tv Nightly Business Report PBS March 31, 2014 6:30pm-7:01pm PDT
this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. featuring stephanie link who shares her investment strategies, stock picks and market insights with action alerts plus. the multi million dollar portfolio she manages with jim cramer. you can learn more thestreet.com/nbr. heading to the hill, general motor will take a massive recall related charge in the first quarter. the announcement comes a day before its ceo faces congress. how did gm get to this point and what happens next? >> i think this extraordinary commitment is still needed and will be for sometime. >> with those words from janet yellen, stocks took off with a triple digit gain on the dow.
>> cutting cholesterol, a new and promising weapon against the fight of cardiovascular disease and the makers we bind it. the devastating problems general motors has gotten worse. gm expects to take a massive 750 million dollars charge this quarter for the cost of recalling and repairing 1.5 million cars with faulty ignition switches. that's on top of a new recall for 1.3 million recalls that may see a sudden loss of power steering and another late recall friday of trucks and suvs for potential problems with transmission coolant lines. the cheer checktive mary barra will testify on capitol hill. late today's her repaired remarks were released and says
the auto maker holds itself fully accountable but can't say why it took so long to identify them. with families of the victims expected at tuesday's hearing, look for tense and emotional testimony in the house. meanwhile, on wall street, gm stock fell nearly 1%. it's down almost 16% this year. here is eamon javers with a timeline of the troubles at gm. >> reporter: what did general motors know and when? those are the questions being asked about a faulty ignition switch. answers are emerging from documents released from the auto maker and congress. in 2001 gm became a ware there was a serious problem with select vehicles. in 2002 delfi says gm approved the part knowing it didn't meet they are enter specifications. in 2003 a dealer technician
observed the car stall after the ignition switched off while driving. these are in contrast that they only knew of the defect in 2004. gm under mary barra issue as recall for over 1.5 million vehicles. sparking regulators a launch a formal investigation. this month, national highway transportation safety add machine station demanded detailed answers to 107 questions to determine if gm properly followed the legal processes and requirements for reporting recalls. and just last friday, gm added almost 1 million vehicles to the recall totaling more than 2.5 million worldwide. tomorrow barra will be on capitol hill. why did it take so long to recall vehicles that had a faulty part leading to at least 13 deaths and where were regulators during this time?
>> joining us now to talk more about gm is colin langin. good to have you with us. apart from the moral or ethical dilemmas presented by these cases, what overall is your estimate of the total cost of resolving this situation for general motors? specifically the ignition defect? >> yeah, sure, i mean, overall right now they just announced after the close today that there's about a 750 million dollar impact for the actual repairs. the ignition is actually probably only very small portion of that. it was really more the subsequent recall impacting that. i think the other major piece of this puzzle that we'll see out over probably the next year or so will be the potential, you know, investigation from the department of justice. if you looked at the recent settlement for criminal penalties with toyota, it was 1.2 billion. that was about the timeliness of
notifying. gm will probably face a similar risk because of the delay and reporting issues. >> colin, how do you think mary barra will do on capitol hill? she apologized and said she wants to do the right thing. do you think she can do anything to repair g m's reputation tomorrow in front of lawmakers? >> i think she has a tough job ahead of her, but i think she's done a good job so far. he's been open, responsive as much as they can be as they are continuing the investigation. she'll be facing tough questions tomorrow and quite frankly, doesn't sound like they have all of the answers yet, but doing a good job of communicating openness and responsiveness and being apologize get tick, which is important in terms of managing the long-term brand impact here. >> the general motors is inoculated for incidents that occurred before 2009. but there are reports today that general motors say set up a reimbursement fund of the current company giving money
back to the stub or bankrupt estate. have you heard anything about that, and what do you think of that as a way to make things, if not right, at least better? >> i mean, it's clearly an option. i think what you said is mostly correct. since any incidents that occurred before bankruptcy, which is the majority of the incidents, as far as we know, they wouldn't be legally liable for. so this would be gm trying to do the right thing. we'll see when or if they make that kind of announcement, you know, could come, you know, with coordination from the department of justice settlement or something like that. it's clearly a possibility they could do something like that. >> there are so many question marks and issues, uncertainty hanging over general motors and yet, from the investment point of view, you still like the stock. tell us why you like it at $34 and i understand you got a $51 target on it. >> yeah, if you look at the stock, it's been down 9% since the news happened.
