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Lou Dobbs Moneyline

Dow Falls 4.36 to 10,872.97; Nasdaq Rises 3.66 to 2,085.58; Fed Cuts Interest Rates 0.5 Percent

Aired May 15, 2001 - 18:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from New York City, this is LOU DOBBS MONEYLINE for Tuesday, May 15th, 2001. Here now, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening. Our top story tonight: The Federal Reserve today cut interest rates, its most aggressive bid to prevent a recession in decades, and this the fifth half-point rate cut in less than five months. And the statement released with the Fed's decision makes it clear that Chairman Greenspan is open to further interest rate cuts. But the reaction on Wall Street today was less than euphoric.

We begin with a look at the Fed's move and the Fed's reasoning.

Tim O'Brien reports from Washington.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The fact that he'd been there and done that apparently was no problem for Alan Greenspan or the Fed. They did it again today: a remarkable, although widely anticipated, fifth-straight rate cut of half a percentage point.

As in the past, the Fed said it was motivated by declining corporate spending and fears that may continue.

"The erosion in current and prospective profitability," said the Fed, "in combination with considerable uncertainty about the business outlook seems likely to hold down capital spending going forward."

LARA RHAME, BROWN BROTHERS HARRIMAN: This is almost a call to CEOs to not shelve all those investment projects.

O'BRIEN: The Fed said that "... earlier reductions in equity wealth ..." -- that is investor losses in the stock market -- "... and the risk of slower growth abroad continue to weigh on the economy."

There was optimism on inflation: "With pressures on labor and product markets easing, inflation is expected to remain contained."

The greater concern, said the Fed, surrounds "... conditions that may generate economic weakness in the foreseeable future."

That language has led some analysts to believe the Fed is keeping options open for yet another possible rate cuts when it meets again at the end of June.

DIANE SWONK, BANK ONE: ... could easily be another 25 points in June, but I think we are coming to close to an end to Fed easing, and markets should be concerned, because this just-in-time Fed that's eased so aggressively could just as easily, just in time, take it back.

(END VIDEOTAPE)

O'BRIEN: Not everybody agrees on either the wisdom or the efficacy of today's rate cut. But economists at Merrill Lynch count 10 prior occasions where the Fed has eased up as much as two full percentage points. And they say, on each occasion, the equity market was back up within a year, with an average gain -- average gain -- of at least 20 percent in the S&P 500 -- Lou.

DOBBS: And Tim, we may not be through yet. Is that correct?

O'BRIEN: That's right. There still could be more in June. They left open the possibility of when the Fed returns in June of another rate cut, but it's highly unlikely there will be anything before then.

DOBBS: Tim, thank you very much. Tim O'Brien reporting from Washington.

Well, the Fed rate cuts began with a surprise easing on the second trading day of this year, and Chairman Greenspan has continued that mission with an intensity that's unprecedented during his tenure. But there's no conclusive evidence that the economy overall is nearing a recession. That has a few wondering why the Fed is moving so far, so fast, trying to prevent a downturn.

Peter Viles reports from New York.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Economic growth actually ticked higher in the first quarter. The retail and housing markets are holding their own. So why is Alan Greenspan's Fed fighting such a furious battle to head off a recession that might not be coming?

Start with the suddenness of this slow-down: Large parts of the economy have stopped on a dime.

JAMES ANNABLE: The reason why Fed policy is more aggressive this time around, and really different this time around, is because the contraction, the inventory correction in the economy was shockingly fast. The Fed decided they needed a rapid-response monetary policy.

VILES: True, consumers are still spending, but the Fed is worried about a number of shocks to the economy: the ripple effect from the Nasdaq collapse. Companies have all but frozen spending on new technology. Corporate profits have fallen into a sharp recession. Those trends threaten the productivity growth that Greenspan believes is the cornerstone of this expansion. BRIAN FABBRI, BNP PARIBAS: They keep pointing out that business confidence is very, very weak, and they face an uncertain economic environment. Their cash flow and profit potential is depressed, and consequently, the outlook for investment is really where the true weakness is in the economy.

VILES: Lastly, the Fed is being aggressive because it can be. Inflation is tame. In fact, deflation is the rule in commodities: gold prices down 7 percent in the past 16 months; copper, down 12 percent; huge declines in steel and coffee prices.

