The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. Leading the news this Tuesday, the stock market had its second-highest one-day rise ever. Senators and President Reagan differed over contra aid. Vietnam said the remains of 21 more missing Americans have been found. And a judge ordered TWA machinists back to work. We'll have the details in our news summary in a moment. Robin?

ROBERT MacNEIL:ZAfter the news summary, TWA boss Carl Icahn takes on the president of the striking flight attendants, Vicki Frankovich. Then, what some businesses call the product liability crisis; we have a debate between Alex Trowbridge, head of the National Association of Manufacturers, and consumer advocate Joan Claybrook. News Summary

MacNEIL: The stock market took off this afternoon, closing at a new record high and making the second biggest gain in its history. The Dow Jones average of 30 industrial stocks rose 43.10 to close at 1746.05. Analysts attributed the broad advance in stock prices to lower interest rates and a sharp jump in the price of oil stocks, as traders speculated that the price of crude oil may have bottomed out. Jim?

JIM LEHRER: The issue of aid to the contra guerrillas in Nicaragua continues to obsess the leaders of the United States government. Today a group of senators spoke out against it, and President Reagan again spoke up in favor of his $100-million request. The anti senators held a news conference to challenge the policy and the cost of the aid.

Sen. TOM HARmIN, (D) Iowa: At the same time the administration is stripping our farmers of the loans and credit needed to keep them on the farms, they're now asking for $100 million to keep the contras fighting that dirty little war in Nicaragua. The President talks much about saving our backyard from communism; I wish the President would save more time saving our farmyards from bankruptcy.

Sen. MARK HATFIELD, (R) Oregon: We're going to have to reduce the needs of -- the ability to meet the needs of our people as against the $100 million. Now, this could be called symbolic in a sense, but really it gets to the basic issue that we should be debating, and that is, what are the proper roles for the federal government? And what constitutes our national defense?

Sen. PATRICK LEAHY, (D) Vermont: The idea that somehow they're going to topple the Sandinista government is laughable by the best analyses of our own military. And so what we're doing is just spending money for nothing.

LEHRER: Mr. Reagan did some of his talking privately to individual members of Congress, one on one, and he also spoke in public on the issue to a group of regional newspaper editors at the White House.

Pres. RONALD REAGAN: In the last few days there has been talk here in Washington of compromise on this issue. Smaller amounts of aid, delay in providing it, restrictions on the uses to which it could be put. All the usual temporizing quibbles. Well, let me set the record straight. The Soviets continue to fund the Nicaraguan communists with massive infusions of arms, cash and so-called advisers. To delay or reduce the aid we've requested for the freedom fighters could be to send too little, too late. Those who would compromise must not compromise the freedom fighters' lives nor their immediate defensive needs.

LEHRER: Again, the votes in both the House and Senate are set for early next week.

MacNEIL: The Pentagon said today that the Vietnamese have agreed to turn over the remains of 21 more Americans missing in action. This came from Robert Armitage, assistant secretary of defense, who also announced that the remains of five Americans handed over in December have been identified. Armitage also said the Pentagon had named a panel to investigate charges that sightings of live Americans have been suppressed by the government.

Off Cape Canaveral salvage ships continued their efforts to retrieve debris and human remains from the Challenger shuttle. Heavy winds and high winds had hampered the efforts after the discovery that the remains of the seven Challenger crew had been found in 100 feet of water 15 to 20 miles off the coast. Elizabeth Brackett has this report.

ELIZABETH BRACKETT [voice-over]: NASA today released pictures of salvage crews recovering a large piece of the shuttle's left solid rocket booster. The piece is one of the largest pulled from the Atlantic Ocean since the Challenger exploded six weeks ago. Pieces of the suspect right solid rocket have not yet been brought ashore. While a fleet of 11 ships continues to search for wreckage today, most questions center around the recent discovery of the crew compartment. Divers from the USS Preserver spotted the compartment last Friday. NASA will not confirm that any of the remains of the astronauts have been brought to the surface, but NASA does say that any assistance in identifying the crew will be conducted by the Armed Forces Institute of Pathology at nearby Patrick Air Force Base. While reporters pored over the few details being provided about the search, NASA stood by its word that no more information about the crew compartment would be released until after the salvage work is completed.

MacNEIL: The acting administrator of NASA, William Graham, told Congress today it would probably cost nearly $3 billion to build a shuttle to replace the lost Challenger. He also said it would be very appropriate to redesign the seals on the solid rocket boosters. Two more astronauts, Gordon Fullerton and Vance Brand, today publicly said that schedule pressures had reduced emphasis on safety. They agreed with the memo issued by chief astronaut John Young, who spoke of an awesome list of safety flaws.

