Transcript: Wednesday, December 3, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, funded in part by —


SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Wall Street and Washington. The two intersected today when some of the biggest names in business from Walmart to ExxonMobil (NYSE:XOM) asked the president about some of the biggest issues facing their companies and the economy.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: And there’s one matter that could keep business leaders up at night in the New Year. We’ll tell you what it is.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, December 3rd.

HERERA: Good evening, everyone. I’m Sue Herera. Susie Gharib is off tonight.

MATHISEN: And I’m Tyler Mathisen. Welcome.

Well, modest gains for stocks today, enough, though, to knock record closing highs for the Dow and S&P 500. But we do begin tonight with a meeting of the Business Roundtable, a collection of top chief executives from some of the nation’s biggest companies weighing in on matters important to the business and the economy. Concerns like tumbling oil and gasoline prices, immigration reform, the gap in finding skilled workers, tax reform for businesses, and individuals and much more.

They took their concerns straight to the president today to discuss ways Washington and Wall Street could work together to create jobs and promote growth.

But before those chief executives, including the leaders of four Dow components, AT&T (NYSE:T), Caterpillar (NYSE:CAT), ExxonMobil (NYSE:XOM), and Walmart talked to the president, they spoke to Becky Quick.


BETTY QUICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: CEOs gathering in Washington today at the Business Roundtable. Among the themes discussed: plummeting energy prices, a skills gap leaving companies struggling to fill some jobs, and spending being held back by the nation’s tax policy.

RANDAL STEPHENSON, AT&T (NYSE:T) CHAIRMAN & CEO: We are of a mindset this could be 4 — this could be 4 percent growth economy if just a few fundamental things are done, in terms of tax reform and in terms of regulation and how we think about regulating business. So, you know, I think we’re all apprehensive to do a high five and declared victory here when so much more is possible.

DOUGLAS OBERHELMAN, CATERPILLAR CEO: Next year, we will get a little healthier. But remember, we’re still running sub 3 percent growth, and for us, we have a high correlation of 3 percent growth in job creation, very simple. Almost in any economy in the world, when we see 3 percent GDP growth, we are adding jobs. We are skilled trades for a lot of really difficult jobs, our service technicians. It’s hard to find qualified people.

QUICK: Now to those falling energy prices, I asked the CEOs of ExxonMobil (NYSE:XOM) and Walmart how the sharp decline is impacting their businesses.

REX TILLERSON, EXXON MOBIL CHAIRMAN & CEO: It’s not the first time we’ve been through a price correction. For a lot of our younger people, this will be their first experience to go through a commodity price correction. But it really means just a return to fundamentals for us. You know, it’s important about watching your cash, watching your investment decisions, being very disciplined about everything and looking for opportunities that may present themselves in an environment like this.

DOUG MCMILLON, WALMART CEO: I don’t think there’s any doubt that low fuel prices help retail and helping us in particular. It’s a little bit of a tailwind. When I got here yesterday, Rex from Exxon said, I haven’t got your thank you note for low fuel price.

So, no doubt it helps. I think it’s important to remember for us in the U.S., we serve the U.S. demographic. Our customer base looks like the bell curve of the U.S. from the income point of view. We do have a very important middle income and lower middle income business, and we do have customers who still pay in cash. About 25 percent of our transactions are still done in cash. So, it’s that customer in particular if it went into the gas tank, it wouldn’t be spent on some item in our store.

QUICK: Overall, the most common word by CEOs to describe business right now, “OK”. We’re not talking great, we’re not talking bad, but OK.



HERERA: And then those same CEOs and many others got to hear from President Obama and participate in a rare question and answer session, delving deeper into concerns about regulation and the widening wage gap.

Eamon Javers has more.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, good morning, everybody. Happy holidays. I hope sales are good.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): President Barack Obama met with some of the nation’s top business leaders today to deliver a message that the U.S. economy is strong and he also took a moment to encourage them to boost worker pay.

OBAMA: Unfortunately, the overall trend lines, though, have been even as productively and profits go up, wages and incomes as a shared overall GDP have shrunk. And that’s part of what is creating an undertow of pessimism despite generally good economic news.

