The Los Angeles Times from Los Angeles, California • 67

Prdbclnto Big Losses mmj- Villi Staftstate in usinessl finance 2 THURSDAY, SEPT. 10, 1970 Part III 13 Swiss Begin UCB Unit's SWISS BANK CASE Did Someone Sell Cocoa Short in a Vr 4 1 4 ivf: f) ft T7- vW-, Ami mi i liiif if); Tiw i- mi i- h-t Rising King Says Trading-in Cocoa Led to Hi Bank's A f. W.1 BY RON S. HEINZEL 3 Timw Staff Writer raa The Swiss. Banking Commission, announced Wednesday itats launched an investigation of a bank in Basel which is 58 controile United California Bank of Los.7An-.

geles to determine whether legal proceedings would be lodged against some of the bank's officers. UCB disclosed in Los Angers Monday that its Swiss subsidiary has suffered losses that may feaoh $30 million. The bank said m6s of the losses were caused by "unauthorized" commodities The Swiss agency, which for policing that nations banks, indicated that its investigation will center on the trading angle. Frank L. King, of UCB, who is in Switzerland to oversee the bank's investigation disclosed Wednesday that the Commodities trading was mainly in eo- tinental Connector, which in addition to the Dunes operates trucking companies and manufactures electronic' components.

Last fall, the SEC in a suit charged Continental Connector with filing financial statements that improperly reflected the earnings of the Dunes. Cerro will acquire assets of Great Southwest's Macco housing unit. Cerro, a New York-based nonfer-rous metals producer, said it reached a preliminary agreement with Great Southwest Corp. to acquire the major assets of Macco leadership housing systems division. Macco is a subsidiary of Great Southwest Corp.

which in turn is owned 90 by Pennsylvania a subsidiary of Penn Central Transportation Co. Cerro said the assets it planned to acquire are located primarily in California and Texas with certain operations in Texas, Florida, and other states. Penn Central's president said the line hopes to buy 6,000 new cars. William H. Moore, head of Penn Central Transporation which is in bankruptcy reorganization, said the line hopes to purchase through equipment trust certificates between 3,000 and 6,000 new hopper and gondola cars next year.

Moore said that it is unlikely that the equipment notes could sell if a planned trustee certificate sale fails. Moore said if the line failed to get the trustee certificates then the only atlernative is a government-backed loan. The trustee certificates, which are planned to be issued and sold by the trustees of the railroad, are senior to all other debt. Admiral Corp. raises prices by 2-6 on new 1971 model appliances.

The company said in Chicago that new Admiral refrigerator, freezer, room air conditioner, and electric range prices will be increased. Admiral said the price boosts resulted from higher labor costs and materials and component cost increases. Whirlpool said it made undisclosed price increases on some models of air conditioners, refrigerators and freezers that were introduced to dealers last. week. West-inghouse declined comment on the price increases by Admiral.

NOT A COMPANY MAN Henry S. Mance, chairman of Lloyd's of London, says most people don't understand that Lloyd's isn't a company but a society of individuals, each of whom risks his entire fortune when taking on an insurance policy. Mance is here to talk to business and insurance executives about Lloyd's. Times photo by Joe Kennedy What Is Lloyd's of London? Chances Are You're Wrong BY ALEXANDER AUERBACH Timet Stiff Writer National News Manufacturers expect their sales to increase by 3 in the third quarter. The Commerce Department reported in a survey that manufacturers expect fourth quarter sales to rise 1.

Actual sales fell Vi in the first quarter of 1970 and rose slightly in the second. Expectations for an 1 upturn were more pronounced for durable goods. The expectations compare with -an actual drop of 3 in the first quarter and a 0.3 rise in the second for durables, the department reported. Sales of nondurable goods were expected to rise 2 in the third quarter and in the fourth after fractional gains in both the first and second quarters, the department reported. The Fannie Mae auction showed that mortgage rates are rising.

The average yield rose slightly to 8.99 at its latest auction of 180-day home loan purchase committments, the Federal National Mortgage Assn. said. The previous auction resulted in an average yield to Fannie Mae of 8.97 on U.S. backed mortgages. Fannie Mae said it would allocate between $200 million and $250 million for the next auction on Sept.

22 with $200 million at the latest auction. Three officials of the financially troubled Beck Industries resigned. The New York-based company said that Harold K. Ross and John I. Taeni have resigned as directors and that Bertram H.

Slater, vice-president-finance, has quit as an officer and director. Slater de-clined comment on speculation his position as a key member of the former management prompted his resignation. Taeni said that his resignation was not connected with the actions of his brokerage firm, Weis3 Vosin, declining to underwrite Beck's proposed public offering of $15 million of subordinated convertible debentures. The failure of the offering triggered Beck's current financial woes. Ross said he left for personal reasons.

