded by grants from the federal government and by AZT's manufacturer, Burroughs Wellcome Co., the U.S. unit of Wellcome PLC of London. However, Dr. Chaisson emphasized that AZT alone wasn't responsible for improving the survival of AIDS patients. Other drugs, such as pentamidine and bactrim for pneumonia, play an important role in staving off AIDS deaths, he added. Dr. Chaisson said his group plans follow-up studies on the problem of unequal access to AIDS treatments. WSJ910516-0148 910516-0148. LEISURE & ARTS: Best Sellers 05/16/91 WALL STREET JOURNAL (J), PAGE A14 WEEK ON LIST FICTION by Mary Higgins Clark (Simon & Schuster, $21.95) 2 2 2 The Firm by John Grisham (Doubleday, $19.95) 1 11 3 H is for Homicide by Sue Grafton (Holt, $17.95) 5 3 4 As the Crow Flies by Jeffrey Archer (HarperCollins, $22.95) 11 2 5 The Seeress of Kell by David Eddings (Del Rey, $20) 3 5 6 Heartbeat by Danielle Steel (Delacorte, $21.95) 4 13 7 The Seventh Commandment by Lawrence Sanders (Putnam, $22.95) 6 4 8 Aspen Gold by Janet Dailey (Little, Brown, $19.95) 7 4 9 Damage by Josephine Hart (Knopf, $18) 8 8 10 The Novel by James Michener LAST WEEKS WEEK ON LIST NONFICTION 1 Nancy Reagan: The Unauthorized Biography by Kitty Kelley (Simon & Schuster, $24.95) 1 5 2 You'll Never Eat Lunch in This Town Again by Julia Phillips (Random House, $21.95) 2 8 3 There Are No Children Here by Alex Kotlowitz (Doubleday/Nan Talese, $21.95) 6 4 4 The Commanders by Bob Woodward (Simon & Schuster, $24.95) -- 1 5 Iron John: A Book About Men by Robert Bly (Addison-Wesley, $18.95) 3 24 6 Moving Pictures by Ali McGraw (Bantam, $20) 5 3 7 Homecoming by John Bradshaw (Bantam, $18.95) 4 40 8 Financial Self-Defense by Charles Givens (Simon & Schuster, $22.95) 7 23 9 A History of the Arab Peoples by Albert Hourani (Harvard University Press, $24.95) 10 8 10 Wealth Without Risk by Charles Givens (Simon & Schuster, $19.95) 9 116 WSJ910516-0147 910516-0147. Corrections & Amplifications 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION ICN PHARMACEUTICALS Inc.'s antiviral drug, ribavirin, was designated by the Food and Drug Administration as an orphan drug for treatment of hemorrhagic fever with renal syndrome. In the May 7 edition it was incorrectly reported that the drug has been sold in the U.S. for treatment of the disorder. (See: "Business Brief -- ICN Pharmaceuticals Inc.: Orphan Drug Designation For Ribavirin Set by FDA" -- WSJ May 7, 1991) --- INTERNATIONAL PAPER Co. is based in Purchase, N.Y. The company's headquarters was incorrectly stated in yesterday's edition. (See: "Business Brief -- International Paper Co.: Shareholders Reject Proposals For Poison Pill, Divestiture" -- WSJ May 15, 1991) WSJ910516-0146 910516-0146. Dallas Investor Simmons Has Amassed $800 Million and Plans Acquisition Bid ---- By Karen Blumenthal Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A2 BRC LK NL TRE VHI BASIC MATERIALS (BSC) ENERGY (ENE) TECHNOLOGY (TEC) AEROSPACE (ARO) DOW JONES INTERVIEW (CEO) CHEMICALS, PLASTICS (CHM) OIL EQUIPMENT, SERVICES, PLATFORM SUPPLIERS (EQS) ALL NON-FERROUS METALS (NFR) OIL EQUIPMENT AND SERVICES (OIE) COPPER, OTHER NON-FERROUS METALS (ONF) PETROLEUM (PET) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) EXCLUSIVE INTERVIEW WITH CHIEF EXECUTIVES (CEO) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) TEXAS (TX) Dallas investor Harold Simmons, unfazed by a sizable loss in his Lockheed Corp. investment, has amassed more than $800 million in cash and is planning another acquisition attempt this year, his top lieutenants say. Officials of Mr. Simmons's companies wouldn't comment on who his next target might be, and he hasn't disclosed stakes in any major companies recently. Through Valhi Inc., his holding company, Mr. Simmons owns interests in chemicals, sugar, timber and a fast-food franchisee. Mr. Simmons's accumulation of cash comes as he and other investors have bailed out of failed acquisition attempts in recent months. He had a $46.7 million loss on his two-year investment in Lockheed when he sold most of his 19.8% stake in March. Earlier this week, Carl Icahn sold his 13.3% interest in USX Corp., recognizing only a 25% profit over five years, and an investment group gave up on acquiring Avon Products Inc. several weeks ago. With lenders still shaky about heavily leveraged purchases, Mr. Simmons's strategists say the investor will need the cash available to fund a multibillion-dollar acquisition. But while credit may be tight for buy-outs, the investor has managed to raise most of his cash by adding debt to his operating companies. For instance, in March, a specialty chemicals subsidiary of NL Industries Inc., a chemical company 68%-owned by Valhi, borrowed $115 million under a seven-year term loan. The subsidiary, Rheox Inc., then paid the cash as a dividend to NL. The debt will be repaid from Rheox's operations, and NL had to guarantee only $15 million of the loan, the company said. NL officials said Rheox now is up for sale because it has reached a size where it must either expand its business or be divested. J. Landis Martin, NL's chief executive officer, said the company will sell Rheox only if it gets the price it wants, and he denied that the transaction stripped assets from the subsidiary. "It's still our property, and it has the same amount of assets," he said. Rheox officers said the unit generates about $30 million a year in cash flow and can easily handle the debt. Altogether, NL had about $690 million in cash and equivalents at March 31, and another $220 million in long-term assets invested in government securities as part of debt agreements. A large portion of the cash comes from its Lockheed stock sale. But NL also had more than $400 million in cash before that sale, much of which came from a seven-year, $1 billion loan denominated in marks that its titanium dioxide subsidiary took out last year. As a result, the company's subsidiaries now have about $1.23 billion in debt, only a small portion of which is guaranteed by their parent company. And NL itself has less than $40 million in debt. Mr. Simmons has access to another $130 million in cash for an acquisition through Tremont Corp., a titanium metals and bentonite mining company that was spun off last year from Baroid Corp., an oil-field services company he controls. Most of that cash came from Baroid, which borrowed the money to capitalize Tremont and is responsible for paying off the debt. Mr. Martin said that while Baroid took on new debt, Baroid's shareholders received the proceeds in the form of Tremont shares. Yesterday, Mr. Simmons and Valhi sold about 17.3 million of their Baroid shares for $6.25 each in a public offering. The sale will reduce Valhi's stake in Baroid to about 19% from 42%. It also will allow Valhi to repay some of its bank debt. However, the company said its bank line will remain available if it needs additional funds for an acquisition. Mr. Martin said Mr. Simmons plans to use the cash "to make a sizable acquisition," but he said the investor has found it "tougher to find deals" in the stock-market rally. "There's no question that there are fewer interesting transactions than at any time in Harold's career," he said. However, he told shareholders at NL's annual meeting that he hopes to report the completion of an acquisition at next year's gathering. Mr. Simmons, who celebrated his 60th birthday this week, couldn't be reached for comment. WSJ910516-0145 910516-0145. Dividend News: CT Financial Services Inc. 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION T.CFS FINANCIAL (FIN) DIVIDENDS (DIV) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) DIVIDENDS (DIV) CANADA (CN) CT FINANCIAL SERVICES Inc., a Toronto financial services holding company, said it plans a split of its noncumulative redeemable perpetual first preference shares, Series 2. Shareholders of record May 28 will receive three additional Series 2 shares for each share held. The company also changed the conditions of the shares to effectively change their issue price to 25 Canadian dollars (US$21.72) a share from C$100. The shares will begin trading on a split basis on May 22. There are currently 500,000 Series 2 shares outstanding. WSJ910516-0144 910516-0144. CFTC Charges Ex-Comex Official In Gold Trades ---- By Kevin G. Salwen Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C1 FINANCIAL (FIN) COMMODITY NEWS, FARM PRODUCTS (CMD) SECURITIES REGULATIONS AND ENFORCEMENT (RGU) SECURITIES (SCR) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) COMMODITIES MARKET (CMD) SECURITIES REGULATION (RGU) COMMODITY FUTURES TRADING COMMISSION (CFT) WASHINGTON -- In the largest case resulting thus far from the 1989 raid on New York commodity exchanges, federal officials charged the former vice chairman of the Commodity Exchange and six other individuals with fraudulent trading. The Commodity Futures Trading Commission's civil charges, which focus on more than 200 gold-futures transactions between September 1986 and December 1988, accuse the traders of carrying out noncompetitive trades, changing prices to help themselves and trading ahead of customer orders. The activity caused more than $190,000 in customer losses, the CFTC said. In one remarkable charge stemming from Oct. 20, 1987 -- the day after Black Monday -- former Vice Chairman Charles Federbush and trader Preston Semel changed a 200-contract gold order by $6 an ounce by crossing out the price written on a trading card and filling in another price, the CFTC said. That produced a gain for Mr. Federbush of $120,000, the agency said, which the customer was forced to pay. In addition to those two traders, the agency's 68-page complaint charges Paul Giarletta of Staten Island, N.Y.; Frank Cull of Somerville, N.J.; Robert Seto of Long Island City, N.Y.; Milton Kaufman of Old Westbury, N.Y.; and Robert Pappas of Levittown, N.Y. None of those charged has settled the case. Mr. Federbush was out of town and couldn't be reached for comment. David Bernfeld, an attorney for Mr. Semel in New York, said he hadn't seen the complaint and couldn't comment. Mr. Pappas declined to comment. Mr. Cull said he couldn't comment at the moment "because things are kind of coming to a head. I'd just rather not say anything." Messrs. Giarletta, Seto and Kaufman couldn't immediately be reached. The CFTC complaint is the fifth case to emerge from the 1989 raid, in which government investigators seized records from members of the New York commodity exchanges. Two cases involve Comex members, while the other three have focused on the New York Mercantile Exchange. CFTC officials said that more are in the pipeline. "We will continue to bring charges," said Dennis Klejna, head of enforcement. "We are going to attack this stuff where we can find it and where we can prove it." In New York, a Comex spokesman said the exchange had already taken disciplinary action against all the CFTC-charged traders, except Mr. Federbush. He didn't explain why Mr. Federbush hadn't been disciplined. "We look upon an official or former official of the exchange no differently than any other member, and would fine and suspend the person accordingly," the spokesman said. Mr. Federbush and Mr. Semel have been in legal trouble before. In 1986, Mr. Federbush consented to a CFTC cease-and-desist order stemming from agency charges that he violated commodity laws dealing with supervision of customer accounts and capital provisions. The charges stemmed from Mr. Federbush's role as chief executive at Volume Investors Corp., a Comex clearing firm that collapsed in 1985 after a drastic oneday rise in the price of gold. Mr. Federbush neither admitted nor denied wrongdoing in those charges, but paid a $15,000 penalty and agreed to have his registration as a floor broker suspended for 60 days. In 1989, Mr. Semel was charged by Comex with fraudulent trading and improper conduct, and was fined $550,000 -- an extraordinarily huge penalty by the exchange. He has appealed the Comex fine to the CFTC, which hasn't yet taken up the case. Mr. Klejna said the CFTC charges aren't related to Mr. Semel's earlier difficulties, which stemmed from an April 1987 Comex trade-processing snarl that caused the exchange to close for three days after an explosive rise in silver prices and other precious metals. Mr. Semel is charged with changing prices on executed customer orders 16 times. Mr. Federbush was the beneficiary of those price changes 12 times, resulting in gains of about $169,000, the agency said. Mr. Giarletta is alleged to have traded opposite his customer orders 93 times. WSJ910516-0143 910516-0143. Shifting Fortunes: PC Firms Are Roiled By Changes as Clones Gain on Brand Names --- Lack of Innovation Makes It Hard for a Compaq or IBM To Justify Higher Prices --- Workstations Cut Into Sales ---- By Stephen Kreider Yoder and G. Pascal Zachary Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A1 AAPL ASTA C C.LGG CPQ DELL HWP IBM INTC MSFT P SNE SUNW XRX CONSUMER CYCLICAL (CYC) ENERGY (ENE) INDUSTRIAL (IDU) TECHNOLOGY (TEC) AUTOMOBILES (AUT) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) ENTERTAINMENT AND LEISURE (ENT) HOME ELECTRONICS, FURNISHINGS, APPLIANCES (HMF) OFFICE EQUIPMENT (OFF) OIL, INTEGRATED MAJORS (OIL) PETROLEUM (PET) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) SEMICONDUCTORS, INTEGRATED CHIPS (SEM) SOFTWARE (SOF) CALIFORNIA (CA) CONNECTICUT (CT) JAPAN (JA) MICHIGAN (MI) NEW YORK (NY) OKLAHOMA (OK) SOUTH KOREA (SK) TEXAS (TX) WASHINGTON (WA) A sea change is roiling the personal-computer industry and especially the market leaders, International Business Machines and Compaq Computer. Compaq yesterday disclosed that it expects second-quarter sales to drop a surprising 15%, causing an 80% drop in estimated earnings to 25 cents a share and contributing to an inventory glut. The news drove its stock down 27% as analysts slashed year-end projections. Last month, IBM said its personal-computer sales sagged 17% in the quarter. But meanwhile, sales are booming at clone makers such as AST Research and Dell Computer. Also faring well is Sun Microsystems, whose powerful desktop computers are increasingly being used as PCs. Apple Computer reported an 85% jump in unit sales of its Macintosh PCs, aided by price cuts and its edge in software. Ironically -- for a high-tech industry in which companies' main fear usually is competitors' innovations -- the two biggest PC makers are being hurt because innovation is scarce. PCs have become so standardized around Intel's powerful microprocessors and Microsoft's operating software that Compaq and IBM have done little to differentiate their desktop machines from others, and so they can't justify higher prices and profit margins. In fact, user surveys find some clones rated higher than Compaq and IBM machines in performance and quality. "Almost everything we buy is a noname clone," says Glenn Thomas, information-services manager at Hudson Foods Inc., of Rogers, Ark. Mr. Thomas once bought almost exclusively from IBM and Compaq but now buys clones from Gateway 2000, of North Sioux City, S.D., and Taiwan's DTK Computer. Clones use essentially the same inner workings as more expensive brethren do, he adds, and some "have PCs that outperform IBM." The trend is being greatly accelerated by the recession, which has caused large corporate buyers to either cut back on computer purchases or seek cheaper machines. In a recent survey, Robertson Stephens & Co., a securities firm, found that these buyers planned to roll back purchases 21% this year. Compaq and IBM are especially vulnerable to the cutbacks because they depend the most heavily on the big companies. Clone makers and Apple, on the other hand, derive a greater percentage of sales from individuals and small businesses. AMR Corp.'s American Airlines says it plans to buy fewer PCs this year than last year. Ford Motor Co., which has 70,000 desktop PCs, says it will purchase fewer than half as many PCs this year as in previous years. Phillips Petroleum Co. plans to buy 1,100 PCs this year, 377 fewer than last year, because "we have less places where we need them now," says John R. Smith, the Bartlesville, Okla., company's procurement manager. Like Mr. Thomas, increasing numbers of companies are bypassing Compaq and IBM when they do buy. Chrysler Corp. has added clone makers to its approved-vendors list and last year leased 3,000 PCs made by South Korea's Lucky Goldstar Group. Says Irene Hession, a PC buyer for Polaroid Corp.: "We have definitely gone toward clones." IBM and Compaq belatedly struck back at the clones last month by cutting prices on popular machines as much as 34%. The move is too late, says Dennis Cox, marketing director at Packard Bell Electronics, a clone-maker and the nation's fifth-largest PC seller last year. "They've been forced to narrow the gap." Despite the turmoil, the PC industry's world-wide sales are expected to increase 11% this year, after a 9% gain last year, says Infocorp. However, Stella Kelly, an analyst at the Santa Clara, Calif., market-research firm, says that growth "hinges on several factors," most notably continued high demand for notebook PCs powered by Intel's 386sx chip, desktop models powered by Intel's 486 chip and Apple's lower-priced Macintosh models. Apple has also slashed prices on its lowest-cost Macintoshes, sparking a surge in sales that promises to double its share of the PC market, to nearly 20%. Computer buyers say Compaq and IBM will eventually benefit from their price cuts as well. "We do expect that Compaq has essentially closed the gap with the quality clones and that their demand will come back," says Ed Anderson, president of ComputerLand Corp.'s USA retail chain. Moreover, the worrisome inventory glut at Compaq and other companies may be magnified by a recent spate of mergers between big retail chains, which now are reducing combined inventories. "To do that, you stop buying for a little while," Mr. Anderson says. "We don't expect to turn it back on for 60 days. It isn't an inventory buildup in the sense of demand being stopped." Joseph "Rod" Canion, Compaq's chief executive, says he isn't sure how much inventory is clogging the dealer channel, but he says "the glut will certainly hurt us for the rest of the second quarter and well into the third quarter." Compaq's earnings comparisons also will suffer because of the strong European business that boosted profits in the past. Some industry analysts expect similar problems at Apple and IBM very soon. "The dealer channel is all mucked up, and it's going to get more mucked up," says JoeAnn Stahel of Storeboard/Computer Intelligence, which tracks PC sales through retailers. "Compaq is not alone in having excess product in some categories." But even when sales recover, Compaq and IBM can kiss their once-juicy profit margins goodbye. Compaq, for instance, has traditionally reported after-tax margins three to four times higher than those of Sun Microsystems. One omen: Apple's slashing of its prices last fall led to an 11% decline in profit margins in the first three months of this year. And it will be increasingly difficult to generate steamy growth in dollar sales after unusually sharp price cuts, even if those cuts attract new computer users. Apple's dollar sales, for instance, grew only 19% in the last quarter despite the 85% jump in unit sales. PC sales in the five years between 1990 and 1994 will grow just 44%, down from the industry's heady 100% growth in the five years preceding 1989, says International Data Corp., market-research firm in Framingham, Mass. All that's a big switch from the 1980s bonanza days for IBM and Compaq. Conservative corporate PC buyers, still nervous about the new technology represented by the PCs they were purchasing to replace typewriters, bought largely from IBM. Meanwhile, Compaq racked up huge growth by offering machines with a technological edge over IBM's. Compaq beat out IBM and others by months with the first PC that used Intel's new 80386 chip in 1986. As long as Big Blue and Compaq were the first with innovations and held a quality edge over the clones, which tended to trail in the use of new technology, the two leaders could charge 30%, 40% and 50% more for their PCs. But that was when desktop PCs were the site of the computer industry's most striking innovations. In those early days, a slew of innovations conspired to make the desktop computer one of the hottest items around, a powerful new tool. The laser printer, floppy drive, mouse pointing device and other features were introduced between 1980 and 1985. But the desktop PC is no longer awash in innovation. Since 1985, its basic features have been essentially unchanged. There have been some innovations in software; for instance, both Apple and Microsoft have improved their system software, which controls the basic operations. But PC makers have mainly relied on weary standards, and their few initiatives have centered on arcane features such as internal channels invisible to customers. Innovations are occurring, but in portable computers and workstations, the industry's fastest-growing segments. In recent years, new types of display screens, harddisk drives, semiconductor memory and communications devices have appeared first on notebook and hand-held computers. Compaq is having trouble keeping its 386 portable in stock, while its other models pile up in inventory. Apple and IBM are suffering from the relative unpopularity of their less-sleek portables. Even as portables are stealing away desktop PC sales because of miniaturization, workstations are cutting into PC sales because they offer brute power and solid, if somewhat unimaginative, networking. Sun continues to post big gains partly because of its inroads into PC rivals. The same is true for Hewlett-Packard and IBM, which also have strong workstation products. "We're at a turning point," says George Dodd, head of computer science at General Motors' research labs. "Because of the drastically reduced prices of these machines," he says, GM engineers will soon be doing tasks they once only dreamed of, such as crash-testing cars on desktop computers instead of smashing into concrete walls, or designing car parts completely by computer. Even when change comes to the desktop PC, clone makers are quick to seize it. Nothing illustrated this better than when Intel, the chief purveyor of the "brain" chips in PCs, introduced a cheaper version of its advanced chip, the 486. The next day, a dozen clone makers announced machines based on the chip and so cheap that IBM, Compaq and others had to slash prices on older machines. PC makers are realizing that standards such as Intel chips cut both ways and that, to prosper, they need to incorporate some unique, tangible features in their PCs. Stewart Alsop, editor of PC Letter, says companies are focusing more on competing by design innovation than by putting together coalitions around different technical standards. "They have begun to realize that what customers want is new value, even more than standards," he says. The race to innovate is most apparent in miniaturization and graphics. Hewlett-Packard, an also-ran in PCs, wowed the industry last month with a new $700 palmsized PC that can send and receive data via satellite. Many computer makers disparaged hand-held PCs as toys and left them to Japanese consumer-electronics concerns. Now they may follow Hewlett-Packard with similar devices. IBM is planning a new emphasis as well. For instance, it has a "skunk works" in Florida building a radically new computer designed to accept handwriting from an electronic pen. Like Apple a laggard in notebook PCs, IBM hopes its future pen-based machine -- due out as early as next year -- will revive its innovative image. Xerox is taking the power of new microprocessors to a different dimension: Rather than create more powerful desktop machines, researchers at its Palo Alto Research Center are designing computers the size of legal pads and Post-it notes. Even relatively successful Apple is eyeing fresh markets, particularly joint ventures with Sony of Japan to develop a new portable computer and a repackaged Macintosh for the home-electronics market to compete with Nintendo. "It's a question of bringing to market products people don't know us for," says John Sculley, Apple's chief executive officer. Mr. Sculley bluntly concedes that Apple has so far missed the explosive wave in portable and, even smaller, notebook computers, but he vows that won't happen again. "We are putting more attention on breakout areas," he says. For these companies, and other traditional PC powerhouses such as Tandy Corp., another key is mastering a diverse set of networking and multimedia technologies, which figures to be the foundation for the desktop computer of the mid-1990s. Just this week, Digital Equipment, another also-ran in PCs, introduced a very fast PC based on Intel's 486 chip with networking capabilities and workstation quality graphics built in. Future machines from some makers are expected to manage and transmit "files" of sound and images as easily as text is handled today. While "some hoary technical issues must be overcome, the big question is how do vendors stuff these capabilities into their machines without making them too expensive," Mr. Alsop says. The extra wallop of computer power will bring sweeping changes for the average PC user, too. With power to spare, computer and software designers say, PCs of the 1990s will talk to users in human voices, show movie-quality video images, play 15-piece orchestra music in stereo. The greater appeal of such machines may slow the trend toward portables, which have been in such demand that some experts predict the end of the desktop. Outfitted with new capabilities, the desktop PC will reassert its dominance in personal computing, says William Gates, Microsoft's chief executive. Mr. Gates doubts that a new class of notebook PCs, armed with built-in radio communicators, will satisfy customers. "What is so urgent that you can't wait to get back to your desktop machine?" he asks. --- Jim Bartimo contributed to this article. WSJ910516-0142 910516-0142. Foreign Exchange: Dollar Falls Below Key Support Levels As Disappointment Grows Over Economy ---- By James T. Areddy Special to The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C10 BASIC MATERIALS (BSC) COMMODITY NEWS, FARM PRODUCTS (CMD) FOREIGN-EXCHANGE MARKETS (FRX) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) COMMODITIES MARKET (CMD) FOREIGN EXCHANGE (FRX) CANADA (CN) EUROPE (EU) FAR EAST (FE) JAPAN (JA) NEW YORK -- The dollar continued to slump as dealers, impatient for conclusive evidence that the U.S. economy is recovering, pushed the currency down through technical support levels. Traders also sold dollars as it became clear that there will be limits to the negative impact on the mark if a change occurs in the top post at the German central bank. Late in the New York trading day, the dollar was quoted at 1.6850 marks, off from 1.6955 marks late Tuesday in New York. The U.S. currency was also changing hands at 137.15 yen, down from 137.94 yen. Sterling was trading at $1.7540, up from $1.7465. In Tokyo early Thursday, the dollar was trading at 137.18 yen, down from Wednesday's Tokyo close of 137.89 yen. Meanwhile, the U.S. currency was trading at about 1.6873 marks, down from 1.6966 marks at Tokyo's close Wednesday. "The signs of a bottom {to the recession} aren't catching up with expectations of a stronger economy" that helped the dollar move from 1.4425 marks in February to 1.7830 marks on April 29, said Keith Raphael, second vice president for foreign exchange at Chase Manhattan in New York. The economic data have "left something to be desired," he said. Meanwhile, German Chancellor Helmut Kohl all but confirmed market speculation that Bundesbank President Karl Otto Poehl will resign. Mr. Poehl, who is to address the issue at a news conference today, said that he and Mr. Kohl had a "friendly talk" late Wednesday. "The market takes it as a given that {Mr. Poehl} will resign," and there is little concern about holding marks ahead of the news, said Bernd Becker, vice president and chief foreign exchange dealer at Oesterreichische Laenderbank in New York. "A lot of people thought it would be a negative for the mark and everyone who bought dollars {on the rumors} is trying to get out of {the U.S. currency} in a hurry," he added. Holders of marks were heartened by the market's consensus that Poehl's replacement also will be a staunch inflationfighter. Judy Rubenstein, vice president and trader at Bank of America in Los Angeles, said that a change at the Bundesbank will be bullish for the mark. She said a new voice is needed to toughen up the central bank's image after such debacles as Mr. Poehl's comment in March that German monetary union has been a "disaster." The dollar's plunge through technical support levels was spurred by sentiment that the U.S. economy continues to wobble rather than show clear signs of a recovery, traders said. When the dollar fell below 1.6885 marks, which was considered a strong support level, "people panicked" and sold the currency more heavily, said Ms. Rubenstein. She suggested that the next support levels lie at 1.6575 marks and 1.6250 marks. Late in the U.S. trading day, Michael Boskin, President Bush's chief economic adviser, said the U.S. recession appears to be "bottoming out." However, some currency traders weren't convinced and the dollar moved lower following the statement. "Some people said the U.S. economy has already hit the bottom; but it is still not clear," said a Bank of Tokyo trader. "There are no fresh, fundamental factors" to make that assessment, he said. Recent reports on the U.S. economy, including a reduction in business inventories in March and an encouraging revision in March's retail sales, are "completely inconclusive" in determining when the economy will rebound, said Mr. Raphael of Chase Manhattan. On the Commodity Exchange in New York Wednesday, gold for current delivery settled at $359.90 an ounce, down 20 cents. Estimated volume was a moderate 3.3 million ounces. In Hong Kong early Thursday, gold was quoted at $360 an ounce. WSJ910516-0141 910516-0141. Who's News: Alpha Industries Fills Post 05/16/91 WALL STREET JOURNAL (J), PAGE B12 AHA WNEWS TECHNOLOGY (TEC) DIVERSIFIED TECHNOLOGY (DTC) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) MASSACHUSETTS (MA) WOBURN, Mass. -- Alpha Industries Inc. said that Martin J. Reid, 49-year-old president and chief operating officer, assumed the additional job of chief executive officer. He succeeds George S. Kariotis, 68, who remains chairman of the maker of microwave semiconductors and other electronic parts. WSJ910516-0140 910516-0140. Financing Business: Compression Labs Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE C17 CLIX TECHNOLOGY (TEC) COMMUNICATIONS TECHNOLOGY (CMT) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) STOCK MARKET, OFFERINGS (STK) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) STOCK & OTHER MARKET NEWS (STK) CALIFORNIA (CA) COMPRESSION LABS Inc., a San Jose, Calif., maker and marketer of video conferencing equipment, said it filed a registration statement with the Securities and Exchange Commission, covering a proposed public offering of two million common shares. Proceeds from the sale will be used to repay bank debt, and for working capital, Compression Labs said. The underwriters, Lehman Brothers and PaineWebber Inc., have been granted an option to buy an additional 300,000 shares to cover overallotments, the company said. Currently, Compression Labs has about 8.5 million common shares outstanding. WSJ910516-0139 910516-0139. Financing Business: Loblaw Cos. 05/16/91 WALL STREET JOURNAL (J), PAGE C17 A.WEG T.L CONSUMER NON-CYCLICAL (NCY) FOOD RETAILERS AND WHOLESALERS, CONVENIENCE STORES (FDR) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) STOCK MARKET, OFFERINGS (STK) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) STOCK & OTHER MARKET NEWS (STK) AUSTRALIA (ASA) CANADA (CN) LOBLAW Cos., Toronto, said it plans to issue five million common shares at 20.25 Canadian dollars (US$17.60) each for expected net proceeds of C$97.4 million (US$84.6 million). Loblaw said proceeds will be used to finance inventory and pay down short-term debt. The company currently has about 72.7 million common shares outstanding. George Weston Ltd., which holds 76% of the food retailer, said it won't participate in the offering. George Weston said it wanted to increase Loblaw's public float. Its stake will fall to 71% on completion of the offering. George Weston, which also has interests in natural resources, said it will record an accounting gain of about C$30 million for the second quarter on the transaction. WSJ910516-0138 910516-0138. Schering-Plough Sees Per-Share Net Rising 20% in '91 ---- By Ralph E. Winter Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A7 SGP CONSUMER NON-CYCLICAL (NCY) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) DOW JONES INTERVIEW (CEO) COSMETICS, PERSONAL CARE, OVER-THE-COUNTER REMEDIES (COS) DRUG MANUFACTURERS (DRG) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BUYBACKS, REDEMPTIONS, REPURCHASES, SWAPS (BBK) EXCLUSIVE INTERVIEW WITH CHIEF EXECUTIVES (CEO) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) NEW JERSEY (NJ) CLEVELAND -- Schering-Plough Corp. expects 1991 per-share earnings to rise 20% on an 8% to 12% sales increase, according to Geraldine U. Foster, vice president. The Madison, N.J., drug company's management is comfortable with analyst estimates that Schering-Plough will earn $2.95 to $3 a share this year, up from 1990 net income of $565.1 million, or $2.50 a share, Ms. Foster said in an interview. Sales for 1990 were $3.32 billion, including $118.9 million from the Maybelline cosmetics business, which Schering-Plough sold last July. Prescription drugs and over-the-counter health-care products are showing strong sales increases this year, Ms. Foster said after addressing securities analysts. Sales of nonprescription products jumped 20% in the first quarter, she said, aided by initial orders for Gyne-Lotrimin, an anti-fungal drug for vaginal yeast infections approved for over-the-counter sales last November. Reorders of the medication, previously sold only by prescription, have been very good, Ms. Foster said. Many women have begun using the product now that they don't need to spend the time and money required to get a prescription, she said. First-quarter sales of prescription drugs rose 17%, she said, sparked by rapidly rising sales of drugs to combat asthma and allergies and of new anti-cancer drugs. The company's 1991 net will rise to 18% to 20% of sales, she said, from 17% last year. The higher margin reflects the sale of Maybelline, she said, but margins also are boosted by growing sales of new drugs. Because the company has extensive sales outside the U.S., a rise in the value of the dollar could slow the increase in Schering-Plough's profit margins, Ms. Foster said. However, "the dollar would have to get very strong" to have a marked impact on profits, she added. Schering-Plough is actively seeking acquisitions, both of drug companies and of individual drug products, she said. Capital spending in 1991 will be $320 million to $350 million, up from $242.9 million last year, she said. The company "is about halfway through" with a previously announced $1 billion stock-repurchase program, she said. The company isn't buying stock as aggressively now that the stock is trading in the area of $50 a share as it did when shares were trading in the low $40s, she said, but management does intend to complete the repurchase program. In composite trading yesterday on the New York Stock Exchange, the stock closed at $50.50, down 50 cents. WSJ910516-0137 910516-0137. Dividend News: National Income Realty Trust 05/16/91 WALL STREET JOURNAL (J), PAGE C8 NIRTS FINANCIAL (FIN) DIVIDENDS (DIV) REAL ESTATE INVESTMENTS (REA) DIVIDENDS (DIV) TEXAS (TX) NATIONAL INCOME REALTY TRUST (Dallas) -- This real estate investment trust said it will pay a special dividend of $2.11 a share on May 23 to holders of record May 20. The trust, controlled by former Southmark Corp. Chairman Gene E. Phillips, and three other trusts controlled by Mr. Phillips agreed to pay special dividends last year as part of a lawsuit settlement. However, at year end, the trusts said they didn't have the cash on hand and couldn't assure the dividend would be paid. The three other trusts previously declared their special dividends, making National Income last to do so. The trusts said future dividends will be considered after year end based on the company's performance, liquidity and commitments. WSJ910516-0136 910516-0136. Who's News: Kroll Associates Names McGuire To Two Positions ---- By Alix M. Freedman Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B9 WNEWS INDUSTRIAL (IDU) INDUSTRIAL & COMMERCIAL SERVICES, LEASING, CLEANING (ICS) INDUSTRIAL AND COMMERCIAL SERVICES (SVC) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW YORK (NY) NEW YORK -- Kroll Associates named Robert J. McGuire president and chief operating officer of the international investigations and corporate security concern. The move, along with several other management changes, reflects the firm's determination to expand beyond its focus in the 1980s on Wall Street's wheeling and dealing. Mr. McGuire, currently senior managing director, succeeds Jules P. Kroll as the company's president. Mr. Kroll, 49 years old, will retain his position as chief executive officer and assume the newly created post of chairman. Mr. McGuire, 54, is a former chief executive officer of Pinkerton's Inc. and served as New York City's police commissioner from 1978 to 1983. Last year, he led a Kroll investigation into the activities of Rev. Bruce Ritter, who resigned last year as head of Covenant House, a provider of shelters for homeless youths, amid allegations of sexual misconduct. Earlier this year, Kroll was hired by Kuwait to track down Iraqi assets that weren't frozen by the U.S. and its allies in August after Iraq invaded Kuwait. Mr. Kroll said the management shifts at Kroll are "a recognition of fundamental change in the areas of growth we expect in the '90s." Mr. Kroll said that six years ago, 65% of the firm's revenue came from investigations relating to mergers and acquisitions, hostile takeovers and due diligence for financial institutions. Today, that figure has plunged to 25%. Now, Mr. Kroll anticipates that internal investigations like that involving Covenant House and investigations into environmental cases, product contamination, extortion and kidnapping will be the key growth areas over the next five years. Kroll's sales totaled an estimated $45 million last year. The company's international business now accounts for 30% of sales, but that figure is expected to rise to 50% by the end of 1993, Mr. Kroll said. As part of Kroll's reorganization, Jerome Pomerance, executive managing director and chief operating officer, and Joseph Rosetti, senior managing director, were both named to the new positions of vice chairmen. WSJ910516-0135 910516-0135. Money-Fund Yield In Latest Week Hits 5-Year Low ---- By Georgette Jasen Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C16 MUTUAL AND MONEY-MARKET FUNDS (FND) MUTUAL FUNDS (FND) Yields on money-market mutual funds continued their steady decline in the latest week, reaching their lowest level in five years. The average seven-day compound yield on taxable funds fell to 5.74% from 5.81% in the week ended Tuesday, according to IBC/Donoghue's Money Fund Report. Compound yields assume reinvestment of dividends. Assets fell by $1 billion, to $457.4 billion, the Holliston, Mass., newsletter said. Martha Wittbrodt, editor of Donoghue's, said the outflow was entirely from funds open to individual investors. Money-fund yields haven't been this low since April 1986, according to Donoghue's. Although money-fund yields remain higher than those on many competing investments, such as bank money-market accounts and certificates of deposit, the spread, or difference in rates, is unusually small. The average money fund is yielding only about a third of a percentage point more than the average bank money-market account, for instance. The seven-day simple yield on taxable money funds slipped to 5.58% from 5.65%. The average 30-day simple yield declined to 5.70% from 5.76% and the average 30-day compound yield fell to 5.86% from 5.93%. Average maturity of the funds' investments -- which include commercial paper (short-term corporate IOUs), Treasury bills and bank CDs -- shortened by a day to 56 days. That's still quite long by historical standards, however, indicating that portfolio managers don't expect a turnaround in rates soon. Longer maturities enable funds to retain comparatively higher yields while short-term interest rates are falling. Until this month, average maturity hadn't topped 56 days in more than a decade. Yields also fell on tax-free money funds, although assets increased slightly. The average seven-day compound yield slid to 4.23% from 4.32% in the latest week, Donoghue's reported. The latest yield is equivalent to a taxable 5.88% for an investor in the 28% tax bracket and to 6.13% for someone paying 31% in taxes. Assets of 260 tax-exempt funds rose by $96.4 million, to $88.2 billion. Average maturity of the tax-free funds' investments, primarily short-term municipal securities, shortened by a day to 44 days. WSJ910516-0134 910516-0134. Dividend News: St. Ives Laboratories 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION SWIS CONSUMER NON-CYCLICAL (NCY) COSMETICS, PERSONAL CARE, OVER-THE-COUNTER REMEDIES (COS) DIVIDENDS (DIV) DIVIDENDS (DIV) CALIFORNIA (CA) ST. IVES LABORATORIES Inc., a Los Angeles-based personal care products concern, declared an initial quarterly dividend of 2.5 cents on common stock, payable June 17 to holders of record June 5. WSJ910516-0133 910516-0133. Letters to the Editor: The Ultimate Dehumanizing Crime 05/16/91 WALL STREET JOURNAL (J), PAGE A17 I take issue with the anonymous author of your April 24 editorial-page article, "Respect Rape Victims' Privacy." She overgeneralizes in many instances and thus draws unfounded conclusions. For example, the purpose of Rape Crisis Centers is not to ". . . prod the victim into realizing the nature of the crime committed against her." I am the victim of rape by a man who afterward tried to murder me, and I have received more support and assistance in my own healing process from the counselors at the Rape Crisis Center in my town than from any other source. The author perceives the problem to be feminists encouraging editors to print victims' names in order to further feminist political agendas. This is not true. Society (the press, families of victims, friends, lovers, neighbors, etc.) is too frequently insensitive to rape and the victim's emotional trauma. I believe this is because rape victims customarily have kept silent about the crime and its effect on their lives. The silence usually grows out of an acute reaction to the emotional trauma manifested as denial of what happened, and the stigma associated with rape. Such reactions result from a fundamental misunderstanding of this particular crime. No woman ever asks to be raped; sometimes we are a little naive and sometimes a little overtrusting. But this isn't a crime. On the other hand, when you are raped your psychological equilibrium is destroyed. The nature of the crime is that a man appropriates and uses your body with the same disregard one feels when using a disposable inanimate object, such as a Kleenex. To be treated as an inanimate object by another person is a shattering experience. Also, the victim lives in constant fear that anytime, anywhere, someone bigger and stronger or craftier than she could rape her again. Women are rightly fearful to come forward because of this stigma. However, the stigma will not disappear unless more women come forward and tell their stories. To this end, I recently went public and allowed the Waterville Morning Sentinel to publish my story. It was not an easy decision to reach. But I firmly believe rape victims should be free of the stigma and I am prepared to bear whatever the personal costs in order to fight for that freedom. I also hope other victims who read my story can find some comfort in the knowledge that they aren't alone in their pain and their struggle to heal. Saranna Robinson Assistant Professor of Economics Colby College Waterville, Maine --- Who are all these feminists demanding that rape victims be named? Most of the ones I know and at least half of the ones I've heard, on TV and in newspapers, oppose identifying rape victims in the press. (Elizabeth Holtzman, on the MacNeil-Lehrer shows, clearly set forth the feminist position against naming names; Susan Estrich laid it out in the New York Times.) Feminists, after all, are not monolithic, as some anti-feminists like to assert. We disagree on a range of issues -- employment policies, divorce laws, pornography and censorship, as well as the treatment of rape victims. Nor do feminists have much influence in the media, as the disparate treatment of women candidates and the misrepresentation of feminist opinion frequently show. Wendy Kaminer Cambridge, Mass. --- The anti-feminist diatribe of your anonymous writer reminded me of all the cliches about women being their own worst enemies. Although I can sympathize with the boundless horror of the writer's experience, I am appalled by her assertion that feminists support publication of rape victims' names. First of all, the writer did not define "feminist" before beginning her attack. Is a feminist anyone who belongs to the National Organization for Women? Most feminists do not belong to NOW or any similar organization. Is a feminist any woman who lobbies for lesbian rights, refuses to wear makeup and hates men? This description does not match the majority of my feminist friends. Unfortunately, over the past 20 years the term "feminism" has been diluted by a number of extremist causes that seek attention by labeling themselves feminist. These causes do not represent most women. Moreover, it's ludicrous to suggest that any women's group is as powerful and influential as the writer suggests. If feminist arguments were so forceful and effective, women would have achieved pay equity long ago, half our congressional representatives would be female, and none of our children would be hungry or homeless. Feminism's primary goal is to empower women by giving them the right to choose what to do with their own lives, careers and