
##223873 @!STEPHEN-AUG : Welcome to Business World . I 'm Stephen Aug and here 's what 's on this week 's agenda . voice-over Oil , at the center of the Persian Gulf crisis . What happens to world oil prices and supplies if oil breaks out in the Middle East ? And what might even higher oil prices do to an already weakened U.S. economy ? From New York , this week 's Business World guest , Secretary of Commerce Robert Mosbacher . Also , retailing in trouble . This Christmas , stores got Scrooged , and there 's no upturn in sight . Are there just too many stores to survive ? And used compact discs . Is this one case where the promise " as good as new " really rings true ? ANNOUNCER : From ABC News , this is Business World , with Sander Vanocur and Stephen Aug . Now , from New York , substituting for the vacationing Sander Vanocur , is Stephen Aug @!AUG This weekend the world is holding its breath , waiting to see if last-minute efforts will head off @ @ @ @ @ @ @ @ @ @ war itself has thrown still another monkey wrench into an economy already plagued by a recession , budget deficits , troubled banks and higher fuel prices . For business firms which need to be able to make plans , the uncertainty itself is extracting a price . voice-over After five months of a steady troop build-up in the Persian Gulf and the continued stand-off with Iraqi President Saddam Hussein , world financial and commodity markets have become accustomed to uncertainty . But what if war breaks out , say a short war ? ROBERT HORMATS , Vice Chairman , Goldman Sachs International : After the first bullet is fired there 's probably going to be a significant decline in the Dow , maybe 200 or 300 points , and probably a major decline in the bond market . After that , once it 's clear that the United States is dominating the war , that there 's relatively little damage to Saudi oil facilities , we expect the markets to reverse themselves and both the bond market and the stock market should rally @!AUG voice-over Crude oil prices , now in @ @ @ @ @ @ @ @ @ @ , but how far ? That depends on who you ask . THOMAS BURNS , Chevron Chief Economist : I would anticipate that prices could get back to $35 to $40 a barrel . I would be very surprised to see them go much further than that unless , of course , there is significant , substantial , sustained damage to Saudi oil production facilities @!AUG voice-over And if there is sustained damage in Saudi Arabia ? Mr. BURNS : Then all bets are off . It 's extremely difficult to determine , in the very initial moments of any kind of an outbreak of war , exactly how much and how serious the damage is and how long it might take to fix . So uncertainty is going to reign . Uncertainty causes prices to rise , perhaps sharply @!AUG voice-over On the home front , meanwhile , the economy is in recession . Business is slowing down . For the most part , business firms have been cutting back on everything from advertising to hiring to purchasing . Planning in such an environment is difficult , at best , @ @ @ @ @ @ @ @ @ @ . JERRY JASINOWSKI , President , National Association of Manufacturers : Everything I hear from business is that the prospects of war have added to their uncertainty , causing them to trim their buying decisions in general , with the exception of their buying decision for oil , where they 're probably buying more in order to protect themselves against future shortages @!AUG voice-over Oil continues to cause dire problems for the airline industry , which is forecasting record losses this year of about $2 billion . The soaring oil prices already have sent two major airlines into bankruptcy , Continental and Pan Am . And unless prices fall soon , the airlines face more turbulence this year , and it 's not just the airlines . Mr. JASINOWSKI : The possibility of war here increases uncertainty and is bad general economic conditions for most of industry @!AUG voice-over The automobile industry is one victim of the uncertainty . Consumers , worried about the prospect of war and suffering financially , have slowed down buying . RICHARD CURTIN , University of Michigan : Overall , consumers are less confident today than @ @ @ @ @ @ @ @ @ @ and in fact , confidence is now at the level that we 've only recorded during recession periods . So it is indeed at a very low level @!AUG voice-over In fact , the ABC News/Money Magazine consumer confidence index , which began in 1985 , is at near-record lows . And most Americans rate their personal finances poorly . They say it 's a poor time to buy things . Until recently , most were saying personal finances were in good shape . For manufacturers and other business firms , planning seems to center around the recession . Mr. JASINOWSKI : Well , right now businesses are pretty much involved in the classic actions of holding down inventories , cutting employment , reducing capital spending modestly in areas where they think they can postpone it and to some extent , cutting back on production @!AUG voice-over Most scenarios call for a short war , but what if the war is much longer than a few weeks ? Mr. HORMATS : Inflation will be relatively high because of sustained high oil prices , there 'll be concerns about additional government borrowing @ @ @ @ @ @ @ @ @ @ market and the stock market as well . Under those circumstance , I think we 're in a for a prolonged period of enormous economic difficulty @!AUG voice-over World War II was , in a sense , good for the economy . It helped pull the nation out of a long Depression . The build-up in Vietnam also helped the nation prosper for a time . Would a Middle East war be good for the economy ? Mr. HORMATS : Those who argue that wars are good for economies because they provide a fiscal boost should take into account that this was is in an oil-producing area and many other wars have not been . In addition , we have a big government debt now , and the cost of this war would add dramatically to the budget deficit , and that would hurt as well @!AUG voice-over And what if peace breaks out tomorrow ? Mr. HORMATS : It means that consumer confidence in this country improves dramatically , which also will give the economy a boost . Good for the stock market , good for the bond market and @ @ @ @ @ @ @ @ @ @ the world is virtually awash with oil , by some estimates a 96- day supply in storage . The U.S. strategic petroleum reserve has about 600 million barrels . The peak of the winter heating oil season is about over . If there is a war , the hope is that oil prices can be stabilized by releasing a few million barrels a day from the U.S. reserve . The hope also is that any war is a short one . In a minute , one man concerned with how the U.S. economy might fare if there is a war , this week 's Business World guest , Secretary of Commerce Robert Mosbacher . Commercial break AUG : When this week 's Business World guest joined us shortly after the Iraqi invasion of Kuwait , he expressed concern about the state of the economy and the hope that a lowering of interest rates by the Federal Reserve board might head off a recession . That did n't happen . Now , poised on the brink of a war , the U.S. is troubled by both a recession and huge budget deficits @ @ @ @ @ @ @ @ @ @ still deal with the impact of all of these on the U.S. economy . I guess , Mr. Secretary , the operative question is if there is a war , what effect is that likely to have on the economy ? Short war , long war . ROBERT MOSBACHER , Secretary of Commerce : Steve , we believe that if there is a war that it will be a relatively short war and it will not have a major effect on the economy . And when it 's over , when the war is over or when the crisis is over , we think that the demand from consumers and in consumer confidence will come surging back @!AUG In fact , it 's consumer confidence that 's been one of the major causes for the fall-off in economic activity , has n't it ? Sec @!MOSBACHER You 're absolutely right @!AUG In your view , peace will bring that roaring back , or we will we still- we 'll still have worries about the deficit , we 'll still have worries about unemployment that are still there , and a lot @ @ @ @ @ @ @ @ @ @ consumer confidence comes back , we 'll find that plants will be busier , unemployment will be decreasing and the financial institutions will get stronger , not just because of that but also because this administration is working with the Fed and will be submitting legislation to try and improve the financial- the banks ' positions @!AUG I 'm glad you brought that up . There is a lot of business concern about big banks . We know that before the Bank of New England went under , a lot of business firms withdrew their money and put them in other banks . What 's going to make those banks strong enough so that they 'll be able to lend money ? Some banks even- their capital situation is so low , they ca n't even lend money if they want to . What 's going to make those banks stronger ? What do you think you need to do , in a short phrase ? Sec @!MOSBACHER Well , we 've started doing some of these things , for instance , lowering interest rates is going to help and the @ @ @ @ @ @ @ @ @ @ big enough quantities , has started , made the first good steps of lowering rates , one . Two , the reserve requirements for banks have been lowered in some areas , without endangering anything , and it frees up some money for lending , too . Three , the secretary of the treasury and others have called for banks to do what I have said all along , to start lending to those customers who are traditional and worthwhile customers @!AUG But that has n't happened yet , has it ? Sec @!MOSBACHER We think it 's beginning to happen . We think we need to see a lot more of it , and we need to see some new legislation that 'll allow banks to both merge and get capital from other sources @!AUG We know that a number of Fortune 500 companies have been deserting the banks that they 've been dealing with for a long period of time , and going to other banks . To what extent has this lack of business confidence in the banking system contributed to the economic downturn ? Sec @!MOSBACHER Oh @ @ @ @ @ @ @ @ @ @ I think we now realize , first the President and the whole administration is concentrating on this problem and wants to help make sure that financial institutions in general and banks in particular are in a good position to service their customers . And so we are moving with legislation , we are moving with the regulators , are being careful not to discourage proper loaning- lending , and we find that there 's less movement today and there will be less as confidence comes back @!AUG You 're planning a trip to Venezuela within a day or so and the original reason was the President 's Enterprise for Latin America program , but I gather that there is more of an emergency nature now involving oil supplies . Sec @!MOSBACHER Well , we still have as our basic agenda the ingredients of business- meeting with business , private sector and private sector and our business leaders going down and finding out from Venezuela how they 're moving towards opening their economy for investment and for trade . They 've come a long ways . They 've still got a long @ @ @ @ @ @ @ @ @ @ oil area and world supplies picture , we 'll have with us the deputy secretary of energy , Henson Moore , who 'll be talking about Venezuela 's efforts to help fill the gap , which they 've done very well , of lack of oil coming from the Mid-East because of the crisis @!AUG Well , thanks very much , Mr. Secretary . We appreciate your being with us here on Business World . And when we come back , retailing sent reeling : are we in for a shopping shake-out ? Commercial break AUG : On Tuesday , we 'll find out the latest retail figures . Expected to show what almost every store owner already knows , retailing is down and Christmas was nothing to celebrate . This slump in retailing is prompting a shake-out . Some stores are likely to fold and some , like the store considered shopping heaven for the yuppies of the ' 80s , Bloomingdale 's , are changing their tune . JEFFREY SHERMAN , President , Bloomingdale 's : In the past we had a vision of what Bloomingdale 's stood for @ @ @ @ @ @ @ @ @ @ tone and try to influence and convince the consumer of what they should buy in the store , and tried to almost set their taste level , set their buying pattern , set their habits . This economy and this uncertainty causes you to kind of give them more of what they want @!AUG voice-over What they want , he admits , is better service than they got in the past . How bad is the retailing industry ? Many stores are reporting that , despite early season markdowns , last year 's Santa was downright stingy . WILLIAM FLATLEY , Consultant , Kurt Salmon : In recent memory , I ca n't remember a Christmas when such large stores as Sears , May Company and others have had sales below a year ago , and when you factor in inflation running about three or four percent , that means that they actually sold fewer items at the store level , which is pretty dismal @!AUG voice-over And the $1.8 trillion retailing industry , meeting in New York this week , says it needs all the help it can get , @ @ @ @ @ @ @ @ @ @ : We clearly need to reduce interest expense . We clearly should not be raising taxes in the face of a recession @!AUG voice-over At Bloomingdale 's , Christmas was flat to slightly down , not much worse than anticipated . Mr. SHERMAN : We bought enough inventory to support the sales projections that we had , and where in past we might have taken more risks in buying more inventory than we thought we might be able to sell in a given period , we also were buying inventory closer to the time we think the customers are going to buy it @!AUG voice-over And though many stores are keeping their own inventories down , the nation 's aggregate inventory might still be too large . KURT BARNARD , " Barnard 's Retail Marketing Report " : Are we overstored ? The answer to that is vastly so . Last year , 1990 , we ended up with 36,650 more shopping centers in the United States , 36,650 shopping centers . That is 66 percent more than we had in 1980 . At the time , the population of the @ @ @ @ @ @ @ @ @ @ to retail consultants Management Horizons , we now have 18 square feet of retail space per capita as opposed to nine square feet in 1974 . And conventional department stores are competing with outlet malls , catalog sales , warehouses and specialty discounters like TJ Maxx , one of several stores bucking the gloomy trend . RICHARD LESSER , President , TJ Maxx : Our sales on a comparable basis with last year and our comparison of stores that were open one year or more , were 10 percent higher than a year ago , which is amongst the highest achievements in the country @!AUG voice- over The Dress Barn another specialty chain , opened one-fifth of its 500 stores last year , and they 're planning 46 new stores this year . ELLIOT JAFFE , CEO , Dress Barn : We are very fast on our feet . We can make decisions very quickly here . We do n't have the layers of management that department stores have . We do n't have the crushing load of debt that the LBO department stores have . We have a clean balance @ @ @ @ @ @ @ @ @ @ to anybody @!AUG voice-over A situation , he says , that gives him an advantage dealing with financially strapped suppliers . But department stores have their own advantages . According to Schultz , a former president of B. Altman : Mr. SCHULTZ : Well , if you have a specialty store that specializes in dresses and dresses are out of favor this year , the department store can devote that space to sportswear , whereas a dress store is pretty well locked in @!AUG voice-over But for all retailers , big and small , the change in consumer habits , eroding consumer confidence , the bleak economy and fear of war in the Middle East mean even tougher times . So look for more bankruptcies , mergers and even the disappearance of some more old names . But for consumers- Mr. FLATLEY : Consumers can still be on the lookout for pretty good bargains , but the selection may be thinner . I think retailers are going to take a hard look again at their inventories and edit out any items that are slow movers or fringe items and really focus @ @ @ @ @ @ @ @ @ @ , stores are better off this recession than the last time around because their individual inventories are smaller . During the last recession , inflation was skyrocketing , so stores stocked up in hopes they 'd beat even higher costs . This time inflation is down and there 's less backlog in the stores . Turning to the week on Wall Street , at Friday 's closing bell the Dow Jones industrials finished down by almost 65 points . Last week our panel of stock market experts from around the country predicted a down week . Our panel 's consensus is for a down week ahead . Some of our panelists say war jitters and some weak earnings reports will carry the market lower . Panelist Peter Eliades , a Los Angeles-based market timer , says this is the time to get your money out of stocks . PETER ELIADES , Market Timer : Currently , all our clients are out of the market in government T-bills , hopefully , or cash equivalents . The reason why we have them there is because we think that we 're in the heart @ @ @ @ @ @ @ @ @ @ a good bear market rally from October 11th till the end of December , and we believe that the bear market is about ready to return and perhaps in earnest , and with some vengeance @!AUG Another sign of the times on Wall Street , according to this week 's issue of Institutional Investors Wall Street Letter , loss-plagued Prudential Bache has told its 6,500 brokers the firm will start holding evening and weekend office hours , and in a slap of the wrist at its least productive brokers , the company said the overtime hours will be mandatory for those who produced less than $180,000 last year . When we return , compact discs , playing well on instant replay and resale . Commercial break AUG : How many times have you heard the phrase , " It 's as good as new ? " And how skeptical are you of claims like that ? Well , there is one business where used may be just as good as new , only a fair side cheaper . ABC News correspondent Ken Prewitt reports that when it comes to compact discs @ @ @ @ @ @ @ @ @ @ Compact Discovery : CDs do n't wear like tapes or records , they do n't wear out . The first time you play a CD it should sound as good as the 1,000th time you play it . KEN PREWITT , ABC News : voice-over That 's because , unlike tape machines and turntables , the laser compact disc player makes no direct physical contact with the disc . CDs are also far less prone to harm , and if they 're damaged , you can spot it . And that benefits both people weeding out their collections and the stores that buy them for resale . STEVE BICKSLER , Owner , Penny Lane Records : I 'd say that 95 percent of every CD that comes in here used we will buy , whereas LPs , the percentage is more like 15 percent @!PREWITT voice-over While only 25 percent of American households have players , compact discs now account for nearly 45 percent of total recording industry sales , and though major chains may not be reselling these durable discs , they 've become a mainstay for some small independent @ @ @ @ @ @ @ @ @ @ Manager , Streetlight Records : We decided- we pursued it very aggressively in the beginning , that we wanted to buy used CDs , and we tried to pay the best for them . And it 's been paying off tremendously @!PREWITT voice-over Prices vary with titles , but you can expect to get about four or five dollars cash or a seven- or eight-dollar store credit for a CD that cost $14 new . Mr. MOSS : It 's more profitable than- much more profitable than the new product . Mr. BICKSLER : A new CD that we would put out at $13.79 , that would be a frontline CD , we might make $2.00 on it , whereas a CD that we put out at $8.99 , we 'd made close to $4.50 @!PREWITT voice-over But does this hit a sour note with the recording industry ? Not yet , say analysts , since it probably accounts for less than two percent of sales , and even if it has a significant potential , it may be hard to suppress . MARTIN POLON , Electronic Media Forecaster : Today @ @ @ @ @ @ @ @ @ @ From a public relations point of view , how is it going to look having battalions of lawyers working for the Germans , the Japanese , the English or the Dutch , trying to close down American used record stores ? PREWITT : voice-over Many of which are thriving , he says , in part because they offer a broader selection of classical , country and classic rock than the youth- oriented mall stores . And as the economy slows , the used CDs ' lower price tag may be music to the merchants ' ears . Mr. MOSS : The biggest challenge , really , is getting good-quality used CDs . Everybody is looking for them , and that 's the limitation . If we have the CDs here , we can sell them , it 's practically a feeding frenzy at times @!PREWITT voice-over Ken Prewitt , ABC News , New York @!AUG We 'll be right back . Commercial break AUG : And finally , our winners and losers . The losers , depositors at the Capital Bank of Boston , which was closed by federal regulators on @ @ @ @ @ @ @ @ @ @ paid off 45 cents on the dollar for deposits over $100,000 . That news comes at almost the same time as the news for this week 's winners , depositors above the $100,000 level at the Bank of New England , where the Federal Deposit Insurance Corporation agreed to pay depositors in full , in part because some of them were banks that had their money at the Bank of New England to reap higher interest rates . That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Stephen Aug . On behalf of the vacationing Sander Vanocur and everyone here at Business World , thanks for being with us. 