Continental Connector said it is seeking to sell its Dunes Hotel. The proposed purchaser of the Las Vegas Strip hotel-casino is American a New York-based conglomerate whose chairman, is financier Meshulam Riklis. Continental, New York, said it is expected that Continental Connector shareholders would ultimately receive about $19 worth of Rapid-American common stock for each share of Continental Connector stock held. They would also keep their stock in Con- The expected" $30 million loss by United California Bank's Swiss subsidiary may have resulted because someone was covering short sales in cocoa futures in a strong bull At least this is what local commodities dealers speculated Wednesday following disclosure earlier in the day by UCB Chairman Frank L. King that the $30 million loss was due to commodities trading mainly in cocoa.

Local dealers say an extremely strong bull market in cocoa futures over the past few months was set off by a combination of several factors including unfavorable weather in the West African "cocoa belt," a report that Brazil may have to reduce its cocoa allocations and aggressive buying by European In addition, one Los Angeles commodities dealer said "it is known that for some time a great number of speculators have been shorting cocoa futures in New York and espec-cially in London. "The Swiss money probably was speculated on the London he said. A short sale involves selling a futures contract you do not own in the hope that the price will If it does the borrowed contract can be replaced later at a cheaper price and the short-seller pockets the difference. If the price goes up, he must re place the borrowed contract with a more expensive contract, and he thus loses money. A speculator can buy a cocoa futures contract on margin by putting up approximately $1,000 of his own funds.

Price changes are registered in multiples of 1100 of a per cent per pound. A fluctuation of 1100 of a cent is equivalent to $3.00 per contract and a rise or fall of 1 cent a pound can add or subtract $300 on the investment. Asked to set up a hypothetical case where a speculator decided to short cocoa in this rising market, a commodities broker said: V- "Let's say the speculator shorted a March cocoa futures contract as recently as Aug. 31 when cocoa closed for 35.50. Within a week the contract was quoted at 36.65 this means tne snort seller lost his investment in that time, Z0 of Most common is the assumption that Lloyd's es a big insurance company, which it isn't.

It is a society of private individuals, grouped in syndicates, who write insurance. Mance explains that it all started back in the 1680s, when shipping merchants used to gather in Edward Lloyd's coffee house near the Thames. Some of the merchants offered insurance on ships and cargo, and soon the word got out that Lloyd's coffee house was the place to go to get insurance. Market Declines in Heavy Trading; Dow Gives Up 6.71 Lloyd's of London has a lot in common with the game of cricket. Both are terribly British and traditional, and both are woefully misunderstood by outsiders.

Cricket will have to muddle along for awhile by itself, but Henry S. Mance is stumping across the United States to acquaint business and insurance executives here with Lloyd's and to get their views of the London insurance market. Mance, chairman of Lloyd's, is quite familiar with some of the misunderstandings about Lloyd's he will encounter here. Insurance Situation on 747s Vague After Arab Guerrilla Blast 1 The question of whether the blowing up of a Boeing 747 jumbo jet airliner in Egypt will increase premiums or result in insurance cancellations brought a variety of answers Wednesday. In Honolulu Dr.

G. Van der Wal, president of the International Air Transport said at an IATA conference he was advised the London insurance market will cancel aircraft insurance contracts effective Tuesday. Sees No Rate Hike In Los Angeles Henry S. Mance, chairman of Lloyd's of London, said in an interview he doesn't expect 747 insurance rates will go up. The Pan American Airways 747 insurance risk was shared by the Lloyd's group, two U.S.

underwriting organizations and the U.S. government, which handled it as a war risk under provisions of the Federal Aviation Act of 1968. The big airplane cost about $24 million and was owned by a consortium of banks headed by the Bankers Trust Co. of New York which leased it to the airline. Mance's view was at variance with that of Pan Am executives In New York.

They said they expected the claim would result in Increased premiums on future policies. The airline spokesmen also said the $24 million wouldn't cover business losses resulting from unavailability of the aircraft. PINTO $150 CHEAPER coa. Will Pay All Creditors King also told a press conference in Basel that the bank was consider- ing closing down its Swiss subsidiary. But, he added, the bank is formulating a plan to repay all creditera and depositors of the subsidiary.