(END VIDEOTAPE)

VILES: This is a green light the Fed did not have heading into the last recession 11 years ago. At that time, inflation was running at 6 percent, which kept the Fed from being as aggressive as it has been so far this year -- Lou.

DOBBS: And Pete, as you suggest, with those commodity price declining, there's just the whiff of some other kinds of pressure in the opposite direction: That is deflation.

VILES: Sure, and the potential of a global slowdown as well.

DOBBS: Right. We thank you very much, Peter Viles.

Wall Street's reaction to today's news seemed almost confounding. Investors were hoping the Fed would cut rates by a half point and suggest further easing. And the Fed delivered exactly what was expected. But while stocks prices were modestly higher within an hour of the Fed decision, those gains had evaporated by the closing bell.

Why is the question. Allan Chernoff reports.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I got five (UNINTELLIGIBLE) and the other guy who bought stock earlier comes in with 25...

(END VIDEO CLIP)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): Word of the Fed's move triggered a three-minute rally. Then, selling pressure hit the stock market.

LARRY WACHTEL, PRUDENTIAL SECURITIES: We had been focusing on this report ad nauseam for a solid week, and when Wall Street focuses on anything this way, there is always a sell-on-the-news syndrome.

CHERNOFF: Bulls made another effort at a rally, following the Fed's midafternoon announcement. The Dow industrials rising as much as 44. Gainers led losers at the closing bell, but the Dow ended down four points.

The Nasdaq climbed as much as 43 points on a late afternoon rally effort, but the index finished with a gain of only three points.

TOM GALLAGHER, CIBC WORLD MARKETS: Tech stocks are acting OK. They're not acting spectacular. I think the overriding concern is that the Fed can do very little to help the technology stocks.

CHERNOFF: Banks were the winners of the session since the Federal Reserve lowered their cost of funds, allowing for bigger profit spreads.

ANDREW COLLINS, ABN AMRO: The spreads in banking are widening significantly, so that's a positive event for the banks in general.

CHERNOFF: Bank of America, Citigroup, Mellon Financial, and Bank of New York were among the gainers.

The credit market had a mixed reaction. Since the Federal Reserve lowered short-term interest rates, yields on short-term notes fell as prices rallied. The long Treasury bond fell more than half a point as traders began to anticipate a strengthening economy and an end to Federal Reserve interest rate cuts.

(END VIDEOTAPE)

CHERNOFF: The Fed pointed to the continued risk of economic weakness. So the markets figure the central bank still has at least one rate cut left in this cycle. But after chopping short-term interest rates by 2 1/2 percentage points this year, traders expect there's only so much more medicine that Alan Greenspan and company will provide for the economy -- Lou.

DOBBS: Allan, and let's hope that no further medicine is required.

CHERNOFF: It may not be.

DOBBS: Thank you, Allan.

Well, the Federal Reserve has slashed the benchmark interest rate to seven-year lows with breathtaking speed. You might think the stock market would show some enthusiasm, but enthusiasm has become something of a precious commodity on Wall Street. The Dow is essentially unchanged since the Fed made its first surprise move of the year on January 3rd. An optimist would note the index has gained 16 percent from its lows for the year in late March. The Nasdaq has fallen 9 percent since the first rate cut, but it has rebounded, along with the blue chips, up 27 percent from its low of the year.

Well, the bear market has wiped out trillions in market value over the past year, and my guest tonight knows first-hand how difficult the trading environment has become: Dick Grasso, the chairman & CEO of the world's largest stock exchange, the New York Stock Exchange.

Dick, good to have you with us.

DICK GRASSO, CHAIRMAN & CEO, NEW YORK STOCK EXCHANGE: Lou, great to be here.

DOBBS: Let me ask you, in this environment, what is the sense that you get in working at the exchange and working with all the specialists. You're a very hands-on and involved participant in the exchange. What is your sense of where we are?

GRASSO: Well, there's a real sense of concern for what investors experienced over the last 12 to 18 months, Lou, but history has proven that prudence in terms of one's investment patterns and patience have provided great rewards for investors. And so given the Fed's action, unprecedented, over these last few months and given the tax bill that we all expect is coming, there is cause for optimism despite the fact that we've seen dramatic declines year over year.

DOBBS: Is the mood improving on the floor?

