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Aired January 07, 2002 - 18:00 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: This is LOU DOBBS MONEYLINE for Monday, January 7.
Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.
Tonight President Bush back in Washington, and he has a heightened focus on the health of the economy, in addition to the war against terror.
After a 12-day stay at his Texas ranch, the president started his day by meeting with his economic team and Federal Reserve Chairman Alan Greenspan. They discussed ways in which to stimulate this economy.
Later, talking with reporters, Mr. Bush said he was optimistic that 2002 will be a better year for the economy than last year. The president also said he would continue to press Congress to pass his economic stimulus package when they return from break on January 23.
John King joins us now from the White House, with the story -- John.
JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: And Lou, that first meeting of the new year for the president here at the White House a very high-powered meeting, as you noted. The Federal Reserve Chairman, Alan Greenspan, on hand; Vice President Dick Cheney; three members of the Bush Cabinet; his entire economic team.
The president dealing with both short-term and long-term economic prescriptions here at the White House. One of the new realities is this government is now running deficits. When Mr. Bush came to office, he was running surpluses.
And another new reality is, it is now a congressional election year, and Democrats say the president is to blame for the fact that the government is back in red ink. One of the president's priorities today was to make the case that no, that's not true, he's not to blame.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It makes sense to spend necessary to win the war. It makes sense to spend money necessary to protect the homeland. And we're in a recession.
There is some talk about raising taxes. And that would be a disaster to raise taxes in the midst of a recession.
(END VIDEO CLIP)
KING: Now, that last part from the president, talk of raising taxes -- the Democrats object to that. They say no Democrats have proposed actual tax increases. But the Senate majority leader, Tom Daschle, last week did say that in his view, the Bush tax cut made the recession worse, and is responsible for turning the government from surpluses to deficits.
So as the president returned to the White House today, yes, he said he hopes to reach an agreement, again, in the short-term, on a stimulus package. He's working on a long-term budget and economic plan, as well. But you could see the political positioning made now, in this, a congressional election year. The Democrats want to blame the president for the struggling economy. The president says it's because of the war and the recession, and he's almost daring the Democrats to come to the floor of Congress and try to raise taxes -- Lou.
DOBBS: John, did Senator Daschle at any time explain how cutting taxes could exacerbate the effect of recession?
KING: He has not quite explained that.
The president today said if you asked economists, they would say a tax cut at a time of recession is the right prescription.
What Senator Daschle says is, he says the Bush tax cut went too far. He says it's not really even a $1.3 trillion tax cut, as the president said, it's at least 1.6 trillion over 10 years -- some say even more than two trillion. Senator Daschle says it was too big -- that a more modest tax cut would have left some money here in Washington to deal with emergency spending. This will be the defining debate of the election year.
They still want to get about the business of talking about health care, patients bill of rights, a prescription drug care benefit. All of it, of course, would have to be paid for, so the big debate over is who is to blame for the surplus. The president says it is a time of war and recession. The Democrats say it was that big tax cut.
It's January. The elections are in November.
DOBBS: And the silly season is upon us, despite everything else.
John, thanks very much. John King from the White House.
Well, the Pentagon is pushing for a large boost in its budget, hoping support for the war against terrorism will translate into support for more money for the Pentagon. President Bush today said protecting the United States is a priority of his next budget. Even with the cost of fighting the war against terrorism estimated at more than $2 billion a month, the Pentagon has much broader plans and needs for that money. Kitty Pilgrim has the report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The war in Afghanistan has been a unique combat situation and a real lesson. For example, the use of precision-guided missiles was effective. But because the war relied on them as one of the key strategies -- 60 percent of munitions were so-called "smart bombs" -- the arsenals were used up very quickly. At up to a million dollars a missile, they're what might be considered a big-ticket item.
LOREN THOMPSON, COO, LEXINGTON INSTITUTE: We discovered in Afghanistan that smart bombs are a critical point of leverage in modern war fights. The problem is the Clinton Administration didn't buy enough, and we're using them up very quickly. We need to buy more, and we need to buy them quickly.
PILGRIM: Most analysts expect the Pentagon to ask for a $20 million increases for 2003. This is a bit less than the 33 billion, or seven percent increase, for 2002. Defense is five percent of GDP. With the war in Afghanistan costing $2 billion a month, the increase doesn't even cover the cost of the conflict.
STEVEN KOSIAK, CENTER FOR STRATEGIC & BUDGETARY ASSESSMENT: It's clearly going to be necessary to increase funding for weapons modernization, because we just didn't buy much in the 1990s, and the equipment's getting too old.
PILGRIM: The great worry is preparing for the last war. But now the military finds it must prepare for both current and future conflicts. For example, conventional forces were expected to face budgetary pressure this year. But now, basic military hardware like aircraft carriers, tanks and tactical fighter jets are likely to get funding. In this war, the importance of long-range bombers was demonstrated.
Yet there will also be a push for more money to fight unconventional wars, with increased funding for intelligence, chemical and biological preparedness.
(END VIDEOTAPE)
PILGRIM (on camera): Now, according to the Defense Department, military costs in Afghanistan will not go down any time soon. What this current war on terrorism has taught military planners is don't count any contingency out when planning for the future -- Lou.
DOBBS: Kitty, did I hear the expression "war fighting"?
PILGRIM: War fighting.
