Chicago Tribune from Chicago, Illinois on October 30, 1984 · 29
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Chicago Tribune from Chicago, Illinois · 29

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Tuesday, October 30, 1984
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29
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DfCSS Section 3 (fhicago (Tribune Tuesday, October 30, 1934 Ford selects Petersem to Tho Indicators 26-week Treasury bill rate In percent; at weekly auction 11.0 I '' ! ' p - 1 io.o j "T TT ' ' 9.0 1 8 15 22 29 5 12 19 26 3 10 Oct. Nov. Dec. to Mow C&Mwe Source: U.S. Department of the Treasury Money market funds 30-day average yield in percent 11.1! "" 10.3 9.9 9.5 12 19 26 3 10 17 24 31 7 14 21 23 Sept. Oct. Nov. Source: Oonoghue'i Money Fund Report Loans to individuals for personal expenditures In billions of dollars; at Chicago banks $4.05 I ' 4.0 3.95 3.9 4- 11 M M M M t 11 11 fl 11 I ! 3.85 19 26 3 10 17 24 31 7 . 14 21 28 Sept. Oct. Nov. Source: Federal Reserve Bank of Chicago Salomon Bros. AAA corporate bond index New issues, medium and long-term 13.4 f. I 12 6 Medl'mTx 12.2 : 11.8 , 11.4 1 "3 4 11.0 21 28 5 12 19 26 2 9 16 23 30 Sept. Oct. Nov. Source: Salomon Bros. Chicago Tribune Charts 7 14 Dec. AP Laserphoto Treasury Secretary Donald T. Regan right explains a point to Paul W. Prior left, chairman of the U.S. League of Savings Institutions, and William O'Connell, league president, after Regan's speech in Washington Monday. Regan calls for reform of insurance on deposits Business ticker 3-month T-bill rates off 8th week Yields on three-month Treasury bills fell for the eighth consecutive week, but the yield on the six-month bills rose slightly in Monday's auctions. The government sold $6.6 billion in three-month bills at an average discount rate of 9.38 percent, down from last weeks 9.54 percent and a seven-month low. The government sold an additional $6.6 billion in six-month bills at an average discount rate of 9.59 percent, up slightly from the 9.57 of the preceding week. Before the increase, rates on six-month bills also had fallen for seven weeks. The yield on the three-month bill was the lowest since 9.37 percent March 12. The increase on six-month bills brought that rate to its highest level since 10.08 percent Oct. 15.. Johnson Products posts loss By Sallie Gaines mini? I AMI T A DV By David Ibata Chicago Tribune WASHINGTON Treasury Secretary Donald T. Regan called Monday for reform of the insurance system that protects customers of banks and savings and loan associations. He referred to the protection provided to banks by the Federal Deposit Insurance Corp. ana to thrifts by the Federal Savings & Loan Insurance Corp. "Deposit insurance should not encourage risky behavior by depository institutions," -Regan told the convention of the U.S. League of Savings Institutions. "The deposit insurance trust fund should not be statutorily restricted from increasing in volume, and the deposit insurance premium mechanism should be flexible." IN A PRESS conference after his speech, Regan said the government will work with financial institutions ,'hat are in trouble because of "macroeconomic" circumstances beyond their control. However, he said, "We have no sympathy for bad or fraudulent management." The government, Regan said, has started looking into "whether the nation's depository insurance system is adequate; whether the insurance ceiling should remain at $100,000 or be changed to protect all depositors, and whether premiums should be finked to performance, much like casualty insurance." The secretary denied that the government had "bailed out" Continental Illinois National Bank and Trust Co. of Chicago. The insurance system, he said, "should be controlled by rules, not discretion" except in "extraordinary circumstances." Regan also predicted that the nation's economy would expand by 4.2 to 4.3 percent in the fourth quarter, that inflation would remain low and interest rates fall and that President Reagan would be re-elected. SEN. RICHARD Lugar R., Ind. agreed about the President, adding that the Republicans would continue to hold a majority in the Senate and would pick up 20 seats in the Continued on page 11 By James Mateja Auto writer i DONALD E. Petersen, president of Ford Motor Co., was selected Monday to succeed Philip Caldwell as chairman and chief executive officer of the automaker Feb. 1, five days after Caldwell reaches retirement age. At the same time, Ford announced that Harold A. Poling, 59, would succeed Petersen as president, also effective Feb. 1. While it was well known that Caldwell was preparing to retire, the timing of the announcement so far in advance of the change surprised most Ford watchers. It was understood the announcement of the executive changes was made following a special telephone conference call involving Ford's board of directors. INSIDERS SAID the announcement was made early to end specu-' lation about Caldwell's successor. At one time it was rumored that Petersen would be edged out and . Poling made chairman based on Poling's success as head of Ford's North American Automotive Operations. Since Poling took over that post in March, 1980. The unit has gone from a perennial billion-dollar money loser to a billion-dollar profitmaker. As