Chicago Tribune from Chicago, Illinois • Page 53

(Oiicaso OTtitmne Tuesday, June 8, 1971 BUSINESS FINANCE PRODUCTION MARKETING TRANSPORTATION 7 Section 3 Penn Central Plan Asks Rules Changes John Connally Asks Congress to Rescue Troubled Lockheed 1 set aside the remaining BY LOUIS DOMBROWSKI (Chicago Trlbum Pnu smlal PHILADELPHIA, June 7 -Trustees of the bankrupt Penn state laws which require a certain number of men in a train crew; and 2 authorize the Bankruptcy Court to establish Central Transportation Co. to compulsory arbitration machin day proposed a four-point program designed to ease out ery in any labor dispute that WASHINGTON, June 7 Iff) encourage attempts by other Secretary of the Treasury John i corporations to save them- moded labor work rules and selves thru federal support. create a financial climate for Connally disagreed, saying the shock of a Lockheed failure B. Connally testified today that if congressional aid for Lock-head Aircraft Corp. doesn't come within 40 days, tens of thousands of jobs may be lost and economic recovery endangered.

But Sen. William Proxmire, Wis. said the Senate and House will require far longer by which free enterprise is limited and business conducted. At another point, Connally stated the problem in a slightly different fashion: "Some aspects of this frankly trouble me and are difficult to defend on the basis of a strictly free-enterprise system." But he insisted the Lockheed situation is unique or nearly so. Connally said he believes some of the nation's, huge cor successful reorganization.

Jf these measures can be put into effect, the trustees told newsmen at their first news conference since assuming control of the carrier, further gov them reasonable protection, the trustees said. They estimated that savings at present wage levels from operating three-man crews would be at least $135 million a year. When coupled with the accelerated program of improving operations, "such savings would put Penn Central in the black," they said. As far as Penn Central finances are concerned, the trustees reported that the negative cash flow in the first four months of 1971 was reversed in May from approximately $4 million a month to a positive flow of more than $13 million. Asked why they decided on the sale of the $1 billion in valuable Park Avenue properties in New York City which return $21 million in net income to the railroad the trustees said they hope to reach an agreement with mortgage holders whereby funds from the sale could be put into the purchase of new railroad equipment.

could light the fires of economic fear in the union hall as well as in the corporate boardroom. Would Generate Fears "Restoration of confidence means the elimination' of fear," he said, "and just at this time, with the economy moving ahead and unemployment topping out, the failure of the ernment assistance beyond the remains unresolved after 90 days. "The outlook for Penn Central is brighter than it was when Congress acted on the $100 million guaranteed loan and the chances of ultimate recovery appear to be better," the trustees said in a statement. Concede Stop Chance They conceded, however, that if a number of adverse contingencies develop, there is a chance that "Penn Central will have to shut down for lack of funds by November or December or possibly earlier." If Penn Central could go to the basic three-man crew in freight service, a total of 8,900 employes would become surplus but the railroad would assure than that to consider the merits of the Nixon administration's plan to grant Lockheed, the porations have reached a size so nation's largest defense con vast, ana require lunas so astronomic in size, that their John B. Connally tractor, guarantees for up to cash demands nearly defy the $100 million in federally guaranteed loans can be avoided.

Will Ask Support The trustees said they will begin negotiations "within the next few days" to achieve a basic three-man operating crew on freight trains. At the same time, the Penn Central will ask Congress and the Nixon administration to support legislation that will nation's largest defense contractor with 72,000 employes earning $830 million a year, 35,000 suppliers and $2.5 billion in annual sales would, beyond ability of the nation's tradition al lending institutions. Lockheed's current crisis was any shadow of a doubt, generate precipitated by the failure of Agree to Phase Out Pound as Reserve deep-seated fears, Connally said. Britain's Rolls-Royce, maker of luxury automobiles and jet engines, in this case the engines of the Lockheed airbus. Connally cited, and Proxmire challenged, what the Treasury Proxmire said the guaranteed secretary said were historic precedents for the action.