##223874 @!SANDER-VANOCUR-AB : Welcome to Business World . I 'm Sander Vanocur , and here 's what 's on this week 's agenda . voice-over Hollywood on the eve of the Oscars . The costs of making movies are out of control . For some studios , there 's no business like show business . For others , there 's no business at all . From Hollywood , this week 's Business World guest , movie producer Thom Mount . Also this week , the showdown between AT&amp;T and NCR . The proxy battle is creating a dilemma for investors . Who are they turning to for help ? And dumping on Indian lands . The Indians could make money by making room for the white man 's garbage , but critics have reservations @!ANNOUNCER From ABC News , this is Business World with Sander Vanocur and Stephen Aug . Now , from New York , here 's Sander Vanocur @!VANOCUR This is the week for some big prizes for the entertainment industry . Tomorrow night is Oscar night , the Academy Awards , the culmination of a year @ @ @ @ @ @ @ @ @ @ might be called " the mother of all proxy battles , " the vote on Thursday on AT&amp;T 's hostile bid for NCR . But as business editor Stephen Aug reports , for those who hold stock in both companies , who wins and who loses is not as simple as the contents of the envelope , please . STEPHEN AUG , ABC News : voice-over It 's just like a world heavyweight championship boxing match . The arena may be different and instead of two heavyweight boxers , the fighters are two heavyweight corporations . The winner 's purse may be worth more than $6 billion . And the odds on AT&amp;T winning its fight for NCR ? PETER LABE , President , Labe , Simpson &amp; Company : There is a 100 percent chance that AT&amp;T will elect four directors . That 's 100 percent . But can AT&amp;T muster more than 80 percent of the votes ? I do n't give them that chance . ROBERT ALLEN , Chairman , AT&amp;T : Maybe it 's an 80 percent chance of getting an 80 percent vote , but that's- @ @ @ @ @ @ @ @ @ @ AT&amp;T , the stakes could determine its future in the computer business . Reportedly , they 've lost $2 billion in it so far . Mr. ALLEN : We 're looking to build for a long period of time . We want NCR to be our computer business and to take advantage of what we bring to the table , which is the best networking capability in the world and one of the greatest laboratories in the world @!AUG voice-over To accomplish this , AT&amp;T has launched a proxy fight . Either it gets 80 percent of the vote and wins the company , or , with a bare majority , it gets four seats on the NCR Board of Directors . Allen says that would put pressure on the remaining eight NCR directors to make a deal . Mr. ALLEN : I can tell you , I would not one-third of my directors elected to my board without my consent and over my objections . I ca n't imagine that the other , surviving directors would be very comfortable in that situation @!AUG voice-over But NCR Chairman Charles Exley says @ @ @ @ @ @ @ @ @ @ , Chairman , NCR : Well , I 've looked at the candidates they 've put up . I'd- These are not four thugs that they 've nominated , and I presume these people will conduct themselves in a suitable way @!AUG voice-over About two- thirds of NCR 's stock is owned by institutional investors , like pension funds . Those who run the funds say their decision is more complicated than simply whether to take $100 a share for their NCR stock . CAROL O'CLEIREACAIN , New York City Finance Commissioner : We are not arbitragers . We 're in this market for the long term . It 's no accident that we own both of these companies . They 're both good , solid companies and we- our portfolios consist of , you know , most of American industry and , so , our concern is that these companies thrive and do well . And so the issue in front of us , really - is this merger going to make these companies better or is it not ? BRUCE KALLOS , Delaware Pension Fund : As we decide @ @ @ @ @ @ @ @ @ @ the vote comes , or the tender comes- is to understand just exactly where that long-term value is . I guess , at this point , my view would be that it 's with the- under the AT&amp;T umbrella @!AUG voice-over To help institutions decide how to vote , a whole new cottage industry has grown up , like Faulk &amp; Company of Atlanta , all the result of a Labor Department ruling that pension funds must vote their shares and justify the votes . Faulk 's firm of 19 people charges for advice by the number of different companies represented in a fund 's portfolio . The average fee runs about $25,000 . ANNE FAULK , Faulk &amp; Company : What we try to determine if asked on that company 's ballot , what is the economy impact it will have on that company , and what 's the impact it will have on the value of the underlying shares ? AUG : voice-over Nell Minow , of Institutional Shareholder Services of Washington , D.C. , which offers similar advice and charges a similar fee , says the AT&amp;T/NCR fight @ @ @ @ @ @ @ @ @ @ advice . NELL MINOW , Institutional Shareholder Services : In AT&amp;T and NCR , we did something we 've never done before , which is that we gave two different kinds of advice based on the individual portfolios . We think that the deal is good for shareholders of NCR and bad for shareholders of AT&amp;T , so , based on the mix in the individual shareholder 's portfolio , we advised neither to vote for it nor to vote against it @!AUG voice-over So , an institution whose AT&amp;T holdings are at least five times the market value of NCR holdings would vote against the merger . Why is it bad for AT&amp;T ? Ms. MINOW : Because we really haven 's seen any evidence that they can run NCR any better than NCR is running itself , or that it provides the kind of significant synergies that would make a heavy investor in AT&amp;T do well @!AUG The AT&amp;T/NCR fight is far different from the big deals of the ' 80s . It 's not a corporate raider on a break-apart , destroy-the-company acquisition . It 's a bid @ @ @ @ @ @ @ @ @ @ of the ' 90s . Now that the end of the junk bond market has dried up financing and knocked most of the individual corporate raiders out of the ring . Sandy ? VANOCUR : Thanks , Steve . Turning to the rest of the action on Wall Street , at Friday 's closing bell , the Dow Jones Industrial Average finished the week down by more than 89 points . voice-over Last week , our panel of stock market experts from around the country predicted an " up " week . Our panel 's consensus is for a down week ahead . Some of our panelists say the market is going through a normal correction after a big rally . Panelist Lou Holland , a Chicago-based money manager says the market is already looking beyond the recession . LOUIS HOLLAND , Investment Advisor : Well , the market , basically , discounts recession and , so , typically , the recession will extend after you 've had a meaningful rally in stocks . And I think because the Fed has made several cuts in the discount rate and it 's @ @ @ @ @ @ @ @ @ @ , you 've had this explosive rally with regard to the market , sort of discounting the worst with regard to a recession @!VANOCUR In just a minute , Hollywood , where red ink is tarnishing the silver screen . Commercial break VANOCUR : Hollywood holds its annual coming-out party tomorrow night - the Academy Awards , when the line , " the envelope , please , " precedes the announcement of the winners of the Oscar . But while the world watches Hollywood show off its glitz and glamour , what it wo n't be showing off is a tide of bottom-line busts . voice-over Pretty Woman , Home Alone , Ghost - the three hits of this movie season . Each has earned more than $175 million at the box office . While only Ghost is nominated for an Academy Award for best picture , they all have one thing in common : moderate budgets , each costing less than $25 million to produce . PETER BART , Editor , " Variety " : There 's no relationship between the cost of a movie and the success of that @ @ @ @ @ @ @ @ @ @ of making a movie has been escalating rapidly , up 40 percent in the last two years , according to the Motion Picture Association . DAVID LONDONER , Managing Director , Wertheim Schroder : If you look at it now , it costs just under $40 million to make and release a movie in the United States and , clearly , the revenues of these companies from those movies are not going up anywhere near as fast @!VANOCUR voice-over Earlier this year , several studios said that costs have gotten too high , and they 're going to try to hold them down . Mr. BART : This is an era where just part of Arnold Schwarzenegger 's salary for the last film consisted of a jet airplane , so you 're talking about unbelievable amounts of money changing hands @!VANOCUR voice-over The cost problem is so acute that a top film executive at box-office leading Disney Studios said in this memo that , quote , " We are entering a period of great danger and even greater uncertainty . Events are unfolding within and without our industry that are extremely @ @ @ @ @ @ @ @ @ @ studios is keener than ever . The hit movie Home Alone started off as a Warner project and was dumped at the last minute . Fox picked up the pieces and made the orphan into a $246- million smash . Independent producer Brian Grazer , who made Splash , thinks that experiments like Splash are n't possible in today 's environment . BRIAN GRAZER , Co-Chairman , Imagine Films : Because there are fewer movie studios right now , they 're looking for companies that deliver mainstream , tried-and-true product . That does n't allow for experimentation , as it did over a year- over 10 years ago , and experimentation is a critical part of our business , because it 's an art form and it 's a business @!VANOCUR voice-over And that makes it harder to get pictures made . Super agent Jeremy Zimmer says that economic considerations are overshadowing the artistic merits . That means the next Dances with Wolves might not get made . JEREMY ZIMMER , Partner , United Talent Agency : Unless you 're willing to roll the dice and close your eyes and give @ @ @ @ @ @ @ @ @ @ believe in the passion in their eye- unless you do that , the business is going to- what made the business great is going to erode and we 'll all be manufacturers , not creators @!VANOCUR voice-over But even good movies ca n't necessarily save a studio . Consider Orion . It has two blockbusters - Oscar favorite Dances with Wolves and Silence of the Lambs , which is currently number one at the box office . The two films have earned close to $190 million so far , but Orion is essentially out of business , not making any new movies and selling off those actually in production to help pay down some of its debt . Mr. LONDONER : If you have a large amount of debt - and in Orion 's case , the debt is significant - you have accumulated interest costs that can offset the effects of one or two movies @!VANOCUR voice-over Increasingly , the only way a movie can make money is with a good run overseas . In fact , more than half of what a film takes in comes from overseas box @ @ @ @ @ @ @ @ @ @ Mr. GRAZER : The international marketplace has become so incredibly important that , in many , many instances , it exceeds in value the- what- the domestic box office @!VANOCUR voice-over Not only are the audiences increasingly international , so are the owners . And on the minds of those " doing lunch " in Hollywood these days is whether the Japanese owners of Columbia Pictures and MCA will let their American managers continue to call the shots . Mr. ZIMMER : I think if the studios are successful and make money , they 'll be left alone and it will stay somewhat the same . I think if somebody goes through a real bad run , the Japanese ownership might take a closer look and try and apply a different philosophy to the day-to-day running of the company @!VANOCUR When we return , one of Hollywood 's most successful producers , this week 's Business World guest , Thom Mount . Commercial break VANOCUR : This week 's Business World guest knows Hollywood from two very different perspectives . As the former head of production for Universal Pictures , he @ @ @ @ @ @ @ @ @ @ days , he has a different perspective . As an independent producer responsible for such hits as Bull Durham and Stealing Home , Thom Mount joins us from Los Angeles . Mr. Mount , it 's tough enough to know how to make a picture that makes money in the United States , but since so much money comes from overseas , how do you make a picture that appeals both here at home and overseas ? THOM MOUNT , Thom Mount Film Group : Well , I 'll tell you , the globalization of the motion picture business has put tremendous pressure on all of us to be articulate regardless of national bias or language . I think one of the keys to this kind of international success are stories whose emotional base crosses all sorts of cultural boundaries . You 'll see a film like the recent hit Ghost do very well in Japan , in France , in the U.S. and in Argentina @!VANOCUR In terms of national boundaries , we hear so much about the Japanese , but you 're getting money elsewhere in Asia - are @ @ @ @ @ @ @ @ @ @ . Mr. MOUNT : Well , I 'll tell you , the finance side of the motion picture business has become completely global . Our company is supported largely by Japanese major corporations for the cost of production of our pictures , but we also involve financing entities in Europe and in other Asian countries @!AUG To what extent is dealing with the Japanese for money any different , say , from dealing with a domestic source of cash ? Mr. MOUNT : Well , the Japanese are tremendously concerned about the quality of the product you 're going to make . This is not always true from other sources . The Japanese are not interested in being associated with motion pictures that are exploitive , are inarticulate , or culturally bereft . They really have a strong , internal , national mandate for high quality @!AUG Are they easier to get money out of ? Do they watch their pennies less carefully ? Because I have the impression there 's so much money there , that it 's probably led to some inflated costs in Hollywood - that they 're @ @ @ @ @ @ @ @ @ @ I think the Japanese learned some very hard lessons here in the last five years . They financed a number of pictures that did n't even receive domestic U.S. distribution . As a result , they 're very wary . They certainly are not spendthrifts or loose with their cash . On the other hand , they appreciate what 's necessary to support the making of a picture that has some serious quality control @!VANOCUR In your city , there 's a famous phrase : " the final cut . " Who gets it - the director , the producer ? When you have Japanese money , German money , Taiwanese money , who gets the final cut ? Mr. MOUNT : In fact , the producing entity retains the final cut on all of our films @!VANOCUR All right , look . The one thing this United States is not bereft of is buoyancy of culture - our clothes , our records , especially our movies . To what extent will that continue even though the money 's coming from elsewhere ? Mr. MOUNT : I think it 's going @ @ @ @ @ @ @ @ @ @ to Tokyo and you wander through the nightclub district , the Ropponogi , you see the kind of illogical extension of popular American culture taken to a new height @!VANOCUR I do n't have the money to wander through that district @!AUG Incidentally , in connection with the Japanese takeovers of some of the big studios and their large film libraries , to what extent do you think they 're going to worry about the content of those libraries and prevent distribution of some Japanese films- U.S. films , say , made during the War ? Mr. MOUNT : I think they have an extremely- In my experience , they have an extremely liberal view of these kinds of issues . In fact , they 're very , very self-exploratory in their own television shows and their own , internal mass culture . They want to understand what happened , what the relationship was and what it can be @!VANOCUR Mr. Mount , very quickly , how did this happen , that so much of the capital disappeared from Hollywood ? Is this emblematic of Hollywood or of the entire United @ @ @ @ @ @ @ @ @ @ has always drawn on off-shore capital . In past years , that capital came from Middle Eastern countries . Currently , Japan has excess capital and a willingness to take the kinds of risks that Hollywood represents . It's- VANOCUR : Thank you very much . Thanks for joining us . Sorry to cut you off . I hope you come back , and good luck with your next movie . Thanks very much . Mr. MOUNT : Thanks @!VANOCUR When we return , will the Indians take the white man 's garbage ? If they get paid for it . Commercial break VANOCUR : The movie many expect will win tomorrow night 's Oscar for Best Picture is set in the Great Plains , on Indian lands . Now , ironically , it 's the white man who 's turning to the American Indians to help solve a problem of the white man 's own making . voice-over Dances with Wolves highlights Indian culture as well as the spectacular scenery of South Dakota 's Rosebud Sioux Indian Reservation , where it was filmed . But now , the same Indian @ @ @ @ @ @ @ @ @ @ the white man 's garbage . The Indians , in partnership with RSW , a Connecticut waste disposal company , plan to cart in garbage from as far away as Denver and Minneapolis . The Sioux would get paid $1 per ton . MAURICE HOBEN , President , RSW : The Indians are well aware that most of the waste that 's going to come to the facility is going to be white man 's waste @!VANOCUR voice-over Nationwide , while some tribal councils seem eager to take the money , other tribe members object . CATHERINE SAUBEL , Los Coyotes Reservation : It goes against everything that the Indian stands for . We are the caretakers of the Earth @!VANOCUR voice-over In the next decade , one- third to one-half of the nation 's 60,000 landfills will be closed . Waste companies are scrambling to find new sites for the future . Indian reservations , which are considered sovereign territories , looked like a new frontier to many waste companies . Due east of San Diego , there 's been a gold rush to secure dump sites at a half @ @ @ @ @ @ @ @ @ @ ) California : There is no oversight by the local county or state governments @!VANOCUR voice-over Federal regulations still apply , but they 're less strict than local California ones . However , the Department of the Interior , which oversees Indian reservations , feels both environmental and Indian economic interests can be protected . TIMOTHY GLIDDEN , Counselor to Secretary of the Interior : Some of these waste management companies feel that they can go out and find some unsuspecting tribe and foist a waste dump on them . I hope that that is not the case . It is our duty to see to it that that is not the case @!VANOCUR voice-over Chambers Development , which plans to create a landfill in the mountainous Los Coyotes Reservation , says it 's not looking for any regulatory shortcuts . ALEXANDER RANGOS , Executive Vice President , Chambers Development : If we had a willing host community in San Diego County that would allow us to build a facility , it would be just as attractive as Los Coyotes . It 's really not a matter of the regulatory process @ @ @ @ @ @ @ @ @ @ voice-over But members of communities surrounding the reservations worry that the process is too different to protect them . Ed Tisdale has a ranch just below what soon may be a dump for 20 percent of San Diego 's garbage at the Campo Indian Reservation . ED TISDALE , Rancher : That , up there , would be what we would maybe consider the mother of all screw-ups , if they put a dump in on a ground- water dependent area . You do n't do these things @!VANOCUR voice-over But the dumps have made some tribal members angry and they 're beginning to organize resistance . STEVE BANEGAS , Barona Reservation : It will up to the council or the tribe to determine what does n't and what goes in and what does not go in and nobody on this reservation is qualified to single out carcinogens or heavy metals or anything like that . MARINA ORTEGA , Santa Ysabel Band : I feel that it definitely is poisoning the environment . It is not a suitable project for the reservations because of the fact that , after these landfills @ @ @ @ @ @ @ @ @ @ left with whatever remains behind @!VANOCUR voice-over Yet , despite an age-old tradition of protecting sacred lands , other Indians say economic necessity may outweigh history . Banning Taylor of Los Coyotes says that in a tribe with 100 adult members , most of them are below the poverty line . The $5,000 a month fee that Chambers is paying , with more money to come if the dump is successful , will make a big difference to his people . Campo 's tribal chairman also sees economic benefits for his tribe 's 200 members and he 's convinced the landfill will be safe . RALPH GOFF , Tribal Chairman , Campo Reservation : This project is probably one of the most scrutinized projects in the state right now . We 've really made sure that , you know , the environmental standards are going to be there- are going to be enforced- you know , that we would have enforcement abilities , everything that anybody that cares about the environment would do @!VANOCUR voice-over And the companies , of course , promise to use the most advanced waste disposal technology @ @ @ @ @ @ @ @ @ @ to do - San Diego County - is to close a landfill with no liner system and allow for a new , double-lined landfill to be opened , so I think the net result is going to be a dramatic improvement in environmental protection @!VANOCUR voice-over But some Indians remain skeptical . They remember what they consider a trail of broken promises from whites in the past . WILLIAM BANEGAS , Barona Tribal Elder : It 's what they do . Throw us in the rocks , in the desert , where the lizard ca n't live . Now , they want to corrupt us , corrupt God 's land . We adore this land @!VANOCUR We 'll be right back . Commercial break VANOCUR : That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Sander Vanocur . On behalf of everyone here at Business World , thanks for being with us. 