Sources outside the bank said that under Swiss law UCB could have merely walked away fromlhejfeal, without making any payments. King said the subsidiary would continue to operate at least unttTa satisfactory repayment plan could be worked out. He said a decision tjn whether to continue operatioris-in Switzerland would be made Sfter the plan was approved. 'CV Regarding the investigation by the Swiss Banking Commission, King said: "We intend to cooperate fully with Swiss authorities and prosecute offenders if there -is a crime involved." He also indicated that losses to UCB might be less than expected earlier saying that about half the subsidiary's loss would probably be tax deductible, adding that there was a possibility of collecting upTo $10 million in insurance. "5 With King at the press conference was Harry Wieser, formerly manager of UCB International in New Please Turn to Page 15, Cot 4 dj3 were 20 new highs and 2 new lqws.

The New York Stock Exchange index of some 1,200 common stocks fell 0.12 to 45.30. Standard Poor's 500-stock index was down 0.25 at 82.79. 5 Airlines, oils, rails, electronics, mail order-retail, steels, and rubber issues were lower. Motors, utilities, and chemicals, were mixed, while aircraf ts and a 1 strength. i On the American Stock Exchange, the price change index closectltm-changed at 21.44.

Declines outnumbered advances by a small margin. There were 13 blocks of 10,000 shares or Total volume came 5.31 million shares, comparetLto tr An ills l.ir Muion i uesaay. hi. Inclination to Buy; ANN ARBOR, Mich. GD Inflated prices and high Interest rates continue to dampen consumer 'Bpend-ing, especially on automobiles.

But a report by the University of Michigan Survey Research Center Indicates consumer attitudes and Inclination to buy may be slightly on the upswing. The center's Quarterly Survey Consumer Attitudes and Inclinations to Buy, conducted regular) since 1951, showed a third-quarter improvement in expectations abqut business trends. (Meanwhile, the Federal Reserve Bank of New York reported chances for near-term economic expansion are much better this having moved sidewayfcln late the domestic economy seems to have begun the second half 1970 on a somewhat' stronger note. Housing starts recorded a sub-, stantial gain in July, while industrial production edges upyard," bank's monthly newsletter said.) A national cross-section of 1,350 persons answering the Michigan survey Indicated a change in expectations on the consumer's part. About 39 responding expected business conditions to improve next 12 months, while 34 expected deterioration.

Rising, Survey Notes The merchants who sold this insurance, known as underwriters because they signed their name under the policy, simply backed the policy with their personal fortune. That's still the policy today, although there may be as many as 600 personal fortunes in a syndicate, each scrupulously audited each year to make sure all risks are covered. It might sound a bit strange to an American used to dealing with corporations and limited liability, but Mance notes that "the proof of the pudding is in the eating: Lloyd's has never failed to cover a loss." Quake, Hurricane Losses Those losses have included claims from the San Francisco earthquake, and $100 million in losses during the 1965 Hurricane Betsy. The latest was a participation in insurance of the Pan American 747 destroyed in Egypt. "We're used to big losses," Mance says, noting that a few years ago three huge supertankers either sank or burned within a six week period.

"You can still get insurance on a supertanker," he smiles, noting that he himself is a marine underwriter. Another sore point with Lloyd's people is the reputation foisted upon them by Hollywood publicity agents as insurers of various stars' bosoms, legs, noses, fingers and vocal cords. Lloyd's can and does accept this kind of risk, but Mance notes that "it's only a tiny, tiny part of our premium the vast bulk of the business being in more ordinary casualty Insurance. The offbeat policies do serve a useful function, he admits, in that they demonstrate the flexibility Lloyd's can offer. Any insurance agent, anywhere in the world, can funnel a request for coverage through one of Lloyd's appointed brokers, who will carry it to the underwriters in their market room on Lime St.

in the City of London. Please Turn to Page IS, Col. 5 THAN VEGA while a Toyota Corolla two-door sedan has a suggested retail price of $1,818. Asked Wednesday if GM is reconsidering the Vega prices it announced Tuesday, a spokesman would make no comment. Pinto will go on sale Friday, along with Ford Division's Maverick and Lincoln-Mercury Division's Comet, two compact cars.

Ford announced that the 1971 Maverick will carry a $2,175 suggested retail price compared to previously. Neither price in- eludes destination charges, which are $100 or more to Los Angeles. Comet, a slightly plusher version of Maverick, will carry a $2,217 sticker in the two-door model All three cars have a 12-month, warranty, the same as Vega and Toyota, but less than California Western Pacific said it won't pay Oct. 1 installment on debentures. Western Pacific Railroad said in San Francisco that its board rescinded the action taken at its April 7, 1970, meeting providing for payment of the Oct.

