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YOUR MONEY

Cutting Back on Holiday Spending; "Made in America" Labels and Toy Safety; Who You Should Tip This Time of Year; Press Conference in Southern California About Malibu Wildfire

Aired November 24, 2007 - 13:00   ET

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


ALI VELSHI, CNN HOST: That the made in American label could really tell you a about toy safety.
CHRISTINE ROMANS, CNN HOST: YOUR MONEY starts right after now in the news.

FREDRICKA WHITFIELD, CNN ANCHOR: A huge fire near Malibu, California, 2,200 acres burning, 35 homes has been destroyed and hundreds of residents have been evacuated. Pepperdine University threatened by similar fires just last month is, again, in harm's way.

And three suspects in the disappearance of Natalee Holloway are spending the weekend in jail in Aruba. The third suspect arrived last night from the Netherlands where he attends college. The chief prosecutor says there's new evidence in this case.

And we'll update your top stories at the bottom of the hour. Now it's time for YOUR MONEY.

VELSHI: Welcome to YOUR MONEY, where we look at how the news of the week affects your wallet. I'm Ali Velshi.

ROMANS: I'm Christine Romans. Coming up on today's program, want to buy so much stuff at holiday time that you don't really need it.

VELSHI: I'm guilty of that.

Plus, those made in America labels and what it says about toy safety.

ROMANS: And later dog walker, yes, postman, no. Find out who you should tip at this time of the year.

VELSHI: Well between the credit squeeze, the soft housing market, price of gas and you may be cutting back on your holiday spending this year. And if that is the case then a couple of recent reports say that you're not alone, 35 percent of the shoppers surveyed by the Consumer Federation of America say they planned to spend less in 2007 than they did last year. That's up from 32 percent last year. The biggest purchasing drop in the survey's eight-year history.

ROMANS: Just over 30 percent of shoppers in an America's research group report expect to back off on how much money they spend. What's more, the same organization says that nearly 50 percent of the people it surveyed half have higher credit card balances than a year ago.

VELSHI: Now, keeping your holiday debt under control starts before you opened your wallet by planning ahead and prioritizing your spending in advance. Carmen Wong Ulrich is the author of "Generation Debt and a finance columnist for men's health." Carmine good to see you again.

CARMEN WONG ULRICH, AUTHOR, "GENERATION DEBT:" Thanks for having me back.

VELSHI: A couple of questions. It might be past the point that people can worry about this now, but what are some things people should worry about now before the holidays about how to spend their money?

ULRICH: Keep it cash as much as possible. If you can learn anything from this year to next year is prepare as much as you can. Part of that is making a list of everyone. You know, I don't want to use the word budget, but list, like Santa's list. How much you'll spend on each person and keep it to that budget. Gifts are half of the expenses of the holidays. Think about decoration, travel, gas, entertainment, and all those things including ...

ROMANS: Food.

ULRICH: Food and even charity. The average amount that people spend on themselves during the holidays is $99. If the average budget is $800, that's a big chunk that maybe you can take yourself off.

ROMANS: You pick something up for grandma, you see something nice for yourself. A point you make that is very important. Somebody that loves you and cares about you doesn't want you to go into credit card debt to buy them a gift. That's something we should remember. There is a lot of pressure on gift giving but no one wants you to be in financial trouble because you had to give them a gift.

ULRICH: Right, exactly. So really keep that in mind. And communicate with your family. If you're in dire straits and you just really need to cut down this year, make it a kids' holiday and you have lots of nieces and nephews. And you say to the adults you know what the kids are going to get the gifts this year.

ROMANS: That is what we are doing this year. Even my siblings, we would exchange a name so we didn't have to buy everybody a gift and now we're not even doing that. We're exchanging gifts among the children. And it makes it all that much more fun.

VELSHI: You were talking about using cash. Here is the thing, we sort of had conflicting information over the course of the last year if you take out x number of dollars and spend it, you're done. But if you put it on a credit card, you have a statement of it, you have a record of it, you have possibly better guarantees on the products that you buy, particularly if they're toys and you find out they need to be recalled.

ULRICH: Exactly. VELSHI: Is there an argument of using credit cards?

ULRICH: Being able to spend what you can afford and saying the word cash, OK, that's what you have on hand. If you keep that in mind. If you use credit cards, which even I do, as well, it is a great way, like you said, it keep a tally of how much you're spending. Use one card. Make sure it's the one with the lowest interest rate and also if you can get rewards on that card, that's great. Make sure you can pay it off as soon as possible; you know 30 percent of shoppers are not going to be able to pay off their credit card debt for a year.

ROMANS: Carmen you say avoid signing up for retail credit cards, why?

