YEAR IN REVIEW 1999: BUSINESS-AND-INDUSTRIAL-REVIEW

Advanced Composites. During 1998 the market for composite materials continued to grow. The Society of Plastics Industry's (SPI's) Composite Institute estimated that U.S. shipments for polymeric composites of all types (including glass-, carbon-, boron-, and organic-fibre-reinforced polymers) totaled 1,580,000 metric tons, an increase of about 2% over 1997 and 8% over 1996; it was the seventh consecutive year that shipments increased. The 1998 increases were most pronounced in the construction, consumer products, and transportation sectors, and were reflective of the growth in infrastructure applications, the continued strength of sporting goods applications, and the growing use of composites in automobiles and light trucks. According to the Suppliers of Composite Materials Association, worldwide carbon-fibre shipments for 1997 were 11,800 metric tons, an increase of 25% over 1996. The industry operated at close to capacity in 1997, and materials were in short supply. It was estimated, however, that capacity would increase 80% by 1999. The industry transition from defense and aerospace applications to higher-volume, lower-cost applications led to the emphasis on the development of lower- cost tooling, materials, and manufacturing processes. For example, processes that produced lower-cost carbon fibres in bundles with increasing number of filaments (48,000-360,000 filaments) were finding applications in high-volume markets. The industry continued to pursue aggressively two potentially large markets that would make use of lower-cost materials and processing methods--construction and automotive. The application of advanced composite technology in construction and infrastructure renewal continued to show promise. The SPI Composites Institute estimated that composite shipments to the construction industry in 1998 totaled 334,000 metric tons, an increase of 5% from 1997. Composites, especially in the form of sheet molding compounds (SMCs), were becoming increasingly important in automobiles and light trucks. According to the SMC Automotive Alliance the amount of SMCs used by the automotive industry increased from 71,000 metric tons in 1993 to more than 107,000 metric tons in 1998. High-performance composites, however, were not finding significant applications in automotive structures, despite collaborative research and development efforts to develop continuous fibre-reinforced composite structures for lightweight, energy-efficient automobiles. The composites had to compete with the improved strength and toughness of metals. The development of ceramic matrix composites (CMCs) continued to advance, particularly in the area of ceramic fibres and fibre coatings. Silicon carbide (SiC) fibres and dual-phase SiC/titanium diboride (TiB2) fibres, essentially free from degradative impurities such as oxygen, free silicon, and free carbon, demonstrated improved property retention at elevated temperatures, but advances were needed to prevent oxidative degradation that plagued nonoxide CMCs. THOMAS E. MUNNS ADVERTISING Worldwide advertising on all media, including Yellow Pages and direct mail, was predicted to increase 5.3% to $418.7 billion in 1998 from $397.5 billion in 1997. Despite late-year jitters in the stock market, economic uncertainty in Asia, and doubts as to whether U.S. consumers would continue their robust spending habits, spending on U.S. advertising in 1998 was predicted to top the $200 billion mark for the first time in any given year. The expected total of $200.3 billion was a 6.8% increase over the revised figure of $187.5 billion in 1997, according to Robert J. Coen, McCann-Erickson Worldwide's senior vice president in charge of forecasting. Advertising spending was closely watched because it was deemed a reliable indicator of the health of the economy. For instance, advertising as a percentage of gross domestic product peaked in 1987 and 1988 at 2.35% as the economy boomed. During the recession of the early 1990s it declined, bottoming out at 2.12% in 1992. Coen predicted that national advertising spending in 1998 would increase 7% to $118 billion, led by strong growth in cable television, broadcast television, and spot radio. Local advertising was expected to increase 6.5% to $82.3 billion. Although countries such as Brazil, the U.K., and Mexico posted strong increases in advertising spending, the Asian financial crisis offset those gains. Spending outside the U.S. in 1998 was expected to increase only 3.6% to $218.4 billion from a revised figure of $210 billion in 1997. General Motors Corp. rose to the rank of top U.S. advertiser in 1997, besting perennial leader Procter & Gamble Co., according to Advertising Age's annual survey of the 100 leading national advertisers. The automaker became the first U.S. firm to spend more than $3 billion on advertising in one year, totaling $3,090,000,000 for an increase of 29.9% over 1996. Procter & Gamble's spending rose 6.3% to $2,740,000,000. According to the survey the 100 U.S. marketers in the report spent $58,030,000,000 in