it's about 5.5 billion of the market cap. if you look at the costs, they are less than $2 billion. there is a bit of over reaction and quite frankly, we like the stock quite a bit before the recall news. over the next few months, you'll probably see a bit of impact on the market share. they are handling it well. none of the current products are affected. i think their sthhare will boun back and they have an awful lot of new product this year. >> the subsequent recalls, after the ignition switch, are they bigger and more costly in someways? >> yeah, they are probably more costly recalls. the actual ignition according to other companies is around 2 to $5. labor costs is probably low. really depends on the complexity. other recalls are more complicated. i think what gm is trying to do, make sure there is no additional recall headlines lingering throughout the rest of the year and i think there is trying and
actually being responsive to potential issues to show they really are trying to change the way they act relative to the history. >> thank you for being with us tonight. he's an auto analyst. >> thank you. investors can thank janet yellen for closing out the first quarter on a high note. she made reassuring comments about keeping interest rates at record low levels for sometime to come. the nasdaq and s&p ended the quarter with gains. a different story for the blue chip dow stocks. up for march but down nearly 1% for the first three months of 2014. here is a look at today's closing numbers. the dow surged 134 points, the nasdaq rose 43 and s&p added 14 and just six points shy of its all-time high. more now on janet yellen's market moving comments and her willingness to show a different more movement of the people's style to market watchers. steve liesman reports. >> reporter: following her speech in which she suggested
the fed will keep the easy monitory policy in place. janet yellen did who no fed chair did before her, put on a welder's mask as she toured a job's training facility. it's part of a promise yellen gave in a confirmation hearing in the fall. she said she would never forget there are ordinary americans behind the statics and ensure the efforts to secure the economy, which was highly controversial during the financial crisis have popular support. yellen took a page out of a playbook mentioning ordinary people, like a woman unemployed for a long time. >> that's what doreen pool learned after she lost her job processing medical insurance claims just as the recession was getting started. like many others, she couldn't find any job despite clerical skills and experience acquired
over 15 years of steady employment. >> her predecessor pioneered the idea teaching college courses on monetary policy throughout the country, but yellen seems to be embracing the technique from the beginning and in a more down home way. yellen made news on monetary policy. >> i think this extraordinary commitment is still needed and will be for sometime. and i believe this view is widely shared by my fellow policy makers at the fed. >> that sent stocks higher and bond yields lower because it meant the fed could keep interest rates lower for longer. for "nightly business report", i'm steve liesman. still ahead, apple versus samsung, one of the fiercest corporate rivalries heads back to court but google may have the most at stake.
