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Lou Dobbs Moneyline
Ford Orders Recall of Firestone Tires; Lawmakers Move to Restrict Cell Phone Use While Driving
Aired May 22, 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.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We're taking immediate precautionary action to ensure our customers' confidence in the safety of their tires.
(END VIDEO CLIP)
LOU DOBBS, CNN ANCHOR: Ford wants 13 million Firestone tires taken off the road, and Ford will pay the multibillion-dollar bill.
The Nasdaq today, higher for the sixth session in a row. The Dow retreats.
Is this a threat to highway safety? Two lawmakers want to ban cell phone use on the road.
And Senator John McCain, investment strategist Joe McAlinden, and former Secretary of State Madeleine Albright.
ANNOUNCER: Live, from the heart of New York City, this is Lou Dobbs' MONEYLINE, for Tuesday, May 22, 2001. Here now, Lou Dobbs.
DOBBS: Good evening. We begin tonight with Ford on the offensive in Washington. CEO Jacques Nasser today met with top legislators and regulators. Nasser brought with him Ford research on the safety of Firestone tires that were, until recently, standard equipment on the best-selling Explorer.
The carmaker insists the Wilderness AT model has a failure rate well above the industry standard. And late this afternoon the company announced a massive tire replacement plan, one that dwarfs last summer's recall. It will replace all 13 million Wilderness AT tires thought to be on the road. The cost will be huge. Ford will take a $2.1 billion charge in the second quarter. That should force the carmaker to report a loss. The announcement comes one day after Ford and Firestone broke off their partnership, one of most enduring in corporate history.
Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Ford president and CEO, Jacques Nasser, hit Washington early to talk to transportation secretary and Senator John McCain, chairman of Senate Commerce Committee. Then Nasser flew back to Dearborn, Michigan, to talk to the customers, saying Ford will replace all Firestone Wilderness AT tires on all Ford vehicles, free of charge.
JACQUES NASSER, CEO, FORD: We simply do not have enough confidence in the future performance of these tires keeping our customers safe. It is as simple and as basic and as fundamental as that.
PILGRIM: The precautionary and preventative replacement will cost Ford some $2 billion, and cover any Ford vehicle that currently has Wilderness AT tires, or has replaced original tires with Firestone tires. Ford, effectively eliminating any linkage with name Firestone.
The heir to the Ford legacy, William Clay Ford, expressing regret over the current falling out between the two companies.
WILLIAM CLAY FORD JR., CHAIRMAN, FORD: This decision is a painful one for me personally. The history between Ford and Firestone really goes back to the beginnings of the two companies, and to my two great-grandfathers, Harvey Firestone and Henry Ford.
PILGRIM: Yesterday, Firestone accused Ford of ignoring safety concerns over the Ford Explorer. Ford, today, breaking out data defending the safety record of the Explorer, pinning the blame on Firestone tires. It is a repeat of allegations made last summer in Congressional hearings over tire malfunctions.
MARK GORDON, VANTAGE PARTNERS: It's not clear how it's going to come out in terms who ultimately is going to bear the blame in the court of public opinion, and in law courts.
(END VIDEOTAPE)
PILGRIM: Ford today defended the time they took between the last recall and the current one. The failure rates on the earlier recalls were much higher. And the National Highway Traffic Safety Administration is due to come out with conclusions about that earlier investigation in a couple of weeks -- Lou?
DOBBS: Kitty, thank you very much. Both stocks involved in this controversy retreated today. Firestone down 9 percent in Tokyo trading, Ford's stock down 67 cents, ending below $26 a share.
The conflict between Ford and Firestone has been bitter, for almost a year. But today's dramatic announcement from Ford brought the dispute to a whole new level of acrimony. Joining us now live from Dearborn, Michigan, is Jeff Flock, who has been reporting on the developments throughout the day.
Jeff, let me ask you first, is this replacement program -- is it U.S. or is it international?
JEFF FLOCK, CNN CORRESPONDENT: No. We asked Jacques Nasser that point-blank and he said at this point it is only U.S. although he suspected that perhaps it would expand beyond that. But at this point, the replacement program is just U.S., Lou,
DOBBS: Focused entirely on the U.S., and that's sufficiently large, to have a tremendous impact on their earnings, turning it into a loss. In point of fact, the data that has been produced by Ford, is voluminous. This almost looks like they're preparing for some sort of defense in the court. Is there any suggestion of that?
FLOCK: Well, I think that's clearly the case right now. Although I asked Jacques Nasser point-blank today if he can say, based on the information that he has thus far, if Ford is clearly not culpable for any of the 6,000 accidents that have been reported. He said that he could not say that. In fact, he said that this is all a very complicated procedure, in terms of determining who's culpable, and that there is probably no one single factor that would determine who is in fact at fault.