bodies. Any true feminist would have informed your writer that a rape victim should be able to choose whether or not to reveal her identity to the public. Let's not forget that rape is a crime primarily perpetrated by men against women. Blaming the victim rarely solves any problems. Joanne Goldberg Menlo Park, Calif. --- What about the same rights for the accused, such as William Kennedy Smith? Or have we forgotten Shakespeare's reminder: "But he that filches from me my good name, robs me of that which not enriches him, and makes me poor indeed." From the standpoint of his reputation, it is now immaterial whether this young man committed any crime, because he has already been robbed of his good name. While the judicial systems in our countries presuppose the innocence of the accused, for all practical purposes this supposition is too often completely meaningless. The judicial myth that an acquittal, on trial, confirms the innocence of the accused and restores his good standing in the community would be simple farce if it were not for the very different and tragic reality for those individuals, and their families, scrutinized so ruthlessly by the media in such salacious matters as, for example, the alleged rape at the Kennedy compound. For much of the media and their conditioned public, an acquittal of Mr. Smith probably would evidence nothing more than the ability of his family to afford a legal defense unavailable to most citizens, or a judiciary unduly impressed by the Kennedy mystique. And thus Mr. Smith will remain in his way as "damaged goods" in the public eye regardless of what any court has to say about his innocence. Yet the solution to this injustice is simple. The law should be amended to prohibit publication of the name of a suspect or an accused person until such time as he has been convicted of an offense and exhausted whatever appeal rights he uses. There still will be ample time after this, and without the current distraction for the media of a libel suit, to trounce the individual to their hearts' content. But if one is acquitted, his reputation will remain intact, and he and his family will be spared the humiliation, harassment and destruction that much of the media regard as a given right in a so-called open society. William O'Donnell-Costello Ottawa, Ontario --- My regards to the Journal and to the thoughtful and courageous woman who wrote this moving article. Women everywhere owe you and her a debt of gratitude for putting this issue in perspective. It is a sad commentary on the state of the news media when two stalwart practitioners of journalism, NBC News and the New York Times, stoop to the screaming headlines and scandalous innuendo of the tabloid press. It is an even more depressing reflection on our society that news editors at these companies claim their revelation of the name of a rape victim is in response to "the public's right to know." I am a feminist, but damn the manhaters among us and the pseudojournalists in the media who use the banners of civil rights and First Amendment privileges to justify the continued humiliation of rape victims through the publication of their names. Your author's story would have been no more compelling with her byline. Had America known the name of the raped Central Park jogger we would have thought the crime no more heinous, but her trauma would have been heightened. Your author makes it clear that this is the point, and the moral implications of how our society responds to rape cannot be dodged or rationalized, no matter how facile or "politically correct" the evader. Mimi Hall Managing Partner Great Lines/South Memphis, Tenn. WSJ910516-0132 910516-0132. Who's News: Intel Creates Groups, Fills New Positions 05/16/91 WALL STREET JOURNAL (J), PAGE B12 INTC WNEWS TECHNOLOGY (TEC) SEMICONDUCTORS, INTEGRATED CHIPS (SEM) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) CALIFORNIA (CA) SANTA CLARA, Calif. -- Intel Corp. said it created three new product groups to help coordinate operations both internally and with customers. The chip maker said Ronald J. Whittier, vice president, was named head of its new Software Technology Group. David L. House, senior vice president, was named chief of its new Architecture and Applications Group. Kenneth B. Fine, a group vice president, was named to head the company's Multimedia and Supercomputing Components Group. The new entities, which report to the company's executive office, are in addition to three existing product groups and reflect the growing significance that the areas are assuming within the company, Intel said. WSJ910516-0131 910516-0131. Revco D.S., Or How a Buy-Out Bonanza Became a Frenzy of Fees in Chapter 11 ---- By George Anders Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C1 RDS CONSUMER CYCLICAL (CYC) BANKRUPTCIES (BCY) DRUG-BASED RETAILERS AND WHOLESALERS, PHARMACIES (RTD) ALL SPECIALTY RETAILERS (RTS) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) OHIO (OH) Revco D.S. Inc. has a special place in the roll-call of 1980s takeovers. It went private in 1986 in a $1.25 billion leveraged buy-out, paid $86.9 million in fees to Wall Street and other advisers, and ended in bankruptcy proceedings less than two years later. Now, Revco is becoming famous a second time. Though the Twinsburg, Ohio, drugstore company remains mired in bankruptcy proceedings, a new brigade of "advisers" is plucking goodies from Revco's shelves. Through Feb. 1, Revco had shelled out another $40 million to a fresh crowd of lawyers, accountants and Wall Street investment bankers who are supposed to be helping the company restructure its debts. Revco's ever-mounting stack of advisers' bills -- which take up more than 1,000 pages in bankruptcy court documentation -- is generating widespread dismay. In March, federal bankruptcy judge F.J. White, who oversees the Revco Chapter 11 case in Akron, Ohio, said he had endured enough. "This court cannot allow a struggling Revco to continue to pay these substantial fees without any apparent conclusion in sight," Judge White declared. The fees "have escalated to a present rate of a staggering $2 million a month," the judge complained, adding that he sees a "discouraging lack of progress" in straightening out Revco's finances. Judge White ordered that Revco forgo paying 25% of all bankruptcy-related fees until its Chapter 11 reorganization is completed. The continuing gusher of fees at Revco shows that for financial advisers, bankruptcy is simply another billing opportunity. "The fees {in bankruptcy reorganizations} are pretty shocking," says Jeremy Bloomer, head of research at Credit Research & Trading, a Greenwich, Conn., firm that specializes in the securities of financially distressed companies. Since entering Chapter 11 in July 1988, Revco has paid multimillion dollar fees to three different top-tier accounting firms. It has reimbursed lawyers employed by the company, by creditor banks, by junk-bond holders and by trade creditors. It even has paid a Brooklyn College law professor and a New York law firm almost $2.5 million for compiling a report about all the problems associated with the original 1986 leveraged buy-out of Revco. Revco's top-billing advisers say they aren't procrastinating and deserve every cent collected so far. "There's been an awful lot of hard work by all parties," says John Dubell, a partner in the accounting firm of Arthur Andersen & Co., which has billed Revco $7.4 million to date. Some of Arthur Andersen's fees cover regular auditing services that Revco would need anyway, Mr. Dubell says. The rest concern "special issues" that Revco faces in Chapter 11. A partner in the Cleveland law firm of Baker & Hostetler, which has billed Revco for $7.5 million since 1988, said he hadn't seen Judge White's order and couldn't comment on it. Junk-bond analysts and even some investment bankers complain, however, that there's no mechanism to rein in bankruptcy fees. "Everyone involved in these restructurings hires a lawyer," complains Credit Research's Mr. Bloomer. Some of these attorneys and investment bankers charge monthly retainers that run $100,000 or more -- with all fees paid by Revco. That can create incentives for advisers to stretch out bankruptcy restructurings and jack up fees, asserts Dean Kehler, a managing director at Argosy Group, a New York investment banking boutique. Mr. Kehler, a former Drexel Burnham Lambert Inc. investment banker, charged his share of big fees to put together takeover deals in the 1980s. But he says: "This is worse." Restructurings take much longer than acquisitions to complete, he says, and the eventual settlements mainly involve an "allocation of pain among existing investors." In the case of Revco, operating results have deteriorated so severely that various restructuring plans have proved infeasible, says Brad Scheler, an attorney at Fried Frank Harris Shriver Jacobson. Fried Frank, which is advising Revco's bondholders, has billed Revco $3.2 million to date. For the nine months ended Feb. 9, Revco had a $62.2 million loss on revenue of $1.3 billion. That amounted to a 34% revenue drop from the year earlier and a significant widening of Revco's loss, leaving aside a big year-earlier charge for store closings. The steady slump in Revco's results is exactly what exasperates investors in the company's defaulted bonds. At the time of Revco's bankruptcy filing in 1988, the total market value of all Revco bank debt, junk bonds, preferred stock and equity was $900 million, calculates David Schulte, a partner in Chilmark Partners L.P., which is collecting $2.4 million for advising Revco's noteholders. Now, the market value of Revco's debt and equity has shrunk to $340 million, he says. As Fried Frank's Mr. Scheler concedes: "Chapter 11 is an expensive, expensive process." WSJ910516-0130 910516-0130. What's News -- World-Wide 05/16/91 WALL STREET JOURNAL (J), PAGE A1 BAKER FAILED to win Israeli compromises on a Mideast peace conference. The secretary of state plans to hold another session today in Jerusalem with Shamir in an attempt to make some progress before leaving for Washington. But in nearly four hours of talks with the Israeli prime minister yesterday, Baker apparently was unable to get Israel to alter its position on two conditions for a regional conference. Syrian officials have refused to budge on the same two points, one involving the U.N.'s role and the other concerning whether the conference would reconvene after an initial meeting. The U.S. said last night that it was still working with Israel "to clarify areas of common understanding and areas of still outstanding issues." --- An advisory panel on the FDA reported that the agency needs more money, a larger staff and greater enforcement powers in order to regain credibility. In Senate testimony, panel chairman Charles Edwards described the agency as "vulnerable to fraud and blunder" and "living on borrowed time." --- Edith Cresson was appointed France's first woman prime minister, potentially signaling a tougher French stand on trade disputes. The appointment by President Mitterrand means the departure of Michel Rocard, who still is considered a strong candidate to succeed Mitterrand in the 1995 elections. --- Serbia and its allies blocked the election of a leader from rival Croatia as Yugoslavia's president, and he said the move could force his republic to secede. Stipe Mesic would have been the first non-Communist president under the scheduled annual rotation of the chairmanship of the eight-member federal presidency. --- The Bush administration proposed legislation to curb soaring medical malpractice costs. The proposal seeks to compel states to limit the amount of damages a malpractice plaintiff can collect, restrict the number of people who can be sued over one incident and change the system for paying damages. --- Over half of U.S. voters believe that while Vice President Quayle isn't qualified to be president, he would be if he had more experience, according to a Wall Street Journal/NBC News poll. The poll also shows that Quayle isn't a drag on Bush's re-election chances. --- Bush disclosed that he favors continuing China's preferential trade status, setting the stage for a debate over the Beijing government's record on human rights and arms control. --- Democrats in the House are preparing a civil-rights bill incorporating compromises that have received the support of major companies. The effort is aimed at attracting enough votes to override an expected presidential veto. --- Researchers in New York said that preliminary success with a variation of an acne drug to treat an adult leukemia may have opened a new avenue to attack cancer. --- The government set a limit on the portion of administrative costs universities can recover under federally sponsored research projects. The White House budget office said the government will limit its reimbursements of schools' general administrative costs to 26%. --- A study of AIDS patients found AZT prolongs survival for minorities as well as whites, rebutting a study that found differing responses. But the latest study found minorities, women, drug users and older people were less likely to get AZT than young, white gay men. --- Peru and the U.S. signed a declaration on Tuesday that lays out a joint policy for continued cooperation in efforts to stem cocaine smuggling into U.S. markets, the State Department announced. --- House Appropriations panels voted to kill fiscal 1992 funding for NASA's costly space station project and to trim Bush's request for the superconducting super collider by almost 19%. --- Pope John Paul II summoned U.S. Roman Catholic leaders to Rome to discuss the role of women in the church. Vatican aides said the meeting, to be held late this month, would focus on the latest draft of a controversial pastoral letter from U.S. bishops that calls sexism in the church a sin. --- Gorbachev said the Soviet Union wanted to attract foreign investors, but not Klondike-style gold diggers who aren't interested in fostering economic development. "We will work out cooperation that will be beneficial to both sides," he told a meeting of Kremlin and republican government officials. --- Washington is considering asking the U.N. for a resolution approving creation of a U.N. police force in northern Iraq, Bush said. But the president added that he still believes "we have authority under existing resolutions" to establish the force, which would be used to protect Kurdish refugees. WSJ910516-0129 910516-0129. Technology: Scientists Getting Closer To Gehrig's Disease Gene 05/16/91 WALL STREET JOURNAL (J), PAGE B5 TECHNOLOGY (TEC) MEDICAL AND BIOTECHNOLOGY, GENETIC RESEARCH, PROSTHETICS (MTC) Gene-hunting scientists said they have narrowed down the location of a defective gene that causes an inherited form of the disease that killed Yankee baseball star Lou Gehrig. A large, international research team reported that it had studied the genes of members of 23 families that were haunted by an inherited form of amyotrophic lateral sclerosis or ALS. The disease is a progressive paralysis in which the nerves that control the muscles are destroyed. It is a fatal disorder with no effective treatment. The researchers, led by neurologist Teepu Siddique of Northwestern University, reported that four genetic probes that distinguished ALS-affected members from healthy relatives all homed in on a section of chromosome number 21, indicating strongly that the ALS gene lay nearby. There are 23 human chromosomes, tiny rod-like structures in cells that contain all the genes. The exact location of the ALS gene, however, isn't yet known. The large majority of ALS cases aren't inherited but occur spontaneously. The researchers, however, suggested that finding the gene for the inherited form of the disease could disclose the cause of the spontaneous form. WSJ910516-0128 910516-0128. Business Brief -- Sonesta International Hotels: Boston Firm to Sell Hotel In Amsterdam to Investors 05/16/91 WALL STREET JOURNAL (J), PAGE C10 SNSTA CONSUMER CYCLICAL (CYC) LODGING, HOTELS, MOTELS, LODGES, CAMPGROUNDS (LOD) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) MASSACHUSETTS (MA) NETHERLANDS (NL) Sonesta International Hotels Corp. signed an agreement to sell its Amsterdam Sonesta Hotel to a group of German investors, and expects to report a second-quarter gain of about $19 million as a result. The Boston hotel concern said the gain would equal $6.52 a share. In the year-earlier second quarter, the company had net income of $579,000, or 20 cents a share, on revenue of $17.6 million. The sale of the hotel is expected to be completed on May 31. Under terms of the transaction, Sonesta will receive about $47 million in cash and a $5.8 million second mortgage note based on current exchange rates of the German mark. Proceeds will be used to pay debt on the hotel, taxes related to the transaction, retirement of other debt and for general corporate purposes. WSJ910516-0127 910516-0127. Volkswagen U.S. Distribution 05/16/91 WALL STREET JOURNAL (J), PAGE A8 G.VOW CONSUMER CYCLICAL (CYC) AUTOMOBILES (AUT) CONNECTICUT (CT) GERMANY (GE) NEW JERSEY (NJ) NEW YORK (NY) TROY, Mich. -- Volkswagen AG's U.S. sales and marketing arm said that effective Jan. 2, 1992, it will take over distribution of VW and Audi products in a three-state area from its independent distributor, World-Wide Volkswagen Corp. of Orangeburg, N.Y. World-Wide, the first VW distributor in the U.S., currently serves about 90 VW and 40 Audi dealers in New York, New Jersey and Connecticut. World-Wide is the last independent VW and Audi distributor in the U.S. Its founder, Arthur Stanton, bought the first VW Beetle sold in the country in 1949. WSJ910516-0126 910516-0126. House Panels Vote To Kill '92 Funds For Space Station ---- By David Rogers Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A4 INDUSTRIAL (IDU) TECHNOLOGY (TEC) AEROSPACE (ARO) ECONOMIC NEWS (ECO) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) NUCLEAR POWER, FUEL (NUK) ECONOMIC NEWS, TRENDS, INDEXES, PROJECTIONS, ANALYSES (ECO) NUCLEAR POWER, ENERGY (NUK) CONGRESS (CNG) DEFENSE DEPARTMENT (DEF) ENVIRONMENTAL PROTECTION AGENCY (EPA) ENERGY DEPARTMENT (ERG) EXECUTIVE (EXE) FEDERAL GOVERNMENT (FDL) HOUSING AND URBAN DEVELOPMENT (HUD) INTERIOR DEPARTMENT (INR) COLORADO (CO) WASHINGTON -- House Appropriations subcommittees voted to kill fiscal 1992 funding for the space station and trim President Bush's request for the superconducting super collider almost 19%. The more than $2 billion savings from the costly station would be redistributed to help finance increases elsewhere in space programs and the National Science Foundation, as well as an expanded $6.6 billion budget for the Environmental Protection Agency. The National Science Foundation would receive an estimated $2.7 billion, including $1.96 billion for research activities or nearly 16% more than the current fiscal year ending Sept. 30. Within the $13.65 billion allocated to the National Aeronautics and Space Administration, lawmakers approved the administration's full requests for the ambitious Earth Observing System satellite program and AXAF X-ray telescope. Separately, in the Energy Department, magnetic fusion research funds would grow 24% to $337.1 million. And even after the cuts imposed yesterday, funding for the massive super collider atom-smasher would increase almost two-thirds to $433.7 million. Despite these adjustments, the defeat of the space station represents a major blow to NASA and its international partners. The move also reflects the new politics of spending caps imposed in last fall's deficit-reduction agreement. Domestic appropriations are held to 5% growth in the fiscal year beginning Oct. 1, and the multibillion dollar station became more vulnerable as lawmakers sought money not only for competing science endeavors but for an amalgam of unrelated housing, veterans, and environmental programs funded under the same bill. Yesterday's meetings were behind closed doors, but the crucial vote on the station was described as 6-3-with Republicans and Democrats on both sides of the issue. After already investing $4.85 billion in the project, NASA is certain to fight back in the Senate. But the agency faces a difficult fight given the budget choices this year. "Station is out unless I get substantially more money," said Rep. Robert Traxler (D., Mich.), chairman of the appropriations subcommittee, following the vote. And though he opposed the termination, House Science Committee Chairman George Brown said it would be difficult to overturn Mr. Traxler's position. "He's made a decision that has a lot of merit and has a strategy to back it up," said the California Democrat. The underlying bill funding NASA's budget provides almost $81 billion in new appropriations for fiscal 1992, including $24.4 billion for the Department of Housing and Urban Development. The panel approved $500 million for the new HOME block grant program to assist states and local governments in providing shelter for low-income families. And though less than a quarter of his request, HUD Secretary Jack Kemp is promised $200 million for his HOPE home-ownership initiative. The super collider and magnetic fusion accounts are part of a smaller $21.5 billion measure funding not only the Energy Department but also water projects built and operated by the Army Corps of Engineers and Bureau of Reclamation. The corps and bureau budgets, totaling almost $4.5 billion, include no new construction starts, and lawmakers devoted themselves instead to protecting more than $100 million for ongoing projects not in the president's budget. An estimated $237 million is provided for solar energy -- more than 17% above the president's budget -- and $4.4 billion is allocated to continue the costly cleanup of nuclear weapon plants. Within atomic energy defense activities, about $637 million is expected to go to the controversial Rocky Flats plant in Colorado. The panel, however, attached language opposed by the department requiring it to first seek the opinion of a panel of outside experts before disbursing those funds related to the recycling of plutonium for weapons at the facility. WSJ910516-0125 910516-0125. Your Money Matters: As Yields on Money Funds Slump Investors Move Cash Elsewhere ---- By Georgette Jasen Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C1 BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) MUTUAL AND MONEY-MARKET FUNDS (FND) STOCK MARKET, OFFERINGS (STK) BOND MARKET NEWS (BON) MUTUAL FUNDS (FND) STOCK & OTHER MARKET NEWS (STK) TREASURY DEPARTMENT (TRE) As money-fund yields have dropped in recent weeks, individual investors have started shifting into what they hope will be more attractive investments. Bond funds, especially short-term bond funds, may be the biggest beneficiaries of the $8.8 billion individuals have pulled out of taxable money funds since mid-March. "We haven't seen flows like this . . . since the spring of 1987," says Neal Litvack, marketing vice president at Fidelity Investments, the Boston-based mutual-fund giant. "It clearly represents conservative money looking for higher yields than money funds are providing." Some of the money is also going into stocks, helping to fuel the market rally that pushed the Dow Jones Industrial Average over the 3,000 mark last month. Sales of stock mutual funds were brisk in March and early April, and are continuing at a healthy pace, fund managers say. "People are looking for alternatives," says John Markese, research director for the American Association of Individual Investors in Chicago. "The spread between inflation rates and money-fund rates is getting close to zero." The average yield on money funds began the year at more than 7%. But after weeks of decline, it's now down to 5.74%. That's almost as anemic as the 5.5% passbook-savings rate, and yields on such no-risk alternatives as short-term bank certificates of deposit and Treasury bills are also disappointing. The low returns have encouraged some recession-wary investors to pay down debts. Government agencies reported a big leap in mortgage prepayments in April, far beyond the usual seasonal increase. And some money-fund withdrawals probably went to pay income taxes, which is typical at this time of year. But investors have also shown more willingness to take on risk in pursuit of higher returns. To some extent, that's a good thing, financial professionals say. Money funds, they say, should be just one part of an investment portfolio. They caution, though, that investors should be aware of what they're doing. "It's a major mistake not to take into account that there's a lot more risk" if investors hope to "maintain parity with what they used to get" on money funds, says Victor Sperandeo, president of Rand Management, a money-management firm in Short Hills, N.J. If interest rates turn up, investors may wish they'd left some money in a money fund. And if the stock market falls 10% or 20% in three months, they might want some cash on hand to take advantage of lower prices. "People need to think about what their objectives are," says Kurt Brouwer, a San Francisco investment adviser. "The time when you feel the pressure to make a move is probably the wrong time." Indeed, financial professionals say that if the cash in your money fund is your short-term emergency fund, or if you expect to need it within six months or a year, you're probably better off leaving it where it is. "Five-and-a-half per cent is nothing to write home about, but it sure beats buying stocks at the top of the market and watching the value of your principal erode," says Thomas S. Bjornstad, a financial planner in Elkhart, Ind. For those who do feel ready to test the alternatives, here's a look at some that money managers are now recommending: Short-Term Bond Funds. When money-fund investors go looking for higher yields, one of the first things they will find is that other investments don't offer the fixed asset value they're used to. But short-term bond funds may be a reasonable alternative. Because these funds typically invest in securities maturing in one to five years, compared with a year or less for money funds, the share price doesn't vary much in response to market fluctuations. But because the so-called yield curve is now fairly steep, with long-term interest rates significantly higher than short-term rates, even a marginal increase in maturity results in a higher yield. For instance, while the yield on three-month Treasury bills is currently just a little over 5.5%, the yield on three-year Treasury notes is about 7%. Moreover, as interest rates have fallen in recent months, the price of short-term bonds has increased -- boosting the total return on the mutual funds that buy them. Mutual fund companies report that there's a great deal of investor interest in short-term bond funds that invest in government securities. Mr. Litvack of Fidelity says that company's Spartan Limited Maturity Government Fund has more than doubled in assets since the start of the year. Intermediate-Term Treasurys. The yield on 10-year Treasury notes is currently just over 8% and Treasurys are guaranteed by the full faith and credit of the U.S. government, a comforting thought for investors used to low-risk money funds. Investors who need the money in the interim can sell on the secondary market. While the price of the bonds may fall if interest rates rise, there's far less price volatility than on 30-year bonds, which are yielding only about a fifth of a percentage point more. "For a conservative investor, they're a pretty good bet," says Ken Gregory, editor of L/G No-Load Fund Analyst, a San Francisco-based newsletter. If interest rates fall further, he adds, the price of the bonds will rise, so "there's practically no risk." Municipal Bonds. Yields on munis haven't fallen nearly as much as on other investments, and they're tax-free, to boot. As measured by an index of 40 municipal bonds compiled by the Bond Buyer, a trade publication, muni yields are now about 7.25%, compared with 7.66% a year ago. That's equal to about 10.5% for someone paying 31% in taxes, which is even a little better than the 10% or so annual return on stocks over the long term. But with a number of states and local governments facing fiscal troubles, it pays to be careful. "Diversify," says Mr. Sperandeo of Rand Management. "Don't have everything in one state." Junk Bond Funds. Yes, junk bonds, those high-yielding low-rated securities that have gotten such a bad name in the last couple of years. Stick to the funds that invest in issues rated just below investment grade, financial professionals advise. "They're very undervalued," says Norman Fosback, editor of several Fort Lauderdale, Fla.-based investment newsletters. "The default rate has been grossly exaggerated." The 85 junk funds tracked by Lipper Analytical Services, which tracks mutual fund performance, posted the highest total return of any group of mutual funds in the first quarter -- a whopping 14.11%. One Other Alternative. If none of this is appealing, here's something to consider that's totally risk-free: Take some of that money earning less than 6% in a money fund and use it to pay off that credit-card balance that's costing you 18% a year. You're guaranteed to come out ahead. WSJ910516-0124 910516-0124. Who's News: Unimed Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 UMED WNEWS CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW JERSEY (NJ) UNIMED Inc. (Somerville, N.J.) -- Scott B. Broder was named vice president of sales and marketing and Thomas H. Browning was named senior director of sales, both new posts in a newly created sales force to support Marinol, this pharmaceutical maker's anti-nausea treatment for cancer chemotherapy patients. Mr. Broder, 45 years old, was previously vice president of sales at Lyphomed Inc., a supplier of hospital pharmaceuticals. Mr. Browning, 35, was national sales director of the ethical pharmaceutical division at Lyphomed. WSJ910516-0123 910516-0123. Joseph Laufer Is Ready to Observe Columbus's Feat --- But the Official Fete Has Run Aground, With 1992 Bash Broke and Storm Battered ---- By Ellen Graham Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A1 CONGRESS (CNG) OHIO (OH) WISCONSIN (WI) As he stands before groups of schoolchildren in his tights, doublet and cape, Joseph Laufer may not be the spitting image of Christopher Columbus. But he has the look. The 56-year-old amateur historian and "events person" also has some of the explorer's pluck. He certainly has thrown himself into commemorating whatever it was that Columbus, an Italian, did for Spain in 1492. It has become one of the touchiest events in American history. Some of the splashier official celebrations planned for next year's 500th anniversary of Columbus's epic voyage have run aground. The Christopher Columbus Quincentenary Jubilee Commission, created by Congress in 1984 to coordinate events large and small, is broke. Its chairman, John Goudie, resigned recently amid charges of mismanagement that are currently under investigation by a House subcommittee. With the anniversary less than 18 months away, the commission is scrambling to get back on track. Money troubles have caused some of the states to scale back but not cancel their own quincentenary plans. "It's really going to be a pretty sad state of affairs compared to what it should be," says Florida state senator Curt Kiser of his state's commemoration, which has fallen victim to a budget crunch. Nor have corporate sponsors taken up the slack. Columbus is a tough sell in board rooms when companies are laying off workers, Mr. Kiser says. It doesn't help that the explorer has become a lightning rod for ethnic sensitivities. Native Americans, Hispanics and Italians have been squabbling over the revisionist view of Columbus as a conquistador and despoiler who can hardly be said to have discovered America. Accordingly, a delicate new terminology has been crafted for all quincentenary discourse: The "discovery" of America, for example, is now known as the "encounter" of two cultures. With officialdom in disarray, it has fallen to certain stalwarts to carry the torch for Columbus. One is Daniel Amato, a member of the Knights of Columbus and a collector of memorabilia from the 1893 Chicago world's fair that marked Columbus's 400th anniversary -- a year late. Mr. Amato has erected a Fiberglas statue of the explorer near his mall of antique shops in Columbus, Wis. "Who's going to come to Columbus, unless you promote Columbus?" he says. Then there is Anne Paolucci, a playwright and academic whose New York organization, Columbus: Countdown 1992, has commissioned literary and artistic works related to the Columbus epic. "Our artists are doing marvelous things, yet the flak is getting all the publicity," she says. Columbus, Ohio, is staging the only major exposition in the U.S. Marjory Pizzuti, who is directing the city's year-long tribute to its namesake, says she hopes to draw tourists and make the city "more top-of-the-mind." Given what she calls the "ambiguity" of the events of 1492, she also sees it as a chance "to explore the good, the bad and the ugly of what happened." Among the scheduled attractions starting this October: a flower festival, a replica of the flagship Santa Maria, body-building contests and -- to honor the Italians' development of double-entry bookkeeping -- an exhibit of "500 Years of Accounting." But few have displayed the zeal of Joseph Laufer. For the past six years -- which is nearly as long as it took Columbus to wheedle the money for his voyage from Queen Isabella -- Mr. Laufer has been engrossed in the quincentenary: issuing a newsletter for fellow enthusiasts around the world, creating a museum of Columbiana behind his Vincentown, N.J., house and carrying his myth-busting version of the explorer's story to gatherings of school-children. As he criss-crosses the country, he is amazed that Columbus isn't more important to people than he is. "That's where the commission totally let us down," he says. The commission "didn't learn anything from Columbus. He was a risk-taker. But, now, nobody wants to offend anybody, so as a result we get nowhere." The commission, regrouping under new management, insists it can turn things around and that hundreds of local events will take place next year. Several newly announced national projects seek private financing. Jim Kuhn, the new executive director, says: "We're very positive about the direction we're taking now." Mr. Laufer isn't holding his breath. After years of pursuing his passion at his own expense (he is on leave from a job as a community college administrator and $50,000 in debt) he recently found a patron. "My Isabella," is his term for New American Crossings, Inc., a Laguna Niguel, Calif., company that promotes quincentenary projects. It is underwriting Mr. Laufer's speaking tour as a way of displaying a mural reproduction of Emanuel Leutze's 1855 painting of Columbus's departure from Spain. The original, owned by investors, is on loan to the Smithsonian Institution. Mr. Laufer lugs the collapsible, 8-by-10-foot copy with him wherever he goes. A recent stop on his mural tour was in Boalsburg, Pa., the site of a strong tangible link to Christopher Columbus in the New World. Columbus never set foot in sleepy Boalsburg, but the contents of his family's chapel in northern Spain found their way here in 1919. Col. Theodore Davis Boal had married into the Columbus family while visiting Europe, and his wife, Mathilde, inherited the chapel. The Boalsburg museum has been designated a National Historic Site. Heirlooms include an admiral's desk, an explorer's cross of the sort used to claim new territory, and two purported fragments of the True Cross. Mr. Laufer was invited to kick off a year and a half of quincentenary events in Boalsburg. The chapel is but one stop on Mr. Laufer's three-day swing through Boalsburg. Dressed in his Columbus costume, fashioned by the seamstress who makes his daughter's prom gowns, he enthralls several hundred local schoolchildren with his warts-and-all rendition of the explorer's life. Mr. Laufer faces up to the decimation of the Taino population of the West Indies following Columbus's arrival there, and to the environmental damage European settlement brought. He talks about Columbus as a single parent who had to leave his son, Diego, with Franciscan priests during his voyages. As for Columbus's all-male crew, he explains: "They didn't know about equal rights back then." Mr. Laufer is a middle-of-the-roader about Columbus; his mission is more to educate than celebrate. Still, he has little sympathy for the Columbus-bashers who would belittle the explorer's achievements. "You can't lay everything at the footsteps of Columbus or the Spanish," he says. Like others associated with the quincentenary, he has learned to watch his language. He avoids the word "discovery," with its Eurocentric bias. "Celebration" and "melting pot" are other taboos. However, he says he drew the line when the National Park Service tried to edit a passage in the children's activity manual he wrote for the agency. In it, he had Columbus bestowing the name "Indians" on the natives of what he thought were the Indies. The Park Service wanted to have Columbus name them "Native Americans." WSJ910516-0122 910516-0122. International: World Wire ---- Compiled by Richard L. Holman 05/16/91 WALL STREET JOURNAL (J), PAGE A12 TAXES CONSUMER CYCLICAL (CYC) CONSUMER NON-CYCLICAL (NCY) CONSUMER AND HOUSEHOLD PRODUCTS AND SERVICES (HOU) INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) NUCLEAR POWER, FUEL (NUK) TEXTILES AND APPAREL (TEX) TOBACCO PRODUCTS (TOB) INTERNATIONAL TRADE NEWS (TRD) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) NUCLEAR POWER, ENERGY (NUK) TAXES, ISSUES, LEGISLATION, ASSISTANCE, EVASION (TAX) TRADE ISSUES (TRD) INTERNATIONAL AGENCIES AND INSTITUTIONS (INT) ECUADOR (EA) EUROPEAN COMMUNITY (EC) EGYPT (EG) GERMANY (GE) HONG KONG (HK) IRAN (IR) IRAQ (IZ) JAPAN (JA) LIBYA (LY) MIDDLE EAST (ML) NEW YORK (NY) SOVIET UNION (UR) WORLD'S MOST EXPENSIVE CITIES A survey ranking the cost of living in the world's most populous cities lists Tokyo as the most expensive and the Ecuadoran capital Quito the cheapest, while Tehran qualifies as both. The survey, prepared twice annually by the Corporate Resources Group of Geneva, said Tehran was a special case, ranking as the most expensive city by far on a cost-of-living index comparison but the least expensive when factoring in black-market exchange rates. The early-March poll noted that currency changes and inflation combined to narrow the list's top-to-bottom gap. Tokyo and Osaka remain the world's most expensive for expatriates, followed by Helsinki; Libreville, Gabon; Brazzaville, Congo; Stockholm; Taipei; Oslo; and Tripoli, Libya. The second 10 are Geneva; Zurich; Abidjan, Ivory Coast; Copenhagen; Dakar, Senegal; Douala, Cameroon; Beijing; Tel Aviv; Belgrade, Yugoslavia; and London. Paris ranked 23, Rome 24, and New York -- the base index for the survey -- was 34th. LEBANON CLOSES MILITIA PORTS Beirut closed the last two militia-run ports, which sprung up during the civil war, and took full control of seaborne trade for the first time in a decade. The move is intended to help Lebanon's treasury by rerouting trade to five government-run ports. Lebanon, which imports most of its food and industrial goods, lost about $100 million a year in customs duties to the militia ports. BURMA REOPENS ALL COLLEGES Burma's military government reopened all colleges and universities shuttered since a failed pro-democracy uprising three years ago. But the junta warned the institutions will be closed if unrest begins anew. Students led the bloody nationwide street protests in 1988, and the army, which seized power in a coup amid the turmoil, shut down all schools. Pre-college schools reopened a year later and some others, such as medical and dental schools, reopened in January. EGYPTIAN GETS TOP ARAB POST The Arab League completed Egypt's rehabilitation in the Arab world by choosing Cairo's highest-ranking diplomat, Foreign Minister Esmat Abdel-Meguid, to lead the 21-nation group as secretary-general for the next five years. The diplomatic victory was clouded by Egypt's break with the eight-member Arab coalition that opposed Iraq's invasion of Kuwait. Egypt, a coalition leader, is withdrawing its forces from Kuwait and Saudi Arabia, undercutting a March 6 agreement for a joint security force. HONG KONG TOBACCO TAX CUT Hong Kong's Legislative Council cut in half to 100%, effective Saturday, a disputed tobacco tax that has been blamed for a sharp acceleration in inflation. The new duty helped fuel March's 12.9% increase in consumer prices from a year earlier. The alcohol and tobacco part of the consumer-price index accounted for 1.8% of the overall growth and rose nearly 52% from February. GERMANY PLANS TO DEPORT JEWS Germany said 269 Soviet Jewish emigrants who fled to Berlin from Israel during the Persian Gulf war must be deported, touching off a row fraught with Nazi-era memories. The Jews' travel documents allow a stay until mid-July. But their Berlin attorney warned of an uproar damaging to Germany's reputation unless Bonn reverses its rejection of Berlin's plea that the Jews, who fled after Iraqi missiles hit Tel Aviv, be given residence permits on humanitarian grounds. U.S., EC URGED TO PATCH IT UP In an effort to mend badly frayed trade ties between the U.S. and the European Community, the head of the General Agreement on Tariffs and Trade has become part referee and part peacemaker. In a speech to the European Atlantic Group in London, Arthur Dunkel, the GATT chief, expressed both impatience and worry about the state of trans-Atlantic economic relations. Disagreements about farm subsidies wrecked trade talks last December that were supposed to have concluded the broad, four-year Uruguay round of negotiations. That round has been kept alive by GATT officials in Geneva, but it could fall apart again unless the Americans and Europeans manage to patch up their differences. Of the posturing, Mr. Dunkel complained that "trade relations are bedeviled by accusations, self-righteousness, mutual misunderstandings and the inability to distinguish special-interest pleading from the general public good." Neither side can claim purity of motives, he said, though "both sides appear to believe they are speaking from positions of rectitude." GATT studies have faulted trade policies on both sides of the Atlantic, such as the U.S.'s trade barriers in textiles and agriculture, and the EC's Common Agriculture Policy, which subsidizes farming interests and locks out competitors. POSTSCRIPTS . . . Thousands of Iraqis lined up under armed guard for passports and exit visas after President Saddam Hussein lifted a blanket ban on leaving the country, imposed before the Persian Gulf war. . . . Moscow today is to sign over to Bonn its share in the Wismut AG uranium mines complex in southern Germany, closed in January after supplying the Kremlin's nuclear program. The Soviets are to have no responsibility for a radioactive legacy that could take years and billions of dollars to clean up. WSJ910516-0121 910516-0121. American Express Service 05/16/91 WALL STREET JOURNAL (J), PAGE A8 AXP FINANCIAL (FIN) TECHNOLOGY (TEC) UTILITIES (UTI) COMMUNICATIONS TECHNOLOGY (CMT) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) TELEPHONE SYSTEMS, INCLUDING CELLULAR (TLS) NEBRASKA (NE) NEW YORK (NY) OMAHA, Neb. -- American Express said a unit of its American Express Information Services Corp. subsidiary is launching a new conference-calling service for businesses. The unit, Integrated Marketing Services, said that through its teleconferencing center in St. Louis, it will be able to offer world-wide conference calling in which conference-call participants can converse simultaneously. In a typical conference call, only one speaker can be heard at a time. "With the (teleconferencing) market growing at about 20% a year, we see plenty of room for an aggressive new competitor," said Steve May, vice president of the teleconference division. WSJ910516-0120 910516-0120. GM Acceptance Corp. Notes 05/16/91 WALL STREET JOURNAL (J), PAGE C9 GM CONSUMER CYCLICAL (CYC) FINANCIAL (FIN) AUTOMOBILES (AUT) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) BUYBACKS, REDEMPTIONS, REPURCHASES, SWAPS (BBK) MICHIGAN (MI) DETROIT -- General Motors Acceptance Corp. said it will exercise its option to redeem on June 15 all of its 8 1/8% notes outstanding due to mature June 15, 1992. The notes, sold in June 1986 in the amount of $200 million, will be redeemed at 100% of their face amount. GMAC is a unit of General Motors Corp. WSJ910516-0119 910516-0119. Improvement in Mainframe Market Expected to Be Slow ---- By Paul B. Carroll Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A6 AMH HIT IBM DEC TECHNOLOGY (TEC) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) The long-awaited upturn in the mainframe market will have to wait a little longer. Sales of mainframes had been expected to pick up this fall as International Business Machines Corp. and makers of compatible machines begin delivering a new generation of mainframes. But interviews with customers and data from market researchers indicate that the pickup this fall will be milder than computer companies had hoped and that any genuine recovery will have to wait until next year. The main culprit is cost-cutting pressure among customers faced with a still-weak economy. Customers also continue to employ personal computers and workstations, rather than mainframes, when new applications are developed. In addition, some customers appear to be waiting until it becomes clear just how powerful IBM's new mainframes will be, and how they compare with the new offerings from Amdahl Corp. and Hitachi Data Systems. "The mainframe market is going to have to work very hard to grow this year," says Peter Burriss, an analyst at market researcher International Data Corp., Framingham, Mass. Meanwhile, sales of disk drives, the refrigerator-sized devices that store most of a company's central data for use by its mainframes, have slowed. Many customers are waiting for an expected announcement this summer from IBM of bigger disk drives and lower prices. The minicomputer market likewise faces continued pressures as customers discover that personal computers and workstations have finally become powerful enough to perform many tasks. In addition, IBM's AS/400 and Digital Equipment Corp.'s Vaxes continue to soak up the limited growth in the minicomputer market, hurting the many smaller makers. At Ford Motor Co., for instance, a spokesman says that the company has given the green light for computer purchases for its product-development and manufacturing programs but, as for anything else, "the things that can wait are waiting." Likewise, Chrysler Corp. has "delayed some purchases that do not make financial sense right now" as part of costcutting efforts, a spokeswoman says. Atlantic Richfield Co.'s mainframe and minicomputer purchases "seem to be slowing down," says John Coman, manager of networks and information services. General Dynamics Corp. says computer purchases are way down across the board because of the shrinking defense budget. Even when companies are still increasing mainframe use, they are being more cost-conscious. AMR Corp.'s American Airlines unit, faced with two consecutive quarterly losses, has decided to lease used mainframes and evaluate buying them later, rather than buy new machines. Martin Marietta Information Systems, a unit of Martin Marietta Corp., has been a loyal IBM customer but is now looking for ways to get a better deal. The company is "seriously looking at other brands," says Thomas Shafer, vice president of corporate computing and communications. "We're very interested in adding some competition for IBM." Greyhound Lines Inc., like a growing number of companies, is turning to "outsourcing," meaning it is turning over its central computer operations to be run by an outside company. Greyhound figures the move will save it $1 million. But outsourcing isn't always such a great deal for computer makers. The outside companies often consolidate clients' computer operations, reducing the number of computers being used. These companies also tend to be huge, like General Motors Corp.'s Electronic Data Systems subsidiary, so they have loads of bargaining power when it comes to negotiating discounts off mainframe list prices. Many companies continue to rely on personal computers when they need to add computing horsepower. Some are even starting to move applications off mainframes onto smaller machines, although that means rewriting the software. United Technologies Corp., for instance, pulled from its mainframe some 13 applications that consolidated and analyzed financial information from the company's many subsidiaries. The system's 3,000 users now rely on personal computers, and the system has been so successful that it is one of the finalists for a Computerworld Smithsonian award, a major honor in the industry. The lack of demand has produced a new wave of discounting. Steve Cohen, a securities analyst at SoundView Financial Group Inc., says surveys that the brokerage firm does in conjunction with market researcher Gartner Group Inc. have found discounts as high as 50%, even on some of the machines that haven't become available yet. "There's nothing going on out there in the market, so it's let's-make-a-deal time," he says. IBM, as the biggest player in the market, is bearing the brunt of the problem. It reported that first-quarter operating earnings fell 50%, and securities analysts recently scaled back their estimate for the year to the point where some expect operating earnings to drop 30% this year from last year's $6.02 billion, or $10.51 a share. But Amdahl has also been feeling pressure. Only Hitachi Data Systems says it has seen no trouble, and that's mainly because it has some new disk drives that have been selling well. As for minicomputers, companies such as Hudson Foods Inc. and Banc One Corp. continue their normal buying of AS/400s from IBM. Likewise, Duke Power Co. and a big New York bank say they plan to continue to purchase Vaxes from Digital. But National City Corp. says it is using more personal computers and workstations instead of minicomputers. Home Depot Inc. also says its minicomputers purchases are in danger. "Based on the power that's coming into the PC and workstation, it's closing the gap on minicomputers," says Andy McKenna, senior vice president, information services, at Home Depot. He feels he is getting "good value for minicomputers and mainframes, but clearly the best values are in the smaller machines. The market is more competitive, and you have more choices." WSJ910516-0118 910516-0118. REVIEW & OUTLOOK (Editorial) -- Asides: Gringo Entropy 05/16/91 WALL STREET JOURNAL (J), PAGE A16 SCE SDO UTILITIES (UTI) ELECTRIC UTILITIES (ELC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) President Bush is lucky he only has to get the U.S.