European Business News (EBN), 96-10-29

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated October 29 0930 CET

CONTENTS

[01] McDonnell chief says long-range commercial jetliner project too costly

[02] Japan's unemployment remains persistently high

[03] U.S. criticises European Union for opposing Helms-Burton law

[04] Japanese industrial production shows growth trend

[05] Zeneca sales for the first nine months rise 14% to 4.098 billion pounds.

[06] Intel says demand for processors has jumped significantly

[07] U.K. Thames Water profits up 6.4%

[01] McDonnell chief says long-range commercial jetliner project too costly

McDonnell Douglas Chief Executive Harry Stonecipher said he couldn't justify the $15 billion investment necessary over the next decade to continue the programme.

Describing the company's decision to pull the plug on the proposed long- range MD-XX, Stonecipher said the project's cost and timing were major problems. Analysts had described the MD-XX as a linchpin of a reinvigorated commercial-jet division. Stoneciper said he remains open to commercial- aircraft partnership proposals from outside investors, including foreign and U.S. competitors.

But regardless of whether such a partnership occurs, he maintained that the company's venerable but struggling Douglas Aircraft unit will stay in the airliner business as a 'niche' player.

The initial development costs for the ill-fated MD-XX were projected to be only about $2 billion, and Stonecipher said he believed there were as many as half a dozen airlines interested in launch orders for a total of 40 to 50 planes.

But the ultimate cost of upgrading operations to develop the MD-XX and other new planes and derivatives, was bound to be much higher. 'It looked to be on the order of a $15 billion investment over 10 years to keep new planes and derivatives coming down the line,' Stonecipher said.

Given the strong position of leading rival Boeing and No. 2 Airbus, Stonecipher said, 'We're probably way too far down the pike to make that kind of investment.'

Moreover, according to McDonnell's CEO, the latest company studies concluded that by the time the MD-XX was launched, 'it probably was going to miss the (current) cycle' of resurgent worldwide demand for new jets.

[02] Japan's unemployment remains persistently high

The government said the figures were swollen by people seeking to change jobs as the economy brightens.

Although Japan does not have the double-digit jobless rates of some Western countries, the climb in the rate seen over the past year has caused concern in a nation which has had minimal unemployment for most of the post-war era.

The government said that although the rate stayed stubbornly high, there was a silver lining in the statistics that suggested growing economic confidence and job mobility.

The figures showed that a record number of workers had voluntarily quit their jobs in September -- a total of 930,000 people, up 30,000 from a year earlier.

The government said it's too early to say whether Japan's jobless rate has peaked. A spokesman for the statistics agency said 'We have to wait until the end of December to see if conditions have really turned around. The official said the agency's assessment of conditions in the labour market remains that 'the overall situation is severe.' The official said the high number of so-called voluntarily unemployed was a mixed blessing. 'Of course, I can't say it's good that the number of jobless is rising, but it appears that the increase in the number of voluntarily unemployed who have now returned to the job market suggests they are more hopeful of finding work because the economy is recovering,' he said.

Analysts said the rise in voluntarily unemployed simply reflects the increasing number of employees who are accepting voluntary retirement packages amid efforts by their companies to restructure, and growing numbers of young workers who have left low-paying work in search of better jobs.

The official said 29% of the 930,000 voluntarily unemployed were workers between the ages of 15 and 24.

[03] U.S. criticises European Union for opposing Helms-Burton law

U.S. State Department spokesman Nicholas Burns said the administration is confident the law, the Helms-Burton Act, can be implemented in a way that will satisfy U.S. international obligations.

The administration wishes, Burns added, that the Europeans will make it a priority to call attention to the 'many, many people in Cuba whose rights are being denied now by the Castro government. 'We'd like to see more talk from the Europeans about democracy in Cuba,' he said.

Burns was responding to a decision by European Union foreign ministers earlier on Monday to make it illegal for Europeans to obey Washington's anti-Cuba Helms-Burton Act. The Helms-Burton Act angered some of Washington's allies, but it helped President Bill Clinton's political support among Cuban-Americans.

The Helms-Burton law allows lawsuits to be filed in U.S. courts against foreign firms that own or operate properties seized by Cuba from U.S. citizens who were Cuban nationals before the 1959 communist revolution.

[04] Japanese industrial production shows growth trend

The rise in output was steeper than consensus forecasts, exceeding the rise of 0.1% that the Japanesegovernment had forecast and the rise of 0.2% that economists had expected.

