Chicago Tribune from Chicago, Illinois on March 20, 1980 · 61
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Chicago Tribune from Chicago, Illinois · 61

Chicago, Illinois
Issue Date:
Thursday, March 20, 1980
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-.(Chicago (Tribune S Thursday, March 20, 1980 ussness BEST COPY AVAILABLE Section 4 (jE Business iEJElJ Ticker kWrigley IMders vote split " Shareholders at the annual meeting of Wm. Wrigley Jr. Co. approved an in-Z crease in authorized common shares to 2 20 million from 8 million, and also ap- proved a management proposal for a 2-Z for-1 stock split. The split will be dis-2 tributed April 7 to stockholders of rec- ord March 20. Stockholders also autnor-Z ized 2 million shares of preferred stock. Claude Brooks, first vice president and 1 secretary, said the additional shares will be used for "corporate purposes" that might include acquisitions and future Z stock splits and stock dividends. Wrig- 2 ley has about 4 million common shares outstanding and another 4 million au-Z thorized but not issued. ; Oak, Video 44 deal Z Oak Industries, Inc., said it has now agreed with Video 44, owner of Chicago -television station WSNS-TV, to purchase 139 per cent of the station for about $7.5 Billion and begin an over-the-air sub-"cription TV service. Oak said it and 5yideo 44 will own the service on an 2jqual basis. The deal replaces an earlier Arrangement between Oak and Capital Cities Communications, Inc., to jointly buy the 49 per cent interest. Oak said TV service could start as early as August. 19 prime spreads More major banks, including the nation's two largest, Bank of America and Citibank, joined the move to a 19 per cent prime rate Wednesday. Others posting the increase from 18',-j per cent are Chemical Bank and Manufacturers Hanover Trust. The latest increase was initiated Tuesday by Chase Manhattan Bank. Some analysts, pointing to strong loan demand despite high rates, expect the prime rate to reach 20 per cent. The next move may come Friday morning when Citibank normally posts its prime rate. Corporate outlooks Sundstrand Corp. expects to report record sales and net income, for 1980, Evans W. Erikson, chairman, said in the annual report. He didn't estimate the size of the projected increase but noted that unfilled orders at the close of 1979 totaled $658 million, about $200 million above the year earlier level. . . . A.E. Staley Mfg. Co. said its 1980 earnings will be "much better" than the $23.6 million, or $1.86 a share, earned in 1979. G.L. Bieger, executive vice president-finance, told analysts that "results for the first six months will assure us of another fine year in soybean processing." CBT move unexpected In an unexpected move, directors of the Chicago Board of Trade approved a proposal to trade Treasury bill futures contracts. The chief market in bill futures is now at the Chicago Mercantile Exchange. Treasury bill contracts also are listed at two New York exchanges and proposed by a third, the planned futures board of the New York Stock Exchange. "This is a politically contentions issue," said one source, who noted that the Commodity Futures Trading Commission, which must approve the contract, and other federal agencies might frown on the addition of another bill entry. But Board of Trade director Richard Sandor said that "this contract is so technically strong that the CFTC would find it hard not to approve it." Ford rating cut to Aa Moody's Investors Services, Inc., lowered the ratings of four senior debt issues and six tax-exempt issues of Ford Motor Co. from Aaa to Aa. "Pending J the success of Ford's small car, Ford's ' profits, cash flow, return on sales, and debt coverage can be expected to de-, Icline in a period of high capital expenditures," Moody's said. Analysts expect . Ford to try to sell bonds to raise money this year for its massive capital pro- gram, estimated at $20 billion between -"1978 and 1985. Ford has had the top "credit rating since it became a public company in 1956. Z Parent for NYSE? l A holding company to operate the New f York Stock Exchange, and the appoint- ment of a president as No. 2 Big Board P officer, are expected to be major organisational changes proposed by a special NYSE committee. The changes would be J" designed to strengthen Big Board ad-' ministration as the exchange branches into trading of financial futures and pos-lisibly options, industry sources said. "For seven years, day in, day out, he caroo into the office and said, 'Good merrting giory!' I had to shoot him, your honor. Citicorp buys 27 of Central National By Bill Barnhart CITICORP of New York, holding company for the nation's second largest bank, has acquired 27 per cent ownership in the Central