Business
The Daily Tar Heel Thursday, March 2, 19895
Stocks
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COMPANY CLOSE .CHANGE HIGH LOW
Duke Power 42 34 - 38 43 38 4234
Food Lion 10 18 18 10 14 10
NCNB Corp. 32 58 , - 12 33 14 3258
RJRNabisco 84 18 12 84 38 8378
Southern Bell 40 12 - 38 41 18 4038
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DTH Graphic
Introducing the new business page:
Student-oriented news you can use
By ERIK FLIPPO
Business Editor
In a continuing effort to improve
our coverage, we have reintroduced
the business page with this edition of
the DTH.
WeVe tried to present business
news with an angle students will find
useful, in an easy-to-access format.
The charts on this page will evolve
to include more in-depth coverage of
American
From Associated Press reports
WASHINGTON Americans'
personal income in January posted
its largest gain in more than a year,
rising 1.8 percent, but people chose
not to spend much of the extra money
and instead built up their savings, the
government reported Wednesday.
Analysts were cautious about
whether the report might signal the
start of a long-sought slowdown in
consumer spending, which would
help cool inflationary pressures in the
economy. They said the robust
income figures suggested continued
strength in the economy.
Led by increases in wages and
salaries reflecting strong employment
gains, income rose $74 billion to a
seasonally adjusted annual rate of
Carolina Students'
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30-89 Days
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2243.04
DOWN 15.35
VOLUME: 1 77.21 million shares
i
223 224 227 228 "31
CLOSE
$ 385.00
$ 5.78
CLOSE
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1.723
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'Expressed hi US dollars per pound
SOURCE: SHEARSON LEHMAN HUTTON, Chapel Hill
the markets and exchanges as the
business desk establishes itself on a
firmer footing.
The business page will run Tues
days and Thursdays, beginning next
week. It will include the charts you
see here and a section of AP business
briefs highlighting important and
interesting news of the day from
around the state, nation and world.
We also will be focusing on
incomes up, latest figures show
$4.28 trillion in January, the Com
merce Department reported.
Personal consumption spending,
meanwhile, edged up just 0. 1 percent
to a seasonally adjusted annual rate
of $3.35 trillion. The figure includes
virtually all consumer spending
except interest payments on debt. ,
At the same time, Americans added
to their savings at an annual rate of
$211 billion.
With the income gain strongly
outpacing the rise in spending, the
personal savings rate rose to 5.8
percent from 4.3 percent in
December. It was the highest savings
rate since May 1985, when Americans
set aside 6.5 percent of their dispos
able income.
Analysts found the weak spending
8.000 simple
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8.4508.816
8.4508.816
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10.00
13.00
16.00
Reynolds
By CRAIG ALLEN
Staff Writer
The Kohlberg Kravis Roberts &
Co. (KKR) leveraged buyout of
RJRNabisco has left several ques
tions about the company's future in
its wake.
KKR obtained the company after
offering the winning bid of $109 per
share, successfully outbidding Ross
Johnson, former chief executive
officer.
The competition for the company
doubled the value of R.J. Reynolds
stock, but the buyout has left some,
including the city of Winston-Salem
(the home of RJR), wondering what
lies ahead for the producer of such
products as Oreo cookies, Del Monte
vegetables, LifeSavers candies and
Winston cigarettes.
Among the concerns of many
Winston-Salem citizens is the possi
bility that the jobs supplied by R.J.
Reynolds Tobacco for many years
may be in jeopardy.
David Fishel, senior vice president
of public relations at R.J. Reynolds,
said he anticipates no loss of jobs for
employees of the Winston-Salem
tobacco division. Fishel also said he
anticipates no major changes in upper
management for the tobacco com
pany, since Ross Johnson has already
left the company.
Bill Stuart, Winston-Salem ' city
manager, agreed, saying that
although .jobs are sometimes lost in
other cities as the result of corporate
MBA studeots to attend natiioiiial mneetmni
By KAREN ENTRIKEN
Staff Writer
Five UNC students will represent
the University, ranked as one of the
top 20 MBA schools in the nation
by a major business magazine, at the
1989 Graduate Business Conference
at the University of Virginia March
16-19.
UNC's MBA school plans to put
in a bid at the conference to host the
1991 conference in Chapel Hill.
"We will be represented in a
national conference in a year that we
have national attention placed on us,"
said John Few, vice president of
student relations for the MBA Stu
campus- and town-related issues,
with upcoming series coverage on a
variety of topics. For example, look
for a series of profiles on local
business people who have carved a
unique niche for themselves in the
Chapel Hill and Triangle areas.
I hope you find this new endeavor
useful, and if you have any ideas on
how to improve the business page,
please give me a call at 962-0245.
figure surprising in light of the strong
income growth and were divided
about whether it marked the start of
a trend, toward slower consumer
spending.
Jerry Jasinowski, chief economist
for the National Association of
Manufacturers, said the figures were
"welcome news, suggesting that fears
of the economy overheating were
unfounded."