##223875 @!SANDER-VANOCUR-AB : Welcome to Business World . I 'm Sander Vanocur and here 's what 's on this week 's agenda . voice-over Retailing and the consumer driven economy . Once it was shop till you drop , ' now it 's the stores that are dropping . KURT BARNARD , Retail Analyst : Are we over-stored ? The answer to that is vastly so @!VANOCUR voice-over New approaches are winning customers . SAM WALTON , Wal-Mart Founder : We think we 've just begun @!VANOCUR voice-over From Boston , This week 's Business World guest , founder of office supply retailer Staples , Tom Stemberg . Aslo , supply- side economics : retail-style manufacturers run lean and mean . DARLENE FOSTER , Shopper : Everybody is offering a discount so why should you pay full price ? VANOCUR : voice-over And how are you going to keep them down in the malls after they 've seen discounts ? ANNOUNCER : From ABC News , this is Business World with Sander Vanocur and Stephen Aug . Now , from New York , here 's Sander Vanocur. @!SANDER-VANOCUR-AB : @ @ @ @ @ @ @ @ @ @ . In 1990 , American consumers spent $1.8 trillion retail dollars . Shopping in the U.S. had almost become a national pastime . The motto , " Shop till you drop , " echoed through the mall . In the period 1980 to 1990 , the number of shopping centers went up by 66 percent , while the population increased by only 10 percent , but there 's a sea change under way in shopping habits . Retail space is going begging and , even if consumers do start spending again , their money is going in new directions . This week , our program will focus on the change in retailing : who 's losing , who 's winning , and the retail shopping spree that characterized the decade ends and consumers who once looked toward the top of the line now focus on the bottom line . voie-over Like many baby boomers raising children , Nancy Gabriel says she no longer shops as she once did . NANCY GABRIEL , Teaching Assistant : Before , I used to go in , and style or color was a major thing @ @ @ @ @ @ @ @ @ @ things I do look at @!VANOCUR voice-over With mounting family expenses , the Gabriels put discretion back in their discretionary spending . BILL GABRIEL , Manager : We put several additions on the house and made improvements to the house . Now , as the kids are starting to go into college and getting ready for college , we ca n't do things like that any longer . I 've known people who have blown their whole retirement income on college , so from that perspective I 'm concerned @!VANOCUR voice-over And they 're willing to travel for bargains . One place high on their list is BJ 's - a membership-only , no-frills wholesale club . Ms. GABRIEL : Well , we do basically shop in discount stores . I do not go to retail stores and shop . I hate to say that , but it 's true . HERBERT ZARKIN , President , BJ 's Wholesale Club : The membership concept is one that you feel you 're willing to become a committed , dedicated member . We do n't want a person to come in and just @ @ @ @ @ @ @ @ @ @ want you to come in and spend a large sum of money on a fairly routine basis @!VANOCUR voice-over That 's because they need the turnover on a large volume of goods since they operate on a margin of about eight to 10 percent compared to 30 percent for a typical department store . Wholesale clubs are n't the only merchants giving department stores a run for their money . Catalog sales , television shopping , and shopping by computer are all gaining popularity , but the biggest challenge comes from discount stores , specialty shops that narrowly target specific customers , category killers , giant discounters that sell one type of item like office supplies , and outlet stores where manufacturers sell their goods direct to the public . PETER SIRIS , Vice President , UBS Securities : You 're finding two things happening , one is consumers spending less , and then consumers also trading down . You know , they say , " You know , it 's great to go into a glitzy , fancy store , and here 's somebody playing a grand piano , but @ @ @ @ @ @ @ @ @ @ miles to a warehouse club I can save five bucks , and I 'd rather save five bucks than listen to the grand piano . " VANOCUR : voice-over Siris says this reflects both a sobering economy and , perhaps , even more significant , long-term demographic trends . Once entrenched in middle age , every generation spends less and saves more . That was true in 1977 , when the ratio of debt to income dropped like a rock from the under-35 to the over-65 's , and it was true in 1988 as well . The best-dressed baby boomers , hung over from the heady 80 's , are less inclined to buy on impulse . In the mid-80 's , Cattiva dresses were made to sell in department stores for about $500 . Now , they 're made to sell for half that price . CHUCK SCHWARTZ , President , Cattiva : People have become much more conservative . People are watching what they spend . People are watching for investment clothing more so than fads , and the dollar 's become very precious @!VANOCUR voice-over Recognizing that @ @ @ @ @ @ @ @ @ @ 's of Ohio , an independent store catering to executives , has taken drastic measures . Not only do they make house calls , they follow-up purchases with phone calls . DREW CASHMERE , Executive Vice President , Godfrey 's : We tend to find a lot of little problems that most men wo n't tell us initially , but we find it 's really helped our business . We 've gotten a lot of compliments @!VANOCUR voice-over With independents offering extra service and bare-bones , cost-cutting operations proliferating , traditional retailers are in trouble . After 87 years in southern California , Buffams , which operated 16 stores employing 1,300 people , is the latest venerable institution to join the casualty list . JOHN DUNCAN , CEO , Buffams : It 's really a discount mode that the customer is looking for today . So having someone meet you at the front door and making sure you got treated properly in the store , make sure the clothes fit you properly , and that you know what you 're buying - those days are disappearing for the mass of customers @ @ @ @ @ @ @ @ @ @ high tech to an old staple - the founder of Staples , Tom Stemberg . Commercial break VANOCUR : This week 's Business World guest is one of the breed of entrepreneurs who has helped change the face of retailing . His office-supply discount chain is a booming success in the Northeast . He got the idea when he visited a warehouse club store for a job interview and saw that shoppers had virtually emptied the office-supply aisle . That was the spark that inspired Staples founder Tom Stemberg , who joins us from Boston . Mr. Stemberg , in contemporary retailing , what is best - bigger , smaller , or niche ? TOM STEMBERG , CEO , Staples Incorporated : I would say the most important thing , if you want to use a term for us , I suppose would be " niche , " which is to serve all of the needs of a customer in a given category with everyday low prices and complete selection , just as we 've done at Staples @!VANOCUR When did it change in America ? Because the mall became a @ @ @ @ @ @ @ @ @ @ housing after World War II , when did that change ? Mr. STEMBERG : You know , I 'm not sure it fully has changed . It 's a gradual metamorphosis when the Toys R Us came into being , I guess in the 50 's , would probably have been the single most significant event creating these specialty discount retailers , which dominated categories . Of course , then you have your electronics chains -Home Depot in the home improvement industry - and now , of course , Staples and Office Depot and others in our industry @!VANOCUR But what did people like those people see . What did you see when you made the change ? Mr. STEMBERG : Well , actually , what I was looking for , frankly , from the perspective of a retailer , was that I looked at consumer behavior and saw that , in every category , a dominant chain had taken over that category by offering complete selection and everyday low prices and , frankly , I went out looking for a category that was growing quickly and with the service economy @ @ @ @ @ @ @ @ @ @ this country , the office-supplies industry , and Staples , sort of , became an obvious opportunity @!VANOCUR You always emphasize small businesses . Elaborate on that . Mr. STEMBERG : Well , at Staples , what we discovered is that the larger corporations the General Electric 's of this world , the IBM 's - could buy office supplies very inexpensively . The small-business person - the small law practices , to small medical practitioners , the consulting firms , the person who has an office in his or her home - had to pay twice or three times as much for office products . The opportunity was very simple - to find an efficient distribution channel which could offer the big-company prices to small business and carry everything that small business was looking for under one roof @!VANOCUR How have demographic changes affected retailing , and I mean by that an older population - living longer , having more money , too ? Mr. STEMBERG : Well , clearly , the greater affluence has helped all kinds of businesses . I 'd say that the older population perhaps more @ @ @ @ @ @ @ @ @ @ they tend to cling more to the older forms of retailing , including mall-based retailing . It 's particularly the younger households with two working partners in that relationship , who are pressed for time , who have that very , very strong need to find absolutely everything under one roof at very good prices . That 's the customer for Staples , Toys R ' Us , Circuit City , and all the other category killer stores @!VANOCUR Very quickly - you mentioned pricing , but you also mentioned convenience . Is convenience more important than pricing , or are they equally important ? Mr. STEMBERG : I 'd say those two factors , as well as selection . It 's really all three wrapped into one , which are equally important , and each customer has his own priority list , though I would say price probably would be number one , selection number two , and convenience number three , if you forced me to rank them , Sandy @!VANOCUR I thank you for doing it . Thanks for joining us here on Business World . Mr. STEMBERG @ @ @ @ @ @ @ @ @ @ stock has been a hot performer - up 66 percent since the first of the year - as have other nontraditional retailers . Home Depot is up 43 percent over the same period , and Wal-Mart , the high-tech discount store founded by Sam Walton , is up more than 35 percent since the start of 1991 . Wal-Mart , with $32.6 billion in sales , has overtaken both K-Mart and Sears to become the nation 's number-one retailer . Walton described one of the secrets of his success . SAM WALTON , Wal-Mart Founder : If something does n't work , we back up and start and try and try and try another direction , and that has helped us over time because , in that process , we 've been able to stay out in front @!VANOCUR At Friday 's closing bell , the Dow Jones industrial average finished the week down by more than 17 points . Last week , our panel of stock-market experts from around the country predicted an up week . Our panel is split for the week ahead . Panelist Al Frank , a @ @ @ @ @ @ @ @ @ @ is positive . AL FRANK , Investment Advisor : We think this is a very healthy market that has a lot further to go . Of course , there will be earnings disappointments and volatility and churning but , over the next several months , we expect the market to advance 10 to 15 percent and feel that people should participate in it , especially in the secondary stocks , which are so strong and outperforming the blue chip stocks by a factor of two to one this year @!VANOCUR When we return - so many shopping centers and not enough shoppers . Are developers getting mauled ? ANNOUNCER : Over the past decade , retail rents have gone from an average yearly increase of nine percent in 1980 down to one percent in 1990 . At the same time , retail-vacancy rates have soared , from 3.9 percent in 1980 to 11.1 percent in 1990 . Commercial break VANOCUR : The downturn in retail sales has been disastrous for states that rely heavily on the sales tax for income . In Pennsylvania , sales-tax revenues , excluding automobiles , were @ @ @ @ @ @ @ @ @ @ In Connecticut , sales taxes brought in five percent less in February than the same month in 1990 and , in Illinois , sales- tax income from March of 1991 was down 11 percent from the year before . And while states worry about how to make up for the shortfall in sales taxes , all operators , facing shortfalls of their own , are hard pressed to offset the loss of customers . voice-over A common lure developers use is the entertainment complex , but that could backfire . CARL STEIDTMANN , Vice President , Management Horizons : It tends to attract an element of the population that is not necessarily there to purchase goods , which is what the mall ultimately has to be about , so you do attract teenagers who are more interested in the scene at the mall and who may actually distract people who would normally come to the mall to purchase goods @!VANOCUR voice-over Real shoppers may be more attracted by attractive prices . Manufacturers ' outlet malls sold about $8 billion worth of goods last year . MARY WESLOWSKI , Shopper : I @ @ @ @ @ @ @ @ @ @ three-hour trip @!VANOCUR voice-over But sometimes , convenience counts . Some downtown malls are capitalizing on that old adage , " Location , location , location . " Although the new Columbus City Center in Ohio is not fully rented , their square-foot sales are about $300 - nearly twice the national average , which is down 20 percent from 1980 . Timing , says its developers , was everything . NORMAN PLOURDE , Columbus City Center : I understand that there was over $10 billion spent in downtown Columbus in new office buildings and so on . There are 100,000 workers in downtown Columbus . We probably have more male shoppers because of the downtown components @!VANOCUR Every shopping mall used to be considered a field of dreams - build one and the world would beat a path to your door but , now , as ABC news correspondent Allan Frank reports , some mall operators are looking to creative solutions to keep from losing sleep . ALLAN FRANK , ABC NEWS : voice-over When this blighted section of Glen Cove , Long Island , was razed in the name @ @ @ @ @ @ @ @ @ @ by a spiffy , suburban shopping center , but retailers proved hard to attract , so its developer began renting it out as office space for commercial tenants . MICHAEL PUNTILLO , Vice President , Jobco Organization : In terms of the facilities we can offer , typical office buildings would not afford the tenant restaurants immediately within the area . We have extensive parking because of the parking facilities that were built to provide space for retail shoppers coming in @!FRANK voice-over For several tenants , the location works well . SUSAN FRENCH , Manager , Royal Holiday : We 've picked great amounts of corporate business from the- just the mall area here at South . ROBERT TAST , Architect : It 's kind of a nice scale and a friendly environment . It 's worked out very well . In fact , if we had to do it again , we would try to locate in a similar situation @!FRANK voice-over But the center 's lone retailer feels off the beaten path . MADELINE FLORES , Fashion Cove Village Boutique : It does n't bring in much walking @ @ @ @ @ @ @ @ @ @ all office buildings around you @!FRANK voice-over In Houston , where retail vacancies are a glut on the market , construction is underway to convert a foreclosed mall into something completely different - a hospital complex . JOHN STYLES , Mid- America Health Care : It was a building that had an excellent location for what we were doing . It was very accessible , which is very important for our patients and the physicians that are coming here , and the building was sitting here on 41 acres of land - a lot of parking , a lot of building for the hospital @!FRANK voice-over And buying the property - once valued at $25 million - for little more than $5 million was healthy for the hospital 's bottom line . To cure the ills of retail properties , developers are seeking creative tenants . At this Danville , California , project , the developer gets a kick out of one tenant 's pretty funny idea . By day , it 's a beauty parlor , by night , a comedy club - no kidding . TOM ENBERG , Whitney @ @ @ @ @ @ @ @ @ @ space and also providing to the community a very unique service or , you know , entertainment opportunity , I mean , that 's to me a real creative retailing approach . That kind of thing , I love to see in a shopping center @!FRANK voice-over Enberg now believes non-retail businesses can not only help fill vacant storefronts , but also can restore character to shopping malls by giving them the vibrant feel that downtowns once had , but he draws the line at some businesses , which project tawdry images . Mr. ENBERG : I do n't want to disparage anybody 's business , but karate studios and check-cashing operations are two of them . You see those in a project , what you 're seeing is a leasing problem , generally speaking , because that somebody 's very desperate to find a retailer @!VANOCUR When we return a look at the retail version of supply side economics . Commercial break ANNOUNCER : In just one year , form 1989 to 1990 , employment in the U.S. apparel industry dropped from 1.09 million to 1.03 million , breaking a @ @ @ @ @ @ @ @ @ @ is littered with remnants of department stores which did n't survive the sea change in retailing - Garfinkel 's , Altman 's , and Sakowitz are gone . Chains like Allied Federated and Ames are in bankruptcy but , as ABC news correspondent Ken Prewitt reports , those failures have had a trickle-down effect , leaving some suppliers hanging by a thread . DAVID ELLIS , Buxbaum Ginsberg &amp; Associates : We 've got a great sale going here , if you need anything just let us know , okay ? We 're getting ready to close down here . KEN PREWITT , ABC News : The people running this sale jokingly say they 're in the growth industry of 90 's - liquidation . Mr. ELLIS : We 'll get rid of everything here - all the merchandise in the store . We always will sell out completely everything @!PREWITT voice-over Why is it ending this way ? MARY ELLEN FOSSETT , Manager , Contemporary Man : Everything so oversaturated . Everywhere you go there's- someone 's running a sale @!PREWITT voice- over Many of them like this . In @ @ @ @ @ @ @ @ @ @ 've become so common that consultants Buxbaum and Ginsberg sell do-it-yourself kits , and it 's not just the retailers and their employees that get hurt . DAVID BUXBAUM , Buxbaum Ginsberg &amp; Associates : A bankruptcy can cost a manufacturer $50,000 , $150,000 , $200,000 , and that 's pretty difficult to overcome . You have to be awfully big have to be very , very financially stable to be able to overcome that @!PREWITT voice-over After losing millions to department-store failures , Bernard Chaus cut back last year 's production and watched sales fall 20 percent and , while he enthusiastically anticipates a fall-season comeback , he has streamlined the operation . BERNARD CHAUS , Chairman , Bernard Chaus Incorporated : One of the more poignant points here is the fact that we 've reduced our price points approximately 15 to 20 percent of what they were a year ago . We also limited the amount of SKU 's , the amount of styles that we have on the line @!PREWITT voice-over Cutbacks in production translate to job losses for the contractors - those who make the garments - @ @ @ @ @ @ @ @ @ @ Contractors : They 're waiting till the last minute to order new supplies . The contractors have to have a quick turnaround , and they 're waiting to get paid after it 's delivered @!PREWITT voice-over As dress-maker Cattiva ships its fall line , the company hopes to devote more time to fashion , less time to bill collecting . Mr. SCHWARTZ : I was hit very hard in the 80 's . Back in the 70 's , when I went into business , money was never discussed . You shipped a product , you got paid . Comes the late 80 's , people in America said it 's okay not to pay bills . It 's okay to become- to go bankrupt @!PREWITT voice- over Now , after 15 years of cutting it alone , Cattiva uses Factors , financiers who collect and assume debts , and Factors are busy people these days . RON McKINNON , Factor Bank of Boston : It 's been both great and terrible at the same time . Because of the concern about the retail bankruptcies the demand for our product and @ @ @ @ @ @ @ @ @ @ compared to anytime in the past 40 . On the other hand , Factors has absorbed more bad debt losses in the last six or nine months than they ever have in their history @!PREWITT voice-over The uncertainties have prompted some manufacturers , like Phillips Van Heusen , to open its own brand-name , price-retail stores - known in the trade as " maker to market . " Selling Van Heusen shirts and Bass shoes directly has helped the company grow 60 percent since 1987 . BRUCE KLATSKY , President , Phillips Van Heusen : It 's been significant in helping us control our distribution and present our product effectively to the American consumer . It helps us avoid any major problems from an inventory standpoint . We have been able to locate them in areas that are not competitive with our traditional customers @!PREWITT voice-over When Van Heusen does sell through traditional channels , it customizes the product . For $34.50 , you can buy this shirt at Macy 's with a Goeffrey Beene label , while at Sears the shirt with the store label goes for $17.99 , but @ @ @ @ @ @ @ @ @ @ the company longevity , it says , and in an industry known for its can-do optimism , staying power is an enviable trait . Mr. SCHWARTZ : Survival is where it 's at today - survival , survival , survival . We come to work knowing we have to survive @!VANOCUR We 'll be right back . Commercial break VANOCUR : That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Sander Vanocur . On behalf of everyone here at Business World , thanks for being with us. 
