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tv   Nightly Business Report  PBS  May 22, 2017 5:00pm-5:31pm PDT

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this is "nightly business report" with tyler mathisen and sue herera. in the driver's seat, a turn of events puts a new ceo at the hell am of ford. but is it enough to get the automaker back in the race and reverse the stock's decline? new highs. defense stocks rise on a massive weapons deal. could they climb even higher? safety concerns? 10 million people have osteoporosis but serious side effects are now clouding a promising treatment. those stories and more tonight on "nightly business report" for this monday, may the 22nd. good evening, everybody. i'm bill griffith in for tyler mathisen, waiting patiently for everybody. >> he got stuck in traffic. >> i'm sue he rer a. we start
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out with a shakeup at an iconic american company, the ceo of ford is out. mark fields is replaced by a former office furniture executive known for his ability to turn companies around. as we've been reporting, pressure was mounting at the automaker to reverse the floundering stock price and to better compete against general motors and tesla in developing the next generation of electric and self-driving cars. the news sent shares of ford accelerating, rising more than 2% in trading today. phil lebeau has more on the change and future of ford. >> with ford shares hanging close to a five-year low, bill ford and the board of directors made a dramatic shift. mark fields, ousted less than three years after becoming ceo. >> we need to be quicker in our decision making. we need to have clarity in our messaging and communication. and we also need a leader who has transformed a company before.
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>> the new ceo is jim hackett, 62 years old. while his time at ford as a director and most recently running the company's mobility division have been limited, hackett has seen enough to know the automaker needs a fresh approach. one that echoes the winning formula of former ceo allen mullally. >> he did a special thing to get the company to be a community again, with this structure that he created. it worked really well. in fact, we're going to use parts of it in the way that we monitor our success. >> ford is not a lost cause. it's still on track for one of its most profitable years later. tesla and waymo are developing technologies like self-driving cars. the biggest challenge facing jim hackett will be changing the culture of a company more than 100 years old. >> he needs to hit the ground
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running and be that person that makes you want to come to work in the morning. that's really hard to do when you're dealing with a company as old and entrenched potentially as dearborn has shown itself to be. >> the initial reaction of wall street to jim hackett is to give him the benefit of the doubt. he could revive shares of ford, but until he lays out his game plan, few expect ford shares to move dramatically higher. phil lebeau, "nightly business report," chi so, with ford struggling, are there others in the automotive industry better positioned for the future? richard is here with us tonight to share his thoughts. senior automotive analyst at "morning star." thank you for joining us tonight. >> thanks for having me tonight, bill. >> before we get to the others, what about ford? is jim hackett the guy and what do you expect to happen there? >> i think that ford motor stock compared to, say, for example, general motors, chrysler, some
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of the other companies that compete in the u.s. market, ford's gotten into a product cycle lull. in the near term here. and we're seeing more product come out from, say, for example, general motors, or chrysler, you know, and because of that, there might be a little bit more excitement in the dealerships at gm and at fiat chrysler. this isn't to count ford motor company out. we go through product cycles in the automotive industry. >> is he enough of a disrupter as he was in his previous category to turn a company like ford around? >> well, you know, the only evidence that we have is what he did as ceo of steel case for 20 years. and at steel case he was a visionary enough to be able to tell the direction that the market was heading, for office furniture, instead of having
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cubicles or individual offices, it was going into more of an open environment. and he saw that in advance. so you've got to give him credit for that. and changing the company's culture and moving towards something that was coming down the line that might not have been readily apparent to others at the time. he might be able to transfer that visionary outlook to ford motor company. >> clearly the automotive industry is in a transformation technologically speaking. driverless cars, with all of the gadgets and things that are in current cars, electric cars. who do you think is best positioned to take advantage of that? and is moving along at this point? >> yeah, sure. i'm going to segregate my comments from the valuation of the stock versus where the companies are positioned. but companies that we think that are really positioned well for technological changes that are occurring in the automotive industry are really in the supply phase.
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like auto lead, borg warner, continental, delphi, lear corporation. these companies all predominantly have electronics and electrical architecture. borg warner, on the other hand, is positioned within propulsion. the parts that make the cars go. so, you know, they're really well positioned for the l electricification. we think auto lead is valued well at this point, continental, delphi, lear. we like borg warner, we think it's undervalued. and magna has similarities to borg warner that make parts that make wheels turn, but they also have autonomous systems that can go into these advanced electronic technologies that are going into cars.