ULRICH: Yes, because they are the vein of the credit card world. The interest rates are so high, we're talking about in the 20s and any discount they give you up front whether it's 10, 20 percent, no interest for a year, and it is worth nothing if you can't pay it off in full.

VELSHI: Both of you would sign up for the 15 percent off if you take the department store credit card. I'm the danger, 15 percent off and I never have to pay.

ROMANS: You're the one they want.

VELSHI: All this advice is really different if you happen to be really good at paying your bills.

ULRICH: I'm guilty as charged, I've done it before. Now it's considered an inconvenience in terms of paperwork and keeping up. If you can be a real accountant with your credit card bills and if you can pay it off, especially the ones that say no interest over the year. If you can pay it off on time, it's a winner for you. If you are not able to, stay away from those cards.

ROMANS: Bottom line, keep it simple. It doesn't have to be elaborate. Keep a list. Maybe the "a" list and "b" list. Sorry to say, but maybe somebody just focus on close family and friends and move on from there.

VELSHI: Or be a bit of a hermit and just not know people.

ULRICH: No, don't be a Scrooge.

VELSHI: Good to see you.

ULRICH: Thanks for having me.

VELSHI: Thank you being with us, Carmen Wong Ulrich is the author of "Generation Debt."

ROMANS: All right. Up next on YOUR MONEY what's driving you to spend your hard-earned cash on all that stuff you don't need.

(COMMERCIAL BREAK) SUSAN LISOVICZ, CNN CORRESPONDENT: I'm Susan Lisovicz at the New York Stock Exchange. Wall Street is bracing for a possible drop in sales this holiday season with a mixed bag of results from retailers. The National Retail Federation is forecasting a 4 percent sales gain for the hottest holiday shopping months, November and December. But that's a smallest projected increase since 2002.

It's delivered against a backdrop of higher gas prices and a soft housing market and lower profit outlooks last week from J.C. Penny and Starbucks. Some of the standout results from retailers, Target disappointing. The long-standing Wall Street favorite reporting a decline in quarterly profits and the countries number two discounter also missed forecasts as sales on high-end goods went soft.

The up upscale Nordstrom chain skyrocketed it 22 percent but cut its outlook. Saks saw it's quarterly more than triple.

I'm Susan Lisovicz. Now back to YOUR MONEY.

ROMANS: You know it's the season of giving and a lot of what we're giving is stuff that the recipients, I'm sure they'd love to get it and it's wrapped very nicely, but they don't really need to get it. You don't have to get stressed out and you don't have to max out your credit cards in the quest for a perfect gift.

VELSHI: In fact our next guest thinks it is time to quit spending on what is unnecessary for the sake of ourselves, our credit and our planet. Lisa Wise is the executive director for the non-profit Center for a New American Dream which works to help Americans consume responsibly. That's what you call the rolling the rock up the hill, Lisa. What on earth could we possibly hear now because whatever you have to say we have advertisers on the other side bombarding people with reasons on why they need to keep spending?

LISA WISE, CTR. FOR A NEW AMERICAN DREAM: Right. Americans are being bombarded with marketing messages and I think it's up to us to say enough is enough and to really set our own priorities as consumers. Particularly hard during this time of year to slow things down but I'll actually going to invite all of you to think about what the holidays are all about. It is really about joy, it is about spending time with your family and it is about quality of life.

Earlier segment we were talking about how to manage your debt. What if you managed to not spend as much in the first place? I think that is a good start for people to start when they think about consuming less overall.

ROMANS: Well it is so interesting that you talk about consuming less. Because during the whole toy industry scandal, I was asking toy industry executives, well, maybe parents just don't need to buy all these toys for their kids. They were, frankly, aghast. They said, no, this is the American way. We should be able to have what we want for our children and children should be able to have all of these things. Is there a rule that we should think about? Some people in my family only give three gifts. WISE: I think setting boundaries is a great way to start. Americans have been super sizing their consumption since the 1950s and, frankly, from our perspective and after some polling nine out of ten Americans are ready to downsize their holidays and be less materialistic but we have to find some creative and really fun ways of doing that. We don't want to deprive people the pleasure of actually being able to exchanging gifts. Because I think that's the joy of the holidays.

I think what's important right now is to set those boundaries and find some creative, fun, traditional ways of being with your family that is not about adding more stuff to your lifestyle and things that are going to be obsolete in a couple months anyway. Pick a number of gifts that you can exchange, set a spending limit, and decide that everything you are going to exchange is eco friendly, enjoy regifting. Dozens and dozens of ways for us to be really creative.

ROMANS: I always give Ali's gifts to somebody else when I get them.