##223876 @!SANDER-VANOCUR-AB : Welcome to Business World . I 'm Sander Vanocur and here 's what 's on this week 's agenda . voice-over Trump 's crown jewel shatters . The Taj Mahal goes bankrupt and Donald Trump tries to restructure his empire . But if the Plaza Hotel becomes a condo , would Eloise want to live there ? From Westchester , the Taj Mahal 's largest bondholder , this week 's Business World guest , financier and airline owner Carl Icahn . Also , the American automobile industry - amid slow sales and foreign competition , the Big Three are languishing . Will the Saturn be General Motors ' shining star ? And the hottest of the imported luxury cars - why is there more demand than supply for these dream machines ? ANNOUNCER : From ABC News , this is Business World with Sander Vanocur and Stephen Aug . Now , from New York , here 's Sander Vanocur @!VANOCUR Early April car sales figures are due out tomorrow , and if the last reports are an indication , the news is going to be dismal @ @ @ @ @ @ @ @ @ @ , sales last month were down 19 percent from a year ago . Automobiles are the largest single manufacturing component of U.S. industry and a slowdown has a broad impact throughout the economy , but as business editor Stephen Aug reports , despite the recession and the downturn in automobile output and employment , at least one automaker is hoping it can find a guiding star - or at least a planet . STEPHEN AUG , ABC News : voice- over The midst of a recession may not seem like the ideal time to open a new car dealership , but for Saturn , the first new General Motors division since 1918 , the feeling is " better late than never . " THOMAS MANOFF , Vice President , Finance , Saturn : I 'm elated . Money 's starting to roll in to Saturn and after five years of spending , it sure feels great to have some income coming into the company @!AUG voice-over But it 's not just Saturn and its parent , G.M. , that need the cash . The entire domestic automobile industry is going to @ @ @ @ @ @ @ @ @ @ the final quarter of last year was , the first quarter of this year is going to be worse . How much worse ? JAMES BUSH , Editor , " Ward 's Auto World " : The worse quarter , probably , in history . The Big Three , as a group , lost $2.1 billion in the fourth quarter and the consensus forecast is on the order of $3 billion in the first quarter of this year @!AUG voice-over The head of automotive operations at Ford agrees . ALLAN GILMOUR , President , Ford Automotive Division : Sales were down in the first quarter , Steve , compared to the fourth quarter of last year , and I think the financial results will be worse @!AUG How much worse ? Mr. GILMOUR : Do n't know yet - still gathering up the numbers - but quite a lot worse @!AUG voice-over One concern is the potential effect of huge inventories of Japanese cars that might be dumped on the U.S. market . While domestic manufacturers shut down operations to control inventories , the Japanese continue producing , storing the excess @ @ @ @ @ @ @ @ @ @ that the heads of G.M. , Ford and Chrysler met with President Bush last month , urging him to retain import restraints . Chrysler chairman Lee Iacocca had warned the President that dumping by the Japanese could send their share of the U.S. market from the present 30 percent to 40 . At that level , he said , " Chrysler is gone and Ford could be mortally wounded . " Not every U.S. auto executive is so pessimistic , especially at Ford , the lowest cost domestic producer . Mr. GILMOUR : Because of the price position that a good cost position can get , I do n't believe that we 're going to see a big , big increase in Japanese penetration from where it is now @!AUG voice-over While the White House rejected quotas , the automakers ' message might have gotten through . Mr. BUSH : The Secretary of Commerce , Mosbacher , was already- was in Tokyo and , I guess , conveyed to them that we stand prepared to enforce our dumping laws , so , I mean , that 's a pretty strong signal @ @ @ @ @ @ @ @ @ @ , the Japanese will pay for it @!AUG voice-over In fact , Interior Secretary Manuel Lujan had suggested the administration might soften its resistance to raising fuel economy standards for new cars @!ACTOR TV Commercial The average driver puts 12,00 to 13,00 miles a year on a car . At Saturn , we knew this @!AUG voice-over Yet , it 's cars like the Saturn on which Detroit is relying to fight the imports . DAVID HEALY , Auto Analyst , Barclays : I think that G.M. has essentially tried to imitate a good , small Japanese car with the Saturn , and I think they 've succeeded . Their aim is to take sales away from imports , particularly in the West Coast markets where they 've started the car , and they seem to be doing this @!AUG voice-over And some West Coast customers agree , like Jennifer Gail Millar , who disposed of a Nissan and bought a Saturn . JENNIFER GAIL MILLAR , Saturn Owner : Design-wise , in terms of the amount of room you 've got in that car- the Japanese models that I tested @ @ @ @ @ @ @ @ @ @ but forget about going and buying some groceries @!AUG voice-over But problems with the Saturn last fall and winter slowed down the assembly line . The company opted to slow production rather than ship to dealers cars that would not perform properly . LEE LUCAS , Saturn of Burlingame : The first few weeks that we were open , we had hundreds - literally hundreds - of people coming in here every day and we did n't have the cars that we needed to supply those people 's needs , and it was kind of a shame @!AUG voice-over Still , problems continued to slip through . Steve Schaefer , who lives in the San Francisco Bay Area got one of them . The front door has to be slammed to shut it . The steering wheel squeaks . STEVE SCHAEFER , Saturn Owner : -this screeching , scraping sound- AUG : voice-over And the dashboard does not fit properly . Schaefer is a former Honda owner , but he still likes his Saturn . Mr. SCHAEFER : I think it 's about 85 to 90 percent of a Honda . @ @ @ @ @ @ @ @ @ @ in the drive train , in the sound of the engine , in the controls and the feeling that 's just slightly less and I think it's- they do n't have quite the experience with it @!VANOCUR The auto industry could be in even more trouble if a nationwide rail strike threatened for Wednesday takes place . A rail strike would stop the movement of new cars to market and parts to keep assembly plants going . The result would likely be more shutdowns and layoffs , but the Bush Administration says it 's willing to ask Congress for emergency legislation if that 's the only way to head off the strike . In just a minute , the creditors play the Taj Mahal casino 's Trump card . Commercial break VANOCUR : When Donald Trump made his deal to take over the opulent Taj Mahal casino , then under construction in Atlantic City , he considered it a tremendous coup , but now , as ABC correspondent Allan Frank reports , the coup may be the coup d'grace . ALLAN FRANK , ABC News : voice-over When the Trump Taj @ @ @ @ @ @ @ @ @ @ as the eighth wonder of the world . DONALD TRUMP : This building is a winner . Nobody 's seen anything like it . The reviews have been unanimous raves @!FRANK voice- over Today , the Taj Mahal is the most conspicuous symbol of tough times for Trump and Atlantic City . As the casino enters its second year of operation , it will be going into bankruptcy . Bondholders , who are owed more than $700 million by Trump , are going to take over half-ownership of the Taj in exchange for reduced interest payments . But bondholders have decided Trump 's management and his much publicized name should remain while he works out his troubles . ROBERT MILLER , Attorney for Bondholders : It 's a fair deal . It 's a fair deal for the bondholders in the sense that , if everything works out , they get their bonds repaid and they get a piece of the upside in the casino , and if things do not work out , they will wind up in control of the casino @!FRANK voice-over With the Taj Mahal deal reducing @ @ @ @ @ @ @ @ @ @ could turn the corner . WAYNE JOSEPHSON , Fitch Investors Service : It will be a close call because Atlantic City is in a recession right now . Even though the Taj Mahal is the most successful casino and the market leader , it 's still generating less cash flow than was expected @!FRANK voice-over With the Taj Mahal under control , if not in the black , Trump will have to spend some time promoting his other properties , the Trump Castle and the Trump Plaza . Both casinos were hurt by the Taj and saw business decline dramatically over the last year . Trump got some breathing room on a $25 million principal payment due soon on the Trump Plaza by cutting an innovative deal with Fidelity Capital . Fidelity traded $25 million worth of Plaza bonds for a mortgage on the casino 's parking garage , carrying about 12 percent interest . Mr. MILLER : It 's amazing that Trump had n't already pledged the parking garage because , up until now , he 'd borrowed against everything that was n't nailed down @!FRANK voice-over At the Castle @ @ @ @ @ @ @ @ @ @ 15th . He hopes to avoid another bankruptcy filing , but Castle bondholders could force him to give up some equity there , too . All 11 casinos in Atlantic City hope and pray they get relief soon . RICHARD BYRNE , Merrill Lynch : We are very optimistic about the longer-term outlook for Atlantic City . The principal reason is the Northeast economy is bound to pick up and secondly , there are no new casino additions planned anytime soon @!FRANK Trump 's credit problems are not confined to Atlantic City . Here at the Plaza Hotel in New York , he hopes to raise cash by converting rooms into condominiums at heretofore unheard of prices of up to $1,600 a square foot . Trump concedes he 's gambling by asking such outrageous prices , but , confident as ever , he insists he 'll get them because the hotel has the best location in the city . voice-over Some real estate experts doubt he can pull it off . LLOYD LINFORD , Reis Reports : His strategy does not represent a slam dunk given the current weakness in Manhattan @ @ @ @ @ @ @ @ @ @ Trump 's properties will attract foreign buyers . BARBARA CORCORAN , Corcoran Group : We had a couple from Rome in the lobby of the Trump Tower on Fifth Avenue about two weeks ago who had shopped the entire market . They had seen Donald Trump in the lobby that day as we were showing the apartment and they bought that particular unit - paid more for it than they would anywhere else , but they were delighted to be there . They felt they had a little piece of Hollywood @!FRANK voice-over With banks anxious to be repaid more than $2 billion , Trump still has plenty of property to peddle . He 's hoping to hand off the Trump Shuttle to Northwest Airlines in a deal that lets Northwest assume the Shuttle 's considerable debts , and he is still a long way from developing a huge parcel on Manhattan 's West Side he once called Trump City . But Trump 's next task is convincing the New Jersey Casino Control Commission tomorrow that it should renew his license to run the Taj Mahal . Allan Frank , ABC @ @ @ @ @ @ @ @ @ @ of Donald Trump 's major creditors and the owner of troubled TransWorld Airlines , Business World guest Carl Icahn . Commercial break VANOCUR : This week 's Business World guest is one of the nation 's best known financiers . He 's the owner of the troubled airline TWA , still awaiting government approval to sell overseas routes to American Airlines in order to raise needed cash . And he 's also the largest single owner of junk bonds in the failed Taj Mahal casino . On Friday , I spoke with Carl Icahn at his office in Mount Kisco , New York . interviewing The conventional wisdom is the junk bond era is over . If it is , then why did some have some disastrous failures or are on the ropes - Trump , First Executive in California - yet you- I do n't think you 're on the ropes . You used junk bonds . What 's the difference ? CARL ICAHN : Well , I think , to begin with , toward the end of the era , a lot of money was spent- a lot of @ @ @ @ @ @ @ @ @ @ ridiculous prices for companies . As a result , these companies could not sustain the debt load that they put on them . In the case of what I did , with ACF , we issued bonds , but we conserved the cash . And even at TWA , where the airline industry is in terrible , terrible shape , the whole industry- You have overcapacity ; you have tremendous costs , costs going up at 10 percent a year and a recession , so everything is hitting at once . But even at TWA , interestingly , we do have cash . Our problem is not , at this moment , cash , but operating losses . So it was different- it was different with us to the extent that we did not overspend the cash that we got from the junk bonds . And , on the other side , in fact , we used some of that cash , or a lot of it , in the last year to buy junk bonds , and we 've done very well with that portfolio @!VANOCUR The money had to @ @ @ @ @ @ @ @ @ @ " prudent lender " ? Mr. ICAHN : All right . I mean , where did the money come from ? I believe- VANOCUR : You and I know where it came from . Mr. ICAHN : I understand , and I think that you 're very right , that it became a tulip-bowl mania . You got a lot of kids out of business school that would just sit there with slide rules and say , " This company can make it if that company made it . " Investment bankers that were getting tremendous commissions would tell companies to go in and tell companies to go in and pay any price for another company , or an LBO group to go pay any amount for a company , because everybody was getting a commission . Everybody was feeding at this thing . And it became a mania where they felt no wrong could be done . And we stopped getting involved in buying companies - as did other prudent investors- or prudent LBO buyers , if you will , stopped doing it because the prices were insane . We @ @ @ @ @ @ @ @ @ @ last three , four years and we said , " Forget it . " But now , interestingly , it went the other way and the junk bonds are selling too cheaply , because all you 're doing now , when you buy a junk bond today , if you 're buying the right ones , is- what you 're doing is buying back the equity of these companies at a very cheap price relative to what it sold for , so it 's now- the pendulum has swung too far the other way , in my opinion , but at the beginning , you 're right . Everybody was just going crazy - about two years ago . Not at the beginning , but maybe two years ago , when it just got out of hand @!VANOCUR You 're known for wanting to take over Texaco - a prudent investment ; USX - a prudent investment . You bought TWA - a prudent investment ? Mr. ICAHN : Well , let 's start with taking over Texaco . I think that Texaco was an investment with us . I do @ @ @ @ @ @ @ @ @ @ , necessarily . I just thought the stock was very cheap @!VANOCUR They thought you wanted to . Mr. ICAHN : Well- VANOCUR : Go back to TWA , though- Mr. ICAHN : -people- It 's interesting . Everyone thinks you want to take over companies . Sometimes you do , and- very often , you do . At times , we were thinking of taking over Texaco , but it was a good investment and at times , we wanted it , maybe . But TWA , interestingly , was a good investment at the time . We had made a deal with the unions , if you remember . Otherwise , I do n't think I would have gotten into it to the extent I did . I definitely would n't have . We could have gotten out and sold our position out . We had made a deal with the unions where they gave us very big concessions and things did work out well for awhile . If you had n't had the bombing in Libya- I mean , it 's easy to look back , but even @ @ @ @ @ @ @ @ @ @ around . But if you had n't had the bombing in Libya and the headaches that we had during the last year , it would n't have- hopefully- it might have turned out a lot better . And even today , we do have a strong cash position , but operationally , as I said , we 're getting hurt @!VANOCUR But is Kirk Kerkorian trying to make a deal with your unions and are you in contact with Kerkorian about what his ambitions are vis vis TWA ? Mr. ICAHN : Well , interestingly , Kerkorian has n't even called me , so it 's a very unusual and enigmatic situation . I mean , Kerkorian is out there saying that he wants to buy this company , but it 's awfully hard to do that when you have n't called the owner , so it makes you wonder . And , as far as I 'm concerned , selling the route is very important to TWA , to our cash position and , basically , to our future @!VANOCUR Thank you very much . Thanks for joining us here @ @ @ @ @ @ @ @ @ @ Turning to the week on Wall Street , at Friday 's closing bell , the Dow Jones Industrial Average finished the week up more than 24 points . Last week , our panel of stock market experts from around the country was split . Our panel 's consensus is for an up week ahead . Panelist Al Frank , a Santa Monica-based newsletter publisher , thinks that , in part , because of its downturn , the auto industry is a good buy . AL FRANK , Investment Advisor : We like the auto stocks right now because they 're so out of favor . We remember back in ' 80 to ' 82 , while Ford was losing money for three years , its stock doubled in price , more than doubled . We think Chrysler , Ford and General Motors are all good stocks trading for less than book value , trading for between 10 and 20 percent of revenues . We would think Chrysler would trade at $25 a share , Ford at $63 and General Motors at $52 in the next three to five years @!VANOCUR When @ @ @ @ @ @ @ @ @ @ on the stock pages . Commercial break VANOCUR : While U.S. car makers are bemoaning weak sales , there are some cars that are in such demand that they 're back-ordered for months . But these are n't the cars you 're likely to see in the supermarket parking lot , not at prices starting above $60,000 . KATE McCLEOD , Acura NSX Owner : I got out of the car at the Chatham Diner and I was instantly surrounded by men . Standing in the pouring rain , they 're chatting me up about my car - " Oh , could I see it , please ? I 've never seen one on the road before . " I mean , it was absolutely a magnet @!VANOCUR voice-over The attention the Acura NSX drew gave McCleod an idea , much better than anything out of Cosmopolitan - what a great way for single women to meet men . Ms. McCLEOD : When this happened to me , I thought , " Well , great . " All these single women I know in New York who have trouble meeting great @ @ @ @ @ @ @ @ @ @ man you want with this car . ED TAYLOR , Vice President , Acura : I know it really can make you feel good . Because of the distinctive styling , it really is a head-turner . It has terrific eye appeal @!VANOCUR voice-over And that 's just what Acura had hoped for when it introduced the limited production car last August . Acura is only allocating 3,000 NSX 's for the U.S. this year @!ACTOR TV Commercial Recently , Acura introduced what many have called the greatest sports car the world has ever known @!VANOCUR voice-over And using that publicity to help sell the other 140,000 cars Acura hopes to sell here this year @!ACTOR TV Commercial Our latest idea is somewhat bigger : the 1991 Acura Legend . Mr. HEALY : When you go into a Honda dealer and see the NSX , you 're probably going to wind up buying a Legend and when you go into a BMW dealer and see an eight-series , you 're probably going to wind up buying a three-series . I think that , in a sense , these are almost loss @ @ @ @ @ @ @ @ @ @ sell very many of these cars @!VANOCUR voice-over Despite the current recession , two other imported car makers have introduced new , $60,000-plus models . BMW is looking to enhance its prestige and reputation with its limited supply , new eight-series car . RICHARD RUBIN , BMW Dealer : I think that most of the people that shop for this kind of car do n't have an income problem to feel a pinch of a dollar or two @!VANOCUR voice-over The pinch for this new , sleeker model is $73,000 and there 's more demand than cars - not what you 'd expect in a recession . CARL FLESHER , Vice President , Marketing , BMW : We believe that our car prices now are very market-driven and I think most individuals who would look at the price tag of this car would - with a smile on my face - honestly say it 's a bargain @!VANOCUR voice-over And when Mercedes recently introduced its new , top-of-the-line roadster , the 500 SL , it stressed safety , as well as engineering and the company 's reputation . But the company @ @ @ @ @ @ @ @ @ @ $97,000 car . MICHAEL JACKSON , Vice President , Marketing , Mercedes Benz : I think it delivers outstanding performance in a very exotic style and design , but , at the same time , is a very practical car for day-to-day use @!VANOCUR voice- over That 's what he said - a practical , $97,000 , two-seat roadster . Whether practical or not , to the founder of this exclusive Manhattan restaurant , the appeal of the car is irresistible . FRANK GIAMBELLI , Mercedes Shopper : The style of this one , the model- you know , like when you see a beautiful young lady- that 's why @!VANOCUR Before you buy one of these beauties , remember . The insurance on the Mercedes costs enough to buy a small Honda and if you 'd like to take one for a test drive , do n't count on doing it at the dealer 's , but you can rent one for $400 a day and 50 cents a mile - not just anywhere , but at the Beverly Hills office of Budget Rent-a-Car . We 'll be right back @ @ @ @ @ @ @ @ @ @ week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Sander Vanocur . On behalf of everyone here at Business World , thanks for being with us. 