-Mexico trade pact past the U.S. Congress, and not the California Public Utilities Commission. The PUC just turned down a proposed merger between giant Southern California Edison and neighboring San Diego Gas & Electric that would have created the biggest utility outside the TVA. After a campaign marked by San Diego civic provincialism that would have made old Mexican nationalists blush, the commissioners managed to find that power-plant and staff consolidation wouldn't yield efficiency gains. In some ways, it's too bad Carlos Salinas and his economically minded crew don't still exercise the dominion their nation once had over Alta California. WSJ910516-0117 910516-0117. Law: Bush Seeks to Compel States to Limit Damage Awards in Malpractice Cases ---- By Hilary Stout Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A4 FINANCIAL (FIN) CONSUMER NON-CYCLICAL (NCY) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA) INSURANCE (INS) LAW AND LEGAL AFFAIRS (LAW) LAW & LEGAL ISSUES, HEARINGS, RULINGS, LEGISLATION (LAW) CONGRESS (CNG) EXECUTIVE (EXE) HEALTH AND HUMAN SERVICES (HHS) WASHINGTON -- Amid growing calls to overhaul the nation's health-care system, the administration proposed legislation to curb runaway costs in malpractice liability. The proposal, outlined in the White House's fiscal 1992 budget proposal in February, was submitted to Congress yesterday. It seeks to compel states to limit the amount of damages a malpractice plaintiff can collect, restrict the number of people who can be sued over one incident and change the system for paying damages. It also calls on states to improve the way they oversee doctors and to require continuing medical education for physicians found deficient by medical boards. States that adopted the recommended changes would receive bonus money from the federal government; those that didn't would lose some federal Medicare and Medicaid funds. While differing on solutions, health care experts agree that malpractice liability has helped propel the rise in U.S. health care costs, both by soaring premiums that doctors must pay for malpractice insurance and a tendency of doctors to order extra medical procedures to head off malpractice suits. In a letter to Congress, President Bush said the legislation would "assist in stemming the rising cost of health care caused by medical malpractice liability." But similar proposals, such as limiting plaintiff's rights, have been defeated in Congress before, and consumer groups immediately charged that the White House bill was kinder to doctors than to patients. "We need reform that aims at reducing the incidence of malpractice," said Pamela Gilbert, the legislative director of Public Citizen's Congress Watch, a consumer advocacy group. But James Todd, executive vice president of the American Medical Association, called the proposal "long overdue, and an essential step toward saving a system in chaos." Medical liability insurance premiums for the average doctor rose from $5,800 in 1982 to $15,500 in 1989, according to the AMA. Moreover, the association says, liability insurance was the fastest growing part of physicians' practice expenses, accounting for about 10% of costs in 1989 compared with 4% in 1982. In addition, an AMA survey found that doctors performed about $15 billion of procedures out of fear of liability alone. Moreover, physicians are also refusing to perform certain high-risk procedures and leaving some medical fields because they are afraid of lawsuits. That has left some rural areas in the nation, for example, without obstetricians. On the other hand, a Harvard University study published last year found that 27,000 people hospitalized in New York state in 1984 were victims of malpractice. Specifically the White House bill would ask states to: -- Limit awards for punitive, pain-and-suffering and other noneconomic damages to $250,000. -- Abolish "joint and several liability," which makes all parties involved in a case responsible for the entire amount owed a plaintiff. -- Prohibit double recovery when the plaintiff has already received compensation from health insurance or other sources. -- Set up alternative mechanisms for settling disputes. -- Encourage the payment of damage awards for future medical bills over a period of time instead of in a lump sum. -- Cooperate with federal efforts to learn the comparative effectiveness of different medical treatments. WSJ910516-0116 910516-0116. A Couple of Saucers of This Stuff Would Really Be the Cat's Meow ---- By Alecia Swasy Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 Will it lead to tiny pizzas topped with mouserella cheese? Probably not. But they are milking mice at the University of Wisconsin. A professor of dairy science, Robert Bremel, is using the rodents to test new genetic combinations that alter the protein levels in milk. By doing that, scientists hope to eventually make designer milks that are tailor-made for different cheeses, yogurts and ice creams. "The hope is to make milk a specialty product, not just a commodity," Mr. Bremel says. Milking mice requires skill, not to mention a very small milking machine. The professor's strategy is to give the mice a "mild analgesic to quiet them down" before attaching the tiny vacuum device that sucks out the milk. Milking time varies, depending on herd size, which also varies because "mice come and go," he says. Experts say the research isn't a lot of bull. "It's significant," says Ewing Row, managing editor of Hoard's Dairyman magazine. "If they get the principles down in mice, it can be transferred to cows." Karl Rosenbaum, a dairy farmer in rural Pennsylvania, wishes researchers would come up with a way to make his cows more like mice. He notes two problems: Cows make quite a mess and kick when milked. But he adds, "Mice may be more energy efficient, but they're only for people with good eyes." And they would certainly disrupt the natural order of life in the barnyard: "We'd have to put muzzles on the barn cats," says his wife, Mary Ann. But Minnie isn't likely to put Elsie out to pasture soon. For one thing, even your cream-of-the-crop mouse produces less than a teaspoon of milk a day. At that rate, you'd need about 6,000 mice to keep pace with just one of Mr. Rosenbaum's Holsteins, which average almost eight gallons of milk a day. "If you want to produce hundreds of tons of anything, the mouse isn't your choice," says Mr. Bremel. The professor says he hasn't tasted the output because he figures the mere thought of drinking mouse milk would sour consumers. "That would be crazy," he says. But advertising experts say he should milk this for all it's worth. "You could certainly make some quality assurance claims for mouse cheese," muses Jeff Manning, senior vice president of Ketchum Advertising U.S. in San Francisco, which has done campaigns on commodities. "Who would know better about cheese than mice?" WSJ910516-0115 910516-0115. Business Brief -- ICN Pharmaceuticals Inc.: Orphan Drug Designation For Ribavirin Set by FDA 05/07/91 WALL STREET JOURNAL (J), NO PAGE CITATION ICN CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) FOOD AND DRUG ADMINISTRATION (FDA) CALIFORNIA (CA) ICN Pharmaceuticals Inc., Costa Mesa, Calif., said it received orphan drug designation from the Food and Drug Administration for its antiviral drug ribavirin. The drug is sold in the U.S. under the name Virazole, for treatment of hemorrhagic fever with renal syndrome. The drug had previously been approved only for treating a respiratory infection caused by the syncytial virus. Although hemorrhagic fever with renal syndrome is rare in the U.S., it is "prevalent" in China and other Third World countries, the company said. Orphan drug status qualifies the owner of its patent for exclusive marketing rights for seven years, subject to FDA approval of the owner's new drug application. ICN plans to submit such an application for Virazole use in hemorrhagic fever cases, the company said. --- Corrections & Amplifications ICN PHARMACEUTICALS Inc.'s antiviral drug, ribavirin, was designated by the Food and Drug Administration as an orphan drug for treatment of hemorrhagic fever with renal syndrome. In the May 7 edition it was incorrectly reported that the drug has been sold in the U.S. for treatment of the disorder. (WSJ May 16, 1991) WSJ910516-0114 910516-0114. U.S. Limits Aid For Research At Universities ---- By Hilary Stout Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A5 ECONOMIC NEWS (ECO) ECONOMIC NEWS, TRENDS, INDEXES, PROJECTIONS, ANALYSES (ECO) EXECUTIVE (EXE) COLORADO (CO) MASSACHUSETTS (MA) NEW YORK (NY) WASHINGTON -- The White House slapped a limit on the portion of administrative costs universities can recover from the government under federally sponsored research projects. Responding to rising evidence that some universities have been claiming such expenses as dry-cleaning bills, wine glasses and trips to the Cayman Islands as costs associated with research, the White House budget office said the government will limit its reimbursements of schools' general administrative costs to 26%. When the federal government awards research grants, it agrees to pay direct costs and to reimburse schools for a portion of their operating expenses to cover indirect costs of engaging in research, such as heating and lighting of laboratories. Each university negotiates a reimbursement rate with the government. The new cap, which takes effect immediately and will modify existing agreements, covers only reimbursement for general administrative expenses. Schools may still have to negotiate higher rates for reimbursement in other areas, such as library and building maintenance. White House officials estimate that about 60 schools now receive reimbursements above 26% for administrative costs, including Syracuse University at 40%, Columbia University, 36%, University of Denver, 38%, and Harvard Medical School, 38%. The officials believe the new limits will save the government about $70 million -- money that agencies can put toward additional research grants. The move is the budget office's second in recent weeks to crack down on improper research cost claims. Recently, the budget office issued rules forbidding some expenses to be counted as research-related administrative costs. "The administration remains committed to funding a fair share of the costs of the research enterprise. But this share must not include excessive administration costs. Abuses in cost recovery must be stopped," said Richard Darman, budget director. But Robert M. Rosenzweig, president of the Association of American Universities, said, "I think it's tough medicine. It's going to hurt." Some schools, he said, "will lose a lot of money at a time when universities are strained financially in other respects." --- Corrections & Amplifications A NEW CAP on federal reimbursements for universities' research-related administrative costs will affect new grants only. An article in Thursday's editions, based on information by a Bush administration official, said the new policy by the White House Budget Office will modify existing grants. (WSJ May 17, 1991) WSJ910516-0113 910516-0113. Pepper...and Salt 05/16/91 WALL STREET JOURNAL (J), PAGE A17 Shell Game ("Teenage Turtles join the president on list of kids' `most admired.'" -- News item) Who could have dreamed Of a genius so fertile That he could have schemed To make stars out of turtle? -- Mary Mobilia. --- Wrong Turn You should sleep on new ideas -- It's better not to rush 'em; But the only trouble is Tossing all night may crush 'em. -- John Dromey. WSJ910516-0112 910516-0112. Who's News: Alco Standard Corp. 05/16/91 WALL STREET JOURNAL (J), PAGE B12 ASN WNEWS BASIC MATERIALS (BSC) RAW AND FINISHED PAPER PRODUCTS (PAP) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) PENNSYLVANIA (PA) ALCO STANDARD Corp. (Valley Forge, Pa.) -- Raymond A. Peterson was named president of Paper Corp. of America, a unit of the distributor of paper products and office products. Mr. Peterson, 56 years old, previously president of the Unisource Corp., a division of Paper Corp., succeeds Edward N. Patrone, who resigned. James J. Swearingen, 56, previously executive vice president of Paper Corp., succeeds Mr. Peterson. WSJ910516-0111 910516-0111. International: Socialist Leader In Japan May Quit; LDP's Abe Is Dead ---- By Christopher J. Chipello Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A12 JAPAN (JA) TOKYO -- The first woman to head a major Japanese political party may soon surrender her post. Takako Doi, heralded just two years ago as the symbol of a new age in Japanese politics, hinted that she is prepared to step down at a Socialist Party convention in July. Rumors that she might resign as chairman of the largest opposition party have been circulating in the wake of the party's heavy losses in last month's local elections and its dismal showing in opinion polls. The reports of Ms. Doi's likely departure came on the same day as the death of Shintaro Abe, a leading figure in the ruling Liberal Democratic Party. Mr. Abe's death at the age of 67, following a long illness, is certain to set off jockeying for power among LDP factions. That could influence the party's leadership contest in October. The LDP's majority in the lower house of the Diet, or parliament, means that its leader becomes Japan's prime minister. Mr. Abe was one of several party elders whose aspirations to become prime minister were derailed by an influence-peddling scandal two years ago. Some of the others, including former Prime Minister Noboru Takeshita and former Finance Minister Kiichi Miyazawa, appear to be positioning themselves for a possible turn in the top office once Prime Minister Toshiki Kaifu's term ends in October. Mr. Abe's faction could switch its loyalties to other factions, affecting the party's power balance. As is often the case in Japanese politics, Ms. Doi's remarks were exceedingly oblique: She talked of her desire, for example, to "renew the spirits" of the party membership. But her comments were widely interpreted as signaling her intention to step down after five years at the party helm. Ms. Doi, a 62-year-old former law professor, took office at a time when the Socialists were floundering. She quickly caught the public's fancy with her tough-toned speeches and charisma, which is unusual for a Japanese politician. With the LDP battered by scandal and its passage of an unpopular consumption tax, she led the Socialists to big gains in the 1989 and 1990 Diet elections, sparking speculation that the perennial opposition party could even gain a share of power. But the Socialists' inability to break free of their Marxist roots and adopt policies more in tune with mainstream Japanese attitudes disillusioned many who had hoped Ms. Doi would lead the party into a new era. Meanwhile, the LDP's rising support ratings and its development of closer ties to moderate opposition parties have threatened to leave the Socialists weaker and more isolated than ever. WSJ910516-0110 910516-0110. Who's News: Cartier Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 WNEWS CONSUMER CYCLICAL (CYC) OTHER SPECIALTY RETAILERS OF LIMITED PRODUCT LINES (OTS) ALL SPECIALTY RETAILERS (RTS) TEXTILES AND APPAREL (TEX) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) NEW YORK (NY) CARTIER Inc. (New York) -- Robert Filotei was named vice president of the wholesale division, succeeding Alan Swierk, who left this maker and marketer of luxury watches, jewelry and other goods. Mr. Filotei, 44 years old, was previously vice president of sales at Parfums Givenchy Inc., a fragrance maker. WSJ910516-0109 910516-0109. Gaylord Plans Debt Revamp, Skips a Payment ---- By James P. Miller Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A9 GCR INDUSTRIAL (IDU) BOND MARKET NEWS (BON) CONTAINERS & PACKAGING, BAGS, CANS, BOXES (CTR) STOCK AND BOND RATINGS (RTG) BOND MARKET NEWS (BON) BOND & STOCK RATINGS (RTG) ILLINOIS (IL) Gaylord Container Corp., mired in an industry downturn, skipped an interest payment and announced debt-restructuring plans. In February, the Deerfield, Ill., packaging concern said it retained BT Securities Corp. as financial adviser to explore such alternatives as a restructuring or asset sales. The restructuring plan's details haven't been completed but probably will involve an offer to purchase the company's junk debt at a steep discount to face value, and rescheduling current bank debt on more manageable terms. Such maneuvers are becoming increasingly common, as companies that leveraged up in the late 1980s hit economic potholes in the '90s. Gaylord, which was formed in 1985 and went public in 1988, sold junk bonds to fund acquisitions that fueled its rapid emergence as a major industry player. But recessionary pressures crimped the cash flow Gaylord needs to service debt. "Our operations are healthy and on track for the future," said Chairman and Chief Executive Officer Marvin A. Pomerantz, "but the industry downturn, coupled with the company's leverage, make it necessary to address the company's long-term financial obligations." Pending completion of the restructuring, Gaylord suspended interest payments on its subordinated debt, including a $3.8 million payment due yesterday on its 13 1/2% subordinated notes due 1996. Gaylord said its bank lenders have tentatively agreed to provide an added $25 million of credit, and to let Gaylord defer payments of principal until March 31, 1992. BT Securities, the company's adviser, is a unit of Bankers Trust Co., Gaylord's lead lender. As of April 30, Gaylord's debt totaled $820 million, including about $216 million of bank debt. In over-the-counter trading yesterday, Gaylord's 13.5% notes due 1998 were bid at 37 cents on the dollar, unchanged from Tuesday. With $30 million of cash on hand, cash from operations and its current bank credit line, the company said it has enough money to keep paying trade creditors and operating expenses. Gaylord, which has about $30 million in principal and interest payments coming due in the next 12 months, said it is undertaking the restructuring because it doesn't think "sufficient funds would be available to meet all of its bank and subordinated debt obligations through the remainder of fiscal 1991." For the fiscal six months ended March 31, Gaylord posted a loss of $22.6 million, or $1.46 a share, on sales of $346.2 million. Yesterday, Standard & Poor's Corp. downgraded about $400 million of the subordinated debt to single-C from triple-C-minus. In New York Stock Exchange composite trading yesterday, Gaylord closed at $2.875 a share, up 12.5 cents. --- Anita Raghavan contributed to this article. WSJ910516-0108 910516-0108. Who's News: Hill Samuel Bank Ltd. 05/16/91 WALL STREET JOURNAL (J), PAGE B12 U.TSB WNEWS FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) GREAT BRITAIN (UK) HILL SAMUEL BANK Ltd. (London) -- Richard Heley, 42 years old, has been appointed head of corporate finance of this investment banking unit of TSB Group PLC, a U.K. banking and financial services group. Mr. Heley succeeds Bay Green, who is rejoining Kleinwort Benson, the British merchant bank, as a director. Mr. Heley had been in the corporate finance division of Hill Samuel. WSJ910516-0107 910516-0107. Who's News: Standard Products Co. 05/16/91 WALL STREET JOURNAL (J), PAGE B12 SPD WNEWS CONSUMER CYCLICAL (CYC) AUTO PARTS AND EQUIPMENT INCLUDING TIRES (AUP) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) CANADA (CN) OHIO (OH) STANDARD PRODUCTS Co. (Cleveland) -- James D. Pry, general manager of this auto parts maker's Goldsboro and Rocky Mount, N.C., facilities, was named president of Standard Products (Canada) and a corporate vice president. Mr. Pry, 47, succeeds Roger L. Burtraw in the Canadian post. Mr. Burtraw resigned. WSJ910516-0106 910516-0106. Who's News: Star Banc Corp. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 STRZ WNEWS FINANCIAL (FIN) CENTRAL U.S. BANKS (BAC) ALL REGIONAL BANKS (BAR) ALL BANKS, BANKING NEWS AND ISSUES (BNK) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) OHIO (OH) STAR BANC Corp. (Eaton, Ohio) -- Daniel M. Duke, president and vice chairman of this holding company's Star Bank affiliate in Preble County, Ohio, was appointed chairman and chief executive officer of the bank. He will retain his title as president. Mr. Duke succeeds William Heistand, who announced his retirement yesterday. WSJ910516-0105 910516-0105. Who's News: Eljer Industries Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 ELJ WNEWS INDUSTRIAL (IDU) BUILDING MATERIALS, CONCRETE, GLASS, PAINT (BLD) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) TEXAS (TX) ELJER INDUSTRIES Inc. (Dallas) -- A. Carl Mudd, 47 years old, former vice president and chief financial officer of Color Tile Inc. of Fort Worth, Texas, was named vice president-finance, secretary and chief financial officer of this maker of building products. He succeeds Wesley A. Thompson, who will continue as a consultant. WSJ910516-0104 910516-0104. Who's News: USX Corp. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 WNEWS X BASIC MATERIALS (BSC) STEEL MANUFACTURERS (STL) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) PENNSYLVANIA (PA) USX Corp. (Pittsburgh) -- Ralph E. "Red" Fifield, previously the general manager for this company's U.S. Steel Group, was named vice president of the group's flat rolled products division. WSJ910516-0103 910516-0103. International: In Moscow, Reform Fatigue Hits As Plan After Plan Is Rolled Out ---- By Peter Gumbel Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A13 INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) SOVIET UNION (UR) MOSCOW -- As the Kremlin puts the finishing touches to its latest "anti-crisis" economic package, skeptics here are starting to talk about a new Soviet ailment: economic-program fatigue. The new plan, expected to be announced in a few days by Prime Minister Valentin Pavlov, would be the sixth worked out by the Soviet government since the fall of 1989. Each was introduced with great fanfare as the solution to the nation's problems. But none have been fully implemented, and none have halted the rapid decline of the Soviet economy, let alone improving it. Already there are signs that the latest package, which relies on a mixture of market-oriented incentives and strict centralized controls, could suffer a similar fate. It differs from its predecessors because the Kremlin has involved most of the 15 Soviet republics in the preparatory work. But with national politics, and the future of Mr. Pavlov's government, in a state of uncertainty pending the signing of a new union treaty, the program could be as short-lived as its predecessors. "The Pavlov government is just trying to maintain control over the economy of the republics," charges Ruslan Khasbulatov, deputy head of the Russian republic's parliament and an adviser to Russian leader Boris Yeltsin. "We understand that, but it's neither far-sighted nor especially successful under present conditions." Mr. Khasbulatov is so disillusioned with the succession of abortive economic programs that he likens them sarcastically to Russian "matryoshka" stacking dolls -- "open one, and you find the next." Soviet President Mikhail Gorbachev apparently isn't putting all his trust in the new plan, either. Though he publicly supports Mr. Pavlov, he is exploring options behind the scenes, Soviet officials say. The most significant of these is a separate program of action being worked out by Grigory Yavlinsky, a young reformist economist who helped draft a blueprint last year that would have established the beginnings of a market economy in the Soviet Union in 500 days. The 500-day plan was discussed last August and September but then dropped by Mr. Gorbachev under pressure from hard-liners. In a long interview in the latest issue of the Moscow News weekly, Mr. Yavlinsky recounts how Mr. Gorbachev became interested in his proposals and gave them tacit support this month. Mr. Gorbachev's aide, Yevgeny Primakov, and Mr. Yavlinsky even signed a letter to the Group of Seven Western industrial nations. Mr. Yavlinsky's proposals rely partly on an infusion of Western aid, both technical and financial, and the letter to the G7 amounted to a plea for assistance. A senior Western diplomat in Moscow who has seen the Yavlinsky draft says it "looks serious, but it is still quite general." He too is growing weary of the numerous Soviet economic programs that have landed on his desk. "We've had the 500-day plan and the son of 500 days," he jokes. "Now this is 500 days -- the movie." Western and Soviet officials say several unresolved struggles underlie the constant to-ing and fro-ing over economic reform. Though there is little disagreement on the need to shift the Soviet economy toward a market system, the arguments boil down to timing and approach. Moscow believes it should use old-style central planning to halt slumping production, and only then move on to genuine liberalization and decentralization. But more-radical reformers, including Mr. Yavlinsky, say stabilizing the economy can best be done by abandoning most central planning and moving rapidly to market mechanisms. The argument is complicated by the fractious state of national politics. Nine of the 15 republics that seem likely to sign a new union treaty are demanding full control over their own economic affairs, and all are working on their own republican programs. They insist the Kremlin's only economic role should be to uphold a common currency and customs system. They are prepared to pay an agreed level of tax to the federal government, but they want their share of the nation's hard-currency revenues and diamond and gold resources. The republics also insist they should be solely responsible for foreign trade. Mr. Pavlov and his officials in central government have moved to take such feelings into account, particularly after a landmark meeting on April 23 between the leaders of the nine republics and Mr. Gorbachev. Soviet press reports say his crisis package, which has been heavily amended by the republics, would seek to ban strikes for 1991, introduce an emergency budget for the second half of the year, provide tax benefits to increase production, speed up privatization of state assets and provide new incentives to foreign investors, among other things. Some basic agreement on the package appears to have been reached yesterday at a Kremlin meeting attended by republican leaders, central government officials and Mr. Gorbachev. Details aren't known, but Ivan Silayev, the prime minister of Russia, told Tass news agency that the crisis package better reflects the interests of the republics. But Mr. Silayev said the key issue of dividing up hard-currency revenues wasn't resolved. Other republics raised different objections prior to yesterday's meeting. The Ukraine, for instance, wants the Kremlin to drop a law requiring factories to turn 40% of their hard-currency earnings over to central authorities. Whatever the fate of the crisis program, forecasts for the Soviet economy in the near term remain bleak. Government officials say that if Mr. Pavlov's plans are implemented, the economic slide may come to a halt this fall, and production could pick up next year. Even so, total national output of goods and services will decline by at least 10% in value this year, they say. If the Pavlov plan isn't implemented, forecasters warn, output could slump 20% this year, including a 25% decline in the final nine months. WSJ910516-0102 910516-0102. Who's News: Mr. Coffee Inc. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 JAVA WNEWS CONSUMER CYCLICAL (CYC) HOME ELECTRONICS, FURNISHINGS, APPLIANCES (HMF) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) OHIO (OH) MR. COFFEE Inc. (Cleveland) -- Robert T. Silkett, 61 years old, was elected to a vacant seat on the board of this manufacturer of automatic drip coffeemakers. Mr. Silkett, who has 35 years of experience in retail food marketing, served as executive vice president and a director of Curtis Burns Foods Inc. of Rochester, N.Y., from 1986 until his retirement in June 1990. WSJ910516-0101 910516-0101. Business Brief -- Nathan's Famous Inc.: Restaurant Operator Signs Overseas Franchise Contract 05/16/91 WALL STREET JOURNAL (J), PAGE A4 ENTERTAINMENT AND LEISURE (ENT) RESTAURANTS, FAST-FOOD, CATERING (RES) NEW YORK (NY) GREAT BRITAIN (UK) Restaurant operator Nathan's Famous Inc. signed an overseas franchise development agreement expected to cost more than $70 million. Privately owned Nathan's Famous, of Westbury, N.Y., said British-controlled American Fast Foods International Inc. will create a minimum of 185 Nathan's restaurants over the next seven years in Europe and Asia. Nathan's currently has 69 restaurants, all but eight of which are franchised. Nathan's reported systemwide sales of $65 million in 1990. American Fast Foods International was formed earlier this year by U.K.-based Tricapital Partners, a world-wide merchant capital partnership. WSJ910516-0100 910516-0100. Who's News: California Water Service Co. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 CWTR WNEWS UTILITIES (UTI) WATER UTILITIES (WAT) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) CALIFORNIA (CA) CALIFORNIA WATER SERVICE Co. (San Jose, Calif.) -- C.H. Stump, 65 years old, chief executive officer and president of this utility, was elected to the additional post of chairman. He will succeed Ralph D. Lindberg, 70, who retires June 1. At that time, Donald L. Houck, 59, executive vice president and chief operating officer, will succeed Mr. Stump as president. He will continue as chief operating officer. WSJ910516-0099 910516-0099. Who's News: Van Dorn Co. 05/16/91 WALL STREET JOURNAL (J), PAGE B9 VDC WNEWS INDUSTRIAL (IDU) CONTAINERS & PACKAGING, BAGS, CANS, BOXES (CTR) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) OHIO (OH) VAN DORN Co. (Cleveland) -- Richard Plociak, president of the company's Davies Can unit since 1987, now will also serve as company vice president. Mr. Plociak joined the company in 1970 as a salesman. WSJ910516-0098 910516-0098. House Democratic Leaders Aim to Wrap Compromises Into New Civil-Rights Bill ---- By Jeffrey H. Birnbaum and Timothy Noah Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A3 LABOR LAW AND LEGAL AFFAIRS (LAW) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) LAW & LEGAL ISSUES, HEARINGS, RULINGS, LEGISLATION (LAW) CONGRESS (CNG) EXECUTIVE (EXE) WASHINGTON -- Democratic leaders in the House are preparing a new civil-rights bill incorporating compromises that previously were embraced by representatives of major corporations. The effort is designed to attract enough votes for the controversial measure that its backers could win a fight to override an expected presidential veto. Several weeks ago, representatives of the Business Roundtable, a big-business group, terminated negotiations with civil-rights officials. They acted under pressure from the White House. The Democratic leaders' strategy is to adopt compromises reached during those talks and include them in a measure that would substitute for the more liberal bill now pending in the House. The ploy would attract moderate and conservative Democrats who were shunning the pending bill because President Bush threatened to label it a "quota bill." The leadership-endorsed substitute probably will be sponsored by a moderate Democrat, perhaps from a Southern or border state. But the substitute plan, details of which were still under discussion, probably would upset at least some backers of the pending bill. One change being considered would limit punitive damages for discrimination against women to $150,000 or the amount of compensatory damages; women's groups have vehemently opposed such a limit, which isn't included in the pending measure. Another potential problem is that the exact wording of agreements between the civil-rights officials and the Business Roundtable hasn't been declared formally and might be disputed. Limiting punitive damages in discrimination lawsuits brought by women would set a "terrible precedent," complained Rep. Pat Schroeder (D., Colo.). She observed that last year's bill included a similar cap, "and the president still wouldn't sign it." To address such complaints, the leadership may allow a separate House vote on the proposed cap when the bill comes to the floor. At a meeting of House Democrats yesterday, several women lawmakers, including Rep. Schroeder, threatened not to support the bill at all if the damages cap is included. The substitute measure also may include a partial ban on "race-norming" on employment tests, a practice in which blacks, Hispanics and Native Americans are scored only in comparison with others of the same group. Rep. Henry Hyde (R., Ohio) previously attempted to attach to the bill an amendment that would ban the practice. The substitute bill also is expected to make it more difficult for businesses to avoid hiring minorities because of "business necessity," though the restrictions would be less than in the pending measure. Business groups that opposed the Business Roundtable negotiations are unlikely to endorse the leadership's substitute. David Rehr, a lobbyist for the National Federation of Independent Business, denounced the compromise effort as a "transparent and superficial" attempt by Democrats to seek "political cover." WSJ910516-0097 910516-0097. Money Rates 05/16/91 WALL STREET JOURNAL (J), PAGE C17 FNM FRE GM MER FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) MORTGAGES, MORTGAGE BANKERS, MORTGAGE-BACKED SECURITIES (MOR) BOND MARKET NEWS (BON) MORTGAGES, MORTGAGE RATES (MOR) TREASURY DEPARTMENT (TRE) FEDERAL RESERVE BOARD (FED) GREAT BRITAIN (UK) CANADA (CN) GERMANY (GE) JAPAN (JA) SWITZERLAND (SZ) Wednesday, May 15, 1991 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: 8 1/2%. The base rate on corporate loans at large U.S. money center commercial banks. FEDERAL FUNDS: 6 3/16% high, 5 1/2% low, 5 3/4% near closing bid, 6% offered. Reserves traded among commercial banks for overnight use in amounts of $1 million or more. Source: Babcock Fulton Prebon (U.S.A.) Inc. DISCOUNT RATE: 5 1/2%. The charge on loans to depository institutions by the New York Federal Reserve Bank. CALL MONEY: 7 1/2% to 8%. The charge on loans to brokers on stock exchange collateral. COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 5.825% 15 to 41 days; 5.50% 42 to 53 days; 5.85% 54 to 89 days; 5.875% 90 to 119 days; 5.90% 120 to 179 days; 5.80% 180 to 235 days; 6% 236 to 270 days. COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 5.95% 30 days; 5.95% 60 days; 5.95% 90 days. CERTIFICATES OF DEPOSIT: 5.63% one month; 5.66% two months; 5.67% three months; 5.77% six months; 6.08% 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: 5.95% one month; 6% three months; 6.125% six months. BANKERS ACCEPTANCES: 5.77% 30 days; 5.74% 60 days; 5.74% 90 days; 5.76% 120 days; 5.76% 150 days; 5.76% 180 days. Negotiable, bank-backed business credit instruments typically financing an import order. LONDON LATE EURODOLLARS: 5 15/16% - 5 13/16% one month; 6% - 5 7/8% two months; 6 1/16% - 5 15/16% three months; 6 1/8% - 6% four months; 6 3/16% - 6 1/16% five months; 6 3/16% - 6 1/16% six months. LONDON INTERBANK OFFERED RATES (LIBOR): 5 15/16% one month; 6 1/16% three months; 6 3/16% six months; 6 5/8% one year. The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks. Effective rate for contracts entered into two days from date appearing at top of this column. FOREIGN PRIME RATES: Canada 9.75%-10.25%; Germany 10.50%; Japan 7.88%; Switzerland 10.50%; Britain 12%. These rate indications aren't directly comparable; lending practices vary widely by location. TREASURY BILLS: Results of the Monday, May 13, 1991, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 5.50% 13 weeks; 5.63% 26 weeks. FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments. Delivery within 30 days 9.47%, 60 days 9.55%, standard conventional fixed-rate mortgages; 6.625%, 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). 