LEHRER: A Kansas City federal judge today ordered Trans World Airlines machinists back to work. The judge issued an injunction against the machinists, barring them from honoring picket lines of striking flight attendants. TWA management said only 20 of the machinists came to work yesterday, and at that rate the airline would soon have to shut down. Bargaining between the company and the attendants' union is set to resume tomorrow in Philadelphia.

MacNEIL: The death toll now stands at six and the number of injured at more than 100 from a series of tornados that struck parts of Kentucky, Ohio and Indiana. Local officials have declared emergencies in Covington and Lexington, Kentucky, and National Guardsmen have been called out in several communities to prevent looting. In some Kentucky neighborhoods just across the Ohio River from Cincinnati, residents were warned to keep out because so many power lines were down. Some of the worst damage was nearby at the Greater Cincinnati Airport. More than 30 planes were damaged, some so badly that they were beyond repair. The airport had to be closed for two hours to clear away the debris, but commercial flights were resumed today, although some roads in the area were still blocked by debris. Preliminary estimates put the damage in the three states at more than $10 million.

LEHRER: John Tower quit today. The former Texas senator resigned his position on the U.S. arms negotiating team at Geneva. White House spokesman Larry Speakes said Tower wanted to leave the job for personal reasons, and President Reagan had accepted the resignation. Tower had been in charge of negotiations with the Soviets on strategic nuclear arms for the last 14 months.

Also on the Soviet front today, the Russians officially protested Friday's U.S. order to reduce personnel at their U.N. Mission in New York from 275 to 170. Moscow said the order jeopardized U.S.-Soviet relations and denied U.S. charges their U.N. staff engaged in espionage.

MacNEIL: In the Philippines, the Aquino government today ordered the arrest of two Marcos legislators accused of killing Aquino supporters in the recent election. They are Arturo Pacificador, an assistant majority leader, and National Assemblyman Orlando Dulay. Both went underground when President Marcos fled the Philippines.

In South Africa, police fired on a crowd outside a courtroom in the Transvaal, killing two youths and wounding 81. The South African government today changed its mind about expelling a CBS News crew. They said CBS could stay after the network gave assurances about observing South African laws in its coverage.

LEHRER: And finally in the news today, two U.S. foreign aid stories. President Reagan notified Congress he intends to sell Saudi Arabia $354 million in anti-aircraft and anti-ship missiles. Congressional supporters of Israel opposed the sale, and each house of Congress now has 50 days to veto it. And the House passed a five-year, $250-million aid package for Northern Ireland. The vote signals congressional support for the recent British-Irish accord on Northern Ireland. It goes to the Senate next month.

MacNEIL: That's our summary of the news. Coming up, TWA boss Carl Icahn debates Vicki Frankovich, president of the striking flight attendants, and another debate on product liability. Damage Control

LEHRER: The liability insurance crisis is first tonight. Business executives raised the Washington consciousness about it today, calling on members of Congress and telling their various and varied horror stories of what high jury awards and high insurance rates have done to their businesses.

ROBERT DEE, Smithkline Beckman Corporation: The product liability nightmare is getting worse every day. The situation has now reached crisis proportions. The number of product liability suits filed in federal courts has doubled between '78 and '85. The jury awards being made every day are staggering, often irresponsible. As a ses, rates have gone up as much as 1,000 . You know from your own experience what this insurance burden means. Whole industries and professions have been declared off-limits for insurance.

MARTIN CONNOR, General Electric: We need uniform, stable product liability law which will make rational risk-management possible. We need the predictability which will make rational insurance rate-setting possible.

PETER NORD, Schauer Manufacturing Corporation: What is it the plaintiff attorneys expect us to do? For crying out loud! We can't think of everything. There are going to be people who are dumb and stupid and screw up no matter what we do. No matter what we do! And we're here because we're sick and tired of it. It's the damned frivolous lawsuits that we get, that my friends get, that I hear about you guys getting. You know, if a guy swallows a razor blade, why should he have to sue the razor-blade company? If somebody skies on a ski slope and breaks their neck, it's their own damn fault. We have to, as a society, realize you can't protect everybody from everything. We just don't have the resources, and we've got to go up to the Hill and say we just want it to be a little more fair.

LEHRER: Today's unusual massing of business executives was organized by the National Association of Manufacturers. NAM's president is Alexander Trowbridge, who served as commerce secretary in the Johnson administration and later as vice chairman of the Allied Chemical Corporation. On the other side of the issueis a coalition of consumer groups which believe there is no connection between the insurance problem and high jury awards in liability cases. That coalition is headed by Joan Claybrook, president of Public Citizen, a Washington-based consumer advocacy organization. She headed the National Highway Traffic Safety Administration in the Carter administration. Ms. Claybrook, do you agree that there is a liability insurance crisis, or a liability insurance problem, or do you disagree about that as well?