DOBBS: Jeff, thank you very much. Jeff Flock from Dearborn, Michigan.
While investors are trying to assess the futures of both companies and their stocks, the accusations continue to fly between Ford and Firestone, and the rhetoric obscures the issues that are most important to the owners of SUVs. Where are the defects that have led to more than 150 highway deaths? Will we ever know? Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): That it did happen broke hearts. That it could happen, shocked consciences. 174 people dead, many more injured, all after car crashes involving Firestone tires, most involving Ford Explorers. The link between the tires, the vehicle and deadly crashes seemed unmistakable.
GARY CRIGGER, BRIDGESTONE/FIRESTONE: At this point, on behalf of the company, I would like to extend our sympathies to the families who have been involved in these accidents.
O'BRIEN: After repeated denials to Ford, Firestone eventually acknowledged it had a problem with its tires. But the company also insisted there must be something wrong with the Ford Explorer too.
Statistics provided by Firestone claim Ford Explorers, equipped with 15-inch, Firestone ATX and wilderness AT tires, are five to 10 times more likely to have a tire problem than Ford Rangers equipped with the same kind of tire.
Ford, meanwhile, has its own statistics which the company says shows its Explorer does much better when equipped with non-Firestone tires. That kind of finger pointing makes a field day for plaintiffs' lawyers, who are suing both companies.
C. TAB TURNER, PLAINTIFF'S ATTORNEY: We have a combination of bad tires on bad vehicles, and when you have a tire failure on a Ford Explorer, especially a tread separation event, at highway speeds, this vehicle is virtually impossible to control and it ends up rolling over.
O'BRIEN: Millions of Americans will be hitting the road this Memorial Day weekend. What should they do?
RALPH HOAR, SAFETYFORUM.COM: Get these tires off your car, and especially if it's a Ford Explorer.
(END VIDEOTAPE)
O'BRIEN: And should you be bringing your Firestones back to the dealer, don't forget your spare. Also, even good tires can cause bad accidents, if the tread is worn or if they are not inflated according to dealer specifications. The Ford-Firestone matter is far from over. The House Energy And Commerce Committee plans to hold more hearings on their problems after the Memorial holiday -- Lou.
DOBBS: Tim, thank you very much. Time O'Brien from Washington.
Well, one company that may stand to benefit from Firestone's trouble: Goodyear. Investors today were betting that the breakup of Firestone's relationship with Ford would turn more business in Goodyear's direction. Goodyear stock gaining more than $2 a share to hit a 52-week high.
Still to come on MONEYLINE, the president of Taiwan tours New York's landmarks. Will the visit raise another problem in the already problematic U.S. relationship with China. We will be discussing that and other policy issues with former Secretary of State Madeleine Albright.
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DOBBS: The president of Taiwan today nearly 8,000 miles away from his home, visiting New York City. He toured Wall Street, the Metropolitan Museum of Art, met with Mayor Rudolph Giuliani and some members of Congress. An itinerary like that would barely cause a ripple for most other visiting dignitaries, but a visit by this leader is an affront to China which views Taiwan as a renegade province.
It's a sensitive subject for the United States because of the significant and growing trade relationship with Beijing and Taiwan even though the Taiwanese visit is not officially sanctioned by the government. China is protesting nonetheless. Peter Viles reports.
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PETER VILES, CNN CORRESPONDENT (voice-over): It was not an official state visit, but at times it looked like one. Chun Xioue Bien (ph) , the president of Taiwan touring the New York Stock Exchange. He also met privately with the mayor and with business executives. A visit the Bush Administration portrayed as routine. President Chun is stopping over on his way to Latin America.
RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: It's a transit that was arranged for the safety, comfort and convenience of the traveler. We've done this before. VILES: True, but when Chun stopped in Los Angeles last year, the Clinton Administration urged members of Congress to stay away. This time he met with about 20 lawmakers.
REP. PETER KING (R), NEW YORK: It's U.S. Congress and the American people acknowledging that President Chun is a Democratically elected president and we want to show our support for him.
VILES: Beijing, which considers Taiwan a rogue province, criticized the visit.
ZHO BANGZO, SPOKESMAN, CHINESE FOREIGN MINISTRY (through translator): The visit violates U.S.-Chinese agreements, and inflames Taiwan's pro-independence forces. It is a gross interference in China's internal affairs.
VILES: But some Asia-watchers considered that a measured response in relation to Beijing's angry reaction to the 1995 visit of then-President Lee Deng Hui (ph).
