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MCDONNELL DOUGLAS STOCK MOVES UP AMID RUMORS THAT A PLANT WILL BE SOLD

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McDonnell Douglas Corp.'s stock moved higher Friday as rumors and speculation about the struggling defense contractor's future continued to swirl.

The company denied rumors - circulated in the financial markets and phoned into news organizations - that it planned to sell its Long Beach, Calif., subsidiary, Douglas Aircraft Co., to Japanese industrial giant Mitsubishi Group and that Chairman John F. McDonnell would resign."McDonnell Douglas has no plans to sell Douglas Aircraft to Mitsubishi or to anyone else," spokeswoman Ellen LeMond-Holman said Friday. "The resignation of John McDonnell, there's no truth to that either."

On Thursday, the company denied rumors that it planned to file for bankruptcy court protection.

McDonnell Douglas stock was up $1.50 to $45.12 1/2 a share in afternoon trading on the New York Stock Exchange.

The rumors have been multiplying as McDonnell Douglas prepares for what it calls substantial layoffs in an effort to cut expenses by $700 million and help bolster its sagging financial performance.

The uncertainty surrounding those layoffs and other cutbacks have kindled the rumors, LeMond-Holman said.

"People are concerned for their jobs and what happens is that anything they hear, they tell that to someone else, and it's that feeding process, one rumor feeding off another," she said. "It's an unfortunate situation, but if we knew how to control rumors, then I guess a lot of people would want to talk to us to find out how to do that."

Howard Rubel who follows the company for the brokerage C.J. Lawrence in New York, said the rumors were helped partly by speculators who were betting on price movements in McDonnell Douglas' stock.

"Basically, speculators are playing games with each other," Rubel said. "It's sort of amusing but it's distracting, too."

Rubel said the rumors were "in the realm of fantasy" and guessed that the company was most likely to engage in layoffs among white-collar workers in areas of the business that haven't shown good returns.

LeMond-Holman also denied a rumor heard by some analysts that McDonnell Douglas had scheduled a news conference for Monday to announce specifics concerning the layoffs and cutbacks.

Paul Nisbet, of Prudential-Bache Securities, said employees likely were the biggest source of rumors.

"It starts at the water cooler and goes all over," he said.

McDonnell Douglas officials blame the layoffs and other cutbacks on the company's weak financial performance at a time that it needs cash to invest in new programs.

McDonnell Douglas earned $2 million during its first quarter, down 98 percent decline from a year earlier. The drop stemmed mainly from huge losses at the Douglas Aircraft unit, which primarily builds commercial jets.

The company, the nation's biggest defense contractor, also faces an uncertain future in the defense business as the Pentagon slashes spending.

While the company has not announced how many workers it plans to lay off, analysts are predicting 10,000 to 15,000 layoffs on top of earlier job cuts of 4,000 workers and 3,000 contracted workers at Douglas Aircraft. McDonnell Douglas now employs about 127,000.

The company faces serious cost problems on three military programs, the C-17 cargo plane, the A-12 advanced tactical aircraft and the T-45 Goshawk trainer.

It also faces large investment costs in its not-yet-certified MD-11 commercial jumbo jet and has experienced production problems with its MD-80 commercial airliners.