.START 

The crowning moment in the career of Joseph F. O'Kicki came as 300 local and state dignitaries packed into his elegant, marble-columned courtroom here last year for his swearing in as President Judge of Cambria County. 

Baskets of roses and potted palms adorned his bench.
The local American Legion color guard led the way.
As the judge marched down the center aisle in his flowing black robe, he was heralded by a trumpet fanfare. 

To many, it was a ceremony more befitting a king than a rural judge seated in the isolated foothills of the southern Allegheny Mountains.
But then Judge O'Kicki often behaved like a man who would be king -- and, some say, an arrogant and abusive one.
While his case may be extreme, it reflects the vulnerability of many small communities to domineering judges. 

Last March, nine months after the judge's swearing-in, the state attorney general's office indicted him on a sweeping array of charges alleging more than 10 years of "official oppression" in Cambria County, a depressed steel and mining community in western Pennsylvania.
The allegations, ranging from theft and bribery to coercion and lewdness, paint a disquieting picture. 

According to testimony in a public, 80-page grand-jury report handed up to the state attorney general, Judge O'Kicki extorted cash from lawyers, muscled favorable loans from banks and bullied local businesses for more than a decade. 

Prosecutors, in an indictment based on the grand jury's report, maintain that at various times since 1975, he owned a secret and illegal interest in a beer distributorship; plotted hidden ownership interests in real estate that presented an alleged conflict of interest; set up a dummy corporation to buy a car and obtain insurance for his former girlfriend (now his second wife); and maintained 54 accounts in six banks in Cambria County. 

In testimony recorded in the grand jury report, court employees said the judge, now 59 years old, harassed his secretaries, made imperial demands on his staff and hounded anyone who crossed him.
Bailiffs claimed they were required to chauffeur him to and from work, mow his lawn, chop his wood, fix his car and even drop by his house to feed his two grown mutts, Dixie and Husky.
One former bailiff charged that the judge double-crossed him by reneging on a promise of a better paying job after pocketing a $500 bribe. 

Some of the allegations are simply bizarre.
Two former secretaries told the grand jury they were summoned to the judge's chambers on separate occasions to take dictation, only to find the judge in his bikini underwear.
One secretary testified that the judge once called her to his office while wearing nothing at all. 

The judge, suspended from his bench pending his trial, which began this week, vehemently denies all the allegations against him, calling them "ludicrous" and "imaginative, political demagoguery." He blames the indictment on local political feuding, unhappiness with his aggressive efforts to clear the courthouse's docket and a vendetta by state investigators and prosecutors angered by some of his rulings against them. 

"I don't know whose toes I've stepped on," says the judge. "I'll find out, eventually, who pushed the state police buttons into action." 

Even if only some of the allegations stand up, however, they provide ample testimony to the awesome power of judges in rural communities.
That power can sometimes be abused, particularly since jurists in smaller jurisdictions operate without many of the restraints that serve as corrective measures in urban areas. 

Lawyers and their clients who frequently bring business to a country courthouse can expect to appear before the same judge year after year.
Fear of alienating that judge is pervasive, says Maurice Geiger, founder and director of the Rural Justice Center in Montpelier, Vt., a public interest group that researches rural justice issues. 

As a result, says Mr. Geiger, lawyers think twice before appealing a judge's ruling, are reluctant to mount, or even support, challenges against him for re-election and are usually loath to file complaints that might impugn a judge's integrity. 

Judge O'Kicki, a stern and forbidding-looking man, has been a fixture in the local legal community for more than two decades.
The son of an immigrant stonemason of Slovenian descent, he was raised in a small borough outside Ebensburg, the Cambria County seat, and put himself through the University of Pittsburgh Law School.
He graduated near the top of his class, serving on the school law review with Richard Thornburgh, who went on to become governor of Pennsylvania and, now, U.S. Attorney General.
It was also in law school that Mr. O'Kicki and his first wife had the first of seven daughters.
He divorced his first wife three years ago and married the daughter of his court clerk. 

Last year, Pennsylvania Supreme Court Justice John P. Flaherty called Mr. O'Kicki one of the finest judges "not only in Pennsylvania but in the United States." Clearly, the judge has had his share of accomplishments.
After practicing law locally, he was elected to his first 10-year term as judge in 1971; in 1981, he was effectively re-elected.
Six years ago, Judge O'Kicki was voted president of the Pennsylvania Conference of State Trial Judges by the state's 400 judges.
He has been considered several times for appointments to federal district and appellate court vacancies in Pennsylvania.
And when he ran unsuccessfully for a state appellate court seat in 1983, the Pennsylvania Bar Association rated him "one of the best available," after interviewing local lawyers. 

"He probably was the smartest guy who ever sat on our bench," says a former president of Cambria County's 150-member bar association, who, like most lawyers in Cambria County, refuses to talk about the judge publicly. "He's sharp as a tack.
He could grasp an issue with the blink of an eye." 

For more than a decade, virtually no one complained about Judge O'Kicki. "What about those institutions that are supposed to be the bedrock of society, the banks and the bar association. . . ?" wrote a columnist for the Tribune-Democrat, a newspaper in nearby Johnstown, shortly after the scandal became public. "If only a banker or a lawyer had spoken out years ago, the judicial process wouldn't be under the taint it is today." 

Officials with the Pennsylvania Judicial Inquiry and Review Board, the arm of the state that investigates judicial misconduct, counter that they had no inkling of anything amiss in Ebensburg. "Nobody told us; nobody called us," says an official close to the case who asked not to be named. "Nobody had the guts to complain." 

Certainly not the lawyers.
Johnstown attorney Richard J. Green Jr. shelled out $500 in loans to the judge over five years, he said in testimony to the grand jury. "The judge never made a pretense of repaying the money," said Mr. Green.
Eventually, Mr. Green testified, he began ducking out of his office rather than face the judge when he visited. 

When Mr. Green won a $240,000 verdict in a land condemnation case against the state in June 1983, he says Judge O'Kicki unexpectedly awarded him an additional $100,000.
Mr. Green thought little of it, he told the grand jury, until the judge walked up to him after the courtroom had cleared and suggested a kickback. 

"Don't you think I ought to get a commission . . . or part of your fee in this case?" Mr. Green said the judge asked him. 

Appalled, Mr. Green never paid the money, he testified.
But he didn't complain to the state's Judicial Inquiry and Review Board, either, saying later that he feared retribution.
Mr. O'Kicki said he will respond to Mr. Green's allegation at his trial. 

Like most of Cambria County's lawyers and residents who had dealings with the judge, Mr. Green declined to be interviewed for this article.
And no one with a complaint about the judge would allow his name to be printed. 

"I don't have anything much to say, and I think that's what you're going to find from everyone else you talk to up here," says local attorney Edward F. Peduzzi. 

Says another lawyer: "The practice of law is a matter of biting one's lip when you live in a small community.
One had best not dance on top of a coffin until the lid is sealed tightly shut." 

The judge was considered imperious, abrasive and ambitious, those who practiced before him say.
He sipped tea sweetened with honey from his high-backed leather chair at his bench, while scribbling notes ordering spectators to stop whispering or to take off their hats in his courtroom.
Four years ago, he jailed all nine members of the Cambria County School Board for several hours after they defied his order to extend the school year by several weeks to make up for time lost during a teachers' strike. 

Visitors in his chambers say he could cite precisely the years, months, weeks and days remaining until mandatory retirement would force aside the presiding president judge, giving Judge O'Kicki the seniority required to take over as the county's top court administrator.
The judge, they say, was fiercely proud of his abilities and accomplishments. 

"My name is judge," Judge O'Kicki told a car salesman in Ebensburg when he bought a new red Pontiac Sunbird in October 1984, according to the grand-jury report.
The dealership dutifully recorded the sale under the name "Judge O'Kicki." 

Yet, despite the judge's imperial bearing, no one ever had reason to suspect possible wrongdoing, says John Bognato, president of Cambria County's 150-member bar association. 

"The arrogance of a judge, his demeanor, the way he handles people are not a basis for filing a complaint," says Mr. Bognato. "Until this came up and hit the press, there was never any indication that he was doing anything wrong." 

State investigators dispute that view now, particularly in light of the judge's various business dealings in Cambria County.
The judge came under scrutiny in late 1987, after the state attorney general's office launched an unrelated investigation into corruption in Cambria County. 

The inquiry soon focused on the judge.
Even his routine business transactions caused trouble, according to the grand jury report.
When the judge bought his new Sunbird from James E. Black Pontiac-Cadillac in Ebensburg five years ago, the dealership had "certain apprehensions" about the judge's reputation, according to the grand-jury report.
The dealership took the extra step of having all the paper work for the transaction pre-approved by Ebensburg's local lender, Laurel Bank. 

Then, as an additional precaution, the car dealership took the judge's photograph as he stood next to his new car with sales papers in hand -- proof that he had received the loan documents. 

But when the judge received his payment book, he disavowed the deal. "There was no loan, there is no loan, there never shall be a loan," the judge wrote the bank on his judicial stationery, according to the report. 