DOBBS: That is -- Washington can be frightening for lots of reasons, but when they come up words like "war fighting" ... PILGRIM: Well, it's been an interesting story all day, because you hear lingo you just don't generally hear.
DOBBS: And probably most of us would prefer not to. It seems like "fighting" would suffice there, or perhaps even "war," but ...
PILGRIM: Seems like it. But I think the point is well made.
DOBBS: I will take your word for it.
Kitty, thank you very much.
U.S. war planes today carried out concentrated bombing against targets along the Afghan/Pakistan border. Military officials say they're trying to flush out al Qaeda and Taliban fighters who remain there and are trying now to flee into Pakistan.
The aircraft also dropped precision-guided weapons on cave entrances, where U.S. Marines found tanks and armored vehicles.
For more now on this story, we're joined by senior military affairs correspondent Jamie McIntyre at the Pentagon -- Jamie.
JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, they call this, another bit of Pentagon parlance, they call it "exploiting the territory." U.S. Marines and Special Forces have been gathering up tanks, armored vehicles, artillery pieces -- putting them into one location and then calling in air strikes from B-1 and B-52 bombers to destroy them.
They also found at those locations what we're told was a lot of dead al Qaeda fighters. But the location of Osama bin Laden and Mullah Omar is as much a mystery as ever, and the Pentagon today vowed to stop speculating today where they might be.
(BEGIN VIDEO CLIP)
REAR ADMIRAL JOHN STUFFLEBEEM, PENTAGON SPOKESMAN: We're going to stop chasing, if you will, the shadows of where we thought he was, and focus more on, you know, the entire picture of the country, where the -- where these pockets of resistance are, what do the anti-Taliban forces need so that we can develop a better intelligence picture.
(END VIDEO CLIP)
MCINTYRE: As the bombing of Afghanistan enters its fourth month, the Pentagon offered these videos, recorded by an AC-130 gunship last week, as evidence that the war is not over. Pictured here is a large training and supply complex in eastern Afghanistan that was targeted because it was believed Taliban and al Qaeda forces were gathering there.
The Pentagon says it's not sure what those people were doing, except that they were probably trying to seek some safety in numbers. But they say there's still a very dangerous situation in -- particularly in eastern Afghanistan, which was described today by one of the Pentagon briefers as a hotbed of support for the al Qaeda and Taliban regime -- Lou.
DOBBS: Jamie, thank you very much. Jamie McIntyre from the Pentagon.
The first U.S. congressional delegation, including a well-known former prisoner of war, arrived in Afghanistan to assess the results of the American-led military campaign there.
Senator John McCain and Connecticut's well-known Senator Joseph Lieberman among the senators who arrived at Bagram Air Base under -- as you might expect -- extremely tight security. The senators met with Afghan leader Hamid Karzai. They said afterwards that the United States must stay engaged in the effort to now rebuild Afghanistan.
For more on the story, we're joined by John Vause at Bagram Air Base.
JOHN VAUSE, CNN CORRESPONDENT: Hello, Lou.
Well, those senators were on the ground for barely four hours tonight, but they say it was in fact a very important meeting with the new interim chairman, Hamid Karzai.
Now, one interesting point to know about Hamid Karzai -- he had to make the long journey to Bagram Air Base here north of Kabul to meet with the senators. This is, of course, a secure location. Hundreds of U.S. and British troops have been on the ground here for more than a month.
Now, that meeting, the senators described as being crucial, very symbolic, and also very important. They wanted to assess the situation on the ground. At that meeting, Hamid Karzai thanked the senators for coming. He also wanted to thank the people of the United States as well as the U.S. government for its continued support in the ongoing struggle against terrorism. It was at that point that one of the senators interrupted and he apologized to Hamid Karzai for the United States abandoning Afghanistan more than a decade ago.
Now, after that meeting, Senator Joseph Lieberman addressed a media conference, and he explained why it was so crucial for the United States to remain engaged in this region.
(BEGIN VIDEO CLIP)
SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: Well, I think people are proud that we're involved here, understand that we need to be here to protect our own security, and it would be a terrible mistake to walk away.
(END VIDEO CLIP)
VAUSE: Now, just a few hours after the senators' touchdown here at Bagram, another dignitary arrived -- British Prime Minister Tony Blair -- the first British prime minister to ever visit Afghanistan. So a very symbolic night here for the Afghanistan people and for the new chairman, Hamid Karzai. Now, they held private talks, and during those private talks, Hamid Karzai told Tony Blair in effect that he was sorry that he could not host Tony Blair in the capital, Kabul. He was sorry that it was still too dangerous to host dignitaries in the capital of this country. Tony Blair's response to that was, "Unfortunately, these are the circumstances we must deal with."
Now, Tony Blair also pledged more security for Afghanistan -- a similar message to the one that the senators brought with them tonight that the world is here to help Afghanistan, to help it rebuild after so many years of war -- Lou.
DOBBS: John, thank you very much. John Vause updating us from Bagram Air Base, where nine U.S. senators and British Prime Minister Tony Blair today arrived for consultation with the provisional government.
Well, from the beginning, President Bush has made it clear that the war against terrorism will reach well beyond the borders of Afghanistan. As a result, there is considerable speculation as to which target is next.
Richard Perle, resident fellow at the American Enterprise Institute and Chairman of the Defense Policy Board, says that Iraq and, principally, Saddam Hussein, should be next.
