The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. In the headlines this Friday, Chrysler matched GM's dramatic cut in interest rates. The United States trade deficit went up a record $18 billion last month. And there was a dramatic escape of an East German family through the Berlin Wall. We will have the details in our news summary in a moment. Robin?

ROBERT MacNEIL: After the news summary, we analyze the price war in car loan interest with a big car dealer, an auto analyst and a banker. Then the new trade threat from Korea -- a documentary report and analysis. Correspondent Tom Bearden reports on a team of forest firefighters in Idaho. And we close with an essay on the new Bob Dylan image. News Summary

LEHRER: A second shot was fired today in the great car loan war. Chrysler announced the drop of its financing rate to 2.4% on most of its 1986 cars and light trucks and some of its 1987 models. It follows in response to yesterday's announcement from General Motors of a 2.9% rate. Chrysler's is for 24 month loans, GM's for 36. Both have slightly higher but still very low rates for longer term contracts. The GM announcement has already had the desired effect. The Associated Press reported GM dealerships were swarming with customers today. Tom Pappert, a group vice president at Chrysler, said his company was determined to hold onto its share of the market.

TOM PAPPERT, Chrysler Corporation: Oftentimes the marketplace determines what the competitive weather is. And recently, we were told that the price of poker just went up. And, as you know, share comes at tremendous expense. And over the last four or five years, we've worked very hard to get where we're at. We don't plan to give any of it back.

LEHRER: Number three in the auto big three is the Ford Motor Company, of course. Yesterday, Ford President Harold Poling said only that the GM announcement had ruined his day. Late today, a company spokesman said Ford would definitely join the cut rate game, and was now working out the specifics. Robin?

MacNEIL: The U.S. trade deficit -- the surplus of imports over exports -- rose to a new monthly record in July: $18 billion. While driven by continued heavy imports of manufactured goods, the deficit also reflected the third straight month of agricultural imports exceeding exports -- in other words, Americans buying more food than they sell abroad.

In business news, Frontier Airlines, the hard-pressed subsidiary of People Express, finally filed for bankruptcy late yesterday. We have a report from Tom Bearden in Denver.

TOM BEARDEN [voice-over]: Hundreds of Frontier employees jammed the area around the ticket counters at Denver's Stapleton International Airport last night. It was an emotion charged meeting. They had been trying to salvage the struggling airline for nearly three years. There were a lot of bitter people, including Frontier's representative with the Airline Pilot's Association, Doug Bader.

DOUG BADER, Airline Pilot's Association: The incredible cruelty of this whole thing is borne entirely by you. I certainly don't know that we have done anything in the 40 years of building the safest airline in aviation history to deserve this.

Continental employee: So to get started, I'd like to welcome you all here today.

BEARDEN [voice-over]: This morning, flight attendants were applying for work at former rival, Continental Airlines. Ten year veteran Debbi Dorn says some Frontier employees are desperate, particularly single parents who learned yesterday that their medical insurance has been cancelled. She says starting over with any airline will be tough.

DEBBI DORN, flight attendant: With the airlines, seniority is what counts. You get, you know, better trips, better time off, better pay. Everything resolves around seniority. And, you know, ten years. What do you have to show for that now? Nothing. You start all over again.

BEARDEN [voice-over]: This group hopes to be hired and undergoing refresher training by next month. But Continental alone has already had 900 applications.Some are afraid the industry won't be capable of absorbing Frontier's 4,700 workers at any price.

MacNEIL: Speaking of bankruptcy, the billionaire Texas Hunt brothers filed for Chapter 11 for one of their companies, Placid Oil. They said it was designed to stop banks from foreclosing on assets used as collateral for loans.

LEHRER: The Morton Thiokol Company will be sued by the family of Challenger astronaut Ron McNair. McNair's widow, Cheryl McNair, told the Houston Chronicle she had to take the action. She said, "To do nothing would be a tacit acquiescence or stamp of approval of the type of conduct that took my husband's life." Thiokol was the principal private contractor for the Challenger space shuttle, which exploded January 28, killing McNair and six other crew members. Mrs. McNair's lawyer said the suit will be filed within ten days. He said it would ask for an unspecific amount of damages.

MacNEIL: In Berlin, there was a daring escape from East to West today. Our report is from Dianne Griffiths of Visnews.

DIANNE GRIFFITHS: [voice-over]: It was one of the most dramatic escapes the wall had ever witnessed. Just after midnight, the young East German couple with their eight month old daughter smashed through a series of barriers at Checkpoint Charlie in a seven and a half ton truck they'd stolen and strengthened with steel plating. It was only when the truck smashed through the first of the heavy steel barriers that anyone knew what was happening. East German guards then opened fire, but still they kept on, plowing through two smaller barriers and colliding with a checkpoint building. With just seconds to spare, they raced to the final steel gates and battered their way through before they closed automatically. Unlike their vehicle, the unnamed couple escaped unhurt. The wall has now claimed 75 lives by would-be escapees.

LEHRER: In Vienna today, scientists finished a week long examination of the Chernobyl nuclear accident, Western medical experts said early predictions that 24,000 people might get cancer because of radiation exposure from the accident were ten times too high. The estimate now is that 2,000 additional cancer cases over the next 70 years could be linked to the Chernobyl accident. The earlier predictions were made on worst case projections of radiation exposure -- estimates that were later reduced when actual measurements were taken.

MacNEIL: In Cameroon, an American relief official put the number killed by poison gas last week at 1,746. The number was increased from 1,500 not because of recent deaths, but because of a revision in the figures. Meanwhile, foreign scientists said the poison gas could occur again at any time. They said the temperature in Lake Nios, where the deadly fumes were emitted, was dangerously high, perhaps indicating another underground upheaval is coming. We have a report from the stricken area by Peter Gould of the BBC.