JOAN CLAYBROOK: No, there is an increase in insurance rates, but we don't think that there's a problem of liability cases. There's no claims relationship of any significant amount between the increased insurance rates and the number of tort cases. There just isn't, and no figures have shown that there is.

LEHRER: No connection, Mr. Trowbridge?

ALEXANDER TROWBRIDGE: Oh, there very definitely is a connection. The casualty and liability insurance industry last year lost $5.5 billion. There has been an escalation in product liability suits in 10, 15 thousand versus only 1,500 ten years ago. There is an escalation in private lawsuits and federal and state courts that is now up to 13 million cases a year. This is a litigious society that's gone berserk.

Ms. CLAYBROOK: First of all, the insurance industry has admitted after being challenged that it made $1.7 billion in profits. It's exempt from the antitrust laws, it's exempt from FTC scrutiny, it's paid no federal taxes on $75 billion in profits in the last 10 years. So the insurance industry is not in trouble. It did have a downturn. That downturn was caused by bad underwriting practices, largely because interest rates went down. They discounted -- richly discounted to get premiums in for high interest rates, and then when interest rates went down they wanted to get rid of some of those claims. So --

LEHRER: We'll get to that in a minute. What about, though, the statistics he just cited on the increase in product liability lawsuits and judgments?

Ms. CLAYBROOK: Well, a lot of numbers are being thrown around, and there are really only a few good studies that are decent. Best's, for example, the insurance experts say that in the last year that the number of claims losses by the insurance companies is the lowest since 1977. Galenter did a study in Wisconsin in which he said that the big increase in lawsuits was on entitlement cases against the Reagan administration for cutting so many people off. The American Bar Association has said that product cases -- now, this is just product cases -- range in about the 5 range, and they have for years.

LEHRER: Five percent of what?

Ms. CLAYBROOK: Five percent of all cases filed. Okay?

LEHRER: Mr. Trowbridge? You all talking about the same thing here?

Mr. TROWBRIDGE: We are obviously disagreeing because our views come from different points of view. But the fact of the matter is that American business faced with lawsuits going to judgments that come up with enormous fees and fines have been now denied the coverage by the insurance industry, which is cancelling out coverage or increasing the premium cost to the point where many companies are simply closing down lines of business or going out of business. And they can't continue to operate under these conditions.

LEHRER: Now, there's no dispute about that? You agree that's happening, right, Ms. Claybrook?

Ms. CLAYBROOK: Oh, I do agree that that is happening, but it's not related to claims.

LEHRER: Okay, what is it related to, then? What's causing it in your opinion?

Ms. CLAYBROOK: It's caused by bad underwriting practices. In the early '80s the interest rates were very high. The insurance industry wanted money to invest so they reduce-discounted premiums; they insured anybody; and they didn't raise their rates. And then when the interest rates dropped they had a financial crisis, because they were dependent on those high interest rates, and then they decided to get rid of anything that looked like it was a bad claim. For example, in Colorado the daycare centers there have sued the insurance industry because they paid $1 million in premiums and only had $55,000 in claims. When you look behind the reasons for cancellation in most cases that's the reason. They just think that there might be a risk and so they want to get rid of any potential risks.

LEHRER: Is that the culprit, the insurance industry?

Mr. TROWBRIDGE: It's interesting to hear supporters of consumer groups defending essentially a world in which the only gainers are the trial lawyers, trial lawyers who take these cases at 40- and 50-percent contingency fee. They are the only gainers in a situation where the cost of insurance gets added onto the cost of the product, or the number of companies in a product line shrinks by reason of going out of business because of lack of coverage, or that courts are clogged with these cases in which the consumer is left without rapid due process. It seems to me that the whole problem here, we're dealing with a tort law system that applies not only to product liability but to -- as Ms. Claybrook has said -- to municipalities, to schools, to fire departments. Everybody is being hit by this enormous increase in the premium rates, which in turn is reflective of the outlandish awards being made.

LEHRER: But she says that that's not the cause. She says the cause is the insurance industry just trying to make a buck. They overinvested one way; now they're trying to recoup.

Mr. TROWBRIDGE: They lost $5.5 billion pre-tax last year. They obviously have tried to get away from the loss coverages, and that is what they're now doing. And it's the nation at large which is being left uncovered by insurance.

LEHRER: Do you feel the least bit awkward, Ms. Claybrook, defending a legal system where I saw a study today -- now, this may be in dispute -- but the study I read today that of $3 that are awarded in liability cases, $2 go to the lawyer and only $1 goes on average to the person who filed the lawsuit?

Ms. CLAYBROOK: Well, first of all, that's incorrect.

LEHRER: That's incorrect? Okay?

Ms. CLAYBROOK: Right. Of the award itself, the lawyer gets between 30 and 40 percent. I believe it should be limited to 30 or 33 percent.

