Transcript: Tuesday, December 10, 2013

nightly-business-report-september-25-201321-300x225ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you in part by —

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Changing of the guard. General Motors (NYSE:GM) names a female chief executive to be the first ever to lead a global automaker. Who is Mary Barra and what will she mean for the company and its stock?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: New rules. Regulators approved the so-called Volcker Rule that goes right to the heart of risk-taking on Wall Street. It ushers in a new era of oversight.

MATHISEN: And ready or not, here it comes. The Fed now seems set to slow its stimulus program beginning next week. Why now? And what should you do, if anything?

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, December 10th.

GHARIB: Good evening, everyone.

History being made in Detroit today. General Motors (NYSE:GM) announced a new CEO and she`s female. It`s the first time in G.M.`s 100-year history a woman has been picked to run the automaker, and it`s also the first female to head a major auto company.

Her name is Mary Barra. And after working more than three decades at G.M., she`ll officially take the top job in January.

Phil LeBeau has more on who is Mary Barra and why she was asked to take the wheel at General Motors (NYSE:GM).

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Mary Barra is a G.M. lifer and soon, her life will revolve around running the global auto giant as CEO.

MARY BARRA, G.M. INCOMING CEO: Well, I`ve worked at General Motors (NYSE:GM) for 33 years. And I`ve also known it`s a great company. The men and women of General Motors (NYSE:GM) are so dedicated and I truly believe we have the best team on the field. So, it`s an honor for me to be able to lead this team.

LEBEAU: Barra`s well-known and well-respected within G.M. She rose through the ranks on the operation side of the business. Most recently, overseeing global product development. Along the way, Barra`s earned high marks for streamlining operations, while pushing G.M. to pick up its game. In fact, she`s bluntly told G.M. designers, no more crappy cars.

JESSICA CALDWELL, EDMUNDS.COM SR. ANALYST: You know, I think if you look what she`s done for the company, she`s very well-respected, highly regarded and made a lot of decisions very intimately involved with the product, as formally an engineer.

LEBEAU: Barra will replace current CEO Dan Akerson who is stepping down to spend more time with his wife who has advanced stage cancer. Akerson has been vocal about G.M. thinking and acting differently.

Putting a woman in charge of a company that historically has been known as an old boys club will certainly change things, but Akerson says Barra wasn`t picked because of her gender.

DAN AKERSON, CEO & CHAIRMAN, GENERAL MOTORS: I`m always looking for talent, in the company, outside the company. And we`ve mixed and matched from internal and long-time G.M. professionals. And I`ve said this publicly before, Mary is one of the most gifted executives I`ve met in my career. She was picked for her talent, not for her gender, not for her political correctness, anything of that order.

LEBEAU (on camera): While Mary Barra is taking over a General Motors (NYSE:GM) that is leaner, more profitable than it`s ever been before and no longer owned by the U.S. government, it`s still an auto company with a fair number of challenges, including the fact that it`s market share in the U.S. has dropped to a low of 17.9 percent and it still needs to finish the restructuring operation in Europe and finally make money on that continent — just two of the challenges facing Mary Barra as she takes over General Motors (NYSE:GM).

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Joining us to talk more about G.M.`s new CEO is Bill George. He`s the former CEO of Medtronic (NYSE:MDT) and professor of management at Harvard Business School, where interestingly Mary Barra last summer took part in a class Bill taught on global leaders.

Bill, always great to see you.

So, what`s Mary Barra like and what kind of leader is she likely to be?

BILL GEORGE, HARVARD BUSINESS SCHOOL PROF. OF MANAGEMENT : She`s a very genuine, authentic leader. She`s going to be a team builder. I spent a whole week with her in the class last summer and our leading global business course last summer. And I`m very high on Mary.

Also, her colleague Dan Aiman (ph) was there. Dan stepped her presence. So, they`re going to make a great team, Tyler, very enthused and give Dan Akerson and the board a lot of credit for building an inside team.

You know, Ed Whitaker and Dan came in and really turned the company around. But now, you have the inside team coming in, much like Sam Palmisano and Ginni Rometty did in following Lou Gerstner.

GHARIB: Right.

GEORGE: So, I think you`re going to see great cars coming out of G.M. Mary is an engineer. She`s been leading the car design, demanding better cars, looking for a world car that can cover Europe and China, as well as the U.S.

GHARIB: OK.

GEORGE: And I think you`re going to see that share growing in the years to come.

GHARIB: Well, as Dan Akerson just said, Bill, in that package that Phil LeBeau did, he said she was picked for talent, not her gender. But she`s going to be watched very carefully because she is a woman at an auto company.

