National Post from Toronto, Ontario, Canada • 41

FINANCIAL POST, MONDAY, DECEMBER 30, 2002 FP3 rif i dl s. Craig, CHUM gird for all-out war RISK OF WAR 'BAD MEWS': DUISENBERG CRTC decisions, territorial incursions will test TV rivals ml va I I I LESS CONFIDENCE Higher energy costs crimping growth, job creation, ECB chief warns Matthew Fraser JEFF KLEIN BLOOMBERG NEWS Gary Cowger, president of GM North America, shown addressing a Las Vegas trade show last month, has overseen conversion of many factories to a system that minimizes retooling downtime for new models. Flexible plants cut costs by USS15B a year, GM says Given expectations that inflation will slow, among other things, "we think that people will have more purchasing power and spend more," Mr. Duisenberg said. The Dutch-born ECB president was quoted on Saturday as telling a German newspaper that euro zone economic growth should pick up in 2003 with inflation slowing toward a rate below the ECB's self-imposed limit of 2 in 2003 and 2004; Euro zone inflation slipped to 2.2 year-on-year in November from 2.3 in October.

The ECB president repeated earlier comments that he was willing to stay in office longer if there isn't a successor by the time he wishes to leave in July, on his 68th birthday. "If this is the case, which I do not presume, this would be a short period," Mr. Duisenberg said. French central bank head Jean-Claude Trichet remains the front-runner to replace Mr. Duisenberg, but Mr.

Trichet's ongoing trial related to a bank scandal in France might force European Union leaders to appoint someone else. In answer to questions about Mr. Trichet, Mr. Duisenberg said his successor did not necessarily have to be French, although he added it probably would. "In the agreement which regulates this it says that the ECB president should be somebody with international experience in finance and banking.

The nationality is not mentioned so it doesn't have to be a Frenchman," he said. "But there was an informal agreement between the heads of state in 1998 that the second president will be somebody of the French nationality. So it doesn't have to be a Frenchman, but it probably will," he added. "But I don't want to say anything about my friend and colleague Trichet. It is a very unpleasant case, which he is involved in.

Let's just await what the investigation concludes." Reuters, with files from Bloomberg News FORD SAVINGS LAG Craig. But Drew Craig proudly rebuffed the overture. That was before Mr. Craig won a licence for a Toronto television station. Emboldened by that victory, Mr.

Craig now believes his company is worth $300-million. That, at least, is what he was attempting to convince Bay Street investment bankers this summer during a series of "beauty contest" meetings aimed at putting an asset valuation on Craig Broadcast Systems. Mr. Craig was pitching Bay Street because he needs to raise cash. TD Capital took a 33 stake in Craig's specialty channels, but apparently wants to monetize part of its investment.

Meanwhile, Mr. Craig has to drum up $40-million to launch Toronto One. But Mr. Craig's asset-value story didn't fly on Bay Street. He was told that, in current market conditions, the timing isn't right to take his company public.

So Mr. Craig has been in the United States raising private capital to launch his Toronto station. An initial public offering can be expected at some point, and it's believed Dominion Securities will be the lead underwriter. In the shorter term, Mr. Craig has some bad news coming.

Any day now, the CRTC is expected to rule in favour of CHUM in its dispute against Craig's MTV channels. Mr. Craig originally had won a licence for a "youth" channel called Connect not for a Canadian version of MTV, But Mr. Craig hastily negotiated a backdoor deal with Viacom to bring MTV and MTV2 into Canada, while granting Viacom increased ownership stakes in the future. CHUM complained that Craig's MTV channels violated regulations because they competed directly with MuchMusic.

The CRTC is expected to order Craig to ensure its ownership arrangements with Viacom comply with Canadian law. The regulator is also expected to instruct Craig to ensure MTV Canada does not compete directly with MuchMusic. And finally, the CRTC will likely and absurdly call for public input on the definition of "pop music" to determine whether MTV2 poses a competitive threat to CHUM channels. The CRTC ruling will be a setback, but not a fatal blow, for Craig. The worst-case scenario is that Viacom, refusing to dilute its global MTV brand at the behest of Ottawa regulators, will pull out of Canada.

Even if Viacom maintains its relationship with Craig, Mr. Craig will find himself dealing with regulatory hassles just as he's preoccupied by launching his Toronto One station. Over at CHUM headquarters, Moses Znaimer and his colleagues can only watch and wait as Drew Craig contemplates his next move. There will be more regulatory head-butting in the next few months, but the real war begins in October when Craig's Toronto One station attempts to dislodge Citytv in the marketplace. When this war is over, the carnage will be extensive so bad, in fact, that it may force CHUM and Craig to reconsider the obvious logic of a merger.