VELSHI: I have no issues with regifting. I think it's a great idea. The other thing Lisa that you touch on, I am talking about when you talk about consumption, we don't pull back on consumption very much for our cars when gas is over $3 a gallon. We don't see all of America rushing towards small cars and there is a very specific example of where we can save. This isn't a matter of bad habit, its psychology.

WISE: Right it is. I think we need to ask ourselves, you know, where can we have more of what matters? I mean, people are in the throws of such busy lifestyles. We're so stressed and I think everybody would argue that part of that stress comes from feeling like we need to have more and more stuff all the time. We think about the investment of time and time at work to surround ourselves with these things that really at the end of the day don't mean that much. I think the exchange is a higher quality of life for people. Slowing down a little bit, enjoying what matters, spending time with your family, those things come with a much higher reward without the same kind of costs.

VELSHI: Lisa, your information is all good, I'm sort of in awe because it's one of those; wow people can change those habits. Lisa, thank you for being with us. Lisa Wise is the executive director of the New American Dream.

Well coming up after the break, the hidden costs that can come with gift cards. You thought this was just a freebie; watch out, it might cost you something. We'll tell you exactly what gift cards are about when we come back.

(COMMERCIAL BREAK)

VELSHI: One way to reduce holiday stress is to let friends and family pick out their own gifts and giving gift cards instead of presents takes the guess work out of the holidays and people end up getting things they really want. I think it's not a bad idea, this trend towards gift cards.

ROMANS: I know, but there are some people who are a little more old-fashioned and they say just give them a check and how personal is giving a check.

VELSHI: But now they box up those gift cards and make it look like a present.

ROMANS: If they ever redeem those gift cards it's a gift that they really want. One study reports that get this, $8 billion worth of gift cards went unused last year. That's about $26 for each person in the United States. Tod Marks is with "Consumer Reports." Todd, that means that people essentially are not picking up their gift. They're giving free money to the retailers or the stores.

VELSHI: Put in their drawer and just sits there.

ROMANS: Why aren't people cashing them in?

TOD MARKS, "CONSUMER REPORTS:" Well, it really comes down to four basic reasons. People told us in a national survey that we did that, one; they didn't have the time to use them. Two, they couldn't find anything they wanted. Three, they lost them. Four, they forgot about them and there was a fifth, they just expired. So, a lot of things that conspire against the consumer. We always tell people if you give a gift card or use a gift card, use it immediately.

VELSHI: I can't help too many people with the lost and forget. I'm one of these people, but the expired thing. I have a real position about the fact that I don't know they should expire. Do most of them expire? Is it an assumption when you get one that it should expire?

MARKS: "Consumer Reports" believes that cards should not come with any fees or expiration dates. A couple classes of cards that are much more apt to have fees and those are the cards issued by bank or credit card companies, like an American Express-type gift card. Along with cards that are sold by shopping centers, what they call mall cards that are good for any store within a particular shopping center, those are the ones that are most likely to have onerous things like activation fees, transaction fees, dormancy fees, which means that the card actually lose value when you don't use them and expiration dates in which they can ultimately become useless if you don't use them within a given time frame.

ROMANS: Yet, the growth of gift card giving is just incredible. Why are people giving them? What is the advantage of giving them?

MARKS: Well, actually, some estimates point gift card growth projected to be at about $100 billion by 2008, so, you're right. Their sales are skyrocketing. And it's -- they're not, they're a popular gift because they're a perfect no must, no fuss way to shop for the finicky person on your list.

VELSHI: Fantastic last-minute gifts and merchants have played up this whole idea of making them feel more like gift then the last minute thing by the way they merchandise them. MARKS: Well it is the same thing like CDs, you put something in a nice box with great packaging and it says I love you in a subtle, but classy way. Something that cash just simply can't do.

ROMANS: That's true. I know you're not an etiquette expert, although I'm sure you use the right fork at dinner, but a lot of people in the etiquette world are still wondering if a gift card is not a gift.

VELSHI: They're old-fashioned.

ROMANS: That is old-fashioned, but especially if somebody doesn't use it.

VELSHI: That makes sense. What do you think?

MARKS: Well I will tell you, if you don't use it, you lose it and we tell people because gift cards are great. Give somebody a gift card to a book store, a restaurant, a hotel. Those are great. Those are the cards that tend to not have any of those ugly fees attached and they don't generally expire. And the other thing, if you don't use it right away, be sure to use it quickly and make sure you buy it for the -- spend the amount of money that is inherent in the card itself because one of the great things about cards for retailers is they spur loyalty, get you into the store and once in the store you tend to buy things that are more expensive.