Later, the judge went a step farther.
After Laurel Bank tried to repossess the car, a vice president asked him to intervene in an unrelated legal dispute involving a trust account.
The judge wrote again. 

"I find myself in an adversary relationship with Laurel Bank, and I am not inclined to extend myself as far as any favors are concerned," the judge wrote back in a letter attached to the grand jury's report. "Perhaps if my personal matters can be resolved with Laurel bank in the near future, I may be inclined to reconsider your request. . . ." The judge now says it was "unfortunate" that he chose to write the letter but says "there was certainly no intent to extort there." 

The bank acquiesced.
It refinanced the judge's loan, lowered its interest rate and accepted a trade-in that hadn't originally been part of the deal -- a beat up 1981 Chevy Citation the dealer had to repair before it could be resold. 

The incident wasn't the only time the judge got special treatment from his local bank.
Two years later, he wrote to complain that the interest he was paying on an unsecured $10,000 loan was "absolutely onerous." Paul L. Kane, Laurel's president at the time, quickly responded.
The bank, he wrote back, was "immediately" lowering the rate by 3.5%, "as a concession to you." 

The judge says he can't discuss in detail how he will defend himself at his trial, although he contends that if he were as corrupt as state prosecutors believe, he would be far wealthier than he is.
His seven-bedroom cedar and brick house outside of Johnstown is up for sale to pay for his lawyers. 

The judge says he is confident he will return to his old bench.
Already, he notes, the 76 charges originally filed against him have been trimmed to 27.
Most of the allegations no longer pending were ethics charges withdrawn by state prosecutors as part of a pre-trial agreement.
The heart of the case -- "official oppression" -- remains intact. 

"If I lose, I lose my position, my career, my pension, my home and my investments," says the judge. "My God and I know I am correct and innocent." 

.START 

For years, a strict regimen governed the staff meetings at Nissan Motor Co. 's technical center in Tokyo's western suburbs. 

Employees wore identification badges listing not only their names but also their dates of hire.
No one could voice an opinion until everybody with more seniority had spoken first, so younger employees -- often the most enthusiastic and innovative -- seldom spoke up at all. 

But in 1986, the badges and the "don't speak out of turn" rule were abolished -- early steps in a cultural revolution still rolling on with all the subtlety of a freight train.
In recent years, Nissan has instituted flex-time work schedules and allowed employees to dress casually, even in blue jeans.
A rule forbidding staffers to own competitors' cars has been lifted, and now many designers drive foreign cars to get useful ideas.
Nissan's decades-old corporate song filled with references to Mount Fuji has been scrapped in favor of a snappy tune sung by a popular Japanese vocalist. 

And in a Japanese corporate first, Nissan recently opened the first coed company dormitory for single employees at the suburban Tokyo technical center. "We had lots of internal debate about this one," concedes Tadahiko Fukuyama, a senior public-relations official. "But in the end, top management decided to follow the voice of the younger generation." 

This corporate glasnost is a big reason Nissan, after years of making lackluster cars and lousy profits, has loosened up its rigid ways and now is riding a string of hits, ranging from the sleek Maxima sedan and Porsche-like 300ZX to the whimsically nostalgic Pao, a minicar sold only in Japan.
The company's turnaround is far from complete; many crucial tests are just beginning.
But its surprising progress so far holds important lessons for companies in trouble. 

The big one: A company's culture can't be radically changed unless top management first admits that things have gone badly awry and then publicly leads the charge.
Atsushi Muramatsu, Nissan's executive vice president for finance, helped set the tone in December 1986, when the company was heading toward the first operating loss by a Japanese auto maker since the nation's postwar recovery. "This is a time of self-criticism to discover what is wrong with us," he said.
Yutaka Kume, who took the helm as Nissan's president in June 1985, added simply, "I am deeply disappointed." 

No wonder.
Nissan, Japan's second-largest auto maker and the world's fourth-largest, was getting beat up not only by its bigger rival, Toyota Motor Corp., but also by Honda Motor Co., the most successful Japanese car company in the U.S. but a relative pipsqueak in Japan. 

Nissan's market share in Japan had been dropping year by year since the beginning of the decade.
Its U.S. sales sagged, partly because of price increases due to the rising yen.
Worst of all, Nissan was preoccupied with management infighting, cronyism and corporate rigidity. 

Consider the experience of Satoko Kitada, a 30-year-old designer of vehicle interiors who joined Nissan in 1982.
At that time, tasks were assigned strictly on the basis of seniority. "The oldest designer got to work on the dashboard," she recalls. "The next level down did doors.
If a new person got to work on part of the speedometer, that was a big deal." 

This system produced boring, boxy cars that consumers just weren't buying.
Desperately hoping to spark sales, Nissan transferred 5,000 middle managers and plant workers to dealerships.
Meanwhile, President Kume ordered everyone from top executives to rookie designers to go "town watching," to visit chic parts of Tokyo to try to gain insights into developing cars for trend-setters. 

Some town-watching excursions were downright comic.
One group of middle-aged manufacturing men from the company's Zama plant outside Tokyo was supposed to check out a trendy restaurant in the city.
But when they arrived at the door, all were afraid to go in, fearing that they would be out of place. 

Other trips were more productive.
Mr. Kume himself visited Honda's headquarters in Tokyo's upscale Aoyama district.
He liked the well-lighted lobby display of Honda's cars and trucks so much that he had Nissan's gloomy lobby exhibit refurbished.
Later, Nissan borrowed other Honda practices, including an engineering "idea contest" to promote inventiveness.
One engineer developed a "crab car" that moves sideways. 

Such sudden cultural shifts may come across as a bit forced, but they seem to be genuine -- so much so, in fact, that some older employees have resisted.
Nissan handled the die-hards in a typically Japanese fashion: They weren't fired but instead "were neglected," says Kouji Hori, the personnel manager at the Nissan Technical Center. 

Despite the pain of adjusting, the cultural revolution has begun to yield exciting cars.
A year ago, the company completely revamped its near-luxury sedan, the $17,699 Maxima, which competes against a broad range of upscale sedans; it replaced its boxy, pug-nosed body with sleek, aerodynamic lines.
Since then, Nissan also has launched new versions of the $13,249 240SX sporty coupe and 300ZX sports car.
The restyled 300ZX costs as much as $33,000 and is squared off against the Porche 944, which begins at $41,900.
Besides new styling, the new Nissans have more powerful engines and more sophisticated suspension systems.
All three new models are outselling their predecessors by wide margins. 

In its home market, Nissan has grabbed attention with limited-production minicars featuring styling odd enough to be cute.
One is the Pao, a tiny coupe with a peelback canvas top and tilted headlights that give it a droopy-eyed look.
Nissan initially planned to sell just 10,000 Paos, but sales have passed 50,000, and there's a one-year waiting list for the car.
Then, there's the S-Cargo, an offbeat delivery van with a snail-like body that inspired its name.
Nissan helped develop a Tokyo restaurant with both vehicles as its design theme.
The chairs are S-Cargo seats, and a gift shop sells such items as alarm clocks styled like the Pao's oversized speedometer. 

All these vehicles have sharply improved Nissan's morale and image -- but haven't done much for its market share.
Nissan had 29% of the Japanese car market in 1980 before beginning a depressing eight-year slide that continued through last year.
Strong sales so far this year are certain to turn the tide, but even the 25% market share that Nissan expects in 1989 will leave it far below its position at the beginning of the decade. 

Nissan concedes that it won't recoup all its market-share losses in Japan until at least 1995, and even that timetable might prove optimistic. "Everyone else is going to catch up" with Nissan's innovative designs, says A. Rama Krishna, auto analyst at First Boston (Japan) Ltd. Nissan's pace of new-model hits will slow, he adds, just as arch-rival Toyota unleashes its own batch of new cars. 

Likewise, in the U.S., Nissan has grabbed 5.2% of the car market so far this year, up from 4.5% a year ago.
But even that brings Nissan only to the share it had in 1987, and leaves the company behind its high of 5.5% in 1980 and 1982. 

Why?
So far, Nissan's new-model successes are mostly specialized vehicles with limited sales potential.
In compact and subcompact cars, the bread-and-butter sales generators for Japanese auto makers, Nissan still trails Toyota and Honda. 

Nissan hopes that that will start to change this fall, with its new version of the Stanza compact sedan.
The Stanza has been a nonentity compared with Honda's hugely successful Accord and Toyota's Camry.
But this year, Honda has revamped the Accord and made it a midsized car.
Nissan instead has kept its new Stanza a bit smaller than that and cut the base price 6%; at $11,450, Stanza prices start $749 below the predecessor model yet have a more-powerful engine.
Accord prices start at $12,345. 

Nissan's risk is that its low-base-price strategy might get lost amid the highly publicized rebates being offered by Detroit's Big Three.
But "on a new car, a rebate doesn't work well" because it cheapens the vehicle's image, contends Thomas D. Mignanelli, executive vice president of Nissan's U.S. sales arm. 

