Transcript: Tuesday, April 1, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.


REP. TIM MURPHY (R), PENNSYLVANIA: Did you review the documents G.M.
submitted to the committee?

MARY BARRA, CEO, GENERAL MOTORS: No, I did not. There were over


tough outing for General Motors (NYSE:GM) CEO as lawmakers pressed her
about why it took a decade to recall cars with defective parts. But did
her answers satisfy investors and drivers?


BRAD KATSUYAMA, IEX GROUP: I believe the markets are rigged.

WILLIAM O`BRIEN, BATS: OK, so there you go.

KATSUYAMA: And I also think that you`re part of the rigging. If you
want to do this, let`s do this.


Is Wall Street rigged? The debate stopped trading midday at the New York
Stock Exchange today.

GHARIB: All this as the S&P rallies to an all-time high. But will
earnings season derail the move higher?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for this
Tuesday, April 1st.

GHARIB: And good evening, everyone.

It was a record day on Wall Street for the S&P 500 and the Dow
transports, by the way. But we begin tonight with General Motors
(NYSE:GM). It is under intense scrutiny by lawmakers for safety concerns
about its cars. And today its new CEO got slammed by members of the House
over how the automaker mishandled the crisis. Faulty ignition switches in
General Motors (NYSE:GM) vehicles have been linked to 31 accidents and at
least a dozen deaths over the past 13 years, prompting a massive recall.
But lawmakers want to know what took G.M. so long, and did G.M. put money
ahead of lives.

For her part, Barra attempted to reassure those lawmakers, along with
investors and drivers, that G.M. cars are safe and that she and the company
are terribly sorry.

Eamon Javers has more on today`s heated testimony, Barra`s
performance, and what`s next for G.M.


G.M. CEO Mary Barra arrived on Capitol Hill this afternoon to apologize for
G.M.`s failures leading up to the automaker`s recall of 2.6 million
vehicles for dangerously defective ignition switches.

UNIDENTIFIED MALE: Nothing but the truth.

JAVERS: The audience included grieving family members of people
killed in switch-related accidents.

BARRA: Today`s G.M. will do the right thing. That begins with my
sincere apologies to everyone who has been affected by this recall,
especially the families and friends who lost their lives or were injured.
I am deeply sorry.

JAVERS: But in the face of tough questions about what G.M. knew and
when about the problem, Barra repeatedly said she did not have the
information, citing G.M.`s ongoing internal investigation.

REP. DIANA DEGETTE (D), COLORADO: G.M. was notified by Delphi of
this, correct? Yes or no?

BARRA: I`m not aware of this.

DEGETTE: You don`t know about that? I`m getting this information
from the chronology that G.M. provided to NHTSA.

BARRA: I was not a part of that organization at the time. That`s why
I`m doing the investigation to understand that.

REP. FRED UPTON (R), MICHIGAN: When was that that G.M. informed

BARRA: I don`t know that.

JAVERS: It was a tough outing for the relatively new CEO of the
nation`s largest carmaker.

SEN. TIM MURPHY (R), PENNSYLVANIA: Ms. Barra, let me ask you a
question. Just want to be clear. Did you review the documents that G.M.
submitted to the committee?

BARRA: No, I did not. There was over 200,000.

JAVERS: The day began on an emotional note as the families of the
dead gathered with lawmakers.

LAURA CHRISTIAN: Our daughters, sons, sisters, brothers, mothers,
fathers, wives and husbands are gone because they were a cost of doing
business G.M. style.

JAVERS (on camera): At the hearing, Barra announced that 9/11 victim
compensation czar Ken Feinberg is going to take on a similar role here for
G.M. She`s not done yet. Tomorrow, she`s going to face a Senate committee
as well.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.


GHARIB: Joining us now to talk more about G.M., Brian Sponheimer.
He`s auto analyst with Cabelli & Company.

So, Brian, how did Mary Barra do in your view? Did she answer the
question that you wanted to hear?

