Transcript: Nightly Business Report – August 8, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: They will be met with fire
and fury like the world has never seen.

(END VIDEO CLIP)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Temperature rising. The
president ups the rhetoric over North Korea and sends the Dow down. Its
historic win streak is over. The big question is, what`s next?

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Code of conduct. Freedom of
speech or crossing the line. Why Google (NASDAQ:GOOG) finds itself at the
center of that debate.

MATHISEN: And, street fight. An exclusive San Francisco street sold for
$90,000. Its wealthy residents aren`t too happy and the matter may be
headed for court.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
August 8th.

Good evening, everyone, and welcome.

The Dow`s record run is over. The blue chip index fell late today on
rising tensions with North Korea. There were reports today that U.S.
intelligence analysts assessed that North Korea has produced a miniaturized
nuclear warhead that is not believed the capability has been tested.

But in response, the president said North Korea better not make any more
threats against the United States.

(BEGIN VIDEO CLIP)

TRUMP: They will be met with fire and fury like the world has never seen.
He has been very threatening beyond a normal statement, and as I said, they
will be met with fire fury and frankly power, the likes of which this world
has never seen before.

(END VIDEO CLIP)

HERERA: And that sent the stock market lower late today. The Dow snapping
its string of record closes falling 33 points to 22085. The NASDAQ off 13.
The S&P 500 down six.

MATHISEN: John Harwood is following the story for us tonight from
Washington.

John, as always, welcome.

What prompted the president to issue his statement today?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyler, after the
United Nations voted sanctions unanimously over the weekend, including
support from China and Russia, this was a victory for the Trump
administration, you then saw the North Korean leader say that there would
be physical reactions from the North Koreans — didn`t really specify it
beyond that general statement, but it sounded like a threat.

And we know that President Trump does not like to be threatened. He has a
personality that favors dominance. And so, he responded very sharply with
those words to that threat.

HERERA: And we know some of the developments about North Korea, but what
do we really know about where they are in advancing what is the nuclear
threat?

HARWOOD: They`re getting closer, faster than most American analysts had
expected over the last several years. You know, first, you`ve got to show
the ability to make a nuclear weapon, then you`ve got to have a missile
capable of delivering that weapon, and then you`ve got to figure out a way
to make the nuclear weapons small enough to fit on the missile.

It appears from U.S. intelligence analysts that they are getting very close
to that step and, of course, we saw the recent test of an intercontinental
ballistic missile that suggested, it didn`t prove, but it suggested that
they had the capacity to reach the U.S. mainland now.

MATHISEN: All right. John, we have to leave it there. John Harwood in
Washington tonight.

HERERA: Investors are not only watching geopolitics but also earnings.
Tonight, we heard from Disney (NYSE:DIS). The Dow component reported a
drop in profit and revenue, but it`s also shifting its strategy. It plans
to take a bigger stake in the streaming firm BAM Tech and it`s also
launching its own streaming service.

Disney (NYSE:DIS) earned $1.58 a share, three cents better than analysts
estimate. Revenue fell slightly to $14 billion, and shares fell in initial
after-hours trading.

Julia Boorstin has more on the company`s quarter and spoke to CEO Bob Iger.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The big headline
from Disney`s earnings is making a big move into digital and taking its
brands direct-to-consumer. The company announcing that its buying a
majority stake in BAM Tech. It used to own 33 percent, but now it`s paying
$1.58 billion to acquire an additional 42 percent stake in the streaming
video company.

With this new company, Disney`s announcing that ESPN will launch a new
multi-sport video streaming service to debut in early 2018. The new
subscription service that will be accessible through the ESPN app will
feature about 10,000 live regional, national and international games every
year, including Major League Baseball, National Hockey League, Major League
Soccer and grand slam tennis among others.

Disney (NYSE:DIS) also announcing that it will launch a new Disney
(NYSE:DIS)-branded direct-to-consumer streaming service to launch in 2019.
This will feature Disney`s films, which is going to be pulling over from
Netflix (NASDAQ:NFLX) when that deal expires in 2019, as well as original
content. Disney (NYSE:DIS) announcing that it will make a significant
investment in an annual slate of original movies, TV shows and short form
content.

We talked to Disney (NYSE:DIS) CEO Bob Iger about what this means for the
company.