Even if the new Stanza succeeds, Nissan will remain behind in the subcompact segment, where its Sentra doesn't measure up to the Honda Civic and Toyota Corolla.
Nissan will introduce a completely revamped Sentra next fall. 

At the opposite end of the market, Nissan launches its luxury Infiniti division on Nov. 8 -- three years after Honda pioneered Japanese luxury cars and two months after Toyota's Lexus went on sale.
Nissan started advertising Infiniti fully eight months before the cars hit American showrooms.
The ads featured fences, rocks and pussy-willow buds -- almost anything but the cars themselves.
The ads have generated some laughs but also plenty of attention because they are so unlike any other U.S. auto advertising. 

On the other hand, Nissan's sales goals for Infiniti are modest compared with Toyota's targets for Lexus.
Nissan will build only about 3,500 of the $38,000 Infiniti Q45 sedans each month, sending about 2,000 of them to the U.S. and keeping the rest for sale in Japan.
Toyota wants to sell about 49,000 Lexus LS400 sedans next year in the U.S. alone. 

"When I saw the Lexus sales projections, I got worried," confesses Takashi Oka, who led the Infiniti development team.
But on reflection, Mr. Oka says, he concluded that Nissan is being prudent in following its slow-startup strategy instead of simply copying Lexus. "Infiniti is Nissan's big business move for the 21st century, and we're in no hurry to generate large profits right away," Mr. Oka says.
Despite plans to add two new Infiniti models next year, bringing the total to four, Infiniti won't show profits for at least five years, he adds. 

These days Nissan can afford that strategy, even though profits aren't exactly robust.
Nissan had record net income of 114.63 billion yen ($868 million) in the fiscal year ended last March 31, a remarkable recovery from the 20.39 billion yen of two years earlier, when the company lost money on operations.
Nissan has increased earnings more than market share by cutting costs and by taking advantage of a general surge in Japanese car sales. 

But Nissan expects to earn only 120 billion yen in the current fiscal year, a modest increase of 4.7%.
The big reason: For all its cost-cutting, Nissan remains less efficient than Toyota.
In its last fiscal year, Nissan's profit represented just 2.3% of sales, compared with 4.3% at Toyota.
To help close the gap, Nissan recently established a top-level cost-cutting committee. 

Nissan is the world's only auto maker currently building vehicles in all three of the world's key economic arenas -- the U.S., Japan and Europe.
That gives it an enviable strategic advantage, at least until its rivals catch up, but also plenty of managerial headaches. 

For example, Nissan's U.S. operations include 10 separate subsidiaries -- for manufacturing, sales, design, research, etc. -- that report separately back to Japan.
And in July, Nissan's Tennessee manufacturing plant beat back a United Auto Workers organizing effort with aggressive tactics that have left some workers bitter. 

"We are in a transitional phase from being a Japanese company to becoming an international company based in Japan," says Mr. Muramatsu, the executive vice president.
He promises that Nissan will soon establish a holding company overseeing all U.S. operations, just as it's doing in Europe. 

Perhaps the biggest challenge, however, will be to prevent a return to its former corporate rigidity as its recovery continues.
Already, personnel officials are talking about the need for a "Phase Two" cultural-reform effort of some sort. "We are still only half way through the turnaround of this company, and there are many more things to do," President Kume says.
He adds, however, that "the momentum we have generated is unstoppable." 

.START 

It has more drug users than Boston has people.
Thirty-four thousand of its children live in foster homes, while 50,000 residents have no homes at all.
Its tax base is shrinking, a $1 billion budget deficit looms, and the city faces contract negotiations with all major municipal unions next year. 

This is New York City.
When the dust and dirt settle in an extra-nasty mayoral race, the man most likely to gain custody of all this is a career politician named David Dinkins.
Running the nation's largest and most ornery city may be no treat, but at least Mr. Dinkins knows what to expect from it.
As the campaign hits the home stretch, however, voters still have very little idea what they can expect from him.
After 25 years in city politics, David Dinkins remains an enigma. 

The soft-spoken, silver-haired Manhattan borough president -- the first black man to win the Democratic nomination for mayor here -- doesn't have a single prominent political enemy.
While he is widely described as a man with deep convictions, he has few major political programs that he can call his own.
Asked about his greatest achievement in public life, he first speaks about the quality of his staff. 

Now, as election day nears, even some supporters wonder what he will do if he wins the mayoralty on Nov. 7.
They wonder whether he can be firm with his longtime allies, including union leaders and political cronies who may seek a place at the trough.
They wonder whether he has the economic know-how to steer the city through a possible fiscal crisis, and they wonder who will be advising him.
Will he, if he wins, be in the thrall of the most liberal of his allies, who advocate such policies as rent control for commercial buildings, or will he tilt toward the real-estate interests that have funneled money into his campaign? 

After his decisive primary victory over Mayor Edward I. Koch in September, Mr. Dinkins coasted, until recently, on a quite-comfortable lead over his Republican opponent, Rudolph Giuliani, the former crime buster who has proved a something of a bust as a candidate. 

But Mr. Dinkins has stumbled in the past two weeks over his campaign's payments to a black activist who is a convicted kidnapper, and over his handling of a stock sale to his son.
Polls also have recorded some slippage in Mr. Dinkins's support among Jewish voters, and citywide projections now put his lead at between four and 20 percentage points. 

In an interview with reporters and editors of The Wall Street Journal, Mr. Dinkins appears quite confident of victory and of his ability to handle the mayoralty. "A lot of people think I will give away the store, but I can assure you I will not," he says. "I am aware we have real budgetary problems." 

The city is full of aging bridges, water mains and roadways that are in need of billions of dollars worth of repair.
Renewed efforts to fight drugs and crime will be costly.
But city officials say tax revenues are lagging.
And after a decade of explosive job growth on Wall Street, a period of contraction is under way. 

Mr. Koch already has announced he will drop 3,200 jobs from the city payroll, but that won't be enough.
New York State Comptroller Edward Regan predicts a $1.3 billion budget gap for the city's next fiscal year, a gap that could grow if there is a recession.
If elected, Mr. Dinkins will probably have no choice but to raise taxes on overburdened businesses or cut spending in already under-serviced neighborhoods. 

"He is going to face a mess," says City Council President Andrew Stein. "His supporters are not venal, but their solution to everything will be to spend more money, and he won't have any money." 

By and large, Mr. Dinkins has finessed the touchy question of whose ox he would gore.
Instead of focusing on the financial future, Mr. Dinkins has sold himself as a unifier for a city recently touched by racial violence and as a soothing antidote to 12 years of commotion generated by Mayor Koch. "The thing about the Dinkins candidacy is that it offers hope to a broad range of people," says Meyer Frucher, a real-estate executive and former aide to Gov. Mario Cuomo. "It is a feel-good candidacy." 

No doubt, Mr. Dinkins has been a calming influence.
He is an avuncular figure who remembers the birthdays of colleagues' children, opens doors for women, and almost never has a bad word to say about anybody.
More important, he emerged as a peacemaker last summer after the Central Park rape of a white jogger -- in which a group of Harlem teens was charged -- and the racial murder of a black teen-ager in the white Brooklyn neighborhood of Bensonhurst.
Rather than scaring off white voters, as many predicted he would, Mr. Dinkins attracted many whites precisely because of his reputation for having a cool head. (Keeping cool is a Dinkins priority: On humid days this summer, he was known to change his double-breasted suits as many as four times a day.) 

But even in his front-runner campaign, he has shown signs of the indecisiveness and confusion that some say has plagued his tenure as Manhattan borough president -- and might hinder him as mayor.
Over the last few weeks, he has frittered away roughly half of what was once a 33-point lead in the polls over Mr. Giuliani.
A story about how he mishandled the sale to his son of his stock in a media company controlled by his political patron Percy Sutton was allowed to fester a full week before Mr. Dinkins faced the media.
He has canceled numerous campaign appointments and was largely inaccessible to the media until the stock story broke. 

His campaign was caught flat-footed amid allegations it paid almost $10,000 for what it said was a "get-out-the-vote" effort by black activist Sonny Carson, a convicted kidnapper who later said publicly that he is "anti-white." Critics have said the payment looked like an attempt by the Dinkins camp to get Mr. Carson to stop leading confrontational demonstrations protesting the Bensonhurst murder -- protests the campaign may have feared could cause some white voters to turn from a black candidate. 

Mr. Dinkins also has failed to allay Jewish voters' fears about his association with the Rev. Jesse Jackson, despite the fact that few local non-Jewish politicians have been as vocal for Jewish causes in the past 20 years as Mr. Dinkins has. 

These campaign problems have echoed difficulties Mr. Dinkins has run into before.
A former U.S. Marine, Mr. Dinkins got off to a quick start in politics, joining a local Democratic political club in the 1950s, linking up with black urban leaders such as Charles Rangel, Basil Paterson and Mr. Sutton, and getting himself elected to the state assembly in 1965.
But his chance to become deputy mayor under Mayor Abraham Beame, a plan boosted by Mr. Sutton, was squandered because of Mr. Dinkins's failure -- still largely unexplained -- to file income tax returns for four years running. "I always thought of this as a thing that could always be done tomorrow," he said at the time. 

