Industrial Review

▪ 1994

Introduction

      The period since 1990 was proving a difficult time for the older industrialized economies, which had suffered from prolonged recession at home, and also for the previously centrally planned economies of Eastern Europe and the former Soviet Union, which were struggling to make the transition to a market-based system. In addition, both faced enormous competition from the dynamic Asian economies, where wages were a fraction of those in the industrial world.

      In the industrialized nations in 1993, the cycle in the major economies remained desynchronized. The recession that began in North America, Australia, and the U.K. in 1990 had come to an end, and a sluggish recovery was under way. In continental Europe and Japan, however, the peak of the cycle came later, as did the recession. Toward the end of 1993, there was still no genuine indication that the trough of the recession had been reached in those economies.

      The policy stance was shifting nonetheless. In the U.S., where the bias had long been pro-growth and pro-jobs, the monetary policy remained supportive of such activity. In Europe and Japan, however, there was a change. Japanese interest rates fell to record low levels, and rates in Germany declined sharply from the near-10% levels that the Bundesbank had established to counter the inflationary effects of the postunification boom.

      Prodded by supragovernmental bodies such as the International Monetary Fund and the Organization for Economic Cooperation and Development, governments were coming to accept the seriousness of the unemployment problem and were seeking to stem job losses, especially in manufacturing. It was in this sector that the need to match the low costs of the newly industrializing economies was most pronounced. Efforts to accomplish this resulted in large-scale restructuring in many companies and rapid productivity gains, especially in those countries where the recession had ended.

       Manufacturing Production in Eastern Europe and the Former Soviet Union*, TableThe slump in output experienced by the former centrally planned economies was at last beginning to come to an end, though the scale of the reduction in activity had been more extreme than many had hoped. According to official data, manufacturing output, which had been the backbone of the planned system, had dropped by about 40-50% in the more reform-minded economies, where there were signs that the bottom had been reached. In the less reformist economies, such as Russia and the other countries of the former Soviet Union, the fall in output was continuing (see Table II (Manufacturing Production in Eastern Europe and the Former Soviet Union*, Table)).

      Against the background of recession in the industrialized world and reconstruction in Eastern Europe, the performance of some of the economies of Asia and Latin America stood out. Particularly in East Asia, the development process had taken off, and the economies were acquiring a seemingly unstoppable momentum. For the most part, they took Japan as their model and were seeking to expand by way of manufactured exports. Capital for their enterprises was provided by Japan itself, where that nation's huge trade surplus was being channeled into mainland Asia, and from other parts of the region. The initial breakthrough achieved by the "four dragons" (Hong Kong, Singapore, South Korea, and Taiwan) was being emulated in such countries as Thailand, Malaysia, and Vietnam.

      The most dramatic development, however, was in China, an economy of 1.2 billion people, where reforms were enabling private, market-based activity to develop alongside a still-restrictive political system. In a number of provinces and special enterprise zones, planning restrictions were lifted, and with capital coming in, especially from Hong Kong and Taiwan, the pace of development was rapid.

       Annual Average Rates of Growth of Manufacturing Output, 1980-92, Table Pattern of Output, 1989-92, TableTable I (Annual Average Rates of Growth of Manufacturing Output, 1980-92, Table) and Table III (Pattern of Output, 1989-92, Table), which are based on UN data and exclude China, show that in the less industrialized countries as a whole, double-digit growth in manufacturing was attained in 1992, while the rest of the world continued to be in recession. In some sectors, such as base metals, chemicals, and paper and printing, double-digit growth had been the norm for the past three years. In marked contrast, the majority of sectors in the industrialized world had been in decline for three years.

       Index Numbers of Production, Employment, and Productivity in Manufacturing Industries, TableThere could be no clearer indication of the trend in the world economy than these summary statistics (see Table IV (Index Numbers of Production, Employment, and Productivity in Manufacturing Industries, Table)). The industrial base of the world economy was shifting away from the older industrial economies in favour of the low-cost regions of East Asia, and the trend was accelerating. This posed a major challenge to the industrial world and to the openness of the world trading system. It remained to be seen whether Europe and North America would respond positively to this challenge or seek to avoid it by protectionist measures of one form or another. (GEOFFREY R. DICKS)

      See also Agriculture and Food Supplies ; Consumer Affairs ; Economic Affairs ; Energy ; Information Processing and Information Systems ; Labour-Management Relations ; Mining ; Photography ; Television and Radio ; Transportation .

ADVERTISING

      In 1993 late-night television generated more than $400 million in advertising revenue for the four major U.S. television networks. The average advertising rates for a 30-second spot varied; "Nightline" with Ted Koppel was the highest at $45,000, followed by "The Tonight Show" starring Jay Leno at $31,000 and the "Late Show with David Letterman" at $30,000. Leading the list of the top 100 national advertisers in the U.S. in 1992 was Procter & Gamble Co., which spent $2,165,600,000. Philip Morris Companies, General Motors Corp., and Sears, Roebuck & Co. all allocated more than $1 billion for advertising in 1992. Together, the top 100 national advertisers spent more than $36 billion in 1992, with automotive companies, business and consumer services, and pharmaceutical concerns spending the most. Procter & Gamble also led ($535,300,000) in network television advertising.

      "Home Improvement" (ABC) headlined the 1993 television season by charging $325,000 for a 30-second advertising spot. "Roseanne" (ABC) was second highest with $300,000, followed by "Seinfeld" (NBC), $295,000, "Coach" (ABC), $290,000, and "NFL Monday Night Football" (ABC), $260,000. ABC boasted five of the most expensive top-10 prime-time shows. The final episode of "Cheers" (NBC) commanded $650,000 for a 30-second commercial.

      Your Choice TV, a pay-per-view cable television service, showed only four minutes of commercial advertising per hour of programming, which included movies, repeat broadcasts, or cable network shows for as little as $1 a program.

      Although African-American buying power represented $282 billion in annual income, large advertisers lacked information about blacks. After extensive studies were conducted, advertisers found that black consumers valued prestigious brand names more highly than other consumers did and were willing to spend more for those products. Black shoppers also paid more attention to advertising. The studies were the first aimed specifically at blacks.

      During the year celebrities touched by scandal lost advertising endorsements. The most notable was singer Michael Jackson, who, amid charges of child molestation, canceled his concert tour to seek treatment for a drug addiction. PepsiCo Inc., sponsor of the tour, ended its nine-year association with the superstar. The messy marital breakup of Burt Reynolds and Loni Anderson caused both the Quaker State (motor oil) Corp. and the Florida Citrus Commission to drop Reynolds as their spokesperson. When basketball player Michael Jordan's father was missing and later found to have been murdered, McDonald's, Gatorade, Hanes apparel, Honey Gold Wheaties cereal, and Ball Park Franks all temporarily pulled ads featuring Jordan. Miller Brewing Co. also temporarily discontinued ads that playfully called for hog-tying "big-shot lawyers" after eight persons were fatally shot at a San Francisco law firm.

      In France the National Assembly passed a new law requiring the media to publish advertising rate cards and purchasers of media advertising time to sign contracts before any transactions occurred. The law abolished the standard 15% agency commission on media time and, instead, required that the commissions be paid from the media to the advertiser, which could then pass the commission on to the advertising agencies. The French law intended to protect advertisers and the media from inordinate losses to advertising agencies. Beginning in January 1993, France joined Canada, Finland, New Zealand, and Norway in banning all tobacco advertising. Fortune magazine reported that Philip Morris planned to keep its Marlboro trade name in the French public eye, however, by means of a travel service and a clothing line bearing the Marlboro name; they would also sponsor more events. The French Grand Prix auto race was canceled because the law forbade the showing on television of cars bearing the names of tobacco company sponsors. The race was reinstated in February, sans advertising, but the cars were allowed to bear the colours of their sponsors. Many millions of sponsorship dollars would likely be lost because of the ban.

      An advertising revolution continued to take place in China. Commercials proliferated and included products ranging from coconut milk to audio systems. Even cars of high-ranking government officials in one city displayed advertisements (free of charge) for an alcoholic product, for which a local distillery paid $78 million in taxes annually. Some 370,000 Chinese found spouses through 1.5 million personals appearing in magazines and newspapers. The country's advertising rates also increased; a 30-second spot on China Central Television appearing immediately after the evening news was $4,386 in 1993, compared with $1,750 in 1992. A 30-second advertising spot before the morning news of the Central Broadcasting Station increased to $78,950 annually. In China there were more than 16,000 advertising agencies, with 12,000 of them owned by the government. In most cases advertisers dealt directly with the media, but the government planned to stop direct advertising and to require all advertising to filter through an advertising agency, which could charge 15% more than the advertising cost. The Chinese postal bureau operated its own advertising agency, which designed and sent direct-mail advertising, 17% of China's total mail in 1992.

      The provocative nonproduct ads of Italian-based clothing manufacturer Benetton continued to arouse controversy. Founder Luciano Benetton posed nude in one ad to "ask for his clothes back" for a redistribution project. Another ad displaying the genitals of men, women, and infants was rejected by all, with the exception of one French publication.

      (EDWARD MARK MAZZE)

      This updates the article marketing.

AEROSPACE

      The international airline business, the biggest sector of the world aerospace industry, continued to operate at disastrously high levels of unprofitability in 1993. The International Air Transport Association, before its annual meeting in November, projected that its members would lose $2 billion during the year, bringing cumulative losses since 1990 to $13.5 billion. Nevertheless, the 1993 figure was smaller than the $4.8 billion shortfall of 1992. The reason for the continued deficit continued to be excess capacity. Ireland's Guinness Peat Aviation, the world's largest commercial-aircraft leasing firm, was saved from bankruptcy when some of its aircraft were purchased by General Electric Capital Corp. and deliveries of others from Boeing Co., McDonnell Douglas Corp., and Airbus Industrie were delayed.

      Observers forecast a "new look" for Europe, with fewer but larger and more efficient airlines, mostly privatized, to compete with the three U.S. megacarriers, United, Delta, and American. Four European airlines (SAS, Swissair, KLM, and Austrian Airlines) were studying strategic alliances to compete more effectively in world markets. British Airways continued plans to invest in U.S. operator US Air despite protests by United, Delta, and American that this was unfair, while Lufthansa narrowed to United its search for a strategic partner.

      The airframe companies likewise all suffered from canceled or deferred orders. U.S. Pres. Bill Clinton intervened for his nation's interests when he telephoned King Fahd of Saudi Arabia with the offer of a $6.2 billion loan, covering 85% of the financing needed to reequip the Arab country's Saudia airline with U.S. equipment.

      More optimistically, Boeing (which rolled out its 1,000th 747) and McDonnell Douglas predicted that the next two decades would see a demand for some 13,000 new transport planes worth $1 billion. For the moment, however, Boeing and Martin Marietta both announced plant closings and personnel layoffs in late 1993. Meanwhile, the four-engined Airbus A340, the largest European-built transport, began scheduled services with Air France and Lufthansa. Russia's advanced transport, the Ilyushin Il-96M, was unveiled at a Moscow air show. Though fitted with U.S. avionics and engines and theoretically a competitor to the Airbus A330/A340 series and the upcoming Boeing 777, it was thought to lack credibility in the U.S. and Western Europe, and observers forecast that it would have an uphill struggle in an already oversubscribed market. Airbus Industrie (scheduled to be privatized in about 1995) was preparing to sign an agreement with Russian transport manufacturer Tupolev to build parts for its A300/320/330 series airliners. In Ukraine the Kiev-based Antonov company continued to expand its monopoly role in the global superheavy load business with its giant An-124 freighters.

      Western nations continued to plan for new military strategies in the wake of geopolitical realignments and changing or diminishing threats from the former Warsaw Pact countries. The problem was how, in the wake of plunging defense needs, to maintain a skilled industrial base of design teams as a hedge against future conflicts. A partial answer was seen to be concentration on technical upgrades; for example, Western avionics companies were studying the market for upgrading Russia's MiG-21. Experts noted that new avionics for this still-effective fighter could be worth about $1 billion over a 10-year period.

      In the U.S. the Department of Defense launched a major reevaluation of its needs in an effort to reduce its budget by many billions of dollars over the next four years. It recommended canceling the A/FX and multi-role fighters (two proposed new combat aircraft) and replacing them with a new plane, the joint attack fighter (for the U.S. Air Force and U.S. Navy), to be placed in service in 2012. The review counseled continuation of both the F-22, winner of the Advanced Tactical Fighter competition for a new U.S. Air Force aircraft to replace the F-15, and the U.S. Navy's F/A-18 carrier fighter. (See Military Affairs .)

      Lockheed Corp. strengthened its position in the military field by purchasing General Dynamics' fighter business at Fort Worth, Texas, for $1.5 billion, thereby consolidating its already strong presence in the Western defense community. Of other programs coming under scrutiny, the U.S. Army ordered that the cost of the RAH-66 Comanche battlefield helicopter be cut by one-third.

      Meanwhile, doubt was cast over the efficiency of some of the "smart" weapons that were supposed to have done so well in the Gulf war. The Tomahawk cruise missile was singled out in this context. Nonetheless, experts predicted that these small, relatively cheap but effective and difficult-to-detect devices would proliferate and perhaps become the most important offensive weapons.

      Europe's top military-aircraft program, the four-nation (U.K., Germany, Italy, and Spain) European Fighter Aircraft, came under threat in late 1992 when Germany, worn down by the expenses of reunification, refused to support the mounting costs. The project was then restructured around a simpler specification and relaunched under the new name Eurofighter 2000.

      Observers at the biennial Paris Air Show—in its 40th year—called for a reduction in the number of such international trade events. Thailand's first aerospace exposition, Thai Airshow 93, was held in September, while Taiwan held its second during the previous month; the Dubayy show was scheduled for November. Industry observers protested that the international aerospace industry could not continue to support such a drain on its resources, especially at a time of deep recession in both civil and military markets. The French aerospace industry association noted that its members were in a crisis situation, and figures showed that this decline had started as long ago as 1983. The sale of 60 Mirage 2000s to Taiwan in late 1992 was one of the few success stories in this field for France.

      The recession problem was even more difficult for Russia's aerospace industry, delegates from which arrived at Paris searching for a new identity. Many new collaborative ventures with Western companies were agreed upon, but the core problem remained that of launching onto international markets new and competitive combat aircraft at a time of acute financial stringency in Russia. In an effort to capture sales, Russia's top military fighters, the MiG-29 Fulcrum and Su-27 Flanker, were heavily promoted at Western air shows (two MiG-29s collided in midair at a major U.K. event), and Malaysia bought a batch of MiG-29s, which would fly alongside U.S.-produced F/A-18 Hornets in that country. (MICHAEL WILSON)

      This updates the article ) manufacturers increased output from 12,846,000 cars to 13,069,000 in 1992, and production in the U.S. rose from 5,439,000 in 1991 to 5,666,000 in 1992. Japanese production declined for the third successive year—9,378,000 cars in 1992, 9,753,000 in 1991, and the record 9,948,000 in 1990.

      The only significant EC manufacturing nation that produced fewer cars in 1992 than in 1991 was Italy, where output fell by 9.6%. Production rose in France, Germany, Spain, and the United Kingdom. Among other manufacturing nations to record higher car production in 1992 were South Korea, Brazil, Sweden, Turkey, Argentina, and Czechoslovakia. Production declined in Australia, Belgium, Canada, India, and Romania. The year was also notable for the collapse of manufacturing in the former Yugoslavia as a result of the civil war.