Barra did as well as could be expected, given that she`s new to the job,
she wasn`t CEO when this all took place. I found her to be humble, to be

She did not speculate as to what the real answers can be. And I think
they`re in search mode as to what the answers really are.

This is very early in the process. It`s not surprising Congress
wanted to see her so quickly. But I think that to her credit, she did not
go so far as to make any statements that down the road could come back to
haunt her.

MATHISEN: But in some cases, she didn`t answer the congressmen and
women`s questions, did she, Brian?

SPONHEIMER: No, I don`t think she did. And I think that could be
expected. As she said, there was a 200,000-page data dump that she and her
team are working through right now I think that —

MATHISEN: If Congress people could have read it why couldn`t she or
her people have done that and briefed her on it? I don`t get it.

SPONHEIMER: I think it`s very easy when you have a 200,000-page data
dump to be able to snipe bits and pieces and have a bit of a gotcha
session. I think Ms. Barra could have done a little bit better job with
some of the more what I would say headline issues that I think she should
have been better briefed on.

But overall, this is an ongoing investigation. And I think the worst
thing that she could have done would be to make a declarative statement
that down the road could be proven to have been misleading.

GHARIB: Brian, what about consumer reaction? How do you think
drivers are going to feel about her testimony? Are they going to feel safe
in a G.M. car? Do they trust the company?

SPONHEIMER: You know, I think the proof of this will bear out over
some time. What was interesting today, G.M. released its March auto sales
with the rest of the automakers. And the passenger car sales are up 10
percent for the month of March. And this has been front page headline
leading news for the past couple of weeks.

So, it would have been interesting to see whether consumers decided
not to purchase towards the back half of the month. That doesn`t appear to
be the case. As this plays out over the course of the next few months, I`d
expect there to be some sort of backlash to consumers. Thus far, it hasn`t
really taken place.

MATHISEN: For investors in General Motors (NYSE:GM), is this a

SPONHEIMER: I think it is in the near-term. Clearly, there are going
to be a couple of moments over the course of the next couple months that
can be expected to be fairly ugly. As this investigation goes forward.

Obviously, with consumers passing away in auto crashes, it`s a
terrible event. And I think that there`s more to be found about this. And
I think that — at least in the near-term, this is an overhang for

GHARIB: Right.

SPONHEIMER: As you look out one year, two years down the road, I
think it really gets back to whether gm can make cars that are of the
quality that consumers expect. They have a good product lineup as far as
what they rolled out over the course of the last two years. The question
is can they convince consumers that what they`re making is on par with
their competition?

GHARIB: And that`s going to be a big question. We`ll see how that
all plays out. Thank you so much, Brian, for coming on the program.

SPONHEIMER: Thank you for having me.

GHARIB: Brian Sponheimer, he`s with Cabelli & Company.

MATHISEN: Well, as Brian alluded to, all this talk today came on the
day that auto sales for March far exceeded estimates, even for General
Motors (NYSE:GM). Overall sales up nearly 6 percent last month, on pace
now to sell more than 16 million units this year. Shares of General Motors
(NYSE:GM) cars rose 4 percent over all. Sales at Ford up 3 percent. Best
March in eight years for that company.

The big winner was Chrysler. Sales there up 13 percent, mainly on the
strength of its Jeep division.

Shares of Ford rose nearly 5 percent on the day. General Motors
(NYSE:GM) shares were flat.

GHARIB: Well, those strong car sales boosted stocks on this first
trading day of the second quarter, along with solid manufacturing and
constructions spending report, and it even pushed the S&P 500 to a new
record high. The Dow rose almost 75 points, the NASDAQ surged about 70
points on a big jump in tech stocks. And the S&P added 13 points, closing
as we told you at 1,885, a record.

MATHISEN: Well, as the market rallies, will earnings season be the
next major hurdle for stocks? According to FactSet, first quarter profit
warnings are already near record levels.

Our friend at FactSet senior earnings analyst John Butters is back
with us to put it into context.

John, welcome back. Good to see you.

