Wall Street Week with Louis Rukeyser; 2826; The Best of W$WW/LR

Yeah. For nearly three decades America's most popular program about the economy people and their money. Going Street Week With Louis Rukeyser is made possible by the annual financial support from viewers like you. By Prudential Securities with more than 50 600 financial advisors nationwide pretensions securities provides solutions for a lifetime of investment needs. That's the power of the rock at work for you by A.G. Edwards committed professionals providing a full range of financial services and investment advice. A.G. Edwards trusted advice exceptional service by Oppenheimer Funds. Where a long term approach to investing has helped put financial security in the

hands of millions of Americans. Oppenheimer Funds. And by the common fun. A small company aggressive growth fun. Believing Louis Rukeyser This is Wall Street Week. Welcome back. Well a funny thing happened to be on the way to the studio. There we were jogging along blissfully toward 10000 on the Dow. When we fell into this huge hole and got battered pretty badly. Were you there too. Did you get hurt too. Guys I'm sorry but there's no way that the misery was shared by so many nice people has me feeling better already. How about you. Hello again. I'm feeling much better now and I hope your finances are too. When I appeared in those bandages on Labor Day weekend the Dow Jones

Industrials had just plunged nearly 900 points in just two weeks. And the gloom and doom crowd thought its hour had come round at last. Then however the financial Red Cross arrived and so did some spectacularly rapid healing tonight. Since it's Christmas with life to give you the ever loyal viewers of Wall Street Week With Louis Rukeyser a special look back at some of the most memorable moments of the past couple of years on our program and what an exciting time it's been around here and economy that just wouldn't quit. A stock market that provided more ups and downs than an elevator made of mergers corporate intrigue and big money developments from the economic unification of Europe to the lockout of the NBA basketball players. And we have the best of those memories tonight. Since we taped this program a week ahead of time to allow everybody involved to enjoy the holiday with their families. We'll be dispensing with our usual market averages tonight. But our elves tell me they have a message just for

you. Yes. Maybe they'd better keep their day jobs in April the largest merger in corporate history was announced a seventy two point six billion dollar deal between travelers a venerable insurance company that had already become a financial services giant and Citicorp which started as a little New York City Bank in 1812 and grew to more than 3000 offices in nearly 100 countries and territories. The merging chairman travelers Sandy Weill and Citicorp John Reed will now serve as coach chief executives of the newly named Citi Group appear together is my guess. In May. Sandy while everyone agrees that you and John have pulled off something remarkable. Critics have questioned whether there's actually much in it for the customers. Are they right. I think the steel was caused by the customer. Basically we are creating a company

which will be able to offer customers the convenience of buying lots of different financial products in the same place at a reasonable price with high quality and we can do that both for the consumer and the corporate customers of this. This deal is customer driven. It's not putting to companies that do the same thing together. It's no surprise to you that this synergy is sometimes not developed in other mergers. Sirius found it couldn't sell insurance policies in stores for it well. Is this something you want to do it want to sell. Travelers insurance policy is to quote customers where we do a lot of cross marketing now in our company where we sell mutual funds annuities automobile and homeowner all of our and all of our financial products throughout the parts of the company. And that's really been one of the engines that has driven our company and when you look at Citicorp Citibank they have 200 million inquiries a year in their credit from their credit card customers. And if we can just talk

to those people for a few more seconds about the things that they may need we may make their life a lot simpler. You have been a leader thinking for a long time now. Do you think the boldness of this merger encouraged omlet Benz and Chrysler. I think there's been a lot of deals since we've announced our deal and I think that was one of them but I like seeing is that we've created a new management concept called co CEO which I also see happened in that deal. I think that we are in a global economy and there's no getting away from the fact that you're going to be affected in one country from what happens in another country. And it's important I think with with the world changing as fast as it does that companies have stability that companies have diverse income both by regions and by product and be very very strong. And I think you're going to see a lot more of it. But it's the same language in this case. Let me turn let me turn to John. Been much written about these so-called cultural gap between your two companies and between investment