MICHAEL KURTZ, IDEAGLOBAL.COM: Here, it looks like the trip is being taken much more low-key by Beijing, and that's certainly a good sign because it suggests that Beijing, even in the wake of the spy plane fallout that we had in April, seems to be putting a priority on maintaining smooth commercial ties with the United States.
VILE (on camera): President Chun leaves tomorrow for a five- nation tour of Latin America, and he will visit the United States again on the way home, a brief stop-over in early June in Houston, Texas.
Peter Viles, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: The significance of both China and Taiwan's relationship with the United States can of course be put in dollar terms. The United States last year ran a $16 billion trade deficit with Taiwan, an $83 billion trade deficit with China. Some China experts are encouraged by the somewhat muted tone by Beijing over recent days. But there's no denying that the visit by President Chun comes at an extremely delicate time for U.S.-China relations.
Joining us now from Washington with her outlook on China and of course other foreign policy issues is former Secretary of State Madeleine Albright. Good to have you with us.
MADELEINE ALBRIGHT, FORMER SECRETARY OF STATE: Very good to be with you, Lou, and welcome back.
DOBBS: Well thank you very much. The visit by Taiwan's president is really created at least a public outcry from China. It's significance in terms of the relationship, how would you judge it?
ALBRIGHT: Well, I think that we have to understand the complexity of our relationship with China, and what it is that I think and others think is in the best interests of the United States. I think that the important point here, that is China is a major power, will continue to be a major power. The United States needs to engage in it. We have a one-China policy, and I think that it is an important policy that has been in existence for the last 40 years -- 35 -- and it should be pursued.
And I think that we did, in fact, the Clinton Administration, did give visas and as you reported we tried to limit the visit. I think that it is important to do this in a measured way. I think maybe this visit is a little long and a little extensive in its, kind of, state aspects of it. So, I think I would have recommended something more measured.
DOBBS: And of course the Bush Administration to this point seems to be taking a stronger position, via Taiwan, than did the Clinton Administration. You were talking about measured responses, do you think the Bush Administration is following the correct course in terms of its policy stance?
ALBRIGHT: Well, I think that -- what I'm concerned about is that there is more of an emphasis being put now on having some confrontations with the Chinese, rather than looking for ways to engage them while making very clear what our policies are.
I don't think the United States gains in a confrontational stance with the Chinese. I think that we have to be very clear about human rights. We have to be clear about the fact that we would like to see a peaceful resolution of the issues between Taiwan and the mainland. And inflaming the situation in one way or another, I don't think in the long run serves American national interests.
DOBBS: And the initiatives by the Bush administration announced by Secretary Powell yesterday to further engage in the Mideast peace process in relation to the Palestinians and the Israelis, do you think the administration has been too slow to act here?
ALBRIGHT: Well, I think that there has been a sense that they could deal with it all themselves, and that the U.S. role was one that had to be in the background. We believed that it is, again, in U.S. national interests to make sure that a situation in the Middle East does not spin out of control, and I'm very glad that they are more engaged now.
I met with Secretary Powell, obviously, during the transition, and I said that it was impossible for a secretary of State to stay out of the Middle East issue. Previous secretaries, my predecessors and his, and I myself thought that you didn't have to be there, but you do. And the role of the United States is essential, and I'm glad that Secretary Powell is now taking in more direct interest.
DOBBS: And of course, you and the Clinton administration more aggressive in terms of the peacekeeping forces, particularly in Bosnia. Defense Secretary Rumsfeld was quoted recently saying that it -- that it was putting a strain on the U.S. military, that he planned to do something about it. Your reaction. ALBRIGHT: Well, I think it was the most unfortunate statement. I think great success that the United States had in supporting change in the Balkans, we managed now also -- Milosevic who was the cause of the problem is now under arrest -- and the story in the Balkans is not one that can be dealt with overnight.
Our allies are carrying a major burden, both in Bosnia and Kosovo. I think it's essential that we stay there and finish the job. The American military that I met with when I was there, they understood why they were there, and understood the value of peacekeeping, and so I think that what Secretary Rumsfeld said was most unhelpful and quite different from something that Secretary Powell has said on his last visit to the region.
DOBBS: Secretary Albright, let me ask you this, we've got about 15 seconds, you are now back in the private sector. Where -- what are your interests and what are you doing?
ALBRIGHT: Well, what I'm interested in is working on what I call post-euphoria democracies, where we have been celebrating with them, but a couple of years later when there is not a dividend for democracy, we are not paying attention. I think it is important to try to create a middle class in those countries, and so I'm going to be working in a business to try to advise a way to develop the infrastructure in those countries.
