tv Bloomberg Bottom Line Bloomberg April 24, 2014 2:00pm-3:01pm EDT
>> from bloomberg world headquarters in new york, i'm mark crumpton and this is " bottom line." 'sday, general motors first-quarter profit the estimates. then government regulators consider new rules on internet traffic and payment. .nd ambulance fraud and overuse how prevalent is it in the united states? to our viewers in the united states and those of you joining us from around the world, welcome. we have all coverage of the top stories making headlines today. megan hughes reports on the bow and thethe fda
e-cigarette industry. and the fcc's proposal for pay for priority internet standards. let's begin with matt miller and gm's first earnings report since its ignition switch result -- recall. gm did better than analysts protected. >> it did, but those numbers were brought down substantially before the report date. earnings pert the share. the adjusted number came in at $.29 compared to what was expected to be only four cents, so analysts were expecting less than a nickel. they've lowered their estimates reportng into guarding's this morning. on the revenue side, general motors actually missed, but only by a little bit. we are looking for 37.9. the problem -- the recall in north america, a huge
at 1.3 billion dollars and they are losing money in south america as well. highlighting the benefits for general motors, those big trucks you see driving around, they make gm a lot of money. make morestimate they than $10,000 on the big truck and on the big suvs like the yukon and suburban, where they really own the entire market. they have almost no competition. to the incoming cfo, chuck stephens, and listen to what he had to say. if you exclude the impact of the recall campaign year-over-year with margins just under eight percent, growth in china earnings were up just under nine percent. when we look at our expectations and the performance we saw in q1, broad-based performance
across. >> the recall is something already everybody knows about, today, stock falling down about 1%. if you look at the last year today, they've taken an even bigger hit, down 17%. >> what should investors be looking out for going forward? >> there are a couple of concerns for investors. far asworst behind gm as the cost related to recalls? investors don't believe one point $3 billion is going to be enough. is a going to hurt sales going forward because in the last quarter, you didn't have the recall effect on consumers minds stillh all stop they were buying a ton of silverado's and impalas. they are great cars, but will it hurt your brand? has the corporate culture changed? you heard mary barra saying new gm, old gm, so is there really a
difference? do they get the message and have they changed the way they operate the company? >> tank you so much. more on gm is coming up with brian johnson. report, heday's lowered his earnings estimate to a penny per share loss from a 20% -- from a 27 robin. i will speak to him in about 10 minutes. in other news, a big change in direction that the federal indications commission when it comes to policing the internet. for the first time, the commission is set to look at new rules that would allow rob van providers to charge companies for access to faster service. with a more on that story from washington. vix say the proposal would break the internet, but what is the s -- the fcc chairman saying? >> yesterday, he called them flat out wrong and today, he said there's been a great deal
of misinformation. a blog post late this morning following news and reaction to the proposed rules and yes, a lot of that has been criticism. what are we talking about here? wheeler will share with his colleagues what is known as a notice for proposed will making to ask for any web content they want, but for the first time, internet service providers will be able to charge a premium to companies like that flicks and amazon who want or contact access to the fastest speed. fcc's this under the watchful eye as they decide on a case-by-case aces if each deal is commercially reasonable. this follows two failed attempts by the commission to put new net neutrality rules in place when each other time, federal courts attend -- essentially tossed
them out after challenges from broadband providers. this time, he's trying to find a safe, legal ground between internet companies and rod bad providers. according to an fcc official, chairman wheeler is moving quickly and aggressively to withstand any further judicial scrutiny and do good on obama's campaign promise of net neutrality. the fcc will post its tentative agenda later today for its first open meeting on may 14 and that will include the latest proposal and wheeler will push for preliminary votes at that meeting with the goal of having the role -- having the rules in place by the end of year. >> internet advocates are making their voices heard. what are they saying? solution that a consumer groups wanted. that the fccdged is inviting isps to pick winners and losers online. very essence of a commercial
reasonableness standard. the core of that neutrality is nondiscrimination. this is not net neutrality. they and others are promising to challenge the proposal, so no matter what the final rules will look like, this is wobbly headed back to court. >> the question now is what constitutes commercially reasonable. >> that is the question. it's the question coming up in a conference call with reporters. the fcc will establish a high bar, but we don't know what that might entail. they were referencing rule-making and public bait that comes with it, assuming the draft does go forward. they say that public comment will play a big role in shaping what the rules will look like. big news also tracking for the e-cigarette industry.