banking and commercial banking in general the clichés are that investment banking is more freewheeling in the higher paid commercial banking more tradition bound. To what extent is this a real gap and what you can do about it. Well I think it clearly is a real gap but it's one that we've had within Citicorp for years and because we've had traders and so forth who are clearly in a distinct category and I think what we've learned and Citicorp and I think in many companies is you can maintain different cultures. You have to be cognizant of it. It's going to be called for here but I don't think any further than exists within the company today. Should savers in's and Citibank be worried that you're going a little too far afield. I see no reason Citibank continues to be a national bank their savings continue to be ensured we continue to be regulated by all the same regulators and if anything we're a stronger institution. While the relationship between you and Sandy is obviously very close and you present yourself as equals in

this merger Sandys to fade. Jeremy Diamond has been named president of the new Citi Group and there's a lot of speculation the traveller's is going to be the dominant partner here. This is incorrect speculation. I think so. I think what we did is Sandy and I want a way about 10 days ago and with Jamie Dimon a number of other people and we agreed as to how he wanted to run the company and if you look carefully what we did is we had a set of priorities we had to deal with. And we also recognized full well that we wanted to get people from city to begin to learn the travelers business people from travelers to learn the city business. Had we left Jamie where he is primarily working now in the Salomon Smith Barney and simply left him there and given him no other assignment he would not have learned anything about the company I wouldn't have seen him in a broad way and frankly it was I who was very much in favor of getting him to take the financial and management functions working with Sandy and me. And so if you look carefully what we have done is we've worked on the things that are important for us. We've pulled together the

bank under victim in Asia and we've got Victor and are working with the derrick mom as well as Jamie and we have set the stage to make sure that we get our priorities right. But also we're cross-breeding the next generation so that we are not going to have anybody who remembers how they came into this company but rather has a full understanding of the full company. As it turns out Jamie Diamond didn't make it to thanksgiving. He was asked to leave citi group last month but that's not the last word on layoffs. You're a brilliant manager but you're also a tough manager there will be layoffs here. Not very many because there's not a lot of overlaps. This is a growth story of what we're putting together here for both the corporate bank clients you know where we'll be able to serve the customer across a broad spectrum of his needs from lending to syndicated loans to used use of the public market as well as to the consumer so I this is not a story about layoffs. You said not very many in what areas include maybe some layoffs.

I don't think we've identified. We certainly decided not to layoff anybody at the chairman and co-CEO level. You have a surplus there. Last week Citi Group gave a pretty Christmas present to more than 10000 workers announcing that they would indeed be laid off. And speaking of layoffs if you have spoken of them as loudly in this decade as Al Dunlap who made a specialty of taking over downtrodden companies and firing so many workers that he earned the charming sobriquet of chainsaw. Now. Sometimes the restructuring work better than others. In May I talked with one of Dunlap's largest stockholders Michael Price who has since retired as head of Mutual shares. Even a heavy hitter like my price doesn't always hit a home run. I heard from a number of your shareholders this week who said that I had to ask you about sunbeam because it's been sliced in half the year because I like it. I don't know I thought we had a home run we won 70 million shares it cost us nothing we bought the company in bankruptcy in

1990. Yes it's down from 45 to 25 but I think what happened recently at Sunbeam is evidence of Wall Street's exuberance and where Wall Street itself feeds on its own you know encouragement by analysts largely maybe some from management but mostly Wall Street's own hype and get stocks above their fundamental values. I think today somebody represents excellent risk from where the management has a vision for the next year. They have to execute on that vision. Yes two weeks later I got a stingingly different view of Dunlap from Andrew Schorr a leading analyst of household products companies. Andrew you are very candid guy and as a result you have been quite outspoken. You recently got in a feud with Al Dunlap of Sunbeam. He told Michael Price my guest here two weeks ago you should be fired. He said he's like a pinata gourmet dinner I guess you would I guess you would downgrade a stock and told Michael that he should be fired. Why do you think I don't want to be fired.

