effects for the U.S. economy. Coming after interest rates already had hit very high levels, the full percentage point increase in the federal discount rate to a record 9̂ 2% could push the whole rate structure up another big notch. An ensuing credit squeeze could act as a brake on general eco­nomic growth.

Some economists now wonder if the U.S. economy will be able to avoid a recession—although it probably would be a shallow one—in the first half of 1979. Business executives generally don't share this concern. Top corporate financial officers don't anticipate a recession in 1979, putting real economic growth next year at 3.4%, a Conference Board survey finds. For the current quarter, confi­dence is still rising, according to an­other survey by the National Associ­ation of Purchasing Management.

Chemical executives in recent weeks have voiced similar enthusiasm about the fourth quarter. And the few official comments to date about 1979 also have been upbeat. Despite pri-

Merger activity picks up Acquisition activity was heavier than usual last week in the U.S. chemical industry. About the only thing that was missing was an unfriendly raid.

This activity included, among others, the purchase by U.S. Steel of Uniroyal's acrylonitrile-butadiene-styrene (ABS) business; preliminary discussions on takeover of an insur­ance holding company by National Distillers & Chemical; the acquisition of CPL Corp. by Whittaker Corp.; and complications in the investment in U.S. Filter and W. R. Grace by West Germany's Friedrich Flick In-dustrieverwaltung KGA (the Flick Group).

All this may represent the begin­ning of another pickup in chemical merger and acquisition activity, which has been slowing down this year. W. T. Grimm & Co., Chicago-based merger specialist, says that in the first nine months of this year, net announcements in the chemical in­dustry have dropped 15% from the same period in 1977. This decline in activity may halt, however, with the slumping stock market. As stock prices decline, companies become cheaper to acquire, and thus may be more attractive buys.

Of the most recent announcements, the biggest involving chemicals is U.S. Steel's purchase of Uniroyal's ABS business. The purchase, terms of which were not disclosed, includes Uniroyal's ABS resin and latex op­erations in Baton Rouge, La., and its latex compounding plant in Dalton,

vate misgivings by other corporate sources, optimism is beginning to grow for chemical fortunes. Chemical stocks' recent above-average perfor­mance may reflect a turnaround in investors' opinion.

Up to now, chemical stocks have fared as poorly relative to other companies' as have chemical earnings in the business expansion since spring 1975. However, a basic pickup in plant-capacity-use levels may have started in chemicals this year (C&EN, Oct. 9, page 8). Continued improve­ment would enable chemical com­panies to do much better over the next few years.

Whether an economic slowdown may intervene for the U.S. in the next year is the current question. Up to last week, the stock market, tradi­tionally a good advance warning on the business cycle, seemed to say yes. Last week's action by the U.S. gov­ernment to use credit-tightening on behalf of the dollar may only help the stock market's eccentric wisdom come true. G

again I Ga. The deal does not include Uni­

royal's ABS sheet business. Uniroyal is the third largest ABS

producer, behind Borg Warner and Monsanto. Uniroyal's Baton Rouge plant, its only ABS production facil­ity, has an annual capacity of 200 million lb of resin and more than 50 million lb of latex.

The acquisition will help U.S. Steel build its chetnical operations as a hedge against the cyclical nature of steel making. Much of U.S. Steel's chemical investment has been in larger-volume, but currently price-depressed, petrochemicals. ABS, on the other hand, seems to have pretty much recovered from a trough in sales

and production that began in 1974. Production this year is expected to be about 1.1 billion lb. This would place output growth since 1975 at an aver­age of about 21% per year. U.S. Steel had chemical sales last year of $699.9 million. Uniroyal's ABS sales were about $72 million in 1977.

In another merger, National Dis­tillers & Chemical says that it is hav­ing discussions on a possible $90 million merger with Indiana Group, an insurance holding company. Na­tional Distillers has suggested that a merger might involve Indiana Group shares' conversion to National Dis­tillers shares. National has tentatively proposed that the exchange be made by valuing Indiana Group shares on the basis of about 1.5 times the book value of Indiana Group at a date to be determined, and that National shares be valued at market value on the same date.

Meanwhile, Whittaker Corp. of Los Angeles has signed a definitive agreement with CPL Corp. of East Providence, R.I., whereby CPL will be merged into a Whittaker subsidiary. Under the agreement, each share of CPL would be converted to a right to receive $23.25. Consummation of the deal is expected in early January.

CPL manufactures industrial coatings, plastisols, sealants, waste and water treatment chemicals, and electrochemically treated metals. Its 1977 sales were $20.5 million.

Whittaker is a widely diversified company with operations in metals, technology, marine, life sciences, and chemical fields. Whittaker had sales of $720 million for its fiscal year ended Oct. 31,1977. Chemical group sales were $53.2 million.

In another deal, a wrinkle has popped up in the Flick Group's ef­forts to invest in both U.S. Filter and W. R. Grace. Flick has transferred its 4.35 million shares of U.S. Filter

U.S. Steel's chemical sales up, but earnings still sag $ Millions $ Millions

1973 74 75 76 77 1973 74 75 76 77

Nov. 6, 1978 C&EN 7

Earnings Sales

preference stock to William L. Cary, former chairman of the Securities & Exchange Commission, as trustee pursuant to a trust agreement. Ac­cording to U.S. Filter, the trustee will hold, manage, and vote the preference shares, which represent 34.5% of the total voting stock of U.S. Filter. The trustee will sell the preference shares within two years, unless, prior to the sale, Filtrol, a subsidary of U.S. Filter, disposes of its petroleum cracking

and hydrocarbon purification business. In that event, the trust will terminate and the shares will be transferred back to Flick.