DOBBS: Madeleine Albright, good to have you with us.
ALBRIGHT: Thanks a lot, Lou.
DOBBS: Coming up next, we will have the latest for you on tax cuts that have hit a stumbling block or two in the Senate this evening. And on Wall Street, blue chips -- well, the blue chips break a winning streak. And how much is the market to move from here? We'll find out.
Later in this program, 30 million subscribers will soon be paying a little more to be online.
(COMMERCIAL BREAK)
DOBBS: Last night, we reported to you that the $1.35 trillion tax-cut plan was expected to sail through the Senate. It is sailing, but one day later, the bill is in encountering some head winds. Jonathan Karl is standing by live now on Capitol Hill and has the latest for us -- Jonathan.
JONATHAN KARL, CNN CORRESPONDENT: Well, Lou, Democratic leaders know they will ultimately lose this battle over tax cuts, but in the process, they want to make Republicans pay as much as possible. What's happening now is the Democrats have forced votes on more than 40 amendments to this tax bill. And until all amendments are considered and voted on, Republicans cannot get a final vote on their tax cut. Tom Daschle says this tactic is all about showing people just how strongly Democrats are opposed to this tax cut.
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SEN. TOM DASCHLE (D-SD) MINORITY LEADER: This is not about obstruction. This is not about delay. This is about making sure that the message is as clear as it can be about the important choices that the American people must face through us, as we debate this critical bill.
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KARL: But Republicans say it is exactly about obstruction, about delay. They point out that all of these Democratic amendments have failed, and that nobody doubts that when the Senate finally gets around to a final vote on taxes, that the tax cut will ultimately pass, and pass with a support at least of a handful of moderate Democrats.
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SEN. TRENT LOTT (R-MS), MAJORITY LEADER: Clearly, the Senate has shown throughout yesterday and today and throughout the last three months that it wants a significant tax relief for working Americans, and we are going to vote that way.
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KARL: Republicans say that they will work into the night until they get this passed, even going into the next several nights and into Memorial Day weekend, if that is what it takes to get what they want, which is to get the tax cut on the president's desk by Memorial Day. Something that Democrats are equally determined to keep from happening, Lou.
DOBBS: Jonathan, thank you very much. While you there at the Senate, and as the Senate is driving these tax cuts through, also, we have just learned, within just moments, that Senator Jim Jeffords of Vermont has called a press conference tomorrow, reports that he is going to switch from the Republican to the Democratic party, what do you know?
KARL: Well, this has been in speculation all day today, as a matter of fact, Jeffords had a meeting this morning with vice president Cheney to talk about his possible party shift. And actually, he met just about two hours ago at the White House with President Bush. We are at the official line from Jeffords' office is that he has not made up his mind, but CNN has also learned that the Democrats have offered Jeffords the chairmanship of the Environment and Public Works Committee should he switch parties.
This offer was made, we are told, by Harry Reid who is the senior Democrat on that committee. He would be giving up his space on that committee, making room for Jeffords to become the chairman. And, we are also told, the Democrats do expect that Jeffords will accept that offer, but again, the official line from Jeffords' office is that he still hasn't made up his mind.
DOBBS: Jonathan, thank you very much. Jonathan Karl., Well, on Wall Street today it was a mixed session. The Dow Jones Industrials retreating for the first time in a week. But the Nasdaq managed to hold on to modest gains, closing higher for the 6th session in a row. Despite today's weakness, market breadth has been surprisingly positive, an encouraging sign that has not been lost on some Wall Street bulls -- Allan Chernoff has our report.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): The stock market has a quality now that it didn't have during the huge rally two years ago: broad-based participation. Technical analysts like Phil Roth say the market's breadth is a critical indicator.
PHIL ROTH, MORGAN STANLEY: The more stocks that are participating in an advance, the higher the quality of the advance, and in all likelihood, the more durable the advance is going to be.
CHERNOFF: In fact, 70 percent of NYSE stocks are trading above their 200-day moving average, one of the best readings in four years. The advance/decline line has been rising for six weeks in a row.
The number of new highs on the big board and the Nasdaq has been expanding. And the Value Line Arithmetic Index, a broad measure of price movement, is at an all-time record high.
ALAN SKRAINKA, EDWARD JONES: Broad participation is very key hitherto sustain the rally. I think that's what we're seeing in the market. Small stocks, mid-caps, large stocks are all doing very well coming off the April lows.
CHERNOFF: Since bottoming on April 4th, the S&P 500 index is up 19 percent. During the same period the S&P small-cap index of 600 stocks is up 23 percent, and the S&P mid-cap index of 400 stocks is the best performer of all, up 26 percent.