National Bank of Chicago, Chicago's seventh largest bank. Central National Chicago Corp., holding company for Central National Bank, disclosed late Wednesday that Citicorp has acquired $12 million of a new issue of nonvoting 12 per cent cumulative preferred shares of Central National Chicago Corp. The move represents an end run around federal laws prohibiting interstate branching of banks and bank holding companies unless laws in both states allow it. In addition to the $12 million in preferred shares, Citicorp has acquired a nontransferable warrant to buy 12 million of Central National Chicago Corp.'s common stock at book value. The 15-year warrant can be exercised only if there are changes in laws banning interstate bank branching or interstate multi-bank holding companies. AT CITICORP'S request, legislation has been introduced in the Illinois Gen eral Assembly to provide for reciprocal bank branching between New York and Illinois. Jackson W. Smart Jr., chairman of Central National Chicago Corp., said the Citicorp deal concludes the bank holding company's search for new capital. He said the deal has been discussed with the Chicago regional office of the U.S. comptroller of the currency, and no approval by the comptroller was required. In addition to the infusion of capital, Citicorp and Central National Corp. have signed an agreement whereby Citibank's financial and informational services group will take over most of the data processing work for Central National Bank. "THIS OPERATIONS arrangement Includes access to Citibank's sophisticated cash management services which will allow Central National Bank to compete on an equal basis with any bank in the United States and should result in measurable operating savings in the next few years," Smart said. Of the $12 million gained from the sale of preferred shares, Central National Corp. will contribute $10 million to Jackson Smart Jr. Citicorp deal concludes his firm's search lor new capital. L I Ml I . Mil U. S. won't raise steel trigger price the capital base of the bank. About $1 million of the $12 million will be used for operating expenses of the bank, and the remainder will go to the holding company. Also, Smart said the comptroller's office has restricted transactions between Central National Chicago Corp. and Central National Bank. He said this requirement represents no change in the relationship and said he does not expect this requirement to hurt the bank's business. ON WEDNESDAY, Midland Bancorp, parent company of the Sears Bank & Trust Co., and Central National Chicago Corp. ended merger talks that had begun in August. Central National has been searching for new capital for several years and had hired the investment banking firm of Warburg Paribus Becker, Inc., to aid in the search. By James O'Shea THE U.S. COMMERCE Department Wednesday refused to accede to the domestic steel industry by forcing up the minimum price of imported steel. It warned U.S. steel makers not to retaliate with so-called "antidumping suits." The government action came in a decision to hold the steel import trigger price for the second quarter of 1980 to the same level set for the first three months of the year an average $368 per metric ton. In effect, the trigger price sets the minimum price for steel imported into the U.S., because importers selling at less than the trigger price subject themselves to government actions designed to prevent them from "dumping" steel at prices lower than their costs of production. The domestic steel industry had pressed the government in the first quarter to raise the steel import trigger price by $44 a ton. However, the government only raised it by about $18 a ton, and now has left it at the same level for the second quarter. U. S. STEEL Corp. had threatened to file a major antidumping complaint, charging Western European steelmakers and Japanese producers with exporting carbon steel products to the U.S. at unfairly low prices. The Carter administration, however, prevailed on the company not to file. In its announcement Wednesday, the administration said that it would suspend the entire trigger price system if numerous antidumping complaints were filed by Big Steel. That could open the nation to imported steel at even lower prices, putting pressure on an already troubled U.S. steel market. John Greenwald, a Commerce Department assistant secretary, said that the trigger prices system was designed as an alternative to major dumping cases, and that the Commerce Department was reviewing the technical aspects of the program. The review, he said, would be complete by May 15. The Commerce Department took over administration of the trigger price programs from the Treasury Department on Jan. 1. Business profits