Later, Mr. Dinkins became more deeply indebted to Mr. Sutton and other city pols, including then-City Council President Paul O'Dwyer, when they helped him get appointed city clerk, a largely ceremonial post responsible for the city's marriage bureau, among other things. (Mr.
O'Dwyer is now one of the lawyers for Mr. Sutton's media company.) 

The debt rose further in 1977 when Mr. Sutton resigned his position as Manhattan borough president to run for mayor.
Mr. Sutton recalls: "When I left, I sat down with Charlie {Rangel}, Basil {Paterson} and David, and David said, 'Who will run for borough president? ' And I said, 'You will. '" 

David Garth, Mayor Koch's longtime media adviser, says of Mr. Dinkins, "He really is the personification of the patronage system.
But the guy is so personally decent, people tend to forget that." 

Mr. Dinkins lost twice by wide margins before finally getting elected borough president in 1985.
But by most accounts, he made little of the post and was best known among city politicians for his problems making up his mind on matters before the city's Board of Estimate, the body that votes on crucial budget and land-use matters.
Colleagues today recall with some humor how meetings would crawl into the early morning hours as Mr. Dinkins would march his staff out of board meetings and into his private office to discuss, en masse, certain controversial proposals. "He taught me how to drink herbal tea instead of coffee at 3 a.m., I'll give him that," says Deputy Mayor Robert Esnard. 

Often, Mr. Dinkins's procrastination prevented him from having a say in the way things turned out, critics claim.
On the campaign stump, he often points out that he was the only Board of Estimate member to vote against a controversial real-estate project at Manhattan's Columbus Circle.
But board members say he took so long to decide how to vote that by the time he decided, it was too late to try to draw other members to his position.
Says one city official: "Everybody else had brought in the wagons and made their deal.
He would have got a lot more done if he made up his mind faster." 

One Board member, Bronx Borough President Ferdinand Ferrer, was said to be so impatient with Mr. Dinkins's behavior at many meetings that he withheld his support for Mr. Dinkins's mayoral effort until late in the primary campaign. "I had some problem from time to time on the length of time he would take to make up his mind," Mr. Ferrer admits, but he maintains that he didn't delay his support of Mr. Dinkins and that he backs the Democratic candidate enthusiastically. 

Mr. Dinkins's campaign manager and former chief of staff, Bill Lynch, denies that the Manhattan borough president has taken too long to decide important issues. "We didn't rubber-stamp everything that came to us," Mr. Lynch says. 

On some occasions when Mr. Dinkins has discussed the issues during the campaign, he has run into a familiar kind of trouble.
Some supporters were stunned this summer when Mr. Dinkins suggested weakening the law forbidding public employees to go on strike.
He withdrew the remark.
When he later sided with striking hospital workers, some allies cringed a little more, concerned that Mr. Dinkins was setting the wrong tone for coming contract negotiations with city employees. 

Then, two days before receiving an endorsement from environmental groups, Mr. Dinkins promised he would issue a three-year moratorium on construction of garbage-incinerator plants.
That announcement was roundly criticized by Mayor Koch -- who has endorsed Mr. Dinkins -- because the city faces a garbage crisis and has already spent $5 million planning for an incinerator that would be scrapped under Mr. Dinkins's proposal. 

While his public statements have at times been confusing, Mr. Dinkins's position papers have more consistently reflected anti-development sentiment.
He favors a form of commercial rent control, which the financial community believes would make it more difficult to attract investment in the city.
In the midst of a labor shortage, he proposes linking city subsidies to businesses to their record of hiring New York City residents.
With an untrained local labor pool, many experts believe, that policy could drive businesses from the city. 

And he favors a more cooperative approach toward the neighboring states of New Jersey and Connecticut in the battle over companies thinking of moving employees out of New York City.
Many economic-development officials say the Koch administration's aggressive approach helped save 5,000 Chase Manhattan Bank jobs from moving across the Hudson. 

But Mr. Dinkins's economic planks don't seem to bother the business community, where he draws significant support.
Steven Spinola, president of the Real Estate Board of New York, an industry organization, says Mr. Dinkins's "economic development program is shortsighted, but when it comes down to it, he can be reasonable." 

Mr. Dinkins's inner circle of advisers appears to include both ideologues and pragmatists, leaving voters with little clue as to who will be more influential.
The key man seems to be the campaign manager, Mr. Lynch.
A disheveled, roly-poly son of a Long Island potato farmer, Mr. Lynch is a veteran union organizer who worked on the presidential campaigns of Sen. Edward Kennedy and Mr. Jackson.
But as the Dinkins campaign hit tough times this month, Andrew Cuomo, the politically seasoned son of the New York governor, is also said to have taken a more active role on strategy. 

Another close ally is Ruth Messinger, a Manhattan city councilwoman, some of whose programs, such as commercial rent control, have made their way into Mr. Dinkins's position papers.
If she remains influential with Mr. Dinkins, as some suggest she will, his mayoralty may take on a more anti-development flavor. 

But Lincoln Center President Nathan Leventhal, who would head a Dinkins transition team, is more mainstream, as is real-estate executive Anthony Gliedman, another insider.
Mr. Dinkins also has said he would receive economic advice from a board that would include American Express Co. chairman James D. Robinson III, investment banker Felix Rohatyn, leveraged-buy-out specialist Reginald Lewis and attorney Joseph Flom. 

Some business leaders and others also believe that Mr. Dinkins would place significant responsibility in the hands of a deputy mayor with a strong administrative background.
Names of possible deputies that have surfaced include former mayoral candidate Richard Ravitch, former schools chancellor Frank Macchiarola and Messrs.
Leventhal and Gliedman. 

Then there are Mr. Dinkins's old-time Harlem colleagues, such as U.S. Rep. Rangel, former Deputy Mayor Paterson and Mr. Sutton.
Having attained positions of real influence or wealth, these men constitute the Old Guard of New York City black politics; they are less confrontational than the younger, more activist black political community that has been based largely in Brooklyn. (Part of Mr. Dinkins's strength is his ability to win the support of both the Brooklyn and Harlem factions.) 

"We know there are potholes for the city out there," says Mr. Paterson, Mr. Dinkins's former law partner. "If any of us think we're going to sidetrack David's determination to be the best possible mayor because of his obligations to us, we are making a sad mistake." Adds Ms. Messinger, who is expected to win the borough president's job Mr. Dinkins is vacating, "You have to remember David is a pragmatist." 

But Mr. Dinkins's sense of pragmatism often comes across more as an insider's determination not to upset the political apple cart.
He is taken aback in an interview when asked whether, as mayor, he plans on reforming the political "fiefdoms" that perpetuate the monumental ineffectiveness of New York's school system. "I will sit down and talk some of the problems out, but take on the political system?
Uh-uh," he says with a shake of the head. 

Despite many doubts about his candidacy, white New Yorkers -- who gave Mr. Dinkins 30% of their votes in the primary -- aren't expected to desert in sufficient numbers to turn the election to Mr. Giuliani.
The former U.S. attorney, who prosecuted targets ranging from Mafia dons to Wall Street executives, has succeeded in raising questions about Mr. Dinkins's ethical standards, but so far has failed to generate excitement about his own candidacy.
As a Republican in an overwhelmingly Democratic city, Mr. Giuliani has an inherent handicap.
As a first-time candidate, he has been slow to learn the nuances of New York City politicking. 

Mr. Giuliani is finding that Mr. Dinkins, in his many years in public life, has built up considerable good will that so far has led many voters to overlook certain failings. "The bottom line is that he is a very genuine and decent guy," says Malcolm Hoenlein, a Jewish community leader. "In the end, I think David will be judged for being David." 

.START 

Georgia-Pacific Corp. 's unsolicited $3.19 billion bid for Great Northern Nekoosa Corp. was hailed by Wall Street despite a cool reception by the target company. 

William R. Laidig, Nekoosa's chairman, chief executive officer and president, characterized the $58-a-share bid as "uninvited" and said Nekoosa's board would consider the offer "in due course." 

T. Marshall Hahn Jr., Georgia-Pacific's chairman and chief executive, said in an interview that all terms of the offer are negotiable.
He added that he had spoken with Mr. Laidig, whom he referred to as a friend, by telephone Monday evening. "I'm hopeful that we'll have further discussions," Mr. Hahn said. 

On Wall Street, takeover stock traders bid Nekoosa's stock well above the Georgia-Pacific bid, assuming that Nekoosa's will either be sold to a rival bidder or to Georgia-Pacific at a higher price -- as much as $75 a share, according to some estimates. 

Yesterday, Nekoosa common closed in composite New York Stock Exchange trading at $62.875, up $20.125, on volume of almost 6.3 million shares.
Georgia-Pacific closed down $2.50, at $50.875 in Big Board trading. 