(END VIDEOTAPE)
CHERNOFF: A rally with widespread participation means there is underlying demand for a broad list of stocks. Analysts say that means it's more than bargain hunting that is driving stock prices. It is a change in investor attitudes toward more confidence in the market.
Now, of course, that confidence can be shaken, but if it holds, technical analysts say the market should move higher -- Lou.
DOBBS: Allan, thanks. Allan Chernoff reporting from Wall Street.
Well, taking a look at the closing numbers, the Dow down 80 points today. The Dow at 11,257. Volume, a solid 1.2 billion shares. The Nasdaq posting a modest eight-point gain at 2,313: more than 2 billion shares changing hands there.
That win for the Nasdaq today made it six in a row. The index hasn't done that since February of last year. Greg Clarkin joins us now from the Nasdaq marketsite with a closer look at today's action -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: And Lou, this winning streak really has a lot of folks on Wall Street encouraged, and while today's gain was rather modest, this eight points, there's a lot of points that traders were encouraged by today and a lot of positives they took out of the action today.
You know, among those, the Nasdaq did not give back any of yesterday's big gains, so that was a real positive. On top of that, it held that 2,300-level very nicely. And on top of that, you had a lot of positive talk about Cisco Systems. That is one of the biggest of the big on the Nasdaq. Salomon Smith Barney, Credit Suisse First Boston, SG Cowen, all out with positive comments, positive research notes on Cisco, all pointing to a brighter future for the networking giant.
Let's take you back here to the wall, show you what it did on the day. Cisco Systems gained 2.6 percent on the day, gaining 59 cents a share, to close at 2,346. Keep in mind, that stock was $13 just seven weeks ago. So 13 and 23 in a pretty short period of time.
Other networking stocks had a nice day as well. Ciena rose almost 6 percent on word that AT&T is starting to deploy some of its fiber-optic equipment.
And then the Internets today, very strong. Inktomi is a good example. It was up almost 10 percent. No real news driving Inktomi shares, although we did see a lot of the Internet stocks just moving nicely higher coming off those April 4th lows.
So what to look for in the next few trading days? Well, look for a pullback, according to many on Wall Street. We do have some economic figures on Friday morning. On top of that, you have a long holiday weekend. Don't be surprised if some folks lighten up some of those positions after this torrid run that the Nasdaq has had since early April -- Lou.
DOBBS: Greg, thank you very much. Greg Clarkin reporting from the Nasdaq marketsite.
Coming up here, another hot energy IPO makes its debut on Wall Street, and will the Nasdaq winning streak extend? Are better things in store for this market? Joseph McAlinden of Morgan Stanley is next.
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DOBBS: In business headlines tonight, SEC scrutiny of Xerox intensifies. The high-profile investigation of accounting irregularities in Mexico has now broadened to Brazil, where former employees allege Xerox booked $140 million in artificial revenues from deals with Citibank. Citibank is not accused of any wrongdoing.
Separately, Citibank's parent, Citigroup, is simplifying its brand name. Citi is dropping the Salomon Smith Barney name from its high-powered investment bank. Salomon, once the most powerful firm on Wall Street, has been relegated to a mutual fund brand name. Citigroup gained about $1 a share today.
Other movers tonight: yet another stellar energy IPO. Peabody Energy up over 31 percent in its first day on the Big Board, raising $420 million. Peabody, one of the world's largest coal companies, aptly chose the ticker symbol BTU. Mcafee.com up 54 percent after winning a contract to provide security software for Microsoft's dot- net technology.
To the downside, Redback Networks off more than $1.50 on news its CEO has resigned. That's just the latest in a string of problems for Redback. Its CFO stepped down in November, and just last month, the company cut 12 percent of its work force. The stock is now off 90 percent from its 52-week high of $181 a share.
It's been a strong rally for the markets, the Dow up 14 percent since April, and the Nasdaq up nearly 26 percent. But can it continue? Joining me now, Joe McAlinden, chief investment officer of Morgan Stanley Investment Management.
Good to have you with us. Good to see you.
JOE MCALINDEN, MORGAN STANLEY INVESTMENT MANAGEMENT: Thank you, Lou. Good to see you.
DOBBS: Joe, at this point, we are looking at quite an impressive run-up here, does this mean that the worst is behind us?
MCALINDEN: I think that the worst for the stock market cycle is behind us, we made a major low in late March and the Dow in early April and everything else. And I think it is basically, up from here, there will be bumps in the road, but I believe we have gone into a new cyclical expansion in stocks or a new bull market.