Richard Perle joins us from Washington, D.C. Richard, good to have you with us.
RICHARD PERLE, AMERICAN ENTERPRISE INSTITUTE: It's great to be here, Lou.
DOBBS: Iraq. You think this is, despite some indication to the contrary, the appropriate next target?
PERLE: Well, I think it would be an entirely appropriate next target, but if there's one in between that's probably all right, too.
The important point is that ultimately we have to confront Saddam Hussein if we're going to win the war on terror. We can't leave in place a man who has supported terrorist organizations the whole of his life, and continues to do so after September 11, and will go on doing so.
DOBBS: But in point of fact, as you well know, Richard, for a decade, we have permitted, for all practical purposes, Saddam Hussein to continue and in some ways, to tweak the noses of the Western powers that sought to address his aggression in 1991.
A number of people say that it is impractical to consider a military operation of the scale of the Persian Gulf War. How to you respond to those people?
PERLE: Well, I don't believe that it would take a military operation on the scale of the Persian Gulf War. It's an entirely different situation. For one thing, Saddam's military forces are now about a third of what they were at the time of the Persian Gulf War in 1991. And it's the same third -- that is, it's the remnant of what he had then, antiquated weapons, old tanks that are sitting ducks for the kind of modern air power that we now possess.
And very often, the people who find Saddam an intimidating, daunting figure are the same people who said we'd get bogged down in Afghanistan.
There are lessons to be learned. Saddam is not 10 feet tall. He's despised within his own country. And if we get behind the internal opposition to Saddam -- as we got behind the Northern Alliance -- there's a strategy that can be made to work.
DOBBS: And what we have witnessed on the part of the U.S. operation against terrorism in Afghanistan is remarkable. For one thing, the military did not fight the last war, as some feared. They fought this war, and rather effectively.
Is it your judgment that we have to be sequential in the -- in the targets that we go after, whether that be Somalia or whether Saddam Hussein's Iraq?
PERLE: No, I don't think we have to be sequential. We could take on more than one at a time if we chose to do so.
What has changed since 1991 -- and your correspondent was onto this point earlier -- is the extraordinary effectiveness of precision weapons. When you can aim a weapon at a target and have a high probability of destroying that target, it changes the history of warfare, because almost all of the weapons fired in all the wars of history have missed. That was the best we could do in the past.
Precision means that a small and efficient force can deliver devastating firepower. We need simply to find the targets, and we have technologies -- extraordinary technologies that permit us to do that under all conditions, including at night, in bad weather, and the like.
So forces on the ground -- the opponents of Saddam Hussein or others in other countries -- combined with American air power, can do remarkable things, as we've seen in Afghanistan. And we need to revise our notion of what we're capable of doing and what our adversaries are capable of resisting.
DOBBS: And that revision well under way after the experience against the al Qaeda and the Taliban in Afghanistan.
At the same time, the world is becoming extraordinarily complex against the backdrop of President Bush's "You're either with us or against us" pronouncements and foreign policy on the issue of terrorism.
The fact is that India and Pakistan tonight remain on the verge of war. The Israelis have confiscated -- seized a ship with some 50 tons of weapons that reportedly came from Iran on its way to the -- to the Palestinians.
How is all of this, in your judgment, going to play through?
DOBBS: Well, the world has not become entirely peaceful or entirely to our liking.
What I think has happened -- and it's fundamental and of great importance -- is that the benefits of victory have been demonstrated in Afghanistan. The destruction of the Taliban regime, the decimation of al Qaeda, has put the United States and American policies in an entirely different perspective around the world.
What we are finding now is that those who wish to be with us, who wish to fight extremism, are greatly encouraged by our victory. I don't know how many people noticed, but the Kuwaiti government just the other day decided not to embrace the form of radical Islamic law that can be such a problem because it is so extreme. And they did that in part because the winning side now is the side of moderation, of anti-terrorism.
So I think that the political -- the geopolitical momentum that arises out of Afghanistan is something that we need to marshal and make the most of.
And we can encourage the Pakistanis and the Indians to resolve their differences.
But most of all, the forces of terror are in retreat, and this is enormously encouraging to those who want to stand with us against terrorism.
DOBBS: Richard Perle, as always, good to have you with us.
PERLE: Good to be here.
DOBBS: Well, Pentagon spokesman, Rear Admiral John Stufflebeem, says he has not seen reports that would indicate a specific culprit in the death of Army Special Forces soldier Nathan Chapman. The 31-year- old Chapman was shot to death last Friday during a mission near Khost. Some reports suggesting a teenager may have shot him from ambush.
Chapman's remains scheduled for return to Seattle, Washington, sometime tomorrow. His body arrived at Ramsden (ph) Air Base in Germany over the weekend, later transferred to an Army facility at Landstuhl.
The Pentagon says a teenage pilot who crashed into a Tampa skyscraper over the weekend was not perceived to be a threat. At one point, the single-engine aircraft came within 100 feet of a runway at MacDill Air Force Base. That's where the U.S. Central Command is headquartered. It oversees, of course, the war in Afghanistan.
The Pentagon says there was no way of knowing what the teenager's intentions were while at the wheel of that aircraft. Fifteen-year-old Charles Bishop crashed the small plane into the Bank of America building Saturday, killing himself. He was carrying a note -- a note that expressed sympathy for Osama bin Laden. Bishop also claimed he was of Arab descent.
