European Business News (EBN), 97-09-09

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Page last updated Tue, September 09 6:59 PM CET

CONTENTS

[01] German unemployment rate worse than expected, inflation outpaces Bundesbank target

[02] GAN and CIC will be privatised in the next few weeks, minister says

[03] GM expects $38 billion in revenue in 1998; seeks to cut costs in Europe Click here for more news from the auto show

[04] UK August annual retail price inflation rises to 3.5%

[05] Deutsche Telekom Chairman warns German regulators

[06] Ford revamps parts unit, preparing to expand outside salesClick here for news from the Frankfurt International Auto show

[07] Santer attacks EMU debate among German officials

[08] US productivity growth rate hits 3-and-a-half year high Data is likely to ease worries about overheating inflation

[09] Generale Bank posts 16% rise in first half earnings

[10] Campbell Soup to spin off 7 businesses

[11] Iberia's role in British Airways/American link isn't likely to lead to clearance

[12] Holderbank's first half profit falls 7.4% to $175 million

[13] Vendex first-half profit surges to $399 million on extraordinary item

[14] WorldCom's latest acquisition turns the Mississippi company into an internet giant

[15] US Securities and Exchange Commission authorises the transmission of 'roadshows' for securites offerings over the internet

[16] The Frankfurt Auto Show

[17] Economic and Corporate Briefs

[01] German unemployment rate worse than expected, inflation outpaces Bundesbank target

The Federal Labor Office reported that Pan-German unemployment rose a seasonally adjusted 49,000 in August, up from a rise of 22,000 in July, far exceeding the widely expected rise of 14,400. But the unemployment numbers weren't the only bad news. The Deutsche Bundesbank also announced that German inflation rose an annualized 2.2% in the six months through August, from 1.7% in the six months through July. That's above the Bundesbank's stated preference for inflation below 2%.

However, many economists say the data won't change expectations for Germany's 1997 GDP growth of between 2%-3% or significantly hasten the timing of an eventual rise in German interest rates.

'The jobless figures will probably make the Bundesbank more cautious about an interest rate rise for now,' said Volker Nitsche, economist at Bankgeselleschaft Berlin. He added the Bundesbank also likely won't be too alarmed by the price data.

Meanwhile, a senior Deutsche Bundesbank official said although there isn't any reason to expect the Bundesbank to lower German interest rates at the moment, arguments for and against a rate increase are equal.

'At the moment no one expects the Bundesbank to lower rates, but the arguments for and against a turn in the interest rate cycle are balancing each other out,' said Ernst Welteke, a member of the Bundesbank's Central Bank Council and president of the regional central bank based in Frankfurt.

Welteke said one of the arguments against higher interest rates is the still-weak German economy, where a recovery isn't yet broad-based and is hampered by continuing weakness in the German labour market. In addition, Welteke said M3 money supply growth came into the Bundesbank's 3.5%-6.5% target corridor for the year only recently, making any rate increase difficult to justify.

'In the past months M3 remained above the corridor and it would be difficult to understand if the Bundesbank raised rates in such a situation, ' Welteke said. Nevertheless, analysts are sticking by their forecasts for German GDP growth.

'We expect 1% growth over the first quarter and an annualized 3% for the year fuelled by a continuation of export growth and more robust industrial output,' said Uwe Angenendt, economist at BHF-Bank in Frankfurt.

[02] GAN and CIC will be privatised in the next few weeks, minister says

The finance minister also said that proceeds from the partial privatisation of Air France will be injected into state firms and that budget spending next year won't exceed the expected rate of inflation.

In an interview with Radio 1, Strauss-Kahn said, 'I said in July GAN and CIC would be put on the market and they will be in the coming weeks and months, more likely weeks. They will be put fully on the market because this is something we consider to be in the interests of the company.'

The government had said that it planned to privatise the two companies but had given no specific indications about the timetable for the move.

Additionally, Strauss-Kahn said that some of the money raised from the partial sale of France Telecom will be injected into other state firms, including Thomson Multimedia. Proceeds will also be used to provide venture capital in the high-technology sector.

France expects to raise around 40 billion francs ($6.6 billion) from the sale of a 20% stake in France Telecom.

'The 40 billion francs involved will be used, as you know, to recapitulates other state companies, including Thomson Multimedia...which we want to retain in the public sector . . . and a part will be recycled in the high technology sector... and used to provide venture capital in this sector,' Strauss-Kahn said.

The previous government had estimated Thomson Multimedia, part of the Thomson group which also owns defence electronics company Thomson CSF , needed a capital injection of around 11 billion francs.

The finance minister also said that 1998 government budget spending will rise 1.4%, equal to the expected rate of inflation and 'not one cent more.'

Previously, Strauss-Kahn had said spending would run at about the same level as inflation, but the government had pegged inflation at a 1.5% rise. Strauss-Kahn has said the 1998 budget deficit will come in at 3% of gross domestic product (GDP), putting the deficit at about FF260 billion.

