Transcript: Nightly Business Report – October 6, 2015

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Strike threat. The
United Auto Workers Union tells Fiat Chrysler that 40,000 workers are ready
to walk off the job.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Harsh reality for fantasy
sports. The controversy that`s engulfing a very new, very big, and very
fast-growing industry.

MATHISEN: Warming up. Why cranking the heat up when the temperatures
drop may not cost you as much this winter. Great news for my wife.

All that and more tonight — she`s always cold — on NIGHTLY BUSINESS
REPORT for Tuesday, October 6th.

HERERA: All right. Good evening, everybody, and welcome.

Preparing to strike, that`s what the united autoworkers union told
Fiat Chrysler its 40,000 members were ready to do, perhaps as soon as
Thursday morning. The union said tomorrow will be the last day its members
work on a day-to-day contract. A clear sign that talks to reach a new
labor deal have broken down.

Phil LeBeau has more on the main sticking points and what a strike
could mean for Fiat Chrysler.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the first
time in eight years, the UAW is ready to strike a big three auto plant.
The union has told Fiat Chrysler its members will walk off the job starting
Thursday morning unless something changes in the stalled talks to get a new
labor contract.

Fiat Chrysler and the UAW are not close to reach agreement. Just last
week, two-thirds of the union members rejected a tentative contract,
partially because there is still a sizable wage gap between lower paid tier
2 workers hired in the last six years and those higher paid workers who
have been at Chrysler far longer.

The autoworkers feel they should get more money because Fiat Chrysler
is rolling up sizable profits, thanks to strong sales of Jeep SUVs and Ram
pickups. While Fiat Chrysler is no longer on the verge of bankruptcy, it
is the least profitable of the big three. And a strike would be felt
almost immediately by the company and its dealers.

Right now, there is a limited supply of certain Jeep models and that
could dwindle quickly if there is a UAW strike that stops production of
jeeps. As for Fiat Chrysler, by one estimate, a week-long strike by the
United Auto Workers would cost the company over a billion dollars in
revenue.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Well, from a possible labor strike in the auto industry to
a potential scandal in a burgeoning one, fantasy sports. Draft Kings and
Fan Duel are the two biggest players in this fast-growing multibillion
dollar business. And just like other new economy companies such as Uber
and Airbnb that operate in regulatory gray areas, Draft Kings and Fan Duel
have seen big money flow in to their sites at a very rapid pace.

But today, the sports gaming outfits faced fire after “The New York
Times (NYSE:NYT)” said an employee of draft kings accidentally leaked
proprietary information to the public, the same week he won a fantasy
contest on a rival site. And that is raising a lot of questions about the
integrity of the industry.

(BEGIN VIDEOTAPE)

MATHISEN: The scandal, if that`s what it turns out to be, is being
compared to insider trading. And it`s an apps comparison except for one
thing. Unlike in the investment markets, no rules, laws or regulations
govern sports fantasy gaming.

DANIEL WALLACH, SPORTS LAWYER: Is it insider training? Maybe not in
the legal sense, but insiders are gaining or have access to information
that could presumably give them an unfair advantage over the consuming
public and too many insiders are playing fantasy sports to take at face
value any statement that nobody is utilizing inside information to win.

MATHISEN: Until today, when both sighs issued statements banning
their employees from doing so. It`s been common practice for employees to
play on rival sites.

In fantasy sports, fans choose real players to create their fantasy
teams. Statistics compiled by the real players during games are then
totaled to see whose fantasy team is best. It might be an advantage if
someone knows how often certain real players are getting picked. Less
popular players can be good value plays because fans who picked that player
have fewer rival gamers to beat, raising their odds of winning. That is,
if the player performs well on the field.

And there`s a lot at stake for these companies. Daily and weekly
payouts instead of waiting for a full season to play out are attracting
customers and how. The Fantasy Sports Trade Association says 57 million
people will play online this year, up about 40 percent from just last year.
They`ll pay more than $2.5 billion in entry fees, a number expected to top
$14 billion in five years.

Investors such as FOX Sports, NBC Sports Ventures and Comcast
(NASDAQ:CMCSA) (NYSE:CCS), parent of NBR`s producer, have backed these
companies with millions, pushing their valuations north of a billion
dollars apiece. The sites pay the leagues and their teams millions in
sponsorship dollars. In some cases, leagues have invested in the sites,
though not the NFL, at least not so far.

And why shouldn`t they? More interest in the games and the players
drives up TV ratings. The NFL Players Association even signed a deal to
let its players appear in advertising, and those ads are everywhere.

