The San Bernardino County Sun from San Bernardino, California on November 16, 1990 · Page 34
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The San Bernardino County Sun from San Bernardino, California · Page 34

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San Bernardino, California
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Friday, November 16, 1990
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Page 34
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Mmiiimni r w.iiwwwwiw,u9)''im ' imii i i B12 oiney The Sun FRIDAY, November 16, 1990 JBumesM 14.60 3.38 0.63 2.41 DOW S&P500 NYSE NASDAQ 2545.05 317.02 174.05 354.46 MARKETS Dow suffers moderate setback, drops 14.60 NEW YORK The stock market suffered a moderate setback Thursday, giving up some of the gains recorded in its first rally since mid-October. The Dow Jones average of 30 industrials, which had built up a net gain of 71.04 points in the week's first three sessions, dropped 14.60 to 2,545.05. Declining issues outnumbered advances by about 3 to 2 in nationwide trading of New York Stock Exchange-listed stocks, with 591 up, 918 down and 470 unchanged. Volume on the floor of the Big Board came to 151.37 million shares, against 179.31 million in the previous session. Nationwide, consolidated volume in NYSE-listed issues totaled 182.17 million shares. PUBLISHING Bay Area papers threaten strike SAN FRANCISCO About 4,500 workers at the three largest San Francisco Bay area daily newspapers threatened to go on strike today for the first time since the 1960s unless their pay increase demands are met. Negotiators for the San Francisco Chronicle, San Francisco Examiner, San Jose Mercury News and unions met Thursday with a federal mediator to discuss a union demand for a 20 percent salary boost. The newspapers, which together have a daily circulation of more than 1 million, completed settlement of non-economic issues during an all-night session. Murdoch assests on selling block After cutting costs by consolidating his Sky Television with British Satellite Broadcasting, Rupert Murdoch said this week that the News Corp., which he controls, wanted to go a step further and sell roughly $1 billion in assets over the next three years. Murdoch said he would sell the assets if bankers agree to defer interest payments on much of the company's bank debt, which now stands at $8.1 billion. He refused to specify what assets would be sold, but one high-level publishing executive at the company's U.S. operations said the word was that none of the American properties would be put on the market. Sunset Magazine names president MENLO PARK. Sunset Publishing Corp. on Thursday named a new president and announced sweeping changes aimed at building circulation and advertising at its flagship publication, 92-year-old Sunset magazine. Ronald Kovas, 48, president and chief executive of Southam Business Information and Communications Group, a publisher of trade magazines based in Toronto, replaces John Henning, 66, who had been president since 1982. Henning, a 40-year Sunset veteran, will become vice chairman of the company, a new position. Sunset, which was purchased by New York-based Time Warner Corp. in March, will accept advertisements for hard liquor for the first time in its history. . COMPANIES Silicon Valley jobs will be cut Evidence of a Silicon Valley recession continued to mount Thursday, as two big high-tech companies announced that they would lay off hundreds.ofworkers. Applied Materials Inc. of Santa Clara, the i ' world's largest supplier of chipmaking equip- ! ment with annual revenues of $500 million, said ;i it would fire between 250 and 300 employees 7 j ' percent to 9 percent of its workforce. Applied also imposed a 10 percent pay cut on its executives and a company-wide salary freeze. Rockwell seeks trainer contract i Rockwell International Corp. will team with , a German aerospace firm to compete for a multi- billion dollar contract to build 800 Air Force and Navy training planes, company officials I said. S' Rockwell and Messerschmitl-Boelkow-'f Blohm, are modifying a propeller-driven Mes- l serschmitt plane now known as the "Fan Train- i " er," officials said Thursday. i r The two companies will outfit the plane with ' j; a jet engine and rename it the "Fan Ranger." .,, The plane is designed to serve as the two i , service branches' primary training aircraft for student pilots, said a Rockwell spokesman. United will back Pan Am tickets ' As part of an agreement reached late ' Wednesday night, United Air Lines will guarantee $100 million worth of Pan Am Corp. tick-.. etsifPan Am stops flying. ' " The move is expected to reassure jittery pas- sengers and travel agents who might otherwise v shy away from the ailing carrier. ''' In addition, the two airlines will share frequent-flier programs and coordinate timetables ii to feed each other's flights at six cities: New York, Miami, San Francisco, Los Angeles, Chi-' cago and Denver. s A shared frequent-flier program is consider ered the most important part of the agreement : for Pan Am. C From Sun News Services Bush admits U.S. may face recession President is optimistic despite depressing predictions By DAVID E. ROSENBAUM The New York Times WASHINGTON President Bush conceded for the first time Thursday night that the country might face a recession, but he said his economic advisers did not believe a long and severe one was in the offing. In an interview broadcast on the Cable News Network, Bush said, "Most seem to feel that if we have a recession, it will not be deep and that we'll come out of it relatively soon, six months at most, and I'd like to think that is true." Most economists are saying the economy, if not in a recession now, is on the verge of one. Bush seemed determined to present an optimistic view. "I'd like to be a little reassuring on this economy," he