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Program: Tuesday, April 20, 2004
Fed.Chairman Alan Greenspan Hints Higher Interest Rates May Be On The Horizon
GM Gets All Revved Up Over First Quarter Earnings
One On One With MCI`s President and CEO Michael Capellas
The Rules For Overtime Get Re-Written In Favor Of Workers
Commentary: The Spirit of America
Paul Kangas' Stocks In The News
Market Stats
04/20/04: Fed.Chairman Alan Greenspan Hints Higher Interest Rates May Be On The Horizon
PAUL KANGAS: Alan Greenspan talks and investors run for the exits. The chairman of the Federal Reserve suggested in testimony on Capitol Hill this afternoon that higher interest rates could be coming, and stocks tumbled in the last hour of trading. The Dow closed off 123 points and the NASDAQ was down 41 points. Here`s Darren Gersh with more on those comments from the Fed chairman that rattled the markets.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sounding a bit like Bob Dylan, the Federal Reserve chairman told a Senate panel that the times they are a-changin`. after a brief slow down in the economy earlier this year, March was a good month. And in the last few weeks, the Fed chairman said, auto sales, retail sales and new orders all came in well.
ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: It is a change, as best as I can see, that has been long overdue and most welcome.
GERSH: Remember pricing power? Mr. Greenspan says it is being restored. Demand is now strong enough, the Fed chairman says, that after years of cutting prices, firms now find they can also raise them.
GREENSPAN: Threats of deflation, which were a significant concern last year by all indications, are no longer an issue before us.
GERSH: The markets took that as a signal that the Fed`s long-promised patience is coming to an end and the central bank is preparing to raise its short-term benchmark interest rate from a 46-year low of 1 percent. Fed watchers had been predicting Mr. Greenspan would give investors a clear indication of the Fed`s new position in the statement following its upcoming May 4 meeting, but even so, today`s news sent stocks and bonds tumbling.
MICHAEL FARR, PRES. , FARR. MILLER & WASHINGTON: I find the market`s reaction and drop today somewhat frustrating. This is a knee-jerk response to something that`s been long anticipated. There`s no real material reason for the market to have dropped today. Everyone has known this has been coming for a long time.
GERSH: And there was no signal today of a dramatic change in Fed policy. Despite rising commodity prices, Mr. Greenspan noted costs are still under control.
GREENSPAN: The inflationary pressures will be reasonably well-contained so long as productivity is moving at a reasonably good clip.
GERSH: Analysts say the tone of the economic data over the next few months will be the deciding factor for when the Fed moves to raise interest rates. Mr. Greenspan is expected to give a much more detailed outlook tomorrow when he testifies before Congress`s Joint Economic Committee. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
04/20/04: GM Gets All Revved Up Over First Quarter Earnings
PAUL KANGAS: Before Mr. Greenspan`s comments soured the markets, General Motors was the big engine of the Dow. GM shares surged 3.5 percent after the automaker announced surprisingly strong first-quarter earnings. The company also issued a more upbeat outlook for the year. Suzanne Pratt takes a closer look at what lies ahead.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Record results from its finance unit and improved sales in Asia helped General Motors accelerate profits in the first quarter. The world`s largest automaker earned $2.25 a share in the quarter, racing past analysts expectations, and far better than its performance a year ago. GM posted the solid quarter despite a drop in sales at its core North American unit and continued losses in Europe. But, Asia Pacific earnings more than tripled, and company executives say they are particularly encouraged about prospects in China.
JOHN DEVINE, CHIEF FINANCIAL OFFICER, GENERAL MOTORS: The growth has been substantial. Everybody`s waiting for it to end. I`m not sure that`s going to happen for some time. Our profitability has also been strong. We increased our market share in China to almost 10 percent. So we`ve grown from literally zero a couple years ago to almost 10 percent today. Profits are really on top of that. So it`s a pretty good outcome.
PRATT: Thanks in part to the positive environment in Asia, GM lifted its full-year profit forecast, saying it will also benefit from the robust U.S. market, the company now expects to earn $7 a share in 2004, up from its previous target of between $6 and $6.50. Analysts say higher interest rates are likely to take a bite out of auto sales this year, but higher rates will also help reduce GM`s pension and healthcare costs.