Earnings season, is it — does it have the potential to stall or
derail the market?

said we`re expecting a much weaker earnings season than we did when we
started the quarter. The expected growth, the index, is now a decline of
0.4 percent. That`s down from an expectation of 4.4 percent, the start of
the quarter. And much of the reason we`ve seen that decline is the high
level of negative guidance that you talked about.

At this point in time, 93 companies in the S&P 500 have given negative
guidance. That`s the second highest number we`ve seen since we`ve been
tracking the data back in 2006. And two sectors in particular really stand
out — the consumer discretionary and industrial sectors. Both of those
sectors are seeing record numbers of companies giving negative guidance.
And those are two sectors that are likely going to be impacted by the
unusually cold weather we had during this past winter.

GHARIB: You know, these analysts track the numbers not only for Q1
but they`re also looking ahead to the second quarter, third quarter, fourth
quarter. What are the projections you`re seeing so far? To Tyler`s point,
how might this play out in the markets?

BUTTERS: Well, first quarter certainly is expected to be the dip in
the earnings for the next couple of quarters. If we look ahead for second
quarter, analysts are looking for growth of 8 percent. And then again in
the second half of 2014, that`s expected to hit double digit earnings
growth of almost 11 percent.

So, one of the key things to watch this earnings season is the
guidance, what sort of comments give, because if we do see analysts or
companies start to lower their expectations, we may see analysts take those
numbers down.

And on the flip side, if we see companies saying, well, the first
quarter was a one quarter aberration due to the weather, we still expect
things to be solid for the rest of the year. You know, again, the market
will probably take that optimistically if we don`t see those numbers come
down in the second half of year.

MATHISEN: Is the weather the principal reason earnings are going to
be flat in first quarter of the year, or are some companies using it as a
fig leaf to cover up things that go deeper than that?

BUTTERS: Right. Well, that`s hard to say at this point. I mean,
certainly, in the past, we have heart companies use weather as an excuse.
We`re seeing some of the boy who cried wolf syndrome potentially.

But this time around, I think it is a legitimate excuse of the 18
companies that have reported so far. Eight of them have cited the negative
impact of weather. Most of those being in consumer space such as
retailers, such as Costco (NASDAQ:COST) or companies in the industrial
space that had difficulty transporting goods or doing — or transportation
in general such as FedEx (NYSE:FDX) and Cintas (NASDAQ:CTAS).

So, I think this quarter the weather is a legitimate issue in terms of
having a negative impact on revenues and earnings.

GHARIB: So, the spotlight will be on JPMorgan (NYSE:JPM) Chase next
week who reports its earning. This is a big Dow stock reporting earnings
next Friday. What are you expecting from them? And looking ahead, how are
the financials doing?

BUTTERS: Right. So, look at JPMorgan (NYSE:JPM) Chase, they`re
expecting about a 10 percent decline in EPS this quarter. And this would
be the third straight quarter they`ve had a year-over-year decline in EPS
if that`s the case.

And the financial sector is really interesting sector, because this
quarter, it`s really a middle of the pack quarter. It`s expecting a
decline of 1 1/2 percent. Last quarter, it was the leader in growth at
about 24.5 percent due to strong results of insurance.

And if we look ahead in the second half of the year, this is one of
the sectors really expected to see a pickup in earnings growth in the third
quarter and fourth quarter. So, we`ll certainly keep an eye on the
guidance and commentary from these companies as this is expected to be one
of the best performing sectors in terms of earnings growth in the second
half of the year and for all of 2014.

MATHISEN: Right. Our quarterly visit with John Butters, thank a lot.

BUTTERS: Great. Thank you for having me.

John is with FactSet.

GHARIB: And still ahead, last minute surge.

A target once thought out of reach was met. 7 million people have
signed up for health care insurance under the Affordable Care Act. But
does that lead to a healthy prognosis for the new law? That`s next.


GHARIB: General Motors (NYSE:GM) wasn`t the only iconic American
company getting grilled by lawmakers today. So was Caterpillar (NYSE:CAT).
The world`s biggest mining and construction equipment maker is accused of
shoveling $8 billion in profits to offshore accounts and evading billions
in U.S. taxes.