Takeover stock traders noted that with the junk-bond market in disarray, Georgia-Pacific's bid is an indication of where the takeover game is headed: namely, industrial companies can continue bidding for one another, but financial buyers such as leveraged buy-out firms will be at a disadvantage in obtaining financing. 

"The way the world is shaping up, the strategic buyer is going to be the rule and the financial buyer is going to be the exception," said one trader. 

For the paper industry specifically, most analysts said the deal will spur a wave of paper-company takeovers, possibly involving such companies as Union Camp Corp., Federal Paperboard Co. and Mead Corp.
The analysts argued that Georgia-Pacific's offer, the first hostile bid ever among major players in the paper industry, ends the unwritten taboo on hostile bids, and will push managements to look closely at the industry's several attractive takeover candidates. 

"Consolidation has been long overdue.
It was just the culture of the industry that kept it from happening.
The Georgia-Pacific offer has definitely changed the landscape," said Gary Palmero of Oppenheimer & Co. Added Mark Rogers of Prudential-Bache Securities Inc.: "It's much easier to be second." 

A Georgia-Pacific acquisition of Nekoosa would create the largest U.S. forest-products company.
Based on 1988 sales, Georgia-Pacific ranked third at $9.51 billion, behind Weyerhaeuser Co. at $10 billion and International Paper Co. at $9.53 billion.
Nekoosa ranked 11th with sales of $3.59 billion.
The combined company would have had 1988 sales of $13.1 billion. 

But such a combination also presents great risks.
At a time when most analysts and industry consultants say pulp and paper prices are heading for a dive, adding capacity and debt could squeeze Georgia-Pacific if the industry declines more than the company expects.
Moreover, any unexpected strengthening of the dollar would hurt Georgia-Pacific because two of Nekoosa's major product lines -- containerboard, which is used to make shipping boxes, and market pulp -- are exported in large quantities. 

"Nobody knows how deep the cycle is going to be," said Rod Young, vice president of Resource Information Systems Inc., a Bedford, Mass., economic-forecasting firm. "Depending on how far down you go, it may be difficult to pay off that debt." 

One person familiar with Georgia-Pacific said the acquisition would more than double the company's debt of almost $3 billion.
It also could be a drag on Georgia-Pacific earnings because the roughly $1.5 billion in goodwill -- the amount by which the bid exceeds Nekoosa's book value of $1.5 billion -- will have to be subtracted from earnings over a period of decades. 

Georgia-Pacific's Mr. Hahn said that a combined operation would allow savings in many ways.
The two companies each produce market pulp, containerboard and white paper.
That means goods could be manufactured closer to customers, saving shipping costs, he said. 

Moreover, production runs would be longer, cutting inefficiencies from adjusting machinery between production cycles.
And Georgia-Pacific could save money in selling pulp, because the company uses its own sales organization while Nekoosa employs higher-cost agents. 

Mr. Hahn said Georgia-Pacific has accounted in its strategy for a "significant downturn" in the pulp and paper industry, an event that he said would temporarily dilute earnings.
But he said that even under those conditions, the company still would realize a savings of tens of millions of dollars in the first year following a merger. "The fit is so good, we see this as a time of opportunity," he said. 

Georgia-Pacific, which has suspended its stock-repurchase program, would finance the acquisition with all bank debt, provided by banks led by BankAmerica Corp. Georgia-Pacific owns 349,900 Nekoosa shares and would need federal antitrust clearance to buy more than $15 million worth.
U.S. clearance also is needed for the proposed acquisition. 

For Nekoosa, defense options may be undercut somewhat by the precarious state of the junk-bond market, which limits how much value the target could reach in a debt-financed recapitalization.
The company's chairman, Mr. Laidig, and a group of advisers met at the offices of Wachtel Lipton Rosen & Katz, a law firm specializing in takeover defense.
Nekoosa also is being advised by Goldman, Sachs & Co. 

Georgia-Pacific's advisers are Wasserstein, Perella & Co., which stands to receive a $15 million fee if the takeover succeeds, and the law firm of Shearman & Sterling. 

People familiar with Nekoosa said its board isn't likely to meet before the week after next to respond to the bid.
The board has 10 business days to respond. 

In addition to the usual array of defenses, including a so-called poison pill and a staggered board, Nekoosa has another takeover defense: a Maine state law barring hostile bidders from merging acquired businesses for five years.
Nekoosa is incorporated in Maine. 

Georgia-Pacific has filed a lawsuit in federal court in Maine challenging the poison pill and the Maine merger law. 

Nekoosa's poison pill allows shareholders to vote to rescind it, but Georgia-Pacific isn't likely to pursue such a course immediately because that would take 90 to 120 days, and wouldn't affect the provisions of the Maine law. 

Among companies mentioned by analysts as possible counterbidders for Nekoosa are International Paper, Weyerhaeuser, Canadian Pacific Ltd. and MacMillan Bloedel Ltd. "I'm sure everybody else is putting pencil to paper," said Kathryn McAuley, an analyst with First Manhattan Co. 

International Paper and Weyerhaeuser declined to comment.
Canadian Pacific couldn't be reached for comment, and MacMillan Bloedel said it hasn't any plans to make a bid for Nekoosa. 

Investors were quick to spot other potential takeover candidates, all of which have strong cash flows and low-cost operations.
Among paper company stocks that rallied on the Big Board because of the offer were Union Camp, up $2.75 to $37.75, Federal Paperboard, up $1.75 to $27.875, Mead, up $2.375 to $38.75, and Temple Inland Inc., up $3.75 to $62.25.
In over-the-counter national trading, Bowater Inc. jumped $1.50 to $27.50. 

Some analysts argued that there won't be a flurry of takeovers because the industry's continuing capacity-expansion program is eating up available cash.
Moreover, some analysts said they expect a foreign paper company with deeper pockets than Georgia-Pacific to end up acquiring Nekoosa, signaling to the rest of the industry that hostile bids are unproductive. 

"This is a one-time event," said Lawrence Ross of PaineWebber Inc., referring to the Georgia-Pacific bid. 

But many analysts believe that, given the attractiveness of paper companies' cash flows, as well as the frantic consolidation of the paper industry in Europe, there will be at least a few more big hostile bids for U.S. companies within the next several months.
The buyers, these analysts added, could be either foreign or other U.S.concerns. 

"The Georgia-Pacific bid may open the door to a new era of consolidation" in the paper industry, said Mark Devario of Shearson Lehman Hutton Inc. 

"I don't think anyone is now immune from takeover," said Robert Schneider of Duff & Phelps Inc., Chicago.
He added: "Every paper company management has to be saying to itself, `Before someone comes after me, I'm going to go after somebody. '" 

Prudential-Bache's Mr. Rodgers said he doesn't see the industry's capacity-expansion program hindering takeover activity.
Several projects, he said, are still on the drawing board.
Moreover, "it's a lot cheaper and quicker to buy a plant than to build one." 

Indeed, a number of analysts said that Japanese paper companies are hungry to acquire additional manufacturing capacity anywhere in the world.
Some predicted that Nekoosa will end up being owned by a Japanese company. 

Meanwhile, Shearson Lehman's Mr. Devario said that, to stay competitive, the U.S. paper industry needs to catch up with the European industry.
Since the most-recent wave of friendly takeovers was completed in the U.S. in 1986, there have been more than 100 mergers and acquisitions within the European paper industry, he said. 

.START 

Bond prices staggered in seesaw trading, rising on reports of economic weakness and falling on reports of economic strength. 

Treasury bonds got off to a strong start, advancing modestly during overnight trading on foreign markets. 

"We saw good buying in Japan and excellent buying in London," said Jay Goldinger, market strategist and trader at Capital Insight Inc., Beverly Hills, Calif.
The market's tempo was helped by the dollar's resiliency, he said.
Late in London, the dollar was quoted at 1.8410 West German marks and 142.70 Japanese yen, up from late Monday in New York.
British sterling eased to $1.5775 from $1.5825. 

When U.S. trading began, Treasury bonds received an additional boost from news that sales of new single-family homes fell 14% in September.
The contraction was twice as large as economists projected and was the sharpest decline since a 19% drop in January 1982. 

Economists said the report raised speculation that the economic slowdown could turn into a recession, which would pave the way for the Federal Reserve to lower interest rates.
But later in the day, a report by the Purchasing Management Association of Chicago cast doubt on the recession scenario.
The association said its October index of economic activity rose to 51.6% after having been below 50% for three consecutive months.
A reading below 50% indicates that the manufacturing industry is slowing while a reading above 50% suggests that the industry is expanding.
Bond prices fell after the Chicago report was released. 

By the end of the day, bond prices were mixed.
The benchmark 30-year bond was nearly 1/4 point higher, or up about $2.50 for each $1,000 face amount.
New two-year notes ended unchanged while three-year and four-year notes were slightly lower.
Municipal bonds ended unchanged to as much as 1/2 point higher while mortgage-backed securities were up about 1/8 point.
Corporate bonds were unchanged. 

In the corporate market, an expected debt offering today by International Business Machines Corp. generated considerable attention. 

