Transcripts For KQED Nightly Business Report 20151209

Strategies may be unraveling. David faber first reported that the tech company may not move forward with its longplanned spinoff of its multibillion dollar stake in alibaba, the giant chinese internet company. It will examine a deal involving yahoo s core internet business. An official announcement of the change could come as soon as tomorrow. Shares of yahoo moved higher initially after the report. The moves raise a host of questions, they come to mind. John ford is here to answer them. Welcome. Why did the board step in here and make this change in a long hailed strategic plan. It comes down to taxes. There was an can agtivist infester starboard pushing them at first to spin off alibaba because its worth so much. Then when the u. S. Government wouldnt say yes, well let you do this without getting taxed they said wait a minute, more and more its looking too risky if we have to pay a tax bill selling that off. Instead, why dont you sell the core business. Yahoo has not yet made it clear its going to sell yahoo the core business. But thats what a lot of investors think could be the end game here. What does this mean for the ceo . This had been rumored, planned for some time . It had. I think the question is, if yahoo gets broken up, is there some piece that continues to be independent . Is it big enough Marissa Mayer sticks around and runs that. If it gets bought by some larger company, does she continue running yahoo . Does she rise up in the ranks of that company . None of that is clear till we hear more about whattia ha plans to does, is it offering itself for sale, soliciting for investors or or breaking into little pieces. Its stake in alibaba is how big . It is sizable. Tens of billions as i recall. It is. Is this a victory then for the starboards and others who have been agitating from within the company . At first this he say get rid of that 30 billion stake or whatever it is, now they say well wait a minute, maybe we dont like the tax bite there. We should change. Are they calling the shots . Its a victory in a huge way. One of the things thats characterized yahoo over the past 15 years is the fierce desire to remain independent. It wasnt too long ago, actually its been awhile, a decade, microsoft wanted to take it out. Jerry yang insisted that that not happen. Jerry also investor in alibaba. Now hes gone on to be a board advisor. It was announced just today of an uber rival in china thats doing quite well. Hes done well as an investor. It seems like yahoo is warming to the idea of being more investor friendly with its core business. Does that go all the way to it no longer insisting on being independent . Well have to see. Your best guess. Is it an independent company in two years. No, john ford, thank you. You answered. Appreciate it. Great to have you with us. Thanks. Now to commodities which continue their dramatic decline and its not just oil which remains around 37 a barrel. But also iron ore, steel, aluminum and pretty much every hard metal. The impact is being felt globally. Angloamerican said today it is cutting 85,000 jobs and sell is standing 60 of its portfolio, one example of the toll the roud of commodities is taking. If 85,000 jobs cuts doesnt get your attention, the descriptor will. British miner angloamerican, the worlds fifth biggest Mining Company by market value says its planning if radical changes. Founded in 1917 by ernest oppenheimer, it says it will sell off 60 of its assets, cut spending by more than half next year, and suspend its dividend. The latest example of whats become a rout in commodities. Angloamerican warned profits will be down at least 20 this year. Joining swiss Miner Glencore among the worst stock performers in the uk lately. Both down more than 70 on the year. These are stunning drops especially when taken on top of the fall in energy prices. S p 500 Energy Companies just energy have given back almost 360 billion in market cap this year. But energy is not the whole story. The infrastructure got built out to try to satisfy chinas what was seen as almost insatiable demand. If they can come back, these commodities will come back. For now were flat on our backs. Producers are in trouble well. 15 of the 19 core commodities in the Thompson Reuters Global Commodities index are down this year. The only positives are agriculture related sugar, cotton, orange juice, and coco. Angloamerican says it expects to continue digging for metals such as copper, bulk materials like coal and iron ore and diamonds. But demand is down in all of these businesses. And so are jobs. Here in the united states, despite its somewhat healthier than the rest of the world job market, employment in mining and logging was down more than 1 last month. For the year, mining and logging have dropped 124,000 jobs so far. I think its a full pallet of elements for the bears to pick from. If its not one thing, the opec meeting falling apart, then its bad chinese trade data. What these sharp losses in commodities are telling us is that this isnt just oil or an energy issue. The numbers say we are seeing a big slowdown in the global economy. In a rare interview today, the ceo of chevron described the Energy Market as being turbulent. Classic understatement there. John watson told Brian Sullivan that the sector is adjusting to lower prices by cutting supply. That Capital Investment will be cut and that he Sees Oil Prices trading higher one year from now. There are adjustments taking place in the business. If you look in the united states, production has fallen 500,000 barrels a day in the last six months. The capital being withdrawn from the business, hundreds of