Strauss-Kahn will present the 1998 budget in draft form to parliament on Sept. 24.

Private economists expect inflation to rise 1.2% to 1.6% in 1998.

Regarding Air France, Strauss-Kahn said any opening of the carrier's capital to private investment could only take place after the company has completed its recovery.

As such, he said the opening of capital, which would be less than 50%, couldn't take place before the end of 1997.

In May, state-owned Air France recorded its first full-year pre-tax profit since 1989, thanks to higher passenger traffic and state aid which lowered debt finance costs.

Last week, former Chairman Christian Blanc boosted the company's profit outlook for the 1997 fiscal year to FF1 billion from FF500 million and predicted even better results for 1998.

Strauss-Kahn said Tuesday that there would be no change in tax rates, or brackets, but that situations in which some people with high revenues avoid paying taxes will be eliminated.

He would not comment on the size of the increase in the CSG, a special tax that applies to all businesses and employees designed to bring down the social security deficit.

'The choice will be between 3 and 4 points. Should we do all this year or 3 this year and 1 next year? The prime minister hasn't decided yet. It depends on the analyses we'll be making in the coming days,' he said.

[03] GM expects $38 billion in revenue in 1998; seeks to cut costs in Europe Click here for more news from the auto show

He also said that the company expects to boost assembly capacity outside North America to 5 million units, with half of that additional capacity coming from new plants in Argentina, Brazil, Poland, Thailand and China.

Speaking at the international motor show in Frankfurt, Lou Hughes, president of GM international operations, said he sees significant growth prospects in Latin America and Asia during the next 10 years.

GM's international or non-North American revenues in 1996 were $35.25 billion, representing about 21% of the car maker's overall corporate revenues.

Hughes said GM's international sales totalled $35 billion in 1996, and should hit $36 billion in 1997 and $38 billion in 1998.

Last year GM international operations sold more than 3.1 million units. International operations hopes to sell about 3.3 million units in 1997. To support this expansion, the company spent close to $2.7 billion in 1996 and expects to spend between $2.6 billion and $2.8 billion in both 1997 and 1998, Hughes said.

All of the international operations' capital expenditures are being internally funded by its cash flow, he said.

Hughes said GM has launched an internal study to explore ways in which it can reduce its European manufacturing costs to bring them more in line with the increasing competitiveness of the European market.

At the motor show, GM's German unit GM Adam Opel unveiled its new Astra. The company expects to sell about 800,000 Astras a year and hopes to increase annual production to one million units by 2000.

Adam Opel also said deliveries for the first seven months of 1997 rose 6.6% from a year ago to 712,000 units. Production during the period increased 1.8% to 544,598 units, the company said.

[04] UK August annual retail price inflation rises to 3.5%

The Office for National Statistics said retail price inflation ran at 3.5 percent in the year to August, its highest level since September 1995.

But with a quarter-point base rate rise early in the month forcing mortgage lenders to push up their rates, underlying inflation -- RPIX -- actually fell back to 2.8 percent year-on-year, from 3.0 in July.

The financial markets were less than happy with the figures. The FTSE-100 index of leading shares dropped 40 points to 4,945 in morning trade while government bond futures, gilts, fell 9/32 to 114-27.

Ciaran Barr, UK economist at Deutsche Morgan Grenfell , said they took fright on realising underlying inflation only fell because of weak food prices. 'If you strip out food, this was not a good report.

The markets reacted positively and then sagged as that was taken on board.'

The increase in the all items 12-month rate was largely due to rises in housing costs, said the Office for National Statistics.

This took place as building societies increased mortgage rates following the Bank of England's decision on July 10 to raise the official lending rate for the third successive month by a quarter point to 6.75%.

It does not take into account the fourth rise in rates to 7% which took place in August.

The upward effect was largely due to a 3.2% rise in the mortgage interest payments component, said the ONS. Average mortgage lending rates rose by around 0.22 percentage point in August.

There were also smaller upward effects from charges for leisure services and personal goods and services, as well as prices for tobacco and clothing and footwear.

The ONS also reported a small upward effect on gasoline prices as retailers continued to react to the increase in duty at the budget.

The U.K. target for RPIX inflation is 2.5% and the Bank of England is charged with setting interest rates to achieve that rate.

EBN interactive round-up

[05] Deutsche Telekom Chairman warns German regulators

'I hope that the regulators don't reach a reckless or false decision,' he told German newswire VWD. Sommer added the decision would play a big part in Germany's future as well as that of Telekom on international phone markets.

The German regulatory authority, under the auspices of the Post Ministry, is negotiating with Deutsche Telekom and competitors on the price of leasing the networks for last mile connections. Deutsche Telekom controls almost all access to such connections.