JAVERS: The president also pushed back on business complaints that Washington regulations are holding them back.

OBAMA: The Republicans and — maybe I throw the BRT in here — are actually about 25 percent right when it comes to regulatory burden.

JAVERS: With so many global CEOs in Washington for the Business Roundtable meeting, it was a day where the business community also told Washington what it wants from the nation’s capital.

STEPHENSON: The United States has a very uncompetitive tax structure. If we want the capital invested in the U.S., we need to fix the tax code. The second is regulation, when ask the CEOs, the cost of regulation is a big concern with people.

LARRY FINK, BLACKWELL CEO: I think there is actually a realistic probability of some form of tax reform. It’s going to take a while. You know, I think the concept would be — has to be revenue neutral. If you have that concept, that it’s going to be revenue neutral, some companies have to accept they’re not going to get the — some of the tax deductions that they previously get.

JAVERS: But despite that, what we didn’t see today is the sometimes confrontation undertone that we’ve seen between business and the White House in the early years of the Obama presidency. Clearly, these two groups have learned to work together.

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


MATHISEN: One of the other major concerns for business leader, of course — leaders, of course, is health care and today came some positive news on that job front. According to the Centers for Medicare and Medicaid Services, health care spending in the U.S. grew at the lowest rate ever recorded last year. With new regulations of the Affordable Care Act set to take effect in 2015, some companies could face legal headaches.

Bertha Coombs has our story.


BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Honeywell never expected to be sued over its wellness plan. Under the Affordable Care Act, it can use incentives to reward employees who work on their health and charge more to those who opt out.

DAVE COTE, HONEYWELL: If they don’t get the survey, pay a hundred bucks more a month for their policy. So, we don’t refuse anybody any coverage.

And the whole point is, why should people who don’t care about how they’re living, why should they be able to take advantage of all the people who do care?

COOMBS: The travel is, under the Americans with Disabilities Act requiring a medical screening and then punishing people for not getting one is discriminatory. That’s why the equal employment opportunity commission has sued.

Some analysts see more lawsuits ahead with the so-called employer mandate going into effect in January requiring large firms to provide insurance for workers who put in 30 hours a week. Under the ACA, workers could sue if their hours are cut and they lose coverage.

Chris Williams of Travelers Insurance says employers haven’t been focused on those risks in the law but plaintiff’s lawyers have and have already been looking to line up aggrieved workers.

CHRIS WILLIAMS, TRAVELERS INSURANCE: There’s thousands of pages of regulations, and they’re going to look through those regulations and statutes and come up with novel causes of action. We started to see that already.

COOMBS: It’s not just private companies. Municipalities with large numbers of unionized workers, teachers, firefighters and officers could also find themselves caught between conflicting parts of the health reform law.

(on camera): Labor lawyers say it could intensify next year as employers try to cut back on benefits of the rich union plans in order to avoid one penalty of the ACA, the so-called Cadillac tax, that could well expose them to another side of the health reform law in the way of litigation.



HERERA: More now on the record high closes for the Dow and the S&P today following some pretty good news about jobs and worker productivity which grew at a faster than forecast pace of 2.3 percent in the third quarter, while labor cost decline.

At the closing bell, the Dow was up 33 points and closing in on that 18,000 mark. The NASDAQ added 18, and the S&P was up by 7.

MATHISEN: Well, stocks are up. And today, another top fed official repeated his call to begin raising benchmark interest rates too and do it soon. Charles Plosser, president of the Federal Reserve Bank of Philadelphia says that keeping rates near zero percent with inflation in his view close to the central bank’s goal and the economy nearing what he says is full employment is just too risky, and he says it’s time the Fed moves towards lifting short-term rates.

HERERA: Meantime, the Federal Reserve’s final Beige Book survey on the economy for this year was released today and its outlook was a bit more upbeat than in past readings. And that’s good news ahead of this Friday’s November jobs report.

Steve Liesman has more.


STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The Federal Reserve painted a painted a picture of stay growth in the U.S. with widespread job gains and an optimistic outlook among businesses. The Fed’s Beige Book, a collection of economic anecdotes from the 12 Federal Reserve bank districts throughout the country backed up recent strong economic reports.