      In the 12 countries of the EC, new car sales rose 6.8% to a record 12,608,000. Total new car sales in 1992 in the European Free Trade Association nations were 6.4% lower, the third successive year of decline. Sales of new cars in Taiwan fell 13.6%; the South African market rose 80%; and Thailand gained 82%.

      The manufacturers' contest in 1992 for leadership in the EC, the world's largest market, resulted in a clear victory for Volkswagen AG and its Spanish subsidiary SEAT, with 1,777,942 sales. France's PSA group—Peugeot and Citroën—sold 1,588,524 cars for second place, ahead of Ford of Europe's 1,503,263.

      In December 1992 there was a major step in the revitalizing of car manufacturing in the U.K. after two decades of decline. Toyota rolled out its first new car from its manufacturing facility at Burnaston near Derby. Toyota planned to produce 200,000 cars a year at Derby and their engines from its second U.K. plant at Deeside by 1995. Thus, Toyota, like Nissan and Honda, became a full-fledged U.K. manufacturer for the EC market.

      European manufacturers found themselves struggling during 1993 to maintain favourable profits and to avoid unfavourable press reports. In an unseemly spectacle that dragged on through the summer, José Ignacio López de Arriortua, the head of purchasing for General Motors Corp. (GM), defected to join Volkswagen as that carmaker's production chief. GM protested and filed suit, charging that López had taken production secrets with him when he left. Volkswagen faced up to its critical need to downsize and in late October announced that it would cut 8,000 of its 108,000-member workforce in Germany as well as 9,000 of the 23,500 employees of SEAT in Barcelona, Spain. VW and the union, IG Metall, agreed on a four-day workweek with some pay cuts to avoid a threatened 30% reduction in the workforce by 1995. Necessary belt-tightening was also behind VW's withdrawal of an offer of an $878 million loan to the Skoda factory in the Czech Republic, which VW was in the process of taking over.

      Italy's Fiat SpA was rocked by the arrests in February of two top corporate officials, and Chairman Gianni Agnelli made the unusual move in April of publicly acknowledging that the political corruption that was being exposed throughout Italy also had touched his company. Finally, in November the Fiat company, tightly controlled by the Agnelli family, agreed to stockholders' demands for changes in its management style.

      In what would have been the biggest automotive story of the year, France's Renault SA and Sweden's AB Volvo, both suffering heavy losses, announced on September 6 that they would merge operations on Jan. 1, 1994. The plans, however, met with stiff resistance from members of Volvo's top management (chairman Pehr Gyllenhammar was forced to resign), as well as from the stockholders, who apparently were concerned about the sale of a leading Swedish company to foreign interests at what they saw as a bargain price.

      The year 1993 ended with warning bells ringing loudly for most of the established world motor industry. For the European manufacturers, the new factories of the Japanese and others such as GM Europe's new facilities at Eisenach, Germany, and Fiat's at Melfi, Italy, intensified the pressure to make older plants more productive. Such improvements would be necessary to compete with the newcomers, which had advantages in quality, productivity, and cost competitiveness. (JOHN R. WEINTHAL)

United States.

      U.S. automakers won back some of their domestic market share in the 1993 model year ended September 30. With strong sales of minivans, trucks, Jeep utility vehicles, and its new LH-body sedans, the Chrysler Corp. posted model-year records in minivan, truck, and Jeep sales while regaining the third-place spot in car sales that it had lost in 1992, when both Honda and Toyota moved ahead of it.

      For the 1993 model year, General Motors sold 2,829,745 cars for a 34% share of the market, down from sales of 2,879,371 and a 35.3% share in model year 1992. Ford Motor Co. sold 1,879,178 cars for a 22.3% share, up from 1,713,481 and a 21% share the year earlier. Chrysler sold 823,466 cars, a 9.9% share, up from 671,936 and an 8.2% share a year earlier.

      Among the Japanese, Toyota sold 763,936 cars, including Lexus, down from 764,480 in 1992. Market share declined to 9.2 from 9.4%. Honda sold 730,497 cars, including Acura, for an 8.8% market share, down from 9.5% in the 1992 model year, while Nissan sold 468,955 new cars, up from 403,388 a year earlier, thanks in large part to the success of its Altima replacement for the former Stanza. Nissan's market share rose to 5.6 from 4.9%.

      GM, Ford, and Chrysler sold 5,532,389 cars in the 1993 model year, and their share of the U.S. market rose to 65.7 from 64.5% the previous year. The Japanese, meanwhile, sold 2,484,092 new cars, again in large part owing to the demand for the new Altima, but their market share declined to 29.9 from 30.1% a year earlier. European car sales in the U.S. slipped to 299,683 units, primarily because of the 10% federal luxury tax on the amount of a sales transaction exceeding $30,000 and the fact that Mercedes-Benz had few entry-level 190 series models on hand in order to clear out stocks in preparation for its new C-Class replacement.

      Among the top sellers, the Ford Taurus captured the number one spot by beating the Honda Accord in total car sales by 399,573 units to 343,017. In 1992 Taurus had outsold the Accord for the first time in three years to capture the title of best-selling car in the industry.

      Behind Taurus and Accord for the 1993 model year were the Toyota Camry (306,586), the Honda Civic (253,086), the Chevrolet Cavalier (249,388), the Ford Escort (246,723), the Chevrolet Lumina (225,025), the Ford Tempo (214,973), the Pontiac Grand Am (211,544), and the Saturn (210,775).

      Among the top-selling trucks, the full-size Ford F-Series was first with sales of 522,096, while the Chevrolet full-size C-K series truck was second at 506,290. Thus, the F-Series and C-K series outsold all makes of automobiles. Rounding out the truck-sales leaders were the compact Ford Ranger pickup (311,406), the Ford Explorer sport utility (301,668), the Dodge Caravan minivan (267,650), the Plymouth Voyager minivan (217,016), the Chevrolet compact S-10 pickup (191,033), the Jeep Grand Cherokee sport utility (190,789), the Ford Aerostar minivan (189,527), and the compact Toyota pickup (183,482). Industrywide, 8,425,596 new cars were sold, up from 8,159,644 in the prior model year, and 5,218,884 new trucks were sold, up from 4,487,654 in the previous year.

      The automakers introduced a variety of new models in the fall of 1993 for the 1994 model year. At GM, Cadillac enlarged and restyled the Deville sedan (dropping the coupe) and renamed the top-of-the-line Deville, the Concours. (It had been called the Sixty Special.) Deville Concours offered Cadillac's 4.6-litre, 32-valve Northstar V-8 engine for the first time. Oldsmobile chopped 7.5 cm (3 in) off the front end of its Silhouette minivan (as did Chevrolet with its Lumina and Pontiac with its Trans Sport minivans) and added two new options, a power side-sliding door and traction control. Oldsmobile was saving its debut of a new top-of-the-line Aurora sedan for mid-1994 as a 1995 model. Buick prepared to bring out at midyear a new, longer Riviera coupe that was to be based on the all-new Oldsmobile Aurora sedan. It, too, would be a 1995 model. Pontiac, other than the minivan, added a driver-side air bag to its top-selling Grand Am compact car for the first time and added a convertible to the Firebird lineup. Chevrolet restyled the S-10 pickup truck, added a Camaro convertible, and prepared to bring out at midyear a new Impala high-performance sedan powered by the 5.7-litre Corvette V-8 engine, as well as a restyled Lumina sedan and a coupe companion to the midsize Lumina called the Monte Carlo, thus resurrecting a familiar name from Chevrolet's past.

      Ford unveiled an all-new Mustang sport coupe available in regular or convertible body styles in both the base and GT models. A 3.8-litre V-6 engine was offered in the base model and a 5-litre V-8 in the GT. For the first time, a removable hardtop option was offered on the Mustang convertible. Also for the first time, all Mustangs offered both driver- and passenger-side air bags as standard equipment. For midyear Ford planned to add a new front-wheel-drive minivan called Windstar. Ford also planned to bring out at midyear a pair of new sedans, the Ford Contour and Mercury Mystique, to replace the venerable Ford Tempo and Mercury Topaz compacts.

      At Chrysler all Dodge, Plymouth, and Chrysler minivans for the first time offered dual air bags as well as the choice of an optional 3-litre V-6 engine that ran on natural gas instead of gasoline. Chrysler also prepared to bring out an all-new subcompact car, called the Neon, to replace the Dodge Shadow and Plymouth Sundance. With dual air bags as standard, Neon was designed to serve as Chrysler's attempt—like GM's Saturn—to build and sell a small car in the U.S. at a profit.

      Among the changes from the imports, Honda brought out a restyled Accord sedan but said that it would not add a V-6 engine in the car until 1995; Toyota added a new V-6 and a coupe to its Camry as well as a redesigned Celica sports coupe; Acura restyled the Integra; Nissan added a driver-side air bag to its Quest minivan and also prepared to bring out newly designed Maxima sedans and 240SX coupes in mid-1994.

      Among the Europeans, Mercedes-Benz replaced its entry-level 190 series with a new, larger C-Class sedan and replaced the 300 series sedan with a new E-Class line. It also changed its nomenclature to call its cars by letter and number: E300, S500, SL600, etc. Audi added a convertible to the 100 series; BMW added a convertible to the 3-Series and put dual air bags in all its cars; Jaguar added a an XJ sedan powered by a V-12 engine and offered the same engine in its XJS coupes for the first time; Porsche dropped the Carrera 4 Targa and Cabriolet; Rolls-Royce offered cellular phones as standard for the first time in all Rolls and Bentley cars and an optional TV screen in the headrest and a VCR recorder in the trunk of all Rolls-Royces for the first time; Volkswagen dropped the entry-level Fox; and Volvo eliminated its 240 series.

      An escalation in the value of the Japanese yen against the U.S. dollar forced the Japanese to dramatically raise prices on their 1994 export models in the fall. Toyota raised U.S. prices by an average of 6.2%, or $957; Nissan by 5.2%, or $823; Honda by 3.3%, or $403; Mazda by 4%, or $666; and Mitsubishi by 8.4%, or $1,500. Honda kept its average down by freezing the price of the base model Accord DX at the 1993 level of $14,330.

      The increases in the Japanese luxury car lines were even more pronounced. Honda's Acura line went up by 7.7%, or $1,508; Nissan's Infiniti line by 6%, or $2,072; and Toyota's Lexus line by 6.5%, or $2,424. The Lexus LS400, which started at $35,000 in 1990 when it was first introduced, was listed at $49,900 for the start of the 1994 model year.

      Among the U.S. manufacturers the average price increase for 1994 was 4.6%, or $701, which compared with an average increase of 5.3%, or $912, among the Japanese. Chrysler raised prices by 5.6%, or $619; Ford by 2.1%, or $365; and GM by 5.8%, or $936. Much of the increase was accounted for by the addition of air bags and/or antilock brakes as standard equipment.

      While the domestic automakers boasted about keeping prices down in comparison with the Japanese, Chrysler increased the price of its minivans by an average of $1,200 per unit. The reason for doing so was the addition of dual air bags and side-door guard beams as standard.

      In Europe, Mercedes-Benz chose to price its new C-Class only $50 over the old 190 series to a base of $29,900 and lowered the price for 1994 on its new E-Class sedan by $1,300 to $42,500. Mercedes, which in 1993 said that it was going to yield the under-$40,000 luxury segment to the Japanese and focus on the $50,000 range instead, decided to change its strategy and compete once the Japanese started raising prices. Thus, the Mercedes C-Class entry-level car was priced about $1,000 less than the entry-level Lexus ES300 sedan, and its E-Class sedan was about $7,000 less than a Lexus LS400 sedan.

      Among other noteworthy events of the year, Mercedes-Benz announced that it would manufacture a luxury sports utility vehicle at a plant to be built in Vance, near Tuscaloosa, Ala. Previously, BMW had announced that it would build cars in the U.S. at a plant in Spartanburg, S.C. To counter the effects of the rising value of the yen, Honda said that by 1996 all Accord and Civic cars to be sold in the U.S. would be made there. Honda also said that it was considering making at least one Acura model in the U.S. Toyota said the fluctuation in the value of the yen might force it to build at least one Lexus model in the U.S.

      At Ford, Harold ("Red") Poling retired as chairman and named Alexander Trotman, president of Ford's automotive group, to succeed him. Lee A. Iacocca, former chairman of the Chrysler Corp., unexpectedly resigned from the board of directors on September 2.

      Finally, GM surprised its competition by announcing that it would make 30 battery-powered Impact electric two-seater cars available to the public to test-drive starting in 1994. GM was seeking to obtain feedback from consumers as to whether they would be willing to purchase a battery-powered car in the future. (JAMES L. MATEJA)

Japan.

      In February, Nissan announced that it would close one of its major factories and lay off 5,000 employees in 1995 as a means of restructuring. The factory, located in Zama, southwest of Tokyo, had been manufacturing 280,000 cars annually. Mazda also announced production cuts at year's end.

      Because of weakened consumer demand, new-car sales in Japan fell 7.8%, to 2,574,229 units, in the first half of 1993 compared with the same period in 1992. It was the worst showing since 1988. The strength of the yen reduced exports. In the first fiscal half year (April-September), Toyota exported 1,748,237 units, and Nissan 900,609. These totals were 9.8 and 26.4% below the figures for the same period in the previous year. Because of both sluggish domestic demand and poor export performance, total car production between April and September was 5,514,420 units, 10.4% lower than in the same period of 1992.

      In an effort to stimulate consumption, the leading automakers introduced restyled and/or new models during September and October. These included Toyota's Celica, Nissan's Skyline, Honda's Accord, and Mazda's Lantis and Eunos 800. Some successes were noted; for example, Nissan's new-car sales in September rose 1.4%, the first upward turn in 22 months. Economic conditions were expected to continue to be severe, however, and 1993 was expected to be the third consecutive year of declining new-car sales. (KAZUNORI OKANO)

      This updates the article automotive industry.

BEVERAGES

Beer.

      Alliances, acquisitions, and segmentation all carried the day in 1993. Brewers that wished to expand their reach saw fit to reach over to somebody else's operations and form various types of partnerships.

      Anheuser-Busch Companies Inc. led the way in this process, teaming up with Kirin Brewery Co. in Japan, Grupo Modelo in Mexico, and Peroni in Italy to expand distribution of its Budweiser brand. Anheuser-Busch also became the first foreign investor in China's Tsingtao. Philip Morris Inc., owner of Miller Brewing Co., bought a piece of Mexico's Femsa, a large beer and soft drink business, while Miller took on the Molson and Foster's business in the United States. Adolph Coors Co., the third largest U.S. beer maker, formed a joint venture with Australia's Lion Nathan to market Australian brews in the U.S. Lion Nathan competitor Foster's, in turn, acquired a 60% stake in Shanghai-based Huaguang Brewery. British-based Guinness PLC extended its reach into North America by buying Jamaica's Desnoes & Geddes Ltd., maker of Red Stripe.

       Estimated Consumption of Beer in Selected Countries, TableAfter several years of stagnant sales (for consumption in selected countries, see Table V (Estimated Consumption of Beer in Selected Countries, Table)), increased emphasis was being placed on less expensive beers. Though they did not provide as much profit margin for the producers, these brands at least kept the product moving out the door. The call for value also led to larger bottles.