weakened in 4th quarter WASHINGTON rAP-Despite a surge in oil-company profits, the overall performance of United States businesses weakened in the final quarter of 1979, and analysts said Wednesday it was a harbinger of things to come. "Business is in no great shape right now, except for the oil companies," said Robert Gough, an economist with Data Resources Inc. in Lexington, Mass. "We ' expect profits to be weak throughout 1980 in large part because of continuing inflation." Added Courtenay M. Slater, chief economist at the Commerce Department, "Generally speaking, we expect very little growth, if not an outright recession, this year. This isn't the kind of environment in which profits are strong." THE COMMENTS were made after the Commerce Department released a report showing that before-tax book profits rose 1.6 per cent in the final Stanley Harris to quit early By Bill Barnhart STANLEY G. HARRIS Jr. will retire early as chairman of Harris Bankcorp., parent company of Harris Trust & Savings Bank, the bank disclosed at its annual meeting Wednesday. Harris is 61'. Charles M. Bliss, 58, president'and chief executive officer, will become chairman of the bank and holding company, on July 1. Succeeding Bliss as president of the bank and holding company will be B. Kenneth West, 46, executive vice president and head of the banking department. The top management changes were announced as Bliss forecast "substantially" lower first-quarter earnings "unless we get relief quickly from these very high interest rates." Harris told shareholders that he had disclosed to Bliss in June, 1979, his intention to retire before age 65 and that "nothing has transpired to alter my intention." Harris will remain a director of the bank and its holding company. BLISS TOLD shareholders that the unprecedented acceleration of interest rates "has adversely affected our net interest margin the cost of funds com- three months of 1979 to an annual $246.2 billion. Book profits had risen 6.3 per cent in the third quarter. When adjusted for taxes and the effects of inflation on inventories and capital consumption, profits were down 5.2 per cent in the last three months of 1979 from the previous quarter to an annual rate of $82.2 billion. Adjusted profits had " fallen 1.5 per cent in the third quarter. A similar pattern was true for the year: Book profits in the fourth quarter of 1979 were 8.3 per cent ahead of the $227.4 billion annual pace of the fourth quarter of 1978. After adjustment, however, profits of an annual 12.2 billion in the fourth quarter last year were 8.5 per cent below the $89.8 billion in the same period of 1978. ANNUAL FIGURES show what would happen over a full year's time if activity in a single quarter continued for B. Kenneth West The new president has long been rumored for a top job. pared with the gain on lending and also resulted in a substantial decline in the market value of our securities portfolio." Bliss predicted that continued high interest rates will cut the first-quarter earnings for all major money-center banks. "Earnings thus far in 1980 have been below the corresponding period last year, which was our best in history." President Carter's latest anti-inflation program holds little promise for a quick remedy to the present inflationary environment, Bliss said. "At this moment, therefore, the Federal Reserve Board seems to be the principal agency attacking inflation, and its efforts will have severe effects upon the banking system in the short-run," he said. HARRIS WILL retire after -his 62d birthday on June 19. He is the grandson of Norman Wait Harris, who in 1882 founded the investment banking firm that was the predecessor of Harris Bank. three more quarters. Slater said.. "1979 was a year of very little economic growth. Business costs have been rising rapidly. If you don't have strong markets and high sales volume, you can't recover costs and make an increased profit." Profits are important, she added, because they are the incentive for businesses to invest and improve production. The surge in oil company profits in the United States could be seen in the Commerce Department's analysis of corporate profits adjusted for inflationary effects on inventories. Domestic profits calculated by this method for the oil industry rose 29 per cent from the third quarter to the fourth quarter to an annual $28.1 billion. They had risen 12 per cent in the previous quarter. The fourth-quarter figure was 90 per cent ahead of the $14.8-billion annual rate of domestic profit reported for oil companies in the final three months of 1978. DOMESTIC PROFITS for all industries were actually down 1.5 per cent from an annual $189 billion in the final three months of 1978 to $186.2 billion in the