advertising in 1997, up 8.6% from 1996; the media portion rose an even stronger 9.9% to $33.4 billion. The substantial increase was attributed to the nation's healthy economy, government initiatives, and new technologies, such as the World Wide Web on the Internet. The Web gained advertising ground in 1998, claiming 1.3% of overall ad budgets. Though technology companies continued to account for the largest percentage, 49.7%, of the Internet ads, governments, organizations, and retailers posted large gains. The percentage of companies advertising on-line rose to 68% in 1998, according to the second annual Web site survey conducted by the Association of National Advertisers. The survey also revealed that 47% of respondents were selling some product or service from their Web sites, up from 26% in 1997. NBC held onto its title of broadcasting the most expensive show on prime-time television. With an average price per 30-second commercial unit of $565,000, NBC's medical drama "ER" was the costliest production of the 1998 fall season. The "ER" price, however, was $10,000 below the record-setting "Seinfeld" average of $575,000 per 30-second unit in the fall of 1997. When the final episode of "Seinfeld" aired, advertisers spent up to $1.7 million for 30-second spots. Based on the strength of "Monday Night Football" and "The Drew Carey Show," ABC was the most expensive of any broadcast network, with an average price per spot of $172,000, a 5.5% gain over 1997. The "Big Four" networks--ABC, CBS, Fox, and NBC--sold approximately $6,050,000,000-$6,100,000,000 worth of commercial time during the 1998 "upfront" market, a media marketplace that occurs before a television season begins. At a time when broadcast television was besieged by viewer defections to cable networks, the Internet, and other entertainment outlets, it was considered a victory for the networks to sell about as much advance commercial time for the 1998-99 prime-time season as they did for 1997-98. U.S. and European multinational firms continued during 1998 to pump marketing dollars into Asia, although consumer purchasing and ad spending tumbled as the economic crisis continued to ripple throughout the region. Some companies, such as Unilever and Philips Consumer Electronics, saw marketing opportunities amid the crisis, with lowered rates charged for media time. Unilever introduced new soaps and detergents under the Sunlight and Surf brand names in Indonesia and Thailand at discounts of up to 30%. In Indonesia, where inflation topped 80% during the year, Unilever began advertising sample-sized products at a fraction of the cost of a full-sized product. Philips in September 1998 launched an $80 million integrated marketing campaign in Indonesia for its state-of-the-art electronics equipment, taking advantage of dampened demand for media time to begin a brand-building campaign. In one of the largest agency switches of 1998, Compaq Computer moved creative duties on its entire $200-$300 million global advertising account to Omnicom Group's DDB Needham agency from Interpublic Group's Ammirati Puris Lintas, which held the account for only a year. Agencies also continued their brisk merger and acquisition pace. Interpublic Group acquired Carmichael Lynch, which had a reputation for feisty ads; Omnicom Group agreed to acquire GGT Group of London; and True North Communications took over Bozell, Jacobs, Kenyon & Eckhardt. In the U.S. the Association of National Advertisers (ANA) startled advertising executives by announcing that it would for the first time open its membership to regional and national agencies from all ends of the creative spectrum. The decision opened a potential rift between the ANA and the American Association of Advertising Agencies, the organization that such agencies had traditionally joined. According to a study conducted by Roper Starch Worldwide Inc. consumers throughout the world were more similar than different, sharing attitudes and behaviour that advertisers and agencies could study to create more effective campaigns. The researchers interviewed 35,000 consumers in 35 countries to identify values and attitudes that crossed national borders. Consumers worldwide were found to belong to six basic groups: strivers, devouts, altruists, intimates, fun seekers, and creatives. The study was an example of recent efforts by advertisers to broaden consumer research beyond such traditional categories as demographics. LAURIE FREEMAN AEROSPACE The improvement in the economic health of the world's airlines that began in 1995 continued in 1998, though growth in traffic and revenues often masked poor profit levels. The move toward ever-bigger alliances also continued. The emergence of the Star Alliance (United Airlines, Lufthansa, SAS, Air Canada, Varig, and Thai Airways) in 1997 was matched by rival Oneworld (American Airlines, British Airways, Canadian Airlines International, Cathay Pacific Airways, and Qantas), announced in September. Both groupings were of similar size, and both were expected to attract additional partners. KLM of The Netherlands and Italy's