DOBBS: A new bull market -- not a bear market rally, this is a new bull market.
MCALINDEN: Right. That is an important distinction, because if this is a bear market rally, after the big move we have had, it is about due to run out of gas.
DOBBS: I would say that bump that you are describing might be -- well, gargantuan.
MCALINDEN: If it was bear market rally. But we might get a little bump anyway, just, with the passage of time here, because, somewhere between Flag Day and Independence Day, you are going to go into earnings confession season. And the earnings, particularly in technology, will be pretty lousy, down 20, 25 percent in the second quarter.
DOBBS: And moving into the third quarter, we are going to see also, are we not, some pretty good news because we'll see those comparables, against the third and fourth quarter of 2000 in which, particularly, the big cap technology stocks started making their confessions.
MCALINDEN: Exactly.
DOBBS: Somewhat forced, but they were confessions nonetheless.
MCALINDEN: Exactly. It will be particularly robust in the fourth quarter and when you get into 2002. We have had an earnings recession, we technically have not had an economic recession, because -- not yet anyway, since we haven't had two down quarters in GDP growth -- but earnings have definitely been clobbered, and -- but I think we can see the other side of the valley now.
DOBBS: And it looks like that two consecutive quarters of earnings recession is going to extend to a third, does it not?
MCALINDEN: Yes, actually the third quarter comparisons will still be very poor, particularly in technology, and still negative for the whole market.
DOBBS: Right. And at this juncture, which sectors do you like best?
MCALINDEN: I think that, you know, I was listening to your earlier comments -- we're experiencing kind of the revenge of the nerds if you think a hot IPO right now is a coal company, compared to what they did last year.
DOBBS: You've got to love it.
MCALINDEN: You got to love these markets, and, I think that those kinds of trends are going to continue. I think the basic industrial companies, aluminums, copper, paper, steels, are going to continue to do well. Capital goods, I also like financial services.
DOBBS: That old economy just keeps going. Terrific, as always, Joe McAlinden, good to have you with us.
MCALINDEN: Good to be here.
DOBBS: Coming up next on MONEYLINE, AOL does something it hasn't in three years -- hikes prices. And customers, what will they do?
And later, safety on the roads. Should cell phones be taken from drivers' hands?
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DOBBS: The board of regional bank Wachovia tonight spurning a hostile bid from Suntrust Bank, choosing instead a nearly $13 billion merger offer from First Union. First Union didn't raise its initial bid which was lower than Suntrust, but instead sweetened the deal by offering to guarantee future dividends that would match Wachovia's current dividend. In today's trading, all three banks ended the session higher.
In tonight's tech watch: America Online, raising prices for its flagship service. Investors reacted favorably to the move, sending AOL Time Warner shares higher, the parent of this network, shares up 64 cents.
Bruce Francis joins us now and has the report for us -- Bruce.
BRUCE FRANCIS, CNN CORRESPONDENT: Lou, that price increase the first one in three years from 21 to 23.90. Analysts say it shifts the money machine that is the online service into higher gear.
(BEGIN VIDEOTAPE)
FRANCIS (voice-over): There are few things Wall Street loves more than a company that raises prices and makes them stick. AOL's increase isn't a surprise to Wall Street. The timing is.
FREDERICK MORAN, JEFFERIES & COMPANY: We had expected that it would get announced later this summer and probably not hit until the fourth quarter. So they are unrolling the price increase fully one quarter earlier than expectation.
FRANCIS: America Online, which, like CNN, is owned by AOL Time Warner, says that the company has invested $3.5 billion in the service over the past three years, and added many new features. The increase works out to be 8.8 percent. Inflation has increased 8.9 percent since the last hike.
AOL users chatting online with MONEYLINE weren't thrilled. Some offered succinct economic comparisons. And advice. And some sounded just plain mad. If AOL's past price increases have hurt membership growth, it's hard to tell. AOL switched to flat pricing in December of 1996. The service had seven million members then.
When it increased rates again in April of 1998, membership had grown to 12 million. Today, with rates poised to rise again in July, AOL has 28 million members. Analyst Jordan Rohan expects that as many as 600,000 could drop the service. But that would eventually be offset by new members.
JORDAN ROHAN, WIT SOUNDVIEW: When you really look at this, if we scrub the numbers for next year, we're expecting somewhere in the order of 4 or $500 million in cash flow impact for next year.
(END VIDEOTAPE)
FRANCIS: Microsoft says that it has no plans to raise rates for MSN, and it may emphasize price in future marketing campaigns. Earthlink wouldn't reveal its pricing plans. It adds up, Lou.