PETER GOULD [voice-over]: One week after Cameroon's worst disaster, there's still an eerie silence in the village of Nios. Almost the entire population was wiped out by the clouds of gas that engulfed their homes. There was little warning, and death came swiftly. The bodies of many of the people who lived here have now been buried in shallow graves outside their homes. In this village, there were only six survivors. It was the misfortune of the people here to live too close to the lake from which the gas erupted. The water there is now being analyzed to determine the extent of the contamination. A few people are now returning. The authorities are doing nothing to prevent them. The only obstacle is the state of the road. Nearby is one of the government's aid centers, set up to provide food and clothing to some of those who fled the area and are still too frightened to go back.

MacNEIL: The last estimates put the number of people affected at 10,000 instead of the 20,000 estimated earlier. The number still in hospital was revised to 437.

LEHRER: The South African government drew criticism today for its planned investigation of a police shooting of 21 blacks. Opposition leaders called on the government to authorize an independent look at the killings this week in the Soweto township. They also claimed the death figure is higher than the 21 given by government officials.

MacNEIL: That's the news summary. Coming up on the News Hours, dirt-cheap car loans, Korean trade competition, firefighting in the Northwest, and an essay on Bob Dylan -- still angry a generation later. Clearance Sale

LEHRER: The big car loan story is first up tonight.General Motors started it yesterday by lowering its 36 month finance rate on 1986 model cars to 2.9%. Chrysler fired back today with a 2.4% rate for 24 months. And Ford said it will soon do something similar. Correspondent Elizabeth Brackett opens our look at this most unusual wrinkle in the competitive world of car selling with this report from Chicago.

ELIZABETH BRACKETT [voice-over]: Business has doubled in the last two days at this Chicago Pontiac dealership. Sales manager Joe Scala says his doors didn't close until late last night.

JOE SCALA, GM dealer: It's been tremendous. It's like going to the auto show, only the people are buying. It's very, very, very good. Everybody's excited in the store -- the sales people, the customers -- and it's a very good feeling. It's like the old days.

BRACKETT [voice-over]: GM dropped interest rates to 2.9% to move sluggish inventories. The lower rate convinced this customer that now is the time to buy.

Customer: Well, I though it was an interesting way to potentially save a little money, because I'm going to be buying a car in the next four months anyway. So I may do it early.

BRACKETT [voice-over]: It didn't take long for the competition to catch up. Late this morning, Chrysler dropped interest rates to 2.4% on a 24 month loan.

Chrysler dealer: We came right back with a super program.

BRACKETT: What do you think that will mean for bringing customers into your dealership?

Chrysler dealer: We expect September to be a record setting month with this new program.

BRACKETT [voice-over]: The new interest rates do mean substantial savings on two and three year car loans. On a $10,000 three year loan, GM figures monthly payments would drop from $345 a month at the old rate of 5.9% to $287 a month at the new 2.9% rate. Carol Anne Bunger hadn't planned on a new car until today.

CAROL ANNE BUNGER: I'm still paying on the other one, so -- But when we did the other one, we financed it. It was 15%.So I'm hoping this will drop my payments down.

BRACKETT [voice-over]: While customers were knocking down the doors at GM and Chrysler showrooms this afternoon, Ford dealers were still waiting for word from Detroit. But salesman Helusa Lari says Ford does not have GM's problems.

HELUSA LARI, Ford salesman: Well, GM is overstocked. That's the reason they're offering 2.9 interest rate. We're not overstocked. We're expecting our '87 models coming in. Our '86s are pretty well cleared out.

BRACKETT: Do you think Ford will respond?

Mr. LARI: I kind of think so, yes.

BRACKETT: You kind of hope so?

Mr. LARI: Well, certainly we hope so. Obviously, we hope so. But if it doesn't happen, we still have the best-built American cars. We have the Tourist, which is Motor Trend's car of the year. We don't really need it.

BRACKETT: You sell cars for a living, right?

Mr. LARI: Yes, ma'am.

BRACKETT [voice-over]: GM and Chrysler dealers say their only worry now is what will happen to sales in late October. That's when interest rate madness is scheduled to end.

MacNEIL: Two views of the new interest rates for car loans. Mark Herman owns a Buick dealership in Yonkers, New York, and is a regional representative of the National Automobile Dealers Association. Maryann Keller is an auto analyst for Furman Selz Mager Dietz and Birney, a brokerage firm in New York. Mr. Herman, is the new deal moving cars from your showroom today?

MARK HERMAN, auto dealer: It's been probably the most exciting two days I've experienced in many, many years.

MacNEIL: Ms. Keller, as a -- someone looking at this a little more coolly, is this a real deal for buyers, or is it an illusion?

MARYANN KELLER, auto industry analyst: This is a real deal for buyers. General Motors got itself into a predicament and has too many 1986 models at the point in time when they should be starting to deliver the '87s, and so this is a real bargain for customers.

MacNEIL: Were you overstocked?

Mr. HERMAN: We were overstocked, yes, based on our sales rate. We had anticipated greater sales during the summer season. They never materialized. So we're very happy that GM came out with --

MacNEIL: Like how much you overstocked, just as an example.

Mr. HERMAN: Normally we'd like to carry anywhere between a 45 and 60 day supply of cars, and we were faced with a 90 day supply of automobiles.

MacNEIL: How many cars is that on your showroom floor?

Mr. HERMAN: Over 300.

MacNEIL: Three hundred more overstocked, or --

Mr. HERMAN: No, no. Total of 300 rather than 200.

MacNEIL: I see. Now, what got GM into that predicament, in your view?

Ms. KELLER: I think General Motors was a little optimistic this year about their market share. And perhaps they were also optimistic about the total level of car sales. I think those were the basic reasons, but I think General Motors also got itself into trouble when it raised prices in March and the rest of the industry didn't follow. At that point, there was so much adverse publicity about the price increase that General Motors continued to suffer even a little bit more after that.