Fantasy sports were deemed legal in 2006 through a loophole in a
federal law that bans online gambling. That law says fantasy sports are
not gambling because they are games of skill rather than games of chance.
But the sudden boom in fantasy sports has many lawmakers reconsidering that
stance.

WALLACH: Clearly, we are headed towards regulation. We`re going to
having government regulation like we do in all forms of gambling such as
the lottery, horse racing, casino gambling, sports betting in Nevada, this
has been the only form of gambling to fly under the radar and make no
mistake about it, it is gambling and it will be regulated.

(END VIDEOTAPE)

HERERA: So what is Washington likely to do, if anything, when it
comes to fantasy sports?

Eamon Javers joins us from our nation`s capital. He`s been following
the story.

So, Eamon, from what you`ve learned, what can we expect from
lawmakers?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, Sue.

I think at the very least, you can expect hearings on Capitol Hill.
One, it`s a high profile a lot of media interest in this issue and also, a
lot of fan interest. A lot of people watch sports and they see these ads
for these companies day in and day out, game after game. There are a lot
of people who are going to want some answers here.

I think Congress is not going to be able to resist the opportunity to
have hearings on this. I also think you might see some activity over at
the Department of Justice and states attorney generals generally looking at
whether or not there was any fraud here.

So, I would not be surprised to see some investigations get started
here that are a little bit more serious than what we`ve seen to date. But
this is an unregulated industry and so there really is no one in Washington
whose directly responsible for it right now.

MATHISEN: That`s an interesting point the states attorneys general
might get in here and look at it for fraud. Is there a partisan divide on
this that you can identify? In other words, would Democrats be more likely
to go for regulating the industry than Republicans, or is it not really a
party dispute?

JAVERS: It`s interesting, Tyler. This is not one of those ones that
cuts very cleanly by party lines and so much does in Washington now.
Almost everything is partisan here.

But this one is tricky. I mean, Republicans generally are more
reluctant to have regulations than Democrats, right? So you wouldn`t want
to see a big government response here if you are a Republican. That said,
there are a lot of fans out there who are concerned and they want these
games to be honest and they want to be able to be told that they can safely
place their bets or participate in these games.

So, Republicans might be balancing it that way. Democrats might be
not wanting to kill the golden goose here, not wanting to over-regulate
although stereotypically that might be their reaction, as well. So, it
doesn`t cut as cleanly as other issues.

HERERA: Very quickly, Eamon, is it more complicated because have you
corporate investments in these fantasy leagues?

JAVERS: Yes, that complicates it. There are big powerful interests
here. Large corporations, the leagues themselves are hugely powerful in
Washington. Also you`ve got Vegas, the casino industry itself. Remember
Harry Reid, the Democrat from Nevada, he is the Senate Democratic leader.

The casinos have a sort of tortured relationship with online gaming in
general. And whether or not they view this as a partnership opportunity or
a threat will dictate how this debate goes in the months to come.

HERERA: Eamon, thank you very much. Eamon Javers in Washington.

JAVERS: You bet.

MATHISEN: And also in Washington, Amtrak telling lawmakers that it
may suspend National Rail Service come December. In a letter addressed to
the chairman of the Senate Commerce Committee that was reviewed by
“Reuters”, the railroad operator says the majority of its network would be
inoperable unless the deadline for implementing certain safety technology
is extended. Amtrak says it will have the technology on the heavily
traveled northeast corridor track by the year end deadline but other
stretches of Amtrak`s track may not be compliant.

HERERA: On Wall Street, stocks closed mixed. The only index that
ended higher was the Dow, which barely held up, with help from DuPont. The
chemical company got a lift after its CEO announced her resignation late
yesterday. By the close, the Dow Jones Industrial Average was 13 points to
16,790, the NASDAQ dropped 32 points, the S&P500 was off seven.

The biotech sector took a hit with the NASDAQ biotech index falling
more than 3 1/2 percent come as drug companies can come under scrutiny over
pricing.

MATHISEN: Oil prices, Sue, rose today after the U.S. cut its forecast
for output. The Energy Information Administration also raised its 2016
growth forecast for world oil demand. The U.S. is the top consumer of oil.
A weak dollar also helped support prices. Domestic crude settled up nearly
5 percent to finish at $48.53.

HERERA: As Ty mentioned, winter is coming. And that means people
across the country will be turning up the heat in their homes as the
temperature drops.

But as Jackie DeAngelis reports, this year, it may not be as costly.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: If the
weather models are right, and energy prices stay low, it`s going to cost
less to stay warm this winter compared to the last two, according to the
Energy Information Agency. A combination of more mild temperatures and
lower energy prices will be a boon to consumers if conditions hold.