The giant computer maker is slated to offer $500 million of 30-year non-callable debentures through underwriters led by Salomon Brothers Inc. Traders expect the bonds to yield about 0.60 to 0.65 percentage point above the Treasury's benchmark 30-year bond, which ended Tuesday with a yield of about 7.90%. 

The last time IBM tapped the corporate debt market was in April 1988, when it offered $500 million of debt securities. 

IBM's visits to the debt market are closely watched by treasurers at other corporations and by credit market analysts.
Some analysts believe the company has the ability to pinpoint the trough in interest-rate cycles. 

In October 1979, just days before the Federal Reserve raised interest rates, IBM offered $1 billion in debt securities.
The boost in rates sent IBM's bonds tumbling, leaving underwriters with millions of dollars of losses and triggering a sell-off in the overall market. 

The company "can't be bullish if they're doing a sizable 30-year bullet," said one analyst. 

Others said IBM might increase the size of the offering to as much as $1 billion if investor demand is strong.
The company has $1 billion in debt filed with the Securities and Exchange Commission. 

"I think the $500 million is a little bit of a fire drill," said Jim Ednee, head of the industrial bond department at Drexel Burnham Lambert Inc. "I think as the pricing time arrives, the bonds will come a little richer and in a larger amount." 

Treasury Securities 

Treasury prices ended mixed in light trading. 

The benchmark 30-year bond was quoted late at 102 12/32 to yield 7.90% compared with 102 7/32 to yield 7.92% Monday.
The latest 10-year notes were unchanged at 100 16/32 to yield 7.904%. 

Short-term rates also were mixed.
The discount rate on three-month Treasury bills rose slightly from the average rate at Monday's auction to 7.79% for a bond-equivalent yield of 8.04%.
The discount rate on six-month Treasury bills fell slightly to 7.60% for a bond-equivalent yield of 7.99%. 

Corporate Issues 

Two junk bond issues were priced yesterday, including a scaled-backed offering by Beatrice Co. 

A spokesman for underwriters Salomon Brothers Inc. said Beatrice cut its high-yield offering to $251 million from a planned $350 million after it became clear the company would have to give investors higher yields. 

In the two-part offering, $151 million of senior subordinated reset notes were priced at 99.75 and carried a rate of 13 3/4%, while the $100 million of senior subordinated floating rate notes were priced to float at 4.25 percentage points above the London Interbank Offered Rate, or LIBOR.
The one-year LIBOR rate yesterday was 8 7/16%. 

Since the recent deterioration of the junk-bond market, at least two other junk issuers have said they plan to scale back planned high-yield offerings, and several issues have been postponed. 

William Carmichael, Beatrice chief financial officer, said favorable market conditions in September prompted the company to plan more debt than necessary. 

"However, given the changes in the market conditions that have occurred since then, we decided to sell only the amount needed to proceed with our contemplated recapitalization," he said. 

Under the firm's original bank credit agreement, it was required to raise $250 million of subordinated debt to be used to repay some of the bank borrowings drawn to redeem $526.3 million of increasing rate debentures in August. 

A month ago, when Beatrice first filed to sell debt, the company had planned to offer $200 million of its senior subordinated reset notes at a yield of 12 3/4%.
The $150 million in senior subordinated floating-rate notes were targeted to be offered at a price to float four percentage points above the three-month LIBOR.
By October, however, market conditions had deteriorated and the reset notes were targeted to be offered at a yield of between 13 1/4% and 13 1/2%. 

Mr. Carmichael said investors also demanded stricter convenants. 

Continental Cablevision Inc., via underwriters at Morgan Stanley & Co., priced $350 million of junk bonds at par to yield 12 7/8%. 

Mortgage-Backed Securities 

J.C. Penney & Co. issued $350 million of securities backed by credit-card receivables.
The securities were priced at 99.1875 to yield about 9.19%.
Underwriters at First Boston Corp. said the J.C. Penney credit-card securities are the first with a 10-year average life, which is much longer than previous such issues. 

Elsewhere, Ginnie Mae's 9% issue for November delivery was quoted at 98 18/32 bid, up 5/32 from late Monday, to yield about 9.333% to a 12-year average life assumption. 

Freddie Mac's 9 1/2% issue was quoted at 99 20/32, up 3/32 from Monday.
Fannie Mae's 9% issue was at 98 7/32, up 1/8. 

On the pricing front, an 11-class issue of $500 million Federal Home Loan Mortgage Corp. Remic mortgage securities was launched by a Morgan Stanley group.
The offering is backed by Freddie Mac's 10% issue with a weighted average term to maturity of 29.583 months. 

Municipal Issues 

Municipal bonds were little changed to 1/2 point higher in late dealings. 

"We were oversold and today we bounced back.
Some accounts came in for some blocks in the secondary {market}, which we haven't seen for a while," said one trader. 

"There were no {sell} lists and the calendar is lightening up a bit.
There's light at the end of the tunnel for municipals," he said, adding that he expects prices to "inch up" in the near term. 

The market's tone improved after Monday's pricing of $813 million New York City general obligation bonds.
The issue's smooth absorption eased fears that supply would overwhelm demand in coming sessions, traders said.
Demand for the bonds was strong enough to permit underwriters to trim some yields in the tax-exempt portion of the offering late Monday. 

A two-part $75.1 million offering of wastewater treatment bonds by the New Jersey Wastewater Treatment Trust was more than half sold by late in the session, according to lead underwriter Merrill Lynch Capital Markets. 

The debt was reoffered priced to yield from 6% in 1991 to 7.15% in 2008-2009. 

Foreign Bonds 

Most foreign government bonds markets were quiet. 

West German bonds firmed a bit after Monday's fall, but traders said the market remains bearish due to speculation that interest rates could rise again. 

In a speech given Friday but released late Monday, Bundesbank Vice President Helmut Schlesinger suggested that it was risky to claim that the booming German economy has reached the peak of its cycle.
His comments were interpreted as a sign that higher interest rates are possible.
On Oct. 5, the Bundesbank raised the Lombard and discount rates by one percentage point to 8% and 6%, respectively, the highest levels in seven years. 

Germany's 7% bond due October 1999 was unchanged at 99.35 to yield 7.09% while the 6 3/4% notes due July 1994 rose 0.025 point to 97.275 to yield 7.445%.
Japanese government bonds showed little change. 

Japan's benchmark No. 111 issue due 1998 ended on brokers' screens at 95.90, down 0.02 point, to yield 5.435%. 

British government bonds were little changed as investors awaited an address on economic policy by John Major, the new Chancellor of the Exchequer.
Britain's benchmark 11 3/4% bond due 2003/2007 rose 2/32 to 111 1/2 to yield 10.14% while the 11 3/4% notes due 1991 were unchanged at 98 21/32 to yield 12.95%. 

.START 

As the leading candidate for president of his country in next year's election, Mario Vargas Llosa ought to be in an enviable position.
But his country is Peru, where political visibility, especially for a believer in democracy and free enterprise -- a right winger in Latin American eyes -- makes a man a target for assassination.
For almost any Peruvian these days, to show an interest in public office is a heroic gesture; for Mr. Vargas Llosa especially so, since he already has achieved a high position in the world's eyes as a writer.
Published everywhere to universal acclaim, doted on like a movie star in the Hispanic world from Barcelona to Ushuaia, Mr. Vargas Llosa could live comfortably on his royalties and console his political conscience with the thought that Peru is a hopeless mess not of his making and that he already did his best to reform it with his magnificently cinematic novel about the years of military dictatorship of his youth, "Conversation in the Cathedral." 

But, after some hesitation, he is back on the stump and also still writing important novels about Peru. "The Storyteller" (Farrar, Straus & Giroux, 246 pages, $17.95), splendidly translated by Helen Lane, first appeared in Spanish in 1987 before the Peruvian economy had reached its present state of virtual collapse.
And in any case the story takes place a bit earlier than that, when the guerrilla war in the highlands had not yet made internal travel a gamble with destiny.
Even still, the very first sentence of this fable that weaves together Peru's most advanced and most primitive cultural strands speaks of "my unfortunate country." The narrator may be talking about the depredations of the Shining Path Maoists among the Indians of the Andes, or he may be referring to the plunging inti, Peru's rubber currency, or the corrupting effect of the cocaine trade.
But he is swiftly drawn into a tangle of memories about a less newsworthy and more exotic part of Peru: its corner of the Amazon jungle. 

This narrator is a foil for Mr. Vargas Llosa, a cosmopolitan writer with one well-tailored leg in journalism.
He is in Florence to shake himself free of Peru and get some writing done, just as Mr. Vargas Llosa has gone to Paris and now goes frequently to London for the same purpose.
But this narrator happens upon some photographs in a gallery, pictures taken in Peruvian Amazonia of the untamed and nomadic Machiguenga tribe.
And they remind him of his own experiences with that unhappy scattered culture and of his friend at Lima's University of San Marcos, Saul Zuratas.
Saul was a high-strung student of ethnography, a Jew marked doubly as an outsider because of a huge wine-dark birthmark on his face, for which people called him Mascarita, Mask Face.
Saul knew about the Machiguengas from his studies, and through him the narrator became interested in this most recalcitrant and un-Westernizable of all the indigenous peoples who had come under the Spanish yoke.
Saul, meanwhile, came to believe that anthropology, even at its most benign, was as insidious a form of cultural imperialism as the superficially more blatant activities of Christian missionaries.
Saul mysteriously disappears. 