Earlier in the year, the regulatory authority ruled Deutsche Telekom must provide competitors individual, decoupled access to such networks, instead of offering a service package as the only means to gain network access.

Separately, European Union anti-trust commissioner Karel van Miert criticised Telekom's prices for network access as 'much too high,' speaking at an E.U. forum on the common market. He said Telekom was seeking to gain time through legal procedures. 'But now that's over,' he said, 'over, over, over with,' he emphasised.

As regulator, Post Minister Wolfgang Boetsch must now act. Van Miert cautioned that if Boetsch should decide against a ruling which is in line with the E.U. and fair competition, the E.U. commission would intervene.

Sommer further criticised the future regulatory authority, which will be officially activated when the Post ministry is dissolved at year-end, for making public its view on prices.

'I am deeply surprised that future regulators, who have a legal function, would declare an opinion publicly while negotiations are still underway,' Sommer said on the fringes of the forum to VWD.

Further, he praised Telekom's partners France Telecom and U.S.-based Sprint Corp., as being the 'most successful partnership in the world.'

While cross-shareholding between Deutsche Telekom and France Telekom is being discussed, Sommer told VWD he rejects the notion that a cross- shareholding plan could include Sprint. Both Deutsche Telekom and France Telecom each hold a 10% stake in the 'Global One' venture with Sprint.

Sommer also said that the acquisition of a higher stake in Global One isn't planned.

[06] Ford revamps parts unit, preparing to expand outside salesClick here for news from the Frankfurt International Auto show

Ford has been working to revamp the $16.4 billion-a-year auto-parts manufacturing operation, aiming to move it from a predominantly internal to an external business in order to make it more competitive and profitable.

Growth from auto-parts operations has obvious limits unless auto makers can find ways to expand their customer base beyond the needs of their own assembly facilities. Broadening that base also can better position them for downturns within their own sales lineup.

Last year, just 5% of the Ford auto-parts operation's sales came from outside the company. Charlie Szuluk, a Ford group vice president and president of Visteon, said he intends to expand outside sales under the new structure.

In auto-parts manufacturing, the unit is second in sales to General Motors' Delphi Automotive Systems, which has annual sales of $26 billion. Ford's move follows a similar one by GM in 1995 to rename its Automotive Components Group Worldwide as part of a reorganization.

Visteon has 78,000 employees in 74 plants, with operations in 19 countries. Ford said it shut down production for one hour to inform employees of the name change via live satellite broadcast.

In recent weeks, the auto maker has been running ads in major newspapers counting down the days until 'the automotive world takes a dramatic new turn.'

[07] Santer attacks EMU debate among German officials

Santer told the radio station Deutschlandradio that 'the German debate, as it is being carried out, doesn't do justice to the project of monetary union as a whole.'

He added that 'I don't see why we already have to tear the euro apart in words now, in advance, before we have undertaken the efforts to fulfil the (Maastricht Treaty's economic convergence) criteria.'

Members of EMU will be selected in the spring of 1998 on the strength of 1997's economic performance. In recent weeks, a number of prominent German politicians, some of them potential successors to Helmut Kohl as Chancellor, have publicly suggested that the start of EMU be delayed if too many countries fail to meet the Maastricht Treaty's requirements.

Even Deutsche Bundesbank President Hans Tietmeyer, while strongly denying that he was arguing for a delay, said that 'the skies won't fall in' if EMU doesn't start on time.

Santer retorted in the interview that the starting point of EMU was clearly defined in the treaty and that the treaty foresees no delay. He added it was unthinkable that the treaty's text should be altered to allow a delay.

Meanwhile the German Finance Minister Theo Waigel said that the German economy grew between 2.5 and three percent in the second quarter of this year, compared with a year earlier, confirming government forecasts.

'Our growth expectation for the full year 1997 of real growth of 2.5 percent has thus been impressively confirmed,' Waigel said at the start of a speech introducing his 1998 budget to parliament.

[08] US productivity growth rate hits 3-and-a-half year high Data is likely to ease worries about overheating inflation

Productivity outside the farm sector rose more than originally thought in the quarter, increasing a revised 2.7% from an originally estimated gain of 0.6%, the Bureau of Labor Statistics said.

That was the largest quarterly increase in worker efficiency since the fourth quarter of 1993, when the series rose by 2.6%. The largest one- quarter gain on record was 5.9% in the fourth quarter of 1992, according to BLS.

The revision to second-quarter productivity reflected a sharp upward adjustment in second quarter gross domestic product growth. Second quarter GDP was reported as up 3.6%, a rate of growth well above the 2.2% initially estimated by the Commerce Department.

Productivity, which gauges business efficiency by measuring workers' hourly output of goods and services, is a key factor in determining inflation. Gains in productivity allow businesses to boost production at no additional cost, or to maintain steady output at lower costs, making it possible to raise salaries or profits without raising prices.