Financial Post mwfraserTogers.com By Celeste Perri The threat of an attack on Iraq is hurting confidence and war would cause damage to the world economy, the president of the European Central Bank said yesterday. "The threat of war is making people more unsure of their future they have less confidence and that is bad news for the world economy," said Wim Duisenberg in an interview on Dutch television. "As an economist, I wouldn't want a war in Iraq." Oil prices have gained 22 this month, partly on concern a war with Iraq would affect oil supplies. Higher energy costs leave consumers and businesses with less money to spend on other purchases, crimping economic growth and job creation. Mr, Duisenberg said that Alan Greenspan, the U.S.

Federal Reserve chairman, is also concerned a war with Iraq would damage the economy. Mr. Greenspan thinks the economy will improve if the risk of war with Iraq is reduced, he said in a speech earlier this month to the Economic Club of New York. The economy of the dozen countries sharing the euro has probably grown at the slowest pace in nine years in 2002, the European Commission predicts. Mr.

Duisenberg said he optimistic" the economy will rebound next year, though that recovery may be slow. "I'm not really gloomy. I'm reasonably optimistic. But it is recovering very slowly," Mr. Duisenberg said in an interview on Belgian television.

"The ECB expects that the most important impulse will come from domestic demand in Europe," he said. Depressed share prices and unhealthy balance sheets are expected to sedate the normally volatile media industries in 2003. But if poor market conditions have put the brakes on merger and acquisition fever, some well-known Canadian media companies will face critical strategic challenges in the coming year. Here's one prediction: The long-simmering rivalry between Toronto-based CHUM Ltd. and Calgary-based Craig Broadcast Systems Inc.

will heat up and reach a boiling point in 2003. It's no secret Moses Znaimer and his colleagues are incensed by Craig's hostile incursions onto CHUM's broadcasting turf. When Craig launched MTV Canada and MTV2, the U.S.-branded niche networks were a direct assault on CHUM's music video channels, especially Much-Music. Now Drew Craig, chief executive of the Western-based broadcaster founded by his grandfather, is preparing a full-scale invasion of CHUM's local television fortress. This fall, Craig will launch a new television station, Toronto One, which threatens to siphon revenue from CHUM's popular Citytv station in the country's most lucrative market.

Undaunted, CHUM which has been slowly building a national network of Citytv-style stations has launched a counter-offensive. CHUM recently applied to Ottawa regulators to launch new TV stations on Craig's home turf in Alberta. The Canadian Radio-television and Telecommunications Commission won't likely find any compelling reasons why CHUM shouldn't be allowed to extend its operations into Alberta to compete with Craig's A Channel. If Craig can enter the Toronto market, why shouldn't CHUM be allowed to enter the Alberta market? CHUM also lodged a complaint to the CRTC claiming Craig's Canadianized versions of MTV violate regulations and, what's more, accord unlawful ownership rights to MTVs corporate parent, U.S.-based media giant Viacom Inc. Against this backdrop of regulatory skirmishes, a full-scale territorial war is about to break out between CHUM and Craig.

There can be little doubt CHUM, with its powerful mix of television and radio assets, is more battle-ready than Craig. Two years ago, CHUM whose market capitalization today stands at $500-million made a $185-million takeover offer for Move to respond more quickly to changes in demand By James Mackintosh LONDON General Motors the world's biggest carmaker, has saved a year from its new manufacturing system after converting more than one-half its North American factories. Gary Cowger, president of GM North America, said the savings would continue as new model lines were launched because "flexible" design meant factories had to close for less time to change from one model to another. The cost reductions follow the shift to "flexible" manufacturing, six weeks. "We have seen huge savings over the past four to five years on implementation of our GMS and our flexibility by having shorter turnovers at model change," he said.