this is it, deadline day to sign up for a new health care plan under the affordable care act in time for coverage to kick in be may 1 and today didn't go so well. with so many last-minute hopefuls trying to enroll before midnight. the federal health care dot glove website reopened the marketplace to get more people signed up. with so many americans signed up for a new plan and more likely to enroll today, a lot of the nation's health insurance companies have already benefitted from the affordable care act. as bertha coombs explains, they may even have more to look
forward to. >> reporter: by noon the healthcare.gov site saw 1.2 million visitors, a crush of last-minute enroll ling after appeals by the president on talk shows and social media to get people to sign up. >> a push has been aimed at them. everybody wants to get them into the pool. >> reporter: for health insurers a larger mix of healthy young people lowers the risk the industry will lose money on affordable care act plans. >> the whole numbers game for them is what do these new members look like? how much will they cost us in terms of medical care and who you do we factor that into the pricing for next year? >> reporter: well point is optimistic about the profit outlook. others like aetna more cautious. investors are bullish on the sector while the s&p rose over
1% year to date, ensurers gained nearly 7% and analysts say the stock will likely see more gains. >> it looks like the insurers priced their insurance business correctly, which means that there is probably some upside in terms of earnings potential for the rest of the year. >> reporter: another positive for insurance earnings, the medicare advantage program, proposed rate cuts look lower than some estimated. >> giving that we're going into a midterm election year, i would be surprised if there would be cuts in any aspect of health care. >> final medicare advantage rates will be release in early april but final aca numbers may not come for awhile. with people experiencing glitches on sites being given up to two more weeks to complete their applications. bertha coombs, "nightly business report." more health news you should know about, an experimental class of cholesterol lowering drugs, showing promise for up to 70 million americans suffering
from heart-related illnesses and could generate $3 billion in annual sales for the companies racing to get new medications to market. dominic chu has the details. >> reporter: the american heart association says cardio vo s ca disease kills more than any. for decades fighting high cholesterol is taking statten drugs like crestor and zocor and l irk patro. if you suffer from high cholesterol, there is a new drug. instead of stanton chemicals, they are protein-based. stanton's curve the cholesterol and companies like amgin and pfizer are working on them, but there is a catch. stantons are usually taken
orally and cheaper because generic versions available. the newic injections, possibly an enpi pen. while the concept is generating positive chatter in medical circles, many more tests will need to be done before it can be determined if these drugs help reduce the risk of heart attacks. >> the question is, whether in long term outcome studies, the reductions in cholesterol that are being reported actually translate into lower rates of heart attack and a lower incident of stroke. >> so there is a lot at stake not just for the big drug company but millions of americans combatting high cholesterol. for "nightly business report", i'm dominic chu. >> johnson & johnson accents a 4 billion-dollar offer for the blood testing unit and that's where we begin the market focus.
carlisle group made a bid for the unit in january and johnson & johnson had until today to agree to the deal. the transaction is expected to close mid year. j and j shares edged up a fraction to $98.23. bill ackman's firm upped the stake in fannie mae and freddie mac. the largest shareholder in both of these government sponsored mortgage lending giants. shares surged about 9%. fannie mae closed at $3.9 and freddie mac at 3 pblt $87. americans cut back on soda at a faster pace last year than in many years, that according to a new report and even diet soda sales are declining. this is the ninth straight year of declines for soft drink sales overall. shares of coke off a fraction to $38.66, pepsico 8 $3.50.
"frozen" topped a billion-dollar in global sales and it surpasses "toy story 3" set in 2010. shares of disney up 1.5% to $80.07. apple and samsung in court again today. this time they are battling over patented technology use in each other's smart phones. as morgan reports, it's google that could have the most at stake in this legal scuffle. >> reporter: apple and samsung are at it again facing off in court for the second time in two years over patents. the new case revolving around design elements and featured use in the company's smart phones. there is a third company that's got a lot to lose, as well. and that's google. it's google's technology in question, specifically the
android operating system. >> everyone expects samsung to argue that four of these patents that are apple asserting against it it licensed from android and expect the google software engineers to testify they have begun development of the features before apple. >> reporter: android is used in over a billion devices including samsung products like the popular galaxy line so the ability to tap a phone number inside a text message and call it, one of the patents in question were created by google, not samsung. apple could collect $2 billion in damages if the court rules in its favor but that's a drop in the bucket for the 480 billion-dollar market cap company. instead, the bigger issue is future market share which apple is feeding to samsung. last year samsung was the market leader with one of every three smart phones sold. apple, with it's higher priced phones was second.
