The Orlando Sentinel from Orlando, Florida on December 22, 1978 · Page 54
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The Orlando Sentinel from Orlando, Florida · Page 54

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Orlando, Florida
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Friday, December 22, 1978
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Page 54
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Sentinel Stan Orlando, Florida 1 0-O Friday. December ?2, 1 978 Back to business Nation's business CAB puts off Eastern's bid for National The Civil Aeronautics Board has decided not to include Eastern Airline's attempt to buy control of National Airlines in a current airline merger hearing involving National. Instead, the board said it will assign the Eastern case to a separate administrative law judge. For several weeks, Judge William Dapper has been holding a hearing on a proposed merger between Pan American World Airways and National as well as Texas International's bid to acquire National through stock purchase. Eastern last week clouded the issue by offering to pay $50 a share for National stock, $9 more than Pan Am's offer. Eastern asked the board to consolidate its takeover effort with Judge Dapper's hearing. In turning down this request Thursday, the board cited Eastern's late bid at a time when the hearing is essentially over and Dapper is prepared to make his recommendation. Dictaphone votes to accept takeover offer One major corporate merger has won a vote of approval while another takeover attempt was broken off 'after a bitter battle. The board of directors of Dictaphone Corp. voted to accept a $120 million offer to be acquired by Pitney-Bowes Inc., the nation's leading maker of postage meters and mail handling equipment. Under the agreement, Pitney Bowes will make a tender offer to buy two million of Dictaphone's 4.3 million shares of common stock at $28 a share and then will offer to acquire the remainder in a stock swap. The merger would be subject to the approval of the stockholders of Dictaphone, a major maker of dictating equipment and office supplies based in Rye, N.Y. Meanwhile, Occidental Petroleum Corp. announced it is withdrawing its $1 billion offer to take over Mead Corp. because of "the ferocity of Mead management's opposition" and the prospect of lengthy court battles. Comcidentally, Mead, a paper, chemicals and coal firm based in Dayton, Ohio, estimated its fourth quarter per share earnings will increase between 45 percent and 50 percent from the 80 cents it earned during the same period last year. Factory order decline bad sign for economy New factory orders for durable goods fell 0.9 percent in November, the first decline since midsummer and was interpreted as a signal that the economy may be weakening, according to the Commerce Department The November drop followed three consecutive strong months when orders rose by an average 5.8 percent. Economists consider when orders rise, it indicates a confidence within the business community that the economy will continue to grow. When it falls, a downturn may be anticipated. Most major industry groups recorded order declines last month, and the non-defense capital goods sector, which is considered a barometer of future plant and equipment spending, plunged 10.2 percent, the department said. Boeing sells 13 more large jets Boeing Co. has sold 13 more of its large jets, including six 707s to the Air Force for use in its Airborne Warning and Control System. Four 767 airliners were ordered by Pacific Western Airlines, a major regional carrier in Canada. One twinjet 727 each was ordered by Southwest Airlines and Turkish Airlines while Braathens of Norway bought a 737. The value of the orders was estimated at approximately $305 million. Boemg also announced it plans to expand its work force in the Seattle area by 10,000 before the end of 1979 bringing the total to 75,000 workers. Boeing employees in the Seattle area totaled 53,000 at the beginning of this year. Meanwhile, Lockheed received an order from British West Indian Airways for two long-range L-1 01 1-500 tristar jets carrying a combined price tag of $85 million. Resorts drops plan to buy slot machine firm Resorts International Inc. has abandoned plans to buy a small Chicago slot machine manufacturing firm. Resorts announced an agreement in principle June 7 to acquire a slot machine subsidiary of Xcor International Inc. in exchange for $3.63 million worth of Resorts class A stock. The aim was to challenge the slot machine supremacy of Bally Manufacturing Corp., which controls more than 80 percent of the market. However, Xcor found that if it broke off its slot machine operations, it would also harm its production of amusement games and vending machines. ' The New Jersey Casino Commission this week proposed a regulation that would prohibit a casino from having more than half of its slots from a single manufacturer. Bally responded by saying its attorneys consider the proposed regulation would be unconstitutional and in restraint of trade. The company said it had been assured by the commission "that the matter would be the subject of further discussions and review before any final action would be taken." Not surprisingly, the