LEHRER: Well, it was lawyers' fees and services. In other words, of the $3, the plaintiff only got $1 was --

Ms. CLAYBROOK: Well, that's the premium --

LEHRER: Is that what -- you say that's not right?

Ms. CLAYBROOK: No, that's of the premium dollar, not of the award by the court or the settlement amount. Of the settlement amount the plaintiff usually gets 60 to 65 percent and the lawyer gets the remainder. Remember that the contingent fee, which is what we're talking about here, is something that allows the consumer to have the door to the courthouse unlocked, because the contingent lawyer, the trial lawyer, only gets paid when he wins. The defense lawyer -- and their costs, by the way, go up much faster than the plaintiffs' lawyers' costs, in all the studies that I've seen -- they get paid by the hour. And so their whole methodology is to delay and to drag it out, to refuse to provide information. Many companies havebeen cited for sanctions by the courts, for example, because they won't give over information. But, I mean, if you're talking about the Firestone 500 cases or the Pinto cases or the X-car cases where people were killed and injured, and you're saying this is not a good sytsem, as a minimum what the tort system provides is deterrence to manufacturers. They don't like it. That's why they want to limit it or get rid of it. And it provides information which we wouldn't otherwise have. It provides legislative -- new ideas for legislation and for regulation. It's been a very, very effective system for all those reasons.

Mr. TROWBRIDGE: It's been a very damaging system --

LEHRER: But isn't she right, Mr. Trowbridge, that without the contingency system the average consumer would have no way to go to a courtroom and really sue?

Mr. TROWBRIDGE: If there is a valid case, a lawyer would take that case believing that he could win it with normal fees or with some sort of limits on the contingency. As it is now, the higher the award the higher the fee of the trial lawyer. And the incentive clearly is to pick up anybody's problem, say, "Let me take care of it for you; I'll take all the risk, just give me about half."

LEHRER: Well, look. Finally here, you all have disagreed on everything else, so I'm sure you'll disagree on this. Mr. Trowbridge, you and the people you represent want something done about this problem.

Mr. TROWBRIDGE: Yes.

LEHRER: What is it that you want done? What kind of legislation do you want enacted?

Mr. TROWBRIDGE: We want a federal standard. We now live within 50 states all having different standards for manufacturers who operate in all of those states. They must try and comply with 50 different sets of standards. We want a fair federal standard. We'd like a --

LEHRER: Standard for what?

Mr. TROWBRIDGE: Standard for liability --

LEHRER: Performance and liability?

Mr. TROWBRIDGE: -- and performance. And how you judge the performance of a company and its product, a set of statute of limitations as to how long that product can be operable and still be --

LEHRER: You want the statute about 20 years, right? Is that right?

Mr. TROWBRIDGE: That would be a fair number.

LEHRER: In other words, if somebody has to claim within 20 years they were injured by a product or forget it.

Mr. TROWBRIDGE: It'd certainly be a fair number.

LEHRER: All right, and what else?

Mr. TROWBRIDGE: Fair standard warning systems, standards in which the manufacturer would be advised on one set of standards for the kind of warning that he must give the user; a limit on what's called "joint and several liability" in which all the companies that make a given product are judged to be guilty if only one of those companies is found guilty in a particular case.

LEHRER: Let's go through those, Ms. Claybrook. Or, first of all, would you accept any of them? Do you support any of them?

Ms. CLAYBROOK: No, we don't, and I'd like to say that I think the real crisis here is in product, unsafe products. The president of the National Association of Manufacturers, for example, is from Smithkline Beckman. His company was indicted on criminal charges even in the Reagan administration just a year ago for manufacturing Selecryne and refusing to disclose in the labeling and to the FDA that the product was going to cause liver damage. It killed 36 people. Now, the crucial issue here is we need a system of law that looks at all the facts; and at the state court level where the judges and juries make these decisions, where all the evidence is considered, that's where the law should be made, and that's where the common law has been made since this country was founded. This bill that we're talking about is a massive federal pre-emption of state law, unusual for manufacturers to favor such a thing, but in this case they do because the decisions would then be made by members of Congress heavily influenced by political action committee funds, and they wouldn't be made by judges and juries who are closest to the people who are injured and killed. The victims are going to lose under this bill, and --

Mr. TROWBRIDGE: The laws that are really being made now under the very strong influence of trial lawyers associations who have even more organization and even better sources of funds, which they use very effectively.

Ms. CLAYBROOK: Oh, I don't think --

Mr. TROWBRIDGE: They have deadlocked the situation totally.

Ms. CLAYBROOK: You don't want to admit that at the state level the manufacturers -- who have the hugest pile of money in the whole United States in terms of income -- and the insurance industry are stronger than a small group of trial lawyers who represent claimants on a contingent basis and take all the risks.