The growth of non-farm unit labour costs, which figure heavily in the prices of goods and services, was revised down to a 0.5% percent rate, its smallest gain in three years, in the second quarter from the previously estimated 2.4%. In the first quarter, the unit labour cost rise was 3.1%.

Overall business productivity was also revised to up 2.7% from an originally reported gain of 0.7%.

Meanwhile, seasonally adjusted July sales of U.S. merchant wholesalers rose 0.5% to $211.88 billion, the Commerce Department said.

July wholesale sales were 4.0% higher than a year earlier.

The July increase in wholesale sales followed a revised 0.4% rise in June from May. The June rise was originally reported as 0.3%.

[09] Generale Bank posts 16% rise in first half earnings

And the bank's Chairman, Ferdinand Chaffart said there is no logic to a link with Fortis but that the company is interested in an alliance with Banque Brussels Lambert.

Chairman Ferdinand Chaffart said the 'steady and durable growth of net profit' was due partly to a 37% increase in Generale Bank Nederland's net profit and the 11.5% net profit growth by Banque Generale de Luxembourg. Generale Bank's parent company and its Belgian subsidiaries accounted for 46% of the group's first-half profit, he said.

Chaffart said the bank's net result for the second half of 1997 should equal that of the first half barring unexpected events.

Saying that Generale Bank has a 'stand-alone policy,' Chaffart tried to dispel speculation the lender is discussing an alliance with banking and insurance group Fortis.

'Our current referent shareholders are happy with what the bank is doing. The management is satisfied with what we are doing on our own. We see no logic in discussing this sort of subject with Fortis,' Chaffart said.

Despite that policy, however, he said there could be some kind of future link-up with Belgium's second-largest lender, Bank Brussels Lambert.

'We are interested in the 'big Belgian bank,' but there must be enough in built value for all shareholders,' Chaffart said. He declined to elaborate on why the bank would stick to its stand-alone policy vis-a-vis Fortis but not when it came to a potential marriage with BBL.

Communications manager Kathleen Steel said Generale Bank and BBL have had only informal talks about a possible tie. No discussions have taken place since last year, she said.

Steel said it's now up to ING Groep of the Netherlands - which has owns 13.4% of BBL's capital and controls another 6.73% until February 1998 - to make the next move if it's interested in acquiring the bank. ING unsuccessfully tried a take-over of BBL in 1992, but rumours have emerged recently that it may be preparing another take-over attempt.

The possible sale of BBL is focused on two issues, according to Steel: the independence of BBL's management and the stake that ING wants in the lender. In any case, she said, 'We think the next move has to come from ING.'

ING isn't necessarily opposed to a merger between Generale Bank and BBL, but will not reveal just where it does stand on that matter or say whether it's planning to purchase BBL itself.

[10] Campbell Soup to spin off 7 businesses

The soup maker said the head of its U.S. Grocery business, Robert F. Bernstock, would head the new operation after it is spun off. Campbell said it hopes to complete the spinoff by February 1998.

Campbell expects the spinoff to be a tax-free distribution of shares of the new company to its shareholders.

The new company will have two units; frozen foods and grocery.

Campbell said the spinoff will allow it to concentrate on growing its core global businesses; soups and sauces, biscuits and confectionery and foodservice. The company also intends to reduce costs in the core and non- core businesses.

Campbell named Mark M. Leckie president of its U.S. Grocery to replace Bernstock. Leckie was executive vice president and general manager of Kraft Post Cereals unit.

Leckie will be joined by Sally Genster Robling, who was named vice president of marketing for U.S. Grocery. Robling was vice president of special markets.

[11] Iberia's role in British Airways/American link isn't likely to lead to clearance

A report that British Airways and American Air have dropped plans to include Iberia in their proposed alliance to co-ordinate flights and set fares lifted British Airways shares early in the session.

But analysts said the move could just as easily be attributed to a strong showing by U.S. airlines stocks in New York late Monday.

There's still a big gulf between what British Airways and American Airlines are prepared to relinquish to clear regulatory hurdles and the concessions that the European Union Commission, the U.K. and U.S. are likely to demand.

Analysts point out that the E.U. Commission's draft proposal that British Airways and American Airlines relinquish 350 weekly takeoff and landing slots at Heathrow airport was drawn up before the two carriers disclosed plans for a link up with Iberia.

But opposition to the deal isn't seen threatening plans for a code sharing deal with Iberia.

American Airlines denied Tuesday that there had been any plans to include Iberia in the British Airways alliance.

A spokeswoman in London said plans to co-ordinate services between London and Madrid with Iberia were unchanged. The three airlines are working toward an agreement to book passengers on each others flights and make their frequent flier programs reciprocal.

American Airlines also said it continues to study the purchase of equity stakes in Iberia.