billions are being taken out right now. Some companies are finishing projects under construction. Thats temporarily adding to supply. But once those projects come online and as people absorb the current prices, youre going to see production drop in many parts of the world. Do you believe that . Because every time the u. S. Comes down, maybe iraq goes up or iran goes up or russia goes up. Weve got 11 million coming out of saudi arabia that we know of. There are countries and companies, john, as you know, that need to keep producing. Why are you so confident we will see supply drop . There is a natural decline that takes place in our business. As you pull investment out, oil fields decline over time. And every country has to make choices. Many developing countries in the world that produce oil have a choice between meeting the fiscal and interm needs with revenue versus reinvesting in the business. That capital is withdrawn. Weve seen that happen n companies in the middle east and in the united states. The market and invests are do respond to the incentives that are out there. We will see production come into balance. He also said chevron will do what it must to make money at whatever oils market price is and that the stocks dividend is safe. That worsening commodities rout weighed on major averages. For the second day in a row, the Dow Jones Industrial average fell 162 points to 17,568. The nasdaq was three points lower and the s p 500 dropped 13 points. In washington, congress is taking a close look at the proposed merger that would create the Worlds Largest beer company. Anheuserbusch inbev wants to buy sab miller for more than 100 billion in a deal that would control a third of all beer sold worldwide. Today it was clear that the combination has some very staunch critics on capitol hill. Hampton pearson reports. Reporter there were no cold ones on the table when Senate Lawmakers began to examine the proposed 100 billion merger between the worlds twos top beer producers. Anheuserbusch inbev was offered to buy sab miller for 107 billion. Ceo carlos brino says the merger is needed to expands the brand in the rest of the world. Not just the u. S. The purpose of this transaction is to enhance our ability to serve new markets particularly in africa, asia, and central and south america. Its about bringing more choices to more consumers around the world. Reporter in lopes of winning regulatory approval, the merged company will spin off the miller brand to molson coors, a major divestiture that also keeps alive the miller versus bud rivalry here in the united states. The divesty tour of millercoors ensures that our market share in the u. S. Will not change as a result of the combination. Lawmakers want to ensure competition from the 4100 craft brewers, a nationwide industry that continues to grow. The main concerns from those brewers the distribution and Pricing Power of ab inbev and the sab miller combination. If you want to grow your business as a craft brewer, if you want to get your beer into a chain store, if you want to get your beer into the stadium, you need to use the anheuserbusch distributor or the millercoors distributor. Antitrust enforcers at the Justice Department will make the final decision on the merger. And theyve been saying no to a lot of deals lately. 77 deals worth some 263 billion abandoned so far this year according to the wall street journal. The ranking democrat on the antitrust subcommittee says theres a reason for the resurgence. Its not like theyre turning down every merger. Youre seeing so many mergers and theyre being diligent doing their job and they must. Critics of the deal are calling on anheuserbusch and sab miller to make even bigger concessions to deal with concerns about competition. Nor nightly Business Report, im Hampton Pearson in washington. From beer to burritos. The chipotle outbreak is growing. Last night we reported a number you have Boston College students fell ill after eating at the chain. Today it appears the norovirus may be to blame, not e. Coli but the bad news continued to pressure shares which fell again today. Morgan brennan reports on the outbreak and its potential fallout. Reporter investors arent the only ones steering clear of chipotle. Actually noticed that the chipotle in my office the lines gone way down. For health woes continue to hit the tex mex chain which has battled an e. Choli outbreak affecting 52 people in nine states according to the cdc. Now College Students in boston have become the latest to the fall ill. Boston college says 80 students reported gastrointestinal symptoms after consuming food at the restaurant. Chipotle is looking into the incident which a Spokesman Says may be likely a norovirus which also seems to be the Direction Health officials in boston are moving. No e. Coli cases linked to chipotle have been confirmed in the state of massachusetts. The Company Believes this could be an isolated incident involving a different illness at a specific store unrelated to the broader e. Coli outbreak, a suspicion backed by a recent report at the Cleveland Circle restaurant. Still the stock fell again down, down more than 15 since early november when the first cases came to light. Analysts say it raises more questions about the companys supply chain and whether the situation is out of their control. But the stock has priced to perfection. One small hiccup in that process can cause a big downturn in the stock. Thats been the risk. The stock dropped from over 700 to almost 500. Thats a big loss in value in a short period of time for one of what looked like a very small isolated event but now its two events. Reporter as Health Officials continue to look