But Lea Tyler, senior economist for
the WEFA Group, a Bala Cynwyd,
Pa., forecasting firm, said it was too
early "to talk about consumers really
retrenching."
Tyler said that if strong employ
ment figures continue to drive income
upward, it could "raise some concerns
about inflation in the coming year."
The Federal Reserve Board since
last March has been pushing interest
rates up in an effort to slow the
economy and dampen inflationary
pressures. Chairman Alan Greenspan
has singled out higher wage pressures
in the economy as part of the cause
for accelerating inflation.
Just last week, the central bank
boosted its key bank lending rate a
half-percentage point to 7 percent
after worries about inflation were
heightened by a report that consumer
prices shot up 0.6 percent in January.
Consumer spending rose at a
robust 3.5 percent annual rate last
year, a pace that analysts said is too
fast given constraints on production
caused by high operating rates and
tight labor markets.
Robert Dederick, chief economist
for Northern Trust Co. in Chicago,
said January's income and spending
report sent mixed signals, with the
strong income gain suggesting "the
economy was continuing to race
ahead too fast," while the spending
pace suggests "a much more res
trained pattern" that would be
welcome.
by yoy It
buyouts, city officials are confident
that jobs in Winston-Salem are not
in jeopardy. Stuart said city officials
are trying to maintain a good rela
tionship with KKR to keep the jobs,
but he declined to discuss details.
"If a company changes ownership,
it would be our posture to maintain
a good working relationship," Stuart
said. "We have had some concern
about the effects of buyouts. When
a company increases its debt load
with these buyouts in other commun
ities, weVe seen some jobs lost. We
certainly don't want to see the job
count (in Winston-Salem) suffer."
Edward Armfield, first vice pres
ident with Robinson & Humphrey,
a division of Shearson Lehman
Hutton, said KKR will have to
generate some revenue to begin to pay
off the tremendous debt that resulted
from the buyout.
According to Armfield, the
tobacco company will stay together
because tobacco is the "most prof
itable legal business in the world."
"They will have to, with the debt
load, sell some divisions," Armfield
said. "The common knowledge is that
they will sell some food divisions."
Another concern for Winston
Salem citizens is the possible decline
in charitable contributions to the city
and state. In the past, R.J. Reynolds
has contributed to the arts, education
and charities like the United Way.
Even UNC has benefitted from the
dent Association.
UNC's MBA school was ranked
eighth among the nation's MBA
schools, between the University of
Virginia and Stanford, in a Business
Week magazine survey last
November.
Last year the MBA school tried to
win the right to hold the, 1990
conference and lost by one vote, Few
said. This year the MBA school has
a five-minute videotape created by
marketing students to present to the
conference, he said.
The 1991 conference topic will be
"Operations Management." It will
feature as a speaker Tom Peters,
rrPPrfnmPr Resume Drop March 7
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1 mm immmmmm
Date Company Job Major
45 Neptcolnc. Chem. ChemBS.MS
44 F.N. Wolf
44-45 Peace Corps Socs. AnyBABS
45 Camp Graham
45-46 Personal Products
46 NSI Tech. Serv. Corp.
Sandra Shaber of the Futures
Group in Washington said it was
possible that January's weak consu
mer spending figure may be one of
"the first signs -that higher interest
rates are taking their toll" on con
sumer spending.
However, Shaber said the figures
more likely signaled that "people are
better able to save" after enjoying
sustained increases in income over the
last year.
January's increase in personal
income was the biggest monthly
increase since a 2 percent jump in
October 1987, while the slim rise in
spending was the weakest perfor
mance since a 1.5 percent decrease
in September.
The increase in income was paced
by a 1.2 percent gain in the key
component of wages and salaries,
reflecting continued strong
employment.
The recent income gains were
bolstered by several unusual factors,
including a 4.1 percent pay raise in
January for federal civilian and
military personnel, a 4 percent cost
of living increase in Social Security
benefits in January and a December
increase in farm subsidy payments,
the Commerce Department said.
Even excluding such factors, how
ever, personal income still increased
1 .6 percent in January and 0.8 percent
in December.
Americans' disposable, or after
tax, incomes rose 1.7 percent in
January after rising 0.9 percent in
December and falling 0.3 percent in
November.
In another report Wednesday, the
Commerce Department said con
struction spending increased 0.4
percent in January, led by a strong
increase in work on non-residential
buildings and held back by a decrease
in work on government projects.
worries N.C city
company's contributions in the past.
The School of Journalism received
a grant from R.J. Reynolds Tobacco
in late 1988.
Many city officials expect the
reduction of contributions by R.J.
Reynolds because KKR is now
concerned with paying the debt left
by the buyout, said Paul Spain, vice
RJR pulls 'smokeless' cigarette
after tepid consumer response
From Associated Press reports
RALEIGH R.J. Reynolds
Tobacco Co. said Tuesday it is closing
the curtain on its Premier brand
"smokeless" cigarettes, which drew
less than rave reviews in test markets.
