Battle-tested Japanese industrial managers here always buck up nervous newcomers with the tale of the first of their countrymen to visit Mexico, a boatload of samurai warriors blown ashore 375 years ago.

"From the beginning, it took a man with extraordinary qualities to succeed in Mexico," says Kimihide Takimura, president of Mitsui group's Kensetsu Engineering Inc. unit.

Here in this new center for Japanese assembly plants just across the border from San Diego, turnover is dizzying, infrastructure shoddy, bureaucracy intense. Even after-hours drag; "karaoke" bars, where Japanese revelers sing over recorded music, are prohibited by Mexico's powerful musicians union.

Still, 20 Japanese companies, including giants such as Sanyo Industries Corp., Matsushita Electronics Components Corp. and Sony Corp. have set up shop in the state of Northern Baja California. Keeping the Japanese happy will be one of the most important tasks facing conservative leader Ernesto Ruffo when he takes office Nov. 1, as the first opposition governor in Mexico's modern history.

Mexico, with its desperate need for investment, and Japan, with its huge budget surplus, would seem like a perfect match. But the two countries remain separated by a cultural barrier wider than the ocean. Conservative Japanese investors are put off by what they consider Mexico's restrictive investment regulations and loose work habits. From the Mexicans' viewpoint, vaunted tactics of methodical Japanese managers don't count for much in a land where a saying says "there are no fixed rules."

Japan ranks as only the fourth largest foreign investor in Mexico, with 5% of the total investments. That is just 1% of all the money Japan has invested abroad.

Mexican President Carlos Salinas de Gortari would like to change that. The young president so admires Japanese discipline that he sends his children to a Japanese school in Mexico City. He already has finagled a $2 billion loan from the Japanese government.

But Mexico urgently needs more help. Mr. Salinas's unpopular Institutional Revolutionary Party, or PRI, faces congressional elections in 1991. For the PRI to stand a chance, Mr. Salinas has to press on with an economic program that so far has succeeded in lowering inflation and providing moderate economic growth. But maintaining the key components of his strategy -- a stable exchange rate and high level of imports -- will consume enormous amounts of foreign exchange. Mr. Salinas needs big investment inflows -- quickly.

The problem is that Japanese businesses make decisions with a view well beyond the coming months that weigh so heavily on Mr. Salinas. "The Japanese will come to Mexico, but not immediately," says Kazushige Suzuki, director-general of the Japanese External Trade Organization in Mexico. If not now, when? "When the fruit is ripe, it falls from the tree by itself," he says. Pressed on the matter, he is more specific. "There will be big Japanese investments probably five to 10 years from now."

Ryukichi Imai, Japan's ambassador to Mexico, agrees that Mexico may be too eager. "There seems to be a presumption in some sectors of (Mexico's) government that there is a lot of Japanese money waiting behind the gate, and that by slightly opening the gate, that money will enter Mexico. I don't think that is the case."

Mexican officials maintain the Japanese reserve is only a result of unfamiliarity. "Because of distance, it takes a while for them to appreciate the economic stability we've achieved," says one economic policymaker. Mexico is sending a number of missions to Japan looking for a major breakthrough investment in telecommunications, petrochemicals or tourism. It is hoped that other Japanese would then follow the leader.

But Japanese investors say that their reluctance to invest stems not only from concerns about Mexico's economic outlook, but also reservations about Mexico's recently revamped investment law. Unable to get a new law through a congress with a strong leftist bloc, Mexico jury-rigged the existing law's regulations. It created special 20-year trusts to allow foreigners 100% ownership in some once-closed industries. It also made artful use of semantics, redefining as non-strategic industries some that had been in the national domain.

"Those devices don't give sufficient certainty to our bosses in Japan," says Yasuo Nakamura, representative of the Industrial Bank of Japan. Mr. Nakamura cites the case of a customer who wants to build a giant tourism complex in Baja and has been trying for eight years to get around Mexican restrictions on foreign ownership of beachfront property. He could develop the beach through a trust, but instead is trying have his grandson become a naturalized Mexican so his family gains direct control.

Some say the best hope for the Mexicans is catching the eye of Japan by promoting the one industry the Japanese clearly like -- the border assembly plants, known as "maquiladoras," which are open to 100% foreign control.

"We must do more to help the Japanese here in Baja if we want them to invest elsewhere," says Mr. Ruffo, the governor-elect of the National Action Party and himself a succesful businessman. Plant operators are heartened by Mr. Ruffo's pledge to cut corruption associated with the ruling party officials. But Mr. Ruffo frets that an even bigger problem could be protectionism from the U.S., where some politicians oppose what they consider Japanese efforts to use maquiladoras to crack the U.S. market through the back door.

Shaken by tumbling stock prices and pessimistic projections of U.S. economic growth, currency analysts around the world have toned down their assessments of the dollar's near-term performance.

Most of the 10 analysts polled last week by Dow Jones International News Service in Frankfurt, Tokyo, London and New York expect the U.S. dollar to ease only mildly in November. Opinion is mixed over its three-month prospects. Half of those polled see the currency trending lower over the next three months, while the others forecast a modest rebound after the New Year.

In late afternoon New York trading yesterday, the dollar stood at 1.8415 West German marks, up from 1.8340 marks late Monday, and at 142.85 yen, up from 141.90 yen late Monday. A month ago, a similar survey predicted the dollar would be trading at 1.8690 marks and 139.75 yen by the end of October. Sterling was trading at $1.5805, down from $1.5820 late Monday.

In Tokyo Wednesday, the U.S. currency was trading at about 142.95 yen at midmorning, up from 142.80 yen at the opening and up from Tuesday's Tokyo close of 142.15 yen.

The average of estimates of the 10 economists polled puts the dollar around 1.8200 marks at the end of November and at 141.33 yen.

By late January, the consensus calls for the dollar to be trading around 1.8200 marks and near 142 yen. Those with a bullish view see the dollar trading up near 1.9000 marks and 145 yen, while the dollar bears see the U.S. currency trading around 1.7600 marks and 138 yen.

A number of those polled predict the dollar will slip as the Federal Reserve eases interest rates.

David Owen, an economist at Kleinwort Benson & Co. in London, said he expects further cuts in short-term U.S. rates in an effort to encourage a narrowing of the trade gap and to ensure a soft landing in the U.S. economy.

Robert White, a vice president and manager of corporate trade at First Interstate of California, agreed with that view and predicted the U.S. federal funds rate will drop to between 7 3/4% and 8% within 60 days from its current level at 8 13/16%. Fed funds is the rate banks charge each other on overnight loans; the Fed influences the rate by adding or draining reserves from the banking system.

Mr. White also predicted a half-point cut in the U.S. discount rate in the near future. The discount rate, currently 7%, is the rate the Fed charges member banks for loans, using government securities as collateral.

He expects such a cut "because of problems in several sectors of the economy, particularly real estate and automobiles."

Bolstering his argument, the Commerce Department reported yesterday that new home sales for September were down 14% from August's revised 3.1% fall. The drop marked the largest monthly tumble since a 19% slide in January 1982.

In last month's survey, a number of currency analysts predicted the dollar would be pressured by a narrowing of interest rate differentials between the U.S. and West Germany.

Indeed, in early October the West German central bank raised its discount and Lombard rates by a full percentage point. Several other European central banks, notably in Britain, followed the West German Bundesbank's lead by raising their own key rates. And a week later, Japan raised its official discount rate by a half point to 3.75%. The Japanese discount rate is the central bank's base rate on loans to commercial banks.

After a surprisingly sharp widening in the U.S. August merchandise trade deficit -- $10.77 billion from a revised $8.24 billion in July and well above expectations -- and a startling 190-point drop in stock prices on Oct. 13, the Federal Reserve relaxed short-term interest rates, knocking fed funds from around 9% to 8 3/4%.

But predictions that central banks of the Group of Seven (G-7) major industrial nations would continue their massive dollar sales went astray, as the market drove the dollar downward on its own, reacting to Wall Street's plunge and subsequent price volatility, lower U.S. interest rates and signs of a slowing U.S. economy. G-7 consists of the U.S., Japan, Britain, West Germany, Canada, France and Italy.

Tomoshige Kakita, senior deputy manager in the treasury department of Mitsui Bank Ltd. in Tokyo, suggested that uncertainty about U.S. stocks and bonds has made Japanese investors leery of holding those securities in the near term, thus damping dollar demand.

But, Mr. Kakita added, once U.S. equities regain some stability, players will move back into dollar-denominated investments, especially Treasury bonds, whose value rises when interest rates decline.

Mr. Kakita said the key dollar-yen exchange rate is at 135 yen. "If 135 is broken, some panic will be seen," he predicted, explaining that Japanese institutions are comfortable with the dollar anywhere between current levels and 135 yen.

Jens-Uwe Fischer, a senior trader at Manufacturers Hanover Trust Co. in Frankfurt, said he expects the dollar to recover within the next three months to around 1.88 marks as U.S. economic data, particularly U.S. trade figures, level off. He contended that the Fed won't ease rates further, but predicted Bundesbank officials will relax key rates in West Germany.

Alfred Zapfel, chief trader at Bank of Boston in Frankfurt, took an opposite stance. He said he expects U.S. interest rates to decline, dragging the dollar down to around 1.80 marks by the end of January after a short-lived dash to 1.87 marks by the end of November. West German interest rates, he said, will remain unchanged.

"But I'm not one of these great dollar bears you see more of these days," Mr. Zapfel said. "I can't really see it dropping far below 1.80 marks."

Scott Greene, chief foreign exchange dealer with Julius Baer & Co. in New York, fits the description of a "great dollar bear." He predicted the U.S. unit will skid below 1.80 marks to around 1.78 marks this month and 1.75 marks by the beginning of the new year.

"We're finally seeing the culmination of all the recessionary buildup of the last few months," he said, noting a continuing downward trend in U.S. interest rates, a shaky stock market and "gloomier economic times ahead" all signal a significantly lower dollar.

In the wake of British Chancellor of the Exchequer Nigel Lawson's surprise resignation and sterling's subsequent nose-dive, most analysts had little good to say about the pound's near-term prospects.

Mr. Owen of Kleinwort Benson suggested that the new chancellor, John Major, will take a tough line in his autumn statement later this month, helping to underpin the pound. But, he warned, the currency will remain at risk.

On the Commodity Exchange in New York, gold for current delivery dropped $3.10 to $374.70 an ounce in moderate trading. Estimated volume was 3.5 million ounces.

In early trading in Hong Kong Wednesday, gold was quoted at $373.80 an ounce.

Christopher Hill in Tokyo, Nicholas Hastings in London, Erik Kirschbaum in Frankfurt and Caitlin Randall and Douglas Appell in New York contributed to this article.

West Germany will repeal the unpopular turnover tax on securities transactions as of Jan. 1, 1991, Economics Minister Helmut Haussmann said.

He said the government will also repeal the 1% transaction tax on the first-time purchase of stakes in companies.

The announcement follows several comments by government officials that the government will speed up the repeal of the tax, which was originally scheduled to fall with the start of the single internal market in the European Community at the end of 1992.

The securities-turnover tax has been long criticized by the West German financial community because it tends to drive securities trading and other banking activities out of Frankfurt into rival financial centers, especially London, where trading transactions isn't taxed.

The tax has raised less than one billion marks ($545.3 million) annually in recent years, but the government has been reluctant to abolish the levy for budgetary concerns. In the interview, Mr. Haussmann didn't specify the amount of revenue the government will lose after the tax disappears.

The new date means that the tax will be officially repealed before the end of the current parliamentary term at the end of 1990 and guarantees its abolition even if the current center-right coalition loses the elections in December 1990.

Earlier this year, President Bush made a final "take-it-or-leave it" offer on the minimum wage: an increase to $4.25 an hour over three years, and only if accompanied by a lower wage for the first six months of a job. Now, the White House has decided to accept the higher wage over only two years. The sub-minimum wage would apply only to first-time teen-age workers for 90 days. The White House had enough votes to sustain a veto but chose to avoid a confrontation. The only permanent losers will be the 200,000 or so workers everyone agrees will be priced out of a job at the $4.25 rate Congress is likely to approve today. It is compromises such as this that convince Washington's liberals that if they simply stay the course, this administration will stray from its own course on this and other issues.

The head trader of Chemical Banking Corp. 's interest-rate options group has left the company, following valuation errors that resulted in a $33 million charge against its third-quarter results.

Chemical said Steven Edelson resigned recently, but one individual close to the situation said the resignation was forced. Mr. Edelson couldn't be reached for comment.

A separate inquiry by Chemical cleared Mr. Edelson of allegations that he had been lavishly entertained by a New York money broker. That inquiry hasn't resolved similar allegations involving another Chemical options trader.

In other personnel changes stemming from problems in its options unit:

-- Chemical named James Kennedy, a trader in swaps contracts for the bank, to assume Mr. Edelson's duties and to be trading manager for derivative products, including swaps and interest-rate options.

-- Lee Wakeman, vice president in charge of options research who discovered the valuation errors and was asked by senior management to straighten out the mess, resigned to take a position in asset and liability management at Continental Bank in Chicago. Mr. Wakeman, whom Chemical tried to keep, didn't return calls for comment.

Separately, Chemical confirmed that it took an undisclosed charge in the second quarter for losses on forward-rate agreements involving foreign currency written by its branch in Frankfurt, West Germany.

A Chemical spokeswoman said the second-quarter charge was "not material" and that no personnel changes were made as a result. The spokeswoman said the Frankfurt situation was "totally different" from problems in the interest-rate options unit.

According to individuals familiar with the situation, the Frankfurt loss stemmed from a computer program for calculating prices on forward-rate agreements that failed to envision an interest-rate environment where short-term rates were equal to or higher than long-term rates.

While the incidents involving interest-rate options and forward-rate agreements are unrelated, some observers say they echo a 1987 incident in which Bankers Trust New York Corp. restated the value of its foreign exchange options contracts downward by about $80 million.

These complex products require close monitoring because each must be valued separately in light of current market conditions. In an interest-rate options contract, a client pays a fee to a bank for custom-tailored protection against adverse interest-rate swings for a specified period. In a forward-rate agreement, a client agrees to an exchange rate on a future currency transaction.

Some competitors maintain the interestrate option loss, in particular, may have resulted more from Chemical's taking large and often contrarian positions than a valuation problem.

Started three years ago, Chemical's interest-rate options group was a leading force in the field. From 1987 to 1988, the value of Chemical's option contracts outstanding mushroomed to $37 billion from $17 billion. More importantly, the volume of options written exceeded those purchased by almost 2-to-1. With such a lopsided book of options, traders say, Chemical was more vulnerable to erroneous valuation assumptions.

The Chemical spokeswoman said the bank has examined its methodologies and internal controls. "We consider our internal controls to have worked well," she said, adding that some procedures have been strengthened. Its valuation methodologies, she said, "are recognized as some of the best on the Street. Not a lot was needed to be done.

When Thomas W. Wathen went big league last year, he acquired a treasure-trove of Americana along with a well-known but ailing security business: Pinkerton's Inc.

There was a wanted poster offering "Rewards for the Arrest of Express and Train Robbers Frank James and Jesse W. James" and the original Pinkerton's logo with an open eye and the inscription "We Never Sleep," which inspired the phrase "private eye." Then there were two gold watches once owned by Allan Pinkerton, who founded the company in Chicago in 1850. But there were supposed to be three, Mr. Wathen's company claims.

The missing watch is emblematic of the problems Mr. Wathen encountered in building his closely held California Plant Protection Security Service into the largest detective and security agency in the U.S. through acquisitions. The ever-optimistic Mr. Wathen has learned that while acquiring a big brand-name company can be a shortcut to growth, it can also bring a host of unforeseen problems.

"We cleared out a lot of rats' nests," says the 60-year-old security veteran.

Mr. Wathen, who started his career as an Air Force investigator and worked as a security officer for several large companies, built his California Plant Protection from a tiny mom-and-pop security patrol firm here in the San Fernando Valley. He joined the firm in 1963 and bought it from the owners the next year. Over the next 20 years, California Plant Protection opened 125 offices around the country.

Yet although California Plant Protection was netting bigger and bigger clients -- the firm provided security for the 1984 Summer Olympics in Los Angeles -- it still didn't have the name recognition of Pinkerton's. So when American Brands Inc. decided to sell the unit in 1987 as part of a divestiture of its food and security industries operations, Mr. Wathen saw a chance to accomplish several objectives.

He decided he could easily merge Pinkerton's operations with his own while slashing overhead costs because the two already operated in many of the same cities. He could acquire a staff of loyal Pinkerton's employees, many of whom had spent their entire careers with the firm, he could eliminate a competitor and he could get the name recognition he'd wanted.

Mr. Wathen also relished the chance to demonstrate an entrepreneur like himself, who'd spent his whole career in the security business, could run Pinkerton's better than an unfocused conglomerate or investment banker. "The security business is my favorite subject. I love this business," he says. "Most of the LBO guys don't know how to run a business anyway."

But there were hitches, not the least of which was that, Mr. Wathen says, he proceeded almost blindly in doing the $95 million acquisition, which was completed in January 1988. "We weren't allowed to do any due diligence because of competitive reasons. If we had, it might have scared us off," he says.

Five years of rapid expansion under American Brands, with an emphasis on marketing the agency's services instead of improving them, had hurt Pinkerton's profits, Mr. Wathen claims. He says his team couldn't tell whether accounts receivable had been paid or not. Pinkerton's had locked itself into low-price contracts to win new business, with no hope of profitability until the contracts expired, he adds. And regional offices were "egregiously overstaffed," he claims. One office had 19 people doing the work of three, "and half of the employees had company automobiles."

American Brands declined to comment on Mr. Wathen's accusations.

The acquisition combined the country's second-largest security company, Pinkerton's, with 1987 sales of $410 million, and the fourth largest, California Plant Protection, with $250 million in sales, creating the industry's biggest firm, which took on the Pinkerton's name. Even after divesting itself of $120 million of unprofitable business, the new Pinkerton's will have sales of about $610 million this year and operating profit roughly double the industry average of 2%-3% of sales, says Lloyd Greif of Sutro & Co. in Los Angeles, which arranged the Pinkerton's acquisition.

Mr. Wathen says his turnaround strategy has been simple: just hack away at the fat. He began by closing 120 of the combined companies' 260 offices in two months, eliminating about 31% of the company's 2,500-person adminstrative staff, including more than 100 sales positions. He shut down the company's tony New York headquarters. Pinkerton's world headquarters today is a nondescript, two-story office building across the street from the small Van Nuys Airport.

Next, Mr. Wathen raised Pinkerton's rates, which were 75-cents-an-hour lower than California Plant Protection's average rate of around $8.63. And he got rid of low-margin businesses that just weren't making money for the company.

Mr. Wathen, who says Pinkerton's had a loss of nearly $8 million in 1987 under American Brands, boasts that he's made Pinkerton's profitable again. But Mr. Wathen's team still must pay down about $82 million of long-term bank debt from the acquisition within the next four years. Last year, earnings of the combined companies didn't cover debt service and Pinkerton's was forced to borrow $20 million of subordinated debt. "We wouldn't have had to refinance if a lot of the problems hadn't been there," Mr. Wathen says. This year, Mr. Wathen says the firm will be able to service debt and still turn a modest profit.

Now Pinkerton's could become entangled in a protracted legal fracas with its former parent. The company recently filed suit in state court in Los Angeles against American Brands, seeking at least $40 million in damages from the Old Greenwich, Conn.-based company.

The suit alleges that American Brands misrepresented the financial condition of Pinkerton's before the sale, failed to disclose pending lawsuits and material contracts in which Pinkerton's was in default, hadn't registered the Pinkerton's name and trademark in the United Kingdom and didn't tell California Plant Protection about some labor controversies.

"We have previously had discussions with representatives of Pinkerton's Inc. concerning the {sale of the company} and we concluded that we did not have liability under the contract," says American Brands. "As this is now a litigation matter, we have no further comment."

And then there's the case of the missing gold watch.

The lawsuit alleges that an inventory of Pinkerton's memorabilia disclosed that one of the watches hadn't been forked over by American Brands. "American Brand's failure to surrender the gold watch has damaged new Pinkerton's in an amount as yet {to be} determined and deprived it of a valuable artifact for which it had bargained," the suit charges.

The key to Pinkerton's future will be sticking to what it does best -- being a security company, says Mr. Wathen. The company is also renewing its emphasis on investigations, particularly undercover investigations for corporations. Although investigations now account for only about 5% of Pinkerton's total revenue, that side of the business has traditionally been the more "glamorous" of the two and it carries historical and sentimental value. (Author Dashiell Hammett, who wrote "The Maltese Falcon," was a former Pinkerton's detective.)

American Brands "just had a different approach," Mr. Wathen says. "Their approach didn't work; mine is.

Farm prices in October edged up 0.7% from September as raw milk prices continued their rise, the Agriculture Department said.

Milk sold to the nation's dairy plants and dealers averaged $14.50 for each hundred pounds, up 50 cents from September and up $1.50 from October 1988, the department said.

Commercial vegetables, led by lettuce and tomatoes, rose 19% in October; oranges and other fruits rose 5%.

Broiler prices fell 6.5 cents in October to 30.6 cents a pound, while turkey prices rose 1.2 cents a pound to 38.5 cents. Egg prices averaged 64.2 cents a dozen, down 0.2 cent from September.

Hogs rose $3.40 to $46.80 a hundredweight in October, while beef cattle slipped 80 cents to $67.40 for each hundred pounds and calves dropped 90 cents to $90.20.

Soybeans averaged $5.28 a bushel, down 42 cents from September; corn averaged $2.20, down seven cents, and sorghum grain averaged $3.61 for each hundred pounds, down 19 cents, according to the department.

Paramount Communications Inc., New York, completed the sale of its Associates Corp. consumer and commercial finance subsidiary to a unit of Ford Motor Co. for $3.35 billion.

Paramount, which agreed to sell the unit in July, said it would realize net proceeds from the sale of $2.6 billion, with an after-tax gain of $1.2 billion. Paramount said the gain would be recorded in its fourth quarter, which ended yesterday.

Paramount said the sale "completes the strategic restructuring" it began in 1983, and would enable it to focus on its entertainment and publishing businesses.

Ford said in July it planned to operate Associates, based in Dallas, as a separate entity in its Ford Financial Services Group. Paramount said Associates has about $14 billion in total assets, making it third-largest in terms of assets among independent finance companies in the U.S.

Sea Containers Ltd., in a long-awaited move to repel a hostile takeover bid, said it will sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 apiece.

Together with the 3.6 million shares currently controlled by management, subsidiaries and directors, the completed tender offer would give Sea Containers a controlling stake.

Describing itself as "asset rich," Sea Containers said it will move immediately to sell two ports, various ferries, ferry services, containers, and other investments. Of the proceeds, $500 million will be used to fund its tender offer. Sea Containers added that the recapitalization plan will reduce its debt by more than $500 million.

The company, which has 13.8 million common shares outstanding, said in mid-June that it was considering a restructuring to ward off a hostile takeover attempt by two European shipping concerns. In late May, Stena Holding AG and Tiphook PLC, launched a $50-a-share, or $777 million, tender offer for the Hamilton, Bermuda-based Sea Containers. In mid-August, the companies, through their jointly owned holding company, Temple Holdings Ltd., sweetened the offer to $63 a share, or $963 million.

Officials for Temple declined to comment.

News of the restructuring plan sent Sea Containers' shares up $1 to $62 in New York Stock Exchange composite trading.

Walter Kirchberger, an analyst with PaineWebber Inc., said that offering holders a higher, $70-a-share price is "a fairly effective method of blocking" the Stena-Tiphook bid. Michael Carstens, an analyst with Tucker Anthony & R.L. Day, added that the sale of assets would allow Sea Containers to focus on its core container businesses.

For holders who decide not to tender their shares, Sea Containers will issue one share of preferred stock with a stated value of $25, plus a cash dividend on the common stock. The company said its directors, management and subsidiaries will remain long-term investors and won't tender any of their shares under the offer.

Sea Containers said the offer will proceed after the Bermuda Supreme Court lifts or modifies an interim injunction restraining the company from buying its shares. That injunction resulted from litigation between Temple and Sea Containers last May.

The company said the court has indicated it will make a decision on or about Nov. 27. Sea Containers will soon set a date for its annual shareholder meeting to seek holder approval for the offer.

You'd think all the stories about well-heeled communities and developers getting HUD grants would prompt Congress to tighten up on upscale housing subsidies. No way. Congress has just made it easier for the affluent to qualify for insured loans from the deficit-ridden Federal Housing Administration. It appears that the only thing Congress is learning from the HUD story is how to enlarge its control of the honey pot going to special interests.

Right now, the largest loan the FHA can insure in high-cost housing markets is $101,250. Last week, housing lobbies persuaded Congress to raise the ceiling to $124,875, making FHA loans more accessible to the well-to-do. But it does that at the cost of deepening the taxpayer's exposure if the FHA is forced to pay for more loans going sour. This is no idle fearlast year the FHA lost $4.2 billion in loan defaults.

But the higher mortgage ceiling is only the starter kit for what Senator Alan Cranston and Majority Leader George Mitchell have in mind for housing. The Senate Banking Committee will begin hearings next week on their proposal to expand existing federal housing programs. Other Senators want to lower the down payments required on FHA-insured loans.

That would be a formula for ensuring even more FHA red ink. Experience has shown that the most important element in predicting a housing-loan default is the down payment. Because a purchaser can use an FHA loan to finance all points and closing costs, the FHA can wind up lending more than a house is worth. If housing prices continue to fall, many borrowers would be better off walking away from their homes and leaving taxpayers with the losses. Much the same thing happened with busted S&Ls, a problem Congress just "solved" with a $166 billion bailout.

We hear that HUD Secretary Jack Kemp is toying with going along with some of the Cranston-Mitchell proposals. That sounds like a formula for ensuring that he gets dragged into the next HUD tar pit. A group of 27 Senators has written Mr. Kemp urging him to reject Cranston-Mitchell and focus on programs that empower the poor rather than create vast new government obligations. But even if he agrees, Mr. Kemp doesn't write the nation's housing law -- Congress does. And the majority of Members cynically view the current discrediting of HUD as mainly a chance to shove through their own slate of projects.

Exhibit A is last week's House vote to fund 40 pet projects out of the same discretionary fund that is at the heart of the HUD scandal. None of the grants had been requested by HUD, judged competitively or were the subject of a single hearing.

More and more observers now realize that the key to ending future HUD scandals lies in forcing Congress to clean up its own act. This week, a Baltimore Sun editorial said the Lantos subcommittee on HUD should forget about Sam Pierce's testimony for the moment and call some other witnesses: the various congressional sponsors of the 40 pork-barrel projects. The Sun concluded that Mr. Pierce is only part of the problem -- and a part that's gone. "If HUD is to be reformed," it concluded, Members of Congress will "have to start looking into, and doing something about, the practices of their colleagues."

Of course, self-reform is about the last thing this Congress is interested in. Proponents of expanding FHA programs say they merely want to help home buyers who are frozen out of high-priced markets. But the FHA program is hemorrhaging bad loans. Jack Kemp has submitted a package of reforms, and they are surely headed for the Capitol Hill sausage-grinder. Like the S&L mess before it, this is a problem Congress should be solving, not ignoring.

Gillette Co., Boston, said it is planning to restructure its South African subsidiary. Under the plan, Gillette South Africa will sell manufacturing facilities in Springs, South Africa, and its business in toiletries and plastic bags to Twins Pharmaceuticals Ltd., an affiliate of Anglo American Corp., a South African company.

Terms were not disclosed. A final agreement has not been signed, and the moves will not have a material effect on the company, Gillette said. The company said it is part of a continuing world-wide restructuring in which it has downsized or sold operations in several countries. Gillette said its continued presence in South Africa "enables it to make meaningful contributions to South African society, to the lives of its employees and to the communities in which it operates." Gillette South Africa employs about 250 people. About 60% of the work force will continue with Gillette or transfer to Twins Pharmaceuticals, the company said.

The Soviet legislature approved a 1990 budget yesterday that halves its huge deficit with cuts in defense spending and capital outlays while striving to improve supplies to frustrated consumers. The vote to approve was

A proposal to raise prices of beer, tobacco and luxuries was rejected 338-44.

Soviet President Mikhail S. Gorbachev told the legislators they had made a good start, but that the most difficult work was still ahead.

The Tass news agency said the 1990 budget anticipates income of 429.9 billion rubles (US$693.4 billion) and expenditures of 489.9 billion rubles (US$790.2 billion).

Those figures are almost exactly what the government proposed to legislators in September. If the government can stick with them, it will be able to halve this year's 120 billion ruble (US$193 billion) deficit.

Officials proposed a cut in the defense budget this year to 70.9 billion rubles (US$114.3 billion) from 77.3 billion rubles (US$125 billion) as well as large cuts in outlays for new factories and equipment.

Tass said the final budget and economic plan calls for a sharp increase in the production of consumer goods.

Trial and Terror

At times I sequester my mind When I must think with precision, Detached from all other thoughts While trying to reach a decision.

But often nothing's resolved, To my frustration and fury: With pros and cons in limbo, I feel like a hung jury.

-- Arnold J. Zarett.

Daffynition

Rodeo applause: broncs cheer.

-- Marvin Alisky.

Ocean Drilling & Exploration Co. will sell its contract-drilling business, and took a $50.9 million loss from discontinued operations in the third quarter because of the planned sale.

The New Orleans oil and gas exploration and diving operations company added that it doesn't expect any further adverse financial impact from the restructuring.

In the third quarter, the company, which is 61%-owned by Murphy Oil Corp. of Arkansas, had a net loss of $46.9 million, or 91 cents a share, compared with a restated loss of $9 million, or 18 cents a share, a year ago. The latest period had profit from continuing operations of $4 million. Revenue gained 13% to $77.3 million from $68.5 million.

Ocean Drilling said it will offer 15% to 20% of the contract-drilling business through an initial public offering in the near future. It has long been rumored that Ocean Drilling would sell the unit to concentrate on its core oil and gas business.

Ocean Drilling said it won't hold any shares of the new company after the restructuring.

After 20 years of pushing labor proposals to overhaul the nation's health-care system, Bert Seidman of the AFL-CIO is finding interest from an unlikely quarter: big business.

Corporate leaders, frustrated by double-digit increases in health-care costs, are beginning to sound like liberal Democrats. Failure to check rising medical costs ultimately could "lead some of us who today are free-market advocates to re-examine our thinking and positions with respect to government-sponsored national health insurance," Arthur Puccini, a General Electric Co. vice president, warned earlier this year.

The pocketbook impact of health benefits has driven business and labor to a surprising consensus. Both the AFL-CIO and the National Association of Manufacturers are calling for measures to control rising costs, improve quality and provide care to the 31 million Americans who currently lack health insurance.

Agreement on these points is a long way from a specific program, and nobody expects the U.S. to rush toward radical restructuring of the health-care system. But there are signs that labor-management cooperation could change the politics of health-care legislation and the economics of medicine. "I can't remember a time when virtually everyone can agree on what the problem is," says Mr. Seidman, who heads the AFL-CIO's department dealing with health matters.

Because the Bush administration isn't taking the initiative on health issues, business executives are dealing with congressional Democrats who champion health-care revision. "Business across the country is spending more time addressing this issue," says Sen. Edward Kennedy (D., Mass.). "It's a bottom-line issue." Business complained earlier this year when Sen. Kennedy introduced a bill that would require employers to provide a minimum level of health insurance to workers but doesn't contain cost-control measures. Partly in response, a bipartisan group of senators from the finance and labor committees is drafting a plan to attract broader support. It will feature a cost-containment provision designed to keep expanded benefits from fueling higher care prices.

At 11.1% of gross national product, U.S. health costs already are the highest in the world. By contrast, Japan's equal 6.7% of GNP, a nation's total output of goods and services. Management and labor worry that the gap makes U.S. companies less competitive.

Chrysler Corp. estimates that health costs add $700 to the price of each of its cars, about $300 to $500 more per car than foreign competitors pay for health. "The cost of health care is eroding standards of living and sapping industrial strength," complains Walter Maher, a Chrysler health-and-benefits specialist.

Labor is upset because many companies are using higher employee insurance premiums, deductibles and co-payments to deflect surging medical costs to workers. Health benefits are contentious issues in the strikes against Pittston Co. and Nynex Corp. In their new contract this year, American Telephone & Telegraph Co. and the Communications Workers of America agreed to look for "prompt and lasting national solutions" to rising health-care costs.

Some analysts are cynical about the new corporate interest in health-care overhaul. Carl Schramm, president of the Health Insurance Association of America, scoffs at "capitalists who want to socialize the entire financing system" for health. "They hope they can buy some government cost discipline," but this is a false hope, Mr. Schramm says. He asserts that government has done an even worse job of controlling its health bill than business.

So far neither the Bush administration nor Congress is prepared to lead the way toward revamping health care. The administration lacks a comprehensive health-care policy. Congress still is struggling to dismantle the unpopular Catastrophic Care Act of 1988, which boosted benefits for the elderly and taxed them to pay for the new coverage.

A bipartisan commission established by Congress and headed by Sen. John Rockefeller (D., W.Va.) is scheduled to present new plans for dealing with the uninsured and long-term care for the elderly by next March 1. A quadrennial commission appointed by Health and Human Services Secretary Louis Sullivan is taking a broad look at the economics of Medicare for the elderly, Medicaid for the poor and the health system in general. It is expected to report next summer.

"No magic bullet will be discovered next year, an election year," says Rep. Fortney Stark (D., Calif.) But 1991 could be a window for action. The pressure for change will rise with costs. "I think employers are really going to be the ones to push for major change," says Sharon Canner, a health expert at NAM.

Any major attempt to revamp the health-care system is likely to trigger opposition from politically powerful interest groups, particularly the American Medical Association, and perhaps from the public as well, if Congress takes steps that patients fear will limit the availability of care.

The NAM embraces efforts, which both the administration and the medical profession have begun, to measure the effectiveness of medical treatments and then to draft medical-practice guidelines. Advocates hope that such standards will improve treatment while limiting unnecessary tests and medical procedures. HHS Secretary Sullivan estimates that as much as 25% of the medical procedures performed each year may be inappropriate or unnecessary.

Limiting care won't be easy or popular. "To slow the rise in total spending, it will be necessary to reduce per-capita use of services," the NAM warns in a policy statement. This will "require us to define -- and redefine -- what is `necessary' or `appropriate' care. This involves trade-offs and {it} cuts against the grain of existing consumer and even provider conceptions of what is `necessary. '"

The AFL-CIO also embraces treatment guidelines. In addition, it's toying with an approach that would impose health-expenditure ceilings or budgets on the government as a whole and on individual states as a way to slow health-care spending. At a meeting here on Nov. 15, the labor federation plans to launch a major effort to build grass-roots support for health-care overhaul.

Stelco Inc. said it plans to shut down three Toronto-area plants, moving their fastener operations to a leased facility in Brantford, Ontario.

The company said the fastener business "has been under severe cost pressures for some time." The fasteners, nuts and bolts, are sold to the North American auto market.

A company spokesman declined to estimate the impact of the closures on earnings. He said the new facility will employ 500 of the existing 600 employees. The steelmaker employs about 16,000 people.

Stelco said it has an option to lease a 350,000-square-foot building in Brantford and proposes to spend 24.5 million Canadian dollars (US$20.9 million) on the facility. The three existing plants and their land will be sold.

First Security Corp. said it tentatively agreed to acquire Deseret Bancorp. for stock valued at about $18 million.

Terms call for First Security to issue about 0.55 share of its stock for each Deseret share held, or a total of about 550,000 First Security shares. It has about 12.3 million shares outstanding.

Deseret, with about $100 million in assets, is the parent of the Deseret Bank, which has six offices and headquarters at Pleasant Grove, Utah. The purchase price is equal to about 1.65 times Deseret's roughly $10.7 million book value, or assets less liabilities.

Salt Lake City-based First Security, with $5.4 billion in assets, said the agreement is subject to shareholder and regulatory approval, and that it hopes to complete the transaction early next year.

Georgia-Pacific Corp. 's unsolicited $3.19 billion bid for Great Northern Nekoosa Corp. was hailed by Wall Street despite a cool reception by the target company.

William R. Laidig, Nekoosa's chairman, chief executive officer and president, characterized the $58-a-share bid as "uninvited" and said Nekoosa's board would consider the offer "in due course."

T. Marshall Hahn Jr., Georgia-Pacific's chairman and chief executive, said in an interview that all terms of the offer are negotiable. He added that he had spoken with Mr. Laidig, whom he referred to as a friend, by telephone Monday evening. "I'm hopeful that we'll have further discussions," Mr. Hahn said.

On Wall Street, takeover stock traders bid Nekoosa's stock well above the Georgia-Pacific bid, assuming that Nekoosa's will either be sold to a rival bidder or to Georgia-Pacific at a higher price -- as much as $75 a share, according to some estimates.

Yesterday, Nekoosa common closed in composite New York Stock Exchange trading at $62.875, up $20.125, on volume of almost 6.3 million shares. Georgia-Pacific closed down $2.50, at $50.875 in Big Board trading.

Takeover stock traders noted that with the junk-bond market in disarray, Georgia-Pacific's bid is an indication of where the takeover game is headed: namely, industrial companies can continue bidding for one another, but financial buyers such as leveraged buy-out firms will be at a disadvantage in obtaining financing.

"The way the world is shaping up, the strategic buyer is going to be the rule and the financial buyer is going to be the exception," said one trader.

For the paper industry specifically, most analysts said the deal will spur a wave of paper-company takeovers, possibly involving such companies as Union Camp Corp., Federal Paperboard Co. and Mead Corp. The analysts argued that Georgia-Pacific's offer, the first hostile bid ever among major players in the paper industry, ends the unwritten taboo on hostile bids, and will push managements to look closely at the industry's several attractive takeover candidates.

"Consolidation has been long overdue. It was just the culture of the industry that kept it from happening. The Georgia-Pacific offer has definitely changed the landscape," said Gary Palmero of Oppenheimer & Co. Added Mark Rogers of Prudential-Bache Securities Inc.: "It's much easier to be second."

A Georgia-Pacific acquisition of Nekoosa would create the largest U.S. forest-products company. Based on 1988 sales, Georgia-Pacific ranked third at $9.51 billion, behind Weyerhaeuser Co. at $10 billion and International Paper Co. at $9.53 billion. Nekoosa ranked 11th with sales of $3.59 billion. The combined company would have had 1988 sales of $13.1 billion.

But such a combination also presents great risks. At a time when most analysts and industry consultants say pulp and paper prices are heading for a dive, adding capacity and debt could squeeze Georgia-Pacific if the industry declines more than the company expects. Moreover, any unexpected strengthening of the dollar would hurt Georgia-Pacific because two of Nekoosa's major product lines -- containerboard, which is used to make shipping boxes, and market pulp -- are exported in large quantities.

"Nobody knows how deep the cycle is going to be," said Rod Young, vice president of Resource Information Systems Inc., a Bedford, Mass., economic-forecasting firm. "Depending on how far down you go, it may be difficult to pay off that debt."

One person familiar with Georgia-Pacific said the acquisition would more than double the company's debt of almost $3 billion. It also could be a drag on Georgia-Pacific earnings because the roughly $1.5 billion in goodwill -- the amount by which the bid exceeds Nekoosa's book value of $1.5 billion -- will have to be subtracted from earnings over a period of decades.

Georgia-Pacific's Mr. Hahn said that a combined operation would allow savings in many ways. The two companies each produce market pulp, containerboard and white paper. That means goods could be manufactured closer to customers, saving shipping costs, he said.

Moreover, production runs would be longer, cutting inefficiencies from adjusting machinery between production cycles. And Georgia-Pacific could save money in selling pulp, because the company uses its own sales organization while Nekoosa employs higher-cost agents.

Mr. Hahn said Georgia-Pacific has accounted in its strategy for a "significant downturn" in the pulp and paper industry, an event that he said would temporarily dilute earnings. But he said that even under those conditions, the company still would realize a savings of tens of millions of dollars in the first year following a merger. "The fit is so good, we see this as a time of opportunity," he said.

Georgia-Pacific, which has suspended its stock-repurchase program, would finance the acquisition with all bank debt, provided by banks led by BankAmerica Corp. Georgia-Pacific owns 349,900 Nekoosa shares and would need federal antitrust clearance to buy more than $15 million worth. U.S. clearance also is needed for the proposed acquisition.

For Nekoosa, defense options may be undercut somewhat by the precarious state of the junk-bond market, which limits how much value the target could reach in a debt-financed recapitalization. The company's chairman, Mr. Laidig, and a group of advisers met at the offices of Wachtel Lipton Rosen & Katz, a law firm specializing in takeover defense. Nekoosa also is being advised by Goldman, Sachs & Co.

Georgia-Pacific's advisers are Wasserstein, Perella & Co., which stands to receive a $15 million fee if the takeover succeeds, and the law firm of Shearman & Sterling.

People familiar with Nekoosa said its board isn't likely to meet before the week after next to respond to the bid. The board has 10 business days to respond.

In addition to the usual array of defenses, including a so-called poison pill and a staggered board, Nekoosa has another takeover defense: a Maine state law barring hostile bidders from merging acquired businesses for five years. Nekoosa is incorporated in Maine.

Georgia-Pacific has filed a lawsuit in federal court in Maine challenging the poison pill and the Maine merger law.

Nekoosa's poison pill allows shareholders to vote to rescind it, but Georgia-Pacific isn't likely to pursue such a course immediately because that would take 90 to 120 days, and wouldn't affect the provisions of the Maine law.

Among companies mentioned by analysts as possible counterbidders for Nekoosa are International Paper, Weyerhaeuser, Canadian Pacific Ltd. and MacMillan Bloedel Ltd. "I'm sure everybody else is putting pencil to paper," said Kathryn McAuley, an analyst with First Manhattan Co.

International Paper and Weyerhaeuser declined to comment. Canadian Pacific couldn't be reached for comment, and MacMillan Bloedel said it hasn't any plans to make a bid for Nekoosa.

Investors were quick to spot other potential takeover candidates, all of which have strong cash flows and low-cost operations. Among paper company stocks that rallied on the Big Board because of the offer were Union Camp, up $2.75 to $37.75, Federal Paperboard, up $1.75 to $27.875, Mead, up $2.375 to $38.75, and Temple Inland Inc., up $3.75 to $62.25. In over-the-counter national trading, Bowater Inc. jumped $1.50 to $27.50.

Some analysts argued that there won't be a flurry of takeovers because the industry's continuing capacity-expansion program is eating up available cash. Moreover, some analysts said they expect a foreign paper company with deeper pockets than Georgia-Pacific to end up acquiring Nekoosa, signaling to the rest of the industry that hostile bids are unproductive.

"This is a one-time event," said Lawrence Ross of PaineWebber Inc., referring to the Georgia-Pacific bid.

But many analysts believe that, given the attractiveness of paper companies' cash flows, as well as the frantic consolidation of the paper industry in Europe, there will be at least a few more big hostile bids for U.S. companies within the next several months. The buyers, these analysts added, could be either foreign or other U.S.concerns.

"The Georgia-Pacific bid may open the door to a new era of consolidation" in the paper industry, said Mark Devario of Shearson Lehman Hutton Inc.

"I don't think anyone is now immune from takeover," said Robert Schneider of Duff & Phelps Inc., Chicago. He added: "Every paper company management has to be saying to itself, `Before someone comes after me, I'm going to go after somebody. '"

Prudential-Bache's Mr. Rodgers said he doesn't see the industry's capacity-expansion program hindering takeover activity. Several projects, he said, are still on the drawing board. Moreover, "it's a lot cheaper and quicker to buy a plant than to build one."

Indeed, a number of analysts said that Japanese paper companies are hungry to acquire additional manufacturing capacity anywhere in the world. Some predicted that Nekoosa will end up being owned by a Japanese company.

Meanwhile, Shearson Lehman's Mr. Devario said that, to stay competitive, the U.S. paper industry needs to catch up with the European industry. Since the most-recent wave of friendly takeovers was completed in the U.S. in 1986, there have been more than 100 mergers and acquisitions within the European paper industry, he said.

Lyphomed Inc., Rosemont, Ill., and Medco Research Inc., Los Angeles, said the Food and Drug Administration granted full marketing approval for a new drug for the treatment of a condition in which the heart beats between 150 and 200 beats a minute.

The condition, known as paroxysmal supraventricular tachycardia, leads to dizziness and fainting. The typical healthy heart beats 70 times a minute.

The drug, called adenocard, returns the heart to a normal rhythm within seconds, according to Lyphomed.

Medco Research developed the drug and licensed it to Lyphomed for sale in the U.S. and Canada.

Private industry's labor costs rose 1.2% in the third quarter, matching the second-quarter pace, as health insurance costs continued to soar, the Labor Department said.

The increase in wage and benefit costs in the third quarter was greater than the 1% rise reported for the third quarter of 1988.

"Wage increases and overall compensation increases are beginning to curl upward a little bit," said Audrey Freedman, a labor economist at the Conference Board, a business research organization.

"One would have thought this would have happened two or three years ago as the labor market tightened. It is a considerably delayed reaction and it's not a severe one at all," she added.

The new data underscored the severity of the nation's health-care cost problem. In the 12 months ended in September, wages and salaries of private-sector workers rose 4.4%, while health insurance costs spurted by 13.7%. The consumer price index climbed 4.3% in the same period.

Despite the big increases in health-care costs, wages still account for a far greater share of overall labor costs. The overall private-sector employment cost index, which includes both wages and benefits, rose 4.7% in the 12 months ended in September, compared with 4.5% for both the 12 months ended in June and the 12 months ended September 1988.

Labor costs are climbing at a far more rapid pace in the health care industry than in other industries. For instance, wages of private-sector hospital workers leaped 6.6% in the 12 months ended in September, compared with 4.4% for workers in all industries.

In the third quarter, wages and salaries in all private industry rose 1.2%, compared with 1% increases in both the second quarter and in the third quarter of 1988.

For the past five years, unions haven't managed to win wage increases as large as those granted to nonunion workers. For private-sector union workers, the cost of wages and benefits rose 0.9% in the third quarter. For nonunion workers, the costs rose 1.4%.

Labor costs continued to rise more rapidly in service industries than in goods-producing industries, the report showed. It also found them rising much more in the Northeast than elsewhere.

Including employees of state and local -- but not the federal -- governments, the employment cost index rose 1.6% in the third quarter, compared with a 1.3% rise in the same quarter in 1988. The index rose 1.1% in the second quarter.

For the 12 months ended in September, this index was up 5.1%. It rose 4.8% for the 12 months ended in June and 4.7% in the 12 months ended in September 1988.

Unlike most economic indicators, none of these figures are adjusted for seasonal variations.

DeSoto Inc. said it is dismissing 200 employees as part of a restructuring aimed at producing pretax savings of $10 million annually.

Under the plan, DeSoto said it will sell certain assets and businesses that don't meet strategic and profitability objectives.

The Des Plaines, Ill., chemical coatings concern, which has about 2,000 employees world-wide, said it plans to sell its domestic rigid container packaging and flexible adhesives businesses, and its Chicago Heights, Ill., resin plant.

The company said it plans to use the sale proceeds to invest in business opportunities more closely identified with the company's "refocused direction.

StatesWest Airlines, Phoenix, Ariz., said it withdrew its offer to acquire Mesa Airlines because the Farmington, N.M., carrier didn't respond to its offer by the close of business yesterday, a deadline StatesWest had set for a response.

However, StatesWest isn't abandoning its pursuit of the much-larger Mesa. StatesWest, which has a 7.25% stake in Mesa, said it may purchase more Mesa stock or make a tender offer directly to Mesa shareholders.

StatesWest had proposed acquiring Mesa for $7 a share and one share of a new series of StatesWest 6% convertible preferred stock it values at $3 a share. Earlier, Mesa had rejected a general proposal from StatesWest to combine the two carriers in some way.

StatesWest serves 10 cities in California, Arizona and Nevada. Mesa flies to 42 cities in New Mexico, Arizona, Wyoming, Colorado and Texas.

A shiny new takeover deal sparked a big rally in stock prices, which buoyed the dollar. Bond prices also edged higher.

Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa helped drive the Dow Jones Industrial Average up 41.60 points, to 2645.08, in active trading. The dollar drew strength from the stock market's climb. Long-term bond prices rose despite trepidation about what a key economic report will show today.

Analysts said the offer for Great Northern Nekoosa broke the pall that settled over the takeover business for the past three weeks in the wake of the collapsed UAL Corp. buy-out. Great Northern Nekoosa soared $20.125 a share, to $62.875, substantially above the $58 a share Georgia-Pacific is offering. That indicates speculators are betting a higher offer is in the wings. Prices of other paper makers rose sharply, although Georgia-Pacific fell $2.50 a share, to $50.875.

Despite all the furor over program trading, program trading played a big role in yesterday's rally. Some traders point out that as the big brokerage firms back out of program trading for their own accounts or for clients, opportunities increase for others to engage in the controversial practice. That's what happened yesterday.

The rally notwithstanding, there are plenty of worries about the short-term course of stock prices. A slowing economy and its effect on corporate earnings is the foremost concern of many traders and analysts. Unless the Federal Reserve eases interest rates soon to stimulate the economy, profits could remain disappointing.

Yesterday's major economic news -- a 0.2% rise in the September index of leading economic indicators -- had little impact on financial markets. But the next important piece of news on the economy's health -- this morning's release of the national purchasing manager's survey for October -- could prompt investors into action.

A report late yesterday that the Chicago-area purchasing managers survey showed increased economic activity in that part of the country cut into bond-price gains. If the national survey confirms a pickup in the manufacturing sector, it could further depress bond prices while bolstering stock prices and the dollar.

Meanwhile, bond investors are laboring under the onus of a national debt ceiling debate. Although the Treasury is expected to announce details of its November quarterly refunding operation today, the Nov. 79 schedule could be delayed unless Congress and the president act soon to lift the nation's debt ceiling.

In major market activity:

Stock prices rallied in active trading. Volume on the New York Stock Exchange totaled 176.1 million shares. Advancing issues on the Big Board surged ahead of decliners 1,111 to

Bond prices rose. The Treasury's benchmark 30-year bond gained less than a quarter of a point, or less than $2.50 for each $1,000 of face amount. The yield on the issue slipped to 7.91%.

The dollar gained against most foreign currencies. In late afternoon New York trading, the dollar was at 1.8415 marks and 142.85 yen compared with 1.8340 marks and 141.90 yen late Monday.

Bouygues S.A., a diversified construction concern based in Paris, said its consolidated profit for the 1989 first half, after payments to minority interests, surged to 188 million French francs ($30.2 million) from 65 million francs a year earlier.

Revenue rose 21% to 22.61 billion francs from 18.69 billion francs.

The company didn't specify reasons for the strong earnings gain. But Bouygues said its first-half profit isn't indicative of the full-year trend because of the highly seasonal nature of many of the company's activities.

For all of 1988, Bouygues had consolidated profit of 519 million francs, after payments to minority interests, on revenue of 50 billion francs. The group has forecast 1989 revenue of 56.9 billion francs.

QVC Network Inc. said it completed its acquisition of CVN Cos. for about $423 million.

QVC agreed to pay $19 and one-eighth QVC share for each of CVN's 20 million fully diluted shares.

The acquisition brings together the two largest competitors to Home Shopping Network Inc., which now reaches more viewers than any other company in the video shopping industry. Among them, Home Shopping, QVC and CVN already control most of that young and fast-growing market, which last year had sales of about $1.4 billion.

Coast Savings Financial Inc. reported a third-quarter loss, citing a previously announced capital restructuring program.

The Los Angeles thrift holding company said it had a loss of $92.2 million, or $6.98 a share, for the quarter ended Sept. 30. Coast earned $10.2 million, or 67 cents a share, in the year-ago quarter. The year-ago results have been restated to comply with government regulations.

The restructuring program is designed to increase the company's tangible capital ratio. It includes removing $242 million in good will from the books, issuing $150 million in preferred stock and commencing an exchange offer for $52 million in convertible bonds.

During the third quarter, the company charged about $46 million against earnings in reducing goodwill, added $20 million to its general loan loss reserves and established a $30 million reserve for its high-yield bond portfolio. The company said its junk-bond portfolio after these moves had been reduced to less than 1% of assets.

Philip Morris Cos. is launching a massive corporate advertising campaign that will put the tobacco giant's name in TV commercials for the first time since the early 1950s, when it stopped advertising its namesake cigarette brand on television.

The campaign, a patriotic celebration of the 200th anniversary of the Bill of Rights, doesn't mention cigarettes or smoking; cigarette ads have been prohibited on television since 1971. But even before it begins, the campaign is drawing fire from anti-smoking advocates, who criticize Philip Morris's attempt to bolster its beleaguered image by wrapping itself in the document that is a cornerstone of American democracy.

Philip Morris, which became the U.S.'s largest food company last year with its $12.9 billion acquisition of Kraft Inc., seems determined to evolve beyond its roots in Marlboro country. The company's research suggests that its name recognition among most consumers remains unusually low, although its array of brands -- including Maxwell House coffee, Jell-O, Cheez Whiz, and Miller beer -- blanket supermarket shelves.

The company is expected to spend about $30 million a year on its two-year corporate campaign, created by WPP Group's Ogilvy & Mather unit in New York. The initial spots will appear during morning and prime-time news shows. Philip Morris hopes that by taking its Bill of Rights theme to the airwaves, in addition to publications, it will reach the broadest possible audience. Until now, its corporate ads, mainly promoting its sponsorship of the arts, have appeared almost exclusively in newspapers and magazines.

"Most people -- whether in Toledo, Tucson or Topeka -- haven't got a clue who we are," says Guy L. Smith, Philip Morris's vice president of corporate affairs. "If they think well of the company through our support of the Bill of Rights, it follows they'll think well of our products." Mr. Smith says the Bill of Rights commercial, which trumpets the themes of liberty and freedom of expression, isn't designed to have any special appeal for smokers. Although Philip Morris typically tries to defend the rights of smokers with free-choice arguments, "this has nothing to do with cigarettes, nor will it ever," the spokesman says.

But some anti-smoking activists disagree, expressing anger at what they see as the company's attempt to purchase innocence by association. "I'm outraged because this company is portraying itself at the heart of American culture and political freedom and in fact it's a killer," says Michael Pertschuk, former chairman of the Federal Trade Commission and a tobacco-industry critic. "It should be treated like the Medellin {drug} mafia, not the Founding Fathers."

Mr. Pertschuk adds that the new commercial dovetails perfectly with major aspects of Philip Morris's political strategy. These include trying to protect its print advertising by invoking the First Amendment, and wooing blacks by portraying itself as a protector of civil rights. (The commercial features, among others, the voice of Martin Luther King Jr., the slain civil rights leader.)

Many marketers say Philip Morris's approach will be effective, but they agree that the ads' implied smoking message is unmistakable. "This is clever, subliminal advertising that really says, `Smokers have rights, too, '" says Al Ries, chairman of Trout & Ries Inc., a Greenwich, Conn., marketing strategy firm. "This is designed to get the wagons in a circle and defend the smoking franchise."

Richard Winger, a partner at Boston Consulting Group, adds: "It's very popular to drape yourself in the flag these days. If you can do that and at the same time send a message that supports your business, that's brilliant."

RJR Nabisco Inc. and American Brands Inc. say they have no plans to follow Philip Morris's lead. (Indeed, RJR Nabisco is currently under fire for having sent 80-second videotapes touting its Now brand to consumers who smoke American Brands' Carltons.)

Despite the criticism, Philip Morris's corporate campaign runs little risk of getting yanked off the tube. "They aren't showing James Madison taking a puff or lighting up," says Laurence Tribe, a professor of constitutional law at Harvard University. "All they are trying to do is borrow some of the legitimacy of the Bill of Rights itself.

Technology stocks woke up, helping the over-the-counter market rise from its recent doldrums.

The Nasdaq Composite Index surged 4.26, or about 0.94%, to 455.63. It was the market's biggest gain since rising more than 7 points on Oct. 19. Advancing OTC stocks outpaced decliners by 1,120 to 806.

But the move lagged a stronger rise in New York Stock Exchange issues. The Big Board's composite index was up more than 1.4%, and the Dow Jones Industrial Average jumped 1.6%.

Nasdaq's gain was led by its biggest industrial stocks. The Nasdaq 100 rose 7.08 to 445.23. The Financial Index of 100 biggest banks and insurance issues added 2.19 to 447.76. Other strong sectors were indicated in gains of the Transportation Index, up 7.55 to 475.35, and the Utility Index, up 8.68 to 730.37.

National Market System volume improved to 94,425,000 shares from 71.7 million Monday.

Many of Nasdaq's biggest technology stocks were in the forefront of the rally. Microsoft added 2 1/8 to 81 3/4 and Oracle Systems rose 1 1/2 to 23 1/4. Intel was up 1 3/8 to 33 3/4.

But traders who watch the stocks warned the rise may be yet another "one-day phenomenon."

Technology stocks bore the brunt of the OTC market's recent sell-off, and traders say it's natural that they rebound sharply now that the market has turned around. But, they caution, conservative investors would do well to sell into the strength.

"They are always the first to be sold when people are taking profits, because people are most scared of the high-technology stocks," said Robin West, director of research for Ladenburg Thalmann's Lanyi division, which specializes in emerging growth stocks.

The technology group includes many of the OTC market's biggest stocks, which dominate the market-weighted Nasdaq Composite Index. Analysts say rallies in the group historically have lifted the market, while weakness in the sector often sank unlisted share prices broadly.

But increasing volatility in the sector has exhausted investors who try to follow its dips and swings. The stocks have been pummeled repeatedly by inventory gluts and disappointing earnings as the industry matures and slows. Some even claim the group has become a lagging, not leading, indicator.

The technology sector of the Dow Jones Equity Market Index has risen only about 6.24% this year, while the Nasdaq Composite Index has gained 18.35%. While the composite index lost less than a third of its year-to-date gains in the market's recent decline, the technology group's gains were more than halved.

The OTC technology sector is far from a cohesive unit. The group is divided primarily between software, semiconductors and computers. While computer stocks have taken the biggest hit from the slowdown in the industry, many software and semiconductor stocks have continued to outperform the market. Microsoft is up more than 50% this year, while Intel is up more than 40%.

The technology group is also split between large companies and small, with the biggest stocks trading as blue-chip issues in the institutional marketplace, while the smaller stocks churn on their individual merits or faults, analysts say. The volatility of smaller technology companies has served the group well overall in recent stock trading, according to Hambrecht & Quist's technology stock indexes.

The brokerage firm tracks technology stocks with its Technology Index, which appreciated only 10.59% in the first nine months of this year. But the firm also tracks smaller technology companies as a subset of the larger group. That index, which contains technology companies with annual revenues of $200 million or less, gained 17.97% by Sept. 30 this year -- still lagging the S&P 500, but leading larger technology firms.

Yesterday, bank stocks lagged behind the overall OTC market. The Nasdaq Bank Index rose 0.17 to 432.78. George Jennison, who trades bank stocks for Shearson Lehman Hutton, said the stocks tend to fall behind because they aren't traded as much as many other issues. But, he added, interest-rate-sensitive stocks in general are stalled.

"The interest-rate sensitives aren't rallying with the rest of the market because of fears about what the (Federal Reserve) will do," Mr. Jennison said. He said that investors will scour the October employment report, due out Friday, for clues about the direction of the economy and the immediate outlook for interest rates.

On the other hand, Mr. Jennison noted that the recent slide in bank and thrift stocks was at least halted yesterday.

Shearson Lehman Hutton gave small investors some welcome news by announcing that it would no longer handle index-arbitrage-related program trades for its accounts. Shearson, with its in-house order execution system, has handled the bulk of such program trades in the over-the-counter market. The trading has been blamed for much of the market's recent volatility. Jaguar topped the most-active list, as its American depository receipts climbed 1 3/4 to 13 5/8 with more than 6.6 million ADRs traded. Britain said it would waive its "golden share" in the luxury auto maker if shareholders vote to allow a suitor to acquire more than 15% of the company. The announcement effectively removes the British government as an impediment to a takeover of the company, which is being stalked by General Motors and Ford.

Gen-Probe was another active takeover stock. It surged 2 3/4 to 6 on volume of more than 1.7 million shares after the company agreed to be acquired by Japan's Chugai Pharmaceutical for about $110 million -- almost double the market price of Gen-Probe's stock.

Priam Corp. lost 5/32 to 3/32 after filing for protection from its creditors under Chapter 11 of the federal Bankruptcy Code.

MCI Communications added 1 1/2 to 43 3/8. The company has toted up over $40 million in contracts in the past two days. Monday, MCI announced a $27 million multiyear contract with the investment bank Stuart-James. Yesterday, it received a $15 million, three-year contract from Drexel Burnham Lambert.

Florida National Banks of Fla. slid 1 1/8 to 24 3/4. Late Monday, the Federal Reserve Board said it is delaying approval of First Union Corp. 's proposed $849 million acquisition of Florida National Banks pending the outcome of an examination into First Union's lending practices in low-income heighborhoods. Florida National said yesterday that it remains committed to the merger.

Dycom Industries gained 3/4 to 16 3/4 after it said it agreed to buy Ansco & Associates and two affiliates for cash and stock. The value of the transaction wasn't disclosed. The companies being acquired provide telecommunications services to the telephone industry.

Willamette Industries, whose stock has suffered steep losses in recent sessions, surged 1 1/2 to 49. The stock was one of many in the paper products industry that rose following Georgia-Pacific's $3.18 billion bid for Great Northern Nekoosa.

A permanent smoking ban on virtually all domestic airline routes won approval from the House, which separately sent to President Bush a nearly $67 billion fiscal 1990 bill including the first construction funds for the space station.

The smoking prohibition remains attached to a $27.1 billion transportation bill that must still overcome budget obstacles in Congress. But yesterday's action put to rest any lingering resistance from tobacco interests. Faced with inevitable defeat, the once dominant industry declined any recorded vote on the ban, which covers all but a fraction of 1% of daily flights in the U.S.

The sole exceptions are an estimated 30 flights of six hours or more beginning or ending in Hawaii and Alaska. Assuming final enactment this month, the prohibition will take effect 96 days later, or in early February.

On a 394-21 roll call, the House adopted the underlying transportation measure. But the bill still faces budget questions because it also is the vehicle for an estimated $3.1 billion in supplemental appropriations for law enforcement and anti-drug programs. The additional spending pushes the measure more than $2 billion above its prescribed budget ceiling, and the House Appropriations Committee leadership must now seek a waiver in hopes of completing action today.

The separate $67 billion bill sent to the White House had budget difficulties, too, but was saved ultimately by its importance to a broad spectrum of interests in Congress and the administration itself. No single bill this year includes more discretionary spending for domestic programs and, apart from the space station, the measure incorporates far-reaching provisions affecting the federal mortgage market.

The current ceiling on home loans insured by the Federal Housing Administration is increased to $124,875 during fiscal 1990. And in anticipation of increased lending, the cap on FHA loan guarantees would rise to approximately $73.8 billion.

Separately, the bill gives authority to the Department of Housing and Urban Development to facilitate the refinancing of high-interest loans subsidized by the government under the so-called Section 235 home-ownership program for lower-income families. This provision met early and strong resistance from investment bankers worried about disruptions in their clients' portfolios. But the promise of at least $15 million in new savings helped to forge a partnership between HUD Secretary Jack Kemp and lawmakers wanting to protect their projects elsewhere.

The estimated $1.8 billion for the space station would be double last year's level, and total appropriations for the National Aeronautics and Space Administration would grow 16% to nearly $12.4 billion. A string of costly projects, including the high-speed national aerospace plane and the advanced communications technology satellite, would continue to be developed within these limits. And while imposing a statutory cap of $1.6 billion on future spending, the bill would give NASA $30 million for the start-up of the CRAF-Cassini mission, a successor to the Voyager space probe.

Separately, the National Science Foundation is promised a 7.7% increase to bring its appropriations to $2.07 billion. And while pursuing these initiatives, Congress and the White House are squeezed too by steady increases -- $551 million -- in veteran's medical care.

The result is that all sides resort to sleight of hand to make room for competing housing and environmental programs, and the commitments now will drive excess spending into fiscal 1991.

Senior members of the House Budget Committee are reduced in frustration to raising doomed parliamentary obstacles to individual bills, yet admit that much of the disorder now stems from the fiscal legerdemain associated with their own summit agreement with the White House this past spring. "It's hard to get the administration's attention on anything," said Rep. Bill Frenzel (R., Minn.), "because the whole agreement was built on gimmickry."

Among the subsidies continued in the transportation bill is $30.7 million to maintain commercial air service for an estimated 92 communities, often in rural areas. Senate Appropriations Committee Chairman Robert Byrd (D., W.Va.) strongly resisted deeper cuts sought by the House. But at a time when the White House wants to kill the entire program, Republicans have been among its leading champions.

Sen. Pete Domenici (R., N.M.), the ranking Republican on the Senate Budget Committee, used his influence to preserve more than $132,000 in subsidies for air service to Sante Fe, N.M., and more than $2.1 million would go for service to eight communities in the western Nebraska district of GOP Rep. Virginia Smith on the House Appropriations Committee.

GP Express, an independent airline serving much of Nebraska, estimates that nearly 40% of its revenues come from the subsidies that, in some cases, exceed the cost of a ticket. For example, a passenger can fly from Chardon, Neb., to Denver for as little as $89 to $109, according to prices quoted by the company. But given the few number of users, the cost to the federal government per passenger is estimated at $193, according to House and Senate appropriations committees.

The House action yesterday came as the Senate remained mired in difficulties over a $17.25 billion measure covering the budgets for the State, Commerce, and Justice departments in fiscal 1990. The compromise bill passed the House last week but has now provoked jurisdictional fights with the Senate Foreign Relations Committee, which jealously protects its prerogatives over operations at the State Department.

The same jealousy can breed confusion, however, in the absence of any authorization bill this year. House and Senate appropriators sought to establish a Nov. 30 deadline after which their bill would become the last word on how funds are distributed. But on a 53-45 roll call this provision was stripped from the bill last night after Foreign Relations Chairman Claiborne Pell (D., R.I.) complained that it was an intrusion on exclusive powers vested in his panel for more than three decades.

Coda Energy Inc. said it arranged a $50 million credit facility with NCNB Texas National Bank, a unit of NCNB Corp., of Charlotte, N.C.

The Dallas oil and gas concern said that $10 million of the facility would be used to consolidate the company's $8.1 million of existing bank debt, to repurchase 4 million of its 4.9 million shares outstanding of Series D convertible preferred stock, and to purchase a 10% net-profits interest in certain oil and gas properties from one of its existing lenders, National Canada Corp. The remaining $40 million can be used over three years for oil and gas acquisitions, the company said.

Ted Eubank, Coda's president, said the loan carries an interest rate of prime plus one percentage point, with 85% of the company's net oil and gas revenue each month dedicated to repayment. The company put up "virtually all" of its oil and gas properties as collateral, he said.

General Dynamics Corp. was given an $843 million Air Force contract for F-16 aircraft and related equipment.

Loral Corp. 's defense systems division received a $54.9 million Air Force contract for a F-15 weapons system trainer.

Southern Air Transport Inc. won $47.5 million in Air Force and Navy contracts for transportation services.

International Business Machines Corp. was given a $31.2 million Air Force contract for satellite data systems equipment.

Directed Technologies received a $28.3 million Defense Advanced Research Projects Agency contract for advanced propulsion systems research.

Propper International Inc. got a $22.8 million Defense Logistics Agency contract for combat camouflage trousers.

Santa Fe Pacific was the kind of story Wall Street loved.

Since the value of its assets wasn't known, analysts were free to pick a number. In one of many rosy scenarios, Bear Stearns's Gary Schneider wrote in March that its real estate alone had a value of $4.5 billion. Throw in its railroad, minerals, pipeline and oil assets, he and others argued, and the Chicago-based conglomerate should be worth 30 a share.

And why should holders expect to realize that presumed "worth?" That was another reason the Street loved Santa Fe. With real estate experts Olympia & York and Samuel Zell's Itel owning close to 40% of Santa Fe's stock, management was under pressure -- in a favored phrase of Wall Street -- to quickly "maximize values."

But value, it turns out, is only what a buyer will pay. And with the company's recent announcement that it is contemplating a partial sale of its real estate, the values suddenly look poorer.

Santa Fe has disclosed that it is negotiating to sell a 20% interest in its real estate unit to the California Public Employees Retirement System for roughly $400 million. Since the real estate unit also includes debt, the imputed value of the real estate itself is close to $3 billion.

"The implied current net asset value of 22.70 {per share} is well below the 30 level that the Street believed," PaineWebber says. "The upside was in the intangible real estate . . . which is no longer an intangible."

So what is Santa Fe worth?

If the railroad is valued on a private market basis -- at the same multiple of earnings as in the recent sale of CNW -- it would have a value of $1.65 billion. A compromise between bulls and bears puts remaining assets and cash -- including its 44% stake in its publicly traded pipeline -- at $2 billion. Santa Fe also has $3.7 billion in debt. In addition, its railroad lost a $750 million antitrust suit, which is on appeal, and which analysts say could be settled for one-third that amount.

That nets out to about $17 a share for the company on a private market basis. But Santa Fe, currently trading at 18 7/8, isn't likely to realize private market values by selling assets, because the tax against it would be onerous. Its plan, instead, is to spin off the remainder of its real estate unit and to possibly do the same with its mining and energy assets.

Robert D. Krebs, Santa Fe's chairman, argues that since its businesses are valued in different ways, "the sum of the parts may be greater than the whole."

But it isn't clear why that should be so. The spinoff argument, after all, reverses the current notion that assets are worth more to private buyers than to public shareholders. And real estate usually hasn't traded well under public ownership.

Salomon Brothers says, "We believe the real estate properties would trade at a discount . . . after the realty unit is spun off. . . . And what about the cost, and risk, of waiting to realize the hypothetical private market values?"

Some analysts remain bullish. Mr. Schneider of Bear Stearns says he is recalculating the worth of the company's assets and, in the meantime, is sticking to his "buy" recommendation on the belief that he will find "values" of 30 a share. He adds: "If for any reason I don't have the values, then I won't recommend it."

First Boston's Graeme Anne Lidgerwood values Santa Fe at 24, down from her earlier estimate of 29. Her recent report classifies the stock as a "hold." But it appears to be the sort of hold one makes while heading for the door.

Quoting from the report: "The stock's narrow discount to asset valuation makes it a relatively unappealing investment at current prices, especially given the risk that our projections could be on the aggressive side."

Chairman Krebs says the California pension fund is getting a bargain price that wouldn't have been offered to others. In other words: The real estate has a higher value than the pending deal suggests. Since most of the unit's real estate is in California, the pension fund will be a useful political ally in a state where development is often held hostage to zoning boards. And, as Mr. Zell says, with Itel and O&Y on the unit's board, the real estate will be run by "a very unusual group" to say the least.

It is possible then that Santa Fe's real estate -- even in a state imperiled by earthquakes -- could, one day, fetch a king's ransom. But as Drexel analyst Linda Dunn notes, its properties will be developed over 15 to 20 years. So despite Wall Street's rosy talk of quickly "maximizing values," holders could be in for a long wait.

Santa Fe Pacific (NYSE; Symbol: SFX)

Business: Railroad, natural resources and real estate

Year ended Dec. 31, 1988:

Revenue: $3.14 billion

Net loss: $46.5 million; 30 cents a share

Third quarter, Sept. 30, 1989:

Net income: 21 cents a share vs. net loss of $4.11 a share

Average daily trading volume: 344,354 shares

Orkem S.A., a French state-controlled chemical manufacturer, is making a friendly bid of 470 pence ($7.43) a share for the 59.2% of U.K. specialty chemical group Coates Brothers PLC which it doesn't already own, the two sides said.

The offer, which values the whole of Coates at #301 million, has already been accepted by Coates executives and other shareholders owning 12.4% of the company. The acceptances give Orkem a controlling 53.2% stake in the company.

Orkem and Coates said last Wednesday that the two were considering a merger, through Orkem's British subsidiary, Orkem Coatings U.K. Ltd.

Orkem, France's third-largest chemical group, said it would fund the acquisition through internal resources. The takeover would be followed by a restructuring of Orkem's U.K. unit, including the addition of related Orkem businesses and possibly further acquisitions. Orkem said it eventually would seek to make a public share offering in its U.K. business.

Intelogic Trace Inc. said it is exploring alternatives to maximize shareholder value, including the possible sale of the company.

But Asher B. Edelman, who controls about 16% of the San Antonio, Texas, computer-servicing company, insisted that the announcement didn't have anything to do with the ongoing battle for control of Datapoint Corp.

Any sale of Intelogic could have an impact on the battle between Mr. Edelman and New York attorney Martin Ackerman for control of Datapoint. Intelogic holds 27.5% of Datapoint's common shares outstanding.

Mr. Edelman said the decision "has nothing to do with Marty Ackerman." Mr. Ackerman contended that it was a direct response to his efforts to gain control of Datapoint.

Intelogic was spun off from Datapoint four years ago, shortly after Mr. Edelman took control of Datapoint.

Marks & Spencer PLC reported a 12% gain in first-half pretax profit, mainly because of improving performances in the U.K. and continental Europe.

In the six months ended Sept. 30, pretax profit at the British clothing and food retailer rose to #208.7 million ($330.1 million) from #185.5 million a year ago.

The results surpassed analysts' forecasts, which averaged around #200 million, and Marks & Spencer responded in trading on London's Stock Exchange with an eight pence rise to 188 pence.

Profit after tax and minority interest but before extraordinary items rose 12% to #135.2 million; per-share earnings rose to five pence from 4.5 pence.

Marks declared an interim per-share dividend of 1.85 pence, compared with 1.7 pence a year earlier.

Sales increased 11% to #2.5 billion from #2.25 billion, while operating profit climbed 13% to #225.7 million from #199.8 million.

Sales in North America and the Far East were inflated by acquisitions, rising 62% to #278 million. Operating profit dropped 35%, however, to #3.8 million. Brooks Brothers, which Marks bought last year, saw operating profit drop in half to #5 million.

Federal and state thrift examiners said they saw evidence of criminal wrongdoing in the collapse of Lincoln Savings & Loan Association, and a California regulator described an attempted "whitewash" by deputies of chief federal regulator Danny Wall.

In a riveting day of hearings before the House Banking Committee, the examiners described finding shredded documents, a mysterious Panamanian subsidiary, millions of dollars funneled into a Swiss bank, and a complacent attitude by Mr. Wall's deputies, one of whom was portrayed as acting more like a public-relations man for the thrift than a federal regulator.

A California official also said he sent the Federal Bureau of Investigation a packet of documents relating to a previously reported $400,000 contribution from Lincoln's parent solicited by Sen. Alan Cranston (D., Calif.).

Federal examiner Alex Barabolak said Lincoln's operations amounted to "pyramiding debt to provide a luxurious life style for its owners." Another federal examiner, John Meek, said Lincoln's principal owner, Charles Keating Jr., and his family drew off at least $34 million from the thrift in salaries, bonuses and proceeds from securities sales in the 3 1/2 years before federal authorities seized it earlier this year. Lincoln's collapse may cost taxpayers as much as $2.5 billion, according to estimates, making it the most expensive thrift failure in history.

"I think there's overwhelming evidence to indicate probable criminal activity," said Mr. Meek, who participated last year in an examination of the Irvine, Calif., thrift. He said the evidence pointed to wrongdoing by Mr. Keating "and others," although he didn't allege any specific violation.

Richard Newsom, a California state official who last year examined Lincoln's parent, American Continental Corp., said he also saw evidence that crimes had been committed. "It sure smells like it," he said. He said 30% of the loans he sampled were "dead meat on the day they were made."

The state examiner also said supervisors of a parallel federal examination seemed so reluctant to demand write-downs of Lincoln's bad loans that he immediately grew suspicious.

"Later on, my concerns about a whitewash became even more serious," he said. He called the sour loans "appalling" and added, "You opened the file up and it just jumped at you."

Leonard Bickwit, a Washington attorney for Lincoln's parent corporation, said in an interview, "We deny any criminal behavior by the association or its officers."

"Those who testified {yesterday} have consistently maintained that anyone who didn't agree with them is part of a coverup, a whitewash, or the subject of excessive influence," Mr. Bickwit said. "We simply don't agree with that or the findings of their investigation."

Mr. Wall's deputies complained that they hadn't been given an opportunity to respond to the criticism brought out during the Banking Committee's hearings, which Committee Chairman Henry Gonzalez (D., Texas) has used as a forum to flay Mr. Wall's handling of the affair and to demand that he step aside from his job.

"A couple of things Mr. Newsom said were at least misleading," said Kevin O'Connell, one of the Washington regulators responsible for the handling of Lincoln. In an interview, he said federal regulators eventually declared one of the loans the state regulator cited to be a total loss, and forced Lincoln to make an $18 million downward adjustment on another.

"Our response to the whitewash would simply be, look what happened," another Washington official, Alvin Smuzynski, said in an interview. Federal officials seized the association in April, a day after the parent corporation entered bankruptcy-law proceedings. The government later brought a $1.1 billion fraud suit against Mr. Keating and others.

Rep. Gonzalez has complained that regulators waited far too long, however, ignoring a recommendation from regional officials to place Lincoln into receivership two years before it failed. "He took the reckless course of ignoring the evidence," Rep. Gonzalez said.

State thrift examiner Eugene Stelzer said he found the chief federal examiner Steve Scott to be totally uninterested in one allegedly fraudulent series of transactions. "Frankly, it was like he worked for the Lincoln public-relations department," Mr. Stelzer testified. And David Riley, a federal examiner who worked under Mr. Scott, said he found his chief oddly upbeat about Lincoln. Asked to comment, a spokesman for Mr. Scott said: "Mr. Scott has spoken to his attorney, who has advised him not to talk to anybody."

Mr. Meek said that a day or two before Lincoln's parent entered bankruptcy proceedings, he and other examiners saw "a truck with a sign on it that said it was from the `Document Destruction Center. ' We observed at least two large plastic bags of shredded paper loaded into this truck."

Mr. Bickwit said the paper had been donated to "a charitable organization that sells it for recycling. They shredded it simply because it contained financial information about their creditors and depositors."

Mr. Meek said his suspicions were aroused by several foreign investments by Lincoln, including $22 million paid to Credit Suisse of Switzerland, an $18 million interest in Saudi European Bank in Paris, a $17.5 million investment in a Bahamas trading company, and a recently discovered holding in a Panama-based company, Southbrook Holdings. Mr. Bickwit said, "I can see why an S&L examiner would regard these as unusual activities," but said the overseas investments "essentially broke even" for the S&L.

LTV Steel Co. is boosting the prices of flat rolled steel products by an average of 3% following a recent erosion in the prices of such crucial steel products.

The big questions are whether the increase, effective Jan. 1, 1990, will stick, and whether other major steelmakers will follow suit. It is widely expected that they will. The increase is on the base price, which is already being discounted by virtually all steel producers.

But LTV's move marks the first effort by a major steelmaker to counter the free fall in spot prices. Major steel producers are selling cold rolled sheet steel at about $370 a ton, compared with a peak price of $520 a ton in 1988. Second-tier companies are receiving even less per ton. LTV's planned increase, which was announced in an Oct. 26 memo to district managers, doesn't affect electrogalvanized steel or tin plate.

LTV confirmed the price-increase plan, saying the move is designed to more accurately reflect the value of products and to put steel on more equal footing with other commodities. A spokesman for LTV Steel, which is a unit of Dallas-based LTV Corp., noted that steel prices, adjusted for inflation, increased only 1.7% between 1981 and the fourth quarter of 1988, while the prices of other industrial commodities increased nearly five times as much. At the same time, steelmakers are trying to invest more to modernize technology and make themselves more competitive.

But analysts say the company is also trying to prevent further price drops. Moreover, they note that LTV may be trying to send a signal to major customers, such as Chrysler Corp. and Whirlpool Corp., that steelmakers need more money. Both companies are in the process of negotiating contracts with LTV and others.

"They {LTV} may believe this can impact contract negotiations and is their signal to the world that now is the time to get tough on prices," said Peter Marcus, an analyst with PaineWebber Inc. Mr. Marcus believes spot steel prices will continue to fall through early 1990 and then reverse themselves. He isn't convinced, though, that the price decline reflects falling demand because the world economy remains relatively strong. And while customers such as steel service centers are continuing to reduce inventories through the fourth quarter, they eventually will begin stocking up again, he notes.

It won't be clear for months whether the price increase will stick. Steelmakers announced a round of base-price increases last year, but began offering sizable discounts over the summer. In fact, LTV was the first steelmaker to publicly boost discounts for buyers of cold rolled sheet steel and hot-dipped galvanized sheet steel.

In composite New York Stock Exchange trading yesterday, LTV common shares fell 12.5 cents to close at $1.50.

The Treasury plans to raise $2.3 billion in new cash with the sale Monday of about $16 billion in short-term bills to redeem $13.71 billion in maturing bills.

However, the Treasury said it will postpone the auction unless it has assurances of enactment of legislation to raise the statutory debt limit before the scheduled auction date.

The offering will be divided evenly between 13-week and 26-week bills maturing on Feb. 8, 1990, and May 10, 1990, respectively.

Tenders for the bills, available in minimum $10,000 denominations, must be received by 1 p.m. EST Monday at the Treasury or at Federal Reserve banks or branches.

J.C. Penney Co. is extending its involvement in a televised home-shopping service by five to 10 years.

Shop Television Network Inc., of Los Angeles, said Penney agreed to continue its exclusive arrangement with Shop Television, which does the production, marketing and cable distribution for the J.C. Penney Television Shopping Channel. The channel reaches 6.5 million homes, a Penney spokesman said.

Michael Rosen, president of Shop Television, said Penney decided to extend its involvement with the service for at least five years. If, by that time, the network reaches 14 million homes, the contract will be renewed for five more years.

Earlier this year, Penney abandoned another home shopping venture, Telaction Corp., after investing $106 million in it. The company took a $20 million charge in the fiscal first quarter ended April 29, related to discontinuing the service.

(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)

LUTHER BURBANK CROSS-BRED PLANTS to produce the billion-dollar Idaho potato. Bioengineers set out to duplicate that feat -- scientifically and commercially -- with new life forms.

In 1953, James Watson and his colleagues unlocked the double helix of DNA (deoxyribonucleic acid), the genetic key to heredity. Twenty years later, two California academics, Stanley Cohen and Herbert Boyer, made "recombinant" DNA, transplanting a toad's gene into bacteria, which then reproduced toad genes.

When Boyer met Robert Swanson, an M.I.T.-trained chemist-turned-entrepreneur in 1976, they saw dollar signs. With $500 apiece and an injection of outside capital, they formed Genentech Inc. Commercial gene-splicing was born.

Genentech's first product, a brain protein called somatostatin, proved its technology. The next to be cloned, human insulin, had market potential and Genentech licensed it to Eli Lilly, which produced 80% of the insulin used by 1.5 million U.S. diabetics.

Their laboratory credentials established, Boyer and Swanson headed for Wall Street in 1980. At the time, Genentech had only one profitable year behind it (a modest $116,000 on revenue of $2.6 million in 1979) and no product of its own on the market. Nonetheless, the $36 million issue they floated in 1980 opened at $35 and leaped to $89 within 20 minutes.

The trip from the test tube was not without snags. Boyer and Cohen, for instance, both still university researchers, had to be talked into applying for a patent on their gene-splicing technique -- and then the Patent Office refused to grant it. That judgment, in turn, was reversed by the U.S. Supreme Court, leaving Cohen and Boyer holding the first patents for making recombinant DNA (now assigned to their schools).

Gene-splicing now is an integral part of the drug business. Genentech's 1988 sales were $335 million, both from licensing and its own products.

The portfolio unit of the French bank group Credit Lyonnais told stock market regulators that it bought 43,000 shares of Cie. de Navigation Mixte, apparently to help fend off an unwelcome takeover bid for the company.

Earlier yesterday, the Societe de Bourses Francaises was told that a unit of Framatome S.A. also bought Navigation Mixte shares, this purchase covering more than 160,000 shares.

Both companies are allies of Navigation Mixte in its fight against a hostile takeover bid launched last week by Cie. Financiere de Paribas at 1,850 French francs ($297) a share. Navigation Mixte's chairman had suggested that friendly institutions were likely to buy its stock as soon as trading opened Monday.

The Credit Lyonnais purchase, for 33,000 regular common shares and 10,000 newly created shares, is valued at about slightly more than 80 million French francs.

Unocal Corp., Los Angeles, said it and Petroleos de Venezuela S.A. would create a petroleum marketing and refining general partnership in the Midwest.

The joint venture, Uno-Ven Co., would generate total annual revenue of about $500 million and have 1,100 employees, a Unocal spokesman said. Unocal said the venture would enable it to recover more of its refining and marketing investment and prepare for expected growth in exploration, production, chemicals and other areas.

It said financing would consist of $250 million from a private placement obtained through Shearson Lehman Hutton Inc. and a $150 million revolving credit line underwritten by Chase Manhattan Bank.

In addition to Unocal's 153,000 barrel-a-day refinery near Lemont, Ill., the new venture would control 17 distribution terminals, a lubricating-oil blending and packaging plant, and 131 company-owned Unocal service stations. It said the venture, expected to take control of the facilities Dec. 1, would also serve another 3,300 independent Unocal gasoline stations. Petroleos will supply 135,000 barrels of oil a day for the refinery, Unocal said.

Mitsubishi Heavy Industries Ltd. said unconsolidated pretax earnings in the fiscal first half surged 79% to a record 63.25 billion yen ($445.7 million), reflecting strong demand for a variety of products.

In the period ended Sept. 30, net income rose 90% to 31.18 billion yen, or 9.34 yen a share, from 16.38 billion yen, or 5.05 yen a share. A year ago, the Tokyo company had pretax profit of 35.38 billion yen.

Sales amounted to 1.011 trillion yen, climbing 29% from 787.02 billion yen.

Encouraged by the brisk performance, Mitsubishi plans to raise its per-share dividend to 3.50 yen from three yen.

Company officials said the current robust domestic demand that has been fueling sustained economic expansion helped push up sales of products like ships, steel structures, power systems and machinery and resulted in sharply higher profit.

Senate leaders traded proposals aimed at speeding action on legislation to narrow the deficit and raise the federal government's debt limit -- but the major stumbling block remains President Bush's proposal to cut the capital-gains tax rate.

Democrats want the tax provision to be a separate bill, subject to the usual procedural obstacles. Republicans, meanwhile, want to try to protect the measure by combining it with two politically popular issues that Democrats could find hard to block.

The talks between Senate Majority Leader George Mitchell of Maine and his GOP counterpart, Sen. Robert Dole of Kansas, are expected to resume today.

Last night, after meeting with Mr. Bush and administration officials at the White House, Mr. Dole proposed streamlining the fiscal 1990 deficit-reduction bill, now stalled in a House-Senate conference committee, and passing a long-term extension of the federal debt ceiling without any accompanying amendments.

Under this plan, two provisions currently in the House version of the deficit-cutting bill -- repeal of both the catastrophic-illness insurance program and a controversial 1986 tax provision intended to counter discrimination in employee-benefit plans -- would be made into a separate bill.

Republicans would try to attach a capital-gains provision to that legislation, hoping the political popularity of its other two parts would dissuade Democrats from blocking it.

Democrats want to avoid having to make that choice by making the capital-gains tax cut an individual bill. Sen. Mitchell is confident he has sufficient votes to block such a measure with procedural actions.

Both plans would drop child-care provisions from the House version of the deficit-reduction legislation and let it progress as a separate bill. While that could make it vulnerable to a veto by Mr. Bush, Democrats argue that a presidential rejection would give their party a valuable issue in next year's congressional elections.

Senate Democrats are to meet today to consider the GOP proposal.

Yesterday, Mr. Dole seemed weary of the Bush administration's strategy of pushing the capital-gains measure at every chance in the face of Democratic procedural hurdles. Pushing the issue on legislation needed to avoid default by the federal government, he told reporters, "doesn't seem to be very good strategy to me."

At 12:01 a.m. EST today, the federal government's temporary $2.87 trillion debt limit expired. To avoid default, lawmakers must pass legislation raising the limit to $3.12 trillion from $2.80 trillion by next Wednesday, according to the Treasury.

Pressed by Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee, Treasury Undersecretary Robert Glauber told a congressional hearing that the administration would give up its demand for the capital-gains tax cut if faced with a potential default.

Price Stern Sloan Inc. said it hired an investment banking firm to assist in evaluating restructuring or merger alternatives and reported a net loss of $8.1 million, or $2.14 a share, for the third quarter ended Sept.

These results compare with net income of $1.8 million, or 44 cents a share, for the corresponding period last year. This quarter's loss includes pretax charges of $4.9 million on the proposed discontinuation of the company's troubled British subsidiary, and $3.7 million of other write-offs the company said were non-recurring and principally related to inventory, publishing advances and pre-publication costs. The publishing concern said it retained the investment banking firm of Donaldson, Lufkin & Jenrette Securities Inc. to act as its financial adviser, assisting in the evaluation of various financial and strategic alternatives, including debt refinancing, raising capital, recapitalization, a merger or sale of the company.

The company also retained attorney Martin P. Levin, a director of the company and former head of the Times-Mirror Publishing Group, as an adviser.

Net sales for this year's third quarter were $14 million, down from $21.4 million last year. The company attributed the decrease in part to the exclusion of the company's British sales from the current year's figures as a result of the subsidiary's status as a proposed discontinued operation and, in part, to lower sales in certain key foreign and domestic accounts. U.K. sales for last year's quarter were about $3 million.

Stock prices surged as a multibillion-dollar takeover proposal helped restore market players' confidence about the prospects for further deal-making.

Paper and forest-products stocks were especially strong, as the offer for Great Northern Nekoosa by Georgia-Pacific triggered speculation that the industry could be in for a wave of merger activity.

The Dow Jones Industrial Average climbed 41.60 to 2645.08 even though some late selling caused the market to retreat from session highs. Trading was moderate, with 176,100,000 shares changing hands on the New York Stock Exchange.

Aside from the takeover news, big buy orders were placed for blue-chip shares in afternoon trading. Traders said the buy programs came from very large institutional accounts that were also active in the stock-index futures markets. At one point, almost all of the shares in the 20-stock Major Market Index, which mimics the industrial average, were sharply higher.

Some 1,111 Big Board issues advanced in price and only 448 declined, while broader market averages rose sharply. Standard & Poor's 500-Stock Index climbed 5.29 to 340.36, the Dow Jones Equity Market Index added 4.70 to 318.79 and the New York Stock Exchange Composite Index climbed 2.65 to

Great Northern surged 20 1/8 to 62 7/8, well above Georgia-Pacific's offering price of $58 a share, amid speculation that other suitors for the company would surface or that the bid would be raised. Nearly 6.3 million shares, or about 11.5% of the company's shares outstanding, changed hands in Big Board composite trading.

With stocks having been battered lately because of the collapse of takeover offers for UAL, the parent company of United Airlines, and AMR, the parent of American Airlines, analysts viewed the proposal as a psychological lift for the market.

The $3.18 billion bid, which had been rumored since last week, "creates a better feeling that there's value in the market at current levels and renews prospects for a hot tape," says A.C. Moore, director of research at Argus Research Corp.

Traders and analysts alike said the market's surge also reflected an easing of concerns about volatility because of moves by a number of brokerage firms to curtail or cease stock-index arbitrage. Much of the instability in stock prices lately has been blamed on arbitrage trading, designed to profit from differences in prices between stocks and index futures.

"People are looking for an ability to try and read the market, rather than be manipulated," said Dudley A. Eppel, manager of equity trading at Donaldson, Lufkin & Jenrette. He noted that institutional investors showed "pretty general" interest in stocks in the latest session.

But traders also said arbitrage-related trading contributed to the market's surge, as buy programs boosted prices shortly after the opening and sporadically through the remainder of the session.

Georgia-Pacific fell 2 1/2 to 50 7/8, but most paper and forest-products stocks firmed as market players speculated about other potential industry takeover targets.

Within the paper sector, Mead climbed 2 3/8 to 38 3/4 on 1.3 million shares, Union Camp rose 2 3/4 to 37 3/4, Federal Paper Board added 1 3/4 to 23 7/8, Bowater gained 1 1/2 to 27 1/2, Stone Container rose 1 to 26 1/8 and Temple-Inland jumped 3 3/4 to 62 1/4.

Forest-products issues showing strength included Champion International, which went up 1 3/8 to 31 7/8; Weyerhaeuser, up 3/4 to 27 1/4; Louisiana-Pacific, up 1 1/8 to 40 3/8, and Boise Cascade, up 5/8 to 42.

The theme of industry consolidation had surfaced earlier this year among drug stocks, which posted solid gains in the latest session. Pfizer gained 1 7/8 to 67 5/8, Schering-Plough added 2 1/4 to 75 3/4, Eli Lilly rose 1 3/8 to 62 1/8 and Upjohn firmed 3/4 to 38.

Also, SmithKline Beecham rose 1 3/8 to 39 1/2. An advisory committee of the Food and Drug Administration recommended that the agency approve Eminase, the company's heart drug.

Two rumored restructuring candidates in the oil industry moved higher: Chevron, which rose 1 3/4 to 68 1/4 on 3.5 million shares, and USX, which gained 1 1/4 to 34 5/8. Pennzoil is rumored to be accumulating a stake in Chevron in order to push for a revamping of the company; investor Carl Icahn has recently increased his stake in USX, which separately reported earnings that were in line with expectations.

Paramount Communications, which completed the $3.35 billion sale of its Associates Corp. financial-services unit to Ford Motor, gained 1 1/8 to 55 7/8 after losing one point Monday amid rumors of a delay. The company said the sale would produce a $1.2 billion gain in the fourth quarter.

BankAmerica climbed 1 3/4 to 30 after PaineWebber boosted its investment opinion on the stock to its highest rating. The upgrade reflected the 20% decline in shares of the bank since the firm lowered its rating in early October, based on the belief the stock had become expensive. Sea Containers, which unveiled a proposed restructuring, advanced 1 to 62. The company said it would repurchase half of its common shares at $70 each, sell an estimated $1.1 billion in assets and pay a special preferred-stock dividend to common-stock holders.

Shaw Industries, which agreed to acquire Armstrong World Industries' carpet operations for an undisclosed price, rose 2 1/4 to 26 1/8. Armstrong added 1/8 to 39 1/8.

ERC Corp. rose 7/8 to 12. The company agreed definitively to be acquired by Ogden Corp. in a stock swap valued at about $82.5 million. Ogden gained 1 1/4 to 32 7/8.

Ocean Drilling & Research dropped 1 1/4 to 21 1/2 following news of a restructuring plan that calls for the company to reorganize its drilling business into a separate company and offer a 15% to 20% stake to the public.

The American Stock Exchange Market Value Index rose 1.71 to 370.58. Volume totaled 11,820,000 shares.

Imperial Holly fell 1 5/8 to 27 1/8 in the wake of its third-quarter earnings report. Net income was down from a year ago, when a gain from the restructuring of a retirement plan boosted earnigs.

Cilcorp Inc., Peoria, Ill., said it agreed to acquire the environmental consulting and analytical service businesses of Hunter Environmental Services Inc. of Southport, Conn.

The utility holding company said Hunter will receive 390,000 shares of a new series of Cilcorp convertible preferred stock with a face value of $39 million for the businesses. Cilcorp will also assume $22 million of Hunter's existing debt. As part of the agreement, Cilcorp said it will pay Hunter $4 million in exchange for agreements not to compete.

Cilcorp said the businesses to be acquired had revenue of $76 million for the year ended March 31.

Separately, Cilcorp said it plans to purchase as many as 1.4 million shares, or 10% of its common stock outstanding from time to time on the open market and through privately negotiated transactions.

The company, which currently has 13.5 million common shares outstanding, said it has no specific plans for the shares.

BUSH AND GORBACHEV WILL HOLD two days of informal talks next month.

The president said that he and the Kremlin leader would meet Dec. 2-3 aboard U.S. and Soviet naval vessels in the Mediterranean to discuss a wide range of issues without a formal agenda. A simultaneous announcement was made in Moscow. Bush said that neither he nor Gorbachev expected any "substantial decisions or agreements." The seaborne meetings won't disrupt plans for a formal summit next spring or summer, at which an arms-control treaty is likely to be completed.

The two leaders are expected to discuss changes sweeping the East bloc as well as human-rights issues, regional disputes and economic cooperation.

Israel's army lifted a blockade around a Palestinian town in the occupied West Bank, ending a 42-day campaign of seizing cars, furniture and other goods to crush a tax boycott. While residents claimed a victory, military authorities said they had confiscated the equivalent of more than $1.5 million to make up for the unpaid taxes.

East German leader Krenz arrived in Moscow for talks today with Gorbachev on restructuring proposals. In East Berlin, Communist Party officials considered legalizing New Forum, the country's largest opposition alliance, as about 20,000 demonstrators staged protests in three cities to press demands for democratic freedoms.

The House approved a permanent smoking ban on nearly all domestic airline routes as part of a $27.1 billion transportation bill that must still overcome budget obstacles in Congress. The chamber also sent to Bush a nearly $67 billion fiscal 1990 measure that includes the first construction funds for a space station.

Nicaragua's Ortega postponed until today a decision on whether to end a 19-month-old cease-fire in the conflict with the Contra rebels. In Washington, the Senate voted to condemn Ortega's threat to cancel the truce, and Bush said he would review U.S. policy toward Managua, including the possibility of renewing military aid to the rebels.

Chinese leader Deng told former President Nixon that the U.S. was deeply involved in "the turmoil and counterrevolutionary rebellion" that gripped Beijing last spring. Nixon, on the fourth day of a private visit to China, said that damage to Sino-U.S. relations was "very great," calling the situation "the most serious" since 1972.

Afghanistan's troops broke through a guerrilla blockade on the strategic Salang Highway, allowing trucks carrying food and other necessities to reach Kabul after a missile attack on rebel strongholds. The convoy of about 100 vehicles was the first to make deliveries to the capital in about 10 days.

Turkey's legislature elected Prime Minister Ozal as the country's first civilian president since 1960, opening the way for a change of government under a new premier he will select. The vote in Ankara was boycotted by opposition politicians, who vowed to oust Ozal. He begins his seven-year term Nov. 9, succeeding Kenan Evren.

South Africa's government dismissed demands by right-wing Conservatives, the nation's main opposition party, for emergency talks on Pretoria's recent tolerance of dissent. The government also urged whites to refrain from panic over growing black protests, such as the massive anti-apartheid rally Sunday on the outskirts of Soweto.

Researchers in Belgium said they have developed a genetic engineering technique for creating hybrid plants for a number of crops, such as cotton, soybeans and rice. The scientists at Plant Genetic Systems N.V. isolated a gene that could lead to a generation of plants possessing a high-production trait.

A bomb exploded at a leftist union hall in San Salvador, killing at least eight people and injuring about 30 others, including two Americans, authorities said. The blast, which wrecked the opposition labor group's offices, was the latest in a series of attacks in El Salvador's 10-year-old civil war.

Hungary's Parliament voted to hold a national referendum on an election to fill the new post of president. The balloting to decide when and how to fill the position, which replaces a collective presidency under a pact signed by the ruling Socialists and opposition groups, is to be held Nov.

The State Department denied asylum to a Vietnamese man who escaped from his homeland by lashing himself to the rudder housing of a tanker for two days in monsoon seas. A spokesman for Democratic Sen. Pell of Rhode Island said, however, that the Immigration and Naturalization Service would review the stowaway's request.

Ogden Projects Inc. said net income jumped to $6.6 million, or 18 cents a share, in the third quarter.

The Fairfield, N.J., company, which is 92%-owned by Ogden Corp., New York, had net of $1.1 million, or four cents a share, a year ago. Revenue soared to $101.7 million from $39.5 million.

Ogden Projects, whose shares began trading on the New York Stock Exchange in August, closed yesterday at $26.875, down 75 cents. The stock began trading this summer at $14 apiece.

Ogden Projects, which has interests in solid-waste recovery and hazardous-waste cleanup, said it has 13 facilities in operation, up from seven a year ago.

Meanwhile, Ogden Corp., which also has interests in building maintenance and management, reported third-quarter net income of $27.1 million, or 67 cents a share, more than twice the $13.5 million, or 34 cents a share, a year earlier. Revenue rose 33% to $378.1 million from $283.8 million.

Under attack by its own listed companies and powerful floor traders, the New York Stock Exchange is considering reinstituting a "collar" on program trading that it abandoned last year, according to people familiar with the Big Board.

The exchange also may step up its disclosure of firms engaged in program trading, these people said.

Big Board officials wouldn't comment publicly. But in an interview in which he called the stock market's volatility a "national problem," Big Board Chairman John J. Phelan Jr. said, "We are going to try to do some things in the short intermediate term" to help the situation.