Coming up next here: As clean-up teams work through the remaining rubble at Ground Zero, the government continues to sort out its formula to distribute the September 11 Victim Compensation Fund.
Peter Viles will be here to give us an update.
Later, troubled Lucent Technologies naming a new president and CEO -- a former executive of Lucent.
And behind those new flashy cars -- automakers also unveiling business goals at their Detroit automobile show. We'll take a look at some of those flashy new automobiles, and we'll find out how DaimlerChrysler intends to return to profitability.
ANNOUNCER: Coming up, Lou talks to Dieter Zetsche, CEO of Chrysler.
(COMMERCIAL BREAK)
DOBBS: Automakers are busy unveiling new models at the annual automobile show in Detroit, amid what has turned out to be a difficult time for some of the car makers. Between recession and vehicle over- capacity worldwide, car makers are facing tough times. But that didn't prevent many of them from unveiling brand-new concepts that are more than appealing.
Attracting more attention than the flashy cars, however, word that Ford Motor may announce huge job and production cuts later this week.
Other news out of Detroit, General Motors says that it is making every effort to avoid bankruptcy for its troubled truck maker, Isuzu. And the Chrysler arm of DaimlerChrysler saying it expects to hold U.S. market share this year, and to keep its marketing costs at or below the levels reached in the fourth quarter of last year.
Auto sales down for 2001, but still managing to post the second- best annual performance ever.
Well, Chrysler's using the show to unveil two of its new offerings: its Pacifica sports wagon and a luxury coupe called the Crossfire.
Joining me now, the man who runs the operation -- the President/CEO of Chrysler, Dieter Zetsche. Good to have you with us, Dieter.
DIETER ZETSCHE, PRESIDENT & CEO, CHRYSLER: Hello. Thank you for having me.
DOBBS: All in all, a tough year, but a year in which you sold a lot of cars. Why is the automobile industry having so much trouble against the backdrop of what looks like terrific volume?
ZETSCHE: Well, obviously, the market is defined by volume on one side, but by the margins per week, or the profits we can make in one week, along the other side. And combining both, it was certainly the second-best markets (UNINTELLIGIBLE), this U.S. automobile side, but the volume were there, there's no doubt.
DOBBS: Well, in talking about cost, some speculation that Chrysler would manage to break even this year. Is that going to -- for 2001. Is that going to be the case?
ZETSCHE: For 2001, we had set a target -- a range -- and we will be within this range, or at the better end. For 2002, it's not only a speculation, but that's what we announced a year ago that we would go for -- break even in 2002 -- and that our target, even though of course the boundary conditions have worsened since then, but we are committed to go for the target.
DOBBS: Committed to the target, yet Ford and Chrysler both have been far more aggressive in terms of rebates, zero financing -- zero percent financing, incentives. Why is that?
ZETSCHE: Well, we think that we have a great product line-up, and that the first thing we want to convince our customers is that they made the right choice by going for our product. For certain, we cannot totally ignore the level of incentives which are spent by our competitors, and we stay competitive in this regard.
But the main focus is our great products.
DOBBS: With that focus on the products -- and as we are talking, Dieter, some of those products are being shown -- being demonstrated there -- or shown off at the Detroit auto show -- what is your target? What are you doing to be able to do? We understand cutting costs, constraining -- controlling costs. But what is going to make the difference for Chrysler, in particular, this year in the market?
ZETSCHE: Well, I think we have a unique opportunity, being part of DaimlerChrysler, to on one side, leverage the tremendous equity of our three great all-American brands, the great talents we're having on styling, which we are famous for, and which I think we have shown with our concept cars this year again, and at the same time, using the technology, the quality, the performance of our friends from Mercedes to propel Chrysler to new levels of excellence.
And that's exactly the route we are going for. And this has already shown results last year, and this will lead us to further success this year.
DOBBS: Well, we wish you all of the best this year, Dieter. Thanks for being with us.
ZETSCHE: Thank you very much. Appreciate it.
DOBBS: Dieter Zetsche.
Coming up next, the first congressional delegation arriving on Afghan soil. We'll have the latest for you from the region. And we'll have the latest for you on the September 11 Victim Compensation Fund. After nearly four months, considerable concern about the distribution of that money. We'll tell you why there are problems.
And Lucent managing to lure its new president and CEO away from Eastman Kodak. The news, however, doesn't meet with resounding favor on Wall Street.
We'll have that story for you, and a lot more. Stay with us.
(BREAK)
DOBBS: In the war against terrorism, nine U.S. senators at Bagram Air Base today in Afghanistan. Leading the delegation, senators John McCain and Senator Joseph Lieberman. They met with the new provisional leader of the Afghanistan government, and afterwards said the United States must stay engaged in Afghanistan to stamp out terrorism and to help Afghanistan rebuild.
Also arriving at Bagram Air Base today, British Prime Minister Tony Blair. The prime minister met with Afghan leader Hamid Karzai and British troops stationed at the base and in the area.
U.S. war planes dropping more bombs near the Afghan/Pakistan border, where al Qaeda fighters are believed to remain in hiding. They also targeted a training camp where U.S. Marines recently found tanks and armored vehicles.