MacNEIL: Who is going to -- first of all, explain -- you can either take a new loan rate -- 2.9% in the case of GM -- or you can have a rebate. Is that correct? A cash rebate. How does that work?

Mr. HERMAN: Well, our cash rebates available are from $500 up to $1,500, depending on the model. So you as a customer have the choice of either the lower discount on the finance rate or taking the cash back. You can not have both.

MacNEIL: The cash back if you buy for cash.

Mr. HERMAN: Yes.

MacNEIL: That's --

Mr. HERMAN: Or you can buy it for cash and finance it through an outside source if you feel you can get a competitive rate.

MacNEIL: Well, who pays for this new low interest rate? I mean, you can't borrow money anywhere else at anything like 2.9%. Who's paying for that?

Ms. KELLER: Well, General Motors is absorbing the incremental cost of this over and above the 5.9%. An auto company makes money in two ways. It makes money selling cars to dealers, who then subsequently sell them to customers. That's the bulk of their profits. And they also make money on car loans. If they're fortunate enough to be able to borrow money at 6% and lend it at 10, they make a great deal of it. But in this case, General Motors will -- the net amount of money that General Motors will realize on the ultimate sale of each of these cars will be somewhat smaller.

MacNEIL: So it won't be losing money; it just will be making less, but getting rid of the cars. Is that the idea?

Ms. KELLER: Right.

MacNEIL: Are the dealers contributing in any way to this -- to this cust in interest rates? Is any of it coming out of your hide, so to speak?

Mr. HERMAN: No, none of it is coming out of our hide, and none of it is coming out of the consumer's hide. This is strictly a benevolent move, if I may say that, on the part of General Motors.

MacNEIL: Have you dealers been urging this sort of thing?

Mr. HERMAN: We have been asking for something to stimulate sales, yes. And we are very pleased with the program that was announced.

MacNEIL: What will happen now, do you suppose, with Chrysler having jumped in? Is that going to take the guilt off the gingerbread for GM? Is your showroom going to be empty on Monday with everybody running over to the Chrysler dealer?

Mr. HERMAN: Well, I don't believe it will, because I think that there is more excitement being created in the market now, and I think if people realize that General Motors' plan is 2.9 for three years, Chrysler is 2.4 for two years, there is quite a difference there. We also wonder how many people truly will finance a car for two years, because the monthly payment will be substantially higher than the three year payment.

MacNEIL: Now, is that going to bring in new people who had not decided to buy cars, or, as in the case of one of the people we saw in Elizabeth Brackett's report, they were going to buy one in the fall or a few months from now.They decided to do it now. What's you view of that?

Ms. KELLER: Well, the only thing that a program such as this does is solve a temporary problem. And as soon as the program is over, I would expect car sales to precipitously decline. It does not create new demand. Just as your tape showed, what it does is it makes people act early. You don't get peoplewho were not in the market to buy a car come and buy one. If they've got a brand new car sitting in their driveway, they're not going to dash out now because there's 2.9% financing available. This is a temporary measure. It's meant to relieve the dealers' oversupply situation, and that it will do.

MacNEIL: You agree with that? It's not going to create new demand.

Mr. HERMAN: I agree with it up to a point. However, as one of the individuals in the tape pointed out, if they financed a care at 12 or 14% a year or two ago, they might find their monthly payments to purchase a new car are less than carrying the old car.

MacNEIL: So that could creat a different -- do you agree with that? Could create a different kind of buyer -- somebody who, instead of waiting for two years or three years to get a new car would do it after one year.

Mr. HERMAN: Well, I think the idea of the shortened period -- the three years, in the case of General Motors, and the two years, in the case of Chrysler -- is designed to try to speed up that buying process -- having the car paid for sooner, so that the customer may be back out in the market at a more quicker time than he would have in the past.

MacNEIL: Are there negatives to this for you as a dealer? I mean, presumably, you've been selling cars in the last few weeks for much higher interest rates than this. And in the last year or so for even higher ones.

Mr. HERMAN: Well, there is no negative --

MacNEIL: What do your customers say who --

Mr. HERMAN: They're mad at me.

MacNEIL: They're mad at you.

Mr. HERMAN: They feel that I should have told them, but I can say that there's nobody that anticipated this or knew this was going to happen. We received it over our dealer communication system yesterday morning.

MacNEIL: Do these kinds of deals help or hurt the car industry as a whole?

Ms. KELLER: I think they hurt the car industry, because it prevents the auto companies from developing the kind of image for their products that they should be. It's kind of generic advertising -- come in and buy a car; not a particular car. It's just advertising the interest rate. And I think that in the long run, the ideal situation is for you to be able to sell a particular model at list price. And this makes the consumer expect a deal. And General Motors got itself into this predicament in August of last year, and it's been perpetuated for the last 12 months with an excess supply situation for that long, and it's been constantly advertising low rates. Now, 2.9% is certainly the lowest, and it's probably -- and it can't go any lower. But the situation was or has been that the consumer simply wouldn't buy if there weren't some sort of program in effect. When General Motors tried to remove the program, the consumer simply stopped. And I think that they've -- they've sort of spoonfed the customer into believing that there will always be an extra gimmick there for them to buy, and they simply don't buy it unless --

MacNEIL: What do you say about that? Are customers beginning to expect -- going to be expecting special gimmicks or deals all the time?

Mr. HERMAN: I totally agree with what Maryann just said. We would like to see a return to normalcy, where a car is priced fairly, the customer purchases based on expectations of what they would like to pay for the car and the perceived value of the car, rather than this conditioning. When the bell goes off, come running and buy the car, and at the end of the round sit back and wait. It's very difficult for us as dealers to administer our dealerships, because of the expense structure, based on these peaks and valleys.

