Chicago Tribune from Chicago, Illinois • 33

Section 3 Chicago Tribune Wednesday, June 3, 1 987 Volcker exit hits markets unevenly Ticker cuts Illinois rates American Telephone Telegraph Corp. said it is cutting prices for long-distance calls made within Illinois by $4 million, effective July 1. The new rates will apply to calls made weekdays from 8 a.m. to 5 p.m. The company also increased to 10 the number of specified holidays on which discounts apply.

The in-state reductions coincide with a proposed 4.8 percent interstate price cut scheduled for the same day. in a time of rising interest rates. Those fears caused the bond market to post its biggest decline in more than two years. The benchmark 30-year bond lost nearly 3 points, equal to a $30 drop on a $1,000 bond, to close at 98l432. That pushed the yield to 8.90, up from 8.63 Monday.

The dollar also closed sharply lower, down nearly 4 yen, at 141.20. Against the West German mark, the dollar dropped more than 3 pfennigs, to close at 1.7945. "This is not the warmest reception anyone's ever received," said Hugh Johnson, market analyst with First Albany Securities, Albany, N.Y. "But the market is reacting more to the fact that Volcker is leaving than that this is a vote of non-confidence in Alan Greens- By Pat Widder Chicago Tribune NEW YORK The stock market trembled but did not crack Tuesday at the news that Paul A. Volcker will retire as chairman of the Federal Reserve Board.

That surprise announcement, however, sent the bond market into a tailspin and caused one of the sharpest daily drops in the dollar's value. When the news that Volcker will not serve a third term came at about 10 a.m. (Eastern time) Tuesday, the Dow Jones industrial average dropped 22 points, then recovered about half of that. The Dow industrials closed down 10.01 at 2278.22. Broader stock market indexes also were down, but looked buoyant com pared with the disaster in the bond and currency markets.

Volcker's nominated successor, Alan Greenspan, was generally viewed by Wall Street as the best of the possible choices. Greenspan, 61, who runs a New York economic consulting firm, was chairman of the Council of Economic Advisers under President Gerald Ford. But there is a clear worry that any replacement, even someone with Greenspan's credentials, will be negative for markets that had come to view Volcker as a tough and steadying presence that cannot be replaced. He is seen as the symbol of Washington's commitment to fight inflation and many fear that Greenspan won't have the resolve or the clout on the Fed to continue the fight pan. And the stock market's refusal to panic is seen as a positive.

"The unthinkable has happened and the world continues to turn," said Monte Gordon, research director at Dreyfus Corp. Richard B. Hoey, chief economist for Drexel Bumham Lambert has conducted a survey since 1983 on who the investment community would like to see replace Volcker. "Greenspan has always been No. 1 or 2 on the list," he said.

"I'm very positive. I do not expect a free fall in the dollar. I think the currency markets will calm themselves over the next couple of days." Byron Wien, senior market analyst Continued on page 5 Area economy still growing The Chicago area Of Chicago business Economic growth index lyuu-rfr Trintex's economy continued to show strength in May, though not quite at the same pace as in April, a monthly survey found. The Purchasing Management Association of Chicago said its index of leading economic indicators fell to an unadjusted 57.2 last month from 60.8 in April. A reading above 50 indicates an expanding economy; below 50 means it's contracting.

62 so fir 56 54 "6 few 8 11 1 g2 s'3 Me 50 mTaH Retail aim: revolution A. "'-v fill Steel firms lose $4.2 billion The U.S. steel industry lost a combined $4.2 billion last year, the worst loss in its history, according to the American Iron and Steel Institute. The trade group cited competition from imports as the largest reason for the results. AAR unit sells 5 jets AAR Corp.

said its AAR Financial Services Corp. unit sold its beneficial interest in five used Boeing 737-200 aircraft. The interest was sold to CIS Corp. of San Francisco. The aircraft were acquired from and leased back to Piedmont Aviation Inc.

in 1985. AAR said its combined profit from the sale and earnings from the lease will be about $6.9 million. Centel water properties sold Centel Corp. said it completed the sale of its water properties in Kansas to Central Kansas Utility Co. of Columbia, Mo.

Terms were not disclosed. Insurer moving to Lisle Wausau Insurance Cos. will move its regional operation and about 220 employees in October to Lisle from River Forest. Wausau leased 40,700 square feet, or Vh floors, of the 2 Arboretum Lakes office building, a 6-story, project completed last November by Trammell Crow Co. Liedtke on board By Janet Key Trintex is offering glimpses of its long-awaited "store," and they indicate that retailing may never be the same.