      At the other end of the spectrum, high-priced specialty beers were gathering strength in the U.S. This trend was an outgrowth of the microbrew movement of the past decade, when brewers made small, handcrafted beers by imitating European brewing styles and attracted loyal audiences. Boston-brewed Samuel Adams and San Francisco's Pete's Wicked Ale emerged as leaders in this category. The large brewers began making their own high-end specialty beers to capitalize on the trend. In 1993 Miller released Reserve Amber Ale, and Coors announced that it would extend its Christmas-season Winterfest line into a year-round rotation of seasonal beers.

      In Canada a new type of beer called ice beer—named for the subfreezing temperature at which it is brewed—was introduced. Labatt Brewing Co. Ltd. and Molson Companies Ltd. brought out ice beers in the spring; by August the ices combined for 10% of the Canadian market. Another prospective innovation, clear beer, may have been ahead of its time. Miller Clear was removed from three test markets within six months of its introduction. (GREG W. PRINCE)

      This updates the article beer.

Spirits.

       Estimated Consumption of Distilled Spirits in Selected Countries, TableEurope continued to be distiller to the world. About 80 of the top 100 spirits brands worldwide were either owned or produced by European companies in 1993. Equally important, European consumption of spirits had remained stable during the past five years, down about 1% since 1987. By contrast, U.S. consumption declined by more than 10% during the same period (for consumption in selected countries, see Table VI (Estimated Consumption of Distilled Spirits in Selected Countries, Table)).

      Nevertheless, the U.S. spirits business, written off in recent years as a victim of changing tastes and lifestyles, showed renewed vitality in 1993, offering packages and products to meet consumer demand. Certainly that was the idea behind the onslaught of prepared cocktail products. Spurred by the debut in 1991 of Bacardi Breezers, other distillers decided to combine spirits with mixers and put them in single-serve cans and bottles. The effect was electric. Prepared cocktails were credited with boosting U.S. spirits volume in 1992, following a string of annual declines. Joining Breezer on the shelves in 1993 were such items as Jack Daniel's Country Cocktails, Jose Cuervo Margaritas to Go, and Seagram's Piña Colada Cooler.

      Seagram Co. Ltd. formed a marketing, sales, and distribution operation in Poland, while it sold its French distribution outfit to the Hiram Walker subsidiary of Allied-Lyons PLC. In another noteworthy international move, Britain's Grand Metropolitan PLC won approval from the government of India to form a joint venture in India to make and sell liquor there. Whiskey remained the spirit of choice in India, holding more than half of the market and outselling second-place rum by a two-to-one margin. Suntory moved into South Korea, selling its whiskeys via Seoul-based Dongwha Liquor. South Koreans, while moving toward beer, ranked as Asia's top spirits-consuming country, with per capita annual consumption of 6.7 litres.

      A growing segment of the industry in the U.S. was the single-malt Scotch whisky business, where a number of competitors—Aberlour, Glenlivet, and Glengoyne among them—were offering a high-quality product. Brown spirits continued to outsell white ones by about a three-to-two margin in the U.S. In the U.K., Scotch whisky sales fell 5.5% from the previous year.

      (GREG W. PRINCE)

      This updates the article distilled spirit.

Wine.

      World wine production in 1992, estimated at 287 million hl (one hectolitre equals 26.4 U.S. gallons), returned to its normal level after an exceptionally weak 1991 harvest (251 million hl). The first indications for 1993 suggested a smaller harvest than in 1992, notably because of spring frosts in the Mediterranean wine-growing region and because of heavy rains during the harvest in France, Switzerland, and Italy.

      Despite the decline in area devoted to wine growing in the European Community (EC) countries, the potential for production remained quite high, with a 1992 EC output of 192 million hl. Italy was again the largest producer, with 68.6 million hl in 1992, followed by France (65.4 million), Spain (37.5 million), the U.S. (16.7 million), and Argentina (14.3 million).

       Estimated Consumption of Wine in Selected Countries, TableWine consumption (for consumption in selected countries, see Table VII (Estimated Consumption of Wine in Selected Countries, Table)) increased in the United Kingdom, Denmark, and The Netherlands; stagnated in Greece and Luxembourg; decreased slightly in Germany and Belgium; and decreased sharply in France and Italy. In the other countries of Europe—apart from Scandinavia—consumption declined, as it also did in South America. In the U.S. the "French Paradox" (the name comes from a television program that discussed the possible beneficial effects of red wine in preventing cardiovascular diseases among French consumers) could explain the increase in consumption.

      The world price index, established by the International Vine and Wine Office, rose 6.6 points in 1992 after a decline of 1.3 points in 1991 and an increase of 28 points in 1990. Spain, which experienced a fall in market price of 15.1 points in 1991, recovered by 14 points, and Italy's prices rose by 7.4 points. On the other hand, France, which lost 2.8 points in 1991, continued this trend with a drop of 11 points in 1992. (YANN JUBAN)

      This updates the article wine.

Soft Drinks.

      Consolidation remained the watchword of the soft drink industry in 1993. In the most noteworthy development of the year, the world's third-largest maker of carbonated soft drinks, Cadbury Schweppes PLC, bought A&W Brands Inc., the United States' sixth-largest soft drink company. At the same time, Cadbury increased its stake in Dr. Pepper/Seven-Up Companies Inc., the third-largest soft drink producer in the U.S. and a company with the best recent growth rates in the industry. Cadbury's actions, along with a new management team (headed by Cadbury's former North American president, John Carson) at Royal Crown, fueled speculation that between them Cadbury, Dr. Pepper/Seven-Up, A&W, and RC could eventually form a solid competitor to perennial soft drink leaders Coca-Cola Co. and PepsiCo Inc.

      Even without that threat, Coca-Cola and PepsiCo also had to consider the impact of supermarket house brand soft drinks that generally sold for lower prices than name brands. As sales of the private labels increased in North America, Coca-Cola closed eight plants in Canada. Coke and Pepsi continued to look abroad from their U.S. headquarters to increase profits.

      Pepsi tried injecting life into the slumping diet drink market by introducing in Europe Pepsi Max, a "full-bodied" reduced-calorie cola. What plagued Pepsi in the U.S., however, was something supposedly added to its products. In June an isolated news report of a syringe found in a can of Diet Pepsi—later found to be based on erroneous information—fueled false claims of tampered-with cans across the country. It was later determined that most people filing such reports had done so fraudulently, either for profit or for a moment's attention. The company's showcase introduction, clear-cola Crystal Pepsi, appeared to be waning despite a massive advertising campaign. A similar translucent offering from Coke, Tab Clear, also failed to gather momentum. (GREG W. PRINCE)

      This updates the article soft drink.

BUILDING AND CONSTRUCTION

      In October 1993 the U.S. Department of Commerce reported that expenditures for building and construction during the first eight months of 1993, on a seasonally adjusted annual-rate basis, were higher in each month than in the comparable months of 1991 and 1992. Total outlays, on this basis, were $456 billion in August 1993, compared with $424 billion in August 1992 and $405 billion in 1991. It was reported also that the number of employees in contract construction had increased greatly during the first nine months of 1993. The preliminary figure reported for September was 4.9 million employees, compared with 4.1 million in January. Both the dollar outlays and the employment data indicated that the construction industry was contributing significantly to the economic recovery in the U.S.

      The number of new housing units started in the U.S. in the second and third quarters of 1993 was higher than in the comparable quarters of 1991 and 1992. This increase was attributed to the low rates of interest on home mortgages and the need to replace housing due to the destruction of homes by Hurricane Andrew and by other violent weather conditions in the United States. Mortgage interest rates were at the lowest levels in more than two decades. The favourable financial conditions brought new home buyers into the market and caused some home owners to upgrade their housing. In many places 30-year fixed-rate mortgages could be obtained at less than 7%. The average price of new homes sold declined in 1991 and 1992, but in 1993 they rose, and in August the average price was reported to be $153,600.

      The National Economic Review provided information on economic developments in Canada, the U.K., selected European countries, and Japan. In Canada residential construction increased in 1992 after being down the two preceding years, but it declined again in the first three months of 1993. The prospects for the remainder of the year were more favourable because housing starts and sales were up in the second quarter. Nonresidential construction also was expected to show improvement in 1993.

      In the U.K., economic growth in 1993 was reported to be about 2%. It was reported also that public housing investment would be up in 1993 and down slightly in 1994, while private housing investment in 1993 would remain at the same level as in the preceding year but would increase slightly in 1994. Consumer confidence in the economy, along with governmental policies and depressed economic conditions in European and other industrialized countries, was reported to be an important factor in evaluating the private and public investment outlook. Germany was experiencing a recession in 1993, with a reported decline in production of 2% and a decline in investment of approximately 3%. Construction was the only type of investment that continued to increase there, largely because of the housing needs brought about by the reunification of the country. France also was in a recession in 1993. Investment had declined in 1991 and 1992 and was expected to fall by 4.5% in 1993. The high rate of unemployment and the uncertain economic outlook were not favourable to housing or business investment.

      Japan's economy in 1993 was experiencing the lowest rate of growth in almost two decades. The outlook for private investment in housing and business in 1993 was for declines similar to those experienced in 1992. The substantial investments by the government in 1992 and 1993, however, were expected to bring about increases in private investment in 1994.

      (CARTER C. OSTERBIND)

      This updates the article building construction.

CERAMICS

      In spite of a weak economy, sales in most sectors of the ceramics industry rose in 1992. This increase was attributed to a slow strengthening of the economy along with a focus on quality, customer service, and increased research and development for new products. Worldwide sales of ceramic materials and components in 1992 totaled approximately $88 billion, according to a survey by Ceramic Industry, an increase of approximately 10% over 1991. Captive production of advanced ceramics continued to grow. This consisted of production that was consumed within a firm as components in systems or subsystems or in their production, and so it was not reported by the U.S. Department of Commerce data and is only partially recorded in this survey.

      Worldwide sales of fibre-optic components totaled $4.3 billion in 1992 and were projected to grow at a compounded average rate of approximately 20% through 1998, when they would reach $14 billion. The largest growth was expected in Eastern Europe, South America, and the Middle East. Long-haul cable installation declined in the United States, Japan, and Germany, but growth of the market in local distribution systems more than offset the fall. Worldwide growth in sales for local distribution systems was expected to increase at a rate of more than 30% through 1998.

      Sales of advanced ceramics were approximately $15 billion in 1992, similar to 1991 sales. Electronic ceramics accounted for 60% of the total. This sector included electronic substrates, electronic packages, capacitors, ferrites, piezoelectrics, and sensors. The market for aluminum nitride electronic substrates, which have a higher thermal conductivity than aluminum oxide, was expected to grow because of the greater heat load that had to be removed from advanced electronic components. Cost, however, continued to be a major factor limiting its use. The current price of aluminum nitride powder was approximately $50 per pound, compared with $2-$5 per pound for aluminum oxide. Dow Chemical Co. recently announced plans to construct a global aluminum nitride powder manufacturing facility that could produce up to 1,135,000 kg (2.5 million lb) per year. An initial production rate of 45,400 kg (100,000 lb) per year was scheduled to begin in late 1996. This large-scale plant was expected initially to reduce the powder cost by 50% to $25 per pound, with further decreases as production levels increased. According to the U.S. Advanced Ceramics Association, worldwide production of aluminum nitride powder in 1993 was 300 metric tons per year, and the market for aluminum nitride powder was expected to increase to $550 million by the year 2000.

      The reduction in defense spending in the U.S. was having a significant effect on the current and future markets for advanced ceramics. The defense industry had been a major factor in the development of advanced ceramics because of unique properties that enabled system designers to develop sophisticated military hardware. By 1993 companies had been forced to reevaluate their advanced ceramics programs. This led to a stronger focus on the reduction of manufacturing costs in order to open up new markets in the civilian sector.

      U.S. shipments of refractor materials in 1992 equaled the 1991 level at $1,950,000,000; worldwide sales were $6 billion. Refractory ceramic fibre insulation, used for industrial furnace lining, represented about 13% of the market for refractories. Since refractories are closely tied to steel production, shipments were expected to grow in 1993, and improved sales were expected owing to an increase in economic activity in the durable-goods sectors.

      Porcelain enamel sales showed a strong increase in 1992 despite the sluggish economy. This rise was attributed to an upturn in appliance sales, a strong emphasis on quality and customer satisfaction, and the introduction of new products. Sales by companies in the United States were approximately $6 billion, an increase of more than 15% for the year.

      Sales of whiteware (including tile, dinnerware, sanitaryware, and electrical porcelain) increased approximately 10% in 1992 to more than $9 billion on a worldwide basis. The strong performance of this sector in a slow economy was attributed to a focus on customer satisfaction and research to develop new products such as low-water-consumption toilets. (DALE E. NIESZ)

      This updates the article industrial ceramics.

CHEMICALS

      For world chemical producers, 1994 loomed as a lustreless year. Sales were not expected to decline, but neither were they expected to increase. In the fall of 1993, unlike the case in the autumn of 1991 and 1992, few industry people spoke with confidence about the coming 15 months. Even in the United States, where faint recovery signs could be seen, optimism was tempered by the industry's massive layoffs and corporate restructurings.

      As expected, corporate profits in individual countries were largely affected by the health of their particular market economies. Early data indicated that the major U.S. companies, after more than two years of unremitting cost cutting, in 1993 managed about a 10% gain in profits, although sales were up only 3%. Some improvement in profits took place in the U.K., but companies in France, Germany, and Japan found the dismal economies of those nations dragging many of them into a second year of profit declines and, sometimes, actual losses.

      In 1993 several product trends were developing that seemed sure to carry into 1994. World sulfur markets were in disarray because environmental rules requiring fuel and exhaust cleanup produced so much "recovered" sulfur that prices for this element neared giveaway levels in much of the U.S. and Canada. Competition forced prices to be low nearly everywhere else in the world.

      Oil and gas price drops presented makers of petrochemicals—dominated by the familiar plastics—with attractive potentials that they were unable to realize because of overcapacity and recession-shrunken markets. The markets for chlorine and sodium hydroxide shifted sharply from the conditions of just two years earlier, with chlorine now in high demand (although facing a clouded future because of environmental pressures) and sodium hydroxide languishing. These two materials are produced in nearly equal amounts from the same electrochemical cells filled with sodium chloride brine. But they are seldom market equals, and through 1993 U.S. chlorine prices rose to their highest levels ($180 per ton) in five years. Demand was keyed to rising building-product markets, particularly to polyvinyl chloride (PVC) plastic. Sodium hydroxide, about $50 per ton in late 1993, had reached $275 per ton in 1991, when chlorine was at about $25 per ton.

      Synthetic fibres, an estimated 9 billion kg (20 billion lb) per year world business (4.1 billion kg [9 billion lb] per year in the U.S. alone), was an industry marked by frantic producer scrambles. For example, the huge Imperial Chemical Industries (ICI) in the U.K. and the Du Pont Co. in the U.S. swapped facilities, with Du Pont concentrating on nylon and ICI on acrylic fibres.

      Synthetic fibres are often primary products of countries that are developing their chemical industries. In 1992, for example, China hiked its fibres output 9%, and Taiwan lifted its production by 5%.

      One of the most important technological advances in the manufacture of the familiar polyethylene plastics was the first commercial production (by Dow Chemical Co. and Exxon Chemical Co. in the U.S. and Mitsui in Japan) of plastics using what are termed "single-site" or "metallocene" catalysts. The U.K.'s BP Chemicals was among rivals expected to enter this business soon. With the new catalysts, polymers could be tailored very precisely for specific properties.