MacNEIL: Do you agree with what she said, though, about it's not letting car manufacturers advertise the qualities of particular cars. They just come in and buy a car at a cheap interest rate, no matter what car.

Mr. HERMAN: Well, one only has to open up anyone of the local newspapers or look at national television and see these ads, and all they're talking about is the financing rate at this point.So I will agree with her, yes.

MacNEIL: Well, thank you both. Let's move on. Jim?

LEHRER: There are some people who are very unhappy over this car loan price war, and most of them are bankers, who charge a lot more than 2.4 or 2.9% for auto loans. Here to speak of that unhappiness is Thomas Honey, president of the Consumer Bankers Association, which represents 700 banks and saving institutions nationwide.

Mr. Honey, can your members compete with 2.4 and 2.9 interest rates?

THOMAS HONEY, Consumer Bankers Association: Jim, our members can no more compete against subsidized loans than steel makers, auto makers, or even textile weavers can compete against subsidized steel, textiles and autos coming in from abroad. It's quite simple. Our members have to borrow money or have to obtain money at a rate of around 6% today. They add to this costs for handling, their handling charges, processing payments, as well as a loan loss reserve. And by the time you bring that all down, you're talking about a loan rate of around 10% today.

LEHRER: Tell us why the people who are swarming into GM dealerships and Chrysler dealerships and soon, I guess, Ford dealerships to buy cars, why they should care about this problem for you all.

Mr. HONEY: Well, right now they probably shouldn't care, because the deal that they're getting today is terrific. In fact, I'm considering getting a new car at this loan rate myself.

LEHRER: Is that right. Mr. Herman, you hear this? He'll make you a deal on a Buick that you won't believe. Sorry.

Mr. HONEY: It's quite simple. Where I might be willing to spend $15,000 for an automobile by paying cash, I can take that same $15,000 and put it in an account -- a three year account -- and make approximately five and a half or six percent on it while I'm paying interest at a rate of 2.9. It would pay me to go and borrow the money in order to buy the car. Certainly it's an incentive to get people into the showroom, and I don't think we deny that at all.

LEHRER: But what harm does it do to your industry?

Mr. HONEY: Well, it -- you may find here that in the long run or, for that matter, even in the short run, that customers, when they go in to buy these cars at these rates, may find that they may not qualify for that particular loan. Whereas, if they go to their established lender or the financial institution where they've had a long, established relationship, that that particular lender, knowing their situation, knowing the character of that individual and a lot of their history, may be willing to concede on some of the points of credit and make the loan and work with that customer. Whereas, with a loan officer within an auto dealership, they have very strict guidelines that they have to follow. And, as a result, they may not -- may not be so conciliatory in granting the loan. In the long run, of course, it means that the captive credit finance companies like GMAC may establish these relationships with these good customers and these high credit-worthy customers. So that banking institutions and credit unions will have to look elsewhere in which to make their loan to asset investments. And if they start doing that, then that will definitely contract the industry in terms of making these loans available, so that the customer has fewer choices in which to get their financing.

LEHRER: Give me a feel for what the impact of this could be on credit unions, savings and loan institutions, banks, and others who normally are in this market of car loans.

Mr. HONEY: Well, we've seen that over the last several years since these incentive financing programs have come about, that the bank's percentage of market share has decreased over 25%. Credit unions have declined some 20% in their percentage of market share since these things -- these programs came about. The more that these begin to decline, the less opportunity there is for the institutions to continue making these loans. In the case of a credit union, for example, the credit union gains its deposits through its members, and they pay those members a percentage rate of interest on those savings. In order to make the income available in order to pay that interest, they have to invest that money. About a third of their loan portfolios used to be in the automobile financing area. Today it is less than 20% and continues to decline. Therefore, the credit unions have to look to other avenues or other ways to lend money. For that kind of institution, that is very difficult, because those opportunities aren't there as they may be in the savings institution or bank who do have additional opportunities. What this may mean in the long run is that lower rates are paid on savings. Programs that have been adopted where people can put money aside for their children's post-high school education, for their retirement, for their pensions, what have you -- those programs may gradually disappear as banks and the other institutions look to other forms of earnings.

LEHRER: All right, let's go back to Mr. Herman and Ms. Keller in New York. Mr. Herman, is that something that concerns you, or do you just see this as a business thing -- everybody's out there in the marketplace in the loan business. You just happen to have a better deal right now.

Mr. HERMAN: Well, I consider the fact that General Motors is in the business to make money, and if they can make money manufacturing cars or lending money, so be it. This particular situation with the low financing is going to help them move inventory, and it's also going to help them sell '87s.

LEHRER: Do you, Mr. Honey, believe that it's possible that GMAC may be thinking of going into the consumer loan business in a much bigger way that goes beyond just financing automobiles?

Mr. HONEY: Well, that's certainly a notion that has not passed unnoticed by our members -- in fact, by banks all across the country. If you look at GMAC today, I believe their total assets are in excess of $80 billion.They are the nation's second largest mortgage lender and climbing. Some months they become the largest mortgage lender.It's clear that if they became a bank tomorrow, they would probably rank in the top five of the banking institutions in the United States with that kind of asset base. The fact that they are moving to obtain these long term account relationships with very good customers on a nationwide basis means that their strategy is clearly directed towards becoming the dominant lender for major purchase financing in this country.

LEHRER: Let's ask Ms. Keller about that. You follow that kind of thing. Does that make sense to you?

Ms. KELLER: It does, because this is something that the captive finance subsidiaries of all three major auto companies have been doing. It's not just General Motors acquiring companies in mortgage banking, but the Ford Motor Company is one of the largest savings and loans in the country right now, which few people realize. And Chrysler Financial made several acquisitions last year in consumer lending. So yes, they are attempting to expand their consumer finance business.

LEHRER: Are they making money at it or is it -- are they doing it just to sell cars?