The bulk of U.S. homes are heated with natural gas, a commodity that
is in abundant supply.

Total natural gas stocks are currently more than 15 percent higher
than they were at this time last year. When supply is in good shape,
prices come down. Gas prices have slipped more than 35 percent in the last
year alone.

ANTHONY GRISANTI, GRZ ENERGY: Natural gas production in this country
hasn`t dropped the way crude oil production has dropped. It`s actually
remained fairly high. And we are a well-supplied market. So, it`s going
to take an extremely cold winter for us to really push natural gas prices
higher. And I think most consumers are going to enjoy cheaper energy bills
than they had last year.

DEANGELIS: In fact, on average, natural gas users can expect to pay
about $578 to heat their homes this winter, about $65 less than last year.
Homes running on heating oil will cost an average of $1,392. That`s a
savings of about 460 bucks. Propane average cost, $1,437. A savings of
$325.

GRISANTI: Because of crude oil, overall energy costs are down.
Gasoline is down. Heating oil is down. Natural gas is out of its own, but
it`s down because of oversupply. So, if we do get a mild winter consumers
are going to save right across the board no matter what you use to heat
your home.

DEANGELIS: Low oil prices will also bring benefits on the road. The
national average for a gallon of regular projected to hit $2 in the month
of December. If that happened, it would be the lowest price we`ve seen in
that month in seven years. So, it could be a very merry Christmas.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN: The U.S. trade deficit expanding by the most in five months
widening in august increasing more than 15 percent to about $48 billion.
This as imports grew and the stronger dollar along with weaker overseas
growth limited U.S. exports.

HERERA: And that slowing growth overseas may not improve anytime
soon. The International Monetary Fund cut its global economic outlook
again to 3.1 percent this year from its previous forecast of 3.3 percent.
The agency says modest U.S. growth and a slow recovery in the eurozone have
not been enough to offset falling output in emerging markets.

MATHISEN: And still ahead, the surprising way the L.A. Dodgers hope
to find success off the field long after baseball season is over.

(MUSIC)

HERERA: Express (NYSE:EXPR) Script says it will cover the pricey new
treatments for high cholesterol. The nation`s biggest pharmacy benefits
manager will pay for Amgen`s drug as well as the one made by Sanofi and
Regeneron, but with conditions. First, it negotiated a discount, and
second, the prescriptions will require prior approval from one of its
pharmacists.

MATHISEN: A ruling from Europe`s top court could impact U.S. tech
companies — a decision invalidates a 15-year-old agreement that lets
American companies handle Europeans data. Under so-called safe harbor
rules, U.S. firms are allowed to transfer personal data of European
citizens back to the U.S. This ruling could impact how Facebook
(NASDAQ:FB), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) and others operate
overseas.

HERERA: Some small tech startups are looking for new sources of
capital and they`re finding that funding in some surprising places.

Jane Wells has the story from Los Angeles.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: While the Dodgers
have been winning on the field most of this year, they`ve been working to
win off the field in L.A.`s growing tech startup scene. They`ve become the
first professional sports franchise to fund a tech incubator.

STAN KASTEN, L.A. DODGERS: We thought beat had an opportunity here to
get beyond just the business that we have of playing baseball on the field
at Dodger Stadium.

WELLS: Why?

KASTEN: Because our brand extends so far throughout the world.

WELLS: Dodgers President Stan Kasten teamed up with advertising
agency RGA to give ten startups a total of $120,000 plus office spaces in
L.A.`s so-called “Silicon Beach” to ramp up their companies. In exchange,
the team gets a piece of the action.

TUCKER KAIN, LOS ANGELES DODGERS: It`s almost like an R&D project.
So we have the opportunity to come into the market, understand who is doing
what, what they`re working on, what problems they`re trying to solve.

WELLS: Winners include Swish Analytics, a subscription site which
provides research for people betting on sports or playing in fantasy
leagues. Its next step is to provide research during games.

BOBBY SKOFF, SWISH ANALYTICS: What is going to be the outcome of the
next pitch of the game, the expected winner of the game based on the play
on an NFL field, who is the next likely person to score the touch down and
doing that at really accurate level.

WELLS: There`s also Appetize, a mobile solution for handling sales
transactions as the places like Dodger Stadium from everything from buying
peanut and cracker jacks, to parking. They`ll be testing the system out
during this week`s playoff games.

KEVIN ANDERSON: So, you`ll see parking attendants going into the line
and transacting at the second, third and fourth car with one of our mobile
point of sale units.