So, if you give somebody a $25 gift card to say a Borders or a Barnes & Noble, that's great, you can get a book, but go to a Best Buy and give with a $25 gift card you're going it end up spending $100 or more out of your own pocket.

VELSHI: Tod, great conversation, thank you for being with us.

MARKS: My pleasure.

VELSHI: Tod Marks from "Consumer Reports."

ROMANS: Ali is not going to get me a gift card this year.

VELSHI: I'm clear on that. That's good for all the other folks I don't know what to get them. I'll get them gift cards.

ROMANS: I'll regift your gift card right away.

Up ahead, safe toys and how to shop for them and American toy makers take on whether made in the USA is any guarantee against trouble.

(COMMERCIAL BREAK)

VELSHI: Twenty six million toys have been recalled so far this year. The vast majority of them manufactured in China and that's causing jitters for many consumers this holiday season.

ROMANS: Some concerned shoppers are coming home to products made in the USA. "AMERICAN MORNING's" Greg Hunter is here with more. Most of the toys are made in China, some in other countries, but some toys still made here.

GREG HUNTER, CNN CORRESPONDENT: Yes that is sad, but true. The Federal Trade Commission says that in order to tag an item made in the USA all or virtually all that must be made right here in the United States. Does that made in the USA label actually help when it comes to sales?

Here's one company that says, most definitely.

(BEGIN VIDEOTAPE)

HUNTER (voice over): The assembly line is running 24/7 at this Little Tikes toy plant in Hudson, Ohio. Churning out its most popular toy, the cozy coupe or what Little Tikes executive Vice President Tom Prichard calls ...

TOM PRICHARD, EVP, LITTLE TIKES: One of the best selling cars in America that's made in America.

HUNTER: Instead of in China, where 80 percent of toys sold in the United States are made.

PRICHARD: We have some of the best people right here in Hudson, Ohio, who know how to make the product and they're experts at doing it.

HUNTER: Workers here earn between $15 and $25 an hour, far most than most of their Asian counterparts. Still, the company says those higher wages pay off by creating a product with unique appeal. With $600 million in sales expected this year, Little Tikes is trumpeting the made in USA.

PRICHARD: Made in America, with Little Tikes means safety, quality, it means durability. Hopefully it means a trust that mom understands it's safe.

HUNTER: Marketing experts say the made in the USA cachet goes far beyond Little Tikes.

DENNIS DUNLOP, CEO, AMERICAN MARKETING ASSN: Consumers right now, in particular, equate quality with made in America.

HUNTER: Other popular toys like Slinkies and Crayola Crayons are also still made in the U.S. Consumer advocates say while U.S.-made products are more likely to comply with regulations than toys made abroad ...

RACHEL WEINTRAUB, CONSUMER FEDERATION OF AMERICA: A made in USA label does not equal a safety certification.

HUNTER: Weintraub wants the government to test all toys, regardless of where they're made. Instead of relying on the companies to do so. Little Tikes conducts its own safety test beginning with design. All products are created in wood or foam and then put to the test. This slide set started out a little shaky so they added on a foot. Little Tikes is adding this label, made in the USA.

PRICHARD: It helps moms find the product they're looking for in here.

(END VIDEOTAPE)

HUNTER: Little Tikes does make some of its toys overseas, but says the majority, nearly 70 percent are made right there in Hudson, Ohio, and they don't have plans to change any time soon. As for some other toys, Crayola mostly made right here in Pennsylvania, right here in the USA and another favorite we found, another toy, kind of nasty, but always fun to blow bubbles. Yes, made in the USA and it was tough to go out and find these toys because 80 percent of toys are made in China alone. You know, China gets a bad rep, but these are American manufacturers over in China.

ROMANS: Tell me why this CEO of Little Tikes decided to keep the bulk of his production here? Most CEOs say they simply don't have a choice.

HUNTER: They have a good relationship with their labor, they get it. That plastic car, for example, that cozy coupe that sells 300,000 a year a huge commitment in terms of resources and also there is a skill to put these together and they're afraid, according to the number two guy who will probably be CEO one day, the number two guy says, you know, it's a big gamble. You take your operation to China, you don't know what kind of a product or how long it will take you to get that quality back and they make, according to them a top-quality car. We're not the cheapest; we think we're the best.

VELSHI: Good story, thanks, Greg.

ROMANS: All right. They are not ready for a personal China toy cut just yet? We're here to tell you exactly how to tell what you buy from where ever in the world is safe.

VELSHI: Alan Korn is the director of Public Policy for Safe Kids Worldwide and his point is that sometimes it's stuff from China sometimes it's stuff right here in the United States. Alan, what do you do to make sure that you're doing the right things for your kids this holiday season?