      The employment picture for the world chemical industry, once one of the brighter scenes in manufacturing, had been discouraging for the past three years and might have hit a low point in 1993. Weak sales forced plant shutdowns that affected production workers. That was accompanied by corporate reorganizations that trimmed professional, executive, and administrative personnel.

      In 1992 chemical industry employment was down 2.2% in the European Community (EC), off 0.1% in the U.S., and up just 1% in Japan. No development in any part of the world pointed to higher employment in 1993. An encouraging aspect in the U.S. was in research and development, where research spending rose 7%, much of it being intensively market oriented.

      Production volumes in the EC rose 2.7% in 1992, with Western Europe overall (EC plus Switzerland, Finland, Norway, Sweden, and Austria) up 2.6%. France, where chemical production increased 5.5% in 1992, took important steps toward its long-talked-of privatization of the chemical industry, with the state-held 43% of Rhône-Poulenc the first to be offered to the public. As 1993 progressed, however, and the economy worsened, hopes dwindled for a high price on the Rhône-Poulenc stock. In Germany, where major chemical companies had experienced decades of steady growth, there was only a 1% gain in 1992, and declines were expected for 1993 and 1994.

      The U.S. production volume in 1992 was up 5.5%, while Australia rose 5.3% and Canada 5%. Some optimism concerning 1994 was expressed for the apparently recovering U.S. and Canada, but industry observers wondered if Australia could avoid the recession fever infecting Japan. Japan's volume in 1992 declined 0.3%. In contrast, South Korea's statistical office showed that that nation had increased its chemical output 12%, while Taiwan upped its output 9%. In China there was wide, varied growth. No chemical industry segment increased by less than 5%, and plastics grew by 19%.

      Eastern Europe experienced its third year of substantial declines in 1992. Russia's production volume fell 20%, while Hungary was down 13.6%, Romania off 14.1%, Ukraine down 13.1%, and Belarus down 15.7%. Czechoslovakia dipped a relatively mild 5.5%, and Poland actually gained 6.8%.

      International chemical trade was vigorous, up some 6% in 1992. Countries, such as the U.S., with comparatively healthy economies, however, found themselves losing export markets to more hard-pressed exporters that offered lower prices.

      (J. ROBERT WARREN)

      This updates the article chemical industry.

ELECTRICAL

      Manufacturers of power station equipment were benefiting in 1993 from the recent deregulation of natural gas. Restrictions on the burning of this fuel in plants generating electric power had recently been relaxed in most countries. This focused attention on power plants that burned natural gas because they were smaller and cheaper than those that burned coal. Electricity producers in the developed and less developed countries were, therefore, abandoning their large, expensive coal-fired plants in favour of gas units.

      During 1992 the demand for gas plant technology rose sharply; the global market in 1993 was forecast by General Electric (GE) to be $5.7 billion of the $13.4 billion total worldwide power station equipment market. GE had a head start in the expanding gas market because a decade earlier it alone had predicted the rush to gas and had begun to revise its manufacturing plans. By September 1993 it was able to claim 40% of the world market for installed or ordered gas-fired electricity-generation plants.

      The world's largest manufacturer of power plant equipment in 1992 was Asea Brown Boveri (ABB), with revenue in its power systems businesses alone of $15,898,000,000, up 2.3% from 1991. ABB said that demand for its gas-fired power plants was driven by the customers' need for low investment costs, short construction times, low emission levels, and high efficiency. The company continued to support coal technology, however; it invested heavily in developing more efficient coal-burning techniques.

      ABB's total revenue in 1992 was $29,615,000,000, an increase of 2.5% over 1991; however, earnings, at $1,110,000,000, were down 3.7% from the previous year. Employment was reduced 14,000 in 1992, leaving a total workforce of 213,407 at the end of the year. Percy Barnevik, chief executive of ABB, said that 1992 "was a year of truth for ABB, since we were confronted with the longest and deepest recession in 45 years." He expected profits in 1993 to be the same as for 1992. However, Barnevik did not let recession get in the way of investment. In 1992, ABB spent $2.4 billion on research and development, 8% of revenue and over twice as much as the company's total earnings.

      The world's second largest company in terms of sales of power system equipment was Siemens, with net sales in its power businesses of DM 12,138,000,000 (about $7,586,000,000). Total sales of the German firm for the year ended Sept. 30, 1992, were DM 78,509,000,000 (about $49,068,000,000), 8% above 1990-91; net income of DM 1,955,000,000 (about $1,222,000,000) was 9% over the previous year. In the six months to March 31, 1993, new orders fell by 4% to DM 40.9 billion (about $25,563,000,000), but sales increased by 3% to DM 37 billion (about $23,125,000,000). By July 1993 the decline in orders had increased to 6%, and Heinrich von Pierer, president and chief executive, said that the company would shed 16,000 workers during the year, bringing the total workforce to below 400,000.

      Third behind ABB and Siemens in the size of power plant sales, General Electric's power systems business had an income in 1992 of $6,371,000,000. Total revenue for all of GE's electrical manufacturing activities (excluding its Aircraft Engines, Broadcasting, and GE Capital Services businesses) was $29,523,000,000, up 3% from 1991.

      The fourth largest firm in power plant sales was the Anglo-French GEC Alsthom. For the year ended March 31, 1993, sales of power plant equipment (excluding transport, marine, and industrial equipment) totaled ECU 4,478,000,000 (about $5,268,000,000), up 6% from the previous year.

      The power systems business of Westinghouse Electric Corp. had an operating revenue in 1992 of some $2.8 billion. The company had experienced continuing financial problems, and in 1992 it decided to divest itself of its financial services and several other businesses. The 1992 sales of the continuing operations only, excluding broadcasting, were $7,594,000,000, down 0.8% from the previous year; however, operating profit, at $587 million, was up 28%. In November 1992, Westinghouse announced its intention to sell its control business. This was acquired by Eaton Corp. for $1.1 billion in September 1993. Eaton manufactured vehicle components and electrical and electronic components, employed 38,000 worldwide, and had an income in 1992 of $3.9 billion.

      Merlin Gerin (part of the French Schneider Group) manufactured high-power transmission plant and power station controls but not power-generation plant equipment. Its sales totaled F 20,519,000,000 (about $3,651,000,000) in 1991.

      In the former Soviet Union, the Siemens power plant division, KWU, acquired in mid-1993 a 10% share in Russia's largest industrial turbine manufacturer, AO Kaluzhsky Turbiny Zavod in Kaluga. Siemens said that one of its first actions would be to improve the Russian production facilities. (T.C.J. COGLE)

      This updates the article energy conversion.

FURNITURE

      After the furniture industry-supported North American Free Trade Agreement was approved in the U.S. Congress in November 1993, home-furnishing businesses anticipated some $1 billion in increased sales by 1995.

      The march toward internationalism and expanding markets combined with optimistic projections that the year would end with substantially increased domestic business was promising to make 1993 the year the industry turned around. Revenues were projected to reach $17,822,000,000 by 1994. This figure was a 9.9% increase over 1992, which closed higher than projected at $16,356,000,000 and marked the third year in a row that sales had moved upward.

      The styles that were introduced in the United States were emphatically homegrown. The emergence of casual, country, western, and lodge styles heralded a slogan to "Buy American!" Multicoloured denim sofas were hyped by Bernhardt Industries Inc., while Lexington promoted De Cristofaro, a garden-variety style that emphasized farm life and such fun American leisure symbols as kites. Century Furniture Co. introduced Jim Peed's "Country Cousins," which featured elements of cottage, mission, low country, and Victorian styles. Hickory Furniture Co. unveiled reproductions based on the furnishings in Mount Vernon, George Washington's Virginia home. More sophisticated and/or international designs such as Classic-Contemporary and British Empire remained visible but were overshadowed.

      The lists of the top manufacturers and retailers prepared by Furniture/Today remained basically the same as in 1992, with the top three furniture manufacturers occupying the same positions. First was Masco Home Furnishings with $1,534,000,000 in sales, followed by Broyhill/Lane with $910 million and La-Z-Boy with $661 million. One major change was the drop of Thomasville Furniture Industries, Inc., from fifth to seventh place. Klaussner had the largest growth spurt at 32.3%. The top three retailers were still Levitz ($901.3 million), Ethan Allen Home Interiors ($597.5 million), and Swedish-based IKEA ($475.6 million).

      Manufacturers La-Z-Boy and Ethan Allen emerged as trendsetters by also retailing their own products, a concept known as vertical marketing. Manufacturers' galleries, including single-product specialty stores, multiproduct stores, and single-product and multiproduct independently operated establishments, continued to expand and were projected to occupy 2,787,000,000 sq m (30 million sq ft) of space by 1997, a 50% increase.

      A consumer study developed by the Wirthin Group for the American Furniture Manufacturers Association and the Home Furnishings Council indicated that attention to quality and consumer needs would improve sales.

      Though the rising cost of wood affected both pricing and the way in which furniture was constructed, large-scale beds of the "Paul Bunyan" type made a discreet return. Discounters continued to plague traditional retailers, and some closed-to-the-public design centres even rethought their marketing strategies. Such new avenues for furniture distribution as catalogs and warehouse stores continued to proliferate. An all-industry voluntary fire-safety program known as UFAC (Upholstered Furniture Action Council) inspired Europeans to create EUFAC. (ABBY CHAPPLE)

      This updates the article furniture industry.

FURS

      Demand for furs continued to show improvement in 1993 following an initial surge in 1992 and after a two-year decline. The slow but gradual economic recovery in the U.S. coaxed middle- and upper-income consumers to relax the tight grip on their purse strings, and colder fall and winter weather prompted many to embrace furs. Retail sales in the U.S. were expected to end the year about 15% higher than 1992's $1.1 billion estimated total. Canada's fur industry, which hit rock bottom in 1992, experienced a magnificent rebound. Total exports rose 38% and U.S. exports jumped 75%.

      Pelt prices staged a dramatic recovery during the year, largely as a result of sharp cutbacks in production. An oversupply of pelts, which had developed since 1987, brought about the collapse of the industry's price structure and resulted in a huge five-year loss. The strongest comeback was made in mink prices, which advanced as much as 50% for some types during the year. Though mink ranchers received a 13.2% increase in pelt prices, the amount was not enough to cover their production costs. As a result, the number of mink farms in operation shrank another 16%.

      Besides stronger sales in the U.S., Germany, and other established markets, broader worldwide pelt demand surfaced in South Korea, China, and Russia.

      Meanwhile, the U.S. industry—which had already undergone severe attrition—shrank further. A late-year report issued by the U.S. International Trade Commission listed only 200 fur-manufacturing establishments, compared with 236 the previous year and 341 in 1989. The survey also counted some 1,000 factory workers, about half the number that were employed in 1989.

      At the same time, imports of fur apparel into the U.S. began rising again after plunging from a 1987 peak of $477 million. Commerce Department figures showed that imports were running more than 50% ahead of 1992; the year's total was expected to reach some $200 million, compared with $122 million in 1992.

      Antifur activities by animal activists were muted for most of the year. The reduced impact of the antifur movement was attributed to the strident measures, including the use of violence, by some of the militants. While media coverage of the antifur activists decreased, legal actions against them rose. Vandals were jailed, and grand jury investigations were under way against several of the movement's leaders. The European Community banned imports of furs from any country that used leghold traps to capture animals; 70% of the beaver pelts from New York had been exported to Europe. (SANDY PARKER)

GAMES AND TOYS

      Nothing stands still for long in the games and toy business, a fact that was again confirmed in 1993. During the year Mattel Inc. announced that it was to merge with Fisher-Price Inc., thus creating a $2.5 billion corporation to challenge Hasbro Inc., which, since it acquired Tonka Corp in 1991, had stood alone at the top of the pack. The deal—a stock swap for Fisher-Price shareholders—combined the $800 million-plus Fisher-Price line with Mattel's billion-dollar Barbie and confirmed Mattel's approach of having toys with worldwide popularity at the heart of its business: Barbie, Fisher-Price, Disney toys, and Hot Wheels accounted for 85% of the corporation's sales, a marked contrast to Hasbro, where no single brand totaled more than 5% of the company's sales.

      Worldwide, the toy and game market—plus video—was estimated in 1993 to be worth $60 billion at retail prices. Of that total, the Toys "R" Us chain of stores controlled about 13% of all sales, with turnover for the year expected to end up at around $8 billion. Toys "R" Us continued its aggressive merchandising in 1993. The company gained business from the defunct Child World and Lionel Leisure chains in the U.S. and opened its first stores in countries as far afield as Austria, Portugal, and Belgium, all the time strengthening its power base in the U.K., France, Germany, and, of course, Japan. It planned to move into Scandinavia in 1994, but local governments and businesses successfully blocked its entry into Italy.

      China cemented its position in 1993 as the main source of toy production, surviving the arrival of a new administration in the U.S. with its most-favoured-nation status intact, but the future was less than certain. The toy industry continued to favour MFN for China, but political considerations could yet prevail, with a fire that killed 80 workers at a Chinese toy factory in November doing little to soothe matters.

      In Europe recession took its toll in France and Germany, but recovery began slowly in the U.K. A product called Ondamania-Slinky by any other name—took the French and Spanish markets by storm but failed when it went to the U.K. Idéal Loisirs, Europe's biggest private toy company after LEGO System A/S, bought Majorette to add die-cast toys to its line, and Hasbro bought the Petra fashion doll from Plasty in Germany.

      Theme parks were the subject of considerable news coverage throughout the year. LEGO announced plans to open an amusement park in Carlsbad, Calif.; the firm had opened its first park in 1968 in its native Denmark. Meanwhile, another famous park, Euro Disney, fell into all sorts of trouble with a staggering $1 billion loss for the year, taking everyone by surprise. France, everyone agreed, was a mistake as a location for the park. At the year's end it was not known whether Disney would pull out of the theme park business in Europe.

      The top toys of the year in the U.S. came from Hasbro and Mattel. They included action figures and dinosaurs based on the film Jurassic Park from Hasbro's Kenner unit, Mattel's Hollywood Hair Barbie, Street Fighter action figures from the Hasbro toy unit, Talking Barney from Playskool, and the American Girl line of dolls, each with its own book, from the Pleasant Co. But the year ended with new characters coming out of nowhere: Mighty Morphin Power Rangers, made by Bandai America.

      Throughout the year Sega Enterprises Ltd. and Nintendo Co. Ltd. were battling for supremacy in the video-game market. Hit game of the year was Mortal Kombat, and Sega overtook Nintendo in the game's 16-bit cartridge format and kept its lead in the compact disc (CD) version. On that front Nintendo was not expected to launch a machine until 1994. The 3DO Co. introduced an advanced games machine that used a 32-bit cartridge.

      Alfred Butts, the inventor of Scrabble, died in April. More than 100 million sets of the world's most popular word game had been sold, in 24 languages, since Butts devised it in the 1930s.

      (JONATHAN M. SALISBURY)

GEMSTONES

      By mid-1993 signs of economic recovery in the Western world were still unevenly spread, although retail sales of gemstones in the United Kingdom steadily improved for several successive months. Jewelers at the top end of the market were still doing quite well. The shakeout of small, mainly new firms seemed to have slowed, leaving the field to the long-established companies. In general, compared with the sales of consumer durables, fine jewelry sales were somewhat better, and most major chains stayed in business.