GRASSO: Oh, no question. You can sense it from that March -- late March, early April low, if you will. There is a great enthusiasm. Even though the markets didn't respond with all that positive a final number today, there's a great sense of confidence.

DOBBS: The challenges for your exchange -- ECNs, electronic trading; the decimalization; globalization, in point of fact; trading on alternate exchanges -- what do you see as your exchange's biggest challenge right now?

GRASSO: Well, our business has never been stronger in terms of the content that we provide to the 85 million Americans who own the great companies that we're privileged to trade, in terms of our strategy of deploying technology to constantly reinvent the marketplace, and bringing the great products, the great companies from both here in the U.S. and around the world to the New York Stock Exchange, creating an avenue of opportunity for 85 million Americans.

So it is sticking to our knitting, getting to the great companies of the world, and increasingly you've seen some of the world's largest cap companies come to the United States and some of our great U.S. companies have come joined us recently.

DOBBS: In terms of one other aspect, and that is, if you will, transparency. Are you satisfied with the way companies are now reporting earnings? Do you feel -- there's lot of discussion of visibility, some say that companies themselves are not helping add visibility, in which -- by the ways in which they are reporting their earnings?

GRASSO: There is a debate, Lou, as you know, as a result of reg FD, the SEC new disclosure requirements, under the so-called Fair Disclosure Act. But I think companies are legitimately trying to keep the marketplace and their owners well informed.

The difficulty of course, is that, as you say, visibility based on economic performance in the third and fourth quarters of this year and into the first half of next year, quite difficult, given the economy's overall condition.

DOBBS: Hopefully we'll see improving visibility. Dick Grasso, good to have you with us, as always.

GRASSO: Good to be with you.

DOBBS: Thanks. We have a lot more on MONEYLINE coming right up. Please stay with us.

ANNOUNCER: Next on Lou Dobbs' MONEYLINE: Vice President Dick Cheney.

(COMMERCIAL BREAK)

DOBBS: The Bush administration will formally release its long- awaited energy proposal Thursday. But the details have been trickling out for weeks. And critics are already on the attack.

Democrats today gathered at a Washington service station. They had with them their alternative energy blueprint. They would call upon OPEC to raise production, to investigate alleged price gouging and to impose price controls. And they wasted no time in blasting the White House.

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D), HOUSE MINORITY LEADER: Their energy policy apparently is to let everybody fend for themselves. The government has no role, and everything will be just fine because, according to them, we live in perfect world in which if you just get out of the way, everything will be great. We'll have good energy supplies, low prices, and we'll save the environment. Well, our answer to that is: that's stupid.

(END VIDEO CLIP)

DOBBS: The partisan bickering coming as a group of power producers released a grim report. According to the North American Electric Reliability Council, California faces 260 hours of rolling blackouts this summer. The report also warned that New England, New York City and Texas should also be on the alert for blackouts.

Vice President Dick Cheney is the president's pointman on energy policy, and earlier today in Washington, I asked the vice president if the nation is indeed facing an energy crisis.

(BEGIN VIDEOTAPE)

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: I think it is for, for certainly for some people. If you're running a company on the West Coast and you have your production interrupted by blackouts, or you're caught in a traffic jam in San Francisco, or you lost your job because your factory had to shut down because of a lack of energy, that's a crisis.

It's the biggest problem, and the best way for us to think about it is long-term, our economic prosperity depends upon having adequate supplies of affordable energy. That's been one of the cornerstones of our economy for a long time, and we need to address that, because it's pretty clear over the last several years, nobody really has, and that's basically what we're doing.

DOBBS (on camera): Your proposal is going forward to deal with the issues, or set of issues, really, involving some reliance on nuclear power, a highly contentious and controversial proposal. Do you think you can successfully move that policy to reality?

CHENEY: Well, I think so. One of the things we emphasize in our report, Lou, is that we've made enormous strides in conservation, getting more efficient in terms of energy use over the last 30 years. It's really been a great success story, and that will continue. Conservation is an important part of satisfying the problem, the requirement, new technologies of various kinds.

But we still -- at the same time, it's not enough to close the gap. We still got to produce additional supplies. And when we look at electricity, there are really only three basic ways that we can count on for the foreseeable future, and that's coal, which is 52 percent of our consumption today; it is natural gas, which is about 14 or 15 percent, but growing; and it's nuclear, which is about 20 percent today, and some of it's made of hydro and so forth, but that won't change much.

