European Business News (EBN), 96-11-27

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

Page last updated November 27 1605 CET

CONTENTS

[01] French truckers reach deal on retirement, but hours and wages remain sticking point

[02] T&N devises plan to limit its future liability to asbestos claims

[03] VW shares drop 5.6% on U.S. court ruling

[04] U.K's SFO launches Wickes inquiry

[05] U.S. durable goods rise above expectations

[06] Eurotunnel passenger traffic may resume partially next week

[07] Netherlands Ahold 1996 net profit 'Significantly Higher'

[08] Virgin Express discusses $1.1 billion deal with Boeing

[09] British Biotech losses widen, but pancreatitis treatment is ready for the market

[10] Japan's confirms view that tight money policy will stay in place

[11] KLM Royal Dutch to cut destinations as part of restructure

[12] French business leaders see improved business environment

[13] UK global trade gap expands in September

[14] EU probes Sabena, Swissair & Austrian Air cooperation

[15] Tate & Lyle 1996 earnings drop 11%

[01] French truckers reach deal on retirement, but hours and wages remain sticking point

A spokesman for the Force Ouvriere union told Dow Jones News Services that the agreement didn't yet satisfy other demands, notably a sizable wage increase.

He said the parties had agreed to retirement at 55 instead of 60, and that truckers would receive 75% of their last wages between those two ages.

LCI news television said both sides hope to reach an agreement on better hours and wages during discussions today.

The strike is entering its 10th day amid signs that small wholesale businesses are beginning to be severely hurt by the protesters, who are blocking some 180 main roads in France and numerous oil refineries.

A radio report said that fishermen were getting only 20% of regular prices on their catch because most wholesalers didn't think they could transport the fish.

Pilots for Air France and its domestic unit, Air Inter, started a two-day strike that will reduce flights by at least 50%.

Railway workers at at least one depot are on strike in support of the truckers.

As the strike entered its 10th day, truck drivers were manning more than 200 roadblocks across the provinces, sealing motorways, ports, borders and fuel depots to back their demands for a 10 percent pay rise, shorter hours and early retirement.

Talks were set to resume at 1600 CET.

[02] T&N devises plan to limit its future liability to asbestos claims

The car-parts maker said it will take a £373 million ($623 million) charge for the full year, in addition to a £50 million provision that was taken in the first half. T&N said it will seek approval to reduce the nominal value of its shares to offset the deficit on its reserves so dividends can still be paid.

'The directors believe the plan will significantly reduce the uncertainty for shareholders, enabling the fundamental worth of the group's businesses to be better reflected in the market value of T&N,' the company said.

The £373 million provision is made up of two elements; £323 million to cover the present value of possible future claims and £50 million to cover certain past claims.

If the defined future claims exceed a present value of £380 million, an insurance policy will take effect and provide £500 million in coverage, the company said.

The insurance is being provided by a consortium of reinsurers including Centre Reinsurance, part of Zurich Group, Munich Reinsurance, and the European International Reinsurance unit of Swiss Re.

[03] VW shares drop 5.6% on U.S. court ruling

The shares dropped 37.75 Deutsche marks to close at 639 marks ($420).

The ruling came in the long-running suit that charges Jose Ignacio Lopez de Arriortua, other VW managers, the company and its North American unit with industrial espionage.

The ruling is seen putting pressure on Germany's largest car maker to reach an out-of-court settlement with GM to avoid an embarrassing and costly trial. The judge's decision opens VW to potentially higher damages in a jury trial verdict and paves the way for a trial to start next year.

Lopez is under investigation in the U.S. and Germany for allegedly taking along secret documents when he abruptly left GM's Opel unit in 1993 and joined the management board of VW in charge of production.

GM claims the stolen documents, which included information on future product plans, parts prices and manufacturing techniques, unfairly allowed VW to reduce its costs, causing GM unspecified financial damage.

Under the racketeering law, known as RICO, GM has claimed that Volkswagen, Lopez, VW chairman Ferdinand Piech and other top executives participated in a conspiracy to steal the documents and transport them to Germany.

In addition to the civil lawsuit, Lopez's lawyer said he expected German prosecutors to file criminal charges against his client by the end of November.