BOB IGER, CHAIRMAN & CEO, DISNEY: This lays the groundwork for the company
to do a number of things. It provides us with all sorts of optionality
that we haven`t had before.

You know, it`s one thing to say you`re going to be in the business of being
direct-to-consumer or over the top. It`s another thing to do it, and to do
it, you need a really strong technology engine, and the talent that has the
experience to manage customers in a completely different way than we`ve
managed customers in our media businesses certainly in the past.

BOORSTIN: No comment from Disney (NYSE:DIS) on exactly when these new
subscription services will launch or how much they`ll cost. But the
company says that this announcement today represents a strategic shift and
how it`s bringing its content directly to consumers.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Burbank, California.

(END VIDEOTAPE)

HERERA: Google (NASDAQ:GOOG) fired an employee who reportedly wrote an
internal memo suggesting men are better suited for technology jobs than
women. The subject of the memo hit a nerve in Silicon Valley, which has
been criticized for its lack of diversity.

Josh Lipton reports tonight from San Francisco.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Google
(NASDAQ:GOOG) CEO Sundar Pichai was in a tough spot. He wants his
employees to feel free to express themselves but he doesn`t want to be
thought of as allowing what some considered bias and bullying at his
company. He decided that the only option was to fire James Damore, the
reported author of that controversial memo.

Pichai said that the engineer had violated the company`s code of conduct.
That code says Googlers are expected to do their utmost to create a
workplace culture that is free of harassment, intimidation, bias and
unlawful discrimination.

Pichai believes Damore violated that code when he wrote a 10-page memo
arguing that innate differences between the sexes could partially explain
the lack of women working in tech.

For example, Damore wrote, women on average have more openness directed
towards feelings and aesthetics rather than ideas. Women generally also
have a stronger interest in people rather than things relative to men.
These two differences in part explain why women relatively prefer jobs in
social or artistic areas.

(on camera): Googlers were outraged by that memo, with some even
threatening to quit in protest. Damore was accused of sexism and some
believe Pichai made the right call.

KARA SWISHER, RECODE EXECUTIVE EDITOR: I think he wanted to create the
controversy in the discussion and he got his opportunity despite the fact
that he said he didn`t get a chance to talk, he got plenty of chance to
talk, and this is the consequences of what he did. Others disagree
however.

LIPTON: Damore also argued in that memo that Google (NASDAQ:GOOG)
alienated its conservative employees. Commentators on the right came to
his defense, including Rich Lowry, editor of “National Review”, who wrote:
It is one thing to disagree with a memo. It is another thing to believe
the views therein should be forbidden.

The controversy speaks to a broader topic in Silicon Valley, the treatment
of women in tech. That`s a hot-button issue here after Uber got hit with
allegations of sexual harassment and prominent venture capitalists were
recently forced to resign after being charged with inappropriate behavior.

Damore did not respond to requests for comment for this story, but this
fight might not be over. He apparently is now considering legal action
against his former employer.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.

(END VIDEOTAPE)

MATHISEN: Here to discuss the Google (NASDAQ:GOOG) memo and how companies
can intelligently manage important but potentially controversial internal
dialogue are Suzy Welch, author of the book “Winning”, and Bill George,
former CEO of Medtronic (NYSE:MDT) and now a professor of management
practice at Harvard Business School.

Welcome to both of you and I`m so happy you both could be here.

Suzy, your point of view is that this controversy about this memo could
have been avoided if Google (NASDAQ:GOOG) had created an environment or had
a culture where a conversation on a topic as important as diversity could
be had and created a kind of forum where maybe a politically unpopular
point of view like this individuals could have gotten aired. Could you
explain?

SUZY WELCH, AUTHOR, “WINNING”: Well, it definitely seems that this
employee took to this internal memo because he felt he had no voice and he
needed to get his opinions out and he wanted them discussed.

My question is, was there a way that he could have done this that didn`t
create this firestorm? Did he, for instance, approach Google`s diversity
team and have the conversation with them? That would seem the appropriate
way to do it.

Do they invite people with different views to come forward and have
conversations? Are there forums where people with different views feel
safe to raise those issues?

And it seems to me that there maybe wasn`t an institutionalized mechanism
for this individual or other individuals like him to come forward and
express their views. And that`s dangerous in any culture. It`s especially
dangerous in a place like Google (NASDAQ:GOOG), which is perceived, because
it is, to have be so powerful in our lives and in tech.