Mr. Phelan has been viewed by many exchange members as being indifferent to stock-price swings caused by program trades. He said he is "very surprised" by the furor over program trading and the exchange's role in it that has raged in recent days.

Mr. Phelan said that the Big Board has been trying to deal quietly with the issue, but that banning computer-assisted trading strategies entirely, as some investors want, would be like "taking everybody out of an automobile and making them ride a horse."

The exchange has a board meeting scheduled for tomorrow, and it is expected that some public announcement could be made after that.

Big Board officials have been under seige from both investors and the exchange's own floor traders since the Dow Jones Industrial Average's 190-point tumble on Oct. 13. Mr. Phelan hasn't been making public remarks in recent days, and many people have urged him to take more of a leadership role on the program trading issue.

What the Big Board is considering is re-establishing a "collar" on program trading when the market moves significantly. Early last year, after a 140-point, one-day drop in the Dow, the Big Board instituted the collar, which banned program trading through the Big Board's computers whenever the Dow moved 50 points up or down in a day. It didn't work.

"The collar was penetrated on a number of occasions," meaning securities firms figured out ways to conduct program trades to circumvent the collar and use the Big Board's electronic trading system, Mr. Phelan said. That was when the exchange took a new tack by publishing monthly statistics listing the top 15 program trading firms.

Exchange officials emphasized that the Big Board is considering a variety of actions to deal with program trading. People familiar with the exchange said another idea likely to be approved is expanding the monthly reports on program trading to cover specific days or even hours of heavy program trading and who was doing it.

Meanwhile, another big Wall Street brokerage firm joined others that have been pulling back from program trading. American Express Co. 's Shearson Lehman Hutton Inc. unit said it ceased all index-arbitrage program trading for client accounts. In stock-index arbitrage, traders buy and sell large amounts of stock with offsetting trades in stock-index futures to profit from fleeting price discrepancies between the two markets.

Shearson, which in September was the 11th-biggest program trader on the Big Board, had already suspended stock-index arbitrage for its own account.

Also, CS First Boston Inc. 's First Boston Corp. unit, the fifth-biggest program trader in September, is "preparing a response" to the program-trading outcry, officials of the firm said. First Boston is one of the few major Wall Street firms that haven't pulled back from program trading in recent days.

Mr. Phelan is an adroit diplomat who normally appears to be solidly in control of the Big Board's factions. But he has been getting heat from all sides over program trading.

Mr. Phelan's recent remarks that investors simply must get used to the stock-market volatility from program trading have drawn criticism from both the exchange's stock specialists, who make markets in individual stocks, and from many companies that have shares listed on the Big Board.

Mr. Phelan said that his predicting continued volatility is just "how the world is. If bringing the message is a crime, I'm guilty of it." But he said this doesn't mean he is satisfied with the market's big swings.

"We're trying to take care of a heck of a lot of constituents," Mr. Phelan said. "Each one has a different agenda."

For example, in a special meeting Monday with Mr. Phelan, senior officials of some of the Big Board's 49 stock specialist firms complained that the exchange is no longer representing their interests. "We are looking for representation we haven't had," a specialist said. "We've had dictation."

After another session Mr. Phelan held yesterday with major brokerage firms such as Morgan Stanley & Co., Goldman, Sachs & Co., PaineWebber Group Inc. and First Boston -- all of which have engaged in program trading -- an executive of a top brokerage firm said, "Clearly, the firms want the exchange to take leadership."

Many specialist firms resent the Big Board's new "basket" product that allows institutions to buy or sell all stocks in the Standard & Poor's 500-stock index in one shot. Ultimately, the specialists view this as yet another step toward electronic trading that could eventually destroy their franchise.

"His {Phelan's} own interests are in building an electronic marketplace," said a market maker.

The basket product, while it has got off to a slow start, is being supported by some big brokerage firms -- another member of Mr. Phelan's splintered constituency.

Mr. Phelan has had difficulty convincing the public that the Big Board is serious about curbing volatility, especially as the exchange clearly relishes its role as the home for $200 billion in stock-index funds, which buy huge baskets of stocks to mimic popular stock-market indexes like the Standard & Poor's 500, and which sometimes employ program trading. The Big Board wants to keep such index funds from fleeing to overseas markets, but only as long as it "handles it intelligently," Mr. Phelan said.

Despite what some investors are suggesting, the Big Board isn't even considering a total ban on program trading or stock futures, exchange officials said. Most revisions it will propose will be geared toward slowing down program trading during stressful periods, said officials working with the exchange. Computers have made trading more rapid, but that can be fixed with some fine-tuning. "I think if you {can} speed things up, you can slow them down," Mr. Phelan said. "That's different than wrecking them."

While volatility won't go away, he said, "Volatility is greater than program trading. What I'm trying to say to people is, it's proper to worry about program trading, but it's only a piece of the business."

For example, Mr. Phelan said that big institutions have so much control over public investments that they can cause big swings in the market, regardless of index arbitrage. "A lot of people would like to go back to 1970," before program trading, he said. "I would like to go back to 1970. But we're not going back to 1970."

Indeed, Mr. Phelan said that if stock-market volatility persists, the U.S. may lose its edge as being the best place to raise capital. "Japan's markets are more stable," he said. "If that continues, a significant number of {U.S.} companies will go over there to raise money."

In coming days, when the Big Board formulates its responses to the program-trading problem, Mr. Phelan may take a more public role in the issue.

Lewis L. Glucksman, vice chairman of Smith Barney, Harris Upham & Co., said: "This is a problem that's taking on a life of its own. The program trading situation seems to have driven individual investors as well as others out of the market, and even Europeans are suspicious. The exchange should take a pro-active position."

For now, however, Mr. Phelan said: "I refuse to get out there and tell everybody everything is hunky-dory. We have a major problem, and that problem is volatility."

Craig Torres contributed to this article.

A NEW MINIMUM-WAGE PLAN has been worked out by Congress and Bush, opening the way for the first increase in over nine years. The compromise proposal, ending a long impasse between Democrats and the president, would boost the minimum wage to $4.25 an hour by April 1991 from $3.35 now. The legislation also includes a lower "training wage" for new workers who are teen-agers.

The Big Board is considering reviving a curb on program trading when the market is volatile. The exchange, which abandoned such a "collar" last year because it didn't prevent sharp price swings, has been under attack recently for not taking action against program trading.

Great Northern Nekoosa reacted coolly to Georgia-Pacific's takeover bid of $58 a share, or $3.19 billion, though the suitor said all terms are negotiable. Great Northern's stock soared $20.125, to $62.875, on speculation that a higher bid would emerge.

Stock prices rallied as the Georgia-Pacific bid broke the market's recent gloom. The Dow Jones industrials finished up 41.60, at 2645.08. The dollar and bond prices also closed higher.

Leading indicators rose a slight 0.2% in September, a further indication the economy is slowing but without any clear sign of whether a recession looms. Meanwhile, new-home sales plunged 14% in the month.

Labor costs climbed 1.2% in private industry during the third quarter, matching the second-quarter rise. Health-insurance costs soared.

Time Warner and Sony could end up becoming partners in several business ventures as part of a settlement of their dispute over Hollywood producers Peter Guber and Jon Peters.

A bidding war for Jaguar became more likely as Britain unexpectedly decided to end restrictions blocking a takeover of the luxury car maker.

Sea Containers plans to sell $1.1 billion of assets and use some of the proceeds to buy about 50% of its common shares for $70 each. The company is trying to fend off a hostile bid by two European shipping firms.

Eastern Airlines pilots were awarded between $60 million and $100 million in back pay by an arbitrator, a decision that could complicate the carrier's bankruptcy reorganization.

LTV Steel is boosting prices of flat rolled steel products an average 3%, but it's unclear whether the increases, set for Jan. 1, 1990, will stick.

Southern's Gulf Power unit paid $500,000 in fines after pleading guilty to conspiracy to make illegal political contributions and tax evasion.

More big Japanese investors are buying U.S. mortgage-backed securities, reversing a recent trend.

USX's profit dropped 23% in the third quarter as improved oil results failed to offset weakness in the firm's steel and natural gas operations.

Miniscribe reported a negative net worth and hinted it may file for Chapter 11. The disk-drive maker disclosed a major fraud two months ago.

Markets --

Stocks: Volume 176,100,000 shares. Dow Jones industrials 2645.08, up 41.60; transportation 1205.01, up 13.15; utilities 219.19, up 2.45.

Bonds: Shearson Lehman Hutton Treasury index 3426.33, up

Commodities: Dow Jones futures index 129.63, up 0.25; spot index 129.84, off 0.25.

Dollar: 142.85 yen, up 0.95; 1.8415 marks, up 0.0075.

Bond prices staggered in seesaw trading, rising on reports of economic weakness and falling on reports of economic strength.

Treasury bonds got off to a strong start, advancing modestly during overnight trading on foreign markets.

"We saw good buying in Japan and excellent buying in London," said Jay Goldinger, market strategist and trader at Capital Insight Inc., Beverly Hills, Calif. The market's tempo was helped by the dollar's resiliency, he said. Late in London, the dollar was quoted at 1.8410 West German marks and 142.70 Japanese yen, up from late Monday in New York. British sterling eased to $1.5775 from $1.5825.

When U.S. trading began, Treasury bonds received an additional boost from news that sales of new single-family homes fell 14% in September. The contraction was twice as large as economists projected and was the sharpest decline since a 19% drop in January 1982.

Economists said the report raised speculation that the economic slowdown could turn into a recession, which would pave the way for the Federal Reserve to lower interest rates. But later in the day, a report by the Purchasing Management Association of Chicago cast doubt on the recession scenario. The association said its October index of economic activity rose to 51.6% after having been below 50% for three consecutive months. A reading below 50% indicates that the manufacturing industry is slowing while a reading above 50% suggests that the industry is expanding. Bond prices fell after the Chicago report was released.

By the end of the day, bond prices were mixed. The benchmark 30-year bond was nearly 1/4 point higher, or up about $2.50 for each $1,000 face amount. New two-year notes ended unchanged while three-year and four-year notes were slightly lower. Municipal bonds ended unchanged to as much as 1/2 point higher while mortgage-backed securities were up about 1/8 point. Corporate bonds were unchanged.

In the corporate market, an expected debt offering today by International Business Machines Corp. generated considerable attention.

The giant computer maker is slated to offer $500 million of 30-year non-callable debentures through underwriters led by Salomon Brothers Inc. Traders expect the bonds to yield about 0.60 to 0.65 percentage point above the Treasury's benchmark 30-year bond, which ended Tuesday with a yield of about 7.90%.

The last time IBM tapped the corporate debt market was in April 1988, when it offered $500 million of debt securities.

IBM's visits to the debt market are closely watched by treasurers at other corporations and by credit market analysts. Some analysts believe the company has the ability to pinpoint the trough in interest-rate cycles.

In October 1979, just days before the Federal Reserve raised interest rates, IBM offered $1 billion in debt securities. The boost in rates sent IBM's bonds tumbling, leaving underwriters with millions of dollars of losses and triggering a sell-off in the overall market.

The company "can't be bullish if they're doing a sizable 30-year bullet," said one analyst.

Others said IBM might increase the size of the offering to as much as $1 billion if investor demand is strong. The company has $1 billion in debt filed with the Securities and Exchange Commission.

"I think the $500 million is a little bit of a fire drill," said Jim Ednee, head of the industrial bond department at Drexel Burnham Lambert Inc. "I think as the pricing time arrives, the bonds will come a little richer and in a larger amount."

Treasury Securities

Treasury prices ended mixed in light trading.

The benchmark 30-year bond was quoted late at 102 12/32 to yield 7.90% compared with 102 7/32 to yield 7.92% Monday. The latest 10-year notes were unchanged at 100 16/32 to yield 7.904%.

Short-term rates also were mixed. The discount rate on three-month Treasury bills rose slightly from the average rate at Monday's auction to 7.79% for a bond-equivalent yield of 8.04%. The discount rate on six-month Treasury bills fell slightly to 7.60% for a bond-equivalent yield of 7.99%.

Corporate Issues

Two junk bond issues were priced yesterday, including a scaled-backed offering by Beatrice Co.

A spokesman for underwriters Salomon Brothers Inc. said Beatrice cut its high-yield offering to $251 million from a planned $350 million after it became clear the company would have to give investors higher yields.

In the two-part offering, $151 million of senior subordinated reset notes were priced at 99.75 and carried a rate of 13 3/4%, while the $100 million of senior subordinated floating rate notes were priced to float at 4.25 percentage points above the London Interbank Offered Rate, or LIBOR. The one-year LIBOR rate yesterday was 8 7/16%.

Since the recent deterioration of the junk-bond market, at least two other junk issuers have said they plan to scale back planned high-yield offerings, and several issues have been postponed.

William Carmichael, Beatrice chief financial officer, said favorable market conditions in September prompted the company to plan more debt than necessary.

"However, given the changes in the market conditions that have occurred since then, we decided to sell only the amount needed to proceed with our contemplated recapitalization," he said.

Under the firm's original bank credit agreement, it was required to raise $250 million of subordinated debt to be used to repay some of the bank borrowings drawn to redeem $526.3 million of increasing rate debentures in August.

A month ago, when Beatrice first filed to sell debt, the company had planned to offer $200 million of its senior subordinated reset notes at a yield of 12 3/4%. The $150 million in senior subordinated floating-rate notes were targeted to be offered at a price to float four percentage points above the three-month LIBOR. By October, however, market conditions had deteriorated and the reset notes were targeted to be offered at a yield of between 13 1/4% and 13 1/2%.

Mr. Carmichael said investors also demanded stricter convenants.

Continental Cablevision Inc., via underwriters at Morgan Stanley & Co., priced $350 million of junk bonds at par to yield 12 7/8%.

Mortgage-Backed Securities

J.C. Penney & Co. issued $350 million of securities backed by credit-card receivables. The securities were priced at 99.1875 to yield about 9.19%. Underwriters at First Boston Corp. said the J.C. Penney credit-card securities are the first with a 10-year average life, which is much longer than previous such issues.

Elsewhere, Ginnie Mae's 9% issue for November delivery was quoted at 98 18/32 bid, up 5/32 from late Monday, to yield about 9.333% to a 12-year average life assumption.

Freddie Mac's 9 1/2% issue was quoted at 99 20/32, up 3/32 from Monday. Fannie Mae's 9% issue was at 98 7/32, up 1/8.

On the pricing front, an 11-class issue of $500 million Federal Home Loan Mortgage Corp. Remic mortgage securities was launched by a Morgan Stanley group. The offering is backed by Freddie Mac's 10% issue with a weighted average term to maturity of 29.583 months.

Municipal Issues

Municipal bonds were little changed to 1/2 point higher in late dealings.

"We were oversold and today we bounced back. Some accounts came in for some blocks in the secondary {market}, which we haven't seen for a while," said one trader.

"There were no {sell} lists and the calendar is lightening up a bit. There's light at the end of the tunnel for municipals," he said, adding that he expects prices to "inch up" in the near term.

The market's tone improved after Monday's pricing of $813 million New York City general obligation bonds. The issue's smooth absorption eased fears that supply would overwhelm demand in coming sessions, traders said. Demand for the bonds was strong enough to permit underwriters to trim some yields in the tax-exempt portion of the offering late Monday.

A two-part $75.1 million offering of wastewater treatment bonds by the New Jersey Wastewater Treatment Trust was more than half sold by late in the session, according to lead underwriter Merrill Lynch Capital Markets.

The debt was reoffered priced to yield from 6% in 1991 to 7.15% in 2008-2009.

Foreign Bonds

Most foreign government bonds markets were quiet.

West German bonds firmed a bit after Monday's fall, but traders said the market remains bearish due to speculation that interest rates could rise again.

In a speech given Friday but released late Monday, Bundesbank Vice President Helmut Schlesinger suggested that it was risky to claim that the booming German economy has reached the peak of its cycle. His comments were interpreted as a sign that higher interest rates are possible. On Oct. 5, the Bundesbank raised the Lombard and discount rates by one percentage point to 8% and 6%, respectively, the highest levels in seven years.

Germany's 7% bond due October 1999 was unchanged at 99.35 to yield 7.09% while the 6 3/4% notes due July 1994 rose 0.025 point to 97.275 to yield 7.445%. Japanese government bonds showed little change.

Japan's benchmark No. 111 issue due 1998 ended on brokers' screens at 95.90, down 0.02 point, to yield 5.435%.

British government bonds were little changed as investors awaited an address on economic policy by John Major, the new Chancellor of the Exchequer. Britain's benchmark 11 3/4% bond due 2003/2007 rose 2/32 to 111 1/2 to yield 10.14% while the 11 3/4% notes due 1991 were unchanged at 98 21/32 to yield 12.95%.

Paramount Communications Inc. said it sold two Simon & Schuster information services units to Macmillan Inc., a subsidiary of Maxwell Communication Corp.

The two units are Prentice Hall Information Services, which publishes tax, financial planning and business law information, among other services, and Prentice Hall Information Network, which electronically delivers tax information.

Terms weren't disclosed, but industry executives said the units were sold for $40 million.

Arthur H. Rosenfeld, previously president of the Prentice Hall Tax and Professional Services division, was named president of the newly formed Macmillan Professional and Business Reference division.

Simon & Schuster retains the Corporation Law looseleaf service, which will become part of its Prentice Hall Law & Business unit.

A governing body of both the Financial Accounting Standards Board and the Governmental Accounting Standards Board voted to give the FASB jurisdiction over accounting standards for certain government-owned entities.

The Financial Accounting Foundation voted 12-2 that FASB accounting rules supercede GASB rules in regard to utilities, hospitals, and colleges and universities owned by the government. GASB rules still apply for other government units.

After the GASB was founded in 1984, 11 years after the FASB, the government-owned entities were supposed to follow FASB rules unless the GASB superceded them. The GASB had told governments they didn't have to follow FASB rules on depreciation, making it difficult for bond-rating agencies to compare private and state-owned schools, which compete in the public bond market.

The foundation vote is effective for the affected government entities with fiscal years that begin starting next Jan. 1 and makes the financial results of the hospitals, colleges and schools easier to compare with for-profit businesses. But it may lead to separate financial reports based on different rules for the government entities under FASB rules and those still under GASB rules.

"Managers of government entities are often more concerned with the political and legal structure and financial-report comparability with profit-making businesses isn't always as high a priority," a foundation spokesman said.

Avery Inc. said it completed the sale of Uniroyal Chemical Holding Co. to a group led by management of Uniroyal Chemical Co., the unit's main business. It valued the transaction at $800 million.

Avery, which continues to operate a coal company it expects to sell at a loss, said in proxy materials it intends to seek control of one or more companies. After fees and repayment of debt, Avery is left with about $24 million in cash and securities from the Uniroyal sale. Avery paid $750 million, including various legal and financing fees, to acquire Uniroyal Chemical, Middlebury, Conn., in 1986 -- a move that burdened Avery with debt.

In over-the-counter trading, Avery shares were quoted yesterday at a bid price of 93.75 cents a share.

According to Avery, for the year ended Sept. 30, 1988, Uniroyal Chemical had sales of $734.2 million and a net loss of $47.1 million. An Avery spokesman said that the loss was magnified by accounting adjustments and that the company's loss was smaller on a cash basis. Uniroyal has 2,600 employees and facilities in the U.S., Canada, Brazil, Italy and Taiwan.

In a related development, Avery said it completed a recapitalization in which its controlling shareholders and top officers, Nelson Peltz and Peter W. May, surrendered warrants and preferred stock in exchange for a larger stake in Avery's common shares. On a fully diluted basis, the two raised their stake to 68% from 51%.

In December 1988, Messrs. Peltz and May sold their stock in Triangle Industries Inc., a packaging company they controlled, to Pechiney Corp. of France. The executives had profited handsomely by building American National Can Co., Triangle's chief asset.

In January 1989, the two men acquired the non-packaging assets of Triangle, including a controlling stake in Avery and, by extension, Uniroyal Chemical. In the August proxy material, Avery said that unless it sold Uniroyal, its ability to service debt would be hurt and Avery's shareholder value would "continue to erode." Until Avery makes an acquisition, Messrs. Peltz and May will waive their direct salaries and bonuses, the company said. For at least the next six months, however, Avery will continue to pay $200,000 a month for management services to a company controlled by Messrs. Peltz and May, according to the proxy material.

Clarcor Inc. said a plan to sell its J.L. Clark Inc. subsidiary to a group headed by Anderson Industries Inc. for $70.3 million has been terminated.

Clarcor, a maker of packaging and filtration products, said the two companies couldn't agree on terms of a definitive agreement. The sale price of the unit, which makes packaging products, was to consist of cash, notes and an amount to be determined by the unit's future performance.

Clarcor said it is inviting proposals from other prospective purchasers of the unit.

Both Clarcor and Anderson are based in Rockford, Ill.

Rally's Inc. said it adopted a shareholders rights plan to protect shareholders from an inadequately priced takeover offer.

The plan provides for the distribution of one common stock-purchase right as a dividend for each share of common outstanding. Each right entitles shareholders to buy one-half share of common for $30.

Earlier this month, a group led by three of the company's directors, Burt Sugarman, James M. Trotter III and Willam E. Trotter II, indicated it had a 45.2% stake in the Louisville, Ky., fast-food company and that it planned to seek a majority of seats on Rally's nine-member board.

The company said it was "concerned about the announced intent to acquire control of the company" by a Sugarman-led group.

Fujitsu Ltd. said it wants to withdraw its controversial one-yen bid to design a waterworks computer system for the city of Hiroshima.

Meanwhile, Japan's Fair Trade Commission said it was considering launching an investigation into whether the bid, the equivalent of less than a penny, violates anti-monopoly laws.

Hiroshima last week held an auction to pick the contractor, expecting to pay about 11 million yen for the project. Eight companies submitted bids, but Fujitsu won the contract by essentially saying it would do the job for free.

News of the bid drew sharp criticism from other computer companies and industry observers. Fujitsu itself, which said the bid hadn't been approved by its headquarters, was clearly embarrassed. The bid wasn't "socially acceptable," a company spokeswoman said.

Hiroshima officials said they still consider the contract in effect and had no immediate plans to cancel it. They said they wanted to wait for the outcome of any government investigation before deciding what to do.

The city's Department of Consumer Affairs charged Newmark & Lewis Inc. with failing to deliver on its promise of lowering prices.

In a civil suit commenced in state Supreme Court in New York, the agency alleged that the consumer-electronics and appliance discount-retailing chain engaged in deceptive advertising by claiming to have "lowered every price on every item" as part of an advertising campaign that began June 1.

The agency said it monitored Newmark & Lewis's advertised prices before and after the ad campaign, and found that the prices of at least 50 different items either increased or stayed the same.

In late May, Newmark & Lewis announced a plan to cut prices 5% to 20% and eliminate what it called a "standard discount-retailing practice" of negotiating individual deals with customers.

The consumer agency also disputed Newmark & Lewis's continuing strategy of advertising "new lower prices" when allgedly there haven't been price reductions since June 1.

Richard D. Lewis, president of the 47-store chain, defended the company's pricing campaign, saying it didn't use "the misleading expression `reduced from original prices. '" Mr. Lewis said the company marked price tags and advertised at its "lowest possible prices" for all its merchandise to reduce public confusion.

Mr. Lewis said the company gave the Consumer Affairs department "volumes of documents" to substantiate its statements, and made "every effort to comply" with all the agency's policies.

In its suit, the consumer agency seeks fines of $1,000 per violation of the city's Consumer Protection Law, costs of investigation, and an injunction to prevent Newmark & Lewis from continuing its allegedly deceptive advertising.

Wary investors have been running for the stock market's equivalent of bomb shelters, buying shares of gold-mining and utility companies.

Those two groups have recently been leading the list of stocks setting new highs. On Friday, when only a dozen common stocks hit 52-week highs on the New York Stock Exchange, five were gold-mining issues, and another four were utilities. On Monday, when a mere seven common stocks managed new highs, six were utilities or golds.

At first glance, gold and utilities seem strange bedfellows. After all, gold prices usually soar when inflation is high. Utility stocks, on the other hand, thrive on disinflation, because the fat dividends utilities pay look more attractive when prices are falling (or rising slowly).

But the two groups have something very important in common: They are both havens for scared money, stocks for people who hate stocks. It's as if investors, the past few days, are betting that something is going to go wrong -- even if they don't know what.

If the stock market and the economy catch their breath and show that they're on firmer footing, these stocks might well fall back. Indeed, that happened to some extent yesterday, as industrial stocks rebounded, partly on news of takeovers in the paper industry.

Still, a lot of investors clearly have revived their interest in gold and utility shares. "The primary overriding thing is that people are frightened," says Martin Sass, a New York money manager. "The aftershocks of Oct. 13 (when the Dow Jones Industrial Average dropped 190 points) are still reverberating."

Certainly, the Oct. 13 sell-off didn't settle any stomachs. Beyond that, money managers and analysts see other problems. Inventories are creeping up; car inventories are already high, and big auto makers are idling plants. Takeover fever has cooled, removing a major horse from the market's cart.

Britain's unsettled political scene also worries some investors. "The gyrations in the British government" add political uncertainty on top of high inflation and a ragged stock market, says John Hoffman, assistant director of research at Smith Barney, Harris Upham & Co. "One of the three major markets in the world is getting chewed up pretty bad."

"If the Fed does not come to the rescue and produce lower short-term interest rates over the next 30 days, the market's going to flounder," says Larry Wachtel, a market analyst with Prudential-Bache Securities.

With this sort of sentiment common, it's natural for investors to seek out "defensive" investments. Utilities are a classic example: Even in recessions, people continue to use electric power, water and gas at a fairly steady rate.

Such defensive issues as food, tobacco, and drug stocks have been in favor for some time. But many of these stocks have now become expensive. Mr. Wachtel points to Coca-Cola Co. and PepsiCo Inc. as examples: They're selling for 18 to 22 times estimated 1990 per-share earnings.

Gold stocks aren't cheap on this basis, either, with many selling for 20 times earnings or more. Even utility stocks aren't all that inexpensive, at an average of 14 times earnings. But the two groups represent a further step in defensiveness. If gold stocks and utilities continue to lead, it may signal that the market is in for rough times.

That's just what Joseph Granville expects. "We are going to explode lower," says the flamboyant market seer, who had a huge following a few years back. "Anyone telling you to buy stocks in this market is technically irresponsible. You don't want to own anything long except gold stocks."

One reason for his gloom is a weekly tally he keeps of stocks within a point of hitting new highs or lows. Last Friday, 96 stocks on the Big Board hit new 12-month lows. But by Mr. Granville's count, 493 issues were within one point of such lows.

Robert Stovall, a veteran New York money manager and president of Stovall/ Twenty-First Securities, has money in both gold and utility issues. "I think we could very well have {an economic} slowdown, beginning very soon if not already," he says.

Mr. Stovall doesn't expect an actual recession. But he does expect "a muffler dragger" of an economy, with "very slow growth, maybe one quarter of no growth at all." In such a climate, utility stocks look good to him. He favors FPL Group Inc., Florida Progress Corp., TECO Energy Inc., Wisconsin Energy Corp., and Dominion Resources Inc.

The appeal of gold issues, Mr. Stovall says, is that "they're a counter group. You go into them because they move counter to the general market." He adds that gold stocks had been down so long they were "ready for a bounce." His favorites are American Barrick Resources Corp., Echo Bay Mines Ltd. and Coeur d'Alene Mines Corp.

Nevertheless, Mr. Stovall emphasizes that "you don't buy {gold stocks} based on powerful fundamentals." In addition to having high price-earnings ratios, most pay puny dividends, if any. "The earning power {of gold mining companies} is restricted unless the gold price hops up over $425 an ounce," he says.

Abby Cohen, an investment strategist for Drexel Burnham Lambert, also thinks it makes sense to have some money in both utilities and gold. "My outlook is for a decline of about 10% in corporate profits" in 1990, she says. But "a bunch of utilities" should post profit increases. Among utilities, Drexel currently favors Entergy Corp. and General Public Utilities Corp.

As for gold, she notes that it usually rises when the dollar is weak, as it has been lately. Among gold stocks, Drexel likes Battle Mountain Gold Co., Newmont Gold Co. and Freeport-McMoRan Gold Co.

It never ceases to amaze me how the business world continues to trivialize the world's environmental problems ("Is Science, or Private Gain, Driving Ozone Policy?" by George Melloan, Business World, Oct. 24). To suggest that a 10% drop in ozone by the middle of the next century would be negligible is irresponsible and shortsighted. Consider the fact that a mere 2% drop in ozone would increase birth defects and mutations by allowing solar radiation to alter the DNA structure. Even a small reduction is unacceptable and to suggest otherwise is penny-wise and pound-foolish.

The reason environmentalists "don't mind seeing new crises arise" is because there are new crises. Crises larger and more dangerous to the quality of life than they were 10 years ago. If you are doubtful, consider for a moment that the Pomton Lakes Reservoirs in northern New Jersey, which supply the tristate area with drinking water, are riddled with toxic PCBs. This is a fact and not the product of some environmental doomsayer or a group's ploy to create a market.

It's time business leaders and the general public learn that mankind does not rule over this natural environment but is rather the integral, symbiotic player within nature's workings.

Mark T. Kuiper Jersey City, N.J.

Mr. Melloan's column was right on the money, but I wish it could have gone one step further. As an employee of a major refrigerator and freezer manufacturer, I have been heavily involved in dealing with the political manifestations of the Rowland-Molina theory (named after the researchers who found in 1974 that chlorofluorocarbons contributed to the depletion of ozone in the earth's atmosphere) and the Montreal Protocol. An important part of my effort has been to understand the science so I can explain it to corporate colleagues facing major changes in product design.

In my research, I have found a paper by Joseph Scotto of the National Cancer Institute and several colleagues reporting an 11-year decrease in UV-B radiation at eight U.S. measurement sites.

Our concern for the ozone layer, of course, grows out of the potential for increasing UV-B radiation, which could damage flora and fauna. The last of the measurements reported was in 1985, but recent conversations with Mr. Scotto indicated that he knew of no recent changes in the trend. I understand, but haven't yet verified, that there are studies by Norwegians, Russians and the Max Planck Institute that show either unchanging or declining UV-B at the surface.

To me, this calls into question the validity of the Rowland-Molina theory and hence the whole chlorofluorocarbons replacement effort. This, in turn, threatens the massive vested interests of which you have written. My questions on this subject at a recent meeting at the World Resources Institute with representatives of the National Resource Development Commission, the Environmental Protection Agency, Friends of the Earth, etc. were greeted with derision and some mumbled comments about that report being discredited. When I expressed amazement that no one was undertaking a more current and credible UV-B study, I was urged to get back to the agenda topic, which was, ironically, a schedule for getting rid of HCFCs, the so-called soft CFCs that are such an important part of the CFC substitution scenario.

Subsequently, I have learned that a private group, of which Du Pont is a part, is funding a modest program to continue data gathering at the Scotto report stations as well as to develop more sophisticated UVB measuring instruments. But this is almost an underground activity. To my knowledge, no government entities, including the EPA, are pursuing UV-B measurements. The topic never comes up in ozonedepletion "establishment" meetings, of which I have attended many.

It seems to me that such measurements are a vital part of any intellectually honest evaluation of the threat posed by CFCs. While recognizing that professional environmentalists may feel threatened, I intend to urge that UV-B be monitored whenever I can.

Frederick H. Hallett Vice President Industry and Government Relations White Consolidated Industries Inc. Washington

The relationship between surface release of CFCs and global stratospheric ozone loss was identified back in 1974. Although, like all scientific theories, it had its initial opponents, few experts question the connection now. The discovery of the ozone "hole" over Antarctica and the results of ground-based and high-altitude aircraft experiments conducted over the past several years serve as evidence that ozone depletion is related to CFC concentrations.

In the September issue of Scientific American, Thomas E. Graedel, distinguished member of the technical staff at AT&T Bell Laboratories, and Paul J. Crutzen, director of the air chemistry division of the Max Planck Institute for Chemistry in Mainz, West Germany, wrote, "It is now quite evident that chlorofluorocarbons, particularly CFC-11 and CFC-12 are the major culprits responsible for ozone depletion." Mr. Melloan quotes Peter Teagan and invokes the name of Arthur D. Little Inc. to support his statement. However, unlike Messrs. Graedel and Crutzen, who are both pioneers in the study of atmospheric chemistry, Mr. Teagan has no special expertise in the area. He is a mechanical engineer, not an atmospheric chemist.

It is insulting and demeaning to say that scientists "needed new crises to generate new grants and contracts" and that environmental groups need them to stay in business. Solving the global environmental problems we all face will require an unprecedented level of cooperation and communication among industry, policy makers and the scientific community world-wide.

Karen Fine Coburn Publisher Global Environmental Change Report Arlington, Mass.

Nearly two months after saying it had been the victim of widespread fraud, MiniScribe Corp. disclosed it had a negative net worth of $88 million as of July 2 and hinted that it might be forced to file for protection under bankruptcy laws.

Richard Rifenburgh, chairman and chief executive of the Longmont, Colo., disk-drive maker, also said the company continued losing money in the third quarter and expects to sustain further losses through the end of the year.

Mr. Rifenburgh told industry analysts he is moving "aggressively" to negotiate out-of-court settlements on a number of shareholder lawsuits, but noted that the company could file for bankruptcy-law protection if settlement talks fail. Mr. Rifenburgh also noted that 150 million shares of MiniScribe common stock were traded during the past three years, "so there's a tremendous amount of exposure."

MiniScribe has said that its financial results for the past three fiscal years would have to be restated because of the allegedly fraudulent accounting and marketing practices that inflated revenues and net income.

MiniScribe also hasn't filed any financial statements for 1989. Mr. Rifenburgh said such statements should be ready by the end of November. He said he expects the company to have $500 million in sales for this year. He didn't say what the company expected to report for year-earlier sales, which will be restated from the previously reported $603 million.

The release of MiniScribe's new balance sheet came one day after it introduced its new line of one-inch disk drives, on which it is pinning much of its hope for survival. Although it is not the first company to produce the thinner drives, which store information in personal computers, MiniScribe says it is the first with an 80-megabyte drive; the company plans to introduce a 120-megabyte drive next year.

Analysts and consultants had mixed reactions to yesterday's announcements, praising Mr. Rifenburgh's efforts but questioning whether the company can survive in a highly competitive marketplace. "It's a wait-and-see attitude," said Dave Vellante, vice president of storage research for International Data Corp. Others pointed out that at least four other disk-drive makers will have competitive one-inch drives early next year and that the industry already operates on very thin margins.

The company also faces delisting by the National Association of Securities Dealers. The company continues to trade in the over-the-counter market with an exception to listing requirements. MiniScribe filed a status report with the NASD on Monday, detailing its efforts to comply with listing requirements and requesting an extension of the exception, but hasn't received a response. MiniScribe common closed yesterday at $1.9375, down 6.25 cents, and has been trading for several months at less than $3 a share.

Meanwhile, U.S. Attorney Jerry Rafferty in Denver is reviewing the report prepared by MiniScribe's outside directors, to determine if criminal charges should be brought before a grand jury.

The MiniScribe report outlines a host of allegedly fraudulent practices, including the shipment of bricks and defective disk drives that were booked as sales, and inventory forgeries in accounting records. The internal investigation also criticized MiniScribe's auditors, Coopers & Lybrand, for allegedly ignoring numerous red flags.

Mr. Rifenburgh said the board still hasn't acted on most of the internal report's recommendations, pending restatement of the balance sheet. He added that he expects to make a recommendation within a few weeks on whether MiniScribe should file its own lawsuits against former company officers and directors.

American Enterprise Institute scholar Norman Ornstein in the Oct. 21 TV Guide on "What TV News Doesn't Report About Congress -- and Should":

By concentrating all their resources on the pay raise, Wright and Tower, the networks actually overlooked some major stories that showed the flaws and shortcomings of the institution. . . . An imaginative producer could easily have created a fast-moving and interesting piece about how Congress really works -- and why voters in, say, West Virginia got a federally funded university project and building while voters in Arkansas did not. But nobody did such a piece, reflecting a contemporary axiom: the more a scandal has to do with a congressman's duties as a congressman, the less likely it is to catch the fancy of a network.

Ethicist Michael Josephson, in one of his institute's recent publications on "Journalism: In the Year 2000":

The operative definition of newsworthiness will favor virtually unrestrained use of personal, sensitive and intimate facts. Traditional standards of relevancy and importance ("is this something the public ought to know") will be replaced by a much broader test ("is this something the public is interested in knowing"). And, since the public has always been fascinated by gossip and voyeurism, reporters and editors will strain for creative angles to justify the inclusion of collateral facts about private lives including sexual activities and domestic relationships, activities of family members, and all matters about mental and physical health. Similarly, visual images will be more vivid, sensational and, sometimes, gruesome. One consequence of the trend toward tabloid standards of taste will be fierce attacks from politicians who will find sufficient evidence of abuse to arouse an already cynical public to control the press.

Bankers Trust New York Corp. won permission from the Federal Reserve Board to move the company's private placement department to its fledgling securities subsidiary.

The seemingly mundane action, which was opposed by the Securities Industry Association, a trade group, has important implications for banks' recent entry into the underwriting of corporate securities. The Fed's action increases the volume of publicly registered securities that banks' securities affiliates will be able to underwrite. Several other banks have similar applications pending.

Over the past two years, the Fed has given a handful of banks' securities affiliates permission to underwrite and deal in a variety of corporate, asset-backed and municipal securities that had previously been the sole domain of securities firms. Securities firms have challenged those Fed approvals, saying they violate federal laws separating the banking and securities businesses.

However, the Fed limited the revenue that banks could earn from these new underwriting activities to no more than 10% of the revenue earned from other securities activities long open to banks, such as dealing in U.S. Treasurys.

For some banks that 10% ceiling created problems. But, by allowing BT Securities Inc. to handle private placements, the Fed boosted the volume of new types of underwriting that the unit can do.

Private placements involve debt and equity securities, typically in denominations of $1 million, that are sold to institutional investors and aren't registered with the Securities and Exchange Commission. Last year, Bankers Trust said it placed $10 billion of corporate debt and equities privately.

Companies listed below reported quarterly profit substantially different from the average of analysts' estimates. The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share. Estimated and actual results involving losses are omitted.

The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days. Otherwise, actual profit is compared with the 300-day estimate.

Bonnie J. Stedt was named an executive vice president of the American Express Travel Related Services Co. unit of this travel and financial services firm. She retains her duties of human-resources director.

Joe F. Lynch, the 56-year-old chairman and chief executive officer of First Continental Real Estate Investment Trust, was named to the new post of vice chairman of this bank holding company.

Every workday at 11 a.m., 40-year-old Mike Sinyard dons cycling clothes, hops on a bike he keeps at his Morgan Hill, Calif., office and sets out to cover a distance most people would travel only by car. As many as 50 of his employees at Specialized Bicycle Components Inc. ride with him. When they return to their desks at 1 p.m., they have pedaled 20 miles.

Such fervor for cycling helped Mr. Sinyard build a creative company at the forefront of its industry. Founded by bike enthusiasts rather than businessmen, Specialized spotted the appeal of fat-tired bikes that go almost anywhere and began mass-producing them in 1981. In the past five years, the company's sales have grown to $80 million from $26 million. Today, so-called mountain bikes account for two-thirds of the $2 billion spent annually on all bicycles in the U.S. With 65% of its sales coming from mountain bikes, Specialized is widely considered to be a market leader. (Accessories, largely for mountain-bike users, account for much of the rest of sales.)

But today, the company needs its entrepreneurial spirit more than ever. One large competitor after another is leaping into the booming market Specialized helped create, turning out mountain bikes with such well-known names as Schwinn, Peugeot, Raleigh and Nishiki.

Thus, Mr. Sinyard's company must innovate more than ever to stay ahead of them, by developing new products specifically for mountain biking. At the same time, though, it must become more structured to better manage its growth. Accomplishing both will be a balancing act as challenging as riding a unicycle.

It is a problem common to small companies that have grown fast -- especially when their success attracts big-time competitors. "The big word around Specialized is passion," says Erik Eidsmo, a former ski-industry executive whom Mr. Sinyard recruited from Citicorp to run marketing and sales. "What I hope to bring to this is another word: process. That's my challenge. It's Mike's challenge as well."

Mr. Eidsmo is one of several key people from outside the cycling industry who were hired to bring the free-wheeling, fast-growing company under tighter control. "We had a lot of problems," Mr. Sinyard says. While the company's sales were soaring, "We still had a system that was probably appropriate for $10 million to $20 million in sales." Adds Mr. Eidsmo, "What felt good that day was done that day."

Since his arrival in May, Mr. Eidsmo has put in place techniques learned while working for Citicorp, such as management-by-objective, detailed project plans and forecasts of company sales and product trends. "We're finally getting -- and it's been very painful -- some understanding of what the company's long-term horizon should begin to look like," Mr. Eidsmo says. "But it's risky," he says of Specialized's attempt to adopt a corporate structure. "You don't want to lose the magic" of the company's creative drive.

Hoping to stay ahead of the pack, the company is emphasizing innovation. At a recent trade show, convention-goers lined up to view a new Specialized bike frame that weighs just 2.7 pounds -- a pound less than the lightest mountain-bike frame on the market. By replacing the frame's steel lugs with titanium ones, Mr. Sinyard's company plans to make its next generation of frames even lighter.

At the trade show, Specialized also unveiled a revolutionary three-spoked bike wheel developed jointly by Specialized and Du Pont Co. Made of space-age materials, the wheel spokes are designed like airplane wings to shave 10 minutes off the time of a rider in a 100-mile race, the company claims. It currently costs $750, though Mr. Sinyard thinks the price can be reduced within three years to between $200 and $250. He was able to slash the price of the company's least expensive mountain bike to $279 from $750 in

But demands on the company's creativity are certain to grow. Competition is intensifying as larger companies invade a mountain-bike market Mr. Sinyard's company once had virtually all to itself. U.S. Cycling Federation official Philip Milburn says mountain biking is "growing at such a monstrous rate that a lot of companies are getting into this."

One especially coveted Specialized market the new players are targeting is mountain-bike accessories, which Mr. Eidsmo calls "the future of our business." Accessories not only sell faster than whole bikes, they also offer profit margins nearly double the 25% to 30% or so on sales of complete cycles. To get a piece of the business, Nike Inc., Beaverton, Ore., introduced a line of mountain-bike shoes. About a month ago, Michelin Tire Corp., Greenville, S.C., began selling mountain-bike tires, for years a Specialized stronghold.

Competition in the sale of complete bikes is heating up too. Trek Bicycle Corp., which accounts for one-quarter of the $400 million in annual sales at its Milwaukee-based parent, Intrepid Corp., entered the mountain-bike business in 1983. Trek previously made only traditional road bikes, but "it didn't take a rocket scientist to change a road bike into a mountain bike," says Trek's president, Dick Burke. The segment now makes up roughly two-thirds of his company's total sales.

At Giant Bicycle Inc., Rancho Dominguez, Calif., sales have tripled since the company entered the U.S. mountain-bike business in 1987. A subsidiary of a Taiwanese holding company with world-wide sales of $150 million, Giant is one example of the sudden globalization of Mr. Sinyard's once-cozy market niche. Schwinn Bicycle Co., Chicago, established joint ventures with bike companies in mainland China and Hungary to sell bikes. In the past year, Derby International Corp., Luxembourg, has acquired such major brands as Peugeot, Raleigh and Nishiki.

In response to the internationalization of the business, Mr. Sinyard's company is replacing independent distributors overseas with wholly owned subsidiaries. The move will cut out the cost of a middleman and give Specialized more control over marketing and sales. But as Bill Austin, Giant's president, puts it, "With some of the bigger players consolidating their strength, the game has changed.

Carl E. Pfeiffer, chief executive officer, was named to the additional post of chairman of this specialty-metals manufacturing concern. Robert C. Snyder, a director and chief operating officer of the company, succeeds Mr. Pfeiffer as president.

Roger M. Marino, president, was named to the new post of vice chairman. Michael Ruettgers, who had been executive vice president, operations, was named president and chief operating officer. EMC manufactures data-storage systems for mainframes and minicomputers.

Richard J. Riordan was elected a director of this single-family home builder, increasing the board to nine. He is a senior partner with the law firm of Riordan & McKinzie and is a partner in Riordan Venture Management.

John Franco, 47 years old, formerly vice chairman of Capital Holding Corp. and president of its Accumulation Investment Group, was named chief executive officer of this insurance holding company, effective Dec. 1, succeeding Robert T. Shaw, who remains chairman. I.C.H. also named Steven B. Bing, 42, senior vice president since 1986, as president, succeeding John W. Gardiner, who will join the HMS Acquisition Corp. division of Hicks, Muse & Co., which has agreed to buy most of I.C.H.'s Denver-based subsidiaries.

MCI Communications Corp. said it won a $27 million contract from Stuart-James Co., a Denver investment banking concern, to provide voice and data telecommunications services.

The agreement calls for MCI to provide data service, 800 and Vnet service, a virtual private network service. The companies wouldn't disclose the length of the contract except to say it was a multiyear agreement.

The head of British Satellite Broadcasting Ltd. said he hopes to raise about #450 million ($711 million) before the satellite-TV venture makes its delayed debut next spring -- with a major chunk coming from new investors.

"We'll raise it through bank loans. We'll raise it through {new} equity. And we'll raise it through existing shareholders" as well as through junk bonds, said Anthony Simonds-Gooding, the private consortium's chief executive. He said he believes the bank loan, to be arranged by February, will supply about half of the financing. British Satellite, which already has raised #423.5 million from 10 backers, initially expected to seek an additional #400 million.

Mr. Simonds-Gooding said the additional financing may leave British Satellite owned by about 20 investors, including Australian entrepreneur Alan Bond, whose nearly 36% stake would be reduced to as little as 20%.

Bond Corp., British Satellite's biggest investor, would like to withdraw from the satellite-TV consortium, and analysts have speculated Hollywood studios might buy the Bond stake. But Mr. Simonds-Gooding said he isn't talking to any studios about investing.

Besides Bond Corp., British Satellite's other backers include Pearson PLC, Reed International PLC and Granada Group PLC. The consortium faced a setback in May when technical problems forced it to postpone the September launch until next spring. Continued uncertainty about the timing of the consortium's debut could make it hard to find a #450 million cash injection.

Mr. Simonds-Gooding conceded that British Satellite's potential U.K. lenders "are saying, `When you're on the air, you'll {actually} get the money. '" The bankers also insist that the loans depend on the consortium raising more money from new and existing backers.

British Satellite today is unveiling a #30 million advertising and promotional drive for the consortium's planned five channels of movies, sports, entertainment and news shows. As part of the drive, the first 50,000 viewers who put up #10 each will get a package valued at #170 -- including a satellite receiving dish, equipment installation and a three-month subscription to its pay-movie service.

British Satellite faces competition from Sky Television, a satellite-TV venture begun last February and owned by Rupert Murdoch's News Corp. The rivals currently are locked in a costly bidding contest for Hollywood film rights.

Shares closed sharply higher in London in the year's thinnest volume Monday, supported largely by a technical bounce after last week's sharp declines.

Tokyo stocks posted a second-consecutive loss Monday, while trading in Frankfurt, West Germany, was mixed.

In London, the Financial Times 100-share index finished 30.1 points higher at 2112.2. The index settled off the high of 2117.1 posted after Wall Street opened stronger. But it showed strength throughout the session, hitting a low of only 2102.2 within the first few minutes of dealings.

The 30-share index settled 23.2 points higher at 1701.7. Volume was only 256.6 million shares, breaking the previous 1989 low of 276.8 million shares recorded Oct. 23. Turnover was also down substantially from 840.8 million shares on Friday.

Dealers said the market was supported to some extent by a firmer pound, gains on Wall Street and shopping by market-makers to cover internal requirements for selected stocks in the 100-share index.

Dealers attributed most of the day's gains to market-makers moving prices higher, rather than an outbreak of significant buying interest. Prices were up across the board, with most blue-chip stocks registering solid gains.

Though the market was stronger, dealers said fresh buying interest was sidelined ahead of a potential market-affecting debate in the House of Commons set for Tuesday. It will be Chancellor of the Exchequer John Major's first appearance before the opposition Labor Party. The market is keenly interested in hearing what he has to say about the status of the current 15% base lending rate.

In London trading, Courtaulds, a chemicals and textiles company, increased 15 pence to 362 after it disclosed plans to spin off its textiles operations into a separately listed company on Jan. 1. It was the most active of the 100-share index at 8.3 million shares, 6.5 million of which were traded by midday.

Jaguar ended 22 higher at 747. Dealers said fresh buying was drawn into Jaguar after a senior executive of Daimler-Benz, the auto maker, told a British television interviewer during the weekend that the West German company held talks with the luxury auto maker over possible joint ventures. Although Daimler has said it isn't interested in mounting a bid for Jaguar, dealers said its name further underlined the growing interest in the British concern.

Glaxo was the biggest gainer, jumping 35 to #13.78 ($21.72) on anticipation of a stock split next week. Total turnover in Glaxo was a thin 975,000 shares.

In Tokyo, stocks had a second-consecutive loss Monday in quiet trading with the exception of concentrated buying in some incentive-backed issues.

The Nikkei index of 225 selected issues fell 109.85 points to 35417.44.

The index fell 151.20 Friday.

In early trading in Tokyo Tuesday, the Nikkei index rose 35.28 points to 35452.72.

On Monday, volume on the First Section was estimated at 600 million shares, down from 1.24 billion shares Friday. Declining issues outnumbered advancers 551 to 349; 224 issues were unchanged. Investors, who took profits Friday, mostly took a wait-and-see attitude Monday amid uncertainty in the foreign-currency market and New York stocks, traders said.

Takamori Matsuda, an analyst at Dresdner-ABD Securities, said fading expectation for lower interest rates made investors step back from real-estate shares, which advanced last week. Some traders said institutions were waiting to see the U.S. jobless rate to be issued Friday.

The Tokyo Stock Price Index of all issues listed in the First Section, which fell 15.82 points Friday, was down 5.16 points, or 0.19%, at 2676.60. The Second Section index, which fell 36.87 points Friday, was down 21.44 points, or 0.59%, to close at 3636.06. Second Section volume was estimated at 15 million shares, down from 24.5 million shares Friday.

Monday's losers included railway, electric-utility and high-technology issues.

The energy of participating investors streamed into Tokyu Group shares, pushing prices of its companies up across the board. Tokyu Group announced during the weekend that each Group company will buy the others' stocks to defend themselves against a rumored takeover. The announcement fueled speculation for future advances in the shares. Tokyu Department Store advanced 260 to 2410. Tokyu Corp. was up 150 at 2890. Tokyu Construction gained 170 to 1610.

Other winners Monday included nonferrous metals, which attracted investors because of a surge in gold prices on the back of the unstable dollar. Petroleum companies were also popular because of expectations of a weaker dollar, which cuts dollar-denominated crude-oil prices.

Share prices in Frankfurt closed narrowly mixed after listless and directionless trading. The DAX index closed at 1466.29, up only 3.36.

Traders said turnover was particularly thin as investors waited for Wall Street to set the direction for the week. Most expect the decline in New York stock prices to continue this week.

Another factor weighing on the Frankfurt market involves fears about the impending wage talks between the IG Metall metal-workers union and industry representatives, which could result in a wave of strikes next spring, traders said.

A few blue-chip stocks posted strong gains, boosted by special factors, while the majority of shares ended little changed.

Elsewhere, stock prices were lower in Brussels, Milan and Stockholm, and mixed in Amsterdam, Paris and Zurich.

Stocks closed higher in Hong Kong, Manila, Seoul, Sydney, Taipei and Wellington, but were lower in Singapore.

Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva. To make them directly comparable, each index is based on the close of 1969 equaling 100. The percentage change is since year-end.

Deere & Co. said it reached a tentative agreement with the machinists' union at its Horicon, Wis., plant, ending a month-old strike by workers at the facility.

The maker of farm equipment said the three-year labor agreement with the International Association of Machinists and Aerospace Workers at John Deere Horicon Works, Deere's primary facility for producing lawn and grounds-care equipment, takes effect immediately and extends through Oct. 1, 1992. About 1,150 employees are covered by the new agreement, Deere said.

Courtaulds PLC announced plans to spin off its textiles operations to existing shareholders in a restructuring to boost shareholder value.

The British chemical and textile company's plan, which requires shareholder approval, would create a new, listed U.K. stock with a probable market capitalization between #300 million ($473 million) and #400 million, analysts said. The establishment of the separate company, to be called Courtaulds Textiles, could be effective as early as next year's first quarter.

Investors welcomed the move. Courtaulds' shares rose 15 pence to 362 pence, valuing the entire company at about #1.44 billion.

Courtaulds' spinoff reflects pressure on British industry to boost share prices beyond the reach of corporate raiders. Courtaulds' restructuring is among the largest thus far in Britain, though it is dwarfed by B.A.T Industries PLC's plans to spin off roughly #4 billion in assets to help fend off a takeover bid from Anglo-French financier Sir James Goldsmith. The divested Courtaulds textile operations had operating profit of #50 million on #980 million in revenue in the year ended March 31.

Some analysts have said Courtaulds' moves could boost the company's value by 5% to 10%, because the two entities separately will carry a higher price earnings multiple than they did combined. In addition, Courtaulds said the moves are logical because they will allow both the chemicals and textile businesses to focus more closely on core activities.

Courtaulds has been under pressure to enhance shareholder value since takeover speculators -- including Australian financier Kerry Packer -- surfaced holding small stakes last year. Though Mr. Packer has since sold his stake, Courtaulds is moving to keep its institutional shareholders happy. Even without a specific takeover threat, Courtaulds is giving shareholders "choice and value," said Julia Blake, an analyst at London stockbrokers Barclays de Zoete Wedd.

In a statement, the company said: "Both parts can only realize their full potential and be appropriately valued by the market if they are separately quoted companies. The sharper definition and the autonomy which each will thereby gain will benefit shareholders, customers and employees."

Courtaulds Chairman and Chief Executive Sir Christopher Hogg will remain in both posts at the surviving chemical company after the spinoff.

Sanwa Shutter Corp. said its affiliated company in Malaysia, established this April, will begin manufacturing steel doors Wednesday.

Its partner in the joint venture is Sin Kean Boon Metal Industries, Penang, Malaysia.

Company officials said the new company, Sin Kean Boon-Sanwa (J.V.) is capitalized at the equivalent of 54 million yen ($381,000). The Japanese concern has a 40% stake, while the local partner has a 60% stake.

The new company was created to meet growing demand for steel doors, concurrent with increasing local concern about fire prevention, the company said.

Barbara Hackman Franklin, president of Franklin Associates, was elected a director of this building products maker. Ms. Franklin, 49 years old, fills the position vacated by Naomi G. Albanese, who retired earlier this year at age 72.

NEC Corp. said it plans to more than double its British subsidiary's capacity for the production of semiconductor wafers.

Officials at the Japanese semiconductor maker said the company intends to increase investment in plant and equipment by 10 billion yen ($70.6 million), to 90 billion yen, in the year ending March 31, with the extra funds used to increase production overseas.

Officials said they weren't sure how the money will be distributed among overseas units, but added that NEC Semiconductors U.K. Ltd. will receive priority.

Officials also disclosed it's possible that NEC may reduce domestic production of one-megabit chips to five million a month from six million, beginning January, because of deteriorating market prices.

Japan's steel exports fell 12.2% in September from a year earlier and were down 1.1% from the previous month, the Japan Iron and Steel Federation reported.

September was the 10th consecutive month in which steel exports failed to reach the year-earlier level.

A federation official attributed the decline to brisk demand from domestic industries backed by continuing economic expansion in Japan.

Japanese steel companies are apparently focusing on domestic sales, but the official said it doesn't necessarily mean that local sales contracts are increasing that markedly.

"They are just too busy to meet domestic demand and have little room for overseas shipments," the official said. After a bad start, Treasury bonds were buoyed by a late burst of buying to end modestly higher.

"The market was pretty dull" for most of the day, said Robert H. Chandross, vice president at Lloyds Bank PLC. He said some investors were reluctant to plunge into the market ahead of several key economic indicators due this week, especially Friday's potentially market-moving employment report.

During the first hour of trading yesterday, prices fell as much as 1/4 point, or down about $2.50 for each $1,000 face amount. But market activity was energized as investors started to view the lower price levels as attractive. And the Treasury's $17.6 billion auction of short-term bills, which generated strong buying interest, helped to lift the bond market out of the doldrums.

"We saw good retail demand by small banks, individuals and institutions and that is one reason why the market advanced" late in the day, said Sung Won Sohn, senior vice president and chief economist at Norwest Corp., Minneapolis. He said the change in sentiment also reflected perceptions that the slate of economic statistic due this week will be "conducive to a bond market rally."

The employment report, which will provide the first official measure of the economy's strength in October, is expected to show smaller gains in the generation of new jobs. Other key economic indicators due this week include today's release of the September leading indicators index and new-home sales. Tomorrow, the October purchasing managers report is due and on Thursday comes October chain-store sales.

Despite yesterday's modest bond market gains, economists say investors are anxious about the Treasury's huge quarterly refunding of government debt, the timing of which depends on Congressional efforts to raise the debt ceiling. Although the Treasury will announce details of the November refunding tomorrow, it could be delayed if Congress and President Bush fail to increase the Treasury's borrowing capacity. The debt ceiling is scheduled to fall to $2.8 trillion from $2.87 trillion at midnight tonight.

The Treasury's benchmark 30-year bond rose 1/8 point. Mortgage-backed securities were up less than 1/8 point and investment-grade corporate bonds were unchanged.

Strong demand for New York City's $813 million general obligation bonds propped up the municipal market. Traders said most municipal bonds ended 1/2 point higher.

The New York City issue included $757 million of tax-exempt bonds priced to yield between 6.50% to 7.88%, depending on the maturity. The $56 million of New York's taxable general obligation bonds were priced to yield between 9.125% to 9.90%.

As expected, the longer-term tax-exempt New York bonds had yields nearly as high as those on taxable long-term Treasury bonds. The yield on the benchmark 30-year Treasury bond ended yesterday at about 7.92%. Bond dealers said the rates for the long-term tax-exempt New York City bonds were among the highest, as a percentage of Treasury rates, for any New York City issue in recent memory.

A spokesman for New York City Comptroller Harrison Goldin said the high rates reflect investors concerns about the city's financial health and political uncertainties.

New York bonds, which have been hammered in recent weeks on the pending supply and reports that the city's economy is growing weaker, rose 1/2 point yesterday.

Treasury Securities

Treasury bonds ended slightly higher in light trading.

The benchmark 30-year bond ended at 102 7/32 to yield 7.92%, compared with Friday's price of 102 2/32 to yield 7.93%. The latest 10-year notes ended at about 100 16/ 32 to yield 7.90%, compared with 100 11/32 to yield 7.93% on Friday.

Short-term interest rates rose at the government's regular weekly Treasury-bill auction. The average discount rate on three-month bills was 7.78% and the rate on six-month bills was 7.62%. Those rates are up from 7.52% and 7.50%, respectively, at last week's auction.

Due to the Treasury's need to raise funds quickly before the current authority to issue debt expires at midnight tonight, yesterday's auction was structured differently from previous sales.

The Treasury bills sold yesterday settle today, rather than the standard settlement day of Thursday. And because of the early settlement, the three-month bills actually have a 93-day maturity, and the six-month bills have an 184-day maturity.

Because of the early settlement, the Federal Reserve was unable to purchase bills for its system account. However, analysts expect the Fed to buy Treasury bills that were auctioned yesterday in the secondary market.

The Treasury also held a hastily scheduled $2 billion sale of 51-cash management bills yesterday.

Here are details of yesterday's three-month and six-month bill auction:

Rates are determined by the difference between the purchase price and face value. Thus, higher bidding narrows the investor's return while lower bidding widens it. The percentage rates are calculated on a 360-day year, while the coupon equivalent yield is based on a 365-day year.

Both issues are dated Oct. 31. The 13-week bills mature Feb. 1, and the 26-week bills mature May 3, 1990.

Here are details of yesterday's 51-day cash management bill auction:

Interest rate 8.07% The bills are dated Oct. 31 and mature Dec. 21, 1989.

Corporate Issues

The junk bond prices of Western Union Corp. tumbled after the company said it won't proceed with an exchange offer to holders of its reset notes.

The Upper Saddle River, N.J., communications firm said it is considering alternatives to the restructuring of the senior secured notes because of changes in the high-yield market.

In June, Western Union was forced to reset the interest rate on the senior secured notes due in 1992 to 19 1/4% from 16 1/2%, a move which increased the firm's annual interest payments by $13.8 million. Although the notes held at a price of 92 to 93 immediately after the reset, they started falling soon afterward.

Yesterday, Western Union's senior secured reset notes fell 3 3/4 points, or about $37.50 for each $1,000 face amount, to close at 50 1/4. Other Western Union securities were also lower. The company's 7.90% sinking fund debentures were quoted at a bid price of 14 1/4 and an offered price of 30, while the 10 3/4% subordinated debentures of 1997 were being bid for at 28 and offered at around 34 3/4. The 10 3/4% debentures last traded at 35.

High-yield traders said spreads between the bid and offered prices of Western Union junk bonds have been widening for some time, and in certain cases, bids for Western Union securities are not available.

Elsewhere, prices of investment-grade and high-risk, high-yield junk bonds ended unchanged.

In the new-issue market for junk securities, underwriters at Salomon Brothers Inc. are expected to price today a $350 million junk bond offering by Beatrice Co..

The two-part issue consists of $200 million of senior subordinated reset notes maturing in 1997 and $150 million of subordinated floating rate notes also maturing in 1997.

Portfolio managers said expectations are for the issue to be priced at a discount with a coupon of 13 3/4% and a yield of about 14%. The Chicago-based food and consumer goods concern was acquired in April 1986 in a $6.2 billion leveraged buy-out engineered by Kohlberg Kravis Roberts & Co.

Proceeds from the note sale will be used to repay a portion of the bank borrowings used by Beatrice to redeem its $526.3 million principal amount of increasing rate debentures in August.

Meanwhile, underwriters at Morgan Stanley & Co. are expected today to price a $350 million high-yield offering by Continental Cablevision Inc. The senior subordinated debentures maturing in 2004 are targeted to be offered at a yield of between 12 5/8% to 12 3/4%.

Mortgage-Backed Securities

Mortgage securities ended 2/32 to 4/32 higher in light trading.

Ginnie Mae's 9% issue for November delivery finished at 98 1/2, up 4/32, and its 10% issue at 102 3/8, up 4/32. Freddie Mac's 9% issue ended at 97 19/32, up 2/32.

In the derivative market, insurance companies have scaled back their purchases of Remic securities, or real estate mortgage investment conduits, as they assess potential claims from the recent California earthquake and hurricane in the Carolinas. This could mean diminished issuance of derivative mortgage issues during the next few weeks.

Insurance companies have been major buyers of prepayment-protected planned amortization classes (PACs) during the past few months. The PACs appeal to insurance companies and other investors because they have higher yields than topgrade corporate bonds and carry the guarantee of Freddie Mac and Fannie Mae, quasi-federal agencies.

In the asset-backed market, Beneficial Corp. offered $248 million of securities backed by home-equity loans, the second large deal in the past week. Last week, a unit of MNC Financial Corp. offered $268 million of home-equity securities.

Both the MNC and Beneficial offering were underwritten by Merrill Lynch Capital Markets, the leading Wall Street firm in the home-equity securities market, which was created early this year.

Municipal Issues

The improved tone in the municipal market, largely an offshoot of the New York City sale's reception, helped municipal futures rebound from early lows, but the spread between the contract and Tbond futures continued to grow more negative.

The MOB spread, or difference between the municipal and T-bond futures contracts, has been near all-time lows in recent trading, driven basically by concerns that new-issue supply would overwhelm demand.

December municipal futures ended up 11/32 point to 92-14, having pulled off a morning low of 91-23 as cash municipals rebounded. But front month T-bond futures settled the afternoon session up a slightly greater 13/32 at 99-04.

Foreign Bonds

British government bonds ended moderately higher, encouraged by a steadier pound and a rise in British stocks. The benchmark 11 3/4% bond due 2003/2007 rose 10/32 to 111 14/32 to yield 10.14%, while the Treasury's 12% notes due 1995 rose 7/32 to 103 5/8 to yield 11.04%.

West German government bonds fell as much as 0.60 point in light, nervous trading. The 7% Treasury bond due October 1999 ended off 0.60 point to 99.35 to yield 7.09%, while the 6 3/4% notes due 1994 fell 0.35 point to 97.25 to yield 7.45%.

Japanese government bonds continued to erode as the dollar remained resilient against the yen. Japan's No. 111 4.6% bond due 1998 ended the day on brokers screens at 95.11 to yield 5.43%.

So-called cross-border acquisitions totaled $23.1 billion in the second quarter, down from $33.6 billion a year earlier, according to the accounting firm KPMG Peat Marwick.

In a cross-border transaction, the buyer is in a different region of the globe from the target. Such transactions numbered 670 in the second quarter, up from 527 a year earlier. However, the total value declined for deals of $100 million and up.

The downturn in total value may be only temporary, suggested Herb Adler, a KPMG Peat Marwick partner. He explained, in part, that restructuring to prepare for the Common Market expansion due in 1992 "has become more of a strategic priority, both for companies inside and outside the European Community."

In the second quarter, middle-market cross-border transactions -- deals under $100 million each -- numbered 619 and totaled $6 billion, compared with 478 such transactions totaling $4.9 billion a year earlier, the firm said.

Large cross-border deals numbered 51 and totaled $17.1 billion in the second quarter, the firm added. That compared with 49 such transactions totaling $28.7 billion as year earlier.

Rymer Foods Inc. said its board authorized the purchase of as many as 500,000 of its common stock purchase warrants at a price of $4 a warrant.

The food company, which has 720,000 warrants and about 2.9 million common shares outstanding, said it may increase the offer to purchase any or all warrants that are properly tendered. A warrant permits a holder to acquire one share of common stock for $17.50 a share. The warrants expire on Oct. 15, 1992, and may be called by the company at a price of $5.25.

The offer is scheduled to expire on Nov. 28, unless extended. In New York Stock Exchange composite trading, Rymer closed yesterday at $10.875, down 12.5 cents.

Seasonal Stackup

Air-traffic problems, though often quite grim, This time of year leave us in stitches, When we notice around our airport A holding pattern for witches.

-- Edward F. Dempsey.

Double-Jointed

"I am beside myself," I've said in moments of heat, Without ever bothering To marvel at the feat.

-- Joshua Adams.

Humility Helper

The ultimate blow to the ego is learning that even your mistakes go unnoticed.

-- Ivern Ball.

Gen-Probe Inc., a biotechnology concern, said it signed a definitive agreement to be acquired by Chugai Pharmaceutical Co. of Tokyo for about $110 million, or almost double the market price of Gen-Probe's stock.

The move is sure to heighten concerns about increased Japanese investment in U.S. biotechnology firms. It is also likely to bolster fears that the Japanese will use their foothold in U.S. biotechnology concerns to gain certain trade and competitive advantages.

Gen-Probe, an industry leader in the field of genetic probes, which is a new technology used in diagnostic tests, last year signed an agreement for Chugai to exclusively market its diagnostic products in Japan for infectious diseases and cancer. Chugai agreed then to fund certain associated research and development costs.

That arrangement apparently has worked well, and Thomas A. Bologna, president and chief executive officer of Gen-Probe, founded in 1983, said the sale of the company means "we will be able to concentrate on running the business rather than always looking for sources of financing." Chugai agreed to pay $6.25 a share for Gen-Probe's 17.6 million common shares outstanding on a fully diluted basis.

Yesterday, in national trading in the over-the-counter market, Gen-Probe common closed at $3.25 a share.

Because the U.S. leads in most areas of biotechnology -- largely because of research investment by the U.S. government -- the sale is sure to increase concerns that Japanese companies will buy American know-how and use it to obtain the upper hand in biotechnology trade and competition.

"The biotechnology firms may be setting up their own competitors," said Richard Godown, president of the Industrial Biotechnology Association. He added that until now the Japanese have only acquired equity positions in U.S. biotechnology companies. "They are piggybacking onto developed technology," he said. During the past five years, Japanese concerns have invested in several of the U.S.'s 431 independent biotechnology companies. Chugai has been one of the most active Japanese players in U.S. biotechnology companies; it has an equity investment in Genetics Institute Inc., Cambridge, Mass., and a joint-venture agreement with Upjohn Co., Kalamazoo, Mich.

The Japanese government, Mr. Godown said, has stated that it wants 10% to 11% of its gross national product to come from biotechnology products. "It is becoming more of a horse race every day between the U.S. and Japan," he said, adding that some fear that as with the semiconductor, electronics, and automobile industries, Japanese companies will use U.S.-developed technology to gain trade advantages.

Mr. Bologna said the sale would allow Gen-Probe to speed up the development of new technology, and to more quickly apply existing technology to an array of diagnostic products the company wants to offer.

By 1988, when only 10 genetic probe-based tests of diagnostic infectious diseases of humans had been approved for marketing by the Food and Drug Administration, eight of them had been developed and sold by Gen-Probe.

Osamu Nagayama, deputy president of Chugai, which spends about 15% of its sales on research and development, was unable to pinpoint how much money Chugai would pump into Gen-Probe. "We think Gen-Probe has technology important to people's health," he said, adding: "We think it is important for us to have such technology." He and Mr. Bologna emphasized that both companies would gain technological knowledge through the sale of Gen-Probe, which will expand "significantly" as a result of the acquisition.

In 1988, Chugai had net income of $60 million on revenue of $991 million. GenProbe had a net loss of $9.5 million on revenue of $5.8 million. Recently, Gen-Probe received a broad U.S. patent for a technology that helps detect, identify and quantify non-viral organisms through the targeting of a form of genetic material called ribosomal RNA.

Among other things, Mr. Bologna said that the sale will facilitate Gen-Probe's marketing of a diagnostic test for acquired immune deficiency syndrome, or AIDS.

Chugai also will help Gen-Probe with its regulatory and marketing expertise in Asia, Mr. Bologna said. The tender offer for Gen-Probe's shares is expected to begin next Monday, the company said.

It was supposed to be a routine courtesy call.

A half-dozen Soviet space officials, in Tokyo in July for an exhibit, stopped by to see their counterparts at the National Space Development Agency of Japan. But after a few pleasantries, the Soviets unexpectedly got serious. The Soviets have a world-leading space program, the guests noted. Wouldn't the Japanese like a piece of it? The visitors then listed technologies up for sale, including launch services and propulsion hardware.

"We were just surprised," says Tad Inada, NASDA's director for international affairs. "Shocked."

That Moscow, with its dilapidated economic machine, would try to sell high technology to Japan, one of the world's high-tech leaders, sounds like a coals-to-Newcastle notion. But "the Soviet Union has areas where it isn't behind Japan," says Mikhail Shapovalov of the Soviet Ministry of Foreign Economic Relations. "We have obtained through the development of Cosmos {the Soviet space program} technologies you don't see anywhere else."

The sales pitch mightn't be as farfetched as it seems. Japan-U.S. trade relations are bumpy these days, and some Japanese favor decreasing their reliance on U.S. technology in light of the FSX fighter-plane flap, when U.S. officials reversed an earlier decision and refused to share certain crucial fighter-plane technology.

And, despite its image as a technology superpower, Japan has a lot of weaknesses. It's a world leader in semiconductors, but behind the U.S. in making the computers that use those chips. It's a world leader in auto manufacturing, but its aviation industry is struggling, and its space program is years behind the U.S., the Europeans and the Soviets.

One question being debated in the Soviet Union is how to use the defense sector's research-and-production expertise in the rest of the economy. Many plants that used to make military equipment are now being ordered to produce televisions, videocassette recorders, small tractors and food-processing machinery. The Soviets also hope to make better use of their considerable expertise in theoretical science, which has helped them win twice as many Nobel science prizes as the Japanese.

Where they lag behind the Japanese is in turning the scientific inventiveness into improved production. By contrast, the Japanese have proved adept at making use of Soviet inventions. Kobe Steel Ltd. adopted Soviet casting technology in 1966 and used it for 14 years until it developed its own system. Kawasaki Steel Corp. bought a Soviet steel-casting patent two years ago and has jointly developed the system with the Soviets. In 1991, the Soviets will take a Japanese journalist into space, the first Japanese to go into orbit.

Soviet efforts to sell their technology abroad don't appear to worry the U.S., Japan's principal ally. "We have never opposed the development of economic relations between our allies and the Soviet Union," says a State Department official. "Frankly, I wouldn't expect the Japanese to get hooked on anybody's technology, least of all the Soviets."

Under Mikhail Gorbachev's perestroika, the Soviets have sought economic ties all over the world, including new export markets. They believe technology is one of their best bets, and some Soviet officials say Moscow will even consider declassifying military know-how if the price is right. The Soviets held export exhibitions that included high-tech items in New York and West Germany. Last week, a Soviet delegation came to Japan to push more space technologies.

Japan is a major target for the Soviets. In August, representatives of Keidanren, Japan's largest business organization, visited Moscow to explore exports and investments that would help the Soviet economy. Out of the blue, the Soviet Chamber of Commerce handed over details on 59 technologies that the Japanese might want to buy. These mainly involved such areas as materials -- advanced soldering machines, for example -- and medical developments derived from experimentation in space, such as artificial blood vessels.

A main motive is hard cash. But, while the Soviets can't expect direct technology flow from Japan, they also hope to benefit from Japanese manufacturing expertise. "The Soviet Union has a lot of know-how, but it has been difficult to put that into actual production because of various structural problems in the economy," says Mr. Shapovalov, the Foreign Ministry official. The Soviets are "contemplating a flexible system under which it would be possible to develop {technology} jointly and even to market it jointly," he says.

Even if the Japanese find Soviet technology desirable, such discussions would be fraught with political complications. Still stinging from the international backlash over the sale two years ago of sensitive military technology to the Soviets by a subsidiary of Japan's Toshiba Corp., many Japanese are eager to avoid appearing to help the Soviets in any way. Another hurdle concerns Japan's attempts to persuade the Soviet Union to relinquish its post-World War II control of four islands north of Japan.

So far, the Soviets have provided only the sketchiest information about their technology and business plans. And what they have shown isn't impressive. "My impression is that there isn't anything which arouses our interest at first glance," says an official from Japan's Ministry of International Trade and Industry.

Peter Gumbel in Moscow contributed to this article.

(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)

MAY 1, 1975, SIGNALED A DISTRESSFUL May Day for securities houses, which were forced to end 183 years of charging fixed commissions. It scared brokers, but most survived.

It took effect after seven years of bitter debate between the Securities and Exchange Commission and traders and exchanges. Despite warnings from such leaders as former Federal Reserve Board Chairman William McChesney Martin that unfixed commissions would undo the industry, the SEC in September 1973 said full competition must start May l, 1975.

The timing for change was right. Institutions had become active market players in the early 1970s and sought exchange seats to handle their own trades. And the industry was rife with brokers trying to secure big client orders by using kickbacks, gifts, women and junkets.

Within three weeks of the 1975 end to fixed rates there were all-out price wars among brokers fighting for institutional business, with rate slashes of 35% to 60% below pre-May 1 levels. Ray Garrett Jr., SEC chairman, said the "breadth and depth of the discounting is more than I expected." Even a federal measure in June allowing houses to add research fees to their commissions didn't stop it.

Longer term, the impact is unclear. The change prompted the rise of discount brokers and a reduction in securities research firms. But there are currently more exchange members than in 1975, with the bigger houses gaining a larger share of total commissions. Commissions, however, account for a smaller share of investment-house business as takeover advisory fees have soared.

Foreign stock markets, with which the U.S. is entwined, also have ended fixed commissions in recent years. It came in London's "Big Bang" 1986 deregulation; and Toronto's "Little Bang" the same year. Paris is currently phasing out fixed commissions under its "Le Petit Bang" plan.

President Bush said that three members of his cabinet will lead a presidential mission to Poland to gauge how the U.S. can help the new non-Communist government's economic changes.

Mr. Bush announced several weeks ago that he intended to send such a mission, composed of top government aides and business and labor leaders. The mission will visit Poland from Nov. 29 to Dec. 2, the White House said.

In remarks at a White House ceremony marking Polish Heritage Month, Mr. Bush announced that Agriculture Secretary Clayton Yeutter, Commerce Secretary Robert Mosbacher and Labor Secretary Elizabeth Dole will lead the U.S. group. Michael Boskin, chairman of the Council of Economic Advisers, also will be a member.

In addition, the White House said that Charles Harper, chairman of ConAgra Inc., and John McGillicuddy, chairman of Manufacturers Hanover Corp., will be among a group of at least 15 business and labor representatives in the presidential mission. Mr. Bush said the group is to "focus on economic sectors where U.S. expertise and cooperation can indeed make a difference."

Mr. Bush has asked Congress to provide more than $400 million in economic aid and food grants for Poland's new government, but has been chided by Democrats for failing to do more.

Warner Communications Inc. is close to an agreement to back a new recorded music and music publishing company in partnership with Irving Azoff, who resigned in September as head of MCA Inc. 's MCA Records unit.

Warner and Mr. Azoff declined comment, as did MCA, where Mr. Azoff had also been discussing such a venture. But record industry executives familiar with the talks said Mr. Azoff and Warner came to an agreement yesterday to form a 50-50 joint-venture company funded by Warner and run by Mr. Azoff. Among other things, they said, Mr. Azoff would develop musical acts for a new record label.

The agreement is said to be similar to Warner's 50-50 partnership with record and movie producer David Geffen, whose films and records are distributed by the Warner Bros. studio and the Warner records unit. Although Mr. Azoff won't produce films at first, it is possible that he could do so later, the sources said.

Like Mr. Geffen's arrangement, the venture gives Mr. Azoff a link to the world's largest and most successful record distributor; in the U.S. alone, Warner has a 40% share of the market, about double its nearest competitor, Sony Corp. 's CBS Records. For Warner, meanwhile, it gives the company a second young partner with a finger on the pulse of the hottest trends in the music business.

The 41-year-old Mr. Azoff, a former rock 'n' roll manager, is credited with turning around MCA's once-moribund music division in his six years at the company. But Mr. Azoff had been negotiating for more than a year to get out of his MCA contract, which expired in 1991. Mr. Azoff reportedly was bored and frequently clashed with top MCA management over a number of issues such as compensation and business plans.

Mr. Azoff also was eager to return to a more entrepreneurial role in which he had a big financial stake in his own efforts. In an interview at the time of his resignation from MCA, he said: "I'd rather build a company than run one.

Part of a Series}

Tom Panelli had a perfectly good reason for not using the $300 rowing machine he bought three years ago. "I ate a bad tuna sandwich, got food poisoning and had to have a shot in my shoulder," he says, making it too painful to row.

The soreness, he admits, went away about a week after the shot. Yet the rowing machine hasn't been touched since, even though he has moved it across the country with him twice. A San Francisco lawyer, Mr. Panelli rowed religiously when he first got the machine, but, he complains, it left grease marks on his carpet, "and it was boring. It's a horrible machine, actually. I'm ashamed I own the stupid thing."

Mr. Panelli has plenty of company. Nearly three-fourths of the people who own home exercise equipment don't use it as much as they planned, according to The Wall Street Journal's "American Way of Buying" survey. The Roper Organization, which conducted the survey, said almost half of the exercise equipment owners found it duller than they expected.

It isn't just exercise gear that isn't getting a good workout. The fitness craze itself has gone soft, the survey found. Fewer people said they were working up a sweat with such activities as jogging, tennis, swimming and aerobics. Half of those surveyed said they simply walk these days for exercise.

That's good news for marketers of walking shoes. The survey also detected a bit more interest in golf, a positive sign for country clubs and golf club makers.

The survey's findings certainly aren't encouraging for marketers of health-club memberships, tennis rackets and home exercise equipment, but people's good intentions, if not their actions, are keeping sales of some fitness products healthy.

For instance, sales of treadmills, exercise bikes, stair climbers and the like are expected to rise 8% to about $1.52 billion this year, according to the National Sporting Goods Association, which sees the home market as one of the hottest growth areas for the 1990s.

But even that group knows some people don't use their machines as much as they should. "The first excuse is they don't have enough time," says research director Thomas Doyle. "The second is they don't have enough discipline." With more than 15 million exercise bikes sold in the past five years, he adds, "a lot of garages, basements and attics must be populated with them."

Still, the average price of such bikes rose last year to $145. Mr. Doyle predicts a trend toward fewer pieces of home exercise equipment being sold at higher prices. Electronic gimmicks are key. Premark International Inc., for example, peddles the M8.7sp Electronic Cycling Simulator, a $2,000 stationary cycle. On a video screen, riders can see 30 different "rides," including urban, mountain and desert scenes, and check how many calories are burned a minute.

Nancy Igdaloff, who works in corporate payments at Bank of America in San Francisco, may be a good prospect for such a gizmo. She's trying to sell a $150 exercise bike she bought about five years ago for her roommate. But rather than write off home fitness equipment, she traded up: Ms. Igdaloff just paid about $900 for a fancier stationary bike, with a timer, dials showing average and maximum speeds and a comfortable seat that feels almost like a chair. "I'm using it a lot," she says. "I spent so much money that if I look at it, and I'm not on it, I feel guilty."

The poll points up some inconsistencies between what people say and what they do. A surprising 78% of people said they exercise regularly, up from 73% in 1981. This conjures up images of a nation full of trim, muscular folks, and suggests couch potatoes are out of season. Of course, that isn't really the case. The discrepancy may be because asking people about their fitness regime is a bit like inquiring about their love life. They're bound to exaggerate.

"People say they swim, and that may mean they've been to the beach this year," says Krys Spain, research specialist for the President's Council on Physical Fitness and Sports. "It's hard to know if people are responding truthfully. People are too embarrassed to say they haven't done anything."

While she applauds the fact that more Americans are getting up from the television to stroll or garden, she says the percentage of Americans who do "real exercise to build the heart" is only 10% to 20%. So many people fudge on answers about exercise, the president's council now uses specific criteria to determine what is considered vigorous: It must produce contractions of large muscle groups, must achieve 60% of maximum aerobic capacity and must be done three or more times a week for a minimum of 20 minutes.

One of the council's goals, set in 1980, was to see more than 60% of adults under 65 years of age getting vigorous exercise by 1990. That target has been revised to 30% by the year 2000.

But even that goal may prove optimistic. Of 14 activities, the Journal survey found that 12 -- including bicycling, skiing and swimming -- are being done by fewer Americans today than eight years ago. Time pressures and the ebb of the fitness fad are cited as reasons for the decline.

Only walking and golf increased in popularity during the 1980s -- and only slightly. Jeanette Traverso, a California lawyer, gave up running three times a week to play a weekly round of golf, finding it more social and serene. It's an activity she feels she can do for life, and by pulling a golf cart, she still gets a good workout. "I'm really wiped out after walking five hours," she says.

Most people said they exercise both for health and enjoyment. "If you sit down all the time, you'll go stiff," says Joyce Hagood, a Roxboro, N.C., homemaker who walks several miles a week. "And it's relaxing. Sometimes, if you have a headache, you can go out and walk it right off."

Only about a quarter of the respondents said they exercise to lose weight. Slightly more, like Leslie Sherren, a law librarian in San Francisco who attends dance aerobics five times a week, exercise to relieve stress. "Working with lawyers," she says, "I need it."

But fully 90% of those polled felt they didn't need to belong to a health club. "They're too crowded, and everybody's showing off," says Joel Bryant, a 22-year-old student from Pasadena, Calif. "The guys are being macho, and the girls are walking around in little things. They're not there to work out."

But at least they show up. Nearly half of those who joined health clubs said they didn't use their membership as often as they planned. Feeling they should devote more time to their families or their jobs, many yuppies are skipping their once-sacred workout.

Even so, the Association of Quality Clubs, a health-club trade group in Boston, says membership revenues will rise about 5% this year from last year's $5 billion. A spokeswoman adds, however, that the group is considering offering "a behavior-modification course, similar to a smoking-cessation program, to teach people ways to stay with it."

There are die-hard bodies, of course. The proprietor of Sante West, an aerobics studio in San Francisco's Marina district, which was hit hard by the earthquake, says, "People were going nuts the minute we opened," three days after the quake. "The emotional aspect is so draining, they needed a good workout."

Perhaps the most disturbing finding is that the bowling alley may be an endangered American institution. The survey reported the number of people who said they bowl regularly has fallen to just 8% from 17% in 1981. The American Bowling Congress claims a higher percentage of the public bowls regularly, but concedes its membership has declined this decade.

To find out why, the group recently commissioned a study of the past 20 years of bowling-related research. Three reasons were pinpointed: a preference for watching bowling and other sports on television rather than actually bowling, dowdy bowling centers, and dissatisfaction with bowling itself. People who start bowling expecting it to be a pleasurable exercise "have been generally disappointed," the report said.

But not Richard Cottrell, a San Francisco cab driver who bowls in two weekly leagues. He hit the lanes three years ago on the advice of his doctor.

"It's good exercise," he says. "I can't do anything score-wise, but I like meeting the girls." He says bowling helps him shed pounds, though that effort is sometimes thwarted by the fact that "when I'm drinking, I bowl better." His Tuesday night team, the Leftovers, is in first place.

WPP GROUP'S Ogilvy & Mather expects profit margins to improve to 11.5% in 1990 in the U.S. Yesterday's edition didn't specify where the improvement would take place.

Concerning your Sept. 29 article "Retailers Face Cutbacks, Uncertain Future": The outcome of our leveraged buyout is looking very positive. Unlike most of the other retailers mentioned in the story, Jos. A. Bank Clothiers Inc. is not in serious financial problems. We did experience some difficulties with the initial LBO terms and, as your article made clear, successfully restructured our debt earlier this year, something those other retailers have yet to accomplish.

Your were on target regarding industry problems, but wide of the mark in portraying the financial health of this company.

Chairman and CEO Jos. A. Bank Clothiers Inc. Owings Mills, Md.

Private housing starts in Japan were unchanged in September from a year earlier at 144,610 units, the Construction Ministry said.

The flat report followed a four-month string of declines. The down trend was partly the result of tighter credit sparked by a discount rate increase by the Bank of Japan in May.

The central bank also unexpectedly raised the base rate by half a percentage point to 3.75% Oct. 11 as part of an inflation-fighting move that indirectly increases interest rates charged on new home construction loans.

If there's somethin' strange in your neighborhood . . .

If there's something' weird and it don't look good.

Who ya gonna call?

For starters, some people call Ed and Lorraine Warren.

When it comes to busting ghosts, the Monroe, Conn., couple are perfect demons. They claim to have busted spirits, poltergeists and other spooks in hundreds of houses around the country. They say they now get three or four "legitimate" calls a week from people harried by haunts. "I firmly believe in angels, devils and ghosts," says Mr. Warren, whose business card identifies him as a "demonologist."

If psychics don't work, but your house still seems haunted, you can call any one of a swelling band of skeptics such as Richard Busch. A professional magician and musician, he heads the Pittsburgh branch of the Committee for the Scientific Investigation of the Paranormal. Mr. Busch says there is a scientific explanation for all haunts, and he can even tell you how to encourage the spirits. "All you have to do is eat a big pizza, and then go to bed," he says. "You'll have weird dreams, too."

Either way, the ghostbusting business is going like gangbusters. Tales of haunts and horrors are proliferating beyond the nation's Elm Streets and Amityvilles. "I get calls nearly every day from people who have ghosts in their house," says Raymond Hyman, a skeptical psychology professor at the University of Oregon.

In a public opinion poll published in the October issue of Parents Magazine, a third of those queried said they believe that ghosts or spirits make themselves known to people. "The movies, the books, the tabloids -- even Nancy Reagan is boosting this stuff," says Paul Kurtz, a philosophy professor at the State University of New York at Buffalo, who heads the Committee for the Scientific Investigation of the Paranormal. The committee, formed in 1967, now has 60 chapters around the world.

The spirits, of course, could hardly care less whether people do or don't believe in them. They don't even give a nod to human sensibilities by celebrating Halloween. For the spooks it's just another day of ectoplasmic business as usual, ghostbusters say; the holiday seems to occasion no unusual number of ghost reports.

One of the busiest ghostbusters is Robert Baker, a 68-year-old semi-retired University of Kentucky psychology professor whose bushy gray eyebrows arch at the mere mention of a ghost. Mr. Baker says he has personally bested more than 50 haunts, from aliens to poltergeists.

Mr. Baker heads the Kentucky Association of Science Educators and Skeptics. Like Hollywood's Ghostbusters, Kentucky's stand ready to roll when haunts get out of hand. But they don't careen around in an old Cadillac, wear funny suits or blast away at slimy spirits. Mr. Baker drives a 1987 Chevy and usually wears a tweed jacket on his ghostbusting forays.

"I've never met a ghost that couldn't be explained away by perfectly natural means," he says.

When a Louisville woman complained that a ghost was haunting her attic, Mr. Baker discovered a rat dragging a trap across the rafters.

A foul-smelling demon supposedly plagued a house in Mannington, Ky. Mr. Baker found an opening under the house that led to a fume-filled coal mine. When the weather cools, Mr. Baker says, hobos often hole up in abandoned houses. "People see activity in there, and the next thing you know, you've got a haunting," he says.

On a recent afternoon, Mr. Baker and a reporter go ghost-busting, visiting Kathleen Stinnett, a Lexington woman who has phoned the University of Kentucky to report mysterious happenings in her house. Mrs. Stinnett says she never believed in ghosts before, but lately her vacuum cleaner turned itself on, a telephone flew off its stand, doors slammed inexplicably, and she heard footsteps in her empty kitchen.

"I was doing the laundry and nearly broke my neck running upstairs to see who was there, and it was nobody," she says, eyes wide at the recollection.

Mr. Baker hears her out, pokes around a bit, asks a few questions and proposes some explanations. Of the self-starting vacuum cleaner, he says: "Could be Cuddles, {Mrs. Stinnett's dog}." The flying telephone: "You tangle the base cord around a chair leg, and the receiver does seem to fly off." The ghostly footsteps: "Interstate 64 is a block away, and heavy traffic can sure set a house to vibrating."

"I'm not sure he's explained everything," Mrs. Stinnett says grudgingly. "There are some things that have gone on here that nobody can explain," she says. Mr. Baker promises to return if the haunting continues.

For especially stubborn haunts, Mr. Baker carries a secret weapon, a vial of cornstarch. "I tell people it's the groundup bones of saints," he says. "I sprinkle a little around and tell the demons to leave. It's reassuring, and it usually works."

Oregon's Mr. Hyman has investigated claims of flying cats, apparitions and bouncing chandeliers and has come up with a plausible explanation, he says, for every one. "Invariably," he says, "eyewitnesses are untrustworthy."

Two years ago, a Canadian reader bet Omni Magazine $1,000 that it couldn't debunk the uncanny goings-on in "the Oregon Vortex," a former Indian burial ground in southern Oregon. To viewers from a distance, visitors to the spot seemed to shrink disproportionately, relative to the background. The magazine called in Mr. Hyman as a consultant.

He showed up with a carpenter's level, carefully measured every surface and showed how the apparent shrinkage was caused by the perspective. "A very striking illusion," Mr. Hyman says now, his voice dripping with skepticism, "but an illusion nevertheless." The Canadian wound up writing a check.

The Rev. Alphonsus Trabold, a theology professor and exorcism expert at St. Bonaventure University in Olean, N.Y., frequently is asked to exorcise unruly spirits, and he often obliges. "On certain occasions a spirit could be earthbound and make itself known," he says. "It happens."

Father Trabold often uses what he calls "a therapeutic exorcism": a few prayers and an admonition to the spirit to leave. "If the person believes there's an evil spirit, you ask it to be gone," he says. "The suggestion itself may do the healing."

But sometimes more energetic attacks are required. To wrestle with a demon in a house owned by a Litchfield, Conn., woman, the Warrens recently called in an exorcist, the Rev. Robert McKenna, a dissident clergyman who hews to the Catholic Church's old Latin liturgy. I attend, and so does a television crew from New York City.

Mr. Warren pronounces the Litchfield case "your typical demonic infestation." A Scottish dwarf built the small red house 110 years ago and now his demonic ghost haunts it, Mr. Warren says. The owner, who begs anonymity, asserts that the dwarf, appearing as a dark shadow, has manhandled her, tossing her around the living room and yanking out a hank of hair. Two previous exorcisms have failed.

"This is a very tenacious ghost," Mr. Warren says darkly.

Father McKenna moves through the house praying in Latin, urging the demon to split. Suddenly the woman begins swaying and then writhing. "She's being attacked by the demon," Mrs. Warren stagewhispers as the priest sprinkles holy water over the squirming woman, and the television camera grinds. A half-hour later, the woman is smiling and chatting; the demon seems to have gone. But Mr. Warren says the woman has "psychic burns" on her back from the confrontation. She declines to show them.

"This was an invisible, powerful force that's almost impossible for a layman to contemplate," Mr. Warren says solemnly as the ghostbusting entourage packs up to leave. "This time though," he says, "I think we got it."

Lyrics from "Ghostbusters" by Ray S. Parker Jr. 1984 by Golden Torch Music Corp. (ASCAP) and Raydiola Music (ASCAP). All administrative rights for the U.S. jointly controlled by both companies. International copyright secured. Made in USA. All rights Reserved. Reprinted by permission.

BROKERAGE HIRING languishes amid market turmoil. But survivors earn more.

Shearson Lehman Hutton Inc. counts under 39,000 workers, down 100 from the start of the year and off 8,500 from after its merger and the market collapse two years ago. Another major firm has cut 6,000 workers, 13% of its staff, since Black Monday. The Bureau of Labor Statistics says securities firms in New York City alone have slashed 17,000 jobs from the December 1987 peak of 163,000. Average annual earnings of those who have hung on, though, surged to $78,625 last year from $69,553 in 1987.

Any hiring is confined to retail sales. Illinois Company Investments had been trimming its ranks until last summer. But then it was acquired by Household International Inc. Now it offers richer commissions to lure a broker a week. Interstate/Johnson Lane Inc. this year adds 70 people -- 60 of them in retail -- to its 1,300-member staff. A.G. Edwards & Sons runs training classes and looks for experienced brokers.

"We're always going to hire someone we consider to be a winner," an Edwards official says.

SKILLED WORKERS aplenty are available to cope with earthquake damage.

"I don't foresee any shortages over the next few months," says Ken Allen, an official of Operating Engineers Local 3 in San Francisco. Ironically, "up until the quake, we desperately tried to fill jobs," especially for crane and bulldozer operators. But the Oct. 17 temblor put a halt to much nonessential building, and heavy rains last week slowed the rest, freeing construction workers for earthquake repairs.

The supply of experienced civil engineers, though, is tighter. In recent months, California's Transportation Department has been recruiting in Pennsylvania, Arizona and Texas for engineers experienced in road and bridge design. But, with the state offering only $39,000 a year and California's high standard of living, "there aren't too many to choose from," says Brent Scott, a recruiting officer. He says the department now has 75 openings and wants to hire 625 civil engineers over the next 15 months.

THE IRS may taketh what the Labor Department giveth. But stay tuned.

Employee-benefit specialists drew a collective sigh of relief in early October when the Labor Department backed away from a proposal that companies let former employees and beneficiaries -- along with active workers -- borrow against balances in 401(k) and similar savings plans. In an advisory letter, the department said that, starting Oct. 18, loans could be limited to "parties in interest," which generally means active workers but also includes retirees who continue as directors and 10% shareholders.

Now comes word that IRS regulations being drafted could put companies in violation of the tax code if they make loans to retiree shareholders and directors but don't make them available to other former workers who usually earned less. The IRS says the question won't be settled until the regulations are issued "shortly." But violation could bring substantial tax penalties to both employer and employees. "It's a severe case of regulatory whiplash," complains Henry Saveth of consultant A. Foster Higgins & Co.

Frederick Rumack of Buck Consultants has asked Labor to recraft its rule to remove the IRS threat.

CORPORATE DOWNSIZING digs deeper. Outplacement consultant Right Associates says the average pay of its clients fell to $66,743 last year from $70,765 in 1987; severance pay dropped to 25 weeks from 29. Both reflect the dismissal of lower-level and shorter-tenure executives.

FIRST TEACH THYSELF. Executives universally believe workers should know their employer-sponsored benefits. But three out of four managers can't accurately state the value of their own packages, consultant Noble Lowndes says.

MEA CULPA. Fully 62% of the doctors surveyed for Metropolitan Life Insurance Co. think their fellow physicians are responsible for rising health-care costs, ahead of hospitals (55%) and patients (48%).

NO, YOU WORK! Only one in four companies with flexible benefit plans lets workers buy or sell vacation days, consultant Towers Perrin says. Employees like the option but firms say it's too tough to run. STUDENTS SHUN burger flipping for jobs tied to careers. Some even study.

"Fast-food jobs aren't popular no matter what they pay," says a Tufts official. Working students, she explains, want "some satisfaction." University of Michigan students look for jobs related to planned careers. Carnegie Mellon, though, says some students conclude they can help their careers most by hitting the books: "They're opting to build their resumes through good grades and leadership roles in fraternities."

Slowing economies in some areas limit student choice. Student job postings at Boston University slip 10% this year following a 10% drop in 1988. Still, the school says there are an ample number and pay is up to $7.20 an hour from $6.90 last year.

M.B.A. candidates at the University of Pittsburgh earn up to $15 an hour on marketing or computer projects.

THE CHECKOFF: Fiery ambition: Hyatt Corp. hires a University of Wyoming graduate with degrees in geology and petroleum engineering for $7.50 an hour to tend wood fires at a Colorado ski resort. . . . Is somebody telling us something? Our copy of Racine (Wis.) Labor comes through the mail wrapped around two sections of Baseball Card News.

Democracy is making a return with a vengeance to Latin America's most populous and deeply indebted country. On Nov. 15, when Brazilians elect a president for the first time in 29 years, the country's 82 million voters will have 22 candidates to choose from.

The candidates have been crisscrossing this huge country of 145 million people, holding rallies and televised debates in hope of being elected to what must be one of the world's most thankless political jobs: trying to drag Brazil out of its economic and social mess.

"I feel sorry for whoever wins," says a Brazilian diplomat.

Who that winner will be is highly uncertain. A half-dozen candidates, backing policies ranging from Thatcherism to watered-down Marxism, are given a chance of winning. "Whoever says he knows which of the six will win is out of his mind," says Antonio Britto, a centrist member of Parliament.

The favorite remains Fernando Collor de Mello, a 40-year-old former governor of the state of Alagoas. He came out of nowhere to grab the lead in opinion polls, probably less because of his vague program to "build a new Brazil" than because of his good looks, the open backing of the powerful Rede Globo television network and his reputation as a hunter of "maharajahs," or overpaid and underworked civil servants.

But after building up a commanding lead, the moderate to conservative Mr. Collor has slipped to about 30% in the polls from a high of about 43% only a few weeks ago. To avoid a runoff, one candidate would have to win 50% of the vote -- a feat that most analysts consider impossible with so many candidates running.

Two left-wing politicians, Socialist Leonel Brizola, a former governor of Rio de Janeiro state, and Marxist-leaning Luis Inacio da Silva, currently are running neck and neck at about 15%, and three other candidates are given a chance of reaching the Dec. 17 runoff election between the two biggest vote-getters: Social Democrat Mario Covas and two conservatives, Paulo Salim Maluf, a former governor of the state of Sao Paulo, and Guilherme Afif Domingos.

The uncertainty is sending shivers through Brazilian financial markets. The dollar, the best indicator of the country's mood, has skyrocketed on the parallel market, as has gold. Capital flight is reported to be strong.

The big question is whether the new president will have the strength and the political support in Congress to take steps to cure Brazil's economic ills. President Jose Sarney, who took office in 1985 when the man picked by an electoral college became critically ill, appears to be simply trying to avoid hyperinflation. The unpopular Mr. Sarney, whose task was to bring about a smooth transition to democracy after 21 years of military rule, isn't seeking re-election.

What comes out of the ballot box could be crucial in determining whether Brazil finally lives up to the potential of the world's eighth largest economy or keeps living up to its other, less enviable title: that of the developing world's largest debtor, teetering on the brink of hyperinflation, mired in deficits and stagnation, with huge economic inequalities and social discontent boiling under the surface.

If Brazil devises an economic strategy allowing it to resume growth and service debt, this could lead it to open up and deregulate its sheltered economy, analysts say, just as Argentinian President Carlos Saul Menem has been doing even though he was elected on a populist platform.

"Depending on the president, we could either be a trillion-dollar economy by the end of the century or stay where we are," says political scientist Amaury de Souza. "And where we are is bad."

Despite valiant efforts by Finance Minister Mailson Ferreira da Nobrega, inflation came to 36% in September alone and is expected to top 1,000% for the year. That might have been considered hyperinflation not long ago, but Argentina endured price increases of almost 200% in July before bringing the rate down sharply in August and September.