Now, an update on the special government fund for the families of the September 11 victims. When the proposed formula for that fund was announced in late December, some found it generous. On average, awards of one-and-a-half million dollars per family, before deductions for life insurance and pension money.
But over recent days, criticism of that fund and its formula have been increasing.
Peter Viles is here now, and has the story for us -- Pete.
PETER VILES, CNN CORRESPONDENT: Lou, there are a number of new complaints against the formula behind this fund, which governs the distribution of billions of dollars in federal money.
One complaint is that many families -- notably the families of New York firefighters who died -- will not receive anything from the federal fund because they have somewhat generous pensions and death benefits.
(BEGIN VIDEO CLIP)
BEVERLY ECKERT, WORLD TRADE CENTER WIDOW: All through the holidays, we kept hearing about how families -- the average family was going to get $1.6 million under the fund. But the public didn't hear about how so many families would get nothing.
(END VIDEO CLIP)
VILES: Another complaint is that the formula devised by Kenneth Feinberg effectively caps earnings at $240,000 a year. Families of victims who earned more than that will be compensated at that level.
(BEGIN VIDEO CLIP)
REP. CAROLYN MALONEY (D), NEW YORK: This was the World Trade Center, the symbol of the financial capital of our country. And many of our financial leaders were in this building -- and future financial leaders. And the way that it caps their earning -- their potential award is unfair and needs to be adjusted.
(END VIDEO CLIP)
VILES: Now, the rules of this fund are not yet final, and the special master, Kenneth Feinberg, has been meeting regularly with victims to listen to these complaints. But the complaints are mounting -- Lou.
DOBBS: Pete, it is in nearly every case a tragedy the families have to go through this. At the same time, it is, it seems to me, unseemly and unfortunate that the families of the victims have to step forward and ask -- really, is what they're doing, is asking for more money.
This fund was set up to prevent lawsuits. What is -- why don't they just sue?
VILES: Well, they can sue, but when Congress set up the fund, it took away some of their leverage. It capped the liabilities of the airlines.
DOBBS: Did they accept the money?
VILES: It capped the liability of the airlines that the amount of insurance the airlines have period, which cuts down the incentive to sue. And they said in return, we'll give you this special fund. You don't like the fund, you can sue but you're going to sue for a limited amount of money.
DOBBS: A million and a half dollars, $1.6 million a lot of money until one starts deducting that from all of the other issues here and elements in it. What is the average family going to receive, the family of a victim of the World Trade Center, whether he or she be a firefighter, public safety person, or an unfortunate employee within the World Trade Center?
VILES: What the 1.6 tells you is you may not get $1.6 million from this Federal fund, but if you get less than that from your life insurance, your pension, your death benefits, the Federal fund will take you up to 1.6.
So these families will be receiving some. It's just that some will get nothing from the fund, everything from pensions, death benefits. We should say that charity money is not counted against your Federal award.
DOBBS: So it's $1.6 million from the Federal fund, plus the money from the charities and that looks as though it's going to amount to something in the neighborhood of right around a half million dollars per family.
We should not be too disappointed in how generously we're treating these families?
VILES: They're being treated much more generously than any victims of past disasters.
DOBBS: Right.
VILES: Or past wars. The complaint, and we hate to say it's a complaint, is that they're not being compensated for what they lost. A lot of these were very high earners, and it's unfortunate to have this ugly dispute over it, but you point out this is a very generous settlement in the end.
DOBBS: Pete, thank you very much. Peter Viles. Well Peter, of course, will be following this story as he has throughout and he will have more on the story at the top of the hour with Wolf Blitzer.
Lucent Technologies today took another step in the painful restructuring of the company, and today named the now ex-president of Eastman-Kodak, Patricia Russo, to be the new President and CEO of Lucent.
Investors didn't appear confident that bringing back a veteran Lucent executive will turn the company's fortunes. Lucent stock, in fact, fell more than two percent today. It was the most actively traded issue on the Big Board. Fred Katayama has the story.
(BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT (voice-over): Lucent Technologies went for blue blood instead of new blood after a 16-month search. Patricia Russo spent eight years at IBM and 20 years at Lucent, and its former parent AT&T.
After just eight months as Eastman-Kodak's President, she'll come home to replace Henry Shock in the corner office.
PATRICIA RUSSO, PRESIDENT AND CEO, LUCENT TECHNOLOGIES: I bring a set of management skills, and at the same time, I bring a familiarity that helps assure continuity, a smooth transition, which by the way is important for our customers and I think important for the investment community.
KATAYAMA: Some analysts had hoped for an outsider, arguing new blood is needed to make big changes. Others say an insider could life company morale and prevent an executive exodus. She's known to inspire loyalty.
JEFFRY LIPSON, JP MORGAN: I think Pat's a good choice. I know a number of people who have worked for Pat in the past and really respect her. They say she's a very decisive person.
KATAYAMA: Lucent investors had mixed feelings, sending the stock up after the open, but pushing it down two percent on the day. Eastman-Kodak fell more than three percent.
Russo knows the company well. Lucent has sold or spun off so many businesses, what's left today is essentially the division Russo ran, the core business selling telecom equipment to big phone companies like AT&T and Bell South.
This Lucent shareholder says Russo's experience is all the more important given investor anxiety.