e-cigarettes and cigars will face regulatory oversight under a new proposal from the fda. megan hughes joins me now. date keeping does the fda want to do here? fewhere would be quite a changes under this proposed regulation. companies would have to pass a review to stay on the market and tell the fda about their ingredients, about details, about the compounds in these papers. it would limit sales to minors which has been a big concern and and free samples and bad e-cigarettes in vending machines and establishments young people can access. it would also require nicotine addiction warnings. argaret hamburg spoke on conference call in the past hour about the research that needs to be done all stop she said until now it has been like the wild, wild west in terms of regulation. >> to date, the agency has not been able to fully affect the public health impact of ,nregulated tobacco products
including the alarming increase and use use of certain unregulated tobacco products like e-cigarettes and certain types of cigars. does notoday's postal do but what they have been pushing for is changes to candy flavor, marketing and tv ads. thatsaid on the call today it may go down the road of the agency does that. it's the first look at the growing market. sales tripled last year in e-cigarettes 2115 lien dollars. the devices reduce an inhalable vapor or that mimics smoking and leaves out torrent chemicals but still delivers nicotine. at the concern. these rules are not the final word. it will be open for public comment for 75 days. then we will get to a final rule and then there's a chance the
company could sue. >> what is the market impact done for companies like altria growthre >> estimates on have already been revised downward because of what we see on the state level. there is some expectation that smaller companies may be pushed out of the market, so that may be something to watch. is the industry's argument here? is there a case to be made that these are a tool to help people quit? fax the industry would not make that argument because it would mean this is essentially a drug and that could mean more regulation. but we did hear today that the company is taking steps to prevent minors from buying products. it supports the fda approach that these are meant for adults. shows the survey
>> we have breaking news -- word from washington that the senate banking committee is scheduled to vote on three fed nominees. michael mckee joins me now with more on that story. >> set to vote doesn't exactly mean the same thing as it does in washington as it does here. they're going to vote for us -- on thenley fischer to be
fed and for jay powell to be reconfirmed. he is still serving but his term has run out and he would be able to continue on in the role. this is the day the fed and its next meeting. this is only the banking committee. recently they will be approved but they will not be confirmed by the senate in time to participate. >> what has been the holdup? >> just sent a bureaucracy. they're finally getting around to a vote but leaves the fed to members short. we've also had jeremy stein leave and ben bernanke has not been replaced. this would only bring the fed up to five members, leaving them to short. some community bankers are under consideration. we have not had one on the board since susan by club. but we do not have any indication of when the president might make those nominations. lex -- >> thank you so much. general motors avoided posting
its second quarterly loss since bankruptcy thanks to higher prices on its new pickups. said autoson is is ant -- brian johnson auto analyst from barclays. welcome to "bottom line." officer himinancial a check stevens, says clearly the headline results are overshadowed by the recall campaign charges. without the recalls, how strong a corner would have gm had? was $.29 even adjusting for some of the one-time items, so it was actually a fairly strong quarter and most of the regions. north america came in much better than we expected. it shows that a pickup trucks, while not getting the share we have been hopeful for have been getting the price.
thanuld be less of a loss that did. stalledich has been around 400 to 500 million despite growing sales actually posted 600 million equity in club -- equity income. >> gm is getting $200 more for its vehicles on average than it and $5,000 more for its pickup trucks. is that enough to offset the 1.3 billion dollar charge for the recalls? the 1.3nough to offset billion dollar charge for recalls, but in terms of thinking about gm for the remainder of the year, it's a fairly healthy price increase and does balance some of the loss of sure they had. event before the ignition switch recall, gm was trying to lower expectations for this year. why? >> i think you had a couple of things. first, you had macro
deterioration in south america and emerging markets. despite there consists -- despite their continued solid performance, you have the rest of asia pacific deteriorating and you have south america deteriorating. saying this for a while, people have the right expectations of price versus share in the pickup truck market. they give up some share in the process of doing it, so we think the market has to take us into account and market probably got ahead of itself. >> gm sales showed a jump in china but the international unit saw decline. disparity? >> you've got to different regions. you got china where they are doing well in terms of sales momentum and they are keeping up and even outpacing the market this quarter. they are actually improving their margins or improving their
profit contribution. rest of asia is a different story. the export model heading to europe under the chevrolet brand, the rest of the markets, they don't give us details, but we know the makers are struggling with the currency and the demand picture there in the flood of japanese imports into the market. other markets like thailand and india have generally disappointed most automakers. >> the ceo has said in a prepared statement that gm's or formants reflected what she called the positive performance of customers to the new vehicles we are bringing to market. our consumers giving gm a vote of confidence? >> so far in the quarter they did.