Mr. TROWBRIDGE: On the basis of our experience I do indeed claim, that because they talk to lawyers within legislatures and they are and have been able to block this for the eight years in which it's been a major national problem.

Ms. CLAYBROOK: Well, the victims are the losers. What you're essentially saying, then, is the victims who are harmed by negligent actions, by defective products, then they're going to be victimized a second time, because the doors to the courthouse are going to be closed. And these decisions are gong to be made by federal legislators who are far away from the problem. Victims can't come up and lobby like the National Association of Manufacturers. You don't see 600 people in wheelchairs flying in on private planes like the manufacturers did today, coming in and squeezing palms to try and persuade their legislators to vote with them or giving political action contributions. It's an unequal system as it is, and at best if you're going to try and limit it, you ought to look at the victim and the rights of the victim rather than just the manufacturers.

Mr. TROWBRIDGE: Look at the cases where companies, because they are being hit by these suits and the cost thereof, are going out of business to the point where, for instance, we have one manufacturer of measles vaccine. We have two manufacturers of diptheria, polio and tetanus shots. That is down from a large selection only five years ago, because a lot of companies were just forced to go out of production.

LEHRER: Mr. Trowbridge, Ms. Claybrook, I have a hunch we could sit here all night and I'd never get you all to agree on this.

Mr. TROWBRIDGE: That may well be.

LEHRER: Thank you very much for helping us air the issue. Robin?

MacNEIL: Still to come on the NewsHour tonight, TWA boss Carl Icahn takes on the president of the striking flight attendants, Vicki Frankovich.

This is pledge week on PBS and we are taking a short break now so that your local public television station can ask for your support. That support helps to keep programs like this on the air.

[PBS pledge week intermission] TWA: Debating Givebacks

MacNEIL: Now the TWA strike. Some 6,000 flight attendants continued their strike today, but a federal judge in Kansas City ordered TWA machinists to go back to work after many of them refused to cross the picket lines. Yesterday, TWA Chairman Carl Icahn said he might sell or break up the airline if the machinists stayed off the job. [voice-over] At New York's Kennedy Airport today strikers were much in evidence outside the TWA terminals. But despite the pickets the airline says it's operating more than half its regularly scheduled flights. Other picketers walked the line outside an airport hotel where TWA is housing some of the 1,700 flight attendants hired so far to replace the strikers.

PICKET INSTRUCTOR: Be nice. No foul language, no cat-calling, no alcohol or recreational drugs. Keep your cool.

MacNEIL [voice-over]: The main strike issues involve wage concessions and work rules. Icahn wants wages cut 17 while flight attendants, who average more than $30,000 a year, have agreed only to a 15 cut. TWA also wants attendants to work eight additional in-flight hours a month, a proposal the union has rejected.[on camera] In our studio tonight we have the two people heading the two sides in this struggle. First, Carl Icahn, who acquired control of the airline after a tough takeover battle only two months ago.

The decision forcing the machinists back to work, does that mean to you that you're going to win this, that the flight attendants won't have the power of the machinists to back them up?

CARL ICAHN: Well, I've thought all along we're going to win this strike, and I think that this decision certainly will speed that occurrence. We always felt that our collective bargaining agreement covered the fact that the machinists could not have sympathy strikes, that we had an agreement with the machinists. We've always gotten along very well with the machinist leadership, and I always believed that the collective bargaining agreement covered the situation.

MacNEIL: The flight attendants seem to be saying, in effect, you're picking on them because they're women. You're asking them for deeper concessions than you asked of the predominantly male pilots and machinists.

Mr. ICAHN: Well, that's completely untrue. First of all, the pilots have given over 34 now with the work rules that we've gotten from them. We originally got around 30 from them, and now we've gotten more work rules from them. And the pilots have been terrific in all of this. They understand that we need concessions in order to keep a viable airline, to keep the airline alive, and they've worked with us very well. They've been helping us tremendously throughout the strike, and so we certainly have gotten very deep concessions from them.

MacNEIL: If you've asked them for a 17 wage cut and they moved as far as 15 , isn't that very close? Why can't you come to an agreement?

Mr. ICAHN: Well, I think there's really a misunderstanding here about the 17 and the 15. The real question here is work rules. The real money involved, the money savings that we need at TWA is productivity, and the work rules that we're asking for are most of the close-to-$100-million concession that we're asking for. In other words, the difference of 17 and 22 is $10 million. We're really asking for $100 million. So the fact that we've come down 5 there -- and I think all along we really would have come down to 17 if we could put a deal on the table -- isn't the meaningful thing. We understand that the flight attendants have a certain standard of living and that you can't just ask that much out of a wage concession, but what we need and must have is productivity. And this extra two weeks -- two hours per week we don't think is that much, and we feel we need it. And we cannot compete. We cannot compete without this.