STEVE MYGRANT, FIFTH THIRD TECHNOLOGY FUND: For example, Deb Hopkins came in from Boeing and took eight months to announce her restructuring plan, and by that time business had turned down very dramatically. So we think someone with experience at the company is the right choice.
KATAYAMA: For now, Russo says she'll focus on carrying out Shock's turnaround plan at improving relationships with customers.
(END VIDEOTAPE)
KATAYAMA (on camera): She faces many challenges, making good on the company's forecast of breaking even in 2002, filling in some holes on the product lineup and getting that stock back up, a stock that peaked at more than $80 a share. And some analysts believe more job cuts may be necessary but she says she doesn't foresee any cuts for now. Lou.
DOBBS: Well, I think we need to be fair to Ms. Russo. We said that there was no Russo rally. Lucent stock dropped two percent, but Kodak's dropped more than three percent, so.
KATAYAMA: Right, and the overall market was down too.
DOBBS: Exactly. So we'll give them -- should we give her more than a few hours in which to create a rally?
KATAYAMA: Perhaps. It is her first day after all, Lou.
DOBBS: Very generous and gracious, Fred, thank you. Fred Katayama. Well still ahead here, the latest developments in the War against Terrorism. U.S. military forces bombing new targets in the hunt for al Qaeda leaders in Afghanistan.
Apple Computer CEO Steve Jobs launches a new product for the company's faithful, and with it renewed help for the computer business. We'll be talking with him.
We'll also have a look at the day's action on Wall Street, including earnings guidance tonight from a company called AOL Time Warner.
And we'll be joined by a Wall Street veteran with his annual predictions, and we're going to talk about his predictions of last year. They were nothing short of stunning in terms of accuracy. Stay with us.
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DOBBS: In the war against terrorism, U.S. warplanes, trying to flush out al Qaeda and Taliban fighters who may be trying to regroup near the border of Afghanistan and Pakistan. Fighter jets also dropping precision-guided bombs on a terrorist training camp near the city of Khost.
And the captain of this ship seized in the Red Sea, containing 50 tons of weaponry, says he's a long time member of Yasser Arafat's Fata (ph) movement. The captain also says he picked up the weapons off the coast of Iran, and he says they were heading for the Palestinian- controlled Gaza. The Palestinian Authority says it will set up its own commission to determine whether any of its officials were involved.
The Pentagon says there was no way officials could have known the 15-year-old suicide pilot's intent before he slammed a single engine aircraft into a skyscraper in Tampa. The boy flew dangerously close to MacDill Air Base before then flying into the Bank of America building, killing himself. Investigators found a note in which the boy expressed support for Osama bin Laden.
On Wall Street, modest gains early in the session evaporated. Stocks ended lower, halting a three-day advance. The Dow suffering its first loss of the new year, the Dow down 61 points, 62.69, the Nasdaq falling 22 points, the S&P 500 down almost 8 points. Christine Romans at the New York Exchange, Greg Clarkin at the Nasdaq marketsite -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: That three-day New Year's rally sizzling a bit here, and when you take a look at the Big Board movers, you can see why.
Coke is on this list. It was down all session, dragging on the Dow Jones Industrial Average. Down here more than a point today, after JP Morgan came out with a note saying that well, they're still concerned about Argentina and Japan and what that's going to mean for Coke. They favor Pepsi instead.
Meanwhile Ford shares down about three percent, plenty of wagering ahead of Friday's final Ford restructuring announcement, Lou. The consensus now, 20,000 job losses and plant closures, Wall Street expecting the cost cutting to be deep.
Meanwhile, good news from Compaq Computer, it says it's going to log a profit for the fourth quarter instead of a loss on revenue of $8 billion. And AOL Time Warner, parent of this network, up two percent on the day.
A lot of folks have already been ratcheting down their numbers for AOL, and after the bell, company coming out moderating its expectations for 2002, also saying it's going to log a first-quarter charge of $40 to $60 billion, that's billion with a "B", because of new accounting rules and market value losses since their merger was announced last January.
But the stock is up after hours, Lou. A lot of folks have been expecting them to moderate their views, and they did. Lou.
DOBBS: That's moderation. I think that's moderation. It's certainly moderating. Christine, thank you. The Nasdaq down more than one percent on the day, two billion shares changing hands. Greg Clarkin brings us up to date. Greg.
GREG CLARKIN, CNN CORRESPONDENT: And, Lou, for the first time in 2002, the Nasdaq loses. Well it's only four session, but still there was a nice little rally last week. Today the composite down 22 points, 2,037 is the closing level.
Here's how some of the big name technology shares did. We did see a pop of enthusiasm for buying at the outset. We had a lot of bullish analyst notes, including Microsoft, even though the company was dealt a legal setback. It was mentioned in two very bullish notes this morning, one out of Goldman Sachs and one out of (UNINTELLIGIBLE). That stock finishes lower by 34 cents.
BEA Systems, another software company, upgraded by Goldman. It's nicely higher. Dell Computer, upgraded by Robertson Stevens. It rises. Vignette, a software company with a big time profit warning, the stock sold off sharply, down $1.45.
Extreme Networks, they had the other extreme. They came out and basically said that they would meet their guidance for the quarter and that stock rose nicely. So, one out of four, Lou, losing sessions for the Nasdaq this year, finishes at 2,037, but still up about 43 percent from those September 21 lows. Lou.