9.41%, standard conventional fixed-rate mortgages; 7.15%, 6/2 rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc. MERRILL LYNCH READY ASSETS TRUST: 5.63%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns. WSJ910516-0096 910516-0096. S&L Bailout Agency May Make Process Of Selling Assets a Bit More Flexible ---- By Paulette Thomas Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A3 FINANCIAL (FIN) SAVINGS AND LOANS, THRIFTS (SAL) CONGRESS (CNG) FEDERAL GOVERNMENT (FDL) TREASURY DEPARTMENT (TRE) WASHINGTON -- The savings-and-loan cleanup agency said it is considering negotiating one-on-one with prospective buyers for about $100 billion in assets from failed S&Ls, rather than forcing them to adhere to inflexible bidding formulas. The plan, disclosed by agency Chairman William Seidman yesterday, is another sign of the Resolution Trust Corp.'s difficulties in selling real estate and related loans amid a capital crunch and real estate slump. All of the assets that would be sold in this fashion have been on the market for at least six months, with no takers. Investors have balked at the take-it-or-leave-it sales terms that aim to ensure fairness in evaluating bids, but leave little room for structuring more-creative deals. "This is what we are hearing over and over from investors," said Lamar Kelly, who is in charge of asset sales for the RTC. The agency also believes it can attract better bids on the pooled assets than on individual assets, if it is flexible in its terms. Under its plan, the agency would "prequalify" about 30 large investors, mostly institutions, that have expressed an interest in large pools of assets and that have a track record in improving ailing real estate. After an initial round of bidding on sales price, the agency would negotiate the financing and other details with the top bidders. The agency expects most of the deals to spread the risk and return between the investor and the government. The agency's board is expected to vote on the policy next week, but it is already in the midst of three separate deals, for sales totaling $1.2 billion, in real estate-related assets under the new terms, Mr. Seidman said. The agency wouldn't identify the investors, because the transactions haven't been completed. The transactions may be controversial on Capitol Hill, because in the final stages, they involve one-on-one negotiations rather that putting the assets out for the highest-competitive bid. "We aren't doing these in a dark closet, alone with one bidder," Mr. Kelly said. "These assets have all been widely marketed." A likely transaction, a spokesman said, would call for the buyer to provide at least 15% of the sales price, and then receive the cash generated from the property, until the investor's down payment is recouped. Then, for a second phase, the agency would receive the cash flow produced by the property, until its interest is paid up. Eventually, the property winds up with the buyer. Already, some investors are circling. Last week, the Blackstone Group, New York, led by Peter G. Peterson, said it was joining as the capital partner with J.E. Robert Cos., Alexandria, Va., to invest roughly $450 million in such joint ventures. Meanwhile, Treasury Secretary Nicholas Brady yesterday requested that the investigative arm of Congress provide the Treasury with examples of failures in the RTC's internal controls and asset management. According to a letter from Mr. Brady, the General Accounting Office has informed the Treasury that the GAO will cite problems with the RTC's internal controls in its 1990 RTC audit, due next month. Mr. Brady requested, by May 24, specific examples of RTC failures in order to "correct any problems in the operation of the RTC." In an earlier report on the S&L agency, the GAO cited similar accounting and management concerns, but didn't provide examples. WSJ910516-0095 910516-0095. Chemical Banking Picks Genesys 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION CHL FINANCIAL (FIN) TECHNOLOGY (TEC) MAJOR MONEY CENTER BANKS (BAN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) NEW YORK (NY) NEW YORK -- Chemical Banking Corp. said it agreed to give exclusive marketing rights for its computer systems used to process retail transactions to Genesys Solutions Group Inc., a closely held Jericho, N.Y., concern. Genesys, which was formed earlier this year, will provide computer systems integration developed by Chemical to other retail banks and their branches. WSJ910516-0094 910516-0094. Bush Supports Extending China's Status in Trade ---- By Gerald F. Seib Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A5 INTERNATIONAL TRADE NEWS (TRD) TRADE ISSUES (TRD) EXECUTIVE (EXE) CHINA (CH) WASHINGTON -- President Bush said he favors continuing China's preferential trade status, setting the stage for a wrenching debate this summer over China's human-rights and arms-control record. Mr. Bush, who disclosed his position in remarks to reporters, has until June 3 to formally notify Congress that he plans to grant China most-favored-nation trade status for another year. That status would guarantee China the most-favorable treatment available on tariffs and quotas under U.S. trade laws. Congress would have 30 days after the formal notification to vote down the president's decision. Within Congress, anger toward China over human rights, arms sales and its trade surplus with the U.S. has been building rapidly in recent weeks. As a result, there's sure to be a drive to block Mr. Bush's effort to continue China's preferential trade treatment, or at least to attach conditions to it, congressional aides say. Mr. Bush, a former U.S. envoy to China, has frequently argued against taking steps that would isolate Beijing and remove incentives for the government there to further relax its Communist system. He reiterated those arguments yesterday in disclosing that he had made a "strong pitch" for continued most-favored-nation status for China at a lunch with Republican senators. "We do not want to isolate China," Mr. Bush said. "And though there are major problems in China, things that we don't like about their system, things are an awful lot better than they were back in 1975," when Mr. Bush was posted there. Mr. Bush also said he appreciated Chinese support during the drive to force Iraqi troops out of Kuwait. China went along with United Nations resolutions exerting diplomatic and economic pressure on Iraq. But the Beijing government also angered administration officials by abstaining on the crucial vote authorizing the use of force to drive Iraqi troops out of Kuwait. In addition, Britain has been pressuring the U.S. to continue China's favorable trade status. Britain worries that failure to do so would hurt the economy of neighboring Hong Kong, a British colony that's scheduled to be turned over to China in coming years. But many lawmakers are angered about China's human rights practices, particularly its failure to move more quickly to loosen the internal crackdown instituted after 1989 pro-democracy demonstrations in Beijing. In addition, lawmakers are troubled by China's trade surplus with the U.S., which rose to $10.4 billion last year and appears to be widening this year. Those concerns are compounded by a new report from a human rights group asserting that China uses what amounts to slave labor to produce some goods. China's image has been tarnished further by recent reports that it may be planning to sell Pakistan a missile capable of carrying nuclear warheads and is helping Algeria build a nuclear reactor that could be useful in a nuclear weapons program. Even if Congress passes a resolution blocking the president's decision to grant China most-favored-nation trade status, Mr. Bush could veto the resolution. In that case, both houses of Congress would have to muster two-thirds majorities to override the veto and stop the trade benefits from going into effect. WSJ910516-0093 910516-0093. International: Honda Unveils Convertible To Boost Japanese Market 05/16/91 WALL STREET JOURNAL (J), PAGE A12 HMC CONSUMER CYCLICAL (CYC) AUTOMOBILES (AUT) JAPAN (JA) TOKYO -- Honda Motor Co., moving to beef up sales in its home market, introduced a sporty convertible to exploit Japan's growing appetite for "minicars." The Japanese auto maker, facing a sales slump in the important U.S. market, is hoping it can sell 3,000 units a month in Japan of the Beat, a two-seat passenger car. The sticker price is relatively low for a car in Japan, 1.39 million yen ($10,077), but high for the minicar segment, where autos often sell for less than 1 million yen. Competition in the market for minicars -- vehicles with engine displacements of less than 660cc -- is intensifying as sales pick up. Last year, analysts estimate, consumers bought 1.8 million mini-vehicles, including trucks, up 6.3% from a year earlier. The country's best-selling car now is Daihatsu's Mira minicar. Honda now has about 13% of the market for mini-vehicles. Though small car sales don't bring fat profits, analysts say, they provide critical cash flow, something Honda needs as long as there is a slump in the U.S. market, where its Accord has been a best seller. "It doesn't have the luxury of ignoring any segment of the domestic market," says Stephen Marvin, an auto analyst at Jardine Fleming Securities Ltd. WSJ910516-0092 910516-0092. Politics & Policy: Bush, in Latest Poll, Has Approval Rating of 74% 05/16/91 WALL STREET JOURNAL (J), PAGE A18 EXECUTIVE (EXE) WASHINGTON -- President Bush continues to get high marks from the public for his handling of the presidency. And most voters aren't alarmed about his health problems. The new Wall Street Journal/NBC News poll conducted Friday through Tuesday found that 74% of registered voters approve of the job Mr. Bush is doing, while 19% disapprove. That marks a slight decline from a March Journal/NBC survey, when the margin was 81% to 13%. But it still leaves the president comfortably in the stratosphere of job-approval rankings. The nationwide survey found that Mr. Bush's foreign policies continue to be the engine that drives his overall approval numbers: 76% approve of his handling of foreign policy, while only 18% disapprove. The president's widely publicized heart problem and subsequent diagnosis of a thyroid condition don't seem to have raised significant doubts in voters' minds about his overall health. In the poll, 83% said they don't believe Mr. Bush's condition will affect his ability to perform his job as vigorously as he has in the past; only 11% believe his health will be a factor. WSJ910516-0091 910516-0091. Wednesday's Markets: Stocks Slide On Compaq Disclosure --- Profit Warning Hurts Technology Issues As DJIA Falls 21.47 ---- By Douglas R. Sease Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C1 BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) FOREIGN-EXCHANGE MARKETS (FRX) STOCK INDEXES (NDX) STOCK MARKET, OFFERINGS (STK) U.S. STOCK MARKET STATISTICS (STT) BOND MARKET NEWS (BON) FOREIGN EXCHANGE (FRX) STOCK AND OTHER INDEXES (NDX) STOCK & OTHER MARKET NEWS (STK) TREASURY DEPARTMENT (TRE) Bad news on the technology front sent stock prices skidding lower again. The dollar weakened, too, but bond prices held their own after stumbling badly Tuesday. The Dow Jones Industrial Average dropped 21.47 points to 2865.38 in active trading. Small stocks fell even harder. The Nasdaq Composite Index, dominated by such big technology firms as Apple Computer, Intel and Sun Microsystems, plunged 10.71 points to 478.08. Traders and analysts said the trigger for the stock market sell-off was Compaq Computer's disclosure early in the trading day that second-quarter earnings would be less than one-fifth of last year's profits. Compaq stock plunged immediately and ended at 36, off 13 1/4, a whopping 27% decline. Worries that Compaq's problems with excess inventory may afflict other technology companies dragged their stocks down, too. International Business Machines, for example, slumped 3 1/4 to 102 3/4; Digital Equipment was off 2 5/8 to 64 3/8; Intel tumbled 4 to end at 49 1/4; and Apple Computer lost 3 to 50 1/2. Peter Canelo, a market strategist at County NatWest Securities in New York, said investors were losing confidence that the economy was on the edge of recovery even before Compaq's announcement yesterday. He said early signs of a recovery -- a big surge in consumer confidence in March, for instance -- had since reversed or remained flat. Beyond that, he said the bond market's inability to absorb last week's big Treasury debt offering created additional concerns about the economy. Big bond dealers have slashed prices of long-term bonds since the auction in an effort to unload some of the new Treasury debt. Consequently, interest rates, which move inversely to bond prices, have risen sharply. "You can't have interest rates going the wrong way in a bad economy," said Mr. Canelo. "All the stock market needed was an excuse and Compaq gave it the excuse." Mr. Canelo said he expects stock prices to fall even further, breaking through what many investors perceive to be a technical support level at 2850 on the Dow industrials. Bonds, on the other hand, are probably approaching an interest-rate yield that will attract buyers. "My guess is that we'll find buyers for bonds at yields of 8.4% to 8.5%," he said. Paul Lasutis, a money manager at Brandywine Asset Management in Wilmington, Del., said the stock market's retreat in recent days is just a temporary setback. "It's not unreasonable to expect a correction" when money managers' bullishness reaches the extremes of recent weeks. But he said he is confident an economic recovery is on the way, mostly because interest rates have fallen considerably and the Federal Reserve has made it clear it will push rates even lower if necessary to spark an economic rebound. "We've seen all we need to see in interest rates for the moment," he said. "But if we need further reductions I'm sure we'll get them." But the lack of any hard evidence of an economic rebound caused currency traders to sell dollars. In major market action: Stock prices plummeted in active trading. Volume on the New York Stock Exchange totaled 193.1 million shares. Declining issues on the Big Board were ahead of advancers 1,074 to 567. Bond prices were steady. The yield on the Treasury's benchmark 30-year bond stood at 8.32%. The dollar fell. In late New York trading the currency was quoted at 1.6850 marks and 137.15 yen compared with 1.6955 marks and 137.94 yen Tuesday. WSJ910516-0090 910516-0090. Law: Northrop Whistleblower Settlement Plan Dropped Amid Claims of Irregularities ---- By David J. Jefferson Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B7 NOC TECHNOLOGY (TEC) AEROSPACE (ARO) DEFENSE DEPARTMENT (DEF) JUSTICE DEPARTMENT (JUS) CALIFORNIA (CA) LOS ANGELES -- A proposed $8.8 million settlement of whistleblower claims against Northrop Corp. over the faulty air-launched cruise missile has been scuttled, as the plaintiffs' attorneys alleged that government prosecutors tried to limit the amount the whistleblowers would receive. The settlement agreement fell apart after the Air Force disclosed earlier this month that Northrop had agreed to spend about $10 million to fix a flaw in the missile's guidance unit. A fluid used in the guidance unit's gyroscopes may freeze before reaching the required military specification of minus 65 degrees Fahrenheit, rendering the navigational gear ineffective, according to records previously obtained by this newspaper. The disclosure of the Air Force agreement was particularly irksome to the plaintiffs, since the government had refused to join their claims that Northrop had knowingly used the defective fluid when building guidance systems for the nuclear-tipped missiles. The Justice Department did, however, join the whistleblowers in their claims that the company falsified test results on the missile components. In papers filed in federal court here yesterday, Herbert Hafif, attorney for the whistleblowers, alleged the existence of "a continuing government scheme to negotiate a secret side deal on the `cold temperature' defect with Northrop." Mr. Hafif added: "The government apparently concluded they would have to try to settle the {missile} claims by somehow getting the whistleblowers to agree to a deceptive settlement." The whistleblowers' suit, which originally sought $63 million, was brought in federal court here in 1987 under the federal False Claims Act, and was joined by the Justice Department in early 1989. Before the recent settlement talks, trial was to have begun last month. The civil suit was paralleled by a criminal investigation and indictment that led to a settlement last year in which Northrop pleaded guilty to falsifying certain tests on the cruise missile and another weapons program, and paid $17 million in fines and penalties. The U.S. Attorney's office didn't have any immediate comment on the failed settlement agreement. Northrop Chairman Kent Kresa told shareholders at the annual meeting yesterday that the case is "in the process of being settled," but declined to comment on this latest development. Separately, Mr. Kresa said yesterday that Northrop plans to transfer some scientists and designers from various programs in its military aircraft sector to a new Advanced Technology and Design organization that will work on future military aircraft programs. The move follows the company's big loss last month in the competition to build the Air Force's next fighter plane. Northrop also plans to expand its work as a subcontractor for commercial jet makers, and will separate its commercial aircraft operations into a separate business unit some time during the next 12 to 18 months, Mr. Kresa said. WSJ910516-0089 910516-0089. Legislation to Boost Fuel Efficiency Of Cars Is Rejected ---- By Rose Gutfeld Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A8 CONSUMER CYCLICAL (CYC) AUTOMOBILES (AUT) ENVIRONMENT (ENV) ENVIRONMENTAL NEWS (ENV) CONGRESS (CNG) ENERGY DEPARTMENT (ERG) TRANSPORTATION DEPARTMENT (TRN) WASHINGTON -- The Senate Energy and Natural Resources Committee rejected a measure that would force auto makers to modestly increase the fuel efficiency of their cars and light trucks. Instead, the panel voted 12-8 to accept weaker language that would merely direct the Transportation Department to set new fuel-economy standards after taking into account such criteria as technological feasibility. The rejected amendment, defeated 13-7, was offered by committee Chairman Bennett Johnston (D., La.). "We're very pleased," said Ron DeFore, a spokesman for the Coalition for Vehicle Choice, which includes auto makers and others opposed to tighter standards. Earlier, the lawmakers voted 15-5 against an amendment that would require a far greater mileage gain. That measure, originally proposed by Sen. Richard Bryan (D., Nev.), has been approved by the Senate Commerce Committee. The fate of congressional efforts to tighten mileage requirements remains unclear for several reasons, however. The full Senate is likely to be more favorably disposed to tighter mileage standards than the generally pro-industry Energy Committee. Environmentalists yesterday contended the defeat of the weaker approach leaves the Bryan bill as the only credible alternative for lawmakers who want to vote for fuel-efficiency rules that are more stringent than current standards. Moreover, Senate Majority Leader George Mitchell and other Democratic leaders haven't yet indicated what role they will play in the issue. The Johnston amendment, which the lawmaker said he would propose again on the Senate floor, would require car makers to bring the average fuel efficiency of their auto fleet to 30.2 miles per gallon for 1996 model cars, to 34 mpg for 2001 models and to 37 mpg for 2006 models. Currently, auto fleets must average 27.5 mpg. By contrast, the Bryan bill would require auto makers to increase average fuel economy 20% by 1996 models and 40% by 2001 models, compared with 1988. That would work out to a 40 mpg average for 2001 models. During the debate, several lawmakers referred to the financial troubles of the auto industry in arguing against the tighter rules. The Bush administration has threatened to veto the Bryan bill, and Energy Secretary James Watkins yesterday sent a letter urging the committee not to set any "arbitrary targets" for fuel efficiency. The mileage measure was offered as part of a comprehensive national energy bill, however, and its defeat may reduce the chances for the overall package. Many lawmakers contend that without significant conservation provisions such as fuel-economy targets, the broader measure is too heavily weighted toward production. The overall bill, proposed by Sens. Johnston and Malcolm Wallop (R., Wyo.) would open Alaska's Arctic National Wildlife Refuge to oil exploration and streamline nuclear plant licensing, among other things. WSJ910516-0088 910516-0088. Enterprise: Government Work Can Be a Boon, but It Isn't Risk-Free --- Producer for TV Marti Learns Lesson About Relying on One U.S. Contract ---- By Eugene Carlson Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B2 CONSUMER CYCLICAL (CYC) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) CORPORATE PROFILE (PRO) CORPORATE PROFILES (PRO) EXECUTIVE (EXE) MARYLAND (MD) WASHINGTON -- Uncle Sam can be a fickle business partner. A small television-production company discovered that painful fact of life after it agreed last year to produce a 30-minute nightly news program on TV Marti, a U.S.-government television channel aimed at Cuba. Fourteen months later, the U.S. Information Agency ended its $7 million contract with Techniarts Engineering, Silver Spring, Md., and began producing the show itself. Techniarts is hopping mad. It has filed suit in U.S. District Court here, charging, in part, that the agency ignored the government's own rules for farming out business to the private sector. The company contends the USIA is required to show that the bureaucracy can do the work cheaper than private contractors before it brings the work back under its own roof. The USIA insists it did nothing wrong, while taking actions that made sense for the government. The legal arguments in the TV Marti case are complex. But the squabble shows that doing business with the government is far from risk-free. Many entrepreneurs view federal, state and local government clients as a sort of security blanket, backed by the full faith and credit of a bottomless treasury. But any small company that invests heavily in equipment or skilled employees on the strength of a single government contract can find itself in the soup if a department or agency suddenly takes a different tack. Techniarts' job was to produce a half-hour "network-quality" news program, with a mix of world news, sports and feature stories of interest to Cuban viewers. To make the program attractive, Techniarts recruited an anchorman and several reporters who spoke Cuban-accented Spanish. There was even a Cuban-weather forecast, with a weatherman standing in front of the Miami skyline. Techniarts produced the program in its studio in Silver Spring, a Washington suburb. The USIA feeds TV Marti broadcasts through its Washington studio, sending them via satellite to an Air Force base in the Florida Keys. The signal is then bounced to a transmitter on a balloon floating 10,000 feet overhead. The height of the balloon allows viewers in Havana and other parts of western Cuba to receive the signal, on channel 13. Congress appropriated $16 million in each of fiscal years 1990 and 1991 for testing TV Marti, named for the 19th-century Cuban poet and patriot Jose Marti (pronounced mar-TEE). The news program is supposed to reflect a reasonably objective view of world events, in the tradition of the USIA's 49-year-old Voice of America. Techniarts' owners say the USIA was fearful that TV Marti wouldn't work, so it chose a private company to act as a guinea pig. William Moore, a Techniarts co-owner, says surveys later showed that a lot of Cubans were tuning in; that's when the USIA decided to bring the news program under its own roof, he says. "It's pure empire building," Mr. Moore says. The USIA insists it had no permanent commitment to Techniarts. "The legislation {authorizing TV Marti} specifically said find out if it's feasible to do this," says Luisa Alvarez, a USIA attorney. "You don't start up a project and employ dozens or hundreds of civil-service employees that may not result in anything." More important, the USIA contends that TV Marti is an "inherently governmental" function, with important foreign-policy overtones, that can't be delegated permanently to a contractor. "Even the most seemingly innocuous word or image, when viewed through the lens of U.S.-Cuban relations, can convey messages," the agency argued in a motion to dismiss the case. But Mr. Moore says the USIA freely placed the program with his own private company at the outset and then proceeded to take Techniarts for a ride. He points to a notice that the USIA placed last October in Commerce Business Daily, which lists pending government contracts. At the time, Techniarts had been producing the show for seven months. The notice said the USIA "intends to negotiate with Techniarts Engineering . . . for news gathering and reporting services for TV Marti" in a new six-month contract to run through July 30, 1991. The new contract would carry a six-month renewal option. Assuming it had a lock on the program for at least several more months, Techniarts committed itself to about $300,000 worth of equipment leases and $200,000 in capital improvements. But the company's attorneys say the USIA quickly mounted a "clandestine" plan to produce TV Marti at USIA headquarters using other contractors, without shopping for bids or determining if the agency could produce the show cheaper. Instead of negotiating the publicly announced contract, the USIA gave Techniarts several month-to-month contracts, and then let its TV Marti role lapse in March. While the USIA denies wrongdoing, an agency spokesman says he won't comment more specifically on Techniarts' charges while the case is in court. Mr. Moore says the company didn't look for new clients because its limited studio space was dedicated to TV Marti, and it assumed its connection would continue. "When a contract like this simply terminates . . . it creates this vacuum," he says. The company says about half its revenue last year came from TV Marti. The company partially bounced back from the loss of TV Marti by winning two Navy contracts valued at $17 million. But Mr. Moore says it will take many more months before the TV-production side of the business is healthy again. Moreover, Techniarts' lawyers say there is a larger issue. They say the USIA is trying to outflank rules set down in the Office of Management and Budget's Circular A-76, which spells out how government activities are to be privatized. By declaring that TV Marti is "inherently governmental," the USIA says in court papers that its action isn't subject to judicial review. Techniarts suffered a major setback in March. The U.S. District Court refused to issue a pretrial order that would have allowed Techniarts to keep producing the news program pending the outcome of the legal case. No trial date has been set. Even if Techniarts prevails at trial, any win would most likely be a Pyrrhic victory. "The best we could expect would be to force a recompetition" for the TV Marti contract, Mr. Moore says. He thinks the USIA isn't likely to look kindly on any new Techniarts bid. WSJ910516-0087 910516-0087. Admiral Likely Candidate For Deputy Security Post 05/16/91 WALL STREET JOURNAL (J), PAGE B9 DEFENSE DEPARTMENT (DEF) EXECUTIVE (EXE) WASHINGTON -- Adm. Jonathan T. Howe, a Navy officer with extensive experience in national security policy, is the leading candidate to succeed Robert Gates as deputy national security adviser, administration officials said. The officials cautioned that Brent Scowcroft, President Bush's national security adviser, hasn't made a final decision yet and that others still are being considered for the deputy's job. Mr. Gates, who held the No. 2 job on the National Security Council staff from the beginning of the Bush administration, was nominated this week to become director of central intelligence. But Adm. Howe, currently the commander of U.S. naval forces in Europe, is being discussed among top administration officials and has talked with them in recent months about joining the National Security Council staff, officials said. Officials said Adm. Howe, 55 years old, is expected to retire soon from the Navy. Adm. Howe was military assistant to Henry Kissinger when Mr. Kissinger was national security adviser in the 1970s. During the Reagan administration, Adm. Howe was director of the State Department's bureau of politico-military affairs. WSJ910516-0086 910516-0086. House Democrats Approve Hostage-Release Inquiries 05/16/91 WALL STREET JOURNAL (J), PAGE A18 CONGRESS (CNG) IRAN (IR) WASHINGTON -- The House Democratic leadership has authorized preliminary staff inquiries into allegations that people in President Reagan's 1980 campaign dealt secretly with Iran in an effort to delay the release of U.S. hostages until after the election. No formal announcement has been made, but staff from such relevant committees as Intelligence, Foreign Affairs, and Judiciary are expected to be tapped to provide some assessment of the evidence available. Speaker Thomas Foley met with senior chairmen privately this week to discuss the issue. Given the sensitivity of the charges, his support was seen as required before proceeding. The allegations have circulated in various forms for several years but gained new attention as a result of recent statements by a former Carter administration official, Gary Sick, who worked in the White House during the hostage crisis. In an opinion piece published in the April 15 New York Times, Mr. Sick outlined an alleged scheme whereby Iran held the hostages until after the election and subsequently received shipments of arms from Israel. President Bush, who ran with Mr. Reagan on the GOP presidential ticket, has repeatedly denied any knowledge or part in such an operation. Most of the attention has been focused on the role played by the late William Casey, a senior campaign official for Mr. Reagan who was later named director of the Central Intelligence Agency. WSJ910516-0085 910516-0085. Entertainment: MGM Grand, Kerkorian Set Park Venture ---- By Pauline Yoshihashi Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 MGG CONSUMER CYCLICAL (CYC) CASINOS AND GAMBLING (CNO) ENTERTAINMENT AND LEISURE (ENT) LODGING, HOTELS, MOTELS, LODGES, CAMPGROUNDS (LOD) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) CALIFORNIA (CA) NEVADA (NV) LAS VEGAS, Nev. -- MGM Grand Inc. and billionaire investor Kirk Kerkorian are bringing the Wizard of Oz to this casino capital. The casino and airline company unveiled working designs and some financing plans for a $910 million hotel-casino and theme park that will incorporate themes from the famous Frank Baum book and old Metro-Goldwyn-Mayer movie, as well as other movie-related themes and attractions. "We have the greatest confidence in the growth of Las Vegas," the normally publicity-shy Mr. Kerkorian told shareholders at the annual meeting here. While the theme park itself will be a far cry from the size and scope of the $600 million-plus Disney-MGM Studios Tour in Orlando, Fla., or the Universal Studios tour in Los Angeles, it will be the first true theme park in this burgeoning destination-resort market. Despite the recession-related slowdown that has affected the region, Las Vegas remains one of the U.S.'s fastest-growing cities and a strong tourist draw. About 20 million visitors came here last year, and that number is expected to grow substantially by the time the MGM Grand project opens in about 2 1/2 years. In addition to the world's largest hotel, with 5,011 rooms, the project will include a $125 million 35-acre theme park featuring 12 rides and attractions. The complex is to employ between 6,000 and 7,000 workers. Robert Maxey, MGM Grand's president and chief executive officer, says final design and construction contracts for the attractions haven't been signed, but no partner will be brought in to oversee the theme park as had been considered earlier. Mr. Maxey said half of the rides will play off the movie theme, such as a movie-backlot tour ride, while the others will be "thrill" rides. In the hotel-casino complex, visitors will enter by way of a three-stage area featuring the Emerald City of Oz. Beyond the wizardry will lie the project's financial heart: a 170,000-square-foot casino. Unlike other movie theme parks, the MGM project won't have a working film studio on site. "We're not in the film business," Mr. Maxey said. Nor does the company want to tie up tourists in the park all day. The attraction is designed as a four-hour diversion for visitors, who presumably will flock back to the casino to drop dollars there. The disclosure of some financing details ends months of speculation over whether the project would ever materialize along the world-famous Strip. MGM Grand said it plans a rights offering to shareholders that will allow them to buy common shares on a 1-for-1 basis. Mr. Kerkorian and his private investment company, Tracinda Corp., intend to buy at least $100 million of the stock by exercising a portion of their rights and will buy additional shares underlying unexercised rights. Mr. Kerkorian and Tracinda control about 82.5% of MGM Grand's stock. Those shares, along with other shares bought as part of the offering, will raise at least $200 million. Michael Tennenbaum, vice chairman of Bear, Stearns & Co., said about five million shares will be available through a public offering. The complicated plan will make MGM Grand shares more accessible to other investors, Mr. Tennenbaum said. Moreover, MGM plans to auction off its Desert Inn hotel casino here. The casino has been on the market for months with a $200 million price tag, so the company now plans to auction the property by July 15. Mr. Kerkorian will bid at least $130 million in cash for the Desert Inn, but the auction will be stopped if the company receives a cash bid of $160 million or another acceptable offer. "We've already got $140 million invested in the project, " Mr. Maxey said. "We plan to raise the rest through mortgage financing or some similar means." MGM Grand is still enmeshed in a lawsuit with Walt Disney Co. over its proposed use of the MGM Grand name on the studio tour. The trial is set for July in Los Angeles, but persons familiar with the situation said it's unlikely that the suit would block plans for the project. WSJ910516-0084 910516-0084. International: Hanson PLC Discloses It Bought ICI Stake of 2.82% as `Investment' ---- By Craig Forman Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A13 HAN ICI CONGLOMERATES (CGL) FINANCIAL (FIN) CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) SECURITIES (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) GREAT BRITAIN (UK) LONDON -- Hanson PLC emerged as the mystery buyer of a stake in Imperial Chemical Industries PLC, igniting further speculation about a possible takeover bid for the U.K. chemicals company. In an announcement after the close of London Stock Exchange trading yesterday, the Anglo-American industrial conglomerate said it acquired a 2.82% ICI stake, or 20 million shares, on Tuesday for "investment purposes." Stockbrokers Smith New Court, without naming its client, had said the stake was acquired at about 1,167 pence ($20.38) a share, or roughly #233 million. That values all of ICI at #8.26 billion ($14.43 billion). A Hanson takeover bid for ICI would electrify the London market and remake a chunk of the British industrial economy. It would put together an industrial conglomerate making products ranging from heart drugs to paint and hot tubs, with roughly #20 billion in annual sales and more than #2 billion in pretax profit. The company would amount to 5.3% of the capitalization of the Financial Times-Stock Exchange 100-Share Index. But analysts, investment bankers and institutional investors were divided about whether the Hanson move is a prelude to a full bid. Though Hanson built itself over the past two decades through takeovers, it also has acquired big chunks of such companies as Midland Bank PLC, Courtaulds PLC and Cummins Engine Co., only to sell the stakes -- usually at a profit -- without making a takeover offer. "Hanson has a good knack of finding undervalued situations, but we don't think this is necessarily a prelude to a bid," said Douglas Ferrans, a director at Scottish Amicable Investment Managers, which holds just under 1% of Hanson and ICI. Under British law, Hanson isn't required to disclose its stake unless it exceeds 3%. And investment bankers and traders were confused about why the conglomerate showed its hand before it had to, thereby further driving up ICI's share price in anticipation of a bid. Hanson's statement about its investment purposes carries greater weight under Britain's Takeover Code than it would under U.S. practice. If it changes its mind and bids, Hanson could be delayed, or blocked, by Britain's Takeover Panel. Hanson Vice Chairman Martin Taylor yesterday said the acquisitive conglomerate -- with #7.15 billion in annual sales and such businesses as Peabody Coal and SCM Chemicals -- "thought it was right" to announce its stake. ICI shares rose 60 pence to 1,218 pence in active trading yesterday. The company declined to say whether it considers Hanson friendly or hostile. Hanson shares rose one-half pence, to close at 220.5. An investment banker familiar with both companies said Hanson's announcement could be seen as a trial balloon, to assess public reaction and to smoke out potential rival bidders. Hanson's biggest obstacle to a takeover would be political more than financial. The company has about #7.4 billion in liquid resources, plus borrowing facilities estimated at #17 billion, enough to finance an ICI bid. The financial question is how much is in it for Hanson. Analysts said Hanson might have to pay 1,300 a share or more in a full bid; with ICI break-up value recently estimated at 1,500. Hanson's early disclosure probably indicates the company's concern about the potentially huge public obstacles to a bid. ICI today, with a staff of 54,000 in 50 locations across Britain and 133,800 world-wide, is as much woven into the fabric of the British economy as steel or coal once were. WSJ910516-0083 910516-0083. Christie's Sells Painting By Kahlo for $1.65 Million 05/16/91 WALL STREET JOURNAL (J), PAGE C8 BID U.CHR FINANCIAL (FIN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) GREAT BRITAIN (UK) NEW YORK -- At Christie's International PLC last night, Frida Kahlo's "Self-Portrait With Loose Hair," sold for $1.65 million, setting a record for a painting by a Latin American artist. Amid softening demand for Impressionist, modern and contemporary artworks, art auction houses and dealers have attempted to jump-start other segments of the art market, and Christie's has been particularly promoting its sales efforts in Latin American art. The Kahlo had been expected to sell for $1.5 million to $2 million. The final price included a 10% commission to Christie's. Overall, at Christie's sale of Latin American art, 24 of the 61 art works didn't sell. Louise Noun, the owner of the Kahlo, reached at her home in Des Moines, Iowa, said she was "delighted." She bought the painting in 1983 for $85,000 from art dealer Mary-Anne Martin. Proceeds go to the University of Iowa. Ms. Noun had earlier arranged to sell the painting privately through Sotheby's Holdings Inc., Christie's chief business rival. She said she changed her mind when Sotheby's canceled its Latin American paintings sale. The previous record for a Latin American art work was set at Sotheby's. In May 1990, Ms. Martin, the Latin American paintings dealer, paid $1.43 million for another Kahlo. WSJ910516-0082 910516-0082. Credit Ratings 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION TRB CONSUMER CYCLICAL (CYC) BOND MARKET NEWS (BON) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) STOCK AND BOND RATINGS (RTG) BOND MARKET NEWS (BON) BOND & STOCK RATINGS (RTG) ILLINOIS (IL) TRIBUNE Co. (Chicago) -- Moody's Investors Service Inc. said it lowered its rating on about $400 million of the long-term debt of this diversified media concern. The ratings concern, which lowered its senior debt rating to single-A-2 from single-A-1, said the action reflects its belief that Tribune's cash flow protection for debt "will be lower and less-predictable than historically" given the combination of long-term fundamental changes in adverstising-dependent businesses and newsprint. Moody's also cited the adverse effect the company's continuing stock repurchase program has had on the company's leverage. Moody's said however that it recognizes the quality of Tribune's newspaper and broadcasting properties, which generate solid cash flow, but notes that the potential for revenue and profit margin growth has been diminished by increased competitive opportunities for advertisers, the consolidation of major retailers, and continuing investments in newspaper plants to reduce costs. Tribune said despite the downgrading, its ratings "remain strong." WSJ910516-0081 910516-0081. Treasury Plans Sales To Raise Fresh Cash Totaling $11.5 Billion 05/16/91 WALL STREET JOURNAL (J), PAGE C17 BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) BOND MARKET NEWS (BON) TREASURY DEPARTMENT (TRE) WASHINGTON -- The Treasury plans to raise a combined $11.5 billion in fresh cash next week with the sale of $12.25 billion of two-year notes on Wednesday and $9.25 billion of five-year notes on Thursday. The balance of the proceeds will be used to redeem $9.99 billion in maturing securities. The new two-year notes will be dated May 31 and mature May 31, 1993; the new five-year notes will be dated May 31 and mature May 31, 1996. The CUSIP number for the two-year notes is 912827A93. The CUSIP number for the five-year notes is 912827B27. Noncompetitive tenders for the two-year notes, available in minimum denominations of $5,000, must be received by noon EDT next Wednesday at the Treasury or at Federal Reserve banks or branches. Competitive tenders must be received by 1 p.m. EDT. Noncompetitive tenders for the five-year notes, available in minimum denominations of $1,000, must be received by noon EDT next Thursday at the Treasury or at Federal Reserve banks or branches. Competitive tenders must be received by 1 p.m. EDT. Separately, the Treasury plans to raise new cash with its sale Tuesday of $16 billion of 335-day cash-management bills. The offering will be dated May 24 and will mature on April 23, 1992. The CUSIP number for the bills is 912794YK4. Noncompetitive tenders for the bills, available in minimum $10,000 denominations, must be received by noon EDT Tuesday at the Treasury or at Federal Reserve banks or branches. Competitive tenders must be received by 1 p.m. EDT. WSJ910516-0080 910516-0080. Union Wants To Reopen Talks With Greyhound ---- By Robert Tomsho Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A6 LABOR X.GRE BANKRUPTCIES (BCY) MASS TRANSIT, BUS LINES, SUBWAYS, HIGHWAYS (TRA) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) FEDERAL GOVERNMENT (FDL) DALLAS -- The striking Amalgamated Transit Union is seeking to reopen talks aimed at settling its bitter 14-month strike against Greyhound Lines Inc., after a federal bankruptcy judge's ruling substantially reduced its clout in the bus company's Chapter 11 case. Although union and company officials said they expect talks to resume sometime during the next two weeks, no date has been set, and neither side would indicate what new proposals they might bring to the bargaining table. "We would welcome the opportunity to sit down with the union, have further discussions and try to settle the matter," said George Hanthorn, Greyhound senior vice president and general counsel. Faced with expensive litigation against the ATU and a battered image, Greyhound's eagerness to settle its disputes with the union isn't surprising. But the GLI Holding Co. unit, which has replaced more than 6,000 striking ATU members with a reduced work force of about 3,000 new hires, has already said it can't rehire all the strikers. Earlier this year, the union rejected a company proposal to rehire up to 1,900 striking ATU members over the next two years at existing pay rates. But the ATU gained some motivation to settle from a federal bankruptcy judge in Corpus Christi, Texas, who ruled late Tuesday that the company's maximum potential liability for back pay to striking ATU members was $31.3 million, or only about 25% of the amount sought by the ATU. While the estimation may not limit what ATU members could ultimately receive as a result of an unfair labor practices case filed against the company by the National Labor Relations Board's general counsel, it will be used to set the number of votes the union can cast on Greyhound's reorganization plan in the bankruptcy court. ATU's general counsel Earle Putnam said that, as a result of the judge's low-claim estimation, "It seems unlikely that we could block a reorganization plan along the lines the company has proposed." The ruling caps a series of recent setbacks for the ATU. Last month, Blackstone Group, a New York investment firm that had discussed joining the union in a possible bid to buy Greyhound, announced that it was no longer interested. Meanwhile, the ruling boosted Greyhound's hopes of emerging from Chapter 11 protection by the third quarter. Having already proposed giving unsecured creditors $165 million in new notes and a 95%equity stake in the closely held concern, the company has in recent weeks settled disputes with several major creditors and reached a tentative agreement on post-bankruptcy financing with a lender group led by Security Pacific Corp. Greyhound filed for Chapter 11 protection from creditors in June 1990, three months after more than 6,000 ATU members walked off the job. WSJ910516-0079 910516-0079. Who's News: Jetborne Says Board Suspended 3 Officers Due to Holder Suit 05/16/91 WALL STREET JOURNAL (J), PAGE B9 JETS INDUSTRIAL (IDU) INDUSTRIAL & COMMERCIAL SERVICES, LEASING, CLEANING (ICS) INDUSTRIAL AND COMMERCIAL SERVICES (SVC) FLORIDA (FL) MIAMI -- Jetborne International Inc. said its board suspended the company's three highest officers pending an investigation into allegations made in a shareholder suit filed last week. The company said David Blattner, chief executive officer; Allan Cohan, chief operating officer; and Michael Levkovitz, executive vice president, were suspended by the board, which was reorganized last week. The suit, filed May 6, alleges, among other things, that the three men took personal loans and gifts of stock from the company, said Arthur Rice, attorney for the company. None of the three men could be reached for comment. The company, which sells aircraft parts, said Amos Alouf, former vice president of aircraft sales, was appointed by the board as interim chief executive officer. The board reorganization follows the resignation last week of four Jetborne directors, including the suspended men. Jetborne said last week that the directors resigned in connection with a prior proposal of its principal stockholder, Finstock Investments Ltd., seeking control of Jetborne and replacement of its board. WSJ910516-0078 910516-0078. Law -- Legal Beat: `Work Environment' Bias Claim on Trial ---- By Amy Dockser Marcus and Milo Geyelin Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B7 LABOR OGLE WNEWS FINANCIAL (FIN) INDUSTRIAL (IDU) ALL BANKS, BANKING NEWS AND ISSUES (BNK) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) LAW AND LEGAL AFFAIRS (LAW) MARINE TRANSPORTATION (MAR) DIVERSIFIED MINING (MNG) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) LAW & LEGAL ISSUES, HEARINGS, RULINGS, LEGISLATION (LAW) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) JUSTICE DEPARTMENT (JUS) TREASURY DEPARTMENT (TRE) OHIO (OH) TEXAS (TX) MINNESOTA (MN) A trial that began this week in Duluth, Minn., tests a claim by women mine workers that their work environment subjected all of them to illegal sexual harassment. Increasingly, individual women are going to court to argue that their entire work environment -- rather than the acts of any individual -- is sexually offensive. But this is believed to be the first time that a class-action suit on behalf of all women in a workplace has been filed in such a case. If successful, employment lawyers say, it could become a powerful tool in future cases. In the Minnesota trial, three women are arguing on behalf of all past, present, and future women employees of Eveleth Mines that they were bombarded daily with obscene graffiti, sexually graphic pictures, unwanted physical touching and sexual comments from male co-workers. They claim these aspects of their work environment violated Title VII of the Civil Rights Act of 1964. Eveleth Mines, a taconite mining operation in Eveleth, is owned by Oglebay Norton Co. of Cleveland. The women are arguing, in essence, that it was a companywide policy to create and maintain a sexually hostile work environment out of a belief that mining was not "women's work" and in the hopes of discouraging the employment and advancement of women. At the trial, the women have asked federal Judge James M. Rosenbaum to order the company to issue and enforce a policy against sexual harassment. Judge Rosenbaum must still decide whether to view the plaintiffs as representing a class consisting of all women in the mine, or just themselves, a decision he has reserved until after the trial. Eveleth Mines has argued in the case that it maintains a policy against sexual harassment as part of a collective bargaining agreement with the union. The policy states that sexual harassment is considered discrimination and that the company will take appropriate corrective action if it occurs. A lawyer for Eveleth Mines could not be reached for comment. A spokesman for Oglebay Norton said the company does not comment on pending litigation. Eveleth Mines employs about 1,000 workers, including about 75 women. Lois E. Jenson, one of the plaintiffs, alleged that she had experienced sexual harassment since her first day on the job in 1975. She said she was told repeatedly by co-workers and supervisors that women didn't belong in the mines and physically and verbally harassed. When she complained about the harassment, she said, she was denied a promotion in retaliation for speaking out. After she filed the suit, she alleges that male co-workers refused to ride in the elevators with her and spread false rumors about her. Jane Lang of Sprenger & Lang, the law firm representing the plaintiffs, said that the company has never disciplined any employee for sexual harassment or conducted any training for its managers and employees. She said that the kind of sexual stereotyping experienced by the women can result in reduced job satisfaction and employment opportunities as well as emotional trauma. Judith Vladeck, an employment lawyer in New York, said that women who bring sexual harassment suits are often accused of being oversensitive and emotional. She said that a class action protects individual women from such attacks and sends a signal that the entire work environment is at fault. In addition, says Richard Glovsky, a Boston employment lawyer, "a lot of meritorious claims are dropped because the company tries to get the woman who is bringing the case to knuckle under. A class action helps balance the scales." --- CASH TRANSACTION reporting law is challenged in suit. Filed in federal court in Houston, the case is the first to contest the constitutionality of a new law that permits the U.S. Treasury Department to impose stricter reporting requirements on financial institutions suspected of drug-money laundering. The suit is being closely watched by the banking community because of the potentially burdensome expense and paperwork involved in complying with the new requirements. Financial institutions are already required to report all cash transactions involving more than $10,000. But the law at issue in the suit, an amendment to the Omnibus Drug Act of 1988, allows Treasury enforcement officials to engage in "geographical targeting." Officials can pinpoint suspect institutions, either individually or within general locales, and lower the reporting requirement to $100 for 60 days. The time limit can be extended. Both law-enforcement tools are designed to help federal authorities investigate criminal activity where cash