Still, massive internal debt has forced the government to borrow massively on the domestic market and to offer inflation-adjusted returns of 2% to 3% a month just to get investors to hold on to its paper. About $70 billion is estimated to be tied up in the short-term money market, which acts both as a hedge against inflation for consumers and an accelerator of inflation and deficits for the government.

By some estimates, Brazil's internal debt, or combined public deficit, could reach 6.5% of its $351 billion gross domestic product.

Much of the money goes into subsidies or keeping inefficient state-controlled companies operating. Among the results is a frequent breakdown of public services. It's not uncommon to wait three minutes for a dial tone after picking up the telephone, and then to be interrupted by a busy signal before finishing dialing the number. Officials also say a national electricity shortage might not be far off. Economists, businessmen and some politicians agree that the answer is an orthodox economic austerity program including reduced state spending; focusing spending on vital areas such as education, health and welfare; turning state companies private; reforming the tax system, raising public service rates to match costs; and possibly a temporary wage and price freeze and a devaluation of the cruzado.

Analysts also say it's inevitable that Brazil will seek to renegotiate its $115 billion foreign debt, on which it suspended interest payments last month.

Analysts say, however, that a tough economic program would have to be accompanied by measures to shield the poor from its recessionary effects, for instance by subsidizing staple food items. About 80% of Brazil's voters are believed to live near the poverty level.

Of the three candidates with a serious chance of winning, Mr. Collor comes closest to advocating the sort of measures that economists say are necessary. But his inexperience raises doubts that he would have the political power to carry them out. The 67-year-old Mr. Brizola has been vague about his intentions and often inflammatory in his rhetoric, but analysts say he probably would be pragmatic.

Mr. da Silva, a 43-year-old former factory worker and labor leader, is the most radical, vowing to withhold payments on the foreign debt and saying he "wouldn't go around putting the country up for sale to the highest bidder." But despite the differences in what they say, according to some analysts here, economic constraints mean the next president may not have many choices about what he does.

Hospital Regulation Sparks Kentucky Feud

WHICH IS the best medicine for runaway health costs: competition or regulation?

The question is at the root of a brawl between Humana Inc., the big for-profit hospital and insurance company, and its not-for-profit brethren in its home state of Kentucky.

The battle focuses on the state's certificate-of-need law, which regulates investment in new medical technology. The law has prevented $216 million of unnecessary expenditures since 1986, according to William S. Conn, president of the Kentucky Hospital Association.

But according to David Jones, Humana's chief executive, it promotes technology monopolies, stifles innovation and raises prices.

If the Legislature doesn't repeal the law, due for revision in 1990, Mr. Jones says Humana may move its insurance operations, including 3,000 jobs in Louisville, to another state.

The company complains that it paid $10 million to non-Humana hospitals in its latest fiscal year for services provided to its insurance plan members. But Humana says its own facilities could serve its insured for less if they were properly equipped.

Mr. Conn charges that Humana's own actions undermine its argument. When a hospital in Lexington installed a lithotripter last year, demand for a similar kidney-stone smashing machine at a Humana hospital in Louisville fell 34%. The Humana hospital responded by jacking up prices to make up for lost revenue, Mr. Conn says, and now charges as much as $8,000 for the procedure, which costs only about $3,500 in Lexington.

Humana contends that $8,000 represents an extreme case and that its regular charge for lithotripsy is $4,900.

Meanwhile, another hospital's proposal for a new-generation lithotripter is pending before the board that administers the certificate-of-need law. Humana, which wants to acquire one of the new machines itself, is on the record as opposed to the proposal.

Debt-Burdened Doctors Seek Financial Security

HEALTH-CARE experts have long worried that young doctors emerging from medical school with a mountain of debt will choose careers in high-paying specialties instead of primary care, where more physicians are needed most.

Now there's a new wrinkle in what young doctors want: More than half of 300 residents responding to recent survey said they'd prefer a guaranteed salary over traditional fee-for-service compensation in their first professional position. And 81% preferred a group practice or health maintenance organization, while just 11% favored solo practice.

"Ten years ago, a physician would go to a town and take out a loan (to start a practice)," says James Merritt, president of Merritt, Hawkins & Associates, an Irvine, Calif., physician recruiter that conducted the survey. "They won't do that very often today at all. They're looking for something that's very safe."

The numbers behind such fears: The average debt of medical school graduates who borrowed to pay for their education jumped 10% to $42,374 this year from $38,489 in 1988, says the Association of American Medical Colleges. That's 115% more than in 1981.

Money isn't the only reason for the shift in practice preferences. It reflects values of a generation that wants more time for families and personal interests, says John H. Moxley III, who directs physician-executive searches for Korn/Ferry International. "This is a change in the social fabric of medicine," he says.

Related Roommates Trim Hospital Bills

WHEN Catherine Bobar spent several weeks at the Medical Center of Vermont recently with a bone infection in her toe, she shared a room just like most patients.

But unlike most patients, her roommate was her husband. "It was certainly good to have him handy," Mrs. Bobar says.

The 12-bed "cooperative care" unit is one of about 18 nationwide where a family member or friend helps care for a patient in the hospital. "The philosophy is to make the patient and the family very responsible for a portion of their own care," says Anthony J. Grieco, medical director of cooperative care at New York University Medical Center, where the concept began 10 years ago. "It helps us, and them, while they're here, and it certainly makes them a better health-care team when they get home."

It also saves money. Because patients require less attention from nurses and other staff, room charges are lower -- about $100 less per day than a regular room at the Vermont hospital.

Cancer patients needing prolonged radiation therapy, diabetics learning to manage their blood sugar levels, and cardiac bypass patients are among those who spend time on cooperative-care units. The approach has generated so much interest that NYU is host to the first conference on cooperative care Nov. 30. "It's really part of the hospital of the 21st century," Dr. Grieco says.

Odds and Ends

THE CHIEF NURSING officer can be responsible for more than 1,000 employees and at least one-third of a hospital's budget; a head nurse typically oversees up to 80 employees and $8 million. So says the Commonwealth Fund, a New York philanthropist that's sponsoring a $1 million project to develop joint masters in business and nursing programs at 10 universities. . . .

Meharry Medical College in Nashville, Tenn., launches a new research publication in the spring: the Journal on Health Care for the Poor and Underserved.

A group of Michigan investors has offered to buy Knight-Ridder Inc. 's ailing Detroit Free Press for $68 million but has left unclear how the offer will be financed.

The offer came just prior to arguments before the U.S. Supreme Court over whether the Free Press should be allowed to enter into a joint operating pact with Gannett Co. 's Detroit News.

The group led by Birmingham, Mich., publicist William D. McMaster didn't name an investment banker backing the deal or say how much its members will contribute to the offer. Indeed, some individuals identified with the group said they haven't committed any money to the bid and weren't aware of it until they heard about it in local news accounts over the weekend.

Knight-Ridder wouldn't comment on the offer. The company has said the paper isn't for sale, and has rebuffed Mr. McMaster's earlier requests for access to Free Press financial statements.

In his letter to Knight-Ridder President James K. Batten, Mr. McMaster said he arrived at the $68 million figure using Knight-Ridder's corporate financial statements and comments by Knight-Ridder officials that the Free Press has a $50 million value in salvage.

But in an interview, Mr. McMaster said he and his investment banker would need access to full financial records before firming up the offer.

Mitsui & Co. said it started a joint venture with Dae Woong Chemical Co., a major pharmaceutical manufacturer in South Korea, to manufacture antibiotic medicines. The new company is capitalized at about $3.5 million.

Mitsui expects the antibiotic products to be exported to Southeast Asia and Africa. It also hopes to enter the U.S. market.

NRM Energy Co. said it filed materials with the Securities and Exchange Commission calling for it to restructure into a corporation from a limited partnership.

The partnership said it is proposing the change largely because the provisions of its senior notes restrict it from making distributions on its units outstanding.

NRM suspended its common distribution in June 1988 and the distribution on its $2 cumulative convertible acquisition preferred units in September. However, unpaid distributions on the acquisition preferred are cumulative and would total $23 million a year, hurting NRM's financial flexibility and its ability to raise capital, NRM said.

In following several other oil and gas partnerships that have made the conversion to a corporation in the last year, NRM also noted that tax advantages for partnerships have diminished under new tax laws and said it would save $2 million a year in administrative costs from the change.

Under the plan, NRM said holders of its common units will receive one share of new common stock in Edisto Resources Corp. for every 14.97 common units owned. Holders of NRM's $2 cumulative convertible acquisition preferred units will receive one new common share in Edisto for every 1.342 units they own.

After the transaction, current common unitholders will own about 21.3% of Edisto, current acquisition preferred holders will own 72.3%, and current stockholders of Edisto will own about 6.4%, about the same stake as Edisto owns now in NRM. Edisto currently is the general partner of NRM.

As the largest holder of acquisition preferred units, Mesa Limited Partnership would own about 28% of Edisto after the transaction. As part of the transaction, Edisto agreed to give Mesa, an Amarillo, Texas, oil and gas partnership managed by T. Boone Pickens Jr., a seat on its board.

NRM said its $2.60 senior cumulative convertible preferred units will be converted into an equal number of shares of $2.60 senior cumulative convertible preferred stock of Edisto.

The transaction is subject to approval of NRM unitholders of record on Oct. 23, among other conditions. NRM said it expects unitholders to vote on the restructuring at a meeting Dec. 15.

Sherwin-Williams Co. and Whittaker Corp. said they've discontinued talks toward a definitive agreement regarding Sherwin-Williams' acquisition of Whittaker's chemical coating group. The companies reached an agreement in principle for the sale in August. Terms weren't disclosed.

Cleveland-based Sherwin-Williams produces paints and coatings, while the Los Angeles-based Whittaker coatings group produces industrial coatings.

USG Corp. agreed to sell its headquarters building here to Manufacturers Life Insurance Co. of Toronto, and will lease the 19-story facility until it moves to a new quarters in 1992.

The building-materials concern didn't disclose terms of the sale, which will close in the first quarter of next year.

Proceeds from the planned sale of the 250,000-square-foot building "will help reduce the debt incurred as a result of our July 1988 recapitalization," said a USG official.

The recently revived enthusiasm among small investors for stock mutual funds has been damped by a jittery stock market and the tumult over program trading.

After hitting two-year highs this summer, net sales of stock funds slowed in September, according to the Investment Company Institute, a trade group. The sales recovery screeched to a halt this month, some analysts say.

"Confidence was starting to come back because we didn't have wildly volatile days," says Tyler Jenks, research director for Kanon Bloch Carre & Co., a Boston research firm. "Now everything" -- such as program trading and wide stock market swings -- "that everyone had pushed back in their consciousness is just sitting right there."

Net sales of stock funds in September totaled $839.4 million, down from $1.1 billion in August, the institute said. But if reinvested dividends are excluded, investors put in only $340 million more than they pulled out for the month. October's numbers, which won't be released for a month, are down further, mutual fund executives say.

Investors in stock funds didn't panic the weekend after mid-October's 190-point market plunge. Most of the those who left stock funds simply switched into money market funds. And some fund groups said investors actually became net buyers.

But the stock market swings have continued. The recent outcry over program trading will cast a pall over the stock-fund environment in the coming months, some analysts say.

"The public is very close to having had it," Mr. Jenks says.

Investors pulled back from bond funds in September, too. Net sales of bond funds for the month totaled $1.1 billion, down two-thirds from $3.1 billion in August. The major reason: heavy outflows from high-risk, high-yield junk bond funds. Big withdrawals from the junk funds have continued this month.

Overall, net sales of all mutual funds, excluding money market funds, fell to $1.9 billion in September from $4.2 billion in August, the trade group said. "Small net inflows into stock and bond funds were offset by slight declines in the value of mutual fund stock and bond portfolios" stemming from falling prices, said Jacob Dreyer, the institute's chief economist.

Many small investors went for the safety of money market funds. Assets of these and other short-term funds surged more than $5 billion in September, the institute said. Analysts say additional investors transferred their assets into money funds this month.

At Fidelity Investments, the nation's largest fund group, money funds continue to draw the most business, says Michael Hines, vice president, marketing. In October, net sales of stock funds at Fidelity dropped sharply, Mr. Hines said. But he emphasized that new accounts, new sales, inquiries and subsequent sales of stock funds are all up this month from September's level.

Investor interest in stock funds "hasn't stalled at all," Mr. Hines maintains. He notes that most of the net sales drop stemmed from a three-day period following the Friday the 13th plunge.

"If that follows through next month, then it will be a different story," he says. But, Mr. Hines adds, sales "based on a few days' events don't tell you much about October's trends."

One trend that continues is growth in the money invested in funds. Buoyed by the continued inflows into money funds, assets of all mutual funds swelled to a record $953.8 billion in September, up fractionally from $949.3 billion in August.

Stock-fund managers, meantime, went into October with less cash on hand than they held earlier this year. These managers held 9.8% of assets in cash at the end of September, down from 10.2% in August and 10.6% in September 1988. Large cash positions help buffer funds from market declines but can cut down on gains in rising markets.

Managers of junk funds were bolstering their cash hoards after the September cash crunch at Campeau Corp. Junk-portfolio managers raised their cash position to 9.4% of assets in September from 8.3% in August. In September 1988, that level was 9.5%.

Investors in all funds will seek safety in the coming months, some analysts say. Among stock funds, the conservative growth-and-income portfolios probably will remain popular, fund specialists say.

"There will be a continuation and possibly greater focus on conservative equity funds, at the expense of growth and aggressive growth funds," says Avi Nachmany, an analyst at Strategic Insight, a New York fund-research concern.

Secretary of State Baker, we read, decided to kill a speech that Robert Gates, deputy national security adviser and a career Soviet expert, was going to give to a student colloquium, the National Collegiate Security Conference. We keep wondering what Mr. Gates wanted to say.

Perhaps he might have cited Mr. Gorbachev's need for "a stable currency, free and competitive markets, private property and real prices" and other pie-in-the-sky reforms. Perhaps he'd have called for "a decentralized political and economic system" without a dominant communist party. Or political arrangements "to alleviate the grievances and demands of Soviet ethnic minorities and republics." Why, a Bob Gates might even have said, "Nor are Soviet problems susceptible to rescue from abroad through abundant Western credits."

If Mr. Gates had been allowed to say these things, we would now be hearing about "discord" and "disarray" on foreign policy. Dark hints would be raised that parts of the administration hope Mr. Gorbachev would fail, just as they were when Vice President Quayle voiced similar sentiments. It's somehow OK for Secretary Baker himself, however, to say all the same things. In fact, he did; the quotes above are from Mr. Baker's speech of two weeks ago.

So far as we can see, there is no disagreement among Mr. Baker, Mr. Quayle, the Mr. Gates we've read, or for that matter President Bush. They all understand point one: Nothing the U.S. can do will make much difference in whether Mr. Gorbachev succeeds with perestroika. Perhaps Mr. Gates would emphasize more than Mr. Baker the many hurdles the Soviet leader must leap if he is going to succeed. But everyone agrees that Mr. Gorbachev's problems result from the failure of his own system. They can be relieved only by changing that system, not by pouring Western money into it. GATT membership will not matter to Donbas coal miners short of soap, nor will a START treaty make any difference to Ukrainian nationalists.

On the other hand, so long as Mr. Gorbachev is easing his grip on his empire, everyone we've heard agrees that the U.S. can benefit by engaging him. If a deal can be made to cut the world's Ortegas loose from Moscow, why not? We don't expect much good from nuclear-arms control, but conventional-arms talks might demilitarize Eastern Europe.

There's nothing in the least contradictory in all this, and it would be nice to think that Washington could tolerate a reasonably sophisticated, complex view. Yet much of the political culture seems intent on castigating the Bush administration for not "helping" Mr. Gorbachev. So every time a Bush official raises a doubt about Mr. Gorbachev, the Washington community shouts "Cold War" and "timidity," and an administration spokesman is quickly trotted out to reply, "Mr. Bush wants perestroika to succeed."

Mr. Baker seems especially sensitive to the Washington ailment known as Beltway-itis. Its symptoms include a cold sweat at the sound of debate, clammy hands in the face of congressional criticism, and fainting spells when someone writes the word "controversy." As one unidentified official clearly in the late stages of the disease told the Times: "Baker just felt that there were some lines in the speech that could be misinterpreted and seized by the press." In short, the problem is not intra-administration disagreement, but preoccupation with the prospect that perestrokia might fail, and its political opponents will ask "Who lost Gorbachev?"

Mr. Baker may want to avoid criticism from Senate Majority Leader George Mitchell, but as Secretary of State his audience is the entire Free World, not just Congress. In any case, he's likely to find that the more he muzzles his colleagues, the more leaks will pop up all around Washington, a lesson once learned by Henry Kissinger. Letting officials express their own nuances can be educational. We note that in Rome yesterday Defense Secretary Cheney said that European euphoria over Mr. Gorbachev is starting to be tempered by a recognition of "the magnitude of the problems he was trying to deal with."

It is in the Western interest to see Mr. Gorbachev succeed. The odds are against him, as he himself would no doubt tell you. The ultimate outcome depends on what he does, not on what we do. Even if the press is ready to seize and misinterpret, these are not very complicated thoughts. Surely there is someone in the administration, maybe Bob Gates, who could explain them to college students, or even schoolchildren.

Vernon E. Jordan was elected to the board of this transportation services concern. Mr. Jordan has served as executive director of the United Negro College Fund, director of the Voter Education Project of the Southern Regional Council and attorney-consultant to the U.S. Office of Economic Opportunity. His election increases Ryder's board to 14 members.

The American Stock Exchange said a seat was sold for $160,000, down $5,000 from the previous sale last Friday.

Seats are currently quoted at $151,000, bid, and $162,000, asked.

Two gunmen entered a Maryland restaurant, ordered two employees to lie on the floor and shot them in the backs of their heads. The killers fled with less than $100.

Describing this and other grisly killings, Sen. Strom Thurmond (R., S.C.) recently urged fellow lawmakers to revive a broad federal death penalty. "The ultimate punishment," he declared, "will protect the law-abiding from the vicious, cruel individuals who commit these crimes."

There's just one problem: The law that Sen. Thurmond is pushing would be irrelevant in the case of the Maryland restaurant murders and almost all other killings. Most murders are state crimes, so any federal capital-punishment law probably would turn out to be more symbolism than substance.

Yet the bill is riding high on the furor over drug trafficking. Senate Republicans, after repeatedly failing to attach death-penalty amendments to unrelated legislation, have finally gotten a full-blown death-penalty bill through committee. The Democratic leadership agreed to allow a floor vote on the issue before the end of the year -- a debate certain to focus on the alleged racial inequality of death sentencing. Even some Democrats concede that there is probably a majority in the Senate that favors some kind of broad capital-punishment measure.

The pending bill, introduced by Mr. Thurmond, would revive the long-dormant federal death-penalty laws by instituting legal procedures required by the Supreme Court. In 1972, the high court swept aside all capital-punishment laws -- federal and state alike -- as unconstitutional. But in 1976, the court permitted resurrection of such laws, if they meet certain procedural requirements. For instance, juries would have to consider specific "aggravating" and "mitigating" factors before deciding whether to condemn someone to death. Since that 1976 ruling, 37 states have reintroduced the death penalty. But congressional Democrats have blocked the same from occurring at the federal level, with the exception of a 1988 law allowing capital punishment for certain drug-related homicides.

The Thurmond bill would establish a federally administered death sentence for 23 crimes, most of which were formerly punishable by death under federal statutes that the Supreme Court invalidated. Among these crimes are murder on federal land, presidential assassination and espionage. The Thurmond bill would also add five new crimes punishable by death, including murder for hire. (Separately, the Senate last week passed a bill permitting execution of terrorists who kill Americans abroad.)

Amid the swirl of punitive rhetoric surrounding the issue, one critical question involves whether a federal death penalty, on top of existing state laws, would deter any would-be criminals.

For one thing, it's unlikely that many people would receive federal death sentences, let alone be executed. Most of the crimes incorporated in the Thurmond bill are exceedingly rare -- killing a Supreme Court justice, for instance, or deliberately causing a train wreck that results in a death.

In fact, only 28 defendants would have been eligible for federal death sentences if the Thurmond bill had been in effect in the past three years, according to a study by the Senate Judiciary Committee's Democratic staff. The last federal execution before the Supreme Court's 1972 ruling banning the death penalty took place in 1963, meaning that the federal government didn't exercise its execution authority for eight years.

"In that sense, the whole debate is sort of a fraud," argues a Democratic Senate staff member. "It's distracting attention from serious issues, like how to make DEA, FBI and Customs work together" on drug enforcement.

Republicans acknowledge that few people would be executed under the Thurmond bill, but they contend that isn't the point. "Many scholars are of the opinion that the mere existence of the penalty deters many people from the commission of capital crimes," says Sen. Orrin Hatch (R., Utah). Executions, regardless of how frequently they occur, are also "proper retribution" for heinous crimes, Mr. Hatch argues. Thomas Boyd, a senior Justice Department official, says the new federal drug-related crimes punishable by death since last November may result in a jump in capital sentences, though that hasn't happened so far.

In addition to resuscitating the old issue of whether death sentences deter criminals, this bill has made race a major part of the death-penalty debate. Before the bill left committee, Sen. Edward Kennedy (D., Mass.) attached an amendment that would allow a defendant to escape from a death sentence in jurisdictions shown to have meted out executions in a racist manner.

The amendment prompted an ironic protest from Mr. Thurmond, who complained that it would "kill" capital punishment. A large number of studies suggest that state judges and juries have imposed the penalty in a racially discriminatory fashion. And the Kennedy amendment would invade not only federal but state sentencings, in two important ways. It would allow all defendants to introduce statistical evidence showing racially disproportionate application of the death penalty in the past. And it would shift the burden to prosecutors to disprove that discrimination caused any statistical racial disparities.

"That burden is very difficult, if not impossible, to meet," says Mr. Boyd. "How do you prove a negative?" Since most prosecutors wouldn't be able to demonstrate conclusively that racial considerations didn't affect sentencing, executions everywhere might come to a halt, Mr. Boyd explains.

At least 15 major studies purport to show that particular states have imposed the death penalty disproportionately against killers of whites compared with blacks, and against black defendants compared with white defendants. Conservatives question the validity of the studies and note that the Supreme Court ruled in 1987 that such research, regardless of its accuracy, isn't relevant to a constitutional attack on a particular death sentence.

The Kennedy amendment would, in effect, legislate around the Supreme Court ruling. Lawyers would eagerly seize on the provision in their death-penalty appeals, says Richard Burr, director of the NAACP Legal Defense and Educational Fund's capital-punishment defense team.

Mr. Kennedy failed to get his amendment incorporated into last year's anti-drug legislation, and it will be severely attacked on the Senate floor this time around. But if it survives, it could prompt other statutory changes, according to the Mr. Burr. It might force Congress and the states to narrow the death penalty only to convictions shown to be relatively free of racial imbalance -- murders by repeat offenders who torture their victims, perhaps.

Narrowing the penalty in this fashion would clearly reduce whatever deterrent effect it now has. And that, in turn, would only strengthen the argument of those who oppose execution under any circumstances.

A state judge postponed a decision on a move by holders of Telerate Inc. to block the tender offer of Dow Jones & Co. for the 33% of Telerate it doesn't already own.

Vice Chancellor Maurice A. Hartnett III of Delaware's Court of Chancery heard arguments for more than two hours here, but he made no comment and asked no questions. He could rule as early as today on the motion seeking a temporary injunction against the Dow Jones offer.

Dow Jones has offered to pay $18 a share, or about $576 million, for the remaining Telerate stake. The offer will expire at 5 p.m. EST on Nov. 6, unless extended again.

Robert Kornreich, an attorney for the Telerate holders, told Judge Hartnett the Dow Jones offer is "arrogant" and "hostile." He accused Dow Jones of "using unfair means to obtain the stock at an unfair price."

Michael Rauch, an attorney for Dow Jones, defended the offer as adequate, based on what the company considers realistic projections of Telerate's revenue growth, in the range of 12%. He also contended that the plaintiffs failed to cite any legal authority that would justify such an injunction.

Telerate provides information about financial markets through an electronic network. Dow Jones publishes The Wall Street Journal, Barron's magazine, other periodicals and community newspapers and operates electronic business information services.

Japan's exports of cars, trucks and buses declined 2.4% to 535,322 units in September from a year earlier, the Japan Automobile Manufacturers Association said.

The association attributed the drop to a trend among auto makers to move manufacturing operations overseas. With the exception of August, when exports rose 2.1%, exports have declined every month from year-earlier levels since March.

Lone Star Technologies Inc. said its Lone Star Steel Co. unit sued it in federal court here, seeking to recover an intercompany receivable valued at a minimum of $23 million.

The lawsuit was filed by Lone Star Steel's unsecured creditors' committee on behalf of Lone Star Steel, which has been operating under Chapter 11 of the federal Bankruptcy Code since June 30.

Lone Star Technologies said it and its subsidiary's creditors agree that the parent company owes the unit money, but they haven't been able to reach agreement on the amount.

Judith Elkin, lawyer for the creditors, said the creditors group is challenging certain accounting entries on the parent company's books and estimates that the receivable owed the steel company could be as much as $40 million.

The Lone Star Steel lawsuit also asks the court to rule that Lone Star Technologies is jointly responsible for a $4.5 million Lone Star Steel pension payment that was due, but wasn't paid, in September and that the parent company can't recover the amount from its subsidiary if the parent company makes the payment.

Separately, Lone Star Technologies said the bankruptcy court granted Lone Star Steel an extension until year end on its exclusive period to present a reorganization plan. The 120-day exclusivity period was to expire yesterday.

Under Chapter 11, a company continues to operate, but is protected from creditor lawsuits while it tries to work out a plan to pay its debt.

Nothing was going to hold up the long-delayed settlement of Britton vs. Thomasini. Not even an earthquake.

On the afternoon of Oct. 17, after hours of haggling with five insurance-claims adjusters over settling a toxic-waste suit, four lawyers had an agreement in hand. But as Judge Thomas M. Jenkins donned his robes so he could give final approval, the major earthquake struck, its epicenter not far from his courtroom in Redwood City, Calif.

The walls shook; the building rocked. For a while, it looked like the deal -- not to mention the courtroom itself -- was on the verge of collapse.

"The judge came out and said, `Quick, let's put this on the record, '" says Sandy Bettencourt, the judge's court reporter. "I said, `NOW?' I was shaking the whole time."

A 10-gallon water cooler had toppled onto the floor, soaking the red carpeting. Lights flickered on and off; plaster dropped from the ceiling, the walls still shook and an evacuation alarm blared outside. The four lawyers climbed out from under a table.

"Let's close the door," said the judge as he climbed to his bench.

At stake was an $80,000 settlement involving who should pay what share of cleanup costs at the site of a former gas station, where underground fuel tanks had leaked and contaminated the soil. And the lawyers were just as eager as the judge to wrap it up. "We were never going to get these insurance companies to agree again," says John V. Trump, a San Francisco defense lawyer in the case.

Indeed, the insurance adjusters had already bolted out of the courtroom. The lawyers went to work anyway, duly noting that the proceeding was taking place during a major earthquake. Ten minutes later, it was done. For the record, Jeffrey Kaufman, an attorney for Fireman's Fund, said he was "rattled -- both literally and figuratively."

"My belief is always, if you've got a settlement, you read it into the record." says Judge Jenkins, now known in his courthouse as "Shake 'Em Down Jenkins."

The insurance adjusters think differently. "I didn't know if it was World War III or what," says Melanie Carvain of Morristown, N.J. "Reading the settlement into the record was the last thing on my mind.

Edison Brothers Stores Inc. said it agreed to buy 229 Foxmoor women's apparel stores from Foxmoor Specialty Stores Corp., a unit of Dylex Ltd. of Toronto. Terms weren't disclosed.

Edison said the acquired stores would be integrated into its current operations.

BROWN-FORMAN Corp. (Louisville, Ky.) -- David R. Jackson, formerly vice president, managing director of corporate communications for Maxwell Communication Inc., was named vice president and assistant to the chairman of this maker of alcoholic beverages and consumer products.

Your Oct. 4 front page noted that British lawyers have to wear wigs in court and that these wigs are made from horses' tails.

Do you think the British know something that we don't?

Yale Jay Lubkin

Owings, Md.

Applause for "Sometimes, Talk Is the Best Medicine," in your Oct. 5 Marketplace section.

Indeed, the "art of doctoring" does contribute to better health results and discourages unwarranted malpractice litigation.

Elaborating on the concern about doctors' sacrificing earnings in order to spend "talk time" with patients, we are finding the quality of the time spent is the key to true rapport. Even brief conversations can show caring and trust, and need not restrict the efficiency of the communication or restrain the doctor's earnings.

The issue is far-reaching. Right now, the American populace is spending about 12% of our gross national product on health care. That amounts to more than $350 billion a year. And it is estimated that more than 20% of that, $70 billion, goes to "defensive medicine" -- those measures taken by doctors to protect themselves from the most unlikely possibilities.

So we all stand to benefit if patient-physician relations become a "partnership."

President North American Physicians Insurance Risk Retention Group

Chrysler Corp. Chairman Lee A. Iacocca said the nation's No. 3 auto maker will need to close one or two of its assembly plants because of the slowdown hitting the industry.

In an interview with the trade journal Automotive News, Mr. Iacocca declined to say which plants will close or when Chrysler will make the moves. But he said, "we have too many plants in our system. So the older or most inefficient capacity has got to go."

According to industry analysts, Chrysler plants most likely to close are the St. Louis No. 1 facility, which builds Chrysler LeBaron and Dodge Daytona models; the Toledo, Ohio, Jeep plant, which dates back to the early 1900s; and two Canadian plants that build the Jeep Wrangler and Chrysler's full-sized vans.

Chrysler has had to temporarily close the St. Louis and Toledo plants recently because of excess inventories of vehicles built there.

At Chrysler's 1990 model preview last month, Chrysler Motors President Robert A. Lutz said the No. 3 auto maker, along with other U.S. manufacturers, might be forced to "realign . . . capacity" if market demand doesn't improve. But Mr. Iacocca's remarks are the most specific indication to date of how many plants could be in jeopardy.

General Motors Corp. has signaled that as many as five of its U.S. and Canadian plants may not survive the mid-1990s as it struggles to trim its excess vehicle-production capacity.

The overcapacity problem has intensified in recent years, with foreign auto makers beginning car and truck production in the U.S. With companies such as Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co. running so-called transplant auto operations, Japanese auto production in the U.S. will reach one million vehicles this year.

"Unless the market goes to 19 million units -- which we all know it's not going to do -- we have the inescapable fact that the transplants are adding capacity," Mr. Lutz said last month. The Japanese-managed plants eventually will have the capacity to build some 2.5 million vehicles in the U.S. and that will translate into "market share that is going to have to come out of somebody," he added.

Already Chrysler has closed the Kenosha, Wis., plant it acquired when it bought American Motors Corp. in 1987. Chrysler has also launched a $1 billion cost-cutting program that will cut about 2,300 white-collar workers from the payroll in the next few months.

Revco D.S. Inc., the drugstore chain that filed for bankruptcy-court protection last year, received a $925 million offer from a group led by Texas billionaire Robert Bass.

Revco reacted cautiously, saying the plan would add $260 million of new debt to the highly leveraged company. It was Revco's huge debt from its $1.3 billion leveraged buy-out in 1986 that forced it to seek protection under Chapter 11 of the federal Bankruptcy Code.

Revco insists that the proposal is simply an "expression of interest," because under Chapter 11 Revco has "exclusivity rights" until Feb. 28. Those rights prevent anyone other than Revco from proposing a reorganization plan.

Also under Chapter 11, a reorganization plan is subject to approval by bondholders, banks and other creditors. A financial adviser for Revco bondholders, David Schulte, of Chilmark Partners, had mixed reactions to the offer.

He said he feared a Revco reorganization might force bondholders to accept a "cheap deal," and that the Bass group's offer would give them more money. However, the group is offering to pay off bondholders in cash only -- $260.5 million -- and no equity. The Revco bonds are high-yield, high-risk "junk" bonds; holders have $750 million in claims against Revco, Mr. Schulte said.

Revco received the offer Oct. 20, but issued a response yesterday only after a copy of the proposal was made public by bondholders. Acadia Partners Limited Partnership, a Fort Worth, Texas, partnership that includes the Robert M. Bass Group, made the proposal. Mr. Bass is based in Fort Worth.

Analysts said the nation's second-largest drugstore chain was a valuable company, despite its financial woes. Its problem, they say, is that management paid too much in the leveraged buy-out and the current $515 million debt load is keeping Revco in the red.

"If bought at the right price, it could still be profitable," said Jeffrey Stein, an analyst at McDonald & Co., Cleveland.

In addition, Revco's 1,900 stores in 27 states represent a lot of real estate, he said, and demographics are helping pharmacies: The nation's aging population will boost demand for prescription drugs.

Last week, Revco's parent company, Anac Holding Corp., said the company reported a loss of $16.2 million for the fiscal first quarter, compared with a loss of $27.9 million in the year-earlier quarter. Sales were $597.8 million, up 2.4% from the previous year.

The company, based in Twinsburg, Ohio, said its operating profit before depreciation and amortization increased 51%, to $9.2 million from $6.1 million.

Acadia Partners and the Bass Group declined to comment. The partnership also includes American Express Co., Equitable Life Assurance Society of the U.S. and Shearson Lehman Hutton Inc.

The offer consists of $410.5 million in cash and the rest in notes. Acadia would sell up to 10% of the equity in the reorganized company to creditors and bondholders in exchange for the cash distribution, but creditors and bondholders would receive no discount for their shares.

Revco's chairman and chief executive officer, Boake A. Sells, said both the company and the bondholders have put forth reorganization plans, but little progress has been made since negotiations began this summer.

He said he has not met with representatives from Acadia. Any reorganization proposal, Mr. Sells said, is difficult to assess because it must be agreed upon by the company, bondholders, banks and other creditors. Revco has $1.5 billion in claims outstanding.

"It's not like the board can decide" by itself, Mr. Sells said, adding, "we're indifferent to (the Bass) plan. We just want a plan that satisfies creditors and at the end leaves a healthy Revco."

But Mr. Schulte, the bondholders' adviser, said Revco was dragging its feet in responding to the proposal. "They want to pretend it doesn't exist," he said.

Mr. Schulte, who met with Acadia representatives on Oct. 10, said, "It's certainly a responsible offer. It's not an effort to steal the company" in the middle of the night.

Copper futures prices failed to extend Friday's rally. Declines came because of concern that demand for copper may slow down.

The December contract was down three cents a pound, settling at $1.1280, which was just above the day's low of $1.1270.

Futures prices fell during three of five sessions last week, and the losses, individually and cumulatively, were greater than the advances.

Two of the major factors buoying prices, the prolonged strikes at the Highland Valley mine in Canada and the Cananea mine in Mexico, were finally resolved. Also, the premiums paid by the U.S. government on a purchase of copper for the U.S. Mint were lower than expected, and acted as a price depressant, analysts said. The mint purchases were at premiums about 4 1/2 cents a pound above the respective prices for the copper. At the time merchants were asking for premiums of about five cents a pound.

All this has led to prolonged selling in futures, mostly on the part of computer-guided funds. Prices fell through levels regarded as important support areas, which added to the selling.

The reluctance of traders to buy contracts indicates that they have begun focusing on demand rather than supply. At least one analyst noted that as production improves, the concern among traders is whether the prospective increased supply will find buyers because of uncertainty over national economies.

"Demand from Japan is expected to continue strong, but not from other areas of the world into the first quarter of next year," he said.

Japan normally depends heavily on the Highland Valley and Cananea mines as well as the Bougainville mine in Papua New Guinea. Recently, Japan has been buying copper elsewhere. But as Highland Valley and Cananea begin operating, they are expected to resume their roles as Japan's suppliers. According to Fred Demler, metals economist for Drexel Burnham Lambert, New York, "Highland Valley has already started operating and Cananea is expected to do so soon."

The Bougainville mine is generally expected to remain closed until at least the end of the year. It hasn't been operating since May 15 because of attacks by native landowners. A recent attempt to resume operations was cut short quickly by these attacks.

However, traders disregarded a potential production disruption in Chile and a continued drop in inventories.

Workers at two Chilean mines, Los Bronces and El Soldado, which belong to the Exxon-owned Minera Disputado group, will vote Thursday on whether to strike after a two-year labor pact ends today. The mines produced a total of 110,000 tons of copper in 1988.

According to Drexel's Mr. Demler, the potential strike is expected to be resolved quickly, which may be one reason why the situation didn't affect prices much. Another analyst said that, if there was any concern, it was that a strike could encourage other walkouts in Chile.

London Metal Exchange copper inventories fell 550 tons last week to 83,950 tons, a smaller-than-expected decline. But that development also had little effect on traders' sentiment.

Mr. Demler said that stocks of copper in U.S. producers' hands at the end of September were down 16,000 metric tons from August to 30,000 tons. Outside the U.S., he said, producer stocks at the end of August were 273,000 tons, down 3,000 tons from the end of July.

Consumer stocks of copper in the U.S. fell to 44,000 tons at the end of September from 54,000 tons a month earlier, and stocks of copper held by consumers and merchants outside of the U.S. at the end of July stood at 123,000 tons, down from 125,000 tons in June. The high point of foreigners' copper stocks this year was 136,000 tons at the end of April, according to Mr. Demler.

In other commodity markets yesterday:

GRAINS AND SOYBEANS: The prices of most corn, soybean and wheat futures contracts dropped slightly as farmers in the Midwest continued to rebuild stockpiles that were depleted by the 1988 drought. Buying by the Soviets has helped to prop up corn prices in recent weeks, but a lack of any new purchases kept prices in the doldrums.

COFFEE: Futures prices rose slightly in a market filled with rumors that a new international coffee agreement might still be achieved. The December contract ended with a gain of 1.29 cents a pound at 74.35 cents. According to one analyst, prices opened higher because of reports over the weekend that Brazil and Colombia, at the Pan-American summit meeting in Costa Rica, had agreed to a reduction in their coffee export quotas for the sake of creating a new agreement. The reports, attributed to the Colombian minister of economic development, said Brazil would give up 500,000 bags of its quota and Colombia 200,000 bags, the analyst said. These reports were later denied by a high Brazilian official, who said Brazil wasn't involved in any coffee discussions on quotas, the analyst said. The Colombian minister was said to have referred to a letter that he said President Bush sent to Colombian President Virgilio Barco, and in which President Bush said it was possible to overcome obstacles to a new agreement. The minister was also quoted as saying that a new pact could be achieved during the first half of next year, according to the analyst.

PRECIOUS METALS: Futures prices showed modest changes in light trading volume. December delivery gold eased 40 cents an ounce to $380.80. December silver was off 3.7 cents an ounce at $5.2830. January platinum rose 90 cents an ounce at $500.20. The market turned quiet after rising sharply late last week, according to one analyst. Last week's uncertainty in the stock market and a weaker dollar triggered a flight to safety, he said, but yesterday the market lacked such stimuli. There was some profit-taking because prices for all the precious metals had risen to levels at which there was resistance to further advance, he said. The dollar was also slightly firmer and prompted some selling, as well, according to the analyst.

Louisiana-Pacific Corp. said its board authorized the purchase of as many as five million of its common shares for employee stock plans and other general corporate purposes.

The forest-products concern currently has about 38 million shares outstanding.

In yesterday's composite trading on the New York Stock Exchange, Louisiana-Pacific shares closed at $39.25, down 37.5 cents.

When the Supreme Soviet passed laws on workers' rights in May 1987 and on self-managing cooperatives a year later, some Western observers assumed Mikhail Gorbachev had launched the Soviet Union on a course that would lead inevitably to the creation of a market economy. Their only doubt concerned the possibility that Mr. Gorbachev might not survive the opposition that his reforms would arouse and that the whole process might be reversed.

If Mr. Gorbachev's goal is the creation of a free market, he and these Western observers have good reason to fear for his future, as economic liberalization within communist societies leads inexorably to demands for fundamental political reform accompanied by civil unrest. These fears were clearly apparent when, last week, Secretary of State James Baker blocked a speech by Robert Gates, deputy national security adviser and Soviet expert, on the ground that it was too pessimistic about the chances of Mr. Gorbachev's economic reforms succeeding.

Yet the Soviet leader's readiness to embark on foreign visits and steady accumulation of personal power, particularly since the last Politburo reshuffle on Sept. 30, do not suggest that Mr. Gorbachev is on the verge of being toppled; nor does he look likely to reverse the powers of perestroika. Indeed, the Soviet miners strike this summer clearly demonstrated that Mr. Gorbachev must proceed with economic reform. But is he so clever that he has achieved the political equivalent of making water run uphill? And has he truly persuaded the Communist Party to accept economic change of a kind that will, sooner or later, lead to its demise?

An alternative and more convincing explanation, confirmed by recent events and a close inspection of the Gorbachev program, is that the new Soviet economic and social structures are intended to conform to a model other than that of the market. For example, while the laws on individual labor activity allow a citizen to earn a living independent of the state, strict provisions are attached on how far this may lead to the development of a free market. Before becoming self-employed, or setting up a cooperative, workers must seek permission from the local soviet (council). Permission is far from automatic: The soviets have the legal right to turn down applications and impose conditions, and they appear to be exercising these powers. Private dressmaking, for example, is allowed in 10 Soviet republics but banned by five; shoemaking is allowed in seven but illegal in nine.

The controls on cooperatives appeared relatively liberal when first introduced. But that changed following a resolution from the Supreme Soviet banning cooperatives from operating in some areas of the economy, and permitting activity in others only if the cooperatives are under contract to the state.

All independent media activity is now illegal, which perhaps is not surprising, but so is the manufacture of perfume, cosmetics, household chemicals and sand candles. Medical cooperatives, among the most successful in the U.S.S.R., are banned from providing general-practitioner services (their main source of income), carrying out surgery, and treating cancer patients, drug addicts and pregnant women.

Earlier this month, the Supreme Soviet adopted two more resolutions restricting the freedom of cooperatives: The first enables the soviets to set prices for which goods may be sold; the second bans cooperatives from buying "industrial and food goods" from the state or other cooperatives. If Mr. Gorbachev is looking toward unleashing the productive forces of the market, these latest resolutions are nothing short of reckless.

Along with some other revealing indicators, these developments suggest that while Mr. Gorbachev wishes to move away from some rigid central controls, he is bent on creating economic structures of a kind that would scarcely find favor with the Austrian or Chicago schools of economic thought. Mr. Gorbachev has ruled out the use of the market to solve the problem of insufficient consumer goods. He told the Congress of People's Deputies on May 30: "We do not share this approach, since it would immediately destroy the social situation and disrupt all the processes in the country."

Having rejected central economic planning for economic reasons, and the market for fear of the social (political) consequences, Mr. Gorbachev seeks a "third way" that would combine the discipline and controls of the former with the economic benefits of the latter. Most important, this would leave the party intact and its monopoly of political power largely undisturbed. Indeed, Mr. Gorbachev's proposals display a close conceptual resemblance to the tenets of Italian fascism, whose architects spoke specifically of a "third way": of having produced a historic synthesis of socialism and capitalism. They, too, promised to combine economic efficiency with order and discipline.

The emergence of Russian corporatism had been anticipated in journalist George Urban's introduction to a series of colloquies -- "Can the Soviet System Survive Reform?" -- published this spring. "Communism will reach its final stage of development in a feckless Russo -- corporation-socialist in form, nationalistic in content and Oriental in style -- that will puzzle the world with alternating feats of realism and recklessness. . . ."

The fascist concept of corporatism envisaged an "organic" society in which citizens were spiritually and morally unified, and prepared to sacrifice themselves for the nation. This unification was to be brought about through policies and institutions that would unite workers and employers with government in a fully integrated and "harmonic" society. The key to the creation of the "organic" state lay in the formation of "natural" groups that would undertake the role of decision-making. By contrast, a parliamentary system based on abstract political rights and groups was held to cause, rather than resolve, conflict.

The closeness of Soviet perestroika to the fascist social blueprint of Mussolini was evident when Mr. Gorbachev presented his economic vision to the Soviet Congress. In doing so, he neither rejected a socialist planned economy nor embraced the free market. Instead, he proposed a "law-governed economy," in which there would be a "clear-cut division between state direction of the economy and economic management." The latter would be undertaken by "enterprises, joint stock companies and cooperatives." These would not function independently, but would act together to form "combines, unions and associations" to tackle problems and coordinate their activities.

Mr. Gorbachev is in a much stronger position to pursue the corporatist ideal than was Mussolini, who was never able to influence business giants such as Pirelli and Fiat. The Soviet Communist Party has the power to shape corporate development and mold it into a body dependent upon it.

To ensure the loyalty of the business sector, Mr. Gorbachev may offer concessions and powers that will allow the business community to preserve its own interests, probably by restricting competition. However, Mr. Gorbachev must ensure that within this "alliance" the business sector remains subordinate to the party. At the same time, he must give it sufficient freedom to provide the economic benefits so desperately needed. It is the promise of economic returns that is supposed to make the corporatist model attractive to both the party and labor.

The work force provides the third arm of the "alliance." Within the alliance it is supposed to act as a balancing force, guarding against excessive control by government or abuse of its economic position by business, for either could result in a deterioration of its living standards (under the new resolutions, workers councils may demand that a cooperative be closed or its prices be reduced). By providing workers with the opportunity to move into the private sector where wages tend to be higher, and by holding out the promise of more consumer goods, Mr. Gorbachev hopes to revive the popularity of the party.

At the same time, the strategy requires that he deal effectively with those who seek genuine Western-style political pluralism. The most important development in Mr. Gorbachev's policy for marginalizing the opposition movement is the claim that the U.S.S.R. also suffers from terrorism. An increasing number of references by the Soviet press to opposition groups now active in the U.S.S.R., particularly the Democratic Union, allege that they show "terroristic tendencies" and claim that they would be prepared to kill in order to achieve their aims. It is possible that, in perpetuating such myths, the ground is being laid for the arrest of opposition activists on the ground of terrorism.

Mr. Gorbachev would appear to see his central task, however, as that of ensuring that foundations of an alliance among labor, capital and the state are properly laid before the demands for a multiparty system reach a crescendo. If he were able to construct a popular and efficient corporatist system, he or his heir would be wellplaced to rein in political opposition, and to re-establish control in Eastern Europe.

The weaknesses in his plan do not lie in the political calculations -- Mr. Gorbachev is a consummate political leader, perhaps one of the greatest -- but in its economic prescription. Contrary to widespread belief, Mussolini failed to live up to his promise to make the trains run on time; it is doubtful whether Soviet-style corporatism will make Soviet trains run on time, or fill the shops with goods that the consumers so desperately crave.

Miss Brady is deputy director of the Russian Research Foundation in London.

New construction contracting climbed 8% in September to an annualized $274.2 billion, with commercial, industrial and public-works contracts providing most of the increase, according to F.W. Dodge Group.

Through the first nine months of the year, the unadjusted total of all new construction was $199.6 billion, flat compared with a year earlier. The South was off 2% after the first nine months, while the North Central region was up 3%. The Northeast and West regions were unchanged.

A small decline in total construction for the entire year is possible if contracting for housing doesn't increase in response to this year's lower mortgage rates, said George A. Christie, vice president and chief economist of Dodge, the forecasting division of publisher McGraw-Hill Inc.

The seasonally adjusted Dodge Index reached 175 in September, its highest level this year, from 162 in August. The index uses a base of 100 in 1982.

Newly contracted residential work edged up 2% in September to an annualized $121.2 billion, largely because multifamily building rebounded from a very weak August.

"At the end of the third quarter, there was still no evidence of renewed home building in response to the midyear decline of mortgage rates," Mr. Christie said. Housing has been weak all year and especially so in the past five months.

Contracting for non-residential buildings rose 10% in September to an annualized $100.8 billion. Commercial and industrial construction rose sharply, partly because of three large projects, each expected to cost more than $100 million. Institutional building, such as hospitals and schools, eased in September following a surge in August.

Although the third quarter was the best so far this year for non-residential building, weakness early in the year held the nine-month total to $69.6 billion, up just 1% from a year earlier.

Public-works and utility projects, also known as non-building contracting, grew 18% to $52.2 billion in September, but the nine-month total of $36.9 billion was down 3% from a year earlier.

The Sept. 30 end of the federal fiscal year may have prodded contractors to get any behind-schedule road and bridge construction under way "before the clock ran out," Mr. Christie said, referring to threatened 5% across-the-board budget cuts.

a-Monthly construction contract values are reported on an annualized, seasonally adjusted basis.

Moody's Investors Service Inc. said it lowered ratings on long-term debt of CS First Boston Inc., the holding company of Wall Street giant First Boston Corp., because of First Boston's "aggressive merchant banking risk" in highly leveraged takeovers.

In downgrading CS First Boston's subordinated domestic, Euromarket and Swiss debt to single-A-3 from single-A-2, Moody's is matching a move made by the other major credit rating concern, Standard & Poor's Corp., several months ago. Moody's also confirmed the Prime-1 rating, its highest, on CS First Boston's commercial paper, or short-term corporate IOUs.

In addition, Moody's said it downgraded Financiere Credit Suisse-First Boston's senior and subordinated Swiss debt to single-A-2 from single-A-1 and lowered Financiere CSFB N.V.'s junior subordinated perpetual Eurodebt, guaranteed by Financiere Credit Suisse -- First Boston, to single-A-3 from single-A-2. About $550 million of long-term debt is affected, according to Moody's.

A spokesman for CS First Boston said: "We remain committed to a full range of businesses, including merchant banking. We think that the ratings revision is unfortunate but not unexpected. Our commitment to manage these businesses profitably will continue."

First Boston's merchant banking risks mounted last month as highly leveraged Campeau Corp., First Boston's most lucrative client of the decade, was hit by a cash squeeze and the high-risk junk bond market tumbled. First Boston incurred millions of dollars of losses on Campeau securities it owned as well as on special securities it couldn't sell. First Boston financings for several other highly leveraged clients, including Ohio Mattress, unraveled as the high-risk junk bond market plummeted.

Moody's said its rating changes actions "reflect CS First Boston's aggressive merchant banking risk as well as the risk profile of its current merchant banking exposures." It said CS First Boston "has consistently been one of the most aggressive firms in merchant banking" and that "a very significant portion" of the firm's profit in recent years has come from merchant banking-related business.

"Moody's believes that the uncertain environment for merchant banking could put pressure on CS First Boston's performance," the rating concern said, citing "continued problems" from the firm's exposures to "various Campeau-related firms" and to Ohio Mattress.

"These two exposures alone represent a very substantial portion of CS First Boston's equity," Moody's said. "Total merchant banking exposures are in excess of the firm's equity.

Quotron Systems Inc. plans to cut about 400, or 16%, of its 2,500 employees over the next several months.

"This action will continue to keep operating expenses in line" with revenue, said J. David Hann, president and chief executive officer of Los Angeles-based Quotron. The move by the financial information and services subsidiary of Citicorp is a "response to changing conditions in the retail securities industry, which has been contracting" since October 1987's stock market crash, the executive added.

Quotron, which Citicorp purchased in 1986, provides price quotations for securities, particularly stocks. Quotron also provides trading and other systems, services for brokerage firms, and communications-network services.

Independent providers of financial information, including Quotron, have been under some pressure as the major securities houses try to regain their hold on the production of market data and on the related revenue. Shearson, Goldman, Sachs & Co., Morgan Stanley & Co. and Salomon Inc. are discussing formation of a group to sell securities-price data.

The job cuts, to be made in a number of areas at various job levels, are "a streamlining of operations," a spokeswoman said. The company has no immediate plans to close any operations, she said, but Quotron may subcontract some work that it has been doing in-house, including refurbishment and production of Quotron 1000 equipment used in delivering financial data.

The spokeswoman said the move isn't directly a response to Quotron's loss of its two biggest customers, Merrill Lynch & Co. and American Express Co. 's Shearson Lehman Hutton Inc., to Automated Data Processing Inc. earlier this year.

The spokeswoman noted that last week, Kidder, Peabody & Co., the securities subsidiary of General Electric Co., chose a Quotron subsidiary to provide order-processing services. And Oct. 24, Quotron said it will market the automated trading system of broker-dealer Chapdelaine Government Securities Inc.

Quotron isn't profitable on Citicorp's books because of the interest charges the New York bank holding company incurred in buying the financial-data concern for $680 million, says Ronald I. Mandle, analyst for Sanford C. Bernstein & Co. But Citicorp "does view Quotron) as being crucial to the financial-services business in the 1990s," the analyst added.

This past summer, Quotron sold its customer-service unit, employing 600, to Phoenix Technologies Inc., a closely held computer-service firm in Valley Forge, Pa. Terms weren't disclosed.

The Oakland Athletics' four-game sweep over the San Francisco Giants in the World Series may widen already-sizable losses that the ABC network will incur on the current, final year of its baseball contract.

The 1989 Series, disrupted by a devastating earthquake and diminished in national interest because both teams came from the San Francisco Bay area, is likely to end up as the lowest-rated Series of this decade and probably since the event has been broadcast.

The first three games were seen by an average of only 17% of U.S. homes, a sharp decline from the 23.7% rating for last year's Series. A final ratings tally from A.C. Nielsen Co. is due today.

The sweep by the A's, whose pitchers and home-run hitters dominated the injury-prone Giants, will only make things worse for ABC, owned by Capital Cities/ABC Inc. The network had been expected to have losses of as much as $20 million on baseball this year.

It isn't clear how much those losses may widen because of the short Series. Had the contest gone a full seven games, ABC could have reaped an extra $10 million in ad sales on the seventh game alone, compared with the ad take it would have received for regular prime-time shows.

ABC had based its budget for baseball on a six-game Series.

A network spokesman wouldn't comment, and ABC Sports officials declined to be interviewed. But some industry executives said ABC, in anticipation of a four-game sweep, limited its losses by jacking up the number of commercials it aired in the third and fourth games. A World Series telecast typically carries 56 30-second commercials, but by the fourth game ABC was cramming in 60 to 62 ads to generate extra revenue.

ABC's baseball experience may be of interest to CBS Inc., which next season takes over the broadcasting of all baseball playoffs in a four-year television contract priced at $1.06 billion. CBS Sports President Neal Pilson has conceded only that CBS will have a loss in the first year. But other industry executives contend the losses could reach $250 million over four years and could go even higher if the World Series end in four-game romps.

The Series typically is among the highest-rated sports events on television. Last year's series, broadcast by General Electric Co. 's NBC, was the lowest-rated Series in four years; instead of featuring a major East Coast team against a West Coast team, it pitted the Los Angeles Dodgers against the losing Oakland A's.

ABC's hurdle was even higher this year with two teams from the same area. The Series got off to a lukewarm start Oct. 14 with a 16.2% rating; the next night it drew 17.4% of homes. Then came the earthquake and a damaging delay of 11 days.

Some people had hoped ABC's ratings would go up because of the intense focus on the event in the aftermath of the earthquake. An analyst's opinion to that effect even sent Capital Cities/ABC shares soaring two weeks ago. But interest instead decreased. The third game, last Friday night, drew a disappointing 17.5 rating.

Bargain hunters helped stock prices break a weeklong losing streak while bond prices and the dollar inched higher.

The Dow Jones Industrial Average gained 6.76 points to 2603.48 in light trading after losing more than 92 points last week. Bond prices continued to edge higher in anticipation of more news showing a slower economy. Although the dollar rose slightly against most major currencies, the focus in currency markets was on the beleaguered British pound, which gained slightly against the dollar.

Trading volume on the New York Stock Exchange dwindled to only 126.6 million shares yesterday as major brokerage firms continued to throw in the towel on program trading. Kidder Peabody became the most recent firm to swear off stock-index arbitrage trading for its own account, and Merrill Lynch late yesterday took the major step of renouncing the trading strategy even for its clients.

Yet that didn't eliminate program trading from the market. The Dow industrials shot up 23 points in the opening hour, at least in part because of buy programs generated by stock-index arbitrage, a form of program trading involving futures contracts. But interest waned as the day wore on and investors looked ahead to the release later this week of two important economic reports.

The first is Wednesday's survey of purchasing managers, considered a good indicator of how the nation's manufacturing sector fared in October. The other is Friday's measure of October employment, an indicator of the broader economy's health. Both are expected to show continued sluggishness, which would be good for bonds and bad for stocks.

In major market activity: Stock prices rose in light trading. But declining issues on the New York Stock Exchange outnumbered gainers 774 to 684, and broader market indexes were virtually unchanged.

Bond prices crept higher. The Treasury's benchmark 30-year bond gained about an eighth of a point, or about $1.25 for each $1,000 face amount. The yield on the issue slipped to 7.92%.

The dollar gained. In late New York trading the dollar was quoted at 1.8340 marks and 141.90 yen, compared with 1.8300 marks and 141.65 yen Friday. The British pound, pressured by last week's resignations of key Thatcher administration officials, nevertheless rose Monday to $1.5820 from Friday's $1.5795.

If Japanese companies are so efficient, why does Kawasaki-Rikuso Transportation Co. sometimes need a week just to tell its clients how soon it can ship goods from here to Osaka? Why, until last spring, did the Long-Term Credit Bank of Japan sometimes take several days to correct typographical errors in its paper work for international transactions?

Because the companies have lacked office computers considered standard equipment in the U.S. and Western Europe, Japanese corporations' reputation as hi-tech powerhouses is only half right. Their factories may look like sets for a Spielberg movie, but their offices, with rows of clerks hunched over ledgers and abacuses, are more like scenes from a Dickens novel.

Now, the personal-computer revolution is finally reaching Japan. Kawasaki-Rikuso, a freight company, set up its own software subsidiary this year and is spending nearly a year's profit to more than double the computer terminals at its main office. In April, the Long-Term Credit Bank linked its computers in Tokyo with its three American offices.

Overall, PC sales in Japan in the first half of 1989 were 34% higher than in the year-earlier period. Combined PC and work-station use in Japan will jump as much as 25% annually over the next five years, according to some analysts, compared with about 10% in the U.S. And with a labor shortage and intense competitive pressure to improve efficiency, more and more Japanese companies are concluding that they have no choice. "We have too many people in our home offices," says Yoshio Hatakeyama, the president of the Japan Management Association. "Productivity in Japanese offices is relatively low."

With Japanese companies in a wide range of industries -- from heavy industry to securities firms -- increasing their market share world-wide, the prospect of an even more efficient Japanese economic army may rattle foreigners. But it also offers opportunities; Americans are well poised to supply the weapons. Japan may be a tough market for outsiders to penetrate, and the U.S. is hopelessly behind Japan in certain technologies. But for now, at least, Americans are far better at making PCs and the software that runs them.

After years of talking about selling in Japan, more and more U.S. companies are seriously pouring in. Apple Computer Inc. has doubled its staff here over the past year. Lotus Development Corp. has slashed the lag between U.S. and Japan product introductions to six months from three years. Ungermann-Bass Inc. has a bigger share of the computer-network market in Japan than at home.

But the Japanese have to go a long way to catch up. Typical is one office of the Ministry of International Trade and Industry's Machinery and Information Industries Bureau -- the main bureaucracy overseeing the computer industry. "Personal Computer" yearbooks are lined up on nearly every desk, and dog-eared copies of Nikkei Computer crowd magazine racks. But amid the two dozen bureaucrats and secretaries sits only one real-life PC.

While American PC sales have averaged roughly 25% annual growth since 1984 and West European sales a whopping 40%, Japanese sales were flat for most of that time. Japanese office workers use PCs at half the rate of their European counterparts and one-third that of the Americans.

Moreover, Japanese offices tend to use computers less efficiently than American offices do. In the U.S., PCs commonly perform many tasks and plug into a broad network. In Japan, many desktop terminals are limited to one function and can't communicate with other machines.

The market planning and sales promotion office of Nomura Securities Co., for example, has more than 30 computers for its 60 workers, a respectable ratio. But the machines aren't on employees' desks; they ring the perimeter of the large office. Some machines make charts for presentations. Others analyze the data. To transfer information from one to the other, employees make printouts and enter the data manually. To transmit charts to branch offices, they use a fax machine. Meanwhile, a woman sitting next to a new Fujitsu terminal writes stock-market information on a chart with a pencil and adds it up with a hand calculator. In an efficient setup, the same PC could perform all those tasks.

In the U.S., more than half the PC software sold is either for spreadsheets or for database analysis, according to Lotus. In Japan, those functions account for only about a third of the software market. Machines dedicated solely to word processing, which have all but disappeared in the U.S., are still more common in Japan than PCs. In the U.S., one-fifth of the office PCs are hooked up to some sort of network. In Japan, about 1% are linked.

"Computers here are used for data gathering," says Roger J. Boisvert, who manages the integrated-technologies group in McKinsey & Co. 's Tokyo office. Some Japanese operations, such as securities-trading rooms, may be ahead of their American counterparts, he says, but "basically, there's little analysis done on computers in Japan." Of course, simply buying computers doesn't always solve problems, and many American companies have erred by purchasing technology they didn't understand. But healthy skepticism is only a small reason for Japan's PC lag. Various cultural and economic forces have suppressed demand.

Because the Japanese "alphabet" is so huge, Japan has no history of typewriter use, and so "keyboard allergy," especially among older workers, remains a common affliction. "I have no experience before with such sophisticated machinery," says Matsuo Toshimitsu, a 66-year-old executive vice president of Japan Air Lines, explaining his reluctance before accepting a terminal in his office this summer.

While most American employees have their own private space, Japanese "salarymen" usually share large, common tables and rely heavily on old-fashioned personal contact. Top Japanese executives often make decisions based on consensus and personal relationships rather than complex financial projections and fancy presentations. And Japan's management system makes it hard to impose a single, integrated computer system corporatewide.

Besides, a computer processing the Japanese language needs a huge memory and much processing capability, while the screen and printer need far better definition to depict accurately the intricate symbols. Until recently, much of the necessary technology has been unavailable or at least unaffordable.

Some analysts estimate the average PC costs about 50% more in Japan than the U.S. But the complex language isn't the only reason. For the past decade, NEC Corp. has owned more than half the Japanese PC market and ruled it with near-monopoly power. With little competition, the computer industry here is inefficient.

The U.S. market, too, is dominated by a giant, International Business Machines Corp. But early on, IBM offered its basic design to anybody wanting to copy it. Dozens of small companies did, swiftly establishing a standard operating system. That spurs competition and growth, allows users to change and mix brands easily, and increases software firms' incentive to write packages because they can be sold to users of virtually any computer.

If a record industry lacked a common standard, Sony CD owners could listen to a Sony version of Madonna's "Like a Prayer" but not one made for a Panasonic player. That is the state of Japan's computer industry. NEC won't release its code, and every one of the dozen or so makers has its own proprietary operating system -- all incompatible with each other. IBM established its standard to try to stop falling behind upstart Apple Computer, but NEC was ahead from the start and didn't need to invite in competitive allies.

Meanwhile, the big players haven't tried to copy the NEC standard. Corporate pride as well as the close ties common among Japanese manufacturers help explain why. Most rivals "have a working relationship with NEC, often through cross-licensing of technology," the Japan Personal Computer Software Association noted recently. "They hesitate to market NEC-compatible machines; NEC disapproves of such machines, and marketing one would jeopardize their relationship."

The result, according to many analysts, is higher prices and less innovation. While tens of thousands of software packages using the IBM standard are available in the U.S., they say only about 8,000 are written for NEC. A year ago, Japan's Fair Trade Commission warned NEC about possible violations of anti-monopoly laws for discouraging retailers from discounting.

In Japan, "software is four to five years behind the U.S. because hardware is four to five years behind, because NEC is enjoying a monopoly," complains Kazuhiko Nishi, the president of Ascii Corp., one of Japan's leading PC-magazine publishing and software companies. "There are no price wars, no competition." An NEC spokeswoman responds that prices are higher in Japan because customers put a greater emphasis on quality and service than they do in the U.S. She adds that some technological advances trail those in the U.S. because the Japanese still import basic operating systems from American companies.

But the market is changing. The government is funding several projects to push PC use. Over the next three years, public schools will get 1.5 million PCs, a 15-fold increase from current levels.

In the private sector, practically every major company is setting explicit goals to increase employees' exposure to computers. Toyota Motor Corp. 's sales offices in Japan have one-tenth the computers per employee that its own U.S. offices do; over the next five years, it is aiming for rough parity. Within a year, Kao Corp., a major cosmetics company, plans to eliminate 1,000 clerical jobs by putting on a central computer network some work, such as credit reports, currently performed in 22 separate offices.

By increasing the number of PCs it uses from 66 to 1,000, Omron Tateishi Electronics Co., of Kyoto, hopes not only to make certain tasks easier but also to transform the way the company is run. "Managers have long been those who supervise their subordinates so orders would be properly acted on," a spokesman says. "But new managers will have to be creators and innovators . . . and for that purpose it is necessary to create an environment where information from both inside and outside the company can be reached easily, and also shared."

Meanwhile, more computer makers now are competing for the new business. Seiko Epson Corp., a newcomer to the industry, fought off a legal challenge and started selling NEC clones last year. It has won about 15% of the retail PC market. Sony Corp., which temporarily dropped out of the PC business three years ago, started selling its work station in 1987 and quickly became the leading Japanese company in that market.

In a country where elbow room is scarce, laptop machines will take a large portion of the industry's future growth. Toshiba Corp. busted open that sector this summer with a notebook-sized machine that retails for less than 200,000 yen (under $1,500) -- one of the smallest, cheapest PCs available in the country. Fujitsu Ltd. is lavishing the most expensive promotion campaign in its history -- including a 100,000-guest bash at Tokyo Dome -- for its sophisticated sound/graphics FM Towns machine, which it advertises for everything from balancing the family checkbook to practicing karaoke, bar singing.

Many of the companies are even dropping their traditional independence and trying to band together to create some sort of standard. Two years ago, most of the smaller makers joined under the Microsoft Corp. umbrella to adopt a version of the American IBM AT standard. That hasn't generated much sales, but this summer Microsoft rallied all the major NEC competitors to make their new machines compatible with the IBM OS/2 standard.

A healthy, coherent Japanese market could also make it far easier for Japanese companies to sell overseas, where their share is still minimal. But it could also help American companies, which also are starting to try to open the market. As with many other goods, the American share of Japan's PC market is far below that in the rest of the world. U.S. makers have under 10% share, compared with half the market in Europe and 80% at home.

Though no formal trade barriers exist, the Japanese computer industry is difficult for outsiders to enter. "If it were an open market, we would have been in in 1983 or 1984," says Eckhard Pfeiffer, who heads Compaq Computer Corp. 's European and international operations. His company, without any major effort, sells more machines in China than in Japan. Although it has opened a New Zealand subsidiary, it is still only "studying" Japan, the only nation that hasn't adopted IBM-oriented specifications. And because general retail centers such as ComputerLand have little presence in Japan, sales remain in the iron grip of established computer makers.

But the Americans are also to blame. They long made little effort here. IBM, though long a leader in the Japanese mainframe business, didn't introduce its first PC in Japan until five years after NEC did, and that wasn't compatible even with the U.S. IBM standard. Apple didn't introduce a kanji machine -- one that handles the Chinese characters of written Japanese -- until three years after entering the market. Critics also say American companies charge too much. Japan's FTC says it is investigating Apple for allegedly discouraging retailers from discounting.

But the U.S. companies are redoubling their efforts. Apple recently hired its first Japanese president, luring away an official of Toshiba's European operations, as well as a whole Japanese top-management team. Earlier this year, it introduced a much more powerful kanji operating system and a kanji laser printer. IBM just last year started selling its first machine that could run in both Japanese and English and that substantially enhances compatibility with its American products.

"It may take five years to break even in Japan," says John A. Siniscal, who runs the Asia-Pacific office for McCormack & Dodge, a U.S. software company. "But it's an enormous business opportunity.

From a reading of the somewhat scant English-language medical literature on RU-486, the French abortion pill emerges as one of the creepiest concoctions around. This is not only because it kills the unborn, a job at which it actually is not outstandingly efficient, zapping only 50% to 85% of them depending on which study you read (prostaglandin, taken in conjunction with the pill, boosts the rate to 95%). By contrast, surgical abortion is 99% effective.

Abortion via the pill is far more of an ordeal than conventional surgical abortion. It is time-consuming (the abortion part alone lasts three days, and the clinical part comprises a week's worth of visits), bloody (one woman in a Swedish trial required a transfusion, although for most it resembles a menstrual period, with bleeding lasting an average of 10 days), and painful (many women require analgesic shots to ease them through). Nausea and vomiting are other common side effects.

Timing is of the essence with RU-486. It is most effective taken about a week after a woman misses her menstrual period up through the seventh week of pregnancy, when it is markedly less effective. That is typically about a three-week window.

So far, all the studies have concluded that RU-486 is "safe." But "safe," in the definition of Marie Bass of the Reproductive Health Technologies Project, means "there's been no evidence so far of mortality." No one has researched the long-term effects of RU-486 on a woman's health or fertility.

The drug seems to suppress ovulation for three to seven months after it is taken. Some women clearly have no trouble eventually conceiving again: The studies have reported repeaters in their programs. But there are no scientific data on this question.

Rather ominously, rabbit studies reveal that RU-486 can cause birth defects, Lancet, the British medical journal, reported in 1987. However, Dr. Etienne-Emile Baulieu, the French physician who invented RU-486, wrote in a Science magazine article last month that the rabbit-test results could not be duplicated in rats and monkeys. The drug has a three-dimensional structure similar to that of DES, the anti-miscarriage drug that has been linked to cervical and vaginal cancer in some of the daughters of the women who took it.

All the published studies recommend that women on whom the drug proves ineffective not carry the pregnancy to term but undergo a surgical abortion. A risk of birth defects, a sure source of lawsuits, is one reason the U.S. pharmaceutical industry is steering clear of RU-486.

One might well ask: Why bother with this drug at all? Some abortion advocates have been asking themselves this very question. RU-486 "probably represents a technical advance in an area where none is needed, or at least not very much," said Phillip Stubblefield, president of the National Abortion Federation, at a reproductive health conference in 1986. Many physicians have expressed concern over the heavy bleeding, which occurs even if the drug fails to induce an abortion.

It typically takes from eight to 10 years to obtain the Food and Drug Administration's approval for a new drug, and the cost of testing and marketing a new drug can range from $30 million to $70 million.

The Health and Human Services Department currently forbids the National Institutes of Health from funding abortion research as part of its $8 million contraceptive program. But the Population Council, a 37-year-old, $20 million nonprofit organization that has the backing of the Rockefeller and Mellon foundations and currently subsidizes most U.S. research on contraceptives, has recently been paying for U.S. studies of RU-486 on a license from its French developer, Roussel-Uclaf, a joint subsidiary of the German pharmaceutical company Hoechst and the French government.

In the year since the pill went on the French market, the National Organization for Women and its offshoot, former NOW President Eleanor Smeal's Fund for a Feminist Majority, have been trying to browbeat the U.S. pharmaceutical industry into getting involved. (Its scare-tactic prediction: the pill "will be available in the U.S., either legally or illegally, in no more than 2-5 years.")

Following the feminist and population-control lead has been a generally bovine press. A June 1988 article in Mother Jones magazine is typical of the general level of media ignorance. "For a woman whose period is late, using RU-486 means no waiting, no walking past picket lines at abortion clinics, and no feet up in stirrups for surgery," burbles health writer Laura Fraser. "It also means she will never have to know whether she had actually been pregnant." Wrong on all counts, Miss Fraser.

RU-486 is being administered in France only under strict supervision in the presence of a doctor. (Roussel reportedly has every pill marked and accounted for to make sure none slips into the black market.) Thus, a woman who used RU-486 to have an abortion would have to make three trips to the clinic past those picket lines; an initial visit for medical screening (anemics and those with previous pregnancy problems are eliminated) and to take the pill, a second trip 48 hours later for the prostaglandin, administered either via injection or vaginal suppository, and a third trip a week later to make sure she has completely aborted.

Furthermore, because timing is so critical with RU-486, she will learn, via a pelvic examination and ultrasound, not only that she is pregnant, but just how pregnant she is. No doctor who fears malpractice liability would likely expose a non-pregnant patient to the risk of hemorrhaging. Many women may even see the dead embryo they have expelled, a sight the surgical-abortion industry typically spares them. At seven weeks, an embryo is about three-fourths of an inch long and recognizably human.

At the behest of pro-choice members of Congress, a four-year reauthorization bill for Title X federal family-planning assistance now contains a $10 million grant for "development, evaluation and bringing to the marketplace of new improved contraceptive devices, drugs and methods." If this passes -- a Senate version has already been cleared for a floor vote that is likely early next year -- it would put the federal government into the contraceptive marketing business for the first time. It also could put the government into the RU-486 business, which would please feminists dismayed at what they view as pusillanimity in the private-sector drug industry.

We do not know whether RU-486 will be as disastrous as some of the earlier fertility-control methods released to unblinking, uncritical cheers from educated people who should have known better. (Remember the Dalkon Shield and the early birth-control pills?) We will not know until a first generation of female guinea pigs -- all of whom will be more than happy to volunteer for the job -- has put the abortion pill through the clinical test of time.

Mrs. Allen is a senior editor of Insight magazine. This article is adapted from one in the October American Spectator.

On June 30, a major part of our trade deficit went poof! No figure juggling; no witchcraft; just vastly improved recording of some of our exports.

The result? The Commerce Department found that U.S. exports in 1988, net of imports, were understated by $20.9 billion a year and understated at the annualized rate of $25.4 billion in the first quarter of 1989. More than half of the "newly found" net exports were from just a few service-sector categories. Some of the biggest service-industry exporters -- American financial-service companies, for example -- have yet to be fully included in our export statistics.

Nearly 10 years ago, representatives of service-sector companies worked out a plan with the Commerce Department to improve the data on service-sector exports. Both groups believed that tens of billions of dollars of service exports -- such as inbound tourism; legal, accounting and other professional services furnished to foreigners; financial, engineering and construction services; and the like -- were not being counted as exports.

The monthly "trade deficit" figure is limited to traditional merchandise trade: manufactured goods and raw materials. In the quarterly balance-of-payments report, those merchandise trade figures are merged with statistics on exports and imports of services, as well as returns on investments abroad by Americans and returns on foreign investments in the U.S.

Over time, through benchmark surveys, the corrected data on service exports and imports have been gathered. The first three major areas of the service sector to be revamped were expenditures by foreign students in the U.S. (net after expenditures by Americans studying abroad), some exports by professional firms (a law firm billing a German client for services rendered in watching legislation in Washington is as much an export as shipment of an American jet engine), and improved data from travel and tourism.

In just these three areas, the Commerce Department found $23 billion more exports than previously reported and $11.6 billion more imports, with the net result that the U.S. service surplus in 1988 increased by $11.3 billion, to $19 billion.

Combined with recalculations and revisions in other trade areas, the value of U.S. net exports that had not previously been recorded was about $20 billion a year. That means that the U.S. trade deficit was running closer to $75 billion than to $95 billion in 1988, and $55 billion (annualized) rather than $80 billion in the first quarter of 1989.

These revised figures also may explain some of the recent strength of the dollar. The materially smaller trade deficit may have been already discounted in the market.

What does this mean for trade policy? Too early to tell, but a trade deficit that is significantly smaller than we imagined does suggest a review of our trade posture. It does not relieve the need for our market-opening efforts for both goods and services, but it does suggest that it is our exports of services, and not just borrowing, that is financing our imports of goods.

Mr. Freeman is an executive vice president of American Express.

The collapse of a $6.79 billion labor-management buy-out of United Airlines parent UAL Corp. may not stop some of Wall Street's top talent from collecting up to $53.7 million in fees.

According to one person familiar with the airline, the buy-out group -- led by United's pilots union and UAL Chairman Stephen Wolf -- has begun billing UAL for fees and expenses it owes to investment bankers, law firms and banks.

The tab even covers $8 million in commitment fees owed to Citicorp and Chase Manhattan Corp., even though their failure to obtain $7.2 billion in bank loans for the buy-out was the main reason for its collapse.

Under a merger agreement reached Sept. 14, the UAL board agreed to reimburse certain of the buy-out group's expenses out of company funds even if the transaction wasn't completed, provided the group didn't breach the agreement. The failure to obtain financing doesn't by itself constitute a breach.

The merger agreement says the buy-out group is entitled to be repaid $26.7 million in fees for its investment bankers, Lazard Freres & Co. and Salomon Brothers Inc., and its law firm, Paul Weiss Rifkind Wharton & Garrison.

The buy-out group is also entitled to $16 million to repay a fund created by the pilots union for an employee stock ownership plan. In addition to the $8 million for Citicorp and Chase, Salomon Brothers is also owed $3 million for promising to make a $200 million bridge loan.

A spokesman for the buy-out group wasn't immediately available for comment.

Separately, UAL stock rose $4 a share to $175 in composite trading on the New York Stock Exchange on reports that Los Angeles investor Marvin Davis has asked United Airlines unions if they're interested in cooperating with Mr. Davis in a new bid for UAL.

But neither the pilots nor the machinists appear interested, and Mr. Davis is barred from making a new bid under terms of an agreement he made with UAL in September unless UAL accepts an offer below $300 a share.

Wall Street continued to buckle under the public outcry against computer-driven program trading.

Kidder, Peabody & Co., a unit of General Electric Co., announced it would stop doing stock-index arbitrage for its own account, and Merrill Lynch & Co. pulled out of the practice altogether.

At the New York Stock Exchange, which has been buffeted by complaints from angry individual investors and the exchange's own listed companies, Chairman John J. Phelan Jr. held an emergency meeting with senior partners of some of the Big Board's 49 stock specialist firms. The specialists, a trader said, were "livid" about Mr. Phelan's recent remarks that sophisticated computer-driven trading strategies are "here to stay." Many investors blame program trading for wild swings in the stock market, including the 190-point plunge in the Dow Jones Industrial Average on Oct. 13. A specialist is an exchange member designated to maintain a fair and orderly market in a specified stock.

Mr. Phelan's meeting with the floor brokers comes as he prepares to explain the exchange's position on program trading to key congressional regulators in a closed session tomorrow, according to exchange officials.

A Big Board spokesman would only say, "We're working the problem and looking at the issue and meeting with a broad number of customers and constituents to get their views and ideas on the issue." The program-trading outcry was taken to a new level when giant Contel Corp. said it and 20 or more of the Big Board's listed companies are forming an unprecedented alliance to complain about the exchange's role in program trading.

The decision by Merrill, the nation's largest securities firm, represents the biggest retreat yet from program trading. Merrill has been the fourth-biggest stock-index arbitrage trader on the Big Board this year, executing an average of 18.1 million shares a month in such trades, or about one million shares a day.

Merrill's move is one of the most sweeping program-trading pullbacks of recent days, because the big securities firm will no longer execute stock-index arbitrage trades for customers. Most Wall Street firms, in pulling back, have merely stopped such trading for their own accounts.

Merrill has been one of the main firms executing index arbitrage for customers. Merrill also said it is lobbying for significant regulatory controls on program trading, including tough margin -- or down-payment -- requirements and limits on price moves for program-driven financial futures.

Merrill, in a statement by Chairman William A. Schreyer and President Daniel P. Tully, said index arbitrage "has been clearly identified in the investing public's mind as a contributing factor to excess market volatility," so Merrill won't execute such trades until "effective controls" are in place.

In stock-index arbitrage, traders buy and sell large amounts of stocks with offsetting trades in stock-index futures and options. The idea is to lock in profits from short-term swings in volatile markets.

Last Thursday, PaineWebber Group Inc. also said it would cease index arbitrage altogether, but the firm wasn't as big an index arbitrager as Merrill is. Other large firms, including Bear, Stearns & Co. and Morgan Stanley & Co., last week announced a pullback from index arbitrage, but only for the firms' own accounts.

Kidder made an abrupt about-face on program trading yesterday, after a special meeting between the firm's president and chief executive officer, Michael Carpenter, and its senior managers. Just a week ago, Mr. Carpenter staunchly defended index arbitrage at Kidder, the most active index-arbitrage trading firm on the stock exchange this year. Index arbitrage, Mr. Carpenter said last week, doesn't have a "negative impact on the market as a whole" and Kidder's customers were "sophisticated" enough to know that.

But yesterday, Mr. Carpenter said big institutional investors, which he wouldn't identify, "told us they wouldn't do business with firms" that continued to do index arbitrage for their own accounts. "We were following the trend of our competitors who were under pressure from institutions," he said.

Kidder so far this year has executed a monthly average of 37.8 million shares in index-arbitrage trading, and is second only to Morgan Stanley in overall program trading, which includes index arbitrage. Most of Kidder's program trading is for its own account, according to the New York Stock Exchange.

Kidder denied that GE's chairman and chief executive, John F. Welch, had anything to do with Kidder's decision. But at least one chief executive said he called Mr. Welch to complain about Kidder's aggressive use of program trading, and other market sources said they understood that Mr. Welch received many phone calls complaining about Kidder's reliance on index arbitrage as a major business. Kidder has generally been sensitive to suggestions that GE makes decisions for its Kidder unit. "Our decision had nothing to do with any pressure Mr. Welch received," Mr. Carpenter said. "This was a Kidder Peabody stand-alone decision."

A spokeswoman for GE in Fairfield, Conn., said, "Absolutely no one spoke to Jack Welch on this subject" and added, "Anyone who claims they talked to Jack Welch isn't telling the truth."

Supporters of index arbitrage haven't been publicly sticking up for the trading strategy, as some did during the post-crash outcry of 1987. But Merrill Lynch, in its statement about pulling out of index arbitrage, suggested that the current debate has missed the mark.

Merrill said it continues to believe that "the causes of excess market volatility are far more complex than any particular computer trading strategy. Indeed, there are legitimate hedging strategies used by managers of large portfolios such as pension funds that involve program trading as a means of protecting the assets of their pension beneficiaries."

Merrill's index arbitragers will continue to do other kinds of computer-assisted program trading, so there probably won't be any layoffs at the firm, people familiar with Merrill's program operation said.

Meanwhile, Bear Stearns Chairman and Chief Executive Alan C. Greenberg said his firm will continue stock-index arbitrage for its clients. At the firm's annual meeting last night, he told shareholders that index arbitrage won't go away, despite the public outcry. "If they think they are going to stop index arbitrage by causing a few Wall Street firms to quit, they are crazy," Mr. Greenberg said. "It's not going to stop it at all."

Mr. Greenberg, noting that stock-index arbitrage rises and ebbs with stock market's volatility, said that for the first four months of the firm's fiscal year beginning in July, stock-index arbitrage had been a "break-even" proposition for Bear Stearns.

In response to a shareholder's suggestion, Mr. Greenberg agreed that European firms will simply pick up the index-arbitrage business left behind by U.S. institutions.

Pressure from big institutional investors has been the major catalyst for Wall Street's program-trading pullback. And there was speculation yesterday that Fidelity Investments and other large mutual-fund companies might soon follow the lead of Kemper Corp. and other institutions in cutting off trading business to securities firms that do program trading. A Fidelity spokesman in Boston denied the speculation, saying the program-trading issue was more of a regulatory problem.

But a much smaller mutual fund company, the USAA Investment Management Co. unit of USAA, San Antonio, Texas, said it informed nine national brokerage firms it will cease business with them unless they stop index-arbitrage trading. USAA, with 400,000 mutual fund accounts, manages more than $10 billion, $2 billion of which is in the stock market. Michael J.C. Roth, USAA executive vice president, called program trading "mindless." He said there is "no valid investment reason" for stock-index futures to exist.

A program-bashing move is clearly on. Charles Wohlstetter, chairman of Contel, who is helping organize the alliance of Big Board-listed firms, said he had no time to work yesterday because he received so many phone calls, faxes and letters supporting his view that the Big Board has been turned into a "gambling casino" by program traders.

"We are reaching the moment of truth" on Wall Street, said Rep. Edward J. Markey (D., Mass.), chairman of the House subcommittee on telecommunications and finance. "{Wall Street} is beginning to realize -- as Shakespeare said -- the trouble is not in our stars, but in ourselves."

Craig Torres and Anne Newman contributed to this article.

An ancient red-figured Greek kylix, or drinking cup, was recovered backstage at Sotheby's this spring and has been returned to the Manhattan couple who lost it in a burglary three years ago. Robert Guy, an associate curator at the Princeton Art Museum, was previewing a June antiquities sale at the auction house when he recognized the kylix, which he, as a specialist in Attic pottery and a careful reader of the Stolen Art Alert in "IFAR Reports," knew was stolen. The timing of his visit was fortuitous; the man who had brought it in for an estimate had returned to collect it and was waiting in the hall. To confirm Mr. Guy's identification, Sotheby's and IFAR exchanged photos by fax, and the waiting man, apparently innocent of knowledge that the kylix was stolen, agreed to release it. The cup had been insured, and in short order it was given over to a Chubb & Son representative. The original owners happily repaid the claim and took their kylix home.

A former curator of the Museum of Cartoon Art in Rye Brook, N.Y., pleaded guilty in July to stealing and selling original signed and dated comic strips, among them 29 Dick Tracy strips by Chester Gould, 77 Prince Valiant Sunday cartoons by Hal Foster, and a dozen Walt Disney animation celluloids, according to Barbara Hammond, the museum's director. He sold them well below market value to raise cash "to pay off mounting credit-card debts," incurred to buy presents for his girlfriend, his attorney, Philip Russell, told IFAR. The curator, 27-year-old Sherman Krisher of Greenwich, Conn., had worked his way up from janitor in seven years at the museum. The theft was discovered early this year, soon after Ms. Hammond took her post.

Sentencing was postponed on Aug. 18, when Mr. Krisher was hospitalized for depression. His efforts to get back the stolen strips had resulted in recovery of just three. But on Oct. 6, he had reason to celebrate. Two days earlier, his attorney met in a Park Avenue law office with a cartoon dealer who expected to sell 44 of the most important stolen strips to Mr. Russell for $62,800. Instead, New York City police seized the stolen goods, and Mr. Krisher avoided jail. He was sentenced to 500 hours of community service and restitution to the museum of $45,000.

Authorities at London's Heathrow Airport are investigating the disappearance of a Paul Gauguin watercolor, "Young Tahitian Woman in a Red Pareo," that has two sketches on its verso (opposite) side. Valued at $1.3 million, it was part of a four-crate shipment. The air-waybill number was changed en route, and paper work showing that the crates had cleared customs was misplaced, so it was a week before three of the four crates could be located in a bonded warehouse and the Gauguin discovered missing. Although Heathrow authorities have been watching a group of allegedly crooked baggage handlers for some time, the Gauguin may be "lost." Chief Inspector Peter Seacomb of the Criminal Investigation Department at the airport said, "It is not uncommon for property to be temporarily mislaid or misrouted."

Officials at the University of Virginia Art Museum certainly would agree. Their museum had purchased an Attic black-figured column krater and shipped it from London. It was reported stolen in transit en route to Washington, D.C., in February. Months later, the Greek vase arrived in good condition at the museum in Charlottesville, having inexplicably traveled by a circuitous route through Nairobi.

Two Mexican college dropouts, not professional art thieves, have been arrested for a 1985 Christmas Eve burglary from the National Museum of Anthropology in Mexico City. About 140 Mayan, Aztec, Mixtec and Zapotec objects, including some of Mexico's best-known archaeological treasures, were taken. The government offered a reward for the return of the antiquities, but routine police work led to the recovery. As it turned out, Carlos Perches Trevino and Ramon Sardina Garcia had hidden the haul in a closet in the Perches family's home for a year. Then they took the art to Acapulco and began to trade some of it for cocaine. Information from an arrested drug trafficker led to the two men and the recovery of almost all the stolen art.

Among other happy news bulletins from the German Democratic Republic, the Leipzig Museum of Fine Arts announced that it has recovered "Cemetery in the Snow," a painting by the German Romantic painter Caspar David Friedrich. The artist's melancholy subjects bring high prices on the world market, and the U.S. State Department notified IFAR of the theft in February 1988. According to a source at the East Europe desk, two previously convicted felons were charged, tried, convicted and sentenced to prison terms of four and 12 years.

The precious canvas, cut from its frame at the time of the theft, was found in nearby Jena, hidden in the upholstery of an easy chair in the home of the girlfriend of one of the thieves. No charges were brought against her.

Trompe l'oeil painting is meant to fool the eye, but Robert Lawrence Trotter, 35, of Kennett Square, Pa., took his fooling seriously. He painted one himself in the style of John Haberle and sold it as a 19th-century original to antique dealers in Woodbridge, Conn. Mr. Trotter's painting showed a wall of wood boards with painted ribbons tacked down in a rectangle; tucked behind the ribbons were envelopes, folded, faded and crumpled papers and currency. Mr. Trotter's fake Haberle was offered at a bargain price of $25,000 with a phony story that it belonged to his wife's late aunt in New Canaan, Conn.

The dealers immediately showed their new acquisition to an expert and came to see it as a fake. They persuaded Mr. Trotter to take it back and, with the help of the FBI, taped their conversation with him. After his arrest, the forger admitted to faking and selling other paintings up and down the Eastern seaboard.

Ms. Lowenthal is executive director of the International Foundation for Art Research (IFAR).

Ford Motor Co. said it is recalling about 3,600 of its 1990-model Escorts because the windshield adhesive was improperly applied to some cars.

Separately, Ford and Mazda Motor Corp. 's U.S. sales arm said they are recalling about 88,500 1988-model Mercury Tracers and 220,000 1986, 1987 and 1988 model Mazda 323s equipped with 1.6-liter fuel-injected engines to replace the oil filler cap. Mazda makes the Tracer for Ford.

As a result of the adhesive problem on the Ford Escort subcompacts, windshields may easily separate from the car during frontal impact, the U.S. auto maker said. When properly applied, the adhesive is designed to retain the windshield in place in a crash test at 30 miles per hour.

A Ford spokesman said the Dearborn, Mich., auto maker isn't aware of any injuries caused by the windshield problem. Ford said owners should return the cars to dealers so the windshields can be removed and securely reinstalled.

Mazda and Ford said a combination of limited crankcase ventilation and improper maintenance could cause engine oil in some of the Mercury Tracers and Mazda 323s to deteriorate more rapidly than normal, causing increased engine noise or reduced engine life. They said the problems aren't safety related.

Both companies will replace the oil filler cap with a ventilated oil filler cap. Both also will inspect and replace, if necessary, oil filters and oil strainers, at no charge to owners.

For owners who have followed the recommended oil maintenance schedule, Mazda will extend to five years or 60,000 miles the warranty term for engine damage due to abnormal engine oil deterioration. The normal term for the 1986 and 1987 model 323 is two years or 24,000 miles; the term for the 1988 323 is three years or 50,000 miles. Ford said the term on its warranty is already six years or 60,000 miles.

Separately, Ford said it will offer $750 cash rebates to buyers of its 1990-model Ford Bronco sport utility vehicle. It said it will also offer buyers the option of financing as low as 6.9% on 24-month loans. Ford also offered the low financing rate option on 1989-model Broncos, which previously carried a $750 cash discount. Ford said the new offer will begin Saturday and run indefinitely.

The Supreme Court agreed to decide whether the federal Pension Benefit Guaranty Corp. may require LTV Corp. to reassume funding responsibility for a $2.3 billion shortfall in the company's pension plans.

The high court's decision, expected next spring, may affect the stability of many large corporate pension plans that have relied on the availability of pension insurance provided by the federal pension regulatory and insurance agency.

The agency, which is funded through insurance premiums from employers, insures pension benefits for some 30 million private-sector workers who take part in single-employer pension plans. It recently reported assets of $2.4 billion and liabilities of $4 billion.

In its appeal to the high court, the agency said the federal appeals court ruling, which favored LTV, threatened to transform the agency from an insurer of troubled pension plans into an "open-ended source of industry bailouts."

The ruling also may determine how quickly LTV is able to complete its Chapter 11 reorganization. LTV filed for protection under Chapter 11 in federal bankruptcy court in 1986. The filing was partly the result of the $2.3 billion shortfall in LTV's three pension plans operated for its LTV Steel Co. subsidiary's employees.

In January 1987, as LTV Steel continued operating while under reorganization, the agency terminated the three LTV pension plans to keep its insurance liability from increasing. Termination means that the agency's insurance assumes the liabilities and pays the pension benefits already owed under the plans, but workers don't accrue new benefits.

A few months later, under pressure from the United Steelworkers of America, LTV instituted a new program to provide retirement benefits similar to those in the terminated plans. Because the federal pension agency had taken over the old plans, LTV would be responsible only for benefits paid under the new pension plans.

But the agency viewed the creation of the new plans as an abuse of federal pension law and an attempt to transfer the liability of the $2.3 billion shortfall from LTV to federal insurance. The agency also concluded that LTV's financial status had improved while it was under reorganization. In September 1987, it ordered LTV to reassume liability and funding for the three original plans.

LTV challenged the order, and a federal district court in New York in June 1988 ruled that the agency improperly ordered LTV to reassume responsibility for the plans.

In May, a federal appeals court in New York agreed that the agency acted unlawfully. The appeals court said there was no evidence that Congress intended to allow the pension agency to consider a company's creation of new benefit plans as a basis for ordering that company to reassume liability for old plans. The appeals court also said the agency had to consider a company's long-term ability to fund pension plans, not just short-term improved financial status.

In Dallas, LTV said that it was disappointed that the court agreed to hear the case because it believes the move will further delay its Chapter 11 proceedings. The company hasn't been able to come up with a reorganization plan, in part, because of the sizable disagreement with the pension agency.

But LTV, a steel, aerospace and energy concern, said it is confident that the Supreme Court will uphold the lower-court decisions and said it expects to continue discussions with the agency about a settlement while the case is being reviewed. (Pension Benefit Guaranty Corp. vs. LTV Corp.

The commercial was absolutely silent. Breaking into the raucous Chicago Bears-Cleveland Browns match during last week's Monday night football game, it was nothing but simple block letters superimposed on the TV screen.

"Due to the earthquake in San Francisco, Nissan is donating its commercial air time to broadcast American Red Cross Emergency Relief messages. Please contribute what you can," the ad said. The Nissan logo flashed on the screen for a moment, and then came a taped plea for donations from former President Reagan -- followed by the silent print telling viewers where to call. Within two hours, viewers pledged over $400,000, according to a Red Cross executive.

Call it disaster marketing. Nissan Motor is just one of a slew of advertisers that have hitched their ads to the devastating San Francisco quake and Hurricane Hugo. Sometimes, the ads attempt to raise money; always, they try to boost good will. By advertising disaster relief, these companies are hoping to don a white hat and come out a hero. But the strategy can backfire; if the ads appear too self-serving, the companies may end up looking like rank opportunists instead of good Samaritans.

That hasn't deterred plenty of companies. Along with Nissan, Grand Metropolitan PLC's Burger King and New York Life Insurance have tied ads to Red Cross donations. Other ads don't bother with the fundraising; a touching, if self-congratulatory, American Telephone & Telegraph ad that aired Sunday intermixed footage of the devastation in San Francisco and Charleston, S.C., with interviews of people recounting how AT&T helped.

At Nissan, "we felt we wanted to do something to help them gather money, and we had this airtime on Monday Night Football," explains Brooke Mitzel, a Nissan advertising creative manager. "What did we get out of it? We got some exposure . . . and pretty much good will."

The ads are just the latest evidence of how television advertising is getting faster on the draw. While TV commercials typically take weeks to produce, advertisers in the past couple of years have learned to turn on a dime, to crash out ads in days or even hours. The big brokerage houses learned the art of the instant commercial after the 1987 crash, when they turned out reassuring ads inviting investors right back into the stock market. They trotted out another crop of instant commercials after the sudden market dip a few weeks ago. Nissan created its quake ad in a weekend.

But as advertisers latch onto disasters with increasing frequency, they risk hurting themselves as much as helping the cause. They chance alienating the customers they hope to woo by looking like opportunistic sharks. "People see extra messages in advertising, and if a manufacturer is clearly trying to get something out of it . . . if it's too transparent . . . then consumers will see through that," warns John Philip Jones, chairman of the advertising department at the Newhouse School of Public Communications at Syracuse University.

"It can backfire because companies can step across the line and go too far, be too pushy," agrees Gary Stibel, a principal with New England Consulting Group, Westport, Conn. "The ultimate form of charity is when you don't tell anyone." Still, he says that only a few of the quake-related campaigns have been "tasteless" and that "the majority have been truly beneficial to the people who need the help. We don't consider that ambulance chasing."

The companies running the disaster ads certainly don't see themselves as ambulance chasers, either. Burger King's chief executive officer, Barry Gibbons, stars in ads saying that the fast-food chain will donate 25 cents to the Red Cross for every purchase of a BK Doubles hamburger. The campaign, which started last week and runs through Nov. 23, with funds earmarked for both the quake and Hugo, "was Barry's idea," a spokeswoman says. "Barry felt very committed. He felt we should be giving something back."

While the campaign was Mr. Gibbons's idea, however, he won't be paying for it: The donations will come out of the chain's national advertising fund, which is financed by the franchisees. And by basing donations on BK Doubles, a new double-hamburger line the fast-food chain is trying to push, Burger King works a sales pitch into its public-service message.

Toyota's upscale Lexus division, a sponsor of the World Series, also put in a plug for Red Cross donations in a World Series game it sponsored. "The World Series is brought to you by Lexus, who urges you to help relieve the suffering caused by the recent earthquake . . . ," the game announcer said. And New York Life made a plea for Red Cross donations in newspaper ads in the San Francisco area, latching onto the coattails of the Red Cross's impeccable reputation: "The Red Cross has been helping people for 125 years. New York Life has been doing the same for over 140 years."

Nancy Craig, advertising manager for the Red Cross, readily admits "they're piggybacking on our reputation." But she has no problem with that, she says: "In the meanwhile, they're helping us." The Red Cross doesn't track contributions raised by the disaster ads, but it has amassed $46.6 million since it first launched its hurricane relief effort Sept. 23.

Ad Notes. . . .

NEW ACCOUNT: Northrup King Co., Golden Valley, Minn., awarded its $4 million field-crop-seeds account to Creswell, Munsell, Fultz & Zirbel, a Cedar Rapids, Iowa, division of Young & Rubicam. The account had previously been handled by Saatchi & Saatchi Wegener, New York.

TV GUIDE: Wieden & Kennedy, Portland, Ore., was named to handle the News Corp. publication's $1 million to $2 million trade-ad account. N W Ayer, the New York agency that had handled the account since 1963, resigned the account about two weeks ago.

NO ALCOHOL: Miller Brewing Co. will introduce its first non-alcoholic beer Jan. 1. The brew, called Miller Sharp's, will be supported by ads developed by Frankenberry, Laughlin & Constable, Milwaukee.

RADIO: Viacom Broadcasting Inc. definitively agreed to acquire KOFY(AM) and KOFY-FM in San Francisco for about $19.5 million from Pacific FM Inc.

The Supreme Court let stand a New York court's ruling that the manufacturers of a drug once used to prevent miscarriages must share liability for injuries or deaths when the maker of an individual dose is unknown.

The high court's action, refusing to hear appeals by several drug companies, is likely to have a significant impact at several levels. The most immediate effect is in New York, where former manufacturers of the anti-miscarriage drug DES -- the synthetic female hormone diethylstilbestrol -- face the prospect of shared liability for damages in many of the 700 to 1,000 DES lawsuits pending in that state. The lawsuits stemmed from the development of cancer and other problems in the daughters of women who took the drug.

On a broader scale, the ruling could encourage other states' courts to adopt the logic of the New York court, not only in DES cases but in other product-related lawsuits, as well.

The New York Court of Appeals ruling parallels a 1980 decision by the California Supreme Court requiring shared liability among manufacturers for injuries when it can't be determined which company is at fault. Paul Rheingold, a New York lawyer who represents DES victims, said that before the New York ruling, only the states of Washington and Wisconsin had followed the California decision. Now that the New York decision has been left intact, other states may follow suit.

"Generally, when New York and California go one way, it has a tremendous influence on other states, especially small ones," said Mr. Rheingold. The high court refused to hear appeals by Rexall Drug Co., which went out of business in 1987 and was taken over by RXDC Liquidating Trust; E.R. Squibb & Sons Inc., a unit of Squibb Corp.; and Eli Lilly & Co.

The appeals involved DES, which was approved by the Food and Drug Administration for use from the 1940s until 1971 to prevent miscarriages during pregnancy. In 1971, the FDA banned the use of DES after studies linked it to cancer and other problems in daughters of women who took the drug.

Lawsuits over the harm caused by DES have flooded federal and state courts in the past decade. In many cases, the lawsuit was filed long after the drug was used -- the cancer in the daughters was typically not detected for years -- and there is no way to prove which of several companies manufactured the doses consumed by certain women.

Under traditional legal theories, inability to prove which company manufactured a drug that caused an injury or death would lead to the lawsuit being dismissed. But in its ruling last April, the New York court said that all producers of the anti-miscarriage drug should share liability when the manufacturer of a specific dose can't be determined. Each company's share of liability would be based on their share of the national DES market.