1, 1970, sinking fund installment in connection with its 30 year, 5 income debentures. Such payment is not required under the indenture, the company said, and in the judgement of the board this conservation of cash is in the best interest of the company and its shareholders under current conditions. The World Canadian newsprint manufacturers are studying an increase in prices. Major Canadian paper mills remain noncommital about their pricing plans following a $10 per ton price increase by the Anglo-Canadian Pulp Paper Co. of Quebec City.

Many Canadian paper producers have said recently that they may raise prices because of increased costs due to new labor agreements, and the recent freeing of the Canadian dollar from the U.S. dollar. Most Canadian newsprint is sold in the United States and a smaller premium is received when the U.S. dollar i3 converted into Canadian funds now that the Canadian dollar has floated upward. Anglo-Canadian's new price is $162 (U.S.) per ton for newsprint compared with $152 for the rest of the industry.

Briefly Told Southwest Bank of St. Louis, with assets of $67 million, became the fourth small bank in recent weeks to lower its prime rate, the Interest rata charged a bank's most credit worthy customers, to 7Vt from 8 Flying Tiger Lines reported August revenue ton miles of 42.16 million, a gain of 117 over the 19.4 million in 1969, due in a great part to new Trans-Pacific routes begun in mid-August, last yqar Toyota said it is negotiating with Texas Instrument to use its Integrated circuit technology relating to the auto industry problems of safe ty and air pollution American Airlines shareholders approved the acquisition of Trans Caribbean Airways Inc. The common stock of Utah Construction Mlnln Co. was listed for trading on the Pacific Coast Exchange Woods Corp. plans to phase out its aerospace operations which accounted for $2 milion of Its $25 million revenues In the first half of 1970.

NEW YORK The stock market suffered moderate losses Wednes-, day after recovering a portion of sharp morning declines. Trading was very active, with 16.25 million shares changing hands on the Big Board. At various times in the day, the New York Stock Exchange tape was running late. Volume Tuesday totaled 17.11 million shares. The Dow Jones average of 30 industrials fell 6.71 to 766.43.

Earlier, it had been off close to 10 points. Analysts attributed the late afternoon recovery to news that House Banking Committee Chairman Wright Patman (D-Tex.) had urged Chase Manhattan Bank to cut its prime rate from 8 to 6. The early downswing, analysts explained, was due to a combination of factors, including profit taking, concern over possible strikes in the auto and rail industries, and worries stemming from recent air hijackings. Later the1 threatened rail strike was postponed. On the Big Board, 684 stocks declined, and 669 while 252 stocks remained unchanged.

There Volkswagen's 24-month, guarantee. Ford was expected to price Pinto under Vega, but the size of the gap was It became possible after GM, apparently facing higher-than-antlcipated cost on. its car, priced it more than $200 higher than the leading imports. Prices for the most popular options are higher on Pinto than on Vega. An air conditioner, which sells for $360 on the Chevrolet car, costs $370 on Pinto.

An automatic transmission is $175 on the Ford subcom-pact compared to $168 on Vega. Still, Ford's base price advantage could put it into much stronger position in battling the Imports than Chevrolet. Both auto makers have said they intend to sell 400,000 mini-cars a year, and both hope to cut sales of imported cars back to 10 of tha total U.S. market. 70 C3 753 3 33 20 10 7C3 C3 1 23 MMUtONS 6 4 731 87 814 821 828 94 911 WEEKS ENDINO YESTERDAY HEW YORK-Dow Jonai 30 Industrial stock owrogt closed at 766.97, down 6.71.

High during th day wos 776.97; th low, 759.31. Th Amcx lnd closed unchanged. OVIR-THt-COUNTIR Tha National Quo. tatlon Burtou Indax of 35 Industrial stocks clostd at 325.00, up 6.33. Tht 1970 high of 432.07 was set Jan.

14. Tht 1970 low of 271.71 wassttMay27. LONDON Ths Financial Timet Index 30 Industrial stocks closed ot 338 8, up 1.3. Tht 1 970 high of 423.4 was set on Jan. 1 4, Tht 1970 low of 315.6 wos set Junt .15, Ford Undercuts GM on Its Minicar's Price BY DAN FISHER Timet Aut Writer DETROIT Ford Motor Co.

undercut Chevrolet's Vega by $150 Wednesday when it announced prices for its new minicar, the Pinto. An exact comparison is difficult, since Ford's price does not include a dealer make-ready charge (which it says is optional) and Chevrolet's Vega sticker price includes a $22 charge for the service. In Los Angeles, Pinto will carry a base price of $2,034 (excluding dealer preparation, but including a $115 transportation charge) compared to Vega's $2,190 (including a $09 transportation charge and dealer preparation). Neither price includes state and local taxes. The cheapest Volkswagen now offered In the Southland costs $1,983,.