Alitalia announced a major European partnership. Meanwhile, the proposed British Airways-American Airlines link was contested by other airlines and by the regulatory authorities as being anticompetitive. PanAm, reborn in 1996, died yet again in February, but a revised business plan to restart the once-famous name with a handful of routes was under consideration. The economic crisis in Asia, with the resulting loss of tourism and business traffic, jolted carriers in the region. Hong Kong's Cathay Pacific registered its first loss in 20 years; debt-laden Philippine Airlines temporarily ceased operations; Indonesia's national carrier Garuda had to return some of its aircraft, and its regional airline, Sempati, closed; Malaysian Airlines sold part of its fleet and deferred deliveries of new aircraft; and Korean Air shelved ambitious expansion plans. Investigation of the 1996 TWA 747 crash off Long Island, New York, ended in July without a firm conclusion as to the cause, though fuel-tank ignition was suspected. In the year's worst accident a Swissair MD-11 crashed into the sea off Nova Scotia during September with the loss of all 229 lives after the crew radioed a flight-deck fire. The airframe companies also continued their consolidation. Alliances between U.S. and European companies, once purely politically inspired, were seen as the most effective way of providing competitive economic solutions to future aerospace needs and sharing resources and business risks. But Lockheed Martin's proposed buyout of Northrop Grumman was blocked by the U.S. Department of Justice, which reasoned that the three existing industrial giants--Boeing, Lockheed Martin, and Raytheon--were already large enough. Boeing was busy digesting McDonnell Douglas following its 1997 acquisition of the California company, and the last of the latter's transport designs, launched by Douglas in 1995 as the MD-95, flew during September in Boeing colours as the 717-200. Not to be outdone, Airbus Industrie announced a rival for the 717, the 107-seat A318, a smaller version of the existing 124-seat A319. Boeing had earlier announced that, owing to poor sales, it would close the MD-11 trijet line. Airbus in its 29th year worked to form a dual civil/military giant, dubbed the European Aerospace and Defense Co., from its four European partner companies (Arospatiale of France, Daimler-Benz Aerospace Airbus GmbH of Germany, British Aerospace PLC, and Construcciones Aeronauticas SA of Spain). France's Dassault Aviation SA scorned a linkup with Arospatiale, but, together with British Aerospace, announced the formation of European Aerosystems Ltd. to better exploit their combined military aircraft expertise. Boeing suffered from supply problems among its subcontractors, as it endeavoured to increase production to meet demand, but later in the year announced that a loss of orders from Asia was forcing a cutback in production. Taking advantage of a healthy regional airline market, Fairchild Dornier prepared to launch a family of jets seating 55-90. Similarly encouraged, new Dutch company Rekkof Restart (Rekkof is Fokker spelled backward) was negotiating to resurrect airframe builder Fokker, which went bankrupt in 1996, in order to resume its 70- and 100-seat regional aircraft production. Dassault continued to assess the market for its proposed Mach 1.8, eight-seat, 6,500-km (4,000-mi)-range SSBJ (supersonic business jet), while Lockheed Martin and Gulfstream in September unveiled a rival American SSBJ design. At a lower level the business and light aviation industry enjoyed a boom, with deliveries of new aircraft up 55% from 1997 and virtually no used aircraft available. The problem of air turbulence came into focus when many passengers were injured and one died aboard a United Airlines 747, which subsequently had to be retired from service because of damage. The cost of turbulence to the airline industry because of injuries and damage since records began was estimated at $100 million. The effort to choose and field new fighters continued; military experts claimed that while the Cold War threat from the Soviet Union had vanished, top Russian fighters such as the MiG-29 and Su-27 could be sold cheaply to Third World countries and could pose a formidable threat to the West. Indeed, cash-strapped Russia was endeavouring to sell Sukhoi Su-27s and Mikoyan MiG-29s on international markets along with advanced missiles. The risk of such high-class weapons being offered at cut-rate prices to pariah nations was viewed as likely to delay further NATO arms-reduction efforts. The U.S. Defense Department purchased 27 MiG-29 Fulcrum Cs from Moldova for technical and operational evaluation against its own F-15 Eagles and F-16 Falcons. The package also included AA-11 Archer air-combat missiles with performance probably superior to that of corresponding U.S. weapons. Russia's ongoing financial crisis paralyzed MiG-MAPO, the Russian company responsible for the MiG-29 and stopped production of the aircraft. The increasing inadequacy of America's Tomahawk cruise missile against "hard" targets