DOBBS: That's a great line. Thank you, Bruce.
Next up, one of the most influential senators in Washington.
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DOBBS: As we reported to you just some minutes ago, Senator Jim Jeffords of Vermont has said that he will be making an announcement on his plans for whether to stay in the Republican Party or bolt and go to the Democratic Party. We are going now to Major Garret at the White House who has the very latest for us -- Major.
MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Lou, evidence is mounting that the decision that Jim Jeffords will announce tomorrow is that he is switching to the Democratic Party. Two sources CNN has spoken with who are very familiar with the senator's thinking say that he told his staff today that he is going to switch parties. There is a last-minute effort undergoing on in his office from his staff to talk him out of that.
But these sources that CNN have spoken with do not believe they will prevail, and that in fact, the senator will announce he is switching parties. The question that many Republicans now have in the Senate is if when he makes that announcement, will he say that the effective date of that party switch will be after President Bush's two top domestic priorities -- his tax cut and his education reform package -- pass with Republican votes, and he would stay in the party until after those pass through the Senate and then become a Democrat -- Lou.
DOBBS: Major, thank you and we will be turning those two questions to one of the most powerful senators on Capitol Hill, Senator John McCain of Arizona. Senator, good to have you with us.
Right now, the Senate focused on the tax cut legislation moving through the Senate. Some considerable number of delays by the Democrats. How does it look tonight?
SEN. JOHN MCCAIN (R), ARIZONA: I think it's certainly almost inevitable that the bill will be passed. There have been a couple of very close votes, just one that was 50-50 a short time ago, and 49-49 on an amendment that I had -- and by the way, I would just like to say welcome back, and I think we can now take your picture off the milk cartons. We are glad you are back.
DOBBS: Senator, thank you very much. It's good to be back, particularly with you. The fact is that 50-50 vote, highlighting again, obviously, the close nature of every vote in the Senate. Senator Jim Jeffords saying that he will make an announcement tomorrow. As Major Garret just reported from the White House, it looks as though he is going to announce that he is switching parties. This is a profound dramatic impact on your body.
MCCAIN: Well, I think so, if it happens. It is not clear yet that Jim is going to switch. I only know what I have heard from media reports, but as far as the two major issues are concerned, Lou, those votes I don't think are going to change, on education and tax, no matter what Jim Jeffords does as far as party identification. The issue have been debated and people have taken positions on those issues.
DOBBS: So, you have a great deal of confidence in terms of education, and in terms of the tax cut tonight?
MCCAIN: I would think so. First of all, education is a top priority as far as the American people are concerned. As far as the tax cuts are concerned, literally every amendment has been defeated that is not in keeping with the Finance Committee's results, and so I think that there is -- however, a question when it goes to conference, and that is what happens.
If the House changes it significantly, if the conference changes it more toward the House position, then I think you may have trouble keeping those votes here in the Senate.
DOBBS: And Senator, at this point, in terms of Senator Jeffords, are you working behind the scenes? Are you talking with the senator, urging him to stay with the party? Or if not, do you intend to do so?
MCCAIN: Well, Jim and I are very old friends, who we've been together for many years. I'm a little reluctant to try to influence someone's decision when this is clearly one that he has thought through. I obviously would like to see him remain in the Republican Party, but at the same time, it is a pretty sensitive area that we're dealing with. And I hope that he'll do -- remain a loyal Republican.
DOBBS: And obviously, on a number of the issues between you, and of course, the White House included tax cuts, which you are supporting. Campaign finance, however, campaign finance reform looks to be a different matter. Is it your sense tonight, as you look forward, that the House will pass campaign finance reform and that President Bush will sign it?
MCCAIN: Well, first of all, on the tax cuts I would have liked to have seen a larger percentage go to working families, less of a reduction in marginal rates, and more to middle-income working families. But on the issue of campaign finance reform, it's clear the opponents want to delay. They want to not take up the issue until after the 4th of July recess, perhaps throwing it into a conference, and then you've got the August recess coming up. So, that is clearly their strategy. And we're going to have to fight like blazes to get them to pass a bill so that we'll have time to get it passed and on the president's desk.
DOBBS: Senator John McCain, as always, good to have you with us. Good to talk with you.
MCCAIN: Thank you, Lou.
DOBBS: Senator John McCain.
Well, coming right up, a look at some of this year's hottest IPOs. We'll be right back. Stay with us.