last quarter of 1979. The oil companies had reported large increases in their profits in the July-September period and said that much was due to the rise in overseas markets. The latest report, in fact, shows that profits outside the United States rose 35 per cent to an annual $15.8 billion in the third quarter. They then fell to an annual $13.5 billion in the fourth. THE REPORT ALSO showed that be-fore-tax profits of the nation's businesses rose 15 per cent last year from an average $206 billion in 1978 to an average $237.4 billion in 1979. Profits by this measure had risen 16.3 per cent in the preceding year. Gross National Product Per cent change from previous quarter; in constant (1972) dollars 10 8 6 4 2 0 -2 '1978 P- Preliminary a Ll 1979' 1980 1st 2d 3d 4th 1st 2d 3d 4th 1st 2d Sourctt: U.S. Depanrnont ot Commerce Firestone to shut down 6 plants AKRON API The announcement of Firestone Tire & Rubber Co. that it will shut down six plants, including two in the Akron area, brought shocked reactions Wednesday from labor and political leaders. Firestone, which reported a first quarter loss of $13.8 million, said the shutdowns will idle 7,000 employes by the end of the current fiscal year in October. Being closed are tire plants in Los Angeles and Salinas, Cal.; Dayton and Barberton, Ohio, and Pottstown, Pa., plus a synthetic latex plant in Akron, Firestone said. Joe Albanese, president of United Rubber Workers Local 18 in Barber-ton, Ohio, said the plan to close the Seiberling plant, with 700 factory workers and 265 salaried employes, was "a terrific bombshell." "IT IS A BIG BLOW to the people of Barberton," he added. "It'll hurt everyone, community and all." Albanese blamed the cutbacks on "poor management at Firestone," which bought out Seiberling in 1965. U.S. Rep. John Seiberling D.,Ohio said he was "shocked and depressed" over the closings. "Something needs to be done to help these people," the congressman said. Richard Riley, chairman and chief executive officer of Firestone, said the closings were part of a restructuring of the company's North American tire operations. He noted that a poor showing by the domestic tire division was a major factor in Firestone's big first quarter loss. Riley added that the closings would cut manufacturing costs and improve Firestone's ability to meet customer needs. "THE REALIGNMENT is intended to meet changing market conditions by eliminating unneeded capacity that has been used mainly for producing bias-ply tires," he said. The company estimated the cost of the closings, including employe termination and pensions, at $32 million after taxes. A company statement said the costs "will be somewhat offset by an estimated $33 million gain from liquidation . . . inventory reserves." Tribune publisher wins award STANTON R. COOK, president of Tribune Co. and publisher of The Chicago Tribune, was given the Chairman's Award of the Better Business Bureau of Metropolitan Chicago Wednesday. Cook got the award, according to a spokesman for the Better Business Bureau, "because of the high ethical standards of The Tribune Co. and its various media." Cook had headed a committee of the organization that sought to communicate the value of self-regulation to local businesses. In part, the citation that accompanied the award said of Cook that he "has constantly recognized the concept of self-regulation as it relates to the principle of free enterprise as being in the public interest, particularly in the development and implementation of ethical advertising standards." Cook was unable to accept the award in person; it was accepted for him by John Madigan, vice president and chief financial officer of Tribune Co., in a meeting in the Conrad Hilton Hotel. Metals issues perform well NEW YORK I API Precious-metals issues were the standouts as the stock market turned in a mixed showing Wednesday. The metals stocks responded to rebounding prices for gold, up more than $60 an ounce to about $550, and silver, which recovered nearly $3 to above $20 an ounce. The Dow Jones industrial average slipped 0.68 to 800.94, holding just above the 800 level, which some analysts regard as a pivotal point in terms of market psychology. The daily tally on the New York Stock Exchange showed about three gainers for every two stocks that fell, and the NYSE composite Index managed a 0.22 rise to 59.31. BIG BOARD VOLUME totaled 36.32 million shares, down from 47.34 million Tuesday. Nationwide turnover in NYSE-listed issues came to 41.69 million. Standard & Poor's index of 400 industrials was up 0.22 at 118.27. and S&P's 530-stock composite index rose 0.21 to t887: Stock Market March-19, 1980 Composite table Volume 41,688,080 Issues traded 1,861 Unchanged 391 Dow Jones Industrials 800.94 -0.68 S.