was demonstrated in August when a number of such weapons were launched from U.S. ships against a pharmaceutical factory in The Sudan that was allegedly making VX nerve-gas precursors and also against an Islamic terrorist/training camp in Afghanistan; the strikes were reprisals for terrorist bombing attacks on U.S. embassies in Kenya and Tanzania. The missile problem was ascribed to the inability of their nonnuclear warheads to penetrate thick bunkers. There was accelerating development in the U.S. of UAVs (unmanned aerial vehicles) and UCAVs (unmanned combat air vehicles), both as a response to mounting public concern in recent decades over risks to aircrews of capture and because of their low cost. U.S. Predator UAVs continued to spy on Serbian army withdrawals from Kosovo in Yugoslavia. U.S. industry was developing a family of microdrones, circular craft a few inches in diameter that could fly reconnaissance missions while being mistaken for birds by hostile forces. MICHAEL WILSON Alternative Energy. The long-term trend toward increased use of alternative energy sources continued in 1998, although it appeared that low prices for fossil fuels such as oil and natural gas might undermine some solar and wind power projects. The latest annual report from the Worldwatch Institute in Washington, D.C., noted that capacity for generating wind power and shipments of solar cells were growing at high rates throughout the world. Worldwatch estimated that in 1997 global wind power generating capacity grew by 25%, reaching 7,630 MW, compared with just 10 MW in 1980. Shipments of solar cells rose 43% in 1997 to 126 MW. The growth in both areas was, however, from a small base. The Paris-based International Energy Agency (IEA) estimated that renewable energy (excluding hydroelectric power) accounted for only about 4% of the energy needs of its members, the world's industrialized countries. Renewable energy sources, mainly in the forms of hydroelectricity and biomass, such as firewood, agricultural by-products, animal waste, and charcoal, in 1997 supplied between 15%-20% of the world's energy demand, according to the IEA. The speed with which renewable sources could grow depended in large part on government policies and technological progress. In many countries conventional fuels were subsidized, and governments offered insufficient financial incentives for companies or individuals to convert to renewable sources. As the IEA pointed out, "to achieve the substantial role expected of renewables in the future, enthusiasm needs to be harnessed to specific action." ROBERT CORZINE AUTOMOBILES The automotive industry seesawed through 1998 with unexpectedly strong sales in some markets and surprisingly weak sales in others. During the year the industry was rocked with merger announcements that demonstrated the unmistakable march toward industrywide consolidation and led some automotive executives to predict that no more than nine automakers would survive the inevitable shakeout. Major corporate reorganizations and personnel changes took place, and labour strife paralyzed the world's largest automaker. It was also a year marked by significant outsourcing of work to suppliers by automakers. The industry was stunned on May 6 to learn that Daimler-Benz AG and Chrysler Corp. would merge into one company, to be called DaimlerChrysler AG. Many industry analysts had predicted such consolidations, but few had foreseen this merger. The announcement was all the more surprising because Chrysler had begun to build an engine plant in Brazil jointly with Bayerische Motoren Werke AG (BMW) and was engaged in technical exchanges exploring other business opportunities with that company. Any thoughts Chrysler may have had about merging with BMW vanished, however, during a secret 17-minute meeting at Chrysler's headquarters in January when Daimler-Benz's chairman, Jrgen Schrempp (see BIOGRAPHIES), proposed the DaimlerChrysler merger. When the public announcement was made four months later, it set off a furious debate as to whether this was truly a merger of equals or whether Daimler was simply taking over Chrysler. For the remainder of the year analysts, pundits, and competitors all tried to divine which company was gaining the upper hand as their operations were combined. Those arguing that it was a merger of equals pointed to the dual headquarters, dual chairmen, fifty-fifty split in automotive management, and the fact that English would be the official language. Those arguing that it was a takeover noted that the dual chairmanship would end in three years with Schrempp then taking charge, that there were more Germans on the management board, and that the new company was incorporated in Germany. There was little doubt DaimlerChrysler would be a formidable competitor. It instantly became the world's fifth largest automaker in vehicle production and the third largest in revenue and profits. The two companies also identified first-year savings of about $1.5 billion through combined purchasing costs, a common finance department, and shared research and development. Analysts