The New York court also upheld a state law, passed in 1986, extending for one year the statute of limitations on filing DES lawsuits. The effect is that lawsuits that might have been barred because they were filed too late could proceed because of the one-year extension. (Rexall Drug Co. vs. Tigue; E.R. Squibb & Sons Inc. vs. Hymowitz, and Eli Lilly & Co. vs. Hymowitz)

Government Contractors

The high court, leaving intact a $4.25 million damage award against General Dynamics Corp., declined to resolve questions about a legal defense against civil lawsuits often used by government contractors.

Last year, the Supreme Court defined when companies, such as military contractors, may defend themselves against lawsuits for deaths or injuries by asserting that they were simply following specifications of a federal government contract. In that decision, the high court said a company must prove that the government approved precise specifications for the contract, that those specifications were met and that the government was warned of any dangers in use of the equipment.

But last February, a federal appeals court in New Orleans upheld a damage award against General Dynamics, rejecting the company's use of the government contractor defense. The appeals court said the defense is valid only if federal officials did more than rubber stamp a company's design or plans and engaged in a "substantive review and evaluation" on a par with a policy decision.

General Dynamics appealed to the high court, backed by numerous business trade groups, arguing that the appeals court definition restricts the defense too severely.

General Dynamics was sued by the families of five Navy divers who were killed in 1982 after they re-entered a submarine through a diving chamber. The accident was caused by faulty operation of a valve. A federal district court awarded damages to the families and the appeals court affirmed the award. (General Dynamics Corp. vs. Trevino

Court in Brief

In other action yesterday, the high court:

-- Let stand the mail fraud and conspiracy conviction of John Lavery, a former vice president of Beech-Nut Nutrition Corp., a unit of Nestle S.A. The conviction stemmed from federal charges of consumer fraud for sale of phony infant apple juice between 1978 and 1983. (Lavery vs. U.S.)

-- Left intact an award of $1.5 million in damages against Dow Chemical Co. in the death of an Oregon man from exposure to Agent Orange. The award was made by a federal court to the widow of a U.S. Forest Service employee who contracted Hodgkin's disease after using herbicides containing Agent Orange in a weed-killing program.

It can be hoped that Spanish Prime Minister Felipe Gonzalez will draw the right conclusion from his narrow election victory Sunday. A strong challenge from the far left, the Communist coalition Izquierda Unida, failed to topple him. He should consider his victory a mandate to continue his growth-oriented economic reforms and not a demand that he move further left. If he follows the correct path, he may be able to look back on this election as the high-water mark of far-left opposition.

The far left had some good issues even if it did not have good programs for dealing with them. It could point to plenty of ailments that the Spanish economic rejuvenation so far has failed to cure. Unemployment still is officially recorded at 16.5%, the highest rate in Europe, although actual joblessness may be lower. Housing is scarce and public services -- the court system, schools, mail service, telephone network and the highways -- are in disgraceful condition. Large pockets of poverty still exist.

The left also is critical of the style of the Socialist government -- a remarkable parallel to the situation in Britain. Mr. Gonzalez and his colleagues, particularly the finance minister, Carlos Solchaga, are charged with having abandoned their socialist principles and with having become arrogant elitists who refuse even to go on television (controlled by the state) to face their accusers. In response to this, the Socialist prime minister has simply cited his free-market accomplishments.

They are very considerable: Since 1986, when Spain joined the European Community, its gross domestic product has grown at an annual average of 4.6% -- the fastest in the EC. In that time more than 1.2 million jobs have been created and the official jobless rate has been pushed below 17% from 21%. A 14% inflation rate dropped below 5%. Net foreign investment through August this year has been running at a pace of $12.5 billion, about double the year-earlier rate. Mr. Gonzalez also has split with the left in reaffirming Spain's NATO commitment and in renewing a defense treaty with the U.S.

Mr. Gonzalez is not quite a closet supply-side revolutionary, however. He did not go as far as he could have in tax reductions; indeed he combined them with increases in indirect taxes.

Yet the best the far-left could do was not enough to deter the biggest voting bloc -- nearly 40% -- from endorsing the direction Spain is taking. Now he can go further. He should do more to reduce tax rates on wealth and income, in recognition of the fact that those cuts yield higher, not lower, revenues. He could do more to cut public subsidies and transfers, thus making funds available for public services starved of money for six years.

The voters delivered Mr. Gonzalez a third mandate for his successes. They, as well as numerous Latin American and East European countries that hope to adopt elements of the Spanish model, are supporting the direction Spain is taking. It would be sad for Mr. Gonzalez to abandon them to appease his foes.

Monday, October 30, 1989

The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.

PRIME RATE: 10 1/2%. The base rate on corporate loans at large U.S. money center commercial banks.

FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 3/4% near closing bid, 8 3/4% offered. Reserves traded among commercial banks for overnight use in amounts of $1 million or more. Source: Fulton Prebon (U.S.A.) Inc.

DISCOUNT RATE: 7%. The charge on loans to depository institutions by the New York Federal Reserve Bank.

CALL MONEY: 9 3/4% to 10%. The charge on loans to brokers on stock exchange collateral.

COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.:8.50% 30 to 44 days; 8.25% 45 to 62 days; 8.375% 63 to 89 days; 8% 90 to 119 days; 7.90% 120 to 149 days; 7.80% 150 to 179 days; 7.55% 180 to 270 days.

COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000:8.55% 30 days; 8.50% 60 days; 8.45% 90 days.

CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year. Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more. The minimum unit is $100,000. Typical rates in the secondary market: 8.55% one month; 8.55% three months; 8.35% six months.

BANKERS ACCEPTANCES: 8.47% 30 days; 8.42% 60 days; 8.25% 90 days; 8.10% 120 days; 8.02% 150 days; 7.95% 180 days. Negotiable, bank-backed business credit instruments typically financing an import order.

LONDON LATE EURODOLLARS: 8 3/4% to 8 5/8% one month; 8 13/16% to 8 11/16% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.

LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year. The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.

FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%. These rate indications aren't directly comparable; lending practices vary widely by location.

TREASURY BILLS: Results of the Monday, October 30, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.78%, 13 weeks; 7.62%, 26 weeks.

FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.86%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par). 9.76%, standard conventional fixed-rate mortgages; 8.75%, 6/2 rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

MERRILL LYNCH READY ASSETS TRUST: 8.70%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.

Oh, that terrible Mr. Ortega. Just when American liberalism had pulled the arms plug on the Contras and their friend Ronald Reagan, along comes Mr. Ortega in Costa Rica this weekend to "blunder" into the hands of what are often called conservatives. Conservatives are the faction in U.S. politics which always said that Mr. Ortega and his friends don't want to hold an election in Nicaragua. Liberals are the faction that says, Give peace a chance; now they are saying Mr. Ortega should give them a break, lest the conservatives ask them to vote for bullets instead of bandages.

We suspect Daniel Ortega knows the difference between a blunder and a strategy. He knows that making George Bush look silly in a photograph with him will trigger Noriegan fulminations, and that announcing an end to the liberals' cease-fire will produce mainly their concern over the Contras' military activities in northern Nicaragua. Mr. Ortega understands better than those who worry about his behavior that what sustains the Sandinista movement is not democratic peace, but nondemocratic unpeace. It is the presence of internal and external "enemies" which justifies the need for a large, active army that Mikhail Gorbachev's Soviet Union continues to supply with bullets.

Annualized interest rates on certain investments as reported by the Federal Reserve Board on a weekly-average basis:

a-Discounted rate. b-Week ended Wednesday, October 25, 1989 and Wednesday October 18, 1989. c-Yields, adjusted for constant maturity.

Cetus Corp. said the government of Spain approved the marketing of its Proleukin interleukin-2 drug to treat kidney cancer.

The biotechnology concern said Spanish authorities must still clear the price for the treatment, but that it expects to receive such approval by year end. Four other countries in Europe have approved Proleukin in recent months. Cetus is currently trying to obtain federal regulatory clearance for U.S. distribution.

The Treasury Department proposed that banks be required to keep detailed records of international wire transfers, which officials believe is the main vehicle used by drug traffickers to move billions of dollars in and out of the U.S.

In recent testimony on Capitol Hill, Treasury officials said they were considering the new reporting requirements, and the expected publication of the proposal in the Federal Register today is the first official step toward creating final regulations. The Treasury is still working out the details with bank trade associations and the other government agencies that have a hand in fighting money laundering.

Among the possibilities the Treasury is considering are requirements that banks keep records identifying the originators and recipients of international wire transfers. Another suggestion would draw banks more directly into tracking down money launderers by developing a "suspicious international wire transfer profile," which banks would use to spotlight questionable payments. But banks may prefer using a profile that targets selected transactions, rather than a blanket reporting requirement.

Banks now are required only to report cash deposits or withdrawals of $10,000 or more. But wire transfers from a standing account -- including those bigger than $10,000 -- aren't reported. Officials believe this has left a gaping loophole that illegal drug businesses are exploiting. Authorities estimate that revenues from illegal drugs in the U.S. total about $110 billion annually.

Sen. John Kerry (D., Mass.), chairman of a Senate Foreign Relations subcommittee that oversees the issue of money laundering, criticized the proposal for ignoring wire transfers between foreign banks that are executed and cleared on U.S. wire systems. The American Bankers Association didn't have any comment on the plan. The proposal now enters a 60-day comment period, after which the Treasury will propose final regulations, followed by another comment period.

Western Union Corp. took steps to withdraw its proposed debt swap for $500 million in high-interest notes and said it is looking at other alternatives for refinancing the debt.

Western Union had said two weeks ago that it might withdraw the pending offer, which would have replaced $500 million in so-called reset notes, now paying 19.25% annual interest and set to come due in 1992, with two new issues paying lower interest.

Yesterday the company said it had filed a request with the Securities and Exchange Commission to withdraw the registration statement regarding the proposed swap. A Western Union spokesman, citing adverse developments in the market for high-yield "junk" bonds, declined to say what alternatives are under consideration.

But some holders of the Western Union notes expect the company to propose a more-attractive debt swap that will give them a substantial equity stake in the company. Western Union has had major losses in recent years as its telex business has faltered in the face of competition from facsimile machines and as other business ventures have gone awry.

The major question, said one holder who asked not to be named, is whether New York investor Bennett S. LeBow, whose Brooke Partners controls Western Union, is willing to offer a large enough equity stake to entice bondholders into agreeing to a new swap.

The $500 million in notes, the largest chunk of Western Union's $640 million in long-term debt, stems from the company's major restructuring in December 1987. The notes became burdensome when reset provisions allowed their interest rate to be raised to 19.25% last June.

Western Union had offered to swap each $1,000 face amount of the notes for six shares of common stock and two new debt issues: a $500 note paying an interest rate starting at 16.75% annually and rising in later years, due in 1992, and a $500 note, due in 1997, paying a fixed rate of 17% and including rights protecting a holder against a decline in the trading price of the bond.

Western Union must make $48 million in interest payments on the reset notes on Dec. 15, and a company spokesman said it fully intends to meet the payments. But Western Union has said it must lower the interest rate on its debt to regain full financial health.

Genentech Inc. said the West German distributor of its heart drug TPA reached a joint marketing agreement with a subsidiary of Hoechst AG, which makes the rival anti-clotting agent streptokinase.

The biotechnology concern said the agreement between its longtime West German distributor, Boehringer-Ingleheim's Dr. Karl Thomae G.m.b. H. subsidiary, and Hoechst's Behringwerke subsidiary was an attempt to expand the market for blood-clot drugs in general.

A Genentech spokeswoman said the agreement calls for Hoechst to promote TPA for heart patients and streptokinase for other clot-reducing purposes.

Investors in the over-the-counter market dumped banking and insurance issues, sending the Nasdaq composite index lower for the third consecutive session.

All Nasdaq industry indexes finished lower, with financial issues hit the hardest. Despite some early computer-guided program buying, the Nasdaq composite fell 1.39 to 451.37. The OTC market now has declined in eight of the past 11 sessions.

The Nasdaq bank index fell 5.00 to 432.61, while the insurance index fell 3.56 to 528.56, and the "other finance" index dropped 3.27 to 529.32. The largest financial issues, as measured by the Nasdaq financial index, tumbled 3.23 to

Meanwhile, the index of the 100 biggest non-financial stocks, the Nasdaq 100, gained 0.47 to 438.15.

Profit-taking accounted for much of the slide in OTC stock prices, according to David Mills, senior vice president of Boston Company Advisers. He said many portfolio managers, whose year-end bonuses are tied to annual performance, are selling now rather than risk seeing their gains erode further.

"The profit locking-in is definitely going on," said Mr. Mills, whose firm manages $600 million for Boston Co.

Tax-loss sellers, those investors who sell loss-making stocks so they can deduct their losses from this year's income, are also getting out, Mr. Mills said. That's helping put pressure on both the market's winners and its losers.

"The stocks that have been the best are having big pullbacks, and the ones that have been the worst are getting clobbered," Mr. Mills said. He expects the market to sink further and to reach a low sometime next month or in December.

The selling by money managers and individual investors is turning traders bearish as well. "We are advising a lot of our clients to make moves that make sense to them, rather than waiting until the last minute, because things have been so volatile," said William Sulya, head of OTC trading at A.G. Edwards & Sons in St. Louis. Ralph Costanza, head of the OTC trading department at Smith Barney, Harris Upham, said many market players are awaiting some resolution of the current debate over program trading.

Much of the market's recent volatility has been blamed on this large-scale computerized trading technique that can send stock prices surging or plummeting in a matter of minutes. The problem has been particularly damaging to the OTC market, traditionally a base for the small investor.

Weisfield's surged 14 to 53 after agreeing in principle to be acquired by a unit of Ratners Group for $50 a share. The stock jumped 9 1/2 Friday, when the company announced it was in takeover talks. Ratners and Weisfield's said they expect to sign definitive agreements shortly and to complete the transaction by Dec. 15.

Mid-State Federal Savings Bank advanced 1 1/2 to 20 1/4 after it said it is in talks with a possible acquirer. The bank said the talks resulted from solicitations by its financial adviser.

Jaguar assumed its recently customary place on the OTC most active list as its American depository receipts gained 1/4 to 11 7/8 on volume of 1.2 million shares and Daimler-Benz joined the list of companies interested in the British car maker. Daimler said it has had talks with Jaguar about possible joint ventures.

Meanwhile, General Motors and Ford Motor continue their pursuit of the company. Ford has acquired more than 13% of Jaguar's shares, and GM has received U.S. regulatory clearance to buy 15%.

ShowBiz Pizza Time gained 1 1/2 to 13. The company reported third-quarter operating profit of 37 cents a share, compared with 12 cents a share a year earlier. A third-quarter charge of $3.5 million related to planned restaurant closings resulted in a net loss for the quarter.

Employers Casualty, which reported a $53.9 million third-quarter loss late Friday, fell 2 1/4 to 13 3/4. The loss was largely due to a $55.2 million addition to reserves. Employers Casualty had a loss of $3.6 million in the year-earlier quarter.

Old Stone fell 1 5/8 to 13 1/2. Late Friday, the company reported a loss of $51.3 million for the third quarter after earning $9.2 million a year before.

The loss came after a $23.3 million addition to loan-loss reserves. The bank made a $4.5 million provision in the 1988 quarter. Old Stone repeated projections that it will be profitable for the fourth quarter and will about break even for the year.

Abraham Lincoln Federal Savings Bank sank 4 to 13 1/2 after announcing a shakeup that will change senior management and reorganize the bank's mortgage business as a separate unit. The bank also said it will establish a loan-loss reserve of $2.5 million to $4 million against a construction loan that is in default.

The bank, which previously said it was for sale, said it has received no offers and that its board will review whether to continue soliciting bids.

Medical scientists are starting to uncover a handful of genes which, if damaged, unleash the chaotic growth of cells that characterizes cancer.

Scientists say the discovery of these genes in recent months is painting a new and startling picture of how cancer develops. An emerging understanding of the genes is expected to produce an array of new strategies for future cancer treatment and prevention.

That is for the future. Already, scientists are developing tests based on the newly identified genes that, for the first time, can predict whether an otherwise healthy individual is likely to get cancer.

"It's a super-exciting set of discoveries," says Bert Vogelstein, a Johns Hopkins University researcher who has just found a gene pivotal to the triggering of colon cancer. "Only a decade ago cancer was a black box about which we knew nothing at the molecular level. Today, we know that the accumulation of several of these altered genes can initiate a cancer and, then, propel it into a deadly state."

Scientists call the new class of genes tumor-suppressors, or simply anti-cancer genes. When functioning normally, they make proteins that hold a cell's growth in check. But if the genes are damaged -- perhaps by radiation, a chemical or through a chance accident in cell division -- their growth-suppressing proteins no longer work, and cells normally under control turn malignant.

The newly identified genes differ from a family of genes discovered in the early 1980s called oncogenes. Oncogenes must be present for a cell to become malignant, but researchers have found them in normal as well as in cancerous cells, suggesting that oncogenes don't cause cancer by themselves. In recent months, researchers have come to believe the two types of cancer genes work in concert: An oncogene may turn proliferating cells malignant only after the tumor-suppressor gene has been damaged.

Like all genes, tumor-suppressor genes are inherited in two copies, one from each parent. Either copy can make the proteins needed to control cell growth, so for cancer to arise, both copies must be impaired. A person who is born with one defective copy of a suppressor gene, or in whom one copy is damaged early in life, is especially prone to cancer because he need only lose the other copy for a cancer to develop.

Emerging genetic tests will be able to spot such cancer-susceptible individuals, ushering in what some scientists believe is a new age of predictive cancer diagnosis.

Bill and Bonnie Quinlan are among the first beneficiaries of the new findings. The Dedham, Mass., couple knew even before Bonnie became pregnant in 1987 that any child of theirs had a 50% chance of being at risk for retinoblastoma, an eye cancer that occurs about once every 20,000 births. Mr. Quinlan, 30 years old, knew he carried a damaged gene, having lost an eye to the rare tumor when he was only two months old -- after his mother had suffered the same fate when she was a baby.

Because of the isolation of the retinoblastoma tumor-suppressor gene, it became possible last January to find out what threat the Quinlan baby faced. A test using new "genetic probes" showed that little Will Quinlan had not inherited a damaged retinoblastoma supressor gene and, therefore, faced no more risk than other children of developing the rare cancer. "It made our New Year," says Mr. Quinlan.

This test was the first to predict reliably whether an individual could expect to develop cancer. Equally important, the initial discovery of the gene that controls retinal cell growth, made by a Boston doctor named Thaddeus Dryja, has opened a field of cancer study, which in recent months has exploded. "It turns out that studying a tragic but uncommon tumor made possible some fundamental insights about the most basic workings of cancer," says Samuel Broder, director of the National Cancer Institute. "All this may not be obvious to the public, which is concerned about advances in treatment, but I am convinced this basic research will begin showing results there soon."

To date, scientists have fingered two of these cancer-suppressors. Dr. Dryja made his retinoblastoma discovery in 1986. Then last spring, researchers reported finding a gene called p53 which, if impaired, turns healthy colon cells cancerous.

Soon after that report, two other research teams uncovered evidence that the same damaged p53 gene is present in tissue from lung and breast cancers. Colon, lung and breast cancers are the most common and lethal forms of the disease, collectively killing almost 200,000 Americans a year. Right now about a dozen laboratories, in the U.S., Canada and Britain, are racing to unmask other suspected tumor-suppressing genes. They have about seven candidates. Researchers say the inactivation of tumor-suppressor genes, alone or in combination, appears crucial to the development of such scourges as cancer of the brain, the skin, kidney, prostate, and cervix. There is evidence that if people inherit defective versions of these genes, they are especially prone to cancer, perhaps explaining, finally, why some cancers seem to haunt certain families.

The story of tumor-suppressor genes goes back to the 1970s, when a pediatrician named Alfred G. Knudson Jr. proposed that retinoblastoma stemmed from two separate genetic defects. He theorized that in the eye cancer, an infant inherited a damaged copy of a gene from one parent and a normal copy from the other. The tumor, he suggested, developed when the second, normal copy also was damaged. But there was no way to prove Dr. Knudson's "two-hit" theory.

Back then, scientists had no way of ferreting out specific genes, but under a microscope they could see the 23 pairs of chromosomes in the cells that contain the genes. Occasionally, gross chromosome damage was visible. Dr. Knudson found that some children with the eye cancer had inherited a damaged copy of chromosome No. 13 from a parent who had had the disease. Under a microscope he could actually see that a bit of chromosome 13 was missing. He assumed the missing piece contained a gene or genes whose loss had a critical role in setting off the cancer. But he didn't know which gene or genes had disappeared.

Then, a scientific team led by molecular geneticist Webster Cavenee, then at the University of Utah, found the answer. The team used a battery of the newly developed "gene probes," snippets of genetic material that can track a gene's presence in a cell. By analyzing cells extracted from eye tumors, they found defects in the second copy of chromosome 13 in the exact area as in the first copy of the chromosome.

The finding riveted medicine. It was the first time anyone had showed that the loss of both copies of the same gene could lead to the eruption of a cancer. "It was extraordinarily satisfying," says Dr. Knudson, now at Fox Chase Cancer Research Center in Philadelphia. "I was convinced that what was true of retinoblastoma would be true for all cancers."

It was an audacious claim. But in Baltimore, Dr. Vogelstein, a young molecular biologist at Johns Hopkins Medical School, believed Dr. Knudson was right, and set out to repeat the Cavenee experiment in cells from other cancers. His was one of two research teams in 1984 to report dual chromosome losses for a rare childhood cancer of the kidney called Wilm's tumor.

Dr. Vogelstein next turned his attention to colon cancer, the second biggest cancer killer in the U.S. after lung cancer. He believed colon cancer might also arise from multiple "hits" on cancer suppressor genes, because it often seems to develop in stages. It often is preceded by the development of polyps in the bowel, which in some cases become increasingly malignant in identifiable stages -- progressing from less severe to deadly -- as though a cascade of genetic damage might be occurring.

Dr. Vogelstein and a doctoral student, Eric Fearon, began months of tedious and often frustrating probing of the chromosomes searching for signs of genetic damage. They began uncovering a confusing variety of genetic deletions, some existing only in benign polyps, others in malignant cells and many in both polyps and malignant cells. Gradually, a coherent picture of cancer development emerged. If both copies of a certain gene were knocked out, benign polyps would develop. If both copies of a second gene were then deleted, the polyps would progress to malignancy. It was clear that more than one gene had to be damaged for colon cancer to develop.

Their report galvanized other molecular biologists. "It was the confirming evidence we all needed that {gene} losses were critical to the development of a common tumor," says Ray White at Howard Hughes Medical Institute in Salt Lake City.

But Dr. Vogelstein had yet to nail the identity of the gene that, if damaged, flipped a colon cell into full-blown malignancy. They focused on chromosome 17. For months the Johns Hopkins researchers, using gene probes, experimentally crawled down the length of chromosome 17, looking for the smallest common bit of genetic material lost in all tumor cells. Such a piece of DNA would probably constitute a gene.

When they found it last winter, Dr. Vogelstein was dubious that the search was over. His doubts stemmed from the fact that several years earlier a Princeton University researcher, Arnold Levine, had found in experiments with mice that a gene called p53 could transform normal cells into cancerous ones. The deletion Dr. Vogelstein found was in exactly the same spot as p53. But Mr. Levine had said the p53 gene caused cancer by promoting growth, whereas the Johns Hopkins scientists were looking for a gene that suppressed growth.

Despite that, when the Johns Hopkins scientists compared the gene they had found in the human cancer cells with the Mr. Levine's p53 gene they found the two were identical; it turned out that in Mr. Levine's cancer studies, he had unknowingly been observing a damaged form of p53 -- a cancer-suppressing gene.

The discovery "suddenly puts an obscure gene right in the cockpit of cancer formation," says Robert Weinberg, a leader in cancer-gene research at Whitehead Institute in Cambridge, Mass.

Evidence now is emerging that the p53 suppressor gene is involved in other cancers, too. Researchers in Edinburgh, Scotland, have found that in 23 of 38 breast tumors, one copy of chromosome 17 was mutated at the spot where gene p53 lies. The scientists say that since breast cancer often strikes multiple members of certain families, the gene, when inherited in a damaged form, may predispose women to the cancer.

The p53 gene has just been implicated in lung cancer. In a report out last week, John Minna and colleagues at the National Cancer Institute say that about half the cells taken from lung cancer tissue they tested are missing this gene.

There also are reports from several labs, as yet unpublished, of missing p53 genes in tissue taken from kidney, brain and skin cancers.

At the same time, the Johns Hopkins team and others are rushing to pinpoint other tumor-suppressor genes. Dr. Vogelstein hopes soon to isolate one on chromosome 18, also involved in colon cancer. Ray White in Utah and Walter Bodmer, a researcher in Great Britain, are close to finding another gene involved with some types of colon cancer, thought to be on chromosome 5.

Dr. Minna believes people who inherit a defective gene somewhere on one of their two copies of chromosome 3 are especially prone to lung cancer. Recently, he and others reported that the retinoblastoma suppressor gene may also be involved in some lung cancers, as well as several other more common cancers, too.

Where these discoveries will lead, scientists can only speculate. Already two major pharmaceutical companies, the Squibb unit of Bristol-Myers Squibb Co. and Hoffmann-La Roche Inc., are collaborating with gene hunters to turn the anticipated cascade of discoveries into predictive tests and, maybe, new therapies.

Some researchers say new cancer drugs to slow or reverse tumor growth may be based on the suppressor proteins normally produced by the genes. The idea would be to administer to patients the growth-controlling proteins made by healthy versions of the damaged genes. It may even be possible to replace defective genes with healthy versions, though no one has come close to doing that so far.

In any case, says Dr. Minna of the National Cancer Institute, "We're witnessing the discovery of one of the most important steps in the genesis of cancer.

Many investors give Michael Foods about as much chance of getting it together as Humpty Dumpty. But now at least there's a glimmer of hope for the stock.

Burger King, which breaks thousands of fresh eggs each morning, is quietly switching over to an alternative egg product made by Michael Foods. Known as Easy Eggs, the product has disappointed investors. When the company this month announced lower-than-forecast sales of Easy Eggs, the stock dropped nearly 19%.

Michael won't confirm the identities of any Easy Egg customers, nor will it say much of anything else. Two Minneapolis shareholder suits in the past month have accused top officers of making "various untrue statements." These federal-court suits accuse the officers of failing to disclose that Easy Eggs were unlikely to sell briskly enough to justify all of Michael's production capacity.

But at least Burger King has signed on, and says that by year end it won't be using any shell eggs. The Miami fast-food chain, owned by Grand Metropolitan of Britain, expects to consume roughly 34 million pounds of liquefied eggs annually.

So there is reason to believe that Michael's hopes for a bacteria-free, long-shelf-life egg weren't all hype. (Easy Eggs are pasteurized in a heat-using process.) Still, caution is advisable. A company official says Michael's break-even volume on Easy Eggs is around 60 million pounds a year -- apparently well above current shipments and a far cry from what the company once suggested was a billion-pound market waiting for such a product. Perhaps to debunk the analysts' talk of over-capacity, Michael today will take some of the skeptics on a tour of its new Gaylord, Minn., plant.

There has been no announcement of the Burger King arrangement by either party, possibly for fear that McDonald's and other fast-food rivals would seize on it in scornful advertising. But Burger King operators independently confirm using Michael's product. Other institutional users reportedly include Marriott, which is moving away from fresh eggs on a region-by-region basis. The extent of Marriott's use isn't known, and Marriott officials couldn't be reached for comment.

Michael Foods has attracted a good many short-sellers, the people who sell borrowed shares in a bet that a stock price will drop and allow the return of cheaper shares to the lender. Many analysts question management's credibility.

"The stock, in my opinion, is going to go lower, not only because of disappointing earnings but {because} the credibility gap is certainly not closing," says L. Craig Carver of Dain Bosworth.

Mr. Carver says that at a recent Dain-sponsored conference in New York, he asked Michael's chief executive officer if the fourth quarter would be down. The CEO, Richard G. Olson, replied "yes," but wouldn't elaborate. (The company didn't put out a public announcement. A spokesman said later that Mr. Olson was being "conservative" in his estimate. But the spokesman added that while Michael will earn less than last year's $1.20 a share, it thinks Street estimates of $1 or so are low.)

Analyst Robin Young of John Kinnard & Co., Minneapolis, calls himself "the last remaining bull on the stock." He argues that Michael Foods is misunderstood: "This is a growth company in the packaged food industry -- a rare breed, like finding a white rhino." Earnings aren't keeping pace, he says, because of heavy investments in the egg technologies and drought-related costs in its potato business.

Mr. Carver, however, believes the company's egg product won't help the bottom line in the short run, even though it "makes sense -- it's more convenient" and justifies its price, which is higher than shell eggs, because of health and sanitation concerns.

Prospective competition is one problem. Last week a closely held New Jersey concern, Papetti High-Grade Egg Products Co., rolled out an aseptically packaged liquefied item called Table Ready. Company President Steve Papetti says Marriott will be among his clients as well.

Michael shares closed at 13 3/4 yesterday in national over-the-counter trading. Says New York-based short seller Mark Cohodes, "In my mind this is a $7 stock." Michael late yesterday announced a $3.8 million stock buy-back program.

Michael, which also processes potatoes, still relies on spuds for about a fourth of its sales and nearly half its pretax profit. But dry growing conditions in the Red River Valley of Minnesota and North Dakota are pushing spot prices of potatoes beyond what Michael contracted to pay last spring. Company lawyers recently sent letters to growers saying that Michael "would take very seriously any effort . . . to divert its contracted-for potatoes to other outlets." Still, analysts believe that profit margins in the potato business will be down again this year.

Pierre Peladeau, a Canadian newspaper publisher little-known in the U.S., figures to become a big player in North American printing -- and his ambitions don't end there.

Yesterday, Quebecor Inc., a Montreal printing, publishing and forest-products company 53%-owned by Mr. Peladeau, agreed to acquire Maxwell Communication Corp. 's U.S. printing subsidiary, Maxwell Graphics Inc., for $500 million in cash and securities. The purchase, expected to be completed by year end, will make Quebecor the second-largest commercial printer in North America, behind only R.R. Donnelley & Sons Co., Chicago.

The printing customers that Quebecor will gain through Maxwell Graphics include the Sunday newspaper supplement Parade, Time, Sports Illustrated and TV Guide.

But the transaction is just Mr. Peladeau's latest step in a larger design: to build Quebecor through acquisitions into an integrated paper, publishing and printing concern with a reach throughout North America. He already has achieved vertical integration on a limited scale: Quebecor can put a weekly newspaper on almost any Quebec doorstep without using outside help, from chopping down the tree to making the newsprint to flinging it up onto the porch.

Analysts say Quebecor's purchase is part of a trend toward consolidation in the North American printing industry. Along with Donnelley, says Jacques Massicotte, an analyst with Nesbitt Thomson Deacon Inc. in Montreal, "Quebecor has positioned itself as one of the two key players." He adds: "I think this is a great strategic move for Quebecor. They are buying an operation that is running well."

Mr. Peladeau says he isn't trying to catch up to Donnelley, which has annual sales of over $3 billion. "Size doesn't matter," Mr. Peladeau says. "What counts is the bottom line."

Some of Mr. Peladeau's ventures, including an earlier push into the U.S. market, haven't paid off on the bottom line. Quebecor started the Philadelphia Journal, a daily tabloid, in 1977 and closed it three years later. The venture cost Quebecor $12 million, Mr. Peladeau says.

More recently, some former Quebecor executives started their own printing company, specializing in printing and distributing advertising circulars. Quebecor still lags in the Quebec circulars market, while Mr. Peladeau's former employees are expanding across Canada.

Mr. Peladeau took his first big gamble 25 years ago, when he took advantage of a strike at La Presse, then Montreal's dominant French-language newspaper, to launch the Journal de Montreal. The tabloid's circulation soared to 80,000, but plunged to under 10,000 when the La Presse strike ended.

Still, Mr. Peladeau stuck with the venture. Now the Journal, flush with ads and hugely profitable, is even with La Presse in weekend circulation and outsells it 3 to 2 every weekday.

Mr. Peladeau has never made any apologies for publishing the tabloid, a brash mix of crime and sports. "I've read Balzac," he answers critics. "It's tabloid news from A to Z."

Quebecor also publishes a second tabloid in Montreal, the struggling 18-month-old Montreal Daily News; dailies in Quebec City and Winnipeg, Manitoba; and dozens of weeklies covering most of Quebec. A series of recent acquisitions made it the dominant magazine publisher in Quebec. After a recent merger, it is also the only province-wide distributor of magazines and newspapers in Quebec. Finally, with Maxwell Communication, the company controls 54% of Donohue Inc., a Quebec City pulp and paper concern.

In yesterday's accord, Quebecor agreed to pay $400 million in cash for Maxwell Graphics, and to give Maxwell Communication a 20% stake, valued at $100 million, in Quebecor's new printing subsidiary. The new, as yet unnamed, subsidiary will combine Quebecor's existing printing unit and Maxwell Graphics. It will have 61 plants from coast to coast and $1.5 billion in annual sales.

Quebecor will own 57.5% of the new subsidiary. Caisse de Depot et Placement, the Quebec government pension-fund agency, will pay $112.5 million for the remaining 22.5% stake in the printing operation.

Pierre-Karl Peladeau, the founder's son and the executive in charge of the acquisition, says Quebecor hasn't decided how it will finance its share of the purchase, but he says it most likely will use debt.

The Maxwell deal is Quebecor's second big printing acquisition in just over a year. Last October, Quebecor bought 23 Canadian printing plants from BCE Inc., a Montreal telecommunications, manufacturing, energy and real estate company. That purchase doubled Quebecor's annual printing revenue to $750 million.

Maxwell's sale of its U.S. printing unit was expected, the last major business to be disposed of in a major reshuffling of assets. According to its most recent annual report, covering the 15 months ended March 31, Maxwell Communication bought $3.85 billion in assets -- including Macmillan Inc. and Official Airlines Guides -- and sold $2 billion in non-strategic businesses. Now, Maxwell founder Robert Maxwell says he has an appetite for new acquisitions in the U.S., adding that he could spend "a good deal more" than $1 billion on another U.S. purchase.

In London trading yesterday, Maxwell Communication shares rose nine pence, to 216 pence ($3.41).

In Montreal, Quebecor's multiple voting Class A stock closed at C$16.375 (US$13.94), down 12.5 Canadian cents. Quebecor Class B stock closed at C$15.375, up 62.5 Canadian cents.

Craig Forman in London contributed to this article.

G.D. Searle & Co. said the Food and Drug Administration approved the sale of Kerlone, a hypertension drug developed by a joint venture between Searle and a French concern.

Searle, a unit of Monsanto Co., said the "beta-blocker" high-blood-pressure drug Kerlone is the first product to reach the market through Lorex Pharmaceuticals, the U.S. company jointly owned by Searle and Synthelabo, a French pharmaceutical concern owned by France's L'Oreal S.A.

The U.S. Equal Employment Opportunity Commission sued New York state for age discrimination against appointed state judges. The suit, filed in federal court in Manhattan, charges that New York's mandatory retirement age of 76 violates federal law.

Separately, the commission intervened in a Connecticut state judge's age-bias suit in federal court in New Haven. The commission's filing in that case challenges Connecticut's mandatory retirement age of 70 for appointed judges.

The New York suit was filed on behalf of Justice Isaac Rubin, whose appointment to the state appellate division expires at year end, and all other judges hurt by the alleged age discrimination. The suit, assigned to federal Judge Kimba Wood, seeks a permanent injunction, back pay for judges who have been forced to retire, reinstatement of retired judges and "other affirmative relief necessary to eradicate the effects of (New York's) unlawful employment practices."

Justice Rubin, a state judge since 1969, said the mandatory-retirement age hurts the court system because it deprives the state of experienced judges still capable of serving on the bench.

"The issue isn't age -- age is just a number. The issue is one of a judge's experience, his competence and his physical ability to serve on the bench," Justice Rubin said. "I've had no problems performing my duties and responsibilities." Because Justice Rubin turned 76 on May 9, he isn't eligible to be reappointed to the bench at the end of the year.

The suit's impact on New York may be narrow, however. Most New York judges are elected, and the federal age-discrimination law doesn't apply to elected officials, said James L. Lee, regional attorney for the EEOC in New York. Under New York law, elected judges must retire at age 70, but then can be appointed to two-year terms until they reach 76.

A spokeswoman for the state's Office of Court Administration declined to comment on the suit. But she said the state currently has 35 appointed judges who are over 70.

In Connecticut, however, most state judges are appointed by the governor and approved by the state legislature. The parties in the Connecticut case have agreed to stay proceedings pending the appeal of another EEOC age-bias case against Vermont. In the Vermont case, a federal judge ruled that the state's mandatory age of 70 for appointed judges was illegal; Vermont's appeal of that decision is pending before the U.S. Second Circuit Court of Appeals in Manhattan.

Aaron Ment, Connecticut's chief court administrator, declined to comment on the suit and the EEOC's intervention. He said the state has 165 appointed judges and 15 "trial referees," who are former judges over age 70 and serve a restricted role on the bench.

ORGANIZED CRIME Strike Forces likely to be abolished next month.

U.S. Attorney General Dick Thornburgh's plan to dissolve the 14 regional organized-crime strike forces is expected to go into effect next month, despite the opposition of Democratic congressional leaders and lawyers in the special units.

The units are autonomous from U.S. attorneys' offices and focus exclusively on prosecuting organized-crime cases. In February, Mr. Thornburgh announced his plan to abolish the units. He says the strike-force lawyers will work more efficiently under the supervision of U.S. attorneys.

Mr. Thornburgh will be free to disband the strike forces after Congress approves a $479 million appropriation for federal law-enforcement and drug-interdiction agencies, according to David Runkel, a Justice Department spokesman. The bill is expected to pass in Congress next month.

Congress temporarily halted Mr. Thornburgh's effort with an appropriation resolution that prohibited him from using budgeted funds to implement his plan.

Opponents say Mr. Thornburgh's plan will needlessly break up longtime, tightly knit crime-fighting units that have successfully prosecuted major organized-crime figures. They predict that organized-crime activity will increase once the units are dissolved and their responsibilities transferred to U.S. attorneys' offices.

Some former strike-force personnel say the units have already begun to break up. The Eastern District unit in Brooklyn, N.Y., lost seven of its 15 attorneys this year partly because the lawyers were troubled by the proposed reorganization, says Laura A. Brevetti, who left the strike force to join Morrison Cohen Singer & Weinstein, a New York law firm.

"Those who have left have expressed an opinion that the strike force should continue," Ms. Brevetti says.

But Mr. Runkel contends there has been no exodus of strike-force lawyers. He says 27 lawyers have left and 21 have been hired since Mr. Thornburgh announced his plan. At the time the plan was announced, there were 135 lawyers.

Some congressional leaders intend to continue to fight for independent strike forces. A spokesman for Sen. Edward M. Kennedy (D., Mass.) says Mr. Thornburgh would be required to reinstate the units next year if an proposed omnibus crime bill is passed. Among other things, the bill calls for a reorganization of the Justice Department. The Senate is expected to consider the bill shortly, says the senator's spokesman.

Mr. Runkel says he doubts Mr. Kennedy can muster enough congressional support to reorganize the Justice Department.

"We will vigorously oppose the bill," he says. "I don't think (the reorganization is) going to happen."

WHITMAN & RANSOM recruits lawyers from disbanding firm: The 204-lawyer New York firm will bring in at least 12 partners and a not yet determined number of associates from Golenbock & Barell, which will dissolve Dec. 31. Golenbock, with 35 lawyers, has lost several partners during the past year. Some Golenbock lawyers won't be invited to join Whitman & Ransom, according to partners at both firms. Whitman & Ransom managing partner Maged F. Riad said the Golenbock recruits will enhance the firm's corporate and litigation departments.

SHORT SKIRTS not welcome in Texas court: Shelly Hancock, a male county court judge in Houston, refused to let a woman plead guilty to a drunk-driving charge because her skirt stopped three inches above her knees. The woman appeared in court Thursday to enter her plea, but when she started to approach the bench, she was stopped by Judge Hancock. He told the woman's lawyer, Victor Blaine, that the short skirt was inappropriate for a court appearance. Despite Mr. Blaine's protests, the judge rescheduled her case for Nov. 27. Kelly Siegler, an assistant district attorney who was in the courtroom, disputed suggestions the action was sexist, saying she had seen Judge Hancock turn away male defendants dressed in shorts, tank tops or muscle shirts "many times." Judge Hancock didn't return phone calls.

Warner Communications Inc. and Sony Corp. resumed settlement talks on their legal battle over Hollywood producers Peter Guber and Jon Peters, but continued to level strong accusations at each other in legal documents.

Warner has filed a $1 billion breach of contract suit in Los Angeles Superior Court against Sony and the Guber-Peters duo, who in turn are countersuing Warner for trying to interfere in Sony's acquisition of Columbia Pictures Entertainment Inc. and Guber Peters Entertainment Co. in two transactions valued at over $5 billion.

Although settlement talks had been dropped, attorneys for the two sides apparently began talking again yesterday in an attempt to settle the matter before Thursday, when a judge is expected to rule on Warner's request for an injunction that would block the two producers from taking over the management of Columbia. Yesterday, in documents filed in connection with that case, Warner accused Sony officials of falsely claiming that they never read the five-year contract requiring the two producers to make movies exclusively for Columbia, citing Securities and Exchange Commission filings made by Sony that described the contracts.

Warner was referring to documents filed last week in which Sony Corp. of America Vice Chairman Michael Schulof and Walter Yetnikoff, president of its CBS Records unit, said they had taken Mr. Guber and Mr. Peters at their word when the producers told them that getting out of the contract would be no problem because of a previous oral agreement.

Wayne Smith, an attorney at Gibson, Dunn & Crutcher in Los Angeles representing Sony, said the Sony executives hadn't seen the contract because "it wasn't relevant once Guber and Peters told them Warner would let them terminate it at any time." Mr. Smith said statements about the contract made in SEC filings were made by attorneys who did have access to the contracts but who weren't part of the negotiations between Sony and the duo.

Warner executives also filed new sworn affidavits denying claims by Messrs. Guber and Peters that the two sides had an oral agreement that enabled the producers to terminate their contract with Warner should the opportunity to run a major studio come up. But Mr. Smith said Sony intends to prove that the oral agreement did in fact exist, and that even the existing written contract doesn't preclude the producers from taking executive posts at another studio.

Warner described as "nonsense" yesterday Sony's assertions in prior court filings that Mr. Guber and Mr. Peters could in theory run Columbia while still fulfilling their contract to produce movies for Warner. Such a dual role would be "impractical and unethical," Warner said, adding, "that concept is as silly as suggesting that the head coach of the Los Angeles Dodgers could simultaneously be general manager of the San Francisco Giants."

Warner, which is in the process of being acquired by New York-based Time Warner Inc., also said it paid the two producers a fixed annual salary of $3 million.

Dataproducts Inc. said it filed a lawsuit in Delaware Chancery Court to block a tender offer by DPC Acquisition Partners, alleging that the hostile offer violates a standstill agreement between the two concerns.

DPC, an investor group led by New York-based Crescott Investment Associates, had itself filed a suit in state court in Los Angeles seeking to nullify the agreement. Earlier this year, Dataproducts had rejected a $15 a share offer from DPC, saying it wasn't adequately financed. DPC last week launched a new, $10-a-share offer for the Woodland Hills, Calif.-based computer printer maker.

DPC said it couldn't comment on the suit.

Boeing Co. 's third-quarter profit leaped 68%, but Wall Street's attention was focused on the picket line, not the bottom line.

In fact, the earnings report unfolded as representatives of the world's No. 1 jet maker and the striking Machinists union came back to the negotiating table for their first meeting in two weeks. Doug Hammond, the federal mediator in Seattle, where Boeing is based, said the parties will continue to sit down daily until a new settlement proposal emerges or the talks break off again.

Despite the progress, Boeing indicated that the work stoppage, now in its 27th day, will have "a serious adverse impact" on the current quarter.

For the third quarter, net rose to $242 million, or $1.05 a share, from $144 million, or 63 cents a share. Sales climbed 71% to $6.36 billion from $3.72 billion as the company capitalized on the ravenous global demand for commercial airliners.

Because it's impossible to gauge how long the walkout by 55,000 Machinists rank and file will last, the precise impact on Boeing's sales, earnings, cash flow and short-term investment position couldn't be determined.

The investment community, however, strongly believes that the strike will be settled before there is any lasting effect on either Boeing or its work force. The company's total firm backlog of unfilled orders at Sept. 30 stood at a mighty $69.1 billion, compared with $53.6 billion at the end of

Although the company could see fourth-quarter revenue shrink by nearly $5 billion if it isn't able to deliver any more planes this year, those dollars actually would just be deferred until 1990. And the company is certain to get out some aircraft with just supervisors and other non-striking employees on hand.

Before the union rejected the company's offer and the strike was launched with the graveyard shift of Oct. 4, Boeing had been counting on turning 96 aircraft out the door in the present period. That included 21 of the company's 747-400 jumbo jets, its most successful product.

"It's not a pretty picture," said David Smith, an analyst with Raymond James & Associates. "But it would just mean a great first and second quarter next year."

Phillip Brannon of Merrill Lynch Capital Markets added: "You don't want to minimize this and say nobody is looking at it. But the strike hasn't gone on long enough for Boeing to lose business in any real sense."

That's the primary reason the company's share price has held up so well when, in Mr. Smith's words, "most companies would have unraveled" by now. In New York Stock Exchange composite trading, Boeing closed yesterday at $54.50 a share, off a scant 12.5 cents.

Still, Boeing went through its normal verbal gymnastics and played up the downside. In a statement, Chairman Frank Shrontz asserted that the company "faces significant challenges and risks," on both its commercial and government contracts.

For instance, he noted that spending on Pentagon programs is shrinking, and Boeing is either the prime contractor or a major supplier on many important military projects, including the B-2 Stealth bomber, the V-22 Osprey tilt-rotor aircraft and the Air Force's next-generation tactical fighter. Because of cost overruns on fixed-price military work, Mr. Shrontz said, the company's defense business will record "a significant loss" in 1989.

Moreover, Mr. Shrontz added, production-rate increases that have been implemented on the 737, 747, 757 and 767 programs have resulted in "serious work force skill-dilution problems." Suppliers and subcontractors are experiencing heightened pressure to support delivery schedules.

And, of course, there's the unsteady labor situation. Besides the Machinists pact, accords representing 30,000 of the company's engineering and technical employees in the Puget Sound and Wichita, Kan., areas expire in early December. Also, a contract with the United Auto Workers at the company's helicopter plant in Philadelphia expired Oct. 15. This contract, covering about 3,000 hourly production and maintenance workers, is being extended on a day-to-day basis.

The Machinists rejected a proposal featuring a 10% base wage increase over the life of the three-year contract, plus bonuses of 8% the first year and 3% the second. On top of that, Boeing would make cost-of-living adjustments projected to be 5% for each year of the contract.

The union, though, has called the offer "insulting." The company reiterated yesterday that it's willing to reconfigure the package, but not add to the substance of it.

For the nine months, Boeing's net increased 36% to $598 million, or $2.60 a share, from $440 million, or $1.92 a share. Sales soared 28% to $15.43 billion from $12.09 billion.

In a separate matter, the Justice Department yesterday said Boeing agreed to pay the government $11 million to settle claims that the company provided inaccurate cost information to the Air Force while negotiating contracts to replace the aluminum skins on the KC-135 tanker aircraft.

The settlement relates to four contracts negotiated from 1982 to 1985, prosecutors said. They added that the settlement is the culmination of a 2 1/2-year investigation into the company's aluminum pricing practices in connection with KC-135s.

A Boeing spokesman responded: "All along the company has said there was no grounds for criminal prosecution. That was borne out by the Justice Department's decision" to settle the case.

Foothills Pipe Lines Ltd. filed an application with Canadian regulators to build a 4.4 billion Canadian dollar (US$3.74 billion) pipeline to transport natural gas from Canada's Arctic to U.S. markets beginning in

The application by Foothills, owned by Calgary-based Nova Corp. of Alberta and Westcoast Energy Inc. of Vancouver, Canada, is expected to kick off what could be a contentious battle for the right to transport vast quantities of gas to southern markets from still-undeveloped fields in Canada's Mackenzie River delta.

"This is a pre-emptive strike by Foothills," said Rick Hillary, natural gas manager of the Calgary-based Independent Petroleum Association of Canada, an industry group.

"Foothills wants to make it clear to other pipeline companies that it's on first insofar as transporting gas from the Arctic to southern markets," Mr. Hillary said.

At least two rival applications are expected to emerge in coming months, including one from TransCanada PipeLines Ltd., Canada's largest natural gas pipeline operator. Another is expected from a consortium of oil and gas producers who won conditional approval this month from Canada's National Energy Board to export about 9.2 trillion cubic feet of Mackenzie delta gas to the U.S. starting in 1996.

The producers include Shell Canada Ltd., a unit of Royal Dutch/Shell Group; Esso Resources Canada Ltd., a unit of Imperial Oil Ltd., which is 71%-owned by Exxon Corp.; and Gulf Canada Resources Ltd., a unit of Olympia & York Developments Ltd.

"The {National Energy Board} approval of the exports just waved the starting flag for the next stage, the rush to build facilities to transport the gas," said Bill Koerner, an analyst with Brady & Berliner, a Washington, D.C., law firm.

Foothills' main rival to build a Mackenzie Delta pipeline is likely to be TransCanada PipeLines. The Toronto-based company, together with Tenneco Inc. of Houston, has had an incomplete proposal filed with Canadian regulators since 1984 that it is now updating.

Like Foothills, TransCanada's Polar Gas consortium plans to build a pipeline directly south from the Mackenzie River delta in Canada's western Arctic with an initial capacity to transport 1.2 billion cubic feet of gas daily. Industry sources said they expect a fierce battle to emerge between TransCanada, which has a monopoly on Canadian gas transportation east of Alberta, and Nova and Westcoast, which control the pipelines within and running west of Alberta, respectively.

"This is virgin territory, unclaimed, and it's going to be nasty," said one observer, who asked not to be named. "Neither is going to back down easily."

TransCanada declined to comment on the Foothills application. But last week Gerald Maier, president and chief executive officer of TransCanada, said the company "intends to be a party to any transportation system that goes up there" and that it would consider joint ventures with other players to ensure it has a role.

A number of issues still need to be resolved before Canadian regulators give any project the final go-ahead.

First, the price of natural gas will have to almost double. Kent Jesperson, president of Foothills, said the company believes the project would be viable if gas prices reach US$3.25 a thousand cubic feet by 1995, in current dollars, up from a current spot price of about US$1.50.

Mr. Jesperson's US$3.25 estimate is somewhat below the $3.39 floor price that Calgary-based consulting firm Paul Ziff & Co. recently said would be needed for Mackenzie delta gas producers to see a return on their investment.

U.S. gas buyers must also decide whether they want to enter firm contracts for Mackenzie delta gas or develop Alaskan reserves in the Prudhoe Bay area first, a project that has been on hold for more than a decade.

Robert Pierce, chairman and chief executive of Foothills, said it's too early to say whether Alaskan or Mackenzie delta gas would flow to market first. But Foothills said it plans to seek regulatory approval to build an alternative line, the Alaska Natural Gas Transportation System further north toward Alaska. If that option is favored by gas buyers and regulators, Foothills said it would build another smaller pipeline connecting Mackenzie Delta reserves to the Alaska mainline.

It's also likely that regulators will try to forge some kind of consensus between the would-be pipeline builders before undertaking any hearings into rival projects. Douglas Stoneman, vice president of Shell Canada, noted that producers would prefer to avoid hearings into competing proposals that would lengthen the regulatory review process and bog down development.

Interprovincial Pipe Line Co., an oil pipeline operator rumored to be mulling a gas pipeline proposal of its own, said that isn't in the cards. Instead, Richard Haskayne, president and chief executive of Interprovincial's Calgary-based parent, Interhome Energy Inc., said the company would prefer to work with other "interested parties" on a joint proposal.

As for Foothills' pre-emptive bid, Mr. Haskayne said, "If they think it gives them some kind of priority position, well, that's their strategy.

The Federal Reserve Board said it is delaying approval of First Union Corp. 's proposed $849 million acquisition of Florida National Banks of Florida Inc., pending the outcome of an examination into First Union's lending practices in low-income neighborhoods.

The decision reflects the Fed's tougher stance on enforcing the Community Reinvestment Act, a federal law passed in 1977 to help low-income residents obtain loans. In recent years, unions and community groups have won big commitments from banks to make low-interest loans in certain neighborhoods by threatening to hold up proposed acquisitions with protests to the Fed about reinvestment act compliance. Few petitions, however, have actually delayed or scuttled mergers.

The current dispute involves allegations that Charlotte, N.C.-based First Union hasn't lived up to its responsibilities under the reinvestment act.

During the summer, Legal Services Corp., a Florida legal aid group, filed a petition with the Fed on behalf of residents in four Florida counties. The petition challenged First Union's lending record in the state, saying that the bank-holding company had "shut itself off from contact with the low-income community and is redlining almost every black neighborhood that it serves in the state."

In deferring action on the merger, the Fed said, "The Board does not believe that there is sufficient information in the record at this time to allow {it} to reach a final conclusion on First Union's record of helping to meet the credit needs of the communities it serves in Florida and North Carolina, including low to moderate-income neighborhoods in those communities."

The Fed said the Comptroller of the Currency is expected to begin a Community Reinvestment Act examination of First Union's Florida and North Carolina banking units in the next two weeks.

First Union, with assets of about $32 billion, said it was disappointed by the delay but said it would cooperate with regulatory authorities. The bank added that it believes the review will "demonstrate that First Union is in compliance with the requirements of the Community Reinvestment Act." The company has already missed its initial Oct. 1 target date for completing the merger. It said yesterday it still expects to close the acquisition later this year or early in 1990.

Florida National, if acquired, would almost double First Union's banking franchise in Florida to $17 billion in assets. That would make it the second-largest bank, after Barnett Banks Inc., in a state widely considered to be the most lucrative banking market in the country.

In New York Stock Exchange composite trading yesterday, First Union shares rose 25 cents to $23. Florida National stock closed unchanged at $25.875 in national over-the-counter trading.

Earlier this year, the Fed denied an application by Continental Bank Corp. to purchase Grand Canyon State Bank in Scottsdale, Ariz., on grounds that Continental hadn't fully complied with the Community Reinvestment Act.

At the time, the Fed said the denial, the first ever on such grounds, signaled the agency's new emphasis on the Community Reinvestment Act.

Eastern Airlines' creditors committee backed off a move to come up with its own alternative proposals to the carrier's bankruptcy reorganization plans, according to sources familiar with the committee.

In a meeting in New York yesterday, the committee put on hold instructions it gave two weeks ago to its experts to explore other options for Eastern's future, the sources said. The consultants had been working to finish a report this week.

That means Eastern, a unit of Texas Air Corp. of Houston, can go forward with its pitch for creditor approval as early as today, when it is expected to deliver a revised reorganization plan to the committee. The committee intends to meet next week to make a recommendation on the new plan.

In another development yesterday, creditors were told that $40 million they had expected to become available for implementing a reorganization may not materialize, according to one source.

Texas Air has run into difficulty reselling about $20 million of debt securities because of problems in the junk bond market, the person said. And plans to raise another $20 million through changes to an insurance policy have hit a snag, the source said. An Eastern spokesman said "the $40 million will have no effect whatsoever on the asset structure of Eastern's plan. Forty million in the total scheme of things is not that significant."

It is unclear what caused the creditors to do an about-face on exploring alternatives to Eastern's new reorganization plan. However, since Eastern first filed for Chapter 11 protection March 9, it has consistently promised to pay creditors 100 cents on the dollar. Because the carrier is still pledging to do that, some committee members successfully argued that there's little reason yet to explore a different plan, according to one person familiar with the creditors' position. Earlier this month the accounting firm of Ernst & Young and the securities firm of Goldman, Sachs & Co., the experts hired by the creditors, contended that Eastern would have difficulty meeting earnings targets the airline was projecting. Ernst & Young said Eastern's plan would miss projections by $100 million. Goldman said Eastern would miss the same mark by at least $120 million.

The consultants maintained Eastern wouldn't generate the cash it needs and would have to issue new debt to meet its targets under the plan. Eastern at the time disputed those assessments and called the experts' report "completely off base."

Yesterday, Joel Zweibel, an attorney for Eastern's creditors committee, declined to comment on whether the experts had ever been instructed to look at other choices and whether they now were asked not to. He said only that the committee has not yet taken any position on Eastern's reorganization plan and that the two sides were still negotiating. "In every case, people would like to see a consentual plan," he said.

Eastern and its creditors agreed in July on a reorganization plan that called for the carrier to sell off $1.8 billion in assets and to emerge from Chapter 11 status in late 1989 at two-thirds its former size. Eastern eventually decided not to sell off a major chunk, its South American routes, which were valued at $400 million. Such a change meant the reorganization plan the creditors had agreed on was no longer valid, and the two sides had to begin negotiating again.

Eastern has publicly stated it is exceeding its goals for getting back into operation and has predicted it would emerge from Chapter 11 proceedings early next year, operating more flights than it originally had scheduled.

The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:

New York City -- $813.4 million of general obligation bonds, Fiscal 1990 Series C and D, including $757.4 million of tax-exempt bonds and $56 million of taxable bonds, tentatively priced by a Goldman Sachs & Co. group. Yields for tax-exempt bonds range from 6 1/2% in 1990 to 7.88% in 2003-2005. Yields for taxable bonds range from 9 1/8% in 1994 to 9.90% in 2009 and 2010. The bonds are all rated single-A by Moody's Investors Service Inc. The underwriters expect a single-A-minus rating from Standard & Poor's Corp., which has the issue under review.

Collateralized Mortgage Securities Corp. -- $150 million of Remic mortgage securities offered in 12 classes by First Boston Corp. The offering, Series 1989-3, is by a company established by First Boston for issuing Remics and other derivative mortgage securities. It is backed by Government National Mortgage Association 9 1/2% securities with a weighted average remaining term to maturity of 29 years and being offered at market prices.

Beneficial Corp. -- $248.3 million of securities backed by home-equity loans through Merrill Lynch Capital Markets. The offering, with an expected average life of 3.2 years, will float monthly at 20 basis points above the rate on an index of 30-day double-A-rated commercial paper, which now yields about 8.50%. The issue has an expected final maturity date of 1998. The offering is rated triple-A by Moody's and S&P, based on the quality of the underlying home equity loans and a letter of credit covering 10% of the deal from Union Bank of Switzerland. The offering is being made through BCI Home Equity Loan Asset-Backed Certificates, Series 1989-1.

Rochester Community Savings Bank -- $200 million of 8.85% certificates backed by automobile loans priced to yield 8.99% via First Boston Corp. The issue, through RCSB 1989-A Grantor Trust, was priced at a yield spread of 100 basis points above the Treasury 7 3/4% note due July 1991. The offering has an expected average life of 1.7 years and a final maturity date of May 15, 1995. The issue is rated triple-A by Moody's, based on the quality of the underlying auto loans and a letter of credit covering 13% of the deal from Credit Suisse.

South Australian Government Finance Authority (agency) -- 125 million Australian dollars of zero-coupon Eurobonds due Dec. 12, 1994, priced at 50.9375 to yield 15.06% less fees via Hambros Bank Ltd. Guaranteed by the South Australian Treasury. Fees 1 3/8.

Government Insurance Office of New South Wales (agency) -- A$50 million of 17 1/2% Eurobonds due Dec. 4, 1991, priced at 101.95 to yield 17.06 less fees via Westpac Banking Corp. Fees 1 1/4.

Swedish Export Credit Corp. (Sweden) -- 100 million Swiss francs of 6 1/8% privately placed notes due Sept. 30, 1996, priced at 100 3/4 to yield 5.99% via Citicorp Investment Bank Switzerland. Call from Sept. 30, 1993, at 100 3/16, declining by 1/16 point a year to to par. Fees 1 3/4.

West German insurance giant Allianz AG entered the takeover battle between France's Cie. Financiere de Paribas and Cie. de Navigation Mixte.

Allianz said it won French government approval to buy as much as one-third of Navigation Mixte, a diversified financial, transport and food holding company. The move comes a week after Paribas announced that it was preparing to bid for 66.7% control of Navigation Mixte.

Munich-based Allianz's brief explanatory statement said it is acting to protect its own interests as a shareholder of Navigation Mixte. That would be a blow to both Paribas and Navigation Mixte. Each had claimed Allianz, Europe's largest insurance company, as a tacit ally.

The Allianz statement also reinforced the belief that the takeover battle could be a long one. It led to broad market speculation that Paribas now will sweeten its bid, which is expected to be formally launched later this week, after approval from French government regulators.

Allianz's entry reflects the increasing eagerness of West German companies, looking ahead to the reduction in European Community internal barriers in 1992, to get involved in what until now were considered internal French affairs. Deutsche Bank, Dresdner Bank and Commerzbank all also have expressed eagerness to expand in France before 1992.

Dresdner Bank this month moved to acquire Banque Internationale des Placements, a small French merchant bank that Deutsche Bank had looked at and passed over. Commerzbank had hoped to buy a stake in Credit Lyonnais, until the Socialists returned to government last year and canceled plans to privatize the large French bank. Deutsche Bank has actively sought a French acquisition for at least two years. Lately, analysts say, Deutsche Bank has shocked some in the French financial community by indicating it wants a strong bank with a large number of branches.

"We are still looking," said a Deutsche Bank spokesman. "The banks we think would fit into our concept are either government-owned or not for sale, though Deutsche Bank would be able to pay a good price."

While Allianz officials weren't willing to comment in any detail on their plans, they said Allianz currently holds between 5% and 10% of Navigation Mixte, an apparent increase from the 5% stake that Navigation Mixte officials had earlier announced. Paris market sources said they believed Allianz was buying yesterday morning, and Navigation Mixte moved up 108 francs ($17.19) to close at 1,908 francs in heavy trading. It was the first day of trading following the suspension of Navigation Mixte shares last Monday, when Paribas announced its plan to pay 1,850 francs for each Navigation Mixte share.

Allianz also holds a 50% stake in Navigation Mixte's insurance subsidiary, one of France's largest insurance groups, which it bought for about 6.5 billion francs just before Paribas launched its bid. Navigation Mixte holds the remaining 50%. Allianz said in its statement that it was acting to protect that interest, which ties it to Navigation Mixte as a partner.

Allianz's statement stressed the company's previously announced position that Paribas's offer price is too low. Allianz also suggested, without saying so directly, that it regrets that Paribas isn't bidding for all of Navigation Mixte's shares. The problem here, analysts say, is that if Paribas wins its 66.7%, remaining Navigation Mixte shares will fall in value. That displeases many current holders, such as Allianz, which couldn't be sure of selling all their shares if they tendered to Paribas.

The Allianz statement led to speculation that Allianz eventually could sell to Paribas. That would be bad news for Navigation Mixte's current management, which was counting on Allianz to help fend off Paribas. Allianz didn't say whom, if anyone, it will support. It said simply that it will boost its Navigation Mixte stake as it sees fit over the coming days to protect itself, as long as it has French regulatory officials' approval.

Paribas currently intends to offer 1,850 francs a share for Navigation Mixte shares that receive full dividends this year. It is to offer 1,800 francs for shares created on July 1, which receive partial dividends. Alternatively, it would offer to swap three Paribas shares for one Navigation Mixte share. Paribas already holds about 18.7% of Navigation Mixte, and the acquisition of the additional 48% would cost it about 11 billion francs under its current bid.

The bid values Navigation Mixte at around 23 billion francs, depending on how many holders of Navigation Mixte warrants exchange them for shares before the bid expires.

Penn Central Corp., Cincinnati, said it agreed in principle to acquire Noranda Inc. 's Carol Cable Co. unit for $177 million.

The company said Carol Cable, based in Pawtucket, R.I., is a leading supplier of electrical and electronic wire and cable for the distributor, retail and original equipment manufacturer markets.

Carol Cable, which operates 12 manufacturing plants, had operating profit of $11.7 million on sales of $153.3 million for the first six months of this year and operating profit of $25.6 million on sales of $294.6 million for all of 1988.

The maker of telecommunications and defense equipment said Carol Cable's portfolio and market focus would complement the company's current wire and cable businesses. The plan is subject to a satisfactory due diligence investigation of Carol Cable by Penn Central, a definitive agreement and regulatory approvals.

Fletcher Challenge Ltd. said its Petrocorp unit agreed to acquire certain Alberta oil and gas interests from Amoco Corp. 's Canadian unit, for about 130 million Canadian dollars (US$110.6 million).

Fletcher Challenge, a big New Zealand-based forest products concern with forestry operations in Canada, said the assets include stakes in four natural gas fields and one oil field near Provost, Alberta, plus gas processing facilities and about 247,000 acres of undeveloped land. The proposed purchase requires approval from Investment Canada, which monitors large foreign investments in Canada.

Amoco Canada Petroleum Co., which operates the major properties included in the asset package, said the sale is part of a plan to streamline its assets.

Petrocorp, a New Zealand-based oil and gas producer, said the planned purchase would be its first oil and gas acquisition outside its home country, and would form the basis for a new stand-alone exploration and production unit in Canada.

MiniScribe Corp., Longmont, Colo., said it introduced a one-inch high, 80-megabyte hard disk drive that it hopes will prove popular with makers of high-performance laptop and portable computers.

The troubled disk drive maker aims with the new 3 1/2-inch disks to revive its reputation and sales growth. MiniScribe said the disk drives have more memory capacity than other disks that size.

MiniScribe said it expects to begin full volume production of the drives in the U.S. and Singapore in the first quarter next year. A drive with 120 megabytes of capacity is scheduled for release during the third quarter of 1990.

MiniScribe has been on the rocks since it disclosed early this year that its earnings reports for 1988 weren't accurate. After an internal investigation, the company found that senior officials used a variety of schemes to fabricate sales gains, including counting shipments of bricks and defective drives as sales.

The New York Times Co. said it reached a settlement with independent home delivery dealers in the metropolitan New York area that will free the newspaper to expand home delivery circulation.

The settlement stemmed from a lawsuit the dealers filed in 1982 when the Times began its own competing direct delivery service. The pact calls for the Times to pay dealers $3.6 million over six years, as well as other payments in the form of subsidies over three years, based on the number of "new customers started by the dealers and on pricing structures," the Times said.

The amount of the settlement will be taken as a charge against earnings in the fourth quarter. The settlement, which involves most of the 300 independent newspaper dealers in the New York area, will allow the Times to freely operate its own direct home delivery system.

Home delivery is the fastest growing segment of the Times's 1.1 million daily circulation. Currently, about 60% of home delivery subscribers in the New York area receive the paper directly from the Times.

Mercury Savings & Loan Association, Huntington Beach, Calif., reported a third-quarter loss of $3.9 million, or 61 cents a share, compared with net income of $1.4 million, or 22 cents a share, in the year-earlier quarter.

Mercury attributed the loss to rapid prepayments of loans and costs incurred in refinancing many house loans this past spring and summer, when interest rates dipped.

The thrift hired an investment banker earlier this month to advise it regarding a possible sale or merger. Mercury also is shrinking itself, part of its plan to change its emphasis from buying mortgage loans from mortgage brokers to making loans directly. Such a focus is "more profitable, more efficient and gives us a greater sense of control," said William A. Shane, Mercury's senior executive vice president. As of Sept. 30, Mercury's assets were $2.25 billion, down from $2.62 billion a year ago.

For the nine months, Mercury posted a loss of $5.4 million, or 86 cents share, against net income of $4 million, or 63 cents share, a year earlier.

Mercury shares closed yesterday at $4.625, up 50 cents, in New York Stock Exchange composite trading.

Bancroft Convertible Fund Inc., New York, likely will reject a renewed offer from Florida investor Robert I. Green to buy Bancroft for $18.95 a share.

Sigmund Levine, Bancroft secretary and treasurer, said the closed-end fund's directors will consider Mr. Green's offer in a couple of weeks at a regular meeting. "He hasn't added anything," Mr. Levine said, predicting the board will again reject Mr. Green's proposal.

In a Securities and Exchange Commission filing, Mr. Green said he had boosted his holdings in Bancroft common to 10.4% from 8.5%, and renewed an offer he made in March to acquire the fund.

Mr. Levine noted that Bancroft's shares have been trading at or above Mr. Green's offering price for the last several months.

He said Bancroft attorneys are scheduled to meet with Mr. Green's attorneys in Delaware Chancery Court at the end of this week to respond to the investor's request for company records for the past five years. Mr. Green couldn't be reached.

Giant Group said a federal court in Delaware has denied a motion by Rally's Inc. seeking to block a group led by Giant Chairman Burt Sugarman from acquiring more of the company's shares.

Rally's, a fast-food chain based in Louisville, Ky., is contending that Mr. Sugarman and two other company directors failed to disclose to the Securities and Exchange Commission that they intended to acquire a big Rally stake.

Mr. Sugarman has in turn contended that the other major shareholder group -- whose interests are represented by three other directors connected to trusts in the name of the children of the company's founder, James Patterson -- has ties to a competing fast food chain, Wendy's International Inc.

The company last week assembled a three-member committee of directors aligned with neither side to analyze the situation. Each group controls more than 40% of Rally's stock. The company just went public earlier this month.

Rally's had no comment, but was expected to make an announcement this morning about the situation.

Singer Bette Midler won a $400,000 federal court jury verdict against Young & Rubicam in a case that threatens a popular advertising industry practice of using "sound-alike" performers to tout products.

The decision in Los Angeles federal court stems from a 1985 Mercury Sable TV ad that Young & Rubicam worked up for Ford Motor Co. The ad agency had approached Ms. Midler about appearing, but she declined, citing a longstanding policy of refusing advertising work. The agency then turned to a former backup singer for Ms. Midler who appeared in the ad and crooned what was generally considered a more than credible imitation of Ms. Midler's 1973 hit song "Do You Wanna Dance."

The appeals court held: "When a distinctive voice of a professional singer is widely known and is deliberately imitated in order to sell a product, the sellers have appropriated what is not theirs."

The judge in the jury trial said there was insufficient evidence to hold Ford liable in the case. In a statement, Young & Rubicam called the award "unfortunate but bearable."

Peter Laird, a Los Angeles lawyer for Ms. Midler, said, "We believe that the verdict reaffirms her position and our position that advertisers and advertising agencies cannot with impunity imitate the voices of well-known performers. That is a property right that belongs to the performer."

The award, although far less than the $10 million, including punitive damages, that Ms. Midler sought, is likely to force Madison Avenue to further rethink how they use famous songs in ads. Last year's appeals court decision, for instance, spawned several suits, reportedly including a recent action by the heirs of singer Bobby Darin against McDonald's Corp. over its "Mac Tonight" TV commercials, a rough parody of Mr. Darin's "Mack the Knife" trademark.

The appeals-court decision last year was particularly surprising because the same court had dismissed a similar case in 1970 involving singer Nancy Sinatra and a tire ad -- also a Young & Rubicam product. Ms. Sinatra sued over the use of her "These Boots are Made for Walkin'" song in the ad.

At that time, the court held that such a claim would interfere with federal copyright law, which has always cracked down on the unauthorized copying of songs and musical compositions but never actual performances.

"One thing that is a little unnerving is that you had three old men on the court of appeals in California coming up with a statement that Nancy Sinatra is not distinctive but that Bette Midler is. I am not sure that judges, many of whom I like very much, are proper repositories for making distinctions about pop singers," said Richard Kurnit, a New York advertising lawyer.

Nonetheless, Mr. Kurnit said that the latest decisions are having a chilling effect. "It has made people think twice about how they use music and is forcing them to be more circumspect about doing a particular rendition of a song in its most famous form," he said.

Joanne Lipman contributed to this article.

James River Corp., Richmond, Va., said it acquired the tissue operations of Buhrmann-Tetterode N.V. of the Netherlands for about $77 million.

The Dutch unit, known as Celtona B.V., is a leading maker of consumer and away-from-home tissue products for the Benelux region. In addition, the acquisition includes production assets of Invercon Papermils, a maker of household tissue products for the U.K. and Ireland. The combined operations had 1988 revenue of about $100 million.

James River, a maker of pulp, paper and plastic products, already has interests in tissue businesses in France, Spain, Italy and Turkey. The company said it plans to form European ventures with Italian and Finnish companies. The Celtona operations would become part of those ventures.

Vitro S.A. of Monterrey, Mexico, said its THR Corp. subsidiary has entered into definitive loan agreements in connection with Vitro's $21.25-a-share tender offer for Anchor Glass Container Corp.

The agreements are with Security Pacific National Bank and an affiliate of Donaldson, Lufkin & Jenrette Securities Corp. Proceeds of the loan agreement, together with funds from Vitro, will permit the purchase of all shares outstanding of Anchor and the payment of all related costs and expenses.

Vitro said the definitive agreements require that Anchor obtain a waiver from its bank lenders of existing covenant defaults under its bank facilities. Since Anchor is still seeking this waiver, Vitro said the tender offer is being extended until 5 p.m. EST tomorrow.

The dollar finished mostly stronger yesterday, boosted by a modest recovery in share prices.

The Dow Jones Industrial Average climbed 6.76 points in a spate of bargain-hunting following last week's declines.

"Attention is fixed on the stock market for lack of anything else to sink our teeth into," said Robert White, a vice president at First Interstate of California.

Some analysts predict that in the absence of market-moving news to push the U.S. unit sharply higher or lower, the currency is likely to drift below 1.80 marks this week.

But others reject the view, and forecast the dollar will continue to hold its current tight trading pattern. They argue that weakness in both the yen and sterling have helped offset bearish U.S. economic news and have lent support to the dollar.

In late New York trading yesterday, the dollar was quoted at 1.8340 marks, up from 1.8300 marks late Friday, and at 141.90 yen, up from 141.65 yen late Friday. Sterling was quoted at $1.5820, up from $1.5795 late Friday.

The dollar rose against the Swiss and French francs.

In Tokyo Tuesday, the U.S. currency opened for trading at 142.32 yen, up from Monday's Tokyo close of 142.17 yen.

Last week, the surprise resignation of British Chancellor of the Exchequer Nigel Lawson sent the British pound into a tailspin.

While sterling bounced back from session lows in a bout of short-covering yesterday, foreign exchange dealers said that any hopes that the pound would soon post significant gains have evaporated.

Traders said that statements made over the weekend to quell concern about the stability of Prime Minister Margaret Thatcher's government and the future of her economic program largely failed to reassure investors and bolster the flagging British unit.

In her first televised interview following Mr. Lawson's resignation, Mrs. Thatcher reiterated her desire to keep sterling strong and warned again that full entry into the European Monetary System's exchange rate mechanism would provide no easy solution to Britain's economic troubles.

She said that the timing of the United Kingdom's entry would depend on the speed with which other members liberalize their economies.

Mrs. Thatcher's remarks were seen as a rebuff to several leading members of her own Conservative Party who have called for a more clear-cut British commitment to the EMS.

At the same time, a recent poll shows that Mrs. Thatcher has hit the lowest popularity rating of any British leader since polling began 50 years ago.

Comments by John Major, who has succeeded Mr. Lawson, also failed to damp market concern, despite his pledge to maintain relatively high British interest rates.

According to one London-based analyst, even higher interest rates won't help the pound if Britain's government continues to appear unstable.

One U.S. trader, however, dismissed sterling doomsayers while acknowledging there is little immediate upside potential for the U.K. unit.

"There is no question that the situation is bad, but we may be painting a gloomier picture than we should," he said.

He predicts the pound will continue to trade in a very volatile fashion, with "fits of being oversold and overbought" before recovering its losses.

Dealers also note that the general lack of enthusiasm for the yen has helped bolster the U.S. dollar.

They observe that persistent Japanese investor demand for dollars for both portfolio and direct investment has kept a base of support for the dollar at around 140 yen.

The dollar began yesterday on a firm note in Tokyo, closing higher in late trade. In Europe, the dollar closed slightly up in a market dominated by cross trades.

On the Commodity Exchange in New York, gold for current delivery settled at $377.80 an ounce, down 70 cents. Estimated volume was a moderate 3.5 million ounces.

In early trading in Hong Kong Tuesday, gold was quoted at $376.80 an ounce.

General Electric Capital Corp. 's Monogram Bank USA acquired a Visa and MasterCard portfolio from Commercial Federal Savings & Loan Association, an Omaha, Neb., unit of Commercial Federal Corp. of Omaha.

Terms weren't disclosed.

The portfolio currently includes $95 million in receivables, GE Capital said. GE Capital is a financial services subsidiary of General Electric Co. of Fairfield, Conn., which also has broadcasting and electrical-products businesses.

GE Capital said Commercial Federal Savings will continue to market Visa and MasterCard programs while Monogram provides "operational and marketing support" and actually owns the accounts. With the acquisition, Monogram, Blue Ash, Ohio, has more than 2.4 million total accounts, GE Capital added.

EAST GERMANS RALLIED in three cities to demand democratic freedoms.

As the country's new leader, Egon Krenz, prepared to travel to Moscow today for talks with Soviet leader Gorbachev, hundreds of thousands of East Germans massed in the streets of Leipzig, Halle and Schwerin to call for internal freedoms and the legalization of the New Forum opposition group. Krenz, however, vowed to preserve the Communist Party's hold on political power and said East Germans shouldn't destabilize the nation with unrealistic demands.

Communist officials this month have faced nearly daily pro-democracy protests, accompanied by the flight to the West by thousands of East Germans.

Soviet police clashed with demonstrators in Moscow following a candlelight vigil around the KGB's Lubyanka headquarters in memory of those persecuted under Stalin. More than 1,000 Muscovites attended the service. A splinter group demonstrated in Pushkin Square, where the police clubbed and detained a number of protesters.

Police in Yugoslavia dispersed about 1,000 ethnic Albanians who were protesting the trial of the former Communist Party chief of the southern province of Kosovo. Azem Vlasi and 14 others are accused of inciting riots and strikes and opposing constitutional limits to Kosovo's autonomy. If convicted, they could be sentenced to death.

A court in Jerusalem sentenced a Palestinian to 16 life terms for forcing a bus off a cliff July 6, killing 16 people, Israeli radio reported. He also received 20-year sentences for each of the 24 passengers injured. It was considered the stiffest sentence passed since the start of the 22-month-old Arab uprising in the Israeli-occupied territories.

U.S. and Soviet negotiators opened talks in New York aimed at resolving differences in proposals to reduce chemical-weapons arsenals. While the Kremlin has urged a ban on output of the poison gases, the White House wants to continue producing the weapons even after an international treaty calling for their destruction is signed.

South Africa's government said peaceful demonstrations such as the anti-apartheid rally Sunday near Soweto have helped ease tensions and assisted political changes. About 70,000 people attended the anti-government rally, at which leaders of the banned African National Congress refused to renounce violence to end apartheid.

Secretary of State Baker expressed concern that Nicaraguan President Ortega may attempt to use alleged attacks by the U.S.backed Contra rebels as an excuse to scuttle elections scheduled for February. Ortega had threatened to end a 19-month-old ceasefire. Baker's remarks came as the White House urged both sides to honor the truce.

The USS Lexington returned to dock in Pensacola, Fla., following an accident Sunday in which the pilot of a training jet crashed into the ship, killing five sailors. The captain of the aircraft carrier, the oldest in the Navy, said the flier was making his first attempt to land on a carrier.

Four people torched three U.S. flags on the central steps of the U.S. Capitol in a bid to test a new federal law protecting the American flag from desecration. All four demonstrators were arrested. The law, which Bush allowed to take effect without his signature, went into force Friday.

Chinese officials said armed police would replace soldiers in Tiananmen Square as part of a scaling down of Beijing's five-month-old state of emergency. Separately, the U.S. Embassy has filed three protests in as many days with China's government, alleging harassment of diplomats and their families, an embassy source said.

Authorities in Algeria said the toll from two earthquakes Sunday had reached at least 30 dead and about 250 injured. The heaviest damage was reported in Tipasa, about 40 miles west of Algiers. As rescue teams continued searching for victims, hundreds of suvivors accused the government of a feeble response following the temblors.

Britain's Thatcher summoned senior advisers for strategy talks as opinion polls showed the prime minister's popularity had hit a record low following the resignation last Thursday of Chancellor of the Exchequer Lawson. One poll, conducted for the British Broadcasting Corp., found that 52% of voters believed that she should quit.

Lawmakers in Hungary approved legislation granting amnesty to many people convicted of crimes punishable by less than three years in prison. They also established an office to control government and party finances. The laws take effect next month.

Died: Robert V. Van Fossan, 63, chairman of Mutual Benefit Life Insurance Co., Sunday, in Morristown, N.J., of cancer.

Fluor Corp. said it was awarded a $300 million contract to provide engineering and construction-management services at a copper mine in Irian Jaya, Indonesia, for a unit of Freeport-McMoRan Copper Co.

Fluor, based in Irvine, Calif., will direct expansion of the mine's capacity to 52,000 metric tons a day from 32,000 metric tons a day. Completion of the project is expected by mid-1992.

In 1988, Fluor had revenue of $5.1 billion and earnings of $56.4 million, or 71 cents a share.

Nixdorf Computer AG, citing continued profitability problems, said it will have to reduce personnel further, notably in research and development sectors.

The troubled West German computer company said, in a statement to its employees, that the number of persons working in product development will be reduced world-wide to 2,440 from 2,888 by the end of 1990. The number of workers in production sectors will be cut by 488, to 5,200 by September. The cuts will be made half within Germany and half abroad.

In the first nine months of 1989, Nixdorf said, sales rose 5% amid good growth in selected areas such as banks and trading companies.

The company also cited some success in damping cost increases and said it wants to return to profitability in 1990. It cited the expected beneficial effects of a concentration on key products, further structural changes within the group and cooperation agreements with other companies.

GREAT NORTHERN NEKOOSA is being sought by another big paper company, Georgia-Pacific, for $58 a share, or about $3.18 billion. The tender offer, which surprised analysts because it appeared to be unsolicited, could spark a period of industry consolidation. Analysts questioned whether Georgia-Pacific will ultimately prevail, saying other paper concerns may make competing bids.

Two more securities firms bowed to the outcry over program trading. GE's Kidder Peabody unit said it would stop doing stock-index arbitrage for its own account, while Merrill Lynch said it was halting such trading entirely. Also, the Big Board met with angry stock specialists.

A big pension-insurance case will be reviewed by the Supreme Court. The justices agreed to decide whether federal insurers can require LTV to take back responsiblilty for funding its $2.3 billion pension shortfall.

Drug companies lost a major liability case. The Supreme Court let stand a New York ruling that all manufacturers of an anti-miscarriage drug are liable for injuries or deaths if the actual maker isn't known.

Revco received a $925 million takeover offer from Texas financier Robert Bass and Acadia Partners. The drugstore chain reacted cautiously, saying the plan would further swell its huge debt, which forced the company into Chapter 11 protection last year.

Rockefeller Group agreed to sell a 51% interest to Mitsubishi Estate, a major Japanese developer and property owner, for $846 million. Officials at some Rockefeller units are said to be unhappy with the agreement.

Continental Air replaced its top executive for the sixth time in as many years. Chairman and Chief Executive Joseph Corr was succeeded by Frank Lorenzo, chief of parent Texas Air.

United Air's parent may have to pay as much as $53.7 million to the labor-management buy-out group for fees and expenses incurred in their failed $6.79 billion takeover bid.

Gen-Probe agreed to be bought by Chugai Pharmaceutical for about $110 million. The sale is likely to fuel concern about growing Japanese investment in U.S. biotechnology firms.

Boeing posted a 68% jump in third-quarter earnings, but Wall Street's attention was focused on the continued strike at the aircraft maker.

The Fed delayed approval of First Union's $849 million acquisition of Florida National Banks pending a review of First Union's lending practices in low-income neighborhoods.

Allianz of West Germany entered the takeover battle between France's Paribas and Navigation Mixte.

Maxwell agreed to sell its U.S. printing unit to Quebecor for $500 million, making Quebecor the No. 2 commercial printer in North America.

New construction contracts rose 8% in September, led by commercial, industrial and public-works projects, according to F.W. Dodge Group.

Western Union took steps to withdraw a $500 million debt swap, citing turmoil in the junk bond market.

Markets --

Stocks: Volume 126,630,000 shares. Dow Jones industrials 2603.48, up 6.76; transportation 1191.86, up 1.43; utilities 216.74, up 0.88.

Bonds: Shearson Lehman Hutton Treasury index 3416.81, up

Commodities: Dow Jones futures index 129.38, off 0.11; spot index 130.09, off 0.71.

Dollar: 141.90 yen, up 0.25; 1.8340 marks, up 0.0040.

Pacific Telesis Group said its Pacific Bell unit sustained property damage of about $45 million to $50 million from the California earthquake earlier this month.

The San Francisco-based telecommunications company said it carries $150 million of earthquake insurance with a $10 million deductible provision.

Sam Ginn, chairman and chief executive officer, told securities analysts in New York that the company expects somewhat slower per-share earnings growth in 1990, although annual growth should return to the traditional figure of about 7% thereafter.

As factors contributing to the temporary slowdown, he cited one-time rate reductions prescribed by California regulators as a prelude to a new framework that removes profit constraints. He also mentioned increased capital investment by Pacific Bell for network improvements.

Mr. Ginn said the company's cellular operations now serve about 341,000 customers, up 46% from a year ago.

General Motors Corp. is planning to build a new engine plant in Europe that may be built in Britain, provided the company can reach a satisfactory agreement with unions, sources said.

Officials of Vauxhall Motors Ltd., GM's British unit, were meeting with union leaders late yesterday in hopes of winning such an accord.

The engine plant may encompass plans for a joint components venture with Jaguar. Alternatively, a separate engine plant may be built as part of GM's planned tie-up with the British luxury car maker, the sources said.

Sources said a "complex and detailed" announcement of a joint agreement between General Motors and Jaguar would be made by Jaguar "some time in the next 2 1/2 weeks.

Cray Research Inc. won government clearance for its proposed reorganization of founder Seymour Cray's supercomputer design team into a separate company.

Internal Revenue Service approval of the move as a tax-free transaction was the last hurdle to splitting up the world's dominant maker of supercomputers, which Mr. Cray founded in 1974.

Cray's directors set Nov. 15 as the record date for distribution of shares in the new company, to be called Cray Computer Corp. It will trade over the counter under the symbol CRAY.

The plan calls for Cray Research holders to receive one share in the new company for every two shares held. An estimated 14.7 million Cray Computer shares will be distributed, Cray Research said.

Under the accord, Cray Research will transfer to Mr. Cray's fledgling operation $53.3 million of assets primarily related to the Cray-3 development project his team is undertaking and will lend Cray Computer $98.6 million.

Cray Research will retain a 10% interest in the new company, which will be based in Colorado Springs, Colo.

When it announced the planned breakup in May, Cray Research said development costs of several competing projects were squeezing its earnings growth. After the split, the two companies presumably will be rivals for orders from government and commercial customers.

Interface Systems Inc., Ann Arbor, Mich., said it will report net income for the fourth quarter ended Sept. 30 fell to $470,000, or 11 cents a share, from $805,000, or 19 cents a share, a year earlier.

Chairman Carl L. Bixby said the decline occurred although revenue rose 30% to more than $8.3 million from $6.4 million a year earlier. The company, which makes computer parts said fiscal 1989 earnings were "down slightly" from $3.2 million, or 74 cents a share, in fiscal l988.

The company said fiscal 1989 revenue increased about 30% to more than $32 million from $25.3 million.

Mr. Bixby said that early signs point to improved earnings and revenue in the first quarter of fiscal 1990. "The current backlog of orders is strong throughout the corporation," he said.

Priam Corp. said it filed for protection under Chapter 11 of the federal Bankruptcy Code and announced a 35% reduction in its world-wide employment.

The filing in bankruptcy court here follows a string of quarterly losses and product glitches for the maker of harddisk drives for minicomputers and microcomputers.

Priam had a loss of $25.4 million for the fiscal year ended July 7, compared with year-earlier profit of $543,000, or two cents a share. Revenue for the year fell 13% to $122.7 million.

The 200-person staff cutback announced yesterday will bring Priam's employment to about 380 workers, less than half of what it was before a similar, 230-person reduction in August.

The company yesterday also said it was scrapping one of its major new products, a 760-megabyte drive, which, while technically proficient, didn't hold much promise of generating substantial orders because financing problems caused a nine-month delay in getting the product to market.

The French Economics Ministry approved a planned asset swap between the defense and electronics group Thomson-CSF S.A. and the bank group Credit Lyonnais.

The ministry said the swap, details of which were disclosed last Thursday, will allow both state-controlled companies to reinforce operations in their main markets and argued that the move shows the dynamism of France's state-sector concerns.

The approval also ends any hope that Banque Nationale de Paris, another state-sector bank, might have had about taking Credit Lyonnais's place in the accord. It hinted over the weekend that it would have been interested in a hook-up with Thomson-CSF.

Under details of the accord, Credit Lyonnais will take slightly more than 50% of Thomson-CSF Finance in exchange for about 14% of its own shares. The move will help the bank to keep up with international solvency ratios being phased in by the Bank for International Settlements and will also represent the first time that its voting shares have been held by a party other than the government. Bio-Technology General Corp. received tenders for 97.9% of its 7.5% convertible senior subordinated notes due April 15, 1997, and 96% of its 11% convertible senior subordinated debentures due March 1, 2006.

In exchange offers that expired Friday, holders of each $1,000 of notes will receive $250 face amount of Series A 7.5% senior secured convertible notes due Jan. 15, 1995, and 200 common shares. For each $1,000 face amount of debentures, holders received $250 of Series B 11% senior secured convertible notes due Oct. 15, 1998, and 200 common shares.

Bio-Technology, a New York maker of genetically engineered products for human and animal health care, said it made the exchange offer to reduce its interest payments.

Japanese companies have long been accused of sacrificing profit to boost sales. But Fujitsu Ltd. has taken that practice to a new extreme.

Japan's biggest computer maker last week undercut seven competitors to win a contract to design a mapping system for the city of Hiroshima's waterworks. Its bid: one yen, or less than a U.S. penny.

The bid created such a furor that Fujitsu said it is now offering to withdraw from the project. "From a common-sense viewpoint, it was not socially acceptable," a Fujitsu spokeswoman said yesterday. Hiroshima city officials couldn't be reached to find out whether they would drop Fujitsu's bid.

Fujitsu said it issued the low bid because it wanted a foot in the door of a potentially lucrative market.

"We desperately wanted the contract because we want experience in the field," the Fujitsu spokeswoman said. "We expect a big market in the future, so in the long term it will be profitable. It's a kind of an investment."

Hiroshima's waterworks bureau said the municipal government had budgeted about 11 million yen ($77,500) for the project. "I was flabbergasted," Tatsuhara Yamane, head of the bureau, was quoted by Kyodo news service as saying. "I understand the firm's enthusiasm in getting the deal, but such a large company would have been better off showing a little more discretion."

Indeed, Fujitsu officials admitted they may have been a little overzealous. The Fujitsu spokeswoman said headquarter officials didn't approve the bid in advance and will take measures so this kind of thing doesn't happen in the future. "It's contrary to common sense," she added.

Specifically, Fujitsu won the right to design the specifications for a computerized system that will show water lines throughout the city. The system could be used in a fire or earthquake to locate problems, among other things.

A waterworks official said Fujitsu will have to design the system so it would be compatible with other makers' equipment. But industry officials expressed concern that the initial project might give Fujitsu an edge in winning more lucrative contracts later.

Fujitsu said it hopes the Hiroshima contract will help it secure pacts with other municipalities. Japanese local governments are expected to invest heavily in computer systems over the next few years, and many companies expect that field to provide substantial revenue. "In the near future, it will be a big market, not just for waterworks, but for all mapping systems," the Fujitsu spokeswoman said. "We can expect a hundreds-of-billions-of-yen market."

No foreign companies bid on the Hiroshima project, according to the bureau. But the Japanese practice of deep discounting often is cited by Americans as a classic barrier to entry in Japan's market. Earlier this year, the U.S. complained that Japan's supercomputer makers were effectively closing out foreign competitors by slashing prices as much as 90% for universities.

Fujitsu wasn't the only company willing to sacrifice profit on the project. Three competitors bid between 300,000 yen and 500,000 yen, according to the Hiroshima government office. Other bids ranged from about 10 million yen to 29 million yen.

American Airlines will expand its trans-Atlantic service 30% beginning next year with six new daily flights between the U.S. and Europe, officials announced yesterday.

American, a unit of AMR Corp., is the nation's largest airline.

The new nonstop flights, starting next May, will include Chicago-Warsaw, Chicago-Helsinki, Miami-Madrid, Dallas-Barcelona, a second daily Chicago-Paris flight and a second daily Chicago-Manchester flight, the officials said.

Chicago has the largest population of citizens of Polish heritage in any city outside Poland.

With the new service, American will fly 161 flights a week to 17 European cities. The additions solidify American's position as the third-largest U.S. transatlantic carrier, behind PanAm Corp. 's Pan American World Airways and Trans World Airlines.

Karstadt AG said sales for its domestic group rose 4.6% in the first nine months of 1989 from a year earlier.

The West German retailing group also said that the results of the first three quarters suggest it will meet its profit goal for the year. Earnings at the department-store division, which generates the bulk of profit, should remain at least stable, while income at the mail-order and tourism units is likely to fall slightly from 1988, the company said.

Karstadt didn't give any group sales or profit figures for the first nine months.

Georgia-Pacific Corp. offered to acquire Great Northern Nekoosa Corp. for $58 a share, or about $3.18 billion.

The offer capped a week of rumors that Georgia-Pacific, an Atlanta-based forest-products company, was considering making a bid for Nekoosa, a paper-products concern based in Norwalk, Conn.

Executives at Nekoosa couldn't be reached, and officials at Georgia Pacific declined to comment. Analysts, however, were surprised because the tender offer appeared unsolicited. "It's quite a bombshell," said one, adding that the offer could spark a period of industry consolidation.

The two companies would appear to be a logical fit because of their complementary lines, and analysts described the offer, representing a 36% premium over Nekoosa's market price, as fair. Nekoosa closed yesterday at $42.75, up $2.75, in New York Stock Exchange composite trading.

But industry observers still questioned whether Georgia Pacific will ultimately prevail. "You have to watch out for counterbids," said one analyst. " International Paper or Weyerhaeuser could step in."

The bid for Great Northern, a notice of which appears in an advertisement in today's Wall Street Journal, is the first big takeover offer since the collapse of a $6.79 billion buy-out of United Airlines parent UAL Corp. Oct. 13.

That collapse, following on the heels of disarray in the market for high-risk, high-yield bonds, cast doubt on the entire takeover business, which has fueled both big profits among Wall Street securities firms and big gains in the stock market generally.

While Georgia-Pacific's stock has outperformed the market in the past two years, Nekoosa has lagged the market in the same period.

Yesterday's rise in Nekoosa's share price came on volume of 786,700 shares, four times the daily average.

According to Dow Jones Professional Investor Report, options trading in Nekoosa was also heavy, ranking only behind International Business Machines Corp. and UAL in volume on the Chicago Board Options Exchange.

According to the Value Line Investment Survey, demand for Nekoosa's commodity paper has weakened, prompting earnings to decline by 6.6% in the third quarter ended Sept. 30. Value Line added, "With discounts widening on business papers, and with newsprint and corrugated shipments flat, we expect negative earnings comparisons through next year."

By contrast, Value Line said Georgia-Pacific "is in a comparatively good position to deal with weakening paper markets," because its production is concentrated not in the Northwest but in the South, where it should be able to avoid some of the cost pressures from rising wood-chip prices. Also, it isn't exposed to the weakening newsprint business, and is strong in the less-cyclical tissue business.

The purchase of Nekoosa would easily eclipse Georgia-Pacific's $530 million acquisition of Brunswick Pulp & Paper Co. last year. That acquisition, which also included the assumption of $135 million in debt, was designed to allow Georgia-Pacific to capitalize on the strong demand for softwood pulp, as well as reduce its exposure to the housing market.

Wasserstein Perella & Co. is the dealer-manager for the offer, which will expire Nov. 29, unless extended.

Ratners Group PLC's U.S. subsidiary has agreed to acquire jewelry retailer Weisfield's Inc. for $50 a share, or about $55 million.

Weisfield's shares soared on the announcement yesterday, closing up $11 to close at $50 in national over-the-counter trading.

Ratners and Weisfield's said they reached an agreement in principle for the acquisition of Weisfield's by Sterling Inc. The companies said the acquisition is subject to a definitive agreement. They said they expect the transaction to be completed by Dec. 15.

Weisfield's, based in Seattle, Wash., currently operates 87 specialty jewelry stores in nine states. In the fiscal year ended Jan. 31, the company reported sales of $59.5 million and pretax profit of $2.9 million.

Ratners, which controls 25% of the British jewelry market, would increase the number of its U.S. stores to about 450 stores from 360. It has said it hopes to control 5% of jewelry business in the U.S. by 1992; currently it controls about 2%.

McDonnell Douglas Corp. received contracts totaling $244.8 million for 72 F-A-18 aircraft for the Navy and helicopter spare parts for the Army.

Aerojet General Corp., a unit of GenCorp Inc., was awarded a $40.1 million Air Force contract for Minuteman missile rocket motors.

Rockwell International Corp. received a $26.7 million Navy contract for submarine ballistic missiles.

Honeywell Inc. got a $22.3 million Navy contract for aircraft missile warning sets.

Beech Aircraft Corp., a unit of Raytheon Co., received an $11.5 million Air Force contract for C-12 aircraft support.

Analog Devices Inc. said it may purchase as many as one million of its common shares over the next several months.

Analog also said that a one million share buy-back program announced in March is substantially complete. The company, which makes integrated circuits and other electronic parts, now has about 47 million common shares outstanding.

In New York Stock Exchange composite trading yesterday, Analog Devices closed at $8.875, up 25 cents.

John Lehman's editorial-page article on the Pentagon as a haunted house omits the real roots of its ghost population ("In the Pentagon, the Undead Walk," Oct. 18). The media's treatment of the Defense Department during the Vietnam War, the Carter administration's denigration of the military, and the public scapegoating of Lt. Col. Oliver North have all served to emasculate the poor souls who live there. The resulting haunted house tends to reward followership, not leadership, it creates guilt about wearing the uniform, and raises doubt about having the will to fulfill the ghosts' role, i.e., to be able to win if called on.

Perhaps the Halloween season is a good time for Congress to be looking at funding for some ghostbusting equipment.

Mike Greece Former Air Force Career Officer New York

Where does Mr. Lehman get off castigating Gen. George Marshall for muscling in on naval prerogatives? Ever since the days of Alfred Thayer Mahan (U.S. naval officer and naval historian) and Teddy Roosevelt the Navy has been the service most favored by Washington officialdom. Mr. Lehman overlooks the fact that the Navy possesses its own air force (the carrier fleet) and its own army (the Marines), which in turn has its own air force.

Of course these turf battles are unseemly, wasteful and potentially dangerous and should be resolved in the interest of national security, but Mr. Lehman seems to be part of the problem rather than part of the answer.

L.H. Blum Beaumont, Texas

I agree with Mr. Lehman 100%!

Isn't this the same guy who resigned as Navy secretary because he couldn't get his 1,000-ship Navy?

I personally do not want to hasten Mr. Lehman's demise, but I can see him figuring prominently in his own article.

Carl Banerian Jr. Birmingham, Mich.

For the sixth time in as many years, Continental Airlines has a new senior executive. Gone is D. Joseph Corr, the airline's chairman, chief executive and president, appointed only last December.

Mr. Corr resigned to pursue other business interests, the airline said. He could not be reached for comment.

Succeeding him as chairman and chief executive will be Frank Lorenzo, chairman and chief executive of Continental's parent, Texas Air Corp. Mr. Lorenzo, 49 years old, is reclaiming the job that was his before Mr. Corr signed on.

The airline also named Mickey Foret as president. Mr. Foret, 44, is a 15-year veteran of Texas Air and Texas International Airlines, its predecessor. Most recently he had been executive vice president for planning and finance at Texas Air.

Top executives at Continental haven't lasted long, especially those recruited from outside. But Mr. Corr's tenure was shorter than most. The 48-year-old Mr. Corr was hired largely because he was credited with returning Trans World Airlines Inc. to profitability while he was its president from 1986 to 1988. Before that, he was an executive with a manufacturing concern.

At Continental he cut money-losing operations, which helped produce a modest profit in this year's second quarter. But Mr. Corr, a stunt pilot in his spare time, was understood to be frustrated by what he regarded as limited freedom under Mr. Lorenzo.