DARREN KIMBALL, AUTO ANALYST, LEHMAN BROTHERS: Higher interest rates are a negative for GM, but, they`re probably not -- the negative is probably not the magnitude that Wall Street fears right now, because you do have that significant mitigation from the pension and healthcare liability side of the equation.
PRATT: Lehman Brothers has an investment banking relationship with GM and owns at least 1 percent of GM stock. GM shares revved ahead on the news. And the stock has gained about a third in the last year. Nevertheless, some analysts say it`s now almost fairly valued.
KIMBALL: We are not uncomfortable with the company`s guidance, and our official price target on the stock is $50, modestly ahead of where it is trading today.
PRATT: GM`s big news also boosted the shares of Ford (F) and DaimlerChrysler (DCX). Ford will release its quarterly earnings tomorrow, and Chrysler is scheduled for next week. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
04/20/04: One On One With MCI`s President and CEO Michael Capellas
SUSIE GHARIB: MCI rose from the ashes of the bankruptcy of WorldCom today. The company has shed its scandal-tainted name and it also has a new board and management team. The bankruptcy process allowed it to slash its debt from $41 billion to about $6 billion, and to slim down its workforce. Analysts say the challenge now will be for MCI to compete in an increasingly competitive telecom industry. And the company has already warned that it expects revenues to drop as much as 12 percent this year. This afternoon, I talked with MCI`s President and CEO Michael Capellas, and began by asking him about his plans to grow MCI.
MICHAEL CAPELLAS, CHMN. & CEO, MCI: I think you had a couple things going on. One is, there`s no question that the industry has gone through some structural changes. Pricing is tough. We`re seeing some technology displacement, whether it`s wireless or cable. But there`s also some areas of growth. For example, we`ve got a great presence internationally. We have got some great opportunities to grow, not only a better share of our international customers, we still service about 65 percent of the Fortune 1000. There`s some great opportunity in pan-European operations. Clearly the good news on the other front is that people will continue to use more and more communication, whether that`s in different forms, new things like streaming video, streaming audio, content management systems. So there will be growth. Coming out of bankruptcy, we think we have some opportunities to grow in some managed services, like security, which is an absolutely number one priority. So you`re going to have some period where you`re offsetting some areas where there has been softness in traditional long distance, and some growth in some other areas. But the industry has got to take some time to sort out over the short term here.
GHARIB: Mr. Capellas, as you mentioned, about the pricing pressures, in fact, Sprint (FON), when they came out with their earnings today, were -- was commenting about the intense price competition. What`s going to be your strategy to deal with that kind of market?
CAPELLAS: Well, firstly, I don`t think the pricing pressure is new. It`s been going on for some time. Every enterprise customer is hotly contested. So I mean, there`s two ways to deal with it. One is to acknowledge that there is, you know, strong pricing pressure at the commodity layer, the basic transport layer, things like just basic long distance, but to understand that you really have got to sell more services, security services, outsourcing of people`s networks, new content management systems, delivering those kinds of things. So you know, it`s like every technology, as it sort of matures, the base level starts to have pricing pressure and you have sort of got to move up the stack.
GHARIB: I understand that Richard Breeden is going to continue as the court-appointed monitor at MCI for a while longer. How is that going to limit your ability to make fast decisions in a market that`s moving so quickly?
CAPELLAS: Well, you know, I think Richard and I have always had, sort of, you know, a really, really good relationship. And I don`t ever feel at any point he actually limited our business decision-making. He`s a very good adviser. I can reach him any time we need to. But from the business side, we feel that we`ve been able to do all the things we need to do. And I don`t really feel it`s a problem at all. In fact, we actually have quite a very, very good relationship.
GHARIB: Mr. Capellas, as you know, the former WorldCom CEO, Bernie Ebbers, is facing criminal charges. With that looming in the background, his fraud case, what impact is that going to have on the new MCI?
CAPELLAS: I don`t think it has any impact at all. I think we have undergone a fairly thorough investigation by multiple parts. I think everything that -- we have nothing to hide. So the history has all been written. And that`s all sort of behind us and we`re moving on. I don`t think -- I think now the courts will decide, as they should, but that`s in our history and it`s all been fully disclosed.
GHARIB: What about the future of MCI stock? To what extent will this whole scandal still be an issue for investors as they look at MCI?
