The Los Angeles Times du lieu suivant : Los Angeles, California • 44

00 AucjctcB (Times Wednesday, September 2, 1987 CCtPart IV JAMES FLANIGAN Dow Plunges 51.98 as Dollar, Bonds Trigger Sharp Selloff By MICHAEL A. HILTZIK, Times Staff Writer related stock-index futures in tandem. The computer programs, which generate waves of sell orders directed at a small number of key stocks, have not exerted such a strong influence on daily trading since a 44.15-point drop in the Dow last Jan. 23. But some analysts said Tuesday that the market may be entering a period in which the programs again create tremendous and disconcerting volatility in the stock market.

This often occurs when investors begin to hesitate after showing a strong orientation in one direction in this case, bullish. "Those who think that program trading has left the market had better think again," said Michael Metz, market strategist for the Oppenheimer Co. stock brokerage. In all, 193.45 million shares changed fz -i" i ii NEW YORK Bruised by a sharp fall in the dollar and the bond market as well as a resurgence of computerized stock selling, the stock market Tuesday had its worst day in 3V6 months. The Dow Jones industrial average suffered the fifth-largest point drop in its history.

The symbolically important Dow index closed the day with a loss of 51.98, at 2,610.97 a decline of 1.95. In the final hour of trading on the New York Stock Exchange, the average actually fell more than 67 points before recovering slightly in the last few minutes of the trading day. Traders and market analysts attributed much of the sharp selloff to the influence of computerized selling programs, which are used mostly by institutional investors who trade millions of dollars worth of stocks and Other Interests 12 of Weintraub Entertainment Group 10 of De Laurentiis Entertainment Group Has a $69-million movie production deal with Nelson Entertainment Hyl (wholly owned, acquired 1982) I I Recent feature films "The Karate Kid II," "Stand By Me" VsKS Owns 50 of RCA Columbia Home Video hands on the New York Stock Exchange, with more than 54 million shares turning over in the final hour. Advancing issues led declines about 2 to 1 on the NYSE. The Dow index's fall was its biggest since May 15, when it dropped 52.97.

The largest one-day loss is the 86.61 -point decline of Sept. 11, 1986. Other major stock market indexes had corresponding declines Tuesday: The New York Stock Exchange composite index fell 3.23 to 181.22; the American Stock Exchange market-value index dropped 1.59 to 359.76, and the NASDAQ over-the-counter composite index slipped 2.47 to 452.50. Traders said the market had been demonstrating some modest strength for most of the day Tuesday; the Dow industrial index had been up as much as 25 points time to address any personnel or organizational issues." Executives appeared stunned at Columbia's Burbank studio. Telephone calls were either not returned, or referred to Coca-Cola's Atlanta headquarters.

Earlier this week, a studio source said there had been rumors that Kaufman would soon be named the top executive of Coca-Cola's Entertainment Business Group, but no one anticipated a merger of the 63-year-old Columbia studio with Tri-Star, founded just five years ago. Please see COKE, Page 3 i jf 1 ft ,4 llMm.t v4 1 I 0M 't A jg8C dJf Coca-Cola Television (wholly owned, formed 1986) Current series on network or in syndication include "Who's the Boss?" "The Facts of Life" and "Designing Women" Acquired Merv Griffin Productions, producer of "Wheel of "Jeopardy," in 1 986 Owns Embassy Communications and Columbia Pictures Television Coke, Tri-Star Confirm Plans for Deal from Monday's close. But just before 3 p.m., when the Dow was still up about six points, investor sentiment suddenly turned. That happened when the bond market fell sharply, responding to late weakness in the dollar's valuation against the Japanese yen. The yen was trading in New York at 141.45 to the dollar late Tuesday, compared to Monday's 142.41; the key 30-year U.S.