      Treatment of coloured stones continued to headline the gemstone news. A treatment used on ruby and sapphire stones to enhance colour, eliminate some unsightly inclusions, and lighten dark colours was partly summarized in a useful new book, though most of the details were still kept secret by the practitioners. Though various gemstone regulatory bodies met several times during the year, no general agreement was reached on whether treatment of the gemstones should be disclosed to the customer. The number of methods used to enhance the colour of emerald also increased; this stone previously had been oiled, but the danger of the oil's being lost during cleaning processes had made the practice unpopular. The newly established methods of filling some of the inclusions in emerald were said to be undetectable and permanent, though many senior gemologists disagreed with that assessment. Overall, the question of treatment was unlikely to be settled quickly. There was no doubt that some stones, especially sapphires from Montana, were permanently improved by heating.

      More gem minerals were appearing on the market from Russia's Ural Mountains, but some rubies from eastern Africa were of widely varied quality. The prospect of Siberia's achieving independence from Russia caused concern in diamond circles. A green transparent zoisite joined the ranks of the rarer gemstones, and fine rhodochrosite was discovered at the Sweet Home Mine in Colorado. Some "Burmese" gemstones appeared on the market since limited access to the northern gem-producing region of Myanmar was again possible. A 51.33-carat diamond, not of top colour, sold for $4,732,500, and a top-quality cultured pearl necklace fetched $1,157,500.

      (MICHAEL O'DONOGHUE)

GLASS

      The glass industry continued to experience difficulties in many of the world's leading industrialized nations. Production capacity continued to exceed demand, despite restructuring and plant closing. Eastern European industrial privatization progressed, and Western European manufacturers were showing increased interest in setting up subsidiaries in Central and Eastern European countries. Exports to Western markets rose in all sectors of the industry despite the recession, and export sales prices increased owing to better access to market information.

      Container manufacturers continued to modernize their production facilities, particularly in the areas of process monitoring and control, in order to compete in a highly competitive packaging market. However, production capacity in the U.S. container industry continued to exceed demand. Shipments in the U.S. rose 1.5% in 1992 and were forecast to climb 2.5% in 1993 to 289.8 million gross units. According to the Glass Packaging Institute, 33% of all glass containers made and sold in the U.S. were recycled in 1992.

      Throughout 1992 the European glass container industry operated in a sharply worsening climate, with the economy in decline. Production fell by 0.4% in 1992 to 15.3 million metric tons, contrasting with the period 1982-92, during which production rose by one-third. The container industry was working toward recycling and recovery targets set by proposed European Community packaging legislation. Glass, compared with some other packaging materials, was well placed, since collection systems had been in use for some time; the average recycling rate of glass in Europe in 1992 was 49%.

      The world's flat glassmaking capacity had been underutilized, which had intensified competition and put pressure on selling prices. Float glass prices in 1992 fell to 1982 levels, some 30% lower than when the recession began. The indications that the worst of the recession was over in the U.S. and U.K. had not yet been reflected in the demand for float glass, which had been partially offset by economic deterioration in the rest of Europe. Although higher sales volumes were achieved in the U.S. market, these were offset by lower prices. Shipments jumped 6.7% in 1992 and were expected to increase 3.6% in 1993, fostered by continued growth in the residential construction and automotive sectors. However, European markets suffered from both lower sales volumes and prices. Attempts to increase prices in Europe failed as imports predominantly from the U.S. undercut them.

      Higher sales volumes were achieved in the worldwide fibreglass-reinforcement and auto-replacement glass sectors. However, these gains also were offset by lower prices. Demand for fibreglass for building insulation was maintained. There was sustained growth in fibreglass production in Southeast Asia and Japan, and an annual growth of 4-5% was predicted for continuous fibreglass for the industry as a whole in 1993.

      The lead crystal industry throughout the industrialized world continued to suffer because of increasing environmental and health and safety legislation and competition from cheap imports. Manufacturers were deciding whether to continue using lead or to develop an alternative.

      (HEIDI C.D. BROWN)

      This updates the article industrial ceramics.

INSURANCE

      Worldwide sales of private insurance approached an estimated $1.5 trillion in 1993. Although sales growth throughout the world had been stagnant in recent years, Europe, Latin America, and Asia (excluding Japan) registered annual increases of 7-10%. U.S. market share was about 42%, while Japan was 12%, Germany 10%, and the U.K. 6%. Highest per capita expenditures for insurance were approximately $3,000 in Switzerland and $2,000 in the U.K. and the U.S.

      In contrast to the U.S. proposals for increased government involvement in health insurance, other countries were reducing their insurance roles. For example, New Zealand's Life Insurance Office was sold; Italy proposed to sell its government insurer that was the largest provider of life insurance; Tasmania ended its 25-year-old state monopoly of insurance; and India and China were studying ways to encourage private insurance to replace or compete with their state-owned insurance monopolies. The global reinsurance market was relatively calm, but increased costs for property coverages were expected for year-end renewals, especially in Europe.

      In the U.K., insurance companies reported a return to profitability for general (non-life) insurance as a result of greater selectivity and increased rates. Life insurers continued their gains but faced problems with government proposals to require disclosure of commissions and with banks and building societies that were setting up their own life insurance companies. Steep rises in automobile and household insurance rates, attributable to higher claims costs, encouraged consumers to search for lower premiums. Lloyd's of London continued to be beset by a sea of troubles. The latest data, for 1990 on its three-year accounting system, showed a loss of £2.9 billion. This topped the all-time losses of the previous two years. Losses for 1991 and 1992, though smaller, were also expected. The number of individual underwriting members had fallen to 19,467 by January 1993 and was continuing to decline. Lloyd's planned to maintain the £9 billion underwriting capacity by attracting limited-liability corporate capital in 1994 for the first time. Meanwhile, many legal actions were in progress against members' agents and against underwriting agents who managed Lloyd's syndicates, which had fallen from 400 in 1990 to 240 in 1993.

      For U.S. property-liability insurers, net written premiums rose to $120 billion for the first half of 1993, up almost 5% compared with the same period of the previous year. The combined ratio of losses and expenses to premiums was down 1%, to 107%. Net income increased to $12 billion, with underwriting losses of $9 billion offset by $21 billion of investment gains. Catastrophe losses, based on those separate losses exceeding $5 million of insured property damage, fell to $4 billion. The floods in the Midwest, which attracted the most attention in the news, caused an estimated $12 billion in damages, but fewer than 10% of those were covered by insurance. Losses after midyear included July windstorms that caused $655 million of insured damages, a tragic Amtrak train crash in September with $300 million in claims, and spectacular firestorms in southern California that burned at least 61,500 ha (152,000 ac) and destroyed hundreds of high-valued homes. Reinsurers were still staggering from the record hurricane losses of 1992 that drove up the combined ratio to 118% and reduced the number of U.S. reinsurers by 10%, to 71. Overall, property-liability insurers faced declining interest income on reinvestments and increased balance-sheet problems unless underwriting losses decreased.

      U.S. Pres. Bill Clinton's proposal for health-care reform overshadowed every other event in U.S. life and health insurance in 1993, setting off a major political battle for survival of private health insurance. Counterproposals viewed with skepticism the viability of Clinton's plan for employer-mandated universal coverage in "regional health alliances." Midyear surveys of health insurance premiums for large employers showed 8% increases, a decline from 11% the year before but still rising at more than twice the general rate of inflation. Critics of the president's plan also warned of decreased Medicare-Medicaid coverage, new sin taxes, the demise of flexible-benefit employee plans, and a very limited role for health insurers and agents.

      The sale of variable insurance products was exceptionally strong during the first half of 1993. (Variable insurance bases its reserves and policy amount payable on investments devoted primarily to common stocks; in a period of inflation the value of the stocks will increase, and so will the amounts payable on the contract, thus counterbalancing decreases in purchasing power.) The Life Insurance Marketing and Research Association reported increased sales of 81% for variable life insurance. A Tillinghast survey noted variable universal life insurance increases of 29% to $750 million and individual variable annuity sales up 42% to $16 billion. Total variable annuity sales were expected to reach $40 billion, more than double those just two years earlier. (DAVID L. BICKELHAUPT)

      This updates the article insurance.

IRON AND STEEL

       World Production of Pig Iron, Table(For world production of pig iron, see Table IX (World Production of Pig Iron, Table).)

      The general economic revival for 1993 in the industrialized countries occurred only in North America, the U.K., and Australia, which started moving slowly out of the recession. In most of the other industrialized countries, including Japan, gross domestic product (GDP) stagnated, and the countries of the European Community (EC) experienced a decrease in their GDP. As a result, steel consumption in the industrialized economies in 1993 was expected to be 6% lower than had been estimated a year earlier, reaching only 297 million metric tons of finished steel products.

      For 1994 only little change could be expected. While the U.S. and the EC countries hoped for a strengthening of the steel market in the second half of that year, with increases of about 3% for each, Japan anticipated a further fall in demand, by nearly 4%, to 74 million metric tons of finished steel products. Thus, total consumption in the industrialized countries in 1994 would only slightly exceed that of 1993, by 1.4%, to reach 301 million metric tons.

      The countries of Central and Eastern Europe as well as the republics of the former Soviet Union continued on a downward trend economically. Steel consumption there in 1993 was estimated to have declined to 16 million metric tons, compared with past peak levels of 40 million metric tons; in the former Soviet Union, where steel consumption amounted to 140 million metric tons before the political changes occurred, it could, at best, reach 75 million metric tons in 1993. The outlook for 1994 was for some improvement in Poland, the Czech Republic, and Hungary, where the private sector was expanding rapidly. In the former Soviet Union the economies of the successor republics were in a dire state of disorganization and of disruption of trading relations. Thus, there was little hope for improvement in 1994, and it was estimated that steel consumption would decline further to 65 million metric product tons.

      The steel markets in the less developed countries showed increased strength in 1993, and consumption in those countries rose by more than 5% to 135 million metric product tons. This trend was expected to continue in 1994, especially in Latin America, where the liberalized and privatized economies were making steady progress and where steel use was forecast to expand by 5.9%, reaching 29 million metric tons of finished steel. The other principal growth area was expected to be Southeast Asia, mainly supported by the dynamic economies of South Korea, Taiwan, Malaysia, and, more recently, India. Steel consumption in this region was projected to exceed 90 million tons in 1994, an increase of more than 6% over 1993.

      The economic progress of the East Asian countries was much enhanced by the newest leap forward of the Chinese economy; the continuing strong growth of China's gross national product by as much as 14% during the first half of 1993 was accompanied by an equally vigorous expansion of steel consumption, estimated at 82 million metric tons in 1993, 12 million tons, or 17%, more than in 1993. For 1994 some slowdown of economic growth was likely as the restrictive policies pursued by the government began to be felt; consequently, steel consumption could remain at about the 1993 level.

       World Production of Crude Steel, TableSteel production (see Table VIII (World Production of Crude Steel, Table)) showed trends largely similar to those observed for demand. Output of the industrialized countries, having fallen by 11 million metric tons, or 3%, in 1992, continued to decline in most of the EC countries (-3% over the first nine months). In North America and, more recently, also in Japan, crude steel production started to rise again, though from a rather low level.

      Central and Eastern European output was sharply reduced in 1992, by as much as 26%; in 1993 the decrease was much less (3.3%), and it could come to a halt in 1994. The republics of the former Soviet Union continued on a downward trend; crude steel production there dropped by about 6% in 1992, and a reduction of almost 15% was expected for 1993. China had already in 1992 expanded its crude steel output to reach 80 million metric tons (a rise of 12%) as new capacities were commissioned; in 1993 an additional 10 million tons were likely to be added, an increase of more than 13%.

      Steel production in the less developed countries continued to rise; in 1992 it increased 5%, and in 1993 it was expected to increase again to a total of 127 million metric tons of crude steel (up 8.5%). Most of the increase came from Southeast Asia (mainly South Korea and Taiwan), but Latin-American steelmakers also significantly increased their output.

      Given the continuing decrease in demand and fierce competition, steel prices failed to improve over 1992, remaining as much as 35% below their prerecession (1989-90) level. Efforts to reduce production capacities, particularly for flat products, continued in the EC countries, where a voluntary reduction by 30 million metric tons of capacity was sought; other industrialized countries also closed down a number of installations or at least refrained from expanding capacities.

      International steel-trade disputes and defensive measures continued during 1993. Part of the 84 antidumping and countervailing duty cases filed by U.S. steelmakers in 1992 against competitors in more than 20 countries were recognized by the International Trade Commission, and countervailing duties were imposed.

      (D.F. ANDERSON)

      This updates the article mineral processing.

MACHINERY AND MACHINE TOOLS

       Machine tools are customarily defined as power-driven machines, not portable by hand, that are used to shape or form metal by cutting, impact, pressure, electrical techniques, or a combination of these processes. This broad category of manufacturing equipment is often subdivided into metal-cutting types and metal-forming types.

      Preliminary figures for 1992 indicated that Japan was again the world's largest producer of machine tools, with production worth $8.4 billion. Other leading producers included Germany, with production worth $7.7 billion; Italy, $3.1 billion; the United States, $3 billion; China, $1.8 billion; Switzerland, $1.7 billion; and Russia, the United Kingdom, and Taiwan, each with production worth about $1 billion.

      In 1992 Germany was the biggest exporter of machine tools, having shipped machines worth $4.7 billion, while Japan was the second largest, with exports worth $3.5 billion. Italy and Switzerland each exported about $1 billion worth.

      The nations with the largest value of consumption of machine tools (consumption signifies the number of machines newly installed in factories and is, therefore, a gauge of industrialization or of modernization) included Japan, with consumption in 1992 worth $5.4 billion; Germany, $4.9 billion; the U.S., $3.7 billion; China, $2.5 billion; Italy, $2.3 billion; and France, $1.7 billion. South Korea, the U.K., and Russia each had totals between $1.4 billion and $1 billion.

      Regarding the machine-tool industry in the U.S., exports reached a new high in 1992 for the third straight year, exceeding $1.2 billion. Exports had increased in each of the past nine years and had nearly tripled since 1984; they accounted for about 40% of total U.S. production in 1992. This percentage had increased in each of the past seven years. Mexico, Canada, and South Korea provided the three largest export markets for the U.S. in 1992, receiving, respectively, $250 million, $165 million, and $140 million worth of machine tools.

      U.S. machine-tool imports fell in 1992 for the fourth straight year—to $1.9 billion. These imports came primarily from Japan, with shipments worth $850 million; from Germany, with shipments worth $340 million; and from Switzerland and Taiwan, each of which shipped about $110 million worth. (JOHN B. DEAM)

      This updates the article machine tool.

MICROELECTRONICS

      Because of increased demand for the chips used in personal computers and related applications, projected worldwide sales of semiconductors rose in 1993 by 29% to $77.3 billion, according to the Semiconductor Industry Association (SIA). North America led the world's major semiconductor markets with 1993 shipments of $24.8 billion, a growth rate of 34.5%. This was the first time since 1985 that the North American market was larger than Japan's. The largest gain, 35.6%, was once again shown by the Asian Pacific market, including Korea, Taiwan, and Singapore, with shipments of $14.4 billion. The world market was expected to reach $100 billion by 1996.

      A devastating fire at the Sumitomo Chemical Co. in Niihama, Japan, in July created a major shortage of the semiconductor epoxy resin used in the casing of many computer chips. Estimates of Sumitomo's share of the semiconductor resin market ran as high as 60%.