So, as a leadership expert, what would you say — advice can you give her, of dos and don`ts?

GEORGE: Well, the first I`d say is make sure you`ve got the right people on the bus. I was glad to see Mark Royce, a long time G.M. vet, also stepping into her old job in product development, because if you don`t have the products, you`re not going to be successful.

And so, get the right team around you, a diverse team, which they are already doing and I`m very pleased to that, then keep the vision very clear ahead that we`ve got to have the best cars in the world. We want to have cars that are good at the low end, at the high end and like a Cadillac and all the trucks where there`s a lot of money there. But have the full range of cars to ensure that.

But beyond that, I think she`s got to have the long-term view and stay the course to compete with any car in the world, the Japanese, the Germans, Koreans on cost, on quality and on design, and I think that`s the new General Motors (NYSE:GM).

In the old days, they were letting that market share slip. So it`s got to be a long-term fixture and one advice I`d say is don`t get thrown off track by a lot of people pulling you into short-term decisions.

MATHISEN: You know, you`ve just finished, I`m told, a case study on the comeback of the auto business, including most notably perhaps General Motors (NYSE:GM), so you know this business and the challenges that G.M. faces inside and out. The saying is that a CEO is never stronger than in his or her first 100 days.

What would you tell her to concentrate on in those first 100 days, specifically?

GEORGE: Get the vision and strategy right, get the team right and make sure you got the right product plan, Tyler. And my great fear for Mary is that — you know, they`re having a great year. Plus double digits, I think 14 percent in November. Things are up and away now.

But they got to make long-term investments. So, we had the General Motors (NYSE:GM) in China, a different class last week, and they got to make big investments in China. That`s going to be a huge market. They got to get the European thing right.

They`ve got to have a strategy in each of those and maybe the right leaders in those areas. And — but don`t get pulled off course — say there is a recession and say the number of cars sold goes down. It will happen. It`s happened for decades. You`ve got to stay the course, make the investments.

GHARIB: OK.

GEORGE: In the past, G.M. has always pulled back during those difficult times.

MATHISEN: All right. Bill, thank you very much. Bill is a former CEO of Medtronic (NYSE:MDT) and professor of management at Harvard Business School.

And later in the program, just a small fraction of Fortune 500 CEOs are women. Why is that? And are companies better off financially with more females in the boardroom?

GHARIB: On Wall Street, it was a day of profit taking. It looks like traders and investors are getting anxious about the Federal Reserve`s pending decision on tapering its stimulus plan. A decision could come as soon as next week`s policy meeting and we`ll have more in a moment.

The Dow was down 52 points today. The NASDAQ fell eight, and the S&P lost five points.

MATHISEN: The nation`s top regulatory agencies voted to approve the so-call Volcker Rule today. It bars big banks from making high risk investments with company money, putting the firm and taxpayers at risk if the bet fails.

With some clarity now on those rules, shares of some of the nation`s biggest investment banks ended slightly higher today, as you see there.

Eamon Javers in Washington with more — Eamon.

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

Well, today, Washington moved to ban what regulators see as one of the potentially riskiest parts of the financial system. Banks trading in their accounts is known as proprietary trading.

(BEGIN VIDEOTAPE)

JAVERS (voice-over): In a snow shuttered Washington, it was an under stated launch today for the long-awaited Volcker Rule. In public meetings at the Federal Reserve —

UNIDENTIFIED MALE: All in favor say aye.

CROWD: Aye!

JAVERS: And at the FDIC.

UNIDENTIFIED MALE: All in favor please say aye.

CROWD: Aye!

UNIDENTIFIED MALE: Thank you very much.

JAVERS: Other regulators across the city joined in, banning proprietary trading by banks, but the new rules include five major exemptions. Banks will be allowed to conduct underwriting as long as their positions don`t exceed certain limits. They will be allowed to engage in market-making but inventory may not breach certain levels. They`ll be allowed to hedge their positions, but they have to document what the hedge is for.

They will be allowed to trade in government debt like treasuries and munis, and some foreign entities will be allowed to trade so long as those risks stay overseas.

All in all, regulators said they are pleased with how the long fought over rules turned out.

BART CHILTON, CFTC COMMISSIONER: It stops the wild flier bets that are just for the house. It will allow legitimate hedging activity for legitimate business risk.

(END VIDEOTAPE)

JAVERS: But, Susie, the rules build in a lot of subjective judgments that regulators are going to have to make, and that means a lot here is going to depend on how the regulators decide to enforce what they have written.

Back to you guys.

GHARIB: All right. Thanks a lot. Eamon Javers reporting from Washington.