'Saying Iberia won't be a part of the alliance is a long way from saying (American Airlines and British Airways) aren't interested,' said Goldman Sachs airlines analyst Guy Kekwick.

On the contrary, he said the uncertainty surrounding the British Airways alliance means American is all the more likely to maintain its ties with Iberia.

Both American and Iberia have strong links with Latin America, and the U.S. carrier is looking to feed more traffic to the continent from its Miami hub. The talks also centre on American purchasing Iberia's 10% stake in Argentina's Aerolineas Argentinas and Austral.

'In the event the deal with British Airways doesn't go through, American will still have a partner in Europe where the cultural links, although not as strong as with BA, are still good,' Kekwick said.

American Airlines and British Airways might have preferred to delay the link up with Iberia to avoid complicating regulatory approval of their wider ranging alliance. But analysts say the timing was driven by Iberia's privatisation agenda.

The Spanish government is keen on securing a tie up with a major carrier, which it believes will make Iberia more attractive to investors. There was a danger that if American waited too long, Iberia might link up with KLM Royal Dutch Airlines.

Since American and British Airways announced plans for a code-sharing agreement with Iberia, KLM has begun talks with Italian state-owned carrier Alitalia.

KLM spokesman Hans Leijte said it was still unclear what exactly Iberia's role will be in relation to the BA/AA alliance. He therefore couldn't comment on what this news meant for KLM. 'The game is still fully in progress,' he said, 'and in the meantime, it's impossible to draw conclusions.'

Allison Bisbey and Simon Philipse, Dow Jones Newswires

[12] Holderbank's first half profit falls 7.4% to $175 million

The company attributed the net profit contraction to the fact that the preceding year's interim results included extraordinary earnings from the sale of Boergardts, Germany, and the divestiture of the minority block in ENCI, Netherlands, which together added 84 million Francs net to earnings.

On top of that, in 1996 the cement group benefited for the last time from a lower tax rate at Holnam Inc., U.S., thanks to tax loss carryforwards, according to Holderbank.

However, Holderbank said it still expected consolidated net profit for the full year of 1997 to exceed 1996 earnings at SF646 million, provided that the major currencies of importance to the group don't weaken against the Swiss franc.

Furthermore, Holderbank Chairman and Managing Director, Thomas Schmidheiny, said 'for the future, Holderbank expects a substantial and sustainable additional profit' coming from an ambitious modernization program, which in the first half of 1997 alone saw an investment of about 400 million Francs.

[13] Vendex first-half profit surges to $399 million on extraordinary item

Net profit mushroomed to 813 million guilders ($399.9 million) from 151 million in the year-ago period, swollen by 429 million of extraordinary income from selling a minority Vedior stake.

Property related income, acquisitions and organic growth from the retail group's core business added to the first half performance, and would contribute to higher full year net, Vendex said in an upbeat statement with results.

'The operating result excluding income from the sale and redevelopment of property will be at least equal to that booked in the first half of last year. The income from the sale and redevelopment of property will be significantly higher than last year,' Vendex said in a statement.

Operating income excluding the 429 million net book profit on June's sale of some 20 percent of Vendex service arm Vedior, and the 99 million guilders result from the redevelopment and sale of real estate more than doubled to 223 million guilders.

Vendex Chairman Jan-Michiel Hessels told a news conference the results were satisfying. 'In the first quarter, results were encouraging. In the second, they were good,' he said.

Overall sales were up 36 percent to 7.8 billion guilders, while autonomous sales growth in retail added 5.8 percent and that in services climbed 6.5 percent.

Hessels said the performance of Vendex Food, where turnover rose 6.1 percent to 2.5 billion guilders and operating income climbed 22 percent to 62 million guilders, had been sound in all formats, with the Edah chain giving excellent results.

He said losses suffered in Belgium had been reduced. 'It's going in the right direction. We're working very hard to have Belgium back in the black in the second half,' he said.

Department stores saw an eight percent increase in sales to 802 million guilders - the operating loss stood at nine million guilders from last year's 11 million.

Hessels said fashion sales growth at its mid-range department stores V&D of 16 percent had outstripped the four percent market growth.

EBNinteractive round-up

[14] WorldCom's latest acquisition turns the Mississippi company into an internet giant

It is WorldCom, a Jackson, Miss., telephone company that in a short year has quietly amassed ownership of an enormous chunk of the global computer network. On Monday, WorldCom confirmed its acquisition not only of CompuServe Corp.'s high-speed networking division but also the pioneering Internet unit of America Online Inc., ANS Communications.

Those deals come on top of WorldCom's $14.4 billion acquisition last year of MFS Communications, a local-phone company that had just bought UUNet Technologies Inc., another operator of a big Internet 'backbone.'

The acquisitions have turned WorldCom into an Internet giant, much as Theodore Vale lashed together small telephone networks around the country a century ago to form AT&T Corp. and Craig McCaw bought up scores of small cellular-phone carriers over the past decade to build giant McCaw Cellular, now AT&T Wireless.