      Motorola, Inc., the second-largest producer of computer chips in the United States, introduced its new PowerPC family of microprocessors, which it developed jointly in conjunction with IBM Corp. and Apple Computer. It was positioned in the same market as the Intel Corp.'s new Pentium chip (see below) but would sell at about one-half the price.

      Both Motorola and Texas Instruments, Inc., announced that they planned to build $1 billion research and semiconductor-manufacturing plants in Texas.

      The Intel Corp., in 1993 the world's largest chip producer, officially introduced its new processor, the Pentium. In a break with tradition, the chip was not called the 586 (after its predecessors, the 386 and 486). Using a technology referred to as submicron [0.8 micron (micrometer)], the Pentium consisted of 3.1 million transistors, more than twice as many as the 486. In addition, the Pentium would support not only DOS/Windows as did its predecessors but also other multitasking operating systems, such as Microsoft's NT Operating System, UNIX, and IBM's OS/2. Operating at 66 MHz, the Pentium microprocessor ran at speeds more than twice as fast as the 486 chips. Hitachi announced a room-temperature single-electron memory chip in December.

      A new law, the Television Decoder Circuitry Act, specified that all new 13-in and larger televisions sold in the United States after July 1993 had to include a microchip able to decode closed-captioned programs. This was expected to lead to expanded use of these chips to provide for "smarter" TVs in the home.

      Driven by the personal and mobile communications markets, as well as the emerging "multimedia" computers, a new market developed for low-cost digital signal processing (DSP) chips. These chips were being used to augment workstations, portable computers, and personal communicators by performing specific processing tasks. Applications for DSP chips included providing modem and fax capabilities for laptop and pen-based personal computers, music synthesis, speech recognition, and text-to-speech/speech-to-text conversions. (THOMAS E. KROLL)

      This updates the article electronics.

NUCLEAR INDUSTRY

      Data for 1992, released by the International Atomic Energy Agency in 1993, revealed that there were 424 nuclear power units in operation in 29 countries, with a total capacity of 330,651 MW. This was a net growth of four units and a rise of 4,040 MW in total capacity compared with the previous year. There were 72 units under construction in 19 countries. Nuclear plants produced a total of 2,027.4 TWh (terawatt hours; one terawatt equals one trillion watts) of electricity during 1992. More than half of the national production of electricity was by nuclear power in France (72.9%); in Lithuania it was about 60% and in Belgium, 59.9%.

      In March the government of the Czech Republic announced that construction of the Temelin plant would be resumed. The project, started in 1985 during the former Czechoslovak Communist regime, had been held up pending a decision on it by the new government. Fuel for the two Skoda-built VVER-1000 reactors (the pressurized-water reactor [PWR] design from the former Soviet Union) was to be supplied by Westinghouse Electric Corp. This would be the first time that a Soviet-designed reactor would use Western-supplied fuel. Under another contract, Westinghouse was to supply the instrumentation and control equipment for Temelin.

      China's second nuclear unit, the 900-MW Guangdong 1 unit at Daya Bay, started operation during the year. Designed by the French firm Framatome, the project was to be financed largely by the sale of electricity to Hong Kong, which would receive some 70% of the output from the station.

      The Narora 1 unit in India was put out of action for a large part of the year by a fire that gutted the turbine hall. Although not affecting the nuclear equipment, the fire destroyed much cabling associated with emergency electrical supplies, requiring activation of the primary and secondary shutdown systems.

      A World Bank study concluded that Ukraine could afford to shut down the Chernobyl units still in operation. The Ukrainian government was concerned that the loss of the units would place too heavy a burden on the local population because of the cost of the increased coal imports that would be necessary. Three PWR-type VVER units were under construction in the region.

      In a bizarre incident at Three Mile Island in Pennsylvania, a man described as a former mental patient drove his station wagon onto the island, crashed through a gate onto the site, and finally rammed through a door into the turbine building. The resulting inquiry by the U.S. Nuclear Regulatory Commission (NRC) concluded that no serious harm had been done to the plant, but as a result of the security questions raised, the NRC introduced upgraded physical barriers to surround U.S. nuclear plants. These had to be able to stop a truck from crashing through the barriers as far as the plant building. Cost estimates for the upgrade ranged from $500,000 to $2 million per station.

      Two five-year contracts were signed for work on advanced light-water reactors (ALWR) by the Advanced Reactor Corp., a consortium of 16 U.S. utilities. One, for $158 million, was with Westinghouse, and the other, for $100 million, was with General Electric Co. (GE). The contracts were for the development of the first-of-a-kind-engineering for Westinghouse's AP600 (advanced 600-MW PWR) and GE's 1,350-MW advanced boiling-water reactor (ABWR).

      ABB Combustion Engineering signed a long-term collaboration agreement with Stone and Webster Engineering to develop the System 80+ ALWR. ABB would supply the nuclear steam supply system and Stone and Webster the balance of the plant. The NRC's schedules for completing the final design approvals of four ALWR designs increased by between 9 and 17 months during the year, causing considerable dismay and criticism among the firms bidding for the contracts. In March, meanwhile, the local authorities at the Tsuruga nuclear sites in Japan approved the first ALWR project in the world, a two-unit advanced PWR with a total rating of 2,700 MW, which were to be a joint Westinghouse-Mitsubishi design.

      The full-power license issued to Comanche Peak 2, near Glen Rose, Texas, by the NRC in April marked the end of an era in the U.S. nuclear industry. This unit was the last to be ordered by a privately owned utility that survived to reach full power.

      Three steam generators were replaced at Virginia Power's North Anna 1 plant in world-record time 14 days ahead of schedule, with half the expected cumulative radiation dose to the workers and for $50 million less than the $185 million budget. The new Westinghouse steam generators were replaced in 51 days during a normal 96-day outage for refueling and maintenance.

      The United States Department of Energy's proposed budget for nuclear power, published in the spring, was not encouraging for many of the new concepts previously being funded. Federal financing was to be cut for gas and sodium cooler reactors, with a proposed overall reduction of some 45% from the previous year. Some of the proposed cuts were rejected by the House of Representatives later in the year, allowing work to continue on the gas turbine modular helium reactor, for example, but terminating funding on the GE advanced liquid-metal reactor and the SP-100 space reactor.

      The British government's review of the future of the coal industry provided two important reassurances for the nationalized nuclear operator, Nuclear Electric. The government accepted the favourable assessment of the costs of running the country's oldest nuclear plants, the Magnox stations, and also accepted the case for continuing the nuclear levy until its phasing out by 1999. But the government declared that it would examine critically any request for extension of the life of an aging Magnox plant. Later in the year, it was announced that the Trawsfynydd Magnox station in Wales, which shut down early in 1991 for investigation of pressure vessel embrittlement, would be decommissioned.

      The U.K. government planned a complete review of the industry within the next year. Nuclear Electric welcomed this decision in the light of improving nuclear unit performance and the progress with the Sizewell B project, Britain's first PWR station, which was running "months ahead of schedule and under budget."

      Retubing of the CANDU pressurized heavy-water reactor (PHWR) unit 4 at Pickering A on the shores of Lake Ontario east of Toronto was completed in a record time of 18 months, compared with 5 years, 4 years, and 23 months for units 2, 1, and 3, respectively. Ontario Hydro withdrew its 25-year supply-and-demand plan in the face of a growing surplus of capacity. The plan, published at the end of 1989, was based on economic and population growth figures that did not come to pass. It originally called for 10 new CANDU units.

      The start-up of Siemens' mixed-oxide fuel fabrication plant in Hanau, Germany, was delayed when three of the six operating licenses were ruled illegal by the State Court. The commissioning of the plant was expected to be held up, possibly for two years, pending appeals by Siemens.

      The reactivation of the Superphénix fast-breeder reactor at Creys-Malville, France, was delayed by the French government, awaiting the publication of a report on the use of the reactor to consume plutonium and other actinides. The conclusions of the public hearings, held in the autumn, were also awaited, and new measures were demanded to protect against sodium fires. These measures were scheduled for completion in March 1994.

      The AEA Technology Prototype Fast Reactor at Dounreay in Scotland was to be closed in March 1994, and the British government also decided to withdraw funding from the European Fast Reactor. German support for that project also appeared to have waned by the end of the year. (RICHARD A. KNOX)

      This updates the article energy conversion.

PAINTS AND VARNISHES

      Paint manufacture may well be a global business, but multinationals experienced distinctly variable performances in 1993. The American components reported better financial results than the European holdings, while those in the Asian Pacific Rim fared best of all. Paint giants Germany and Japan both reeled under the recession.

      With a growth rate of 15%, China's Pearl River Delta emerged as the world's fastest-growing region. In China paint production neared one million metric tons, and the increase in demand for high-tech coatings such as automotive finishes could run as high as 47%. Emertung Coatings, an Australian joint venture with a Hong Kong company, was quick to spot the opportunity of expanding into the promising Vietnamese market.

      In the coatings world, 1993 would be remembered as the year when Akzo of The Netherlands merged with Nobel Industries of Sweden to form the world's largest paint manufacturer, ahead of ICI. ICI, meanwhile, had become a highly specialized paint business, concentrating on three core areas only—architectural, automotive, and packaging coatings—in all of which the company had a dominant global presence.

      Intercontinental joint ventures were popular. Courtaulds Coatings of the U.K. and Nippon of Japan established a common Europewide coil coatings operation. Akzo and Dexter of the U.S. forged a two-part deal involving a European joint venture in aerospace finishes on the one hand and a transfer of Dexter's American coil coatings business to Akzo in exchange for Akzo's American aerospace coatings on the other.

      Joint ventures were also used for global marketing. Herberts of Germany entered into two such intercontinental agreements—one with Dai Nippon Toryo for automotive coatings and the other with Croda to distribute automotive repair paints in Australia.

      Technological innovation followed in the footsteps of environmental legislation. Volatile organic compound (VOC) control continued as the major environmental issue, and compliant coatings were the favourite research topic. Europe had opted largely for the development of waterborne coatings, while powder coatings were more popular in the U.S., where companies were particularly attracted by the absence of solid waste—an important consideration for an industry liable for hefty waste-disposal costs.

      The North American paint industry was preoccupied with aerosol restrictions, with the removal of old lead paint, and, of course, with waste. In Europe VOC control was still the major concern. European Community legislation on the classification, labeling, and packaging of chemicals was implemented in the U.K. in the form of the Chemical Hazard and Information Packaging (CHIP) regulations, which required data sheets for all industrial paints. (HELMA JOTISCHKY)

PHARMACEUTICALS

      Even before 1993 drew to a close, it brought down a deluge of bad news on the heads of U.S. pharmaceutical industry executives. The image of the big companies as blue-chip, inevitably profitable cash cows for investors was smashed. The first blow was delivered by Pres. Bill Clinton's national health plan, which presented a real threat to industry profits, research expenditures, and even current detailing practices (the means by which companies encourage prescribing among physicians and hospitals). A proposed new national health board would be empowered to investigate "unreasonable" prices; manufacturers would be required to rebate 15% for each drug paid for by Medicare; the government would have the authority to bargain down prices of new drugs before they could be paid for under Medicare; and most Americans would henceforth join health plans that would provide clout to bring down drug prices generally and encourage generic drug use.

      In expectation of some or all of these effects, stock prices of Merck & Co. and other blue-chip manufacturers sustained a hammering in the late spring, losing as much as one-third of their market value. Replacement of top executives at Merck, Glaxo, Upjohn, Eli Lilly & Co., and other big firms also may have been in part a manifestation of the hard times experienced by the industry. So wide a swath through top company jobs had not been cut in recent memory.

      Such a major downsizing by big U.S. corporations was also difficult to recall. In October, Eli Lilly announced that it would trim 4,000 from its workforce, only weeks after Bristol-Myers Squibb said that it would offer early retirement to 2,600 workers. Lilly's cuts were expanded to include major reductions in its European operations, and it eliminated another 2,000 domestic jobs by restricting use of temporary and contract workers and consultants. Marion Merrell Dow reported plans to lay off 1,100 to 1,300, and Procter & Gamble said it would lay off 12% of its workforce over four years, some in its pharmaceutical operation. Other personnel cutbacks involved 3,000 at Johnson & Johnson, 2,250 at Searle, 1,500 at Upjohn, about 600 at Ciba-Geigy, and 2,800 (in addition to 2,700 already under way) at Warner-Lambert Co.

      Beginning in late 1992 large pharmaceutical houses began to buy up generic-drug manufacturers, whose products had begun to represent a major source of competition. Copley Pharmaceuticals agreed to be acquired by Hoechst Celanese, and Marion Merrell Dow acquired the generic business of the Rugby-Darby Group. Merck acquired Medco Containment Services, Inc., a mail-order pharmacy and managed-care drug company, in November. In a radical move, SmithKline Beecham PLC broke with industry norms in November 1993 when it offered U.S. pharmacy customers a rebate for its Tagamet (cimetidine) ulcer medicine—essentially bringing brand-name price competition to the prescription-drug market.

      The final blow to the industry came in mid-October, when seven big U.S. drug manufacturers and one mail-order pharmacy were taken to court by 20 drugstores for price-fixing and antitrust violations. The manufacturers were accused of illegal discrimination by refusing to grant equal discounts on drugs provided to health maintenance organizations, hospitals, mail-order prescription houses, and clinics. (The National Association of Retail Druggists said the discount offered to some hospitals could be as much as 82% for some drugs.) Drug companies insisted that they should have the right to charge different prices to various classes of buyers. (DONALD A. DAVIS)

      This updates the article pharmaceutical industry.

PLASTICS

      Although it was calculated that world consumption of plastics topped 100 million metric tons in 1993 for the first time, with a growth rate from 1992 of 3-4%, in all developed countries the industry had a very poor year, and no respite was expected until late 1994 at the earliest. There were tentative signs of economic recovery in the U.S., but in Europe (except the U.K.) the recession deepened sharply, particularly in Germany, where the weakening performance set the pace for low demand for plastics throughout the area.

      The Asia-Pacific region (except Japan) showed a marked exception to this gloomy picture, mainly because of the dynamic performance of the fledgling polymer industries in Thailand, Singapore, Taiwan, Malaysia, Indonesia, and, most important, China, with its huge potential. Southeast Asia led the world with double-digit plastics growth in 1993, and multinational firms increasingly sought stakes in the area through licensing and joint manufacturing ventures. One estimate was that the region's demand for polyolefins was growing 4-6% faster than that in the world as a whole and, thus, by the year 2000 its share should increase to nearly a third, compared with the present 28%—surpassing Europe and almost equaling North America. Furthermore, Asia was expected to become increasingly self-sufficient in the production of plastics.

      The roots of the trouble elsewhere, especially in Europe, continued to lie in massive overcapacity for producing the "commodity" thermoplastics—polyolefins (polyethylene and polypropylene), polyvinyl chloride, and polystyrene. This overcapacity along with weak demand and substantial imports caused prices in Europe to remain very low, with near-zero or even negative profit margins for the material suppliers. The consequent potential for real industrial disaster was increasingly recognized as the year progressed. Although generally regarded as no more than palliative moves, with the really tough decisions still to come, there were some mergers and exchanges in 1993. Neste of Finland and Statoil of Norway combined their petrochemical activities to create the largest European polyolefins manufacturer, ranking fifth on the world scene. Also, Hoechst and Wacker-Chemie of Germany merged their polyvinyl chloride businesses.