Trintex, the joint venture in electronic retailing by Sears, Roebuck Co. and International Business Machines will make its debut next year with at least 44 other retailers on board, of-fering such products as Levi Strauss ap-' parel, Chanel perfumes and cosmetics, Volkswagen cars and Bally fitness equipment. The core of the Trintex system is the home computer. Subscribers sitting at their computer can reach the service through their local telephone lines. By touching a key, they can call up information from any retailer on the service.

By touching another key, they can order goods and even pay for them electronically. Not only will Trintex subscribers be able to shop at home for everything from apparel to perfume to home electronics, they'll be able to bank, make travel arrangements, exchange messages and receive local and national news, Dow Jones financial data and news and public television features such as "This Old House" and "Last Chance Garage" said Harry Smith, vice president of product and commercial development for Trintex. The idea, Smith said, is to "encourage habitual daily usage" of the system by offering as many Trintex services as possible, even if the subscriber doesn't feel like shopping. Trintex, he said, should be "fun and entertaining. While viewing the information, subscribers will see your retailers' targeted ads." Trintex offered some details of its formerly top-secret operation at a Touche Ross Co.

conference on electronic retailing in Washington late last month. Triburw photo by Charm Osgood This Moscow plant was still assembling 1975-model cars says a Soviet economist, adding: Tne economy, "to be last year. "The state of our economy satisfies no one," perfectly honest is virtually unplannable." Soviet economic debate heats up Economist wants to open markets, condone unemployment J. Hugh Liedtke, chairman and chief executive of Pennzoil was elected to the board of Gulf Western Inc. Liedtke has been chief executive officer of Pennzoil and its predecessor companies since 1953, heading it during the court fight that resulted in its $10.3 billion damage award against Texaco Inc.

Gulf Western Chairman Mar rate is 3 percent Shmelev argued that a guaranteed job has spoiled Soviet workers and that unemployment should be allowed to rise as a stick to goad a laggard work force to more efficient labor. "We should not close our eyes to the economic harm caused by our parasitic confidence in a guaranteed job," Shmelev wrote. "The real danger of losing one's job and having to temporarily take unemployment benefits or work wherever one is sent is a very good cure for laziness, drunkenness or irresponsibility." Shmelev said such radical measures are necessary if the Soviet economy is to drag itself from a decades-old bog that Continued on page 5 By Thorn Shanker Chicago Tribune MOSCOW In an essay of remarkable bluntness, a Soviet economist proposed Tuesday that the USSR condone unemployment and open its markets to foreign competition as a step to losing an "ideological virginity" that has stunted economic maturity. In another article published Tuesday, a Soviet scientist said that achievements of capitalist economies should be copied and not criticized. The articles reflect the heated debate underway in top party and academic circles as the nation prepares for important meetings later this month of the party's Central Committee and of the Supreme Soviet.

The Central Committee approves national policy, while the Supreme Sovi et, the USSR's nominal parliament, passes legislation. Writing in the current issue of the literary journal, Noyy Mir (New World), economist Nikolai Shmelev takes issue with the myth of full employment in the Soviet Union. Guaranteeing a job for every Soviet worker is a cornerstone of the Kremlin's social-welfare policy. Almost daily, state-controlled media here accuse the West of violating human rights by not resolving its problems of joblessness and homeless-ness. But Shmelev wrote that a constant unemployment rate of 2 percent exists in the USSR, made up of "people who are looking for or who are between jobs." When the nation's vagrant population is added in, he said, the unemployment 1 "aA Liedtke Productivity up, factory orders off tin S.

Davis said Liedtke "has demonstrated broad business judgments and insights in directing the success of his company." FMC in Thai venture FMC Chemical Products Group said it entered into an agreement with Indo-Thai Synthetics, a division of Birla Group of India. Under the agreement, the companies will form Thai Peroxide Co. to build a hydrogen peroxide plant in Thailand. 2 firms buy 1 of Midway Two Boston-based affiliated investment firms, FMR Corp. and Fidelity International said they hold a combined 7.66 percent of Midway Airlines common shares.

Although other companies nave tried and failed to market at-home electronic shopping services, Trintex may be the first viable scenario for storeless retailing and shopping by personal computer. The first Trintex system will go into operation early next year, reportedly jn Hartford, Conn. Later in the year, Trintex will introduce the service in Boston, Atlanta and San Francisco, says Gary H. Arlen, publisher of "Electronic Shopping News," an industry trade publication. There are no immediate plans to expand the system to Chicago, Arlen said, because Trintex wants to hit the most home computer-saturated markets first.