##223877 @!SANDER-VANOCUR-AB : Welcome to Business World . I 'm Sander Vanocur , and here 's what 's on this week 's agenda . voice-over Can customers bank on their banks ? What happens to the consumer in a banking industry consolidation ? From Washington , this week 's Business World guest , Federal Deposit Insurance Corporation Chairman L. William Seidman . Can his agency handle a banking shake- up ? Also , rising health-care costs put the squeeze on even an expert . Why did it cost this family 60 percent more to have a baby now than one born just four years ago ? And palm-top computers , once considered executive toys - with new hardware and software , the industry appears poised to take off @!ANNOUNCER From ABC News , this is Business World with Sander Vanocur and Stephen Aug . Now , from New York , here 's Sander Vanocur @!VANOCUR Banking reform is in trouble in Congress . Just this past week , Treasury Secretary Nicholas Brady blasted Congress for trying to deal only with the shortfall in bank deposit insurance funds instead of @ @ @ @ @ @ @ @ @ @ . This came amid another major bank bailout . The failed Bank of New England was sold to Fleet/Norstar in a deal which is still expected to cost the government insurance fund more than $2 billion . Banking consolidation does n't just mean fewer banks . As business editor Stephen Aug reports , it may mean fewer places where a banking customer can turn for service . STEPHEN AUG , ABC News : voice-over In Texas City , Texas , a community of 41,000 , Mayor Chuck Doyle is a keen observer of the Texas banking situation . That 's because he 's also chairman of the board of Gulf National Bank . And he says the huge mergers and buyouts of Texas banks by out-of-state companies like NCNB of North Carolina may be bad for Texans , but they 're certainly good for healthy , smaller banks . CHUCK DOYLE , Chairman , Gulf National Bank : It 's removed ownership from the personal banking side and that has created a void in understanding between this side of the desk and the borrower 's side of the desk . Now @ @ @ @ @ @ @ @ @ @ an independent community banker , because we still operate in that personalized service . And , so , in some ways , it 's been a windfall for us @!AUG voice-over Across town , at the Texas City Feed and Supply store , Rusty Schaper says he likes dealing with a smaller bank . RUSTY SCHAPER , Texas City Feed and Supply : I hope that I always- will always have the opportunity to bank with a small-type bank where people treat me sort of like the big fish in the pond @!AUG voice-over Healthy , small banks are not confined to small communities . Even a big city like Chicago has community banks , in this case , a multi-ethnic community where the folks at Devon Bank offer service in 33 languages . RICHARD LOUNDY , CEO , Devon Bank : We wind up taking business from some of these big banks , often , because the customer does n't have a loan officer that he can always relate to . Every six months or every year , they change the loan officer . He ca n't talk to the @ @ @ @ @ @ @ @ @ @ come and talk to me @!AUG voice-over Devon Bank and Gulf National are among the more than 13,000 banks in the United States . Add in credit unions and savings and loan associations and there are nearly 30,000 financial institutions that accept deposits and make loans . Include the growing numbers of branches and automatic teller machines and banking is virtually everywhere , and it 's become expensive . JAMES McDERMOTT Jr. , President , Keefe Bruyette &amp; Woods : Banking companies need to get this cost structure down . The revenues have been coming down and the cost structures must adjust @!AUG voice-over All of which is leading a growing number of people to say the United States is simply " overbanked . " Mr. McDERMOTT : I do n't think there is any question that there is excess capacity in the system , that there are too many banks chasing too few good deals . THOMAS THEOBALD , Chairman , Continental Bank : One way of proving that is that the returns to bank shareholders have been less than in other industries @!AUG voice-over In fact , Theobald 's @ @ @ @ @ @ @ @ @ @ Illinois Bank , which failed and was virtually taken over by the FDIC . The new Continental handles solely business accounts , so it does business with half the employees it had four years ago . With the banking industry consolidating , those cutbacks are likely to happen elsewhere . Mr. THEOBALD : What 's underway today will mean a reduction of several hundred thousand employees among the million and a half who are working for insured banks today @!AUG voice-over Many of the cuts result from bank failures , going back to the first bank the FDIC ever shut down , back in 1934 , the Fondulac State Bank of East Peoria , Illinois . Today , instead of closing banks , most failures are handled by merging the insolvent bank with a healthy institution . That 's the way the Bank of New England was sold last week to Fleet/Norstar , then the second biggest bank in New England . But unlike other big takeovers , officials promised decision-making will remain in local hands . TERRENCE MURRAY , Chairman , Fleet/Norstar : You give tremendous autonomy to the local @ @ @ @ @ @ @ @ @ @ in Buffalo or Albany or Boston , they are part of that community . They 're part of the fabric of that community and they have very broad decision-making authorities @!AUG voice-over Murray says only about one-third of today 's banks may survive the next dozen years of mergers . Still , most mergers may be among bigger banks , leaving the healthy community banks independent . EDWARD FURASH , President , Furash &amp; Company : The policy of banking in the United States has been to protect small banks , to see to it that local institutions were available to make loans to businessmen and individuals and the whole philosophy has been " money will be cheap and available to people who want to expand our economy . " AUG : voice-over And many smaller bankers agree , contending that the nation does not necessarily have too many banks . Mayor DOYLE : We have a decentralized , unit bank state that was here for so long , and we have a lot of independent , community banks and I do n't think the majority of the citizens in Texas @ @ @ @ @ @ @ @ @ @ , consolidation continues and in the rush to merge , there 's concern that some banks may grow too fast . At Fleet/Norstar , they say that 's not going to happen following the Bank of New England acquisition . Mr. MURRAY : Their intent is to fully digest it over the next two or three years and not to do anything major during that period , in New England or outside of New England @!AUG That implies no further big mergers in the immediate future for Fleet/Norstar . But what has smaller bankers upset is the prospect that the " too big to fail " doctrine is going to remain in effect . Protecting deposits at the big banks beyond the $100,000 limit , they fear , is going to erode their deposit base and force them out of business no matter how well they 're run . Sandy ? VANOCUR : Thanks , Steve . In just a minute , the man in charge of cleaning up the mess the banks leave behind , FDIC Chairman L. William Seidman . Commercial break VANOCUR : Comptroller General Charles Bowsher told @ @ @ @ @ @ @ @ @ @ Insurance Fund only has half the money it claims , and that it could be insolvent by next year . For this week 's Business World guest , that 's just the latest in a series of problems which are plaguing him both as Chairman of the FDIC and as head of the Resolution Trust Corporation , charged with the savings and loan bailout . L. William Seidman joins us from our studios in Washington . Mr. Chairman , as a former bank auditor , is the Comptroller General giving you a fair count ? L. WILLIAM SEIDMAN , Chairman , FDIC : Well , we do n't agree with him . It 's an argument among accountants about exactly when we should pick up some losses . It 's really kind of not real world @!VANOCUR All right , the real world is that the last time you were on Business World , I believe you said that you could n't take a hit like the Bank of New England . Well , you 're going to take a $2 billion hit . Could you take another hit like that @ @ @ @ @ @ @ @ @ @ Bank of New England , but do n't ask me if we could handle two of them @!AUG Well , I 'm going to ask you just that . Could you handle two of them ? Mr. SEIDMAN : It 'd be tight . It 'd be very tight if we had two of that size . We do n't see anything like that coming , at least through the fiscal year , which ends on September 30th @!AUG Let me put that question a little differently . To what extent are there banks out there that you 'd like to close because they 're insolvent and costing a lot of money , but you ca n't because you do n't have the money ? Mr. SEIDMAN : There are no banks , as far as I know , in that condition . In the first place , we do n't close them . The primary regulator closes them . Bob Clark , the comptroller , or the state regulator , so that could n't happen even if we wanted it to @!AUG Well , maybe I phrased the question a @ @ @ @ @ @ @ @ @ @ the fund is essentially broke . Mr. SEIDMAN : No , it 's not broke . No matter what the Comptroller says , we all agree we have about $7 billion in cash on hand . We can borrow $5 billion from the Treasury on a moment 's notice , because our line is already in place , so we have funding at this time , but , obviously , it 's going down because the recession is taking its toll on banks @!VANOCUR Mr. Chairman , I believe you 've been on Business World more than any other guest , and we 've always danced around but never addressed this question . Is not the banking , the savings , industry , the only form of American capitalism that is virtually risk-free ? Is that not the problem ? Mr. SEIDMAN : Well , it is- I would n't say it 's risk-free , because the stockholders can lose their money in banks , and many have , and outside creditors can lose their money . What makes it different from other industries is that banks raise their funds on @ @ @ @ @ @ @ @ @ @ and so that certainly makes it different from any other industry @!VANOCUR All right , sir . Whatever the reforms are , whoever you 're going to let into it , smaller banks will be closed , larger entities will go in the banking business , but you 're still going to guarantee them the full faith and credit of the U.S. government - are you not ? Mr. SEIDMAN : Well , we 're going to pull that guarantee in some . It 's not going to be as broad as it is now and , more importantly , we 're going to put many , many restrictions on what banks can do with those funds that they get through insured deposits @!AUG Let 's go over for a minute to what you need in terms of money . The administration is asking for - what ? - $70 billion in borrowing authority . Henry Gonzalez of the House Banking Committee says , " Well , we 're ready to give $25 billion . " What do you really need ? Would $25 billion be enough ? Mr. SEIDMAN : @ @ @ @ @ @ @ @ @ @ has asked to cover potential losses . The rest of the money that we 're talking about is money that we borrow short term to carry the assets that we take out of bad banks till we sell those assets . When we sell them , we pay that money back . So those are not losses . That 's just what we call working capital . So $25 billion is the right number in terms of what we need to cover any potential losses that anybody has predicted @!VANOCUR Mr. Chairman , what 's wrong with borrowing that money from the Fed ? Mr. SEIDMAN : Well , I do n't think there 's anything wrong . I 'd be happy to borrow it from the Fed . However , Chairman Greenspan and the governors think that it would be a bad precedent . We really do n't care . We 'll borrow it wherever we can get the best rate @!VANOCUR Thanks very much for joining us once again on Business World . And when we come back , when health-care costs go up and insurance benefits go down @ @ @ @ @ @ @ @ @ @ VANOCUR : Turning to the week on Wall Street , at Friday 's closing bell , the Dow Jones Industrial Average finished the week down by more than 53 points . Last week , our panel of stock market experts from around the country predicted a down week . Our panels ' consensus is for another down week ahead . Panelist Robert Farrell , chief technical analyst for Merrill Lynch , thinks there will be more action on the Street as companies try to get rid of debt . ROBERT FARRELL , Technical Analyst : There was so much debt that was put on corporate bond sheets in the 1980s that everytime the market does get better , corporations are going to try to raise funds by selling equity to pay off that debt . And we do see a very big calender this quarter . My guess is that 's one of the things that will contribute to the market being at a- at least a point where it 's going to have to take a rest @!VANOCUR The price of health care has been skyrocketing and the administration 's @ @ @ @ @ @ @ @ @ @ rise from more than 12 percent of the gross national product today to 17 percent by the year 2000 and a staggering 37 percent by 2030 . For working people , it means almost certainly having to pay more of the bill themselves . And that may be true even for those who think they know how to control costs . DAVE RAHILL , Foster Higgins : " Mirror , mirror on the wall , who 's the fairest one of all ? " VANOCUR : voice-over Even if you answer " baby Allison , " the bill for her normal birth was n't attractive to the Rahills . It cost almost $10,000 . Mr. RAHILL : We knew it would be a large bill , but I guess a couple of things took us a little bit by surprise @!VANOCUR voice-over But you 'd think that Dave Rahill , who advises corporations on how to hold down medical costs , would have been able to keep his own costs down . Mr. RAHILL : My wife asked me to talk to the doctor because she felt I was the expert @ @ @ @ @ @ @ @ @ @ feel a full sense of confidence negotiating the birth of my daughter with our physician @!VANOCUR voice-over Confronting doctors about their bills is one of the main tactics that companies are telling their employees to use in an effort to hold down costs . Despite Rahill talking the doctor out of doing additional tests that would have added another $500 , the family 's portion of the cost of Allison 's birth was 60 percent higher than the cost of their first child , born in the same suburban hospital four years earlier . What happened to the Rahills is typical of what is happening to families across the country . In the last five years , employers have increasingly shifted more medical costs to employees through higher premiums , larger deductibles and copayments . Dr. ROGER TAYLOR , Wyatt Consulting : In 1990 , if you take an employee with a family , they paid about $1 for every $2 that they employer paid in health-care cost . That 's , essentially , a one-to-two ratio , and that 's about double what was happening in 1985 @!VANOCUR voice-over Even @ @ @ @ @ @ @ @ @ @ coverage , as a percentage of compensation , the cost has shot up from eight percent in 1987 to an expected 14.5 percent in 1993 . While 61 percent of companies paid the total cost of health insurance for their employees and dependents in 1987 , only 43 percent do so now . Employees and their dependents are being caught in a squeeze between coverage and cost . DAVID WALKER , Arthur Anderson &amp; Company : I think people are going to have to make decisions . There 's no question about it . They 're going to have to make decisions as to the level of coverage that they want and they can afford @!VANOCUR voice-over Not only are their premiums higher , but insurance companies are limiting the amount they will pay for a procedure , leaving employees to negotiate with their doctors or be liable for the balance.Prof . UWE REINHARDT , Princeton University : You really do n't know what a medical procedure will cost you , because you do n't know how much , in addition to the insurance carrier 's allowed fee , the doctor @ @ @ @ @ @ @ @ @ @ the insurance carrier 's allowed fee is , so it 's a very strange system @!VANOCUR voice-over Even Rahill , who knows how the system works , got a firsthand lesson when he took his daughter to the orthopedist . Mr. RAHILL : His charge for what was termed an initial , comprehensive exam was $125 . That turned out to be $25 higher than what our insurance company recognized as a reasonable , prevailing fee . We then got reimbursed for 80 percent of the reasonable fee . We got reimbursed $80 , so we had to pay not just 20 percent of the fee , but we wound up paying almost 45 percent of the fee @!VANOCUR When we return , healthy growth in one segment of the computer industry , where little things mean a lot . Commercial break VANOCUR : The computer industry , especially hardware makers like IBM , have been hard hit by the recession . Even Wall Street darling Compaq took a beating this week when its quarterly earnings were less than analysts projected . But one segment of the industry is behaving as @ @ @ @ @ @ @ @ @ @ that , at least in this business , good things really do come in small packages . STEVEN FRANCIS , Service Representative : And how much could you pay per month on the balance in addition to the new bills as they come out ? CUSTOMER : Fifty dollars a month @!VANOCUR voice-over At New York 's Brooklyn Union Gas Company , service representatives use a handheld organizer made by Sharp to figure out whether customers qualify for credit . Mr. FRANCIS : The customer actually sees us . We 're asking questions . We 're keying information into our Wizards . They know we 're not just coming off-the-cuff with these questions @!VANOCUR voice- over Handheld organizers and computers are the cutting edge of portable technology , even though they had been categorized as executive toys , primarily used for keeping track of phone numbers and appointments . ANDREW SEYBOLD , Dataquest : I expect to see this type of box become a miniature terminal for electronic mail , for- through MCI Mail , through lots of the mail services and , also , to get back to my desk @ @ @ @ @ @ @ @ @ @ while I 've been away @!VANOCUR voice-over And the technology will be even more portable when Motorola ties a pager to Hewlett Packard 's new handheld computer . Executives on the go like the new technology because it means carrying a few ounces worth of palm-top computer instead of five to 15 pounds of portable computer . And corporations like Prudential Insurance are buying thousands of Sharp Wizards for sales forces because , at $400 a pop , they 're comparatively cheap and because they do n't require computer literacy . GIL DeLISO , Marketing Manager , Sharp : It allows the sales person in the field to be more efficient in terms of presenting the product and closing the sales . MARK EPPLEY , CEO , Traveling Software : We 're kind of at the beginning of a revolution in portable computing . In essence , this is a concept that we 've discussed in our company and we believe in . It 's called the " extended office . " VANOCUR : voice-over The burgeoning market for palm- top computers is being made possible by miniaturized hardware and portable @ @ @ @ @ @ @ @ @ @ ways : hooking your handheld to your desktop with products like those from Nictrix , Intellilink and Traveling Software ; or you can use memory cards with commercial software , like these , made to run on the pocket PC ; or , finally , you can use special drives to write your programs to blank memory cards , like Flash Memory , made by Intel , which can hold as much information as a box of floppy disks , but at a still hefty price , more than $700 . The cards also run on the newly announced Hewlett Packard 95LX , a product designed jointly by HP and software maker Lotus . JOHN YOUNG , CEO , Hewlett Packard : It 's a machine that 's , I think , targeted , certainly , as a key user base , Lotus 1-2-3 users and there 's 14 million of those around out of the 60 million PC owners today , so it 's a big subset of the overall marketplace @!VANOCUR voice-over The 11-ounce , $700 machine comes with more memory already built in than was available on early @ @ @ @ @ @ @ @ @ @ machine , the Poqet PC , an American-made computer , was the first handheld to use industry-standard programs and while it has n't been a big success so far , the company , now part of Fujitsu , says new models are on the way . BOW RODGERS , Executive Vice President , Poqet Computer : Pocket 2 is 1991 situation , which is a refinement , improvement , an updating , in our opinion , of the products that we have right now , the product we have right now . But a revolutionary jump , not an evolutionary jump , is in 1992 @!VANOCUR voice-over Even though handheld computers have been around for several years , analysts say that because of software , the field is poised to take off . Mr. SEYBOLD : In 1991 , you 're talking non-Casio , non-Sharp sales in excess of 500,000 units . I 'm talking about the Hewlett Packard and Poqet genre type of equipment , with Sharp and Casio selling an equal number in their own niches @!VANOCUR The one major limitation still facing these computers is n't in the @ @ @ @ @ @ @ @ @ @ human fingers . They 're just too big to do any serious typing . When we come back , this week 's winners and losers . Commercial break VANOCUR : Finally , this week 's winners and losers depends on whether you 're a boss or a worker . According to a survey by Business Week magazine at the nation 's 500 largest companies , average CEO salaries and bonuses climbed seven percent in 1990 to $1,953,000 , while corporate profits dropped by seven percent . Over the decade of the ' 80s , while factory worker compensation rose 53 percent , executive compensation was up 212 percent . That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Sander Vanocur . On behalf of everyone here at Business World , thanks for being with us. 