KASTEN: We`re a proven ready made laboratory. We have 47,000 people
a night.

WELLS: It all comes to a head on November 10th.

STEPHEN PLUMLEE: We`ll have a demo day at Dodger Stadium where all
ten companies will present publicly.

WELLS: And that`s when the Dodgers hope to start cashing in and maybe
hit a few home runs. Long after baseball season is over.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

MATHISEN: PepsiCo reports better than expected results and that is
where we begin tonight`s “Market Focus”.

The snacks and beverage giant`s quarterlies were bolstered by stronger
sales in North America.

The company`s chief financial officer explained the refreshing
performance.

(BEGIN VIDEO CLIP)

HUGH JOHNSTON, PEPSICO CFO: The PepsiCo is working. You know,
previously, Europe and Asia Middle East Africa were going more quickly as
North America was a bit slower. Now that North America has picked up quite
a bit, you see all of the businesses and North America beverages Frito-lay
and even Quaker are all performing really well.

(END VIDEO CLIP)

MATHISEN: Shares rose more than 1 percent for PepsiCo today to
$97.07.

The Bud Miller deal may be unraveling. As we told you last month,
Anheuser Busch offered $100 billion to purchase SAB Miller. According to
Bloomberg, SAB rejected the bid today because it`s seeking a higher offer,
frothier you might say. Anheuser shares fell 1 percent to $109.60. And
SAB Miller trades overseas.

Skyworks Solution agreeing to buy PMC Sierra in a $2 billion deal.
Skyworks is a chip supplier for Apple (NASDAQ:AAPL) and PMC is a software
solution developer. Skyworks fell 1.5 percent to $80.71. PMC Sierra rose
33 percent to $10.24.

HERERA: FedEx (NYSE:FDX) has joined UPS in hiking its fuel
surcharges. The announcement comes just before the key holiday shopping
season and is the second increase by FedEx (NYSE:FDX) this year. It will
take effect November 2nd. FedEx (NYSE:FDX) shares were 1 percent higher to
$151.51. UPS fell a few cents to $101.43.

Disappointing quarterly results from Yum Brands (NYSE:YUM). The
parent of Pizza Hut missed on both the top and bottom lines and said the
pace of recovery in its China division is below expectations. Shares
dropped initially in after-hours trading. During the regular session, the
stock was a fraction higher to close at $83.42.

A weak outlook from Adobe late today. The maker of Photoshop released
a weak earnings outlook for fiscal 2016. And shares slid in initial after-
hours trading before coming back. During the regular session the stock was
off a fraction to $85.15.

Freeport McMoRan is considering spinning off its oil and gas unit.
The announcement comes just a few weeks after the activist investor Carl
Icahn disclosed a 8.5 percent stake in the mining and energy company.
Shares jumped almost 6 percent to $11.83.

MATHISEN: So, do activists investors help or hurt a company its stock
price and are they bad or good for business?

It depends according to a new “Wall Street Journal” study that
examined what happened at 71 large U.S. companies when activist investors
targeted them.

David Benoit is a reporter with “The Wall Street Journal” and he joins
us to talk more about his findings in a very interesting article today in
the paper.

David, welcome, number one.

DAVID BENOIT, THE WALL STREET JOURNAL: Thanks for having me.

MATHISEN: Very quickly what, did you do, how did you do it, and what
did you find?

BENOIT: So, what we did was we took 71 of the largest activist
campaigns. We started with the companies worth $5 billion and up and we
kind of dug in and looked at total shareholder returns, we looked at
earnings, we looked at profit margins, about how much they`re spending on
capital.

And what we determined was — well, about half the time, these
companies do really well. They outperform their peers across all those
metrics and the other half of the time, they don`t. They miss. And just
underperform.

HERERA: So what is a company to do then, let`s say an activist
investor like a Carl Icahn, like a pelts takes a large stake in your
publicly held company. Is there a best strategy? Is there a way to kind
of maneuver around that the particular situation?

BENOIT: So it really comes down to the nuts and boats. That`s kind
of what I think this half and half shows. Pretty much a company when they
get investment has to stop and think and look at the ideas these activists
are presenting and say are they the right thing for us or the wrong thing
for us. And they`re going to have to convince shareholders whichever way
they`re going they`re going the right way after that.

HERERA: So, David, even though it was sort of sounds like sort of a
50/50 shot that you did better if you followed the activists, were there
some activist who did better than others? In other words, you looked at
Ackman, you looked at Icahn, you look at Dan Loeb. Did somebody have a
better performance?