said. "I am concerned about the slowdown. I worry about anybody that wants a job and doesn't have one. But I am not a gloom and doom person on where the American economy will be before long. And yet I don't want to mislead you, because I am concerned that we're in a downturn here." If Bush and his advisers have made any important decisions on economic policy, they are not letting on, either in meetings or in interviews. The weakness of the economy is now a clear political debit for Bush and is one factor that led to his recent decline in popularity. His political advisers say that if he is seen as holding a firm grip on economic policy and if the economy regains strength next year, he will be well positioned for his re-election race in 1992. The CNN interview came after Bush heard a gloomy assessment of the economy Thursday morning from a group of business executives. It was See BUSHB9 President 'But I am Bush not a gloom and doom pers n' U.S. blames Drexel for thrift crisis 'Junk bond' use termed cause of 48 S&L failures By STEPHEN LABATON The New York Times NEW YORK The government asserted Thursday that a principal culprit in the savings and loan debacle that is costing taxpayers billions of dollars was Drexel Burnham Lambert Inc. and the "junk bond" market it developed. In arguing this case in Federal Bankruptcy Court in Manhattan, the government entered a new legal frontier in its attempt to recover some of the billions of dollars lost at failed savings institutions. For the first time, it disclosed in considerable detail what it had already found out about the investment firm's role in the collapse of 48 savings institutions and one that is struggling to survive, Columbia Savings and Loan Association of Beverly Hills. Drexel accomplished its dominance of the junk bond market, the government contends, by bribing savings executives, raising more money than necessary from one savings institution to enable it to invest in more Drexel junk bonds, and manipulating the prices of bonds, often by trading them between institutions. Among institutions cited with which Drexel arranged deals were Centrust Savings of Miami, .Gibraltar Savings of Beverly Hills, and Lincoln Savings and Loan of Irvine. Drexel and its other creditors assert the government's claims are an attempt to squeeze as much as possible from the remains of Drexel, while shifting the blame away from regulators who failed to act quickly enough throughout the 1980s in the face of economic problems like bad real estate loans. "The government is clearly trying to stir up a lot of dust, but if it hadn't fallen asleep at the switch in the first place, then the S&L's wouldn't be in the position that they are now," said Harrison J. Goldin, the former comptroller of New York City who is representing a committee of Drexel's unsecured creditors. "These claims have little merit." Alan Miller, Drexel's main lawyer, said, "What they are trying to See DREXELB9 Ranked here In order of the size of losses are the top ten of 41 savings and loans the government regulators allege were defrauded by Drexel Burnham Lambert Inc. The claims were filed by the Federal Deposit Insurance Corp. ' and the Resolution Trust Corp. in U.S. Bankruptcy Court late Wednesday and released publicly Thursday. The agencies noted that the data on some of the thrifts may be incohnplete because of difficulty obtaining complete records. Losses in Total current millions junk bond Thrift name City ol dollars holdings at cost Imperial Savings Association San Diego $56.20 mil. $426.80 mil. Gibraltar Savings Association Houston 44.60 327.51 Gibraltar Savings Beverly Hills and 44.50 18.70 Simi Valley, Calif. Lincoln Savings and Irvine, Calif. 32.06 300.63 Loan Association CenTrust Savings Bank Miami 27.96 838.10 Home Owners Federal Savings Boston 16.64 13.69 and Loan Association Beverly Hills Savings and Laguna Hills, 15.84 22.86 Loan Association Calif. Columbia Savings Englewood, Colo. 13.30 5.00 Sunbelt Savings Dallas 12.22 0 Association of Texas City Federal Savings Bank Bedmlnster, N.J. 9.15 296.10 Columbia files $4.5 billion loss claim against Drexel AP The New YorkTimes LOS ANGELES Columbia Savings and Loan Association said Thursday it had filed a $4.5 billion claim against Drexel Burnham Lambert Group Inc., contending Drexel was responsible for the huge losses suffered by Columbia on its portfolio of "junk bonds." Columbia said it had filed the claim Wednesday with the Federal Bankruptcy Court in New York, which is overseeing the liquidation of Drexel. Columbia executives say they believe theirs is the only such claim filed against Drexel by a savings and loan association. Columbia, which is based in Beverly Hills, was one of Drexel's larg est junk bond customers. It had more than $4.5 billion in high-risk high-yield securities, but the value of the bonds has plunged during the past year-and-a-half to less than $3 billion. Columbia said its $4.5 billion claim was based on federal statutes that permit it to seek damages three times its actual loss of $1.5 billion. Columbia said it is continuing to consider making claims against Michael R. Milken, who headed Drexel's junk bond operations and was a close associate of Columbia's former chairman, Thomas Spiegel, who resigned last year. A new management team, headed by Edward G. Harshfield, has so far been unsuccessful at trying to sell the junk bond portfolio. Jury awards $45 million for firings Lockheed loses whistleblower suit The New York Times LOS ANGELES In one of the largest punitive damage award cases of its kind, a jury Thursday awarded $45 million to three former Lockheed employees who claimed they were wrongfully dismissed after raising questions about the safety of cargo jets the company makes for the Air Force. Lawyers who represent workers said the decision sends a far-reaching message: Companies must allow