DOBBS: And for the past 12 months?
CLARKIN: Past 12 months it sits right now down still, about 21 percent or so.
DOBBS: The perspective thing, Greg, all important. Thank you.
CLARKIN: Sure.
DOBBS: Greg Clarkin. Well a Wall Street veteran releasing his annual list of predictions. Byron Wien, the Senior Investment Strategist at Morgan Stanley predicts sweeping changes in his top surprises of 2002, and Byron's been doing this for almost two decades and he's done pretty well.
This year saying after 15 years as Fed Chairman, he expects Alan Greenspan to retire, and he predicts a third straight down year for the broader markets. But Wien's past predictions have produced mixed results as have most forecaster's predictions.
Byron joins us now. Happy New Year.
BYRON WIEN, MORGAN STANLEY: Good to be here.
DOBBS: All right, let's talk about a couple of these. Let me talk about last year if I may.
WIEN: Sure.
DOBBS: Before we go to this year, because I think our viewers will be fascinated to find some of the things that you suggested. I'm going to have to do this -- you've been doing this a while, so have I.
You say that Bush proves to be a unifier all, and I should point out that this was in January of last year.
WIEN: They came out just about this time last year.
DOBBS: You suggested it because of a number of things, and obviously that's exactly what has transpired.
WIEN: Right.
DOBBS: The dollar you said would remain surprisingly strong against both the Yen and the Euro.
WIEN: Right.
DOBBS: That has been absolutely the case. You said the price of crude oil would soar to $40. That was so accurate, I can't even -
WIEN: You don't get all of them right, and remember these aren't really predictions. They're surprises. They're things that I think have a better than 50 percent probability, but they're not sure things.
DOBBS: Now you're not trying to couch this with me, are you?
WIEN: No, I'm not trying to hedge. I'm on the hook for these.
DOBBS: Well, you're pretty good. You say the Japanese economy, last year and again, January of last year, you said the Japanese economy would slip back into recession and did it ever. And, looking at another reference here, you said the U.S. economy dips into outright recession in the first half.
WIEN: I was a little early.
DOBBS: Well, actually March of last year.
WIEN: Yes.
DOBBS: So you nailed that one as well, so these are remarkable.
WIEN: Yes, it was a good year.
DOBBS: I find it absolutely stunning. I don't think anybody I know who forecasts or considers himself or herself a futurist has come closer. This year, however, I think you've got some problems. WIEN: OK.
DOBBS: Let's talk about some of these.
WIEN: All right.
DOBBS: Suggesting that a post-Enron populism sweeps the U.S. regulatory landscape, leaving conservative pro-business Republicans in the outside looking in.
WIEN: Well, what I say there, the following sentence deals with the Democrats getting control of both the House and the Senate, and you know what I'm basically saying and it refers to some of the earlier surprises, is that I think the economy is going to be weak. I think the Stock Market is going to be lackluster.
DOBBS: Yes, in point of fact you say that it's going to be a double dip.
WIEN: Right.
DOBBS: We're going to come out of this and then go back into recession.
WIEN: Right, exactly. We're going to come out of it because we are rebuilding inventories right now. The economy looks good at this point, and then I think we're going to slip back later on.
DOBBS: And why do you think Alan Greenspan would retire?
WIEN: Well I think he's going to get -- if I'm right and the economy doesn't pull out of this recession definitively, I think he's going to be criticized for having started the easing too late and perhaps not doing enough of it early enough.
DOBBS: It gets a little complicated. He did a masterful job from 1987, post-crash.
WIEN: Right and he was new in the job. He had just been in the job a few months. He did a terrific job then.
DOBBS: Well, Byron, it's always fascinating to look at your forecasts. We'll watch with interest.
WIEN: OK.
DOBBS: Obviously.
WIEN: I look forward to being here next year.
DOBBS: You got it.
WIEN: And you calling me to account.
DOBBS: Well this year, all I can do is simply congratulate you on a remarkable series of surprises and forecasts and predictions. Byron, thanks. Best to you.
WIEN: Thank you. Thanks for having me.
DOBBS: Well in tonight's corporate news, we want to turn to that briefly if we may. A Federal judge has rejected Microsoft's request for a four-month delay of hearings and proposed tough remedies in the antitrust case. That judge denied Microsoft's argument that it doesn't have enough time to prepare its case against the nine states still suing Microsoft.
Yves St. Laurent today announced that he is closing the fashion house he began more than 40 years ago. St. Laurent is credited with introducing women's pantsuits amongst a host of other fashion innovations. Although he gave no specific reason for his retirement, observes cite battles with his label's new owner, the Gucci designer Tom Ford and his health.
Well, one corporate legend retires, another expanding. Ted Turner hoping to create a new empire, a restaurant chain featuring 25 versions of the Bison burger. The first of Ted's Montana grills opens to the public next week in Columbus, Ohio. Ted Turner is, by the way, the nation's largest Bison producer and rancher. He has 30,000 buffalo. That is one-tenth of all of the buffalo who roam the U.S.
Still ahead here, Apple Computer with a new product release today. CEO Steve Jobs will be here, and he says it may be the best thing Apple has ever done. Stay tuned.
ANNOUNCER: After the break, Lou talks with Steve Jobs, CEO of Apple Computer.