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>> we've got it all written down. thank you for your information. >> thank you. meantime, on wall street, defense stocks helped lift the major averages after more than $100 billion worth of arms deals inked between the u.s. and saudi arabia over the weekend. on friday, we told you that those deals were likely to happen. investors also brushed off north korea's successful test of an intermediate range ballistic missile. the dounl climbed about 90 points to 20,894. the nasdaq added nearly 58. and the s&p 500 rose 12. shares of lockheed martin, dow component boeing, general dynamics all rose on the weapons deal between the u.s. and saudi arabia reached over the weekend. the price tag was massive. and could potentially grow. morgan brennan has more details for us tonight. >> it wasn't business as usual when president trump visited saudi arabia over the weekend. his first international trip as
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commander in chief, amid a flurry of big tick et deals, centering around security in the region. >> america is prepared to stand in pursuit of shared interests and common security. but the nations of the middle east cannot wait for american power to crush this enemy for them. >> that sentiment was the em pe tus behind a weapons package. one of the biggest arms deals ever struck, that could, according to the administration, grow to $350 billion over the coming decade. lockheed martin announced $28 billion in potential new business, including black hawk helicopters, a revised deal for combat ships and the prospective sale of an advanced missile defense system. raftion and general dynamics struck an agreement for wide-bodied planes. some sales had already been approved under president obama, but many more will require
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approval from congress and the defense department. analysts say that timing and the details are less certain. commerce secretary who accompanied the president in riyadh is optimistic. >> it will take congressional approval, in some cases. i don't think that's going to be a big deal. these are our allies. they're important allies. and these weapons, if you analyze them, are as much for defense as for anything else. >> but defense won't be the only industry to reap the spoils of more trade with the kingdom. general electric said it reached more than $16 billion worth of deals. black stone group's infrastructure fund picked up a $20 billion investment from the kingdom's sovereign wealth fund. and a $50 billion worth of deals with american oil and services companies. for "nightly business report," i'm morgan brennan. the defense stocks, many of them, are at record highs on the trump saudi deal. and historically following
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agreements like that one, it will p surge over the next month. welcome. nice to have you here. >> always great to be here. >> you're relatively bullish on this sector. >> not relatively, very bullish on this sector, absolutely correct. i think this sector's got plenty of ramp left in it. the deal we saw over the weekend with saudi arabia is just one bit of evidence that defense is a very high priority, not only with international governments, but the u.s. as well. >> we saw, though, early in the trump administration the president was very concerned about costs. i know you like lockheed martin, for example. he was very concerned about the cost of the f-35 fighter jet. will their profit margins be squeezed, even though we're talking about a big defense contract? they're forced to bring those costs down. >> well, first off, i tend to think that this is exactly what we want from a president, from an administration. as taxpayers, it's a good idea
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when anybody says we want to get costs down. i think that that's good. but to your point about margins, no, actually, i don't. i think this president actually wants to get the best price for things. he also knows good business. he certainly knows about good business. and so i this i that, for example, lockheed martin recently signed a contract, latest contract for the f-35 with double-digit margins. so i think that the president understands good business. i don't think there's going to be margin pressure. but i think there will always be this focus on cost. >> the background of you're expecting defense to grow on an average of 6% annually, versus i think most street expectations are significantly lower than that. >> absolutel so i think that the defense spending, a number of buckets in it, pays for military personnel and things like that, i think the addressable part will grow at about 6% on average for the
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next several years. i think that what that's going to do is benefit companies like l-3, which benefit a lot from readiness. one of the things we'll need to spend on immediately is getting the state of the force up and improve that, et cetera. i think that's right. i think expectations are really for like 2% to 3% right now. so my bullish thesis would say that i think that growth is going to be substantially more than what expectations are. >> for the foreseeable future, very quickly, you believe that spending cycles in defense over 20 years or so. >> absolutely right. i think that 2016 starts the next uptick in the defense spending cycle. you're right, if i look historically, defense spending generally moves in 20-year cyclical patterns. i think we're just starting the uptick of a new one right there. >> richard, thank you so much for joining us. >> thank you for having me. still ahead, 15 years after going public, netflix looks a lot different today than it did