Ms. KELLER: They're making tremendous amounts of money. The earnings growth in the captive finance subsidiaries has been spectacular for all three companies. As a matter of fact, there's actually been talk that at some point they might consider spinning them off and turning them into publicly owned corporations in and of themselves.

LEHRER: When you use -- when you use the term captive finance, what do you mean? That has kind of an interesting connotation to it. What does that mean?

Ms. KELLER: It means that it is essentially a subsidiary of the auto company. It is just in a different business, and that's why it's referred to as a captive.

LEHRER: And your point is, Mr. Honey, is that if this does in fact happen -- this continues to grow, and these three big, huge -- these big, huge. These big subsidiaries continue to grow, that it's going to eventually reduce competition in the credit market?

Mr. HONEY: If it continues in this direction, yes. You will see a consolidation of the lenders. The institutions that were once involved in it, particularly with their dealer relationships, will begin to erode as they look for new avenues. I might add at this point, however, that all we're asking for is an industry; it is not really to shut these programs down. We believe that the consumer is entitled to these low rates, because it does move the automobile. We are advocating as an association that the subsidies also be granted to all traditional lenders, so that the consumer will still have the widest possible choice of making the loan.

LEHRER: Well now, how would that work?

Mr. HONEY: Well, it would be very simple. Many of the foreign auto manufacturers operate similar programs in this country.They have an agreement with lenders -- the dealer has the agreement with the lender --

LEHRER: Lender meaning one of your banks.

Mr. HONEY: One of our banks; or even a credit union, for that matter.

LEHRER: Okay.

Mr. HONEY: Very similar to what Mr. Herman may have with some banks in his area. What they do is they go ahead and they sell, if you will, the contract or the sales contract for the loan to this particular bank at the low market rate being offered. Let's say it's 5.5. The lender then agrees to take that loan at that rate of 5.5. The auto manufacturer then subsidizes the difference between that loan -- between the normal rate for that loan -- let's say in this case it's 10.5%. They in effect pay 5% to the lender to make up the difference in the contract.

LEHRER: Mr. Herman, why in the world would you want to do that?

Mr. HERMAN: I was listening very carefully to what Mr. Honey was saying. That borders on subvention, and in that situation it's the consumer that ends up paying the difference, either in the price of the automobile or the fact they're not going to get as substantial a discount on the car. There have been programs similar to that thatwe've had in General Motors where we were not able to offer the consumers much of discount, as we can in this one, which is wholly underwritten in this case by General Motors and GMAC.

LEHRER: So you do not do the kind of deals that Mr. Honey just outlined, right?

Mr. HERMAN: No we don't.We also have an import store, and we don't do it there either.

LEHRER: Finally, let me ask all three of you from your different perspectives, beginning with you, Ms. Keller, is this -- is this in fact going to turn out to be a temporary thing, or do you expect these rates to stay very low, and if so, how low and for low long?

Ms. KELLER: Well, I think the rate of 2.9% will disappear sometime in the middle of October as planned. I personally feel that the tax reform act is going to prevent interest rates on auto loans to get much higher than say the 9 or 10% level. I think we've seen the end of the 14% car loan for a very long time, because I don't think the consumer will tolerate that kind of rate when he can't deduct the interest expense.

LEHRER: But you think it will go back.

Ms. KELLER: Oh, it will go back up to a more normal level of, say, eight or nine, yes.

LEHRER: Do you agree, Mr. Herman?

Mr. HERMAN: Yes, I do. I just can't see anybody lending money for less than it costs to borrow it.

LEHRER: Mr. Honey?

Mr. HONEY: Yes. I would hope that that's the case. At least, we have a lot of wishful thinking in our industry that that's what it would have -- that's what it would be.

LEHRER: All right. Mr. Honey, Mr. Herman and Ms. Keller, thank you all three very much.

MacNEIL: Still ahead on the News Hour, Korean trade competition, firefighting in the Northwest, and an essay on Bob Dylan -- still angry a generation later. Made in Korea

MacNEIL: Whether foreign cars had anything to do with it, the trade deficit reached a record $18 billion last month. The largest part of the trade deficit comes from Japan, which has long been a major competitor in auto manufacturing and consumer electronics.But Americans have recently started buying products from a new industrial power in Asia. South Korea has emerged as a major contender in the fight for American markets. Spencer Michaels of public station KQED has a report.

SPENCER MICHAELS [voice-over]: Hyundai, Goldstar, Leading Eagle.These are the troops on the Korean side in its trade war with the Japanese.The Koreans are underselling them on the world market, competing with quality products at low prices.It's a rivalry that goes back a long way.

STEPHEN KAHNG, computer designer: There has been war between Japan and Korea a couple of times, and Japan ruled Korea for 36 years.So there is some competitiveness there.

MICHAELS [voice-over]: The Koreans have taken a page out of the Japanese book, moving in on the low end of the consumer electronics and computer markets, using manufacturing smarts, some of the lowest wages in Asia, and a tough work ethic to grab a share of trade with the West. Here's how they do it. If an American workers earns $10 an hour, his Japanese counterpart makes $6. In Korea, that same worker would make $1 an hour, and the appreciation of the yen has made Japanese products expensive, while the Korean products remain cheap. Bargain prices for Korean goods have propelled them into the U.S. marketplace. Ralph Thomson is senior vice president of the American Electronics Association, a group very much concerned with the growth of Asian manufacturing and technology. He spoke with producer Bob Calow.

RALPH THOMSON, American Electronics Association: The Koreans are good -- they're good imitators or the original Japanese imitators. They're good at the game of adaptation and imitation. The Japanese see a marvelous emulator of the emulator. They feel crowded, and they should.