&P. 500 104.31 0.21 N.Y.S.E. Index 59.31 0.22 Based on N.Y.S.E. trades. 104.3!. The American Stock Exchange infex climbed 5.01 to 258.28. The list of top percentage gainers was dominated by silver stocks Sunshine Mining, up $3.37 at $30.12; Hecla Mining, up $3.75 at $32.37; and Callahan Mining, up S3.87 at $38.87. A-nong leading gold issues, ASA rose $3.12 to $45.50; Homestake Mining $2.75 to $49.50; Dome Mines $4 to $60.75; Campbell Red Lake $3 to $31.75; and Engelhard Minerals $2.37 to $29. AT&T profits increase 7.1 NEW YORK I API American Telephone & Telegraph Co. said Wednesday its first quarter profits were up 7.1 per cent to $1.4 billion. The company said earnings for the quarter, ended Feb. 29, came to $1.93 t. share, up from $1.31 billion or $1.8 a share in the same period a year earlier. Revenues rose 11.3 per cent to $11.89 billion. AT&T Chairman Charles L. Brown said that earnings were rising at a slower pace. "The reason for this slowing of earnings growth can be summed up in one word: inflation," he said. Perhaps indicating the economy is slowing, AT&T said all major parts of its business grew at a slower rate than '. during the same period a year ago. Although the period was the first quarter of AT&T's fiscal year, ft provid- " ed figures for the 12 months ended Feb. , 29. It said it earned $5.71 billion or $8.02 : per share, up 6.7 per cent from $5.35 billion or $7.81 a share in the preceding 12 months. Chrysler may need direct loans to fend off bankruptcy DON'T BE surprised If Uncle Sam's last-minute Christmas gift to Chrysler Corp. the promise of loan guarantees of up to $1.5 billion is not enough to bail out the financially plagued automaker. To meet critical short-term cash needs, estimated at roughly $100 million a month, Chrysler's management may be forced to shift gears and push for direct government loans. If the loans aren't forthcoming, the company could go bankrupt, possibly before year's end. This new and ominous assessment in effect, a warning that no investor should own a Chrysler security comes from one of Wall Street's brightest minds. He's 43-year-old David Healy, the auto industry specialist of Drexel Burnham Lambert. He's been following the fortunes of the car mnkars (or the last 17 Dan v!i Dorfman ir',V.: years. THANKS TO THOSE loan guarantees, coupled with a sudden surge of enthusiasm stemming from Chrysler's participation in the defense sector as a tank manufacturer, Chrysler's shares have rebounded Jrom their lows of the last year. On Wednesday, the stock closed at $7.12. In a bleak commentary fired off to Drexel Burnham's clients, Healy suggests that such investor interest is unwarranted. He questions whether Chrysler will be able to obtain certain much-needed bank loans, doubts whether the company's cost-cutting efforts will produce the expected level of savings, expects the automaker to run longer and deeper in the red than it expects, bellevei the Chrysler management is underestimating the competition in Its forecasts of Increased market share, and points out that tank are a negligible part of Chrysler's business about l or 2 per cent. THERE SEEMS to be an assumption that Chrysler has been balled out by the government's rescue legislation, But this is far from the case. As Healy points out in his report, the legislation requires that Chrysler must first assemble a package of at least $1.43 billion in nonfederally guaranteed assistance before qualifying for the federal guarantees. Some parts of this non-guaranteed finance package have been tentatively assembled, but key bank loan portions are far from complete. These would include, Healy lays, $400 million of new money from U.S. institutions, $150 million from foreign institutions, and $100 million of concessions with respect to existing debt from U.S. institutions. Healy believes that some members of C'irysler's U.S. loan syndicate, notably regional U.S. banks, actually wrote off existing Chrysler debt at year-end 1979. Therefore, he says, it seems almost im possible to expect that these same banks will advance new nonguaranteed funds. HEALY BELIEVES that banks belonging to the Chrysler syndicate also may be unwilling to extend more credit! to Chrysler for fear of shareholder law-' suits charging "waste" of bank funds by lending them to a creditor already in default. This reluctance could be intensified by the general money market squeeze. Healy says one observer pre-, diets that "the banks will just let Chrv. ler hang." In 1979, Chrysler reported a net loss of nearly $1.1 billion, the largest annual, deficit ever recorded by an American, corporation. Chrysler is talking of cutting the loss Continued on page 9 ,1

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