The Flick Group has advised U.S. Filter that it has taken this action in the belief that significant competition exists in this product line between Filtrol and a subsidiary of Grace. Flick currently owns 12% of Grace's common shares and proposes to ac­quire an additional 19%. G

sought "compensatory and exemplary damages" for injuries their dairy herd allegedly suffered from eating cattle feed contaminated with polybromi-nated biphenyls (PBB). It was the first such suit to be tried.

But Michigan Circuit Court Judge William R. Peterson rejected the Tacomas' claims. "The court's con­clusions of law are made easy by the facts," the judge says in his opinion. "The health of their animals was not impaired, nor was their performance in milk production affected by PBB."

Not at issue was whether cattle feed made by Farm Bureau had been accidentally contaminated with PBB made by Michigan Chemical. It had been, in 1973. Nor was there any question that large doses of the flame retardant are acutely toxic to cattle. That had been dramatically demon­strated in the aftermath of the origi­nal contamination episode. Nor was it disputed that the Tacomas had bought feed that contained trace amounts of PBB as the result of "cross-contamination" of feedmixing equipment. Nor that Roy Tacoma had shot 115 of his cattle in July of 1976.

However, Judge Peterson says, most of those animals were never tested for PBB. Of those tested, the majority showed no PBB residues. "Plaintiffs have not shown any single incident of death that could be at­tributed to PBB." Nor were their claims of lost milk production and increased veterinary expenses borne out by the facts as evidenced by the plaintiffs' own records.

The real tragedy in the case, ac­cording to Judge Peterson, "lies in the needless destruction of animals ex­posed to low levels of PBB and even of animals who never received any PBB." Despite plaintiffs' represen­tations to the contrary, the judge adds, the preponderance of evidence indicated that low levels—but much higher than those to which any of the Tacomas' animals were exposed— were "relatively nontoxic" to cattle.

In Chicago, Velsicol vice chairman W. Howard Beasley expressed plea­sure at the decision, particularly the finding that low levels of PBB were not damaging. Velsicol has tried to settle valid claims and will continue to do so, Beasley adds.

The decision was a "stunning sur­prise" to the plaintiffs' attorneys. They contend that the court adopted an unusually severe standard of proof and ignored important evidence. They are reviewing the case with the Tacomas—and with other families they represent in similar cases—and they expect that the decision will be appealed. G

Costle to head new Regi President Carter has appointed En­vironmental Protection Agency Ad­ministrator Douglas M. Costle to di­rect the recently established Regu­latory Council, which is charged with monitoring the economic effects of government regulation.

The Administration hopes that the council, as part of its anti-inflation drive, will help to hold down the costs that federal regulations impose on business and, ultimately, on the con­sumer (C&EN, Oct. 30, page 6). The council will be composed of repre­sentatives of all departments and agencies that have major regulatory responsibilities. Independent regu­latory agencies such as the Consumer Product Safety Commission and the Nuclear Regulatory Commission will be invited to participate in the Reg­ulatory Council's activities, but they cannot be forced to do so.

Costle explains that the council's first priority will be to develop a uni­fied calendar of major regulations. All agencies will submit their regulatory agendas to the council, which will then collate, index, and categorize them and publish the results in the Federal Register. The calendar will state the goals and benefits, legal re­quirements, and expected timetables of the regulations, along with avail­able estimates of economic impact. Carter has directed that the first cal­endar be published no later than Feb. 1,1979.

A number of benefits will result from the work done in developing the calendar, according to Costle. They include identifying areas of potential duplication, overlap, or inconsistency; coordinating efforts to eliminate such problems; and pinpointing opportu­nities for joint development of regu­lations. Specifically, Costle points to the need for a consistent national policy for regulating carcinogens. The council also will provide a mechanism for regulatory agencies to share in­formation on health, environmental, and economic impacts of regulations and thus reduce reporting burdens on industries or state and local govern­ments.

8 C&EN Nov. 6, 1978

Council

Costle: first priority is calendar

"None of this means we are going to use a meat axe on the body of federal regulations," Costle warns. "We cannot repeal laws that are already on the books." And he sees no need to do so. Although admitting that regula­tions impose costs, he believes that they are not necessarily inflationary. He points to EPA's own regulations requiring power plants to stop emitting sulfur dioxide from their smokestacks as an example of non-inflationary regulations. "If those near the plants save more through reduced medical care charges, less crop loss, or lost wages than they pay in higher electric bills to amortize the investment in smokestack scrubbers, clearly the regulations are not infla­tionary," Costle says. D

Judge throws out PBB damage suit Roy and Marilyn Tacoma have lost their case. The Tacomas, dairy farmers from Falmouth, Mich., had sued Michigan Chemical Co. (now part of Velsicol) and Farm Bureau Services (a Michigan agricultural cooperative) for $1 million. They had