European Business News (EBN), 96-11-29

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

Page last updated November 29 1545 CET

CONTENTS

[01] VW accepts Lopez resignation, effective immediately

[02] French strike seen ebbing as owners relent

[03] German public broadcasters to offer digital TV without fees

[04] Waigel blasts foreign criticism of German monetary policy

[05] Northern Electric expects fiscal 1997 profit to drop at least 26%

[06] Samsung hopes to reopen Fokker negotiations

[07] Hochtief issues profit warning for the full year

[08] Boeing may hire McDonnell Douglas to supply design and testing services

[09] KNP clears clears potential obstacle to TNT takeover

[10] Nine former directors face court over Baring's failure

[01] VW accepts Lopez resignation, effective immediately

The resignation, which was offered at the beginning of the week, comes in the wake of a U.S. court ruling that General Motors of the U.S. can invoke federal racketeering laws in its three-year legal battle with VW over alleged industrial espionage.

'The supervisory board, in today's meeting, responded to Mr Lopez's wish and agreed to the end of his contract effective November 29,' the company said.

Volkswagen praised Lopez's qualifications as an engineer and his charisma and wished him success in future ventures.

GM, Lopez's former employer, accused him of stealing secret documents on purchasing and car production plans when he moved to VW in March 1993.

GM's German subsidiary Adam Opel had demanded VW fire Lopez, apologise publicly and pay compensation in return for an out-of-court settlement. But following Lopez's departure the German operating arm of General Motors gave notice to Volkswagen that the resignation of VW board member Jose Ignacio Lopez de Arriortua will in no way solve the bitter legal battle between the two global automotive giants.

'The resignation of Lopez, which was more than three years overdue, can't compensate our company for the substantial damages it has incurred during that time,'' Ruesselsheim-based Adam Opel AG said in a statement.

[02] French strike seen ebbing as owners relent

The leaders said they would take agreements they made with the companies to the truckers, who have blocked roads throughout France and crippled transportation and industry and created gas shortages, for their approval. 'We are going to return to our representatives, militants, to our workers who are at the blockades. We will present them with the documents and ask them to appreciate the advances made after the 12 days of this battle,' explained Claude Debons, deputy secretary general of the CFDT, the major trucker union.

The only union that was not favorable was the CGT, which said that 'nothing had advanced' in the realm of salary, but that other important progress had been made. The unions and the trucking companies made agreements with the help of the government Friday afternoon on all their concerns, including such sticking points as salaries and paid work hours.

[03] German public broadcasters to offer digital TV without fees

According to The Wall Street Journal Europe, the two networks said the electronics industry has agreed to develop an open decoder technology that would allow viewers to enjoy the advantages of digital television without paying for the programs. The decoder boxes, which would decode digital TV signals but wouldn't require the sophisticated technology needed to unscramble images for paying customers only, would also be cheaper than the decoders currently sold by Kirch Group's digital pay-TV unit.

ARD and ZDF said they aren't planning to enter the pay-TV business, or to build the decoder themselves. 'Digital television is much more than just pay-TV,' said a spokesman for ARD in Munich. 'We feel that digital TV offers a lot of opportunity even in the free-TV area.'

Among the manufacturers who have expressed interest in developing the decoders are Pace, Philips, Grundig, Alcatel, Loewe Opta, Sony, Schneider and Thomson, according to ARD.

Rather than a large number of special-interest channels, the public broadcasters said they want to give viewers a chance to watch existing programs at times more convenient to them. They also plan to bundle their service in a way that offers programs additional to or related to specific issues.

One digital channel, according to ARD's plans, would offer late broadcasts earlier in the day and vice versa. Another channel would provide additional or background information to regular programs, as well as material that hasn't been broadcast before.

A third channel would offer what's called near-video-on-demand, which means showing programs on a staggered schedule to let viewers pick the time when they want to tune in.

For the audience, these frills would come at no additional cost, except that of buying a decoder. German households with TV and radio already pay mandatory license fees that largely finance the public broadcasters.

The new decoder is likely to cost 500 marks at most and is set to be unveiled at an electronics fair in Berlin next August. ARD said the decoder should be equipped to be upgraded into a pay-TV decoder for viewers who decide to subscribe to pay-TV services at a later date.

The decoder might be the third such technology on the German market: Kirch is already selling one, the d-box, and Deutsche Telekom is currently inviting industry bids for a different decoding technology.

[04] Waigel blasts foreign criticism of German monetary policy

'We stand by monetary policy as conceived by the Bundesbank,' Waigel said, speaking during a debate in the Bundestag, the lower house of the German parliament. 'We reject the criticism of the Bundesbank domestically and abroad,' he added.

The comments come a day after members of the Bank of France's monetary policy council criticised German monetary policy, saying it could hamper the creation of Europe's planned single currency.

The French council members called for an abandoning of France's strong- franc policy, while French finance minister Jean Arthuis admitted his government is trying to convince Germany to lower short-term interest rates.