A U.S. grand jury is also investigating Lopez and a Frankfurt appellate court last Friday approved sending documents from the German probe to U.S. prosecutors.

[04] U.K's SFO launches Wickes inquiry

In a statement, the SFO said the present management of the company is cooperating fully with the inquiries. The probe is being carried out in conjunction with the Metropolitan Police. A Wickes spokesman said he couldn't comment on which directors are under investigation.

Wickes, which operates the U.K's third-largest home-improvement retail chain, has been plagued with problems since its shares were suspended in June. The group's procedures for accounting for discounts from suppliers are suspected to be the key problem.

Shortly after the suspension, Wickes chairman and chief executive Henry Sweetbaum resigned and the group launched an inquiry into its accounts.

Wickes' stock remains suspended at 67 pence a share. 'The company intends to cooperate fully with these enquiries and no further comment can be made at this time,' said a Wickes spokesman. 'We haven't named anyone,' said a spokesman for the SFO. He said the investigation is focusing on 'former directors.'

A spokesman for Wickes said that in addition to Sweetbaum, the group's most recent executive directors include administration director Michael Corner and finance director Stuart Stradling, who brought the matter to the attention of the board. Stradling replaced Trefor Llewellyn in 1995.

[05] U.S. durable goods rise above expectations

September durable goods orders were revised to up 4.6% from up 4.9%.

The October increase was led by a 17.3% increase in orders for electronic and other electrical equipment. This category includes communications equipment and other items such as radios, televisions and refrigerators. It does not include computer equipment.

The October increase in durable goods orders was sharply above expectations. A Dow Jones News Services' survey of 14 economists published a day before the official report expected a 2.0% drop for October durable goods orders.

Orders for defence capital goods fell 8.4% last month after rising 7.4% in September.

[06] Eurotunnel passenger traffic may resume partially next week

The news came as five members of the Channel Tunnel Safety Authority met Eurotunnel executives to discuss whether the north tunnel would be safe to carry passengers on its own while the damaged south tunnel is out of action.

He said the delay in the reopening since the Nov. 18 fire was in part to check that security measures in case of a passenger evacuation were not compromised.

Limited freight runs resumed last week through the intact eastbound track of the tunnel.

After surveying the damage on Tuesday, Eurotunnel assistant director Alain Bertrand said repairs would take three to six months. Ponsolle said the damage was estimated at 300 million to 500 million francs ($60 million to $100 million).

Eurotunnel co-chairman Patrick Ponsolle said the tunnel fire would not affect a plan to restructure the company's debt.

[07] Netherlands Ahold 1996 net profit 'Significantly Higher'

Ahold said the sharp rise in net earnings is mainly the result of its acquisition earlier this year of U.S. supermarket retailer Stop & Shop. Ahold said there was also continued growth in operating results in all operating areas. Earnings per share in the third quarter amounted to 0.93 guilder, compared to 0.81 guilder in the third quarter of 1995.

Over the first nine months of the year, Ahold said its earnings per share amounted to 2.98 guilders, against 2.62 guilders in the same period a year earlier.

For the full year of 1996, Ahold said it expects net earnings to be 'significantly higher' than in 1995, and noted that the acquisition of Stop & Shop is expected to 'positively influence the further growth of earnings per share.' In September, Ahold's forecast was more modest, saying it expected consolidated net earnings for 1996 to show a 'further increase' over 1995.

The results were at the low end of expectations, but the share price recovered some of the losses it made earlier in the day. At 1420 GMT Ahold shares stood 1.90 guilders lower at 104.40 guilders, while the 25-share AEX index was 6.72 points lower at 620.38. Earlier in the session, Ahold's shares had dropped to a low of 102.90 guilders.

[08] Virgin Express discusses $1.1 billion deal with Boeing

The carrier is also talking about fleet expansion with Europe's Airbus Industrie and McDonnell Douglas, but 'clearly Boeing is the leading contender,' Jonathan Ornstein, Virgin Express's chief executive officer, told The Wall Street Journal Europe. Virgin Express's current 13-plane fleet consists entirely of 737s.