Well I certainly don't want to personalize this will take me it's OK with me I won't take myself you know his level but I think it's important to know that I am not responsible for the stock price. He is and I think it's going to be very difficult to turn around sunbeam under present management. He has been the paradigm if you will of corporate downsizing and firing a lot of people. Has he gone too far in your judgment too for way way too far I don't think he creates a lot of value. How would you run somebody. I would first recognize that I'm not the person to run it. So I would bring in somebody more qualified than me. OK you are one number one that I would find someone who has a strong consumer non-durable a package goods background recognizing that this is still an appliance business that does not have as he believes 15 to 20 percent margins make it more realistic. I would advertise the product qualities that improve R&D. Two weeks later Chainsaw Al Dunlap was fired himself and the

stock continued to flounder. On a happier note we did our first program from Texas last year and it seemed only fair to act as if we belonged. Up. The US. Already. You can call me el Are you in. Later on in that program without the hat. I talk with two of the most dynamic figures in recent American business history Bob Crandall the CEO of Dallas based American Airlines and Eckhard Pfeiffer the trailblazing CEO of Houston based Compaq Computer. They were unusually frank about where they intended to take their companies and where they didn't. We've seen a great deal of cost cutting in unfair cutting in the industry as a whole.

What's the future for the other side of the equation better passenger comfort and service. I think it's very limited very limited very limited. The reality is that the airline industry is intensely competitive. We do what our customers have told us they want us to do. I made a speech the other day and I made the observation that that generally speaking the public has said they would rather have more seats in the airplane and lower prices. And they've given us a very clear signal about that. We have tried on several occasions taking seats out. And the public each time they said we will not pay for that extra space in either money or by waiting there for a flight and your comfortable airline when we're through with I mean we're going to go home even if we go home and scrunched up air he said a generous Bob Zale. I accept your forecasts though it disheartens make.

That cut. What's the future for. The PC segment of compact in which you lead the world as we move toward ever cheaper PCs. It's not about $500 computers now is the business getting worse as the price goes down. Compaq made a decision back in 1991 to participate across the entire spectrum of the industry at that point in time. The consumer market was still relatively small. In the meantime it has developed a house that has embraced the industry standard PC and actually Compaq is taking a lead. We are leading the sap 1000 segment in the last quarter actually was a market share here in the United States of well over 40 percent 55 close to 50 percent. So we have seen the opportunity to lower the entry point for the consumer and

that's what the consumer has been waiting for we have seen a huge demand of newcomer as a first time by us and obviously it will also penetrate into the education system and will draw along with that. The low entry point for the commercial desktops depending on which news story you read Compaq seems to be on both sides of the government's fight with Microsoft. Where are you really. Compaq and Microsoft have a very close relationship. Actually since the founding of Compaq Microsoft was founded a little earlier. That's when the so-called industry standard PC was bought on and consequently it was a very close relationship in fact almost like a marriage. Intel was building the chips Compaq was building the computer. Microsoft the operating system and then along the applications and that really hasn't

changed. So this triumvirate has been advancing the PC industry over the last 15 years and doing this advancing of the industry. Obviously there is a lot of discussion a lot of joint planning what we call the road map planning. What is the next level of the next generation in technology the chips the architecture the operating systems. And that is not all of us. Klesha and total agreement right from the start everybody has creative people everybody brings a great idea to the table and that's how the how the relationship works. And there is never total agreement and so there are debates so that specifically on the issue of whether the Microsoft Explorer must be put on Windows 95 in future Windows How do you stand on that. That's that's a decision that I think is really more determined by a leading question rather than the technical question I think.

Internet Explorer works best with Windows but it leaves anybody the opportunity to go with another browser. That's I think how it has been happening and I think it will continue. Not long after the program Bob Crandall decided to retire to sail around the world with his wife Jan Eckhard Pfeiffer and Compaq are still going strong. Last July we traveled in the other direction to London for a look at the future of European unification and how this historically dramatic development had become possible in the first place. Near the end of 1945 Hitler had been defeated but Europe was anything but united. Ashes and rubble pervaded its ancient cities and the world wondered whether the continent's historic enmities would soon burst into a global

flame again. The first big push to bring Europeans together came from across the Atlantic. When U.S. Secretary of State George C. Marshall loans the multibillion dollar reconstruction plan that would bear his name in the belief that a healthy and united Europe. Would be the best deterrent to a third world war. Hope began to stir in the European embers. And nurtured by the eloquent enthusiasm of Winston Churchill the one Europe movement found its roots. The true forefather of today's surge toward unity however was French statesman John manee who convinced his countrymen that they should view Germany not as an irreconcilable foe but as an economic partner. And they as ideas were put to the test in 1953 when France agreed to merge its coal and steel production capabilities with Germany's