Standard & Poor`s is cutting its growth forecast for the U.S. by half a percent for 2014. The agency now sees GDP coming in at 2.6 percent next year.

S&P also says it sees the Federal Reserve gradually pulling back on its bond buying program. And as we said earlier, Wall Street is starting to believe the Fed will start that pull back next week at the final policy meeting this year.

Steve Liesman has more and what it could mean for the markets and the economy.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A taper by the Federal Reserve at its meeting next week, now looking more likely than not. The economic data, the market`s reaction to it and statements by Fed officials themselves all point to a possibility the Fed could move next week to reduced and the amount of stimulus in the economy that it provides to bond purchases or quantitative easing.

The Fed offered three tests for tapering or reducing that QE and those tests look now to have been met. One of them was confidence in the outlook. Pretty much, average job growth now has risen to 193,000, with strong jobs growth. That`s up 44,000 where it was when the Fed said tapering was a close call in September. The unemployment rate now at 7 percent is down 2/10 from where it was in the late summer.

The end of fiscal uncertainty is another factor. Remember, the Fed wouldn`t taper ahead of the potential government shutdown back in September, but now, a budget deal looks to be in the works that could put off the debate over deficits for at least two years.

Meanwhile, interest rates are well-behaved, as far as the Fed is concerned. Short-term rates have remained low, amid good economic news. That`s a sign to the Fed that the markets believe that even if the Fed tapers, the Fed will keep the Fed funds rate low.

Of course, predicting, the Central Bank`s news has been tough of late. They didn`t taper in September when the market thought it would and they announced a schedule to taper in June when the market didn`t expect it. What the Fed is trying to do is to pivot, from using quantitative easing as the main tool to guide or to stimulate the economy to forward guidance and back to the old way they used to do it through the Fed funds rate. Next week could be the beginning of that process.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Well, good news in the job market, the Labor Department says that advertised job openings in October rose to a five-year high with nearly 4 million positions looking to be filled.

Also, the number of people quitting their jobs in October and presumably moving on to a better one also reached a five-year high.

GHARIB: Still ahead, a stunning management shakeup at Lululemon. But will the changes put the retailer back on top?

(MUSIC)

MATHISEN: Shares of athletic wear maker Lululemon have fallen about 7 percent this year as the company endured a couple of missteps. First, there were those too sheer yoga pants. Then, there was backlash over some unflattering comments about the bodies of potential customers from Lululemon`s founder, not exactly the way to win friends and influence people.

But a newly hired chief executive is promising to focus on quality products and could be just what the company needs to turn things around.

Courtney Reagan has more.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Finally, Lululemon names a new CEO and a shakeup in the boardroom. It`s been six months since Lululemon`s Christine Day announced she`d retire her post as CEO once a successor was found.

And just in time for Christmas, the retailer announces Tom Shoes president, Laurent Potdevin, will step into the top spot at Lulu.

LAURENT POTDEVIN, INCOMING LULULEMON CEO: Over the past 20 years, I`m incredibly lucky to be involved with global iconic brand, and Lululemon is just only on its way to get there.

REAGAN: It`s not just the CEO seat that`s rotating. The controversial founder Chip Wilson is resigning his post as chairman but will remain on the board. Wilson recently made comments suggesting women`s bodies may have been the issue behind the see through pants problem that led to a recall of the $72 plus yoga pants.

Well, the remark didn`t sit well with Lulu`s consumers. The loyal shoppers appear to have forgiven the retailer itself, though questions remain about Lulu`s management.

(on camera): Prior to joining Tom Shoes, Potdevin was with snowboard company Burton for 15 years. Both are privately held. He`s not well-known by Wall Street and as a result, the hiring announcement is getting some mixed reviews.

SAM POSER, STERNE AGEE: Christine Day had a great retail sensibility and I think did a fabulous job doing that, but didn`t have the background from an operation l perspective. In the case of Laurent, the new CEO, he has a great operational background but may not have the retail perspective. So, I really think the jury is still out.

REAGAN (voice-over): Wall Street will get a clear picture of the company Potdevin will be taking over once the Yoga retailer`s earnings are reported Thursday. It`s a big job with competition intensifying.

Under Armour (NYSE:UA), Nike (NYSE:NKE) and Athleta are among the rivals aiming for a piece of Lululemon`s market share.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

GHARIB: MasterCard (NYSE:MA) will launch a 10-1 stock flip and will up its dividend. And that`s where we begin tonight`s “Market Focus.”

The world`s number two credit and debit card company will bump up its dividend by 83 percent and buy back 3.5 billion shares of common stock. The stock took off in after-hours trading on the news. Shares ended the day a fraction higher to $763.61.