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then. and there could be even more change the trump administration asked a court to put on hold an obamacare related case. the case involves federal payments that insurers use to lower deductibles and co-payments for some people who purchase individual policies on the exchanges created by the affordable care act. the delay increases urn certainty for insurers who are trying to set rates for plans that have to be sold next year. the payments amount to about $7 billion. the president and republican lawmakers are working on legislation to overhaul the health care system. an experimental breast cancer drug appears to be
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effective, but a preliminary review by the fda also shows there is some uncertainty as to the magnitude of that benefit. the treatment is made by puma biotech, and the initial reviews sent shares up by 39%. a panel of outside advisers to the fda will meet on wednesday. they'll be talking about the drug and whether to recommend it to be approved. amgen has serious heart related side effects observed in a late stage critical trial. the setback caused shares to fall 2%. meg terrell is following the story from the new york stock exchange meg, good to see you. the drug worked. the stock is down. how concerning are the side effects? >> well, the side effects were concerning enough that amgen which had expected an fda decision on the drug by july, no longer expects the fda to be able to review the drug on that
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time line. this is a late stage study. it had already been through a lot of other clinical trials. this is the first time anybody's seen this potential side effect. what they observed is a potential heart risk for the drug. they said it was serious adverse events related to cardiovascular issues. clearly pretty concerning here. >> what's the future of the drug in the meantime and what does it mean for amgen? how big a hit is this for them? >> that's right. they already do have some osteoporosis drugs available. this one was going to be a continuation of that franchise. some analysts are taking their models for this drug completely out of what they expect for amgen in the future. others say maybe a 50/50 chance. but there is going to be a significant delay. you are seeing some competitors, including radius health, getting a little bit of a boost today. they just had a new osteoporosis drug approved in april. perhaps less competition for them. in terms of amgen, this is a little bit of a blow today. >> absolutely. obviously there are some other
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options for osteoporosis, but how many? >> there are quite a few drugs out there for osteoporosis already. radius health just got approval in april. a lot of drugs available are generic drugs which makes this more of a pressure-filled environment. generic drugs are a lot cheaper. preferred by insurance companies, and doctors often prescribe them a little bit more. so newer, more expensive drugs have already an uphill battle in gaining market share. but still, clearly, there is a need for new drugs in this space. a lot of people have osteoporosis and need a better option. >> you and i were discussing this earlier today, the risks involved in this business, even for a large established company like amgen, it's never a guarantee, is it? >> it never is. drug development is an incredibly risky business. just last month we did a story with you guys in iceland showing how amgen uses genetics to help the discovery. even when you have those clues, and that kind of tool, it doesn't make everything perfect.
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this is a really hard thing to do. >> indeed it is. meg, thank you so much. meg terrell at the new york stock exchange. topping a street estimate, tonight's market focus. the lab equipment company saw profit and revenue rise in the latest quarter saying strength in the chemical and energy business helped results. they also saw the strong revenue growth in asia and up. shares initially rose in after-hours trading but finished the regular session down slightly to $56.08. and the months-long proxy fight between specialty metals maker and largest shareholder appears to be over, arconic saying to let the hedge fund elliott management nominate three members to its board of directors. while arconic will name two candidates. arconic shares rose fractionally.
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a ceo made comments that seemed to squash speculation that the semiconductor maker entered into a licensing deal with intel. amd said it's, quote, not looking at enabling a competitor to compete against our products, end quote. that news sent shares down more than 3% to $11.04 today. u.s. space specialty chemicals maker huntsman said it's merging with switzerland's claryant in a $14 billion deal. it has an enterprise value of $20 billion. huntsman shares were off 2% to $26.15. former manage es of the solar energy company sun run said they were instructed by their bosses to delay releasing data ahead of the company's public offering in 2015. it showed canceled customer contracts. according to "the wall street journal," one manager said there was an internal push to get as many sales through, and not to report the cancellations. shares of the small cap fell almost 3% to $4.90.
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and china's cheetah mobile reported earnings for the latest quarter. the mobile internet company posted revenue that grew and said that much of that gain was driven by demand for contest driven apps. shares of cheetah mobile rose about 7.5% to $11.34. netflix has been around for 15 years. get this, shares are up by more than 14,000% since it first started trading. julia boorstin takes a look at what lies next for netflix. >> netflix and its ceo have changed quite a bit from the days of red envelopes delivered by the postal service. netflix had 600,000 subscribers only in the u.s., paying $20 a month for dvds by mail. with about 11,000 titles.