said they expected annual savings to reach $3.3 billion. Daimler-Benz planned to open up its distribution system to Chrysler in Europe and in less-developed countries where the American automaker was weak. Both companies, however, were adamant that they would keep their product brand identities separate. No Chrysler car would carry the famous three-pointed star that adorns the grille of every Mercedes, and no Mercedes would be sold in a Chrysler dealership. In 1997 Freightliner, a subsidiary of Daimler-Benz, had bought the heavy-duty truck operations of Ford Motor Co. in North America and renamed it Sterling. Daimler and Chrysler were not the only automakers seeking consolidation. Volkswagen AG paid Vickers PLC about $700 million (479 million) to buy British luxury carmaker Rolls-Royce Motor Cars Ltd., only to discover that it did not get the rights to the Rolls-Royce name or the famous insignia. Instead, VW was stuck with an old assembly plant and the rights to the venerable Bentley nameplate. It turned out that the jet engine maker Rolls-Royce PLC owned the rights to the name. Much to VW's embarrassment, BMW later bought the rights to use the Rolls-Royce name for only $66 million (40 million) and then granted VW the use of the name until 2002. In an ongoing effort to corner the market on famous high-end automotive brands, Volkswagen bought Lamborghini and Bugatti and also held exploratory talks to buy Swedish automaker Volvo. As the South Korean economy all but collapsed, automakers there scrambled to survive as best they could. Kia Motors Corp. was placed in receivership, and a round of bidding ensued to sell the troubled automaker. The sale went through three separate rounds of bidding before South Korea's Hyundai Motor Co. acquired a 51% stake both in Kia and in its truck-making subsidiary, the Asia Motors Co., for $951 million. Daewoo's chairman Kim Woo Choong (see BIOGRAPHIES) publicly announced that General Motors Corp. was going to buy one-half of his company, but GM officials denied those claims. Meanwhile, Daewoo bought Ssangyong, which made vans, trucks, and a limousine based on an older design of the Mercedes-Benz E-class. Samsung completed building an assembly plant in South Korea capable of building 240,000 cars a year, but at the end of the year it decided to swap all of its automotive operations for Daewoo's electronics business. Several multibillion-dollar mergers and acquisitions in the automotive supplier industry also took place in 1998. Dana bought Echlin for $4.3 billion and later purchased FMO for $434 million. German tire maker Continental AG bought the brake and chassis business of ITT Industries for $1.9 billion. French supplier Valeo SA purchased ITT's Electrical Systems for $1.7 billion. Federal-Mogul acquired Cooper Automotive for $1.9 billion. Du Pont Co. bought the Herberts group, which made automotive paints and finishes, for $1,890,000,000. The Lear Corp. purchased the seating operations from GM's parts-making operation, Delphi, for about $450 million. General Motors later announced that it would spin off Delphi as a stand-alone $32 billion company starting in 1999. Canadian supplier Magna bought Steyr-Daimler-Puch AG for $398 million. The Steyr operations included two assembly plants in Austria that made the four-wheel-drive versions of the Mercedes-Benz G-class and E-class, as well as the Jeep Cherokee and Mercedes M-class. This acquisition cemented Magna's strategy to become a supplier with the capability to design, engineer, and manufacture entire vehicles. Throughout the year automakers announced future contracts with suppliers that would employ modular design. Rather than build cars one piece at a time in their own assembly plants, automakers increasingly ordered suppliers to make modules, groups of parts that are assembled into one entity. "Corner modules," for example, emerged as a particular favourite among automakers. Such a module consisted of the brakes, suspension, and shock absorbers, which the supplier then delivered as a unit to a car company's assembly plant. All the automaker then had to do was bolt the modules onto a car, thus greatly simplifying the assembly process and reducing costs. Ford began building an assembly plant to make modular cars under a plan it code-named the Amazon project. GM, already underway with a Brazilian project it code-named Blue Macaw, also proposed to the United Automobile Workers (UAW) that it bulldoze four small car plants in North America and replace them with smaller modular plants. Dana began supplying "rolling chassis" to a new Chrysler assembly plant in Campo Largo, Braz., signaling a new method for building vehicles. At a small, nearby plant of its own, Dana installed most of the components that comprise a truck chassis, including the axles, brakes, suspension, wheels, and tires. It then shipped the chassis to Chrysler's plant, where it was rolled to the assembly line. Chrysler then bolted the body to the chassis and installed the interior, and a new Dakota pickup truck was ready for sale. Other automakers announced their