Treasury bond fell $11.25 for each $1,000 in face value. The bond's yield rose to 9.27, its highest rate of the year, from 9.16 late Monday. The fall in the bond market rippled through the stock-index futures markets in Chicago, and the drop in prices there kicked in computer programs that instruct brokers to purchase the futures and sell Please see STOCKS, Page 2 GM Says Parts Divisions Must 'Earn Their Way' New President Calls for Separate UAW Contract DETROIT OB-General Motors new president, Robert C. Stempel, said Tuesday that the nation's largest auto maker's many parts and components operations must "earn their way" or face sale or closure. Stempel also stressed that GM will try to negotiate its own United Auto Workers contract, despite the union's decision Monday to reach a settlement first with Ford Motor Co.

and then try to win a similar one fromGM. "General Motors is a much different corporation than virtually any other maker," Stempel said at a news conference as he started his first day on the job. Stempel, a former GM executive vice president in charge of truck operations and overseas companies, succeeded F. James McDonald as president and chief operating officer. McDonald retired Monday after six years as president and more than 40 years withGM.

Competition a Factor Stempel said UAW and GM bargainers need to look to their competitors, especially new firms doing business in the United States, for ways to pay and organize parts workers, which may be different from assembly plant workers. He added: "We make a great deal of the components we use, and we sell a great deal of our parts outside General Motors. If we're going to be competitive in those businesses, general labor contracts may not apply in some of those areas where we have new competitors in the supply industry." However, Stempel added: "If I can get those component divisions to really earn their way, there's no question about their being here or their job security. I'm talking about earning their way here in America." GM's nearly 90 parts and components plants employ about 120,000 of its 335,000 Please see GM, Page 3 Selling to Tourists California Growers Find Loophole in Japan's Rice Ban By BRUCE KEPPEL and NANCY YOSHIH ARA, Times Staff Writers When many Japanese tourists make their way home from United States these days, tucked into their suitcases among their purchases of Gucci purses, Chanel cosmetics and UCLA T-shirts are two-pound bags of rice. That's right, rice the California-grown variety.

The tourists are, in effect, becoming accomplices of California farmers, who have found a legal way around Japan's ban on imports of foreign rice. A loophole in the law allows individual Japanese residents visiting abroad to bring up to 220 pounds of foreign-grown rice into Japan annually. Kiyoshi Eddie Minaga wa hopes to cash in on the loophole. His firm, Tokiwa Foods, a Los Angeles food supplier to sushi bars, is selling the tourists packages of rice supplied by the Farmers' Rice Cooperative of Sacramento, the state's largest rice-marketing cooperative. The specially designed, two-pound Please tee RICE, Page 2 The Chip Pact Helped Pull Plug on Japan What's the story on the electronics industry a year after the U.S.

government forced a semiconductor trade agreement on Japan? That a bit of forceful government intervention can do a world of good. Even at first glance the U.S. industry looks healthier. Semiconductor companies have returned to making a profit, and stock prices have climbed back to respectable, if not record, levels. Mergers are occurring as stron-.

ger companies grow by acquiring product lines from weaker ones as National Semiconductor did in acquiring Fairchild. And, says analyst James Barlage of Smith Barney, Harris Upham, the industry can look forward to sales growth of 13 to 14 a year as a cyclical upturn in business proceeds. Behind such routine reports, however, lies a more instructive story, one of a national policy that says this industry is too important to leave to chance. "I think there's a stalemate going on," says Intel Corp. President Andrew Grove, of the global competition today.

"The industry with the aid of the government has forced a stalemate as in World War when the armies went into the trenches." The Japanese industry, Grove says, has solidified its lead in one kind of chip; the U.S. industry has kept its lead in another. The Japanese dominate consumer electronics, and U.S. industry leads in computers and the sophisticated microprocessors that go with them. The statistics confirm a dead heat.

The Japanese and U.S. electronics industries each control about 43 of a $31-billion worldwide market with the other 14 split among European developed countries and Asian developing ones, such as South Korea and Taiwan. The Currency Factor "Don't underestimate what it takes to bring a juggernaut to a standstill," says Grove. "For 10 years, the tide was running in favor of the Japanese industry; for the last two years that hasn't been the For the first time, Japanese penetration in a targeted industry has been stopped." What did it? Currency shifts were important. The shift of the yen has brought "the cost of an engineer in Tokyo into parity with the cost of an engineer in Silicon Valley," says analyst Michael Stark of Robertson, Colman Stephens, a San Francisco brokerage.

Engineers in Tokyo aren't paid in dollars, of course, but the international value of the yen they are paid becomes part of the cost of the Japanese memory chip. A salary of 6 million yen used to be the equivalent of $25,000, a fair starting salary for an engineer. Now that 6 million yen is worth $40,000. That's a fair leap in any language, when, you consider that pay and bonuses of knowledge workers like engineers can add up to half the costs of producing microchips. But more than currency, it was the government's enforcement of the semiconductor agreement that mainly turned the tide.