Ornstein said in a phone interview that a key factor in Boeing's favour is an agreement between Virgin Express and Sabena, under which the Belgian carrier -- whose narrow-body fleet is mostly 737s -- performs maintenance for Virgin Express. In addition, he said, the 737-700 offers a range that is suitable both for Virgin Express's budget flights within Europe and its charter business to places like Kenya.

Virgin Express's fleet-expansion strategy underlines both the growing importance of no-frills airlines in Europe and the strengthening ties between Virgin Express and Sabena. Ornstein said the two carriers are looking at ways to cooperate in fuelling, ground operations and catering.

Although Virgin Express is talking to Boeing about new 737s, Ornstein cautioned that the carrier is also considering the used-aircraft leasing market as an alternative. Boeing and Airbus are rapidly boosting production of new aircraft because of aggressive fleet overhauls by carriers such as AMR's American Airlines and USAir Group, and there are signs that prices of used aircraft are therefore weakening, he said.

'A few months ago, 737-400s were leasing at $280,000 to $290,000 a month,' Ornstein said, 'but we just had an offer at $255,000.' If such a trend continues, he said, the current relatively attractive pricing of new aircraft will disappear.

The list price of the 737-700 is between $39 million and $46 million, depending on equipment options, though airlines routinely pay significantly discounted prices.

Virgin Express was formed earlier this year when Branson took over Brussels- based Eurobelgian Airlines. Virgin Express has expanded its low-fare service to routes such as Brussels-Copenhagen and Rome-Barcelona. Last month, it agreed to operate Sabena's routes between Brussels and London's Heathrow Airport.

That service, Ornstein said, has seen a 'boom' since Nov. 19, when the Eurostar passenger-train service linking London with Brussels and Paris was indefinitely cancelled because of a fire in the Channel Tunnel.

[09] British Biotech losses widen, but pancreatitis treatment is ready for the market

Phase III, or late-stage, testing on the drug, a treatment for acute pancreatitis, has been successfully completed, and application to bring the drug to market in Europe will be made in the first quarter of 1997, the company said. The company also gave a brand name to lexipafant: It's to be marketed as Zacutex.

The bullish news was part of the company's latest earnings statement, which showed pretax losses doubling to £8.1 million ($15.1 million) in the fiscal second quarter. For the first half, ended Oct. 31, the company's pretax loss expanded to £16.1 million from £11 million the year earlier.

[10] Japan's confirms view that tight money policy will stay in place

While the tankan suggested business sentiment will improve three months from now, the pace of improvement will remain very moderate, illustrating the weak momentum of Japan's current economic recovery, analysts said.

They also voiced some concerns that sentiment may in fact deteriorate by the time of the next tankan release in February, when companies may start to adjust ahead of an expected consumption tax hike in April and the national budget for the new fiscal year beginning April 1.

The tankan's main business condition diffusion index for big manufacturers - the percentage of companies seeing better conditions minus the percentage seeing worsening conditions - rose to minus three in November from minus seven in August. The Bank of Japan said companies expect the main diffusion index to improve to minus one by February.

'The tankan confirmed no change in monetary policy for the next nine to 12 months,' says Tetsufumi Yamakawa, senior economist at Goldman Sachs (Japan).

While analysts say they don't expect the economy's recovery trend to be reversed, they cite slower growth in corporate sales and pretax profits as signs that the momentum of the private sector-led recovery may be slackening.

'The general impression is that economic recovery is continuing and there are some bright spots such as a rise in capital investment plans,' says Tamotsu Yasuda, manager in the treasury & investment division at Tokyo- Mitsubishi Bank. 'But if you look at the details, they aren't necessarily all that strong.'

In the tankan, the automobile industry showed the largest improvement in sentiment - 14 percentage points - among non-basic material industries in the major manufacturers' sector.

Mineko Sasaki-Smith, chief economist at CS First Boston (Japan), points to the profit outlook of major companies as another sign that the economy isn't picking up speed.

While big manufacturers' pretax profit growth projections for the current fiscal year begun April 1 show a slight upward revision at 14.1%, the level is sharply lower than the actual 35.8% growth recorded in the previous fiscal year, she says.

Likewise, pretax profits for big nonmanufacturers projected at 8.1% for the current fiscal year are about half of the 16.4% growth seen in the previous fiscal year.