LUXEMBURG, June 7 W) $250 million in new loans. Cautioning the Senate Banking Committee not to "dawdle," Connally said Lockheed is now spending $5 million a week of its own and bank money to keep alive its commercial H011 airbus project. Money Almost Depicted He said the money will be near exhaustion and the firm's financial situation critical 30 days from now and said Congress must act no later than 10 days after that. Proxmire questioned the wisdom of insulating huge corporations from failure, said Lockheed is a firm with an "infinite capacity for mismanagement," and declared Congress must not set a precedent which would And at one point Connally loan rescue plan also entails the indirect rescue of Rolls-Royce, a firm in direct competition with such American firms as General Electric. Ticker Britain will be ready to discuss how to line up sterling with the Common Market's proposed economic and monetary union by 1980.

Meanwhile, Britain will try to stabilize official sterling balancesabout $4 billion worth of said Froxmires fears for the free enterprise system are not timely. "We sometimes kid ourselves The European Common Market today accepted a British promise to phase out the pound sterling as a world reserve currency. The phasing out of sterling as a reserve currency means that eventually countries which have held sterling in their reserves, along with gold and dollars, will no longer do so. This will be done gradually. The agreement was one of the major problems facing the short-term debts held in Lon that it is a free enterprise system, but' it isn't all that free," Connally said.

He referred to the multiple controls and regulations set by Lockheed Posts Increased Sales, Net in Quarter Lockheed Aircraft Corp. yesterday reported net income of the federal government as rules six common Market nations donin a way consistent with long-term plans. In Line by 1978 Rippon said Britain would be in line with the Common Market practice on capital movements by 1978. The market's executive commission was less than happy with the agreement. Several delegates said the sterling problem would be taken up again after Britain's entry.

$8.3 million, equal to 73 cents and Britain in the current entry talks. Ezra Sohmon Nominated to Economic Unit Chicago Trlbuns Prass Service WASHINGTON, June 7 President Nixon today nominated Ezra Solomon, a former professor of finance at the University of Chicago Graduate School of Business, to be a member of his Council of Economic Advisers. Solomon, currently a professor of finance at Stanford University, will succeed Hen-drick Houthakkcr, who is returning to his teaching post at Harvard University this fall. The President's intention to appoint Solomon to the three-man council was first disclosed by Tub Chicago Tribune nearly a month ago. Solomon, 51, was born in Rangoon, Burma, and came to the United States after World War II.

He became a citizen in 1952. His new post, which must be confirmed by the Senate, pays S38.O00 a year. Stocks Mixed; Late Trade Trims Gains share, in the first quarter ended March 31, compared with earnings of $5.1 million, or 45 cents a share, in the lute period THOMAS G. AYERS, president of Commonwealth Edison proposed the electric utility industry spend $150 million to S200 million a year on research and development. Ayers, speaking at the 39th annual convention of the Edison Electric Institute in Cleveland, urged the increased spending to as- sure future electricity supplies and to solve environmental problems.

ARMOUR FOODS CO. has been organized as a operating division of Armour Co. Clifton B. Cox has been named president and chief executive. The company formerly was known as Armour Foods Division of Armour Co.

MONTGOMERY WARD CO. said It has held discussions with Putsch Kansas City, operator of five restaurants and cafeterias, regarding possible acquisition of the chain. A company spokesman said no agreement has been reached and discussions are continuing. BANK OF AMERICA, SAN FRANCISCO, said it has increased interest rates paid on passbook savings to per cent from 5 per cent for one-year accounts. It has also increased its minimum interest charge on conventional home mortgage loans from 7 per cent to 7Vfe per cent.

TRANS WORLD AIRLINES EXPECTS to have a loss for all of 1971, C. E. Meyer senior vice president-finance, toid a press conference in New York City yesterday. The airline lost $03.5 million last year, Makes 2 More Points In his presentation, Geoffrey Rippon, the chief British negotiator, made two other main points: After becoming a member, a year ago. Sales totaled $586 million.

against $521 million a year ago. Net income for the first quarter includes an extraordinary gain of $3.8 million, or 33 cents a Set First Sears Tower Steel share, from the sale of unimproved property. Lockheed chairman Daniel Haughton said quarterly results were based on Lockheed's 7,000 employes of Sears will work in the 4.4 miliion-square-fpot structure. Cushman Wakefield, is developer and rental agent, and Diesel Construction is general contractor. points early in the session.