Toll Brothers (NYSE:TOL) out with a big earnings beat. The luxury home builder reported an increase in new home deliveries last quarter and home prices. But its results were not as strong as a year ago, partly because of rising rates.

(BEGIN VIDEO CLIP)

DOUGLAS YEARLEY, TOLL BROTHERS CEO: As all the builders I`ve been talking about lately, our business has been flat since the summer. Flat is OK for 2013 considering where we were in `10 and `11. We`re anxiously awaiting for the spring selling season that begins in February.

(END VIDEO CLIP)

GHARIB: Taking a look at the shares of Toll Brothers (NYSE:TOL), they fell fractionally to $33.34.

Higher demand for repairs helped AutoZone (NYSE:AZO) post quarterly earnings stronger than expected. The cold weather and increased ware and tear drove more customers to the largest retailer of U.S. auto parts. AutoZone (NYSE:AZO) has been focusing its sales on the commercial repair business to offset weakness in the do-it-yourself market. Shares revved higher up 3 percent to $471.86.

MATHISEN: Merck (NYSE:MRK) announced it will move its experimental Alzheimer`s drug into a late stage trial among patients with mild to moderate disease. A monitoring committee gave the drug maker the OK to go ahead with the testing involving nearly 2,000 patients. The progress didn`t seem to impress investors, though, today. Shares fell a fraction to $49.43.

Shares of the chip makers Rambus (NASDAQ:RMBS) are on a tear after news broke that it signed an agreement with Micron Technology (NASDAQ:MU). The two companies settled a 13-year legal dispute. Micron agreed to pay as much as $280 million over seven years to license Rambus (NASDAQ:RMBS) patents that will now use in selected products. Rambus (NASDAQ:RMBS) up 12 percent to $9.58. Shares of Micron up a little bit to $23.14.

And shares of Burlington stores caught a chill. The discount retailer said third quarter loss widened because of cost related to its October IPO. Perhaps even more troubling, Burlington predicts slower growth in same store sales for the holiday season. The stock plunged almost 8 percent to $25.92.

GHARIB: Back now to our top story, the new CEO at General Motors (NYSE:GM). Now, despite the breakthrough news about Mary Barra, our next guest says not much has changed for women in corporate America. According to a new survey by catalyst, this is a group that monitors the status of women in business, there has not been a significant increase in the number of female CEOs, senior executives and board members in U.S. companies.

Deborah Gillis is the chief operating officer at Catalyst.

So, Deborah, tell us why we`re not seeing progress, even though there have been some really smart women in — being promoted into the CEO jobs and I`m thinking of Ellen Coleman at DuPont or Ginni Rometty at IBM. And not in the corporate world, Janet Yellen, who`s going to be the first woman to head up the Federal Reserve.

What`s going on? Aren`t we seeing more on this stuff going on in corporate America?

DEBORAH GILLIS, CATALYST CHIEF OPERATING OFFICER: Well, you just identified some very remarkable women leaders. I think what`s important when we talk about this is to focus on a leadership of women. Unfortunately, the Catalyst census shows that for the eight consecutive years, we`ve seen no increase in women`s representation on boards now stands at 16.9 percent and when we look at women executive officers, again, four consecutive years of no significant growth, women now hold 14.6 percent of those seats.

So, clearly, women are facing barriers to their advancement and a big part of what this includes is the fact that the companies that they are working for are not paying the right amount of attention to the fact that this is a talented group of leaders that need to be supported and advanced through the pipeline.

MATHISEN: You say that the facts show that companies that have women represented on their boards and in the executive ranks do better in terms of performance than those that don`t. Explain that and why doesn`t that get through the thick heads of some people and say, hey, we can do better if we have more women there? And finally, why do you think that is?

GILLIS: Well, Catalyst research does show that on average, Fortune 500 companies that have the highest representation of women and leadership as compared to those with the lowest representation of women do better financially. Why is that? Well, it`s for a variety of reasons. They — those companies are topping into the full range of talent that`s available in the marketplace. They are also tapping into the knowledge of women who understand the preferences of the marketplace.

So, essentially, we would say to serve the market, you need to look like the market, tap into the talent that`s available and also into the insights that those leaders would have for your company.

GHARIB: All right. So make a case about — you have a company now put as woman or couple women on their board. How does that change things? I mean, how does the conversation at those board meetings change?

GILLIS: I think any conversation changes when you have different perspectives around a decision-making table. Different points of view are being raised, different ways of looking at a problem. Again, what`s really important is that there are diverse perspectives. That`s where we really see the opportunity for invasion to happen in organizations.