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DOBBS: Apple Computer today launching its flagship desktop computer, the iMac, Apple hoping the new product line will lead it out of a slump in the computer industry. The original iMac produced three years ago helped to revitalize the company. CEO Steve Jobs unveiled this new lines of computers at the annual Mac World gathering in San Francisco, and he joins us from there now. Steve, good to have you with us.
STEVE JOBS, CEO, APPLE COMPUTER: Good to be here.
DOBBS: The reception, there's been a lot of talk about the new product line. The fact of the matter is, you've got another winner on your hands?
JOBS: Well, we'll find out soon enough. We just launched it today, so we'll see the orders start to stream in over the next month and we're hopeful.
DOBBS: Now, there were also a number of people looking for the G5 introduction, some other products as well and some disappointed about that. When do we see that?
JOBS: Well, you know, we introduced an all new iMac which is a huge seller for us.
DOBBS: Right.
JOBS: We introduced the new I-book today and anew digital hub application called I-photo, which is sort of the missing link in digital photography. You can't do everything in one day, so we'll just have to wait for that one.
DOBBS: Give us a sense of when.
JOBS: You know, we can't talk about unannounced products, but.
DOBBS: All right. I know a number of people watching you and following you very carefully were, hopefully were looking for that product introduction. One of the things that you have to struggle with at Apple, and despite the fact you've done a terrific job since you came back, driving the company ahead, restoring its stock price. Your stock is up almost what, 60 percent over the past year.
The fact is, you're still locked at five percent of the market. Are you going to be able to break Apple out of that? Because you get ringing endorsements for the innovation in products, for the new marketing and everything else, but still you're at five percent. When do we see the breakout?
JOBS: Well, I'd say a few things. Number one, our share of the personal computer market is larger than either Mercedes or BMW's share of the automotive market. So just to put that in perspective.
DOBBS: Sure.
JOBS: But one of the things we're doing to increase our market share is we've actually opened 27 retail stores in the U.S. And what's interesting, is those stores, those 27 stores in the month of December alone had 800,000 visitors and 40 percent of the customers that bought a computer at our stores didn't own Mac when they bought it.
So, I think we're starting to see a little bit of optimism about that, and I think we're going to really focus on that in the next year or two to try to get our market share up a little bit.
DOBBS: Well, as you try to drive that share of market, at the same time you're in an industry caught in a recession and a tough recession. Do you see the computer industry, the PC industry itself recovering anytime soon?
JOBS: Well, you know right now the winners are going to be the survivors.
DOBBS: Right.
JOBS: Because it's a pretty tough industry right now.
DOBBS: Yes. JOBS: But yes, I think what we're focused on right now is that we see the next great age of personal computing coming, and that is where the personal computer becomes the digital hub for all these other cool little digital devices we have, like digital camcorders or digital cameras.
DOBBS: Right.
JOBS: DVD players, et cetera, and we're doing a lot of work in that area, and we're getting a lot of good feedback.
DOBBS: OK, well Steve Jobs, as always, it is good to have you here and much continued success.
JOBS: I have to show you one thing before I leave, Lou.
DOBBS: Do we have time?
JOBS: Check this out.
DOBBS: If you can show it to us in two seconds in two seconds.
Oh, that's cool. I will admit that's cool, Steve.
JOBS: Thanks.
DOBBS: Designed, I understand, inspired by the sunflower?
JOBS: We want to keep the flat screen flat.
DOBBS: You got it. Well again, all the very best Steve.
JOBS: Thanks.
DOBBS: Keep promoting -- Steve Jobs. And now, let's turn to Wolf Blitzer for the very latest. His show begins in just a few minutes. Wolf, tell us what's up.
WOLF BLITZER, "WOLF BLITZER REPORTS": Thank you very much, Lou. Between all the charities and the Federal Government, billions of dollars have been targeted to help the families of those killed on September 11. But many are complaining they still haven't received any money. They say all the paperwork and bureaucracy are causing them yet more nightmares. We'll have a special investigation into what's going on. "September 11, The Money Maze", that's at the top of the hour -- Lou.
DOBBS: Wolf, looking forward to it. Thank you very much. Coming up next, we'll take a look at your thoughts and some of what could move the markets tomorrow. We'll tell you who did what at the box office. Stay with us.
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ANNOUNCER: Tomorrow on LOU DOBBS MONEYLINE, K-Mart's retail celebrities. As the discount retailer struggles, what's in store for celebrities who have built their reputation alongside the Blue Light Special? Tomorrow, on LOU DOBBS MONEYLINE.
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DOBBS: Tomorrow, Dow component ALCOA will report its earnings. Factory orders for the month of November also will be reported. Economists there expecting a drop of about two and a half percent.
And President Bush travels to Hamilton, Ohio; Durham, New Hampshire; and Boston, Massachusetts. He will be addressing educational issues.
Now taking a quick look at your thoughts. Kitty Lewis writes in to say, "what happened to all that wonder bipartisanship exhibited by our House of Representatives and Senate just after September 11? As a voting American, I'm getting very weary of our elected officials fighting amongst themselves about their own agendas."
Well, Kitty, that's what some politicians seem born to do, but this year we'll have to wait to see just how voters respond at the polls in this unusual time.
That's MONEYLINE for this Monday evening. Thanks for being with us. I'm Lou Dobbs, good night from New York. "WOLF BLITZER REPORTS" begins right now.
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