MICHAELS [voice-over]: The most visible symbol of the Korean emergence has been the Hyundai Corporation's low-priced entry into the American automobile market. The Hyundai Excel has shattered sales records since it was introduced earlier this year. They've sold more than 52,000 in five months. That's a record for an imported car's first year. Daewoo, another Korean industrial giant, wanted to break into the American computer market. They approached Stephen Kahng, a Korean-born computer designer working in California. Kahng's design, a low-cost, quality computer, is being sold in the U.S. as the Leading Edge, and it is the hottest personal computer on the market. In fact, the Leading Eagle is a clone of the IBM personal computer, and first retailed from $500 to $1,000 less than the IBM. Andy Jong owns a computer outlet in Berkely, California.

ANDY JONG, computer dealer: They did a remarkable job of in a very small space combining large memory to something that you couldn't get in any other computers -- graphics ability for both monochrome and color screen and computational ability and access that wasn't available anywhere else. And they made it such a reliable machine that out of -- say if we sell 500 machines, we might not get one back. We can only speculate on what IBM is going to do, but it's real clear that they're currently losing market share to Leading Edge and the other clones. The sales on the computer are very good. And, in fact, our limitations for how many we're able to sell are actually how many Leading Eagle is willing to ship us.

MICHAELS [voice-over]: In spite of all this, the Koreans still remain dependent on Japanese and American technology. But here in the Silicon Valley, Samsung seeks to become independent. This is their $600 million semiconductor research facility. In this high tech test lab, Samsung is developing their own chips to use in Korea.

JOHNSON LIM, Samsung Corporation: Okay, right now we're developing our own property design. And afterwards, we make a prototype. If a prototype's working, then we transfer them to Korea. To manufacture is cheaper in Korea than over here. But the -- in the Bay area we have the technical talent, so they could easily catch up with their competitors -- the Japanese or the Americans.

Mr. KAHNG: I think Koreans more or less as a manufacturing partner, they wouldn't mind being a little brother to American companies. They are not intending to come over here and take over the marketplace. They are willing to listen to your terms and try to do the business the way you do the business in America.

MICHAELS [voice-over]: That's why American companies are turning toward Korea for joint partnerships in steel, semiconductors and computers. Hewlett Packard recently agreed to join with Samsung to produce a new line of business computers. Samsung opened a large electronics assembly plant in New Jersey. Richard Carlson is an economist with a market research firm in Silicon Valley. He sees the Korean boom as a rare opportunity for American business.

RICHARD CARLSON, economist: You do not want to go head to head with the Koreans in labor-intensive products. But, on the other hand, it's a wonderful way to beat the Japanese at their own game. If we don't do this, we're going to lose both. The Japanese will have Japanese technology, Japanese protectionism and Korean labor where labor matters. And if we let them do that, if our companies let them do that foolishly, they'll lose everything.

MICHAELS [voice-over]: The Koreans are hoping their industrial success will lead to prosperity, just as it did in Japan 25 years before. As the Japanese have prospered, wages have risen and business goals have shifted to more sophisticated, higher profit products, like advanced computers and robotics. As a result, there's room at the bottom for countries like Korea to make their moves.

MacNEIL: To tell us more about how South Korean is competing in U.S. markets, we have Robert Hormats, former assistant secretary of state, now a senior vice president at the Wall Street investment banking firm of Goldman Sachs. Mr. Hormats advises several Korean companies on how to do business in the U.S.

First of all, how do you react to today's trade figures -- the deficit of $18 billion for the month of July?

ROBERT HORMATS, economist: Well, the trade figures today were a disaster, the worst month we've ever had. And the tragic thing is that one year ago September, there was a big attempt to move exchange rates, to devalue the dollar, to make us more competitive. And we've really not seen the results of that. In fact, things have gotten worse. So it's a major problem, and it's an unsustainable problem. Because eventually, with these big trade deficits, either the Congress is going to act to reduce them through protectionism or the dollar is going to collapse because markets lose confidence in it.

MacNEIL: How do -- how does Korean trade relate to those figures?

Mr. HORMATS: Well, Korean trade is really only a reelatively small part of those figures. The overall U.S. trade deficit for the first six months of this year was about $90 billion. The deficit with Korea was about $3 billion. There is a deficit, but Korea is a somewhat more open market than some other countries, although they are a very competitive market and a competitive economy coming into the United States.

MacNEIL: Does that mean that, although their exports to this country are growing -- Americans are buying more Korean things for the reasons we just heard -- that the U.S. is able to continue to sell a lot there?

Mr. HORMATS: We do sell a lot to Korea. We sell a lot of capital equipment. We sell food. And we sell a lot of military equipment. The Korean market is demanding a lot of American products too.

MacNEIL: The decline in the value of the American dollar was supposed to help American exports by making the exports of America's trade rivals more expensive. Now, that is beginning to help take place with the yen. What is it in the case of Korea?

Mr. HORMATS: Well, Korean -- the Korean currency, the won, has stayed pretty much even with the dollar. The dollar has not declined vis-a-vis the won as it has the yen. And that has increased the competitiveness of Korean products quite considerably vis-a-vis their competitors in Japan.

MacNEIL: And made no difference in the pricing in dollars. It just -- it stayed as cheap as it was against the dollar.

Mr. HORMATS: Exactly. If you assume that the Koreans are competing against Japanese products, it means that the Koreans now have a 30 to 40% differential in their favor vis-a-vis Japanese products. And it means they've stayed the same in American dollar terms.

MacNEIL: Are they beginning, the Koreans, to encroach on the Japanese share of the American market?

Mr. HORMATS: Yes, they are. They're selling computers, they're selling autos, they're selling a lot of consumer electronics. And that certainly is cutting into Japanese exports to some degree.

MacNEIL: Does that mean that they're taking away from the Japanese or that the Koreans plus the Japanese are eating more into the American share of, say, the automobile market?