So, nuclear power is a good technology, it's a safe technology, it's gotten better all the time, and we already use it for 20 percent of our electricity. And if we go forward -- we're concerned about things like carbon dioxide emissions, for example -- nuclear power offers us some real bright prospects.

DOBBS: In terms of nuclear power, the issue remains: how do you handle the waste byproducts? Does the administration have a solution to that central issue?

CHENEY: We talk about it in our report. I don't want to today lay out all of the specific recommendations, but we clearly understand that in terms of what government could do addressing the waste question is key. If we can successfully address the waste question and deal with that, then I think that will give people, potential investors and utilities that have to decide which form of power they want to use, a future confidence that nuclear power is a viable option.

If we're not able to address the waste question satisfactorily -- and it's not just a technical problem. It's more than that, it's a political problem at this point, but if we're not able to do that, then I don't think we'll get the kind of investment by the private sector in nuclear power that we'd like to see.

So, it's crucial, we do have to address it, and we do address it in our report.

DOBBS: Mr. Vice President, are you at all encouraged by some indication at this early stage that refining capacity may mitigate some of the projections, some of the forecasts of very high gasoline prices this summer?

CHENEY: I think it will. We've seen some forecasts that indicate, as we move into the summer, gasoline prices should moderate from where they've been recently.

But it's a tough problem. Again, no new refineries built in the country in 25 years. A lot of old refineries shut down, couldn't comply with the environmental requirements, to the extent that if there has been any expansion at all, it's been at existing facilities.

And when we add the tight refinery situation to the boutique fuel requirements we've got for clean air purposes, then there's not a lot of slack in the system.

We also, while we can import some refined product from overseas, it can really only be used in the attainment area in terms of air quality in the United States. They don't manufacture the kind of gasoline in Europe, for example, that necessarily meets Chicago's very specialized requirements. So we do need to find ways though to stimulate additional refinery capacity going forward.

DOBBS: One of the difficult issues for this administration is -- in terms of energy policy -- is that this administration obviously is supportive of markets, free market capitalism. At the same time, there is a clear necessity for government leadership here, political leadership. How delicate is the balance, and how difficult is it to come up with a plan with those competing impulses, if you will?

CHENEY: Well, it's challenging, I guess, is the way I'd put it. If it were easy to do, if this was an easy set of problems to solve, they'd have been solved a long time ago. There wouldn't be any need for us even to address it. But there is a need, partly because we have not had a coherent national energy policy now for some period of time.

And to say it's difficult, yes, but on the other hand, the president basically says, "Look, that's what I came here to do," is to take on tough issues and try to resolve them, including tax policy, including Social Security, including Medicare reform and including education and energy. So it's sort of we feel like it's part of our portfolio.

We would be letting down those people who elected us, the American people, if we didn't stand up and said, "Look, here is a serious problem and we need to address, and here's what we need to do."

DOBBS: In describing the energy crisis as having greater effect on certain states than others -- California, obviously first among them -- Gray Davis, the governor of California, has been very vocal in his criticism of the administration, very vocal in his criticism of energy companies and calling for price controls. What's your reaction?

CHENEY: Well, he's also sent us a very nice letter thanking the president for all that we'd done. We have responded affirmatively to nearly all his requests. We didn't agree with what he wanted to do in terms of price controls, but speeding up the processing of permits for siting power plants and so forth. We've been very responsive. We've ordered federal facilities in California to cut back on their consumption. So, we want to be as supportive as possible.

But I think the approach that Governor Davis has set isn't really all that helpful, frankly. You know, you're sort of in the blame game. He said early on, that the problem California has was created primarily in California. It was a flawed regulatory scheme. It was the difficulty in anybody building the plants. Nobody built a power plant out there for ten years.

And once they saw that they did have problems, which over a year ago they were well aware of, they avoided dealing with it until it reached the point now where the prices are skyrocketing, they're having rolling blackouts and they've bankrupted one of the two big utilities in the state. I think the governor should focus on California problems and not try to throw the blame elsewhere.

(END VIDEOTAPE)

DOBBS: And California's problems are worsening. This just in to CNN, the Associated Press reporting that California's credit rating has been downgraded by Moody's Investor Service because of the power crisis' increasing drain on the state's financial resources. Moody's lowered its rating on almost $20 billion of state general obligation bonds. That action puts California among the 12 lowest states in Moody's ratings.