ALAN KORN, PUBLIC POLICY FOR SAFE KIDS WORLDWIDE: There has been so much news out there. It has almost like the perfect storm over the past two, three months. Every single day a toy recall. You know, the good news is not withstanding that news and not withstanding all the recalls we had, toys in this country are wildly safe. Children ...

VELSHI: Wildly safe.

KORN: Yeah, they really are.

ROMANS: I don't know about my Thomas the tank engines, Alan; you'll have to sell me.

KORN: I have Thomas the tank engines in my own home, too. ROMANS: Was that a wildly safe toy that sold millions and millions of copies?

KORN: This one was not. This one had lead on it and it's not good and parents need to know whether or not they have these types of products in their home to get them out. Given the number of toys in the marketplace, there's not that many that are dangerous but that does not mean you caution to the wind. Whenever you've got, iconic brands like Thomas the tank engine, Barbie, Dora the explorer, you know there is going to be a lot of units out there and you really need to be vigilant about getting these things out of the home, off the shelves and out of the day care centers.

VELSHI: All right. You got some very specific points for people to remember if they're still buying their toys for this holiday season. Shop at a reputable dealer, stay away from second-hand shops and sign up for these CPSC recall alerts, the Consumer Product Safety Commission because it's very hard to track when you're buying gifts whether it's going to be recalled.

KORN: That's right. One of the biggest problems is people don't know whether or not there have been a recall or not. They won't catch the news program in the morning or in the evening or on CNN, they'll miss the recall notice and one of the best ways is if you go to the CPSC Web site, which is www.cpsc.gov, you can click on for a recall alert. That way when and if there is a recall, and there's going to be more, you're going to get a direct notification about whether or not the toy, about the toy that's been recalled and then there's a picture, nice identifying marks, you can check your home or day care to make sure it's not there. Get it out if it is.

ROMANS: Let's talk about picking age-appropriate toys for your child. This is important. It is also important for parents to remember that if you have a 5-year-old and you have an 18-month-old, you're going to have to assume that that 18-month-old has access to those 5- year-old's toys. You have to be careful about that. Tell us how to be sure about the parts aren't too small and how to make sure that you don't have choking hazards in your toy box.

KORN: A very good point. In fact about 20 kids die each year from toy-caused injury. Of those 20, the vast majority are choking or aspiration. And one of the things parents can do this is a small parts tester, a little bit difficult to see. But it's a little tube with a scientifically determined opening on the end of it. If there's any toy component that you buy that fits fully inside this the small parts tester, then you know that toy is not for the 18-month-old that you were referring to. This is a toy for children 3 and up. I've had children and young children, he's 7 now, but when he was 2 years old he put absolutely everything in his mouth. And I mean everything. Including small parts, which could be choking hazards?

ROMANS: We're going through that now. Something my pediatrician recommends, a toilet paper roll, empty, put two fingers over it, take it to the store with you. If there is something that can slide through two fingers and a toilet paper roll, it is too small for any child under three, four if you want to really be cautious. KORN: Keep those toys separated. You don't have to go out and buy a small parts tester. The inside of a toilet paper roll, which is larger than this, but pretty good. If it fits inside there, not for children under 3. Separate those toys when buying the toys you'll see a lot of toys, by law have to have to have a label on the front of it. You'll see it right there point of purchase that warns the parent that this toy has small parts and not for children under 3.

You were talking before about toy selection at the point of purchase at the retail store, preferably a reputable one. You take a look for this label and then you know head to another aisle, another section, there are plenty of choices in this country for purchases.

ROMANS: Alan I'm going to jump in there, because I want to really warn parents about the labels, Ali, a congressional panel has done investigation and has actually found that there are Chinese manufacturers that have been slapping labels on with no, you know, the brand will say this has to be appropriate for ages 3 and up. So, the manufacturer will slap on appropriate for age 3 and up with no kind of correlation with actually being appropriate. So parent should be cautious.

VELSHI: Use common sense and use these tests that Alan is talking about.

ROMANS: Outside a reputable retailer, very careful about things like that.

VELSHI: Alan good to talk to you. Thank you for being with us.

KORN: Sure, our pressure.

VELSHI: Alan Korn is the director of Public Policy for Safe Kids Worldwide.

Well, coming up, why your holiday buying ought to start with a spending plan and not a shopping list.

Also, we're going to figure out who deserves a tip at this time of year. And how much you ought to give them. Stay with us on YOUR MONEY.