speculation grew of a power struggle for Caldwell's post, rumors surfaced that Caldwell would not retire but stay on another year. Insiders said Caldwell may have wanted the executive changes known before the annual meeting of Ford's top 450 executives, coming up in three weeks, at which time performance is reviewed and planning outlined. THOUGH THE Ford announcement ended speculation on who would replace Caldwell, new speculation arose as to whether Petersen and Poling would be able to work in harmony. Scott Merlis, analyst with Shear- : son LehmanAmerican Express Inc. in New York, applauded the early announcement of the new Ford leadership. "There's no need now for a palace coup," he said. "The ambi- A -:- Ford Motor Co. President Donald E. Petersen Caldwell Poling guity over succession has now been resolved, and the continuity of sucT cession has been farilitnreri. There's been so much speculation and rumor over the last year as to who the chairman would be when Caldwell retired that there were pools gping among middle management. The announcement today certainly creates order where there had been uncertainty." Merlis said Petersen "is a positive leader, a person who has felt the pulse of the market and one of the people responsible for Ford's decision to go to aerodynamic Continued on page 6 How law changes cash-value rules of life insurance Universal life insurance Insurer's age Percent death benefit must be above cash value Minimum Maximum Johnson Products Co. Inc. reported a net loss and lower sales for its fiscal fourth quarter and year, ended Aug. 31. The net loss reflects a combination of lower sales and record expenditures for advertising and promotion,' about $3 million more than for fiscal 1983, said George E. Johnson, president. He said the sales decline was mainly because of a sharp drop in retail curl hair kit sales, particularly Classy Curl, one of the company's best sellers, which had to be recalled because of a change in its chemical structure. The fourth-quarter loss was $2.5 million, down from net income of $444,000, or 11 cents a share, in the year-earlier period. Sales in the fourth quarter slipped to $11.1 million from $13.3 million. Sales for the year were $41.5 million, down from $45.7 million in fiscal 1983; net loss ior tne iiscai year was $4 minion, down trom net earnings of $1.6 million, or 41 cents a share, a year Qpotllfjllt COME JANUARY, neonle buvine life insurance will find the array of products on the market changed, thanks to the tax bill approved last summer. The tax bill changed tne definition of what legally can be considered life insurance, and companies across the nation are working to revamp their policies by the Jan. 1 deadline. But while the law has created a huge administrative lob for the insurance industry, there seems to be little criticism of the new rules or feeling that the revised products will be inferior to their predecessors. At issue are policies that, in addition to providing a death benefit, accumulate a cash value. It was that cash side that concerned Congress. Many policies are designed to allow the customer to decide 0-40 250 250 1 41-45 215 250 , 46-50 185 215 I 51-55 150 185 1 55-60 130 150 1 I 61-65 120 130 1 66-70 115 120 1 71-75 105 115 I 76-90 105 105 I 91-95 100 105 General Binding net triples Third-quarter earnings of General Binding Corp. of Northbrook nearly tripled on record sales. Net income climbed to $1.4 million, or 28 cents share, from $470,000, or 9 cents a share, in the year-earlier period. Sales rose 10 percent, to $38.3 million, from $34.8 million. The latest period included a gain of 2 cents a share on the sale of land in Florida; the year-ago period included a $546,000 loss from discontinued operations, which was partly offset by an extraordinary gain of $427,000 from the repurchase of debt outstanding. Land of Lincoln net up 16 Land of Lincoln Savings and Loan Association reported a net income of $753,564, or 24 cents a share, for its first fiscal quarter, ended Sept. 30, up 16 percent from $648,918, or 26 cents a share, a year earlier. Net interest income rose to $3.6 million trom $1.97 million, reflecting an improved interest-rate margin to 1.62 percent from 0.80 percent. Lincoln's assets totaled $730.7 million Sept. 30. Mediflex signs 5-year deal Mediflex Systems Inc., Evanston, said it has signed a five-year agreement worth more than $3.2 million with Baptist Regional Health Services Inc. of Pensacola, Fla., for contract management services and software products for the multihospital group. Traded over-the-counter, Mediflex, specializing in health-care applications for computers, had sales of $28.7 million in the year ended May 31. Building contracts off 3.6 The total value of new construction contracts fell 3.6 percent in September from a year earlier, as the favorable effects of lower interest rates had not yet hit the construction industry, the F.W. Dodge Division of McGraw-Hill Information Systems Co. said. The combined value of construction in the residential, commercial, industrial, utility and public work sectors fell to $16.75 billion in September from $17.38 billion in September, 1983, and was down 5 percent from August s f' Contifcied on page 6 how much premium he wants to pay, and how much of that would buy