Well, the blame game includes OPEC. Many are blaming OPEC for the volatile oil and gas prices that we've experienced. Tomorrow night here on MONEYLINE the vice president addresses OPEC and its role in what the administration views as an energy crisis. Be sure to join us as our conversation with the vice president continues.

Coming up next: We'll tell you what the new census reveals about our country and perhaps our economic future.

(COMMERCIAL BREAK)

DOBBS: New figures from Census 2000 out tonight. They show a country in the midst of profound social change. Traditional families: a mother, father, and children now making up less than a quarter of our population. Kitty Pilgrim looks at the implications for this country's economic future.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): It's just not the same. The "Leave It To Beaver" culture of the 1950s no longer exists, 26 percent of all households are now one person living alone. The number of single parent families grew five times faster than traditional families in the last decade. The number of unmarried couples in the United States nearly doubled in the last 10 years. And people are marrying later, and delaying having children. Some demographers were shocked at the social implications of the latest data.

KENNETH CONNOR, FAMILY RESEARCH COUNCIL: Children are much more likely to live below the poverty level when they are in families that merely cohabit together. And as a family unit itself, married couples are much more likely to make more money than cohabiting couples.

PILGRIM: Yet others point out economic pluses. They say today's society is less rigid. That keeps the labor force more nimble.

DELOS SMITH, THE CONFERENCE BOARD: Much more mobile. Again, the ease of moving, I think this is one of the great strengths of the United States is that flexibility. There is no country in the world that moves as much as this country does.

PILGRIM: Other pluses hidden in the data: Some of those single people are seniors. With gains in medicine, older people are living independently, longer. As people form and reform nontraditional groups from decade to decade, it boosts consumption. In addition, single parents in the work force change working norms, allowing for nontraditional working hours and new ways to do business.

(END VIDEOTAPE)

One inescapable trend is the steady march of baby boomers through this economy, the most rapid increase in size of any of the population. Now peak earning years, 45 to 54, they are boosting consumption and prosperity -- Lou

DOBBS: Kitty, thank you very much.

Just ahead, the Federal case against a Chief Executive Officer once known as "Chainsaw Al."

(COMMERCIAL BREAK)

DOBBS: Federal charges today against the one time corporate executive known as "Chainsaw Al." The S.E.C. accusing Al Dunlap, the former CEO of Sunbeam, and several other Sunbeam officials, with fraud.

Fred Katayama reports.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): It's one of the largest cases of accounting fraud in U.S. history. The Securities and Exchange Commission says it all started when Al Dunlap was hired as Sunbeam's CEO in July 1996, and went on until he was fired in mid '98.

They contend Dunlap and others ran "a fraudulent scheme" to create the illusion that the ailing appliance maker was successfully restructuring itself, padding its earnings in 1997 by at least $60 million, all aimed at facilitating a sale of the economy.

Among other things, the suit charges the executives' recorded revenues on contingent sales; accelerated sales from later periods; and deleted records to hide returns of merchandise.

It says investors lost billions of dollars as Sunbeam stock plummeted and its market cap shrank by 5 million. BRIAN LANE: The fact that the SEC has taken the initial step of naming an individual here and the CEO in this case is important. It does separate it from a number of cases, because my experience at the SEC, we wouldn't name somebody unless we had some feeling that they were personally involved.

KATAYAMA: In a statement, Dunlap called the SEC's accusation totally false, saying he was outraged the SEC has chosen to bring these baseless chargers against him.

Also named in the complaints, Sunbeam's auditor at Arthur Anderson. Known as Chainsaw Al, Dunlap ruthlessly cut costs to turn around companies. He fired more than 11,000 at Scot Paper, before selling it to Kimberly-Clark. At Sunbeam, he cut 12,000 jobs, but couldn't revive it. The 104-year-old company filed for bankruptcy protection in February.

(END VIDEOTAPE)

KATAYAMA: The SEC wouldn't say when a hearing would be held. It's seeking to permanently bar Dunlap and three executives from serving as officers or directors of any public company. It appears to be setting for Sunbeam's former chief executive -- Lou

DOBBS : Any explanation from the SEC why it required so much time to decide to bring these charges?