proposed New Jersey rule was hailed by Allied Leisure Industries Inc., a firm based in Hialeah, which recently announced it was entering the slot machine making field. KENNETH MICHAEL I , if mtirnmittti ' i in iw After six weeks on the Job, Chrysler boss Lee A. lacocca has prepared a game plan he hopes leads to success lor the beleaguered company, which has fallen more than $80 million behind last year's profits. lacocca says 'discipline' Chrysler's No. 1 problem DETROIT After six weeks as president of Chrysler Corp., Lee A. lacocca says the beleaguered No. 3 auto firm is suffering from discipline problems, but he expects to turn it around with tough leadership. "I laid out a set of basics and I outlined how we are going to run this railroad," lacocca said in a interview with the Detroit News. His comment referred to a recent meeting with top Chrysler executives. "The reason this company has suffered is not because people made stupid mistakes, but because of what I call discipline of timing," he told the News. "They've missed their blocks and tackles. They're late. "I think I may get more out of this organization than the organization knows it can do." i lacocca, 53, was named Chrysler's president and chief operating officer a few months after Henry Ford II unceremoniously ousted him from the presidency of Ford Motor Co. last July. He inherited leadership of a troubled company that fell from a $163 million profit in the first nine months of 1977 to a $248 million loss in the first three quarters of 1978. During his first six weeks at the helm, he said he has been "assessing what I think are a pretty good bunch of guys. I've been in the trenches doing what I think is fundamental . . . having everybody hold to a commitment." lacocca described the problems facing Chrysler as: Poor discipline: "This company for three years has not been making its budgets or its programs (on time.)" Product: The need to be competitive in the full-size car market because "that's where the money is." Quality control: "I think we've got to do some work, obviously." Advertising: "You can rest assured we're not going to spend the kind of dollars we did last year ($100 million).' "From top to bottom, decisions were late," lacocca said. "And when you're late and you compress 36 months' time into 32 (to bring out a model) you're kidding yourself." Rushing a car into production, he said, takes time away from product engineers and as a result, "it's the owners who discover the problems." lacocca, who was credited for the development of Ford's highly successful Mustang in the mid 1960s, will not have major impact on a new Chrysler car until 1982 because of the lead time required. He said he is impressed with Chrysler's Omni and Horizon front-wheel-drive subcompacts and the new full-sized New Yorker. Marlowe on vacation Business editor Dick Marlowe is on vacation. His column will resume when he returns. Stock market records third straight gain NEW YORK The stock marked tallied a small advance Thursday in active trading as a two-day rally faltered and then gained steam late in the session. The Dow Jones average of 30 industrials, ahead by more than 4 points at noon and down by .69 a half-hour before the 4 p.m. close, finished the day up 1.13 at 794.79, continuing Tuesday's and Wednesday's slight gains. Advances led declines by about 3-2 among New York Stock Exchange-listed issues, and Big Board volume rose to 28.67 million shares from Wednesday's 26.25 million. In the wake of Monday's 17.84-point Dow Jones drop, "the market is just holding," said Charles Jensen at MKI Securities. "That in itself is a constructive thing." "There's still alot of caution around," said Jensen. "People aren't yet convinced that the bottom has been reached." After the market closed, the Federal Reserve Board announced a $100 million drop in the nation's basic money supply. Analysts said the drop may allow the Fed to ease its tight-money stand, although earlier predictions had expected continued tightening as an anti-inflation move. On Wednesday, Chemical Bank raised its prime lending rate '4 -point to 11 percent, a shade below the record 12 percent. The American Stock Exchange index rose 0.94 to 148.34 and the price of a share advanced 8 cents. The National Association of Securities Dealers' NASDAQ index gained 0.52 to 115.85. Dictaphone was the most active NYSE-listed issue, climbing 5 to 25 after the firm revealed it has agreed to merge with Pitney Bowes. Pitney Bowes stock shed Vi to 23 Vz. Penn Central preferred B stock was the second most active NYSE-listed issue, unchanged at 5. Sears, Roebuck was the third most active issue, unchanged at 20'8. The NYSE's composite common-stock index rose .06 to 52.89, and the Amex market value index was ahead .94 at 148.34. Standard & Poor's index of 400 industrials advanced .04 to 105.49; the S&P 500-stock composite index rose .03 to 94.71. 