(COMMERCIAL BREAK)

WHITFIELD: Hello, I'm Fredricka Whitfield in Atlanta. You are looking at live pictures right now of Malibu, California, extensive fires. At least 2,200 acres have burned and possibly at least 35 homes have perished, as well. Hundreds of people have been evacuated and this is really a fire that is being fueled by these Santa Ana winds that are kicking up, 30-mile-per-hour sustained winds. We heard the warnings all week that towards this weekend there would be such a problem and the Santa Ana winds and here we are. We'll take you right now live to a press conference there in Malibu for an update.

UNIDENTIFIED MALE: Fire remains a very dynamic and dangerous situation. The winds have died down and are expected to die down as the afternoon wears on, but I think we need to caution everyone that winds can start up again in a hurry, they can change direction suddenly and the fire itself can create its own weather conditions. Just because the wind is dying down does not mean people are out of danger.

Let me just give you a few facts. First of all, the evacuation areas, the mandatory evacuation areas are Coral Canyon on the east, Maholland on the north and the coastline on the south. That is a mandatory evacuation area that includes all of Point Dunn. There are 2,200 acres that so far have been engulfed in flames and 35 structures so far, at least 35 structures have been destroyed. Five out of 200 structures in the Legato Canyon, 15 out of 100 in the Sea Breeze area and 15 out of 100 in the Newell area in Coral Canyon.

There are 1,700 firefighters fighting this fire and 23 aircraft have been fighting this fire. We have had one firefighter, a state firefighter who was injured, not seriously. The cause of the fire is still under investigation. I want to thank the Los Angeles County Fire Department and all our mutual aid partners who responded so quickly to what has been a devastating fire and again could have been much worse. Out fire department, our law enforce personal you will hear from the Sheriff Bacum (ph) momentarily, have done an outstanding job in evacuating some 10,000 or more people from this evacuation area.

We want it urge everyone to pay close attention to the radio and listen carefully to all the admonitions of the fire department, the sheriff's department, the public safety personnel, the highway patrol and all the others. This is still a dangerous and dynamic situation. There are a lot of homes in this area and until the fire is knocked down, we can't be sure what the next development will be.

Again, we have spoken to the governor this morning and he is fully briefed and the state has been very cooperative. We have everything we need from all our partners. Let me turn it over to Sheriff Lee Baca.

UNIDENTIFIED FEMALE: Is the governor coming?

UNIDENTIFIED MALE: Did you ask a question?

UNIDENTIFIED FEMALE: Is the governor coming?

SHERIFF LEE BACA, LOS ANGELES COUNTY, CALIFORNIA: Let me say this. First of all, the governor has been in complete communication with myself, Chief Michael Freeman, so, Governor Schwarzenegger has been fully briefed on the things that we're discussing with you at this moment. Let me say this, we've been here before. Los Angeles County is a county that has a mutual aid system with the state of California. I'm the mutual aid coordinator for Los Angeles County. The mutual aid coordinator for fire is the county fire Chief Mr. Freeman, who you will hear from in a moment. We have activated our county emergency operation center earlier this morning and in that center we have actively coordinated as much fire and law enforcement necessary to combat this fire. That is our standard practice in this county.

Our state partners are in position. You will hear more about the equipment that is being provided, not only by the state of California, but locally in Los Angeles County. We own our own aircraft in this county and, therefore, we're in a positive position to deploy immediately. What we're facing here now is a matter of strategy that the fire chief will describe with you in a moment. We have evacuated a substantial amount of the area affected by the fire. The evacuation point is to go north on PCH into Ventura County. And it's also been said by Mr. Erasloski (ph) that the Channel Island's High School is that point to go to, if you go north on PCH.

Currently, a girl high school for those residents that live up near Mulholland that is where you evacuate to in that region. The governor is well aware of the difficulty that we're facing. The governor has extended his concerns for the residents that have been evacuated. And it is his hope that when we control this fire those residents can go right back to their home as quickly as possible. That is one of our top priorities.

I want to introduce Captain Webb from the California Highway Patrol along with Captain Martin from the L.A. County Sheriff's Department who are in command of law enforcement resources. Currently we have close to 100 law enforcement resources doing the evacuation and protecting fire equipment. And for those who are inconvenienced by the evacuation or closing of roads, it's very important to remember that the fire equipment that's coming in and out of here is in great need of protection and free access.

So we can deal with the fire. That's an important aspect of what we're doing here is protecting the fire equipment, opening the roads so the fire equipment can come quickly to the scenes of where the fire is. So, we're at the point now where the mutual aid system is in full activation and sheriff's department personnel are coming from throughout the entire county, as far away as Palmdale, West Hollywood, the Lennox area and Temple area and the San Gabriel Valley. We believe that this fire is not only being effectively managed in a cooperative matter with law enforcement and fire services, but that we are full, unified command when it comes to the state, the county and the resources that are being brought in from the various cities.