In addition to statements by French monetary policy council members, former French president Valery Giscard d'Estaing further advocated allowing the French franc to depreciate against the Deutsche mark.

He said the Bank of France should allow the franc to fall to the 15% limit from its central parity rate of 3.3539 francs per mark within the exchange rate mechanism of Europe's monetary system.

Waigel stressed that economic growth and jobs can't be achieved by a targeted exchange-rate policy. Exchange rates are ultimately determined by markets on the basis of fundamental economic data supported by monetary, economic and fiscal policy that is 'credible and oriented toward stability, ' the finance minister added.

Turning to Europe's planned currency union, Waigel emphasised the need for a stability pact, designed to secure the stability of the future single European currency once it is formed.

European Union finance ministers are set to discuss the details of the planned stability pact Monday.

In addition, Waigel said the Maastricht Treaty criteria for participation in currency union are 'clearly stipulated and not up for discussion.'

The Maastricht Treaty sets forth five requirements for EMU membership in relation to public debt and deficits, inflation, exchange rates and long- term interest rates.

EU leaders will decide in early 1998 which countries will participate in EMU based on their 1997 economic and fiscal performances.

[05] Northern Electric expects fiscal 1997 profit to drop at least 26%

The British regional electric company said it was significantly reducing its debt-to-equity ratio and might raise its final dividend for the year by 7%. The company predicted its debt level would end up 'significantly lower' than market forecasts and said it still plans to issue a special dividend of 56.5 pence a share next February.

Chairman David Morris stressed that Northern's balance sheet proves it can continue to deliver a strong financial performance as an independent company.

In the half, pretax profit dropped to £50.7 million ($85.1 million). The company said earnings for the year would pretax profit for the full year ending next March 31 will be 'not less' than £112 million. The company posted a full-year profit of £150.8 million the year earlier.

At the end of the current year, the company said its debt-to-earnings ratio would be around 95%, paying out the special dividend. The payout is part of a package used to fend off a bid from Trafalgar House, now a part of Kvaerner.

Northern said price cuts imposed by the Office of Electricity Regulation knocked £10.8 million off the interim profit figure, which was also hit by the underrecovery of regulated income that should be recovered in the second half.

The Northern earnings statement was originally due to be delivered Dec. 5 but was brought forward to show what the company says is a balance sheet that proves CalEnergy's bid is too low.

CalEnergy launched its bid for Northern Oct. 28 at 630 pence a share. Northern has said it's worth around 700 pence a share. In the earnings, Northern stressed its debt picture over the profit number, which it said was affected by the last price review of the RECs by the electricity regulator.

[06] Samsung hopes to reopen Fokker negotiations

The potential takeover fell apart when Samsung Aerospace failed to form a consortium with three other local companies including Daewoo Group, Hanjin Group and Hyundai Group to jointly pursue the Dutch company.

But despite Samsung hopes to revive the constortium, industry observers say the deal appears to be dead. The deal has potential business hazards, analysts say, and the takeover appears to be impossible unless the three companies agree to share the burden.

'Since the takeover is so risky, Samsung and the government alone will not be able to purchase the Dutch company,' said Ahn Young-soo, a senior researcher at the state-run Korea Institute for International Economics and Trade. 'And the government itself won't be able to inject its promised $2 billion to develop a 100-seat (midsize) aircraft.'

The administration of President Kim Young-sam vowed to begin production in Korea of such aircraft as a campaign promise in 1992, and has pledged funds to help the plan come to fruition.

The three companies, concerned they may play only a secondary role in the consortium led by rival Samsung Group, made it clear Friday that they won't accept Samsung's offer for a consortium.

'Hyundai hasn't been interested in the takeover in the past, and isn't interested now,' Park Ho-keun, a Hyundai Group spokesman said, saying that the company is angry over Samsung's sudden invitation to the deal. Other company officials say they won't join either because they believe the bid by the South Korean government and Samsung Aerospace to purchase Fokker is politically motivated.

They say the government is trying to purchase Fokker without any practical study or consideration of the global aircraft market's future and the level of aircraft-manufacturing capability of South Korea.

'In view of industrial development stages, there isn't good reason South Korea should try to develop a midsize aircraft now,' a source at Daewoo Group said. 'Unless the government revises its plan, companies will not join the consortium.'

It is premature, says the source, for the local companies to manufacture aircraft since 'they are merely at a parts-making stage now.'

With hasty plans to manufacture midsize aircraft made early in President Kim's term, other industry sources say the Trade, Industry and Energy Ministry has been demanding the three companies join in the consortium, threatening to exclude them from any government projects in the future if they don't cooperage.

They say development and manufacturing of midsize aircraft or 100-seat passenger planes were part of Kim's election commitments pledged in 1992. Kim's five-year term ends in early 1998.

Ministry officials, in meetings throughout the day, weren't available Friday for comment.