so a win for apple could impact samsung's devices, and the technology google has created for them, forcing changes that could push up costs. >> suddenly you can see they are not able to sell certain things they might want to sell or if they can, they have to pay apple a royalty to do so. the pricing goes up and guess what? more dollars in apple's pocket. >> reporter: still questions linger over the legality of software patpatents, written to generally. it's a top pick just heard in a separate case today by the supreme court and one legal experts say apple and samsung's face-off could help decide. for "nightly business report", i'm morgan brenham. caterpillar avoided paying more than $2 billion in taxes since the year 2000 that says the manufacturing company used an aggressive tax strategy to
shift profits overseas. john harwood joins us from washington. john, tell us, what's the goal of tomorrow's hearing? >> the chairman of the committee has been working with republicans, john mccain among others to shine a light on the tax avoiding by american corporations. usually perfect legal tax avoiding but things that he regards as loopholes should be closed, and he's going to try to spotlight some of those with the caterpillar problems. he's making the argument and their subcommittee did an investigation that showed caterpillar spent $55 million on advice from price waterhouse cooper that allowed it to avoid the 2.4 billion in taxes and the subcommittee wants to argue that the irs needs to tighten up, congresseeds to, though that's difficult given how divided it is. >> there is low odds this will lead to tax reform. >> tax reform will be difficult.
both champions of tax reform, people i interviewed in 2013 who said that they were going to each pass a piece of legislation in their chamber, the ambassador to china, he quit his senate seat and dave camp, the republican chairman of the house weighs and means committee announced today he's retiring from congress. that tells you the outlook is bleak for bipartisan tax reform. >> john, for years, a lot of people, lawmakers in washington have been trying to get companies to bring their profits made overseas to the u.s. and invest that money here. is this at all connected to that whole push? >> yes, and what the committee is arguing is that a shell subsidiary was created in switzerland that didn't have any real business function but solely for the purpose of coming to the united states and having taxes paid on them. this is a continuing issue, both parties don't like it.
both parties raised questions about it, although soul solutioe different. the outlook is bleak over the longer run, this is accelerating a conversation that will probably play out over the next several years in congress and who knows, maybe within five or six years, something will get done. >> john harwood from a very nice looking nation's capitol where it was snowing yesterday when i was down there. john, good to see you. >> and coming up on the program, the banking industry has undergone big changes since the financial crisis, but what other transformations are in store? we'll hear predictions from some banking industry leaders.
and finally tonight, the financial crisis is behind us and a laundry list of regulations making sure the sector is safer than before. so what might the future of the banking world look like. kayla takes a look. >> four years after the banking reform bill was passed in washington, much about the way large financial institutions are run has changed. new capitol standards mean bnks have more cash on hand and are largely insulated for major downturns in the market. in response, risky investments like the mortgage that brought the u.s. financial system to its knees. >> i think the financial system is safer and sounder today than it was in '08.
>> reporter: many policy makers say wall street hasn't changed enough. >> it's these very large institutions that are highly inner connected. that's the key problem. >> reporter: the federal reserve may have thorn that out. citi group, the third largest bank failed on a straightforward mark auditing. bernie frank of the dod frank reform bill said that might not be bad. >> they have toughened themselves up and even though city, while they didn't get what they want in terms of dividends, is in better shape. >> reporter: new technologies mean new hurdles for regulators, invasions in online banking and payments bring new threats. cyber security seen as major changes for the industry today. >> that's a major challenge for the industry and regulators to
make sure that our banking system is resilient. >> reporter: even as washington works to protect consumers, regulation always has unintended consequences. >> it's going so far that it's beginning inpaid on their ability to focus on strategy, business operations and other elements necessary for leaders and board of directors properly guided businesses. >> reporter: here at the future of national banking conference, attendees have expressed mixed feelings how this wealth of new regulation will be. one thing both sides will agree on, we won't know for sure until the next financial crisis. for "nightly business report", i'm kayla tausche. >> do we need another financial crisis to solve the problems? >> i hope not. >> that's "nightly business report" for tonight. i'm susie gharib thanks for watching. >> i'm tyler mathisen. have a good evening everybody. hope to see you back here