KATAYAMA: Well, for one thing, this is a whole panoply of charges, a waterfront of charges, compared to other accounting cases, which basically focus on accounting irregularities and revenue recognition. This goes all the way to billing whole policies.

DOBBS : OK, Fred, thank you.

In tonight's MONEYLINE movers, another strong IPO to report, Satyam Computer Services up almost 22 percent on its first day of trading, raising over $140 million. Almost sounds like the good old days. The Indian-based information technology company counts General Electric, Ford, and Sony among its clients.

Pacific Sunwear up more than 2 1/2 on about seven times its average volume. Three analysts upgraded the company today, after it promised 20 percent profit growth in the second half of the year.

Abbott Labs up over 1 1/2. J.P. Morgan upgraded the drugmaker, setting a $63 price target. The news comes just after Abbott reported a new drug that may slow the spread of prostrate cancer. Over the past year, Abbott shares have added almost 35 percent.

And late breaking news from Applied Materials: the world's biggest chip-equipment firm reporting a 52 percent drop in its net income. Excluding items, profits were a penny short of already reduced Street estimates. Topping it off, Applied has warned, for the next quarter, citing the ongoing chip slump.

In after hours trading, the stock is off nearly 60 cents. Another victim of chip slump, the world's leader, Intel. Just weeks ago, the chip maker reported a 16 percent drop in first quarter revenues and, including acquisition costs. Profits sank more than 80 percent. Intel, though, seizing adversity as a chance to strike at the competition, saying it will spare no expense to build market share.

Still, despite that news, Intel shares remain 64 percent off their 52-week high, moving just fractionally today.

Joining me now, the man who co-founded Intel, and the man who put Intel as an icon and in technology, Andy Grove. Andy, good to have you with us.

ANDY GROVE, CHAIRMAN, INTEL: Good to be back.

DOBBS : Andy, you have talked about the difficulties in terms of the broader sector of technology and suggested some caution in talking about, when the turn around would come. Do you have a clear sense this evening as to when we might expect that turnaround?

GROVE: Well, I don't have a whole lot to add to the quarterly conference call, where we expressed a sense that the computing business seems to be bumping along some kind of a fairly low level, but not getting worse. Our communication business is still soft and corresponding to the market segment that it serves that seem to be retrenching, it continues to retrench.

DOBBS: Michael Dell, a couple weeks ago, said one of the problems with the slumping PC business -- he did not really blame you, but suggested that Intel and Microsoft -- were quicker to market with new products, new advancements that might be helpful to the PC industry. Would you concur with Michael Dell's judgment?

GROVE: If we were quicker to come to market?

DOBBS: With faster processors and Microsoft, with improved upgrades and operating system, it might be helpful to the PC market?

GROVE: I agree with that. I think, basically, in our business, whenever there is a slump, the only way you recover is on the strength of new technology, and new products. And the quicker we can bring those to market and the quicker our computer manufacturers can integrate them and bring them to the market and merchandise them, the better. The consumer will be more attractive, the consumer will be to buy a product and the better we will be. We're really doubling our efforts to do exactly that.

DOBBS : Pentium 4. How goes it to this juncture?

GROVE: It is, so far, the fastest ramp of any microprocessor in our history. It is a complex microprocessor. It is a very powerful microprocessor. It is also a new generation of what's known in the industry as instructions (UNINTELLIGIBLE), fundamental computer architecture. It is likely to be around and the basis for computing for the next five years, so it -- it is job one for everybody at Intel to ramp it both in the factory and in the marketplace successfully.

DOBBS: You and CEO Craig Barrett moving Intel in new directions. No company, of course, particularly of the size and scope of Intel, could move altogether that quickly, are you satisfied with the pace of change that's taking place at Intel?

GROVE: Well, I'm satisfied that we pick the right direction, predominant directions that we've added to our portfolio have to do with communication chips, and chips for digital wireless phones. The logic of choosing those is satisfactory and proven to be right. What is unfortunately not good is that the headwinds that have developed in both of those industry's lower forecast for infrastructure investment and in communications industry and lower growth rate in the wireless industry, have generated headwind just in the time when we're getting started in that.

And so, just as in the computing industry, in networking, and in wireless industry, the recovery will come on the strength of new products, new technology. And we intend to do exactly the same, be ready with the new technologies for when the headwinds shift into tailwinds.