##223878 @!STEPHEN-AUG : Welcome to Business World . I 'm Stephen Aug and here 's what 's on this week 's agenda . voice-over Cities in trouble : Bridgeport files for bankruptcy . Will other municipalities follow suit ? And what happens to the municipal bond market if they do ? From Washington , this week 's Business World guest , Gerald McEntee , head of the nation 's largest public employees ' union . And computer confusion in standards : if you 're sitting in front of a computer screen , do terms like DOS 5 , OS/2 and Windows 3 mean anything more than just techno-babble ? And computer animation comes to commercials . Will award-winning , high-tech whimsy sell products any better than real actors ? ANNOUNCER : From ABC News , this is Business World , with Sander Vanocur and Stephen Aug . Now , from New York , sitting in for the vacationing Sander Vanocur , here 's Stephen Aug @!AUG Cities in crisis . The recession is hitting home in dozens of states and hundreds of cities and it 's worst in the @ @ @ @ @ @ @ @ @ @ turned up . That 's meant less revenue and more social services demands . The sum total ; a fiscal disaster which , late in the week , claimed its first major casualty , Bridgeport , Connecticut . While Bridgeport may stand alone as the first into bankruptcy court , it 's got lots of company trying to swim upstream against the tide of red ink . Thursday 1st PRO-LABOR DEMONSTRATOR : Cut management back ! Do n't lay off the workforce ! That 's what we have to do . 2nd PRO-LABOR DEMONSTRATOR : Eleven hundred workers and keep 300 outside political hacks . That 's bad business ! AUG : voice-over Hundreds of New York City park workers rallied to protect their jobs in the face of proposed cuts that would lay off fully one third of them . Still , that 's only part of New York Mayor David Dinkins ' plan to eliminate a $3.5 billion deficit from the city 's proposed $28.7 billion budget . Dinkins would eliminate 8,000 jobs over the next three weeks and possibly as many as 27,000 in the months ahead . @ @ @ @ @ @ @ @ @ @ May 8,1991 ) We must not simply succumb to our plight . We can do something about it @!AUG voice-over New York 's problems are just one example of the financial angst afflicting American state and local governments . In California , the state government is faced with a deficit topping $14 billion . PETE WILSON , Governor of California : ( March 29,1991 ) We can pray for a May miracle in terms of revenue recovery , but it 's very clear we can not rely upon hope and it 's very clear that we can not wait @!AUG voice-over Unfortunately for Wilson , the May miracle did not occur . State tax revenues have now fallen each month for the first five months of this year . In Los Angeles , the state 's biggest city , they 're planning to cut 445 police jobs through attrition to help trim an expected $177-million city deficit . TOM BRADLEY , Mayor of Los Angeles : The steps which we 've taken are almost Draconian , but we simply ca n't go beyond that @!AUG voice-over In Maine , the state @ @ @ @ @ @ @ @ @ @ furloughs were ordered in Rhode Island and Suffolk County , New York . Then , last week , Bridgeport , Connecticut , became the biggest American city in generations to seek bankruptcy court protection . MARY MORAN , Mayor of Bridgeport : We have a problem . We have to get off the merry-go-round . We have to say , " We have a problem , " and we have to do something about it . That 's what we 're doing @!AUG voice-over But in the credit markets , the Bridgeport bankruptcy caused not even a ripple , possibly because about half the bonds are privately insured . And earlier in the week , New York City was able to sell $675 million worth of bonds , but the city had to pay a relatively high 8.5 percent interest rate to attract buyers . FELIX ROHATYN , Chairman , Municipal Assistance Corporation : The reality of life is that the city 's bonds are selling as if they carried a lower rating than that provided by Standard &amp; Poor 's @!AUG voice-over Rohatyn was instrumental in helping New York through @ @ @ @ @ @ @ @ @ @ says , this time , conditions are worse and he 's not alone . Prof. RAYMOND HORTON , Columbia Business School : New York City is still able to borrow money in the public credit markets . If it loses the ability to access the public credit markets , then things will be much worse . ELIZABETH HOLTZMAN , New York City Comptroller : Now , of course , the city ca n't rely on the federal government . The federal government has , over the past 12 years , been pulling the rugs- the rugs out from all the cities in this country @!AUG voice-over Twenty one states have budget trouble . California , Connecticut , Louisiana , Maine , Massachusetts , New Hampshire , New York , Pennsylvania , Vermont and Virginia are the worst , with deficits amounting to more than 15 percent of their budgets . There is no one reason why all these states got into trouble . MARCIA HOWARD , Association of State Budget Officers : If you look , particularly , around 1986- ' 87 , you 'll see that several states cut taxes @ @ @ @ @ @ @ @ @ @ other hand , many states were , as you say , implementing programs that used much of the surpluses that they were generating during those years , and those programs are now causing problems in the state budgets @!AUG voice-over Add on 10 years ' worth of billions of dollars in federal aid cutbacks , the AIDS epidemic , the crack invasion and growing homelessness , and the final straw was the recession . But some say politicians must share the blame for overspending , hiring too many people , far more than the growth in population . DANIEL MITCHELL , Economist , The Heritage Foundation : If you look at a state like New York , you have a 30 percent growth in public employees since 1980 , when you only had a two percent increase in the population and I think that there 's no way you can justify that we had much more government needs today as opposed to 1980 @!AUG voice-over To solve their problems , state and local governments are looking at raising college tuitions , cutting back Medicaid where they can and raising taxes . @ @ @ @ @ @ @ @ @ @ 's supposed to help . Mr. MITCHELL : A state that raises taxes is going to lose taxpayers and businesses to a neighboring state @!AUG voice-over And there are nationwide effects . Mr. ROHATYN : Government cutbacks and tax increases , in order to close these deficits , that , in my judgment , are going to be the equivalent of , say , a $50-billion tax increase across the country and coming on top of a very weak economy , which might be trying to turn its head up a little bit , I think it 's going to be very negative @!AUG It 's worth noting that public employee unions are , by far , the fastest growing labor unions and while only 12 percent of workers in private industry are union members , 37 percent of public employees are . By the turn of the century , the public sector unions could account for 60 to 70 percent of all trade union members . In a minute , will city workers offer the kind of give-backs that industrial unions gave to bail out corporations ? We 'll ask @ @ @ @ @ @ @ @ @ @ AUG : In Rhode Island , state workers have agreed to take some unpaid work days as a means of helping ease the state 's fiscal crisis , but in New York City , after getting new contracts , municipal unions have been reluctant to help . As head of the American Federation of State , County and Municipal Employees , this week 's Business World guest faces the question , " What should public workers do to help their fiscally strapped employers ? " Gerald McEntee joins us from our studios in Washington . Mr. McEntee , I guess that- why do n't we start with that ? What should public employees be doing to help the city ? GERALD McENTEE , President , AFSCME : Well , I think public sector workers and public employees , whether they work in a city or a state , are willing to come forward and attempt to help the cities and states . I mean , we 've been through this before @!AUG Yeah , but , in fact , they really have n't been willing to come forward this time . @ @ @ @ @ @ @ @ @ @ example , to take days off was because the government was shutting down the state for one day a week . Is n't that right ? Mr. McENTEE : Well , we reached agreement in the State of Rhode Island , because of the problems , to help the governor meet the fiscal crisis facing Rhode Island . But go back to the ' 70s . We were the union that , really , bailed out New York City . We did it with Detroit . We did it with Philadelphia . Our people have always been ready to come forward to help fiscally strapped cities and states . We 're ready to do it in New York City , but we have yet to see a major , overall plan to bring the city out of the fiscal crisis that now exists @!AUG All right , now- Mr. McENTEE : You see pieces of it , but we 've yet to see an overall plan @!AUG In the ' 70s , one way you helped New York City was , as I recall , your pension plan bought Big Mac @ @ @ @ @ @ @ @ @ @ well with them . I mean , they were a fine investment . This time around , it 's like a private employer . When the steel industry got into trouble , the workers were forced , practically , to make givebacks . The same in the automobile industry . But , for some reason , the public employees are not willing to do this . They say , " We 're not going to do it . " How do you say you 're helping them ? Mr. McENTEE : Well , we do say we 're helping them . Our people go to the negotiating table and if a case is made by the management of that particular state and the city , our people have been ready , willing and able to meet that kind of problem . One of the problems is that people talk about this " growth " in the public sector and the growth of public employees . And we would like people to take an awfully close and real look at what kind of growth we 've had @!AUG All right , let @ @ @ @ @ @ @ @ @ @ if I may , you mentioned the City of New York and we have seen growth in the last decade , 62 percent in management and very little growth - up around 15 or 20 percent , if that - in the people who actually perform the work , collecting the garbage and keeping the bridges in repair @!AUG All right , so your argument , then , is if you 're going to cut the workers , you certainly better cut the management . Mr. McENTEE : Well , you most certainly have to take a hard look at bloated management that now exists in so many states and so many cities @!AUG All right . One way to solve that problem would be privatization . Let 's take garbage collection . You privatize the garbage collection , you get rid of , practically , the whole sanitation department and it becomes cheaper . Is n't that a good idea ? Mr. McENTEE : Well , you 'd get rid of the sanitation department . You would n't get rid of the managers . We 've had experiences with sanitation @ @ @ @ @ @ @ @ @ @ high degree of management . We 've seen , after a period of time of one or two years , the cost of even the private sector being in excess of the public sector . They will lowball in order to get their first contract in , but once it 's in and the city or the state 's rid of the equipment , then they can really call the shots . In addition , we have seen the private sector , particularly in the defense department of the federal government , take over in terms of weapons and equipment and things like that , and that 's probably been one of the greatest scandals that we 've had , in terms of federal government and private sector , in the history of this country @!AUG All right . I 'm sorry . We 're out of time , Mr. McEntee , but thanks very much for being with us . When we come back , when is a standard not a standard ? When it 's set by the computer industry . Commercial break AUG : Turning to the week @ @ @ @ @ @ @ @ @ @ the Dow Jones Industrial average finished the week down by almost 51 points . Last week , our panel of stock market experts from around the country predicted an up week . Our panel 's consensus is for a down week ahead . Panelist Lou Holland of Chicago-based Holland Capital Management says stocks may look less attractive than bonds , for the moment . LOU HOLLAND , Investment Advisor : I think we 're still in the bull market . The problem is that stocks are not particularly cheap , selling at about 18 times earnings , yielding around three percent , in an environment where bonds are yielding almost 8.5 percent . However , in the second half of the year , I do think that the dollar will continue to be strong and I think interest rates , again , will begin to come down and I think , in that kind of environment , you 're going to see a continuation of the bull market @!AUG On Friday came word that traditional rivals Apple and IBM are talking about exchanging technology , just the latest effort by high-tech @ @ @ @ @ @ @ @ @ @ have been joint announcements by a host of companies , ostensibly to set standards to make computers easier to use and buying decisions easier to make . The result , however , can be just the reverse . voice-over DOS 5 , OS/2-2 , OS/2-3 , Windows 3 , RISK , SISK , 286 , 386 , 486 - it may sound like techno-babble , but it 's the computer industry 's buzzwords for pieces of hardware and software , competing to become standards for users of the nation 's 57 million personal computers . GLEN HANEY , CEO , DataQuest : IBM has set the standards for the industry for such a long time and has disadvantaged so many companies thereby that people area always in the mode of wanting to establish some new standards that are more amenable to their interest and to their hardware and their technology @!AUG voice-over Now , IBM is being challenged as the hardware leader by hundreds of clones and IBM is playing challenger to Microsoft , a company it helped make successful in the battle over operating systems . But the set of @ @ @ @ @ @ @ @ @ @ mean little more than confusion for computer users . JIM MANZI , CEO , Lotus Development : To us , and I think to users , generally , the operating system is plumbing . What the user wants is water and that comes at the application level , so our objective is the companies that deliver water , regardless of what the plumbing is @!AUG voice-over But the cost of upgrading that plumbing , be it hardware or software , is n't just esoteric . It 's expensive . SHELDON LAUBE , Director of Technology , Price Waterhouse : The switching of an operating system in an organization like ours with over 10,000 personal computers is a major undertaking . It 's not one we 'd like to do a few times a year . We do n't even want to do it every two or three years , AUG : voice-over Laube estimates that for every $100 Price Waterhouse spends on a new software package , it costs two to three times that much in training and support . To upgrade hardware from older 286 machines to faster 386 machines @ @ @ @ @ @ @ @ @ @ about $5,000 to $6,000 per computer , including installation . And after installing 6,000 copies of Microsoft 's Windows , now , Price Waterhouse is waiting for the release of IBM 's new operating system , due out later this year , which may mean doing it all over again . While Windows has helped boost sales of programs that are more user friendly , critics say it 's slow and still based on Microsoft 's original PC operating system , known as DOS , built for machines with far less capabilities than today 's . Up till now , the competition has largely been Microsoft versus Microsoft . Over the past year , the company shipped 18 million copies of DOS and four million copies of Windows 3 , but IBM and Microsoft together sold only 400,000 copies of OS/2 . BILL GATES , CEO , Microsoft : We 've seen what the market 's done , which is overwhelmingly buy Windows , and so Microsoft is responding to that . We 're listening to that and IBM 's position has n't changed at all , based on customers ' @ @ @ @ @ @ @ @ @ @ in a quandary . Do they upgrade operating systems and applications packages now or do they wait for the next promised model , which may still be , in industry jargon , " vapor ware " ? BILL MACHRONE , Editor-In- Chief , " PC " Magazine : Do I stick with Excel on this platform or do I wait for Lotus to bring out 1-2-3-4 Windows ? So there 's this waiting game . There 's no solution for it @!AUG voice-over But customers are not laying down and playing dead . An increasing number have formed user groups , many working with British-based X/Open Company to get manufacturers to overcome industry politics and agree to a set of customer-endorsed standards . GEOFF MORRIS , CEO , X/Open : As long as the buyer remains in charge of compatibility in these specifications and drives these specifications and states the priorities and his needs and the suppliers meet those needs , then any politics will evaporate @!AUG voice-over And what about hardware ? In order to get the most out of Windows and Windows programs , hardware makers are pushing faster @ @ @ @ @ @ @ @ @ @ and 486 chips . While the new computer programs have allowed software makers to largely ignore the recession , that has not been the case for hardware makers , with some , like Compaq , Apple and even IBM , suffering downturns in stock prices after poor earnings reports . LUCIANNE PAINTER , Analyst , Salomon Brothers : I think the hardware industry and the software industry are really exhibiting opposite results and I think that will continue , especially in recessionary times @!AUG voice-over And stay tuned . There are still more standards debates on the way over even newer operating systems and even more powerful hardware . on camera And to prove the point , on Tuesday , Microsoft unveils the fifth generation of DOS . When we return , one application of computer technology with something to sell . Commercial break AUG : If you watch television , you watch commercials ; at least , we hope you watch commercials , since that 's what pays the rent . But , as ABC News correspondent Ken Prewitt reports , many commercials are being done with computer animation , @ @ @ @ @ @ @ @ @ @ 's real or Memorex . KEN PREWITT , ABC News : voice-over It 's cute , charming , Academy Award-winning , but can computer animation sell products ? Lifesavers test market experience says yes . CHERYL BACHELDER , Vice President , Marketing , Planters/Lifesavers : We achieved a 14 percent share of market in our test market for Lifesavers holes and that was well above our expectations , probably about a third above our expectations @!PREWITT voice-over To introduce a new product , Planters/Lifesavers wanted a new technique with enough character and color to cut through the clutter . RALPH GUGGENHEIM , Executive Producer , Pixar : You 're seeing things that look very dimensional ; they occupy space ; they reflect life and they move in a very realistic manner and yet , at the same time , they do things that no one would ever expect to see - when a bottle was portrayed as a boxer or when lifesavers ride skateboards @!PREWITT voice-over The Lifesavers commercial , developed for cartoon-watching kids , unexpectedly wowed the grown-ups . Ms. BACHELDER : Beating our expectations on important measures like purchase @ @ @ @ @ @ @ @ @ @ product after they see the commercial . It 's one of the strongest commercials we 've ever produced @!PREWITT voice-over Faster computers with better software have brought down costs from an estimated $600,000 for a 30-second spot five years ago to about a third of that today . BERNIE OWETT , Creative Director , J. Walter Thompson : I do n't naturally gravitate toward computers or machines . It 's incredible , but in the last three or four years , the bulk of my work has had either total computer animation or pieces of it @!PREWITT voice-over Another advantage , a character already built and stored in the computer costs less when used again in a campaign . TOM KENNEDY , Executive Producer , Industrial Light and Magic : We can create a character that has life long after the first commercial airs and there 's an initial investment in computer modeling , so you can amortize that cost through a campaign where you bring that character back @!PREWITT voice-over Computer animation has meant visible growth for companies like Rhythm and Hues , whose earnings have risen from about $1.8 @ @ @ @ @ @ @ @ @ @ , but computer animation is n't always that visible . JOHN HUGHES , President , Rhythm and Hues : It 's almost like a chameleon , also , in that you can imitate anything . You can make it look like cell animation . You can make it look like clay animation . You can make it look almost photo-real @!PREWITT voice-over In some cases , computer- generated images , known as CGI , are replacing stop-motion or being used to create a set or to perform special effects . ANTHONY VAGNONI , Editor , " Advertising Age " : When you see it in those circumstances - the bear into the bull or the melting football players for Diet Coke - you wo n't necessary know it 's CGI . There 's a whole body of effects work that 's created to be not noticed . It 's called seamless effects @!PREWITT voice-over Advances in technology are bringing more companies into the field and making the technique more accessible to more advertisers . But the real breakthrough may be yet to come . Mr. VAGNONI : There has n't been @ @ @ @ @ @ @ @ @ @ . We seem to be able to relate better to cartoons , hand-drawn cartoon like Bugs Bunny than we can to computer-generated cartoons , but who knows ? Someone may come up with the Daffy Duck of CGI and rewrite everything @!AUG We 'll be back with a final word . Commercial break AUG : And , finally , a look at one of this week 's winners and losers . The winner , Chrysler chairman Lee Iacocca . Despite his company 's financial problems , Chrysler has decided to buy his Florida oceanfront condo for almost $800,000 after already having bought his Michigan home for just over $900,000 . The company says the purchases will let Iacocca concentrate on Chrysler business . And he may need to do just that , because Chrysler was also this week 's loser , as both Standard &amp; Poor 's and Moody 's downgraded Chrysler bonds because of its huge losses . That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Stephen Aug . On behalf of the @ @ @ @ @ @ @ @ @ @ thanks for being with us. 