changes hands in bulk quantities, especially drug smuggling. The suit was filed on behalf of 10 Houston giro houses, currency-exchange businesses that wire-transfer money for a fee. The plaintiffs contend that the law is unconstitutional because it delegates too much power to the Treasury Department and discriminates against the giro house owners, who are Hispanic. In a preliminary ruling this week, federal Judge John D. Rainey refused to issue a temporary injunction barring implementation of the law, but he ordered Treasury Department officials to get court approval if they want to extend the stricter requirements for longer than 60 days. The challenge to the law's constitutionality is pending. Federal law-enforcement officials have applied the law only once before, but its use has never been challenged in court, and no large bank or financial institution has ever been targeted. "There's been very little outcry from the banking sector, because they haven't been hit with one of these yet," said Washington banking lawyer Amy Rudnick. That could change. Currency-transaction reports provide detailed information about persons conducting large cash transactions and the individuals or companies for whom they work. Large financial institutions have already complained that filing them for transactions over $10,000 creates excessive paperwork. Treasury Department officials said the new law is intended to be used only in instances where strong evidence of money laundering already exists. --- HENRY KRAVIS'S EX-WIFE loses bid to reopen divorce settlement. A New York state judge dismissed Helene Kravis's lawsuit accusing her former husband of fraud in their 1984 divorce settlement. Mrs. Kravis, known as Hedi, claimed that her husband understated his net worth (assets minus liabilities) by more than $10 million, causing her to accept less than she deserved. Mr. Kravis is a founding partner of the leveraged buy-out group Kohlberg Kravis Roberts & Co. Justice Walter M. Schackman, of state court in Manhattan, dismissed the suit, saying that Mrs. Kravis's claims were "at best, vague, conclusory and speculative" and that she had failed to present any evidence of fraud. The judge also said that Mrs. Kravis waited too long to file the suit, which she brought in 1989. Mark Abramowitz, an attorney for Mrs. Kravis with the firm Parker Chapin Flattau & Klimpl, said no decision has yet been made on whether to appeal the ruling. Mr. Kravis was represented by Robert S. Cohen of Morrison Cohen Singer & Weinstein. Mr. and Mrs. Kravis were married for 13 years before separating. Their divorce settlement guaranteed her a minimum of $3 million and no more than $4 million. In his decision, Justice Schackman said that Mrs. Kravis has received a total of $7.5 million from Mr. Kravis since the divorce, which included payments under the agreement and additional voluntary payments. --- NOTED: Joan Story was named as the partner-in-charge of Pettit & Martin's 114-lawyer San Francisco office. She is the first woman to head the law firm's headquarters office. Ms. Story, 47 years old, has spent her entire legal career at the firm, where she specializes in real estate. WSJ910516-0077 910516-0077. TWA Proposes To Buy Back All of Its Debt --- Ailing Airline Seeks to Shed Heavy Interest Burden, Offers Discounted Prices ---- By Asra Q. Nomani Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A2 LABOR TWA CONSUMER CYCLICAL (CYC) AIRLINES (AIR) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) BOND MARKET NEWS (BON) EARNINGS (ERN) BUYBACKS, REDEMPTIONS, REPURCHASES, SWAPS (BBK) BOND MARKET NEWS (BON) EARNINGS (ERN) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) ILLINOIS (IL) NEW YORK (NY) Trans World Airlines, in a restructuring effort, proposed to purchase its $1.2 billion in outstanding debt for cash, offering debtholders deeply discounted prices. The move is an attempt to rid TWA of an expensive item -- interest expenses on the debt -- which has hamstrung the carrier since owner Carl Icahn took it private in 1988. The Mt. Kisco, N.Y., airline's highly leveraged position has grown more troublesome in recent months amid high jet fuel prices and the effects on air travel of the recession and the Mideast war. Since January, TWA has failed to meet interest and principal payments due on its debt. In another indication of TWA's troubles, the carrier yesterday posted a first-quarter net loss of $88.2 million, compared with a year-ago net loss of $143 million. This year's loss was narrowed by the recent $110 million sale of TWA's Chicago-London route authority to AMR Corp.'s American Airlines. In the first quarter, TWA reported an operating loss of $144.4 million, wider than the year-earlier's $100.7 million operating loss. Revenue for the quarter fell 19% to $820.2 million from $1.01 billion a year-earlier. In the debt-purchase offer, Mr. Icahn estimates he personally would lose "in excess" of $40 million on TWA debt he holds. Still, some debt specialists believe a successful restructuring could strengthen the airline and make it a much more valuable property for Mr. Icahn, who controls 90% of its stock. The offer affects seven issues of TWA debt, much of it junk bonds issued when the company went private. As previously reported, Mr. Icahn plans to fund the restructuring largely with proceeds from the $445 million sale of three London routes to American Airlines. The carrier also collected between $110 million to $120 million from Mr. Icahn's sale Tuesday of USX Corp. stock, according to a person familiar with the move. Early indications of the debt purchase surfaced last week when Mr. Icahn held talks with his unions over plans for such an action. Of the secured debt, TWA is offering equipment-trust noteholders the best price: 73 cents on the dollar. The company soon risks losing 10 jets and 62 engines secured by those notes. TWA warned that unless it clears pending litigation that allows repossession, it could be forced to file for federal bankruptcy-court protection. The company also contended yesterday that it "likely will" file for Chapter 11 bankruptcy-court protection if it doesn't complete a restructuring. TWA is also putting pressure on its unions for "significant" concessions. Union leaders aren't expected to cave in to Mr. Icahn's threats. Kent Scott, chairman of the TWA pilots' union, said yesterday, "We aren't interested in giving concessions to this management, and we're concerned about the amount of cash the restructuring will take." A full debt purchase, at prices offered yesterday, would cost TWA about $457 million. Under the offering, TWA also would buy its 15% "lightbulb" secured notes for 65 cents on the dollar. That debt is secured by a potpourri of assets including lightbulbs -- hence its name -- as well as important takeoff and landing slots at Chicago's O'Hare International Airport. Those slots are part of a $70 million sale of O'Hare assets that TWA is trying to complete with American Airlines. The noteholders are blocking completion of the sale. In junk bond trading yesterday, TWA's 15% lightbulb secured notes jumped five points to 59, or $590 for each $1,000 bond. Unsecured noteholders, who could force the company into an involuntary Chapter 11 filing, are being offered the least. TWA is offering senior unsecured holders 35 cents on the dollar, while it proposes giving junior subordinated holders 17.5 cents on the dollar. Mr. Icahn said yesterday he plans to tender the $188.5 million of junior note holdings he controls. According to a person familiar with the holding, Mr. Icahn paid an average price of 40 cents for each $1 bond; thus, he stands to lose $42.4 million. TWA's 16% senior unsecured notes and its 17.25% senior unsecured notes ended in trading at 30, or $300 for each $1,000 bond. Although heavily discounted, the prices were greeted warmly yesterday by holders, their representatives and debt analysts. "The offers are fair in the sense they're higher than recent trading prices and probably higher than what bondholders would get in a liquidation," said Frank Plimpton, a distressed-securities analyst at R.D. Smith & Company Inc., a New York brokerage firm. Some haggling is still expected over final prices of the offer, which is expected to be filed with the Securities and Exchange Commission tommorrow. Jeremy Bloomer, managing director of Credit Research and Trading Corp., a Greenwich, Conn., investment bank advising a committee of TWA unsecured holders, said, "It's a very good start, but there's more than one inning to this ball game." WSJ910516-0076 910516-0076. Marketing & Media: EC Commission Proposes Ban On Tobacco Ads ---- By Julie Wolf Special to The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B6 CONSUMER CYCLICAL (CYC) CONSUMER NON-CYCLICAL (NCY) ADVERTISING, MARKETING, PUBLIC RELATIONS (ADV) FOOD PRODUCTS (FOD) CONSUMER AND HOUSEHOLD PRODUCTS AND SERVICES (HOU) CONSUMER AND HOUSEHOLD PRODUCTS (HPR) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) TOBACCO PRODUCTS (TOB) INTERNATIONAL TRADE NEWS (TRD) TRADE ISSUES (TRD) EUROPEAN COMMUNITY (EC) FRANCE (FR) ITALY (ITA) NORWAY (NOY) NEW YORK (NY) PORTUGAL (PO) BRUSSELS -- The European Community Commission proposed a ban on tobacco advertising in newspapers, magazines and billboards, in a move that is likely to be opposed by some EC nations. Vasso Papandreou, the EC's commissioner for social affairs, said the measure was necessary for health reasons as well as to prevent trade barriers that could result from a proliferation of different national rules. She said a ban also would help protect those most vulnerable to cigarette advertising -- adolescents and children. Ms. Papandreou said there was growing support in the EC for an advertising ban, which so far has been introduced in three community countries. She also cited last year's vote by the European Parliament calling for such a prohibition. But the proposal is likely to prove controversial because it would hurt the advertising and publishing industries, already suffering from the economic downturn. Tobacco companies also are certain to lobby strongly against the measure, which still must be adopted by EC ministers. In the past, Britain, Germany and the Netherlands have come out against EC restrictions on tobacco advertising. The proposed legislation would prohibit all tobacco advertising in publications, billboards and movie theaters as of Jan. 1, 1993. It also would ban advertising of other products sporting tobacco companies' logos, such as T-shirts and shoes. Television advertising of tobacco products is banned under separate EC legislation that comes into force later this year. An exception to the ban would be advertising at places where tobacco products are sold. In addition, companies whose main line of business isn't tobacco, such as Dunhill, would be allowed to advertise products with their name on it. Tobacco companies condemned the proposal, saying it was "at odds with marketplace realities" and would serve to protect state-owned cigarette monopolies. "A large body of professional research has failed to establish any connection between advertising and total cigarette consumption; nor does the evidence support the theory that advertising leads people to start smoking," the Confederation of European Community Cigarette Manufacturers said. Paul Maglione, a spokesman for Philip Morris, said some EC countries had ulterior motives in supporting a ban on tobacco advertising. France, Italy and Portugal, which recently have banned advertising, have state tobacco monopolies that are losing market share to international tobacco companies, he said. EC commission officials, however, rejected such arguments, citing Norway, which has no tobacco industry and was one of the first countries to ban advertising. WSJ910516-0075 910516-0075. Business Brief -- Vencor Inc.: Hospital Concern Projects Record Profit, Sales in 1991 05/16/91 WALL STREET JOURNAL (J), PAGE C8 VCOR CONSUMER NON-CYCLICAL (NCY) HEALTH CARE PROVIDERS, MEDICINE, DENTISTRY (HEA) KENTUCKY (KY) Vencor Inc.'s chief executive officer, W. Bruce Lunsford, said he sees record earnings and revenue for the company in 1991. For 1990, the Louisville, Ky., hospital concern reported earnings of $3.3 million, or 54 cents a share, on revenue of $78.3 million. Last month, Vencor reported record first-quarter earnings of $1.73 million, or 23 cents a share, a fourfold increase over 1990. For the same period, revenue rose 62% to $28.1 million. Mr. Lunsford attributed the increased earnings to Vencor's growth plan, which included doubling the number of beds from a year ago by adding six hospitals to its network. "We are actively reviewing other acquisition opportunities," he added. WSJ910516-0074 910516-0074. Business Bulletin: A Special Background Report On Trends in Industry And Finance ---- By Pamela Sebastian 05/16/91 WALL STREET JOURNAL (J), PAGE A1 AFP CONSUMER CYCLICAL (CYC) FINANCIAL (FIN) ADVERTISING, MARKETING, PUBLIC RELATIONS (ADV) ALL BANKS, BANKING NEWS AND ISSUES (BNK) ENTERTAINMENT AND LEISURE (ENT) INITIAL STOCK OFFERINGS (INI) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) SECURITIES (SCR) STOCK MARKET, OFFERINGS (STK) REAL ESTATE INVESTMENTS (REA) INITIAL PUBLIC OFFERINGS (INI) STOCK & OTHER MARKET NEWS (STK) CALIFORNIA (CA) FLORIDA (FL) ILLINOIS (IL) MASSACHUSETTS (MA) POLAND (PL) TEXAS (TX) NEW YORK (NY) SWITZERLAND (SZ) ENGLISH CLASSES for immigrants face surging demand and shrinking budgets. Adults new to the U.S. and its tongue strain English as a Second Language classes, notably in California, Florida and Texas. Some classes reject students; others bulge, placing "a terrible burden" on teachers and pupils, says Terry O'Donnell at Teachers of English to Speakers of Foreign Languages, in Virginia. Northern Virginia Community College says enrollment jumped 20% from last spring. "We're swamped," says NVCC's Judith Paiva. A possible $8 million fund cut worries Texans. A decade ago, one Dallas County community college had just 10 ESL students; by 1989 there were 4,931. Migrant workers add to demand in Florida, while California eyes some 40,000 more students next fall, when a federal amnesty for undocumented aliens expires. The Golden State provides ESL classes to 1.1 million adults per year. Volunteers, employers and commercial classes help fill the gap. Bronx Community College's waiting list tops 1,000 for its free ESL classes, which may be curbed by budget cuts. GUTTER BALLS no longer thwart little bowlers, thanks to lane "bumpers." Inflated tubes that fill the gutters (aka "channels") keep bowling balls -- and bowling centers -- on course. Bumpers, along with lighter balls, shorter lanes and punchier marketing, add sales to a sport that saw its heyday in the '50s and '60s. Now, children as young as four can roll 'em, a development that triples spending in the child sector, says the Bowling Proprietors Association. A strike and a spare: Children routinely use non-peak hours, and their birthday bowling bashes sweeten margins. The device "opened a whole new market for children between four and eight," says Bill Morris, head of Regal Bowling Lanes in Tampa, Fla. He and others aid activity by donating bowling equipment to grade schools so they can teach the sport. Brunswick Bowling & Billiards plays the game by offering a line of light (six pounds) bright "Oddballs" plus Snoopy and Disney character items that propel its youth group receipts to 10% to 15% of all sales. HYPOS FOR IPOS: Services aim to keep the bloom on issues as the stocks age. Initial public offerings may be raging now, but Wall Street usually loses interest in a few months as prices dip, notes Robert Natale, editor of S&P's "Emerging and Special Situations Newsletter." Enter PR firms and consultants to help promote the stocks. Edelman PR taps S&P to help poll IPOs. It finds (perhaps unsurprisingly) that a big problem is keeping investor attention, partly because analysts' ranks have slipped some 30% since the mid-1980s. Financial PR firm Hill & Knowlton teams up with Technimetrics, an investor data base service, to offer "Intro" -- a "starter kit" for the newly public that provides help filing disclosure documents and finding key investors. The four-month program costs $30,000. Dallas Semiconductor went public in 1987 and soon signed on with Technimetrics, paying some $4,000 a year to find out who was investing in it and the competition, says CFO Michael Pate. Before going public, firms worry most about IPO expenses. Afterward, they worry about being ignored. PAPAL BEST: Pope John Paul II's letter on the market-based economy and the fall of communism sells 10,000 copies since the start of May. Papal encyclicals usually total only half that number, says the U.S. Catholic Conference, which markets the 116-page document for $6.45 a copy. ALL THE NEWS that fits is in the 10K: Affiliated Publications, publisher of the Boston Globe, drops its annual report this year in favor of sending shareholders the "more informative" 10K document. It says the move saves about $250,000. SWISS BANKS may be closer to home and probably less troubled these days, but top Polish bankers head to the U.S. for lessons. Some 40 officials of newly private Polish banks study free markets at the J.L. Kellogg Graduate School of Management at Northwestern University in Evanston, Ill. PRIME SIGN? Public television plumbs a growing video aftermarket. Buoyed by local response to its home-video purchasing service, WGBH in Boston plans a national rollout this fall. Its Public Video Service initially offers over 500 titles and eyes sales of 2,000 copies in its first months. Average sale: $50. The most popular programs include Nova, Julia Child, Masterpiece Theatre, Mystery] and Sesame Street. "We want to become a national retail store in the sky," says Karl Rosenberger, service director. Signals, a catalog of gifts tied to Public Broadcast System programs, says tapes outsold other goods (mugs, T-shirts and gizmos), so it spun off a video-only catalog. But public TV isn't alone in tuning in to home VCRs. Video Yesteryear, a Sandy Hook, Conn., catalog firm offering 1,200 classic films, adds 150 titles a year to meet demand. And, Video Delivery Box, Wyncote, Pa., gets on the bandwagon with customized gift video-shipping boxes. WGBH links with distributor Commtron Corp. to expand inventory to include 14,000 movies and programs. BRIEFS: Columbus Common, a Manhattan condos-plus-garden complex, passes out packets of forget-me-not and other posy seeds to promote unit sales. . . . The Northeastern Association of the Blind, Albany, N.Y., plans to hold part of a concert in a cave to emphasize the significance of music to the sightless. WSJ910516-0073 910516-0073. Executive Pay May Be Subject To New Scrutiny --- SEC, in Shift, Would Allow Corporate Shareholders To Vote on Some Issues ---- By Kevin G. Salwen Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A3 LABOR SECURITIES REGULATIONS AND ENFORCEMENT (RGU) STOCK MARKET, OFFERINGS (STK) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) SECURITIES REGULATION (RGU) STOCK & OTHER MARKET NEWS (STK) CONGRESS (CNG) SECURITIES AND EXCHANGE COMMISSION (SEC) DELAWARE (DE) WASHINGTON -- The door is opening for shareholders to have more say on executive pay. In a move that could sharply change the nature of management accountability to holders, the Securities and Exchange Commission will make it more difficult for companies to keep certain questions off proxy ballots. That means shareholders are likely to get a chance to vote on several issues dealing with how top executives are paid. Until now, compensation has been mostly off limits to shareholders, who were told by companies and the SEC that pay was a matter of "ordinary business" for a corporation and therefore wasn't fodder for proxy votes. But in recent years, the agency has been inching toward allowing more votes. For example, last year, the SEC decided to force companies to allow shareholder votes on "golden parachute" executive pay packages. At the same time, companies have become more responsive to shareholder demands. In the past two proxy seasons, 29 companies have agreed to allow holders to decide questions involving management compensation. At a congressional hearing yesterday, the SEC's director of corporation finance, Linda Quinn, signaled a further shift in the agency's policy. If shareholders put together a pay-related proposal to change a company's bylaws that is in keeping with state corporation law, "it will be viewed not just as a compensation issue and not just as ordinary business," she said. That means the agency is likely to block companies from keeping the question off the ballot. Ms. Quinn said it wasn't clear whether the proposal would have to deal with the executive pay system as a whole or whether a plan could set specific policies such as a dollar limit on the chief executive's salary. That would depend, she said, on how far state law would allow holders to change company bylaws, which are like a constitution. For now, though, most issues are expected to deal with corporate-governance questions, such as whether to have the executive compensation committee composed of outside directors only. Significantly, Delaware is one of the states that will be involved in the new rules because it allows corporate bylaw changes by holders. Delaware is the corporate home of more than half of all U.S. corporations. The shift comes at a time when the SEC is studying the broader issue of proxy reform. Shareholder groups, led by institutional investors, are pressing the agency to open the proxy process to a broader range of questions, allow proxy voting to be confidential and permit freer communication among shareholders. Ms. Quinn said the agency staff will be proposing proxy-rule changes to the commission in the next month or two. Corporate America has been fighting those steps, offering its own advice to the agency. It contends that shareholders shouldn't be allowed to dabble in the day-to-day operations of companies and that institutional holders are simply trying to set up a network to empower themselves against management. Ms. Quinn's comments cheered shareholder groups. "It is unquestionably clear that compensation is the corporate governance issue of the '90s," said Nell Minow, president of Institutional Shareholder Services. "It all boils down to compensation." Ms. Minow added that she expects to see a number of shareholder proposals in line with the new rules. Corporate groups expressed caution. A spokesman for the Business Roundtable Task Force on Corporate Governance, Austin Sullivan of General Mills Inc., noted that the big-business group agreed with Ms. Quinn's view that holder resolutions dealing with bylaws must fall within the guidelines of state law. But he added that "it's difficult to know if Ms. Quinn's remarks represent a significant departure from the existing rules until we see what sort of proposal they end up approving." By almost any measure, top executives are paid handsomely. In a survey of 200 chief executives, Prof. Graef Crystal of the University of California at Berkeley found that their average annual compensation including salary, options and bonuses was $2.8 million. He told the Senate Subcommittee on Oversight and Government Management that the chief executive officer of a major Japanese company earns about 17 times the pay of the average Japanese worker. The figure rises to about 23 to 25 times in France and Germany. But the average U.S. chief makes 53 more times than the average worker in cash compensation and 109 times more if bonuses and stock options are added. Sen. Carl Levin (D., Mich.), who heads the subcommittee, said he plans to press the SEC to move toward allowing more votes on compensation, particularly those dealing with stock options. WSJ910516-0072 910516-0072. Business Brief -- Golden West Financial Corp.: Thrift Company to Exercise Option to Buy Failed S&L 05/16/91 WALL STREET JOURNAL (J), PAGE A7 GDW FINANCIAL (FIN) SAVINGS AND LOANS, THRIFTS (SAL) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) FEDERAL GOVERNMENT (FDL) CALIFORNIA (CA) FLORIDA (FL) Golden West Financial Corp. said it plans to exercise its option to acquire Beach Federal Savings & Loan Association, a failed thrift in Boynton Beach, Fla., which it now operates. Golden West said it is mulling over whether to operate Beach from the holding company or from its principal unit, World Savings & Loan Association. In 1988, Golden West paid $2 million for the option to purchase the thrift any time before the end of 1993 and provided $38 million in regulatory capital. It is now moving to acquire the 15-branch thrift on the news that the Federal Deposit Insurance Corp. plans to prepay in July a $1.1 billion loan made to Beach three years ago. Beach has $1.49 billion in assets, and has reported meager earnings over the last several quarters. Golden West, with about $22 billion in assets, operates 212 offices in eight states through its World Savings subsidiary. WSJ910516-0071 910516-0071. Consumer Savings Rates 05/16/91 WALL STREET JOURNAL (J), PAGE C17 FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) BOND MARKET NEWS (BON) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) BOND MARKET NEWS (BON) Super-NOW Accounts-a 4.73% Six-month Certificates-a 5.84% One-year Certificates-a 6.08% Thirty-month Accounts-a 6.53% Five-Year Certificates-a 7.01% U.S. Savings Bonds-b 6.57% a-Average rate paid yesterday by 100 large banks and thrifts in the 10 largest metropolitan areas as compiled by Bank Rate Monitor. b-Current annual yield. Guaranteed minimum 6%. WSJ910516-0070 910516-0070. Marketing & Media: News Corp. Loss Grew Sharply In 3rd Quarter ---- By Dennis Kneale Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B8 NWS CONSUMER CYCLICAL (CYC) ENTERTAINMENT AND LEISURE (ENT) EARNINGS (ERN) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) EARNINGS (ERN) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) AUSTRALIA (ASA) GREAT BRITAIN (UK) NEW YORK -- News Corp.'s loss widened almost sevenfold to $162.7 million in its fiscal third quarter, largely because of the costs of its huge refinancing and higher interest expense. The media and entertainment concern posted 19% revenue growth in the March 31 quarter. Operating profit before the special charges rose 18% on strong results at 20th Century Fox Film Corp., whose "Home Alone" continues strongly, with the biggest revenue from home-video and international release yet to come, and at the Fox Broadcasting Co. television network. But News Corp.'s British newspapers had a tough quarter, and profit in Australia and the Pacific Basin plunged 26%. In addition, the rise in operating profit overall was inflated somewhat by the inclusion of earnings from the HarperCollins book-publishing business, which wasn't counted in the results a year ago. Moreover, the company has yet to complete the planned $650 million sale of most of its U.S. magazines to K-III Holdings Inc., which is controlled by buy-out concern Kohlberg Kravis & Roberts Co. And although News Corp. has also put its U.K. magazines up for sale, it hasn't yet announced any success in finding a buyer. Some Wall Street analysts, however, expressed mild surprise that News Corp.'s results weren't worse. The entire media industry was hurt in the first calendar quarter by the recession, a related advertising slump and the Persian Gulf war. "It's almost a meaningless quarter for everybody," because of the mix of events, said John Reidy, an analyst at Smith Barney, Harris Upham & Co. "I don't think these are bad numbers, given that this is one of the worst advertising quarters in history," said Mr. Reidy, who rates News Corp. shares a "strong hold." In composite trading on the New York Stock Exchange yesterday, News Corp.'s American depositary receipts fell 50 cents to close at $12.75. In the quarter ended March 31, News Corp. posted a loss of $162.7 million, or 95 cents an ADR, widened sharply from a year-ago loss of almost $24 million, or nine cents an ADR. Revenue rose to $2 billion from $1.68 billion. The results included a one-time charge of $166.3 million, including $150 million for costs related to the restructuring of nearly $8 billion in News Corp. debt. Those costs entailed a 1% one-time fee to the group of some 100 banks in the refinancing, additional fees paid to the two lead banks -- Citibank and Midland PLC -- and legal fees. The refinancing also included a rise of one percentage point in the interest rate on News Corp. debt. Net interest expense in the quarter rose 18% from a year earlier, to nearly 305 million Australian dollars (US$237.7 million), although most of the increase stemmed from the new inclusion of HarperCollins debt on the company's balance sheet. WSJ910516-0069 910516-0069. Tie Sale to Nitsuko Unit 05/16/91 WALL STREET JOURNAL (J), PAGE B4 J.NTO TIE TECHNOLOGY (TEC) BANKRUPTCIES (BCY) COMMUNICATIONS TECHNOLOGY (CMT) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CONNECTICUT (CT) JAPAN (JA) SEYMOUR, Conn. -- Tie-Communications Inc., a telecommunications concern, said it agreed to sell the rights to its equipment distribution channels to a unit of Nitsuko Ltd. of Japan. Under the agreement, Tie will receive a one-time cash payment, in addition to ongoing royalties from sales by Nitsuko America. In turn, Nitsuko America will assume some liabilities and acquire certain assets from Tie. Currently, Tie is proceeding with a prepackaged restructuring under Chapter 11 of the U.S. Bankruptcy Code. Tie officals said they expect the company to emerge from Chapter 11 by July 1. WSJ910516-0068 910516-0068. Marketing Brief -- Time Warner Inc.: HBO Unit Plans to Buy TVS Entertainment Stake 05/16/91 WALL STREET JOURNAL (J), PAGE B6 F.CEA F.CLP TWX U.DMG U.TVS CONSUMER CYCLICAL (CYC) ENTERTAINMENT AND LEISURE (ENT) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) FRANCE (FR) NEW YORK (NY) GREAT BRITAIN (UK) Time Warner Inc. said its Home Box Office Inc. unit agreed to acquire a stake in TVS Entertainment PLC, one of 16 British TV broadcasters that isn't run by the government. HBO's pact is in partnership with Daily Mail & General Trust PLC; Canal Plus Productions S.A., a French pay-television concern, and Cie. Generale des Eaux of Paris. The partners agreed to buy 53.6 million shares of TVS for $52.3 million. HBO's investment could amount to between $19.2 million and $26.2 million for 16.3% to 21.6% of the voting capital. TVS and HBO have co-produced several made-for-TV movies, and Time Warner is said to be in negotiations with Canal Plus regarding a significant investment in Time Warner's entertainment operations. For TVS, the offer provides a much-needed infusion of cash. TVS grew rapidly in the 1980s, culminating in 1988 in its $320 million acquisition of MTM Entertainment, which racked up losses as TVS found it tough selling reruns in the U.S. Jessica Josephson, editor and publisher of the London-based newsletter European Media Business & Finance, said the investment was "no lose" for Time Warner since it could lead to a controlling interest in MTM, which now has two series, "The Trials of Rosie O'Neill" and "Evening Shade," both on CBS Inc.'s network. WSJ910516-0067 910516-0067. U.S. Home Gets Ruling on Loan 05/16/91 WALL STREET JOURNAL (J), PAGE B12 GE UH CONGLOMERATES (CGL) CONSUMER CYCLICAL (CYC) BANKRUPTCIES (BCY) CONGLOMERATES (CGL) HOME CONSTRUCTION (HOM) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) CONNECTICUT (CT) TEXAS (TX) HOUSTON -- U.S. Home Corp. said a federal bankruptcy judge has allowed it to borrow as much as $37.1 million of a $75 million loan from General Electric Capital Corp. The home builder, which sought bankruptcy-law protection a month ago, said the loan will allow it to continue building and selling homes while it works out a plan to pay its debts. U.S. Home said that the judge will rule on whether it can borrow the full $75 million after a hearing later this month. General Electric Capital, a unit of General Electric Co., made the loan after the bankruptcy filing to provide the company with working capital. WSJ910516-0066 910516-0066. REAL ESTATE ---- By Mitchell Pacelle 05/16/91 WALL STREET JOURNAL (J), PAGE B1 BCS FINANCIAL (FIN) UTILITIES (UTI) MAJOR MONEY CENTER BANKS (BAN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) CDS, INTEREST RATES, COMMERCIAL PAPER (FIN) MORTGAGES, MORTGAGE BANKERS, MORTGAGE-BACKED SECURITIES (MOR) REAL ESTATE INVESTMENTS (REA) TELEPHONE SYSTEMS, INCLUDING CELLULAR (TLS) HEAVY CONSTRUCTION; INDUSTRIAL AND COMMERCIAL (CON) MORTGAGES, MORTGAGE RATES (MOR) HOUSING AND URBAN DEVELOPMENT (HUD) CALIFORNIA (CA) MASSACHUSETTS (MA) PENNSYLVANIA (PA) GREAT BRITAIN (UK) Slump Leaves Banks Busy Making Loans LENDERS take heed: A rolling loan gathers no loss. Commercial bankers across the nation seem to be following that advice as tens of billions of dollars in medium-term commercial real-estate loans made in the 1980s come due. Many developers who have kept current on these five-year and seven-year loans can't secure long-term financing from traditional sources, mainly insurance companies, which have virtually stopped lending because of the real-estate slump. So, the developers can't make the final balloon payments to their bankers. Rather than foreclose on these developers, as they have on those defaulting on short-term construction loans, many commercial banks are rolling over the loans -- that is, making new loans to pay off the old ones. As a result, while many commercial banks have virtually stopped making loans for new real-estate projects, they are originating more long-term commercial real-estate loans than ever. In the first three-quarters of 1990, commercial banks originated more than $127 billion in long-term real-estate loans, surpassing the totals for all of 1987 and 1989 and approaching the record of $131 billion, set in 1988, according to Goldman Sachs. Full-year figures for 1990 haven't been compiled, but William Breuggeman, a Goldman Sachs research consultant, estimates the total at a record $170 billion. "The banks are going to try to be tough with owners, to tell them to find money elsewhere," Mr. Breuggeman says. "As a practical matter, though, banks don't have much of an alternative but to refinance." David Shulman, director of real-estate research for Salomon Brothers, says, "In some cases, {banks} want to postpone the day of reckoning." In other cases, they want to support good projects until liquidity returns. Mr. Shulman expects the rollover trend to continue well into next year, as the medium-term loans made at the height of the development boom come due. Feds Postpone Deadline For Licensing Appraisers THE FEDERAL thrift bailout law of 1989 aimed to eliminate faulty appraisals, one cause of the real-estate lending fiasco, by requiring all 50 states to begin licensing appraisers by this July 31. But a recent survey by the Appraisal Foundation reported that 10 states -- including California, Massachusetts and Pennsylvania -- didn't expect to have certification programs in place on time. Five other states said they weren't sure they would. As a result, federal financial regulators last month extended the deadline to Dec. 31, and legislation has been introduced in both houses of Congress to push the cutoff to the end of next year. Appraisers now face no entry-level educational or regulatory requirements. The legislation requires that properties in real-estate transactions financed by federally insured lenders be appraised by licensed appraisers. Licensing criteria, set by the states, include courses, examinations and continuing education. Four federal regulatory bodies have suggested that the licensing requirement apply to all transactions of more than $50,000, but commercial banks are seeking a $100,000 threshold. The median sales price of single-family homes last year was about $95,000. Kevin McCullagh, a senior vice president at Mellon Bank in Pittsburgh, says the lower threshold would cost home buyers time and money because there would be a shortage of certified appraisers. Realtor Mortgage Fees Headed for Compromise THE Department of Housing and Urban Development appears to be heading for a compromise on a long-simmering dispute over whether real-estate brokers should be allowed to collect mortgage-origination fees. At issue is whether residential real-estate brokers who place mortgage applications with banks on behalf of home buyers should be able to collect fees from buyers for the service. Brokers have received fees of up to 1% of mortgage amounts for doing so. Citibank introduced the practice in the early 1980s to gain a larger share of the home mortgage market. But mortgage bankers strongly oppose the practice, arguing that it is a conflict of interest for brokers to simultaneously collect sales commissions from home sellers and mortgage-origination fees from home buyers. In April, New York regulators declared the practice "unlawful" due to "inherent conflicts of interest," effectively barring brokers there from taking origination fees until HUD issues rules. The National Association of Realtors argues that so long as buyers are informed of a broker's relationship with the lenders, the fees aren't improper. John Tuccillo, the group's chief economist, says representing the seller in the home sale and the buyer in securing the mortgage constitute two separate transactions. Realtors and bankers who have seen a draft of HUD's proposed regulation indicate that the agency is prepared to allow the practice, but to cap fees at $250 -- which opponents of the practice say would reduce the incentive to brokers to pursue the fees. Odds and Ends BARCLAYS American Mortgage, an affiliate of Barclays Bank, offers home mortgage services over the phone. Borrowers can dial an 800 number, give the lender pertinent information, then sign documents faxed or sent through the mail. . . . Weichert Realtors in Morris Plains, N.J., offers home-buying help to couples getting married: Weichert will set up a "down-payment fund," a bank account in which wedding guests can deposit money toward a down payment. WSJ910516-0065 910516-0065. OTC Focus: Technology Shares Lead Market Lower Amid Fear of Computer Inventory Glut ---- By Anne Newman and Dave Pettit Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C6 STOCK INDEXES (NDX) OTC GENERAL MARKET COMMENT (OTC) STOCK MARKET, OFFERINGS (STK) U.S. STOCK MARKET STATISTICS (STT) STOCK AND OTHER INDEXES (NDX) STOCK & OTHER MARKET NEWS (STK) NEW YORK -- Fearing an inventory glut among computer dealers, investors flogged technology issues and triggered the biggest one-day drop in over-the-counter stocks since small issues launched the broad market rally in October. Compaq Computer, listed on the New York Stock Exchange, provoked the bloodbath. It said second-quarter profit would slide to below 25 cents a share from $1.18 a year earlier, and blamed mergers among dealers for creating excess inventory. Investors' fears quickly spread to the many technology stocks that trade over-the-counter: The Nasdaq Composite Index, heavily influenced by big computer-related companies such as Microsoft, Apple Computer and Intel, plunged 10.71 to 478.08, a 2.19% loss and the largest one-day drop since Oct. 11. The Nasdaq Composite now is down more than 33 points, or 6.5%, from its all-time high of 511.31 set last month. OTC volume rose to 186.7 million shares from 155 million Tuesday. Decliners swamped advancers, 1,396 to 584; 63 stocks reached new highs while 52 fell to new lows. "They're throwing the baby out with the bath water," said Lawrence Bowman, manager of the Fidelity Select Technology and Fidelity Select Computer funds. Investors bailed out of technology stocks across-the-board, regardless of how strong demand is for a company's products, how dependent a company may be on dealers or how vulnerable overseas profits may be because of the stronger dollar, he said. The Nasdaq Industrial Index, which includes many large technology issues, dove 14.43 to 529.23, a 2.6% fall. Intel, the day's most active OTC issue, tumbled 4 to 49 1/4; Apple dropped 3 to 50 1/2; Sun Microsystems fell 2 to 34 7/8; Microsoft skidded 3 1/4 to 98; AST Research toppled 2 5/8 to 22 1/8; Quantum slipped 1 3/8 to 11 3/4; Novell fell 5/8 to 52 1/2; Seagate Technology declined 3/4 to 12 1/8; Intelligent Electronics extended its losses 2 to 21 1/2; SynOptics Communications sank 3 1/4 to 30 3/4; and Cisco Systems fell 2 3/8 to 28 1/4. The selling spread across the OTC universe to leading health care, biotechnology and other high-growth companies: Shares of Medical Care International dropped 3 to 50 1/2; U.S. Healthcare slid 2 7/8 to 28 3/4; Medco Containment slipped 1 1/4 to 44; Amgen fell 1 3/4 to 116; and Costco Wholesale dropped 2 1/2 to 71 1/4. Mr. Bowman said that he used the opportunity to strengthen his portfolio with more shares of "high-quality" technology companies: those with strong demand for their products that he expects won't be hurt by inventory backlogs among dealers or by the stronger dollar affecting their overseas earnings. "The stocks may not go anywhere in three months," he said, "but when market turns, the higher-quality names will run the fastest." He added to his positions in Intel, Sun, Autodesk, which fell 2 to 54 1/4, Novell and AST Research, but said he would be using the next few days to sell shares of weaker companies. Despite the debacle in OTC stocks, an initial public offering of OW Office Warehouse fared well. Underwritten by Donaldson, Lufkin & Jenrette and William Blair & Co., the operator of retail supply warehouses offered two million shares at $14.50 apiece. OW Office Warehouse ended the day at 14 1/2 on more than two million shares. But another recent new offering, Leslie's Poolmart, plunged after its underwriter, Montgomery Securities, lowered its earnings estimates. Analyst Robert Cheadle lowered the estimates yesterday, less than a month after Montgomery took the California retailer of swimming pool supplies public at $11 a share. Yesterday, the company reported that its first-quarter losses widened to 72 cents a share from 66 cents, although revenue rose to $10.3 million from $8.9 million. The stock tumbled 2 3/4 to 8 1/4. More than 20 million American depositary receipts of Telefonos de Mexico S.A., or Telmex, changed hands as the OTC issue eased 1/32 to 3 3/8. The Mexican telephone company said that it will give holders of the ADRs representing its A shares, which are traded on Nasdaq, the opportunity for a limited period to convert them to ADRs representing new "L" shares traded on the New York exchange. The L shares came to the Big Board recently via Goldman Sachs. Peter DaPuzzo, head of equity trading at Shearson Lehman Brothers, said that although the Nasdaq market fell sharply, he was encouraged by the relatively moderate volume. "It isn't a convincing type of selloff where everybody is taking their money out and hiding," he said. He said new leadership may come from the financial segment and early cyclical areas such as retailing and housing issues. The New York Stock Exchange Composite Index closed with a loss of 1.57, or 0.77%, while the industrial average was down 21.47, or 0.74%, to 2865.38. Ameritrust fought the downward trend to close with a gain of 1 1/8 to 17 1/8. The company confirmed that it has received offers to begin negotiations for a merger. The other party wasn't identified; Ameritrust didn't say whether it plans to take part in talks. The stock rose 1 Tuesday on speculation about an acquisition. Tele-Communications Class A shares fell 7/8 to 15 3/8. The company posted a first-quarter loss of seven cents a share, compared with a loss of 19 cents in the year-ago period. Meanwhile, Cytogen, which offered two million additional shares at $14.75 apiece, ended unchanged at 14 3/4, and Michael Foods, which offered 2,250,000 shares at $19.375, closed off 1/8 to 19 1/4. Scitex fell 3/4 to 26 3/4. The stock had advanced earlier in the session after the company posted first-quarter net income of 61 cents a share compared with year-ago net of 39 cents. System Software Associates fell 1 3/4 to 13 1/2. Late Tuesday, the manufacturer of software products for large business computers projected second-quarter net of five cents to nine cents a share, down sharply from 32 cents last year. Bruno's Inc. rose 1/4 to 18 1/8. The stock will be added to the Standard & Poor's 500 Index on May 21, replacing Square D, which is being acquired by Schneider S.A. Shares of firms entering the index typically rise as portfolio managers add the issues to funds that are designed to mimic that market barometer's performance. Dick Clark Productions rose 2 to 5 1/2. The company posted third-quarter net income of 16 cents a share, up from six cents a year ago. Revenue advanced to $15.3 million in the period from $8.4 million a year ago. In-Store Advertising lost 1/4 to 3 1/8. The company posted a first-quarter loss of 58 cents a share, compared with net income of one cent last year. WSJ910516-0064 910516-0064. Business Brief -- Landmark Land Corp.: Net Loss in First Quarter Widened to $18.2 Million 05/16/91 WALL STREET JOURNAL (J), PAGE A3 LML FINANCIAL (FIN) EARNINGS (ERN) REAL ESTATE INVESTMENTS (REA) EARNINGS (ERN) CALIFORNIA (CA) Landmark Land Corp., Carmel, Calif., said its first-quarter net loss widened to $18.2 million, or $2.27 a share, further complicating its struggle to remain afloat. The year-earlier net loss was $12.8 million, or $1.60 a share. However, the latest loss was significantly less than losses in recent quarters, when the company, under pressure from thrift regulators, belatedly recognized long-deferred losses at its Oak Tree Savings Bank unit. Oak Tree is one of the most troubled thrifts in the country. Landmark is a real estate developer that made most of its investments through its Oak Tree unit. In the quarter, Oak Tree had a net loss of $20 million, driving its net worth down to a negative $440.8 million, one of the largest such deficits among thrifts. The thrift has "classified assets" -- loans or real estate that regulators believe are substandard -- totaling $506.8 million. Its reserves for losses totaled $125.3 million at March 31. Regulators are considering seizing the thrift. Landmark itself had negative net worth of $228.9 million at March 31. Landmark said it remains in negotiations with regulators on the fate of Oak Tree and a proposed $739 million sale of real estate assets to Daiichi Real Estate Co. WSJ910516-0063 910516-0063. Business Brief -- Del-Val Financial Corp.: Loss Totaled $59.1 Million In 1990 as Revenue Fell 05/16/91 WALL STREET JOURNAL (J), PAGE B8 DVL FINANCIAL (FIN) EARNINGS (ERN) REAL ESTATE INVESTMENTS (REA) EARNINGS (ERN) NEW JERSEY (NJ) Del-Val Financial Corp., Bogota, N.J., posted a 1990 net loss of $59.1 million, or $9.29 a share, vs. year-earlier net income of $8.6 million, or $1.86 a share. The real-estate investment trust attributed the loss primarily to a $64.4 million loan-loss provision related to troubled affiliate Kenbee Management Inc., as well as to the deteriorating New Jersey real-estate market. Kenbee formerly managed Del-Val, which has said Kenbee is the source of almost all of Del-Val's loans receivable. Revenue declined to $17.8 million from $20.9 million. Meanwhile, Del-Val said its independent auditor, Richard A. Eisner & Co., declined to issue an opinion on the financial statements because of major uncertainties, including pending shareholder lawsuits and administrative investigations. In March, Deloitte & Touche was dismissed as DelVal's auditor after it said it advised the trust that the scope of its audit needed to be expanded. WSJ910516-0062 910516-0062. Chairman of Toronto Exchange 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION WNEWS FINANCIAL (FIN) SECURITIES (SCR) STOCK MARKET, OFFERINGS (STK) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) STOCK & OTHER MARKET NEWS (STK) CANADA (CN) TORONTO -- The Toronto Stock Exchange named K. Michael Edwards, president and chief operating officer of securities firm Richardson Greenshields of Canada Ltd., as chairman. Mr. Edwards succeeds Charles Caty, who completed a four-year term as chairman. Mr. Caty, 50 years old, is vice president and director of RBC Dominion Securities Inc. Frederick M. Ketchen, senior vice-president of equity trading at Scotia-McLeod Inc., was named vice chairman of the exchange. WSJ910516-0061 910516-0061. Business Brief -- WestAir Holding Inc.: Net Loss for First Quarter Posted by Regional Airline 05/16/91 WALL STREET JOURNAL (J), PAGE A8 WAH CONSUMER CYCLICAL (CYC) AIRLINES (AIR) EARNINGS (ERN) EARNINGS (ERN) CALIFORNIA (CA) WestAir Holding Inc., Fresno, Calif., reported a first-quarter net loss, citing aggressive industrywide discounting, high fuel prices and sluggish traffic. For the quarter, the regional airline said it had a loss of $4.5 million, or 69 cents a share, against a year-earlier profit of $167,000, or three cents a share. Revenue rose to $62 million from $60 million. WestAir, which operates as United Express under a marketing agreement with United Airlines, also announced schedule changes in an attempt to avoid some of the price wars being waged on the West Coast. For instance, the carrier said it will discontinue service between Sacramento and Burbank, Calif., and between Santa Rosa and Los Angeles next month, and redeploy those planes to provide connecting service to Dulles Airport in Washington, D.C. WestAir's stock closed yesterday at $3.75, down 25 cents, in composite American Stock Exchange trading. WSJ910516-0060 910516-0060. Business Brief -- Automatic Data Processing Inc.: Share Price Falls in Wake Of Meeting With Analysts 05/16/91 WALL STREET JOURNAL (J), PAGE A6 AUD TECHNOLOGY (TEC) SOFTWARE (SOF) NEW JERSEY (NJ) Automatic Data Processing Inc.'s share price fell sharply in New York Stock Exchange trading as investors reacted to management's cautious tone following a meeting with analysts Tuesday night. Officials of the Roseland, N.J., computer services company couldn't be reached for comment, but analysts said Automatic Data indicated that it continues to feel recessionary pressures. In composite trading, its stock price fell $3.375 to close at $32.50. So far this year, the stock has traded between $25 and $37 a share. Rick Sherlund of Goldman, Sachs & Co. said, "Management was a little more downbeat and cautious than they've traditionally been." He said the company did surprisingly well until the third quarter, ended March 31, when earnings began to show the impact of recession. Mr. Sherlund is retaining his $1.62-a-share earnings estimate for the fiscal year ending this June 30, up from $1.44 last year. Meanwhile, Stephen T. McClellan, an analyst with Merrill Lynch, cut estimates for the current year to $1.62 a share from $1.65. Mr. Sherlund said the company's 13% annual growth rate will slow to around 11% next fiscal year. WSJ910516-0059 910516-0059. Business Brief -- Comcast Corp.: Cable Company's Net Loss Narrowed in First Quarter 05/16/91 WALL STREET JOURNAL (J), PAGE A7 CMCSA CONSUMER CYCLICAL (CYC) EARNINGS (ERN) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) EARNINGS (ERN) PENNSYLVANIA (PA) Comcast Corp. reported a narrower loss of $42.3 million, or 37 cents a share, in the first quarter, as revenue rose 13%. In the year-earlier quarter, the net loss was $45.9 million, or 41 cents a share. The Philadelphia company, which develops and operates cable systems, attributed the recent results to financing costs, non-cash charges for depreciation and ammortization. The company also cited losses associated with its stakes in other companies, including its 50%-owned Storer Communications Inc. Revenue rose to $174.7 million from $154.1 million. WSJ910516-0058 910516-0058. Fidelity Parent's 1990 Profit Fell As Revenue Rose ---- By William M. Bulkeley Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C19 EARNINGS (ERN) MUTUAL AND MONEY-MARKET FUNDS (FND) EARNINGS (ERN) MUTUAL FUNDS (FND) MASSACHUSETTS (MA) BOSTON -- The parent of the Fidelity Investments family of mutual funds said 1990 earnings plunged despite revenue growth, and analysts said an industry price war is partly to blame. Closely held FMR Corp. said net income for 1990 fell 40% to $31.9 million from $53.2 million. A spokesman said the lower earnings reflect increased investments in computer systems, facilities, and emerging businesses such as a new investment-advice magazine, a fiber optic communications company in Boston's financial district and a mobile radio communications firm. But Sy Jacobs, financial services analyst for Mabon Securities, said Fidelity is locked in a market-share war with publicly held Dreyfus Corp. that has hurt both firms' profits. "It's been a trend that when you introduce a new product, you hold down the management fees," he said. "Short term, the more money that comes in the door, the more money you lose." Fidelity has been marketing heavily its Spartan funds, which include a money market fund with a management fee equal to 37 basis points, or hundredths of a percentage point, vs. 50 or 60 basis points on other Fidelity money market funds. Spartan funds hold down costs by requiring large investments and limited transactions. Laurence Dwyer, a public relations specialist at Fidelity, said, "The lower fees and subsidized expenses on some Spartan funds have had a minor impact on our profits." He said the Spartan money market fund was profitable last year. Dean Eberling, an analyst with Shearson Lehman Brothers, said, "the long-term growth implied by this strategy is pretty good, but the cost near term is pretty heavy." He added, "because they're not a public company, what do they care?" FMR's revenue for 1990 rose 17% to $1.27 billion from $1.08 billion. Assets under management rose 9.1% to $118.8 billion at the end of 1990 from $108.9 billion a year earlier. A spokesman said that because of the stock market run-up during the first quarter, assets under management currently total about $134 billion. FMR is about half-owned by Edward Johnson III, its chairman and chief executive officer, with the rest of the stock held by Fidelity employees who can sell it only to the company. As such, FMR isn't required to release financial results. Last year saw a slowdown in many areas of Fidelity's performance compared with the last half of the 1980s. Fidelity's assets under management had a compound annual growth rate of 16.2% for the five-year period, well above the 9.1% rate for only last year. Mutual fund accounts fell 2.2% in 1990 to 4.4 million. Brokerage accounts fell 10% to 1.8 million. However, the number of both mutual fund transactions and brokerage account transactions rose sharply last year. Fidelity said that at the end of 1990, it had 7,000 employees, up 7.9% for the year but well below the 8,100 employed at the end of 1987. WSJ910516-0057 910516-0057. Marketing & Media -- Advertising: Top Ad Executives Meet to Tackle Their Biggest Marketing Task ---- By Joanne Lipman 05/16/91 WALL STREET JOURNAL (J), PAGE B6 ACCOB CCI FCB GREY J.FJH NLI OMC RAL WNEWS WPPGY CONSUMER CYCLICAL (CYC) FINANCIAL (FIN) INDUSTRIAL (IDU) CONSUMER NON-CYCLICAL (NCY) ADVERTISING, MARKETING, PUBLIC RELATIONS (ADV) AUTOMOBILES (AUT) MAJOR MONEY CENTER BANKS (BAN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) BEVERAGES (BVG) DISTILLERS AND BREWERS, MAKERS OF ALCOHOLIC BEVERAGES (DST) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) FOOD PRODUCTS (FOD) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) OTHER SPECIALTY RETAILERS OF LIMITED PRODUCT LINES (OTS) ALL SPECIALTY RETAILERS (RTS) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) JUSTICE DEPARTMENT (JUS) COLORADO (CO) ILLINOIS (IL) JAPAN (JA) MARYLAND (MD) NEW YORK (NY) SINGAPORE (SN) GREAT BRITAIN (UK) WHITE SULPHUR SPRINGS, W.Va. -- The ad industry's top executives meet today to tackle their biggest marketing challenge: persuading their clients to spend money. As the annual conference of the American Association of Advertising Agencies convenes, recession-weary advertisers are cutting ad spending at an alarming rate. Times are so tough for ad agencies that conference attendance at the Greenbrier, a genteel golf-and-tennis resort where rooms can top $500 a day, is at its lowest ebb in more than a decade. Fewer than 450 executives are expected, down from more than 600 last year and a far cry from the 1981 high of more than 800. "The economy in general is bad -- and the advertising economy is very bad," says John O'Toole, the trade association's president. The title of his keynote speech today: "Remembering a Year Best Forgotten." Trying desperately to reverse the ad-spending trend, executives here have armed themselves with piles of studies, which all come to the same conclusion: Advertisers that continue to spend or even increase ad spending during a recession gain market share at the expense of rivals. The ad executives are mounting their own ad campaigns to try to get that message across. The association itself is about to unveil a series of ads featuring top executives, including Ira C. Herbert, president of Coca-Cola Co.'s North American operations, saying things like, "The surest, swiftest way to achieve corporate anonymity is to stop advertising." The media has joined in the act with similar ads. The Newspaper Advertising Bureau this week announced a campaign suggesting that "trimming newspaper from your ad budget" will lead to "a cut in sales." The Wall Street Journal has run an ad summarizing recession research and saying, "recessionary advertising works." The ad industry, though, may be talking to itself -- and clients may not be listening. The ad agency association, for example, has distributed more than 4,000 booklets capsulizing research showing the benefits of advertising during economic downturns titled, "Advertising in a Recession: The Best Defense is a Good Offense." "Can I tell you a lot of advertisers have changed their minds because of this?" asks Keith Reinhard, chairman of Omnicom Group's DDB Needham ad agency and outgoing chairman of the association. "Not yet." The association's booklet cites the case of Chevrolet, which increased ad spending for its fuel-saving economy models during the 1975 recession, even as Ford cut advertising by 14%. Chevrolet gained market share at the expense of its rival. A McGraw-Hill study of 468 companies during that recession found the same pattern: Those that maintained or increased ad spending showed better sales growth than those that cut spending, the booklet says. Ad agencies, including Ayer and DDB Needham, have weighed in with new research papers of their own. Ayer suggests tailoring ad programs to poorer, harsher realities, citing previous recession campaigns like the "A-1 Steak Sauce isn't just for sirloin anymore" ads showing people slopping the sauce on humble hamburger rather than steak. Counsels the Ayer report: "Top executives should cash in on the opportunity that rival companies {with lower ad spending} are creating for them." The most ambitious of the new studies comes from WPP Group's Center for Research & Development. The study analyzed 749 businesses over a four-year period and found that "advertisers who increase spending -- whether modestly or aggressively -- achieve greater market-share gains than those who cut their advertising investment." The study would have seemed like a good marketing tool for WPP units Ogilvy & Mather and J. Walter Thompson, except that WPP didn't take its own advice: Immediately after the study was issued last fall, WPP closed the center's doors in a cost-cutting move. Ad executives are well aware that they are preaching to the converted as they tell each other how important it is for clients to continue spending. But like the annoying chant of Wisk's "Ring around the collar," they won't be silenced. "We've got to keep it up and wear away to show advertisers that it is in their interest to advertise during a recession," says the association's Mr. O'Toole. "It doesn't necessarily work overnight." --- Ayer Loses Citibank Citicorp pulled its estimated $10 million New York branch Citibank account from Ayer and awarded it to Foote, Cone & Belding, the Chicago-based agency that handles the bulk of Citicorp's account. "We're continuing to develop a global communications strategy to make sure that there's consistency among our businesses world-wide, particularly on the advertising side," a spokesman explained the consolidation. The account is expected to be serviced at Foote Cone's New York agency, FCB/Leber Katz Partners. Ayer told its employees that this won't affect the agency's role on Citicorp's corporate account, but officials at both Ayer and Citicorp said that account isn't active. "Conflicts and consolidations are a world-wide reality of this business," said Dom Rossi, president of Ayer's New York office. "We wish Citibank well." Ayer's direct marketing unit will continue to do work for Citicorp bank cards. Foote Cone handles bank advertising for branches in California, Florida, and a number of other states, and Citicorp advertising in more than 10 countries. In late 1989, Citicorp awarded the Citicorp Savings Illinois account, which had been handled at Ayer's Chicago office, to Foote Cone. --- Ad Notes. . . . EVEREADY UPDATE: Following a judge's decision yesterday, Adolph Coors said it plans to immediately begin airing a Coors Light commercial parodying the Energizer bunny ads. Judge Charles R. Nogle Sr. in federal court in Chicago denied Eveready Battery Co.'s motion that sought to block Coors from airing the spot. The commercial shows actor Leslie Nielsen decked in bunny ears and banging a big drum. Coors's "imitation of the Energizer bunny is far from excessive," the judge wrote. "Mr. Nielsen is not a toy {mechanical or otherwise}, does not run on batteries, is not 15 inches tall, is not predominantly pink, {and} does not wear sunglasses or beach thongs." Eveready, a unit of Ralston Purina, said it will continue its suit in federal court if Coors airs the spot. AGENCY SWITCH: Newmark & Lewis, Hicksville, N.Y., named Partners & Shevack, New York, to handle its estimated $18 million account. New York-based Ayer was assigned the account just three weeks ago, but the consumer-electronics chain changed its mind and decided the campaign Partners & Shevack pitched would better serve the company, said Dick Lewis, co-chairman. FINALISTS: Subaru of America named six finalists for its $60 million ad account: Warwick Baker & Fiore; W.B. Doner & Co.; Jordan, McGrath, Case & Taylor; DCA; Wieden & Kennedy; and the incumbent, Levine, Huntley, Vick & Beaver. Subaru is a unit of Fuji Heavy Industries. SINGAPORE: D'Arcy Masius Benton & Bowles extended its equity partnership with Tokyu Agency International, the agency's partner agency in Japan, to include DMB&B Singapore. The Singapore agency will now be known as DMB&B Tokyu. Terms weren't disclosed. WHO'S NEWS: James D. Patterson was named managing director of Leo Burnett's office in Singapore. WSJ910516-0056 910516-0056. Business Brief -- A&W Brands Inc.: Soft-Drink Concern Buys Rest of Subordinated Notes 05/16/91 WALL STREET JOURNAL (J), PAGE A7 SODA CONSUMER NON-CYCLICAL (NCY) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) BEVERAGES (BVG) SOFT DRINKS, MAKERS OF NON-ALCOHOLIC BEVERAGES (SFT) BUYBACKS, REDEMPTIONS, REPURCHASES, SWAPS (BBK) NEW YORK (NY) A&W Brands Inc. said it purchased the remaining $3.3 million of its 12.75% subordinated notes outstanding. The White Plains, N.Y., soft-drink maker said it paid $104.80 for each $100 of principal amount, for a total payment of $3.5 million, including accrued and unpaid interest. The purchase was financed by using $3 million of the company's exisiting credit facility plus cash. The purchase, which eliminates all the company's high-yield debt and significantly reduces its bank debt, was part of a $35 million offering in May 1986 set to mature May 15, 1996. M.L. Lowenkron, A&W's president and chief executive, said the purchase "clearly illustrates the company's highly successful results over the past five years." WSJ910516-0055 910516-0055. Spectrum Information's Contract 05/16/91 WALL STREET JOURNAL (J), PAGE A2 SPCLC TECHNOLOGY (TEC) COMMUNICATIONS TECHNOLOGY (CMT) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) TEXAS (TX) DALLAS -- Spectrum Information Technologies Inc. said it agreed to provide about 2,250 laptop computers and peripherals to Aid Association for Lutherans, a fraternal insurance company, for $10 million. Spectrum, which develops and sells telecommunications and portable data products, said the sale was made through its Dealer Service Business Systems Inc. unit, a laptop reseller. Delivery is expected to occur in Spectrum's second quarter ending Sept. 30. WSJ910516-0054 910516-0054. Midlantic Plans Sale Of United Penn Bank, Gets Bid on New York Unit 05/16/91 WALL STREET JOURNAL (J), PAGE A9 AIB CSFN MIDL FINANCIAL (FIN) EASTERN U.S. BANKS (BAE) MAJOR MONEY CENTER BANKS (BAN) ALL REGIONAL BANKS (BAR) ALL BANKS, BANKING NEWS AND ISSUES (BNK) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) IRELAND (EI) NEW JERSEY (NJ) PENNSYLVANIA (PA) EDISON, N.J. -- Midlantic Corp., trying to raise capital as bad loans continue to hurt earnings, said it put its United Penn Bank subsidiary on the block. The move comes less than a month after the bank holding company announced it was negotiating to sell its York Bank & Trust unit. Both subsidiaries are similar in size, with United Penn having about $1.5 billion in assets while York has about $1.4 billion in assets. The sale of both units would shrink Midlantic's asset base by about 13%, the company said. Yesterday, Allied Irish Banks PLC said it tendered a bid for York Bank. Patrick Dowling, AIB's deputy chief executive officer, said the Irish commercial banking group is among "four or five bidders" for the 26-branch operation. Among the other bidders is CoreStates Financial Corp., a Philadelphia banking group. Mr. Dowling said AIB gave Midlantic a "range we are willing to pay" for AIB, but didn't disclose its bid. Midlantic officials declined to comment on the offer. The company didn't disclose the names of potential buyers for United Penn, which has 34 offices in Pennsylvania, but said it anticipates entering into an agreement of sale upon completion of normal due diligence reviews. A spokeswoman said the sale price would represent a substantial premium above a book value of $85.5 million. "The sale of United Penn, which represents about 7% of Midlantic's asset base, is part of the corporation's current restructuring program to further strengthen capital," said Gerry J. Scheuring, who took the helm as chairman last month. WSJ910516-0053 910516-0053. Business Brief -- First City Financial Corp.: Unit Is Expected to Reach Pact on Revamping Debt 05/16/91 WALL STREET JOURNAL (J), PAGE A8 T.FCY FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) BOND MARKET NEWS (BON) BOND MARKET NEWS (BON) CANADA (CN) First City Financial Corp., Toronto, said its First City Industries Inc. unit is optimistic it can reach an agreement with its lenders to restructure $97 million of debentures. First City Financial said the unit expected to default on the debentures, which came due at midnight yesterday. The default could result in another $27 million of debentures coming due, it said. A spokesman for the parent said no other large redemptions are scheduled this year for First City Financial or any of its units. First City Financial, the Belzberg family's flagship holding company, is in the midst of its own debt restructuring following heavy losses at its recently discontinued securities investment and trading operations. WSJ910516-0052 910516-0052. United New Mexico Financial 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION BNKS I FINANCIAL (FIN) ALL REGIONAL BANKS (BAR) WESTERN U.S. BANKS (BAW) ALL BANKS, BANKING NEWS AND ISSUES (BNK) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) NEW MEXICO (NM) ALBUQUERQUE, N.M. -- United New Mexico Financial Corp. said it completed its previously announced acquisition of three units of First Interstate Bancorp, Los Angeles, for $52.5 million. United New Mexico, a bank holding company, said it completed a previously announced offering of common and preferred stock to fund the purchase of the First Interstate Banks of Albuquerque, Lea County and Roswell, all in New Mexico. The offering approximately doubled the company's 4.3 million common shares outstanding, assuming conversion of the preferred. WSJ910516-0051 910516-0051. Business Brief -- Bernard Chaus Inc.: Apparel Maker Posts a Loss Of $5.2 Million for Quarter 05/16/91 WALL STREET JOURNAL (J), PAGE A7 CHS CONSUMER CYCLICAL (CYC) EARNINGS (ERN) TEXTILES AND APPAREL (TEX) EARNINGS (ERN) NEW YORK (NY) Bernard Chaus Inc., New York, citing unusually weak retailing business during the winter, reported a net loss of $5.2 million, or 29 cents a share, in its March 31 third quarter. In the year-earlier quarter, the maker of women's sportswear had a profit of $200,000, or one cent a share. Although Chaus's sales improved in April and so far in May, officials say they expect the company to report a loss for the year ending June 30. Third-quarter sales fell 23%, to $54.8 million from $71.4 million. The company attributed the decline in sales and earnings to reduced selling prices and fewer items being sold. For the nine-month period, the company reported a net loss of $9.4 million, or 51 cents a share, compared with a profit of $300,000, or two cents a share, last year. Separately, the company said its chairman and chief executive officer, Bernard Chaus, has been hospitalized but is in "stable" condition. In his absence, his duties are being handled by President Josephine Chaus. Officials weren't immediately available to elaborate. WSJ910516-0050 910516-0050. Business Brief -- Wheeling-Pittsburgh Steel Corp.: Concern to Pay $6 Million To Settle Pollution Charges 05/16/91 WALL STREET JOURNAL (J), PAGE A3 WHX BASIC MATERIALS (BSC) ENVIRONMENT (ENV) STEEL MANUFACTURERS (STL) ENVIRONMENTAL NEWS (ENV) JUSTICE DEPARTMENT (JUS) OHIO (OH) WEST VIRGINIA (WV) Wheeling-Pittsburgh Steel Corp. said it agreed to pay $6 million in civil fines to settle alleged violations of the federal Clean Water Act at three plants in Ohio. The agreement, which was filed in U.S. District Court in Columbus, Ohio, is a "fair compromise," the steelmaker said. The company will pay the fine and perform environmental audits to ensure that it reduces toxicity at the facilities, which are located in Steubenville, Mingo Junction and Yorkville, Ohio. The fine will be paid from a special escrow fund set aside for this purpose before Wheeling-Pittsburgh emerged from bankruptcy proceedings on Jan. 3. The Wheeling, W.Va., concern also said it will undertake certain environmental projects beyond those required by law. WSJ910516-0049 910516-0049. Business Brief -- R.G. Barry Corp.: Firm Sees First-Half Loss But Narrower Than in 1990 05/16/91 WALL STREET JOURNAL (J), PAGE A2 RGB CONSUMER CYCLICAL (CYC) TEXTILES AND APPAREL (TEX) OHIO (OH) R.G. Barry Corp.'s chairman and chief executive officer, Gordon Zacks, said he expects the company to post a loss on slightly improved sales for the first half. But the loss will be "somewhat less" than the year-earlier first-half deficit of $6.1 million, or $1.63 a share, on revenue of $20.4 million, Mr. Zacks said. "For the year, we expect a return to profitability," he said, though he added that "the timing of a turnaround is difficult to predict." The Pickerington, Ohio, company, which makes washable slippers and other comfort footwear under brand names including Capezio and Dearfoams, laid off 13% of its work force last December. WSJ910516-0048 910516-0048. Japan's Steel Output Rises 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION BASIC MATERIALS (BSC) STEEL MANUFACTURERS (STL) JAPAN (JA) TOKYO -- Japan's steel production rose 4.1% in April from the year before, the ninth consecutive month that output surpassed year-earlier levels, the Japan Iron and Steel Federation reported. Production totaled 9.5 million metric tons, rising from 9.1 million tons the year earlier and reaching the highest level for the month of April since 1980, a federation official said. April's production was 1.2% below March's output of 9.6 million metric tons. The official said that drop was because April had fewer working days than March. WSJ910516-0047 910516-0047. Business Brief -- Tele-Communications Inc.: Cable Company and Affiliate Narrow First-Period Losses 05/16/91 WALL STREET JOURNAL (J), PAGE B6 TCOMB UAECA CONSUMER CYCLICAL (CYC) ENTERTAINMENT AND LEISURE (ENT) EARNINGS (ERN) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) EARNINGS (ERN) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) COLORADO (CO) Tele-Communications Inc. and its 54%-owned United Artists Entertainment Co. both narrowed their net losses for the first quarter and reported gains in operating cash flow. Tele-Communications, which has offered to acquire the remaining public shares of United Artists, posted a loss of $25 million, or seven cents a share, compared with $67 million, or 19 cents a share, in the previous year's quarter. United Artists reported a loss of $20 million, or 14 cents a share, compared with $36.4 million, or 26 cents a share. Both companies are based in Denver. Cash flow, or operating profit before depreciation and amortization, increased 17% to $387 million in the quarter at Tele-Communications, the nation's largest operator of cable systems. At United Artists, which operates both cable systems and theaters, cash flow increased by 32% to $119.1 million. Cable operators use cash flow as the primary indicator of performance. WSJ910516-0046 910516-0046. Columbia Gas Plans to Sell Unit 05/16/91 WALL STREET JOURNAL (J), PAGE C13 CG ENERGY (ENE) UTILITIES (UTI) GAS UTILITIES (GAS) OIL, SECONDARY (OIS) PETROLEUM (PET) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CANADA (CN) DELAWARE (DE) WILMINGTON, Del. -- Columbia Gas System Inc. said it plans to sell its wholly owned Canadian oil and gas exploration unit, Columbia Gas Development of Canada Ltd. A Columbia Gas official declined to specify an asking price; the Calgary-based subsidiary had $15.6 million in revenue in 1990. In addition to owning interests in Canadian oil and gas leases, Columbia Gas Development of Canada has five million barrels of oil reserves and 139 billion cubic feet of natural gas reserves. Currently, it employs 55 people in the Calgary office and a field staff of eight. One Canadian analyst estimated the company might be worth around $140 million. John H. Croom, Columbia Gas System's chairman and chief executive officer, said selling the Canadian assets will enable the company to concentrate on its domestic operations. The company has previously sold some other Canadian oil and gas properties. WSJ910516-0045 910516-0045. Thor Industries Sells Unit 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION THO CONSUMER CYCLICAL (CYC) ENTERTAINMENT AND LEISURE (ENT) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CANADA (CN) OHIO (OH) JACKSON CENTER, Ohio -- Thor Industries Inc., hurting from the travel slump, sold its unprofitable Okanagan Manufacturers division, which makes recreational vehicles. The buyer is Trav-L-Mate Industries Ltd., a privately held recreational vehicle maker in Penticton, British Columbia. Terms weren't disclosed, but Thor said Trav-L-Mate paid for the purchase with cash and short-term notes. Okanagan, also based in Penticton, had a loss on $9 million of sales last year, Thor officials said. The unit has been hurting for the past 18 months, the officials said. WSJ910516-0044 910516-0044. Bank of New England Former Vice President Is Convicted of Fraud ---- Special to The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C9 FNG NEB FINANCIAL (FIN) EASTERN U.S. BANKS (BAE) ALL REGIONAL BANKS (BAR) BANKRUPTCIES (BCY) ALL BANKS, BANKING NEWS AND ISSUES (BNK) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) JUSTICE DEPARTMENT (JUS) MASSACHUSETTS (MA) RHODE ISLAND (RI) BOSTON -- Lewis D. Shattuck, a former vice president of Bank of New England, was convicted of 40 counts involving bank fraud, misuse of funds and falsification of bank records. Mr. Shattuck, 42 years old, was a loan officer at Security National Bank in Lowell, Mass., which was taken over by Bank of New England in September 1986. He was responsible for lending to real estate developers and other commercial accounts. The government once stated that Bank of New England incurred losses in excess of $18 million on loans granted by Mr. Shattuck. According to Assistant U.S. Attorney Lon. F. Povich, who prosecuted the case, Mr. Shattuck was convicted of crimes involving $600,000 of loans. The jury found that Mr. Shattuck issued loans to a developer and subsequently solicited and received kickbacks from him. The jury also found that Mr. Shattuck diverted bank funds to his personal use and falsified records to conceal his actions. Mr. Shattuck will be sentenced July 13. He faces a maximum of five years' imprisonment and $250,000 in fines on each of the counts. Bank of New England was seized by the government this year and is being acquired by Fleet/Norstar Financial Group Inc., Providence, R.I. WSJ910516-0043 910516-0043. Business Brief -- Loral Corp.: Profit Rose 22% in Quarter On Sales Increase of 76% 05/16/91 WALL STREET JOURNAL (J), PAGE C10 AXP LOR FINANCIAL (FIN) TECHNOLOGY (TEC) AEROSPACE (ARO) EARNINGS (ERN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) EARNINGS (ERN) FLORIDA (FL) NEW YORK (NY) Loral Corp. said net income in its fourth quarter ended March 31 rose 22% to $30.7 million, or $1.19 a share, from $25.1 million, or $1 a share, a year earlier. Sales jumped 76% to $782.2 million from $444.7 million. The results include the operations of Loral Aerospace Holdings Inc., formerly Ford Aerospace, acquired by Loral and a partner from Ford Motor Co. in October. Net income in the latest period is after a $7.9 million deduction representing the partner's share of Loral Aerospace's profits. Shearson Lehman Brothers Inc., an American Express Co. subsidiary, holds a 48.5% stake in the aerospace unit. The latest quarter includes about $6 million of aftertax interest expense and $1.5 million of one-time expenses related to the aerospace acquisition. Loral's space systems division, formerly part of Ford Aerospace, had a $2.1 million loss. Last month, Loral sold a 49% stake in the division to three European companies. For the year, Loral's profit rose 15% to $90.4 million, or $3.55 a share, from $78.2 million, or $3.11 a share. Year-ago figures include $707,000, or three cents a share, from discontinued operations. Sales rose 67% to $2.13 billion from $1.27 billion. WSJ910516-0042 910516-0042. Business Brief -- American Capital Corp.: Transcapital Financial Unit Is Told to Increase Capital 05/16/91 WALL STREET JOURNAL (J), PAGE A5 ACC TFC FINANCIAL (FIN) SAVINGS AND LOANS, THRIFTS (SAL) TREASURY DEPARTMENT (TRE) FLORIDA (FL) OHIO (OH) Transcapital Financial Corp. said federal regulators have told the savings and loan holding company that it must increase its capital by $130.6 million, or enough to reach a capital-to-assets ratio of 4.5%. Cleveland-based Transcapital, Ohio's largest thrift with $5 billion in assets, said it will seek a preliminary injuction against the order. The company said it is in compliance with capital requirements. Transcapital, which is a majority-owned subsidiary of American Capital Corp., Miami, filed suit against the Office of Thrift Supervision earlier this year alleging that the agency breached a 1986 contract. The dispute centers on the company's acquisition of two failed thrifts from the government. Transcapital said regulators agreed that $150 million in goodwill from the deals could be used as capital. After changes in federal law, however, the company was forced to remove that sum as capital from its balance sheet. The suit is pending. The OTS declined to comment. i3 WSJ910516-0041 910516-0041. BMW Sets Price of 325i Model 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION G.BMW CONSUMER CYCLICAL (CYC) AUTOMOBILES (AUT) GERMANY (GE) DETROIT -- BMW of North America Inc., the U.S. sales unit of Germany's Bayerische Motoren Werke AG, said its redesigned 1992 model 325i sedan will have a base price of $27,990, a 6% increase from the 1991 model. The car is expected to reach dealer showrooms June 21. The 325i has as standard equipment a driver's side airbag and anti-lock brakes, and features a seat-belt tensioning device that automatically tightens the lap and shoulder belts of occupants during a frontal collision. The car has a 24-valve, double overhead cam, six-cylinder engine. "This car addresses key consumer concerns of safety, comfort and value," said Karl Gerlinger, president of the unit. Mr. Gerlinger said the 325i will help boost U.S. sales to a projected 85,000 cars in the mid-1990s from 63,600 cars last year. WSJ910516-0040 910516-0040. Litton Says Judge Denied an Injunction On Buying Intermec 05/16/91 WALL STREET JOURNAL (J), PAGE A7 INTR LIT TECHNOLOGY (TEC) DIVERSIFIED TECHNOLOGY (DTC) INDUSTRIAL TECHNOLOGY & PRODUCTION, QUALITY CONTROL (ITC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) WASHINGTON (WA) BEVERLY HILLS, Calif. -- Litton Industries Inc. said a U.S. district court in Seattle denied a motion for a preliminary injunction against the completion of a $24-a-share tender offer by Litton for Intermec Corp. The tender offer is scheduled to expire at 12:01 a.m. EDT tomorrow. The motion was made by two Intermec shareholders in a lawsuit, which requested class-action status, that claimed that Intermec breached its fiduciary duty in agreeing to the offer for $24 a share, or nearly $200 million. The shareholders couldn't be reached to comment. Intermec, based in Everett, Wash., makes bar-code readers and printers. Litton is a provider of advanced electronic and defense systems, resource exploration services and industrial automation systems. The shareholders claimed that they and similarly situated shareholders are being forced to accept a price well below Intermec's true value. Intermec said the suit is without merit and that the company intends to fight it. WSJ910516-0039 910516-0039. Nuevo Energy Co. Purchase 05/16/91 WALL STREET JOURNAL (J), PAGE A7 NEV ENERGY (ENE) OIL DRILLING AND EXPLORATION (DRL) OIL EQUIPMENT AND SERVICES (OIE) PETROLEUM (PET) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) TEXAS (TX) HOUSTON -- Nuevo Energy Co. said it agreed to buy certain oil and gas properties from privately held Kilroy Co. of Texas. Terms of the cash transaction weren't disclosed. Nuevo Energy said the acquisition is of properties both onshore and offshore Texas and south Louisiana. The acquisition will add about one million barrels of oil and 24 billion cubic feet of natural gas to Nuevo's current reserves of about 1.8 million barrels of oil and 126.6 billion cubic feet of natural gas. WSJ910516-0038 910516-0038. Legg Mason Plans Acquisition 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION LM FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) SECURITIES (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) MARYLAND (MD) NEW YORK (NY) BALTIMORE -- Legg Mason Inc. said it agreed in principle to acquire Dorman & Wilson Inc., a mortgage banking firm based in White Plains, N.Y. Terms weren't disclosed. The securities and investment concern said the acquisition, expected to be completed before year end, will result in Legg Mason's mortgage banking business having one of the largest commercial servicing portfolios at more than $8 billion. Under the agreement, Ronald F. Poe will continue as chief executive officer of Dorman & Wilson. WSJ910516-0037 910516-0037. Business Brief -- International Semi-Tech: Computer Unit to Be Sold For Cash, Westbridge Stake 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION H.SEM T.ISE TWB.A TECHNOLOGY (TEC) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CANADA (CN) HONG KONG (HK) International Semi-Tech Microelectronics Inc. said it agreed to sell its computer services subsidiary and will concentrate on the manufacture and distribution of consumer goods. International Semi-Tech, based in Toronto, said it will receive 22.2 million Canadian dollars (US$19.3 million) of cash and notes, plus a 27% stake in Westbridge Computer Corp., in return for merging its wholly owned STM Systems Corp. with Westbridge. It said it plans to sell the Westbridge shares within two years. The transaction is subject to various conditions. Westbridge is a computer services company in Regina, Saskatchewan. A spokesman for International Semi-Tech said the transaction will free it to concentrate on its 40%-held Hong Kong subsidiary, Semi-Tech (Global) Ltd. The Hong Kong concern has 30,000 retail outlets and makes Singer sewing machines. WSJ910516-0036 910516-0036. Business Brief -- Regeneron Pharmaceuticals Inc.: Firm's First-Quarter Loss Widened to $1.1 Million 05/16/91 WALL STREET JOURNAL (J), PAGE C2 REGN TECHNOLOGY (TEC) EARNINGS (ERN) MEDICAL AND BIOTECHNOLOGY, GENETIC RESEARCH, PROSTHETICS (MTC) EARNINGS (ERN) NEW YORK (NY) Regeneron Pharmaceuticals Inc., the biotechnology company that raised $91 million in its initial public offering in April, said its pro-forma, first-quarter loss widened from the previous year. The net loss for the quarter ended March 31 increased to $1.1 million, or seven cents a share, from $913,000, or six cents a share. Although revenue rose to $2 million, from $431,000, expenses jumped to $3.2 million, from $1.3 million. Based in Tarrytown, N.Y., Regeneron, which focuses on treatment of degenerative neurologic diseases and nerve injuries, said research and development claimed the bulk of expenses, with such outlays rising to $2.5 million, from $1 million. Regeneron's offering in early April was one of the more widely followed issues in the recent surge of biotechnology financings. But the shares, which went public at $22, subsequently plunged and closed yesterday at $10.75 in over-the-counter trading. WSJ910516-0035 910516-0035. Campbell Soup Posts 43% Earnings Increase For Fiscal 3rd Quarter 05/16/91 WALL STREET JOURNAL (J), PAGE A11 CPB T.CSC CONSUMER NON-CYCLICAL (NCY) EARNINGS (ERN) FOOD PRODUCTS (FOD) EARNINGS (ERN) CANADA (CN) NEW JERSEY (NJ) CAMDEN, N.J. -- Campbell Soup Co. said its fiscal third-quarter earnings surged 43% as the nation's largest soup maker continued to reap the benefits of a major restructuring. Profit in the quarter ended April 28 was $76.4 million, or 60 cents a share, compared with $54.6 million, or 42 cents a share, a year earlier. Sales rose 3% to $1.52 billion, excluding divested and discontinued businesses. The consensus on Wall Street had been that Campbell would earn 55 cents a share, but the higher-than-anticipated results nonetheless drew scant praise from some analysts. They questioned the durability of Campbell's turnaround, noting that the record earnings were achieved almost entirely through improved margins, rather than from sales and volume growth. "Margin improvements aren't sustainable after a certain point," said William Leach, an analyst at Donaldson Lufkin & Jenrette Securities. "Eventually, they will have to get the top line going again." In New York Stock Exchange composite trading, Campbell slipped $1 to $76.375. Campbell North America, the largest division which accounted for about 85% of earnings, reported a 36% increase in operating profit, to $143.7 million. Unit volume in the core soup business rose a healthy 4% in the quarter, helped by the timing of trade promotions and advertising. But on a nine-month basis volume was flat. In Campbell North America's other big businesses, unit volume of convenience meals, which includes Swansons, Le Menu and Mrs. Paul's, fell 8% in the quarter. Volume in the company's grocery business, which includes Prego spaghetti sauce and V-8 juice, fell 8% as did volume at Pepperidge Farm. Donaldson Lufkin's Mr. Leach noted that advertising and promotion expenditures were down between 1% asnd 2% in the third quarter and added: "When you look at the volume trends, they shouldn't be cutting back on advertising, but to some extent it appears that they are milking the business to satisfy the Dorrances." Campbell's founding Dorrance family controls 60% of the company's stock. For more than a year, certain dissident family members with a 14% stake have been pressing for the sale of the company. Leonard Griehs, Campbell's director of investor relations, disagreed with Mr. Leach's observations on the advertising cutback. "If you look at the history of our advertising and marketing, we went up 15% a year for the past few years and got no volume out of it," he said. "What we are doing now is to be disciplined about ad spending and our plans are to focus on profitable volume." For the nine months, Campbell's net rose 33% to $316.8 million, or $2.49 a share, up from $242.8 million, or $1.87 a share. Sales rose 6% to $4.86 billion, excluding divested and discontinued businesses. WSJ910516-0034 910516-0034. Belgian Firm to Cut Debt 05/16/91 WALL STREET JOURNAL (J), PAGE A13 B.SGL B.TRB FINANCIAL (FIN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) STOCK MARKET, OFFERINGS (STK) STOCK & OTHER MARKET NEWS (STK) BELGIUM (BEL) BRUSSELS -- Societe Generale de Belgique S.A. moved to lighten its heavy debt load by selling shares and shuffling assets with an affiliated company, Tractebel S.A. The holding company said it has raised about 8.2 billion francs ($235 million) in the transactions. It is selling 700,000 Generale shares to various investors, mostly outside Belgium, for a total of 1.6 billion francs. The shares had been held in Generale's treasury. The company said a further 400,000 shares could be sold. WSJ910516-0033 910516-0033. Marketing Brief: Noted.... 