      Interest in high-performance specialty polymers continued to weaken with the continuing downturn in such sectors as defense and aerospace. There was instead an accelerating move toward the "monomaterial" concept; i.e., the use of single or compatible polymers not only in a specific item, such as a package, but in complete assemblies, especially in the automotive field. This trend especially favoured versatile polypropylene, which continued to be the fastest growing of the commodity plastics (at about 5% per annum), with 1993 world production estimated at 14.5 million metric tons; this, however, was far less than polyethylene (32.5 million metric tons) and polyvinyl chloride (18.5 million metric tons). Polyethylene terephthalate was again a star performer among the low-tonnage thermoplastics, with demand for it in the film, sheet, and transparent semirigid bottle markets still rising steadily.

      The continuing emphasis on recycling used plastics was a powerful incentive toward monomaterial use because it would reduce some of the problems of handling mixed waste. Germany was the leader in its tough legislation on compulsory recycling, but its reluctance to allow the incineration of plastics for energy recovery resulted in the creation of increasingly large amounts of waste for which no economic use could be found. (ROBIN C. PENFOLD)

PRINTING

      The world's printing-equipment-manufacturing industries went through a major slump period in 1993. Only toward the end of the year, boosted by the results of the Ipex graphic arts show in England and Japan's Igas exhibition, did orders begin to pick up.

      The genuinely digital printing press arrived. Indigo (Israel) claimed to have sold about 300 units to business-forms-printing groups in North America and Japan. Web-fed Xeikon (Belgium) sold 50 offset units to the largest U.S. printing group, R.R. Donnelley & Sons, which also ordered the first of the "Sunday Press" extra-high-speed web offset presses from Heidelberg Harris. The M-3000 press series was "gapless" and had a continuous blanket. It was a main challenger to gravure presses designed to cope economically with split runs. Semicommercial web presses from Germany, France, and the U.K., combining the cost advantages of newsprinting with good colour options, began to be installed in Europe and Southeast Asia as well as North Africa. Weber Colour in Switzerland put the first three Rotoman 2000 machines into production and, like Monarch Litho in California, installed batteries of MAN Roland 700 sheetfed offset machines.

      Sony Corp. developed the Gravuan system for engraving plastic gravure printing plates from a PC paginator. Automated robotic offset plate change became de rigueur on new machine models, and Mitsubishi (Japan) also introduced that system to commercial web printing. German manufacturers Heidelberg and MAN Roland installed robotized paper-handling systems for sheetfed offset in France and The Netherlands.

      Computer press controls became universal, and telecommunications links with manufacturers were introduced to allow diagnostics of press troubles. Production-control systems were evaluated to give customers direct information about the progress of their work by linking into press-control systems.

      Frequency-modulated (random or crystal and diamond) screening for colour reproduction, new "universal" offset printing plates, and direct-to-plate imaging pointed to the day soon when most reproduction work for printing would be handled in-house by printers and even their customers and designers.

      New printing plate (offset) capacity was opened in the U.S., the U.K., Germany, India, and Japan, causing price drops.

      (W. PINCUS JASPERT)

      This updates the article printing.

RUBBER

      The debate over the continuance of the International Natural Rubber Agreement (INRA) heated up during 1993 as producing and consuming countries questioned the merits of the nited Nations-sponsored price-support agreement. The agreement, which was intended to stabilize natural rubber prices and guarantee adequate supplies, was scheduled to expire at the end of the year but could be renewed for two years. INRA set up a pricing mechanism whereby natural rubber would be bought should prices drop below the must-buy mark and sold when they rose above another predetermined level. Because of the depressed prices for natural rubber over the past few years, the pricing mechanism of INRA dropped the must-buy price by 5% over the objections of the producing countries. This disagreement put a hold on buying from January to September, when the buffer stock manager purchased almost 18,000 metric tons and brought the buffer stock to about 200,000 tons. Early in the year the Association of Natural Rubber Producing Countries (ANRPC) said that it wanted either a new agreement or no agreement at all and hinted at cutbacks in production to boost prices. Toward the end of the year, however, the ANRPC appeared interested in renegotiating even with the lower must-buy price.

      The number of major plant closings was slight. Michelin continued its heavy workforce reduction by eliminating nearly 3,000 jobs in France and 2,500 each in Spain and North America. In addition, Michelin's U.S. subsidiary, Uniroyal-Goodrich, issued a formal notice that it planned to close its Fort Wayne, Ind., tire plant. Uniroyal-Goodrich closed its Kitchener (North), Ont., plant at the end of 1992, shifting about 400 of the plant's 1,200 workers to its Kitchener (South) facility, which would receive $79.3 million in investment though 1997. Michelin also sold its retail tire subsidiary, Tire Kingdom, and its synthetic rubber subsidiary, Ameripol Synpol. Ameripol Synpol, the world's largest producer of styrene butadiene rubber, was purchased by Gantrade Corp. of Montvale, N.J.

      Pirelli Group suffered from the aftereffects of its attempt to merge with Continental A.G. Owing nearly $270 million from its stock maneuverings, Pirelli announced that it would sell off its nontire businesses. During 1993, Pirelli divested its hydraulic hose operations in Belgium to Mark IV Industries. It also sold its profiles plant in Italy and its I.T.R. S.p.A. hose business to Saing S.p.A. The company dropped passenger tire production at its plant in Burton upon Trent, England, laying off 700.

      Continental cut 2,500 jobs, mostly in Germany. Continental phased out truck tire production at its Sarregeumines, France, plant, eliminating 180 jobs, and its General Tire subsidiary withdrew from the front tire farm market and eliminated 340 jobs at its Mayfield, Ky., plant. Goodyear reduced its workforce by 1,000 worldwide during the year, not including almost 200 workers idled at its Philippsburg, Germany, plant. Other significant closings during the year involved Mexico's Euzkadi Tire, closing its Mexico City tire plant, and Freudenberg Group, closing an automotive and machinery components plant in Germany.

      The opening of Michelin's new state-of-the-art tire facility in Clermont-Ferrand, France, was among the new investments in 1993. The Michelin plant was said to produce the same number of tires as a plant 10 times its size. Pirelli kept active in China by completing a 300,000-per-year truck and bus tire facility in Qingdao (Tsingtao) and closing deals for a 1.4 million-a-year radial tire production facility in Beijing (Peking) and a 800,000-a-year radial tire plant on Hainan (Hai-nan) Island.

      Goodyear and India's Ceat agreed to build a $150 million tire facility in Aurangabad, India. The production of the radial tire and bias earthmover tire plant was expected to reach three million tires annually by 1998. Goodyear also announced that it would spend $22 million to expand its radial tire plant in Malaysia and $34 million to increase medium radial truck tire production by 35% at its Topeka, Kan., plant. Goodyear's subsidiary, Kelly-Springfield, was spending $21.8 million to increase radial light truck capacity at its Fayetteville, N.C., plant. Bridgestone announced a $110 million expansion at its Warren county, Tenn., plant that would increase truck tire production by 76% and a 63% expansion at its bias tire facility in Indonesia.

      The International Rubber Study Group (IRSG), which is devoted to collecting worldwide data on the rubber industry, found itself on shaky ground in 1993, and there was speculation that the 50-year-old group might not make it through 1994. Canada withdrew from the IRSG in 1993, and Nigeria, Italy, and Côte d'Ivoire did not pay their annual dues. Russia paid its 1991-92 dues but still owed for two years. (DONALD SMITH)

SHIPBUILDING

      The world order book, comprising ships under construction and ships on order on which construction had not begun, showed a large decrease compared with 1992. The second-quarter figures issued by Lloyd's Register showed the total volume of tonnage in the world order book to be 35,052,973 gt (gross tons), a decrease of 6,355,621 gt from the same quarter of 1992.

      The total order book was made up of 16,724,962 gt of ships under construction and 18,328,010 gt of ships on order. The decreased figure for the world order book was due to a large decrease—5,354,492 gt—in ships on order. The downward trend was reinforced by a 1,001,129-gt decline of ships under construction.

      There were significant changes in the types of ships being built and on order. The second-quarter figures from Lloyd's Register revealed a major decline for oil tankers. The total world order book for this type of ship was 13,944,466 gt, a startling decrease of 6,128,139 gt. Significantly, much of this was due to a decrease in orders on which construction had not begun, totaling 5,203,969 gt. The world order book for bulk carriers and general cargo ships, at 8,982,488 gt and 6,506,333 gt, respectively, was little changed.

      In terms of percentage of the total world order book in 1993, tankers represented 39.8%, bulk carriers 25.6%, and general cargo 18.6%. Of the general cargo total, 56.2% represented container ship tonnage. Liquefied-gas carriers accounted for 2.8 million gt of the total order book, equal to a capacity of 3.7 million cu m (1 cu m = 35.3 cu ft).

      Continuing concern about the vulnerability of bulk carriers to side structural failures led to the introduction of a structural condition survey by London underwriters in 1991. As a result, various condition and structural surveys were requested by underwriters on selected vessels at the time of renewal or inception of insurance policies to ensure that the vessels were seaworthy. As many as 80% of the ships examined required repairs and attention to various defects. These structural condition surveys were a direct result of underwriters' loss of confidence in the traditional inspections by ship-classification societies.

      The largest ship completed during the June quarter was the 301,824-dwt (deadweight ton) tanker Chios, built in South Korea for the Livanos Group. The biggest ship built in Japan was the 290,927-dwt tanker Ocean Guardian for Amoco Corp., while the largest European-built ship was the 298,900-dwt tanker Elisabeth Maersk, built in Denmark. The biggest dry-cargo ships completed in the second quarter were three 150,000-dwt bulk carriers: Cape Kestrel, Anangel Pride, and Anangel Solidarity.

      In Japan the Techno-Superliner research-project team built two model ships for sea tests. Research was also being conducted on fuel-cell ship propulsion and superconducting electromagnetic ship propulsion.

      The second-quarter figures again showed Japan as the leading shipbuilding country, with a 31.4% share of the world order book. Japan's order book of 10,998,066 gt was 3,809,654 gt more than shipbuilding giant South Korea, which captured 7,188,412 gt of the world order book, followed by China with 1,869,588 gt and Germany with 1,658,831 gt. The next 13 places were shared by 11 European countries, Brazil, and Taiwan. Croatia continued to advance in the world shipbuilding table with an order book of 677,095 gt, placing ahead of both Ukraine and Spain. (EDWARD CROWLEY)

      This updates the article ship construction.

TELECOMMUNICATIONS

      On the road to the "information superhighway," 1993 was the year of partnerships and mergers between cable, entertainment, and telecommunications companies. The largest merger was the proposed $33 billion acquisition of the largest U.S. cable provider—Tele-Communications, Inc. (TCI)—by Bell Atlantic Corp., one of the original regional Bell companies formed by the breakup of AT&T in 1984. AT&T had earlier proposed a $12.6 billion purchase of McCaw Cellular Communications, Inc., joining the biggest long-distance provider with the largest cellular telephone service company. In March Sprint Corp. completed its purchase of the Centel Corp. for $4.7 billion, forming a $10.4 billion corporation and the only large telecommunication company providing local-exchange, long-distance, and cellular service. In December Southwestern Bell Corp. and Cox Cable of Atlanta, Ga., announced plans to form a $4.9 billion joint telephone-cable network.

      British Telecom agreed to purchase a 20% interest in MCI, the second largest long-distance provider in the U.S., for $4.3 billion. U S West, Inc., invested $2.5 billion in Time Warner, Inc., and BellSouth Corp. put up $1.5 billion for the QVC home shopping network to use in its bid against Viacom, Inc., for control of the Paramount Communications entertainment conglomerate. Novell, Inc., bought the rights to the popular UNIX operating system and its development arm, UNIX Systems Laboratories, from AT&T for $350 million in Novell stock. In Germany three corporate giants—the Mannesmann engineering group, RWE Energie, and the Deutsche Bank—joined in a bid in December to challenge the telecommunications monopoly of state-owned Deutsche Telekom.

      U.S. Pres. Bill Clinton chose Reed Hundt to head the Federal Communications Commission (FCC). The FCC, reacting to the U.S. Congress and the Cable Act of 1992, ordered cable companies to reduce their fees by $1 billion and roll them back to the October 1992 level. At the same time, local stations were allowed to negotiate compensation from the cable providers for retransmitting their signals. Many cable companies scaled down their basic services to include only local broadcast stations and the local access channels, and in some parts of the country a number of subscribers found that their rates actually increased. The FCC also ruled that businesses would now be able to retain their toll-free 800 numbers even though they changed carriers, resulting in fierce marketing among the long-distance companies.

      In order to provide microwave spectrum availability for a new type of cellular communication, called personal communications services (PCS), the FCC announced that it would evict current users in the 2-GHz (gigahertz) band. All incumbents now had to negotiate with the PCS provider that would be assigned the spectrum on the basis of the results of an auction.

      The Radio Broadcast Data System (RBDS) was introduced in 1993. This technology allowed an unused FM band, called the subcarrier band, to transmit digital signals along with the regular broadcast. Installed in both car and home radios would be a device to decode the digital signal. These decoded signals would allow broadcasters to provide ancillary information along with their regular broadcasts. Among the features of RBDS signals would be the ability to provide the call letters of the station, the name of a song and the artist performing it, weather reports, stock quotations, and emergency notices, and the signals would also allow the radio to scan for preselected, specific types of programming.

      Motorola's $3,370,000,000 Iridium, a satellite-linked digital cellular network that would provide worldwide fax, paging, voice, and data services, added new partners during the year, such as Russia's Khrunichev Enterprise and a consortium of 20 Japanese companies, including Sony, Mitsubishi, and Kyocera. The project was seen to be especially important to less developed countries that lacked the infrastructure needed to provide wire-based telecommunications.

      In the courts U.S. District Judge T.S. Ellis ruled in favour of Bell Atlantic's position that the 1984 Cable Act, which prevents telephone companies from providing cable-TV services in areas where they sell telephone services, inhibits their First Amendment rights to free speech. Chicago-based Ameritech Corp. took the same issue to court in Chicago and Detroit, Mich.

      In January it was charged that there might be evidence of a link between brain cancer and cellular phones. The disclosure brought the stock prices of cellular telecommunications companies down. Although no direct link was found, more study was proposed. (THOMAS E. KROLL)

      This updates the article telecommunications system (telecommunication).

TEXTILES

      As with other industries, textiles continued to suffer from the effects of a major world slump, and there were few signs of recovery in 1993. Machinery suppliers to the industry explained that barring a major improvement, they would probably not be able to regain even very low levels of activity. A number of European companies had to close. Others sought protection by concluding joint-venture agreements with companies in Asia, where engineering standards were often extremely high and labour costs were only a fraction of those in Europe. Much the same description applied to the textile industry, where Western manufacturers became involved in joint ventures by providing development capital and know-how to their new partners.

      World textile makers pinned great hopes on new microfibres—man-made fibres that were vastly finer than anything ever before available. Softer and more luxurious materials could now be produced, and it was thought that mass production of a leather/suede substitute, which would be much softer and would incorporate easy-care properties such as wash and wear, was on the horizon. Microfibres were far more expensive than traditional fibres, however, and the amount of dyestuff required for obtaining a particular depth of shade was much greater.

      "Rationalization"—or coming to terms with excess capacity among the fibre producers in developed countries—prompted certain large companies to give up fibre making completely, as they felt unable to compete effectively in what had become a commodity market. Other companies turned their attention to products with special characteristics, such as modified polyester fibres designed to transmit fluids. Others moved toward making fibres with properties that made them ideal for demanding applications in aerospace, electronics, and medicine.