MacNEIL: You've hired 1,500 or so new flight attendants as well as adding 1,500 supervisors. Will they keep their jobs if you make a settlement with the union?

Mr. ICAHN: Absolutely. I've given my word and that's very important to me. I've given my word to the new hires that they will not be replaced.

MacNEIL: What about the people who are on strike now? Did they all get their jobs back?

Mr. ICAHN: Well, they're on strike. What do you mean, do they get --

MacNEIL: If you reach a settlement, will the 6,000 flight attendants who are on strike be re-employed by TWA?

Mr. ICAHN: We have made this clear. We have made this clear, and I told Ms. Frankovich throughout the last month that I felt that she's leading her people over a cliff; that it's very important that she understand, and we've told the flight attendants this, that they may not all get their jobs back because we will not replace the new hirees. We'd like the flight attendants; we appreciate that they worked hard, and we hoped that we could reach a settlement. We've tried very hard to do so. But we must have these concessions if we are going to live at TWA as a viable entity.

MacNEIL: How many flight attendants do you need at TWA? You've been operating on 6,000. How many do you need?

Mr. ICAHN: Well, with the concessions, with the new work rules, at TWA we need at peak season about 5,000. And right now we need about 3,500. Now, I know that confuses you a little bit, but at this point -- because now -- we're a summer airline. So at this point we have people on furlough, people on leaves, and so we are operating the airline with about 4,500. But with the new work rules we save about 1,000. So we need 3,500 people now; 5,000 people in the peak season. We have hired close to 1,800 new hirees, so that means that in peak season we need 5,000, so we need about 3,000 more.

MacNEIL: What did you mean yesterday when you told the Washington Post you might consider breaking up or selling the airline?

Mr. ICAHN: Well, I've been saying that. I've said that before and I'll say it again. I would love to see TWA flourish. It is very -- we've made an important investment here. I've done everything I can to keep TWA viable. We went out and borrowed $600 million. It was difficult to borrow that. I put my reputation on the line doing that. And it's very important for me to see it viable. But also extremely important to me that I'm not going to let the people who loaned me money down; I'm not going to let my shareholders down. I being one of the principal shareholders, I don't want to let myself down. So what I'm saying is that I'm not going to sit here and see TWA bleed to death, and that is what will happen if we don't get these concessions, there's no question. And even if we do get the concessions, it's still a difficult row to hoe out there. We're in a very competitive environment. Texas Air is taking over Eastern and that is going to put tremendous pressure to cut costs in the industry. People Express flies against us in 22 of our routes. We are in a very competitive area and we must have these concessions.

Now, I'm saying this, that TWA is a very valuable property. We have these trans-Atlantic routes that are worth a tremendous amount, we have the polar system. We now have a very good domestic hub in St. Louis with Ozark and us merging, and if need be, if we can't get these concessions and can't make bottom-line money we'll have to break it up. And that's why I've been telling Ms. Frankovich this is a no-win situation because even if the flight attendants possibly could win this -- we don't think they will at all -- but even if they possibly could with the help of the mechanics -- that would be the only way they could -- they'd still lose, because then I would be forced to break up the airline.

MacNEIL: Okay. We'll move on. Thank you. Jim?

LEHRER: Yes, the other side of the dispute now from Victoria Frankovich, president of the TWA flight attendants union. Ms. Frankovich, are you leading your people over the cliff?

VICKI FRANKOVICH: Well, that certainly is not our intention. What we are attempting to do is protect ourselves from a totally unreasonable and outrageous demand.

LEHRER: Why is it an unreasonable demand?

Ms. FRANKOVICH: We offered a 15% wage cut. That 15% cut is comparable to what the other employees on this property, who are in the same wage bracket as we, were forced to do. In addition to that, we have offered a $12,000-a-year starting salary. And when we get into the area of productivity, in the final hours of our countdown prior to our strike, we put a $20-million additional offer of increased productivity on the table. And that's composed of such things as an offer on our part to work an additional five hours a month. I think there's a common misconception about the kind of work that flight attendants do. In order for us to earn the money that we make now, we are away from home about 240 hours a month, and it takes us that amount of me me to be in the air 70 to 75 hours during the month. The additional work rule changes that we've offered at this point would keep us away from home 260 hours a month for a total of 80 hours in the air. Now, that is already a tremendous increase, and it's already $20 million more in concessions than what was made by the people on the ground, the agents, by the cooks, by the janitors, by the mechanics and by the other grounds people who are paid comparably to us.

LEHRER: Well, what do you say to Mr. Icahn's claim that he needs $100 million in concessions on work rules and that would include two hours per week more, I guess, than what you all -- I don't know if that's more than what you're offering, but two hours -- you need two more hours a week from flight attendants, it would amount to $100 million more. He says he has to have that or the airline cannot make it.