While not officially an executive at Continental during Mr. Corr's tenure, Mr. Lorenzo is known for keeping close tabs on Texas Air's operating units. Continental is Texas Air's flagship and was built painfully to its present size under Mr. Lorenzo after emerging from bankruptcy proceedings in 1986.

It's unclear what role, if any, Mr. Lorenzo's recent exploration of a possible sale of a stake in Continental had in Mr. Corr's departure. One source familiar with the airline said, however, that Mr. Corr wasn't informed in advance during the summer when Mr. Lorenzo began discussions with potential buyers.

During his tenure, Mr. Corr attempted through a series of meetings to inform managers of some of the company's future plans, traveled widely to talk to employees and backed training sessions designed to improve the carrier's image.

Mr. Foret is one of a handful of executives Mr. Lorenzo has relied on over the years. Previously, he had served in financial planning positions at the company's Eastern Airlines unit. Another longtime ally, Phil Bakes, currently heads Eastern, now in Chapter 11 bankruptcy proceedings. Mr. Bakes previously had a turn at running Continental.

Among the other alumni are Stephen Wolf, now chairman of UAL Inc., and Thomas Plaskett, president of Pan Am Corp.

Doskocil Cos. said its bank-debt payments have been extended until May 31, 1990, to give it more time to sell its Wilson Foods Corp. retail and fresh meat operations.

The company was to repay $58 million in debt on Dec. 31 and $15 million on March 31. The company acquired the debt when it paid $155 million to purchase Wilson last year.

An agreement to sell the Wilson assets for $150 million in cash and notes collapsed in late September, when the buyer, a company controlled by George Gillett, couldn't secure financing.

Companies listed below reported quarterly profit substantially different from the average of analysts' estimates. The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share. Estimated and actual results involving losses are omitted.

The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days. Otherwise, actual profit is compared with the 300-day estimate.

Charles D. Way, president of this restaurant operator, assumed the additional post of chief executive officer. He succeeds Alvin A. McCall in the position. Mr. McCall will remain chairman.

Australia's inflation is expected to rise as high as 8.3% in the quarter ending March 30, but could fall to around 7% by June, according to economists.

The government said the consumer price index rose 2.3% in the quarter ended Sept. 30 from the previous quarter and 8% from a year ago.

Charles A. Pearce, 66 years old, will retire from his post as chief executive officer of this bank holding company effective Dec. 31. He will remain chairman. Charles R. Simpson Jr., 46, president and chief operating officer, will assume the chief executive's post.

It is a peaceful time in this part of western India. The summer crop is harvested, winter sowing has yet to begin. Farmers in loose turbans and fancy earrings spend their afternoons laughing and gossiping at the markets.

One could imagine such a lull in the lives of the Arabs before the quadrupling of oil prices. For just as the Arabs were in the 1960s, the farmers of Sidhpur are on the brink of global power and fame. The Arabs had merely oil. These farmers may have a grip on the world's very heart. Or, at least, its heart disease.

That is because Sidhpur has a near-monopoly on the world's supply of flea seed, also known as flea wort or, in Western parlance, psyllium: a tiny, tasteless, obscure seed that, according to early research, may reduce cholesterol levels in the blood. Ever since the link to cholesterol was disclosed, Americans have begun scarfing up psyllium in their breakfast cereals. If further research proves the seed's benefits, this dusty farm district could become the epicenter of a health-food fad to rival all fads since cod-liver oil.

"This seed's not grown anywhere else in India, or anywhere else in the world," says T.V. Krishnamurthy, a vice president of Procter & Gamble India Ltd., a major psyllium buyer and promoter. "The proper climatic conditions don't exist in many places in the world." Arvind Patel, a processor and exporter of the seed, raves: "If psyllium takes the place of oat bran, it will be huge."

Whether psyllium makes Sidhpur's fortune depends on cholesterol-fearing Americans, the U.S. Food and Drug Administration and, of course, the outcome of further research. Only one thing is certain here: Pysllium is likely to remain solely an export item from Sidhpur for a long time. Local farmers say it is as good a cash crop as mustard or fenugreek, a legume. But they have no desire to eat a bowl of psyllium each morning, and, perhaps, little need: lean, frugal vegetarians, the farmers are innocents in the clogged, treacherous world of cholesterol.

Psyllium is an annual herb, Plantago ovata, that has been used for centuries by folk doctors here, mainly as a laxative and anti-diarrheal. As such, the soluble fiber has an almost fanatic following in northern India. "I can assure you," attests a 25-year-old lawyer in New Delhi, with a meaningfully raised eyebrow, "from personal experience, it works." A prominent businessman in Bombay gives a similar testimonial: "I have been taking it daily since 1961. " Folk doctors also prescribe it for kidney, bladder and urethra problems, duodenal ulcers and hemorrhoids. Some apply it to gouty joints.

The plant has a hairy stem that produces flowers and diminutive seeds. It is the seed's colorlessness and size -- 1,000 of them weigh only 1.5 grams, or about as much as two paper clips -- that explain the historical allusions to fleas. The transluscent husk of the seed is removed, sifted and crushed; the seed itself is fed to animals. Some 90% of the crop, which was worth $26 million last year, is exported.

For decades, psyllium husk has been the main ingredient in such laxatives as Procter & Gamble Co. 's Metamucil, the top-selling brand in the U.S., and Ciba-Geigy Corp. 's Fiberall. But some time ago, researchers discovered that soluble fibers also lower cholesterol levels in the blood. Cincinnati-based P&G took an interest; it ordered two studies on psyllium and cholesterol.

One of the studies, done at the University of Minnesota, tested 75 people with raised cholesterol levels. After 16 weeks, the group that took three daily teaspoons of Metamucil saw a significant dip in their general cholesterol levels, and an even larger reduction in levels of low-density lipoproteins, the so-called bad cholesterol. In late 1987, P&G asked the FDA for approval to market Metamucil as the first non-prescription, cholesterol-lowering product in the

In April, the psyllium bandwagon got more crowded. General Mills Inc., the food giant, launched a breakfast cereal called Benefit, containing psyllium, oat, wheat and beet bran; the words, "reduce cholesterol" were prominently displayed on its package. In September, Kellogg Co. launched a competing psyllium-fortified cereal called Heartwise.

Suddenly, on television, in advertisements and on their cereal boxes, Americans were inundated with news about the obscure seed. The flood of claims and counter-claims worried consumers and actually hurt sales of the new cereals. This month, the Food and Drug Administration expressed concern that Americans might someday, in various forms, ingest too much psyllium.

Currently, there is a lull in the psyllium war. The FDA has asked Kellogg and General Mills to show research that their cereals are safe. It also ordered P&G to produce more studies to buttress its claims that Metamucil can lower cholesterol. But the agency hasn't yanked psyllium off store shelves. If the FDA approves the new uses of psyllium, other companies are expected to rush to market with psyllium products.

"It's going to be a sensational thing," says Mr. Krishnamurthy of P&G in Bombay. Says psyllium exporter Mr. Patel: "I just got back yesterday from the U.S. In the newspapers, on the radio and TV, psyllium is everywhere."

But the news of the boom has yet to trickle down to the farmers. They only know of one use for the crop, as a laxative, and with psyllium prices currently languishing in the wake of a bumper crop, they think of the seed as a marginal crop, something to grow between summer wheat crops.

"Psyllium's not a good crop," complains Sooraji Jath, a 26-year-old farmer from the village of Lakshmipura. " You get a rain at the wrong time and the crop is ruined."

Even at the Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council, the government agency that promotes the seed, the psyllium boom is distant thunder. The staff brags about psyllium's hefty contribution to American regularity, without quite grasping the implications of the research on cholesterol. The council's annual report has psyllium on its last page, lumped with such unglamorous export items as sarsaparilla and "Nux vomica," a plant that induces vomiting.

In one way, the psyllium middlemen -- the buyers and exporters -- are glad to keep news of the boom to themselves. They want psyllium prices low for their purchases next year.

But there's a catch. Sidhpur and adjacent districts are the only places in the world where psyllium is grown in large quantities. This is partly due to the particular demands of the crop. Psyllium needs sandy soil, dew during the first few weeks, and then total dryness when its seeds are maturing. Small crops are grown in Pakistan, France, Spain, Italy, Belgium and Brazil, but their quality can't compare to that of Indian psyllium.

Big buyers like Procter & Gamble say there are other spots on the globe, and in India, where the seed could be grown. "It's not a crop that can't be doubled or tripled," says Mr. Krishnamurthy. But no one has made a serious effort to transplant the crop.

In Sidhpur, it is almost time to sow this year's crop. Many farmers, too removed to glean psyllium's new sparkle in the West, have decided to plant mustard, fennel, cumin, fenugreek or castor-oil seeds.

Mr. Jath is thinking of passing up psyllium altogether this year in favor of a crop with a future such as cumin or fennel. "Maybe I'll plant castor-oil seeds." His brother, Parkhaji, whose head is swathed in a gorgeous crimson turban, nods vigorous assent.

So when next year's psyllium crop is harvested in March, it may be smaller than the 16,000 metric tons of the past few years -- right at the crest of the psyllium boom.

And the world could experience its first psyllium shortage.

Kellwood Co. said it completed a previously announced acquisition of Crowntuft Manufacturing Corp., a New York-based maker of chenille robes and lounge wear.

The apparel maker wouldn't disclose terms of the agreement. Kellwood said Gabriel Hakim Sr., president of Crowntuft, will continue to head Crowntuft's management group.

A seat on the Chicago Mercantile Exchange was sold for $416,000, down $36,000 from the previous sale Oct.

Seats currently are quoted at $410,000 bid, $425,000 asked.

The record price for a full membership on the exchange is $550,000, set March 9, 1989.

Small businesses say a recent trend is like a dream come true: more-affordable rates for employee-health insurance, initially at least. But then they wake up to a nightmare.

The reasonable first-year rates can be followed by increases of 60% or more if a covered employee files a major claim, they complain. Insurance premiums for one small Maryland concern went up 130% in less than two years, the last increase coming after one of its three workers developed a herniated disk.

"There's a distinct possibility that I may lose my job over this," the employee, Karen Allen, of Floor Covering Resources, Kensington, Md., recently told a congressional hearing. She said her employer can't afford the rate increases, and she fears she won't find another job with a benefit plan covering her ailment.

For employee and employer alike, the worry is widespread. Surveys repeatedly show that small-business owners rank the availability and rising cost of health insurance as one of their biggest concerns.

The House Energy and Commerce Committee's health subcommittee, headed by Democratic Rep. Henry Waxman of California, is looking into complaints that small businesses not only can't keep reasonably priced employee-health insurance if claims are filed, but often can't get coverage at all if a worker is termed medically uninsurable.

"I have an old-fashioned name for people in that position: sick people who need health insurance," Rep. Waxman says. " What we're seeing now makes a mockery of the idea of insurance: collect premiums from the healthy, dump the sick and let them pay their own bills." Some lawmakers may seek legislation to limit overly restrictive insurance policies.

The concern grows out of increased efforts by the insurers to woo the small-business market. As larger companies increasingly self-insure, or use reserves to pay their own workers' medical bills, the insurance industry has turned to the small-employer market that was once a backwater for them.

"Insurance companies will offer a good rate if no one is sick, but it's a roll of the dice," says Rosemary Heinhold of the Small Business Service Bureau, a group representing 35,000 small businesses nationwide. "One case of cancer or a high-risk pregnancy with a sick infant, and rates go up 40% to 60%. Small-business people end up paying insurance premiums worth two to three times the cost of one illness."

In addition, the group says some of its member companies have been denied insurance because individual workers had medical problems that ranged from a mild cardiac condition to psychological counseling after a divorce, hemorrhoids and overweight.

The Health Insurance Association of America, an insurers' trade group, acknowledges that stiff competition among its members to insure businesses likely to be good risks during the first year of coverage has aggravated the problem in the small-business market. But it says that rapid rate increases are directly tied to the soaring cost of health care.

Some business analysts blame the problem on tough competition in the insurance market. They say insurance companies use policies aimed at excluding bad risks because their competitors do. But the general practice makes it more difficult to combine small groups of people into larger groups, thus spreading the risk over a larger base of premiums.

"I'm not accusing insurers of dereliction of duty," Robert Patricelli of the U.S. Chamber of Commerce told Mr. Waxman's panel. "You can't ask one carrier to underwrite on social grounds when that might destroy it in the marketplace."

Rep. Waxman and Democratic Sen. Edward Kennedy of Massachusetts have proposed regulation to deal with the problem. The proposal is just part of legislation that would require businesses to provide health benefits, an idea that is strongly opposed by small business who say it would just compound the insurance-cost problems.

But small-business lobbyists say they support the idea, included in the Kennedy-Waxman bill, of new laws or regulations requiring greater use of community rating, which pegs rates to the use of health care by a community or other large group, and is designed to prevent insurance companies from taking only low-risk small companies as clients.

But first on the list of priorities, says the National Federation of Independent Business, is to prohibit state laws requiring the inclusion of specialty items, such as psychiatric care, in basic health plans. Such requirements, they argue, make it difficult to provide a basic, low-cost health-benefits package.

"Before the state of Wisconsin mandated that mental-health care be covered, there were only 70 mental-health clinics in the state; now there are 400," says Carolyn Miller, an NFIB lobbyist. She contends that similar mandates have driven up insurance costs 20% in Maryland and 30% in California.

The insurance-industry association also strongly disagrees with the proposed community rating, which "doesn't save one dollar," argues James Dorsch, HIAA's Washington counsel. "It just makes healthy businesses subsidize unhealthy ones and gives each employer less incentive to keep his workers healthy." Mr. Dorsch says the HIAA is working on a proposal to establish a privately funded reinsurance mechanism to help cover small groups that can't get insurance without excluding certain employees.

The complexities of the insurance problem make the outcome difficult to predict. But to Ms. Allen, the employee whose back problem triggered a huge insurance-rate increase, the issue was simple. "What good is having health insurance," she asked, "when it's so expensive that it becomes impossible to keep after only one major claim?

The Belgian consumer price index rose a provisional 0.1% in October from the previous month and was up 3.64% from October 1988, the Ministry of Economic Affairs said.

The index, which uses a base of 1981 as 100, was calculated at 140.91 points in October, from 140.74 in September.

Annual inflation rose to 3.64% in October from 3.55% in September.

Belgium's inflation has been rising steadily for the past year, but the ministry said the latest rise is slower than gains in September and August.

Nashua Corp., rumored a potential takeover target for six months, said that a Dutch company has sought U.S. approval to buy up to 25% of Nashua's shares.

Nashua immediately responded by strengthening a poison-pill plan and saying it will buy back up to one million of its shares, or 10.4% of the 9.6 million outstanding.

Nashua, whose major business is selling copiers, facsimile machines and related supplies, said Reiss & Co. B.V. of the Netherlands filed a request with the Federal Trade Commission under the Hart-Scott-Rodino Act for permission to buy more than $15 million of Nashua's stock but less than 25%.

Previously, an affiliate of Unicorp Canada disclosed a stake of less than 5% in Nashua, according to Daniel M. Junius, Nashua's treasurer.

Nashua's stock has fluctuated sharply on takeover speculation, rising to a high for the year of $42.875 a share in June from $29.75 in March. But the company has had weak results so far this year, with earnings declining 43% to $13.7 million, or $1.43 a share, on a 4% decline in revenue to $713.5 million through the first nine months of the year.

Its stock has slumped recently, closing unchanged Friday at $29 a share in composite trading on the New York Stock Exchange; at that price, the company has a market value of about $278.4 million. Nashua announced the Reiss request after the market closed.

Mr. Junius said Nashua's "intention is to remain an independent public company." The company said it amended its shareholder rights plan by reducing to 10% from 20% the level of ownership by an outsider that would trigger the issuance to other holders of rights to buy additional shares of Nashua common at half price.

In addition, the company's board authorized the purchase of up to an additional one million shares. Under a program approved by the company in 1987 that didn't specify a share amount, Nashua had purchased 481,000 shares through Sept. 29.

Alex Henderson, an analyst at Prudential-Bache Securities, said that while Nashua's performance this year has been "atrocious," the company nonetheless is attractive as a "classic breakup candidate because there's no similarity between its {four} businesses." He estimated the breakup value at $55 a share. In addition to selling Japanese-made photocopiers and facsimile machines in Europe and copier supplies in the U.S., Nashua has three other major businesses: labels and tapes, data storage disks for computers and mail-order photofinishing.

The closely held supermarket chain named Frank Nicastro vice president and treasurer. The 47-year-old Mr. Nicastro joins Grand Union from Singer Co., where he was treasurer.

The current account deficit on France's balance of payments narrowed to 1.48 billion French francs ($236.8 million) in August from a revised 2.1 billion francs in July, the Finance Ministry said.

Previously, the July figure was estimated at a deficit of 613 million francs.

Seasonally adjusted figures for August weren't available because of a recent strike that has disrupted the ministry's data collection.

Weisfield's Inc. said it is in preliminary discussions regarding the possible sale of the company.

A spokesman for the retail jeweler said the company would provide more details today and that it expects to reach a definitive agreement by the end of the week.

In over-the-counter trading Friday, Weisfield's gained $9.50 to $39. At that price, the company has an indicated value of $42.9 million. Weisfield's had about 1.1 million shares outstanding as of July 31.

The stock gained $2.75 Thursday to close at a then-52 week high.

In the aftermath of the Beijing massacre on June 4, economists advanced wildly divergent views on how Hong Kong would be affected.

Among the most upbeat was BT Brokerage (Asia) Ltd. In a June 5 reaction, the Bankers Trust Co. unit proclaimed the economy "shockproof."

Others were more cautious. In a July analysis titled "From Euphoria to Despair," W.I. Carr (Far East) Ltd., another securities firm, said that eroding confidence might undermine future economic development.

Today, with business activity in Hong Kong staggering along at an uneven pace, the economy itself seems locked in a struggle between hope and fear.

Manufacturers have survived the turmoil in China largely unscathed. Signs of revival seem evident in Hong Kong's hard-hit hotel sector. But in the stock and real-estate markets, activity remains spotty even though prices have regained much of their lost ground. Waning demand reported by importers, retailers and even fancy restaurants all reinforce a profile of a community that is sharply tightening its belt.

As many economists and businessmen see it, those incongruities underscore a paradox that seems likely to bedevil the economy throughout the 1990s. That paradox is Hong Kong's economically rewarding yet politically perilous relationship with China.

As a model of capitalist efficiency on southern China's doorstep, Hong Kong's prospects look good. China's land and labor offer inexpensive alternatives to local industry. China-bound freight streams through the territory's port. In the decade since the communist nation emerged from isolation, its burgeoning trade with the West has lifted Hong Kong's status as a regional business center. These benefits seem secure despite China's current economic and political troubles. But to Hong Kong, China isn't purely business. It is also the sovereign power that, come 1997, will take over this British colony. China's leaders have promised generous liberties for post-1997 Hong Kong. That promise sounds shaky now that those same leaders have fallen back on Marxist dogma and brute force to crush their nation's democracy movement.

Outflows of people and capital from Hong Kong have been growing since the sovereignty issue first arose in the early 1980s. A widely held assumption all along has been that, given its robust economy, Hong Kong will be able to attract sufficient foreign money and talent to comfortably offset the outflows. With interest in emigration and investment abroad soaring since June 4, that assumption no longer seems so safe.

Investment and emigration plans take time to come to fruition. Only four months have passed since the Beijing massacre, and few are prepared to predict its ultimate impact. The only consensus is that more money and people may leave Hong Kong than had been thought likely. This expected blow has cast a pall over the economy's prospects. The question, as many people see it, is how long such uncertainty will last.

Maureen Fraser, an economist with W.I. Carr, a subsidiary of France's Banque Indosuez, believes that the territory may not be able to regain its momentum until some time after 1997. It may experience an upswing or two in between. But with local investors shaken by China's political and economic turmoil, she says, a genuine recovery may not arrive until Hong Kong can prove itself secure under Chinese sovereignty.

"Investors have to accept the possibility of a significant slowdown in economic activity in the runup to 1997," she says. "Over the next few years, I would advise caution."

In a soon-to-be published book on the territory, a political economist, Miron Mushkat, has derived three future scenarios from interviews with 41 Hong Kong government officials and businessmen. Nearly half of them argue that Hong Kong's uneasy relationship with China will constrain -- though not inhibit -- long-term economic growth. The rest are split roughly between optimists who expect Hong Kong to hum along as before and pessimists who foresee irreparable chaos.

The interviews took place two years ago. Since the China crisis erupted, Mr. Mushkat says, the scenario as depicted by the middle-of-the-road group bears a remarkable resemblance to the difficulties Hong Kong currently faces. The consensus of this group, which he dubs "realists," is that the local economy will grow through the 1990s at annual rates averaging between 3% and 5%.

Such a pace of growth, though respectable for mature industrialized economies, would be unusually slow for Hong Kong. Only twice since the 1960s has annual gross domestic product growth here fallen below 5% for two or more consecutive years. The first instance occurred in 1967-68, when China's Cultural Revolution triggered bloody street rioting in the colony. The other came in 1974-75 from the combined shock of world recession and a severe local stock market crash. During the past 10 years, Hong Kong's economic growth has averaged 8.3% annually. Given Hong Kong's record, Mr. Mushkat's "realists" might have sounded unduly conservative when the interviews took place two years ago. Under the current circumstances, he says, their scenario no longer seems unrealistic.

"The city could lose some of its entrepreneurial flavor. It could lose some of its dynamism," says Mr. Mushkat, a director of Baring Securities (Hong Kong) Ltd., a unit of Britain's Barings PLC. " It doesn't have to be a disaster. It just means that Hong Kong would become a less exciting place."

Going by official forecasts of GDP, which measures the colony's output of goods and services, minus foreign income, Mr. Mushkat's "realists" seem relatively close to the mark. After taking into account the fallout from the China crisis, the government has projected 1989 GDP growth of 5%. The updated forecast, published Aug. 25, compares with an earlier forecast of 6% published March 1 and a 7.4% rate achieved in

Sir Piers Jacobs, Hong Kong's financial secretary, says a further downward revision may be justified unless the economy stages a more convincing rally. "We aren't looking at anything like a doomsday scenario," he says. "But clearly we're entering a difficult period."

Many factors besides a dread of 1997 will have a bearing on Hong Kong's economy. One concerns Japanese investors. Barely visible on Hong Kong's property scene in 1985, by last year Japan had become the top foreign investor, spending $602 million. The market has grown relatively quiet since the China crisis. But if the Japanese return in force, their financial might could compensate to some extent for local investors' waning commitment.

Another -- and critical -- factor is the U.S., Hong Kong's biggest export market. Even before the China crisis, weak U.S. demand was slowing local economic growth. Conversely, strong consumer spending in the U.S. two years ago helped propel the local economy at more than twice its current rate.

Indeed, a few economists maintain that global forces will continue to govern Hong Kong's economic rhythm. Once external conditions, such as U.S. demand, swing in the territory's favor, they argue, local businessmen will probably overcome their 1997 worries and continue doing business as usual.

But economic arguments, however solid, won't necessarily impress Hong Kong's 5.7 million people. Many are refugees, having fled China's unending cycles of political repression and poverty since the Communist Party took power in 1949. As a result, many of those now planning to leave Hong Kong can't easily be swayed by momentary improvements in the colony's political and economic climate.

Emigration applications soared in 1985, when Britain and China ratified their accord on Hong Kong's future. In 1987, Hong Kong's most prosperous year for a decade, 30,000 left, up 58% from the previous year. Last year, 45,000 went. The government predicts that annual outflows will level off over the next few years at as much as 60,000 -- a projection that is widely regarded as unrealistically low. A large number of those leaving are managers and professionals. While no one professes to know the exact cost of such a "brain drain" to the economy, hardly anyone doubts that it poses a threat.

"When the economy loses a big portion of its work force that also happens to include its most productive members, economic growth is bound to be affected," says Anthong Wong, an economist with Hang Seng Bank.

While Wall Street is retreating from computer-driven program trading, big institutional investors are likely to continue these strategies at full blast, further roiling the stock market, trading executives say.

Bowing to a mounting public outcry, three more major securities firms -- Bear, Stearns & Co. Inc., Morgan Stanley & Co. and Oppenheimer & Co. -- announced Friday they would suspend stock-index arbitrage trading for their own accounts.

PaineWebber Group Inc. announced a pullback on Thursday from stock-index arbitrage, a controversial program-trading strategy blamed by many investors for encouraging big stock-market swings.

Though the trading halts are offered as a sign of concern about recent stock market volatility, most Wall Street firms remain open to handle program trading for customers. Trading executives privately say that huge stock-index funds, which dwarf Wall Street firms in terms of the size of their program trades, will continue to launch big programs through the stock market.

Wells Fargo Investment Advisers, Bankers Trust Co. and Mellon Capital Management are among the top stock-index arbitrage clients of Wall Street, trading executives say. These huge stock-index funds build portfolios that match the S&P 500 stock index or other stock indexes, and frequently swap between stocks and futures to capture profits. "They will do it every chance they get," said one program-trading executive.

Consequently, abrupt swings in the stock market are not likely to disappear anytime soon, they say. In fact, without Wall Street firms trading for their own accounts, the stock-index arbitrage trading opportunities for the big funds may be all the more abundant. "More customers may come to us now," said James Cayne, president of Bear Stearns Cos.

Executives who manage these funds see the current debate over program trading as a repeat of the concern expressed after the 1987 crash. They noted that studies completed after the 1987 crash exonerated program trading as a source of volatility. "The issues that are (now) being raised, in classic anti-intellectual fashion, fly in the face of a number of post-crash studies," said Fred Grauer, chairman of Wells Fargo Investment Advisers.

A Bankers Trust spokesman said that the company's investment arm uses stock-index arbitrage to enhance investors' returns. Officials at Mellon Capital were unavailable for comment.

Stock-index funds have grown in popularity over the past decade as pension funds and other institutional investors have sought a low-cost way to match the performance of the stock market as a whole. Many money managers who trade stock actively have trouble consistently matching the S&P-500's returns.

Some stock-index funds are huge. Wells Fargo Investment Advisers, for example, managed $25 billion in stock investments tracking the S&P 500 at the end of June, according to Standard & Poor's Corp. Mr. Grauer said $2 billion of that is used in active index arbitrage.

Stock-index funds frequently use the futures markets as a hedging tool, but that is a far less aggressive strategy than stock-index arbitrage, in which traders buy and sell big blocks of stocks with offsetting trades in stock-index futures to profit from price differences.

The 190-point plunge in the stock market Oct. 13 has heightened concerns about volatility. And while signs of an economic slowdown, softer corporate earnings and troubles with takeover financing all have contributed to the stock market's recent weakness, many investors rushed to blame program trading for aggravating market swings.

The Wall Street firms' pullback followed their recent blacklisting by several institutional investors. Last Tuesday, Kemper Corp. 's Kemper Financial Services Inc. unit said it would no longer trade with firms committed to stock-index arbitrage, including the three that later suspended stock-index arbitrage trading on Friday. Phoenix Mutual Life Insurance Co. and Founders Asset Management Inc. also cut off brokerage firms that engage in program trading.

Though it is still doing stock-index arbitrage trades for customers, Morgan Stanley's trading halt for its own account is likely to shake up firms such as Kidder, Peabody & Co. that still do such trades for their own account. Morgan Stanley has consistently been one of the top stock-index arbitrage traders in recent months.

Indeed, Morgan Stanley's president, Richard B. Fisher, said the firm is putting up money to form a group of regulators, investors and investment banks to find out if stock-index arbitrage artificially induces stock-market volatility.

"We have to clear up these issues and find out what is present that is creating artificial volatility," Mr. Fisher said. "There is no question that investor confidence (in the stock market) is critical."

Joining the call for some kind of study or regulatory action, Merrill Lynch & Co. recommended program-trading reforms late Friday, including higher margins on stock-index futures and greater regulatory coordination. Separately, Mr. Cayne of Bear Stearns said his firm is working with regulators to balance margin requirements to "enhance stabilization." Margin rules determine the minimum amount of cash an investor must put up when buying a security. Current rules permit investors to put up less cash for futures than for stocks.

Some observers say that different rules governing stock and futures markets are partly responsible for volatility. These rules, they say, permit faster and cheaper trading in futures than in stocks, which frequently knocks the two markets out of line.

Stock-index arbitrage, because it sells the more "expensive" market and buys the "cheaper" one, attempts to reestablish the link between the stock and futures markets, and the adjustments are often abrupt. But unequal trading rules allow the futures market to trade differently from stocks, which invites frequent bouts of stock-index arbitrage in the first place.

"There has to be better coordination on a regulatory basis," said Christopher Pedersen, director of trading at Twenty-First Securities Corp. "One agency should have the authority over all equity products.

Like so many trends in the entertainment industry, the current spate of rape dramas on television seems to represent a confluence of high-mindedness and self-interest. The former comes from the latest wave of political activism in Hollywood, especially around feminist issues such as abortion. The latter comes from the perception, on the part of many people in network TV, that their only hope of keeping viewers from defecting to cable is to fill the airwaves with an increasingly raw sensationalism. Put these together, and you get programs about rape.

The best of the crop was last week's season premiere of "In the Heat of the Night," the NBC series based on a 1967 feature film about a black Philadelphia police detective in a small Southern town. In the series, Virgil Tibbs (Howard Rollins) and his wife, Althea (Anne-Marie Johnson) have settled in Sparta, Miss. Because the show has acquired a sense of place by being filmed on location in Georgia, this episode -- in which Althea gets raped by an arrogant white schoolteacher -- does a decent job of tracing the social repercussions of the crime.

Obviously, it's harder to establish a sense of place in a one-shot TV movie. But tonight's offering, "Settle the Score" (9-11 p.m. EST, on NBC), doesn't even try. This tale of a Chicago policewoman returning home to find the man who raped her 20 years earlier is supposed to be set in the Ozarks. But it's more like an illustration of what Ben Stein describes in his study of social attitudes in the TV industry: "Fear of violence and animosity . . . because of race or religion, fear and lack of comprehension about the politics of small-town people . . . produce a powerful wave of dislike of small towns in the minds of TV writers and producers."

The writer and executive producer of "Settle the Score," Steve Sohmer, is a graduate of Yale who participated in a PBS documentary, aired this summer, in which six members of the Yale class of 1963 ruminated about their lives since graduation. At one point in the documentary, Mr. Sohmer, who is Jewish, says he felt rejected by many of the Protestants and Southerners he met at Yale. He quotes one student saying, "You're just the kind of Jewboy we Southerners can't stand. " Mr. Sohmer confesses that it was partly in response to such attitudes that he is now "a dweller on one of the two islands off the coast of America." But is exile in Hollywood enough? Not to judge by "Settle the Score," in which Mr. Sohmer seems to be settling a score of his own. Of all the unflattering portraits of small-town America I've seen on TV, this film is the most gratuitously nasty. The sole sympathetic character is the prodigal daughter Kate (Jaclyn Smith), and she is tolerable only by virtue of having nothing in common with her kinfolk, a truly benighted pack of Southern Protestants whose grim existence consists mostly of growing peaches and repressing sex.

I mean, these folks are so uptight that they blame pretty Kate for the fact that when she was a teen-ager, someone tied her hands behind her back, thrust her head into a gunny sack, brutally raped and beat her, and then left her to die in a cold-storage room. Her Pa (Howard Duff) is the kind of guy who, while saying grace at the supper table, pauses at the word "sin" and glares at the daughter he hasn't seen for two decades, because he knows in his heart that she enjoyed what happened in the cold-storage room, and has been indulging the same taste ever since in the fleshpots of Chicago.

People like Pa do exist, of course. But in Mr. Sohmer's Ozarks, he is but the tip of the patriarchal iceberg. Every man Kate encounters is either sniggeringly puritanical, viciously patronizing, revoltingly lecherous, or all three. Add the fact that any one of them, including Pa, could be her attacker, and you have a setting that doesn't resemble small-town America, or even Hollywood's nightmare of small-town America, so much as a paranoid feminist dystopia like Margaret Atwood's "The Handmaid's Tale," itself soon to be (you guessed it) a Hollywood movie.

There are two exceptions: Josh (Jeffrey DeMunn), the local doctor who has always loved Kate; and Lincoln (Richard Masur), Kate's simple-minded but affectionate brother. Josh makes clumsy passes at Kate when she's seething with anger and fear, but we know from the outset that he's not a member of the evil patriarchy. How could he be? He's the director of the local Planned Parenthood chapter. As for Lincoln, if you can't guess why he's so sweet to his sister when everybody else hates her, then I'm not going to tell you.

As for the women, they're pathetic. Kate's Ma (Louise Latham) is a moral coward. Her sister-in-law (Amy Wright) is a sniveling prude afraid that Kate will seduce all the married men in town, including a particularly loathsome fellow named Tucker, whose idea of fun is to leave his wife at home tending to her bruises and cigarette burns, while he bullies Kate into a dance that consists of drooling on her while trying to break her ribs. At the very least, it would appear that Sis is a poor judge of masculine charm.

Yet even these insulting caricatures are not as bad as the moral hypocrisy at the heart of "Settle the Score." In the aforementioned episode of "In the Heat of the Night," we saw Althea being attacked, but we weren't invited to enjoy the spectacle. In Mr. Sohmer's film, by contrast, we are urged to share the perverse excitement of the rapist creeping up on his victim, as the camera ogles Kate in various stages of undress and lingers on the sight of her trussed-up body during frequent flashbacks to the rape.

At this point, the truce between feminism and sensationalism gets mighty uneasy. Take the scene in which Kate stands naked by a lighted window, whispering to her hidden assailant, "Look all you want. Starting tomorrow, I'm stalking you. " Or the one in which she and Josh are stranded in the city, and, after insisting on separate motel rooms, she knocks on his door to pour out her feelings about the rape -- wearing nothing but a mini-slip and a push-up bra. Surely the question is obvious. With friends like Mr. Sohmer, do the feminists of Hollywood need enemies?

Crossland Savings Bank's stock plummeted after management recommended a suspension of dividend payments on both its common and preferred stock because Crossland may not meet the new government capital criteria effective Dec. 7.

In composite trading on the New York Stock Exchange Friday, Crossland closed at $5.25, down $1.875, a 26% decline.

A spokesman said the savings bank may not qualify for the capital requirements because, under the proposed guidelines, its $380 million of preferred stock doesn't meet the "core capital" criteria outlined under the new Financial Institutions Reform, Recovery and Enforcement Act of 1989. He added that final guidelines to be published in early November will determine whether the bank is in compliance.

Crossland said it retained three investment bankers to assist it in developing and implementing a financial restructuring plan. It wouldn't identify the bankers.

Additionally, Crossland reported a third-quarter loss of $175.5 million, or $13.44 a share, compared with net income of $27.1 million, or $1.16 a share, a year ago. A major factor in the third-quarter loss was the write-down of $143.6 million of goodwill.

The spokesman said that the proposed guidelines caused Crossland to revise its business objectives and, consequently, to write down the asset value of some previous acquisitions. Crossland recorded an additional $20 million in loan loss reserves in the third quarter.

Net interest income for the third quarter declined to $35.6 million from $70.1 million a year ago. However, non-interest income rose to $23.5 million from $22 million. Third-quarter loan originations dropped sharply to $663 million from $1 billion a year ago.

Standard & Poor's Corp. lowered the rating on Crossland's preferred stock to double-C from single-B-minus and placed it on CreditWatch for possible further downgrade. It also placed on CreditWatch for possible downgrade other securities, including the double-B-minus/B rating of Crossland's certificates of deposit and the single-B rating of its senior subordinated capital notes. About $518 million of debt is affected.

The envelope arrives in the mail. Open it and two soulful eyes on a boy's brown face peer out from the page, pleadingly. Does the tyke have a good mind about to be wasted? Is he a victim of Gramm-Rudman cuts? No, but he's endangered all the same: His new sitcom on ABC needs a following to stay on the air.

ABC hasn't had much luck with shows featuring blacks in recent years, and the producers of one new arrival are a bit desperate. "Homeroom," a show about a black ad executive who gives up the boardroom for a fourth-grade classroom, is flunking the ratings test. So producers Alyce and Topper Carew spun their Rolodexes and gathered names of black opinion makers to mount a direct-mail campaign. By wooing a core black audience they figure they might keep the show alive at least until the spring semester.

Using direct mail for a TV show is like fishing for whale with a breaded hook. It just isn't done. But employing this kind of gut-wrenching plea to black consciousness makes it even more unusual. Still, Mr. Carew thinks he can reach a good chunk of the three million-plus black homes he needs by mailing to the almost 10,000 blacks who form what he calls "the grapevine."

"The grapevine isn't organized, but you and I know it exists," says Mr. Carew, referring to the often uncannily small world of black professionals and community leaders.

"This is a very personal, ethnic style," Mr. Carew says. " I want people in the barber shops and the beauty shops and standing in line at the rib joints to be talking about the show. I want white America to talk about it, too, but I'm convinced that the grapevine is what's happening."

ABC says it is aware of the producers' action, but the mailing was sent without the network's blessing. The letter, in fact, takes a jab at ABC for being a laggard in black programming.

Meanwhile, as the Sunday evening show struggles to stay afloat against the tough competition of "Murder, She Wrote," the grapevine idea is threatening to turn into a weed: The tactic apparently has inspired sample viewings, but accolades are slow in coming.

Doug Alligood, a black advertising executive who tracks black viewing patterns, gives the Carews an "A" for marketing moxie, but isn't alone in his lukewarm reaction. Some shows just don't impress, he says, and this is one of them.

TransCanada PipeLines Ltd. said it plans to shift its headquarters to Calgary, Alberta, from Toronto next year to cut costs and be closer to the upstream natural-gas industry.

Gerald Maier, president and chief executive officer of the natural-gas pipeline and marketing concern, said the company's future growth is "increasingly linked" to decisions made by Calgary-based gas producers.

"Since deregulation of the market in 1985, producers have become much more intensely involved in both transportation and marketing," Mr. Maier said. " It's a matter of being close to those suppliers; many of those companies don't know us as well as they should."

TransCanada transports all gas that moves eastward from Alberta. That includes all the gas consumed in Ontario and Quebec, along with the bulk of Canadian gas exports to the

Walter Litvinchuk, vice president of Pan-Alberta Gas Ltd., a Calgary-based gas marketing concern, said the industry will welcome the move.

"Having more than a token presence here should enhance communications and business relationships," Mr. Litvinchuk said. " Since the cost of transporting gas is so important to producers' ability to sell it, it helps to have input and access to transportation companies."

The move, which could cost TransCanada as much as 50 million Canadian dollars (US$42.5 million) in relocation and severance payments, should be complete by next summer, Mr. Maier said. All 700 Toronto-based employees will be offered positions in Calgary, the company said.

The company will save between C$4 million and C$6 million annually in office expenses and other administrative costs by moving to Calgary, Mr. Maier added.

Part of both the costs and the savings could be passed on to shippers on the TransCanada pipeline through tolls, which are based on the value of the pipeline system and the cost of operating it.

TransCanada is 49.1% owned by Montreal-based holding company BCE Inc.

Since its founding in 1818, Brooks Brothers, the standard-bearer of the Ivy League look, has eschewed flashy sales promotions and fashion trends -- the rules that most retailers live by. But with sales growth sluggish and other men's stores putting on the heat, the venerable retailer can no longer afford such a smug attitude.

So two weeks ago, thousands of Brooks Brothers charge customers -- customers conditioned to wait for twice-yearly clearance sales -- got a surprise: an invitation to come in and buy any one item for 25% off. During the four-day promotion, shoppers at the Short Hills, N.J., store lined up to pay for big-ticket items like coats and suits.

That's not all. Departing from its newspaper ads featuring prim sketches of a suit or a coat, Brooks Brothers is marketing an updated image in a new campaign that carries the slogan, "The Surprise of Brooks Brothers." One color photo displays a rainbow of dress shirts tied in a knot; another picture shows neckties with bold designs. The message is loud and clear: This is not your father's Brooks Brothers.

As part of its national ad pitch, Brooks Brothers will show less preppy women's clothes, moving away from its floppy-tie business stereotype. One ad shows a bright red jacket paired with a black leather skirt. And the ad copy is cheeky: "How can you be a Wall Street hot shot without at least one Brooks Brothers suit in your portfolio?"

Brooks Brothers hopes that shaking its time-honored traditions will attract more young men and more women and change consumer perceptions about its range of merchandise. "We have men who only buy their shirts and underwear here or younger customers who only buy their {job} interview suit here," says William Roberti, chairman and chief executive officer of Brooks Brothers. " We want them to buy more of their wardrobe here." Industry watchers agree that Brooks Brothers is long overdue in updating its buttoned-down image, which has stunted its growth. When acquired in May 1988 by British retailer Marks & Spencer PLC, Brooks Brothers' annual operating profit was about $41.8 million on sales of $290.1 million. Mr. Roberti concedes that since the $750 million takeover, "sales growth hasn't been dramatic." For the 11 months ended March 31, operating profit at the 52-store chain totaled $40.5 million on sales of $286.8 million.

As Brooks Brothers jumps into the fashion fray, it will be playing catch up. Many clothiers, especially Ralph Lauren, have cashed in on the recent popularity of updated Ivy League and English styles. In keeping with men's broader fashion scope today, businessmen are dabbling in English and Italian suits that are conservative but not stodgy. The rigid Ivy League customer, Brooks Brothers' bread and butter, meanwhile is becoming extinct. Thus, Brooks Brothers has lost customers to stores that offer more variety such as Paul Stuart, Barneys New York and Louis, Boston.

"Brooks Brothers no longer has a lock on the {Ivy League} customer who is status-conscious about his clothes," says Charlie Davidson, president of the Andover Shop, a traditional men's store in Cambridge, Mass.

By making a break from tradition, Brooks Brothers is seeking a delicate balance. If it promotes fashion too much, the shop risks alienating its old-line customers; by emphasizing "value," it risks watering down its high-minded mystique.

Fashion industry consultants also question whether the company can make significant strides in its women's business, given that its customer base is less established and that conservative business dress for women is on the decline. Brooks Brothers' aim is for 20% of total sales to come from the women's department, up from the current 12%.

"Everybody forgets that there are fashion cycles in classic merchandise," observes Carol Farmer, a retail consultant. "For women, dressing for success in a real structured way is over."

Despite these challenges, Marks & Spencer sees big potential in Brooks Brothers, noting the widely recognized name and global presence. Marks & Spencer plans to open roughly 18 more U.S. stores in the next five years. Brooks Brothers says business is robust at its 30 outlets in Japan and two shops in Hong Kong. Marks & Spencer is also considering opening stores across Europe sometime in the future.

Alan Smith, president of Marks & Spencer North America and Far East, says that Brooks Brothers' focus is to boost sales by broadening its merchandise assortment while keeping its "traditional emphasis." The British parent is also streamlining: Brooks Brothers, which continues to make almost all of its merchandise, recently shut one of its two shirt plants in Paterson, N.J., and has closed boys' departments in all but 20 stores.

Brooks Brothers is also remodeling its stores. Wednesday, it will unveil a $7 million refurbishing at its flagship store on Madison Avenue. With newly installed escalators, the store retains its signature wood-and-brass look but is less intimidating. More shirts and sweaters will be laid out on tables, instead of sitting behind glass cases, so that customers can "walk up and touch them," Mr. Roberti says.

Because the biggest growth in menswear is in casual sportswear, Brooks Brothers is chasing more of that business. The entire second floor of its Madison Avenue store is now casual sportswear featuring items such as ski sweaters, leather backpacks and a $42 wool baseball hat with the store's crest.

The centerpiece of the overhaul, according to Mr. Roberti, is the men's tailored clothing department, where Brooks Brothers has added new suit styles and fabrics. "The perception out there is that we are very conservative and we only sell one type of suit," Mr. Roberti says, referring to Brooks Brothers' signature three-button "sack suit," with a center-vented jacket and boxy fit.

But it now offers more two-button versions and suits with a tapered fit. It also plans to add suits cut for athletic men with broader upper bodies. Next spring, nearly 30% of its suits will have pleated pants, compared with virtually none a couple of years ago.

Says Mr. Roberti: "We want to turn the customer on.

Ferro Corp. said it will buy back as many as one million common shares. The maker of chemical and industrial materials didn't say how much it would pay or when it would make the transactions.

Ferro also said it would cancel the unused portion of a 1987 buy-back plan for administrative reasons. The plan calls for the company to buy back 2,250,000 shares, which reflects a 3-for-2 stock split this year. So far the company had bought back 1.6 million shares.

In New York Stock Exchange composite trading Friday, Ferro closed at $25.25, down 50 cents.

Arthur Price abruptly quit as president and chief executive officer of MTM Entertainment Inc., a Los Angeles production company that has fallen on hard times.

Mr. Price, 61 years old, also stepped down from the board of TVS Entertainment PLC, the British TV company that last year bought MTM, producer of such TV programs as "Hill Street Blues" and "The Mary Tyler Moore Show."

A TVS spokesman said he didn't know Mr. Price's plans. James Gatward, TVS's chief executive, said in a statement that he will "assume overall responsibility" for MTM's operations until a successor is named.

Industry analysts speculated that Mr. Price's sudden departure may have stemmed from conflicts with Mr. Gatward.

Mr. Price "wanted to run the MTM business" and may have regretted selling the company to TVS, suggested Charles Denton, managing director of Zenith Productions, a subsidiary of Carlton Communications PLC, London.

Mr. Gatward declined to comment, and Mr. Price couldn't be reached on Friday. In the TVS statement, Mr. Price said "leaving MTM was a very difficult decision," but added that "it is now time for a change. . . ."

The $320 million purchase of MTM represented an audacious international move for TVS, which then was about half the U.S. concern's size. At the time, Mr. Gatward said his friendship with Mr. Price had smoothed the way for its link with the small British company. But TVS stunned industry analysts last month by disclosing that it expected MTM to post an operating loss for this year.

In that announcement, TVS also said it was trimming production finance and hiring a new U.S. sales manager. Mr. Gatward has spent a lot of time since late September at MTM's headquarters; he eliminated three departments and fired six executives, according to the TVS spokesman. Further staff cuts are likely, the spokesman indicated. "Obviously, we are looking at making economies across the board."

TVS blames difficulties in peddling reruns of MTM shows to U.S. broadcasters for the problems at MTM. The market for reruns sold to local U.S. broadcasters has been weak for the past three or four seasons.

Mr. Price co-founded MTM in 1969 with U.S. actress Mary Tyler Moore and Grant Tinker, her then-husband. Mr. Tinker later left to become chairman of National Broadcasting Co. The TVS spokesman said Mr. Price still holds about an 8% TVS stake, acquired as part of the MTM acquisition. In late trading on London's Stock Exchange Friday, TVS shares rose four pence to 195 pence a share.

Two rival bidders for Connaught BioSciences extended their offers to acquire the Toronto-based vaccine manufacturer Friday.

Institut Merieux S.A., which offered 942 million Canadian dollars (US$801.2 million), or C$37 a share for Connaught, said it would extend its bid, due to expire last Thursday, to Nov. 6.

A C$30-a-share bid by Ciba-Geigy Ltd., a pharmaceutical company based in Basel, Switzerland, and California-based Chiron Corp., a bioresearch concern, was extended to Nov. 16. It had been due to expire Friday evening.

Merieux previously said it would ensure its bid remained open pending a final decision by Canadian regulators on whether to approve the takeover. Merieux, a vaccine and bioresearch firm based in Lyon, France, is controlled 50.1% by state-owned Rhone Poulenc S.A.

The Canadian government previously said Merieux's bid didn't offer enough "net benefit" to Canada to be approved, and gave Merieux an until mid-November to submit additional information.

Merieux officials said last week that they are "highly confident" the offer will be approved once it submits details of its proposed investments to federal regulators.

Both offers are conditional on regulatory approvals and enough shares being tendered to give the bidders a majority of Connaught's shares outstanding.

Institut Merieux, which already holds a 12.5% stake in Connaught, said that at the close of business Thursday, 5,745,188 shares of Connaught and C$44.3 million face amount of debentures, convertible into 1,826,596 common shares, had been tendered to its offer. At the close of business Thursday, Ciba-Geigy and Chiron said 11,580 common shares had been tendered to their offer. At last report, Connaught had 21.8 million shares outstanding.

Separately, the Ontario Supreme Court said it will postpone indefinitely a ruling on the lawsuit launched by the University of Toronto against Connaught in connection with the Merieux bid.

In a statement prepared by lawyers for the university and Connaught, the parties said they agreed that as a result of reaching a C415 million research accord, "It is unnecessary that there be a judgment on the merits {of the case} at this time."

Lawyers for the two sides weren't immediately available for comment.

The university had sought an injunction blocking Connaught's board from recommending or supporting an offer for the company by Merieux.

Conseco Inc. said it is calling for the redemption on Dec. 7 of all the 800,000 remaining shares outstanding of its $1.875 Series A convertible preferred stock at $26.805 a share.

The insurance concern said all conversion rights on the stock will terminate on Nov. 30. Until then, Conseco said the stock remains convertible into common stock at the rate of 1.439 shares of common stock for each share of preferred stock, which is equivalent to a conversion price of $17.50 a common share. In New York Stock Exchange trading Friday, Conseco closed at $19.50, down 25 cents.

Centerior Energy Corp. said the Ohio Water Development Authority approved terms for two series of tax-exempt bonds to finance a water-pollution control and solid-waste disposal facilities.

The authority will issue a total of $446.5 million of pollution-control revenue bonds. Proceeds of the sale will go to Centerior's operating subsidiaries to finance the projects, located at a nuclear unit located near Cleveland.

The bonds will be issued for a term of 34 years at an interest rate of 8%. Goldman, Sachs & Co. is the underwriter.

General Motors Corp. 's GMC Truck division put a $750 cash incentive on its 1990 full-sized Jimmy and Suburban trucks.

The program, which runs through Jan. 4, also offers low-rate financing in lieu of the cash rebate.

After days of intense but fruitless negotiations, a federal judge last week threatened to convert William Herbert Hunt's Chapter 11 personal bankruptcy case into a Chapter 7 liquidation.

Judge Harold C. Abramson raised the possibility after talks to end a feud between two major creditors failed and all three reorganization plans in the case ran into roadblocks.

If the case is converted to Chapter 7, what remains of the oil tycoon's once-vast estate -- now believed to have a value of less than $125 million -- would be sold off quickly with most of the proceeds going to the Internal Revenue Service, whose claim for $300 million in back taxes has priority in the case. Hundreds of smaller creditors could get nothing, according to attorneys involved.

While admitting such a move would be "devastating" to most creditors, Judge Abramson told a courtroom filled with nearly two dozen attorneys that he was concerned about the toll mounting legal bills will take on Mr. Hunt's shrinking estate and about the fact that, following voting by creditors, none of the reorganization plans appeared to be viable in their present form.

"It would be a shame to have a Chapter 7 after all the progress in this case," said Judge Abramson. Under Chapter 11 of the Federal Bankruptcy Code, a company continues to operate under protection from creditors' lawsuits while it works out a plan to pay its debts. Under Chapter 7, the assets of a company are sold off to pay creditors.

Despite his reluctance to take the latter step, the judge indicated he would move quickly after hearing testimony later this week in the bitter dispute between Manufacturers Hanover Trust Co. and Minpeco S.A., a minerals concern owned by the Peruvian governmemt.

The Manufacturers Hanover Corp. unit, which is seeking repayment of a $36 million loan, has asked the court to give its claim priority over that of Minpeco, which won a $132 million judgment against Mr. Hunt, his brother Nelson Bunker Hunt and other defendants last year in a case stemming from their alleged attempts to corner the silver market in

While claiming that penalties, legal fees and interest have driven the value of its claim to more than $250 million, Minpeco has agreed to settle for an allowed claim of as much as $65.7 million. But even that is disputed by Manufacturers Hanover which, in alliance with the IRS, contends that Minpeco has already collected more than its actual damages from other defendants in the silver-conspiracy case.

Under prodding from Judge Abramson, a Minpeco executive flew in from Peru last week to talk directly with executives from Manufacturers Hanover on a settlement. Despite long private sessions in both New York and Dallas, the two sides ended the week "6,000 miles and many dollars apart," according to attorney Hugh Ray, who represents Manufacturers Hanover. Meanwhile, inside the courtroom, the judge said he would fine attorneys for the two creditors $50 every time they referred to each other with terms such as "liar" or "slime."

All three major creditors -- the IRS, Minpeco and Manufacturers Hanover -- voted against and effectively doomed a reorganization plan proposed by Mr. Hunt. A reorganization plan proposed jointly by the IRS and Manufacturers Hanover was stalled by a negative vote from Minpeco. The mineral concern's own reorganization plan met a similar fate after opposition from the IRS and Manufacturers Hanover. Neither plan is dead, however, and the judge could force creditors to accept some version of them after ruling on the Minpeco-Manufacturers Hanover dispute.

Meanwhile, settlement negotiations continue between Mr. Hunt and the IRS, which has already reached a tentative agreement with Nelson Bunker Hunt. The two sides have been far apart on how much Herbert Hunt will continue to owe the government after his assets are sold.

Stuart E. Eizenstat, a partner in the Washington law firm of Powell, Goldstein, Frazer & Murphy, was named a director of this utility holding company, increasing board membership to 14.

Pacific First Financial Corp. said it signed a non-binding letter of intent to acquire the construction lending unit of Old Stone Bank of California.

Terms haven't been finalized, but the transaction is expected to close by year end, Pacific First said.

Old Stone's construction lending portfolio includes about $250 million in real-estate loans outstanding. The unit has 30 employees in four California offices, the company said.

Pacific First owns Pacific First Federal Savings Banks and other financial services firms.

General Electric Co. 's rail-car leasing unit completed the $178.5 million purchase of similar businesses from Leucadia National Corp. and Brae Corp., 74%-owned by Leucadia, the sellers said.

The buyer was GE Capital Railcar Services, Chicago, a major owner of railway equipment and part of the GE Capital operations.

Leucadia, New York, estimated it had a pre-tax gain on the transaction of $57 million, including its part of Brae's gain. Because of tax-loss carry-forward, Leucadia said it expects to escape taxes on "a substantial portion of the gain."

The estimated gain for Brae is $15 million, including a tax credit of $7 million, the sellers said. "The credit for income taxes is a result of having provided deferred income taxes applicable to the sold assets at the higher income tax rates in effect in prior years," the sellers said.

Automatic Data Processing Inc. plans to redeem on Nov. 16 its $150 million of 6.5% convertible subordinated debentures due March 1, 2011.

The computing-services concern will pay $1,059.04 for each $1,000 face amount of debt. The conversion price for the debentures is $41.725 a share. In New York Stock Exchange composite trading Friday, Automatic Data closed at $46.50 a share, down $2.25.

If all the debt is converted to common, Automatic Data will issue about 3.6 million shares; last Monday, the company had nearly 73 million shares outstanding.

Automatic Data is redeeming the bonds because the after-tax cost of the interest on the bonds is higher than the dividend yield on the common, a spokesman said.

Dow Jones & Co. extended its tender offer of $18 a share, or about $576 million, for the 33% of Telerate Inc. that it doesn't already own until 5 p.m. EST, Nov. 6.

The offer, which Telerate's two independent directors have rejected as inadequate, previously had been scheduled to expire at midnight Friday. Dow Jones said it extended the offer to allow shareholders time to review a supplement to the Dow Jones tender offer circular that it mailed last Friday.

The supplement contains various information that has been filed with the Securities and Exchange Commission since Dow Jones launched the offer on Sept. 26, but it doesn't change the terms and conditions of the offer except to extend its expiration date.

In Delaware Chancery Court litigation, Telerate has criticized Dow Jones for not disclosing that Telerate's management expects the company's revenue to increase by 20% annually, while Dow Jones based its projections of Telerate's performance on a 12% revenue growth forecast. In the tender offer supplement, Dow Jones discloses the different growth forecasts but says it views the 20% growth rate "as a hoped-for goal" of Telerate's management "and not as a realistic basis on which to project the company's likely future performance."

Telerate shares fell 50 cents on Friday to close at $20 each in New York Stock Exchange composite trading. Dow Jones shares also fell 50 cents to close at $36.125 in Big Board composite trading.

Dow Jones has said it believes the $18-a-share price is fair to Telerate's minority shareholders. Late last week, representatives of Dow Jones and Telerate began negotiations about the terms of the offer, but those talks didn't result in any changes in the offer.

Telerate provides information about financial markets through an electronic network. Dow Jones, which owns 67% of Telerate, publishes The Wall Street Journal, Barron's magazine, community newspapers and operates financial news services and computer data bases.

Chamberlain Manufacturing Corp. won a $25.8 million Army contract for 155mm artillery shell casings.

Avondale Industries Inc. received a $13.5 million Navy contract for ship spare parts.

Air & Water Technologies Corp. completed the acquisition of Falcon Associates Inc., a Bristol, Pa., asbestos-abatement concern, for $25 million of stock.

Air & Water, which provides environmental services and systems, paid about 1.4 million of its shares for Falcon. In American Stock Exchange composite trading Friday, Air & Water closed unchanged at $17.50.

At July 31, Air & Water had nearly 10 million shares outstanding.

The Canadian pig herd totaled 10,674,500 at Oct. 1, down 3% from a year earlier, said Statistics Canada, a federal agency.

Sows for breeding and bred gilts totaled 1,070,000, down 2% from a year ago.

(Jacksonville, Fla.) -- Charles Bates, president, chief executive and chief operating officer will resign from these positions and the board effective Oct. 31.

Norman J. Harrison, chairman, will succeed him as chief executive. Roger L. Sutton, executive vice president, was appointed as the new president and chief operating officer. Kerry P. Charlet will become executive vice president, and retain his positions as chief financial officer and treasurer.

Upset over the use of what it says are its exclusive trademarks, Hells Angels Motorcycle Corp. is fighting back -- in court. Concord New Horizons Corp., creators of a 1988 movie called Nam Angels, used the gang's name and trademarks without authorization, the not-for-profit corporation says in a complaint filed in federal court.

Nam Angels depicts a group of the cycle gang's members on a mercenary mission to Viet Nam during the war years.

In addition to being broadcast on cable television, the movie also is being distributed on videocassettes, the suit alleges in seeking unspecified damages. Also named in the suit is Media Home Entertainment Inc. of Culver City, Calif., its parent, Heron Communications Inc., and Broadstar Television of Los Angeles, holders of the copyright on the movie.

A Concord spokeswoman called the suit "unfounded" but declined to comment further.

Besides being upset with the film's use of the Hells Angels name and logos, the Angels are angry with their depiction in the movie.

"There is absolutely no way our board or membership would have approved the portrayal of the Hells Angels in this movie," said George Christie, president of the club's Ventura chapter. "Portrayal of our members as disloyal to each other is totally contrary to the most important values of our organization -- loyalty and trust."

Nam Angels shows Angels fighting with each other and also depicts them as showing no remorse when a member is killed. Both of these actions aren't characteristic of real Hells Angels, Mr. Christie said.

Hells Angels was formed in 1948 and incorporated in 1966. In addition to 26 chapters in the U.S., there are 40 chapters in foreign countries.

Douglas H. Miller, self-employed in the oil and gas securities business, was named chairman of this oil and gas exploration company, filling a vacancy. Mr. Miller, who has been a Coda director, also was named chief executive officer, succeeding Ted Eubank, who remains president and chief operating officer.

Lawrence M. Gressette Jr., president, was elected to the additional posts of chairman and chief executive officer of this utility holding company, effective Feb. 1, 1990. The 57-year-old Mr. Gressette, who was also elected chairman and chief executive of all Scana subsidiaries, succeeds John A. Warren. Mr. Warren will remain on the company's board.

The American Stock Exchange said a seat was sold for $165,000, unchanged from the previous sale Oct. 13.

Seats on the Amex currently are quoted at $151,000 bid and $200,000 asked.

The world had a big yuk recently when the Soviets reported a rash of UFO landings, one of them bringing tall aliens who glowed in the dark to Voronezh. It is the opinion of Timothy Good, author of "Above Top Secret: The World UFO Cover-Up" (Quill/William Morrow, 592 pages, $12.95), that the world laughs too fast.

Here is a bible for UFO watchers, complete with pictures of people who say they've had personal relationships with aliens. One photo shows a woman sporting a scar she says was made by a laser beam (a low-caliber weapon, from the looks of the wound).

So far anyway, our alien visitors seem more intent on brightening our skies than pulverizing us. Mr. Good devotes much serious space to the events of Feb. 25, 1942, when American gunners spotted strange lights in the sky above Los Angeles. Air-raid sirens sounded the alarm at 2:25 a.m., summoning 12,000 air wardens to duty. Soon all hell broke loose.

Ground batteries, targeting an odd assortment of aircraft traveling at highly unusual speeds, opened up a furious fusillade. The sky filled with 12.8-pound shells, several of which fell back to Earth, destroying homes and buildings. When the smoke cleared, six people were dead (three from heart attacks), and everyone wondered what in the world they were shooting at.

Mr. Good, who documents these things as best he can, provides an official explanation in the form of a memorandum from Chief of Staff George C. Marshall to President Roosevelt: "1,430 pounds of ammunition," he wrote his commander in chief, were expended on "unidentified aircraft," flying at speeds as slow as 200 mph and elevations between 9,000 and 18,000 feet.

Well, thousands of Californians on the scene insisted the ammo had been uselessly aimed at a large, hardy UFO, but you will just have to make your own decision about such sightings. One thing's for sure: There have been a ton of them, and greater beings than the editors of the National Enquirer have shown interest. Gerald Ford, a fairly down-to-earth fellow, once sent a letter to the chairman of the Armed Services Committee recommending that "there be a committee investigation of the UFO phenomenon. I think we owe it to the American people to establish credibility regarding UFOs and to produce the greatest possible enlightenment on the subject."

Jimmy Carter went further in a 1976 campaign promise: "If I become president, I'll make every piece of information this country has about UFO sightings available to the public, and the scientists. I am convinced that UFOs exist because I have seen one. . . ."

But you know about campaign promises. It still doesn't look like governments are coughing up everything they know. Still, despite their efforts to convince the world that we are indeed alone, the visitors do seem to keep coming and, like the recent sightings, there's often a detail or two that suggests they may actually be a little on the dumb side.

For instance, witnesses in Voronezh say the pinheaded behemoths and their robot friend, after strolling around the city park, left behind some rocks. Now why, you have to ask yourself, would intelligent beings haul a bunch of rocks around the universe? Or land in Russia so often. In a 1961 incident, a Soviet mail plane disappeared off the radar screen just after radioing its position to ground control in Sverdlovsk. A search party soon found the unscathed aircraft in a forest clearing much too small to have allowed a conventional landing. What's more, the seven mail personnel aboard were missing.

Again, you have to ask the obvious question: Why would intelligent beings kidnap seven Soviet mailmen?

Speculation as to the nature of aliens will no doubt continue until we wake up one morning to find they've taken over "The Today Show," the way they overwhelm an entire town in Jack Finney's "Invasion of the Body Snatchers" (Fireside/Simon & Schuster, 216 pages, $8.95). Maybe some of our talk-show hosts and anchors have already been taken over? The point of this 1955 novel, which spawned two movies, is that the soulless pod people replicated by alien plants are virtually indistinguishable from human folks.

Another guy who thinks they're out there and closing fast is Whitley Strieber, whose new novel, "Majestic" (Putnam, 317 pages, $18.95), takes a look at a reported 1947 UFO crash near the Roswell Army Air Field in a New Mexico desert. Mr. Strieber knows a lot about aliens. He even had sex with one -- sort of, and not intentionally -- as readers learned in his "Communion" (a book recently described in the New York Times as a "nonfiction best seller").

The way Mr. Strieber tells it in his earnest prose, the intelligence officer who found the craft's strange debris was forced by the government to call the flower-inscribed scraps parts of a weather balloon. The apparent crash became top secret, and the alien creatures went away upset with the rude ways of human beings. We lost our chance to communicate with sweet-natured visitors "about four feet tall {who} looked as though they were made of puffed-up marshmallow."

Mr. Shiflett is an editorial writer for the Rocky Mountain News.

Trustcorp Inc. will become Society Bank & Trust when its merger is completed with Society Corp. of Cleveland, the bank said.

Society Corp., which is also a bank, agreed in June to buy Trustcorp for 12.4 million shares of stock with a market value of about $450 million. The transaction is expected to close around year end.

When the economy stumbled in the mid-1970s, Akzo NV fell out of bed.

Towering overcapacity in the synthetic fiber business, which accounted for half of the Dutch chemical company's sales, led to huge losses and left Akzo's survival in doubt. It wasn't until the early 1980s that Akzo nursed itself back to health.

Now, as a new downturn in the chemical industry looms, Akzo says it is in far better shape to cope. Investment analysts generally agree.

Aside from slashing costs and investing heavily in its plants, Akzo has spent 3.9 billion guilders ($1.88 billion) on acquisitions since 1983 to give it better balance. During the same period, the company has sold about 1.6 billion guilders of assets.

The fibers business, whose products go into textiles, carpeting and myriad industrial uses, now accounts for only 20% of Akzo's sales. "We have definitely become less cyclical," Syb Bergsma, executive vice president-finance, said in an interview.

Still, Akzo hasn't yet found a way to achieve another goal: a large presence in the U.S. market for prescription drugs. Mr. Bergsma said prices for U.S. pharmaceutical companies remain too high, making it unlikely that Akzo will pursue any major acquisitions in that area. But he said Akzo is considering "alliances" with American drug companies, although he wouldn't elaborate.

An indication of Akzo's success in reshaping itself will come Thursday when it reports third-quarter results. Analysts expect the company to show profit of about 225 million guilders, up 9% from 206.3 million guilders a year earlier.

A bigger test will come next year if, as many analysts expect, bulk chemical prices slump in Europe.

"Maybe Akzo can surprise the investment world a bit," said Jaap Visker, an analyst at Amsterdam-Rotterdam Bank NV. He figures Akzo is likely to be one of the few major chemical companies to show profit growth next year. The bank projects Akzo will show per-share earnings of 24 guilders in 1990, up from an estimated 22.5 guilders for this year and the 20.9 guilders reported for 1988.

At James Capel & Co. in London, analyst Jackie Ashurst notes that Akzo is less exposed than many of its rivals to the most volatile chemical products. For example, Akzo has only minor petrochemical operations, is small in plastics and doesn't make fertilizers.

Thus, while Akzo profited less than many rivals from the boom of recent years in petrochemicals and plastics, it has less to fear from the current slump.

The company is exposed to bulk chemicals, however. Although bulk-chemical prices have begun falling in the U.S., they are generally stable in Europe, Mr. Bergsma said. A decline may come in the first half of 1990, he said, but the market doesn't appear on the verge of a severe downturn.

To reduce the danger of such pricing cycles, Akzo has invested heavily in specialty chemicals, which have highly specific industrial uses and tend to produce much higher profit margins than do bulk chemicals. Akzo's biggest move in this area was the 1987 acquisition of Stauffer Chemical Co. 's specialty chemical business for $625 million.

In a less glamorous field, Akzo is the world's biggest producer of industrial salt, used as a raw material for the chemical industry as well as for such tasks as melting ice. Akzo also makes products derived from salt, such as chlorine and caustic soda.

In the fibers division, profit remains weak, largely because of persistent overcapacity. But Akzo is still slimming down: It recently announced plans to eliminate about 1,700 fiber-related jobs in the Netherlands and West Germany.

Although the polyester and rayon markets remain mostly bleak, Akzo has high hopes for some emerging fiber businesses, such carbon fibers and aramid, extremely strong fibers used to reinforce tires and metals and to make such products as bullet-proof vests.

Akzo's Twaron aramid fiber is a distant second to Du Pont Co. 's Kevlar, which dominates the market. Mr. Bergsma said world-wide industry sales of aramid fibers are expected to total about $500 million this year. Sales growth of 10% a year seems possible, he said, and Akzo expects its Twaron business to become profitable in 1990.

Akzo also has spent heavily on acquisitions in paints, auto finishes and industrial coatings. In August, for example, it completed the $110 million acquisition of Reliance Universal Inc., a U.S. maker of industrial coatings for wood, metals and plastics, from Tyler Corp. Mr. Bergsma said Akzo is likely to see strong profit growth from coatings as it realizes cost savings and other benefits from its greater scale.

For Akzo's drug business, where profits have shown litle change for the past five years, Mr. Bergsma predicted moderate profit growth. Akzo is the leading seller of birth-control pills in Europe but is still seeking regulatory approvals to enter that market in the U.S. and Japan. Mr. Bergsma said Akzo hopes to have approval to sell its Marvelon pill in the U.S. in 1992.

Akzo also has small operations in diagnostic tests, generic drugs and veterinary products. Veterinary products are showing especially strong growth, Mr. Bergsma said. Among the leading products is a flu shot for horses.

We're sorry to see Nigel Lawson's departure from the British government. He is a politician with the courage of true conviction, as in summarily sacking exchange controls and in particular slashing the top rate of income taxation to 40%. But in the end his resignation as Chancellor of the Exchequer may be a good thing, especially if it works as he no doubt intends -- by forcing Prime Minister Thatcher and her counterparts elsewhere to confront the genuine intellectual issues involved.

The early omens, we admit, scarcely suggest so wholesome an outcome. The Fleet Street reaction was captured in the Guardian headline, "Departure Reveals Thatcher Poison." British politicians divide into two groups of chickens, those with their necks cut and those screaming the sky is falling. So far as we can see only two persons are behaving with a dignity recognizing the seriousness of the issues: Mr. Lawson and Sir Alan Walters, the counterpoint of the Chancellor's difficulties, who also resigned as personal adviser to Mrs. Thatcher.

The problem is that on the vital issue of monetary policy and exchange rates, conservative, free-market economists divide into at least three incompatible camps. There are the strict monetarists, who believe that floating exchange rates free an economy to stabilize its price level by stabilizing the monetary aggregates. There are the supply-side globalists, who seek to spread the advantages of a common currency through fixed exchange rates. And there are the twin-deficit Keynesians, who predict/advocate devaluations to balance trade flows. This is a problem not only for Prime Minister Thatcher but for President Bush, as shown in the ongoing bickering over the dollar between the Federal Reserve and the Mulford Treasury.

In the British case, Mr. Lawson is the closest thing in London to a supply-side globalist. He not only slashed marginal tax rates, initially sparking fresh growth in Britain, but he wanted to regulate monetary policy by targeting exchange rates, indeed joining the European Monetary System. While no doubt agreeing with Mr. Lawson on everything else, Sir Alan is a dyed-in-the-wool monetarist, inclined to defend floating rates to the death.

To make matters even more confusing, the earlier U.S. experience made clear that Mr. Lawson's tax cuts would have profound effects on Britain's international accounts and the value of sterling. They increased the after-tax rate of return and made Britain a far more attractive place to invest, producing sudden capital inflows. By accounting definitions, this had to produce a sudden trade deficit. As in the U.S., it also produced a sudden burst in the demand for sterling, that is a surge in the sterling monetary aggregates, M-Whatever.

At this point, the options were: Crunch money to stop the boost in the aggregates, as Sir Alan surely advised, and forget the soaring pound. To push the pound even lower trying to cure the trade deficit, a policy Britain has repeatedly proved disastrous. Or to supply enough money to meet the increased demand and stabilize the exchange rate, as the Chancellor argued, and ensure the permanence of this policy by joining the EMS.

Faced with a similar situation, Paul Volcker let the dollar soar, (though monetary aggregates also grew so rapidly monetarists issued egg-on-the-face warnings of inflation). But this devastated the U.S. manufacturing sector, laying the seeds of protectionism. Mr. Lawson, though not allowed to join the EMS, chose to "shadow" the deutsche mark. He reaped inflation along with rapid growth, no doubt validating Sir Alan's predictions in the Prime Minister's mind. But more recently, the pound has been falling with high inflation, which has also seemed almost impervious to the high interest rates Mr. Lawson deployed to stop it.

So the British experience presents a genuine puzzle that reaches far beyond the shores of Albion. We had been soliciting opinions on it long before Mr. Lawson's resignation, and offer some of the collection for the benefit of his successor and one-time deputy, John Major. To begin with, we should note that in contrast to the U.S. deficit, Britain has been running largish budget surpluses. In pursuit of this mystery, Keynesian adepts and twin-deficit mavens need not apply.

We should also add Mr. Lawson's own explanation, as we understand it. Unlike the U.S., Britain never achieved even a momentary reduction in real wages. The wage stickiness, which OECD studies confirm is particularly high in Britain, gives its economy a structural bias toward inflation. Inflation is easier to spark and harder to control.

We should also concede that in the British experience the monetarist cause regains some of the credibility it lost in the U.S. experience. Nearby Paul Craig Roberts, a distinguished supply-sider with monetarist sympathies, argues the case for Sir Alan. Perhaps the fiscal shock of tax cuts is after all best absorbed by floating rates, though of course in the event Mr. Lawson resigned over whether to support a weak pound, not restrain a strong one. We recall that Mr. Roberts not only chides the Chancellor for being too easy because of a desire to constrain sterling, but also led the chorus saying that Mr. Volcker was too tight when he let the dollar rise. Somewhere in between there must be a golden mean, perhaps measured by M-Whatever, but perhaps measured by purchasing power parity.

The globalists tend to think Mr. Lawson ran onto technical reefs. In fixing rates the choice of initial parities is crucial, for example, and perhaps he picked the wrong pound-DM rate. For that matter, perhaps he fixed to the wrong currency. We sympathize with Mrs. Thatcher's reluctance to tie her currency to one governed by the domestic political imperatives of West Germany. Perhaps the shock would have been less if they'd fixed to another low-tax, deregulated, supply-side economy.

Alan Reynolds of Polyconomics adds his suspicion that the unrecognized inflationary culprit is the budget surplus. Those who can shake Keynesian ghosts out of their heads might recognize that the retirement of gilts for cash is equivalent to an expansionary open-market operation, indeed, it is the definition of an open market operation to expand the money supply. Mr. Reynolds also notes that since British banks have no reserve requirements, high interest rates are less likely to curb inflation than to cause recession.

We would add that in political terms, Mrs. Thatcher's problem was failing to decide between the Chancellor and her adviser. In the end, neither policy was followed, and instead of learning anything we are left with a mystery. In particular, "shadowing" a currency is anything but fixing; it is an open announcement that the exchange rate target has no credibility. All the more so when strong voices are heard opposing the policy. Better to have a true monetarist policy, just for the experience.

So Mr. Lawson had to resign. In the end his move was sparked by remarks in excerpts from Sir Alan's autobiography in The American Economist, a 10,000-circulation academic journal. But it was the underlying situation that became intolerable.

What Mr. Major and Mrs. Thatcher will do now remains to be seen. They confront stubborn inflation and a sagging economy, that is to say, stagflation. This cannot be solved by provoking a further downturn; reducing the supply of goods does not solve inflation. Our advice is this: Immediately return the government surpluses to the economy through incentive-maximizing tax cuts, and find some monetary policy target that balances both supply and demand for money (which neither aggregates nor interest rates can do). This was the version of supply-side economics that, in the late 1970s and early '80s, worked in America and world-wide to solve a far more serious stagflation than afflicts Britain today.

Ogilvy & Mather, whose declining profitability prompted its takeover by WPP Group earlier this year, will see its profit margins bounce back to the "11.5% range" in 1990, said Graham Phillips, the agency's new chairman-elect.

The ad agency's pretax profit margins were slightly under 10% at the time of the takeover, according to analysts; London-based WPP's goal is to increase margins to 12%.

Mr. Phillips made his comments during an interview detailing his plans for the agency. British-born, the 24-year Ogilvy veteran was named last week to succeed Kenneth Roman, who is leaving by year's end to take a top post at American Express, an Ogilvy client. Surrounded by stacks of paper, two computers and photos of himself boating and flying, Mr. Phillips laid out several changes he hopes to make at the agency.

First and foremost, Mr. Phillips said he hopes to improve client service. Ogilvy under the fastidious Mr. Roman gained a reputation as occasionally being high-handed in its treatment of clients, of preaching what strategy a client should -- indeed, must -- follow. And some of its top client-service executives, including Mr. Phillips, were promoted to the point they were saddled with administrative duties, with little time to see clients.

But Mr. Phillips recently freed himself up to spend more time with clients by delegating much of his administrative work to a deputy. He also plans to get to know clients that Mr. Roman was closer to, such as Lever Brothers, American Express and Seagram. The two men are planning joint visits to a number of clients to attempt to smoothly hand over the reins. "Clients want to see more of our senior people involved in the business -- not once a month, but two or three times a week," he said.

Mr. Phillips also hopes to finally implement a reorganization announced earlier this year but put on hold by the WPP takeover. The reorganization is supposed to make one-stop shopping -- buying advertising, public relations and design all in one place, or "Ogilvy Orchestration" in Ogilvyspeak -- a reality.

Under the reorganization, Ogilvy plans to name one executive on each account as a "client service director" to work as the client's single contact for all those services. "There is little or no integration of our work, quality is spotty, there is no single focus," Mr. Phillips complained to staffers in March, when the reorganization was announced. Now Mr. Phillips says he hopes to have the new system in place for several clients -- including American Express, American Telephone & Telegraph and Ryder -- by year's end.

Industry executives and analysts are divided on whether Mr. Phillips is up to the task. He isn't as well-known to clients as is Mr. Roman. Under his watch, office politicking was often rampant in the agency's New York operation and the office there has had a dismal new-business record for more than a year. And while last week the agency hired a top Chiat/Day/Mojo executive, Bill Hamilton, to try to bolster its work, "Graham has to get the revenue of that New York office moving," says James Dougherty, an analyst with County NatWest Securities.

The one thing Mr. Phillips clearly does have going for him is continuity, although it isn't certain if that will be enough. As Mr. Dougherty says, "The last thing they need is enormous disruption at the top . . . and Graham is obviously a long-term member of the Ogilvy Mafia, as we call it."

Mr. Phillips and Mr. Roman are indeed quite similar in substance, if not in style. While Mr. Roman is a workaholic detailsman, Mr. Phillips would rather delegate, leaving him time for his interests outside the office. Mr. Roman, by contrast, seems rarely to cut loose at all, although he did appear at Ogilvy's Halloween party Friday decked out in duck feet and a duck hat, costumed as a "lame duck."

Mr. Phillips said the company's expected margin improvement will be all but inevitable, given that the company's profitability was dragged down this year by an expensive move to luxurious, oversized new New York headquarters. The move, budgeted at about $7 million, actually came in at about $10 million, he said.

But margins will be helped, too, by some other cost-saving steps. Ogilvy eliminated the mail room staff, closed the executive dining room and, after the takeover, let go half a dozen financial executives. WPP, which assumes financial control of its businesses in a hands-on way, instituted a new financial system and plans to sublet some floors in Ogilvy's new headquarters building to outsiders. The fact that the agency will now be part of a U.K. company, under British accounting rules, will also make the profit picture look better.

Y&R's Klein Steps Down

Arthur Klein, president of Young & Rubicam's New York office, stepped down "temporarily" in the wake of charges by a federal grand jury in New Haven, Conn., that he, the agency and another top executive bribed Jamaican tourist officials to win its account in 1981.

In an internal memo, Alex Kroll, the agency's chairman, said Mr. Klein decided to remove himself to minimize "negative reaction" from prospective clients and others and to prepare for his defense. "The fact that he is in the process of defending himself against the present charges could conceivably have an adverse impact on Y&R," Mr. Kroll wrote. He said Mr. Klein will return to his post at the end of the trial "at which he will be vindicated."

Mr. Klein will work with Mr. Kroll on some of the agency's joint venture activities and acquisitions while the case is pending. Peter Georgescu, president of Y&R's ad operations, will assume Mr. Klein's day-to-day role.

Wells Rich's New Partner

Wells, Rich, Greene named Cheryl Heller as an executive vice president and creative partner in its image group, which concentrates on fashion and visually oriented advertising.

Ms. Heller, 38, had headed up Boston agency Heller/Breene, a unit of WCRS. The agency, with about $35 million in billings, will be dissolved, with some of its staffers absorbed by WCRS's Della Femina McNamee unit in Boston, Ms. Heller said. She said it was too early to say what would happen to its clients, including Reebok and Apple.

At Wells Rich, Ms. Heller will concentrate on accounts that include Philip Morris's Benson & Hedges cigarette brand, which relies on print ads, Ms. Heller's specialty. As previously reported, the account is troubled, with Philip Morris asking Backer Spielvogel Bates, Ogilvy & Mather, and possibly others to try their hand at developing new creative work. Wells Rich declined to comment on the status of the account, as did the other agencies.

Waxman Industries Inc. said holders of $6,542,000 face amount of its 6 1/4% convertible subordinated debentures, due March 15, 2007, have elected to convert the debt into about 683,000 common shares.

The conversion price is $9.58 a share.

The company said the holders represent 52% of the face amount of the debentures.

Waxman sells a variety of hardware products for the home repair market.

R.H. Macy & Co., the closely held department store chain, said in a financial filing Friday that its sales for the fiscal fourth quarter ended July 29 were up 10% to $1.59 billion against $1.44 billion a year earlier.

Comparable store sales for the quarter were up 7.3%.

The net loss for the quarter was $43.1 million against a year-earlier loss of $106 million. The loss in the fourth quarter of 1988 reflected in part expenses for an unsuccessful bid for Federated Department Stores Inc., as well as the restructuring of some of its department store operations.

For the year, sales were up 5.6% to $6.97 billion compared with $6.61 billion in fiscal 1988. Sales for both years reflect 12-month performances for each year of I. Magnin, Bullock's, and Bullocks Wilshire. Macy acquired those three businesses in May 1988. On a comparable store basis, including the new acquisitions for both years, sales for fiscal 1989 were up 1.9%.

Macy reported a net loss for fiscal 1989 of $53.7 million compared with a net loss of $188.2 million for fiscal 1988.

The company's earnings before interest, taxes and depreciation, which bondholders use a measurement of the chain's ability to pay its existing debt, increased 11% in fiscal 1989 to $926.1 million from $833.6 million. The $833.6 million figures includes the new acquisitions. Excluding those businesses, earnings before interest, taxes and depreciation for 1988 would have been $728.5 million.

As of Feb. 1, 1990, the Bullocks Wilshire stores will operate as I. Magnin stores. Altogether, Macy and its subsidiaries own or lease 149 department stores and 61 specialty stores nationwide.

Although management led a leveraged buy-out of R.H. Macy in July 1986, the company still makes financial filings because of its publicly traded debt. The company estimates its total debt at about $5.2 billion. This includes $4.6 billion of long-term debt, $457.5 million in short-term debt, and $95.7 million of the current portion of long-term debt.

In a letter to investors, Chairman Edward S. Finkelstein wrote that he expects the company to "benefit from some of the disruption faced by our competitors. While our competitors are concerned with their financial viability and possible ownership changes, we will be concentrating on buying and selling merchandise our customers need and want."

Mr. Finkelstein is apparently referring to B. Altman and Bonwit Teller, two New York retailers that have recently filed for Chapter 11 bankruptcy protection, as well as the retail chains owned by financially troubled Campeau Corp. Those chains include Bloomingdale's, which Campeau recently said it will sell. Other retail properties for sale include Saks Fifth Avenue and Marshall Field, retailers now owned by B.A.T PLC, the British tobacco conglomerate.

In his letter, Mr. Finkelstein also referred to the recent San Francisco earthquake. Mr. Finkelstein flew to San Francisco the day after the earthquake, and found that 10 to 12 of his company's stores had sustained some damage, including the breakage of most windows at the I. Magnin store on Union Square.

"The volume and profit impact on our fiscal first quarter will not be positive, but looking at the whole fiscal year, we don't see the effect as material," wrote Mr. Finkelstein.

RJR Nabisco Inc. said it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle S.A.'s Nestle Foods unit for $370 million.

The sale, at a higher price than some analysts had expected, helps the food and tobacco giant raise funds to pay debt and boosts Nestle's 7% share of the U.S. candy market to about 12%.

The candy businesses had sales of about $154 million last year, which was roughly 12% of total revenue for RJR's Planters LifeSavers unit, according to a memorandum distributed by RJR's owner, Kohlberg Kravis Roberts & Co., to bankers last December.

The Nestle acquisition includes a candy plant in Franklin Park, Ill., which employs about 800 workers.

The sale, which had been expected, is part of KKR's program to pay down $5 billion of a $6 billion bridge loan by February. Roughly $2 billion of that debt has already been repaid from previous asset sales, and RJR expects to use another $2 billion from the pending, two-part sale of most of its Del Monte unit. That sale, however, could still fall through if financing problems develop. Thus, it remains crucial for RJR to obtain top dollar for its smaller assets like the candy brands.

Louis Gerstner Jr., chairman and chief executive officer of New York-based RJR, called the sale a "significant step" in the company's divestiture program, as well as a "a strategic divestiture." Since KKR bought RJR in February for $25 billion of debt, it has agreed to sell nearly $5 billion of RJR assets. RJR's executives have said they will dispense with certain brands, in particular, that aren't leaders in their markets. "RJR Nabisco and Planters LifeSavers will concentrate more on our own core businesses," Mr. Gerstner said Friday.

Baby Ruth and Butterfinger are both among the top-selling 15 chocolate bars in the U.S., but RJR's overall share of the roughly $5.1 billion market is less than 5%. Nestle's share of 7% before Friday's purchases is far below the shares of market leaders Hershey Foods Corp. and Mars Inc., which have about 40% and 36% of the market, respectively.

"This means Nestle is now in the candybar business in a big way," said Lisbeth Echeandia, publisher of Orlando, Fla.-based Confectioner Magazine. "For them, it makes all kinds of sense. They've been given a mandate from Switzerland" to expand their U.S. chocolate operations. Nestle S.A. is based in Vevey, Switzerland.

The new candy bars, "make an important contribution to our Nestle Foods commitment to this very important strategic unit," said C. Alan MacDonald, president of Nestle Foods in Purchase, N.Y.

Aetna Life & Casualty Co. 's third-quarter net income fell 22% to $182.6 million, or $1.63 a share, reflecting the damages from Hurricane Hugo and lower results for some of the company's major divisions.

Catastrophe losses reduced Aetna's net income by $50 million, including $36 million from Hugo. Last year catastrophe losses totaled $5 million, when net was $235.5 million, or $2.07 a share. The year-earlier results have been restated to reflect an accounting change.

The insurer has started processing claims from the Northern California earthquake nearly two weeks ago. But because these claims are more difficult to evaluate and have been coming in more slowly, the company has no estimate of the impact of the earthquake on fourth-quarter results.

In New York Stock Exchange composite trading Friday, Aetna closed at $60, down 50 cents.

In the latest quarter, Aetna had a $23 million loss on its auto/homeowners line, compared with earnings of $33 million last year. Profit for its commercial insurance division fell 30% to $59 million, reflecting higher catastrophe losses and the price war in the property/casualty market for nearly three years.

However, Aetna's employee benefits division, which includes its group health insurance operations, posted a 34% profit gain to $106 million.

Third-quarter results included net realized capital gains of $48 million, which included $27 million from the sale of Federated Investors in August and a $15 million tax credit.

In the nine months, net rose 4.3% to $525.8 million or $4.67 a share, from $504.2 million, or $4.41 a share, last year.

Out of the mouths of revolutionaries are coming words of moderation.

Here, at a soccer stadium near the black township of Soweto yesterday, were eight leaders of the African National Congress, seven of whom had spent most of their adult lives in prison for sabotage and conspiracy to overthrow the government. Here were more than 70,000 ANC supporters, gathering for the first ANC rally inside South Africa since the black liberation movement was banned in 1960. Here was the state security appartus poised to pounce on any words or acts of provocation, let alone revolution.

But the words that boomed over the loudspeakers bore messages of peace, unity, negotiation and discipline. "We stand for peace today and we will stand for peace tomorrow," said Walter Sisulu, the ANC's former secretary general who, along with five of his colleagues, served 26 years in prison before being released two weeks ago. Some members of the huge crowd shouted "Viva peace, viva."

These are curious times in South African politics. The government and the ANC, the bitterest of enemies, are engaged in an elaborate mating dance designed to entice each other to the negotiating table. Pretoria releases the ANC leaders, most of whom were serving life sentences, and allows them to speak freely, hoping that the ANC will abandon its use of violence. The ANC leaders speak in tones of moderation, emphasizing discipline, hoping the government will be encouraged to take further steps, such as freeing Nelson Mandela, the most prominent ANC figure, and unbanning the organization.

The government of President F.W. de Klerk is using this situation to improve its international image and head off further economic sanctions. Meanwhile, the many organizations inside the country that back the ANC are taking the opportunity to regain their strength and mobilize their supporters even though the state of emergency, which has severely curtailed black opposition, remains in force.

The result is that the unthinkable and illogical are happening. Six months ago, government approval for an ANC rally was inconceivable. Equally inconceivable is that the ANC, given the chance to hold a rally, would extend a hand, albeit warily, to the government. In a message read out at the rally, exiled ANC President Oliver Tambo, who can't legally be quoted in South Africa, said the country was at a crossroads and that Mr. de Klerk "may yet earn a place among the peacemakers of our country" if he chooses a "path of genuine political settlement."

Still, this doesn't mean that either the government or the ANC is changing stripes -- or that either has moved significantly closer to the other.

The government may ease repression in some areas, but it still keeps a tight grip in others. For instance, it releases Mr. Sisulu without conditions, yet his son, Zwelakhe, a newspaper editor, is restricted to his home much of the day and isn't allowed to work as a journalist.

The ANC vows to keep up pressure on the government. Speakers yesterday called on foreign governments to increase sanctions against Pretoria and urged supporters inside the country to continue defying emergency restrictions and racial segregation, known as apartheid. "We cannot wait on the government to make changes at its own pace," Mr. Sisulu said.

Because the ANC remains banned, both the government, which approved the rally, and the organizers, who orchestrated it, denied it was an ANC rally. They both called it a "welcome home" gathering. Nevertheless, an ANC rally by any other name is still an ANC rally.

The recently released leaders sat high atop a podium in one section of the stadium stands. Behind them was a huge ANC flag and an even bigger sign that said "ANC Lives, ANC Leads." Next to them was the red flag of the outlawed South African Communist Party, which has long been an ANC ally. In the stands, people waved ANC flags, wore ANC T-shirts, sang ANC songs and chanted ANC slogans.

"Today," said Mr. Sisulu, "the ANC has captured the center stage of political life in South Africa."

As a police helicopter circled overhead, Mr. Sisulu repeated the ANC's demands on the government to create a climate for negotiations: Release all political prisoners unconditionally; lift all bans and restrictions on individuals and organizations; remove all troops from the black townships; end the state of emergency, and cease all political trials and political executions. If these conditions are met, he said, the ANC would be prepared to discuss suspending its guerrilla activities.

"There can be no question of us unilaterally abandoning the armed struggle," he said. " To date, we see no clear indication that the government is serious about negotiations. All their utterances are vague."

Echoing a phrase from Mr. de Klerk, Mr. Sisulu said, "Let all of us who love this country engage in the task of building a new South Africa.

When Westinghouse Electric Corp. shuttered its massive steam turbine plant in Lester, Pa., three years ago, it seemed like the company had pulled the plug on its century-old power generation business.

But now Westinghouse is enjoying a resurgence in demand for both steam and combustion turbines and may even join the growing legion of independent electric producers. And with its new venture with Japan's Mitsubishi Heavy Industries Ltd., announced last week, it is poised to penetrate growing markets overseas.

For the first time since the mid-1970s, Westinghouse this year has seen a significant increase in orders for power plants. Most are from independent producers instead of regulated utilities, and Westinghouse believes it will ride a wave of demand stretching over the next six years.

Analysts agree, predicting that the revived market could significantly boost Westinghouse's bottom line in coming years. "Westinghouse's earnings could be materially enhanced in the mid-1990s or sooner," says Russell L. Leavitt, of Salomon Brothers Inc. The company expects a need for 140,000 megawatts of new generation in the U.S. over the next decade. Already this year, it has received orders for four 150-megawatt advanced combustion turbines from Florida Power & Light Co. and for two 300-megawatt plants from Intercontinental Energy Corp., among others.

Westinghouse's own role as a supplier also is changing. In the past, the company usually took token equity positions in power plants it supplied as a "kicker" to close deals.

But last June's annnouncement that Westinghouse would put up all of the $70 million to build a new 55-megawatt plant could herald a new age. Westinghouse's plant will provide electrical power to the Southern California Edison Co. and backup power and steam to the U.S. Borax & Chemical Co.

"We haven't decided on a strategy yet, but we could become an independent producer depending on whether we're the developer or just the supplier," says Theodore Stern, executive vice president of the company's energy and utility systems group.

At the same time, Westinghouse hopes its venture with Mitsubishi will help fend off growing competition, particularly in the U.S., from such European competitors as Asea Brown Boveri AG, Siemens AG, and British General Electric Co. Under the agreement, Westinghouse will be able to purchase smaller combustion turbines from its Japanese partner, and package and sell them with its own generators and other equipment.

Westinghouse also jointly will bid on projects with Misubishi, giving it an edge in developing Asian markets. In addition, the two companies will develop new steam turbine technology, such as the plants ordered by Florida Power, and even utilize each other's plants at times to take advantage of currency fluctuations.

"Even though we'll still compete against Mitsubishi, we can also work jointly on some projects, and we'll gain a lot of sourcing flexibility," Mr. Stern contends.

The Westinghouse-Mitsubishi venture was designed as a non-equity transaction, circumventing any possible antitrust concerns. Westinghouse carefully crafted the agreement because the Justice Department earlier this year successfully challenged a proposed steam turbine joint venture with Asea Brown Boveri.

It is expected that the current surge in demand for new power will be filled primarily by independent producers which, unlike utilities, aren't regulated and therefore don't need government approval to construct new plants. Westinghouse expects about half of its new orders for turbines to come from independent producers for at least the next six years.

Despite shutdowns of the company's Lester and East Pittsburgh plants, the company believes it has sufficient capacity to meet near-term demand with its much smaller and more efficient manufacturing facilities in North Carolina.

Still, Westinghouse acknowledges that demand from independent producers could evaporate if prices for fuel such as natural gas or oil rise sharply or if utilities, which have been pressured by regulators to keep down rates, are suddenly freed to add significant generating capacity.

Even if that scenario occurs, Westinghouse figures it is prepared. The company already is gearing up for a renaissance of nuclear power even though it hasn't received an order for a domestic nuclear plant in a decade. John C. Marous, chairman and chief executive officer, says he expects a commercial order by 1995 for the company's AP600 nuclear power plant, which is under development. "Once we see an order, we expect it'll be on line by 2000.

Among the things I learned covering the World Series these past few weeks is that the Richter scale, which measures earthquakes, isn't like the one in your bathroom. A quake that measures two on the Richter isn't twice as severe as a "one" -- it's 10 times worse. A "three" is 10 times 10 again, and so on. That put the "seven" of Oct. 17 in perspective for me. Think I'll buy one of those "I Survived" T-shirts after all.

By Richterian standards, the show that the Oakland Athletics put on Friday and Saturday nights, in putting a mercifully swift end to the game's Longest Short Series, rated somewhere between a 10 and an 11. The boys with the white elephants on their sleeves might not have made the earth move much, but they certainly did some impressive things with baseballs.

The Pale Pachyderms propelled six of 'em out of the unfriendly confines of Candlestick Park during the two games en route to 13-7 and 9-6 wins over the San Francisco Giants. Combined with their two pre-quake victories, way back on Oct. 14 and 15 (the scores were 5-0 and 5-1, remember?), that gave them a sweep of the best-of-seven series.

The joke here is that the Giants lost by de fault. That's geologically correct, but a trifle unfair otherwise. They showed up, but didn't -- or couldn't -- challenge.

They led for nary an inning in the four games, and managed to stir their fans only once. That came in the seventh inning of Game Four when, trailing 8-2, they scored four times and brought their big heat -- Will Clark and Kevin Mitchell -- to the plate with one out and a runner on. But Clark flied out to short right field and Mitchell's drive to left was caught on the warning track by Rickey Henderson as 62,000 sets of lungs exhaled as one.

"I went out to Todd {Burns, the A's reliever} and told him that we weren't gonna let this guy beat us," said Oakland catcher Terry Steinbach of the decisive confrontation with Mitchell, the National League's reigning home-run king. "I told him to make Mitchell reach for everything, and that's what we did. The ball he hit wasn't a strike. If it had been, he mighta hit it out."

But if the A's hadn't won in four, they would have prevailed in five, or six, or seven. The best team won this Series, which is more unusual than it may sound. Baseball ain't football, where the good teams beat up on the bad ones. The best baseball teams win six of 10 games and the worst win four of 10. Without becoming overly contentious, allow me to suggest that several recent champions of the world according to us (as in U.S.) might not have ranked No. 1 in many polls. That list includes last season's champs, the Los Angeles Dodgers, who rode a miracle home run by Kirk Gibson and two faultless pitching performances by Orel Hershiser to a five-game triumph over a bewitched, bothered Oakland crew.

These A's, however, got few grades as low as B on their 1989 report card. They led the Major Leagues in regular-season wins with 99 and flattened the Toronto Blue Jays four games to one for the American League pennant before stomping their cross-bay rivals. The pithiest testimony to their domination of the just-concluded tournament came from Giants' manager Roger Craig after his team had fallen in Game Three to a five-home-run barrage that tied a 61-year-old Series record. Asked what he would do differently on the morrow, Craig allowed that he might play his outfielders deeper, "maybe on the other side of the fence."

The A's offensive showing in the Series got an A, as in awesome. Their 85 total bases broke a record for a four-game set, and their nine home runs tied one. Eight Oakland players hit homers, with centerfielder Dave Henderson getting two, both on Friday. Rickey Henderson, the do-everything leadoff man, had nine hits and set or tied four-game Series marks for triples (2) and stolen bases (3).

The sole A not to homer was cleanup hitter Mark McGwire, their regular-season leader with 33, and he contributed five hits plus a diving fielding play on a ground ball in Game Three that stopped a Giant rally while the issue still was in doubt. "Think I'll redo my image -- get this changed to a glove," quipped the big first baseman Saturday night, fingering the gold bat he wears on a neck chain.

Even with that power show, though, the Oakland Series' star, certified by the Most Valuable Player award, was a pitcher, Dave Stewart. He shut out the Giants on five hits in Game One, and allowed three runs on five hits in seven innings Friday after the 12-day break caused by the earthquake.

Stewart's honor was a nice note on a couple of grounds. One was that, despite his 62 regular-season wins over the past three seasons in the Land Beyond the Late News, he has been overshadowed by his more-muscular mates and missed out on prizes that might have been his due. The other is that he's an Oakland native, and lifted residents' spirits by his visits to quake-hit areas last week.

Afterward, as the A's toasted their victory with beer (they dispensed with traditional champagne showers in deference to the quake victims), Stewart said he thought his championship-team ring would outshine his individual trophy. "Give me four or five more Series with these guys, and I don't care if I ever win a Cy Young," he said, in reference to baseball's best-pitcher award.

Indeed, the possibility of an A's ring cycle, a/k/a a dynasty, was a major topic of post-game discussion Saturday, so much so that Sandy Alderson, the team's general manager, felt obliged to dampen it. "People change, teams change," he cautioned. "It's easier to get worse than better in this game."

He might have added an interesting historical fact: The last Series sweep, by the Cincinnati Reds, came in 1976, which also was the first year of baseball player free agency. It was widely predicted that free agency would allow the glamorous, "big market" teams to monopolize the best talent, but quite the opposite has occurred: Twelve different clubs have won titles in the 14 seasons since its advent. The number includes such unstylish burgs as, well, Oakland.

The rationale for responding to your customers' needs faster than the competition can is clear: Your company will benefit in terms of market share, customer satisfaction and profitability. In fact, managers today are probably more aware of speed as a competitive variable than ever before. However, for many, managing speed does not come naturally.

"Most of us grew up believing in the axioms `Haste makes waste' and `Don't cut corners, ' ideas that seem to run counter to the concept of managing speed," says Dean Cassell, vice president for product integrity at Grumman Corp. "But in the real world, you learn that speed and quality are not a trade-off. Speed is a component of quality -- one of the things we must deliver to satisfy customers."

Companies that actually market speed as part of their service train their managers to lead and participate in teams that increase speed and improve quality in everyday operations. Managers learn to spot opportunities to increase customer satisfaction through speed, and shift some responsibility for analyzing, improving and streamlining work processes from themselves to teams of employees.

One team at the Federal Express Ground Operations station in Natick, Mass., focused on a particularly time-sensitive operation: the morning package sort. Every morning, tractor-trailer trucks arrive at the Natick Ground Station from Boston's Logan Airport, carrying the day's package load. In peak periods that load may include 4,000 pieces. The packages must be sorted quickly and distributed to smaller vans for delivery, so couriers can be on the road by 8:35. No customer is present at the morning package sort, but the process is nevertheless critical to customer satisfaction.

"We're committed to deliver the customer's package by a stated time, usually 10:30," notes Glenn Mortimer, a Federal Express courier who led the Natick team. "The sooner our vans hit the road each morning, the easier it is for us to fulfill that obligation."