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now, netflix is a global entertainment powerhouse. with 100 million subscribers in over 190 countries. paying about $10 a month for streaming. distinguished by the original content. according to an early shareholder, netflix's success is driven by its ceo's vision. >> reed is an incredibly gracious and humble guy. so he's probably going to cringe when i say this. but he is wicked smart. and i don't mean in the, i'm the smartest guy in the room sense, i mean someone who's capable of thinking of first principles yet also at the visionary level. >> the number of titles netflix offers varies from country to country. the company says it streams more than 125 million hours a day. netflix's growth will come from continued global expansion, and more exclusive content. the company's releasing more than 1,000 hours of originals this year and spending more than $6 billion on content saying it
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has no plans to do live news or sports, but it's doing everything else. >> original content, it's the marketing engine for the company. people watch it for the shows that are on. you want the shows branded as your service. the other is people recognize that they're more and more competitive. traditional players are less likely to be open to licensing them content, or at least some of them are. you have to have the ability to fill the pileline. >> while he sees plenty of room for netflix to continue the global growth and data about how and what people watch, the company's biggest challenge is more alternatives from traditional media companies. there's also the question of whether the company will have to get into live sports, which it says it's staying away from if it wants to be truly competitive. netflix, of course, needs to reed hastings needs to make sure the company continues to have the movies and shows people need to see. for "nightly business report," i'm julia boorstin in los
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angeles. coming up, so, you think you know economics? >> what other famous book did he or she write? >> 11,000 kids from 40 states test their knowledge in a national challenge. but only team was victorious. here's a look to what to watch for tomorrow. the white house releases its proposed budget for the 2018 fiscal year. with a supply of existing homes for sale at historic lows, the focus will be on the are elease of april's home sales. amazon meets with its
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shareholders. the ceo is expected to lay out his vision for the company-the next yea and that's what to watch for on tuesday. meantime, regulators are investigating a pair of recalls from hundred dye and kia. the national highway traffic safety administration wants more information on the timing of those recalls. the agency is also looking to determine whether it covered as many vehicles as it sh the recall is related to an engine defect, and currently affects more than 1 1/2 million vehicles. the united states collected less perm income tax revenue in april than a year earlier. according to analysis done by reuters, it appears as if high earners shifted their income to next year. hoping that the federal government passes tax cuts. taxes on wages and investment income are key revenue sources for the states that collect them. april is the most important revenue month because, of course, it's the tax filing deadline. all right. high school wiz kids who could be the next janet yellen.
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best and brightest students are testing their knowledge of economics. steve liesman, host of the competition, got to award the championship trophy. >> dancers, musicians, basketball players and wrestlers. 11,000 unique kids from 40 different states. but they have something in common. they're just about as smart as they come. and they study and really get economics. the winners faced off in the finals of the annual national economics challenge. call it the national spell bee for economics. you can't believe the drama, and you can't believe the brains. >> carl marx and the other famous work is the communist manifesto. >> after more than 20 questions, the teams from mountain view high school in minnesota and chattahoochee high school in georgia were neck and neck. >> the score is now 12-11. >> in the end, mountain view pulled out a win for the fifth time in seven years.
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>> the equilibrium price and quantity will not change. >> that's correct. [ cheers and applause ] >> mountain view economics teacher credit hard work and making economics fun. >> you're not going to get them there by beating them over the head and take more tests. they have to be doing it because it's fun for them. >> the first-ever international round with students from china competing against the u.s. >> 18 years and 9 years for country b. >> that is correct. >> the u.s. won both rounds, but china competed well, and they'll be back. the challenge is sponsored by the council for economic education who teaches teachers how to teach economi >> we're trying to get kids just like these engaged in economics so they can make great decisions and understand how the world works. >> kids like dentner -- >> hike. >> why? >> freer the markets, the freer
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the people. >> we could do a lot worse than raise more kids like that. >> the freer the markets the freer the people. >> i'm very hopeful on that. not to take sides, but i was kind of rooting for chattahoochee high school. i have family in that part of georgia. and i like saying chattahoochee. >> that's "nightly business report" for tonight. i'm sue herera. thanks for watching. >> i'm bill griffith. have a great evening. we'll see you tomorrow. the wor.
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