Hampton Pearson was at that Senate hearing and has more.


Heavy equipment giant Caterpillar (NYSE:CAT) avoided paying $2.4 billion in
U.S. taxes under a corporate restructuring 15 years ago that shifted most
of the profits from parts sales worldwide to a subsidiary in Switzerland.
That`s the major finding in a just released report from the Senate
Permanent Subcommittee on Investigations.

What turned into a five-hour marathon hearing began with committee
chairman, Michigan Democrat Carl Levin, saying closing off shore loopholes
should not be held hostage to a complete overhaul of the tax code.

SEN. CARL LEVIN (D), MICHIGAN: We cannot tolerate the loss of our
taxable revenue the way it is currently lost to Uncle Sam, which is the use
of these tax loopholes which are unjustified and which are exploited and
pushed over the limit at times. We`ve had hearing after hearing which
shows that.

PEARSON: Caterpillar (NYSE:CAT) and its long-time tax consultants,
PricewaterhouseCooper, which was paid $55 million for its strategic advice,
say they are obeying the law, pointing out Caterpillar`s effective tax rate
is 29 percent, three points higher than the average for U.S. corporations.

philosophy is that our business structure drives our tax structure. We do
not invent artificial tax structures.

PEARSON: Republicans on the committee were outspoken in their defense
of Caterpillar (NYSE:CAT) and its offshore tax strategy, leading to charge
Senator Rand Paul.

SEN. RAND PAUL (R), KENTUCKY: We should be complimenting caterpillar
and perhaps giving them an award. Caterpillar (NYSE:CAT) not only employs
52,000 people but pays $600 million in taxes every year. So, really, we`ve
got the wrong people on trial here. The tax code needs to be on trial

PEARSON (on camera): So, Caterpillar (NYSE:CAT) now joins the ranks
of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Hewlett-Packard
(NYSE:HPQ) who have all been called to Capitol Hill in the last 18 months
to defend their tax strategies.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.


MATHISEN: And staying in Washington, there`s some celebrating at the
White House tonight over a milestone for the Affordable Care Act. The
administration says more than 7 million Americans signed up for a new
health care plan through online marketplaces by last night`s open
enrollment deadline. President Obama spoke at the White House late today.


always work with anyone who`s willing to make this law work even better.
But the debate over repealing this law is over. The Affordable Care Act is
here to stay.



MATHISEN: So, has the six-month enrollment period been a success?

John Harwood joins us now from Washington with more.

John, what happened at the end of the enrollment process to reach
these goals, these unexpected numbers?

White House always said that the shape of the enrollment process would
include a spike at the end. I think this is a spike that was bigger than
they expected,

But they did a very heavy social media campaign. That`s why they sent
the president on with Zach Galifianakis on “Between Two Ferns”, meant to
hit young people. They had LeBron James endorsed. You had Ellen DeGeneres
hosting the president on his show, a whole series of celebrities tweeting
out on the last day that people signed up. So, I think that`s what
produced this number.

And as for whether that makes the enrollment a success, don`t know
that yet. We won`t know until we see how financially viable and balanced
these exchanges are.

GHARIB: So President Obama found it pretty upbeat today saying the
Affordable Care Act is here to stay. John, what`s his message?

HARWOOD: Well, his message was two parts really, Susie. One was
celebration. As you indicated earlier, I haven`t seen the president, his
aides, congressional Democrats this elated since the night he won a second
term. But the president also was reflecting real exasperation with the
political resistance he`s faced. There was a plaintive tone in his voice
when he said I can`t under understand why people argue against giving
health care to people.

Now, that political battle is not over. But he was trying to steal
his side for the fight that`s going to take place through the fall when
Democrats try to win back the House, that`s going to be hard, and hold on
the Senate, that`s also going to be hard.

MATHISEN: What is the GOP`s reaction to today`s events?