This is what we know at the end of the opening section of "The Storyteller." The next voice we hear sounds like this: "There was no evil, there was no wind, there was no rain.
The women bore pure children.
If Tasurinchi wanted to eat, he dipped his hand into the river and brought out a shad flicking its tail . . ." And this: "Moving, walking.
Keeping on, with or without rain, by land or by water, climbing up the mountain slopes or climbing down the ravines." The speaker is never identified.
He tells his stories in his majestically simple way, in a "language" all his own.
There are creation myths and cosmologies and hunting stories -- a whole culture is contained within these dreamy narratives.
It is as though Mr. Vargas Llosa had recorded a storytelling session at a Machiguenga campfire.
And this is just the effect he hopes to have on the reader, as he alternates chapters in his "own" voice with chapters somehow "borrowed" from the Machiguenga storyteller. 

For most of the book, there is no direct connection between its urban and its Amazonian modes.
But the contrast between them becomes a living thing through the brilliant contrast of narrative styles that Mr. Vargas Llosa creates.
He controls this counterpoint like a novelistic Bach, reaching an audacious extreme in a hilarious chapter in which the "Vargas Llosa" voice relates his adventures as an inept television newsman.
But the joke turns serious when a reportage takes him to Amazonia and he encounters the missionaries who know more than anyone else about the Machiguengas.
By this point, the narrator has become obsessed with finding out about the Machiguenga storytellers, who, he had heard years before, functioned like cultural glue for a tribe split into many small bands in constant motion through the jungle.
The storytellers traveled among the bands, reminding them of their identity.
But why would no Machiguenga the narrator meets during his reportage even admit that there were storytellers? 

The narrator eventually deduces the extraordinary answer, which is confirmed in a literally Kafkaesque manner by a storyteller in the next chapter.
I am trying to give away as little as possible, but this is not really a mystery or some kind of jungle thriller.
It will be read for the brilliant clash of styles of narration and the even more brilliant way that they have been tied together into a large metaphor for literature and its function in society. 

A baby boom in sub-Saharan Africa, the world's poorest region, poses a threat for the area's future. 

The region's population, currently estimated at some 500 million people, is growing by 3.2% a year -- "faster than any major region has ever experienced over a sustained period," the World Bank noted in a recent review of the region between the great desert and South Africa.
This is more than six times the rate for industrial nations. 

"Rapid population growth impedes sub-Saharan Africa's progress toward virtually all its major goals," including higher living standards, the bank said.
Noting that traditional African culture respects a woman with many offspring, it said substantial resources, including foreign aid, are needed to effect change. 

Otherwise, the bank said, "By the time a child born today is 22, if present trends continue, sub-Saharan Africa's population will have doubled.
When that child is 40, it will have quadrupled." 

West Germany's Lufthansa has agreed to buy a 10% stake in Austrian Airlines when the Austrian government continues next spring to sell parts of the carrier to the public, an Austrian Airlines spokesman said.
Swissair will at the same time raise its stake in Austrian Airlines to 10% from the current 8% holding, he added.
Elsewhere, Singapore Airlines Ltd., following its recently announced tie-up with Delta Air Lines Inc., is now "contemplating an alliance" with one of several European carriers, Chairman J.Y. Pillay said. 

King Fahd of Saudi Arabia dismissed as untrue allegations that his country's relations with Kuwait were marred by the Saudis' execution last month of 16 Kuwaiti Shiites; the Shiites had been convicted for bombings at Mecca.
The king stressed to the Kuwaiti Al-Seyassah newspaper that the terrorists were given a fair trial in accordance with Islamic law. "Those people have been convicted after committing an awful crime," the king said.
The Kuwaiti government hasn't issued any comment on the executions. 

Israel is ending six weeks of seizing property from Palestinians who refuse to pay income and value-added taxes in the occupied West Bank town of Beit Sahour, despite having failed to break the revolt, security sources said.
Troops and tax collectors have confiscated cars, furniture and goods valued at about $1.5 million from residents of the mainly Christian middle-class town, sparking international protests.
The army gave no explanation for calling off the seizures, less than a month after Defense Minister Yitzhak Rabin vowed to break the tax rebels. 

The Asian Development Bank denied media speculation that it's about to resume lending to China.
The bank cut off loans to the country in the wake of the June 4 massacre in Beijing.
The ADB staff is continuing to "prepare loan proposals for China" to present to the bank's board, said R.D. Pacheco, the bank's chief information officer.
Other ADB officials said the board wasn't ready to consider resuming loans to China because leading ADB members, including the U.S. and Japan, remain opposed to a return to normal business with Beijing. 

As Japan formally announced it's joining an international ban on trading ivory, hundreds of angry ivory traders and carvers marched in downtown Hong Kong to protest the ban.
Some of the marchers presented a petition to the U.S. consulate demanding that Washington, which earlier banned the import of ivory, help the endangered industry.
Hong Kong traders have until Jan. 19 to sell off their stockpile of 670 tons of ivory. 

Environmental groups urged Japan to stop importing timber from Malaysia's Sarawak state, where they say loggers are destroying rain forests and trampling on the rights of natives. 

Japan imports about 50% of the logs exported from the state, which is on the island of Borneo.
The call came as the council of the International Tropical Timber Organization opened a nine-day session in the Japanese city of Yokohama.
Dr. Mikhail Kavanagh, an official of the World Wide Fund for Nature, said that "anything that the Japanese can do to influence the trade is going to come straight back in to influence how the forests are managed." He urged Japan to reduce "wasteful use of tropical timbers," such as disposable chopsticks. 

One study group says Japan's consumption of disposable chopsticks has doubled in the past decade, reaching 20.5 billion pairs in 1988. 

Pravda said that Nikolai Vasilenko, a Soviet farmer, dug up a gold bar valued at $235,000, but consumer-goods shortages left him little to spend it on during a trip to Vladivostok.
He wanted to buy, but couldn't find, a shaving brush, a sewing machine and a colander . . . China is facing a musical talent shortage because top artists are leaving for foreign countries, the China Youth News said.
The official daily said that 470 musicians went abroad at their own expense in the past decade, and it implied that few are likely to return. 

.START 

If Japanese companies are so efficient, why does Kawasaki-Rikuso Transportation Co. sometimes need a week just to tell its clients how soon it can ship goods from here to Osaka?
Why, until last spring, did the Long-Term Credit Bank of Japan sometimes take several days to correct typographical errors in its paper work for international transactions? 

Because the companies have lacked office computers considered standard equipment in the U.S. and Western Europe, Japanese corporations' reputation as hi-tech powerhouses is only half right.
Their factories may look like sets for a Spielberg movie, but their offices, with rows of clerks hunched over ledgers and abacuses, are more like scenes from a Dickens novel. 

Now, the personal-computer revolution is finally reaching Japan.
Kawasaki-Rikuso, a freight company, set up its own software subsidiary this year and is spending nearly a year's profit to more than double the computer terminals at its main office.
In April, the Long-Term Credit Bank linked its computers in Tokyo with its three American offices. 

Overall, PC sales in Japan in the first half of 1989 were 34% higher than in the year-earlier period.
Combined PC and work-station use in Japan will jump as much as 25% annually over the next five years, according to some analysts, compared with about 10% in the U.S.
And with a labor shortage and intense competitive pressure to improve efficiency, more and more Japanese companies are concluding that they have no choice. "We have too many people in our home offices," says Yoshio Hatakeyama, the president of the Japan Management Association. "Productivity in Japanese offices is relatively low." 

With Japanese companies in a wide range of industries -- from heavy industry to securities firms -- increasing their market share world-wide, the prospect of an even more efficient Japanese economic army may rattle foreigners.
But it also offers opportunities; Americans are well poised to supply the weapons.
Japan may be a tough market for outsiders to penetrate, and the U.S. is hopelessly behind Japan in certain technologies.
But for now, at least, Americans are far better at making PCs and the software that runs them. 

After years of talking about selling in Japan, more and more U.S. companies are seriously pouring in.
Apple Computer Inc. has doubled its staff here over the past year.
Lotus Development Corp. has slashed the lag between U.S. and Japan product introductions to six months from three years.
Ungermann-Bass Inc. has a bigger share of the computer-network market in Japan than at home. 

But the Japanese have to go a long way to catch up.
Typical is one office of the Ministry of International Trade and Industry's Machinery and Information Industries Bureau -- the main bureaucracy overseeing the computer industry. "Personal Computer" yearbooks are lined up on nearly every desk, and dog-eared copies of Nikkei Computer crowd magazine racks.
But amid the two dozen bureaucrats and secretaries sits only one real-life PC. 