DOBBS: I was hoping that you would give us perhaps tonight the exact date in which those headwinds would shift to fill our sales -- I'll give you one more last opportunity.

GROVE: I'll have to check with my calendar. I hope to get my calendar is long enough to include those dates.

DOBBS: All right, Andy, as always. Great to talk to you. Thanks for being with us.

GROVE: Thank you for having me, Lou.

DOBBS: Andy Grove.

Still to come on MONEYLINE, the man at the helm of the Magic Kingdom. Stay with us.

(COMMERCIAL BREAK)

DOBBS: On Wall Street today, shares of Disney up fractionally. Its ABC network today, meeting with advertisers here in New York City, pitching its new fall line-up, a critical time for the network. Indeed, for the industry as a whole. Last year, advertisers committed a record $8 billion to six networks. This year may prove more challenging. ABC, of course, part of the Walt Disney empire, the company that owns theme parks, Miramax, cruise ships, the Anaheim Angels...

And the man who runs it all, Michael Eisner. Michael, good to have you with us.

MICHAEL EISNER, WALT DISNEY CORP.: Thank you for inviting me.

DOBBS: The advertising -- we might as well begin with all the challenges, and move to, I hope, some of the more positive developments out there right now. But let's start with the advertising challenge, particularly for ABC, other networks, including this one. How severe -- how optimistic are you?

EISNER: Well, I'm always optimistic about everything. I think it's a little early to tell. I think the companies like ABC are showing a lot of discipline. I think that -- we just -- I just came from our presentation of our fall schedule. I guess I think this way every year, but I definitely think this way today. It's fabulous. I think we have a lot of good shows. I think we have a lot of strength, and I think there's a lot of excitement in the room. Whether that translates to an upfront that's as big as last year, I don't know. I certainly hope it will be bigger than the year before last, which I think it will. So we're OK. It's not -- the floor has not fallen away.

DOBBS: Let me ask you. In terms of the overall business that you run, also critical, of course, theme parks, theme parks related, obviously, to consumer confidence. Are you seeing good and positive things there?

EISNER: I think there's an uptick, generally, in consumer confidence. I just came from a business counsel meeting with about 200 other CEOs, and my sense is there is optimism, certainly for next year. Optimism going in after the summer is over, more optimism than I thought there would be.

The theme parks -- the bookings are good, particularly Florida. Outside the United States, I think there's a little bit of a wait-see in California. Energy crisis and all that kind of stuff. There's been -- it's usually not as bad as people think, or even as good as people think. I think we're right in the middle, and it's a waiting period.

DOBBS: Well, your record, in terms of theme parks, and now with California Adventure, which you have just brought to the market -- I can remember how you were severely second-guessed in terms of Tokyo, in terms of Paris. You turned out to be pretty wise. What's your judgment right now on California Adventure?

EISNER: Well, it's the best reviewed park we have. It's a great compliment to Disneyland. "I know it's going to work," he said optimistically. The problem is, is a power paranoia, because it's not as bad as people think. Is it going to be as difficult as, say, a riot or an earthquake, and have people nervous about coming to California? I don't think it's as bad as that. There is a little apprehension on that.

But as far as the product, the creative product, and the cost that we spent on it, we're in good shape. But we've been there before. We've been there when Europe, as you mentioned, the Disney- MGM Studios, Epcot originally. But I'm hopeful.

DOBBS: And the movies -- we've got about 30 seconds -- "Pearl Harbor," it looks to be a blockbuster. EISNER: I hate to be a promoter, but I have to be on "Pearl Harbor", It is a fantastic film. It starts with a love story. Second act is getting our ass kicked in Pearl Harbor, and the third act is coming back with Jimmy Doolittle and doing it to them. And then actually crashing, and China being rescued. It really is a -- I sound like a promo. I'm sorry. But it's good. I'll tell you some bad ones after we go off the air, but that's a good one.

DOBBS: You know what? If that's good, promote. I'm looking forward to seeing it. All right, Michael, thanks a lot. We appreciate it.

EISNER: Thank you.

DOBBS: Michael Eisner.

Still to come here, keeping car sales on track in a slowing economy. We'll talk to the man who runs the world's No. 2 car maker.