Mr. HORMATS: It's a bit of both. Japanese autos are under quota, so the new cars that come in from Korea are, in effect, cutting into the shar of other companies, particularly American companies. In some other products, the Japanese are just being displaced by the Koreans, so it's not a one for one relationship.

MacNEIL: In Spencer Michaels' piece we heard about joint ventures -- American companies finding it advantageous to make a deal with Korean companies. Can you describe that a bit? What kinds of industries is it happening in and to what extent?

Mr. HORMATS: It's happening in a lot of areas. General Motors is working with Daewoo, and next year Pontiac division will be importing cars made in Korea by Daewoo. Caterpillar is working very closely with Daewoo on forklifts. A number of Korean companies are producing products even for American military equipment -- the F-16, for instance, is going to have computer components and fuselage components from Korea. So a lot of American companies are working very closely with the Korean companies, both to bring in components which they incorporate in their final products or to bring in final goods which they market under a Korean name or an American name.

MacNEIL: Are American consumers aware of how much they may be buying, either as components or whole products, are Korean made?

Mr. HORMATS: Probably not. A lot of foreign products from Korea and from other countries use American names. Leading Eagle, for instance, is not a Korean name; it's an American name. Americans simply buy products, look at the price, look at the quality, and don't really know where it's from.

MacNEIL: But that is a Korean company that's marketing Leading Eagle. What about the question of, say, Caterpillar if it's marketing something that's made by Daewoo. Does it go out of its way to say this is a fine, Korean-made product? Or does it let its consumer believe it's an American product?

Mr. HORMATS: I suspect they will market it under a Caterpillar name, but it's not clear. I mean, Korea's developing a reputation for quality, and some products may well be marketed under an American and a Korean name.

MacNEIL: If American companies are getting things or parts of things made for them in Korea, where wages are a lot cheaper, are they exporting jobs -- American jobs -- and American industrial capacity to Korea?

Mr. HORMATS: Well, in some cases that's true. In some cases imports of labor-intensive products do take jobs in certain sectors in certain industries in the U.S. But there is another point as well, and that is that in some cases we would not be able to produce certain final products competitively if it weren't for the ability to import low-cost components to put into those final products. In some cases, if we don't import low-cost components, we wouldn't be able to make the final product competitively.

MacNEIL: Is the Korean advantage simply the cheapness of labor there?

Mr. HORMATS: Not really. Labor is very cheap, and that certainly is cause for concern among labor unions here, and understandably so. But there are a lot of countries that have very cheap labor. The key for Korea is not the cheapness of the labor, but the skills and the level of education of Korean labor. The Koreans have devoted a lot of time and effort to educating their people. They started in the '50s after the Korean war. And that education pays off, particularly in producing the sort of high tech goods we've seen. Education is a critical component in today's high tech manufacture goods.

MacNEIL: Robert Hormats, thank you for joining us.

Mr. HORMATS: Thank you. Battling Blazes

LEHRER: Next, a story about some people who spent this month of August fighting forest fires in the Pacific Northwest. There were 6,724 separate blazes in Southern Idaho and Eastern Oregon alone, others in California, Nevada, Utah, Montana, Wyoming and Colorado. In all, an area the size of the state of Rhode Island was destroyed. Eighteen thousand firefighters were involved. Tom Bearden has our report from Idaho.

BEARDEN [voice-over]: For the past two weeks, this cow pasture 60 miles north of Boise has been home for the firefighters battling the Anderson Creek fire -- the Northwest's largest fire this year. There are 2,200 of them from all over the country -- professional teams from New York, New Mexico, California, even Alaska.They're skilled at building fire lines in dense forests or battling the flames up close. The salaries for these men and women are the most expensive thing about fighting the fire, and it isn't cheap -- about $325,000 per day.

Firefighter [on radio]: Send four more trucks, all available pickups. Over.

BEARDEN [voice-over]: There's enough man power here to allow crews to get some rest and relaxation, time to take care of basic chores, even time for phone calls home or fun and games. But the games don't last for long. Up on the fire line, the mop-up work began this week -- the job of making sure the smoldering brush and wood doesn't get a chance to catch fire again.The fire had jumped the firebreak, and this crew, a team from Southern Utah, had the gritty job of snuffing it out. Crew member David Orton:

DAVID ORTON, firefighter: You start it good and get it out good, I don't think you've got much of a chance of it coming up again. It all depends. If you miss just a little bit and the winds come up real bad, it could start up again.

BEARDEN [voice-over]: But even the work on the fire line isn't steady. Hours of waiting for an assignment can be followed by hours of intense work.

Mr. ORTON: It's been off and on, but the days that we do work, we work pretty hard. It's pretty steady, long hours. The other day we just cut line -- cut fire line like this. Only it was where the Cat couldn't get, so we had to go in with shovels. And there was about 200 of us, 220 of us.And we had to go in and cut the line. And there was five miles of it, but we didn't get it all cut that day.

BEARDEN [voice-over]: A fast attack team usually flown in by helicopter had spent the morning putting down a spot fire.The next ten hours were spent waiting for transportation back to the base, even though the main fire, still spewing mountains of smoke, was burning just down the ridge. Despite such idleness, crews insist firefighting is grueling work. Crew leader Charlie Elliot:

CHARLIE ELLIOTT, crew leader: In initial attack, it's not unusual to work a 24 to 36 hour shift. We're getting only a 15 minute break every few hours, and that's working real hard -- as hard as you can go. And then youmight get a few hours of sleep and go right back to a 12 to 16 hour shift. It really wears you out.

DOC SMITH, incident commander: That's the hardest work there is.

BEARDEN [voice-over]: Incident commander Doc Smith:

Mr. SMITH: It's hot, it's dry. I was a miner -- a hard rock miner -- for a year after I got out of the navy, and I thought that was hard, hard work, but this is just incredible. Mining almost pales by comparison.

Firefighter [on radio]: Where do you want to start the line? You want to start it halfway up the hill to the west of that saddle and take it as far east as I can go?