interest in the "rolling chassis" concept. Since a supplier would do a substantial part of the assembly work, it would allow the automakers to build smaller assembly plants with fewer workers. Analysts pointed out that the unions were likely to fight this move, viewing this outsourcing as a tactic to deplete their memberships by as much as 30%. Ford announced significant management changes that resulted in a member of the Ford family being named to run the company once again. William Clay Ford, Jr., a great grandson of the founder of the company, was to become chairman of the board on Jan. 1, 1999. Jacques Nasser was promoted to president and chief executive officer. Ford moved the headquarters for its Lincoln-Mercury division out of Detroit to Irvine, Calif. General Motors was dogged throughout the year by press reports detailing management friction between GM Europe (GME) and its International Operations (IO). GME argued that it was sacrificing too much of its engineering resources to satisfy the growing global needs of IO. GM's management reassigned the president of GME to Russia and moved the headquarters of IO from Zrich, Switz., to Detroit. It later initiated a major corporate restructuring wherein it merged its North American Operations (NAO) with IO. Richard Wagoner, the former head of NAO, was named president of the company. The UAW went on strike against GM in June in what became the most severe work stoppage at the company in nearly 30 years. When General Motors was unable to persuade the UAW local at its Flint (Mich.) Metal Center to agree to work changes designed to improve productivity, it transferred stamping dies from that plant to another in Ohio. That triggered an immediate strike at the stamping plant in Flint, and the nearby GM Delphi Flint East plant that made spark plugs and oil filters initiated a sympathy strike. In a matter of weeks the lack of crucial parts made by the plants on strike shut down almost all other GM manufacturing facilities. The strike lasted 54 days, idled more than 190,000 GM workers, and cost the company about 325,000 units and nearly $3 billion in net profits. GM executives said the company would be able to make up much of the lost production with heavy overtime, but by the end of the year GM was still struggling to recapture lost market share. In an effort to avoid another crippling strike, especially with its three-year labour contract due to expire in 1999, GM recalled Gary Cowger, an executive with extensive manufacturing and labour experience, back from GM Europe to run its Labor Relations department. One of the year's most notable product developments included the much-anticipated debut of the new Volkswagen Beetle. Based on VW's Golf model and built in Mexico, it became an instant smash hit in the American market. VW soon began exporting limited quantities to Europe, where it also received rave reviews, prompting the company to explore adding manufacturing capacity to build the car there. Toyota introduced the luxurious Lexus RX-300, known as the Harrier in Japan and other markets. This featured the body of a sport utility vehicle mated to a passenger-car platform. It represented a new entry in a new market segment that was dubbed "sport wagons," which many analysts expected to become a harbinger for the future. Cadillac introduced the first automotive application of night vision. This was an infrared device that greatly enhanced a driver's vision in darkness, fog, or rain, thanks to a screen that sat above the dashboard. Developed by Delco Electronics and Raytheon, General Motors had been working on the device for almost a decade. The California Air Resources Board announced that it would require large sport utility vehicles and pickup trucks to meet the same emissions standards as passenger cars by 2004. Automakers vehemently protested the ruling, arguing that these trucks were used for workloads, such as towing and hauling, that passenger cars could not accomplish. They also argued that they did not know how to meet those standards for trucks with large engines. The board countered that a large number of these vehicles were used for general driving purposes, and that their growing popularity forced the state to impose stricter standards in order to preserve its improvement in air quality. Automakers feared that if California proceeded with the regulations they might be adopted by other states, eventually depriving the car companies of a popular line of vehicles. Sales in Europe rose 6% to about 14.7 million units, as the passenger-car market continued to recover. The strength of the European market helped Volkswagen surpass Toyota to become the third largest automaker in sales volume behind GM and Ford. Sales in Japan, however, slid about 13% to about six million units for the year, as the economy failed to recover. Automakers in Southeast Asia and Brazil found themselves temporarily closing their assembly plants, as the economic crisis in those regions paralyzed their economies. As truck-type vehicles accounted for nearly half of all new vehicles sold in the