Other cities (likely to get Trintex before Chicago include Dallas, Houston and Minneapolis. Trintex's goal is to eventually have 75 to 80 percent of all U.S. households a local telephone call away from its information and shopping services, Smith said. Within 10 years, time-strapped consumers routinely will buy dishwashers, stereo equipment, apparel, fitness equipment and even cars by touching a television screen and picking up a telephone or hitting a button on a computer keyboard, says Thomas Rauh, head of Touche Ross' electronic retailing services. "This is how shopping will evolve in the next 10 years," said a retailer at the conference.

"This isn't any fly-by-night operation or some flash in a pan this is Sears and IBM, for God's sake." "What you have is two familiar household names bringing you products in a futuristic way. That's a tremendous Continued on page 5 U.S. nonfarm sector In percent change from previous quarter; seasonally adjusted annual rates Business facts 070 4 3 2 1 0 -1 -2 -3 -4 WASHINGTON (AP) Productivity of the nation's businesses improved slightly during the first quarter but much less than previously thought and new orders for factory goods slowed in April, the government said Tuesday. Sales of new homes, however, jumped a robust 7.6 percent in April, the biggest increase in four months, according to another government report Analysts termed the sharp increase in new-home sales a fluke, saying it was more a case of panic buying in response to higher mortgage rates than an expression of confidence in the economy. And they said the Labor Department's revision of first-quarter productivity gains downward to an annual rate of 0.5 percent, combined with the smallest increase in factory orders in three months, only reinforces that wariness.

In preliminary figures last month, the Labor Department's Bureau of Labor Statistics reported that nonfarm business productivity improved at an annual rate of 1.7 percent the first quarter, more than triple the rate in the revised report Tuesday. That earlier calculation of efficiency in producing goods and services assumed a S.4 percent increase in output of goods and services, accompanied by only a 3.6 percent increase in the number of hours worked to achieve it. Instead, the bureau said Tuesday, output in January, February and March grew at an annual rate of only 4.3 percent, while the number of hours worked rose by 3.8 percent. "The productivity numbers are back where they belong, which is low," said lackluster, it at least reversed productivity declines the last six months of 1986. Hourly labor costs did not change from the fourth quarter of 1986, the bureau said Tuesday.

And when adjusted for inflation, wages and benefits actually fell 5 percent, the biggest drop in workers' buying power per hour of labor since a 6.1 percent decline in the first quarter of 1951. Measured in output, labor costs dropped 0.5 percent the first quarter the first decrease in a year after a 4.2 percent rise the last three months of 1986. "That is a good sign for the inflation outlook, even though productivity growth continues to be unimpressive, said Allen Sinai, chief economist for Shearson Lehman Brothers a Wall Street brokerage house. Excluding banks and other financial corporations, hourly compensation adjusted for inflation fell an even larger 5.6 percent. Meanwhile, the bureau said, profits for each unit of output soared 36.4 percent the first quarter.

While the productivity improvements for business as "a whole were less than previously believed, efficiency gains were much better for manufacturers, who enjoyed a rebuilding of depicted business inventories in the first quarter. The revised figures showed productivity in manufacturing rising at an annual rate of 2.1 percent during the three months, with a 3.7 percent increase in output on a 1.6 percent rise in the Continued on page 5 7 3d 4th 1st 2d 3d 4th 1st u1985j- 1986- '87 Chicago Tribune Chart; Source: U.S. Department of Commerce I In dollars per ounce 1 (SX 53 10 16 24 1 8 IS 22 29 Ag) April May Chicago Tribun Graphics JT byTlmWIiam; jw Sourctt- T.PQT Jf. I Inside Allegis Corp. says it is creating a limited partnership to sell some of its Canadian hotels.

Page 2. Great Lakes International's William Coinon Is expected to plead guilty to bid-rigging charges. Page 3. A judge blocks Chem-Nuclear from operating a nuclear waste compactor near Cnannahon, III. IJage 3.

Michael Evans, who runs an economic forecasting firm in Washington. "A lot of people displaced from their old jobs are setting up shingles and going into business for themselves. But they're not bringing in much business." Because productivity is a measure of efficiency, any improvement is viewed as the ultimate source for rising wages. While the first-quarter gain was seen as Ktt tn, Hdurt, fn ti pn rn -ft, fa tm.