I think it`s no surprise in the earlier story that you were talking about when you look at Mary Barra`s appointment as the CEO of G.M. She had been leading their product development function prior to this appointment.

One of the things that Catalyst sees in our research is that women are less likely than men to have the opportunity to lead those mission critical functions that really put them in the pipeline for those more senior leadership roles.

GHARIB: Interesting conversation. Thank you so much.

Deborah Gillis, chief operating officer at Catalyst.

MATHISEN: And coming up, the big money that some of the major drugmakers are pouring into the fight against super bugs.

(MUSIC)

GHARIB: New developments out of Washington tonight, a budget deal has been reached. Senate Budget Committee Chair Patty Murray of Washington and House Budget Committee Chair Paul Ryan of Wisconsin are announcing the agreement on Capitol Hill tonight.

MATHISEN: Princeton University has begun administering vaccinating against meningitis B. The vaccine being offered is not approved for use in the U.S. but the FDA and CDC both allowed its use for this particular outbreak at the school. Eight students at the campus have contracted the potentially fatal bacteria since March. Nearly 2,000 students received the vaccination on Monday, the first day it was available.

GHARIB: Well, the outbreak at Princeton is helping raise awareness of what federal officials are calling super bugs. These are drug-resistant bacteria that are killing more people every year. One pharmaceutical company is making a big bet on what it hopes will be a new remedy to combat those super bugs.

Bertha Coombs has more.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Cubist Pharmaceutical researchers are in a race against time, to develop antibiotics that fight infections that are becoming increasingly deadly, because they don`t respond to drugs.

DR. OBI UMEH, CUBIST PHARMACEUTICAL: You`re going after pathogen that evolve and changes ability to respond to your drug. So, it`s not just that you`re going after a target. You`re going after a moving target.

COOMBS: The Centers for Disease Control recently warned antibiotic resistant bacteria are becoming a serious health threat, with super bugs like C. Difficile, a bacteria that affects hospital patients bowels and the Staph infection MRSA increasingly untreatable with current antibiotics.

DR. MICHAEL BELL, CENTERS FOR DISEASE CONTROL: We are rapidly a point where the antibiotics that we relied on for generations really will no longer be available to treat infections that can actually be lethal.

COOMBS (on camera): Well, the number of infections that are drug-resistant has been growing. The pipeline for antibiotics hasn`t been for years. The challenge for drug makers is profitability. Many of the most popular drugs are now off patent. And any new drugs they develop will likely be left in reserve, as a treatment of last resort.

BARBARA RYAN, FTI CONSULTING: The challenges are the reason that you don`t see, you know, the hordes of companies going after these opportunities that you see, let`s say, in oncology where there is a lot of green field.

COOMBS: Last year, Congress passed legislation to extend patent exclusivity on new antibiotics to encourage new development. While, the FDA is offering an expedited pass for approval. Cubist acquired two small firms this fall, working on antibiotics to combat acute infections, and with a pipeline now of five drugs, is hoping the new regulations will help them bring the drugs to markets sooner.

MICHAEL BONNEY, CUBIST PHARMACEUTICAL: We think we figured out a model fundamentally different from the historic, large pharmaceutical company models that allows us to be a serial developer, if you will, of antibiotics for these resistant bacterial infections.

COOMBS: The need for new drugs is clear.

UMEH: If we move to the post-antibiotic era, that means these — all of the advantages of modern medicine could be reversed.

COOMBS: The hope is to get ahead of that threat.

Bertha Coombs, NIGHTLY BUSINESS REPORT, Lexington, Massachusetts.

(END VIDEOTAPE)

MATHISEN: Finally tonight, a company called Career Bliss is out with its annual survey of the companies with the happiest employees. The rankings are based on worker reviews of things like work life balance, relationships with bosses, the companies work environment and growth opportunities.

Here we go, third place, computer chip maker Texas Instruments (NYSE:TXN). In second place, the nation`s largest non-profit health care provider Kaiser Permanente. And coming in first for the second year in a row, pharmaceutical giant, Pfizer (NYSE:PFE), with a lot of employees citing positive relationships with senior management and opportunities to move up the ladder and I thought it was just the free Prozac, Susie.

Just kidding, kidding.

GHARIB: Interesting that there`s a couple of health care companies.

MATHISEN: Yes, exactly, and no Disney (NYSE:DIS) there in top three. How about that? They call it the happiest place on earth.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. We`re pretty happy over here, Tyler and I.

I`m Susie Gharib. Thanks for watching.

MATHISEN: Indeed. Thanks from me as well. I`m Tyler Mathisen. Have a great evening, everybody. Stay warm. 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) 2013 CNBC, Inc.

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