Harumi Takahashi, head of Ministry of International Trade and Industry's statistics analysis bureau, said the ministry dropped its reference to 'high inventories' in the latest report, as quarterly figures suggest inventory adjustment is mostly completed.

She also noted July-September output rose 1.5% from the prior quarter and increased by 3.7% from the year-prior quarter, marking the ninth consecutive year-on-year rise on a quarterly basis.

For the coming two reporting months, MITI forecasts that adjusted industrial production will rise 4.0% in October from September, followed by a decline of 1.9% during November. Last month, MITI forecast that October production would rise by 3.2% from September.

Takahashi said that trend toward quarterly growth in output likely will continue, with production in the October-December period seen rising 2.6% from the latest quarter and 4.2% from the year-ago period.

She said that forecast is preliminary and is based on the assumption that December output will be the same as November output.

For August, adjusted production fell 2.3% from the month before; shipments declined by 2.3%; inventories rose by 0.8%; and the inventories-to-shipment ratio rose by 1.3%.

Takahashi said output of passenger cars was the largest factor pushing overall industrial production higher in September. Output of mid-sized passenger cars rose 17% from levels in August, while output of compact cars rose by 3.2% from the prior month, she said.

For the latest reporting month, after adjustment for seasonal factors, sectors that enjoyed month-on-month rises in industrial production included the general machinery, autos and other transportation, and paper and pulp industries. Among declining sectors were steel, precision machinery, and textiles industries.

[05] Zeneca sales for the first nine months rise 14% to 4.098 billion pounds.

Agrichemicals sales also rose by 14%, hitting 1.387 billion pounds, helped by what the company called a buoyant agricultural sector and strong growth in herbicides sales. Speciality sales rose 2% to 802 million pounds, Zeneca said, though the Stahl leather business, helped by fashion trends, saw a 9% sales gain from a year earlier.

Meanwhile, the seed business, which entered into a joint venture with Royal Vanderhave in August and is now accounted for as an associate company, recorded unchanged sales of 117 million pounds. Zeneca stock is unchanged at 1750 pence in pre-opening dealing.

[06] Intel says demand for processors has jumped significantly

'People want products we can't ship, that is true, particularly higher frequency ones,' Yu told Reuters during a visit to Hong Kong. 'I think demand has jumped significantly, which is a change from quite a long time.' 'We're gearing up manufacturing, we should be out of it pretty soon,' he added.

Earlier this month, Intel said it was experiencing 'some tightness' in capacity for manufacturing microprocessors and some fabrication plants were running at 100 percent, but added it was not worried about meeting customer needs. Yu, who oversees development of Intel's Pentium, Pentium Pro and future microprocessors, said the surge in demand came suddenly in the last 30 to 60 days following a period of perhaps 18 months when Intel could supply any product customers wanted.

Supply was tightest at the high end, but the shortage existed across the board, he said. Yu denied Intel was having any greater than expected problems with Pentium Pro manufacturing yields, and said tight supply for the top end chips was due just to strong demand. Yu said he thought there was now greater demand for all chips used in making personal computers, not just microprocessors, noting the recent stabilisation in the price of memory chips. 'To build a PC you need more than processors,' he said.

But he said Intel continued to watch the end-user market carefully to catch any hint of a demand turn that could signal a potential oversupply situation. 'Right now is great, but how do I know tomorrow is great? We watch the market very carefully,' he said.

[07] U.K. Thames Water profits up 6.4%

'The first half of the year has been highly successful,' said group Chairman Sir Robert Clarke in a statement. 'I am confident this success will be sustained in the second half.' Clarke said Thames Water's utility business increased its pretax profit by 8%, while its non-regulated businesses made a pretax profit of 9 million pounds.

'As a result of this strong performance in all parts of the group and the balance sheet restructuring, we have decided to increase the dividend per share by 22%,' said Clarke. Thames' restructuring program involved a 'managed withdrawal' from its design and contracting businesess - which Clarke said is now 'largely completed' within the provisions already made - a share buyback and convertible bond buy-in.

'Our customers, who have the lowest bills in England and Wales, have again not had any restrictions imposed on their use of water, even though we have had another exceptionally dry year,' said Clarke. The group's chairman also said Thames plans to invest a further 150 million pounds in the business over the next five years, on top of its present annual investment program of 350 million pounds per year to improve services.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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