BENOIT: So, what we saw kind of generally was that the activist who
got on boards and got their own people on boards did the best. The two
that really stand out are both West Coast names, ValueAct run by Jeff Ubben
and Mason Morfit right now. They`re doing a lot of kind of big
investments. They got on Microsoft`s board. They looked very good in our
study.

And then kind of an older version of that Relational run by Ralph
Whitworth has performed pretty well in our universe of companies.

MATHISEN: So, they`re you`re following the jockey I guess and not
necessarily the horse. David, fascinating article today.

BENOIT: Thanks.

MATHISEN: Recommend it highly. David Benoit with “The Wall Street
Journal.”

BENOIT: Thanks very much.

HERERA: Coming up, why one small business owner`s decision to embrace
mobile technology is creating a new financial life line for his company.

(MUSIC)

HERERA: The biggest 500 companies in America hold more than $2
trillion in combined profits overseas to avoid taxes. That`s according to
a study by two non-profit groups. The study also found that by keeping
money in other countries, the firms are able to avoid paying about $620
billion in U.S. taxes. Apple (NASDAQ:AAPL) holds $181 billion offshore,
more than any other U.S. company.

MATHISEN: Profits on Wall Street rose by nearly a third to more than
$11 billion in the first half of this year, according to a report out today
by the New York state comptroller. The move higher marks the street`s
strongest first half of year since 2011. Despite the rise, the report also
found the slowing global economy could hurt the industry over the second
half of the year.

HERERA: Mom and pop businesses are embracing change going mobile.
Adopting new technologies in an effort to avoid getting beat by the
competition. In the first of our three-part series, Sharon Epperson
introduces us to one entrepreneur who can now go to where his customers are
and no longer has to wait for them to come to him.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: James Xavier
Parisi knows a lot about wine.

JAMES PARISI: Wine had always been a passion of mine. And it`s
something that I`ve studied since I was 18 years old.

EPPERSON: He also knows a lot about how well his wine is selling,
thanks to the analysis he gets through a mobile point of sale system.

J. PARISI: Point of sale system is a combination of your register,
customer accounts, what they`re buying, and also your inventory levels. It
will see where percentage of sales go, and you`ll also, heck, I`ve got what
my newest POS system will actually factor in weather as determinations of
what`s going on.

EPPERSON: The technology helped Parisi figure out an important factor
about how to grow his business. He says his wine company needs to be able
to meet customers wherever they want to do business.

PARISI: I`ve got to expand and get out there. I`ve got to get known.
I`ve got to bring my products to the people. So I`ll conduct tastings.

EPPERSON: So he`s hosting tasting events and doing business outside
of his stores even on a boat.

MELINDA EMERSON: You want to make sure that you can take people`s
currency anywhere they want to do business with you. So it`s extremely
important that not only your website is mobile ready, but your cash
register needs to be mobile ready too.

EPPERSON: Parisi agrees his business needs to be able to meet
customers wherever they want to do business.

PARISI: You get caught up in a moment and the next day you go, no.
It`s you know, that was a really nice time but you know, they doesn`t
follow through. When you`re there and if you can, doing that. You know,
these cloud based POS systems allow for you to grab that opportunity.

EPPERSON: Opportunities like this can have helped Xavier Wine Company
generate about 30 percent of its sales outside of the actual store.

DAVE KERPEN: We live in an era of instant gratification. Customers
want what they want when they want it and they want it to be as easy as
possible. So, those small businesses that are going to be the most
successful are the ones that truly embrace this and make it as easy as
possible using mobile phones, tablets and other tools to conduct business.

EPPERSON: This strategy has given Xavier Wine Company a new buzz.

PARISI: They don`t want to go to a store anymore if it`s not directly
in their path of walking, a lot of people won`t go out of their way. But
if you bring them a unique enough product, they`ll love it when you come to
them.

EPPERSON: For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

(END VIDEOTAPE)

HERERA: Tomorrow, our small business series continues with a husband
and wife team who are using technology and social media to modernize their
22-year-old business.

MATHISEN: It is interesting how so many businesses are trying to take
their businesses where customers are but a lot of others don`t.

HERERA: Can`t or won`t. Yes.

MATHISEN: They`re passive.

HERERA: That`s why we`re doing the series I guess.

MATHISEN: Yes.

HERERA: All right. That`s nicely business report for tonight. I`m
Sue Herera. Thanks for watching.

MATHISEN: And I`m Tyler Mathisen. Split the difference on the
thermostat, folks. Have a great evening everybody. We`ll see you
tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2015 CNBC, Inc.

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