wanting to look at april sales and may sales to see what impact all of the headlines which seem to be fading a bit will have on the brand equity and sales in the u.s.. >> talk to me about the chevy silverado. that sold for higher prices than the previous version. what kind of a lift did that give to gm? >> overall, they produced about 250 thousand pickup trucks and suvs last quarter. thousandt in for every dollars additional price they get, that's $250 million of profit contribution. driverfairly significant to the bottom line. remember we were at the low end, so there were 700 million -- 700
oem dollars of material costs. 700 million dollars net and we were not at all surprised by that. shifted and you have a better powertrain, better interior, better connected car content. new gm versushe old gm debate. they were putting money in the product and rewarded with that in the show room sticker. >> we have less than a minute left. i want to get back to mr. stevens because he declined to forecast future recall related cost. he said the charges we have taken are based on what we know today. , wedded as issues come up will deal with them aggressively and put our customers first. there's something in the translation there that there's the possibility they may be dealing with this for some time, maybe a bit longer than they thought. >> i will tell you what we have in our model.
we have the 1.3 billion this quarter and then we are putting in about 2 billion to 3 billion this year. .eally for the litigation typically, companies don't want to include things like a federal fine. when i heard them say that, there may be some cost but it is not appropriate to comment on. thank you. up next, we will get you and on the markets up eight for this thursday. ♪
>> coming up on 26 minutes past the hour, that means bloomberg television is on the markets. let's look at where stocks are trading right now. we have a mixed picture right now. we've seen stocks increasing but the dow jones has turned lower. some stocks lower today, led by verizon even as tech heavyweights like apple and facebook are up on the backs of earnings. many stocks we are watching our earnings related. cap pillar eat top and bottom line -- caterpillar eat top and bottom-line estimates. forecasting its construction business should improve but the mining business continues to disappoint. mining, we are watching freeport mac brand. they beat first-quarter earnings estimate aided by the energy companies it bought last year. that helped offset lower copper prices and lower copper output in indonesia.
>> welcome back to the second bottom-line" on bloomberg television. i'm mark crumpton. with checksum of the top stories we're following. as trade to go shooters struggled to come -- to overcome france's, president obama said the trade deal is not in danger. he urged japan to take bold steps in agreement to his agenda in the region. both sides appeared to be eager to show progress before the president departs tokyo friday morning. rush's minister announced new exercises along the military --
military exercises along the border after ukrainian troops killed pro-russian insurgents in eastern part of the country. it was the first since the active president ordered the resumption of military operations in eastern ukraine are pro-russian protesters and masked gunmen have seized government buildings in at least 10 cities as set up roadblocks. seekinger of people u.s. unemployment benefits surged by 24,000 to a seasonally adjusted hundred 29,000 last week. the game likely reflected temporary layoffs in the week before easter. applications can be volatile around easter because many school systems temporary -- temporarily layoff strivers, cafeteria workers, and other employees during spring break. export-import bank of the united states is hosting its annual conference in washington today and tomorrow. jon huntsman took part in the global challenges and trends battle this morning. he's chairman of the atlantic
council, an organization promoting construction -- constructive readership international affairs. he joins me now from our washington bureau. welcome to "bottom line." thank you for your time. you were part of the panel today that looks at global challenges, particularly as they relate to american companies. what trends do you see and how will they impact growth through the end of this year? are going the trends to be based on election because you have leadership changes in many parts of the world, certainly in the asia-pacific region. you have important elections in india and in tunisia and leaders in their second year in office. i think you will be a mix of people consolidating power and being elected a new. a lot of the economic activity beyond that which just goes on a day-to-day basis will have a lot to do, certainly in the asia-pacific region, was how
effective the united states is in promoting trade. the transpacific ardor ship, if that is to take flight, which will be a very difficult thing to do given the mood in congress could stimulate trade in a big way, which is a job creator here at home. that's a big question and may be pushed off to 2015. >> china's ascendancy in the region is reflected in efforts to complete what you just referenced. the deal would involve 12 nations, including the united states. tona was not invited participate. what with the completion of deal mean for washington and does beijing see it as an economic threat? >> the deal would be good with just the 12 nations being looked at. but i have to tell you without china somehow factored into a long-term strategy, it would be a huge headache, if not -- if not downright harmful. a big thing for
washington to be bringing china into some sort of closer economic collaboration, maybe through a bilateral investment treaty, spend a couple of years doing that to make more efficient power flows of investment, recognizing how it is done in the modalities by which it is done to stop then to have a date out in the future where china could be a full participant in the pacific framework. i'm fearful of that doesn't happen, china will create their own counterweight. that would be in competition to the ones we are creating and they can have all kinds of traded inefficiencies which would result. >> we should mention obviously because you're not speaking from the abstract, you're the former u.s. ambassador to china, so you know this on an intimate level. as the geopolitics lays out, what do the white house and congress need to do to develop export opportunities in china?