Following a problem-solving formula used by teams throughout Federal Express, members of the Natick team monitored their morning routine, carefully noting where and when the work group's resources were used effectively and where they were idle, waiting for others upstream in the process to send packages their way.

"We suspected there was downtime built into our process. But we didn't know just where it was until we completed our data gathering," Mr. Mortimer says. "We used the data to redesign our sorting system and put our resources where they could do the most good." The team even created a points system to identify those couriers and subgroups that were doing the most to reduce package-sort cycle time. Winners of the friendly competition earn a steak dinner out with their spouses.

"Monitoring shows that the Natick team's new system really does reduce cycle time for the morning package sort," reports James Barksdale, chief operating officer at Federal Express. "The vans leave at least 15 minutes earlier, on average, than they used to. And service levels have increased to the point where they're consistently above 99%."

A cross-functional team at Union Carbide's Tonawanda, N.Y., facility, which produces air-separation plants, followed a similar path to reduce manufacturing cycle time.

"The team included craftsmen from the shop floor as well as engineering, scheduling and purchasing personnel," reports Alan Westendorf, director of quality. "First, they produced a flowchart detailing the process by which an air-separation plant actually gets built. Then they identified snags in the process."

The Tonawanda team determined that holdups for inspections were the main problem and identified which kinds of delays involved critical inspections and which were less critical or could be handled by workers already on the line. The team then proposed modifications in their work process to management.

"The streamlined manufacturing process benefits our customers in at least two ways," Mr. Westendorf concludes. "First, we have better quality assurance than ever, because the people building the product have taken on more responsibility for the quality of their own work. Second, we trimmed more than a month off the time required to deliver a finished product."

At Grumman's Aircraft Systems Division, a cross-functional team reduced the cycle time required to produce a new business proposal for an important government contract. The team was composed of representatives from engineering, manufacturing, corporate estimating, flight test, material, quality control, and other departments.

"We needed contributions from all these departments to generate the proposal," says Carl Anton, configuration-data manager for Grumman's A-6 combat aircraft program. "But instead of gathering their input piecemeal, we formed the team, which reached consensus on the proposal objectives and produced a statement of work to guide all the functions that were involved."

Armed with this shared understanding and requisite background information, each department developed its specialized contribution to the proposal, submitting data and cost estimates on a closely managed schedule. "We cleared up questions and inconsistencies very quickly, because the people who had the skills and perspective required to resolve them were part of the task team," Mr. Anton explains.

The team trimmed more than two months from the cycle time previously required to develop comparable proposals. "The team eliminated the crisis mentality that proposal deadlines can generate. The result was a more thoughtful, complete and competitive proposal," Mr. Anton concludes.

The successes achieved at Federal Express, Union Carbide and Grumman suggest that managing speed may be an underutilized source of competitive advantage. Managers in all three companies recognize speed as a component of quality and a key to customer satisfaction. They effectively lead team efforts to reduce cycle time. And they prepare all their people to increase the speed and improve the quality of their own work.

Mr. Labovitz is president of ODI, a consulting firm in Burlington, Mass.

Home taping of pre-recorded music cuts into record industry revenues, but banning home taping would hurt consumers even more.

That's the conclusion of an independent report prepared by the Office of Technology Assessment at the request of the House and Senate judiciary committees. The report is to be released today.

The report says the availability of such advanced analog recording equipment as cassette recorders doesn't seem to increase the quantity of home copying. That finding, the report says, casts doubt on the record industry's contention that the new generation of digital recording equipment will inevitably lead to wholesale abuse of copyrighted material by home tapers.

The longstanding position of the Recording Industry Association of America, a trade group based in Washington, D.C., is that record companies, performers, songwriters and music publishers need to be remunerated by government-imposed fees on the sale of blank tapes and recording equipment to make up for royalties lost to home taping.

"I think it is a nail in the coffin in any royalty tax proposal," says Gary Shapiro, vice president for government and legal affairs of the Electronic Industries Association in Washington. "What {the report} shows is everything we've been saying for the past eight or nine years -- that audio taping is the best thing to happen for the recording industry. The people who tape the most buy the most."

Trish Heimers, a spokesperson for RIAA says her organization hasn't received a copy of the completed report yet and has no immediate comment.

A recent agreement between the recording industry and electronics manufacturers requires that any digital audio tape, or DAT, recorder sold in the U.S. have a built-in device that restricts its ability to make second copies from DAT tape copies of digital compact disks. But the disappointing sales of DAT machines here and abroad so far have not seemed to warrant the three years of legal wrangling that went into the agreement.

Under current copyright laws, it is considered "fair use" to reproduce copyrighted material for one's personal use or for use by one's family or friends, while copying for purposes of resale or profit is prohibited. A survey contained in the 291-page report, "Copyright and Home Copying: Technology Challenges the Law," found that most people consider home copying for such personal use a "right" -- a right, moreover, that was exercised by 40% of Americans over the age of 10 in the past year.

The study says that the "ambiguous legal status" of home copying makes it "appropriate to examine the effects on consumers, as well as on industry." Reports by the Office of Technology Assessment don't prescribe any specific legislative action but suggest a range of options that Congress may pursue.

The study also says that advent of new communications technologies makes "an explicit congressional definition of the legal status of home copying more desirable in order to reduce legal and market uncertainties and to prevent de facto changes to copyright law through technology," and says that finding an "appropriate balance of harms and benefits is a political decision, not a technical one.

Switzerland's most famous raider says he isn't one. Werner K. Rey believes fortunes are made by being friendly.

And in little more than a decade of being friendly -- and at the same time rocking the staid Swiss business community with some U.S.-style wheeling and dealing -- the 46-year-old Mr. Rey has grown from a modest banker to a billionaire. He achieved this in part with an uncanny talent for getting his foot peacefully in the door of established European companies.

His latest coup: September's masterminding of the five billion Swiss-franc ($3.07 billion) merger between Adia S.A., the world's second-largest temporary employment agency, and Inspectorate International S.A., a Rey-controlled product-inspection company.

Shareholders must approve the merger at general meetings of the two companies in late November. But approval is almost certain since Mr. Rey and a friendly Adia management are in control.

After the transaction, Mr. Rey estimates the value of his 20% stake in the new company, to be held by his Omni Holding AG, will be about 1 billion Swiss francs. This will be his return on an original investment of between 50 million Swiss francs and 80 million Swiss francs. Mr. Rey bought a controlling stake in Inspectorate for 18 million Swiss francs in 1982, building up the little-known engineering company with European and U.S. acquisitions.

"I like to succeed," says Mr. Rey during a recent morning of working at home, which he also likes. Home is an estate with green meadows opening onto Lake Geneva and a low-slung house whose rooms overlook the water and offer a view of the French Alps. In the corner of his reception room is a delicate antique desk piled high with dossiers. There is a small Renoir on the wall. Zurich-based magazine Bilanz lists Mr. Rey as having a fortune of about 1.5 billion Swiss francs. Writes Bilanz: "No one in Switzerland ever came so far so fast . . . He was simply the first in this country to realize that treasures were just lying around waiting to be picked up. In short: Rey found companies with weak earnings but rich assets."

However, the Swiss financial press in general, as well as many analysts, have had a hard time making up their minds about Mr. Rey and his un-Swiss ways.

For Switzerland's most prestigious newspaper, Neue Zuercher Zeitung, Mr. Rey seems destined to remain the "former Bally raider," an image that has proved hard to overcome.

In 1976, as an upstart in the eyes of Switzerland's establishment, Mr. Rey laid the foundations of his present-day prominence with an unheard-of raid on Bally, the country's traditional shoemaker.

Sitting beside a banker at a luncheon in London, where he was working as a financial consultant, he learned that a large packet of Bally's shares was up for sale. Looking into Bally, he could hardly believe what he saw: a company with enormous real-estate holdings in major European cities and a market capitalization of 28 million Swiss francs; it had 7,000 employees.

Investing four million Swiss francs earned from his financial transactions and two million Swiss francs from his parents and his wife, Mr. Rey acquired 20% of Bally's shares.

But such tactics were alien to Switzerland in 1976, and still aren't common because of share restrictions that companies are allowed to maintain. Eventually, Mr. Rey was forced to sell his Bally shares to the weapons maker Oerlikon-Buehrle Holding AG as establishment pressure grew on this hostile move into the Swiss old boys' network.

Mr. Rey made 50 million Swiss francs on the sale. "Bally was not an unfriendly takeover," he insists. Buying from willing shareholders makes an unfriendly takeover impossible, Mr. Rey contends. "I bought from willing shareholders."

Nevertheless, Mr. Rey has been very careful since then to make sure his moves are welcome. And he has worked to shed his raider image.

In 1979, his career as an industrialist began with the acquisition of the Swiss metals works Selve, based in Thun. With the nonferrous metals business undermined in Switzerland by tough foreign competition and high domestic costs, this looked like a dull undertaking. But Mr. Rey brought about a merger in the next few years between the country's major producers; the increased efficiency has perked up the industry.

Three years later, machinery producer Ateliers de Constructions Mecaniques de Vevey S.A. was to become part of the Rey empire. Once again the company's future looked less than rosy. But after restructuring under new management, the profits began rolling in.

A major boost to Mr. Rey's respectability among the Swiss came in 1986 when he sold 60% of his Phibro Bank to the conservative Swiss cantonal banks. They renamed it Swiss Cantobank and are using it to expand abroad. In 1987, Mr. Rey bested leading publishing houses to take over Switzerland's Jean Frey AG, a major producer of magazines and newspapers.

And with the recent acquisition of 30% of Winterthur-based machinery manufacturer Gebrueder Sulzer AG, Mr. Rey has enjoyed the status of white knight. Sulzer preferred him to financier Tito Tettamanti, whose secretive raid on the company's stock had led to a bitter battle.

Meanwhile, as such strategic investments have mounted, the merchant-banking arm of Mr. Rey's Omni Holding has been busily buying and selling dozens of companies, often after a financial or corporate restructuring.

Today, this branch of Mr. Rey's empire runs under the name Omnicorp Offering Services and handles mergers and acquisitions, placement of securities and real estate. In its portfolio are such diverse companies as United Kingdom-based Air Europe; Checkrobot Inc., a U.S. company that makes supermarket checkout machines; Norment Industries, a U.S. manufacturer of securities systems; Com Systems Inc., a U.S. regional telephone company; and major real-estate projects in the U.S. and Europe.

For financial analysts, reading Omni's accounts is a tough challenge. "Companies move in and out," says Helga Kern of KK Swiss Investment.

Financial analysts note that Mr. Rey is attracted to companies that are undervalued on the basis of their real-estate interests. In August, Omni unexpectedly bought Inspectorate's 80% stake in Harpener AG of West Germany, a land-rich company. The internal transaction within the Rey empire puzzled Harpener's small shareholders, but analysts say it makes sense for Inspectorate-Adia to focus on its main businesses of product inspection and temporary help.

Mr. Rey says the move is yet another example of his conservatism. He explains that companies with real estate give "security." The real estate can be used, he points out, as guarantees for bank loans for corporate development.

He says he wants to "influence" but not "manage" companies. "I don't want to be like {financier Alan} Bond and the other Australians. I don't want companies to be built around me as a person. I want them to stand alone.

Ultimate Corp. signed a letter of intent to market Hewlett-Packard Co. minicomputers, the companies said.

Ultimate expects the 3 1/2-year agreement to generate $100 million in sales, but it wouldn't estimate profit.

Under terms of the pact, Ultimate, a computer-systems concern, will market the full line of HP 9000 series 800 multipleuser minicomputers. Hewlett-Packard is based in Palo Alto, Calif.

In the second step of a reorganization that began earlier this year, Boeing Co. said it will create a Defense and Space Group to consolidate several divisions.

Meanwhile, Boeing officials and representatives of the Machinists union met separately last night with a federal mediator in an attempt to break the month-old strike that has shut the aerospace giant's assembly lines at a time when it has an $80 billion backlog of jetliner orders. The two sides were scheduled to meet with the mediator this morning.

Machinists already have rejected a package that would provide a 10% pay raise plus bonuses over the three-year life of the contract. Boeing has said repeatedly it won't expand its offer and the machinists have responded that the offer isn't good enough.

However, the resolve of some of the striking 57,000 machinists might be weakening. About 1,000 strikers signed petitions last week calling for Boeing and Machinists representatives to schedule new meetings. The two sides hadn't met since Oct. 18.

While Boeing's commercial business is booming, its military business is feeling the effects of a declining defense budget after a strong buildup during the Reagan presidency. In May, the company consolidated its Aerospace and Electronics groups; the new Defense and Space Group will contain the Aerospace and Electronics division and Advanced Systems, both based in the Seattle area; Boeing Helicopters in Philadelphia; Boeing Military Airplanes in Wichita, Kan., and ArgoSystems in Sunnyvale, Calif.

B. Dan Pinick, president of Boeing Aerospace and Electronics, will become president of the new group, which will become operational Jan. 2.

In addition, Boeing said it also will reorganize all its work in Wichita into military and commercial divisions. All of the changes will reduce its overhead and streamline operations, Boeing said.

Analysts agreed. "It's a further step to better returns in the hemorrhaging defense business," said Steven Binder, an analyst with Bear, Stearns & Co. in New York. "They had to do it."

Howard Rubel, an analyst with C.J. Lawrence, Morgan Grenfell Inc. in New York, said the shift reflects Boeing confidence in Mr. Pinick, described by Mr. Rubel as an expert on doing business with the military. "His side of the business has been successful in a tough environment," Mr. Rubel said.

A two-day meeting of representatives of Cocom, the 17-nation group that oversees exports of sensitive goods to communist countries, didn't take any substantive decisions on trimming the list of items under controls. Nor did it ease restrictions on exports to Poland and Hungary, according to U.S. officials who attended the talks.

The U.S. had been under pressure from several Cocom members, especially France, West Germany and Italy, to ease restrictions on some types of machine tools, which those countries argued were now widely available to East Bloc countries from non-Cocom members. For several years some European countries have complained that outdated Cocom lists and restrictions served more to hamper their trade than to add to Western security.

Some countries also have been pressing for special treatment for Hungary and Poland as they move toward more democratic rule, just as special treatment had been agreed on for China. But U.S. officials said representatives at the meeting decided that this was "a matter for further discussion at future meetings." They added that "all of us (Cocom members) look at the changes in Hungary and Poland in a positive way, but a question of this scope deserves further discussion and study." The officials also said the meeting agreed to continue treating China as a special case, despite the recent repression of dissent there, but to offer no further concessions.

The U.S. officials said that despite the rapid changes under way in Eastern Europe and the Soviet Union, all the Cocom members agreed on "the continuing need for this organization," which was founded 40 years ago at the start of the Cold War. The officials said the meeting agreed to continue working toward "streamlining" Cocom's restricted products list, and to improve procedures for punishing companies that don't comply with the export restrictions. The officials said this meeting "put in motion" procedural steps that would speed up both of these functions, but that no specific decisions were taken on either matter.

Unisys Corp. 's announcement Friday of a $648.2 million loss for the third quarter showed that the company is moving even faster than expected to take write-offs on its various problems and prepare for a turnaround next year.

At the same time, the sheer size of the loss, coupled with a slowing of orders, made some securities analysts wonder just how strong that turnaround will be at the computer maker and defense-electronics concern.

"Unisys is getting clobbered. Just clobbered," said Ulric Weil, an analyst at Weil & Associates who had once been high on the company. "The quarter was terrible, and the future looks anything but encouraging."

Unisys, whose revenue inched up 3.7% in the quarter to $2.35 billion from $2.27 billion in the year-earlier quarter, had an operating loss of about $30 million. On top of that, the Blue Bell, Pa., concern took a $230 million charge related to the layoffs of 8,000 employees. That is at the high end of the range of 7,000 to 8,000 employees that Unisys said a month ago would be laid off. Unisys said that should help it save $500 million a year in costs, again at the high end of the previously reported range of $400 million to $500 million.

The company also took a write-off of $150 million to cover losses on some fixed-price defense contracts, as some new managers took a hard look at the prospects for that slow-growing business. In addition, Unisys set up an unspecified reserve -- apparently $60 million to $70 million -- to cover the minimum amount it will have to pay the government because of its involvement in the defense-procurement scandal. Unisys also noted that it paid $78.8 million in taxes during the quarter, even though tax payments normally would be minimal in a quarter that produced such a big loss.

The tax payments will leave Unisys with $225 million in loss carry-forwards that will cut tax payments in future quarters. In addition, Unisys said it reduced computer inventories a further $100 million during the quarter, leaving it within $100 million of its goal of a reduction of $500 million by the end of the year.

Still, Unisys said its European business was weak during the quarter, a worrisome sign given that the company has relied on solid results overseas to overcome weakness in the U.S. over the past several quarters.

The company also reported slower growth in another important business: systems that use the Unix operating system. That would be a huge problem if it were to continue, because Unisys is betting its business on the assumption that customers want to move away from using operating systems that run on only one manufacturer's equipment and toward systems -- mainly Unix -- that work on almost anyone's machines.

In addition, Unisys must deal with its increasingly oppressive debt load. Debt has risen to around $4 billion, or about 50% of total capitalization. That means Unisys must pay about $100 million in interest every quarter, on top of $27 million in dividends on preferred stock.

Jim Unruh, Unisys's president, said he is approaching next year with caution. He said the strength of the world-wide economy is suspect, and doesn't see much revenue growth in the cards.

He also said that the price wars flaring up in parts of the computer industry will continue through next year. He said the move toward standard operating systems means customers aren't locked into buying from their traditional computer supplier and can force prices down. That, he said, is why Unisys is overhauling its whole business: It needs to prepare for a world in which profit margins will be lower than computer companies have been used to.

"We've approached this not as a response to a temporary condition in the industry but as a fundamental change the industry is going through," Mr. Unruh said. "The information-systems industry is still going to be a high-growth business, and we're confident that we have tremendous assets as a company. But we don't minimize the challenges of the near term."

Securities analysts were even more cautious, having been burned repeatedly on Unisys this year. Some had predicted earnings of more than $4 a share for this year, up from last year's fully diluted $3.27 a share on earnings of $680.6 million. But the company said Friday that it had losses of $673.3 million through the first nine months, compared with earnings a year earlier of $382.2 million, or $2.22 a share fully diluted, as revenue inched up 1.4% to $7.13 billion from $7.03 billion. And Unisys is expected to do little better than break even in the fourth quarter.

So Steve Milunovich at First Boston said he is cutting his earnings estimate for next year to $2 a share from $3. "I was feeling like I was too high to begin with," he said.

Mr. Weil of Weil & Associates said he will remain at $1 a share for next year but said he wonders whether even that low target is at risk. "The break-even point for next year is much lower, but is it low enough?" he asked.

Reflecting the concern, Unisys stock fell a further 75 cents to $16.25 in composite trading Friday on the New York Stock Exchange.

If a TV weatherman gets butterflies facing the camera again after a questionable forecast, Donald H. Straszheim surely understands. The chief economist of Merrill Lynch & Co. finds himself in such a position as he buzzes the Midwest on his first road trip since backpedaling on a major prediction.

Mr. Straszheim expects he will take some heat, and he's right. Since the last time he traveled this way several months ago, he has recanted a series of bold forecasts of a recession. In February 1988, for example, Merrill Lynch's weekly commentary announced that "the economy is likely to fall into recession in early 1989."

The forecasts were widely disseminated, and, in a splashy ad campaign launched in the summer of 1988, Merrill Lynch urged investors to buy bonds. It said long-term interest rates, then above 9%, could drop to 7% by the end of 1989, so bonds, which benefit from falling rates, would be a good buy. The firm also raised the percentage of bonds in its model portfolio from 40% to 45% and later to 55%.

But this September -- just when many market economists, including some at Merrill Lynch, believed that Mr. Straszheim was about to be proved right -- he took a detour if not a U-turn. He softened the talk about a recession. Now, in fact, he is predicting economic growth of 2.9% this year and 2.1% next year, a more optimistic outlook than the consensus of some four dozen top forecasters surveyed by Blue Chip Economic Indicators newsletter.

And, just recently, Merrill Lynch cut the recommended bondholdings back to 50%. While such changes might sound minor, they aren't: Merrill Lynch manages or oversees some $300 billion in retail accounts that include everything from mutual funds to individual annuities.

Two well-known colleagues who believe Mr. Straszheim was right the first time are David Bostian Jr. and A. Gary Shilling, both of whom run their own New York research firms. Mr. Bostian said in August that his macroeconomic index signaled recession. Mr. Shilling, who was Merrill Lynch's chief economist from 1967 to 1971, has heralded a recession for months. "My own personal opinion is that Don threw in the towel just about the time he should have doubled his bet," he says.

Now a rocky stock market and weak corporate profits may further threaten the economy. And Mr. Straszheim conceded after a recent drop in manufacturing jobs that "it may prove to be the case that we got whipsawed -- that we pulled the recession forecast at just the wrong time." He adds, "That's the forecasting business."

However risky the business, it's brisk these days. Pestered by bosses, brokers, clients and media people and pushed by their own egos, Wall Street economists are forecasting about everything from broad economic trends to the dinkiest monthly indicator. But the surprisingly durable seven-year economic expansion has made mincemeat of more than one forecast.

This isn't the quiet economic science practiced in the universities. This is the commercial version.

Carrying the new message on the road, Mr. Straszheim meets confrontation that often occurs in inverse proportion to the size of the client. No sophisticated professional expects economists to be right all the time. Some smaller clients don't seem to notice his switch. But with some clients, the talk can heat up a bit.

Dennis O'Brien, the treasurer of Commonwealth Edison Co. in Chicago, adopts a polite approach, waiting for an opportunity to ask about the forecast. A good half-hour into breakfast at the Palmer House, Mr. O'Brien looks up from his plate after Mr. Straszheim says something about people who believe interest rates are about to nosedive. "I'm one of them who hope they will, with $6 billion in debt on the books. Is that the forecast?" Mr. O'Brien asks, trying to pin down the economist. He doesn't fully succeed, although Mr. Straszheim lists an array of interest-rate scenarios.

In a chilly conference room at Alliance Capital Management in Minneapolis, in contrast, the firm's money managers seem ready to pin Mr. Straszheim to the wall. Alfred Harrison, the manager, shoves Mr. Straszheim's handout back at him: "Do we want to go through this? Or can we ask you why you changed your forecast just when it's about to be right?"

Swiveling in his chair, Mr. Straszheim replies that the new outlook, though still weak, doesn't justify calling a recession right now. " It's all in this handout you don't want to look at. We could still have a recession" at some point. One of Mr. Straszheim's recurring themes is that the state of the economy isn't a simple black or white. Sometimes, like now, it's gray.

This somewhat-ambiguous assessment moves one Alliance portfolio manager to ask: "So, what is this -- a Stealth recession?" Another challenges Merrill Lynch's bond recommendation last year. "We're not running that ad campaign any more," Mr. Straszheim snaps in a rare show of irritation. He adds, "I think it was a fairly decent call."

Explaining his change of mind, Mr. Straszheim says later, "It's hard to pin this on one factor." He says the economy, and especially the employment numbers, look much better than he expected; interest rates have generally declined; inflation hasn't run amok. "Our business is constantly looking at all these things," he says. His new forecast calls for "a soft landing." And it may be right, judging from last week's report that inflation-adjusted gross national product rose at a 2.5% annual rate in the third quarter.

Mr. Shilling understands Mr. Straszheim's problems. "There's unbelievable pressure on economists to forecast these numbers," he says. " You make a forecast, and then you become its prisoner."

It is indeed hard to back away from a widely publicized forecast, and Mr. Straszheim is fidgeting with the handcuffs on this trip. His approach to the recantation is direct but low-key. "For some time, we had forecast negative third- and fourth-quarter growth. We pulled that forecast," he begins matter-of-factly in a meeting with Piper, Jaffray & Hopwood Inc. officials in Minneapolis, the first stop.

Crane Co. said it holds an 8.9% stake in Milton Roy Corp., an analytical-instruments maker, and may seek control of the company.

Crane, a maker of engineered products for aerospace, construction, defense and other uses, made the disclosure in a Securities and Exchange Commission filing.

In the filing, Crane said that in the past it considered seeking control of Milton Roy, of St. Petersburg, Fla., through a merger or tender offer and that it expects to continue to evaluate an acquisition from time to time. Crane officials didn't return phone calls seeking comment.

Crane holds 504,200 Milton Roy shares, including 254,200 bought from Sept. 14 to Thursday for $15.50 to $16.75 each. In New York Stock Exchange composite trading Friday, Milton Roy shares leaped $2, to $18.375 each, while Crane sank $1.125, to $21.125 a share.

John M. McNamara, chief financial officer of Milton Roy, said the company has no comment on Crane's filing.

Milton Roy recently fended off unsolicited overtures from Thermo Electron Corp., a Waltham, Mass., maker of biomedical products. Milton Roy disclosed in May that it was approached for a possible acquisition by Thermo Electron, which agreed to purchase Milton Roy's liquid-chromatography line for $22 million in February. Thermo Electron acquired some 6% of Milton Roy's common stock before throwing in the towel and reducing its stake in early September.

Gabelli Group began raising its Milton Roy stake in July, and holds 14.6%, according to a recent SEC filing. It hasn't made merger overtures to the board.

Earlier this month, Milton Roy signed a letter of intent to acquire Automated Custom Systems Inc., Orange, Calif., and its sister operation, Environmental Testing Co., in Aurora, Colo. The companies are automotive-emissions-testing concerns.

Under the terms, Milton Roy will pay an initial $4 million for the operations and additional payments during the next four years based on the earnings performance of the businesses.

In the nine months, Milton Roy earned $6.6 million, or $1.18 a share, on sales of $94.3 million.

Last week the British displayed unusual political immaturity. The Chancellor of the Exchequer, Nigel Lawson, resigned because Prime Minister Thatcher would not fire her trusted adviser Sir Alan Walters. The opposition Labor Party leader, Neil Kinnock, in a display of the male chauvinism typical of the British lower class, denounced Mrs. Thatcher for having an independent mind and refusing to heed the men in her Cabinet. The British press, making a mountain out of a molehill, precipitated an unnecessary economic crisis by portraying Mrs. Thatcher as an autocrat who had thrown economic policy into confusion by driving a respected figure from her government.

Behind the silly posturing lies a real dispute. Mr. Lawson and his European-minded colleagues want the British pound formally tied to the West German mark. Sir Alan considers this an ill-advised and costly policy. As there is an effort to "anchor the dollar" either to gold or other currencies, the dispute is worth examining.

Until his resignation, Mr. Lawson had been conducting British monetary policy as if the pound were tied to the mark. When Mrs. Thatcher cut the top tax rate to 40%, Mr. Lawson flooded the country with money to prevent the pound from rising against the mark. As a result, he reignited the inflation that Mrs. Thatcher, through a long and costly effort, had subdued.

With inflation surging, the pound began falling against the mark. To keep the exchange rate pegged, Mr. Lawson tightened monetary policy and pushed interest rates up to 15%. This doubled the mortgage interest rates of the many new homeowners that Mrs. Thatcher's policies had created, producing widespread disaffection and pushing Labor ahead in the polls.

Instead of realizing his mistake in letting the exchange rate dominate both British economic policy and Mrs. Thatcher's political fortune, Mr. Lawson pushed for tying the pound formally to the mark by entering the European Monetary System, which subordinates all member currencies to German monetary policy. This put Mrs. Thatcher in a bind. The concept of European integration is one of those grand schemes that appeal to intellectuals, the media and the imagination, but are full of practical pitfalls.

If the pound had been tied to the mark, the British would have been unable to cut their exorbitant tax rates. The reason is simple. When a country cuts tax rates, it makes itself more attractive to investors and drives up the value of its currency.

It was fear of disturbing EMS exchange-rate relationships that caused the Chirac government in France to be timid about cutting tax rates. Edouard Balladur, the finance minister at the time, was sold on the tax-cut policy but was concerned that his government would be criticized as anti-European for disturbing the linked European currency relationship.

The price of attracting capital -- whether one's own or that of foreigners -- is a trade deficit. To avoid this deficit Mr. Lawson inflated the pound in order to prevent its rise. This misguided policy could not prevent a British trade deficit. Consequently, Mr. Lawson saddled Mrs. Thatcher with a record trade deficit, renewed inflation and high interest rates -- three political failures in a row. Little wonder that Mrs. Thatcher's opponents were so anxious to keep Mr. Lawson in office.

It is extraordinary that the British Treasury thought it could prevent a trade deficit by inflating the pound. The British balance-of-payments statistics show that after the top tax rate was cut to 40%, the flow abroad of British capital slowed, to 50 billion pounds ($79 billion at the current rate) in 1988 from 93 billion pounds in 1986. This change in the British capital account required an offsetting change in the trade account, a change that could not be prevented by pegging the currency.

Nigel Lawson was a victim of the immense confusion in thought that has been characteristic of Western financial circles during the 1980s. The most important governments have ignored the role of low tax rates in attracting real capital investment, instead emphasizing financial flows in response to high interest rates. This has led them in a fruitless and destructive policy circle. First comes monetary expansion to drive down the currency's value that was pushed up by tax-rate reduction. Then, when the currency falls, interest rates are raised to attract financial flows in order to stabilize the exchange rate. This policy is totally mindless, and Sir Alan is correct to point out its deficiencies.

Britain and all of Europe need to reconsider the prospects for European integration in light of the possible reunification and neutralization of Germany. A unified Germany that remained within the Western alliance would give Germany such an overshadowing position that all other members of a unified Europe would become vassals of the German state. Unless the Soviet Union collapses, German reunification is likely to require Germany's neutralization. The implications for Britain, France and the rest of Europe of having their currencies tied to the economic policy of a neutral country need considering before we judge Mr. Lawson's resignation to be unfortunate.

In the least, we must recognize the futility of trying to use exchange-rate intervention to offset the effects of tax-rate reduction on capital flows.

Mr. Roberts was assistant Treasury secretary under President Reagan.

Joseph P. Jordan, 52 years old, becomes president, chief executive officer and a director of the bank company. Mr. Jordan, formerly president and chief executive of Fishkill National Bank in Beacon, N.Y., succeeds Donald Broderick, who died at 52 in an automobile accident.

Personal spending, which fueled the economy's growth in the third quarter, was clearly slowing by the end of the period, raising questions about the economy's strength as the year ends.

Personal spending grew 0.2% in September to a $3.526 trillion annual rate, the Commerce Department said. It was the smallest monthly increase in a year.

At the same time, personal income was held down by the effects of Hurricane Hugo, which tore through parts of North and South Carolina in late September. The department said personal income rose 0.3% in September to a $4.469 trillion rate but would have climbed 0.6% had it not been for the storm. Among the economic effects of the hurricane was a sharp drop in rental income.

The figures came a day after the government released a report showing that consumer spending propelled U.S. economic expansion in the third quarter while -- on an inflation-adjusted basis -- business investment slowed, government spending declined, and exports were flat.

But the new statistics show that by September, the burst in spending seemed to be tapering off. Many economists expect the weakness to continue.

"I think the consumer has pretty well played himself out," said David Littman, senior economist at Manufacturers National Bank of Detroit.

"I don't think there's a lot in the wings" in other sectors of the economy to keep growth above 1%, he said. In the third quarter, the economy grew at a moderate 2.5% annual rate.

In August, personal income rose 0.3% and spending grew 0.9%.

Analysts have attributed much of the summer's spurt in spending to bargain car prices at the end of the model year. Car sales slackened in September after the 1990 models were introduced. According to the Commerce Department report, spending on durable goods -- items expected to last at least three years, including cars -- declined by $6.2 billion.

The nation's savings rate was unchanged in September at 4.9% of after-tax income, far below the 5.6% it reached in July.

All the figures are adjusted for seasonal variations.

Here is the Commerce Department's latest report on personal income. The figures are at seasonally adjusted annual rates in trillions of dollars.

CRA Ltd. said it agreed to sell a 40% stake in its Howick coal mine in the state of New South Wales to Mitsubishi Development Pty. of Japan.

The price wasn't disclosed. The agreement is subject to government approval.

RA acquired the Howick coal mine Oct. 20 when it bought British Petroleum Co. 's Australian coal interests for $275 million. CRA said then that it was looking for a partner for the mine, which produces more than three million metric tons of coal a year.

CRA is 49%-owned by RTZ Corp. of Britain.

Control Data Corp., which just months ago was hemorrhaging financially, thinks it will be healthy enough soon to consider repurchasing public debt.

Moreover, the company, whose go-it-alone approach nearly proved fatal, now sees alliances with others as the way back to prosperity in what it calls "the data solutions" business.

"I'm not saying everything is hunky-dory, but we have completed the transition," Robert M. Price, chairman and chief executive, said in an interview. "Transition" is a reference to the company's five-year restructuring effort. During that time, Control Data had losses of more than $1 billion.

Now, following asset sales that shrank revenue by more than one-third this year alone, Control Data is flush with cash. So its senior executives are talking openly about possibly buying back some of the company's $172.5 million in subordinated convertible debentures next year.

"We'd like to continue to reduce debt," President Lawrence Perlman said. Noting that the company is offering to buy back $154.2 million in senior notes paying 12 3/4%, he said the response will help determine future debt-reduction efforts. The offer was automatically triggered by the recent sale of Control Data's Imprimis disk-drive business to Seagate Technology Inc.

Mr. Perlman, who is also acting chief financial officer and the odds-on favorite to become the next chief executive, said the company is achieving "modest positive cash flow from operations, and we expect that to continue into 1990."

He said the company has no intention of tapping its short-term bank lines "for a good part of 1990." Sometime next year, Control Data will "develop a new bank relationship," Mr. Perlman said. In recent months a group of lenders, led by Bank of America, has extended Control Data up to $90 million in revolving loans through January, as well as $115 million in standby letters of credit.

Loan covenants require that the company achieve specified levels of operating earnings and meet a rolling four-quarter profitability test. Last week Control Data reported third-quarter earnings of $9.8 million, or 23 cents a share, on revenue of $763 million. Through the first nine months, the company had a loss of $484 million, largely reflecting the closing of its supercomputer unit.

While a few assets are still being shopped -- including the sports and entertainment ticketing portion of the company's Ticketron unit -- Mr. Price said future restructuring would be a question of strategy. "We don't need the cash."

Ticketron's automated wagering business, which operates lotteries in a half dozen states, is not for sale, the company said. Rather, Mr. Perlman said, Control Data intends to bid for the coming Minnesota lottery contract and is seeking new applications for the technology overseas, where "there is great interest in games of skill." He wouldn't elaborate.

Control Data's semiconductor business, VTC Inc., continues to lose money, the executives acknowledged, but they said they consider some of the technology vital to national defense and so are reluctant to dispose of it.

The company's strategy for keeping its computer products business profitable -- it recently achieved profitability after several quarters of losses -- calls for a narrow focus and a lid on expenses. Partly, costs will be held down through strategic technology alliances, management said. Control Data recently announced an agreement with MIPS Computer Systems Inc. to jointly develop machines with simplified operating software.

James E. Ousley, computer products group president, said such arrangements could help slash Control Data's computer research and development costs in half by the end of 1990. He disclosed that before Control Data scrapped its ETA Systems Inc. supercomputer business this past spring, those costs were running at nearly 35% of group revenue. At the same time four of six design projects were spiked, he said.

Asked how the company hopes to expand its computer hardware business, Mr. Ousley said it sees good opportunities in systems integration. "We think we're getting only 10% of the integration dollars our customers are spending," he said. "We're in environments that are going to spend a lot of money on that."

Control Data mainframes are designed for numerically intensive computing users, such as the scientific, engineering and academic communities. Utilities management is a major commercial niche.

Reviewing the company's scrape with disaster, Mr. Price conceded it had tried to do too much on its own. "Absolutely," he said.

But while its stock is selling at about half Control Data's estimated breakup value, neither Messrs. Perlman nor Price said he spends much time considering the possibility of a hostile takeover. "We've been listed as a candidate for so long it's not worth worrying about," said Mr. Price.

Well, the arrogant East Coast media have spoken again ("Going for the Green," editorial, Oct. 17). Having resided in the great state of California for the past seven years, I find it hard to ignore our environmental problems when I start my commute to work with eyes tearing and head aching from the polluted air; when I try to enjoy the beaches and come home covered with tar and oil; when I hear of numerous deaths related to irresponsible processing of cheese and use of chemicals in fruit growing.

Perhaps it's entertaining for those like you to discount the concerns of environmentalists, suggesting that their save-the-earth initiatives are "whacky" and referring to so many citizens as "la-la activists." Strange that we don't hear similar criticisms of the East Coast activists who seek to clean up Boston Harbor or rid their beaches of medical waste.

While there are no easy low-cost solutions, simply ignoring our problems will result in their severity increasing and spreading throughout the state, the nation and the world. If nothing else, such initiatives as these will provide an awareness to citizens and lawmakers and encourage appropriate corrective action.

Before your next California-bashing editorial, please spend more time out here witnessing the situation -- it just may change your view.

John Barry Ventura, Calif.

I realize you were just looking for something snotty to say about California and its environmental movement, but picking Frank Lloyd Wright to say it for you was a bad call. Wright's organic architecture demonstrated a keen sensitivity to the environment decades before it became fashionable among "la-la activists." Indeed, Wright said all his life that the greatest lessons he learned were derived from the study of nature. Obviously, it's lost on you that about 75% of the American people these days (and in fact the president of the United States) consider themselves environmentalists.

As for California being a state run by liberal environmental loonies, let's not forget where Ronald Reagan came from. Perhaps Mr. Reagan, who claimed that air pollution is caused by trees, is the man you should be quoting to back up your position that economics is more important than the Earth. But it was Frank Lloyd Wright who said, "Is this not Anti-Christ? The Moloch that knows no God but more?"

Robert Borden Santa Monica, Calif.

Your editorial was commendable and neatly matched by the readers' comments in letters to the editor, "Alar: Scaring on the Side of Caution." The illogic and inaccuracy of John H. Adams's comments for the National Resources Defense Council fully justifies your characterization of California's Greens in particular as "la-la activists." We may all hope that California's voters will heed the scientific realities that their own university's renowned Prof. Tom Jukes provides them and ignore the charlatanry profferred by their "wealthy Hollywood weepers."

I have a different approach to offer, not only to Californians, but to all Americans. In a free country, the law should restrict citizens as little as is consistent with good manners and public safety. Would-be naysayers should have the burden of proving reasonable necessity when they urge a prohibition for enactment into law.

W. Brown Morton Jr. Warsaw, Va.

The 170 airlines in the International Air Transport Association last year posted group net profit of $2.5 billion on revenue of $125.1 billion.

According to the association's annual report, scheduled to be released today in Warsaw, IATA members haven't posted such a strong performance since the late 1970s. Revenue last year increased by more than 11% over 1988, and net income nearly tripled from restated year-earlier net of $900 million.

The group attributed the strong results to the favorable economic climate, rising demand for air travel and improved average yield (revenue received per ton of traffic transported a kilometer). Systemwide, IATA airlines carried 632 million passengers last year, 2% more than in 1987. But passenger-kilometers, the distance flown while carrying people, increased 5.3% in 1988.

The association said that lack of airport and air space capacity is the biggest problem facing the airline industry.

The KGB has abolished a unit known for persecuting dissidents, the government newspaper Izvestia said. The newspaper quoted KGB chairman Vladimir A. Kryuchkov as saying the definition of anti-Soviet crimes had narrowed, the laws had changed and people no longer have to fear a simple slip of the tongue. Mr. Kryuchkov was quoted as saying that in place of the infamous 5th Directorate a new unit would work "to foil the conspiracies of foreign intelligence services to create and use organized anti-government groups in our country."

Czechoslovakia has restricted consumer-goods exports to neighbor countries because of "massive buying out of food" by tourists from Poland, Hungary and the Soviet Union, the Rude Pravo daily said. Rising inflation in Poland and Hungary makes Czechoslovak food, clothing and shoes relatively cheap for visitors from these countries. The paper gave no details of what the restrictions would entail but said the measures were necessary to protect the domestic market.

West Germany's biggest union, IG Metall, said it is ready to back demands for more pay and shorter hours with strikes against the nation's automotive, steel and engineering industries. Its chairman told the union to prepare for the worst in next year's confrontation with employers over a new three-year wage deal. A major goal is to cut the working week to 35 hours from the present 37.

Last week came news of alarm in Venice over a plan to tap gas fields off the city's coast. Now comes word from a scientist that over the next century Venice will sink nearly three times faster than the present rate because of the "greenhouse effect." "Global warming means higher tides which will lower Venice by another 23 inches in the next 100 years," Giovanni Cecconi of the the New Venice Consortium said. The consortium of scientists and companies was set up by Italy to help preserve the fabled city of canals. Venice has sunk 10 inches in this century.

West Germany's Quelle said it will establish a mail-order operation with two local partners in the Soviet Union next year. Saying this is a first for a Western company, West Germany's largest mail-order group said the newly established Moscow-based Intermoda company is scheduled to begin operations in February 1990. Intermoda will initially only send the textile and clothing section of the Quelle catalog, translated into Russian, to Soviet customers who have access to convertible currency.

The European Community Commission has imposed provisional anti-dumping duties on imports of South Korean small-screen color-television sets.

Saying that a surge in low-priced imports had damaged EC producers' profits and led to job losses, the commission imposed a duty of 10.2% on TVs made by Daewoo, a duty of 12.3% on Goldstar Co., 13% on Samsung and 19.6% on TVs made by other South Korean producers.

The commission said that EC television producers lost "important market shares" and suffered an "unsustainable" pressure on prices because of the Korean companies' marketing and pricing policies, which it said were "in clear violation" of international trade rules.

In other news concerning South Korea's television industry, Samsung signed an agreement with Soyuz, the external-trade organization of the Soviet Union, to swap Korean television sets and videocassette recorders for pig iron from the Soviet Union. South Korea and the Soviet Union have no diplomatic relations but exchanged trade offices earlier this year.

Sri Lanka, where more than 15,000 people have died in six years of ethnic turmoil, said it will ban sex and violence from state-owned television next year. "Many programs we have now come from the West and are not suitable to our culture," a government minister said. A star attraction on the national network is the U.S.'s "Dynasty." . . . A poll of South Koreans showed overwhelming opposition to efforts to curb dog-meat consumption just because it offends foreigners.

Broad Inc. said it doubled its regular quarterly dividend to five cents a share from 2.5 cents on common, and to 4.5 cents a share 2.25 cents on Class B stock, payable Nov. 10 to holders of record Nov. 6.

The financial services company emerged from the restructuring of Kaufman & Broad, Inc., which spun off its home-building subsidiary into Kaufman & Broad Home Corp. earlier this year and changed its name to Broad Inc.

For the 10-month fiscal year ended Sept. 30, Chairman Eli Broad said he expected earnings results to approximate analysts' estimates, which the company said have been revised upward to 80 cents a share. This would compare with an estimated loss of 3 cents a share for the comparable 10 months last year, which included restructuring costs.

If this battle were a movie, the producers would be fighting over two scripts with nothing but an opening scene in common.

In the opener, Sony Corp. would agree to buy Columbia Pictures Entertainment Inc. in a transaction valued at close to $5 billion. Shortly after that, Sony would offer to buy Guber-Peters Entertainment Co. for $200 million and offer its co-chairmen, Peter Guber and Jon Peters, the chance to run Columbia. Mr. Peters would fly to New York with the intention of telling Warner Communications Inc. Chairman Steven J. Ross that Guber-Peters planned to end its five-year contract to produce movies exclusively for Warner.

That's where the two scripts would diverge. In affidavits filed in Los Angeles Superior Court in connection with the $1 billion breach-of-contract suit Warner brought against Sony for hiring the two producers, Mr. Guber and Mr. Peters tell one story. Warner tells another.

In the affidavits, Mr. Peters says he was "shocked" when Mr. Ross refused a meeting and made it clear he would stop them. Mr. Peters claims he reminded Mr. Ross that Robert Daly and Terry Semel, the top executives of the Warner Brothers studio, had "repeatedly agreed that we had every right to accept" an offer such as Sony's. In response, Mr. Peters says, Mr. Ross referred to his colleagues at Warner with an "obscenity" and said: "Tell them that they don't have a job. You can take them with you."

Warner denies Mr. Ross ever said any such thing, and, in fact, denies virtually everything Mr. Guber and Mr. Peters say in their affidavits. Tomorrow, Warner will file another batch of documents contending that "the essence of everything these guys are saying is basically lies," says Warner's chief outside counsel, Stuart Rabinowitz. Thursday, a judge is scheduled to rule on Warner's motion seeking to block the Guber-Peters duo from going to Columbia.

The battery of legal documents filed in the past week in connection with the suit provide a peek into the inner workings of this Hollywood dogfight. But they also make it clear that the first thing a judge will have to decide is which, if any, version of events in this morass is fiction, and which fact.

The matter may never even be tried in court. Warner says that what it really wants is for the producers to fulfill their contractual obligations, but the bitterness of this battle and the accusations flying on both sides make it unlikely that the decade-long relationship between Warner and its two most prolific producers can ever be repaired. Warner, which is in the process of merging with Time Warner Inc., says it is willing to settle the matter out of court. So far, however, Sony hasn't been willing to meet its considerable financial demands.

Mr. Guber and Mr. Peters don't have much to gain from a protracted battle. Sony, for its part, could decide that the cost of a Warner settlement or court fight is too high, choosing instead to find someone else to run Columbia, although that too would be costly given the financial arrangement already guaranteed to Mr. Guber and Mr. Peters. In that case, Mr. Guber and Mr. Peters might not suffer financially, but they would be left without their dream job of running a studio and with a considerably scarred relationship with Warner.

At the center of any court fight will be the differing interpretations of the written contract between Warner and the two producers, but other murkier issues will play a big role. Sony and the Guber-Peters team are hanging much of their case on Warner's willingness last year to release the producers from another contract and on an oral agreement they say allowed them to terminate the current written contract if the opportunity to run a major studio came up. Warner denies such an agreement was made, and disputes the Guber-Peters version of virtually every telephone call and meeting the two sides had on the matter.

Just how rancorous the relationship has become is clear from the differing versions of the two sides' current business dealings. Mr. Guber and Mr. Peters say in their affidavits that Warner already is taking steps to freeze them out of their projects at Warner, notably the Sylvester Stallone film "Tango and Cash."

Mr. Peters says in his affidavit that the movie's staff was told last week that Warner was "taking over" the picture, and another producer would be giving all of the orders. Over his objections, Mr. Peters says, the film's release date was moved up "by many months" to December, and plans for a soundtrack "worth millions of dollars" were dropped.

Hubert de la Bouillaire, an editor on the film, backs Mr. Peters in a separate sworn declaration. Mr. de la Bouillaire says Warner Brothers production president Mark Canton called him Oct. 19 and said Mr. Peters is "off the picture. If he calls you up, just tell him everything is fine." The editor also says the new producer on the film, Bruce Baird, told editors to screen the picture without telling stars Sylvester Stallone and Kurt Russell or Mr. Peters. "The less they know, the easier it is for us. If someone asks, just lie and tell them it will be done," Mr. de la Bouillaire says Mr. Baird told them.

That, says Warner's Mr. Rabinowitz, is "a total 100% lie." The movie, he says, is in its post-production stages of "cleaning up the film." He says Mr. Peters and Mr. Guber, as the contractual producers with consultation rights, have been invited to screenings and to give their input on the film. Dozens of Guber-Peters staffers are still working on the Warner lot and consulting on various projects on a "daily basis," the attorney says.

Mr. Guber, in his affidavit, says that when he advised Warner President Terry Semel of the Sony offer at lunch on Sept. 25, Mr. Semel "hugged and congratulated me, and expressed joy that we had finally realized our long-term ambition of running and having an equity position in a major entertainment company."

Mr. Guber says he brought to lunch a release document Warner had agreed to in 1988, when he and Mr. Peters made an aborted bid to buy part of MGM/UA Entertainment Co. to run the MGM studio. Mr. Guber says he had crossed out "MGM" with a red pen and written in "Columbia," giving the document to Mr. Semel. "Mr. Semel said absolutely nothing to indicate Warner would have any objection to our assuming management positions at Columbia," Mr. Guber says.

Mr. Semel, in his affidavit, doesn't mention any hugging or congratulating. He says he told Mr. Guber he couldn't sign any documents and that "the deal, although apparently a good one for him and Mr. Peters, would have a very negative impact on Warner." He said he would contact Mr. Ross and Warner Brothers Chairman Robert Daly and that, in a conference call, the three agreed they couldn't let the producers out of their contract.

Mr. Ross, in his own affidavit, says he and Mr. Daly instructed Mr. Semel to tell the producers Warner wouldn't terminate their agreement.

Mr. Guber says that Mr. Semel did convey that information and that Mr. Semel said Mr. Ross was "crazy because of the Time deal," meaning, Mr. Guber says, that Mr. Ross "did not want to communicate to his new merger partner, Time Inc., that Warner's agreements provided for our departure under these circumstances."

Mr. Guber also says in his affidavit that Mr. Daly "told us that even if Sony did not want us, Warner's relationship with us already was irreparably damaged, that there was no way `to put the egg together, ' and that it would sue Sony for tons of money."

Moreover, Mr. Guber claims, Mr. Semel told him that Mr. Ross probably wouldn't object "if it were anybody other than Sony. But Sony is a problem." The Guber-Peters side has said Warner is particularly concerned about the prospect of a huge Japanese company controlling important segments of the U.S. entertainment business.

Some in Hollywood suggest Mr. Guber and Mr. Peters took encouragement from Warner studio executives such as Mr. Semel and Mr. Canton too literally. According to this theory, Warner executives, hoping to strengthen their relationships with the producers, encouraged Mr. Guber and Mr. Peters in their ambitions to build a major entertainment company. But the Warner executives in their affidavits deny ever telling the producers they could get out of their written contract.

Mr. Rabinowitz, the Warner attorney, says the studio still wants the producers to come back and fulfill their contract. "They are like a mini-studio; they have 50 projects in development for Warner," he says.

But Mr. Guber indicates in his affidavit that not all of the projects will be used. For example, he says that since 1985, he and Mr. Peters have developed over 85 movie projects, and Warner has "passed" or chosen not to produce at least 76.

As for the projects remaining at Warner, Mr. Guber says, "Mr. Semel informed me that Warner's producers have already started a `feeding frenzy' for our projects.

E.W. Scripps Co. said it has acquired a Georgia cable television company and a Massachusetts publishing firm. Terms on both deals weren't disclosed.

The media company said it purchased Cable USA Inc., a privately held cable television system in Carroll County, Ga., a suburb of Atlanta. The system is still under construction and will serve a market of 7,600 homes.

The company also has acquired Sundance Publishers and Distributors Inc., a family owned producer and distributor of educational materials in Littleton, Mass.

Despite politicians' hand-wringing about the federal budget, the government ended fiscal 1989 with a $152.08 billion deficit, about the same as the two previous years.

Even White House budget director Richard Darman had trouble finding a silver lining in the report. "I suppose you could say the good news is that the deficits are not heading up," he said, "but you can't be satisfied with deficits at this level and we're not."

The federal deficit was $155.15 billion in 1988 and $149.69 billion in 1987.

The 1989 deficit would have been nearly $10 billion larger had the government been able to spend as much as Congress intended on cleaning up the thrift industry before the year ended on Sept. 30. Because the Resolution Trust Corp. couldn't spend the money fast enough, the savings-and-loan outlays were pushed into fiscal 1990.

Nevertheless, the 1989 deficit still exceeded the $136 billion target set by the Gramm-Rudman deficit-reduction law by $16 billion, a reminder of that law's shortcomings.

The law sets a deficit target of $100 billion for fiscal 1990. A partisan fight over cutting capital-gains taxes has slowed the progress of 1990 deficit-reduction legislation almost to a halt, triggering across-the-board spending cuts under the Gramm-Rudman law.

The White House and the Democratic leadership in Congress blame each other for turning capital-gains taxes into such a divisive issue this year. Neither side showed any sign of retreating.

Meeting with reporters Friday, Mr. Darman again said he would rather live with across-the-board spending cuts than accept a deficit-reduction bill like the one passed by the House, which would increase spending in future years.

Underscoring the size of the deficits of the past few years, the Treasury report showed that for the first time interest paid on the public debt -- $240.86 billion -- exceeded spending on Social Security, the single largest government program.

In all, federal outlays amounted to $1.143 trillion in 1989, up 7.5% from the previous year, the Treasury said. Federal revenues rose 9% to $990.79 billion.

The Treasury said a surge in tax receipts noted earlier in the year didn't turn out to be quite as strong as it first appeared. The Treasury marked up its forecast by $17 million in July, but that proved to be about $5 billion too optimistic.

The government ran a deficit of $6.16 billion in September, compared with a surplus of $10.17 billion in September 1988.

Outlays for the month totaled $105.39 billion, up from $87.57 billion a year earlier. The increase reflects spending on the S&L rescue as well as payroll and Social Security checks normally issued in October that were issued in September this year because Oct. 1 fell on a Sunday.

Revenues were $99.23 billion, up from $97.74 billion a year earlier.

CMS Energy Corp. said it would begin paying a 10-cent-a-share quarterly dividend, the company's first since 1984.

Consumers Power Co., now the main unit of CMS Energy, ran into financial problems over its $4.2 billion Midland nuclear plant, which was abandoned as a nuclear facility in 1984 because of construction delays and high costs. CMS is nearly done converting the Midland plant to a gas-fired cogeneration facility at a cost of $600 million.

CMS management said Thursday that they planned to recommend paying a modest dividend when the board of directors met Friday. The dividend will be paid Nov. 22 to shares of record Nov. 7.

The company suffered a loss of $270 million in 1985, but its financial situation has been improving since then.

Humana Inc. said it expects to receive about $27 million in federal income-tax refunds and interest from a court ruling on a tax dispute.

The health-care company said it expects the refund to be included in the first quarter ending Nov. 30. The refund is about $9 million. Accrued interest on the refund was about $18 million as of Oct. 25.

The refund stems from a court ruling that found certain payments by Humana subsidiaries to its insurance subsidiary during fiscal 1977 through 1979 were deductible as premiums for liability insurance.

Polly Peck International Inc. 's agreement to acquire 51% of Sansui Electric Co. proves that foreign companies can acquire Japanese companies -- if the alternative for the Japanese company is extinction.

Polly Peck, a fast-growing British conglomerate, will pay 15.6 billion yen ($110 million) for 39 million new shares of Sansui, a well-known maker of high-fidelity audio equipment that failed to adjust to changing market conditions. Japanese government officials, eager to rebut foreign criticism of Japanese investments overseas, hailed the transaction as proof foreigners can make similar investments in Japan. Polly Peck's chairman, Asil Nadir, echoed the official Japanese view of the accord, which was announced Friday.

"The myths that Japan is not open to concerns from outside has, I think, been demolished at a stroke," Mr. Nadir said.

But analysts say Sansui is a special case. It expects to post a loss of 6.4 billion yen for the year ending tomorrow and its liabilities currently exceed its assets by about 13.8 billion yen. " If you find sound, healthy companies in Japan, they are not for sale," said George Watanabe, a management-consultant at Tokyo-based Asia Advisory Services Inc.

Statistics on acquisitions by foreigners vary in detail, because unlike Sansui, which is listed on the Tokyo and Osaka stock exchanges, most of the Japanese companies acquired by foreigners are privately held. But by all accounts foreign companies have bought only a relative handful of Japanese companies this year, while Japanese companies have acquired hundreds of foreign companies.

Nor do analysts expect the Sansui deal to touch off a fresh wave of foreign purchases. If the strong yen and the high stock prices of Japanese companies weren't deterrents enough, webs of cross-shareholdings between friendly Japanese companies and fiercely independent Japanese corporate attitudes repel most would-be acquirers.

Usually when a Japanese company is ready to sell, it has few alternatives remaining, and the grim demeanors of Sansui's directors at a joint news conference here left little doubt that this was not the company's finest hour. Sansui was once one of Japan's premier makers of expensive, high-quality stereo gear for audiophiles.

But in recent years, the market has moved toward less expensive "mini-component" sets, miniaturized amplifiers and receivers and software players that could be stacked on top of each other.

Some of Sansui's fellow audio-specialty companies, such as Aiwa Co. and Pioneer Electric Corp., responded to the challenge by quickly bringing out mini-component products of their own, by moving heavily into the booming compact disk businesses or by diversifying into other consumer-electronics fields, including laser disks or portable cassette players. Sansui was late into the mini-component business and failed to branch into other new businesses.

As the yen soared in recent years, Sansui's deepening financial problems became a vicious circle. While competitors moved production offshore in response to the sagging competitiveness of Japanese factories, Sansui lacked the money to build new plants in Southeast Asia. "Our company has not been able to cope very effectively with" changes in the marketplace, said Ryosuke Ito, Sansui's president.

But even a Japanese company that looks like a dog may turn out to be a good investment for a foreign concern, some management consultants maintain.

Yoshihisa Murasawa, a management consultant for Booz-Allen & Hamilton (Japan) Inc., said his firm will likely be recommending acquisitions of Japanese companies more often to foreign clients in the future. "Attitudes {toward being acquired} are still negative, but they're becoming more positive," Mr. Murasawa said. "In some industries, like pharmaceuticals, acquisitions make sense."

Whether Polly Peck's acquisition makes sense remains to be seen, but at the news conference, Mr. Nadir brimmed with self-confidence that he can turn Sansui around. Sansui, he said, is a perfect fit for Polly Peck's electronics operations, which make televisions, videocassette recorders, microwaves and other products on an "original equipment maker" basis for sale under other companies' brand names.

He said Polly Peck will greatly expand Sansui's product line, using Sansui's engineers to design the new products, and will move Sansui's production of most products other than sophisticated audio gear offshore into Polly Peck's own factories.

"Whatever capital it (Sansui) needs so it can compete and become a totally global entity capable of competing with the best in the world, that capital will be injected," Mr. Nadir said.

And while Polly Peck isn't jettisoning the existent top-management structure of Sansui, it is bringing in a former Toshiba Corp. executive as executive vice president and chief operating officer.

Such risk taking is an everyday matter for the brash Mr. Nadir, who is 25% owner of Polly Peck as well as its chairman. He took Polly Peck, once a small fabric wholesaler, and used it at as a base to build a conglomerate that has been doubling its profits annually since 1980. In September, it announced plans to acquire the tropical-fruit business of RJR Nabisco Inc. 's Del Monte foods unit for #557 million ($878 million).

Last month, Polly Peck posted a 38% jump in pretax profit for the first half to #54.8 million from #39.8 million on a 63% rise in sales.

Joann S. Lublin in London contributed to this article.

The bolstered cellular agreement between BellSouth Corp. and LIN Broadcasting Corp. carries heightened risks and could fail to fend off McCaw Cellular Communications Inc., the rival suitor for LIN.

Moreover, the amended pact shows how McCaw's persistence has pushed LIN and BellSouth into a corner, forcing huge debt on the proposed new company. The debt, estimated at $4.7 billion, could mortgage the cellular company's future earning power in order to placate some LIN holders in the short term.

The plan still calls for LIN to combine its cellular telephone properties with BellSouth's and to spin off its broadcasting operations. But under new terms of the agreement, announced Friday, LIN holders would receive a special cash dividend of $42 a share, representing a payout of about $2.23 billion, shortly before the proposed merger. LIN said it expects to borrow the money to pay the dividend, but commitments from banks still haven't been obtained. Under previous terms, holders would have received a dividend of only $20 a share.

In addition, New York-based LIN would exercise its right to buy out for $1.9 billion the 55% equity interest of its partner, Metromedia Co., in a New York cellular franchise. That money also would have to be borrowed. In effect, McCaw has forced LIN's hand by bidding $1.9 billion for the stake earlier this month.

"We're taking on more debt than we would have liked to," acknowledged Michael Plouf, LIN's vice president and treasurer. Although he expressed confidence that the proposed new company's cash flow would be sufficient to cover interest payments on the debt, he estimated that the company wouldn't be profitable until 1994 or later.

Analyst estimate the value of the BellSouth proposal at about $115 to $125 a share. They value McCaw's bid at $112 to $118 a share. The previous BellSouth pact was valued at about $98 to $110 a share.

McCaw, the largest provider of cellular telephone service in the U.S., already owns about 9.4% of LIN's stock. In response to BellSouth's amended pact, the Kirkland, Wash., company extended its own offer to buy 22 million LIN shares for $125 apiece, which would give McCaw a 50.3% controlling interest. Over the weekend, McCaw continued to call for an auction of LIN. Analysts said they expect McCaw to escalate the bidding again.

"This game isn't over yet," said Joel D. Gross, a vice president at Donaldson, Lufkin & Jenrette Securities Corp. "At some point, it will become non-economical for one company. But I don't think we're at that point yet."

Under its revised proposal, Atlanta-based BellSouth would have a 50% interest in the new cellular company and would be responsible for half of its debt. To sweeten the pact further -- and to ease concerns of institutional investors -- BellSouth added a provision designed to give extra protection to holders if the regional Bell company ever decides to buy the rest of the new cellular company. The provision, described as "back-end" protection, would require BellSouth to pay a price equivalent to what an outside party might have to pay.

McCaw's bid also has a similar clause. Only McCaw's proposal requires the company to begin an auction process in June 1994 for remaining shares at third-party prices.

To mollify shareholders concerned about the long-term value of the company under the BellSouth-LIN agreement, BellSouth also agreed to pay as much as $10 a share, or $540 million, if, after five years, the trading value of the new cellular company isn't as high as the value that shareholders would have realized from the McCaw offer.

"We're very pleased with the new deal. We didn't expect BellSouth to be so responsive," said Frederick A. Moran, president of Moran Asset Management Inc., which holds 500,000 LIN shares. BellSouth's "back-end protection was flawed previously. We think this is a superior deal to McCaw's. We're surprised. We didn't think a sleeping {Bell} mentality would be willing to take on dilution."

But Kenneth Leon, a telecommunications analyst with Bear, Stearns & Co., finds the BellSouth proposal still flawed because the company doesn't have to wait five years to begin buying more LIN shares. "How many shares will be around in 1995?" he asked. "There's nothing preventing BellSouth from buying up shares in the meanwhile."

BellSouth's revised proposal surprised many industry analysts, especially because of the company's willingness to accept some dilution of future earnings. William O. McCoy, president of the company's BellSouth Enterprises Inc. unit, said the revised agreement with LIN would dilute BellSouth earnings by about 9% in both 1990 and 1991 and by significantly less thereafter. Indeed, BellSouth's cellular operations were among the first in the country to become profitable.

For 1988, BellSouth earned $1.7 billion, or $3.51 a share, on revenue of $13.6 billion. Analysts were predicting 1990 BellSouth earnings in the range of $3.90 a share, or $1.9 billion, but now those estimates are being scaled back.

In composite trading Friday on the New York Stock Exchange, BellSouth shares fell 87.5 cents to $52.125.

In national over-the-counter trading, LIN shares soared $4.625 to closed at $112.625, while McCaw fell $2.50 a share to $37.75.

The proposed BellSouth-LIN cellular company, including the newly acquired Metromedia stake, would give the new entity 55 million potential customers, including about 35 million in the nation's top 10 markets.

Mr. Leon of Bear Stearns speculated that McCaw, in an attempt to buy time, might consider filing an antitrust suit against BellSouth with the Justice Department and U.S. District Judge Harold Greene, who oversees enforcement of the consent decree that broke up the Bell system in 1984.

Indeed, McCaw seemed to hint at that option in a brief statement. Urging LIN directors to conduct "a fair auction on a level playing field," McCaw asked how well the public interest would be served "with the Bell operating companies controlling over 94% of all cellular {potential customers} in the nation's top 10 markets.

Market makers in Nasdaq over-the-counter stocks are adding their voices to the swelling chorus of complaints about program trading.

Their motivation, however, has a strong practical aspect: Program trading is hazardous to their paychecks. The most controversial form of program trading, stock-index arbitrage, is "making it tough for traders to make money," declares Robert Antolini, head of OTC trading at Donaldson, Lufkin & Jenrette.

Stock-index arbitrage -- the computer-guided buying and selling of stocks with offsetting trades in stock-index futures to profit from fleeting price discrepancies -- affects the OTC market directly through the 31 stocks included in Standard & Poor's 500-stock index. The S&P 500 is often used in arbitrage strategies.

The portion of OTC volume attributable to program trading isn't known, as it is on the New York Stock Exchange, where it amounted to more than 13% in September. Estimates from traders put it at less than 5% of Nasdaq's average daily volume of roughly 133 million shares.

Other market-maker gripes: Program trading also causes the Nasdaq Composite Index to lose ground against other segments of the stock market. Because of program trading it is more difficult to trade many OTC stocks without sharp price moves, a condition known as illiquidity. Moreover, the price volatility that is amplified by program trading is undercutting efforts to woo individual investors back to an OTC market that sorely misses them.

Some of these problems are neither new nor unique to the OTC market. But the big, often tumultuous slide in stock prices this month has turned some of those who have been profiting from the practice against it.

Peter DaPuzzo, head of retail equity trading at Shearson Lehman Hutton, acknowledges that he wasn't troubled by program trading when it began in the pre-crash bull market because it added liquidity and people were pleased to see stock prices rising.

"We weren't as concerned until they became sell programs," says Mr. DaPuzzo, who now thinks it adds unnecessary volatility. Shearson Lehman, however, executes program trades for clients.

Merrill Lynch, Goldman Sachs and Kidder Peabody, in addition to Shearson, do program-trade OTC stocks. Shearson, Merrill Lynch and Goldman Sachs say they do so only for customers, however. Kidder Peabody does program trading for its own as well as clients' accounts.

Of course, there were sell programs in past years, too, but they seem to hurt market makers more painfully these days. That's largely because of defensive measures they adopted after the 1987 crash, when individual investors fled the market and trading activity dwindled. Market makers, to cut costs, slashed inventories of stocks they keep on hand to sell investors when other holders aren't selling.

And to protect their reduced capital investment from eroding further, market makers became quicker to lower price quotes when sell programs are in progress. On days when prices are tumbling, they must be willing to buy shares from sellers when no one else will. In such an environment, market makers can suffer huge losses both on trades made that day at steadily dropping prices and in the value of their inventories of shares.

"It makes no sense for us to put money at risk when you know you're going to lose," says Mr. Antolini, of Donaldson Lufkin.

But this skittishness, Mr. Antolini says, is creating liquidity problems in certain OTC stocks. "It's harder to sell stocks when the sell programs come in because some market makers don't want to {take the orders}. No one has big positions and no one wants to take big risks."

Joseph Hardiman, president of the National Association of Securities Dealers, which oversees trading on Nasdaq, agrees that program trading is hurting the market's efforts to bring back small investors. But, he observes, while makers suffer losses when program trading drags the market down, they also make money when program trading pushes the prices higher. "Sometimes {traders} lose sight of that," he says.

The OTC stocks in the S&P 500 include Nasdaq's biggest, such as Apple Computer, MCI Communications, Tele-Communications and Liz Claiborne. These big stocks greatly influence the Nasdaq Composite Index. When the computers say "sell," the composite tumbles as well as the Dow Jones Industrial Average.

The problem, market makers say, is that while the industrial average and the S&P 500 usually recover as buy programs kick in, the Nasdaq Composite frequently is left behind.

Eight trading days after Oct. 12, the day before the stock market plunge, for instance, the Nasdaq Composite had fallen 4.3%, compared with 3.3% for the S&P 500, 3.5% for the New York Stock Exchange Composite Index and 3.6% for the industrial average. This gap eventually closes, but slowly. Three days later, as of Friday's close, the Nasdaq Composite was down 6%, compared with 5.9% for the industrial average, 5.7% for the S&P 500 and 5.8% for the Big Board Composite.

The main reason for this lag is that individual investors own 65% of the OTC market's capitalization, according to Mr. Hardiman, much more than on the Big Board. Such investors tend to be more cautious than institutional investors are about re-entering the market after massive selloffs, market makers say.

Friday's Market Activity

The Nasdaq Composite Index tumbled 5.39, or 1.2% to 452.76 on Friday. For the week, the index dropped 3.8%.

Weakness in big technology stocks hurt the composite as well as the Nasdaq 100 Index, which fell 1.4%, or 6.43, on Friday, to 437.68. The Nasdaq Financial Index lost about 1%, or 3.95, to 448.80.

Friday's trading volume totaled 132.8 million shares. The average daily share turnover for October is almost 148 million shares.

LIN Broadcasting surged 4 5/8 to 112 5/8; LIN and BellSouth sweetened their merger agreement in an attempt to keep shareholders from tendering their shares to McCaw Cellular Communications. McCaw, which dropped 2 1/2 to 37 3/4, has offered $125 a share for a majority of LIN's shares.

The revised LIN-BellSouth agreement boosts the dollar amount of the special dividend LIN promises to pay shareholders. LIN now plans to dole out $42 a share in cash, up from the earlier $20 amount.

Intel eased 1/8 to 31 7/8. The semiconductor concern said the interruption in shipment of its 80486 computer chip will be brief and have little impact on the company's earnings. The stock fell 7/8 Thursday amid concerns over problems discovered with the chip. Intel told analysts that the company will resume shipments of the chips within two to three weeks.

Weisfield's rocketed 9 1/2 to 39 after the jewelry store operator said it is in preliminary discussions, with a party it wouldn't identify, regarding the possible acquisition of the company.

Starpointe Savings Bank rose 3 to 20 after the Federal Deposit Insurance Corp. approved Dime Savings Bank of New York's $21-a-share acquisition of Starpointe.

Kirschner Medical fell 4 to 15. The company said its third-quarter earnings will probably be lower than the 16 cents a share it reported last year, despite a rise in the company's revenue. Kirschner earned $376,000 on revenue of $14.5 million in the 1988 quarter. The company blamed a number of factors for the earnings decline, including softer sales of joint-implants.

London share prices closed sharply lower Friday in active trading after Chancellor of the Exchequer Nigel Lawson's resignation slapped the market and Wall Street's rapid initial sell-off knocked it down.

London shares were depressed initially by overnight losses in New York and by the drop in sterling after Mr. Lawson's resignation. It showed some early resilience after central bank support firmed sterling, but the weight of Wall Street late in London trading, and signs of further weakness in the British pound, proved a hefty load to bear. New York stocks recovered some of their losses after the London market closed.

The Financial Times 100-share index shed 47.3 points to close at 2082.1, down 4.5% from the previous Friday and 6.8% from Oct. 13, when Wall Street's plunge helped spark the current weakness in London.

The 30-share index settled 42.0 points lower at 1678.5. Volume was 840.8 million shares, up from 443.6 million Thursday and the week's most active session.

Dealers said the turnover, largely confined to the 100-share index stocks, partly reflected the flurry of activity typical at the close of a two-week trading account and the start of a new account. But they said Friday's focus on the top-tier stocks telegraphed active overseas selling and showed the broad-based fears over the status of the U.K. economy and Britain's currency in the wake of the upheaval in Prime Minister Margaret Thatcher's cabinet.

A senior dealer with Warburg Securities noted British Gas, the most active blue-chip stock at 20 million shares traded, was affected by the political implications of Mr. Lawson's departure and Mrs. Thatcher's cabinet shuffle.

He attributed the unusually high volume to broad-based selling on fears that the Thatcher government may be in turmoil and Britain's Labor Party positioned to regain control of the government and renew efforts at nationalization.

British Gas shed 8.5 pence a share to close at 185 pence ($2.90).

Other dealers added that the blue-chip stocks in general were hit by profit-taking over concerns that London shares will continue posting declines and the uncertainty over sterling given that Mr. Lawson's successor, John Major, had only been in the job one day.

Besides British Gas, British Steel skidded 1.74 to 123.5 on turnover of 11 million shares.

British Petroleum fell 5 to 286 on 14 million shares traded. Dealers said the multinational oil company was pressured by recent brokerage recommendations urging investors to switch into Shell Trading & Transport. Shell eased 1 to 416 on turnover of 4.8 million shares.

Among the other actively traded blue-chip issues, Imperial Chemical Industries dropped 11 to #10.86, Hanson skidded 9.5 to 200.5, and British Telecom fell 10 to 250.

In Tokyo, stocks closed lower but above intraday lows in active trading. The Nikkei index was pressured down by profit-taking triggered by sharp advances made through this week and fell 151.20 points to 35527.29.

In early trading in Tokyo Monday, the Nikkei index fell 148.85 points to 35378.44.

On Friday, the Tokyo stock price index of first section issues was down 15.82 at 2681.76. First-section volume was estimated at 1.3 billion shares, up from 886 million shares Thursday.

An official at Wako Securities said brokerages' excessive expectations about recent advances in Tokyu Group shares and real estate issues were dashed Friday.

Dealers placed heavy buy orders in the morning to start the first trading day for November transactions. But they failed to sell these stocks to client investors, who were cautious about the sharp gains these issues made this week, the Wako official said.

Fund managers said Friday's profittaking was a natural result of the week's "abnormal fever" in buying real estate, shipbuilding, steel and construction shares.

Frankfurt prices closed lower again Friday, the fourth decline in the past five days and the culmination of a week that saw the DAX index lose 4%. The DAX dropped 19.69 points Friday to 1462.93.

Traders said the continued turbulence in other markets, coupled with the drop in London following the Lawson resignation, were responsible.

Traders said that selling pressure wasn't enormous and that the DAX dropped Friday more on a lack of any substantial buying interest. They said contributing to the downward drift was the fact that many professional traders had chosen to square positions ahead of the weekend.

"It's the whole uncertainty about what's happening around us," said Valentin Von Korff, a trader at Credit Suisse First Boston in Frankfurt. "If you take away the outside influences, the market itself looks very cheap. What's happening here isn't justified by the fundamentals."

Traders said the market remains extremely nervous because of the wild swings seen on the New York Stock Exchange last week. That's leaving small investors with cold feet, they said, and prompting institutions to take a reserved stance on the sidelines as well, at least until the market in New York settles down somewhat.

Elsewhere, share prices closed lower in Paris, Zurich, Amsterdam, Brussels and Stockholm, and were mixed in Milan. The British shakeup was widely cited for the declines.

Share prices also closed lower in Sydney, Hong Kong, Singapore, Taipei, Manila, Wellington and Seoul. Concern about declines in other markets, especially New York, caused selling pressure.

Here are price trends on the world's major stock markets, as calculated by Morgan Stanley Capital International Perspective, Geneva. To make them directly comparable, each index is based on the close of 1969 equaling 100. The percentage change is since year-end.

Last week's best and worst performing stocks among those issues that make up 80% of the world's stock market capitalization (in local currency)

Source: Morgan Stanley Capital Intl.

APARTHEID FOES STAGED a massive anti-government rally in South Africa.

More than 70,000 people filled a soccer stadium on the outskirts of the black township of Soweto and welcomed freed leaders of the outlawed African National Congress. It was considered South Africa's largest opposition rally. Walter Sisulu, the ANC's former secretary general who served 26 years in prison before being released two weeks ago, urged peace, negotiation and discipline. President de Klerk's government permitted the rally, and security forces didn't interfere.

Pretoria's approval of the demonstration and the ANC's conciliatory tone appeared aimed at setting up negotiations to give blacks political rights.

CONGRESSIONAL LEADERS BACKED Bush's criticism of Nicaragua's Ortega.

While lawmakers haven't raised the possibility of renewing military aid to the Contras following Ortega's weekend threat to end a truce, Senate Majority Leader Mitchell said on NBC-TV that Ortega had made "a very unwise move. " Minority Leader Dole plans to offer a resolution tomorrow denouncing the Nicaraguan president, whose remarks came during a celebration in Costa Rica marking regional moves to democracy. Ortega cited renewed attacks by the U.S.backed rebels.

Lawmakers must decide next month whether the Contras will get so-called humanitarian aid under a bipartisan agreement reached in March.

Spain's Socialist Party claimed victory in nationwide elections, saying it had retained its parliamentary majority by one seat. With all the votes counted, a government spokesman said Prime Minister Gonzalez's party won 176 seats in the 350-seat Cortes, or lower house of parliament. The Socialists held 184 seats going into the balloting.

Thousands of East Germans attended public rallies organized by the Communist leadership and demanded free speech, controls on the security forces and an end to official privileges. The gatherings in East Berlin and elsewhere were viewed as part of a government effort to stop activists from staging protests to press their demands. Dissidents in Czechoslovakia said the nation's pro-democracy movement was growing despite the government's move to crush a protest Saturday in Prague's Wenceslas Square. More than 10,000 demonstrators had called for free elections and the resignation of Communist Party leader Milos Jakes. Police detained more than 350 people.

Federal investigators have determined a metallurgical flaw that developed during the making of an engine disk led to the July crash of a United Airlines jetliner in Sioux City, Iowa, killing 112 people.

Congress sent to Bush an $8.5 billion military construction bill that cuts spending for new installations by 16%. The measure also moves more than $450 million in the Pentagon budget to home-state projects from foreign bases.

U.S. and Soviet officials are to open a new round of talks today aimed at reducing chemical-weapons arsenals amid superpower differences over whether to stop making the gases. The talks in New York are the first since Bush and Soviet Foreign Minister Shevardnadze unveiled proposals in September to scrap existing weapons.

Afghan guerrillas bombarded Kabul in a weekend assault that Western diplomats called one of the biggest offensives since the Soviet Union completed a troop withdrawal in February. The rebels also reportedly tightened a blockade on roads leading to the capital, and government forces shelled a guerrilla-held area in western Afghanistan.

Lebanon's Christian leader convened an emergency meeting of his cabinet after indications that he might dissolve Parliament in an attempt to scuttle an Arab-sponsored peace plan. Gen. Michel Aoun rejected the pact because it fails to provide a timetable for a Syrian troop pullout from Lebanon.

Authorities in Hawaii said the wreckage of a missing commuter plane with 20 people aboard was spotted in a remote valley on the island of Molokai. There wasn't any evidence of survivors. The plane failed to reach Molokai's airport Saturday while on a flight from the neighboring island of Maui.

The Oakland Athletics won baseball's World Series, defeating the San Francisco Giants in a four-game sweep. An earthquake Oct. 17 in Northern California had caused a 10-day delay midway through the championship contest, which ended Saturday at San Francisco's Candlestick Park.

Died: Rudolf von Bennigsen-Foerder, 63, chairman of Veba AG of West Germany, in Duesseldorf, of pneumonia.

The West German machinery and plant equipment industry's orders rose an inflation-adjusted 1% in September from a year earlier despite a sharp drop in foreign orders, the German Association of Machinery Makers said.

Before adjustment for inflation, the association said, orders were up a nominal 5%. While domestic orders climbed an adjusted 8% and a nominal 11% in September, foreign orders declined 4% after inflation and 1% on a nominal basis.

In the third quarter, orders rose a real 5% and a nominal 9%. Domestic orders were up a real 11% and a nominal 14%, while foreign orders rose a real 1% and a nominal 5%.

When Michael S. Perry took the podium at a recent cosmetics industry event, more than 500 executives packing the room snapped to attention.

Mr. Perry, who runs Unilever Group's world-wide personal-care business, paused to scan the crowd. "I see we have about half the audience working for us," he said, tongue in cheek. "The other half, we may have before long."

Members of the audience gasped or laughed nervously; their industry has been unsettled recently by acquisitions. First Unilever, the Anglo-Dutch packaged-goods giant, spent $2 billion to acquire brands such as Faberge and Elizabeth Arden. It now holds the No. 3 position at U.S. department-store cosmetic counters. Then Procter & Gamble Co. agreed to buy Noxell Corp. for $1.3 billion. That acquisition, to be completed by year end, will include the Cover Girl and Clarion makeup lines, making P&G the top marketer of cosmetics in mass-market outlets.

It's not so much the idea of acquisitions that has agitated the cosmetics industry as the companies doing the acquiring: P&G and Unilever bring with them great experience with mundane products like soap and toilet paper, sparking disdain in the glitzy cosmetics trade; but they also bring mammoth marketing clout, sparking fear. Though it is far from certain that companies best known for selling Promise margarine and Tide detergent will succeed in cosmetics, there's little doubt they will shake up the industry.

For now, both companies are keeping quiet about their specific plans. But industry watchers expect them to blend the methodical marketing strategies they use for more mundane products with the more intuitive approach typical of cosmetics companies. Likely changes include more emphasis on research, soaring advertising budgets and aggressive pricing. But some cosmetics-industry executives wonder whether techniques honed in packaged goods will translate to the cosmetics business. Estee Lauder Inc., Revlon Inc. and other cosmetics houses traditionally have considered themselves fashion enterprises whose product development is guided by the creative intuition of their executives. Cosmetics companies roll out new makeup colors several times a year, and since most products can be easily copied by competitors, they're loath to test them with consumers.

"Just because upscale cosmetics look like packaged goods and smell like packaged goods, it doesn't mean they are packaged goods," says Leonard Lauder, chief executive of Estee Lauder. "They're really fashion items wrapped up in little jars."

In contrast to the more artistic nature of traditional cosmetics houses, Unilever and P&G are the habitats of organization men in gray-flannel suits. Both companies are conservative marketers that rely on extensive market research. P&G, in particular, rarely rolls out a product nationally before extensive test-marketing. Both can be extremely aggressive at pricing such products as soaps and diapers -- to the extent that some industry consultants predict cents-off coupons for mascara could result from their entry into the field.

P&G already has shown it can meld some traditional packaged-goods techniques with the image-making of the cosmetics trade in the mass-market end of the business. Consider Oil of Olay, which P&G acquired as part of Richardson-Vicks International in 1985. The moisturizer, introduced in 1962, had a dowdy image. "Oil of Olay brought with it the baggage of being used basically by older women who had already aged," says David Williams, a consultant with New England Consulting Group.

P&G set out to reposition the brand by broadening the product line to include facial cleansers and moisturizers for sensitive skin. It also redesigned Oil of Olay's packaging, stamping the traditional pink boxes with gold lines to create a more opulent look. Moreover, P&G shifted its ad campaign from one targeting older women to one featuring a woman in her mid-30s vowing "not to grow old gracefully." The company says sales have soared.

Goliaths like Unilever and P&G have enormous financial advantages over smaller rivals. Next year, Noxell plans to roll out a perfume called Navy, says George L. Bunting Jr., chairman of Noxell. Without P&G's backing, Noxell might not have been able to spend the estimated $5 million to $7 million needed to accomplish that without scrimping on its existing brands. Packaged-goods companies "will make it tougher for smaller people to remain competitive," Mr. Bunting says.

Further consolidations in the industry could follow. Rumors that Unilever is interested in acquiring Schering-Plough Corp. 's Maybelline unit are widespread. Unilever won't comment; Schering, however, denies the brand is for sale.

The presence of Unilever and P&G is likely to increase the impact of advertising on cosmetics. While the two are among the world's biggest advertisers, most makers of upscale cosmetics spend relatively little on national ads. Instead, they focus on events in department stores and pour their promotional budgets into gifts that go along with purchases. Estee Lauder, for example, spends only an estimated 5% of sales on advertising in the U.S., and Mr. Lauder says he has no plans to change his strategy.

The most dramatic changes, however, probably will come in new-product development. Nearly 70% of cosmetics sales come through mass-distribution outlets such as drug stores and supermarkets, according to Andrew Shore, an analyst at Shearson Lehman Hutton Inc. That figure has been inching up for several years. As the trend continues, demand for mass-market items that are high quality but only mid-priced -- particularly skin-care products -- is expected to increase. This fall, for example, L'Oreal Group, ordinarily a high-end line, rolled out a drug-store line of skin-care products called Plenitude, which retail for $5 to $15.

The packaged-goods marketers may try filling that gap with a spate of new products. Unlike the old-line cosmetics houses, Unilever and P&G both have enormous research and development bases to draw on for new products. P&G, in fact, is noted for gaining market leadership by introducing products that offer a technical edge over the competition. Sales of its Tide detergent soared earlier this year, for example, after P&G introduced a version that includes a bleach safe for all colors and fabrics.

That's led industry executives to speculate that future product development will be driven more by technological innovation than by fashion whims -- especially among mass-market brands. "There will be more emphasis on quality," says Guy Peyrelongue, chief executive of Cosmair Inc., the U.S. licensee of L'Oreal. "You'll see fewer gimmicks."

But success for Unilever and P&G is far from guaranteed, as shown by the many consumer-product companies that have tried and failed to master the quirky beauty business. In the 1970s, several pharmaceutical and packaged-goods companies, including Colgate-Palmolive Co., Eli Lilly & Co., Pfizer Inc. and Schering-Plough acquired cosmetics companies. Industry consultants say only Schering-Plough, which makes the mass-market Maybelline, has maintained a meaningful business. Colgate, which acquired Helena Rubenstein in 1973, sold the brand seven years later after the brand languished.

Unilever already has experienced some disappointment. The mass-market Aziza brand, which it acquired in 1987 along with Chesebrough-Pond's Inc., has lost share, according to industry analysts.

The ritzy world of department-store cosmetics retailing, where Unilever is concentrating its efforts, may prove even more treacherous. In this niche, makeup colors change seasonally because they are linked to ready-to-wear fashions. Because brand loyalty is weak and most cosmetics purchases are unplanned, careful training of store sales staffs by cosmetics companies is important. And cultivating a luxury image strong enough to persuade consumers to pay more than $15 for lipstick or eye makeup requires a subtle touch that packaged-goods companies have yet to demonstrate on their own.

There may be a truce in the long war of nerves between the White House and Congress over how this country conducts secret intelligence operations abroad.

After years of mistrust born of Watergate, past misdeeds of the Central Intelligence Agency, and the Iran-Contra scandal, President Bush and the Senate Intelligence Committee appear ready -- for now, at least -- to trust each other when it comes to setting policy on covert activities. If that attitude lasts, it could infuse covert action planning with a level of care and confidence that hasn't been seen in years.

Over the past week, the president has agreed to keep the committee informed, usually in advance, of covert actions and to put key intelligence decisions in writing. That wasn't always the way the Reagan administration handled such matters.

Mr. Bush has pledged as well to respect the 14-year-old executive order barring U.S. agents from assassinating foreign leaders or helping others to do so. Congress never fully trusted former CIA chief William Casey and National Security Adviser John Poindexter to honor the ban.

Despite objections by the CIA, Mr. Bush also has agreed to the establishment of an inspector general at the CIA who would be independent of the CIA director.

In return, the Senate panel has dropped efforts to enact legislation requiring the administration to inform it within 48 hours of the launching of any covert activity. It also has removed a ban on CIA use of a contingency fund for covert acts and has agreed to wipe away some tortured and legalistic restrictions on coup planning put in place to ensure that the CIA didn't get back in the assassination game.

"We've finally been able to convince them that Casey and {Oliver} North don't work here anymore," says one administration official.

The new understanding didn't just spring to life in a spontaneous eruption of sweetness and light. It emerged after a rancorous display of old-style intelligence politics that followed this month's failed coup attempt in Panama.

The White House used television appearances and leaks to argue that congressionally imposed restrictions on covert actions made U.S. support for such coups difficult. Mr. Bush even disclosed privately that one Reagan-era deal with Congress required him to notify the odious Panamanian dictator, Manuel Noriega, if the U.S. learned of a coup plot that might endanger his life. The president also hinted he might veto this year's intelligence authorization bill if it is too restrictive.

Intelligence Committee Chairman David Boren (D., Okla.) and Vice Chairman William Cohen (R., Maine), for their part, angrily accused the White House of selectively leaking classified documents and trying unfairly to shift the blame to Congress for the bungled attempt to topple Gen. Noriega.

The White House got the better of the exchange but took care not to press its advantage to the kind of constitutional confrontation sought by conservative Republicans who don't want any congressional oversight of intelligence activities. Instead, Mr. Bush and his aides made it clear they respected Congress's role and felt they could work with the conservative Mr. Boren and the moderate Mr. Cohen to iron out their differences.

The senators responded in kind. Sen. Boren happily told reporters that there had been "a meeting of the minds" with the White House, and that the committee had given Mr. Bush "a clean slate," free of the impediments imposed during the Reagan years. Sen. Cohen said the relationship has reverted to its pre-Reagan character.

There still are some details to be nailed down. Mr. Bush is reserving the right in "rare" instances to keep Congress in the dark, asserting a constitutional prerogative the committee doesn't recognize. And a pending Justice Department interpretation of the assassination ban could raise questions that would have to be settled.

Moreover, both sides may face political critics. Some conservatives will accuse the president of promising Congress too much. And they continue anonymously attacking CIA Director William Webster for being too accommodating to the committee. At the same time, some congressional liberals will accuse Sens. Boren and Cohen of wimping out, and they will warn that the lawmakers' concessions raise the specter of more internationally embarrassing covert operations like the mining of Nicaraguan harbors and the Iran arms sales.

But if the cooperative attitude holds and there is greater consultation on covert activities, the country could be entering an era when such hare-brained schemes are scrapped before they get off the drawing boards, while risky but well-planned secret operations can be undertaken without fear that a panicky Congress will balk.

Several of the New York Stock Exchange's own listed companies, led by giant Contel Corp., are joining for the first time to complain about program trading and the exchange's role in it.

Claiming program trading has turned the Big Board into a "gambling casino," Contel Chairman Charles Wohlstetter said that he and at least 20 other corporate executives are forming an unprecedented alliance. The group, Mr. Wohlstetter said in an interview, wants to end the market's wild price swings that critics blame on computer-aided program-trading strategies. The group will complain to Washington, to the heads of program-trading firms and to the heads of the Big Board itself, he said.

"They should call {the exchange} Trump East," charged Mr. Wohlstetter, the 79-year-old founder of Contel who's also a former investment banker and stock trader. "What is the mission of the financial community -- to help some scavengers or schemers, or help corporate America?" Contel is a $6 billion telephone and electronics company.

Pressure has been building on the Big Board in the past two weeks to do something about market volatility, which many investors say is caused by program trading. The market's Friday-the-13th plunge of 190 points in the Dow Jones Industrial Average, and the Big Board's understated response to it, galvanized some longstanding dissatisfaction among companies listed on the exchange. Last month, program trading accounted for a record 13.8% of average daily Big Board volume.

Mr. Wohlstetter, for example, said he wrote to Big Board Chairman John J. Phelan Jr. about program trading after the 190-point Dow plunge, and as in previous queries, "what I get back is gobbledygook." He said he's upset that Mr. Phelan, trying to calm investors after the plunge, said that investors would simply have to get used to the market's big price swings. The Big Board "is partly to blame {for the price swings}, because they're cowards," said Mr. Wohlstetter. "Their powerful members manage them."

The focus of the outcry has been stock-index arbitrage, which accounts for about half the program trading that goes on. Index arbitragers argue that their trading is healthy because it links markets, but critics say such trading accelerates market movements and increases the chance for a crash.

The Big Board has refused to be drawn into a public debate about program trading. Richard Grasso, Big Board president, last week said only that the exchange is concerned about all its constituents. Privately, exchange officials worry that without a hospitable system for program trading at the Big Board, billions of dollars in trading will simply migrate to overseas exchanges such as London's. It is partly for this reason that the exchange last week began trading in its own stock "basket" product that allows big investors to buy or sell all 500 stocks in the Standard & Poor's index in a single trade. One intended customer of the new basket product is index arbitragers, according to the exchange.

Investors have complained for some time about program trading, particularly index arbitrage, to little avail. But according to some Big Board traders, an organized campaign from exchange-listed companies might make the exchange finally consider big changes. "They won't fight the listed companies. Now the assault is on," said one top trader. The Big Board can't ban stock-index futures, of course, but it could ban use of its high-speed electronic trading system for program trading or at least encourage securities firms to back off. The exchange put a bit of a damper on program trading when, last year, it simply started to publish monthly statistics of each firm's program-trading volume.

Contel's Mr. Wohlstetter said the group of Big Board companies isn't ready to go public yet with its effort, and that he doesn't plan to be the leader once it is public. However, he said he planned to spend the weekend making calls to gather additional support. Among those Mr. Wohlstetter said he has been talking to are Sanford Weill of Primerica Corp., which is the parent of Smith Barney, Harris Upham & Co.; GTE Corp. 's James Johnson, and ITT Corp. 's Rand Araskog.

None of these chief executives were available for comment.

Among the targets of the Big Board companies' campaign will be some corporate pension funds that use program-trading strategies to maximize returns on their investments. For Contel's part, the company a month ago informed each of its money managers that it would drop them if they give business to program-trading firms.

It was just those kinds of ultimatums that last week succeeded in turning up the heat in the debate. Kemper Corp. 's Kemper Financial Services unit said it cut off Bear Stearns, Morgan Stanley, Oppenheimer and General Electric Co. 's Kidder, Peabody & Co. unit. All of the firms except Kidder, which is the second-biggest program trader on Wall Street, quickly announced pull-backs from index arbitrage.

Kidder officials stand by their aggressive use of program trading. Chief Executive Officer Michael Carpenter said that despite the outcry even by some of Kidder's own brokers, he believes index arbitrage doesn't have a "negative impact on the market as a whole. " However, pressure on Kidder's parent, GE, could change Kidder's policy. GE Chairman John Welch has been "besieged with phone calls" complaining about his unit's program trading, according to a person close to him.

Margaret Thatcher's instinctive response to the latest upheaval in her government is to promise business as usual. That may be the last thing she needs.

As the air clears from last week's storm of resignations and reshufflings, the government faces a daunting job of rebuilding confidence in its policies. The prime minister and her new chancellor of the exchequer, the untested John Major, need to haul the country through something like a recession to bring down inflation and set the economy moving again. Mrs. Thatcher has to come to terms with European economic integration, beginning with the European Monetary System, which Britain is committed to joining fully someday. Finally, the government has to convince a rattled financial community -- and voters -- it is proceeding coherently toward its goals.

It sounds like the work of a decade, but the deadline is late 1991, when Mrs. Thatcher is expected to call another national election. What's worrying her supporters is that the economic cycle may be out of kilter with the political timetable. She could end up seeking a fourth term in an economy sick with inflation, high interest rates and a heavy trade deficit.

Though Mrs. Thatcher has pulled through other crises, supporters wonder if her steely, autocratic ways are the right formula today. "There's a rising fear that perhaps Mrs. Thatcher's style of management has become a political liability," says Bill Martin, senior economist at London brokers UBS-Phillips & Drew.

The prime minister's insistence on keeping a private coterie of advisers -- including an economic guru who openly criticized former Chancellor of the Exchequer Nigel Lawson -- confused the financial community. Last week, the strategy of playing the two experts off each other blew up: Mr. Lawson quit in exasperation and Sir Alan Walters, the adviser, announced his resignation within an hour.

The confusion could be costly. Currency traders, suspecting Mr. Major won't defend the pound strenuously, sent the British currency sharply lower Friday against the dollar and West German mark. Analysts expect further jitters this week.

A continuing slide in the pound could force the government to push through another rise in the base rate, currently 15%. That could shove a weak economy into recession. Economists have been anticipating a slump for months, but they now say it will be deeper and longer than they had thought. Britain's economy "is developing rapidly toward no-growth," says J. Paul Horne, international economist with Smith Barney, Harris Upham Co. in Paris.

A mild slowdown probably would have run its course by early 1991, economists say, while the grueling downturn now expected could stretch into 1992. Recovery could be hampered if Britain's major trading partners in Europe, which are enjoying robust economic activity, cool off as expected in late 1990 and 1991.

That would leave Mrs. Thatcher little room for maneuver. For the Tories to win the next election, voters will need to sense economic improvement for about a year beforehand. Though Mrs. Thatcher doesn't need to call an election until June 1992, she would prefer doing so in late 1991. "If the economy shows no sign of turning around in about year's time, she will be very vulnerable," says John Barnes, a lecturer at the London School of Economics.

There's an equally pressing deadline for the government to define its monetary and economic ties to the rest of the European Community. It has sent mixed signals about its willingness to take part in the exchange-rate mechanism of the European Monetary System, which links the major EC currencies. At a June EC summit, Mrs. Thatcher appeared to ease her opposition to full EMS membership, saying Britain would join once its inflation rate fell and the EC liberalized capital movements.

Since then, the government has left observers wondering if it ever meant to join. Sir Alan assailed the monetary arrangement as "half-baked" in an article being published in an American economics journal. That produced little reaction from his boss, reinforcing speculation the government would use its two conditions as a pretext for avoiding full EMS membership.

Despite the departure of Mr. Lawson and Sir Alan, the tug-of-war over the EMS could continue. Sir Geoffrey Howe, deputy prime minister and a Lawson ally on the EMS, has signaled he will continue pressing for early membership.

Of immediate concern is whether the Thatcher government will continue Mr. Lawson's policy of tracking the monetary policies of the West German Bundesbank and responding in kind when the Frankfurt authorities move interest rates. Mrs. Thatcher "doesn't like taking orders from foreigners," says Tim Congdon, economist with Gerrard & National Holding PLC.

As Conservatives rally around Mrs. Thatcher during the crisis, many harbor hopes last week's debacle will prompt change. "We won't have any more of this wayward behavior," says Sir Peter Hordern, a backbench Tory member of Parliament. "The party is fed up with sackings of good people."

It's an unrealistic expectation. As long as a decade ago, Mrs. Thatcher declared she didn't want debate in her cabinet; she wanted strong government. Over the weekend, she said she didn't intend to change her style and denied she is authoritarian. "Nonsense," she told an interviewer yesterday on London Weekend Television. "I am staying my own sweet, reasonable self.

Joseph L. Dionne, chairman and chief executive officer of McGraw-Hill Inc., was elected to the board of directors of this electronics manufacturer. He succeeds the retiring James W. Wilcock.

Base Data

Computers that once were the state of the art, The marvels bought three years ago, Are now obsolete. As we queasily start The search for replacements, we know The new one we purchase in hopes it will do, Despite every wonder that's stated, Means more speed, more graphics, more memory, too, But also more quickly out- dated!

-- Bern Sharfman.

Curdling Confession

I know when dividends are due; When bonds should be retired; But what gets by me every time Is has the milk expired?

-- Ralph Shaffer.

Daffynition

Tithing: Obedience to one-tenth Commandment.

-- Len Elliott.

Wives May Not Benefit When Men Do Chores

WHEN HUSBANDS take on more housework, they tend to substitute for chores done by the kids rather than by the wife.

Rand Corp. researchers Linda Waite and Frances Goldscheider analyzed a large sample of married women with at least one child at home between the ages of six and 18. The women indicated which family member usually did various household chores and the approximate share each did.

Not unexpectedly, wives, whether working or non-working, did by far the most -- about 80% of the shopping, laundry and cooking, and about two-thirds of housecleaning, washing dishes, child care and family paper work. Only for yardwork and home maintenance did women do less than half.

But the researchers found that while children's household tasks eased the mother's burden appreciably, the husband's helping hand "appears to lighten the children's load almost on a one-for-one basis and to reduce the wife's responsibility only modestly."

This pattern was particularly evident among more highly educated couples. In these families, husbands took on 80% more chores than in couples with only grammar school education. But the kids with highly educated parents did 68% less housework than those in less-educated families.

"It is clear," Ms. Waite says, "that most of the effect of increasing education has been to shift who is helping the wife/mother. Her share decreases, but only slightly."

Nursing Home Patients Apt to Be Private Payers

FAR FEWER elderly nursing home residents bankrupt themselves than was previously believed, two recent studies declare.

State governments place very low ceilings on how much property people may own or how much income they may keep if they want welfare help on medical bills. Conventional wisdom has long held that anywhere from one-fourth to one-half of all elderly long-term care patients are obliged to spend themselves into poverty before qualifying for Medicaid assistance. But separate reports from Joshua Weiner and Denise Spence of the Brookings Institution and Korbin Liu of the Urban Institute find that "a surprisingly small proportion" -- only about 10% -- of residents start out as private payers but "spend down" to Medicaid levels in a single nursing home stay before they die or are discharged. (Another one-third are already on Medicaid when they enter the nursing homes, a considerably higher proportion than the analysts anticipated.)

But a remarkably high percentage -- over half -- are private payers throughout their stay, even a fairly lengthy one. About one-third pay out of their own pockets, while the rest are covered throughout by Medicare, private insurers or the Veterans Administration. Both reports are based on several thousand patients sampled in a 1985 nationwide government survey.

The Brookings and Urban Institute authors caution, however, that most nursing home stays are of comparatively short duration, and reaching the Medicaid level is more likely with an unusually long stay or repeated stays. Moreover, they note, those who manage to pay their own way often do so only by selling their homes, using up life savings or drawing heavily on children and other relatives.

Reagan Era Young Hold Liberal Views

THE REAGAN generation young men and women reaching political maturity during Ronald Reagan's presidency -- are firmly liberal on race and gender, according to NORC, the social science research center at the University of Chicago.

Many political analysts have speculated that the Reagan years would produce a staunchly conservative younger generation. NORC's most recent opinion surveys find the youngest adults indeed somewhat more pro-Reagan and pro-Republican than other adults. But, says chief investigator Tom Smith, this "does not translate into support for conservatism in general or into conservative positions on feminist and civil rights issues."