into the e. Coli outbreak, the food culprit behind it has yet to be identified. Last friday they warned the same store sales could be down dramatically this quarter with earnings markedly lower than analysts anticipated. It could get much worse because with every report, consumers are becoming increasingly skittish even here into manhattan not affected by any other food bourn illness. Were going to going there last week, wednesday. The person i was with was did you hear they had something wrong with their food. I was like maybe ill have a salad. For nightly Business Report, im Morgan Brennan in new york city. So how much damage will the crisis at chipotle do to the companys brand . Not to mention its stock price . Here to discuss this is dean crutchfield with the dean crutchfield company. Welcome. Good to have you with us. How does chipotle come back from this . What doo they need to do . Its a big question. Is this a close shave or a deep cut . How far does this go . The stock price might rebound maybe. We hope so, but the public has a memory that can last forever. And the public can make or break a brand. So they are absolutely the focus for chipotle right now. Its putting the public at easy because theyve been let down and theres fear. How damaged do you think the brand is. I think the damage is, you can repair this damage. Its a question how they go about it. I havent seen enough to satisfy me regarding chipotles response. I believe all channels of communication should be wide open. And the ceo should be speaking more without being beached on a sludge bank of corporate puff. Its about communicating to everybody in every way from video to statements. This needs to be done across all channels. A good example was mattel some years ago with the lead scare opened up 300 channels of communication within 24 hours. Where is chipotle . Beached on a sledge bank of corporate puff is the best phrase ive heard in weeks, dean. And we love you for it. So the first thing it seems to me they need to do is figure out what the heck happened in those cases of e. Coli because unless you can explain that and say that you fixed that problem, you have a hard time winning back trust, dont you . You do. And this is a leadership problem. Leadership is about turning the hard into the possible. Thats seriously the case for chipotle. That leadership needs to come out. They need to east whats going on wrong. Who is responsible for this . We need to know who is responsible for this catastrophe. Thats all about accountability and transparency. At the moment, its not there. People want to know theres a witch hunt going on to find out what the problem is. You say turn your customers into representatives for the brand. How do they best do that . By getting them to talk more. Thats what i mean by all channels of communication. Get to where people are comfortable, where people are accessing their information. Doesnt have to be facebook. Theres lots of other channels of communication that can be done. But the public in a sense are a brands best friend. Theyre like the reps of a brand because they like it because they love it. Now, i an brand is about recognition about, association and loyalty. The last thing that chipotle wants to be recognized for is a bad process when it comeshe to handling food. I mean, thats its business. Very quickly, would you take your children to chipotle tonight . I wouldnt out of principle that there is a concern. But if they really loved it, i might do it. Dean, thank you very much. Dont get beached on a sludgefield of corporate puffery. Dean crutchfield. Come back anytime, man. Thank you, mate. Still ahead, a new danger on the road and behind the wheel. Online lender prosper reportedly made a 28,500 loan top San Bernardino shooter syed farook as first reported by rueters, the fbi is examining the couples financial activity before the shootings. Prosper says it is printed by law from dislosing any nonpublic personally identifiable information on any loan originates through its platform. Drivers are more distracted than ever before. Not just texting and driving, theyre surfing the web. Phil lebeau has the story. Most drivers know the dangers of texting and driving. But they still do it. In fact, are a new survey by state farm found drivers are not only texting, theyre using their smart cell phones to do a 0 whole lot more. More than a third of those surveyed admit they text and drive while almost as many are now surfing the web while behind the wheel. And theres also a sizable number of people taking pictures or recording videos while driving. There are probably a number of reasons why someone might choose to either text or visit sites on the internet while driving. We did ask folks when theyre more likely to do that. And they reported while theyre stopped at an intersection which may seem fine because your car is stopped. 40 of crashes are at intersections. Mullin believes drivers are doing more on their phone beuse their phones can do more. In other words, its easier and quicker to get on the internet through a smartphone. So more people are doing it while driving. Even though many surveyed admit they know its a dangerous decision. Last year in the u. S. , almost 33,000 people were killed in auto accidents. While drunk driving is responsible for almost a third of those deaths, almost 3200 people were killed in crashes caused by distracted driving. Despite numerous Public Service campaigns and many states making it illegal to even hold your phone while driving, it hasnt stopped many people from doing it. And thats the bad news about this latest survey of drivers. Americans know they shouldnt be on their phone when theyre out on the road and theyre doing it anyway. Phil lebeau 234rks, chicago. We begintonights market focus with Southwest Airlines which was the worst performing s p 500 stock today. The carrier announcing that it a key revenue metric could slip in its current quarter. The airline did say passenger traffic improved by almost 14 in november. Nonetheless, shares tumbled 9 to 45. 