Firefighter [on radio]: Yeah, that sounds good.

BEARDEN [voice-over]: Sometimes the toll isn't physical; it's emotional.This day, crews were trying to outfox the fire -- destroy its ability to grow. On this ridge, a crucial spot where an old logging road was being used as a fire line, the south side was first bombed with retardant. And the north side was intentionally set on fire to burn up fuels. The idea was to keep the main fire away from the firebreak itself. Crews stood guard, and the line held.

Mr. SMITH: When it gets across the line, you cuss it. When you lose the piece of line that you worked so hard on, you swear at it. You feel like that it's -- that it's always out there trying to get you in the sense that it -- I mean, really get you, you know. I mean, you're -- it's -- our people are at risk of their -- their very life.

BEARDEN [voice-over]: So why do these firefighters do it?

Mr. ELLIOTT: It's exhilarating. Most of us, we get a real charge out of it. That's why we do this job.

BEARDEN [voice-over]: For others, it's simply a good paying job.

Firefighter: The money's the good part about it.

BEARDEN [voice-over]: The pay starts at about $8 an hour, plus overtime and a 25% bonus for working while the fire is out of control. Still, the urge to get out is strong. After nearly three weeks of a steady diet of smoke, sweat and Gatorade, they had the sense that they had conquered the fire that lightening started August 10. Many had had their fill of firefighting.

Firefighter: You hear we might go on R&R two days, and then back on?

Firefighter: I'm hitchhiking home, man. I ain't staying here. I've had enough.

BEARDEN [voice-over]: But as this crew stopped for lunch, and as the Anderson Creek blaze appeared to be winding down, hot desert air was blowing north into Idaho, and the forecast called for more lightening. Still Angry

MacNEIL: Finally tonight, we have an essay. In the 1960s a young folk singer named Bob Zimmerman came to Greenwich Village in New York. When he left, he was a legend named Bob Dylan. Essayist Penny Stallings looks at the legend now.

BOB DYLAN [singing]: How does it feel? Oh, how does it feel to be on your own with no direction home like a complete unknown, like a rolling stone?

PENNY STALLINGS: Remember back in the '60s when Bob Dylan used to be God? Okay, so maybe you didn't but it, but I did, and there were millions like me -- millions who rushed out for every new albumn, certain they'd find some sort of cosmic truth. So what if you couldn't always make out the lyrics. So what if you didn't know what they meant even when you did. Dylan was deep, very deep. He had all the answers before we even knew the questions.

Most of us have packed away our search for cosmic truth along with our tarot cards and bell bottoms. But amazingly, Bob Dylan, the preeminent icon of the era, has managed to stay in style. Oh, he's put on a few metaphysical miles since the '60s. But unlike most of his contemporaries, he's still packing them in. Recently, Dylan wound up the final leg of his much-ballyhooed American tour playing to almost a million people, and not just old peaceniks either -- teenagers, heavy metal morons, yuppies, punks, mommies, daddies.And in all, quite a mix.

For those who followed him since the old days, he was as mercurial and maddening as ever. There he stood, hunched over the microphone, stylishly disheveled in motorcycle boots and black leather, playing the venerated anthems and butchering them beyond recognition, spitting our the old vendetta songs with all the rancor he first brought to them as a self-styled pariah.

Why, you wonder. Why is he still angry after all these years? He may not be God anymore, but he is a living legend, as revered for his contributions to the pop vernacular as Elvis or the Beatles. He's got everything he needs -- oil shelters in Oklahoma, a copper-domed castle in Malibu, friends in high places. So what is it that's got him so antsy? Is it crimes against humanity or just the heat generated by all that leather?

The answer's simple really. That's his job, his shtick. Genius is pain, and as an official genius, Dylan understands that he's got to keep the old angst flowing; that, whether real or affected, it's a rebel image that keeps a rock and roll star forever young. For over 20 years, Dylan's managed to remain a walking contradiction, partly truth, partly fiction, casting himself as a street-wise Candide, in the early '60s he played the part of an unwitting pop artist who'd stumbled into the limelight. He courted fame surreptitiously, making a big show of refusing to play the game.

Mr. DYLAN: I got nothing to say about these songs I write. I just write them. I don't need to say anything about them. I don't write them for any reason. There's no great message. I mean, you know, if you want to tell other people that, go ahead and tell them. But I'm not going to have to answer to it. And they're just going to think, you know, "What's this Time magazine telling us?"

STALLINGS: Through it all, he remained the consummate pop star, as skilled at maintaining his celebrity as Liz or Liza. Take his most recent tour. Now, any live Dylan performance is bound to stir up excitement, but not necessarily the kind that sells out 20,000 seat arenas. So Dylan brought along big time rock star Tom Petty. You see, Dylan understands the value of hanging out with winners.That's why he insisted on playing his Live-Aid set with Rollings Stones' Ron Wood and Keith Richards, instead of those old fogeys, Peter, Paul and Mary.

So you can call him Bobby, or you can call him Zimmy, or you can call him an opportunist or the pop laureate of his generation. But no matter what you call him, you can't look away. Like it or not, Bob Dylan is the baby boomers' Old Blue Eyes -- embarrassing one instant, thrilling a second later. Only one thing is certain: whatever he does next, I'll be there.

LEHRER: Again, the major stories this Friday. Chrysler matched General Motors in the price war on auto loan rates, lowering its 24 month interest rate to 2.4%. GM announced yesterday it was dropping its 36 month rate to 2.9%. Ford announced today it was working on a cut rate plan too. And the U.S. trade deficit jumped $18 billion in July, the largest monthly increase ever. Good night, Robin.

MacNEIL: Good night, Jim. That's our News Hour tonight. Have a good Labour Day weekend. We'll see you on Monday night. I'm Robert MacNeil.Good night.