##223879 @!SANDER-VANOCUR : Welcome to Business World . I 'm Sander Vanocur and here 's what 's on this week 's agenda . voice over Scandal at Salomon Brothers , the largest government securities trader . Heads are already rolling . Can super-investor Warren Buffet save Salomon from the fate of Drexel ? We 'll ask this week 's Business World guest from Pickwick Lake , Tennessee , Ralph Horn , chairman of the Public Securities Association . And the Hollywood entertainment machine . Is Arnold Schwarzenegger strong enough to terminate the industry flow of red ink ? Also , a new way to chart the music at the top of the charts , and Big Bertha , the driving force in golf clubs , giving players more bang for the buck @!ANNOUNCER From ABC News , this is Business World with Sander Vanocur and Stephen Aug . Now , from New York , here 's Sander Vanocur @!VANOCUR The special board meeting being held today by Salomon , Inc. , parent of Salomon Brothers , may be anticlimactic. voice-over All day Friday , the players on Wall Street @ @ @ @ @ @ @ @ @ @ out that longtime chairman John Gutfreund , the man featured in the best-seller Liar 's Poker , was folding his last hand , turning in his resignation . In place of the ultimate trader Gutfreund , the ultimate investor , Warren Buffet , a man with almost mythical savvy , is expected to take over as chairman and CEO , all this after admission that the trading desk at Salomon broke rules on at least three different occasions on buying government securities and that the men at the top knew but did n't tell . on camera Salomon is the grandaddy of the 40 so- called " primary dealers " in government securities , and even though government agencies now involved in the Salomon investigation say the change in management will buy some time , there could still be civil and criminal charges , fines and other sanctions . But the government finds itself in a very awkward position . Government securities have been one of the least regulated areas in the business because the Federal Reserve and the Treasury , which sell the securities , also regulate the dealers who @ @ @ @ @ @ @ @ @ @ the industry , we turn to this week 's Business World guest , head of the association that represents government bond dealers , the Public Securities Association , Ralph Horn , who joins us from Pickwick Lake , Tennessee . Mr. Horn , in the matter of Salomon Brothers , was this a lack of government regulation or a breakdown of rules by Salomon ? RALPH HORN , Chairman , Public Securities Association : It seems to be much more of a breakdown of rules by one of the participants , as far as we can see @!VANOCUR Well , look , we 've gone through an awful lot in the last five years in areas besides government securities , and will the public not be asking for who 's in charge ? Mr. HORN : Well , obviously , this is the largest and the most liquid market in the world , and the investors do need to have the confidence that the rules that are in place are being adhered to , so there are rules in place . The Fed and the Treasury do the monitoring of those @ @ @ @ @ @ @ @ @ @ so there are- the rules there are in place where these types of infractions can be dealt with @!VANOCUR But , sir , in the area of financial instruments , has n't the market in which you work been dependent upon word and honor ? Mr. HORN : That is correct , but , again , as I state , this is such a huge marketplace and there are so many participants that looking at what the market 's done over the last two or three days would n't indicate that there is any lack of confidence that has showed up @!VANOCUR Well , is this going to hurt people like you ? Mr. HORN : It should n't . Again , there are 40 primary dealers . There are hundreds of dealer banks and bond- that have bond divisions . There are non-bank dealers all over the country that bid and trade in these securities every day and distribute those securities , so it 's such a huge market , having an infraction by one participant I do n't think will have a negative effect on the marketplace or on @ @ @ @ @ @ @ @ @ @ @!VANOCUR But , sir , it 's more than one participant . This is the biggest participant . You 're now talking about an area which involves that phrase " the full faith and credit of the U.S. government . " Should n't investors have some qualms now ? Mr. HORN : Well , I think we need to wait and see how this plays out , Sandy , because the rules are in place and the investigation is ongoing and the PSA believes that those rules should be adhered to and we should have full enforcement if there are any aberrations or violations of those rules , so , as this is playing out , I guess the most obvious thing , if those rules were n't in place , then I would n't be sitting here talking with you today @!VANOCUR But if the rules were in place and it took all this time to find out , does n't that suggest the rules may be okay , but the enforcement may be lax ? Mr. HORN : Well , I think we 'll have to wait and see @ @ @ @ @ @ @ @ @ @ know how long the investigation has been going on and to what extent it 's been going on - what we 're hearing now @!VANOCUR Well , I 'm not trying to get you to point a finger , but if the Congress comes back and in the securities bill revision that 's now going on , says there ought to be greater regulation in this least regulated area , what would be the position of your association ? Mr. HORN : Well , the association has been very much involved in the reauthorization of the government Securities Act , and that act deals mostly in the secondary market , and these infractions involve the bidding at auction in the primary market , so , to this point , the Senate Banking Subcommittee that marked up a bill two or three weeks ago dealt with the secondary market and talked about some sales practice guidelines - this , on the other hand , hopefully is an isolated incident - and it dealt with the auction process where the securities were being purchased from the U.S. Treasury , rather than the selling @ @ @ @ @ @ @ @ @ @ So I think there is a major distinction there @!VANOCUR Thank you very much . Thanks for joining us from Pickwick Lake . In a minute , Hollywood , where moviemakers are suffering from a nearly industry-wide summer cold . Commercial break VANOCUR : Turning to the week on Wall Street , at Friday 's closing bell , the Dow Jones Industrial average finished the week down by more than 28 points , just as our panel of stock market experts from around the country had predicted . Our panel 's consensus is for another down week ahead . Panelist Robert Farrell , chief market analyst for Merrill Lynch , says the up-and-down economic figures could have an impact on the market . ROBERT FARRELL , Chief Market Analyst : I think we 're in this crucial stage now where the stock market has assumed that the economy is going to do better , so that if it does n't show better signs of improvement soon , I think the stock market can have a letdown . That might mean that as we go into the fall , it 's going @ @ @ @ @ @ @ @ @ @ whose performance has been less than meteoric in recent weeks are movies . Independent production companies in particular have suffered , as their products have languished at the box office . The big studios have also failed to come up with much that made for a boffo box office , with at least one notable exception . voice-over The smash hit of the season , Terminator 2 , continues to annihilate the competition at the box office . Made by Carolco Pictures , it 's distributed by Tristar , a unit of Sony 's Columbia Pictures . MIKE MEDAVOY , Chairman , Tristar Pictures : It is a move that 's going to play worldwide , probably do in the neighborhood of $400 million just in the theatrical side of it . ARNOLD SCHWARZENEGGER , Actor : " Terminator 2 , " Tristar Pictures Hasta la vista , baby @!VANOCUR voice-over Yet even the terminator ca n't blow away the shaky economics behind the world of make-believe . Ticket sales are declining and box office revenues are flat . Meanwhile , movie production costs are up 33 percent since 1987 . @ @ @ @ @ @ @ @ @ @ picture now costs $38 million . JOE ROTH , Chairman , Twentieth Century Fox : It is the most burdensome part of this job , is the constant pressure of the cost of movies , the cost of advertising , the cost of actors , the cost of writers , and with lowering admissions , the graph does n't really pan out @!VANOCUR voice- over Legendary Hollywood agent Irving Lazar sees problems . IRVING LAZAR , Agent : If you want to make that movie with Schwarzenegger , who gets perhaps $15 million alone as his fee- if you want to make that kind of movie , that 's what it 's going to cost . In point of fact , it 's a gamble which should rarely be taken @!VANOCUR voice-over One example , Tristar 's early summer release Hudson Hawk cost $50 million to make , including $5 million for star Bruce Willis . Panned by critics , it quickly became the biggest box office disaster in years . BRUCE WILLIS , Actor : " Hudson Hawk , " Tristar Pictures One-800- I 'm gon na die ! VANOCUR @ @ @ @ @ @ @ @ @ @ from future budget busters . At the old Columbia lot , now named Sony Studios , a $50 million Stephen Spielberg version of Peter Pan is being shot . Mr. MEDAVOY : I do n't think there 's any rules in this business . You make movies that you think are going to have broad appeal , and sometimes they 'll work and sometimes they wo n't @!VANOCUR voice-over One reason for such bravado , the enormous growth of home video . Domestic home video wholesale revenue is about $4 billion , versus box office revenues that are just under $2.5 billion net to studios . Then there 's the explosion is foreign sales . Mr. MEDAVOY : I would say now , for example , 50 percent of the revenues that come into the motion picture business , or the entertainment business , per se , in the motion picture company comes out of the foreign markets , and it becomes a very important part of it @!VANOCUR voice- over Unfortunately , not all of the studios have learned how to capitalize on the global market . Despite the success @ @ @ @ @ @ @ @ @ @ still in financial trouble . JESSICA REIF , Analyst , Oppenheimer &amp; Company : Dances With Wolves , which was one of their top-grossing films in the U.S.- Orion sold the international distribution rights , so they were not able to benefit from the success that they had in the States @!VANOCUR voice- over Even Kevin Costner may not get paid . JERRY KATZMAN , President , William Morris Agency : I do n't know , and I do n't think anybody knows yet , what Kevin Costner will see from that movie @!VANOCUR voice-over Now , ironically , a scene from Orion 's latest release where Bill and Ted try to outwit the Grim Reaper could be a parable about its own fate , without the Hollywood ending . In the meantime , the whole industry seemed to have geared up production just as the so-called ancillary markets have turned soft . Ms. REIF : You know , ancillary markets are important , but they are not growing , and I think that 's critical @!VANOCUR voice-over Fox 's Joe Roth , who backed Home Alone , last year 's @ @ @ @ @ @ @ @ @ @ thinks too many movies are being made . Mr. ROTH : The poor American consumer has to choose between five or six new movies every single weekend , and so , unfortunately , when those movies die , they 're not really worth what somebody who ran numbers thought they were worth when it comes time to putting them on television in Germany or on video in Japan @!VANOCUR voice- over And it 's not just quantity , but also a lack of quality that 's hurting business . Robert Towne , who wrote the screenplay for Chinatown , says a growing corporate mentality at the studios is stifling creativity . ROBERT TOWNE , Scriptwriter : Most writers are not in any position to defend their material against a conglomerate , the phalanx of executives that for months and months go over a script expressing all of their wishes @!VANOCUR voice-over More bad news for the big studios , the top-grossing movies this season were made by so-called independents . Castle Rock 's City Slickers has done over $100 million , Carolco 's Terminator 2 , over $160 million , and @ @ @ @ @ @ @ @ @ @ They keep the lion 's share of the profits . The studios only get a distribution fee . These newcomers also know how to maximize the international market . JAMES ROBINSON , Chairman , Morgan Creek : Robin Hood is a story which virtually every country in the world that would be one of our markets- they know the story @!VANOCUR voice-over And Robinson , a former car distributor , held on to the foreign rights to his picture , unlike Orion , which pre-sold Dances With Wolves . Mr. ROBINSON : What we chose to do was not to take any advances and , basically , if you will , take the risk , but if the film played , as they say , we 'd get to keep all the money , and it did play and we get to keep all the money @!VANOCUR And on the subject of being on-target , when we come back , a look at a new way of measuring music sales that some critics say is hitting a sour note . Commercial break VANOCUR : If you listen to most radio stations @ @ @ @ @ @ @ @ @ @ , you 'll hear something about the Billboard ratings . It 's the chart that 's at the top of the charts in the multi-billion dollar music business , where ratings not only reflect sales , they help boost them as well . That 's why when Billboard decided to change the way it measures popularity , it set the record world spinning . voice-over A lot of rappers and country artists are riding high on Billboard 's pop album chart . That 's proof , says the 97-year-old publication , that its new ratings system , based on actual sales figures , has lofty implications . TIMOTHY WHITE , Editor-In-Chief , " Billboard " Magazine : What we 're seeing now is sort of the dawn of a new era of democracy in terms of the pop album charts , because a sale , a purchase , is a vote @!VANOCUR voice-over Billboard began printing the charts in May , after what it calls " a long mating dance " with Soundscan , a small , New York- based company that 's been buying computerized sales data , sometimes exclusively @ @ @ @ @ @ @ @ @ @ Soundscan : The charts were really a byproduct . We felt that the real advantage to our system to the record industry was the information that allowed them to operate in a more profitable nature that would lead to the bottom line @!VANOCUR voice- over For example , he says sales of Natalie Cole 's number-one album can be broken down to see how many copies are being sold and where they 're being sold . Reportedly , Soundscan expects about $800,000 from each of the six major labels for its data . Sony , the first to sign on , says it will help with promotion . PAUL SMITH , President , Sony Music : If the artist goes into several venues and nothing happens as a result , no records sell , then maybe that 's the time to cut that tour short @!VANOCUR voice-over And , he adds , accurate data will help minimize returns in what is still largely a consignment industry . But how accurate is the data ? Not all industry insiders are singing Soundscan 's praises . The company says its sample , about @ @ @ @ @ @ @ @ @ @ sales per week , is certainly better than the previous system , which relied on employee estimates and was susceptible to hype and human bias . MICHAEL SHALETT , Chief Operating Officer , Soundscan : Music that previously had been directed only to genre-specific charts - black , classical , country , et cetera - all of a sudden showed up as being more popular . I think immediately , the industry reacted and said , " There might be something wrong with the sample . " VANOCUR : voice-over But MCA says Billboard acted too soon . RICHARD PALMESE , President , MCA Records : Currently , the Soundscan system does not represent accurate sales of records across the country . Their chart , which is compiled for Billboard , represents less than 50 percent of records sold , and that 's a problem @!VANOCUR voice-over One problem , it omits an industry giant , Tower Records , which may put certain artists at a disadvantage , and while most of the titles on Tower 's top list are similarly positioned in Soundscan 's chart , there are some glaring @ @ @ @ @ @ @ @ @ @ is number 164 on the charts . The retailer feels alternative artists will have a rough time . STAN GORMAN , Senior Vice President , Tower Records : The accounts that are signed up to Soundscan wo n't carry them until they 're hot . We 're not signed up to Soundscan , and in the case of groups like The Bulgarian Voices , which was one of our top sellers for a long time , I do n't think it would make the charts now @!VANOCUR voice-over Tower says it 's not withholding information . It 's just an analog company in a digital world , although computerization is in the works . Even so , Tower says , judging what 's hot in the music business should be more than a matter of counting sales , but Soundscan is banking on others to disagree and see its data as precisely the tune needed to bring the industry up-to-date . Mr. FINE : Record manufacturers now can use that information to do what all other industries do . They can test market ; they can do advertising control . This @ @ @ @ @ @ @ @ @ @ we return , a new club becomes the driving force in golf . Commercial break VANOCUR : The golf world was stunned a week ago when a new sports hero from Arkansas drove his way onto the American scene . John Daly won his first golf tournament in a big way , winning the PGA Championship tournament with a soft touch on the greens and Jolly Green Giant drives off the tees . voice-over Every golfers ' dream , whether a pro or a president , is to hit the ball farther and straighter off the tee than ever before , and sometimes a new golf club will help . Pres. GEORGE BUSH : I never got off the tee so well in my life @!VANOCUR voice-over The President 's new driver is named Big Bertha , a wide-bodied club manufactured by Callaway Golf in California . Golf clubs are divided into two groups : woods for tee and long fairway shots , irons for the fairways and approach shots . For the past decade , woods have been made of various metals and composites , and Big Bertha is made @ @ @ @ @ @ @ @ @ @ Big Bertha as the most forgiving club they 've ever seen . PAUL TUTTLE , World of Gulf : It 's a very easy to hit golf club . The oversized metal head makes it very forgiving . It 's enabled the average golfer who never hit a driver good to be able to hit a driver , get maximum distance and keep it in play in the fairway @!VANOCUR voice-over The problem was how do you make a large-headed , stainless club without making it so heavy that no one can hit it . RICHARD HELMSTETTER , President , Callaway Golf : We 've had to stretch the metal much farther . The same amount of metal is in it , but to make it strong enough so it does n't cave in and to make it stretch over the big , long distances is very , very difficult , and that technology is technology that we 've developed inside of this company @!VANOCUR voice-over The Big Bertha woods have become the darlings of the senior pro tour . Chi Chi Rodriguez stayed close to Jack Nicklaus in last month @ @ @ @ @ @ @ @ @ @ hit with a five-wood with unerring accuracy . That edge does not come cheaply . Big Bertha , with a graphite shaft , retails for about $260 , compared to $150 for an average wood . Callaway 's sales have doubled every year since bursting on the scene in 1988 , and while most golf sales have been pinched this year , Callaway is expected to reach nearly $50 million . ELY CALLAWAY , Chairman , Callaway Golf : To be able to meet the demands of the market , you have to anticipate that it 's going to be successful , and we did @!VANOCUR voice-over To keep his key personnel , Callaway made them corporate officers . He promoted his R&amp;D director to president , hired one of the top machinists in the country who makes golf clubs as vice president , and made his marketing director another vice president . To promote job opportunities for production workers , the company offers English classes for its largely Spanish-speaking workforce . ALFONSO REYES , Inspector : Estara- You know , like , checking the club , because now I am @ @ @ @ @ @ @ @ @ @ pro shops tell us the popularity of Big Bertha is unprecedented , and that even with careful planning , some shortages have been inevitable . ROY PACE , Pro , Weeburn Country Club : There is a supply problem of- They 're hard to get . He 's backlogged with orders . So far , I thought ahead and got some in here ahead of time and it was fortunate that way @!VANOCUR voice-over What drives this 72-year-old Georgian at a time when most of his peers would much rather be on the golf course gently swinging Big Bertha ? Mr. CALLAWAY : The enjoyment I get out of creating a new company is to build a management team that can carry it on better than I can after I have either sold it or after I 'm gone @!VANOCUR We 'll be right back . Commercial break VANOCUR : That 's it for this week . Whatever business you 're in , we hope the week ahead is a prosperous one . I 'm Sander Vanocur . On behalf of everyone here at Business World , thanks for being with @ 