U.S., large sport utility vehicles came under increasing scrutiny by the National Highway Traffic Safety Administration. The government agency worried that the large vehicles posed safety hazards to passengers of small cars and began exploring ways to force changes in bumper heights to minimize the dangers that these trucks posed. Strong vehicle sales in the U.S. market confounded the experts. Most automakers started the year fearing that the economic crisis in Asian and South American economies might cause the U.S. economy to slow. By early spring most automakers were increasing their sales incentives. GM, Ford, and Chrysler began offering "loyalty coupons" to former customers with the intention of luring them back into their showrooms. Most analysts pointed out that sudden surges in incentives that artificially increased demand usually resulted in a period immediately afterward when sales would dip below their normal trend and thus predicted that sales would slow later in the year. The market, however, continued to gain steam, and by the end of the year sales had reached 15.9 million units, a surprising 4% increase and the second best year in the history of the industry. Analysts credited the strength in the market to low unemployment, low interest rates, and flat car prices. JOHN MCELROY Beer. Brewers did not just seek the right formulas for their products in 1998--they sought identities and purposes that would perk up sales and propel them toward a healthier sales environment in the first part of the new century. While Anheuser-Busch maintained its position as the world's preeminent beer marketer, it demonstrated an awareness that, despite the seemingly endless double-digit volume gains for Bud Light, its existing brand portfolio--most specifically, Budweiser--did not necessarily reflect the changing tastes of beer drinkers. Consequently, the firm began the aggressive testing of Tequiza, a tequila-flavoured brew with a hint of lime that was designed to lure U.S. drinkers away from the explosively popular Corona Extra. That Anheuser-Busch was a major stockholder in Mexico's Grupo Modelo, exporter of Corona Extra, revealed the complexity of the fight for market share. Corona's gain in the United States, while a plus for Anheuser-Busch's share in Modelo, came at the expense of its own products at home. Meanwhile, Corona seemed to be making itself at home in more places in 1998, usurping the number one import ranking in the U.S. from Heineken and passing several competitors to become the fifth largest beer brand in the world. The momentum of Mexican beers was felt at Modelo rival FEMSA, where the brewer of Dos Equis and Tecate increased production to meet international demand. Another noteworthy Corona-related development was the decision of one of its U.S. importers, Gambrinus, to buy one of the best-known American microbrewery labels, Pete's Wicked Ale. A few years ago craft beers such as Pete's were seen as the rising tide lifting imports from the U.S.; in 1998 that situation was reversed, as many U.S. consumers shifted to beers brewed abroad. The beer of the 21st century may well be delivered to its drinkers in a plastic bottle. Several major brewers tested different resins to determine whether such packaging would retain the product's all-important freshness. They included Bass in the U.K. with its Carling Black Label brand and Miller Brewing, which offered Lite, Genuine Draft, and Icehouse in plastic in some U.S. markets. GREG W. PRINCE BUILDING AND CONSTRUCTION The U.S. government reported that a seasonally adjusted annual rate of $660.6 billion of construction had been completed in 1998 by September, a 6% increase over the September 1997 figure. The National Association of Home Builders reported in October an annual pace of 1.6 million housing starts, on track for a 7.9% increase over 1997. Several large public works projects in the U.S. made significant progress during the year. Boston advanced its Central Artery Project, a multiyear, $10.8 billion effort to relieve downtown traffic congestion. Denver, Colo., tried to improve airport access, opening two sections of E-470 in June. The privately financed toll road connected rapidly growing suburbs east and south of the city to Denver International Airport. Los Angeles pushed forward with the long-awaited Alameda Corridor project, a plan to ease freight deliveries to downtown from the ports of Los Angeles and Long Beach 32 km (20 mi) away. The road-and-rail combination was designed to consolidate three freight routes into a single corridor by its 2001 completion date. In Phoenix, Ariz., the Arizona Diamondbacks major league baseball team opened a 48,500-seat stadium in March. It was the first U.S. stadium with natural grass under a retractable roof, which was designed to open or close in five minutes. The $354 million stadium's air conditioning system was designed to cool the seating area from 110 F to 80 F (43 C to 26 C) in less than four hours. Other stadiums with retractable roofs were being planned in Seattle, Wash.; Milwaukee, Wis.; and Houston, Texas. In the