HERERA: Bill, what about that? That there needs to be some sort of way
for employees to express opinions, and the other issue is though, if those
opinions are viewed as discriminatory and they are expressed in a company,
what can they do about it?

BILL GEORGE, FORMER MEDTRONIC CEO: Well, I — there are ways of Google
(NASDAQ:GOOG) I`ve been there three times in recent years and they do have
ways to express your — it`s a very open culture. It`s one in which you`re
encouraged to express your views.

But that doesn`t give you the right to stereotype people based on race,
gender, national origin or any other form. You have to look at the real
people. And I don`t think this is a political issue at all. I think it`s
one that perpetuates a culture that discriminates against women, against
minorities, and makes it all the more difficult for Google (NASDAQ:GOOG) to
right the imbalance that exists in Silicon Valley and frankly on Wall
Street and many other places.

And so, I think having a code of conduct which is very clear about this —
by the way, it`s the same thing true with foul language like we saw in
General Kelly enforcing against Scaramucci in the White House or
inappropriate sexual advances and we`ve heard about in Uber. I think it`s
totally a probably to come they have a code of conduct and freedom of
speech doesn`t give you the right to say things that are hurtful to other
people. And so, I think Sundar did the right thing.

MATHISEN: I`d like to follow up with you, Bill, so that sue can ask the
next question to Suzy, to her friend Suzy Welch.

GEORGE: OK.

MATHISEN: Bill, my question is, would you have fired this individual for
that memo?

GEORGE: I would have, yes. And in Medtronic (NYSE:MDT), we had a very
open culture. We had 800 lines. We had town hall forms. They had all
kinds of things. But putting a memo like that that is overtly
discriminatory and stereotyping women in particular is wrong.

Look, as a man, I take offense of the memo. I`d like to think of as I`m an
open person. I don`t want to think that I don`t have empathy, I`m not
cooperative or that I like things and don`t like people.

I mean, come on. This kind of thing gets away from who is the authentic
person, Tyler. So, I take offense to it as a man. But I`ll have to admit,
I haven`t been discriminated against like this. I bet Suzy has, but I
haven`t been.

HERERA: Well, you know, Suzy, to your point about mechanisms being in
place, I take the point if there — if there is a legitimate beef with a
company or you feel that you`ve been wronged, but this was discriminatory
language. Does it still hold that there is a legitimate forum in which to
express that through a company`s procedures?

WELCH: Do we take this man who wrote the memo at his word when he says I
believe in inclusiveness, I believe that I believe sexism exists? I mean,
he says a lot of things at the beginning in the end of the memo that that
seemed to suggest that that he`s not against women being engineers. What
he is — what he could be saying, because I don`t know his heart, is I`m
not sure the way we`re going about increasing diversity is right. Can we
have a conversation if our techniques about increasing diversity are right?

I mean he`d have to be out of his mind in the context of Silicon Valley to
write a memo that says I think that diversity is wrong, especially since he
knows enough about the Internet and computers in his own company to know
that his identity was going to be revealed, right?

And so, he`d have to be an absolute fool to do that.

MATHISEN: Right.

WELCH: I think he tried to say at the beginning in the end, I am not
against inclusiveness and I`m not against women. But are there
differences? We`re not succeeding. Can we talk about whether we`re doing
this the right way?

If in fact that`s what it was saying —

MATHISEN: Right.

WELCH: — that`s not a legitimate question to ask, can we think about
different ways to increase inclusiveness?

HERERA: OK.

MATHISEN: Yes. We could spend a whole hour or more on this, and with you
two, it would be great.

Suzy Welch, Bill George, thanks so much.

GEORGE: Thanks, Ty.

HERERA: Still ahead, a manufacturing revival.

(BEGIN VIDEO CLIP)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Brian Sullivan
in Kenosha, Wisconsin, and perhaps the key state that delivered the
presidency to Donald J. Trump. Are his manufacturing job promises coming
true? That story coming up on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

(MUSIC)

MATHISEN: President Trump`s promise to bring manufacturing jobs back to
the U.S. helped him win Wisconsin, one of the key states that turned the
election his way. So, 200 days into his presidency, how are business
owners feeling?