##237156 ANNOUNCER : From Washington , Crossfire . On the left , Mike Kinsley . On the right , Pat Buchanan . Tonight , The Victim 's Crusade . In the crossfire , California Representative William Dannemeyer , sponsor of the Bergalis Bill . Dr. Les Seldin , spokesman for the American Dental Association . And registered nurse Barbara Fassbinder . PAT BUCHANAN : Good evening and welcome to Crossfire . Today Kimberly Bergalis , the 23-year-old Florida woman who 's dying of AIDS that was transmitted to her by her dentist , testified for 30 seconds before Congress . Her last request : pass the Dannemeyer bill which requires health care workers to tell their patients if they have the fatal and communicable disease . KIMBERLY BERGALIS , AIDS Patient : I did nothing wrong . I 'm being made to suffer like this . My life has been taken away . Please enact legislation so that no other patient or health care provider will have to go through the hell that I have @!BUCHANAN Kimberly 's father expressed the family anger at what he called the preferential @ @ @ @ @ @ @ @ @ @ Father : It 's time for Congress to get off their duff and to say , for ten years we have treated this issue not as a disease , but as a civil rights issue and the protection of privacy issue , as anything other than a disease that this country 's ever had before . Why is AIDS deserving of preferential treatment ? Our daughter , as I said , is an example of that inactivity , inability , unwillingness- she 's going to die because of that @!BUCHANAN Tonight , why should n't health care workers tell their patients if they have this horrible disease that can be contracted and can kill ? Michael ? MIKE KINSLEY : Congress Dannemeyer , your bill would n't simply require health care workers to tell their patients they had AIDS . It would require testing of health care workers who do invasive procedures , surgeons , dentists and so on . Now , public affairs experts say that would cost about $ 500 million a year . Is that about right to you ? Representative WILLIAM DANNEMEYER , ( R ) California @ @ @ @ @ @ @ @ @ @ we should we make very clear that my bill only relates to those health care workers , surgeons and dentists , who are engaging in invasive procedures , which is a relatively small percentage of all people practicing medicine or dentistry in this country , and I think it 's appropriate for them to be tested . It 's not an intrusion into their life and if they are HIV positive , then they would be required to get the written consent of their patients before they get- KINSLEY : But is it correct that it would cost hundreds of millions of dollars a year , $ 500 million a year to conduct these tests ? Rep. DANNEMEYER : Absolutely not @!KINSLEY How much would it cost ? Rep. DANNEMEYER : The U.S.- no one knows that for sure @!KINSLEY Well , do n't you think before you- Rep. DANNEMEYER : We know , Michael , that we can- the U.S. Army has been conducting tests routinely for several years at less than $ 5 per test , and you can easily calculate what the cost of that would be @!KINSLEY @ @ @ @ @ @ @ @ @ @ million a year . You are the one who is proposing to make this a law . You 're behaving like a conservative parody of a liberal saying , I want to do this in a law and I 'm not even willing to give a number of how much it would cost . How much would it cost ? Rep. DANNEMEYER : Let me say that , you know , every life is precious . It 's not- you know , we ca n't equate lives with cost . We have to enforce the public health laws of this country . I think quite frankly what this really comes down to is that when any of us go to see a doctor or a dentist we ought not to get a fatal disease @!KINSLEY Well , here 's the problem . You have to equate lives with cost because we spend money to save lives and we do n't spend money and it costs lives . For example , people- children are dying of measles in this country because the government has run out of money- is unwilling to spend @ @ @ @ @ @ @ @ @ @ to me it would- that 's a lot less than $ 500 a year . Before you start spending $ 500 million or whatever figure on this testing , you ought to say , is this the most efficient way to save innocent lives ? Rep. DANNEMEYER : Well , since you have such an obvious interest in the cost figure , Michael , I 'll tell you what I 'm going to do for you . I 'm going to make a calculation and bring it over to you . You can share it with your listeners . The cost of this- KINSLEY : Should n't you have made that calculation before you propose it ? BUCHANAN : For heaven 's sakes , if it 's $ 5 for an AIDS test and there are 100,000 doctors and dentists , that 's $ 500,000 @!KINSLEY He wants to test all the patients , too . Rep. DANNEMEYER : No , wait a minute . I just said- BUCHANAN : I mean , you 're talking about the guys that are doing basic surgery . Let me get Dr. Seldin- Dr. @ @ @ @ @ @ @ @ @ @ have to get off the money issue here @!BUCHANAN All right . Let 's get off the money issue and let 's get on the basic health question . Even if the danger of transmission from a Dr. Acer to Kimberly Bergalis is insignificant , does n't the patient have a right to know that there 's a slim chance that they can get a horrible communicable and fatal disease from this invasive surgery ? Dr. SELDIN : If we are doing invasive surgery , if we are doing what the CDC has now established as exposure prone procedures which have yet to be defined , we would suggest and support the position that the ADA has concurred with the CDC , yes , let 's tell our patients and let them make a decision @!BUCHANAN Well , let 's not simply suggest . Let 's make it mandatory on people who do these kinds of procedures that they tell the patients they 're at risk . Example : when you had the flu and the flu vaccine , maybe there was one in ten million chance that somebody would react @ @ @ @ @ @ @ @ @ @ needles had a right to know that and a lot of them said , well , I do n't want to take that chance , forget the needle , I do n't want the flu vaccine . Do n't they have a right to know if the dentist sitting there who 's going to pull a tooth has AIDS ? Dr. SELDIN : What makes you feel that the dentist or the health care practitioner is going to be irresponsible and not follow those guidelines that- BUCHANAN : Dr. Acer convinces me he might . Dr. SELDIN : No , you go back to when Dr. Acer , in fact , was treating Kimberly Bergalis and let us put now in perspective that the Kimberly Bergalis , Barbara Webb and the other three unfortunate victims of this incident- BUCHANAN : Five people are going to die because of this clown . Dr. SELDIN : I do n't consider that his position at that time , 1987 , was one of a clown . We were n't thinking in 1987 about the possibility of- BUCHANAN : Why were you not thinking- Dr. @ @ @ @ @ @ @ @ @ @ in the transmission and risk of health care worker to patient at that time . In 1987 we were concerned about infection control , protecting the health care worker . That 's what we were seeing on television . Rep. DANNEMEYER : May I- KINSLEY : Many more health care workers have died than- Rep. DANNEMEYER : Let me- KINSLEY : No health care patient that we know of has died . Rep. DANNEMEYER : Let me inject something in here I think the American public needs to hear . The CDC , the Center for Disease Control , has developed a computer model that postulates that we have a 128 patients in this country just like Kimberly Bergalis , and this computer model says that we have 1,248 dentists who are HIV carriers and 336 surgeons ; and we know that about 40 to 50,000 health care workers today are HIV positive and we know that 6,438 health care workers have been diagnosed as fully developed AIDS . Dr. SELDIN : And what are computer models worth ? We are talking about statistical machinations . The ADA went out- BUCHANAN @ @ @ @ @ @ @ @ @ @ BUCHANAN : You 're talking about dead people also . We know that five people have got it . Dr. SELDIN : That 's correct @!BUCHANAN I mean- Dr. SELDIN : And we know that five people got it in Dr. Acer 's office . We do not know the mode of transmission- BUCHANAN : Tell me why you 're against it . Why are you against testing people who do invasive surgery and giving the patients the information ? Dr. SELDIN : We are not opposed to that . I am in favor of that . What I am opposed to is the concept of legislating it as a mandatory issue . It is not necessary @!KINSLEY Congressman Dannemeyer , there actually is increasing evidence that Dr. Acer was exactly what Pat says , a clown . He was very irresponsible about his sanitary precautions , possibly some people even say in some way was trying infect his patients on purpose . Now , he is the only known case , the only known case of a doctor actually transmitting this disease . There 's no way , is there @ @ @ @ @ @ @ @ @ @ who was purposely trying to make them sick ? You do n't have to have AIDS to purposely try and make your patients sick , do you ? Rep. DANNEMEYER : Well , I think the- 92 percent of the American people agree with the position that I 've taken , that when any of us go to a doctor and a dentist we should n't come out with a fatal disease . Dr. SELDIN : I do n't believe in leaning on public opinion polls to determine the best interest that the health care professions have for the public . Rep. DANNEMEYER : You know , it depends on whose ox is being gored . This business where I serve in the House of Representatives , if somebody 's on the other side and they had a poll that 's like I do they 'd be quoting it right now @!BUCHANAN Dr. Seldin , from a health care standpoint , Dr. Seldin , even an insignificant threat , it would seem that the objective of health care workers is to provide the maximum possible protection for their patients . What @ @ @ @ @ @ @ @ @ @ What is the argument against it ? Dr. SELDIN : The argument against it is that we do not have in this point in time a national emergency that demands legislation . We have an- one case in Florida which has cast a pall and a fear amongst the people of this country . We have tried to address the problem . We 've tried to address it by dealing with the prevention of the disease . This mandatory testing does n't prevent the disease @!BUCHANAN How can it hurt that all- how can it hurt your people if they are simply required by law to get the tests and required by law to tell their patients , how will that hurt your people ? Dr. SELDIN : How will it hurt my people ? It will hurt my people only when things must change . The CDC in the development of guidelines , the emanation of the disease and the development of- all the changes that have taken place over the past ten years , it 's a dynamic process . Rep. DANNEMEYER : What- Dr. SELDIN : No , @ @ @ @ @ @ @ @ @ @ early July- Rep. DANNEMEYER : The civil rights of the infected take precedence over the civil rights of the uninfected . That 's what 's going on @!BUCHANAN Sure @!KINSLEY No , I 'll tell you what the cost is . The cost is this is a one in 21 million chance-that was what the latest estimate is-of catching AIDS in an hour of surgery . Rep. DANNEMEYER : Michael , there are- KINSLEY : We have limited resources in this country , limited financial resources , limited political resources , limited time of our valuable congressmen to address issues , and the question is , why are you devoting your time and the taxpayers ' resources to a problem of one in 21 million ? Rep. DANNEMEYER : There 's 191,000 people in this country that have been diagnosed with AIDS , 3 to 4 percent of them- the CDC says they ca n't tell us the means of transmission . That , if I 've calculated right , is about 8,000 people . I 'm not saying that among those 8,000 there are Kimberly Bergalis 's , but I @ @ @ @ @ @ @ @ @ @ us how those 8,000- KINSLEY : You were just citing the Center for Disease Control a while back- Rep. DANNEMEYER : That 's right @!KINSLEY Now , you 're saying you do n't believe them . Well , anyway , when we come back we 're going to hear the flip side of the Kimberly Bergalis story . We 'll talk to a nurse who caught AIDS from a patient but testified today against Congressman Dannemeyer 's bill . Find out why in a moment . Commercial break KINSLEY : Welcome back to Crossfire . Should there be mandatory AIDS testing of doctors , nurses , dentists , and patients ? That 's the gist of the so-called Kimberly Bergalis bill , proposed by our guest Representative William Dannemeyer of California . Kimberly Bergalis is the young woman who seems to have caught AIDS from her dentist . Joining us also is Les- Dr. Les Seldin , a dentist in New York , and spokesman for the American Dental Association , which opposes mandatory testing . And joining us now is Barbara Fassbinder a registered nurse from Lamoni , Iowa . @ @ @ @ @ @ @ @ @ @ infected with the AIDS virus ? BARBARA FASSBINDER , Registered Nurse , HIV Positive : I became infected in August of 1986 in an emergency room in a small hospital in Wisconsin , when I was assisting in resuscitating a young man who came into the emergency room and stopped breathing , and during the course of the resuscitation some blood from an artery seeped through some gauze onto my finger that had small cuts on it and his blood entered the small cuts on my finger @!KINSLEY Well , in light of your experience , why do you oppose Congressman Dannemeyer 's bill which might have made it possible- might have resulted in testing of this patient so you might have had the option not to serve him or whatever ? Ms. FASSBINDER : Excuse me , but mandatory testing would not have done a thing for me at that time . The tests at that time- it was one to two weeks . He had a cardiopulmonary arrest within an hour of his arrival in the emergency room . Emergency personnel find themselves in situations like this all the @ @ @ @ @ @ @ @ @ @ universal precautions because we , especially in emergency settings , you can not know who is infected and who is not @!BUCHANAN Ms. Fassbinder , Pat Buchanan . Obviously it was an odd chance that happened whereby in this situation medical worker and patient , you acquired AIDS . Now , it might be rare and it 's going to be an add chance in the future but if the health worker has AIDS and especially does routine or regular invasive procedures , why should n't an innocent patient at least know there is some risk , even if a long shot , a very long shot , of catching a really terrible and fatal disease that is certainly going to kill them ? Why should n't the patient at least know there 's some risk there ? Ms. FASSBINDER : I think the issue really is public education at this point . The public needs to be aware of the level of risk that 's involved , you agree , but the information of a surgeon 's HIV status is really irrelevant compared to what is his level of practice @ @ @ @ @ @ @ @ @ @ me- Ms. FASSBINDER : -adhere to the universal precautions @!BUCHANAN OK . Let me take the case of the cardiac pulmonary arrest . A patient comes in with a heart failure . You 've got to do open heart surgery . You 've got a doctor who 's coming maybe off a golf course or something like that and he 's sweating and this is hours and fluids are all over the place . Now- in other words , there is a chance , a very long shot that this- the patient , maybe , who does n't have AIDS can contract this through this exchange of fluids . Why should n't a patient if he can get the knowledge and you have the knowledge at least be alert to the fact that there 's a long shot chance that he could get it so at least he can make a decision to say , well , no , I want another doctor in some other situation ? Ms. FASSBINDER : Excuse me but your analogy there just does n't fit . There 's been no reported cases of contracting HIV @ @ @ @ @ @ @ @ @ @ to , there is no chance of body fluids mixing . The surgeon has to get cut and bleed into an open patient wound @!BUCHANAN All right . I mean , that- Ms. FASSBINDER : Through gloves @!BUCHANAN OK . That can- well , that can perhaps , I mean , remotely happen . Something happened there to you , but what is the problem , Ms. Fassbinder , for surgeons and dentists , dentists who do oral surgery and surgeons to be tested beforehand and if they have the HIV simply to tell their patients or let patients on whom they work know that there 's a remote chance of a transfer of blood between the two of them in some kind of invasive procedure so a patient can at least make his own decision ? Ms. FASSBINDER : Well , I agree that voluntary testing by all health care workers who do invasive- exposure prone invasive procedures especially is very important so that they can seek proper counseling , so that their practice can be reviewed , so they can be reviewed to see if they 're competent to @ @ @ @ @ @ @ @ @ @ much for joining us . We 'll be back to discuss that AIDS Commission . Is President Bush doing enough for AIDS sufferers or is the government doing more for them than for anybody else ? Commercial break BUCHANAN : Dr. Seldin , despite the fact that the American people , I think , spend more per capita on AIDS research than any other disease in history , as much as we spend for heart disease and cancer which kill 15 and 30 times as many , do you not think it is outrageous of the AIDS Commission to blast the President for lack of leadership on this ? Dr. SELDIN : No , I really do n't . The AIDS Commission blasted the President because he felt that there was no leadership from the White House on this issue and with all that 's been going on , and I grant you he 's had a lot of things on his mind , I think that it 's something that the American public has centered on and needs attention to from our leadership @!BUCHANAN How can- I mean , let @ @ @ @ @ @ @ @ @ @ how many shows we 've done in the last two years on diseases . My guess is we 've done 25 on AIDS and maybe zero on other diseases . It is true of every TV show in the country . Presidents have spoken , they 've been fund raisers . It 's a front page issue . How can anybody say we have n't focused on this disease which kills 36,000 people , less than die of breast cancer each year ? Dr. SELDIN : We 're focusing on it but not in the same way that we might be focusing on research for other areas of disease . We need to put money and develop and put the man power into developing better ways of protecting , treating and helping these people , not only those who already have the disease , but those who we would like to prevent- KINSLEY : Congressman Dannemeyer , it seems to me that Pat 's criticism applies to you as well as to the AIDS Commission . Here you are with limited attention saying- of trying to obsess the country even more @ @ @ @ @ @ @ @ @ @ how much money is being spent on AIDS . You 're proposing to require a massively expensive testing program , costs hundreds of millions of dollars that also could be spent on other diseases , yet you are- Rep. DANNEMEYER : We 're spending $ 1.8 billion this year on AIDS and I hope we find a cure , a vaccine . That 's far more than we 're spending on any heart disease- KINSLEY : But you 're proposing to spend more , even more . Rep. DANNEMEYER : And I think it 's appropriate that the civil rights of the uninfected people take precedence over the civil rights of the infected . I want to cite a study by John Colombotos , Ph.D . at Columbia University- KINSLEY : Briefly , sir . Rep. DANNEMEYER : - School of Public Health , of physicians and registered nurses , about a thousand physicians , 1500 nurses , 57 percent of the doctors support the idea of mandatory testing and 63 percent of the nurses support mandatory testing . We 've had voluntary guidelines since 1957- or 1987 , excuse me @ @ @ @ @ @ @ @ @ @ right . Dr. SELDIN : I can tell you- KINSLEY : I 've got to- he ran out the clock . Thank you , Congressman Dannemeyer . Thank you , Dr. Seldin . I 'll drill Pat here in a bit . Commercial break KINSLEY : Pat , this is not a matter of civil rights as you keep saying . It 's a matter of sensible public health policy . The risk of getting AIDS from your surgeon is one in millions , 21 million , according to the latest study . Yes , in theory people have the right to know . It costs too much money to test everyone to find out . It makes no sense @!BUCHANAN You use the $ 500 million figure . That is $ 5,000 per single little AIDS test for 100,000 health workers . Where do you get these nutsy numbers ? KINSLEY : You 've got to test the health workers , you 've got to test the patients . Far more workers than patients catch AIDS . You 've got to test them frequently to make sure they have n't @ @ @ @ @ @ @ @ @ @ costs @!BUCHANAN People , Michael , people have a right to know , even if there 's a minuscule danger of catching this fatal disease @!KINSLEY You ca n't know everything in the world there 's a one in 21 chance of happening to you . It costs too much money , Pat @!BUCHANAN Why are you protecting these doctors and dentists with AIDS ? Tell me @!KINSLEY I 'm not- I 'm protecting your pocketbook , Pat , for a change . From the left , I 'm Mike Kinsley . Good night for Crossfire @!BUCHANAN Money over public health- KINSLEY : Oh , please @!BUCHANAN When did you take that position , Michael ? From the right , Pat Buchanan . Join us tomorrow night for another edition of Crossfire @!KINSLEY PrimeNews is coming up . Here 's Charles Bierbauer with a look at the headlines . CHARLES BIERBAUER , PrimeNews : Thanks , Michael . Coming up indeed , the U.N . Security Council accepts Iraq 's offer to end the standoff in Baghdad . A reputed hit man for the Medellin cocaine cartel is arrested in New @ @ @ @ @ @ @ @ @ @ pundits as the Democratic field begins to take shape . Those stories and more at the top of the hour on PrimeNews . 