JOE LAVORGNA, DEUTSCHE BANK CHIEF U.S. ECONOMIST: The economy is in good shape. It’s not great, it’s good. It’s been a Rodney Dangerfield economy. It hasn’t gotten a lot of respect.

LIESMAN: The Beige Book said business spending improved in that retailers were upbeat on holiday sales and that lower gas prices would help consumers out when they went to stores for the holiday shopping season.

The main negative? Real estate sales rose in only half the country and home prices were little changed.

But beyond housing, other economic data has been upbeat. A key report on the service sector hit the second highest level since the financial crisis with gains in new orders and exports. Auto sales topped the 17 million mark for only the second time since 2006 and the ADP jumps came in a touch below expectations but still suggestive that private sector growth remains strong at 208,000.

(on camera): The Friday jobs report will set the stage for the rest of the month. Wall Street economists looking for a total of 230,000 jobs created in November and unemployment rates remain unchanged at 5.8 percent. That will continue the string of 200,000 plus jobs created in the U.S. economy to show these strong economic numbers are showing up in more American paychecks.



MATHISEN: Gus Faucher joins us now to talk more about the U.S. economy. He’s senior economist at PNC Financials.

Gus, welcome back. Good to have you with us.

Why don’t we spin forward to Friday and the jobs number? What are you looking for? And what would alarm you on the downside if the number doesn’t come in quite as high as forecasted?

GUS FAUCHER, PNC FINANCIAL SR. ECONOMIST: We’re looking for 230,000 jobs added in November. That’s close to the average we’ve seen so far in 2014. If it was below 200,000, I’d be a little bit concerned. That’s slower than the pace we’ve seen this year.

But, you know, overall, it looks like the economy is adding jobs at a decent clip and the job growth is broad-based. It’s across industry. So, that’s a positive as well.

HERERA: You know, Gus, one worry is those people who have been out of work for a long period of time and are discouraged workers and they don’t show up on the rolls at all and there are those who say that’s quite a large portion of parts of the population. Does that concern you?

FAUCHER: It does. We have seen the labor force participation rate, which is the share of the working age population that’s either working or looking for work to stabilize but it’s still near a 40-year low. I do think that there are a lot of people on the sidelines who would come back in as the labor market gets stronger.

I think we will see that, but it hasn’t been as strong as we’d like to see. But I think as the job market picks up, as wage growth picks up, we will see some of the people come back into the labor force.

MATHISEN: Some — we had the report a moment ago from Bertha Coombs on the Affordable Care Act, and some people have felt for a long time that that law was going to restrain hiring or depress it. Now, clearly, some of the provisions of it have not kicked in just yet. More will next year.

Have you seen any evidence that businesses held back on hiring as a result of the ACA?

FAUCHER: You know, we’ve seen anecdotal evidence but aggregate numbers look pretty good. And, certainly, one thing that we have seen is that we do see businesses moving workers from part-time to full-time status. There was a concern they were holding off because of the concerns about the ACA.

But so far, at a macro level, we haven’t seen businesses reluctant to hire because of the ACA. It could be more prominent in 2015 as mandates start to kick in, however.

HERERA: Let me turn to the data that we got today, because there was quite a bit of it. What does it tell you about where we are in the economic recovery? We’re not quite at expansion, certainly, in some cases, in some parts of that data, but it’s been pretty decent recently.

FAUCHER: That’s right. I think things have definitely look stronger. WE had winter in 2014 that affected many parts of the country but since then, 3 percent at an annual pace. And it’s broad-based growth.

So, we have consumer spending, we have businesses investing, housing market recovery is still slow but it is picking up. A lot of industries adding jobs. We even have government adding the jobs which wasn’t the case for a number of years.

So, we really have an economy that’s firing on most if not all cylinders at this point and that’s why I think things have looked better in the last half of 2014.

MATHISEN: Very quickly, what does low oil price mean for the U.S. economy?

FAUCHER: On the whole, it’s a positive. It means consumers have more money to spend on Christmas presents. It also means businesses have more money to hire and invest.