'The outlook for corporate earnings remains quite moderate, which is good news for bonds but unlikely to boost stock prices much further from current levels,' Sasaki-Smith says.

[11] KLM Royal Dutch to cut destinations as part of restructure

The Dutch carrier KLM also plans to outsource some of its flights in Europe so as to free up its regional City Hopper subsidiary which it hopes to deploy as a feeder plane that will bring passengers into KLM's hub airport, Schiphol.

KLM hopes the move will bring more passengers to its more profitable European and intercontinental flights. In the future, KLM's Dutch partner, the Maastricht-based Air Exel Commuter, will take passengers from Eindhoven to London Heathrow or Paris' Charles de Gaulle Airport. This will be done so that KLM can improve connections on the City Hopper to bring passengers from places like Malmo, Sweden to Schiphol and then on to Toulouse.

[12] French business leaders see improved business environment

The index for production outlook in November stood at minus 21, compared with minus 23 in October. That figure is the difference between the percentage of businesses believing production will improve (a positive value) and the percentage believing it will deteriorate (a negative value).

Business leaders were the most pessimistic concerning the automobile sector, which has suffered since the end of a government incentive program which expired at the end of September. The business leaders said they see continued weakness in the sector over coming months.

Intermediate goods activity rebounded in recent months, business leaders said, according to Insee. Over coming months, that rebound is expected to slow, indicating moderate sector growth, Insee said.

The professional equipment goods sector remained somewhat weak over the past three months, the business leaders said. While the production outlook is expected to weaken slightly further over coming months, it should remain at reasonable levels.

Consumer goods production, on the other hand, strengthened over the past few months, with order books well filled, particularly by foreign orders.

Business leaders see the growth in the sector continuing over the coming months.

[13] UK global trade gap expands in September

The global deficit in September compares with a downwardly revised £568 million in August. The expansion came as import growth of 4.6% outstripped export growth of 2.4%.

The provisional, seasonally adjusted deficit was narrower than the £1.05 billion shortfall economists were expecting. The Office for National Statistics said the deficit in the third quarter was the narrowest since the first quarter of 1995, adding that the trend in the deficit is narrowing.

The merchandise trade gap with countries outside the European Union narrowed to a seasonally adjusted £424 million ($708 million) in October from a downwardly revised £805 million in September as exports rose 6.2% and imports fell 0.2%, the Office for National Statistics said.

The shortfall is almost half the £800 million economists were expecting. The September shortfall was previously estimated at £851 million.

The Treasury noted that in Chancellor of the Exchequer Kenneth Clarke had said in his budget speech that 'exports were performing very well.' A spokesman added: 'These figures confirm that.'

[14] EU probes Sabena, Swissair & Austrian Air cooperation

E.U. Competition chief Karel Van Miert informed his fellow Commissioners Wednesday that the code-sharing and other arrangements between the three carriers appear to 'substantially' restrict competition on several routes.

In a document Van Miert presented to the Commissioners, Van Miert's services state that the evidence of antitrust activity is enough to warrant an inquiry.

When the British Airways/American Airlines probe was announced earlier this year, E.U. officials announced their intention of looking into other existing cooperation agreements involving E.U. carriers.

[15] Tate & Lyle 1996 earnings drop 11%

The rising price of maize couldn't be passed on to consumers, the company said, causing heavy pressure on its Staley unit in the U.S.

Chairman Neil Shaw said other parts of the business made good progress and an ambitious investment programme was continuing.

The higher raw-materials prices knocked Staley's earnings in half, but the unit still 'contributed significantly' to group profit as a result of cost reduction measures taken in recent years, said Tate & Lyle.

Operating profit in North America, the geographical area that accounts for the largest slice of Tate & Lyle's sales, fell 32% to £166.2 million on a 12% increase in sales to £1.9 billion.

But a recovery of the U.S. sugar market helped profits in the fourth quarter, the group said. The selling price of white sugar increased following a weak U.S. beet crop, which reduced supplies. Raw cane sugar costs fell following increased availability of cane raw sugar due to increases in the import quotas. Both of these factors helped margins said the group.

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

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