the European coal and steel community was successful. And so was the pursuit of peace. The past half century has been the first 50 years for more than four centuries that did not see a major war in western Europe. Amid unaccustomed peace and prosperity. The European community also known as the Common Market took shape. In 1958 Belgium France Germany Italy Luxembourg and the Netherlands formed the east seized charter group of six nations Britain Denmark and Ireland joined 15 years later in 1973. Greece was admitted in 1981 followed by Portugal and Spain in 1986 and in 1995 Austria Finland and Sweden. But the number of nations in the European Union to 15. Together these at least partially United States of Europe covered just one third of the land

area of the U.S. but have a much larger population. Three hundred eighty million compared with two hundred sixty eight million. And the Europeans economy is actually larger a gross domestic product of about 8 trillion dollars as compared with seven point two trillion for the US. The shares of world trade are remarkably similar. Twenty point nine percent for the European Union. Nineteen point six percent for the U.S.. But not every European is racing to seal the bargain. And the skepticism is particularly evident here in Britain after a stunning economic turnaround on the free market policies of Margaret Thatcher. Many of Queen Elizabeth's subjects regardless of their domestic political affiliations wonder about the wisdom of turning over a fundamental national economic decisions to bureaucrats. On the other side of the channel. The reality nonetheless is that it diminished Britain. Its worldwide empire now just a historic memory needs however

reluctantly to find a new role for the 21st century. Middle England as it doesn't much like to be called still has a close relationship with the US where its direct investment of one hundred forty two billion dollars is greater than that of any other nation. But practical considerations are pushing it eastward. In less time than it takes to go by train from New York to Washington. A Londoner travelling by rail through the Channel Tunnel can be in Brussels. The graceful old city that is now in effect Europe's capital. Outside the European parliament building there it takes a Levon official languages to tell you where you are. A reminder inside and out that true political union is still more elusive than economic cooperation. The most visible symbol of that economic cooperation is now hot off the presses.

A single currency the euro which is scheduled to replace the national currencies of 11 of the 15 countries by July of 20 000 to Britain Denmark and Sweden have not yet agreed to join this monetary union. While Greece has so far failed to qualify for economic reasons. But if the schedule is kept travelers and business people will find Europe a simpler less confusing but less diverse. There will be no more German Meagher or French franc or Italian lira. Just in 11 countries. The Euro. The new money symbolizes the overriding question about the new Europe. Is it truly possible to have economic union in countries with highly different economies and cultures without taking the next steps to political union as well. Once again the world has an urgent reason to watch what is happening.

In Europe. We'll continue to watch European unity in the months ahead. I know that every one of you watches every single week we do take attendance you know but we may have a few additional viewers tonight. This was supposed to be the first night of NBC News coverage of the National Basketball Association. Instead there has been a lockout of the players by the owners. A possibility I had raised in January with Michael Jordan's agent David Falk. There seems to be some indication that the owners are beginning to resist. Do you expect a lockout in professional basketball next summer. I laid out I think David Stern is way too savvy to to ruin the momentum that he's created over the past 15 years in the NBA. You bet Al Dunlap wasn't the only one who encountered an unexpected bounce in 1998. And there we do have to stop. I hope you'll be back with us again next week when we'll be live again for our annual stock picking a new year's party. It's our yearly funfest of black ties and red faces. And I hope you'll

come. Meanwhile this has been Wall Street Week. I'm Lewis we've got him on the wall. A good night. For Wall Street Week With Louis Rukeyser was produced in association with Kaiser television incorporated by Maryland Public Television made possible by the annual financial support from viewers like you. By Prudential Securities. With more than 50 600 financial advisers nationwide preventions securities provides solutions for a lifetime of investment needs. That's the power of the rock at work for you. By A.G. Edwards providing a full range of personalized financial retirement and estate planning. A.G. Edwards trusted advice exceptional service by Oppenheimer Funds. Every year millions of Americans place their financial futures in the

hands of one mutual fund company. Oppenheimer Funds. And finally the Calphalon funded. A small company aggressive growth fund. For printed transcript of this program. Send $5 to transcripts Wall Street Week With Louis Rukeyser Maryland Public Television Owings Mills Maryland 2 1 1 1 7. Transcripts are also available to subscribers of Alan Jones interactive. This is PBS.