Ms. FRANKOVICH: Well, I have a couple responses to that. The first thing is, airline analysts have agreed with Mr. Icahn when he said that he needed somewhere in the vicinity of $300 million in employee concessions to turn this airline around. To date he has $275 million in employee concessions in place. Our offer is $50 million, which would bring the total employee concession up to $325 million. We have satisfied what he set as the goal for turning this carrier around and what the industry analysts agreed with as the goal. And when we get back to the question of what he really wants from us in productivity, he's thrown around this figure, two hours of extra work a week. I think you should understand we've already offered five hours a month, and that five hours a month is worth $20 million. There is a tremendous difference between what he's demanding and what we're offering. As I mentioned before, we work 240 hours a month right now. His demand would cause us to work 320 hours a month. It's totally unacceptable. And one of the problems there is the more hours you try to squeeze in during the day, and the less rest, which is exactly what these things amount to, the more difficult it is for us to be able to react quickly in the event of an emergency -- which is, in fact, our primary responsibility, the responsibility of safety to our passengers.

LEHRER: Do you take his comment seriously about his willingness to sell the airline or to sell it off piece by piece? Do you think that's a real threat?

Ms. FRANKOVICH: It certainly is a concern. That is a reaction of a corporate raider and not a manager of an airline. The problem for us is we are in a strike that is not of our making. We won an agreement, and because we won an agreement we offered the additional amount of money, the additional amount of work rules, the additional amount of productivity that was not demanded of other employees.

LEHRER: Why do you think he's singled you out, if he did in fact single you out?

Ms. FRANKOVICH: The only thing that we can conclude -- the facts really speak for themselves. Our offer is far and away greater than that demanded by other employees who are comparably paid. I can only conclude that he believes that, as he's said to me in conversations, we are second incomes, that we are women who in fact he did not anticipate would strike, that we are not breadwinners, and that in fact we would come up with the additional amount of money that he's demanding, not based on a comparison with the industry, not based on the other employees in the industry, but just based on his conclusion that he could get that money from us.

LEHRER: Thank you. Robin?

MacNEIL: Is that right, Mr. Icahn? You think they're not breadwinners; they're second incomes, and because they're women you can force them to the wall?

Mr. ICAHN: You know, I hate to dignify that. I've been hearing that now for the last month. I never said that, and I hate to even dignify it with a response except to say that I was brought up in a family where my father was retired at an early age. My mother was a schoolteacher, and she basically supported the family. So I understand what it is for a woman to work. And it's ludicrous to keep bringing this up.

MacNEIL: He says it's ludicrous to bring that up.

Ms. FRANKOVICH: It would be ludicrous if it weren't a reality. I can conclude nothing else. I have received no response but that that makes any sense. Why are we being asked to give a disproportionate share of the burden?

MacNEIL: Why?

Mr. ICAHN: They're not being asked to give a disproportionate share. That's the whole thing here. The machinists are working right now at pretty much market rates. The pilots are working pretty much at market rates; they've given 34 up. Right now in the industry you cannot rig a market, and this is really what IFFA is trying to do. It's almost like what OPEC did with oil. You can, in the industry --

MacNEIL: IFFA is the union, the flight attendants union?

Mr. ICAHN: Yeah, the flight attendants. You can hire -- the market is that I have 4,000 applicants for these jobs at $1,000 a month, $12,000 a year. The average pay now to a flight attendant is $35,000. I must compete against other airlines that keep hiring people at $12,000 a year. Now, I'd like to think TWA does a great job, and we've gotten great reviews -- we've gotten great reviews on these new flight attendants. People have called up and said they love them. And what I like, I think, is TWA does a great job, and people like to fly us. But there's no reason somebody is going to fly us against another airline. Why should they fly TWA unless we can also compete in cost to the passenger?

MacNEIL: What about that point, that in the hard cruel world of airline deregulation Mr. Icahn can hire flight attendants for $12,000 and other airlines are flying with flight attendants for $12,000 a year?

Ms. FRANKOVICH: Well, that is exactly the reason that we've offered a $12,000 starting salary, and we in fact have challenged Mr. Icahn that we will in fact make our contract competitive with the same carriers that the pilots' agreement is competitive with and the same carriers that the mechanics' agreement is competitive with.

MacNEIL: Now, those are not the low-rate carriers. Those are --

Ms. FRANKOVICH: It is not Continental. Those are the carriers in the industry with whom we are comparable. United, American, Northwest, Delta.

Mr. ICAHN: But Ms. Francovich has not answered the question. The question that you asked her was, how do I compete now? She says, "Well, I'll let you hire new ones for $1,000 a month," but what about the 6,000 people that I'm paying $35,000? They're not leaving.