November elections voters approved measures to fund new baseball parks in Cincinnati, Ohio, and San Diego, Calif., as well as a new football stadium in Denver. In July Hong Kong opened Chek Lap Kok Airport, the heart of a $21 billion transportation system. For the passenger terminal British architect Sir Norman Foster designed the largest enclosed space ever constructed, big enough to house five Boeing 747s tip to tip. Despite problems with the baggage-handling system on opening day, the airport soon began to serve an estimated 35 million passengers a year. It was designed to handle up to 87 million passengers a year eventually. Asia's financial crisis entered its second year, causing many large projects to be abandoned or scaled down. Hong Kong-based infrastructure entrepreneur Sir Gordon Wu Ying-sheung suspended work on the 1,320-MW Tanjung Jati B coal-fired power plant in central Java. The project was 70% completed, but Sir Gordon, chairman of Hopewell Holdings Ltd., said in September that Indonesia's economic depression had caused financiers to lose confidence. Hopewell paid $230 million to win the 30-year build-own-operate contract and could lose as much as $620 million. Another of Sir Gordon's high-profile projects, a railway in Thailand, was also on hold. In May the European Parliament opened a new headquarters building in Strasbourg, France. The complex, designed by Paris-based Architecture Studio Europe, was supported by a 45,500-cu m concrete mat resting on piles driven 14 m deep. (1 cu m = 35.3 cu ft; 1 m = 3.28 ft.) Walkways connected a 17-story cylindrical office building to the debating chamber, a 42-m-tall steel and concrete elliptical "egg" with an exterior covered with cedar and oak planks. ANDREW G. WRIGHT Ceramics. The ceramics industry demonstrated significant growth in 1998. Strong manufacturing economies in the U.S. and parts of Latin America generated double-digit growth rates for some segments of the industry, and recovering economies in the European Union brought about improved performance there compared with 1997. Difficulties continued in Asia (notably in Russia and other countries of the former Soviet Union), which accounted for nearly one-third of the global ceramic market, and in certain areas of Eastern Europe. In the U.S., where glass (q.v.) was considered part of the industry, total industry sales rose to nearly $95 billion, with glass accounting for 60% of sales, and the advanced ceramics segment continuing its growth to 28%. Advanced ceramics, highly engineered materials that enable the operation of many industrial and consumer processes, grew strongly in 1998. Electronic materials dominated this category (about 75%), and the high growth rate of computers and communication equipment caused electronic ceramics to be the fastest-growing major product sector. Multilayer ceramic capacitors continued to gain market share through a reduction in thickness, and demand for these widely used components outstripped supply. A new automobile, for example, used 1,000 such capacitors on average. Explosive growth in wireless communication stimulated double-digit growth in the production of capacitors, piezoelectric crystals, varistors, thermistors, and similar ceramic components, many of which were used in mobile phone handsets. On the other hand, the growth of multilayer multicomponent electronic packages was disappointing, and the production of conventional ceramic packages for integrated circuits continued to stagnate because of competition from polymer composite packages with improved heat-removal capabilities. Advanced structural and composite ceramics, historically limited to cost-insensitive aerospace and military applications, continued steady market penetration in industrial sectors due to lower costs and higher product reliability. The most successful approaches to achieving lower costs centred on dimensional control and net-shape fabrication to minimize machining and finishing expenses. Intrinsic reliability of materials moved incrementally forward via improved powder processing, although the unpredictable nature of ceramic strength and failure continued to limit applications. The use of silicon nitride ball bearings increased by more than 10% for a second year in a row owing to improved reliability, reduced costs, and greater customer acceptance. Ceramic turbochargers, valves and valve-train elements, and assorted combustion chamber components were gaining acceptance and were being used by automotive manufacturers principally in Japan and Europe. Ceramic catalysts, a mainstay of automobile ceramics in the U.S. since 1975, were being used to clean factory smokestacks of pollutants. This market, as with automotive catalysts, was expected to be dominated by extruded ceramic honeycomb catalyst structures with wall thicknesses as small as 50 mm (0.002 in), a value thought impossible a decade ago. The most notable examples of commercialized ceramic matrix composite materials were silicon carbide/alumina cutting tools that were used increasingly for machining cast iron and for high-velocity cutting