"Our decision to end the test
market for Premier is based on
consumer response that tells us that
while smokers are very interested in
the concept, the current product has
not achieved adequate consumer
acceptance," the company said.
"The two primary areas that the
test showed us we have to work on
(are) taste and the aroma," company
spokesman David Fishel said. "All I
can say for competitive reasons is that
we learned a lot in the test marketing
that we will be able to use later on."
The company had been test
marketing Premier in Arizona and
eastern Missouri, but the highly
touted "smokeless" smoke got low
author of the best seller "In Search
of Excellence."
The five students who will attend
this year's conference are officers of
the MBA Student Association. The
group organizes all aspects of MBA
life, from job recruiting and guest
speakers to intramural sports, by
using its 24 clubs and committees.
"Several things have happened to
the MBA school since it was thrust
into the national limelight," Few said.
Alumni support has increased, more
recruiters are visiting the Universty
and applications submitted to the
school have skyrocketed in number,
he said.
Democrats and Republicans
split on commission report
From Associated Press reports
WASHINGTON A hope
lessly deadlocked National Eco
nomic. Commission, failing to
reach a grand compromise to solve
the nation's fiscal problems, issued
a final report Wednesday that split
essentially along party lines.
The commission's seven Repub
licans and the one Democrat
appointed by President Bush
endorsed the president's 1990
fiscal budget, calling it a "worka
ble plan for eliminating the deficit"
without resorting to higher taxes.
But the commission's six Demo
crats refused to go along with the
majority report and instead issued
a minority document which cas
tigated Bush's $1.16 trillion
budget, charging that it employed
unrealistic economic assumptions
and failed to distribute the pain
of deficit reduction equally among
different segments of society.
The Bush budget "rules out any
discussion of additional revenues
and relies heavily on hard and
disproportionate reductions in
domestic spending, many of which
have been rejected repeatedly by
the Congress and the American
people," the Democrats wrote.
However, the Democrats did
not offer their own plan for dealing
with the deficit, and they did not
specifically endorse higher taxes
although many of them have
stated the need for higher
revenues.
The 14-member commission,
now on its way out, was labeled
a huge disappointment by former
supporters. Backers believed the
commission would offer the best
hope, given a new administration,
of crafting a workable comprom-
president and general manager of the
Winston-Salem Chamber of Com
merce. He did, however, praise the
company for its past contributions.
"We suspect that the level of
benevolence may suffer a bit," said
Spain. "They (RJR) have been a
partner in everything in this commun
ity worthwhile."
marks from consumers.
"They're terrible; they're nasty.
They're beyond nasty," said Mark
Padgett, an employee at a 7-Eleven
store in Phoenix, Ariz., said shortly
after the cigarettes hit the market last
October.
Premier was advertised as "the
cleaner smoke" because, the company
said, it substantially reduces certain
compounds found in the smoke of
tobacco-burning cigarettes and virtu
ally eliminates cigarette ashes and
smoke.
Several health organizations,
including the American Medical
Association (AMA), petitioned the
Food and Drug Administration
(FDA) to ban the sale of the cigarette.
The AMA argued that Premier was
a drug-delivery device, not a cigarette.
Reynolds disagreed with that
contention.
O
"Applications are up 57 percent,"
said Clay Dunnagan, vice president
of finance for the association.
"Thirty-five hundred submitted appli
cations is a slightly high figure with
200 spots to fill."
UNC's MBA school is one of the
smallest in the top 20, with a class
size of about 200 each year, Few said.
Total enrollment for the school is 478.
The school is also the least expen
sive of the top 20 MBA schools.
Tuition for one year at the UNC
MBA school is $4,916. All other
schools in the top 20 range from
$6,000 to $15,000, according to
Business Week.
Business Briefs
ise of spending cuts and tax
increases that would balance the
government's books.
Trade deficit rises
WASHINGTON The U.S.
trade deficit worsened in the final
three months of the year, climbing
to $32 billion, as both U.S. exports
and imports hit record levels, the
government reported Tuesday.
The Commerce Department
said the deficit from October
through December swelled by 10
percent from a third quarter deficit
of $29. 17 billion.
The trade deficit had shown
steady improvement through the
first three quarters of 1988, helping ;
to push the deficit for the entire ' ;
year down to $126.5 billion, 21.1
percent below the all-time high of .
$160.28 billion set in 1987. :
While economists were pleased 1
with the big improvement for the ,
year, they expressed fears that the
improvement has now stalled and
will hold back overall economic
growth in 1989.
"The trade deficit has stopped
improving," said David Wyss, an ,
economist with Data Resources '
Inc. of Lexington, Mass. "We -made
some big gains in exports
in 1987 and 1988, but they haven't
been enough to balance our big :
appetite for imports."
The trade deficit with Japan
also set a record, rising by $3.2
billion to $ 1 5.5 billion in the fourth
quarter.