05/16/91 WALL STREET JOURNAL (J), PAGE B6 PCI WNEWS CONSUMER CYCLICAL (CYC) ENTERTAINMENT AND LEISURE (ENT) MEDIA, PUBLISHING, BROADCASTING, ELECTRONIC PUBLISHING (MED) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) PERSONNEL ANNOUNCEMENTS, PROMOTIONS, APPOINTMENTS (PER) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) NEW YORK (NY) PORTUGAL (PO) NEWSPAPERS: Portugal received $56 million from the sale of the Lisbon daily newspaper Diario de Noticias as part of its privatization drive. Portugal's leading film distribution group Lusomundo, acting along with the newspaper's commercial director and some big financial groups, gained at least 40% of the paper, people in the market said. The journalists' cooperative Pronoticias got over 34% and media group Media 4-Comunicacao Lda, 25%. WHO'S NEWS: Nina Hoffman was named to the new post of senior vice president and publisher of Prentice Hall General Reference, a division of Paramount Communications Inc.'s Simon & Schuster. Ms. Hoffman, 37, had held several executive posts with the Bantam division of Bantam Doubleday Dell Publishing Group. WSJ910516-0032 910516-0032. Chambers Landfill Is Operational 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION CDVA INDUSTRIAL (IDU) POLLUTION CONTROL, WASTE MANAGEMENT SERVICES (POL) INDUSTRIAL AND COMMERCIAL SERVICES (SVC) PENNSYLVANIA (PA) PITTSBURGH -- Chambers Development Co. said its Fulkroad landfill near Harrisburg, Pa., is fully operational. The double-lined landfill is permitted to receive an average of 750 tons of municipal solid waste a day. WSJ910516-0031 910516-0031. Technology: Burroughs Wellcome Sues Barr 05/16/91 WALL STREET JOURNAL (J), PAGE B4 BRL CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) JUSTICE DEPARTMENT (JUS) NORTH CAROLINA (NC) NEW YORK (NY) RESEARCH TRIANGLE PARK, N.C. -- Burroughs Wellcome Co., trying to prevent Barr Laboratories Inc. from marketing a generic AIDS drug, said it sued Barr for patent infringement. As previously reported, Barr last month applied to the U.S. Food and Drug Administration for approval to make a generic version of AZT, or zidovudine, challenging the exclusive U.S. marketing rights held by Burroughs Wellcome. Zidovudine is the only drug approved to treat AIDS, or acquired immune deficiency syndrome. Burroughs Wellcome said it "has addressed erroneous" claims that the patents were invalid many times before and that it "remains confident of its patent position." The suit was filed in U.S. District Court in Raleigh, N.C. Barr is based in Pomona, N.Y. WSJ910516-0030 910516-0030. World Markets: Tokyo Stock Prices Slide Below Key Index Level, Partly on Monetary Policy; London Shares Soften ---- A Wall Street Journal News Roundup 05/16/91 WALL STREET JOURNAL (J), PAGE C10 BASIC MATERIALS (BSC) COMMODITY NEWS, FARM PRODUCTS (CMD) PRECIOUS METALS, STONES, GOLD, SILVER (PCS) STOCK MARKET, OFFERINGS (STK) COMMODITIES MARKET (CMD) STOCK & OTHER MARKET NEWS (STK) CANADA (CN) EUROPE (EU) FAR EAST (FE) JAPAN (JA) Tokyo stock prices slid partly on monetary-policy concerns Wednesday, with the main Nikkei index closing below 26000 for the first time since March 5. London shares shadowed Wall Street's directionless early dealings and ended softer. Uncertainty in Tokyo about when the Bank of Japan may move to ease monetary policy deepened the wait-and-see mood gripping the market, which opened lower following Wall Street's steep decline Tuesday. The Nikkei index of 225 issues, which fell 63.12 points Tuesday, dropped 207.61 to 25822.47. In Tokyo Thursday, the Nikkei index fell 322.72 points to close the morning session at 25499.75. In Wednesday's session, the Tokyo Stock Price Index, or Topix, of all first section issues, which lost 4.72 points Tuesday, fell 7.46 to 1965.60. First section volume was estimated at 280 million shares, little changed from 282.4 million shares a day earlier. Losers swamped gainers 684-268. In London, the Financial Times-Stock Exchange 100-share index ended down 4.3 points at 2459.4. The FT 30-share index edged up 0.9 point to 1926.2. Investors were sidelined ahead of today's parliamentary by-elections in Britain, though the market viewed a poor outcome for the ruling Conservative Party as a foregone conclusion. Volume fell to 422.2 million shares from Tuesday's total of 507.8 million shares. Stocks were soft throughout Europe. Frankfurt prices ended marginally but broadly lower, amid growing speculation the German central bank president will announce his resignation today. The DAX index settled at 1590.35, down 8.15 points. Paris equities rebounded from lows to close slightly down on the day, following the announcement that Edith Cresson was appointed to succeed French Prime Minister Michel Rocard, whose resignation the market had expected. In Asia, where stocks were mixed overall, Seoul share prices fell sharply on continued national political and social unrest. Australian shares firmed on the lowest inflation rate since 1985. Taipei stocks posted the year's biggest single-day declines, amid concerns about growing protests after the sedition arrest of a graduate student for allegedly supporting Taiwan's independence. Among corporate developments, in Tokyo, Daiwa House Industry surged 60 yen to 1,970 yen ($14.26). The home builder's unconsolidated pretax profit for the year ended March 31 rose 41% to 89.38 billion yen ($647.2 million). Olympus Optical fell 20 to 1,170. The camera and endoscope maker reported a 9.4% drop in unconsolidated pretax profit for the year ended March 31 to 12.72 billion yen. In London, Grand Metropolitan declined 6 pence to 779 pence ($13.58). The food and beverage concern's pretax profit for the six months ended March 31 fell 7.8% to #337 million ($587.6 million), at the lower end of expectations, led down partly by the dollar's weakness and a drop in property sales. Ultramar eased 1 to 311. The oil and natural gas concern's first-quarter net income plunged 87% to #2.3 million on a historic-cost basis, which factors in inventory holding losses that hurt refining and marketing results; weak demand also was cited. The results were in line with market expectations, though at the low end. Imperial Chemical Industries was the London bourse's biggest percentage gainer, jumping 60 pence, or 5.2%, to #12.18, and Hanson closed at 220.50 pence, up 1/2. After trading closed, Hanson, an industrial conglomerate, emerged as the mystery buyer of a 2.82% ICI stake. Hanson said the purchase was for investment purposes. Ladbroke Group fell 2 to 272. The leisure and property concern expects first-half profit to be disappointing, compared with that of a year earlier, but anticipates a stronger second half. In Frankfurt, Hoechst shed 1.60 marks to 256.30 marks ($151.04). The chemical and pharmaceutical company's first-quarter pretax profit fell 11% to 820 million marks ($483.2 million), despite a rise in sales to 11.23 billion marks. Lufthansa lost 3.50 to 126. Group net income for 1990 plunged 86% to 15.2 million marks. The airline, 51.6%-owned by the German state, said the Persian Gulf war sharply boosted fuel prices and insurance costs. Lufthansa will omit its dividend on common stock; last year, it paid 4 marks a share. Preussag fell 4 to 328.50. The precious-metals, energy and transportation conglomerate plans to raise its 1990 dividend 13% to 9 marks a share. In Paris, Societe Nationale Elf Aquitaine fell 5.10 French francs to 352.40 francs ($61.20). The French state-controlled oil company, which has about 245.5 million shares outstanding, will issue 7.5 million new shares, tentatively on June 1113, as part of its project to be listed on the New York Stock Exchange. Generale des Eaux rose 38 to 2,629. The diversified water distributor and municipal services concern's 1990 profit attributable to shareholders, after taxes and special items, rose 21% to 2.22 billion francs ($385.5 million). In Sydney, News Corp. skidded 30 Australian cents, or 3.4%, to 8.40 Australian dollars (US$6.55), for the session's second-biggest percentage plunge, as the market anticipated a poor earnings report. After the market closed, the publishing and broadcasting company, owned by Rupert Murdoch, reported that for the third quarter ended March 31, its operating loss, after taxes, widened to A$204.7 million (US$159.6 million) from an A$30.8 million deficit a year earlier. In Brussels, Societe Generale de Belgique fell 15 Belgian francs to 2,340 francs ($67.06). The holding company said it will sell its 31% stake in its Cie. Immobiliere de Belgique, or Immobel, real estate unit to its utilities affiliate, Tractebel, as part of a program to shed $900 million in assets. Immobel fell 145 francs to 3,455 francs. Tractebel eased 10 to 8,450. In Wellington, Lion Nathan rose 2 New Zealand cents to 3.32 New Zealand dollars (US$1.95). The retailing and brewing concern's operating profit after taxes for the first half ended Feb. 28 rose 16% to NZ$37.6 million (US$22.1 million), including a five-month contribution from the company's recently acquired half share in the Australian brewing concern National Brewing Holdings Ltd. 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 May 14 May 13 Year U.S. .......................... 346.6 351.3 + 13.0 Britain ....................... 739.5 746.4 + 15.7 Canada ........................ 388.1 391.3 + 5.8 Japan ......................... 1113.3 1117.2 + 12.0 France ........................ 502.5 509.3 + 18.5 Germany ....................... 254.9 256.2 + 13.0 Hong Kong ..................... 2755.6 2739.1 + 26.8 Switzerland ................... 206.1 206.3 + 22.1 Australia ..................... 322.3 322.6 + 20.4 World index ................... 505.2 508.0 + 9.5 WSJ910516-0029 910516-0029. International: Austrian Banks' Merger Talks 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION R.OLB FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) AUSTRIA (AU) VIENNA -- Two Austrian banks said they will begin formal negotiations toward a merger that would create Austria's largest financial institution. The boards of Oesterreichische Laenderbank AG and Zentralsparkasse & Kommerzialbank approved the start of "definite negotiations" after months of less formal talks on the feasibility of a merger. Assets of the new bank would be 483 billion Austrian schillings ($40.45 billion), excluding the banks' shareholdings in other companies, the statement said. The merger plan is part of a restructuring of the Austrian banking industry in response to the scheduled 1992 unification of financial and trade markets within the European Community, of which Austria is not a member. The negotiations are to be completed by Sept. 30, the banks said. WSJ910516-0028 910516-0028. International Brief -- Grand Metropolitan PLC: U.K. Firm's Pretax Profit Fell 7.8% for Six Months 05/16/91 WALL STREET JOURNAL (J), PAGE A12 GRM CONSUMER NON-CYCLICAL (NCY) DIVIDENDS (DIV) EARNINGS (ERN) FOOD PRODUCTS (FOD) DIVIDENDS (DIV) EARNINGS (ERN) GREAT BRITAIN (UK) Grand Metropolitan PLC reported that its pretax profit fell 7.8% in the six months ended March 31, led by the dollar's weakness, a decline in property sales and an adverse swing in exceptional items. The British food and drink company, which owns the Burger King chain and Pillsbury Co., said pretax profit slipped to #377 million ($657.3 million) from #409 million a year earlier. Stock analysts had been expecting a figure between #370 million and #406 million. Grand Met said it plans to boost its interim dividend payment by 11% to 8.4 pence a share from 7.6 pence a share. The dividend is payable Oct. 7 to stockholders of record Aug. 9. Sales eased 11% to #4.43 billion from #4.97 billion. But the company pointed out that the sales decline would have been only 5.6% if results from discontinued operations had been factored out. Grand Met Chairman Allan Sheppard said he stands by his earlier forecast that the full year will be one of "progress for the group." Grand Met's food division experienced a 5.9% sales slip to #1.75 billion from #1.86 billion. Part of the decline reflected sterling's rise against the dollar. Results from Burger King were also affected by exchange rates, while its Pearle eyeglasses unit was hurt by weaker demand. WSJ910516-0027 910516-0027. Business Brief -- Duramed Pharmaceuticals Inc.: Wider First-Quarter Loss Is Posted on Revenue Drop 05/16/91 WALL STREET JOURNAL (J), PAGE A7 DRMD CONSUMER NON-CYCLICAL (NCY) DRUG MANUFACTURERS (DRG) EARNINGS (ERN) EARNINGS (ERN) OHIO (OH) Duramed Pharmaceuticals Inc., reeling from the recall of most of its products, posted a wider first-quarter loss of $2.78 million, or 44 cents a share, on sharply lower revenue of $1.2 million. The year-earlier loss was $1.8 million, or 29 cents a share, on revenue of $5.2 million. In light of the Food and Drug Administration's recent interpretations of requirements for making prescription drugs, all but one of the company's prescription drugs are being recalled, Duramed said. The exception is methylprednisolone, an anti-inflammatory steroid. Duramed's chairman and president, E. Thomas Arington, said the company is trying to "stabilize operations with its remaining product line," including a handful of over-the-counter drugs. But a turnaround is "impossible to predict," said Timothy Holt, vice president, finance. In December 1989, the company recalled a batch of generic conjugated estrogen drugs, used to treat post-menopausal symptoms and osteoporosis, citing tablet variations from batch to batch. Duramed discontinued the line in February. WSJ910516-0026 910516-0026. Pacific G&E Bonds Priced 05/16/91 WALL STREET JOURNAL (J), PAGE C17 PCG UTILITIES (UTI) BOND MARKET NEWS (BON) ELECTRIC UTILITIES (ELC) BOND MARKET NEWS (BON) CALIFORNIA (CA) SAN FRANCISCO -- Pacific Gas & Electric Co. said $200 million in 8 7/8% first and refunding mortgage bonds was priced at 95.5 to yield 9.314%. In competitive bidding, First Boston Corp. won the right to underwrite the bonds, which are due in 2024. WSJ910516-0025 910516-0025. What's News -- Business and Finance 05/16/91 WALL STREET JOURNAL (J), PAGE A1 COMPAQ PREDICTED its second-quarter profit will drop 80% and revenue will decline 15%. Compaq stock plunged $13.25, or 27%, to $36 a share. The expected results reflect a shift in the personal-computer market in favor of clones at the expense of market leaders IBM and Compaq. Stock prices tumbled, pulled down by a slide in technology issues that was triggered by Compaq's news. The Dow Jones industrials sank 21.47 points to 2865.38 in active trading. Small stocks fared even worse. Bonds held steady, while the dollar fell. --- The SEC is making it easier for shareholders to vote on issues dealing with how much executives are paid. But individual salaries still won't be subject to shareholder votes. --- The S&L cleanup agency is considering negotiating individually with prospective buyers for about $100 billion in assets from failed thrifts, in another indication of difficulties in selling real estate and related loans. --- TWA offered to purchase its $1.2 billion in debt at deep discounts in an attempt to rid the troubled airline of its burdensome interest expense. --- Harold Simmons has amassed more than $800 million in cash and is planning an acquisition attempt this year, say aides to the Dallas investor. --- A former vice chairman of New York's Commodity Exchange and six other people were charged by federal officials with fraudulent trading. --- Britain's Hanson said it was the buyer of a 2.82% stake in Imperial Chemical for "investment purposes," prompting new takeover speculation. --- MGM Grand unveiled working designs and disclosed some financing plans for a $910 million hotel-casino and movie theme park in Las Vegas. --- Sony intends to sell by the end of 1992 a machine that can record on and play miniature compact disks. --- Money-market fund yields continued to fall in the latest week, reaching their lowest level in five years. --- A Senate committee rejected a measure that would force auto manufacturers to increase the fuel efficency of their cars and light trucks. --- A ban on tobacco advertising in newspapers and magazines and on billboards was proposed by the European Community Commission. --- News Corp. posted a sharply wider loss for the latest quarter, largely because of costs tied to a refinancing. --- Gaylord Container skipped an interest payment and said it plans to restructure its $820 million in debt. --- American International elected Thomas Tizzio president. He succeeds Maurice Greenberg, who remains chairman of the insurer. --- Northrop's proposed $8.8 million settlement of whistleblower claims regarding a faulty cruise missile has been scuttled by the plaintiffs. --- MCI enlisted office-equipment supplier Rolm to help market MCI's phone services to businesses. --- Fidelity Investments' parent reported a 40% drop in 1990 profit. Analysts cited a mutual fund price war. --- Cotton prices surged in heavy trading amid planting delays caused by bad weather in cotton regions. --- Tokyo stock prices slid amid concern about Japanese monetary policy. London shares also declined. --- Continental Airlines softened its new rules on employee appearance and offered to reinstate a worker it had fired for not wearing makeup. --- Markets -- Stocks: Volume 193,110,000 shares. Dow Jones industrials 2865.38, off 21.47; transportation 1140.87, off 18.86; utilities 209.38, up 0.56. Bonds: Lehman Brothers Treasury index 3746.11, up 2.46. Commodities: Oil $20.92 a barrel, up 18 cents. Dow Jones futures index 127.25, up 0.60; spot index 129.10, up 0.27. Dollar: 137.15 yen, off 0.79; 1.6850 marks, off 0.0105. WSJ910516-0024 910516-0024. Marketing: UPS Plans Test of Second-Day Delivery of Documents ---- By Daniel Pearl Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 FDX X.UPS INDUSTRIAL (IDU) AIR FREIGHT (AIF) POSTAL SERVICE (POS) GEORGIA (GA) TENNESSEE (TN) The fight for customers is taking the express-delivery business further away from next-day delivery. United Parcel Service of America Inc. is telling its customers that it will start testing a second-day letter-delivery service next week. The service will cost $5 and will guarantee that deliveries reach their destinations by the end of the second business day after being shipped. Test markets will be Boston, Chicago, Los Angeles, Providence, R.I., and Washington, D.C. UPS and Federal Express Corp. have both offered second-day delivery of packages for years. But this is the first time an air-express company has promoted a second-day service for letters. Documents are the most visible part of the air-express business and are used to attract new customers. UPS's new service is important for other reasons as well. It is the latest step in a quiet shift away from the foundation of the air-express-delivery business: delivery as fast as possible. It is also the next step toward what some industry executives see as an inevitable array of delivery services with different time guarantees and prices that would, in effect, offer a more reliable, if more expensive, alternative to the U.S. mail. Indeed, UPS's second-day letter test may start a new battle with an old nemesis, the U.S. Postal Service, which is protected by law from private competition on non-urgent letter delivery. UPS says its new service doesn't violate that protection. Among other things, the company says, the service meets requirements that it charge at least twice as much as Postal Service prices for personal correspondence. But Robert Michelson, the Postal Service's general manager of expedited services, says, "It's quite possible they will have a problem vis-a-vis the private express statutes." Because priority mail, which provides second-day delivery to major cities, costs $2.90, Mr. Michelson suggests that UPS's new service might be priced too low to be legal. But Postal Service officials say they haven't studied the UPS service closely enough to decide whether to challenge it. The strategy is risky for other reasons, too. UPS and Federal Express, the market leader, have spent many millions of dollars over the years convincing television viewers that it's important to deliver documents and goods before 10:30 the next morning. That sense of urgency was what enabled Federal Express's chairman and chief executive officer, Frederick W. Smith, to create his company -- and the industry -- in 1973. Now the message is changing. "If you know you're going to be out of town for two or three days, why send it next day?" says Joseph Pyne, UPS's air marketing manager. "People have gotten into the habit of sending next day, but sometimes there's not a need." Indeed, UPS may end up simply persuading people who use its next-morning letter service, which costs $9.75, to use the cheaper, second-day product instead. That's what has happened to Federal Express since it introduced next-afternoon service two years ago. In this year's first quarter, Federal's next-afternoon package volume rose 30% from a year earlier, while next-morning volume fell 10%. In a further move away from the traditional definition of "express," Federal greatly expanded its next-afternoon service last month by raising the weight limit to 150 pounds from five pounds, hoping to hold onto cost-conscious customers and to draw shippers who wouldn't ordinarily use an air-express company. "You can either cannibalize your own base or let someone else do it," says William J. Razzouk, Federal's senior vice president for sales and customer information. Initially, UPS plans to promote its second-day letter service with a direct mailing to small businesses that aren't UPS customers. It will include a free trial offer. Typical prospects would be finance companies, accountants and architects, the company says, and the pitch will be "uncompromised reliability, but not necessarily overnight service." Mr. Pyne says he also sees a potential for a third-day letter service, and beyond. Mr. Razzouk of Federal Express says his company has considered and rejected the product UPS is testing. "We don't think there's a very big market for second-day letters," he says. "People either need it sometime tomorrow, or they'll ship it by mail." Some others disagree. Justin Zubrod, a management consultant with A.T. Kearney Inc. in Chicago, says he would use a second-day or third-day service for items such as staff activity reports that come out on Friday. "I don't need it Monday, but I need it sometime next week so I can manage my week," he says. Sonny Smith, president of Express Management Services Inc., an Atlanta consulting firm, says, "There's a phenomenal marketplace." He says his clients are shifting to second-day delivery because they don't gain anything by getting a document in the afternoon. "How many people are actually going to use a next-afternoon shipment between 4:30 and 5?" he asks. "Hardly anyone I know of." WSJ910516-0023 910516-0023. Heard on the Street: Post-Bankruptcy Shares: Next Big Play? ---- By Linda Sandler Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C1 CKP CMAFC IYCOY J.SEV LESL LTV MAXIQ MLI RDS REPH SLCMC STK T.CMP USG WHX X.GRE CONSUMER CYCLICAL (CYC) BANKRUPTCIES (BCY) ENTERTAINMENT AND LEISURE (ENT) HEARD ON THE STREET (HRD) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) STOCK MARKET, OFFERINGS (STK) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) HEARD ON THE STREET (HRD) STOCK & OTHER MARKET NEWS (STK) CALIFORNIA (CA) NEW YORK -- While initial stock offerings have been grabbing all the glory, there's a shadow market for new stocks that is doing nicely too. It's where people trade shares of companies coming out of bankruptcy or reorganizations. In recent months, some investors have made 50% to 100% on their money by trading the new shares of Republic Health, Southland Corp. and Maxicare Health Plans after those companies finished reorganizing their businesses. Also way up this year are some post-bankruptcy stocks issued years ago, such as Storage Technology. If investors' hunger persists, there could be a big play over the next year amounting to a couple of billion dollars in new shares of companies that are reorganizing their debts inside or out of court, including LTV Corp., Federated Department Stores, Allied Stores and USG Corp. This isn't the old bankruptcy game, where investors buy the old stock of a company mired in court, and often hang on for years only to get wiped out when a flood of new stock is created. In this game, investors wait until the lawyers get through with the carcass and buy new shares when the company leaves the court. Although post-bankruptcy shares have got clipped lately in bad markets like yesterday's, they are luring even some vulture investors who aren't big stock market players. With distressed debt looking pricey now, "one of the main ways we're trying to play bankruptcies is stocks coming out" of bankruptcy, says New York money manager John Gordon of Deltec Asset Management. Post-bankruptcy stocks, unlike initial offerings that investment bankers unveil with great hype, aren't underwritten at all. Troubled companies create them after creditors and investors approve a plan to wipe out chunks of debt; the companies then cancel their old shares and hand out new ones in part payment of claims. The new shares first trade informally among dealers and sometimes run up steeply there even before they get on an exchange or Nasdaq, as did Southland and Maxicare earlier this year. "If the restructuring is done right you have a viable company coming out" of a reorganization, says Joseph Bencivenga, who runs Salomon Brothers' junk-bond research. Then, he says, "it makes sense" to buy a post-bankruptcy stock. Toys 'R' Us has been a notable winner since it reorganized in the late 1970s. Post-bankruptcy shares might be better for speculators to trade than for investors to hold. Though Southland has buttressed its equity, it still has heavy debts and might be strained by big interest bills and capital spending, according to Moody's Investors Service, the credit-rating agency. There's no guarantee that LTV's steel operations or Revco D.S.'s and Circle K's chain stores will thrive even after those companies revamp their finances, investors say. Storage Technology took years to fulfill its promise and Manville still hasn't done so, says Los Angeles trader Paul Debban of Seidler Amdec Securities. Last year, many vultures essentially bought new bankruptcy shares in advance by buying distressed debt that would partly be swapped for stock. Southland's reorganization, completed in March, gave New York investor Carl Icahn about 5% of Southland's new shares, which closed at 1 15/16 bid yesterday. Some distressed-debt players now see quicker gains in buying post-bankruptcy shares. Quite a few new bankruptcy shares stay in limbo for a while. But that creates what Deltec's Mr. Gordon calls "a window of inefficiency" for investors to climb through. The window opens up because many lenders start unloading the shares soon after they get them, and it could be months or years before stock players and analysts revive their interest in companies that have gone through the wringer. Mr. Gordon says, "It can take awhile for the new equity to find a new home." Some traders think Maxicare, at 7 3/4 bid yesterday, could go higher. Mr. Gordon has recently been buying the reorganized steel company, Wheeling-Pittsburgh, at 8 3/8 yesterday, and he's "looking at" Mueller Industries, at 11 1/4 yesterday, which was spun out of Sharon Steel after that company reshuffled its businesses earlier this year. And though it's still reorganizing, he fancies Greyhound Lines, the beleaguered bus company known to traders as "the dogs." Mr. Gordon owns some 13% Greyhound bonds and expects the company to issue new stock later this year. With retailers in fashion again, everybody wants a piece of department-store sisters Federated and Allied Stores. But their new shares are perhaps a year away from being created, and their senior, safer bonds are expensive. George Putnam III, who publishes Boston's "Turnaround Letter," thinks investors might get a chance to buy both retailers' senior bonds at lower prices later this year if the market cools. However, he says it's now okay to buy Revco's 11 3/4% and 12 1/8% bonds (he thinks "the bottom is near"), Ames Department Stores' 13% notes and Circle K's 12 3/4% bonds. At First Boston, junk-bond specialist Robert Long thinks some of USG's old bonds, and its new shares when they eventually arrive, could be interesting. USG, which makes building products, is trying to reorganize itself out of court. "You have a cyclical industry that is clearly at or near its low," Mr. Long says. "It could have upside potential." --- ADD LESLIE'S POOLMART to the list of tanked initial public stock offerings. And add its underwriter, Montgomery Securities, to the list of red-faced brokers. Four weeks ago, Mongtomery was singing the praises of Leslie's and estimating it would earn 60 cents a share in 1991. The IPO was so hot that Leslie's sold 2.5 million shares, or 46% of its stock, at $11 apiece, up from an expected $9 or so. That was last month. Yesterday Mongtomery cut its estimate, apparently to 53 cents a share. The reduced estimate -- which quickly followed Tuesday's first-quarter earnings report -- sent Leslie's shares into a 25% swoon, down 2 3/4 to 8 1/4. What flip-flopped Montgomery's opinion of Leslie's, a Chatsworth, Calif.-based retailer of swimming pool supplies? Robert Cheadle, its analyst, couldn't be reached. John Skeen, head of research at the San Francisco underwriter, didn't return telephone calls. Gordon McCoun, analyst at Brean Murray, Foster Securities, which invested in Leslie's, says "it was a pretty hot deal. As I began to work through the numbers I couldn't get to the earnings number that had been talked about at the road show." Yet Brean or its clients didn't unload all their stock before yesterday's tumble. Insiders sold about 525,000 shares in the offering. Brian McDermott, Leslie's president, sold 37,000 shares, about 13% of his personal stake, which was acquired at 50 cents a share. "We don't want people to lose money on our stock," he said. Randall Rose, a fund manager at Tamarisk Partners, expects more of the same as the IPO boom continues. "Analysts don't have time to come out with well thought-out estimates," he says. "Deals are getting sloppy." -- Roger Lowenstein WSJ910516-0022 910516-0022. Continental Bank Unit Sale 05/16/91 WALL STREET JOURNAL (J), PAGE C11 CBK FINANCIAL (FIN) CENTRAL U.S. BANKS (BAC) ALL REGIONAL BANKS (BAR) ALL BANKS, BANKING NEWS AND ISSUES (BNK) SECURITIES (SCR) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) ILLINOIS (IL) NEW YORK (NY) CHICAGO -- Continental Bank Corp. said it completed the previously announced sale of its securities clearing unit, First Options of Chicago Inc., to Spear, Leeds & Kellog, a New York securities firm. Terms of the sale weren't disclosed. Continental is the nation's 26th-largest bank holding company, with assets of $25.6 billion. Spear Leeds is a closely held partnership that acts as a specialist firm on the New York Stock Exchange. It had owned First Options from 1979 to 1986. WSJ910516-0021 910516-0021. Abreast of the Market: Industrials Fall 21.47 Despite Rally Late in Day; Technologies Plunge ---- By Craig Torres and Craig S. Smith Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C2 STOCK INDEXES (NDX) NYSE GENERAL MARKET COMMENTARY (NYS) STOCK MARKET, OFFERINGS (STK) U.S. STOCK MARKET STATISTICS (STT) STOCK AND OTHER INDEXES (NDX) STOCK & OTHER MARKET NEWS (STK) NEW YORK -- Led by an across-the-board trouncing of technology shares, the stock market fell as nervous investors began to sell more aggressively. The Dow Jones Industrial Average finished 21.47 points, or 0.74%, lower at 2865.38. In the past four sessions, the average has fallen 105.77 points, or 3.56%. In late trading, the Dow industrials were off more than 40 points. But bargain hunters picked up stocks -- and prices -- in the last half hour of trading. The industrial average closed above 2850, a "support level" cited by technical analysts. Compaq Computer stunned investors by announcing that it expects second-quarter earnings to fall below 25 cents a share on a more than 15% drop in revenue from the year-ago period. Compaq earned $1.18 a share on revenue of $862 million in the second quarter of 1990. Compaq fell 13 1/4, or 27%, to 36 on 11.3 million shares. The Compaq news tarred dozens of technology issues. Hewlett-Packard, expected to report earnings today, fell 1 3/4 to 46 with 1.5 million shares changing hands. International Business Machines slipped 3 1/4 to 102 3/4 and Digital Equipment tumbled 2 5/8 to 64 3/8. The Nasdaq composite index, which includes many big technology shares, such as Intel, Apple Computer and Microsoft, fell 10.71, or 2.19%, to 478.08. In early trading, stocks held up despite the bad earnings news from Compaq. But as the day wore on, nervousness grew. Dozens of technology stocks crumbled, and traders started to see large institutions become less sensitive to selling prices. Analysts were reluctant to make any broad conclusions about the market from Compaq's earnings. Even so, money managers are starting to worry that the earnings rebound, which many had expected for hundreds of companies in the second and third quarters, won't materialize. Compaq's earnings outlook "reflects that we are in a weak (consumer) demand" climate, said Warren Shaw, managing director at Chancellor Capital Management. "It is causing companies to cut prices to gain market share." Nonetheless, many companies seem to be having no problem selling new shares. First Boston last night priced 12.7 million shares of Fruit of the Loom at $14.25 each, the same price the listed shares closed at yesterday. Despite the market's drop, strong demand is expected in today's sale of some 6.1 million new shares of AnnTaylor in an underwriting led by Merrill Lynch. Federal Home Loan Mortgage gained 3/8 to 78 1/4. Berkshire Hathaway, a concern controlled by legendary investor Warren Buffett, in a first-quarter filing with the Securities and Exchange Commission, didn't include the 2.4 million shares in Freddie Mac that it had held at the end of last year. A Freddic Mac spokeswoman said first-quarter financial statements for Wesco Financial Corp., a unit of Berkshire Hathaway, indicate the company didn't reduce its holdings of Freddie Mac stock through March 31. Berkshire still owns 2.4 million Freddic Mac shares, according to the Freddie Mac spokeswoman. Nancy Spady, an analyst at Shearson Lehman, said Mr. Buffett may want a confidential filing status because he plans to increase or decrease his position in the stock sometime soon. Mr. Buffett purchased the shares for an average price of $29.89 each, or a total of $71.7 million. Automatic Data Processing plunged 3 3/8 to 32 1/2 when Merrill Lynch cut its investment rating on the stock after the company told analysts at a meeting Tuesday that the recession continues to hurt its business. The company said earnings growth will probably slow in its fiscal fourth quarter from the 14% growth reported in the third quarter, ended in March. Among semiconductor stocks, Advanced Micro Devices fell 3/4 to 11 1/8, Texas Instruments lost 1 1/8 to 37 7/8 and Motorola fell 5/8 to 62 3/4. El Paso Refinery skidded 7 1/4 to 14 3/8 after it suspended its regular quarterly distributions. On Tuesday, the company reported a first-quarter loss of 17 cents a unit, compared with year-earlier profit of 16 cents a unit. While the company declared a special dividend Tuesday to be paid in securities, it said cash distributions probably won't be resumed until the middle of 1992. USX-Marathon Group, representing USX's oil business, was active again. Tuesday, investor Carl Icahn sold a 33.3 million-share block of the stock. Nearly 6.8 million shares of USX-Marathon Group traded yesterday, with the stock unchanged at 25 1/8. Telefonos de Mexico, which began trading Tuesday on volume of more than 16.5 million shares, eased 1/8 to 27 1/4 on nearly four million shares yesterday. Wells Fargo surged 1 1/4 to 87 1/8 after the banking company disclosed that Berkshire Hathaway filed with the Federal Reserve Board for approval to raise its stake in the bank to 22% from 9.7%. Lands' End dropped 1 5/8 to 19 1/4. The apparel retailer reported first-quarter profit of eight cents a share, down from nine cents a year ago and below some analysts' estimates. Imperial Chemical Industries' American depositary receipts jumped 5 3/4 to 86 1/4. The stock surged 4 1/2 Tuesday after the purchase of a large block of the company's stock sparked speculation that the company would be sold. Yesterday, Imperial disclosed that Hanson PLC, Britain's largest industrial conglomerate, controls about 20 million of Imperial's shares outstanding. Hanson's ADRs added 1/2 to 19 7/8. Blockbuster fell 5/8 to 9 1/8. The company's stock has been beaten lower by concern that competition will limit its earnings growth. Georgia Gulf fell 1 3/4 to 16 1/4. Wertheim Schroder cut its invesment rating on the stock and removed the issue from the firm's recommended list. The brokerage firm cited concerns about Japanese competition as the reason for its downgrade. First Financial Management lost 1/4 to 36. The company has filed to offer four million shares of common stock. The American Stock Exchange Market Value Index fell 3.46 to 356.79. WSJ910516-0020 910516-0020. Cincinnati Gas & Electric 05/16/91 WALL STREET JOURNAL (J), PAGE A7 CIN UTILITIES (UTI) ELECTRIC UTILITIES (ELC) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) STOCK MARKET, OFFERINGS (STK) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) STOCK & OTHER MARKET NEWS (STK) OHIO (OH) CINCINNATI -- Cincinnati Gas & Electric Co.'s board authorized the issuance of 3.5 million common shares at $31.625 each. The offering was made through a nationwide underwriting group with Morgan Stanley & Co. and Merrill Lynch & Co. as joint managers. Proceeds will be used to repay part of the company's short-term debt incurred primarily in its construction program. WSJ910516-0019 910516-0019. Value of Bush Portfolio Decreased During 1990 05/16/91 WALL STREET JOURNAL (J), PAGE A5 EXECUTIVE (EXE) MAINE (ME) WASHINGTON -- As did many investors, President Bush saw the recession shrink the value of his portfolio in 1990. But Mr. Bush got a double whammy last year. Tax officials in Kennebunkport, Maine, also sharply increased the assessed value of his home in the seaside community, which could drive up the president's tax bill. Mr. Bush's annual financial disclosure statement, released by the White House yesterday, reported that the president's blind trust, in which he has placed virtually all of his investments, was worth $1,243,000 at the end of 1990. A year earlier, the trust was valued at $1,275,000. As previously disclosed on Mr. Bush's tax returns, though, income from the trust actually rose in 1990, to $248,000 from $217,000 a year earlier. The assessed value of Mr. Bush's vacation home and compound on the Maine coast has been increased to $2,196,000, up from $892,000 a year ago. That represents an increase of 146%. Kennebunkport officials couldn't be reached to determine how frequently they reassess the value of such property. WSJ910516-0018 910516-0018. Politics & Policy: Polled Voters Say Quayle Could Grow Into Job Of President and Is Not a Drag on GOP Ticket ---- By Michel McQueen Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A18 EXECUTIVE (EXE) WASHINGTON -- As the White House prepares a low-key campaign to boost Vice President Quayle's public profile, Mr. Quayle is poised to benefit from a public that believes he can grow into the job of president. A new Wall Street Journal/NBC News poll taken this week shows that more than half the voters -- 51% -- believe that while Mr. Quayle isn't currently qualified to be president, he would be if he had more experience. That sentiment dovetails neatly with a new White House strategy to boost the vice president's stature by giving him a little more public exposure, adding responsibilities and giving him more chances to speak out about his activities. The poll also shows that, despite the hopes of many Democrats and the renewed attention focused on the vice president since Mr. Bush's health problems, Mr. Quayle isn't a drag on Mr. Bush's re-election chances. In the poll of 1,508 voters, which was conducted for the Journal and NBC by Democratic pollster Peter Hart and Republican pollster Robert Teeter, half of those surveyed were asked to choose their preference in a hypothetical election matchup between President Bush and New York Democratic Gov. Mario Cuomo; the other voters were asked their preference between a Bush-Quayle ticket and one made up of Gov. Cuomo and Texas Sen. Lloyd Bentsen, the 1988 nominee. The result: The poll found Mr. Bush getting 61% of the vote when the vice presidential candidates weren't mentioned -- and an identical 61% when they were mentioned. (Gov. Cuomo got 27% in the first case and 29% in the second.) Despite this encouraging news for Mr. Quayle, political strategists say the widespread anxieties about his qualifications and skill won't be calmed overnight. Former Reagan political aide Mitchell Daniels, who has been consulted by Quayle aides for advice on improving the vice president's image, says that what he doesn't do in the wake of renewed scrutiny "may be more important" than what he does. "To overreach or to appear preoccupied with this would really be to appear nonpresidential and only aggravate the problem," Mr. Daniels says. As a result, Quayle advisers have decided on a deliberately understated approach. "We're just going to keep on doing our job," says vice presidential chief of staff William Kristol. Mr. Quayle's foreign-travel schedule doesn't need to be augmented; he already has "a number of important trips coming up" to Asia and Eastern Europe, Mr. Kristol notes. Meanwhile, some of Mr. Quayle's advisers, including Mr. Daniels, have privately urged him to be more confrontational with Democrats, especially on issues, such as deregulation, that will warm the hearts of conservatives. "Pick more fights," one adviser says he has told the vice president, "preferably fights you can win." Mr. Quayle has in fact recently become more aggressive in using the Competitiveness Council he heads as a tool to push for greater environmental deregulation. In addition, he was recently put in charge of a working group intended to develop a more coherent government policy toward the telecommunications industry. The question remains whether such undertakings will be enough to convince a still deeply skeptical public that the vice president has in fact grown in office. The Journal/NBC poll, which was conducted Friday through Tuesday, found that voters aged 18 to 34 and blue-collar workers are the most likely to believe Mr. Quayle could eventually be qualified to handle the presidency; even four in 10 Democrats think he could. Still, only 13% of all voters surveyed believe he is qualified right now for the office; fully a third of voters feel that he wouldn't be qualified even if he had more experience. Thirty-four percent of voters have a positive opinion of Mr. Quayle and 35% a negative one, figures that are virtually unchanged from a March Journal/NBC survey. Further, voters by a margin of 49% to 41% say they disagree with the president's decision to keep Mr. Quayle on the ticket in 1992. While 59% of Republicans are willing to back their president's decision, only 40% of independent voters, and just 25% of Democrats, agree. In the poll, voters by a margin of 56% to 34% say they are uncomfortable with the notion of Mr. Quayle as president should something happen to Mr. Bush -- although that does mark an improvement from a Journal/NBC poll last September, when 69% were uncomfortable and only 22% were comfortable at the thought. "The problem Quayle has," says Democratic strategist Greg Schneiders, "is that in order to achieve spin, you need velocity, and the vice president has no velocity." Yet White House officials, and particularly the vice president's staff, believe that any too-obvious efforts to generate such momentum would look artificial and invite suspicions that they are panicking. That's why Mr. Quayle resolutely turned down all the invitations he received in the wake of President Bush's hospitalization to appear on various television-interview shows. Veteran Republican strategist John Sears says the only way for Mr. Quayle to overcome the negative perceptions is a little bit at a time. "It's a long-term venture for him," Mr. Sears says. "It involves doing well every time for a long period of time. You make a mistake and you're right back to square one." Mr. Quayle's increased use of his Competitiveness Council position is one way to do things a little bit at a time -- as well as to pick the battles with liberals that his advisers say will help mobilize core GOP support for the vice president. For instance, his group is currently working with others in the government to narrow the definition of wetlands to trim the acreage that will be protected. The group is also working on a proposal to shield banks from liability when projects they have financed turn out to have environmental problems. Mr. Quayle's activities have already earned the ire of environmental activists in Congress. In the effort to gain more respect, the vice president has a couple of powerful things going for him. One is support from President Bush himself, who is said by aides to view Mr. Quayle's situation with a great deal of sympathy, given the rough treatment he himself sometimes received in his eight years as Ronald Reagan's vice president. Mr. Bush is said by aides to believe that Mr. Quayle has little choice but to "grin and bear it" as he did, and has also expressed admiration for Mr. Quayle's grace under the pressure of constant criticism. Secondly, the vice president could benefit from a public backlash at all the criticism he has received in the news media. In the Journal/NBC poll, 51% of voters feel the media have "gone too far" in raising questions about Mr. Quayle's ability to handle the presidency; 39% believe the media have "acted responsibly." In the long run, says Republican theoretician Kevin Phillips, "the real challenge for Quayle comes in the metamorphosis he has to make in the second term, after they've been re-elected. Time enough then to cope with the image change." WSJ910516-0017 910516-0017. Continental Airlines Makes Over Rules On Use of Makeup --- Simple Guidelines Adopted; Sales Agent, Fired in May, Is Offered Job, Back Pay ---- By Patricia Ann McKanic and Bridget O'Brian Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A8 CTA LABOR CONSUMER CYCLICAL (CYC) AIRLINES (AIR) BANKRUPTCIES (BCY) BANKRUPTCY DECLARATIONS AND PROCEEDINGS (BCY) LABOR, PERSONNEL ISSUES, TRENDS, MANAGEMENT TECHNIQUES (LAB) TEXAS (TX) HOUSTON -- Continental Airlines backed down from its controversial rules on employee personal appearance and offered to reinstate an employee it had fired for not wearing makeup. The airline, a unit of Continental Airlines Holdings Inc., said it turned its new "customer service appearance standards" into simple guidelines. Teresa Frischette, a part-time sales agent in Boston who was fired in May for not wearing foundation and lipstick, was offered her job back with back pay. Continental had implemented the rules May 1, the latest aspect of a multifaceted attempt to upgrade its long-tarnished image. Last year, flight attendants got new navy-blue uniforms and last month gate agents received uniforms. The airline has also unveiled planes newly painted in bold colors, renovated aircraft interiors and has begun a low-key advertising campaign to convince passengers that the airline that once infuriated fliers has changed. But the airline stumbled when it ventured into the arena of personal appearance, as the airline readily conceded yesterday. "The approach we took did not work," said the airline's chairman, Hollis L. Harris. "In review and retrospect, we just admit we made a mistake." Ms. Frischette couldn't be reached to comment, but her attorney, Sarah Wunsch of the Civil Liberties Union in Boston, said, "I think it's very important {Continental} did what they did. I wish they'd seen the light earlier." Mr. Harris said he hadn't spoken to Ms. Frischette but he wanted to "personally apologize for causing her embarrassment." Yesterday's announcement was a turnaround from Mr. Harris's public position only a day earlier, when he said the company would rehire Ms. Frischette if she adhered to the personal appearance code. That code was written by women on the airline's professional standards committee, who insisted that a minimum of makeup be worn, according to a company spokesman. Negative publicity, including editorials in large newspapers and Ms. Frischette's appearance on an Oprah Winfrey show describing her plight, apparently convinced the airline to soften its hard line. Mr. Harris said the appearance standards will still have some gray areas, and that employees seen as extreme in appearance would be called in for a talk instead of being terminated. Continental declined to make public the guidelines, saying they were internal documents. WSJ910516-0016 910516-0016. Raytheon Gets Air Force Job 05/16/91 WALL STREET JOURNAL (J), PAGE A18 ROK RTN TECHNOLOGY (TEC) AEROSPACE (ARO) DIVERSIFIED TECHNOLOGY (DTC) DEFENSE DEPARTMENT (DEF) MARYLAND (MD) WASHINGTON -- Raytheon Co. was issued a $100.5 million Air Force contract for 10 initial production terminals and spares for the Milstar communications satellite program. Rockwell International Corp. received a $93 million Air Force contract for nine terminals and spares for the Milstar program. Science Applications International Corp. was awarded a $14.2 million Army contract for computers. Johns Hopkins University received a $10.3 million Navy contract for research and development. WSJ910516-0015 910516-0015. Technology: Sony