employees to raise questions about unethical practices and product safety without fear of losing their jobs. "This will act as a strong incentive for individuals to continue coming forward," said Janet Goldstein, a Los Angeles lawyer who represents defense workers, but was not involved in this case. Attorneys representing Lockheed Corp. denied the three workers had been wrongfully dismissed and said they would appeal. Joseph G. Twomey, Lockheed's vice president and general counsel, said in a statement the punitive damage award was "grossly disproportionate to the actual damages found by the jury" and "unsupportable factually and legally." After deliberating for six days, a Superior Court jury awarded the three employees $15 million each in punitive damages and less than $400,000 in compensatory damages split among them. The punitive damage amount was so large because juries are allowed to set punitive damages based on a company's size. Lockheed has almost $10 billion in sales. The three former Lockheed employees are Tom Benecke, 48, and Terrence Schielke, 40, both internal auditors, and Clyde W. Jones Jr., 62. a quality control worker. Their case dates to 1985, when Benecke and Schielke began raising questions about the safety of the mainframe of four cargo jets built in 1983. Lockheed built 50 of the jets between 1983 and 1989 at a cost of $6.6 billion. The trial was not intended to rule See AWARDB9 Business inventories up; production cuts possible By JOHN D. McCLAIN Associated Press WASHINGTON Business inventories grew 0.5 percent in September, the government said Thursday, leading some analysts to express concern the buildup could lead to further production cuts and loss of jobs. Economist Evelina Tainer of the First National Bank of Chicago noted that industrial production in October already dropped 0.8 percent, its sharpest cutback in nine months. "It's consistent with the idea that the economy is sliding into a recession and growth will be negative in the fourth quarter," she said. Analysts said the inventory level itself had not reached a dangerous level although continued vigilance was needed to prevent an even deeper reduction in output. The Commerce Department said inventories held on shelves and back-lots in September totaled a seasonally adjusted $81 1.5 billion, up from $807.5 billion the previous month. But the accumulation slowed from a 0.7 percent gain in both July and August, the largest increases since an 0.8 percent advance in July 1989. Business sales dipped 0.5 percent to a seasonally adjusted $548.7 billion. down from $551.5 billion a month earlier. It was the first decline in sales since a 0.4 percent drop in July and the largest since a 1.0 percent decrease last April. August sales had jumped 2.1 percent. The ratio of inventories to sales edged up to 1.48 from a 1.46 level in August. The ratio means it would take 1.48 months to exhaust the backlog of goods at the September sales pace. Still, the ratio was down from its recent peak of 1.54 in July 1989 and economist Michael P. Niemira of Mitsubishi Bank in New York said businesses are now able to react more rapidly to economic developments and avoid serious buildups. The ratio reached a high of 1.74 in January 1982 during the last recession. "I think you'll see inventories coming down, but coming down coincident with a slowdown in sales," Niemira said. In recent months, sales gains were fueled by high gasoline prices, rather than volume. When the gasoline component was excluded, retail sales actually fell 0.1 percent last month while rising just 0.9 percent in September. All categories posted inventory gains manufacturers, up 0.6 percent, and wholesalers and retailers, up 0.4 percent each. Judge's ruling calms Eastern ticketholders By AGIS SALPUKAS The New York Times Eastern Airlines appeared Thursday to be weathering any damage done to its advance bookings by a request by its unsecured creditors that the carrier be shut down and liquidated. Travel agents reported bookings were holding up now that a federal bankruptcy judge has given the airline more time and money to make its recovery program work. Nevertheless, Martin R. Shu-grue Jr., the trustee appointed by the court to run Eastern, lashed out at the unsecured creditors at a news conference in New York. "Their actions in public and in the media are nothing short of reckless and shameful," he said. "They have set back our recovery efforts." Late on Wednesday, Judge Burton R. Lifland, the chief judge or the U.S. Bankrupty Court of the Southern District of New York, gave Eastern $15 million and more time for its management to show the carrier was on the road to recovery. But he approved only half the amount Shugrue sought. Shugrue had told the court Eastern was attracting more business travelers and had a chance to break even by March. He also contended a liquidation of the Miami-based airline would damage the value of some assets. While the judge ruled in favor of Shugrue, he said further disbursements from the escrow fund, which now stands at $257 million, would depend upon how close Eastern came to meeting its revenue goals. One of the primary uncertainties about Eastern's immediate fate, Shugrue said, was whether the call for a shutdown and liquidation had hurt bookings, which had been good until the current struggle with the creditors. Spot checks Thursday of five leading travel agencies that have branch offices thoughout the East Coast showed that although some travelers had expressed concern about Eastern, they hod not canceled their flights. Michael Hadlow, the executive vice president of United States Travel Systems, a large national travel agency, said he had talked to offices throughout the East Coast. "We have not seen a downturn in Eastern's bookings," he said. f r r- r .- i- . .' r- r t i !

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