CAPELLAS: Well, again, I think you sort of have gone through the cleansing process we`ve gone through. You know, we`ve had pretty much a couple different people have gone through, whether that was Mick Lucas (ph) at Thornberg (ph), and told the story. We`ve taken the corrective actions. We have a new management team. We have a new board. And I think we`ve done a pretty darn good job of putting that sort of in the rear-view mirror. Now people will sort of judge us for what we do. And I would add from the customers` perspective, it`s just incredible how they`ve stayed with it, how strong customer loyalty has been. So that`s just something as well.
GHARIB: Thank you very much, Mr. Capellas. And good luck to you.
CAPELLAS: Thank you so much. And we hope to see you again. All the best.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
04/20/04: The Rules For Overtime Get Re-Written In Favor Of Workers
SUSIE GHARIB: Good news tonight for millions of Americans, they could be eligible for some extra money in their paychecks. The Labor Department issued new rules governing overtime pay. The guidelines have been in the works for two years, and today`s version is a different plan from the first outline discussed a year ago. Stephanie Woods reports.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Workers earning nearly $24,000 a year will be guaranteed overtime. Overtime pay for police, firefighters, medical technicians and nurses is also protected. The Labor Department says the goal is to strengthen overtime protection for workers.
ELAINE CHAO, SECRETARY OF LABOR: Under these final rules, workers will clearly know their rights and employers will know their responsibilities.
WOODS: An additional 1.3 million low-wage salaried workers will now be entitled to overtime pay. That`s a huge shift from the proposal announced last year, which the department said would have stripped those benefits from 644,000 workers. The new rules also let workers who earn up to $100,000 a year rack up overtime, more than a 50 percent increase from the original proposal. Critics say the changes are a step in the right direction, but the administration should do more.
CHRISTNE OWENS, DIRECTOR, PUBLIC POLICY, AFL-CIO: If you`re going to protect some workers, it sends a disconcerting signal about the workers who are not explicitly named.
WOODS: The Labor Department estimates businesses will pay an additional $375 million annually in overtime. Business groups say the plan should be good for business in the long run.
MICHAEL EASTMAN, U.S. CHAMBER OF COMMERCE: It should be easier for them to determine whether or not their employees are exempt or entitled to overtime. And therefore, they will be able to take that money that they have been spending on consultants and lawyers and use that money to grow their business and create jobs.
WOODS: Democrats blasted the plan.
SEN. TOM HARKIN (D), IOWA: The final rule released today takes some steps towards fixing the administration`s worst PR problems, but it`s clear that workers who currently receive overtime pay -- many workers who now receive overtime pay, will lose their rights under this regulation.
WOODS: The plan is set to go into effect mid-August. It doesn`t need congressional approval, but Democrats are promising to block any rules that take away any worker`s overtime pay. Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
04/20/04:Commentary: The Spirit of America
SUSIE GHARIB: Tonight`s commentator takes a look at American involvement in the war in Iraq, but from a very different perspective. Here`s Daniel Henninger, deputy editor of the editorial page of "The Wall Street Journal."
DANIEL HENNINGER DEPUTY EDITOR, "WALL STREET JOURNAL" EDITORIAL PAGE:: I wrote a column for "The Wall Street Journal" about the war in Iraq, the war that people argue about on television every night. By now, everyone is either for this war or they hate and oppose it. But maybe a middle ground is possible. My column wasn`t about the right or wrong. It was about a remarkable group called Spirit of America, started by a businessman in California named Jim Hake. Jim found out that the American GIs in Iraq had rebuilding projects for which the bureaucracy is ill-equipped to help, small stuff like supplies for schools and medical clinics. The Spirit of America project I wrote about was an effort to raise money here to equip seven small TV stations over there. Marines would rebuild the stations and turn them over to Iraqi cooperatives. Now, I`m not here to ask for money but to make sense of what happened after the column. The response was huge. Given a chance to help the Marines in a nonmilitary way, thousands gave. Why? Partly, I think it`s the weird media age we live in. The closer events like this war are brought to us, the more disconnected they seem from our lives. In World War II people helped in small ways. We just sit home staring helplessly at the soldiers on TV. This project gave folks a chance to get off their hands and touch those GIs. We`d be a better people if we had more chances like this to extend a helping hand to our men and women in Iraq. I`m Dan Henninger.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
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This was meant as a positive thread. If you wish to make political comments, please start your own thread. There are many good people out there who are not just interested in supporting the troops but in helping the Iraqi people as well.
Thanks