Brian Sullivan is in Kenosha, Wisconsin.

(BEGIN VIDEOTAPE)

SULLIVAN (voice-over): Stung by plant closings and job losses, Wisconsin
turned red for the White House for the first time since 1984. Things were
pretty bleak here for a number of years.

Not anymore. After peaking at more than 9 percent in 2009, Wisconsin`s
unemployment rate is now one of the lowest in America. And here in the
southeast corner of the state, the problem is not finding a job, it`s
finding workers.

JIM HAWKNS, CEO, KENALL MANUFACTURING: There is a strain on our labor
force right now. There`s a skilled labor shortage in the region in the
state and throughout the country that needs to be addressed. We cannot
find skilled qualified labor.

SULLIVAN: President Trump is taking credit for part of the recovery and a
million jobs created around the nation.

So, when Republican Governor Scott Walker joined us at a manufacturing
facility in Kenosha, we asked him, how much of Wisconsin`s recovery comes
from D.C. and how much is due to the big changes and hard decisions made on
the state level over the past few years?

GOV. SCOTT WALKER (R), WISCONSIN: We started this years ago. Companies
like Kenall Manufacturing where —

SULLIVAN (on camera): We`re right now.

WALKER: — we`re at right now — where they make industrial lights, one of
the great companies in the country, they moved up from Illinois because
they saw the change. Where a state where the tax burdens gone down, the
regulatory environment improved, lawsuits — frivolous lawsuits have gone
away, the workforce has improved.

SULLIVAN (voice-over): Whomever you give the credit to, it is undeniable
there is a bit of a manufacturing renaissance taking place here. And the
renaissance that students at Gateway Technical College are excited to be a
part of.

UNIDENTIFIED MALE: I feel like a lot of manufacturing is coming back to
America, where it was before, everybody wanted to go overseas where it`s
cheap and now, they`re realizing you actually need skilled workers which
you can find right here in America, in Wisconsin.

SULLIVAN (on camera): And with the skills, they`re learning, they`ll
likely have their choice of jobs. Amazon (NASDAQ:AMZN) has a massive new
facility up the road with a few thousand workers. Many companies are
moving here like this one which relocated from Illinois for the lower
taxes. And if the state can pass the economic incentives, Apple
(NASDAQ:AAPL) supplier Foxconn is likely to open up a giant new
manufacturing facility in the area.

WALKER: Thirteen thousand jobs paying over $53,000 a year plus benefits,
$10 billion economic investment over the next 15 years. It`s going to be
on top of that, another $10.5 billion in payroll. The trade-off is $3
billion in incentives that they pay as they grow, it`s a good deal.

SULLIVAN (voice-over): Whether Foxconn ultimately builds the plant may
still be up in the air, but the truth on the ground here in the Badger
State is that the recovery is real and people remain optimistic that
Washington will keep its promises. Whether that will happen is also still
up in the air.

For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan, Kenosha, Wisconsin.

(END VIDEOTAPE)

HERERA: Fewer promotions helped result at Michael Kors. That`s where we
begin tonight`s “Market Focus”.

The luxury handbag maker said the decision to scale back its offerings in
department stores due to heavy discounting was a good move. Shoppers in
the latest quarter were willing to pay more. Same store sales, along with
earnings and revenue were all ahead of street targets. The company also
raised its sales forecast for the year. Shares soared 21 percent to
$45.25.

Different story though at Ralph Lauren. The apparel maker said fewer
promotions actually contributed to a drop in sales. Still, the results
were ahead of estimates and profit was also a beat. Shares were higher by
13 percent to $88.53.

MATHISEN: Dean Foods (NYSE:DF) said lower milk volumes caused results that
disappointed. The company which sells Friendly`s Ice Cream and Land
O`Lakes Butter said it expects volume pressures to continue and as a result
cut its outlook for the full year. Shares down nearly 21 percent to
$11.86.

And Valeant Pharmaceuticals saw its lost narrow but reported lower sales as
it`s contending with the generic pricing pressures. The drug maker also
it`s revenue outlook for 2017, said it plans to repay more than $5 billion
in debt by early next year. Shares up almost 2 percent to $16.64.

HERERA: The latest report on airlines shows efforts to bump fewer
passengers are starting to pay off. In fact, during the second quarter,
there was a nearly percent drop in the number of people overbooked on
flights.