Now, I'd like to introduce to you the mayor of Malibu, who has been on top of this since the beginning. And this city, obviously, has had experiences with fires, Mayor Jennings.

MAYOR JEFF JENNINGS, MALIBU, CALIF: Thank you, sheriff. Waking up at 4:00 in the morning with the smell of smoke in your nose and the wind beating at the windows is something we learn to live with here, but always comes as something of a shock. Any time you have fire that claims 35 homes, it's a disaster. There are some silver linings as we stand here today, the wind, as you can tell, has dropped. It gives the firefighters and the aircraft a chance to really hammer the fire and try to bring it under control.

Hopefully the conditions will remain the same. I want to express the city's gratitude to all of the personnel from county and state fire, from CHP and from the sheriff's office. For the quick way in which they responded to this situation. It's a great to be able to say that we had no loss of lives and we're sorry about the one injury that's been suffered. But it's certainly not as bad as it could have been.

To the residents, I just want to say, listen to your radios. Go outside and see which way the wind is blowing, stay alert, stay vigilant. Things look, to me, as though they're promising and we're going to be able to get a handle on this thing, but as the professionals have told you, it's very, very unpredictable, no way to know for sure which way it will go. Stay alert, have your evacuation plan ready to go, get your animals and your photographs and all the rest of that stuff ready to go in the car so you can leave and we'll hopefully try to get through with this thing before too many days are over. Thank you.

Chief Freeman is going to come up and speak.

CHIEF MICHAEL FREEMAN, LOS ANGELES COUNTY FIRE DEPT: Good morning and, first of all, I'd like to thank everyone in the media for the great job you're doing getting the word out to our citizens about evacuations about the status of the fire. I want to assure everyone that Los Angeles County Fire Department is tremendously supported within the county, within our mutual aid areas the sheriff has already described. Also the state of California and the federal government.

The deployment of aircraft and all preparations made are paying off. What we see, of course, a fire that right now has consumed in excess of 2,200 acres. It continues to burn. The fire is down near the pacific coast highway. Just talked to the operation's chief and they're doing construction protection in canyon area and they'll continue to work very diligently with all the personnel to protect life and property, as far as that is possible.

The plan for the fire operation is to take care of that structure protection and life protection and that goes back to the evacuation. Evacuation is crucial for life safety. The evacuation done safely and completely has been ordered in conjunction with the sheriff's department and the CHP makes the firefighter's job much easier because they only have to be concerned with their safety and not the safety of citizens. As we emphasize previously, this is the time for the firefighter firefighters, the 23 aircraft, and the dozens of dozers, the hand crews and all of the experts to do this the structure protection. I can assure you they're going to do the utmost to protect every structure that is possible.

One of the things that we'll be working on is to try to hold this fire to the east side of Canine Due Road and south of Tunnel One, which is the tunnel on the pacific coast highway side. Now, that is a difficult task. There's a lot of heavier unburned fuel up in that area. And that's where our dozers and our hand crews and the aircraft are going to be working very hard to try to hold that fire there. If we are successful, then that would become, essentially, the west flank of the fire.

Now, the head of the fire is kind of pushing in a northwesterly direction and it's along Pacific Coast Highway as I indicated. A lot of canyons and drainages up in there and the fire is very dynamic. It is dangerous, it is dangerous to the firefighters and dangerous to our law enforcement personnel who are up there doing their very best to do the evacuation. So, continue to cooperate and I assure you that firefighters, and law enforcement will do everything that is humanly possible to bring this fire to a successful and a safe conclusion.

Lastly, I know that the people who have been evacuated from those neighborhoods where there have been reports of structures lost, we're going to do our very best to get addresses so that we can get that information out so that we can give you the news as best we can. That will take a while. I would say 98 percent of our personnel that are up in the fire area right now; their job is to protect life and property. Very hard for them to go and get addresses and things like that. We'll do our best because we do understand the concern of homeowners. So, we'll do our best on that. I think all of us here are open to questions, if you have them. So, we'll try to choose up some.

UNIDENTIFIED FEMALE: Conditions continue exactly as they are now, what do you expect?

FREEMAN: I expect a very, a very difficult and concerted effort in the Canine Dune area, all up and down that road to hold the fire to the east side of that canyon. We do anticipate that the fire may get across and then the effort is to try to pick it up, that is to catch it and nail it before it continues to move west wardly.

UNIDENTIFIED MALE: What is your access on that ground troops or air cover getting into that area?

FREEMAN: Pete, like any fire preparation out here in the brush, it's a combination. You can't do it just with the aircraft; you can't do it just with the ground. So it is a combination ground attack, hand crews, dozers where we can get them in there and the aircraft. A combined operation.