04. Fairchild semiconductor has received an unsolicited buyout offer from an indisclosed buyer. Bloomberg reports a group led by China Resources holdings is the bidder. The nearby 2. 5 billion offer trumps an agreed upon deal theirchild had with a semiconductor company. Shares rose to 20. 62. Norfolk southern rejected canadian packs offer calling it inadequate. The new bid attempted to ease concerns that the Railroad Deal would be shot down by regulators. Norfolkumbled more than 5. 5 , Canadian Pacific off by more than 3 . Eli lilly hiking its quarterly dividend. The payout will be made march 10th. Shares rose to 86. 41. Meantime mastercard will raise its dividend and the firm announced a new buy back program. The new payout is 19 cents a share. The plan adds nearly 800 million to its existing buyback program. Shares rose in an initial afterhours trading during the regular session, the stock was a fraction higher to close at 9. 18. Morgan stanley will cut 1200 jobs. A good portion of the positions are commodities traders as well as salespeople. The bank will take a 150 charge to cover severance expenses. Shares fell to 34. 06. Smith wesson reported late earnings that topped estimates. The gunmaker saw sales rise 15 in its most recent quart. Shares volatile after close during the regular session, the stock was almost 5 higher to 21. 39. And coming up, a new investigation into the firearm maker remington. And a surprise decision by a kansas city judge. Here is wha to watch tomorrow on the data front. A report on wholesale trade. The Weekly Mortgage application numbers come out, as well and Time Magazine will reveal its person of the year. It wont be me. Thats what to watch tomorrow. A federal judge in kansas city has postponed final approval of a nationwide class action suit involving an allegedly unsafe rifle we first investigated five years ago. The surprise ruling comes just hours after we unveiled a new trove of documents about the remington 700. The most popular bolt action rifle in the world which the Company Still maintains is safe. Scott cohn is here with us with an all new remington investigation. Good to see you. This Class Action Settlement involves 13 different remington models all with a similar design to the iconic model 700. The allegation is that the guns have a design defect that allows them to fire without the trigger being pulled. Remington maintains theyre safe but wants to put the issue in the past and is agreeing to replace every trigger. Critics argumented remington downplayed the settlement and the alleged risks. Today, u. S. District judge said he was sending the parties back to the drawing board because so few people have filed claims. This process which has taken decades is a far cry from the process with most products. The Consumer Product Safety Commission which can order rawles on everything from teddy bears to air rifles is barred by law from having anything to do with firearms because of the Second Amendment guarantee of the right to bear arms. Arthur bryant heads the legal Watchdog Group public justice. I think Second Amendment rights are critically important and need to be protected. But so do First Amendment rights, Fourth Amendment rights, fifth amendment rights. All of our constitutional rights. So do our right to life, liberty and happiness. And if your gun fires when no one pulls the trigger, you can kiss all the rest of those rights goodbye. Public justice fights against Court Secrecy and got the new documents released. You can see some of what they found and more in our new investigation remington under fire, the reckoning. You can see that on nbr. Com. Scott, did the judge give any hint what he wanted the parties to do . He mainly wants them to come up with a better way to notify the public. There is in the settlement a website. There were print ads, some direct mail. Clearly people have not responded yet and theres hes going to look for a more powerful way of notifying the public. If you own one of these guns, what does it mean for you . Well, it means that the settlement, if you choose to take advantage of it, is delayed but you can still file a claim right away. And in this story you can see how to do that at nbr. Com. It probably is a good idea if youre going to do this to go ahead and file a claim and then well see what the results are. But there are a lot of guns. 7. 5 million guns and remington already was predicting it would take about 1 weeks to get the repairs done. Once again, you can see it on nbr. Com. That does it for nightly Business Report for tonight. Im sue herara. Thanks forks joining us. Im tyler mathison. Have a great evening, everybody. And well see you back here tomorrow night. The following kqed production was produced in high definition. [ music ] in san jose a new gallery is dedicated to showing only local artists. Cherri lakey a lot of these people that work in those corporations are also artists. Youve undoubtedly heard but did you know that its revival may have started in berkeley . And experimental music pioneer pauline oliveros. Pauline oliveros one of my major accomplishments in life was going beyond fear through music. This time on spark. [ music ] major funding for spark is provided by the william and flora hewlett foundation, supporting creativity and innovation in the arts since 1967