All told, WorldCom has strung together nearly 50 acquisitions in little more than a decade. And the spending isn't over, vows Bernard J. Ebbers, WorldCom's president and chief executive, 'as long as we're alive.'

Ebbers hands much of the credit for Monday's three-way deal with CompuServe owner H&R Block Inc. and AOL to John Sidgmore, UUNet's president and chief executive. Sidgmore's star is so ascendant at WorldCom that he has also been named WorldCom's chief operations officer and vice chairman.

The 46-year-old Sidgmore is on a tear. Though he entered the Internet industry only three years ago, he has emerged as one of its consummate deal makers. Under his leadership, he turned the fledgling Internet-access company into a multimillion-dollar machine. He also has done what relatively few technology companies have managed in the past decade: He emerged from a relationship with software giant Microsoft Corp. a richer, unscathed man.

UUNet provides the underlying structure for Microsoft Network, Microsoft's on-line service. And while Microsoft remains one of Sidgmore's biggest customers, he managed Sunday to land another enormous source of revenue: AOL, which has entered into a five-year agreement with WorldCom to use its lines to link AOL members to the service. WorldCom can now claim the two largest commercial on-line services as its customers, even though they are the fiercest of competitors.

'It was my manifest destiny to own both of those customers,' says Sidgmore. 'I killed myself to get this (AOL) deal.'

For months both AOL and WorldCom were eyeing the CompuServe business, trying to figure how to acquire the lagging service from H&R Block. AOL's early attempts to purchase the company in a stock swap were foiled last spring when Congress closed a tax loophole that would have benefited Block. WorldCom, for its part, didn't want CompuServe's consumer on-line business, which was losing subscribers.

Jared Sandberg, Wall Street Journal

[15] US Securities and Exchange Commission authorises the transmission of 'roadshows' for securites offerings over the internet

The SEC's response to a request for guidance from Net Roadshow Inc. represents a big step in the commission's effort to interpret decades-old securities laws in the age of on-line trading and publishing. The presentations would be available only to large investment operations and not to the general investing public.

Roadshows are oral presentations that corporate officers and underwriting investment banks make to promote their offerings to institutional investors, typically in financial centers around the country over a period of weeks.

The presentations aren't covered by securities laws governing the distribution of an offering's prospectus materials because they are made orally. Broadcasts on television and radio, on the other hand, are regarded as prospectuses and are subject to strict SEC registration requirements.

Transmitting roadshows on-line doesn't fit neatly into either category. So the SEC's division of corporation finance decided to allow Internet roadshows with certain conditions designed to keep them as close as possible to one-time oral presentations.

'The premise is that it will broaden the audience substantially, not only in the U.S. but internationally,' Brad Hammond, Net Roadshow president, said in an interview. 'This is to supplement a live roadshow, not to replace it.'

The SEC's response came in the form of a so-called no-action letter, in which the commission said it wouldn't recommend an enforcement action based on the terms the company described in a letter to the commission in July.

The SEC added, however, that it may revise its position in the future 'since regulatory responses to legal issues raised by technological developments may evolve.' The no-action letter was released by the SEC yesterday.

Net Roadshow said it planned to contract with the underwriting investment banks that sponsor the roadshows to distribute the presentations over the Internet only to brokerage houses, money managers and other institutional investors who would normally attend.

Those investors will be allowed only to view the roadshow using an access code and they must agree not to download the material to their own computers.

The investors will also be urged to read the offering's preliminary prospectus, which will be available at Net Roadshow's Web site. A log will be maintained of who received the access code, and the code for each roadshow will be changed daily. Each investor will be allowed to view a roadshow for one day only.

[16] The Frankfurt Auto Show

Volkswagen

Volkswagen said group worldwide sales rose 9.8% to 2,923,000 vehicles in the first eight months of 1997.

In the same period, car deliveries rose 6.4% to 1,843,000 units, the best result for the period in VW's history, it said. VW management board member Robert Buechelhofer noted that VW's global market share stood at just over 10%. He said pan-Europe sales rose 7.7% to 1.908 million vehicles and sales in eastern Europe, where the carmaker said it was the market leader, were up 34%. North American sales rose 10.9% to 177,000 vehicles.

'This is the best result to date for this period in the history of the Volkswagen brand,' Buechelhofer said, noting a sales increase in Asia of 24% and a 12% gain in South America.

In Europe, Buechelhofer said VW results were virtually consistent with the 1996 period despite the Golf model change and launch of the new Passat saloon.

However, the carmaker dismissed market talk it was considering a cooperation with Chrysler as pure speculation.

'This is pulled out of thin air,' said Buechelholfer.

Audi

Meanwhile Audi, a subsidiary of Volkswagen, delivered 370,000 vehicles in the eight-month period, a rise of 15%. That was also a record for the period.