Expects to Unveil in '92 A Mini-CD Player That Records ---- By Jacob M. Schlesinger Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 PHG SNE TAN TCSFY TWX CONSUMER CYCLICAL (CYC) INDUSTRIAL (IDU) TECHNOLOGY (TEC) AEROSPACE (ARO) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) ENTERTAINMENT AND LEISURE (ENT) HOME ELECTRONICS, FURNISHINGS, APPLIANCES (HMF) OTHER SPECIALTY RETAILERS OF LIMITED PRODUCT LINES (OTS) RECREATION, ENTERTAINMENT, TOYS, MOVIES, PHOTOGRAPHY, SPORTS (REC) ALL SPECIALTY RETAILERS (RTS) FRANCE (FR) JAPAN (JA) NETHERLANDS (NL) NEW YORK (NY) TEXAS (TX) TOKYO -- Sony Corp. said it expects to sell by the end of next year a miniaturized compact disk player that can record sound as well as play it, making it the only major electronics company that has announced commercial plans for the long-awaited technology. For reasons that appear to be commercial as well as technological, however, the format will be limited: The 2.5-inch diameter recordable disks won't work on current CD players, and current CDs won't work on the new machines. The electronics company wants to avoid appearing to undercut another fledgling advanced recording method that it is also promoting, digital audio tapes (DATs). Sony officials also acknowledge that they tailored the new product in part to avoid the wrath of the recording industry, which has fought to limit the use of new high-quality sound reproduction technologies. Nonetheless, the company declared "a new age in audio systems" by unveiling a product described as "the successor" to the conventional cassette, particularly for portable uses such as Sony's own Walkman. The new so-called Mini Disc offers higher sound quality than traditional tapes, although not quite as high as current CDs or DATs, and, as with CDs, allows instant access to any song. It also has "shockproof" features that prevent sound-skipping when the machine is jostled -- such as during jogging -- a major problem with current portable CD players. "We want this. . .to become a media of the next generation," Sony President Norio Ohga said at a news conference in Tokyo yesterday. Sony, in addition to its world-wide consumer electronics business, owns the world's largest record company, Sony Music (the former CBS Records), and views the new format as a way to help inject new unit sales into the record business. "The recording industry needs a shot in the arm by next year," said Michael P. Schulhof, president of Sony Software Corp. Sony says it expects other record companies to jump on the bandwagon, and has briefed all of them on the new format. Time Warner Inc.'s Warner record unit is providing some songs for Sony to use in demonstrating the new disks, but has made no formal decision on whether to release a product. MCA Records, a unit of Sony rival Matsushita Inc., has made no decision about whether to release recordings on the disk. Sony billed its current machine as a "prototype" and wouldn't release marketing details such as the exact timing of sales, the price, or the expected demand. A Sony spokesman said the machine would be "affordable" when it goes on sale in late 1992, and that the blank recordable 74-minute disks would likely sell for the same price as current top-of-the line hi-fi tapes. The recordable CD has been anticipated for several years. Tandy Corp. of Fort Worth, Texas, announced in April 1988 that it expected to put a $500 CD recorder on sale by early 1990. But development was hindered by technical difficulties and by the lack of a clear legal framework. A Tandy spokesman said the CD is now "in the product development phase." Thomson CSF of France showed a prototype last year but hasn't disclosed any marketing plans. A spokeswoman for Philips Electronics N.V. of the Netherlands, co-inventor with Sony of the CD player, said Philips has developed its own recordable disk systemone that would be compatible with existing players and disks -- but won't introduce it until an agreement can be reached with the music industry to resolve copyright problems. Meanwhile, Philips plans to introduce next year a rival technology called digitial compact cassettes. But Sony is a logical leader in the new technology because of its active search for new applications of optical disk technology. In addition to home audio products, Sony is pushing disks into computers and video players, and last year introduced a hand-held gadget that stores volumes of books onto a compact disk. Besides, the timing is now right. Consumer electronics makers have been limping along without a mega-hit since the CD player first went on sale nine years ago. Mr. Ohga flashed a graph showing that after two decades of rapid growth, audio equipment sales in Japan have leveled off in the past couple of years while software sales have plunged. "We thought we should seriously come up with a new recordable media," he said. The disk of the new product is set in a thin square plastic case that looks like a computer floppy disk. Like CDs and DATs, the sound is stored digitally -- as opposed to the analog format used on conventional records and tapes -- and is read by a laser. Unlike a CD, the new Mini Disc has a magnetic layer that allows for regular recordings. The recording isn't quite as precise as CDs or DATs, a difference which allows Sony to pack more music onto the disk. The player itself is the size of a handheld tape recorder. Some analysts said that incompatibility would limit sales of the new machine. "There'd be much more hope for it if it were a compatible format," said Barry Dargan, a consumer electronics analyst with the Tokyo office of James Capel Ltd. "I would have thought they'd have learned their lesson" he added, referring to Sony's early failure in the video-cassette-recorder market by pushing a product incompatible with other makers. But Sony officials believe the product will create a new market, just as CDs did. The announcement comes amid growing reports that the digital-audio tape recorder, which Sony first put on sale in Japan in 1987 and in the U.S. last June, has been a major disappointment. Mr. Ohga bristled at the suggestion that the new product indicated a shift away from DATs. "DAT is far from being a failure, rather it has been growing rapidly," he said. WSJ910516-0014 910516-0014. New Securities Issues 05/16/91 WALL STREET JOURNAL (J), PAGE C15 ALPB AMR CHL F.BNP F.CBA F.CCF F.CN FNM GE GM J.TER PCG Z.NES SO F.TCF U.WBS BOND MARKET NEWS (BON) MORTGAGES, MORTGAGE BANKERS, MORTGAGE-BACKED SECURITIES (MOR) STOCK AND BOND REGISTRATIONS, PRICINGS (REG) BOND MARKET NEWS (BON) MORTGAGES, MORTGAGE RATES (MOR) BOND AND STOCK REGISTRATIONS AND PRICINGS (REG) U.S. GOVERNMENT AGENCY FINANCINGS -- NON-TREASURY (AGN) VETERANS AFFAIRS DEPARTMENT (VET) CALIFORNIA (CA) CONNECTICUT (CT) DISTRICT OF COLUMBIA (DC) EUROPE (EU) FRANCE (FR) JAPAN (JA) MARYLAND (MD) MICHIGAN (MI) NEW YORK (NY) SWITZERLAND (SZ) TENNESSEE (TN) TEXAS (TX) The following were among yesterday's offerings and pricings in U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report: CORPORATES AMR Corp. -- $200 million of 9 1/2% notes due May 15, 2001, priced at 99.464 to yield 9.584%. The noncallable notes were priced at a spread of 145 basis points above the Treasury's 10-year note. Rated Baa-1 by Moody's Investors Service Inc. and triple-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Salomon Brothers Inc. Pacific Gas & Electric Co. -- $200 million of 8 7/8% first and refunding mortgage bonds due July 1, 2024, won in competitive bidding by underwriters led by First Boston Corp., will be reoffered at 95.50 to yield 9.314%. The bonds, which are noncallable for five years, were priced at 100 basis points above the Treasury's 30-year bond. The issue is rated single-A-1 by Moody's and single-A by S&P. Alabama Power Co. -- $100 million of 9 1/4% first mortgage bonds due May 1, 2021, won by First Boston and reoffered at 98.79 to yield 9.37%. The bonds, which are nonrefundable for five years, were priced at 105 basis points above the Treasury's 30-year bond. The issue is rated single-A-1 by Moody's and single-A by S&P. Chemical Banking Corp. -- $100 million of 8.70% notes due May 15, 1994, priced at 99.90 to yield 8.737%. The noncallable notes were priced at 163 basis points above the Treasury's three-year note. Rated Baa-3 by Moody's and triple-Bplus by S&P, the issue will be sold through underwriters led by Goldman, Sachs & Co. MUNICIPALS Washington Suburban Sanitary District, Md. -- $248.5 million of various refunding revenue bonds due Nov. 1, 1991-2014, via a Bear, Stearns & Co. group. The bonds, rated double-A-1 by Moody's and double-A by S&P, were priced for reoffering to yield from 4.70% in 1992 to 6.80% in 2013 and 2014. Bonds maturing in 1991 are not formally reoffered to investors. The offering consists of $108.7 million of water supply refunding bonds, $72.4 million of sewage disposal refunding bonds and $67.4 million of general construction bonds. Washington, D.C. -- $195.6 million of general obligation bonds, Series 1991 A, due June 1, 1993-2006, 2008 and 2011, via a Lehman Brothers Inc. group. The bonds, insured and rated triple-A by Moody's and S&P, were priced for reoffering to yield from 5.20% in 1993 to 7.00% in 2011. Current interest serial bonds are priced to yield from 5.20% in 1993 to 6.85% in 2005. Bonds maturing in 2006 are not formally reoffered to investors. There are $27.5 million of 6 3/4% term bonds priced at 98 to yield 6.95% in 2008 and $48.9 million of 6 7/8% term bonds priced at 98 5/8 to yield 7.00% in 2011. Washington Department of Ecology -- $77.8 million of certificates of participation, Series 1991 A, State Office Building project, due April 1, 1998-2006, 2012, and 2016, tentatively priced by a Goldman Sachs group to yield from 6.10% in 1998 to 7.00% in 2006 and 2012. Current interest serial bonds are priced to yield from 6.10% in 1998 to 7.00% in 2006. There are $31.1 million of 6% term bonds priced at 89.11 to yield 7.00% in 2012 and $27.2 million of 5% term bonds priced at 76.88 to yield 6.97% in 2016. The bonds are rated single-A-1 by Moody's and single-A by S&P. In offering the bonds, the Washington Department of Ecology is acting by and through the Washington Department of General Administration. Tennessee Local Development Authority -- $51.5 million of various state loan programs revenue bond anticipation notes, Series 1991 A and B. Lehman Brothers, bidding alone, apparently won $30 million of Series B notes due May 15, 1992. The notes, rated MIG-1 by Moody's and SP1-plus by S&P, carry a coupon of 4.63%. The notes are not being formally reoffered. Citicorp Securities Markets Inc., bidding alone, apparently won the remainder, $21.5 million of Series A notes that mature July 30, 1991. The notes, rated MIG-1 by Moody's and SP1-plus by S&P, carry a coupon of 4.25% and are priced for reoffering to yield 4.00%. MORTGAGES American Housing Trust IX -- $328.9 million of pass-through mortgage securities backed by vendee loans from the Department of Veterans Affairs, priced by underwriters led by First Boston. Vendee loans, backed by the U.S. government, are loans issued to finance the sale of VA-owned properties acquired as a result of VA loan defaults. The pass-through securities are sold through a special trust created to sell vendee loan-backed issues. The collateral has a weighted average coupon rate of 9.38% and weighted average remaining term to maturity of 28.83 years. Federal National Mortgage Association -- $210 million of real estate mortgage investment conduit securities offered by Donaldson, Lufkin & Jenrette Securities Corp. The offering, Series 1991 G-17, is backed by Government National Mortgage Association 10% securities. Further details weren't immediately available. EUROBONDS Export-Import Bank of Japan (Japan) -- $200 million of 8 3/4% Eurobonds due June 20, 2001, via LTCB International. Reoffered at 99.86 to yield 8.588% (semiannual equivalent), margin 47 basis points above comparable U.S. Treasury. Fees 0.325. Tokyo Electric Power Co. (Japan) -- 200 million Canadian dollars of 10 1/2% Eurobonds due June 14, 2001, issue price 101.575, via lead underwriter Wood Gundy Inc. Reoffer price 99.95 to yield 10.51% (annual), or 60 basis points above semiannual yield on Canadian government benchmark 10-year bond. Fees 2. Credit National (France) -- C$150 million of 10 3/8% Eurobonds due June 12, 1998, issue price 101.80, via Bankers Trust International. Reoffer 100.30 to yield 10.31%, or 61 basis points above comparable Canadian government bond yields. Fees 1 7/8. Compagnie Francaise des Petroles Total (France) -- C$100 million of 10 1/2% Eurobonds due June 26, 1996, issue price 101.65, via Deutsche Bank Capital Markets Ltd. Reoffered at 100.10 to yield 10.47% (annual), or 82 basis points above Canadian government 9 1/4% issue due October 1996. Fees 1 7/8. Compagnie Bancaire (France) -- 200 million European currency units of 9 3/8% Eurobonds, issue price 101.575, via Paribas Capital Markets Ltd. Reoffered at par. Fees 1 7/8. Landeskreditbank Baden-Wuerttemberg (Germany) -- 100 million ECUs of 9% Eurobonds due June 5, 1995, issue price 101.425, via Deutsche Bank Capital Markets. Reoffered at par. Fees 1 5/8. Deutsche Siedlungs & Landesrentenbank (Germany) -- 50 million marks of 10% bonds due June 7, 1994, priced at 100 3/4 to yield 9.70% with redemption at par, via Schweizerischer Bankverein (Deutschland) AG. Borrower has the choice of redeeming bonds at par or as 26 shares of German utility company Veba AG plus 1,160 marks for each bond. Fees 1 1/2. Woolwich Building Society (U.K.) -- #100 million of floating-rate notes due June 1996, via Deutsche Bank Capital Markets. Notes pay three-month London interbank offered rate plus 0.15 point, issue price par. Reoffered at 99.69. Fees 0.41. GMAC Australia Finance Ltd. (U.S. parent) -- 75 million Australian dollars of 11 3/4% Eurobonds due June 20, 1996, issue price 101 1/4, via Hambros Bank Ltd. Yield 11.95% less full commissions. Guarantor General Motors Acceptance Corp., a unit of General Motors Corp. Fees 2. Nestle Holdings Inc. (U.S.) -- $200 million of 5 7/8% Eurobonds with equity warrants due June 19, 1998, issue price par, via UBS Phillips & Drew. Each $10,000 bond has 90 warrants attached, and 60 warrants allow holders to buy one registered share of Nestle S.A. for 9,200 Swiss francs, a 9% premium to Tuesday's closing price. Exercise period June 19, 1991, to Nov. 30, 1994. Fees 2 1/4. De Nationale Investeringsbank N.V. (Netherlands) -- 150 million Dutch guilders of 9% bonds due June 14, 1996, priced at 101.15 to yield 8.70%, via Swiss Bank Corp. Investment Banking. Fees 1. Credit Commercial de France (France) -- 150 million Swiss francs of 7 1/4% subordinated public bonds due June 18, 2001, priced at 102 via Credit Suisse. Fees 2 7/8. General Electric Capital Corp. (U.S.) -- 75 million Swiss francs of 6 3/4% privately placed notes due June 14, 1996, priced at 102 via Banque Paribas (Suisse). Fees 1 1/2. European Investment Bank (agency) -- 200 million Swiss francs of 6 5/8% public bonds due June 24, 1999, priced at 102 1/4 via Credit Suisse. Fees 2 3/8. Banque Nationale de Paris (France) -- 75 million Swiss francs of 7 1/4% privately placed notes due 1994, priced at 102 1/4 via S.G. Warburg Soditic. Fees 1 1/4. WSJ910516-0013 910516-0013. Commodities: Cotton Futures Prices Surge in Heavy Trading As Plantings Are Delayed Again by Bad Weather ---- By Elyse Tanouye Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C12 COMMODITY NEWS, FARM PRODUCTS (CMD) COMMODITY MARKETS FOR METALS (MIN) PETROLEUM (PET) COMMODITIES MARKET (CMD) Cotton prices continued to surge in heavy trading. Traders are concerned about dwindling cotton supplies because plantings are being delayed by weather problems in key growing areas. After setting a life-of-contract high of 92 cents a pound, cotton for July delivery ended at 91.96 cents, up 1.63 cents. October cotton also ended near the new contract high of 82.75 cents set yesterday, finishing at 82.63, up 1.46 cents. So far this week, July and October cotton have gained more than four cents. Estimated trading volume of 11,500 contracts yesterday far exceeded the daily average of 7,379 this year. Of particular concern to traders is the bad weather in the areas that normally produce cotton harvested during the late summer and early fall. Plantings in the Mississippi Delta are well behind schedule and continue to be delayed by rainy weather this week. Rain over the weekend relieved some of the dryness in West Texas, but conditions are still too dry in much of the area, said Jim Roemer, meteorologist with Freese Notis Weather in Des Moines, Iowa. Below-normal temperatures and rain, which have slowed growth of the cotton crop in California, will continue over this weekend, he predicted. Textile mills, which had been waiting for the price of cotton to decline before securing supplies, still need to buy cotton for the rest of the year, said O.A. Cleveland, an economist with Mississippi State University. But cotton supplies will be very tight until late October. Outside the U.S., however, cotton supplies are expected to be plentiful. Australia had a "huge" increase in cotton production this year, said Carolyn Whitton, an international cotton analyst with the U.S. Agriculture Department, adding that large crops are also being harvested in South America. "That should take care of demand that's out there," she said. For the 1991-92 crop year, which begins Aug. 1, the Agriculture Department is forecasting a 5% increase in world production to 91 million bales and a 2% to 2.5% rise in demand to 88 million bales, Ms. Whitton said. That resulting surplus should allow leftover stocks -- those that are "carried over" into the following crop year -- to rebuild somewhat next year, she added. Leftover stocks are currently very low. While supplies may be abundant overseas, domestic consumers of cotton, such as textile mills, have very limited access to international cotton because of import quotas, Ms. Whitton noted. But most consumers buy well in advance and should have locked in their supply needs through December by now, she said. Mr. Cleveland of Mississippi State expects July cotton will easily reach 94 cents to 96 cents before the contract expires. And he predicts October futures will gain on July because "it is behaving more like an old-crop month." In other commodity markets yesterday: ENERGY: Petroleum futures prices closed mixed yesterday, with crude oil and heating oil higher and gasoline lower in trading on the New York Mercantile Exchange. Traders were apparently reacting to Tuesday's report from the American Petroleum Institute that showed a bearish buildup in gasoline inventories, and to technical factors related to the price difference between heating oil and gasoline. When all was said and done, crude oil for June delivery was 18 cents a barrel higher at $20.92, June gasoline stood at 69.08 cents a gallon, down 0.91 cent, and June heating oil was at 55.52 cents a gallon, up 0.77 cent. GRAINS and SOYBEANS: Prices of soybean futures contracts settled mixed after traders realized that they had misinterpreted an Agriculture Department report on the acreage that farmers might switch this year to soybeans from other crops such as corn. Soybean prices fell Tuesday when traders thought the report indicated that farmers intended to plant roughly two million acres more of soybeans than expected. After closer study, however, traders dismissed some of the government assumptions used to make the projection. Prices of corn and wheat futures contracts dipped when the U.S. Senate delayed a vote that could have helped clear the way for the administration to grant export credit guarantees to the Soviet Union. Most traders had expected the vote to take place during the trading session. The Senate was considering, among other things, whether to loosen the definition of credit worthiness so that Moscow could qualify. COPPER: Futures prices rebounded. Copper for July delivery ended 1.4 cents higher at 98.9 cents per pound. Traders tied the rise to short-covering, or buying of contracts to offset previous bets that the price would fall. Mike Frawley, a metals trader at Dean Witter, said there were rumors about an unspecified problem at a big smelter in Germany. He added that the strikes in Poland have spread to other copper mines. An analyst noted that labor negotiations are coming up in Chile and unions will be making their demands public as early as today. He predicted copper prices may firm over the next few days, but said the long-term trend still is down. WSJ910516-0012 910516-0012. Quarterly Earnings Surprises 05/16/91 WALL STREET JOURNAL (J), PAGE B8 UAECA CPB LOR SCIXF WAH 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. Results in parentheses are losses. 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 120-day estimate. (# of analysts) ACTUAL --------------- % COMPANY NAME EPS 30-DAY 120-DAY DIFF. POSITIVE Utd Artists Ent ($ .14) ... ($ .17) (3) 17.65 Campbell Soup .60 ... .56 (12) 7.14 Loral Corp 1.19 ... 1.13 (13) 5.31 Scitex Corp .61 ... .58 (5) 5.17 NEGATIVE Westair Holding ($ .69) ... ($ .55) (4) 25.45 Source: Zacks Investment Research WSJ910516-0011 910516-0011. Fidelity Bancshares Merger 05/16/91 WALL STREET JOURNAL (J), NO PAGE CITATION FFTN UPC FINANCIAL (FIN) ALL REGIONAL BANKS (BAR) SOUTHERN U.S. BANKS (BAS) ALL BANKS, BANKING NEWS AND ISSUES (BNK) SAVINGS AND LOANS, THRIFTS (SAL) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) TENNESSEE (TN) NASHVILLE, Tenn. -- Fidelity Bancshares Inc. said it entered into a definitive agreement to be acquired by Union Planters Corp. for $79 million, or $23.50 a share. Fidelity said it will merge with a unit of Union Planters National Bank, which is the principal subsidiary of Union Planters Corp. Immediately following the acquisition, Fidelity Federal Bank, a federally chartered savings bank owned by Fidelity Bancshares, will convert to a national bank and then merge with Union Planters National Bank. Union Planters, a bank holding company, is based in Memphis, Tenn. In national over-the-counter trading yesterday, Fidelity Bancshares closed at $20.375, up 12.5 cents. WSJ910516-0010 910516-0010. Canada Plans Bond Auction 05/16/91 WALL STREET JOURNAL (J), PAGE C12 BOND MARKET NEWS (BON) BOND MARKET NEWS (BON) CANADA (CN) OTTAWA -- The Canadian government announced plans to auction 1.35 billion Canadian dollars (US$1.17 billion) of two-year bonds on May 22. The bonds will mature June 6, 1993. The proceeds of the sale will be used to redeem C$550 million of government bonds maturing June 6 and for general government purposes. WSJ910516-0009 910516-0009. Business Brief -- H.J. Heinz Co.: Company's Ore-Ida Acquires Closely Held Foods Concern 05/16/91 WALL STREET JOURNAL (J), PAGE A11 HNZ CONSUMER NON-CYCLICAL (NCY) FOOD PRODUCTS (FOD) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CALIFORNIA (CA) PENNSYLVANIA (PA) H.J. Heinz Co.'s Ore-Ida unit acquired Continental Delights Inc., a closely held snack foods concern based in Hayward, Calif., Ore-Ida officials said. Terms weren't disclosed. Ore-Ida, a frozen foods concern, has annual sales of $1 billion. Pittsburgh-based H.J. Heinz makes a variety of food products including ketchup and other condiments, processed foods, soups and baby foods. The acquisition will help Ore-Ida expand into the frozen sandwiches market, which grew more than 16% last year, Ore-Ida officials said. Continental, which distributes Igors' Piroshkis snack foods and Continental Delights baked products, has annual sales of $10 million to $15 million. Previous Continental owners Peter Pulis and James Kelly will continue to play an important role in managing the business, Ore-Ida said. WSJ910516-0008 910516-0008. International: Poland Seeks New Plan For Its Commercial Debt ---- Special to The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE C13 FINANCIAL (FIN) ALL BANKS, BANKING NEWS AND ISSUES (BNK) INTERNATIONAL ECONOMIC NEWS AND STATISTICS (IEN) INTERNATIONAL ECONOMIC NEWS AND ANALYSIS (IEN) POLAND (PL) LONDON -- Poland is seeking to cap its commercial debt payments at $500 million annually for the next 10 years under a proposal linked to its repayment of about $1.25 billion in interest arrears to banks. The proposal, submitted last week to a 10-bank creditors committee in Frankfurt, has drawn mixed reviews, because Poland has added conditions, including a cap on service of future credits under any debt-reduction accord reached with its nearly 500 creditor banks. Poland did, however, unconditionally agree to make a $100 million payment July 1 on its current interest arrears and begin an escrow account in late June with the Bank for International Settlements representing 20% of interest due on future debt payments, senior creditor bankers say. Poland's creditor banks have demanded Poland pay 30% of its current interest arrears before detailed talks on debt-reduction begin. They have also asked Poland to guarantee payments on 45% of future interest due once a formal debt plan its under negotiation. Last month, the so-called Paris Club group of creditors agreed to forgive at least 50% of Poland's nearly $30 billion of official debts. But under that accord the Warsaw government must seek "comparability of treatment" on its commercial bank debt. WSJ910516-0007 910516-0007. U.S. Reflects Industry Trend ---- By Bob Davis Staff Reporter of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE A6 PKN SUNW TECHNOLOGY (TEC) COMPUTERS AND INFORMATION TECHNOLOGY (CPR) DIVERSIFIED TECHNOLOGY (DTC) DEFENSE DEPARTMENT (DEF) FEDERAL GOVERNMENT (FDL) INTERNAL REVENUE SERVICE (IRS) TREASURY DEPARTMENT (TRE) CALIFORNIA (CA) CONNECTICUT (CT) The federal government, the largest single computer buyer, clearly reflects the trend in private industry away from mainframes and established names in micros. And the government may eventually offer computer makers a way out of the doldrums. But its purchases lag behind the private sector because of the government's arcane procurement rules. "We can't do anything fast," says Steven Broadbent, the Treasury's deputy assistant secretary for information services. The Internal Revenue Service, for instance -- part of the Treasury Department -- plans to award a contract valued at as much as $400 million next month for tens of thousands of microcomputers. This is the way the federal government tries to push prices down. It centralizes its computer buys -- figuring higher volume means lower unit prices -- and then makes the procurements somewhat indefinite. That way a whole range of users in the agencies can make use of the contract to get a low-cost computer. The IRS microcomputer purchase, for instance, is good for as long as four years, so people who don't have an immediate need for the machine can decide later on they need computers and purchase them under the micro contract. Robert Dornan, vice president of Federal Sources Inc., a Vienna, Va., market research firm that tracks federal computer spending, says the Pentagon has been able to drive down prices with these so-called indefinite-delivery contracts. The Air Force, for instance, will put out a huge procurement, which the other services then will tap when they need micros. "They get commodity buys with fantastic price competition and huge, huge discounts," he says. Federal Sources also predicts that federal spending will help turn around the computer industry slump. The company projects that federal government purchases of computer hardware will jump 30% to $3.75 billion in the year ending Sept. 30, 1992, from $2.9 billion in the current fiscal year. Here are a few federal computer procurements that are expected to be awarded over the next 18 months. -- The Navy is expected to award a contract in October to buy 1,700 superminicomputers, which would replace Perkin-Elmer Corp. minicomputers. Other defense services could buy superminis under this contract. -- The Navy is also planning to buy 4,000 powerful workstations, with speeds of 50 million to 100 million instructions a second, for $400 million. These would be used on ships to aid in tactical decision making. They would replace current generation of Sun Microsystems Inc. microcomputers. -- NASA also is expected to buy $100 million of workstations for its Goddard Space Flight Center in Greenbelt, Md. "We see a substantial growth in minis, workstations and networks," says Mr. Dornan. "The government is moving a lot of work off mainframes and into distributed processing." That trend is evident at the Internal Revenue Service, says Mr. Broadbent. "The IRS is clearly headed in the direction of distributed processing," he says."We're moving away from huge centralized databases and moving them {the databases} out into the office, and maintaining a central file of where all the records are." (See related story: "Improvement in Mainframe Market Expected to Be Slow" -- WSJ May 16, 1991) WSJ910516-0006 910516-0006. LEISURE & ARTS -- Film: Bizarre Life of New Zealand's `Mad Writer' ---- By Julie Salamon 05/16/91 WALL STREET JOURNAL (J), PAGE A14 Film biographies of writers are frequently undermined because their subjects' grandest adventures usually take place inside their heads. But, in a movie called "An Angel at My Table," director Jane Campion has found a way to visualize the interior life of the New Zealand writer Janet Frame with sensitivity and emotional power. Ms. Frame's life, both interior and exterior, has been bizarre. Born in 1924, she grew up on the South Island of rural New Zealand to a poor family with an intellectual bent. Her twin died at the age of two weeks. Janet was a funny, fat little girl who early on got used to being a spectator to life. Not long after she went to college she was labeled a schizophrenic and shipped off to a mental hospital. After eight years and 200 shock treatments she was released, only to find out later that she had been misdiagnosed. While she was in the hospital, she kept up with the writing she'd begun as a child, and, by the time she emerged, she was a published author (and a legend in New Zealand, where she became known as "the mad writer"). She went on to write 11 novels, short stories and the autobiographies that are the basis for "An Angel at My Table." The Frame saga may have seemed perfect material for Ms. Campion, who is also a New Zealander. The director's debut film, "Sweetie," was the dark story of two strange sisters and their strange relationship with each other. But while Ms. Campion doesn't skimp on the sad and horrible side of Janet Frame's life, her portrait of the writer has remarkable warmth and compassion. She's teamed up with the screenwriter Laura Jones, who wrote the smart, heartbreaking script for the Australian film "High Tide." The film makers have divided the story into three parts, like a book, starting with their heroine's childhood in the remotest corner of the British empire, a backwater of New Zealand. In this section, two little girls portray the young Janet (Alexia Keogh) and teenage Janet (Karen Fergusson). Ms. Keogh's Janet is a round little girl with a great cloud of red hair (Ms. Frame's most distinguishing physical feature throughout her life, along with bad teeth). From the beginning, she was a watcher, a bright, emotional child who seemed to see life as a continuation of the stories she was always reading -- something to observe with pleasure and wistfulness but not to take part in. Ms. Campion never strays from Janet's point of view. Her childhood unfolds as a series of memories, laid out with a minimum of facts and an abundance of emotional detail. The Frame family was large: four girls and one boy. It was a lively household, where the children -- especially the girls -- created a rich fantasy life for themselves. Their parents serve mainly as background; they seem almost irrelevant to Janet's childhood. But her father, a railway worker, encouraged Janet's early literary aspirations, buying her a beautiful notebook to record her poems. In those pre-television days of the Depression, they amused each other with books and the imaginary lives they invented for themselves. With her sisters, all more conventionally pretty than she, Janet always felt like part of the group. They loved her because she was their sister and because they liked the stories she told them and the poetry she wrote. At school she learned the distinction between the cute girls and the brainy ones (she always watched the cute ones wistfully while she sat with the smart girls, who were discussing Karl Marx). Yet the film makers make the difficulties of adolescence seem both familiar and exotic, filtered through Janet's tender, poetic sensibility. Ms. Campion has a graceful touch. Here she's never maudlin, never glib and she has elicited wonderful shadings of feeling from her young performers. The older Janet got, the more distant she felt from the world around her. The safety of her childhood home had already been disrupted by death before she left for college. That sense of exposure and vulnerability was exaggerated once she was out in the world on her own. A young actress named Kerry Fox plays the adult Janet, with a compelling mix of fragility and fortitude. She and Ms. Campion present Janet as she sees herself, as a spectator whose delicate maneuvering through life is taken as madness. Janet lives with her aunt and sickly uncle when she first goes to university. She eats sparse portions of food alone in the kitchen -- then eats the scraps off her relatives' plates when they aren't looking. She hides her menstrual rags in a drawer and secretly takes them off to a cemetery to bury them. It's as though she wants no evidence of her corporeal existence. But she wants to be noticed through her writing. And her writing sustains her, even when she's incarcerated in the mental institution. Though the film doesn't skip the horror of her life there, those years blur together, as they must have for Janet Frame. This is one place the film's impressionist style misses a beat; Janet emerges from the institution a published author, though there's barely a clue of how that happened. Her post-institution induction into the literary world doesn't have the same emotional pull as the scenes of her childhood. But that doesn't diminish the strength of the movie's insight. It made me want to read the writing that has been the point of the life. --- VIDEO TIP: Many female writers I know were first inspired by Jo March, the tomboyish girl writer in Louisa May Alcott's "Little Women." Though Jo's story is quite different from Janet Frame's, their appeal is remarkably the same. Four movies were made out of "Little Women," but the one to watch is George Cukor's 1933 version, with Katharine Hepburn as Jo. WSJ910516-0005 910516-0005. Who's News: Two Regulatory Chiefs Stir Up Business --- Under Steiger, FTC Has Ended `No-Go' Stance ---- by Paul M. Barrett and Jeanne Saddler Staff Reporters of The Wall Street Journal 05/16/91 WALL STREET JOURNAL (J), PAGE B1 ADVERTISING, MARKETING, PUBLIC RELATIONS (ADV) BIOGRAPHY (BIO) ENVIRONMENT (ENV) BIOGRAPHY (BIO) ENVIRONMENTAL NEWS (ENV) FEDERAL TRADE COMMISSION (FTC) JUSTICE DEPARTMENT (JUS) WASHINGTON -- The Federal Trade Commission, mocked as a "toothless watchdog" during the Reagan era and as the "national nanny" in the Carter years, is now trying to find a regulatory middle ground. FTC officials make clear they have no plans to return to the go-go activism of the late 1970s. But a surge in antitrust and consumer-protection enforcement actions under Chairwoman Janet Steiger, who was appointed by President Bush in 1989, is sending a message to business that the no-go stance of the past decade is over. "We'll keep moving along, bringing more cases," Ms. Steiger said in an interview. Future targets for charges of deceptive advertising, according to FTC officials, will include some health-care ads, such as those for diets and cosmetic surgery; telemarketing fraud; ads aimed at children; and ads about nutritional value. The FTC also plans to hold hearings soon on whether there should be federal rules on environmental claims in advertising. The agency and several state attorneys general are investigating claims made by some plastics manufacturers that their products are degradable and therefore better for the environment. Targets for possible antitrust actions include manufacturers that force retailers to participate in "cooperative advertising" programs. Such programs, common among car makers, typically include a minimum price set by the supplier. The activism of Ms. Steiger, formerly chairwoman of the U.S. Postal Commission, is a surprise to many, perhaps including Bush administration officials. When she took over, "she sent the signal to get out and bring cases," says one veteran antitrust staff lawyer. Result: The FTC took action to block or modify 20 mergers in fiscal 1990, compared with nine in 1987. Early this year, the agency brought its first resale-price maintenance case in nearly a decade; and last month Nintendo Co., the home video-game giant, agreed to compensate consumers after being hit with similar charges by the FTC and state antitrust regulators. (Nintendo didn't admit any wrongdoing.) This month, the FTC also announced a settlement of a telemarketing case bringing refunds of $47 million to consumers. Some critics say the FTC has gone too far on some matters, such as price maintenance, that might help ensure good service. But because "we've also maintained frequent contact with advertisers and consumer groups . . . we've been able to be more active without butting heads, " says Barry Cutler, the FTC's director of consumer protection. That is helping the agency find a middle ground, he says. Daniel Jaffe, head of government relations for the Association of National Advertisers, agrees that the agency is accessible: "They don't just let you in the door to talk; they listen." And Mark Silbergeld, head of Consumers Union's Washington office, says the FTC shows all the signs of being a "born-again consumer-protection agency." But he cautions, "The question is whether over the next couple of years they can really deliver on this or if it's more bark than bite." The FTC's incipient renaissance could be halted, however, by the pending departure of two of the five commissioners who frequently join with Ms. Steiger in a pro-enforcement majority. Senate Democrats already warn that the White House is trying to rein in an agency that, under Ms. Steiger's leadership, has become more activist than the administration expected. Says Ms. Steiger: "There is no reason to expect a change in our commitment to enforcing laws on behalf of consumers. Period." (See related story: "FDA's Kessler Moves Swiftly on Food Labels" -- WSJ May 16, 1991) WSJ910516-0004 910516-0004. ARX Inc. Posts Loss Totaling $2.4 Million For Fiscal 3rd Period 05/16/91 WALL STREET JOURNAL (J), PAGE A6 ARX VTX INDUSTRIAL (IDU) TECHNOLOGY (TEC) AEROSPACE (ARO) ELECTRICAL COMPONENTS AND EQUIPMENT (ELQ) EARNINGS (ERN) EARNINGS (ERN) NEW YORK (NY) PLAINVIEW, N.Y. -- ARX Inc. said its VTX Electronics Corp. subsidiary will hire special counsel to investigate understated liabilities and warned that VTX may be forced to file for bankruptcy-court protection. The electronics and defense concern also reported a fiscal third-quarter loss of $2.4 million, or 28 cents a share, compared with net income of $339,000, or five cents a share, the year earlier. Sales for the quarter ended March 31 fell 4% to $29.2 million from $30.5 million. The company cited a $2.2 million loss in its T-Cas unit, which includes a $1.4 million loss reserve for revised estimates of costs on two telecommunication systems contracts. It also reported a $578,000 net loss at its 72%-owned VTX unit, and a $500,000 charge against its fiscal 1990 results because of an understatement of liabilities by the unit. For the nine months, the company reported net losses of $9.8 million, or $1.17 a share, compared with net income of $1.2 million, or 16 cents a share, the year earlier. Revenue rose to $86.3 million from $80.7 million. ARX said the special counsel will investigate and review the reasons for the VTX's understated liabilities and determine if any further adjustment is necessary. The company said it will issue restated financial results for the year ended June 30, 1990. VTX is negotiating with certain trade creditors and ARX cautioned that if the unit can't obtain agreements, VTX may be required to seek protection from its creditors. It added that in view of this, the value of its investment in VTX, which was about $8.6 million as of March 31, can't currently be determined. WSJ910516-0003 910516-0003. Molson to Redeem Debt, Ending Search For Beer Acquisition 05/16/91 WALL STREET JOURNAL (J), PAGE C11 MOL.A CONSUMER NON-CYCLICAL (NCY) BUYBACKS, REDEMPTIONS, SWAP OFFERS (BBK) BEVERAGES (BVG) DIVIDENDS (DIV) DISTILLERS AND BREWERS, MAKERS OF ALCOHOLIC BEVERAGES (DST) EARNINGS (ERN) TENDER OFFERS, MERGERS, ACQUISITIONS (TNM) BUYBACKS, REDEMPTIONS, REPURCHASES, SWAPS (BBK) DIVIDENDS (DIV) EARNINGS (ERN) ACQUISITIONS & MERGERS, TAKEOVERS, BOARD BATTLES (TNM) CANADA (CN) TORONTO -- Molson Cos., after a fruitless search for an acquisition in the brewing industry, said it plans to redeem 150 million Canadian dollars (US$130.3 million) in debentures that it issued last year to finance an expansion of the business. "We have not found anything that we consider an opportunity that we would wish to take advantage of" in the beer business, said Hershell Ezrin, spokesman for the company. Mr. Ezrin said Molson instead will focus its expansion efforts on its other businesses, which include entertainment, retailing and the cleaning industry. The debentures were part of a C$300 million debt and equity issue last year to finance growth. Separately, Molson announced it plans to split its Class A nonvoting shares and its Class B common shares on a 3-for-2 basis. The split, which is subject to shareholder approval, would affect holders on record as of July 17. Molson also reported a net loss of C$38.7 million, or C$1.08 a share, for the fiscal year ended March 31, after taking a previously announced pretax charge of C$157.1 million. The charge was related to Molson's investment in cash-strapped Harlin Holdings Pty. of Australia, the closely held parent of Molson's joint-venture brewing partner in North America. In the year-earlier period, Molson had net income of C$117.9 million, or C$3.59 a share, after an extraordinary gain of C$11.2 million. Revenue in the latest year slid to C$2.53 billion from C$2.55 billion. The earnings were in line with analysts' expectations. Molson also announced it would raise its quarterly dividend to 27 Canadian cents a share from 25 Canadian cents. The dividend, before the proposed share split, will be paid on July 1, it said. WSJ910516-0002 910516-0002. Bally's Profit Jumps As a One-Time Gain Masks Operating Loss 05/16/91 WALL STREET JOURNAL (J), PAGE A11 BLY CONSUMER CYCLICAL (CYC) CASINOS AND GAMBLING (CNO) ENTERTAINMENT AND LEISURE (ENT) EARNINGS (ERN) EARNINGS (ERN) ILLINOIS (IL) CHICAGO -- Bally Manufacturing Corp. posted sharply higher first-quarter net income, but only because a one-time gain masked an operating loss for the casino, health club and manufacturing company. Separately, Bally's former chairman sued the company for $5.4 million. Robert E. Mullane, who retired abruptly last October after holding the top post for 11 years, claimed the company owes him salary and other compensation under an employment agreement he contends was breached. In the first quarter, Bally earned $27.9 million, or 86 cents a share, including a gain of $35.2 million from the prepayment of debt. In the year-earlier period, Bally earned $7.6 million, or 21 cents a share. Revenue fell 10% in the latest quarter to $495.6 million from $551.3 million. The company had an operating loss of $7.3 million, or 25 cents a share, as the recession and effects of the Mideast war hurt casino and health-club revenue, as well as sales of slot machines and fitness equipment. In New York Stock Exchange composite trading yesterday, Bally shares closed at $4.75, up 25 cents. Mr. Mullane's suit, filed in U.S. District Court here, accused Bally of fraudulently inducing him to sign a termination agreement last October and with "materially" breaching his contract by failing to make any principal or interest payment on a nearly $1.6 million promissory note. Mr. Mullane was succeeded as chairman and chief executive officer by Bally's largest shareholder, New Jersey businessman Arthur M. Goldberg. Neil E. Jenkins, Bally vice president and general counsel, said yesterday he hadn't seen the lawsuit and declined to comment on it. WSJ910516-0001 910516-0001. Sotheby's Reports Loss of $5.2 Million For the First Quarter 05/16/91 WALL STREET JOURNAL (J), PAGE A4 BID FINANCIAL (FIN) EARNINGS (ERN) DIVERSIFIED FINANCIAL SERVICES, CREDIT INSTITUTIONS (FIS) EARNINGS (ERN) GREAT BRITAIN (UK) NEW YORK -- Sotheby's Holdings Inc. reported a first-quarter net loss of $5.2 million, or 10 cents a share, which it said reflected the impact of the Gulf war and a downturn in the art market. The New York auction house had net income of $6 million, or 10 cents a share, in the year-earlier period. Revenue fell 47% to $32.4 million from $61.4 million. The firm held fewer auctions in the latest period than in first quarter of 1990. Sellers were reluctant to put property on the auction block because of the economic and political uncertainty caused by the war with Iraq, according to Sotheby's. The auction house also reported reduced sales volume at the auctions it held. Michael L. Ainslie, president and chief executive officer, predicted that second-quarter results will be "significantly lower than last year's record levels." Sales results at the series of Impressionist and modern paintings auctions the firm held last week "fell short" of expectations because of the absence of bidding by art dealers and by Japanese collectors who previously were active buyers, he said. However, other segments of the art market have had "encouraging results," Mr. Ainslie said. In particular, the firm's recent auctions of contemporary art indicated "there was a greater stability to this market than we have seen in several months," he said. So far this year, the firm has also had reasonably successful sales of Chinese art and ceramics, silver, baseball cards and jewelry. However, a disproportionate share of its profit comes from sales of Impressionist and modern art. Sotheby's fell 50 cents a share in composite trading on the New York Stock Exchange to close at $12.375.