>> a lot of those opportunities are going to appear themselves. we need to be aware of them and hopefully build on the opportunities that will naturally exist. i say that because china is moving from an investment led export machine, to a consumption model where they have to expand business and move incomes of the latter. and they are going to consume more and have more of an appetite for u.s. products. opening fors a huge the united states. i don't care if you are a republican or democrat, this will be a reality for us. >> the export-import chairman says the united states stands to lose business to china, russia and france if they don't renew the charter. gain an edge of congress fails to act on the bank's charter? >> the bank has been an important part of our export economy since the 1930's. last i looked, it had not returned a billion dollars to
the treasury in fiscal year 2013. i think it supports couple hundred thousand jobs. conclude that china has a similar support structure. player inevery major the put a -- any asia-pacific region would have something similar. without it, we would be disadvantaged somewhat. there just certain export credits regular commercial banks are not going to engage in and that leaves a huge hole in the market for somebody. if we are not there on the competition would pick it up and that would not be a good news story. >> the main beneficiaries are bowling, kellogg put -- had a pillar, and general motors. the tea party says this is an example of corporate welfare. do these companies really need government support? >> of course they don't always need government support. they are competing against other companies abroad receiving export credits and subsidies that give them a distinct advantage in the marketplace. i am one who is in favor of
phasing out all corporate subsidies. i think that's not a good thing longer-term but we have to recognize we are in a very competitive world and you unilaterally disarm. these things are nice to talk about it get you good applause line that a town hall meeting, but we are in a hypercompetitive world need to recognize what the competition is doing and seek to meet them toe to toe in the marketplace. right now, it would be a disadvantage if we were to withdraw support. platforms so mike a and as you know, your name comes up when the discussion turns to the presidency. to be sure, we are a long way from 2016, but are you least considering a run for the republican presidential nomination? >> not at this moment. in 15as us taken different directions. i learned a long time ago in politics that you never say no, although we are not gearing up and organizing. i do not have any focus on 2016
other than to always be in a position to serve my country would ask. >> the former utah governor and former ambassador to china and singapore and a chairman to the atlantic console joining us from washington. a privileged to have you on the broadcast. >> great pleasure to be with you. >> tomorrow night on "political capital" the u.s. secretary of commerce will talk trade and american economic interests abroad. on can see that interview "political capital" here on bloomberg television. coming up, ambulance fraud. we will tell you how some ambulance operators are getting taxpayers to foot the bill for what are expensive taxi rides. ♪
underlying sales rose 3.6% but came in slower in the fourth quarter. growth will -- the costa rican government is waiting for the obama administration to explain why at lunch the secret cuba twitter network. to stirram was funded unrest but usaid has died it was secret or that i had a political agenda. that is your latin american report for this thursday. paid $5 medicare billion to ambulance companies, an amount greater than what was paid to cancer doctors or orthopedic surgeons. the u.s. to part of health and human services has found ambulance service is one of the biggest areas of abuse in medicare. shannon pettypiece looked into this now and joins me in the studio. of pen us about the case choice ambulance.
how'd do the federal officials allege their gaming the system? >> this is a particularly egregious case but not unusual. the dialysisside center. they were waiting for patients who could walk and get to the treatment on their own. can were telling them we get medicare to pay for your trip to dialysis for free in one of our ambulances. are usedow ambulances for emergencies and people who get toill they cannot their doctors appointment any other way. this company was taking patients who could walk or sit and stand just fine, putting them in ambulances transporting them back and forth, and charging medicare, some cases more than a thousand dollars a week to give patients rides in their ambulances. >> how widespread is this? >> this is a particularly
egregious case. there was one man who used to smoke cigarettes in the front seat of the ambulance on his way back and sometimes they would have to patients in the ambulance in the back writing to their treatment and they would ill medicare twice for it. this case was unusual but i talked to a person in philadelphia who has done six of these cases. the department of justice has gone out and taken action against 12 different ambulance providers. they estimate they overpay ambulance dividers by $300 million a year in excess payments. some of that is not necessarily fraud, but it is quite common in certain pockets of the country. doing anything about it? >> and step up efforts to do increased inspections and put
new harriers for ambulances to get certified. moratorium ona the market until medicare gets a handle about this issue. it's relatively easy to start and and villains company which is surprising because you think of them like a hospital order straight home. entry is not big. in this case, it was just started by russian immigrant doing going in a doctors office. >> why hasn't medicare done more about this and other forms of fraud? recently, medicare serve what they call pay and shake. they will pay you an after-the-fact they will make sure the claim was appropriate. >> but that is after the fact. >> one of the theories is that care is a politically sensitive
program. it involves seniors, seniors one wants a senior going to the doctor. muchuch paperwork and too hassle. no one wants a senior getting the claim denied. medicare has been hands off. now there is a big push under the affordable care act to crack down on a lot of spending. they are doing more about fraud, but it has been a sensitive area. >> what about insurance earnings and any thing they have done on the affordable care act? >> we are starting to see insight into who has signed up for this. uput 80% of people signed pay premiums, so that will be good news for them. aboutis a big question whether people were actually going to play -- going to pay
and not just sign up for the plants. i have to ask you about the ambulance story, if you want to see it it is on bloomberg.com and the bloomberg terminal all stop -- bloomberg terminal. when you saw these numbers were you as a loan away as everyone else will be when they see it? >> i started looking into this because i didn't realize medicare spent $5 billion year on ambulances. thatcently got new data breaks out how much it pays different doctors and service providers. area that getse more our cardiologists and ophthalmologists. hospitals which are huge factor. what madeised me and me look into where it's going.