"We have been saving a year over the last several years by being able to improve throughput." On top of that, an extra can be saved from the cost of introducing a new model as GM equips body shops with "C-Flex" flexible robots, although so far only three plants have the system. The level of savings is far higher than that planned at Ford Motor GM's rival, which is hoping to save to over the next decade from its belated move to flexible production. Ford said the cost of changing from one model to another would fall by one-half, as most machinery could be re-used. Its flexible systems will also cost 10 to 15 less than tooling previously cost it because of economies of scale generated by using the same designs for every factory. Chrysler, the U.S.

arm of German-American carmaker Daim-lerChrysler AG, has also cut the cost of introducing new models by using machinery suppliers to its Mercedes-Benz sister brand and by using equipment for longer. Dieter Zetsche, chief executive, said this month that the cost of the new generation of tooling and of metal stamping dies was 40 lower as a result. Flexible manufacturing allows carmakers to respond quickly to changes in demand. Less flexible plants often sit idle when demand for their product slackens as it would cost too much to retool for another vehicle. Financial Times MODEL CHANGEOVER TIME HAS BEEN CUT FROM SIX WEEKS TO THREE DAYS Vivendi taps into Chinese thirst for theme parks where one production line can produce multiple models with only minor changes.

In the past most of the tooling had to be replaced to change models. Mr. Cowger, who has overseen conversion of 17 of the company's 29 North American plants to flexible production using GM's new Global Manufacturing System, said a model changeover in a plant now took three days, down from even come close to the same category." According to Chinese industry estimates, nearly half of the parks built since 1989 generally based on kitsch re-creations of ancient Chinese dynasties or overseas landmarks have closed. The competitor that Universal does pay attention to, Walt Disney has temporarily suspended plans for a mainland theme park after losing the race to be first into Shanghai. Although the finer financial details of the Universal park have yet to be agreed on, it will replicate the successful formula rolled out first in Los Angeles and more recently in Osaka.

Universal will invest about for a third of the equity in the joint-venture company with its two partners, Shanghai Jinjiang, China's largest hotel chain, and the company that runs the Waigaiqiao free trade zone. Debt financing will make up the remainder of the funds for the park. The final cost will not be known until the park design is completed but it is likely to be about The Universal park's prime position, in Shanghai's Pudong district near the 2010 Expo, its powerful local backing, and Universal's management skills and branded products make it a formidable competitor. There is also no doubt that Shanghai is rich enough to support the venture. The city and its population of 16 million sit at the centre of the Yangtze delta region of about 80 million people, with a per capita income of about to and growing fast Financial Times Pfizer wins belated FDA approval for anti-migraine drug Relpax INTENDED 1999 LAUNCH By Richard McGregor SHANGHAI When the Frobel Land theme park near Shanghai closed in 1998, just a year after opening, staff angry about not being paid grabbed what valuables they could to make up for lost salaries.

So too did local farmers, who had been evicted to clear land for its building. The ignominious closure of the Frobel development due to disappointing attendance was one of scores of failures in the theme park sector in China in the past five years after a building boom starting in the late 1980s. Now, with the recent announcement that Universal Parks Resorts, a unit of France's Vivendi Universal S.A., will build a park in Shanghai, the sector is set for another spurt of growth. But, most likely, it will be a spurt dominated by Universal itself, to the exclusion of many budding Chinese operators who attempted to enter the market over the past decade. "We pay very little attention to those other parks from a competitive standpoint," said one executive Involved in the Universal deal.

"They are not products that i I Biosciences for indiplon, an insomnia therapy. The progress of Relpax had been stalled after the U.S. Food and Drug Administration ordered further clinical trials because of concerns about possible heart-related side effects. Pfizer had originally intended to launch Relpax in 1999. However, analysts said the new drug would only have limited commercial potential amid a glut of similar antimigraine medicines called trip-tans already on the market.

AstraZeneca, GlaxoSmithKline and Merck have already introduced comparable products. "Had it been approved on a more timely basis, it would have been more significant for Pfizer," said ANDREW SERBAN BLOOMBERG NEWS Pfizer led by CEO Henry McKinnell, introduces its latest drug to a crowded market of similar migraine treatments. By Ei.i.f.n Kki.i.f.her NEW YORK After a near four-year hold-up, Pfizer the world's largest drug company, has won regulatory approval in the U.S. for Relpax, its latest treatment for migraines. The approval, granted last Friday, adds to Pfizer's market-leading franchise in central nervous system therapies, where its products include Zoloft, the anti-depressant, and Neurontin, which is used to treat epilepsy.

The company also recently announced a deal with Neurocrine works on blood vessels in the brain and sensory nerve endings to stave off the symptoms of severe headaches. The drug has already been introduced in 17 countries, including Mexico, Japan and Italy. Financial Times Rita Freedman at PNC Advisors. "There are a number of other drugs already available." Industry watchers once predicted that peak sales of Relpax could reach to a year. Developed by Pfizer, Relpax.