It hit directly at the practice of Hitachi, NEC and Fujitsu exporting their excess production at low prices to gain a market. It wasn't as if the Japanese companies were making money on such semiconductor sales. The memory chips were loss leaders, subsidized by profits from other company divisions. The agreement put a stop to that by raising market prices. The agreement was attacked on classical economic grounds.

There were arguments that if the Japanese wanted to lose money supplying us electronic chips, we should accept it as a gift. If we lost an industry in the process, it was argued, the workings of global economics would benefit us in other ways. Those arguments ignored what had happened in the 1970s, as U.S. industry and government stood by while the consumer electronics industry went under. Now the pace of technology in consumer electronics is set in Japan, which went on from TV sets Please tee FLANIGAN, Page 2 Tuesday, Sept.

1, 1987 By KATHRYN HARRIS, Times Staff Coca-Cola and Tri-Star Pictures confirmed Tuesday that their top executives have proposed a combination of the two companies' entertainment holdings under the leadership of Victor A. Kaufman, the current Tri-Star chairman. Tri-Star to be renamed Columbia Pictures Entertainment would have assets of $3.1 billion and would catapult to the ranks of such industry leaders as MCA ($2.7 billion) and Warner Communications ($3.2 billion). Under the proposal, Coca-Cola would exchange nearly all of its entertainment business assets including Coca-Cola Gleason and Hanks in "Nothing in Common' ST YsJV. nl Writer Television and Columbia Pictures for new Tri-Star shares, boosting Coca-Cola's stake to 80.

But Coca-Cola said it intends to reduce that stake to 49 by distributing the remainder to Coca-Cola shareholders in the form of a taxable, one-time dividend of Tri-Star stock early next year. If the deal is consummated, the new company would continue to operate two independent movie-making units with separate distribution and marketing staffs, Kaufman said in a telephone interview. Beyond that, however, Kaufman said: "We really have not had any Tri-Star Pictures (owns 36, formed 1982) Recent feature films include "Peggy Sue Got Married," "Nothing in Common" Acquired Loews Theatres chain, 1986 feature films to be produced by IndieProd as a division of Carolco. Melnick, whose most recent independent production in release is "Roxanne," has produced such well-known films as "That's Entertainment," "All That Jazz," "Altered States" and "Footloose." Carolco is best known for its "Rambo" movies, the third of which began shooting last week. Carolco President Peter Hoffman said in an interview that the primary purpose of making the Melnick deal is to send a message that the firm intends to make "studio-quality pictures in an Independent framework." Melnick, 53, was an independent produc-Pleaae see CAROLCO, Page 2 Jackie Tom LA Melnick Agrees to Merge With Carolco for $3 Million in Stock By AL DELUG ACH, Times Staff Writer Daniel Melnick, an independent Hollywood producer and former movie studio executive, has agreed to merge his Indie-Prod Co.

into publicly traded Carolco Pictures for about $3 million worth of Carolco stock. He also agreed to make movies under Carolco's banner. According to a joint announcement Tuesday, the industry veteran will receive 400,000 shares of Carolco stock for his independent movie production entity. Separately, Carolco said it is committed to lay out more than $7 million in overhead and development costs on Melnick's movie operations. Under a five-year agreement, Melnick is to receive more than 50 interest in v.

fes? Off Daniel Melnick Factory Orders Drop in July The 0.2 decline, the first since January, was due largely to a 6.8 fall in defense orders for manufactured goods, according to the Commerce Department. Please see Page New York Exchange paoe 6 American Exchange 8 OTC Markets 10 Bonds 12 Commodities 8 Mutual Funds 9 Tax-Free Money Funds 7 3 University Reassessing Kodak Ties The University of Rochester will re-examine its ties to Kodak after its business school rescinded its acceptance of an employee of a Kodak rival. Please see Page 2 a A iv a IV i NYSE 181.21 a A iv IV i LJuLJ DOW 30 2,610.97 A IV VI LJuLJ WIL8HIRE 3,194.063 A IV VI LJuLJ NA8DAQ 452.50 A IV VI LJuLJ AMEX 359.76 i.