Answers to a dozen questions in the 1986, 1987, 1988 and 1989 national surveys reveal that men and women in the 18 to 24 age bracket are considerably more liberal on race and gender than were the 18 to 24 year olds in NORC's polling in the early 1970s and early 1980s. They were also as liberal or more liberal than any other age group in the 1986 through 1989 surveys.

For example, 66% of the 18 to 24 year olds in the four latest surveys favored an "open housing" law prohibiting homeowners from refusing on racial grounds to sell to prospective buyers. That compares with 58% of the similar age group in the 1980 through 1982 surveys and 55% in the 1972 through 1975 surveys.

Asked whether they agreed or disagreed with the claim that men are emotionally better suited to politics than women, 70% of the Reagan generation disagreed, compared with under 60% of younger men and women in the earlier years. Odds and Ends

SEPARATED and divorced men and women are far more likely to be smokers than married persons, the Centers for Disease Control discovers. . . . Graduate students are taking longer than ever to get their doctor of philosophy degrees, the National Research Council says. It estimates the time between college graduation and the awarding of a Ph. D. has lengthened by 30% over the past 20 years, with the average gap now ranging from about 7.4 years in the physical sciences to 16.2 years in education.

October was an edgy month for the practitioners of glasnost, the official Soviet policy of allowing more candor from the nation's media. For one of the superstars of glasnost, Vitaly Korotich, editor of the trail-blazing weekly Ogonyok, Friday, Oct. 20 was a somersaulting day that turned from tension to elation.

He had been summoned to the Central Committee of the Soviet Communist Party, after he finished his lunch at the Savoy Hotel, an unlikely prelude to a bureaucratic brow-beating: Eight-foot-tall Rubenesquely naked ladies float on their canvases toward a ceiling teeming with cherubs, all surrounded by gilt laid on with a pastry chef's trowel and supported by marble corinthian columns whose capitals are fluting fountains of gold.

Why had Mr. Korotich been called? "I told my driver," he said, "that he was taking my butt to the Central Committee so they can . . ." whack, whack, whack his hand made vigorous spanking gestures on his left palm. " They feel the need from time to time to `educate' me."

And indeed, as he later reported, that was the import of the meeting. Anxious allies of President Mikhail Gorbachev are cautioning media leaders to take it easy, to be careful not to do anything that could be used by Mr. Gorbachev's opponents. The government is nervous. According to Mr. Korotich, who was present, Mr. Gorbachev's publicized tongue-lashing of the press on Oct. 13 was more of a plea: "Be careful boys; use good judgment. We're standing in gasoline, so don't smoke!"

U.S. and northern European diplomats confirm Mr. Korotich's assessment that glasnost is in no immediate danger. In fact, a very high-ranking Soviet official told an American official at a diplomatic dinner that no change in the policy was contemplated. The day after that conversation at the residence of the U.S. ambassador, the Brezhnevite editor of Pravda, Victor Afnasjev, was replaced by a college classmate of Mr. Gorbachev's. Brezhnevite holdovers have more to fear from Mr. Gorbachev than the verbal spanking he gave to the press.

At the end of the very week in which Mr. Korotich was called to the Central Committee, Ogonyok was again demonstrating its independence by printing a poll that showed that 35% of the Soviet population, a plurality, believed that Mr. Gorbachev's economic reforms, perestroika, would result in only insignificant change.

A good measurement of the popularity of ice-breaker journals like Ogonyok is circulation. When Mr. Korotich took it over in 1986, it sold 250,000 copies; today it sells 3.4 million. Pravda, meanwhile, has retained only 57% of its 1986 readership.

Glasnost has made celebrities of men like Mr. Korotich. Prevented by the Communist Party from getting on its slate of nominees for the new Supreme Soviet, he stood as an independent candidate for Congress from his native Ukraine and won with 84% of the vote. The same evening that he was summoned for a warning from the Party, he was cheered by thousands of his supporters at a rally of what can only be called the Korotich party.

But as astounding as the changes that have already occurred are, there is a fragility to glasnost. Censorship isn't a Marxist invention. The czars were no civil libertarians. As late as the 1890s, the Russian government prevented any coverage of famines. It even directed newspapers not to publish anything that might stain the honor of the Turkish sultan's wives. So glasnost is not a value woven with steel threads into the fabric of Russian society. It is an admirable public relations program initiated by a single political leader during a four-year blink of history. It is public relations of the highest sophistication, that recognizes that credibility is enhanced by honesty -- up to a point.

What is that point? Will Ogonyok begin a series of reports analyzing the failures of perestroika? "I'd be destroying myself," replies Mr. Korotich, who then asks, "What would that accomplish? " His answer reveals his vulnerability -- it also draws the line that Soviet society must cross to enter the normal dialogue of Western culture. It is the line beyond which the press can report not only on the bankruptcy of factories but on the failures of even admirable leaders.

Mr. Ayers is editor and publisher of the Anniston, Ala., Star.

A state trial judge in Illinois gave preliminary approval to a proposed settlement of a suit against a Bank of New York Co. unit, Irving Trust Co., over the interest rates on Irving's former One Wall Street Account money-market deposit accounts.

Judge Albert Green, in Cook County Circuit Court in Chicago, also recognized the suit, filed last May by Robert and Cynthia Langendorf, as a class action covering thousands of Irving customers. The plaintiffs accused Irving of paying less interest than promised in a marketing brochure. Irving maintained -- and still does -- that its actions were proper under its account agreements with customers.

Under the proposed settlement, customers with valid claims -- to be submitted by Dec. 15 -- will receive "valuable bank services," such as credit cards with reduced finance charges, for two years. Larry Drury, attorney for the plaintiffs, valued the settlement at between $6 million and $8 million. A Bank of New York spokesman in Manhattan, Owen Brady, said, "That's the maximum, outside figure.

Federal Reserve critics used to complain of "stop and go" monetary policies. They claimed that the Fed would first give a green light to the economy by making credit readily available and then turn on the red and bring growth to a screeching halt. But under Alan Greenspan that has changed. A supremely cautious man, the Fed chairman is forever blinking yellow.

Indeed, his caution has become legendary within the government. He fusses endlessly over economic statistics, dissecting them in dozens of ways, probing for hours in search of potential problems. After thoroughly digesting reams of information, he often concludes that more data are needed, and when he finally decides to act, his movements sometimes seem excrutiatingly small.

Such caution was evident after the recent Friday-the-13th stock market plunge. Some Bush administration officials urged Mr. Greenspan to make an immediate public announcement of his plans to provide ample credit to the markets. But he refused, claiming that he wanted to see what happened Monday morning before making any public statement.

Mr. Greenspan's decision to keep quiet also prompted a near-mutiny within the Fed's ranks. A "senior Fed official" spoke on Saturday after the market swoon to both the Washington Post and the New York Times, saying the Fed was prepared to provide as much credit as the markets needed. The statement angered Chairman Greenspan, but it was greeted with applause by the Bush administration and the financial markets. And, while the mutinous Fed member hasn't gone public, some Fed governors, most notably Vice Chairman Manuel Johnson, are known to have disagreed with the chairman's decision to remain silent. Ironically, the anonymous official's comments have earned some plaudits for Mr. Greenspan, who is mistakenly seen as the source. At a hearing last week, Democratic Sen. Chris Dodd of Connecticut told Treasury Secretary Nicholas Brady that "Chairman Greenspan's" announcement over the Oct. 13 weekend was a "very important statement." Mr. Brady hesitantly replied that he wasn't sure whether Mr. Greenspan "made a statement himself, or whether that was a newspaper report."

The Fed chairman's caution was apparent again on the Monday morning after the market's plunge, when the central bank took only modest steps to aid the markets. A surprisingly small amount of reserves was added to the banking system. And, by the end of that week, the key federal funds interest rate, which is largely controlled by the Fed, had settled at 8.75%, barely changed from the level of just under 9% that prevailed the previous week.

Bush administration officials appear increasingly concerned that Mr. Greenspan is cautious to a fault. Signs of growing weakness in the economy, paired with indications that inflation is staying well under control, have caused them to wonder why the Fed chairman is so grudging in reducing rates.

Those concerns aren't expressed in public. In fact, the administration and the Fed have been going out of their way in the past two weeks to dispel any impression that they are at odds, fearing stories about an administration-Fed split added to the stock market's jitters. Still, the split is there.

The administration's concerns are understandable. The economy is showing signs of weakness, particularly among manufacturers. Exports, which played a key role in fueling growth over the last two years, seem to have stalled. Factory payrolls and production fell in September, and the auto industry and housing are in a severe crunch.

But Mr. Greenspan remains reluctant to loosen policy, partly because he faces a phalanx of presidents of regional Fed banks who oppose credit easing. In addition, the chairman has a wary eye aimed a year or two down the road. Inflation may be stable at the moment, running at about 4.5%. But if the Fed eases too soon, Mr. Greenspan fears, prices may begin to accelerate again next year. Moreover, if the Fed holds tight, it may be able gradually to reduce inflation, moving toward the zero-inflation goal that the Fed chairman embraced in testimony to Congress last week.

So far, Mr. Greenspan's cautious approach to policy has served both him and the nation well. His hand on the monetary tiller seems one reason why the economy next month seems highly likely to begin an unprecedented eighth year of peacetime growth without a recession. "We've gotten through two stock market crashes, and we've gone through an election without any major problems," says David Hale, an economist of Kemper Financial Services. "I think you have to give Greenspan a good rating."

But such caution is no guarantee against mistakes. The Fed's reluctance to ease credit now could be laying the groundwork for a new recession, perhaps starting early next year. If that happens, Chairman Greenspan could well become an open target. Already, Congress is toying with legislation to curb the Fed's independence. If the economy turns down, such proposals could gain strong momentum.

The following issues were recently filed with the Securities and Exchange Commission:

ECI Environmental Inc., initial offering of 1.1 million shares, of which ECI will sell 990,000 and co-founders will sell 110,000 shares, via Oppenheimer & Co.

Fastenal Co., proposed offering of 400,000 common shares by holders, via Robert W. Baird & Co. and William Blair & Co.

First Capital Holdings Corp., proposed offering of $275 million of floating rate senior notes, via Shearson Lehman Hutton Inc.

Industrial Funding Corp., initial offering of common stock, via Alex. Brown & Sons Inc. and Piper Jaffray & Hopwood.

Parametric Technology Corp., initial offering of 1.7 million common shares, of which 1,365,226 shares will be sold by the company and 334,774 shares by holders, via Alex Brown & Sons, Hambrecht & Quist and Wessels, Arnold & Henderson.

Union Camp Corp., shelf offering of up to $250 million of debt securities. Spencer J. Volk, president and chief operating officer of this consumer and industrial products company, was elected a director. Mr. Volk, 55 years old, succeeds Duncan Dwight, who retired in September.

In an age of specialization, the federal judiciary is one of the last bastions of the generalist. A judge must jump from murder to antitrust cases, from arson to securities fraud, without missing a beat.

But even on the federal bench, specialization is creeping in, and it has become a subject of sharp controversy on the newest federal appeals court.

The Court of Appeals for the Federal Circuit was created in 1982 to serve, among other things, as the court of last resort for most patent disputes. Previously, patent cases moved through the court system to one of the 12 circuit appeals courts. There, judges who saw few such cases and had no experience in the field grappled with some of the most technical and complex disputes imaginable.

A new specialty court was sought by patent experts, who believed that the generalists had botched too many important, multimillion-dollar cases. Some patent lawyers had hoped that such a specialty court would be filled with experts in the field. But the Reagan administration thought otherwise, and so may the Bush administration.

Since 1984, the president has filled four vacancies in the Federal Circuit court with non-patent lawyers. Now only three of the 12 judges -- Pauline Newman, Chief Judge Howard T. Markey, 68, and Giles Rich, 85 -- have patent-law backgrounds. The latter two and Judge Daniel M. Friedman, 73, are approaching senior status or retirement.

Three seats currently are vacant and three others are likely to be filled within a few years, so patent lawyers and research-based industries are making a new push for specialists to be added to the court. Several organizations, including the Industrial Biotechnical Association and the Pharmaceutical Manufacturers Association, have asked the White House and Justice Department to name candidates with both patent and scientific backgrounds. The associations would like the court to include between three and six judges with specialized training.

Some of the associations have recommended Dr. Alan D. Lourie, 54, a former patent agent with a doctorate in organic chemistry who now is associate general counsel with SmithKline Beckman Corp. in Philadelphia. Dr. Lourie says the Justice Department interviewed him last July.

Their effort has received a lukewarm response from the Justice Department. "We do not feel that seats are reserved (for patent lawyers)," says Justice spokesman David Runkel, who declines to say how soon a candidate will be named. "But we will take it into consideration."

The Justice Department's view is shared by other lawyers and at least one member of the court, Judge H. Robert Mayer, a former civil litigator who served at the claims court trial level before he was appointed to the Federal Circuit two years ago. "I believe that any good lawyer should be able to figure out and understand patent law," Judge Mayer says, adding that "it's the responsibility of highly paid lawyers (who argue before the court) to make us understand (complex patent litigation)."

Yet some lawyers point to Eli Lilly & Co. vs. Medtronic, Inc., the patent infringement case the Supreme Court this month agreed to review, as an example of poor legal reasoning by judges who lack patent litigation experience. (Judge Mayer was not on the three-member panel.)

In the Lilly case, the appeals court broadly construed a federal statute to grant Medtronic, a medical device manufacturer, an exemption to infringe a patent under certain circumstances. If the Supreme Court holds in Medtronic's favor, the decision will have billion-dollar consequences for the manufacturers of medical devices, color and food additives and all other non-drug products that required Food & Drug Administration approval.

Lisa Raines, a lawyer and director of government relations for the Industrial Biotechnical Association, contends that a judge well-versed in patent law and the concerns of research-based industries would have ruled otherwise. And Judge Newman, a former patent lawyer, wrote in her dissent when the court denied a motion for a rehearing of the case by the full court, "The panel's judicial legislation has affected an important high-technological industry, without regard to the consequences for research and innovation or the public interest."

Says Ms. Raines, "(The judgment) confirms our concern that the absence of patent lawyers on the court could prove troublesome.

Friday, October 27, 1989

The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.

PRIME RATE: 10 1/2%. The base rate on corporate loans at large U.S. money center commercial banks.

FEDERAL FUNDS: 8 3/4% high, 8 11/16% low, 8 5/8% near closing bid, 8 11/16% offered. Reserves traded among commercial banks for overnight use in amounts of $1 million or more. Source: Fulton Prebon (U.S.A.) Inc.

DISCOUNT RATE: 7%. The charge on loans to depository institutions by the New York Federal Reserve Bank.

CALL MONEY: 9 3/4% to 10%. The charge on loans to brokers on stock exchange collateral.

COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.50% 30 to 44 days; 8.25% 45 to 65 days; 8.375% 66 to 89 days; 8% 90 to 119 days; 7.875% 120 to 149 days; 7.75% 150 to 179 days; 7.50% 180 to 270 days.

COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.575% 30 days; 8.475% 60 days; 8.40% 90 days.

CERTIFICATES OF DEPOSIT: 8.09% one month; 8.04% two months; 8.03% three months; 7.96% six months; 7.92% one year. Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more. The minimum unit is $100,000. Typical rates in the secondary market: 8.55% one month; 8.50% three months; 8.40% six months.

BANKERS ACCEPTANCES: 8.52% 30 days; 8.35% 60 days; 8.33% 90 days; 8.17% 120 days; 8.08% 150 days; 8% 180 days. Negotiable, bank-backed business credit instruments typically financing an import order.

LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 11/16% to 8 9/16% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 7/16% to 8 5/16% six months.

LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 7/16% six months; 8 3/8% one year. The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.

FOREIGN PRIME RATES: Canada 13.50%; Germany 9%; Japan 4.875%; Switzerland 8.50%; Britain 15%. These rate indications aren't directly comparable; lending practices vary widely by location.

TREASURY BILLS: Results of the Monday, October 23, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.52% 13 weeks; 7.50% 26 weeks.

FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac): Posted yields on 30-year mortgage commitments for delivery within 30 days. 9.80%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae): Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.75%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages. Source: Telerate Systems Inc.

MERRILL LYNCH READY ASSETS TRUST: 8.65%. Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.

THE FINANCIAL ACCOUNTING STANDARDS BOARD'S coming rule on disclosure involving financial instruments will be effective for financial statements with fiscal years ending after June 15, 1990. The date was misstated in Friday's edition.

Kidder, Peabody & Co. is trying to struggle back.

Only a few months ago, the 124-year-old securities firm seemed to be on the verge of a meltdown, racked by internal squabbles and defections. Its relationship with parent General Electric Co. had been frayed since a big Kidder insider-trading scandal two years ago. Chief executives and presidents had come and gone.

Now, the firm says it's at a turning point. By the end of this year, 63-year-old Chairman Silas Cathcart -- the former chairman of Illinois Tool Works who was derided as a "tool-and-die man" when GE brought him in to clean up Kidder in 1987 -- retires to his Lake Forest, Ill., home, possibly to build a shopping mall on some land he owns. "I've done what I came to do" at Kidder, he says.

And that means 42-year-old Michael Carpenter, president and chief executive since January, will for the first time take complete control of Kidder and try to make good on some grandiose plans. Mr. Carpenter says he will return Kidder to prominence as a great investment bank.

Wall Street is understandably skeptical. Through the first nine months of the year, Kidder ranks a distant 10th among underwriters of U.S. stocks and bonds, with a 2.8% market share, up slightly from 2.5% in the year-earlier period, according to Securities Data Co. It's quite a fall from the early 1980s, when Kidder still was counted as an investment-banking powerhouse. Gary S. Goldstein, president of the Whitney Group, an executive search firm, said: "I'd like to see (Kidder) succeed. But they have to attract good senior bankers who can bring in the business from day one."

In 1988, Kidder eked out a $46 million profit, mainly because of severe cost cutting. Its 1,400-member brokerage operation reported an estimated $5 million loss last year, although Kidder expects it to turn a profit this year.

In fact, Kidder is a minor player in just about every business it does except computer-driven program trading; in that controversial business, only Morgan Stanley & Co. rivals Kidder. But even that niche is under attack, as several Wall Street firms pulled back from program trading last week under pressure from big investors.

Mr. Carpenter, a former consulting-firm executive who has a love for "task forces," says he has done a "complete rethink" of Kidder in recent months. There have been a dizzying parade of studies of the firm's operations. More than 20 new managing directors and senior vice presidents have been hired since January. The firm's brokerage force has been trimmed and its mergers-and-acquisitions staff increased to a record 55 people.

Mr. Carpenter says that when he assumes full control, Kidder will finally tap the resources of GE. One of GE's goals when it bought 80% of Kidder in 1986 was to take advantage of "syngeries" between Kidder and General Electric Capital Corp., GE's corporate-finance unit, which has $42 billion in assets. The leveraged buy-out group of GE Capital now reports to Mr. Carpenter.

So far, instead of teaming up, GE Capital staffers and Kidder investment bankers have bickered. Yet, says Mr. Carpenter, "We've really started to exploit the synergy between GE Capital and Kidder Peabody." The units have worked on 37 investment banking deals this year, he says, though not all of them have panned out.

"We've had a good relationship with GE, which is the first time you could say that -- uh, let me withdraw that. It's been a steadily improving relationship," says Mr. Carpenter.

Still, without many actual deals to show off, Kidder is left to stress that it finally has "a team" in place, and that everyone works harder.

A month ago, the firm started serving dinner at about 7:30 each night; about 50 to 60 of the 350 people in the investment banking operation have consistently been around that late. "We are working significantly longer and harder than has been the case in the past," says Scott C. Newquist, Kidder's head of investment banking since June.

Everywhere, Kidder stresses the "always working" theme. A new in-house magazine, Kidder World -- which will focus on the firm's synergy strategy, says Mr. Carpenter -- confides that on weekends Mr. Newquist "often gets value-added ideas while flying his single-engine Cessna Centurion on the way to Nantucket."

The firm's new head of mergers and acquisitions under Mr. Newquist, B.J. Megargel, talks of the opportunity to "rebuild a franchise" at Kidder. "The Kidder name is one of only six or seven that every CEO recognizes as a viable alternative" when considering a merger deal, he says. Now, according to a Kidder World story about Mr. Megargel, all the firm has to do is "position ourselves more in the deal flow."

With investment banking as Kidder's "lead business," where do Kidder's 42-branch brokerage network and its 1,400 brokers fit in? Mr. Carpenter this month sold off Kidder's eight brokerage offices in Florida and Puerto Rico to Merrill Lynch & Co., refueling speculation that Kidder is getting out of the brokerage business entirely. Mr. Carpenter denies the speculation. To answer the brokerage question, Kidder, in typical fashion, completed a task-force study. The result: Kidder will focus on rich individual investors and small companies, much closer to the clientele of Goldman, Sachs & Co. than a serve-the-world firm like Merrill Lynch or Shearson Lehman Hutton Inc. Mr. Carpenter notes that these types of investors also are "sophisticated" enough not to complain about Kidder's aggressive use of program trading.

As part of the upscale push, Kidder is putting brokers through a 20-week training course, turning them into "investment counselors" with knowledge of corporate finance. They will get "new and improved tools to sell, particularly to the affluent investor," says brokerage chief Charles V. Sheehan.

Theoretically, the brokers will then be able to funnel "leads" on corporate finance opportunities to Kidder's investment bankers, possibly easing the longstanding tension between the two camps. However, skeptics caution that this kind of cross-pollination between brokers and investment bankers looks great on paper, but doesn't always happen.

Kidder competitors aren't outwardly hostile to the firm, as many are to a tough competitor like Drexel Burnham Lambert Inc. that doesn't have Kidder's long history. However, competitors say that Kidder's hiring binge involving executive-level staffers, some with multiple-year contract guarantees, could backfire unless there are results.

The departing Mr. Cathcart says he has no worries about Kidder's future. Mr. Cathcart, who will return to the Quaker Oats Co. board of directors, in addition to his personal ventures, is credited with bringing some basic budgeting and planning discipline to traditionally free-wheeling Kidder. He also improved the firm's compliance procedures for trading.

Mr. Cathcart says he has had "a lot of fun" at Kidder, adding the crack about his being a "tool-and-die man" never bothered him. "It was an absolutely marvelous line and one I used many times," he says.

Smiling broadly when he talks about Mr. Carpenter, Mr. Cathcart says the new Kidder chief is "going to be recognized shortly as one of the real leaders in the investment-banking business." In coming years, Mr. Cathcart says, Kidder is "gonna hum."

Or, as Mr. Carpenter, again drawing on his consulting-firm background, puts it: "We're ready to implement at this point.

UNDER A PROPOSAL by Democrats to expand Individual Retirement Accounts, a $2,000 contribution by a taxpayer in the 33% bracket would save $330 on his taxes. The savings was given incorrectly in Friday's edition.

In what could prove a major addition to the Philippines' foreign-investment portfolio, a Taiwanese company signed a $180 million construction contract to build the centerpiece of a planned petrochemical complex.

Taiwan's USI Far East Corp., a petrochemical company, initialed the agreement with an unidentified Japanese contractor to build a naphtha cracker, according to Alson Lee, who heads the Philippine company set up to build and operate the complex. Mr. Lee, president of Luzon Petrochemical Corp., said the contract was signed Wednesday in Tokyo with USI Far East officials. Contract details, however, haven't been made public. The complex is to be located in Batangas, about 70 miles south of Manila.

USI Far East will hold a 60% stake in Luzon Petrochemical, according to papers signed with the Philippine government's Board of Investments.

The proposed petrochemical plant would use naphtha to manufacture the petrochemicals propylene and ethylene and their resin derivatives, polypropylene and polyethylene. These are the raw materials used in making plastics.

The contract signing represented a major step in the long-planned petrochemical project. At an estimated $360 million, the project would represent the single largest foreign investment in the Philippines since President Corazon Aquino took office in February 1986. It also is considered critical to the country's efforts to both attract other investment from Taiwan and raise heavy industry capabilities. The project has been in and out of the pipeline for more than a decade.

However, workers can't break ground until legal maneuvers to block the complex are resolved, moves which caused the signing to remain questionable up to the last moment. As previously reported, a member of the Philippines' House of Representatives has sued to stop the plant. The legislator, Enrique Garcia, had actively backed the plant, but at the original site in his constituency northwest of Manila. The country's Supreme Court dismissed the suit, but Mr. Garcia late last month filed for a reconsideration.

In addition, President Aquino has yet to sign into law a bill removing a stiff 48% tax on naphtha, the principal raw material to be used in the cracker.

However, at a news conference Thursday, Mrs. Aquino backed the project and said her government was attempting to soothe the feelings of residents at the original site, adjacent to the government's major petroleum refinery in Bataan province. "We have tried our best to tell the people in Bataan that maybe this time it will not go to them, but certainly we will do our best to encourage other investors to go to their province," Mrs. Aquino told Manila-based foreign correspondents.

The project appeared to be on the rocks earlier this month when the other major partner in the project, China General Plastics Corp., backed out. China General Plastics, another Taiwanese petrochemical manufacturer, was to have a 40% stake in Luzon Petrochemical.

However, Mr. Lee said that USI Far East is confident other investors will take up the slack. He said USI Far East has applied to both the Asian Development Bank and the World Bank's International Finance Corp. for financing that could include equity stakes.

Three new issues begin trading on the New York Stock Exchange today, and one began trading on the Nasdaq/National Market System last week.

On the Big Board, Crawford & Co., Atlanta, (CFD) begins trading today. Crawford evaluates health care plans, manages medical and disability aspects of worker's compensation injuries and is involved in claims adjustments for insurance companies.

Also beginning trading today on the Big Board are El Paso Refinery Limited Partnership, El Paso, Texas, (ELP) and Franklin Multi-Income Trust, San Mateo, Calif., (FMI). El Paso owns and operates a petroleum refinery. Franklin is a closed-end management investment company.

On the Nasdaq over-the-counter system, Allied Capital Corp., Washington, D.C., (ALII) began trading last Thursday. Allied Capital is a closed-end management investment company that will operate as a business development concern.

THE YALE POLITICAL UNION doesn't pay an honorarium to speakers. In Thursday's edition, it was incorrectly indicated that the union had paid a fee to former House Speaker Jim Wright.

President Bush insists it would be a great tool for curbing the budget deficit and slicing the lard out of government programs. He wants it now.

Not so fast, says Rep. Mickey Edwards of Oklahoma, a fellow Republican. "I consider it one of the stupidest ideas of the 20th century," he says.

It's the line-item veto, a procedure that would allow the president to kill individual items in a big spending bill passed by Congress without vetoing the entire bill. Whatever one thinks of the idea, it's far more than the budgetary gimmick it may seem at first glance. Rather, it's a device that could send shock waves through the president's entire relationship with Democrats and Republicans alike in Congress, fundamentally enhance the power of the presidency and transform the way the government does its business.

President Bush badly wants a line-item veto and has long called for a law giving it to the president. Now the White House is declaring that he might not rely on Congress -- which hasn't shown any willingness to surrender such authority -- to pass the line-item veto law he seeks. White House spokesmen last week said Mr. Bush is considering simply declaring that the Constitution gives him the power, exercising a line-item veto and inviting a court challenge to decide whether he has the right.

Although that may sound like an arcane maneuver of little interest outside Washington, it would set off a political earthquake. "The ramifications are enormous," says Rep. Don Edwards, a California Democrat who is a senior member of the House Judiciary Committee. "It's a real face-to-face arm wrestling challenge to Congress."

White House aides know it's a step that can't be taken lightly -- and for that reason, the president may back down from launching a test case this year. Some senior advisers argue that with further fights over a capital-gains tax cut and a budget-reduction bill looming, Mr. Bush already has enough pending confrontations with Congress. They prefer to put off the line-item veto until at least next year.

Still, Mr. Bush and some other aides are strongly drawn to the idea of trying out a line-item veto. The issue arose last week when Vice President Dan Quayle told an audience in Chicago that Mr. Bush was looking for a test case. White House Press Secretary Marlin Fitzwater confirmed that Mr. Bush was interested in the idea, but cautioned that there wasn't a firm decision to try it.

Mr. Bush, former President Reagan and a host of conservative activists have been arguing that a line-item veto would go a long way in restoring discipline to the budget process. They maintain that a president needs the ability to surgically remove pork-barrel spending projects that are attached to big omnibus spending bills. Those bills can't easily be vetoed in their entirety because they often are needed to keep the government operating.

Conservatives note that 43 governors have the line-item veto to use on state budgets. More provocatively, some conservative legal theorists have begun arguing that Mr. Bush doesn't need to wait for a law giving him the veto because the power already is implicit in the Constitution.

They base their argument on a clause buried in Article I, Section 7, of the Constitution that states: "Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him or . . . disapproved by him. . . ."

This clause, they argue, is designed to go beyond an earlier clause specifying that the president can veto a "bill," and is broad enough to allow him to strike out items and riders within bills. Senate Minority Leader Robert Dole (R., Kan.), for one, accepts this argument and earlier this year publicly urged Mr. Bush "to use the line-item veto and allow the courts to decide whether or not it is constitutional."

There's little doubt that such a move would be immediately challenged in court -- and that it would quickly make its way to the Supreme Court to be ultimately resolved. "It's a major issue, and they wouldn't want to leave it at a lower level," says Stephen Glazier, a New York attorney whose writings have been instrumental in pushing the idea that a president already has a line-item veto.

Rep. Edwards, the California Democrat, is one who pledges that he would immediately challenge Mr. Bush in the courts, arguing a line-item veto would expand a president's powers far beyond anything the framers of the Constitution had in mind. "It puts this president in the legislative business," he declares. "That's not what our fathers had in mind."

In addition to giving a president powers to rewrite spending bills meant to be written in Congress, Rep. Edwards argues, a line-item veto would allow the chief executive to blackmail lawmakers.

He notes that, as a lawmaker from the San Francisco area, he fights each year to preserve federal funds for the Bay Area Rapid Transit system. If a president had a line-item veto and wanted to force him to support a controversial foreign-policy initiative, Rep. Edwards says, the president could call and declare that he would single-handedly kill the BART funds unless the congressman "shapes up" on the foreign-policy issue.

Proponents maintain that a president would choose to use a line-item veto more judiciously than that. But there may be another problem with the device: Despite all the political angst it would cause, it mightn't be effective in cutting the deficit. Big chunks of the government budget, like the entitlement programs of Social Security and Medicare, wouldn't be affected. Governors have found that they have to use the device sparingly to maintain political comity. And it isn't even clear that some pork-barrel projects can be hit with a line-item veto because they tend to be listed in informal conference reports accompanying spending bills rather than in the official bills themselves.

Still, proponents contend that the veto would have what Mr. Glazier calls an important "chilling effect" on all manner of appropriations bills. Lawmakers, they say, would avoid putting many spending projects into legislation in the first place for fear of the embarrassment of having them singled out for a line-item veto later.

Whatever the outcome of a test case, President Bush would have to move cautiously becase the very attempt would "antagonize not just Democrats but Republicans," says Louis Fisher, a scholar at the Congressional Research Service who specializes in executive-legislative relations. Republicans have as much interest as Democrats in "the way the system works," he notes.

Indeed, although a majority of Republican lawmakers favor a line-item veto, some, ranging from liberal Oregon Sen. Mark Hatfield to conservative Rep. Edwards are opposed. Rep. Edwards voices the traditional conservative view that it's a mistake to put too much power in the hands of a single person. Conservatives pushing for a line-item veto now, he notes, may regret it later: "Sometime, you're going to have a Democratic president again" who'll use his expanded powers against those very same conservatives.

"Every order, resolution, or vote to which the concurrence of the Senate and House of Representatives may be necessary (except on a question of adjournment) shall be presented to the President of the United States; and before the same shall take effect, shall be approved by him, or being disapproved by him, shall be repassed by two-thirds of the Senate and House of Representatives, according to the rules and limitations prescribed in the case of a bill."

This hasn't been Kellogg Co. 's year. The oat-bran craze has cost the world's largest cereal maker market share. The company's president quit suddenly. And now Kellogg is indefinitely suspending work on what was to be a $1 billion cereal plant.

The company said it was delaying construction because of current market conditions. But the Memphis, Tenn., facility wasn't to begin turning out product until 1993, so the decision may reveal a more pessimistic long-term outlook as well.

Kellogg, which hasn't been as successful in capitalizing on the public's health-oriented desire for oat bran as rival General Mills Inc., has been losing share in the $6 billion ready-to-eat cereal market. Kellogg's current share is believed to be slightly under 40% while General Mills' share is about 27%.

Led by its oat-based Cheerios line, General Mills has gained an estimated 2% share so far this year, mostly at the expense of Kellogg. Each share point is worth about $60 million in sales.

Analysts say much of Kellogg's erosion has been in such core brands as Corn Flakes, Rice Krispies and Frosted Flakes, which represent nearly one-third of its sales volume. Kellogg is so anxious to turn around Corn Flakes sales that it soon will begin selling boxes for as little as 99 cents, trade sources say.

"Cheerios and Honey Nut Cheerios have eaten away sales normally going to Kellogg's corn-based lines simply because they are made of oats," says Merrill Lynch food analyst William Maguire. "They are not a happy group of people at Battle Creek right now." Kellogg is based in Battle Creek, Mich., a city that calls itself the breakfast capital of the world.

Another analyst, John C. Maxwell Jr. of Wheat, First Securities in Richmond, Va., recently went to a "sell" recommendation on Kellogg stock, which closed Friday at $71.75, down 75 cents, in New York Stock Exchange composite trading. "I don't think Kellogg can get back to 40% this year," he said. "Kellogg's main problem is life style. People are reading the boxes and deciding they want something that's `healthy' for you -- oats, bran." Mr. Maxwell said he wouldn't be surprised if, over the next two years or so, General Mills' share increased to 30% or more.

In announcing the plant delay, Kellogg Chairman William E. LaMothe said, "Cereal volume growth in the U.S. has not met our expectations for 1989." He said construction wouldn't resume until market conditions warrant it.

Kellogg indicated that it has room to grow without adding facilities. The company has five other U.S. plants, including a modern facility at its Battle Creek headquarters known as Building 100, which is to add bran-processing and rice-processing capacity next year.

General Mills, meanwhile, finds itself constrained from boosting sales further because its plants are operating at capacity. A large plant in Covington, Ga., is to come on line next year.

A Kellogg officer, who asked not to be named, said the Memphis project was "pulled in for a reconsideration of costs," an indication that the ambitious plans might be scaled back in any future construction. Initial cost estimates for the plant, which was to have been built in phases, ranged from $1 billion to $1.2 billion.

A company spokesman said it was "possible, but highly unlikely," that the plant might never be built. "As we regain our leadership level where we have been, and as we continue to put new products into the marketplace and need additional capacity, we will look at resuming our involvement with our plan," he said.

The new facility was to have been the world's most advanced cereal manufacturing plant, and Kellogg's largest construction project. The company had retained the Fluor Daniel unit of Fluor Corp. as general contractor.

But in recent weeks, construction-industry sources reported that early preparation work was slowing at the 185-acre site. Subcontractors said they were told that equipment orders would be delayed. Fluor Daniel already has reassigned most of its work crew, the sources said.

Last Friday's announcement was the first official word that the project was in trouble and that the company's plans for a surge in market share may have been overly optimistic. Until recently, Kellogg had been telling its sales force and Wall Street that by 1992 it intended to achieve a 50% share of market, measured in dollar volume.

Although he called current market conditions "highly competitive," Mr. LaMothe, Kellogg's chairman and chief executive officer, forecast an earnings increase for the full year. Last year, the company earned $480.4 million, or $3.90 a share, on sales of $4.3 billion.

As expected, Kellogg reported lower third-quarter earnings. Net fell 16% to $123.1 million, or $1.02 a share, from $145.7 million, or $1.18 a share. Sales rose 4.8% to $1.20 billion from $1.14 billion.

The company had a one-time charge of $14.8 million in the latest quarter covering the disposition of certain assets. The company wouldn't elaborate, citing competitive reasons.

PARKER HANNIFIN Corp., which is selling three automotive replacement parts divisions, said it will retain its Automotive Connectors and Cliff Impact divisions. The divisions that Parker Hannifin is retaining weren't mentioned in Thursday's edition.

The following were among Friday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:

Sun Microsystems Inc. -- $125 million of 6 3/8% convertible subordinated debentures due Oct. 15, 1999, priced at 84.90 to yield 7.51%. The debentures are convertible into common stock at $25 a share, representing a 24% conversion premium over Thursday's closing price. Rated single-B-1 by Moody's Investors Service Inc. and single-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Goldman, Sachs & Co.

Hertz Corp. -- $100 million of senior notes due Nov. 1, 2009, priced at par to yield 9%. The issue, which is puttable back to the company in 1999, was priced at a spread of 110 basis points above the Treasury's 10-year note. Rated single-A-3 by Moody's and triple-B by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.

Canadian Imperial Bank of Commerce (Canada) -- 10 billion yen of 5.7% bonds due Nov. 17, 1992, priced at 101 1/4 to yield 5.75% less full fees, via LTCB International Ltd. Fees 1 3/8.

The Singapore and Kuala Lumpur stock exchanges are bracing for a turbulent separation, following Malaysian Finance Minister Daim Zainuddin's long-awaited announcement that the exchanges will sever ties.

On Friday, Datuk Daim added spice to an otherwise unremarkable address on Malaysia's proposed budget for 1990 by ordering the Kuala Lumpur Stock Exchange "to take appropriate action immediately" to cut its links with the Stock Exchange of Singapore.

The delisting of Malaysian-based companies from the Singapore exchange may not be a smooth process, analysts say. Though the split has long been expected, the exchanges aren't fully prepared to go their separate ways.

The finance minister's order wasn't sparked by a single event and doesn't indicate a souring in relations between the neighboring countries. Rather, the two closely linked exchanges have been drifting apart for some years, with a nearly five-year-old moratorium on new dual listings, separate and different listing requirements, differing trading and settlement guidelines and diverging national-policy aims.

QUANTUM CHEMICAL Corp. 's plant in Morris, Ill., is expected to resume production in early 1990. The year was misstated in Friday's editions.

Italy's trade deficit narrowed to 2.007 trillion lire ($1.49 billion) in September from 2.616 trillion lire a year earlier, the state statistical office Istat said.

The deficit was 466 billion lire in August. For the first nine months, the trade deficit was 14.933 trillion lire, compared with 10.485 trillion lire in the year-earlier period. Istat said the statistics are provisional and aren't seasonally adjusted.

Imports rose 11% to 18.443 trillion lire in September from a year earlier, while exports rose 17% to 16.436 trillion lire. In the nine months, imports rose 20% to 155.039 trillion lire, while exports grew 18% to 140.106 trillion lire. Import values are calculated on a cost, insurance and freight (c.i.f.) basis, while exports are accounted for on a free-on-board (f.o.b.) basis.

As competition heats up in Spain's crowded bank market, Banco Exterior de Espana is seeking to shed its image of a state-owned bank and move into new activities.

Under the direction of its new chairman, Francisco Luzon, Spain's seventh largest bank is undergoing a tough restructuring that analysts say may be the first step toward the bank's privatization.

The state-owned industrial holding company Instituto Nacional de Industria and the Bank of Spain jointly hold a 13.94% stake in Banco Exterior. The government directly owns 51.4% and Factorex, a financial services company, holds 8.42%. The rest is listed on Spanish stock exchanges.

Some analysts are concerned, however, that Banco Exterior may have waited too long to diversify from its traditional export-related activities. Catching up with commercial competitors in retail banking and financial services, they argue, will be difficult, particularly if market conditions turn sour.

If that proves true, analysts say Banco Exterior could be a prime partner -- or even a takeover target -- for either a Spanish or foreign bank seeking to increase its market share after 1992, when the European Community plans to dismantle financial barriers.

With 700 branches in Spain and 12 banking subsidiaries, five branches and 12 representative offices abroad, the Banco Exterior group has a lot to offer a potential suitor.

Mr. Luzon and his team, however, say they aren't interested in a merger. Instead, they are working to transform Banco Exterior into an efficient bank by the end of 1992. "I want this to be a model of the way a public-owned company should be run," Mr. Luzon says.

Banco Exterior was created in 1929 to provide subsidized credits for Spanish exports. The market for export financing was liberalized in the mid-1980s, however, forcing the bank to face competition. At the same time, many of Spain's traditional export markets in Latin America and other developing areas faced a sharp decline in economic growth.

As a result, the volume of Banco Exterior's export credit portfolio plunged from 824 billion pesatas ($7.04 billion) as of Dec. 31, 1986, to its current 522 billion pesetas.

The other two main pillars of Banco Exterior's traditional business -- wholesale banking and foreign currency trading -- also began to crumble under the weight of heavy competition and changing client needs.

The bank was hamstrung in its efforts to face the challenges of a changing market by its links to the government, analysts say. Until Mr. Luzon took the helm last November, Banco Exterior was run by politicians who lacked either the skills or the will to introduce innovative changes. But Mr. Luzon has moved swiftly to streamline bureaucracy, cut costs, increase capital and build up new areas of business.

"We've got a lot to do," he acknowledged. "We've got to move quickly."

In Mr. Luzon's first year, the bank eliminated 800 jobs. Now it says it'll trim another 1,200 jobs over the next three to four years. The bank employs 8,000 people in Spain and 2,000 abroad.

To strengthen its capital base, Banco Exterior this year issued $105 million in subordinated debt, launched two rights issues and sold stock held in its treasury to small investors.

The bank is now aggressively marketing retail services at its domestic branches. Last year's drop in export credit was partially offset by a 15% surge in lending to individuals and small and medium-sized companies.

Though Spain has an excess of banks, analysts say the country still has one of the most profitable markets in Europe, which will aid Banco Exterior with the tough tasks it faces ahead.

Expansion plans also include acquisitions in growing foreign markets. The bank says it's interested in purchasing banks in Morocco, Portugal and Puerto Rico. But the bank's retail activities in Latin America are likely to be cut back.

Banco Exterior was one of the last banks to create a brokerage house before the four Spanish stock exchanges underwent sweeping changes in July. The late start may be a handicap for the bank as Spain continues to open up its market to foreign competition.

But Mr. Luzon contends that the experienced team he brought with him from Banco Bilbao Vizcaya, where he was formerly director general, will whip the bank's capital market division into shape by the end of 1992. The bank also says it'll use its international network to channel investment from London, Frankfurt, Zurich and Paris into the Spanish stock exchanges.

General Motors Corp. 's general counsel hopes to cut the number of outside law firms the auto maker uses from about 700 to 200 within two years.

Harry J. Pearce, named general counsel in May 1987, says the reduction is a cost-cutting measure and an effort to let the No. 1 auto maker's 134-lawyer in-house legal department take on matters it is better equipped and trained to handle. GM trimmed about 40 firms from its approved local counsel list, Mr. Pearce says.

The move is consistent with a trend for corporate legal staffs to do more work in-house, instead of farming it out to law firms. Mr. Pearce set up GM's first in-house litigation group in May with four lawyers, all former assistant U.S. attorneys with extensive trial experience. He intends to add to the litigation staff. Among the types of cases the in-house litigators handle are disputes involving companies doing business with GM and product-related actions, including one in which a driver is suing GM for damages resulting from an accident.

Mr. Pearce has also encouraged his staff to work more closely with GM's technical staffs to help prevent future litigation. GM lawyers have been working with technicians to develop more uniform welding procedures -- the way a vehicle is welded has a lot to do with its durability. The lawyers also monitor suits to identify specific automobile parts that cause the biggest legal problems.

Mr. Pearce says law firms with the best chance of retaining or winning business with GM will be those providing the highest-quality service at the best cost -- echoing similar directives from GM's auto operations to suppliers.

This doesn't necessarily mean larger firms have an advantage; Mr. Pearce said GM works with a number of smaller firms it regards highly. Mr. Pearce has shaken up GM's legal staff by eliminating all titles and establishing several new functions, including a special-projects group that has made films on safety and drunk driving.

FEDERAL PROSECUTORS are concluding fewer criminal cases with trials.

That's a finding of a new study of the Justice Department by researchers at Syracuse University. David Burnham, one of the authors, says fewer trials probably means a growing number of plea bargains. In 1980, 18% of federal prosecutions concluded at trial; in 1987, only 9% did.

The study covered 11 major U.S. attorneys' offices -- including those in Manhattan and Brooklyn, N.Y., and New Jersey -- from 1980 to 1987.

The Justice Department rejected the implication that its prosecutors are currently more willing to plea bargain. "Our felony caseloads have been consistent for 20 years," with about 15% of all prosecutions going to trial, a department spokeswoman said. The discrepancy is somewhat perplexing in that the Syracuse researchers said they based their conclusions on government statistics.

"One possible explanation for this decline" in taking cases to trial, says Mr. Burnham, "is that the number of defendants being charged with crimes by all U.S. attorneys has substantially increased."

In 1980, the study says, prosecutors surveyed filed charges against 25 defendants for each 100,000 people aged 18 years and older. In 1987, prosecutors filed against 35 defendants for every 100,000 adults.

Another finding from the study: Prosecutors set significantly different priorities. The Manhattan U.S. attorney's office stressed criminal cases from 1980 to 1987, averaging 43 for every 100,000 adults. But the New Jersey U.S. attorney averaged 16. On the civil side, the Manhattan prosecutor filed an average of only 11 cases for every 100,000 adults during the same period; the San Francisco U.S. attorney averaged 79.

The study is to provide reporters, academic experts and others raw data on which to base further inquiries.

IMELDA MARCOS asks for dismissal, says she was kidnapped.

The former first lady of the Philippines, asked a federal court in Manhattan to dismiss an indictment against her, claiming among other things, that she was abducted from her homeland. Mrs. Marcos and her late husband, former Philippines President Ferdinand Marcos, were charged with embezzling more than $100 million from that country and then fraudulently concealing much of the money through purchases of prime real estate in Manhattan.

Mrs. Marcos's attorneys asked federal Judge John F. Keenan to give them access to all U.S. documents about her alleged abduction. The U.S. attorney's office, in documents it filed in response, said Mrs. Marcos was making the "fanciful -- and factually unsupported -- claim that she was kidnapped into this country" in order to obtain classified material in the case. The office also said Mrs. Marcos and her husband weren't brought to the U.S. against their will after Mr. Marcos was ousted as president. The prosecutor quoted statements from the Marcoses in which they said they were in this country at the invitation of President Reagan and that they were enjoying the hospitality of the U.S.

Lawyers for Mrs. Marcos say that because she was taken to the U.S. against her wishes, the federal court lacks jurisdiction in the case.

THE FEDERAL COURT of appeals in Manhattan ruled that the dismissal of a 1980 indictment against former Bank of Crete owner George Koskotas should be reconsidered. The indictment, which was sealed and apparently forgotten by investigators until 1987, charges Mr. Koskotas and three others with tax fraud and other violations. He made numerous trips to the U.S. in the early 1980s, but wasn't arrested until 1987 when he showed up as a guest of then-Vice President George Bush at a government function. A federal judge in Manhattan threw out the indictment, finding that the seven-year delay violated the defendant's constitutional right to a speedy trial. The appeals court, however, said the judge didn't adequately consider whether the delay would actually hurt the chances of a fair trial. Mr. Koskotas is fighting extradition proceedings that would return him to Greece, where he is charged with embezzling more than $250 million from the Bank of Crete. His attorney couldn't be reached for comment.

PRO BONO VOLUNTARISM: In an effort to stave off a plan that would require all lawyers in New York state to provide twenty hours of free legal aid a year, the state bar recommended an alternative program to increase voluntary participation in pro bono programs. The state bar association's policy making body, the House of Delegate, voted Saturday to ask Chief Judge Sol Wachtler to give the bar's voluntary program three years to prove its effectiveness before considering mandatory pro bono. "We believe our suggested plan is more likely to improve the availability of quality legal service to the poor than is the proposed mandatory pro bono plan and will achieve that objective without the divisiveness, distraction, administrative burdens and possible failure that we fear would accompany an attempt to impose a mandatory plan," said Justin L. Vigdor of Rochester, who headed the bar's pro bono study committee.

DALLAS AND HOUSTON law firms merge: Jackson & Walker, a 130-lawyer firm in Dallas and Datson & Scofield, a 70-lawyer firm in Houston said they have agreed in principle to merge. The consolidated firm, which would rank among the 10 largest in Texas, would operate under the name Jackson & Walker. The merger must be formally approved by the partners of both firms but is expected to be completed by year end. Jackson & Walker has an office in Fort Worth, Texas, and Dotson & Scofield has an office in New Orleans.

PILING ON? Piggybacking on government assertions that General Electric Co. may have covered up fraudulent billings to the Pentagon, two shareholders have filed a civil racketeering suit against the company. The suit was filed by plaintiffs' securities lawyer Richard D. Greenfield in U.S. District Court in Philadelphia. He seeks damages from the company's 15 directors on grounds that they either "participated in or condoned the illegal acts . . . or utterly failed to carry out their duties as directors." GE is defending itself against government criminal charges of fraud and false claims in connection with a logistics-computer contract for the Army. The trial begins today in federal court in Philadelphia. The government's assertions of the cover-up were made in last minute pretrial motions. GE, which vehemently denies the government's allegations, denounced Mr. Greenfield's suit. "It is a cheap-shot suit -- procedurally defective and thoroughly fallacious -- which was hurriedly filed by a contingency-fee lawyer as a result of newspaper reports," said a GE spokeswoman. She added that the company was considering bringing sanctions against Mr. Greenfield for making "grossly inaccurate and unsupported allegations.

The head of the nation's largest car-dealers group is telling dealers to "just say no" when auto makers pressure them to stockpile cars on their lots.

In an open letter that will run today in the trade journal Automotive News, Ron Tonkin, president of the National Car Dealers Association, says dealers should cut their inventories to no more than half the level traditionally considered desirable.

Mr. Tonkin, who has been feuding with the Big Three since he took office earlier this year, said that with half of the nation's dealers losing money or breaking even, it was time for "emergency action."

U.S. car dealers had an average of 59 days' supply of cars in their lots at the end of September, according to Ward's Automotive Reports. But Mr. Tonkin said dealers should slash stocks to between 15 and 30 days to reduce the costs of financing inventory.

His message is getting a chilly reception in Detroit, where the Big Three auto makers are already being forced to close plants because of soft sales and reduced dealer orders. Even before Mr. Tonkin's broadside, some large dealers said they were cutting inventories.

Ford Motor Co. and Chrysler Corp. representatives criticized Mr. Tonkin's plan as unworkable. It "is going to sound neat to the dealer except when his 15-day car supply doesn't include the bright red one that the lady wants to buy and she goes up the street to buy one," a Chrysler spokesman said.

Southern Co. 's Gulf Power Co. unit may plead guilty this week to charges that it illegally steered company money to politicians through outside vendors, according to individuals close to an investigation of the utility holding company.

The tentative settlement between Gulf Power, a Pensacola, Fla., electric company, and federal prosecutors would mark the end of one part of a wide-ranging inquiry of Southern Co. in the past year. A grand jury has been investigating whether officials at Southern Co. conspired to cover up their accounting for spare parts to evade federal income taxes.

The grand jury has also been investigating whether Gulf Power executives violated the federal Utility Holding Company Act, which prohibits certain utilities from making political contributions.

The individuals said Gulf Power and federal prosecutors are considering a settlement under which the company would plead guilty to two felony charges and pay fines totaling between $500,000 and $1.5 million. Under one count, Gulf Power would plead guilty to conspiring to violate the Utility Holding Company Act. Under the second count, the company would plead guilty to conspiring to evade taxes.

The guilty pleas would be made solely by Gulf Power, the individuals said. No employee or vendor would be involved.

A spokesman for Southern Co. would say only that discussions are continuing between Gulf Power and federal prosecutors. "We have no further developments to report," he said. Officials at Gulf Power couldn't be reached for comment. And prosecutors declined to comment.

While Southern Co. has been reluctant to discuss the grand jury investigations, Edward L. Addison, chief executive officer, has said the company is prepared to defend its tax and acccounting practices if any charges are brought against it. Morever, Mr. Addison has said Southern Co. and its units don't condone illegal political contributions. Neither Mr. Addison nor any other Southern Co. official has been charged with any wrongdoing in connection with the current inquiries.

The probe of Southern Co. has attracted considerable attention this year because of several events that have befallen the company, including the death of a Gulf Power executive in a plane crash and the disappearance of a company vendor who was to be a key grand jury witness.

Witnesses have said the grand jury has asked numerous questions about Jacob F. "Jake" Horton, the senior vice president of Gulf Power who died in the plane crash in April. Mr. Horton oversaw Gulf Power's governmental-affairs efforts. On the morning of the crash, he had been put on notice that an audit committee was recommending his dismissal because of invoicing irregularities in a company audit. Investigators have been trying to determine whether the crash was an accident, sabotage or suicide.

Gulf Power said in May that an internal audit had disclosed that at least one vendor had used false invoices to fund political causes. But the company said the political contributions had been made more than five years ago.

Exxon Corp. is resigning from the National Wildlife Federation's corporate advisory panel, saying the conservation group has been unfairly critical of the Exxon Valdez oil spill along the Alaskan coast.

The federation said Friday that it regrets the resignation, but issued a stinging response that called Exxon a "corporate pariah" that should keep an open dialogue with environmentalists.

The federation, with 5.8 million members nationwide, has been one of the sharpest critics of Exxon's handling of the 11 million gallon tanker spill and has accused the company of repeatedly ignoring requests to meet and discuss it.

The March 24 oil spill soiled hundreds of miles of shoreline along Alaska's southern coast and wreaked havoc with wildlife and the fishing industry.

Exxon's Exxon USA unit was one of the charter members of the Corporate Conservation Council, a panel of executives formed in 1982 by the National Wildlife Federation to foster "frank and open discussions" between industry and the federation's leaders.

In a letter to the federation, Raymond Campion, Exxon's environmental coordinator, said: "Recent public actions by you regarding the Valdez oil spill have failed to demonstrate any sense of objectivity or fairness."

The federation was among the plaintiffs in a lawsuit filed in August against Exxon seeking full payment of environmental recovery costs from the spill.

First Tennessee National Corp. said it would take a $4 million charge in the fourth quarter, as a result of plans to expand its systems operation.

The banking company said it reached an agreement in principle with International Business Machines Corp. on a systems operations contract calling for IBM to operate First Tennessee's computer and telecommunications functions.

Further, under the agreement, First Tennesse would continue to develop the software that creates customer products and sevices.

"Because personal computers will soon be on the desks of all of our tellers, and customer service and loan representatives, information will be instantly available to help customers with product decisions and provide them with information about their accounts," according to John Kelley, executive vice president and corporate services group manager at First Tennessee.

However, about 120 employees will be affected by the agreement. First Tennessee, assisted by IBM, said it will attempt to place the employees within the company, IBM or other companies in Memphis. The process will take as many as six months to complete, the company said.

The agreement is subject to the banking company's board approval, which is expected next month.

The Treasury Department said the U.S. trade deficit may worsen next year, after two years of significant improvement.

In its report to Congress on international economic policies, the Treasury said that any improvement in the broadest measure of trade, known as the current account, "is likely at best to be very modest," and "the possibility of deterioration in the current account next year cannot be excluded."

The statement was the U.S. government's first acknowledgement of what other groups, such as the International Monetary Fund, have been predicting for months. Continued strength in the dollar was cited as one reason the trade position may deteriorate.

The Treasury's report, which is required annually by a provision of the 1988 trade act, again took South Korea to task for its exchange-rate policies. "We believe that there have continued to be indications of exchange-rate `manipulation'" during the past six months, it said, citing the lack of market forces in South Korea's exchange-rate system and the use of capital and interest-rate controls to manipulate exchange rates.

The Treasury expressed pleasure, however, with the government of Taiwan, which was cited for exchange-rate manipulation in last year's report. The Treasury said Taiwan has liberalized its exchange rate system in the past year.

The fiscal 1989 budget deficit figure came out Friday. It was down a little. The next time you hear a Member of Congress moan about the deficit, consider what Congress did Friday. The Senate, 84-6, voted to increase to $124,000 the ceiling on insured mortgages from the FHA, which lost $4.2 billion in loan defaults last year.

Then, by voice vote, the Senate voted a pork-barrel bill, approved Thursday by the House, for domestic military construction. Compare the Bush request to what the Senators gave themselves:

For construction in West Virginia, Mr. Bush requested $4.5 million; Congress gave Senator Byrd's state $21.5 million. Senator Byrd is chairman of the Appropriations Committee. For Iowa, a $1.8 million request became $12 million for Senator Grassley, ranking minority member of a military construction subcommittee. Rep. Jamie Whitten of Mississippi and chairman of House Appropriations turned a $20 million Bush request for his state into a $49.7 million bequest. Senator Sasser of Tennessee is chairman of the Appropriations subcommittee on military construction; Mr. Bush's $87 million request for Tennessee increased to $109 million. In a remark someone should remember this time next year, Senator Sasser said, "I think we've seen the peak of military construction spending for many years to come."

Tell us about spending restraint. Tell us about the HUD scandals. Tell us what measure, short of house arrest, will get this Congress under control.

Costa Rica reached an agreement with its creditor banks that is expected to cut that government's $1.8 billion in bank debt by as much as 60%.

The agreement was announced by Costa Rican President Oscar Arias Friday, as President Bush and other leaders from the Western Hemisphere gathered in the Central American nation for a celebration of democracy. Costa Rica had been negotiating with the U.S. and other banks for three years, but the debt plan was rushed to completion in order to be announced at the meeting. The government had fallen $300 million behind in interest payments.

Treasury Secretary Nicholas Brady called the agreement "an important step forward in the strengthened debt strategy," noting that it will "when implemented, provide significant reduction in the level of debt and debt service owed by Costa Rica."

Under the plan, Costa Rica will buy back roughly 60% of its bank debt outstanding at a deeply discounted price, according to officials involved in the agreement. The remainder of the debt will be exchanged for new Costa Rican bonds with a 6 1/4% interest rate.

The International Monetary Fund and the World Bank are expected to provide approximately $180 million to help support the deal, and additional funds are expected from Japan.

Treasury officials say the Costa Rican agreement demonstrates that the Brady debt plan can benefit small debtor countries as well as big debtors, such as Mexico.

The Treasury said it plans to sell $2 billion of 51-day cash-management bills today, raising all new cash.

The bills will be dated Oct. 31 and will mature Dec. 21,

No non-competitive tenders will be accepted. Tenders, available in minimum denominations of $1 million, must be received by noon EST today at Federal Reserve Banks or branches.

The Treasury also announced details of this week's unusual bill auction, which has been changed to accommodate the expiration of the federal debt ceiling at midnight tomorrow.

The 13-week and 27-week bills will be issued tomorrow rather than Thursday, Nov. 2, as originally planned. The three-month bills will still mature Feb. 1, 1990, and the six-month bills on May 3, 1990.

The Treasury also said noncompetitive tenders will be considered timely if postmarked no later than Sunday, Oct. 29, and received no later than tomorrow.

The Treasury said it won't be able to honor reinvestment requests from holders of bills maturing Nov. 2 held in the Treasury's book-entry system. The department will make payment for bills maturing on Nov. 2 to all investors who have requested reinvestment of their bills on that date, as well as to all account holders who have previously requested payment.

American Pioneer Inc. said it agreed in principle to sell its American Pioneer Life Insurance Co. subsidiary to Harcourt Brace Jovanovich Inc. 's HBJ Insurance Cos. for $27 million.

American Pioneer, parent of American Pioneer Savings Bank, said the sale will add capital and reduce the level of investments in subsidiaries for the thrift holding company.

Recently, the boards of both the parent company and the thrift also voted to suspend dividends on preferred shares of both companies and convert all preferred into common shares. The company said the move was necessary to meet capital requirements.

The transaction is subject to execution of a definitive purchase agreement and approval by various regulatory agencies, including the insurance departments of the states of Florida and Indiana, the company said.

In the second quarter, American Pioneer reported a loss of $7.3 million, compared with net income of $1.1 million a year earlier. The banking operation had a loss of $8.7 million in the second quarter, largely because of problem real-estate loans, while the insurance operations earned $884,000.

October employment data -- also could turn out to be the most confusing.

On the surface, the overall unemployment rate is expected to be little changed from September's 5.3%. But the actual head count of non-farm employment payroll jobs is likely to be muddied by the impact of Hurricane Hugo, strikes, and less-than-perfect seasonal adjustments, economists said.

The consensus view calls for an overall job gain of 155,000 compared with September's 209,000 increase. But the important factory-jobs segment, which last month plunged by 103,000 positions and raised recession fears, is most likely to be skewed by the month's unusual events.

Several other reports come before Friday's jobs data, including: the September leading indicators index, new-home sales and October agricultural prices reports due out tomorrow; the October purchasing managers' index and September construction spending and manufacturers' orders on Wednesday; and October chain-store sales on Thursday. Friday brings the final count on October auto sales.

"The employment report is going to be difficult to interpret," said Michael Englund, economist with MMS International, a unit of McGraw-Hill Inc., New York.

Mr. Englund added that next month's data isn't likely to be much better, because it will be distorted by San Francisco's earthquake. What's more, he believes seasonal swings in the auto industry this year aren't occurring at the same time as in the past, because of production and pricing differences that are curbing the accuracy of seasonal adjustments built into the employment data.

Wednesday's report from the purchasing agents will be watched to see if the index maintains a level below 50%, as it has for the past couple of months. A reading of less than 50% indicates an economy that is generally contracting while a reading above 50% indicates an economy that's expanding.

Samuel D. Kahan, chief financial economist at Kleinwort Benson Government Securities Inc., Chicago, said that the purchasers' report is valuable because it often presents the first inkling of economic data for the month. But he added: "Some people use the purchasers' index as a leading indicator, some use it as a coincident indicator. But the thing it's supposed to measure -- manufacturing strength -- it missed altogether last month."

David Wyss, chief financial economist at Data Resources Inc., Boston, said that the purchasers' index "does miss occasionally," adding: "When it misses one month it tends to miss the next month, too."

The consensus view on September leading indicators calls for a gain of 0.3%, the same as in August. Economists said greatly increased consumer optimism, a larger money supply and higher stock prices helped lift the index. All orders-related components, such as consumer-goods orders and building permits, are thought to have been weaker.

Data Resources' Mr. Wyss added that he will be keeping a closer eye than ususal on October chain-store sales. Usually, October "isn't a very interesting month {for retail figures} because school clothes have been bought and people are waiting for December to buy Christmas presents," he said. But Mr. Wyss said he will watch the numbers to get an inkling of whether consumers' general buying habits may slack off as much as their auto-buying apparently has. He noted that higher gasoline prices will help buoy the October totals.

Seasonal factors are also expected to have taken their toll on September new-home sales, which are believed to have fallen sharply from August's 755,000 units. Construction spending is believed to have slipped about 0.5% from August levels, although economists noted the rate probably will pick up in the months ahead in response to hurricane and earthquake damage.

Factory owners are buying new machinery at a good rate this fall, machine tool makers say, but sluggish sales of new cars and trucks raise questions about fourth-quarter demand from the important automotive industry.

September orders for machine tools rebounded from the summer doldrums, but remained 7.7% below year-earlier levels, according to figures from NMTBA -- the Association for Manufacturing Technology. Domestic machine tool plants received $303 million of orders last month, up 33% from August's $227.1 million, but still below the $328.2 million of September 1988, NMTBA said.

Machine tools are complex machines ranging from lathes to metal-forming presses that are used to shape most metal parts.

"Overall demand still is very respectable," says Christopher C. Cole, group vice president at Cincinnati Milacron Inc., the nation's largest machine tool producer. "The outlook is positive for the intermediate to long term."

September orders for all U.S. producers, in fact, were slightly above the monthly average for 1988, a good year for the industry.

"Aerospace orders are very good," Mr. Cole says. "And export business is still good. While some automotive programs have been delayed, they haven't been canceled."

"September was one of the biggest order months in our history," says James R. Roberts, vice president, world-wide sales and marketing, for Giddings & Lewis Inc., Fond du Lac, Wis. At a recent meeting of manufacturing executives, "everybody I talked with was very positive," he says. Most say they plan to spend more on factory equipment in 1990 than in 1989.

But sales of North American-made 1990-model cars are running at an annual rate of only six million, down from 7.1 million a year earlier. And truck sales also are off more than 20%. Auto makers, who began deferring some equipment purchases last spring, can be expected to remain cautious about spending if their sales don't pick up, machine tool builders say.

Machine tool executives are hopeful, however, that recent developments in Eastern Europe will expand markets for U.S.-made machine tools in that region. There is demand for state-of-the-art machine tools in the Soviet Union and in other Eastern European countries as those nations strive to improve the efficiency of their ailing factories as well as the quality of their goods.

However, there's a continuing dispute between machine tool makers and the Defense Department over whether sophisticated U.S. machine tools would increase the Soviet Union's military might. "The Commerce Department says go, and the Defense Department says stop," complains one machine tool producer.

If that controversy continues, U.S. machine tool makers say, West German and other foreign producers are likely to grab most of the sales in Eastern Europe.

September orders for machining centers, lathes, milling machines, grinders, boring mills and other machines that shape metal by cutting totaled $192.9 million, down 28% from $266.5 million a year earlier, but a 23% increase from August's $156.3 million, NMTBA said.

Orders last month for metal-forming presses and other machinery to form metal with pressure surged to $110.1 million, a 78% rise from $61.7 million a year earlier and a 55% gain from $70.9 million in August. Today's presses are large and costly machines, and a few orders can produce a high total for one month that doesn't necessarily indicate a trend.

Machine tool shipments last month were $281.2 million, a 24% rise from a year earlier and a 25% increase from August. Shipments have run well ahead of 1988 all year, as machine tool builders produce against relatively good backlogs.

U.S. producers had a $2.15 billion backlog of unfilled orders at the end of September. That was up 2.8% from a year earlier, even though orders for the first nine months of 1989 were down 19% from the comparable 1988 period.

$2,057,750,000. $675,400,000. $1,048,500,000. $588,350,000.

In Bombay stock market circles, the buzzword is "mega." At least 40 companies are coming to the capital market to raise $6 billion, an amount never thought possible in India.

"When they talk mega-issues, they're truly talking mega," says S.A. Dave, chairman of the Securities and Exchange Board of India. "The capital market is booming."

But the mega-issues are raising megaquestions about the rapidly evolving Indian capital market. One is whether there is enough money to fund the new issues without depressing stock trading.

Moreover, in the relatively unregulated Indian stock markets, investors frequently don't know what they are getting when they subscribe to an issue. A prospectus in India doesn't always tell a potential investor much. Some of the large amounts are being raised by small firms. In addition, once money is raised, investors usually have no way of knowing how it is spent.

Some analysts are concerned that the mega-issues, in such an unregulated environment, could lead to a mega-crash. "The rate of failures will be much more than the rate of successes in the mega-projects," says G.S. Patel, a former chairman of the giant, government-run mutual fund, the Unit Trust of India. "They're going to have mega-problems."

The Indian stock markets have been on a five-year high, with dips and corrections, since Prime Minister Rajiv Gandhi started liberalizing industry. But the last stock market boom, in 1986, seems small compared with the current rush to market.

The $6 billion that some 40 companies are looking to raise in the year ending March 31 compares with only $2.7 billion raised on the capital market in the previous fiscal year. In fiscal 1984, before Mr. Gandhi came to power, only $810 million was raised.

This year's biggest issue, $570 million of convertible debentures by engineering company Larsen & Toubro Ltd., is the largest in Indian history. And it isn't the only giant issue: together, the top four issues will raise $1.3 billion. Convertible debentures -- bonds that can later be converted into equity shares -- are the most popular instrument this year, though many companies are also selling nonconvertible bonds or equity shares.

These mega-issues are being propelled by two factors, economic and political.

In the past, the socialist policies of the government strictly limited the size of new steel mills, petrochemical plants, car factories and other industrial concerns to conserve resources and restrict the profits businessmen could make. As a result, industry operated out of small, expensive, highly inefficient industrial units.

When Mr. Gandhi came to power, he ushered in new rules for business. He said industry should build plants on the same scale as those outside India and benefit from economies of scale. If the output was too great for the domestic market, he said, companies should export.

India's overregulated businessmen had to be persuaded, but they have started to think big. Some of the projects being funded by the new issues are the first fruits of Mr. Gandhi's policy, and they require more capital than the smaller industrial units built in the past. The industrial revolution has produced an explosion in the capital market, which is a far cheaper source of funds than government-controlled banks, where interest rates for prime borrowers are around 16%.

The second factor spurring mega-issues is political. Mr. Gandhi has called general elections for November, and many businessmen fear that he and his Congress (I) Party will lose. Some companies are raising money in anticipation of a government less predictable than Mr. Gandhi's, and possibly more restrictive.

The buoyant Bombay rumor mill also says that some of the money raised in the current spate of issues will be used as campaign donations before the elections. No one admits to anything, but India's industrialists have a history of making under-the-table campaign donations.

So far, the mega-issues are a hit with investors. Earlier this year, Tata Iron & Steel Co. 's offer of $355 million of convertible debentures was oversubscribed. Essar Gujarat Ltd., a marine construction company, had similar success with a slightly smaller issue. Larsen & Toubro started accepting applications for its giant issue earlier this month; bankers and analysts expect it to be oversubscribed.

Still to come are big issues by Bindal Agro Chem Ltd., a petrochemical and agrochemical company, and Usha Rectifier Corp. (India), a semiconductor maker. While many investors are selling parts of their portfolios to buy the new issues, prices on India's 16 stock exchanges are holding up so far.

"I don't think it will lead to any chaos in the secondary market," says Mr. Patel, "only a sagging tendency." Says M.J. Pherwani, chairman of the Unit Trust of India: The "markets are headed for growth unheard of and unseen before."

But with growth come growing pains, and never has this been clearer on the Indian capital market than now.

In the past, the government controlled the markets indirectly, through its tight grip on industry itself. Various ministries decided the products businessmen could produce and how much; and government-owned banks controlled the financing of projects and monitored whether companies came through on promised plans.

The government has been content with this far-reaching, subtle form of control, exercised on a case-by-case basis with no clear rules or guidelines. But now, with large amounts being raised from investors, the government's dawdling on regulation and disclosure requirements has a more dangerous aspect. The Securities and Exchange Board of India was set up earlier this year, along the lines of the U.S. Securities and Exchange Commission, but New Delhi hasn't pushed the legislation to make it operational. Mr. Dave, its head, acts cheery and patient, but he makes no bones about the need to get to work.

"Mega or non-mega, we feel the prospectus standards need to be considerably improved," he says. "Disclosures are very poor in India." He says the big questions -- "Do you really need this much money to put up these investments? Have you told investors what is happening in your sector? What about your track record? -- "aren't asked of companies coming to market. Instead, he says, most investors have to rely on the rumor-happy Indian press.

An example is the biggest offering of them all, Larsen & Toubro's $570 million bond issue. The engineering company was acquired in a takeover earlier this year by the giant Reliance textile group. Although Larsen & Toubro hadn't raised money from the public in 38 years, its new owners frequently raise funds on the local market. (Reliance floated a $357 million petrochemical company in 1988 that was, at the time, the largest public issue in Indian history.) The media has raised questions about Larsen & Toubro's issue, pointing out that it exceeds the company's annual sales and its market capitalization.

Even stranger is the case of Usha Rectifier, a semiconductor company with 1988 sales of $28 million that's raising $270 million to build an iron plant.

Once the money is raised, it isn't always certain how it is used. Larsen & Toubro, for example, says it's raising $570 million to use as supplier credit on large engineering jobs. Unlike other companies, it hasn't pin-pointed specific projects for the funds. And even when specific projects are described in prospectuses, the money often is used elsewhere, according to analysts.

"Someone must monitor where the funds are deployed," says Mr. Dave. Mr. Patel agrees: "There is no proper monitoring and screening of the use of these funds. They're trying to plug the various loopholes, but they're totally unprepared for this."

Because of the large amounts of money being raised, the loose disclosure requirements and the casual monitoring of how the money is used, some analysts fear that there could be a few mega-crashes, which could hurt market confidence far more than the small bankruptcies that followed the boom of 1986. The government insists that such a possibility is low. It says that despite loose regulation of the market itself, its longstanding regulation of industry will prevent such crashes.

T.T. Ram Mohan contributed to this article.

Lion Nathan Ltd., a New Zealand brewing and retail concern, said Friday that Bond Corp. Holdings Ltd. is "committed" to a transaction whereby Lion Nathan would acquire 50% of Bond's Australian brewing assets.

Lion Nathan issued a statement saying it is applying to Australia's National Companies & Securities Commission, the nation's corporate watchdog agency, for a modification to takeover regulations "similar to that obtained by" S.A. Brewing Holdings Ltd.

SA Brewing, an Australian brewer, last Thursday was given approval to acquire an option for up to 20% of Bell Resources Ltd., a unit of Bond Corp.

Bell Resources is acquiring Bond's brewing businesses for 2.5 billion Australian dollars (US$1.9 billion).

S.A. brewing would make a takeover offer for all of Bell Resources if it exercises the option, according to the commission.

Bond Corp., a brewing, property, media and resources company, is selling many of its assets to reduce its debts.

"Lion Nathan has a concluded contract with Bond and Bell Resources," said Douglas Myers, chief executive of Lion Nathan.

Finnair, Finland's state-owned airline, joined the wave of global airline alliances and signed a wide-ranging cooperation agreement with archrival Scandinavian Airlines System.

Under the accord, Finnair agreed to coordinate flights, marketing and other functions with SAS, the 50%-state-owned airline of Denmark, Norway and Sweden. The pact also calls for coordination between Finnair and Switzerland's national carrier, Swissair, with which SAS entered a similar alliance last month.

Finnair and SAS said they plan to swap stakes in each other. Neither disclosed details pending board meetings next month. Officials hinted, however, that SAS would take a stake of at least 6% in Finnair, valued at about $40 million at current market prices. Finnair would receive SAS shares valued at the same amount, officials said.

General Motors Corp. and Ford Motor Co. are now going head to head in the markets for shares of Jaguar PLC, as GM got early clearance from the Federal Trade Commission to boost its stake in the British luxury car maker.

GM confirmed Friday that it received permission late Thursday from U.S. antitrust regulators to increase its Jaguar holdings past the $15 million level. Ford got a similar go-ahead earlier in October, and on Friday, Jaguar announced that the No. 2 U.S. auto maker had raised its stake to 13.2%, or 24.2 million shares, from 12.4% earlier in the week.

A spokesman for GM, the No. 1 auto maker, declined to say how many Jaguar shares that company owns. In late trading Friday, Jaguar shares bucked the downward tide in London's stock market and rose five pence to 725 pence ($11.44). Trading volume was a moderately heavy 3.1 million shares. In the U.S., Jaguar's American depositary receipts were among the most active issues Friday in national over-the-counter trading where they closed at $11.625 each, up 62.5 cents.

Analysts expect that the two U.S. auto giants will move quickly to buy up 15% stakes in Jaguar, setting up a potential bidding war for the prestigious Jaguar brand.

British government restrictions prevent any single shareholder from going beyond 15% before the end of 1990 without government permission. The British government, which owned Jaguar until 1984, still holds a controlling "golden share" in the company.

With the golden share as protection, Jaguar officials have rebuffed Ford's overtures, and moved instead to forge an alliance with GM. Jaguar officials have indicated they are close to wrapping up a friendly alliance with GM that would preserve Jaguar's independence, but no deal has been announced. Ford, on the other hand, has said it's willing to bid for all of Jaguar, despite the objections of Jaguar chairman Sir John Egan. Analysts continued to speculate late last week that Ford may try to force the issue by calling for a special shareholder's meeting and urging that the government and Jaguar holders remove the barriers to a full bidding contest before December 1990. But a Ford spokeswoman in Dearborn said Friday the company hasn't requested such a meeting yet.

Individuals close to the situation believe Ford officials will seek a meeting this week with Sir John to outline their proposal for a full bid. Any discussions with Ford could postpone the Jaguar-GM deal, headed for completion within the next two weeks. The GM agreement is expected to retain Jaguar's independence by involving an eventual 30% stake for the U.S. auto giant as well as joint manufacturing and marketing ventures.

Jaguar and GM hope to win Jaguar shareholders approval for the accord partly by structuring it in a way that wouldn't preclude a full Ford bid once the golden share expires. "There's either a minority {stake} package capable of getting Jaguar shareholder approval or there isn't," said one knowledgeable individual. " If there isn't, {the deal} won't be put forward" to shareholders.

Union sentiment also could influence shareholder reaction to a Jaguar-GM accord. GM's U.K. unit holds crucial talks today with union officials about its consideration of an Ellesmere Port site for its first major engine plant in Britain. One auto-industry union leader said, "If they try to build it somewhere else {in Europe} besides the U.K., they are going to be in big trouble" with unionists over any Jaguar deal.

These are the last words Abbie Hoffman ever uttered, more or less, before he killed himself. And You Are There, sort of:

ABBIE: "I'm OK, Jack. I'm OK." (listening) "Yeah. I'm out of bed. I got my feet on the floor. Yeah. Two feet. I'll see you Wednesday? . . . Thursday."

He listens impassively.

ABBIE (cont'd.): "I'll always be with you, Jack. Don't worry."

Abbie lies back and leaves the frame empty.

Of course that wasn't the actual conversation the late anti-war activist, protest leader and founder of the Yippies ever had with his brother. It's a script pieced together from interviews by CBS News for a re-enactment, a dramatic rendering by an actor of Mr. Hoffman's ultimately unsuccessful struggle with depression.

The segment is soon to be broadcast on the CBS News series "Saturday Night With Connie Chung," thus further blurring the distinction between fiction and reality in TV news. It is the New Journalism come to television.

Ms. Chung's program is just one of several network shows (and many more in syndication) that rely on the controversial technique of reconstructing events, using actors who are supposed to resemble real people, living and dead. Ms. Chung's, however, is said to be the only network news program in history to employ casting directors.

Abbie Hoffman in this case is to be played by Hollywood actor Paul Lieber, who isn't new to the character. He was Mr. Hoffman in a 1979 Los Angeles production of a play called "The Chicago Conspiracy Trial."

Television news, of course, has always been part show-biz. Broadcasters have a healthy appreciation of the role entertainment values play in captivating an audience. But, as CBS Broadcast Group president Howard Stringer puts it, the network now needs to "broaden the horizons of nonfiction television, and that includes some experimentation."

Since its premiere Sept. 16, the show on which Ms. Chung appears has used an actor to portray the Rev. Vernon Johns, a civil-rights leader, and one to play a teenage drug dealer. It has depicted the bombing of Pan Am flight 103 over the Scottish town of Lockerbie. On Oct. 21, it did a rendition of the kidnapping and imprisonment of Associated Press correspondent Terry Anderson, who was abducted in March 1985 and is believed to be held in Lebanon. The production had actors playing Mr. Anderson and former hostages David Jacobsen, the Rev. Benjamin Weir and Father Lawrence Jenco.

ABC News has similarly branched out into entertainment gimmickry. "Prime Time Live," a new show this season featuring Sam Donaldson and Diane Sawyer, has a studio audience that applauds and that one night (to the embarrassment of the network) waved at the camera like the crowd on "Let's Make a Deal." (ABC stops short of using an "applause" sign and a comic to warm up the audience. The stars do that themselves.) NBC News has produced three episodes of an occasional series produced by Sid Feders called "Yesterday, Today and Tomorrow," starring Maria Shriver, Chuck Scarborough and Mary Alice Williams, that also gives work to actors.

Call it a fad. Or call it the wave of the future.

NBC's re-creations are produced by Cosgrove-Meurer Productions, which also makes the successful prime-time NBC Entertainment series "Unsolved Mysteries."

The marriage of news and theater, if not exactly inevitable, has been consummated nonetheless. News programs, particularly if they score well in the ratings, appeal to the networks' cost-conscious corporate parents because they are so much less expensive to produce than an entertainment show is -- somewhere between $400,000 and $500,000 for a one-hour program. Entertainment shows tend to cost twice that. Re-enactments have been used successfully for several seasons on such syndicated "tabloid TV" shows as "A Current Affair," which is produced by the Fox Broadcasting Co. unit of Rupert Murdoch's News Corp. That show, whose host is Ms. Chung's husband, Maury Povich, has a particular penchant for grisly murders and stories having to do with sex -- the Robert Chambers murder case, the Rob Lowe tapes, what have you.

Gerald Stone, the executive producer of "A Current Affair," says, "We have opened eyes to being a little less conservative and more imaginative in how to present the news."

Nowhere have eyes been opened wider than at CBS News. At 555 W. 57th St. in Manhattan, one floor below the offices of "60 Minutes," the most successful prime-time news program ever, actors wait in the reception area to audition for "Saturday Night With Connie Chung."

CBS News sends scripts to agents, who pass them along to clients. The network deals a lot with unknowns, including Scott Wentworth, who portrayed Mr. Anderson, and Bill Alton as Father Jenco, but the network has some big names to contend with, too. James Earl Jones is cast to play the Rev. Mr. Johns. Ned Beatty may portray former California Gov. Pat Brown in a forthcoming epsiode on Caryl Chessman, the last man to be executed in California, in 1960.

"Saturday Night" has cast actors to appear in future stories ranging from the abortion rights of teen-agers to a Nov. 4 segment on a man named Willie Bosket, who calls himself a "monster" and is reputed to be the toughest prisoner in New York.

CBS News, which as recently as two years ago fired hundreds of its employees in budget cutbacks, now hires featured actors beginning at $2,700 a week. That isn't much compared with what Bill Cosby makes, or even Connie Chung for that matter (who is paid $1.6 million a year and who recently did a guest shot of her own on the sitcom "Murphy Brown"). But the money isn't peanuts either, particularly for a news program.

CBS News is also re-enacting the 1979 Three Mile Island nuclear accident in Middletown, Pa., with something less than a cast of thousands. It is combing the town of 10,000 for about 200 extras. On Oct. 20, the town's mayor, Robert Reid, made an announcement on behalf of CBS during half-time at the Middletown High School football game asking for volunteers.

"There was a roll of laughter through the stands," says Joe Sukle, the editor of the weekly Press and Journal in Middletown. "They're filming right now at the bank down the street, and they want shots of people getting out of cars and kids on skateboards. They are approaching everyone on the street and asking if they want to be in a docudrama."

Mr. Sukle says he wouldn't dream of participating himself: "No way. I think re-enactments stink."

Though a re-enactment may have the flavor, Hollywood on the Hudson it isn't. Some producers seem tentative about the technique, squeamish even. So the results, while not news, aren't exactly theater either, at least not good theater. And some people do think that acting out scripts isn't worthy of CBS News, which once lent prestige to the network and set standards for the industry.

In his review of "Saturday Night With Connie Chung," Tom Shales, the TV critic of the Washington Post and generally an admirer of CBS, wrote that while the show is "impressive, . . . one has to wonder if this is the proper direction for a network news division to take."

Re-creating events has, in general, upset news traditionalists, including former CBS News President Richard S. Salant and former NBC News President Reuven Frank, former CBS News anchorman Walter Cronkite and the new dean of the Columbia University Graduate School of Journalism, Joan Konner. Says she: "Once you add dramatizations, it's no longer news, it's drama, and that has no place on a network news broadcast. . . . They should never be on. Never."

Criticism of the Abbie Hoffman segment is particularly scathing among people who knew and loved the man. That includes his companion of 15 years, Johanna Lawrenson, as well as his former wife, Anita. Both women say they also find it distasteful that CBS News is apparently concentrating on Mr. Hoffman's problems as a manic-depressive.

"This is dangerous and misrepresents Abbie's life," says Ms. Lawrenson, who has had an advance look at the 36-page script. "It's a sensational piece about someone who is not here to defend himself."

Mrs. Hoffman says that dramatization "makes the truth flexible. It takes one person's account and gives it authenticity."

CBS News interviewed Jack Hoffman and his sister, Phyllis, as well as Mr. Hoffman's landlord in Solebury Township, Pa. Also Jonathan Silvers, who collaborated with Mr. Hoffman on two books.

Mr. Silvers says, "I wanted to be interviewed to get Abbie's story out, and maybe talking about the illness will do some good."

The executive producer of "Saturday Night With Connie Chung," Andrew Lack, declines to discuss re-creactions as a practice or his show, in particular. "I don't talk about my work," he says. The president of CBS News, David W. Burke, didn't return numerous telephone calls.

One person close to the process says it would not be in the best interest of CBS News to comment on a "work in progress," such as the Hoffman re-creation, but says CBS News is "aware" of the concerns of Ms. Lawrenson and Mr. Hoffman's former wife. Neither woman was invited by CBS News to participate in a round-table discussion about Mr. Hoffman that is to follow the re-enactment.

Mr. Lieber, the actor who plays Mr. Hoffman, says he was concerned at first that the script would "misrepresent an astute political mind, one that I admired," but that his concerns were allayed. The producers, he says, did a good job of depicting someone "who had done so much, but who was also a manic-depressive.

Dentsu Inc., the world's largest advertising agency on the strength of its dominance in the Japanese market, is setting its sights on overseas expansion.

Last year, Dentsu started HDM, a joint network with U.S. ad agency Young & Rubicam and Eurocom of France. A few months ago, Dentsu acquired 69% of Australian agency Fortune Communication Holdings Ltd. for 5.9 million Australian dollars (US$4.6 million). Dentsu has U.S. subsidiaries, but they keep low profiles.

Now, the giant marketing company, which holds 25% of Japan's 4.4 trillion yen ($30.96 billion) advertising industry, is considering the acquisition of an advertising network in the U.S. or Europe. What is driving Dentsu's international expansion largely is the need to keep up with its Japanese clients as they grow in the U.S. and Europe. "If we don't do something . . . we won't be able to catch up with demand," says a Dentsu spokesman. "Our president said acquisition is an effective method."

Last year, Dentsu's foreign business accounted for less than 10% of total billings, but the company is aiming at 20% in the near future. So far, it appears cautious about taking the big step. For example, the spokesman says Dentsu has been approached by banks and securities companies a number of times to invest in the troubled British marketing group Saatchi & Saatchi PLC. But he said Dentsu hasn't looked seriously at Saatchi.

Though Dentsu says it has no concrete acquisition plans or deadlines, it is laying the groundwork for international growth. It is setting up a special team in charge of international markets and training workers to do business abroad.

For the year ended March 31, Dentsu sales rose 19% to $8.9 billion from $7.5 billion, and net income jumped 59% to $102 million from $64 million. Dentsu's billings last year were larger than those of Young & Rubicam, the world's second-largest ad agency, according to a survey by the publication Advertising Age.

But success overseas in unfamiliar markets could be trickier than for other industries such as manufacturers. On its own, Dentsu's muscle in Japan may count for little in major foreign markets when seeking non-Japanese clients. Thus, an acquisition may prove the necessary course.

But Japanese agencies are cautious about expanding abroad because client relationships are different. Japanese agencies do business with rival clients in the same industry, a practice "that would be unacceptable by traditional Western conflict rules," says Roy Warman, the London chief executive of Saatchi & Saatchi's communications division.

Although acquiring a foreign company would expand Japanese advertising agencies' business to foreign clients, many clients would also be Japanese companies expanding overseas, says the Dentsu spokesman. But the different business system would make it hard for Dentsu to provide these Japanese companies the same kind of services they do in Japan.

Ciba-Geigy AG, the big Swiss chemicals company, said that it agreed in a letter of intent with Corning Inc. to acquire Corning's 50% share of Ciba Corning Diagnostics Corp., based in Medfield, Mass.

Ciba Corning, which had been a 50-50 venture between Basel-based Ciba-Geigy and Corning, has annual sales of about $300 million, the announcement said. Terms of the transaction weren't disclosed. Ciba Corning makes clinical diagnostics systems and related products for the medical-care industry.

The announcement said the acquisition should be completed by December after a definitive agreement is completed and regulatory approval is received.

Ciba-Geigy intends to develop the Ciba Corning unit into a "substantial business," making the unit an "integral part" of Ciba-Geigy's "comprehensive disease management concept.

The NBC network canceled its first new series of the fall TV season, killing Mel Brooks's wacky hotel comedy "The Nutt House."

The show, one of five new NBC series, is the second casualty of the three networks so far this fall. Last week CBS Inc. canceled "The People Next Door." NBC's comedy had aired Wednesdays at 9:30 p.m. and in five outings had drawn an average of only 13.2% of homes, lagging behind the Jamie Lee Curtis comedy "Anything But Love" on ABC and CBS's one-hour drama "Jake and the Fatman." NBC, a unit of General Electric Co., hasn't decided on a permanent replacement for the canceled series.

John Labatt Ltd. said it plans a private placement of 150 million Canadian dollars (US$127.5 million) in preferred shares, to be completed around Nov. 1.

Proceeds will be used to reduce short-term debt at the beer and food concern, said Robert Vaux, vice president, finance.

The preferred shares will carry a floating annual dividend equal to 72% of the 30-day bankers' acceptance rate until Dec. 31, 1994. Thereafter, the rate will be renegotiated. Mr. Vaux said that if no agreement is reached, other buyers will be sought by bid or auction. The shares are redeemable after the end of 1994.

Mr. Vaux said the share issue is part of a strategy to strengthen Labatt's balance sheet in anticipation of acquisitions to be made during the next 12 to 18 months. Labatt's has no takeover bids outstanding currently, he said.

Lead underwriter to the issue is Toronto Dominion Securities Inc.

Texas Instruments Inc., once a pioneer in portable computer technology, today will make a bid to reassert itself in that business by unveiling three small personal computers.

The announcements are scheduled to be made in Temple, Texas, and include a so-called "notebook" PC that weighs less than seven pounds, has a built-in hard disk drive and is powered by Intel Corp. 's 286 microprocessor. That introduction comes only two weeks after Compaq Computer Corp., believing it had a lead of three to six months on competitors, introduced the first U.S. notebook computer with such features.

Despite the inevitable comparison with Compaq, however, Texas Instruments' new notebook won't be a direct competitor. While Compaq sells its machines to businesses through computer retailers, Texas Instruments will be selling most of its machines to the industrial market and to value-added resellers and original-equipment manufacturers.

The introductions also mark Texas Instruments' plunge back into a technology it has all but ignored for the past several years. Although the Dallas-based computer giant introduced the first portable data terminal in 1971 -- a 38-pound monster -- and the world's first microprocessor-based portable in 1976, the only portable machines it has introduced since the first part of the decade have been "dumb" terminals with limited on-board processing ability. It stopped selling a standard personal computer a while ago.

Now that is about to change, as Texas Instruments begins marketing two 14-pound laptop PCs with 20 megabyte and 40 megabyte hard drives. The laptops are not revolutionary and, indeed, are tardy in a market first opened by GRiD Systems Corp., now a unit of Tandy Corp., almost two years ago.

But the notebook, with the more advanced microprocessor and hard disk, is more innovative. Weighing 6.7 pounds with battery, the notebook measures 8.2 by 11.7 inches, has a 20-megabyte hard disk drive and boasts a backlit screen that is 22% larger than Compaq's. Its keyboard, according to industry consultants, is better than Compaq's, but its battery life of two to three hours is shorter. It doesn't have an internal floppy disk drive, although a snap-on drive can be purchased separately. Its greatest drawback may be its 3-inch thickness, big enough for one consultant to describe it as "clunky."

List prices on the heavier Texas Instrument laptops will be $4,999 for the TI Model 25, with a 20 megabyte disk drive, and $5,599 for the 40-megabyte Model 45. The notebook, the TI Model 12, will be priced at $4,199.

Shearson Lehman Hutton Inc. said it applied to Taiwanese securities officials for permission to open brokerage offices in Taipei.

Shearson's application is the first since the Taiwan Securities and Exchange Commission announced June 21 that it would allow foreign brokerage firms to do business in that country. Taiwan officials are expected to review the Shearson application later this year.

Under current rules, investors in Taiwan can buy overseas stocks only through the purchase of mutual funds issued by local and foreign investment trusts. The new rules will allow investors to buy foreign stocks directly.

A spokesman for Shearson said the brokerage service will be directed at individual investors who want to buy foreign and domestic stocks. "It's an attractive market with good growth opportunities," he added.

Retailers in the West and parts of the South are entering the critical Christmas shopping season with more momentum than those in other regions.

In a new report, the International Council of Shopping Centers said sales of general merchandise in the West for the first seven months of 1989 rose 6.6% above year-earlier levels.

Sales increased a more modest 4.8% in the South and 4.4% in the Midwest. But sales in the oil-patch state of Texas surged 12.9% and sales in South Carolina jumped 10.6% in the period, the New York trade group said.

In the Northeast, however, sales declined 0.4% in the period, with sales in New England falling 2.6%.

The numbers show that "we don't have a monolithic economy," said Isaac Lagnado, council research director. "There are a lot of have and have-not markets."

Sales nationally rose 3.9% through July, the latest month for which the figures are available, the council said.

The Northern California earthquake and Hurricane Hugo are likely to temporarily damp sales growth in the West and South Carolina. But Mr. Lagnado predicted the regional trends would continue through Christmas. "The big mo is as much of a factor in retailing as in politics," he said.

The Christmas quarter is important to retailers because it represents roughly a third of their sales and nearly half of their profits.

The council's report is based on data the trade group buys from the U.S. Census Bureau. The information on 125 metropolitan markets is supplied by retailers such as Sears, Roebuck & Co. and K mart Corp. as well as closely held concerns such as R.H. Macy & Co. The council plans to release its regional reports monthly.

Mr. Lagnado said strength in employment appears to have the biggest impact on sales growth. El Paso, Austin and Fort Worth, the three strongest retail markets in the nation, are all located in Texas, where employment grew a relatively strong 2%. Massachusetts, which has lost jobs in the computer and defense-related industries, was the weakest link in bleak New England.

The results reflect a reversal in the fortunes of the regions during the past two years. In 1987, the West had the slowest sales growth, and the South and the Midwest were first and second respectively, according to the council.

Mr. Lagnado said that although retailers probably won't ever recover sales lost because of the California quake and Hurricane Hugo, they could see some benefits later on. Stores such as Sears that sell big-ticket durable goods might actually get a boost as consumers rush to replace items lost in the disasters, he said.

Kerr-McGee Corp. said it will spend $42 million to purchase land and relocate its ammonium perchlorate storage facility to Clark County, Nev., from Henderson, Nev.

The company said it will move the storage and cross-blending operations to a site 23 miles northeast of Las Vegas to distance the operations from residential areas. Ammonium perchlorate is an oxidizer that is mixed with a propellant to make rocket fuel used in the space shuttle and military rockets.

In May 1988, an ammonium perchlorate plant in Henderson owned by an American Pacific Corp. unit was leveled by a series of explosions. After the explosion, Kerr-McGee temporarily shut down its facility just south of Las Vegas for a safety inspection. American Pacific and Kerr-McGee are the only two U.S. manufacturers of ammonium perchlorate.

When the plant was destroyed, "I think everyone got concerned that the same thing would happen at our plant," a KerrMcGee spokeswoman said. That prompted Kerr-McGee to consider moving the potentially volatile storage facilities and cross-blending operations away from town.

Kerr-McGee said it has purchased 3,350 acres from the federal government in Clark County and plans to begin construction early next year. The new facility is expected to begin operations in early 1991. The Henderson plant will continue its other chemical operations, the company said.

This maker of electronic devices said it replaced all five incumbent directors at a special meeting called by Milton B. Hollander, whose High Technology Holding Co. of Stamford, Conn. acquired most of its 49.4% stake in Newport in August. Elected as directors were Mr. Hollander, Frederick Ezekiel, Frederick Ross, Arthur B. Crozier and Rose Pothier. Removed from office were George Pratt, Robert E. Davis, Norman Gray, John Virtue, corporate secretary, and Barrett B. Weekes, chairman, president and chief executive officer. Newport officials didn't respond Friday to requests to discuss the changes at the company but earlier, Mr. Weekes had said Mr. Hollander wanted to have his own team on the board.

Shiseido Co., Japan's leading cosmetics producer, said it had net income of 5.64 billion yen ($39.7 million) in its first half, which ended Sept. 30.

Exact comparisons with the previous year were unavailable because of a change in the company's fiscal calendar. The Tokyo-based company had net of 3.73 billion yen in the previous reporting period, which was the four months ended March 31.

Sales in the first half came to 159.92 billion yen, compared with 104.79 billion yen in the four-month period.

Shiseido predicted that sales for the year ending next March 31 will be 318 billion yen, compared with 340.83 billion yen in the year ended Nov. 30, 1988. It said it expects net to rise to 11 billion yen from 8.22 billion yen.

Bruce W. Wilkinson, president and chief executive officer, was named to the additional post of chairman of this architectural and design services concern. Mr. Wilkinson, 45 years old, succeeds Thomas A. Bullock, 66, who is retiring as chairman but will continue as a director and chairman of the executive committee.

Merger and acquisition activity in the third quarter exceeded the year-earlier pace, said Merrill Lynch & Co. 's W.T. Grimm & Co. unit in Schaumburg, Ill.

A total of 672 transactions were announced during the latest quarter, up 13% from the year-earlier period's 597, Grimm said. Transactions in which prices were disclosed totaled $71.9 billion, up 36% from $52.9 billion a year earlier, the company added.

Grimm counted 16 transactions valued at $1 billion or more in the latest period, twice as many as a year earlier. The largest was the $12 billion merger creating Bristol-Myers Squibb Co.

In the first nine months, 1,977 transactions were announced, up 15% from 1,716 in the year-earlier period. Transactions in which prices were disclosed totaled $188.1 billion, up 15% from $163.2 billion a year earlier.

Citing current stock market conditions and the trend away from highly leveraged transactions, Grimm said it wasn't certain that the total value of transactions for the year will exceed the record $247 billion in 1988.

MEDICINE SHOPPE INTERNATIONAL Inc. declared a 3-for-2 stock split, and substantially boosted the dividend payout. The franchiser of pharmacies said the added shares will be distributed Dec. 4 to stock of record Nov. 13. The company also changed its dividend policy, under which holders had received an annual 10 cents-a-share payment, by declaring a four-cents-a-share dividend, to be paid quarterly on post-split shares.

NBI Inc. said that it cannot pay the Oct. 31 dividend on its Series A convertible preferred stock, allowing the stock's holder to convert the shares into as much as 27.7% of NBI's shares outstanding.

NBI said that it has the funds to pay the dividend, but that it doesn't have the surplus or profit required under Delaware law for payment of the dividend. All the preferred stock is held by the Yukon Office Supply Stock Ownership Plan.

Under terms of the stock, the Yukon ESOP can demand that the stock be redeemed for $4,090,000 on Nov. 30, but NBI said it is legally prohibited from making the redemption. Failure to pay the dividend allows Yukon to convert all or some of its shares into NBI common after Nov. 30, at a conversion price based on NBI's closing stock price.

NBI, a maker of word-processing systems, said it can't predict if any of the preferred stock will be converted.

NBI also said it has hired Prudential-Bache Securities Inc. as its financial adviser and investment banker to help it restructure financially and improve its balance sheet.

Insurers may see claims resulting from the San Francisco earthquake totaling nearly $1 billion -- far less than the claims they face from Hurricane Hugo -- but the recent spate of catastrophes should jolt property insurance rates in coming months.

The property claims service division of the American Insurance Services Group estimated insured losses from the earthquake at $960 million. This estimate doesn't include claims under workers' compensation, life, health disability and liability insurance and damage to infrastructure such as bridges, highways and public buildings.

The estimated earthquake losses are low compared with the $4 billion in claims that insurers face from Hurricane Hugo, which ripped through the Caribbean and the Carolinas last month. That's because only about 30% of California homes and businesses had earthquake insurance to cover the losses.

However, insurance brokers and executives say that the combination of the Bay area earthquake, Hugo and last week's explosion at the Phillips Petroleum Co. 's refinery in Pasadena, Texas, will cause property insurance and reinsurance rates to jump.

Other insurance rates such as casualty insurance, which would cover liability claims, aren't likely to firm right away, says Alice Cornish, an industry analyst with Northington Research in Avon, Conn. She believes the impact of losses from these catastrophes isn't likely to halt the growth of the industry's surplus capital next year.

Property reinsurance rates are likely to climb first, analysts and brokers believe. "The reinsurance market has been bloodied by disasters" in the U.S. as well as in Great Britain and Europe, says Thomas Rosencrants, director of research at Interstate/Johnson Lane Inc. in Atlanta.

Insurers typically retain a small percentage of the risks they underwrite and pass on the rest of the losses. Insurers buy this insurance protection for themselves by giving up a portion of the premiums they collect on a policy to another firm -- a reinsurance company, which, in turn, accepts a portion of any losses resulting from this policy. Insurers, such as Cigna Corp., Transamerica Corp, and Aetna Life & Casualty Co., buy reinsurance from other U.S.-based companies and Lloyd's of London for one catastrophe at a time.

After Hugo hit, many insurers exhausted their reinsurance coverage and had to tap reinsurers to replace that coverage in case there were any other major disasters before the end of the year.