1 ' k lm H 5 1 1. h 't'f ( : W I !' : I H M i") ' - i U'leo Piess Inlernrtt.O'Ull The shape of sound Veteran piano builder Anthony Sartoris inspects the bent wood rims of prized Steinway grand pianos, ingeniously engineered to withstand 17 tons of string tension. The rims are molded into shape on presses invented by ancestors of the fourth generation Stemways, who still oversea production. Production is so meticulous it takes a year to make a nine-foot concert grand that only 460,000 Steinway pianos have been made in the company's 125-year history. GSA, FCC question AT&T's big profit Washington SUr WASHINGTON The General Services Administration and the Federal Communications Commission staff have questioned the record-breaking profits being turned in by American Telephone & Telegraph Co. In separate statements Wednesday, GSA charged that AT&T is earning far too much money, and asked the FCC to launch an investigation into whether AT&T's profits should be rolled back. The FCC staff wrote AT&T a letter pointing out that the company's profits were "in violation" of commission guidelines, and asked what the company intended to do about it. In a document filed with the commission, GSA, which represents the government as a consumer, contended that not only are AT&Ts profits higher than the FCC's guidelines permit but that the guidelines themselves are too high. GSA said a rollback to a profit level within the guidelines should result in a refund of about $200 million to long-distance customers, and pushing profit levels down might save customers more than $600 million a year. The document was described by one GSA official as a "fairly significant piece of litigation." In effect, the agency is asking the commission to open a new investigation of AT&T's rates. AT&T has been operating under profit guidelines the FCC set in January 1975. At the time the commission said the company could earn a rate of return on investment of 9'i to 10 percent. AT&T had sought a 10 Vi to 11 percent range. But GSA says AT&T's latest report to the commission shows the company has earned 10.42 percent on its investment so far this year or possibly $200 million more than it should have earned. What's more, GSA contends that given today's eco nomic conditions, even the 9'& to 10 percent range is too high. GSA would lower this to between 8.82 and 9.32 percent. Lowering the rate of return to this range could cut phone bills by $600 million a year, GSA says. At the FCC, Larry F. Darby, chief of the common carrier bureau which regulates telephone and telegraph companies wrote to William Stump, an AT&T assistant vice president in charge of federal regulatory matters. Darby pointed out that the ra.te of return had run at a 10.42 percent for the first nine months of 1978 and that even if some adjustments were made that had been required, this would still be more than 10.1 percent. The staff, indicating that this high level of earnings would continue, asked AT&T to submit its own earnings projections. The letter also asked the company to advise the commission what it intends to do about the situation. One commission staff member pointed out that AT&T really has two options. One would be to lower rates to bring their rate of return down. The other option would be to ask the FCC to revise the prescribed rate of return. The guessing is that AT&T would seek a higher rate of return. Nevertheless, during the course of any FCC investigation, AT&T will continue to earn at its present levels. An AT&T publicist, Pickard Wagner, said the company believes its earnings "are not excessive by any standard." He said the current earnings level was set by the FCC more than three years ago "after lengthy and exhaustive hearings and at a time when the cost of money was considerably lower than it is today." Wagner said GSA's suggestion "makes no sense whatsoever." He added that the higher earnings level has been achieved through productivity gains, and not through rate increases. He suggested the earnings level "should be higher, not lower than it is today." As for the commission's letter, Wagner said the company had been "discussing our earnings results with the FCC." Any FCC ruling in this area would be highly significant. Interstate revenues regulated by the commission comprise about 30 percent of Bell System revenues. Further, many state regulators traditionally have based their rate-of-return ruling on what the FCC does. The GSA document was filed and the FCC letter was written, perhaps coincidentally, within hours after AT&T reported its highest third-quarter earnings ever. AT&T earned $1.36 billion in the period ended Nov. 30, up from $1.15 billion a year earlier. Per-share earnings rose from $1.74 to $1.97 on a greater number of shares. The company's best quarter ever was the one ended Aug. 31 when it earned $1.42 billion, or $2.09 a share. Revenues in the latest quarter increased 12.2 percent, to $10.56 billion, and were up 12.9 percent for 12 months, to $40.7 billion. AT&T said earnings for the 'latest 12 months amounted to a record $5.24 billion, or $7.71 a share, up almost 19 percent from the $4.41 billion earned in the period a year ago. AT&T, however, tempered its earnings report by noting that it reflects a California Public Utilities Commission order affecting the second-largest Bell System company, Pacific Telephone & Telegraph. The commission's order, which the Supreme Court earlier this month refused to review and which is currently in abeyance, would require Pacific Telephone to lower its rates and make substantial refunds.

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