HARWOOD: Well, you see a whole series of reactions. First of all,
yesterday, Speaker Boehner said we`re going to continue trying to repeal
the law. You had some Republicans coming out and saying that the numbers
are made up, that this is just spin from the administration.

Others saying, well, yes, maybe people have signed up but they haven`t
paid their premiums. I think they`re still trying to absorb these numbers.
And over time, once we see how satisfied Americans are, maybe the program
gets more popular or not. The outcome of that is going to determine how
well the election goes and then the fate of the law going forward.

MATHISEN: All right. John, thank you very much.

John Harwood at the White House tonight.

GHARIB: Trading on the New York Stock Exchange at a standstill for a
time today. Traders were transfixed on author Michael Lewis who says that
stock trading is rigged by so-called high frequency traders.

Things got really hot between Brad Katsuyama of the trading company
IEX Group and prominent figure in “Flash Boys”, and William O`Brien of the
high tech exchange operator Bats, over whether the average investor can
compete with high-speed traders accused of rigging the market.


O`BRIEN: You said in the book, that`s when I knew the markets were
rigged. It`s disgusting you`re trying to parse your words now. OK? You
can`t say that.

SUE HERERA, CNBC: You are quoted that way in the book. But —

KATSUYAMA: OK, let`s walk through an example —

O`BRIEN: Do you believe it or not? Because you said it.

KATSUYAMA: Let me walk you through an example —

O`BRIEN: It`s a yes or no question. Do you believe it or not?

KATSUYAMA: I believe the markets are rigged.

O`BRIEN: OK, so there you go.

KATSUYAMA: And I also think that you`re a part of the rigging. If
you want to do this, let`s do this.


GHARIB: Well, Lewis brought the term high frequency trading to light
this week with his new book “Flash Boys”, but still supports investing in


MICHAEL LEWIS, “FLASH BOYS” AUTHOR: Do you not invest because — do
you stay out of the market entirely because you don`t want to be scalped a
bit? No, you don`t. But that doesn`t mean the scalping is OK. To what
degree does that system have in it this incredible instability just to
enable the scalping? The complexity of the system is breathtaking.


GHARIB: Meanwhile, the FBI has opened an investigation into the
practice, trying to find out if firms taking advantage of fast-moving
market data over high-tech wires unavailable to other investors are
actually engaging in insider trading — Tyler.

MATHISEN: There`s a big change coming to the New York Stock Exchange.
Goldman Sachs (NYSE:GS) is preparing to sell its so-called designated
market maker stock trading unit, which pairs up buyers and sellers right on
the floor of the New York Stock Exchange.

Goldman acquired the space by paying $6.5 billion back in 2000 for a
small specialist trading firm. But now that so much trading is moved off
the exchange floor, experts say that that space is now worth only about $30
million, or maybe less.

So, can you say tax write-off?

GHARIB: Intuitive Surgical`s new device gets the OK from regulators
and shares jump. That`s where we begin tonight`s “Market Focus”.

The Food and Drug Administration approved the company`s device called
the Da Vinci XI. It`s the newest version of its surgical robots. The
device allows surgeons to perform complex but minimally invasive
procedures. The stock was the biggest gainer on the S&P 500 today, surging
nearly 13 percent to $493.60.

Shares of Yahoo (NASDAQ:YHOO)! rose on reports that it`s in talks to
acquire online video service news distribution network for $300 million.
The deal could be a competitive threat to Google`s YouTube. Yahoo
(NASDAQ:YHOO)! was up more than 1.5 percent to $36.49.

And casino stocks popped after Macau announced first quarter gaming
revenue grew 20 percent, beating analyst estimates. Wynn Resorts
(NASDAQ:WYNN), Las Vegas Sands (NYSE:LVS) and MGM get most of their revenue
from Macau. Shares of all three companies were up more than 2 percent.

Here are the numbers: Wynn closed at $227.18, Sands at 82 bucks and
MGM at $26.53.

MATHISEN: News Corp (NASDAQ:NWS)., its chairman Rupert Murdoch, and
company officials won the dismissal of a lawsuit. That suit accused them
of defrauding shareholders by hiding illegal phone hacking at two of its
newspapers. Shares of News Corp (NASDAQ:NWS). up 1 1/2 percent today to
finish at $16.94.