(COMMERCIAL BREAK)

DOBBS: Now a look at the future of Ford. It's been a turbulent year for the car maker; the uproar over Firestone tires used on Ford vehicles put the company on the defensive, a slowing economy threatening sales. Ford stock plummeted last summer during that Firestone controversy, but it's since rebounded, even overperforming its U.S. peers over the past year.

Joining me from Dearborn, Michigan, Jacques Nasser, Ford's president and CEO. Jacques, good to have you with us.

JACQUES NASSER, CEO, FORD MOTOR: Good evening, Lou. How are you?

DOBBS: I'm outstanding. You have had quite a year by any definition for any CEO. Give us your outlook, from this vantage point?

NASSER: Well, it was a very difficult year for our customers last year, and it was a tough year for the Ford team all around. But when you look at our results, it was a pretty good year -- could have been a great year, but it was a good year for us.

First quarter was strong, stronger than what we had expected and the outlook at the moment is softening. We're pleased that the Fed interest rates decrease was announced...

DOBBS: Right.

NASSER: ... this afternoon. That will help. It won't have an immediate impact, but I think the cumulative effect and stabilization of consumer confidence will help us going forward.

The main thing in this industry, however, Lou, is products. Product really drives our business, and we've got very, very strong brands, of course, with Jaguar and Aston Martin and Volvo and Land Rover and Lincoln and Mercury and Mazda and the Ford brand, of course.

DOBBS: Jacques, are you going to name all of them? Are you going to name all of them? Michael Eisner was just saying he's not a promoter. I see you have no such recalcitrance.

NASSER: I have no shame.

DOBBS: No resistance at all.

NASSER: None.

DOBBS: The fact of the matter is that you've also had some difficulty. In terms of market share, you've also had tremendous successes with some of the vehicles that you're talking about. But in April, each of the U.S. carmakers losing ground significantly in double-digit declines in sales. Do you see an end in sight to that sales decline?

NASSER: The Europeans and the Japanese have got an exchange rating advantage at the moment. If you would just take in the advantage over the last several months, it equates to about $2,000, and that's being reflected in the marketplace. We're very competitive, I think, on product and brands. And I see our share coming back, and I can't speak for the rest of the U.S. industry: I think Ford is in a very, very strong position.

DOBBS: And with the Bush administration talking about an energy crisis, you are, and frankly the other carmakers as well, with heavy commitments in SUVs and some other issues. But you have the strongest commitment to raising gas mileage. You're also involved in -- in that with your chairman, Bill Ford. Are you going to be able to sell more while doing it, if you will, right?

NASSER: Well, I think Bill has provided the vision that I think is right for us in the 21st century. We committed to a 25 percent fuel economy improvement on SUVs last year. And we did that not only because we think it's the right thing to do for our planet, but we also think it's just good business. And that is way ahead of any government regulation. It was a voluntary commitment on our part, and we think that's the type of leadership position that automotive companies should be adhering to.

DOBBS: Well, Jacques, your outlook for the rest of the year, if I may ask with about 30 seconds left?

NASSER: I'd say softening. We see the industry leveling off for the balance of the year. A touch over 60 million units here in the U.S., with similar weakening, I'd say, in Europe and the rest of the world. So a fairly soft market, Lou.

DOBBS: OK. Well, Jacques, we wish you all the very best. Jacques Nasser, the chief executive officer of Ford motor.

NASSER: Thank you.

DOBBS: Thanks. And we'll be right back. Please stay with us. (COMMERCIAL BREAK)

DOBBS: The markets stalled on today's interest rate cut. Tomorrow, investors will have more economic clues to decipher: The Consumer Price Index expected to jump 0.4 of a percent in that report. Economists expecting housing-starts for April to show a slight decline. Also, watch for earnings from Hewlett Packard and Tiffany's.

Finally tonight, new blood for a nation sorely in need of it: Japan. Congratulations in order for Crown Princess Masako, pregnant after eight years of marriage and eight years of agonizing anticipation by the Japanese people. The public has been desperate there for an heir to the world's oldest monarchy. The royal family has not produced a male heir in decades. And even if the princess has a girl, the new prime minister, Junichiro Koizumi, said he would look into changing the law to allow a woman to rule.

Not only did the Tokyo market close sharply higher, the news may even help Japan's floundering economy: Many expect a baby boom to result.

That's MONEYLINE for this Tuesday evening. Thanks for being with us. Good night from New York. "CROSSFIRE" coming up next.

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