Phil LeBeau has more on the push to have fewer fliers stranded at the gate.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It looks
like airlines are getting the message, after years of over selling flights
and dismissing it as the way business was done, carriers are changing their
ways. In fact, the Department of Transportation says the number of people
kicked off of flights in the second quarter dropped almost 30 percent.

What`s changed? Well, after Dr. David Dao was dragged off a United
Airlines flight in early April and it erupted as a huge scandal with the
video going viral, airlines did an about-face. Some like Southwest said
they would stop over-booking flights altogether, while others like United
said they would focus on dramatically cutting the number of passengers they
bump — a move showing the airline realizes social media has changed how
airlines interact with customers.

OSCAR MUNOZ, UNITED AIRLINES CEO: That`s a new era with regards to social
media, and it`s just something that we have to adapt to and accept up. But
overall, other than just being nice, we do have to train and develop and
nurture a more values-oriented customer service policy.

LEBEAU: JetBlue is also charting a new path with its passengers. The
airline has hired Gladly, a platform designed to improve how airlines
communicate with customers. The key: constantly integrating all the
different messages someone may be sending the airline so their complaint is
handled quicker, more effectively.

JOSEPH ANSANELLI, GLADLY CEO: By knowing who you are, by knowing what
you`re dealing with, you can then get a better customer service experience.
So, it`s really about that knowledge and empathy that you can deliver.

LEBEAU: Gladly may have its work cut out if JetBlue doesn`t improve its
performance. In June, it was dead last landing flights on time, after
Spirit and Virgin America. By comparison, Hawaiian (NASDAQ:HA)
consistently had the most plane on schedule. In fact, Hawaiian (NASDAQ:HA)
flights were on time 90 percent of the time, well ahead of Alaska and
Delta.

(on camera): While airlines are trying to do a better job, customers are
more vocal than ever before if their trip goes south. In fact, in June,
the Department of Transportation saw a 7 percent increase in the number of
complaints from airline customers, proof the industry still have some work
to do.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And coming up, meet the proud owners of one of San Francisco`s
swankiest streets.

(MUSIC)

MATHISEN: Here`s what to look at tomorrow: a meal kid delivery company
Blue Apron will release its first financial results as a public company.
We`ll take a look at how strong worker productivity was for the second
quarter, and data will be released on where wholesale trade inventories
stood for June. And that, folks, is what to watch Wednesday.

HERERA: Real estate in San Francisco is pricey. That`s certainly no
secret. But residents of one exclusive neighborhood got an unexpected
surprise.

Aditi Roy reports.

(BEGIN VIDEOTAPE)

ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): This gated
community in San Francisco filled with mega mansions is one of the most
exclusive neighborhoods in the city. It`s where Dianne Feinstein and Nancy
Pelosi once lived and now is at the center of a street fight.

The controversy is over the sale of one of the streets in the posh
neighborhood, a Bay Area couple bought it for a mere $90,000 at a little-
known auction. And now, Michael Chang and his wife Tina are considering
charging homeowners for street parking.

MICHAEL CHANG, SAN FRANCISCO STREET OWNER: Well, this is a private street
and that`s not prohibited.

ROY: The couple nabbed the prized property because the homeowners
association which owned the real estate failed to pay its $14 a year
property tax bill over three decades, prompting the auction.

An attorney for the homeowners association says that`s because the bill was
sent to the wrong address for all those years.

Now, neighbors are outraged. The homeowners association is suing the city
and asking the board of supervisors to rescind the sale.

(on camera): I talked to a spokesperson for the city treasurer`s office
who tells me they were just following policy. The attorney for the
homeowners association sent us a statement, calling the new street owners,
quote, opportunistic. Cheng told me that`s just untrue. And the board of
supervisors is supposed to take up the issue in the fall.

For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.

(END VIDEOTAPE)

HERERA: We`ll keep you posted on that one.

MATHISEN: Make a toll road.

HERERA: That`s what they want to do.

That`s it for us tonight. I`m Sue Herera.

We want to remind you that this is the time of year your public television
station seeks your support.

MATHISEN: And I`m Tyler Mathisen. We surely thank you for your support.
Have a great evening, everybody. We`ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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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) 2017 CNBC, Inc.

 

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