UNIDENTIFIED FEMALE: The cost of it?

FREEMAN: The cause of it. It is under investigation. It occurred off a paved highway in kind of a dirt motorway. We're not; we don't have any information on that. It is under investigation. Again, we're very diligent in trying to establish a cause. But right now it is just officially under investigation. We have arson investigators up there now.

UNIDENTIFIED FEMALE: Where exactly is that?

FREEMAN: It is off of Coral Canyon.

WHITFIELD: It is a cooperative effort involving not just the Los Angeles area firefighters, fire team's response teams, but, really, in that entire region trying to contain what is turning out to be a blaze of 2200 acres plus, which has already destroyed 35 homes and the words of the Malibu Mayor Jeff Jennings; it's something you live with. A threat of fire, but, still, this is a shock. This holiday weekend at least 35 homes destroyed by wildfires, still unclear how this fire started. Hundreds of people are being evacuated under mandatory evacuations.

You can see the scope of the fire to the right of your screen, just by looking that plumes of smoke there now drifting in a westerly fashion being pushed by the Santa Ana winds right towards the more populated, more densely populated areas there of Malibu along the Pacific Coast. We'll have much more here in the newsroom.

(COMMERCIAL BREAK)

WHITFIELD: Welcome back to the NEWSROOM. You are looking at the bottom of your screen, is a live press conference taking place right now in Malibu because of the types of images you're seeing on the upper parts of the screen. Huge fire, 2,200 acres there in Malibu, at least 35 structures have been destroyed and the L.A. County Fire Chief Michael Freeman who is speaking now says that number is expected to be even higher.

More than 35 homes destroyed, but, he's hoping of course that the number would stay at 35. The fire is raging right now and is not contained and being fueled by the Santa Ana wind. Let's listen in right now to the L.A. County Fire Chief Michael Freeman.

FREEMAN: We want an arm chair quarterback and saying why aren't they flying this side or that side? As I said earlier, the pilots and firefighters will do their utmost to use that equipment and training to the best ability. But you can't fly a fixed-wing aircraft in dense smoke. As soon as they can get on the west side, I assure you they'll do that. Most of that is being handled by the helicopters because they can pick and choose their way in there. A lot of that effort is structure protection. But that's the reason.

UNIDENTIFIED MALE: (INAUDIBLE) what role was the predeployment plan here?

FREEMAN: It basically gets personnel and equipment out here or in the vicinity sooner.

UNIDENTIFIED FEMALE: Did you have everything you needed?

FREEMAN: Yes, ma'am. We have everything we need for now. As the supervisor said and I want to reemphasize it is a dynamic and dangerous situation. We continue to evaluate it. As soon as we conclude here it we'll go to the command post and get the latest updates. Just before coming here we tried to project four to six hours and trying to ascertain given what we had now, is that sufficient for the future? A lot of personnel and equipment that has been brought to southern California. We're using what we need. We will call for more ahead of the time if we see the need for that.

UNIDENTIFIED MALE: In Escondido this morning there were a number of homes I watched burn. One brush patrol and one battalion chief in there, how stretched thin were you guys this morning?

FREEMAN: What you're seeing there is the challenge of deployment as the fire is moving as we put resources into neighborhood and so forth. They have to dig in and start protecting structures. What you saw at the initial on slot of that fire is just the leading edge, the wave of the other resources that are coming in there. That is the challenge that the firefighters have on the ground is moving the resources that are here and getting them in here and getting them in the right position. I think you're seeing the leading edge of the fire and then trying to get the resources.

UNIDENTIFIED MALE: Protecting other homes.

FREEMAN: Well, assets were coming into the area, as well.

UNIDENTIFIED MALE: Do you feel better prepared than you were a month ago with equipment and personnel and everything?

FREEMAN: I feel that we do everything we can to be prepared. The investment that has been made in aircraft, in planning, preplanning and so forth, we're as well-prepared as we can be. We were and have been. Yes, sir. OK, thank you very much.

UNIDENTIFIED FEMALE: Next update?

WHITFIELD: You're listening to the Los Angeles County Fire Chief Michael Freeman saying it is a dynamic and dangerous situation as we look at the live view now of what they're up against. A raging wildfire there in Malibu, which has already claimed at least 35 homes and the fire chief explained that they're going to try, it's low priority, but they'll try to get the locations of these destroyed homes so that they can some way at the command post kind of post four people that have been evacuated and the many hundreds of people that have been evacuated to find out if their homes made it or not.

This is breaking news we continue to follow here at CNN. Disaster is striking hard and fast in Southern California as you can see.

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