The New York Stock Exchange index of some 1,300 common stocks slipped 0.09 to 55.86. Standard Poor's 500 Stock Index slipped 0.21 to 101.99. Losers edged gainers by 704 to 689 among the 1,670 issues traded on the Big Board. In early trading, advances held a margin of nearly 2 to 1 over declines. There were 76 new 1971 highs and 52 new lows.

Volume Down Big Board volume totaled 13.8 million shares compared with 14.4 million shares Friday. A number of very big blocks were traded, including 225,500 shares of Sybron, 149,500 of United Brands, 144,500 of Continental Telephone and 118,500 of Duquesne Light. Statistics on what slocks did are on page 12. NEW YORK, June 7 GTI-The stock market drifted lower in moderate trading today. The market opened with a moderate gain, but prices eroded as the quiet session wore on.

Corporate bonds were unchanged to lower. Governments were lower. The momentum of a rally that had boosted the market in the five previous sessions faded as investors resumed the cautious stance that had prevailed during most of May. Dow Average Up The Dow Jones Industrial average closed with a gain of 0.91 0.09 per cent at 923.06 after having been up nearly two The first section of steel for the 1,450 foot-high Sears Tower, tallest office building in the world, was set in place yesterday at Adams Street and Wacker Drive by crews of the American Bridge Division of United States Steel Corp. Gordon M.

Metcalf, chairman of Sears, Roebuck and Arthur M. Wood, president, signaled the start of the 16 months of steel work by tightening the first nut on the 25 by 16 foot column. The building is scheduled to open to the first of its 16,000 occupants by early 1974. About i assumption of successfully concluding various interrelated conditional agreements and the continued viability of the corporation. "Both of these depend on our achievement of long-term financing arrangements with our lending banks," Haughton said.

"A key to this new credit agreement is a guarantee by the United States government of up to $250 million in additional bank loans to Lockheed," he said. to help you ease the money squeeze. Eliot Jane way 2 Investor 'Animals' Altogether Different BY ELIOT JANEWAY Consulting Econonist (Chicago Tilbunt Prn Servlcal NEW YORK, June 7 -Funds is a blanket word in THURSDAY Janeway follows rule of "in time of trouble, consult your elder statesmen" by interviewing Alf M. London, Republican nominee for President in 1936. Wall Street.

The term is popularly jumbled to describe two altogether different kinds of institutional investor animals. Mutual Funds, in re tual fund investor, operating with personal money for personal advantage, is a principal in his or her own right trying to make money out of money. By contrast, pension fund investment is invariably trusteed under the control of an institutional fiduciary working other peoples money, and doing so under pressure to produce results readily measurable by cash in the till on days certain. More than an academic difference is involved between mutual fund players for paper; profits and pension fund fiduciaries obligated to produce cash income. It is the practical difference between the positions of those who own and those who owe.

The stockholders of mutual funds own the securities held in mutual fund portfolios, free from any fixed scheduled pressure to raise cash to honor obligations. But pension funds owe the securities they hold to their beneficiaries, and on terms fixed in advance. Before the onset of the new era of high interest rates, pension fund trustees felt free to play the growth stock game in pretty much the same way as patient mutual fund areholders have learned to do. They reckoned that a steady rate of annual gain would close any gaps between annual cash input by the sponsoring corporations and retirement cash benefits owed to beneficiaries. Was a Prudent Bet For many years, this was a prudent bet.

During those years, the stock market was Continued on page 8, col. 3 Jane war mutual funds and pension funds reflects their different purposes. Mutual funds are designed to serve long-term investors as vehicles for capital appreciation, with investors foregoing income in the present as a trade-off against the hope that paper profits will be built up for cashing in further down the road. A Different Calculation The pension fund investment works on an altogether different calculation. The mu- cent years, have increasingly been taken to mean institutional funds, in fact, however, pension funds may end up exerting more influence on the institutionalized character of the stock market than the mutual funds, which have been making the news.

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