MacNEIL: But her point is that you asked the pilots to take wages that were comparable to some of the leading carriers, and the machinists, but you're asking them to take wages that are comparable with the least expensive airline, say, Continental or Peoples.

Mr. ICAHN: No. Well, first of all, the pilots gave 34 by now with the work rules. Secondly, and this is a sore point, I made a deal on August 5th with the pilots and the machinists. Ms. Frankovich was asked to come to that meeting. At that point we could have made a deal and worked everything out, and at that point I could have got my financing cheaper if Ms. Frankovich had come to the meeting, and she did not come because she had to go to a party in California. Both I, the machinists begged her to come and even the pilots told her to come. This was the last meeting we had --

MacNEIL: Did you have a chance to make a deal earlier that you didn't take?

Ms. FRANKOVICH: Before the infamous weekend that Mr. Icahn chooses to keep using as his excuse for this disproportionate demand from us, I offered 15 , which is the exact same compromise made by the machinists, and it was rejected by Mr. Icahn, as it is today.

MacNEIL: Mr. Icahn, what about Ms. Frankovich's point that you've said you needed $300 millions in reduced costs, that you had achieved 270, they have now offered 50, which brings the total to 320, that you're past your goal if you accepted what they're offering?

Mr. ICAHN: Yeah, but that's not my goal anymore. That was a goal --

MacNEIL: Oh, you've changed your goal?

Mr. ICAHN: I certainly changed it, and August 5th, when I made this deal, I can tell you now categorically, knowing the situation -- the industry has changed a great deal, especially for TWA. Terrorism has forced us to take down a lot of flights in southern Europe, and while we are flying -- while we have gotten good domestic passenger bookings, it is off in Europe. And not only that, but with fare wars and what have you, we have now looked at the situation and $300 million is not the goal anymore.

MacNEIL: What is the goal now?

Mr. ICAHN: The goal -- we have to cut costs, I'd say $450- to $500 million for this company to exist. The deal we made in August, then, would not be made today with the same people.

MacNEIL: Are the flight attendants going to make all that up?

Mr. ICAHN: No, they're not going to make it all up.

MacNEIL: So you'll be going back to the pilots and the machinists?

Mr. ICAHN: We have already spoken to the pilots concerning these work rules, and that's why we've gotten some very good work rule, concessions from the pilots over and above what they've given. We've done a lot of other things. The Ozark merger is going to help us. There are things that are going to help us, but we are cutting, cutting and cutting costs throughout the whole company.

MacNEIL: Ms. Frankovich, you say that this is absolutely unacceptable to be asked to work 320 hours a week which is what a new -- you say --

Ms. FRANKOVICH: A month.

MacNEIL: A month, I beg your pardon. You say you're not going any further in your offer. You open talks tomorrow, the first actual negotiations in the strike. Where is it going to go?

Ms. FRANKOVICH: We will be prepared to negotiate, of course. The difficulty in our posture is that we have gone beyond the limits that are possible for us. It's going to be very, very difficult for us. We're going to explore every possible alternative, but I think the point that you last hit on is the source of our greatest problem. If in fact Mr. Icahn needs more than his original goal of $300 million, not only should our additional $25 million over that goal have satisfied that problem, but we should now have a deal and if we're going to go back later with the mechanics and with the pilots in search for new additional monies when those monies become necessary, then let's do that equally and fairly. We should not be required to give more than our fair share.

Mr. ICAHN: But what Ms. Frankovich doesn't understand is simply this. There are two factors here. Number one, the machinists and the pilots, for that matter, are working fairly close to the market rate of the other airlines. Number two, the deal I made with the pilots and the machinists was a deal that was done. It's water under the bridge. A lot of deals are done. If I had to do that deal again today I wouldn't do it. It was done August 5th. Ms. Frankovich had a chance to be in on that, be at that meeting -- it was a 28-hour meeting -- and she went to a party. So that's done. Plus the fact that it's not disproportionate anyway.

MacNEIL: What about tomorrow? We just have a few seconds. She says she's ready to negotiate. Are you ready to negotiate tomorrow?

Mr. ICAHN: What the facts are, are. What is, is. We cannot give any more. We must have these concessions to exist. There is no question about it. Those are the facts.

MacNEIL: We have to -- Mr. Icahn, Ms. Frankovich, we have to leave it there. Thank you.

LEHRER: Again, the major stories of this day. The stock market went up by the second-largest increase in history. President Reagan and several senators argued for and against aid to the Nicaraguan contras. Vietnam said the remains of 21 more missing Americans have been found and, as we heard, TWA machinists lost their battle to honor the flight attendants' picket lines. Good night, Robin.

MacNEIL: Good night, Jim. That's our NewsHour tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.