MATHISEN: All right. Gus, thank you very much. Have a happy holiday. Gus Faucher with PNC Financial

HERERA: And still ahead, air bag recall expands as two automakers take it nationwide. Details ahead.


MATHISEN: A new legal challenge to President Obama’s executive order that’s aimed at easing the threat of deportation for nearly 5 million undocumented workers here, immigrations in the U.S.

Texas leading a 17-state coalition suing the administration, saying the president doesn’t have the authority to rewrite immigration laws and that the order was a reward for people who break current U.S. policies.

HERERA: Two major automakers are expanding their recalls of cars with potentially defective driver’s side airbags made by Japan’s Takata Corporation. Chrysler is adding 149,000 pickup trucks in seven states to an existing recall in a handful of Southern (NYSE:SO) states. Earlier today, Honda expanded its current recall to all 50 states.

At a hearing on Capitol Hill, an executive from Honda said the company will still prioritize recalls in high humidity areas.


RICK SCHOSTEK, HONDA NORTH AMERICA EXECUTIVE VICE PRESIDENT: Why are we doing this? Because our customers have concerns and we want to address them. We believe this expansion and acceleration of current action. We believe there will be a part shortage that may occur, despite Takata’s efforts to decrease the supply of inflators.


HERERA: To alleviate some of that shortage, Honda says it’s working with other airbag manufacturers as well. Five deaths have been attributed to Takata’s air bags which can explode and send metal shrapnel into the car’s passenger compartment.

Takata is rebuffing demands for a nationwide recall of all its cars with the airbags, saying the demand isn’t supported by the evidence.

MATHISEN: Abercrombie slashes its outlook because of a tough retail environment and that is where we begin tonight’s “Market Focus”.

The teen retailer did manage to post earnings that beat estimates by a penny, but revenue was below forecasts and same-store sales tumbled 10 percent. It slashed its full-year profit forecast, saying it expects retail conditions to remain difficult. Despite all that, shares rose almost 3.5 percent to $28.81. You figure.

Aeropostale (NYSE:ARO) posted a loss after the bell that matched estimates, buft after it announced that it will close 75 stores in its fourth quarter, shares initially tumbled in after-hours trading. This is the company’s eighth consecutive quarterly loss, which it blamed on weak mall traffic among other things. And you can see the stock really plummeting there after hours. Before the close, shares were up about 4 percent to $3.19.

Brown-Forman also lowered its earnings outlook for the year, blaming currency issues. The Jack Daniel’s maker earnings and revenue that missed Wall Street forecasts. That made the results even harder for investors to swallow. But it go down better with old Jack Daniels, I suppose. Shares fell $3.75 to $92.25.

An unsolicited buyout offer sent shares of Carbonite higher today. J2 Global offered to buy the rest of the Cloud-based backup company that it doesn’t already own, valuing it at $15 a share. Carbonite, which is a small-cap stock, saw its stock surge almost 23 percent, as you see there, to $14.44. J2 Global also up about 6 percent. In its case, to $60.33.

HERERA: Johnson & Johnson (NYSE:JNJ) has hired Goldman Sachs (NYSE:GS) to explore a sale of its Splenda brand, that’s according to reports. Selling the artificial sweetener would let the health care company leave the business, which has faced challenges because of weak soft drink sales and increased competition. Shares were down slightly to $107.72.

Kraft (NYSE:KFT) Foods is hiking the prices on most of its single serve coffee K-Cups for the first time. The maker of Maxwell House coffee blamed higher commodity costs, saying prices will be about 9 percent higher starting December 28th. Shares were up a few cents to $60.19.

And Hershey is considering ditching high-fructose corn syrup in some of its products. The candy maker said consumers prefer sugar. The idea to switch comes amid concerns that corn syrup is more unhealthy. Some of the products that could be affected are Almond Joy and York Peppermint Patties. Shares were down slightly to $99.89.

And Corning (NYSE:GLW) hiked its dividend by 20 percent to 12 cents a shares, which will be paid to shareholders at the end of March. The specialty glass company also unveiled a new share buyback program of $1.5 billion. Its shares rose 2.5 percent to $21.54.