      A new cellulosic fibre known as lyocell, with properties that made it superior to cotton, was introduced. It was based on cellulose, which generated virtually zero effluent.

      Polypropylene, a man-made fibre that is attractive to manufacturers because it is based on propylene—a waste gas from oil refineries—was witnessing a worldwide overproduction. In an attempt to tackle these difficulties and seek ways to avoid possible market collapse, the United Nations Industrial Development Organization convened a meeting of more than 100 experts from 35 countries in Tehran in November to try to help less developed countries absorb excess capacity through development of downstream petrochemical industries. (PETER LENNOX-KERR)

Wool.

      Prices in the 1992-93 selling season declined further. The Australian Wool Corporation's market indicator fell to 381 cents (Australian) per kilogram (1 kg = 2.2 lb) on April 28, and prices in real terms were the lowest in 50 years. After fluctuating without clear trend from April to September, the market began to gather strength. The forecast of the Australian wool clip in 1993-94 was revised substantially downward. Production in New Zealand, South Africa, and South America also fell as farmers reacted to uneconomic prices. Demand at the same time gradually improved. A steady recovery in prices in September and October was accompanied by much sharper rises affecting superfine merinos and carpet wools as special shortages were revealed. By November the wool market as a whole was, unexpectedly, on a rising trend, and fears about the weight of stockpile wool receded.

      In the spring the Australian government announced measures to find long-term solutions to the wool crisis. In August a review committee recommended the disposal of the four million-bale stockpile by fixed schedule rather than by the flexible policy adopted by the Australian Wool Realisation Commission. It was also recommended that the commission be replaced by a new wool organization, Wool International, with "a clear commercial focus." There was great concern in most wool-using countries, expressed through the international Wool Textile Organization, with stockpile disposal by fixed schedule causing particular anxiety. (H.M.F. MALLETT)

Cotton.

      Like other natural-product industries—cotton textiles were about to be transformed. Thanks to genetic engineering, it had become possible to introduce into the large cotton molecule specific features that could completely change it. A gene from the indigo plant was grafted to cotton DNA to produce a naturally blue cotton suitable for processing into the denim fabric used to make blue jeans. Dyeing would not be necessary. In the U.S. a far-reaching patent was granted to a single company that would effectively control this new type of cotton as well as other variants that might emerge from further genetic engineering. This was a highly controversial matter, and it raised serious legal and ethical questions.

      The main cotton-producing areas were China and the United States, followed by India, Central Asia, Pakistan, and Brazil; total growing area is about 32 million ha (80 million ac), yielding some 550-600 kg/ha (490-535 lb/ac). World production of cotton in 1992 was estimated at 17,970,000 metric tons, down almost 3 million from the previous year, and it was predicted that output would hold at that level for at least two more seasons. With cotton consumption by textile industries exceeding production by about one million kilograms per year, stocks were likely to be reduced and prices somewhat stabilized.

      In China cotton production in 1993-94 was expected to fall because of inflation-adjusted procurement prices as well as pest problems. Drought in India had an adverse effect on the crop. Pakistan had problems in the previous season with leaf-curl virus, but this was expected to be overcome, and production in the current season was likely to move toward some two million metric tons. The situation in Central Asia was somewhat confused, and problems were reported in developing independent exporting businesses. Likewise, Eastern Europe, once a major consumer of cotton, witnessed a decline, but there were clear signs of stabilization, and those mills still operating were profitable and increasing their output.

      (PETER LENNOX-KERR)

Silk.

      The world silk market continued to deteriorate in 1993 for a number of reasons: the global recession, the difficulties hard-currency countries had in obtaining export orders, the continuing decline in popularity of the kimono in Japan, and a continuing flood of cheap silk garments from China and Hong Kong. Only in China itself with its rapidly rising prosperity was demand good; stocks of raw silk were reported to be low. Despite this, China cut its official price for 3A 20/22 to $30 per kilogram in December 1992. Later, even this price was undermined by goods smuggled out to Hong Kong. Beijing (Peking) tried to counteract by further discounting. By July 1993 the position appeared to be stabilizing as the unofficial RMB rate against the dollar came closer to the official rate. However, the provincial branches were obtaining more autonomy and becoming more difficult for Beijing to control.

      Brazil's silk industry continued to modernize, and raw silk of excellent quality was produced. Sellers followed China's prices downward. Other countries—e.g., Paraguay, South Africa, and Romania—continued to nurture emerging silk production.

      A bright spot was a growing fashion for silk noil yarn for use in knitwear. Bottlenecks in supply were thought to augur well for the future of silk demand generally in 1994.

      Raw silk production figures for 1992 in metric tons were:

      China 54,500

      India (1991-92) 11,600

      Japan 5,100

      Brazil 2,296

      Total world production in 1991 was estimated at 76,526 metric tons.

      (ANTHONY H. GADDUM)

      This updates the article textile.

TOBACCO

      A crisis loomed in 1993 as favourable weather helped farmers produce, for the first time in years, far more tobacco than the world needed or was prepared to add to already plentiful stocks. World production, estimated at nearly 7.4 billion kg (16,280,000,000 lb), was some 15% above foreseeable demand; in a normal year supply and demand differed by 1 or 2%. Farm prices for tobacco slumped in free markets throughout the world, causing planters to curb their plans for 1994.

      Smoking, predominantly of cigarettes, rose in 1993 by some 1.3%. As usual, an increase in Third World consumption more than offset losses in regions sensitive to antismoking campaigns. Tobacco imports were affected when a new U.S. law limited the foreign-tobacco content of U.S.-made cigarettes to 25%. The import limit aroused the ire of Third World producing nations and would undoubtedly face a challenge at world trade talks. More than 40% of the tobacco used by U.S. manufactures was imported, and it was as much as 40% less expensive than domestic tobacco. As a result, other countries affected by the curb would secure fresh markets, perhaps at the expense of U.S. exports.

      In the U.S., Philip Morris Companies stunned the market in April by substantially reducing the price of Marlboro cigarettes, the world's best-selling brand. The move was made to stave off competition from discount brands, but the lost revenues in sales apparently were a factor in Philip Morris' decision, announced in November, to slash 14,000 jobs and close or idle 40 factories. RJR Nabisco Holdings Corp. followed suit a few weeks later. Ever increasing tobacco taxes, including the massive increases proposed in the U.S. on cigarettes, cigars, snuff, and other tobacco products to fund a national health care plan, steered smokers to lower-priced brands. There was also a fresh surge in illegal imports. In Canada 20% of all sales were contraband.

      Transnational tobacco groups, predominantly U.S. ones, moved into Eastern Europe and the former Soviet Union as state enterprises were slowly privatized. Post-communist countries used Western cigarette blends, acquired manufacturing efficiency, and cautiously introduced Western brands.

      In Germany, where loose tobacco was less heavily taxed, sales rose for tobacco rolls (cylinders of cut tobacco, which were easily inserted into hulls of cigarette paper). Cigar production continued to fall, but all-natural brands gained popularity in Europe. (MICHAEL F. BARFORD)

TOURISM

      The prolonged recession pared tourism growth in 1993, but the sector fared better than such industries as consumer durables and automobiles. Even unemployed and part-time workers preferred to reduce the length of their holidays, forgo the use of travel agencies, or vacation at home as alternatives to postponing travel. Businesses economized by combining trips, trading down (especially from five- to four-star hotels), teleconferencing, and negotiating discounts with travel agencies. The youth market was squeezed as college graduates faced uncertain job prospects. The latter group, however, was not only growing, but its members were increasingly prosperous and self-reliant.

       Major Tourism Earners and Spenders, TableThough the number of people flying was inexorably rising, actual passenger growth remained one or two percentage points below what was forecast. Worldwide tourism offered a similar scenario; upward movement continued, though at a slower pace. Worldwide international arrivals, which had reached 482 million in 1992, were expected to grow by 3.8% in 1993 to reach 500 million. Worldwide international tourism receipts (for major tourism earners and spenders by nation, see Table X (Major Tourism Earners and Spenders, Table)) rose by 9.3% in 1993 to $324.1 billion (compared with $296.4 billion in 1992).

      Most tourism-related businesses felt the chill from the winds of the economic recession. Hotels imposed tighter cost controls, programmed seasonal closures, divested themselves of surplus real estate, and converted to more profitable brand names. Indeed, during 1992-93 hotels and motels showed some of the highest share price gains on U.S. stock exchanges. Many of the world's 762 scheduled airlines, however, were unprofitable and saddled with excess capacity. Losses in 1992 peaked at $4.8 billion and were expected to reach $2 billion in 1993. Government moves to reduce subsidies to publicly owned airlines were met, as exemplified by French carrier Air France in October, with protests, strikes, and political compromise to save jobs. Still, each airline passenger actually cost the carrier $15. Such new computer reservation systems as Amadeus and Galileo helped travel agencies increase employee productivity and expand services without adding to the payroll. Tour operators continued to prosper by offering packages tailored to the market's straitened financial circumstances. Market leaders such as the United Kingdom's Thomson Holidays cut prices by 6% in anticipation of a higher volume. Tour operators predicted a market growth of 5% in 1994 as the world economy moved slowly out of recession.

      Regionally, international travel to Africa steadily grew. Major tourist countries such as Morocco and Tunisia saw hotel reservations increase by 7 and 4%, respectively. Rwanda's mountain gorillas, a top tourist attraction, helped tourism become the nation's second highest earner of foreign exchange. Seychelles also secured a position as a popular ecotourism destination, with a 21% surge in arrivals.

      The United States had an estimated 12% increase in 1993 tourism industry earnings, for a total of $60 billion. Canada's tourism was steady, while Mexico lifted foreign travel spending by 5%. In the Caribbean, tourist arrivals increased by 17% in Antigua and 13% in Grenada. Barbados (6%), Bermuda (7%), and Jamaica (10%) all had a surge in hotel reservations. In Latin America, Chile (6%), Guatemala (8%), and Paraguay (8%) experienced tourism growth.

      Tourist arrivals in China grew by 21%. The Philippines began the year on an upbeat note (20%), while Hong Kong (4%), Singapore (7%) and New Zealand (8%) all performed positively in 1993. While Indonesia posted a 7% growth in its tourism earnings, Australia marked time under a recessionary cloud. Japan's rising yen made it an increasingly expensive destination, resulting in a 3% decline in arrivals and a 6% fall in receipts. Sri Lanka's tourism recovery continued, with tourist arrivals increasing by 25%. Maldives received 6% more visitors in accommodation. Ethnic conflicts in India hurt tourism. Conservationists, however, welcomed a Supreme Court judgment banning industries from polluting and damaging India's prized Taj Mahal.

      Despite the liberalization offered by the single market, European tourism was strongly influenced by poor economic prospects and high unemployment in 1993. France, Germany, Greece, The Netherlands, and Portugal showed little change compared with 1992, while Austria (1%) and Switzerland (3%) posted small declines.

      The troubled Euro Disney theme park near Paris reached its yearly target of 11 million visitors but failed to achieve profitability. The site, which posted a $930 million loss in November, suffered from poor weather, few overnight stays, and a lack of French enthusiasm. There was speculation in the press in November that the attraction might be forced to close if agreement with creditor banks could not be reached by March 1994. Cyprus' hoteliers welcomed fewer visitors in early 1993, though Turkey showed a small increase in arrivals. Following three devaluations of the peseta, Spain emerged as the star of 1993, with arrivals 3% ahead of those in the record 1992 Seville Expo year.

      The signing of Israeli-Palestinian accords offered a welcome break for Middle East tourism. Israel showed a 12% increase in tourism, and Syria was 17% ahead of 1992 receipts. Egypt's industry was threatened by violence directed at tourists, and hotel reservations plummeted by 14% during the first half of the year.

      Violence against tourists also brought unwelcome media publicity to Egypt and the U.S., and especially Florida, where nine foreign visitors were killed near some of the state's most popular resorts. WTO's General Assembly held on the island of Bali, Indonesia, in October adopted resolutions condemning violence against tourists and calling upon governments to take corrective action. (PETER SHACKLEFORD)

WOOD PRODUCTS

      Launched in Toronto on Oct. 3, 1993, against a backdrop of concern about world timber supplies, the embryonic Forest Stewardship Council (FSC) took centre stage in the conservation debate. The council's underlying aim was to promote voluntary timber certification on a national basis and to ensure that only timber from sustainable forests was cut and traded on the world market. The FSC would act as an independent agency to accredit certification bodies, which would verify that producers were obtaining timber from forests managed under FSC guidelines. The council and its guiding principles provoked international controversy, especially among producers concerned about the cost of certification.

      Earlier in the year the International Tropical Timber Organization (ITTO) sustained pressure from those tropical hardwood producers supporting ITTO to both extend and increase the scope of the International Tropical Timber Agreement (slated to expire on March 31, 1994) to include nontropical temperate and boreal timber, which together made up 90% of the world's resources. Consumer countries also vehemently demanded that Target 2000, an objective for trading only timber from sustainable forests by the year 2000, be written into an extended agreement. Producers hotly contested the measure.

      As many world markets stirred from recession, demand for wood products showed a small but noticeable upturn with a corresponding improvement in prices. In the U.S., hardwood product exports in 1992 reached a record $1.9 billion, but an inherent decline in log sales continued in 1993.

      The log trade, predominantly in Southeast Asia, was in major conflict with tropical conservation values. Voracious markets such as Japan, where annual housing starts continued to rise, maintained a high demand for lumber. Malaysia lifted its ban on log exports from Sabah in the spring following an appeal from Japanese buyers and against the wishes of the Sabah state government, which then issued its own ban. By August, however, stringent measures to halt or restrict log exports from Malaysia, Papua New Guinea, Myanmar, and Cambodia had sent principal buyers—Japan, China, Korea, and Taiwan—scrambling for suppliers. Africa was earmarked for secondary rather than primary species. Criticism of harvesting policy was not limited to tropical areas. Canada continued to defend clear-cutting where appropriate as a fundamental management technique and firmly rejected charges of overcutting. From 1982 to 1991 the country's standing timber in commercial forests increased by 554 million cu m (1 cu m = 35.3 cu ft), but in British Columbia's vulnerable coastal forests, cutting rates were adjusted. The U.S. also revised its felling policy. The West Coast harvest was expected to fall 30% by 1995, with a drop of 20% in Alaska.

      Concern deepened about timber production in the former Soviet Union, where 57% of the world's softwood inventory was concentrated. Commercial logging there fell by 30% from 400 million cu m in 1990. The emerging states of Russia and Latvia, however, made major strides. Russia annually felled some 280 million cu m of timber, compared with an estimated annual growth of 600 million cu m. Latvia led the way in establishing (with Lithuania and Estonia) the Baltic Wood Exporters Association.

      Demand for wood fibre was increasingly met by timber from plantation forests, which accounted for some 4% of world forest cover and 10% of world fibre resource.

      A demand for wood-based board products continued to grow in 1993, although the product mix shifted. Oriented strand board continued to take a market share from plywood, necessitating a step-up in North American production. Canadian producers welcomed the mid-December ruling by a joint U.S.-Canadian trade panel that punitive tariffs on billions of dollars of Canadian softwood lumber by the U.S. Commerce Department were not appropriate. A ruling by the Commerce Department was required in early January.

      (JEAN CLARK CAMERON KLOOS)

      This updates the article wood.

* * *