>> be sure to check out the latest edition of bloomberg businessweek with its focus on stories of success. it hits newsstands and your tablet today. you can read it on the go with our new business we cap. --e for hot shots, a look of look at some of the most compelling images of the day. even robots are not immune to showing off what a world leader is around. edit visit to a science museum in japan, president obama was greeted by a robot and told the president that he could kick a soccer ball. mr. obama fielded the ball and said that the robot did a good job.
the robot proceeded to do a little dance. pointg a perfect 300 bowling game is no easy feat. it backwards.ay a man from illinois who suffers from the injuries has been trying to perfect his game of accords bowling. he says playing this way does not cause as much pain because he's not forced to bend his knee. -- a bulldogmoron beauty contest. 50 bulldogs and error-prone -- went to're proud owners the bulldog competition. it's been going on for 35 years as part of the search to find a real dog to represent their mascot, the bulldogs. director,to the event this is a case where beauty is in the eye of the boulders. stay with us. another check of the market movers is on the other side of the break.
television is on the markets. let's look at where stocks are trading -- a mixed picture and little changed when all is said and done with earnings news pushing stocks and pulling stocks in either direction. let's get to a couple on the upside, helping the nasdaq to be the outperform her. surgingf the tech giant with a seven to one stock split. they said they would increase their share buyback and dividend. 's profits nearly tripled. the social networking giant reported an 82% increase in ad revenue and announced it acquired a mobile fitness at called move will thought and staying with technology, earlier today, there was a report google said the head of its googled less division which was intended to challenge facebook has stepped down after eight years with the company. joining me for a closer look at all the news and technology today is ari leavy.
the general and we are talking leaving googley -- can you tell us about the implications of this? att was not his first role the company. he had been a big layer at google but google plus hasn't seemed to work out so well. >> the story is that he is basically been the one to say regardless of how badly google plus may perform, we will make sure it succeeds and push google plus to all of our users to make sure that's how they are signing on for products and to make sure we have our users connected to their friends, whether they necessarily know it or not all of putting they stake in the ground versus facebook which has had to make sure their users are connected in a way they can understand. in, they havened
you signed into all sorts of other things, including the social network. >> does it matter for the big picture at google? of the earnings at google are still searched, so how significant is it? >> there is all sorts of money you cande in social as see through facebook and twitter's numbers. sell any number of ways and so advertisers -- google just needs more people engaged so advertisers can reach them in time. google doesn't want you on other platforms and they want to make sure you're getting all the necessarily -- all the necessary services on google. who replaces him in this role is important. he's a public figure and an extremely aggressive sales guy. >> speaking of cross marketing and trying to play up the ad revenue, facebook seems to be
doing well on that front. what stood out to you from the facebook earnings report? >> that is the story. two years ago, facebook was gearing up to go public. this was a company built for the web and now everything is moving mobile. what's going to happen? the stock was cut in half after the ipo and those concerns seems to be the past. there is still work to do on the product but the numbers are clearly very good right now. >> thank you so much. we will be on the markets again in 30 minutes. ♪
>> call it the apple effect, the company rep per -- report .arning and -- i'm trish regan "street smart" starts now. welcome to the most important hour of the session. 59 minutes on the clock and coming up today, amazon's rhyme focus -- the company looks for growth. we will tell you the metrics that matter most ahead of the latest report. we are talking