While American PC sales have averaged roughly 25% annual growth since 1984 and West European sales a whopping 40%, Japanese sales were flat for most of that time.
Japanese office workers use PCs at half the rate of their European counterparts and one-third that of the Americans. 

Moreover, Japanese offices tend to use computers less efficiently than American offices do.
In the U.S., PCs commonly perform many tasks and plug into a broad network.
In Japan, many desktop terminals are limited to one function and can't communicate with other machines. 

The market planning and sales promotion office of Nomura Securities Co., for example, has more than 30 computers for its 60 workers, a respectable ratio.
But the machines aren't on employees' desks; they ring the perimeter of the large office.
Some machines make charts for presentations.
Others analyze the data.
To transfer information from one to the other, employees make printouts and enter the data manually.
To transmit charts to branch offices, they use a fax machine.
Meanwhile, a woman sitting next to a new Fujitsu terminal writes stock-market information on a chart with a pencil and adds it up with a hand calculator.
In an efficient setup, the same PC could perform all those tasks. 

In the U.S., more than half the PC software sold is either for spreadsheets or for database analysis, according to Lotus.
In Japan, those functions account for only about a third of the software market.
Machines dedicated solely to word processing, which have all but disappeared in the U.S., are still more common in Japan than PCs.
In the U.S., one-fifth of the office PCs are hooked up to some sort of network.
In Japan, about 1% are linked. 

"Computers here are used for data gathering," says Roger J. Boisvert, who manages the integrated-technologies group in McKinsey & Co. 's Tokyo office.
Some Japanese operations, such as securities-trading rooms, may be ahead of their American counterparts, he says, but "basically, there's little analysis done on computers in Japan." Of course, simply buying computers doesn't always solve problems, and many American companies have erred by purchasing technology they didn't understand.
But healthy skepticism is only a small reason for Japan's PC lag.
Various cultural and economic forces have suppressed demand. 

Because the Japanese "alphabet" is so huge, Japan has no history of typewriter use, and so "keyboard allergy," especially among older workers, remains a common affliction. "I have no experience before with such sophisticated machinery," says Matsuo Toshimitsu, a 66-year-old executive vice president of Japan Air Lines, explaining his reluctance before accepting a terminal in his office this summer. 

While most American employees have their own private space, Japanese "salarymen" usually share large, common tables and rely heavily on old-fashioned personal contact.
Top Japanese executives often make decisions based on consensus and personal relationships rather than complex financial projections and fancy presentations.
And Japan's management system makes it hard to impose a single, integrated computer system corporatewide. 

Besides, a computer processing the Japanese language needs a huge memory and much processing capability, while the screen and printer need far better definition to depict accurately the intricate symbols.
Until recently, much of the necessary technology has been unavailable or at least unaffordable. 

Some analysts estimate the average PC costs about 50% more in Japan than the U.S.
But the complex language isn't the only reason.
For the past decade, NEC Corp. has owned more than half the Japanese PC market and ruled it with near-monopoly power.
With little competition, the computer industry here is inefficient. 

The U.S. market, too, is dominated by a giant, International Business Machines Corp.
But early on, IBM offered its basic design to anybody wanting to copy it.
Dozens of small companies did, swiftly establishing a standard operating system.
That spurs competition and growth, allows users to change and mix brands easily, and increases software firms' incentive to write packages because they can be sold to users of virtually any computer. 

If a record industry lacked a common standard, Sony CD owners could listen to a Sony version of Madonna's "Like a Prayer" but not one made for a Panasonic player.
That is the state of Japan's computer industry.
NEC won't release its code, and every one of the dozen or so makers has its own proprietary operating system -- all incompatible with each other.
IBM established its standard to try to stop falling behind upstart Apple Computer, but NEC was ahead from the start and didn't need to invite in competitive allies. 

Meanwhile, the big players haven't tried to copy the NEC standard.
Corporate pride as well as the close ties common among Japanese manufacturers help explain why.
Most rivals "have a working relationship with NEC, often through cross-licensing of technology," the Japan Personal Computer Software Association noted recently. "They hesitate to market NEC-compatible machines; NEC disapproves of such machines, and marketing one would jeopardize their relationship." 

The result, according to many analysts, is higher prices and less innovation.
While tens of thousands of software packages using the IBM standard are available in the U.S., they say only about 8,000 are written for NEC.
A year ago, Japan's Fair Trade Commission warned NEC about possible violations of anti-monopoly laws for discouraging retailers from discounting. 

In Japan, "software is four to five years behind the U.S. because hardware is four to five years behind, because NEC is enjoying a monopoly," complains Kazuhiko Nishi, the president of Ascii Corp., one of Japan's leading PC-magazine publishing and software companies. "There are no price wars, no competition." An NEC spokeswoman responds that prices are higher in Japan because customers put a greater emphasis on quality and service than they do in the U.S.
She adds that some technological advances trail those in the U.S. because the Japanese still import basic operating systems from American companies. 

But the market is changing.
The government is funding several projects to push PC use.
Over the next three years, public schools will get 1.5 million PCs, a 15-fold increase from current levels. 

In the private sector, practically every major company is setting explicit goals to increase employees' exposure to computers.
Toyota Motor Corp. 's sales offices in Japan have one-tenth the computers per employee that its own U.S. offices do; over the next five years, it is aiming for rough parity.
Within a year, Kao Corp., a major cosmetics company, plans to eliminate 1,000 clerical jobs by putting on a central computer network some work, such as credit reports, currently performed in 22 separate offices. 

By increasing the number of PCs it uses from 66 to 1,000, Omron Tateishi Electronics Co., of Kyoto, hopes not only to make certain tasks easier but also to transform the way the company is run. "Managers have long been those who supervise their subordinates so orders would be properly acted on," a spokesman says. "But new managers will have to be creators and innovators . . . and for that purpose it is necessary to create an environment where information from both inside and outside the company can be reached easily, and also shared." 

Meanwhile, more computer makers now are competing for the new business.
Seiko Epson Corp., a newcomer to the industry, fought off a legal challenge and started selling NEC clones last year.
It has won about 15% of the retail PC market.
Sony Corp., which temporarily dropped out of the PC business three years ago, started selling its work station in 1987 and quickly became the leading Japanese company in that market. 

In a country where elbow room is scarce, laptop machines will take a large portion of the industry's future growth.
Toshiba Corp. busted open that sector this summer with a notebook-sized machine that retails for less than 200,000 yen (under $1,500) -- one of the smallest, cheapest PCs available in the country.
Fujitsu Ltd. is lavishing the most expensive promotion campaign in its history -- including a 100,000-guest bash at Tokyo Dome -- for its sophisticated sound/graphics FM Towns machine, which it advertises for everything from balancing the family checkbook to practicing karaoke, bar singing. 

Many of the companies are even dropping their traditional independence and trying to band together to create some sort of standard.
Two years ago, most of the smaller makers joined under the Microsoft Corp. umbrella to adopt a version of the American IBM AT standard.
That hasn't generated much sales, but this summer Microsoft rallied all the major NEC competitors to make their new machines compatible with the IBM OS/2 standard. 

A healthy, coherent Japanese market could also make it far easier for Japanese companies to sell overseas, where their share is still minimal.
But it could also help American companies, which also are starting to try to open the market.
As with many other goods, the American share of Japan's PC market is far below that in the rest of the world.
U.S. makers have under 10% share, compared with half the market in Europe and 80% at home. 

Though no formal trade barriers exist, the Japanese computer industry is difficult for outsiders to enter. "If it were an open market, we would have been in in 1983 or 1984," says Eckhard Pfeiffer, who heads Compaq Computer Corp. 's European and international operations.
His company, without any major effort, sells more machines in China than in Japan.
Although it has opened a New Zealand subsidiary, it is still only "studying" Japan, the only nation that hasn't adopted IBM-oriented specifications.
And because general retail centers such as ComputerLand have little presence in Japan, sales remain in the iron grip of established computer makers. 

But the Americans are also to blame.
They long made little effort here.
IBM, though long a leader in the Japanese mainframe business, didn't introduce its first PC in Japan until five years after NEC did, and that wasn't compatible even with the U.S. IBM standard.
Apple didn't introduce a kanji machine -- one that handles the Chinese characters of written Japanese -- until three years after entering the market.
Critics also say American companies charge too much.
Japan's FTC says it is investigating Apple for allegedly discouraging retailers from discounting. 

But the U.S. companies are redoubling their efforts.
Apple recently hired its first Japanese president, luring away an official of Toshiba's European operations, as well as a whole Japanese top-management team.
Earlier this year, it introduced a much more powerful kanji operating system and a kanji laser printer.
IBM just last year started selling its first machine that could run in both Japanese and English and that substantially enhances compatibility with its American products. 

"It may take five years to break even in Japan," says John A. Siniscal, who runs the Asia-Pacific office for McCormack & Dodge, a U.S. software company. "But it's an enormous business opportunity." 