TJX Companies (NYSE:TJX), the parent of T.J. Maxx and Marshalls, upped
its quarterly dividend by 21 percent. The new dividend of about 17 cents a
share will be paid to shareholders in June. Shares up a fraction, $61.19
to finish there.

Coming up, 4 million Americans expected to get hit with the
alternative minimum tax. Are you at risk of paying it? And is there
anything you can do to avoid it?


GHARIB: Just 14 days to go before Tax Day, April 15th. And many high
earners are dreading the possibility that they might have to pay the
alternative minimum tax this year. So, what`s the AMT all about and how
can you avoid being targeted for the tax?

Sharon Epperson has some answers.


Almost half of Americans do their own taxes. And many think they`re taking
advantage of all tax breaks. But millions of taxpayers may not realize
some big tax breaks they`d normally take on their regular income tax return
won`t save them any money at all if they`re subject to the AMT, the
alternative minimum tax.

BOB MEIGHAN, TURBOTAX VICE PRESIDENT: Many people actually call it
the stealth tax. And it`s because it comes as a surprise to people that
they`re affected by the AMT.

EPPERSON: Many taxpayers needed to do two calculations, one for their
regular tax and one for the AMT, and prepare to pay the higher amount. A
certain amount of income is exempt from the AMT. If you`re a married
couple, the full exemption amount is $80,800. It`s $51,900 for single

But the AMT exemption phases out as incomes rise. As result,
taxpayers with incomes over $200,000 are most likely to face this tax.

MEIGHAN: It`s generally those people who are I`d say moderate to
upper income who may have lots of like state income tax deductions, a lot
of children or other exemptions. They`re the ones who are generally going
to be affected by it or at least need to check to make sure they`re not
affected by it.

EPPERSON (on camera): If you live in New York or any place where
state and local taxes are high, those taxes can be a big deduction on your
regular return. But the AMT won`t allow it. You won`t save much with
miscellaneous deductions, including exemptions for children, either.

for AMT purposes are in essence penalties. They`re trying to capture taxes
on expenses and deductions that really shouldn`t have slipped in their
minds through the cracks.

EPPERSON (voice-over): Many deductions are adjusted downward or
eliminated entirely when calculating the alternative minimum tax and may
trigger a tax liability.

So what can a taxpayer do to avoid the AMT? Don`t take too many
itemized deductions, tax experts say, since they`ll lose their value.
Instead, shift some deductions to a year when you`re less likely to be
subject to the AMT.

But with the April 15th tax filing deadline just two weeks away, many
taxpayers will just need to be prepared to pay the higher tax.



GHARIB: If you want to know more about the alternative minimum tax
and what it means to you, go to our Web site,

MATHISEN: And finally tonight, it is April 1st, April Fools` Day.
That means some companies try to drum up some press by announcing
outrageous stunts or unveil hard to believe products that seem to fool a
lot of people, including some of us.

Domino`s Pizza (NYSE:DPZ) is at it again this year announcing the
Edibox. What it calls the world`s first edible pizza box. Do not try this
at home, folks.

Online grocer Fresh Direct said it would start delivering salmon that
was caught by eagles.

And PepsiCo, which makes Cheetos snacks, handed out bottle of cheese
scented perfume called “Cheeteau”, described to give as having, quote,
“buttery notes, accents of sharp cheddar, and a touch of lemon for
balance.” How do you like that? Happy April Fools` Day.

GHARIB: People were having a lot of fun today.

MATHISEN: Yes, absolutely.

GHARIB: I couldn`t play any jokes on you, though.

MATHISEN: No, no, nor I on you.

GHARIB: Well, that`s NIGHTLY BUSINESS REPORT on this April Fools`
Day. I`m Susie Gharib. Thanks for watching.

MATHISEN: And that`s no kidding — I`m Tyler Mathisen. Have a great
evening, everybody. We`ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post
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