MATHISEN: Coming up, lots of packages, of course, being shipped at this time of year, but getting a box where it needs to go is a very complex high-tech process. You can’t believe the conveyor belts you’re about to see. I’m going to take you along the ride, next.


MATHISEN: Are you watching more or less TV these days and are you watching those shows on new devices? The media ratings company Nielsen says the traditional TV viewing like broadcast or cable television fell by 4 percent in the third quarter of year. But during the same period, streaming of TV shows and movies through services like Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN) Prime shot up by an astounding 60 percent and there was a big jump in viewership on smartphones and tablets.

HERERA: No pressure here but there’s 21 days until Christmas and shippers like FedEx (NYSE:FDX) are working hard to avoid last year’s massive delivery delays caused by wicked weather and too many late orders. So, we followed the shipping route for one holiday gift box to see just how complex that process really is.

Morgan Brennan has more from Washington.


MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: For FedEx (NYSE:FDX), this is the most important time of the year. Parcel carrier expects to ship a record 290 million packages this holiday season and do so while preventing a repeat of last Christmas, when some gifts didn’t make their shipping deadline. We got a behind the scenes look at FedEx’s express operation, shipping a package of wine across country overnight delivery.

UNIDENTIFIED MALE: That’s a particular bottle that currently retails for almost $4,000.

BRENNAN (on camera): First off, picking the wine. As you can see, there’s a lot to choose from.

(voice-over): The journey started Tuesday at’s distribution facility in Berkeley, California. We settled on four bottles from California, carefully packed up to get them there safely.

(on camera): So, now, our wine, which is in this box is ready for 2,800 mile journey cross country overnight. Off to FedEx (NYSE:FDX) in Oakland where it hits its first round of sorting.

ROBIN VAN GALDER, OAKLAND REGIONAL SORT OPERATIONS, FEDEX: It will go through our automated sort and it will be loaded into a container and our outbound priority overnight flight.

BRENNAN: This facility is busy but nothing compared to the next stop, Memphis. Middle of the night but no sleeping here as ground crew greets our cargo at FedEx’s biggest sorting hub. This facility is known as the matrix, miles of conveyor belt, millions of packages a day. Most FedEx (NYSE:FDX) express shipments pass through here including hours.

Now, East Coast-bound to Dulles, Virginia, from tarmac to truck in under an hour, it’s on to the nation’s capital for the third and final sort.

(on camera): Well, here it is and at least from the outside, it looks like it’s one piece.

(voice-over): Now loaded on to the delivery truck, our wine goes to its final destination. CNBC’s D.C. office.

(on camera): From weather to logistics, many factors need to go right when shipping a package. FedEx (NYSE:FDX) employs 15 meteorologists and has invested billions of dollars over the last several years into ensuring that entire process goes according to plan.

Today? At least for our precious cargo, it did.

For NIGHTLY BUSINESS REPORT, I’m Morgan Brennan, Washington, D.C.


MATHISEN: I wonder what she’s going to do with that.


MATHISEN: The price of oil may have edged a little higher today, but prices at the pump continue to fall. And today, something no one has seen in quite some time, regular gas sells for under $2 a gallon. Where? Oklahoma City.


And finally tonight, a real surprise in the coveted pick for Truck of the Year at “Motor Trend” magazine. The mid-sized 2015 Chevy Colorado took top honors and not the redesigned, more fuel efficient aluminum bodied Ford F-150 pickup, which hits stores this month.

“Motor Trend” editors say they admired Ford for cutting as much as 600 pounds from their truck but simply, quote, “wasn’t best in class”, and the Chevy truck was. Fancy that.

MATHISEN: How about that?

HERERA: That will do it for NIGHTLY BUSINESS REPORT tonight. I’m Sue Herera, in for Susie Gharib.

And we want to remind you, this is a time of year your public television station seeks your support.

MATHISEN: And I’m Tyler Mathisen. On behalf of your public television station, thank you for your support. Have a great evening, everybody and we’ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post broadcast at 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) 2014 CNBC, Inc.

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