Even after the two sides acquire the production facilities of Fokker, Ahn, at the state-run institute, says it is still unclear whether the South Korean side will be able to succeed in a passenger aircraft market dominated by the three giants, Europe's Airbus Industrie, McDonnell Douglas and Boeing of the U.S.

[07] Hochtief issues profit warning for the full year

'As a whole we must assume that we shall not quite reach the net result shown in the previous year,' Hochtief said in a report to its employees.

The nine-month report to employees said it was clear that continued strength in its international business would not be able fully to offset the fall in its domestic profits.

Germany's second largest construction company had previously given no precise forecast for the 1996 year except to say that it was hoping for profit 'continuity' in relation to the net profit of £137 million Deutsche marks ($89.5 million) it made in 1995.

The profit warning came despite figures in the report showing an 11.1% rise in nine-month building output to 8.82 billion marks, helped by a 28.5% gain in international output to 3.52 billion marks.

Incoming orders were 44.3% above the previous-year level at 11.8 billion marks, again helped by a large gain in international activity, where orders rose 94% to six billion marks.

Separately, a Hochtief spokeswoman confirmed a newspaper report that the company was interested in pursuing 'cooperation' possibilities with former takeover target Holzmann. Hochtief currently holds a 20% stake in Holzmann.

Hochtief is currently seeking to overturn a German cartel office ruling preventing it from increasing its stake for competition reasons.

[08] Boeing may hire McDonnell Douglas to supply design and testing services

The historic move would make sense both for busy Boeing, the world's largest maker of commercial aircraft, and for McDonnell Douglas's struggling Douglas Aircraft commercial-jet. There are yet no signals from people following the developments that Seattle-based Boeing expects to acquire Douglas Aircraft over the long term.

Once a general longer-term 'collaborative' agreement is signed, the two companies will study some large-scale contracts under which the McDonnell unit might assume responsibility for design and testing of most of a 'derivative' aircraft, such as a new 767-400 plane that Boeing has been contemplating. Numerous smaller design jobs, as well as assembly and painting work, and the lending of McDonnell employees to Boeing, also are being envisioned as possibilities in the discussions to date.

St. Louis-based McDonnell Douglas recently abandoned its effort to return as a major player in the commercial-jet industry, where it has managed to land only limited orders for its jetliners.

McDonnell hopes to remain a maker of planes in a few niche markets -- if its existing airline customers can be convinced that it will survive and continue to make those 100-, 150- and 300-seat jetliners.

Boeing, meanwhile, is headed for record airliner production -- and is already enduring a painful factory-capacity crunch -- as it rakes in hundreds of new-jet orders from carriers eager to expand and replenish their fleets. Boeing's capacity and staffing shortages have been exacerbated by its recent good fortunes in the defence-and-space arena, where it recently landed major military-aircraft and laser-weapon contracts. That situation will only worsen if, in the months ahead, Boeing decides to proceed with production of bigger and longer-range versions of its 747 jumbo jet.

'When we look at what's ahead of us, particularly if we end up with a great big [747] airplane, the demand on resources is truly overwhelming,' said Ronald Woodard, Boeing's commercial-airplane chief, in an interview. Mr. Woodard said that the company is looking everywhere in the world for 'industry assist' contracts, under which vendors will supply engineering work, parts and services.

'McDonnell Douglas is one of the companies we have talked to,' he said, adding that 'there is no agreement in place. We are just at the front end of seeing if that's possible.' Mr. Woodard also noted that Boeing is looking for those major subcontracting packages as a way to avoid layoffs and factory closures when the current boom in jetliners subsides. A McDonnell Douglas spokesman confirmed that discussions have taken place, but he wouldn't elaborate.

Neither Mr. Woodard nor the McDonnell spokesman would discuss the timetable for further meetings, but other people tracking the developments confirmed that the two sides are considering signing the overarching agreement to collaborate in the days ahead.

[09] KNP clears clears potential obstacle to TNT takeover

Earlier Friday, the Dutch postal and telecommunications company removed all conditions from its offer and said its TNT stake had increased to 51.9%, including a 19.9% holding acquired from Bankers Trust Australia Ltd. Friday night, KPN said its stake had been increased further to 55.9% of TNT's ordinary or common shares and 40.4% of TNT's converting preference shares. The offers are scheduled to close Dec. 12.

[10] Nine former directors face court over Baring's failure

The administrators of Barings Ernst & Young are already undertaking legal proceedings against Coopers & Lybrand in the U.K. as auditors of Barings. Coopers & Lybrand's action has been brought Friday because it believes the managers of Barings should take the blame for the bank's collapse.

'Despite the fact that we are not responsible for the collapse of Barings we face a substantial claim,' said a Coppers & Lybrand spokesman. 'We are peerceived to have deep pockets which are available to those who have lost money, while those who are really responsible for the collapse at Barings escape.' 'We are not prepared to incur a liability which is rightfully that of the Barings management,' added the spokesman. Coopers & Lybrand said that it may also take further third party proceedings against other members of Barings' management in due course.

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

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