insurance and how much would be invested. Some of those policies were designed so that a vast majority of the premium could be invested. THE BENEFIT of "loading" a policy on the cash side was that, as long as the product was legally considered life insurance, the investments could accumulate tax-free until the policyholder cashed in the policy. Such policies are investments, not insurance, Congress decided, and began moving in the 1982 tax bill Note: Under the 1984 Tax Act, universal lite insurance policies must meet one of two tests to prevent policy holders from accumulating large sums of money tax-free under the guise of an insurance policy. Under the test most likely to be used by the IRS, this is how much cash value a policy may have as of Jan. 1. Chicago Tribune Graphic; Source: Internal Revenue Service the Tax Equity and Fiscal Responsibility Act, .TEFRA to restrict the ratio of cash build-up to or I-ud to the actual death benefit provided in the policy. TEFRA Continued on page 11 Trading halt hits buyer of Banker's Life By Sallie Gaines THE AMERICAN Stock Exchange halted trading in ICH Corp. stock Monday, but that shouldn't affect Tuesday's sale of Banker's Life and Casualty Co. to ICH, Banker's owners said. Banker's is owned by the Chicago-based John D. and Catherine T. MacArthur Foundation. The foundation and ICH are to close the deal Tuesday. ICH's commitment from lenders for money for the deal runs out Tuesday afternoon, according to a spokesman for the Illinois Department of Insurance. As of Monday night, however, the department had not approved the deal, although a spokesman said a decision is expected Tuesday morning. IN HALTING trading in the stock of Louisville-based ICH, the Amex cited only "news pending." ICH stock has risen about $40 a share since June, but dropped $6 after reports Friday that the California Department of Insurance turned down the deal. It closed at $61.50 on Friday. But a spokesman for the Illinois Insurance Department said California since has approved the sale with conditions that ICH has accepted. All states in which Banker's Life has subsidiaries must approve the sale. Besides Illinois and California, they are Texas, Iowa, Florida and New York. Spokesmen for ICH would not comment Monday on Continued on page 6 Controversy over ex-Mart chiefs pool dies quietly WHEN THOMAS KING swims laps in the new pool in his Near North Side townhouse, ne may do it with a feeling of justifiable relief. A big burden brought by construction of that pool, as well as other renovations of the home, has been removed from his shoulders. The U.S. attorney's office has decided not to bring charges against either King, former general manager of the Merchandise Mart, or his Mart aide, Harry Finkel, as a result of questions of possible misuse of Mart funds in the $1.4 million renovation of the townhouse, 115 E. Bellevue PI. A grand jury investigation was prompted by published reports suggesting improprieties in those renovations, which were arranged for through the Mart's construction department and ran into major cost overruns. EVEN BEFORE questions arose, King had repaid all the money. Federal prosecutors found insufficient evidence to suggest fraud on the part of King, who was apparently an unwitting victim of cost overruns and phony invoices charged to the Mart. A decision to drop the investigation was made weeks ago. Lack of any official announcement is said to reflect a deep desire by King to keep the whole matter out of public view. Some say the disclosures had a wrenching effect on his life and played a part in the decision to leave the Mart, owned by the Warren, Kelly 1 .r & Tybor ' Kennedy family. King, former Mayor Jane Byrne's chief fundraiser, is a longtime friend of the Kennedys and remains a consultant. One key element in dropping the investigation was that apparently no one in the Kennedy clan felt there was reason to testify against him. Kink is president of Calmark Equities Inc. and a consultant to the public relations firm of Hill & Knowlton. Healthy flight of lawyers THE FLOOD GATES are opening at Hinshaw Culbertson Moelmann Hoban & Fuller, the town's specialist in medical malpractice defense, and the parting may not be sweet. A hefty total of 19 lawyers are splitting to form a health-care practice section at Katten Muchin Zavis Pearl & Galler. At least two partners are leaving Hinshaw: William Kucera, who will head up the new health section, and Robert Zimmerman. Hinshaw is miffed and has retained former U.S. Atty. Thomas Foran to investigate, among other things, whether there was any new client solicitation by the departing crew while still at Hinshaw. He calls it bilking COOK COUNTY Public Guardian Patrick Murphy has filed a complaint with the Attorney Registration and Discipline Commission against Loop lawyer Sheldon Klrshner over what Murphy deems the bilking of an elderly client. He maintains that Kirshner had a senile Zeila Burgeson, who was either 84 or 89 upon her death Oct. 10, sign over an "exceedingly broad power of attorney," including "paying his own legal fees from her accounts without anyone overseeing these payments," and wound up taking $11,000 from her. Murphy, appointed temporary guardian Aug. 23 Continued on page 5

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