The German carmaker said it expected to meet its sales goal of 20 billion marks in 1997 and that its shipments this year should surpass the level of 490,000 units achieved in 1996. Audi reiterated that it expects sales of its Audi A6 to top 60,000 in 1997.

'By the end of the year we will as planned probably have more than 60,000 new Audi A6s in front of our customers' houses,' said Franz-Josef Paefgen, chairman of the board of management of Audi.

So far this year, Audi has shipped more than 25,000 A6s, Paefgen said.

He noted a 27% increase in Audi sales in North America due to strong demand for the A4 model.

And at Spanish-based SEAT, VW said sales were up 12.2% at 268,000 vehicles, primarily from sales in Europe.

Skoda

Sales at Skoda, based in the Czech Republic, rose 28% to 219,000 vehicles, with growth split almost equally between western and eastern Europe.

The VW subsidiary said it expected to meet its sales goal of 20 billion marks in 1997 and shipments this year should surpass the 490,000 units achieved in 1996.

Turning to strategic issues, VW said it was not interested in making an acquisition at the moment and its planned rights issue was simply aimed at raising its capital ratio.

'We are very satisfied with our four brands and I don't see any need for an addition,' chief executive Ferdinand Piech told a news conference.

Asked whether VW would be interested in buying a carmaker, for example Porsche, VW chief financial officer Bruno Adelt said: 'VW opted to use the capital rise measure due to market conditions.'

Porsche

Chairman of German sports car manufacturer Porsche, Wendelin Wiedeking, said he expects further increases in earnings in the company's fiscal year.

Wiedeking extended yesterday's optimistic forecast for the fiscal year ending July 31, 1998, saying he expects 'a further significant improvement in our results' for fiscal 1998.

Yesterday, Porsche had said it expected deliveries in its current fiscal year to rise to at least 38,000 units from 32,300 in fiscal 1997, and group sales to increase to 4.5 billion Deutsche marks from a preliminary 4 billion marks the previous year.

BMW

BMW is returning to Formula One racing and will supply engines to the British team Williams starting in 2000.

BMW chairman Bernd Pischetsrieder confirmed earlier media reports and said that the company had been thinking about returning to Formula One for some time.

Pischetsrieder and other BMW officials did not say how long the partnership with Williams was planned for. But insiders said it was believed to be a five-year deal that would cost BMW about 200 million marks ($110 million) a year.

BMW provided engines for several Formula One teams between 1982 and 1987, scoring nine victories in 91 Grand Prix races. Nelson Piquet won the Formula One drivers championship in 1983 in a turbo-charged Brabham-BMW.

By returning to Formula One, BMW will expand its rivalry with Mercedes-Benz, which supplies engines to McLaren, winner of two races this season with driver David Coulthard.

Opel

German car maker Adam Opel, the Germany-based arm of General Motors, said that deliveries for the first seven months of 1997 rose 6.6% to 712,000 units.

Opel also said that production during the period increased 1.8% to 544,598 units.

Group sales for the first 6 months of 1997 rose to 15.6 billion Deutsche marks, up 1.1 billion marks from 1996.

Rover

Rover chairman Walter Hasselkus said that he was 'very confident indeed' that the carmaker will achieve its goal of returning to profit by the year 2000. Rover is a wholly-owned subsidiary of Germany's BMW, and has lost money ever since BMW bought in 1994.

'Everything is in place to achieve profitability at the end of the century, ' said Hasselkus.

The introduction of the Freelander - the smallest vehicle yet in its Land Rover sport utility vehicle series - was 'very significant' for Rover's profitability goals, Hasselkus said, adding he was convinced the new model would be a success.

He predicted 'several ten thousands of the cars' would be produced and consequently sold but did not give a more precise forecast.

Asked whether Rover saw Mercedes-Benz's M-class sport-utility vehicle, built in the US and soon to be launched in Europe, as a threat, Hasselkus said:

'We never underestimate Mercedes-Benz but when it comes to 4x4 business...it is Land Rover territory. We take it very seriously but we are not frightened stiff.'

But of the projected recovery the Chairman said, 'Admittedly it also depends to a certain extent on the exchange rate. If the pound should stay very strong for a long period of time it could become a little bit difficult but otherwise we are very confident everything is in place.'

However, Hasselkus said Rover would not respond to the pound's strength by reducing the specification on its vehicles to make them cheaper.

'At the end of the day you have to position your car with the proper specification.

Volvo

Swedish carmaker Volvo said it would achieve its target of selling 230,000 cars in Europe in 1997.

'We set ourselves the goal of selling 230,000 cars in Europe in 1997. We will achieve that goal. That means around 20,000 more cars sold compared with last year,' said Volvo's European marketing director Hans-Olov Olsson.

Volvo sold 216,100 cars in Europe in 1996.