After the earthquake two weeks ago, brokers say companies scrambled to replace reinsurance coverages again and Lloyd's syndicates turned to the London market excess lines for protection of their own.

James Snedeker, senior vice president of Gill & Roeser Inc., a New York-based reinsurance broker, says insurers who took big losses this fall and had purchased little reinsurance in recent years will be asked to pay some pretty hefty rates if they want to buy reinsurance for 1990. However, companies with few catastrophe losses this year and already big buyers of reinsurance are likely to see their rates remain flat, or perhaps even decline slightly. Many companies will be negotiating their 1990 reinsurance contracts in the next few weeks.

"It's a seller's market," said Mr. Snedeker of the reinsurance market right now.

But some large insurers, such as State Farm Mutual Automobile Insurance Co., don't purchase reinsurance, but fund their own program. A few years ago, State Farm, the nation's largest home insurer, stopped buying reinsurance because no one carrier could provide all the coverage that it needed and the company found it cheaper to self-reinsure. The $472 million of losses State Farm expects from Hugo and an additional $300 million from the earthquake are less than 5% of State Farm's $16.7 billion total net worth.

Since few insurers have announced what amount of losses they expect to see from the earthquake, it's impossible to get a clear picture of the quake's impact on fourth-quarter earnings, said Herbert Goodfriend at Prudential-Bache Securities Corp.

Transamerica expects an after-tax charge of less than $3 million against fourth-quarter net; Hartford Insurance Group, a unit of ITT Corp., expects a $15 million or 10 cents after-tax charge; and Fireman's Fund Corp. expects a charge of no more than $50 million before taxes and after using its reinsurance.

Sharp Corp., Tokyo, said net income in its first half rose 59% to 18.32 billion yen ($128.9 million) from 11.53 billion yen a year earlier.

The consumer electronics, home appliances and information-processing concern said revenue in the six months ended Sept. 30 rose 8.9% to 517.85 billion yen from 475.6 billion yen.

Sales of information-processing products and electric parts increased a strong 22% to 236.23 billion yen from 194.24 billion yen and accounted for 46% of total sales.

In audio equipment, sales rose 13% to 44.3 billion yen from 39.19 billion yen. Sales of electric appliances were flat, and sales of electronic equipment declined slightly.

Sharp projected sales for the current year ending March 31 at 1.6 trillion yen, a 7% increase the previous fiscal year. It said it expects net to rise 45% to 380 billion yen.

Sun Microsystems Inc., a computer maker, announced the effectiveness of its registration statement for $125 million of 6 3/8% convertible subordinated debentures due Oct. 15, 1999.

The company said the debentures are being issued at an issue price of $849 for each $1,000 principal amount and are convertible at any time prior to maturity at a conversion price of $25 a share.

The debentures are available through Goldman, Sachs & Co.

Nelson Holdings International Ltd. shareholders approved a 1-for-10 consolidation of the company's common stock at a special meeting.

At the same time, shareholders approved the adoption of a rights plan and a super-majority voting approval requirement. They also approved the relocation of the company's registered office to Toronto from Vancouver and a name change to NHI Nelson Holdings International Ltd.

Following the consolidation, the entertainment company, which has film and television operations in Beverly Hills, Calif., will have about 4.1 million shares outstanding. The number of authorized common shares will remain at 100 million. Under the rights plan, holders will have one right for each common share held, with each right entitling the purchase of one common share for 100 Canadian dollars. The rights plan would be triggered if a person or group acquires 20% or more of the common shares outstanding without making an offer to all shareholders.

Under the super-majority amendment, certain mergers and other transactions would require approval of holders of 80% of the company's common shares outstanding.

Wilfred American Educational Corp. said a federal grand jury in Boston indicted the operator of cosmetology and business schools for mail fraud.

The charges in the 12-count indictment, which stem from events that allegedly occurred in late 1984 and early 1985, involve enrollment procedures of six students and the preparation of certain reports, Wilfred said. No individuals were charged in the indictment.

Wilfred American said it will "vigorously defend" itself against the charges and added that the charges relate to procedures that it has since changed.

Eight admissions representatives at two of Wilfred's former Massachusetts schools previously pleaded guilty to charges of aiding, abetting and counseling students to submit false financial-aid applications. Wilfred closed its Massachusetts schools earlier this year.

In New York Stock Exchange composite trading Friday, Wilfred fell 6.25 cents to 93.75 cents a share.

Rally's Inc. said it filed suit in U.S. District Court in Delaware against a group led by Burt Sugarman, seeking to block the investors from buying more shares.

Rally's, a Louisville, Ky., fast-food chain, alleges that the three investors, who are directors of the company, broke securities laws because they didn't disclose their intentions to acquire a big Rally's stake.

The group, led by Giant Group Ltd. and its chairman, Mr. Sugarman, owns about 45.2% of Rally's. In the Securities and Exchange Commission filings, the group has said it may seek control of Rally's.

Mr. Sugarman called the lawsuit "not nice" and said his group will continue to push for control of the company and the removal of certain directors.

He asserts that some directors, who have joined forces with company founder James Patterson, have ties to Wendy's, a competing hamburger chain. The Patterson group, which controls about 42% of Rally's shares, also may seek control.

Rally's also said it formed a committee of three directors, who aren't associated with either the Patterson or Sugarman groups, to analyze the situation.

Leaseway Transportation Corp. said it will restructure $192.5 million of certain subordinated debentures to reduce its debt obligations and interest expense.

The 13.25% subordinated debentures due 2002 were issued in August 1987 as part of the $690 million financing for a leveraged buy-out of the company. Leaseway provides transportation services for manufacturers, distributors and retailers.

Leaseway said it has begun discussions with certain institutional debt holders to review the proposed private placement transaction, which would exchange the debt for new subordinated debt instruments and equity securities.

Specific terms are subject to review and a final agreement with debt holders, the company said. But the proposed transaction calls for an exchange of the debt for new debentures of lower face value and reduced cash interest. Also, debt holders would be offered an equity position in Leaseway, which in total would represent a controlling interest in the company.

Drexel Burnham Lambert Inc. is the adviser on the transaction.

Company officials said Leaseway fulfilled payment requirements of its debt obligations since the leveraged buy-out, but "our performance since the {buy-out} makes it imperative to implement actions that will further improve our cash flow.

Nicaraguan President Daniel Ortega may have accomplished over the weekend what his U.S. antagonists have failed to do: revive a constituency for the Contra rebels.

Lawmakers haven't publicly raised the possibility of renewing military aid to the Contras, and President Bush parried the question at a news conference here Saturday, saying only that "if there's an all-out military offensive, that's going to change the equation 180 degrees."

But Mr. Ortega's threat over the weekend to end a 19-month cease-fire with the rebels seeking to topple him, effectively elevated the Contras as a policy priority just as they were slipping from the agendas of their most ardent supporters.

Senate Majority Leader George Mitchell (D., Maine) said yesterday on NBC-TV's "Meet the Press" that Mr. Ortega's threat was "a very unwise move, particularly the timing of it."

The threat came during a two-day celebration in Costa Rica to highlight Central America's progress toward democracy in the region, attended by President Bush, Canadian Prime Minister Brian Mulroney and 14 other Western Hemisphere leaders. Mr. Bush returned to Washington Saturday night.

Mr. Ortega announced on Friday that he would end the cease-fire this week in response to the periodic Contra assaults against his army. Saturday, he amended his remarks to say that he would continue to abide by the cease-fire if the U.S. ends its financial support for the Contras. He asked that the remaining U.S. humanitarian aid be diverted to disarming and demobilizing the rebels.

Not only did Mr. Ortega's comments come in the midst of what was intended as a showcase for the region, it came as Nicaragua is under special international scrutiny in anticipation of its planned February elections. Outside observers are gathering in Nicaragua to monitor the registration and treatment of opposition candidates. And important U.S. lawmakers must decide at the end of November if the Contras are to receive the rest of the $49 million in so-called humanitarian assistance under a bipartisan agreement reached with the Bush administration in March.

The humanitarian assistance, which pays for supplies such as food and clothing for the rebels amassed along the Nicaraguan border with Honduras, replaced the military aid cut off by Congress in February 1988. While few lawmakers anticipated that the humanitarian aid would be cut off next month, Mr. Ortega's threat practically guarantees that the humanitarian aid will be continued.

Senate Minority Leader Robert Dole (R., Kan.) said yesterday on "Meet the Press": "I would hope after his {Mr. Ortega's} act yesterday or the day before, we'd have unanimous support for quick action on remaining humanitarian aid." Sen. Dole also said he hoped for unanimous support for a resolution he plans to offer tomorrow denouncing the Nicaraguan leader.

While renewing military aid had been considered out of the question, rejected by Congress and de-emphasized by the Bush administration, Mr. Ortega's statement provides Contra supporters with the opportunity to press the administration on the issue.

"The administration should now state that if the {February} election is voided by the Sandinistas . . . they should call for military aid," said former Assistant Secretary of State Elliott Abrams. "In these circumstances, I think they'd win."

Sen. Mitchell said that congressional Democrats intend to honor the March agreement to give non-lethal support to the Contras through the February elections, although he added that the agreement requires that the Contras not initiate any military action.

Mr. Ortega's threat to breach the cease-fire comes as U.S. officials were acknowledging that the Contras have at times violated it themselves. Secretary of State James Baker, who accompanied President Bush to Costa Rica, told reporters Friday: "I have no reason to deny reports that some Contras ambushed some Sandinista soldiers."

Mr. Baker's assistant for inter-American affairs, Bernard Aronson, while maintaining that the Sandinistas had also broken the cease-fire, acknowledged: "It's never very clear who starts what." He added that the U.S. has cut off aid to some rebel units when it was determined that those units broke the cease-fire.

In addition to undermining arguments in favor of ending Contra aid, Mr. Ortega's remarks also played to the suspicions of some U.S. officials and conservatives outside the government that he is searching for ways to manipulate or void the February elections.

Administration officials traveling with President Bush in Costa Rica interpreted Mr. Ortega's wavering as a sign that he isn't responding to the military attacks so much as he is searching for ways to strengthen his hand prior to the elections. Mr. Abrams said that Mr. Ortega is seeking to demobilize the Contras prior to the elections to remove any pressure to hold fair elections.

"My sense is what they have in mind is an excuse for clamping down on campaigning" by creating an atmosphere of a military emergency, he said.

Milton Petrie, chairman of Petrie Stores Corp., said he has agreed to sell his 15.2% stake in Deb Shops Corp. to Petrie Stores.

In a Securities and Exchange Commission filing, Mr. Petrie said that on Oct. 26 Petrie Stores agreed to purchase Mr. Petrie's 2,331,100 Deb Shops shares. The transaction will take place tomorrow.

The filing said Petrie Stores of Secaucus, N.J., is purchasing Mr. Petrie's Deb Shops stake as an investment. Although Petrie Stores has considered seeking to acquire the remaining equity of Deb Stores, it has no current intention to pursue such a possibility, the filing said.

Philadelphia-based Deb Shops said it saw little significance in Mr. Petrie selling his stock to Petrie Stores. "We didn't look at it and say, `Oh my God, something is going to happen, '" said Stanley Uhr, vice president and corporate counsel.

Mr. Uhr said that Mr. Petrie or his company have been accumulating Deb Shops stock for several years, each time issuing a similar regulatory statement. He said no discussions currently are taking place between the two companies.

Nikon Corp. said unconsolidated pretax profit increased 70% to 12.12 billion yen ($85.3 million) in the first half ended Sept. 30, from 7.12 billion yen a year ago.

The Tokyo camera maker said net income more than doubled to 5.85 billion yen, or 16.08 a share, from 2.63 billion yen, or 7.24 yen a share.

Nikon said sales rose despite the adverse effect of Japan's unpopular consumption tax, introduced in April. Increasing personal spending and capital investment are fueling growth, the company said. Rising export sales also contributed to strong growth, Nikon added.

Total sales gained 20% to 122.36 billion yen from 102.01 billion yen. Exports made up 46.2% of the latest year's total, up from 39.8% a year ago.

Camera sales showed the strongest gains, rising 37% to 50.59 billion yen.

Nikon forecast sales for the year ending March 31 will rise 9.6% to 240 billion yen. Pretax profit is expected to increase 18% to 22 billion yen and net income is expected to rise 53% to 10.5 billion yen.

Presidio Oil Co. said it signed a definitive agreement to acquire Gulf Canada Resources Ltd. 's U.S. unit for $163 million.

Presidio, a Denver oil and gas concern, said it will acquire the properties and operations of Home Petroleum Corp., which includes two regional gas-gathering systems and proved reserves of about nine million barrels of oil and 72 billion cubic feet of natural gas.

Presidio said the properties are generally situated in Wyoming, North Dakota, Texas, Oklahoma and Louisiana.

Gulf Canada, Calgary, said the transaction is part of its plan to sell non-strategic assets and focus operations on Canada, Indonesia and other international areas.

A spokesman for Gulf Canada, which is controlled by Toronto's Reichmann family, said the properties account for about 6% of the company's assets and produce about 5,000 barrels of oil and 35 million cubic feet of gas a day. He said Gulf Canada will likely report an extraordinary gain from the sale in the fourth quarter, but he wouldn't offer a specific estimate.

The transaction is expected to close by Nov. 30.

NEC Corp., a Tokyo-based computer and electronics concern, said net income rose 18% to 29.66 billion yen ($208.7 million) in the fiscal first half, ended Sept. 30, from 25.12 billion yen a year earlier.

Sales rose 7.4% to 1.255 trillion yen from 1.168 trillion yen.

NEC said first-half computer sales totaled 555.5 billion yen, up 11% from 500.26 billion yen a year earlier. Sales of electrical devices rose 13% to 283.8 billion yen from 251.8 billion yen. It said sales of home electronic products advanced 3.7% to 44.92 billion yen from 43.34 billion yen.

In the period just ended, computers accounted for 44% of total sales, NEC said, and electrical devices made up 23%.

NEC forecast sales for the year ending next March 31 of 2.74 trillion yen, an increase of 27% from the previous fiscal year. It said net income will rise 25% to 69 billion yen.

Montedison S.p. A. definitively agreed to buy all of the publicly held shares of Erbamont N.V. for $37 each.

Montedison now owns about 72% of Erbamont's shares outstanding.

The companies said the accord was unanimously approved by a special committee of Erbamont directors unaffiliated with Montedison.

Under the pact, Montedision will make a $37-a-share tender offer for Erbamont stock outstanding. The tender offer will be followed by the sale of all of Erbamont's assets, subject to all of its liabilities, to Montedison. Erbamont will then be liquidated, with any remaining Erbamont holders receiving a distribution of $37 a share.

The companies said the transaction is being structured this way because the laws of the Netherlands Antilles, under which Erbamont is organized, don't provide for merger transactions.

A unit of DPC Acquisition Partners launched a $10-a-share tender offer for the shares outstanding of Dataproducts Corp., and said it would seek to liquidate the computer-printer maker "as soon as possible," even if a merger isn't consummated.

DPC Acquisition is controlled by Crescott Investment Associates, Wilson Investment Group, Kernel Corp. and Catalyst Partners. The investor group owns 1,534,600 Dataproducts common shares, or a 7.6% stake.

The offer is based on several conditions, including obtaining financing. DPC Acquisition said it had received the reasonable assurance of Chase Manhattan Bank N.A. that the financing can be obtained.

In a filing with the Securities and Exchange Commission, DPC Acquisition said it expects it will need about $215 million to buy the shares and pay related fees and expenses. DPC Acquisition added that it has not begun discussions with financing sources, and said it expected to repay the amounts borrowed through proceeds of the liquidation.

Dataproducts officials declined to comment, and said they had not yet seen a suit filed in federal court by DPC Acquisition that seeks to nullify a standstill agreement between DPC Acquisition and Dataproducts.

Earlier this year, DPC Acquisition made a $15-a-share offer for Dataproducts, which the Dataproducts board said it rejected because the $283.7 million offer was not fully financed. Dataproducts has since started a restructuring, and has said it is not for sale.

Jayark Corp. agreed to pay $4 million in cash, $2 million of 12% convertible debentures, and 1.6 million common shares to acquire closely held Kofcoh Imports Inc.

In over-the-counter trading Friday, Jayark was quoted at 87.5 cents bid, down 15.625 cents. At the market price, the transaction has a total indicated value of $7.4 million.

Kofcoh is a New York holding company for Rosalco Inc., which imports furniture and other items. David L. Koffman, president and chief executive officer of Jayark, holds about 40% of Kofcoh, Jayark said.

Jayark, New York, distributes and rents audio-visual equipment and prints promotional ads for retailers. In the quarter ended July 31, Jayark had an average of 5.6 million shares outstanding.

The transaction is subject to approval by a panel of disinterested directors, the company said, adding that shareholder approval isn't needed.

Ajinomoto Co., a Tokyo-based food-processing concern, said net income in its first half rose 8.9% to 8.2 billion yen ($57.7 million) from 7.54 billion yen a year earlier.

Sales in the six months ended Sept. 30 were up 4.5% to 229.03 billion yen from 219.27 billion yen. Sales were higher in all of the company's business categories, with the biggest growth coming in sales of foodstuffs such as margarine, coffee and frozen food, which rose 6.3%.

Oils and fats also did well, posting a 5.3% sales increase. Sales in the category that includes pharmaceuticals, amino acids and chemicals rose 4.7%.

Ajinomoto predicted sales in the current fiscal year ending next March 31 of 480 billion yen, compared with 460.05 billion yen in fiscal 1989. It said it expects full-year net of 16 billion yen, compared with 15 billion yen in the latest year.

The New York Mercantile Exchange, the world's chief oil futures marketplace, is at a critical juncture.

Several longtime observers of the commodities industry think the fortunes of the Merc over the next decade will be determined to a large extent by how well its new natural gas futures contract does and how successful its new president is in raising the level of compliance by floor traders with exchange and Commodity Futures Trading Commission rules. If the exchange falters in these moves, they say, it might once again fall behind its chief New York competitor, the Commodity Exchange. On Friday, the Merc's board announced that it had approved Sabine Pipe Line Co. 's Henry Hub in Erath, La., as the delivery site for its long-awaited natural gas futures contract. It also said that it would start trading the contract as soon as the CFTC approved it. The CFTC has 90 days to respond to such applications. The Merc first started working on developing this contract in 1984.

Only three weeks earlier, the Merc had turned to one of its own executives, 40-year-old R. Patrick Thompson, to replace Rosemary T. McFadden as president. Mr. Thompson is believed to have a mandate from the board of directors to help improve the Merc's tarnished reputation as an exchange whose floor traders don't follow the rules very well.

Ms. McFadden had been forced out in July in a bitter power struggle with Z. Lou Guttman, chairman and a longtime floor trader on the exchange. Mr. Guttman told one person familiar with the New York exchanges during the search for a replacement that he was looking for a president who would be "responsive to the needs of the membership and the board."

Mr. Thompson first came to the exchange in 1981 and has been executive vice president since March 1988. He previously held posts of senior vice president of compliance and senior vice president and general counsel.

By contrast, the Comex in July imported a highly regarded outsider, Arnold F. Staloff, as its president. Mr. Staloff, 44, was a senior officer of the Philadelphia Stock Exchange and is considered a specialist in new financial products.

Mr. Thompson isn't bereft of experience with new products, however. For the past two years, he said, he and the exchange's research department have been working on the new natural gas contract, seeking a good delivery site and studying the natural gas market.

"Our members are eager to begin trading this contract, so we expect no difficulty in attracting locals to the natural gas pit," he said. The educational effort of teaching companies in the natural gas industry how to use the futures to hedge would have to continue for another a year or two, he added. The Merc's extremely successful contracts in crude oil, gasoline and heating oil have made it the largest futures exchange in New York, and third behind the Chicago Board of Trade and Chicago Mercantile Exchange.

In a recent interview, Mr. Thompson said the biggest problem facing all commodity exchanges was one of image. Earlier this year, the U.S. attorney indicted 45 floor traders and one clerk at the two big Chicago exchanges. Federal authorities in New York started investigating exchanges in May, though no indictments have been handed down there. So far they have issued scores of subpoenas, some of which went to members of the New York Merc. Mr. Thompson will have to face some of the consequences of those subpoenas.

In a recent General Accounting Office study, the Merc was found to have been the most lax in enforcing exchange rules. It levied the smallest number of suspensions of traders and fines of the four largest commodity exchanges studied over the past five years. It also had both the fewest, and least experienced, investigators per million contracts traded.

The Merc received considerable criticism in 1987 when it was discovered that its compliance director, Kevin P. Conway, who then was responsible for policing the exchange's busy oil and metal pits, "was engaged in other personal business activities on Exchange time," including out-of-state trips, according to a New York Merc report prepared last year. Mr. Conway is no longer at the exchange.

"We had a management breakdown in 1987 in terms of compliance," Mr. Thompson says. "We recognized the problem and took care of it." He says that even if the natural gas contract boosts volume at the exchange strongly, the 1990 business plan calls for having adequate compliance people to ensure that exchange rules are being followed.

For years the five New York exchanges have been talking about cooperating in various aspects of their business in order to improve the efficiency of their operations. Periodically, there has even been talk of mergers between one or more exchanges. So far there is little to show for such efforts.

Mr. Thompson believes the case for working together is stronger now than ever. "The cost of competition has become extremely high," he says. "We must find ways to save money for the futures commission merchants who do business on our exchanges." He thinks that progress in cooperation can be made in areas where no vested interests have built up. One of those areas is the development of a hand-held electronic device that would permit floor traders to enter trades as they make them. The GAO has recommended the creation of a system to record trade data so that an independent, verifiable audit trail can be established to prevent customer fraud. The Merc is now cooperating with the Comex in developing such a device to provide such an audit trail. The Chicago exchanges also are working on such a device.

Another major electronics problem faces Mr. Thompson -- the creation of a 24-hour trading system that can be used outside normal trading hours. In January, the New York Merc signed a letter of intent with the Chicago Merc as a preliminary step to joining their electronic system called Globex. But in May, the Chicago Merc said it was looking into creating a common system with the Chicago Board of Trade, and it suspended negotiations with the New York Merc.

Mr. Thompson says his exchange isn't waiting for the results of the Chicago exchanges' cooperation. It recently began a pilot program to test an electronic trading system called ATS/2, the automated trading system created by the International Commodities Clearing House.

Looking ahead to commodity markets this week:

Copper

Michael Frawley, metals trader for PaineWebber Inc. in New York, said there is good technical support between $1.10 and $1.12 a pound for December copper, which ended Friday at $1.1580 a pound, up 1.6 cents. He views the $1.10 to $1.12 range as a buying opportunity and considers the market oversold.

"I think the market could pop up to the $1.22 to $1.25 level without too much difficulty," he said. But he said it won't climb further and he expects it to remain in a trading range between $1.10 and $1.25. He noted that the equity markets will set the tone for the industrial metals this week and traders should keep an eye on Wall Street.

William O'Neill, research director for Elders Futures Inc. in New York, said for a rally to occur, there must be demand from the Far East. He added that talk of strike settlements at producing mines has been fully discounted. However, to resume the bull trend, according to Mr. O'Neill, copper would have to close over $1.19. He said there are two reports this week that might affect prices: the purchasing managers report on Wednesday and the unemployment report on Friday.

Precious Metals

Friday's strong price gains confirmed a turnaround in the precious metals markets, according to PaineWebber's Mr. Frawley. "Most traders will be looking to buy {on} pullbacks," he said.

He thought the moves in the metals last week were most influenced by the uncertainty in the equity and other financial markets. According to Mr. Frawley, floor traders say there is good support for December gold in the $374 to $375 per ounce area, around $5.20 an ounce for December silver and in the $485 to $490 an ounce range for January platinum.

William O'Neill, research director for Elders Futures Inc. in New York, said the price action for all of last week is the best he has seen on a weekly basis in more than a year. He said last week's activity in gold could portend a move to $390 an ounce for the December contract.

He also said traders should keep an eye on the stock market, because "if the stock market rallies, that could spell trouble for the precious metals."

He said traders should be on the lookout for how metals producers react to this rally. "I expect to see some selling, but will they kill this one as they have every rally in the recent past" by selling and locking in prices for their production? He noted that for the first time in months there was some light investor interest in the metals.

Grains And Soybeans

Prices this week will likely be dominated by reports on the progress of the corn and soybean harvest as well as by speculation about more purchases of U.S. crops by the Soviet Union.

In recent weeks, warm and dry weather has sped the Midwest harvest and that is permitting farmers to rebuild the stockpiles that were cut by the 1988 drought. If the weather allowed farmers to work in their fields over the weekend, many Midwest grain elevators will probably sell futures contracts today at the Chicago Board of Trade in order to hedge their weekend purchases from farmers. That selling of futures contracts by elevators is what helps keep downward pressure on crop prices during the harvest.

Traders will also watch for whether the Soviet Union continues its traditional fall buying of U.S. grain. So far this month, the Soviets have bought about 7.2 million metric tons of U.S. corn.

There may be some activity in soybean prices this week as investors try to get rid of the contract for November delivery. Investors usually don't want to take physical delivery of a contract, preferring instead to profit from its price swings and then end any obligation to take delivery or make delivery as it nears expiration.

Employees of the Globe and Mail, a Thomson Corp. newspaper in Toronto, voted to accept a tentative contract agreement Saturday, averting a strike at Canada's leading daily.

Under the terms of the three-year contract, similar to one reached at Torstar Corp. 's Toronto Star newspaper earlier this month, the 500 Globe and Mail workers will see a raise of 8% in the contract's first year and 7% in each of the following two years.

Lorne Slotnick, vice chairman of the Southern Ontario Newspaper Guild, the union representing the workers, said Thomson made significant concessions in the final round of talks. In addition to wage increases, the union negotiated improved vacation plans, benefit packages and pension plans, Mr. Slotnick said.

He said more than 70% of the bargaining unit voted in favor of the agreement.

Wall Street is just about ready to line the bird cage with paper stocks.

For three years, a healthy economy and the export-boosting effects of a weak dollar propelled sales and earnings of the big paper companies to record levels. As the good times rolled they more than doubled their prices for pulp, a raw material used in all sorts of paper, to $830 a metric ton this past spring from $380 a ton at the start of 1986.

But now the companies are getting into trouble because they undertook a record expansion program while they were raising prices sharply. Third-quarter profits fell at several companies.

"Put your money in a good utility or bank stock, not a paper company," advises George Adler of Smith Barney.

Other analysts are nearly as pessimistic. Gary Palmero of Oppenheimer & Co. expects a 30% decline in earnings between now and 1991 for "commodity-oriented" paper companies, which account for the majority of the industry. Robert Schneider of Duff & Phelps sees paper-company stock prices falling 10% to 15% in 1990, perhaps 25% if there's a recession.

Paper companies concede that business has been off recently. But they attribute much of the weakness to customer inventory reductions. Generally they maintain that, barring a recession and a further strengthening of the dollar against foreign currencies, the industry isn't headed for a prolonged slump. "It won't be an earthshaking drop," a Weyerhaeuser spokesman says.

Last week Mr. Adler lowered his rating from hold to "avoid" on Boise Cascade, Champion International, Great Northern Nekoosa, International Paper, Louisiana Pacific and Weyerhaeuser. Oppenheimer's Mr. Palmero, meanwhile, is steering clear of Gaylord Container, Stone Container and Federal Paper Board. Mr. Schneider is cool to Georgia Pacific and Abitibi-Price. Lawrence Ross of PaineWebber would avoid Union Camp.

The companies in question believe the analysts are too pessimistic. Great Northern Nekoosa said, "The odds of the dire predictions about us being right are small." International Paper emphasizes that it is better positioned than most companies for the coming overcapacity because its individual mills can make more than one grade of paper.

A Boise-Cascade spokesman referred to a speech by Chairman John Fery, in which he said that markets generally are stable, although some risk of further price deterioration exists.

Stone Container Chairman Roger Stone said that, unlike for some other paper products, demand for Stone's principal commodity, unbleached containerboard, remains strong. He expects the price for that product to rise even more next year.

Gaylord Container said analysts are skeptical of it because it's carrying a lot of debt. Champion International said, "We've gotten our costs down and we're better positioned for any cyclical downturn than we've ever been."

Louisiana Pacific and Georgia Pacific said a number of other analysts are recommending them because of their strong wood-products business.

Federal Paper Board said, "We're not as exposed as the popular perception of us." The company explained that its main product, bleached paperboard, which goes into some advertising materials and white boxes, historically doesn't have sharp price swings.

Because the stock prices of some paper companies already reflect an expected profit slump, PaineWebber's Mr. Ross says he thinks that next year the share prices of some companies may fall at most only 5% to 10%. A company such as Federal Paper Board may be overly discounted and looks "tempting" to him, he says, though he isn't yet recommending the shares.

Wall Street isn't avoiding everything connected with paper. Mr. Palmero recommends Temple-Inland, explaining that it is "virtually the sole major paper company not undergoing a major capacity expansion," and thus should be able to lower long-term debt substantially next year.

A Temple-Inland spokesman said the company expects record earnings in 1989, and "we're still pretty bullish" on 1990.

The analysts say their gloomy forecasts have a flip side. Some take a warm view of consumer-oriented paper companies, which buy pulp from the commodity producers and should benefit from the expected declines in pulp prices. Estimates on how much pulp prices will fall next year currently run between $150 and $250 a metric ton.

Analysts agree that the price drop should especially benefit the two big tissue makers, Scott Paper and Kimberly-Clark. A spokesman for Scott says that assuming the price of pulp continues to soften, "We should do well.

Shoney's Inc. said it will report a write-off of $2.5 million, or seven cents a share, for its fourth quarter ended yesterday. The restaurant operator cited transaction costs from its 1988 recapitalization as a result of a $160 million restructuring of its bank debt.

The write-off will be reported as an extraordinary item in the company's 1989 operating results.

In addition, the effective interest rate on the $410 million of total remaining bank debt after the restructuring is 10.66%. The combined effect of these changes is expected to save the company about $4 million in interest expenses next year, or six cents a share.

Shoney's said the latest restructuring affected bank indebtedness that was incurred to finance $585 million of the company's $728 million recapitalization that took place in

The company has made payments of $175 million against the original $585 million of bank debt incurred in connection with the recapitalization. These payments consisted of $54 million in scheduled payments and $121 million in prepayments, funded by $82.8 million from operating cash flow, zero-coupon subordinated debt and assets sales.

ABB Asea Brown Boveri B.V. said it signed a contract for the largest-ever power plant order in the Netherlands.

ABB said the contract, signed with the Dutch utility N.V. Energieproduktiebedrijf UNA, is valued in excess of $200 million. The accord is for a turbogenerator plant at the coal-fired power station Hemweg in Amsterdam. ABB Asea Brown Boveri is the Dutch unit of the Swedish-Swiss electrical engineering group ABB Asea Brown Boveri AG.

ABB said a significant portion of the order will be placed with Dutch subcontractors, adding that a group has been set up for this purpose.

The Dutch utility firm serves the Amsterdam and Utrecht areas. The planned turbogenerator plant is expected to go into operation in 1994.

Nissan Motor Co. expects net income to reach 120 billion yen (U.S. $857 million) in its current fiscal year, up from 114.6 billion yen in the previous year, Yutaka Kume, president, said.

Mr. Kume made the earnings projection for fiscal 1990, ending next March 31, in an interview with U.S. automotive writers attending the Tokyo Motor Show.

The executive said that the anticipated earnings increase is fairly modest because Nissan is spending heavily to bolster its dealership network in Japan and because of currency-exchange fluctuations.

During the next decade, Mr. Kume said, Nissan plans to boost overseas vehicle production sufficiently to account for a majority of sales outside Japan. Last year, Mr. Kume said, Nissan exported slightly over one million vehicles, and produced 570,000 cars and trucks at its factories in North America, Europe and Australia. But by 1992, he added, Nissan will build one million vehicles a year outside Japan, or sufficient to equal exports.

"By the end of the 1990s," he said, "we want to be producing roughly two vehicles overseas for every vehicle that we export from Japan." That will involve a substantial increase in overseas manufacturing capacity, he acknowledged, but didn't provide specific details.

National Intergroup Inc. said it expects to report a charge of $5.3 million related to the sale of its aluminum unit's extrusion division for the third quarter.

The company said it has agreed to sell the extrusion division for $15 million to R.D. Werner Co., a closely held firm based in Greenville, Pa.

The charge is offset by an after-tax gain of about $30 million in the quarter from the previously announced pact to sell National Aluminum's rolling division.

National Intergroup in the year-ago third quarter earned $22.5 million, or 97 cents a share, including a gain of $18 million from the sale of a steel tube company. Revenue was $778.6 million.

The company also said it continues to explore all options concerning the possible sale of National Aluminum's 54.5% stake in an aluminum smelter in Hawesville, Ky.

The sale of the extrusion division is subject to audit adjustments for working capital changes through the closing.

The agreement also provides for potential payments of additional proceeds to National Aluminum over the next two years, depending on the plant's shipping levels.

The extrusion unit produces bare and painted custom extrusions for building products and construction industries. In fiscal 1989, it had sales of about $40 million and an operating loss of $1.5 million.

The municipal bond market is bracing for tough times through the end of the year as it struggles to absorb an oversupply of bonds and two of its best customers turn into sellers.

Commercial banks and property/casualty insurers, which together own about 36% of all municipal bonds, have been dumping their securities for weeks. Last week, traders said, there were three institutional sellers for every buyer.

"Every day we're getting new bid lists" from would-be sellers, one trader said. "Most dealers cannot continue to absorb this supply."

As a result, yields on long-term muni bonds now stand at about 95% of long-term Treasury yields, the highest such level in more than two years.

"There is incredible negative psychology building in the market," said Donna Avedisian, a vice president at Merrill Lynch & Co. "People are very concerned about who is going to step up to the plate and buy municipal bonds in the absence of institutional buyers." The yield on a group of 25 revenue bonds compiled by the Bond Buyer, a trade publication, now exceeds 7.50%.

At this week's New York City bond sale, traders expect yields on the 20-year New York bonds to nearly match the 7.9% yield on 30-year Treasury bonds. For an investor in the 28% federal tax bracket, 7.9% tax-free is the same as 10.38% on a taxable investment. That's a taxable-equivalent yield nearly three percentage points more than the current yield on 30-year Treasury bonds. How quickly things change. This past summer, investors' appetite for municipal bonds seemed insatiable. Individuals eager for tax-free income drove up bond prices, making state and local government debt one of the best-performing types of fixed-income investments during the period.

But while analysts say that municipal bonds still offer good value, you wouldn't know it by the way institutional investors are rushing to dump their holdings.

Bond market analysts say the institutional selling was triggered by several factors. Big banks such as Chemical Bank and Chase Manhattan, which have been taking heavy charges to expand their Third World loan-loss reserves, aren't looking for tax-exempt income. "We don't need the shelter of tax-free bonds," said a spokeswoman at Chemical.

In recent weeks, traders said, Chemical has sold more than $1 billion of tax-free bonds. The spokeswoman confirmed that the bank has significantly reduced its muni holdings, but couldn't immediately confirm the amount.

Insurance companies are rushing to sell before the end of the year, when some of their tax benefits associated with municipal bonds will be phased out. There is speculation that property/casualty firms will sell even more munis as they scramble to raise cash to pay claims related to Hurricane Hugo and the Northern California earthquake.

Fundamental factors are at work as well. Muni bond holders are worried about the impact of a slowing economy on tax revenue, at a time when many state and local governments already face budget deficits and huge spending needs. The recent natural disasters, and the need of many other cities to rebuild crumbling infrastructure, suggests that supply of new issues will continue to rise sharply -- even as demand tapers off.

"There is just so much going on that it's difficult to pick just one factor that's driving the market," said Ronald Ian Heller, vice president at First Chicago Capital Markets Inc., a subsidiary of First Chicago Corp.

Some of the recent selling could actually be considered a positive sign. Mutual funds, for example, are said to be selling existing municipal bonds to raise cash to buy new issues. Because municipal bonds yields have risen at a time when interest rates generally have fallen, some portfolio managers are assuming that bonds bought now will appreciate in value as the municipal bond market rebounds.

Ms. Avedisian believes that the mutual funds are selling muni bonds that have a negative convexity -- those that have appreciated in price slowly relative to the decline in interest rates. Such bonds, she says, are those that are nearing their call date.

But traders said the market's tone could pick up this week if New York City's $787 million bond offering goes well. The offering will include $729 million of 20-year tax-exempt bonds and $57.8 million of taxable bonds. A few weeks ago, New York sold $750 million of tax-exempts.

New York City bonds have been beaten down for three straight weeks. On Friday, some issues fell nearly one point, or close to $10 for each $1,000 face amount.

The sell-off in New York City bonds was triggered by concerns about the city's financial health and political uncertainty in view of the impending mayoral election. The city's economy is growing weaker and expenditures are rising as tax revenue is falling.

"The city has issued so much supply recently that some people are getting a little concerned. They'd like to see some other names in their portfolios," said Michael S. Appelbaum, first vice president at Shearson Lehman Hutton.

But he thinks investors may be overreacting to the market's problems. Overall, he says, municipal prices are "very cheap" and represent an "excellent buying opportunity."

Friday's Market Activity

Treasury bonds fell sharply on confusion about this week's Treasury debt auction and rumors that a major Japanese investor was unloading large amounts of long-term bonds.

The Treasury's benchmark 30-year bond ended at a price of 102 2/32, down nearly 5/8 point from Thursday, or about $6.25 for each $1,000 face amount. The issue's yield rose to 7.93% from 7.88%.

Late Thursday, the Treasury said it needed to raise $17 billion quickly and would do so by issuing new securities this week.

Credit market analysts expected the Treasury to cancel today's three-month and six-month sale and to sell $17 billion of cash management bills.

Instead, the Treasury announced it would sell $2 billion of 51-day cash management bills today and said that the weekly sale of $15.6 billion of three-month and six-month bills will take place today, as usual, but the sale will settle tomorrow instead of Thursday.

By moving the settlement date ahead, the Treasury can raise money under the $2.87 trillion debt ceiling that is in effect through tomorrow, after which it reverts to $2.8 trillion.

The market also was hurt by rumors that Nippon Kangyo Kakumaru, a Japanese brokerage firm, was unloading some of the 30-year bonds it recently purchased. One dealer said the talk was that the firm sold about $500 million of bellwether 30-year bonds.

The firm is thought to have purchased up to $3 billion of 30-year bonds in a buying spree on Wednesday and the previous Thursday.

Dealers say the firm apparently has wanted to publicize its recent buying and subsequent selling of 30-year bonds by using Cantor Fitzgerald Securities Corp. as a broker. Cantor provides price quotes to Telerate Systems Inc., a widely used electronic system.

Nippon Kangyo's moves puzzled traders and created confusion among potential investors, many of whom decided to stay out of the market. As a result of its large-scale buying, some analysts now say that liquidity, or the ability to easily buy and sell, has been constrained in the benchmark Treasury bond issue.

In other markets:

-- The junk bonds of RJR Nabisco Inc. rallied Friday on news that the company is selling its candy bar brands to Nestle Foods Corp. for $370 million.

The sale price, which was above Wall Street expectations, sent many RJR securities up by one point.

"It shows that there are buyers of high-quality assets at high prices in today's market," said Robert Long, managing director and head of the high-yield research department at First Boston Corp.

Many of the RJR securities, which had been trading near their 52-week lows earlier in the session, bounced back after the company's announcement that it agreed to sell its Baby Ruth, Butterfinger and Pearson candy businesses to Nestle Foods, a unit of the Swiss-based food concern. The sale, expected to close before the end of the year, also includes a manufacturing plant in Franklin Park, Ill.

RJR's subordinated discount debentures of 2001, which traded as low as 45 Friday, finished the day at 46 7/8. Other RJR securities also closed higher. RJR Holdings Capital Corp. 's 14.7% convertible pay-in-kind securities maturing in 2009 closed 1/2 higher at 86 1/2 after trading as low as 85 1/4.

Most other junk bond issues finished a quarter-point lower on rumors that Campeau Corp. was filing for protection from creditors under Chapter 11 of the Bankruptcy Code. A spokesman for Campeau called the rumors "ridiculous." Most investment-grade bonds fell 3/8 to 1/2 point.

-- Mortgage securities fell 7/32 to 8/32 but held up better than intermediate Treasurys.

Dealers said some defensive investors were buyers of mortgages, as were dealers seeking collateral for REMICs priced earlier last week. Among major issues, Government National Mortgage Association 9% securities for November delivery ended at 98 12/32, down 8/32 point for a yield of about 9.35% to a 12-year average life assumption.

The premium the elderly pay for coverage of doctor's bills under Part B of the Medicare health insurance plan will rise to $29 a month in 1990 from $27.90, the Department of Health and Human Services said.

In addition, a second Part B premium to cover the cost of the new program of insurance against catastrophic illness will rise to $4.90 a month from $4, if Congress doesn't change the program.

The House has voted to repeal most of the Catastrophic Coverage Act of 1988, however, which would end the monthly catastrophic-care premium, as well as an unpopular income surtax paid by about 40% of the wealthier Medicare beneficiaries.

Under a less-sweeping Senate plan, the catastrophic-care monthly premium would continue, rising to $4.90 next year, but the surtax would be abolished.

Medicare Part B pays 80% of a beneficiary's allowable doctor's bills after an annual deductible of $75. The Catastrophic Coverage Act would add a stop-loss provision next year to limit the maximum beneficiaries must pay for doctors. Both the House and Senate bills to reduce the cost and coverage of the catastrophic-care plan would eliminate the cap on doctor's bills.

If the House prevails in its efforts to kill the catastrophic-care plan, the monthly Part B premium will be $29 next year. If the Senate plan prevails, the premium will be $33.90, with the additional $4.90 going to pay for expanded hospital coverage under Part A of Medicare. Most of Part A's costs are paid by a payroll tax on workers and employers.

Lockheed Corp. said it will trim its Aeronautical Systems work force in California and Georgia by several hundred workers, reflecting the defense industry's decline.

The Lockheed unit has 24,000 workers; it expects to make the cuts through a combination of furloughs, attrition and retirements. The reductions should be complete by the end of the year, a spokesman said, adding that the exact number to be cut hasn't been determined.

Lockheed reported a $32 million third-quarter net loss, largely because of cost overruns on fixed-price military contracts.

Noting that other defense contractors are complaining of losses on such contracts, analysts say taxpayers have been getting illusionary bargains on weapons systems in recent years.

Defense contractors "cannot continue to get contracts on that basis," said Howard Rubel, an analyst with C.J. Lawrence, Morgan Grenfell Inc. in New York. "The pain is too great.

Jim Pattison Industries Ltd., one of a group of closely held companies owned by entrepreneur James Pattison, said it "intends to seek control" of 30%-owned Innopac Inc., a Toronto packaging concern.

Jim Pattison Industries, a holding company with annual sales of about C$1.9 billion, largely from car dealerships and grocery stores, didn't elaborate on the statement, and a company official declined further comment.

The company said it currently holds about 4.2 million of Innopac's 13.8 million common shares outstanding, which have an aggregate market value of about 137.8 million Canadian dollars (US$117.3 million).

Separately, Innopac reported a fourth-quarter loss of about C$2.6 million, or 18 Canadian cents a share, reflecting inventory write-downs. The results made net income for the year ended Aug. 31 C$2.7 million, or 20 Canadian cents a share, down from C$9.7 million, or 70 Canadian cents a share last year. Revenue was C$291.6 million, up from C$252 million in 1988.

Martin Fabi, Innopac's president and chief executive, said Innopac viewed Mr. Pattison's decision to seek control as a "very positive" move. "I'm happy that he feels positively about our company," he said. Mr. Fabi wouldn't say directly whether Mr. Pattison has disclosed potential terms for his planned bid for control.

Among other things, Innopac is involved in recycling polystyrene foam products that are often used by fast food chains, such as McDonald's Corp., for food packaging. A joint venture involving units of Innopac and Mobil Corp. earlier this year opened the first U.S. polystyrene recycling plant, in Leominster, Mass.

PROGRAM TRADING is being curbed by more securities firms, but big institutional investors are expected to continue the practice, further roiling the stock market. Bowing to criticism, Bear Stearns, Morgan Stanley and Oppenheimer joined PaineWebber in suspending stock-index arbitrage trading for their own accounts. Still, stock-index funds are expected to continue launching big programs through the market.

Several Big Board firms are organizing to complain about program trading and the exchange's role in it. The effort is being led by Contel.

Personal spending rose 0.2% in September, the smallest gain in a year. The slowdown raises questions about the economy's strength because spending fueled much of the third-quarter GNP growth. Meanwhile, personal income edged up 0.3%.

Factory owners are buying new machinery at a healthy rate this fall, machine-tool makers say. But weak car sales raise questions about future demand from the auto sector.

Southern's Gulf Power unit may plead guilty this week to charges it illegally steered company money to politicians through third parties. The tentative pact would resolve part of a broad investigation of the Atlanta-based company in the past year.

LIN Broadcasting and BellSouth sweetened their plan to merge cellular phone operations, offering LIN holders a special $42-a-share payout. But the new pact will force huge debt on the new firm and could still fail to thwart rival suitor McCaw Cellular.

Unisys posted a $648.2 million loss for the third quarter as it moved quickly to take write-offs for various problems and prepare for a turnaround. But some analysts wonder how strong the recovery will be.

RJR Nabisco agreed to sell three candy businesses to Nestle for $370 million. The accord helps RJR pay off debt and boosts Nestle's 7% share of the U.S. candy market to 12%.

GM and Ford are expected to go head to head in the markets to buy up rival 15% stakes in Jaguar. GM confirmed it received U.S. antitrust clearance to boost its holding.

Sansui Electric agreed to sell a 51% stake to Polly Peck of Britain for $110 million. Still, analysts said the accord doesn't suggest Japan is opening up to more foreign takeovers.

Kellogg suspended work on a $1 billion cereal plant, indicating a pessimistic outlook by the cereal maker, which has been losing market share.

Insurers could see claims totaling nearly $1 billion from the San Francisco earthquake, far less than the $4 billion from Hurricane Hugo.

Nashua strengthened its poison-pill plan after announcing a Dutch firm is seeking to buy up to 25% of the New Hampshire copier company.

Mobil is cutting back its U.S. oil and gas exploration and production group by up to 15% as part of a restructuring of the business.

Markets --

Stocks: Volume 170,330,000 shares. Dow Jones industrials 2596.72, off 17.01; transportation 1190.43, off 14.76; utilities 215.86, up 0.19.

Bonds: Shearson Lehman Hutton Treasury index 3406.31, off

Commodities: Dow Jones futures index 129.49, up 0.27; spot index 130.80, off 0.24.

Dollar: 141.65 yen, off 0.45; 1.8300 marks, off 0.0100.

(During its centennial year, The Wall Street Journal will report events of the past century that stand as milestones of American business history.)

Thomas Jefferson sold Congress on the idea of the decimal system for currency, thus saving Americans the headaches of pounds, shillings and pence. But he struck out with the decimal system of metric weights and measures the French had invented. Instead, Congress opted for the inches, feet and yards the colonists had brought with them.

Americans didn't dislike metrics; they simply ignored them. Scientists felt differently. In 1807, the Swiss mathematician who headed the U.S. Coast and Geodetic Survey made an "iron meter" that he had brought from Europe the standard of measure. By the end of the century scientists had embraced the system.

Businessmen took their cue from the engineers. When Congress finally passed the Metric Conversion Act in 1975, industry was far ahead. Because the law made compliance voluntary, it inspired little more than jokes. (The press had a field day with questions about what would happen to "six-footer," "yardstick" and "inchworm.")

Today, though the public is barely aware, much of U.S. industry, particularly companies manufacturing or selling overseas, have made metrics routine. General Motors, for example, uses metric terms for its automobile bodies and power trains. (In auto advertising, however, items such as wheelbases are still described in inches.) Farm-machine makers such as Caterpillar and Deere work in the metric system. The liquor industry went metric 10 years ago.

The Pentagon has led the charge, particularly as military alliances spread world-wide. New weapons systems will be around until the next century, notes John Tascher, the Defense Department's metric coordinator.

Still, like the auto makers, when dealing with Mr. Everyman the Pentagon sticks to the tried and true. Soldiers and sailors are still measured in inches and pounds.

Whittle Communications L.P., which for months has fought a public relations battle with education leaders, said it has signed 500 schools in 24 states to subscribe to the controversial Channel One news program and its sister programs.

Channel One, a satellite-delivered daily program supported by advertising, is scheduled to be launched next March. Whittle said its field staff signed up the 500 schools in 238 school districts after only eight weeks and company executives now expect to reach their start-up goal of 1,000 schools before the end of this year.

Christopher Whittle, chairman of the Knoxville, Tenn., media company that is 50% owned by Time Warner Inc., said that by December 1990 he expects to have Channel One installed in about 8,000 schools with a potential audience of six million. Installation of the TV system, which includes providing free 19-inch TV sets in classrooms, begins in January.

"What we've done in eight weeks shows we won't have enormous difficulties getting to the place we want to be," said Mr. Whittle. He said his sales force is signing up schools at the rate of 25 a day.

In California and New York, state officials have opposed Channel One. Mr. Whittle said private and parochial schools in both states will be canvassed to see if they are interested in getting the programs.

Subscribing schools get the 12-minute daily Channel One news program, whose four 30-second TV ads during each show have drawn protests from educators.

Subscribers also get the Classroom Channel, which will feature ad-free educational programming similar to some public-TV shows, and the Educator's Channel, which will offer instructional programming for teachers and school administrators and will be supported by advertising.

Whittle has met some resistance. The Educational Network, as Mr. Whittle has named the three programs, has been offered to 1,290 school districts and Whittle continues to negotiate with 919 districts. About 10% of the school districts approached have rejected the network.

Mr. Whittle said that so far, three of the six schools that carried the program in a five-week test last spring have subscribed to the program. One of the test schools, Withrow High School in Cincinnati, rejected the project.

John Bruner, associate director of communications for Cincinnati Public Schools, said Channel One was rejected because students watching the program didn't fare particularly better on a 28-question current events quiz than a control school without the program and school absences were almost unchanged during the period when the program was being aired.

"The number of correct responses was 45% on the test and school absences didn't change much," said Mr. Bruner. "The pilot program was received well (by teachers and students), but there wasn't reason enough to sign up. We even invited the public to stop by and see the program, but there wasn't much interest."

Advertisers are showing interest. Last month, Whittle announced it had sold $150 million in advertising time on the network to national advertisers. Mr. Whittle Friday said several more advertisers have been added. Whittle is spending $150 million initially to launch the network. Installation of satellite dishes, TVs and videocassette equipment will cost the company about $20,000 per school, Mr. Whittle said.

The following U.S. Treasury, corporate and municipal offerings are tentatively scheduled for sale this week, according to Dow Jones Capital Markets Report:

$15.6 billion of three-month and six-month bills. $2 billion of 51-day cash management bills.

Associated Natural Gas Corp. -- 1.4 million common shares, via Dillon Read & Co.

B & H Crude Carriers Ltd. -- Four million common shares, via Salomon Brothers Inc.

Chemical Banking Corp. -- 14 million common shares, via Goldman, Sachs & Co.

Chemex Pharmaceuticals Inc. -- 1.2 million units consisting of two shares of common stock and one common warrant, via PaineWebber Inc.

Comcast Corp. -- $150 million convertible debentures, via Merrill Lynch Capital Markets.

Energy Service Co. -- 9.5 million common shares, via Alex. Brown & Sons Inc.

Harmonia Bancorp Inc. -- 4,750,000 common shares, via Shearson Lehman Hutton Inc.

Healthsource Inc. -- Two million common shares, via Kidder, Peabody & Co.

Immune Response Corp. -- Three million common shares, via Merrill Lynch.

Marsam Pharmaceuticals Inc. -- 1.3 million common shares, via Smith Barney Harris Upham & Co.

Potash Corp. of Saskatchewan Inc. -- 13 million common shares, via Merrill Lynch.

Municipal

New Jersey Wastewater Treatment Trust -- $75,075,000 of various bonds, including $40.86 million Wastewater Treatment insured bonds, Series 1989A, and $34,215,000 Wastewater Treatment bonds, Series 1989B, via competitive bid.

Eastern Municipal Water District, Calif. -- $56,565,000 of 1989 certificates of participation (treatment plant projects), via competitive bid.

California Health Facilities Financing Authority -- $114 million of health facility revenue bonds (Catholic Healthcare West), Series 1989A, via a First Boston Corp. group.

Detroit -- $130 million of distributable state aid bonds, via a Chemical Securities Inc. group.

Maryland Community Development Administration, Department of Housing and Community Development -- $80 million of single-family program bonds, 1989 4th and 5th Series, via a Merrill Lynch group.

Matagorda County Navigation District No. 1, Texas -- $70,315,000 of pollution control revenue Alternative Minimum Tax (AMT) bonds (South Texas Project Units No. 1 and 2), via a Goldman Sachs group.

New York City -- $786,860,000 of bonds, Fiscal 1990 Series C and D, including $729.04 million tax-exempt bonds and $57.82 million taxable bonds, via a Goldman Sachs group.

Santa Ana Redevelopment Agency -- $107 million of tax allocation bonds, 1989 Series A-D, via a Donaldson Lufkin & Jenrette Securities Corp. group.

Pending Shelby County, Tenn. -- $80 million of refunding bonds, Series 1989, via a First Tennessee Bank group.

Hewlett-Packard Co. said it raised its stake in Octel Communications Corp. to 8.5% of the common shares outstanding.

In a Securities and Exchange Commission filing, Hewlett-Packard said it now holds 1,384,119 Octel common shares, including 100,000 shares bought from Aug. 26 to Oct. 20 for $23.31 to $24.25 a share.

Hewlett-Packard, a Palo Alto, Calif., computer company, said it acquired the stock "to develop and maintain a strategic partnership in which each company remains independent while working together to market and sell their products."

Octel said the purchase was expected. Hewlett-Packard affirmed it doesn't plan to obtain control of Octel, a Milpitas, Calif., maker of voice-processing systems.

According to the filing, Hewlett-Packard acquired 730,070 common shares from Octel as a result of an Aug. 10, 1988, stock purchase agreement. That accord also called for Hewlett-Packard to buy 730,070 Octel shares in the open market within 18 months. In addition, Hewlett-Packard acquired a two-year option to buy an extra 10%, of which half may be sold directly to Hewlett-Packard by Octel.

Following is a weekly listing of unadited net asset values of publicly traded investment fund shares, reported by the companies as of Friday's close. Also shown is the closing listed market price or a dealer-to-dealer asked price of each fund's shares, with the percentage of difference.

Closed End Bond Funds

Flexible Portfolio Funds

Specialized Equity and Convertible Funds

a-Ex-dividend. b-As of Thursday's close. c-Translated at Commercial Rand exchange rate. e-In Canadian dollars. f-As of Wednesday's close. z-Not available.

Wham! Bam! Twice in two weeks the unraveling of the on-again, off-again UAL buy-out slammed the stock market.

Now, stock prices seem to be in a general retreat. Since peaking at 2791.41 on Oct. 9, the Dow Jones Industrial Average has lost 194.69 points, or 7%, closing Friday at 2596.72, down 17.01. The number of issues falling on the New York Stock Exchange each day is eclipsing the number of gainers. And the number of stocks hitting new lows far outstrips the number setting new highs.

But why should an iffy $6.79 billion leveraged buy-out deal shake the foundations of the entire stock market?

Opinions vary about how important the UAL deal was to the market's health, but analysts generally agree that the market gyrations created as the UAL plan crumbled revealed a fundamental change in investor psychology.

"If this had happened a few months ago when the atmosphere was still very positive it wouldn't have been greeted with anything like the impact it has had over the past two weeks," says Dennis Jarrett, a market strategist at Kidder Peabody.

There are, of course, analysts who view the near-panic that briefly swept through investors on Oct. 13 and again on Oct. 24 as momentary lapses of good judgment that have only temporarily undermined a healthy stock market. Sure, price action is volatile and that's scary, but all-in-all stocks are still a good place to be, they suggest.

The reaction to the UAL debacle "is mindless," says John Connolly, chief market strategist at Dean Witter. "UAL is a small deal as far as the overall market is concerned. The only way you can make it a big deal is to draw linkages that just don't make sense." He suggests, for example, that investors may have assumed that just because UAL couldn't get financing, no leveraged buy-outs can get financing. Carried even further, some investors assumed that since leveraged buy-outs are the only thing propping up stock prices, the market would collapse if no more LBOs could be done.

"There will still be deals," argues Mr. Connolly. "There may not be as many and the buyers may not get away with some of the things they've done in the past, but deals won't disappear." He forecasts that the emphasis in mergers and acquisitions may soon return to what he calls "strategic deals, in which somebody is taking over a company not to milk the cash flow, but because it's a good fit."

And even without deals, Mr. Connolly figures the market would remain healthy. He notes, for instance, that there hasn't been a merger or acquisition among the 30 stocks in the Dow Jones Industrial Average since 1986, yet that average only three weeks ago hit a record high.

"Those stocks are up because their earnings are up and their dividends are up," he says.

Even the volatility created by stock index arbitrage and other computer-driven trading strategies isn't entirely bad, in Mr. Connolly's view. For the long-term investor who picks stocks carefully, the price volatility can provide welcome buying opportunities as short-term players scramble frantically to sell stocks in a matter of minutes. "Who can make the better decision, the guy who has 10 seconds to decide what to do or the guy with all the time in the world?" he says. "What on earth does the UAL deal have to do with the price of Walmart, which I was able to buy on Oct. 16 at a very attractive price?"

Kidder Peabody's Mr. Jarrett also sees some benefits to the stock market's recent drop. "We've run into a market that was beginning to run out of steam and get frothy," he says. "The balloon had been blown up so big that when somebody came along with a pin -- in this case the UAL deal -- we got a little pop."

The pop sobered up investors who had been getting a little too ebullient, says Mr. Jarrett. "It provided an excuse for people to get back to reality and to look at the economic data, especially the third-quarter economic numbers, and to realize that we can't continue to gloss over what is going on in the junk bond market."

But he figures that at current levels the stock market is comfortably valued, even with the economy obviously slowing. "Just because we've got some realism back in the market doesn't mean it's going lower from here," he says. "The bottom line is that it's healthy to have this kind of sideways activity, especially after a 30% gain in stock values over the past 12 months." He's now estimating that after a period of consolidation, the Dow Jones Industrial Average will once again forge new highs.

Maybe, maybe not. Abby Joseph Cohen, a market strategist at Drexel Burnham Lambert, isn't nearly so sanguine about the market's chances of surging to new highs anytime soon. Her view is that stock prices have three major props: merger and buy-out proposals, earnings and the economic outlook. At current levels of economic activity and earnings, stocks are fairly valued, she says. But any chance for prices to surge above fair value lies in the speculation that accompanies a vigorous merger and buy-out business, and UAL has obviously put a damper on that. "Stocks aren't cheap anymore, there have been some judicial and legislative changes in the merger area and all of this changes the arithmetic of deals," she says. "I'm not saying they've stopped altogether, but future deals are going to be structured differently and bids probably won't be as high."

But that's not the only problem for stocks. The other two props -- earnings and the economic outlook -- are troubling, too. "M&A is getting all the headlines right now, but these other things have been building up more gradually," she says. Third-quarter earnings have been generally disappointing and with economic data showing a clear slowing, the outlook for earnings in the fourth quarter and all of 1990 is getting worse.

"There are a lot more downward than upward revisions and it looks like people are questioning corporate profits as a means of support for stock prices," she says.

With all this, can stock prices hold their own? "The question is unanswerable at this point," she says. "It depends on what happens. If the economy slips into a recession, then this isn't a level that's going to hold."

Friday's Market Activity

Stock prices tumbled for a third consecutive day as earnings disappointments, a sluggish economy and a fragile junk bond market continued to weigh on investors.

The Dow Jones Industrial Average fell 17.01 points to 2596.72 in active trading. Volume on the New York Stock Exchange totaled 170,330,000 shares. Declining issues on the Big Board were far ahead of gainers, 1,108 to 416. For the week the Dow Jones Industrial Average sank 92.42 points, or 3.4%.

Oil stocks escaped the brunt of Friday's selling and several were able to post gains, including Chevron, which rose 5/8 to 66 3/8 in Big Board composite trading of 2.4 million shares. The stock's advance reflected ongoing speculation that Pennzoil is accumulating a stake in the company, according to Dow Jones Professional Investor Report.

Both companies declined to comment on the rumors, but several industry analysts told the Professional Investor Report they believed it was plausible that Pennzoil may be buying Chevron shares as a prelude to pushing for a restructuring of the company.

USX gained 1/2 to 33 3/8 on a report in Business Week magazine that investor Carl Icahn is said to have raised his stake in the oil and steel company to just about 15%. Earlier this month, Mr. Icahn boosted his USX stake to 13.4%.

Elsewhere in the oil sector, Exxon rallied 7/8 to 45 3/4; Amoco rose 1/8 to 47; Texaco was unchanged at 51 3/4, and Atlantic Richfield fell 1 5/8 to 99 1/2. Mobil, which said it plans to cut its exploration and production work force by about 8% in a restructuring, dropped 5/8 to 56 1/8.

The precious metals sector outgained other Dow Jones industry groups by a wide margin for the second consecutive session. Hecla Mining rose 5/8 to 14; Battle Mountain Gold climbed 3/4 to 16 3/4; Homestake Mining rose 1 1/8 to 16 7/8; Lac Minerals added 5/8 to 11; Placer Dome went up 7/8 to 16 3/4, and ASA Ltd. jumped 3 5/8 to 49 5/8.

Gold mining stocks traded on the American Stock Exchange also showed strength. Echo Bay Mines rose 5/8 to 15 7/8; Pegasus Gold advanced 1 1/2 to 12, and Corona Class A gained 1/2 to 7 1/2.

Unisys dropped 3/4 to 16 1/4 after posting a third-quarter loss of $4.25 a share, including restructuring charges, but other important technology issues were mixed.

Compaq Computer, which had lost 8 5/8 Thursday following a disappointing quarterly report, gained 5/8 to 100 5/8. International Business Machines dropped 7/8 to 99 7/8. Digital Equipment tacked on 1 1/8 to 89 1/8, and Hewlett-Packard fell 3/8 to 49 3/8.

Dividend-related trading swelled volume in Merrill Lynch, which closed unchanged at 28 3/8 as 2.7 million shares changed hands. The stock has a 3.5% dividend yield and goes ex-dividend today.

Erbamont advanced 1 1/8 to 36 1/2 on 1.9 million shares. Montedison, which owns about 72% of the company's common stock, agreed to buy the rest for $37 a share. Himont, another majority-owned unit of Montedison, added 1 1/4 to 47 1/8.

Milton Roy jumped 2 to 18 3/8. Crane said it holds an 8.9% stake in the company and may seek control. Crane dropped 1 1/8 to 21 1/8.

Comprehensive Care, which terminated its agreement to merge with First Hospital, dropped 7/8 to 3 7/8. The company's decision was made after First Hospital failed to obtain financing for its offer.

Federal investigators have identified the problem in last July's crash of a United Airlines flight in Iowa: a structural flaw that developed during the making of a titanium engine disk.

For several months, officials at the Federal Aviation Administration and the National Transportation Safety Board have suspected that a metallurgical flaw in the disk led to a crack that ultimately caused the tail engine to break apart in flight. The explosion sent shards of metal flying, severing the DC-10's hydraulic or control systems, and led to the crash that killed 112 people.

But investigators could confirm their theory only after the recent retrieval of a big chunk of Flight 232's tail engine from a cornfield near the Sioux City Airport in Iowa. The safety board will begin four days of hearings on the accident tomorrow in Sioux City. Among the issues the board will examine is whether United Airlines, a unit of UAL Corp., should have been able to detect the cracks through maintenance checks. The engine involved was a CF6-6 made by General Electric Co.

Anthony Broderick, the FAA's acting executive director for regulatory standards and compliance, said that recent tests of the failed engine disk indicate that a flaw -- known as "hard alpha" -- occurred in the titanium during its production almost 20 years ago. He said there wasn't any way to detect the flaw at that time, and that the process has since been changed to decrease the chance that such flaws would occur.

The FAA already has ordered that all 232 disks made by the old process be removed from the planes and subjected to an ultrasonic test in a water-submersion chamber. Such tests make the FAA confident that a Sioux City-type accident "won't happen again," said Mr. Broderick. A spokesman for GE said that the company has been working with the FAA all along on this issue and "will comply fully with the required inspections." But he also pointed out that the recalls will have no impact on GE's engine production. The CF6-6 series engines aren't being manufactured any more; they are only being used in the DC-10 Series 10 planes currently in service, he said.

A frozen mountaintop in Tibet may offer an important clue about whether the Earth is warming perilously.

Researchers at Ohio State University and Lanzhou Institute of Glaciology and Geocryology in China have analyzed samples of glacial ice in Tibet and say temperatures there have been significantly higher on average over the past half-century than in any similar period in the past 10,000 years.

The ice samples are an important piece of evidence supporting theories that the Earth has warmed considerably in recent times, largely because of pollutants in the air, and will warm far more in the century ahead. A substantial warming would melt some of the Earth's polar ice caps, raising the level of the oceans and causing widespread flooding of heavily populated coastal areas.

"If you can use data to reconstruct what happened in the past, you have much more confidence in predictions for the future," said Lonnie Thompson, a research scientist at Ohio State who dug for and analyzed the ice samples.

To compare temperatures over the past 10,000 years, researchers analyzed the changes in concentrations of two forms of oxygen. These measurements can indicate temperature changes, researchers said, because the rates of evaporation of these oxygen atoms differ as temperatures change.

Analysis of ice from the Dunde ice cap, a glacial plateau in Tibet 17,000 feet above sea level, show that average temperatures were higher in 1937-87 than in any other 50-year period since before the last Ice Age, Mr. Thompson said. Some climate models project that interior regions of Asia would be among the first to heat up in a global warming because they are far from oceans, which moderate temperature changes.

But the ice-core samples aren't definitive proof that the so-called greenhouse effect will lead to further substantial global heating, Mr. Thompson acknowledged. According to greenhouse theories, increased carbon dioxide emissions, largely caused by burning of fossil fuels, will cause the Earth to warm up because carbon dioxide prevents heat from escaping into space.

Skeptics say that if that's the case, temperatures should have risen fairly uniformly over the past century, reflecting the increase in carbon dioxide. Instead, the Dunde ice-core record shows increasing temperatures from 1900 through the early 1950s, decreasing temperatures from the late 1950s through the mid-1970s, then higher temperatures again through last year. Other temperature data show similar unexplained swings.

"Climate varies drastically due to natural causes," said Mr. Thompson. But he said ice samples from Peru, Greenland and Antarctica all show substantial signs of warming.

Telxon Corp. said its vice president for manufacturing resigned and its Houston work force has been trimmed by 40 people, or about 15%.

The maker of hand-held computers and computer systems said the personnel changes were needed to improve the efficiency of its manufacturing operation.

The company said it hasn't named a successor to Ronald Bufton, the vice president who resigned. Its Houston work force now totals 230.

CNW Corp. said the final step in the acquisition of the company has been completed with the merger of CNW with a subsidiary of Chicago & North Western Holdings Corp.

As reported, CNW agreed to be acquired by a group of investors led by Blackstone Capital Partners Limited Partnership for $50 a share, or about $950 million.

Congress sent to President Bush an $8.5 billion military construction bill that cuts spending for new installations by 16% while revamping the Pentagon budget to move more than $450 million from foreign bases to home-state projects.

The fiscal 1990 measure builds on a pattern set earlier this year by House and Senate defense authorizing committees, and -- at a time of retrenchment for the military and concern about the U.S.'s standing in the world economy -- overseas spending is most vulnerable. Total Pentagon requests for installations in West Germany, Japan, South Korea, the United Kingdom and the Philippines, for example, are cut by almost two-thirds, while lawmakers added to the military budget for construction in all but a dozen states at home.

The result is that instead of the Pentagon's proposed split of 60-40 between domestic and foreign bases, the reduced funding is distributed by a ratio of approximately 70-30. The extra margin for bases in the U.S. enhances the power of the appropriations committees; meanwhile, lawmakers used their positions to garner as much as six times what the Pentagon had requested for their individual states.

House Appropriations Committee Chairman Jamie Whitten (D., Miss.) helped secure $49.7 million for his state, or more than double the Pentagon's budget. West Virginia, home of Senate Appropriations Committee Chairman Robert Byrd, would receive $21.5 million -- four times the military's request. Tennessee and North Carolina, home states of the two Democratic chairmen of the House and Senate military construction subcommittees, receive $243.2 million, or 25% above the Pentagon's request. Though spending for Iowa and Oregon was far less, their increases above Pentagon requests -- 640% and 430%, respectively -- were much greater because of the influence of Republicans at critical junctures.

The swift passage of the bill, which cleared the Senate and House on simple voice votes last week, contrasts with the problems still facing a more cumbersome $66.8 billion measure funding housing, environmental, space and veterans programs. By an 84-6 margin, the Senate approved the bulk of the spending Friday, but the bill was then sent back to the House to resolve the question of how to address budget limits on credit allocations for the Federal Housing Administration.

The House Democratic leadership could seek to waive these restrictions, but the underlying bill is already under attack for excesses elsewhere. Appropriations committees have used an assortment of devices to disguise as much as $1 billion in spending, and as critics have awakened to these devices, the bill can seem like a wounded caribou trying to make it past ice and wolves to reach safer winter grazing.

Much of the excess spending will be pushed into fiscal 1991, and in some cases is temporarily parked in slow-spending accounts in anticipation of being transferred to faster-spending areas after the budget scorekeeping is completed.

For example, a House-Senate conference ostensibly increased the National Aeronautics and Space Administration budget for construction of facilities to nearly $592 million, or more than $200 million above what either chamber had previously approved. Part of the increase would provide $90 million toward ensuring construction of a costly solid rocket-motor facility in Mr. Whitten's Mississippi. But as much as $177 million, or nearly 30% of the account, is marked for potential transfers to research, management and flight accounts that are spent out at a faster clip.

The bill's managers face criticism, too, for the unusual number of conditions openly imposed on where funds will be spent. Conservatives, embarrassed by Republican influence-peddling scandals at the Department of Housing and Urban Development, have used the issue in an effort to shift blame onto a Democratic-controlled Congress. HUD Secretary Jack Kemp backed an unsuccessful effort to strike such language last week, but received little support from the White House budget office, which wants to protect space-station funding in the bill and has tended to turn its eyes from pork-barrel amendments.

Within discretionary funds for community development grants, more than $3.7 million is allocated to six projects in Michigan, home state of a subcommittee chairman, Rep. Bob Traxler. House Speaker Thomas Foley won $510,000 for a project in his district in Washington state, and $1.3 million, earmarked by Sen. Daniel Inouye, amounts to a business subsidy under the title "Hawaiian sugar mills job retention."

The powerful Democrat had first wanted to add language relaxing environmental restrictions on two mills on the Hamakua coast that are threatening to close. When this plan met resistance, it was agreed instead to take money from HUD to subsidize needed improvements in two settling ponds for the mills, which employ an estimated 1,500 workers, according to Mr. Inouye's office.

Dennis Farney's Oct. 13 page-one article "River of Despair," about the poverty along the Mississippi, fanned childhood memories of when my parents were sharecroppers in southeastern Arkansas, only a few miles from the river. Although we were white, the same economic factors affected us as affects the black people Mr. Farney writes about. Fortunately, an aunt with a college degree bought a small farm and moved us 50 miles north to good schools and an environment that opened the world of opportunity for me as an eight-year-old.

Though I've been blessed with academic degrees and some success in the materialistic world, I've never forgotten or lost contact with those memories of the 1930s.

Most of the land in that and other parts of the Delta are now owned by second, third or fourth generations of the same families. These are the families who used -- and sometime abused -- their sharecroppers, people who had no encouragement and little access to an education or training for a better life. Following World War II, when one family with mechanized equipment could farm crops formerly requiring 20 families, the surplus people were dumped into the mainstream of society with no Social Security, no skills in the workplace, no hope for their future except welfare. And today, many of their children, grandchildren and great-grandchildren remain on welfare.

In the meantime, the landowners continue receiving generous subsidies that began during New Deal days. Or those who choose not to farm can lease their lands and crop allotments for handsome sums.

Farmers in the Midwest and other areas have suffered, but those along the Mississippi continue to prosper with holdings that were built with the sweat of men and women living in economic slavery. And when they were no longer needed, they were turned loose unprepared to build lives of their own.

Denton Harris

Chairman

Metro Bank

Atlanta

Because the cycle of poverty along the lower Mississippi goes back so many generations, breaking this cycle will be next to impossible. Sadly, the cycle appears not as waves but as a downward spiral. Yet the evidence that we have not hit bottom is found in the fact that we are not yet helping ourselves. The people of the Delta are waiting for that big factory to open, river traffic to increase, government spending to fund job-training programs or public schools to educate apathetic students.

Because we refuse to face the tough answers, the questions continue as fodder for the commissions and committees, for the media and politicians. Coffee-shop chatter does not lend itself to solving the problems of racism, teen pregnancy or lack of parental support or guidance.

Does the Delta deserve government help in attracting industry when the majority of residents, black and white, do not realize racism alienates potential employers? Should we focus on the region's infant-mortality rate when the vocal right-wingers and the school boards, mayors and legislators prohibit schools from teaching the two ways (abstinence or contraceptives) of decreasing teen pregnancy? Delta problems are difficult, not impossible, to solve -- I am just not convinced that we are ready to solve them yet.

Leslie Falls Humphries

Little Rock, Ark.

I would like to issue a challenge to corporate America. The next time expansion plans are mentioned at the old company and somebody says, "Aw heck, guys, nobody can do it like Japan or South Korea," I wish you would butt in and say, "Hold it, fellas, why don't we compare prices and use our own little Third World country. We would even save on freight."

There is no mystery why the Delta originated "Singin' the Blues."

Eugene S. Clarke IV

Hollandale, Miss.

Your story is an insult to the citizens of the Mississippi Delta. Many of the problems you presented exist in every part of this country. Poverty is only two blocks from President Bush's residence. For years, we tried to ignore the problem of poverty, and now that it has gotten out of hand it's a new crusade for the media and our Democratic Congress.

Nobody should have to live in such poor conditions as in "Sugar Ditch," but when you travel to Washington, Boston, Chicago or New York, the same problems exist. The only difference is, in those cities the poor are housed in high-rise-project apartments each consisting of one room, with rusty pipes called plumbing, rodents and cockroaches everywhere and nonworking elevators -- and with the building patrolled by gangs and drug dealers.

Many middle-class people would love free food, Medicaid insurance, utilities and rent. Then maybe I could stay home and have seven children and watch Oprah Winfrey, like Beulah in the article, instead of having one child and working constantly just to stay above water, like so many families in this country.

Dee Ann Wilson

Greenville, Miss.

Mobil Corp. is in the midst of cutting back its exploration and production group, which finds and develops oil and gas reserves in the U.S., by as much as 15% as part of a new restructuring of that sector of its business.

Management advised employees Friday that it was going to reduce employment in production operations of the group by 8%, or 400 people. The exploration side of the unit has recently undergone a similar overhaul, during which it also lost as many as 400 employees, a company spokesman said in response to questions. Mobil Exploration & Producing U.S. Inc., the group involved, currently has a work force of somewhat less than 5,000.

A few years ago, Mobil restructured the entire company during an industrywide shakeout. But since then U.S. oil production has declined and Mobil wants to focus its oil-finding efforts overseas.

Mobil alluded to the work-force cuts last week when it took a $40 million charge as part of its third-quarter earnings and attributed it to a restructuring. Mobil officials said that it is unlikely any additional charges related to this move will be taken in future quarters.

On Wednesday, Mobil will begin offering separation packages and voluntary retirement in its U.S. production operation. Mobil officials said they have been studying ways of streamlining these operations since early this year.

During the coming months, layers of management will be peeled away and regional offices will become more autonomous. For greater efficiency, employees at those locations will be reorganized into teams responsible for managing the properties under their jurisdiction, Mobil said. "The main feature of the new organization is that each local manager will have both the authority and accountability for profitable and technically sound operations," said Charles E. Spruell, president of the Mobil unit.

Field offices at New Orleans; Houston; Denver; Midland, Tex.; Bakersfield, Calif.; Oklahoma City; and Liberal, Kan., will be maintained. But the staffs at some of those locations will be slashed while at others the work force will be increased.

For instance, employment in Denver will be reduced to 105 from 430. But on the West Coast, where profitable oil production is more likely than in the midcontinent region, the Bakersfield, Calif., office staff of 130 will grow by 175 to 305. The reorganization will "focus on the value and potential of assets," Mr. Spruell said.

Wanted: An investment that's as simple and secure as a certificate of deposit but offers a return worth getting excited about.

With $150 billion of CDs maturing this month, a lot of people have been scouring the financial landscape for just such an investment.

In April, when many of them bought their CDs, six-month certificates were yielding more than 9%; investors willing to look could find double-digit yields at some banks and thrifts. Now, the nationwide average yield on a six-month CD is just under 8%, and 8.5% is about the best around.

But investors looking for alternatives aren't finding it easy. Yields on most fixed-income securities are lower than several months ago. And the stock market's recent gyrations are a painful reminder of the dangers there.

"If you're looking for a significantly higher yield with the same level of risk as a CD, you're not going to find it," says Washington financial planner Dennis M. Gurtz.

There are, however, some alternatives that income-oriented investors should consider, investment advisers say. Short-term municipal bonds, bond funds and tax-deferred annuities are some of the choices they mention -- and not just as a way to get a higher return.

In particular, advisers say, investors may want to look at securities that reduce the risk that CD holders are confronting right now, of having to reinvest the proceeds of maturing short-term certificates at lower rates.

A mix of CDs and other holdings may make the most sense. "People should remember their money isn't all or nothing -- they don't need to be shopping for the one interest-rate-type investment and putting all their money in it," says Bethesda, Md., adviser Karen Schaeffer.

Here's a look at some of the alternatives:

SHORT-TERM MUNICIPALS: Investors with a heavy tax load should take out their calculators. Yields on municipal bonds can be higher than after-tax yields on CDs for maturities of perhaps one to five years. That's because municipal-bond interest is exempt from federal income tax -- and from state and local taxes too, for in-state investors.

For an investor paying tax at a 33% rate, a seemingly puny 6% yield on a one-year muni is equivalent to a taxable 9%. Rates approach 6.5% on five-year municipals.

Some of the more cautious CD holders might like "pre-refunded" municipals. These securities get top credit ratings because the issuers have put aside U.S. bonds that will be sold to pay off holders when the municipals are retired.

"It's a no-brainer: You don't have to worry about diversification; you don't have to worry about quality," says Steven J. Hueglin, executive vice president of the New York bond firm of Gabriele, Hueglin & Cashman Inc.

Consider a "laddered" bond portfolio, with issues maturing in, say, 1992, 1993 and 1994, advises Malcolm A. Makin, a Westerly, R.I., financial planner. The idea is to have money rolling over each year at prevailing interest rates.

BOND FUNDS: Bond mutual funds offer diversification and are easy to buy and sell. That makes them a reasonable option for investors who will accept some risk of price fluctuation in order to make a bet that interest rates will decline over the next year or so.

Buyers can look forward to double-digit annual returns if they are right. But they will have disappointing returns or even losses if interest rates rise instead. Bond resale prices, and thus fund share prices, move in the opposite direction from rates. The price movements get bigger as the maturity of the securities lengthens.

Consider, for instance, two bond funds from Vanguard Group of Investment Cos. that were both yielding 8.6% on a recent day. The Short Term Bond Fund, with an average maturity of 2 1/2 years, would deliver a total return for one year of about 10.6% if rates drop one percentage point and a one-year return of about 6.6% if rates rise by the same amount. But, in the same circumstances, the returns would be a more extreme 14.6% and 2.6% for the Vanguard Bond Market Fund, with its 12 1/2-year average maturity.

"You get equity-like returns" from bonds if you guess right on rates, says James E. Wilson, a Columbia, S.C., planner. If interest rates don't change, bond fund investors' returns will be about equal to the funds' current yields.

DEFERRED ANNUITIES: These insurance company contracts feature some of the same tax benefits and restrictions as non-deductible individual retirement accounts: Investment gains are compounded without tax consequences until money is withdrawn, but a 10% penalty tax is imposed on withdrawals made before age 59 1/2. Aimed specifically at CD holders are so-called CD-type annuities, or certificates of annuity. An interest rate is guaranteed for between one and seven years, after which holders get 30 days to choose another guarantee period or to switch to another insurer's contract without the surrender charges that are common to annuities.

Some current rates exceed those on CDs. For instance, a CD-type annuity from North American Co. for Life & Health Insurance, Chicago, offers 8.8% interest for one year or a 9% rate for two years.

Annuities are rarely a good idea at age 35 because of the withdrawal restrictions. But at age 55, "they may be a great deal," says Mr. Wilson, the Columbia, S.C., planner.

MONEY MARKET FUNDS: That's right, money market mutual funds. The conventional wisdom is to go into money funds when rates are rising and shift out at times such as the present, when rates seem headed down. With average maturities of a month or so, money funds offer fixed share prices and floating returns that track market interest rates, with a slight lag.

Still, today's highest-yielding money funds may beat CDs over the next year even if rates fall, says Guy Witman, an editor of the Bond Market Advisor newsletter in Atlanta. That's because top-yielding funds currently offer yields almost 1 1/2 percentage points above the average CD yield.

Mr. Witman likes the Dreyfus Worldwide Dollar Money Market Fund, with a seven-day compound yield just under 9.5%. A new fund, its operating expenses are being temporarily subsidized by the sponsor.

Try combining a money fund and an intermediate-term bond fund as a low-risk bet on falling rates, suggests Back Bay Advisors Inc., a mutual fund unit of New England Insurance Co. If rates unexpectedly rise, the increasing return on the money fund will partly offset the lower-than-expected return from the bond fund.

Federal drug regulators, concerned over British reports that diabetics have died after shifting from animal to human-based insulin, say they are considering a study to see if similar deaths have occurred here.

The United Kingdom reports came from Dr. Patrick Toseland, head of clinical chemistry at Guy's Hospital in London. In a telephone interview Friday, Dr. Toseland said the number of sudden, unexplained deaths of diabetics he had seen this year was 17 compared with just two in 1985. At least six of the deaths occurred among relatively young diabetics who had switched from animal to human insulin within the past year, he said.

Dr. Solomon Sobel, director of metabolism and endrocrine drug products for the U.S. Food and Drug Administration, said FDA officials have discussed Dr. Toseland's findings "fairly intensively." While there have been no reports of similar sudden unexplained deaths among diabetics in the U.S., Dr. Sobel said the FDA plans to examine Dr. Toseland's evidence and is considering its own study here.

Dr. Toseland, a toxicologist, said he was preparing an article for a British forensic medical journal raising the possibility that the deaths may have occurred after human insulin blunted critical warning signs indicating hypoglycemia, or low blood sugar, which can kill diabetics.

The usual warning signs of hypoglycemia include sweating, anxiety and cramps. With proper warning, diabetics can easily raise their blood sugar to safe levels by eating sugar or sugary food. "The anecdotal data certainly shows that some of the people were not aware of the rapid onset of hypoglycemia," Dr. Toseland said.

At the U.S. National Institutes of Health, Dr. Robert E. Silverman, chief of the diabetes program branch, said no evidence of unexpected deaths from hypoglycemia had shown up in a study of 1,500 diabetics that has been under way at NIH for five years. However, he said officials conducting the study hadn't been looking for signs of problems related to hypoglycemia unawareness. "We are now monitoring for it much more closely," he said.

"We do know there are slight differences in the way human and animal insulins drive down blood sugar," Dr. Sobel said. The human-based drug starts the blood sugar dropping sooner and drives it down faster, he said. "But we don't believe there is enough of a difference to be clinically significant," Dr. Sobel said.

Reports of Dr. Toseland's findings in the British press have triggered widespread concern among diabetics there. Both the British Diabetic Association and the Committee on Safety in Medicines -- Britain's equivalent of the U.S. FDA -- recently issued statements noting the lack of hard scientific evidence to support Dr. Toseland's findings. On Friday, the American Diabetes Association issued a similar statement urging the six million U.S. diabetics not to overreact to the British report.

"A loss of the warning symptoms of hypoglycemia is a complex problem that is very unlikely to be due simply to the type of insulin used," the American association said.

The FDA already requires drug manufacturers to include warnings with insulin products that symptoms of hypoglycemia are less pronounced with human insulin than with animal-based products.

Eli Lilly & Co., the Indianapolis-based drug manufacturer, dominates the U.S. human insulin market with its product known as Humulin. Lilly is building plants to make the insulin in Indianapolis and Fagershein, France. In its latest annual report, Lilly said Humulin sales have shown "excellent growth."

Lilly officials said they had seen reports of hypoglycemic unawareness among some patients making the shift from animal to human insulin, but didn't know if the problem had caused any deaths. Dr. Leigh Thompson, a Lilly group vice president, said the company's clinical trials of both its animal and human-based insulins indicated no difference in the level of hypoglycemia between users of either product.

Dr. Toseland said most of the British diabetics who died had been taking a human-based insulin made by Novo/Nordisk, a Danish manufacturer. None of the diabetics were using Lilly's insulin.

SharesBase Corp. said it will reduce its 221-person work force by about 25%, effective tomorrow, in an effort to stem continuing losses.

The company, which makes data base systems and software, said it expects to report a loss for the third quarter ended Sept. 30.

Defense intellectuals have complained for years that the Pentagon cannot determine priorities because it has no strategy. Last April, the new defense secretary, Richard Cheney, acknowledged that, "given an ideal world, we'd have a nice, neat, orderly process. We'd do the strategy and then we'd come around and do the budget. This city doesn't work that way." With a five-year defense plan costing more than $1.6 trillion, it's about time we put together a defense strategy that works in Washington.

This won't happen until strategists come down from their ivory tower and learn to work in the real world of limited budgets and uncertain futures. As it is, we identify national goals and the threats to these goals, we shape a strategy to counter these threats, we determine the forces needed to execute the strategy, before finally forging the budgets needed to build and maintain the forces. These procedures consume millions of man-hours of labor and produce tons of paper, and each year, their end product -- the Five Year Defense Plan -- promptly melts away.

The graph on the left shows how this happens (see accompanying illustration -- WSJ Oct. 30, 1989). Compare the past eight five-year plans with actual appropriations. The Pentagon's strategists produce budgets that simply cannot be executed because they assume a defense strategy depends only on goals and threats. Strategy, however, is about possibilities, not hopes and dreams. By ignoring costs, U.S. strategists abdicate their responsibility for hard decisions. That puts the real strategic decisions in the hands of others: bean counters, budgeteers, and pork-barrelers. These people have different agendas. And as a result -- as the recent vote by the House to undo Mr. Cheney's program terminations suggests -- the preservation of jobs is becoming the real goal of defense "strategy."

How can we turn this situation around?

Reform starts in the Pentagon. Strategists should consider the impact of budget uncertainties at the beginning of the planning process. They ought to examine how a range of optimistic to pessimistic budget scenarios would change the defense program. They would then develop priorities by identifying the least painful program cuts as they moved from higher to lower budgets. They would also identify the best way to add programs, should the budget come in at higher levels. This kind of contingency analysis is common in war planning and business planning. There is no reason that it can not be done for defense planning.

Two steps are necessary to translate this idea into action. Step 1 cleans up our books. Our five-year plan contains three accounting devices -- negative money, an above guidance management reserve and optimistic inflation estimates -- which understate the spending the Pentagon has committed itself to by almost $100 billion.

Negative money was invented in 1988 to make the 1990-94 Five Year Defense Plan conform to the numbers in President Reagan's final budget submission to Congress. That plan exceeded the numbers contained in his budget message by $45 billion. To make the books balance, as is required by law, somebody invented a new budget line item that simply subtracted $45 billion. It is known in the Pentagon as the "negative wedge."

The Pentagon argues that the negative wedge is the net effect of $22 billion in the as-yet unidentified procurement reductions that it intends to find in future years and $23 billion in an "above guidance" management reserve that accounts for undefined programs that will materialize in the future.

The 1990 plan also assumes inflation will decline to 1.7% by 1994. Most forecasters, including those in the Congressional Budget Office, assume inflation will be in excess of 4% in each of those five years. At that rate, the defense plan is underfunded by $48 billion.

By adding the negative wedge and recalculating the remaining program using a more probable inflation estimate, we arrive at a baseline program costing $1.7 trillion between 1990 and 1994.

Step 2 examines how four progressively lower budget scenarios would change the baseline and how these changes would affect our national security. The graph on the right (which assumes a 4% rate of inflation), places these scenarios in the context of recent appropriations (see accompanying illustration -- WSJ Oct. 30, 1989). Note how the baseline program assumes a sharp increase in future appropriations. Step 2 will answer the question: What happens if these increases do not materialize?

Scenario 1, known as the "Constant Dollar Freeze," reimburses the Pentagon for inflation only -- it slopes upward at 4% per year. This scenario has been the rough position of the U.S. Senate since 1985, and it reduces the baseline by $106 billion between 1990 and 1994.

Scenario 3, the "Current Dollar Freeze," has been the approximate position of the House of Representatives for about four years. It freezes the budget at its current level, and forces the Pentagon to eat the effects of inflation until 1994. This reduces the baseline by $229 billion.

Scenario 2 extends the recent compromises between the House and the Senate; it splits the difference between Scenarios 1 and 3, by increasing the budget at 2% per year. It reduces the baseline by $169 billion.

Finally, Scenario 4 reduces the budget by 2% per year for the next five years -- a total reduction of $287 billion. This can be thought of as a pessimistic prediction, perhaps driven by the sequestering effects of the Gramm-Rudman deficit reduction law or possibly a relaxation of tensions with the Soviet Union.

The strategic planners in the Joint Chiefs of Staff would construct the most effective defense program for each scenario, maximizing strengths and minimizing weaknesses. They would conclude their efforts by producing a comprehensive net assessment for each plan -- including the assumptions made, an analysis of its deficiencies and limitations, the impact on national security, and the best strategy for working around these limitations.

This exercise would reveal the true cost of a particular program by forcing the strategists to make hard decisions. If, for example, they choose to keep the B-2 Stealth bomber, they would have to sacrifice more and more other programs -- such as carrier battlegroups or army divisions -- as they moved toward lower budget levels. These trade-offs would evolve priorities by revealing when the cost of the B-2 became prohibitive.

Some may be tempted to argue that the idea of a strategic review merely resurrects the infamous Zero-Based Budgeting (ZBB) concept of the Carter administration. But ZBB did not involve the strategic planners in the Joint Chiefs of Staff, and therefore degenerated into a bean-counting drill driven by budget politics. Anyway, ZBB's procedures were so cumbersome that everyone involved was crushed under a burden of marginalia. A strategic review is fundamentally different. It would be run by the joint chiefs under simple directions: Produce the best possible force for each budget scenario and provide the Secretary of Defense with a comprehensive net assessment of how that force could be used to achieve U.S. goals.

It might be feared that even thinking about lower budgets will hurt national security because the door will be opened to opportunistic budget cutting by an irresponsible Congress. This argument plays well in the atmosphere of gaming and mistrust permeating the Pentagon and Congress, and unfortunately, there is some truth to it. But in the end, it must be rejected for logical as well as moral reasons. To say that the Pentagon should act irresponsibly because acting responsibly will provoke Congress into acting irresponsibly leads to the conclusion that the Pentagon should deliberately exaggerate its needs in the national interest; in other words, that it is justified in committing a crime -- lying to Congress -- because it is morally superior.

Strategy is not a game between the Pentagon and Congress; it is the art of the possible in a world where constraints force us to choose between unpleasant or imperfect alternatives. If we want meaningful priorities, we must understand the trade-offs they imply before we make commitments. Strategy is not a separate event in an idealized sequence of discrete events; it is a way of thinking that neutralizes threats to our interests in a manner consistent with our financial, cultural and physical limitations.

Mr. Spinney is a permanent Pentagon official. This is a condensed version of an essay that will appear in the January issue of the Naval Institute Proceedings. The views expressed do not reflect the official policy of the Department of Defense.

Although bullish dollar sentiment has fizzled, many currency analysts say a massive sell-off probably won't occur in the near future.

While Wall Street's tough times and lower U.S. interest rates continue to undermine the dollar, weakness in the pound and the yen is expected to offset those factors. "By default," the dollar probably will be able to hold up pretty well in coming days, says Francoise Soares-Kemp, a foreign-exchange adviser at Credit Suisse. "We're close to the bottom" of the near-term ranges, she contends.

In late Friday afternoon New York trading, the dollar was at 1.8300 marks and 141.65 yen, off from late Thursday's 1.8400 marks and 142.10 yen. The pound strengthened to $1.5795 from $1.5765.

In Tokyo Monday, the U.S. currency opened for trading at 141.70 yen, down from Friday's Tokyo close of 142.75 yen.

The dollar began Friday on a firm note, gaining against all major currencies in Tokyo dealings and early European trading despite reports that the Bank of Japan was seen unloading dollars around 142.70 yen. The rise came as traders continued to dump the pound after the sudden resignation Thursday of British Chancellor of the Exchequer Nigel Lawson.

But once the pound steadied with help from purchases by the Bank of England and the Federal Reserve Bank of New York, the dollar was dragged down, traders say, by the stock-market slump that left the Dow Jones Industrial Average with a loss of 17.01 points.

With the stock market wobbly and dollar buyers discouraged by signs of U.S. economic weakness and the recent decline in U.S. interest rates that has diminished the attractiveness of dollar-denominated investments, traders say the dollar is still in a precarious position. "They'll be looking at levels to sell the dollar," says James Scalfaro, a foreign-exchange marketing representative at Bank of Montreal.

While some analysts say the dollar eventually could test support at 1.75 marks and 135 yen, Mr. Scalfaro and others don't see the currency decisively sliding under support at 1.80 marks and 140 yen soon.

Predictions for limited dollar losses are based largely on the pound's weak state after Mr. Lawson's resignation and the yen's inability to strengthen substantially when there are dollar retreats. With the pound and the yen lagging behind other major currencies, "you don't have a confirmation" that a sharp dollar downturn is in the works, says Mike Malpede, senior currency analyst at Refco Inc. in Chicago.

As far as the pound goes, some traders say a slide toward support at $1.5500 may be a favorable development for the dollar this week.

While the pound has attempted to stabilize, currency analysts say it is in critical condition. Sterling plunged about four cents Thursday and hit the week's low of $1.5765 when Mr. Lawson resigned from his six-year post because of a policy squabble with other cabinet members.

He was succeeded by John Major, who Friday expressed a desire for a firm pound and supported the relatively high British interest rates that he said "are working exactly as intended" in reducing inflation. But the market remains uneasy about Mr. Major's policy strategy and the prospects for the pound, currency analysts contend.

Although the Bank of England's tight monetary policy has fueled worries that Britain's slowing economy is headed for a recession, it is widely believed that Mr. Lawson's willingness to prop up the pound with interest-rate increases helped stem pound selling in recent weeks. If there are any signs that Mr. Major will be less inclined to use interest-rate boosts to rescue the pound from another plunge, that currency is expected to fall sharply.

"It's fair to say there are more risks for the pound under Major than there were under Lawson," says Malcolm Roberts, a director of international bond market research at Salomon Brothers in London.

"There's very little upside to sterling," Mr. Roberts says, but he adds that near-term losses may be small because the selling wave that followed Mr. Major's appointment apparently has run its course.

But some other analysts have a stormier forecast for the pound, particularly because Britain's inflation is hovering at a relatively lofty annual rate of about 7.6% and the nation is burdened with a struggling government and large current account and trade deficits.

The pound likely will fall in coming days and may trade as low as 2.60 marks within the next year, says Nigel Rendell, an international economist at James Capel & Co. in London. The pound was at 2.8896 marks late Friday, off sharply from 2.9511 in New York trading a week earlier.

If the pound falls closer to 2.80 marks, the Bank of England may raise Britain's base lending rate by one percentage point to 16%, says Mr. Rendell. But such an increase, he says, could be viewed by the market as "too little too late." The Bank of England indicated its desire to leave its monetary policy unchanged Friday by declining to raise the official 15% discount-borrowing rate that it charges discount houses, analysts say.

Pound concerns aside, the lack of strong buying interest in the yen is another boon for the dollar, many traders say.

The dollar has a "natural base of support" around 140 yen because the Japanese currency hasn't been purchased heavily in recent weeks, says Ms. Soares-Kemp of Credit Suisse. The yen's softness, she says, apparently stems from Japanese investors' interest in buying dollars against the yen to purchase U.S. bond issues and persistent worries about this year's upheaval in the Japanese government.

On New York's Commodity Exchange Friday, gold for current delivery jumped $5.80, to $378.30 an ounce, the highest settlement since July 12. Estimated volume was a heavy seven million ounces.

In early trading in Hong Kong Monday, gold was quoted at $378.87 an ounce.

We are deeply disturbed that a recent editorial stated that the "Americans With Disabilities Act of 1989" was "crafted primarily by Democratic Senators Kennedy and Harkin" with a premise "based on the presumption that most Americans are hostile to the disabled. . . ." Perhaps even more offensive is the statement, "It is surprising that George Bush and the White House inner circle would ally themselves with this crabby philosophy."

This legislation was not drafted by a handful of Democratic "do-gooders." Quite the contrary -- it results from years of work by members of the National Council on the Handicapped, all appointed by President Reagan. You depict the bill as something Democratic leaders "hoodwinked" the administration into endorsing. The opposite is true: It's the product of many meetings with administration officials, Senate staffers, advocates, and business and transportation officials. Many congressmen are citing the compromise on the "Americans With Disabilities Act of 1989" as a model for bipartisan deliberations.

Most National Council members are themselves disabled or are parents of children with disabilities. We know firsthand the discrimination addressed by the act: to be told there's no place for your child in school; to spend lonely hours at home because there is no transportation for someone in a wheelchair; to be denied employment because you are disabled.

Your editorial mockingly entitles this legislation the "Lawyers' Employment Act." For the 43 million people with disabilities and their families, this legislation is the "Emancipation Proclamation."

Sandra Swift Parrino

Chairperson

National Council on the Handicapped

A group of investors led by Giant Group Ltd. and its chairman, Burt Sugarman, said it filed with federal antitrust regulators for clearance to buy more than 50% of the stock of Rally's Inc., a fast-food company based in Louisville, Ky.

Rally's operates and franchises about 160 fast-food restaurants throughout the U.S. The company went public earlier this month, offering 1,745,000 shares of common stock at $15 a share. Giant has interests in cement making and newsprint.

The investor group includes Restaurant Investment Partnership, a California general partnership, and three Rally's directors: Mr. Sugarman, James M. Trotter III and William E. Trotter II. The group currently holds 3,027,330 Rally's shares, or 45.2% of its commmon shares outstanding. Giant Group owned 22% of Rally's shares before the initial public offering.

A second group of three company directors, aligned with Rally's founder James Patterson, also is seeking control of the fast-food chain. It is estimated that the Patterson group controls more than 40% of Rally's stock.

Rally officials weren't available to comment late yesterday.

For the year ended July 2, Rally had net income of $2.4 million, or 34 cents a share, on revenue of $52.9 million.

Companies listed below reported quarterly profit substantially different from the average of analysts' estimates. The companies are followed by at least three analysts, and had a minimum five-cent change in actual earnings per share. Estimated and actual results involving losses are omitted.

The percent difference compares actual profit with the 30-day estimate where at least three analysts have issues forecasts in the past 30 days. Otherwise, actual profit is compared with the 300-day estimate.

DPC Acquisition Partners, a hostile suitor for Dataproducts Corp., filed a petition in federal district court in Los Angeles seeking to have its standstill agreement with the computer printer maker declared void, and it proceeded with a $10-a-share tender offer for the company.

The offer would give the transaction an indicated value of $189 million, based on the 18.9 million shares the group doesn't already own. DPC holds about 7.8% of Dataproducts' shares.

Lawyers representing DPC declined to elaborate, saying they didn't have a final copy of the filing. Jack Davis, Dataproducts' chairman, said he hadn't yet seen the filing and couldn't comment.

DPC made a $15-a-share bid for the company in May, but Dataproducts management considered the $283.7 million proposal unacceptable. Dataproducts had sought a buyer for several months, but it is now in the midst of a restructuring plan and management says the company is no longer for sale.

Appalachian Power Co., a subsidiary of American Electric Power Co., said it will redeem on Dec. 1 the entire $44.2 million of its 12 7/8% first mortgage bonds due 2013.

The redemption price will be 109.66% of the principal amount of the bonds, plus accrued interest to the date of redemption.

The European Community's consumer price index rose a provisional 0.6% in September from August and was up 5.3% from September 1988, according to Eurostat, the EC's statistical agency.

The month-to-month rise in the index was the largest since April, Eurostat said.