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DOBBS: Energy IPOs in our sector report tonight. While overall IPO activity is down a dramatic 63 percent from a year ago, energy IPOs are simply hot. As we reported to you earlier, Peabody Energy, one of the world's largest coal companies, surged more than 30 percent in its debut today. Taking a look at other top energy offerings of the year, Global Power Group, which debuted last week, up almost 80 percent. Williams Energy Partners, up 51 percent since its February offering. Aquila Energy up 40 percent, and Reliant Resources gaining 21 percent.
Coming up next on MONEYLINE, cell phones: Are they a hazard on the highways? We'll take a look at the latest effort in Washington to keep them off the road.
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DOBBS: The safety of cell phones is a health concern that could affect hundreds of millions of people around the world. Today the national Toxicology program announced the beginning of a $10 million scientific investigation, the first federally funded, to look into human effects studying cell phone microwaves on animals. This on the same day that a General Accounting Office report found that current research is inconclusive as to whether cell phone radiation poses a health hazard to humans.
The GAO report says, quote, "It will likely be many more years before a definitive conclusion can be reached on whether mobile phone emissions pose any risk to human health."
Radiation not the only cell phone issue making up debate in Washington, today. Two lawmakers, Senator Jon Corzine of New Jersey, and Congressman Gary Ackerman of New York introduced the first measure that would impose a nationwide ban on handheld cell phones in cars, and the wireless industry wasted no time in firing back. Steve Young has our report.
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STEVE YOUNG, CNN CORRESPONDENT (voice-over): The politicians say their legislation is about saving lives by avoiding accidents like a 1999 crash in Hill Town, Pennsylvania, in which a 2-year-old girl died because an adult in another car was using a handheld cell phone.
Both bills are patterned on pending measures in 40 states to ban drivers from using handheld mobile phones. The House version lets drivers use hands free phones, but calls would have to be placed through voice activation. The Senate bill would let the states decide if hands-free is OK.
SEN. JON CORZINE (D), NEW JERSEY: I have a cell phone, too, and have been known to be a dangerous driver when I am using it. And I do think there's a common sense to this that the American people are beginning to recognize and react to.
YOUNG: The bills let states impose driver penalties and those that don't could lose federal highway funds. The cell phone industry pushed its 911 speed dial saying common sense can't be legislated, cell phones caused a tiny percentage of car accidents in one study, and education could prove better than sanctions.
If the trade association has its doubts about a ban, many drivers don't, even in California where the car is king.
UNIDENTIFIED MALE: I've seen a lot of drivers out there who are not paying attention to their driving and they're using a phone.
UNIDENTIFIED FEMALE: Me, myself, personally, I can't do it. I have to pull over to the side and basically stop to concentrate.
UNIDENTIFIED MALE: Illegal? That would be fine with me. I've seen cars go through intersections, guys on the freeway swerve because they're trying to dial.
YOUNG: The Cell Phone Association says drivers should always ask "is this the right time to make a call?"
(END VIDEOTAPE)
YOUNG: Lawmakers say if it's a hand-held cell phone in a car, the right answer is "never" -- Lou.
DOBBS: I can't imagine there not being something of a rebellion over this issue, but the surveys say otherwise.
YOUNG: Yeah, most people say they favor this.
DOBBS: Steve, thank you very much.
Well, putting all of this in economic perspective, there are currently around 115 million wireless phone users in the United States. It is a market worth $52 billion a year.
Well, coming up next, the e-mail that has Wall Street talking and one young man walking. "Ahead of the Curve" is next.
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DOBBS: Tomorrow brings a mix of news for Wall Street as tomorrows are want to do. Expect earnings reports from retailers Polo-Ralph Lauren and Neiman Marcus. Also, Amazon.com holds its annual shareholder meeting in Seattle, Washington, of course. And business leaders will be convening in Redmond, Washington for Microsoft's fifth annual CEO summit. And the topic this year is "Technology to Manage Rapid Change."
Finally, on Wall Street, the confluence of youth and money supports many excesses, and a 20-something pays the price for his arrogance. His name is Peter Chung. His job: an up-and-comer in the Seoul office of the prestigious Carlyle (ph) Group. His big blunder: writing about his supposed sexual conquests and lavish lifestyle, and then hitting send in an e-mail to his friends.
Chung bragged about his expansive apartment; his three bedrooms to maintain his -- quote -- "harem of chickies"; his taste in the "finest clubs, bars and lounges" -- all summed up in one smug line: "What can I say? Life is good. Chung is king of his domain."
Briefly -- not anymore. Chung's friends forwarded his e-mail, which then was spread to thousands of people at firms all around the world. While many of them found it amusing, Chung's superiors found it offensive. Chung has been fired.
And that is MONEYLINE for this Tuesday evening. We thank you for joining us. I'm Lou Dobbs. "CROSSFIRE" is coming up next.
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