He said much of the improvement was due to sales of the new S/V40 series. 'We stretched our original sales target by 5,000 cars and we see now that we will manage that,' Olsson said.

Profit margins on the 40-series were much better than on the earlier 400 series, he added. The 40 series is currently selling at an annualised rate of around 115,000 cars.

SAAB

Saab Automobile said the company had received orders for 15,000 of its new 9-5 model in the first few days since its commercial launch.

The 9-5 is destined to replace the 9000 series, used mainly by company executives and targeted at the prestige end of the car market, as distinct from the sporty 900 series.

'This has been Saab's most successful model launch ever. We have so far received 15,000 orders for the car,' chief executive Robert Hendry said. Indeed the launch success of the 9-5 model was pressuring the company's production capacity, Saab Automobile spokesman Olle Axelson said.

Saab's goal was to sell 70,000 of the model in 1999.

'This includes sales of the station wagon,' said Axelson.

Chrysler

Chrysler aims to help the developing world with advice about plastics, after the No. 3 US auto maker announced it has come up with a way to build a recyclable five-seat passenger car mostly out of the material.

It would require one-third the labour and investment of conventional small cars, travel 50 miles on a gallon of gasoline, and sell for half the price of a conventional subcompact.

Chrysler's new vehicle is bubble-shaped but will look familiar to Europeans, resembling the classic post-World War II Citroen Deux Chevaux, which was in fact the inspiration for Chrysler's Composite Concept Vehicle.

However, the vehicle doesn't meet US or European crash standards. Standards aren't as high in countries where the CCV is being considered, but Chrysler says it wants to make the CCV more crash-resistant.

Chrysler calls the CCV a breakthrough. 'Before now, you could have a lightweight car made of expensive, exotic materials, or you could have an affordable car, but you could not have both,' says Bernard Robertson, Chrysler's vice president of engineering technologies. 'The goal for us was to try to do a vehicle at half the variable cost of a subcompact and target it to markets where people are walking or riding bicycles.'

Chrysler executives have 'entertained the idea' of distributing the car overseas no earlier than 2000, Robertson says, but no formal plan is expected until a series of safety and manufacturing concerns are resolved. A test fleet is scheduled to be produced by the end of this year.

[17] Economic and Corporate Briefs

Czech construction output declined 0.5% in July from July 1996, and dropped 1.1% in January through July from the same period of the last year, the Czech Statistical Office reported, citing data in constant 1994 prices. In current prices, the construction output rose 10.8% in July from July 1996, and rose 9.8% from the beginning of the year through July, compared with the first seven months of last year, the CSU said. The CSU didn't release any commentary on the construction output data.

Dutch Retail sales rose an unadjusted 6.5% in July, compared with the same month a year ago, the Dutch Central Bureau for Statistics said. The unadjusted figures don't compensate for price changes during the reported period. After adjustment for an average 1.2% rise in prices, the CBS said the volume of retail sales in July rose by 5.2% from a year earlier. The CBS said consumer confidence in July led to a strong increase in sales in the non-food sector in particular, as was already the case in the first half of the year.

Volvo's Volvo Car Corp. halted production at its assembly plant in Thailand because of the turbulent economic conditions and the unstable currency. 'To begin with, the plant will be shut for 10 weeks, and then we will have to evaluate the situation again,' Volvo spokesman Ingemar Hesslefors told Dow Jones Newswires. About 120 people will be temporarily dismissed.

RJB Mining reported a pretax profit of £87.2 million ($139.5 million) for the first half year, against last year's first half profit of £86.1 million, despite a drop in coal sales. The figures were in line with expectations. But RJB cited improved margins due to cost reductions and improved operating efficiencies as some of the reasons behind the maintained profit. RJB unveiled an increased interim dividend of 10.0 pence, up from 8.0 pence on last year's interim, despite the flat profit.

Biocompatibles International said that its first half loss widened to £11.4 million ($18.2 million), from £8 million a year ago. The UK healthcare products company also said talks with Cordis, a unit of Johnson & Johnson of the US, over the licensing of Biocompatibles' products are continuing but no definitive agreement has yet been reached. Biocompatibles said discussions with Cordis now are focusing on the use of phosphorylcholine coatings made by Biocompatibles that incorporate a therapeutic drug. 'Outline terms have been proposed and discussions are continuing,' Biocompatibles said.

BBA Group reported an 11% rise in its pre-exceptional earnings to £80.2m ($128.3m), although excluding currency factors the figure would have jumped by 18%. Post exceptional profit slipped to £78.3m following a £1.9m restructuring charge. Commenting on the results Chief Executive Roberto Quarta said, 'BBA's interim results demonstrate the strength of the group's underlying growth, averaging 6% across our core businesses.' BBA has recommended an increase in its interim dividend to 2.4 pence from 2.1 pence per share.

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

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